UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 25, 1999
--------------------------------
Commission File Number 1-13507
--------------------------------
American Skiing Company
(Exact name of registrant as specified in its charter)
Maine 04-3373730
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 450
Bethel, Maine 04217
(Address of principal executive office) (Zip Code)
(207) 824-8100 (Registrant's telephone number, including area code) Not
Applicable
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of
common stock were 14,760,530 shares of Class A common stock, $.01 par value, and
15,526,243 shares of common stock, $.01 par value, as of June 9, 1999.
American Skiing Company and Subsidiaries
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statement of Operations (unaudited)
for the three months ended April 25, 1999 and April 26, 1998..........1
Condensed Consolidated Statement of Operations (unaudited)
for the nine months ended April 25, 1999 and April 26, 1998...........2
Condensed Consolidated Balance Sheet
as of April 25, 1999 (unaudited) and July 26, 1998....................3
Condensed Consolidated Statement of Cash Flows (unaudited)
for the nine months ended April 25, 1999 and April 26, 1998...........4
Notes to (unaudited) Condensed Consolidated Financial Statements......5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General...............................................................9
Liquidity and Capital Resources.......................................9
Changes in Results of Operations.....................................18
Changes in Financial Condition.......................................22
Year 2000 Disclosure.................................................23
Forward-Looking Statements...........................................26
Item 3. Quantitative and Qualitative Disclosures
About Market Risk..............................................26
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.............................27
i
American Skiing Company and Subsidiaries
Part I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Statement of Operations
(In thousands, except share and per share amounts)
For the three months ended
April 25, 1999 April 26, 1998
(unaudited)
Net revenues:
Resort $ 154,317 $ 144,245
Real estate 10,324 40,914
----------------- ------------------
Total net revenues 164,641 185,159
Operating expenses:
Resort 74,573 66,094
Real estate 8,554 28,451
Marketing, general and administrative 14,519 11,429
Depreciation and amortization 19,731 17,960
----------------- ------------------
Total operating expenses 117,377 123,934
----------------- ------------------
Income from operations 47,264 61,225
Interest expense 10,144 7,486
----------------- ------------------
Income before provision for income taxes 37,120 53,739
Provision for income taxes 14,787 20,958
----------------- ------------------
Income before preferred stock dividends and accretion 22,333 32,781
Accretion of discount and dividends accrued on
mandatorily redeemable preferred stock 1,096 1,091
----------------- ------------------
Net income available to common shareholders $ 21,237 $ 31,690
================= ==================
Accumulated deficit, beginning of period $ (31,036) $(11,987)
Net income available to common shareholders 21,237 31,690
----------------- ------------------
Retained earnings (accumulated deficit), end of period $ (9,799) $ 19,703
================= ==================
Basic earnings per common share (note 7)
Net income available to common shareholders $ 0.70 $ 1.05
================= ==================
Diluted earnings per common share (note 7)
Net income available to common shareholders $ 0.69 $ 1.03
================= ==================
Weighted average common shares outstanding - basic 30,286,773 30,265,552
================= ==================
Weighted average common shares outstanding - diluted 30,630,173 30,840,085
================= ==================
See accompanying notes to (unaudited) Condensed Consolidated Financial Statements.
1
American Skiing Company and Subsidiaries
Condensed Consolidated Statement of Operations
(In thousands, except share and per share amounts)
For the nine months ended
April 25, 1999 April 26, 1998
(unaudited)
Net revenues:
Resort $ 277,833 $ 264,141
Real estate 21,109 49,614
------------------ ------------------
Total net revenues 298,942 313,755
Operating expenses:
Resort 171,897 147,313
Real estate 20,459 34,706
Marketing, general and administrative 43,267 31,281
Stock compensation charge (note 10) - 14,254
Depreciation and amortization 41,450 34,475
------------------ ------------------
Total operating expenses 277,073 262,029
------------------ ------------------
Income from operations 21,869 51,726
Interest expense 29,213 25,028
------------------ ------------------
Income (loss) before provision for (benefit from) income taxes and
minority interest in loss of subsidiary (7,344) 26,698
Provision for (benefit from) income taxes (768) 10,413
Minority interest in loss of subsidiary - (456)
------------------ ------------------
Income (loss) before extraordinary items (6,576) 16,741
Extraordinary loss, net of income tax benefit of $3,248 - 5,081
------------------ ------------------
Income (loss) before preferred stock dividends and accretion (6,576) 11,660
Accretion of discount and dividends accrued on
mandatorily redeemable preferred stock 3,234 4,262
------------------ ------------------
Net income (loss) available to common shareholders $ (9,810) $ 7,398
================== ==================
Retained earnings, beginning of year $ 11 $ 12,305
Net income (loss) available to common shareholders (9,810) 7,398
----------------- ------------------
Retained earnings (accumulated deficit), end of period $ (9,799) $ 19,703
================== ==================
Basic earnings (loss) per common share (note 7)
Income (loss) before extraordinary items $ (0.32) $ 0.51
Extraordinary loss - (0.21)
----------------- ------------------
Net income (loss) available to common shareholders $ (0.32) $ 0.30
================= ==================
Diluted earnings (loss) per common share (note 7)
Income (loss) before extraordinary items $ (0.32) $ 0.51
Extraordinary loss - (0.21)
----------------- ------------------
Net income (loss) available to common shareholders $ (0.32) $ 0.30
================= ==================
Weighted average common shares outstanding - basic 30,286,357 24,313,067
================== ==================
Weighted average common shares outstanding - diluted 30,286,357 24,656,151
================== ==================
See accompanying notes to (unaudited) Condensed Consolidated Financial Statements.
2
American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheet
(In thousands, except share and per share amounts)
April 25, 1999 July 26, 1998
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 9,107 $ 15,370
Restricted cash 6,815 6,260
Accounts receivable 13,009 7,538
Inventory 13,357 13,353
Prepaid expenses 2,445 3,709
Deferred income taxes 652 1,413
----------------- ------------------
Total current assets 45,385 47,643
Property and equipment, net 529,643 521,139
Real estate developed for sale 154,291 78,636
Goodwill 77,341 78,687
Intangible assets 23,089 23,706
Deferred financing costs 9,585 9,212
Long-term investments 6,147 7,397
Other assets 18,111 14,479
----------------- ------------------
Total assets $ 863,592 $ 780,899
================= ==================
Liabilities, Mandatorily Redeemable Preferred Stock and Shareholders' Equity
Current liabilities
Current portion of long-term debt $ 19,691 $ 44,153
Accounts payable and other current liabilities 94,835 44,372
Deposits and deferred revenue 20,771 10,215
Demand note, Principal Shareholder 1,846 1,846
----------------- ------------------
Total current liabilities 137,143 100,586
Long-term debt, excluding current portion 263,739 211,570
Subordinated notes and debentures, excluding current portion 127,672 127,497
Other long-term liabilities 11,719 10,484
Deferred income taxes 21,190 22,719
Minority interest in subsidiary 392 375
----------------- ------------------
Total liabilities 561,855 473,231
Mandatorily Redeemable 10 1/2% Repriced Convertible Preferred Stock par value of
$1,000 per share; 40,000 shares authorized; 36,626 shares issued and
outstanding; including cumulative dividends in arrears (redemption value of
$39,464 and $42,698, respectively) 42,698 39,464
Shareholders' Equity
Common stock, Class A, par value of $.01 per share; 15,000,000 shares authorized;
14,760,530 issued and outstanding 148 148
Common stock, par value of $.01 per share; 100,000,000 shares
authorized; 15,526,243 and 15,525,022 issued and outstanding, respectively 155 155
Additional paid-in capital 268,535 267,890
Retained earnings (accumulated deficit) (9,799) 11
----------------- ------------------
Total shareholders' equity 259,039 268,204
================= ==================
Total liabilities, mandatorily redeemable preferred stock and shareholders' equity $ 863,592 $ 780,899
================= ==================
See accompanying notes to (unaudited) Condensed Consolidated Financial Statements.
3
American Skiing Company and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(In thousands)
For the nine months ended
April 25, 1999 April 26, 1998
(unaudited)
Cash flows from operating activities
Net income (loss) $ (6,576) $ 11,660
Adjustments to reconcile net loss to net cash used in operating activities:
Minority interest in loss of subsidiary - (456)
Depreciation and amortization 41,450 33,088
Amortization of discount on debt 247 2,183
Deferred income taxes (768) 6,960
Stock compensation charge 644 14,254
Extraordinary loss - 8,329
Gain/loss from sale of assets 95 -
Decrease (increase) in assets:
Restricted cash (555) (733)
Accounts receivable (5,471) (14,287)
Inventory (4) (2,475)
Prepaid expenses 1,264 (490)
Real estate developed for sale (71,549) (45,919)
Other assets (3,632) (5,657)
Increase (decrease) in liabilities:
Accounts payable and other current liabilities 50,463 13,630
Deposits and deferred revenue 10,556 (2,914)
Other long-term liabilities 1,235 (6,161)
----------------- -----------------
Net cash provided by operating activities 17,399 11,012
----------------- -----------------
Cash flows from investing activities
Payments for purchases of businesses, net of cash acquired - (294,364)
Capital expenditures (43,319) (70,371)
Long-term investments 1,250 497
Assets held for sale - -
Proceeds from sale of assets 365 11,599
Other, net 5 -
----------------- -----------------
Net cash used in investing activities (41,699) (352,639)
----------------- -----------------
Cash flows from financing activities
Borrowings (repayments) under New Credit Facility (46,794) 155,787
Repayment of Old Credit Facility - (59,623)
Proceeds from long-term debt 19,920 9,062
Proceeds from non-recourse real estate debt 71,223 31,219
Repayment of long-term debt (6,730) (9,619)
Repayment of non-recourse real estate debt (18,211) -
Deferred financing costs (1,371) (3,255)
Proceeds from initial public offering - 244,555
Repayment of subordinated notes - (21,882)
Proceeds from issuance of mandatorily redeemable securities - 17,500
Cash payment in connection with early retirement of debt - (5,087)
================= =================
Net cash provided by financing activities 18,037 358,657
================= =================
Net increase (decrease) in cash and cash equivalents (6,263) 17,030
Cash and cash equivalents, beginning of period 15,370 15,558
----------------- -----------------
Cash and cash equivalents, end of period $ 9,107 $ 32,588
================= =================
See accompanying notes to (unaudited) Condensed Consolidated Financial Statements.
