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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR THE YEAR ENDED SEPTEMBER 30, COMMISSION FILE
1996 NUMBER: 1-9614
VAIL RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0291762
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NO.)
POST OFFICE BOX 7
VAIL, COLORADO 81658
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (970) 476-5601
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III or this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
As of December 20, 1996, neither of the registrant's classes of Common Stock
was publicly held or traded. The aggregate shares of voting stock held by non-
affiliates of the registrant is approximately 1,002,470 shares.
As of December 20, 1996, 10,372,241 shares of Common Stock were issued and
outstanding, of which 6,213,110 shares were Class A Common Stock and 4,159,131
shares were Common Stock.
Documents Incorporated by Reference: None
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TABLE OF CONTENTS
PART I
Item 1. Business.......................................................... 2
Item 2. Properties........................................................ 10
Item 3. Legal Proceedings................................................. 10
Item 4. Submission of Matters to a Vote of Security-Holders............... 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................... 11
Item 6. Selected Financial Data........................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 14
Item 8. Financial Statements and Supplementary Data....................... F-1
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.............................................. 19
PART III
Item 10. Directors and Executive Officers of the Registrant................ 19
Item 11. Executive Compensation............................................ 23
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 27
Item 13. Certain Relationships and Related Transactions.................... 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K... 28
1
PART I
ITEM 1. BUSINESS.
Vail Resorts, Inc. ("VRI"), formerly known as Gillett Holdings, Inc., is
organized as a holding company and operates through various subsidiaries. VRI
and its subsidiaries (collectively, the "Company") currently operate in two
business segments, ski resorts and real estate development. Vail Associates,
Inc., a wholly-owned subsidiary of Vail Resorts, Inc., and its subsidiaries
(collectively, "Vail Associates") operate one of the world's largest skiing
facilities on Vail Mountain and Beaver Creek Mountain in Colorado and have
related real estate operations. Vail Associates Real Estate Group ("VAREG") is
a wholly-owned subsidiary of Vail Associates, Inc. which conducts the Company's
real estate development activities.
RESORTS
The Company operates skiing facilities on Vail Mountain and Beaver Creek
Mountain in Colorado. For the 1995-1996 ski season, Vail Mountain and Beaver
Creek Mountain had 2,228,057 total skiers, as compared to 2,136,063 total
skiers for the previous year. The operation of a ski resort business is
seasonal. The Company's ski areas typically open in mid-November and close in
mid-April each year. Vail Associates currently employs approximately 800 year-
round and 3,500 seasonal employees.
Vail Mountain consists of 4,112 acres of skiable terrain located on 12,590
permitted acres. Vail Mountain is the largest single ski mountain complex in
the United States and for the 1996-97 ski season, will have a total of 26
lifts, including 10 high speed quads and a new high speed custom-designed
gondola, constituting the largest network of high speed lifts in the world.
Vail Mountain's 34th season ran from November 11, 1995 through May 1, 1996.
Vail Mountain had a total of 1,652,191 skiers for the season, the highest
number of skier days of any North American ski mountain and a new record for
Vail Mountain. The Company has received approval, subject to a pending appeal,
from the United States Forest Service (the "Forest Service") for infrastructure
development of bowl skiing terrain within its current permit area known as
Category III. (See "Business--Regulation and Legislation"). Category III will
add approximately 2,000 additional acres of ski terrain to Vail Mountain's back
bowls, including 850 acres of new trails and an additional 1,150 acres of
undisturbed gladed skiing, increasing the ski terrain on Vail Mountain by
approximately 50%. The terrain's high, north facing location typically yields
reliable snow conditions and should allow for earlier and later ski season
operations than is typical for Vail's existing south facing Back Bowls.
Beaver Creek Resort is a year-round recreational complex located on 2,126
acres of land located approximately ten miles west of the Town of Vail. Beaver
Creek Mountain consists of the Beaver Creek, Arrowhead and Bachelor Gulch ski
areas. Beaver Creek Mountain, opened in 1980, is located on approximately 2,775
permitted acres and consists of approximately 1,191 acres of skiable terrain.
In 1993, the Company expanded Beaver Creek Mountain by acquiring privately
owned ski terrain and development property on Arrowhead Mountain and in
Bachelor Gulch. The Company recently completed initial development of ski
infrastructure in Bachelor Gulch in connection with its real estate development
activities (see "Real Estate" below), thereby interconnecting the Beaver Creek,
Bachelor Gulch and Arrowhead ski areas, resulting in total skiable terrain on
Beaver Creek Mountain of 1,521 acres for the 1996-97 ski season. Beaver Creek
Mountain will operate 14 lifts for the 1996-97 ski season. Beaver Creek
Mountain is among the nation's 20 largest ski areas (based upon the annual
number of skiers). During its 16th season, from November 18, 1995 through April
14, 1996, Beaver Creek Mountain had a total of 575,866 skiers.
