<PAGE>
As filed with the Securities and Exchange Commission on September 7, 1999
Registration No. 333-80621
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
VAIL RESORTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 7990 51-0291762
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
137 Benchmark Road
Avon, CO 81620
(970) 845-2500
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
See Table of Additional Registrants
--------------
Martha D. Rehm, Esq.
Senior Vice President and General Counsel
Vail Resorts, Inc.
137 Benchmark Road
Avon, CO 81620
(970) 845-2500
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
with a copy to:
James J. Clark, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
(212) 701-3000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 426(b) under the Securities Act, check the following and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Maximum
Title of Each Class of Amount to be Proposed Aggregate Amount of
Securities to be Registered Maximum Price Offering Price Registration
Registered Proposed Per Unit (1) Fee (2)
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<S> <C> <C> <C> <C>
8 3/4% Senior
Subordinated Notes due
2009.................. $200,000,000 100% $200,000,000 $55,600(4)
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Guarantees of 8 3/4%
Senior Subordinated
Notes due 2009........ (3) (3) (3) (3)
</TABLE>
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933, as amended
(the "Securities Act").
(2)Calculated pursuant to Rule 457(f)(2) under the Securities Act.
(3)Pursuant to Rule 457(n), no registration fee is required with respect to the
Guarantees.
(4)Previously Paid.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this registration statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
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<PAGE>
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
Primary
State or other Standard I.R.S.
Exact name of registrant jurisdiction of Industrial Employer
as specified in its incorporation or Classification Identification
charter File number organization Code Number No.
- ------------------------ ------------ ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Vail Holdings, Inc. 333-80621-05 Colorado 551112 84-0568230
The Vail Corporation 333-80621-06 Colorado 71392 84-0601461
Beaver Creek Associates,
Inc. 333-80621-07 Colorado 71392 84-0677537
Beaver Creek
Consultants, Inc. 333-80621-08 Colorado 56151 84-0760348
Lodge Properties, Inc. 333-80621-09 Colorado 72111 84-0607010
Piney River Ranch, Inc. 333-80621-10 Colorado 71399 84-1147680
Vail Food Services, Inc. 333-80621-11 Colorado 72231 84-0596378
Vail Resorts Development
Company 333-80621-12 Colorado 23311 84-1242948
Vail Summit Resorts,
Inc. 333-80621-13 Colorado 71392 43-1273996
Vail Trademarks, Inc. 333-80621-14 Colorado 541199 84-1253319
Vail/Arrowhead, Inc. 333-80621-15 Colorado 23311 84-1253320
Vail/Beaver Creek Resort 333-80621-16
Properties, Inc. Colorado 531311 52-1479879
Beaver Creek Food 333-80621-17
Services, Inc. Colorado 72231 84-0815288
Lodge Realty, Inc. 333-80621-18 Colorado 53121 13-3051423
Vail Associates
Consultants, Inc. 333-80621-19 Colorado 53121 84-0738502
Vail Associates
Holdings, Ltd. 333-80621-20 Colorado 53139 84-1214955
Vail Associates 333-80621-21
Management Company Colorado 531311 84-1248614
Vail Associates Real
Estate, Inc. 333-80621-22 Colorado 53121 84-1013094
Vail/Battle Mountain,
Inc. 333-80621-23 Colorado 53139 84-1146997
Keystone Conference
Services, Inc. 333-80621-24 Colorado 72111 84-1075280
Keystone Development
Sales, Inc. 333-80621-25 Colorado 53121 43-1463384
Keystone Food and 333-80621-26
Beverage Company Colorado 72231 84-0678950
Keystone Resort Property 333-80621-27
Management Company Colorado 531311 84-0705922
Property Management 333-80621-28
Acquisition Corp., Inc. Tennessee 531311 62-1634422
The Village at 333-80621-29
Breckenridge
Acquisition Corp., Inc. Tennessee 72111 62-1633660
GHTV, Inc. 333-80621-01 Delaware 551112 39-1284459
Gillett Broadcasting of 333-80621-02
Maryland, Inc. Delaware 53139 52-1480854
Gillett Broadcasting,
Inc. 333-80621-03 Delaware 551112 37-0920781
Gillett Group
Management, Inc. 333-80621-04 Delaware 541618 62-1148746
Grand Teton Lodge
Company Wyoming 72111 83-0161154
Larkspur Restaurant &
Bar, LLC Colorado 72211 84-1510919
</TABLE>
The address, including zip code, and telephone number, including area
code, of the principal executive offices of the additional registrants listed
above is: c/o Vail Resorts, Inc., 137 Benchmark Road, Avon, CO 81620, and the
telephone number at that address is (970) 845-2500.
2
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not consummate the exchange offer until the registration statement filed with +
+the Securities and Exchange Commission is effective. This prospectus is not +
+an offer to sell these notes and is not soliciting an offer to buy these +
+notes in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
SUBJECT TO COMPLETION DATED SEPTEMBER 7, 1999
[LOGO OF VAIL RESORTS, INC.]
Exchange Offer
for
$200,000,000 Aggregate Principal Amount
of
8 3/4% Senior Subordinated Notes Due 2009
--------
Terms of Exchange Offer
. Expires 5:00 p.m., New . The exchange of the
York City time, on outstanding Notes will
1999, unless not be a taxable
extended. exchange for federal
income tax purposes.
. Subject to certain
customary conditions, . We will not receive any
which may be waived by cash proceeds from the
us. exchange offer.
. All outstanding 8 3/4% . The terms of the notes
Senior Subordinated to be issued in
Notes due 2009 that are exchange for the
validly tendered and outstanding Notes are
not withdrawn will be substantially identical
exchanged. to the outstanding
Notes, except for
. Tenders of outstanding certain transfer
Notes may be withdrawn restrictions and
any time prior to the registration rights
expiration of this relating to the
exchange offer. outstanding notes.
. Any outstanding Notes
not validly tendered
will remain subject to
existing transfer
restrictions.
See "Risk Factors" beginning on page 13 for a discussion of certain factors
that should be considered by holders who tender their outstanding Notes in the
exchange offer.
There has not been previously any public market for the exchange notes that
will be issued in the exchange offer. We do not intend to list the exchange
notes on any national stock exchange or on the Nasdaq Stock Market. There can
be no assurance that an active market for such exchange notes will develop.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the notes to be distributed in the
exchange offer, nor have any of these organizations passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this Prospectus is , 1999.
<PAGE>
The exchange offer is not being made to, nor will we accept surrenders
for exchange from, holders of outstanding notes in any jurisdiction in which
the exchange offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended. The Exchange Act file number for our SEC
filings is 001-09614. You may read and copy any document we file at the
following SEC public reference rooms:
Judiciary Plaza 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Room 1024 Chicago, Illinois 60661 New York, New York
Washington, D.C. 20549 10048
You may obtain information on the operation of the public reference room
in Washington, D.C. by calling the SEC at 1-800-SEC-0330.
We file information electronically with the SEC. Our SEC filings also are
available from the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements, and other information regarding
issuers that file electronically.
The SEC allows us to "incorporate by reference" certain documents we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information in the documents incorporated
by reference is considered to be part of this prospectus, and information in
documents that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings we will make with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act.
. Annual Report on Form 10-K for the fiscal year ended July 31, 1998;
and
. Quarterly Reports on Form 10-Q for the quarters ended October 31,
1998, January 31, 1999 and April 30, 1999.
We will provide a copy of the documents we incorporate by reference, at
no cost, to any person who receives this prospectus, including any beneficial
owner of our common stock. To request a copy of any or all of these documents,
you should write or telephone us at the following address and telephone number:
Vail Resorts, Inc.
Post Office Box 7
Vail, Colorado 81658
Telephone: (970) 845-2500
Attention: Beth McMullen Lohman
To obtain timely delivery, you must make your request no later than
, 1999 (five business days prior to the expiration date for the exchange
offer).
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<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to analyses and other information which are
based on forecasts of future results and estimates of amounts not yet
determinable. These statements also relate to our future prospects,
developments and business strategies.
These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" and similar terms and
phrases, including references to assumptions. These statements are contained in
sections entitled "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and other sections of this prospectus and in the documents
incorporated by reference in this prospectus.
Although we believe that our plans, intentions and expectations reflected
in or suggested by such forward-looking statements are reasonable, we cannot
assure you that such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from our
forward-looking statements are set forth below and elsewhere in this
prospectus, including under the section headed "Risk Factors." Such factors
include, among others, unfavorable weather conditions; our ability to obtain
financing on terms acceptable to us to finance our capital expenditure and
growth strategy; our ability to develop our resort and real estate operations,
including, among other factors, regulatory impediments to such development;
competition in our resort businesses; our reliance on government permits for
our use of federal land; our ability to integrate and successfully operate
future acquisitions; and adverse changes in the real estate market. All
forward-looking statements attributable to us or any persons acting on our
behalf are expressly qualified in their entirety by these cautionary
statements.
Our risks are more specifically described in "Risk Factors" and in our
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are
incorporated by reference in this prospectus. If one or more of these risks or
uncertainties materializes, or if underlying assumptions prove incorrect, our
actual results may vary materially from those expected, estimated or projected.
We will not update these forward-looking statements, even if new information,
future events or other circumstances have made them incorrect or misleading.
ii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements (including the notes thereto) appearing elsewhere in, or
incorporated by reference into, this prospectus. The terms "the Company," "we,"
"us" and "our" as used in this prospectus refer to Vail Resorts, Inc. and its
subsidiaries and predecessors as a combined entity, except where it is clear
from the context that such term means only the parent company. On September 1,
1997 we changed our fiscal year end from September 30 to July 31. Accordingly,
"fiscal" in connection with a year prior to 1998 refers to the 12 months ended
September 30, while "fiscal" in connection with 1998 refers to the ten months
ended July 31 and "fiscal" in subsequent years refers to the 12 months ended
July 31. Unless otherwise specified, "ski season" shall mean the period from
the opening of any of our mountains for skiing to the closing of our last
mountain for skiing, typically late October to early May, and "skier day" shall
mean one guest accessing a ski mountain on any one day. "Beaver Creek" and
other designated trademarks are registered trademarks of Vail Resorts, Inc.
The Company
Vail Resorts is one of the leading resort operators in North America.
Through our five premier properties we provide a comprehensive resort
experience throughout the year to a diverse clientele with an attractive
demographic profile. Our resorts currently include:
. Vail Mountain--the largest and most popular single ski mountain
complex in North America ("Vail"),
. Beaver Creek Resort--one of the world's premier family-oriented
mountain resorts ("Beaver Creek"),
. Breckenridge Mountain--an attractive destination resort with numerous
apres ski activities and an extensive bed base ("Breckenridge"),
. Keystone Resort--a year-round family vacation destination
("Keystone"), and
. Grand Teton Lodge Company--our first summer destination resort with
four resort properties in and around Grand Teton National Park ("Grand
Teton").
We are one of the most profitable mountain resort operators due to the
following competitive strengths:
. ownership of premium resorts,
. attractive guest demographics,
. strong brand franchise,
. scope, diversity and quality of our complementary activities and guest
services, and
. proximity of our ski resorts to both Denver International Airport and
Vail/Eagle County Airport.
We had an 8.7% share of skier days in the United States for the 1997-98
ski season and are uniquely positioned to attract a broad range of guests due
to our diverse ski terrain, varied price points and numerous activities and
services. Our ski resorts are located within 50 miles of each other, which
enables us to offer guests the opportunity to visit each ski resort during one
vacation stay and participate in common loyalty programs. We also own
substantial real estate proximate to our ski resorts from which we derive
significant strategic benefits and cash flow.
For the twelve months ended April 30, 1999, our revenue from resort
operations ("Resort Revenue") and Resort EBITDA (as hereinafter defined) was
$405.6 million and $87.6 million, respectively.
Our principal executive office is located at 137 Benchmark Road, Avon,
Colorado 81620, and our phone number at that address is (970) 845-2500.
1
<PAGE>
Resorts
Vail--Located 100 miles from Denver, Vail is the largest and most popular
single ski mountain complex in North America, offering over 4,600 acres of
unique and varied ski terrain spanning approximately 20 square miles. Included
in this complex are Vail's world-famous Back Bowls, the largest network of high
speed quad chairlifts in the world, a top rated ski school and a wide variety
of dining and retail venues. Vail's skier days were 1.34 million for the 1998-
99 ski season. Vail hosted the World Alpine Ski Championships in January 1999,
the first time a North American ski resort has been selected to host this
prestigious event twice. For the last ten years, Vail has been rated the number
one ski resort in the United States by the Mountain Sports and Living (f/k/a
Snow Country) magazine survey.
Beaver Creek--Located ten miles west of Vail, Beaver Creek is one of the
world's premier family-oriented mountain resorts, offering its guests a
superior level of service in a pristine alpine setting. Since opening in 1980,
Beaver Creek has been one of the fastest growing ski resorts in North America,
with annual skier days increasing from 111,746 in the 1980-81 ski season to
617,000 for the 1998-99 ski season. With the connection (through ski lifts and
trails) of three distinct ski areas--Beaver Creek, Arrowhead(TM) and Bachelor
Gulch(TM)--Beaver Creek provides guests with a European-style village-to-
village ski experience. Beaver Creek offers a distinct and varied vacation
experience from Vail and was ranked number six in the 1998 Mountain Sports and
Living magazine survey. It has consistently been rated among the top ten
resorts in the United States in various other industry surveys.
Breckenridge--Located approximately 85 miles west of Denver and 40 miles
east of Vail, Breckenridge offers over 2,000 acres of skiing on four different
mountain peaks, including open bowl skiing and excellent beginner and
intermediate ski terrain. The ski area is located adjacent to the Town of
Breckenridge, a Victorian mining town, which has numerous apres ski activities
and an extensive and growing bed base, making Breckenridge an attractive
destination resort for national and international skiers. Breckenridge's skier
days were 1.39 million for the 1998-99 ski season, a new record for
Breckenridge.
Keystone--Located 70 miles west of Denver and 15 miles from Breckenridge,
Keystone offers over 1,800 acres of skiable terrain. Keystone's skier days were
1.26 million for the 1998-99 ski season. Keystone has the largest and most
advanced snowmaking capability of any Colorado mountain resort with snowmaking
coverage extending over nearly 50% of Keystone's skiable acreage. Keystone also
provides the largest single-mountain night skiing experience in North America,
with 17 lighted trails covering 2,340 vertical feet, offering a 12 1/2 hour ski
day. Keystone is a planned family-oriented community that offers numerous year-
round activities, the majority of which we operate, including the Keystone
Conference Center, which is the largest convention center in the Colorado Rocky
Mountains.
Grand Teton--On June 14, 1999 we acquired Grand Teton for a total
purchase price of $55 million. Grand Teton is based in Jackson Hole, Wyoming
and operates four premier resort properties in and around Grand Teton National
Park. Within the park, we operate the 37-cabin Jenny Lake Lodge, a AAA four-
diamond lodge; Jackson Lake Lodge, a picturesque 385-room lodge that boasts the
most extensive meeting facilities in any national park; and Colter Bay Village,
a unique family resort with 226 cabins as well as extensive camping and
recreational facilities. Outside the park, we operate the Jackson Hole Golf and
Tennis Club, the top-rated golf course in the State of Wyoming. We also
acquired 30 acres of developable land adjacent to the golf course suitable for
future residential development. For the twelve month period ended December 31,
1998, Grand Teton had Resort Revenues and Resort EBITDA of $26.6 million and
$7.9 million, respectively.
Business Strategy
A key component of the business strategy for our mountain resorts has
been to expand and enhance our core ski operations, while at the same time
increasing the scope, diversity and quality of the complementary activities and
services offered to our skiing and non-skiing guests throughout the year. This
focus has resulted
2
<PAGE>
in growth in skier days and lift ticket sales and has also allowed us to expand
our revenue base beyond our core ski operations. As a result of this strategy,
non-lift ticket revenue as a percentage of total Resort Revenue has increased
to over 63% of total Resort Revenue for the twelve months ended January 31,
1999, as compared to 36% in fiscal 1985.
Our focus on developing a comprehensive destination resort experience has
also allowed us to attract a diverse guest population with an attractive
demographic and economic profile, including a significant number of affluent
and family-oriented destination guests, who tend to generate higher and more
diversified revenues per guest than day skiers from local population centers.
While our Resort Revenue per skier day is currently among the highest in the
industry, we estimate that we currently capture only 20% of the total vacation
expenditures of an average destination guest at our resorts. See "Business--
Resorts."
In connection with this strategy, we have completed numerous internal
growth initiatives over the past several years to add "new attractions" and
improve on-mountain facilities, including:
. expanding ski terrain at Beaver Creek by 30%,
. constructing seven high-speed four-passenger chairlifts and a state-
of-the-art gondola,
. building innovative family attractions such as Adventure Ridge(TM) and
Adventure Point(TM),
. introducing snowboarding at Keystone,
. significantly improving snowmaking systems at all of our resorts,
. adding 20 new restaurants and 3 private on-mountain clubs, and
. updating our guest-focused information systems, including introducing
resort-wide charging, which offers guests a cashless on-mountain
experience and "direct-to-lift" convenience.
Our total resort capital spending on these and other internal initiatives
over the past three calendar years has been in excess of $140 million.
As a complement to our internal growth strategy, we also selectively
acquire businesses in and around our resorts to (1) broaden our participation
in the services available to our guests, thereby allowing us to maintain and
improve the quality of our guests' experience, (2) increase our ability to
offer "package" vacation products to our guests, and (3) increase Resort
Revenue per skier day. Over the past 18 months, we have acquired for an
aggregate purchase price of approximately $72 million, five hotels operating a
total of 519 rooms and three property management operations which oversee
approximately 400 units. We have also secured additional contracts to manage
nearly 300 individual condominium units. Since acquiring these hotel
properties, we have significantly improved their occupancy, average daily rate,
operating margins and Resort EBITDA.
We have also recently expanded our retail presence by entering into a
joint venture, SSI Venture, with one of the largest retailers of ski- and golf-
related sporting goods in Colorado. SSI Venture operates approximately 70
retail and rental locations in Vail, Beaver Creek, Breckenridge, Keystone,
Denver, Boulder, Colorado Springs, Aspen and Telluride, thereby expanding our
operations throughout the Colorado market. We hold a 51.9% ownership interest
in SSI Venture.
We intend to acquire additional resorts which we believe can be
successfully integrated into our existing operations, can enhance our ability
to attract destination guests to all of our resorts and can benefit from our
capital investment and management expertise. Our 1997 acquisition of
Breckenridge and Keystone exemplifies this strategy. We believe we have
successfully broadened the appeal of these resorts to destination guests and
improved their operating performance through capital investment, coordinated
marketing, improved central reservations and a common, four-resort lift ticket.
We have also realized efficiencies in our purchasing, information systems,
accounting and legal areas by sharing these functions across all of our
resorts.
3
<PAGE>
We believe our recent acquisition of Grand Teton provides us with a
significant new opportunity to further leverage our hospitality, dining, retail
and recreation expertise. With its peak season from the late Spring through
early Fall, Grand Teton will significantly increase our summer Resort Revenue.
In addition, with four premier resort properties in and around Grand Teton
National Park, Grand Teton provides a platform to further grow our business in
the National Parks.
Real Estate
We also benefit from our extensive holdings of real property in proximity
to our resorts and from the activities of Vail Resorts Development Company
("VRDC"), our wholly-owned subsidiary. VRDC manages our real estate operations,
including the planning, oversight, marketing, infrastructure improvement and
development of Vail Resorts' real property holdings. VRDC generated $84.2
million in revenue from real estate operations for the twelve months ended July
31, 1998. As of January 31, 1999, the book value of our real estate held for
sale was approximately $155.0 million. In addition to the substantial cash flow
generated from real estate sales, our resort operations benefit from these
development activities through:
. the creation of additional resort lodging which is available to our
guests,
. the ability to control the architectural theme of our resorts,
. the creation of unique facilities and venues which provide us with the
opportunity to create new sources of recurring revenue, and
. the expansion of our property management and brokerage operations,
which are the preferred providers of these services for developments
on VRDC's land.
In order to facilitate the development and sale of its real estate
holdings, VRDC spends significant amounts on mountain improvements such as ski
lifts, snowmaking equipment and trail construction. While these mountain
improvements enhance the value of the real estate held for sale (for example,
by providing ski-in/ski-out accessibility), they also benefit resort
operations. In most cases, VRDC seeks to minimize our exposure to development
risks and maximize the long-term value of our real property holdings by selling
land to third party developers for cash payments prior to the commencement of
construction, while retaining approval of the development plans as well as an
interest in the developer's profit. We also typically retain the option to
purchase any commercial space created in a development. We are able to secure
these benefits from third party developers as a result of the high property
values and strong demand associated with property in close proximity to our
world class mountain resort facilities. See "Risk Factors--Future changes in
the real estate market could affect the value of our investments."
We also benefit from our interest in a joint venture ("Keystone JV")
which is developing a significant portion of the Keystone resort and has
approvals to add up to 3,400 residential and lodging units and up to 318,000
square feet of retail and restaurant space over the next 20 years. We believe
that the build-out of this real estate will result in increased skier days and
Resort Revenue per skier day and will significantly increase the number of
higher revenue destination guests at Keystone. See "Business--Real Estate."
Recent Results
On May 11, 1999, we sold and issued the outstanding Notes. The proceeds
from this offering were used to repay indebtedness under our credit facility
(which can be reborrowed).
On June 8, 1999, we announced that Resort Revenue for the third quarter
1999 increased 11% to $188.2 million from $170.1 million in the comparable
period last year. Total Revenue for the third quarter (which includes revenue
from real estate operations) grew 16% to $202.2 million from $174.0 in the same
quarter in fiscal 1998.
4
<PAGE>
Resort EBITDA for the third quarter were $75.4 million versus $86.1
million in the same quarter of 1998, reflecting the overall weakness in
Colorado ski industry due largely to unfavorable weather conditions during the
1998-1999 ski season.
Net income for the third quarter was $30.2 million, or $0.87 per diluted
share, compared to $41.7 million, or $1.20 per diluted share, in the third
quarter of 1998.
For the nine months ended April 30, 1999, Resort Revenue increased 17% to
$379.3 million compared to $324.2 million in the same period of 1998. Total
Revenue grew to $410.8 million from $390.0 million in the first nine months of
fiscal 1998.
Resort EBITDA for the nine month period was $100.9 million compared to
$119.3 million in 1998.
Net income for the nine month period was $26.3 million, or $0.76 per
diluted share, compared to $46.9 million, or $1.35 per diluted share, in the
same period in fiscal 1998.
In the third quarter of fiscal 1999, revenue per skier day grew 14% to
$75.38 from $66.30 in the comparable quarter last year, despite a 3% decline
in skier days. Total skier days for the third quarter were 2.5 million
compared to 2.6 million last year.
In addition, skier days for the 1998-1999 total ski season for all four
of our ski resorts combined were 4,606,754, a 2% decline from the 4,716,605
skier days reported in the 1997-1998 ski season.
5
<PAGE>
The Exchange Offer
Registration Rights......... You are entitled to exchange your outstanding
Notes for freely tradeable exchange notes with
substantially identical terms. The exchange offer
is intended to satisfy your exchange rights.
After the exchange offer is complete, you will no
longer be entitled to any exchange or
registration rights with respect to your
outstanding Notes. Accordingly, if you do not
exchange your outstanding Notes, you will not be
able to reoffer, resell or otherwise dispose of
your outstanding Notes unless you comply with the
registration and prospectus delivery requirements
of the Securities Act, or there is an exemption
available.
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount of our 8 3/4% Senior Subordinated Notes
due 2009, which have been registered under the
Securities Act, for $1,000 principal amount of
our outstanding 8 3/4% Senior Subordinated Notes
due 2009, which were issued in a private offering
on May 11, 1999. As of the date of this
prospectus, there are $200.0 million of
outstanding Notes. We will issue exchange notes
promptly after the expiration of the exchange
offer.
Resales..................... We believe that the exchange notes issued in the
exchange offer may be offered for resale, resold
or otherwise transferred by you without
compliance with the registration and prospectus
delivery requirements of the Securities Act
provided that:
. you are acquiring the exchange notes in
the ordinary course of your business;
. you are not participating, do not intend
to participate and have no arrangement
or understanding with any person to
participate, in a distribution of the
exchange notes; and
. you are not an "affiliate" of ours.
If you do not meet the above criteria you will
have to comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any reoffer,
resale or other disposition of your exchange
notes.
Each broker or dealer that receives exchange
notes for its own account in exchange for
outstanding Notes that were acquired as a result
of market-making or other trading activities must
acknowledge that it will deliver this prospectus
in connection with any sale of exchange notes.
Expiration Date............. 5:00 p.m., New York City time, on , 1999,
unless we extend the expiration date.
6
<PAGE>
The exchange offer is subject to certain
Conditions to the Exchange customary conditions, which may be waived by us.
Offer...................... The exchange offer is not conditioned upon any
minimum principal amount of outstanding notes
being tendered.
Procedures for Tendering
Outstanding Notes.......... If you wish to tender outstanding Notes, you must
complete, sign and date the letter of
transmittal, or a facsimile of it, in accordance
with its instructions and transmit the letter of
transmittal, together with your Notes to be
exchanged and any other required documentation to
United States Trust Company of New York, who is
the exchange agent, at the address set forth in
the letter of transmittal to arrive by 5:00 p.m.
New York City time, on the expiration date. See
"The Exchange Offer--Procedures for Tendering
Outstanding Notes." By executing the letter of
transmittal, you will represent to us that you
are acquiring the exchange notes in the ordinary
course of your business, that you are not
participating, do not intend to participate and
have no arrangement or understanding with any
person to participate in the distribution of
exchange notes, and that you are not an
"affiliate" of ours. See "The Exchange Offer--
Procedures for Tendering Outstanding Notes."
Special Procedures for
Beneficial Holders......... If you are the beneficial holder of outstanding
Notes that are registered in the name of your
broker, dealer, commercial bank, trust company or
other nominee, and you wish to tender in the
exchange offer you should contact the person in
whose name your outstanding Notes are registered
promptly and instruct such person to
tender on your behalf. See "The Exchange Offer--
Outstanding Notes."
Guaranteed Delivery
Procedures................. If you wish to tender your outstanding Notes and
you cannot deliver such Notes, the letter of
transmittal or any other required documents to
the exchange agent before the expiration date,
you may tender your outstanding 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 before 5:00
p.m., New York City time, on the expiration date.
Acceptance of Outstanding
Notes and Delivery of Subject to certain conditions, we will accept for
Exchange Notes............. exchange any and all outstanding Notes which are
properly tendered in the exchange offer before
5:00 p.m., New York City time, on the expiration
date. The exchange notes will be delivered
promptly after the expiration date. See "The
Exchange Offer--Terms of the Exchange Offer."
7
<PAGE>
Certain Federal Income Tax
Considerations............. The exchange of outstanding Notes for exchange
notes will not be a taxable event for federal
income tax purposes. You will not recognize any
taxable gain or loss as a result of exchanging
outstanding Notes for exchange notes, and you
will have the same tax basis and holding period
in the exchange notes as you had in the
outstanding Notes immediately before the
exchange. See "Certain Federal Income Tax
Considerations."
Exchange Agent..............
United States Trust Company of New York is
serving as exchange agent in connection with the
exchange offer. The address, telephone number and
facsimile number of the exchange agent are set
forth in "The Exchange Offer-- Exchange Agent."
8
<PAGE>
Summary of the Exchange Notes
The summary below describes the principal terms of the exchange notes.
Certain of the terms and conditions described below are subject to important
limitations and exceptions. The "Description of Notes" section of this
prospectus contains a more detailed description of the terms and conditions of
the exchange notes.
Issuer...................... Vail Resorts, Inc.
Notes Offered............... Up to $200,000,000 aggregate principal amount of
8 3/4% Senior Subordinated Notes due 2009.
Interest Payment Dates...... Interest will accrue on the exchange notes from
the last interest payment date on which interest
was paid on the outstanding Notes surrendered in
exchange therefor or if no interest has been paid
on the outstanding Notes, from May 11, 1999 and
will be payable semi-annually on each May 15 and
November 15 of each year, commencing November 15,
1999.
Maturity.................... May 15, 2009.
Guarantees.................. Certain of our subsidiaries other than those
treated as unrestricted subsidiaries will
guarantee the exchange notes on a senior
subordinated basis. Future subsidiaries which are
deemed restricted subsidiaries will also be
required to guarantee the exchange notes if they
guarantee any other of our debt. See "Description
of Notes--Guarantees."
Ranking..................... The exchange notes will be unsecured senior
subordinated obligations and will be subordinated
to all our existing and future senior debt. The
exchange notes will rank equally with all our
other existing and future senior subordinated
debt and will rank senior to all our subordinated
indebtedness.
Our subsidiaries' guarantees with respect to the
exchange notes will be general unsecured senior
subordinated obligations of such guarantors and
will be subordinated to all of such guarantors'
existing and future senior debt. The guarantees
will rank equally with any senior subordinated
indebtedness of the guarantors and will rank
senior to such guarantors' subordinated debt.
Because the exchange notes are subordinated, in
the event of bankruptcy, liquidation or
dissolution, holders of the exchange notes will
not receive any payment until holders of senior
indebtedness have been paid in full. The term
"senior debt" is defined in the "Description of
Notes--Subordination" section of this prospectus.
At April 30, 1999, after giving effect to the
offering of the outstanding Notes and the
application of the net proceeds, we had $99.6
million of senior debt outstanding on a
consolidated basis.
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<PAGE>
Redemption.................. We may redeem the exchange notes, in whole or in
part, at any time on or after May 15, 2004, at
the declining redemption prices set forth in this
prospectus plus accrued interest.
Optional Redemption.........
On or prior to May 15, 2002, we may redeem up to
35% of the exchange notes with the net proceeds
of certain equity offerings at 108.75% of the
principal amount thereof, plus accrued interest,
if at least 65% of the aggregate principal amount
of the exchange notes remains outstanding. See
"Description of Notes--Optional Redemption."
On or prior to May 15, 2004, we may also redeem
the exchange notes, in whole or in part, upon the
occurrence of a change of control at a make-whole
price as described under "Description of Notes--
Optional Redemption."
Change of Control........... Upon certain change of control events, if we do
not redeem the exchange notes, each holder of
exchange notes may require us to repurchase all
or a portion of its exchange notes at a purchase
price equal to 101% of the principal amount
thereof, plus accrued interest. Our ability to
repurchase the exchange notes upon a change of
control event will be limited by the terms of our
debt agreements, including our credit facility.
We cannot assure you that we will have the
financial resources to repurchase the exchange
notes. See "Description of Notes--Repurchase of
the Option of Holders--Change of Control."
Certain Covenants...........
The indenture that will govern the exchange notes
contains covenants that, among other things, will
limit our ability and the ability of certain of
our subsidiaries to:
. incur additional indebtedness,
. pay dividends on, redeem or repurchase
our capital stock,
. make investments,
. engage in transactions with affiliates,
. create certain liens,
. sell assets, or
. consolidate, merge or transfer all or
substantially all our assets and the
assets of our subsidiaries on a
consolidated basis.
These covenants are subject to important
exceptions and qualifications, which are
described in the "Description of Notes" section
of this prospectus.
Risk Factors................ See "Risk Factors" for a discussion of factors
you should carefully consider before deciding to
tender your outstanding Notes for exchange notes.
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<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary historical data for the fiscal years 1996 and 1997 is derived
from actual audited results for such years. On September 1, 1997, we changed
our fiscal year end from September 30 to July 31. Accordingly, our fiscal year
1998 ended on July 31, 1998 and consisted of ten months. To see the audited
results for the ten months ended July 31, 1998, see "Selected Consolidated
Financial and Operating Data." Also included for comparative purposes are the
unaudited pro forma results for the twelve months ended July 31, 1997 and the
actual unaudited results for the twelve months ended July 31, 1998. These pro
forma results are not necessarily indicative of the actual results of
operations that would have been achieved nor are they necessarily indicative of
future results of operations. The summary historical data for the nine months
ended April 30, 1998 and 1999 are derived from our unaudited consolidated
financial statements, which included all adjustments management considers
necessary to present fairly the financial results for these interim periods.
All of these adjustments were of a normal recurring nature. The results of such
interim periods are not necessarily indicative of results to be expected for
the full year due to the highly seasonal nature of our business (which
ordinarily produces losses for the first and fourth quarters). See "--Recent
Results" and "Risk Factors--Our resort business is highly seasonal."
<TABLE>
<CAPTION>
Pro Forma
Twelve Month Twelve Twelve
Fiscal Year Ended Months Months Nine Months Ended Twelve
September 30, Ended Ended April 30, Months
---------------------------- July 31, July 31, ------------------ Ended April
1995 1996 1997(1) 1997(2) 1998 1998 1999(3) 30, 1999(3)
-------- -------- -------- ----------- ----------- -------- -------- -----------
(audited) (unaudited) (unaudited) (unaudited) (unaudited)
(In thousands, except ratio data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Resort................. $126,349 $140,288 $259,038 $292,127 $350,498 $324,195 $379,346 $ 405,649
Real estate............ 16,526 48,655 71,485 74,356 84,177 65,760 31,409 49,826
-------- -------- -------- -------- -------- -------- -------- ----------
Total revenues......... 142,875 188,943 330,523 366,483 434,675 389,955 410,755 455,475
Operating expenses:
Resort................. 82,305 89,890 172,715 200,488 238,889 200,552 273,900 312,237
Real estate............ 14,983 40,801 66,307 64,646 74,057 58,939 26,248 41,366
Corporate expense(4)... 6,701 12,698 4,663 4,236 5,543 4,313 4,555 5,785
Depreciation and
amortization.......... 17,968 18,148 34,044 37,997 42,965 31,163 38,181 49,983
-------- -------- -------- -------- -------- -------- -------- ----------
Total operating
expenses.............. 121,957 161,537 277,729 307,367 361,454 294,967 342,884 409,371
Income from operations.. 20,918 27,406 52,794 59,116 73,221 94,988 67,871 46,104
Interest expense....... (19,498) (14,904) (20,308) (16,799) (20,891) (16,064) (17,593) (22,420)
Net income (loss)...... 3,282 4,735 19,698 25,966 30,073 46,857 26,319 9,535
Other Data:
Skier days(5).......... 2,136 2,228 4,273 4,890 4,717 4,706 4,579 4,590
Resort EBITDA(4)(6).... 37,343 46,200 81,660 87,403 106,066 119,330 100,891 87,627
Real estate operating
income(7)............. 1,543 7,854 5,178 9,710 10,120 6,821 5,161 8,460
-------- -------- -------- -------- -------- -------- -------- ----------
Total EBITDA(4)(8)..... 38,886 54,054 86,838 97,113 116,186 126,151 106,052 96,087
Resort capital
expenditures(9)....... 20,320 13,912 51,020 41,047 93,333 79,853 53,691 67,171
Total debt to Resort
EBITDA................ 5.1x 3.1x 3.2x 2.7x 2.7x 3.4x
Resort EBITDA to
interest expense...... 1.7 3.1 4.0 5.2 5.1 3.9
Resort EBITDA to pro
forma interest
expense(10)........... 3.3
Total debt to Total
EBITDA................ 4.9 2.7 3.1 2.4 2.4 3.1
Total EBITDA to
interest expense...... 1.9 3.6 4.3 5.8 5.6 4.3
Total EBITDA to pro
forma interest
expense(10)........... 3.7
Balance Sheet Data (at
period end):
Total assets........... $912,122 $1,014,810
Real estate held for
sale(11).............. 138,916 152,141
Long term debt
(including current
maturities)........... 284,014 293,862
Stockholders' equity... 462,624 489,972
</TABLE>
- --------
(footnotes appear on following page)
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- --------
(1) Our consolidated statement of operations for the fiscal year ended
September 30, 1997 includes the results of Keystone and Breckenridge for
the 270-day period from January 4, 1997 to September 30, 1997.
(2) The unaudited pro forma results for the twelve months ended July 31, 1997
give effect to our acquisition of the Keystone and Breckenridge resorts
(which occurred on January 3, 1997) and the initial public offering of
our common stock (which occurred on February 4, 1997) as if such events
occurred on August 1, 1996, and are presented exclusive of a pre-tax $2.2
million reorganization charge and a $8.5 million one-time non-recurring
charge to corporate expense.
(3) Included in the summary consolidated historical data for the nine months
and twelve months ended April 30, 1999, are the results of operations of
our 51.9%-owned joint venture, SSI Venture (which commenced operations on
August 1, 1998). SSI Venture will not be a guarantor of the Notes. For the
nine months ended April 30, 1999, SSI Venture had revenues of $64.3
million, income from operations of $8.3 million and EBITDA of $11.6
million. At April 30, 1999, SSI Venture had total assets of $38.3 million,
total debt of $9.8 million and stockholders' equity of $20.6 million. For
the nine months ended April 30, 1999, the EBITDA of SSI Venture
represented less than 12% of our Resort EBITDA. See Note 16 to the Audited
Consolidated Financial Statements of the Company and Note 7 to the
Unaudited Consolidated Condensed Financial Statements of the Company.
(4) Corporate expense includes certain executive, tax, legal, directors' and
officers' insurance and other consulting fees. For fiscal 1996, corporate
expense included the costs associated with our holding company structure
and overseeing multiple lines of business, including certain discontinued
operations. For the year ended September 30, 1996, corporate expense
includes the following non-recurring charges: (i) $4.5 million related to
a rights distribution to option holders, (ii) $1.9 million of
compensation expense related to the exercise of certain options held by
our former Chairman and Chief Executive Officer and (iii) $2.1 million
related to the termination of an employment agreement with our former
Chairman and Chief Executive Officer. For purposes of calculating Resort
EBITDA and Total EBITDA for this period, corporate expense excludes these
non-recurring charges.
(5) A skier day represents one guest accessing a ski mountain on any one day
and includes guests using complimentary tickets and ski passes.
(6) Resort EBITDA (earnings before interest expense, income tax expense,
depreciation and amortization) is defined as Resort Revenue less resort
operating expenses and corporate expense. Resort EBITDA is not a term
that has an established meaning under generally accepted accounting
principles ("GAAP"). We have included the information concerning Resort
EBITDA because our management believes it is an indicative measure of a
resort company's operating performance and is generally used by investors
to evaluate companies in the resort industry. Resort EBITDA does not
purport to represent cash provided by operating activities, and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. For information regarding
our historical cash flows from operating, investing and financing
activities, see our consolidated financial statements included elsewhere
in this prospectus.
(7) Real estate operating income is defined as revenue from real estate
operations less real estate costs and expenses, which include selling and
holding costs, operating expenses, and an allocation of the land,
infrastructure, mountain improvement and other costs relating to property
sold. Real estate costs and expenses exclude charges for depreciation and
amortization, as we have determined that the portion of those expenses
allocable to real estate are not significant.
(8) Total EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization. EBITDA is presented because
management believes it provides useful information regarding a company's
ability to incur and service debt. EBITDA should not be considered in
isolation or as a substitute for net income or cash flows prepared in
accordance with GAAP, nor should it be used as a measure of our
profitability or liquidity.
(9) We typically categorize approximately $15 million to $20 million per year
of total resort capital expenditures as maintenance capital expenditures,
except for fiscal 1996, during which approximately $7 million was
categorized as maintenance capital expenditures. For the nine months
ended April 30, 1999 and 1998, approximately $12 million for each period
was categorized as maintenance capital expenditures.
(10) Pro forma interest expense gives effect to the private offering of the
outstanding Notes on May 11, 1999 and the repayment of indebtedness under
our credit facility (which can be reborrowed) with the proceeds thereof.
(11) Real estate held for sale includes all land, development costs and other
improvements associated with real estate held for sale, as well as
investments in real estate joint ventures.
12
<PAGE>
RISK FACTORS
In addition to the other information in this prospectus, you should
carefully consider the following factors prior to exchanging outstanding Notes
for exchange notes in the exchange offer.
We are highly leveraged. At April 30, 1999, we had $293.9 million of
indebtedness, representing approximately 37% of our total capitalization. See
"Capitalization." Furthermore, subject to certain restrictions in our credit
facility and the indenture governing the exchange notes, we, along with our
subsidiaries, may incur additional indebtedness from time to time to finance
acquisitions, provide for working capital or capital expenditures or for other
purposes.
Our high level of indebtedness could have important consequences to you,
including limiting our ability to:
. obtain additional financing for acquisitions, working capital,
capital expenditures or other purposes,
. use operating cash flow in other areas of our business because we
must dedicate a substantial portion of these funds to make principal
payments and fund debt service,
. borrow additional funds or dispose of assets,
. compete with others who are not as highly leveraged, and
. react to changing market conditions, changes in our industry and
economic downturns.
We currently expect that we will be able to service our indebtedness out
of cash flow from operations. If we are unable to generate sufficient cash flow
to meet our debt service obligations, we will have to pursue one or more
alternatives, such as reducing or delaying capital expenditures, refinancing
debt, selling assets or raising equity capital. Each of these alternatives is
dependent upon financial, business and other general economic factors that
affect us, many of which are beyond our control. We cannot assure you that any
of these alternatives could be accomplished on satisfactory terms or that they
would yield sufficient funds to retire the Notes and the indebtedness senior to
the exchange notes. While we believe that our cash flow from operations will
provide an adequate source of long-term liquidity, a significant drop in
operating cash flows resulting from economic conditions, competition or other
uncertainties beyond our control would increase the need for alternative
sources of liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
Our future growth requires additional capital whose availability is not
assured. We intend to make significant investments in our resorts to maintain
our competitive position. We spent approximately $80.5 million and $51.0
million in the fiscal years ended July 31, 1998 and September 30, 1997,
respectively, on resort capital expenditures and expect to continue making
substantial resort capital expenditures. We could finance future expenditures
from any of the following sources:
. cash flow from operations,
. bank borrowings,
. public offerings of debt or equity,
. private placements of debt or equity, or
. some combination of the above.
We might not be able to obtain financing for future expenditures on
favorable terms.
Our recent or future acquisitions might not be successful. In recent
years, we have acquired several major resorts, including Keystone and
Breckenridge, Grand Teton and a number of real estate developments. Although we
believe we have enhanced our earnings and achieved cost savings by integrating
these acquisitions into our operations, we cannot assure you that we will be
able to continue this successful
13
<PAGE>
integration, manage these acquired properties profitably or increase our
profits from these operations. We would face various risks from additional
acquisitions, including:
. inability to integrate acquired businesses into our operations,
. increased goodwill amortization,
. diversion of our management's attention, and
. unanticipated problems or liabilities.
These problems from future acquisitions could adversely affect our
operations and financial performance.
Our resort business is highly seasonal. We currently generate more than
80% of our revenue during the ski season, from November to April. We rely on
borrowings under our credit facility to support our capital requirements during
the unprofitable period between ski seasons, from May to October. If we are
unable to comply with the conditions of our credit facility or if the financing
we receive is insufficient for our needs, our inability to obtain adequate
financing outside of the ski season could have a material adverse effect on us.
Grand Teton, which we recently acquired, realizes most of its revenues between
May and October. However, this will only partially offset the seasonal nature
of our ski business.
Our future development might not be successful. We have significant
development plans for our resort and real estate operations. We could
experience significant difficulties completing these projects, including:
. delays in completion,
. our cost estimates may prove inaccurate,
. difficulty in receiving the necessary regulatory approvals, or
. we may not benefit from the projects as we expected.
We may not be able to fund these projects with cash flow from operations
and borrowings under our credit facility if we faced these difficulties.
Our ski resorts face significant competition. The number of people who
ski in the United States (as measured in skier days) has increased by
approximately 4% since the 1985-86 ski season and there is substantial
competition among ski resorts for these customers. The factors that are
important to these customers include:
. proximity to population centers,
. availability and cost of transportation to ski areas,
. ease of travel to ski areas (including direct flights by major
airlines),
. pricing of our products and services,
. snowmaking facilities,
. type and quality of skiing offered,
. duration of the ski season,
. weather conditions,
. number, quality and price of related services and lodging, and
. reputation.
We have many competitors for our ski vacationers, including ski resorts
in Utah, California, Nevada, New England and the other major resorts in
Colorado. Our destination guests can choose from any of these alternatives, as
well as skiing and non-skiing vacation destinations around the world. Our day
skier customers can choose from a number of nearby competitors, including
Copper Mountain, Telluride, Steamboat Springs,
14
<PAGE>
Winter Park and the Aspen resorts, as well as other forms of leisure such as
attendance at movies, sporting events and participation in other indoor and
outdoor recreational activities. This competition may adversely affect our
skier days and the pricing of our products and services.
We rely on government permits. Virtually all of our ski trails and
related activities on Vail, Breckenridge and Keystone and a substantial portion
on Beaver Creek are located on federal land. The United States Forest Service
has granted us permits to use these lands, but maintains the right to review
and approve the location, design and construction of improvements in these
areas and on many operational matters. The Forest Service can terminate most of
these permits if required in the public interest; however, the permit for a
large part of the Beaver Creek property is terminable at will. Although we do
not know of any permit used by a major ski resort then in operation that has
been terminated by the Forest Service over the opposition of the permitee, a
termination of any of our permits would adversely affect our business and
operations.
We have applied for several new permits for improvements and new
development and to renew and modify an existing permit. We have also sought to
renew and unify our permits for use of large parts of our Beaver Creek
property. While these efforts, if not successful, could impact our expansion
efforts as currently contemplated, we do not believe they would adversely
affect our results of operations or financial condition. Furthermore, Congress
may increase the fees we pay to the Forest Service for use of these federal
lands.
Grand Teton operates three resort properties within Grand Teton National
Park under a concession contract with the National Park Service. The concession
contract expires at the end of 2002, at which time the contract renewal will be
subject to a competitive bidding process. Should we not receive the renewal of
the concession contract, we would be compensated for the value of our
"possessory interest" in the assets of the three resort properties operated
under the concession contract, which is generally defined as the replacement
cost of such assets less depreciation.
We are subject to the risk of unfavorable weather conditions. We depend
upon favorable weather conditions and adequate snowfall during the winter ski
season to attract guests to our ski resorts. Our ski resorts have been affected
by aberrant weather patterns during the 1998-1999 ski season, which caused much
of our skiing terrain to be closed during the Christmas and New Year's
holidays. Our operating results could also be adversely affected by unfavorable
weather conditions and inadequate snowfall in future periods.
We are subject to the risk of an economic slowdown. Because our resorts
derive a significant portion of their revenues from the worldwide leisure
market, an economic recession or other significant economic slowdown could
adversely affect our business. We cannot assure you that a decrease in the
amount of discretionary spending by the public in the future would not have an
adverse effect on our business.
Apollo Ski Partners has influence over us. Apollo Ski Partners owns
approximately 99.9% of our outstanding shares of Class A Common Stock, giving
them approximately 22% of the combined voting power with respect to all matters
submitted for a vote of all stockholders. The holders of Class A Common Stock
elect a class of directors that constitutes two-thirds of our board of
directors. Accordingly, Apollo Ski Partners and, indirectly, Apollo Advisors,
L.P. (which indirectly controls Apollo Ski Partners) will be able to elect two-
thirds of our board of directors and control the approval of matters requiring
approval by the board of directors, including mergers, liquidations and asset
acquisitions and dispositions. In addition, Apollo Ski Partners and Apollo
Advisors, L.P. may be able to significantly influence decisions on matters
submitted for stockholder consideration.
Future changes in the real estate market could affect the value of our
investments. We have extensive real estate holdings in proximity to our
mountain resorts. We have invested approximately $56.9 million and $15.7
million in fiscal years 1997 and 1998, respectively, in our real estate
operations. We plan to make significant additional investments in the Keystone
JV and in developing property at all our resorts.
15
<PAGE>
The value of our real property and the revenue from related development
activities may be adversely affected by a number of factors, including:
. national and local economic climate,
. local real estate conditions (such as an oversupply of space or a
reduction in demand for real estate in an area),
. attractiveness of the properties to prospective purchasers and
tenants,
. competition from other available property or space,
. our ability to obtain adequate insurance,
. unexpected construction costs,
. government regulations and changes in real estate, zoning or tax
laws,
. interest rate levels and the availability of financing, and
. potential liabilities under environmental and other laws.
In addition, we run the risk that our new acquisitions may fail to
perform in accordance with our expectations, and that our estimates of the
costs of improvements for such properties may prove inaccurate. While we
attempt to mitigate our exposure to these risks by selling multi-family
development parcels to third-party developers who assume the risk of
construction or by pre-selling single-family homesites or condominium
residences to individual purchasers prior to the start of our construction
projects, we cannot assure you that we will continue to do so in the future.
Although we believe that the current market for the sale of our resort property
is strong, we cannot assure you that such market conditions will continue. See
"Business--Real Estate."
Year 2000. We are in the process of evaluating and resolving the
potential impact of the Year 2000 issue on our computerized systems and other
infrastructure that contain embedded technology. The Year 2000 issue is a
result of certain computer programs being written using two digits rather than
four to define the applicable year. Computer programs which are date-sensitive
may recognize a date using "00" as the year 1900 rather than the year 2000,
which could result in major computer system or program failures or
miscalculations or equipment malfunctions. We recognize that the impact of the
Year 2000 issue extends beyond traditional computer hardware and software to
embedded hardware and software contained in equipment used in operations, such
as chairlifts, alarm systems and elevators, as well as to third parties.
We have committed resources to conduct risk assessments and to correct
problems, where required, within each of the following areas: information
technology, operations equipment, and external parties. We expect to complete
our assessments, remediation, verification and testing of our information
technology and operations equipment by the end of November 1999. While we have
initiated communication with significant third parties to determine the extent
to which we are vulnerable to those third parties' failures to remediate their
own Year 2000 issue, we cannot guarantee that their Year 2000 issues would not
adversely affect our operations.
The total cost of our Year 2000 efforts is not expected to be material
with respect to our operations, liquidity or capital resources. We estimate the
multi-year cost of our Year 2000 project will be between $900,000 and $1.1
million. Of the total project cost, approximately $600,000 is attributable to
the purchase of new software or equipment which will be capitalized. The
remaining costs will be expensed as incurred. Fiscal 1998 expensed costs were
approximately $150,000, and expensed costs for the nine months ended April 30,
1999 were approximately $150,000. Approximately $60,000 of Year 2000 costs have
been capitalized as of April 30, 1999. Costs exclude expenditures for systems
which were replaced under our regularly planned schedule.
There is still uncertainty around the scope of the Year 2000 issue and
its implications for us. At this time we cannot quantify the potential impact
of these failures. Due to the general uncertainty inherent in the Year 2000
problem, as well as, in part, the uncertainty of the Year 2000 readiness of
suppliers and the current
16
<PAGE>
status of our Year 2000 program, we are unable to determine at this time
whether any Year 2000 failures will have material adverse consequences on our
results of operations, liquidity or financial condition. Our Year 2000 program
and contingency plans are being developed to address issues within our control
and to reduce the level of our uncertainty about our Year 2000 issues.