4
American Skiing Company and Subsidiaries
Notes to (unaudited) Condensed Consolidated Financial Statements
1. Change in Accounting Estimate. Effective July 27, 1998, the Company
extended the estimated useful lives of certain of its ski lifts. As a result of
this change in estimate, the Company realized a decrease in depreciation expense
of approximately $0.7 million over the period including the second and third
quarters of fiscal 1999, as the Company records a full year of depreciation on
ski-related assets evenly over the second and third quarters of its fiscal year.
This reduction of depreciation expense has resulted in an increase in net
earnings per common share of $0.01 for the three months ended April 25, 1999 and
$0.02 for the nine months ended April 25, 1999. The Company is continuing to
evaluate the current depreciable lives of various other assets to ensure they
appropriately reflect their actual useful lives.
2. General. In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all adjustments necessary to
present fairly the financial position of the Company as of April 25, 1999, the
results of operations for the three and nine months ended April 25, 1999 and
April 26, 1998, and the statement of cash flows for the nine months ended April
25, 1999 and April 26, 1998. All adjustments are of a normal recurring nature.
The unaudited condensed consolidated financial statements should be read in
conjunction with the following notes and the Company's consolidated financial
statements in the Form 10-K, filed with the Securities and Exchange Commission
on October 27, 1998.
3. Inventories. Inventories are stated at the lower of cost (first-in,
first-out) or market, and consist primarily of retail goods, food and beverage
products and operating supplies.
4. Property and Equipment. The Company has identified non-strategic
assets with a carrying value of approximately $15 million for sale. These assets
are currently classified as property and equipment and are still in use by the
Company, but the Company expects these assets to be sold during the next nine
months. The Company has reviewed these assets for impairment in accordance with
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", and has made no adjustments to the
carrying values based on the results of such review.
5. Income Taxes. The expense (benefit) for taxes on income (loss) is
based on a projected nine month effective tax rate of 10.5%. The net deferred
income tax liability includes the cumulative reduction in current income taxes
payable resulting principally from the excess of depreciation reported for
income tax purposes over that reported for financial reporting purposes.
6. Seasonal Business. Results for interim periods are not indicative of
the results expected for the year due to the seasonal nature of the Company's
business.
7. Earnings (loss) per Common Share. Effective January 25, 1998, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 specifies the computation, presentation, and disclosure
requirements for earnings per share for public entities. Earnings (loss) per
common share for the three and nine months ending April 25, 1999 and April 26,
1998 were determined based on the following data:
5
American Skiing Company and Subsidiaries
Three Months Ended Nine Months Ended
April 25, April 26, April 25, April 26,
1999 1998 1999 1998
(unaudited) (unaudited) (unaudited) (unaudited)
-------------- -------------- -------------- --------------
Income (loss)
Income (loss) before preferred stock dividends and
accretion and extraordinary items $ 22,333 $ 32,781 $ (6,576) $ 16,741
Accretion of discount and dividends accrued on
mandatorily redeemable preferred stock (1,096) (1,091) (3,234) (4,262)
-------------- -------------- -------------- --------------
Income (loss) before extraordinary items 21,237 31,690 (9,810) 12,479
Extraordinary loss - - - (5,081)
============== ============== ============== ==============
Net income (loss) available to common shareholders $ 21,237 $ 31,690 $ (9,810) $ 7,398
============== ============== ============== ==============
Shares
Total weighted average shares outstanding (basic) 30,287 30,266 30,286 24,313
Dilutive common stock options 343 574 - 343
============== ============== ============== ==============
Total weighted average shares outstanding (diluted) 30,630 30,840 30,286 24,656
============== ============== ============== ==============
The Company currently has outstanding 36,626 shares of Mandatorily Redeemable
Convertible Preferred Stock which are convertible into shares of the Company's
Common Stock. The Common Stock shares into which these securities are
convertible have not been included in the dilutive share calculation in
accordance with the if-converted method as the impact of their inclusion would
be anti-dilutive.
8. Reclassifications. Certain amounts in the prior year's unaudited
condensed consolidated financial statements and the audited financial statements
as filed with the Securities and Exchange Commission on October 27, 1998 have
been reclassified to conform to the current period presentation.
9. Pro forma disclosure. The following unaudited pro forma statement of
operations for the nine months ended April 26, 1998 is presented for comparative
purposes. The pro forma results assume that the acquisition of Steamboat and
Heavenly on November 12, 1997 and the initial public offering of the Company on
November 6, 1997 were consummated on July 26, 1997. Pro forma results are not
indicative of what actual results would have been, nor an indication of future
results.
Consolidated Statement of Operations
(In thousands, except per share data)
Pro Forma
For the nine
months ended
April 26, 1998
(unaudited)
Total net revenues $317,361
================
Income (loss) before extraordinary items $ 9,192
================
Net loss available to common shareholders $ (151)
================
Basic and diluted loss per share
Income (loss) before extraordinary items $ 0.16
================
Net loss available to common shareholders $ (0.01)
================
6
10. Stock option plan. The Company recorded a compensation expense
charge of $14.3 million in the first quarter of fiscal 1998 to recognize
compensation expense for stock options granted to certain key members of
management. This charge is based on the difference between the exercise price of
$2.00 per share of common stock and the fair market value as of the date of
grant of $18.00 per share. Under these grant agreements, the Company agreed to
pay the optionees a fixed tax "bonus" to provide for certain tax liabilities
that the optionees may incur upon exercise. The estimated amount of the tax
liability payment of $5.7 million was fully accrued along with the stock option
compensation charge of $8.6 million. During the three and nine months ended
April 25, 1999 the Company recorded stock compensation expense of $0.1 million
and $0.6 million, respectively, which represents the vesting of additional stock
options. Such amounts are included in marketing, general and administrative
expenses in the accompanying condensed consolidated statement of operations for
the three and nine months ended April 25, 1999.
11. Long Term Debt. The Company established a senior credit facility on
November 12, 1997 (as amended to date, the "Senior Credit Facility"). The Senior
Credit Facility is divided into two sub-facilities, $65 million of which is
available for borrowings by ASC East, Inc. and its subsidiaries (the "East
Facility") and $150 million of which is available for borrowings by ASC Utah and
ASC West, Inc. and its subsidiaries (the "West Facility"). The East Facility
consists of a six-year revolving credit facility in the amount of $35 million
and an eight-year term facility in the amount of $30 million. The West Facility
consists of a six-year revolving facility in the amount of $75 million and an
eight-year term facility in the amount of $75 million.
The Company negotiated an amendment to the Senior Credit Facility on
March 3, 1999 (the "Credit Facility Amendment") which significantly modifies the
covenant requirements for the second and third fiscal quarters of 1999 and on a
prospective basis. The Credit Facility Amendment requires minimum quarterly
EBITDA levels and places a maximum range of non-real estate capital expenditures
for fiscal 2000 of between $15 and $20 million, with maximum levels depending on
the Company's ability to consummate sales of certain non-strategic assets, as
defined in the Credit Facility Amendment. Following fiscal 2000, annual resort
capital expenditures (exclusive of real estate) are capped at the lesser of (i)
$35 million or (ii) the total of consolidated EBITDA for the four fiscal
quarters ended April of the previous fiscal year less consolidated debt service
for the same period.
On January 8, 1999, the Company's real estate development holding
company, American Skiing Company Resort Properties, Inc. ("Resort Properties"),
closed on a term loan facility (the "Resort Properties Term Facility") with
BankBoston. The Resort Properties Term Facility has a maximum principal amount
of $58 million, bears interest at a variable rate equal to BankBoston's base
rate plus 8.25%, or a current rate of 16% per annum (payable monthly in arrears)
and matures on June 30, 2001. The terms of the Resort Properties Term Facility
are subject to change as the arrangement becomes fully syndicated. The Resort
Properties Term Facility is currently fully underwritten by BankBoston. The
Resort Properties Term Facility is collateralized by security interests in, and
mortgages on, substantially all of Resort Properties' assets, which primarily
consist of undeveloped real property and the stock of its real estate
development subsidiaries (including Grand Summit Resort Properties, Inc.