Given their location in the Colorado Rocky Mountains, Vail Mountain and
Beaver Creek Mountain receive some of the most reliable snowfall experienced
anywhere in the world, averaging approximately 340 inches of annual snowfall
over the last 20 years, which is significantly in excess of the average for all
ski resorts in the Rocky Mountains for such period. Despite the substantial
natural snowfall, the Company continues to invest in the latest technology in
snowmaking systems and actively acquires additional water
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rights, which has allowed it to offer its guests more predictable and
consistent conditions, particularly during the early and late ski season.
During 1995, the Company doubled its snowmaking capacity on Vail Mountain and
purchased water rights sufficient to enable a further doubling of snowmaking
capacity in the future. For the 1996-97 ski season, the Company will increase
snowmaking capacity on Beaver Creek Mountain by 60% and, with the addition of
a new reservoir planned for completion in 1997, will further increase
snowmaking capacity on Beaver Creek Mountain by an additional 100%. For the
1996-97 ski season, approximately 800 acres of the Company's ski terrain will
be covered by snowmaking. In addition, the Company has extensive snowgrooming
equipment, including the largest fleet of snowcats in the world.
The Company's customers are primarily comprised of worldwide resort
destination guests and, to a lesser extent, day skiers from the Denver
Metropolitan area, and Eagle and Summit counties. For the 1995-96 ski season,
the Company believes that destination guests represented 73% of total skier
days. Although the Company's resorts accommodate a wide range of budgets and
attract guests from different regions of the country and the world, they are
particularly attractive to family-oriented guests who tend to generate higher
and more diversified revenues per guest than day skiers from local population
centers. Over forty percent of the Company's destination guests visited with
their families during the 1995-96 ski season. International guests, who tend
to have longer average stays and higher vacation expenditures than other
destination guests, accounted for approximately 13% of the Company's
destination skier days during the 1995-96 ski season.
Consistent with the trends in the overall ski market, snowboarders represent
the fastest growing segment of the Company's guest demographic. The Company is
committed to promoting snowboarding as an exciting outgrowth of traditional
skiing. As an example of this commitment, the Company has upgraded its
snowboard facilities, published trail maps for the convenience of snowboarders
and created additional trails, half-pipes and other varied terrain to attract
snowboarders.
The Company derives Resort Revenue from a wide variety of sources, including
lift ticket sales, ski school, food service, retail stores, equipment rental,
travel reservation services, lodging, property and club management, real
estate brokerage, licensing and sponsorship activities and other recreational
activities.
Lift Ticket Sales. Lift ticket revenue represents the Company's single
largest revenue source. The Company's favorable demographics and world class
resort facilities have enabled the Company to achieve premium ticket pricing.
The lead ticket price, which for the 1995-96 ski season was $48 a day, is
among the highest in the industry. To maximize skier volume during non-peak
periods and attract certain segments of the market, the Company also offers a
wide variety of incentive ticket programs, including season passes, student
rates, group discounts and senior discounts.The Company engages in
sophisticated yield management analysis to maximize its effective ticket price
(defined as total ticket revenue divided by total skier days) which was $31.12
for the 1995-96 ski season, among the highest in the industry.
Ski School. The Company operates the world's largest ski school with
approximately 1,300 instructors. The Company estimates that it has a guest
participation rate of approximately 12% which it believes to be the highest in
the industry.
The success of the ski school comes from (i) personalizing and enhancing the
guest vacation experience, (ii) creating new teaching and learning systems
(many of which have historically been purchased from the Company by the
Professional Ski Instructors of America and adopted as the standard for the
industry), (iii) introducing innovative teaching methods for children,
including separate children's centers, mountain-wide attractions, themed
entertainment and teaching systems geared toward specific age groups, and (iv)
continually creating new techniques to react to technological advances in
ski/snowboard equipment. Customer service is continually reviewed and improved
as the result of feedback from customers. The Company has adopted a pay
incentive program to reward instructors based on guest satisfaction and repeat
student visits.
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Food Service. Food service is a key component in providing a satisfying guest
experience and has been an important source of revenue growth for the Company.
The Company believes that by owning and operating both on-mountain and base
area restaurants, it can better ensure the quality of products and services
offered to its guests, as well as capture a greater percentage of the guest's
vacation expenditures. The strategies with respect to its food service
operations include (i) focusing growth in venues which allow for food service
throughout the day and throughout the year, including breakfast, lunch, apres-
ski, dinner, evening entertainment, group functions and summer/non-ski season
operations, (ii) creating unique themed environments to maximize guest
enjoyment and revenue opportunities, (iii) further expanding on-mountain
seating, (iv) offering affordable family lunchtime and evening dining and
entertainment, (v) continuing to create additional private clubs and
restaurants which are financed through memberships and the sale of related real
estate and (vi) continuing affiliations with institutions such as Johnson and
Wales, one of the largest culinary and restaurant management schools in the
world. The large number of food service facilities operated by the Company
allows it to improve margins through large quantity purchasing agreements and
sponsorship relationships.
