UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended April 30, 2006
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from____________ to ____________.
--------------------------------
Commission File Number 1-13507
--------------------------------
American Skiing Company
(Exact name of registrant as specified in its charter)
Delaware 04-3373730
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
136 Heber Avenue, #303
P.O. Box 4552
Park City, Utah 84060
(Address of principal executive offices)
(Zip Code)
(435) 615-0340
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
One):
Large accelerated filer |_| Accelerated filer | | Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
As of June 5, 2006, 31,738,183 shares of common stock were issued and
outstanding; of which 14,760,530 shares were Class A common stock.
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations and Changes in
Accumulated Deficit for the 13 weeks ended May 1, 2005 and
April 30, 2006 (unaudited).........................................3
Condensed Consolidated Statements of Operations and Changes in
Accumulated Deficit for the 40 weeks ended May 1, 2005 and the 39
weeks ended April 30, 2006 (unaudited).............................4
Condensed Consolidated Balance Sheets as of July 31, 2005 and
April 30, 2006 (unaudited).........................................5
Condensed Consolidated Statements of Cash Flows for the 40 weeks ended
May 1, 2005 and the 39 weeks ended April 30, 2006 (unaudited)......7
Notes to Condensed Consolidated Financial Statements (unaudited)......8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General..............................................................22
Liquidity and Capital Resources......................................22
Results of Operations................................................26
Item 3. Quantitative and Qualitative Disclosures about Market Risk...........30
Item 4. Controls and Procedures..............................................30
Part II - Other Information
Item 1. Legal Proceedings....................................................31
Item 1A. Other Risk Factors...................................................32
Item 6. Exhibits............................................................33
2
Part I - Financial Information
Item 1
Financial Statements
Condensed Consolidated Statements of Operations and Changes in Accumulated
Deficit
(In thousands, except per share amounts)
13 weeks ended 13 weeks ended
May 1, 2005 April 30, 2006
(unaudited) (unaudited)
-------------- ---------------
Net revenues:
Resort $ 132,266 $ 132,837
Real estate 2,928 24,185
-------------- ---------------
Total net revenues 135,194 157,022
-------------- ---------------
Operating expenses:
Resort 61,615 61,269
Real estate 2,461 18,832
Marketing, general and
administrative 14,261 13,861
Depreciation and amortization 13,020 12,602
-------------- ---------------
Total operating expenses 91,357 106,564
-------------- ---------------
Income from operations 43,837 50,458
Interest expense (20,002) (21,719)
Increase in fair value of interest rate
swap agreement - 674
-------------- ---------------
Net income $ 23,835 $ 29,413
============== ===============
Accumulated deficit, beginning of period $ (603,429) $ (670,400)
Net income 23,835 29,413
-------------- ---------------
Accumulated deficit, end of period $ (579,594) $ (640,987)
============== ===============
Basic and diluted net income per common
share $ 0.29 $ 0.34
============== ===============
Basic and diluted weighted average
common shares outstanding 31,738 31,738
============== ===============
See accompanying Notes to Condensed Consolidated Financial Statements.
3
Condensed Consolidated Statements of Operations and Changes in Accumulated
Deficit
(In thousands, except per share amounts)
40 weeks ended 39 weeks ended
May 1, 2005 April 30, 2006
(unaudited) (unaudited)
--------------- ---------------
Net revenues:
Resort $ 253,497 $ 259,871
Real estate 7,317 29,766
--------------- ---------------
Total net revenues 260,814 289,637
--------------- ---------------
Operating expenses:
Resort 153,010 152,998
Real estate 5,724 24,217
Marketing, general and
administrative 41,288 43,314
Depreciation and amortization 29,699 28,573
Gain on sale of property - (169)
Impairment loss on property sold - 1,533
--------------- ---------------
Total operating expenses 229,721 250,466
--------------- ---------------
Income from operations 31,093 39,171
Interest expense (61,139) (64,988)
Write-off of deferred financing costs and
loss on extinguishment of senior
subordinated notes (5,983) -
Increase in fair value of interest rate
swap agreement - 1,710
--------------- ---------------
Net loss $ (36,029) $ (24,107)
=============== ===============
Accumulated deficit, beginning of period $ (543,565) $ (616,880)
Net loss (36,029) (24,107)
--------------- ---------------
Accumulated deficit, end of period $ (579,594) $ (640,987)
=============== ===============
Basic and diluted net loss per common
share $ (1.14) $ (0.76)
=============== ===============
Basic and diluted weighted average common
shares outstanding 31,738 31,738
=============== ===============
See accompanying Notes to Condensed Consolidated Financial Statements.
4
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
July 31, 2005 April 30, 2006
(unaudited) (unaudited)
-------------- --------------
Assets
Current assets:
Cash and cash equivalents $ 6,216 $ 24,086
Restricted cash 2,557 2,614
Accounts receivable, net 5,627 10,169
Inventory 3,576 4,223
Prepaid expenses and other 3,829 2,982
Deferred income taxes 7,536 7,536
-------------- --------------
Total current assets 29,341 51,610
Property and equipment, net 348,619 329,830
Real estate developed for sale 22,304 3,848
Intangible assets, net 6,307 6,264
Deferred financing costs, net 6,472 5,639
Other assets 9,891 12,133
-------------- --------------
Total assets $ 422,934 $ 409,324
============== ==============
(continued on next page)
See accompanying Notes to Condensed Consolidated Financial Statements.
5
Condensed Consolidated Balance Sheets (continued)
(In thousands, except share and per share amounts)
July 31, 2005 April 30, 2006
(unaudited) (unaudited)
-------------- --------------
Liabilities and Shareholders' Deficit
Current liabilities:
Current portion of long-term debt $ 31,223 $ 6,856
Accounts payable and other current
liabilities 43,219 50,129
Deposits and deferred revenue 22,139 17,435
-------------- --------------
Total current liabilities 96,581 74,420
Long-term debt, net of current portion 209,519 198,352
Subordinated notes and debentures 102,813 113,149
Other long-term liabilities 10,635 8,788
Deferred income taxes 7,536 7,536
Mandatorily Redeemable 8 1/2% Series B
Convertible Participating Preferred
Stock, par value of $0.01 per share;
150,000 shares authorized, issued, and
outstanding (redemption value of $0) - -
Mandatorily Redeemable Convertible
Participating 12% Series C-1 Preferred
Stock, par value of $0.01 per share;
40,000 shares authorized, issued, and
outstanding, including cumulative
dividends (redemption value of $63,574
and $69,452, respectively) 63,203 69,198
Mandatorily Redeemable 15% Nonvoting
Series C-2 Preferred Stock, par value
of $0.01 per share; 139,453 shares
authorized, issued, and outstanding,
including cumulative dividends
(redemption value of $248,339 and
$277,256, respectively) 246,924 276,265
-------------- --------------
Total liabilities 737,211 747,708
-------------- --------------
Shareholders' deficit:
Common stock, Class A, par value of
$0.01 per share; 15,000,000 shares
authorized; 14,760,530 shares
issued and outstanding 148 148
Common stock, par value of $0.01 per
share; 100,000,000 shares
authorized; 16,977,653 shares
issued and outstanding 170 170
Additional paid-in capital 302,285 302,285
Accumulated deficit (616,880) (640,987)
-------------- --------------
Total shareholders' deficit (314,277) (338,384)
-------------- --------------
Total liabilities and
shareholders' deficit $ 422,934 $ 409,324
============== ==============
See accompanying Notes to Condensed Consolidated Financial Statements.
6
Condensed Consolidated Statements of Cash Flows
(In thousands)
40 weeks ended 39 weeks ended
May 1, 2005 April 30, 2006
(unaudited) (unaudited)
--------------- ---------------
Cash flows from operating activities
Net loss $ (36,029) $ (24,107)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 29,699 28,573
Amortization of deferred financing
costs and accretion of discount and
dividends on mandatorily redeemable
preferred stock 35,422 36,169
Non-cash interest on junior
subordinated notes 5,637 9,012
Non-cash increase in fair value of
interest rate swap agreement - (1,710)
Non-cash Phantom Equity Plan
compensation expense 456 217
Write-off of deferred financing costs
and extinguishment of senior
subordinated notes 5,983 -
Gain on sale of property (772) (575)
Impairment loss on property sold - 1,533
Decrease (increase) in assets:
Restricted cash (55) (57)
Accounts receivable, net (2,895) (4,542)
Inventory 227 (647)
Prepaid expenses and other (382) 847
Real estate developed for sale 2,051 18,456
Other assets 1,103 (752)
Increase (decrease) in liabilities:
Accounts payable and other current
liabilities 4,959 6,596
Deposits and deferred revenue (311) (4,704)
Other long-term liabilities (278) (740)
--------------- ---------------
Net cash provided by operating
activities 44,815 63,569
--------------- ---------------
Cash flows from investing activities
Capital expenditures (13,333) (8,545)
Proceeds from sale of property 1,041 3,017
--------------- ---------------
Net cash used in investing
activities (12,292) (5,528)
--------------- ---------------
Cash flows from financing activities
Proceeds from resort senior credit
facilities 261,934 47,475
Repayment of principal on resort
senior credit facilities (151,402) (62,068)
Proceeds from long-term debt 2,550 -
Repayment of principal on long-term
debt (132,059) (5,224)
Repayment of principal on real estate
debt (3,060) (20,354)
Decrease in restricted cash 2,144 -
Deferred financing costs (7,308) -
--------------- ---------------
Net cash used in financing
activities (27,201) (40,171)
--------------- ---------------
Net increase in cash and cash equivalents 5,322 17,870
Cash and cash equivalents, beginning of
period 7,024 6,216
--------------- ---------------
Cash and cash equivalents, end of period $ 12,346 $ 24,086
=============== ===============
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 16,637 $ 20,005
Acquisition of equipment held under
capital leases 12,674 4,637
Conversion of Series A Preferred
Stock to New Junior Subordinated
Notes 76,673 -
Addition of interest to principal
outstanding for New Junior
Subordinated Notes 910 8,728
See accompanying Notes to Condensed Consolidated Financial Statements.
7
Notes to Condensed Consolidated Financial Statements (unaudited)
1. General
American Skiing Company (ASC), a Delaware corporation, and its
subsidiaries (collectively, the Company) own and operate resort facilities, real
estate development companies, golf courses, ski and golf schools, retail shops,
and other related companies. The Company conducts its resort operations through
its wholly owned subsidiaries which operated the following ski resorts during
the 39 weeks ended April 30, 2006 and the 40 weeks ended May 1, 2005:
Sugarloaf/USA and Sunday River in Maine, Attitash in New Hampshire, Killington
and Mount Snow in Vermont, The Canyons in Utah, and Steamboat in Colorado. The
Company conducts its real estate development operations through its wholly owned
subsidiary, American Skiing Company Resort Properties (Resort Properties), and
Resort Properties' subsidiaries, including Grand Summit Resort Properties, Inc.
and The Canyons Resort Properties, Inc.
The Company reports its results of operations in two business segments,
resort operations and real estate operations. The Company's fiscal year is a
fifty-two week or fifty-three week period ending on the last Sunday of July.
Fiscal 2006 is a fifty-two week reporting period and fiscal 2005 was a
fifty-three week reporting period. Each quarter consists of 13 weeks, with the
exception of the second quarter of fiscal 2005, which consisted of 14 weeks. The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation have been included.
Results for interim periods are not indicative of the results expected
for the year due to the seasonal nature of the Company's business. Due to the
seasonality of the ski industry, the Company typically incurs significant
operating losses in its resort operations segment during its first and fourth
fiscal quarters. The unaudited condensed consolidated financial statements
should be read in conjunction with the following notes and the Company's
consolidated financial statements included in its Form 10-K for the fiscal year
ended July 31, 2005 filed with the Securities and Exchange Commission on October
31, 2005.