("GSRP"), the Company's hotel development subsidiary). As of April 25, 1999, the
total assets that collateralized the Resort Properties Term Facility, and are
included in the accompanying condensed consolidated balance sheet, had a book
value of approximately $194.2 million. The Resort Properties Term Facility is
non-recourse to the Company and its resort operating subsidiaries, however,
7
alterations in the Resort Properties Term Facility resulting from syndication
requirements could also modify the non-recourse nature of that facility to the
Company and its resort operating subsidiaries (other than ASC East and its
resort operating subsidiaries).
On September 25, 1998, GSRP closed on a construction loan facility with
TFC Textron Financial (the "Textron Facility"). The Textron Facility matures on
September 24, 2002. The principal of the Textron Facility is payable
incrementally as quartershare sales are closed at the rate of 80% of the net
proceeds of each closing. The Textron Facility is collateralized by mortgages
against the project sites (including the completed Grand Summit Hotels at
Killington, Mt. Snow, Sunday River and Attitash Bear Peak), and is subject to
covenants, representations and warranties customary for this type of
construction facility. The Textron Facility is non-recourse to the Company and
its resort operating subsidiaries (although it is collateralized by substantial
assets of GSRP ($64.5 million as of April 25, 1999), which comprise substantial
assets of the Company).
The Textron Facility was structured to finance two of the Company's hotel
projects, one at The Canyons and one at Steamboat. In early March, 1999 Textron
advised GSRP that it was having difficulties syndicating the Steamboat portion
of the Textron Facility. On March 8, 1999, GSRP released Textron from any
further obligation to syndicate the Steamboat portion of the Textron Facility.
On April 8, 1999, Textron renewed its commitment to fund the initial $12 million
in construction draws on the Steamboat portion of the Textron Facility. The
amendment to the Textron Facility further modified the loan to provide for a
total syndication requirement of $105 million, in order for the Textron Facility
to be considered "fully funded". In addition, in order to facilitate
syndication, the interest rate of the Textron Facility was changed from prime
plus 1.5% per annum to prime plus 2.5% per annum. Also on April 8, 1999, Resort
Properties and BankBoston amended the Resort Properties Term Facility to provide
that BankBoston would not declare a default under the Resort Properties Term
Facility, due to the Textron Facility not being fully syndicated, until July 8,
1999, so long as Textron continued to fund the Steamboat portion of the Textron
Facility. During the period from April 8, 1999 through July 8, 1999, Textron,
BankBoston and Resort Properties agreed to coordinate their efforts to syndicate
the balance of the Textron Facility. On June 1, 1999, Textron notified Resort
Properties that it had received written commitments for the syndication of an
additional $40 million of the Textron Facility, which, following execution of
documentation adding those additional lenders to the Textron Facility, will
bring the total syndicated amount of the Textron Facility to $110 million and
cause the Textron Facility to be fully funded. Upon closing of the $40 million
in syndication commitments, the proceeds of the Textron Facility will
consequently be available to fund the expected remaining project costs of the
hotels at both The Canyons and Steamboat.
On December 19, 1998, Canyons Resort Properties, Inc., (a wholly owned
subsidiary of Resort Properties), and KeyBank, N.A. closed on a construction
loan facility (the "Key Facility") for an additional hotel project (the Sundial
Lodge) at The Canyons. The Key Facility has a maximum principal amount of $29
million, bears interest at a rate of prime plus 1/4% per annum (payable monthly
in arrears), and matures on June 30, 2000. The Key Facility is collateralized by
a mortgage and security interest in the Sundial Lodge project, a $5.8 million
payment guaranty of Resort Properties, and a full completion guaranty of Resort
Properties. The Key Facility is non-recourse to the Company and its resort
operating subsidiaries.
12. Commitments and Contingencies. The Company's President, Chief
Executive Officer and majority shareholder (the "Majority Shareholder") is the
obligor under a margin loan (the "Margin Loan") with ING (U.S.) Capital
Corporation ("ING"). The Margin Loan has two different maintenance bases: (i)
8
one which requires that the aggregate market value of the collateral be at a
certain level in order to take additional advances under the arrangement to make
interest payments (the "Advance Base") and (ii) one which requires that the
aggregate market value of the collateral be at a certain level in order to avoid
a default under the terms of the Margin Loan (the "Minimum Base"). The Margin
Loan is collateralized by the Majority Shareholder's 833,333 shares of the
Company's Common Stock and 14,760,530 shares of the Company's Class A Common
Stock and a note receivable from one of the Company's subsidiaries. At any time
that the aggregate market value of the collateral is below the Minimum Base, the
Majority Shareholder is required either to pay down the balance of the Margin
Loan or to pledge additional collateral. The Company is not liable for nor do
any of its assets collateralize the Margin Loan. However, a default under the
Margin Loan that is not cured within the applicable grace period could result in
a realization by ING of some or all of the Majority Shareholder's shares of the
Company's Common and Class A Common Stock which could result in a change in
control of the Company. A change in control of the Company could cause a default
under one or more of the Company's major credit facilities, which would likely
be material and adverse to the Company, and could also limit the annual
utilization of the Company's current net operating losses for income taxes under
section 382 of the Internal Revenue Code.
On March 3, 1999, as additional security for the Margin Loan, the
Majority Shareholder pledged to ING a promissory note from one of the Company's
subsidiaries to the Majority Shareholder. The balance of the note as of April
25, 1999 was $1.8 million. The note was established in order to cover certain
income tax liabilities generated when the Company's subsidiary (which at the
time was wholly owned by the Majority Shareholder) converted from an S
Corporation to a C Corporation as defined by the Internal Revenue Code. The
pledge of the note was required to enable the Majority Shareholder to obtain an
interest advance under the Margin Loan without violating the Advance Base
maintenance base.
During the last two weeks of April 1999, there were three separate days
when the Maintenance Base of the Margin Loan was below the required minimum
collateral base. ING waived this violation with the understanding that the
Majority Shareholder would develop a plan to reduce the outstanding balance on
the Margin Loan.
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The following is management's discussion and analysis of financial
condition and results of operations for the three and nine months ended April
25, 1999. As you read the material below, we urge you to carefully consider our
condensed, consolidated financial statements and related notes contained
elsewhere in this report and the audited financial statements and related notes
contained in our Form 10-K filed with the Securities and Exchange Commission on
October 27, 1998.
Liquidity and Capital Resources
Short-Term. The Company's primary short-term liquidity needs are
funding seasonal working capital requirements, continuing and completing real
estate development projects, funding its summer 1999 capital improvement program
9
and servicing indebtedness. Cash requirements for ski-related and real estate
development activities are provided by separate sources. The Company's primary
sources of liquidity for ski-related working capital and ski-related capital
improvements are cash flow from operations of its non-real estate subsidiaries
and borrowings under the Senior Credit Facility (as hereinafter defined). Real
estate development and real estate working capital is funded primarily through
construction financing facilities established for major real estate development
projects and through a term loan facility established through the Company's real
estate development holding company, American Skiing Company Resort Properties,
Inc. ("Resort Properties"). The construction financing facilities and Resort
Properties Term Facility (collectively, the "Real Estate Facilities") are
without recourse to the Company and its resort operating subsidiaries. The Real
Estate Facilities are collateralized by significant real estate assets of Resort
Properties and its subsidiaries, including, without limitation, the assets and
stock of Grand Summit Resort Properties, Inc. ("GSRP"), the Company's primary
hotel development subsidiary. As of April 25, 1999, the book value of the total
assets that collateralized the Real Estate Facilities, and are included in the
accompanying condensed consolidated balance sheet, were approximately $194.2
million.
Resort Liquidity. The Company established a senior credit facility on
November 12, 1997 (as amended to date, the "Senior Credit Facility"). The Senior
Credit Facility is divided into two sub-facilities, $65 million of which ($5.4
million of which was available at June 1, 1999) is available for borrowings by
ASC East, Inc. and its subsidiaries (the "East Facility") and $150 million of
which ($12.9 million of which was available at June 1, 1999) is available for
borrowings by ASC Utah and ASC West, Inc. and its subsidiaries (the "West
Facility"). The East Facility consists of a six-year revolving credit facility
in the amount of $35 million and an eight-year term facility in the amount of
$30 million. The West Facility consists of a six-year revolving facility in the
amount of $75 million and an eight-year term facility in the amount of $75
million.
The Senior Credit Facility contains restrictions on the payment of
dividends by the Company on its common stock. Those restrictions prohibit the
payment of dividends in excess of 50% of the Company's consolidated net income
after July 31, 1997, and further prohibit the payment of dividends under any
circumstances when the effect of such payment would be to cause the Company's
debt to EBITDA (as defined within the credit agreement) ratio to exceed 4.0 to
1. Based upon these restrictions (as well as additional restrictions discussed
below), the Company does not expect that it will be able to pay dividends on its
common stock during either the current or next fiscal year.
The maximum availability under the revolving facilities will reduce over
the term of the Senior Credit Facility by certain prescribed amounts. The term
facilities amortize at an annual rate of approximately 1.0% of the principal
amount for the first six years with the remaining portion of the principal due
in two substantially equal installments in years seven and eight. Beginning in
July 1999, the Senior Credit Facility requires mandatory prepayment of 50% of
the Company's excess cash flows during any period in which the ratio of the
Company's total senior debt to EBITDA exceeds 3.50 to 1. In no event, however,
will such mandatory prepayments reduce either revolving facility commitment
below $35 million. Management does not presently expect to generate excess cash
flows, as defined in the Senior Credit Facility, during fiscal 1999 or fiscal
2000.