The Company's restaurant operations range from full service sit-down
restaurants to trailside express food outlets and offer a wide variety of
cuisine. The Company operates 19 restaurants on Vail Mountain and 11
restaurants on Beaver Creek Mountain and in Beaver Creek Village. The Company
currently has indoor seating capacity on Vail Mountain of 3,136. On Beaver
Creek Mountain the Company currently has 1,449 indoor seats. For the 1996-97
ski season, the Company plans to open five additional food service
establishments on Vail Mountain, including two at the Golden Peak base area.
Retail/Rental Operations. The Company's retail division operates all on-
mountain locations and selected base area locations. Over the last six months,
the Company has taken several steps to significantly expand the scope of its
retail and rental operations in order to maximize revenue derived from these
activities. This expansion will increase retail space from 29,320 square feet
in fiscal 1996 to 33,658 for fiscal 1997 and 42,273 square feet expected for
fiscal 1998.
The Company's on-mountain retail locations offer ski accessories (i.e., hats,
gloves, sunglasses, goggles, warmers), snack food and selected logo
merchandise, all in locations which are conveniently located for skiers. Off-
mountain, the Company operates both ski equipment rental and retail locations.
The Company's retail operations typically feature Company or resort-related
logo merchandise and products of the Company's sponsors. The Company's rental
operations offer a wide variety of ski and snowboard equipment for daily and
weekly use. The Company intends to utilize certain locations within the
Company's newly created leasable space as new retail and rental operations,
while continuing to maintain a significant presence of third party tenants.
Hospitality. The Company's hospitality operations are designed to offer the
Company's guests a full complement of quality resort services and provide the
Company with additional sources of revenue and profitability. These operations
include reservations, tour and travel operations, lodging and property and club
management.
The Company's reservation center provides information and access to the full
complement of the resorts' services and activities. The center handles over
211,000 calls per year and is capable of booking and selling airline and ground
transportation, lodging, lift tickets, ski school and most other Vail Valley
activities, earning commissions on each third party sale. These advance
reservation activities have had a significant impact on Vail Associates'
ability to attract direct air service to the Vail/Eagle County Airport. Located
25 miles from Beaver Creek Resort, the Vail/Eagle County Airport provides
direct air service from 8 U.S. cities and one-stop connections from 26
international destinations. For the 1996-97 season, scheduled inbound and
outbound one-way seating capacity is 164,264, an increase of 36.6% over the
prior season.
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The Company's property management operation seeks to utilize the Company's
hospitality expertise through the first class management of lodging properties
owned by both the Company and third parties. The Company currently manages 13
properties, including hotels, timeshare projects and condominiums. In certain
situations, such as the Pines Lodge in Beaver Creek Resort (a 60 room luxury
hotel), the Company will purchase properties whose financial performance can be
improved through the Company's property management operation.
The Company is also active in the creation and management of private
membership clubs, which allows the Company to provide high-end services and
amenities to its upper income guest, and evening dining options and other
services and activities to its overall guest population. The Company's current
clubs include (i) the Beaver Creek Club, which offers members luncheon
privileges at Beano's Cabin (which is open to the general public for dinner)
and certain golf, tennis and skiing amenities, (ii) Game Creek Club, which
offers members luncheon privileges and will be open to the general public for
dinner commencing with the 1996-97 ski season, and (iii) the Passport Clubhouse
at Golden Peak(TM), which, when completed, will provide members with a reserved
parking space, concierge services, a private dining facility and locker and
club facilities at the base of Vail Mountain. In addition to using membership
sales to defray and in some cases entirely pay for the cost of construction,
the Company earns management fees for overseeing club operations. The Company
intends to create selected additional clubs over the next five years, including
the Arrowhead Alpine Club at Arrowhead Village and a mountain club to be
located in Bachelor Gulch Village similar to Beano's Cabin. These clubs allow
the Company to add to its restaurant operations and related skier service and
retail operations, at a relatively modest capital cost.
Commercial Leasing Operations. The Company owns significant on-mountain and
base area restaurant, retail and commercial space at both Vail Mountain and
Beaver Creek Mountain. The Company operates all on-mountain space and leases a
portion of its base area space to third parties. The strategy of the Company's
leasing operation is to secure the commercial locations adjacent to its resorts
for retail, restaurant and entertainment venues and carefully select the
appropriate tenant mix for these locations to provide a high quality and
diverse selection of retailers and restauranteurs.