2. Significant Accounting Policies
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of sales and expenses
during the reporting periods. Areas where significant judgments are made
include, but are not limited to: allowances for doubtful accounts, litigation
accruals, insurance reserves, long-lived asset valuation, realizability and
useful lives, and allowances for deferred income tax assets. Actual results
could differ materially from these estimates. The following are the Company's
significant accounting policies:
Principles of Consolidation
The accompanying condensed consolidated financial statements include
the accounts of ASC and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an
original maturity to the Company of three months or less to be cash equivalents.
Cash equivalents, which consisted of short-term certificates of deposit, totaled
approximately $0.9 million as of each of July 31, 2005 and April 30, 2006.
8
Restricted Cash
Restricted cash consists of deposits received and held in escrow
related to pre-sales of real estate developed for sale, guest advance deposits
for lodging reservations, and cash held in cash collateral accounts by lenders
on behalf of the real estate companies. The cash becomes available to the
Company when the real estate units are sold, the lodging services are provided,
or upon approval of expenditures by lenders.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method)
or market, and consists primarily of retail goods, food, and beverage products.
Property and Equipment
Property and equipment are carried at cost, net of accumulated
depreciation, amortization, and impairment charges. Depreciation and
amortization are calculated using the straight-line method over the assets'
estimated useful lives which range from 9 to 40 years for buildings, 3 to 12
years for machinery and equipment, 10 to 50 years for land improvements, and 5
to 30 years for lifts, lift lines, and trails. Assets held under capital lease
obligations are amortized over the shorter of their useful lives or their
respective lease lives, unless a bargain purchase option exists at the end of
the lease in which case the assets are amortized over their estimated useful
lives. Due to the seasonality of the Company's business, the Company records a
full year of depreciation and amortization relating to its ski resort operating
assets during the second and third quarters of the Company's fiscal year.
Real Estate Developed for Sale
The Company capitalizes as real estate developed for sale the original
acquisition cost of land, direct construction and development costs, property
taxes, interest incurred on costs related to real estate under development, and
other related costs (engineering, surveying, landscaping, etc.) until the
property has been developed to the point it is ready for sale. The cost of sales
for individual parcels of real estate or quarter and eighth share units within a
project is determined using the relative sales value method. Selling costs are
charged to expense in the period in which the related revenue is recognized.
Goodwill and Other Intangible Assets
As prescribed in Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets," certain indefinite-lived intangible
assets, including trademarks, are no longer amortized but are subject to annual
impairment assessments. An impairment loss is recognized to the extent that the
carrying amount exceeds the asset's fair value. Definite-lived intangible assets
continue to be amortized on a straight-line basis over their estimated useful
lives of 31 years, and assessed for impairment utilizing guidance provided by
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
As of July 31, 2005 and April 30, 2006, other intangible assets consist
of the following (in thousands):
------------------------------------------------------------------
July 31, 2005 April 30, 2006
------------------------------------------------------------------
Definite-lived Intangible Assets:
Lease agreements $ 1,853 $ 1,853
Less: accumulated amortization (404) (447)
--------------- --------------
1,449 1,406
Indefinite-lived Intangible Assets:
Trade names 170 170
Water rights 4,688 4,688
--------------- --------------
Intangible Assets, net $ 6,307 $ 6,264
=============== ==============
------------------------------------------------------------------
Amortization expense related to definite-lived intangible assets was
approximately $44,000 for the 40 weeks ended May 1, 2005 and $43,000 for the 39
weeks ended April 30, 2006. Future amortization expense related to
definite-lived intangible assets is estimated to be approximately $58,000 for
each of the next five fiscal years.
9
Long-Lived Assets
In accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," long-lived assets, such as property, equipment,
and definite-lived intangibles are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell, and depreciation ceases.
Revenue Recognition
Resort revenues include sales of lift tickets, skier development, golf
course and other recreational activities fees, sales from restaurants, bars, and
retail and rental shops, and lodging and property management fees (real estate
rentals). Daily lift ticket revenue is recognized on the day of purchase. Lift
ticket season pass revenue is recognized on a straight-line basis over the ski
season, which is the Company's second and third quarters of its fiscal year. The
Company's remaining resort revenues are generally recognized as the services are
performed. Real estate revenues are recognized under the full accrual method
when title has been transferred, initial and continuing investments are adequate
to demonstrate a commitment to pay for the property, and no continuing
involvement exists. Amounts received from pre-sales of real estate are recorded
as restricted cash and deposits and deferred revenue in the accompanying
condensed consolidated balance sheets until the earnings process is complete.
Stock Option Plan
Effective August 1, 1997, the Company established a fixed stock option
plan, the American Skiing Company Stock Option Plan (the Plan), which is more
fully described in Note 2 of the Company's fiscal 2005 Annual Report on Form
10-K, that provides for the grant of incentive and non-qualified stock options
for the purchase of up to 8,688,699 shares of the Company's common stock by
officers, management employees, members of the board of directors of the Company
and its subsidiaries, and other key persons (eligible for nonqualified stock
options only) as designated by the Compensation Committee. The Plan has no
restricted stock option component. There have been no options granted since July
2001.
Prior to July 31, 2005, as permitted under SFAS No. 123, the Company
accounted for its stock option plans following the recognition and measurement
principles of Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. Accordingly, no
stock-based compensation had been reflected in net income (loss) for stock
options, as all options granted had an exercise price equal to the market value
of the underlying common stock on the date of grant and the related number of
shares granted was fixed at that point in time.
In December 2004, the Financial Accounting Standards Board (FASB)
issued SFAS No. 123(R), "Share Based Payment." This statement revised SFAS No.
123 by eliminating the option to account for employee stock options under APB
Opinion No. 25 and requires companies to recognize the cost of employee services
received in exchange for awards of equity instruments based on the grant-date
fair value of those awards (the "fair-value-based" method).
Effective August 1, 2005, the Company adopted the fair value
recognition provisions of SFAS No. 123(R) using the modified prospective
application method. Under this transition method, compensation cost recognized
in the 13 and 39 week periods ended April 30, 2006, includes amounts of: (a)
compensation cost of all stock-based payments granted prior to, but not yet
vested as of, August 1, 2005 (based on grant-date fair value estimated in
accordance with the original provisions of SFAS No. 123, and previously
presented in the pro-forma footnote disclosures), and (b) compensation cost for
all stock-based payments granted subsequent to August 1, 2005 (based on the
grant-date fair value estimated in accordance with the provisions of SFAS No.
123(R)). In accordance with the modified prospective application method, results
for prior periods have not been restated. The effect of adopting SFAS No. 123(R)
as of August 1, 2005 for the 39-week period ended April 30, 2006 was less than
$1,000 of reported compensation expense.
10
Under the modified prospective application method, results for prior
periods have not been restated to reflect the effects of implementing SFAS No.
123(R). The following pro-forma information, as required by SFAS No. 148,
"Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment
of FASB Statement No. 123", is presented for comparative purposes and
illustrates the effect on net income (loss) and net income (loss) per common
share for the periods presented as if the Company had applied the fair value
recognition provisions of SFAS No. 123 to stock-based employee compensation
prior to August 1, 2005 (in thousands, except per share amounts):
--------------------------------------------------------------------
13 weeks ended 40 weeks ended
May 1, 2005 May 1, 2005
--------------------------------------------------------------------
Net income (loss)
As reported $ 23,835 $ (36,029)
Amount allocated to
participating securities (14,510) -
Stock-based employee
compensation determined under
fair-value method for all
awards, net of tax (33) (101)
-------------- --------------
Pro forma $ 9,292 (36,130)
============== ==============
Basic and diluted net income
(loss) per common share
As reported $ 0.29 (1.14)
Pro forma 0.29 (1.14)
--------------------------------------------------------------------
The following table summarizes stock option activity during the 39 weeks ended
April 30, 2006:
- ----------------------------------------------------------------------------------------------------------
Weighted Average
Weighted Average Remaining Contractual Intrinsic Value
Options Exercise Price Term (in years) (In thousands)
- ----------------------------------------------------------------------------------------------------------
Outstanding at July 31, 2005 3,811,187 $ 4.26 4.25
Granted -
Exercised -
Forfeited -
---------------
Outstanding at April 30, 2006 3,811,187 $ 4.26 3.48 $ -
===============
Vested at April 30, 2006 3,811,187 $ 4.26 3.48 $ -
Exercisable at April 30, 2006 3,811,187 $ 4.26 3.48 $ -
2006
- ----------------------------------------------------------------------------------------------------------
As of April 30, 2006, all options have vested. Accordingly, there is no
future compensation cost related to non-vested options or non-vested restricted
options to be recognized.
The following table summarizes information about the stock options outstanding
under the Plan as of April 30, 2006:
- ----------------------------------------------------------------------------------------------
Weighted Average Weighted Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices Contractual Exercise Price Exercise Price
life (in years)
- ----------------------------------------------------------------------------------------------
$0.72 25,000 5.20 $ 0.72 25,000 $ 0.72
1.75 - 2.50 1,420,337 3.87 2.11 1,420,337 2.11
3.00 - 4.00 1,439,250 3.82 3.18 1,439,250 3.18
7.00 - 8.75 735,750 2.51 7.19 735,750 7.19
14.19 - 18.00 190,850 1.48 17.55 190,850 17.55
----------- ------------
3,811,187 3.48 4.26 3,811,187 4.26
=========== ============
- ----------------------------------------------------------------------------------------------
11
Derivative Financial Instruments
All derivatives are recognized in the condensed consolidated balance
sheets at their fair values. On the date the derivative contract is entered
into, the Company designates the derivative as either a hedge of the fair value
of a recognized asset or liability ("fair value" hedge), or the variability of
cash flows to be received or paid related to a recognized asset or liability
("cash flow" hedge). During May 2005, the Company entered into a three-year
interest rate swap agreement covering a notional amount of $95.0 million related
to its Resort Senior Credit Facility. The agreement is adjusted to market value
at each reporting period and the increase or decrease is reflected in the
condensed consolidated statements of operations. For the 39-week period ended
April 30, 2006, the Company recognized approximately $1.7 million of other
non-cash income from market value adjustments to this agreement.
Accounting for Variable Interest Entities
In December 2003, the FASB issued a revision to FASB Interpretation
(FIN) No. 46, "Consolidation of Variable Interest Entities" (FIN No. 46(R)). FIN
No. 46(R) clarifies the application of ARB No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity risk for the entity to finance its activities without additional
subordinated financial support. FIN No. 46(R) requires the consolidation of
these entities, known as variable interest entities, by the primary beneficiary
of the entity. The primary beneficiary is the entity, if any, that will absorb a
majority of the variable interest entity's expected losses, receive a majority
of the variable interest entity's expected residual returns, or both. Under
these guidelines, the Company adopted FIN No. 46(R) during fiscal 2004.
On May 14, 2004, Resort Properties completed the restructuring of its
real estate term loan facility with Fleet National Bank, Ski Partners, LLC, and
Oak Hill Capital Partners. As a result of the restructuring, a new business
venture called SP Land Company, LLC (SP Land) was created by Ski Partners, LLC,
Resort Properties, and Killington, Ltd. (Killington) (an ASC subsidiary). As
part of the restructuring, certain developmental land parcels at the Killington
resort and cash with a combined carrying value of approximately $2.2 million
were transferred by Resort Properties and Killington into SP Land Company, LLC,
together with all indebtedness, including related interest and fees, under the
real estate term loan facility held by Fleet National Bank and Ski Partners, LLC
totaling $55.4 million. Collectively, Killington and Resort Properties own 25%
of the membership interests of SP Land. The remaining 75% of the membership
interests in SP Land is owned by Ski Partners, LLC, together with a preferential
interest in SP Land of approximately $37.2 million. In accordance with FIN No.
46(R), SP Land is a variable interest entity and is accounted for on the equity
method because it does not meet the requirements for consolidation.