Your claims are subordinated to our and our subsidiaries' senior
debt. Payments on the exchange notes and the guarantees are subordinated to all
of our and the guarantors' existing and future indebtedness, including amounts
under our credit facility, other than future indebtedness that expressly
provides that it is equal to or subordinated in right of payment to the
exchange notes and the guarantees. As a result, upon any distribution to our
creditors in a bankruptcy, liquidation or reorganization or similar proceeding
with respect to us or our property, the holders of our senior debt and our
guarantors' senior debt will be entitled to be paid in full before any payment
may be made with respect to the exchange notes and the guarantees. Claims in
respect of the exchange notes will be effectively subordinated to all
liabilities, including trade payables, of any of our subsidiaries that are not
subsidiary guarantors. At April 30, 1999, after giving effect to the offering
of the outstanding Notes and the application of net proceeds, we had $99.6
million of senior debt outstanding on a consolidated basis.
Our subsidiary, The Vail Corporation, is the borrower under our $450.0
million revolving credit facility and its obligations are guaranteed by us and
certain of our subsidiaries. At April 30, 1999, after giving effect to the
offering of the outstanding Notes and the application of the proceeds, we would
have had $21.8 million outstanding, $64.9 million of letters of credit issued
thereunder and remaining availability of $363.3 million, of which $137.9
million could have been borrowed under the most restrictive of the financial
covenants contained in the credit facility.
At April 30, 1999, SSI Venture had $9.7 million outstanding under the
$20.0 million SSI Venture credit facility, all of which was guaranteed by one
of our subsidiaries.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Description of
Certain Indebtedness."
Guarantees may be unenforceable due to fraudulent conveyance
statutes. Although laws differ among various jurisdictions, in general, under
fraudulent conveyance laws, a court could subordinate or avoid any subsidiary
guarantee if it found that:
. the guarantee was incurred with actual intent to hinder, delay or
defraud creditors, or
. the guarantor did not receive fair consideration or reasonably
equivalent value for the guarantee and the guarantor was any of the
following:
. insolvent or rendered insolvent because of the guarantee,
. engaged in business or transactions for which its remaining
assets constituted unreasonably small capital, or
. intended to incur, or believed that it would incur, debts
beyond its ability to pay at maturity.
If a court avoided a guarantee as a result of fraudulent conveyance, or
held it unenforceable for any other reason, noteholders would cease to have a
claim against the guarantor and would be creditors solely of Vail Resorts and
the remaining guarantors.
There are restrictions imposed by the terms of our indebtedness. The
operating and financial restrictions and covenants in our credit facility may
adversely affect our ability to finance future operations or capital needs or
to engage in other business activities. Our credit facility includes covenants
that will require us to meet certain financial ratios and financial conditions
which may require that we take action to reduce debt or to act in a manner
contrary to our business objectives. If we breach any of these restrictions or
covenants or suffer a material adverse change which restricts our borrowing
ability under our credit facility, we would be
17
<PAGE>
unable to borrow funds thereunder without a waiver. A breach could cause a
default under the exchange notes and our other debt. Our indebtedness may then
become immediately due and payable. We may not have or be able to obtain
sufficient funds to make these accelerated payments, including payments on the
Notes.
In addition, the indenture governing the exchange notes restricts, among
other things, our ability to:
. borrow money,
. pay dividends on stock or make certain other restricted payments,
. use assets as security in other transactions,
. make investments,
. enter into certain transactions with our affiliates, and
. sell certain assets or merge with other companies.
If we fail to comply with these covenants, we would be in default under
the indenture governing the exchange notes, and the principal and accrued
interest on the exchange notes would become due and payable. See "Description
of Notes--Certain Covenants."
We may not be able to purchase the exchange notes upon a change of
control. Upon certain change of control events, each holder of exchange notes
may require us to repurchase all or a portion of its exchange notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued
interest. Our ability to repurchase the exchange notes upon a change of
control event could be limited by the terms of our debt agreements. Upon a
change of control event, we may be required to repay the outstanding principal
and any accrued interest on any other amounts owed by us under our credit
facility. We cannot assure you that we would be able to repay amounts
outstanding under our credit facility or obtain necessary consents under such
facilities to repurchase these exchange notes. Any requirement to offer to
purchase any exchange notes may result in our having to refinance our
outstanding indebtedness, which we may not be able to do. In addition, even if
we were able to refinance such indebtedness, such financing may be on terms
unfavorable to us. Certain provisions in our credit facility may delay, defer
or prevent a merger, tender offer or other takeover attempt. The term "Change
of Control" is defined in "Description of Notes--Certain Definitions."
There is currently no trading market for the exchange notes. The
exchange notes will be new securities for which there is currently no public
market. We do not intend to list the exchange notes on any national securities
exchange or quotation system. The Initial Purchasers in the offering of
outstanding Notes have advised us that they currently intend to make a market
in the exchange notes, but they are not obligated to do so and, if commenced,
may discontinue such market making at any time. Accordingly, no market may
develop for the exchange notes, and if a market does develop, it may have
limited or no liquidity. As outstanding Notes are tendered and accepted in the
exchange offer, the aggregate principal amount of outstanding Notes will
decrease, which will decrease their liquidity.
Failure to exchange your outstanding Notes will leave them subject to
transfer restrictions. If you do not exchange your outstanding Notes for
exchange notes, you will continue to be subject to the restrictions on
transfer of your outstanding Notes set forth in their legend because the
outstanding Notes were issued pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act. In general, outstanding Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. We currently do not anticipate registering the outstanding
Notes under the Securities Act.
Blue sky restrictions on resale of exchange notes. In order to comply
with the securities laws of certain jurisdictions, the exchange notes may not
be offered or resold by any holder unless they have been registered or
qualified for sale in such jurisdictions or any exemption from registration or
qualifications is available and the requirements of such exemption have been
satisfied. We do not currently intend to register or qualify the resale of the
exchange notes in any such jurisdictions. However, an exemption is generally
available for sales to registered broker-dealers and certain institutional
buyers. Other exemptions under applicable state securities laws may also be
available.
18
<PAGE>
USE OF PROCEEDS
The exchange offer is intended to satisfy certain of our obligations
under the registration rights agreement. We will not receive any cash proceeds
from the exchange offer.
The net proceeds from the sale of the outstanding Notes were $194.3
million. We used the net proceeds from the sale of the outstanding Notes to
repay indebtedness under our credit facility (which can be reborrowed).
CAPITALIZATION
The following table sets forth our capitalization as of April 30, 1999
and as adjusted to reflect the sale of the outstanding Notes and the
application of the net proceeds of that offering. See "Description of Certain
Indebtedness."
<TABLE>
<CAPTION>
Actual Adjusted
---------- -----------
(In thousands, except
share amounts)
<S> <C> <C>
Cash..................................................... $ 10,063 $ 10,063
========== ==========
Short-term debt.......................................... 530 530
Industrial Development Bonds............................. 63,200 63,200
Credit facilities........................................ 225,688 31,438
Senior Subordinated Notes................................ -- 200,000
Other.................................................... 4,444 4,444
---------- ----------
Total debt........................................... 293,862 299,612
Stockholders' equity:
Class A common stock, $0.01 par value, 20,000,000
shares authorized, 7,439,834 shares issued and
outstanding........................................... 74 74
Common stock, $0.01 par value, 80,000,000 shares
authorized, 27,087,701 shares issued and outstanding.. 271 271
Additional paid-in capital............................. 402,592 402,592
Retained earnings...................................... 87,035 87,035
---------- ----------
Total stockholders' equity........................... 489,972 489,972
---------- ----------
Total capitalization..................................... $ 783,834 $ 789,584
========== ==========
</TABLE>
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents selected historical consolidated financial
data for the periods indicated. The financial data for the twelve month fiscal
years ended September 30, 1996 and 1997 and the ten month fiscal year ended
July 31, 1998 are derived from our consolidated financial statements, which
have been audited by Arthur Andersen LLP, independent accountants, and should
be read in conjunction with those statements and related notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the other financial information included elsewhere in this
prospectus. Also included for comparative purposes are the unaudited pro forma
results for the twelve months ended July 31, 1997 and the actual unaudited
results for the twelve months ended July 31, 1998. These pro forma results are
not necessarily indicative of the actual results of operations that would have
been achieved nor are they necessarily indicative of future results of
operations. The financial data for the nine months ended April 30, 1998 and
1999 are derived from our unaudited consolidated financial statements, which
included all adjustments management considers necessary to present fairly the
financial results for these interim periods. All of these adjustments were of a
normal recurring nature. The results of such interim periods are not
necessarily indicative of results to be expected for the full year due to the
highly seasonal nature of our business (which ordinarily produces losses for
the first and fourth quarters). See "Prospectus Summary--Recent Results" and
"Risk Factors--Our resort business is highly seasonal."
<TABLE>
<CAPTION>
Twelve Ten Pro Forma
Month Month Twelve Twelve
Fiscal Year Ended Fiscal Year Months Months Nine Months Ended
September 30, Ended Ended Ended April 30,
---------------------------- July 31, July 31, July 31, --------------------
1995 1996 1997(1) 1998 1997(2) 1998 1998 1999(3)
-------- -------- -------- ----------- ----------- ----------- -------- ----------
(audited) (audited) (unaudited) (unaudited) (unaudited)
(In thousands, except ratio data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Resort................. $126,349 $140,288 $259,038 $336,547 $292,127 $350,498 $324,195 $ 379,346
Real estate............ 16,526 48,655 71,485 73,722 74,356 84,177 65,760 31,409
-------- -------- -------- -------- -------- -------- -------- ----------
Total revenues......... 142,875 188,943 330,523 410,269 366,483 434,675 389,955 410,755
Operating expenses:
Resort................. 82,305 89,890 172,715 217,764 200,488 238,889 200,552 273,900
Real estate............ 14,983 40,801 66,307 62,619 64,646 74,057 58,939 26,248
Corporate expense(4)... 6,701 12,698 4,663 4,437 4,236 5,543 4,313 4,555
Depreciation and
amortization.......... 17,968 18,148 34,044 36,838 37,997 42,965 31,163 38,181
-------- -------- -------- -------- -------- -------- -------- ----------
Total operating
expenses.............. 121,957 161,537 277,729 321,658 307,367 361,454 294,967 342,884
Income from operations.. 20,918 27,406 52,794 88,611 59,116 73,221 94,988 67,871
Interest Expense....... (19,498) (14,904) (20,308) (17,789) (16,799) (20,891) (16,064) (17,593)
Net income (loss)....... 3,282 4,735 19,698 41,018 25,966 30,073 46,857 26,319
Other Data:
Skier days(5).......... 2,136 2,228 4,273 4,717 4,890 4,717 4,706 4,579
Resort EBITDA(4)(6).... 37,343 46,200 81,660 114,346 87,403 106,066 119,330 100,891
Real estate operating
income(7)............. 1,543 7,854 5,178 11,103 9,710 10,120 6,821 5,161
-------- -------- -------- -------- -------- -------- -------- ----------
Total EBITDA(4)(8)..... 38,886 54,054 86,838 125,449 97,113 116,186 126,151 106,052
Resort capital
expenditures(9)....... 20,320 13,912 51,020 80,454 41,047 93,333 79,853 53,691
Total debt to Resort
EBITDA................ 5.1x 3.1x 3.2x 2.5x 2.7x 2.7x
Resort EBITDA to
interest expense...... 1.9 3.1 4.0 6.4 5.2 5.1
Total debt to Total
EBITDA................ 4.9 2.7 3.1 2.3 2.4 2.4
Total EBITDA to
interest expense...... 2.0 3.6 4.3 7.1 5.8 5.6
Ratio of earnings to
fixed charges(10)..... 1.1 1.6 2.6 4.9 3.6 3.4
Balance Sheet Data (at
period end):
Total assets........... $429,628 $422,612 $855,949 $912,122 $814,816 $912,122 $933,967 $1,014,810
Real estate held for
sale(11).............. 54,858 84,055 154,925 138,916 155,672 138,916 134,940 152,141
Long term debt
(including current
maturities)........... 191,313 144,750 265,062 284,014 236,347 284,014 248,338 293,862
Stockholders' equity... 167,694 123,907 405,666 462,624 417,187 462,624 476,981 489,972
</TABLE>
- --------
(footnotes appear on following page)
20
<PAGE>
- --------
(1) Our consolidated statement of operations for the fiscal year ended
September 30, 1997 includes the results of Keystone and Breckenridge for
the 270-day period from January 4, 1997 to September 30, 1997.
(2) The unaudited pro forma results for the twelve months ended July 31, 1997
give effect to our acquisition of the Keystone and Breckenridge resorts
(which occurred on January 3, 1997) and the initial public offering of our
common stock (which occurred on February 4, 1997) as if such events
occurred on August 1, 1996, and are presented exclusive of a pre-tax $2.2
million reorganization charge and a $8.5 million one-time non-recurring
charge to corporate expense.
(3) Included in the selected consolidated historical data for the nine months
ended April 30, 1999, are the results of operations of our 51.9%-owned
joint venture, SSI Venture (which commenced operations on August 1, 1998).
SSI Venture will not be a guarantor of the Notes. For the nine months ended
April 30, 1999, SSI Venture had revenues of $64.3 million, income from
operations of $8.3 million and EBITDA of $11.6 million. At April 30, 1999,
SSI Venture had total assets of $38.3 million, total debt of $9.8 million
and stockholders' equity of $20.6 million. For the nine months ended April
30, 1999, the EBITDA of SSI Venture represented less than 12% of our Resort
EBITDA. See Note 16 to the Audited Consolidated Financial Statements of the
Company and Note 7 to the Unaudited Consolidated Condensed Financial
Statements of the Company.
(4) Corporate expense includes certain executive, tax, legal, directors' and
officers' insurance and other consulting fees. For fiscal 1996, corporate
expense included the costs associated with our holding company structure
and overseeing multiple lines of business, including certain discontinued
operations. For the year ended September 30, 1996, corporate expense
includes the following non-recurring charges: (i) $4.5 million related to
a rights distribution to option holders, (ii) $1.9 million of compensation
expense related to the exercise of certain options held by our former
Chairman and Chief Executive Officer and (iii) $2.1 million related to the
termination of an employment agreement with our former Chairman and Chief
Executive Officer. For purposes of calculating Resort EBITDA and Total
EBITDA for this period, corporate expense excludes these non-recurring
charges.
(5) A skier day represents one guest accessing a ski mountain on any one day
and includes guests using complimentary tickets and ski passes.
(6) Resort EBITDA (earnings before interest expense, income tax expense,
depreciation and amortization) is defined as Resort Revenue less resort
operating expenses and corporate expense. Resort EBITDA is not a term that
has an established meaning under generally accepted accounting principles
("GAAP"). We have included the information concerning Resort EBITDA
because our management believes it is an indicative measure of a resort
company's operating performance and is generally used by investors to
evaluate companies in the resort industry. Resort EBITDA does not purport
to represent cash provided by operating activities, and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP. For information regarding our historical
cash flows from operating, investing and financing activities, see our
consolidated financial statements included elsewhere in this prospectus.
(7) Real estate operating income is defined as revenue from real estate
operations less real estate costs and expenses, which include selling and
holding costs, operating expenses, and an allocation of the land,
infrastructure, mountain improvement and other costs relating to property
sold. Real estate costs and expenses exclude charges for depreciation and
amortization, as we have determined that the portion of those expenses
allocable to real estate are not significant.
(8) Total EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization. EBITDA is presented because
management believes it provides useful information regarding a company's
ability to incur and service debt. EBITDA should not be considered in
isolation or as a substitute for net income or cash flows prepared in
accordance with GAAP, nor should it be used as a measure of our
profitability or liquidity.
(9) We typically categorize approximately $15 million to $20 million per year
of total resort capital expenditures as maintenance capital expenditures,
except for fiscal 1996, during which approximately $7 million was
categorized as maintenance capital expenditures. For the nine months ended
April 30, 1999 and 1998, approximately $12 million for each period was
categorized as maintenance capital expenditures.
(10) The ratio of earnings to fixed charges represents the number of times
fixed charges were covered by pre-tax earnings before provisions for
interest expense. Fixed charges consist of interest expense, capitalized
interest, amortization of debt issuance costs, and a portion of the
operating lease expense deemed to be representative of the interest
factor.
(11) Real estate held for sale includes all land, development costs and other
improvements associated with real estate held for sale, as well as
investments in real estate joint ventures.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements included elsewhere in this prospectus.
Introduction
Our revenues are derived primarily from the operations of our ski resorts
and from the sale of real estate in proximity to our resorts. We have and will
continue to acquire new resorts and properties and to undertake improvements on
existing resort areas to enhance our ability to attract customers for our
resort operations and real estate properties. While the value of our real
estate development is tied to the quality of our ski resorts, the development
of new lodging, conference centers and other facilities also benefits our
resort operations. Therefore, our future results of operations from both of
these sources will be affected by some of the same factors, including
competition in a static market, general economic conditions, consumer trends
and the success of our acquisition strategy.
On January 3, 1997, we acquired the Breckenridge, Keystone and Arapahoe
Basin mountain resorts as well as significant related real estate interests and
developable land. Pursuant to a consent decree with the United States
Department of Justice, the Company divested the Arapahoe Basin ski area on
September 5, 1997.
On September 1, 1997, the Company changed its fiscal year end from
September 30 to July 31. Accordingly, the Company's fiscal year 1998 ended on
July 31, 1998 and consisted of ten months. This Management's Discussion and
Analysis compares actual results for the ten months ended July 31, 1998 and
1997, and for the fiscal years ended September 30, 1997 and 1996. Supplemental
pro forma comparisons are presented for the ten and twelve-month periods ended
July 31, 1998 and 1997. Ten-month comparisons are presented to conform with the
actual ten-month transitional period, while twelve-month comparisons are
presented to compare year to date results for the Company's new fiscal year
ended July 31. Also presented for comparative purposes are the nine months
ended April 30, 1999 and 1998.
Nine Months Ended April 30, 1999 versus Nine Months Ended April 30, 1998
<TABLE>
<CAPTION>
Nine Nine
Months Months
Ended Ended Percentage
April 30, 1999 April 30, 1998 Increase Increase
-------------- -------------- -------- ----------
(dollars in thousands)
(unaudited)
<S> <C> <C> <C> <C>
Resort Revenue............... $379,346 $324,195 $55,151 17.0
Resort Operating Expense..... 273,900 200,552 73,348 36.6
</TABLE>
22
<PAGE>
Resort Revenue. Resort Revenue for the nine months ended April 30, 1999
and 1998 is presented by category as follows:
<TABLE>
<CAPTION>
Nine Nine
Months Months
Ended Ended
April April Percentage
30, 30, Increase Increase
1999 1998 (Decrease) (Decrease)
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Lift Ticket........................... $135,667 $146,458 $(10,791) (7.4)
Ski School............................ 37,833 38,639 (806) (2.1)
Dining................................ 52,325 45,972 6,353 13.8
Retail/Rental......................... 66,198 19,727 46,471 235.6
Hospitality........................... 50,886 39,057 11,829 30.3
Other................................. 36,437 34,342 2,095 6.1
-------- -------- -------- -----
Total Resort Revenue.................. 379,346 324,195 55,151 17.0
======== ======== ======== =====
Total Skier Days...................... 4,579 4,706 (127) (2.7)
======== ======== ======== =====
ETP................................... $ 29.63 $ 31.12 $(1.49) (4.8)
======== ======== ======== =====
</TABLE>
Lift ticket revenue decreased due to a 2.7% decrease in total skier days
as well as a 4.8% decrease in ETP (effective ticket price, "ETP", is defined as
total lift ticket revenue divided by total skier days). The Company attributes
the decrease in skier days to above-average temperatures and below-average
snowfall throughout the majority of the ski season, which had a negative impact
on the entire Colorado market. In addition, the October 19, 1998 fires on Vail
mountain and the Canadian dollar exchange rate which favored the Canadian ski
industry also impacted skier days. The decrease in ETP is the result of a shift
in the proportion of total skier days to local and Front Range (Denver/Colorado
Springs metropolitan areas) skier days. Lift tickets sold to local and Front
Range skiers tend to have a lower ETP than tickets sold to destination guests.
This shift mainly occurred due to the popularity of the Buddy Pass, a
discounted season pass for Breckenridge and Keystone resorts, which accounted
for a significant portion of local and Front Range skier days.
Ski and Snowboard School revenue decreased due to a decrease in skier
days and the shift in the proportion of total skier days to local and Front
Range skier days as Front Range skiers are less likely to purchase lessons than
destination skiers.
Dining revenue increased primarily as a result of the addition of 12
dining operations acquired in four hotel acquisitions, coupled with modest
growth at existing facilities. The Lodge at Vail acquisition added two fine
dining establishments, eight restaurants were added with the acquisition of
VAB, and the Inn at Keystone and the Great Divide Lodge (formerly the
Breckenridge Hilton) each added one dining facility. The Company also added
TenMile Station, the first new on-mountain restaurant at Breckenridge in over
10 years.
The increase in Retail/Rental revenue is due to the addition of
approximately 30 retail and rental outlets provided by SSI Venture LLC.
Hospitality revenue increased as a result of strong performance from
existing operations due in part to a combination of effective yield management
and expansion of the managed property inventory. The acquisitions of the Lodge
at Vail, the Great Divide Lodge, and the Inn at Keystone in fiscal 1998 and VAB
in fiscal 1999 also contributed significantly. In addition to adding lodging
capacity, the Lodge at Vail and the Village at Breckenridge each added
additional property management operations. The Village at Breckenridge also
runs a vacation services operation/travel agency.
Other revenue increased as a result of the increased popularity of the
summer mountain activities including the new Alpine Slide at Breckenridge
mountain, expanded contract services for Beaver Creek,
23
<PAGE>
Bachelor Gulch, and Arrowhead Villages, growth in club operations, expanded
licensing and sponsorship contracts, and increases in commercial leasing
revenue.
Resort Operating Expense. Resort Operating Expense for the nine months
ended April 30, 1999 was $273.9 million, an increase of $73.3 million, or
36.6%, compared to the nine months ended April 30, 1998. The increase in resort
operating expense is primarily attributable to the incremental operating
expenses contributed by VAB, SSI Venture L.L.C. the Inn at Keystone, the Lodge
at Vail and the Great Divide Lodge. A portion of the increase can also be
attributed to the increase variable expenses associated with the increased
level of resort revenue derived from non-lift businesses such as dining,
retail/rental and hospitality operations. These operations tend to have a
greater level of variable operating expenses proportionate to revenues as
compared to lift operations. These increases have been partially offset by cost
saving measures that have been implemented at all levels of the Company's
operations throughout the fiscal year.
Real Estate Revenue. Revenue from real estate operations for the nine
months ended April 30, 1999 was $31.4 million, a decrease of $34.4 million, or
52.2%, compared to the nine months ended April 30, 1998. The decrease is
attributed to the sell-out of homesites at Bachelor Gulch Village in fiscal
1998. Revenue for the nine months of fiscal 1999 consists primarily of the
sales of the Bell Tower Mall, one luxury residential penthouse condominium at
the Lodge at Vail, the sale of three development sites at Arrowhead Village,
the sale of two single family homesites and one multi-family homesite at
Bachelor Gulch and the Company's investment in Keystone/Intrawest LLC. Profits
from Keystone/Intrawest LLC during the nine months ended April 30, 1999
included the sale of 137 village condominium units, primarily at the River Run
development, and 57 single-family homesites surrounding an 18-hole golf course
development. Real estate revenue for the nine months ended April 30, 1998
consisted primarily of the sales of 37 single-family homesites at Bachelor
Gulch, two multi-family homesite at Arrowhead, six luxury residential
condominiums at the Golden Peak base area of Vail mountain and the Company's
investment in Keystone/Intrawest LLC.
Real Estate Operating Expense. Real estate operating expense for the nine
months ended April 30, 1999 were $26.2 million, a decrease of $32.7 million, or
55.5%, compared to the nine months ended April 30, 1998. The decrease in real
estate operating expense is due to the sell-out of homesites at Bachelor Gulch
Village in fiscal 1998. Real estate cost of sales for the nine months ended
April 30, 1999 consists primarily of the cost of sales and real estate
commissions associated with the sale of the Bell Tower Mall, one luxury
residential penthouse condominium at the Lodge at Vail, three development sites
at Arrowhead Village, and two single family homesites and one multi-family
homesite at Bachelor Gulch. Real estate cost of sales for the nine months ended
April 30, 1998 consisted primarily of the cost of sales and real estate
commissions associated with the sales of 37 single-family homesites at Bachelor
Gulch, two development sites at Arrowhead, and six luxury residential
condominiums at the Golden Peak base area of Vail mountain. Real estate
operating expenses include selling, general and administrative expenses
associated with the Company's real estate operations.
Corporate expense. Corporate expense increased by $242,000, or 5.6%, for
the nine months ended April 30, 1999 as compared to the nine months ended April
30, 1998. The increase is primarily attributable to an increase in professional
service fees. Corporate expense includes certain executive salaries, directors'
and officers' insurance, investor relations expenses and tax, legal, audit,
transfer agent, and other consulting fees.
Depreciation and Amortization. Depreciation and amortization expense
increased by $7.0 million, or 22.5%, for the nine months ended April 30, 1999
as compared to the nine months ended April 30, 1998. The increase was primarily
attributable to the inclusion of depreciation and amortization associated with
the three hotel acquisitions in fiscal 1998 and one hotel acquisition and the
SSI Venture LLC discussed above in fiscal 1999 and an increased fixed asset
base due to fiscal 1999 capital improvements.
Interest expense. During the nine months ended April 30, 1999, and the
nine months ended April 30, 1998, the Company recorded interest expense of
$17.6 million and $16.1 million, respectively, relating
24
<PAGE>
primarily to the Company's Credit Facility and the Industrial Development Bonds
in fiscal 1999 and fiscal 1998, as well as the Company's Credit Facility and
the Industrial Development Bonds. The increase in interest expense for the nine
months ended April 30, 1999 compared to the nine months ended April 30, 1998,
is attributable to a higher average balance outstanding on the Credit Facility
due to amounts borrowed for the VAB acquisition and working capital funding to
SSI Venture LLC made during the first quarter, and the SSV Facility established
in the second quarter. The increase in interest expense was partially offset by
favorable interest rates.
Ten Months Ended July 31, 1998 Compared To Ten Months Ended July 31, 1997
The actual results of the ten months ended July 31, 1998 compared to the
actual results of the ten months ended July 31, 1997 discussed below are not
comparable due to our acquisition of Keystone and Breckenridge on January 3,
1997. Accordingly, the usefulness of the comparisons presented below is
limited, as the ten months ended July 31, 1997 includes the results of such
acquisition for the period from January 4 to July 31 while the ten months ended
July 31, 1998 includes the results of such acquisition for the full ten-month
period. Please see pro forma results of operations included elsewhere in this
Management's Discussion and Analysis.
Resort Revenue. Resort Revenue for the ten months ended July 31, 1998 was
$336.5 million, an increase of $88.0 million, or 35.4%, compared to the ten
months ended July 31, 1997. The increase was primarily attributable to the
inclusion of the acquisition of Keystone and Breckenridge for the full ten-
month period in fiscal 1998 but only for the period from January 4 to July 31
in fiscal 1997, and increases in lift ticket, ski school, dining, retail and
rental, hospitality and other revenues at all four resorts during fiscal 1998.
Resort Operating Expense. Resort Operating Expense was $217.8 million for
the ten months ended July 31, 1998, an increase of $64.6 million, or 42.1%, as
compared to the ten months ended July 31, 1997. The increase in Resort
Operating Expense is attributable to the inclusion of the acquisition of
Keystone and Breckenridge for the full ten months in fiscal 1998 but only for
the period from January 4 to July 31 in fiscal 1997, and increased variable
expenses resulting from the increased level of non-lift Resort Revenue during
the ten months ended July 31, 1998.
Real Estate Revenue. Revenue from real estate operations for the ten
months ended July 31, 1998 was $73.7 million, an increase of $12.6 million,
compared to the ten months ended July 31, 1997. Revenue for the ten months of
fiscal 1998 consisted primarily of the sales of 37 single-family homesites and
five multi-family sites in the Bachelor Gulch Village development ($45.7
million), and the sale of four luxury residential condominiums at the Golden
Peak base area of Vail Mountain ($18.7 million). Revenue for the first ten
months of fiscal 1997 consisted primarily of the sales of 63 single-family
homesites in the Bachelor Gulch Village development ($46.6 million) and eight
residential condominiums.
Real Estate Operating Expense. Real estate operating expense for the ten
months ended July 31, 1998 was $62.6 million, an increase of $7.7 million,
compared to the ten months ended July 31, 1997. Real estate cost of sales for
the first ten months of fiscal 1998 consisted primarily of the cost of sales
and real estate commissions associated with the sale of 37 single-family
homesites and five multi-family sites in the Bachelor Gulch Village development
and four luxury residential condominiums at the Golden Peak base area of Vail
Mountain. Real estate cost of sales for the first ten months of fiscal 1997
consisted primarily of the cost of sales and real estate commissions associated
with the sale of 63 single-family homesites in the Bachelor Gulch Village
development and eight residential condominiums.
Corporate Expense. Corporate expense increased by $880,000 for the ten
months ended July 31, 1998, as compared to the ten months ended July 31, 1997.
Corporate expense includes certain executive salaries, directors' and officers'
insurance, investor relations expenses and tax, legal, audit, transfer agent
and other consulting fees. The increase over fiscal 1997 is primarily
attributable to an increase in investor relations costs, transfer agent fees
and public reporting costs.
25
<PAGE>
Depreciation and Amortization. Depreciation and amortization expense
increased by $9.2 million for the ten months ended July 31, 1998. The increase
was primarily attributable to the inclusion of depreciation expense and
amortization of goodwill for the acquisition of Keystone and Breckenridge for
the full ten-month period in fiscal 1998 but only for the period from January 4
to July 31 of fiscal 1997, and capital expenditures made in fiscal 1997 at all
four resorts.
Interest Expense. During the ten months ended July 31, 1998, and the ten
months ended July 31, 1997, the Company recorded interest expense of $17.8
million and $17.2 million, respectively. Interest expense related primarily to
the credit facility (See Note 6(b) of Notes to Consolidated Financial
Statements) and the Industrial Development Bonds (see Note 6(a) of Notes to
Consolidated Financial Statements) in fiscal 1998 and fiscal 1997, as well as
certain then outstanding senior subordinated notes in fiscal 1997. The Company
maintained a higher average balance outstanding under its credit facility in
fiscal 1998 due to amounts drawn for the hotel acquisitions, resort capital
expenditures and investments in real estate. The higher interest on the credit
facility in fiscal 1998 was partially offset by the interest incurred in fiscal
1997 on the $165 million in debt assumed in the acquisition of Keystone and
Breckenridge, higher interest rates on certain outstanding senior subordinated
notes which were outstanding until March 1997, and the one-time contractual
redemption premium on the early redemption of such senior subordinated notes.
Gain/Loss on the Sale of Fixed Assets. During the ten months ended July
31, 1998, the Company recorded a loss on the sale of fixed assets of $1.7
million. This loss was primarily attributable to the removal and write-off of a
fixed grip chairlift at Keystone Mountain. The lift is being replaced with a
new high-speed quad chairlift consistent with the Company's initiative to
increase uphill skier capacity and overall guest service. Additionally, the
Company wrote off certain retail software systems which will not be used by its
new retail joint venture in fiscal 1999.
Fiscal Year Ended September 30, 1997 ("Fiscal 1997") Compared to Fiscal Year
Ended September 30, 1996 ("Fiscal 1996")
Resort Revenue. Resort Revenue for fiscal 1997 was $259.0 million, an
increase of $118.8 million, or 84.6%, compared to fiscal 1996. The increase was
attributable primarily to (i) the inclusion of the results of the Acquired
Resorts from January 4, 1997 ($104.8 million) and (ii) increases in lift
ticket, ski school, food service, retail and rental, hospitality and other
revenues.
Resort Operating Expense. Resort Operating Expense was $172.7 million for
fiscal 1997, representing an increase of $82.8 million, or 92.1%, as compared
to fiscal 1996. The increase in Resort Operating Expense is primarily
attributable to (i) the inclusion of the results of the Acquired Resorts from
January 4, 1997 ($69.1 million), (ii) increased variable expenses resulting
from the increased level of Vail/Beaver Creek Resort Revenue and skier days in
fiscal 1997, (iii) expenses associated with new Vail/Beaver Creek food service
and retail/rental operations and (iv) a one-time reorganization charge of $2.2
million in the third quarter of fiscal 1997.
Real Estate Revenue. Revenue from real estate operations for fiscal 1997
was $71.5 million, an increase of $22.8 million, compared to fiscal 1996.
Revenue for fiscal 1997 consisted primarily of the sales of 65 single-family
homesites in the Bachelor Gulch Village development which totaled $47.5
million, two luxury residential condominiums at the Golden Peak base area of
Vail Mountain totaling $8.0 million, various condominiums in Beaver Creek
Village totaling $4.2 million and Arrowhead Village land sales of approximately
$5.1 million. Revenue for fiscal 1996 consisted primarily of the sales of 30
single-family homesites in the Strawberry Park development at Beaver Creek
Resort which totaled $30.9 million.
Real Estate Operating Expense. Real estate operating expense for fiscal
1997 was $66.3 million, an increase of $25.5 million, compared to fiscal 1996.
Real estate cost of sales for fiscal 1997 consisted primarily of the cost of
sales and real estate commissions associated with the sales of 65 single-family
homesites in the
26
<PAGE>
Bachelor Gulch Village development, two luxury residential condominiums at the
Golden Peak base area of Vail Mountain, various condominiums in Beaver Creek
Village, and Arrowhead Village land sales. Real estate cost of sales for fiscal
1996 consisted primarily of the cost of sales and real estate commissions
associated with the sale of 30 single-family homesites in the Strawberry Park
development at Beaver Creek Resort.
Corporate Expense. Corporate expense was $4.7 million for fiscal 1997, a
decrease of $8.0 million as compared to fiscal 1996. For periods prior to
fiscal 1997, corporate expense included the costs associated with the Company's
holding company structure and overseeing multiple lines of business, including
the discontinued operations. In fiscal 1997, corporate expense includes certain
personnel, tax, legal, directors' and officers' insurance and other consulting
fees relating solely to the Company's resort and real estate operations.
Corporate expense for fiscal 1996 includes the following nonrecurring charges:
(i) $2.1 million related to the termination of an employment agreement with the
Company's former Chairman and Chief Executive Officer, (ii) $4.5 million
related to nonrecurring payments to certain holders of employee stock options,
and (iii) $1.9 million of compensation expense related to the exercise of stock
options by the Company's former Chairman and Chief Executive Officer. Excluding
the effect of those items, corporate expense increased by approximately
$400,000.
Depreciation and Amortization. Depreciation and amortization expense was
$34.0 million for fiscal 1997, an increase of $15.9 million, as compared to
fiscal 1996. The increase was primarily attributable to the inclusion of the
results of Keystone and Breckenridge from January 4, 1997 ($14.1 million) and
Vail/Beaver Creek capital expenditures made in fiscal 1996 and the first
quarter of fiscal 1997.
Interest Expense. During fiscal 1997 and fiscal 1996, the Company
recorded interest expense of $20.3 million and $14.9 million, respectively,
which relates primarily to the Company's then outstanding senior subordinated
notes, the Industrial Development Bonds, and the Company's credit facility. The
increase in interest expense from fiscal 1996 to fiscal 1997 is attributable to
the interest incurred on the $165 million in debt assumed in the acquisition of
Keystone and Breckenridge and the contractual redemption premium incurred in
the early redemption of the 12 1/4% senior subordinated notes due 2004,
partially offset by interest reductions due to redemptions totaling $54.5
million in principal amount of senior subordinated notes in the first half of
fiscal 1996.
Pro Forma Results of Operations--Ten Months Ended July 31, 1998 Compared to Ten
Months Ended July 31, 1997
The following unaudited pro forma results of operations of the Company
for the ten months ended July 31, 1997 assume the acquisition of Keystone and
Breckenridge occurred on October 1, 1996. These pro forma results are not
necessarily indicative of the actual results of operations that would have been
achieved nor are they necessarily indicative of future results of operations.
The unaudited pro forma financial information below excludes the results of
Arapahoe Basin, which the Company divested in September 1997. The audited
summarized information for the ten months ended July 31, 1998 are provided for
comparative purposes.
<TABLE>
<CAPTION>
Ten (Pro Forma)
Months Ten Months
Ended Ended
July 31, July 31, Percentage
1998 1997 Increase Increase
-------- ----------- ----------- ----------
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Resort Revenue.......... $336,547 $280,949 $55,598 19.8%
Resort Operating
Expense................ 217,764 183,086 34,678 18.9%
</TABLE>
27
<PAGE>
Resort Revenue. Pro forma Resort Revenue for the ten months ended July
31, 1998 and 1997 are presented by category as follows:
<TABLE>
<CAPTION>
Ten (Pro Forma)
Months Ten Months
Ended Ended Percentage
July 31, July 31, Increase Increase
1998 1997 (Decrease) (Decrease)
-------- ----------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Lift Tickets......................... $147,128 $135,827 $11,301 8.3%
Ski School........................... 38,647 34,462 4,185 12.1
Dining............................... 48,246 39,580 8,666 21.9
Retail/Rental........................ 19,975 17,400 2,575 14.8
Hospitality.......................... 43,127 29,967 13,160 43.9
Other................................ 39,424 23,713 15,711 66.3
-------- -------- ------- ----
Total Resort Revenue................. $336,547 $280,949 $55,598 19.8%
======== ======== ======= ====
Total Skier Days..................... 4,717 4,890 (173) (3.5%)
======== ======== ======= ====
ETP.................................. $ 31.19 $ 27.78 $ 3.41 12.3%
======== ======== ======= ====
</TABLE>
Lift ticket revenue increased due to a 12.3% increase in ETP partially
offset by a 3.5% decline in the number of total skier days. The increase in ETP
is primarily due to increases in lead ticket prices at each resort, a less
aggressive ticket discounting strategy, and improvement in the proportion of
destination skier days to total skier days. The increase in lead ticket prices
and less aggressive discounting is consistent with the Company's strategy to
provide a high quality guest experience at a premium price. The improvement in
the proportion of destination skier days was driven by an increase in
destination skier days and a decline in local and Colorado Front Range
(Denver/Colorado Springs) skier days (non-destination skier days). The Company
attributes the increase in destination guests to the Company's new and
innovative marketing and loyalty programs and continuous commitment to guest
service. The decline in local and Front Range skier days is primarily
attributable to unusual weather patterns and below average snowfall for much of
the season at the Company's resorts.
Ski school revenue increased primarily due to price increases and an
increase in the number of ski and snowboard lessons sold. The number of lessons
increased due to an increase in the number of destination skiers who have a
greater tendency to purchase lessons than do local and Front Range guests.
Additionally, the Beaver Creek children's program has continued its success due
to a number of initiatives designed to increase participation. Demand continued
to be strong for snowboarding and private lessons driven by the popularity of
snowboarding and the increase in destination guests.
Dining revenue increased as a result of strong performance from existing
operations, the addition of several new dining operations, and dining
operations acquired in three hotel acquisitions. Five dining operations were
new to Vail Mountain in fiscal 1998, including the addition of two fine dining
facilities from The Lodge at Vail acquisition, and two facilities in the newly-
renovated and expanded Golden Peak base facility, resulting in an overall
seating capacity increase of 10%. Beaver Creek opened seven new operations, six
of which are located in the recently completed Beaver Creek Village core,
thereby increasing seating capacity by 29%. Four dining operations were new to
Breckenridge and Keystone resorts during fiscal 1998 including the operations
acquired in the acquisitions of the Great Divide Lodge (formerly Breckenridge
Hilton) and the Inn at Keystone, and two new, on-mountain operations.
Retail and rental revenues increased due to strong performance from
existing operations and the addition of three new operations. Increases in
existing operations were led by the completion of the Beaver Creek Village core
which provided a complementary balance of retailers in Beaver Creek Village,
making it an
28
<PAGE>
attractive retail shopping destination, and the newly renovated and expanded
Golden Peak facility at the base of Vail Mountain. Two new rental operations
were opened in Beaver Creek Village and one new retail/rental operation was
opened in a strategic location at the base of Peak 8 in Breckenridge, where the
Company formerly had no presence in the retail/rental market. The Company's
retail and rental business also benefited from continuing improvements in
inventory management and store product mix.
Hospitality revenue increased due to an increasing base of property
management services, growth in the travel and reservations businesses, and the
acquisitions of The Lodge at Vail, the Great Divide Lodge (f/k/a Breckenridge
Hilton), and the Inn at Keystone. Property management services contributed
toward the growth over fiscal 1997 due to an increase in occupancy and average
daily rate (defined as revenue divided by room nights) at Beaver Creek Resort
driven by the increase in skier visits and number of rooms under management.
Other revenue increased as a result of the increased popularity of the
Adventure Ridge activities center at the top of Vail Mountain, expanded
contract services for Beaver Creek, Bachelor Gulch and Arrowhead Villages, the
expansion of the Beaver Creek Club, licensing and sponsorship revenue growth,
and increases in brokerage and commercial leasing revenue.
Resort Operating Expense. Resort Operating Expense was $217.8 million for
the ten months ended July 31, 1998, compared to $183.1 million for the ten
months ended July 31, 1997. As a percentage of Resort Revenue, Resort Operating
Expense decreased from 65.2% to 64.7% in the ten months ended July 31, 1998.
The overall increase in Resort Operating Expense is attributable to increased
variable operating expenses resulting from the increased level of Resort
Revenue derived from non-lift businesses such as dining, retail/rental,
hospitality and other operations.
Pro Forma Results of Operations--Twelve Months Ended July 31, 1998 Compared to
Twelve Months Ended July 31, 1997
The following unaudited pro forma results of operations of the Company
for the twelve months ended July 31, 1997 assume the acquisition of the
Keystone and Breckenridge occurred on August 1, 1996. These pro forma results
are not necessarily indicative of the actual results of operations that would
have been achieved nor are they necessarily indicative of future results of
operations. The unaudited pro forma financial information below excludes the
results of Arapahoe Basin, which the Company divested in September 1997. The
unaudited summarized information for the twelve-months ended July 31, 1998 are
provided for comparative purposes.
<TABLE>
<CAPTION>
Twelve (Pro Forma)
Months Twelve Months
Ended Ended
July 31, July 31, Percentage
1998 1997 Increase Increase
-------- ------------- -------- ----------
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C>
Resort Revenue....................... $350,498 $292,127 $58,371 20.0%
Resort Operating Expense............. 238,889 200,488 38,401 19.2%
</TABLE>
29
<PAGE>
Resort Revenue. Pro forma Resort Revenue for the twelve-months ended July
31, 1998 and 1997 is presented by category as follows:
<TABLE>
<CAPTION>
Twelve (Pro Forma)
Months Twelve Months
Ended Ended Percentage
July 31, July 31, Increase Increase
1998 1997 (Decrease) (Decrease)
-------- ------------- ---------- ----------
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C>
Lift Tickets....................... $147,128 $135,827 $11,301 8.3%
Ski School......................... 38,647 34,462 4,185 12.1
Dining............................. 52,371 43,099 9,272 21.5
Retail/Rental...................... 20,799 17,165 3,634 21.2
Hospitality........................ 47,128 34,065 13,063 38.3
Other.............................. 44,425 27,509 16,916 61.5
-------- -------- ------- ----
Total Resort Revenue............. $350,498 $292,127 $58,371 20.0%
======== ======== ======= ====
Total Skier Days................... 4,717 4,890 (173) (3.5%)
======== ======== ======= ====
ETP................................ $ 31.19 $ 27.78 $ 3.41 12.3%
======== ======== ======= ====
</TABLE>
Lift ticket revenue increased due to a 12.3% increase in ETP partially
offset by a 3.5% decline in the number of total skier days. The increase in ETP
is primarily due to increases in lead ticket prices at each resort, a less
aggressive ticket discounting strategy, and improvement in the proportion of
destination skier days to total skier days. The increase in lead ticket prices
and less aggressive discounting is consistent with the Company's strategy to
provide a high quality guest experience at a premium price. The improvement in
the proportion of destination skier days was driven by an increase in
destination skier days and a decline in local and Colorado Front Range
(Denver/Colorado Springs) skier days (non-destination skier days). The Company
attributes the increase in destination guests to the Company's new and
innovative marketing and loyalty programs and continuous commitment to guest
service. The decline in local and Front Range skier days is primarily
attributable to unusual weather patterns and below average snowfall for much of
the season at the Company's resorts.
Ski school revenue increased primarily due to price increases and an
increase in the number of ski and snowboard lessons sold. The number of lessons
increased due to an increase in the number of destination skiers who have a
greater tendency to purchase lessons than do local and Front Range guests.
Additionally, the Beaver Creek children's program has continued its success due
to a number of initiatives designed to increase participation. Demand continued
to be strong for snowboarding and private lessons driven by the popularity of
snowboarding and the increase in destination guests.
Dining revenue increased as a result of strong performance from existing
operations, the addition of several new dining operations, and dining
operations acquired in three hotel acquisitions. Five dining operations were
new to Vail Mountain in fiscal 1998, including the addition of two fine dining
facilities from The Lodge at Vail acquisition, and two facilities in the newly-
renovated and expanded Golden Peak base facility, resulting in an overall
seating capacity increase of 10%. Beaver Creek opened seven new operations, six
of which are located in the recently completed Beaver Creek Village core,
thereby increasing seating capacity by 29%. Four dining operations were new to
Breckenridge and Keystone resorts during fiscal 1998 including the operations
acquired in the acquisitions of the Great Divide Lodge (formerly Breckenridge
Hilton) and the Inn at Keystone, and two new, on-mountain operations.
Retail and rental revenues increased due to strong performance from
existing operations and the addition of three new operations. Increases in
existing operations were led by the completion of the Beaver Creek Village core
which provided a complementary balance of retailers in Beaver Creek Village
making it an attractive retail shopping destination, and the newly renovated
and expanded Golden Peak facility at the base of
30
<PAGE>
Vail Mountain. Two new rental operations were opened in Beaver Creek Village
and one new retail/rental operation was opened in a strategic location at the
base of Peak 8 in Breckenridge where the company formerly had no presence in
the retail/rental market. The Company's retail and rental business also
benefited from continuing improvements in inventory management and store
product mix.
Hospitality revenue increased due to an increasing base of property
management services, growth in the travel and reservations businesses, and the
acquisitions of The Lodge at Vail, the Great Divide Lodge (f/k/a Breckenridge
Hilton), and the Inn at Keystone. Property management services contributed
toward the growth over fiscal 1997 due to an increase in occupancy and average
daily rate (defined as revenue divided by room nights) at Beaver Creek Resort
driven by the increase in skier days and number of rooms under management.
Other revenue increased as a result of the increased popularity of the
Adventure Ridge activities center at the top of Vail Mountain, expanded
contract services for Beaver Creek, Bachelor Gulch, and Arrowhead Villages, the
expansion of the Beaver Creek Club, licensing and sponsorship revenue growth,
and increases in brokerage and commercial leasing revenue.
Resort Operating Expense. Resort Operating Expense was $238.9 million for
the twelve months ended July 31, 1998, compared to $200.5 million for the
twelve months ended July 31, 1997. As a percentage of Resort Revenue, Resort
Operating Expense was 68.2% and 68.6% for the twelve months ended July 31, 1998
and 1997, respectively. The overall increase in Resort Operating Expense is
attributable to increased variable expenses resulting from the increased level
of Resort Revenue derived from non-lift businesses such as dining,
retail/rental, hospitality and other operations.
Liquidity and Capital Resources
We have historically provided funds for operating expenditures, debt
service, capital expenditures and acquisitions through a combination of cash
flow from operations, short-term and long-term borrowings and sales of real
estate.
Our cash flows from investing activities have historically consisted of
payments for acquisitions, resort capital expenditures, and investments in real
estate.
On June 14, 1999 the Company purchased 100% of the outstanding shares of
Grand Teton Lodge Company, a Wyoming corporation, from CSX Corporation for a
total purchase price of $55 million. The Grand Teton Lodge Company operates
four resort properties in northwestern Wyoming: Jenny Lake Lodge, Jackson Lake
Lodge, Colter Bay Village and Jackson Hole Golf & Tennis Club. Grand Teton
Lodge Company operates the first three properties, all located within the Grand
Teton National Park, under a concessionaire contract with the National Park
service. Jackson Hole Golf & Tennis Club is located outside the park on
property owned by Grand Teton Lodge Company and includes approximately 30 acres
of developable land.
During the ten months ended July 31, 1998, we acquired three hotel
properties: the Great Divide Lodge (f/k/a Breckenridge Hilton), The Lodge at
Vail, The Inn at Keystone and certain other assets, for an aggregate purchase
price of $54.3 million (net of cash acquired in the transactions). We have
since incurred approximately $7.3 million during the ten months ended July 31,
1998 to substantially complete a new wing of The Lodge at Vail. We sold a
penthouse condominium acquired as part of the acquisition in January 1999 for a
total purchase price of $3.3 million.
On August 1, 1998, we entered into a joint venture with one of the
largest retailers of ski- and golf-related sporting goods in Colorado. We
contributed our retail and rental operations to the joint venture for a 51.9%
ownership interest in SSI Venture. Specialty Sports, Inc. contributed 30 stores
located in Denver, Boulder, Aspen, Telluride, Vail and Breckenridge to the
joint venture and holds a 48.1% share in SSI Venture.
31
<PAGE>
Resort capital expenditures for the ten months ended July 31, 1998 were
$80.5 million, of which management estimates approximately $15 million
represented maintenance capital expenditures. Investments in real estate for
that period were $15.7 million, which included $3.1 million of mountain
improvements, including ski lifts and snowmaking equipment, which are related
to real estate development but which also benefit resort operations. The
primary projects included in resort capital expenditures were (i) trail and
infrastructure improvements at Keystone Mountain, (ii) terrain and facilities
improvements at Breckenridge, (iii) expansion of the grooming fleet at Vail and
Beaver Creek Mountains, (iv) retail/rental and restaurant additions in Beaver
Creek Village, (v) new high-speed quad chairlifts at Breckenridge and Keystone,
(vi) upgrades to office and front-line information systems, and (vii) the
addition of a new wing at The Lodge at Vail. The primary projects included in
investments in real estate were (i) continuing infrastructure related to Beaver
Creek, Bachelor Gulch and Arrowhead Villages, (ii) golf course development, and
(iii) investments in developable land at strategic locations at all four
mountain resorts.
During the nine months ended April 30, 1999, we acquired one hotel
property, The Village at Breckenridge, and certain other related assets for a
total purchase price of $33.8 million. We simultaneously entered into a
contract to sell certain of the acquired assets for $10 million which closed in
April 1999.
Resort capital expenditures for the nine months ended April 30, 1999 were
$53.7 million. Investments in real estate for that period were $22.9 million.
