<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 1997
REGISTRATION NO. 333-26091
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BOOTH CREEK SKI HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C>
DELAWARE 84-1359604
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
</TABLE>
and subsidiary guarantors
TRIMONT LAND COMPANY
SIERRA-AT-TAHOE, INC.
BEAR MOUNTAIN, INC.
BOOTH CREEK SKI ACQUISITION CORP.
WATERVILLE VALLEY SKI RESORT, INC.
MOUNT CRANMORE SKI RESORT, INC.
SKI LIFTS, INC.
GRAND TARGHEE INCORPORATED
B-V CORPORATION
TARGHEE COMPANY
TARGHEE SKI CORP.
(Exact name of registrants as specified in their respective charters)
<TABLE>
<S> <C>
CALIFORNIA 94-1640750
DELAWARE 68-0305344
DELAWARE 33-0679795
DELAWARE 84-1359820
DELAWARE 02-0492684
DELAWARE 02-0492680
WASHINGTON 91-0412837
DELAWARE 82-0307639
WYOMING 84-1398702
DELAWARE 84-1360243
DELAWARE 68-0393702
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7990
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
</TABLE>
------------------------
<TABLE>
<C> <C>
NANCI N. NORTHWAY
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
BOOTH CREEK SKI HOLDINGS, INC.
HIGHWAY 267 AND NORTHSTAR DRIVE HIGHWAY 267 AND NORTHSTAR DRIVE
TRUCKEE, CALIFORNIA 96160 TRUCKEE, CALIFORNIA 96160
(916) 562-1010 (916) 562-1010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL NUMBER,
EXECUTIVE OFFICE) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
COPY TO:
BRUCE A. TOTH
WINSTON & STRAWN
35 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60601
(312) 558-5723
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the Securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
================================================================================
<PAGE> 2
BOOTH CREEK SKI HOLDINGS, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NUMBER ITEM LOCATION IN PROSPECTUS
- ------ ---- ----------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................... Inside Front Cover Page; Outside Back Cover
Page
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information......................... Summary; Risk Factors; Selected Combined
Financial Data; Pro Forma Financial
Information
4. Terms of the Transaction........................ Outside Front Cover Page; Summary;
Description of the Notes; The Exchange Offer;
Certain U.S. Federal Income Tax
Considerations
5. Pro Forma Financial Information................. Pro Forma Financial Information
6. Material Contracts with the Company Being
Acquired...................................... Inapplicable
7. Additional Information Required................. Inapplicable
8. Interests of Named Experts and Counsel.......... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................... Inapplicable
10. Information with Respect to S-3 Registrants..... Inapplicable
11. Incorporation of Certain Information by
Reference..................................... Inapplicable
12. Information with Respect to S-3 or S-2
Registrants................................... Inapplicable
13. Incorporation of Certain Information by
Reference..................................... Inapplicable
14. Information with Respect to Registrants other
than S-3 or S-2 Registrants................... Outside Front Cover Page; Summary; Risk
Factors; The Transactions; Capitalization;
Pro Forma Financial Information; Selected
Combined Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain Transactions;
Ownership and Control; Description of
Certain Indebtedness; Description of the
Notes
15. Information with Respect to S-3 Companies....... Inapplicable
16. Information with Respect to S-3 or S-2
Companies..................................... Inapplicable
17. Information with Respect to Companies Other than
S-3 or S-2 Companies.......................... Inapplicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM
NUMBER ITEM LOCATION IN PROSPECTUS
- ------ ---- ----------------------
<C> <S> <C>
18. Information if Proxies, Consents or
Authorizations are to be Solicited............ Inapplicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in
an Exchange Offer............................. Management; Ownership and Control; Certain
Transactions
</TABLE>
<PAGE> 4
PROSPECTUS
BOOTH CREEK SKI HOLDINGS, INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS
SERIES B 12 1/2% SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR
EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING
12 1/2% SENIOR NOTES DUE 2007, OF WHICH
$116,000,000 PRINCIPAL AMOUNT IS OUTSTANDING
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON AUGUST 13, 1997, UNLESS EXTENDED.
------------------------
Booth Creek Ski Holdings, Inc., a Delaware corporation (the "Company"),
hereby offers (the "Exchange Offer"), upon the terms and conditions set forth in
this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), to exchange $1,000 principal amount of its Series
B 12 1/2% Senior Notes due 2007 (the "New Notes"), registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 12 1/2% Senior Notes due 2007 (the "Old
Notes"), of which $116,000,000 principal amount is outstanding. The form and
terms of the New Notes are the same as the form and terms of the Old Notes
(which they replace), except that the New Notes will bear a Series B designation
and will have been registered under the Securities Act and, therefore, will not
bear legends restricting their transfer and will not contain certain provisions
relating to an increase in the interest rate which were included in the terms of
the Old Notes in certain circumstances relating to the timing of the Exchange
Offer. The New Notes will evidence the same debt as the Old Notes (which they
replace) and will be issued under and be entitled to the benefits of the
Indenture, dated as of March 18, 1997 (the "Indenture"), among the Company, the
Guarantors (as defined herein) and Marine Midland Bank, as trustee (the
"Trustee"). The Old Notes and the New Notes are sometimes referred to herein
collectively as the "Notes." See "The Exchange Offer" and "Description of the
Notes."
Interest on the Notes will be paid in cash semi-annually on March 15 and
September 15 of each year, commencing on September 15, 1997. The Notes will
mature on March 15, 2007 and are not subject to any sinking fund requirement.
The Notes are redeemable at the option of the Company, in whole or in part, at
any time on or after March 15, 2002, at the redemption prices set forth herein,
plus accrued and unpaid interest to the date of redemption. In addition, the
Company, at its option, may redeem in the aggregate up to 30% of the original
principal amount of the Notes at any time and from time to time prior to March
15, 2000 at 112.5% of the aggregate principal amount so redeemed, plus accrued
and unpaid interest to the redemption date, with the Net Proceeds (as defined
herein) of one or more Public Equity Offerings (as defined herein), provided
that at least $77.0 million of the principal amount of the Notes originally
issued remain outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 90 days following the
closing of any such Public Equity Offering. See "Description of the Notes --
Optional Redemption."
Upon a Change of Control (as defined herein), each holder of the Notes will
be entitled to require the Company to repurchase such holder's Notes at 101% of
the principal amount thereof plus accrued and unpaid interest to the repurchase
date. See "Description of the Notes -- Change of Control Offer." In addition,
the Company is obligated in certain instances to make an offer to repurchase the
Notes at a purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest to the date of repurchase with the net cash
proceeds of certain asset sales. See "Description of the Notes -- Certain
Covenants -- Limitation on Certain Asset Sales."
The New Notes will be general senior unsecured obligations of the Company
ranking pari passu with all other existing and future senior indebtedness of the
Company and senior to any subordinated indebtedness of the Company. The New
Notes will be unconditionally guaranteed, on a senior unsecured basis, jointly
and severally by certain Restricted Subsidiaries (as defined herein) of the
Company. The New Notes and the Guarantees (as defined herein) will be
effectively subordinated to all secured indebtedness of the Company and the
Guarantors, including indebtedness under the Senior Credit Facility (as defined
herein). In addition, the New Notes will be structurally subordinated to any
indebtedness of the Company's subsidiaries that are not Guarantors. As of May 2,
1997 the Company had approximately $3.4 million of senior indebtedness
outstanding (other than the Notes and the Guarantees). In addition, the Company
would have had $12.0 million of additional borrowing availability under the
Senior Credit Facility. See "Capitalization." For
(Continued on Next Page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 21 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JULY 14, 1997.
<PAGE> 5
(Continued from Cover Page)
the twelve months ended October 31, 1996 after giving pro forma effect to the
Transactions, earnings would have been inadequate to cover fixed charges by
$13.0 million. See "Risk Factors -- High Level of Indebtedness and Leverage."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on August 13, 1997,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
The Old Notes were sold in an aggregate principal amount of $110.0 million
by the Company on March 18, 1997 to CIBC Wood Gundy Securities Corp. (the
"Initial Purchaser") in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act. An additional $6.0 million
aggregate principal amount of Old Notes were sold by the Company on April 25,
1997 to the Initial Purchaser pursuant to the exercise of an option by the
Initial Purchaser in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act. These transactions are
collectively hereinafter referred to as the "Initial Offering." The Initial
Purchaser subsequently placed the Old Notes with qualified institutional buyers
in reliance upon Rule 144A under the Securities Act. Accordingly, the Old Notes
may not be reoffered, resold or otherwise transferred in the United States
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The New
Notes are being offered hereunder in order to satisfy the obligations of the
Company and the Guarantors under the Registration Rights Agreement (as defined
herein) entered into by the Company and the Guarantors in connection with the
Initial Offering. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes. See "The Exchange Offer -- Resale of the New
Notes." Each broker-dealer (a "Participating Broker-Dealer") that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer as a result of marketmaking activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"The Exchange Offer."
There has not previously been any public market for the Old Notes or the
New Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the New Notes will
develop. See "Risk Factors -- Absence of a Public Market." Moreover, to the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected.
The New Notes will be available initially only in book-entry form and the
Company expects that the New Notes issued pursuant to the Exchange Offer will be
issued in the form of a Global Note (as defined herein), which will be deposited
with, or on behalf of, The Depository Trust Company ("DTC") and registered in
its name or in the name of Cede & Co., its nominee. Beneficial interests in the
Global Note representing the New Notes will be shown on, and transfers thereof
will be effected through, records maintained by DTC and its participants. After
the initial issuance of the Global Note, New Notes in certificated form will be
issued in exchange for the Global Note only under the limited circumstances set
forth in the Indenture. See "Description of the Notes -- Book-Entry, Delivery
and Form."
2
<PAGE> 6
AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Commission a
Registration Statement on Form S-4 (the "Exchange Offer Registration Statement,"
which term shall encompass all amendments, exhibits, annexes and schedules
thereto) pursuant to the Securities Act, and the rules and regulations
promulgated thereunder, covering the New Notes being offered hereby. This
Prospectus does not contain all the information set forth in the Exchange Offer
Registration Statement. For further information with respect to the Company and
the Exchange Offer, reference is made to the Exchange Offer Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Exchange Offer Registration Statement, reference is made to the
exhibit for a more complete description of the document or matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
The Exchange Offer Registration Statement, including the exhibits thereto, can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the
Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of such site is http://www.sec.gov.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Company and the Guarantors will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. The obligation of
the Company and the Guarantors to file periodic reports and other information
with the Commission will be suspended if the Notes are held of record by fewer
than 300 holders as of the beginning of any fiscal year of the Company and the
Guarantors other than the fiscal year in which the Exchange Offer Registration
Statement is declared effective. The Company has agreed that, whether or not it
is required to do so by the rules and regulations of the Commission, for so long
as any of the Notes remain outstanding, it will furnish to the holders of the
Notes and file with the Commission (unless the Commission will not accept such a
filing) (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
independent auditors and (ii) all current reports that would be required to be
filed with the Commission on Form 8-K if the Company were required to file such
reports.
FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), CONCERNING FUTURE
OPERATIONS OF THE COMPANY. WHEN USED IN THIS DOCUMENT, THE WORDS "ANTICIPATE,"
"BELIEVE," "ESTIMATE" AND "EXPECT" AND SIMILAR EXPRESSIONS ARE GENERALLY
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. PROSPECTIVE INVESTORS ARE
CAUTIONED THAT ANY FORWARD-LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING
INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY OR ITS MANAGEMENT, ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING THOSE ITEMS IDENTIFIED
UNDER "RISK FACTORS." THE COMPANY DOES NOT INTEND TO UPDATE THESE
FORWARD-LOOKING STATEMENTS.
3
<PAGE> 7
CERTAIN DEFINITIONS AND MARKET AND INDUSTRY DATA
The term "day skier" generally refers to a skier or snowboarder who lives
in a resort's regional ski market and skis or snowboards for one day before
returning home.
The terms "EBITDA," "EBITDA margin" and "resort cash flow" are referred to
in various places in this Prospectus. "EBITDA" represents income from operations
before depreciation and amortization expense and the non-cash cost of real
estate sales. "EBITDA margin" is EBITDA divided by total revenue. "Resort cash
flow" represents, with respect to a particular resort for a given period, the
EBITDA of the resort for such period before deducting corporate overhead charges
allocated to the resort for such period. Although EBITDA and resort cash flow
are not measures of performance under United States generally accepted
accounting principles ("GAAP"), the terms are presented because management
believes they provide useful information regarding a company's ability to incur
and service debt. Neither EBITDA nor resort cash flow should be considered in
isolation or as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in accordance
with GAAP, or as a measure of profitability or liquidity. In addition, "EBITDA,"
"EBITDA margin" and "resort cash flow" as determined by the Company may not be
comparable to the related or similar measures as reported by other companies and
do not represent funds available for discretionary use.
"Guarantors" refers to all Restricted Subsidiaries of the Company having
either assets or stockholders' equity in excess of $20,000. As of the date of
this Prospectus, the Guarantors consist of (i) Trimont Land Company, a
California corporation and operator of Northstar-at-Tahoe, (ii) Sierra-at-Tahoe,
Inc., a Delaware corporation and operator of Sierra-at-Tahoe, (iii) Bear
Mountain, Inc., a Delaware corporation and operator of Bear Mountain, (iv)
Waterville Valley Ski Resort, Inc., a Delaware corporation and operator of
Waterville Valley, (v) Mount Cranmore Ski Resort, Inc., a Delaware corporation
and operator of Mt. Cranmore, (vi) Booth Creek Ski Acquisition Corp., a Delaware
corporation and direct owner of Waterville Valley Ski Resort, Inc. and Mount
Cranmore Ski Resort, Inc., (vii) Ski Lifts, Inc., a Washington corporation and
operator of Snoqualmie Pass, (viii) Grand Targhee Incorporated, a Delaware
corporation and operator of Grand Targhee, (ix) B-V Corporation, a Wyoming
corporation and a wholly-owned subsidiary of Grand Targhee Incorporated, (x)
Targhee Company, a Delaware corporation and a wholly-owned subsidiary of Grand
Targhee Incorporated, and (xi) Targhee Ski Corp., a Delaware corporation and a
wholly-owned subsidiary of Grand Targhee Incorporated. As of the date of this
Prospectus, the Company's only Unrestricted Subsidiary, which will not be a
Guarantor, holds certain developmental real property formerly owned by Ski
Lifts, Inc.
The term "regional overnight skier" generally refers to a skier or
snowboarder who lives in a resort's regional ski market and lodges in the
vicinity of the resort to ski or snowboard for more than one day before
returning home.
The term "regional resort" refers to a resort that primarily serves a
regional ski market.
The term "regional ski market" generally refers to a market that lies
within a 200 mile radius (or three hours driving time) of a resort.
"Restricted Group" means Booth Creek and its Restricted Subsidiaries (as
defined in "Description of the Notes -- Certain Definitions") as of the date of
this Prospectus.
"Revenue per skier day" represents a resort's total revenue from resort
operations, excluding revenues earned from real estate and timber sales, for a
given period divided by such resort's total skier days for the same period.
"Skier day" represents one skier or snowboarder visiting one ski resort for
one day, including skiers and snowboarders using complimentary and season
passes. Calculation of skier days requires an estimation of visits by season
pass holders. Although different ski resort operators may use different
methodologies for making such estimations, management believes that any
resulting differences in total skier days are immaterial.
The term "ski season" generally refers to the period during which resorts
offer skiing or snowboarding to paying guests. Depending on the location of the
resort, the natural snowfall patterns and/or the amount of snowmaking, the ski
season can range from early November to late May, although the Company's resorts
typically close in April.
4
<PAGE> 8
"Ticket yield" is the ratio of the average ticket price paid by all guests
to the price of a full price weekend adult ticket. The ticket yield reflects the
impact of discounting and promotions and the mix of ticket types (adult,
children, complimentary, multi-day, season passes, etc.)
The term "vertical drop" generally refers to the change in elevation from
the highest skiable point to the base of the mountain.
"Vertical transfer feet per hour" ("VTFH") is the number of people lifted
1,000 vertical feet per hour.
Market data used throughout this Prospectus were obtained from internal
company surveys, industry publications and currently available information. The
sources for this data include, without limitation, the 1995/96 Kottke National
End of Season Survey, the Sporting Goods Manufacturers Association, RRC
Associates and the National Skier/Boarder Opinion Survey. Industry publications
generally state that the information contained therein has been obtained from
sources believed to be reliable, but there can be no assurance as to the
accuracy and completeness of such information. The Company has not independently
verified such market data. Similarly, internal Company surveys, while believed
by the Company to be reliable, have not been verified by any independent
sources.
5
<PAGE> 9
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. As used in this Prospectus, the "Company" or
"Booth Creek" refers to Booth Creek Ski Holdings, Inc. and its subsidiaries,
after giving effect to the Acquisitions (as defined), unless the context
otherwise requires. Since November 27, 1996 the Company has acquired the
Northstar-at-Tahoe ("Northstar") and Sierra-at-Tahoe ("Sierra") ski resorts in
the Lake Tahoe region of Northern California, the Bear Mountain ski resort
(together with Northstar and Sierra, the "California Resorts") in Southern
California, the Waterville Valley and Mt. Cranmore ski resorts in New Hampshire
(the "New Hampshire Resorts"), the Snoqualmie Pass ski resort complex, which
consists of four separate and distinct resorts ("Snoqualmie Pass") in the
Cascade Mountains of Northwest Washington and the Grand Targhee ski resort
("Grand Targhee") in the Grand Tetons in Wyoming. References in this Prospectus
to the closing date of the Initial Offering shall mean March 18, 1997. Please
refer to "Certain Definitions and Market and Industry Data" beginning on page 4
for the definitions of certain terms used in this Prospectus.
THE COMPANY
Booth Creek owns and operates seven ski resort complexes encompassing ten
separate resorts, making the Company the fourth largest operator in North
America based on approximately 1.8 million skier days recorded during the
1995/96 ski season. Booth Creek primarily operates regional ski resorts which,
in the aggregate, attract approximately 85% of their guests from their regional
ski markets, within a 200 mile driving radius of each resort. The Company's
properties offer approximately 8,150 acres of skiable terrain, 354 trails, 89
lifts (including 12 high-speed lifts) and on-mountain capacity to accommodate
approximately 50,000 guests daily. For the twelve months ended October 31, 1996
and the six months ended May 2, 1997, the Company's resorts generated
approximately $82.1 million and $71.2 million of pro forma revenue,
respectively, $3.1 million and $8.8 million of pro forma operating income,
respectively and ($8.4 million) and $805,000 of pro forma net income (loss),
respectively. For the twelve months ended October 31, 1996 and the six months
ended May 2, 1997, the Company's resorts generated approximately $20.7 million
and $16.7 million of adjusted pro forma EBITDA, respectively.
The Company has acquired an attractive group of resort properties primarily
located near major skiing populations. According to the Sporting Goods
Manufacturers Association, the average American skier skied approximately 3.3
days during the 1995/96 ski season, of which approximately 80% of visits were at
regional ski resorts. The Company's resorts are located near approximately 26%
of all skiers in the United States, including four of the five largest regional
ski markets: Los Angeles/San Diego, San Francisco/Sacramento, Boston and
Seattle/Tacoma. The Company believes this geographical diversification serves to
limit the Company's exposure to regional economic downturns and unfavorable
weather conditions.
The domestic skiing industry has been relatively consistent, averaging
approximately 52 million skier days over the last 10 years with approximately 54
million skier days recorded during the 1995/96 ski season. While skier
visitation has been relatively stable, the number of U.S. ski areas has declined
from 709 in 1986 to 519 in 1996. The Company believes that this attrition is
occurring primarily because smaller resorts lack the variety of terrain,
infrastructure, capital and management capability required to compete with
larger, more sophisticated resorts. Furthermore, given the lack of suitable real
estate, environmental concerns and considerable development and start-up costs,
no new major ski resort has opened in the United States since 1989. According to
RRC Associates, the 519 domestic ski areas averaged approximately 104,000 skier
days, and only 25% of all resorts reported more than 220,000 skier days during
the 1995/96 ski season. Five of the Company's seven resort complexes typically
exceed the 220,000 skier day threshold. The Company also believes that the ski
resort industry is experiencing a period of consolidation, resulting in larger
companies operating multiple resorts. The four largest ski resort companies,
including the Company, accounted for approximately 23% of all U.S. skier days
recorded during the 1995/96 ski season.
The Company's resorts continue to differentiate themselves in their
respective markets by selectively upgrading on-mountain facilities and guest
services, employing targeted marketing strategies and offering
6
<PAGE> 10
extensive skier development programs, all of which create a
competitively-priced, high-quality guest experience. The Company's resorts have
collectively spent over $35.0 million in expansion-related capital improvements
over the past three years, including the addition of eight high-speed
chairlifts, additional snowmaking capability, improved trail grooming equipment,
and enhanced on-mountain lodging, retail and food service amenities. The Company
believes its existing resorts have been well maintained and ongoing capital
expenditure requirements are expected to be approximately $5.0 million in the
aggregate in each of the next two years. The Company's California Resorts have
introduced what management believes to be one of the industry's leading
marketing programs, Vertical Plus, an electronic annual frequent skier program
designed to build customer loyalty, increase visitation frequency and maximize
guest revenue yields. In less than three full ski seasons since the introduction
of Vertical Plus, its members already account for approximately 11% of total
skier days at Northstar and Sierra. The Company intends to expand Vertical Plus
to its other resorts over the next two ski seasons. In addition to Vertical
Plus, the Company uses targeted advertising, database marketing and strategic
marketing alliances to enhance the image of its resorts and increase regional
market share. The Company also offers extensive development programs to improve
the technical skill level of all types of skiers, which management believes is
important to expand the total skier population and increase skier visitation
frequency. Northstar and Sierra are consistently rated by consumer publications
as having premier ski instruction and development programs. The Company intends
to implement similar skier development programs at its other resorts in future
ski seasons.
OPERATING STRATEGY
The Company expects to capitalize on certain benefits associated with being
a multiple resort operating company by extending key operating strategies and
management practices which have been successfully implemented at its California
Resorts to the Company's other resorts. The key elements of the Company's
strategy include the following:
Continually Enhance the Guest Experience. In addition to offering
accessible locations, the Company is committed to providing a high-quality
guest experience by offering a diversity of terrain, consistent snow
conditions (the Company's most weather-sensitive resorts have snowmaking
coverage on nearly 100% of their trails), state-of-the-art ski lift
capacity, attractive facilities, a friendly atmosphere and extensive skier
development programs. The Company believes the physical condition of its
resorts is very competitive with other regional resorts, and will continue
to selectively enhance and expand its resorts in order to continuously
offer a diverse and competitively-priced, high-quality skiing experience.
Incorporate Sophisticated Management Information Systems. The
Company's California Resorts utilize what management believes is one of the
industry's premier management information systems, providing daily
statistical and financial information on all operating departments within
each resort. This system enables management to continuously monitor and
align staffing and services to meet market demands, while enhancing the
quality and timing of communications and decisions. The Company plans to
integrate all of its resorts into its management information system.
Develop Effective Marketing Plans. The Company's marketing plans are
designed to attract skiers and snowboarders by emphasizing the Company's
diverse facilities, high-quality services and proximity to each of the
regional skier markets in which it operates. The Company intends to
position each of its resorts as an economical and attractive alternative to
competing regional resorts and to other forms of leisure entertainment. The
Company's marketing objectives are to (i) increase each of its resorts'
relative market share, (ii) expand the number of skiers in each of its
markets, (iii) increase skier visitation frequency and (iv) influence the
vacation destination choices of prospective guests. A key component to the
Company's marketing plans will be the expansion of Vertical Plus to enhance
guest loyalty and increase skier visitation frequency. The Company also
believes there are opportunities to cross-market its resorts through the
integration and expansion of the Vertical Plus program.
Maximize Revenues and Resort Cash Flow. The Company focuses on
increasing revenues and resort cash flow by managing the mix of skier days
and revenue per skier day. The strategy for each resort is based on the
demographic profile of its market and the physical capacity of its mountain
and facilities. The Company seeks to increase skier days by developing
effective ticket pricing strategies and marketing programs to improve peak
and off-peak volume. The Company seeks to improve revenue per skier day by
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<PAGE> 11
effectively managing the price, quality and value of each of its
ski-related services, including retail shops, ski rentals, ski lessons and
food and beverage facilities. The Company also generates revenue from a
variety of non-ski related services, such as golf, tennis, health clubs and
conference centers, as well as from real estate and timber sales.
Pursue Cost Savings Opportunities. The Company expects to realize
significant cost savings from operating multiple resorts through
centralized purchasing of insurance, retail inventory, capital and rental
equipment, bulk purchasing of advertising and printing, as well as through
the selective consolidation of administrative functions. In addition, the
Company intends to extend the flexible staffing practices utilized at its
California Resorts to its other resorts, which management estimates will
reduce annual expenses by approximately $500,000 at its non-California
Resorts. By pursuing these and other operating synergies, management
believes that it can realize significant cost savings while growing skier
days and enhancing profitability.
Selectively Develop New Terrain and Real Estate. Management believes
that the Company has significant opportunities to expand skiable terrain
and trails and to develop Company-owned real estate for commercial and
residential use. The Company owns or has access to approximately 2,640
acres at Northstar, 425 acres at Grand Targhee and 700 acres at Mt.
Cranmore for potential development of additional ski terrain and/or for
residential and commercial purposes. The Company also owns approximately 84
acres at Snoqualmie Pass available for additional residential and
commercial development which it holds through an Unrestricted Subsidiary.
See "The Transactions." Management believes that the Company's undeveloped
acreage at Northstar is the only significant privately-held land available
for skiing expansion in the Lake Tahoe basin and could double the amount of
skiable terrain and the number of trails at Northstar while significantly
increasing the on-site bed base. The Company believes that increasing the
on-site and area bed base is important in attracting regional overnight
skiers, expanding market share and capturing a greater portion of each
guest's expenditures. Management anticipates that any significant
development project would be undertaken through a joint venture with a
major real estate development company, which would offset a significant
portion of the infrastructure cost.
ACQUISITION STRATEGY
The Company believes that the domestic ski industry is highly fragmented
but is undergoing a transition from individual resort ownership to ownership by
multiple resort operating companies. With their high-quality facilities and
services, sophisticated information systems and experienced management team, the
California Resorts, in management's view, will serve as the core of the
Company's operations and its base for future expansion. The acquisitions of the
New Hampshire Resorts, Snoqualmie Pass and Grand Targhee provide the Company
with additional geographical diversity and proximity to other major skiing
population centers. In addition, the Company believes that there are numerous
opportunities to introduce sophisticated management practices, many of which are
already employed at its California Resorts, to all of its resorts, which are
expected to increase the number of skier days, revenue per skier day and resort
cash flow. The Company will consider future acquisition opportunities that it
believes will further expand the Company's national presence or enhance its
operating synergies.
MANAGEMENT
The Company believes that one of its most important assets is its
experienced and guest-oriented management team. The 10 members of the Company's
senior management team have, on average, approximately 17 years of experience in
the ski industry. George N. Gillett, Jr., Chairman of the Board of Directors and
Chief Executive Officer of the Company, has 13 years of experience operating ski
resorts, including the Vail Ski Resort, which during his association as owner
and Chairman became the largest ski mountain complex, and one of the most
profitable ski resorts, in North America. Each of the Company's resorts is
managed by an on-site resort executive with extensive local experience and
industry expertise. See "Management." The Company's principal executive offices
are located at Highway 267 and Northstar Drive, Truckee, California 96160. Its
telephone number at that location is (916) 562-1010. The Company was
incorporated in Delaware on October 8, 1996.
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<PAGE> 12
THE TRANSACTIONS
The Company was formed by a group of investors led by Mr. Gillett in 1996
to acquire the New Hampshire Resorts and the California Resorts. The New
Hampshire Resorts, Waterville Valley and Mt. Cranmore, were acquired for
approximately $17.5 million and the California Resorts, Northstar, Sierra and
Bear Mountain, were acquired for approximately $121.5 million. In addition, the
Company has acquired Snoqualmie Pass for approximately $14.0 million and Grand
Targhee for approximately $7.9 million (excluding certain contingent payments).
The Company financed the purchase of the New Hampshire Resorts and the
California Resorts with the proceeds from: (i) $90.0 million of senior
subordinated notes issued to an affiliate of the Initial Purchaser (the "Bridge
Notes"); (ii) $10.0 million of subordinated option notes (the "Hancock Option
Notes," and together with the Bridge Notes, the "Bridge Financing Facilities")
issued by Parent (as defined); (iii) the issuance of the ASC Seller Note (as
defined) and (iv) the investment in the Company of $40.0 million of equity by
Parent, which was funded through the issuance by Parent of debt and equity
securities to John Hancock Mutual Life Insurance Company ("John Hancock") and
affiliates of George N. Gillett, Jr. and the Initial Purchaser. Snoqualmie Pass
was purchased effective January 15, 1997 for an aggregate purchase price of
approximately $14.0 million, which included the assumption of approximately $3.6
million of indebtedness, the issuance by the Company of the Snoqualmie Seller
Note (as defined) in the amount of approximately $9.8 million, and other
obligations to the selling shareholders of approximately $600,000. Grand Targhee
was purchased on March 18, 1997 for an aggregate purchase price of approximately
$7.9 million. In addition, concurrently with the consummation of the Initial
Offering, the Senior Credit Facility, which initially provided borrowing
availability of up to $10.0 million, was amended to, among other things, provide
a total revolving credit commitment of $20.0 million, subject to certain
conditions, and initial borrowing availability of up to $12.0 million, subject
to seasonal reductions. The Company used the proceeds from the Initial Offering,
together with available cash on hand and an additional equity contribution of
$6.5 million by Parent, (i) to repay the Bridge Financing Facilities, the
Snoqualmie Seller Note and certain debt assumed in connection with the
acquisition of Snoqualmie Pass, (ii) to finance the purchase price for the
acquisition of Grand Targhee and repay certain assumed indebtedness in
connection therewith, (iii) to pay fees and expenses in connection with the
Initial Offering and the Senior Credit Facility and (iv) for general corporate
purposes. The acquisitions of the New Hampshire Resorts, the California Resorts,
Snoqualmie Pass and Grand Targhee are sometimes collectively referred to herein
as the "Acquisitions." The foregoing transactions, as described more fully below
in "The Transactions," as well as the Initial Offering and the application of
the net proceeds therefrom, are hereinafter referred to collectively as the
"Transactions."
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<PAGE> 13
THE INITIAL OFFERING
Notes
Pursuant to a Securities Purchase Agreement dated as of March 13, 1997 (the
"Purchase Agreement"), the Company sold Old Notes in an aggregate principal
amount of $110.0 million to the Initial Purchaser on March 18, 1997, and an
additional $6.0 million aggregate principal amount of Old Notes to the Initial
Purchaser on April 25, 1997 pursuant to the exercise of an option by the Initial
Purchaser. The Initial Purchaser subsequently resold the Old Notes purchased
from the Company to qualified institutional buyers pursuant to Rule 144A under
the Securities Act.
Registration Rights Agreement
Pursuant to the Purchase Agreement, the Company, the Guarantors and the
Initial Purchaser entered into a Registration Rights Agreement, dated as of
March 18, 1997 (the "Registration Rights Agreement"), which grants the holders
of the Old Notes certain exchange and registration rights. The Exchange Offer is
intended to satisfy such exchange rights which terminate upon the consummation
of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered............ $116,000,000 aggregate principal amount of
12 1/2% Senior Notes due 2007 of the Company.
The Exchange Offer............ $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of
Old Notes. As of the date hereof, $116,000,000
aggregate principal amount of Old Notes are
outstanding. The Company will issue the New
Notes to holders on or promptly after the
Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by
any holder thereof (other than any such holder
which is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities
Act) without compliance with the registration
and prospectus delivery provisions of the
Securities Act, provided that such New Notes
are acquired in the ordinary course of such
holder's business and that such holder does not
intend to participate and has no arrangement or
understanding with any person to participate in
the distribution of such New Notes. Each holder
accepting the Exchange Offer is required to
represent to the Company in the Letter of
Transmittal that, among other things, the New
Notes will be acquired by the holder in the
ordinary course of business and the holder does
not intend to participate and has no
arrangement or understanding with any person to
participate in the distribution of such New
Notes.
Any Participating Broker-Dealer that acquired
Old Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating Broker-Dealer that receives New
Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes. The Letter of
Transmittal states that by so acknowledging
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<PAGE> 14
and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that
it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may
be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in
connection with resale of New Notes received in
exchange for Old Notes where such Old Notes
were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The
Company has agreed that, for a period of 180
days after the Expiration Date, it will make
this Prospectus available to any Participating
Broker-Dealer for use in connection with any
such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the New Notes will not be able to rely on the
position of the staff of the Commission
enunciated in no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which
the holder is not indemnified by the Company.
Minimum Condition............. The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered or accepted for exchange.
Expiration Date............... 5:00 p.m., New York City time, on August 13,
1997 unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended.
Accrued Interest on the New
Notes and the Old Notes....... Each New Note will bear interest from its
issuance date. Holders of Old Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including,
the issuance date of the New Notes. Such
interest will be paid with the first interest
payment on the New Notes. Interest on the Old
Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange Offer --
Conditions." The Company reserves the right to
terminate or amend the Exchange Offer at any
time prior to the Expiration Date upon the
occurrence of any such condition.
Procedures for Tendering Old
Notes......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, or an Agent's
Message (as defined) in connection with a
book-entry transfer, together with the Old
Notes and other required documentation to the
Exchange Agent (as defined) at the address set
forth herein. By executing the Letter of
Transmittal, each holder will represent to the
Company
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<PAGE> 15
that, among other things, the New Notes
acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of
business of the person receiving such New
Notes, whether or not such person is the
holder, that neither the holder nor any such
other person (i) has any arrangement or
understanding with any person to participate in
the distribution of such New Notes, (ii) is
engaging or intends to engage in the
distribution of such New Notes, or (iii) is an
"affiliate," as defined under Rule 405 of the
Securities Act, of the Company. See "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer" and "The Exchange Offer --
Procedures for Tendering."
Untendered Old Notes.......... Following the consummation of the Exchange
Offer, holders of Old Notes eligible to
participate but who do not tender their Old
Notes will not have any further exchange rights
and such Old Notes will continue to be subject
to certain restrictions on transfer.
Accordingly, the liquidity of the market for
such Old Notes could be adversely affected.
Consequences of Failure
to Exchange................. The Old Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant
to Rule 144A or Rule 144 under the Securities
Act or pursuant to some other exemption under
the Securities Act, (iii) outside the United
States to a non-U.S. person pursuant to the
requirements of Rule 904 under the Securities
Act, or (iv) pursuant to an effective
registration statement under the Securities
Act. See "The Exchange Offer -- Consequences of
Failure to Exchange."
Shelf Registration
Statement..................... In the event that changes in the law or the
applicable interpretations of the staff of the
Commission do not permit the Company to effect
the Exchange Offer, or if for any other reason
the Exchange Offer is not consummated within
210 days of the date of the original issuance
of the Old Notes, the Company and the
Guarantors will (i) as promptly as possible,
file a shelf registration statement (the "Shelf
Registration Statement") covering resales of
the Old Notes, (ii) use their respective best
efforts to cause the Shelf Registration
Statement to be declared effective under the
Securities Act and (iii) use their respective
best efforts to keep effective the Shelf
Registration Statement until three years after
its effective date. A holder of the Old Notes
that sells such Old Notes pursuant to the Shelf
Registration Statement generally would be
required to be named as a selling security
holder in the related prospectus and to deliver
a prospectus to purchasers, will be subject to
certain of the civil liability provisions under
the Securities Act in connection with such
sales and will be bound by the provisions of
the Registration Rights Agreement which are
applicable to such a holder (including certain
indemnification obligations).
Special Procedures for
Beneficial Owners........... Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on
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<PAGE> 16
such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering its Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time. The Company will keep the
Exchange Offer open for not less than twenty
days in order to provide for the transfer of
registered ownership.
Guaranteed Delivery
Procedures.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply
with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer --
Guaranteed Delivery Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Old Notes and
Delivery of New Notes....... The Company will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange Offer --
Terms of the Exchange Offer."
Federal Income Tax
Consequences.................. The exchange of Old Notes for New Notes by
tendering holders will not be a taxable
exchange for federal income tax purposes, and
such holders should not recognize any taxable
gain or loss or any interest income as a result
of such exchange.
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Exchange Agent................ Marine Midland Bank.
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<PAGE> 17
THE NEW NOTES
General........................ The form and terms of the New Notes are the
same as the form and terms of the Old Notes
(which they replace) except that (i) the New
Notes bear a Series B designation, (ii) the
New Notes have been registered under the
Securities Act and, therefore, will not bear
legends restricting the transfer thereof, and
(iii) the holders of New Notes will not be
entitled to certain rights under the
Registration Rights Agreement, including the
provisions providing for an increase in the
interest rate on the Old Notes in certain
circumstances relating to the timing of the
Exchange Offer, which rights will terminate
when the Exchange Offer is consummated. See
"The Exchange Offer -- Purpose and Effect of
the Exchange Offer." The New Notes will
evidence the same debt as the Old Notes and
will be entitled to the benefits of the
Indenture. See "Description of the Notes."
The Old Notes and the New Notes are referred
to collectively herein as the "Notes."
Issuer......................... Booth Creek Ski Holdings, Inc.
Securities Offered............. $116,000,000 principal amount of Series B
12 1/2% Senior Notes due 2007.
The Indenture governing the Notes (the
"Indenture") provides for the issuance of
additional series of Notes in aggregate
principal amounts of not less than $25.0
million per series, subject to compliance
with the covenant regarding incurrence of
additional indebtedness and provided that no
Default (as defined) or Event of Default (as
defined) exists under the Indenture at the
time of issuance or would result therefrom
and that the aggregate principal amount of
Notes issued under the Indenture does not
exceed $200.0 million.
Maturity Date.................. March 15, 2007.
Interest Payment Dates......... Interest will accrue on the New Notes from
the date of issuance (the "Issue Date") and
will be payable semi-annually on each March
15 and September 15, commencing September 15,
1997.
Ranking........................ The New Notes will be general senior
unsecured obligations of the Company ranking
pari passu with all other existing and future
senior indebtedness of the Company and senior
to any subordinated indebtedness of the
Company. The New Notes will be effectively
subordinated to all secured indebtedness of
the Company and the Guarantors, including
indebtedness under the Senior Credit
Facility. In addition, the New Notes will be
structurally subordinated to any indebtedness
of the Company's subsidiaries that are not
Guarantors. Booth Creek and the Guarantors
had approximately $3.4 million of senior
indebtedness outstanding (other than the
Notes and the Guarantees) as of May 2, 1997,
and borrowing availability of $12.0 million
under the Senior Credit Facility. See
"Description of Certain Indebtedness --
Senior Credit Facility."
Guarantees..................... The New Notes will be unconditionally
guaranteed, on an unsecured senior basis, as
to the payment of principal, premium, if
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<PAGE> 18
any, and interest, jointly and severally (the
"Guarantees"), by all Restricted Subsidiaries
of the Company having either assets or
stockholders' equity in excess of $20,000
(the "Guarantors"). As of the Issue Date, all
of the Company's direct and indirect
subsidiaries will be Restricted Subsidiaries,
except the Real Estate LLC (as defined in
"The Transactions -- The Snoqualmie
Acquisition"). Each Guarantee will be
effectively subordinated to all secured
indebtedness of such Guarantor. See
"Description of the Notes -- Certain
Covenants -- Limitation on Creation of
Subsidiaries" and "Description of the
Notes -- Guarantees."
Optional Redemption............ The Notes will be redeemable at the option of
the Company, in whole or in part, at any time
on or after March 15, 2002, at the redemption
prices set forth herein plus accrued interest
to the date of redemption. In addition, the
Company, at its option, may redeem in the
aggregate up to 30% of the original principal
amount of the Notes at any time and from time
to time prior to March 15, 2000 at a
redemption price equal to 112.5% of the
principal amount thereof plus accrued
interest to the redemption date with the Net
Proceeds of one or more Public Equity
Offerings, provided that at least $77.0
million aggregate principal amount of Notes
originally issued remain outstanding
immediately after the occurrence of any such
redemption and that any such redemption
occurs within 90 days following the closing
of any such Public Equity Offering.
Change of Control.............. In the event of a Change of Control, holders
of the Notes will have the right to require
the Company to repurchase their Notes at 101%
of the aggregate principal amount thereof
plus accrued and unpaid interest to the
repurchase date. See "Description of the
Notes -- Change of Control Offer."
Asset Sale Proceeds............ The Company will be obligated in certain
instances to make offers to repurchase the
Notes at a purchase price in cash equal to
100% of the principal amount thereof plus
accrued and unpaid interest to the date of
repurchase with the net cash proceeds of
certain asset sales. See "Description of the
Notes -- Certain Covenants -- Limitation on
Certain Asset Sales."
Certain Covenants.............. The Indenture contains covenants for the
benefit of the holders of the Notes that,
among other things, restrict the ability of
the Company and any Restricted Subsidiaries
(as defined) to: (i) incur additional
Indebtedness; (ii) pay dividends and make
distributions; (iii) issue stock of
subsidiaries; (iv) make certain investments;
(v) repurchase stock; (vi) create liens;
(vii) enter into transactions with
affiliates; (viii) enter into sale and
leaseback transactions; (ix) create dividend
or other payment restrictions affecting
Restricted Subsidiaries; (x) merge or
consolidate the Company or any Guarantors;
and (xi) transfer and sell assets. These
covenants are subject to a number of
important exceptions. See "Description of the
Notes -- Certain Covenants."
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<PAGE> 19
Registration Rights............ Pursuant to the Registration Rights
Agreement, the Company and the Guarantors
agreed to use their best efforts to file
within 45 days, and cause to become effective
within 150 days, of the closing date of the
Initial Offering a Registration Statement
under the Securities Act with respect to an
offer to exchange the Old Notes for New Notes
of the Company with terms substantially
identical to the Old Notes. In addition,
under certain circumstances the Company may
be required to file a Shelf Registration
Statement. Among other provisions, in the
event that (i) such Registration Statement or
Shelf Registration Statement has not been
filed with the Commission within 45 days
after the closing date of the Initial
Offering; (ii) such Registration Statement or
Shelf Registration Statement is not declared
effective within 150 days after the closing
date of the Initial Offering; or (iii) an
exchange offer is not consummated within 60
days after the Registration Statement is
declared effective (each such event referred
to in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy
available to holders of the Old Notes will be
the immediate assessment of additional
interest ("Additional Interest") as follows:
the per annum interest rate on the Old Notes
will increase by .50%, and the per annum
interest rate will increase by an additional
.25% for each subsequent 90 day period during
which the Registration Default remains
uncured, up to a maximum additional interest
rate of 2% per year in excess of the interest
rate set forth on the cover page hereof. All
Additional Interest will be payable to
holders of the Old Notes in cash on each
March 15 and September 15, commencing with
the first such date occurring after any such
Additional Interest commences to accrue, and
continuing until such Registration Default is
cured. After the date on which such
Registration Default is cured, the interest
rate on the Old Notes will revert to the
interest rate originally borne by the Old
Notes. See "The Exchange Offer."
RISK FACTORS
Before tendering their Old Notes for the New Notes offered hereby, holders
of the Old Notes should consider carefully the information set forth under the
caption "Risk Factors," and all other information set forth in this Prospectus.
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<PAGE> 20
SUMMARY COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT REVENUE PER SKIER DAY)
The summary combined financial data presented below should be read in
conjunction with the combined financial statements of the Fibreboard Resort
Group and notes thereto included elsewhere in this Prospectus, the unaudited
interim financial statements of the Company and the notes thereto included
elsewhere in this Prospectus, "Selected Combined Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The summary combined financial data (except for the other financial
and operating data) of the Fibreboard Resort Group (i) as of and for the year
ended December 31, 1992 and as of December 31, 1993 have been derived from the
unaudited financial statements of the Fibreboard Resort Group, (ii) for the year
ended December 31, 1993 and as of and for the years ended December 31, 1994 and
1995 and as of and for the ten months ended October 31, 1996 have been derived
from the audited combined financial statements of the Fibreboard Resort Group
and (iii) for the ten months ended October 31, 1995 and for the period from
November 1, 1996 to December 2, 1996 have been derived from the unaudited
combined financial statements of the Fibreboard Resort Group. The summary
historical financial data of the Company as of and for the six months ended May
2, 1997 were derived from the unaudited financial statements of the Company. The
Company was formed in October 1996 and had no operations until its acquisition
of seven ski resort complexes during the first six months of fiscal 1997. The
summary pro forma data presented below should be read in conjunction with the
information contained in "Pro Forma Financial Information."
<TABLE>
<CAPTION>
FIBREBOARD RESORT GROUP
-----------------------------------------------------------------------------------
PERIOD FROM
10 MONTHS 10 MONTHS NOVEMBER 1,
YEAR ENDED DECEMBER 31, ENDED ENDED 1996 TO
----------------------------------------- OCTOBER 31, OCTOBER 31, DECEMBER 2,
1992(a) 1993(b) 1994(c) 1995(d) 1995(d) 1996(e) 1996(e)
-------- -------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Resort Operations........................ $ 20,336 $ 25,528 $ 40,810 $ 39,823 $ 32,072 $ 36,829 $ 1,395
Real Estate and Other.................... -- -- 610 5,213 4,659 4,288 304
-------- -------- -------- -------- -------- -------- -------
20,336 25,528 41,420 45,036 36,731 41,117 1,699
Operating Expenses:
Cost of Sales -- Resort Operations....... 15,224 18,117 26,920 28,569 21,536 26,950 2,890
Cost of Sales -- Real Estate and Other... -- -- 280 1,989 1,780 2,142 161
Selling, General & Administrative........ 3,155 4,579 5,545 5,871 4,399 5,220 1,087
Management Fee and Corporate Expenses.... 169 507 655 1,247 513 701 70
-------- -------- -------- -------- -------- -------- -------
Operating Income (Loss)................... 1,788 2,325 8,020 7,360 8,503 6,104 (2,509)
Interest (Income) Expense (net)........... (386) 186 666 821 334 1,189 289
-------- -------- -------- -------- -------- -------- -------
Pre-tax Income (Loss)..................... 2,174 2,139 7,354 6,539 8,169 4,915 (2,798)
Income Taxes (Benefit).................... 880 876 2,979 2,624 3,308 2,018 (885)
-------- -------- -------- -------- -------- -------- -------
Income (Loss) Before Minority Interest and
Extraordinary Item....................... 1,294 1,263 4,375 3,915 4,861 2,897 (1,913)
Minority Interest......................... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Income (Loss) Before Extraordinary Item... 1,294 1,263 4,375 3,915 4,861 2,897 (1,913)
Extraordinary Loss on Early Retirement of
Debt..................................... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Net Income (Loss)................... $ 1,294 $ 1,263 $ 4,375 $ 3,915 $ 4,861 $ 2,897 $(1,913)
======== ======== ======== ======== ======== ======== =======
OTHER FINANCIAL AND OPERATING DATA:
Skier Days................................ 324,863 436,153 837,179 784,964 626,500 706,075 30,818
Revenue per Skier Day (i)................. $ 62.60 $ 58.53 $ 48.75 $ 50.73 51.19 $ 52.16 $ 45.27
Depreciation & Amortization............... $ 1,003 $ 2,514 $ 3,449 $ 4,024 $ 2,989 $ 4,354 $ 7
Non-cash Cost of Real Estate and Other
(j)...................................... $ -- $ -- $ -- $ 1,618 1,488 $ 1,461 $ 133
Capital Expenditures Excluding
Acquisitions and Real Estate and Other... $ 6,192 $ 4,619 $ 6,199 $ 5,226 2,188 $ 5,761 $ 5,531
Net cash provided by (used in):
Operating activities..................... $ UN $ 4,212 $ 9,482 $ 7,861 $ 7,506 $ 4,923 $ 2,827
Investing activities..................... UN (18,336) (6,287) (29,430) (28,321) (8,467) (6,020)
Financing activities..................... UN 9,027 (2,664) 26,071 18,059 (2,778) 1,906
EBITDA.................................... $ 2,791 $ 4,839 $ 11,469 $ 13,002 $ 12,980 $ 11,919 $(2,369)
EBITDA Margin............................. 13.7% 19.0% 27.7% 28.9% 35.3% 29.0% (139.4)%
<CAPTION>
COMPANY
--------------------------------------
UNAUDITED
HISTORICAL PRO FORMA(g)
----------- ------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
MAY 2, OCTOBER 31, MAY 2,
1997(f) 1996 1997
----------- ----------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Resort Operations........................ $ 60,469 $ 77,471 $ 70,430
Real Estate and Other.................... 450 4,657 754
---------- ---------- ----------
60,919 82,128 71,184
Operating Expenses:
Cost of Sales -- Resort Operations....... 41,229 76,726(h) 61,856(h)
Cost of Sales -- Real Estate and Other... 378 2,297 539
Selling, General & Administrative........ 6,518 -- --
Management Fee and Corporate Expenses.... 827 -- --
---------- ---------- ----------
Operating Income (Loss)................... 11,967 3,105 8,789
Interest (Income) Expense (net)........... 6,304 15,686 7,843
---------- ---------- ----------
Pre-tax Income (Loss)..................... 5,663 (12,581) 946
Income Taxes (Benefit).................... 1,416 (4,437) --
---------- ---------- ----------
Income (Loss) Before Minority Interest and
Extraordinary Item....................... 4,247 (8,144) 946
Minority Interest......................... 87 281 141
---------- ---------- ----------
Income (Loss) Before Extraordinary Item... 4,160 (8,425) 805
Extraordinary Loss on Early Retirement of
Debt..................................... 1,998 -- --
---------- ---------- ----------
Net Income (Loss)................... $ 2,162 $ (8,425) $ 805
========== ========== ==========
OTHER FINANCIAL AND OPERATING DATA:
Skier Days................................ 1,565,917 1,828,000 1,846,119
Revenue per Skier Day (i)................. $ 38.62 $ 42.38 $ 38.15
Depreciation & Amortization............... $ 5,124 $ 13,197 $ 6,792
Non-cash Cost of Real Estate and Other
(j)...................................... $ 349 $ 1,607 $ 482
Capital Expenditures Excluding
Acquisitions and Real Estate and Other... $ 2,416 $ 10,308 $ 10,343
Net cash provided by (used in):
Operating activities..................... $ 13,621 $ NA $ NA
Investing activities..................... (144,620) NA NA
Financing activities..................... 139,715 NA NA
EBITDA.................................... $ 17,440 $ 17,909 $ 16,063
EBITDA Margin............................. 28.6% 21.8% 22.6%
</TABLE>
<TABLE>
<CAPTION>
FIBREBOARD RESORT GROUP COMPANY
------------------------------------------------------------------ ------------
AS OF DECEMBER 31, AS OF OCTOBER 31, AS OF
----------------------------------------- ---------------------- MAY 2,
1992(a) 1993(b) 1994(c) 1995(d) 1995(e) 1996(e) 1997
------- ------- ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficit)..................... $ 5,414 $ (3,271) $ (6,555) $(35,980) $(36,123) $(36,187) $ (2,799)
Total Assets.................................. 27,859 39,618 43,065 73,316 64,125 69,602 192,157
Total Debt Including Intercompany Payable..... 10,608 15,743 15,422 41,493 33,487 38,715 119,367
Preferred Stock of Subsidiary (k)............. -- -- -- -- -- -- 3,125
Common Stockholders' Equity/Net Assets........ 13,435 17,826 19,752 23,667 24,606 26,564 48,662
UN - Unavailable NA - Not Applicable
</TABLE>
(see footnotes on following page)
17
<PAGE> 21
NOTES TO SUMMARY COMBINED FINANCIAL DATA
The selection of a December 31 year end does not result in the presentation
of the results of the resorts for a single ski season. Accordingly, as the
results of a single ski season are split into two reporting periods, differing
trends may develop, as compared to results of operations for other resorts
consisting of a single ski season, which should be evaluated by an investor.
As the results of operations of ski resorts are highly seasonal, with the
majority of revenue generated in the period from November through April, the
results of operations for the 10 months ended October 31, 1996 and 1995, the
period from November 1, 1996 to December 2, 1996, and the six months ended May
2, 1997 are not representative of a pro rata year of operations.
(a) Includes the financial results of Northstar only.
(b) Includes the financial results of Northstar for the entire period and of
Sierra for the period beginning June 11, 1993, the date on which it was
acquired by Fibreboard Corporation.
(c) Includes the financial results of Northstar and Sierra for the entire
period.
(d) Includes the financial results of Northstar and Sierra for the entire
period and of Bear Mountain for the period beginning October 23, 1995, the
date on which it was acquired by Fibreboard Corporation.
(e) Includes the financial results of Northstar, Sierra and Bear Mountain for
the entire period.
(f) Reflects the financial results of Waterville Valley and Mt. Cranmore from
November 27, 1996, Northstar, Sierra and Bear Mountain from December 3,
1996, Snoqualmie Pass from January 15, 1997, and Grand Targhee from March
18, 1997, the respective dates of acquisition of each resort by the
Company.
(g) Pro forma statement of operations and other financial and operating data
for the year ended October 31, 1996 and the six months ended May 2, 1997
give effect to the Transactions as if they had occurred on November 1,
1995. See "Pro Forma Financial Information."
(h) The historical financial presentations for the Fibreboard Resort Group,
Waterville Valley, Mt. Cranmore, Ski Lifts, Inc. and Grand Targhee
Incorporated are inconsistent in categorizing cost of sales -- resort
operations, selling, general and administrative expenses and management
fees and corporate expenses. For presentation purposes in this Prospectus,
all operating expenses, including depreciation and amortization, have been
aggregated as cost of sales -- resort operations.
(i) Reflects revenues from resort operations divided by skier days.
(j) Non-cash cost of real estate sales represents the allocated portion of real
estate development expenditures previously capitalized (including
acquisition costs allocated to real estate development) which relate to
current year real estate sales.
(k) Represents preferred stock of a subsidiary of the Company which is subject
to mandatory redemption requirements.
18
<PAGE> 22
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT REVENUE PER SKIER DAY)
The summary financial data (revenues, resort cash flow and capital
expenditures only) presented below should be read in conjunction with the
respective financial statements of the various resorts and the Company and the
notes thereto to the extent included elsewhere in this Prospectus, "Selected
Combined Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Capital expenditures data excludes
acquisitions, real estate development costs and purchases of timber. Skier days
information is based on management estimates. The following summary financial
data have been presented on a historical basis for each resort. During the
periods presented all resorts experienced ownership changes. Accordingly, for
the periods in which these changes occurred, the data presented below include
information for both before and after such changes on a combined basis to
provide comparable period data.
The financial statements of Northstar, Sierra (since its acquisition by
Fibreboard Corporation on June 11, 1993) and Bear Mountain (since its
acquisition by Fibreboard Corporation on October 23, 1995) have been included as
the combined financial statements of The Resort Group of Fibreboard Corporation.
These financial statements, as listed in the "Index of Financial Statements",
are audited for the ten months ended October 31, 1996 and for each of the years
ended December 31, 1995, 1994 and 1993 and unaudited for the period from
November 1, 1996 to December 2, 1996.
The financial statements of Waterville Valley, as listed in the "Index of
Financial Statements", are audited for the year ended October 29, 1995, the
period from October 30, 1995 to June 30, 1996 and the period from July 1, 1996
to October 27, 1996 and are unaudited for the period from October 28, 1996 to
November 26, 1996.
The financial statements of Mt. Cranmore have been excluded from the filing
as management has determined that such financial statements are not material to
the Company or to an investor in the Exchange Offer.
The financial statements of Ski Lifts, Inc., as listed in the "Index of
Financial Statements", are audited for the years ended September 30, 1996, 1995,
and 1994 and are unaudited for the period from October 1, 1996 to January 15,
1997.
The financial statements of Grand Targhee Incorporated, as listed in the
"Index of Financial Statements", are audited for the years ended May 31, 1996,
1995 and 1994 and are unaudited for the period from June 1, 1996 to March 18,
1997.
All resort operations are included in the unaudited financial statements of
the Company for the period from each respective acquisition date to May 2, 1997.
Financial data for Sierra, Bear Mountain, Waterville Valley and Mt.
Cranmore for periods prior to those noted in the table are unavailable or, in
the opinion of management, are not material to the Company or to those investor
in the Exchange Offer.
<TABLE>
<CAPTION>
TEN SIX
MONTHS MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
----------------------------------------- OCTOBER 31, MAY 2,
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
NORTHSTAR-AT-TAHOE
(EXCLUDES REAL ESTATE AND OTHER)
Revenue........................... $ 20,336 $ 24,574 $ 28,821 $ 26,994 $ 21,210 $ 23,773
Resort Cash Flow.................. 2,960 6,193 7,155 5,800 4,670 6,913
Capital Expenditures.............. 6,192 4,240 5,479 1,999 1,562 449
Skier Days........................ 324,863 410,207 509,502 436,954 320,440 445,753
Revenue per Skier Day............. $ 62.60 $ 59.91 $ 56.57 $ 61.78 $ 66.19 $ 53.33
</TABLE>
<TABLE>
<CAPTION>
TEN SIX
MONTHS MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------------ OCTOBER 31, MAY 2,
1993 1994 1995 1996 1997
-------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
SIERRA-AT-TAHOE
Revenue..................................... $ 7,491 $ 11,989 $ 11,395 $ 8,472 $ 8,314
Resort Cash Flow............................ 2,625 4,639 4,073 3,113 1,421
Capital Expenditures........................ 624 750 1,350 3,095 4,821
Skier Days.................................. 227,347 327,677 308,992 210,651 213,156
Revenue per Skier Day....................... $ 32.95 $ 36.58 $ 36.88 $ 40.22 $ 39.00
</TABLE>
19
<PAGE> 23
SUMMARY FINANCIAL DATA -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT REVENUE PER SKIER DAY)
<TABLE>
<CAPTION>
TEN SIX
MONTHS MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------------ OCTOBER 31, MAY 2,
1993 1994 1995 1996 1997
-------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
BEAR MOUNTAIN
Revenue..................................... $ 12,237 $ 16,082 $ 9,916 $ 7,147 $ 9,451
Resort Cash Flow............................ 3,540 5,995 1,599 1,230 971
Capital Expenditures........................ NA NA 218 1,051 425
Skier Days.................................. 291,543 382,253 209,561 174,984 276,729
Revenue per Skier Day....................... $ 41.97 $ 42.07 $ 47.32 $ 40.84 $ 34.15
</TABLE>
<TABLE>
<CAPTION>
YEAR YEAR SIX MONTHS
ENDED ENDED ENDED
OCTOBER 29, OCTOBER 27, MAY 2,
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
WATERVILLE VALLEY
Revenue..................................................... $ 9,653 $11,733 $ 9,497
Resort Cash Flow............................................ 1,387 2,018 2,487
Capital Expenditures........................................ 1,249 1,175 601
Skier Days.................................................. 207,386 256,563 219,313
Revenue per Skier Day....................................... $ 46.55 $ 45.73 $ 43.30
</TABLE>
<TABLE>
<CAPTION>
NINE
YEAR MONTHS
ENDED ENDED
JULY 28, MAY 2,
1996 1997
---------- ----------
<S> <C> <C>
MT. CRANMORE
Revenue..................................................... $ 4,161 $ 3,697
Resort Cash Flow............................................ 637 414
Capital Expenditures........................................ 2,533 80
Skier Days.................................................. 123,201 120,052
Revenue per Skier Day....................................... $ 33.77 $ 30.79
</TABLE>
<TABLE>
<CAPTION>
SEVEN
YEAR ENDED SEPTEMBER 30, MONTHS ENDED
------------------------------------------------------------------- MAY 2,
1992 1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
SNOQUALMIE PASS
Revenue....................... $ 8,084 $10,247 $10,241 $10,670 $ 9,451 $ 10,181
Resort Cash Flow(a)........... 890 1,677 1,777 1,629 1,251 2,444
Capital Expenditures.......... 582 853 346 1,159 1,466 413
Skier Days.................... 432,014 521,127 519,953 515,487 455,240 476,218
Revenue per Skier Day......... $ 18.71 $ 19.66 $ 19.69 $ 20.69 $ 20.76 $ 21.38
</TABLE>
<TABLE>
<CAPTION>
ELEVEN
YEAR ENDED MAY 31, MONTHS ENDED
------------------------------------------------------------------- MAY 2,
1992 1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
GRAND TARGHEE
Revenue....................... $ 6,319 $ 6,298 $ 6,285 $ 6,762 $ 7,376 $ 6,753
Resort Cash Flow(a)........... 928 672 1,098 1,066 1,225 330
Capital Expenditures.......... 309 292 170 473 236 3,443
Skier Days.................... 134,535 108,666 113,298 117,772 116,696 94,898
Revenue per Skier Day......... $ 46.97 $ 57.96 $ 55.47 $ 57.41 $ 63.21 $ 71.16
</TABLE>
- ---------------
(a) Because no corporate overhead charges were allocated during the fiscal
periods presented, resort cash flow equals EBITDA for each period.
20
<PAGE> 24
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Old Notes for the New Notes offered hereby, holders of the Old
Notes should consider carefully the following factors, which may be generally
applicable to the Old Notes as well as the New Notes.
HIGH LEVEL OF INDEBTEDNESS AND LEVERAGE
The Company is highly leveraged. At May 2, 1997 the Company's total
indebtedness (including current maturities) and stockholders' equity was $119.4
million and $48.7 million, respectively. In addition, for the twelve months
ended October 31, 1996, after giving pro forma effect to the Transactions, the
Company's pro forma EBITDA would have been $17.9 million and pro forma interest
expense would have been $15.7 million (including amortization of deferred
financing costs of $860,000). The Company's ability to make scheduled payments
of the principal of, or interest on, or to refinance its indebtedness (including
the Notes) depends on its future performance, which to a certain extent is
subject to economic, financial, competitive and other factors beyond its
control. FOR THE TWELVE MONTHS ENDED OCTOBER 31, 1996, AFTER GIVING PRO FORMA
EFFECT TO THE TRANSACTIONS, EARNINGS WOULD HAVE BEEN INADEQUATE TO COVER FIXED
CHARGES BY $13.0 MILLION. THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL NOT
GENERATE NET LOSSES IN THE FUTURE. Continued net losses could have an adverse
effect on the market value and marketability of the Notes.
The Company believes that its cash flow from operations, together with
borrowings under the Senior Credit Facility, will be adequate to meet its
anticipated requirements for working capital, capital expenditures, interest
payments and scheduled principal payments over the next twelve months. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." However, any decline in the
Company's expected operating performance could have a material adverse effect on
the Company's liquidity and on its ability to service its debt and make required
capital expenditures. There can be no assurance that the Company's business will
generate cash flow at or above expected levels. If the Company is unable to
generate sufficient cash flow from operations in the future to service its debt
and make necessary capital expenditures, or if its future earnings are
insufficient to make all required principal or interest payments out of
internally generated funds, the Company may be required to refinance all or a
portion of its existing debt, sell assets or obtain additional financing. There
can be no assurance that any such refinancing or asset sales would be possible
or that any additional financing could be obtained on terms acceptable to the
Company or at all, particularly in view of the Company's high level of debt.
The Company's high level of debt will have several important effects on its
future operations, including the following: (a) the Company will have
significant cash requirements to service debt, reducing funds available for
operations, expansions and improvements and increasing the Company's
vulnerability to adverse general economic and industry conditions; (b) the
financial covenants and other restrictions contained in the Senior Credit
Facility, the Indenture and other agreements relating to the Company's
indebtedness require the Company to meet certain financial tests and restrict
its ability to borrow additional funds and to dispose of assets and (c) because
of the Company's debt service requirements, funds available for working capital,
capital expenditures, acquisitions and general corporate purposes may be
limited. The Company's leveraged position may increase its vulnerability to
competitive pressures and the seasonality of the skiing and recreational
industries. In addition, although management believes that capital expenditures
above maintenance levels can be deferred to address cash flow or other
constraints, such initiatives cannot be deferred for extended periods without
adverse effects on skier days, revenues and profitability. The Company's
continued growth depends, in part, on its ability to maintain its facilities,
and, therefore, to the extent it is unable to do so with internally generated
cash, its inability to finance capital expenditures through borrowed funds could
have a material adverse effect on the Company's future operations.