As part of the restructuring of the real estate term loan facility,
Killington also contributed all of its interest in approximately 256 acres of
developmental real estate into a joint venture entity called Cherry Knoll
Associates, LLC (Cherry Knoll). Each of SP Land and Killington own 50% of the
membership interests in Cherry Knoll. In addition, Killington maintains a
preferential distribution interest in Cherry Knoll of $1.5 million. In
accordance with FIN No. 46(R), Cherry Knoll is a variable interest entity and is
accounted for on the equity method because it does not meet the requirements for
consolidation.
In October 2004, the Company, through one of its subsidiaries, acquired
a 49% interest in SS Associates, LLC (SS Associates) by contributing its rights
to purchase a building to SS Associates and by making a refundable security
deposit of $0.4 million. In accordance with FIN No. 46(R), the Company
consolidates SS Associates because it meets the requirements of a variable
interest entity for which the Company is the primary beneficiary.
SS Associates purchased a building in October 2004 for $3.5 million
(including costs to close) with cash and the issuance of long-term debt of $2.5
million. The loan is secured by the building, has 59 monthly payments of $29,000
each, a final payment in October 2009 of $1.5 million, and bears interest at
6.5% per year. SS Associates is obligated on the loan and none of the Company's
remaining subsidiaries is obligated. SS Associates leases the building to the
Company for $0.5 million per year. The non-ASC owned interest in SS Associates
of $0.5 million (owned in part by certain members of mid-level management at the
Company's Killington resort) is included in other long-term liabilities in the
accompanying condensed consolidated balance sheet as of April 30, 2006.
Reclassifications
Certain amounts in the prior periods' financial statements and related
notes have been reclassified to conform to the current periods' presentation.
12
Recently Issued Accounting Standards
In December 2004, the FASB issued SFAS No. 152, "Accounting for Real
Estate Time-Sharing Transactions - an amendment of FASB Statements No. 66 and
67." This statement amends SFAS No. 66, "Accounting for Sales of Real Estate,"
(SFAS No. 66) and SFAS No. 67, "Accounting for Costs and Initial Rental
Operations of Real Estate Projects," to state that the guidance for (a)
incidental operations and (b) costs incurred to sell real estate projects also
applies to real estate time-share transactions. The accounting for those
operations and costs is also subject to the guidance of Statement of Position
(SOP) 04-2, which provides guidance on the seller's accounting for real estate
time-sharing transactions. SFAS No. 152, however, does not change the revenue
guidance in SFAS No. 66. The provisions of SFAS No. 152 became effective for the
quarter ended October 30, 2005 and were adopted by the Company. There was no
material impact to the accompanying condensed consolidated financial statements
due to the adoption of this standard.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets - an Amendment of APB Opinion No. 29" (SFAS No. 153). This
statement amends APB Opinion No. 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. The
provisions of SFAS No. 153 became effective for the quarter ended October 30,
2005 and were adopted by the Company. There was no impact to the accompanying
condensed consolidated financial statements due to the adoption of this
standard.
In March 2005, the FASB issued FIN No. 47, "Accounting for Conditional
Asset Retirement Obligations" (FIN No. 47). FIN No. 47 clarifies the term
"conditional asset retirement obligation" as used in SFAS No. 143, "Accounting
for Asset Retirement Obligations." SFAS No. 143 refers to a legal obligation to
perform an asset retirement activity in which the timing and (or) method of
settlement are conditional on a future event that may or may not be within the
control of the entity. SFAS No. 143 requires an entity to recognize the fair
value of a legal obligation to perform asset retirement activities when the
obligation is incurred. FIN No. 47 further clarifies when an entity has
sufficient information to reasonably estimate the fair value of a conditional
asset retirement obligation. The provisions of FIN No. 47 became effective for
the quarter ended October 30, 2005 and were adopted by the Company. Management
has determined under SFAS No. 143 that it cannot reasonably estimate the fair
value of its asset retirement obligations relating to certain provisions in its
lease agreements at Attitash, Mount Snow, and Steamboat requiring it to reforest
certain ski terrain leased from the U.S. Forest Service, as the option to renew
these leases is in the control of the Company and management currently has no
intention to terminate the lease. Management has not recorded a liability in its
condensed consolidated financial statements for these obligations. Management
has determined that these obligations are not conditional on a future event and
as such, the adoption of FIN No. 47 had no impact on the accompanying condensed
consolidated financial statements.
3. Net Income (Loss) per Common Share
Net income (loss) per common share for the periods ended May 1, 2005
and April 30, 2006, was determined based on the following data (in thousands):
--------------------------------------------------------------------------------------------------------
13 weeks ended 13 weeks ended 40 weeks ended 39 weeks ended
May 1, 2005 April 30, 2006 May 1, 2005 April 30, 2006
--------------------------------------------------------------------------------------------------------
Net income (loss) $ 23,835 $ 29,413 $ (36,029) $ (24,107)
Less: amounts allocated to
participating securities (14,510) (18,720) - -
---------------- ---------------- ---------------- ---------------
Net income (loss) attributable
to common shareholders $ 9,325 $ 10,693 $ (36,029) $ (24,107)
================ ================ ================ ===============
Weighted average common shares
outstanding - basic and diluted 31,738 31,738 31,738 31,738
================ ================ ================ ===============
--------------------------------------------------------------------------------------------------------
13
The Company accounts for its earnings per share under Emerging Issues
Task Force Issue No. 03-06, "Participating Securities and the Two Class Method
Under FAS No. 128, Earnings per Share". The Company's mandatorily redeemable 12%
Series C-1 Convertible Participating Preferred Stock (Series C-1 Preferred
Stock) is a participating security because it may participate in dividends with
common stock. Accordingly, net income is allocated to each security based on the
ratio of the number of shares if-converted to the total number of shares. In
periods when a net loss is incurred, the net loss is not allocated to the Series
C-1 Preferred Stock because it does not have a contractual obligation to share
in the losses of the Company, and the impact of inclusion would be
anti-dilutive. As of May 1, 2005 and April 30, 2006, the Company had 14,760,530
shares of its Class A common stock outstanding, which are convertible into
shares of the Company's common stock. The shares of the Company's common stock
issuable upon conversion of the shares of the Company's Class A common stock
have been included in the calculation of the weighted average common shares
outstanding. As of May 1, 2005 and April 30, 2006, the Company had 40,000 shares
of its Series C-1 Preferred Stock outstanding, which are convertible into shares
of the Company's common stock. If converted at their liquidation preferences as
of May 1, 2005 and April 30, 2006, these convertible preferred shares would
convert into approximately 49,381,000 and 55,561,000 shares of common stock,
respectively. For the periods ended May 1, 2005 and April 30, 2006, the common
shares into which these preferred securities are convertible have not been
included in the dilutive share calculation as the impact of their inclusion
would be anti-dilutive. The Company also had 3,811,187 options outstanding to
purchase shares of its common stock under the Plan as of each of May 1, 2005 and
April 30, 2006. These stock options are excluded from the dilutive share
calculation, as the impact of their inclusion would be anti-dilutive.
4. Segment Information
In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131), the Company has classified
its operations into two business segments, resort operations and real estate
operations. Revenues at each of the resorts are derived from the same lines of
business which include lift ticket sales, food and beverage, retail sales
including rental and repair, skier development, lodging and property management,
golf, other summer activities and miscellaneous revenue sources. The performance
of the resorts is evaluated on the same basis of profit or loss from operations.
Additionally, each of the resorts has historically produced similar operating
margins and attracts the same class of customer. Based on the similarities of
the operations at each of the resorts, the Company has concluded that the
resorts satisfy the aggregation criteria set forth in SFAS No. 131. The
Company's real estate revenues are derived from the sale, resale, and leasing of
interests in real estate development projects undertaken by the Company at its
resorts and the sale of other real property interests. Revenues and operating
losses for the two business segments are as follows (in thousands):
---------------------------------------------------------------------------------------------------------
13 weeks ended 13 weeks ended 40 weeks ended 39 weeks ended
May 1, 2005 April 30, 2006 May 1, 2005 April 30, 2006
---------------------------------------------------------------------------------------------------------
Revenues:
Resort $ 132,266 $ 132,837 $ 253,497 $ 259,871
Real estate 2,928 24,185 7,317 29,766
---------------- ------------------------------------------------
Total $ 135,194 $ 157,022 $ 260,814 $ 289,637
================ ================================================
Net income (loss):
Resort $ 24,489 $ 24,022 $ (34,059) $ (26,375)
Real estate (654) 5,391 (1,970) 2,268
---------------- ------------------------------------------------
Total $ 23,835 $ 29,413 $ (36,029) $ (24,107)
================ ================================================
================ ================================================
---------------------------------------------------------------------------------------------------------
14
Identifiable assets for the two business segments and a reconciliation
of the totals reported for the operating segments to the totals reported in the
condensed consolidated balance sheets is as follows (in thousands):
------------------------------------------------------------------------
July 31, 2005 April 30, 2006
------------------------------------------------------------------------
Identifiable Assets:
Resort $ 355,483 $ 361,971
Real Estate 58,296 38,242
-------------- ---------------
$ 413,779 $ 400,213
============== ===============
Assets:
Identifiable assets for segments $ 413,779 $ 400,213
Intangible and deferred income
tax assets not allocated to
segments 9,155 9,111
-------------- ---------------
Total consolidated assets $ 422,934 $ 409,324
============== ===============
------------------------------------------------------------------------
5. Long-Term Debt
Resort Senior Credit Facility
The Company entered into agreements dated November 24, 2004 with Credit
Suisse, GE Capital, and other lenders whereby the lenders provided the Company
with a $230.0 million senior secured loan facility (Resort Senior Credit
Facility) consisting of a revolving credit facility and two term loan
facilities. The proceeds of the Resort Senior Credit Facility were used to repay
in full the previously existing resort senior credit facility and redeem the
Company's $120.0 million senior subordinated notes (Senior Subordinated Notes),
as well as to pay fees and expenses related to the transaction. The Resort
Senior Credit Facility consists of the following:
o Revolving Facility - $40.0 million, including letter of credit
(L/C) availability of up to $6.0 million. The amount of
availability under this facility is correspondingly reduced by
the amount of each L/C issued.
o First Lien Term Loan - $85.0 million borrowed on the funding date
of November 24, 2004.
o Second Lien Term Loan - $105.0 million borrowed on the funding
date of November 24, 2004.
The Revolving Facility and First Lien Term Loan are provided under a
single credit agreement (collectively, the First Lien Credit Agreement), mature
in November 2010 and bear interest, at the option of the Company, either at a
rate equal to the prime rate, as publicly quoted in The Wall Street Journal,
plus 3.5%, or at a rate equal to LIBOR (as defined) plus 4.5%, payable quarterly
(10.5% based on the prime rate for the Revolving Facility and 9.28% based on the
LIBOR rate for the First Lien Term Loan as of April 30, 2006). The First Lien
Term Loan requires 23 quarterly principal payments of $212,500 beginning on
January 15, 2005 and a final payment of $80.1 million in November 2010. The
Revolving Facility is comprised of two sub-facilities, each in the amount of
$20.0 million and each with separate fees for the unused portion of the
facilities in the amounts of 1.0% and 4.5% per annum, respectively. The Second
Lien Term Loan is provided under a separate credit agreement (Second Lien Credit
Agreement), matures in November 2011, bears interest at a rate equal to the
prime rate, as publicly quoted in The Wall Street Journal, plus 7.0%, or at a
rate equal to LIBOR (as defined) plus 8.0%, payable quarterly (12.56% as of
April 30, 2006 based on the LIBOR rate), and principal is due upon maturity.
The Revolving Facility and the First Lien Term Loan obligations under
the First Lien Credit Agreement are secured by a first-priority security
interest in substantially all of the Company's assets, other than assets held by
Grand Summit, and the Company's obligations under the Second Lien Credit
Agreement are secured by a second-priority security interest in the same assets.
Collateral matters between the lenders under the First Lien Credit Agreement and
the lenders under the Second Lien Credit Agreement are governed by an
inter-creditor agreement.