The primary projects included in resort capital expenditures were (i) trail and
infrastructure improvements and a new high speed quad chairlift at Keystone
Mountain, (ii) upgrades to the snowmaking system at Keystone, (iii) terrain and
facilities improvements and a new on-mountain restaurant at Breckenridge
Mountain, (iv) expansion of the children's ski school at Beaver Creek, (v)
expansion of Adventure Ridge at Vail, (vi) development of Adventure Point at
Keystone, (vii) expansion of the grooming fleet at all four resorts, (viii)
upgrades to office and front line information systems, (ix) significant
renovations of the Great Divide Lodge as well as minor renovations of the
Company's other hotels, and (x) infrastructure for the Category III expansion
on Vail Mountain. The primary projects included in investments in real estate
were (i) continuing infrastructure related to Beaver Creek, Bachelor Gulch and
Arrowhead Villages, (ii) construction of the Arrowhead Alpine Club, (iii) golf
course development, and (iv) investments in developable land at strategic
locations at all four resorts.
The seasonal nature of our construction activity results in the
concentration of capital expenditures in the May-December periods.
Consequently, we categorize capital expenditures on a calendar rather than
fiscal year basis. For calendar 1999, we anticipate spending between $45 and
$55 million for resort capital expenditures and between $30 and $40 million for
real estate capital expenditures. Management estimates that for calendar 1999,
approximately $15 million to $20 million of resort capital expenditures will be
categorized as resort maintenance capital expenditures for mountain, lodging,
dining and other operations including information systems, with the remainder
of resort capital expenditures being used to fund strategic projects such as
the Category III expansion on Vail Mountain, a new high-speed six-passenger
chairlift at Breckenridge, and trail, hospitality and infrastructure
improvements across all four resorts. Primary real estate projects for calendar
1999 include construction of condominiums at Arrowhead, the Arrowhead Alpine
Club and Bachelor Gulch Club and further development of the Red Sky Ranch
residential golf resort. We plan to fund resort and real estate capital
expenditures with cash flow from operations and borrowings under our revolving
credit facility.
During the ten months ended July 31, 1998, we generated $21.2 million in
cash flow from our financing activities consisting of net borrowings under our
revolving credit facility and other debt of $15.7 million, $8 million received
from the exercise of employee stock options and the refund of a bond reserve
fund of $3.3 million, less the payment of $5.7 million due under a rights
distribution to certain option holders. During the nine months ended April 30,
1999, the Company generated $10.1 million in cash from its financing activities
consisting of net long-term debt borrowings of $9.4 million and $0.6 million
received from the exercise of employee stock options.
At April 30, 1999 we had $41.2 million of outstanding Industrial
Development Bonds issued by Eagle County, Colorado. Interest accrues at 6.95%
per annum and the principal amount matures on August 1, 2019.
32
<PAGE>
Interest is payable semi-annually on February 1 and August 1. The bonds are
secured by the Vail and Beaver Creek Mountain United States Forest Service
permits.
We currently have a $450.0 million revolving credit facility maturing on
December 19, 2002. At April 30, 1999, after giving effect to the offering and
the application of the net proceeds, we would have had $21.8 million
outstanding, $64.9 million of letters of credit issued thereunder and remaining
availability of $363.3 million, of which $137.9 million could have been
borrowed under the most restrictive of the financial covenants contained in the
credit facility. Upon the consummation of the offering of outstanding Notes on
May 11, 1999, borrowings under our credit facility bear interest annually at
our option at the rate of (i) LIBOR (the London interbank offered rate for a
given interest period) plus a margin (ranging from .75% to 2.25%) or (ii) the
Base Rate (defined as the higher of the Federal Funds Rate, as published by the
Federal Reserve Bank of New York, plus 0.5%, or the agent's prime lending rate)
plus a margin up to .75%. In addition, we must pay a fee on the face amount of
each letter of credit outstanding at a rate ranging from .75% to 2.25%. We will
pay a quarterly unused commitment fee ranging from 0.20% to 0.50%. The interest
margins and commitment fee fluctuate based upon the ratio of Funded Debt to our
Resort EBITDA (as defined in our credit facility). See "Description of Certain
Indebtedness--Revolving Credit Facility."
At April 30, 1999, SSI Venture had $9.7 million outstanding under the
$20.0 million SSI Venture credit facility, all of which was guaranteed by one
of our subsidiaries. See "Description of Certain Indebtedness--SSI Venture
Credit Facility."
During the ten months ended July 31, 1998, 1,043,271 employee stock
options were exercised at exercise prices ranging from $6.85 to $24.00.
Additionally, 8,260 shares were issued to management under the restricted stock
plan. During the nine months ended April 30, 1999, 62,160 employee stock
options were exercised at exercise prices ranging from $10.00 to $10.75.
Additionally, 8,751 shares were issued to management under the Company's
restricted stock plan.
Based on current levels of operations and cash availability, management
believes we are in a position to satisfy our working capital, debt service and
capital expenditure requirements for at least the next twelve months.
Seasonality
The Company's ski and resort operations are extremely seasonal in nature.
In particular, revenues and profits are substantially lower, historically
resulting in losses, in the first and fourth quarters due to the closure of its
ski operations. Based on the Company's fiscal year ended July 31, 1998, 87% of
total resort revenues were earned during the second and third fiscal quarters.
Inflation
Although the Company cannot accurately determine the precise effect of
inflation on its operations, management does not believe inflation has had a
material effect on the results of operations in the last three fiscal years.
When the cost of operating resorts increases, the Company generally has been
able to pass the increase on to its customers. However, there can be no
assurance that increases in labor and other operating costs due to inflation
will not have an impact on the Company's future profitability.
Year 2000 Compliance
The Year 2000 issue is a result of certain computer programs being
written using two digits rather than four to define the applicable year.
Computer programs which are date-sensitive may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in major computer
system or program failures or miscalculations or equipment malfunctions. The
Company recognizes that the impact of the Year 2000 issue extends beyond
traditional computer hardware and software to embedded hardware and software
contained in equipment used in operations, such as chairlifts, alarm systems
and elevators, as well as to third parties.
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State of Readiness. The Year 2000 issue is being addressed within the
Company, under the direction of the information systems department, by its
individual business units. The Company has established a Year 2000 task force
consisting of representatives from all major business units to coordinate the
Company's Year 2000 efforts and progress is reported periodically to a Year
2000 executive committee consisting of certain senior management members.
The Company has committed resources to conduct risk assessments and to
take corrective action, where required, within each of the following areas:
information technology, operations equipment, and external parties. Information
technology includes telecommunications as well as traditional computer software
and hardware in the mainframe, midrange and distributed applications
environments. Operations equipment includes all automation and embedded chips
used in business operations. External parties include any third party with whom
the Company interacts, or upon whom the Company relies in the performance of
day-to-day operations. The Company's program for addressing the Year 2000 issue
includes the following phases: (1) inventory; (2) assessment; (3) remediation;
(4) testing; and (5) contingency planning. Approximately 10% of the Company's
normal information technology work has been deferred due to the fact that
personnel of the information systems department have dedicated certain portions
of their time to the Year 2000 issue. However, the Company plans to complete
and implement its information technology projects as planned.
The Company has traditionally upgraded and replaced its information
technology systems on a regular basis. As a result of this process, most of the
Company's information technology systems and applications are currently Year
2000 compliant. In the remaining information technology area, inventory and
assessment audits in the telecommunications, mainframe, midrange and
distributed applications are substantially complete with remediation,
verification and testing expected to be completed by October 31, 1999. With
respect to operations equipment, the Company has identified areas that it
considers "mission critical", in that a Year 2000 failure could impact the
health or safety of employees or resort guests or could have a material adverse
effect on the Company. The Company is engaging a third party consultant to
assist the Company in completing inventory and assessment audits of operations
equipment. The Company has extended its targeted completion date for these
audits to October 31, 1999 to allow the outside consulting firm to perform the
necessary work. Remediation, verification and testing with respect to
operations equipment are now expected to be completed by November 30, 1999.
The Company is communicating with its significant suppliers to determine
the extent to which the Company is vulnerable to those third parties' failure
to remediate their own Year 2000 issue. However, there can be no guarantee that
the systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company. Many of the external parties that the
Company relies on provide commodity goods or service that are widely available
from a range of vendors; therefore, third party impact on the Company is
expected to be minimal. The Company is seeking confirmation of Year 2000
compliance from critical suppliers and is identifying alternative suppliers as
part of its contingency plans. The Company will seek letters of compliance or
other satisfactory evidence of compliance (for example, web site disclosures)
from certain non-critical suppliers based on risk assessment of such suppliers.
Risk assessment with respect to major external vendors has been completed. Risk
assessment with respect to minor vendors is continuing and is expected to be
completed by August 31, 1999. Monitoring of risk in this area will continue
throughout 1999, as many external parties will not have completed their work
with respect to the Year 2000 issue.
Costs. The total estimated multi-year cost of the Year 2000 project is
estimated to be between $900,000 and $1,100,000 and its being funded from
operating cash flow. These costs are not expected to be material to the
Company's consolidated results of operations, liquidity or capital resources.
Of the total project cost, approximately $600,000 is attributable to the
purchase of new software or equipment that will be capitalized. The remaining
costs will be expensed as incurred. In a number of instances, the Company may
decide to install new software or upgraded versions of current software
programs that are Year 2000 compliant.
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In these instances, the Company may capitalize certain costs of the new system
in accordance with current accounting guidelines. As of April 30, 1999,
$360,000 of the total estimated Year 2000 project costs have been incurred of
which $300,000 has been expensed and $60,000 was capitalized. Fiscal 1998
expensed costs were approximately $150,000 and expensed costs for the nine
months ended April 30, 1999 were approximately $150,000. Costs exclude
expenditures for systems that were replaced under the Company's regularly
planned schedule.
Risks. Failure to address a Year 2000 issue could result in a business
disruption that could materially affect the Company's operations, liquidity or
capital resources. The Company believes that the most reasonably likely worst
case scenario would consist of isolated instances of minor system or equipment
failures, for which the Company will have developed contingency plans.
There is still uncertainty around the scope of the Year 2000 issue and
its implications for the Company. At this time the Company cannot qualify the
potential impact of these failures. Due to the general uncertainty inherent in
the Year 2000 problem, as well as, in part, the uncertainty of the Year 2000
readiness of suppliers and the current status of the Company's Year 2000
program, the Company is unable to determine at this time whether any Year 2000
failures will have material adverse consequences on the Company's results of
operations, liquidity or financial condition. The Company's Year 2000 program
and related contingency plans are being developed to address issues within the
Company's control and to reduce the level of the Company's uncertainty about
its Year 2000 issues. The program minimizes, but does not eliminate, the issues
relating to external parties. Further, there can be no assurance that the
Company will successfully identify or remediate its potential Year 2000
problems and failure to do so may have a material adverse effect on the
Company.
Contingency Plans. The Company is developing contingency plans, and
expects to complete them by October 31, 1999. The Company will consider, among
other factors, the results and responses from its communications with material
third parties in determining the nature and the scope of contingency plans.
However, generally, the Company's contingency plans will include, but are not
limited to, development of manual work-arounds to system failures,
identification of alternative sources for goods and services and reasonable
increases in the amount of on-hand goods and supplies. Typically these plans
address the anticipated consequences of single events, while the scope of the
Year 2000 issues may cause multiple concurrent events for a longer duration.
Development of contingency plans for multiple concurrent events is in progress
and is expected to be completed by November 30, 1999.
The costs of the project, estimated completion dates, worst-case scenario
and other forward-looking statements above are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantees that
these estimates will be achieved, or that events will occur as projected, and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, timely implementation
of, and allocation of resources to, the Company's Year 2000 program, success of
the Company in identifying computer systems and non-information technology
systems that contain two digit date codes, the Company's appropriate risk
assessment and prioritization of such systems, the nature and amount of
programming and testing required and the time it actually takes to upgrade,
replace or otherwise take corrective action with respect to each of the
affected systems and the success of the Company's suppliers and other external
parties with which the Company interacts in addressing their Year 2000 issues.
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BUSINESS
General
Vail Resorts is one of the leading resort operators in North America.
Through our five premier properties we provide a comprehensive resort
experience throughout the year to a diverse clientele with an attractive
demographic profile. Our resorts currently include:
. Vail Mountain--the largest and most popular single ski mountain
complex in North America ("Vail");
. Beaver Creek Resort--one of the world's premier family-oriented
mountain resorts ("Beaver Creek");
. Breckenridge Mountain--an attractive destination resort with numerous
apres ski activities and an extensive bed base ("Breckenridge");
. Keystone Resort--a year-round family vacation destination
("Keystone"); and
. Grand Teton Lodge Company--our first summer destination resort with
four resort properties in and around Grand Teton National Park
("Grand Teton").
We are one of the most profitable mountain resort operators due to the
following competitive strengths:
. ownership of premium resorts,
. attractive guest demographics,
. strong brand franchise,
. scope, diversity and quality of our complementary activities and
guest services, and
. proximity of our ski resorts to both Denver International Airport and
Vail/Eagle County Airport.
We had an 8.7% share of skier days in the United States for the 1997-98
ski season and are uniquely positioned to attract a broad range of guests due
to our diverse ski terrain, varied price points and numerous activities and
services. Our ski resorts are located within 50 miles of each other, which
enables us to offer guests the opportunity to visit each ski resort during one
vacation stay and participate in common loyalty programs. We also own
substantial real estate from which we derive significant strategic benefits and
cash flow. We expect to develop and expand our non-mountain operations in the
coming years.
Industry
There are approximately 800 ski areas in North America, which generated a
total of approximately 70 million skier days during the 1997-98 ski season.
There are approximately 521 ski areas in the U.S., which generated
approximately 54 million skier days during the 1997-98 ski season. These
resorts range from small ski resort operations, which cater primarily to day
skiers from nearby population centers, to larger resorts which, given the scope
of their operations and their accessibility, are able to attract both day
skiers and destination resort guests who are seeking a comprehensive vacation
experience. While the day skier tends to focus primarily on lift ticket price
and round-trip travel time, destination travelers tend to make their choices
based on the number of amenities and activities offered, as well as the
perceived overall quality of the vacation experience. As a result, destination
guests generate significantly higher Resort Revenue per skier day than day
skiers. We believe we are one of a relatively small number of ski areas in
North America able to attract both the day skier and the destination guest and
provide a comprehensive vacation experience.
Within the United States, regional distribution of skier days during the
1997-98 ski season is estimated to have been as follows: Northeast (12.7
million); Southeast (4.3 million); Midwest (6.7 million); Rocky Mountain (19.1
million); and Pacific West (11.2 million). The 27 ski areas located in Colorado
currently account for 22% of total skier days in the United States, up from
approximately 18% in 1985-86. While total skier days generated by all United
States resorts have increased by a total of 4% since the 1985-86 ski season,
skier days generated by Colorado ski areas have grown by approximately 31%
during the same period. During the same time period, skier days at our resorts
have increased by 39%. We believe that the primary reasons for
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Colorado's growth relative to the rest of the United States include the quality
of the ski areas located in the state, the accessibility of its resorts from
major transportation centers and the relatively favorable climate of the Rocky
Mountains.
We believe that we benefit from certain trends and developments which
favorably impact the North American ski industry, including (1) advances in ski
equipment technology ("fat" skis and specially shaped skis) which facilitate
learning and make the sport easier to enjoy, thereby increasing an individual's
days skied per year and overall years of skiing, (2) the rapid growth of
snowboarding, which is increasing youth participation in "on-snow" sports, (3)
a greater focus on leisure and fitness and (4) a growing interest among
affluent families in purchasing second homes in mountain resort communities.
There can be no assurance, however, that such trends and developments will have
a favorable impact on the ski industry.
Snowboarding has energized interest in "on-snow" sports, primarily among
males between the ages of 13 and 24. According to the National Sporting Goods
Association (the "NSGA"), the number of snowboarders in the U.S. has increased
from 1.46 million in 1990 to 2.52 million in 1997, an increase of 73%. U.S.
skier days attributable to snowboarders have increased an average of 21% per
year over the past four years and snowboarders are currently estimated to
represent 21% of all U.S. skier days. With international markets believed to be
experiencing similar growth rates, snowboarding is among the fastest growing
sports in the world. Snowboarding was inaugurated as the newest Olympic sport
at the 1998 Winter Olympic Games in Nagano, Japan. Management believes that the
growth in snowboarding has had a positive impact on the ski industry and will
continue to be an important source of our lift ticket, ski school, retail and
rental revenue growth. We believe that the growth in snowboarding among
children and teens, who influence family vacation decisions, allows us to
attract additional family-oriented destination guests. Consequently, we are an
industry leader in the creation of snowboard attractions, programs and events.
The mountain resort industry is in a period of consolidation as the cost
of the infrastructure required to maintain competitiveness has increased,
thereby enhancing the position of larger and better capitalized resort owners.
The number of U.S. ski resorts has declined from approximately 709 in 1986 to
521 in 1998 and, based on industry estimates, the number of mountain resorts is
expected to decline further, as the majority of mountain resorts lack the
infrastructure, capital and management capability to compete in this multi-
dimensional and service-intensive industry. At the same time, the high cost of
mountain resort development and environmental restrictions have prevented new
resorts from being created. Since Beaver Creek opened in 1980, only one other
major ski facility has opened in the United States. Despite this consolidation,
the ski industry remains highly fragmented and we expect that no one resort
operator will account for more than 10% of the United States' 54 million skier
days for the 1997-98 ski season. We believe that the consolidation trend in the
mountain resort industry will continue, and we intend to selectively pursue
acquisition opportunities which we believe will provide attractive investment
returns.
Resorts
Vail
Opened in 1962, Vail is the largest and most popular single ski mountain
complex in North America, offering over 4,600 acres of unique and varied ski
terrain, spanning approximately 20 square miles. Included in this complex is
the largest network of high speed lifts in the world, a top-rated ski school
and a wide variety of dining and retailing establishments. Vail is ideally
suited for all levels of skiers as it has a balanced distribution of beginner,
intermediate and advanced terrain. Perhaps no single physical attribute defines
Vail better than the Back Bowls. More than seven miles wide, the Back Bowls are
one of the most distinctive terrain features found at any ski mountain in North
America and offer some of the finest skiing in the world. Vail typically
receives "dry" snowfall due to its central Rocky Mountain location.. We
recorded 1.34 million skier days for the 1998-99 season, our 36th season. For
the last ten years, Vail has been rated the number one ski resort in the United
States by the Mountain Sports and Living (f/k/a Snow Country) magazine survey.
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While Vail provides the largest and most varied ski terrain of any North
American mountain resort, we have received approval from the Forest Service for
infrastructure development of bowl skiing terrain within its current permit
area known as Category III; such approval is subject to potential appeal.
Category III will add 850 acres of new trails to the Back Bowls, increasing the
ski terrain in the Back Bowls by over 30%. With between 40% and 50% of the
guests at Vail Mountain classified as intermediate skiers, Category III
represents a significant expansion in non-expert bowl skiing for these skiers.
The terrain's high, north facing location typically yields extremely reliable
snow conditions and should allow for earlier and later ski season operations
than Vail's existing Back Bowls which face south. Although we believe that the
completion of this terrain expansion will significantly increase the number of
skier days at Vail, particularly in the early and late season non-peak periods,
there can be no assurance that such an increase will be achieved. See "Risk
Factors--We rely on government permits."
We have also consistently improved and expanded guest amenities at Vail
to increase Resort Revenue and Resort EBITDA. We currently own and operate 26
dining venues on the mountain and in the base villages and over 55,000 square
feet of retail, restaurant and commercial space located throughout the mountain
and at the three primary access points--Golden Peak, Vail Village and
Lionshead. Significant projects already completed include:
. The Golden Peak redevelopment, which replaced the entire base
facility at one of Vail Mountain's primary access points with a new
83,000 square foot facility. Included in the new base lodge are three
dining venues, a retail and rental outlet and skier services
facilities.
. A new high-speed quad chairlift at the Golden Peak base area and a
new 12 passenger gondola at the Lionshead base area, which improved
access to the mountain.
. Adventure Ridge, a non-ski activity center on the top of Vail
Mountain, which offers sledding and tubing, ice skating, snowmobile
tours, snow-biking, laser tag and a snowboard park in addition to
substantial day and evening retail and dining operations.
We are currently planning several additional resort attractions,
including:
. The Category III expansion which, subject to final government
approval, will increase the number of ski trails on Vail's renowned
Back Bowls by 850 acres. See "Risk Factors--We rely on government
permits."
. The redevelopment of our owned property in Lionshead, which will
create significant additional resort lodging and retail and
restaurant space. See "--Real Estate."
Beaver Creek
Beaver Creek, located ten miles west of Vail, consists of the Beaver
Creek, Arrowhead and Bachelor Gulch ski areas, and includes over 1,600 acres of
ski terrain. We acquired Beaver Creek in 1972 and opened the ski facilities
during the 1980-81 ski season. In 1993, we expanded Beaver Creek by acquiring
significant privately owned ski terrain and development property at Arrowhead
and Bachelor Gulch. This purchase allowed us to (1) develop a European style
village-to-village ski experience which interconnects, through ski lifts and
ski trails, the three distinct ski areas, (2) add significant intermediate
terrain, (3) improve skier distribution patterns across Beaver Creek and (4)
add mountain infrastructure capable of supporting anticipated skier growth.
Like Vail, Beaver Creek benefits from "dry" dependable snowfall in addition to
excellent snowmaking capabilities. Since its opening, Beaver Creek has
increased its skier days from 111,746 in 1980-81 to 617,000 in the 1998-99 ski
season, making it one of the fastest growing mountain resorts in North America.
Management believes that the success of Beaver Creek has resulted from its
unique combination of ambiance, architecture and a variety of groomed and
natural terrain providing world-class skiing which appeals to Beaver Creek's
family-oriented destination guests. Beaver Creek operates 14 lifts, including
six high speed quads. We also own and operate 19 restaurants on-mountain and in
the base areas, as well as over 130,000 square feet of retail, restaurant and
commercial space strategically located on and at the base of Beaver Creek. See
"--Resort Operations--Dining."
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We have implemented a number of capital improvements at Beaver Creek,
including the build-out of the Beaver Creek Village core with a final series of
additions to fully integrate Beaver Creek Mountain with the European-style
village at its base. These additions included two residential and retail multi-
use complexes, a series of outdoor escalators to move guests through the
village to the mountain, the 527-seat Vilar Center for the Arts at Beaver Creek
as well as a year-round, outdoor ice-skating area.
One of the primary factors in the growth of Beaver Creek has been an
increase in resort lodging. In addition to the significant growth taking place
at Beaver Creek, there has been substantial development in the surrounding
communities of Avon, Edwards, Eagle and Gypsum, providing additional,
moderately-priced, resort lodging. We anticipate the substantial resort lodging
growth to continue from the buildout of the Bachelor Gulch Village and
Arrowhead Village resort communities, both of which offer unique slopeside
development opportunities due to our fee simple ownership of the mountain land,
and from the significant development taking place in the surrounding
communities. See "--Real Estate."
Breckenridge
Breckenridge is located approximately 85 miles west of Denver and 40
miles east of Vail. Breckenridge's skier days were 1.39 million for the 1998-99
season. Breckenridge offers over 2,000 acres of skiing on four different
mountain peaks, including open bowl skiing and excellent beginner and
intermediate ski terrain. Breckenridge's mountains are interconnected by a
network of 23 lifts, including six high-speed quad chairlifts. Breckenridge
currently operates 15 dining venues, both on- and off-mountain, and over 17,000
square feet of on-mountain retail, restaurant and commercial space.
Breckenridge benefits significantly from its location adjacent to the
Town of Breckenridge, a restored 140 year old Victorian mining town which has
over 20,000 beds, over 70 restaurants and bars and over 130 shops. Significant
apres ski activities and extensive bed base have made Breckenridge an
attractive destination to national and international destination guests. We
anticipate significant additional resort lodging growth will be fueled by third
party developers as well as by the development of our owned properties. See "--
Real Estate."
Since our acquisition of Breckenridge in January 1997, we have made
substantial capital improvements to the resort which we believe have enhanced
all aspects of the overall guest experience. We added two new high-speed quad
chairlifts, increased snowmaking capacity by 50% and opened the first new on-
mountain restaurant at Breckenridge in over 10 years. We also acquired and
completely renovated the Great Divide Lodge and upgraded the Bergenhof Lodge
and Vista Haus restaurant.
Future plans at Breckenridge include substantial upgrades to the newly-
acquired Village at Breckenridge, a primary port of entry to the mountain,
skiing terrain expansion on Peak 7, and residential and commercial development
of the Company's land at the Peak 8 base area and in the Town of Breckenridge.
Keystone
Keystone is located approximately 70 miles west of Denver and 15 miles
from Breckenridge. Keystone's skier days were 1.26 million for the 1998-99 ski
season. Comprised of three mountains and interconnected by a network of 20
lifts, including two high speed gondolas and five high-speed quad chairlifts,
Keystone provides over 1,800 skiable acres suited to a wide variety of skier
ability levels. Keystone has the largest and most advanced snowmaking
capability of any Colorado mountain resort with snowmaking coverage extending
over nearly 50% of Keystone's skiable acreage. As a result, Keystone is
typically among the first mountain resorts in the nation to open each season
and is one of the last to close. Keystone also provides the
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largest single-mountain night skiing experience in North America. With 17
lighted trails covering 2,340 vertical feet from the summit to the base,
Keystone offers a 12 1/2 hour ski day which allows day guests to customize
their ski day and destination guests the opportunity to ski on arrival days.
Keystone is a planned family-oriented community which offers a variety of year
round activities, the majority of which we operate, including 24 on-mountain
and in-valley restaurants and over 94,000 square feet of on-mountain and in-
valley retail, restaurant and commercial space.
In addition, the Keystone JV is developing a significant portion of the
Keystone resort and has master plan approvals to add up to 3,400 residential
and lodging units and up to 318,000 square feet of retail and restaurant space
over the next 20 years. We believe that the build-out of this real estate will
result in increased skier days and Resort Revenue per skier day and will
significantly increase the number of higher revenue destination guests at
Keystone. See "--Real Estate."
Since our purchase of Keystone in January 1997, we have added two new
high-speed quad chairlifts, created Area 51, Colorado's newest snowboard park,
and opened Adventure Point, an on-mountain day and night recreation area. In
addition, a new restaurant was added at the North Peak base area. The Keystone
Lodge, which already carries the AAA Four Diamond rating, has also undergone an
extensive two-phase renovation.
Our continuing plans for Keystone include the installation of Keystone's
sixth high-speed quad chairlift, on-going expansion of Adventure Point,
increased ski terrain and an expansion of the Keystone Conference Center.
Grand Teton
On June 14, 1999, we completed our purchase of Grand Teton for a total
purchase price of $55 million. Based in Jackson Hole, Wyoming, Grand Teton
operates four premier resort properties in and around Grand Teton National
Park. Within the park, Grand Teton operates the 37-cabin Jenny Lake Lodge, a
AAA four-diamond lodge; Jackson Lake Lodge, a picturesque 385-room lodge that
boasts the most extensive meeting facilities in any national park; and Colter
Bay Village, a unique family resort with 226 cabins as well as extensive
camping and recreational facilities. Outside the park, Grand Teton operates the
Jackson Hole Golf and Tennis Club, the top-rated golf course in the state of
Wyoming. We also acquired 30 acres of developable land adjacent to the golf
course suitable for future residential development. Grand Teton has an
operating season generally running from mid-May through mid-October.
Accessibility
Given their close proximity to Vail/Eagle County Airport ("Vail/Eagle
Airport") and the recently-completed Denver International Airport ("DIA"), all
of our ski resorts are easily accessible to national and international
destination resort guests, as well as to day travelers from the Denver
metropolitan area. The Vail/Eagle Airport is located within 25 miles of Beaver
Creek and can accommodate large jet aircraft from major metropolitan areas.
Nearly 45% of the destination guests who traveled by air to ski at Vail and
Beaver Creek during the 1997-98 ski season arrived through Vail/Eagle Airport,
up from only 9% in 1990. We estimate that approximately 55% of the destination
guests flying to Vail and Beaver Creek and a similar percentage of the
destination guests traveling to Breckenridge and Keystone arrive through DIA.
All of Grand Teton's properties are located within approximately thirty miles
of Jackson Hole Airport, which is serviced by three major airlines.
Over the last seven years, we have worked closely with the nation's major
airlines to significantly improve accessibility to our resorts through
Vail/Eagle Airport. As a result of these efforts, the number of daily non-stop
flights, total seats, major airlines and cities served by Vail/Eagle Airport
have increased significantly. Vail/Eagle Airport currently provides direct
flight access from 13 major cities and we expect that Vail/Eagle Airport will
continue to expand its operations and offer more direct flights from more North
American cities.
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Furthermore, we continue to work with the major airlines to increase both
direct and connecting international flights into Vail/Eagle Airport. Presently,
guests from major cities located in Europe, South America, Mexico, New Zealand,
Australia and the Pacific Rim can conveniently fly to the Vail Valley with only
a single stopover or connection through a major U.S. city. We believe that the
proximity of our ski resorts to Vail/Eagle Airport provides us with a
significant competitive advantage relative to other North American destination
ski resorts. In order to induce major air carriers to offer flights from
selected new cities to the Vail/Eagle Airport, we have entered into agreements
guaranteeing the carriers minimum seasonal revenue associated with such
flights. Payments to date under these agreements have not been material.
Weather, Snowmaking and Grooming
Given their location in the Colorado Rocky Mountains, our ski resorts
receive some of the most reliable snowfall experienced anywhere in the world,
averaging between 20 and 30 feet of annual snowfall over the last 20 years,
which is significantly in excess of the average for all ski resorts in the
Rocky Mountains for such period.
Despite the natural snowfall typically received by our mountain resorts,
we continue to invest in the latest technology in snowmaking systems and
actively acquire additional water rights to allow for future snowmaking
expansion. Additionally, we have invested significantly in the most extensive
fleet of snowgrooming equipment in the world. The use of our snowmaking systems
in the early-season and snowgrooming equipment throughout the season, help us
to provide top-to-bottom skiing at all of our mountain resorts in both early-
and late-season, as well as during periods of lower than average snowfall.
For the 1998-1999 ski season, however, we experienced highly aberrant
weather conditions, which negatively impacted our financial performance. See
"Offering Memorandum Summary--Recent Results." Snowfall through New Year's Day
was the second lowest in forty years at Vail Mountain. This resulted in only
38% of our total skiable terrain across our four resorts being open to our
guests on Christmas Day. These weather conditions continued throughout the
winter as snowfall in February and March was the third lowest and temperatures
in March were the second warmest since Vail opened.
Resort Operations
We derive Resort Revenue from a wide variety of sources, including lift
ticket sales, dining, ski school, equipment rental, retail stores, travel
reservation services, lodging, property, club and conference management, real
estate brokerage, licensing and sponsorship activities, recreational activities
(including golf and tennis facilities) and property, club and conference
management. Our ability to appeal to a broad spectrum of guests and offer a
wide selection of activities and services has enabled us to generate Resort
Revenue per skier day that is among the highest in the industry.
Lift Ticket Revenue. Lift ticket revenue represents our single largest
revenue source. Our favorable demographics and world-class resort facilities
have enabled us to achieve premium ticket pricing. The lead ticket price, which
for the 1998-99 ski season was $61 a day for Vail and Beaver Creek Mountains
and $52 a day for Breckenridge and Keystone, is among the highest in the
industry. To maximize skier volume during non-peak periods and attract certain
segments of the market, we also offer a wide variety of incentive ticket
programs, including season passes, student rates, group discounts and senior
discounts. We engage in yield management analysis to maximize our effective
ticket price (defined as total lift ticket revenue divided by total skier
days). During the 1997-98 ski season, we introduced interchangeable lift
tickets which were valid across all four of our resorts and Arapahoe Basin ski
area. This allowed guests to ski and snowboard at any of our resorts with one
lift ticket. We also introduced Peaks at Vail Resorts, a loyalty program
similar to an airline frequent flier program. The program rewards guests who
frequent the resorts with a system of points that can be accumulated and
redeemed for rewards during subsequent visits.
Dining. Dining is a key component in providing a satisfying guest
experience and has been an important source of revenue growth. We believe that
by owning and operating both on-mountain and base area
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restaurants, we can better ensure the quality of products and services offered
to our guests, as well as capture a greater percentage of the guest's vacation
expenditures. Our strategies with respect to our dining operations include (1)
focusing growth in venues which allow for dining throughout the day and
throughout the year, including breakfast, lunch, apres ski, dinner, evening
entertainment, group functions and summer/non-ski season operations, (2)
creating unique themed environments to maximize guest enjoyment and revenue
opportunities, (3) further expanding on-mountain seating, (4) offering
affordable family lunchtime and evening dining and entertainment and (5)
continuing affiliations with institutions such as Johnson and Wales University,
one of the largest culinary and restaurant management schools in the world. The
large number of dining facilities we operate allow us to improve margins
through large quantity purchasing agreements and sponsorship relationships.
Our existing restaurant operations offer a wide variety of cuisine and
range from top-rated, full service sit-down restaurants to trailside express
food outlets. We operate 26 on-mountain and base restaurants in Vail, 19
restaurants in Beaver Creek, 15 restaurants in Breckenridge and 24 restaurants
in Keystone. Our recent acquisition of Grand Teton added eight dining
facilities, including both in-park and out-of-park operations.
On October 19, 1998, fires on Vail mountain destroyed certain of our
facilities including the ski patrol headquarters, a day skier shelter, the Two
Elk Lodge restaurant and the chairlift drive housing for the High Noon Life
(Chair #5). The fires have been determined to have been deliberately set and
are under investigation by federal, state and local law enforcement officials.
All of the facilities damaged are fully covered by our property insurance
policy. The incident is also covered under our business interruption insurance
policy. Although we are unable to estimate the total amount which will be
recovered through insurance proceeds, we do not believe the incident will have
a material impact on our ongoing financial results.
Hospitality. Our hospitality operations are designed to offer guests a
full complement of quality resort services and provide additional sources of
revenue and profitability. These operations include reservations, tour and
travel operations and hotel, property, club and conference center management.
We operate a consolidated central reservation center servicing our guests
in (1) Vail, Beaver Creek and the surrounding communities, (2) Keystone and (3)
Greater Summit County including Breckenridge and the communities surrounding
both Breckenridge and Keystone. The central reservation center is capable of
booking and selling airline and ground transportation, lodging, lift tickets,
ski school and most other activities at our resorts, earning commissions on
each third party sale. The center historically has handled over 150,000 calls
per year for Vail, Beaver Creek and the surrounding communities, over 300,000
calls per year for Keystone and approximately 60,000 calls per year for Greater
Summit County.
We have significantly improved our central reservation operations by (1)
creating preferred relationships with major travel companies, (2) increasing
purchases of bulk air and large blocks of room nights, (3) capitalizing on the
growth of our customer database, (4) expanding the variety of activities and
services offered and (5) improving cross-selling of our activities and
services, particularly prior to the guest's arrival at the resort.
We have also entered into preferred relationships with travel agent
consortiums representing approximately 9,000 North American travel agents.
These travel agents have agreed to emphasize our resorts as resorts of choice
to their clientele and in return receive certain commission overrides.
We believe there are significant advantages to continuing to grow and
increase the scope of our hotel and property management operations. Our hotel
and property management operations enable us to (1) leverage and enhance our
central reservations operations (2) ensure quality of the guest experience, (3)
offer full service vacation packages to our guests, affording us a competitive
advantage and (4) leverage the existing property management operation for
increased financial performance.
With the recent acquisitions of the Lodge at Vail, the Great Divide
Lodge, the Inn at Keystone and the Village at Breckenridge, we have taken the
first steps toward applying our hotel and property management
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strategy, already in place at Keystone and Beaver Creek, to Vail and
Breckenridge. We intend to continue to expand our property management
operations in Vail, Breckenridge and Beaver Creek by competing for and securing
new management contracts or through acquisitions. Additionally, in Keystone,
the Company expects to secure contracts on additional condominiums and homes
developed by the Keystone JV and third party developers. See "--Real Estate."
Including the recent acquisitions mentioned above we currently own seven
hotels totaling approximately 730 rooms and suites, manage an additional hotel
with 42 rooms and suites and manage approximately 1,800 condominium units
across all four of our resorts. Additionally, our recent acquisition of Grand
Teton added 385 lodge rooms, 263 cabins, and extensive camping facilities.
Additionally, we own and operate the Keystone Conference Center, which is
the largest convention center in the Colorado Rocky Mountains. With meeting
facilities totaling 32,500 square feet and capable of accommodating groups of
up to 1,800, the Keystone Conference Center draws groups throughout the year
and is typically sold-out during the non-ski season.
Ski and Snowboard School. We operate the world's largest ski and
snowboard school operation with over 2,000 instructors across the four ski
resorts. We estimate that it has one of the highest guest participation rates
in the industry. The success of the ski and snowboard school comes from:
. personalizing and enhancing the guest vacation experience,
. creating new teaching and learning systems (many of which we have
historically developed and sold to the Professional Ski Instructors
of America),
. introducing innovative teaching methods for children, including
separate children's centers, mountain-wide attractions and
educational programs like SKE-cology, themed entertainment and
teaching systems geared toward specific age groups, and
. continually creating new techniques to react to technological
advances in ski and snowboard equipment.
In addition, we have adopted a pay incentive program to reward
instructors based on guest satisfaction and repeat clientele. Future growth in
ski school revenue is expected to stem from significant growth in the sport of
snowboarding, for which we have qualified instructors, as well as teaching
opportunities resulting from the technological advances continuously taking
place in alpine skiing equipment.
Retail/Rental Operations. Prior to entering into the SSI Venture joint
venture, our retail division owned and operated all on-mountain locations and
selected base area locations. We operated approximately 40 retail and rental
outlets across our four resorts for the 1997-98 ski season. The on-mountain
retail locations offer ski accessories (i.e., hats, gloves, sunglasses,
goggles, handwarmers) and selected logo merchandise, all in locations which are
conveniently located for skiers. Off-mountain, we operated both ski and
snowboard equipment rental and full service retail locations. Among other
merchandise, our retail operations typically feature resort-related logo
merchandise and products of our sponsors. Our rental operations offer a wide
variety of ski and snowboard equipment for daily and weekly use.
On August 1, 1998, we entered into the SSI Venture joint venture with one
of the largest retailers of ski- and golf-related sporting goods in Colorado.
We contributed 36 of our 40 retail and rental locations in Vail, Breckenridge,
Keystone and Beaver Creek in exchange for a 51.9% interest in SSI Venture. Our
joint venture partners, Specialty Sports, Inc., contributed an additional 30
stores located in Denver, Boulder, Aspen, Telluride, Vail and Breckenridge. SSI
Venture currently owns and operates approximately 70 retail and rental
locations across Colorado. The owners and operators of Specialty Sports, Inc.,
the Gart family, have been operating in the sporting goods industry in Colorado
since 1929. Vail Resorts participates in the strategic and financial management
of the joint venture. We feel the new joint venture will greatly enhance our
guests' experience through increased focus on quality guest service and retail
product selection.
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Other Resort Operations
Adventure Ridge(TM) and Adventure Point(TM). Vail completed the first
ever mountaintop activities center, known as Adventure Ridge(TM), during the
1996-97 season. Adventure Ridge(TM) offers terrain parks and half-pipes for
skiers and snowboarders, as well as activities for non-skiers such as an ice-
skating rink, tubing runs, snow-biking, snowmobile tours, and four dining
operations. Consistent with our strategy to expand our offering of on-mountain
activities, and given the success of Adventure Ridge(TM) at Vail, we are
developing Adventure Point(TM) at Keystone, which currently features a tubing
hill and a variety of children's attractions. These non-traditional attractions
play a large role in the expansion of activities for our guests and create a
competitive advantage for our resorts.
Commercial Leasing Operations. We own significant base area restaurant,
retail and other commercial space. The strategy of our leasing operation is to
secure the commercial locations adjacent to our resorts for retail, restaurant
and entertainment venues and then to carefully select the appropriate tenant
mix for these locations to provide a high quality and diverse selection of
retailers and restauranteurs. Our total leasable commercial space is currently
over 240,000 square feet. For the 1998-99 ski season, approximately 30% of our
commercial space will be used for retail space, 38% for restaurant operations,
and the remaining 32% will be leased for office space and other uses.
Licensing and Sponsorship. An important part of our business strategy is
to leverage our brand name by entering into sponsorship relationships and
strategic alliances with world-class business partners, building our logo and
licensing business and gaining national and international exposure by hosting
special events. Our leading industry position, coupled with the demographics of
our customer base makes us an attractive partner. Our sponsors include America
West, American Airlines, Atlas Snowshoes, Avis Rent-A-Car, Bailey's Irish
Cream, Bolle America, Chevrolet, Coca-Cola, Coors Brewing Company, Compaq
Computers, Continental Airlines, Delta Air Lines, Evian, FILA, Hertz, Kendall-
Jackson, MCI WorldCom, Microsoft, Northwest Airlines, Pepsi-Cola, Sprint
Communications, TAG Heuer, THOR.LO, United Airlines and Yahoo!. Examples of the
types of relationships we have with our partners include Chevy Trucks, which
provides us with mountain vehicles and national marketing exposure, and Pepsi-
Cola, which, among other things, provides substantial marketing benefits. Our
sponsorship arrangements typically have three to five year terms and provide
benefits in the form of cash payments, expense reductions, capital improvements
and/or marketing exposure. We have licensed the use of our trademarks to over
one hundred companies for a variety of products such as apparel and sunglasses.
While terms of each license agreement vary, such agreements generally are for a
two year term and provide for the payment by the licensee of quarterly royalty
payments ranging from 6% to 8% of the gross wholesale price of the licensed
goods.
Private Membership Clubs. We are also active in the creation and
management of private membership clubs, which allows us to provide high-end
services and amenities to our upper-income guests, as well as evening dining
options and other services and activities to our overall guest population. Our
current clubs include (1) the Beaver Creek Club, which offers members luncheon
privileges at Beano's Cabin (which is open to the general public for dinner)
and certain golf, tennis and skiing amenities, (2) Game Creek Club, which
offers members luncheon privileges and is open to the general public for dinner
and (3) the Passport Clubhouse at Golden Peak, which provides members with a
reserved parking space, concierge services, a private dining facility and
locker and club facilities at the base of Vail Mountain. In addition,
construction is currently underway on the Arrowhead Alpine Club and the
Bachelor Gulch Club. We have pre-sold a significant number of memberships for
both of these clubs.
Promotions and Special Events. Our four resorts are frequently the sites
of special events and promotions. In addition to hosting annual World Cup
alpine skiing and World Cup mountain biking events, Vail Mountain and Beaver
Creek Mountain hosted the 1997 World Cup Skiing Finals and the 1999 World
Alpine Ski Championships. Vail previously hosted the World Championships in
1989 and is the first North American host site to have been selected by the
World Cup governing body twice. These events give us
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significant international exposure. Television viewership for the 1999 World
Alpine Ski Championships was estimated to have been in excess of 500 million
viewers worldwide.
Brokerage. Our real estate brokerage operations are conducted through a
joint venture in which we have a 50% interest. The joint venture was created in
June 1994 to facilitate the merger of our brokerage operations, Vail Associates
Real Estate, Inc., with the brokerage operations of Slifer, Smith & Frampton,
which combined the two largest brokerage operations in the Vail Valley. The
joint venture has a large share of both first-time developer sales and resales
throughout the Vail Valley, creating both a significant source of profitability
and a valuable source of information in planning and marketing our real estate
projects. In addition to profit distributions from the joint venture, we will
directly receive certain override payments on all brokerage revenue from sales
of our own property. Brokerage activities at Keystone are conducted by the
Keystone JV.
Other Revenue Sources. In addition to the revenue sources listed above,
we provide security and other village services to the Beaver Creek, Bachelor
Gulch and Arrowhead Villages. We also derive revenue during the non-ski season
by offering guests a variety of activities and services, including (1) golf and
tennis, including the recently acquired Jackson Hole Golf and Tennis Club, (2)
gondola and chair-lift rides for mountain-biking and sight-seeing, (3) on-
mountain and base area bike rentals, (4) on-mountain lunch operations, (5)
wedding and group functions at mountain and village restaurants, (6) white
water rafting and (7) horseback riding.
Marketing and Sales
The primary objectives of our marketing efforts include (1) building
demand during both peak and non-peak periods, (2) increasing overall sales
through targeted promotional programs in national and international markets,
and (3) continuing to increase the recognition and goodwill associated with the
Company's brand names and trademarks.
Our primary marketing method is direct print media advertising in ski
industry publications such as SKI and Mountain Sports and Living (f/k/a Snow
Country) and lifestyle publications such as Conde Nast Traveler and Bon
Appetit, whose readership reflects the demographic profile of our clientele.
Additionally we market directly to many of our guests through our website which
provides information regarding our guest services and amenities, live video of
on-mountain conditions and comprehensive on-line reservation capability. Our
website receives over 2 million visits annually. (Nothing contained on the
website shall be deemed to be incorporated herein.)
We are also very active in a number of promotional programs such as
discount programs offered through local retailers designed to attract day
skiers from local population centers, and loyalty programs which allow guests
to build points for lift ticket usage and participation in other related
activities, throughout each of our four ski resorts. In an effort to target
destination guests, a newspaper and radio advertising campaign is used in
markets which have direct air service to the Vail/Eagle Airport.
In addition to advertisements directed at the vacation guest, an
important part of our marketing activities also focus on attracting ski groups,
corporate meetings and convention business.
Real Estate
We benefit from our extensive holdings of real property at our resorts
throughout Summit and Eagle Counties and from the activities of VRDC, a wholly
owned subsidiary. VRDC manages our real estate operations, including the
planning, oversight, marketing, infrastructure improvement and development of
Vail Resorts' real property holdings. In addition to the substantial cash flow
generated from real estate sales, these development activities benefit the
Company's resort operations through (1) the creation of additional resort
lodging which is available to our guests, (2) the ability to control the
architectural theming of our resorts, (3) the creation of unique facilities and
venues (primarily restaurant and retail operations) which provide us with
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the opportunity to create new sources of recurring revenue and (4) the
expansion of our property management and brokerage operations, which are the
preferred providers of these services for all developments on our land.
In order to facilitate the development and sale of our real estate
holdings, VRDC also invests in mountain improvements, such as ski lifts,
snowmaking equipment and trail construction. While these mountain improvements
enhance the value of the real estate held for sale (for example, by providing
ski-in/ski-out accessibility), they also benefit resort operations. In most
cases, VRDC seeks to minimize our exposure to development risks and maximize
the long-term value of our real property holdings by selling land to third
party developers for cash payments prior to the commencement of construction,
while retaining approval of the development plans as well as an interest in the
developer's profit. We also typically retain the option to purchase, any
retail/commercial space created in a development. We are able to secure these
benefits from third-party developers because of the high property values and
strong demand associated with property in close proximity to our mountain
resort facilities.
VRDC's principal activities include (1) the sale of single family
homesites to individual purchasers, (2) the sale of certain land parcels to
third-party developers for condominium, townhome, cluster home, lodge and mixed
use developments, (3) the zoning, planning and marketing of new resort
communities (such as Beaver Creek, Bachelor Gulch Village and Arrowhead), (4)
arranging for the construction of the necessary roads, utilities and mountain
infrastructure for new resort communities, (5) the development of certain
mixed-use condominium projects which are integral to resort operations (such as
properties located at a main base facility) and (6) the purchase of selected
strategic land parcels, which we believe can augment our existing land holdings
or resort operations.
Our current development activities are focused on (1) the completion of
three of our resort communities, Beaver Creek, Bachelor Gulch Village and
Arrowhead, (2) preparing for the redevelopment of the Lionshead base area and
adjacent land holdings located within the town of Vail, (3) preparing for the
development of our real estate holdings in the Town of Breckenridge, (4)
participation with our joint venture partner in the development of our base
area land holdings at Keystone, and (5) the planning of our significant real
estate holdings in and around Avon and at the entrance to Beaver Creek.
Beaver Creek
Beaver Creek, which opened in 1980, has emerged as one of the world's
preeminent resort communities. Beaver Creek Village offers a wide array of
shopping, dining, lodging and entertainment options in addition to being the
primary skiing access point to Beaver Creek Mountain.
The Beaver Creek Village core is substantially complete, and our
remaining land holdings in Beaver Creek Resort consist of zoned multi-family
sites (requiring limited additional infrastructure expenditures) expected to
contain approximately 200 multi-family residences located at the entrances to
Beaver Creek Resort and 30 townhome units at the base of Beaver Creek Mountain.
We expect to sell these remaining land holdings over the next five years.
Bachelor Gulch Village
The Bachelor Gulch Village development, which will be the newest village
on Beaver Creek Mountain, is comprised of 1,410 acres of company-owned land
located in a valley between Arrowhead and Beaver Creek. A private residential
resort community zoned for 672 residential units, Bachelor Gulch Village is an
intimate mountain village architecturally modeled after the grand lodges of the
U.S. National Parks. It consists of private, upscale real estate enclaves, and
most of the homesites have ski-in/ski-out access. The village is a skiing
gateway to Beaver Creek Mountain, and plans incorporate approximately 68,000
square feet of retail, restaurant and commercial space.
Infrastructure development at Bachelor Gulch Village commenced in 1994
and was substantially completed in 1998. Through April 30, 1999, we have sold
104 single-family and 52 multi-family homesites,
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respectively. Our current unsold inventory in Bachelor Gulch Village consists
of 11 cluster homesites and development parcels zoned for 474 condominium,
timeshare and lodge units. We expect to complete the sale of substantially all
of these parcels over the next five years.
Arrowhead
Arrowhead, known as "Vail's Private Address," is comprised of over 1,500
acres of company-owned land and is recognized for its country club approach to
residential and resort amenities. Home of the Country Club of the Rockies, a
private golf club designed by Jack Nicklaus, Arrowhead is already a well-
established private resort consisting of 500 residential units and features
amenities such as swimming, clay tennis courts, hiking, mountain biking and
private fly-fishing on the Eagle River, and privacy gates that assure
controlled access 24 hours a day. Arrowhead contains the westernmost skiing
access point to Beaver Creek Mountain.
Through April 30, 1999, we have sold 26 single-family lots and 188 multi-
family units. Our current development activities are focused on the development
of Arrowhead Village, consisting of a 207 unit staged development centered
around a private alpine club. The current unsold inventory in Arrowhead Village
includes land zoned for 26 single-family homesites, 25 cluster homesites, four
duplex homesites and 50 multi-family units.
Lionshead
We are currently planning the redevelopment of our owned property in
Lionshead, together with related properties owned by third parties. Current
plans contemplate luxury hotel rooms, a significant number of condominiums and
timeshare units, significant additions to restaurant and retail space, an
employee housing complex and an office facility (intended to be used for Vail
Mountain's administrative and operations functions). The redevelopment of
Lionshead will require certain approvals from, and a cooperative partnership
with, the Town of Vail. There can be no assurance that we will receive such
approvals or cooperation, although we have recently received approval from the
Town of Vail on zoning entitlements.