Licensing and Sponsorship. An important part of the Company's business
strategy is to leverage its brand name by (i) entering into sponsorship
relationships and strategic alliances with world-class business partners, (ii)
building its logo and licensing business and (iii) gaining national and
international exposure through the hosting of special events. The Company's
leading industry position coupled with the demographics of its customer base
make it an attractive partner. Examples of the Company's sponsors include (i)
FILA, which is supplying the Company's employee ski uniforms over a six-year
period and has launched a line of clothing using the Vail name and logo (ii)
Chevy Trucks, which provides the Company with mountain vehicles and national
marketing exposure, and (iii) Pepsi, which, among other things, provides
substantial marketing benefits. The Company's sponsorship arrangements
typically have a three to five year term and provide benefits in the form of
cash payments, expense reductions, capital improvements and/or marketing
exposure. The Company has licensed the use of its trademarks to over one
hundred companies for a variety of products such as apparel and sunglasses.
While the terms of each license agreement vary, such agreements generally are
for a two-year term and provide for the payment by the licensee of quarterly
royalty payments ranging from 6% to 8% of the gross wholesale price of the
licensed goods.
Vail and Beaver Creek Mountains are frequently the sites of special events
and promotions. In addition to hosting annual World Cup Skiing and World Cup
Biking events, Vail Mountain and Beaver Creek Mountain have collectively been
chosen as the site for the 1997 World Cup Skiing Finals and the 1999 World
Alpine Skiing Championships, an event previously hosted by Vail in 1989,
marking the first time a North American site has been selected twice. These
events give the Company significant international exposure. TV viewership in
Europe for World Cup Skiing and the World Alpine Skiing Championships is
estimated to be in excess of 250 million viewers. These events will be
organized by and co-hosted with the Vail Valley Foundation, a non-profit
foundation whose mandate is to bring international sporting and cultural events
to
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the Vail Valley. The Foundation provides significant funding, volunteers and
liability assumption in conjunction with such events. The Company's facilities
are also the site of numerous skiing, snowboarding and music events sponsored
by corporations. These events generate revenue for the Company through
sponsorship fees and increased skier traffic, as well as provide national and
international brand exposure through television and advertising campaigns. The
Company also owns an interest in an events production company, Eclipse
Television and Sports Marketing, LLC, which creates and produces made-for-TV
events.
Brokerage. The Company's real estate brokerage operations are conducted
through a joint venture in which the Company has a 50% interest. The joint
venture was created in June 1994 to facilitate the merger of the Company's
brokerage operations, Vail Associates Real Estate, Inc., with the brokerage
operations of Slifer, Smith and Frampton, which combined the two largest
brokerage operations in the Vail Valley. The joint venture has a large share of
both first time developer sales and resales throughout the Vail Valley,
creating both a significant source of profitability and a valuable source of
information in planning and marketing the Company's real estate projects. In
addition to profit distributions from the joint venture, the Company will
directly receive certain override payments on all brokerage revenue from sales
of its own property.
Other Revenue Sources. The Company also derives revenue during the non-ski
season by offering guests a variety of activities and services, including (i)
gondola and chairlift rides, (ii) on-mountain and base area bike rentals, (iii)
on-mountain lunch operations, (iv) wedding and group functions at mountain and
village restaurants, (v) golf and tennis, (vi) horseback riding, fly fishing,
hiking and barbecues at Piney River Ranch(TM) and (vii) shopping at the
Company's retail locations.
REAL ESTATE.
The Company's real estate activities are conducted by VAREG. VAREG's
principal activities include (i) the sale of single family homesites to
individual purchasers; (ii) the sale of certain land parcels to third party
developers for condominium, townhome, cluster home, lodge and mixed use
developments; (iii) the zoning, planning and marketing of new resort
communities (such as Beaver Creek Resort, Bachelor Gulch Village and
Arrowhead); (iv) arranging for the construction of the necessary roads,
utilities and mountain infrastructure for new resort communities; (v) the
development of certain mixed use condominium projects integral to resort
operations (such as the base facility at Golden Peak); and (vi) the purchase of
selected strategic land parcels, which the Company believes can augment its
existing land holdings or resort operations. The Company's current development
activities are focused on (i) the completion of its three resort communities,
Beaver Creek Resort, Bachelor Gulch Village and Arrowhead; (ii) preparing for
the redevelopment of the Lionshead base area at Vail Mountain and adjacent land
holdings; and (iii) the long-term planning of the Company's significant real
estate holdings in and around Avon and at the entrance to Beaver Creek Resort.
In developing its real estate holdings, VAREG typically contracts to sell
multi-family sites to third party developers who undertake the construction and
sale of these projects. In this case, the Company typically receives an upfront
cash payment and a residual interest in the profit realized by such developers.
In connection with the sale of single-family homesites and VAREG's development
of certain mixed use condominium projects, VAREG often seeks to sell such
homesites or condominium residences to individual purchasers in advance of
significant infrastructure investments. As a result, the Company is able to
forecast a large portion of its real estate revenues 12 to 18 months in advance
and reduce development risk prior to making significant expenditures.
The Company currently owns 574 acres of developable real estate, including
land zoned for 1,144 residential units and 152,000 square feet of commercial
space. The majority of the Company's undeveloped land holdings and current
development activities are located in Beaver Creek Resort, Bachelor Gulch
Village and Arrowhead. A summary of each of these resort communities is set
forth below.