The Senior Credit Facility contains affirmative, negative and financial
covenants customary for this type of credit facility, including maintenance of
certain financial ratios. Except for a leverage test, compliance with financial
covenants is determined on a consolidated basis notwithstanding the bifurcation
10
of the Senior Credit Facility into sub-facilities. The East Facility is
collateralized by substantially all the assets of ASC East, Inc. and its
subsidiaries, except its real estate development subsidiaries (consisting of
Resort Properties and its subsidiaries), which are not borrowers under the
Senior Credit Facility. The West Facility is collateralized by substantially all
the assets of ASC Utah, ASC West, Inc. and its subsidiaries. Each of the East
and West facilities is collateralized by a guaranty of the Company, which
guaranty is secured by substantially all assets of the Company.
The revolving facilities are subject to annual 30-day clean down
requirements to an outstanding balance of not more than $10 million for the East
Facility and not more than $45 million for the West Facility, which clean down
period must include April 30 of each fiscal year. The Company completed the
clean down requirement for both the East Facility and the West Facility on April
30, 1999.
Due to the adverse weather conditions in the eastern United States and
Colorado during the Company's second fiscal quarter of 1999 and their effect on
the Company's second quarter revenue, EBITDA and net income, the Company entered
into an amendment to the Senior Credit Facility on March 3, 1999 (the "Credit
Facility Amendment") which significantly modified the covenant requirements of
the Senior Credit Facility for the second and third fiscal quarters of 1999 and
on a prospective basis. Based upon historical operations, management presently
anticipates that the Company will be able to meet the financial covenants of the
Senior Credit Facility, as amended by the Credit Facility Amendment. Failure to
meet one or more of these covenants could result in an event of default under
the Senior Credit Facility. In the event that such default were not waived by
the lenders holding a majority of the debt under the Senior Credit Facility,
such default would also constitute defaults under one or more of the Textron
Facility, the Key Facility, the Resort Properties Term Loan, and the Indenture
(each as hereinafter defined), the consequences of which would likely be
material and adverse to the Company.
The Credit Facility Amendment also places a maximum level of non-real
estate capital expenditures for fiscal 2000 of between $15 million and $20
million, with maximum levels depending on the Company's ability to consummate
sales of certain non-strategic assets. Following fiscal 2000, annual resort
capital expenditures (exclusive of real estate capital expenditures) are capped
at the lesser of (i) $35 million or (ii) the total of consolidated EBITDA (as
defined therein) for the four fiscal quarters ended in April of the previous
fiscal year less consolidated debt service for the same period.
The Company intends to use borrowings under the Senior Credit Facility
for seasonal working capital needs, summer 1999 resort capital improvements and
to build retail and other inventories prior to the start of the 1999-2000 ski
season. Due to the adverse weather conditions in the Company's second fiscal
quarter and their impact on the Company's fiscal 1999 cash flows, the Company
expects to maximize borrowings under the Senior Credit Facility sometime between
September and November of 1999. During this period, the Company expects to have
little, if any, borrowing availability under the Senior Credit Facility and will
have limited ability to fund unusual and/or unanticipated expenses. The working
capital deficit resulting from the Company's poor second quarter results will
likely negatively effect the Company's liquidity during the remainder of fiscal
1999 and through December of 1999.
The Company's liquidity is also significantly affected by its high
leverage. As a result of its leveraged position, the Company will have
significant cash requirements to service interest and principal payments on its
11
debt. Consequently, cash availability for working capital needs, capital
expenditures and acquisitions is very limited. Furthermore, the Senior Credit
Facility and the Indenture each contain significant restrictions on the ability
of the Company and its subsidiaries to obtain additional sources of capital and
may affect the Company's 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.
Due to the adverse weather conditions experienced by the Company during
its second fiscal quarter of 1999 and their resulting impact on the Company's
cash flows, the Company is taking the following steps in order to improve cash
flows for the remainder of fiscal 1999 and fiscal 2000: (a) the sale of some of
the Company's non-strategic assets (assets deemed by management not to be
significant to skiing and other resort activities or to real estate development
plans), (b) a reduction of capital expenditures for the remainder of fiscal 1999
and fiscal 2000, and (c) a reduction of the operating expenditures of the
Company and its subsidiaries. The Company's ability to meet its short term
liquidity requirements is largely dependent upon the successful implementation
of its plan to sell certain non-strategic assets and reduce short term operating
costs. There can be no assurance that the Company will continue to be able to
sell such assets and reduce costs or that the resulting proceeds and cost
savings will be sufficient to allow the Company to meet its short term liquidity
needs.
The Company has engaged Donaldson, Lufkin & Jenrette Securities
Corporation and ING Barings to explore strategic alternatives for the Company,
which may include the raising of equity and/or possible business combinations to
reduce the Company's leverage, increase liquidity, and better position the
Company to execute it's growth plan. There can be no assurance that the Company
will be able to consummate such a transaction.
ASC East, Inc. is prohibited under the indenture governing its $120
million 12% Senior Subordinated Notes due 2006 (the "Indenture") from paying
dividends or making other distributions to the Company, except under certain
circumstances (which are not currently applicable and are not anticipated to be
applicable in the foreseeable future). Therefore, ASC East, Inc.'s ability to
distribute excess cash to the Company for use by the Company or its other
subsidiaries (other than subsidiaries of ASC East) is, and will likely continue
to be, significantly limited. As of April 25, 1999, the amount of net assets of
ASC East, Inc. and its subsidiaries (including Resort Properties, GSRP, and
their respective subsidiaries) which are restricted under the Indenture was
approximately $75.8 million. These net assets are comprised of the following:
current assets of $35.9 million, intangible assets of $21.5 million, operating
assets of $460.6 million, net of current liabilities of $153.6 million and
long-term liabilities of $280.7 million. As of the end of the third fiscal
quarter of 1999, ASC East had $0 available for distribution to the Company under
the terms of the Indenture.
The Company issued $17.5 million of convertible-preferred stock and
$17.5 million of convertible notes in July, 1997 to fund development at The
Canyons. These securities were converted on November 12, 1997 into Mandatorily
Redeemable 10 1/2% Repriced Convertible Preferred Stock of the Company. The 10
1/2% Repriced Convertible Preferred Stock shares are exchangeable at the option
of the holder into shares of the Company's common stock at a conversion price of
$17.10 for each common share. In the event that the 10 1/2% Repriced Convertible
Preferred Stock is held to its maturity date of November 15, 2002, the Company
will be required to pay the holders the face value of $36.6 million plus
dividends in arrears. So long as the 10 1/2% Repriced Convertible Preferred
Stock remains outstanding, the Company may not pay any cash dividends on its
common stock unless all accrued dividends on the 10 1/2% Repriced Convertible
Stock have been paid up to date and in cash. Because the Company has been
accruing unpaid dividends on the 10 1/2% Repriced Convertible Preferred Stock,
the Company is not presently able to pay cash dividends on its common stock and
management does not expect that the Company will have this ability in the near
future.
The Company's President, Chief Executive Officer and majority
shareholder (the "Majority Shareholder") is the obligor under a margin loan (the
"Margin Loan") with ING (U.S.) Capital Corporation. The Margin Loan has two
different maintenance bases: (i) one which requires that the aggregate market
value of the collateral be at a certain level in order to take additional
advances under the arrangement to make interest payments (the "Advance Base")
and (ii) one which requires that the aggregate market value of the collateral be
at a certain level in order to avoid a default under the terms of the Margin
Loan (the "Minimum Base"). The Margin Loan is collateralized by the Majority
Shareholder's 833,333 shares of the Company's Common Stock and 14,760,530 shares
of the Company's Class A Common Stock. At any time that the aggregate market
12
value of the collateral is below the Minimum Base, the Majority Shareholder is
required to either pay down the balance of the Margin Loan or to pledge
additional collateral. The Company is not liable for nor do any of its assets
collateralize the Margin Loan. However, a default under the Margin Loan that is
not cured within the applicable grace period could result in a realization by
ING of some or all of the Majority Shareholder's shares of the Company's Common
and Class A Common Stock which could result in a change in control of the
Company. A change in control of the Company could cause a default under one or
more of the Company's major credit facilities, which would likely be material
and adverse to the Company, and could also limit the annual utilization of the
Company's current net operating losses for income taxes under section 382 of the
Internal Revenue Code.
On March 3, 1999, as additional security for the Margin Loan, the
Majority Shareholder pledged to ING a promissory note from one of the Company's
subsidiaries to the Majority Shareholder. The balance of the note as of April
25, 1999 was $1.8 million. The note was established in order to cover certain
income tax liabilities generated when the Company's subsidiary (which at the
time was wholly owned by the Majority Shareholder) converted from an S
Corporation to a C Corporation as defined by the Internal Revenue Code. The
pledge of the note was required to enable the Majority Shareholder to obtain an
interest advance under the Margin Loan without violating the Advance Base
maintenance base.
During the last two weeks of April 1999, there were three separate days
when the Maintenance Base of the Margin Loan was below the required minimum
collateral base. ING waived this violation with the understanding that the
Majority Shareholder would develop a plan to reduce the outstanding balance on
the Margin Loan.