Keystone
In 1994, over 500 acres of developable land at Keystone was contributed
to the Keystone JV. A master development plan has been approved which
contemplates continued development over the next 20 years. The plan calls for
the creation of six separate neighborhoods, each featuring distinctive
amenities and architecture based on the area's mining, ranching and railroad
history. At full buildout, there will be an estimated 4,600 residential homes
and lodging units and 382,000 square feet of commercial space as well as more
than 300 acres of open space at Keystone. A network of pedestrian trails and a
shuttle bus system are planned to link the neighborhoods and amenities.
As residential and commercial projects are completed, we have a priority
right to receive payments of up to $22.6 million for land contributed to the
Keystone JV, of which we have received payments of $2.2 million. An additional
$6.8 million is currently due. We also receive approximately 40% to 50% of the
profits generated by the Keystone JV and will have the opportunity to lease
commercial space created by the Keystone JV. The Keystone JV is involved in a
wide range of real estate development activities, including the planning,
infrastructure improvement, construction and marketing of all real property
improvements on its land. The Keystone JV seeks to minimize its exposure to
development and construction risks by pre-selling a significant portion of the
residential and lodging units prior to the commencement of construction of a
project and by individually financing each project through a secured
construction loan and equity investment.
As of April 30, 1999, the Keystone JV had constructed and sold 451
condominium and townhome units and 57 single-family homesites. Additionally,
there are 92 condominium and townhome units currently under construction and
scheduled for completion in 1999 of which 66 units have already been sold.
Commercial space developed through April 1999 includes 84,000 square feet
completed and an additional 32,000 square feet scheduled for completion in
1999. During the next five years, the Keystone JV expects to develop more than
700 new residential and lodging units and 124,000 square feet of commercial
space. In addition, Keystone's second championship golf course is currently
under construction with an opening planned for Summer 2000.
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Breckenridge
We own approximately 270 acres of development land at one of the primary
base portals to Breckenridge plus 30 acres of development land near the center
of the Town of Breckenridge. VRDC is engaged in development planning for a new
base village, which is currently envisioned to include approximately 850
residential units, restaurant and retail space, a conference facility, and
other recreational amenities. Residential offerings will include ski-in/ski-out
single family homesites, multi-family condominium units, and townhouse units.
Avon
We own and are currently formulating plans for the development of two key
commercial sites in the Town of Avon. Avon is located at the entrance to Beaver
Creek Mountain and serves as a lodging base for resort guests. Our plans
currently include the construction of two mixed-use complexes which incorporate
lodging, dining, commercial space and a parking facility. The Town of Avon runs
a free shuttle bus service that transports guests throughout the town and up to
Beaver Creek Village, thus making the town an attractive and convenient source
for lodging and dining options. We expect to complete development of these
sites over the next five years.
Red Sky Ranch
We are in the planning stages for the Red Sky Ranch residential golf
resort development on a 700-acre parcel of land we own located approximately 10
miles west of Beaver Creek. Although this land is proximate to our Vail and
Beaver Creek resorts, it sits at a substantially lower elevation and has a
relatively moderate year-round climate, allowing for a longer golf season. We
anticipate the opening of this resort development in Summer 2003.
Grand Teton
Our recent purchase of the Grand Teton Lodge Company included 30 acres of
developable land adjacent to the Jackson Hole Golf and Tennis Club, which is
suitable for residential real estate development. We are currently reviewing
possible development plans for this parcel.
Employees
We currently employ approximately 6,200 year-round and 6,000 seasonal
employees. Approximately 90 of the seasonal employees are unionized. The
acquisition of Grand Teton adds approximately 40 year-round and 1,000 seasonal
employees. We consider our employee relations to be good.
Regulation and Legislation
We have been granted the right to use federal land as the site for ski
lifts and trails and related activities, under the terms of the permits with
the Forest Service. The Forest Service has the right to review and approve the
location, design and construction of improvements in the permit area and many
operational matters. While virtually all of the skiable terrain on Vail
Mountain, Breckenridge, and Keystone is located on Forest Service land, a
significant portion of the skiable terrain on Beaver Creek Mountain, primarily
in the Bachelor Gulch and Arrowhead Mountain areas, is located on Company-owned
land.
We have received approval from the Forest Service for infrastructure
development of bowl skiing terrain in Category III which is located within the
current Vail Mountain permit area. Certain opponents of the Category III
expansion filed a lawsuit against the Forest Service seeking to overturn this
approval and enjoin the project, and we intervened as an additional defendant
in the lawsuit. The federal district court denied the opponents' request for an
injunction, entered judgment for defendants, and dismissed the case. The
opponents' subsequent request for an injunction pending appeal was denied
without prejudice to the ultimate determination of their appeal. Their appeal
was briefed and argued on an expedited basis. In July 1999 the opponents of
Category III expansion renewed their request to enjoin the Category III
expansion, which was again denied. Subsequently, the federal court of appeals
affirmed the federal district court's decision to dismiss the case.
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In late July 1999, the U.S. Army Corps of Engineers alleged that certain
construction we have undertaken as part of the Category III expansion involved
discharges of fill material into wetlands in violation of the Clean Water Act.
The Corps did not specify the size of the alleged impact, but our own initial
review indicates that it involved approximately one-half acre. Subsequently,
three organizations and one individual collectively notified us and the federal
agencies that if the alleged violations are not remedied within 60 days, they
intend to file a citizen enforcement action under the Act. Under the Clean
Water Act, unauthorized discharges of fill may be resolved through the issuance
of an after-the-fact permit by the Corps of Engineers. They can also give rise
to administrative, civil and criminal enforcement actions seeking monetary
penalties and injunctive relief, including removal of the unauthorized fill. As
of this date, the United States Environmental Protection Agency, the lead
enforcement agency in this matter, has not informed us how it intends to
proceed.
We also received the approval of the Forest Service to develop a
chairlift, other skier facilities and associated skiing terrain on Peak 7 and a
teaching chairlift, two new ski trails and additional snowmaking on Peak 9, all
located at the Breckenridge. As part of that process, certain federal agencies
expressed concern about the analysis of potential future development on private
land that the Company owns below Peak 7. In response to an administrative
appeal of the Forest Service approval decision by certain individuals and
groups, the Regional Forester upheld the approval of these projects in November
1998. We have subsequently advised the Forest Service that we will postpone the
Peak 7 improvements, which will allow the Town of Breckenridge time to review a
development plan for the private land in question. Based upon the Town's
actions, the Forest Service will consider whether to conduct further
environmental review of the Peak 7 improvements. We have applied to the U.S.
Army Corps of Engineers for a wetlands permit for the Peak 7 improvements, but
the Corps of Engineers has not yet issued a final decision on this application.
We have also sought approval from the Forest Service and other agencies
to develop chairlifts, associated skiing terrain, and snowmaking in Jones
Gulch, which is located within the current Keystone permit area. The Forest
Service has advised us that this development will be the subject of an
environmental impact statement, and work on this statement is currently
underway. Other agencies will conduct related reviews. The initial issues
include the potential effect of the expansion on wildlife and wetlands, and it
is possible that the future resolution of these issues could affect whether, in
what form, and under what conditions the project is approved. In December 1998,
the Corps of Engineers notified Keystone that it had preliminarily determined
that the wetlands permit for Keystone's snowmaking diversion limits such
diversions to 550 acre-feet annually. We disagree that the permit limits
diversions, and discussions with the Corps of Engineers are ongoing. We were
authorized to divert additional water to meet our snowmaking needs during 1998
and we believe that we will be authorized by the Corps of Engineers to continue
to divert sufficient water to meet our snowmaking needs during 1999 and
subsequent years.
Our resort operations require permits and approvals from certain federal,
state, and local authorities, in addition to the Forest Service and Corps of
Engineers approvals discussed above. 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 to us, or that material permits, licenses, or approvals will
not be terminated, non-renewed or renewed on terms or interpreted in ways that
are materially less favorable to us. Although we believe that we will be
successful in implementing our development plans and operations, no assurance
can be given that any particular permits and approvals will be obtained or
upheld on judicial review.
The permits originally granted by the Forest Service were (1) Term
Special Use Permits granted for 30-year terms, but which may be terminated upon
30 days written notice by the Forest Service if it determines that the public
interest requires such termination, and (2) Special Use Permits that are
terminable at will by the Forest Service. In November 1986, a new law was
enacted providing that Term Special Use Permits and Special Use Permits may be
combined into a unified single Term Special Use Permit that can be issued for
up to 40 years. Vail Mountain operates under a unified permit for the use of
12,950 acres that expires October 31, 2031. Breckenridge operates under a Term
Special Use Permit for the use of 3,156 acres that expires on December 31,
2029. Keystone operates under a Term Special Use Permit for the use of 5,571
acres that expires
49
<PAGE>
on December 31, 2032. The Beaver Creek property is covered by a Term Special
Use Permit covering 80 acres and a Special Use Permit covering the remaining
2,695 acres, both expiring in 2006. We have exercised our statutory right to
convert our dual permits for the Beaver Creek Mountain Resort into a unified
permit for the maximum period of 40 years and we are currently in the process
of negotiating the final terms of the unified permit. The Forest Service can
terminate most of these permits if it determines that termination is required
in the public interest. In addition, a large part of the Beaver Creek property
under permit is terminable at will. However, to our knowledge, no recreational
Special Use Permit or Term Special Use Permit for any major ski resort then in
operation has ever been terminated by the Forest Service over the opposition of
the permitee.
For use of our permits, we pay a fee to the Forest Service. Under
recently enacted legislation, retroactively effective to fiscal 1996, we pay a
fee to the Forest Service ranging from 1.5% to 4.25% of sales occurring on
Forest Service land. However, through fiscal 1998, we must pay the greater of
(1) the fee due under the new legislation or (2) the fees actually paid for
fiscal 1995 that were calculated under the former fee calculation method.
Included in the calculation are sales from, among other things, lift tickets,
ski school lessons, food and beverages, rental equipment and retail merchandise
sales.
Legal Proceedings
The athletic nature of our ski operations subjects us to litigation in
the ordinary course of business, including claims for personal injury and
wrongful death. We are currently defending 12 such lawsuits, all of which are
covered by extensive liability insurance subject to applicable self-insured
retentions. We are defending eight of such lawsuits under the Colorado Ski
Safety Act (the "Act"), a comprehensive assumption-of-risk statute. The Act
delineates the responsibilities of both ski resort operators and skiers. As
long as the ski resort operator complies with the Act's mandates, which consist
of markings in relation to ski lifts and man made obstructions, signage in
relation to closed areas and ski trails and their difficulty, designation of
the ski resort boundaries, closed trails and "danger areas" and flagging and
lighting certain maintenance equipment such as snowmobiles, the operator is
presumed to be not negligent in accidents involving injury to one of its
guests. The Act further provides that a skier injured through one of the
"inherent dangers and risks of skiing," which include weather and snow
conditions and collisions with manmade and natural objects and other skiers, is
barred from suing the mountain resort. Consequently, if we are successful in
asserting that a claim brought against us is covered by the Act, we will face
no liability for such claim (although there may be other claims not covered by
the Act that arise out of the same incident).
Other than the matters discussed in the preceding paragraphs and other
matters with respect to which we believe we have no material liability or as to
which we are adequately insured, we are not currently a defendant in any
material litigation and there are no material legal proceedings pending against
us or to which any of our property is subject and, to the knowledge of
management, no such proceedings have been threatened against us.
50
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth information with respect to the directors
and executive officers of Vail Resorts.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Adam M. Aron............ 44 Chairman of the Board of Directors and Chief Executive Officer
of the Company
Frank J. Biondi, Jr..... 54 Director
Leon D. Black........... 47 Director
Craig M. Cogut.......... 45 Director
Stephen C. Hilbert...... 53 Director
Robert A. Katz.......... 32 Director
Thomas H. Lee........... 55 Director
William L. Mack......... 59 Director
Joe R. Micheletto....... 62 Director
Antony P. Ressler....... 38 Director
Marc J. Rowan........... 36 Director
John J. Ryan III........ 71 Director
John F. Sorte........... 51 Director
Bruce H. Spector........ 56 Director
William P. Stiritz...... 64 Director
James S. Tisch.......... 46 Director
Andrew P. Daly.......... 53 President and Director of the Company
James P. Donohue........ 58 Senior Vice President and Chief Financial Officer of the Company
John McD. Garnsey....... 49 Senior Vice President and Chief Operating Officer for Beaver Creek
James S. Mandel......... 48 Senior Vice President, Vail Resorts Development Company
Paul A. Testwuide....... 58 Senior Vice President of Resort Projects for Vail
James P. Thompson....... 55 President, Vail Resorts Development Company
Martha Dugan Rehm....... 48 Senior Vice President, General Counsel and Secretary of the Company
Bruce Mainzer........... 46 Senior Vice President of Marketing and Sales for the Company
John W. Rutter.......... 47 Senior Vice President and Chief Operating Officer for Keystone
William A. Jensen....... 46 Senior Vice President and Chief Operating Officer for Vail and
Acting Chief Operating Officer for Breckenridge
Porter Wharton III...... 49 Senior Vice President of Public Affairs
</TABLE>
Pursuant to the Restated Certificate of Incorporation and Restated Bylaws
of Vail Resorts, the Board is divided into two classes of Directors, denoted as
Class 1 and Class 2, each serving one-year terms. Class 1 directors are elected
by a majority vote of the holders of the Class A Common Stock and Class 2
directors are elected by a majority vote of the holders of the Common Stock.
The Class 1 directors are Messrs. Black, Cogut, Daly, Katz, Mack, Ressler,
Rowan, Ryan and Spector, and the Class 2 directors are Messrs. Aron, Biondi,
Hilbert, Lee, Micheletto, Sorte, Stiritz and Tisch.
Adam M. Aron was appointed the Chairman of the Board and Chief Executive
Officer of the Company in July 1996. Prior to joining the Company, Mr. Aron
served as President and Chief Executive Officer of Norwegian Cruise Line Ltd.
from July 1993 until July 1996. From November 1990 until July 1993, Mr. Aron
served as Senior Vice President of Marketing for United Airlines. From 1987 to
1990, Mr. Aron served as Senior Vice President of Marketing for the Hyatt
Hotels Corporation. Mr. Aron is also a director of Sunterra Corporation,
Florsheim Group, Inc., and Crestline Capital Corporation.
Frank J. Biondi, Jr. was appointed a director of the Company in July
1996. Mr. Biondi is Chairman of Biondi Reiss Capital Management. Mr. Biondi
previously served as Chairman and Chief Executive Officer of Universal Studios
Inc. from April 1996 through November 1998. Mr. Biondi served as President and
Chief
51
<PAGE>
Executive Officer of Viacom, Inc. from July 1987 to January 1996. He has also
held executive positions with The Coca-Cola Company, Home Box Office Inc. and
Time Inc. Mr. Biondi currently is a director of Leake and Watts Services, The
Museum of Television and Radio, The Bank of New York and MiningCo.com, Inc.
Leon D. Black was appointed a director of the Company in October 1992.
Mr. Black is one of the founding principals of Apollo Advisors, L.P. ("Apollo
Advisors"), which was established in August 1990, and which, together with an
affiliate, acts as managing general partner of Apollo Investment Fund, L.P.
("Apollo Fund"), AIF II, L.P. and Apollo Investment Fund III, L.P., private
securities investment funds, of Apollo Real Estate Advisors, L.P. ("AREA")
which, together with an affiliate, acts as managing general partner of the
Apollo real estate investment funds and of Lion Advisors, L.P. ("Lion
Advisors"), which acts as financial advisor to and representative for certain
institutional investors with respect to securities investments. Mr. Black is
also a director of Converse, Inc., Samsonite Corporation and Telemundo Group,
Inc. Mr. Black is Mr. Ressler's brother-in-law.
Craig M. Cogut was appointed a director of the Company in October 1992.
Mr. Cogut is currently a senior principal of Pegasus Investors, L.P., which
acts as a managing general partner of private securities investment funds.
Prior thereto he was one of the founding principals of Apollo Advisors and of
Lion Advisors.
Stephen C. Hilbert was appointed a director of the Company in December
1995. Mr. Hilbert founded Conseco, Inc. in 1979 and serves as its Chairman,
President and Chief Executive Officer. Conseco, Inc. is a financial services
holding company based in Carmel, Indiana, which owns and operates life
insurance companies and provides investment management, administrative and
other fee-based services. Mr. Hilbert serves as a director of the Indiana State
University Foundation and the Indianapolis Convention and Visitor's
Association. He also serves on the Board of Trustees of both the Indianapolis
Parks Foundation and the U.S. Ski Team Foundation, as a Trustee of the Central
Indiana Council on Aging Foundation, and as a director of both the Indianapolis
Zoo and the St. Vincent Hospital Foundation.
Robert A. Katz was appointed a director of the Company in June 1996. Mr.
Katz is a principal of Apollo Advisors and Lion Advisors, with which he has
been associated since 1990. Mr. Katz is also a director of MTL, Inc., Aris
Industries, Inc. and Alliance Imaging, Inc.
Thomas H. Lee was appointed a director of the Company in January 1993.
Mr. Lee founded the Thomas H. Lee Company in 1974 and since that time has
served as its President. The Thomas H. Lee Company and the funds which it
advises invest in friendly leveraged acquisitions and recapitalizations. From
1966 through 1974, Mr. Lee was with First National Bank of Boston where he
directed the bank's high technology lending group from 1968 to 1974 and became
a Vice President in 1973. Prior to 1966, Mr. Lee was a Securities Analyst in
the institutional research department of L.F. Rothschild in New York. Mr. Lee
serves as a director of Atlantic Holding Corporation, Finlay Enterprises, Inc.,
First Security Services Corporation, Livent Inc. and Miller Import Corporation.
William L. Mack was appointed a director of the Company in January 1993.
Since 1963, Mr. Mack has been the President and Managing Partner of The Mack
Organization, an owner and developer of and investor in office and industrial
buildings and other commercial properties principally in the New York/New
Jersey metropolitan area as well as throughout the United States. Mr. Mack is a
founding principal of AREA. He has been Director of the Urban Development
Corporation for the State of New York since 1983. Mr. Mack is Chairman Emeritus
and Trustee of the Long Island Jewish Medical Center. Mr. Mack also serves as a
director of Bear Stearns Companies, Inc., the Mack-Cali Realty Corp. and
Metropolis Realty Trust, Inc.
Joe R. Micheletto was appointed a director of the Company in February
1997. Mr. Micheletto has been Chief Executive Officer and President of Ralcorp
Holdings, Inc. ("Ralcorp") since September 1996 and was Co-Chief Executive
Officer and Chief Financial Officer of Ralcorp from January 1994 to September
1996. From 1985 to 1994, he served as Vice President and Controller of Ralston
Purina Company. From 1991 to 1997, Mr. Micheletto served as Chief Executive
Officer of Ralston Resorts, Inc. Mr. Micheletto also serves as a director of
Agribrands International, Inc. and Ralcorp.
52
<PAGE>
Antony P. Ressler was appointed a director of the Company in October
1992. Mr. Ressler is one of the founding principals of Apollo Advisors, L.P.,
Lion Advisors, L.P. and Ares Management, L.P. Mr. Ressler is also a director of
Allied Waste Industries, Inc., Berlitz International, Inc., Prandium, Inc.,
United International Holdings, Inc. and United Pan-Europe Communications N.V.
Mr. Ressler is Mr. Black's brother-in-law.
Marc J. Rowan was appointed a director of the Company in October 1992.
Mr. Rowan is one of the founding principals of Apollo Advisors and of Lion
Advisors. Mr. Rowan is also a director of NRT, Inc. and Samsonite Corporation.
John J. Ryan III was appointed a director of the Company in January 1995.
Mr. Ryan has been a financial advisor based in Geneva, Switzerland since 1972.
Mr. Ryan is a director of Artemis S.A. and Financiere Pinault S.A., private
holding companies in Paris, France, and he is also a director of Converse, Inc.
He is a Director of Evergreen Resources Inc., a publicly held oil and gas
exploration company. Mr. Ryan is President of J.J. Ryan & Sons, a closely held
textile trading corporation in Greenville, South Carolina.
John F. Sorte was appointed a director of the Company in January 1993.
Mr. Sorte has been President of New Street Advisors L.P., a merchant bank, and
of New Street Investments L.P., its broker-dealer affiliate, since he co-
founded both companies in March 1994. From 1992 to March 1994, Mr. Sorte was
President and Chief Executive Officer of New Street Capital Corporation, a
merchant banking firm. Mr. Sorte is also a director of WestPoint Stevens Inc.
and serves as Chairman of the Board of Directors of The New York Media Group,
Inc.
Bruce H. Spector was appointed a director of the Company in January 1995.
Mr. Spector has been a consultant to Apollo Advisors since 1992 and since 1995
has been a principal in Apollo Advisors. Prior to October 1992, Mr. Spector, a
reorganization attorney, was a member of the Los Angeles law firm of Stutman
Triester and Glatt. Mr. Spector is also a director of Telemundo Station Group,
Inc., United International Holdings, Inc. and Metropolis Realty Trust, Inc.
William P. Stiritz was appointed a director of the Company in February
1997. Mr. Stiritz became Chairman, CEO and President of Agribrands
International, Inc. in April 1998. Since 1982 he has served as Chairman of
Ralston Purina Company. Mr. Stiritz also serves separately as Chairman of
Ralcorp. Mr. Stiritz also is a director of the following companies: Angelica
Corporation, Ball Corporation, May Department Stores Company and Reinsurance
Group of America, Incorporated.
James S. Tisch was appointed a director of the Company in January 1995.
Mr. Tisch is President and Chief Operating Officer of Loews Corporation. He has
been with Loews Corporation since 1977. Prior to 1977, Mr. Tisch was with CNA
Financial Corporation. Mr. Tisch is Chairman of the Board of Directors of
Diamond Off-shore Drilling, Inc. and is a member of the Board of Directors of
CNA Financial Corporation and Loews Corporation. He is also Chairman of the
Federation Employment and Guidance Service, a member of the Board of Directors
of UJA-Federation of New York, and a Trustee of The Mount Sinai Medical Center.
Andrew P. Daly was appointed a director of the Company in June 1996. Mr.
Daly became President of Vail Associates, Inc. ("Vail Associates") in 1992 and
President of the Company in 1996. He joined Vail Associates in 1989 as
Executive Vice President and President of Beaver Creek Resort Company. Prior to
joining Vail Associates, Mr. Daly owned and was President of Lake Eldora Ski
Corporation, which operated the Eldora Mountain Resort ski area. From 1982 to
1987, Mr. Daly was Chief Executive Officer of Copper Mountain Resort, where he
held several positions from 1972 to 1982.
James P. Donohue became Senior Vice President and Chief Financial Officer
of the Company in October 1996. From 1991 to October 1996, Mr. Donohue served
as Senior Vice President and Chief Financial Officer of Fibreboard Corporation,
a manufacturer and distributor of building products, which also owned and
operated three ski resorts located in California. Prior to 1991, Mr. Donohue
was an Executive Vice President of Continental Illinois Bank., N.A.
John McD. Garnsey joined the Company in May 1999 as Senior Vice President
and Chief Operating Officer for Beaver Creek. Mr. Garnsey served as President
of the Vail Valley Foundation from 1991 through April 1999 and as Vice
President from 1983 to 1991. Mr. Garnsey is also a director of the Vail Valley
53
<PAGE>
Foundation, Bravo!Colorado, the Vilar Center for the Performing Arts at Beaver
Creek, Vail Valley Tourism and Convention Bureau and Ski Club Vail. In
addition, Mr. Garnsey was President of the Organizing Committee for the 1999
World Alpine Ski Championships.
William A. Jensen joined Breckenridge as Senior Vice President and Chief
Operating Officer in May 1997 and was appointed Chief Operating Officer for
Vail in May 1999. He remains Acting Chief Operating Officer for Breckenridge
until a successor is appointed. Mr. Jensen was President of the Fibreboard
Resort Group from 1991 to 1996. He was Vice President of Sunday River Ski
Resort from 1989 to 1991 and from 1983 to 1989 Mr. Jensen was Vice President of
Kassbohrer of North America, a grooming vehicle manufacturer.
Bruce W. Mainzer joined the Company in June 1997 as Senior Vice President
of Marketing and was named Senior Vice President of Marketing and Sales in
August 1998. From 1996 to 1997, Mr. Mainzer was the Executive Vice President of
Marketing and Planning at Carnival Airlines in Miami. From 1994 to 1996,
Mr. Mainzer was Vice President of Marketing for Norwegian Cruise Line Ltd. From
1985 to 1994, Mr. Mainzer served in a variety of key marketing positions at
United Airlines including heading the departments of yield management, market
research and brand marketing.
James S. Mandel has served as Senior Vice President of Commercial
Development for Vail Resorts Development Company since April 1, 1999. From 1994
to December 1998, Mr. Mandel was the Senior Vice President and General Counsel,
and served as Secretary of the Company from 1995 to 1998. From January 1999
through March 1999, Mr. Mandel practiced law and was an advisor to and part-
time employee of the Company. From 1978 until joining the Company, Mr. Mandel
was a partner with Brownstein Hyatt Farber & Strickland, P.C., a Denver law
firm, and specialized in real estate development and corporate finance.
Martha Dugan Rehm became Senior Vice President, General Counsel and
Secretary of the Company in May 1999. Prior to joining the Company, Ms. Rehm
served since mid 1998 as Vice President and General Counsel of Corporate
Express. Inc., a supplier of office products and computer supplies to
corporations. Prior to 1998, she was a partner for many years with Holme
Roberts & Owen, LLP, a Denver-based law firm, where her practice included
general corporate law emphasizing corporate finance and securities
transactions. Ms. Rehm began practicing law with that firm in 1983.
John W. Rutter was appointed Senior Vice President and Chief Operating
Officer of Keystone Resort in May 1997. From 1991 to 1997, he was Executive
Vice President of Ski Operations for Ralston Resorts, Inc. From 1980 to 1991,
he was Vice President of Ski Operations for Keystone Resort and Arapahoe Basin.
Mr. Rutter also serves on the Management Committee of Keystone/Intrawest LLC.
Mr. Rutter is Chairman of the Board of Directors of the National Ski Areas
Association and serves on its Public Lands Committee.
Paul A. Testwuide became Senior Vice President of Resort Projects for
Vail in May 1999. Prior to accepting this position, Mr. Testwuide was Chief
Operating Officer for Vail and Beaver Creek in 1998 and from 1992 to 1998, he
was Vice President of Mountain Operations for Vail Associates. Mr. Testwuide
was Managing Director of Vail Mountain Operations from 1989 to 1992, Director
of Mountain Operations from 1976 to 1989 and served as the Director of Ski
Patrol from 1971 to 1976. Mr. Testwuide has held various management positions
in mountain operations since joining Vail Associates in 1963.
James P. Thompson joined Vail Resorts Development Company in 1993 in
connection with Vail Associates' acquisition of the Arrowhead at Vail
development. He joined Arrowhead at Vail in 1989, and served as its President.
Prior to joining Arrowhead at Vail, Mr. Thompson served as Vice President of
Moore and Company in Denver for 14 years, leading their land acquisitions,
syndications and development activities.
Porter Wharton III joined the Company in January 1999 as Senior Vice
President of Public Affairs. From 1985 to January 1999, Mr. Wharton was
Chairman and Chief Executive Officer of The Wharton Group, a Denver-based
national government relations and issues management consulting firm. He also
has served as a consultant to the Company since 1995.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
the Common Stock and Class A Common Stock as of April 30, 1999 by (i) each
person or entity who owns of record or beneficially five percent or more of any
class of capital stock, (ii) each director and named executive officer of the
Company and (iii) all directors and executive officers as a group. To our
knowledge, each of such stockholders has sole voting and investment power as to
the shares shown unless otherwise noted.
<TABLE>
<CAPTION>
Common Stock Class A Common Percent of
Beneficially Owned Stock Beneficially Owned Class A Common
------------------- ---------------------------- Stock and
Name of Percent Percent Common Stock
Beneficial Owner Shares of Class Shares of Class Beneficially Owned
---------------- ---------- -------- -------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Apollo Ski Partners,
L.P. (1)(2)............ -- -- 7,439,542 99.9% 21.5%
Ralcorp Holdings, Inc.
(3).................... 7,554,406 27.9% -- -- 21.9%
Ronald Baron (4)........ 11,906,200 44.0% -- -- 34.5%
Capital Research and
Management Company
(5).................... 1,519,600 5.6% -- -- 4.4%
All directors and
officers as a group, 14
persons (6)............ 868,654 3.2% -- -- 2.5%
</TABLE>
- --------
(1) Apollo Ski Partners was organized principally for the purpose of holding
Common Stock and Class A Common Stock of the Company. The general partner
of Apollo Ski Partners is Apollo Fund, a Delaware limited partnership and
a private securities investment fund. The managing general partner of
Apollo Fund is Apollo Advisors, a Delaware limited partnership, the
general partner of which is Apollo Capital Management, Inc. ("Apollo
Capital"), a Delaware corporation. Mr. Black, a director of the Company,
is a director of Apollo Capital. All officers, directors and shareholders
of Apollo Capital, including Messrs. Black, Katz, Mack, Ressler, Rowan and
Spector (directors of the Company), disclaim any beneficial ownership of
the Common Stock and Class A Common Stock of the Company owned by Apollo
Ski Partners. The address for Apollo Ski Partners is 2 Manhattanville
Road, Purchase, NY 10577.
(2) The Class A Common Stock is convertible into Common Stock (i) at the
option of the holder, (ii) automatically, upon transfer to a non-affiliate
of such holder and (iii) automatically, if less than 5,000,000 shares (as
such number shall be adjusted by reason of any stock split,
reclassification or other similar transaction) of Class A Common Stock are
outstanding.
(3) As reported by Ralcorp on Schedule 13D filed with the Securities and
Exchange Commission on February 13, 1997. The address for Ralcorp is 800
Market Street, Suite 1600, St. Louis, MO 63101.
(4) As reported by Ronald Baron and related entities on Schedule 13D/A filed
with the Securities and Exchange Commission on May 21, 1999. The address
for Ronald Baron is 767 Fifth Avenue, 24th Floor, New York, NY 10153.
(5) As reported by Capital Research and Management Company on Schedule 13G
filed with the Securities and Exchange Commission on February 11, 1999.
The address for Capital Research and Management Company is 333 South Hope
Street, Los Angeles, CA 90071.
(6) With the exception of 26,000 shares of Common Stock owned by Mr. Ressler,
no directors or officers of the Company directly own shares of Common
Stock (other than options to purchase Common Stock granted to officers of
the Company and as otherwise described in this prospectus).
55
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
Revolving Credit Facility
Our revolving credit facility (as amended, the "Credit Facility") with
our subsidiary, The Vail Corporation, as borrower, NationsBank, N.A., as agent
(the "Agent"), certain other financial institutions, as lenders, and
NationsBanc Montgomery Securities LLC provides for debt financing up to an
aggregate principal amount of $450.0 million. The proceeds of the loans made
under the Credit Facility may be used to fund our working capital needs,
capital expenditures and other general corporate purposes, including the
issuance of letters of credit.
Borrowings under the Credit Facility bear interest annually at the
borrower's option at the rate of (i) LIBOR (the London interbank offered rate
for a given interest period) plus a margin (ranging from .75% to 2.25%) or (ii)
the Base Rate (defined as the higher of the Federal Funds Rate, as published by
the Federal Reserve Bank of New York, plus 0.5%, or the Agent's prime lending
rate) plus a margin up to .75%. In addition, the borrower must pay a fee on the
face amount of each letter of credit outstanding at a rate ranging from .75% to
2.25%. The borrower must also pay a quarterly unused commitment fee ranging
from .20% to .50%. The interest margins and fees described in this paragraph
fluctuate based upon the ratio of Funded Debt (as defined) to Resort EBITDA (as
defined). The Credit Facility matures on December 19, 2002.
The Vail Corporation's obligations under the Credit Facility are
unsecured and are guaranteed by us and certain of our subsidiaries.
The Credit Facility contains various covenants that limit, among other
things, subject to certain exceptions, indebtedness, liens, transactions with
affiliates, restricted payments and investments, mergers, consolidations and
dissolutions, sales of assets, dividends and distributions and certain other
business activities. The Credit Facility also contains certain financial
covenants, including a Funded Debt to Resort EBITDA, Senior Debt to Resort
EBITDA, Minimum Fixed Charge Coverage Ratio and Interest Coverage Ratio (each
as described in the Credit Facility).
At April 30, 1999, the borrower had various letters of credit outstanding
in the aggregate amount of $64.9 million, including letters of credit in the
amount of $47.2 million to secure metro district bonds issued in connection
with infrastructure and other costs at Bachelor Gulch Village. See Note 11 to
our Consolidated Financial Statements.
Industrial Revenue Bonds
Pursuant to an indenture (the "IRB Indenture") dated as of April 1, 1998,
between Eagle County, Colorado, as issuer (the "IRB Issuer"), and U.S. Bank
National Association, as trustee (the "IRB Trustee"), $41.2 million aggregate
principal amount of industrial revenue bonds (the "IRBs") were issued for the
purpose of providing funds to The Vail Corporation d/b/a Vail Associates, Inc.
("VAI") to refinance certain existing industrial revenue bonds. Pursuant to a
financing agreement (the "IRB Agreement") dated as of April 1, 1998, among the
IRB Issuer and VAI, the IRB Issuer loaned to VAI the proceeds of the issuance
of the IRBs and VAI agreed to make payments in the aggregate amount, bearing
interest at rates and payable at times, corresponding to the principal amount
of, interest rates on and due dates under the IRBs. The obligations of VAI
under the IRB Indenture, the IRB Agreement and the IRBs are secured by certain
multi-party agreements between VAI, the IRB Trustee and the U.S. Forest Service
(the "Permit Agreements") relating to the Vail Mountain and Beaver Creek
Mountain Forest Service Permits (the "Permits"). The Permit Agreements provide
that the U.S. Forest Service will cooperate with the IRB Trustee in obtaining a
new holder of the Permits (acceptable to the U.S. Forest Service in its sole
discretion) in the event of a default by VAI with respect to its obligations
under the IRBs. However, the Permit Agreements expressly provide that no
security interest is created in or collateral assignment made with respect to
the Permits.
56
<PAGE>
The IRBs mature, subject to prior redemption, on August 1, 2019. The IRBs
bear interest at the rate of 6.95% per annum, with interest payable semi-
annually on February 1 and August 1. The IRBs are subject to re-demption at the
option of VAI, at any time and from time to time on or after August 1, 2008,
and are subject to mandatory redemption if interest payments on the IRBs lose
their tax exempt status. Furthermore, in the event that VAI or one of its
affiliates incurs additional indebtedness with (1) senior or superior rights to
the Permits or (2) equivalent rights with respect to the Permits above an
aggregate principal amount of $250,000,000 (including the unpaid principal
amount of the IRBs) the IRBs will bear an interest rate of 7.45% per annum or,
under certain limited circumstances, may be subject to mandatory redemption.
We also have indebtedness in connection with $22.0 million of outstanding
industrial revenue bonds which we assumed in connection with our acquisition of
Keystone and Breckenridge. These IRBs consist of two series of refunding bonds
which were originally issued to finance the cost of sports and recreational
facilities at Keystone. The Series 1990 Sports Facilities Refunding Revenue
Bonds have an aggregate outstanding principal amount of $19.0 million. The
principal matures in installments in 2006 and 2008. These bonds bear interest
at a rate of 7.75% for bonds maturing in 2006 and 7.875% for bonds maturing in
2008. The Series 1991 Sports Facilities Refunding Revenue Bonds have an
aggregate outstanding principal amount of $3 million and bear interest at
7.125% for bonds maturing in 2002 and 7.375% for bonds maturing in 2010.
SSI Venture Credit Facility
On December 30, 1998, SSI Venture established a credit facility that
provides debt financing up to an aggregate principal amount of $20 million. The
SSI Venture credit facility consists of (i) a $10 million Tranche A Revolving
Credit Facility and (ii) a $10 million Tranche B Term Loan Facility. The SSI
Venture credit facility matures on the earlier of December 31, 2003 or the
termination date of the Credit Facility discussed above. The Vail Corporation
guarantees the SSI Venture credit facility. Minimum amortization under the
Tranche B Term Loan Facility is $625,000, $1.38 million, $1.75 million, $2.25
million, $2.63 million, and $1.38 million during the fiscal years 1999, 2000,
2001, 2002, 2003, and 2004, respectively. The SSI Venture credit facility bears
interest annually at the rates prescribed above for the Credit Facility. SSI
Venture also pays a quarterly unused commitment fee at the same rates as the
unused commitment fee for the Credit Facility.
57
<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
Exchange Offer Registration Statement. We issued the outstanding Notes on
May 11, 1999. The Initial Purchasers have advised us that they subsequently
resold the outstanding Notes to "qualified institutional buyers" in reliance on
Rule 144A under the Securities Act and to certain persons in offshore
transactions in reliance on Regulation S under the Securities Act. As a
condition to the offering of the outstanding Notes, we entered into a
registration rights agreement dated May 11, 1999, pursuant to which we agreed
for the benefit of all holders of the outstanding Notes, at our own expense, to
do the following:
(1) to file the registration statement of which this prospectus is
a part with the SEC on or prior to 60 days after the closing date of the
outstanding Notes,
(2) to use our best commericially reasonable efforts to cause the
registration statement to be declared effective under the Securities Act
on or prior to 180 days after the closing date of the outstanding Notes,
(3) to use our commercially reasonable best efforts to keep the
registration statement effective until the closing of the exchange
offer, and
(4) to use our commerically reasonable best efforts to issue, on
or prior to 60 business days after the date on which the exchange offer
registration statement was declared effective.
We also agreed that promptly upon the registration statement being
declared effective, we would offer to all holders of the outstanding Notes an
opportunity to exchange the outstanding Notes for the exchange notes. Further,
we agreed to keep the exchange offer open for acceptance for not less than the
minimum period required under applicable Federal and state securities laws. For
each outstanding Note validly tendered pursuant to the exchange offer and not
withdrawn, the holder of the outstanding Note will receive an exchange note
having a principal amount equal to that of the tendered outstanding Note.
Interest on each exchange note will accrue from the last date on which interest
was paid on the tendered outstanding Note in exchange therefor or, if no
interest was paid on such outstanding Note, from the issue date.
The following is a summary of the registration rights agreement. It does
not purport to be complete and it does not contain all of the information you
might find useful. For further information you should read the registration
rights agreement, a copy of which has been filed as an exhibit to the
registration statement. The exchange offer is intended to satisfy certain of
our obligations under the registration rights agreement.
Transferability. We issued the outstanding notes on May 11, 1999 in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws. Accordingly, the outstanding notes may not be
offered or sold in the United States unless registered or pursuant to an
applicable exemption under the Securities Act and applicable state securities
laws. Based on no-action letters issued by the staff of the Commission with
respect to similar transactions, we believe that the exchange notes issued
pursuant to the exchange offer in exchange for outstanding Notes may be offered
for resale, resold and otherwise transferred by holders of notes who are not
our affiliates without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that:
(1) any exchange notes to be received by the holder were acquired
in the ordinary course of the holder's business;
(2) at the time of the commencement of the exchange offer the
holder has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities
Act) of the exchange notes; and
(3) the holder is not an "affiliate" of the Company, as defined in
Rule 405 under the Securities Act, or, if it is an affiliate, that it
will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
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However, we have not sought a no-action letter with respect to the
exchange offer and we cannot assure you that the staff of the Commission would
make a similar determination with respect to the exchange offer. Any holder who
tenders his outstanding Notes in the exchange offer with any intention of
participating in a distribution of exchange notes (1) cannot rely on the
interpretation by the staff of the Commission, (2) will not be able to validly
tender outstanding Notes in the exchange offer and (3) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transactions.
In addition, each broker-dealer that receives exchange 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 exchange notes. The letter of
transmittal accompanying this prospectus states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
acting in the capacity of an "underwriter" within the meaning of Section 2(11)
of the Securities Act. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
exchange notes received in exchange for outstanding notes where the outstanding
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. Pursuant to the registration rights
agreement, we agreed to make this prospectus available to any such broker-
dealer for use in connection with any such resale.
Shelf Registration Statement. We will, at our cost, (a) as soon as
practicable, file with the SEC a shelf registration statement covering resales
of the outstanding Notes, but in any event, on or prior to the 60th day after
the date we become obligated to file the shelf registration statement, (b) use
our commercially reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act on or prior to the
180th day after the date we become obligated to file the shelf registration
statement and (c) use our commercially reasonable best efforts to keep the
shelf registration statement continually effective, supplemented and amended to
the extent necessary to ensure that it is available for resales of Notes by the
Holders of Transfer Restricted Securities for a period of at least two years
following the effective date of such shelf registration statement (or shorter
period that will terminate when all the Notes covered by such shelf
registration statement have been sold pursuant to such shelf registration
statement or are otherwise no longer Transfer Restricted Securities), if:
(1) we are not required to file the exchange offer registration
statement or not permitted to consummate the exchange offer because the
exchange offer is not permitted by applicable law or Commission policy
or
(2) any Initial Purchaser that is a Holder of Transfer Restricted
Securities notifies us prior to the 20th day following consummation of
the exchange offer that (a) it is prohibited by law or Commission policy
from participating in the exchange offer or (b) it may not resell the
exchange notes acquired by it in the exchange offer to the public
without delivering a prospectus and the prospectus contained in the
exchange offer registration statement is not appropriate or available
for such resales.
We will, in the event of the filing of the shelf registration statement,
provide to each holder of the outstanding Notes copies of the prospectus which
is a part of the shelf registration statement, notify each such holder when the
shelf registration statement for the outstanding Notes has become effective and
take certain other action as are required to permit unrestricted resales of the
outstanding Notes. A Holder of outstanding Notes who sells such outstanding
Notes pursuant to the shelf registration statement generally will (1) be
required to be named as a selling security holder in the related prospectus,
(2) be required to deliver the prospectus to purchasers, (3) be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales and (4) be bound by the provisions of the
registration rights agreement which are applicable to the Holder (including
certain indemnification obligations). In addition, each Holder of the
outstanding Notes will be required to deliver information to be used in
connection with the shelf registration
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statement and to provide comments on the shelf registration statement within
the time periods set forth in the registration rights agreement in order to
have their outstanding Notes included in the shelf registration statement and
to benefit from the provisions regarding the increase in interest rate set
forth in the following paragraph.
Terms of the Exchange Offer
Upon satisfaction or waiver of all the conditions of the exchange offer,
we will accept, any and all outstanding Notes properly tendered and not
withdrawn prior to the expiration date and will issue the exchange notes
promptly after acceptance of the outstanding Notes. See "--Conditions to the
Exchange Offer" and "Procedures for Tendering Private Notes." We will issue
$1,000 principal amount of exchange notes in exchange for each $1,000 principal
amount of outstanding Notes accepted in the exchange offer. As of the date of
this prospectus, $200,000,000 aggregate principal amount of the outstanding
Notes are outstanding. Holders may tender some or all of their outstanding
Notes pursuant to the exchange offer. However, outstanding Notes may be
tendered only in integral multiples of $1,000.
The exchange notes are identical to the outstanding Notes except for the
elimination of certain transfer restrictions, registration rights, restrictions
on holding notes in certificated form and liquidated damages provisions. The
outstanding Notes will evidence the same debt as the outstanding Notes and will
be issued pursuant to, and entitled to the benefits of, the indenture pursuant
to which the outstanding Notes were issued and will be deemed one issue of
notes, together with the outstanding Notes.
This prospectus, together with the letter of transmittal, is being sent
to all registered holders and to others believed to have beneficial interests
in the outstanding Notes. Holders of outstanding Notes do not have any
appraisal or dissenters' rights under the indenture in connection with the
exchange offer. We intend to conduct the exchange offer in accordance with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations of the Commission promulgated thereunder.
For purposes of the exchange offer, we will be deemed to have accepted
validly tendered private notes when, and as if we have given oral or written
notice thereof to the exchange agent. The exchange agent will act as our agent
for the purpose of distributing the exchange notes from us to the tendering
holders. If we do not accept any tendered outstanding Notes because of an
invalid tender, the occurrence of certain other events set forth in this
prospectus or otherwise, we will return the unaccepted outstanding Notes,
without expense, to the tendering holder thereof as promptly as practicable
after the expiration date.
Holders who tender private notes in the exchange offer will not be
required to pay brokerage commissions or fees or, except as set forth below
under "--Transfer Taxes," transfer taxes with respect to the exchange of
outstanding Notes pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 1999, unless we, in our sole discretion, extend 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, we
will notify the exchange agent by oral or written notice and each registered
holder by means of press release or other public announcement of any extension,
in each case, prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date. We reserve the right, in our
sole discretion, (1) to delay accepting any outstanding Notes, (2) to extend
the exchange offer, (3) to terminate the exchange offer if the conditions set
forth below under "--Conditions" shall not have been satisfied, or (4) to amend
the terms of the exchange offer in any manner. We will notify the exchange
agent of any delay, extension, termination or amendment by oral or written
notice. We will additionally notify each registered holder of any amendment. We
will give to the exchange agent written confirmation of any oral notice.
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Exchange Date
As soon as practicable after the close of the exchange offer we will
accept for exchange all outstanding Notes properly tendered and not validly
withdrawn prior to 5:00 p.m., New York City time, on the expiration date in
accordance with the terms of this prospectus and the letters of transmittal.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the exchange offer, and subject
to our obligations under the registration rights agreement, we (1) shall not be
required to accept any outstanding Notes for exchange, (2) shall not be
required to issue exchange notes in exchange for any outstanding Notes and (3)
may terminate or amend the exchange offer, if at any time before the acceptance
of such exchange notes for exchange, any of the following events shall occur:
(1)any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or
otherwise materially impair our ability to proceed with the exchange
offer;
(2) any change, or any development involving a prospective change,
in our business or financial affairs or any of our subsidiaries has
occurred which, in our sole judgment, might materially impair our
ability to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us;
(3) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in our sole judgment, might materially impair our
ability to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us;
(4) any governmental approval has not been obtained, which
approval we shall, in our sole discretion, deem necessary for the
consummation of the exchange offer as contemplated hereby; or
(5) the exchange offer will violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in our sole
discretion. Our failure at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and such right shall be deemed
an ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any outstanding Notes
tendered, and no exchange notes will be issued in exchange for any such
outstanding Notes, if at such time any stop order shall be threatened by the
Commission or be in effect with respect to the registration statement of which
this prospectus is a part or the qualification of the indenture under the Trust
Indenture Act of 1939, as amended.
The exchange offer is not conditioned on any minimum aggregate principal
amount of outstanding Notes being tendered for exchange.
Consequences of Failure to Exchange
Any outstanding Notes not tendered pursuant to the exchange offer will
remain outstanding and continue to accrue interest. The outstanding Notes will
remain "restricted securities" within the meaning of the Securities Act.
Accordingly, prior to the date that is one year after the later of the issue
date and the last date on which we or any of our affiliates was the owner of
the outstanding Notes, the outstanding Notes may be
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resold only (1) to us, (2) to a person whom the seller reasonably believes is
a "qualified institutional buyer" purchasing for its own account or for the
account of another "qualified institutional buyer" in compliance with the
resale limitations of Rule 144A, (3) to an Institutional Accredited Investor
that, prior to the transfer, furnishes to the trustee a written certification
containing certain representations and agreements relating to the restrictions
on transfer of the Notes (the form of this letter can be obtained from the
trustee), (4) pursuant to the limitations on resale provided by Rule 144 under
the Securities Act, (5) pursuant to the resale provisions of Rule 904 of
Regulation S under the Securities Act, (6) pursuant to an effective
registration statement under the Securities Act, or (7) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to compliance with applicable state
securities laws. As a result, the liquidity of the market for non-tendered
outstanding Notes could be adversely affected upon completion of the exchange
offer. The foregoing restrictions on resale will no longer apply after the
first anniversary of the issue date of the outstanding Note or the purchase of
the outstanding Notes from us or an affiliate.
Fees and Expenses
We will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone
by our officers and employees.
Expenses incurred in connection with the exchange offer will be paid by
us. Such expenses include, among others, the fees and expenses of the trustee
and the exchange agent, accounting and legal fees, printing costs and other
miscellaneous fees and expenses.
Accounting Treatment
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize the expenses of the
exchange offer over the term of the exchange notes.
Procedures for Tendering Outstanding Notes
The tender of outstanding Notes pursuant to any of the procedures set
forth in this prospectus and in the letter of transmittal will constitute a
binding agreement between the tendering holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal. The tender of outstanding Notes will constitute an
agreement to deliver good and marketable title to all tendered outstanding
Notes prior to the expiration date free and clear of all liens, charges,
claims, encumbrances, interests and restrictions of any kind.
Except as provided in "--Guaranteed Delivery Procedures," unless the
outstanding Notes being tendered are deposited by you with the exchange agent
prior to the expiration date and are accompanied by a properly completed and
duly executed letter of transmittal, we may, at our option, reject the tender.
Issuance of exchange notes will be made only against deposit of tendered
outstanding notes and delivery of all other required documents.
Notwithstanding the foregoing, DTC participants tendering through its
Automated Tender Offer Program ("ATOP") will be deemed to have made valid
delivery where the exchange agent receives an agent's message prior to the
expiration date.
Accordingly, to properly tender outstanding notes, the following
procedures must be followed:
Notes held through a Custodian. Each beneficial owner holding
outstanding Notes through a DTC participant must instruct the DTC participant
to cause its outstanding Notes to be tendered in accordance with the
procedures set forth in this prospectus.
Notes held through DTC. Pursuant to an authorization given by DTC to the
DTC participants, each DTC participant holding outstanding Notes through DTC
must (1) electronically transmit its acceptance
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through ATOP, and DTC will then edit and verify the acceptance, execute a book-
entry delivery to the exchange agent's account at DTC and send an agent's
message to the exchange agent for its acceptance, or (2) comply with the
guaranteed delivery procedures set forth below and in a notice of guaranteed
delivery. See "--Guaranteed Delivery Procedures--Notes held through DTC."
The exchange agent will (promptly after the date of this prospectus)
establish accounts at DTC for purposes of the exchange offer with respect to
outstanding notes held through DTC. Any financial institution that is a DTC
participant may make book-entry delivery of interests in outstanding Notes into
the exchange agent's account through ATOP. However, although delivery of
interests in the outstanding Notes may be effected through book-entry transfer
into the exchange agent's account through ATOP, an agent's message in
connection with such book-entry transfer, and any other required documents,
must be, in any case, transmitted to and received by the exchange agent at its
address set forth under "--Exchange Agent," or the guaranteed delivery
procedures set forth below must be complied with, in each case, prior to the
expiration date. Delivery of documents to DTC does not constitute delivery to
the exchange agent. The confirmation of a book-entry transfer into the exchange
agent's account at DTC as described above is referred to herein as a "Book-
Entry Confirmation."
The term "agent's message" means a message transmitted by DTC to, and
received by, the exchange agent and forming a part of the book-entry
confirmation, which states that DTC has received an express acknowledgement
from each DTC participant tendering through ATOP that such DTC participants
have received a letter of transmittal and agree to the bound by the terms of
the letter of transmittal and that we may enforce such agreement against such
DTC participants.
Cede & Co., as the holder of the global note, will tender a portion of
the global note equal to the aggregate principal amount due at the stated
maturity for which instructions to tender are given by DTC participants.