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Beaver Creek Resort
Over the past 12 months, VAREG has completed extensive development planning
to complete the Beaver Creek Resort village core. VAREG has sold the One Beaver
Creek and Beaver Creek Village Center development sites to third party
developers. These projects will be adjacent to the Company's existing retail
operations and will contain the majority of the Company's retail and restaurant
operations in Beaver Creek Resort.
In addition to the completion of the Beaver Creek Resort village core, the
Company is engaged in the development of its residential property in Beaver
Creek Resort. In 1994, the Company contracted to sell 30 single-family ski-in-
ski-out homesites (averaging approximately two acres each), in an area known as
Strawberry Park on Beaver Creek Mountain. All 30 lots were sold by VAREG in one
day in a lottery format because demand significantly exceeded the number of
homesites available for purchase. All of those sales closed during fiscal 1996
for total gross proceeds of 30.9 million, an average of over $1.0 million per
homesite.
The Company's remaining land holdings in Beaver Creek Resort consist of one
single-family homesite as well as zoned multi-family sites (requiring limited
additional infrastructure expenditures) expected to contain approximately 200
multi-family residences located at the entrances to Beaver Creek Resort.
Bachelor Gulch Village
The Bachelor Gulch Village development, which will be the newest village on
Beaver Creek Mountain, is comprised of 1,410 acres of Company-owned land
located in a valley between Arrowhead and Beaver Creek Resort. A private
residential resort community set in a natural ski mountain environment,
Bachelor Gulch Village, when completed, will combine a skiing gateway to Beaver
Creek Mountain, an intimate mountain village and private, upscale real estate
enclaves with ski-in/ski-out access to a substantial portion of the homesites,
and architecture modeled after the grand lodges of the U.S. National Parks. In
addition, plans for Bachelor Gulch Village incorporate 67,880 square feet of
retail, restaurant and commercial space. Commencing with the 1996-97 ski
season, Bachelor Gulch Village will feature a high speed quad chairlift and
approximately 150 acres of mostly intermediate ski terrain contiguous with
Beaver Creek Mountain.
The Company is currently completing its master plan for the development of
715 residential units in Bachelor Gulch Village. Infrastructure development
commenced in 1994 and is expected to be substantially complete in 1998. A
significant portion of the infrastructure costs have already been incurred,
including the majority of the mountain improvements.
During the summer of 1995 and the winter and summer of 1996, 93 single-family
homesites (averaging approximately two acres per lot) were contracted for by
purchasers at prices aggregating $72 million (an average of $776,000 per lot).
All 93 homesites were sold in a lottery format because demand significantly
exceeded homesites available for purchase. Closings of these sales are
anticipated to occur in calendar 1996 and 1997.
The Company's current unsold inventory in Bachelor Gulch Village consists of
18 single-family homesites, 48 cluster homesites and development parcels zoned
for 570 condominium, timeshare and lodge units.
Arrowhead
Arrowhead, known as "Vail's Private Address," is comprised of over 1,500
acres of Company-owned land and is recognized for its country club approach to
residential and resort amenities. Home of the Country Club of the Rockies, a
private golf club designed by Jack Nicklaus, Arrowhead features swimming, clay
tennis
courts, hiking, mountain biking, private fly-fishing on the Eagle River and
privacy gates that assure controlled
access 24 hours a day. Arrowhead contains the westernmost skiing access point
to Beaver Creek Mountain.
7
The Company's current development activities are focused on the development
of Arrowhead Village, a 218 unit staged development centered around an alpine
club. The proposed Arrowhead Alpine Club is expected to serve as the social and
athletic activity center of Arrowhead. The Arrowhead Alpine Club is expected to
be a 79,000 square foot facility consisting of 23 residential condominiums and
14,500 square feet of spa and athletic training space and 5,800 square feet of
restaurant, retail and skier service facilities. The Company's plans to build
the Arrowhead Alpine Club are contingent upon the pre-sale of a sufficient
number of condominium residences and Arrowhead Alpine Club memberships. The
Company is currently marketing both condominium residences and Alpine Club
memberships.
In Arrowhead Village, developers have commenced construction of 44 multi-
family units on land purchased from the Company. Multi-family parcels planned
for 13 additional units have been sold to developers and construction is
expected to begin in the Spring of 1997. In addition to the remaining multi-
family parcels in Arrowhead Village, the Company has extensive land holdings in
Arrowhead, including land zoned for 28 single-family homesites, and 34 cluster
homesites and 45 townhomes, and land for an additional 150 multi-family and 30
single family homesites which are planned, but not yet zoned.
In addition to the Company's extensive land holdings contained in the resort
communities discussed above, the Company has substantial land holdings in
Lionshead (located in the Town of Vail), Avon (located at the base of Beaver
Creek Mountain) and elsewhere in the Vail Valley.