15
The Resort Senior Credit Facility contains affirmative, negative, and
financial covenants customary for this type of credit facility, which includes
maintaining a minimum level of EBITDA (as defined), limiting the Company's
capital expenditures, maintaining a minimum ratio of appraised asset value to
debt, and having a zero balance on the Revolving Credit Facility (excluding
L/Cs) on April 1 of each year. The Resort Senior Credit Facility also contains
events of default customary for such financings, including but not limited to
nonpayment of amounts when due; violation of covenants; cross default and cross
acceleration with respect to other material debt; change of control;
dissolution; insolvency; bankruptcy events; and material judgments. Some of
these events of default allow for grace periods or are qualified by materiality
concepts. The Resort Senior Credit Facility requires the Company to offer to
prepay the loans with proceeds of certain material asset sales and recovery
events, certain proceeds of debt, 50% of excess cash flow, and proceeds from the
issuance of capital stock. The Resort Senior Credit Facility also restricts the
Company's ability to pay cash dividends on or redeem its common and preferred
stock. Pursuant to the requirements of the Resort Senior Credit Facility, on May
23, 2005, the Company entered into an interest rate swap agreement for 50% of
the First Lien Term Loan and the Second Lien Term Loan for a notional amount of
$95.0 million. Under the swap agreement, during the period from May 16, 2005 to
November 15, 2005, the Company paid 4.16% and received the 6-month LIBOR rate.
During the period from November 16, 2005 to May 15, 2008, the Company pays 4.16%
and receives the 3-month LIBOR rate. As a result of entering into this interest
rate swap agreement, the Company has fixed the cash-pay rate on the notional
amount until the maturity of the swap agreement in May 2008. Changes in the fair
value of the interest rate swap agreement are recorded as an increase in the
fair value of this interest rate swap agreement at each reporting period-end.
During the 39-week period ended April 30, 2006, the Company recognized
approximately $1.7 million of increase in fair value of this agreement due to
market value adjustments. The total balance sheet effect as of April 30, 2006 is
a net asset of $2.0 million.
As of April 30, 2006, the Company had $82.7 million and $105.0 million
of principal outstanding under the First Lien Term Loan and Second Lien Term
Loan portions of the Resort Senior Credit Facility, respectively. Furthermore,
as of April 30, 2006, the Company had $1.6 million in outstanding L/Cs and no
outstanding borrowings under the Revolving Credit Facility, with $38.4 million
available for additional borrowings. The Company was in compliance with all
financial covenants of the Resort Senior Credit Facility through April 30, 2006.
Construction Loan Facility
The Company conducts substantially all of its real estate development
through subsidiaries, each of which is a wholly owned subsidiary of Resort
Properties. Grand Summit owns the existing Grand Summit Hotel project at
Steamboat, which was primarily financed through a $110.0 million Senior
Construction Loan (Senior Construction Loan). Due to construction delays and
cost increases at the Steamboat Grand Hotel project, on July 25, 2000, Grand
Summit entered into the $10.0 million Subordinated Construction Loan, which was
subsequently increased to $10.6 million in December 2003 (Subordinated
Construction Loan). Together, the Senior Construction Loan and the Subordinated
Construction Loan comprise the "Construction Loan Facility". The Company used
the Construction Loan Facility solely for the purpose of funding the completion
of the Steamboat Grand Hotel. The Construction Loan Facility is without recourse
to ASC and its resort operating subsidiaries and is collateralized by
significant real estate assets of Resort Properties and its subsidiaries,
including the assets and stock of Grand Summit, ASC's primary hotel development
subsidiary.
The outstanding principal amounts under the Construction Loan Facility
are payable incrementally as quarter and eighth share unit sales are closed,
based on a predetermined per unit amount, which approximated between 70% and 80%
of the net proceeds of each closing up until the March 18, 2006 auction held at
Steamboat and then 85% of all units sold at the auction. Mortgages against the
commercial core units and unsold unit inventory at the Grand Summit Hotel at
Steamboat and a promissory note from the Steamboat Homeowners Association
secured by the Steamboat Grand Hotel parking garage collateralize the
Construction Loan Facility, and are subject to covenants, representations, and
warranties customary for that type of construction facility. The Senior
Construction Loan is without recourse to ASC and its resort operating
subsidiaries other than Grand Summit.
On December 8, 2005, the Company announced that it would be conducting
an auction on March 18, 2006 for the remaining unsold developer inventory at the
Grand Summit Hotel at Steamboat. In connection with the auction announcement, on
February 14, 2006, Grand Summit entered into a letter agreement with the lenders
under the Senior Construction Loan waiving the March 31, 2006 maximum
outstanding principal balance requirement and resetting the predetermined per
unit principal paydown amount noted above to 85% of all gross proceeds received
from this auction. The Senior Construction Loan, as amended, requires that the
loan be paid off as of June 30, 2006.
16
The auction, together with subsequent sales activity, resulted in a
near sell-out of the remaining inventory of residential units. As of April
30, 2006, sales of $21.0 million had been closed, with an additional $2.2
million in sales contracts pending final closings. As a result, the Company has
paid off the Senior Construction Loan, including deferred loan fees of $750,000.
In addition, the Company has reduced the balance of the Subordinated
Construction Loan by $8.5 million to a remaining balance of $2.1 million as of
April 30, 2006.
Until July 31, 2005, the Subordinated Construction Loan carried
interest at a fixed rate of 20% per annum, payable monthly in arrears. Only 50%
of the amount of this interest was due and payable in cash and the other 50%, if
no events of default existed under the Subordinated Construction Loan or the
Senior Construction Loan was automatically deferred until the final payment date
of the Subordinated Construction Loan. Subsequent to July 31, 2005, the interest
rate was decreased to 10% per annum, all of which is payable in cash, pursuant
to the Eighth Amendment Agreement between Grand Summit and the lenders. The
total deferred interest under the Subordinated Construction Loan as of April 30,
2006 was $4.2 million. The Subordinated Construction Loan, as amended, including
the related deferred interest balance, matures on November 30, 2007. The
Subordinated Construction Loan, including the related deferred interest balance
is secured by the same collateral which secured the Senior Construction Loan and
is non-recourse to ASC and its subsidiaries other than Grand Summit.
Other Long-Term Debt
The Company has $15.4 million of other long-term debt as of April 30,
2006. This is comprised of $7.4 million of capital lease obligations and $8.0
million of notes payable with various lenders.
6. Subordinated Notes and Debentures
11.3025% Junior Subordinated Notes
Pursuant to the terms of a securities purchase agreement, which closed
on August 31, 2001, the Company issued, and Oak Hill Capital Partners, L.P.
(together with certain of its related affiliates and associates, Oak Hill)
purchased, $12.5 million aggregate principal amount of Junior Subordinated Notes
(Junior Subordinated Notes), which are convertible into shares of the Company's
Non-voting Series D Participating Preferred Stock (Series D Preferred Stock).
The Junior Subordinated Notes are unsecured and bear interest at a rate of
11.3025%, which compounds annually and is due and payable at the maturity of the
Junior Subordinated Notes. The Junior Subordinated Notes were amended in
connection with the Company's entry into the Resort Senior Credit Facility on
November 24, 2004 to extend their maturity to May 2012. The proceeds of the
Junior Subordinated Notes were used to fund short-term liquidity needs of Resort
Properties by way of the purchase of certain real estate assets by ASC from
Resort Properties. As of April 30, 2006, the outstanding balance on the Junior
Subordinated Notes was approximately $20.6 million including compounded
interest.
New Junior Subordinated Notes
In connection with the Company's entry into the Resort Senior Credit
Facility on November 24, 2004, the Company entered into an exchange agreement
with the holder of the Company's Series A Preferred Stock and issued $76.7
million of junior subordinated notes due May 2012 (New Junior Subordinated
Notes) to the holder of the Series A Preferred Stock in exchange for all
outstanding shares of Series A Preferred Stock. The New Junior Subordinated
Notes accrue interest at a rate of 11.25% upon issuance, gradually increasing to
a rate of 13.0% in 2012. No principal or interest payments are required to be
made on the New Junior Subordinated Notes until maturity. However, interest is
added to the principal outstanding on January 1 of each year. On January 1,
2005, $0.9 million of interest was added to the principal outstanding and on
January 1, 2006, $8.7 million was added to the principal outstanding. The New
Junior Subordinated Notes are subordinated to all of the Company's other debt
obligations and all trade payables incurred in the ordinary course of business.
None of the Company's subsidiaries are obligated on the New Junior Subordinated
Notes, and none of the Company's assets serve as collateral for repayment of the
New Junior Subordinated Notes. The indenture governing the New Junior
Subordinated Notes also restricts the Company from paying cash dividends or
making other distributions to its shareholders subject to certain limited
exceptions. As of April 30, 2006, the outstanding balance on the New Junior
Subordinated Notes was $86.3 million. Accrued interest as of April 30, 2006 on
the New Junior Subordinated Notes was $4.3 million.
17
Other Subordinated Debentures
Other subordinated debentures owed by the Company to institutions and
individuals as of April 30, 2006 are unsecured and are due as follows (dollars
in thousands):
------------------------------
Interest Principal
Year Rate Amount
------------------------------
2010 8% $ 1,292
2012 6% 1,155
2013 6% 1,065
2015 6% 1,500
2016 6% 1,196
---------
$ 6,208
==========
------------------------------
7. Mandatorily Redeemable Securities
Series A Preferred Stock
As of July 25, 2004, the Company had 36,626 shares of Series A
Preferred Stock outstanding. In connection with the Company's entry into the
Resort Senior Credit Facility on November 24, 2004 all outstanding shares of the
Series A Preferred Stock were exchanged for New Junior Subordinated Notes in the
principal amount of $76.7 million.
Series B Preferred Stock
Pursuant to a Preferred Stock Subscription Agreement (the Series B
Agreement) dated July 9, 1999, the Company sold 150,000 shares of its 8.5%
Series B Convertible Participating Preferred Stock (Series B Preferred Stock) on
August 9, 1999 to Oak Hill for $150.0 million.
On August 31, 2001, in connection with a recapitalization transaction,
the Series B Preferred Stock was stripped of all of its economic and governance
rights and preferences, with the exception of its right to elect up to six
directors of ASC. The Company issued mandatorily redeemable Series C-1 Preferred
Stock and Series C-2 Preferred Stock with an aggregate initial face value of
$179.5 million which was equal to the accrued liquidation preference of the
Series B Preferred Stock immediately before being stripped of its right to such
accrued liquidation preference. The Series B Preferred Stock currently remains
outstanding but will lose its remaining rights, including voting rights, upon
redemption of the Series C-1 Preferred Stock and Series C-2 Preferred Stock in
July 2007.
Series C-1 Preferred Stock and Series C-2 Preferred Stock
Pursuant to the terms of a securities purchase agreement, which closed
on August 31, 2001, the Company issued to Oak Hill two new series of Preferred
Stock: (i) $40.0 million face value of Series C-1 Preferred Stock; and (ii)
$139.5 million face value of Series C-2 Preferred Stock. The initial face values
of the Series C-1 Preferred Stock and Series C-2 Preferred Stock correspond to
the accrued liquidation preference of the Series B Preferred Stock immediately
before being stripped of its right to such accrued liquidation preference. The
Series C-1 Preferred Stock and Series C-2 Preferred Stock are entitled to annual
preferred dividends of 12% and 15%, respectively. At the Company's option,
dividends can either be paid in cash or in additional shares of preferred stock.
The Series C-1 Preferred Stock is convertible into common stock at a price of
$1.25 per share, subject to adjustments. The Series C-2 Preferred Stock is not
convertible. Both the Series C-1 Preferred Stock and Series C-2 Preferred Stock
are mandatorily redeemable and mature in July 2007. As of April 30, 2006,
cumulative dividends in arrears totaled approximately $29.5 million and $137.8
million for the Series C-1 Preferred Stock and Series C-2 Preferred Stock,
respectively. The Series C-1 Preferred Stock and Series C-2 Preferred Stock have
certain voting rights as defined in the securities certificates of designation
relating thereto and rank senior in liquidation preference to all common stock
and Class A common stock outstanding as of April 30, 2006, common stock, Class A
common stock and Series D Preferred Stock issued in the future, and rank pari
passu with each other and the Series B Preferred Stock. The Series C-1 Preferred
Stock is also participating preferred stock and consequently has the right to
participate in any dividends paid or payable to the common stock of the Company
on an as-if-converted basis.