By tendering, each holder and each DTC participant will represent to us
that, among other things, (1) it is not our affiliate, (2) it is not a broker-
dealer tendering outstanding Notes acquired directly from us for its own
account, (3) the exchange notes acquired pursuant to the exchange offer are
being obtained in the ordinary course of business of such holder and (4) it has
no understandings with any person to participate in the exchange offer for the
purpose of distributing the exchange notes.
We will not accept any alternative, conditional, irregular or contingent
tenders (unless waived by us). By executing a letter of transmittal or
transmitting an acceptance though ATOP, as the case may be, each tendering
holder waives any right to receive any notice of the acceptance for purchase of
its outstanding Notes.
We will resolve all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of tendered outstanding Notes, and
such determination will be final and binding. We reserve the absolute right to
reject any or all tenders that are not in proper form or the acceptance of
which may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any condition to the exchange offer and any
irregularities or conditions of tender as to particular outstanding Notes. Our
interpretation of the terms and conditions of the exchange offer (including the
instructions in the letter of transmittal) will be final and binding. Unless
waived, any irregularities in connection with tenders must be cured within such
time as we shall determine. We, along with the exchange agent, shall be under
no duty to give notification of defects in such tenders and shall not incur
liabilities for failure to give such notification. Tenders of outstanding Notes
will not be deemed to have been made until such irregularities have been cured
or waived. Any outstanding notes received by the exchange agent that are not
properly tendered and as to which the irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
LETTERS OF TRANSMITTAL AND OUTSTANDING NOTES MUST BE SENT ONLY TO THE
EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES TO US
OR DTC.
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The method of delivery of outstanding Notes, letters of transmittal, any
required signature guaranties and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or letters of
transmittal and, except as otherwise provided in the applicable letter of
transmittal, delivery will be deemed made only when actually received by the
exchange agent. If delivery is by mail, it is suggested that the holder use
properly insured, registered mail with return receipt requested, and that the
mailing be made sufficiently in advance of the expiration date to permit
delivery to the exchange agent prior to the expiration date.
Guaranteed Delivery Procedures
Notes held through DTC. DTC participants holding outstanding Notes
through DTC who wish to cause their outstanding Notes to be tendered, but who
cannot transmit their acceptances through ATOP prior to the expiration date,
may cause a tender to be effected if:
(1) guaranteed delivery is made by or through a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act, including:
. a bank;
. a broker, dealer, municipal securities dealer, municipal
securities broker, government securities dealer or government
securities broker;
. a credit union;
. a national securities exchange, registered securities association
or clearing agency; or
. a savings institution that is a participant in a Securities
Transfer Association recognized program;
(2) prior to the expiration date, the exchange agent receives from
any of the above institutions a properly completed and duly executed
notice of guaranteed delivery (by mail, hand delivery, facsimile
transmission or overnight courier) substantially in the form provided
with this prospectus; and
(3) book-entry confirmation and an agent's message in connection
therewith are received by the exchange agent within three NYSE trading
days after the date of the execution of the notice of guaranteed
delivery.
Notes held by Holders. Holders who wish to tender their outstanding
Notes but (1) whose outstanding Notes are not immediately available and will
not be available for tendering prior to the expiration date, or (2) who cannot
deliver their outstanding Notes, the letter of transmittal, or any other
required documents to the exchange agent prior to the expiration date, may
effect a tender if:
. the tender is made by or through any of the above-listed
institutions;
. prior to the expiration date, the exchange agent receives from any
above-listed institution a properly completed and duly executed
notice of guaranteed delivery, whether by mail, hand delivery,
facsimile transmission or overnight courier, substantially in the
form provided with this prospectus; and
. a properly completed and executed letter of transmittal, as well
as the certificate(s) representing all tendered outstanding Notes
in proper form for transfer, and all other documents required by
the letter of transmittal, are received by the exchange agent
within three NYSE trading days after the date of the execution of
the notice of guaranteed delivery.
Withdrawal Rights
You may withdraw tenders of outstanding Notes, or any portion of your
outstanding Notes in integral multiples of $1,000 principal amount due at the
stated maturity, at any time prior to 5:00 p.m., New York City
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time, on the expiration date. Any outstanding Notes properly withdrawn will be
deemed to be not validly tendered for purposes of the exchange offer.
Notes held through DTC. DTC participants holding outstanding Notes who
have transmitted their acceptances through ATOP may, prior to 5:00 p.m., New
York City time, on the expiration date, withdraw the instruction given thereby
by delivering to the exchange agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal of such
instruction. Such notice of withdrawal must contain the name and number of the
DTC participant, the principal amount due at the stated maturity of outstanding
Notes to which such withdrawal related and the signature of the DTC
participant. Receipt of such written notice of withdrawal by the exchange agent
effectuates a withdrawal.
Notes held by Holders. Holders may withdraw their tender of outstanding
Notes, prior to 5:00 p.m., New York City time, on the expiration date, by
delivering to the exchange agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal. Any such
notice of withdrawal must (1) specify the name of the person who tendered the
outstanding notes to be withdrawn, (2) contain a description of the outstanding
Notes to be withdrawn and identify the certificate number or numbers shown on
the particular certificates evidencing such outstanding notes and the aggregate
principal amount due at the stated maturity represented by such outstanding
notes and (3) be signed by the holder of such outstanding Notes in the same
manner as the original signature on the letter of transmittal by which such
outstanding Notes were tendered (including any required signature guaranties),
or be accompanied by (x) documents of transfer in a form acceptable to us, in
our sole discretion and (y) a properly completed irrevocable proxy that
authorized such person to effect such revocation on behalf of such holder. If
the outstanding Notes to be withdrawn have been delivered or otherwise
identified to the exchange agent, a signed notice of withdrawal is effective
immediately upon written, telegraphic or facsimile notice of withdrawal even if
physical release is not yet effected.
All signatures on a notice of withdrawal must be guaranteed by a
recognized participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Program or the Stock Exchange
Medallion Program; provided, however, that signatures on the notice of
withdrawal need not be guaranteed if the outstanding Notes being withdrawn are
held for the account of any of the institutions listed above under "--
Guaranteed Delivery Procedures."
A withdrawal of an instruction or a withdrawal of a tender must be
executed by a DTC participant or a holder of outstanding Notes, as the case may
be, in the same manner as the person's name appears on its transmission through
ATOP or letter of transmittal, as the case may be, to which such withdrawal
relates. If a notice of withdrawal is signed by a trustee, partner, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person must
so indicate when signing and must submit with the revocation appropriate
evidence of authority to execute the notice of withdrawal. A DTC participant or
a holder may withdraw an instruction or a tender, as the case may be, only if
such withdrawal complies with the provisions of this prospectus.
A withdrawal of a tender of outstanding Notes by a DTC participant or a
holder, as the case may be, may be rescinded only by a new transmission of an
acceptance through ATOP or execution and delivery of a new letter of
transmittal, as the case may be, in accordance with the procedures described
herein.
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Exchange Agent
United States Trust Company of New York has been appointed as exchange
agent for the exchange offer. Questions, requests for assistance and requests
for additional copies of this prospectus or of the letter of transmittal should
be directed to the exchange agent addressed as follows:
By Registered or Certified Mail:
United States Trust Company of New York
as Exchange Agent
P.O. Box 843 Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
By Hand before 4:30 p.m.:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Lower Level Corporate Trust Window
By Hand after 4:30 p.m. or By Overnight Courier:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Facsimile: By Telephone:
(212) 780-0592 (212) 548-6565
Attention: Customer Service
The exchange agent also acts as trustee under the Indenture.
Transfer Taxes
Holders of outstanding Notes who tender their outstanding Notes for
exchange notes will not be obligated to pay any transfer taxes in connection
therewith, except that holders who instruct us to register exchange notes in
the name of, or request that outstanding Notes not tendered or not accepted in
the exchange offer be returned to, a person other than the registered tendering
holder will be responsible for the payment of any applicable transfer tax
thereon.
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DESCRIPTION OF NOTES
General
The outstanding Notes were and the exchange notes will be, issued
pursuant to an Indenture (the "Indenture"), dated as of May 11, 1999, among the
Company, as Issuer, The Vail Corporation, Vail Holdings, Inc. and each of the
other Guarantors, as guarantors, and United States Trust Company of New York,
as trustee (the "Trustee"). The terms of the exchange notes are identical in
all material respects to the outstanding Notes, except that the exchange notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting their transfer and will not contain certain provisions
providing for liquidated damages under certain circumstances described in the
Registration Rights Agreement, the provisions of which will terminate upon the
consummation of the exchange offer. The following summary of certain provisions
of the Indenture and the Notes does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of the
Indenture (including the definitions of certain terms therein and those terms
made a part thereof by the Trust Indenture Act of 1939, as amended) and the
Notes. Copies of the proposed form of Indenture and Registration Rights
Agreement can be requested by prospective investors from the Company at the
address and telephone number set forth under "Where You Can Find More
Information." The definitions of certain terms used in the following summary
are set forth below under "Certain Definitions." For purposes of this
"Description of Notes," the term "Company" refers only to Vail Resorts, Inc.
and not to any of its Subsidiaries and the term "Notes" refers to both the
outstanding Notes and the exchange notes.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Debt of the
Company. As of April 30, 1999, after giving pro forma effect to the Offering
and the application of the net proceeds therefrom, the Company and the
Guarantors would have had consolidated Senior Debt of approximately $89.9
million outstanding. The Indenture, subject to certain limitations, permits the
incurrence of additional Senior Debt in the future. As of the date of the
Indenture, substantially all of the Company's consolidated Subsidiaries were
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
The obligations of the Company under the Notes are guaranteed, jointly
and severally on a senior subordinated basis, by the Guarantors. The Subsidiary
Guarantee of each Guarantor will be subordinated in right of payment to all
existing and future Senior Debt of such Guarantor. See "--Subsidiary
Guarantees."
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $300.0 million (of
which $200.0 million is being issued in the Offering) and will mature on May
15, 2009. Interest on the Notes will accrue at the rate of 8 3/4% per annum and
will be payable semi-annually in arrears on May 15 and November 15 of each
year, commencing on November 15, 1999, to Holders of record on the immediately
preceding May 1 and November 1, respectively. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest
has been paid, from the date of original issuance. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months. Principal of and
premium, if any, interest and Liquidated Damages, if any, on the Notes will be
payable at the office or agency of the Company maintained for such purpose or,
at the option of the Company, payment of interest and Liquidated Damages may be
made by check mailed to the Holders of the Notes at their respective addresses
set forth in the register of Holders of Notes; provided that all payments of
principal, premium, if any, interest and Liquidated Damages, if any, with
respect to Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency will be the
office of the Trustee maintained for such purpose. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.
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Subordination
The payment (by set-off, redemption, repurchase or otherwise) of
principal of and premium, if any, interest and Liquidated Damages, if any, on
the Notes (including with respect to any repurchases of the Notes) is
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full in cash or, at the option of the holders of Senior Debt of the
Company, in Cash Equivalents, of all Obligations in respect of Senior Debt of
the Company, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution to creditors of the Company upon any liquidation,
dissolution or winding up of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary, an assignment for the benefit of
creditors or any marshalling of the Company's assets and liabilities, the
holders of Senior Debt of the Company are entitled to receive payment in full
in cash or, at the option of the holders of Senior Debt of the Company, in Cash
Equivalents, of all Obligations due or to become due in respect of such Senior
Debt (including interest after the commencement of any such proceeding, at the
rate specified in the applicable Senior Debt) before the Holders of Notes are
entitled to receive any payment of principal of, or premium, if any, interest
or Liquidated Damages, if any, on the Notes, and until all Obligations with
respect to Senior Debt of the Company are paid in full in cash or, at the
option of the holders of Senior Debt of the Company, in Cash Equivalents, any
distribution of any kind or character to which the Holders of Notes would be
entitled shall be made to the holders of Senior Debt of the Company (except
that Holders of Notes may receive Permitted Junior Securities and payments made
from the trust described under "--Legal Defeasance and Covenant Defeasance" or
"--Satisfaction and Discharge of Indenture").
The Company also shall not, directly or indirectly, (1) make, any payment
of principal of, or premium, if any, interest or Liquidated Damages, if any, on
the Notes (except in Permitted Junior Securities or from the trust described
under "--Legal Defeasance and Covenant Defeasance" or "--Satisfaction and
Discharge of Indenture," if no default of the kind referred to in clause (a)
below had occurred and was continuing, and no Payment Blockage Notice (as
defined below) was in effect, at the time amounts were deposited with the
Trustee as described therein) or (2) acquire any of the Notes for cash or
property or otherwise or make any other distribution with respect to the Notes
if
(a) any default occurs and is continuing in the payment when due, whether
at maturity, upon any redemption, by declaration or otherwise, of any principal
of, or premium, if any, or interest on, any Designated Senior Debt of the
Company or
(b) any other default occurs and is continuing with respect to Designated
Senior Debt of the Company that permits holders of the Designated Senior Debt
of the Company as to which such default relates to accelerate its maturity and
the Trustee receives a notice of such default (a "Payment Blockage Notice")
from the holders of such Designated Senior Debt of the Company.
Payments on the Notes may and shall be resumed (1) in the case of a
payment default, upon the date on which such default is cured or waived or
otherwise has ceased to exist and (2) in the case of a nonpayment default, upon
the earlier of the date on which such nonpayment default is cured or waived or
otherwise has ceased to exist or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt of the Company has been accelerated and such
acceleration remains in full force and effect. No new period of payment
blockage may be commenced unless and until 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice unless such nonpayment default shall have been waived
for a period of not less than 90 days. Each Holder by such Holder's acceptance
of a Note irrevocably agrees that if any payment or payments shall be made
pursuant to the Indenture and the amount or total amount of such payment or
payments exceeds the amount, if any, that such Holder would be entitled to
receive upon the proper application of the subordination provisions of the
Indenture, then such Holder will be obliged to pay over the amount of such
excess payment to the holders of Senior Debt of the Person that made
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such payment or payments or their representative or representatives, as
instructed in a written notice of such excess payment, within ten days of
receiving such notice.
The Indenture further requires that the Company promptly notify holders
of Senior Debt of the Company and the Guarantors if payment of the Notes is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. On a pro forma basis,
after giving effect to the Offering and the application of the net proceeds
therefrom, the principal amount of consolidated Senior Debt of the Company and
Guarantors outstanding at April 30, 1999 would have been approximately $89.9
million. The Indenture limits, through certain financial tests, the amount of
additional Indebtedness, including Senior Debt, that the Company and its
Restricted Subsidiaries can incur. See "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
"Designated Senior Debt" of any Person means (i) any Indebtedness of such
Person outstanding under the Credit Agreement and (ii) any other Senior Debt of
such Person, the principal amount of which is $25 million or more and that has
been designated by the Company as "Designated Senior Debt" of such Person.
"Permitted Junior Securities" means Equity Interests (other than
Disqualified Stock) in the Company or debt securities that are subordinated to
all Senior Debt of the issuer of such debt securities (and any debt securities
issued in exchange for Senior Debt of the issuer of such debt securities) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt.
"Senior Debt" of any Person means (i) the Obligations of such Person
under the Credit Agreement, including, without limitation, Hedging Obligations
and reimbursement obligations in respect of letters of credit and bankers
acceptances, and (ii) any other Indebtedness of such Person, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Debt of a
Person will not include (v) any obligation to, in respect of or imposed by any
environmental, landfill, waste management or other regulatory governmental
agency, statute, law or court order, (w) any liability for federal, state,
local or other taxes, (x) any Indebtedness of such Person to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred by such Person in violation of the Indenture
(except to the extent that the original holder thereof relied in good faith
after being provided with a copy of the Indenture upon an Officer's Certificate
of such Person to the effect that the incurrence of such Indebtedness did not
violate the Indenture).
Subsidiary Guarantees
The Company's payment obligations under the Notes are jointly and
severally guaranteed (the "Subsidiary Guarantees") by all of the Company's
consolidated Subsidiaries existing on the Closing Date, other than SSI Venture,
LLC and Vail Associates Investment, Inc. See Note 3 to "Selected Consolidated
Financial and Operating Data." The Subsidiary Guarantee of each Guarantor are
subordinated in right of payment to the same extent as the obligations of the
Company in respect of the Notes, as set forth in the Indenture, to the prior
payment in full in cash or, at the option of the holders of Senior Debt of such
Guarantor, in Cash Equivalents, of all Senior Debt of such Guarantor, which
would include any Guarantee issued by such Guarantor that constitutes Senior
Debt of such Guarantor, including Guarantees of Indebtedness under the Credit
Agreement. The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Restricted Subsidiary after the
Closing Date, or any Unrestricted Subsidiary shall cease to be an Unrestricted
Subsidiary and shall become a Restricted Subsidiary, then, unless such
Subsidiary is not required to guarantee and has not guaranteed the Company's
Obligations under the Credit Agreement and has not guaranteed any other
Indebtedness of the Company or any Restricted Subsidiary, such Subsidiary shall
become a Guarantor in accordance with the terms of the Indenture. A Subsidiary
shall, without limitation, be
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deemed to have guaranteed Indebtedness of another Person if such Subsidiary has
Indebtedness of the kind described in clause (ii) or clause (iii) of the
definition of the term "Indebtedness." The obligations of each Guarantor under
its Subsidiary Guarantee will be limited to the maximum amount that would not
result in the obligations of such Guarantor under its Subsidiary Guarantee
constituting a fraudulent conveyance under applicable law.
The Indenture provides that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
Person, whether or not affiliated with such Guarantor, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to another Person,
unless (1) the Person formed by or surviving such consolidation or merger (if
other than such Guarantor) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a Person organized and
existing under the laws of the United States of America, any state thereof, or
the District of Columbia and expressly assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes and the Indenture and
(2) immediately after giving effect to such transaction, no Default or Event of
Default exists. The provisions of clause (i) of the preceding sentence shall
not apply if the Person formed by or surviving the relevant consolidation or
merger or to which the relevant sale, assignment, transfer, lease, conveyance
or other disposition shall have been made is the Company, a Guarantor or a
Person that is not, after giving effect to such transaction, a Restricted
Subsidiary of the Company.
The Indenture provides that in the event of (1) a merger or consolidation
to which a Guarantor is a party, then the Person formed by or surviving such
merger or consolidation (if, after giving effect to such transaction, other
than the Company or a Restricted Subsidiary of the Company) shall be released
and discharged from the obligations of such Guarantor under its Subsidiary
Guarantee, (2) a sale or other disposition (whether by merger, consolidation or
otherwise) of all of the Equity Interests of a Guarantor at the time owned by
the Company and its Restricted Subsidiaries to any Person that, after giving
effect to such transaction, is neither the Company nor a Restricted Subsidiary
of the Company, or (3) the release and discharge of a Guarantor from all
obligations under Guarantees of (a) Obligations under the Credit Agreement and
(b) any other Indebtedness of the Company or any of its Restricted
Subsidiaries, then in each such case such Guarantor shall be released and
discharged from its obligations under its Subsidiary Guarantee; provided that,
in the case of each of clauses (1) and (2), (i) the relevant transaction is in
compliance with the Indenture, and (ii) the Person being released and
discharged shall have been released and discharged from all obligations it
might otherwise have under Guarantees of Indebtedness of the Company or any of
its Restricted Subsidiaries and, in the case of each of clauses (1), (2) and
(3), immediately after giving effect to such transaction, no Default or Event
of Default shall exist.
Optional Redemption
Except as described below, the Notes are not redeemable at the Company's
option prior to May 15, 2004. Thereafter, the Notes are subject to redemption
at any time at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on May 15 of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004................................... 104.375%
2005................................... 102.916%
2006................................... 101.458%
2007 and thereafter.................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to May 15, 2002,
the Company may on any one or more occasions redeem up to 35% of the aggregate
principal amount of Notes theretofore issued under the
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Indenture at a redemption price equal to 108.75% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net cash proceeds of one or more
Equity Offerings; provided that (1) at least 65% of the original aggregate
principal amount of Notes remain outstanding immediately following each such
redemption and (2) such redemption shall occur within 60 days of the closing of
any such Equity Offering.
In addition, upon the occurrence of a Change of Control (as defined
below) at any time prior to May 15, 2004, the Notes will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice given within 30 days following
such Change of Control, at the Make-Whole Price, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection
of Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
shall cease to accrue on Notes or portions of Notes called for redemption.
Mandatory Redemption
Except as set forth below under "--Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, unless notice of redemption
of the Notes in whole has been given pursuant to the provisions of the
Indenture described above under "Optional Redemption", the Company is obligated
to make an offer (a "Change of Control Offer") to each Holder of Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase (the "Change of Control
Payment"). Within 30 days following a Change of Control, the Company will mail
a notice to each Holder with a copy to the Trustee describing the transaction
or transactions that constitute the Change of Control and offering to
repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice. In addition, the
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions
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thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail or deliver to each Holder of Notes
so tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Company is not required to make a Change of Control Offer following a
Change of Control if a third party makes such a Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn pursuant to
such Change of Control Offer.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction. However, restrictions in the Indenture
described herein on the ability of the Company and its Restricted Subsidiaries
to incur additional Indebtedness, to grant Liens on their respective
properties, to make Restricted Payments and to make Asset Sales may also make
more difficult or discourage a takeover of the Company, whether favored or
opposed by the management of the Company. Consummation of any such transaction
in certain circumstances may require repurchase of the Notes, and there can be
no assurance that the Company or the acquiring party will have sufficient
financial resources to effect such repurchase. Such restrictions and the
restrictions on transactions with Affiliates may, in certain circumstances,
make more difficult or discourage any leveraged buyout of the Company or any of
its Subsidiaries by their management. While such restrictions cover a wide
variety of arrangements which have traditionally been used to effect highly
leveraged transactions, the Indenture may not afford the Holders of Notes
protection in all circumstances from the adverse aspects of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction.
The Credit Agreement prohibits the Company from repurchasing any Notes
without the prior written consent of lenders holding a majority of the
commitments under the Credit Agreement. Any other credit agreements or other
agreements governing indebtedness to which the Company becomes a party may
contain similar restrictions and provisions and may provide that certain change
of control events with respect to the Company would constitute events of
default thereunder. In the event a Change of Control occurs at a time when the
Company is prohibited from repurchasing Notes, the Company could seek the
consent of its lenders to the repurchase of Notes or could attempt to refinance
or repay the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from repurchasing Notes. In such case, the Company's failure to
repurchase tendered Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute a default under the Credit
Agreement. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the Holders of the Notes.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Company and its Restricted Subsidiaries taken as a
whole. Although there is case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to another Person or group may be
uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset
Sale unless (1) the Company (or such Restricted
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Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced by a Board
Resolution ) of the assets or Equity Interests issued or sold or otherwise
disposed of and (2) at least 75% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of (x) cash or Cash
Equivalents or (y) a controlling interest in another business or fixed or other
long-term assets, in each case, in a Similar Business; provided that the amount
of (a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or such Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any Guarantee thereof) that are assumed by
the transferee of any such assets or Equity Interests such that the Company or
such Restricted Subsidiary are released from further liability and (b) any
securities, notes or other obligations received by the Company or such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash within 90 days or are guaranteed (by means
of a letter of credit or otherwise) by an institution specified in the
definition of "Cash Equivalents" (to the extent of the cash received or the
obligations so guaranteed) shall be deemed to be cash or Cash Equivalents for
purposes of this provision, subject to application as provided in the following
paragraph.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company, at its option, may (1) apply such Net Proceeds to permanently
prepay, repay or reduce any Senior Debt of the Company (and to correspondingly
reduce commitments with respect thereto in the case of revolving borrowings) or
(2) apply such Net Proceeds to the acquisition of a controlling interest in
another business, the making of a capital expenditure or the acquisition of
other long-term assets, in each case, in a Similar Business, or determine to
retain such Net Proceeds to the extent such Net Proceeds constitute such a
controlling interest or long-term asset in a Similar Business. Pending the
final application of any such Net Proceeds, the Company may invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10 million,
the Company will be required to make an offer to all Holders of Notes (and
holders of other Indebtedness of the Company to the extent required by the
terms of such other Indebtedness) (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes (and such other Indebtedness) that does not
exceed the Excess Proceeds at an offer price in cash in an amount equal to 100%
of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase, in accordance with
the procedures set forth in the Indenture. To the extent that the aggregate
principal amount of Notes (and such other Indebtedness) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes (and such other Indebtedness) tendered exceeds the
amount of Excess Proceeds, the Notes (and such other Indebtedness) to be
purchased will be selected on a pro rata basis. Upon completion of an Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Asset
Sale Offer must be commenced within 60 days following the date on which the
aggregate amount of Excess Proceeds exceeds $10 million and remain open for at
least 30 and not more than 40 days (unless otherwise required by applicable
law). The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Asset Sale Offer.
The Credit Agreement prohibits the Company from repurchasing any Notes
without the prior written consent of lenders holding a majority of the
commitments under the Credit Agreement. Any other credit agreements or other
agreements governing indebtedness to which the Company becomes a party may
contain similar restrictions and provisions. In the event the Company is
required to make an Asset Sale Offer at a time when the Company is prohibited
from repurchasing Notes, the Company could seek the consent of its lenders to
the repurchase of Notes or could attempt to refinance or repay the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from repurchasing
Notes. In such case, the Company's failure to repurchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Credit Agreement. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to the
Holders of the Notes.
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Any other credit agreements or other agreements governing indebtedness to
which the Company becomes a party may require that the Company and its
Subsidiaries apply all proceeds from certain asset sales to repay in full
outstanding obligations thereunder prior to the application of such proceeds to
repurchase outstanding Notes.
Certain Covenants
Restricted Payments
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, (1) declare or pay any dividend or
make any other payment or distribution on account of the Company's Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving the Company) or to any direct or indirect
holders of the Company's Equity Interests in their capacity as such (other than
dividends or distributions (a) payable in Equity Interests (other than
Disqualified Stock) of the Company, (b) payable in Capital Stock or assets of
an Unrestricted Subsidiary of the Company or (c) payable to the Company or any
Restricted Subsidiary of the Company); (2) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company, or any Equity Interests of any of its Restricted Subsidiaries held by
any Affiliate of the Company (other than any such Equity Interests owned by the
Company or any Restricted Subsidiary of the Company, any Equity Interests then
being issued by the Company or a Restricted Subsidiary of the Company or any
Investment in a Person that, after giving effect to such Investment, is a
Restricted Subsidiary of the Company); (3) make any payment on or with respect
to, or purchase, redeem, repay, defease or otherwise acquire or retire for
value, any Indebtedness of the Company or any Guarantor that is subordinated in
right of payment to the Notes or any Guarantee thereof, except a regularly
scheduled payment of interest or principal or sinking fund payment (other than
the purchase or other acquisition of such subordinated Indebtedness made in
anticipation of satisfying any sinking fund payment due within one year from
the date of acquisition); or (4) make any Restricted Investment (all such
payments and other actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the
Consolidated Interest Coverage Ratio test set forth in the first
paragraph of the covenant described below under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments declared or made by the
Company and its Restricted Subsidiaries after the Closing Date
(without duplication and excluding Restricted Payments permitted
by clauses (2) and (3) of the following paragraph), is less than
the sum of
. 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after
the date of the Indenture to the end of the Company's
most recently ended fiscal quarter for which internal
financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit);
plus
. 100% of the aggregate net cash proceeds and the fair
market value of any assets or property (as determined in
good faith by the Board of Directors of the Company)
received by the Company from the issue or sale since the
Closing
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Date of Equity Interests of the Company (other than
Disqualified Stock), or of Disqualified Stock or debt
securities of the Company that have been converted into
such Equity Interests (other than Equity Interests or
Disqualified Stock or convertible debt securities sold to
a Subsidiary of the Company and other than Disqualified
Stock or convertible debt securities that have been
converted into Disqualified Stock); plus
. with respect to Restricted Investments made after the
Closing Date, the net reduction of such Restricted
Investments as a result of (x) any disposition of any
such Restricted Investments sold or otherwise liquidated
or repaid, to the extent of the net cash proceeds and the
fair market value of any assets or property (as
determined in good faith by the Board of Directors of the
Company) received, (y) dividends, repayment of loans or
advances or other transfers of assets to the Company or
any Restricted Subsidiary of the Company or (z) the
portion (proportionate to the Company's interest in the
equity of a Person) of the fair market value of the net
assets of an Unrestricted Subsidiary or other Person
immediately prior to the time such Unrestricted
Subsidiary or other Person is designated or becomes a
Restricted Subsidiary of the Company (but only to the
extent not included in the first subclause of this clause
(c)); provided that the sum of items (x), (y) and (z) of
this subclause shall not exceed, in the aggregate, the
aggregate amount of such Restricted Investments made
after the Closing Date.
The foregoing provisions will not prohibit (1) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture, (2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, Equity
Interests of the Company (other than any Disqualified Stock, except to the
extent that such Disqualified Stock is issued in exchange for other
Disqualified Stock or the net cash proceeds of such Disqualified Stock is used
to redeem, repurchase, retire or otherwise acquire other Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from the second clause of clause (c) of the preceding
paragraph; (3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness in exchange for, or out of the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; (4) the repurchase,
redemption or other acquisition or retirement for value of any Equity
Interests of the Company or any Restricted Subsidiary of the Company held by
any employees, officers or directors of the Company or any of its Restricted
Subsidiaries or, upon the death, disability or termination of employment of
such officers, directors and employees, their authorized representatives in an
aggregate amount not to exceed in any twelve month period, $2.0 million plus
the aggregate net cash proceeds from any issuance during such period of Equity
Interests by the Company to such employees, officers, directors, or
representatives plus the aggregate net cash proceeds from any payments on life
insurance policies in which the Company or its Restricted Subsidiaries is the
beneficiary with respect to such employees, officers or directors the proceeds
of which are used to repurchase, redeem or acquire Equity Interests of the
Company held by such employees, officers, directors or representative; (5) the
repurchase of Equity Interests of the Company deemed to occur upon the
exercise of stock options or similar arrangement if such Equity Interests
represents a portion of the exercise price thereof; or (6) additional
Restricted Payments in an amount not to exceed $15 million; provided, however,
that at the time of, and after giving effect to, any Restricted Payment
permitted under clauses (4) or (6) no Default or Event of Default shall have
occurred and be continuing.
In the case of any Restricted Payments made other than in cash, the
amount thereof shall be the fair market value on the date of such Restricted
Payment of the asset(s) or securities proposed to be transferred or issued by
the Company or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment.
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The fair market value of any such asset(s) or securities shall be determined in
good faith by the Board of Directors of the Company. Where the amount of any
Investment made other than in cash is otherwise required to be determined for
purposes of the Indenture, then unless otherwise specified such amount shall be
the fair market value thereof on the date of such Investment, and fair market
value shall be determined in good faith by the Board of Directors of the
Company.
Designation of Unrestricted Subsidiaries
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments (including without limitation any direct or indirect obligation to
subscribe for additional Equity Interests or maintain or preserve such
subsidiary's financial condition or to cause such person to achieve any
specified level of operating results) by the Company and its Restricted
Subsidiaries (except to the extent repaid) in the Subsidiary so designated will
be deemed to be Investments at the time of such designation and, except to the
extent, if any, that such Investments are Permitted Investments at such time,
will reduce the amount otherwise available for Restricted Payments. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Investment would
be permitted at such time and if such Restricted Subsidiary otherwise meets (or
would meet concurrently with the effectiveness of such designation) the
definition of an Unrestricted Subsidiary.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation. The Board of Directors of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (1) such Indebtedness is permitted under the covenant described
under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock,"
and (2) no Default or Event of Default would be in existence following such
designation.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company's Restricted Subsidiaries will not issue
any shares of Preferred Stock (other than to the Company or a Restricted
Subsidiary of the Company); provided, however, that the Company and the
Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) if the
Consolidated Interest Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred would have been equal to or greater than 2 to 1, determined on a pro
forma basis, as if the additional Indebtedness had been incurred at the
beginning of such four-quarter period and no Event of Default shall have
occurred and be continuing after giving effect on a pro forma basis to such
incurrence.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness under the Credit Agreement in an
aggregate amount outstanding (with letters of credit being deemed
for all purposes of the Indenture to have a principal amount equal
to the maximum potential liability of the Company and its
Restricted Subsidiaries in respect thereof) at any time not to
exceed the greater of (x) $450 million and (y) 3.5 times
Consolidated Resort
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EBITDA for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available
immediately preceding the date on which such Indebtedness is being
incurred less, in each case, the aggregate amount of such
Indebtedness permanently repaid with the Net Proceeds of any Asset
Sale;
(ii) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness represented by the Notes (including
the Exchange Notes), the Guarantees thereof and the Indenture in
the principal amount of Notes originally issued on the Closing
Date;
(iii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iv) the incurrence by the Company and its Restricted
Subsidiaries of additional Indebtedness (other than Hedging
Obligations) in an aggregate principal amount not to exceed $50
million at any time outstanding;
(v) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of
assets or a new Restricted Subsidiary (including Indebtedness that
was incurred by the prior owner of such assets or by such
Restricted Subsidiary prior to such acquisition by the Company and
its Restricted Subsidiaries); provided that the aggregate
principal amount of Indebtedness incurred pursuant to this clause
(v) does not exceed $20 million at any time outstanding;
(vi) the incurrence by the Company and its Restricted
Subsidiaries of Permitted Refinancing Indebtedness;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the
Company and its Restricted Subsidiaries; provided, however, that
any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
the Company or a Restricted Subsidiary of the Company, and any
sale or other transfer of any such Indebtedness to a Person that
is not the Company or a Restricted Subsidiary of the Company,
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the
case may be;
(viii) the incurrence by the Company or any of its
Restricted Subsidiaries of Hedging Obligations incurred for the
purpose of hedging against fluctuations in currency values or for
the purpose of fixing or hedging interest rate risk with respect
to any floating rate Indebtedness of the Company or any of its
Restricted Subsidiaries permitted by the Indenture; provided that
the notional principal amount of any Hedging Obligations does not
significantly exceed the principal amount of Indebtedness to which
such agreement relates;
(ix) the Guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted
Subsidiary of the Company permitted by the Indenture;
(x) the incurrence of Indebtedness arising from agreements
providing for indemnification, adjustment of purchase price, earn
out or other similar obligations, in each case incurred in
connection with the acquisition or disposition of any business or
assets or subsidiaries of the Company permitted by the Indenture;
and
(xi) the Indebtedness incurred from time to time under a
revolving credit facility of SSI Venture in an aggregate amount
outstanding at any time not to exceed $10 million, so long as SSI
Venture remains a Restricted Subsidiary of the Company.
For purposes of determining the amount of any Indebtedness of any Person
under this covenant, (a) the principal amount of any Indebtedness of such
Person arising by reason of such Person having granted or assumed a Lien on its
property to secure Indebtedness of another Person shall be the lower of the
fair market
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value of such property and the principal amount of such Indebtedness
outstanding (or committed to be advanced) at the time of determination; (b) the
amount of any Indebtedness of such Person arising by reason of such Person
having Guaranteed Indebtedness of another Person where the amount of such
Guarantee is limited to an amount less than the principal amount of the
Indebtedness so Guaranteed shall be such amount as so limited; and (c)
Indebtedness shall not include a non-recourse pledge by the Company or any of
its Restricted Subsidiaries of Investments in any Person that is not a
Restricted Subsidiary of the Company to secure the Indebtedness of such Person.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company, in its sole discretion, either (a) shall classify (and may later
reclassify) such item of Indebtedness in one of such categories in any manner
that complies with this covenant or (b) shall divide and classify (and may
later redivide and reclassify) such item of Indebtedness into more than one of
such categories pursuant to such first paragraph.
Liens
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) (a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness or other obligations owed
to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries, (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries or (iv) guarantee the Notes or any renewals or refinancings
thereof, in each case except for such encumbrances or restrictions (other than
encumbrances and restrictions in respect of clause (iv) of this sentence)
existing under or by reason of (a) Existing Indebtedness as in effect on the
Closing Date, (b) the Credit Agreement as in effect as of the Closing Date, and
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof; provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive with respect to
such dividend and other payment restrictions than those contained in the Credit
Agreement as in effect on the Closing Date, (c) the Notes, any Guarantee
thereof and the Indenture, (d) applicable law, (e) any instrument governing
Indebtedness or Equity Interests of a Person acquired by the Company or any of
its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness or Equity Interests were incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the Equity Interests,
properties or assets of any Person, other than the Person, or the Equity
Interests, property or assets of the Person, so acquired; provided that, in the
case of Indebtedness, such Indebtedness was permitted by the Indenture, (f) by
reason of customary nonassignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired or proceeds therefrom, (h) customary restrictions in asset
or stock sale agreements limiting transfer of such assets or stock pending the
closing of such sale, (i) customary non-assignment provisions in contracts
entered into in the ordinary course of business, or (j) Permitted Refinancing
Indebtedness; provided
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that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving Person), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another Person
unless (i) the Company is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a Person organized or existing under the laws of the
United States, any state thereof or the District of Columbia; (ii) the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after giving effect to such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Restricted Subsidiary of the Company, the Company or the Person formed
by or surviving any such consolidation or merger (if other than the Company),
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made, (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company, immediately preceding the transaction and (B) will, at
the time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Interest Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "Incurrence
of Indebtedness and Issuance of Preferred Stock."
Nothing contained in the foregoing paragraph shall prohibit (i) any
Restricted Subsidiary from consolidating with, merging with or into, or
transferring all or part of its properties and assets to the Company or (ii)
the Company from merging with an Affiliate for the purpose of reincorporating
the Company in another jurisdiction to realize tax or other benefits; provided,
however, that in connection with any such merger, consolidation or asset
transfer no consideration, other than common stock (that is not Disqualified
Stock) in the surviving Person or the Company shall be issued or distributed.
Transactions with Affiliates
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the
Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate payments or consideration in excess
of $5.0 million, a Board Resolution authorizing and determining the fairness of
such Affiliate Transaction approved by a majority of the independent members of
the Board of Directors of the Company and (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
payments or consideration in excess of $15.0 million, an opinion as to the
fairness to the Company or such Restricted Subsidiary of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing.
The foregoing provisions will not prohibit (i) reasonable fees and
compensation paid to and indemnity provided on behalf of officers, directors,
employees, agents or consultants of the Company or any Restricted Subsidiary of
the Company as determined in good faith by the Company's Board of Directors or
senior
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management including, without limitation, any issuance of Equity Interests of
the Company pursuant to stock option, stock ownership or similar plans; (ii)
transactions between or among the Company and/or its Restricted Subsidiaries;
(iii) any agreement or arrangement as in effect on the Closing Date and
publicly disclosed or any amendment thereto or any transaction contemplated
thereby (including pursuant to any amendment thereto) in any replacement
agreement or arrangement thereto so long as any such amendment or replacement
agreement or arrangement is not more disadvantageous to the Company or its
Restricted Subsidiaries, as the case may be, in any material respect than the
original agreement as in effect on the Closing Date; (iv) loans or advances to
employees and officers of the Company and its Restricted Subsidiaries not in
excess of $5 million at any time outstanding; and (v) any Permitted Investment
or any Restricted Payment that is permitted by the provisions of the Indenture
described above under the caption "Restricted Payments".
Limitation on Layering Debt
The Indenture provides that (A) the Company will not, directly or
indirectly, incur, create, issue, assume, guarantee or otherwise become liable
for any Indebtedness that is by its terms subordinate or junior in right of
payment to any Senior Debt of the Company and senior in any respect in right of
payment to the Notes and (B) no Guarantor will, directly or indirectly, incur,
create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is by its terms subordinate or junior in right of payment to
any Senior Debt of such Guarantor and senior in any respect in right of payment
to the Subsidiary Guarantee of such Guarantor.
Additional Subsidiary Guarantees
The Indenture provides that if any Restricted Subsidiary of the Company
after the date of the Indenture shall become or be required to become a
guarantor under the Credit Agreement, or shall become a guarantor of any other
Indebtedness of the Company or any Restricted Subsidiary, then such Restricted
Subsidiary shall become a Guarantor, in accordance with the terms or the
Indenture; provided that if such Restricted Subsidiary is released and
discharged from all obligations under such guarantees, it shall be released and
discharged from its obligations under its Subsidiary Guarantee as described
under "--Subsidiary Guarantees" above.
Payments for Consent
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, 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 is paid to all Holders of the Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Holders of Notes (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 and, with respect to the annual information only, a report thereon by the
Company's certified independent accountants 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. In addition, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Company and its Restricted Subsidiaries will agree that, for so
long as any Notes remain outstanding, they will furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the Act.
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Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due (whether payable at maturity, upon redemption or repurchase or
otherwise) of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Company or any of its Restricted Subsidiaries to comply with the provisions
described under the caption "Merger, Consolidation or Sale of Assets"; (iv)
failure by the Company to comply with the provisions described under the
captions "Change of Control" or "Asset Sale" (whether or not prohibited by the
subordination provisions of the Indenture) (other than a failure to purchase
Notes pursuant to an offer commenced under such provisions, which shall be
subject to clause (ii) above) for 30 days after written notice by the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Notes; (v) failure by the Company or any of its Restricted Subsidiaries for 60
days after written notice by the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes to comply with any of its other
agreements in the Indenture or the Notes other than those referred to in
clauses (i), (ii), (iii) or (iv) above; (vi) default under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any of its Significant Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Significant Subsidiaries), whether such Indebtedness
or guarantee now exists, or is created after the Closing Date, which default
(a) is caused by a failure to pay principal after final maturity of such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10 million or more without such Indebtedness being discharged or such
acceleration having been cured, waived or rescinded within 30 days of
acceleration; (vii) failure by the Company or any of its Significant
Subsidiaries to pay final judgments aggregating in excess of $10 million and
either (a) any creditor commences enforcement proceedings upon any such
judgment or (b) such judgments are not paid, discharged or stayed for a period
of 60 days; (viii) except as permitted by the Indenture, any Guarantee of the
Notes by a Significant Subsidiary shall be held in any judicial proceeding to
be unenforceable or invalid or shall cease for any reason to be in full force
and effect, or any Guarantor which is a Significant Subsidiary or any Person
acting on behalf of any such Guarantor, shall deny or disaffirm its obligations
under its Guarantee of the Notes; and (ix) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes and all other Obligations thereunder to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect
to the Company, all outstanding Notes will become due and payable without
further action or notice. Holders of the Notes may not enforce the Indenture or
the Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal, premium, if any, interest or Liquidated Damages, if any,) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company or any
Guarantor with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to the optional redemption provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
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The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
principal, premium, if any, interest or Liquidated Damages, if any, on the
Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees, Incorporators and
Stockholders
No director, officer, employee, incorporator or stockholder of the
Company or any Guarantor, as such, shall have any liability for any obligations
of the Company or such Guarantor under the Notes, the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of 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.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of and premium, if any, interest
and Liquidated Damages, if any, on the Notes when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of and premium, if any, interest and
Liquidated Damages, if any, on the outstanding Notes on the Stated Maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (a) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (b) since
the Closing Date, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes, as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would
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have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date
of such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit); (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute
a default under, any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that after
the 91st day following the deposit, the trust fund will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Satisfaction and Discharge of the Indenture
The obligations of the Company and the other Guarantors under the
Indenture will terminate when (i) either (a) all outstanding Notes have been
delivered to the Trustee for cancellation, or (b) all such Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable, will become due and payable within one year or are to be called for
redemption within one year under irrevocable arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name and
at the expense of the Company and the Company has irrevocably deposited or
caused to be deposited with the Trustee, in trust, funds in an amount
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of (and
premium, if any, on) and interest and Liquidated Damages, if any, to the date
of maturity or date of redemption, (ii) the Company has paid or caused to be
paid all sums payable by the Company under the Indenture, and (iii) the Company
has delivered an Officers' Certificate and an Opinion of Counsel relating to
compliance with the conditions set forth in the Indenture.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture
or the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture, or the Notes thereof may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal of or change the fixed maturity
of any Note
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or alter the provisions with respect to the price to be paid, or the timing of
redemption or payment, upon redemption of the Notes or, after the Company has
become obligated to make a Change of Control Offer or an Asset Sale Offer,
amend, change or modify the obligation of the Company to make or consummate
such Change of Control Offer or Asset Sale Offer; (iii) reduce the rate of or
change the time for payment of interest or Liquidated Damages, if any, on any
Note; (iv) waive a Default or Event of Default in the payment of principal of
or premium, interest or Liquidated Damages, if any, on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority
in aggregate principal amount of the Notes and a waiver of the payment default
that resulted from such acceleration); (v) make any Note payable in money other
than that stated in the Notes; (vi) except pursuant to the terms of the
Indenture, release any Guarantor from its Guarantee of the Notes; (vii) make
any change in the subordination provisions in the Indenture that adversely
affects the rights of any Holder of any Notes in any material respect or any
change to any other provision thereof that adversely affects the rights of any
Holder of Notes under the subordination provisions of the Indenture in any
material respect (it being understood that amendments to the provisions of the
Indenture described above under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" which may have the effect of
increasing the amount of Senior Debt that the Company and its Restricted
Subsidiaries may incur shall not, for purposes of this clause (vii), be deemed
to be a change that adversely affects in a material respect the rights of any
Holder of Notes under the subordination provisions of the Indenture; or (viii)
make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Notes, the Company, the Guarantors and the Trustee may amend or supplement the
Indenture, the Notes to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or any Guarantor's obligations to
Holders of Notes in the case of a merger, consolidation or sale of assets, to
provide security for the Notes, to add a Guarantor, to make any change that
would provide any additional rights or benefits to the Holders of Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder in any material respect, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
The consent of the Holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
Concerning the Trustee
The Trustee has been appointed by the Company as Registrar and Paying
Agent with respect to the Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days and apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to the Trustee against any
loss, liability or expense.
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Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness or preferred stock of any other Person existing at the time such
other Person is merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Indebtedness or preferred stock incurred
in connection with, or in contemplation of, such other Person merging with or
into or becoming a Subsidiary of such specified Person and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For 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, shall
mean 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.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
(collectively, "dispositions") of any assets or rights (including, without
limitation, by way of a Sale and Leaseback Transaction), other than
dispositions of inventory or sales or leases of real estate constituting Real
Estate Held for Sale in the ordinary course of business, and (ii) the issuance
of Equity Interests by any Restricted Subsidiary or the disposition by the
Company or a Restricted Subsidiary of Equity Interests in any of the Company's
Restricted Subsidiaries (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary of the Company), in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $3.0 million or (b) for net proceeds
in excess of $3.0 million. Notwithstanding the foregoing, the following will be
deemed not to be Asset Sales: (i) a transfer of assets by the Company to a
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary; (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary; (iii)
a Permitted Investment or Restricted Payment that is permitted by the covenant
described above under the caption "Restricted Payments;" (iv) a disposition of
Cash Equivalents solely for cash or other Cash Equivalents; (v) a disposition
in the ordinary course of business of used, worn-out, obsolete, damaged or
replaced equipment; (vi) the grant of licenses to third parties in respect of
intellectual property in the ordinary course of business of the Company or any
of its Restricted Subsidiaries, as applicable; (vii) any disposition of
properties or assets that is governed by the provisions described under "Change
of Control" or "Merger, Consolidation or Sale of Assets;" and (viii) the
granting or incurrence of any Permitted Lien.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of the Company in full force and effect at the time of determination
and certified as such by the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
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"Cash Equivalents" means (a) marketable obligations issued or
unconditionally guaranteed by the U.S. or issued by any of its agencies and
backed by the full faith and credit of the U.S., in each case maturing within
one year from the date of acquisition; (b) short-term investment grade domestic
and eurodollar certificates of deposit or time deposits that are fully insured
by the Federal Deposit Insurance Corporation or are issued by commercial banks
organized under the laws of the U.S. or any of its states having combined
capital, surplus, and undivided profits of not less than $100,000,000 (as shown
on its most recently published statement of condition); (c) commercial paper
and similar obligations rated "P-1" by Moody's Investors Service, Inc.
("Moody's") or "A-1" by Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc. ("S&P"); (d) readily marketable tax-free municipal
bonds of domestic issuer rated "A-2" or better by Moody's or "A" or better by
S&P, and maturing within one year from the date of issuance; and (e) mutual
funds or money market accounts investing primarily in items described in
clauses (a) through (d) above.
"Change of Control" means, with respect to the Company or any successor
Person permitted under the covenant "Merger, Consolidation or Sale of Assets,"
the occurrence of any of the following: (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than
Apollo and its Affiliates, acquires "beneficial ownership" (as determined in
accordance with Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than 50% of the total outstanding shares of Voting Stock (as defined)
except to the extent that, and so long as, Apollo and its affiliates hold the
right, by voting power, contract or otherwise, to elect or designate, and do so
elect or designate, a majority of the Company's Board of Directors; (b) the
Company consolidates with or merges into any other corporation, or conveys,
transfers or leases all or substantially all of its assets to any person, or
any other corporation merges into the Company and, in the case of any such
transaction, the outstanding common stock of the Company is changed or
exchanged as a result, unless the shareholders of the Company immediately
before such transaction own, directly or indirectly, at least 51% of the
outstanding shares of Voting Stock of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction (except to the extent that,
and so long as, Apollo and its affiliates hold the right, by voting power or
otherwise, to elect or designate, and do so elect or designate, a majority of
the Board of Directors of the corporation resulting from such transaction); or
(c) the first day on which more than a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"Closing Date" means the date of the closing of the sale of the Notes
initially issued pursuant to the Indenture.
"Consolidated EBITDA" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing such Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, (iii) Consolidated Interest Expense,
and (iv) depreciation and amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-
cash expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that
was paid in a prior period) of such Person and its Restricted Subsidiaries for
such period to the extent that such depreciation, amortization and other non-
cash expenses were deducted in computing such Consolidated Net Income, minus
(v) non-cash items increasing such Consolidated Net Income, in each case, for
such period without duplication on a consolidated basis and determined in
accordance with GAAP.
"Consolidated Interest Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Resort EBITDA of such Person for
such period to the Consolidated Interest Expense of such Person and its
Restricted Subsidiaries for such period. In the event that the Company or any
of its Restricted Subsidiaries incurs, assumes, Guarantees, redeems, repays or
otherwise retires any Indebtedness (other than revolving credit borrowings)
subsequent to the commencement of the period for which the Consolidated
Interest Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Consolidated Interest Coverage Ratio is
made (the "Calculation Date"), then the Consolidated Interest
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Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee, redemption, repayment or retirement of Indebtedness as
if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) (a) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions and (b) other transactions
consummated by the Company or any of its Restricted Subsidiaries with respect
to which pro forma effect may be given pursuant to Article 11 of Regulation S-X
under the Securities Act, in each case during the four-quarter reference period
or subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Resort EBITDA for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in
the definition of Consolidated Net Income, (ii) the Consolidated Resort EBITDA
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded and (iii) the Consolidated Interest Expense attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent (x) that the obligations giving rise to such Consolidated
Interest Expense will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date, or (without
duplication) (y) such Consolidated Interest Expense is less than the
Consolidated Resort EBITDA attributable to such discontinued operations for the
same period.