COMPETITION. The ski industry is highly competitive. Vail Associates competes
directly with numerous ski areas in Colorado for the day skier, with major ski
resort areas in the United States, Canada and Europe for the destination skier
and with worldwide recreation resorts for the vacation guest. Vail Associates'
major U.S. competitors include the Utah ski areas, the Lake Tahoe area in
California and Nevada, the New England ski areas and the major Colorado areas
including the Summit County resorts, Crested Butte, Telluride, Steamboat
Springs, Winter Park and the Aspen resorts. The competitive position of Vail
Associates' ski areas is dependent upon many diverse factors such as proximity
to population centers, availability and cost of transportation to the areas,
including direct flight availability by major airlines, pricing, snowmaking
facilities, type and quality of skiing offered, duration of the ski season,
prevailing weather conditions, the number, quality and price of related
services and lodging facilities, and the reputation of the areas. Based upon a
review of these factors, management believes that Vail Associates is in a
strong competitive position.
Maintaining the ski resorts and improving the facilities is capital
intensive. In order to be competitive, Vail Associates has focused on improving
the resort facilities and related amenities available to skiers at the Vail and
Beaver Creek resorts and has substantially upgraded the facilities at both
resorts. Resort capital expenditures for fiscal 1996 totaled $13.9 million. In
addition, the Company invested $40.6 million in its real estate development
activities.
The market for undeveloped real estate near ski resorts is subject to
fluctuations due to many factors including changes in the general economy,
costs and availability of borrowed money and conditions in the construction and
real estate industry generally. In addition, changes in legislation and
governmental regulations, such as local and federal tax laws, land-use and
zoning restrictions, and environmental protection, could adversely affect real
estate sales. With respect to the sale of undeveloped real estate in Vail,
Beaver Creek Resort and Arrowhead, Vail Associates has many competitors, not
only in the Vail and Beaver Creek Resort areas but also throughout the Colorado
mountain country and in the other major ski areas in the United States.
Management believes that the size, historically consistent snow conditions and
existing amenities of the Vail and Beaver Creek resorts give Vail Associates a
competitive advantage over many of its competitors.
REGULATION AND LEGISLATION. Vail Associates has been granted the right to use
12,590 acres of federal land adjacent to the Town of Vail and 2,775 acres of
federal land adjacent to its Beaver Creek property as the site for ski lifts
and trails and related activities under the terms of permits with the Forest
Service. The Forest Service has the right to review and comment on the
location, design and construction of improvements
8
in the permit area and on many operational matters. While virtually all of the
skiable terrain on Vail Mountain is located on Forest Service land, a
significant portion of the skiable terrain on Beaver Creek Mountain, primarily
in the Bachelor Gulch and Arrowhead Mountain areas, is located on Company owned
land. The Company has received approval from the Forest Service, subject to a
pending appeal, for infrastructure development of bowl skiing terrain in
Category III which is located within the current Vail Mountain permit area. On
appeal, the Forest Service Supervisor was directed to verify that the
administrative record includes appropriate information on potential off-site
cumulative impacts to traffic/transportation, housing and wildlife. The Company
believes that the appropriate information is included in the administrative
record.
The permits originally granted to the Company, for the Vail and Beaver Creek
mountain resorts consisted of (i) Term Special Use Permits which were granted
for 30 year terms, but which may be terminated upon 30 days written notice by
the Forest Service if it determines that the public interest requires such
termination and (ii) Special Use Permits which are terminable at will by the
Forest Service. In November 1986, a new law was enacted providing that Term
Special Use Permits and Special Use Permits may be combined into a unified
single term special use permit which can be issued for up to 40 years. On
December 23, 1991, the Company exercised its statutory right to convert its
dual permits for Vail Mountain into a unified permit covering 12,590 acres. The
Vail permit expires on October 1, 2031, but can be terminated by the Forest
Service if required in the public interest. The Beaver Creek property is
covered by a Term Special Use Permit covering 80 acres and a Special Use Permit
covering the remaining 2,695 acres. These permits will expire in 2006 but are
terminable by the Forest Service at its discretion. In December 1992, the
Company exercised its statutory right to convert its dual permits for the
Beaver Creek mountain resort into a unified permit for the maximum period of 40
years and is currently in the process of negotiating the final terms of the
unified permit. To the Company's knowledge, no recreational Special Use Permit
or Term Special Use Permit for any major ski resort has ever been terminated by
the Forest Service.
Under recently enacted legislation, retroactively effective to fiscal 1996,
the Company pays a fee to the Forest Service ranging from 1.5% to 4.25% of
sales occurring on Forest Service land. However, through fiscal 1998, the
Company must pay the greater of (i) the fee due under the new legislation or
(ii) the fees actually paid for fiscal 1995. Included in the calculation are
sales from, among other things, lift tickets, ski school lessons, food and
beverages, rental equipment and retail merchandise sales.
BUSINESS SEGMENTS
Business segment information is presented in Note 11 to the accompanying
consolidated financial statements.