Series D Preferred Stock
The Company has authorized the issuance of 5,000 shares of Series D
Preferred Stock. As of April 30, 2006, no shares of Series D Preferred Stock
have been issued. The Series D Preferred Stock is junior in right of preference
to the Series C-1 Preferred Stock and Series C-2 Preferred Stock, is not
entitled to preferred dividends, and is redeemable at the option of the
shareholders.
18
8. Dividend Restrictions and Stockholders Agreement
Dividend Restrictions
Borrowers under the Resort Senior Credit Facility, which include ASC,
are restricted from paying cash dividends on any of their preferred or common
stock.
Grand Summit, the borrower under the Construction Loan Facility, is
restricted from declaring dividends or advancing funds to ASC by any other
method, unless specifically approved by the Construction Loan Facility lenders.
Stockholders Agreement
The Company, Oak Hill, and Mr. Leslie B. Otten (Mr. Otten) entered into
a Stockholders Agreement, dated as of August 6, 1999, amended on July 31, 2000
(as amended, the Stockholders Agreement), pursuant to which each of Mr. Otten
and Oak Hill agreed to vote its capital stock of the Company so as to cause
there to be:
o Six directors of the Company nominated by Oak Hill, so long as Oak
Hill owns 80% of the shares of common stock it owned as of July 31,
2000 on a fully diluted basis, such number of directors decreasing
ratably with the percentage of Oak Hill's ownership of the common
stock on a fully diluted basis compared to such ownership as of July
31, 2000; and
o Two directors of the Company nominated by Mr. Otten, so long as Mr.
Otten owns 15% of the shares of common stock outstanding on a fully
diluted basis, and one director so nominated, so long as Mr. Otten
owns at least 5% of the shares of common stock outstanding on a fully
diluted basis.
As of April 30, 2006, Oak Hill owned not less than 80% of the shares of
common stock it owned as of July 31, 2000, on a fully diluted basis, and Mr.
Otten owned not less than 15% of the shares of common stock outstanding on a
fully diluted basis.
The Stockholders Agreement provides that, so long as Oak Hill owns at
least 20% of the outstanding shares of common stock on a fully diluted basis,
the affirmative vote of at least one Oak Hill director is required prior to the
approval of (i) the Company's annual budget, (ii) significant executive
personnel decisions, (iii) material actions likely to have an impact of 5% or
more on the Company's consolidated revenues or earnings, amendments to the
Company's articles of incorporation or by-laws, (iv) any liquidation,
reorganization, or business combination of the Company, (v) the initiation of
certain material litigation, and (vi) any material financing of the Company.
Under the Stockholders Agreement, Oak Hill and Mr. Otten have agreed
not to dispose of their securities of the Company if, (i) as a result of such
transfer, the transferee would own more than 10% of the outstanding shares of
common stock of the Company (on a fully diluted basis), unless such transfer is
approved by the Board of Directors (x) including a majority of the Common
Directors (as defined in the Stockholders Agreement), or (y) the public
stockholders of the Company are given the opportunity to participate in such
transfer on equivalent terms, (ii) the transferee is a competitor of the Company
or any of its subsidiaries, unless such transfer is approved by the Board of
Directors, or (iii) such transfer would materially disadvantage the business of
the Company. The Stockholders Agreement provides for additional customary
transfer restrictions applicable to each of Mr. Otten and Oak Hill as well as
standstill provisions applicable to Oak Hill.
19
The Stockholders Agreement provides that, upon the Company's issuance
of shares of common stock or securities convertible into common stock, subject
to certain exceptions, Mr. Otten and Oak Hill will have the right to purchase at
the same price and on the same terms, the number of shares of common stock or
securities convertible into common stock necessary for each of them to maintain
individually the same level of beneficial ownership of common stock of the
Company on a fully diluted basis as it owned immediately prior to the issuance.
This anti-dilution provision is subject to customary exceptions.
9. Phantom Equity Plan
ASC has established the American Skiing Company Phantom Equity Plan
(LTIP). Certain of ASC's executive officers participate in the LTIP.
Participants are entitled to a payment on awards granted under the LTIP, to the
extent vested upon a Valuation Event (as defined below) or in certain cases upon
termination of employment. The amount of any award is based ultimately on the
Equity Value, as defined by the LTIP, obtained through a Valuation Event. A
Valuation Event is defined in the LTIP as any of the following: (i) a sale or
disposition of a significant Company operation or property as determined by the
Board of Directors; (ii) a merger, consolidation, or similar event of the
Company other than one (A) in which the Company is the surviving entity or (B)
where no Change in Control (as defined in the LTIP) has occurred; (iii) a public
offering of equity securities by the Company that yields net proceeds to the
Company in excess of $50 million; or (iv) a Change in Control. Compensation
expense relating to the LTIP is estimated and recorded based on the probability
of the Company achieving a Valuation Event and its estimated Equity Value.
During the 13 weeks and 40 weeks ended May 1, 2005, the Company recorded an
expense related to the increase in the value of the LTIP of $0.6 million and
$0.5 million, respectively. During the 13 weeks and 39 weeks ended April 30,
2006, the Company recorded expenses relating to the LTIP of approximately $0.1
million and $0.2 million, respectively. These are included in marketing,
general, and administrative expenses in the accompanying consolidated statements
of operations. The total liability for the LTIP is $1.5 million, and is included
in other long-term liabilities in the condensed consolidated balance sheet as of
April 30, 2006,
10. Commitments and Contingencies
Certain claims, suits and complaints in the ordinary course of business
are pending or may arise against the Company, including all of its direct and
indirect subsidiaries. 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 are not likely to have a material effect on the
financial position, results of operations or liquidity of the Company if
disposed of unfavorably.
ASC Utah, a subsidiary of the Company, owns and operates The Canyons
resort. ASC Utah leases approximately 2,100 acres, including most of the base
area and a substantial portion of the skiable terrain at The Canyons resort,
under a lease (the "Ground Lease") from Wolf Mountain Resorts, LC ("Wolf"). The
initial term of the Ground Lease is 50 years expiring July 2047, with an option
to extend for three additional terms of 50 years each. The Ground Lease provides
an option to purchase those portions of the leased property that are intended
for residential or commercial development, subject to certain reconveyance
rights. Included in the leased premises under the Ground Lease is a sub-lease of
all of Wolf's interest as tenant in a lease from the Osguthorpe family (the
"Osguthorpe Lease"), through which ASC Utah operates additional ski terrain.
At various points following its acquisition of The Canyons, ASC Utah
entered into direct agreements with the Osguthorpe family amending or modifying
the Osguthorpe Lease. On March 31, 2006, Wolf issued to ASC Utah a written
notice of default (the "Default Notice") relating to the Osguthorpe Lease.
Specifically, Wolf alleged in the Default Notice that ASC Utah breached its
obligations under the Ground Lease to obtain Wolf's prior written consent to any
modification to the Osguthorpe Lease. In its Default Notice, Wolf demanded that
ASC Utah "disavow any claims as a tenant arising from or through the Osguthorpe
Lease property and reinstate and transfer to Landlord [Wolf] all of its rights
to the leased property the [sic] comprising Osguthorpe Lease."
Under the terms of the Ground Lease, ASC Utah had sixty (60) days, or
until May 30, 2006, to cure the default alleged in the Default Notice (subject
to further extension under certain enumerated circumstances). Wolf agreed in
writing to extend this cure period to June 16, 2006. As cure for the allegations
in the Default Notice, on June 7, 2006, ASC Utah executed and delivered to Wolf
an Assignment, Acknowledgement and Ratification, dated June 5, 2006 (the
"Assignment") assigning all of its right title and interest in and to the
amendments to the Osguthorpe Lease to Wolf. In addition, ASC Utah delivered to
Wolf a consent to assignment executed by the applicable Osguthorpe parties.
20
On June 14, ASC Utah initiated a declaratory judgment action in state
court in Summit County, Utah. The action seeks a declaration that the steps
taken by ASC Utah in response to the Default Notice are sufficient to cure any
alleged default under the Ground Lease, and in the interim seeks a temporary
restraining order preventing Wolf from declaring the Ground Lease terminated or
from exercising any other rights it may have on account of the alleged defaults
raised in the Default Notice until the Court decides this declaratory judgment
action.
The Company strongly believes that the actions taken by ASC Utah are
sufficient to cure the defaults alleged under the Default Notice. There can be
no assurance, however, that the Summit County state court will agree that ASC
Utah has cured the alleged defaults. In the event that the state court in Summit
County finds that the actions taken by ASC Utah are not sufficient to cure the
defaults under the Default Notice, and if ASC Utah is unable to effect a cure of
such defaults within any remaining cure period, the remedies available to Wolf
may include damages to Wolf (which the Company believes to be minimal) and/or
termination of the Ground Lease. Termination of the Ground Lease would
significantly reduce the value of ASC Utah's operation at The Canyons, and would
materially curtail, if not completely eliminate, ASC Utah's ability to obtain
recurring revenues from those assets. In the event of termination of the Ground
Lease, Wolf would have certain rights to repurchase for fair market value assets
of ASC Utah which are used in conjunction with its operation of The Canyons.
Wolf's right to terminate the Ground Lease is subject to certain rights of cure
and foreclosure in favor of ASC Utah's lenders. In the event of a timely cure by
one or more of those lenders, such lenders are entitled to step into the shoes
of ASC Utah as a tenant under the Ground Lease.
Termination of the Ground Lease by Wolf would likely cause a default
under the Company's Resort Senior Credit Facility. In the event of such a
default, the Company would engage in discussions with the lenders under those
facilities in an effort to satisfactorily address the default. There can be no
assurance that such discussions would be successful, and if they were not
successful the Company could be forced to refinance such obligations on
materially worse terms than those presently available.
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
Certain statements contained in this report constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E of the Securities Exchange Act of
1934, as amended (the Exchange Act). These forward-looking statements are not
based on historical facts, but rather reflect our current expectations
concerning future results and events. Similarly, statements that describe our
objectives, plans or goals are or may be forward-looking statements. We have
tried, wherever possible, to identify such statements by using words such as
"anticipate", "assume", "believe", "expect", "intend", "plan", and words and
terms of similar substance in connection with any discussion of operating or
financial performance. Such forward-looking statements involve a number of risks
and uncertainties. In addition to factors discussed above, other factors that
could cause actual results, performances or achievements to differ materially
from those projected include, but are not limited to, the following: the loss or
termination of our leasehold rights at The Canyons as a result of a failure to
adequately cure alleged defaults under governing lease documents, changes in
regional and national business and economic conditions affecting both our resort
operating and real estate segments; competition and pricing pressures; negative
impact on demand for our products resulting from terrorism and availability of
air travel (including the effect of airline bankruptcies); failure to maintain
improvements to resort operating performance at the covenant levels required by
our Resort Senior Credit Facility; adverse weather conditions regionally and
nationally; changes in weather patterns resulting from global warming; seasonal
business activity; increased gas and energy prices; changes to federal, state
and local regulations affecting both our resort operating and real estate
segments; failure to renew land leases and forest service permits; disruptions
in water supply that would impact snowmaking operations; the loss of any of our
executive officers or key operating personnel; and other factors listed from
time to time in our documents we have filed with the Securities and Exchange
Commission. We caution the reader that this list is not exhaustive. We operate
in a changing business environment and new risks arise from time to time. The
forward-looking statements included in this document are made only as of the
date of this document and under Section 27A of the Securities Act and Section
21E of the Exchange Act, we do not have or undertake any obligation to publicly
update any forward-looking statements to reflect subsequent events or
circumstances.