"Consolidated Interest Expense" means with respect to any Person for any
period the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), (ii)
the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period, (iii) any interest
expense for such period on Indebtedness of another Person that is guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries (whether or not
such Guarantee or Lien is called upon), in each case, on a consolidated basis
and in accordance with GAAP, and (iv) any Preferred Stock dividends paid in
cash by the Company or any of its Restricted Subsidiaries to a Person other
than the Company or any of its Restricted Subsidiaries, determined, in each
case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the net income (but not loss) of any Person that
is not a Restricted Subsidiary of such Person or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash by such Person during such period to
the referent Person or a Restricted Subsidiary thereof, (ii) the net income
(but not loss) of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that net income is not at the date of determination
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the consolidated stockholders' equity of such Person and its consolidated
Restricted Subsidiaries as of such date, less (without duplication) amounts
attributable to Disqualified Stock of such Person, in each case determined in
accordance with GAAP.
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"Consolidated Resort EBITDA" means, with respect to any Person for any
period, the Consolidated EBITDA of such Person for such period minus
consolidated real estate revenue of such Person and its Restricted Subsidiaries
for such period plus consolidated real estate operating expenses of such Person
and its Restricted Subsidiaries for such period minus any portion of such
Consolidated EBITDA attributable to Unrestricted Subsidiaries of such Person
for such period, in each case as reported on such Person's consolidated
statement of operations and determined on a consolidated basis and in
accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Closing Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"Credit Agreement" means that certain amended and restated credit
agreement, dated as of May 1, 1999, by and among the Company, the Lenders named
therein, Nationsbank, N.A. as Agent, and NationsBanc Montgomery Securities LLC,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, 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 redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the Notes
mature; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring on or prior to
91 days after the date on which the Notes mature shall not constitute
Disqualified Stock if (1) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable in any respect to the
holders of such Capital Stock than the terms applicable to the Notes and
described under the captions "Repurchase at the Option of Holders--Asset Sales"
and "Repurchase at the Option of Holders--Change of Control"; and (2) any such
requirement only becomes operative after compliance with such terms applicable
to the Notes, including the purchase of any Notes tendered pursuant thereto.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means (1) a public or private sale of Capital Stock of
the Company and (ii) the sale of other securities convertible or exchangeable
into Capital Stock (other than Disqualified Stock) of the Company; provided, an
Equity Offering shall be deemed to occur with respect to all or a portion of
such securities only upon the conversion or exchange of such securities into
Capital Stock.
"Existing Indebtedness" means Indebtedness of the Company and the
Company's Subsidiaries (other than Indebtedness under the Credit Agreement and
the Notes) in existence on the Closing Date, until such Indebtedness is repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect in the United States from time to time.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means (i) each of the Company's Restricted Subsidiaries that
is a party to the Indenture on the date of execution and delivery of the
Indenture and (ii) each other Person that becomes a guarantor of the
obligations of the Company under the Notes and the Indenture from time to time
in accordance with the provisions of the Indenture described under the caption
"Certain Covenants--Additional Affiliate Guarantees", and their respective
successors and assigns; provided, however, that "Guarantor" shall not include
any Person that is released from its Guarantee of the obligations of the
Company under the Notes and the Indenture as described under "Subsidiary
Guarantees."
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) currency exchange or interest rate swap, cap or collar
agreements and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in currency exchange or interest rates.
"Indebtedness" means, with respect to any Person, without duplication,
(i) any indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
bankers' acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property (which purchase price
is due more than one year after taking title to such property) or services or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP; (ii) all indebtedness of others secured by a Lien on any
asset of such Person (whether or not such indebtedness is assumed by such
Person the amount of such obligation, to the extent it is without recourse to
such Person, being deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured); (iii) to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person; provided, however, that (1) the amount outstanding at any time of
any Indebtedness issued with original issue discount is the face 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 (2) Indebtedness shall not include any liability for federal, state,
local or other taxes; and (iv) with respect to any Restricted Subsidiary of the
Company, Preferred Stock of such Person (in an amount equal to the greater of
(x) the sum of all obligations of such Person with respect to redemption,
repayment or repurchase thereof and (y) the book value of such Preferred Stock
as reflected on the most recent financial statements of such Person).
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP,
excluding, however, trade accounts receivable and bank deposits made in the
ordinary course of business consistent with past practice. If the Company or
any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Restricted Subsidiary of the Company shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Restricted Subsidiary not sold or
disposed of in an amount determined as provided in the penultimate paragraph of
the covenant described above under the caption "Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under
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applicable law (including any conditional, sale or other title retention
agreement, any lease in the nature thereof, and any option or other agreement
to sell or give a Lien).
"Make-Whole Amount" means, with respect to any Note, an amount equal to
the excess, if any, of (a) the present value of the remaining principal,
premium, if any, and interest (other than accrued interest otherwise payable
upon redemption) payments that would be payable with respect to such Note if
such Note were redeemed on May 15, 2004, computed using a discount rate equal
to the Treasury Rate plus 50 basis points, over (b) the principal amount of
such Note.
"Make-Whole Average Life" means, with respect to any date of redemption
of Notes, the number of years (calculated to the nearest one-twelfth) from such
redemption date to May 15, 2004.
"Make-Whole Price" means, with respect to any Note, the greater of (a)
the sum of the principal amount of and Make-Whole Amount with respect to such
Note, and (b) the redemption price of such Note on May 15, 2004.
"Net Income" means, with respect to any Person, the net income (or loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, (i) any gain (or
loss), together with any related provision for taxes on such gain (or loss),
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to Sale and Leaseback Transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries
and (ii) any extraordinary or nonrecurring gain (or loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (or
loss).
"Net Proceeds" means the aggregate cash proceeds or Cash Equivalents
proceeds received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any non-cash consideration received in
any Asset Sale, but only as and when received, and any proceeds deemed to be
cash or Cash Equivalents pursuant to clause (b) of the first paragraph under
the caption "Asset Sales"), net of (i) the direct costs relating to such Asset
Sale (including, without limitation, legal, accounting and investment banking
fees, and sales commissions) and any relocation expenses incurred as a result
thereof, (ii) taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), (iii) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale, (iv) all distributions and other payments required to be made
to minority interest holders of a Restricted Subsidiary or joint venture as a
result of such Asset Sale, and (v) any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.
"Obligations" means any principal, interest (including post-petition
interest), penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Holder" means Apollo Advisors, L.P., a Delaware limited
partnership, or any fund, investment vehicle or account managed, advised or
controlled by Apollo Advisors, L.P., or any of its Affiliates.
"Permitted Investments" means (i) any Investment in the Company or a
Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Restricted Subsidiary of the Company
in a Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Company and, to the extent required under the
Indenture, a Guarantor 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 of the
Company; (iv) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "Repurchase at the Option
of Holders--Asset Sales"; (v) any
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acquisition of assets received solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company; (vi) any Investment
in a Similar Business (including any Investment made in any Unrestricted
Subsidiaries in a Similar Business) if, after giving effect to such Investment,
the aggregate amount of all Investments made pursuant to this clause (vi) then
constituting Unrestricted Investments Outstanding does not exceed the greater
of (x) $75 million and (y) 7.5% of Total Consolidated Assets of the Company at
the time of such Investment; (vii) contributions of Real Estate Held for Sale
to Real Estate Joint Ventures; provided, in the case of any Investment made
pursuant to this clause (vii) or the preceding clause (vi), that after giving
effect to such Investment (a) no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, and (b) the
Company would, at the time of such Investment and after giving pro forma effect
thereto as if such Investment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set
forth in the first paragraph of the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock;" and (viii)
Investments received in connection with the settlement of any ordinary course
obligations owed to the Company or any of its Restricted Subsidiaries.
"Permitted Liens" means (i) Liens in favor of the Company or any of its
Restricted Subsidiaries; (ii) Liens securing Senior Debt of the Company or any
Restricted Subsidiary of the Company; (iii) Liens on property or Equity
Interests of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets or Equity Interests
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens
incurred or pledges and deposits made in connection with worker's compensation,
unemployment insurance and other social security benefits, statutory
obligations, bid, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business (other
than contracts in respect of borrowed money and other Indebtedness); (vi) Liens
existing on the Closing Date; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefore;
(viii) Liens securing the Notes or any Guarantee thereof; (ix) Liens securing
Permitted Refinancing Indebtedness to the extent that the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded was permitted to
be secured by a Lien; provided that such Liens do not extend to any assets
other than those that secured the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (x) Liens incurred in the ordinary
course of business of the Company or any Restricted Subsidiary of the Company
with respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; (xi) Liens
securing Capital Lease Obligations; provided that such Liens do not extend to
any property or assets which are not leased property subject to such
Capitalized Lease Obligation; (xii) judgment liens not giving rise to an Event
of Default so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such judgment,
degree or order shall not have been finally terminated or the period within
such proceedings may be initiated shall not have expired; (xiii) Liens securing
obligations of the Company under Hedging Obligations; (xiv) purchase money
Liens securing Purchase Money Obligations; provided that the related
Indebtedness shall not be secured by any property or assets of the Company or
any Restricted Subsidiary other than the property or assets so acquired
pursuant to such Purchase Money Obligation; (xv) Liens upon specific items of
inventory or other goods and proceeds of any Person securing such Person's
obligations in respect of bankers' acceptances issued or created for the
account of such Person to facilitate the purchase, shipment or storage of such
inventory or other goods; (xvi) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual, or warranty
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requirements of the Company or any of its Restricted Subsidiaries, including
rights of offset and set-off; (xvii) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; provided that such Liens
do not extend to any property or assets which are not leased property subject
to such leases or subleases; and (xviii) Liens created for the benefit of all
of the Notes and/or any Guarantees thereof.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness (other than Hedging Obligations and other than
Indebtedness permitted to be incurred pursuant to clause (i), clause (iv) or
clause (vii) of the second paragraph under "--Incurrence of Indebtedness and
Issuance of Preferred Stock") of the Company or any of its Restricted
Subsidiaries; provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus premium and
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date equal to or later than the final maturity date of, and has
a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated
in right of payment to the Notes or any Guarantee thereof, such Permitted
Refinancing Indebtedness is subordinated in right of payment to the Notes or
such Guarantee on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary that is an
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means an individual, limited or general partnership,
corporation, limited liability company, association, unincorporated
organization, trust, joint stock company, joint venture or other entity, or a
government or any agency or political subdivisions thereof.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Purchase Money Obligations" of any Person means any obligations of such
Person or any of its Subsidiaries to any seller or any other person incurred or
assumed in connection with the purchase of real or personal property to be used
in the business of such person or any of its subsidiaries within 180 days of
such purchase.
"Real Estate Held for Sale" means, with respect to any Person, the real
estate of such Person and its Restricted Subsidiaries classified for financial
reporting purposes as Real Estate Held for Sale on the Closing Date or
thereafter acquired as Real Estate Held for Sale.
"Real Estate Joint Venture" means any Person engaged exclusively in the
acquisition, development and operation or resale of any real estate asset or
group of related real estate assets (and directly related activities).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.
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"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Similar Business" means any business conducted by the Company or any of
its Subsidiaries as of the Closing Date or any other recreation, leisure and/or
hospitality business including without limitation ski mountain resort
operations, or any business or activity that is reasonably similar thereto or a
reasonable extension, development or expansion thereof or is reasonably
ancillary thereto.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of at least a majority of the
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).
"Total Consolidated Assets" means, with respect to any Person as of any
date, the book value of the assets of such Person and its Restricted
Subsidiaries as shown on the most recent consolidated balance sheet of such
Person.
"Treasury Rate" means, at any time of computation, the yield to maturity
at such time (as compiled by and published in the most recent statistical
release (or any successor release) of the Federal Reserve Bank of New York,
which has become publicly available at least two business days prior to the
date of the redemption notice or, if such statistical release (or successor
release) is no longer published, any generally recognized publicly available
source of similar market data) of United States Treasury securities with a
constant maturity most nearly equal to the Make-Whole Average Life; provided,
however, that if the Make-Whole Average Life is not equal to the constant
maturity of the United States Treasury security for which a weekly average
yield is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are given,
except that if the Make-Whole Average Life is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to
a constant maturity of one year shall be used.
"Unrestricted Investments Outstanding" means, at any time of
determination, in respect of all Permitted Investments made pursuant to clause
(vi) of the definition of the term Permitted Investments, the excess, if any,
of (i) the sum of all Permitted Investments theretofore made by the Company or
any Restricted Subsidiary on or after the date of the Indenture pursuant to
clause (vi) of the definition of Permitted Investments over (ii) the amount of
all cash, and the fair market value of any assets or property, distributed as
dividends and distributions to the Company or a Restricted Subsidiary of the
Company (to the extent that the Company does not elect to include the amount of
such dividends and distributions in the computation of Consolidated Net Income
pursuant to the parenthetical of clause (i) of the definition thereof at the
time of determination), and all repayments of the principal amount of loans or
advances, the net cash proceeds, and the fair market value of assets or
property, received from sales or transfers, in respect of such Investments to
the Company or any of its Restricted Subsidiaries and any other reduction made
in cash of such Investments in such Person.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary is not party
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to any agreement, contract, arrangement or understanding with the Company or
any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding comply with the covenant set
forth under "Transactions with Affiliates."
"Voting Stock" of any Person as of any date means classes of the Capital
Stock of such Person that is at the time entitled to vote in the election of at
least a majority of the directors, managers, trustees or other governing body
of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange 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 exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding Notes where such outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. We have agreed that for a period of 30 days after effectiveness of
the exchange offer registration statement, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by 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 exchange 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 at 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
broker-dealer and/or the purchasers of any such exchange notes. Any broker-
dealer that resells exchange 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 exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit of any such resale of exchange
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 broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. By acceptance of the
exchange offer, each broker-dealer that receives exchange notes pursuant to the
exchange offer hereby agrees to notify us prior to using this prospectus in
connection with the sale or transfer of exchange notes, and acknowledges and
agrees that, upon receipt of notice from us of the happening of any event which
makes any statement in this prospectus untrue in any material respect or which
requires the making of any changes in this prospectus in order to make the
statements herein not misleading (which notice we agree to deliver promptly to
such broker-dealer), such broker-dealer will suspend use of this prospectus
until we have amended or supplemented the prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such broker-dealer.
For a period of 30 days after effectiveness of the exchange offer
registration statement, we will promptly send additional copies of this
prospectus and any amendment or supplement thereto to any broker-dealer that
requests such documents in the letter of transmittal. We have agreed to pay all
expenses incident to the exchange offer (including the expenses of any one
special counsel for the holders of the Notes) other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the
Notes participating in the exchange offer (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a discussion of certain U.S. federal income tax and
estate tax consequences of (i) the exchange of outstanding Notes for exchange
notes and (ii) the ownership and disposition of the exchange notes. For
purposes of this discussion, a "U.S. Holder" is a Holder that is an individual
who is a citizen or resident of the United States, a corporation or a
partnership that is organized in or under the laws of the United States or any
state thereof, an estate the income of which is includible in gross income for
U.S. tax purposes regardless of its source or, a trust the administration of
which is subject to the primary supervision of a United States court and as to
which one or more United States persons have the authority to control all
substantial decisions of the trust. A "Non-U.S. Holder" is a Holder that is not
a U.S. Holder. This summary applies only to Notes held as capital assets within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"). It does not discuss all of the tax consequences that may be
relevant to a Holder in light of its particular circumstances or to Holders
subject to special rules, such as tax-exempt organizations, dealers in
securities or foreign currencies, financial institutions, life insurance
companies, or regulated investment companies, or to Holders whose functional
currency is not the United States dollar or who hold the Notes as part of a
synthetic security, conversion transaction, or certain "straddle" or hedging
transactions. It also does not deal with holders other than Holders
participating in the exchange offer (except where otherwise specifically
noted). Persons considering participation in the exchange offer should consult
their own tax advisors concerning the application of United States federal
income tax laws to their particular situations as well as any consequences of
the exchange of outstanding Notes for exchange notes, and the ownership and
disposition of the exchange notes arising under the laws of any other taxing
jurisdiction.
The U.S. federal income tax and estate tax considerations set forth below
are based upon the Code and regulations, rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed, revoked
or modified, possibly with retroactive effect, so as to result in U.S. federal
income tax consequences different from those presented below.
Federal Income Tax Consequences of Tendering Outstanding Notes for Exchange
Notes
Exchange Offer. The exchange of outstanding Notes for exchange notes
pursuant to the exchange offer should not be treated as an exchange or other
taxable event for United States federal income tax purposes because under
Treasury regulations, the exchange notes should not be considered to differ
materially in kind or extent from the outstanding Notes. Rather, the exchange
notes received by a holder should be treated as a continuation of the
outstanding Notes in the hands of such holder. As a result, there should be no
United States federal income tax consequences to holders who exchange
outstanding Notes for exchange notes pursuant to the exchange offer and any
such holder should have the same tax basis and holding period in the exchange
notes as it had in the outstanding Notes immediately before the exchange.
Federal Income Tax Consequences of Owning Exchange Notes
U.S. Holders
Interest. Interest on an exchange note will be taxable to a U.S. Holder
as ordinary interest income in accordance with the U.S. Holder's method of
accounting for U.S. federal income tax purposes.
Sale, Exchange or Redemption of an Exchange Note. A U.S. Holder will
recognize gain or loss, if any, on the sale, redemption or other taxable
disposition of an exchange note in an amount equal to the difference, if any,
between the U.S. Holder's adjusted tax basis in the exchange note and the
amount received therefor (other than amounts attributable to accrued and unpaid
interest on the exchange notes, which will be treated as interest for U.S.
federal income tax purposes). Subject to the market discount rules noted under
"--U.S. Holders--Market Discount and Bond Premium" below, gain or loss, if any,
recognized on the sale,
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redemption or other taxable disposition of a Note generally should be long-term
capital gain or loss if the exchange was held as a capital asset and was held
for more than one year as of the date of disposition.
Market Discount and Bond Premium. If a U.S. Holder acquires an exchange
note subsequent to its original issuance and the exchange note's principal
amount exceeds the U.S. Holder's initial tax basis in the exchange note by more
than a de minimis amount, the U.S. Holder will be treated as having acquired
the exchange note at a "market discount" equal to such excess. In addition, if
a U.S. Holder's initial tax basis in an exchange note exceeds the principal
amount of the exchange note, the U.S. Holder will generally be treated as
having acquired the exchange note with "bond premium" in an amount equal to
such excess. U.S. Holders should consult their tax advisers regarding the
existence, if any, and the tax consequences of market discount and bond
premium.
Backup Withholding and Information Reporting. A U.S. Holder of an
exchange note may be subject to information reporting and possible backup
withholding. If applicable, backup withholding would apply at a rate of 31%
with respect to interest on, or the proceeds of a sale, exchange, redemption,
retirement, or other disposition of, such exchange note, unless such U.S.
Holder (i) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact, or (ii) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable backup withholding rules.
Non-U.S. Holders
The Exchange Notes. The payment of interest on an exchange note will
generally not be subject to U.S. federal income tax (or to withholding of tax),
if (1) the interest is not effectively connected with the conduct of a trade or
business within the United States or, if a tax treaty applies, the interest is
not attributable to a permanent establishment in the United States, (2) the
Non-U.S. Holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled to vote, (3)
the Non-U.S. Holder is not a controlled foreign corporation that is related to
us actually or constructively through stock ownership and (4) either (i) the
beneficial owner of the exchange note certifies to us or our agent, under
penalties of perjury, that it is not a U.S. Holder and provides its name and
address on U.S. Treasury Form W-8 (or on a suitable substitute form) or (ii) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the exchange note certifies under penalties
of perjury that such a Form W-8 (or suitable substitute form) has been received
from the beneficial owner by it or by a financial institution between it and
the beneficial owner and furnishes the payer with a copy thereof.
Recently adopted Treasury Regulations (the "Final Withholding
Regulations") will change the methods for satisfying the certification
requirement described in clause (4) above. The Final Withholding Regulations
also will require, in the case of Notes held by a foreign partnership that (i)
this certification generally be provided by the partners rather than by the
foreign partnership and (ii) the partnership provide certain information,
including a United States employer identification number. A look-through rule
would apply in the case of tiered partnerships. The Final Withholding
Regulations will become effective for payments made after December 31, 1999.
A Non-U.S. Holder will generally not be subject to U.S. federal income
tax on any gain realized in connection with the sale, exchange, retirement, or
other disposition of a Note, unless (i) the gain is effectively connected with
a trade for business of the Non-U.S. Holder in the United States (or, if a tax
treaty applies, the gain is attributable to a permanent establishment in the
United States); (ii) in the case of a Non-U.S. Holder who is an individual and
holds the Note as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year of the disposition and either (a) has
a "tax home" for United States federal income tax purposes in the United States
or (b) has an office or other fixed place of business in the United States to
which the gain is attributable; or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of United States federal income tax laws applicable
to certain United States expatriates.
97
<PAGE>
An exchange note held directly by an individual who, at the time of
death, is not a citizen or resident of the United States should not be
includible in such individual's gross estate for U.S. estate tax purposes as a
result of such individual's death if the individual does not actually or
constructively own 10% or more of the total combined voting power of all
classes of our stock entitled to vote and, at the time of the individual's
death, if payments with respect to such Note would not have been effectively
connected with the conduct by such individual of a trade or business in the
United States. Even if the exchange note was includible in the gross estate
under the foregoing rules, the Note may be excluded under the provisions of an
applicable estate tax treaty.
Backup Withholding and Information Reporting. Interest payments on the
exchange notes made by us or any paying agent of ours to certain noncorporate
Non-U.S. Holders generally will not be subject to information reporting or
"backup withholding" if the certification described under "--Non-U.S. Holders--
The exchange note" above is received, provided in each case that the payer does
not have actual knowledge that the Holder is a U.S. Holder.
Payment of proceeds from a sale of an exchange note to or through the
U.S. office of a broker is subject to information reporting and backup
withholding unless the Non-U.S. Holder certifies as to its non-U.S. status or
otherwise establishes an exemption from information reporting and backup
withholding. Payment outside the United States of the proceeds of the sale of
an exchange note to or through a foreign office of a "broker" (as defined in
applicable U.S. Treasury Regulations) should not be subject to information
reporting or backup withholding, except that if the broker is a U.S. person, a
controlled foreign corporation for U.S. federal income tax purposes or a
foreign person 50% or more of whose gross income is from a U.S. trade or
business, information reporting should apply to such payment unless the broker
has documentary evidence in its records that the beneficial owner is not a U.S.
Holder and certain other conditions are met or the beneficial owner otherwise
establishes an exemption.
THE U.S. FEDERAL INCOME TAX AND ESTATE TAX DISCUSSION SET FORTH ABOVE IS
INTENDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A PARTICULAR
HOLDER'S SITUATION. PERSONS CONSIDERING PARTICIPATING IN THE EXCHANGE OFFER
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES
OF EXCHANGING THE OUTSTANDING NOTES AND, OWNING AND DISPOSING OF THE EXCHANGE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL OR FOREIGN LAWS AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES (POSSIBLY INCLUDING
RETROACTIVE CHANGES) IN U.S. FEDERAL AND OTHER TAX LAWS.
LEGAL MATTERS
Certain legal matters with respect to the Notes and the Guarantees will
be passed upon for us by Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York and by Martha D. Rehm, Esq.,
General Counsel to the Company.
EXPERTS
The consolidated financial statements of Vail Resorts, Inc. and
subsidiaries as of July 31, 1998 and September 30, 1997 and for the ten-month
period ended July 31, 1998 and for the years ended September 30, 1997 and 1996,
included in this prospectus and elsewhere in the registration statement, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and included herein in reliance
upon the authority of said firm as experts in accounting and auditing.
98
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
VAIL RESORTS, INC.
<TABLE>
<S> <C>
Audited Consolidated Financial Statements
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of July 31, 1998 and September 30, 1997... F-3
Consolidated Statements of Operations for the ten months ended July 31,
1998 and the years ended September 30, 1997 and 1996.................... F-4
Consolidated Statements of Stockholders' Equity for the ten months ended
July 31, 1998 and the years ended September 30, 1997 and 1996........... F-5
Consolidated Statements of Cash Flows Operations for the ten months ended
July 31, 1998 and the years ended September 30, 1997 and 1996........... F-6
Notes to Consolidated Financial Statements............................... F-7
Unaudited Consolidated Condensed Interim Financial Statements
Consolidated Condensed Balance Sheets as of April 30, 1999 and July 31,
1998.................................................................... F-24
Consolidated Condensed Statements of Operations for the Three Months
Ended
April 30, 1999 and 1998................................................. F-25
Consolidated Condensed Statements of Operations for the Nine Months Ended
April 30, 1999 and 1998................................................. F-26
Consolidated Condensed Statements of Cash Flows for the Nine Months Ended
April 30, 1999 and 1998................................................. F-27
Notes to Consolidated Condensed Financial Statements..................... F-28
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vail Resorts, Inc.:
We have audited the accompanying consolidated balance sheets of VAIL
RESORTS, INC., formerly known as Gillett Holdings, Inc. (a Delaware
corporation), and subsidiaries as of July 31, 1998 and September 30, 1997 and
the related consolidated statements of operations, stockholders' equity and
cash flows for the ten-month period ended July 31, 1998 and for the years ended
September 30, 1997 and 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated 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 financial statements referred to above present fairly,
in all material respects, the financial position of Vail Resorts, Inc. and
subsidiaries as of July 31, 1998 and September 30, 1997 and the results of
their operations and their cash flows for the ten-month period ended July 31,
1998 and for the years ended September 30, 1997 and 1996.
Arthur Andersen LLP
Denver, Colorado
October 15, 1998
F-2
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................. $ 13,366 $ 8,142
Restricted cash....................................... 6,146 6,561
Trade Receivables, net of allowances of $1,220 and
$742, respectively................................... 22,224 17,638
Notes receivable...................................... 4,263 4,469
Inventories........................................... 8,893 10,789
Deferred income taxes (Note 9)........................ 12,126 24,500
Other current assets.................................. 4,708 4,253
-------- --------
Total current assets................................ 71,726 76,352
Property, plant and equipment, net (Note 7)............. 501,371 411,117
Real estate held for sale............................... 138,916 154,925
Deferred charges and other assets....................... 12,605 12,217
Notes receivable, noncurrent portion.................... 1,372 1,073
Intangible assets, net (Note 7)......................... 186,132 200,265
-------- --------
Total assets........................................ $912,122 $855,949
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses (Note 7)........ $ 55,012 $ 70,171
Income taxes payable.................................. 2,239 325
Rights payable to stockholders........................ -- 5,707
Long-term debt due within one year (Note 6)........... 1,734 1,715
-------- --------
Total current liabilities........................... 58,985 77,918
Long-term debt (Note 6)................................. 282,280 263,347
Other long-term liabilities............................. 28,886 23,281
Deferred income taxes (Note 9).......................... 79,347 85,737
Commitments and contingencies (Note 11)
Stockholders' equity (Notes 1 and 14):
Preferred stock, $.01 par value, 25,000,000 shares
authorized, no shares issued and outstanding......... -- --
Common stock--
Class A common stock, $.01 par value, 20,000,000
shares authorized, 7,639,834 and 11,639,834 shares
issued and outstanding as of July 31, 1998 and
September 30, 1997, respectively................... 76 116
Common Stock, $.01 par value, 80,000,000 shares
authorized, 26,817,346 and 21,765,815 shares issued
and outstanding as of July 31, 1998 and September
30, 1997, respectively............................. 269 218
Additional paid-in capital............................ 401,563 385,634
Retained earnings..................................... 60,716 19,698
-------- --------
Total stockholders' equity........................ 462,624 405,666
-------- --------
Total liabilities and stockholders' equity........ $912,122 $855,949
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Ten
Months Ended Year Ended Year Ended
July 31, September 30, September 30,
1998 1997 1996
------------ ------------- -------------
<S> <C> <C> <C>
Net revenues:
Resort............................. $336,547 $259,038 $140,288
Real estate........................ 73,722 71,485 48,655
-------- -------- --------
Total net revenues............... 410,269 330,523 188,943
Operating expenses:
Resort............................. 217,764 172,715 89,890
Real estate........................ 62,619 66,307 40,801
Corporate expense.................. 4,437 4,663 12,698
Depreciation and amortization...... 36,838 34,044 18,148
-------- -------- --------
Total operating expenses......... 321,658 277,729 161,537
-------- -------- --------
Income from operations............... 88,611 52,794 27,406
Other income (expense):
Investment income.................. 1,784 1,762 586
Interest expense................... (17,789) (20,308) (14,904)
Loss on disposal of fixed assets... (1,706) (182) (2,630)
Other expense...................... (736) (383) (1,500)
-------- -------- --------
Income before income taxes........... 70,164 33,683 8,958
Provision for income taxes (Note 9).. (29,146) (13,985) (4,223)
-------- -------- --------
Net income........................... $ 41,018 $ 19,698 $ 4,735
======== ======== ========
Net income per common share (Notes 2
and 4):
Basic.............................. $ 1.20 $ 0.66 $ 0.23
======== ======== ========
Diluted............................ $ 1.18 $ 0.64 $ 0.22
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
---------------------------------------- Paid-in Earnings Stockholders'
Class A Common Total Amount Capital (Deficit) Equity
---------- ---------- ---------- ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1995................... 12,817,692 6,943,984 19,761,676 $198 $135,561 $31,935 $ 167,694
Net income for the year
ended September 30,
1996................... -- -- -- -- -- 4,735 4,735
Shares issued pursuant
to stock grants
(Note 13).............. -- 238,324 238,324 2 1,989 -- 1,991
Rights payable to
stockholders........... -- -- -- -- (13,843) (36,670) (50,513)
Shares of Class A Common
Stock converted to
Common Stock (Note
14).................... (391,472) 391,472 -- -- -- -- --
---------- ---------- ---------- ---- -------- ------- ---------
Balance, September 30,
1996................... 12,426,220 7,573,780 20,000,000 200 123,707 -- 123,907
Net income for the year
ended September 30,
1997................... -- -- -- -- -- 19,698 19,698
Issuance of shares
pursuant to options
exercised (Note 13).... -- 744,482 744,482 7 10,212 -- 10,219
Issuance of shares in
acquisition of resort,
net (Note 5)........... -- 7,554,406 7,554,406 76 151,012 -- 151,088
Issuance of shares in
initial public
offering, net.......... -- 5,000,000 5,000,000 50 98,100 -- 98,150
Issuance of shares in
acquisitions of retail
space, net............. -- 106,761 106,761 1 2,348 -- 2,349
Compensation expense
related to employee
stock options.......... -- -- -- -- 255 -- 255
Shares of Class A Common
Stock Converted to
Common Stock (Note
14).................... (786,386) 786,386 -- -- -- -- --
---------- ---------- ---------- ---- -------- ------- ---------
Balance, September 30,
1997................... 11,639,834 21,765,815 33,405,649 334 385,634 19,698 405,666
Net income for the ten-
month period ended July
31, 1998............... -- -- -- -- -- 41,018 41,018
Issuance of shares
pursuant to options
exercised (Note 13).... -- 1,043,271 1,043,271 11 7,990 -- 8,001
Tax effect of stock
option excercises...... -- -- -- -- 7,669 -- 7,669
Restricted stock issue
(Note 13).............. -- 8,260 8,260 -- 270 -- 270
Shares of Class A Common
Stock Converted to
Common Stock (Note
14).................... (4,000,000) 4,000,000 -- -- -- -- --
---------- ---------- ---------- ---- -------- ------- ---------
Balance, July 31, 1998.. 7,639,834 26,817,346 34,457,180 $345 $401,563 $60,716 $ 462,624
========== ========== ========== ==== ======== ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Ten Year Year
Months Ended Ended Ended
July 31, September 30, September 30,
1998 1997 1996
------------ ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 41,018 $ 19,698 $ 4,735
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization....... 36,838 34,044 18,148
Deferred compensation payments in
excess of expense.................. -- (331) (814)
Noncash cost of real estate sales... 49,112 52,647 32,394
Noncash compensation related to
stock grants (Note 13)............. 285 306 25
Noncash compensation related to
stock options...................... -- 255 1,915
Noncash equity income............... (2,973) (701) --
Deferred financing costs
amortized.......................... 448 389 247
Loss on disposal of fixed assets.... 1,706 182 2,630
Deferred income taxes, net (Note
9)................................. 29,146 7,413 2,500
Changes in assets and liabilities:
Restricted cash..................... (415) 529 (575)
Accounts receivable, net............ (4,358) 2,089 475
Notes receivable, net............... (93) (4,469) --
Inventories......................... 2,497 (835) (418)
Accounts payable and accrued
expenses........................... (16,226) (10,712) 9,551)
Other assets and liabilities........ (2,642) 2,867 (4,947)
--------- --------- ---------
Net cash provided by operating
activities....................... 134,343 103,371 65,866
Cash flows from investing activities:
Cash paid in resort acquisition,
net of cash acquired............... -- (146,386) --
Cash paid in hotel acquisitions,
net of cash acquired............... (54,250) -- --
Resort capital expenditures......... (80,454) (51,020) (13,912)
Investments in real estate.......... (15,661) (56,947) (40,604)
Investments in joint venture........ -- 2,511 (200)
--------- --------- ---------
Net cash used in investing
activities....................... (150,365) (251,842) (54,716)
Cash flows from financing activities:
Proceeds from initial public
offering........................... -- 98,150 --
Proceeds from the exercise of stock
options............................ 8,001 -- --
Payments under Rights............... (5,707) (42,175) --
Refund of bond reserve fund......... 3,297 -- --
Proceeds from borrowings under
long-term debt..................... 334,000 235,000 84,000
Payments on long-term debt.......... (318,345) (139,984) (130,547)
--------- --------- ---------
Net cash provided by (used in)
financing activities............. 21,246 150,991 (46,547)
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents.................... 5,224 2,520 (35,397)
Cash and cash equivalents:
Beginning of period................. 8,142 5,622 41,019
--------- --------- ---------
End of period....................... $ 13,366 $ 8,142 $ 5,622
========= ========= =========
Cash paid for interest............... $ 16,336 $ 20,166 $ 21,880
========= ========= =========
Taxes paid, net of refunds........... $ -- $ 1,925 $ 400
========= ========= =========
Supplemental disclosure of non-cash
transactions:
Issuance of common stock in resort
acquisition (Note 5)................ $ 151,088
=========
Assumption of liabilities in resort
acquisition (Note 5)................ $ 91,480
=========
Option exercise (Note 13)............ $ 2,740
=========
Issuance of common stock in purchase
of retail space..................... $ 2,349
=========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Vail Resorts, Inc. ("Vail Resorts") is organized as a holding company and
operates through various subsidiaries. Vail Resorts and its subsidiaries
(collectively, the "Company") currently operate in two business segments,
mountain resorts and real estate development. Vail Associates, Inc., an
indirect wholly-owned subsidiary of Vail Resorts, and its subsidiaries,
(collectively, "Vail Associates") operate four of the world's largest skiing
facilities on Vail, Breckenridge, Keystone and Beaver Creek mountains in
Colorado. The Breckenridge and Keystone mountain resorts (collectively, the
"Acquired Resorts"), together with the Arapahoe Basin mountain resort and
significant related real estate interests and developable land, were acquired
by the Company on January 3, 1997 (the "Acquisition"). The Company divested the
Arapahoe Basin mountain resort on September 5, 1997. Vail Resorts Development
Company ("VRDC"), a wholly-owned subsidiary of Vail Associates, Inc., conducts
the Company's real estate development activities. The Company's mountain resort
business, which is primarily composed of ski operations and related amenities,
is seasonal in nature with a typical ski season beginning in mid-October and
continuing through mid-May.
On September 1, 1997, the Company announced the change of its fiscal year
end from September 30 to July 31. Accordingly, the Company's fiscal year 1998
ended on July 31, 1998 and consisted of ten months. For fiscal 1998, the
Company filed a transitional interim report for the four months ended January
31, 1998, a quarterly report for the three months ended April 30, 1998 and will
file this annual report for the ten-months ended July 31, 1998. This annual
report for the ten-months ended July 31, 1998 includes statements of financial
position as of July 31, 1998, and September 30, 1997, results of operations and
statements of cash flows for the ten-months ended July 31, 1998 and twelve-
months ended September 30, 1997 and 1996.
2. Summary of Significant Accounting Policies
Principles of Consolidation--The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. Investments in joint ventures are accounted for under the equity
method. All significant intercompany transactions have been eliminated.
Cash and Cash Equivalents--The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. The carrying amounts reported in the balance sheet for cash
equivalents are at fair value.
Restricted Cash--Restricted cash represents amounts held as reserves for
self-insured worker's compensation claims, and owner and guest advance deposits
held in escrow for lodging reservations.
Inventories--The Company's inventories consist primarily of purchased retail
goods, food, and spare parts. Inventories are stated at the lower of cost,
determined using the first-in, first-out (FIFO) method, or market.
Property, Plant and Equipment--Property, plant and equipment is carried at
cost net of accumulated depreciation. Depreciation is calculated generally on
the straight-line method based on the following useful lives:
<TABLE>
<CAPTION>
Estimated
Life
---------
<S> <C>
Land improvements..................................................... 40
Buildings and terminals............................................... 40
Ski lifts............................................................. 15
Machinery, equipment, furniture and fixtures.......................... 3-12
Automobiles and trucks................................................ 3-5
</TABLE>
Ski trails are depreciated over the life of their respective United States
Forest Service permits.
F-7
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Real Estate Held for Sale--The Company capitalizes as land held for sale the
original acquisition cost (or appraised value as of the effective date, as
defined below), direct construction and development costs, property taxes,
interest incurred on costs related to land under development, and other related
costs (engineering, surveying, landscaping, etc.) until the property reaches
its intended use. The cost of sales for individual parcels of real estate or
condominium units within a project is determined using the relative sales value
method. Selling expenses are charged against income in the period incurred.
Interest capitalized on real estate development projects during fiscal years
1997 and 1996 totaled $0.5 million and $2.2 million, respectively. There was no
interest capitalized on real estate development projects during fiscal 1998.
The Company is a partner in the Keystone/Intrawest LLC ("Keystone JV"),
which is a joint venture with Intrawest Resorts, Inc. formed to develop land at
the base of Keystone Mountain. The Company contributed 500 acres of development
land as well as certain other funds to the joint venture. The Company's
investment in the Keystone JV including the Company's equity earnings from the
inception of the Keystone JV, are reported as real estate held for sale in the
accompanying balance sheet as of July 31, 1998. The Company recorded $2.9
million and $0.7 million in equity income for the ten-month period ended July
31, 1998 and fiscal year ended September 30, 1997, respectively.
Deferred Financing Costs--Costs incurred with the issuance of debt
securities are included in deferred charges and other assets, net of
accumulated amortization. Amortization is charged to interest expense over the
respective original lives of the applicable debt issues.
Interest Rate Agreements--Interest rate exchange agreements, defined as
swaps, are effective at creating synthetic instruments and thereby modifying
the Company's interest rate exposures. The Company enters into interest rate
swaps to minimize the impact of interest rate movements on the expense
associated with its floating rate debt. Net interest is accrued as either
interest receivable or payable with the offset recorded in interest expense.
Any premium paid is amortized over the life of the agreement.
Intangible Assets--"Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets" ("Excess Reorganization Value") represents the excess of
the Company's reorganization value over the amounts allocated to the net
tangible and other intangible assets of the Company upon emergence from
bankruptcy on October 8, 1992 (the "Effective Date"). The Company has
classified as goodwill the cost in excess of fair value of the net assets of
companies acquired in purchase transactions. Intangible assets are recorded net
of accumulated amortization in the accompanying consolidated balance sheet and
amortized using the straight-line method over their estimated useful lives as
follows:
<TABLE>
<S> <C>
Excess reorganization value.................................... 20 years
Goodwill....................................................... 40 years
Trademarks..................................................... 40 years
Other intangibles.............................................. 3-15 years
</TABLE>
Long-lived Assets--The Company evaluates potential impairment of long-lived
assets and long-lived assets to be disposed of in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No.
121"). SFAS No. 121 establishes procedures for the review of recoverability,
and measurement of impairment, if necessary, of long-lived assets, goodwill and
certain identifiable intangibles held and used by an entity. SFAS No. 121
requires that those assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. SFAS No. 121 also requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less estimated selling costs. As of July 31,
1998, management believes that there has not been any impairment of the
Company's long-lived assets, goodwill or other identifiable intangibles.
F-8
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Recognition--Resort Revenues are derived from a wide variety of
sources, including sales of lift tickets, ski school tuition, dining, retail
stores, equipment rental, hotel operations, property management services,
travel reservation services, club management, real estate brokerage,
conventions, licensing and sponsoring activities and other recreational
activities, and are recognized as services are performed. Revenues from real
estate sales are not recognized until title has been transferred, and revenue
is deferred if the receivable is subject to subordination until such time as
all costs have been recovered. Until the initial down payment and subsequent
collection of principal and interest are by contract substantial, cash received
from the buyer is reported as a deposit on the contract.
Deferred Revenue--The Company records deferred revenue related to the sale
of season ski passes. The number of season pass holder visits is estimated
based on historical data and the deferred revenue is recognized throughout the
season based on this estimate. During the ski season the estimated visits are
compared to the actual visits and adjustments are made if necessary.
Advertising Costs--Advertising costs are expensed the first time the
advertising takes place. Advertising expense for the ten-month period ended
July 31, 1998 and the fiscal years ended September 30, 1997 and 1996 was $8.7
million, $8.8 million and $6.9 million, respectively. At fiscal years ended
July 31, 1998 and September 30, 1997, advertising costs of $0.9 million and
$1.3 million are reported as current assets in the Company's consolidated
balance sheets.
Income Taxes--The Company uses the liability method of accounting for income
taxes as prescribed by SFAS No. 109, "Accounting for Income Taxes." Under SFAS
No. 109, a deferred tax liability or asset is recognized for the effect of
temporary differences between financial reporting and income tax reporting.
(See Note 9).
Net Income Per Share--In accordance with SFAS No. 128, "Earnings Per Share",
the company computes net income per share on both the basic and diluted basis
(See Note 4).
Fair Value of Financial Instruments--The recorded amounts for cash and cash
equivalents, receivables, other current assets, and accounts payable and
accrued expenses approximate fair value due to the short-term nature of these
financial instruments. The fair value of amounts outstanding under the
Company's Credit Facilities approximates book value due to the variable nature
of the interest rate associated with that debt. The fair values of the
Company's Industrial Development Bonds and other long-term debt have been
estimated using discounted cash flow analyses based on current borrowing rates
for debt with similar maturities and ratings. The estimated fair values of the
Industrial Development Bonds and other long-term debt at July 31, 1998 and
September 30, 1997 are presented below (in thousands):
<TABLE>
<CAPTION>
September 30,
July 31, 1998 1997
---------------- ----------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Industrial Development Bonds........... $64,560 $76,935 $61,263 $65,910
Other Long-Term Debt................... $ 1,370 $ 1,414 $ 1,662 $ 1,615
</TABLE>
Stock Compensation--The Company's stock option plans are accounted for in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". The Company has adopted the disclosure requirements
of SFAS No.123, "Accounting for Stock-Based Compensation" (See Note 13).
F-9
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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, the
disclosure of contingent assets and liabilities at the balance sheet date 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
accompanying consolidated financial statements for the years ended September
30, 1997 and 1996 to conform to the current period presentation.
New Accounting Standards--During fiscal year 1998, the Company adopted the
provisions of SFAS No. 128, "Earnings Per Share," which requires that the
company discloses both basic earnings per share and diluted earnings per share.
The Company adopted the provisions of SFAS No. 128 retroactively for 1997 and
1996, as required.
The Company is required to adopt SFAS No. 130, "Reporting Comprehensive
Income", in the first quarter of fiscal 1999. Upon adoption of SFAS No. 130,
the Company will report all changes in the Company's stockholders' equity other
than transactions with stockholders on the face of the income statement. The
Company currently does not have any transactions that would necessitate
disclosure of comprehensive income, however the Company will continue to
evaluate the impact of the pronouncement.
The Company is required to adopt SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", for fiscal year 1999. SFAS No. 131
will supercede the business segment disclosure requirements currently in effect
under SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise".
SFAS No. 131, among other things, establishes standards regarding the
information a company is required to disclose about its operating segments and
provides guidance regarding what constitutes a reportable operating segment.
The Company is currently evaluating disclosures under SFAS No. 131 compared to
current disclosures.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", will not have an effect on the Company because it
does not have a defined benefit pension plan.
The Accounting Standards Executive Committee ("AcSEC") issued Statement of
Position ("SOP") 98-1 providing guidance on accounting for the costs of
computer software developed or obtained for internal use. The effective date
for this pronouncement is for fiscal years beginning after December 15, 1998.
The Company is in the process of reviewing its current policies for accounting
for costs associated with internal software development projects and how they
may be affected by SOP 98-1.
The AcSEC issued SOP 98-5 which requires that all non-governmental entities
expense costs of start-up activities as incurred. The effective date for this
pronouncement is for fiscal years beginning after December 15, 1998. The
Company is in the process of reviewing its current policies for accounting for
costs associated with start-up activities and how they may be affected by SOP
98-5.
F-10
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Change in Fiscal Year End
On September 1, 1997, the Company changed its fiscal year end from September
30 to July 31, beginning with fiscal year 1998. Comparative results of
operations of the Company for the ten-months ended July 31, 1998 and 1997 are
as shown below. Also presented is the Company's 1998 fiscal year restated for
the July 31, 1998 year end.
<TABLE>
<CAPTION>
Ten-Months Ended
July 31, Twelve-Months
---------------------- Ended July
1998 1997 31, 1998
--------- ----------- -------------
(audited) (unaudited) (unaudited)
<S> <C> <C> <C>
Net Revenue:
Resort.................................... $336,547 $248,511 $350,498
Real estate............................... 73,722 61,104 84,177
-------- -------- --------
Net Revenues................................ 410,269 309,615 434,675
Operating Expenses:
Resort.................................... 217,764 153,212 238,889
Real Estate............................... 62,619 54,944 74,057
Corporate expense......................... 4,437 3,557 5,543
Depreciation and amortization............. 36,838 27,604 42,965
Reorganization charge..................... -- 2,200 --
-------- -------- --------
Total operating expenses.................... 321,658 241,517 361,454
-------- -------- --------
Income from operations...................... 88,611 68,098 73,221
Other income (expense):
Investment income......................... 1,784 1,372 2,174
Interest expense.......................... (17,789) (17,236) (20,891)
Gain (loss) on sale of fixed assets....... (1,706) (100) (1,788)
Other..................................... (736) 87 (1,217)
-------- -------- --------
Income before income taxes.................. 70,164 52,221 51,499
Credit (provision) for income taxes......... (29,146) (21,781) (21,426)
-------- -------- --------
Net income.................................. $ 41,018 $ 30,440 $ 30,073
======== ======== ========
Basic net income per common share........... $ 1.20 $ 1.06 $ 0.88
======== ======== ========
Diluted net income per common share......... $ 1.18 $ 1.02 $ 0.87
======== ======== ========
</TABLE>
F-11
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Net Income Per Common Share
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" ("EPS"), effective for periods ending after December
15, 1997, including interim periods. SFAS No. 128 establishes standards for
computing and presenting earnings per share. SFAS No. 128 requires the dual
presentation of basic (replaces primary EPS) and diluted EPS on the face of the
income statement and requires a reconciliation of numerators (net income) and
denominators (weighted average shares outstanding) for both basic and diluted
EPS in the footnotes. Basic EPS excludes dilution and is computed by dividing
net income available to common shareholders by the weighted average shares
outstanding. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised resulting in
the issuance of common shares that would then share in the earnings of the
Company. The Company has adopted the requirements of SFAS No. 128 for the ten-
month period ended July 31, 1998. Pro forma presentation and disclosure
requirements are supplied for prior period comparisons in accordance with the
statement.
<TABLE>
<CAPTION>
Ten
Months Ended September 30, September 30,
July 31, 1998 1997 1996
---------------- ----------------- ---------------
Basic Diluted Basic Diluted Basic Diluted
------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Income Per Common Share
Net Income................. $41,018 $ 41,018 $ 19,698 $ 19,698 $ 4,735 $ 4,735
Weighted average shares
outstanding............... 34,204 34,204 30,067 30,067 20,266 20,266
Effect of dilutive stock
options................... -- 547 -- 912 -- 1,189
------- -------- -------- -------- ------- -------
Total shares............... 34,204 34,751 30,067 30,979 20,266 21,455
------- -------- -------- -------- ------- -------
Net Income Per Common
Share..................... $ 1.20 $ 1.18 $ 0.66 $ 0.64 $ 0.23 $ 0.22
======= ======== ======== ======== ======= =======
</TABLE>
5. Acquisitions
On January 3, 1997, the Company acquired from Ralston Foods, Inc. 100% of
the stock of Ralston Resorts, Inc., ("Ralston Resorts") the owner and operator
of the Breckenridge, Keystone and Arapahoe Basin mountain resorts located in
Summit County, Colorado, for a total purchase price, including direct costs, of
$297.3 million. In connection with the Acquisition, the Company refinanced
$139.7 million of indebtedness, issued 7,554,406 shares of Common Stock valued
at $151.1 million to Ralston Foods, Inc., assumed liabilities of $59.8 million
and incurred $9.0 million in acquisition costs. Pursuant to a consent decree
with the United States Department of Justice and the Attorney General of the
State of Colorado (the "Consent Decree"), the Company sold the assets
constituting the Arapahoe Basin mountain resort on September 5, 1997 for a sum
of $4.0 million.
The Acquisition was accounted for as a purchase combination. Under purchase
accounting, the acquisition cost was allocated to the assets and liabilities of
the Acquired Resorts based on their relative fair values.
The following unaudited pro forma results of operations of the Company for
the ten-months ended July 31, 1997 assume that the Acquisition occurred on
October 1, 1996. The unaudited pro forma results of operations include the
effects of the Company's initial public offering only from its effective date
of February 7, 1997. These pro forma results are not necessarily indicative of
the actual results of operations that would have been achieved nor are they
necessarily indicative of future results of operations. The unaudited pro forma
financial information below excludes the results of Arapahoe Basin, which the
Company divested. The audited summarized financial information for the ten-
months ended July 31, 1998 are provided for comparative purposes.