INITIAL PUBLIC OFFERING
On June 6, 1996, the Company filed a Registration Statement on Form S-2 for
an initial public offering ("Offering"). The Company plans to raise $100
million in the Offering with certain selling stockholders raising an additional
$100 million. The consummation of the Offering is contingent upon the closing
of the acquisition of Ralston Resorts, Inc. under a stock purchase agreement
dated July 22, 1996 (see "Acquisition" below).
ACQUISITION
On July 22, 1996, the Company entered into a Stock Purchase Agreement
("Purchase Agreement") with Ralston Foods, Inc. and its wholly-owned subsidiary
Ralston Resorts, Inc., pursuant to which the Company will acquire the capital
stock of Ralston Resorts, Inc., the operator of the Breckenridge, Keystone and
Arapahoe Basin ski resorts located in Summit County, Colorado (the
"Acquisition"). Under the terms of the Purchase Agreement, the Company will
assume and/or refinance $165 million of indebtedness of Ralston Resorts, Inc.
and will issue approximately 3.8 million shares of Common Stock to Ralston
Foods, Inc. The closing of the Acquisition is dependent upon various
conditions, including obtaining financing to refinance the indebtedness
assumed, the continuing accuracy of representations and warranties made by the
parties to the Purchase Agreement, and the receipt of necessary government
approvals including those required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
9
ITEM 2. PROPERTIES.
The following table sets forth the principal properties owned or leased by
the Company:
LOCATION OWNERSHIP USE
----------------------- ----------------------- ----------------------------------------------------------------------------
Vail Mountain Owned Ski resort operations, commercial space
Beaver Creek Mountain Owned Ski resort operations, commercial space, real estate held for sale or
development, employee housing
Arrowhead Mountain Owned Ski resort operations, commercial space, real estate held for sale or
development
Bachelor Gulch Village Owned Ski resort operations, commercial space, real estate held for sale or
development
Vail Mountain Term Special Use Permit Ski lifts, ski trails, buildings and other improvements
(12,590 acres)
Beaver Creek Mountain Term Special Use Permit Ski lifts, ski trails, buildings and other improvements
(80 acres)
Beaver Creek Mountain Special Use Permit Ski trails
(2,695 acres)
Beaver Creek Resort Owned Golf course
Avon, CO Leased Corporate offices
The Vail and Beaver Creek Forest Service Permits are encumbered.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no established public trading market for the common stock of the
Company. As of December 23, 1996, 10,372,241 shares of common stock were
outstanding: 6,213,110 shares of Class A Common Stock held by approximately 6
holders and 4,159,131 shares of Common Stock held by approximately 10 holders.
On September 25, 1996, the Company distributed a right to receive up to $4.87
per share of Common Stock (the "Rights") to all stockholders of record on
October 11, 1996, with a maximum aggregate amount payable under the Rights of
$50.5 million. The purpose of the Rights is to provide cash to the existing
stockholders of the Company as a partial return on their investment in the
Company. As of September 30, 1996, the Company had outstanding contracts (the
"Real Estate Contracts") for the sale of certain real estate and related
amenities. The Company will make payments under the Rights only to the extent
it receives sufficient gross proceeds under the Real Estate Contracts to make
such payments. The Company currently estimates payments under the Rights will
be made in January and in June 1997. In addition, the Company has amended
certain option agreements held by management of the Company to eliminate the
right of option holders to receive any portion of the payments made under the
Rights. In connection with such amendment, the Company has accrued a payable to
such option holders of approximately $4.5 million (the "Option
Payment"). The Rights and the Option Payment are hereinafter collectively
referred to as the "Distribution."
Other than the Distribution, the Company has never paid or declared a cash
dividend on its Common Stock or Class A Common Stock. The declaration of cash
dividends in the future will depend on the Company's earnings, financial
condition and capital needs and on other factors deemed relevant by the Board
of Directors at that time. It is the current policy of the Company's Board of
Directors to retain earnings to finance the operations and expansion of the
Company's business, and the Company does not anticipate paying any cash
dividends (other than the Distribution) on its shares of Common Stock or Class
A Common Stock in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The Company previously owned subsidiaries which were engaged in the beef
products and communications businesses. Packerland Packing Company, Inc. and
its subsidiaries (collectively, "Packerland") operated one of the largest "lean
beef" slaughtering and packing operations in the United States. GHTV, Inc. and
its subsidiaries (collectively, "GHTV") owned and operated various broadcast
stations and other related businesses. In 1991, due to an inability to service
debt incurred in connection with the acquisition of certain assets in the
communications business, the Company and these subsidiaries filed for relief
under Chapter 11 of the Bankruptcy Code. On October 8, 1992 (the "Effective
Date"), the Company, Packerland and GHTV emerged from bankruptcy pursuant to a
plan of reorganization (the "Plan") under which the beef products and
communications businesses were to be sold. Packerland was subsequently sold on
August 31, 1994. All of the GHTV subsidiaries had been sold as of September 23,
1994. The results of operations of Packerland and GHTV subsequent to the
Effective Date have been reported as discontinued and are therefore excluded
from the following selected financial data for periods ending after the
Effective Date.