21
General
We are organized as a holding company and operate through various
subsidiaries. We are one of the largest operators of alpine ski and snowboard
resorts in the United States. We develop, own and operate a range of
hospitality-related businesses, including skier development programs, hotels,
golf courses, restaurants and retail locations. We also develop, market and
operate ski-in/ski-out alpine villages, townhouses, condominiums, and quarter
and eighth share ownership hotels. We report our results of operations in two
business segments, resort operations and real estate operations.
Our operating strategies include taking advantage of our multi-resort
network, increasing our revenue per skier, continuing to build brand awareness
and customer loyalty, expanding our sales and marketing efforts, continuing to
focus on cost management, expanding our golf and convention business, improving
our hotel occupancy and operating margins, and capitalizing on real estate
growth opportunities through joint ventures.
Our revenues are highly seasonal in nature. Each year, we realize
approximately 90% of resort operations segment revenues and over 100% of resort
operations segment operating income during the period from mid-November through
April. In addition, a significant portion of resort operations segment revenue
and approximately 20% of annual skier visits are generated during the Christmas
and Presidents' Day vacation. Our resorts typically experience operating losses
and negative cash flows for the period from May through mid-November.
A high degree of seasonality in our revenues increases the impact of
certain events on our operating results. Adverse weather conditions, access
route closures, equipment failures, and other developments of even moderate or
limited duration occurring during peak business periods could reduce revenues.
Adverse weather conditions can also increase power and other operating costs
associated with snowmaking or could render snowmaking wholly or partially
ineffective in maintaining quality skiing conditions. Furthermore, unfavorable
weather conditions, regardless of actual skiing conditions, can result in
decreased skier visits.
The following is our discussion and analysis of financial condition and
results of operations as of April 30, 2006 and for the 13 weeks and 39 weeks
then ended. As you read the information below, we urge you to carefully consider
our fiscal 2005 Annual Report on Form 10-K filed on October 31, 2005 and our
unaudited condensed consolidated financial statements and related notes
contained elsewhere in this report.
Liquidity and Capital Resources
Short-Term Liquidity Needs
Our primary short-term liquidity needs involve funding seasonal working
capital requirements, marketing and selling real estate development projects,
funding our fiscal 2006 capital improvement program, and servicing our debt. Our
cash requirements for ski-related and real estate sales activities are provided
from separate sources.
Our primary source of liquidity for ski-related working capital and
ski-related capital improvements are cash flows from operating activities of our
resort operating subsidiaries and borrowings under our Resort Senior Credit
Facility. The total debt outstanding under our Resort Senior Credit Facility as
of April 30, 2006 was $187.7 million.
Real estate working capital is funded primarily through unit inventory
sales and short-term rental of remaining unit inventory. Historically, the
Construction Loan Facility funded such working capital. The Construction Loan
Facility is without recourse to ASC and its subsidiaries other than Grand Summit
and is collateralized by significant real estate assets of Grand Summit. As of
April 30, 2006, the carrying value of the total assets that collateralized the
Construction Loan Facility was $24.2 million. The total debt outstanding on the
Construction Loan Facility as of April 30, 2006 was $2.1 million. See "Real
Estate Liquidity" below.
22
Resort Liquidity
We entered into agreements dated November 24, 2004 with Credit Suisse,
GE Capital, and other lenders whereby the lenders provided us with a $230.0
million Resort Senior Credit Facility consisting of a revolving credit facility
and two term loan facilities. The proceeds of the Resort Senior Credit Facility
were used to refinance our prior resort senior credit facility and redeem our
Senior Subordinated Notes as well as to pay fees and expenses related to the
transaction. The Resort Senior Credit Facility consists of the following:
o Revolving Facility - $40.0 million, including letter of credit
(L/C) availability of up to $6.0 million. The amount of
availability under this facility is correspondingly reduced by
the amount of each L/C issued.
o First Lien Term Loan - $85.0 million borrowed on the funding date
of November 24, 2004.
o Second Lien Term Loan - $105.0 million borrowed on the funding
date of November 24, 2004.
The Revolving Facility and First Lien Term Loan are provided under the
First Lien Credit Agreement, mature in November 2010 and bear interest, at our
option, either at a rate equal to the prime rate as publicly quoted in the Wall
Street Journal, plus 3.5%, or at a rate equal to LIBOR (as defined) plus 4.5%,
payable quarterly (10.5% based on the prime rate for the Revolving Facility and
9.28% based on the LIBOR rate for the First Lien Term Loan as of April 30,
2006). The First Lien Term Loan requires 23 quarterly principal payments of
$212,500 each, beginning on January 15, 2005 and a final payment of $80.1
million in November 2010. The Revolving Facility is comprised of two
sub-facilities, each in the amount of $20.0 million and each with separate fees
for the unused portion of the facilities (in the amounts of 1.0% and 4.5% per
annum, respectively). The Second Lien Term Loan is provided under the Second
Lien Credit Agreement, matures in November 2011, bears interest at a rate equal
to the prime rate as publicly quoted in the Wall Street Journal plus 7.0% or at
a rate equal to LIBOR (as defined) plus 8.0%, payable quarterly (12.56% as of
April 30, 2006 based on the LIBOR rate), and principal is due upon maturity.
The Revolving Facility and the First Lien Term Loan obligations under
the First Lien Credit Agreement are secured by a first-priority security
interest in substantially all of our assets, other than assets held by Grand
Summit, and our obligations under the Second Lien Credit Agreement are secured
by a second-priority security interest in the same assets. Collateral matters
between the lenders under the First Lien Credit Agreement and the lenders under
the Second Lien Credit Agreement are governed by an inter-creditor agreement.
The Resort Senior Credit Facility contains affirmative, negative, and
financial covenants customary for this type of credit facility, which includes
maintaining a minimum level of EBITDA (as defined), limiting our capital
expenditures, maintaining a minimum ratio of appraised asset value to debt, and
having a zero balance on the Revolving Credit Facility (excluding L/Cs) on April
1 of each year. The Resort Senior Credit Facility also contains events of
default customary for such financings, including but not limited to nonpayment
of amounts when due; violation of covenants; cross default and cross
acceleration with respect to other material debt; change of control;
dissolution; insolvency; bankruptcy events; and material judgments. Some of
these events of default allow for grace periods or are qualified by materiality
concepts. The Resort Senior Credit Facility requires us to prepay the loans with
proceeds of certain material asset sales and recovery events, certain proceeds
of debt, 50% of excess cash flow, and proceeds from the issuance of capital
stock. The Resort Senior Credit Facility also restricts our ability to pay cash
dividends on or redeem our common or preferred stock. Pursuant to the
requirements of the Resort Senior Credit Facility, on May 23, 2005, we entered
into an interest rate swap agreement for 50% of the First Lien Term Loan and the
Second Lien Term Loan for a notional amount of $95.0 million. Under the swap
agreement, during the period of May 16, 2005 to November 15, 2005, we paid 4.16%
and received the 6-month LIBOR rate. During the period from November 16, 2005 to
May 15, 2008, we pay 4.16% and receive the 3-month LIBOR rate. As a result of
entering into this interest rate swap agreement, we have fixed the cash-pay rate
on the notional amount until the maturity of the swap agreement in May 2008.
As of April 30, 2006, the Company had $82.7 million and $105.0 million
of principal outstanding under the First Lien Term Loan and Second Lien Term
Loan portions of the Resort Senior Credit Facility, respectively. Furthermore,
as of April 30, 2006, the Company had $1.6 million in outstanding L/Cs and no
outstanding borrowings under the Revolving Credit Facility, with $38.4 million
available for additional borrowings under the Revolving Facility. The Company
was in compliance with all financial covenants of the Resort Senior Credit
Facility through April 30, 2006. We currently anticipate that the remaining
borrowing capacity under the Resort Senior Credit Facility will be sufficient to
meet our working capital needs at least through the end of our third quarter of
fiscal 2007.
23
We have $15.4 million of other long-term debt as of April 30, 2006.
This is comprised of $7.4 million of capital lease obligations and $8.0 million
of other notes payable with various lenders.
We closely monitor our operating results that impact our ability to
meet the financial covenants under our Resort Senior Credit Facility. We take
various actions to maintain compliance with our financial covenants, including
selling non-core assets to increase revenues, and reducing our cost structure
during the off-season and seasonal low-visitation at our resorts. In the event
of a violation of the financial covenants under our Resort Senior Credit
Facility, we would engage in discussions with our lenders for a waiver of those
covenants for the period in question. Due to the restrictions under our Resort
Senior Credit Facility, we have limited access to alternate sources of funding.
Our significant debt levels affect our liquidity. As a result of our
highly leveraged position, we have significant cash requirements to service
interest and principal payments on our debt. Consequently, cash availability for
working capital needs, capital expenditures, and acquisitions is significantly
limited, outside of any availability under the Resort Senior Credit Facility.
Furthermore, our Resort Senior Credit Facility contains significant restrictions
on our ability to obtain additional sources of capital and may affect our
liquidity. These restrictions include restrictions on the sale of assets,
restrictions on the incurrence of additional indebtedness, and restrictions on
the issuance of preferred stock.
Real Estate Liquidity
To fund working capital and fund its real estate sales plan, Grand
Summit relies primarily on unit inventory sales, short-term rental of remaining
unit inventory, as well as lease payments from long-term commercial tenants.
The Company conducts substantially all of its real estate development
through subsidiaries, each of which is a wholly owned subsidiary of Resort
Properties. Grand Summit owns the existing Grand Summit Hotel project at
Steamboat, which was primarily financed through the $110.0 million Senior
Construction Loan. Due to construction delays and cost increases at the
Steamboat Grand Hotel project, on July 25, 2000, Grand Summit entered into the
$10.0 million Subordinated Construction Loan, which was subsequently increased
to $10.6 million in December 2003. Together, the Senior Construction Loan and
the Subordinated Construction Loan comprise the Construction Loan Facility. The
Company used the Construction Loan Facility solely for the purpose of funding
the completion of the Steamboat Grand Hotel. The Construction Loan Facility is
without recourse to ASC and its resort operating subsidiaries and is
collateralized by significant real estate assets of Resort Properties and its
subsidiaries, including the assets and stock of Grand Summit, ASC's primary
hotel development subsidiary.
The outstanding principal amounts under the Construction Loan Facility
are payable incrementally as quarter and eighth share unit sales are closed
based on a predetermined per unit amount, which approximated between 70% and 80%
of the net proceeds of each closing up until the March 18, 2006 auction held at
Steamboat and then 85% of all units sold at the auction. Mortgages against the
commercial core units and unsold unit inventory at the Grand Summit Hotel at
Steamboat and a promissory note from the Steamboat Homeowners Association
secured by the Steamboat Grand Hotel parking garage collateralize the
Construction Loan Facility, are subject to covenants, representations, and
warranties customary for that type of construction facility. The Senior
Construction Loan is without recourse to ASC and its resort operating
subsidiaries other than Grand Summit.
On December 8, 2005, the Company announced that it would be conducting
an auction on March 18, 2006 for the remaining unsold developer inventory at the
Grand Summit Hotel at Steamboat. In connection with the auction announcement, on
February 14, 2006, Grand Summit entered into a letter agreement with the lenders
under the Senior Construction Loan waiving the March 31, 2006 maximum
outstanding principal balance requirement and resetting the predetermined per
unit principal paydown amount noted above to 85% of all gross proceeds received
from this auction. The Senior Construction Loan, as amended, requires that the
loan be paid off as of June 30, 2006.
The auction, together with subsequent sales activity, resulted in a
near sell-out of the remaining inventory of residential units. As of April
30, 2006, sales of $21.0 million had been closed, with an additional $2.2
million in sales contracts pending final closings. As a result, the Company has
paid off the Senior Construction Loan, including deferred loan fees of $750,000.
In addition, the Company has reduced the balance of the Subordinated
Construction Loan by $8.5 million to a remaining balance of $2.1 million as of
April 30, 2006.