F-12
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
(Pro Forma)
Ten Months Ten Months
Ended Ended
July 31, 1998 July 31, 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Resort revenue...................................... $ 336,547 $ 280,949
Real estate revenue................................. 73,722 63,025
Total revenues...................................... 410,269 343,974
Net income.......................................... 41,018 29,572
Basic net income per common share................... $ 1.20 $ 0.95
Diluted net income per common share................. $ 1.18 $ 0.91
</TABLE>
During the ten months ended July 31, 1998, the Company acquired three hotel
properties. On October 1, 1997, the Company purchased the assets constituting
the Great Divide Lodge (f/k/a Breckenridge Hilton) for a total purchase price
of $18.6 million. The Great Divide Lodge is a 208-room full service hotel,
located at the base of Breckenridge Mountain, and includes dining, conference
and fitness facilities. On October 7, 1997, the Company purchased 100% of the
outstanding stock of Lodge Properties, Inc., a Colorado corporation, ("LPI"),
for a total purchase price of $30.9 million. LPI owns and operates The Lodge at
Vail, a 59-room hotel with dining and conference facilities. LPI also provides
management services to an additional 40 condominiums and owns a parcel of
developable land strategically located at the primary base area of Vail
Mountain. On January 15, 1998 the Company purchased the assets constituting the
Inn at Keystone for a total purchase price of $9.3 million. The Inn at Keystone
is a 103-room full service hotel, located near Keystone Mountain, and includes
dining, conference and spa facilities. All acquisitions were accounted for as
purchase combinations and funded with cash from operations or proceeds from the
Revolving Credit Facility.
6. Long-Term Debt
Long-term debt as of July 31, 1998 and September 30, 1997 is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
(d)
(e) Average September
Maturity Rate July 31, 1998 30, 1997
--------- ------- ------------- ---------
<S> <C> <C> <C> <C>
Industrial Development Bonds (a)..... 1999-2020 7.38% $ 64,560 $ 61,263
Credit Facilities (b)................ 2003 7.39% 218,000 202,000
Other (c)............................ 1998-2002 6.09% 1,454 1,799
--------- ---------
284,014 265,062
Less: Current Maturities............. 1,734 1,715
--------- ---------
$ 282,280 $ 263,347
========= =========
</TABLE>
- --------
(a) At September 30, 1997 the Company had $41.2 million of outstanding
Industrial Development Bonds issued by Eagle County, Colorado which accrued
interest at 8% per annum and matured on August 1, 2009. Interest was
payable semi-annually on February 1 and August 1. The Company provided the
holder of these bonds a debt service reserve fund of $3.3 million, which
was netted against the principal amount for financial reporting purposes.
The Industrial Development Bonds were secured by the stock of the
subsidiaries of Vail Associates, Inc. and the Vail and Beaver Creek
Mountain United States Forest Service Permits. On April 9, 1998, the
Industrial Development Bonds issued by Eagle County, Colorado were
refinanced. Under the terms of the new agreement interest accrues at 6.95%
per annum and the $41.2 million bond principal amount matures on August 1,
2019. Interest is payable semi-annually on February 1 and August 1. The
previous debt service fund of $3.3 million was refunded to the company. The
bonds are secured by the Vail and Beaver Creek Mountain United States
Forest Service Permits. In connection with the Acquisition, the Company
assumed two series of refunding bonds. The Series 1990 Sports Facilities
Refunding Revenue Bonds have an aggregate principal amount of $20.4
million, bear interest at rates
F-13
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
ranging from 7.2% to 7.875% and mature in installments in 1998, 2006 and
2008. The Series 1991 Sports Facilities Refunding Revenue Bonds have an
aggregate principal amount of $3 million and bear interest at 7.125% for
bonds maturing in 2002 and 7.375% for bonds maturing in 2010.
(b) On September 30, 1997, the Company's Credit Facilities consisted of (i) a
$175 million Revolving Credit Facility, (ii) a $115 million Tranche A Term
Loan Facility and (iii) a $50 million Tranche B Term Loan Facility
(together with Tranche A, the "Term Loan Facilities") thereby providing
for aggregate debt financing of $340 million (collectively, the "Credit
Facilities"). The Revolving Credit Facility would have matured on April
15, 2003 and the Term Loan Facilities required minimum amortization
payments ranging from $11.5 to $41.0 million annually from 1998 to 2004.
On December 19, 1997, the Company refinanced its Credit Facilities to
provide an increase in aggregate debt financing from $340.0 million to
$450.0 million and to eliminate the required minimum amortization payments
under the Term Loan Facilities. All amounts outstanding under the
Revolving Credit Facility and the Term Loan Facilities at December 19,
1997 were refinanced under a single revolving credit facility maturing on
December 19, 2002. Interest on outstanding borrowings under the new
Revolving Credit Facility is payable at rates based upon either LIBOR
(5.69% at July 31, 1998) plus a margin ranging from .50% to 1.25% or prime
(8.5% at July 31, 1998) plus a margin of up to .125%. The Company also
pays a quarterly unused commitment fee ranging from .125% to .30%. The
interest margins fluctuate based upon the ratio of Funded Debt to the
Company's Resort EBITDA (as defined in the underlying Revolving Credit
Facility agreement).
(c) Other obligations bear interest at rates ranging from 0.0% to 6.5% and
have maturities ranging from 1998 to 2002.
(d) Average borrowing rate for the ten months ended July 31, 1998.
(e) Maturity based on fiscal year end July 31, 1998.
Aggregate maturities for debt outstanding are as follows (in thousands):
Due during twelve-months ending July 31:
<TABLE>
<CAPTION>
As of
July 31,
1998
--------
<S> <C>
1999................................................................ $ 1,734
2000................................................................ 352
2001................................................................ 353
2002................................................................ 375
2003................................................................ 219,500
Thereafter.......................................................... 61,700
--------
Total Debt........................................................ $284,014
========
</TABLE>
7. Supplementary Balance Sheet Information (in thousands)
The composition of property, plant and equipment follows:
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Land and land improvements............................... $115,516 $95,124
Buildings and terminals.................................. 227,956 152,171
Machinery and equipment.................................. 175,453 146,741
</TABLE>
F-14
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Automobiles and trucks.................................. 10,900 14,958
Furniture and fixtures.................................. 35,968 28,282
Construction in progress................................ 21,851 33,691
-------- --------
587,644 470,967
Accumulated depreciation and amortization............... (86,273) (59,850)
-------- --------
$501,371 $411,117
======== ========
</TABLE>
Depreciation expense for the ten months ended July 31, 1998 and for the
fiscal years of 1997 and 1996 totaled $28.4 million, $25.1 million and $11.4
million, respectively.
The composition of intangible assets follows:
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Trademarks.............................................. $ 42,611 $ 42,611
Other intangible assets................................. 38,802 38,244
Goodwill................................................ 125,307 118,469
Excess Reorganization Value (See Note 2)................ 24,593 37,702
-------- --------
$231,313 $237,026
Accumulated amortization................................ (45,181) (36,761)
-------- --------
$186,132 $200,265
======== ========
</TABLE>
Significant additions to intangible assets during the ten-months ended July
31, 1998 were primarily related to the acquisitions of three hotel properties
(See Note 5).
Amortization expense for the ten months ended July 31, 1998 and for the
fiscal years of 1997 and 1996 totaled $8.4 million, $8.9 million and $6.8
million, respectively.
The composition of accounts payable and accrued expenses follows:
<TABLE>
<CAPTION>
July
31, September 30,
1998 1997
------- -------------
<S> <C> <C>
Trade payables............................................ $24,637 $25,236
Deposits.................................................. 4,516 10,050
Accrued salaries and wages................................ 8,930 9,026
Accrued interest.......................................... 3,051 1,448
Property taxes............................................ 4,144 5,943
Liability to complete real estate sold.................... 2,910 7,336
Other accruals............................................ 6,824 11,132
------- -------
$55,012 $70,171
======= =======
</TABLE>
8. Retirement and Profit Sharing Plans
The Company maintains a defined contribution retirement plan, qualified
under Section 401(k) of the Internal Revenue Code, for its employees. Employees
are eligible to participate in the plan upon attaining the age of 21 and
completing 1,500 hours of service since their employment commencement date or
one year of employment with a minimum of 1,000 hours of service. Participants
may contribute from 2% to 22% of their
F-15
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
qualifying annual compensation up to the annual maximum specified by the
Internal Revenue Code. The Company matches an amount equal to 50% of each
participant's contribution up to 6% of a participant's annual qualifying
compensation. The Company's matching contribution is entirely discretionary and
may be reduced or eliminated at any time.
Total profit sharing plan expense recognized by the Company for the ten
months ended July 31, 1998 and for the fiscal years of 1997 and 1996 was
$844,000, $731,000 and $594,000, respectively.
9. Income Taxes
At July 31, 1998, the Company has total federal net operating loss ("NOL")
carryovers of approximately $337 million for income tax purposes that expire in
the years 2004 through 2008. The Company will be able to use these NOLs to the
extent of approximately $8.0 million per year through October 8, 2007
(Section 382 amount). Consequently, the accompanying financial statements and
table of deferred items only recognize benefits related to the NOLs to the
extent of the Section 382 amount.
At July 31, 1998 the Company has approximately $2.8 million in unused
minimum tax credit carryovers. These tax credits have an unlimited carryforward
period.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes. Significant components of the Company's
deferred tax liabilities and assets as of July 31, 1998 and September 30, 1997
are as follows (in thousands):
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Deferred income tax liabilities:
Fixed assets................................... $ 64,508 $ 66,324
Intangible assets.............................. 18,165 20,600
Other, net..................................... 745 --
-------- --------
Total........................................ 83,418 86,924
Gross deferred income tax assets:
Accrued expenses............................... 5,094 5,468
Net operating loss carryfowards................ 23,643 45,649
Minimum tax credit............................. 2,761 1,729
Other, net..................................... -- 963
-------- --------
Total........................................ 31,498 53,809
Valuation allowance for deferred income tax
assets.......................................... (15,301) (28,122)
-------- --------
Deferred income tax assets, net of valuation
allowance....................................... 16,197 25,687
-------- --------
Net deferred income tax liability................ $ 67,221 $ 61,237
======== ========
</TABLE>
The net current and noncurrent components of deferred income taxes
recognized in the July 31, 1998 and September 30, 1997 balance sheets are as
follows (in thousands):
<TABLE>
<CAPTION>
July 31, September 30,
1998 1997
-------- -------------
<S> <C> <C>
Net current deferred income tax asset............... $12,126 $24,500
Net noncurrent deferred income tax liability........ 79,347 85,737
------- -------
Net deferred income tax liability................... $67,221 $61,237
======= =======
</TABLE>
F-16
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Significant components of the provision for income taxes from continuing
operations are as follows (in thousands):
<TABLE>
<CAPTION>
Ten Months Year Ended Year Ended
Ended July September 30, September 30,
31, 1998 1997 1996
---------- ------------- -------------
<S> <C> <C> <C>
Current:
Federal......................... $ 1,157 $ 622 $1,193
State........................... 1,082 277 175
------- ------- ------
Total current................. 2,239 899 1,368
Deferred:
Federal......................... 17,173 6,850 2,065
State........................... 1,920 727 435
------- ------- ------
Total deferred................ 19,093 7,577 2,500
Tax Benefit Related to Exercise of
Stock Options and Restricted
Stock............................ 7,814 5,509 355
------- ------- ------
$29,146 $13,985 $4,223
======= ======= ======
</TABLE>
A reconciliation of the income tax provision from continuing operations and
the amount computed by applying the U.S. federal statutory income tax rate to
income from continuing operations before income taxes is as follows:
<TABLE>
<CAPTION>
Ten Months
Ended Year Ended Year Ended
July 31, September 30, September 30,
1998 1997 1996
---------- ------------- -------------
<S> <C> <C> <C>
At U.S. federal income tax rate... 35.0 % 35.0 % 35.0 %
State income tax, net of federal
benefit.......................... 4.8 % 3.3 % 4.7 %
Goodwill and Excess Reorganization
Value amortization............... 1.8 % 3.8 % 8.6 %
Other............................. (0.1)% (0.6)% (1.2)%
---- ---- ----
41.5 % 41.5 % 47.1 %
==== ==== ====
</TABLE>
10. Related Party Transactions
Corporate expense includes an annual fee of $500,000 for management services
provided by an affiliate of the majority holder of the Company's Class A Common
Stock. This fee is generally settled partially through use of the Company's
facilities and partially in cash. The fee for the ten-months ended July 31,
1998 and the years ended September 30, 1997 and 1996 was $417,000, $500,000 and
$500,000, respectively. At July 31, 1998, the Company's liability with respect
to this arrangement was $960,000.
Vail Associates has the right to appoint 4 of 9 directors of the Beaver
Creek Resort Company of Colorado ("Resort Company"), a non-profit entity formed
for the benefit of property owners and certain others in Beaver Creek. Vail
Associates has a management agreement with the Resort Company, renewable for
one-year periods, to provide management services on a fixed fee basis. During
fiscal years 1991 through 1998, the Resort Company was able to meet its
operating requirements through its own operations. Management fees and
reimbursement of operating expenses paid to the Company under its agreement
with the Resort Company during fiscal years 1998, 1997 and 1996 totaled $4.7
million, $4.9 million and $5.5 million, respectively. Related amounts due the
Company at July 31, 1998 were $109,000.
F-17
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In 1991, the Company loaned to Andrew P. Daly, the Company's President,
$300,000, $150,000 of which bears interest at 9% and the remainder of which is
non-interest bearing. The principal sum plus accrued interest is due no later
than one year following the termination, for any reason, of Mr. Daly's
employment with the Company. The proceeds of the loan were used to finance the
purchase and improvement of real property. The loan is secured by a deed of
trust on such property.
In 1995, Mr. Daly's spouse and James P. Thompson, President of VRDC, and his
spouse received financial terms more favorable than those available to the
general public in connection with their purchase of lots in the Bachelor Gulch
development. Rather than payment of an earnest money deposit with the entire
balance due in cash at closing, these contracts provide for no earnest money
deposit with the entire purchase price (which was below fair market value) paid
under promissory notes of $438,750 and $350,000 for Mr. Daly's spouse and Mr.
and Mrs. Thompson, respectively. Each are secured by a first deed of trust and
amortized over 25 years at 8% per annum interest, with a balloon payment due on
the earlier of five years from the date of closing or one year from the date
employment with the Company is terminated. The promissory notes were executed
upon the closings of the lot sales in December 1996.
11. Commitments and Contingencies
Smith Creek Metropolitan District ("SCMD") and Bachelor Gulch Metropolitan
District ("BGMD") were organized in November 1994 to cooperate in the
financing, construction and operation of basic public infrastructure serving
the Company's Bachelor Gulch Village development. SCMD was organized primarily
to own, operate and maintain water, street, traffic and safety, transportation,
fire protection, parks and recreation, television relay and translation,
sanitation and certain other facilities and equipment of the BGMD. SCMD is
comprised of approximately 150 acres of open space land owned by the Company
and members of the Board of Directors of the SCMD. In two planned unit
developments, Eagle County has granted zoning approval for 1,395 dwelling units
within Bachelor Gulch Village, including various single family homesites,
cluster homes and townhomes, and lodging units. As of July 31, 1998, the
Company has sold 102 single family homesites and 5 parcels to developers for
the construction of various types of dwelling units. Currently, SCMD has
outstanding $44.5 million of variable rate revenue bonds maturing on October 1,
2035, which have been enhanced with a $47.2 million letter of credit issued
against the Company's Revolving Credit Facility. It is anticipated that as the
Bachelor Gulch community expands, BGMD will become self supporting and that
within 25 to 30 years will issue general obligation bonds, the proceeds of
which will be used to retire the SCMD revenue bonds. Until that time, the
Company has agreed to subsidize the interest payments on the SCMD revenue
bonds. The Company has estimated that the present value of this aggregate
subsidy to be $15.6 million at July 31, 1998. The Company has allocated $9.6
million of that amount to the Bachelor Gulch Village homesites which were sold
as of July 31, 1998 and has recorded that amount as a liability in the
accompanying financial statements. The total subsidy incurred as of July 31,
1998 and 1997 was $2.9 million and $1.4 million, respectively.
At July 31, 1998, the Company had various other letters of credit
outstanding in the aggregate amount of $17.2 million.
The Company has executed as lessee operating leases for the rental of office
space, employee residential units and office equipment though fiscal 2008. For
the ten-month period ended July 31, 1998, and the years ended September 30,
1997 and 1996, lease expense related to these agreements of $6.4 million, $6.2
million and $3.8 million, respectively, which is included in the accompanying
consolidated statements of operations.
F-18
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future minimum lease payments under these leases as of July 31, 1998 are as
follows:
<TABLE>
<S> <C>
Due during fiscal year ending July 31:
1999............................................................. $ 4,334,493
2000............................................................. 2,992,051
2001............................................................. 2,563,510
2002............................................................. 1,743,934
2003............................................................. 1,689,097
Thereafter....................................................... 6,174,261
-----------
Total.......................................................... $19,497,346
===========
</TABLE>
The Company is a party to various lawsuits arising in the ordinary course of
business. In the opinion of management, all matters are adequately covered by
insurance or, if not covered, are without merit or are of such kind, or involve
such amounts as would not have a material effect on the financial position,
results of operations and cash flows of the Company if disposed of unfavorably.
12. Business Segments
The Company currently operates in two business segments, Resort and Real
Estate. Data by segment is as follows:
<TABLE>
<CAPTION>
Ten Months
Ended Year Ended Year Ended
July 31, September 30, September 30,
1998 1997 1996
---------- ------------- -------------
<S> <C> <C> <C>
Net Revenues:
Resort........................... $336,547 $259,038 $140,288
Real Estate...................... 73,722 71,485 48,665
-------- -------- --------
$410,269 $330,523 $188,943
======== ======== ========
Income from operations:
Resort........................... $ 81,945 $ 52,279 $ 32,250
Real Estate...................... 11,103 5,178 7,854
Corporate........................ (4,437) (4,663) (12,698)
-------- -------- --------
$ 88,611 $ 52,794 $ 27,406
======== ======== ========
Depreciation and amortization:
Resort........................... $ 36,838 $ 34,044 $ 18,148
Real Estate...................... -- -- --
-------- -------- --------
$ 36,838 $ 34,044 $ 18,148
======== ======== ========
Capital expenditures:
Resort........................... $ 80,454 $ 51,020 $ 13,912
Real Estate...................... 15,661 56,947 40,604
-------- -------- --------
$ 96,115 $107,967 $ 54,516
======== ======== ========
<CAPTION>
July 31, September 30, September 30,
1998 1997 1996
---------- ------------- -------------
<S> <C> <C> <C>
Identifiable assets:
Resort........................... $501,371 $411,117 $197,279
Real Estate...................... 138,916 154,925 84,055
-------- -------- --------
$640,287 $566,042 $281,334
======== ======== ========
</TABLE>
F-19
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Stock Compensation Plans
At July 31, 1998, the Company has two stock-based compensation plans, which
are described below. The Company applies APB Opinion No. 25 and related
Interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock option plans. Had compensation cost for
the Company's two stock-based compensation plans been determined consistent
with SFAS No. 123, "Accounting for Stock Based Compensation", the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
July
31, September 30, September 30,
1998 1997 1996
------- ------------- -------------
<S> <C> <C> <C>
Net income
As Reported.......................... $41,018 $19,698 $4,735
Pro forma............................ $39,320 $18,211 $4,420
Basic net income per share
As Reported.......................... $ 1.20 $ 0.66 $ 0.23
Pro forma............................ $ 1.15 $ 0.61 $ 0.22
Diluted net income per share
As Reported.......................... $ 1.18 $ 0.64 $ 0.22
Pro forma............................ $ 1.13 $ 0.59 $ 0.21
</TABLE>
The Company has two fixed option plans. Under the 1993 Plan, options
covering an aggregate of 2,045,510 shares of Common Stock may be issued to key
employees, directors, consultants, and advisors of the Company or its
subsidiaries and vest in equal installments over five years. Under the 1996
Plan, 1,500,000 shares of Common Stock may be issued to key employees,
directors, consultants, and advisors of the Company or its subsidiaries and
vest in equal installments over three to five years. Under both plans, the
exercise price of each option equals the market price of the Company's stock on
the date of the grant, and an option's maximum term is ten years.
F-20
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively: dividend
yield of 0% for each year, and expected volatility of 14.7%, 29.8% and 29.8%;
risk-free interest rates ranging from 5.49% to 6.61%, 5.66% to 6.68% and 5.66%
to 6.68%; and expected lives ranging from 6 to 8 years for each year. A summary
of the status of the Company's two fixed stock option plans as of July 31, 1998
and September 30, 1997 and 1996 and changes during the years ended on those
dates is presented below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Weighted
Shares Average
Subject Exercise
Fixed Options to Option Price
-------------------------------------------------------- --------- --------
<S> <C> <C>
Balance at September 30, 1995........................... 2,033 $ 8
Granted............................................... 1,711 13
Exercised............................................. -- --
Forfeited............................................. (18) 7
------
Balance at September 30, 1996........................... 3,726 10
Granted............................................... 795 23
Exercised............................................. (1,573) 11
Forfeited............................................. (39) 10
------
Balance at September 30, 1997........................... 2,909 15
Granted............................................... 96 28
Exercised............................................. (1,043) 8
Forfeited............................................. (125) 17
------
Balance at July 31, 1998................................ 1,837 $18
======
</TABLE>
The following table summarizes information about fixed stock options
outstanding at July 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------- --------------------------
Weighted-Average Weighted- Weighted-
Exercise Shares Remaining Average Shares Average
Price Range Outstanding Contractural Life Exercise Price Exercisable Exercise Price
- ----------- ----------- ----------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 6-11 701,963 5.6 $ 9.06 616,363 $ 8.84
$20-25 1,065,000 8.6 22.44 353,667 22.00
$26-29 70,000 9.7 27.47 --
--------- -------
$ 6-29 1,836,963 7.5 $17.55 970,030 $13.64
========= =======
</TABLE>
During fiscal years 1997 and 1996, the Company granted restricted stock to
certain executives under the 1996 Plan. The aggregate number of shares granted
totaled 12,000 and 62,000 in fiscal 1997 and 1996, respectively. The shares
vest in equal increments over periods ranging from three to five years.
Compensation expense related to these restricted stock awards is charged
ratably over the respective vesting periods. No restricted stock was granted
during fiscal 1998, however 8,260 vested shares were issued.
14. Capital Stock
The Company has two classes of Common Stock outstanding, Class A Common
Stock and Common Stock. The rights of holders of Class A Common Stock and
Common Stock are substantially identical, except that, while any Class A Common
Stock is outstanding, holders of Class A Common Stock elect a class of
directors that constitutes two-thirds of the Board and holders of Common Stock
elect another class of directors
F-21
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
constituting one-third of the Board. At July 31, 1998 and September 30, 1997,
one shareholder owned substantially all of the Class A Common Stock and as a
result, has effective control of the Company's Board of Directors. The Class A
Common Stock is convertible into Common Stock (i) at the option of the holder,
(ii) automatically, upon transfer to a non-affiliate and (iii) automatically if
less than 5,000,000 shares (as such number shall be adjusted by reason of any
stock split, reclassification or other similar transaction) of Class A Common
Stock are outstanding. The Common Stock is not convertible. Each outstanding
share of Class A Common Stock and Common Stock is entitled to vote on all
matters submitted to a vote of stockholders. A 4,000,000 share block of Class A
Common stock was converted to Common Stock during Fiscal 1998 as they were sold
to a non-affiliated company of the prior holder.
15. Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Fiscal 1998 ten-month transition period
-----------------------------------------
Three Three
Ten Months Months Months Four Months
Ended Ended Ended Ended
July 31, July 31, April January 31,
1998 1998 30, 1998 1998
---------- -------- -------- -----------
<S> <C> <C> <C> <C>
Resort revenue...................... $336,547 $ 26,303 $170,051 $140,193
Real estate revenue................. 73,722 18,417 3,912 51,393
Total revenue....................... 410,269 44,720 173,963 191,586
Income from operations.............. 88,611 (21,767) 75,226 35,152
Net income (loss)................... 41,018 (16,784) 41,663 16,139
Basic net income (loss) per common
share.............................. $ 1.20 $ (0.49) $ 1.21 $ 0.47
Diluted net income (loss) per common
share.............................. $ 1.18 $ (0.48) $ 1.20 $ 0.47
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1997
--------------------------------------------------------------
Three
Twelve Months Three Months Months Three Three Months
Ended Ended Ended Months Ended
September 30, September 30, June 30, Ended March December 31,
1997 1997 1997 31, 1997 1996
------------- ------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Resort revenue.......... $259,038 $ 22,840 $ 28,031 $173,056 $ 35,111
Real estate revenue..... 71,485 9,596 9,878 2,229 49,782
Total revenue........... 330,523 32,436 37,909 175,285 84,893
Income from operations.. 52,794 (22,578) (17,701) 81,407 11,666
Net income (loss)....... 19,698 (15,937) (13,895) 44,463 5,067
Basic net income (loss)
per common share....... $ 0.66 $ (0.48) $ (0.42) $ 1.42 $ 0.24
Diluted net income
(loss)
per common share....... $ 0.64 $ (0.47) $ (0.40) $ 1.38 $ 0.23
During fiscal year 1998, the Company changed its fiscal year end from
September 30 to July 31. Quarterly results restated for twelve-months ended
July 31, 1998 are as follows:
<CAPTION>
Fiscal 1998
--------------------------------------------------------------
Three- Three-
Months Months Three-
Twelve-Months Three- Months Ended Ended Months Ended
Ended Ended April January 31, October 31,
July 31, 1998 July 31, 1998 30, 1998 1998 1997
------------- ------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Resort revenue.......... $350,498 $ 26,303 $170,051 $136,322 $ 17,822
Real estate revenue..... 84,177 18,417 3,912 51,158 10,690
Total revenue........... 434,675 44,720 173,963 187,480 28,512
Income from operations.. $ 73,221 $(21,767) $ 75,226 $ 50,045 $(30,283)
Net income (loss)....... 30,073 (16,784) 41,663 25,946 (20,752)
Basic net income (loss)
per common share....... $ 0.88 $ (0.49) $ 1.21 $ 0.76 $ (0.61)
Diluted net income
(loss) per common
share.................. $ 0.87 $ (0.48) $ 1.20 $ 0.75 $ (0.59)
</TABLE>
F-22
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company's payment obligations under the 8 3/4% Senior Subordinated
Notes due 2009, are fully and unconditionally guaranteed on a joint and
several, senior subordinated basis by all of the Company's consolidated
subsidiaries (collectively, and excluding the Non-Guarantor Subsidiaries (as
defined below) the "Guarantor Subsidiaries") except for SSI Venture LLC and
Vail Associates Investments, Inc. (together, the "Non-Guarantor Subsidiaries").
SSI Venture LLC is a 51.9% owned joint venture which owns and operates certain
retail and rental operations. Vail Associates Investments, Inc. is a 100% owned
corporation which owns real estate held for sale.
As SSI Venture LLC began operations on August 1, 1998, no financial
information for SSI Venture LLC existed prior to that date. In addition, in the
Company's opinion, the financial information of Vail Associates Investments,
Inc. as of and prior to July 31, 1998 is immaterial to the financial position
of the Company and would not have provided additional meaningful information to
investors. Therefore, the Company has not presented herein comparative
consolidated financial information of the Guarantor Subsidiaries and Non-
Guarantor Subsidiaries.
17. Subsequent Events
On August 1, 1998 the Company entered into a joint venture with one of the
largest retailers of ski and golf-related sporting goods in Colorado. The two
companies merged their retail operations into a joint venture to be known as
SSI Venture LLC. The Company contributed its retail and rental operations to
the joint venture for a 51.9% share of the joint venture. Specialty Sports,
Inc. contributed an additional 30 stores located in Denver, Boulder, Aspen,
Telluride, Vail and Breckenridge. The owners and operators of Specialty Sports,
Inc., the Gart family, have been operating in the sporting goods industry in
Colorado since 1929 and will run the day-to-day operations of SSI Venture LLC.
Vail Resorts will participate in the strategic and financial management of the
joint venture.
On August 13, 1998 the Company purchased 100% of the outstanding stock of
The Village at Breckenridge Acquisition Corp., Inc. and Property Management
Acquisition Corp., Inc. (collectively, "VAB"), for a total purchase price of
$33.8 million. VAB owns and operates The Village at Breckenridge, which is
strategically located at the base of Peak 9 at Breckenridge Mountain Resort.
Included in the acquisition were the 60-room Village Hotel, the 71-room
Breckenridge Mountain Lodge, two property management companies which currently
hold contracts for 360 condominium units, eight restaurants, approximately
28,000 square-feet of retail space leased to third parties, and approximately
32,000 square feet of convention and meeting space. In addition, the
acquisition includes the Maggie Building, that is generally considered to be
the prime base lodge of Breckenridge Mountain Resort, but until now, has
neither been owned nor managed by the Company. This transaction also included
VAB's other Breckenridge assets, including the Bell Tower Mall and certain
other real estate parcels for near-term development. Simultaneously, the
Company has entered into a contract to sell these same assets for $10 million
to East West Partners of Avon, Colorado, a highly-experienced mountain resort
real estate developer. The acquisition was funded with proceeds from our credit
facility.
F-23
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
April 30, July 31,
1999 1998
---------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................ $ 10,063 $ 19,512
Receivables.............................................. 47,917 26,487
Inventories.............................................. 19,581 8,893
Deferred income taxes.................................... 12,126 12,126
Other current assets..................................... 4,717 4,708
---------- --------
Total current assets................................. 94,404 71,726
Property, plant and equipment, net....................... 553,104 501,371
Real estate held for sale................................ 152,141 138,916
Deferred charges and other assets........................ 19,028 13,977
Intangible assets, net................................... 196,133 186,132
---------- --------
Total assets......................................... $1,014,810 $912,122
========== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses.................... $ 89,419 $ 55,012
Income taxes payable..................................... 2,239 2,239
Long-term debt due within one year (Note 6).............. 530 1,734
---------- --------
Total current liabilities............................ 92,188 58,985
Long-term debt (Note 6).................................. 293,332 282,280
Other long-term liabilities.............................. 28,398 28,886
Deferred income taxes.................................... 101,338 79,347
Commitments and contingencies (Note 3)................... -- --
Minority interest in net assets of consolidated joint
venture................................................. 9,582 --
Stockholders' equity:
Common stock
Class A common stock, $.01 par value, 20,000,000 shares
authorized, 7,439,834 and 7,639,834 shares issued and
outstanding at April 30, 1999 and July 31, 1998,
respectively.......................................... 74 76
Common stock, $.01 par value, 80,000,000 shares
authorized, 27,087,701 and 26,817,346 shares issued
and outstanding at April 30, 1999 and July 31, 1998,
respectively.......................................... 271 269
Additional paid-in capital............................... 402,592 401,563
Retained earnings........................................ 87,035 60,716
---------- --------
Total stockholders' equity........................... 489,972 462,624
---------- --------
Total liabilities and stockholders' equity........... $1,014,810 $912,122
========== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-24
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
April 30, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Net revenues:
Resort......................................... $188,220 $170,051
Real estate.................................... 14,022 3,912
-------- --------
Total net revenues........................... 202,242 173,963
Operating expenses:
Resort......................................... 111,097 82,413
Real estate.................................... 14,108 3,292
Corporate expense.............................. 1,733 1,544
Depreciation and amortization.................. 13,434 11,488
-------- --------
Total operating expenses..................... 140,372 98,737
-------- --------
Income from operations........................... 61,870 75,226
Other income (expense):
Investment income.............................. 738 570
Interest expense............................... (5,755) (4,869)
Gain on disposal of fixed assets............... 18 378
Other expense.................................. (9) (101)
Minority interest in consolidated joint
venture....................................... (1,914) --
-------- --------
Income before income taxes..................... 54,948 71,204
Provision for income taxes..................... (24,701) (29,541)
-------- --------
Net income..................................... $ 30,247 $ 41,663
======== ========
Net income per common share (Note 4):
Basic.......................................... $ 0.87 $ 1.21
-------- --------
Diluted........................................ $ 0.87 $ 1.20
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-25
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
April 30, April 30,
1999 1998
----------- -----------
<S> <C> <C>
Net revenues:
Resort................................................ $379,346 $324,195
Real estate........................................... 31,409 65,760
-------- --------
Total net revenues.................................. 410,755 389,955
Operating expenses:
Resort................................................ 273,900 200,552
Real estate........................................... 26,248 58,939
Corporate expense..................................... 4,555 4,313
Depreciation and amortization......................... 38,181 31,163
-------- --------
Total operating expenses............................ 342,884 294,967
-------- --------
Income from operations.................................. 67,871 94,988
Other income (expense):
Investment income..................................... 1,643 1,665
Interest expense...................................... (17,593) (16,064)
Gain on disposal of fixed assets...................... 44 296
Other income (expense)................................ 130 (802)
Minority interest in consolidated joint venture....... (3,715) --
-------- --------
Income before income taxes.............................. 48,380 80,083
Provision for income taxes.............................. (22,061) (33,226)
-------- --------
Net income.............................................. $ 26,319 $ 46,857
======== ========
Net income per common share (Note 4):
Basic................................................. $ 0.76 $ 1.37
======== ========
Diluted............................................... $ 0.76 $ 1.35
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-26
<PAGE>
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
April 30, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................... $ 26,319 $ 46,857
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 38,181 31,163
Non-cash cost of real estate sales............ 8,326 47,397
Non-cash compensation related to stock
grants....................................... 268 268
Non-cash equity (income) loss................. 1,424 (2,769)
Deferred financing costs amortized............ 448 440
Gain on disposal of fixed assets.............. (44) (296)
Deferred income taxes, net.................... 22,061 33,226
Minority interest in consolidated joint
venture...................................... 3,715 --
Changes in assets and liabilities:
Accounts receivable, net...................... (20,420) (10,166)
Inventories................................... (6,074) (989)
Accounts payable and accrued expenses......... 29,652 588
Other assets and liabilities.................. (2,550) (9,496)
-------- --------
Net cash provided by operating activities... 101,306 136,223
Cash flows from investing activities:
Cash paid in hotel acquisitions, net of cash
acquired..................................... (33,800) (54,250)
Cash paid by consolidated joint venture in
acquisition of retail operations............. (10,516) --
Resort capital expenditures................... (53,691) (79,853)
Investments in real estate.................... (22,850) (17,403)
-------- --------
Net cash used in investing activities....... (120,857) (151,506)
Cash flows from financing activities:
Refund of development bond reserve fund....... -- 3,297
Proceeds from the exercise of stock options... 628 6,919
Payments under Rights......................... -- (5,707)
Proceeds from borrowings under long-term
debt......................................... 132,866 331,297
Payments on long-term debt.................... (123,392) (319,058)
-------- --------
Net cash provided by financing activities... 10,102 16,748
-------- --------
Net (decrease) increase in cash and cash
equivalents.................................... (9,449) 1,465
Cash and cash equivalents:
Beginning of period........................... 19,512 10,217
-------- --------
End of period................................. $ 10,063 $ 11,682
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-27
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Vail Resorts, Inc., a Delaware corporation ("Vail Resorts"), is a holding
company and operates through various subsidiaries. Vail Resorts and its
subsidiaries (collectively, the "Company") currently operate in two business
segments: resorts and real estate development. The Vail Corporation, a wholly-
owned subsidiary of Vail Resorts, and its subsidiaries (collectively, "Vail
Associates") operate four of the world's largest skiing facilities on Vail,
Breckenridge, Keystone and Beaver Creek mountains in Colorado. Vail Resorts
Development Company ("VRDC"), a wholly owned subsidiary of Vail Associates,
conducts the Company's real estate development activities. The Company's resort
business, which is currently composed primarily of ski operations and related
amenities, is seasonal in nature with a typical ski season beginning in mid-
October to early November and continuing through late April to mid-May.
In the opinion of the Company, the accompanying consolidated condensed
financial statements reflect all adjustments necessary to present fairly the
Company's financial position, results of operations and cash flows for the
interim periods presented. All such adjustments are of a normal recurring
nature. Results for interim periods are not indicative of the results for the
entire year. The accompanying consolidated financial statements should be read
in conjunction with the audited consolidated financial statements for the year
ended July 31, 1998, included in the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 1998.
2. Accounting Policies
The Company adopted the provisions of SFAS 130, "Reporting Comprehensive
Income" as of August 1, 1998. SFAS 130 establishes standards for reporting and
display of comprehensive income and its components in a full set of general-
purpose financial statements. The adoption of this statement had no impact on
the Company's financial statements, as there are no differences between net
income and comprehensive income for the periods reported herein.
3. Commitments and Contingencies
Smith Creek Metropolitan District ("SCMD") and Bachelor Gulch Metropolitan
District ("BGMD") were organized in November 1994 to cooperate in the
financing, construction and operation of basic public infrastructure serving
the Company's Bachelor Gulch Village development. SCMD was organized primarily
to own, operate and maintain water, street, traffic and safety, transportation,
fire protection, parks and recreation, television relay and translation,
sanitation and certain other facilities and equipment of BGMD. SCMD is
comprised of approximately 150 acres of open space land owned by the Company
and members of the Board of Directors of SCMD. In two planned unit
developments, Eagle County has granted zoning approval for 1,395 dwelling units
within Bachelor Gulch Village, including various single family homesites,
cluster homes, townhomes, and lodging units. As of April 30, 1999, the Company
has sold 104 single-family homesites and six parcels to developers for the
construction of various types of dwelling units. Currently, SCMD has
outstanding $44.5 million of variable rate revenue bonds maturing on October 1,
2035, which have been enhanced with a $47.2 million letter of credit issued
against the Company's Credit Facility as defined herein. It is anticipated that
as the Bachelor Gulch community expands, BGMD will become self supporting and
that within 25 to 30 years will issue general obligation bonds, the proceeds of
which will be used to retire the SCMD revenue bonds. Until that time, the
Company has agreed to subsidize the interest payments on the SCMD revenue
bonds. The Company has estimated that the present value of this aggregate
subsidy to be $14.3 million at April 30, 1999. The Company has allocated $10.3
million of that amount to the Bachelor Gulch Village homesites which were sold
as of April 30, 1999 and has recorded that amount as a liability in the
accompanying financial statements. The total subsidy incurred as of April 30,
1999 and July 31, 1998 was $3.6 million and $2.9 million, respectively.
F-28
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
At April 30, 1999, the Company had various other letters of credit
outstanding in the aggregate amount of $17.7 million.
On October 19, 1998, fires on Vail Mountain destroyed certain of the
Company's facilities including the Ski Patrol Headquarters, a day skier
shelter, the Two Elk Lodge restaurant and the chairlift drive housing for the
High Noon Lift (Chair #5). Chair #5 and three other chairlifts, which sustained
minor damage, have been repaired and are currently fully operational. All of
the facilities damaged are fully covered by the Company's property insurance
policy. Although the Company is unable to estimate the total amount which will
be recovered through insurance proceeds, the Company does not expect to record
a loss related to the property damage. The incident is also covered under the
Company's business interruption insurance policy. The Company is unable to
estimate at this time the impact the incident will have in terms of business
interruption, however the Company expects the incident will not have a material
impact on its results of operations and cash flows due to mitigating measures
being undertaken by the Company and the insurance coverage.
The Company has executed as lessee operating leases for the rental of office
space, employee residential units and office equipment though fiscal 2008. For
the nine months ended April 30, 1999, and April 30, 1998, lease expense related
to these agreements of $4.8 million and $5.4 million, respectively, was
recorded and is included in the accompanying consolidated statements of
operations.
Future minimum lease payments under these leases as of April 30, 1999 are as
follows:
Due during fiscal year ending July 31:
<TABLE>
<S> <C>
1999............................................................. $ 1,332,451
2000............................................................. 2,992,051
2001............................................................. 2,563,510
2002............................................................. 1,743,934
2003............................................................. 1,689,097
Thereafter....................................................... 6,174,261
-----------
Total.......................................................... $16,495,304
===========
</TABLE>
The Company is a party to various lawsuits arising in the ordinary course of
business. In the opinion of management, all matters are adequately covered by
insurance or, if not covered, are without merit or are of such kind, or involve
such amounts as would not have a material effect on the financial position,
results of operations and cash flows of the Company if disposed of unfavorably.
F-29
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
4. Net Earnings Per Common Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income available to common shareholders by the weighted average
shares outstanding. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised
resulting in the issuance of common shares that would then share in the
earnings of the Company.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, 1999 April 30, 1999
--------------------------------------------
(In thousands, except per share amounts)
Basic Diluted Basic Diluted
---------- --------------------- -----------
<S> <C> <C> <C> <C>
Net earnings per common share:
Net earnings..................... $ 30,247 $ 30,247 $ 26,319 $ 26,319
Weighted average shares
outstanding..................... 34,571 34,571 34,557 34,557
Effect of dilutive stock
options......................... -- 196 -- 252
---------- ---------- ---------- ----------
Total shares................... 34,571 34,767 34,557
</TABLE>
34,809
<TABLE>
<S> <C> <C> <C> <C>
---------- ---------- ---------- ----------
Net earnings per common share.... $ 0.87 $ 0.87 $ 0.76 $ 0.76
========== ========== ========== ==========
<CAPTION>
Three Months Ended Nine Months Ended
April 30, 1998 April 30, 1998
--------------------------------------------
(In thousands, except per share amounts)
Basic Diluted Basic Diluted
---------- --------------------- -----------
<S> <C> <C> <C> <C>
Net earnings per common share:
Net earnings..................... $ 41,663 $ 41,663 $ 46,857 $ 46,857
Weighted average shares
outstanding..................... 34,303 34,303 34,183 34,183
Effect of dilutive stock
options......................... -- 480 -- 458
---------- ---------- ---------- ----------
Total shares................... 34,303 34,783 34,183 34,641
---------- ---------- ---------- ----------
Net earnings per common share.... $ 1.21 $ 1.20 $ 1.37 $ 1.35
========== ========== ========== ==========
</TABLE>
5. Acquisitions and Business Combinations
On August 1, 1998, the Company entered into a joint venture with one of the
largest retailers of ski- and golf-related sporting goods in Colorado. The two
companies merged their retail operations into a joint venture named SSI Venture
LLC. The Company contributed its retail and rental operations to the joint
venture and holds a 51.9% share of the joint venture. Specialty Sports, Inc.
contributed 30 stores located in Denver, Boulder, Aspen, Telluride, Vail and
Breckenridge to the joint venture and holds a 48.1% share in the joint venture.
The owners and operators of Specialty Sports, Inc., the Gart family, have been
operating in the sporting goods industry in Colorado since 1929 and run the
day-to-day operations of SSI Venture LLC. Vail Resorts participates in the
strategic and financial management of the joint venture. SSI Venture LLC is a
fully consolidated entity in the Company's accompanying financial statements
with the minority interest in earnings and net assets appropriately reflected
on the financial statements.
On August 13, 1998, the Company purchased 100% of the outstanding stock of
The Village at Breckenridge Acquisition Corp., Inc. and Property Management
Acquisition Corp., Inc. (collectively, "VAB") for a total purchase price of
$33.8 million. VAB owned and operated The Village at Breckenridge, which is
strategically located at the base of Peak 9 at Breckenridge Mountain Resort.
Included in the acquisition were the 60-room Village Hotel, the 71-room
Breckenridge Mountain Lodge, two property management companies
F-30
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
which currently hold contracts for approximately 360 condominium units, eight
restaurants, approximately 28,000 square feet of retail space leased to third
parties, and approximately 32,000 square feet of convention and meeting space.
In addition, the acquisition includes the Maggie Building, which is generally
considered to be the primary base lodge of Breckenridge Mountain Resort, but
until now had neither been owned nor managed by the Company. This transaction
also included VAB's other Breckenridge assets, including the Bell Tower Mall
and certain other real estate parcels which the Company sold on April 10, 1999,
to East West Partners of Avon, Colorado for $10 million. The acquisition was
funded with proceeds from the Company's revolving credit facility.
6. Long-Term Debt
Long-term debt as of April 30, 1999 and July 31, 1998 is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
April
30, July 31,
Maturity(d) 1999 1998
----------- -------- --------
<S> <C> <C> <C>
Industrial Development Bonds (a)................. 1999-2020 $ 63,200 $ 64,560
Credit Facilities (b)............................ 2003 266,688 218,000
Other (c)........................................ 1999-2028 4,974 1,454
-------- --------
293,862 284,014
Less: Maturities within 12 months................ 530 1,734
-------- --------
$293,332 $282,280
======== ========
</TABLE>
- --------
(a) The Company has $41.2 million of outstanding Industrial Development Bonds
(the "Industrial Development Bonds") issued by Eagle County, Colorado that
mature, subject to prior redemption, on August 1, 2019. These bonds accrue
interest at 6.95% per annum, with interest being payable semi-annually on
February 1 and August 1. In addition, the Company has outstanding two
series of refunding bonds. The Series 1990 Sports Facilities Refunding
Revenue Bonds have an aggregate outstanding principal amount of $19.0
million, which matures in installments in 2006 and 2008. These bonds bear
interest at a rate of 7.75% for bonds maturing in 2006 and 7.875% for bonds
maturing in 2008. The Series 1991 Sports Facilities Refunding Revenue Bonds
have an aggregate outstanding principal amount of $3 million and bear
interest at 7.125% for bonds maturing in 2002 and 7.375% for bonds maturing
in 2010.
(b) The Company's credit facilities consist of a revolving credit facility
("Credit Facility") that provides for debt financing up to an aggregate
principal amount of $450 million. Borrowings under the Credit Facility bear
interest annually at the Company's option at the rate of (i) LIBOR (4.90%
at April 30, 1999) plus a margin ranging from 0.50% to 1.25% or (ii) the
agent's prime lending rate, (7.75% at April 30, 1999) plus a margin of up
to 0.125%. The Company also pays a quarterly unused commitment fee ranging
from 0.125% to 0.30%. The interest margins fluctuate based upon the ratio
of the Company's total Funded Debt to the Company's Resort EBITDA (as
defined in the underlying Credit Facility). The Credit Facility matures on
December 19, 2002.
On December 30, 1998, SSI Venture LLC established a credit facility ("SSV
Facility") that provides debt financing up to an aggregate principal amount of
$20 million. The SSV Facility consists of (i) a $10 million Tranche A Revolving
Credit Facility and (ii) a $10 million Tranche B Term Loan Facility. The SSV
Facility matures on the earlier of December 31, 2003 or the termination date of
the Credit Facility discussed above. Vail Associates guarantees the SSV
Facility. Minimum amortization under the Tranche B Term Loan Facility is
$625,000, $1.38 million, $1.75 million, $2.25 million, $2.63 million, and $1.38
million during the fiscal years
F-31
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
1999, 2000, 2001, 2002, 2003, and 2004, respectively. The SSV Facility bears
interest annually at the rates prescribed above for the Credit Facility. SSI
Venture LLC also pays a quarterly unused commitment fee at the same rates as
the unused commitment fee for the Credit Facility.
(c) Other obligations bear interest at rates ranging from 0.0% to 6.5% and have
maturities ranging from 1999-2028.
(d) Maturity years based on fiscal year end July 31.
Aggregate maturities for debt outstanding are as follows (in thousands):
<TABLE>
<CAPTION>
As of
April
30,
1999
Due during fiscal years ending July 31: --------
<S> <C>
1999................................................................ $ 340
2000................................................................ 548
2001................................................................ 430
2002................................................................ 439
2003................................................................ 227,243
Thereafter.......................................................... 64,862
--------
Total Debt........................................................ $293,862
========
</TABLE>
7. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company's payment obligations under the 8 3/4% Senior Subordinated Notes
due 2009 (see Note 8), are fully and unconditionally guaranteed on a joint and
several, senior subordinated basis by all of the Company's consolidated
subsidiaries (collectively, and excluding the Non-Guarantor Subsidiaries (as
defined below), the "Guarantor Subsidiaries") except for SSI Venture, LLC and
Vail Associates Investments, Inc. (together, the Non-Guarantor Subsidiaries").
SSI Venture, LLC is a 51.9%-owned joint venture which owns and operates certain
retail and rental operations. Vail Associates Investments, Inc. is a 100%-owned
corporation which owns certain real estate held for sale.
Presented below is the consolidated condensed financial information of Vail
Resorts, Inc. (the "Parent Company"), the Guarantor Subsidiaries and the Non-
Guarantor Subsidiaries as of April 30, 1999 and for the nine months then ended.
As SSI Venture LLC began operations on August 1, 1998, no financial information
for SSI Venture, LLC existed prior to that date. In addition, in the Company's
opinion, the financial information of Vail Associates Investments, Inc. as of
and prior to July 31, 1998 is immaterial to the financial position of the
Company and would not provide additional meaningful Information to investors.
Therefore, the Company has not presented herein comparative consolidated
condensed financial information for the nine months ended April 30, 1998.
Investments in Subsidiaries are accounted for by the Parent Company and
Guarantor Subsidiaries using the equity method of accounting. Net income of
Guarantor and Non-Guarantor Subsidiaries is, therefore, reflected in the Parent
Company's and Guarantor Subsidiaries' investments in and advances to (from)
Subsidiaries. Net income of the Guarantor and Non-Guarantor Subsidiaries is
reflected in Guarantor Subsidiaries and Parent Company as equity in
consolidated subsidiaries. The elimination entries eliminate investments in
Non-Guarantor Subsidiaries and intercompany balances and transactions.