FINANCIAL PERFORMANCE
For the twelve months ended October 31, 1996, after giving pro forma effect
to the Transactions, the Company would have incurred a net loss of $8.4 million,
primarily as a result of increased depreciation and amortization related to the
Acquisitions, increased interest expense related to the financing of the
Acquisitions and poor operating performance at Bear Mountain. For the six months
ended May 2, 1997, after giving pro
21
<PAGE> 25
forma effect to the Transactions, the Company would have generated net income of
only $805,000, primarily as a result of increased depreciation and amortization,
increased interest expense, poor weather conditions, particularly at Sierra, and
the incurrence of certain non-recurring or unusual expenses, as well as the
timing of real estate and timber sales. The Company generates the vast majority
of its annual revenues between November and April of each fiscal year, which
falls within the Company's first and second fiscal quarters. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
General" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Seasonality." There can be no assurance that the
Company's results of operations will improve in future periods.
HOLDING COMPANY STRUCTURE; EFFECTS OF ASSET ENCUMBRANCES
Virtually all of the Company's operating income will be generated by its
subsidiaries. As a result, the Company will be dependent on the earnings and
cash flow of, and dividends and distributions or advances from, its subsidiaries
to provide the funds necessary to meet its debt service obligations, including
the payment of principal of and interest on the Notes. In particular, the
Company is heavily dependent upon the earnings of Northstar, which accounted for
approximately 37% and 33% of the Company's pro forma revenues for the twelve
months ended October 31, 1996 and the six months ended May 2, 1997,
respectively. There can be no assurance that the Company's subsidiaries will
generate sufficient cash flow to dividend, distribute or advance funds to the
Company. Should the Company fail to satisfy any payment obligation under the
Notes, the holders thereof would have a direct claim therefor against the
Guarantors pursuant to the Guarantees. However, the Guarantees will be
effectively subordinated to all secured indebtedness of the Guarantors,
including the obligations of the Guarantors under the Senior Credit Facility.
Substantially all of the assets of the Guarantors are pledged to secure the
obligations of the Company and such Guarantors under the Senior Credit Facility.
The Indenture limits, but does not prohibit, the ability of the Company and its
Restricted Subsidiaries to incur additional senior or secured indebtedness. In
the event of a default under the Senior Credit Facility (or any other secured
indebtedness), the lenders thereunder would be entitled to a claim on the assets
securing such indebtedness which is prior to any claim of the holders of the
Notes. Accordingly, there may be insufficient assets remaining after payment of
prior secured claims (including claims of lenders under the Senior Credit
Facility) to pay amounts due on the Notes. See "-- High Level of Indebtedness
and Leverage" and "-- Effective Subordination of the Notes."
EFFECTIVE SUBORDINATION OF THE NOTES
The Notes and the Guarantees will be general senior unsecured obligations
of the Company and the Guarantors, respectively, and will be effectively
subordinated to all secured indebtedness of the Company and the Guarantors,
respectively, including indebtedness under the Senior Credit Facility. In
addition, the Notes will be structurally subordinated to any indebtedness of the
Company's subsidiaries that are not Guarantors. The Indenture limits, but does
not prohibit, the ability of the Company and its Restricted Subsidiaries to
incur additional secured indebtedness.
RESTRICTIONS UNDER DEBT AGREEMENTS
The Indenture contains covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries to incur additional
indebtedness, incur liens, pay dividends and make certain other restricted
payments, make investments, consummate certain asset sales, enter into certain
transactions with affiliates, issue subsidiary stock, create dividend or other
payment restrictions affecting Restricted Subsidiaries, consolidate or merge
with any other person or transfer all or substantially all of the assets of the
Company.
In addition, the Senior Credit Facility contains restrictive covenants
which, generally, are more restrictive than those contained in the Indenture,
and limit the ability of the Company and its subsidiaries to prepay their
indebtedness (including the Notes and obligations under the Guarantees). The
Senior Credit Facility also requires the Company to maintain specified
consolidated financial ratios and satisfy certain consolidated financial tests.
The Company's ability to meet those financial ratios and financial tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet those ratios and tests. A breach of any of the covenants under
the Senior Credit Facility or the Indenture could result in a default under the
Senior Credit Facility and/or the Indenture. If an event of default occurs under
the Senior Credit Facility,
22
<PAGE> 26
the lenders could elect to declare all amounts outstanding thereunder, together
with accrued interest, to be immediately due and payable. If the Company is
unable to repay those amounts, the lenders could proceed against the collateral
granted to them to secure that indebtedness. The capital stock of the Company's
principal subsidiaries, as well as substantially all of the Company's
consolidated assets, will be pledged to secure the Senior Credit Facility. See
"Description of the Notes" and "Description of Certain Indebtedness -- Senior
Credit Facility."
REGIONAL AND NATIONAL ECONOMIC CONDITIONS
The skiing industry is seasonal in nature, and is particularly vulnerable
to shifts in regional and national economic conditions. A significant portion of
the Company's guests reside in California, Washington and the New England
states. The economies of New England and California have been affected in recent
years by substantial job losses in the manufacturing sector and in the defense
industry, and have experienced other adverse economic trends. Although data
indicate an improvement of the New England and California economies, there can
be no assurance that such improvement will continue or that stagnation or
declines in skier days or real estate-related sales will not occur. Skiing is a
discretionary recreational activity entailing relatively high costs of
participation, and a worsening in the regional economy, or deteriorating
national economic conditions, could adversely impact skier days and the
Company's real estate and other revenues. Accordingly, the Company's financial
condition, particularly in light of its highly leveraged condition, could be
adversely affected by such a worsening in regional or national economies. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON WEATHER CONDITIONS; SEASONALITY
Although several of the Company's facilities include high quality
snowmaking equipment, its revenues and operating expenses continue to be heavily
influenced by weather conditions, particularly during key holiday periods and
weekends. Adverse weather conditions, such as warm weather, rainfall and/or an
extreme shortage of natural snowfall, lead to increased power and other
operating costs associated with snowmaking, and can render snowmaking wholly or
partially ineffective in maintaining quality skiing conditions. In addition,
other adverse weather conditions, such as extreme cold temperatures, can
adversely affect ski conditions and/or make skiing conditions less comfortable.
Moreover, it has been management's experience that, despite the presence of high
quality snow on the mountains, unfavorable weather conditions in more highly
populated areas can result in decreased skier days. Prolonged adverse weather
conditions, or the occurrence of such conditions during key periods of the ski
season, can dramatically and adversely affect operating results. For example,
skier days and resort revenue were significantly impacted by severe adverse
weather conditions at Bear Mountain during the 1995/96 ski season and at
Northstar, Sierra and the New Hampshire Resorts during the early part of the
1996/97 ski season. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General." In addition, the Company's
revenues are highly seasonal in nature, with the vast majority of its revenues
historically being generated in the first and fourth calendar quarters. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality." This high degree of seasonality of revenues
exacerbates the potential effect on operating results of adverse weather and
other developments of even moderate or limited duration.
COMPETITION
The skiing industry is highly competitive and is characterized by
relatively high fixed operating expenses and heavy dependence upon marginal
revenues and maintenance or improvement of skier day levels. The Company's
competitors include other major ski resorts in the western and northeastern
United States for skiers and snowboarders in those regional ski markets and
destination ski resorts throughout North America for its vacation business. The
Company also competes with other non-ski-oriented resorts. See "Business --
Competition." The Company believes that competition for skiers focuses on snow
conditions, size, quality and variety of terrain, the extent and quality of
other facilities, quality of service, location and accessibility, and price.
While the Company regularly monitors the activities of its principal competitors
and modifies its marketing and operational strategies and techniques as
necessary, there can be no assurance that its competitors will not be successful
in capturing a material portion of the Company's present or potential customer
base. Some of the Company's competitors have greater financial resources than
the Company and
23
<PAGE> 27
could use these resources to take steps which could adversely affect the
Company's competitive position. Such competitors may also be better positioned
than the Company to withstand downturns in the skiing industry, adverse weather
conditions, price and other forms of competition, and other negative
developments. See "Business -- Competition."
RISKS OF EXPANSION
An element of the Company's business strategy is the development of new
skiable terrain, recreational facilities and residential and commercial real
estate at its ski resorts. See "Business -- Real Estate Development." Such
efforts will be dependent upon, among other things, receipt of adequate
financing on suitable terms and obtaining and maintaining the requisite permits
and licenses. There can be no assurance as to whether, when or on what terms
such financing, permits and licenses may be obtained. In addition, such efforts
entail risks associated with development and construction activities, including
cost overruns, shortages of materials or skilled labor, labor disputes,
unforeseen environmental or engineering problems, work stoppages, and acts of
God, any of which could delay construction and result in a substantial increase
in cost to the Company. See "Business -- Real Estate Development" and
"Business -- Regulatory Matters." The Company may also grow through
acquisitions; however, there can be no assurance that attractive acquisition
candidates will be identified, or that any such acquisitions will be completed
on terms acceptable to the Company, that necessary financing will be available
on suitable terms, if at all, or that such acquisitions will be permitted under
applicable antitrust laws. See "-- High Level of Indebtedness and Leverage."
RISK ASSOCIATED WITH LEASED PROPERTY AND PROPERTY USED PURSUANT TO PERMITS
Portions of the land underlying certain of the Company's ski resorts are
used pursuant to permits or licenses from governmental and private entities. If
any such permit or license were to be terminated as a result of a default by the
user thereunder or not renewed upon expiration or otherwise revoked prior to
expiration, the Company would lose possession of the land subject thereto,
perhaps making it impossible for the Company to operate the affected resort.
Special use permits granted by the United States Forest Service (the "Forest
Service" or the "USFS") are subject to termination if the federal government
determines that the land is needed for a "higher public purpose." Such permits
are granted subject to third party claims to the permitted land, if any, and the
USFS reserves the right to use and permit others to use the permitted land so
long as such use does not materially interfere with the rights and privileges
authorized by the permits. For a description of such permits and licenses, see
"Business -- Regulation and Legislation." In addition, future expansion could
require amendment of the permits or licenses, which may involve additional
review under the federal National Environmental Policy Act (the "NEPA") or other
federal, state or local environmental laws and the imposition of additional
conditions and requirements.
REGULATORY MATTERS
The Company's resorts are subject to a wide variety of federal, state and
local laws and regulations designed to protect the environment. Management
believes that the Company's resorts have all permits, licenses and approvals
material to their operations and are presently in compliance with all land use
and environmental laws and regulations, except where non-compliance is not
expected to have a material adverse effect on the Company's financial condition
or future results of operations. However, failure to comply with such laws and
regulations could result in the imposition of severe penalties and other costs
or restrictions on operations by government agencies or courts that could
adversely affect operations. The restrictions imposed by or enforcement of
environmental laws and regulations may change from time to time, and there can
be no assurance that such changes will not occur in a manner that will cause a
detrimental effect to the Company, that material permits, licenses or agreements
will not be canceled, non-renewed, or renewed on terms materially less favorable
to the Company, or that necessary new permits and approvals will be obtained.
See "Business -- Regulation and Legislation" and "Business -- Regulatory
Matters."
The Company has not received any notice of material non-compliance with
permits, licenses or approvals necessary for the operation of its properties or
of any material liability under any environmental law or regulation. However, at
Grand Targhee, the Wyoming Department of Environmental Quality (the "DEQ") has
issued a Notice of Violation of state water pollution requirements based on
alleged discharge from a
24
<PAGE> 28
wastewater lagoon without a permit. The Company expects to enter into an amended
consent order with the DEQ requiring construction and operation of a new
wastewater facility by November 1998 at a cost ranging from approximately
$750,000 to $1.0 million. Penalties for the alleged noncompliance have not been
sought by the DEQ or by any other governmental authority or person, although
such action could be pursued. See "Business -- Regulatory Matters."
Pursuant to the air emissions reduction program currently in effect in the
area regulated by the South Coast Air Quality Management District (the
"SCAQMD"), where Bear Mountain is located, Bear Mountain will be required to
"bank" emission credits from other facilities which have already implemented
NO(x) emission reductions. The Company may purchase "banked" emission credits in
a one-time transaction at the current market rate of approximately $681,000 or
over time up to the year 2010 at prevailing market rates. See "Business --
Regulatory Matters."
ADEQUACY OF WATER SUPPLY
The Company's operations are heavily dependent upon its continued ability,
under applicable laws, regulations, policies, permits, licenses, or contractual
arrangements, including leases, reservations in deeds, easements and
rights-of-way, to have access to adequate supplies of water with which to make
snow and service the other needs of its facilities, and otherwise to conduct its
operations. There can be no assurance that new applications of existing laws,
regulations and policies, or changes in such laws, regulations and policies will
not occur in a manner that could have an adverse effect on the Company, or that
important permits, licenses or agreements will not be canceled, non-renewed, or
renewed on terms materially less favorable to the Company. Additionally, the
rights of the Company to use various water sources on or about its properties
may be also subject to the rights of other riparian users and the public
generally. See "Business -- Regulatory Matters" and "Business -- Resort
Operations." Waterville Valley's snowmaking equipment is presently dependent on
a single source of water that is inconsistent during the winter months;
construction of storage facilities to accumulate sufficient water throughout the
year will begin pending approval by the USFS. See "-- Dependence on Weather
Conditions; Seasonality" and "-- Risk Associated with Leased Property and
Property Used Pursuant to Permits."
CONTROLLING STOCKHOLDERS
George N. Gillett, Jr. beneficially owns all of the issued and outstanding
shares of voting stock of Parent and approximately 38% of the issued and
outstanding shares of capital stock of Parent on a fully-diluted basis. Mr.
Gillett also is Chairman of the Board of Directors and Chief Executive Officer
of the Company and Parent. By virtue of his stock ownership, management position
and pursuant to the Stockholders Agreement (as defined), Mr. Gillett will have
the power to control all matters submitted to stockholders of the Company and
Parent and to elect a majority of the directors of Parent and its subsidiaries.
John Hancock owns common stock and warrants of Parent representing approximately
53% of the issued and outstanding shares of capital stock of Parent on a
fully-diluted basis. Pursuant to the Stockholders Agreement, John Hancock is
entitled to designate two of the five members of Parent's Board of Directors.
The interests of Mr. Gillett and John Hancock as equity holders may differ from
the interests of holders of the Notes. See "Ownership and Control" and "Certain
Transactions."
CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all of the outstanding Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest to the date of repurchase. There can be no
assurance that the Company will have sufficient funds available to finance a
Change of Control Offer. In addition, upon a Change of Control, the Indenture
would require the Company, before repurchase of the Notes, to (i) repay in full
all obligations under or in respect of the Senior Credit Facility or offer to
repay in full all obligations under or in respect of the Senior Credit Facility
and repay the obligations under or in respect of the Senior Credit Facility of
each lender who has accepted such offer or (ii) obtain the requisite consent
under the Senior Credit Facility to permit the repurchase of the Notes as
described above. See "Description of the Notes -- Change of Control Offer." The
Company's inability to repay its obligations
25
<PAGE> 29
or obtain the requisite consent under the Senior Credit Facility, and to
repurchase all of the tendered Notes, would constitute an event of default under
the Indenture.
FRAUDULENT CONVEYANCE
The incurrence by the Company of indebtedness such as the Notes may be
subject to review under relevant state and federal fraudulent conveyance laws if
a bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors of
the Company. Under these laws, if a court were to find that, after giving effect
to the sale of the Notes and the application of the net proceeds therefrom,
either (a) the Company incurred such indebtedness with the intent of hindering,
delaying or defrauding creditors or contemplated insolvency with a design to
prefer one or more creditors to the exclusion in whole or in part of others or
(b) the Company received less than reasonably equivalent value or consideration
for incurring such indebtedness and (i) was insolvent or rendered insolvent by
reason of such transaction, (ii) was engaged in a business or transaction for
which the assets remaining with the Company constituted unreasonably small
capital or (iii) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they matured, such court may subordinate
such indebtedness to presently existing and future indebtedness of the Company,
avoid the issuance of such indebtedness and direct the repayment of any amounts
paid thereunder to the Company's creditors or take other action detrimental to
the holders of such indebtedness.
The Company's obligations under the Notes are guaranteed by the Guarantors.
The incurrence by a Guarantor of a Guarantee may be subject to review under
relevant state and federal fraudulent conveyance laws if a bankruptcy case or
lawsuit is commenced by or on behalf of unpaid creditors of such Guarantor.
Under these laws, if a court were to find that either (a) a Guarantee was
incurred by a Guarantor with the intent of hindering, delaying or defrauding
creditors or such Guarantor contemplated insolvency with a design to prefer one
or more creditors to the exclusion in whole or in part of others or (b) such
Guarantor received less than reasonably equivalent value or consideration for
incurring such Guarantee and (i) was insolvent or rendered insolvent by reason
of such transaction, (ii) was engaged in a business or transaction for which the
assets remaining with such Guarantor constituted unreasonably small capital or
(iii) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, such court may subordinate such
Guarantee to presently existing and future indebtedness of such Guarantor, avoid
the issuance of such Guarantee and direct the repayment of any amounts paid
thereunder to such Guarantor's creditors or take other action detrimental to the
holders of such Guarantee. A legal challenge of a Guarantee on fraudulent
conveyance grounds, may, among other things, focus on the benefits, if any,
realized by the Guarantor as a result of the issuance by the Company of the
Notes.
To the extent any Guarantee were avoided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the Notes would cease to have any
claim in respect of such Guarantor and would be creditors solely of the Company
and any Guarantor whose Guarantee was not avoided or held unenforceable. In such
event, the claims of the holders of the applicable Notes against the issuer of
an invalid Guarantee would be subject to the prior payment of all liabilities
and preferred stock claims of such Guarantor. There can be no assurance that,
after providing for all prior claims and preferred stock interests, if any,
there would be sufficient assets to satisfy the claims of the holders of the
applicable Notes relating to any voided portions of any of the Guarantees.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, were greater than the value of all its property at a fair
valuation, or if the present fair saleable value of the debtor's assets were
less than the amount required to repay its probable liabilities on its debts,
including contingent liabilities, as they become absolute and matured.
Based upon financial and other information currently available to it,
management of the Company believes that the indebtedness retired with the
proceeds of the Initial Offering and the indebtedness evidenced by the Notes and
the Guarantees was incurred for proper purposes and in good faith, and that at
the time the Company incurred the indebtedness retired with the proceeds of the
Initial Offering and the Company and the Guarantors incurred the indebtedness
evidenced by the Notes and the Guarantees, the Company and each Guarantor was
(i) neither insolvent nor rendered insolvent thereby, (ii) in possession of
sufficient capital to
26
<PAGE> 30
run its business effectively and (iii) incurring debts within its ability to pay
as the same mature or become due. See "Management's Discussions and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." In reaching these conclusions, the Company has relied upon various
valuations and estimates of future cash flow that necessarily involve a number
of assumptions and choices of methodology. No assurance can be given, however,
that the assumptions and methodologies chosen by the Company would be adopted by
a court or that a court would concur with the Company's conclusions.
DEPENDENCE ON KEY PERSONNEL
The Company's business depends upon the efforts, abilities and expertise of
its executive officers and other key employees, including George N. Gillett, Jr.
If the Company were to lose the services of certain of these executive officers
or key employees, the Company's operating results could be adversely affected.
The Company has no long-term employment contracts with any of its executive
officers or key employees. See "Management."
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange Offer,
there has not been any public market for the Old Notes. The Old Notes have not
been registered under the Securities Act and will be subject to restrictions on
transferability to the extent that they are not exchanged for New Notes by
holders who are entitled to participate in the Exchange Offer. The holders of
Old Notes (other than any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who are not eligible to
participate in the Exchange Offer are entitled to certain registration rights,
and the Company and the Guarantors are required to file a Shelf Registration
Statement with respect to such Old Notes. The New Notes will constitute a new
issue of securities with no established trading market. The Company does not
intend to list the New Notes on any national securities exchange or seek the
admission thereof to trading in the National Association of Securities Dealers
Automated Quotation System. The Initial Purchaser has advised the Company that
it currently intends to make a market in the New Notes, but it is not obligated
to do so and may discontinue such market making at any time. In addition, such
market making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act and may be limited during the Exchange Offer and the
pendency of the Shelf Registration Statement. Accordingly, no assurance can be
given that an active public or other market will develop for the New Notes or as
to the liquidity of the trading market for the New Notes. If a trading market
does not develop or is not maintained, holders of the New Notes may experience
difficulty in reselling the New Notes or may be unable to sell them at all. If a
market for the New Notes develops, any such market may be discontinued at any
time.
If a public trading market develops for the New Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the New Notes may trade at a discount from their
principal amount.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of the Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth in the legend thereon, as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws, or pursuant to an exemption therefrom. Except under certain
limited circumstances, the Company does not intend to register the Old Notes
under the Securities Act. In addition, any holder of Old Notes who tenders in
the Exchange Offer for the purpose of participating in a distribution of the New
Notes may be deemed to have received restricted securities and, if so, will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. To the extent Old
Notes are tendered and accepted in the Exchange Offer, the trading market, if
any, for the Old Notes not so tendered could be adversely affected. See "The
Exchange Offer."
27
<PAGE> 31
THE TRANSACTIONS
THE NEW HAMPSHIRE ACQUISITIONS
On November 27, 1996, Booth Creek Ski Acquisition Corp., a wholly-owned
subsidiary of the Company, purchased the assets of the Waterville Valley and Mt.
Cranmore resorts from subsidiaries of American Skiing Company for an aggregate
purchase price of $17.5 million (the "New Hampshire Acquisitions"). The purchase
price was paid with $14.75 million in cash (before giving effect to normal
working capital adjustments for current assets acquired and current liabilities
assumed, primarily consisting of receivables, inventories, accounts payable and
deferred revenues) and the $2.75 million ASC Seller Note. See "Description of
Certain Indebtedness -- ASC Seller Note."
THE CALIFORNIA ACQUISITIONS
On December 3, 1996, the Company purchased from Fibreboard Corporation all
of the issued and outstanding capital stock of Trimont Land Company, which
operates Northstar, Sierra-at-Tahoe, Inc., which operates Sierra, and Bear
Mountain, Inc., which operates Bear Mountain (the "California Acquisitions").
The aggregate purchase price for the California Acquisitions was $121.5 million
in cash (before giving effect to normal working capital adjustments for current
assets acquired and current liabilities assumed, primarily consisting of
receivables, inventories, accounts payable and deferred revenues).
THE SNOQUALMIE ACQUISITION
Effective January 15, 1997, the Company purchased all of the issued and
outstanding common stock of Ski Lifts, Inc. ("Ski Lifts"), the owner and
operator of the ski resort assets of Snoqualmie Pass (the "Snoqualmie
Acquisition"), for an aggregate purchase price of approximately $14.0 million,
which included the assumption of approximately $3.6 million of indebtedness, the
issuance by Ski Lifts of the $9.8 million Snoqualmie Seller Note, and other
obligations to the selling shareholders of approximately $600,000. The
Snoqualmie Seller Note, which bore interest at a rate of 5% per annum, was
repaid with a portion of the proceeds of the Initial Offering.
In connection with the consummation of the Snoqualmie Acquisition, Ski
Lifts transferred approximately 71 acres of owned real estate held for
development purposes into a Delaware limited liability company (the "Real Estate
LLC"), of which Ski Lifts is a member and 99% equity interest holder and the
Company is the other member and 1% equity interest holder. The Real Estate LLC
has been an Unrestricted Subsidiary since the closing of the Initial Offering.
In addition, Ski Lifts granted the Real Estate LLC an option (the "Real Estate
Option") to purchase an additional 14 acres of developmental real estate for
nominal consideration, exercisable under certain conditions. Ski Lifts also
issued 28,000 shares of non-voting preferred stock (the "Ski Lifts Preferred
Stock") to its prior owners having an aggregate liquidation preference equal to
$3.5 million, the aggregate estimated fair market value of the real estate
transferred to the Real Estate LLC and the real estate subject to the Real
Estate Option. Concurrently with these transactions, the Real Estate LLC entered
into an agreement to purchase (the "Preferred Stock Purchase Agreement") the Ski
Lifts Preferred Stock, on a quarterly basis over the five years following the
date of the Snoqualmie Acquisition, at a purchase price equal to the liquidation
preference thereof plus accrued dividends to the date of purchase. The Company
advanced the first three quarterly payments under the Preferred Stock Purchase
Agreement at or prior to the closing date of the Initial Offering. The Real
Estate LLC's obligations under the Preferred Stock Purchase Agreement are
secured by a first priority lien on the developmental real estate held by the
Real Estate LLC and substantially all of its other assets. The Ski Lifts
Preferred Stock provides for a 9% cumulative dividend and is redeemable at the
option of Ski Lifts without premium. In addition, pursuant to the terms of the
Ski Lifts Preferred Stock, the holders thereof have no redemption rights and are
entitled to receive dividend payments only when and if declared by the board of
directors of Ski Lifts. See "Description of Certain Indebtedness -- Ski Lifts
Preferred Stock Purchase Agreement."
28
<PAGE> 32
THE GRAND TARGHEE ACQUISITION
On March 18, 1997, the Company acquired all the issued and outstanding
capital stock of Grand Targhee Incorporated (the "Grand Targhee Acquisition"),
the owner of the ski resort assets of Grand Targhee, for an aggregate purchase
price of approximately $7.9 million plus contingent payments of up to $2.0
million based on the number of skier days recorded at Grand Targhee through the
1998/99 ski season and additional commissions of up to approximately $1.8
million based on the number of dwelling units developed at the resort through
2012 at a rate of $3,000 per unit.
THE SENIOR CREDIT FACILITY
On December 3, 1996, the Company and certain of its subsidiaries entered
into the Senior Credit Facility with The First National Bank of Boston, as
lender and administrative agent, which provided for borrowings in a principal
amount of up to $10.0 million at any one time outstanding. In connection with
the consummation of the Initial Offering, the Senior Credit Facility was amended
to, among other things, increase the total revolving credit commitment
thereunder to $20.0 million, subject to certain conditions, and the initial
borrowing availability to $12.0 million, subject to seasonal reductions. The
Senior Credit Facility is secured by a substantial portion of the Company's
consolidated assets and a pledge of the stock of Booth Creek's principal
subsidiaries. See "Description of Certain Indebtedness -- Senior Credit
Facility."
THE BRIDGE FINANCING FACILITIES
Financing for the acquisitions of the California Resorts and the New
Hampshire Resorts was provided in part by (i) $90.0 million from the issuance of
the Bridge Notes and (ii) $10.0 million from the issuance of the Hancock Option
Notes by Parent to John Hancock. Prior to the consummation of the Offering, the
Hancock Option Notes were exchanged for notes of the Company with substantially
identical terms, which were then repaid with a portion of the net proceeds of
the Initial Offering. The Bridge Notes bore interest at an average rate of
approximately 11 1/4% prior to their repayment. The Hancock Option Notes bore
interest at a rate of 12% per annum.
THE EQUITY FINANCING
Financing for the acquisitions of the California Resorts and the New
Hampshire Resorts was also provided in part by the investment in the Company of
$40.0 million of equity by Parent. The funds comprising the equity contribution
from Parent were obtained from the issuance by Parent of equity and notes to
John Hancock, CIBC WG Argosy Merchant Fund 2, L.L.C. (the "CIBC Merchant Fund")
and Booth Creek Partners Limited II, L.L.L.P. Prior to the consummation of the
Initial Offering, Parent made an additional equity contribution of $6.5 million.
See "Certain Transactions -- The Financing Transactions."
THE INITIAL OFFERING
The Initial Offering, in which $110.0 million aggregate principal amount of
Old Notes were sold by the Company to the Initial Purchaser on March 18, 1997
and an additional $6.0 million aggregate principal amount of Old Notes were sold
by the Company to the Initial Purchaser on April 25, 1997 pursuant to the
exercise of an option by the Initial Purchaser, yielded net proceeds to the
Company of approximately $112.5 million. The Company used the net proceeds from
the Initial Offering, as well as an additional $6.5 million equity contribution
from Parent and available cash on hand, (i) to repay the entire amount
outstanding under the Bridge Financing Facilities, which was $100.0 million, the
entire amount outstanding under the Snoqualmie Seller Note, which bore interest
at a rate of 5% per annum, which was approximately $9.8 million, and
approximately $3.6 million of debt assumed in connection with the Snoqualmie
Acquisition, (ii) to finance the approximately $7.5 million purchase price of
the Grand Targhee Acquisition, (iii) to pay the approximately $4.5 million of
fees and expenses incurred in connection with the Initial Offering and the
Senior Credit Facility and (iv) for general corporate purposes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
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<PAGE> 33
CAPITALIZATION
The following table sets forth the cash and the capitalization of the
Company at May 2, 1997. This table should be read in conjunction with the
information contained in unaudited financial statements of the Company as of May
2, 1997.
<TABLE>
<CAPTION>
AS OF MAY 2, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash(a)..................................................... $ 8,716
========
Debt:
Senior Credit Facility(b)................................. $ --
ASC Seller Note(c)........................................ 2,500
Notes..................................................... 116,000
Other Debt(d)............................................. 867
--------
Total Debt............................................. 119,367
Preferred Stock of Subsidiary(e)............................ 3,125
Common Stockholders' Equity(f).............................. 48,662
--------
Total Capitalization................................... $171,154
========
</TABLE>
- ---------------
(a) Cash at May 2, 1997 includes $655,000 of cash restricted in escrow for
payment of an assumed $655,000 obligation of Grand Targhee and restricted
cash of $240,000 relating to advance deposits for lodging and property
rentals.
(b) The Senior Credit Facility provides for a total revolving credit commitment
of $20.0 million, subject to certain conditions, and initial borrowing
availability of up to $12.0 million. The Company generates a significant
amount of cash flow from operations between November and April of each
year. A significant portion of the Company's available cash on hand upon
consummation of the Initial Offering was used to fund the Transactions.
(c) The ASC Seller Note was issued in connection with the New Hampshire
Acquisitions. The ASC Seller Note bears interest at 12% per annum and
matures on June 20, 2004. As of May 2, 1997, $250,000 of this note has been
paid.
(d) Represents debt assumed in connection with the acquisitions and capital
leases.
(e) Represents preferred stock of Ski Lifts, Inc., a subsidiary of the Company,
held by the prior owners of Ski Lifts, Inc. An Unrestricted Subsidiary of
the Company has an obligation to purchase the Ski Lifts Preferred Stock.
Such obligation is non-recourse to the Company and its Restricted
Subsidiaries. As of May 2, 1997, $375,000 of the preferred stock has been
repurchased.
(f) Parent contributed an aggregate of $40.0 million to the Company on November
27, 1996 and December 3, 1996 in connection with the New Hampshire
Acquisitions and the California Acquisitions, respectively, and made
additional capital contributions totaling $6.5 million prior to the
consummation of the Initial Offering. The pro forma balance also reflects
the write-off of $2.7 million of deferred financing costs related to the
repayment of the Bridge Financing Facilities.
30
<PAGE> 34
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma condensed consolidated statements of
operations give effect to the Transactions as if they had occurred on November
1, 1995.
The pro forma financial information presented below should be read in
conjunction with the separate historical consolidated financial statements of
the Company and certain of the businesses it has acquired, and related notes
thereto, included elsewhere in this Prospectus. The pro forma condensed
consolidated financial statements do not purport to be indicative of the results
that actually would have been obtained had the Transactions occurred as of the
assumed dates and for the periods presented and are not intended to be a
projection of future results or trends. Operating results for any interim period
are not necessarily indicative of results that may be expected for the full
year.
The pro forma adjustments, as described in the accompanying Notes to
Unaudited Pro Forma Financial Information, are based on available information
and certain assumptions that management believes are reasonable. The allocations
of the purchase prices of the Acquisitions are subject to revision when
additional information concerning certain asset valuations is obtained and such
revisions could be material.
31
<PAGE> 35
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
FOR THE SIX MONTHS ENDED MAY 2, 1997
<TABLE>
<CAPTION>
CALIFORNIA
RESORTS NEW HAMPSHIRE RESORTS
---------------- -------------------------------------
FIBREBOARD
RESORT WATERVILLE SNOQUALMIE
GROUP VALLEY MT. CRANMORE PASS
HISTORICAL HISTORICAL HISTORICAL HISTORICAL
---------------- ---------- ------------ ----------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FROM FROM FROM FROM
THE NOVEMBER 1, 1996 OCTOBER 28, 1996 OCTOBER 28, 1996 NOVEMBER 1, 1996
COMPANY THROUGH THROUGH THROUGH THROUGH
HISTORICAL(A) DECEMBER 2, 1996 NOVEMBER 26, 1996 NOVEMBER 26, 1996 JANUARY 15, 1997
------------- ---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Resort Operations....... $60,469 $ 1,395 $ 310 $ 45 $3,465
Real Estate and Other... 450 304
Operating Expenses:
Resort Operations....... 43,450 4,040 674 245 2,816
Cost of Sales -- Real
Estate and Other...... 378 161 -- --
Depreciation and
Amortization.......... 5,124 7 82 18 208
------- ------- ----- ----- ------
Operating Income......... 11,967 (2,509) (446) (218) 441
Interest Expense (net)... 6,304 289 10 15 79
------- ------- ----- ----- ------
Pre-tax Income (Loss).... 5,663 (2,798) (456) (233) 362
Income Taxes (Benefit)... 1,416 (885) -- -- --
------- ------- ----- ----- ------
Income (Loss) Before
Minority Interest and
Extraordinary Item...... 4,247 (1,913) (456) (233) 362
Minority Interest........ 87 -- -- -- --
------- ------- ----- ----- ------
Income (Loss) Before
Extraordinary Item...... 4,160 (1,913) (456) (233) 362
Extraordinary Loss on
Early Retirement of
Debt.................... 1,998 -- -- -- --
------- ------- ----- ----- ------
Net Income (Loss)........ $ 2,162 $(1,913) $(456) $(233) $ 362
============ ================ ================= ================= ================
OTHER DATA:
EBITDA................... $17,440 $(2,369) $(364) $(200) $ 649
Non-cash Cost of Real
Estate and Other........ $ 349 $ 133 $ -- $ -- $ --
<CAPTION>
GRAND
TARGHEE
HISTORICAL
----------------
FOR THE PERIOD
FROM PRO FORMA
NOVEMBER 1, 1996 FOR THE SIX
THROUGH PRO FORMA MONTHS ENDED
MARCH 18, 1997 ADJUSTMENTS MAY 2, 1997
---------------- ----------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Resort Operations....... $4,746 $ -- $70,430
Real Estate and Other... -- 754
Operating Expenses:
Resort Operations....... 3,936 (75)(b) 55,064
(22)(c)
Cost of Sales -- Real
Estate and Other...... -- -- 539
Depreciation and
Amortization.......... 275 1,078(d) 6,792
------ ------- -------
Operating Income......... 535 (981) 8,789
Interest Expense (net)... 24 1,122(e) 7,843(i)
------ ------- -------
Pre-tax Income (Loss).... 511 (2,103) 946
Income Taxes (Benefit)... 231 (762)(f) --
------ ------- -------
Income (Loss) Before
Minority Interest and
Extraordinary Item...... 280 (1,341) 946
Minority Interest........ -- 54(g) 141
------ ------- -------
Income (Loss) Before
Extraordinary Item...... 280 (1,395) 805
Extraordinary Loss on
Early Retirement of
Debt.................... -- (1,998)(h) --
------ ------- -------
Net Income (Loss)........ $ 280 $ 603 $ 805
================ =========== ===============
OTHER DATA:
EBITDA................... $ 810 $ 97 $16,063(j)
Non-cash Cost of Real
Estate and Other........ $ -- $ -- $ 482
</TABLE>
Note: Except for minor cutoff differences by resort ranging from one to three
days, all of the financial information presented above is for the period
from November 1, 1996 through May 2, 1997.
(see footnotes on following pages)
32
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(a) The Company historical consolidated statement of operations includes the
results of operations for each acquisition since the respective date of
acquisition as follows:
<TABLE>
<S> <C> <C>
California Resorts -- December 3, 1996
New Hampshire Resorts -- November 27, 1996
Snoqualmie Pass -- January 15, 1997
Grand Targhee -- March 18, 1997
</TABLE>
(b) The following adjustments have been made to reduce historical operating
expenses:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 2, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
THE ACQUISITIONS
Replacement of executive management....................... $52
Lease modification........................................ 23
----
Total........................................... $75
====
</TABLE>
Replacement of executive management represents elimination of non-recurring
executive management compensation and benefits paid to (i) former owners of
Ski Lifts, Inc. and (ii) former owners of Grand Targhee Incorporated. The
responsibilities of these individuals will be absorbed by existing Company
management.
Lease modification represents elimination of lease expenses for the
Teewinot Lodge, which is being acquired by the Company in the Grand Targhee
Acquisition.
(c) Represents corporate management fee allocations from Fibreboard Corporation
($70,000) for the period from November 1, 1996 through December 2, 1996 and
American Skiing Company and S-K-I Limited for Waterville Valley ($10,000)
for the period from October 28, 1996 through November 27, 1996 net of (i)
the management fees that would have been paid to Booth Creek, Inc. pursuant
to the Management Agreement ($29,000) and (ii) the estimated amounts for
certain corporate expenses if the Company had operated on a stand-alone
basis ($29,000).
(d) Historical depreciation and amortization for periods prior to the respective
resort acquisition dates has been adjusted to reflect post-acquisition date
assumptions. Pro forma depreciation and amortization charges relate to the
estimated fair values assigned using purchase accounting. Land improvements
and buildings have been assigned a 20 year life, machinery and equipment 3
to 15 year lives, and goodwill a 15 year life. These are estimated charges
based on preliminary purchase price allocations which are subject to final
allocations pursuant to appraisals.
(e) Historical interest expense has been eliminated. Pro forma interest expense
includes interest on the $116.0 million of Notes at 12.5%, the ASC Seller
Note at 12%, certain capital leases and other debt at 10% and amortization
of $6.0 million of deferred financing fees (amortized generally over a 10
year period).
(f) Adjusts income tax provision to reflect the expected pro forma effective tax
rate for the period.
(g) Reflects cumulative preferred stock dividend of 9% on the Ski Lifts
Preferred Stock.
(h) Eliminates historical extraordinary loss on early retirement of debt.
(i) Pro forma cash interest expense would be approximately $7.4 million which
excludes $430,000 in amortization of deferred financing fees.
(j) EBITDA is not a measure of performance under United States generally
accepted accounting principles, and should not be considered in isolation or
as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with
generally accepted accounting principles, or as a measure of profitability
or liquidity. Pro forma EBITDA does not reflect certain additional
adjustments which management believes are relevant in evaluating the future
operating performance of Company. The following additional adjustments,
which eliminate the impact of certain nonrecurring charges and reflect the
estimated impact of management's business and operating strategy are based
on estimates and assumptions made and believed to be reasonable by the
Company and are
33
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS -- (CONTINUED)
inherently uncertain and subject to change. The following calculation should
not be viewed as indicative of actual or future results. The following table
reflects the effects of these items:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 2, 1997
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Pro forma EBITDA........................................... $16,063
Additional adjustments:
Reduction of insurance premium........................... 134
In-house operation of certain ski related services....... 435
One-time charges at Grand Targhee........................ 54
-------
Total additional adjustments.......................... 623
-------
Adjusted pro forma EBITDA.................................. $16,686
================
</TABLE>
Reduction of insurance premium represents elimination of insurance expenses
as a result of a new insurance package entered into by the Company, which
has reduced insurance premiums as a result of the consolidation of the
Company's resorts.
In-house operation of certain ski-related services represents the increase
in revenues and elimination of expenses related to services performed by
outside vendors at Snoqualmie Pass that will be performed by the Company
and which are performed by the Company at its other resorts.
One-time charges at Grand Targhee represents elimination of the cost
associated with abandoning a land exchange project.
34
<PAGE> 38
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 1996
------------------------------------------------------------------------------------------
CALIFORNIA
RESORTS NEW HAMPSHIRE
---------- RESORTS
FIBREBOARD -----------------------
THE RESORT WATERVILLE MT. SNOQUALMIE
COMPANY GROUP VALLEY CRANMORE PASS PRO FORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Resort Operations..... $-- $44,773 $11,733 $4,004 $9,504 $ -- $70,014
Real Estate and
Other............... -- 4,657 -- -- -- -- 4,657
Operating Expenses:
Resort Operations..... -- 36,017 10,302 3,556 8,176 (278)(a) 57,095
(678)(b)
Cost of Sales -- Real
Estate and Other.... -- 2,297 -- -- -- -- 2,297
Depreciation and
Amortization........ -- 5,483 1,229 222 950 4,511 (c) 12,395
--- ------- ------- ------ ------ -------- -------
Operating Income
(Loss)................ -- 5,633 202 226 378 (3,555) 2,884
Interest Expense
(net)................. -- 1,676 100 225 335 10,395 (d) 12,731
--- ------- ------- ------ ------ -------- -------
Pre-tax Income (Loss)... 3,957 102 1 43 (13,950) (9,847)
Income Taxes
(Benefit)............. -- 1,630 455 -- -- (5,679)(e) (3,594)
--- ------- ------- ------ ------ -------- -------
Income (Loss) Before
Minority Interest..... -- 2,327 (353) 1 43 (8,271) (6,253)
Minority Interest....... -- -- -- -- -- 281 (f) 281
--- ------- ------- ------ ------ -------- -------
Net Income (Loss)....... $-- $ 2,327 $ (353) $ 1 $ 43 $ (8,552) $(6,534)
======= ======== ======= ======= ======== ========= ========
OTHER DATA:
EBITDA.................. $-- $12,723 $ 1,431 $ 448 $1,328 $ 956 $16,886
Non-cash Cost of Real
Estate and Other...... $-- $ 1,607 $ -- $ -- $ -- $ -- $ 1,607
<CAPTION>
YEAR ENDED OCTOBER 31, 1996
-------------------------------------
GRAND
TARGHEE PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Resort Operations..... $7,457 $ -- $77,471
Real Estate and
Other............... -- -- 4,657
Operating Expenses:
Resort Operations..... 6,569 (135)(a) 63,529
Cost of Sales -- Real
Estate and Other.... -- 2,297
Depreciation and
Amortization........ 626 176 (g) 13,197
------ ------- -------
Operating Income
(Loss)................ 262 (41) 3,105
Interest Expense
(net)................. 122 2,833 (h) 15,686(j)
------ ------- -------
Pre-tax Income (Loss)... 140 (2,874) (12,581)
Income Taxes
(Benefit)............. 48 (891)(i) (4,437)
------ ------- -------
Income (Loss) Before
Minority Interest..... 92 (1,983) (8,144)
Minority Interest....... -- -- 281
------ ------- -------
Net Income (Loss)....... $ 92 $(1,983) $(8,425)
======= ========= ========
OTHER DATA:
EBITDA.................. $ 888 $ 135 $17,909(k)
Non-cash Cost of Real
Estate and Other...... $ -- $ -- $ 1,607
</TABLE>
Note: Except for minor cutoff differences by resort ranging from one to three
days, all of the financial information presented above is for the period
from November 1, 1996 through May 2, 1997.
(see footnotes on following pages)
35
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(a) The following adjustments have been made to reduce historical operating
expenses:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
THE ACQUISITIONS (EXCLUDING THE GRAND TARGHEE ACQUISITION)
Replacement of executive management....................... $116
Profit sharing payment.................................... 162
------
Total........................................... $278
======
THE GRAND TARGHEE ACQUISITION
Replacement of executive management....................... $ 75
Lease modification........................................ 60
------
Total........................................... $135
======
</TABLE>
Replacement of executive management represents elimination of non-recurring
executive management compensation and benefits paid to (i) former owners of
Ski Lifts, Inc. and (ii) former owners of Grand Targhee Incorporated. The
responsibilities of these individuals will be absorbed by existing Company
management.
Profit sharing payment represents elimination of one-time profit sharing
contribution, considered a retention bonus, given to Ski Lifts, Inc.
workforce in anticipation of the Snoqualmie Acquisition as specified in the
acquisition agreement.
Lease modification represents elimination of lease expenses for the
Teewinot Lodge, which is being acquired by the Company in the Grand Targhee
Acquisition.
(b) Represents corporate management fee allocations from Fibreboard Corporation
($791,000) and American Skiing Company and S-K-I Limited for Waterville
Valley ($587,000) net of (i) the management fees that would have been paid
to Booth Creek, Inc. pursuant to the Management Agreement ($350,000) and
(ii) the estimated amounts for certain corporate expenses if the Company had
operated on a stand-alone basis ($350,000).
(c) Historical depreciation and amortization are eliminated. Pro forma
depreciation and amortization charges relate to the estimated fair values
assigned using purchase accounting. Land improvements and buildings have
been assigned a 20 year life, machinery and equipment 3 to 15 year lives,
and goodwill a 15 year life. These are estimated charges based on
preliminary purchase price allocations which are subject to final
allocations pursuant to appraisals.
(d) Historical interest expense has been eliminated. Pro forma interest expense
includes interest on the Bridge Financing Facilities at 11%, the Senior
Credit Facility at 8.5%, the Snoqualmie Seller Note and debt assumed in
connection with the Snoqualmie Acquisition, the ASC Seller Note at 12% and
amortization of $5.2 million of deferred financing fees (amortized generally
over a 10 year period).
(e) Adjusts income tax provision to reflect an estimated 36.5% effective tax
rate.
(f) Reflects cumulative preferred stock dividend of 9% on the Ski Lifts
Preferred Stock.
(g) Historical depreciation and amortization are eliminated. Pro forma
depreciation and amortization charges relate to the estimated fair values
assigned using purchase accounting. Land improvements and buildings have
been assigned a 20 year life, machinery and equipment 3 to 15 year lives,
and goodwill a 15 year life. These are estimated charges based on
preliminary purchase price allocations which are subject to final
allocations pursuant to appraisals.
(h) Historical interest expense has been eliminated. Pro forma interest expense
includes interest on the $116.0 million of Notes at 12.5%, the ASC Seller
Note at 12%, certain capital leases and other debt at 10% and amortization
of $6.0 million of deferred financing fees (amortized generally over a 10
year period).
(i) Adjusts income tax provision to reflect the benefit of operating losses to
the extent of recorded deferred tax liabilities.
(j) Pro forma cash interest expense would be approximately $14.8 million which
excludes $860,000 in amortization of deferred financing fees.
(k) EBITDA is not a measure of performance under United States generally
accepted accounting principles, and should not be considered in isolation or
as a substitute for net income, cash flows from operating
36
<PAGE> 40
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS -- (CONTINUED)
activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles, or as a measure of
profitability or liquidity. Pro forma EBITDA does not reflect certain
additional adjustments which management believes are relevant in evaluating
the future operating performance of Company. The following additional
adjustments, which eliminate the impact of certain nonrecurring charges and
reflect the estimated impact of management's business and operating strategy
are based on estimates and assumptions made and believed to be reasonable by
the Company and are inherently uncertain and subject to change. The
following calculation should not be viewed as indicative of actual or future
results. The following table reflects the effects of these items:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1996
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Pro forma EBITDA........................................... $17,909
Additional adjustments:
Reduction of insurance premium........................... 652
Snoqualmie Pass cost reductions.......................... 500
In-house operation of certain ski related services....... 435
Removal of Bear Mountain one-time post-acquisition
adjustments........................................... 415
Post-closing inventory and accounting adjustments........ 309
One-time charges at Grand Targhee........................ 237
One-time charges at Waterville Valley.................... 147
Removal of prior owner services at Mt. Cranmore.......... 49
-------
Total additional adjustments.......................... 2,744
-------
Adjusted pro forma EBITDA.................................. $20,653
=======
</TABLE>
Reduction of insurance premium represents elimination of insurance expenses
as a result of a new insurance package entered into by the Company, which
has reduced insurance premiums as a result of the consolidation of the
Company's resorts.
Snoqualmie Pass cost reductions represents elimination of expenses
primarily related to a reduction in summer labor costs.
In-house operation of certain ski-related services represents the increase
in revenues and elimination of expenses related to services performed by
outside vendors at Snoqualmie Pass that will be performed by the Company
and which are performed by the Company at its other resorts.
Removal of Bear Mountain one-time post-acquisition adjustments represents
elimination of certain charges incurred by the Company in connection with
the acquisition of Bear Mountain by Fibreboard Corporation, which the
Company believes will not occur in the future. These costs included
misclassified payroll and related expenses, labor expense overruns expected
to be reduced and snowboard inventory writeoffs.
Post-closing inventory and accounting adjustments represents elimination of
one-time charges at Northstar for inventory write-offs and sales tax audit
adjustments.
One-time charges at Grand Targhee represents elimination of several
one-time expenses incurred by Grand Targhee Incorporated that reduced
operating results. These expenses include the cost associated with
abandoning a land exchange project, the write-off of an investment in a
central reservation system, the establishment of an accrual for vacation
pay, contributions to a local charity associated with the shareholders of
Grand Targhee Incorporated, a loss on the disposal of fixed assets, fees
associated with an application for financing which was never consummated
and the write-off of certain credit card receivables.
One-time charges at Waterville Valley represent elimination of several
expenses incurred by Waterville Valley that were either non-recurring in
nature, such as expenses related to the former owner, emissions testing for
the state, or a tank removal project, or related to expenditures for
property, plant and equipment which the Company would have capitalized such
as roof and lodge repairs and various signage.
Removal of prior owner services at Mt. Cranmore represents elimination of
expenses incurred by Mt. Cranmore that were allocated to the resort by its
former owner for services which are now being provided by the Company at no
cost.
37
<PAGE> 41
UNAUDITED ADJUSTED PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT REVENUE PER SKIER DAY)
The following unaudited adjusted pro forma financial data, which is not
determined in accordance with generally accepted accounting principles, give
effect to the Transactions as if they had been completed as of November 1, 1995.
The information presented may not be indicative of the actual results had the
Transactions occurred on such date, and there can be no assurance that the
Company will be able to achieve such results in the future. The unaudited
adjusted pro forma financial data reflect the combined financial data of the
Company's seven ski resort complexes adjusted for the removal of (i) corporate
expenses and allocations, (ii) management fees, (iii) one-time expenses and
write-offs and (iv) other non-recurring charges of prior owners. In addition,
the unaudited adjusted pro forma financial data give effect to the Management
Agreement (as defined) with Booth Creek, Inc. and the reduction of full-time
employees and other operating improvements which management of the Company
expects to implement. See "Certain Transactions -- Management Agreement with
Booth Creek, Inc." The unaudited adjusted pro forma financial data presented
below should be read in conjunction with the information contained in "Pro Forma
Financial Information" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
ADJUSTED PRO FORMA
-----------------------------------------
YEAR ENDED SIX MONTHS ENDED
OCTOBER 31, 1996(A) MAY 2, 1997(B)
(UNAUDITED)
------------------- ------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Resort Operations......................................... $ 77,471 $ 70,430
Real Estate and Other..................................... 4,657 754
--------- ---------
82,128 71,184
Operating Expenses:
Cost of Sales -- Resort Operations(c)..................... 60,785 54,441
Cost of Sales -- Real Estate and Other(c)................. 690 57
--------- ---------
Adjusted Pro Forma EBITDA(c)................................ $ 20,653 $ 16,686
========= =========
OTHER FINANCIAL AND OPERATING DATA:
RESTRICTED GROUP(D)
Skier Days.................................................. 1,828,000 1,846,119
Revenue per Skier Day....................................... $ 42.38 $ 38.15
Adjusted Pro Forma EBITDA(c)................................ $ 20,653 $ 16,686
Cash Interest Expense(e).................................... 14,826 7,413
Ratio of Adjusted Pro Forma EBITDA to Cash Interest
Expense................................................... 1.4x NM
Ratio of total debt to Adjusted Pro Forma EBITDA(f)......... 5.8x NM
</TABLE>
NM -- Not Meaningful.
(see footnotes on following pages)
38
<PAGE> 42
NOTES TO UNAUDITED ADJUSTED PRO FORMA FINANCIAL DATA
(a) The unaudited adjusted pro forma financial data presented reflect the
following pro forma adjustments to operating expenses and management fee and
corporate expenses. The following table reflects the effect of these items
in the calculation of pro forma EBITDA.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1996
----------------
(DOLLARS IN THOUSANDS)
<S> <C>
Historical EBITDA........................................... $16,818
Pro forma adjustments:
Corporate management fee allocations...................... 678
Replacement of executive management....................... 191
Lease modification........................................ 60
Profit sharing payment.................................... 162
-------
Total pro forma adjustments............................. 1,091
-------
Pro forma EBITDA............................................ $17,909
=======
</TABLE>
In addition, the unaudited adjusted pro forma financial data presented
reflect certain additional adjustments which management believes are
relevant in evaluating the future operating performance of the Company. The
following additional adjustments, which eliminate the impact of certain
nonrecurring charges and reflect the estimated impact of management's
business and operating strategy, are based on estimates and assumptions made
and believed to be reasonable by the Company but that are inherently
uncertain and subject to change. The following calculation should not be
viewed as indicative of actual or future results. The following table
reflects the effect of these items on pro forma EBITDA:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1996
----------------
(DOLLARS IN THOUSANDS)
<S> <C>
Pro forma EBITDA............................................ $17,909
Additional adjustments:
Reduction of insurance premium............................ 652
Snoqualmie Pass cost reductions........................... 500
In-house operation of certain ski-related services........ 435
Removal of Bear Mountain one-time post-acquisition
adjustments............................................. 415
Post-closing inventory and accounting adjustments......... 309
One-time charges at Grand Targhee......................... 237
One-time charges at Waterville Valley..................... 147
Removal of prior owner services at Mt. Cranmore........... 49
-------
Total additional adjustments............................ 2,744
-------
Adjusted pro forma EBITDA................................... $20,653
=======
</TABLE>
Corporate management fee allocations represent the allocations from
Fibreboard Corporation ($791,000) and American Skiing Company and S-K-I
Limited for Waterville Valley ($587,000) net of (i) the management fees that
would have been paid to Booth Creek, Inc. pursuant to the Management
Agreement ($350,000) and (ii) the estimated amounts for certain corporate
expenses if the Company had operated on a stand-alone basis ($350,000).
Replacement of executive management represents elimination of non-recurring
executive management compensation and benefits paid to (i) former owners of
Ski Lifts, Inc. ($116,000) and (ii) former owners of Grand Targhee
Incorporated ($75,000). The responsibilities of these individuals will be
absorbed by existing Company management.
Lease modification represents elimination of lease expenses for the Teewinot
Lodge, which is being acquired by the Company in the Grand Targhee
Acquisition.
Profit sharing payment represents elimination of one-time profit sharing
contribution, considered a retention bonus, given to Ski Lifts, Inc.
workforce in anticipation of the Snoqualmie Acquisition as specified in the
acquisition agreement.
Reduction of insurance premium represents elimination of insurance expenses
as a result of a new insurance package entered into by the Company, which
has reduced insurance premiums as a result of the consolidation of the
Company's resorts.
Snoqualmie Pass cost reductions represents elimination of expenses primarily
related to a reduction in summer labor costs.
In-house operation of certain ski-related services represents the increase
in revenue and elimination of expenses related to services performed by
outside vendors at Snoqualmie Pass that will be performed by the Company and
which are performed by the Company at its other resorts.
39
<PAGE> 43
NOTES TO UNAUDITED ADJUSTED PRO FORMA FINANCIAL DATA -- (CONTINUED)
Removal of Bear Mountain one-time post-acquisition adjustments represents
elimination of certain charges incurred by the Company in connection with
the acquisition of Bear Mountain by Fibreboard Corporation, which the
Company believes will not occur in the future. These costs included
misclassified payroll and related expenses, labor expense overruns expected
to be reduced and snowboard inventory writeoffs.
Post-closing inventory and accounting adjustments represents elimination of
one-time charges at Northstar for inventory write-offs and sales tax audit
adjustments.
One-time charges at Grand Targhee represents elimination of several one-time
expenses incurred by Grand Targhee Incorporated that reduced operating
results. These expenses include the cost associated with abandoning a land
exchange project, the write-off of an investment in a central reservation
system, the establishment of an accrual for vacation pay, contributions to a
local charity associated with the shareholders of Grand Targhee
Incorporated, a loss on the disposal of fixed assets, fees associated with
an application for financing which was never consummated and the write-off
of certain credit card receivables.
One-time charges at Waterville Valley represents elimination of several
expenses incurred by Waterville Valley that were either non-recurring in
nature, such as expenses related to the former owner, emissions testing for
the state, or a tank removal project, or related to expenditures for
property, plant and equipment which the Company would have capitalized such
as roof and lodge repairs and various signage.
Removal of prior owner services at Mt. Cranmore represents elimination of
expenses incurred by Mt. Cranmore that were allocated to the resort by its
former owner for services which are now being provided by the Company at no
cost.
(b) The unaudited adjusted pro forma financial data presented reflect the
following pro forma adjustments to operating expenses and management fee and
corporate expenses. The following table reflects the effect of these items
in the calculation of pro forma EBITDA.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 2, 1997
----------------
(DOLLARS IN THOUSANDS)
<S> <C>
Historical EBITDA........................................... $15,966
Pro forma adjustments:
Corporate management fee allocations...................... 22
Replacement of executive management....................... 52
Lease modification........................................ 23
-------
Total pro forma adjustments............................. 97
-------
Pro forma EBITDA............................................ $16,063
=======
</TABLE>
In addition, the unaudited adjusted pro forma financial data presented
reflect certain additional adjustments which management believes are
relevant in evaluating the future operating performance of the Company. The
following additional adjustments, which eliminate the impact of certain
nonrecurring charges and reflect the estimated impact of management's
business and operating strategy, are based on estimates and assumptions made
and believed to be reasonable by the Company but that are inherently
uncertain and subject to change. The following calculation should not be
viewed as indicative of actual or future results. The following table
reflects the effect of these items on pro forma EBITDA:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MAY 2, 1997
----------------
(DOLLARS IN THOUSANDS)
<S> <C>
Pro forma EBITDA............................................ $16,063
Additional adjustments:
Reduction of insurance premium............................ 134
In-house operation of certain ski-related services........ 435
One-time charges at Grand Targhee......................... 54
-------
Total additional adjustments............................ 623
-------
Adjusted pro forma EBITDA................................... $16,686
=======
</TABLE>
Corporate management fee allocations represent the allocations from
Fibreboard Corporation ($70,000) and American Skiing Company and S-K-I
Limited for Waterville Valley ($10,000) net of (i) the management fees that
would have been paid to Booth Creek, Inc. pursuant to the Management
Agreement ($29,000) and (ii) the estimated amounts for certain corporate
expenses if the Company had operated on a stand-alone basis ($29,000).
40
<PAGE> 44
NOTES TO UNAUDITED ADJUSTED PRO FORMA FINANCIAL DATA -- (CONTINUED)
Replacement of executive management represents elimination of non-recurring
executive management compensation and benefits paid to (i) former owners of
Ski Lifts, Inc. ($29,000) and (ii) former owners of Grand Targhee
Incorporated ($23,000). The responsibilities of these individuals will be
absorbed by existing Company management.
Lease modification represents elimination of lease expenses for the Teewinot
Lodge, which is being acquired by the Company in the Grand Targhee
Acquisition.
Reduction of insurance premium represents elimination of insurance expenses
as a result of a new insurance package entered into by the Company, which
has reduced insurance premiums as a result of the consolidation of the
Company's resorts.
In-house operation of certain ski-related services represents the increase
in revenue and elimination of expenses related to services performed by
outside vendors at Snoqualmie Pass that will be performed by the Company and
which are performed by the Company at its other resorts.
One-time charges at Grand Targhee represents elimination of the cost
associated with abandoning a land exchange project.
(c) Excludes depreciation and amortization expenses of $13.2 million and $6.8
million and the non-cash cost of real estate and other sales of $1.6 million
and $482,000 for the year ended October 31, 1996 and the six months ended
May 2, 1997, respectively. The historical financial presentations for the
Fibreboard Resort Group, Waterville Valley, Mt. Cranmore, Ski Lifts, Inc.
and Grand Targhee Incorporated are inconsistent in categorizing cost of
sales -- resort operations, selling, general and administrative expense and
management fees and corporate expenses. For presentation purposes in this
Prospectus, all operating expenses have been aggregated as cost of sales --
resort operations.
(d) The Restricted Group includes Booth Creek and its Restricted Subsidiaries as
of the date of this Prospectus. The Restricted Group data excludes the real
estate assets at Snoqualmie Pass, which are held by an entity that is an
Unrestricted Subsidiary. See "The Transactions -- The Snoqualmie
Acquisition." Such assets have not historically generated cash flow and the
Unrestricted Subsidiary has an obligation to purchase shares of preferred
stock of Ski Lifts, Inc. having an aggregate liquidation preference of $3.5
million from the prior owners of Snoqualmie Pass. Such obligation is
recourse only to the assets of the Unrestricted Subsidiary and is
non-recourse to the Company and its Restricted Subsidiaries.
(e) Reflects interest on the $116.0 million of Notes at 12.5%, the ASC Seller
Note at 12.0% and capital leases and certain other debt at 10.0%. Cash
interest expense excludes $860,000 and $430,000 in non-cash amortization of
deferred financing fees for the year ended October 31, 1996 and the six
months ended May 2, 1997, respectively.
(f) Total debt for purposes of this ratio includes the Notes, the ASC Seller
Note and other debt, including capital leases. Total debt does not include
any borrowing under the Senior Credit Facility. The Company did not have
borrowings under the Senior Credit Facility upon completion of the Initial
Offering. See "Capitalization."
41
<PAGE> 45
SELECTED COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT REVENUE PER SKIER DAY)
The selected combined financial data presented below should be read in
conjunction with the combined financial statements of the Fibreboard Resort
Group and notes thereto included elsewhere in this Prospectus, the unaudited
interim financial statements of the Company and the notes thereto included
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The selected combined financial
data (except for the other financial and operating data) of the Fibreboard
Resort Group (i) as of and for the year ended December 31, 1992 and as of
December 31, 1993 have been derived from the unaudited financial statements of
the Fibreboard Resort Group, (ii) for the year ended December 31, 1993 and as of
and for the years ended December 31, 1994 and 1995 and as of and for the ten
months ended October 31, 1996 have been derived from the audited combined
financial statements of the Fibreboard Resort Group and (iii) for the ten months
ended October 31, 1995 and for the period from November 1, 1996 to December 2,
1996 have been derived from the unaudited combined financial statements of the
Fibreboard Resort Group. The selected historical financial data of the Company
as of and for the six months ended May 2, 1997 were derived from the unaudited
financial statements of the Company. The Company was formed in October 1996 and
had no operations until its acquisition of seven ski resort complexes during the
first six months of fiscal 1997. The selected pro forma data presented below
should be read in conjunction with the information contained in "Pro Forma
Financial Information."