24
Until July 31, 2005, the Subordinated Construction Loan carried
interest at a fixed rate of 20% per annum, payable monthly in arrears. Only 50%
of the amount of this interest was due and payable in cash and the other 50%, if
no events of default existed under the Subordinated Construction Loan or the
Senior Construction Loan was automatically deferred until the final payment date
of the Subordinated Construction Loan. Subsequent to July 31, 2005, the interest
rate was decreased to 10% per annum, all of which is payable in cash, pursuant
to the Eighth Amendment Agreement between Grand Summit and the Lenders. The
total deferred interest under the Subordinated Construction Loan as of April 30,
2006 was $4.2 million. The Subordinated Construction Loan, as amended, including
the related deferred interest balance, matures on November 30, 2007. The
Subordinated Construction Loan, including the related deferred interest balance,
is secured by the same collateral which secured the Senior Construction Loan and
is without recourse to ASC and its subsidiaries other than Grand Summit.
There can be no assurance that Grand Summit will meet the amortization
requirements of the Subordinated Construction Loan, in particular with respect
to the remaining deferred interest under the facility. If Grand Summit fails to
meet those future requirements, there can be no assurance that the lenders under
the facility will be willing to enter into a waiver or amendment of those
requirements on terms acceptable to Grand Summit or at all. If Grand Summit
fails to meet the requirements and is unable to obtain a waiver of such
requirements from the existing lenders, Grand Summit will be in payment default
under the Construction Loan Facility and the lenders could commence enforcement
actions against Grand Summit and the assets of Grand Summit which secure the
Construction Loan Facility. The Construction Loan Facility is non-recourse to
ASC and its subsidiaries other than Grand Summit. The remaining assets securing
the Construction Loan Facility consist of the commercial core of the Steamboat
Grand Hotel, a note receivable from the HOA for the Steamboat Grand Hotel, and
the phase II development rights relating to the Steamboat Grand Hotel project.
Long-Term Liquidity Needs
Our primary long-term liquidity needs are to fund skiing-related
capital improvements at certain of our resorts. For each of fiscal 2006 and
2007, we anticipate our annual maintenance capital needs to be approximately
$10.0 million. There is a considerable degree of flexibility in the timing and
scope of our growth capital program. Although we can defer specific capital
expenditures for extended periods, continued growth of skier visits, revenues
and profitability will require continued capital investment in on-mountain
improvements.
We finance on-mountain capital improvements through resort cash flows,
capital leases, and our Resort Senior Credit Facility. The size and scope of the
capital improvement program will generally be determined annually depending upon
the strategic importance and expected financial return of certain projects,
future availability of cash flows from each season's resort operations, and
future borrowing availability and covenant restrictions under the Resort Senior
Credit Facility. The Resort Senior Credit Facility places a maximum level of
non-real estate capital expenditures for each of fiscal 2006 and 2007 at $15.5
million, including assets purchased under capital leases, with the ability to
increase this amount if certain conditions are met. Additionally, the Resort
Senior Credit Facility allows the maximum expenditure level to increase for
certain specified capital expenditure obligations. We believe that these capital
expenditure amounts will be sufficient to meet our non-real estate capital
improvement needs for fiscal 2006 and 2007.
As described above, the Revolving Facility and First Lien Term Loan of
the Resort Credit Facility mature in November 2010. The First Lien Term Loan
requires quarterly principal payments of $212,500 each, and a final payment of
approximately $80.1 million in November 2010. The Second Lien Term Loan matures
in November 2011. The Subordinated Construction Loan, including the related
deferred interest balance, matures in November 2007.
We also have mandatorily redeemable Series C-1 Preferred Stock with an
accreted value including cumulative dividends of $69.5 million as of April 30,
2006 and mandatorily redeemable Series C-2 Preferred Stock with an accreted
value including cumulative dividends of $277.3 million as of April 30, 2006,
both of which mature in July 2007 and will be required to be redeemed to the
extent that the Company has legally available funds to effect such redemption.
We do not expect to redeem the Series C-1 Preferred Stock or the Series C-2
Preferred Stock prior to their final maturity. There can be no assurance that
the necessary liquidity will be available to effect the redemption on a timely
basis.
Contractual Obligations
There have been no material changes outside the Company's ordinary
course of business during the quarterly period ended April 30, 2006.
25
Off-Balance Sheet Arrangements
Other than as set forth under "Contractual Obligations" above and our
interest rate swap agreement described above under "Resort Liquidity", we do not
have any off-balance sheet transactions, arrangements, or obligations (including
contingent obligations) that have, or are reasonably likely to have, a material
current or future effect on our financial position, results of operations,
business prospects, liquidity, capital expenditures, or capital resources.
Results of Operations
For the 13 weeks ended May 1, 2005 compared to the 13 weeks ended April 30, 2006
Resort Operations:
The components of resort operations for the 13 weeks ended May 1, 2005
and the 13 weeks ended April 30, 2006 are as follows (unaudited, in thousands):
- --------------------------------------------------------------------------------
--------------------------------- ------------
13 weeks ended 13 weeks ended Variance
May 1, 2005 April 30, 2006
---------------- ---------------- ------------
Total resort revenues $ 132,266 $ 132,837 $ 571
---------------- ---------------- ------------
Cost of resort operations 61,615 61,269 (346)
Marketing, general and
administrative 14,261 13,861 (400)
Depreciation and amortization 12,640 12,368 (272)
---------------- ------------------------------
Total resort expenses 88,516 87,498 (1,018)
---------------- ---------------- ------------
Income from resort operations 43,750 45,339 1,589
Interest expense (19,261) (21,991) (2,730)
Increase in fair value of
interest rate swap agreement - 674 674
---------------- ---------------- ------------
Net income from resort
operations $ 24,489 $ 24,022 $ (467)
================ ================ ============
- --------------------------------------------------------------------------------
Resort revenues were approximately $132.8 million as compared to $132.3
million, an increase of $0.6 million, or 0.4%, for the 13 weeks ended April 30,
2006 when compared to the 13 weeks ended May 1, 2005. Strong destination
business at the Company's western resorts, combined with increased revenues from
season pass sales at its eastern resorts, offset revenue shortfalls attributable
to an overall decrease in skier visitation.
Estimated skier visits at the Company's eastern resorts were 24% lower
than last year, primarily as a result of significant rain events during key
weekends. However estimated skier visits increased 14% and 6%, respectively, at
The Canyons and Steamboat resorts due, in part, to favorable weather and
abundant natural snowfall. This resulted in estimated total skier visits for the
Company as a whole decreasing by 13% for this period over the comparable period
of the previous year. Beginning in fiscal 2006, the Company revised the
methodology used to estimate skier visitation at its eastern resorts. The
Company now uses scanning of certain lift ticket products to estimate skier
visitation and believes this methodology to be a more accurate reflection of
skier visitation levels. While this methodology has changed, the Company
believes that any discrepancies in such methods in comparison with prior years
are immaterial to total skier visitation levels reported.
26
Our resort segment generated net income of $24.0 for the 13 weeks ended
April 30, 2006, compared $24.5 million for the 13 weeks ended May 1, 2005. This
$0.5 million, or 1.9%, decrease resulted primarily from the net effect of the
following:
Increases in revenues and decreases in costs:
(i) $0.6 million increase in revenues;
(ii) $0.3 million decrease in cost of operations;
(iii) $0.4 million decrease in marketing, general and
administrative expenses;
(iv) $0.3 million decrease in depreciation expense; and
(v) $0.6 million increase of the fair value of the interest
rate swap arrangement;
More than offset by increases in costs:
(vi) $2.7 million increase in interest expense.
Recent Trends: In addition to the financial results through April 30,
2006, management has reported early results for the fourth fiscal quarter,
reflecting a 1% increase in revenues for the first five weeks of its fiscal 2006
fourth quarter over the first five weeks of its fiscal 2005 fourth quarter.
Company-wide hotel bookings for the remainder of the fourth quarter are 10%
ahead of pace with the same period in the prior year.
Real Estate Operations:
The components of real estate operations for the 13 weeks ended
May 1, 2005 and the 13 weeks ended April 30, 2006 are as follows (unaudited, in
thousands):
- --------------------------------------------------------------------------------
-------------------------------- ------------
13 weeks ended 13 weeks ended Variance
May 1, 2005 April 30, 2006
--------------- ---------------- ------------
Total real estate revenues $ 2,928 $ 24,185 $ 21,257
--------------- ---------------- ------------
Cost of real estate operations 2,461 18,832 16,371
Depreciation and amortization 380 234 (146)
--------------- ---------------- ------------
Total real estate expenses 2,841 19,066 16,225
--------------- ---------------- ------------
Income from real estate operations 87 5,119 5,032
Interest income (expense) (741) 272 1,013
--------------- ---------------- ------------
Net income (loss) from real estate
operations $ (654) $ 5,391 $ 6,045
=============== ================ ============
- --------------------------------------------------------------------------------
Real estate revenues were approximately $24.2 million as compared to
$2.9 million, an increase of $21.3 million, for the 13 weeks ended April 30,
2006 when compared to the 13 weeks ended May 1, 2005. This increase is primarily
a result of a successful sales auction of the remaining fractional-share units
held on March 18, 2006 at the Steamboat Grand Hotel, which generated
approximately $21.0 million in revenues in the 13-week period ended April 30,
2006.
27
Our real estate segment generated net income of $5.4 million for the 13
weeks ended April 30, 2006, compared to a loss of $0.6 million for the 13 weeks
ended May 1, 2005. This $6.0 million increase in net income results primarily
from the net effect of the following:
Increases in revenues and decreases in costs:
(i) $21.3 million increase in revenues;
(ii) $0.1 million decrease in depreciation and amortization; and
(iii) $1.0 million decrease in interest expense due to the reduction
of the outstanding construction loans and due to a $0.5
million year-to-date correction in the amount of deferred
interest attributable to the Subordinated Construction Loan;
Partially offset by increases in costs:
(iv) $16.4 million increase in cost of operations, due primarily to
$15.5 million in cost of sales related to the sales auction of
the remaining fractional-share units at the Steamboat Grand
Hotel.
Recent Trends: As of June 9, 2006, Grand Summit had six eighth-share
units remaining with a total projected sales price of $282,000. The Company will
continue to focus efforts to sell these remaining units.
Income Taxes:
We recorded no expense for income taxes for either the 13 weeks ended
May 1, 2005 or the 13 weeks ended April 30, 2006. The Company incurred a net
loss for the 40 weeks ended May 1, 2005 and for the 39 weeks ended April 30,
2006, recorded a net loss for the year ended July 31, 2005, and expects to incur
a net loss for the year ended July 30, 2006. We believe it is more likely than
not that we will not realize income tax benefits from operating losses in the
foreseeable future, and therefore, have recorded a full valuation allowance
against our existing deferred income tax assets.