The Majority Shareholder has indicated to management of the company
that he has both the means and the intent to pay down and/or further
collateralize the Margin Loan as necessary to prevent a default under such loan.
The Company can provide no assurances that the Majority Shareholder will prevent
a default.
Real Estate Liquidity: Funding of working capital for Resort Properties is
provided through (1) revenue from real estate sales and related operations, (2)
13
proceeds from a term loan facility between BankBoston and Resort Properties
established January 8, 1999 in the maximum principal amount of $58 million (the
"Resort Properties Term Facility") and (3) project-specific construction loans.
The Resort Properties Term Facility bears interest at a variable
rate equal to BankBoston's base rate plus 8.25%, or a current rate of 16% per
annum (payable monthly in arrears), and matures on June 30, 2001. As of June 1,
1999, $50.8 million was outstanding under the Resort Properties Term Facility.
The Resort Properties Term Facility is collateralized by security interests in,
and mortgages on, substantially all of Resort Properties' assets, which
primarily consist of undeveloped real property and the stock of its real estate
development subsidiaries (including GSRP). As of April 25, 1999, the book value
of the total assets that collateralized the Resort Properties Term Facilitity,
and are included in the accompanying condensed consolidated balance sheet, was
approximately $194.2 million. The Resort Properties Term Facility is
non-recourse to the Company and its resort operating subsidiaries.
In conjunction with the Resort Properties Term Facility, Resort
Properties entered into a syndication letter with BankBoston (the "Syndication
Letter") pursuant to which BankBoston agreed to syndicate up to $43 million of
the Resort Properties Term Facility. Under the terms of the Syndication Letter,
one or more of the terms of the Resort Properties Term Facility (excepting
certain terms such as the maturity date and commitment fee) may be altered
depending on the requirements for syndication of the facility. However, no
alteration of the terms of the facility may occur without the consent of Resort
Properties. Although Resort Properties expects the terms of the Resort
Properties Term Facility to remain substantially similar to those discussed
above, one or more of such terms could be altered in order to syndicate the
facility, and such alterations could be material and adverse to the Company. The
Syndication Letter also provides that, in the event that BankBoston is unable to
syndicate at least $33 million of the Resort Properties Term Facility on or
before July 9, 1999, then BankBoston may, at its option, require repayment of
the outstanding balance of the facility within 120 days of its request for
repayment by Resort Properties. As of June 1, 1999, BankBoston had not
syndicated any portion of the Resort Properties Term Facility. BankBoston has
not indicated to the Company whether it intends to require repayment pursuant to
the foregoing terms if the Resort Properties Term Facility is not syndicated. If
BankBoston were to require repayment, there can be no assurance that the Company
could secure replacement financing for the Resort Properties Term Facility. The
failure to secure replacement financing on terms similar to those existing under
the Resort Properties Term Facility could result in a material adverse effect on
the liquidity of Resort Properties and its subsidiaries, including GSRP, and
could also result in a default under the Indenture and the Senior Credit
Facility.
The Company runs substantially all of its real estate development
through single purpose subsidiaries, each of which is a wholly-owned subsidiary
of Resort Properties. In its fourth fiscal quarter of 1998, the Company
commenced construction on three new hotel projects (two at The Canyons in Utah
and one at Steamboat in Colorado). Two of these new hotel projects are Grand
Summit Hotels which are being constructed by GSRP. The Grand Summit Hotel at The
Canyons is being financed through a construction loan facility among GSRP and
various lenders, including TFC Textron Financial, the syndication agent and
14
administrative agent, which closed on September 25, 1998 (the "Textron
Facility"). The Company's other Grand Summit Hotel is being constructed at the
Company's Steamboat resort in Colorado. The project was initially planned to be
financed through the Textron Facility. In early March, 1999, Textron advised
GSRP that it was having difficulties syndicating the Steamboat portion of the
Textron Facility. On March 8, 1999, GSRP released Textron from any further
obligation to syndicate the Steamboat portion of the Textron Facility.
On April 8, 1999, Textron renewed its commitment to fund the initial $12
million in construction draws on the Steamboat portion of the Textron Facility.
The amendment to the Textron Facility further modified the loan to provide for a
total syndication requirement of $105 million, in order for the Textron Facility
to be considered "fully funded". In addition, in order to facilitate
syndication, the interest rate of the Textron Facility was changed from prime
plus 1.5% per annum to prime plus 2.5% per annum. Also on April 8, 1999, Resort
Properties and BankBoston amended the Resort Properties Term Facility to provide
that BankBoston would not declare a default under the Resort Properties Term
Facility, due to the Textron Facility not being fully syndicated, until July 8,
1999, so long as Textron continued to fund the Steamboat portion of the Textron
Facility. During the period from April 8, 1999 through July 8, 1999, Textron,
BankBoston and Resort Properties agreed to coordinate their efforts to syndicate
the balance of the Textron Facility. On June 1, 1999, Textron notified Resort
Properties that it had received written commitments for the syndication of an
additional $40 million of the Textron Facility, and which, following execution
of documentation adding those additional lenders to the Textron Facility will
bring the total syndicated amount of the Textron Facility to $110 million and
cause the Textron Facility to be fully funded. Following full syndication, the
proceeds of the Textron Facility will consequently be available to fund the
expected remaining project costs of the hotels at both The Canyons and
Steamboat.
As of June 1, 1999, the amount outstanding under the Textron Facility was
$44.2 million. The Textron Facility matures on September 24, 2002. The principal
of the Textron Facility is payable incrementally as quartershare sales are
closed at the rate of 80% of the net proceeds of each closing. The Textron
Facility is collateralized by mortgages against the project sites (including the
completed Grand Summit Hotels at Killington, Mt. Snow, Sunday River and Attitash
Bear Peak), and is subject to covenants, representations and warranties
customary for this type of construction facility. The Textron Facility is
non-recourse to the Company and its resort operating subsidiaries (although it
is collateralized by substantial assets of GSRP, which comprise substantial
assets of the Company).
The remaining hotel project commenced by the Company in 1998, the
Sundial Lodge project at The Canyons, is being financed through a construction
loan facility between Canyons Resort Properties, Inc., (a wholly-owned
subsidiary of Resort Properties) and KeyBank, N.A. (the "Key Facility"). The Key
Facility has a maximum principal amount of $29 million, bears interest at a rate
of prime plus 1/4% per annum (payable monthly in arrears), and matures on June
30, 2000. Additional costs (approximately $8 million) for the Sundial Lodge
project have been financed through proceeds of the Resort Properties Term
Facility, which have been loaned on an intercompany basis by Resort Properties
to Canyons Resort Properties, Inc.. The Key Facility closed on December 19,
1998. The Company began drawing under the Key Facility in late April of 1999,
following completion of the required equity contribution (approximately $8
million) of the Company in the Sundial Lodge project. The Company had no
15
advances outstanding under the Key Facility as of April 25, 1999, but subsequent
to the end of the quarter the Company has drawn $3.9 million from this facility.
The Key Facility is collateralized by a mortgage and security interest in the
Sundial Lodge project, a $5.8 million payment guaranty of Resort Properties, and
a full completion guaranty of Resort Properties. The Key Facility is
non-recourse to the Company and its resort operating subsidiaries (although it
is collateralized by substantial assets of Resort Properties and its
subsidiaries). As of April 25, 1999, the book value of the total assets that
collateralized the Real Estate Facilities, and are included in the accompanying
condensed consolidated balance sheet, were approximately $194.2 million.
Long-Term. The Company's primary long-term liquidity needs are to fund
skiing related capital improvements at certain of its resorts and development of
its slopeside real estate. The Company has invested over $175 million in skiing
related facilities in fiscal years 1997 and 1998 combined. As a result, the
Company expects its resort capital programs for the next several fiscal years to
be more limited in size. The fiscal 1999 resort capital program is expected to
total approximately $57 million, substantially all of which was expended or
fully committed prior to April 25, 1999. The fiscal 2000 resort capital program
is estimated at between $15 million and $20 million.
The Company's largest long-term capital needs relate to certain resort
capital expenditure projects and the Company's real estate development program.
For the next two fiscal years, the Company anticipates its annual maintenance
capital needs to be approximately $12 million. There is a considerable degree of
flexibility in the timing and, to a lesser degree, scope of the Company's growth
capital program. Although specific capital expenditures can be deferred for
extended periods, continued growth of skier visits, revenues and profitability
will require continued capital investment in on-mountain improvements. The
Company's practice is to finance on-mountain capital improvements through resort
cash flow and its Senior Credit Facility. The size and scope of the capital
improvement program will generally be determined annually depending upon future
availability of cash flow from each season's resort operations and future
borrowing availability and covenant restrictions under the Senior Credit
Facility. The Credit Facility Amendment places a maximum level of non-real
estate capital expenditures for fiscal 2001 and beyond at the lesser of (i) $35
million or (ii) the total of (a) consolidated EBITDA (as defined therein) for
the four fiscal quarters ended in April of the previous fiscal year less (b)
consolidated debt service for the same period. Management believes that these
capital expenditure amounts will be sufficient to meet the Company's needs for
non-real estate capital expenditures for the near future.
The Company's business plan anticipates the development of both Grand
Summit hotels and condominium hotels at several resorts, as well as resort
villages at Sunday River, Killington, The Canyons, Steamboat and Heavenly. The
timing and extent of these projects are subject to local and state permitting
requirements which may be beyond the Company's control, as well as to the
Company's cash flow requirements and availability of external capital.