<TABLE>
<CAPTION>
FIBREBOARD RESORT GROUP
-----------------------------------------------------------------------------------
PERIOD FROM
10 MONTHS 10 MONTHS NOVEMBER 1,
YEAR ENDED DECEMBER 31, ENDED ENDED 1996 TO
----------------------------------------- OCTOBER 31, OCTOBER 31, DECEMBER 2,
1992(a) 1993(b) 1994(c) 1995(d) 1995(d) 1996(e) 1996(e)
-------- -------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Resort Operations....................... $ 20,336 $ 25,528 $ 40,810 $ 39,823 $ 32,072 $ 36,829 $ 1,395
Real Estate and Other................... -- -- 610 5,213 4,659 4,288 304
-------- -------- -------- -------- -------- -------- -------
20,336 25,528 41,420 45,036 36,731 41,117 1,699
Operating Expenses:
Cost of Sales -- Resort Operations...... 15,224 18,117 26,920 28,569 21,536 26,950 2,890
Cost of Sales -- Real Estate and
Other................................. -- -- 280 1,989 1,780 2,142 161
Selling, General & Administrative....... 3,155 4,579 5,545 5,871 4,399 5,220 1,087
Management Fee and Corporate Expenses... 169 507 655 1,247 513 701 70
-------- -------- -------- -------- -------- -------- -------
Operating Income (Loss).................. 1,788 2,325 8,020 7,360 8,503 6,104 (2,509)
Interest (Income) Expense (net).......... (386) 186 666 821 334 1,189 289
-------- -------- -------- -------- -------- -------- -------
Pre-tax Income (Loss).................... 2,174 2,139 7,354 6,539 8,169 4,915 (2,798)
Income Taxes (Benefit)................... 880 876 2,979 2,624 3,308 2,018 (885)
-------- -------- -------- -------- -------- -------- -------
Income (Loss) Before Minority Interest
and Extraordinary Item.................. 1,294 1,263 4,375 3,915 4,861 2,897 (1,913)
Minority Interest........................ -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Income (Loss) Before Extraordinary
Item.................................... 1,294 1,263 4,375 3,915 4,861 2,897 (1,913)
Extraordinary Loss on Early Retirement of
Debt.................................... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------
Net Income (Loss)................. $ 1,294 $ 1,263 $ 4,375 $ 3,915 $ 4,861 $ 2,897 $(1,913)
========= ========= ========= ========= ========== ========== ===========
OTHER FINANCIAL AND OPERATING DATA:
Skier Days............................... 324,863 436,153 837,179 784,964 626,500 706,075 30,818
Revenue per Skier Day (i)................ $ 62.60 $ 58.53 $ 48.75 $ 50.73 51.19 $ 52.16 $ 45.27
Depreciation & Amortization.............. $ 1,003 $ 2,514 $ 3,449 $ 4,024 $ 2,989 $ 4,354 $ 7
Non-cash Cost of Real Estate and Other
(j)..................................... $ -- $ -- $ -- $ 1,618 1,488 $ 1,461 $ 133
Capital Expenditures Excluding
Acquisitions and Real Estate and
Other................................... $ 6,192 $ 4,619 $ 6,199 $ 5,226 2,188 $ 5,761 $ 5,531
Net cash provided by (used in):
Operating activities.................... $ UN $ 4,212 $ 9,482 $ 7,861 $ 7,506 $ 4,923 $ 2,827
Investing activities.................... UN (18,336) (6,287) (29,430) (28,321) (8,467) (6,020)
Financing activities.................... UN 9,027 (2,664) 26,071 18,059 (2,778) 1,906
Ratio of Earnings to Fixed Charges (k)... -- -- -- -- -- --
EBITDA................................... $ 2,791 $ 4,839 $ 11,469 $ 13,002 $ 12,980 $ 11,919 $(2,369)
EBITDA Margin............................ 13.7% 19.0% 27.7% 28.9% 35.3% 29.0% (139.4)%
<CAPTION>
COMPANY
--------------------------------------
HISTORICAL UNAUDITED PRO FORMA(g)
----------- ------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED
MAY 2, OCTOBER 31, MAY 2,
1997(f) 1996 1997
----------- ----------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Resort Operations....................... $ 60,469 $ 77,471 $ 70,430
Real Estate and Other................... 450 4,657 754
---------- ---------- ----------
60,919 82,128 71,184
Operating Expenses:
Cost of Sales -- Resort Operations...... 41,229 76,726(h) 61,856(h)
Cost of Sales -- Real Estate and
Other................................. 378 2,297 539
Selling, General & Administrative....... 6,518 -- --
Management Fee and Corporate Expenses... 827 -- --
---------- ---------- ----------
Operating Income (Loss).................. 1,967 3,105 8,789
Interest (Income) Expense (net).......... 6,304 15,686 7,843
---------- ---------- ----------
Pre-tax Income (Loss).................... 5,663 (12,581) 946
Income Taxes (Benefit)................... 1,416 (4,437) --
---------- ---------- ----------
Income (Loss) Before Minority Interest
and Extraordinary Item.................. 4,247 (8,144) 946
Minority Interest........................ 87 281 141
---------- ---------- ----------
Income (Loss) Before Extraordinary
Item.................................... 4,160 (8,425) 805
Extraordinary Loss on Early Retirement of
Debt.................................... 1,998 -- --
---------- ---------- ----------
Net Income (Loss)................. $ 2,162 $ (8,425) $ 805
=========== =========== ===========
OTHER FINANCIAL AND OPERATING DATA:
Skier Days............................... 1,565,917 1,828,000 1,846,119
Revenue per Skier Day (i)................ $ 38.62 $ 42.38 $ 38.15
Depreciation & Amortization.............. $ 5,124 $ 13,197 $ 6,792
Non-cash Cost of Real Estate and Other
(j)..................................... $ 349 $ 1,607 $ 482
Capital Expenditures Excluding
Acquisitions and Real Estate and
Other................................... $ 2,416 $ 10,308 $ 10,343
Net cash provided by (used in):
Operating activities.................... $ 13,621 $ NA $ NA
Investing activities.................... (144,620) NA NA
Financing activities.................... 139,715 NA NA
Ratio of Earnings to Fixed Charges (k)... 1.74 -- 1.09
EBITDA................................... $ 17,440 $ 17,909 $ 16,063
EBITDA Margin............................ 28.6% 21.8% 22.6%
</TABLE>
<TABLE>
<CAPTION>
FIBREBOARD RESORT GROUP COMPANY
------------------------------------------------------------------ --------
AS OF DECEMBER 31, AS OF OCTOBER 31, AS OF
----------------------------------------- ---------------------- MAY 2,
1992(a) 1993(b) 1994(c) 1995(d) 1995(e) 1996(e) 1997
------- ------- ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficit)......................... $ 5,414 $ (3,271) $ (6,555) $(35,980) $(36,123) $(36,187) $ (2,799)
Total Assets...................................... 27,859 39,618 43,065 73,316 64,125 69,602 192,157
Total Debt Including Intercompany Payable......... 10,608 15,743 15,422 41,493 33,487 38,715 119,367
Preferred Stock of Subsidiary (l)................. -- -- -- -- -- -- 3,125
Common Stockholders' Equity/Net Assets............ 13,435 17,826 19,752 23,667 24,606 26,564 48,662
UN - Unavailable NA - Not Applicable
</TABLE>
(see footnotes on following page)
42
<PAGE> 46
NOTES TO SELECTED COMBINED FINANCIAL DATA
The selection of a December 31 year end does not result in the presentation
of the results of the resorts for a single ski season. Accordingly, as the
results of a single ski season are split into two reporting periods, differing
trends may develop, as compared to results of operations for other resorts
consisting of a single ski season, which should be evaluated by an investor.
As the results of operations of ski resorts are highly seasonal, with the
majority of revenue generated in the period from November through April, the
results of operations for the 10 months ended October 31, 1996 and 1995, the
period from November 1, 1996 to December 2, 1996, and the six months ended May
2, 1997 are not representative of a pro rata year of operations.
(a) Includes the financial results of Northstar only.
(b) Includes the financial results of Northstar for the entire period and of
Sierra for the period beginning June 11, 1993, the date on which it was
acquired by Fibreboard Corporation.
(c) Includes the financial results of Northstar and Sierra for the entire
period.
(d) Includes the financial results of Northstar and Sierra for the entire period
and of Bear Mountain for the period beginning October 23, 1995, the date on
which it was acquired by Fibreboard Corporation.
(e) Includes the financial results of Northstar, Sierra and Bear Mountain for
the entire period.
(f) Reflects the financial results of Waterville Valley and Mt. Cranmore from
November 27, 1996, Northstar, Sierra and Bear Mountain from December 3,
1996, Snoqualmie Pass from January 15, 1997, and Grand Targhee from March
18, 1997, the respective dates of acquisition of each resort by the Company.
(g) Pro forma statement of operations and other financial and operating data for
the year ended October 31, 1996 and the six months ended May 2, 1997 give
effect to the Transactions as if they had occurred on November 1, 1995. See
"Pro Forma Financial Information."
(h) The historical financial presentations for the Fibreboard Resort Group,
Waterville Valley, Mt. Cranmore, Ski Lifts, Inc. and Grand Targhee
Incorporated are inconsistent in categorizing cost of sales -- resort
operations, selling, general and administrative expenses and management fees
and corporate expenses. For presentation purposes in this Prospectus, all
operating expenses, including depreciation and amortization, have been
aggregated as cost of sales -- resort operations.
(i) Reflects revenues from resort operations divided by skier days.
(j) Non-cash cost of real estate sales represents the allocated portion of real
estate development expenditures previously capitalized (including
acquisition costs allocated to real estate development) which relate to
current year real estate sales.
(k) For purposes of this computation, earnings are defined as pretax income
(loss) and fixed charges excluding the Ski Lifts Preferred Stock dividend
requirement. Fixed charges are the sum of (i) interest costs (including the
interest portion of operating leases), (ii) amortization of deferred
financing costs and (iii) the Ski Lifts Preferred Stock dividend
requirement. Earnings were inadequate to cover fixed charges by
approximately $13.0 million for the unaudited pro forma year ended October
31, 1996.
(l) Represents preferred stock of a subsidiary of the Company which is subject
to mandatory redemption requirements.
43
<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis below relates to (i) the historical financial
statements and results of operations of the Company, the California Resorts,
Waterville Valley, Ski Lifts and Grand Targhee and (ii) the liquidity and
capital resources of the Company after giving effect to the consummation of the
Transactions. The following discussion should be read in conjunction with the
consolidated financial statements and related notes thereto included elsewhere
in this Prospectus.
GENERAL
The Company's ski operations are highly sensitive to regional weather
conditions and the overall strength of the regional economies in the areas in
which the Company operates. The Company believes that the geographic diversity
of the Company's resorts and the use of extensive snowmaking technology coupled
with advanced trail grooming equipment, which together can provide consistent
skiing conditions, can partially mitigate the risk of both economic downturns
and adverse weather conditions in any given region. However, the Company remains
vulnerable to warm weather, heavy rains and drought conditions, which can have a
significant effect on the operating revenues and profitability at any one of the
Company's resorts. Bear Mountain experienced its worst early winter conditions
in over 40 years during the 1995/96 ski season, with a lack of natural snowfall
and warm weather which severely limited snowmaking. As a result, skier days were
approximately 30% below the prior year's level. In addition, during the early
part of the 1996/97 ski season, the Lake Tahoe region experienced significant
rainfall, flooding and mudslides. The inclement weather resulted in poor ski
conditions at Northstar and Sierra and a major access highway to Sierra being
closed for several weeks during the first quarter of the Company's current
fiscal year. Furthermore, much of the poor weather occurred during the Christmas
holiday period, a traditionally busy period at the Company's resorts. As a
result, skier days and resort revenue at Sierra were adversely impacted. Certain
of the Company's other resorts also experienced poor weather conditions during
the six months ended May 2, 1997, which resulted in a reduction in skier days,
revenue and operating income. These conditions also reduced EBITDA for the
period.
The Company's three most weather-sensitive resorts, Bear Mountain,
Waterville Valley and Mt. Cranmore, have invested heavily in snowmaking
capabilities to provide coverage on virtually all of their trails and have been
open for skiing at least 122, 159, and 103 days, respectively, during each of
the last six ski seasons. The Company's Northstar, Sierra, Snoqualmie Pass and
Grand Targhee resorts are less weather-sensitive based on their historical
natural snowfall, averaging approximately 286, 467, 363, and 483 inches of snow,
respectively, per year since 1991 through the 1996/97 ski season. As a result of
their historic natural snowfall, their snowmaking capabilities are considerably
less extensive than at Bear Mountain or the New Hampshire Resorts.
The Company's results of operations are also highly dependent on its
ability to compete in each of the large regional ski markets in which it
operates. At Northstar and Sierra, more than 75% and 88%, respectively, of the
1995/96 ski season total skier days were attributable to residents of the San
Francisco, Sacramento and Central California Valley regions. At Bear Mountain,
more than 94% of the 1995/96 ski season total skier days were attributable to
residents of the Los Angeles and San Diego metropolitan regions. At Waterville
Valley and Mt. Cranmore, more than 78% and 76%, respectively, of the 1995/96 ski
season total skier days were attributable to residents of the Boston
metropolitan area and Southern New Hampshire. At Snoqualmie Pass, the Company
estimates that more than 95% of the 1995/96 ski season total skier days were
attributable to residents of the Seattle/Tacoma metropolitan region. The
Company's Grand Targhee resort attracts approximately 60% of its skiers from
outside its local skiing population.
The Company seeks to maximize revenues and operating income by managing the
mix of skier days and revenue per skier day. These strategies are also designed
to maximize resort cash flow. The strategy for each resort is based on the
demographic profile of its market and the physical capacity of its mountain and
facilities. The Company seeks to increase skier days by developing effective
ticket pricing strategies and marketing programs to improve peak and off-peak
volume. The Company seeks to improve revenue per skier day by effectively
managing the price, quality and value of each of its ski-related services,
including retail shops, ski
44
<PAGE> 48
rentals, ski lessons and food and beverage facilities. The Company also
generates revenue from a variety of non-ski related services, such as golf,
tennis, health clubs and conference centers, as well as from real estate and
timber sales.
The Company expects to increase skier days by offering a consistent,
quality guest experience and developing effective target marketing programs. See
"Business -- Marketing and Sales." The Company's resorts have spent more than
$35.0 million in capital expenditures during the last three years to upgrade
chairlift capacity, expand terrain, improve rental lodging and retail facilities
and increase snowmaking capabilities, all of which management believes are
important in providing a consistent, quality guest experience.
The Company believes it can selectively increase lift ticket prices and
skier days to generate additional revenue and resort cash flow from other
related services and activities in conjunction with the upgrading of its resort
infrastructure and facilities. For example, Grand Targhee announced a $4 per
lift ticket increase effective upon installation of two new lifts completed in
January 1997. Management believes that this lift ticket price increase will
increase revenue and resort cash flow by over $400,000 based on the number of
skier days in the 1995/96 ski season. In addition, the Company's Northstar
resort has been successful in increasing lift ticket revenues, other ski-related
revenues and non-ski related revenues (excluding real estate and timber sales)
by 16.6%, 43.6% and 13.6%, respectively, from the year ended December 31, 1992
to the year ended October 31, 1996. The Company believes that by extending its
successful operating strategies it can significantly increase revenue per skier
day at each of its resorts.
In addition to revenues generated from skiing operations, the Company's
resorts generate significant revenues from non-ski operations, including
lodging, conference center services, health and tennis clubs and summer
activities such as mountain biking rentals and golf course fees. Moreover, real
estate and timber sales at Northstar generated $4.7 million during the year
ended October 31, 1996, accounting for 15.0% of Northstar's total revenue during
such period. The table below summarizes the components of revenue (excluding
real estate and timber sales) for each of the resorts for the recent twelve
month periods indicated.
COMPONENTS OF REVENUE
<TABLE>
<CAPTION>
TWELVE MONTHS REVENUE PER LIFT TICKET OTHER SKI-RELATED NON-SKI RELATED
RESORT ENDED SKIER DAY REVENUE REVENUE REVENUE
------ ------------------ ----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Northstar.............. October 31, 1996 $63.52 41.2% 43.5% 15.3%
Sierra................. October 31, 1996 40.71 60.7 39.3 0.0
Bear Mountain.......... October 31, 1996 40.04 59.0 36.0 5.0
Waterville Valley...... October 27, 1996 45.73 46.8 39.0 14.2
Mt. Cranmore........... July 28, 1996 33.77 53.8 33.5 12.7
Snoqualmie Pass........ September 30, 1996 20.76 63.2 32.4 4.4
Grand Targhee.......... May 31, 1996 63.21 35.2 52.3 12.5
</TABLE>
A significant portion of total operating costs at the Company's resorts are
variable, consisting primarily of retail and food service cost of sales,
utilities and labor expense. These variable costs can fluctuate significantly
based upon skier days and seasonal factors. With the exception of certain
management, marketing and maintenance personnel, all of the Company's employees
are compensated on an hourly basis. Management believes a key element to
maximizing profitability during the winter season is to closely monitor staffing
requirements and to redirect or lay-off employees when skier volumes or seasonal
needs dictate. In addition to financial performance, the advanced management
information system currently in place at Northstar, Sierra, and Bear Mountain
provides detailed statistics regarding staffing utilization which is
instrumental in adjusting personnel requirements. Management believes that
significant labor savings can be realized by implementing this system throughout
the Company's resorts. The table below highlights the employment at each of the
resorts as of January 31, 1997 and resort revenue per employee based on such
employment and revenue
45
<PAGE> 49
(excluding real estate and other) for each resort's last completed fiscal year
or, in the case of Northstar, Sierra and Bear Mountain, the twelve months ended
October 31, 1996.
EMPLOYMENT BREAKDOWN
<TABLE>
<CAPTION>
RESORT
SEASONAL EMPLOYMENT NON-SEASONAL REVENUE PER
RESORT (WINTER) EMPLOYMENT EMPLOYEE
------ ------------------- ------------ -----------
<S> <C> <C> <C>
Northstar............................................ 685 174 $29,927
Sierra............................................... 342 22 28,802
Bear Mountain........................................ 520 41 15,296
Waterville Valley.................................... 402 59 25,452
Mt. Cranmore......................................... 300 66 11,372
Snoqualmie Pass...................................... 969 60 9,185
Grand Targhee........................................ 220 100 23,266
</TABLE>
RESULTS OF OPERATIONS OF THE COMPANY
Historical Six Months Ended May 2, 1997
The Company was formed October 8, 1996. During the six months ended May 2,
1997, the Company made the following acquisitions which are included in the
results of operations of the Company from the respective purchase dates and
accounted for using the purchase method:
<TABLE>
<CAPTION>
RESORT ACQUISITION DATE
------ ----------------
<S> <C>
Waterville Valley November 27, 1996
Mt. Cranmore November 27, 1996
Northstar December 3, 1996
Sierra December 3, 1996
Bear Mountain December 3, 1996
Snoqualmie Pass January 15, 1997
Grand Targhee March 18, 1997
</TABLE>
For the six months ended May 2, 1997, revenues totaled $60.9 million,
approximately $23.7 million, or 39%, of which was generated by Northstar.
Operating income for the same period totaled $12.0 million, or 19.6%, of
revenues.
Both revenues and operating income were negatively impacted by the poor
weather conditions experienced by a number of the Company's resorts during the
1996/97 ski season as discussed previously. Operating income is also net of over
$5.1 million of depreciation and amortization expenses reflecting the stepped up
values of the recently acquired resorts.
Interest expense is primarily composed of interest on the Bridge Financing
Facilities (which bore interest at approximately 11% per annum) through March
18, 1997 and on the Notes (which bore interest at 12.5% per annum) from March
18, 1997 through May 2, 1997.
Amortization of deferred financing costs relate primarily to fees
associated with the Bridge Financing Facilities. Unamortized fees associated
with the Bridge Financing Facilities at March 18, 1997, the date the Bridge
Financing Facilities were repaid, totaled over $2.6 million and were written off
and reflected as an extraordinary loss on the early retirement of debt, net of a
related $666,000 tax benefit, in the consolidated statement of operations.
Taxes have been provided at a 25% rate, the expected effective income tax
rate for the year.
46
<PAGE> 50
Pro Forma Six Months Ended May 2, 1997 as Compared to the Combined Six Months
Ended April 30, 1996
The Company was formed on October 8, 1996. During the six months ended May
2, 1997, the Company acquired Northstar, Sierra, Bear Mountain, Waterville
Valley, Mt. Cranmore, Snoqualmie Pass and Grand Targhee. Each resort has been
included in the statement of operations of the Company from the respective
purchase date and accounted for using the purchase method.
To provide an understanding of the results of operations of the Company's
resorts for the six months ended May 2, 1997, for purposes of this discussion
the Company is comparing revenue, operating expenses (excluding depreciation and
amortization) and cost of sales -- real estate and other on a pro forma basis
for the six months ended May 2, 1997 to the combined historical results of the
seven resorts for the six months ended April 30, 1996.
Total pro forma revenue for the six months ended May 2, 1997 was $71.2
million, a decrease of $396,000, or .6%, from the combined revenue of the
Company's resorts for the six months ended April 30, 1996. Northstar, Bear
Mountain, and Snoqualmie generated increased revenues in the 1997 period of
9.1%, 15.9%, and 11.4%, respectively, due to skier day increases of 10.1%,
29.1%, and 4.6%, respectively, as compared to the 1996 period. Skier day growth
at Bear Mountain was offset by reduced ticket prices, due to the mix of ticket
types (adult, children, complimentary, multi-day, season passes, etc.) and
various promotional offers, resulting in the net 15.9% increase in revenue.
Sierra, Waterville, and Grand Targhee revenues in 1997 decreased 20.3%, 5.7%,
and 9.9%, respectively, as compared to the 1996 period, reflecting the decrease
in skier days of 17.2%, 14.5%, and 18.7%, respectively. Road closures at Sierra
and Grand Targhee and less favorable weather conditions contributed to these
decreases. Real estate revenues in the 1997 period declined $1,379,000 to
$754,000, or 64.7%, due to fewer lot sales in the 1997 period at Northstar.
Pro forma operating expenses, excluding depreciation and amortization, for
the six months ended May 2, 1997 totalled $55.1 million, an increase of $7.3
million, or 15.3%, from the combined operating expenses of the Company's resorts
for the six months ended April 30, 1996. This increase was primarily due to road
closures at Sierra and Grand Targhee, early opening of many of the Company's
resorts (which were expected to generate improved momentum into peak holiday
periods but resulted in increased operating costs) and poor weather conditions
at many of the Company's resorts during peak holiday periods.
The pro forma cost of sales -- real estate and other for the six months
ended May 2, 1997 totalled $539,000, a decrease of $296,000, or 35.4%, from the
combined costs of the Company's resorts for the six months ended April 30, 1996.
This decrease is due primarily to fewer lot sales in the 1997 period at
Northstar offset, in part, by increased costs allocated to each parcel in the
1997 period as part of the purchase accounting at Northstar.
47
<PAGE> 51
RESULTS OF OPERATIONS OF CALIFORNIA RESORTS
The following table summarizes Fibreboard Resort Group's historical results
of operations as a percentage of revenue for the years ended December 31, 1992,
1993, 1994, and 1995, for the ten month periods ended October 31, 1995 and 1996.
<TABLE>
<CAPTION>
TEN MONTHS TEN MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
----------------------------- OCTOBER 31, OCTOBER 31,
1992 1993 1994 1995 1995 1996
----- ----- ----- ----- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenue
Lift Tickets........................................ 44.7% 45.0% 50.8% 44.7% 42.7% 45.0%
Ski Related Resort.................................. 38.3 39.9 38.5 35.1 34.0 34.0
Non-Ski Related Resort.............................. 17.0 15.1 9.2 8.6 10.6 10.6
Real Estate and Timber.............................. -- -- 1.5 11.6 12.7 10.4
----- ----- ----- ----- ----- -----
Total Net Revenue............................ 100.0 100.0 100.0 100.0 100.0 100.0
Cost of Sales -- Resort Operations.................... 74.9 71.0 65.0 63.4 58.6 65.5
Cost of Sales -- Real Estate and Other................ -- -- 0.7 4.4 4.8 5.2
Selling, General and Administrative Expense........... 15.5 17.9 13.4 13.1 12.0 12.7
Management Fee and Corporate Expenses................. 0.8 2.0 1.6 2.8 1.4 1.7
----- ----- ----- ----- ----- -----
Operating Income...................................... 8.8 9.1 19.3 16.3 23.2 14.9
Interest (Income) Expense, Net........................ (1.9) .7 1.6 1.8 .9 2.9
----- ----- ----- ----- ----- -----
Pre-tax Income........................................ 10.7 8.4 17.7 14.5 22.3 12.0
Income Taxes.......................................... 4.3 3.4 7.2 5.8 9.0 4.9
----- ----- ----- ----- ----- -----
Net Income............................................ 6.4% 5.0% 10.5% 8.7% 13.3% 7.1%
===== ===== ===== ===== ===== =====
OTHER DATA:
EBITDA................................................ 13.7% 19.0% 27.7% 28.9% 35.3% 29.0%
</TABLE>
Ten Months Ended October 31, 1996 as Compared to the Ten Months Ended October
31, 1995
The ski resort industry is highly seasonal, with operations typically
commencing in November or December of each year, and closing in April or May.
The exclusion of the months of November and December from the 1996 and 1995
fiscal periods results in decreases in virtually all income statement captions
when compared to full fiscal periods.
Total revenue for the ten months ended October 31, 1996 was $41,117,000, an
increase of $4,386,000 or 11.9% from the comparable period in 1995. This
increase is attributable to the acquisition of Bear Mountain in October 1995,
which accounted for $7,147,000 of additional revenue during the ten month period
ended October 31, 1996. Partially offsetting this increase was a $2,390,000
decline in lift ticket and ski-related revenues at the Company's Northstar and
Sierra resorts, primarily resulting from fewer skier days, and a $371,000
decline in real estate and timber sales, primarily resulting from fewer
developmental real estate sales.
Skier days and revenue per skier day were 706,075 and $52.16 for the ten
months ended October 31, 1996, as compared to 626,500 and $51.19 for the
comparable period in 1995. The increase in skier days is attributable to the
acquisition of Bear Mountain in October 1995, which accounted for 174,984 of the
additional skier days. Skier days at the Company's Northstar and Sierra resorts
declined by 95,409 in the ten months ended October 31, 1996 as compared to the
comparable period in the prior year due to particularly favorable ski conditions
in the prior period.
Cost of sales for resort operations for the ten months ended October 31,
1996 increased by $5,414,000, or 25.1%, from the comparable period in the prior
year due to a $5,860,000 increase in costs resulting from the acquisition of
Bear Mountain in October 1995, offset by slightly lower cost of sales for resort
operations at Northstar and Sierra of approximately $500,000.
Selling, general, administrative and other operating expenses (including
management fees and corporate allocations) increased by $1,009,000, or 20.5%, in
the ten months ended October 31, 1996 as compared to the comparable period in
the prior year due to a $1,406,000 increase in costs resulting from the
acquisition of Bear
48
<PAGE> 52
Mountain in October 1995, offset by slightly lower selling, general,
administrative and other operating expenses at Northstar and Sierra.
Interest expense, net for the ten months ended October 31, 1996 increased
by $855,000 as compared to the same period in 1995 as a result of the advance
made by Fibreboard Corporation to the Resort Group in October 1995 to finance
the acquisition of Bear Mountain.
The provision for income taxes for the ten months ended October 31, 1996
decreased by $1,290,000 as compared to the comparable period in 1995 due to the
decrease in income subject to income tax. The effective income tax rate for the
ten months ended October 31, 1996 was 41.1%, as compared to 40.5% for the same
period in 1995.
EBITDA for the ten months October 31, 1996 was $11,919,000, a decrease of
$1,061,000, or 8.2%, from the comparable period in the prior year. EBITDA margin
decreased from 35.3% during the ten months ended October 31, 1995 to 29.0%
during the comparable 1996 period.
Year Ended December 31, 1995 as Compared to the Year Ended December 31, 1994
Total revenue for 1995 was $45,036,000, an increase of $3,616,000, or 8.7%,
from 1994. This increase is attributable to the completion and sale of
residential lots at the Big Springs development at Northstar, which accounted
for an increase in revenue in 1995 of $4,418,000. Partially offsetting this
increase was a $802,000 decline in lift ticket and ski-related revenues,
primarily as a result of fewer skier days.
Skier days and revenue per skier day were 784,964 and $50.73 for 1995, as
compared to 837,179 and $48.75 for 1994. The operating season is dependent on
favorable snow conditions, and in 1995 the season did not open until
mid-December due to unusually warm weather and low precipitation. Revenue per
skier day increased in 1995 as a result of increased lift ticket prices.
Costs of sales for resort operations for 1995 increased by $1,649,000, or
6.1%, from the prior year, primarily as a result of increased costs resulting
from the acquisition of Bear Mountain.
Selling, general, administrative and other operating expenses increased by
$326,000, or 5.9%, from 1994 to 1995. This increase was due to the formation of
the Fibreboard Resort Group, which was necessitated by the acquisition of Bear
Mountain, which added resort operating personnel, and the expansion of
management training programs. Prior to this time, management at Northstar
oversaw both Northstar and Sierra. Management fees allocated to the Fibreboard
Group for 1995 increased by $592,000, or 90.4%, from 1994 due principally to the
effects of a nonrecurring supplemental allocation of Fibreboard Corporation's
corporate expenses to its various operating subsidiaries and divisions in 1995.
Net interest expense increased by $155,000 over the prior year. This
increase is due to an increase in intercompany interest of $488,000 charged to
the California Resorts by Fibreboard Corporation, as Fibreboard Corporation did
not charge intercompany interest in 1994. This increase was partially offset by
a decrease in interest expense to third parties of $302,000, as the Company paid
all of its outstanding debt to third parties during 1995, and an increase in
interest income of $31,000.
For 1995, the tax rate applied to the California Resorts was 40%, a
decrease from the rate of 40.5% applied in 1994.
EBITDA for 1995 was $13,002,000, an increase of $1,533,000, or 13.4%, from
1994. EBITDA margin increased from 27.7% in 1994 to 28.9% in 1995.
49
<PAGE> 53
RESULTS OF OPERATIONS OF WATERVILLE VALLEY
The following review of the performance of Waterville Valley is for the
audited fiscal periods ended October 31, 1995 and October 27, 1996. Waterville
Valley was sold by S-K-I Limited to American Skiing Company effective June 30,
1996. Accordingly, for the financial statements covering periods subsequent to
June 30, 1996, purchase price accounting was reflected. Therefore, the pre- and
post-acquisition financial statements of Waterville Valley reflect different
bases of accounting which can significantly impact depreciation, amortization,
interest and related tax expenses. However, for purposes of the following
discussion regarding fiscal 1996 and fiscal 1995 activity, the pre- and
post-acquisition financial information has been combined to provide the reader
with an indication of the trend of results. Such combined information is
referred to herein as "Combined 1996" information. The following table
summarizes Waterville Valley's historical results of operations as a percentage
of revenue for the year ended October 31, 1995 and Combined 1996.
<TABLE>
<CAPTION>
COMBINED
1995 1996
----- --------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................................................... 100.0% 100.0%
Cost of Sales............................................... 48.3 49.1
----- -----
Gross Margin................................................ 51.7 50.9
Other Costs and Expenses.................................... 39.7 38.7
Depreciation and Amortization............................... 11.3 10.5
----- -----
Income from Operations...................................... 0.7 1.7
Interest Expense............................................ 1.0 0.8
----- -----
Income (Loss) Before Income Taxes........................... (0.3) 0.9
Income Tax Expense (Benefit)................................ (0.1) 3.9
----- -----
Net Income (Loss)................................. (0.2)% (3.0)%
===== =====
OTHER DATA:
EBITDA...................................................... 12.0% 12.2%
</TABLE>
Year Ended October 27, 1996 as Compared to the Year Ended October 31, 1995
Combined 1996 revenue increased by $2,081,000, or 22%, over fiscal 1995
revenue of $9,653,000. The revenue increase was primarily due to more favorable
weather conditions, including a significant increase in snowfall (203 inches in
fiscal 1996 vs. 101 inches in fiscal 1995) which contributed to a 23.7% increase
in skier days. In addition, fiscal 1995 revenue was negatively impacted by
problems with the high-speed quad lift which was non-operational for two and
one-half weeks in December 1994. Skier days and revenue per skier day were
256,563 and $45.73 for 1996, as compared to 207,386 and $46.55 in 1995.
Cost of sales as a percent of revenue increased slightly to 49.1% in the
Combined 1996 fiscal period compared to 48.3% in fiscal 1995.
Due to increased revenue volumes in fiscal 1996, the other costs and
expenses and depreciation and amortization percentages of revenue decreased
slightly in the Combined 1996 fiscal period as compared to 1995 due to the fixed
nature of certain of these expenses.
The tax provision for the Combined 1996 fiscal period is significantly
higher than the prior year due to the inability in the post-acquisition period
to recognize the tax benefits of the operating losses generated.
EBITDA for the Combined 1996 period was $1,431,000, an increase of
$272,000, or 23.5%, from 1995 EBITDA of $1,159,000. EBITDA margin increased from
12.0% in 1995 to 12.2% in 1996.
50
<PAGE> 54
RESULTS OF OPERATIONS OF SNOQUALMIE PASS
Ski Lifts, Inc. was acquired by Booth Creek effective January 15, 1997, and
its results of operations have been included in the Company's consolidated
results of operations since such date. The following review of the performance
of Ski Lifts, Inc. is for the audited fiscal periods ended September 30, 1994,
1995 and 1996 and the unaudited three and one-half month periods ended January
15, 1996 and 1997. The comparison of the three and one-half month period ended
January 15, 1997 to the four month period ended January 31, 1996, as summarized
in the historical financial statements, would significantly impact revenues,
cost of sales, general, administrative and other expenses as the second half of
January is a significant revenue producing period. Thus, as noted above, this
discussion covers the two three and one-half month periods ended January 15,
1997 and 1996 based on unaudited results through January 15, 1997 and estimated
unaudited results through January 15, 1996.
The following table summarizes Ski Lifts' historical results of operations
as a percentage of revenue for the years ended September 30, 1994, 1995 and 1996
and the three and one-half month periods ended January 15, 1996 and 1997.
<TABLE>
<CAPTION>
THREE AND ONE- THREE AND ONE-
HALF MONTHS HALF MONTHS
YEAR ENDED SEPTEMBER 30, ENDED ENDED
-------------------------- JANUARY 15, JANUARY 15,
1994 1995 1996 1996 1997
------ ------ ------ -------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating Salaries, Wages and Other Employee
Costs.......................................... 46.9 48.0 48.6 54.7 50.0
General, Administrative and Other Operating
Expenses....................................... 29.4 30.5 32.1 45.3 38.1
Other Operating Expenses......................... 15.8 15.9 16.4 19.5 15.4
----- ----- ----- ----- -----
Gross Margin..................................... 7.9 5.6 2.9 (19.5) (3.5)
Other Costs and Expenses (Income)................ 2.3 3.2 3.0 (0.2) (0.6)
----- ----- ----- ----- -----
Income (Loss) from Operations.................... 5.6 2.4 (0.1) (19.3) (2.9)
Income Tax Expense (Benefit)..................... 1.9 (3.7) 0.0 0.0 0.0
----- ----- ----- ----- -----
Net Income (Loss) (Before Cumulative
Effect of Change in Accounting
Principle)............................ 3.7% 6.1% (0.1)% (19.3) (2.9)
Net Income (Loss)....................... 2.0% 6.1% (0.1)% (19.3) (2.9)
===== ===== ===== ===== =====
OTHER DATA:
EBITDA........................................... 17.4% 15.3% 13.2% (2.4)% 7.6%
</TABLE>
Three and One-Half Months Ended January 15, 1997 as Compared to the Three and
One-Half Months Ended January 15, 1996
Ski Lifts, Inc. was acquired by Booth Creek effective January 15, 1997. The
discussion below compares the results of operations of Ski Lifts, Inc. prior to
its acquisition by Booth Creek and since its last completed fiscal year to the
comparable period in the prior year. The operating data presented are based on
unaudited results through January 15, 1997 and estimated unaudited results
through January 15, 1996.
Total revenues for the 1997 period were $3,511,000, an increase of
$890,000, or 34% from the 1996 period. The increase resulted from increased
operating days and skier visits.
Skier days and revenue per skier day were 167,708 and $20.94 for the 1997
period, as compared to 112,985 and $23.20 for 1996 period. There were 47
operating days through January 15, 1997 as compared to 33 operating days through
January 15, 1996. The Snoqualmie Pass ski areas opened November 22, 1996 for the
1996/97 season as compared to December 9, 1995 for the 1995/96 season. Revenue
per skier day was lower for the 1997 period as compared to the 1996 period as a
result of the ski areas being closed for six days from December 26, 1996 through
January 1, 1997 due to highway closures from avalanche danger and severe weather
conditions. This six day closure was largely responsible for the decrease in
revenue per skier day in the 1997 period as these were higher holiday priced
days. Additionally, the early season days are priced at lower rates initially
until all four ski areas comprising Snoqualmie Pass are in full operation. Due
to the late start in the 1995/96 season, there were fewer days when the lower
rates were in effect.
51
<PAGE> 55
Operating salaries, wages and other employee costs for the 1997 period
increased by $323,000, or 22.6%, as compared to the 1996 period. The higher
labor costs were due to the earlier start of the 1996/97 ski season as well as
increased labor costs associated with additional snow grooming and removal
required as a result of unusually heavy snowfall during late December and early
January.
General, administrative and other operating expenses for the 1997 period
increased by $150,000, or 12.7%, as compared to the 1996 period. Approximately
30% of this increase was due to increased maintenance, gas, oil, diesel and
electricity charges incurred as a result of the unusually large snowfall
experienced at the areas during 1997, as discussed above. The remaining increase
was a result of the increased number of operating days and skier visits in the
1997 period as compared to the 1996 period.
Net interest expense for the 1997 period was approximately $113,000 as
compared to approximately $110,000 for the 1996 period.
EBITDA for the 1997 period was $266,000, an increase of $330,000 from the
1996 period. EBITDA margin increased from (2.4%) in the 1996 period to 7.6% in
the 1997 period due to the increased number of operating days and skier visits
in the 1997 period, which resulted in higher revenues.
Year Ended September 30, 1996 as Compared to the Year Ended September 30, 1995
Total revenues for 1996 were $9,451,000, a decrease of $1,219,000, or 11%,
from 1995, primarily due to a shorter operating season. Lift revenues, which
comprised 65% of total revenue in 1996, declined by $922,000, or 13%, from 1995,
while ski rental revenue decreased by 12%. For 1996, the operating ski season
lasted only 117 days, as compared to 158 days for 1995, because of unfavorable
weather conditions.
Skier days and revenue per skier day were 455,240 and $20.76 for 1996, as
compared to 515,487 and $20.69 for 1995. The operating season is dependent on
favorable snow conditions, and in 1996 the season did not open until
mid-December, as compared to mid-November in 1995, due to lack of snow, and
after opening snow coverage was minimal, resulting in lower than average skier
days in December. In addition, in February of 1996 there were unusual weather
patterns which resulted in significantly fewer skier days than in the prior
year. Snow conditions and the quantity of snow most directly impact the number
of skier days, and therefore total revenue.
Operating salaries, wages and other employee costs for 1996 were
$4,595,000, a decrease of $525,000, or 10%, from 1995. The decrease resulted
from the shorter operating season due to the later opening of the resort which
was offset by a profit sharing contribution of $162,000 in 1996. The Company
employs approximately 60 year-round employees and 1,000 seasonal employees.
Thus, with a shorter operating season, employee costs decreased in proportion to
overall lift revenues. As a result of the poor operating season in 1996, a large
number of year-round employees were laid off for a period of four to ten weeks,
whereas in 1995 the same group of employees were laid off for a two week period.
General, administrative and other operating expenses decreased by $218,000,
or 6.6%, from 1995 to 1996. This decrease was primarily due an overall decrease
in the number of operating days.
Interest expense increased by $37,500 from 1995 to 1996, due primarily to
higher average borrowings.
For 1995, Ski Lifts, Inc. recognized a tax benefit of $408,000 for the
elimination of certain deferred tax balances upon conversion to S Corporation
status for federal income tax purposes.
EBITDA for 1996 was $1,251,000, a decrease of $378,000, or 23.2%, from
1995. EBITDA margin decreased from 15.3% in 1995 to 13.2% in 1996.
Year Ended September 30, 1995 as Compared to the Year Ended September 30, 1994
Total revenues for 1995 were $10,670,000, an increase of $429,000, or 4%,
from 1994. Lift revenues, which comprised 66% of total revenue in 1995,
increased by $471,000, or 7%, from 1994. The increase in lift revenues was
offset by a decrease in ski rentals and ski shop sales which decreased overall
by approximately $60,000 from 1994 to 1995. This decrease resulted from poor
snow conditions during the December holidays,
52
<PAGE> 56
which resulted in decreased rentals and retail sales. The 1995 operating season
lasted 158 days, as compared to 130 days for 1994.
Skier days and revenue per skier day were 515,487 and $20.69 for 1995, as
compared to 519,953 and $19.69 for 1994. The increase in revenue per skier day
resulted from an increase in lift ticket prices of approximately $1 per ticket.
The operating season is dependent on favorable snow conditions, and in 1995,
while there was an increase in operating days of 21%, the overall revenue
increase was only 4% due to the deterioration of ski conditions from
mid-December through February. Snow conditions and the quantity of snow most
directly impact the number of skier days, and therefore total revenue.
Operating salaries, wages and other employee costs for 1995 were
$5,120,000, an increase of $316,000, or 6.5%, from 1994. The increase results
from the longer operating season in 1995 compared to 1994. The longer operating
season increased labor hours and, as a result, employee costs.
General, administrative and other operating expenses increased by $244,897,
or 8%, from 1994 to 1995. This increase was primarily due to an overall increase
in the number of operating days.
Interest expense decreased by $14,800 from 1994 to 1995, due primarily to
lower average borrowings.
For 1995, Ski Lifts, Inc. recognized a tax benefit of $408,000 for the
elimination of certain deferred tax balances upon conversion to S Corporation
status for federal income tax purposes.
EBITDA for 1995 was $1,629,000, a decrease of $148,000, or 8.3%, from 1994.
EBITDA margin decreased from 17.4% in 1994 to 15.3% in 1995.
RESULTS OF OPERATIONS OF GRAND TARGHEE
Grand Targhee Incorporated was acquired by the Company on March 18, 1997
and its results of operations have been included in the Company's consolidated
results of operations since such date. The following review of the performance
of Grand Targhee Incorporated is for the audited fiscal periods ended May 31,
1994, 1995 and 1996 and the unaudited nine and one-half month periods ended
March 18, 1996 and 1997. The comparison of the nine and one-half month period
ended March 18, 1997 to the ten month period ended March 31, 1996, as summarized
in the historical financial statements, would significantly impact revenues,
direct expenses, and other costs and expenses as the second half of March is a
significant revenue producing period. Thus, as noted above, this discussion
covers the two nine and one-half month periods ended March 18, 1997 and 1996
based on unaudited results through March 18, 1997 and estimated unaudited
results through March 18, 1996.
The following table summarizes Grand Targhee Incorporated's historical
results of operations as a percentage of revenue for the years ended May 31,
1994, 1995 and 1996 and the nine and one-half month periods ended March 18, 1996
and 1997.
<TABLE>
<CAPTION>
NINE AND ONE-HALF NINE AND ONE-HALF
MONTHS ENDED MONTHS ENDED
1994 1995 1996 MARCH 18, 1996 MARCH 18, 1997
----- ----- ----- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Direct Expenses................ 55.1 55.1 56.4 53.1 66.0
----- ----- ----- ------ ------
Gross Margin................... 44.9 44.9 43.6 46.9 34.0
Other Costs and Expenses....... 40.5 40.7 39.5 35.6 41.2
----- ----- ----- ------ ------
Income (Loss) Before Income
Taxes........................ 4.4 4.2 4.1 11.3 (7.2)
Income Tax Expense (Benefit)... 1.8 1.2 1.0 3.9 (1.4)
----- ----- ----- ------ ------
Net Income (Loss).... 2.6% 3.0% 3.1% 7.4% (5.8)%
===== ===== ===== ====== ======
OTHER DATA:
EBITDA......................... 17.5% 15.7% 16.6% 20.8% 4.8%
</TABLE>
53
<PAGE> 57
Nine and One-Half Months Ended March 18, 1997 as Compared to the Nine and
One-Half Months Ended March 18, 1996
Total revenues for the nine and one-half months ended March 18, 1997 were
$5,680,000, a decrease of $874,000, or 13% as compared to the same period in
1996. Revenues from lift ticket and season pass sales, which comprised 32% of
the 1997 period's total revenue, decreased $461,000 or 20% from the 1996 period.
This decrease was due primarily to a 18.7% decrease in skier days. Actual 1997
period skier days were 94,898 as compared to 116,696 in the 1996 period. Skier
days in the current period were significantly impacted by poor weather
conditions which limited access to the resort, particularly during the Christmas
holiday season, and delays in the completion of a new high-speed detachable quad
lift which became operational on January 27, 1997.
The remaining decrease in revenues is attributable to lower revenues from
food, beverage, retail merchandise and other guest services resulting from fewer
skiers and lodging guests. Total revenue per skier increased to $59.85 in 1997
as compared to $56.16 in 1996.
Direct expenses in the 1997 period were $3,750,000, or 66.0% of revenues,
as compared to $3,479,000, or 53.1% of revenues, in the 1996 period. The
increase in direct expenses as a percentage of revenue was primarily due to
fewer skiers and the relatively high level of direct expenses that are fixed in
nature. As a result, gross margin decreased from 46.9% in the 1996 period to
34.0% in the 1997 period.
Other costs and expenses remained relatively unchanged at $2,334,000 in the
1996 period and $2,337,000 in the 1997 period. However, due to declining
revenues, other costs and expenses increased as a percentage of revenues from
35.6% to 41.2%. The increase in other costs and expenses as a percent of revenue
was due to fewer skiers and the fixed nature of these costs and expenses.
Other costs and expenses included interest expense, which decreased $13,000
or 12% from the 1996 period due to lower debt levels, and $54,000 of land
abandonment costs in the 1997 period related to the failed attempt to swap
certain real estate.
EBITDA for the 1997 period was $272,000, a decrease of $1,092,000 from
$1,364,000 in the 1996 period. EBITDA margin was 4.8% in the 1997 period
compared to 20.8% in the 1996 period.
Year Ended May 31, 1996 as Compared to the Year Ended May 31, 1995
Total revenues for 1996 were $7,376,000, an increase of $614,000, or 9%,
over 1995. Revenues from lift ticket and season pass sales, which comprised 36%
of 1996 total revenues, increased $143,000, or 6%, over 1995. This increase was
due to a 7% increase in lift ticket revenue per skier, offset by a 1% decrease
in skier days. Actual 1996 skier days were 116,696 as compared to 117,772 skier
days in 1995. Skier days were not significantly impacted by the length of the
ski season, which was 148 days in 1996, 8 days shorter than the 156 days in
1995.
The remaining increase in revenues is attributable to a higher level of
spending by both skiers and lodging guests for food, beverage, retail
merchandise and other guest services. Total revenue per skier (excluding lodging
revenue) increased by 11% from $38.64 per skier in 1995 to $42.91 per skier in
1996. Total revenues per lodging guest (excluding lift ticket revenue) were
$63.53, a 7.6% increase from 1995. The number of lodging guests in 1996 was
37,987, a 1% decrease from 1995. Increased spending by skiers and lodging guests
is primarily due to new guest facilities at the resort, including a restaurant,
liquor store, snowboard retail shop and spa.
Direct expenses in 1996 were $4,159,000, or 56.4%, of revenues, as compared
to 55.1% of revenues in 1995. The increase in direct expenses as a percentage of
revenues is primarily due to an increase in direct labor costs resulting from
the hiring of additional staff to operate new guest facilities and a change in
the employee benefit package which increased the percentage of insurance
benefits paid by the Company. As a result of these increases, gross margin
decreased from 44.9% in 1995 to 43.6% in 1996.
Other costs and expenses increased by $167,000 from $2,751,000 in 1995 to
$2,918,000 in 1996 but decreased as a percentage of revenues from 40.7% in 1995
to 39.5% in 1996. The decrease as a percentage of revenues was generally due to
management's efforts to control general and administrative marketing costs, a
$36,000 reduction in lease expense related to employee housing and a $54,000
reduction in interest expense due primarily to lower average borrowings.
Significant increases in other costs and expenses included $99,000
54
<PAGE> 58
of costs related to an abandoned land exchange, a $43,000 loss on disposition of
miscellaneous assets and a $43,000 write-off of the net book value of the
Shoshone lift which was replaced in fiscal 1997.
EBITDA for 1996 was $1,225,000, an increase of $159,000, or 14.9%, from
1995. EBITDA margin increased from 15.8% in 1995 to 16.6% in 1996.
Year Ended May 31, 1995 as Compared to the Year Ended May 31, 1994
Total revenues for 1995 were $6,762,000, an increase of $477,000, or 8%,
over 1994. Revenues from lift ticket and season pass sales, which comprise 37%
of 1995 total revenues, increased $281,000, or 13%, over 1994. This increase is
due to a 4% increase in skier days, 113,298 skier days in 1994 versus 117,772
skier days in 1995, and a 8% increase in lift ticket revenue per skier. The
resort was open for skiing 156 days in 1995 as compared to 150 days in 1994.
The remaining net revenue increase of $196,000 in 1995 was due to higher
lodging, food and beverage and retail sales which increased a total of $271,000
(8%) over 1994. Revenue increases in these categories were primarily due to the
higher number of skier days and a higher number of lodging guests. The number of
lodging guests increased 14% from 32,937 guests in 1994 to 37,528 in 1995.
Direct expenses increased 8% to $3,728,000 in 1995. However, direct
expenses as a percentage of revenues and gross margin as a percentage of
revenues remained constant at 55.1% and 44.9%, respectively.
Other costs and expenses increased 8% in 1995 to $2,751,000 as compared to
$2,549,000 in 1994. As a percentage of revenue, other costs and expenses
increased slightly from 40.5% in 1994 to 40.7% in 1995. Significant increases in
expenses included a $50,000 increase in professional fees primarily due to legal
fees associated with an environmental impact statement and an increase in
marketing labor and advertising expenses of $79,000 related to increased resort
marketing programs. Interest expense decreased $33,000 primarily due to lower
average borrowings.
EBITDA for 1995 was $1,066,000, a decrease of $32,000, or 2.9%, from 1994.
EBITDA margin decreased from 17.5% in 1994 to 15.7% in 1995.
COMPANY COST REDUCTION MEASURES AND OPERATING IMPROVEMENTS
As part of its business and operating strategy, management has identified
and is in the process of implementing certain cost reduction measures and
operating improvements that are expected to result in improved operating
results. The following table sets forth certain expenses incurred by either the
Fibreboard Resort Group, the New Hampshire Resorts, Ski Lifts, Inc. or Grand
Targhee Incorporated for the twelve month period ending October 31, 1996, which
the Company believes will not recur in future periods as a result of such cost
reduction measures and operating improvements. In addition, while management
believes the following expenses will not recur in future periods, there can be
no assurance that the Company will not incur other expenses similar to the
expenses described below in future periods. The following calculation should not
be viewed as indicative of future results.
<TABLE>
<CAPTION>
EXPECTED COST
SAVINGS
-------------
<S> <C>
Reduction in insurance premiums............................. $ 652,000
Snoqualmie Pass cost reductions............................. 500,000
In-house operation of certain ski-related services.......... 435,000
Removal of Bear Mountain one-time post-acquisition
adjustments............................................... 415,000
Post-closing inventory and accounting adjustments........... 309,000
One-time charges at Grand Targhee........................... 237,000
One-time charges at Waterville Valley....................... 147,000
Removal of prior owner services at Mt. Cranmore............. 49,000
----------
Expected cost savings adjustment.................. $2,744,000
==========
</TABLE>
Reduction of insurance premium represents elimination of insurance expenses
as a result of a new insurance package entered into by the Company, which
has reduced insurance premiums as a result of
55
<PAGE> 59
the consolidation of the Company's resorts and achievement of economies of
scale. The level of insurance coverage maintained is considered to be
consistent with historical levels.
Snoqualmie Pass cost reductions represents elimination of expenses
primarily related to a reduction in summer labor costs.
In-house operation of certain ski-related services represents the increase
in revenue and elimination of expenses related to services performed by
outside vendors at Snoqualmie Pass that will be performed by the Company
and which are performed by the Company at its other resorts.
Removal of Bear Mountain one-time post-acquisition adjustments represents
elimination of certain charges incurred by the Company in connection with
the acquisition of Bear Mountain by Fibreboard Corporation, which the
Company believes will not occur in the future. These costs included
misclassified payroll and related expenses, labor expense overruns expected
to be reduced and snowboard inventory writeoffs.
Post-closing inventory and accounting adjustments represents elimination of
one-time charges at Northstar for inventory writeoffs and sales tax audit
adjustments.
One-time charges at Grand Targhee represents elimination of several
one-time expenses incurred by Grand Targhee Incorporated that reduced
operating results. These expenses include the cost associated with
abandoning a land exchange project, the write-off of an investment in a
central reservation system, the establishment of an accrual for vacation
pay, contributions to a local charity associated with the shareholders of
Grand Targhee Incorporated, a loss on the disposal of fixed assets, fees
associated with an application for financing which was never consummated
and the write-off of certain credit card receivables.
One-time charges at Waterville Valley represents elimination of several
expenses incurred by Waterville Valley that were either non-recurring in
nature, such as expenses related to the former owner, emissions testing for
the state, or a tank removal project, or related to expenditures for
property, plant and equipment which the Company would have capitalized such
as roof and lodge repairs and various signage.
Removal of prior owner services at Mt. Cranmore represents elimination of
expenses incurred by Mt. Cranmore that were allocated to the resort by its
former owner for services which are now being provided by the Company at no
cost.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund capital expenditures,
service indebtedness and support seasonal working capital requirements. The
Company's primary sources of liquidity will be cash flow from operations and
borrowings under the Senior Credit Facility. Virtually all of the Company's
operating income will be generated by its subsidiaries. As a result, the Company
will be dependent on the earnings and cash flow of, and dividends and
distributions or advances from, its subsidiaries to provide the funds necessary
to meet its debt service obligations, including the payment of principal of and
interest on the Notes. See "Risk Factors -- Holding Company Structure; Effects
of Asset Encumbrances." The Senior Credit Facility currently provides for
borrowing availability of up to $12.0 million during the period from each July
15 through each January 31 during the term of such facility and $6.0 million
during the remainder of each year. In addition, the Company is required to repay
all borrowings under the Senior Credit Facility on or before March 1 of each
year and have no outstanding indebtedness thereunder during the two months
thereafter. Upon the satisfaction of a certain financial ratio on or after July
15, 1998, total borrowing availability under the Senior Credit Facility
increases to $20.0 million. The Company intends to use borrowings under the
Senior Credit Facility to meet seasonal fluctuations in working capital
requirements, primarily related to off-season operations and maintenance
activities during the months of May through October, to fund capital
expenditures for lifts, trail work, grooming equipment and other on-mountain
equipment and facilities and to build retail and other inventories prior to the
start of the skiing season. The Senior Credit Facility requires the Company to
escrow $5,820,000 on or prior to August 1, 1997 to fund the first payment of
interest payable on the Notes after the Issue Date. Pursuant to the terms of the
Senior Credit Facility, the Company may not borrow in excess of $1,430,000
thereunder to fund such interest payment. The Company expects to fund such
interest payment through available cash on hand (including any remaining
proceeds from the Initial Offering) and borrowings under the
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<PAGE> 60
Senior Credit Facility up to the $1,430,000 limit. The Company used a
substantial portion of available cash on hand upon consummation of the Initial
Offering to fund a portion of the Transactions. Such use of cash and borrowings
may affect the Company's ability to undertake significant off-season capital
projects during 1997.
The Company's pro forma capital expenditures for the year ended October 31,
1996 and the six months ended May 2, 1997 were each approximately $10.3 million.
For the pro forma year ended October 31, 1996, expenditures included
approximately $5.5 million for maintenance capital expenditures, $1.2 million
for the development of Northstar's Big Springs project, $1.7 million for two
lifts at Grand Targhee, $1.7 million for a lift at Mt. Cranmore and $200,000 for
other facility upgrades. For the pro forma six months ended May 2, 1997,
expenditures related primarily to new lifts at Sierra and Grand Targhee and new
snow groomers at various resorts. Management anticipates that total capital
expenditures following consummation of the Initial Offering through fiscal year
1998 will be approximately $15.0 million. Future capital expenditures include
approximately $5.0 million in each of the next two years for resort maintenance
and safety and $5.0 million for resort upgrades that management deems
appropriate. The Company plans to fund these capital expenditures from available
cash flow, vendor financing to the extent permitted under the Senior Credit
Facility and the Indenture and borrowings under the Senior Credit Facility.
Management believes that there is a considerable degree of flexibility in
the timing (and, to a lesser degree, the scope) of its capital expenditure
program, and even greater flexibility as to its real estate development
objectives. While the capital expenditure program described above is regarded by
management as important, both as to timing and scope, discretionary capital
spending above maintenance levels can be deferred, in some instances for
substantial periods of time, in order to address cash flow or other constraints.
With respect to the Company's potential real estate development opportunities,
management believes that such efforts will enhance ski-related revenues and will
contribute independently to earnings. In addition, with respect to significant
development projects, the Company anticipates entering into joint venture
arrangements that would reduce infrastructure and other development costs.
Nonetheless, existing lodging facilities in the vicinity of each resort are
believed to be adequate to support current skier volumes, and a deferral or
curtailment of these development efforts is not regarded by management as likely
to adversely affect skier days and ski-related revenues or profitability. The
Company also believes that its current infrastructure is sufficient, and that
development of real estate opportunities is not presently necessary, to support
its existing operations.
The Company's liquidity will be significantly affected by the substantial
indebtedness incurred in connection with the financing of the Acquisitions,
including the indebtedness evidenced by the Notes. As a result of its leveraged
position, the Company will have significant cash requirements to service debt
and funds available for working capital, capital expenditures, acquisitions and
general corporate purposes may be limited. In addition, the Company's high level
of debt may increase its vulnerability to competitive pressures and the
seasonality of the skiing and recreational industries. Any decline in the
Company's expected operating performance could have a material adverse effect on
the Company's liquidity and on its ability to service its debt and make required
capital expenditures. See "Risk Factors -- High Level of Indebtedness and
Leverage." Further, upon the occurrence of a Change of Control, the Company may
be required to repurchase the Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest. The occurrence of a change of control may also
constitute a default under the Senior Credit Facility. See "Risk
Factors -- Change of Control" and "Description of the Notes -- Change of
Control."
Management believes that the Company's cash flow from operations and
borrowings available under the Senior Credit Facility will be sufficient to
enable the Company to meet all of its cash operating and debt service
requirements over the next twelve months.
SEASONALITY
The business of the Company is highly seasonal, with the vast majority of
its annual revenues expected to be generated between November and April of each
fiscal year. Management considers it essential to achieve optimal operating
results during key holidays and weekends during this period. During the
off-season months of May through October, the Company's resorts typically
experience a substantial reduction in labor and utility expense due to the
absence of ski operations, but make significant expenditures for maintenance,
expansion and capital improvement in preparation for the ensuing ski season. See
"Risk Factors -- Dependence on Weather Conditions; Seasonality."
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<PAGE> 61
BUSINESS
OVERVIEW
Booth Creek owns and operates seven ski resort complexes encompassing ten
separate resorts, making the Company the fourth largest operator in North
America based on approximately 1.8 million skier days recorded during the
1995/96 ski season. Booth Creek primarily operates regional ski resorts which,
in the aggregate, attract approximately 85% of their guests from their regional
ski markets, within a 200 mile driving radius of each resort. The Company's
properties offer approximately 8,150 acres of skiable terrain, 354 trails, 89
lifts (including 12 high-speed lifts) and on-mountain capacity to accommodate
approximately 50,000 guests daily. For the twelve months ended October 31, 1996
and the six months ended May 2, 1997, the Company's resorts generated
approximately $82.1 million and $71.2 million of pro forma revenue,
respectively, $3.1 million and $8.8 million of pro forma operating income,
respectively and ($8.4 million) and $805,000 of pro forma net income (loss),
respectively. For the twelve months ended October 31, 1996 and the six months
ended May 2, 1997, the Company's resorts generated approximately $20.7 million
and $16.7 million of adjusted pro forma EBITDA, respectively.
The Company has acquired an attractive group of resort properties primarily
located near major skiing populations. According to the Sporting Goods
Manufacturers Association, the average American skier skied approximately 3.3
days during the 1995/96 ski season, of which approximately 80% of visits were at
regional ski resorts. The Company's resorts are located near approximately 26%
of all skiers in the United States, including four of the five largest regional
ski markets: Los Angeles/San Diego, San Francisco/Sacramento, Boston and
Seattle/Tacoma. The Company believes this geographical diversification serves to
limit the Company's exposure to regional economic downturns and unfavorable
weather conditions.
In addition to their proximity to four of the five largest metropolitan
skier population markets, the Company's resorts continue to differentiate
themselves in their respective markets by selectively upgrading on-mountain
facilities and guest services, employing targeted marketing strategies and
offering extensive skier development programs, all of which create a
competitively-priced, high-quality guest experience. The Company's resorts have
collectively spent over $35.0 million in expansion-related capital improvements
over the past three years, including the addition of eight high-speed
chairlifts, additional snowmaking capability, improved trail grooming equipment,
and enhanced on-mountain lodging, retail and food service amenities. The Company
believes its existing resorts have been well maintained and ongoing capital
expenditure requirements are expected to be approximately $5.0 million in the
aggregate in each of the next two years. The Company's California Resorts have
introduced what management believes to be one of the industry's leading
marketing programs, Vertical Plus, an electronic annual frequent skier program
designed to build customer loyalty, increase visitation frequency and maximize
guest revenue yields. In less than three full ski seasons since the introduction
of Vertical Plus, its members already account for approximately 11% of total
skier days at Northstar and Sierra. The Company intends to expand Vertical Plus
to its other resorts over the next two ski seasons. In addition to Vertical
Plus, the Company uses targeted advertising, database marketing and strategic
marketing alliances to enhance the image of its resorts and increase regional
market share. The Company also offers extensive development programs to improve
the technical skill level of all types of skiers, which management believes is
important to expand the total skier population and increase skier visitation
frequency. Northstar and Sierra are consistently rated by consumer publications
as having premier ski instruction and development programs. The Company intends
to implement similar skier development programs at its other resorts in future
ski seasons.
The Company believes that one of its most important assets is its
experienced and guest-oriented management team. The 10 members of the Company's
senior management team have, on average, approximately 17 years of experience in
the ski industry. George N. Gillett, Jr., Chairman of the Board of Directors and
Chief Executive Officer of the Company, has 13 years of experience operating ski
resorts, including the Vail Ski Resort, which during his association as owner
and Chairman became the largest ski mountain complex, and one of the most
profitable ski resorts, in North America. Each of the Company's resorts is
managed by an on-site resort executive with extensive local experience and
industry expertise. See "Management."
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<PAGE> 62
OPERATING STRATEGY
The Company expects to capitalize on certain benefits associated with being
a multiple resort operating company by extending key operating strategies and
management practices which have been successfully implemented at its California
Resorts to the Company's other resorts. The key elements of the Company's
strategy include the following:
Continually Enhance the Guest Experience. In addition to offering
accessible locations, the Company is committed to providing a high-quality
guest experience by offering a diversity of terrain, consistent snow
conditions (the Company's most weather-sensitive resorts have snowmaking
coverage on nearly 100% of their trails), state-of-the-art ski lift
capacity, attractive facilities, a friendly atmosphere and extensive skier
development programs. The Company believes the physical condition of its
resorts is very competitive with other regional resorts, and will continue
to selectively enhance and expand its resorts in order to continuously
offer a diverse and competitively-priced, high-quality skiing experience.
Incorporate Sophisticated Management Information Systems. The
Company's California Resorts utilize what management believes is one of the
industry's premier management information systems, providing daily
statistical and financial information on all operating departments within
each resort. This system enables management to continuously monitor and
align staffing and services to meet market demands, while enhancing the
quality and timing of communications and decisions. The Company plans to
integrate all of its resorts into its management information system.
Develop Effective Marketing Plans. The Company's marketing plans are
designed to attract skiers and snowboarders by emphasizing the Company's
diverse facilities, high-quality services and proximity to each of the
regional skier markets in which it operates. The Company intends to
position each of its resorts as an economical and attractive alternative to
competing regional resorts and to other forms of leisure entertainment. The
Company's marketing objectives are to (i) increase each of its resorts'
relative market share, (ii) expand the number of skiers in each of its
markets, (iii) increase skier visitation frequency and (iv) influence the
vacation destination choices of prospective guests. A key component to the
Company's marketing plans will be the expansion of Vertical Plus to enhance
guest loyalty and increase skier visitation frequency. The Company also
believes there are opportunities to cross-market its resorts through the
integration and expansion of the Vertical Plus program.
Maximize Revenues and Resort Cash Flow. The Company focuses on
increasing revenues and resort cash flow by managing the mix of skier days
and revenue per skier day. The strategy for each resort is based on the
demographic profile of its market and the physical capacity of its mountain
and facilities. The Company seeks to increase skier days by developing
effective ticket pricing strategies and marketing programs to improve peak
and off-peak volume. The Company seeks to improve revenue per skier day by
effectively managing the price, quality and value of each of its
ski-related services, including retail shops, ski rentals, ski lessons and
food and beverage facilities. The Company also generates revenue from a
variety of non-ski related services, such as golf, tennis, health clubs and
conference centers, as well as from real estate and timber sales.