F-32
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Supplemental Condensed Consolidating Balance Sheet
April 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equiva-
lents................ $ -- $ 9,246 $ 817 $ -- $ 10,063
Receivables........... 321 47,395 201 -- 47,917
Inventories, net...... -- 5,871 13,710 -- 19,581
Deferred income tax-
es................... 1,634 10,492 -- -- 12,126
Other current assets.. -- 4,454 657 -- 5,111
-------- ---------- ------- ---------- ----------
Total current
assets............. 1,955 77,458 15,385 -- 94,798
Property, plant and
equipment, net......... -- 541,758 11,346 -- 553,104
Real estate held for
sale................... -- 147,815 4,326 -- 152,141
Deferred charges and
other assets........... 373 18,111 544 -- 19,028
Intangible assets, net.. -- 183,898 12,235 -- 196,133
Investments in
subsidiaries and
advances to (from)
subsidiaries........... 492,091 195,112 (5,780) (681,423) --
-------- ---------- ------- ---------- ----------
Total assets........ $494,419 $1,164,152 $38,056 $ (681,423) $1,015,204
======== ========== ======= ========== ==========
Current liabilities:
Accounts payable and
accrued expenses..... $ 1,080 $ 80,409 $ 7,930 $ -- $ 89,419
Income taxes payable.. 2,239 -- -- -- 2,239
Long-term debt due
within one year...... -- 464 66 -- 530
-------- ---------- ------- ---------- ----------
Total current
liabilities........ 3,319 80,873 7,996 -- 92,188
Long-term debt.......... -- 283,644 9,688 -- 293,332
Other long-term
liabilities............ 1,128 27,270 -- -- 28,398
Deferred income taxes... -- 101,732 -- -- 101,732
Minority interest in net
assets of consolidated
joint venture.......... -- -- 9,582 -- 9,582
Total stockholders'
equity............. 489,972 670,633 10,790 (681,423) 489,972
-------- ---------- ------- ---------- ----------
Total liabilities
and stockholders'
equity............. $494,419 $1,164,152 $38,056 $ (681,423) $1,015,204
======== ========== ======= ========== ==========
</TABLE>
F-33
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Supplemental Condensed Consolidating Statement of Operations
For the Nine Months Ended April 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenues ......... $ -- $348,017 $64,326 $ (1,588) $410,755
Total operating expenses
....................... 916 287,545 56,011 (1,588) 342,884
------- -------- ------- --------- --------
Income (loss) from op-
erations ............ (916) 60,472 8,315 -- 67,871
Other income (expense)
....................... 187 (15,371) (592) -- (15,776)
Minority interest in net
income of consolidated
joint venture ......... -- -- (3,715) -- (3,715)
------- -------- ------- --------- --------
Income (loss) before
income taxes ........ (729) 45,101 4,008 -- 48,380
Benefit (provision)
for income taxes..... 332 (22,393) -- -- (22,061)
------- -------- ------- --------- --------
Net income (loss) be-
fore equity in income
of consolidated sub-
sidiaries ........... (397) 22,708 4,008 -- 26,319
Equity in income of con-
solidated subsidiaries
....................... 26,716 4,008 -- (30,724) --
------- -------- ------- --------- --------
Net income (loss) .... $26,319 $ 26,716 $ 4,008 $ (30,724) $ 26,319
======= ======== ======= ========= ========
</TABLE>
F-34
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Supplemental Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended April 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows provided by
(used in) operating
activities............. $(397) $ 92,142 $ 9,561 $ -- $ 101,306
Cash flows from
investing activities:
Cash paid in hotel
acquisitions, net of
cash acquired ....... -- (33,800) -- -- (33,800)
Cash paid by
consolidated joint
venture in
acquisition of retail
operations .......... -- -- (10,516) -- (10,516)
Resort capital
expenditures ........ -- (49,370) (4,321) -- (53,691)
Investments in real
estate .............. -- (22,850) -- -- (22,850)
----- --------- -------- ----- ---------
Net cash used in
investing
activities ........ -- (106,020) (14,837) -- (120,857)
Cash flows from
financing activities:
Proceeds from the
exercise of stock
options ............. 628 -- -- -- 628
Proceeds from
borrowings under
long-term debt ...... -- 128,020 4,846 -- 132,866
Payments on long-term
debt ................ -- (123,392) -- -- (123,392)
Advances to (from)
affiliates .......... (231) (1,016) 1,247 -- --
----- --------- -------- ----- ---------
Net cash provided by
financing
activities ........ 397 3,612 6,093 -- 10,102
----- --------- -------- ----- ---------
Net increase (decrease)
in cash and cash
equivalents ........... -- (10,266) 817 -- (9,449)
Cash and cash
equivalents:
Beginning of period .. -- 19,512 -- -- 19,512
----- --------- -------- ----- ---------
End of period ........ $ -- $ 9,246 $ 817 $ -- $ 10,063
===== ========= ======== ===== =========
</TABLE>
F-35
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
8. Subsequent Events
On June 14, 1999, the Company purchased 100% of the outstanding shares of
Grand Teton Lodge Company, a Wyoming corporation, from CSX Corporation for a
total purchase price of $50 million. The Grand Teton Lodge Company operates
four resort properties in northwestern Wyoming: Jenny Lake Lodge, Jackson Lake
Lodge, Colter Bay Village and Jackson Hole Golf & Tennis Club. Grand Teton
Lodge Company operates the first three properties, all located within Grand
Teton National Park, under a concessionaire contract with the National Park
Service. Jackson Hole Golf & Tennis Club is located outside the park on
property owned by Grand Teton Lodge Company and includes approximately 30 acres
of developable land.
The Company completed a $200 million private debt offering of Senior
Subordinated Notes (the "Notes") on May 11, 1999. The Notes have a fixed annual
interest rate of 8.75% which will be paid every six months on May 15 and
November 15, beginning November 15, 1999. The Notes will mature on May 15, 2009
and no principal payments are due to be paid until maturity. The Company has
certain early redemption options under the terms of the Notes. Substantially
all of the Company's subsidiaries have guaranteed the Notes. The Notes are
subordinated to certain of the Company's debts, including the Credit Facility,
and will be subordinated to certain of the Company's future debts. The proceeds
of the offering were used to reduce the Company's outstanding debt under the
Credit Facility. The private debt offering is not registered with the
Securities and Exchange Commission. Pursuant to the terms of the offering, the
Company will register with the Securities and Exchange Commission exchange
notes with substantially the same terms as the Notes to enable holders of the
Notes to make a market in the Notes.
In conjunction with the private debt offering the Company amended its Credit
Facility effective May 1, 1999. The amended Credit Facility provides the
Company additional financial flexibility. Borrowings under the amended Credit
Facility bear interest annually at the Company's option at the rate of (i)
LIBOR (4.90% at April 30, 1999) plus a margin ranging from 0.75% to 2.25% or
(ii) the agent's prime lending rate, (7.75% at April 30, 1999) plus a margin of
up to 0.75%. The Company also pays a quarterly unused commitment fee ranging
from 0.20% to 0.50%. The interest margins fluctuate based upon the ratio of the
Company's total Funded Debt to the Company's Resort EBITDA (as defined in the
underlying Credit Facility). The Credit Facility matures on December 19, 2002.
F-36
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must
not rely on any unauthorized information. This prospectus does not offer to
sell or buy any securities in any jurisdiction where it is unlawful. The infor-
mation in this prospectus is current as of , 1999.
--------------------
TABLE OF CONTENTS
--------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information...................................... i
Prospectus Summary....................................................... 1
Risk Factors............................................................. 13
Use of Proceeds ......................................................... 19
Capitalization........................................................... 19
Selected Consolidated Financial and Operating Data ...................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 36
Management............................................................... 51
Principal Stockholders................................................... 55
Description of Certain Indebtedness ..................................... 56
The Exchange Offer....................................................... 58
Description of Notes..................................................... 67
Plan of Distribution .................................................... 95
Certain Federal Income Tax Considerations................................ 96
Legal Matters ........................................................... 98
Experts.................................................................. 98
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$200,000,000
[LOGO OF VAIL RESORTS, INC.]
Exchange Offer for $200,000,000 Aggregate Principal Amount of 8 3/4% Senior
Subordinated Notes due 2009
------------
PROSPECTUS
------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") makes
provision for the indemnification of officers and directors of corporations in
terms sufficiently broad to indemnify the officers and directors of the
registrant under certain circumstances for liabilities (including reimbursement
of expenses incurred) arising under the Securities Act.
The Company's Restated Certificate of Incorporation (the "Certificate")
provides that to the fullest extent permitted by Delaware Law or another
applicable law, a director of the Company shall not be liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Under current Delaware Law, liability of a director may not be
limited (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and (iv)
for any transaction from which the director derives an improper personal
benefit. The effect of the provision of the Certificate is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any stockholder to seek
nonmonetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care. In addition, the Company's Restated Bylaws (the
"Bylaws") provide that the Company shall indemnify its directors, officers and
employees to the fullest extent permitted by applicable law.
The Bylaws provide that the Company may indemnify any person who is or was
involved in any manner or is threatened to be made so involved in any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
any action, suit or proceeding by or in the right of the registrant to procure
a judgment in its town), by reason of the fact that he is or was or had agreed
to become a director, officer or employee of the registrant or is or was or had
agreed to become at the request of the board or an officer of the registrant a
director, officer or employee of another corporation, partnership, joint
venture, trust or other entity against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such Proceeding.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
The following exhibits are either filed herewith or, if so indicated,
incorporated by reference to the documents indicated in parentheses which have
previously been filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation filed with the
Secretary of State of the State of Delaware on the Effective Date.
(Incorporated by reference to Exhibit 3.1 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
3.2 Amended and Restated By-Laws adopted on the Effective Date.
(Incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
4.1 Form of Class 2 Common Stock Registration Rights Agreements
between the Company and holders of Class 2 Common Stock.
(Incorporated by reference to Exhibit 4.13 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
4.2 Purchase Agreement, dated as of May 6, 1999 among the Vail
Resorts, Inc., the guarantors named on Schedule I thereto, and
Bear, Stearns & Co. Inc., Nationsbanc Montgomery Securities LLC,
BT Alex. Brown Incorporated, Lehman Brothers Inc. and Salomon
Smith Barney Inc.*
4.3 Indenture, dated as of May 11, 1999 among Vail Resorts, Inc., the
guarantors named therein and the United States Trust Company of
New York, as trustee.*
4.4 Form of Global Note (to be included in Exhibit 4.3).*
4.5 Registration Rights Agreement, dated as of May 11, 1999 among Vail
Resorts, Inc., the guarantors signatory thereto and Bear, Stearns
& Co. Inc., Nationsbanc Montgomery Securities LLC, BT Alex. Brown
Incorporated, Lehman Brothers Inc. and Salomon Smith Barney Inc.*
4.6 First Supplemental Indenture, dated as of August 27, 1999, among
the Company, the guarantors named therein and the United States
Trust Company of New York, as trustee.
5.1 Opinion of Cahill Gordon & Reindel as to the legality of the
exchange notes.*
5.2 Opinion of General Counsel to the Company as to the legality of
the guarantees.
12 Computation of Ratio of Earnings to Fixed Charges*
23.1 Consent of Arthur Andersen LLP, independent public accountants.
24.1 Power of Attorney (set forth on the signature pages to this
Registration Statement).*
25.1 Statement regarding eligibility of Trustee on Form T-1.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Previously filed.
Item 22. Undertakings.
The undersigned Registrants hereby undertake:
(1) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Company's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that it
incorporated by reference in the registration statement 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.
(2) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the undersigned registrants (the "Registrants")
pursuant to the foregoing provisions, 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 Registrants 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
II-2
<PAGE>
by such director, officer or controlling person in connection with the
securities being registered, the Registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, subject
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.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form S-4 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.
(5) 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 7th day of September, 1999.
VAIL RESORTS, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ Chief Executive Officer
Adam M. Aron and Director
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ (Principal Accounting
James P. Donohue Officer)
Director September 7, 1999
______________________________________
Antony P. Ressler
* Director September 7, 1999
______________________________________
Bruce H. Spector
Director September 7, 1999
______________________________________
Craig M. Cogut
Director September 7, 1999
______________________________________
Frank Biondi
* Director September 7, 1999
______________________________________
James S. Tisch
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director September 7, 1999
______________________________________
John F. Sorte
* Director September 7, 1999
______________________________________
John J. Ryan III
* Director September 7, 1999
______________________________________
Joseph M. Micheletto
* Director September 7, 1999
______________________________________
Leon D. Black
* Director September 7, 1999
______________________________________
Marc J. Rowan
* Director September 7, 1999
______________________________________
Robert A. Katz
* Director September 7, 1999
______________________________________
Stephen C. Hilbert
Director September 7, 1999
______________________________________
Thomas H. Lee
* Director September 7, 1999
______________________________________
William L. Mack
Director September 7, 1999
______________________________________
William Stiritz
</TABLE>
* By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
BEAVER CREEK ASSOCIATES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
----------------------------
Attorney-in-Fact
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
BEAVER CREEK CONSULTANTS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
----------------------------
Attorney-in-Fact
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
BEAVER CREEK FOOD SERVICES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Paul A. Testwuide (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
GHTV, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
GILLETT BROADCASTING, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
GILLETT BROADCASTING OF MARYLAND, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
GILLETT GROUP MANAGEMENT, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
KEYSTONE CONFERENCE SERVICES, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Senior Vice President and September 7, 1999
______________________________________ Director
John W. Rutter
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
KEYSTONE DEVELOPMENT SALES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President September 7, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
* Senior Vice President September 7, 1999
______________________________________
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
James P. Thompson
* Director September 7, 1999
______________________________________
John W. Rutter
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
KEYSTONE FOOD & BEVERAGE COMPANY
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
John W. Rutter (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
KEYSTONE RESORT PROPERTY MANAGEMENT,
INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President September 7, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
John W. Rutter
* Director September 7, 1999
______________________________________
James P. Thompson
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
LODGE PROPERTIES, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
LODGE REALTY, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
Victor Charles Viola
* Director September 7, 1999
______________________________________
Andrew P. Daly
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
PINEY RIVER RANCH, INC.
/s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
James P. Thompson
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
PROPERTY MANAGEMENT ACQUISITION
CORP., INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Andrew P. Daly Executive Officer)
* President September 7, 1999
______________________________________
William A. Jensen
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL/ARROWHEAD, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
Andrew P. Daly
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL ASSOCIATES CONSULTANTS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL ASSOCIATES HOLDINGS, LTD.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
Andrew P. Daly
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL ASSOCIATES INVESTMENTS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
James P. Thompson
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL ASSOCIATES MANAGEMENT COMPANY
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President September 7, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
* Director September 7, 1999
______________________________________
Andrew P. Daly
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL ASSOCIATES REAL ESTATE, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President September 7, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
* Director September 7, 1999
______________________________________
Theodore E. Ryczek
* Director September 7, 1999
______________________________________
Andrew P. Daly
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL/BATTLE MOUNTAIN, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Andrew P. Daly (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
James P. Thompson
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September 1999.
VAIL/BEAVER CREEK RESORTPROPERTIES,
INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James. P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
James P. Thompson
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
THE VAIL CORPORATION
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director
Adam M. Aron
* President, Chief Executive September 7, 1999
______________________________________ Officer and Director
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL FOOD SERVICES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
Paul A. Testwuide (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL HOLDINGS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ Chief Executive Officer
Adam M. Aron and Director
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL RESORTS DEVELOPMENT COMPANY
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director
Adam M. Aron
* Chief Executive Officer, September 7, 1999
______________________________________ President and Director
James P. Thompson
/s/ James P. Donohue Senior Vice President September 7, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
* Director September 7, 1999
______________________________________
Andrew P. Daly
* Director September 7, 1999
______________________________________
Marc J. Rowan
* Director September 7, 1999
______________________________________
Robert A. Katz
* Director September 7, 1999
______________________________________
James S. Mandel
</TABLE>
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL SUMMIT RESORTS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-33
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
VAIL TRADEMARKS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
THE VILLAGE AT BRECKENRIDGE
ACQUISITION CORP., INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board, September 7, 1999
______________________________________ President and Director
William A. Jensen (Principal Executive
Officer)
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
GRAND TETON LODGE COMPANY
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Adam M. Aron Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
</TABLE>
II-36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
LARKSPUR RESTAURANT & BAR, LLC
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Andrew P. Daly Chief Executive Officer September 7, 1999
______________________________________ (Principal Executive
Andrew P. Daly Officer)
______________________________________ President and Member, September 7, 1999
Thomas Salamunovich Board of Governors
/s/ James P. Donohoe Chief Financial Officer September 7, 1999
______________________________________ (Principal Accounting
James P. Donohue Officer)
/s/ Martha Dugan Rehm Member, Board of Governors September 7, 1999
______________________________________
Martha Dugan Rehm
/s/ William Jensen Member, Board of Governors September 7, 1999
______________________________________
William Jensen
/s/ Eric Resnick Member, Board of Governors September 7, 1999
______________________________________
Eric Resnick
/s/ Marla Steele Member, Board of Governors September 7, 1999
______________________________________
Marla Steele
Member, Board of Governors September 7, 1999
______________________________________
Kevin Deighan
Member, Board of Governors September 7, 1999
______________________________________
David Ferguson
</TABLE>
II-37
<PAGE>
EXHIBIT 4.6
____________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 27, 1999
to
INDENTURE
Dated as of May 11, 1999
among
VAIL RESORTS, INC., as Issuer,
the Guarantors named therein, as Guarantors,
and
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
____________________
up to $300,000,000
8 3/4 % Senior Subordinated Notes due 2009
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of August 27, 1999, among Vail
Resorts, Inc., a Delaware corporation (the "Issuer"), the Guarantors named on
the signature pages hereto (the "Guarantors"), Grand Teton Lodge Company, a
Wyoming corporation and Larkspur Restaurant & Bar, LLC (together, the
"Additional Guarantors"), and United States Trust Company of New York, as
Trustee (the "Trustee").
WHEREAS, the Issuer and the Guarantors have heretofore executed and
delivered to the Trustee an Indenture dated as of May 11, 1999 (the "Indenture")
providing for the issuance of up to $300,000,000 aggregate principal amount of 8
3/4% Senior Subordinated Notes due 2009 of the Company (the "Notes"); and
WHEREAS, subsequent to the execution of the Indenture and the issuance
of $200,000,000 aggregate principal amount of the Notes, each of the Additional
Guarantors have become guarantors under the Credit Agreement; and
WHEREAS, pursuant to and as contemplated by Section 4.18 and 9.01 of
the Indenture, the parties hereto desire to execute and deliver this
Supplemental Indenture for the purpose of providing for the Additional
Guarantors to expressly assume all the obligations of a Guarantor under the
Notes and the Indenture; and
NOW, THEREFORE, in consideration of the above premises, each party
agrees, for the benefit of the other and for the equal and ratable benefit of
the Holders of the Notes, as follows:
I.
ASSUMPTION OF GUARANTEES
The Additional Guarantors hereby expressly assume all of the
obligations of a Guarantor under the Notes and the Indenture to the fullest
extent required by the Indenture; and the Additional Guarantors may expressly
exercise every right and power of a Guarantor under the Indenture with the same
effect as if they had been named Guarantors therein.
II.
MISCELLANEOUS PROVISIONS
A. Terms Defined.
-------------
For all purposes of this First Supplemental Indenture, except as
otherwise defined or unless the context otherwise requires, terms used in
capitalized form in this First Supplemental Indenture and defined in the
Indenture have the meanings specified in the Indenture.
B. Indenture.
---------
Except as amended hereby, the Indenture and the Notes are in all
respects ratified and confirmed and all the terms shall remain in full force and
effect.
<PAGE>
-2-
C. Governing Law.
-------------
THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
D. Successors.
----------
All agreements of the Company, the Guarantors and the Additional
Guarantors in this First Supplemental Indenture, the Notes and the Guarantees
shall bind their respective successors. All agreements of the Trustee in this
First Supplemental Indenture shall bind its successors.
E. Duplicate Originals.
-------------------
The parties may sign any number of copies of this First Supplemental
Indenture. Each signed copy shall be an original, but all of them together
shall represent the same agreement.
<PAGE>
-3-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, all as of the date first written
above.
Issuer:
VAIL RESORTS, INC.
By: /s/ Martha Dugan Rehm
-------------------------------
Name: Martha Dugan Rehm
Title: Senior Vice President
<PAGE>
-4-
Guarantors:
GHTV, Inc.
Gillett Broadcasting of Maryland, Inc.
Gillett Broadcasting, Inc.
Gillett Group Management, Inc.
Vail Holdings, Inc.
The Vail Corporation
Beaver Creek Associates, Inc.
Beaver Creek Consultants, Inc.
Lodge Properties, Inc.
Piney River Ranch, Inc.
Vail Food Services, Inc.
Vail Resorts Development Company
Vail Summit Resorts, Inc.
Vail Trademarks, Inc.
Vail/Arrowhead, Inc.
Vail/Beaver Creek Resort Properties, Inc.
Beaver Creek Food Services, Inc.
Lodge Realty, Inc.
Vail Associates Consultants, Inc.
Vail Associates Holdings, Ltd.
Vail Associates Management Company
Vail Associates Real Estate, Inc.
Vail/Battle Mountain, Inc.
Keystone Conference Services, Inc.
Keystone Development Sales, Inc.
Keystone Food and Beverage Company
Keystone Resort Property Management Company
Property Management Acquisition Corp., Inc.
The Village at Breckenridge Acquisition Corp., Inc.
Each by its authorized officer:
By: /s/ James P. Donohue
--------------------------------
Name: James P. Donohue
Title: Senior Vice President
<PAGE>
-5-
Additional Guarantors:
GRAND TETON LODGE COMPANY
By: /s/ Martha Dugan Rehm
------------------------------
Name: Martha Dugan Rehm
Title: Senior Vice President
LARKSPUR RESTAURANT & BAR, LLC
By: /s/ Martha Dugan Rehm
------------------------------
Name: Martha Dugan Rehm
Title: Secretary
<PAGE>
-6-
Trustee:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By: /s/ Cynthia Chaney
---------------------------------
Name: Cynthia Chaney
Title: Assistant Vice President
<PAGE>
EXHIBIT 5.2
[Letterhead of Vail Resorts, Inc.]
August 18, 1999
VAIL RESORTS, INC.
137 Benchmark Road
Avon, Colorado 81620
Re: 8 3/4% Senior Subordinated Notes due 2009, Series B,
of Vail Resorts, Inc. and related Guarantees
----------------------------------------------------
Ladies and Gentlemen:
I am General Counsel for Vail Resorts, Inc. (the "Company") and the
guarantors listed on Exhibit I hereto (collectively, the "Guarantors" and,
together with Company, the "Issuers") in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed by, among others, the
Company and the Guarantors with the Securities and Exchange Commission (the
"Commission") for registration under the Securities Act of 1933, as amended (the
"Act"), of (i) up to $200,000,000 principal amount of 8 3/4% Senior Subordinated
Notes due 2009, Series B, of the Company (the "Exchange Notes"), and (ii) the
Guarantors' unconditional guarantee of the Exchange Notes (the "Guarantees," and
together with the Exchange Notes, the "Securities"). The Securities will be
issued pursuant to an indenture dated as of May 11, 1999 (the "Indenture"),
between the Company, the Guarantors. and the United States Trust Company of New
York, as trustee, in connection with the exchange offer (the "Exchange Offer")
pursuant to which the Securities will be issued for a like principal amount of
the Company's outstanding 8 3/4% Senior Subordinated Notes due 2009.
Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to such terms in the Registration Statement.
In connection therewith, we have examined, among other things,
originals or copies, certified or otherwise identified to our satisfaction, of
the Certificates of Incorporation of the Issuers, resolutions of the Boards of
Directors of the Issuers with respect to the filing of the Registration
Statement and such other documents as we have deemed necessary or appropriate
for the purpose of rendering this opinion.
<PAGE>
In our examination of documents, instruments and other papers, we have
assumed the genuineness of all signatures on original and certified documents
and the conformity to original and certified documents of all copies submitted
to us as conformed, photostatic or other copies. As to matters of fact, we have
relied upon representations of officers of the Issuers.
Based upon the foregoing, and subject to the qualifications stated
herein, it is our opinion that:
The Exchange Notes have been duly authorized for issuance by the
Company and, when duly executed, authenticated and delivered in exchange for the
Initial Notes in accordance with the terms of the Exchange Offer and the
Indenture as contemplated by the Registration Statement, will constitute valid
and legally binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
Subject to the exceptions set forth in the next paragraph hereof, the
Guarantees of the Guarantors have been duly authorized by the Guarantors and,
when the Exchange Notes have been duly executed, authenticated and delivered in
accordance with the terms of the Exchange Offer and the Indenture as
contemplated by the Registration Statement and the Guarantees of the Guarantors
have been duly executed and delivered, the Guarantees of the Guarantors will
constitute valid and legally binding obligations of the Guarantors, entitled to
the benefits of the Indenture and enforceable against the Guarantors in
accordance with their terms except that the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
I am an attorney admitted to practice in the State of Colorado. I
express no opinion concerning the laws of any jurisdiction other than the laws
of the State of Colorado and the Federal laws of the United States of America.
With respect to the opinions expressed in paragraph 2 hereof concerning Property
Management Acquisition Corp., Inc., The Village at Breckenridge Acquisition
Corp., Inc. and the Grand Teton Lodge Company, I have assumed that the
Guarantees have been duly authorized by such entities.
-2-
<PAGE>
I hereby consent to any reference required by law to the undersigned
as the Company's general or legal counsel in the Registration Statement under
the caption "Legal Matters," and to the inclusion of this opinion as an exhibit
to the Registration Statement. M Y consent to such reference does not
constitute a consent under Section 7 of the Securities Act and in consenting to
such reference I have not certified any part of the Registration Statement and
do not otherwise come within the categories of persons whose consent is required
under Section 7 or under the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Martha D. Rehm
-3-
<PAGE>
EXHIBIT I
Vail Holdings, Inc.
The Vail Corporation
Beaver Creek Associates, Inc.
Beaver Creek Consultants, Inc.
Lodge Properties, Inc.
Piney River Ranch, Inc.
Vail Food Services, Inc.
Vail Resorts Development Company
Vail Summit Resorts, Inc.
Vail Trademarks, Inc.
Vail/Arrowhead, Inc.
Vail/Beaver Creek Resort Properties, Inc.
Beaver Creek Food Services, Inc.
Lodge Realty, Inc.
Vail Associates Consultants, Inc.
Vail Associates Holdings, Ltd.
Vail Associates Management Company
Vail Associates Real Estate, Inc.
Vail/Battle Mountain, Inc.
Keystone Conference Services, Inc.
Keystone Development Sales, Inc.
Keystone Food and Beverage Company
Keystone Resort Property Management Company
Property Management Acquisition Corp., Inc.
The Village at Breckenridge Acquisition Corp., Inc.
Grand Teton Lodge Company
Larkspur Restaurant & Bar, LLC
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this Form
S-4 Registration Statement of our report dated October 15, 1998 included
herein, pertaining to the consolidated financial statements of Vail Resorts,
Inc. and subsidiaries as of July 31, 1998 and September 30, 1997 and for the
ten-month period ended July 31, 1998 and the years ended September 30, 1997 and
1996, and to all references to our Firm included in this Registration
Statement.
/s/ Arthur Andersen LLP
Denver, Colorado
September 7, 1999
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
---------
--------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------
Vail Resorts, Inc.
(Exact name of obligor as specified in its charter)
Delaware 51-0291762
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
137 Benchmark Road 81620
Avon, CO (Zip code)
(Address of principal executive offices)
--------------------
8-3/4% Senior Subordinated Notes due 2009
(Title of the indenture securities)
<PAGE>
-2-
GENERAL
1. General Information
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it is
subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
-----------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Vail Resorts, Inc. currently is not in default under its indenture.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15
of Form T-I are not required under General Instruction B.
16. List of Exhibits
----------------
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a
Trust Company, is incorporated by reference to Exhibit T-1.1
to Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No. 33-
97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE>
-3-
16. List Of Exhibits
----------------
(cont'd)
T-1.4 - The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form
T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T- 1.6 - The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 - A copy of the latest report of condition of the trustee pursuant
to law or the requirements of its supervising or examining
authority.
NOTE
====
As of June 14, 1999, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
---------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 14th day
of June 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Cynthia Chaney
--------------------------
Cynthia Chaney
Assistant Vice President
<PAGE>
Exhibit T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/Gerard F. Ganey
--------------------------
Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31,1999
-------------
($ IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 139,755
Short-Term Investments 85,326
Securities, Available for Sale 528,160
Loans 2,081,103
Less: Allowance for Credit Losses 17,114
------------
Net Loans 2,063,989
Premises and Equipment 57,765
Other Assets 125,780
------------
Total Assets $ 3,000,775
============
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 623,046
Interest Bearing 1,875,364
------------
Total Deposits 2,498,410
Short-Term Credit Facilities 184,281
Accounts Payable and Accrued Liabilities 126,652
------------
Total Liabilities $ 2,809,343
============
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 53,041
Retained Earnings 121,759
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 1,637
------------
Total Stockholder's Equity 191,432
------------
Total Liabilities and
Stockholder's Equity $3,000,775
============
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do
hereby declare that this Statement of Condition has been prepared in conformance
with the instructions issued by the appropriate regulatory authority and is true
to the best of my knowledge and belief.
Richard E. Brinkmann, Managing Director & Controller
May 18, 1999
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
Vail Resorts, Inc.
OFFER TO EXCHANGE ITS 8 3/4% SENIOR SUBORDINATED NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR
ANY AND ALL OF ITS ISSUED AND OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE
2009
PURSUANT TO THE PROSPECTUS, DATED , 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY
BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON
THE EXPIRATION DATE.
United States Trust Company of New York, as Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand before 4:30 p.m. By Hand after 4:30 p.m. or
United States Trust Company United States Trust Company By Overnight Courier:
of New York of New York United States Trust Company
P.O. Box 843 Cooper Station 111 Broadway of New York
New York, NY 10276 New York, New York 10006 770 Broadway, 13th Floor
Attention: Corporate Trust Servicer Attention: Lower Level Corporate New York, NY 10003
Trust Window
</TABLE>
By Facsimile:
(212) 780-0592
Confirm by Telephone:
(212) 548-6565
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions other than as set forth above, will not
constitute a valid delivery.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated , 1999 (the "Prospectus"), of Vail Resorts, Inc., a
company organized under the laws of Delaware, and this Letter of Transmittal,
which together constitute the Company's offer (the "Exchange Offer") to
exchange up to $200,000,000 aggregate principal amount of the Company's 8 3/4%
Senior Subordinated Notes due 2009 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), for a like principal amount of the Company's issued and outstanding 8
3/4% Senior Subordinated Notes due 2009 (the "Outstanding Notes"), which have
not been so registered.
For each Outstanding Note accepted for exchange, the registered holder of
such Outstanding Note (collectively with all other registered holders of
Outstanding Notes, the "Holders") will receive an Exchange Note having a
principal amount equal to that of the surrendered Outstanding Note. Registered
holders of Exchange Notes on the relevant record date for the first interest
payment date following the consummation of the Exchange Offer will receive
interest accruing from the most recent date to which interest has been paid
or, if no interest has been paid, from May 11, 1999. Outstanding Notes
accepted for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer. Accordingly, Holders whose Outstanding
Notes are accepted for exchange will not receive any payment in respect of
accrued interest on such Outstanding Notes otherwise payable on any interest
payment date the record date for which occurs on or after consummation of the
Exchange Offer.
This Letter of Transmittal is to be completed by a Holder of Outstanding
Notes either if certificates are to be forwarded herewith or if a tender of
certificates for Outstanding Notes, if available, is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in "The Exchange Offer--Procedures for Tendering Outstanding Notes"
section of the Prospectus. Holders of Outstanding Notes whose certificates are
not immediately available, or who are unable to deliver their certificates or
confirmation of the book-entry tender of their Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and all other documents required by this Letter of Transmittal
to the Exchange Agent on or prior to the Expiration Date, must tender their
Outstanding Notes according to the guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. See Instruction 1. Delivery of documents to the Book-Entry
Transfer Facility does not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
Outstanding Notes indicated below. Subject to, and effective upon, the
acceptance for exchange of the Outstanding Notes tendered hereby, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Company all right, title and interest in and to such Outstanding Notes as are
being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Outstanding
Notes tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim when the same are accepted
by the Company. The undersigned hereby further represents that any Exchange
Notes acquired in exchange for Outstanding Notes tendered hereby will have
been acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the undersigned, that neither
the Holder of such Outstanding Notes nor any such other person has an
arrangement or understanding with any person to participate in a distribution
of such Exchange Notes and that neither the Holder of such Outstanding Notes
nor any such other person is an "affiliate" (as defined in Rule 405 under the
Securities Act) of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Outstanding Notes may be offered for resale, resold and
otherwise transferred by a Holder thereof (other than a 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 Exchange Notes are
acquired in the ordinary course of such Holder's business and such Holder has
no arrangement with any person to participate in a distribution of such
Exchange Notes. However, the SEC has not considered the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the SEC would make a similar determination with respect to the Exchange Offer
as in other circumstances. If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes and has no arrangement or
understanding to participate in a distribution of Exchange Notes. If any
Holder is an affiliate of the Company, is engaged in or intends to engage in,
or has any arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, such Holder could not rely on the applicable interpretations of the
staff of the SEC and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
If the undersigned is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Outstanding Notes that were acquired as a result
of market-making activities or other trading activities, it acknowledges that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. However, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Outstanding Notes tendered hereby. All
authority conferred or agreed to be conferred in this Letter of Transmittal
and every obligation of the undersigned hereunder shall be binding upon the
successors, assigns, heirs, executors, administrators, trustees in bankruptcy
and legal representatives of the undersigned and shall not be affected by, and
shall survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" herein, please issue the Exchange Notes (and, if applicable,
substitute certificates representing Outstanding Notes for any Outstanding
Notes not exchanged) in the name of the undersigned or, in the case of a book-
entry delivery of Outstanding Notes, please credit the account indicated below
maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions" herein,
please send the Exchange Notes (and, if applicable, substitute certificates
representing Outstanding Notes for any Outstanding Notes not exchanged) to the
undersigned at the address shown in the box herein entitled "Description of
Outstanding Notes Delivered."
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX BELOW ENTITLED "DESCRIPTION OF
OUTSTANDING NOTES DELIVERED" AND SIGNING THIS LETTER, WILL BE DEEMED TO
HAVE TENDERED OUTSTANDING NOTES AS SET FORTH IN SUCH BOX.
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate numbers
and principal amount of Outstanding Notes should be listed on a separate
signed schedule affixed hereto.
DESCRIPTION OF OUTSTANDING NOTES DELIVERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address of Registered Holder(s) Certificate Aggregate Principal Amount
(Please fill-in, if blank) Number(s)* Principal Amount Tendered **
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Totals:
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Outstanding Notes are being tendered by book-
entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the Outstanding Notes represented by the listed
certificates. See Instruction 2. Outstanding Notes tendered hereby must
be in denominations of principal amount of $1,000 and any integral
multiple thereof. See Instruction 1.
[_] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
Account Number ____________________ Transaction Code Number _________________
[_] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder ___________________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution Which Guaranteed Delivery _______________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number ____________________ Transaction Code Number _________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE ADDITIONAL
COPIES OF THE PROSPECTUS AND ANY AMENDMENTS OR SUPPLEMENTS THERETO. (UNLESS
OTHERWISE SPECIFIED, 10 ADDITIONAL COPIES WILL BE FURNISHED.)
Name ________________________________________________________________________
Address _____________________________________________________________________
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
(See Instructions 3 and 4)
To be completed ONLY if To be completed ONLY if
certificates for Outstanding certificates for Outstanding
Notes not exchanged and/or Notes not exchanged and/or
Exchange Notes are to be issued Exchange Notes are to be sent to
in the name of someone other than someone other than the person or
the person or persons whose persons whose signature(s)
signature(s) appear(s) on this appear(s) on this Letter of
Letter of Transmittal below or if Transmittal below or to such
Outstanding Notes delivered by person or persons at an address
book-entry transfer which are not other than shown in the box
accepted for exchange are to be entitled "Description of
returned by credit to an account Outstanding Notes Delivered" on
maintained at the Book-Entry this Letter of Transmittal above.
Transfer Facility other than the
account indicated above.
Mail Exchange Notes and/or
Outstanding Notes to:
Issue Exchange Notes and/or
Outstanding Notes to: Name: ____________________________
(Please Type or Print)
Name: ____________________________
(Please Type or Print) Address: _________________________
(Zip Code)
Address: _________________________
(Zip Code)
[_] Credit unexchanged
Outstanding Notes delivered by
book-entry transfer to the
Book-Entry Transfer Facility
account set forth below.
----------------------------------
(Book-Entry Transfer Facility
Account)
<PAGE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
HEREOF (TOGETHER WITH THE CERTIFICATES FOR OUTSTANDING NOTES OR A
BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE
NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE
AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY
BOX ABOVE
PLEASE SIGN HERE
(All Tendering Holders Must Complete This Letter of Transmittal
And The Accompanying Substitute Form W-9)
Dated: _____________________, 1998
X ______________________________________________________________________________
X ______________________________________________________________________________
(Signature(s))
Area Code and Telephone Number: ________________________________________________
If a holder is tendering any Outstanding Notes, this letter must be signed by
the Holder(s) as the name(s) appear(s) on the certificate(s) for the
Outstanding Notes or by any person(s) authorized to become Holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a
fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name: __________________________________________________________________________
________________________________________________________________________________
(Please Type or Print)
Capacity (full title): _________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
Telephone: _____________________________________________________________________
SIGNATURE GUARANTEE (If required by Instruction 3)
Signature(s) Guarantees by an Eligible Institution: ____________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name and Firm)
Dated: _____________________, 1999
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER TO EXCHANGE
THE 8 3/4% SENIOR SUBORDINATED NOTES DUE 2009 OF THE FAIRCHILD CORPORATION,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR
ANY AND ALL OF THE ISSUED AND OUTSTANDING 8 3/4% SENIOR SUBORDINATED NOTES DUE
2009 OF THE FAIRCHILD CORPORATION
1. Delivery Of This Letter And Outstanding Notes; Guaranteed Delivery
Procedures.
This Letter of Transmittal is to be completed by Holders of Outstanding
Notes either if certificates are to be forwarded herewith or if tenders are to
be made pursuant to the procedures for delivery by book-entry transfer set
forth in "The Exchange Offer--Procedures for Tendering Outstanding Notes"
section of the Prospectus. Certificates for all physically tendered Outstanding
Notes, or Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile hereof) and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at the address set forth
herein on or prior to the Expiration Date, or the tendering holder must comply
with the guaranteed delivery procedures set forth below. Outstanding Notes
tendered hereby must be in denominations of principal amount of $1,000 and any
integral multiple thereof.
Holders whose certificates for Outstanding Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Outstanding Notes pursuant to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of
the Prospectus. Pursuant to such procedures, (i) such tender must be made
through an Eligible Institution, (ii) on or prior to 5:00 p.m., New York City
time, on the Expiration Date, the Exchange Agent must receive from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Outstanding Notes and the amount of Outstanding Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Outstanding Notes, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and any other documents required by
this Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent, and (iii) the certificates for all physically tendered
Outstanding Notes, in proper form for transfer, or Book-Entry Confirmation, as
the case may be, and any other documents required by this Letter of
Transmittal, are deposited by the Eligible Institution within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter of Transmittal, the Outstanding Notes
and all other required documents is at the election and risk of the tendering
Holders, but delivery will be deemed made only upon actual receipt or
confirmation by the Exchange Agent. If Outstanding Notes are sent by mail, it
is suggested that the mailing be registered mail, properly insured, with return
receipt requested, and made sufficiently in advance of the Expiration Date to
permit delivery to the Exchange Agent prior to 5:00 p.m., New York City time,
on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (not Applicable To Holders Who Tender By Book-Entry
Transfer).
If less than all of the Outstanding Notes evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount of Outstanding Notes to be tendered in the box
6
<PAGE>
above entitled "Description of Outstanding Notes--Principal Amount Tendered." A
reissued certificate representing the balance of nontendered Outstanding Notes
will be sent to such tendering Holder, unless otherwise provided in the
appropriate box of this Letter of Transmittal, promptly after the Expiration
Date. See Instruction 4. All of the Outstanding Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated.
3. Signatures On This Letter, Bond Powers And Endorsements, Guarantee Of
Signatures.
If this Letter of Transmittal is signed by the Holder of the Outstanding
Notes tendered hereby, the signature must correspond exactly with the name as
written on the face of the certificates without any change whatsoever.
If any tendered Outstanding Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter of Transmittal.
If any tendered Outstanding Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this letter as there are different registrations of
certificates.
When this Letter of Transmittal is signed by the Holder or Holders of the
Outstanding Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If however, the Exchange
Notes are to be issued, or any untendered Outstanding Notes are to be reissued,
to a person other than the Holder, then endorsements of any certificates
transmitted hereby or separate bond powers are required. Signatures on such
certificates(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the Holder or
Holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the Holder or Holders appear(s) on the
certificate(s) and signatures on such certificate(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal or any certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OUTSTANDING NOTES OR SIGNATURES ON BOND
POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FINANCIAL
INSTITUTION (INCLUDING MOST BANKS, SAVINGS AND LOAN ASSOCIATIONS AND BROKERAGE
HOUSES) THAT IS A PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION
PROGRAM, THE NEW YORK STOCK EXCHANGE MEDALLION SIGNATURE PROGRAM OR THE STOCK
EXCHANGES MEDALLION PROGRAM (EACH, AN "ELIGIBLE INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE INSTITUTION,
PROVIDED THE OUTSTANDING NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF
OUTSTANDING NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH OUTSTANDING NOTES) WHO HAS NOT
COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
7
<PAGE>
4. Special Issuance and Delivery Instructions.
Tendering Holders of Outstanding Notes should indicate in the applicable box
the name and address to which Exchange Notes issued pursuant to the Exchange
Offer and/or substitute certificates evidencing Outstanding Notes not exchanged
are to be issued or sent, if different from the name or address of the person
signing this Letter of Transmittal. In the case of issuance in a different
name, the employer identification or social security number of the person named
must also be indicated. Holders tendering Outstanding Notes by book-entry
transfer may request that Outstanding Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such Holder may
designate hereon. If no such instructions are given, such Outstanding Notes not
exchanged will be returned to the name and address of the person signing this
Letter of Transmittal.
5. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Outstanding Notes to it or its order pursuant to the Exchange Offer. If,
however, Exchange Notes and/or substitute Outstanding Notes not exchanged are
to be delivered to, or are to be registered or issued in the name of, any
person other than the Holder of the Outstanding Notes tendered hereby, or if
tendered Outstanding Notes are registered in the name of any person other than
the person signing this Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the transfer of Outstanding Notes to the Company or
its order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted herewith, the amount of such transfer
taxes will be billed to such tendering Holder and the Exchange Agent will
retain possession of an amount of Exchange Notes with a face amount equal to
the amount of such transfer taxes due by such tendering Holder pending receipt
by the Exchange Agent of the amount of such taxes.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes specified in this
Letter of Transmittal.
6. Waiver of Conditions.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
7. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders of Outstanding Notes, by execution of this
Letter of Transmittal, shall waive any right to receive notice of the
acceptance of their Outstanding Notes for exchange.
Although the Company intends to notify Holders of defects or irregularities
with respect to tenders of Outstanding Notes, neither the Company, the Exchange
Agent nor any other person shall incur any liability for failure to give any
such notice.
8. Mutilated, Lost, Stolen or Destroyed Outstanding Notes.
Any Holder whose Outstanding Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
9. Withdrawal of Tenders.
Tenders of Outstanding Notes may be withdrawn at any time prior to 5:00
P.M., New York City time, on the Expiration Date. For a withdrawal to be
effective, a written notice of withdrawal must be received by the Exchange
Agent at one of the addresses set forth above. Any such notice of withdrawal
must specify the name
8
<PAGE>
of the person having tendered the Outstanding Notes to be withdrawn, identify
the Outstanding Notes to be withdrawn (including the principal amount of such
Outstanding Notes), and (where certificates for Outstanding Notes have been
transmitted) specify the name in which such Outstanding Notes are registered,
if different from that of the withdrawing Holder. If certificates for
Outstanding Notes have been delivered or otherwise identified to the Exchange
Agent, then prior to the release of such certificates the withdrawing Holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution in which
case such guarantee will not be required. If Outstanding Notes have been
tendered pursuant to the procedure for book-entry transfer described above, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Outstanding
Notes and otherwise comply with the procedures of such facility. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, whose determination will be final
and binding on all parties. Any Outstanding Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the Exchange
Offer. Any Outstanding Notes which have been tendered for exchange but which
are not exchanged for any reason will be returned to the Holder thereof without
cost to such Holder (or, in the case of Outstanding Notes tendered by book-
entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described above, such
Outstanding Notes will be credited to an account maintained with such Book-
Entry Transfer Facility for the Outstanding Notes) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Outstanding Notes may be retendered by following one of the
procedures set forth in "The Exchange Offer--Procedures for Tendering
Outstanding Notes" section of the Prospectus at any time on or prior to the
Expiration Date.
10. Requests For Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus, this Letter of Transmittal and other
related documents may be directed to the Exchange Agent at the address
indicated above.
9
<PAGE>
IMPORTANT TAX INFORMATION
Under current United States federal income tax law, a Holder of Exchange
Notes is required to provide the Company (as payor) with such Holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 or otherwise
establish a basis for exemption from backup withholding to prevent backup
withholding on any Exchange Notes delivered pursuant to the Exchange Offer and
any payments received in respect of the Exchange Notes. If a Holder of
Exchange Notes is an individual, the TIN is such holder's social security
number. If the Company is not provided with the correct taxpayer
identification number, a Holder of Exchange Notes may be subject to a $50
penalty imposed by the Internal Revenue Service. Accordingly, each prospective
Holder of Exchange Notes to be issued pursuant to Special Issuance
Instructions should complete the attached Substitute Form W-9. The Substitute
Form W-9 need not be completed if the box entitled Special Issuance
Instructions has not been completed.
Certain Holders of Exchange Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt prospective Holders of Exchange
Notes should indicate their exempt status on Substitute Form W-9. A foreign
individual may qualify as an exempt recipient by submitting to the Company,
through the Exchange Agent, a properly completed Internal Revenue Service Form
W-8 (which the Exchange Agent will provide upon request) signed under penalty
of perjury, attesting to the Holder's exempt status. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the Holder of Exchange Notes or other payee. Backup
withholding is not an additional United States federal income tax. Rather, the
United States federal income tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on any Exchange Notes delivered pursuant to
the Exchange Offer and any payments received in respect of the Exchange Notes,
each prospective Holder of Exchange Notes to be issued pursuant to Special
Issuance Instructions should provide the Company, through the Exchange Agent,
with either: (i) such prospective Holder's correct TIN by completing the form
below, certifying that the TIN provided on Substitute Form W-9 is correct (or
that such prospective Holder is awaiting a TIN) and that (A) such prospective
Holder has not been notified by the Internal Revenue Service that he or she is
subject to backup withholding as a result of a failure to report all interest
or dividends or (B) the Internal Revenue Service has notified such prospective
Holder that he or she is no longer subject to backup withholding; or (ii) an
adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The prospective Holder of Exchange Notes to be issued pursuant to Special
Issuance Instructions is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the prospective
record owner of the Exchange Notes. If the Exchange Notes will be held in more
than one name or are not held in the name of the actual owner, consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance regarding which number to report.
10
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE IMPORTANT TAX INFORMATION)
PAYOR'S NAME: THE BANK OF NEW YORK
PART I--PLEASE PROVIDE YOUR
SUBSTITUTE TIN IN THE BOX AT RIGHT OR TIN: __________________
Form W-9 INDICATE THAT YOU APPLIED Social security
FOR A TIN AND CERTIFY BY number or Employer
Department of the SIGNING AND DATING BELOW. Identification
Treasury Internal Number
Revenue Service
TIN Applied for [_]
Payer's Request for --------------------------------------------------------
Taxpayer
Identification
Number ("TIN")
and Certification
PART II--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me);
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I
have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding; and
(3) any other information provided on this form is
true and correct
Signature: _________________ Date: ___________________________________________
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup withholding.
NOTE: FAILURE BY A PROSPECTIVE HOLDER OF NEW NOTES TO BE ISSUED PURSUANT TO
THE SPECIAL ISSUANCE INSTRUCTIONS ABOVE TO COMPLETE AND RETURN THIS FORM
MAY RESULT IN BACKUP WITHHOLDING OF 31% OF THE NEW NOTES DELIVERED TO YOU
PURSUANT TO THE EXCHANGE OFFER AND ANY PAYMENTS RECEIVED BY YOU IN
RESPECT OF THE NEW NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART II OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of the exchange, 31% of all reportable payments made to me thereafter
will be withheld until I provide a number.
------------------------------------ ------------------------------------
Signature Date
<PAGE>
Exhibit 99.2
FORM OF
NOTICE OF GUARANTEED DELIVERY
Vail Resorts, Inc.
OFFER TO EXCHANGE ITS 8 3/4% SENIOR SUBORDINATED NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS ISSUED AND OUTSTANDING
8 3/4% SENIOR SUBORDINATED NOTES DUE 2009
PURSUANT TO THE PROSPECTUS, DATED , 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS
MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY
TIME, ON THE EXPIRATION DATE.
As set forth in the Prospectus dated , 1999 (the "Prospectus") under
the caption "The Exchange Offer--Guaranteed Delivery Procedures" and the
accompanying Letter of Transmittal (the "Letter of Transmittal") and
Instruction 1 thereto, this form, or one substantially equivalent hereto, must
be used to accept the Exchange Offer if certificates representing the 8 3/4%
Senior Subordinated Notes due 2009 (the "Outstanding Notes") of Vail Resorts,
Inc., a Delaware corporation (the "Company"), are not immediately available or
if the procedure for book-entry transfer cannot be completed on a timely basis
or time will not permit a Holder's certificates or other required documents to
reach the Exchange Agent on or prior to the Expiration Date. Such form may be
delivered by hand or transmitted by telegram, telex, facsimile transmission or
mail to the Exchange Agent and must include a guarantee by an Eligible
Institution unless such form is submitted on behalf of an Eligible
Institution. Capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Prospectus.
The Exchange Agent is
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Hand before 4:30 p.m.: By Hand after 4:30 p.m. or Overnight
UNITED STATES TRUST UNITED STATES TRUST By Courier:
COMPANY OF NEW YORK COMPANY OF NEW YORK UNITED STATES TRUST
COMPANY OF NEW YORK
111 Broadway
P.O. Box 843 Cooper Station New York, NY 10006 770 Broadway, 13th Floor
New York, NY 10276 Attention: Lower Level Corporate New York, NY 10003
Attention: Corporate Trust Services Trust Window
</TABLE>
By Facsimile:
(212) 780-0592
Confirm by Telephone:
(212) 548-6565
Delivery of this instrument to an address or transmission via facsimile number
other than the ones above will not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
1
<PAGE>
Ladies & Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus
and the accompanying Letter of Transmittal, receipt of which is hereby
acknowledged, the undersigned hereby tenders to Vail Resorts, Inc., a Delaware
corporation (the "Company"), $ principal amount of Outstanding
Notes, pursuant to the guaranteed delivery procedures set forth in the
Prospectus and accompanying Letter of Transmittal.
Certificate Numbers of Principal Amount Tendered
Outstanding Notes
(if available)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
If Outstanding Notes will be tendered by book-entry transfer to the
Depositary Trust Company, provide account number.
Account No. ___________________________
The undersigned authorizes the Exchange Agent to deliver this Notice of
Guaranteed Delivery to the Company and the United States Trust Company Of New
York, as Trustee with respect to the Outstanding Notes tendered pursuant to
the Exchange Offer.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
SIGN HERE
----------------------------------------------------------------------------
Signature(s) of Registered Holder(s) or Authorized Signatory
----------------------------------------------------------------------------
Name(s) of Registered Holder(s)
(Please Type or Print)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Address
----------------------------------------------------------------------------
Zip Code
----------------------------------------------------------------------------
Area code and Telephone Number
Dated: _______________________________________________________________, 1999
<PAGE>
GUARANTEE
(Not to be Used for Signature Guarantees)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office in the United States,
hereby (a) represents that the above-named person(s) has a net long
position in the Outstanding Notes tendered hereby within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b)
represents that such tender of Outstanding Notes complies with Rule 14e-4
and (c) guarantees delivery to the Exchange Agent of certificates
representing the Outstanding Notes tendered hereby, in proper form for
transfer, or confirmation of book-entry transfer of such Outstanding Notes
into the Exchange Agent's account at a Book-Entry Transfer Facility (as
defined in the Prospectus), in each case together with a properly completed
and duly executed Letter of Transmittal with any required signature
guarantees and any other documents required by the Letter of Transmittal,
within three New York Stock Exchange trading days after the date hereof.
------------------------------------ ------------------------------------
Name of Firm
Title
------------------------------------ ------------------------------------
Authorized Signature
Name (Please Type or Print)
------------------------------------ Dated: _____________________________
Address
, 1999
------------------------------------
Area Code and Telephone Number
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES FOR OUTSTANDING NOTES MUST BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
3