Substantially all of the Company's real estate development is undertaken through
the Company's real estate development subsidiary, Resort Properties. Recourse on
indebtedness incurred to finance this real estate development is limited to
Resort Properties and/or its subsidiaries (including GSRP). Such indebtedness is
generally collateralized by the projects financed under the particular
indebtedness which, in some cases, constitutes a significant portion of the
assets of the Company. As of April 25, 1999, the total assets that
collateralized the Real Estate Facilities, and are included in the accompanying
condensed consolidated balances sheet, totaled approximately $194.2 million.
Resort Properties' seven existing development projects are currently being
funded by the Resort Properties Term Facility, the Textron Facility and the Key
Facility.
The Company expects to undertake future real estate development
projects through special purpose subsidiaries with financing provided
principally on a non-recourse basis to the Company and its resort operating
subsidiaries. Although this financing is expected to be non-recourse to the
Company and its resort subsidiaries, it will likely be collateralized by
16
existing and future real estate projects of the Company which may constitute
significant assets of the Company. Required equity contributions for these
projects must be generated before those projects can be undertaken. Potential
sources of equity contributions include sales proceeds from existing real estate
projects and assets, and potential sales of equity interests in Resort
Properties and/or its real estate development subsidiaries. Financing
commitments for future real estate development do not currently exist, and no
assurance can be given that they will be available or established. The Company
will be required to establish both equity sources and construction facilities or
other financing arrangements for these projects before undertaking each
development.
The Company from time to time considers potential acquisitions which,
based upon the historical performance of the target entities, are expected to be
accretive to earnings. There are not currently any funding sources immediately
available to the Company for such acquisitions. The Company would need to
establish such sources prior to consummating any such acquisition.
17
Changes in Results of Operations
Third Quarter of Fiscal 1999 compared to Third
Quarter of Fiscal 1998.
1. Resort revenues. Resort revenues increased $10.1 million, or 7%, from $144.2
million for the three months ended April 26, 1998 to $154.3 million for the
three months ended April 25, 1999. The increase is attributable to the
following: a) $2.5 million, or 3.2%, increase in ticket sales due to higher
yields on lower skier visits; b) $2.3 million or 12.5% increase in food and
beverage revenue and $1.1 million, or 5.9%, increase in retail sales due to
additional outlets; c) $1.9 million, or 14.9%, increase in skier development
revenue due to the establishment of a new skier development program which
included the opening of four new Perfect Turn Discovery Centers; d) $1.7
million, or 14.8%, increase in lodging revenue due to the addition of two new
hotels; and e) $0.6 million increase in other miscellaneous revenue sources.
2. Real estate revenues. Real estate revenues decreased $30.6 million, or 74.8%,
from $40.9 million for the three months ended April 26, 1998 to $10.3 million
for the three months ended April 25, 1999. The majority of this decrease is
attributable to substantial revenues recognized in fiscal 1998 from closings of
pre-sold quartershare units at the Company's Grand Summit Hotels at Killington
and Mt. Snow and the absence of new real estate inventory in fiscal 1999. These
two projects were completed during the third fiscal quarter of 1998, at which
time the company realized approximately $28.1 million in sales revenue. The
Jordan Grand Hotel was completed during the second quarter of fiscal 1998 and
generated revenue of $7.9 million during the third quarter of 1998. During the
third fiscal quarter of 1999, the Company realized $7.7 million in on-going
sales of quartershare units at all three hotels.
3. Cost of resort operations. Cost of resort operations increased $8.5 million,
or 12.9%, from $66.1 million for the three months ended April 26, 1998 to $74.6
million for the three months ended April 25, 1999. The majority of this increase
is due to: a) $0.9 million in additional snowmaking costs due to the lack of
natural snow at the Company's eastern resorts; b) $1.6 million in additional
costs associated with increased food and beverage outlets; c) $0.6 million in
skier development costs associated with a new skier development program which
included four new Perfect Turn Discovery Centers; d) $1.4 million in lodging
costs associated with the opening of two new hotels; and e) $1.6 million
increase in property taxes due to increased tax rates in Vermont and an
increased asset base at The Canyons.
4. Cost of real estate operations. Cost of real estate operations decreased
$19.9 million, or 51.9%, from $28.5 million for the three months ended April 26,
1998 to $8.6 million for the three months ended April 25, 1999. This decrease is
attributable to substantial cost recognized in the third quarter of 1998 from
closings of pre-sold quartershare units at the Company's Grand Summit Hotels at
Killington and Mt. Snow. The Summit projects were completed in the third quarter
of 1998, at which time the Company realized costs of approximately $16.9
million. The Jordan Grand Hotel was completed in the second quarter of 1998,
during the third quarter of 1998 realized costs totaled $4.1 million. The cost
associated with the on-going sales of quartershare units at all three of these
hotels in the third quarter of 1999 totaled $4.1 million.
18
5. Marketing, general and administrative. Marketing, general and administrative
expense increased $3.1 million, or 27.2%, from $11.4 million for the three
months ended April 26, 1998 to $14.5 million for the three months ended April
25, 1999. This increase can be attributable to the following: a) a planned
increase in marketing of $1.3 million at all of the resorts; b) $0.8 million due
to severance payments and restructuring of management compensation; c) $0.3
million resulting from the expansion of management information systems; and d)
$0.7 million increase associated with the increased scope of the Company's
operations.
6. Depreciation and amortization. Depreciation and amortization increased $1.7
million, or 9.4%, from $18.0 million for the three months ended April 26, 1998
to $19.7 million for the three months ended April 25, 1999 primarily due to
additional depreciation related to the Company's capital improvements of
approximately $52 million in the fourth quarter of 1998 and first three quarters
of fiscal 1999. This increase is offset slightly by the change in the estimated
useful lives of certain of the Company's ski-related assets, which decreased
depreciation expense by $0.3 million compared to the third fiscal quarter of
1998. See footnote 1 to the Company's financial statements - Change in
Accounting Estimate.
7. Interest expense. Interest expense increased $2.6 million, or 34.7%, from
$7.5 million for the three months ended April 26, 1998 to $10.1 million for the
three months ended April 25, 1999 mainly due to increased debt levels associated
with financing the Company's recent capital improvements and real estate
projects.
8. Provision for income taxes. Provision for income taxes decreased $6.2 million
from $21.0 million for the three months ended April 26, 1998 to $14.8 million
for the three months ended April 25, 1999. The change is primarily attributable
to the decrease in the Company's pre-tax income for the three months ended April
25, 1999 as compared to the Company's pre-tax income for the three months ended
April 26, 1998.
First Nine months of Fiscal 1999 compared to First
Nine Months of Fiscal 1998.
1. Resort revenues. Resort revenues increased $13.7 million, or 5.2%, from
$264.1 million for the nine months ended April 26, 1998 to $277.8 million for
the nine months ended April 25, 1999. The inclusion of the results from
Steamboat and Heavenly resorts for the first fiscal quarter of 1999 accounts for
a $3.6 million increase (the results of Steamboat and Heavenly for fiscal 1998
are only included for the period commencing with the purchase of these resorts
on November 12, 1997). The remaining increase is attributable to the following:
a) $4.0 million, or 12.6%, increase in food and beverage and $3.3 million, or
9.1%, increase in retail sales associated with additional outlets; b) $1.8
million, or 7.9%, increase in skier development associated with a new skier
development program which included the opening of four new Perfect Turn
Discovery Centers; c) $3.9 million, or 16.2%, increase in lodging revenue
associated with the opening of three new hotels; and d) $2.5 million, or 134.5%,
increase in sponsorship marketing revenue due to the increased number of
sponsors and increase in funds received from existing sponsors. The increases in
revenues were offset by a decrease of $1.3 million, or 0.8%, in ticket revenue
due to a decrease in skier visits, and $2.3 million in other miscellaneous
revenue sources.
19
2. Real estate revenues. Real estate revenues decreased $28.5 million, or 57.5%,
from $49.6 million for the nine months ended April 26, 1998 to $21.1 million for
the nine months ended April 25, 1999. The majority of this decrease is
attributable to the substantial revenues recognized in fiscal 1998 from closings
of pre-sold quartershare units at the Company's Grand Summit Hotels at
Killington, Mt. Snow and Sunday River. These projects were completed during the
second and third fiscal quarters of 1998, at which time the Company realized
$42.4 million in sales revenue for the nine months ended April 26, 1998. For the
nine months ended April 25, 1999 the Company realized $14.0 million in on-going
sales of quartershare units.
3. Cost of resort operations. Cost of resort operations increased $24.6 million,
or 16.7%, from $147.3 million for the nine months ended April 26, 1998 to $171.9
million for the nine months ended April 25, 1999. The inclusion of the Steamboat
and Heavenly resorts for the first fiscal quarter of 1999 accounts for $8.6
million of the increase (the results of Steamboat and Heavenly for fiscal 1998
are only included for the period commencing with the purchase of these resorts
on November 12, 1997). The majority of the remaining increase is attributable to
the following: a) $4.8 million in lodging costs associated with the operation of
three new hotels; b) $1.2 million increase associated with a new skier
development program which included the operation of four new Perfect Turn
Discovery Centers; c) $3.6 million in food and beverage and retail costs
associated with increased outlets; d) $1.1 million increase in snowmaking due to
the lack of natural snow at the Company's eastern resorts; e) $1.5 million
increase in property taxes due to increased tax rates in Vermont and an
increased asset base at The Canyons; and f) $1.0 million increase in event costs
associated with marketing sponsorship.