Pursue Cost Savings Opportunities. The Company expects to realize
significant cost savings from operating multiple resorts through
centralized purchasing of insurance, retail inventory, capital and rental
equipment, bulk purchasing of advertising and printing, as well as through
the selective consolidation of administrative functions. In addition, the
Company intends to extend the flexible staffing practices utilized at its
California Resorts to its other resorts, which management estimates will
reduce expenses by approximately $500,000 at its non-California Resorts. By
pursuing these and other operating synergies, management believes that it
can realize significant cost savings while growing skier days and enhancing
profitability.
Selectively Develop New Terrain and Real Estate. Management believes
that the Company has significant opportunities to expand skiable terrain
and trails and to develop Company-owned real estate for commercial and
residential use. The Company owns or has access to approximately 2,640
acres at Northstar, 425 acres at Grand Targhee and 700 acres at Mt.
Cranmore for potential development of
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<PAGE> 63
additional ski terrain and/or for residential and commercial purposes. The
Company also owns approximately 84 acres at Snoqualmie Pass available for
additional residential and commercial development which it holds through an
Unrestricted Subsidiary. See "The Transactions." Management believes that
the Company's undeveloped acreage at Northstar is the only significant
privately-held land available for skiing expansion in the Lake Tahoe basin
and could double the amount of skiable terrain and the number of trails at
Northstar while significantly increasing the on-site bed base. The Company
believes that increasing the on-site and area bed base is important in
attracting regional overnight skiers, expanding market share and capturing
a greater portion of each guest's expenditures. Management anticipates that
any significant development project would be undertaken through a joint
venture with a major real estate development company, which would offset a
significant portion of the infrastructure cost.
ACQUISITION STRATEGY
The Company believes that the domestic ski industry is highly fragmented
but is undergoing a transition from individual resort ownership to ownership by
multiple resort operating companies. With their high-quality facilities and
services, sophisticated information systems and experienced management team, the
California Resorts, in management's view, will serve as the core of the
Company's operations and its base for future expansion. The acquisitions of the
New Hampshire Resorts, Snoqualmie Pass and Grand Targhee provide the Company
with additional geographical diversity and proximity to other major skiing
population centers. In addition, the Company believes that there are numerous
opportunities to introduce sophisticated management practices, many of which are
already employed at its California Resorts, to all of its resorts, which are
expected to increase the number of skier days, revenue per skier day and resort
cash flow. The Company will consider future acquisition opportunities that it
believes will further expand the Company's national presence or enhance its
operating synergies.
INDUSTRY
There are 519 ski areas in the United States, which during the 1995/96 ski
season generated approximately 54 million skier days. These areas range from
small ski resort operations, which cater primarily to day skiers and regional
overnight skiers from nearby population centers, to larger resorts which, given
the scope of their operations and their accessibility, are able to attract
skiers and snowboarders from their regional ski markets as well as destination
resort guests who are seeking a comprehensive vacation experience. While
regional ski market skiers tend to focus primarily on lift ticket price and
round-trip travel time, destination travelers tend to be heavily influenced by
the number of amenities and activities offered as well as the perceived overall
quality of the vacation experience. The table below summarizes regional skier
days from the 1991/92 ski season through the 1995/96 ski season.
U.S. SKI INDUSTRY REGIONS AND SKIER DAYS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PACIFIC
SEASON NORTHEAST SOUTHEAST MIDWEST ROCKY MTS WEST LAKE TAHOE TOTAL
- ------ --------- --------- ------- --------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1991/92......................... 12,252 4,425 6,535 17,687 7,036 2,900 50,835
1992/93......................... 13,217 4,660 6,978 18,602 7,375 3,200 54,032
1993/94......................... 13,718 5,808 7,364 17,503 7,144 3,100 54,637
1994/95......................... 11,265 4,746 6,907 18,412 7,446 3,900 52,676
1995/96......................... 13,825 5,693 7,284 18,148 6,033 3,000 53,983
5 year avg...................... 12,855 5,066 7,014 18,070 7,007 3,220 53,233
</TABLE>
- ---------------
Northeast: CT, MA, ME, NH, NY, VT, RI
Southeast: AL, GA, KY, MD, NC, NJ, PA, TN, VA, WV
Midwest: IA, IL, IN, MI, MN, MO, ND, NE, OH, SD, WI
Rocky Mts: CO, ID, MT, NM, UT, WY
Pacific West: AK, AZ, CA (excluding Lake Tahoe Region), NV, OR, WA
Source: 1995/96 Kottke National End of Season Survey
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<PAGE> 64
The ski resort industry is presently experiencing a period of
consolidation. The number of U.S. ski areas has declined from 709 in 1986 to 519
in 1996 and, based on industry estimates, the number of ski areas is expected to
decline further, as many mountain resorts lack the infrastructure, capital and
management capability to compete in this multi-dimensional and service-intensive
industry. No major new ski resort has opened in the United States since 1989. Of
the 519 ski areas, RRC Associates estimates the average resort recorded
approximately 104,000 skier days and only 25% of all resorts reported more than
220,000 skier days during the 1995/96 ski season. All of the Company's resorts
except Mt. Cranmore and Grand Targhee typically record more than 220,000 annual
skier days. The trend among leading resorts is toward investing in improving
technology and infrastructure, including high speed lifts, attractive facilities
and extensive snowmaking capabilities to deliver a more consistent, quality
experience. The Company's resorts have spent over $35.0 million in
expansion-related capital expenditures over the last three years to improve
their competitive position. Management believes the need for increased
investment in a resort has required a greater access to capital and has enhanced
the position of larger and better capitalized resort owners. Despite this
consolidation, the ski industry remains highly fragmented, with no one resort
and no one resort operator accounting for more than 3% and 10%, respectively, of
the United States' 54 million skier days during the 1995/96 ski season.
Management believes that changes in demographics and certain ski industry
trends will be favorable for the U.S. ski industry. The single largest group of
skiers is the baby boom generation, which accounted for approximately 26% of all
U.S. skier days during the 1995/96 ski season. Members of this generation are
moving into an age and economic cycle when a greater portion of their disposable
income is available for recreational activities and the purchase of vacation
homes. The next largest groups are the echo boom generation (children of baby
boomers) and the "X" generation (young adults). With an estimated 114 million
people, members of these generations are beginning to form their recreational
habits and offer the largest potential increase in skiers since the emergence of
the baby boom generation in the late 1960's through the mid 1970's.
The emergence and growth of snowboarding, driven primarily by the echo boom
and X generations, have energized interest in "on-snow" recreation. According to
the National Sporting Goods Association, the estimated number of snowboarders
has increased from 1.5 million in the 1992/93 ski season to 2.3 million in the
1995/96 ski season, an increase of almost 55%. Snowboarding is now regarded as
one of the fastest growing sports in the world. Recently the International
Olympic Committee designated snowboarding as a medal event in the 2002 Winter
Olympic Games. Snowboarders are primarily between the ages of 13 and 25 and
presently represent an estimated 14% of all domestic ski resort visitors, an
estimated 16% at domestic regional resorts, and an estimated 20% at the
Company's resorts. Regional resorts are the industry leaders in providing
designated snowboarding parks, trails and specialized trial grooming techniques
for snowboarders. All of the Company's resorts have allocated significant
terrain to snowboarders. Management believes that the growth in snowboarding has
had, and will continue to have, a positive impact on the snow sports industry,
especially since it is attracting new age groups, and will continue to be an
important source of lift ticket, ski school, retail and rental revenue growth
for the Company.
The advent of snowboarding has been accompanied by the recent introduction
of new "parabolic," or shaped, alpine skis which are making skiing easier to
learn and enjoy. The new skis, which are estimated to account for up to 75% of
all new ski sales, are expected to significantly improve a new skier's learning
progression, as well as enhance the experience of skiers of all abilities
through increased technical ability and control. The California Resorts have
replaced all of their rental skiing equipment for the 1996/97 ski season with
the new skis. Further advances and innovations in skier equipment, trail
maintenance and lift technology are also expected to lead to the greater
popularity of skiing.
In the 1995/96 ski season, skier days declined at the Company's Northern
California Resorts as the Lake Tahoe region experienced unusually low December
snowfall and warm weather. The Lake Tahoe region has averaged approximately 3.2
million annual skier days over the last five years, including approximately 3.0
million in the 1995/96 ski season. Management estimates that approximately 60%
of the skiers visiting Lake Tahoe resorts during the 1995/96 ski season were
from the San Francisco, Sacramento and Central Valley metropolitan areas. Other
guests come principally from Southern California and states with large ski
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<PAGE> 65
populations, such as Texas, Illinois and Florida. Skiers in this market can
choose from among nine major resorts, which include Northstar, Sierra, Squaw
Valley, Heavenly Valley, Alpine Meadows, Kirkwood, Diamond Peak, Homewood and
Mt. Rose. Squaw Valley and Heavenly Valley attract a significantly greater share
of destination skiers than the area's other resorts.
The Southern California market has averaged approximately 2.3 million
annual skier days over the last five years. Management estimates that
approximately 95% of the skiers visiting Southern California resorts during the
1995/96 ski season were drawn primarily from the Los Angeles, Orange County and
San Diego metropolitan areas. Skiers in this market can choose from among five
major resorts, which include Bear Mountain, Snow Summit, Snow Valley, Mammoth,
and Mountain High.
The Northeast market (including New York) has averaged approximately 12.9
million annual skier days over the last five years. The Northeast market
consists of a significant percentage of day or weekend skiers due to the
relatively short driving radius to major metropolitan areas. While the Northeast
does not draw significant numbers of vacationing skiers from the Western regions
of the United States, it does compete with the Rocky Mountains and Pacific West
areas for Eastern vacationing skiers. Within the Northeast region, skiers can
choose from among over 50 major ski areas and resorts. The region's major ski
areas and resorts are concentrated in the mountainous areas of New England and
eastern New York, with the bulk of skiers coming from the population centers
located in eastern Massachusetts, southern New Hampshire, Connecticut, eastern
New York, New Jersey and the Philadelphia area.
The Company's Snoqualmie Pass resort complex operates in the Washington
State segment of the Pacific West market, which recorded approximately 1.4
million skier days during the 1995/96 ski season. Management estimates that
approximately 95% of the skier days recorded at Washington State resorts during
the 1995/96 ski season were attributable to residents of the Seattle/Tacoma
metropolitan area. Other guests come primarily from other parts of Washington,
Oregon and Western Canada. Washington State resorts do not attract a significant
number of destination skiers. Within Washington State, skiers can choose from
among 14 ski resorts, including the four resorts comprising Snoqualmie Pass. The
largest ski areas in Washington State are Snoqualmie Pass, Stevens Pass and
Crystal Mountain, each of which had over 250,000 skier days during the 1995/96
ski season. Other ski areas in Washington are moderate to small in size.
The Rocky Mountains market has averaged over 18 million skier days over the
last five years, with a high percentage of visitors consisting of destination
skiers. Of the 94 ski areas in the region, 29 are located in Colorado,
accounting for approximately 63% of all recorded skier days during the 1995/96
ski season. The 40 ski resorts in the northern Rocky Mountain states of Montana,
Idaho and Wyoming recorded a total of approximately 2.9 million skier days
during the 1995/96 ski season. Because resorts in this part of the region are
generally less accessible than resorts in Colorado or Utah, they tend to be
smaller and attract fewer destination skiers from outside of the northern Rocky
Mountain states.
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<PAGE> 66
RESORT OPERATIONS
The Company's seven resort complexes offer a variety of ski and non-ski
activities. The table below provides a summary of each resort's ski operations
and is followed by a more detailed description of each resort.
<TABLE>
<CAPTION>
1994/95 1995/96
SKIABLE VERTICAL SNOWMAKING LODGES ON SKIER SKIER
RESORT ACRES DROP TRAILS LIFTS COVERAGE GROOMERS PREMISES VISITS VISITS
------ ------- -------- ------ -------------- ---------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northstar-at-Tahoe... 2,000 2,280 61 1 Gondola 50% 12 6 527,653 404,736
4 High-Speed
Quads(1)
4 Fixed Grip
3 Surface
Sierra-at-Tahoe...... 1,675 2,212 46 3 High-Speed 12% 8 1 369,932 257,499
Quads
6 Fixed Grip
1 Surface
Bear Mountain........ 175 1,665 33 1 High-Speed 100% 6 3 305,799 214,284
Quad
8 Fixed Grip
2 Surface
Waterville Valley.... 300 2,020 50 1 High-Speed 91% 4 3 207,386 256,563
Quad
8 Fixed Grip
4 Surface
Mt. Cranmore......... 200 1,200 36 1 High-Speed 100% 3 2 96,527 123,201
Quad
4 Fixed Grip
1 Surface
Snoqualmie Pass...... 2,300 2,200 65 23 Fixed Grip -- 16 7 515,487 455,240
9 Surface
Grand Targhee........ 1,500 2,200 63 1 High-Speed -- 6 3 117,772 116,696
Quad
3 Fixed Grip
1 Surface
<CAPTION>
1996/97 1996
SKIER BEDS IN
RESORT VISITS VICINITY
------ ------- --------
<S> <C> <C>
Northstar-at-Tahoe... 445,753 16,000
Sierra-at-Tahoe...... 213,156 20,000
Bear Mountain........ 276,729 11,000
Waterville Valley.... 219,313 6,500
Mt. Cranmore......... 120,052 16,000
Snoqualmie Pass...... 476,218 1,000
Grand Targhee........ 94,898 750
</TABLE>
- ---------------
(1) High-Speed Quads are four-person chairlifts which detach from a cable during
passenger loading and unloading and reattach and accelerate thereafter.
Northstar-at-Tahoe
In management's opinion, Northstar-at-Tahoe, located near the north end of
Lake Tahoe, offers more activities and services in both winter and summer than
any of its competitors in the Lake Tahoe area. The resort's 8,600-foot Mt. Pluto
features 2,000 acres of skiable terrain for all abilities and a 2,280 foot
vertical drop. Northstar's 61 ski trails are served by 12 operating lifts,
including one gondola, four high-speed quads, two triple lifts and two double
lifts, which combine to transport up to 19,275 skiers uphill per hour. Northstar
also has approximately 42 kilometers of groomed trails for cross-country skiing
and snowbiking and several on-mountain terrain parks for snowboarders and
adventurous skiers offering non-traditional bumps, jumps and turns. Since the
1988 ski season, Northstar has spent over $25.0 million in capital expenditures,
including $10.0 million to install four new high-speed lifts, $12.0 million to
install snowmaking equipment, upgrade trail grooming equipment, and expand
skiable terrain, and $3.0 million to upgrade lodging and retail facilities.
Other facilities at Northstar include a European-style village that consists of
a 22,700 sq. ft. ski lodge, condominium/hotel accommodations, various
restaurants, bars, shops, a day-care center and entertainment and convention
facilities. Summer recreation facilities include an 18-hole golf course, ten
tennis courts, a horseback riding stable, mountain bike rentals and a swimming
pool. Northstar currently ranks third in skier days in the Lake Tahoe area and
is one of only 18 resorts in the United States to surpass the 500,000 skier days
milestone, which it did during the 1994/95 ski season. Between 1990 and 1997,
Northstar was named one of the top ten United States family resorts by Travel &
Leisure, Better Homes & Gardens and Family Circle, as well as one of the best 50
North American ski resorts by Snow Country and Ski magazines.
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<PAGE> 67
Northstar provides a full-service skiing experience for its clientele,
which typically includes the upper-income, baby boomer population. Northstar's
marketing is focused on the San Francisco Bay and the Sacramento Valley areas as
a destination alternative to Colorado and Utah resorts. Northstar also markets
aggressively in Southern California and states with large ski populations.
Northstar is within a one hour drive of the Reno International Airport, which
offers convenient scheduled air service to all parts of the United States,
Western Canada and Mexico. Small private planes can fly into the all-weather
Truckee Airport, where Northstar operates transit buses to the resort.
Typical Northstar guests include single male intermediate skiers between
the ages of 25 and 44 earning between $50,000 and $100,000 and families headed
by professionals or business executives with incomes in excess of $100,000.
Northstar is within a 200 mile driving radius of the major population centers of
San Francisco and Sacramento and, therefore, attracts a significant number of
its guests from Northern California. Northstar has approximately 6,000 beds at
the resort with an additional 40,000 beds in the vicinity, 10,000 of which are
within a 10 mile radius. Management estimates that during the 1995/96 ski season
75% of the skiers visiting Northstar came from Northern California, 8% from
Southern California, 16% from other states, and 1% from international locales.
Northstar's snowmaking system is engineered to cover approximately 50% of
its ski trails, which management believes is adequate given the area's heavy
annual snowfall, which averaged approximately 286 inches per year during the
past six years. Northstar has pumping rights from nearby water sources which,
when coupled with its 60 million gallon water storage capacity, have been more
than sufficient to support the resort's needs. Snowmaking during the 1995/96 ski
season consumed approximately 35.9 million gallons of water, which was slightly
below Northstar's six year average of 36.3 million gallons per year.
The following table summarizes the number of ski days operated, skier days
and seasonal snowfall totals at Northstar during the previous six ski seasons.
<TABLE>
<CAPTION>
YEAR DAYS OPERATED SKIER DAYS SNOWFALL (INCHES)
- ---- ------------- ---------- -----------------
<S> <C> <C> <C>
1991/92................................................ 136 323,526 118
1992/93................................................ 162 415,959 370
1993/94................................................ 142 416,498 153
1994/95................................................ 156 527,653 432
1995/96................................................ 121 404,736 269
1996/97................................................ 141 445,753 375
</TABLE>
Northstar consists of over 6,500 acres of privately owned land, of which
less than one-third has been developed. Management believes that Northstar has
significant opportunities to develop additional ski terrain as well as
residential and commercial space. See "Business -- Real Estate Development."
Sierra-at-Tahoe
Sierra-at-Tahoe is conveniently located near the large bed base of South
Lake Tahoe and is the closest major ski resort to Sacramento and the Central
California Valley. The resort's 8,852-foot peak offers 1,675 skiable acres and a
2,212 foot vertical drop. Sierra's 46 ski trails are currently served by 10
operating lifts, including three high-speed quads, one triple lift and five
double lifts, which combine to transport up to 16,400 skiers uphill per hour. In
addition to significantly upgrading its retail and restaurant facilities in
recent years, Sierra has invested approximately $9.8 million since 1994 to
replace its Yan lifts with new high-speed lifts, upgrade its grooming equipment
and rebuild its base lodge facilities. Sierra operates a 49,000 sq. ft. base
lodge which offers a variety of food and beverage services. Management believes
that Sierra's recent investment in its ski infrastructure has made it the best
ski value in the South Lake Tahoe area. Sierra does not offer summertime
activities.
Sierra's demographic characteristics closely parallel Northstar's, although
Sierra's core customer base is slightly younger and less affluent with more
aggressive skiing demands. Sierra does not own or manage any real estate units
in the area but there are 50,000 beds in the South Lake Tahoe vicinity,
including 20,000 beds within a 10 mile radius. Sierra attracts a larger share of
its guests from the Sacramento and Central Valleys than the San Francisco Bay
area.
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<PAGE> 68
Sierra owns 21 acres of its 1,700 gross acreage and leases the remainder
under a special use permit with the United States Forest Service. See
"-- Regulation and Legislation." Sierra's skiable terrain, notable for its
extensive summer grooming and wind-protected slopes, requires less snow than
other resorts to provide ideal ski conditions. Due to its abundant annual
snowfall, which has averaged approximately 467 inches per year since 1991,
Sierra is not dependent upon snowmaking and, as a result, its snowmaking
equipment covers only 12% of Sierra's total acreage. Sierra also employs a
modern fleet of groomers which maintain high-quality skiing surfaces.
The following table summarizes the number of ski days operated, skier days
and seasonal snowfall totals at Sierra during the previous six ski seasons.
<TABLE>
<CAPTION>
YEAR DAYS OPERATED SKIER DAYS SNOWFALL (INCHES)
- ---- ------------- ---------- -----------------
<S> <C> <C> <C>
1991/92................................................ 138 210,805 257
1992/93................................................ 136 243,254 608
1993/94................................................ 135 247,883 425
1994/95................................................ 165 369,932 590
1995/96................................................ 121 257,499 480
1996/97................................................ 135 213,156 440
</TABLE>
Bear Mountain
Bear Mountain is located in the San Bernardino mountains of Southern
California. Its 8,805-foot peak features 175 acres of skiable terrain and a
1,665 foot vertical drop. Bear Mountain's 33 ski trails are served by 11 lifts,
including one high-speed quad, one fixed grip quad, three triple lifts and two
double lifts, which combine to transport up to 15,500 skiers uphill per hour.
During the 1996 off-season, Bear Mountain invested approximately $1.0 million to
upgrade its base lodge facilities. Other facilities at Bear Mountain include
three lodges which provide an aggregate of approximately 31,000 sq. ft. of space
for food and beverage services (restaurants and cafeterias), skier services and
entertainment. Summer recreation facilities include a nine-hole golf course.
Bear Mountain is within a one to three hour drive of the Los Angeles and
San Diego metropolitan areas, providing it with access to nearly 16 million
Southern Californians of whom approximately 800,000 actively participate in
skiing and snowboarding. Nearly 94% of Bear Mountain's skiers are from Southern
California. Bear Mountain appeals to the younger generations of skiers, the echo
boom and "X" generations, who are generally less affluent than the targeted
customers at the Company's Lake Tahoe resorts. While Bear Mountain is in the
middle of an 11,000 bed base area, it is primarily a day ski facility.
Bear Mountain owns 34 of its 732 gross acreage and leases 698 acres of
mountain terrain under a Forest Service special use permit. See "-- Regulation
and Legislation." Management believes that Bear Mountain has one of the largest
snowmaking capacities per acre of any resort west of the Mississippi and
incorporates a state-of-the-art system which allows it to efficiently cover 100%
of its ski trails. Bear Mountain also has access to three reservoirs capable of
holding 11 million gallons of water for snowmaking. Management believes that the
skiing infrastructure at Bear Mountain, including lifts, snowmaking and trail
grooming equipment, is very strong, making it one of the most attractive ski
areas in Southern California.
Bear Mountain was acquired by Fibreboard Corporation shortly before the
1995/96 ski season. At the time of such acquisition, the resort had no marketing
manager and no significant advertising campaigns were planned heading into the
ski season. These factors, combined with the warmest early winter weather in 43
years, led to a significant decline in skier days during the 1995/96 ski season.
Since Southern California tends to experience warm spring weather sooner than
the regions in which the Company's other resorts are located, leading to a
typically shorter ski season at Bear Mountain than at the Company's other
resorts, early season skier days are more important at Bear Mountain than at the
Company's other resorts, and during the 1995/96 ski season, the resort was not
fully open until late December 1995. The Company is in the process of
implementing an aggressive marketing campaign for the current ski season,
targeted to Bear Mountain's core customer base. The Company believes that these
efforts will enhance Bear Mountain's reputation as one of Southern California's
premier ski facilities.
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<PAGE> 69
The following table summarizes the number of ski days operated, skier days
and seasonal snowfall totals at Bear Mountain during the previous six ski
seasons.
<TABLE>
<CAPTION>
YEAR DAYS OPERATED SKIER DAYS SNOWFALL (INCHES)
- ---- ------------- ---------- -----------------
<S> <C> <C> <C>
1991/92................................................ 169 340,616 184
1992/93................................................ 159 295,070 240
1993/94................................................ 156 320,227 117
1994/95................................................ 175 305,799 161
1995/96................................................ 123 214,284 119
1996/97................................................ 122 276,729 102
</TABLE>
Waterville Valley
Waterville Valley has long been recognized as one of the largest and most
picturesque ski resorts in New Hampshire. Waterville's major base facilities are
located on the 4,004 foot high Mt. Tecumseh and offer 300 skiable acres and a
vertical drop of 2,020 feet. Waterville Valley's 50 trails are served by 13
operating lifts, including one high-speed quad, three triple lifts and four
double lifts, which combine to transport up to 16,631 skiers uphill per hour.
The resort operates a 30,000 sq. ft. base lodge (complete with multiple food
service centers and child care), a mid-mountain lodge featuring a cafeteria and
deli and a mountain-top lodge with snack bar and acclaimed restaurant dining.
The Waterville Valley resort has a year-round Base Camp Adventure Center
offering mountain bikers, cross-country skiers, and hikers access to 105
kilometers of trails in the White Mountain National Forest. Other resort
amenities include an ice skating arena, golf course, tennis center, sports and
fitness center, and horseback riding. Waterville Valley's Conference Center has
17,000 sq. ft. of meeting space and provides banquet facilities for up to 1,000
people. With 11 meeting rooms, a business center, audio-visual capabilities and
a self-contained pub, the Conference Center's on-site staff supports events
year-round.
Waterville has traditionally created an environment conducive to families
who are either day skiers, regional overnight skiers or vacation skiers. Its
location adjacent to Interstate 93 (a major north-south thoroughfare for skiers)
makes it one of the most accessible of the larger New England resorts and it has
the facilities, trails and programs to satisfy adults and children of all
abilities. Waterville's proximity to large East Coast markets (Boston is less
than two and one-half hours away by car) attracts day skiers, while the town's
substantial bed base can accommodate the regional overnight skiers and
vacationers who will stay an average of two to four days. There are
approximately 6,500 beds in the Waterville area, of which approximately 3,000
can be rented. The majority of Waterville's skiers come from Massachusetts (49%)
and New Hampshire (23%), with the remainder coming from Connecticut, New York,
New Jersey and other regional locations.
Waterville owns 35 acres on its smaller Snow's Mountain and two acres at
the Conference Center. It leases 790 acres of land on Mt. Tecumseh from the
federal government under a Special Use Permit issued by the Forest Service.
Waterville's snowmaking system is engineered to cover 91% of the ski trails on
Mt. Tecumseh. Snowmaking during the 1995/96 ski season consumed approximately
116 million gallons of water for about 682 acre feet of coverage; water for
snowmaking is currently pumped from a local river and a pond. Waterville has
begun the process of obtaining permits for additional water sources and water
storage facilities for snowmaking.
The following table summarizes the number of ski days operated, skier days
and seasonal snowfall totals at Waterville Valley during the previous six ski
seasons. Prior to the 1994/95 ski season, Waterville was operated by a local
developer who eventually lost the property and related real estate through
bankruptcy.
<TABLE>
<CAPTION>
YEAR DAYS OPERATED SKIER DAYS SNOWFALL (INCHES)
---- ------------- ---------- -----------------
<S> <C> <C> <C>
1991/92................................................ 167 333,863 108
1992/93................................................ 160 333,213 145
1993/94................................................ 165 300,821 148
1994/95................................................ 163 207,386 101
1995/96................................................ 168 256,563 203
1996/97................................................ 159 219,313 182
</TABLE>
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<PAGE> 70
Mt. Cranmore
Mt. Cranmore is the oldest continuously operated ski area in the United
States. Strategically located in the hub of New Hampshire's Mount Washington
Valley, Mt. Cranmore's 1,714 foot summit offers 200 skiable acres and a 1,200
foot vertical drop. Mt. Cranmore's 36 trails, including 12 trails lighted for
night skiing, are served by six operating lifts, including one high-speed quad,
one triple lift, three double lifts and one surface lift, which combine to
transport up to 6,600 skiers uphill per hour. The installation of the high-speed
quad in 1995 and other recent capital improvements totaling $2.0 million,
together with an aggressive marketing program, contributed to a 28% increase in
skier days for Mt. Cranmore during the 1995/96 ski season. The mountain is
serviced by two base lodges, offering multiple eating locations and
pub/restaurant facilities, as well as a restaurant at the summit. In addition,
Mt. Cranmore owns a year-round 43,000 sq. foot athletic facility which includes
an outdoor tennis stadium with seating for up to 5,500 people, four indoor
tennis courts, a pool, a spa, a weight-lifting area, aerobic rooms, an
indoor-climbing wall, locker rooms, a snack area and a nursery. Mt. Cranmore
also operates on-premises ski and rental shops.
Management believes that Mt. Cranmore has great appeal to the family skier
due to its intimate size, high percentage of intermediate trails (45%, with 33%
for advanced) and its well-developed children's ski programs. An additional
family attraction is Mt. Cranmore's neighboring town of North Conway, which is
within walking distance of the mountain and has one of New England's largest
rural retail outlet and restaurant centers. North Conway is part of the White
Mountains area, which is the dominant tourist destination in New Hampshire.
Approximately 10 million people live within a four-hour drive of Mt. Cranmore.
During the 1995/96 ski season, management estimates that 61% of the resort's
guests were from the Boston metropolitan area, 16% were from New Hampshire and
8% were from Rhode Island. To accommodate destination/vacation skiers there are
16,000 rental beds in the Mt. Washington Valley, including 76 condominium units
at Mt. Cranmore itself.
Mt. Cranmore owns 840 acres and holds deeded easements enabling it to
develop an additional 1,200 acres of ski terrain. Mt. Cranmore does not lease
any of its land from the federal government. Mt. Cranmore's snowmaking equipment
consists of a computerized Hydralink weather-monitoring snowmaking system which,
when installed in 1995, increased snowmaking output by 40% and currently covers
100% of the resort's ski trails. In addition to pumping rights from a nearby
stream, Mt. Cranmore has an agreement with the local water district for
unrestricted access to an additional reservoir of 1 million gallons of water for
snowmaking. Mt. Cranmore's base area pond also holds 2.5 million gallons.
Snowmaking during the 1995/96 ski season consumed approximately 90 million
gallons of water for complete coverage.
The following table summarizes the number of ski days operated, skier days
and seasonal snowfall totals at Mt. Cranmore during the previous six ski
seasons.
<TABLE>
<CAPTION>
YEAR DAYS OPERATED SKIER DAYS SNOWFALL (INCHES)
- ---- ------------- ---------- -----------------
<S> <C> <C> <C>
1991/92........................................ 103 108,416 68
1992/93........................................ 112 103,841 96
1993/94........................................ 106 104,935 90
1994/95........................................ 105 96,527 63
1995/96........................................ 142 123,201 115
1996/97........................................ 135 120,052 114
</TABLE>
Snoqualmie Pass
Snoqualmie Pass is located in the Cascade mountains of Northwest Washington
and consists of four resorts, Alpental, Snoqualmie Summit, Ski Acres and Hyak,
which collectively offer 2,300 acres of skiable terrain. Individually, Alpental
has a 5,400 foot top elevation, 754 acres of skiable terrain (188 of which are
lighted) and a 2,200 foot vertical drop; Snoqualmie Summit has a 3,900 foot top
elevation, 334 acres of skiable terrain (285 of which are lighted) and a 1,000
foot vertical drop; Ski Acres has a 3,900 foot top elevation, 490 acres of
skiable terrain (344 of which are lighted) and a 1,060 foot vertical drop; and
Hyak has a 3,700 foot top elevation, 730 acres of skiable terrain (58 of which
are lighted) and a 1,080 foot vertical drop. Snoqualmie Pass' 65 ski trails are
served by 32 operating lifts, including one fixed-grip quad, four triple lifts,
18 double lifts
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and nine surface lifts, which combine to transport up to 30,290 skiers uphill
per hour. Ski Acres and Hyak also offer approximately 55 kilometers of
cross-country skiing on an expert trail system and a lighted beginner/student
trail which hosts a season-long night racing series. In addition, Snoqualmie
Summit, Ski Acres and Hyak are interconnected by cross-over trails. Since 1987,
Snoqualmie Pass has invested approximately $9.9 million to improve base
facilities and lodges and install additional lifts. Snoqualmie Pass operates
seven lodges which provide an aggregate of approximately 111,175 sq. ft. of
space for food and beverage services (restaurants and cafeterias), skier
services and entertainment.
Snoqualmie Pass is within a one-hour drive of the Seattle/Tacoma
metropolitan area, providing it with access to nearly 442,000 active skiers and
snowboarders. Although the Snoqualmie Pass complex offers a relatively even
variety of trail difficulty, each of its resorts have been designed to appeal to
specific skier profiles: 90% of Alpental's trails are designed for intermediate
and advanced skiers, 82% of Hyak's trails are designed for beginner and
intermediate skiers, 80% of Snoqualmie Summit's trails are designed for beginner
and intermediate skiers, and 50% of Ski Acres' trails are designed for beginner
skiers. Overall, Snoqualmie Pass is one of the largest learn-to-ski areas in the
United States, with approximately 26% of its 1995/96 ski season skier days being
attributable to guests enrolled in ski school. In addition, Snoqualmie Pass is
the largest night ski complex in the United States, with approximately 40% of
its 1995/96 ski season skier days being recorded at night.
Snoqualmie Pass owns 768 acres of its 4,152 gross acreage, leases 1,520
acres under a private permit and utilizes 1,864 acres of mountain terrain under
a Forest Service special use permit. See "-- Regulation and Legislation."
Snoqualmie Pass enjoys abundant annual snowfall, averaging approximately 363
inches per year since 1991. As a result, there are no snowmaking capabilities at
any of the Snoqualmie Pass resorts. Snoqualmie Pass does, however, possess water
rights that would allow it to engage in snowmaking, if necessary. The Company
intends to purchase five Bombardier Snowcat groomers for Snoqualmie Pass to
complement and upgrade the resort's existing fleet of 16 groomers.
The following table summarizes the number of ski days operated, skier days
and seasonal snowfall totals at Snoqualmie Pass during the previous six ski
seasons.
<TABLE>
<CAPTION>
YEAR DAYS OPERATED SKIER DAYS SNOWFALL (INCHES)
- ---- ------------- ---------- -----------------
<S> <C> <C> <C>
1991/92........................................ 83 432,014 210
1992/93........................................ 127 521,127 295
1993/94........................................ 130 519,953 300
1994/95........................................ 158 515,487 405
1995/96........................................ 117 455,240 375
1996/97........................................ 143 476,216 595
</TABLE>
Grand Targhee
Grand Targhee is located in the Grand Teton mountains of Wyoming,
approximately 50 miles northwest of the town of Jackson. Jackson, Wyoming is a
major ski destination resort center, recording an average of 400,000 skier days
at the area's three resorts in the last three ski seasons. Grand Targhee, with a
top elevation of 10,200 feet, 1,500 acres of skiable terrain for all abilities
and a 2,200 foot vertical drop, offers two different mountain ski areas. The
first mountain is served by four operating lifts, including the longest
high-speed quad in the state of Wyoming, which combine to transport up to 4,680
skiers uphill per hour. The second mountain is reserved for Snowcat powder
skiing. Grand Targhee also has approximately 17 kilometers of groomed trails for
cross-country skiing. Grand Targhee recently has invested approximately $3.0
million to improve uphill capacity and the overall ski experience. Other
facilities at Grand Targhee include base lodge facilities, hotel accommodations,
restaurants, shops, a child care center and retail stores. In addition, Grand
Targhee owns and operates a spa, fitness and conference center.
Grand Targhee competes for day and regional overnight skiers in the
northern Rocky Mountain region as well as national destination skiers traveling
to the greater Jackson, Wyoming area. Guests from Idaho, Utah, Wyoming and
Montana have accounted for approximately 38% of Grand Targhee's total skier days
over the past five ski seasons. Grand Targhee's national destination guests,
those guests residing outside the northern
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<PAGE> 72
Rocky Mountain region, accounted for the remaining 62% of the resort's skier
days during the same period. A majority of these guests came from California,
Washington, New York and Minnesota. Overall, approximately 60% of Grand
Targhee's skiers reside more than 200 miles from the resort. Given that Grand
Targhee only operates 96 rental units, many of the resort's overnight regional
and destination skiers secure hotel accommodations at other resorts or hotels in
the area. The Company believes that there are in excess of 5,000 beds in the
Jackson, Wyoming vicinity. Management believes that the distinguishing features
of Grand Targhee are well-maintained and uncrowded facilities, excellent ski
conditions, attractive vacation packages and a high quality family ski school.
Grand Targhee is located entirely on land leased under a Forest Service
special use permit. See "-- Regulation and Legislation." Grand Targhee has
averaged approximately 483 inches of snowfall during the last six years, and
historically has received the second highest snowfall amount of all ski resorts
in the United States. In 1996, Ski magazine rated Grand Targhee as the second
best ski area in North America for snow conditions. In the same survey, Ski
magazine readers rated snow conditions as the most important factor in choosing
a ski destination resort.
The following table summarizes the number of ski days operated, skier days
and seasonal snowfall totals at Grand Targhee during the previous six ski
seasons.
<TABLE>
<CAPTION>
YEAR DAYS OPERATED SKIER DAYS SNOWFALL (INCHES)
- ---- ------------- ---------- -----------------
<S> <C> <C> <C>
1991/92........................................ 153 134,535 258
1992/93........................................ 153 108,666 553
1993/94........................................ 151 113,298 368
1994/95........................................ 153 117,772 537
1995/96........................................ 149 116,696 523
1996/97........................................ 146 94,898 659
</TABLE>
Management believes that Grand Targhee is currently underutilized, and that
a key component of increasing skier days at the resort will be expanding its
on-mountain bed base. Grand Targhee has recently received United States Forest
Service approval to build 590 rental units and has had discussions that would
allow for the future development of private dwellings.
REAL ESTATE DEVELOPMENT
The Company believes that it has significant opportunities to develop
available acreage for additional skiing terrain and trails as well as for
residential lodging and commercial uses. Management believes that selective real
estate development can enhance the Company's resorts and that there is
opportunity for synergy between real estate development and the Company's ski
operations. In management's view, increasing the on-mountain bed base, expanding
retail and other commercial services and developing additional skiable terrain
at a resort can accelerate growth in skier days and ski-related revenues. The
following table lists certain owned or leased land available to the Company for
expansion.
<TABLE>
<CAPTION>
RESIDENTIAL/
COMMERCIAL/ NUMBER
LOCATION OWNED/DEEDED SKI TERRAIN OF ACRES PRINCIPAL USES
-------- ------------ ------------ -------- --------------
<S> <C> <C> <C> <C>
Northstar: Big Springs...... Owned Residential 90 On-mountain housing
Northstar: North Lookout
Mountain......... Owned Ski Terrain 1,300 Expand ski terrain by 65%
Northstar: Sawtooth Ridge... Owned Ski Terrain 700 Expand ski terrain by 35%
Northstar: Zoned/
Undeveloped..... Owned Residential/ 550 Increases on-mountain
Commercial housing by 78% (1,100 units)
Mt. Cranmore: Black Cap..... Deeded: Ski Terrain 700 Significantly expand and
Privately Owned vary ski terrain
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Bear Mountain...................... Leased: Ski Terrain 114 Expand ski terrain by 25%
Forest Service
Bear Mountain: Big Bear Lake....... Owned Residential 6 56 condominiums
Snoqualmie Pass.................... Owned Residential 84 On-mountain housing
Grand Targhee...................... Leased: Ski Terrain 320 Expand ski terrain
Forest Service
Grand Targhee...................... Leased: Residential/ 105 Ski Village which would increase
Forest Service Commercial on-mountain bed base by 615% and
expand commercial facilities
</TABLE>
The Company's strategy with regard to the expansion of skiable terrain at
its resorts is based on the evaluation of several key factors, including (i) the
anticipated growth of the skier base within the relevant market and the
Company's ability to improve its competitive market position in that market, as
measured by the potential increase in the number of skier days and revenue per
skier on a long-term basis which the Company believes it can capture through
expansion and (ii) the return on capital expected to be realized from an
expansion project versus alternative projects. Management plans to undertake
extensive planning and pre-development steps prior to investing significant
capital into any development project. As the Company has done with Northstar's
"Big Springs" development project, management intends to undertake a number of
these projects with real estate partners who can provide a substantial portion
of the construction capital.
The Company's resorts have traditionally taken a conservative approach
toward residential and commercial development and real estate development
efforts have taken place primarily at Northstar. Beginning in 1995, the resort
developed a new single family home residential community on Mt. Pluto ("Big
Springs") consisting of 158 private residential subdivision lots. The total
project has been planned in five phases to reduce infrastructure development
costs and maximize returns by controlling both the timing and inventory of lots
on the market. Northstar sold all of the 44 lots offered in phase one for an
average price of approximately $154,000 and has sold 16 of the 35 lots available
in phase two for an average price of approximately $152,000. Northstar is
selling these lots in advance with the builder or property owner responsible for
construction, resulting in little required capital investment by the Company.
New homes range in price from approximately $600,000 to $1.2 million. The sale
of the remaining lots in phase two requires no significant capital expenditures
by the Company, since the infrastructure has already been developed. The sale of
the remaining lots in phases three, four and five will require an estimated $3.0
million in capital expenditures to complete infrastructure development.
Northstar expects to sell the remaining properties over the next five years.
Management believes that the Big Springs development project alone will increase
the on-mountain bed base by 5% over the next two years, and should contribute to
an increase in paid skier days. Northstar also has opportunities to develop an
additional 550 acres of owned real property on Mt. Pluto, which has been zoned
for commercial and residential use.
In addition, Northstar has begun a program to harvest timber through third
party contracting. The timber harvesting program, which produced revenues of
approximately $693,000 in the ten months ended October 31, 1996, is managed
carefully to avoid interference with Northstar's resort operations and prevent
any diminution in the quality of the resort's natural environment. The Company
also intends to eventually expand Northstar's ski operations to the challenging
additional terrain it owns on both North Lookout Mountain and Sawtooth Ridge,
which are adjacent to the resort's current operations. Management believes that
the skiable acreage at Northstar could more than double with the development of
this terrain. The timing and scope of this expansion will depend on market
conditions and on an evaluation of the Company's other expansion criteria.
Mt. Cranmore holds an easement entitling it to develop at least 700 acres
of additional ski terrain known as the "Black Cap Mountain area" or "Black Cap."
The Black Cap easement was granted in 1951 and allows the Company to expand Mt.
Cranmore's existing ski and recreational infrastructure and develop additional
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trails. The Black Cap property underlying the Company's easement is privately
owned and therefore not subject to the same governmental regulations which
presently restrict the activities of many New England ski areas that are located
on national or state forest land. The Black Cap land available for development
by the Company is high-quality, mostly south and southwest-facing ski terrain
located in an area that can accommodate alpine and cross country trails, ski
lifts, snowmaking and night ski lighting. Expansion would not only significantly
increase Mt. Cranmore's skier capacity, but would also enhance the quality and
diversity of its skiable terrain. Given the resort's location in the heart of
the Mt. Washington region, the dominant tourist destination in New Hampshire,
the Company believes that expansion into Black Cap could position Mt. Cranmore
as a premier attraction in the White Mountains area and one of the largest and
most appealing resorts in New Hampshire.
Bear Mountain has received final approval from the Forest Service and local
governmental authorities of an expansion plan (the "Bear Mountain Expansion
Plan") that would, among other things, increase the resort's skiable terrain by
114 acres and increase daily skier capacity by approximately 25%. The approval,
however, is subject to numerous mitigation conditions, including a requirement
that Bear Mountain acquire and dedicate to the Forest Service two acres of
spotted owl habitat and one acre of flying squirrel habitat in exchange for each
acre proposed for development. Bear Mountain has also entered into a developer's
agreement with the City of Big Bear Lake that generally authorizes, subject to
certain conditions, the construction of up to 56 condominium units on property
currently owned by Bear Mountain. The Company does not presently have any
imminent expansion or development plans for Bear Mountain, and any future
expansion or development would depend on a variety of factors, including local
market conditions and the resolution of regulatory and Forest Service permitting
issues.
Snoqualmie Pass owns 84 acres of real property at the base of its mountain,
which is available for residential development. The developmental real estate at
Snoqualmie Pass is currently owned by the Real Estate LLC, an Unrestricted
Subsidiary of the Company. The Real Estate LLC has executed a deed of trust with
respect to the real property in favor of the holders of the Ski Lifts Preferred
Stock to secure the Real Estate LLC's obligation to purchase such preferred
stock. See "The Transactions." In the event the Real Estate LLC defaults under
its obligation to purchase the Ski Lifts Preferred Stock, the holders thereof
could foreclose on the developmental real property and deprive the Company of
the benefit thereof.
The Company, through a study commissioned by Grand Targhee, has identified
approximately 320 acres of additional skiable terrain adjacent to the resort
which could be developed with Forest Service approval. The study also contains
numerous recommendations for the further development of Grand Targhee's
infrastructure, including the creation of a European-style village center
comprising a variety of tightly-knit structures with central pedestrian streets,
plazas, commercial and recreation facilities and amenity spaces which reflect
and complement the sloped mountain topography. The village center design
includes nine additional or renovated hotel/condotel developments providing 590
additional public accommodation units, which would increase the resort's
on-mountain bed base by 615%. The village center would be built on Forest
Service land, and the Company has received preliminary approval for the
construction of the residential units envisioned by the study, together with the
development of an additional 320 acres of skiable terrain, subject to certain
conditions. Management believes that the expansion of Grand Targhee's
on-mountain bed base will be an important component in addressing the resort's
historic underutilization. The Company intends to pursue long-term development
opportunities with third parties, although the timing and scope of any such
development is still being evaluated.
The Company has no agreements, arrangements or understandings with respect
to financing the development of any of the real estate projects discussed
herein. Any future development would be subject to, among other things, the
Company's ability to obtain the necessary financing and all necessary permits
and approvals. No assurance can be given that the Company will develop
successfully any additional properties or, if completed, any such properties
will be successful. In addition, there are risks inherent in any expansion
project and in the implementation of the Company's development strategy. See
"Risk Factors -- Risks of Expansion" and "Risk Factors -- High Level of
Indebtedness and Leverage."
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MARKETING AND SALES
Staff
The Company has a total marketing staff of approximately 36 persons,
including a marketing director at each resort who reports to the corporate
director of marketing as well as to each resort's general manager. The marketing
staff at each resort is responsible for the development of resort-specific
marketing plans and also participates in the development of the Company's
overall marketing strategy.
Strategy
The Company's marketing plans are designed to attract both day skiers and
vacationers by emphasizing the Company's diverse facilities and services and
proximity to approximately 26% of the total skiers in the United States. The
Company intends to position each of its resorts as an attractive alternative to
competing regional resorts and to other forms of leisure and entertainment. The
primary objectives of the Company's marketing efforts are to (i) increase each
of its resorts' relative market share, (ii) expand the number of skiers in each
of its markets, (iii) increase skier visitation frequency and (iv) influence the
vacation destination choice of its prospective guests.
The Company's marketing efforts are predicated on knowing its guests and
understanding the markets in which it competes. Accordingly, the Company's
resorts, typically through professional marketing firms, conduct extensive
market research, including on-site guest surveys, off-site focus groups,
advertising tests and regional phone surveys. Each of the Company's resorts
develops its own resort-specific marketing program based upon its unique
qualities and characteristics as well as the demographics of its skier base.
Management believes that a major benefit of being a multiple resort operator
will be the ability to coordinate resort marketing programs in a manner that
makes them more effective. For example, the extension of Vertical Plus to all of
the Company's resorts will, in management's view, reinforce the existing
marketing programs at each resort and create significant cross-marketing
opportunities.
The Company's resorts offer a variety of terrain for alpine skiing and
snowboarding, with most providing a high percentage of intermediate trails and
well developed skier development programs, which can accommodate skiers and
snowboarders of all skill levels. Northstar markets primarily to the upper
income baby boom generation and their families residing in the San Francisco Bay
and Sacramento Valley areas as a full service, all season resort for day and
vacation guests. In addition, the resort has been successful in attracting
vacationing skiers from major Southern California markets largely through the
use of targeted marketing programs, including tour packages with major airlines.
Management believes that Northstar's diverse year round activities and services
have made it attractive to affluent families interested in recreation-centered
vacation homes. Real estate development and the resulting increase in
on-mountain bed base likewise provide Northstar with significant opportunities
for future growth. Sierra has been positioned as Lake Tahoe's economical "value"
resort, primarily targeted to families, teenagers and young adults from the
Central California Valley. Bear Mountain primarily targets generation "X" skiers
and snowboarders as well as value-oriented families from the major Southern
California metropolitan areas. Waterville Valley generally focuses on regional
and vacationing families from the Southern New Hampshire and Boston metropolitan
markets by promoting the resort's diverse year round facilities and New England
village atmosphere. Mt. Cranmore targets vacationing families (including
non-skiers) from the Boston metropolitan area by emphasizing its proximity to
the Mt. Washington 16,000 area bed base and North Conway retail and restaurant
district. Snoqualmie Pass' diversity of terrain among its four resorts and
significant night skiing programs allow the resort to target multiple
demographic groups including families, teenagers and young adults from the
Seattle/ Tacoma metropolitan area. Grand Targhee primarily targets destination
skiers visiting the Jackson Hole area as well as day skiers and regional
overnight skiers from Wyoming, Idaho and Utah.
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Programs
The Company has developed a number of specific marketing programs to
achieve its objectives, including the following:
- Customer loyalty programs
- Multimedia advertising
- Data-based marketing programs
- Extensive skier development programs
- Strategic marketing alliances
- School, group and business affiliations
Customer loyalty programs. The Company believes that the success of each
of its resorts depends, in large part, on its ability to retain and increase the
skier visitation frequency of its existing customer base. For example,
approximately 82% of Northstar's 1995/96 ski season skier days were attributable
to guests who had visited the resort on at least one other occasion. The Company
believes a critical component to developing customer loyalty will be the
expansion of Vertical Plus, the Company's electronic, frequent skier program.
For an annual membership fee of $49, Vertical Plus members receive a special,
personalized identification wristband containing a preprogrammed computer
microchip which acts as their lift access for the season. In addition to
offering daily ticket discounts, the system tracks the amount of vertical feet
skied at participating resorts and rewards members with prizes based on the
number of vertical feet skied in a season. Other benefits of the program include
members-only lift lines, direct lift access, the convenience of being able to
make cashless retail transactions and electronic messaging. An additional major
benefit provided by this proprietary program is a state-of-the-art data
collection system that provides "real-time" information for marketing,
operations and capital investment analysis. The program was created in 1992 and
currently has approximately 16,000 members, which accounted for approximately
11% of all skier days recorded at Northstar and Sierra during the 1995/96 ski
season. Vertical Plus is currently in operation at Northstar, Sierra and Bear
Mountain, and will be extended to the Company's other resorts in the near
future.
Multimedia advertising. The Company's marketing efforts include print,
broadcast, outdoor, Internet and direct mail advertising, with the particular
method tailored for each resort and existing market opportunities. The Company
is also very active in a variety of promotional programs designed to attract
guests from population centers in and around the Los Angeles, San Diego, San
Francisco, Sacramento and Boston metropolitan areas and states with large skier
populations such as Texas, Illinois, Florida and New York. For example, the
Company's Northstar and Sierra resorts have participated in extensive
cooperative marketing with other Lake Tahoe resorts to promote the region as a
premier vacation destination.
Data-based marketing programs. Primarily through the information obtained
from Vertical Plus and extensive market surveys and other market research, the
Company maintains a database containing detailed information on its existing
customers. Currently, the database contains information on the Company's
California Resorts, but is currently being updated with customer information
from the Company's other resorts. Management believes that database marketing is
an effective and efficient method to identify, target and maintain an on-going
relationship with the Company's best customers. For example, the Company has
been successful in the use of targeted direct mailings, which are designed to
match customer preferences with special ski package offers to build peak and
off-peak volume. Management believes that these types of relationship-based
marketing programs build guest loyalty and play an important role in solidifying
a resort's existing customer base.
Extensive skier development programs. The Company's resorts operate a
variety of skier development programs designed to improve the skills of children
and beginners, as well as more advanced skiers and snowboarders. Management
believes that these development programs increase skier days at the Company's
resorts by expanding the total market of skiers and making skiing more
enjoyable. Northstar, Sierra and Waterville Valley operate ski schools that are
consistently rated among the best in their respective regions. In addition,
several of the Company's resorts have introduced a development program, Vertical
Improvement, geared toward intermediate and advanced skiers, which offers free
specialized instruction and daily training. Northstar has also been an industry
leader in developing interesting terrain features and trails designed to
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improve the skill levels of its guests. For example, the resort recently
developed four "terrain feature" ski trails geared toward its intermediate and
advanced-level guests. The Company intends to expand its highly successful
skiing and snowboarding instruction programs developed at Northstar and Sierra
to all of its resorts over the next two ski seasons.
Strategic marketing alliances. The Company is a national ski resort
operator with more than 1.8 million skier days recorded during the 1995/96 ski
season. At least one of the Company's resorts is within driving distance of four
of the five largest consumer markets in the United States. These factors,
together with the attractive demographics of the Company's skier base, position
the Company to further develop resort marketing programs with major corporate
sponsors. Sponsorship opportunities include potential relationships with
automobile manufacturers, soft drink companies, and ski and snowboard equipment
manufacturers. Currently, Northstar and Sierra have a relationship with a major
automobile manufacturer that involves over $1 million worth of television
exposure, free use of vehicles for Company purposes and a vehicle give-away
promotion for resort guests. Management believes that the media exposure
generated by this partnership is important in building market share and the
image of the resorts, and that current joint marketing programs can be greatly
expanded.
School, group and business affiliations. The Company is dedicated to
developing special programs designed to attract school, business and other
groups. By introducing skiing and snowboarding to a wider audience, these
programs broaden the Company's customer base and have proven to be a
particularly effective way to build name recognition and brand loyalty. Ski
groups have also emerged as the fastest and most profitable way of increasing
business during non-peak periods. Marketing personnel at each resort provide
year-round assistance to group leaders in organizing and developing events.
Business affiliations are developed and maintained through corporate tickets
programs, whereby participating businesses are given an opportunity to provide
their employees with incentive-based pricing.
COMPETITION
The general unavailability of new mountains, regulatory requirements and
the high costs and expertise required to build and operate resorts present
significant barriers to entry in the ski industry. The last major new ski resort
to open in the United States was in 1989, and in the past 15 years, management
believes at least 85 proposed resorts have been stalled or abandoned due to
environmental issues and the high costs of entering into the capital intensive
ski industry. The domestic ski industry is currently composed of 519 resorts and
is highly competitive. The Company's competitive position in the markets in
which it competes is dependent upon many diverse factors, including proximity to
population centers, pricing, snowmaking capabilities, type and quality of skiing
offered, prevailing weather conditions, quality and price of complementary
services. The Company's Lake Tahoe resorts, Northstar and Sierra, face strong
competition from Lake Tahoe's seven other major ski resorts. Northstar's primary
competition in the Northwestern Lake Tahoe area is from Squaw Valley and Alpine
Meadows. Northstar also competes with major ski and non-ski destination resorts
throughout North America. Sierra primarily competes in the Southern Lake Tahoe
area with Heavenly Valley and Kirkwood. The Company's other California Resort,
Bear Mountain, competes primarily with Snow Summit and Mammoth.
The Company's New England resorts, Waterville Valley and Mt. Cranmore,
compete in the highly competitive Northeast ski market, which consists of Maine,
New Hampshire, Vermont, Massachusetts, Connecticut and New York. Within the
Northeast region, skiers can choose from over 50 major resorts and ski areas,
most of which are located in the mountainous areas of New England and eastern
New York. Waterville's primary regional competitors include Loon Mountain,
Bretton Woods, Attitash/Bear Peak and Gunstock. Mt. Cranmore's primary regional
competitors are the Attitash/Bear Peak ski resort and Gunstock.
Snoqualmie Pass competes primarily with five local ski areas, including
Crystal Mountain, Stevens Pass, White Pass, Mission Ridge and Mt. Baker.
Additional competition comes from the regional destination resorts at Mt.
Bachelor, Mt. Hood Meadows, Sun Valley and Whistler/Blackcomb, as well as other
day and weekend ski facilities in Washington, Oregon and British Columbia.
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Grand Targhee competes for day and regional overnight skiers in the
northern Rocky Mountain region as well as national destination skiers traveling
to the greater Jackson, Wyoming area. Jackson Hole Ski Resort is the resort's
largest single competitor. Grand Targhee has participated in joint marketing
programs with Jackson Hole to promote the Jackson area and many visitors to the
region ski at both resorts. Grand Targhee also competes for day and regional
overnight skiers with Sun Valley and resorts in Utah.
On a regional basis, at least one of the Company's resorts is readily
accessible to four of the five largest ski markets in the United States.
Management estimates that approximately 80% of the skiers visiting the Company's
Lake Tahoe resorts are from the San Francisco, Sacramento Valley and Central
Valley metropolitan areas, while approximately 94% of Bear Mountain's skiers are
from the Los Angeles and San Diego metropolitan areas. Waterville Valley and Mt.
Cranmore are estimated to attract more than 78% and 76%, respectively, of their
guests from the Boston metropolitan area and southern New Hampshire. Snoqualmie
Pass attracts approximately 95% of its skier guests from the Seattle/Tacoma
region. Grand Targhee primarily attracts day and regional overnight skiers from
the northern Rocky Mountain region and destination skiers visiting the region.
REGULATION AND LEGISLATION
The Company's operations are dependent upon its ownership or control over
the real estate constituting each resort. The real property presently used at
the Northstar and Mt. Cranmore resorts is owned by the Company. The Company has
the right to use a substantial portion of the real property associated with the
Bear Mountain, Sierra, Snoqualmie Pass, Grand Targhee and Waterville Valley
resorts under the terms of special use permits issued by the Forest Service. The
special use permits for the Bear Mountain, Sierra, and Waterville Valley resorts
were reissued at the time of the Company's acquisition of such resorts, with the
Bear Mountain permit expiring in 2020, the Sierra permit expiring in 2008 and
the Waterville Valley permit expiring in 2034. As a result of the acquisitions
of Snoqualmie Pass and Grand Targhee, the Company will be similarly required to
obtain reissuance of the permits for these resorts from the Forest Service. The
Company is currently seeking such reissuance and is unaware of any reason that
it will be unable to obtain reissuance of these permits in a timely manner on
satisfactory terms, as it did at Bear Mountain, Sierra, and Waterville Valley,
although no assurance can be given in this regard. The failure of the Company to
obtain the reissuance of the Snoqualmie Pass or Grand Targhee permits, or the
termination or revocation of any of its other Forest Service permits, could
result in a default under the Senior Credit Facility and/or the inability of the
Company to borrow thereunder. Assuming that the Snoqualmie Pass and Grand
Targhee permits are reissued, they will expire in 2032 and 2034, respectively.
The Forest Service has the right to approve the location, design and
construction of improvements in the permit area and many operational matters.
Under the permits, the Company is required to pay fees to the Forest Service.
Under recently enacted legislation, retroactively effective to the 1995/96 ski
season, the fees range from 1.5% to approximately 4.0% of certain revenues, with
the rate generally rising with increased revenues. However, through fiscal 1998,
the Company is required to pay the greater of (i) the fees due under the new
legislation and (ii) the fees actually paid for the 1994/95 ski season, unless
gross revenue in a ski season falls more than 10% below that of the 1994/95 ski
season, in which case the fees due are calculated solely under the new
legislation. The calculation of gross revenues includes, among other things,
lift tickets, ski school lessons, food and beverages, rental equipment and
retail merchandise revenues. Total fees paid to the Forest Service by the
Company's resorts during their last completed fiscal years were approximately
$810,000. The new legislation is not expected to have a material effect on fees
payable in future periods.
The Company believes that its relations with the Forest Service are good,
and, to the best of its knowledge, no special use permit for any major ski
resort has ever been terminated by the Forest Service. Prior to permit
termination, the USFS would be required to notify the Company of the grounds for
such action and to provide it with reasonable time to correct any curable
non-compliance.
LEGAL PROCEEDINGS
Each of the Company's resorts has pending and is regularly subject to
litigation with respect to personal injury claims relating principally to skiing
activities at its resorts. The Company and each of its resorts maintain
extensive liability insurance that the Company considers adequate to insure
claims related to usual
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and customary risks associated with the operation of ski resorts. The Company
does not believe that it or any of its resorts are involved in any litigation
that will, individually or in the aggregate, have a material adverse effect on
its financial condition or future results of operations.
EMPLOYEES
As of March 31, 1997, the Company employed a full-time corporate staff of
10 persons. In addition, the Company's resorts employ an aggregate of
approximately 520 full-time and 3,500 seasonal employees. None of the employees
of the Company or its resorts is represented by a labor union, and the Company
considers its employee relations to be good.
REGULATORY MATTERS
The Company's resorts are subject to a wide variety of federal, state and
local laws and regulations relating to land use, water resources, discharge,
storage, treatment and disposal of various materials and other environmental
matters. Management believes that the Company's resorts are presently in
compliance with all land use and environmental laws, except where non-compliance
is not expected to result in a material adverse effect on its financial
condition. The Company also believes that the cost of complying with known
requirements, as well as anticipated investigation and remediation activities,
will not have a material adverse effect on its financial condition or future
results of operations. However, failure to comply with such laws could result in
the imposition of severe penalties and other costs or restrictions on operations
by government agencies or courts that could adversely affect operations.
The Company has not received any notice of material non-compliance with
permits, licenses or approvals necessary for the operation of its properties or
of any material liability under any environmental law or regulation. However, at
Grand Targhee, the Wyoming Department of Environmental Quality (the "DEQ") has
issued a Notice of Violation of state water pollution requirements based on
alleged discharge from a wastewater lagoon without a permit. The Company expects
to enter into an amended consent order with the DEQ requiring construction and
operation of a new wastewater facility by November 1998 at a cost ranging from
approximately $750,000 to $1.0 million. Penalties for the alleged noncompliance
have not been sought by the DEQ or by any other governmental authority or
person, although such action could be pursued.
Pursuant to the air emissions reduction program currently in effect in the
area regulated by the South Coast Air Quality Management District (the
"SCAQMD"), where Bear Mountain is located, Bear Mountain will be required to
"bank" emission credits from other facilities which have already implemented
NO(x) emission reductions. The Company may purchase "banked" emission credits in
a one-time transaction at the current market rate of approximately $681,000 or
over time up to the year 2010 at prevailing market rates.
The Company believes it has all permits, licenses and approvals from
governmental authorities material to the operation of the resorts as currently
configured. As a result of the Acquisitions, the Company has been required, and
will in the future be required, to obtain certain governmental approvals with
respect to the transfer of certain licenses and permits, including licenses to
sell alcoholic beverages at certain of its resorts. The Company will continue to
seek such approvals and is unaware of any reason that it will be unable to
obtain such approvals in a timely manner on satisfactory terms, although no
assurances can be given in this regard.
The operations at the resorts require permits and approvals from certain
federal, state and local authorities. In addition, the Company's operations are
heavily dependent upon its continued ability, under applicable laws,
regulations, policies, permits, licenses or contractual arrangements, to have
access to adequate supplies of water with which to make snow and service the
other needs of its facilities, and otherwise to conduct its operations. There
can be no assurance that new applications of existing laws, regulations and
policies, or changes in such laws, regulations and policies will not occur in a
manner that could have a detrimental effect on the Company, or that material
permits, licenses or agreements will not be canceled, non-renewed, or renewed on
terms materially less favorable to the Company. Major expansions of any one or
more resorts could require, among other things, the filing of an environmental
impact statement or other documentation with the Forest Service and state or
local governments under the NEPA and certain state or local counterparts if it
is determined that the expansion may have a significant impact upon the
environment. Although the Company has no reason to believe that it will not be
successful in implementing its operations and development plans, no assurance
can be given that necessary permits and approvals will be obtained.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth information with respect to the directors,
executive officers and other key employees of the Company.
<TABLE>
<CAPTION>
YEARS IN
NAME AGE POSITION INDUSTRY
- ---- --- -------- --------
<S> <C> <C> <C>
George N. Gillett, Jr.................. 58 Chairman of the Board of Directors;
Chief Executive Officer; Director 13
Jeffrey J. Joyce....................... 35 Executive Vice President, Finance 8
Nanci N. Northway...................... 42 Vice President, Treasurer, Chief
Financial Officer and Secretary 20
Julianne Maurer........................ 40 Corporate Director of Marketing 13
Timothy Silva.......................... 45 General Manager -- Northstar 23
John A. Rice........................... 41 General Manager -- Sierra 16
Catherine M. Thero..................... 34 General Manager -- Bear Mountain 10
Timothy M. Harris...................... 32 General Manager -- Mt. Cranmore 8
Chris Thompson......................... 49 General Manager -- Snoqualmie Pass 33
Larry H. Williamson.................... 55 General Manager -- Grand Targhee 21
</TABLE>
George N. Gillett, Jr. Mr. Gillett has been the Chairman of the Board of
Directors of the Company since its formation in October 1996 and Chief Executive
Officer since February 1997. Mr. Gillett served as Chairman from 1977 until
September 1996 of Gillett Holdings, Inc. (which was renamed Vail Resorts, Inc.
in 1996). Gillett Holdings, Inc. owned Packerland Packing Company, Inc. until
its sale in 1994, the Vail ski resort since its acquisition in 1985 and various
media properties, including a controlling interest in SCI Television, Inc. from
1987 until 1993. Since August 1994 he has served as Chairman of Packerland
Packing Company, Inc., a meatpacking company based in Green Bay, Wisconsin. From
October 1987 until May 1993, Mr. Gillett served as Chairman and Chief Executive
Officer of SCI Television, Inc. and from May 1993 until May 1996 as President of
New World Television, Inc. (renamed from SCI Television Inc. in 1993). Mr.