Results of Operations
For the 40 weeks ended May 1, 2005 compared to the 39 weeks ended April 30, 2006
Resort Operations:
The components of resort operations for the 40 weeks ended May 1, 2005
and the 39 weeks ended April 30, 2006 are as follows (unaudited, in thousands):
- --------------------------------------------------------------------------------
--------------------------------- ------------
40 weeks ended 39 weeks ended Variance
May 1, 2005 April 30, 2006
---------------- ---------------- ------------
Total resort revenues $ 253,497 $ 259,871 $ 6,374
---------------- ---------------- ------------
Cost of resort operations 153,010 152,998 (12)
Marketing, general and
administrative 41,288 43,314 2,026
Depreciation and amortization 28,503 27,870 (633)
Gain on sale of property - (169) (169)
Write-off of deferred financing
costs and loss on
extinguishment of senior
subordinated notes 5,983 - (5,983)
---------------- ---------------- ------------
Total resort expenses 228,784 224,013 (4,771)
---------------- ---------------- ------------
Income from resort operations 24,713 35,858 11,145
Interest expense (58,772) (63,943) (5,171)
Increase in fair value of
interest rate swap agreement - 1,710 1,710
---------------- ---------------- ------------
Loss from resort operations $ (34,059) $ (26,375) $ 7,684
================ ================ ============
- --------------------------------------------------------------------------------
28
Resort revenues were approximately $259.9 million as compared to $253.5
million, an increase of $6.4 million, or 2.5%, for the 39 weeks ended April 30,
2006 when compared to the 40 weeks ended May 1, 2005. Strong destination
business at the Company's western resorts, combined with increased revenues from
season pass sales at its eastern resorts, offset revenue shortfalls attributable
to an overall decrease in skier visitation. Estimated skier visits at the
Company's eastern resorts were 16% lower than last year, primarily as a result
of significant rain events during key weekends. However estimated skier visits
increased 16% and 8%, respectively, at The Canyons and Steamboat resorts due, in
part, to favorable weather and abundant natural snowfall. This resulted in
estimated total skier visits for the Company as a whole decreasing by 7% for
this period over the comparable period of the previous year. Beginning in fiscal
2006, the Company revised the methodology used to estimate skier visitation at
its eastern resorts. The Company now uses scanning of certain lift ticket
products to estimate skier visitation and believes this methodology to be a more
accurate reflection of skier visitation levels. While this methodology has
changed, the Company believes that any discrepancies in such methods in
comparison with prior years are immaterial to total skier visitation levels
reported.
Our resort segment incurred a $26.4 million net loss for the 39 weeks
ended April 30, 2006, compared to a $34.1 net loss for the 40 weeks ended May 1,
2005. This $7.7 million, or 22.6%, decrease in the net loss resulted primarily
from the net effect of the following:
Increases in revenues and decreases in costs:
(i) $6.4 million increase in revenues;
(ii) $0.6 million decrease in depreciation expense;
(iii) $0.2 million increase in net gain on sale of property;
(iv) $6.0 million decrease due to the non-recurring write-off
of deferred financing costs and loss on extinguishment of
senior subordinated notes experienced in 2005 and;
(v) $1.7 million increase in fair value of the interest rate
swap arrangement;
Partially offset by increases in costs:
(vi) $2.0 million increase in marketing, general and
administrative expense; and
(vii) $5.2 million increase in interest expense.
Real Estate Operations:
The components of real estate operations for the 40 weeks
ended May 1, 2005 and the 39 weeks ended April 30, 2006 are as follows
(unaudited, in thousands):
- --------------------------------------------------------------------------------
--------------- ---------------- ------------
40 weeks ended 39 weeks ended Variance
May 1, 2005 April 30, 2006
--------------- ---------------- ------------
Total real estate revenues $ 7,317 $ 29,766 $ 22,449
--------------- ---------------- ------------
Cost of real estate operations 5,724 24,217 18,493
Depreciation and amortization 1,196 703 (493)
Impairment loss on sale of
property - 1,533 1,533
--------------- ---------------- ------------
Total real estate expenses 6,920 26,453 19,533
--------------- ---------------- ------------
Income from real estate operations 397 3,313 2,916
Interest expense (2,367) (1,045) 1,322
--------------- ---------------- ------------
Net income (loss) from real estate
operations $ (1,970) $ 2,268 $ 4,238
=============== ================ ============
- --------------------------------------------------------------------------------
29
Real estate revenues were approximately $29.8 million as compared to
$7.3 million, an increase of $22.4 million, for the 39 weeks ended April 30,
2006 when compared to the 40 weeks ended May 1, 2005. This increase is primarily
a result of a successful sales auction of the remaining fractional-share units
at the Steamboat Grand Hotel, which generated approximately $21.0 million in
revenues in the 39-week period ended April 30, 2006.
Our real estate segment generated net income of $2.2 million for the 39
weeks ended April 30, 2006, compared to a net loss of $2.0 million for the 40
weeks ended May 1, 2005. This $4.2 million increase in net income results
primarily from the net effect of the following:
Increases in revenues and decreases in costs:
(i) $22.4 million increase in revenues;
(ii) $0.5 million decrease in depreciation and amortization; and
(iii) $1.3 million decrease in interest expense due to the reduction
of the outstanding construction loans
Partially offset by increases in costs and loss on sale of property:
(iv) $18.5 million increase in cost of operations, due primarily to
$17.7 million in cost of sales related to increased sales of
fractional-share units at the Steamboat Grand Hotel, and a
$0.8 million provision for a probable settlement related to
real estate development obligations at The Canyons; and
(v) $1.5 million impairment loss on the sale of retail commercial
property at the Steamboat Grand Hotel.
Income Taxes:
We recorded no benefit from income taxes for either the 40 weeks ended
May 1, 2005 or the 39 weeks ended April 30, 2006. The Company incurred a net
loss for the year ended July 31, 2005, and expects to incur a net loss for the
year ended July 30, 2006. We believe it is more likely than not that we will not
realize income tax benefits from operating losses in the foreseeable future, and
therefore, have recorded a full valuation allowance against our existing
deferred income tax assets.
Item 3
Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in information relating to market
risk since our disclosures included in Item 7A of Form 10-K for the fiscal year
ended July 31, 2005, as filed with the Securities and Exchange Commission on
October 31, 2005.
Item 4
Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Our Chief Executive
Officer and our Chief Financial Officer carried out an evaluation of
the effectiveness of our "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and
15d-15(e)). Based on that evaluation, these officers have concluded
that as of the end of the period covered by this report, our disclosure
controls and procedures were effective.
(b) Changes in internal control over financial reporting. No change
occurred in the Company's internal control over financial reporting (as
defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and
15d-15(f)) during the quarterly period ended April 30, 2006 that has
materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system will be met. In addition, the design of any control
system is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of control systems,
there is only reasonable assurance that our controls will succeed in achieving
their stated goals under all potential future conditions.
30
Part II - Other Information
Item 1
Legal Proceedings
ASC Utah, a subsidiary of the Company, owns and operates The Canyons
resort. ASC Utah leases approximately 2,100 acres, including most of the base
area and a substantial portion of the skiable terrain at The Canyons resort,
under a lease (the "Ground Lease") from Wolf Mountain Resorts, LC ("Wolf"). The
initial term of the Ground Lease is 50 years expiring July 2047, with an option
to extend for three additional terms of 50 years each. The Ground Lease provides
an option to purchase those portions of the leased property that are intended
for residential or commercial development, subject to certain reconveyance
rights. Included in the leased premises under the Ground Lease is a sub-lease of
all of Wolf's interest as tenant in a lease from the Osguthorpe family (the
"Osguthorpe Lease"), through which ASC Utah operates additional ski terrain.
At various points following its acquisition of The Canyons, ASC Utah
entered into direct agreements with the Osguthorpe family amending or modifying
the Osguthorpe Lease. On March 31, 2006, Wolf issued to ASC Utah a written
notice of default (the "Default Notice") relating to the Osguthorpe Lease.
Specifically, Wolf alleged in the Default Notice that ASC Utah breached its
obligations under the Ground Lease to obtain Wolf's prior written consent to any
modification to the Osguthorpe Lease. In its Default Notice, Wolf demanded that
ASC Utah "disavow any claims as a tenant arising from or through the Osguthorpe
Lease property and reinstate and transfer to Landlord [Wolf] all of its rights
to the leased property the [sic] comprising Osguthorpe Lease."
Under the terms of the Ground Lease, ASC Utah had sixty (60) days, or
until May 30, 2006, to cure the default alleged in the Default Notice (subject
to further extension under certain enumerated circumstances). Wolf agreed in
writing to extend this cure period to June 16, 2006. As cure for the allegations
in the Default Notice, on June 7, 2006, ASC Utah executed and delivered to Wolf
an Assignment, Acknowledgement and Ratification, dated June 5, 2006 (the
"Assignment") assigning all of its right title and interest in and to the
amendments to the Osguthorpe Lease to Wolf. In addition, ASC Utah delivered to
Wolf a consent to assignment executed by the applicable Osguthorpe parties.
On June 14, ASC Utah initiated a declaratory judgment action in state
court in Summit County, Utah. The action seeks a declaration that the steps
taken by ASC Utah in response to the Default Notice are sufficient to cure any
alleged default under the Ground Lease, and in the interim seeks a temporary
restraining order preventing Wolf from declaring the Ground Lease terminated or
from exercising any other rights it may have on account of the alleged defaults
raised in the Default Notice until the Court decides this declaratory judgment
action.
The Company strongly believes that the actions taken by ASC Utah are
sufficient to cure the defaults alleged under the Default Notice. There can be
no assurance, however, that the Summit County state court will agree that ASC
Utah has cured the alleged defaults. In the event that the state court in Summit
County finds that the actions taken by ASC Utah are not sufficient to cure the
defaults under the Default Notice, and if ASC Utah is unable to effect a cure of
such defaults within any remaining cure period, the remedies available to Wolf
may include damages to Wolf (which the Company believes to be minimal) and/or
termination of the Ground Lease. Termination of the Ground Lease would
significantly reduce the value of ASC Utah's operation at The Canyons, and would
materially curtail, if not completely eliminate, ASC Utah's ability to obtain
recurring revenues from those assets. In the event of termination of the Ground
Lease, Wolf would have certain rights to repurchase for fair market value assets
of ASC Utah which are used in conjunction with its operation of The Canyons.
Wolf's right to terminate the Ground Lease is subject to certain rights of cure
and foreclosure in favor of ASC Utah's lenders. In the event of a timely cure by
one or more of those lenders, such lenders are entitled to step into the shoes
of ASC Utah as a tenant under the Ground Lease.
Termination of the Ground Lease by Wolf would likely cause a default
under the Company's Resort Senior Credit Facility. In the event of such a
default, the Company would engage in discussions with the lenders under those
facilities in an effort to satisfactorily address the default. There can be no
assurance that such discussions would be successful, and if they were not
successful the Company could be forced to refinance such obligations on
materially worse terms than those presently available.
31
Item 1A
Other Risk Factors
Failure to cure the alleged default under the Ground Lease could have a material
adverse effect on the Company.
ASC Utah is currently in dispute with Wolf regarding the Gound Lease and ASC
Utah has taken actions to cure the alleged default. See "Item 1--Legal
Proceedings." Even though the Company strongly believes that the actions taken
by ASC Utah are sufficient to cure the defaults alleged under the Default
Notice, there can be no assurance that the Summit County state court will agree
that ASC Utah has cured the alleged defaults. In the event that the state court
in Summit County finds that the actions taken by ASC Utah are not sufficient to
cure the defaults under the Default Notice, and if ASC Utah is unable to effect
a cure of such defaults within any remaining cure period, the remedies available
to Wolf may include damages to Wolf (which the Company believes to be minimal)
and/or termination of the Ground Lease. Termination of the Ground Lease would
significantly reduce the value of ASC Utah's operation at The Canyons, and would
materially curtail, if not completely eliminate, ASC Utah's ability to obtain
recurring revenues from those assets. In the event of termination of the Ground
Lease, Wolf would have certain rights to repurchase for fair market value assets
of ASC Utah which are used in conjunction with its operation of The Canyons.
Wolf's right to terminate the Ground Lease is subject to certain rights of cure
and foreclosure in favor of ASC Utah's lenders. In the event of a timely cure by
one or more of those lenders, such lenders are entitled to step into the shoes
of ASC Utah as a tenant under the Ground Lease. In addition, termination of the
Ground Lease by Wolf would likely cause a default under the Company's Resort
Senior Credit Facility. In the event of such a default, the Company would engage
in discussions with the lenders under those facilities in an effort to
satisfactorily address the default. There can be no assurance that such
discussions would be successful, and if they were not successful the Company
could be forced to refinance such obligations on materially worse terms than
those presently available.
32
Item 6
Exhibits
Included herewith are the following exhibits:
Exhibit No. Description
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
American Skiing Company
Date: June 14, 2006
By: /s/ William J. Fair
--------------------------------
William J. Fair
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Helen E. Wallace
--------------------------------
Helen E. Wallace
Senior Vice President, Chief
Financial Officer
(Principal Financial Officer)
34