4. Cost of real estate operations. Cost of real estate operations decreased
$14.2 million, or 40.9%, from $34.7 million for the nine months ended April 26,
1998 to $20.5 million for the nine months ended April 25, 1999. This decrease is
attributable to the substantial cost recognized in the third quarter of 1998
from closings of pre-sold quartershare units at the company's Grand Summit
Hotels at Killington, Mt. Snow and Sunday River. These projects were completed
in the second and third quarters of fiscal 1998. The cost associated with the
revenue realized for the nine months ended April 26, 1998 totaled $24.8 million.
The cost associated with the on-going sales of these units in the third quarter
of 1999 totaled $8.3 million. The remaining $2.2 million difference is
attributable mainly to the write-off of $0.7 million in prepaid advertising and
commission charges incurred in generating pre-sale contracts, some of which have
subsequently expired, for a Grand Summit Hotel at the Company's Sugarbush
resort. The timing of development for the Sugarbush project is expected to be
re-evaluated by the Company during next year's skiing season. Additionally, $0.8
million of expenses were incurred during the second quarter of fiscal 1999
relating to the Company's unsuccessful $300 million bond offering which was
undertaken to provide additional financing for the Company's real estate
projects.
5. Marketing, general and administrative. Marketing, general and administrative
expense increased $12.0 million, or 38.3%, from $31.3 million for the nine
months ended April 26, 1998 to $43.3 million for the nine months ended April 25,
1999. The inclusion of the Steamboat and Heavenly resorts for the first fiscal
quarter of 1999 accounts for $5.0 million of the increase. The remaining
increase can be attributed to the following: a) a planned increase in marketing
expenses at the all resorts of $2.9 million; b) a stock compensation charge
relating to the vesting of additional shares of management stock options of $0.6
20
million; c) $0.6 million of additional expenses resulting from the expansion of
management information services functions; d) $2.0 million of severance payments
and restructuring of management compensation; and e) $0.6 million increase in
costs associated with being a public company.
6. Stock compensation charge. Stock compensation charges decreased $14.3
million, or 100%. This charge was recognized during the nine months ended April
26, 1998 to reflect stock options granted to certain members of senior
management in relation to the Company's initial public offering. Approximately
$0.6 million of stock compensation charges for the vesting of additional options
was expensed for the nine months ended April 25, 1999 to marketing, general and
administrative. [See footnote 10 - Stock Option Plan].
7. Depreciation and amortization. Depreciation and amortization increased $7.0
million, or 20.3%, from $34.5 million for the nine months ended April 26, 1998
to $41.5 million for the nine months ended April 25, 1999. The inclusion of the
Steamboat and Heavenly resorts for the first fiscal quarter of 1999 accounts for
$1.6 million of the increase. The remaining increase is primarily due to
additional depreciation on capital improvements of approximately $52 million
made this year. These increases are slightly offset by the change in the
estimated useful lives of certain of the Company's ski-related assets, which
decreased depreciation expense by $0.7 million compared to the first nine months
of 1998. [See footnote 1 - Change in Accounting Estimate].
8. Interest expense. Interest expense increased $4.2 million, or 16.8%, from
$25.0 million for the nine months ended April 26, 1998 to $29.2 million for the
nine months ended April 25, 1999 mainly due to increased debt levels associated
with financing the Company's recent capital improvements and real estate
projects.
9. Provision for (benefit from) income taxes. Provision for (benefit from)
income taxes decreased $11.2 million from a provision of $10.4 million to a
benefit of $0.8 million, which is primarily attributable to the increase in the
Company's pre-tax loss for the nine months ended April 25, 1999 as compared to
the nine months ended April 26, 1998, when the Company had pre-tax income. The
benefit for the nine months ended April 25, 1999 was reduced from the statutory
rate due primarily to a decrease in estimated deferred tax benefits relating to
stock compensation tax benefits.
10. Accretion of discount and dividends accrued on mandatorily redeemable
preferred stock. Accretion of discount and dividends accrued on mandatorily
redeemable preferred stock decreased $1.1 million, or 25.6%, from $4.3 million
for the nine months ended April 26, 1998 to $3.2 million for the nine months
ended April 25, 1999. The decrease is primarily attributable to $0.9 million in
additional accretion recognized during the nine months ended April 26, 1998
relating to a conversion feature on the Company's Series A 14% Exchangeable
Preferred Stock, that allowed holders of these securities to convert to shares
of the Company's Common Stock at a 5% discount to the Company's initial public
offering price. An additional $0.9 million of the decrease is due to
amortization of issuance costs recognized for the nine months ended April 26,
1998 related to the Company's Series A 14% Exchangeable Preferred Stock upon its
conversion into Mandatorily Redeemable 10 1/2 % Repriced Convertible Preferred
Stock. These decreases were offset by the full nine months accretion for this
year and the compounding effect of the dividend accrual.
21
Changes in Financial Condition
Third Quarter of Fiscal 1999 Compared to Fiscal Year End 1998
1. Cash and cash equivalents: Cash and cash equivalents decreased $6.3 million,
or 40.9%, from a balance of $15.4 million at July 26, 1998 to a balance of $9.1
million at April 25, 1999. The decrease is primarily attributable to an
investment made in the Company's real estate subsidiaries of $5.5 million from
proceeds of the Company's initial public offering.
2. Accounts receivable: Accounts receivable increased $5.5 million, or 73.3%,
from a balance of $7.5 million at July 26, 1998 to a balance of $13.0 million at
April 25, 1999. The increase is primarily attributable to an increase in
receivables of $5.3 million at the Company's resorts due to the increased
business activity concurrent with the ski season.
3. Prepaid expenses: Prepaid expenses decreased $1.3 million, or 35.1%, from a
balance of $3.7 million at July 26, 1998 to a balance of $2.4 million at April
25, 1999. The write off of sales and marketing expenses relating to the
Sugarbush Grand Summit Hotel project, which has been postponed, accounts for
$0.7 million of the decrease. The remaining decrease is primarily attributable
to the recognition of various prepaid advertising, insurance and other costs
which were expensed over the 1998/99 ski season.
4. Property, plant and equipment, net: Property, plant and equipment, net,
increased $8.5 million, or 1.6%, from a balance of $521.1 million at July 26,
1998 to a balance of $529.6 million at April 25, 1999. The increase is primarily
attributable to resort related capital improvements of $52.3 million, less $38.3
million in depreciation expense, $0.5 million in asset sales and $2.4 million in
assets transferred to real estate developed for sale.
5. Real estate developed for resale: Real estate developed for resale increased
$75.7 million, or 96.3%, from a balance of $78.6 million at July 26, 1998 to a
balance of $154.3 million at April 25, 1999. The increase is primarily
attributable to the development of the Sundial Lodge project at The Canyons and
Grand Summit Resort Hotel projects at The Canyons and Steamboat, slightly offset
by sales of the eastern Grand Summit Hotel inventory.
6. Long-term investments: Long-term investments decreased $1.3 million, or
17.6%, from a balance of $7.4 million at the year ended July 26, 1998 to a
balance of $6.1 million at the quarter ended April 25, 1999. The decrease is
primarily attributable to the maturity of certain long-term investments at the
Company's captive insurance subsidiary which were held as cash at April 25, 1999
and were re-invested in long-term investments subsequent to the quarter end.
7. Other assets: Other assets increased $3.6 million, or 24.8%, from a balance
of $14.5 million at July 26, 1998 to a balance of $18.1 million at April 25
1999. The increase is primarily attributable to $3.4 million in land option
payments made at The Canyons.
8. Current portion of long-term debt: Current portion of long-term debt
decreased $24.5 million, or 55.4% from a balance of $44.2 million at July 26,
22
1998 to a balance of $19.7 million at April 25, 1999. The decrease is primarily
attributable to a net pay down of the Company's Senior Credit Facility
consistent with the seasonal nature of the Company's cash flows.
9. Accounts payable and other current liabilities: Accounts payable and other
accrued liabilities increased $50.5 million, or 113.5%, from a balance of $44.4
million at July 26, 1998 to a balance of $94.8 million at April 25, 1999. The
increase is attributable to i) an increase of $14.0 million relating to the
construction projects at the Company's real estate subsidiaries, ii) an increase
of $5.6 million in accrued interest due to the timing of various interest
payments, and iii) increases of $21.7 million in trade accounts payable and $9.1
million in other accruals due to the seasonal operating cycle of the Company's
business and timing of payments.
10. Deposits and deferred revenue: Deposits and deferred revenue increased $10.6
million, or 103.9%, from a balance of $10.2 million at July 26, 1998 to a
balance of $20.8 million at April 26, 1999. The change is attributable to i) an
increase of $5.6 million in sales deposits taken at the Company's real estate
subsidiaries, ii) a deposit of $3.0 million relating to non-strategic asset
sales and iii) an increase of $2.0 million relating to deferred revenue
associated with the Company's prepaid ticket programs.