Gillett filed a petition of voluntary bankruptcy under Chapter 7 of the United
States Bankruptcy Code on August 13, 1992 and was discharged from bankruptcy on
July 27, 1993. In addition, certain entities for which Mr. Gillett has served as
an executive officer or director, including Gillett Holdings, Inc., SCI
Television, Inc. and their respective subsidiaries, filed bankruptcy petitions,
or had bankruptcy petitions filed against them, in 1991 and 1993 under Chapter
11 of the United States Bankruptcy Code. All of these entities have since been
discharged from bankruptcy.
Jeffrey J. Joyce. Mr. Joyce has held the position of Executive Vice
President, Finance of the Company since October 1996. He also has served since
August 1994 as a Vice President of Packerland Packing Company, Inc., which is
indirectly controlled by George N. Gillett, Jr., Chairman of the Board of
Directors and Chief Executive Officer of the Company. From July 1988 until July
1993, Mr. Joyce was employed by Gillett Holdings, Inc., an affiliate of George
N. Gillett, Jr., in various financial management positions.
Nanci N. Northway. Ms. Northway has held the positions of Vice President,
Treasurer, Chief Financial Officer and Secretary of the Company since December
1996. Prior to this time, she served as Assistant Controller and Treasurer of
Trimont Land Company, Sierra-at-Tahoe, Inc. and Bear Mountain, Inc. from May
1983, July 1993 and October 1995, respectively, until the consummation of the
Acquisitions in December 1996.
Julianne Maurer. Ms. Maurer has held the position of Corporate Director of
Marketing of the Company since December 1996. Prior to this time she served as
Director of Marketing of the Fibreboard Resort Group since November 1982.
Timothy Silva. Mr. Silva has been the General Manager of Northstar since
January 1995. Prior to this time, he served as Director of Operations of Trimont
Land Company, the owner and operator of Northstar, since February 1992.
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John A. Rice. Mr. Rice has been the General Manager of Sierra since July
1993. Prior to this time, he served as Vice President of Administration of Bear
Mountain, Ltd. (the predecessor of Bear Mountain, Inc.) since July 1988.
Catherine M. Thero. Ms. Thero has been the General Manager of Bear
Mountain, since March 1996. Prior to this time, she served as a Senior Associate
of Sno.engineering, Inc. since May 1995. From June 1989 until May 1995, Ms.
Thero was the President of Resort Consulting Group. From May 1992 until January
1994, Ms. Thero was the Director of Projects at the Sunday River Ski Resort in
Maine.
Timothy M. Harris. Mr. Harris has been the General Manager of Mount
Cranmore since July 1995. From October 1994 to July 1995, Mr. Harris served as
Skier Services Manager, and from November 1987 to October 1994, he served Guest
Services Manager, at Sugarbush Resort.
Chris Thompson. Mr. Thompson became the General Manager of Snoqualmie Pass
upon consummation of the Snoqualmie Acquisition. He has also served as Chief
Operating Officer and Vice President of Ski Lifts, Inc., the owner and operator
of Snoqualmie Pass, since 1994 and 1992, respectively. From 1987 to 1992, he
served as General Manager of the Alpental ski resort at Snoqualmie Pass.
Larry H. Williamson. Mr. Williamson became the General Manager of Grand
Targhee upon consummation of the Grand Targhee Acquisition. Mr. Williamson has
held the position of General Manager of Grand Targhee Incorporated, the owner
and operator of Grand Targhee, since March 1996. Prior to this time, he served
as Director of Mountain Operations of Grand Targhee since 1989.
EMPLOYMENT AND OTHER AGREEMENTS
The Company is a party to an agreement with Nanci N. Northway, Vice
President, Treasurer, Chief Financial Officer and Secretary of the Company,
pursuant to which Ms. Northway is entitled to a one-time payment of $100,000
within 90 days following an initial public offering of the Company's common
stock or a change in control of the Company, in each case occurring while Ms.
Northway is an employee of the Company.
DIRECTORS
All directors of Booth Creek and Parent hold office until the respective
annual meeting of stockholders next following their election, or until their
successors are elected and qualified. George N. Gillett, Jr. is the sole
director of Booth Creek. Pursuant to the Stockholders Agreement, John Hancock
has nominated Dean C. Kehler and Gregg L. Engles to serve on Parent's Board of
Directors and the Gillett Family Partnership has nominated George N. Gillett,
Jr. to serve as Chairman of the Board of Directors of Parent and Jeffrey J.
Joyce to serve as a director. One additional nomination to Parent's Board of
Directors remains to be made by the Gillett Family Partnership. See "Certain
Transactions -- Stockholders Agreement." No directors of Booth Creek or Parent
receives compensation for acting in such capacity.
Since August 1995, Mr. Kehler has been a Managing Director of the Initial
Purchaser, an affiliate of Canadian Imperial Bank of Commerce and the CIBC
Merchant Fund, and has investment responsibilities with respect to the CIBC
Merchant Fund. From February 1990 to August 1995, Mr. Kehler was a Managing
Director of Argosy Group, L.P., an investment banking firm. Mr. Engles has
served as the Chairman of the Board and Chief Executive Officer of Suiza Foods
Corporation since October 1994. He has also served as the Chairman of the Board
and Chief Executive Officer of Reddy Ice Corporation since May 1988, Chairman of
the Board of Suiza Holdings, L.P. since December 1993, and Chairman of the Board
of Velda Farms since April 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's compensation policies are determined and executive officer
compensation decisions are made by the Board of Directors. Mr. George N.
Gillett, Jr. has been the sole director of the Company since its formation in
October 1996.
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CERTAIN TRANSACTIONS
THE FINANCING TRANSACTIONS
Since its formation in October 1996, the Company has engaged in a series of
related transactions for the purpose of raising capital to finance the
Acquisitions. As part of these transactions, (i) in November and December 1996
Booth Creek Partners Limited II, L.L.L.P. (the "Gillett Family Partnership")
contributed an aggregate of $7.5 million to Parent in exchange for 3,630 shares
of Class A Common Stock of Parent; (ii) on November 27, 1996, Parent entered
into a Securities Purchase Agreement (the "Hancock Securities Purchase
Agreement") with John Hancock Mutual Life Insurance Company ("John Hancock")
pursuant to which John Hancock purchased for an aggregate consideration of $42.5
million (a) 2,558 shares of Parent's Class B Common Stock (the "Hancock
Purchased Common Shares"), (b) warrants (the "Hancock Warrants") to purchase an
additional 2,500 shares of Parent's Class B Common Stock (the "Hancock
Underlying Shares") and (c) $35.0 million aggregate principal amount of Parent's
notes, including the Hancock Option Notes (the "Hancock Parent Financing Debt");
(iii) on November 27, 1996, Parent entered into a Securities Purchase Agreement
(the "CIBC Merchant Fund Securities Purchase Agreement" and, together with the
Hancock Securities Purchase Agreement, the "Securities Purchase Agreements")
with the CIBC Merchant Fund pursuant to which the CIBC Merchant Fund purchased
for an aggregate consideration of $6.5 million (a) 512 shares of Parent's Class
B Common Stock (the "CIBC Merchant Fund Purchased Common Shares" and, together
with the Hancock Purchased Common Shares, the "Purchased Common Shares"), (b)
warrants (the "CIBC Merchant Fund Warrants" and, together with the Hancock
Warrants, the "Warrants") to purchase an additional 400 shares of Parent's Class
B Common Stock (the "CIBC Merchant Fund Underlying Shares" and, together with
the Hancock Underlying Shares, the "Underlying Shares") and (c) $5.0 million
aggregate principal amount of Parent's notes (the "CIBC Merchant Fund Parent
Financing Debt"); and (iv) in December 1996, using the proceeds of the
foregoing, Parent made an equity contribution of $40.0 million and a loan of
$10.0 million to the Company, which was used to consummate the Acquisitions (the
foregoing transactions are collectively referred to herein as the "Financing
Transactions"). The loan from Parent to the Company had terms identical to the
Hancock Option Notes and was repaid in connection with the consummation of the
Initial Offering.
In connection with the consummation of the Initial Offering, the Hancock
Option Notes were exchanged for notes of the Company with substantially
identical terms and repaid with a portion of the proceeds of the Initial
Offering. The remaining portion of the Hancock Parent Financing Debt and the
CIBC Merchant Fund Parent Financing Debt (collectively, the "Parent Financing
Debt") matures on November 27, 2008 and bears interest at 12% per annum, if paid
in cash, or 14% per annum, if paid in kind, payable semi-annually on each May 27
and November 27 commencing on May 27, 1997.
The Securities Purchase Agreements, which govern the Parent Financing Debt,
contain financial covenants relating to the maintenance of ratios of (a)
consolidated total debt to consolidated cash flow, (b) consolidated cash flow to
consolidated fixed charges and (c) consolidated cash flow to consolidated
interest charges. The Securities Purchase Agreements also contain restrictive
covenants pertaining to the management and operation of Parent and its
subsidiaries, including the Company. The covenants include, among others,
significant limitations on discounts or sales of receivables, funded debt and
current debt, dividends and other stock payments, redemption, retirement,
purchase or acquisition of equity interests in Parent and its subsidiaries,
transactions with affiliates, investments, liens, issuances of stock, asset
sales, acquisitions, mergers, fundamental corporate changes, tax consolidation,
modifications of certain documents and leases. The Securities Purchase
Agreements further required that all of the issued and outstanding common stock
of Booth Creek be pledged upon consummation of the Initial Offering to secure
the Parent Financing Debt and provide that Parent shall cause Booth Creek to pay
cash dividends to Parent in the maximum amount permitted by law, subject to
restrictions contained in the Company's debt agreements, in order to satisfy
Parent's interest payment obligations under the Parent Financing Debt.
The Securities Purchase Agreements provide for events of default customary
in agreements of this type, including: (i) failure to make payments when due;
(ii) breach of covenants; (iii) bankruptcy defaults; (iv) breach of
representations or warranties in any material respect when made; (v) default by
Parent or any
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of its subsidiaries under any agreement relating to debt for borrowed money in
excess of $1.0 million in the aggregate; (vi) final judgments for the payment of
money against Parent or any of its subsidiaries in excess of $1.0 million in the
aggregate; (vii) ERISA defaults; (viii) any operative document ceasing to be in
full force and effect; (ix) any enforcement of liens against Parent or any of
its subsidiaries; and (x) a change of control of Parent. The Securities Purchase
Agreements contain financial and operating covenants, events of default and
other provisions customary for agreements of this type.
The Warrants are exercisable, subject to certain conditions, at a per share
price of $0.01 (as adjusted by certain anti-dilution provisions) at any time
prior to November 27, 2008, on which date all unexercised Warrants will be
deemed automatically exercised. The Securities Purchase Agreements provide that
the holders of at least two-thirds of the Purchased Common Shares and the
Underlying Shares will each be entitled to require Parent to register their
shares under the Securities Act for resale to the public. The holders of
Registrable Shares (as defined in the Securities Purchase Agreements) are also
entitled to certain piggyback and other registration rights, subject in all
cases to certain qualifications.
STOCKHOLDERS AGREEMENT
In connection with the consummation of the Financing Transactions, Parent,
the Gillett Family Partnership, John Hancock and the CIBC Merchant Fund entered
into a Stockholders Agreement dated November 27, 1996 (the "Stockholders
Agreement"). Pursuant to the Stockholders Agreement, the Board of Directors of
Parent shall consist of five directors, three of whom shall be designated by the
Gillett Family Partnership and two of whom (the "Unaffiliated Directors") shall
be designated by John Hancock. No transaction between Parent or any of its
subsidiaries, including the Company, and George N. Gillett, Jr. or any of his
affiliates may be approved by the Board of Directors of Parent unless such
transaction is approved by all of the Unaffiliated Directors. Moreover, without
the consent of John Hancock and the CIBC Merchant Fund (or their respective
transferees) (collectively, the "Institutional Investors"), neither Parent nor
any subsidiary of Parent, including the Company, may issue any equity securities
except, in the case of Parent, for certain enumerated permitted issuances and,
in the case of any subsidiary of Parent, issuances to Parent or to any
wholly-owned subsidiary of Parent. With respect to issuance of equity securities
of Parent requiring the approval of the Institutional Investors, the
Institutional Investors also are entitled to certain preemptive rights. In
addition, the Stockholders Agreement provides that neither Parent nor any of its
subsidiaries, including the Company, may acquire any assets or business from any
other person (other than inventory and equipment in the ordinary course of
business) without the consent of the Required Institutional Investors (as
defined in the Stockholders Agreement).
The Stockholders Agreement further provides that, subject to certain
exceptions, the Gillett Family Partnership may not sell, assign, gift, pledge or
otherwise transfer any equity securities of Parent beneficially owned by it
(other than to an affiliate of the Gillett Family Partnership that becomes a
party to the Stockholders Agreement) prior to November 27, 1999. In the event
that at any time after such date, the Gillett Family Partnership shall not hold
a majority of the outstanding Class A Common Stock of Parent as a result of the
conversion of shares of Class B Common Stock into Class A Common Stock, the
Stockholders Agreement requires that Parent grant to the Gillett Family
Partnership registration rights with respect to its equity securities which are
in all material respects the same as those provided to the Institutional
Investors under the Securities Purchase Agreements.
In addition to the foregoing, the Stockholders Agreement gives each party
thereto certain co-sale rights and rights of first offer upon the sale or other
transfer of any equity securities of Parent by any other party, and requires
that, as a condition to the issuance or transfer of any equity securities of
Parent to any third party (other than a person who acquires such securities
pursuant to an effective registration statement under the Securities Act) that
such person become a party to the Stockholders Agreement and agree to be bound
by all the terms and conditions thereof.
The provisions of the Stockholders Agreement relating to the composition of
the Board of Directors of Parent terminate following any transfer or transfers
of equity securities of Parent by the Gillett Family Partnership, John Hancock
and the CIBC Merchant Fund (other than a transfer by any of them to any of
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their respective affiliates) if after giving effect to any such transfer or
transfers the Gillett Family Partnership, John Hancock and the CIBC Merchant
Fund have transferred in the aggregate 20% or more of the equity securities of
Parent, as calculated in the Stockholders Agreement. The Stockholders Agreement
shall terminate, and be of no force or effect, upon the consummation of a
Qualified Public Offering (as defined in the Stockholders Agreement).
Pursuant to the Stockholders Agreement, John Hancock has nominated Dean C.
Kehler and Gregg L. Engles to serve on Parent's Board of Directors. The Gillett
Family Partnership has nominated George N. Gillett, Jr. to serve as Chairman of
the Board of Directors of Parent and Jeffrey J. Joyce to serve as a director.
One additional nomination to Parent's Board of Directors remains to be made by
the Gillett Family Partnership. George N. Gillett, Jr., Chairman and Chief
Executive Officer of the Company, is the managing general partner of the Gillett
Family Partnership. See "Management -- Directors."
THE INITIAL OFFERING
CIBC Wood Gundy Securities Corp. was the Initial Purchaser in the Initial
Offering and received compensation in such capacity. CIBC Wood Gundy Securities
Corp. is an affiliate of CIBC, which was the lender under the Bridge Notes, and
is an affiliate of the CIBC Merchant Fund, which owns 512 shares, and Warrants
to acquire an additional 400 shares, of Class B Common Stock of Parent and $5.0
million aggregate principal amount of notes issued by Parent.
MANAGEMENT AGREEMENT WITH BOOTH CREEK, INC.
Booth Creek, Inc. (the "Management Company") provides management services
to the Company, the Parent and the Company's subsidiaries pursuant to the
Management Agreement dated November 27, 1996 (the "Management Agreement")
between the Company and the Management Company. The Management Company provides
the Company, the Parent and the Company's subsidiaries with financial advice
with respect to, among other matters, cash management, accounting and data
processing systems and procedures, budgeting, equipment purchases, business
forecasts, treasury functions and investor relations. The Management Company
also provides general supervision and management advice concerning tax, legal
and corporate finance matters, administration and operation, personnel matters,
business insurance and the employment of consultants, contractors and agents.
Under the terms of the Management Agreement, the Company provides customary
indemnification, reimburses certain costs and pays the Management Company an
annual management fee of $350,000 plus an operating bonus, not to exceed
$400,000, equal to 2.5% of the excess of Consolidated EBITDA (as defined in the
Securities Purchase Agreements) for such year over $25 million. The obligation
of the Company to make payments under the Management Agreement is subject to the
provisions of the Securities Purchase Agreements.
Since the formation of the Company, the Management Company and certain of
its affiliates have made advances and deposits, and have incurred fees and
expenses, in connection with certain of the Acquisitions for which they were
later reimbursed by the Company pursuant to the Management Agreement.
Reimbursement amounts did not include any payment of interest.
The Management Agreement will terminate automatically upon consummation of
a sale of all or substantially all of the assets or stock of the Parent and its
subsidiaries on a consolidated basis, and may be terminated earlier for certain
cause by either the Company or the Management Company. George N. Gillett, Jr.,
Chairman and Chief Executive Officer of the Company is the sole shareholder,
sole director and the Chief Executive Officer of the Management Company.
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OWNERSHIP AND CONTROL
The Company is a wholly-owned subsidiary of Booth Creek Ski Group, Inc., a
Delaware corporation ("Parent"). The following table sets forth information
concerning the beneficial ownership of Parent's Common Stock (including Class A
Common Stock and Class B Common Stock) as of May 31, 1997 by (i) each person
known to the Company to own beneficially more than 5% of the outstanding Common
Stock of Parent, (ii) by each director and executive officer of the Company and
(iii) all directors and executive officers of the Company as a group. Each share
of Parent's Class B Common Stock is non-voting (except with respect to certain
amendments to the certificate of incorporation and bylaws of Parent and as
otherwise required by the General Corporation Law of the State of Delaware) and
is convertible into one share of voting Class A Common Stock of Parent at any
time, subject to applicable regulatory approvals. All shares are owned with sole
voting and investment power, unless otherwise indicated.
<TABLE>
<CAPTION>
PARENT'S CLASS A PARENT'S CLASS B
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------- ------------------
BENEFICIAL OWNER SHARES % SHARES %
- ---------------- -------- ----- ------- ----
<S> <C> <C> <C> <C>
Booth Creek Partners Limited II, L.L.L.P.................. 3,630 100%
6755 Granite Creek Road
Teton Village, Wyoming 83025
John Hancock Mutual Life Insurance Company................ 5,058(1) 58% 5,058(1) 85%
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
CIBC WG Argosy Merchant Fund 2, L.L.C..................... 912(2) 20% 912(2) 15%
425 Lexington Avenue, 3rd Floor
New York, New York 10017
George N. Gillett, Jr..................................... 3,630(3) 100%
Chairman of the Board of the Company
Rose Gillett.............................................. 3,630(3) 100%
6755 Granite Creek Road
Teton Village, Wyoming 83025
Jeffrey J. Joyce.......................................... 544.5(4) 15%
Executive Vice President, Finance of the Company
Total Executive Officers and Directors as a Group......... 3,630(5) 100%
</TABLE>
- ---------------
(1) Comprised of 2,558 shares of Class B Common Stock of Parent and Warrants to
purchase 2,500 shares of Class B Common Stock of Parent. Each share of
Parent's Class B Common Stock is convertible into one share of Class A
Common Stock of Parent at any time, subject to applicable regulatory
approvals. Each Warrant may be exercised for one share of Parent's Class B
Common Stock at an exercise price of $.01 per share.
(2) Comprised of 512 shares of Class B Common Stock of Parent and Warrants to
purchase 400 shares of Class B Common Stock of Parent. Each share of
Parent's Class B Common Stock is convertible into one share of Class A
Common Stock of Parent at any time, subject to applicable regulatory
approvals. Each Warrant may be exercised for one share of Parent's Class B
Common Stock at an exercise price of $.01 per share.
(3) Booth Creek Partners Limited II, L.L.L.P. owns directly 3,630 shares of
Class A Common Stock of Parent. George N. Gillett, Jr. is the managing
general partner and Rose Gillett is a co-general partner of Booth Creek
Partners Limited II, L.L.L.P. and each may be deemed to possess shared
voting and/or investment power with respect to the interests held therein.
Accordingly, the beneficial ownership of such interests may be attributed
to George N. Gillett, Jr. and Rose Gillett. Rose Gillett is the wife of
George N. Gillett, Jr.
(4) Represents shares of Class A Common Stock of Parent that Mr. Joyce has an
option to purchase from Booth Creek Partners Limited II, L.L.L.P. (the
"Option") pursuant to that certain Option Letter
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Agreement dated December 3, 1996. The Option is exercisable, in whole or in
part, at any time on or prior to December 1, 2006 at an initial exercise
price equal to $2,066.12 per share, which exercise price shall increase by
$55.10 on December 1, 1997 and on each December 1 thereafter. The shares
subject to the Option and the per share exercise price are subject to
adjustment under certain circumstances, and the obligation of Booth Creek
Partners Limited II, L.L.L.P. to sell shares of Class A Common Stock of
Parent upon exercise of the Option is subject to compliance with applicable
securities laws.
(5) Represents 3,630 shares of Class A Common Stock of Parent owned by Booth
Creek Partners Limited II, L.L.L.P., of which George N. Gillett, Jr. may be
deemed to be the beneficial owner. Jeffrey J. Joyce may be deemed to be the
beneficial owner of 544.5 of such shares pursuant to the Option described
in note (4) above.
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR CREDIT FACILITY
The following is a summary of the material provisions of the Amended and
Restated Credit Agreement dated as of March 18, 1997 (the "Senior Credit
Facility"), among the Company, its subsidiaries, the financial institutions
party thereto and The First National Bank of Boston, as administrative agent
("Agent"). The following summary does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all of the provisions of the
Senior Credit Facility, including all of the definitions therein of terms not
defined in this Prospectus.
General. The Senior Credit Facility provides for borrowing availability of
up to $12.0 million during the period from each July 15 through each January 31
during the term of such facility and $6.0 million during the remainder of each
year. In addition, the Company is required to repay all borrowings under the
Senior Credit Facility on or before March 1 of each year and have no outstanding
indebtedness thereunder during the two months thereafter. From and after July
15, 1998, borrowing availability under the Senior Credit Facility increases to
$20.0 million upon the Company achieving a certain level of adjusted
consolidated cash flow to total debt service for any trailing four quarter
period ending on or after April 30, 1998. The Senior Credit Facility requires
the Company to escrow $5,820,000 on or prior to August 1, 1997 to fund the first
payment of interest payable on the Notes after the Issue Date. Pursuant to the
terms of the Senior Credit Facility, the Company may not borrow in excess of
$1,430,000 thereunder to fund such interest payment. The Company expects to fund
such interest payment from available cash on hand (including any remaining
proceeds from the Initial Offering) and borrowings under the Senior Credit
Facility. Borrowings under the Senior Credit Facility are collectively referred
to herein as the "Loans." See "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Interest. For purposes of calculating interest, the Loans can be, at the
election of the Company, Base Rate Loans or LIBOR Rate Loans or a combination
thereof. Base Rate Loans will bear interest at the sum of (a) a margin of
between 0% and .50%, depending on the level of consolidated EBITDA of the
Company and its subsidiaries (as determined pursuant to the Senior Credit
Facility), plus (b) the higher of (i) The First National Bank of Boston's base
rate or (ii) the federal funds rate plus .50%. LIBOR Rate Loans will bear
interest at the LIBOR Rate plus a margin of between 2.0% and 3.0%, depending on
the level of consolidated EBITDA.
Repayment. Subject to the provisions of the Senior Credit Facility, the
Company may, from time to time, borrow, repay and reborrow under the Senior
Credit Facility. The entire unpaid balance under the Senior Credit Facility is
payable on the second anniversary of the closing date of the Senior Credit
Facility.
Security. Borrowings under the Senior Credit Facility are secured by (i) a
pledge to the Agent for the ratable benefit of the financial institutions party
to the Senior Credit Facility of all of the capital stock of the Company's
principal subsidiaries and (ii) a grant of a security interest in substantially
all of the consolidated assets of the Company and its Restricted Subsidiaries.
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Covenants. The Senior Credit Facility contains financial covenants
relating to the maintenance of (i) ratios of (a) financing debt to consolidated
cash flow, (b) adjusted consolidated cash flow to total debt service and (c)
consolidated cash flow to consolidated interest expense, (ii) consolidated net
worth and (iii) consolidated cash flow. The Senior Credit Facility also contains
restrictive covenants pertaining to the management and operation of the Company
and its subsidiaries. The covenants include, among others, significant
limitations on indebtedness, guarantees, mergers, acquisitions, fundamental
corporate changes, capital expenditures, asset sales, leases, investments, loans
and advances, liens, dividends and other stock payments, transactions with
affiliates, optional payments and modification of debt instruments and issuances
of stock.
Events of Default. The Senior Credit Facility provides for events of
default customary in facilities of this type, including: (i) failure to make
payments when due; (ii) breach of covenants; (iii) breach of representations or
warranties in any material respect when made; (iv) default by the Company or
Parent under any agreement relating to financing debt for borrowed money in
excess of $1.0 million in the aggregate; (v) bankruptcy defaults; (vi) judgments
in excess of $1.0 million; (vii) ERISA defaults; (viii) any security document
ceasing to be in full force and effect or any security interest created thereby
ceasing to be enforceable and of the same effect and priority purported to be
created thereby; and (ix) a change of control of the Company.
ASC SELLER NOTE
As part of the purchase price for the acquisitions of the New Hampshire
Resorts, Booth Creek Ski Acquisition Corp., a wholly-owned subsidiary of the
Company, and Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski Resort,
Inc., wholly-owned subsidiaries of Booth Creek Ski Acquisition Corp. and the
respective owners of the assets of the Waterville Valley and Mt. Cranmore
resorts, jointly and severally issued a promissory note to American Skiing
Company in the aggregate principal amount of $2.75 million (the "ASC Seller
Note"). The ASC Seller Note matures on June 30, 2004 and bears interest at 12%
per annum payable semi-annually on each June 30 and December 31 commencing on
June 30, 1997.
SKI LIFTS PREFERRED STOCK PURCHASE AGREEMENT
In connection with the consummation of the Snoqualmie Acquisition, Ski
Lifts issued 28,000 shares of Ski Lifts Preferred Stock to its former
shareholders having an aggregate liquidation preference equal to $3.5 million,
the aggregate estimated fair market value of the developmental real estate held
by the Real Estate LLC and the real estate subject to the Real Estate Option.
Concurrently with these transactions, the Real Estate LLC entered into the
Preferred Stock Purchase Agreement pursuant to which the Real Estate LLC is
required to purchase the Ski Lifts Preferred Stock, on a quarterly basis over
the five years following the date of the Snoqualmie Acquisition, at a purchase
price equal to the liquidation preference thereof plus accrued dividends to the
date of purchase. The Company advanced the first three quarterly payments under
the Preferred Stock Purchase Agreement at or prior to the closing date of the
Initial Offering. The Real Estate LLC's obligations under the Preferred Stock
Purchase Agreement are secured by a first priority lien on the development real
estate held by the Real Estate LLC and substantially all of its other assets.
The Ski Lifts Preferred Stock provides for a 9% cumulative dividend and is
redeemable at the option of Ski Lifts without premium. In addition, pursuant to
the terms of the Ski Lifts Preferred Stock, the holders thereof have no
redemption rights and are entitled to receive dividend payments only when and if
declared by the board of directors of Ski Lifts.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company to the Initial Purchaser
pursuant to the Purchase Agreement. The Initial Purchaser subsequently resold
the Old Notes to qualified institutional buyers in reliance on Rule 144A under
the Securities Act. As a condition to the Purchase Agreement, the Company and
the Guarantors entered into the Registration Rights Agreement with the Initial
Purchaser pursuant to which the Company and the Guarantors have agreed, for the
benefit of the holders of the Old Notes, at the Company's cost, to use their
best efforts to (i) file the Exchange Offer Registration Statement within 45
days after the date of the original issue of the Old Notes with the Commission
with respect to the Exchange Offer for the New Notes; (ii) use their best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act within 150 days after the date of the
original issuance of the Old Notes and (iii) unless the Exchange Offer would not
be permitted by applicable law or Commission policy, commence the Exchange Offer
and use their best efforts to issue on or prior to 60 days after the date on
which the Exchange Offer Registration Statement was declared effective by the
Commission (the "Exchange Offer Effectiveness Date") New Notes in exchange for
all Old Notes tendered prior thereto in the Exchange Offer. Upon the Exchange
Offer Registration Statement being declared effective, the Company will offer
the New Notes in exchange for surrender of the Old Notes. The Company will keep
the Exchange Offer open for not less than 20 business days (or longer if
required by applicable law) after the date on which notice of the Exchange Offer
is mailed to the holders of the Old Notes. For each Old Note surrendered to the
Company pursuant to the Exchange Offer, the holder of such Old Note will receive
a New Note having a principal amount equal to that of the surrendered Old Note.
Each New Note will bear interest from its issuance date. Holders of Old Notes
that are accepted for exchange will receive, in cash, accrued interest thereon
to, but not including, the issuance date of the New Notes. Such interest will be
paid with the first interest payment on the New Notes. Interest on the Old Notes
accepted for exchange will cease to accrue upon issuance of the New Notes.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes will in general be
freely tradeable after the Exchange Offer without further registration under the
Securities Act. However, any purchaser of Old Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the New Notes (i) will not be able to rely on the interpretation of
the staff of the Commission, (ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Old Notes, unless such sale or transfer is made pursuant to an
exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging, and does not intend to engage, in distribution of the
New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or any other
person participates in the Exchange Offer for the purpose of distributing the
New Notes it must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the New
Notes and cannot rely on those no-action letters. As indicated above, each
Participating Broker-Dealer that receives New Notes for its own account in
exchange for Old Notes must acknowledge that it (i) acquired the Old Notes for
its own account as a result of market-making activities or other trading
activities, (ii) has not entered into any arrangement or understanding with the
Company or any "affiliate" of the Company (within the meaning of Rule 405 under
the Securities Act) to distribute the New Notes to be received in the Exchange
Offer and (iii) will deliver a
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prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. For a description of the procedures for resales by
Participating Broker-Dealers, see "Plan of Distribution."
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is not consummated within
210 days of the date of the original issuance of the Old Notes, the Company and
the Guarantors will (i), as promptly as possible, file the Shelf Registration
Statement covering resales of the Old Notes, (ii) use their respective best
efforts to cause the Shelf Registration Statement to be declared effective under
the Securities Act and (iii) use their respective best efforts to keep effective
the Shelf Registration Statement until three years after its effective date. The
Company will, in the event of the filing of the Shelf Registration Statement,
provide to each holder of the Old Notes copies of the prospectus which is a part
of the Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resale of the Old Notes. A holder of the Old
Notes that sells such Old Notes pursuant to the Shelf Registration Statement
generally would be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such a holder (including certain
indemnification obligations).
The Registration Rights Agreement provides that (i) the Company and the
Guarantors will file an Exchange Offer Registration Statement with the
Commission on or prior to 45 days after the date of the original issue of the
Old Notes, (ii) the Company and the Guarantors will use their best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 150 days after the date of the original issue of the
Old Notes, (iii) unless the Exchange Offer would not be permitted by applicable
law or Commission policy, the Company and the Guarantors will commence the
Exchange Offer and use their best efforts to issue on or prior to 60 days after
the Exchange Offer Effectiveness Date New Notes in exchange for all Old Notes
tendered prior thereto in the Exchange Offer and (iv) if obligated to file the
Shelf Registration Statement, the Company and the Guarantors will use their best
efforts to file the Shelf Registration Statement with the Commission in a timely
fashion. If (a) the Company and the Guarantors fail to file any of the
registration statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such registration
statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness, (c) the Company fails to consummate the
Exchange Offer within 60 days of the effectiveness of the Exchange Offer
Registration Statement, or (d) the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the period specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
the sole remedy available to holders of the Old Notes will be the immediate
assessment of Additional Interest as follows: the per annum interest rate on the
Old Notes will increase by 0.5% during the first 90-day period the Registration
Default exists and is not waived or cured and the per annum interest rate will
increase by an additional 0.25% for each subsequent 90-day period during which
the Registration Default remains uncured, up to a maximum additional interest
rate of 2.0% per annum in excess of 12 1/2% per annum. All Additional Interest
will be payable to holders of the Old Notes in cash on each March 15 and
September 15, commencing with the first such date occurring after any such
Additional Interest commences to accrue, until such Registration Default is
cured. After the date on which such Registration Default is cured, the interest
rate on the Old Notes will revert to 12 1/2% per annum. For purposes of the
foregoing, "Transfer Restricted Securities" means each Note until (i) the date
on which such Note has been exchanged by a person other than a broker-dealer for
a New Note in the Exchange Offer, (ii) following the exchange by a broker-dealer
in the Exchange Offer of a Note for a New Note, the date on which such New Note
is sold to a purchaser who receives from such broker-dealer on or prior to the
date of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Act.
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<PAGE> 90
Holders of Old Notes will be required to make certain representations (as
described in the Registration Rights Agreement) in order to participate in the
Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement within the time periods set
forth in the Registration Rights Agreement in order to have their Old Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Additional Interest set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of Old Notes accepted in the
Exchange Offer. Holders may tender some or all of their Old Notes pursuant to
the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP number from the Old Notes, (ii) the New Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (iii) the holders of the New Notes will not be entitled
to certain rights under the Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the Old Notes in
certain circumstances relating to the timing of the Exchange Offer, all of which
rights will terminate when the Exchange Offer is terminated. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $116,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
July 14, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "-- Fees and Expenses."
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EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
August 13, 1997, unless the Company in its sole discretion extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, prior to the
Expiration Date (i) to delay accepting any Old Notes, to extend the Exchange
Offer or to terminate the Exchange Offer if any of the conditions set forth
below under "Conditions" shall not have been satisfied, by giving oral or
written notice of such delay, extension or termination to the Exchange Agent or
(ii) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from their date of issuance. Holders of
Old Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the New Notes on
September 15, 1997. Interest on the Old Notes accepted for exchange will cease
to accrue upon issuance of the New Notes.
Interest on the New Notes is payable semi-annually on each March 15 and
September 15, commencing on September 15, 1997.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. To be tendered effectively,
the Old Notes, Letter of Transmittal or an Agent's Message in connection with a
book-entry transfer and other required documents must be completed and received
by the Exchange Agent at the address set forth below under "Exchange Agent"
prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the
Old Notes may be made by book-entry transfer in accordance with the procedures
described below. Confirmation of such book-entry transfer must be received by
the Exchange Agent prior to the Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent, forming a part of a
confirmation of a book-entry transfer, which states that such book-entry
transfer facility has received an express acknowledgment from the participant in
such book-entry transfer facility tendering the Notes that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal, each holder will make the
representations set forth above in the third paragraph under the heading "--
Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY
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<PAGE> 92
MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALER,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of the Medallion System (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at DTC for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in DTC's system may make book-entry delivery of Old Notes by causing
DTC to transfer such Old Notes into the Exchange Agent's account with respect to
the Old Notes in accordance with DTC's procedures for such transfer. Although
delivery of the Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents must in each case be transmitted to and received or confirmed
by the Exchange Agent at its address set forth below on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures. Delivery
of documents to DTC does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the
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defects or irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering holders, unless otherwise provided in the Letter
of Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution,
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Notes into the Exchange Agent's account at DTC), and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC), and
all other documents required by the Letter of Transmittal are received by
the Exchange Agent upon three New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"); (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at DTC to be credited); (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes are
to be registered, if different from that of the Depositor. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes which have been tendered but which are not accepted
for exchange will be returned to the holder thereof without cost to such holder
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described above under "-- Procedures for Tendering" at any
time prior to the Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein prior to the
Expiration Date, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable discretion that any of the
above conditions are not satisfied, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw such
Old Notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
EXCHANGE AGENT
Marine Midland Bank has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C>
By Mail: By Overnight Courier:
MARINE MIDLAND BANK MARINE MIDLAND BANK
140 Broadway -- Level A 140 Broadway -- Level A
New York, New York 10005-1180 New York, New York 10005-1180
</TABLE>
Attention: Corporate Trust Services
(registered or certified mail recommended)
By Hand:
MARINE MIDLAND BANK
140 Broadway -- Level A
New York, New York 10005-1180
Attention: Corporate Trust Services
Attention: Corporate Trust Services
Facsimile Transmission:
(212) 658-2292
Confirm by Telephone:
(212) 658-5931
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
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The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a person
inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, (iii) in accordance with
Rule 144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel reasonably acceptable to the Company), (iv) outside the United States to
a foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, or (v) pursuant to an effective registration under the
Securities Act, in each case in accordance with any applicable securities laws
of any state of the United States.
RESALE OF THE NEW NOTES
With respect to resales of New Notes, based on interpretations by the staff
of the Commission set forth in no-action letters issued to third parties, the
Company believes that a holder or other person who receives New Notes, whether
or not such person is the holder (other than a person that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) who
receives New Notes in exchange for Old Notes in the ordinary course of business
and who is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes, will be allowed to resell the New Notes to the public without
further registration under the Securities Act and without delivering to the
purchasers of the New Notes a prospectus that satisfies the requirements of
Section 10 of the Securities Act. However, if any holder acquires New Notes in
the Exchange Offer for the purpose of distributing or participating in a
distribution of the New Notes, such holder cannot rely on the position of the
staff of the Commission enunciated in such no-action letters or any similar
interpretive letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction, unless an exemption from registration is otherwise available.
Further, each Participating Broker-Dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging, and does not intend to engage, in the distribution of
the New Notes, (iii) the holder of any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other
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person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder of any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the New Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the New Notes and cannot rely on those no-action letters. As indicated
above, each Participating Broker-Dealer that receives a New Note for its own
account in exchange for Old Notes must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. For a description of
the procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
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DESCRIPTION OF THE NOTES
The New Notes will be issued under an Indenture, dated as of March 18, 1997
(the "Indenture") among the Company, the Guarantors and Marine Midland Bank, as
trustee (the "Trustee"). The terms of the New Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), as in effect on
the date of the Indenture. The form and terms of the New Notes are the same as
the form and terms of the Old Notes (which they replace) except that (i) the New
Notes bear a Series B designation, (ii) the New Notes have been registered under
the Securities Act and, therefore, will not bear legends restricting the
transfer thereof, and (iii) the holders of New Notes will not be entitled to
certain rights under the Registration Rights Agreement, including the provisions
providing for an increase in the interest rate on the Old Notes in certain
circumstances relating to the timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated. The New Notes are subject to
all such terms, and holders of the New Notes are referred to the Indenture and
the Trust Indenture Act for a statement of them. The following is a summary of
the material terms and provisions of the New Notes. This summary does not
purport to be a complete description of the New Notes and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the New
Notes and the Indenture (including the definitions contained therein). A copy of
the form of Indenture has been filed as an exhibit to the Exchange Offer
Registration Statement of which this Prospectus is a part. See "Available
Information." Definitions relating to certain capitalized terms are set forth
under "-- Certain Definitions" and throughout this description. Capitalized
terms that are used but not otherwise defined herein have the meanings assigned
to them in the Indenture and such definitions are incorporated herein by
reference. The Old Notes and the New Notes are sometimes referred to herein
collectively as the "Notes."
The Indenture provides for the issuance of additional series of Notes in
aggregate principal amounts of not less than $25.0 million per series, subject
to compliance with the covenant described below under "Limitation on Additional
Indebtedness" and provided that no Default or Event of Default exists under the
Indenture at the time of issuance or would result therefrom and that the
aggregate principal amount of Notes issued under the Indenture does not exceed
$200.0 million. All Notes will be substantially identical in all material
respects other than issuance dates.
GENERAL
The Notes will be general senior unsecured obligations of the Company.
The Notes will be unconditionally guaranteed, on a senior unsecured basis,
as to payment of principal, premium, if any, and interest, jointly and
severally, by all direct and indirect Restricted Subsidiaries of the Company
having either assets or stockholders equity in excess of $20,000 (including each
Restricted Subsidiary which guarantees payment of the Notes pursuant to the
covenant described under "Limitation on Creation of Subsidiaries") (the
"Guarantors").
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on March 15, 2007. The Notes are limited in aggregate
principal amount to $200.0 million. Any Notes issued after the Issue Date (other
than the Notes issuable upon exercise of the Initial Purchaser's option) can
only be issued in compliance with the covenant described under "Limitation on
Additional Indebtedness." The Notes will bear interest at a rate of 12 1/2% per
annum from the date of original issuance until maturity. Interest is payable
semi-annually in arrears on March 15 and September 15 commencing September 15,
1997, to holders of record of the Notes at the close of business on the
immediately preceding March 1 and September 1, respectively.
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OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after March 15, 2002 at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued interest to the redemption date, if redeemed during the twelve-month
period beginning on March 15, of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- -----------
<S> <C>
2002........................................................ 106.250%
2003........................................................ 104.167%
2004........................................................ 102.083%
2005 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the aggregate up
to 30% of the original principal amount of Notes at any time and from time to
time prior to March 15, 2000 at a redemption price equal to 112.5% of the
aggregate principal amount so redeemed plus accrued interest to the redemption
date out of the Net Proceeds of one or more Public Equity Offerings; provided
that at least $77.0 million of the principal amount of Notes originally issued
remain outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 90 days following the closing of any such
Public Equity Offering.
In the event of redemption of fewer than all of the Notes, the Trustee
shall select by lot or in such other manner as it shall deem fair and equitable
the Notes to be redeemed. The Notes will be redeemable in whole or in part upon
not less than 30 nor more than 60 days' prior written notice, mailed by first
class mail to a holder's last address as it shall appear on the register
maintained by the Registrar of the Notes. On and after any redemption date,
interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Company shall fail to redeem any such Note.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants. Except as
otherwise specified, all of the covenants described below appear in the
Indenture.
Limitation on Additional Indebtedness
The Company will not, and will not permit any Restricted Subsidiary of the
Company to, directly or indirectly, incur (as defined) any Indebtedness
(including Acquired Indebtedness) unless (a) after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the ratio of the Company's EBITDA to the Company's Consolidated
Interest Expense (determined on a pro forma basis for the last four fiscal
quarters of the Company for which financial statements are available at the date
of determination (the "Specified Period")) is greater than 2.0 to 1 and (b) no
Default or Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness.
If, during the Specified Period or subsequent thereto and on or prior to
the date of determination, the Company or any of its Restricted Subsidiaries
shall have engaged in any Asset Sale or acquisition or shall have designated any
Restricted Subsidiary to be an Unrestricted Subsidiary or any Unrestricted
Subsidiary to be a Restricted Subsidiary, EBITDA and Consolidated Interest
Expense for the Specified Period shall be calculated on a pro forma basis giving
effect to such Asset Sale or acquisition or designation, as the case may be, and
the application of any proceeds therefrom as if such Asset Sale or acquisition
or designation had occurred on the first day of the Specified Period.
If the Indebtedness which is the subject of a determination under this
provision is Acquired Indebtedness, or Indebtedness incurred in connection with
the simultaneous acquisition of any Person, business, property or assets, or
Indebtedness of an Unrestricted Subsidiary being designated as a Restricted
Subsidiary, then such ratio shall be determined by giving effect (on a pro forma
basis, as if the transaction had occurred at the beginning of the Specified
Period) to both the incurrence or assumption of such Acquired Indebtedness or
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such other Indebtedness by the Company or any of its Restricted Subsidiaries and
the inclusion in EBITDA of the EBITDA of the acquired Person, business, property
or assets or redesignated Subsidiary.
If any Indebtedness outstanding or to be incurred (x) bears a floating rate
of interest, the interest expense on such Indebtedness shall be calculated as if
the rate in effect on the date of determination had been the applicable rate for
the entire Specified Period (taking into account on a pro forma basis any
Interest Rate Agreement applicable to such Indebtedness if such Interest Rate
Agreement has a remaining term as at the date of determination in excess of 12
months), (y) bears, at the option of the Company or a Restricted Subsidiary, a
fixed or floating rate of interest, the interest expense on such Indebtedness
shall be computed by applying, at the option of the Company or such Restricted
Subsidiary, either a fixed or floating rate and (z) was incurred under a
revolving credit facility, the interest expense on such Indebtedness shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period. For purposes of this covenant, EBITDA for the fiscal quarter
ended January 31, 1997 shall be deemed to be $5,002,000, for the fiscal quarter
ended October 31, 1996 shall be deemed to be ($924,000), for the fiscal quarter
ended July 31, 1996 shall be deemed to be ($3,344,000) and for the fiscal
quarter ended April 30, 1996 shall be deemed to be $15,156,000. Consolidated
Interest Expense for each of the four fiscal quarters in the year ended January
31, 1997 shall be deemed to be $3,682,750.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may incur Permitted Indebtedness.
Limitation on Restricted Payments
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the covenant set forth under "Limitation
on Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) an amount equal to the excess of (x)
cumulative Adjusted EBITDA of the Company subsequent to the Issue Date
less, (y) 1.75 times cumulative Consolidated Interest Expense of the
Company subsequent to the Issue Date, plus (2) 100% of the aggregate Net
Proceeds and the fair market value of securities or other property received
by the Company from the issue or sale, after the Issue Date, of Capital
Stock (other than Disqualified Capital Stock or Capital Stock of the
Company issued to any Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted or exercised or
exchanged, as the case may be, plus (3) 100% of the capital contributions
made by the Parent to the Company after the Issue Date (other than capital
contributions which constitute Indebtedness), plus (4) in the case of the
disposition or repayment of any Investment constituting a Restricted
Payment made after the Issue Date, an amount equal to the lesser of the
cash return of capital with respect to such Investment and the initial
amount of such Investment, in either case, less the cost of disposition of
such Investment, plus (5) $3,500,000. For purposes of determining under
this clause (c) the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property other
than cash shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) the retirement of any shares of Capital Stock of the Company or
subordinated Indebtedness by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified
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Capital Stock), or out of, the Net Proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Company) of other shares of Capital Stock of
the Company (other than Disqualified Capital Stock), (iii) the redemption or
retirement of Indebtedness of the Company subordinated to the Notes in exchange
for, by conversion into, or out of the Net Proceeds of, a substantially
concurrent sale or incurrence of Indebtedness (other than any Indebtedness owed
to a Subsidiary) of the Company that is contractually subordinated in right of
payment to the Notes to at least the same extent as the subordinated
Indebtedness being redeemed or retired, (iv) the retirement of any shares of
Disqualified Capital Stock by conversion into, or by exchange for, shares of
Disqualified Capital Stock, or out of the Net Proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of other shares of
Disqualified Capital Stock, (v) the payment by the Company of cash dividends to
the Parent for the purpose of paying, so long as all proceeds thereof are
promptly used by the Parent to pay, franchise taxes and federal, state and local
income taxes and interest and penalties with respect thereto, if any, payable by
the Parent, provided that any refund shall be promptly returned by the Parent to
the Company, (vi) payments to employees (other than George N. Gillett, Jr. and
Jeffrey J. Joyce) for repurchases of Capital Stock; provided, however, that the
amount of all such payments under this clause (vi) does not exceed $500,000
during any twelve month period; and provided, further, that with respect to this
clause (vi), no Default or Event of Default shall have occurred and be
continuing at the time of any such payment or will occur immediately after
giving effect to any such payment; and provided, further, that, in determining
the aggregate amount of all Restricted Payments made subsequent to the Issue
Date, all payments made pursuant to this clause (vi) shall be included, (vii)
deposits and loans, not to exceed $3,000,000 at any time outstanding, made in
connection with acquisition agreements; provided, however, that if an
acquisition is not consummated within 180 days after the deposit or loan is made
with respect to such acquisition, in determining the aggregate amount of all
Restricted Payments made subsequent to the Issue Date, such deposit or loan
shall be included, or (viii) contingent payments made in accordance with the
terms of the Purchase Agreement dated as of February 11, 1997 relating to the
acquisition of the capital stock of Grand Targhee Incorporated.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Limitation on Restricted Payments" were computed,
which calculations may be based upon the Company's latest available financial
statements, and that no Default or Event of Default exists and is continuing and
no Default or Event of Default will occur immediately after giving effect to any
Restricted Payments.
Limitations on Investments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with the
"Limitation on Restricted Payments" covenant, after the Issue Date.
Limitations on Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of the Company or any Restricted Subsidiary or any shares of stock or
debt of any Restricted Subsidiary which owns property or assets, now owned or
hereafter acquired, unless (i) if such Lien secures Indebtedness which is pari
passu with the Notes, then the Notes are secured on an equal and ratable basis
with the obligations so secured until such time as such obligation is no longer
secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes, any such Lien shall be subordinated to the Lien
granted to the Holders of the Notes to the same extent as such subordinated
Indebtedness is subordinated to the Notes.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the
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sale, purchase, exchange or lease of assets, property or services) with any
Affiliate (including entities in which the Company or any of its Restricted
Subsidiaries own a minority interest) or holder of 10% or more of the Company's
Common Stock (an "Affiliate Transaction") or extend, renew, waive or otherwise
modify the terms of any Affiliate Transaction entered into prior to the Issue
Date unless (i) such Affiliate Transaction is between or among the Company and
its Wholly-Owned Subsidiaries; or (ii) the terms of such Affiliate Transaction
are fair and reasonable to the Company or such Restricted Subsidiary, as the
case may be, and the terms of such Affiliate Transaction are at least as
favorable as the terms which could be obtained by the Company or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an arm's-
length basis between unaffiliated parties. In any Affiliate Transaction
involving an amount or having a value in excess of $1,000,000 which is not
permitted under clause (i) above, the Company must obtain a resolution of the
Board of Directors certifying that such Affiliate Transaction complies with
clause (ii) above. In transactions with a value in excess of $3,000,000 which
are not permitted under clause (i) above, the Company must obtain a written
opinion as to the fairness of such a transaction from an independent investment
banking firm or a firm experienced in the subject matter of the Affiliate
Transaction in question.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under "Limitations on Restricted
Payments" contained herein, (ii) any transaction, approved by the Board of
Directors of the Company, with an officer or director of the Company or of any
Subsidiary in his or her capacity as officer or director entered into in the
ordinary course of business, including compensation and employee benefit
arrangements with any officer or director of the Company or any of its
Subsidiaries, (iii) capital contributions made by the Parent to the Company or
made by the Company and its Subsidiaries to Subsidiaries of the Company, or (iv)
if no Default or Event of Default has occurred and is continuing, payments by
the Company pursuant to the Gillett Management Agreement as in effect on the
Issue Date in an amount not to exceed $350,000 in any fiscal year.
Limitation on Creation of Subsidiaries
The Company will not create or acquire, nor permit any of its Restricted
Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted
Subsidiary existing as of the date of the Indenture, (ii) a Restricted
Subsidiary that is created after the date of the Indenture to hold assets or
conduct businesses previously held or conducted by the Company or any of its
other Subsidiaries or that is acquired or created after the date of the
Indenture in connection with the acquisition by the Company of a ski resort
related business or asset, or (iii) an Unrestricted Subsidiary; provided,
however, that each Restricted Subsidiary acquired or created pursuant to clause
(ii) shall at the time it has either assets or stockholders equity in excess of
$20,000 have evidenced its guarantee with such documentation, satisfactory in
form and substance to the Trustee relating thereto as the Trustee shall require,
including, without limitation a supplement or amendment to the Indenture and
opinions of counsel as to the enforceability of such guarantee, pursuant to
which such Restricted Subsidiary shall become a Guarantor. See "Description of
the Notes -- General."
Limitation on Certain Asset Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or its
Restricted Subsidiaries, as the case may be, receives consideration at the time
of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Company's board of directors, and
evidenced by a board resolution); (ii) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the form
of cash or Temporary Cash Investments; and (iii) the Asset Sale Proceeds
received by the Company or such Restricted Subsidiary are applied (a) first, to
the extent the Company elects, or is required, to prepay, repay or purchase debt
of the Company or any Restricted Subsidiary under the Senior Credit Facility
within 180 days following the receipt of the Asset Sale Proceeds from any Asset
Sale, provided that any such repayment shall result in a permanent reduction of
the commitments thereunder in an amount equal to the principal amount so repaid;
(b) second, to the extent of the balance of Asset Sale Proceeds after
application as described above, to the extent the Company elects, to an
investment in the existing businesses of the Company and its Restricted
Subsidiaries or in assets (including Capital Stock or other securities purchased
in connection with the acquisition of Capital Stock or property of another
person) used or useful in businesses similar or ancillary to
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the business of the Company or its Restricted Subsidiaries as conducted at the
time of such Asset Sale, provided that such investment occurs or the Company or
a Restricted Subsidiary enters into contractual commitments to make such
investment, subject only to customary conditions (other than the obtaining of
financing), on or prior to the 181st day following receipt of such Asset Sale
Proceeds (the "Reinvestment Date") and Asset Sale Proceeds contractually
committed are so applied within 270 days following the receipt of such Asset
Sale Proceeds; and (c) third, if on the Reinvestment Date with respect to any
Asset Sale, the Available Asset Sale Proceeds exceed $5,000,000, the Company
shall apply an amount equal to such Available Asset Sale Proceeds to an offer to
repurchase the Notes, at a purchase price in cash equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
repurchase (an "Excess Proceeds Offer"). If an Excess Proceeds Offer is not
fully subscribed, the Company may retain the portion of the Available Asset Sale
Proceeds not required to repurchase Notes.
If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Reinvestment Date, a notice to the
holders stating, among other things: (1) that such holders have the right to
require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date, which shall be no earlier than 30 days and not later than 60
days from the date such notice is mailed; (3) the instructions, determined by
the Company, that each holder must follow in order to have such Notes
repurchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the repurchase of such Notes.
Notwithstanding the foregoing, (i) the Company and its Subsidiaries may
sell real property constituting residential or commercial development parcels
and timber provided that (x) the aggregate fair market value of all such
property sold in any period of 365 consecutive days does not exceed $5,000,000
and (y) at the time of such sale and after giving effect thereto, no Default or
Event of Default shall exist and (ii) Ski Lifts, Inc. (or any successor company)
may sell and transfer real property pursuant to the Real Estate Option.
Limitation on Preferred Stock of Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary to issue any
Preferred Stock (except Preferred Stock to the Company or a Restricted
Subsidiary) or permit any Person (other than the Company or a Restricted
Subsidiary) to hold any such Preferred Stock unless the Company or such
Restricted Subsidiary would be entitled to incur or assume Indebtedness under
the first paragraph of the covenant described under "Limitation on Additional
Indebtedness" in the aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued; provided that the
foregoing covenant shall not apply to Preferred Stock of a Restricted Subsidiary
outstanding on the Issue Date.
Limitation on Capital Stock of Restricted Subsidiaries
The Company will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Restricted Subsidiary (other than under the
Senior Credit Facility or a successor facility) or (ii) permit any of its
Restricted Subsidiaries to issue any Capital Stock, other than to the Company or
a Wholly-Owned Subsidiary of the Company. The foregoing restrictions shall not
apply to an Asset Sale made in compliance with "Limitation on Certain Asset
Sales" or the issuance of Preferred Stock in compliance with the covenant
described under "Limitation on Preferred Stock of Restricted Subsidiaries."
Limitation on Sale and Lease-Back Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined in good faith by the board of
directors of the Company and (ii) the Company could incur the Attributable
Indebtedness in respect of such Sale and Lease-Back Transaction in compliance
with the covenant described under "Limitation on Additional Indebtedness."
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Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances or capital contributions to
the Company or any of its Restricted Subsidiaries or (c) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (i)
encumbrances or restrictions existing on the Issue Date or under the Senior
Credit Facility, (ii) the Indenture, the Notes and the Guarantees, (iii)
applicable law, (iv) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries or of any
Person that becomes a Restricted Subsidiary as in effect at the time of such
acquisition or such Person becoming a Restricted Subsidiary (except to the
extent such Indebtedness was incurred in connection with or in contemplation of
such acquisition of such Person becoming a Restricted Subsidiary), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person (including any Subsidiary of the Person), so acquired, provided that the
EBITDA of such Person is not taken into account (to the extent of such
restriction) in determining whether any financing or Restricted Payment in
connection with such acquisition was permitted by the terms of the Indenture,
(v) customary non-assignment provisions in leases or other agreements entered
into in the ordinary course of business and consistent with past practices, (vi)
Refinancing Indebtedness, provided that such restrictions are in the aggregate
no more restrictive than those contained in the agreements governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded, (viii) customary restrictions in security agreements or mortgages
securing Indebtedness of the Company or a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements and mortgages, (ix) customary net worth provisions contained in
leases and other agreements entered into by a Restricted Subsidiary in the
ordinary course of business or (x) customary restrictions with respect to a
Restricted Subsidiary pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital Stock or
assets of such Restricted Subsidiary.
Payments for Consent
Neither the Company nor any of the Guarantors shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all holders of the Notes which so consent, waive or agree to amend
in the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
CHANGE OF CONTROL OFFER
Within 20 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof plus any accrued and unpaid
interest to the Change of Control Payment Date (as hereinafter defined) (such
applicable purchase price being hereinafter referred to as the "Change of
Control Purchase Price") in accordance with the procedures set forth below.
Within 20 days of the occurrence of a Change of Control, the Company also
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and to
each
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holder of the Notes, at the address appearing in the register maintained by the
Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment, and
otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 business days from the date such
notice is mailed (the "Change of Control Payment Date"));
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
the Company shall execute and issue, and the Trustee shall promptly authenticate
and mail to such holder, a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered; provided that each such new Note shall be
issued in an original principal amount in denominations of $1,000 and integral
multiples thereof.
The Indenture requires that if the Senior Credit Facility is in effect, or
any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to holders
described in the preceding paragraph, but in any event within 30 days following
any Change of Control, the Company covenants to (i) repay in full all
obligations under or in respect of the Senior Credit Facility or offer to repay
in full all obligations under or in respect of the Senior Credit Facility and
repay the obligations under or in respect of the Senior Credit Facility of each
lender who has accepted such offer or (ii) obtain the requisite consent under
the Senior Credit Facility to permit the repurchase of the Notes as described
above. The Company must first comply with the covenant described in the
preceding sentence before it shall be required to purchase Notes in the event of
a Change of Control; provided that the Company's failure to comply with the
covenant described in the preceding sentence constitutes an Event of Default
described in clause (iii) under "Events of Default" below if not cured within 30
days after the notice required
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by such clause. As a result of the foregoing, a holder of the Notes may not be
able to compel the Company to purchase the Notes unless the Company is able at
the time to refinance all of the obligations under or in respect of the Senior
Credit Facility or obtain requisite consents under the Senior Credit Facility.
Failure by the Company to make a Change of Control Offer when required by the
Indenture constitutes a default under the Indenture and, if not cured within 30
days after notice, constitutes an Event of Default.
The Indenture provides that, (A) if the Company or any Subsidiary thereof
has issued any outstanding (i) Indebtedness that is subordinated in right of
payment to the Notes or (ii) Preferred Stock, and the Company or such Subsidiary
is required to repurchase, or make an offer to repurchase, such Indebtedness, or
redeem, or make an offer to redeem, such Preferred Stock, in the event of a
Change of Control or to make a distribution with respect to such subordinated
Indebtedness or Preferred Stock in the event of a Change of Control, the Company
shall not consummate any such repurchase, redemption, offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Company shall have paid the Change of Control Purchase Price in full to the
holders of Notes that have accepted the Company's Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to holders of
the Notes and (B) the Company will not issue Indebtedness that is subordinated
in right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change in Control under the
Indenture.
In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Company to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at that time, the Company will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Neither the Company nor any Guarantor will consolidate with, merge with or
into, or transfer all or substantially all of its assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions), to any Person unless: (i) the Company or the Guarantor, as the
case may be, shall be the continuing Person, or the Person (if other than the
Company or the Guarantor) formed by such consolidation or into which the Company
or the Guarantor, as the case may be, is merged or to which the properties and
assets of the Company or the Guarantor, as the case may be, are transferred
shall be a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, in
form and substance satisfactory to the Trustee, all of the obligations of the
Company or the Guarantor, as the case may be, under the Notes and the Indenture,
and the obligations under the Indenture shall remain in full force and effect;
(ii) immediately before and immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction or series of transactions on
a pro forma basis the Consolidated Net Worth of the Company or the surviving
entity as the case may be is at least equal to the Consolidated Net Worth of the
Company immediately before such transaction or series of transactions; and (iv)
immediately after giving effect to such transaction on a pro forma basis the
Company or the surviving Person could incur at least $1.00 additional
Indebtedness (other than Permitted Indebtedness) under the covenant set forth
under "Limitation on Additional Indebtedness," provided that a Person that is a
Guarantor may consolidate with, merge into or transfer all or substantially all
of its assets to the Company or another Person that is a Guarantor without
complying with this clause (iv).
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto, if any, comply with this provision and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
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GUARANTEES
The Notes are jointly and severally guaranteed on a senior unsecured basis
by the Guarantors. The Guarantees are full and unconditional, subject to the
following paragraph.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of such Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under "Limitation on Certain Asset Sales," or the Guarantor
merges with or into or consolidates with, or transfers all or substantially all
of its assets to, the Company or another Guarantor in a transaction in
compliance with "Merger, Consolidation or Sale of Assets," and such Guarantor
has delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent herein provided for relating to such
transaction have been complied with.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the
Notes;
(ii) default for 30 days in payment of any interest on the Notes;
(iii) default by the Company or any Guarantor in the observance or
performance of any other covenant in the Notes or the Indenture for 30 days
after written notice from the Trustee or the holders of not less than 25%
in aggregate principal amount of the Notes then outstanding;
(iv) failure to pay when due principal, interest or premium in an
aggregate amount of $5,000,000 or more with respect to any Indebtedness of
the Company or any Restricted Subsidiary thereof (other than Indebtedness
owed to the Company or any Subsidiary of the Company), or the acceleration
of any such Indebtedness aggregating $5,000,000 or more, which default
shall not be cured, waived or postponed pursuant to an agreement with the
holders of such Indebtedness within 60 days after written notice as
provided in the Indenture, or such acceleration shall not be rescinded or
annulled within 20 days after written notice as provided in the Indenture;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5,000,000 (which are not paid or
covered by third party insurance by financially sound insurers that have
not disclaimed coverage) shall be rendered against the Company or any
Restricted Subsidiary thereof, and shall not be discharged for any period
of 60 consecutive days during which a stay of enforcement shall not be in
effect;
(vi) certain events involving bankruptcy, insolvency or reorganization
of the Company or any Significant Restricted Subsidiary thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if any,
or interest on the Notes) if the Trustee considers it to be in the best interest
of the holders of the Notes to do so.
The Indenture provides that if an Event of Default (other than an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued
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interest to the date of acceleration and (i) such amounts shall become
immediately due and payable or (ii) if there are any amounts outstanding under
or in respect of the Senior Credit Facility, such amounts shall become due and
payable upon the first to occur of an acceleration of amounts outstanding under
or in respect of the Senior Credit Facility or five business days after receipt
by the Company and the Representative of the holders of Indebtedness under or in
respect of the Senior Credit Facility, of notice of the acceleration of the
Notes; provided, however, that after such acceleration but before a judgment or
decree based on acceleration is obtained by the Trustee, the holders of a
majority in aggregate principal amount of outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than nonpayment of accelerated principal, premium or interest that has
come due solely because of such acceleration, have been cured or waived as
provided in the Indenture and if the rescission would not conflict with any
judgment or decree. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization shall occur, the principal, premium and
interest amount with respect to all of the Notes shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or the Notes or for any remedy thereunder, unless such
holder shall have previously given to the Trustee written notice of a continuing
Event of Default and unless also the holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request and
offered reasonable indemnity to the Trustee to institute such proceeding as a
trustee, and unless the Trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted on such Note on or after the respective due dates expressed in such
Note.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor shall have any liability for any obligations of the Company or
the Guarantors under the Notes, the Guarantees or the Indenture or for a claim
based on, in respect of, or by reason of such obligations or their creation.