11. Long-term debt, excluding current portion: Long-term debt, excluding current
portion, increased $52.2 million, or 24.7%, from a balance of $211.6 million at
July 26, 1998 to a balance of $263.8 million at April 25, 1999. The increase is
attributable to i) a $48.6 million increase in debt at the Company's real estate
subsidiaries to finance construction of Grand Summit Resort Hotels at The
Canyons and Steamboat and to finance the Sundial Lodge at The Canyons, ii) a
$16.0 million decrease in debt due to net repayments on the Company's Senior
Credit Facility and iii) an $18.7 million increase in capital leases to finance
capital improvements.
12. Other long-term liabilities: Other long-term liabilities increased $1.2
million, or 11.4%, from a balance of $10.5 million at July 26, 1998 to a balance
of $11.7 million at April 25, 1999. The increase is primarily attributable to
cash received on an interest rate swap agreement used as a cash flow hedge on
the Senior Subordinated Notes of the Company's subsidiary, ASC East, Inc.,
offset by a reduction in self insurance reserve requirements at the Company's
captive insurance subsidiary.
13. Mandatorily redeemable repriced convertible preferred stock: Mandatorily
redeemable repriced convertible preferred stock increased $3.2 million, or 8.1%,
from a balance of $39.5 million at July 26, 1998 to a balance of $42.7 million
at April 26, 1999. The increase is attributable to the accretion of the
dividends payable for the period.
14. Retained earnings: Retained earnings decreased $9.8 million from a balance
of $11 thousand at July 26,1998 to an accumulated deficit of $9.8 million at
April 25, 1999. The decrease is attributable to the Company's net loss for the
period.
Year 2000 disclosure
Background
The "Year 2000 Problem" is the result of many existing computer
programs and embedded chip technologies containing programming code in which
calendar year data is abbreviated by using only two digits rather than four to
refer to a year. As a result of this, some of these programs fail to operate or
23
may not properly recognize a year that begins with "20" instead of "19". This
may cause such software to recognize a date using "00" as the year 1900 rather
than the year 2000. Even systems and equipment that are not typically thought of
as computer-related often contain embedded hardware or software that may
improperly understand dates beginning with the year 2000. Inability of systems
to properly recognize the year 2000 could result in system failure or
miscalculations causing disruptions to operations, including temporary inability
to process transactions or engage in normal business activities.
The Company has developed a Year 2000 task force with representation
throughout the organization. The task force has developed a comprehensive
strategy to systematically evaluate and update systems as appropriate. In some
cases, no system changes are necessary or the changes have already been made. In
all other cases, modifications are planned to prepare the Company's systems to
be Year 2000 compliant by September 1999. The disclosure below addresses the
Company's Year 2000 Project.
Company's state of readiness
The Year 2000 Project is divided into three initiatives: (i)
Information Technology ("IT") Systems, (ii) Non-IT Systems and (iii) related
third party providers. The Company has identified the following phases with
actual or estimated dates of completion: 1) identify an inventory of systems,
(completed April 30, 1999), 2) gather certificates and warranties from
providers, (completed April 30, 1999), 3) determine required actions and
budgets, (completed April 30, 1999), 4) perform remediation and tests (expected
to be completed by September 1, 1999) and 5) designing contingency and business
continuation plans for each Company location (expected to be completed by June
30, 1999).
The following is a summary of the different phases and progress to date
for each initiative identified above:
IT Systems: The Company has continuously updated or replaced older
technology with more current technology. As the Company has acquired ski
resorts, it updated certain technology at these resorts. The Company's main IT
systems include an enterprise-wide client server financial system, an
enterprise-wide client server ticketing and direct to lift system, a mid-range
enterprise-wide payroll system, various point of sale and property management
systems, upgraded personal computers, wide area networking and local area
networking. Phases 1 through 3 are complete and the remaining phases are
currently on schedule. During phase 1 and 2, the Company noted that its
Sugarloaf and Sugarbush resorts have not yet converted to Year 2000 compliant
lodging systems. The Company expects to convert these two resorts to Year 2000
compliant systems by August 1, 1999. The Company has estimated that all
deficiencies will be remedied by September 1, 1999, which is in accordance with
the original timetable.
Non-IT Systems: Internal non-IT systems are comprised of faxes,
copiers, printers, postal systems, security systems, ski lifts, elevators and
telecommunication systems. Phases 1 through 3 are complete. The Company has
estimated that remediation will be completed by September 1, 1999, which is in
accordance with the original timetable.
24
Related third party providers: The Company has identified its major
related third party providers as certain utility providers, employee benefit
administrators and supply vendors. Phases 1 through 3 are complete. The Company
has estimated that remediation will be completed by September 1, 1999, which is
in accordance with the original timetable.
Actual and anticipated costs
The total cost associated with required modifications to become Year
2000 compliant is not expected to be material to the Company's financial
position. The estimated total cost of the Year 2000 Project is approximately
$295,000. This estimate includes Information System conversions for Year 2000
compliant lodging systems at Sugarloaf. The Company had planned to update these
systems regardless of Year 2000 issues to standardize systems within American
Skiing Company resorts. The total amount expended on the Year 2000 Project
through April 25, 1999 was $100,000. As of April 25, 1999, the estimated future
costs of the Year 2000 Project are $195,000, of which approximately (1) $0
related to costs to modify software, hire internal personnel and hire outsourced
Year 2000 solution providers and (2) $195,000 related to replacement costs of
non-compliant IT systems. The anticipated costs related to non-IT systems is
deemed by management to be immaterial.
Risks
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Year 2000 Project is expected
to significantly reduce the Company's level of uncertainty about the Year 2000
problem. The Company believes that, with the implementation of new business
systems and completion of the Year 2000 Project as scheduled, the possibility of
significant interruptions of normal operations should be reduced. Readers are
cautioned that forward-looking statements contained in the Year 2000 Update
should be read in conjunction with the Company's disclosures under the heading:
"Forward-Looking Statements".
Contingency plans
As of April 25, 1999, the Company had not completed the development of
a contingency plan related to Year 2000. The Company expects to complete the
contingency plan by June 30, 1999, 30 days behind the original schedule.
25
Forward-Looking Statements
The above information includes forward-looking statements, the
realization of which may be impacted by the factors discussed below. The
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 (the "Act"). This report
contains forward looking statements that are subject to risks and uncertainties,
including, but not limited to, uncertainty as to future financial results,
substantial leverage of the Company, the capital intensive nature of development
of the Company's ski resorts; rapid and substantial growth that could place a
significant strain on the Company's management, employees and operations;
uncertainties associated with fully syndicating the Resort Properties Term
Facility, the Textron Facility and various capital leases; uncertainties
associated with obtaining additional financing for future real estate projects
and to undertake future capital improvements; demand for and costs associated
with real estate development; change in market conditions affecting the interval
ownership industry; regulation of marketing and sales of the Company's
quartershare interests; seasonality of resort revenues; fluctuations in
operating results; the Company's ability to sell non-strategic assets to the
extent planned; dependence on favorable weather conditions; the discretionary
nature of consumers' spending for skiing and resort real estate; competition;
regional and national economic conditions; laws and regulations relating to the
Company's land use, development, environmental compliance and permitting
obligations; renewal or extension terms of the Company's leases and United
States Forest Service permits; industry competition; the adequacy of water
supply; the ability of the Company to make its information technology assets and
systems year 2000 compliant and the costs of any modifications necessary in that
regard; and other risks detailed from time to time in the Company's filings with
the Securities and Exchange Commission. These risks could cause the Company's
actual results for fiscal year 1999 and beyond to differ materially from those
expressed in any forward looking statements made by, or on behalf of, the
Company. The foregoing list of factors should not be construed as exhaustive or
as any admission regarding the adequacy of disclosures made by the Company prior
to the date hereof or the effectiveness of said Act.
Item 3
Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in information relating to
market risk since the Company's disclosure included in Item 7A of Form 10-K as
filed with the Securities and Exchange Commission on October 27, 1998.
26
Part II - Other Information
Item 6
Exhibits and Reports on Form 8-K
a) Exhibits
Included herewith is the Financial Data Schedule submitted as Exhibit
27 in accordance with Item 601(c) of Regulation S-K. Also included are the
following material agreements entered into in the Company's third fiscal quarter
of 1999.
Exhibit No. Description
- ----------- -----------
1) First Amendment Agreement Re: Loan and Security Agreement Among Grand
Summit Resort Properties, inc., as Borrower and Textron Financial
Corporation, as Administrative Agent dated as of April 5, 1999
2) Forbearance Agreement date as of March 8, 1999, between American
Skiing Company Resort Properties, Inc. and BankBoston, N.A., as Agent
3) Amended and Restated Forbearance Agreement dated as of April 20, 1999
between American Skiing Company Resort Properties, Inc. and
BankBoston, N.A., as Agent
b) Reports on Form 8-K
The Company filed a Form 8-K on March 19, 1999, reporting the
resignation of PriceWaterhouseCoopers, LLP as its independent accountants.
The Company filed a Form 8-K on April 1, 1999, reporting the
appointment of Arthur Andersen, LLP as its new independent accountants.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 9, 1999 /s/ Christopher E. Howard
- ---------------------------- ----------------------------
Christopher E. Howard
Executive Vice President
(Duly Authorized Officer)
Date: June 9, 1999 /s/ Mark J. Miller
- -------------------------------- ----------------------------
Mark J. Miller
Senior Vice President
Chief Financial Officer
(Principal Financial and
Accounting Officer)
28