Each Holder of the Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides the Company may elect either (a) to defease and be
discharged from any and all obligations with respect to the Notes (except for
the obligations to register the transfer or exchange of such Notes, to replace
temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office
or agency in respect of the Notes and to hold monies for payment in trust)
("defeasance") or (b) to be released from their obligations with respect to the
Notes under certain covenants contained in the Indenture and described above
under "Covenants" ("covenant defeasance"), upon the deposit with the Trustee (or
other qualifying trustee), in trust for such purpose, of money and/or U.S.
Government Obligations which through the payment of principal and interest in
accordance with their terms will provide money, in an amount sufficient to pay
the principal of, premium, if any, and interest on the Notes, on the scheduled
due dates therefor or on a selected date of redemption in accordance with the
terms of the Indenture. Such a trust may only be established if, among other
things, the Company has delivered to the Trustee an Opinion of Counsel (as
specified in the Indenture) (i) to the effect that neither the trust nor the
Trustee will be required to register as an investment company under the
Investment Company Act of 1940, as amended, and (ii) to the effect that holders
of the Notes or persons in their positions will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount
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and in the same manner and at the same times, as would have been the case if
such deposit, defeasance and discharge had not occurred which, in the case of
defeasance only, must be based upon a private ruling concerning the Notes, a
published ruling of the Internal Revenue Service or a change in applicable
federal income tax law.
MODIFICATION OF INDENTURE
From time to time, the Company, the Guarantors and the Trustee may, without
the consent of holders of the Notes, amend or waive provisions of the Indenture
or the Notes or supplement the Indenture for certain specified purposes,
including providing for uncertificated Notes in addition to certificated Notes,
and curing any ambiguity, defect or inconsistency, or making any other change
that does not materially and adversely affect the rights of any holder. The
Indenture contains provisions permitting the Company, the Guarantors and the
Trustee, with the consent of holders of at least a majority in principal amount
of the outstanding Notes, to modify or supplement the Indenture or the Notes,
except that no such modification shall, without the consent of each holder
affected thereby, (i) reduce the principal amount of outstanding Notes whose
holders must consent to an amendment, supplement, or waiver to the Indenture or
the Notes, (ii) reduce the rate of or change the time for payment of interest on
any Note, (iii) reduce the principal of or premium on or change the stated
maturity of any Note, (iv) make any Note payable in money other than that stated
in the Note or change the place of payment from New York, New York, (v) change
the amount or time of any payment required by the Notes or reduce the premium
payable upon any redemption of Notes, or change the time before which no such
redemption may be made, (vi) waive a default in the payment of the principal of,
interest on, or redemption payment with respect to any Note, (vii) take any
other action otherwise prohibited by the Indenture to be taken without the
consent of each holder affected thereby or (viii) affect the ranking of the
Notes or the Guarantee in a manner adverse to the Holders.
The consent of the holders is not necessary to approve the particular form
of any proposed amendment. It is sufficient if such consent approves the
substance of the proposed amendment.
REPORTS TO HOLDERS
So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it will continue to furnish the information required thereby
to the Commission and to the holders of the Notes. The Indenture provides that
even if the Company is entitled under the Exchange Act not to furnish such
information to the Commission or to the holders of the Notes, they will
nonetheless continue to furnish such information to the Commission and holders
of the Notes.
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 100 days after the end
of the Company's fiscal year and on or before 50 days after the end of each the
first, second and third fiscal quarters in each year an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
has occurred. If they do, the certificate will describe the Default or Event of
Default and its status.
THE TRUSTEE
The Trustee under the Indenture is the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the continuance
of an Event of Default, the Trustee need perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of
Default actually known to the Trustee, the Trustee will exercise such rights and
powers vested in it under the Indenture and use the same degree of care and
skill in its exercise as a prudent person would exercise under the circumstances
in the conduct of such person's own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and
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transfer documents, and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar is not required to transfer or exchange any Note
selected for redemption. Also, the Registrar is not required to transfer or
exchange any Note for a period of 15 days before selection of the Notes to be
redeemed.
The Notes will be issued in a transaction exempt from registration under
the Act and will be subject to the restrictions on transfer described in
"Transfer Restrictions."
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for the
full definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Adjusted EBITDA" means EBITDA minus cash taxes actually paid.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities under the Guarantee of such Guarantor at such date and
(y) the present fair salable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all other fixed and contingent
liabilities and after giving effect to any collection from any Subsidiary of
such Guarantor in respect of the obligations of such Subsidiary under the
Guarantee), excluding Indebtedness in respect of the Guarantee, as they become
absolute and matured.
"Affiliate" of any specified Person means any other Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that neither CIBC nor any of its Affiliates shall be treated
as an Affiliate of the Company or of any Subsidiary of the Company.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Company or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions involving assets with a fair market value in
excess of $500,000 of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Company, (b) all or substantially all of the assets
of the Company or of any Restricted Subsidiary thereof, (c) real property or (d)
all or substantially all of the assets of any ski resort property, or part
thereof, owned by the Company or any Restricted Subsidiary thereof, or a
division, line of business or comparable business segment of the Company or any
Restricted Subsidiary thereof; provided that Asset Sales shall not include
sales, leases, conveyances, transfers or other dispositions to the Company or to
a Restricted Subsidiary or to any other Person if after giving effect to such
sale, lease, conveyance, transfer or other disposition such other Person becomes
a Restricted Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts
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to be provided by the Company or a Restricted Subsidiary as a reserve, in
accordance with GAAP, against any liabilities associated with the assets sold or
disposed of in such Asset Sale and retained by the Company or a Restricted
Subsidiary after such Asset Sale, including, without limitation, pension and
other post employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and
other noncash consideration received by the Company or any Restricted Subsidiary
from such Asset Sale or other disposition upon the liquidation or conversion of
such notes or noncash consideration into cash.
"Attributable Indebtedness" under the Indenture in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the present value
(discounted at a rate of 10%, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale and Lease-Back Transaction (including any period for which such
lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sales that have not been applied
or committed in accordance with clauses (iii)(a) or (iii)(b), and which has not
yet been the basis for an Excess Proceeds Offer in accordance with clause
(iii)(c), of the first paragraph of "Certain Covenants -- Limitation on Certain
Asset Sales."
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
A "Change of Control" of the Company means the occurrence of one or more of
the following events:
(i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets
of the Company to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof; (ii) the approval by the holders of Capital Stock of the Company
of any plan or proposal for the liquidation or dissolution of the Company;
(iii) prior to a Qualified IPO, John Hancock Mutual Life Insurance Company
and/or its Affiliates (other than its portfolio companies, including,
without limitation, the Parent and its Subsidiaries) shall cease to
beneficially own (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, Voting Stock representing, or Class B Common Stock
and/or Warrants exercisable for shares of Class B Common Stock representing
upon conversion, at least 50.1% of the total voting power of all Voting
Stock of the Company or Parent on a fully diluted basis; (iv) any Person or
Group (other than the Permitted Holders) shall become the beneficial owner,
directly or indirectly, of Voting Stock representing, or Common Stock or
Warrants exercisable for Common Stock representing upon conversion, more
than 35% of the total voting power of all Voting Stock of the Company or
Parent on a fully diluted basis; (v) prior to a Qualified IPO, Booth Creek
Partners Ltd. II, L.L.L.P. or any Affiliate thereof that is a Permitted
Holder shall cease to have the right to appoint a majority of the Board of
Directors of Parent; (vi) the replacement of a majority of the Board of
Directors of Parent over a two-year period from the directors who
constituted the Board of Directors of Parent at the beginning of such
period, and such replacement shall not have been approved or recommended by
a vote of at least two-thirds of the Board of Directors of Parent then
still in office who either were members of such Board of Directors at the
beginning of such period or whose election as a member of such Board of
Directors was previously so approved; (vii) there shall be consummated any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which the Common Stock
of the Company would be converted into cash, securities or other property,
other than a merger or consolidation of the Company in which the holders of
the Common Stock of the Company outstanding immediately prior to the
consolidation or merger hold, directly or indirectly, at least a majority
of the Common Stock of the surviving corporation immediately after such
consolidation or merger; (viii) George N. Gillett, Jr. ceases, other than
by death or disability,
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to have an executive management position with the Company; or (ix) any
creditor of Parent shall foreclose on any Capital Stock of the Company.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to, Redeemable Dividends, whether paid or accrued,
on Preferred Stock of Subsidiaries of such Person (other than Preferred Stock
outstanding on the Issue Date), imputed interest included in Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, the net costs
associated with hedging obligations, amortization of other financing fees and
expenses, the interest portion of any deferred payment obligation, amortization
of discount or premium, if any, and all other non-cash interest expense (other
than interest amortized to cost of sales)) plus, without duplication, all net
capitalized interest for such period and all interest incurred or paid under any
guarantee of Indebtedness (including a guarantee of principal, interest or any
combination thereof) of any Person, plus the amount of all dividends or
distributions paid on Disqualified Capital Stock (other than dividends paid or
payable in shares of Capital Stock of the Company).
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the "other Person") in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the net income of such other Person to
be consolidated into the net income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or its Subsidiaries, (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions (other than pursuant to the Notes or the Indenture) shall be
excluded to the extent of such restriction or limitation, (c)(i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any gain or loss resulting from
an asset sale by the Person in question or any of its Subsidiaries or
abandonments or reserves relating thereto and the related tax effects according
to GAAP other than asset sales in the ordinary course of business shall be
excluded, and (d) extraordinary gains and losses shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at any date, the
consolidated stockholder's equity of such Person less the amount of such
stockholder's equity attributable to Disqualified Capital Stock of such Person
and its Subsidiaries, as determined in accordance with GAAP.
"Disqualified Capital Stock" means any Capital Stock of the Company or a
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to 180 days after the maturity date of the Notes, for cash or securities
constituting Indebtedness. Without limitation of the foregoing, Disqualified
Capital Stock shall be deemed to include (i) any Preferred Stock of a Restricted
Subsidiary of the Company and (ii) any Preferred Stock of the Company, with
respect to either of which, under the terms of such Preferred Stock, by
agreement or otherwise, such Restricted Subsidiary or the Company is obligated
to pay current dividends or distributions in cash during the period prior to the
maturity date of the Notes; provided, however, that Preferred Stock of the
Company or any Restricted Subsidiary thereof that is issued with the benefit of
provisions requiring a change of control offer to be made for such Preferred
Stock in the event of a change of control of the Company or such Restricted
Subsidiary, which provisions have substantially the same effect as the
provisions of the Indenture described under "Change of Control," and Capital
Stock of the Company or any Restricted
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Subsidiary thereof that is issued to employees (other than George N. Gillett,
Jr. and Jeffrey J. Joyce) in connection with compensation arrangements that is
issued with the benefit of provisions requiring the Company or such Restricted
Subsidiary to redeem such Capital Stock shall not be deemed to be Disqualified
Capital Stock solely by virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision for
taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period (but only including Redeemable
Dividends in the calculation of such Consolidated Interest Expense to the extent
that such Redeemable Dividends have not been excluded in the calculation of
Consolidated Net Income), plus (iv) depreciation for such period on a
consolidated basis, plus (v) amortization of intangibles for such period on a
consolidated basis, plus (vi) amortization of any capitalized real estate
development costs, plus (vii) any other non-cash items reducing Consolidated Net
Income for such period, minus (b) all non-cash items increasing Consolidated Net
Income for such period, all for such Person and its Subsidiaries determined in
accordance with GAAP, except that with respect to the Company each of the
foregoing items shall be determined on a consolidated basis with respect to the
Company and its Restricted Subsidiaries only; and provided, however, that, for
purposes of calculating EBITDA during any fiscal quarter, cash income from a
particular Investment of such Person shall be included only (x) if cash income
has been received by such Person with respect to such Investment during each of
the previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Temporary Cash Investments.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such person (and
"incurrence," "incurred," "incurable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations, (ii) obligations secured by a Lien to which the
property or assets owned or held by such Person is subject, whether or not the
obligation or obligations secured thereby shall have been assumed (provided,
however, that if such obligation or obligations shall not have been assumed, the
amount of such Indebtedness shall be deemed to be the lesser of the principal
amount of the obligation or the fair market value of the pledged property or
assets), (iii) guarantees of items of other Persons which would be included
within this definition for such other Persons (whether or not such items would
appear upon the balance sheet of the guarantor), (iv) all obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (provided that in the case of any such letters of
credit, the items for which such letters of credit provide credit support are
those of other Persons which would be included within this definition for such
other Persons), (v) in the case of the Company, Disqualified Capital Stock of
the Company or any Restricted Subsidiary thereof, and (vi) obligations of any
such Person under any Interest Rate Agreement applicable to any of the foregoing
(if and to the extent such Interest Rate Agreement
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obligations would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP). The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent obligations, the
maximum reasonably anticipated liability upon the occurrence of the contingency
giving rise to the obligation, provided (i) that the amount outstanding at any
time of any Indebtedness issued with original issue discount is the principal
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP and (ii) that Indebtedness shall not include any liability
for federal, state, local or other taxes. Notwithstanding any other provision of
the foregoing definition, any trade payable arising from the purchase of goods
or materials or for services obtained in the ordinary course of business shall
not be deemed to be "Indebtedness" of the Company or any Restricted Subsidiaries
for purposes of this definition. Furthermore, guarantees of (or obligations with
respect to letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business or acquired as part of the assets acquired by the Company in connection
with an acquisition of assets which is otherwise permitted by the terms of the
Indenture), loan or capital contribution to (by means of transfers of property
to others, payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude (i) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices and (ii) the repurchase of securities of any Person by such Person.
"Issue Date" means the date the Notes are first issued by the Company and
authenticated by the Trustee under the Indenture.
"Lien" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Company, the aggregate net proceeds received by the Company, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the board of directors, at the time of
receipt) and (b) in the case of any exchange, exercise, conversion or surrender
of outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to the
Company upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less all
expenses incurred by the Company in connection therewith).
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chairman, Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer, Controller or any Treasurer of such
Person that shall comply with applicable provisions of the Indenture.
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"Permitted Holders" means Booth Creek Partners Limited II, L.L.L.P. as long
as George N. Gillett, Jr. is the managing general partner, Jeffrey J. Joyce,
only with respect to shares he purchases upon exercise of his option to purchase
up to 15% of the shares of Common Stock of Parent held by George N. Gillett, Jr.
and Affiliates of George N. Gillett, Jr., the Parent as long as it is controlled
by another Permitted Holder other than Jeffrey J. Joyce, John Hancock Mutual
Life Insurance Company and/or its Affiliates (other than its portfolio
companies, including without limitation, the Parent and its Subsidiaries), CIBC
WG Argosy Merchant Fund 2, L.L.C. and/or its Affiliates, George N. Gillett, Jr.,
Rose Gillett, any trust solely for the benefit of George N. Gillett, Jr. and
Rose Gillett or their respective immediate family members, or any partnership or
other entity all the ownership interests in which are beneficially owned by any
of the foregoing; provided that with respect to any such trust, partnership or
other entity either George N. Gillett, Jr. or Rose Gillett shall at all times
have the exclusive power to direct, directly or indirectly, the voting of the
shares of Voting Stock of the Company held by such trust, partnership or other
entity.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary arising
under or in connection with the Senior Credit Facility in a principal
amount at any time not to exceed $20,000,000 less each permanent reduction
of commitments to extend credit thereunder as provided for under the
Indenture;
(ii) Indebtedness under the Notes and the Guarantees;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the Indenture;
(iv) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred after the Issue Date to acquire property in the ordinary course of
business which Indebtedness and Capitalized Lease Obligations do not in the
aggregate exceed $2,500,000 at any time outstanding;
(vi) Obligations of the Company or any Restricted Subsidiary under (A)
Interest Rate Agreements designed to protect against fluctuations in
interest rates in respect of Indebtedness of the Company and its Restricted
Subsidiaries permitted to be incurred under the Indenture, which
obligations do not exceed the aggregate principal amount of such
Indebtedness, and (B) Currency Agreements designed to protect the Company
and its Subsidiaries against fluctuations in foreign currency exchange
rates in respect of foreign exchange exposures incurred by the Company and
its Restricted Subsidiaries;
(vii) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; provided, however, that
upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(viii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the acquisition or disposition of any business, assets or a
Subsidiary;
(ix) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business;
(x) any guarantee by the Company of Indebtedness or other obligations
of any of its Restricted Subsidiaries, and any guarantee by any Restricted
Subsidiary of Indebtedness of the Company or any other Restricted
Subsidiary, so long as the incurrence of such Indebtedness is permitted
under the terms of the Indenture;
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(xi) additional Indebtedness of the Company and its Restricted
Subsidiaries not to exceed $2,500,000 in principal amount outstanding at
any time;
(xii) Refinancing Indebtedness; and
(xiii) Indebtedness assumed and subsequently repaid in connection with
the acquisition of Grand Targhee Incorporated.
"Permitted Investments" means, for any Person, Investments made on or after
the date of the Indenture consisting of
(i) Investments by the Company, or by a Restricted Subsidiary thereof,
in the Company or a Restricted Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Company or (b) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary thereof;
(iv) reasonable and customary loans and advances made to employees in
connection with their relocation (including related travel expenses) not to
exceed $500,000 in the aggregate at any one time outstanding;
(v) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are issued
by a third party to the Company or Restricted Subsidiary solely as partial
consideration for the consummation of an Asset Sale that is otherwise
permitted under the covenant described under "Certain Covenants --
Limitation on Certain Asset Sales;"
(vi) any Investment existing on the Issue Date;
(vii) any Investment acquired by the Company or any of its Restricted
Subsidiaries (a) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such Investment or accounts receivable or
(b) as the result of a foreclosure by the Company or any of its Restricted
Subsidiaries with respect to any secured Investment or other transfer of
title with respect to any secured Investment in default;
(viii) Investments the payment for which consists of Capital Stock of
the Company (exclusive of Disqualified Capital Stock);
(ix) Investments by Ski Lifts in the Real Estate LLC pursuant to the
Real Estate Option; and
(x) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (ix)
that are at that time outstanding, not to exceed $1,000,000.
"Permitted Liens" means (i) Liens on property or assets of, or any shares
of stock of or secured debt of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Restricted Subsidiaries;
provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Restricted Subsidiary of the
Company or merging into the Company or any of its Restricted Subsidiaries, (ii)
Liens securing Refinancing Indebtedness; provided that any such Lien does not
extend to or cover any Property, shares or debt other than the Property, shares
or debt securing the Indebtedness so refunded, refinanced or extended, (iii)
Liens in favor of the Company or any of its Restricted Subsidiaries, (iv) Liens
securing industrial revenue bonds, (v) Liens to secure Purchase Money
Indebtedness that is otherwise permitted under the Indenture, provided that (a)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation
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and delivery charges and other direct costs of, and other direct expenses paid
or charged in connection with, such purchase or construction) of such Property,
(b) the principal amount of the Indebtedness secured by such Lien does not
exceed 100% of such costs, and (c) such Lien does not extend to or cover any
Property other than such item of Property and any improvements on such item,
(vi) statutory liens or landlords', carriers', warehouseman's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business which do not secure any Indebtedness and with
respect to amounts not yet delinquent or being contested in good faith by
appropriate proceedings, if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor, (vii)
other Liens securing obligations incurred in the ordinary course of business
which obligations do not exceed $2,500,000 in the aggregate at any one time
outstanding, (viii) any extensions, substitutions, replacements or renewals of
the foregoing, (ix) Liens for taxes, assessments or governmental charges that
are being contested in good faith by appropriate proceedings, (x) Liens securing
Capital Lease Obligations permitted to be incurred under clause (v) of the
definition of "Permitted Indebtedness," provided that such Lien does not extend
to any property other than that subject to the underlying lease, (xi) easements
or minor defects or irregularities in title and other similar charges or
encumbrances on property not interfering in any material respect with the use of
such property by the Company or any Restricted Subsidiary, (xii) Liens securing
Indebtedness of the Company or any Restricted Subsidiary under the Senior Credit
Facility and (xiii) deposit arrangements entered into in connection with
acquisitions or in the ordinary course of business.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means a public offering by the Company of shares
of its Common Stock (however designated and whether voting or non-voting) and
any and all rights, warrants or options to acquire such Common Stock.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualified IPO" shall mean an underwritten initial offering and sale by the
Company to the public of its Common Stock pursuant to an effective registration
statement filed by the Company under the Securities Act; provided that the
aggregate net proceeds to the Company from such offering and sale is at least
$35,000,000.
"Redeemable Dividend" means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company or its Restricted Subsidiaries
outstanding on the Issue Date or other Indebtedness permitted to be incurred by
the Company or its Restricted Subsidiaries pursuant to the terms of the
Indenture, but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes to at least the same extent as the Indebtedness being
refunded, refinanced or extended, if at all, (ii) the Refinancing Indebtedness
is scheduled to mature either (a) no earlier than the Indebtedness being
refunded, refinanced or extended, or (b) after the maturity date of the Notes,
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Notes has a weighted average life
to maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the weighted average life to
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maturity of the portion of the Indebtedness being refunded, refinanced or
extended that is scheduled to mature on or prior to the maturity date of the
Notes, (iv) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the sum of (a) the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or extended, (b)
the amount of accrued and unpaid interest, if any, and premiums owed, if any,
not in excess of preexisting prepayment provisions on such Indebtedness being
refunded, refinanced or extended and (c) the amount of customary fees, expenses
and costs related to the incurrence of such Refinancing Indebtedness, and (v)
such Refinancing Indebtedness is incurred by the same Person that initially
incurred the Indebtedness being refunded, refinanced or extended, except that
the Company may incur Refinancing Indebtedness to refund, refinance or extend
Indebtedness of any Wholly-Owned Subsidiary of the Company; provided, however,
that subclauses (ii) and (iii) of this definition will not apply to any
refunding or refinancing of any Indebtedness under the Senior Credit Facility.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Restricted Subsidiary of the Company or any payment made to
the direct or indirect holders (in their capacities as such) of Capital Stock of
the Company or any Restricted Subsidiary of the Company (other than (x)
dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Capital Stock), and (y) in the case of
Restricted Subsidiaries of the Company, dividends or distributions payable to
the Company or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase,
redemption or other acquisition or retirement for value of any Capital Stock of
the Company or any of its Restricted Subsidiaries (other than Capital Stock
owned by the Company or a Wholly-Owned Subsidiary of the Company, excluding
Disqualified Capital Stock), (iii) the making of any principal payment on, or
the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Indebtedness which is subordinated in
right of payment to the Notes other than subordinated Indebtedness acquired in
anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity (in each case due within one year of the date of
acquisition), (iv) the making of any Investment or guarantee of any Investment
in any Person other than a Permitted Investment, (v) any designation of a
Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the
Investment by the Company therein and (vi) forgiveness of any Indebtedness of an
Affiliate of the Company (other than a Restricted Subsidiary) to the Company or
a Restricted Subsidiary. For purposes of determining the amount expended for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other than cash shall be valued at its fair market
value.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date, except the Real Estate LLC. The Board of
Directors of the Company may designate any Unrestricted Subsidiary or any Person
that is to become a Subsidiary as a Restricted Subsidiary if immediately after
giving effect to such action (and treating any Acquired Indebtedness as having
been incurred at the time of such action), the Company could have incurred at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the "Limitation on Additional Indebtedness" covenant.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of the
Company of any real or tangible personal Property, which Property has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person in contemplation of such leasing.
"Senior Credit Facility" means the Amended and Restated Credit Agreement
among the Company, the Guarantors, the lenders listed therein and The First
National Bank of Boston, as agent, together with the documents related thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
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"Significant Restricted Subsidiary" means any Restricted Subsidiary of the
Company that satisfies the criteria for a "significant subsidiary" set forth in
Rule 1.02(v) of Regulation S-X under the Securities Act.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of its
Subsidiaries; or (ii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Temporary Cash Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or of any
governmental agency or political subdivision thereof, maturing within 365 days
of the date of purchase; (ii) Investments in certificates of deposit issued by a
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits at the time of investment totaling more than $500,000,000 and
rated at the time of investment at least A by Standard & Poor's Corporation and
A-2 by Moody's Investors Service, Inc., maturing within 365 days of purchase; or
(iii) Investments not exceeding 365 days in duration in money market funds that
invest substantially all of such funds' assets in the Investments described in
the preceding clauses (i) and (ii).
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified as an
Unrestricted Subsidiary by a resolution adopted by the Board of Directors of the
Company; provided that a Subsidiary organized or acquired after the Issue Date
may be so classified as an Unrestricted Subsidiary only if such classification
is in compliance with the covenant set forth under "Limitation on Restricted
Payments." The Trustee shall be given prompt notice by the Company of each
resolution adopted by the Board of Directors of the Company under this
provision, together with a copy of each such resolution adopted.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof to vote
under ordinary circumstances in the election of members of the board of
directors or other governing body of such Person.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
BOOK-ENTRY, DELIVERY AND FORM
The New Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Global
Note"). The Global Note will be deposited upon issuance with the Trustee, as
custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant as described below. Notes sold to Accredited Investors (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) may be represented
by the Global Note or, if such an investor may not hold an interest in the
Global Note, a certificated Note.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Notes for Certificated Notes."
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar of the Notes.
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Depository Procedures
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and the Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the Exchange Agent with portions of the principal
amount of the Global Note and (ii) ownership of such interests in the Global
Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Note).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in the Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in the Global Note to pledge such interests
to persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests. For certain other restrictions
on the transferability of the Notes, see "-- Exchange of Book-Entry Notes for
Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of (and premium, if any) and interest
on the Global Note registered in the name of DTC or its nominee will be payable
to DTC or its nominee in its capacity as the registered holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee will
treat the persons in whose names the Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company,
the Trustee nor any agent of the Company or the Trustee has or will have any
responsibility or liability for (i) any aspect or accuracy of DTC's records or
any Participant's or Indirect Participant's records relating to or payments made
on account of beneficial ownership interests in the Global Note, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Note, or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Note as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of the Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
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Interest in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account will DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if any of the events described under "-- Exchange of Book Entry Notes
for Certificated Notes" occur, DTC reserves the right to exchange the Global
Note for Notes in certificated form, and to distribute such Notes to the
relevant Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Note among accountholders in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company, the Trustee nor
any agent of the Company or Trustee will have any responsibility for the
performance of DTC, or its respective accountholders, indirect participants or
accountholders of their respective obligations under the rules and procedures
governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
The Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that is it unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act; (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for the Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "IRS") will not take a contrary view, and
no ruling from the IRS has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. The Company recommends that
each holder consult such holder's own tax adviser as to the particular tax
consequences of exchanging such holder's Old Notes for New Notes, including the
applicability and effect of any state, local or foreign tax laws.
The Company believes that the exchange of Old Notes for New Notes pursuant
to the Exchange Offer will not be treated as an "exchange" for federal income
tax purposes because the New Notes will not be considered to differ materially
in kind or extent from the Old Notes. Rather, the New Notes received by a holder
will be treated as a continuation of the Old Notes in the hands of such holder.
As a result, there will be no federal income tax consequences to holders
exchanging Old Notes for New Notes pursuant to the Exchange Offer.
117
<PAGE> 121
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
October 13, 1997 (90 days after the commencement of the Exchange Offer), all
dealers effecting transactions in the New Notes, whether or not participating in
this distribution, may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the New Notes
by Participating Broker Dealers. New Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such New Notes. Any Participating Broker-Dealer that resells the New Notes
that were received by it for its own account pursuant to the Exchange Offer and
any broker or dealer that participates in a distribution of such New Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of New Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
LEGAL MATTERS
The validity of the issuance of the New Notes will be passed upon for the
Company and the Guarantors by Winston & Strawn, New York, New York.
EXPERTS
The balance sheet of the Company as of October 31, 1996, the financial
statements of Waterville Valley Ski Area Ltd., a subsidiary of S-K-I Limited,
for the year ended October 29, 1995 and the period from October 30, 1995 to June
30, 1996, and the financial statements of Waterville Valley Ski Area Ltd., a
subsidiary of American Skiing Company, for the period from July 1, 1996 to
October 27, 1996 appearing in this Prospectus have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon appearing
elsewhere herein, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The combined balance sheets of the Resort Group of Fibreboard Corporation
as of October 31, 1996, December 31, 1995, and 1994, and the related combined
statements of income and cash flows for the ten months ended October 31, 1996,
and each of the three years in the period ended December 31, 1995, included in
this Prospectus and elsewhere in the registration statement of which this
Prospectus is a part have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
The financial statements of Ski Lifts, Inc. as of September 30, 1996, 1995
and 1994 and for each of the three years in the period ended September 30, 1996
included in this Prospectus have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their report thereon, which includes an
118
<PAGE> 122
explanatory paragraph describing Ski Lifts, Inc.'s change in method of
accounting for income taxes and an emphasis of a matter paragraph describing an
agreement in principle to sell the stock of Ski Lifts, Inc., and are included
herein in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of Grand Targhee Incorporated as of May 31, 1996
and 1995 and for each of the three years in the period ended May 31, 1996
included in this Prospectus have been audited by Feldhake & Associates, P.C.,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
119
<PAGE> 123
BOOTH CREEK SKI HOLDINGS, INC.
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BOOTH CREEK SKI HOLDINGS, INC.
Financial Statements -- May 2, 1997 (unaudited)
Consolidated Balance Sheet.................................. F-2
Consolidated Statement of Operations........................ F-3
Consolidated Statement of Shareholder's Equity.............. F-4
Consolidated Statement of Cash Flows........................ F-5
Notes to Consolidated Financial Statements.................. F-6
Financial Statements -- October 31, 1996
Report of Independent Auditors.............................. F-15
Balance Sheet............................................... F-16
Notes to Balance Sheet...................................... F-17
THE RESORT GROUP OF FIBREBOARD CORPORATION
Combined Financial Statements -- December 2, 1996
(unaudited)
Combined Statement of Operations............................ F-18
Combined Statement of Cash Flows............................ F-19
Notes to Combined Financial Statements...................... F-20
Combined Financial Statements -- October 31, 1996 and
October 31, 1995 (unaudited) and December 31, 1995 and
1994
Report of Independent Public Accountants.................... F-21
Combined Balance Sheets..................................... F-22
Combined Statements of Operations........................... F-23
Combined Statements of Cash Flows........................... F-24
Notes to Financial Statements............................... F-25
WATERVILLE VALLEY SKI AREA LTD. (A SUBSIDIARY OF AMERICAN
SKIING COMPANY)
Financial Statements -- November 26, 1996 and November 26,
1995 (unaudited)
Statements of Operations.................................... F-33
Statements of Cash Flows.................................... F-34
Notes to Financial Statements............................... F-35
Financial Statements -- October 27, 1996
Report of Independent Auditors.............................. F-36
Balance Sheet............................................... F-37
Statement of Operations and Accumulated Deficit............. F-38
Statement of Cash Flows..................................... F-39
Notes to Financial Statements............................... F-40
WATERVILLE VALLEY SKI AREA LTD. (A SUBSIDIARY OF S-K-I
LIMITED)
Financial Statements -- June 30, 1996 and October 29, 1995
Report of Independent Auditors.............................. F-45
Balance Sheets.............................................. F-46
Statements of Operations and Retained Earnings (Accumulated
Deficit).................................................. F-47
Statements of Cash Flows.................................... F-48
Notes to Financial Statements............................... F-49
SKI LIFTS, INC.
Financial Statements -- January 15, 1997 and January 31,
1996 (unaudited)
Statements of Operations.................................... F-54
Statements of Cash Flows.................................... F-55
Notes to Financial Statements............................... F-56
Financial Statements -- September 30, 1996 and 1995
Report of Independent Accountants........................... F-57
Balance Sheets.............................................. F-58
Statements of Operations and Retained Earnings.............. F-59
Statements of Cash Flows.................................... F-60
Notes to Financial Statements............................... F-61
GRAND TARGHEE INCORPORATED
Condensed Financial Statements -- March 18, 1997 and March
31, 1996 (unaudited)
Condensed Statements of Operations.......................... F-67
Condensed Statements of Cash Flows.......................... F-68
Notes to Condensed Financial Statements..................... F-69
Financial Statements -- May 31, 1996 and 1995
Independent Auditors' Report................................ F-70
Balance Sheets.............................................. F-71
Statements of Operations.................................... F-72
Statements of Changes in Stockholder's Equity............... F-73
Statements of Cash Flows.................................... F-74
Notes to Financial Statements............................... F-75
</TABLE>
F-1
<PAGE> 124
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
MAY 2, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 8,716
Accounts receivable, net of allowances of $12............. 1,352
Inventories............................................... 2,759
Prepaid expenses and other current assets................. 807
--------
Total current assets........................................ 13,634
Property, plant and equipment, net.......................... 131,564
Real estate held for development and sale................... 13,330
Deferred financing costs, net of accumulated amortization of
$250...................................................... 5,944
Other assets................................................ 2,638
Goodwill, net of accumulated amortization of $697........... 25,047
--------
Total assets................................................ $192,157
========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 915
Accounts payable and accrued liabilities.................. 15,518
--------
Total current liabilities................................... 16,433
Long-term debt.............................................. 118,452
Deferred income taxes....................................... 5,187
Other long-term liabilities................................. 298
Commitments and contingencies
Preferred stock of subsidiary; 28,000 shares authorized,
25,000 shares issued and outstanding; liquidation
preference and redemption value of $3,212 at May 2,
1997...................................................... 3,125
Shareholder's equity:
Common stock, .01 par value; 1,000 shares authorized,
issued and outstanding................................. --
Additional paid-in capital................................ 46,500
Retained earnings......................................... 2,162
--------
Total shareholder's equity.................................. 48,662
--------
Total liabilities and shareholder's equity.................. $192,157
========
</TABLE>
See accompanying notes.
F-2
<PAGE> 125
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED MAY 2, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Resort operations......................................... $60,469
Real estate and other..................................... 450
-------
Total revenue............................................... 60,919
-------
Operating expenses:
Cost of sales -- resort operations........................ 36,105
Cost of sales -- real estate and other.................... 378
Depreciation.............................................. 4,427
Amortization.............................................. 697
Selling, general and administrative expense............... 6,518
Management fees and corporate expenses.................... 827
-------
Total operating expenses.................................... 48,952
-------
Operating income............................................ 11,967
Other income (expense):
Interest expense.......................................... (5,163)
Amortization of deferred financing costs.................. (1,196)
Interest income........................................... 55
-------
Other income (expense), net............................... (6,304)
-------
Income before income taxes.................................. 5,663
Provision for income taxes.................................. 1,416
-------
Income before minority interest and extraordinary item...... 4,247
Minority interest........................................... 87
-------
Income before extraordinary item............................ 4,160
Extraordinary loss on early retirement of debt (net of
applicable income taxes of $666).......................... 1,998
-------
Net income.................................................. $ 2,162
=======
</TABLE>
See accompanying notes.
F-3
<PAGE> 126
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (UNAUDITED)
SIX MONTHS ENDED MAY 2, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
COMMON STOCK ADDITIONAL RECEIVABLE
--------------- PAID-IN FROM RETAINED
SHARES AMOUNT CAPITAL SHAREHOLDER EARNINGS TOTAL
------ ------ ---------- ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1996.............. 1,000 $ -- $ 2 $(2) $ -- $ --
Payment received on shareholder note
receivable............................. -- -- -- 2 -- 2
Capital contributions.................... -- -- 46,498 -- -- 46,498
Net income............................... -- -- -- -- 2,162 2,162
----- ---- ------- --- ------ -------
Balance at May 2, 1997................... 1,000 $ -- $46,500 $-- $2,162 $48,662
===== ====== ======= ========= ====== =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 127
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED MAY 2, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 2,162
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 4,427
Amortization of goodwill.................................. 697
Noncash cost of real estate sales......................... 349
Amortization of deferred financing costs.................. 1,196
Deferred income taxes..................................... 1,416
Minority interest......................................... 87
Extraordinary loss on early retirement of debt............ 1,998
Changes in operating assets and liabilities:
Accounts receivable.................................... (426)
Inventories............................................ 1,020
Prepaid expenses and other current assets.............. 900
Accounts payable and accrued liabilities............... (205)
--------
Net cash provided by operating activities................... 13,621
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of ski resorts, net of cash acquired............ (142,062)
Capital expenditures........................................ (2,416)
Other assets................................................ (142)
--------
Net cash used in investing activities....................... (144,620)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of long-term debt.................................. 216,000
Principal payments of long-term debt........................ (112,980)
Deferred financing costs.................................... (9,805)
Payment received on shareholder note receivable............. 2
Capital contributions....................................... 46,498
--------
Net cash provided by financing activities................... 139,715
--------
Increase in cash............................................ 8,716
Cash at beginning of period................................. --
--------
Cash at end of period....................................... $ 8,716
========
</TABLE>
See accompanying notes.
F-5
<PAGE> 128
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MAY 2, 1997
1. ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Booth Creek Ski Holdings, Inc. ("Booth Creek") was organized on October 8,
1996 in the State of Delaware for the purpose of acquiring and operating various
ski resorts, including Northstar-at-Tahoe ("Northstar"), Sierra-at-Tahoe
("Sierra"), Bear Mountain, Waterville Valley, Mt. Cranmore, Snoqualmie Pass
("Snoqualmie") and Grand Targhee, as described more fully in Note 2.
The consolidated financial statements include the accounts of Booth Creek
and its subsidiaries (collectively referred to as the "Company"), all of which
are wholly-owned except for Snoqualmie as discussed in Note 2. All significant
intercompany transactions and balances have been eliminated.
Booth Creek is a wholly-owned subsidiary of Booth Creek Ski Group, Inc.
("Parent").
The accompanying consolidated financial statements as of May 2, 1997 and
for the six months then ended are unaudited, but include all adjustments
(consisting only of normal, recurring adjustments except for the extraordinary
loss recognized upon the early retirement of certain debt) which, in the opinion
of management of the Company, are considered necessary for a fair presentation
of the Company's financial position at May 2, 1997 and its operating results and
cash flows for the six months then ended. Due to the highly seasonal nature of
the Company's business and the effect of recent acquisitions (Note 2), the
results for the interim period are not necessarily indicative of results for the
entire year. Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to generally accepted
accounting principles applicable for interim periods. Management believes that
the disclosures made are adequate to make the information presented not
misleading.
REPORTING PERIODS
The Company's reporting periods end on the Friday closest to the end of
each month.
BUSINESS AND PRINCIPAL MARKETS
Northstar is a year-round destination resort including ski and golf
facilities. Sierra is a day ski area. Both Northstar and Sierra are located near
Lake Tahoe, California. Bear Mountain is a day ski area located approximately
two hours from Los Angeles, California. Waterville Valley, a destination resort,
and Mt. Cranmore, a day ski area, are located in New Hampshire. Snoqualmie is
located in Northwest Washington and is a day ski area. Grand Targhee is a
destination ski resort located in Wyoming.
Operations are highly seasonal at all locations with the majority of
revenues realized during the ski season from late November through early April.
The length of the ski season and the profitability of operations are
significantly impacted by weather conditions. Although Northstar, Bear Mountain,
Waterville Valley and Mt. Cranmore have snowmaking capacity to mitigate some of
the effects of adverse weather conditions, abnormally warm weather or lack of
adequate snowfall can materially affect revenues. Sierra, Snoqualmie and Grand
Targhee lack significant snowmaking capability but generally benefit from higher
annual snowfall.
Other operational risks and uncertainties that face the Company include
competitive pressures affecting the number of skier visits and ticket prices;
the success of marketing efforts to maintain and increase skier visits; the
possibility of equipment failure; and continued access to water supplies for
snowmaking.
CASH
Included in cash at May 2, 1997 is restricted cash of $240,000 relating to
advance deposits and rental fees due to property owners for lodging and property
rentals, and restricted cash of $655,000 relating to a liability assumed in the
purchase of Grand Targhee.
F-6
<PAGE> 129
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
1. ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or
market. The components of inventories at May 2, 1997 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Retail products............................................. $1,587
Supplies.................................................... 896
Food and beverage........................................... 276
------
$2,759
===========
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
on the straight-line method based upon the estimated service lives of the
property, which are as follows:
<TABLE>
<S> <C>
Land improvements........................................... 20 years
Buildings and improvements.................................. 20 years
Machinery and equipment..................................... 3 to 15 years
</TABLE>
REAL ESTATE ACTIVITIES
The Company capitalizes as real estate held for development and sale the
original acquisition cost (or appraised value in connection with purchase
business combinations), direct construction and development costs, and other
related costs. Property taxes, insurance and interest incurred on costs related
to real estate under development are capitalized during periods in which
activities necessary to get the property ready for its intended use are in
progress. The Company capitalized interest costs of $150,000 for the six months
ended May 2, 1997. Land costs and other common costs incurred prior to
construction are allocated to each land parcel benefited. Construction related
costs are allocated to individual units in each development phase using the
relative sales value method. Selling expenses are charged against income in the
period incurred.
Sales and profits on real estate sales are recognized using the full
accrual method at the point that the Company's receivables from land sales are
deemed collectible and the Company has no significant remaining obligations for
construction or development. If such conditions are not met, the recognition of
all or part of the sales and profit is postponed.
REVENUE RECOGNITION
Revenues are generally recognized as services are provided and products are
sold. Sales of season passes are initially deferred in unearned income and
recognized ratably over the ski season.
AMORTIZATION
The excess of the purchase price over the fair values of the net assets
acquired (goodwill) is being amortized using the straight-line method over a
period of 15 years.
Deferred financing costs are being amortized over the lives of the related
obligations.
F-7
<PAGE> 130
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
1. ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- (CONTINUED)
ADVERTISING COSTS
The cost of advertisements is expensed when the advertisement is initially
released. The cost of professional services for advertisements, sales campaigns,
promotion, and public relations is expensed when the services are rendered. The
cost of brochures is expensed over the ski season. Advertising expenses for the
six months ended May 2, 1997 were approximately $1,487,000.
INCOME TAXES
Deferred income taxes are provided for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
The Company is included in the federal and state tax returns of Parent. The
provision for federal and state income tax is computed as if the Company filed
separate consolidated tax returns.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. ACQUISITIONS
As described below, Booth Creek consummated the New Hampshire, California,
Snoqualmie and Grand Targhee acquisitions prior to May 2, 1997. These
acquisitions have been accounted for using the purchase method of accounting.
The results of operations of the Waterville Valley, Mt. Cranmore, Northstar,
Sierra, Bear Mountain, Snoqualmie and Grand Targhee resorts have been included
in the accompanying statement of operations since the effective dates of such
acquisitions. The consolidated financial statements reflect the preliminary
allocations of purchase price based on the estimated fair values of assets
acquired and liabilities assumed at the respective dates of acquisition and are
subject to final allocations pursuant to appraisals, the effects of which could
be material.
THE NEW HAMPSHIRE ACQUISITIONS
On November 27, 1996, Booth Creek Ski Acquisition Corp., a wholly-owned
subsidiary of Booth Creek, purchased the assets of the Waterville Valley and Mt.
Cranmore resorts from subsidiaries of American Skiing Company for an aggregate
purchase price of $17.5 million. The purchase price was paid with $14.5 million
in cash, before giving effect to normal working capital adjustments for current
assets acquired and current liabilities assumed, and the $2.75 million ASC
Seller Note (Note 5).
THE CALIFORNIA ACQUISITIONS
On December 3, 1996, Booth Creek purchased from Fibreboard Corporation all
of the issued and outstanding capital stock of Trimont Land Company, which
operates Northstar, Sierra-at-Tahoe, Inc., which operates Sierra, and Bear
Mountain, Inc., which operates Bear Mountain. The aggregate purchase price was
$121.5 million in cash, before giving effect to normal working capital
adjustments for current assets acquired and current liabilities assumed.
THE SNOQUALMIE ACQUISITION
Effective January 15, 1997, Booth Creek purchased all of the issued and
outstanding common stock of Ski Lifts, Inc. ("Ski Lifts"), the owner and
operator of the ski resort assets of Snoqualmie Pass, for an
F-8
<PAGE> 131
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
aggregate purchase price of approximately $14 million, which included the
assumption of approximately $3.6 million of indebtedness, the issuance by Ski
Lifts of the approximately $9.8 million Snoqualmie Seller Note (Note 5), and
other obligations to the selling shareholders of approximately $600,000.
In connection with the consummation of the Snoqualmie acquisition, Ski
Lifts transferred approximately 71 acres of owned real estate held for
development purposes into a Delaware limited liability company (the "Real Estate
LLC"), of which Ski Lifts is a member and 99% equity interest holder and Booth
Creek is the other member and 1% equity interest holder. In addition, Ski Lifts
granted the Real Estate LLC an option (the "Real Estate Option") to purchase an
additional 14 acres of developmental real estate for nominal consideration. Ski
Lifts also issued 28,000 shares of non-voting preferred stock (the "Ski Lifts
Preferred Stock") to its prior owners having an aggregate liquidation preference
equal to $3.5 million, the aggregate estimated fair market value of the real
estate transferred to the Real Estate LLC and the real estate subject to the
Real Estate Option. Concurrently with these transactions, the Real Estate LCC
entered into an agreement to purchase (the "Preferred Stock Purchase Agreement")
the Ski Lifts Preferred Stock, on a quarterly basis over the five years
following the date of the Snoqualmie Acquisition, at a purchase price equal to
the liquidation preference thereof plus accrued dividends to the date of
purchase. Through May 2, 1997, the Company has advanced the first three
quarterly payments under the Preferred Stock Purchase Agreement aggregating
$375,000. The Real Estate LLC's obligations under the Preferred Stock Purchase
Agreement are secured by a first priority lien on the developmental real estate
held by the Real Estate LLC and substantially all of its other assets. The Ski
Lifts Preferred Stock provides for a 9% cumulative dividend and is redeemable at
the option of Ski Lifts without premium. In addition, pursuant to the terms of
the Ski Lifts Preferred Stock, the holders thereof have no redemption rights and
are entitled to receive dividend payments only when and if declared by the board
of directors of Ski Lifts. The amount of cumulative preferred dividends in
arrears at May 2, 1997 was $87,000.
THE GRAND TARGHEE ACQUISITION
On March 18, 1997, Booth Creek acquired all the issued and outstanding
capital stock of Grand Targhee Incorporated, the owner of the ski resort assets
of Grand Targhee, for an aggregate purchase price of approximately $7.9 million
plus contingent payments of up to $2 million based on the performance of Grand
Targhee through the 1998/99 ski season and additional commissions based on the
number of dwelling units developed at the resort through 2012.
Summary information regarding the preliminary purchase price allocations to
the assets acquired and liabilities assumed in each of the acquisitions
described above.
<TABLE>
<CAPTION>
NEW GRAND
HAMPSHIRE CALIFORNIA SNOQUALMIE TARGHEE
ACQUISITIONS ACQUISITIONS ACQUISITION ACQUISITION
------------ ------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net working capital................................ $ (291) $ (4,508) $(6,687) $ (812)
Property, plant and equipment...................... 17,500 87,984 19,487 8,834
Real estate and other long-term assets............. -- 12,044 4,188 61
Goodwill........................................... 1,234 22,885 1,625 --
Long-term debt..................................... (2,750) -- (9,880) --
Deferred income taxes and other long-term
liabilities...................................... -- -- (8,235) --
------- -------- ------- ------
Net purchase price................................. $15,693 $118,405 $ 498 $8,083
========= ========= ======== ========
</TABLE>
F-9
<PAGE> 132
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at May 2, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Land and improvements....................................... $ 30,401
Buildings and improvements.................................. 31,388
Machinery and equipment..................................... 74,202
--------
135,991
Less accumulated depreciation............................... (4,427)
--------
$131,564
===========
</TABLE>
The allocation of purchase price to and amongst the various categories of
property, plant and equipment was based on preliminary and tentative information
and is subject to change as additional information becomes known.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following at May 2,
1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Accounts payable............................................ $ 8,440
Accrued compensation........................................ 593
Taxes other than income..................................... 2,220
Unearned income and deposits................................ 863
Interest.................................................... 1,918
Other....................................................... 1,484
-------
$15,518
===========
</TABLE>
5. FINANCING ARRANGEMENTS
SENIOR CREDIT FACILITY
The following is a summary of certain provisions of the Credit Agreement
(the "Senior Credit Facility") dated as of December 3, 1996 and subsequently
amended on March 18, 1997, among Booth Creek, its subsidiaries, the financial
institutions party thereto and The First National Bank of Boston, as
administrative agent ("Agent").
General -- The Senior Credit Facility provides for borrowing
availability of up to $12 million during the period from July 15 through
January 31 and $6 million during the remainder of the year. In addition,
the Company is required to repay all borrowings under the Senior Credit
Facility on or before March 1 of each year and have no outstanding
indebtedness thereunder during the two months thereafter. From and after
July 15, 1998, borrowing availability under the Senior Credit Facility
increases to $20 million upon the Company achieving a certain level of
adjusted consolidated cash flow to total debt service for any trailing
four quarter period ending on or after April 30, 1998. The Senior Credit
Facility requires the Company to escrow $5,820,000 on or prior to August
1, 1997 to fund the first payment of interest on certain senior notes
(see "Long-Term Debt" below) after their issuance. Pursuant to the terms
of the Senior Credit Facility, the Company may not borrow in excess of
$1,430,000 thereunder to fund such interest payment. The Company expects
to fund such payment from available cash on hand and borrowings under
the Senior Credit Facility up to the $1,430,000 limit. Borrowings under
the Senior Credit Facility are collectively referred to
F-10
<PAGE> 133
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
5. FINANCING ARRANGEMENTS -- (CONTINUED)
herein as the "Loans." There were no borrowings outstanding under the
Senior Credit Facility at May 2, 1997.
Interest -- For purposes of calculating interest, the Loans can be, at
the election of the Company, Base Rate Loans or LIBOR Rate Loans or a
combination thereof. Subsequent to the offering on March 18, 1997 of
certain senior notes (see "Long-Term Debt" below), Base Rate Loans bear
interest at the sum of (a) a margin of between 0% and .5%, depending on
the level of consolidated EBITDA of the Company and its subsidiaries (as
determined pursuant to the Senior Credit Facility), plus (b) the higher
of (i) The First National Bank of Boston's base rate or (ii) the federal
funds rate plus .5%. LIBOR Rate Loans bear interest at the LIBOR rate
plus a margin of between 2% and 3%, depending on the level of
consolidated EBITDA.
Repayment -- Subject to the provisions of the Senior Credit Facility,
the Company may, from time to time, borrow, repay and reborrow under the
Senior Credit Facility. The entire unpaid balance under the Senior
Credit Facility is due and payable on March 18, 1999.
Security -- Borrowings under the Senior Credit Facility are secured by
(i) a pledge of the Agent for the ratable benefit of the financial
institutions party to the Senior Credit Facility of all of the capital
stock of Booth Creek's principal subsidiaries and (ii) a grant of a
security interest in substantially all of the consolidated assets of
Booth Creek and its subsidiaries (excluding the Real Estate LLC).
Covenants -- The Senior Credit Facility contains financial covenants
relating to the maintenance of (i) ratios of (a) financing debt to
consolidated cash flow, (b) adjusted consolidated cash flow to
consolidated debt service and (c) consolidated cash flow to consolidated
interest expense, (ii) consolidated net worth, and (iii) consolidated
cash flow. The Senior Credit Facility also contains restrictive
covenants pertaining to the management and operation of Booth Creek and
its subsidiaries. The covenants include, among others, significant
limitations on indebtedness, guarantees, mergers, acquisitions,
fundamental corporate changes, capital expenditures, asset sales,
leases, investments, loans and advances, liens, dividends and other
stock payments, transactions with affiliates, optional payments and
modification of debt instruments and issuances of stock.
LONG-TERM DEBT
Long-term debt consists of the following instruments at May 2, 1997, which
are described below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Senior Notes................................................ $116,000
ASC Seller Note............................................. 2,500
Other debt.................................................. 867
--------
119,367
Less current portion........................................ 915
--------
$118,452
===========
</TABLE>
On March 18, 1997, the Company consummated an offering (the "Offering") of
$110 million in senior debt securities (the "Senior Notes"). An additional $6
million aggregate principal amount of Senior Notes were sold by the Company on
April 25, 1997. The proceeds of the Offering, along with $6.5 million in
additional equity contributions of Parent and available cash on hand, were used
to i) repay $90 million in bridge notes bearing interest at approximately 11%,
ii) repay the $9.8 million Snoqualmie Seller Note bearing interest at 5% per
annum and certain other debt assumed in connection with the Snoqualmie
acquisition, iii) repay obligations relating to a $10 million intercompany note
payable to Parent, iv) acquire Grand
F-11
<PAGE> 134
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
5. FINANCING ARRANGEMENTS -- (CONTINUED)
Targhee and repay certain debt assumed in connection therewith, and v) pay
certain fees and expenses associated with the Offering and the Senior Credit
Facility. Existing deferred financing costs at March 18, 1997 of approximately
$2.7 million relating principally to the bridge notes repaid, were charged off
in connection with the early extinguishment of debt, and have been reflected as
an extraordinary item in the accompanying statement of operations (net of
related income taxes of $666,000).
The Senior Notes mature on March 15, 2007, and bear interest at 12.5%
payable semiannually on each March 15 and September 15, commencing September 15,
1997. The Senior Notes will be unconditionally guaranteed, on an unsecured
senior basis, as to the payment of principal, premium, if any, and interest,
jointly and severally (the "Guarantees"), by all Restricted Subsidiaries of the
Company having either assets or stockholders' equity in excess of $20,000 (the
"Guarantors"). As of the date of the Offering, all of the Company's direct and
indirect subsidiaries will be Restricted Subsidiaries, except the Real Estate
LLC. Each Guarantee will be effectively subordinated to all secured indebtedness
of such Guarantor. The Senior Notes will be general senior unsecured obligations
of the Company ranking equally in right of payment with all other existing and
future senior indebtedness of the Company and senior in right of payment to any
subordinated indebtedness of the Company. The Senior Notes will be effectively
subordinated in right of payment to all secured indebtedness of the Company and
the Guarantors, including indebtedness under the Senior Credit Facility. In
addition, the Senior Notes will be structurally subordinated to any indebtedness
of the Company's subsidiaries that are not Guarantors. The indenture for the
Senior Notes contains covenants for the benefit of the holders of the Senior
Notes that, among other things, restrict the ability of the Company and any
Restricted Subsidiaries to: (i) incur additional indebtedness; (ii) pay
dividends and make distributions; (iii) issue stock of subsidiaries; (iv) make
certain investments; (v) repurchase stock; (vi) create liens; (vii) enter into
transactions with affiliates, (viii) enter into sale and leaseback transactions,
(ix) create dividend or other payment restrictions affecting Restricted
Subsidiaries; (x) merge or consolidate the Company or any Guarantors; and (xi)
transfer and sell assets.
The Guarantors are wholly-owned subsidiaries of Booth Creek and have fully
and unconditionally guaranteed the Senior Notes on a joint and several basis. In
addition, the aggregate assets, liabilities, earnings and equity of the
Guarantors are substantially equivalent to the assets, liabilities, earnings and
equity of Booth Creek on a consolidated basis. Accordingly, Booth Creek has not
presented separate financial statements and other disclosures concerning the
Guarantors because management has determined that such information is not
material to investors.
Booth Creek has no operations or assets separate from its investments in
its subsidiaries. In addition, the assets, equity, income and cash flow of the
Real Estate LLC, Booth Creeks' only unrestricted subsidiary described in Note 2,
are inconsequential and the common stock of the Real Estate LLC is entirely
owned by Booth Creek.
ASC Seller Note
As part of the purchase price for the acquisitions of Waterville Valley and
Mt. Cranmore, Booth Creek Ski Acquisition Corp., a wholly-owned subsidiary of
Booth Creek, and Waterville Valley Ski Resort, Inc. and Mount Cranmore Ski
Resort, Inc., wholly-owned subsidiaries of Booth Creek Ski Acquisition Corp. and
the respective owners of the assets of the Waterville Valley and Mt. Cranmore
resorts, jointly and severally issued a promissory note to American Skiing
Company in the aggregate principal amount of $2.75 million, of which $2.5
million is outstanding at May 2, 1997. The ASC Seller Note requires annual
principal payments commencing January 31, 1998 at any initial level of $100,000
per year and increasing to $350,000 by January 31, 2003, with the remaining
principal balance of $1,150,000 due on June 30, 2004. The ASC Seller Note bears
interest at 12% per annum payable semi-annually on each June 30 and December 31
commencing on June 30, 1997.
F-12
<PAGE> 135
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
5. FINANCING ARRANGEMENTS -- (CONTINUED)
Other Debt
Other debt of $867,000 at May 2, 1997 consists of various notes payable and
capital lease obligations assumed in connection with the acquisitions of Ski
Lifts and Grand Targhee. Included in this balance is $655,000 of Grand Targhee
assumed debt which was fully paid in May 1997 and funded by the restricted cash
described in Note 1.
During the six months ended May 2, 1997, the Company paid cash for interest
costs of approximately $3,346,000.
6. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases certain machinery, equipment and facilities under
operating leases. Aggregate future minimum lease payments as of January 31, 1997
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
JANUARY 31,
----------- (IN THOUSANDS)
<S> <C>
1998...................................................... $ 2,090
1999...................................................... 1,297
2000...................................................... 730
2001...................................................... 350
2002...................................................... 177
Thereafter................................................ 454
--------
$ 5,098
===========
</TABLE>
Total rent expense for all operating leases amounted to $2,801,000 for the
six months ended May 2, 1997.
In addition, the Company leases property from the U.S. Forest Service under
Special Use Permits for all or certain portions of the operations of Sierra,
Bear Mountain, Waterville Valley, Snoqualmie and Grand Targhee. These leases are
effective through 2008, 2020, 2032, and 2034, respectively. Lease payments are
based on a percentage of revenues, and were approximately $683,000 for the six
months ended May 2, 1997.
LITIGATION
The nature of the ski industry includes the risk of skier injuries.
Generally, the Company has insurance to cover potential claims; in some cases
the amounts of the claims may be substantial. The Company is also involved in a
number of other claims arising from its operations.
Management, in consultation with legal counsel, believes resolution of
these claims will not have a material adverse impact on the Company's
consolidated financial condition or results of operations.
PLEDGE OF STOCK
The stock of the Company is pledged to secure $30 million of indebtedness
of the Parent.
7. INCOME TAXES
Income taxes recognized for six months ended May 2, 1997 are based on the
Company's estimated effective income tax rate for the year ending October 31,
1997.
F-13
<PAGE> 136
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
7. INCOME TAXES -- (CONTINUED)
Deferred tax liabilities of $5,187,000 at May 2, 1997 relate primarily to
differences between the book and tax bases of certain assets and liabilities
arising as a result of the stock purchase for the Snoqualmie acquisition, as the
underlying net assets of Snoqualmie were not adjusted to their fair values for
tax reporting purposes.
8. MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS
Booth Creek, Inc. (the "Management Company") provides management services
to Booth Creek, the Parent and Booth Creek's subsidiaries pursuant to the
Management Agreement dated November 27, 1996 (the "Management Agreement")
between Booth Creek and the Management Company. The Management Company provides
Booth Creek, the Parent and Booth Creek's subsidiaries with financial advice
with respect to, among other matters, cash management, accounting and data
processing systems and procedures, budgeting, equipment purchases, business
forecasts, treasury functions and investor relations. The Management Company
also provides general supervision and management advice concerning tax, legal
and corporate finance matters, administration and operation, personnel matters,
business insurance and the employment of consultants, contractors and agents.
Under the terms of the Management Agreement, the Company provides customary
indemnification, reimburses certain costs and pays the Management Company an
annual management fee of $350,000 plus an operating bonus, not to exceed
$400,000, equal to 2.5% of the excess of consolidated EBITDA (as defined in the
debt agreements for the Offering) for such year over $25 million. The obligation
of the Company to make payments under the Management Agreement is subject to the
provisions of the debt agreements for the Offering. Management fees during the
six months ended May 2, 1997 were $159,000.
Since the formation of the Company, the Management Company and certain of
its affiliates have made advances and deposits of approximately $1,400,000
through May 2, 1997, and have incurred expenses of approximately $600,000
through May 2, 1997, in connection with certain of the acquisitions. All of
these costs were later reimbursed by the Company pursuant to the Management
Agreement.
F-14
<PAGE> 137
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Booth Creek Ski Holdings, Inc.
We have audited the accompanying balance sheet of Booth Creek Ski Holdings,
Inc. (the Company), as of October 31, 1996. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Company at October 31, 1996, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
February 3, 1997
F-15
<PAGE> 138
BOOTH CREEK SKI HOLDINGS, INC.
BALANCE SHEET
October 31, 1996
<TABLE>
<S> <C>
ASSETS
Total Assets................................................ $ --
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding.................................... $ 10
Additional paid-in capital.................................. 2,010
Note receivable from stockholder (Note 2)................... (2,020)
-------
Total Liabilities and Stockholder's Equity.................. $ --
=======
</TABLE>
See accompanying notes.
F-16
<PAGE> 139
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO BALANCE SHEET
October 31, 1996
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
FORMATION AND OWNERSHIP
Booth Creek Ski Holdings, Inc. (the Company) was formed October 8, 1996 to
acquire and operate ski resort properties located throughout the United States.
Through October 31, 1996, the Company had no operations.
The Company is a wholly owned subsidiary of Booth Creek Ski Group, Inc.
(Group).
ACCOUNTING PERIOD
The Company's fiscal year end is October 31.
2. NOTE RECEIVABLE
In conjunction with the original issuance of 1,000 shares of common stock,
a note due from the original stockholder for $2,020 was issued and has been
presented as a reduction to stockholder's equity.
3. SUBSEQUENT EVENTS -- ACQUISITIONS
On November 27, 1996, the Company completed the acquisition of the assets
of the Waterville Valley and Mt. Cranmore ski resorts from American Skiing
Company for $14.4 million in cash, assumption of certain liabilities ($.3
million), and a promissory note due to the seller of $2.75 million.
On December 3, 1996, the Company completed the acquisition of the assets of
the Northstar-at-Tahoe, Sierra-at-Tahoe and Bear Mountain ski resorts from
Fibreboard Corporation for $119.0 million in cash and assumption of certain
estimated liabilities ($2.5 million).
Both of these acquisitions will be accounted for using the purchase method
and will be included in the results of operations of the Company from their
respective purchase dates. The acquisitions were financed through equity
contributions from Group and various bridge financing facilities.
The Company is also in various stages of negotiation relating to two
additional acquisitions, and expects to complete such acquisitions. These
include the acquisition of the stock of Ski Lifts, Inc., which operates four ski
resorts referred to as the Snoqualmie Pass ski resort complex, for a total
purchase price of approximately $13.9 million, including debt assumption and the
acquisition of the stock of Grand Targhee, Incorporated for a total purchase
price of $7.6 million, including debt assumption.
F-17
<PAGE> 140
THE RESORT GROUP OF FIBREBOARD CORPORATION
COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD FROM NOVEMBER 1, 1996 TO DECEMBER 2, 1996
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
Revenue:
Resort.................................................... $ 1,395
Real estate and other..................................... 304
-------
Total revenue.......................................... 1,699
-------
Cost of sales:
Resort.................................................... 2,890
Real estate and other..................................... 161
-------
Total cost of sales.................................... 3,051
-------
Gross margin................................................ (1,352)
Sales, general and administrative expense................... 1,087
Management fee.............................................. 70
-------
Operating loss.............................................. (2,509)
Interest expense............................................ (86)
Interest and other income................................... 14
Intercompany interest expense, net.......................... (217)
-------
Loss before income taxes.................................... (2,798)
Income tax benefit.......................................... 885
-------
Net loss.................................................... $(1,913)
=======
</TABLE>
See accompanying notes.
F-18
<PAGE> 141
THE RESORT GROUP OF FIBREBOARD CORPORATION
COMBINED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE PERIOD FROM NOVEMBER 1, 1996 TO DECEMBER 2, 1996
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(1,913)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation, amortization and depletion.................. 90
Non-cash cost of real estate sales........................ 133
Gain on sale of assets.................................... (9)
Net changes in assets and liabilities:
Accounts receivable.................................... 56
Inventories............................................ (776)
Prepaid expenses....................................... (308)
Accounts payable and accrued liabilities............... 5,554
-------
Net cash provided by operating activities................... 2,827
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from property and equipment sales.................. 30
Purchase of other assets.................................... (442)
Capital expenditures -- property and equipment.............. (5,531)
Development expenditures -- real estate held for resale..... (192)
Principal payments received on real estate loans............ 115
-------
Net cash used in investing activities....................... (6,020)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in intercompany payable to Fibreboard
Corporation............................................... 1,906
-------
Net cash provided by financing activities................... 1,906
-------
Net decrease in cash and cash equivalents................... (1,287)
Cash and cash equivalents, beginning of period.............. 1,499
-------
Cash and cash equivalents, end of period.................... $ 212
=======
</TABLE>
See accompanying notes.
F-19
<PAGE> 142
THE RESORT GROUP OF FIBREBOARD CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD FROM NOVEMBER 1, 1996 TO DECEMBER 2, 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
The Resort Group of Fibreboard Corporation (the "Group") includes the
following wholly-owned subsidiaries of Fibreboard Corporation, a Delaware
corporation ("Fibreboard"): Trimont Land Company, d.b.a. Northstar-at-Tahoe,
Sierra-at-Tahoe, Inc., and Bear Mountain, Inc.
The accompanying combined financial statements for the period from November
1, 1996 to December 2, 1996 are unaudited, but include all adjustments
(consisting only of normal recurring adjustments) which, in the opinion of
management of the Group, are considered necessary for a fair presentation of the
Group's operating results and cash flows for the period from November 1, 1996 to
December 2, 1996. Due to the highly seasonal nature of the Group's business, the
results for the interim period are not necessarily indicative of results for the
entire year. Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to generally accepted
accounting principles applicable for interim periods. The unaudited interim
financial statements should be read in conjunction with the following note and
the audited financial statements of the Group as of October 31, 1996 and for the
ten months then ended.
The Group recognizes depreciation expense on substantially all resort
related assets over the course of the operating ski season, which is presumed to
be the months of December through March. Accordingly, depreciation expense of
$7,000 recorded in the period from November 1, 1996 to December 2, 1996 is not
reflective of the Group's annual depreciation charges.
2. SUBSEQUENT EVENT
On December 3, 1996, Booth Creek Ski Holdings, Inc. purchased from
Fibreboard all of the issued and outstanding capital stock of Trimont Land
Company, Sierra-at-Tahoe, Inc. and Bear Mountain, Inc. The aggregate purchase
price was $121.5 million in cash, before giving effect to certain working
capital adjustments.
F-20
<PAGE> 143
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Fibreboard Corporation and Mr. George N. Gillett, Jr.:
We have audited the accompanying combined balance sheets of The Resort
Group of Fibreboard Corporation (wholly-owned subsidiaries of Fibreboard
Corporation, a Delaware corporation) as of October 31, 1996, December 31, 1995,
and 1994, and the related combined statements of income, and cash flows for the
ten months ended October 31, 1996, and each of the three years ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of The Resort Group of
Fibreboard Corporation as of October 31, 1996, December 31, 1995, and 1994, and
the results of its operations and its cash flows for the ten months ended
October 31, 1996, and each of the three years ended December 31, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
November 22, 1996
F-21
<PAGE> 144
THE RESORT GROUP OF FIBREBOARD CORPORATION
COMBINED BALANCE SHEETS
AS OF OCTOBER 31, 1996, DECEMBER 31, 1995, AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
OCTOBER 31, --------------------
1996 1995 1994
----------- ---- ----
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,499 $ 7,821 $ 3,319
Accounts receivable, net of allowance for doubtful
accounts of $10, $12, and $11, respectively............ 799 853 537
Current portion of notes receivable....................... 350 78 24
Inventories............................................... 2,106 3,267 1,468
Prepaid expenses.......................................... 681 545 502
Current portion of real estate held for resale............ 1,416 1,105 208
-------- -------- --------
Total current assets................................... 6,851 13,669 6,058
-------- -------- --------
Property and equipment, at cost:
Land and improvements..................................... 26,500 26,500 12,469
Buildings................................................. 15,309 14,914 10,907
Machinery and equipment................................... 38,415 38,923 31,820
Construction in progress.................................. 5,384 -- --
-------- -------- --------
85,608 80,337 55,196
Less: Accumulated depreciation............................ (27,285) (23,261) (19,447)
-------- -------- --------
Net property and equipment............................. 58,323 57,076 35,749
Timber rights, net of accumulated depletion of $16.......... 1,484 -- --
Notes receivable, net of current portion.................... 1,368 752 554
Real estate held for resale, net of current portion......... 806 1,162 303
Other assets................................................ 770 657 401
-------- -------- --------
Total assets........................................... $ 69,602 $ 73,316 $ 43,065
======== ======== ========
LIABILITIES AND NET ASSETS
Current liabilities:
Current portion of long-term debt......................... $ -- $ -- $ 1,000
Accounts payable and accrued liabilities.................. 4,323 8,156 7,391
Intercompany payable to Fibreboard Corporation............ 38,715 41,493 4,222
-------- -------- --------
Total current liabilities.............................. 43,038 49,649 12,613
Long-term debt.............................................. -- -- 10,200
Other long-term liabilities................................. -- -- 500
-------- -------- --------
Total liabilities...................................... 43,038 49,649 23,313
Commitments (Note 11)
Net assets................................................ 26,564 23,667 19,752
-------- -------- --------
Total liabilities and net assets.......................... $ 69,602 $ 73,316 $ 43,065
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 145
THE RESORT GROUP OF FIBREBOARD CORPORATION
COMBINED STATEMENTS OF OPERATIONS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1996 AND 1995 AND
THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
OCTOBER 31, OCTOBER 31, ---------------------------
1996 1995 1995 1994 1993
----------- ----------- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Resort.................................... $36,829 $32,072 $39,823 $40,810 $25,528
Real estate............................... 3,595 4,659 5,028 610 --
Timber.................................... 693 -- 185 -- --
------- ------- ------- ------- -------
Total revenue........................ 41,117 36,731 45,036 41,420 25,528
------- ------- ------- ------- -------
Cost of Sales:
Resort.................................... 26,950 21,536 28,569 26,920 18,117
Real estate (including $1,461, $1,488,
$1,618, $0, and $0, respectively, of
non-cash cost of sales) (Note 3)....... 1,739 1,780 1,928 280 --
Timber.................................... 403 -- 61 -- --
------- ------- ------- ------- -------
Total cost of sales.................. 29,092 23,316 30,558 27,200 18,117
------- ------- ------- ------- -------
Gross margin......................... 12,025 13,415 14,478 14,220 7,411
Sales, General, and Administrative
Expense................................... 5,220 4,399 5,871 5,545 4,579
Management Fee (Note 8)..................... 701 513 1,247 655 507
------- ------- ------- ------- -------
Operating income..................... 6,104 8,503 7,360 8,020 2,325
Interest expense............................ 100 418 439 741 326
Interest and other income................... (350) (84) (106) (75) (140)
Intercompany interest expense, net.......... 1,439 -- 488 -- --
------- ------- ------- ------- -------
Income before income taxes........... 4,915 8,169 6,539 7,354 2,139
Provision for Income Taxes.................. 2,018 3,308 2,624 2,979 876
------- ------- ------- ------- -------
Net income.................................. $ 2,897 $ 4,861 $ 3,915 $ 4,375 $ 1,263
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 146
THE RESORT GROUP OF FIBREBOARD CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1996 AND 1995 AND
THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
OCTOBER 31, OCTOBER 31, -------------------------------
1996 1995 1995 1994 1993
----------- ----------- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 2,897 $ 4,861 $ 3,915 $ 4,375 $ 1,263
Adjustments to reconcile to cash
provided by operating activities --
Depreciation, amortization, and
depletion.......................... 4,354 2,989 4,024 3,449 2,514
Non-cash cost of real estate sales
(Note 3)........................... 1,461 1,488 1,618 -- --
Gain on sale of assets............... (147) (20) (342) (326) --
Changes in assets and liabilities --
Decrease (increase) in accounts
receivable......................... 54 242 (286) (107) (161)
Decrease (increase) in inventories... 1,161 (427) (1,427) (9) (308)
(Increase) decrease in prepaid
expenses........................... (136) (116) 56 106 (479)
(Increase) decrease in notes
receivable......................... (888) (150) (252) 116 66
(Decrease) increase in accounts
payable and accrued liabilities.... (3,833) (1,361) 555 1,878 1,317
------- -------- -------- ------- --------
Net cash provided by operating
activities...................... 4,923 7,506 7,861 9,482 4,212
------- -------- -------- ------- --------
Cash flows from investing activities:
Non-cash assets of acquired
operations........................... -- (20,604) (20,604) -- (13,054)
Proceeds from property and equipment
sales................................ 361 -- -- -- --
Development expenditures -- real estate
held for resale...................... (1,297) (3,443) (3,374) (198) --
Capital expenditures -- property and
equipment............................ (5,761) (3,786) (5,226) (6,199) (4,619)
Capitalized interest.................... (157) -- -- -- (183)
Acquisition of timber rights............ (1,500) -- -- -- --
(Increase) decrease in other assets..... (113) (488) (226) 110 (480)
------- -------- -------- ------- --------
Net cash used by investing
activities...................... (8,467) (28,321) (29,430) (6,287) (18,336)
------- -------- -------- ------- --------
Cash flows from financing activities:
New borrowings.......................... -- -- -- 15,000
Repayment of long-term debt............. -- (11,200) (11,200) (3,798) (24)
(Decrease) increase in intercompany
payable to Fibreboard Corporation.... (2,778) 29,259 37,271 1,134 (5,949)
------- -------- -------- ------- --------
Net cash (used) provided by
financing activities............ (2,778) 18,059 26,071 (2,664) 9,027
------- -------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents............................. (6,322) (2,756) 4,502 531 (5,097)
Cash and cash equivalents, beginning of
year.................................... 7,821 3,319 3,319 2,788 7,885
------- -------- -------- ------- --------
Cash and cash equivalents, end of year.... $ 1,499 $ 563 $ 7,821 $ 3,319 $ 2,788
======= ======== ======== ======= ========
Supplemental cash flow information:
Cash paid for interest to third
parties.............................. $ 55 $ 590 $ 590 $ 810 $ 186
======= ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 147
THE RESORT GROUP OF FIBREBOARD CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
1. ORGANIZATION
BASIS OF PRESENTATION
The Resort Group of Fibreboard Corporation (the Group) includes the
following wholly-owned subsidiaries of Fibreboard Corporation, a Delaware
corporation (Fibreboard): Trimont Land Company, d.b.a. Northstar-at-Tahoe
(Northstar), Sierra-at-Tahoe, Inc. (Sierra), and Bear Mountain, Inc. (Bear),
from the date of acquisition by Fibreboard.
Although for presentation purposes the Group's fiscal years and months are
on a calendar basis, these fiscal periods actually end on the last Saturday of
the period. Fiscal year 1995 and 1993 each contained 52 weeks; fiscal year 1994
contained 53 weeks. The impact of the additional week in 1994 resulted in
increased revenue and income as the additional week was a peak holiday week.
BUSINESS
Northstar is a year-round destination resort including ski and golf
facilities. Northstar also has real estate operations. Sierra is a day ski area.
Both Northstar and Sierra are located near Lake Tahoe, California. Bear is a day
ski area located approximately two hours from Los Angeles, California.
Operations are highly seasonal at all locations with more than 75% of
revenues realized during the ski season from late November through early April.
The length of the ski season and the profitability of operations are impacted by
weather. Although Northstar and Bear have snowmaking capacity to mitigate some
of the effects of adverse weather conditions, abnormally warm weather or lack of
adequate snowfall can materially affect revenues. Sierra lacks significant
snowmaking capability but generally benefits from higher annual snowfall.
Depending on the weather and other factors, annual skier visits have varied from
300,000 to 500,000 at Northstar, 230,000 to 350,000 at Sierra and 230,000 to
360,000 at Bear over the last decade.
In 1993 and 1994, Northstar's real estate activities consisted primarily of
property management services for the homeowners at the resort. Beginning in
1995, the Group began also developing and selling residential lots.
Other risks and uncertainties that face the resort group include
competitive pressures affecting the number of skier visits and ticket prices;
the success of marketing efforts to maintain and increase skier visits; the
possibility of equipment failure; and continued access to water for snowmaking.
On August 29, 1996, Fibreboard entered into a letter of intent to sell the
assets of the Group to Booth Creek, Inc., for $121.5 million in cash. The
transaction is expected to close in December 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Group participates in Fibreboard's centralized cash management system
to minimize the amount of cash on deposit with banks and to maximize interest
income. Cash includes cash on hand or in banks available for immediate
disbursal. The Group considers all highly-liquid investments with an original
maturity of three months or less to be cash equivalents.
F-25
<PAGE> 148
THE RESORT GROUP OF FIBREBOARD CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or
market. The components of inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
OCTOBER 31, ---------------
1996 1995 1994
----------- ---- ----
<S> <C> <C> <C>
Retail Products.................................... $1,186 $1,851 $ 756
Supplies........................................... 805 1,141 424
Food and Beverage.................................. 115 275 288
------ ------ ------
Total inventories............................. $2,106 $3,267 $1,468
====== ====== ======
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method based upon the estimated service lives of the property,
ranging from 3 to 20 years. Annual depreciation on most property and equipment
is recognized from December 1 to March 31, consistent with the ski season.
Therefore, the accompanying statement of operations for the ten month period
ended October 31, 1996 includes 75% of annual depreciation. Depreciation expense
for the ten month period ended October 31, 1996 and the years ended December 31,
1995, 1994, and 1993 was $4,338, $4,024, $3,449, and $2,514, respectively.
The Group capitalizes interest on borrowed funds during construction
periods. Capitalized interest is amortized over the lives of the related assets.
Interest capitalized in the ten month period ended October 31, 1996 and the
years ended December 31, 1995, 1994, and 1993 was $64, $0, $0, and $183,
respectively.
ADVERTISING COSTS
The cost of advertising is expensed when the advertisement is released. The
cost of professional services for advertising, sales campaigns, promotion, and
public relations is expensed when the services are rendered. The cost of
brochures is expensed over the ski season.
INCOME TAXES
The Group accounts for income taxes according to the provisions of
Statement of Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
SFAS No. 109 utilizes the liability method and deferred taxes are determined
based on the estimated future tax effects of differences between the financial
statement and tax bases of assets and liabilities given the provisions of the
enacted tax laws. Deferred taxes primarily consist of the basis differences
associated with property and equipment and certain liabilities as of October 31,
1996 and December 31, 1995 and 1994.
The Group is included in the federal and state consolidated tax returns of
Fibreboard. The Group computes its tax liability as if it had filed a separate
tax return and accrues such amount to Fibreboard. Accordingly, all current and
deferred taxes, which are provided for in total at the statutory rate, are
included in the intercompany payable to Fibreboard Corporation.
F-26
<PAGE> 149
THE RESORT GROUP OF FIBREBOARD CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The following table summarizes the differences between the statutory
federal and the effective rate:
<TABLE>
<CAPTION>
DECEMBER 31,
OCTOBER 31, ----------------------
1996 1995 1994 1993
----------- ---- ---- ----
<S> <C> <C> <C> <C>
Tax at statutory federal rate................ $1,721 $2,289 $2,574 $749
State taxes, net of federal tax benefit...... 297 395 445 129
Other........................................ -- (60) (40) (2)
------ ------ ------ ----
Tax provision................................ $2,018 $2,624 $2,979 $876
====== ====== ====== ====
</TABLE>
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements to be consistent with the current year presentation.
3. REAL ESTATE OPERATIONS:
Revenues and profits on the sales of real estate at Northstar are
recognized in accordance with SFAS No. 66, "Accounting for the Sales of Real
Estate."
Real estate held for resale includes the initial development expenditures
(e.g., roads, sewage systems, engineering fees, and capitalized interest) for a
new residential development at Northstar. The costs have been allocated to the
individual lots based on the development phase in which the lot is located. The
current portion of these costs relates to lots which the Group expects to sell
within one year. These costs are recognized as non-cash cost of sales upon the
sale of the lot.
Effective January 1, 1996, the Group capitalized interest applicable to
real estate development. In the ten months ended October 31, 1996, approximately
$119 was capitalized. Of that amount, $26 was applicable to lots sold in 1996.
Such amount is reflected in cost of sales in the accompanying statement of
operations.
F-27
<PAGE> 150
THE RESORT GROUP OF FIBREBOARD CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. REAL ESTATE OPERATIONS -- (CONTINUED)
Notes receivable relate to these real estate sales and equipment sales and
consist of the following as of October 31, 1996 and December 31, 1995 and 1994:
<TABLE>
<CAPTION>
DECEMBER 31,
OCTOBER 31, ------------
1996 1995 1994
----------- ---- ----
<S> <C> <C> <C>
Secured notes receivable bearing interest at 7.75% to
10.5%; payments of interest and principal are due
monthly and the notes mature between 1997 and
2011................................................ $1,584 $830 $578
Notes receivable for sale of equipment; payable in
full in April 1997.................................. 134 -- --
------ ---- ----
1,718 830 578
Less: current portion................................. (350) (78) (24)
------ ---- ----
Long-term notes receivable............................ $1,368 $752 $554
====== ==== ====
</TABLE>
Future maturities of these notes are as follows:
<TABLE>
<S> <C>
1996 (two months)........................................... $ 11
1997........................................................ 454
1998........................................................ 784
1999........................................................ 29
2000........................................................ 32
2001........................................................ 34
Thereafter.................................................. 374
------
$1,718
======
</TABLE>
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
DECEMBER 31,
OCTOBER 31, ---------------
1996 1995 1994
----------- ---- ----
<S> <C> <C> <C>
Accounts payable.................................... $1,176 $3,396 $2,885
Payroll related..................................... 1,076 1,640 1,362
Taxes other than income............................. 945 647 541
Unearned income..................................... 880 2,177 2,153
Interest............................................ 50 5 155
Other............................................... 196 291 295
------ ------ ------
$4,323 $8,156 $7,391
====== ====== ======
</TABLE>
Unearned income relates primarily to season ski passes and customer
deposits. Revenue from season passes is recognized ratably over the ski season.
5. EMPLOYEE BENEFIT PLANS
The Group's employees are eligible to participate in a 401(k) plan. The
Group contributed $226, $288, $246, and $207 as a result of these plans in the
ten month period ended October 31, 1996 and the years ended December 31, 1995,
1994, and 1993, respectively. Certain current and former group employees have
vested benefits in Fibreboard's defined benefit plan which was frozen in 1993.
All pension liabilities and expenses are funded directly by Fibreboard.
F-28
<PAGE> 151
THE RESORT GROUP OF FIBREBOARD CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
Certain Group officers and key employees participate in the Fibreboard
stock option, rights, and long-term equity incentive plans. Stock options are
generally granted at the then market value of Fibreboard stock. If the option
price is less than the market price, compensation expense is recognized over the
vesting period. Compensation related to restricted stock awards, rights, and
incentive compensation is recognized over the related term of the award.
6. CREDIT FACILITY
The Group's long-term debt consisted of the following as of December 31,
1994:
<TABLE>
<CAPTION>
1994
----
<S> <C>
Reducing revolving credit facility, interest at LIBOR plus
1.0% to 1.375%, secured by the assets of the Group........ $ 6,700
Term loan, interest at prime plus 0.5%, secured by the
assets of Northstar....................................... 4,500
-------
11,200
Less current portion........................................ (1,000)
-------
$10,200
=======
</TABLE>
The group has a reducing revolving credit facility which provides for
maximum borrowings of $34,686. Maximum availability reduces to $28,657 on April
30, 1997, $22,628 on April 30, 1998, and $16,600 on April 30, 1999, with any
remaining outstanding amounts due on May 31, 2000. Borrowings against the line
are secured by all of the stock and assets of the Group. As of October 31, 1996,
no amounts were borrowed against this facility. The Company pays a fee of 0.375%
of the unused amount; such fees were $81, $85, $33, and $9 for the ten months
ended October 31, 1996, and each of the years ended December 31, 1995, 1994, and
1993, respectively, and are included in interest expense. The amount of credit
available to the Group is reduced by $1,207 of letters of credit outstanding as
of October 31, 1996.
The Group's loan agreements contain various financial covenants, the most
restrictive of which impose limitations on dividends and other distributions and
require the maintenance of minimum levels of net worth and certain coverage
ratios. As of September 30, 1996, the most recent reporting date for the bank,
the Group was not in compliance with certain covenants. The Group obtained a
waiver from the bank and was therefore able to draw on the line of credit
through the next reporting date for the bank, December 31, 1996. At that time,
the compliance with covenants will again be reviewed.
7. ACQUISITIONS
SIERRA-AT-TAHOE
In July 1993, the Group acquired the net assets of Sierra Ski Ranch for
$13,054 in cash. The acquisition was accounted for as a purchase of assets. The
ski area was subsequently renamed Sierra-at-Tahoe.
BEAR MOUNTAIN
In October 1995, the Group acquired the net assets of Bear for $20,604 in
cash. The acquisition was accounted for as a purchase of assets. The Group's
acquisition of Bear was financed by a loan from Fibreboard, which has been
recorded at the Group level and is included in the intercompany payable balance
as of October 31, 1996 and December 31, 1995.
F-29
<PAGE> 152
THE RESORT GROUP OF FIBREBOARD CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. ACQUISITIONS -- (CONTINUED)
The table below presents the unaudited revenues and net income of the Group
as if Sierra and Bear had been a member of the Group since January 1, 1994, and
had been charged intercompany interest from that date.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenue:
Resort........................................... $48,304 $56,891 $44,302
Real estate...................................... 5,028 610 --
Timber........................................... 185 -- --
------- ------- -------
53,517 57,501 44,302
======= ======= =======
Net Income......................................... $ 3,672 $ 5,065 $ 1,737
======= ======= =======
</TABLE>
The pro forma information does not purport to be indicative of results that
actually would have occurred had the acquisitions been made on the dates
indicated or of results which may occur in the future.
8. INTERCOMPANY TRANSACTIONS:
The Group is charged a management fee by Fibreboard based on services
rendered at Fibreboard for the benefit of the Group. These services primarily
relate to legal, accounting, cash management, human resources, tax consultation
and filings, management information systems (MIS), and overall corporate
strategy and direction. The fee for the above services and others is based on a
percentage of income, headcount, and estimated time spent by the legal and MIS
staff on the Group's behalf.
This fee was $701, $1,247, $655, and $507, for the ten month period ended
October 31, 1996 and the years ended December 31, 1995, 1994, and 1993,
respectively.
The Group was charged interest of $1,622, including $183 which was
capitalized by the Group (Notes 2 and 3), and $488 by Fibreboard for the ten
months ended October 31, 1996, and for the year ended December 31, 1995,
respectively, based on outstanding intercompany amounts.
In 1996, Fibreboard transferred timber rights of $1.5 million to the Group.
All of the above transactions are accounted for through the Intercompany
payable to Fibreboard Corporation account. In addition, all excess cash is
remitted to and checks are covered by Fibreboard. Allocations for payroll,
taxes, workers' compensation and income taxes are also accounted for through
this account. The most significant activity, which occurred during 1995, related
to the acquisition of Bear Mountain ($20,604) which was funded by Fibreboard and
the refinancing of separate Group debt ($11,200) by Fibreboard.
<TABLE>
<S> <C>
Intercompany payable to Fibreboard Corporation
Balance, December 31, 1994................................ $ 4,222
Bear Mountain Acquisition................................. 20,604
Debt Refinancing.......................................... 11,200
Other, net................................................ 5,467
-------
Balance, December 31, 1995................................ 41,493
Other, net................................................ (2,778)
-------
Balance, October 31, 1996................................. $38,715
=======
</TABLE>
F-30
<PAGE> 153
THE RESORT GROUP OF FIBREBOARD CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. LITIGATION:
The nature of the ski industry includes the risk of skier injuries.
Generally, the Group has insurance to cover potential claims; in some cases the
amounts of the claims are very substantial. Also, a case involving a fatality in
1994 may subject the Group to punitive damages which are not included in the
Group's insurance coverage. The Group is also involved in a number of other
claims arising from its operations.
Management, in consultation with legal counsel, believes resolution of
these claims will not have a material adverse impact on its financial condition
or results of operations.
10. BUSINESS SEGMENTS
The Company operates is three business segments -- resorts, real estate,
and timber. Data by segment is as follows:
<TABLE>
<CAPTION>
OCTOBER 31, DECEMBER 31,
----------- ---------------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Resort................................ $36,829 $39,823 $40,810 $25,528
Real estate........................... 3,595 5,028 610 --
Timber................................ 693 185 -- --
------- ------- ------- -------
41,117 45,036 41,420 25,528
======= ======= ======= =======
Operating income:
Resort................................ 5,805 7,002 6,084 2,325
Real estate........................... 116 116 116 --
Timber................................ -- -- -- --
------- ------- ------- -------
6,104 7,360 8,020 2,325
======= ======= ======= =======
Depreciation, amortization, and
depletion:
Resort................................ 4,338 4,024 3,449 2,514
Real estate........................... -- -- -- --
Timber................................ 16 -- -- --
------- ------- ------- -------
4,354 4,024 3,449 2,514
======= ======= ======= =======
Capital expenditures, exclusive of
acquisitions:
Resort................................ 5,761 5,226 6,199 4,619
Real estate........................... 1,297 3,374 198 --
Timber................................ 1,500 -- -- --
------- ------- ------- -------
8,558 8,600 6,397 4,619
======= ======= ======= =======
Identifiable assets:
Resorts............................... 58,323 57,076 35,749
Real estate........................... 3,806 3,097 1,089
Timber................................ 1,484 -- --
Corporate............................. 5,989 13,143 6,227
------- ------- -------
$69,602 $73,316 $43,065
======= ======= =======
</TABLE>
F-31
<PAGE> 154
THE RESORT GROUP OF FIBREBOARD CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS:
The Group leases certain machinery and equipment under operating leases.
Minimum lease payments for the remainder of 1996 and the next five years are as
follows:
<TABLE>
<S> <C>
1996 (two months)........................................... $ 307
1997........................................................ 973
1998........................................................ 504
1999........................................................ 224
2000........................................................ 84
2001........................................................ --
------
$2,092
======
</TABLE>
In addition, the Group leases property from the U.S. Forest Service for
Sierra and Bear. These leases are effective through 2008 and 2020, respectively.
Lease payments are based on a percentage of revenues. Total rent expense for all
operating leases amounted to $1,842, $1,411, $1,216, and $550, in the ten months
ended October 31, 1996 and the years ended December 31, 1995, 1994, and 1993,
respectively.
During 1996, the Group entered into a contract to replace certain lift
equipment at Sierra. The total cost of the new equipment is approximately $8.4
million of which the Group will receive a vendor's credit for $2 million related
to the equipment being replaced. As of October 31, 1996, the Group had incurred
approximately $2.3 million toward this commitment.
F-32
<PAGE> 155
WATERVILLE VALLEY SKI AREA LTD.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE PERIOD FROM
OCTOBER 28, 1996 TO OCTOBER 28, 1995 TO
NOVEMBER 26, 1996 NOVEMBER 26, 1995
------------------- -------------------
<S> <C> <C>
Revenue:
Resort services.......................................... $ 79,963 $ 185,572
Consumer products........................................ 61,711 112,637
Rental and other income.................................. 49,374 75,180
Conference center........................................ 119,212 61,381
--------- ---------
310,260 434,770
Cost of sales:
Resort services.......................................... 135,307 224,969
Consumer products........................................ 150,962 101,081
Rental and other income.................................. 57,394 29,397
Conference center........................................ 94,712 80,632
--------- ---------
438,375 436,079
--------- ---------
Expenses:
Selling, general and administrative...................... 180,738 243,161
Utilities................................................ 45,583 115,768
Insurance................................................ 9,546 23,899
Depreciation and amortization............................ 82,300 94,000
--------- ---------
318,167 476,828
--------- ---------
Loss from operations....................................... (446,282) (478,137)
Interest expense........................................... 9,750 25,239
--------- ---------
Net loss................................................... $(456,032) $(503,376)
========= =========
</TABLE>
See accompanying notes.
F-33
<PAGE> 156
WATERVILLE VALLEY SKI AREA LTD.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE PERIOD FROM
OCTOBER 28, 1996 TO OCTOBER 28, 1995 TO
NOVEMBER 26, 1996 NOVEMBER 26, 1995
------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................... $(456,032) $(503,376)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................ 82,300 94,000
Changes in operating assets and liabilities:
Accounts receivable................................... (42,874) 37,541
Inventories........................................... 86,607 (87,819)
Prepaid expenses and other assets..................... (18,039) (22,183)
Accounts payable and accrued expenses................. 77,220 94,314
--------- ---------
Net cash used in operating activities...................... (270,818) (387,523)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment.................. (156,445) (37,711)
--------- ---------
Net cash used in investing activities...................... (156,445) (37,711)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliate........................................... 426,141 580,150
Principal payments on long-term debt....................... (5,069) (1,282)
--------- ---------
Net cash provided by financing activities.................. 421,072 578,868
--------- ---------
Net increase (decrease) in cash............................ (6,191) 153,634
Cash at beginning of period................................ 116,115 225,068
--------- ---------
Cash at end of period...................................... $ 109,924 $ 378,702
========= =========
</TABLE>
See accompanying notes.
F-34
<PAGE> 157
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
For the Periods from October 28, 1996 to November 26, 1996 and
from October 28, 1995, to November 26, 1995
1. ORGANIZATION AND BASIS OF PRESENTATION
Waterville Valley Ski Area Ltd. (the "Company") was a wholly-owned
subsidiary of S-K-I Ltd., which was acquired by American Skiing Company on June
30, 1996. The Company owns and operates the Waterville Valley ski resort and
conference center in Waterville Valley, New Hampshire.
Due to the change in ownership on June 30, 1996 and the related purchase
accounting, the statements of operations and cash flows for the 1996 period are
not comparable to the 1995 period, primarily in the areas of depreciation,
amortization, interest expense and income taxes. Accordingly, the two periods
are separated by a vertical line.
The accompanying combined financial statements for the period from October
28, 1996 to November 26, 1996 and from October 28, 1995 to November 26, 1995 are
unaudited, but include all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management of the Company, are considered
necessary for a fair presentation of the Company's operating results and cash
flows for such periods. Due to the highly seasonal nature of the Company's
business, the results for the interim periods are not necessarily indicative of
results for the entire year. Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to generally
accepted accounting principles applicable for interim periods. The unaudited
interim financial statements should be read in conjunction with the following
note and the audited financial statements of the Company as of October 27, 1996
and for the period from July 1, 1996 to October 27, 1996.
2. SUBSEQUENT EVENT
On November 27, 1996, Booth Creek Ski Acquisition Corp., a wholly-owned
subsidiary of Booth Creek Ski Holdings, Inc., purchased the assets of the
Company and another resort from subsidiaries of American Skiing Company for an
aggregate purchase price of $17.5 million. The purchase price was paid with
$14.75 million in cash, before giving effect to certain working capital
adjustments, and a $2.75 million note issued to American Skiing Company.
F-35
<PAGE> 158
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Waterville Valley Ski Area Ltd.
We have audited the accompanying balance sheet of Waterville Valley Ski
Area Ltd., as of October 27, 1996 and the related statements of operations and
accumulated deficit and cash flows for the period from July 1, 1996 to October
27, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Waterville Valley Ski Area
Ltd. as of October 27, 1996 and the results of its operations and its cash flows
for the period from July 1, 1996 to October 27, 1996, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 25, 1997
F-36
<PAGE> 159
WATERVILLE VALLEY SKI AREA LTD.
BALANCE SHEET
October 27, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash...................................................... $ 116,115
Accounts receivable, net of allowance of $37,236 for
doubtful accounts...................................... 320,972
Inventories............................................... 223,721
Prepaid expenses and other assets......................... 217,044
-----------
Total current assets................................. 877,852
Property, plant and equipment, net.......................... 13,066,931
Goodwill, net............................................... 1,272,650
-----------
Total assets......................................... $15,217,433
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 432,180
Accrued expenses.......................................... 878,581
Advance ticket revenue.................................... 454,946
Due to affiliate.......................................... 557,220
Current portion of notes payable.......................... 21,300
Capital lease obligations................................. 106,256
-----------
Total current liabilities............................ 2,450,483
Notes payable, net of current portion....................... 150,754
Deferred taxes.............................................. 875,000
Commitments and contingencies
Stockholder's equity:
Common stock, no par, 100 shares authorized, issued and
outstanding............................................ 12,940,000
Accumulated deficit....................................... (1,198,804)
-----------
Total stockholder's equity........................... 11,741,196
-----------
Total liabilities and stockholder's equity........... $15,217,433
===========
</TABLE>
See accompanying notes.
F-37
<PAGE> 160
WATERVILLE VALLEY SKI AREA LTD.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
Period from July 1, 1996 to October 27, 1996
<TABLE>
<S> <C>
Revenue:
Resort services........................................... $ 116,506
Consumer products......................................... 76,693
Rental and other income................................... 244,789
Conference center......................................... 516,716
-----------
954,704
Cost of sales:
Resort services........................................... 238,470
Consumer products......................................... 106,080
Rental and other expenses................................. 243,639
Conference center......................................... 344,559
-----------
932,748
-----------
21,956
Expenses:
Selling, general and administrative....................... 704,987
Utilities................................................. 216,090
Insurance................................................. 30,333
Depreciation and amortization............................. 329,350
-----------
1,280,760
-----------
Loss from operations........................................ (1,258,804)
Interest expense............................................ (50,000)
-----------
Loss before income tax benefit.............................. (1,308,804)
Income tax benefit.......................................... 110,000
-----------
Net loss and accumulated deficit at October 27, 1996........ $(1,198,804)
===========
</TABLE>
See accompanying notes.
F-38
<PAGE> 161
WATERVILLE VALLEY SKI AREA LTD.
STATEMENT OF CASH FLOWS
Period from July 1, 1996 to October 27, 1996
<TABLE>
<S> <C>
Operating activities
Net loss.................................................. $(1,198,804)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 329,350
Changes in operating assets and liabilities:
Accounts receivable.................................. 27,380
Inventories.......................................... 33,507
Prepaid expenses..................................... (169,952)
Accounts payable and accrued expenses................ 900,507
-----------
Net cash used in operating activities..................... (78,012)
Investing activity
Purchase of property, plant and equipment................. (366,931)
-----------
Net cash used in investing activity....................... (366,931)
Financing activities
Due to affiliate.......................................... 407,314
Principal payments on long-term debt...................... (5,379)
-----------
Net cash provided by financing activities................. 401,935
-----------
Net decrease in cash........................................ (43,008)
Cash at beginning of period................................. 159,123
-----------
Cash at end of period....................................... $ 116,115
===========
State income taxes paid..................................... $ 15,000
===========
</TABLE>
See accompanying notes.
F-39
<PAGE> 162
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS
October 27, 1996
1. BUSINESS ORGANIZATION
Waterville Valley Ski Area Ltd. (the Company) is a wholly-owned subsidiary
of S-K-I Ltd., which was acquired by American Skiing Company on June 30, 1996
(see Note 3). The Company owns and operates the Waterville Valley ski resort and
conference center located in Waterville Valley, New Hampshire. The Company also
operates a year-round base camp adventure center offering mountain bikers, cross
country skiers and hikers access to 100 kilometers of trails in the White
Mountains National Forest.
Due to the seasonality of the Company's business and the nature of its
operations, which require a significant level of fixed operating costs,
operating results may be significantly affected by the level of revenues, which
depend on, among other things, weather conditions. The seasonality also has a
significant effect on the Company's working capital requirements during the
year, since operating losses are generally incurred from May through October. To
the extent cash flows from operations are not sufficient to meet its working
capital requirements, the Company has been dependent on borrowings from its
affiliates, principally S-K-I Ltd. As discussed in Note 12, Booth Creek Ski
Holdings Inc. purchased the business and net assets of the Waterville Valley ski
resort and conference center effective November 27, 1996 and has represented
that it has the ability and intent to fund its operations for the foreseeable
future until the Company is able to support its own operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUES
Revenues from the sale of lift tickets, ski schools and the repair shop
have been included in the statement of operations in the caption Resort
Services. Revenues from restaurants and retail shop sales have been included in
the caption Consumer Products. Revenues from ski, locker and real estate rentals
have been included in the caption Rental and Other Income. Revenues from use of
the Company's convention center have been included in the caption Convention
Center.
Revenue is recognized at the time services are provided or products are
sold. Sales of season and advance lift tickets prior to the beginning of the
skiing season (November 1) are deferred and recognized in Resort Services during
the ski season, which generally commences in November and extends through April.
INVENTORIES
Inventories, which consist principally of food, beverage and retail
merchandise, are valued at the lower of cost (first-in, first-out) or market.
INCOME TAXES
The Company determines its provision for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires that the liability method be used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax basis of
assets and liabilities, and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
The Company is a wholly-owned subsidiary of S-K-I Ltd., which files its
federal return on a consolidated basis. However, the Company, for purposes of
the accompanying financial statements, has provided for income taxes on a
separate-return basis.
F-40
<PAGE> 163
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost with depreciation being
computed ratably on a monthly basis using the straight-line method over the
useful lives of the related assets:
<TABLE>
<S> <C>
Land and trail improvements................................. 20 years
Buildings and improvements.................................. 20 years
Machinery, snow making and other equipment.................. 3-6 years
Lifts and lines............................................. 10-20 years
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash, accounts
receivable and notes payable approximate their fair values.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for impairment of long-lived assets based on Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of," which provides
criteria for the recognition and measurement of impairment loss associated with
long-lived assets. This standard has had no material impact on the Company's
financial position or results of operations.
GOODWILL
Goodwill represents the excess of cost over the fair value of net assets of
businesses acquired, which is amortized over 20 years. Accumulated amortization
is $29,350 at October 27, 1996.
F-41
<PAGE> 164
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. ACQUISITION
On June 30, 1996, the capital stock of S-K-I Ltd. was acquired by American
Skiing Company, with S-K-I Ltd. becoming the surviving company. The acquisition
was accounted for under the purchase method of accounting. The portion of the
total purchase price allocated to the Company was as follows:
<TABLE>
<S> <C>
Assets
Current assets............................................ $ 812,000
Property, plant and equipment............................. 13,000,000
Goodwill.................................................. 1,302,000
-----------
15,114,000
Liabilities
Current liabilities....................................... 1,143,000
Notes payable............................................. 156,000
Deferred income taxes..................................... 875,000
-----------
2,174,000
-----------
$12,940,000
===========
</TABLE>
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<S> <C>
Retail merchandise.................................. $ 192,241
Food and beverage................................... 31,480
-----------
$ 223,721
===========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<S> <C>
Land................................................ $ 610,000
Land and trail improvements......................... 2,151,878
Buildings and improvements.......................... 4,620,572
Machinery, snow making and other equipment.......... 3,654,018
Lifts and lines..................................... 1,630,000
Construction in progress............................ 700,463
-----------
13,366,931
Less accumulated depreciation and amortization...... (300,000)
-----------
$13,066,931
===========
</TABLE>
F-42
<PAGE> 165
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<S> <C>
Accrued costs in connection with acquired business.......... $200,000
Accrued compensation........................................ 55,135
Deposits.................................................... 50,527
Accrued rentals............................................. 90,082
Accrued utilities and other operating....................... 322,074
Unearned advertising revenue................................ 64,000
Accrued insurance........................................... 96,763
--------
$878,581
========
</TABLE>
7. TRANSACTIONS WITH AFFILIATE
S-K-I Ltd. provides all cash management and working capital financing to
the Company. S-K-I Ltd. also provides certain insurance coverages and management
services for which a corporate charge is allocated to the Company. The corporate
charge covering management services, including staff salaries, payroll taxes,
employee benefits and officers life insurance amounted to $32,096 for the period
from July 1, 1996 to October 27, 1996. The corporate charge included in
insurance expense for insurance coverages, including liability and workers'
compensation, amounted to $25,333 for the period from July 1, 1996 to October
27, 1996.
Interest expense of $36,000 for the period from July 1, 1996 to October 27,
1996 represents interest cost, net of interest income, charged to the Company
from S-K-I Ltd. related to the net amounts due to and from S-K-I Ltd. based on
average monthly balances. These amounts are included in interest expense.
8. NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<S> <C>
Note payable -- Town of Waterville.......................... $162,271
Other notes payable......................................... 9,783
--------
172,054
Less current portion........................................ 21,300
--------
$150,754
========
</TABLE>
These notes are unsecured and interest rates range from 7% to 14%. Interest
paid on these notes approximated interest expense of $14,000 for the period from
July 1, 1996 to October 27, 1996.
Aggregate annual maturities of long-term debt obligations as of October 27,
1996 are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 21,300
1998........................................................ 15,615
1999........................................................ 15,615
2000........................................................ 15,615
2001........................................................ 15,615
Thereafter.................................................. 88,294
--------
$172,054
========
</TABLE>
F-43
<PAGE> 166
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. LEASES AND PERMITS
The Company operates certain portions of its skiing terrain under special
use permits granted by the U.S. Forest Service. Amounts payable under these
permits are measured based on percentages of revenues from certain activities.
No fees were incurred under these permits for the period from July 1, 1996 to
October 27, 1996.
The Company is committed under operating leases for certain machinery and
equipment which expire at various dates through 2001. Total rent expense under
operating leases amounted to approximately $86,000 for the period from July 1,
1996 to October 27, 1996.
Future minimum rental payments under theses leases as of October 27, 1996
are as follows:
<TABLE>
<S> <C>
1997........................................................ $267,449
1998........................................................ 192,701
1999........................................................ 178,859
2000........................................................ 173,501
2001........................................................ 78,000
--------
$890,510
========
</TABLE>
The Company leases certain machinery and equipment under agreements
classified as capital leases. Assets capitalized under capital leases had a cost
of $200,000 and accumulated amortization of $68,000 at October 27, 1996. Future
minimum lease payments which are paid in installments during the skiing season
under capital leases are as follows:
<TABLE>
<S> <C>
1997........................................................ $185,652
Less amounts representing interest.......................... 79,396
--------
Less current portion........................................ $106,256
========
</TABLE>
10. INCOME TAXES
The income tax benefit of $110,000 for the period from July 1, 1996 to
October 27, 1996 is based on the Company's recovery of its previously provided
current federal taxes payable in 1995 and 1996. The Company includes currently
payable and refundable income taxes in amounts due to an affiliate.
The deferred tax liability of $875,000 is based on the excess of the
financial statement basis of property, plant and equipment over the tax basis
principally related to the difference between the fair market value of property,
plant and equipment at June 30, 1996, the acquisition date described in Note 3,
and the carryover tax basis.
11. MARKETING AGREEMENT
Effective September 1, 1996, the Company entered into a one-year
promotional program with Volvo Cars of North America (Volvo) to promote skiing
and snowboarding in New England.
The Company was provided the use of four Volvo station wagons and $40,000
in cash in exchange for designating Volvo as the official automobile of the
Waterville ski area. The Company accounted for the transaction based upon the
estimated fair value of the services and cash received of $64,000. This amount
has been included as prepaid advertising in prepaid assets and as unearned
advertising revenue included in accrued expenses. These amounts will be
amortized to advertising expense and income, respectively, during the 1997 ski
season.
12. SUBSEQUENT EVENT
On November 27, 1996, the business and net assets of the Waterville Valley
ski resort and conference center, along with another affiliated ski resort, were
acquired by Booth Creek Ski Holdings, Inc. for $17,500,000.
F-44
<PAGE> 167
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Waterville Valley Ski Area Ltd.
We have audited the accompanying balance sheets of Waterville Valley Ski
Area Ltd. as of October 29, 1995 and June 30, 1996, and the related statements
of operations and retained earnings (accumulated deficit), and cash flows for
the year ended October 29, 1995 and the period from October 30, 1995 to June 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
Except as discussed in the following paragraph, we conducted our audits in
accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Waterville Valley Ski Area
Ltd. as of October 29, 1995 and June 30, 1996, and the results of its operations
and its cash flows for the year ended October 29, 1995 and the period from
October 30, 1995 to June 30, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 25, 1997
F-45
<PAGE> 168
WATERVILLE VALLEY SKI AREA LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 29, JUNE 30,
1995 1996
----------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 237,160 $ 159,123
Accounts receivable, net of allowance of $11,678 in 1995
and $9,352 in 1996 for doubtful accounts............... 544,767 348,352
Inventories............................................... 272,582 257,228
Prepaid expenses.......................................... 103,585 47,092
----------- -----------
Total current assets........................................ 1,158,094 811,795
Property, plant and equipment, net.......................... 11,660,674 11,903,703
Deferred taxes.............................................. 11,000 --
----------- -----------
Total assets................................................ $12,829,768 $12,715,498
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 607,172 $ 196,335
Accrued expenses.......................................... 262,393 467,946
Advance ticket revenue.................................... 484,605 919
Due to affiliate.......................................... 799,776 150,200
Current portion of notes payable.......................... 26,986 21,050
Capital lease obligations................................. -- 106,256
----------- -----------
Total current liabilities................................... 2,180,932 942,706
Notes payable, net of current portion....................... 173,349 156,383
Deferred taxes.............................................. -- 379,000
Commitments and contingencies
Stockholder's equity:
Common stock, no par, 100 shares authorized, issued and
outstanding............................................ 10,491,417 10,491,417
Retained earnings (accumulated deficit)................... (15,930) 745,992
----------- -----------
Total stockholder's equity.................................. 10,475,487 11,237,409
----------- -----------
Total liabilities and stockholder's equity.................. $12,829,768 $12,715,498
=========== ===========
</TABLE>
See accompanying notes.
F-46
<PAGE> 169
WATERVILLE VALLEY SKI AREA LTD.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED OCTOBER 30,
OCTOBER 29, 1995 TO
1995 JUNE 30, 1996
----------- -------------
<S> <C> <C>
Revenue:
Resort services........................................... $5,528,249 $ 6,141,127
Consumer products......................................... 1,278,170 2,607,329
Rental and other income................................... 1,501,038 1,509,125
Conference center......................................... 1,345,349 521,146
---------- -----------
9,652,806 10,778,727
Cost of sales:
Resort services........................................... 2,140,755 2,006,867
Consumer products......................................... 720,780 1,854,198
Rental and other expenses................................. 945,950 491,251
Conference center......................................... 857,169 476,037
---------- -----------
4,664,654 4,828,353
---------- -----------
4,988,152 5,950,374
Expenses:
Selling, general and administrative....................... 2,754,344 2,329,963
Utilities................................................. 753,287 962,209
Insurance................................................. 321,459 297,357
Depreciation and amortization............................. 1,090,992 900,408
---------- -----------
4,920,082 4,489,937
---------- -----------
Income from operations...................................... 68,070 1,460,437
Interest expense............................................ (95,000) (50,000)
---------- -----------
Income (loss) before income taxes........................... (26,930) 1,410,437
Income taxes (benefit)...................................... (11,000) 565,000
---------- -----------
Net income (loss)........................................... (15,930) 845,437
Accumulated deficit, beginning of period.................... -- (15,930)
Dividends declared.......................................... -- (83,515)
---------- -----------
Retained earnings (accumulated deficit), end of period...... $ (15,930) $ 745,992
========== ===========
</TABLE>
See accompanying notes.
F-47
<PAGE> 170
WATERVILLE VALLEY SKI AREA LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED OCTOBER 30,
OCTOBER 29, 1995 TO
1995 JUNE 30, 1996
----------- -------------
<S> <C> <C>
Operating activities
Net income (loss)......................................... $ (15,930) $ 845,437
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 1,090,992 900,408
Deferred taxes......................................... (11,000) 390,000
Changes in operating assets and liabilities:
Accounts receivable.................................. (544,767) 196,415
Inventories.......................................... (222,140) 15,354
Prepaid expenses..................................... (103,585) 56,493
Advance ticket revenue............................... (182,558) (483,686)
Accounts payable and accrued expenses................ 758,271 (205,284)
----------- ----------
Net cash provided by operating activities................. 769,283 1,715,137
Investing activities
Purchase of property, plant and equipment................. (1,248,814) (808,513)
----------- ----------
Net cash used in investing activities..................... (1,248,814) (808,513)
Financing activities
Principal payments on notes payable and capital leases.... (85,085) (251,570)
Due to affiliate.......................................... 799,776 (649,576)
Dividends paid............................................ -- (83,515)
----------- ----------
Net cash provided by (used in) financing activities....... 714,691 (984,661)
----------- ----------
Net increase (decrease) in cash............................. 235,160 (78,037)
Cash at beginning of period................................. 2,000 237,160
----------- ----------
Cash at end of period....................................... $ 237,160 $ 159,123
=========== ==========
State income taxes paid..................................... $ 35,000
==========
Non-cash investing activities:
Equipment acquired under lease obligations................ $ 334,924
==========
</TABLE>
See accompanying notes.
F-48
<PAGE> 171
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
1. BUSINESS
Waterville Valley Ski Area Ltd. (the Company), a wholly-owned subsidiary of
S-K-I Ltd., owns and operates the Waterville Valley ski resort and conference
center located in Waterville Valley, New Hampshire. The Company also operates a
year-round base camp adventure center offering mountain bikers, cross country
skiers and hikers access to 100 kilometers of trails in the White Mountains
National Forest.
Due to the seasonality of the Company's business and the nature of its
operations, which require a significant level of fixed operating costs,
operating results may be significantly affected by the level of revenues which
depend on, among other things, weather conditions. The seasonality also has a
significant effect on the Company's working capital requirements during the
year, since operating losses are generally incurred from May through October. To
the extent cash flows from operations are not sufficient to meet its working
capital requirements, the Company is dependent on borrowings from its
affiliates, principally S-K-I Ltd. and its successor (see Note 11), which have
represented that they have the ability and intent to fund the Company's
operations for the foreseeable future or until the Company is able to support
its own operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUES
Revenues from the sale of lift tickets, ski schools and repair shop have
been included in the statement of operations in the caption Resort Services.
Revenues from restaurants and retail shop sales have been included in the
caption Consumer Products. Revenues from ski, locker and real estate rentals
have been included in the caption Rental and Other Income. Revenues from use of
the Company's convention center have been included in the caption Convention
Center.
Revenue is recognized at the time services are provided or products are
sold. Sales of season and advance lift tickets prior to the beginning of the
skiing season (November 1) are deferred and recognized in Resort Services during
the skiing season, which generally commences in November and extends through
April.
INVENTORIES
Inventories, which consist principally of food, beverage and retail
merchandise, are valued at the lower of cost (first-in, first-out) or market.
INCOME TAXES
The Company determines its provision for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires that the liability method be used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax basis of
assets and liabilities, and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
The Company is a wholly-owned subsidiary of S-K-I Ltd., which files its
federal return on a consolidated basis using a tax year end of July 31. However,
for purposes of the accompanying financial statements, the Company has recorded
its tax provision on a separate-return basis.
F-49
<PAGE> 172
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost with depreciation being
computed ratably on a monthly basis using the straight-line method over the
useful lives of the related assets:
<TABLE>
<S> <C>
Land and trail improvements................................. 20 years
Buildings and improvements.................................. 20 years
Machinery, snow making and other equipment.................. 3-6 years
Lifts and lines............................................. 10-20 years
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash, accounts
receivable and notes payable approximate their fair values.
ACCOUNTING PRONOUNCEMENT
In March 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of", which establishes
criteria for the recognition and measurement of impairment loss associated with
long-lived assets. The Company adopted this standard effective October 30, 1995
and its adoption did not have a material impact on the Company's financial
position or results of operations.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
OCTOBER 29, JUNE 30,
1995 1996
----------- --------
<S> <C> <C>
Retail merchandise....................................... $241,102 $224,715
Food and beverage........................................ 31,480 32,513
-------- --------
$272,582 $257,228
======== ========
</TABLE>
F-50
<PAGE> 173
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
OCTOBER 29, JUNE 30,
1995 1996
----------- --------
<S> <C> <C>
Land................................................ $ 576,719 $ 576,719
Land and trail improvements......................... 2,802,998 2,820,209
Buildings and improvements.......................... 3,742,613 3,895,776
Machinery, snow making and other equipment.......... 3,137,919 4,025,896
Lifts and lines..................................... 2,058,242 2,108,471
Construction in progress............................ 377,444 363,691
----------- -----------
12,695,935 13,790,762
Less accumulated depreciation and amortization...... 1,035,261 1,887,059
----------- -----------
$11,660,674 $11,903,703
=========== ===========
</TABLE>
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
OCTOBER 29, JUNE 30,
1995 1996
----------- --------
<S> <C> <C>
Accrued compensation..................................... $ 44,531 $ 49,762
Deposits................................................. 54,627 52,532
Accrued rentals.......................................... 31,826 95,864
Accrued utilities and other operating.................... 66,683 78,486
Accrued insurance........................................ 64,726 191,302
-------- --------
$262,393 $467,946
======== ========
</TABLE>
6. TRANSACTIONS WITH AFFILIATES
S-K-I Ltd. provides all cash management and working capital financing to
the Company. S-K-I Ltd. also provides certain insurance coverages and management
services for which a corporate charge is allocated to the Company. The corporate
charge covering management services, including staff salaries, payroll taxes,
employee benefits, officers life insurance and professional fees amounted to
$227,783 in fiscal 1995 and $554,892 for the period from October 30, 1995 to
June 30, 1996. The corporate charge included in insurance expense for insurance
coverages, including liability and workers compensation amounted to $226,357 in
fiscal 1995 and $261,459 for the period from October 30, 1995 to June 30, 1996.
Interest expense of $48,000 in fiscal 1995 and $31,000 for the period from
October 30, 1995 to June 30, 1996 represents interest cost, net of interest
income, charged to the Company related to the net amounts due to and from S-K-I
Ltd. based on average monthly balances. These amounts are included in interest
expense.
F-51
<PAGE> 174
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
OCTOBER 29, JUNE 30,
1995 1996
----------- --------
<S> <C> <C>
Note payable -- Town of Waterville....................... $176,145 $163,502
Other.................................................... 24,190 13,931
-------- --------
200,335 177,433
Less current portion..................................... 26,986 21,050
-------- --------
$173,349 $156,383
======== ========
</TABLE>
These notes are unsecured and interest rates range from 7% to 14%. Interest
paid on these notes approximated interest expense of $47,000 and $19,000 in
fiscal 1995 and for the period from October 30, 1995 to June 30, 1996,
respectively.
Aggregate annual maturities of long-term debt obligations as of June 30,
1996 are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 21,050
1998........................................................ 21,605
1999........................................................ 15,615
2000........................................................ 15,615
2001........................................................ 15,615
Thereafter.................................................. 87,933
--------
$177,433
========
</TABLE>
8. LEASES AND PERMITS
The Company operates certain portions of its skiing terrain under special
use permits granted by the U.S. Forest Service. Amounts payable under these
permits are measured based on percentages of revenues from certain activities.
Fees for these permits amounted to $145,422 in fiscal 1995 and $165,214 for the
period from October 30, 1995 to June 30, 1996 and are included in cost of resort
services.
The Company is committed under operating leases for certain machinery and
equipment which expire at various dates through 2001. Total rent expense under
operating leases for the year ended October 29, 1995 and the period from October
30, 1995 to June 30, 1996 were $235,000 and $213,000, respectively.
Future minimum rental payments under these leases as of June 30, 1996 are
as follows:
<TABLE>
<S> <C>
1997........................................................ $258,944
1998........................................................ 215,489
1999........................................................ 173,894
2000........................................................ 163,894
2001........................................................ 163,894
--------
$976,115
========
</TABLE>
The Company leases certain machinery and equipment under agreements
classified as capital leases. Assets capitalized under capital leases had a cost
of $334,924 and accumulated amortization of $136,184 at
F-52
<PAGE> 175
WATERVILLE VALLEY SKI AREA LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. LEASES AND PERMITS -- (CONTINUED)
June 30, 1996. Future minimum lease payments which are made in installments
during the ski season are as follows:
<TABLE>
<S> <C>
1997........................................................ $185,652
Less amounts representing interest.......................... 79,396
--------
$106,256
========
</TABLE>
9. INCOME TAXES
The provisions (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED OCTOBER 30,
OCTOBER 25, 1995 TO
1995 JUNE 30, 1996
----------- -------------
<S> <C> <C>
Current:
Federal............................................. $ 110,000
State............................................... 65,000
---------
175,000
Deferred:
Federal............................................. $ (9,000) 295,000
State............................................... (2,000) 95,000
--------- ---------
(11,000) 390,000
--------- ---------
$ (11,000) $ 565,000
========= =========
</TABLE>
Income taxes currently payable are included in amounts due to an affiliate.
The tax effects of temporary differences that give rise to significant
portions of net deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
OCTOBER 29,
1995 JUNE 30, 1996
----------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward..................... $ 219,000
Deferred tax liabilities:
Depreciation........................................ (208,000) $(379,000)
--------- ---------
Net deferred tax assets (liabilities)................. $ 11,000 $(379,000)
========= =========
</TABLE>
At October 29, 1995, the Company had a federal net operating loss
carryforward of approximately $547,000, available to reduce future taxable
income, which was fully utilized in the period from October 30, 1995 to June 30,
1996.
10. SUBSEQUENT EVENT
On July 1, 1996, the capital stock of S-K-I Ltd. was acquired by American
Skiing Company with S-K-I Ltd. becoming the surviving company. S-K-I Ltd.
continued to own and operate Waterville Valley Ski Area Ltd. until November 27,
1996, at which date the business and net assets of the Waterville Valley ski
resort and conference center were acquired by Booth Creek Ski Holdings, Inc.
F-53
<PAGE> 176
SKI LIFTS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
OCTOBER 1, 1996 OCTOBER 1, 1995
TO JANUARY 15, TO JANUARY 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Revenues:
Lifts..................................................... $2,268,458 $3,137,639
Ski rentals............................................... 322,580 457,500
Ski school lessons........................................ 66,518 141,385
Service and other sales................................... 123,489 140,130
Building lease income..................................... 38,488 37,065
Restaurant sales.......................................... 459,798 547,667
Beer, wine and liquor..................................... 126,862 183,003
Ski shop.................................................. 104,500 132,899
---------- ----------
Total revenues.............................................. 3,510,693 4,777,288
---------- ----------
Costs and expenses:
Operating salaries, wages and other employee costs........ 1,755,257 1,849,023
General, administrative and other operating expenses...... 1,225,208 1,387,450
Depreciation and amortization............................. 277,478 385,016
Cost of restaurant, liquor and ski shop sales............. 263,900 285,600
---------- ----------
Total costs and expenses.................................... 3,521,843 3,907,089
---------- ----------
Operating income............................................ (11,150) 870,199
---------- ----------
Other income (expense):
Interest income........................................... 5,917 7,635
Interest expense.......................................... (118,839) (132,576)
Gain (loss) on disposal of equipment...................... 8,165 (21,459)
Equity in earnings of real estate partnership............. 7,532 --
Ski school administrative and late fees................... 2,000 10,551
Miscellaneous income -- auction sales..................... -- 3,268
Other income.............................................. 2,480 8,169
---------- ----------
(92,745) (124,412)
---------- ----------
Net income (loss)........................................... $ (103,895) $ 745,787
========== ==========
</TABLE>
See accompanying notes.
F-54
<PAGE> 177
SKI LIFTS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
OCTOBER 1, 1996 OCTOBER 1, 1995
TO JANUARY 15, TO JANUARY 31,
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ (103,895) $ 745,787
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 277,478 385,016
(Gain) loss on disposal of equipment...................... (8,165) 21,459
Gain on sale of investment................................ -- (18,890)
Other..................................................... 31,920 25,051
Changes in:
Receivables............................................ (8,040) 59,042
Inventories............................................ (69,514) (109,052)
Prepaid expenses and other............................. 44,272 5,907
Unearned revenue....................................... 1,203,254 894,248
Accounts payable and other............................. 789,043 316,336
Accrued interest, wages and taxes...................... 311,226 638,239
Insurance claims....................................... 24,003 7,144
----------- -----------
Net cash provided by operating activities................... 2,491,582 2,970,287
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment......................... (379,269) (1,141,385)
Proceeds from sale of equipment............................. 8,001 --
Proceeds from sale of investment............................ -- 118,358
----------- -----------
Net cash used in investing activities....................... (371,268) (1,023,027)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit borrowings and repayments, net............... (1,405,000) (1,971,000)
Additions to long-term debt................................. 150,000 580,000
Payments on long-term debt and capital leases............... (679,771) (355,980)
Distributions to shareholders............................... (55,141) --
----------- -----------
Net cash used in financing activities....................... (1,989,912) (1,746,980)
----------- -----------
Net increase in cash and cash equivalents................... 130,402 200,280
Cash and cash equivalents:
Beginning of year......................................... 84,965 92,607
----------- -----------
End of year............................................... $ 215,367 $ 292,887
=========== ===========
</TABLE>
See accompanying notes.
F-55
<PAGE> 178
SKI LIFTS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIODS FROM OCTOBER 1, 1996 TO JANUARY 15, 1997 AND FROM
OCTOBER 1, 1995 TO JANUARY 31, 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
Ski Lifts, Inc. (the "Company") operates alpine and cross-country ski
resorts at Snoqualmie Summit, Ski Acres, Alpental and Hyak in the western
Cascade mountains of Washington State.
The accompanying financial statements for the periods from October 1, 1996
to January 15, 1997 and from October 1, 1995 to January 31, 1996 are unaudited,
but include all adjustments (consisting only of normal recurring adjustments)
which, in the opinion of management of the Company, are considered necessary for
a fair presentation of the Company's operating results and cash flows for the
periods from October 1, 1996 to January 15, 1997 and from October 1, 1995 to
January 31, 1996. Due to the highly seasonal nature of the Company's business,
the results for the interim periods are not necessarily indicative of results
for the entire year. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to generally accepted
accounting principles applicable for interim periods. The unaudited interim
financial statements should be read in conjunction with the following note and
the audited financial statements of the Company as of September 30, 1996 and for
the year then ended.
2. SUBSEQUENT EVENT
Effective January 15, 1997, Booth Creek Ski Holdings, Inc. ("Booth Creek")
purchased all of the issued and outstanding common stock of the Company for an
aggregate purchase price of approximately $14.0 million, which included the
assumption of approximately $3.6 million of indebtedness, the issuance by the
Company of a note in the amount of approximately $9.8 million to the selling
shareholders, and other obligations to the selling shareholders of approximately
$600,000.
In connection with the consummation of the acquisition, the Company
transferred approximately 71 acres of owned real estate held for development
purposes into a Delaware limited liability company (the "Real Estate LLC"), of
which the Company is a member and 99% equity interest holder and Booth Creek is
the other member and 1% equity interest holder. In addition, the Company granted
the Real Estate LLC an option (the "Real Estate Option") to purchase an
additional 14 acres of development real estate for nominal consideration,
exercisable under certain conditions. The Company also issued 28,000 shares of
non-voting preferred stock (the "Preferred Stock") to its prior owners having an
aggregate liquidation preference equal to $3.5 million, the aggregate estimated
fair market value of the real estate transferred to the Real Estate LLC and the
real estate subject to the Real Estate Option. Concurrently with these
transactions, the Real Estate LLC entered into an agreement to purchase (the
"Preferred Stock Purchase Agreement") the Preferred Stock, on a quarterly basis
over the five years following the date of the acquisition, at a purchase price
equal to the liquidation preference thereof plus accrued dividends to the date
of purchase. Booth Creek advanced the first three quarterly installments under
the Preferred Stock Purchase Agreement on or prior to March 18, 1997. The Real
Estate LLC's obligations under the Preferred Stock Purchase Agreement are
secured by a first priority lien on the developmental real estate held by the
Real Estate LLC and substantially all of its other assets. The Preferred Stock
provides for a 9% cumulative dividend and is redeemable at the option of the
Company without premium. In addition, pursuant to the terms of the Preferred
Stock, the holders thereof have no redemption rights and are entitled to receive
dividend payments only when and if declared by the board of directors of the
Company.
F-56
<PAGE> 179
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Ski Lifts, Inc.
We have audited the accompanying balance sheets of Ski Lifts, Inc. as of
September 30, 1996 and 1995, and the related statements of operations and
retained earnings and cash flows for each of the three years in the period ended
September 30, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ski Lifts, Inc. as of
September 30, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1996 in
conformity with generally accepted accounting principles.
As discussed in Note 13 to the financial statements, in December 1996, the
stockholders of the Company reached an agreement in principle to sell the stock
of the Company to a third party.
As reported in Note 8 to the financial statements, Ski Lifts, Inc. changed
its method of accounting for income taxes effective October 1, 1993.
COOPERS & LYBRAND L.L.P.
Seattle, Washington
December 9, 1996, except for Note 13 to the
financial statements as to which the date is
December 19, 1996
F-57
<PAGE> 180
SKI LIFTS, INC.
BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 84,965 $ 92,607
Receivables............................................... 77,881 170,596
Inventories............................................... 208,620 211,401
Prepaid expenses and other................................ 44,272 42,832
---------- ----------
Total current assets................................... 415,738 517,436
---------- ----------
Property and equipment, net................................. 8,697,089 8,278,770
---------- ----------
Other assets:
Self insurance deposit.................................... 360,000 360,000
Investments, at cost...................................... 125,327 243,685
Equity in real estate partnership......................... 3,771 5,674
Other..................................................... 120,633 128,898
---------- ----------
609,731 738,257
---------- ----------
Total assets........................................... $9,722,558 $9,534,463
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit........................... $3,500,000 $3,395,000
Current portion of long-term debt......................... 80,115 73,708
Obligation under capital lease............................ 27,215 25,038
Notes payable to affiliate................................ 1,305,205 1,313,178
Unearned revenue.......................................... 151,563 121,212
Accounts payable and other................................ 308,600 490,048
Accrued interest, wages and business taxes................ 234,424 77,510
Insurance claims.......................................... 191,626 284,351
---------- ----------
Total current liabilities.............................. 5,798,748 5,780,045
Long-term debt, less current portion........................ 553,956 139,071
Obligation under capital lease, less current portion........ 37,659 64,873
Deferred income taxes....................................... 28,120 28,120
---------- ----------
Total liabilities...................................... 6,418,483 6,012,109
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock (1,000 shares authorized and outstanding, no
par value)............................................. 36,720 36,720
Retained earnings......................................... 3,267,355 3,485,634
---------- ----------
Total stockholders' equity............................. 3,304,075 3,522,354
---------- ----------
Total liabilities and stockholders' equity............. $9,722,558 $9,534,463
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-58
<PAGE> 181
SKI LIFTS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Lifts................................................ $6,155,890 $7,077,779 $6,606,408
Ski rentals.......................................... 934,708 1,057,518 1,094,285
Ski school lessons................................... 250,345 246,040 223,575
Service and other sales.............................. 230,042 250,867 229,980
Building lease income................................ 173,727 202,733 210,412
Restaurant sales..................................... 1,117,254 1,216,973 1,210,660
Beer, wine and liquor................................ 349,605 380,214 404,313
Ski shop............................................. 239,521 237,587 261,024
---------- ---------- ----------
Total revenues.................................... 9,451,092 10,669,711 10,240,657
---------- ---------- ----------
Costs and expenses:
Operating salaries, wages and other employee costs... 4,594,629 5,119,558 4,803,428
General, administrative and other operating
expenses.......................................... 3,035,147 3,252,677 3,007,780
Depreciation and amortization........................ 976,578 1,032,579 963,843
Cost of restaurant, liquor and ski shop sales........ 570,138 668,278 652,289
---------- ---------- ----------
Total costs and expenses.......................... 9,176,492 10,073,092 9,427,340
---------- ---------- ----------
Operating income.................................. 274,600 596,619 813,317
---------- ---------- ----------
Other income (expense):
Interest income...................................... 30,732 22,348 19,591
Interest expense..................................... (327,178) (289,657) (304,428)
Loss on abandonment of capitalized construction
costs............................................. -- (107,155) --
Gain (loss) on sales of equipment.................... (48,268) 928 21,957
Miscellaneous, net................................... 58,301 31,099 29,821
---------- ---------- ----------
(286,413) (342,437) (233,059)
---------- ---------- ----------
Income (loss) before income taxes and cumulative
effect of accounting change..................... (11,813) 254,182 580,258
---------- ---------- ----------
Income taxes:
Current.............................................. -- (10,551) (161,726)
Deferred............................................. -- 408,285 (35,718)
---------- ---------- ----------
Total income tax expense (benefit)................ -- 397,734 (197,444)
---------- ---------- ----------
Net income (loss) before cumulative effect of
accounting change.................................... (11,813) 651,916 382,814
Cumulative effect of change in method of accounting for
income taxes......................................... -- -- (171,023)
---------- ---------- ----------
Net income (loss).................................... (11,813) 651,916 211,791
Retained earnings:
Beginning of year.................................... 3,485,634 2,833,718 2,621,927
Stockholder distributions............................ (206,466) -- --
---------- ---------- ----------
End of year.......................................... $3,267,355 $3,485,634 $2,833,718
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-59
<PAGE> 182
SKI LIFTS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net income (loss).................................... $ (11,813) $ 651,916 $ 211,791
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................... 976,578 1,032,579 963,843
Deferred Federal income taxes................... -- (408,285) 206,741
(Gain) loss on sale of equipment................ 48,268 2,209 (12,778)
Loss on abandonment of capitalized construction
costs........................................ -- 107,155 --
Gain on sale of investment...................... (18,890) -- --
Other........................................... 10,168 (22,629) 10,276
Changes in:
Receivables.................................. 92,715 (98,163) 46,481
Inventories.................................. 2,781 (101,398) (28,708)
Prepaid expenses and other................... (1,440) (104,785) (570)
Income taxes receivable...................... -- 23,042 197,388
Self-insurance deposit....................... -- (35,000) --
Unearned revenue............................. 30,351 (34,764) (58,640)
Accounts payable and other................... (181,448) 194,743 (51,730)
Accrued interest, wages and taxes............ 156,914 (9,008) (270,500)
Insurance claims............................. (92,725) (11,869) 44,851
----------- ----------- ----------
Net cash provided by operating
activities.............................. 1,011,459 1,185,743 1,258,445
----------- ----------- ----------
Investing activities:
Purchases of property and equipment.................. (1,465,647) (1,158,802) (346,290)
Proceeds from sale of equipment...................... 22,482 7,711 12,778
Proceeds from sale of investment..................... 137,248 -- --
Purchases of investment.............................. -- (84,096) (13,386)
Other................................................ -- -- 17,957
----------- ----------- ----------
Net cash used in investing activities...... (1,305,917) (1,235,187) (328,941)
----------- ----------- ----------
Financing activities:
Line of credit borrowings and repayments, net........ 105,000 1,113,624 (374,924)
Additions to long-term debt.......................... 2,650,000 410,000 86,053
Payments on long-term debt and capital leases........ (2,253,745) (1,457,704) (556,886)
Payments on notes payable to affiliate............... (7,973) (14,465) (11,236)
Distributions to stockholders........................ (206,466) -- --
----------- ----------- ----------
Net cash provided by (used in) financing
activities.............................. 286,816 51,455 (856,993)
----------- ----------- ----------
Net increase (decrease) in cash and cash equivalents... (7,642) 2,011 72,511
Cash and cash equivalents:
Beginning of year.................................... 92,607 90,596 18,085
----------- ----------- ----------
End of year.......................................... $ 84,965 $ 92,607 $ 90,596
=========== =========== ==========
- ---------------------------------------------------------------------------------------------------
Supplemental information:
Cash paid for:
Interest, net of amounts capitalized.............. $ 301,359 $ 299,196 $ 383,402
Income taxes...................................... $ -- $ 74,723 $ 114,538
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-60
<PAGE> 183
SKI LIFTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
Ski Lifts, Inc. (the "Company"), operates alpine and cross-country ski
resorts at Snoqualmie Summit, Ski Acres, Alpental and Hyak in the western
Cascade mountains of Washington State.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Construction in progress
consists of costs incurred related to the construction of various buildings at
the ski resorts including interest costs of $30,000 in 1996. Depreciation is
computed using the straight-line method over estimated useful lives as follows:
<TABLE>
<CAPTION>
DESCRIPTION YEARS
----------- -----
<S> <C>
Buildings and land improvements............................. 15 - 40
Lifts, tows and hill lighting............................... 5 - 30
Vehicles and equipment...................................... 4 - 15
</TABLE>
Gains or losses are recognized in the year of retirement or disposition.
Expenditures for additions and betterments are capitalized and expenditures for
maintenance are charged to expense as incurred.
INVENTORIES
Inventories include ski accessories, food and liquor and are stated at the
lower of first-in, first-out cost or market.
EQUITY IN REAL ESTATE PARTNERSHIP
The investment in real estate partnership is accounted for using the equity
method.
LIFT REVENUE AND UNEARNED REVENUE
The Company records lift ticket revenue from season pass and scrip sales
during the ski season in which passes and scrip are used. Unearned revenue is
recorded for unused season passes, coupons, scrip and other items.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates
and assumptions.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist of the Company's line of credit and long-term
debt. Information about the fair value of these financial instruments is
included in Note 6.
F-61
<PAGE> 184
SKI LIFTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. PROPERTY AND EQUIPMENT:
Property and equipment at September 30 consists of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land and land improvements........................ $ 2,913,165 $ 2,893,603
Buildings......................................... 6,166,183 5,267,535
Lifts, tows and hill lighting..................... 4,244,025 4,262,588
Vehicles and equipment............................ 6,192,877 6,036,959
Construction in process........................... 626,788 652,092
------------ ------------
20,143,038 19,112,777
Less accumulated depreciation and amortization.... (11,445,949) (10,834,007)
------------ ------------
Property and equipment, net..................... $ 8,697,089 $ 8,278,770
============ ============
</TABLE>
During 1994, equipment with a cost of $129,000 was acquired pursuant to a
capital lease. Accumulated amortization on this equipment totaled $73,100 and
$47,300 at September 30, 1996 and 1995, respectively.
3. SELF-INSURANCE DEPOSIT:
The Company is self insured for worker's compensation (see Note 12).
Amounts required to be held in trust as a security deposit by the Department of
Labor and Industries totaled $360,000 at September 30, 1996 and 1995. This
deposit may be adjusted annually. The deposit was invested in a certificate of
deposit which bore interest at 5.42% and 6.00% at September 30, 1996 and 1995,
respectively.
4. EQUITY IN REAL ESTATE PARTNERSHIP:
On March 15, 1991, the Company formed a general partnership with certain
other partners (who are stockholders and officers of the Company) to purchase a
building. The Company paid $75,000 for its 25% general partner's interest. The
Company is allocated operating profits and losses in proportion to its
partnership interest (profits of $5,598, $5,720 and $8,030 in 1996, 1995 and
1994, respectively, are included in miscellaneous income in the Statements of
Operations). The Company and a stockholder of the Company have provided a
$250,000 subordinated line of credit to the partnership with interest payable
monthly at 9%. At September 30, 1996 and 1995 the Company had no amount
outstanding under this agreement. The Company leases a portion of the building
for its headquarters under the terms described in Note 11.
5. INVESTMENTS:
During 1990, the Company paid $100,000 for an investment in 2,223 shares of
Class E preferred stock of Arlberg Holding Company, ("Arlberg") an insurance
corporation owned by various ski resorts. In December, 1995 these shares were
redeemed by Arlberg resulting in a gain of $18,890 for the year ended September
30, 1996. The Company also holds 17,033 shares of common stock of Arlberg with a
cost of $75,327 and $50,000 of convertible debentures of Arlberg at September
30, 1996 and 1995. These debentures, which bear interest at 9%, mature on June
30, 2000, and are convertible, under certain conditions, into common stock. A
stockholder of the Company serves as a director of Arlberg.
F-62
<PAGE> 185
SKI LIFTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. LINE OF CREDIT AND LONG-TERM DEBT:
At September 30, 1996, the Company had a $3,500,000 revolving line of
credit agreement with a bank expiring on April 1, 1998. Borrowings under the
agreement, which are payable on demand and are collateralized by substantially
all assets except real estate, bear interest at the bank's prime rate plus .75%
(9.0% and 9.5% at September 30, 1996 and 1995, respectively).
Long-term debt consists of the following at September 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Note payable with monthly payments of $7,393 including
interest at 8.25%, collateralized by certain equipment,
due May, 1998............................................. $139,071 $212,779
Revolving loan facility with maximum borrowings of
$2,132,000; maximum borrowings reduced by $164,000
annually; interest payable monthly at prime plus 1.15%,
(9.4% and 9.9% at September 30, 1996 and 1995,
respectively), collateralized by personal and real
property; total unpaid principal and interest is due
September, 2004........................................... 495,000 --
-------- --------
634,071 212,779
Less current portion........................................ (80,115) (73,708)
-------- --------
$553,956 $139,071
======== ========
</TABLE>
The aggregate amount of scheduled principal payments on the above notes as
of September 30 are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 80,115
1998........................................................ 58,956
Thereafter (2004)........................................... 495,000
--------
$634,071
========
</TABLE>
The carrying amounts reported in the balance sheet approximate fair values
based upon interest rates that are currently available to the Company for
issuance of similar debt with similar terms and maturities.
The Company's debt agreements limit capital expenditures, and require that
the Company meet certain financial ratios including maintenance of minimum
tangible net worth and a minimum debt to net worth ratio. As of September 30,
1996 and 1995, the Company had obtained a waiver of rights from creditors with
respect to occurrences of noncompliance with these provisions.
7. RELATED PARTY TRANSACTIONS:
The Company borrows money for operating purposes from W. W. Moffett, Inc.,
which is an affiliated company through common stockholders. The notes payable
from W. W. Moffett, Inc. totaled $1,305,205 and $1,313,178 at September 30, 1996
and 1995, respectively, bear interest at 5.93% and 5.84%, respectively, are
subordinated to the line of credit and long-term debt, and are due on demand.
Interest expense on these notes payable for 1996, 1995 and 1994 was
approximately $76,000, $77,000 and $48,000, respectively.
F-63
<PAGE> 186
SKI LIFTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. INCOME TAXES:
As of October 1, 1994, an election to be taxed as an S Corporation under
Section 1362 of the Internal Revenue Code became effective. This Section
provides that, in lieu of corporate income taxes, the stockholders pay taxes on
the Company's taxable income.
Effective October 1, 1993, the Company adopted the liability method of
accounting for income taxes under Financial Accounting Standards Board Statement
No. 109, Accounting for Income Taxes ("Statement No. 109"), and the cumulative
effect of this change is reported in the 1994 statement of operations. Under
Statement No. 109, the differences between the tax bases of assets and
liabilities and their financial statement amounts are reflected as deferred
income taxes using enacted tax rates. Deferred Federal income taxes are provided
for temporary differences which result principally from use of accelerated
depreciation methods for certain assets, and from reporting certain other items
in different periods for financial reporting and Federal income tax purposes.
In addition, the S Corporation rules provide that a tax be payable by the
Company if assets acquired on or before September 30, 1994, are sold or disposed
of prior to October 1, 2004. This tax is payable on the resultant gains to the
extent of the excess of the fair market value of the assets over their tax bases
on September 30, 1994. Accordingly, the Company continues to record deferred
taxes on its balance sheet with respect to assets for which sale or disposition
may result in built-in gain taxes.
The S Corporation election resulted in recognition of a deferred tax
benefit of $408,285 in the 1995 statements of operations and retained earnings.
Total gross deferred tax liabilities at September 30, 1996 and 1995 were
approximately $28,000.
At September 30, 1996 and 1995, the Company has alternative minimum tax
credits of approximately $150,000 which can be utilized against regular taxes.
9. SPECIAL USE PERMITS AND PROPERTY LEASES:
The Company operates on approximately 3,821 acres of land of which 1,864
acres are covered by a Special Use Permit issued by the United States Department
of Agriculture's Forest Service (the "Forest Service"). This permit expires
December 31, 2032 and is generally renewable. Special Use Permit fees are based
on revenues for 1996 and are based on fixed assets and revenues for 1995 and
1994. Total Special Use Permit fees for 1996, 1995 and 1994 were approximately
$120,000, $188,600 and $180,300, respectively.
The remaining 1,957 acres are owned by the Company or leased from a private
company. The lease payments are based primarily on skier visits. Total lease
expense for 1996, 1995 and 1994 was $8,810, $7,096 and $10,316, respectively.
10. EMPLOYEE BENEFIT PLANS:
The Ski Lifts, Inc. Profit Sharing Retirement Plan (the "Plan") provides
for both a 401(k) defined contribution plan and a unilateral profit sharing plan
for all employees who have worked over 1,000 hours and are over 21 years of age.
During 1996, 1995 and 1994, the Company contributed $56,887, $55,810 and
$51,499, respectively, under the defined contribution provisions of the Plan.
The Company has accrued discretionary contributions as of September 30, 1996 of
approximately $162,000 under the unilateral profit sharing provisions of the
Plan.
F-64
<PAGE> 187
SKI LIFTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. LEASE COMMITMENTS AND SUBLEASE AGREEMENTS:
The Company leases its office space from a partnership in which the Company
is a general partner (see Note 4). On November 1, 1995, this lease was amended
to extend the expiration date to March 31, 2006. Rental expense approximated
$105,000, $90,000 and $90,000 in 1996, 1995 and 1994, respectively.
A portion of the office space is subleased to third parties under six to
thirty-six month noncancelable operating leases. Sublease income received in
1996, 1995 and 1994 was $68,210, $59,667 and $55,913, respectively.
At September 30, 1996, future minimum lease payments and income under
noncancelable operating subleases are as follows:
<TABLE>
<CAPTION>
RENT SUBLEASE NET
PAYMENTS PAYMENTS PAYMENTS
-------- -------- --------
<S> <C> <C> <C>
1997.......................................... $ 108,908 $14,375 $ 94,533
1998.......................................... 108,908 -- 108,908
1999.......................................... 108,908 -- 108,908
2000.......................................... 108,908 -- 108,908
2001.......................................... 108,908 -- 108,908
2002 and thereafter........................... 490,084 -- 490,084
---------- ------- ----------
$1,034,624 $14,375 $1,020,249
========== ======= ==========
</TABLE>
In addition, the Company leases snow grooming and maintenance equipment
under a capital lease. The following is a schedule of future minimum lease
payments under capital leases together with the present value of net minimum
lease payments as of September 30, 1996:
<TABLE>
<S> <C>
FOR THE FISCAL YEARS:
1997...................................................... $ 31,610
1998...................................................... 31,610
1999...................................................... 7,903
--------
Net minimum lease payments................................ 71,123
Less amount representing interest......................... (6,249)
--------
Present value of net minimum lease payments............... 64,874
Less current portion...................................... (27,215)
--------
Long-term obligation...................................... $ 37,659
========
</TABLE>
12. CONTINGENCIES:
The Company is party to various claims arising in the normal course of
business related to alleged injuries which, in the opinion of management, will
not have a material effect on the Company's business. The Company's insurance
limits its risk of loss on such claims to the amounts of the deductible under
the related insurance policies. At September 30, 1996 and 1995, $142,124 and
$240,240, respectively, were accrued related to such claims (primarily
deductible amounts).
The Company is self-insured with the State of Washington for workers'
compensation (see Note 3). Provision is made in the financial statements for the
estimated cost of claims. The accrued liability at September 30, 1996 and 1995
was $49,502 and $44,111, respectively.
The Company is currently undergoing an examination by the Forest Service
for fiscal years 1991 through 1995 in connection with the Company's use of land
under a special use permit. Although the Company has not
F-65
<PAGE> 188
SKI LIFTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. CONTINGENCIES -- (CONTINUED):
yet received the final report, the Forest Service has indicated that the
assessment will be approximately $100,000. This amount has been accrued for at
September 30, 1996, however, the Company intends to vigorously challenge the
proposed assessment of additional use fees.
13. SUBSEQUENT EVENT:
In December 1996, the stockholders of the Company reached an agreement in
principle to sell the stock of the Company to a third party. The proposed
transaction is expected to be completed in January 1997.
F-66
<PAGE> 189
GRAND TARGHEE INCORPORATED
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JUNE 1, 1996 TO JUNE 1, 1995 TO
MARCH 18, 1997 MARCH 31, 1996
--------------- ---------------
<S> <C> <C>
Revenue:
Sales..................................................... $5,679,620 $7,100,901
---------- ----------
Direct expenses:
Labor, taxes and benefits................................. 1,945,416 1,932,585
Cost of goods sold........................................ 729,967 890,735
Other direct costs........................................ 1,074,617 896,650
---------- ----------
3,750,000 3,719,970
---------- ----------
Gross margin................................................ 1,929,620 3,380,931
---------- ----------
Operating costs and expenses:
General and administrative................................ 690,938 731,386
Marketing................................................. 477,636 425,869
Insurance................................................. 179,769 215,354
Forest service lease...................................... 136,481 170,301
Other leased property..................................... 2,125 55,600
Property maintenance...................................... 214,642 192,071
Depreciation and amortization............................. 489,600 500,000
---------- ----------
2,191,191 2,290,581
---------- ----------
Income (loss) from operations............................... (261,571) 1,090,350
Other expense:
Interest expense.......................................... (92,439) (107,275)
Abandonment of land swap costs............................ (53,669) --
---------- ----------
Income (loss) before income tax benefit (expense)........... (407,679) 983,075
Income tax benefit (expense)................................ 81,536 (334,200)
---------- ----------
Net income (loss)........................................... $ (326,143) $ 648,875
========== ==========
</TABLE>
See notes to condensed financial statements.
F-67
<PAGE> 190
GRAND TARGHEE INCORPORATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JUNE 1, 1996 TO JUNE 1, 1995 TO
MARCH 18, 1997 MARCH 31, 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (326,143) $ 648,875
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 533,954 542,500
Loss on disposal of equipment............................. 5,361 2,364
Changes in assets and liabilities:
Trade accounts receivable.............................. (84,056) (163,692)
Inventories............................................ (84,180) (58,252)
Prepaid expenses....................................... (9,939) (27,425)
Accounts payable....................................... 597,125 97,398
Current and deferred income taxes...................... (100,536) 227,200
Due to/from related parties............................ (34,143) (5,123)
----------- ----------
497,443 1,263,845
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.......................... (529,960) (414,041)
Proceeds from disposal of property and equipment............ -- 1,000
Other assets................................................ (35,870) 2,002
----------- ----------
(565,830) (411,039)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing on new notes and capital leases................... 1,877,201 134,500
Net borrowings (payments) on line of credit................. (334,500) (300,000)
Payments on long-term debt and capital lease obligations.... (1,384,093) (262,358)
----------- ----------
158,608 (427,858)
----------- ----------
Net increase in cash........................................ 90,221 424,948
Cash at beginning of period................................. 41,211 63,677
----------- ----------
Cash at end of period....................................... $ 131,432 $ 488,625
=========== ==========
</TABLE>
See notes to condensed financial statements.
F-68
<PAGE> 191
GRAND TARGHEE INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIODS FROM JUNE 1, 1996 TO MARCH 18, 1997,
AND FROM JUNE 1, 1995 TO MARCH 31, 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
Grand Targhee Incorporated (the "Company"), a Delaware corporation, owns
and operates the Grand Targhee ski and summer resort.
The accompanying financial statements for the periods from June 1, 1996 to
March 18, 1997, and from June 1, 1995 to March 31, 1996 are unaudited, but
include all adjustments (consisting only of normal recurring adjustments and a
charge for abandoned land swap costs of $53,669 in the period from June 1, 1996
to March 18, 1997) which, in the opinion of management of the Company, are
considered necessary for a fair presentation of the Company's operating results
and cash flows for the periods from June 1, 1996 to March 18, 1997, and from
June 1, 1995 to March 31, 1996. Due to the highly seasonal nature of the
Company's business, the results for the interim periods are not necessarily
indicative of results for the entire year. Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to generally accepted accounting principles applicable for interim
periods. The unaudited interim financial statements should be read in
conjunction with the following notes and the audited financial statements of the
Company as of May 31, 1996 and for the year then ended.
2. CONSTRUCTION OF NEW LIFTS AND RELATED FINANCING
During the period from June 1, 1996 to March 18, 1997, the Company
constructed two new lifts. The cost of the lifts was approximately $3,313,000
(including capitalized interest of $62,000), which was financed in part with the
proceeds of a $400,000 loan from a stockholder and a $655,000 loan from a third
party.
3. SUBSEQUENT EVENT
On March 18, 1997, Booth Creek Ski Holdings, Inc. ("Booth Creek") acquired
all of the issued and outstanding capital stock of the Company. The aggregate
purchase price for the acquisition was approximately $7.9 million plus
contingent payments of up to $2 million based on the performance of the resort
through the 1998/99 ski season and additional commissions based on the number of
dwelling units developed at the resort through 2012.
F-69
<PAGE> 192
INDEPENDENT AUDITORS' REPORT
Board of Directors
Grand Targhee Incorporated
Alta, Wyoming
We have audited the accompanying balance sheets of Grand Targhee
Incorporated as of May 31, 1996 and 1995 and the related statements of
operations, changes in stockholder's equity and cash flows for the years ended
May 31, 1996, 1995 and 1994. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Grand Targhee Incorporated
as of May 31, 1996 and 1995, and the results of its operations and its cash
flows for the years ended May 31, 1996, 1995 and 1994 in conformity with
generally accepted accounting principles.
FELDHAKE & ASSOCIATES, P.C.
Englewood, Colorado
June 20, 1996, except for Note 11 for
which the date is January 27, 1997
F-70
<PAGE> 193
GRAND TARGHEE INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 41,211 $ 63,677
Receivables from related parties.......................... 44,045 23,923
Trade accounts receivable................................. 25,042 21,863
Inventories............................................... 298,520 276,963
Prepaid expenses.......................................... 135,308 100,705
---------- ----------
Total current assets................................... 544,126 487,131
---------- ----------
Property and equipment, at cost:
Buildings and improvements................................ 5,119,403 5,067,537
Ski lift facilities....................................... 927,851 949,120
Snow cats and hill grooming equipment..................... 574,361 573,423
Furniture and fixtures.................................... 959,008 888,465
Land improvements......................................... 222,021 222,021
Other equipment........................................... 1,312,395 1,219,995
Transportation equipment.................................. 183,454 160,454
Construction in process................................... 67,439 64,037
---------- ----------
9,365,932 9,145,052
Less accumulated depreciation and amortization............ 4,674,236 4,125,060
---------- ----------
4,691,696 5,019,992
---------- ----------
Other assets:
Deposits -- ski lifts..................................... 684,500 100,000
Other..................................................... 25,610 63,482
---------- ----------
710,110 163,482
---------- ----------
Total assets........................................... $5,945,932 $5,670,605
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 165,829 $ 111,470
Accrued liabilities....................................... 270,405 411,104
Advanced deposits......................................... 147,867 179,956
Income taxes currently payable............................ 19,000 107,000
Line of credit with bank.................................. 334,500 300,000
Current portion of notes payable.......................... 219,274 288,906
Current portion of obligations under capital leases....... 59,821 69,571
---------- ----------
Total current liabilities.............................. 1,216,696 1,468,007
---------- ----------
Long term debt:
Notes payable............................................. 725,439 358,388
Obligations under capital leases.......................... 56,284 26,747
Due to related parties.................................... 416,216 460,618
---------- ----------
1,197,939 845,753
---------- ----------
Deferred income taxes....................................... 130,000 182,000
---------- ----------
Stockholder's equity:
Common stock, $.01 par value
Authorized -- 600,000 shares
Issued and outstanding -- 450,000 shares............... 4,500 4,500
Capital in excess of par value............................ 1,887,942 1,887,942
Retained earnings......................................... 1,508,855 1,282,403
---------- ----------
Total stockholder's equity............................. 3,401,297 3,174,845
---------- ----------
Total liabilities and stockholder's equity $5,945,932 $5,670,605
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-71
<PAGE> 194
GRAND TARGHEE INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenue:
Sales.................................................. $7,364,363 $6,736,459 $6,241,285
Concessions............................................ 11,896 25,350 44,089
---------- ---------- ----------
7,376,259 6,761,809 6,285,374
---------- ---------- ----------
Direct expenses:
Labor, taxes and benefits.............................. 2,245,472 1,915,790 1,764,753
Cost of goods sold..................................... 982,957 912,930 843,431
Other direct costs..................................... 930,238 899,083 852,193
---------- ---------- ----------
4,158,667 3,727,803 3,460,377
---------- ---------- ----------
Gross margin............................................. 3,217,592 3,034,006 2,824,997
---------- ---------- ----------
Operating costs and expenses:
General and administrative............................. 892,745 876,697 801,207
Marketing.............................................. 482,854 475,848 342,266
Insurance.............................................. 218,362 198,424 199,987
Forest service lease................................... 171,436 164,015 154,194
Other leased property.................................. 66,100 104,750 102,000
Property maintenance................................... 210,415 194,653 179,382
Depreciation and amortization.......................... 583,282 576,802 566,397
Impairment of long-lived assets........................ 42,619 -- --
---------- ---------- ----------
2,667,813 2,591,189 2,345,433
---------- ---------- ----------
Income from operations................................... 549,779 442,817 479,564
---------- ---------- ----------
Other income (expenses):
Abandonment of land exchange costs..................... (99,259) -- --
Gain (loss) on disposition of assets................... (42,799) 9,732 (1,000)
Interest income........................................ 9,595 2,206 1,872
Interest expense....................................... (117,864) (171,812) (204,604)
---------- ---------- ----------
(250,327) (159,874) (203,732)
---------- ---------- ----------
Income before income taxes............................... 299,452 282,943 275,832
Income tax expense....................................... 73,000 79,098 113,371
---------- ---------- ----------
Net income............................................... $ 226,452 $ 203,845 $ 162,461
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-72
<PAGE> 195
GRAND TARGHEE INCORPORATED
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
years ended May 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
CAPITAL
IN EXCESS TOTAL
COMMON OF PAR RETAINED STOCKHOLDER'S
STOCK VALUE EARNINGS EQUITY
------ --------- -------- -------------
<S> <C> <C> <C> <C>
Balance at
June 1, 1993................................... $4,500 $1,887,942 $ 916,097 $2,808,539
Net income....................................... -- -- 162,461 162,461
----- ---------- ---------- ----------
Balance at
May 31, 1994................................... 4,500 1,887,942 1,078,558 2,971,000
Net income....................................... -- -- 203,845 203,845
----- ---------- ---------- ----------
Balance at
May 31, 1995................................... 4,500 1,887,942 1,282,403 3,174,845
Net income....................................... -- -- 226,452 226,452
----- ---------- ---------- ----------
Balance at
May 31, 1996................................... $4,500 $1,887,942 $1,508,855 $3,401,297
====== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-73
<PAGE> 196
GRAND TARGHEE INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 226,452 $ 203,845 $ 162,461
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 632,935 622,739 618,597
Impairment of long-lived asset....................... 42,619 -- --
Loss (gain) on disposal of assets.................... 42,799 (9,732) 1,000
Changes in assets and liabilities:
Trade receivables.................................. (3,179) 17,900 (31,264)
Inventory.......................................... (21,557) (5,295) (34,535)
Prepaid expenses................................... (34,603) (10,442) (20,213)
Net deferred taxes................................. (52,000) (28,000) 17,373
Accounts payable and accrued liabilities........... (189,428) 252,326 (82,766)
Due to/from related parties........................ 23,003 (27,112) 9,776
--------- ---------- ---------
667,041 1,016,229 640,429
--------- ---------- ---------
Cash flows from investing activities:
Proceeds from sale of fixed assets...................... 1,000 20,650 --
Purchase of property and equipment...................... (236,454) (472,527) (169,665)
Deposits and other assets............................... 2,002 (10,944) (22,463)
Related party receivable................................ (30,000) -- --
--------- ---------- ---------
(263,452) (462,821) (192,128)
--------- ---------- ---------
Cash flows from financing activities:
Borrowing on new notes.................................. 400,000 276,537 4,590
Borrowings from related parties......................... -- -- 188,100
Payments on debt to related parties..................... (77,915) -- --
Net borrowing on line of credit......................... (300,000) (152,547) (199,955)
Payments on long-term debt and capital lease
obligations.......................................... (448,140) (650,790) (662,255)
--------- ---------- ---------
(426,055) (526,800) (669,520)
--------- ---------- ---------
Net increase (decrease) in cash........................... (22,466) 26,608 (221,219)
Cash at beginning year.................................... 63,677 37,069 258,288
--------- ---------- ---------
Cash at end of year....................................... $ 41,211 $ 63,677 $ 37,069
========= ========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-74
<PAGE> 197
GRAND TARGHEE INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Grand Targhee
Incorporated (the Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations of
the Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted accounting
principles and have been consistently applied.
HISTORY OF ORGANIZATION
In October 1992, in connection with a tax-free reorganization pursuant to
Section 368 (a)(1)(F) of the Internal Revenue Code of 1986, as amended, Big
Valley Corporation, a Wyoming corporation, merged with Grand Targhee
Incorporated, a Delaware corporation. Grand Targhee Incorporated was formed just
prior to the merger and had no prior operations. Prior to this merger, Big
Valley Corporation operated the Grand Targhee Resort. As part of the merger
agreement, the outstanding stock of Big Valley Corporation common stock was
exchanged for 450,000 shares of common stock of Grand Targhee Incorporated. The
purpose of this merger was to establish Delaware as the State of domicile and
change the name of the corporation.
BUSINESS ACTIVITIES
The Company operates the Grand Targhee Ski and Summer Resort (the Resort).
The Resort offers downhill skiing and related activities such as cross-country
skiing, ski lessons and other winter and summer activities. In addition, the
Company operates lodging facilities, restaurants and retail shops.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method.
DEPRECIATION
The cost of buildings, improvements and equipment is depreciated over the
lesser of the length of the lease with the Forest Service or the estimated
useful lives of the assets. Depreciation is computed on the straight-line method
over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 12 - 30
Ski lift facilities......................................... 11 - 30
Snow cats and hill grooming equipment....................... 5
Furniture and fixtures...................................... 5 - 7
Land improvements........................................... 3 - 30
Ski rental equipment........................................ 3
Other equipment............................................. 3 - 10
Transportation equipment.................................... 3 - 7
</TABLE>
CASH FLOWS
For purposes of the statement of cash flows, the Company considers
short-term cash investments with a maturity of three months or less as cash. The
Company considers the line of credit with the bank to be short-term and presents
transactions net for purposes of the statement of cash flows.
Interest paid for the years ended May 31, 1996, 1995 and 1994 was $187,424,
$158,469 and $233,795, respectively.
F-75
<PAGE> 198
GRAND TARGHEE INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Company acquired certain equipment totaling $132,364 and $47,698
through capital leases and purchase contracts during the years ended May 31,
1996 and 1995. respectively.
The Company made deposits on the new chair lifts (Note 8) through advances
of $334,500 from its line of credit and $250,000 from its term loan during the
year ended May 31, 1996. These advances were non-cash transactions for the
Company and therefore are not presented in the statements of cash flows.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect certain reported amounts and disclosures. Actual results
could differ from those estimates.
RECLASSIFICATION
Certain reclassifications have been made to the 1994 and 1995 financial
statements in order to conform to the 1996 presentation.
2. INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
MAY 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Retail goods............................................. $250,688 $248,941
Lounge -- beverage and supplies.......................... 6,792 9,923
Restaurant -- food and supplies.......................... 28,910 14,843
Sundries................................................. 12,130 3,256
-------- --------
$298,520 $276,963
======== ========
</TABLE>
3. LINE OF CREDIT
The Company has a line of credit in the amount of $850,000 with a bank
which is subject to renewal annually in April. As of May 31, 1996 the company
has an outstanding balance of $334,500. This line of credit is secured under a
general blanket collateral agreement which includes a security interest in the
Company's stock, buildings, inventory, equipment, furnishings, the forest
service lease and receivables. Additionally, this line of credit is personally
guaranteed by the stockholder and an officer of the Company. Interest is at 2%
above Chase Manhattan Bank's prime rate. Interest only payments are due monthly
beginning on April 30, 1996. Monthly principal payments of the lesser of
$200,000 or the entire principal balance then outstanding are due December 1996
through March 1997 with remaining balance due April 30, 1997.
F-76
<PAGE> 199
GRAND TARGHEE INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
MAY 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Notes payable to the Farmers Home Administration, payable in
annual installments of $53,214 including interest at 5%,
balance due August, 1999, collateralized by buildings and
equipment................................................. $202,715 $243,743
Note payable to a bank, payable in five monthly principal
payments of $12,500 each year, December through April,
plus monthly interest payments at 3% above the bank's
index rate, due December 15, 1998, collateralized by
virtually all assets of the Company. ..................... -- 189,518
Note payable to a bank, payable in five monthly installments
equal to one thirty-fifth of the principal balance of the
note, December through April, plus monthly interest
payments at prime plus 2% as published by Chase Manhattan
Bank, due April 30, 2003, collateralized by virtually all
assets of the company, this loan is cross-collateralized
with the bank line of credit, see Note 3. ................ 650,000 --
Equipment purchase contract, payable in four monthly
installments of $1,381 each year, January through April,
including interest at 7.9% due April 1998, collateralized
by certain equipment...................................... 9,983 --
Notes payable -- individuals(1)............................. -- 100,000
Note payable to a related party, payable in monthly
installments of $2,046, including interest at 10.48%,
balance due August 1, 1997, unsecured..................... 28,645 49,033
Notes payable with interest ranging from 9% to 10%, due
January 26, 1997, guaranteed by the stockholder and an
officer of the Company, unsecured......................... 53,370 50,000
Short-term note payable with interest at a rate of 3.5%,
guaranteed by the stockholder and an officer of the
Company, unsecured........................................ -- 15,000
-------- --------
944,713 647,294
Less current portion........................................ 219,274 288,906
-------- --------
$725,439 $358,388
======== ========
</TABLE>
- -------------------------
(1) Notes payable -- individuals represent notes to individuals in the amounts
ranging from $10,000 to $25,000, at an interest rate of 13% due within 60
days of the date the note holder demands payment.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31,
----------
<S> <C>
1997........................................................ $216,721
1998........................................................ 149,302
1999........................................................ 157,184
2000........................................................ 142,934
2001........................................................ 92,857
Thereafter.................................................. 185,715
--------
$944,713
========
</TABLE>
F-77
<PAGE> 200
GRAND TARGHEE INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. RELATED PARTY TRANSACTIONS
Transactions with related parties are as follows:
<TABLE>
<CAPTION>
MAY 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
CURRENT RECEIVABLE (PAYABLE):
High Mountain Travel................................... $ -- $ 154
Grand Teton Furniture Company.......................... -- (39,250)
Targhee Institute...................................... 14,045 23,769
Moritz Bergmeyer....................................... 30,000 --
------- --------
44,045 (15,327)
Portion included in accounts payable..................... -- 39,250
------- --------
$44,045 $ 23,923
======= ========
</TABLE>
The receivable from Moritz Bergmeyer is non-interest bearing and is due on
demand. The remaining related party accounts are non-interest bearing and result
from operating activities.
<TABLE>
<S> <C> <C>
LONG-TERM PAYABLE:
Notes payable and accrued interest..................... $154,609 $212,136
Leases payable......................................... 261,607 248,482
-------- --------
$416,216 $460,618
======== ========
</TABLE>
Targhee Institute was formed with the assistance of the Company as a
not-for-profit entity. Targhee Institute's purpose is to provide educational
programs on science, nature, and cultural related topics. The Company received
$102,522, $39,775 and $61,180 during the years ended May 31, 1996, 1995 and 1994
from Targhee Institute for room, board, and site fees related to its educational
and cultural programs. High Mountain Travel is a for-profit travel agency formed
by the shareholder to provide bus transportation to the ski resort area. The
Company accrued commissions totaling $31,879, $37,485 and $40,020 to High
Mountain Travel for the years ended May 31, 1996, 1995 and 1994, respectively.
During the years ended May 31, 1996, 1995 and 1994, the Company incurred
interest expense of $9,064, $22,596 and $6,169, respectively, with related
parties. The Company incurred lease expense of $63,000, $99,000 and $96,000 with
related parties during the years ended May 31, 1996, 1995 and 1994,
respectively. See also Notes 7 and 8.
During the year ended May 31, 1994, the Company acquired furniture and
fixtures from Grand Teton Furniture totaling $41,230. Grand Teton Furniture is
related to the Company through common ownership and management.
6. INCOME TAXES
At May 31, 1996, the Company has for tax purposes unused Alternative
Minimum Tax (AMT) credits of approximately $60,000 which can be carried forward
indefinitely. The Company has established a valuation allowance of $60,000
because of limitations on the usage of this credit. As a result, the Company has
used $0 of its AMT tax credit carryovers to reduce deferred income taxes
payable.
Deferred income taxes arise primarily because of temporary differences
related to recognition of the gain on the disposal of the building and equipment
destroyed in a fire. For tax purposes, the gain is treated as a reduction of the
cost of the replacement property and is recognized ratably over the life of the
property as a
F-78
<PAGE> 201
GRAND TARGHEE INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES -- (CONTINUED)
reduction of depreciation. The resulting deferred taxes are allocated between
current and non-current liabilities based on the expected reversal period.
Income tax expense for the years ended May 31, 1996, 1995 and 1994 vary
from Federal statutory rates because of the impact of the Alternative Minimum
Tax and use of the Alternative Minimum Tax Credit. Income tax expense includes
the following components:
<TABLE>
<CAPTION>
PAYABLE
--------------------
EXPENSE CURRENT DEFERRED
------- ------- --------
<S> <C> <C> <C>
Balance June 1, 1993........................................ $ 33,206 $192,627
Payments.................................................... (33,204) --
Expense..................................................... $113,371 95,998 17,373
======== --------- --------
Balance May 31, 1994........................................ 96,000 210,000
Payments.................................................... (96,098) --
Expense..................................................... $ 79,098 107,098 (28,000)
======== --------- --------
Balance May 31, 1995........................................ 107,000 182,000
Payments.................................................... (213,000) --
Expense..................................................... $ 73,000 125,000 (52,000)
======== --------- --------
Balance May 31, 1996........................................ $ 19,000 $130,000
========= ========
</TABLE>
7. LEASING ARRANGEMENTS
The Company leases certain furniture, fixtures, and equipment under leases
which expire at various times over the next three years. In addition, the
Company leases a building from its stockholder as more fully described in Note
8.
The following is a yearly schedule of future minimum lease payments under
long-term capital and operating leases:
<TABLE>
<CAPTION>
YEAR ENDED CAPITAL OPERATING
MAY 31, LEASES LEASES
---------- ------- ---------
<S> <C> <C>
1997...................................................... $ 68,276 $ 59,000
1998...................................................... 46,673 59,000
1999...................................................... 18,261 59,000
2000...................................................... -- 59,000
2001...................................................... -- --
-------- --------
Total minimum lease payments................................ 133,210 $236,000
========
Less amounts representing interest.......................... 17,105
Less portion included in current liabilities................ 59,821
--------
$ 56,284
========
</TABLE>
Substantially all of the operating leases are with the stockholder.
Management expects, as part of normal operations, to renew its operating leases
after the current lease term. In addition to these long-term operating leases,
minimum payments for short-term renewable leases with related parties in effect
at May 31, 1996 was approximately $250 per month.
F-79
<PAGE> 202
GRAND TARGHEE INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. LEASING ARRANGEMENTS -- (CONTINUED)
Equipment under capital leases of approximately $165,000, is included in
snow cats and hill grooming equipment, furniture and fixtures, other equipment
and transportation equipment. At the conclusion of these leases, title will
transfer to the Company or the Company will have the option to acquire the asset
at a bargain price. Amortization associated with the equipment under capital
leases is included in depreciation expense.
8. COMMITMENTS AND CONTINGENCIES
FOREST SERVICE LEASE
The Company has an agreement with the United States Department of
Agriculture whereby the Forest Service has granted the Company a permit for use
at the Resort. The permit, expiring on December 31, 2034, is a special use
permit covering approximately 2,400 acres for the purposes of constructing,
operating and maintaining a ski and summer resort including food service, retail
sales and other facilities.
A further reissuance of the National Forest special use permit may be
granted provided the holder shall comply with the then existing laws and
regulations governing the occupancy and use of National Forest lands.
The fee for this use is based on a graduated rate fee system using the cost
of certain "gross fixed assets" and annual sales to determine the rate applied
to sales. This fee was $171,436, $164,015 and $154,194 for the years ended May
31, 1996, 1995 and 1994, respectively. The Company is required to have minimum
public liability and bodily injury insurance in force. All installations and
improvements made on the property must be incompliance with the terms of the
permits. The Resort is subject to inspection by the Forest Service and must be
maintained to meet the applicable safety standards. The Company may sublease the
use of land and improvements covered under these permits and the operation of
concessions and facilities upon prior written notice to the authorized officer.
LEASE WITH RELATED PARTY
The Company has a sub-lease with its stockholder extending through May,
2000, allowing the stockholder the right to use and occupy a portion of the
Forest Service lease. The lease term requires payment of $1,000 per year.
The Company has a five year lease with the stockholder extending through
May, 2000, allowing the Company the use of the Teewinot Lodge, located on the
sub-lease with the stockholder described above. The lease agreement calls for
annual payments of $60,000 payable in equal monthly installments of $5,000. The
Company is to maintain the premises and pay insurance and taxes thereon. During
the years ended May 31, 1996, 1995 and 1994, rent under this lease was $60,000.
CONCENTRATION OF CREDIT RISK
The Company's revenues are earned from the general public. The nature of
operations are such that credit is not generally extended to its customers.
Goods and services purchased are supplied by a variety of vendors. The Company
is, however, dependent upon a permit from the U.S. Forest Service because the
Resort is located in the Targhee National Forest.
The Company maintains its bank accounts in a Federally insured financial
institution. Amounts are insured up to $100,000. At times during the year,
amounts in excess of $100,000 are on deposit with the financial institution.
F-80
<PAGE> 203
GRAND TARGHEE INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
CONSTRUCTION OF NEW LIFTS
At May 31, 1996, the Company has committed to the construction of two new
lifts. One is a stealth detachable quad and the second is a fixed grip quad.
These lifts will replace the current Bannock and Shoshone lifts. The Bannock
lift will continue to operate until its replacement is fully operational. The
Shoshone lift is being abandoned and impairment of its net carrying value at May
31, 1996 has been recognized (Note 9).
The contract calls for the new Bannock detachable quad to cost $2,371,865
and the Shoshone fixed grip quad to cost $437,750. The price is a "turnkey"
price but does not include removal of existing equipment nor taxes.
Financing for these lifts is provided in part by the existing term loan
from the Company's bank. The balance of the financing is to be provided through
loans arranged by the potential purchaser of the Company (Note 11). At May 31,
1996, the Company has made deposits of $684,500. Of this amount, $100,000 was
deposited as of May 31, 1995 and the balance was paid with $334,500 advanced
from the line of credit and $250,000 advanced from the term loan.
9. IMPAIRMENT OF LONG-LIVED ASSETS
At May 31, 1996, the Company has contracted to construct two new ski lifts
to be operational for the 1996-1997 ski season (Note 8). As part of this
process, the existing Shoshone lift with a net book value of $42,619 will be
abandoned. Fair market value of the abandoned lift, estimated by management
based on published advertisements for lifts with similar characteristics, is
$25,000. Cost to salvage this lift is also estimated at $25,000. A loss of
$42,619 is included in the statements of operations for the year ended May 31,
1996. The impairment is included in accumulated depreciation and amortization in
the balance sheet.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of funds in financial institutions, which includes
checking accounts and operating money markets, are equal to their carrying
value.
The estimated fair values of amounts due to/from related parties are equal
to their carrying value because terms of these rights and obligation have been
recently established or have recently been subject to remodification.
The established fair values of capitalized lease obligations and notes
payable are equal to their carrying value because all material obligations of
their nature have been negotiated recently with the exception of the note
payable to the U.S. Department of Agriculture, F.H.A. Department. The carrying
amount of this loan is $202,715 and the estimated fair value is not determinable
because notes of this nature are no longer issued.
11. SUBSEQUENT EVENT
On November 15, 1996, Mr. Moritz O. Bergmeyer and Ms. Carol Mann Bergmeyer
executed a letter of intent with Booth Creek, Inc. pursuant to which Booth Creek
proposes to acquire all of the issued and outstanding capital stock of the
Company.
F-81
<PAGE> 204
===============================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information........................ 3
Certain Definitions and Market and Industry
Data....................................... 4
Prospectus Summary........................... 6
Risk Factors................................. 21
The Transactions............................. 28
Capitalization............................... 30
Pro Forma Financial Information.............. 31
Selected Combined Financial Data............. 42
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 44
Business..................................... 58
Management................................... 77
Certain Transactions......................... 79
Ownership and Control........................ 82
Description of Certain Indebtedness.......... 83
The Exchange Offer........................... 85
Description of the Notes..................... 94
Certain U.S. Federal Income Tax
Considerations............................. 117
Plan of Distribution......................... 118
Legal Matters................................ 118
Experts...................................... 118
Index of Financial Statements................ F-1
</TABLE>
UNTIL OCTOBER 13, 1997 (90 DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
===============================================================
===============================================================
$116,000,000
BOOTH CREEK LOGO
BOOTH CREEK
SKI HOLDINGS, INC.
OFFER TO EXCHANGE $1,000
IN PRINCIPAL AMOUNT OF ITS
SERIES B 12 1/2% SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000
IN PRINCIPAL AMOUNT OF ITS OUTSTANDING
12 1/2% SENIOR NOTES DUE 2007
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
MARINE MIDLAND BANK
BY FACSIMILE:
(212) 658-2292
CONFIRMATION BY TELEPHONE:
(212) 658-5931
BY MAIL, OVERNIGHT COURIER OR HAND DELIVERY:
140 BROADWAY -- LEVEL A
NEW YORK, NEW YORK 10005-1180
ATTENTION: CORPORATE TRUST SERVICES
-----------------
PROSPECTUS
-----------------
JULY 14, 1997
===============================================================
<PAGE> 205
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Capitalized terms used but not defined in Part II have the meanings
ascribed to them in the Prospectus contained in this Registration Statement.
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Booth Creek Ski Holdings, Inc. and its subsidiaries, Sierra-at-Tahoe, Inc.,
Bear Mountain, Inc., Booth Creek Ski Acquisition Corp., Waterville Valley Ski
Resort, Inc., Mount Cranmore Ski Resort, Inc., Grand Targhee Incorporated,
Targhee Company and Targhee Ski Corp. (collectively, the "Delaware
Subsidiaries"), are Delaware corporations. Section 145 ("Section 145") of the
General Corporation Law of the State of Delaware (the "DGCL") provides that a
Delaware corporation may indemnify any persons who were, are or are threatened
to be made, parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any persons who are, were or are threatened
to be made, a party to any threatened, pending or completed action or suit by or
in the right of the corporation by reasons of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests, provided that no indemnification is
permitted without judicial approval if the officer, director, employee or agent
is adjudged to be liable to the corporation. Where an officer, director,
employee or agent is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director has actually and reasonably incurred.
The Certificate of Incorporation and/or Bylaws of each of Booth Creek and the
Delaware Subsidiaries provide for the indemnification of persons under the
circumstances described in Section 145 of the DGCL.
Trimont Land Company is a California corporation and its Articles of
Incorporation and Bylaws provide for indemnification of its officers and
directors to the fullest extent permitted by law. Section 204(10) of the
California General Corporation Law (the "CGCL") eliminates the liability of a
corporation's directors for monetary damages to the fullest extent permissible
under California law. Pursuant to Section 204(11) of the CGCL, a California
corporation may indemnify Agents (as defined in Section 317 of the CGCL),
subject only to the applicable limits set forth in Section 204 of the CGCL with
respect to actions for breach of duty to the corporation and its shareholders.
As permitted by Section 317 of the CGCL, indemnification may be provided by
a California corporation of its Agents (as defined in Section 317 of the CGCL),
to the maximum extent permitted by the CGCL, in connection with any proceeding
arising by reason of the fact that such person is or was such a director or
officer, against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in any such proceeding.
Ski Lifts, Inc. is a Washington corporation and its Articles of
Incorporation provide for indemnification of its officers and directors in
accordance with Section 23B.08.510 of the Revised Code of Washington, which
authorizes Washington corporations to indemnify their officers and directors
under certain circumstances against expenses and liabilities incurred in legal
proceedings involving such persons because of their being or having been an
officer or director.
II-1
<PAGE> 206
Under Washington law, the indemnification provision of Ski Lifts' Articles
of Incorporation eliminates the liability of a director for breach of fiduciary
duty but does not eliminate the personal liability of any director for (i) acts
of omissions of a director that involve intentional misconduct or a knowing
violation of law, (ii) conduct in violation of Section 23B.08.310 of the Revised
Code of Washington (which section relates to unlawful distributions) or (iii)
any transaction from which a director personally received a benefit in money,
property or services to which the director was not legally entitled.
B-V Corporation is a Wyoming corporation and its Bylaws provide for
indemnification of its officers and directors to the fullest extent permitted by
the Wyoming Business Corporation Act, Wyoming Statutes 17-16-850 et seq., which
provides for indemnification by a corporation of costs incurred by directors,
employees, and agents in connection with an action, suit, or proceeding brought
by reason of their position as a director, employee, or agent. The person being
indemnified must have acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<C> <S>
*3.1 Certificate of Incorporation of Booth Creek Ski Holdings,
Inc.
*3.2 Bylaws of Booth Creek Ski Holdings, Inc.
*3.3 Restated Articles of Incorporation of Trimont Land Company.
*3.4 Bylaws of Trimont Land Company.
*3.5 Certificate of Incorporation of Sierra-at-Tahoe, Inc.
*3.6 Bylaws of Sierra-at-Tahoe, Inc.
*3.7 Certificate of Incorporation of Bear Mountain, Inc.
*3.8 Bylaws of Bear Mountain, Inc.
*3.9 Certificate of Incorporation of Booth Creek Ski Acquisition
Corp.
*3.10 Bylaws of Booth Creek Ski Acquisition Corp.
*3.11 Amended and Restated Certificate of Incorporation of
Waterville Valley Ski Resort, Inc.
*3.12 Bylaws of Waterville Valley Ski Resort, Inc.
*3.13 Amended and Restated Certificate of Incorporation of Mount
Cranmore Ski Resort, Inc.
*3.14 Bylaws of Mount Cranmore Ski Resort, Inc.
*3.15 Amended and Restated Articles of Incorporation of Ski Lifts,
Inc.
*3.16 Bylaws of Ski Lifts, Inc.
*3.17 Certificate of Incorporation of Grand Targhee Incorporated.
*3.18 Bylaws of Grand Targhee Incorporated.
*3.19 Articles of Incorporation of B-V Corporation.
*3.20 Bylaws of B-V Corporation.
*3.21 Certificate of Incorporation of Targhee Company.
*3.22 Bylaws of Targhee Company.
*3.23 Certificate of Incorporation of Targhee Ski Corp.
*3.24 Bylaws of Targhee Ski Corp.
*4.1 Indenture dated as of March 18, 1997 by and among Booth
Creek Ski Holdings, Inc., as Issuer, Trimont Land Company,
Sierra-at-Tahoe, Inc., Bear Mountain, Inc., Waterville
Valley Ski Resort, Inc., Mount Cranmore Ski Resort, Inc.,
Booth Creek Ski Acquisition Corp., Ski Lifts, Inc., Grand
Targhee Incorporated, B-V Corporation, Targhee Company and
Targhee Ski Corp., as Subsidiary Guarantors, and Marine
Midland Bank, as trustee (including the form of 12 1/2%
Senior Note due 2007 and the form of Guarantee).
</TABLE>
II-2
<PAGE> 207
<TABLE>
<C> <S>
*4.2 Supplemental Indenture No. 1 to Indenture dated as of April
25, 1997 by and among Booth Creek Ski Holdings, Inc., as
Issuer, Trimont Land Company, Sierra-at-Tahoe, Inc., Bear
Mountain, Inc., Waterville Valley Ski Resort, Inc., Mount
Cranmore Ski Resort, Inc., Booth Creek Ski Acquisition
Corp., Ski Lifts, Inc., Grand Targhee Incorporated, B-V
Corporation, Targhee Company and Targhee Ski Corp., as
Subsidiary Guarantors, and Marine Midland Bank, as trustee.
*4.3 Registration Rights Agreement dated as of March 18, 1997 by
and among Booth Creek Ski Holdings, Inc., as Issuer, Trimont
Land Company, Sierra-at-Tahoe, Inc., Bear Mountain, Inc.,
Waterville Valley Ski Resort, Inc., Mount Cranmore Ski
Resort, Inc., Booth Creek Ski Acquisition Corp., Ski Lifts,
Inc., Grand Targhee Incorporated, B-V Corporation, Targhee
Company and Targhee Ski Corp., as Subsidiary Guarantors, and
CIBC Wood Gundy Securities Corp.
*4.4 Securities Purchase Agreement dated as of March 13, 1997, by
and among Booth Creek Ski Holdings, Inc., Trimont Land
Company, Sierra-at-Tahoe, Inc., Bear Mountain, Inc.,
Waterville Valley Ski Resort, Inc., Mount Cranmore Ski
Resort, Inc., Booth Creek Ski Acquisition Corp. and Ski
Lifts, Inc. and CIBC Wood Gundy Securities Corp.
*5.1 Opinion of Winston & Strawn.
*10.1 Amended and Restated Credit Agreement dated as of March 18,
1997 among Booth Creek Ski Holdings, Inc., Booth Creek Ski
Acquisition Corp., Trimont Land Company, Sierra-at-Tahoe,
Inc., Bear Mountain, Inc., Waterville Valley Ski Resort,
Inc., Mount Cranmore Ski Resort, Inc., Ski Lifts, Inc.,
Grand Targhee Incorporated and The First National Bank of
Boston.
*10.2 Purchase and Sale Agreement dated as of August 30, 1996 by
and between Waterville Valley Ski Area, Ltd., Cranmore,
Inc., American Skiing Company and Booth Creek Ski
Acquisition Corp.
*10.3 Subordinated Promissory Note dated November 27, 1996 issued
by Booth Creek Ski Acquisition Corp.,Waterville Valley Ski
Resort, Inc. and Mount Cranmore Ski Resort, Inc. to American
Skiing Company.
*10.4 Stock Purchase and Indemnification Agreement dated as of
November 26, 1996 among Booth Creek Ski Holdings, Inc.,
Fibreboard Corporation, Trimont Land Company,
Sierra-at-Tahoe, Inc. and Bear Mountain, Inc.
*10.5 Escrow Agreement dated December 3, 1996 by and among
Fibreboard Corporation, Booth Creek Ski Holdings, Inc. and
First Trust of California.
*10.6 Purchase Agreement dated February 11, 1997 among Booth Creek
Ski Holdings, Inc., Grand Targhee Incorporated, Moritz O.
Bergmeyer and Carol Mann Bergmeyer.
*10.7 Promissory Note dated February 11, 1997 issued by Grand
Targhee Incorporated to Booth Creek Ski Holdings, Inc.
*10.8 Stock Purchase Agreement dated as of February 21, 1997 by
and between Booth Creek Ski Holdings, Inc., William W.
Moffett, Jr., David R. Moffett, Laurie M. Padden,
individually and as custodian for Christina Padden, Jennifer
Padden and Mary M. Padden, Stephen R. Moffett, Katharine E.
Moffett, Frances J. DeBruler, individually and as
representative of the Estate of Jean S. DeBruler, Jr.,
deceased, and Peggy Westerlund, and David R. Moffett, as
representative.
*10.9 Preferred Stock Purchase Agreement dated as of February 21,
1997 by and between DRE, L.L.C., William W. Moffett, Jr.,
David R. Moffett, Laurie M. Padden, individually and as
custodian for Christina Padden, Jennifer Padden and Mary M.
Padden, Stephen R. Moffett, Katharine E. Moffett, Frances J.
DeBruler, individually and as representative of the Estate
of Jean S. DeBruler, Jr., deceased, and Peggy Westerlund and
David R. Moffett, as representative.
*10.10 Management Agreement dated as of November 27, 1996 by and
between Booth Creek Ski Holdings, Inc. and Booth Creek, Inc.
*10.11 Letter Agreement dated December 3, 1996 between Booth Creek
Ski Holdings, Inc. and Nanci N. Northway.
*10.12 Ski Area Term Special Use Permit No. 4002/01 issued by the
United States Forest Service to Waterville Valley Ski
Resort, Inc.
*10.13 Ski Area Term Special Use Permit No. 5123/01 issued by the
United States Forest Service to Bear Mountain, Inc.
</TABLE>
II-3
<PAGE> 208
<TABLE>
<C> <S>
*10.14 Ski Area Term Special Use Permit No. 4186/01 issued by the
United States Forest Service to Sierra-at-Tahoe, Inc.
*10.15 Ski Area Term Special Use Permit No. 4033/01 issued by the
United States Forest Service to Grand Targhee Incorporated.
*10.16 Ski Area Term Special Use Permit No. 4127/09 issued by the
United States Forest Service to Ski Lifts, Inc.
*10.17 Annual Special Use Permit Nos. 4127/19 & 4127/19 issued by
the United States Forest Service to Ski Lifts, Inc.
*10.18 Amendment No. 1 to Credit Agreement as Amended and Restated
dated as of June 15, 1997 among Booth Creek Ski Holdings,
Inc., Booth Creek Ski Acquisition Corp., Trimont Land
Company, Sierra-at-Tahoe, Inc., Bear Mountain, Inc.,
Waterville Valley Ski Resort, Inc., Mount Cranmore Ski
Resort, Inc., Ski Lifts, Inc., Grand Targhee Incorporated
and BankBoston, N.A.
*12.1 Statement Regarding Computation of Ratio of Earnings to
Fixed Charges.
*21.1 Subsidiaries of the Registrants.
*23.1 Consents of Ernst & Young LLP.
*23.2 Consent of Arthur Andersen LLP.
*23.3 Consent of Coopers & Lybrand L.L.P.
*23.4 Consent of Feldhake & Associates, P.C.
*23.5 Consent of Winston & Strawn (included in Exhibit 5.1)
*24.1 Powers of Attorney.
*25.1 Statement of Eligibility of Trustee.
*27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Tender Instructions.
</TABLE>
- ---------------
* Previously filed.
(b) Financial Statement Schedules:
None.
ITEM 22. UNDERTAKINGS.
Each undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
II-4
<PAGE> 209
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
the time shall be deemed to be the initial bona fide offering
thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) Each undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the registrant undertakes that
such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form;
(5) Each registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and
is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof;
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrants pursuant to the provisions
described under Item 20 or otherwise, the registrants have been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, each registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final
adjudication of such issue;
(7) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrants
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective;
(8) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof;
(9) Each undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request; and
(10) Each undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it became
effective.
II-5
<PAGE> 210
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
BOOTH CREEK SKI HOLDINGS, INC.
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer
Nanci N. Northway (principal financial and accounting
officer)
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 211
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
TRIMONT LAND COMPANY
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer
Nanci N. Northway (principal financial and accounting
officer)
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 212
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
SIERRA-AT-TAHOE, INC.
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer
Nanci N. Northway (principal financial and accounting
officer)
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 213
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
BEAR MOUNTAIN, INC.
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer
Nanci N. Northway (principal financial and accounting
officer)
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 214
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
BOOTH CREEK SKI ACQUISITION CORP.
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer (principal financial and
Nanci N. Northway accounting officer)
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 215
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
WATERVILLE VALLEY SKI RESORT, INC.
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer (principal financial and
Nanci N. Northway accounting officer)
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 216
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
MOUNT CRANMORE SKI RESORT, INC.
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer (principal financial and
Nanci N. Northway accounting officer)
*By: /s/ NANCI N. NORTHWAY
---------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 217
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
SKI LIFTS, INC.
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer (principal financial and
Nanci N. Northway accounting officer)
*By: /s/ NANCI N. NORTHWAY
---------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 218
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
GRAND TARGHEE INCORPORATED
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer (principal financial and
Nanci N. Northway accounting officer)
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 219
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
B-V CORPORATION
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer (principal financial and
Nanci N. Northway accounting officer)
* JEFFREY J. JOYCE Director July 14, 1997
- ---------------------------------------------
Jeffrey J. Joyce
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 220
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
TARGHEE COMPANY
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer (principal financial and
Nanci N. Northway accounting officer)
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
<PAGE> 221
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Truckee,
State of California, as of July 14, 1997.
TARGHEE SKI CORP.
By: /s/ NANCI N. NORTHWAY
------------------------------------
Nanci N. Northway
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* GEORGE N. GILLETT, JR. Chairman of the Board of Directors and July 14, 1997
- --------------------------------------------- Chief Executive Officer
George N. Gillett, Jr.
/s/ NANCI N. NORTHWAY Vice President and Chief Financial July 14, 1997
- --------------------------------------------- Officer
Nanci N. Northway (principal financial and accounting
officer)
*By /s/ NANCI N. NORTHWAY
----------------------------------------
Nanci N. Northway
(Attorney-in-Fact)
</TABLE>