On October 14, 1993, by consent of the Company's board of directors, the
fiscal yearend of the Company and its corporate subsidiaries was changed to
September 30, and the fiscal yearend of Packerland and its subsidiaries was
changed to the Sunday nearest September 30 (October 3, 1993). Prior to this
change, the reporting period of these entities was the 52/53 week year ending
on the Sunday nearest December 31. This change was made to conform the fiscal
yearend of these entities with that of Vail Associates, which has a September
30 fiscal yearend. Prior to this change, the operating results of Vail
Associates and its subsidiaries were consolidated on a one quarter lag basis.
11
The following table presents selected historical consolidated financial data
of the Company for the periods indicated. The financial data for the years
ended September 30, 1996, 1995 and 1994 are derived from the consolidated
financial statements of the Company, which have been audited by Arthur Andersen
LLP, independent accountants whose 1994 report with respect to Packerland, is
based on the report of Ernst & Young LLP. The financial data for the period
from October 9, 1992 through September 30, 1993 and from December 30, 1991
through October 8, 1992 are derived from the consolidated financial statements
of the Company, which have been audited by Ernst & Young LLP, whose reports
with respect to Vail Associates, are based on the reports of Arthur Andersen
LLP. The selected historical consolidated financial data set forth below should
be read in conjunction with the consolidated financial statements of the
Company and the related notes thereto.
Due to certain accounting adjustments required by Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code,"
issued by the American Institute of Certified Public Accountants and certain
other events occurring on the Effective Date, the following selected financial
data prior to the Effective Date are not comparable to the financial data as of
and subsequent to the Effective Date.
The Other Data prersented below include information on Resort Cash Flow.
Resort Cash Flow is defined as revenues from resort operations less resort
operating expenses, excluding depreciation and amortization. Resort Cash Flow
is not a term that has an established meaning under generally accepted
accounting principles. The Company has included information concerning Resort
Cash Flow because management believes it is an indicative measure of a resort
company's operating performance and is generally used by investors to evaluate
companies in the resort industry. Resort Cash Flow does not purport to
represent cash provided by operating activities and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with generally accepted accounting principles. For information regarding the
Company's historical cash flows from operating, investing and financiing
activities see the Company's consolidated financial statements included in Item
8. Furthermore, Resort Cash Flow is not available for the discretionary use of
management and, prior to the payment of dividends, the Company uses Resort Cash
Flow to meet its capital expenditure and debt service requirements. The data
presented below are in thousands except per share amounts.
POST-EFFECTIVE DATE
------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30,
------------------------------------
1993 1994 1995 1996
-------- -------- -------- --------
STATEMENT OF OPERATIONS DATA:
Revenues:
Resort................................... $114,623 $124,982 $126,349 $140,288
Real estate.............................. 4,610 22,203 16,526 48,655
-------- -------- -------- --------
Total revenues......................... 119,233 147,185 142,875 188,943
Operating expenses:
Resort................................... 69,749 78,365 82,305 89,890
Real estate.............................. 5,165 20,341 14,983 40,801
Corporate expense........................ 6,467 7,160 6,701 12,698
Depreciation and amortization............ 13,404 17,186 17,968 18,148
-------- -------- -------- --------
94,785 123,052 121,957 161,537
Operating income from continuing
operations............................... 24,448 24,133 20,918 27,406
Income (loss) from continuing operations
(after-tax).............................. (146) 761 3,282 4,735
Earnings per common share;
Income (loss) from continuing
operations.............................. $ (.01) $ .08 $ .32 $ .44
======== ======== ======== ========
OTHER DATA:
Resort
Resort Revenue........................... $114,623 $124,982 $126,349 $140,288
Resort Cash Flow......................... 44,874 46,617 44,044 50,398
Skier days............................... 2,059 2,056 2,136 2,228
Resort Revenue/skier day................. $ 55.67 $ 60.79 $ 59.15 $ 62.97
Real estate
Revenues from real estate sales.......... $ 4,610 $ 22,203 $ 16,526 $ 48,655
Real estate operating profit............. (555) 1,862 1,543 7,854
Real estate assets....................... 15,673 42,637 54,858 88,665
12
PRE-
EFFECTIVE DATE
---------------
PERIOD FROM
DECEMBER 30,
1991 THROUGH
OCTOBER 8, 1992
---------------
STATEMENT OF OPERATIONS DATA:
Net revenues.................................................... $650,184
Operating expenses ............................................. 617,738
--------
Income from operations.......................................... 32,446
Other income (expense).......................................... (23,849)
Reorganization items............................................ 133,609
--------
Income before income taxes and extraordinary items.............. 142,206
Provision for income taxes...................................... (17)
--------
Income before extraordinary items............................... 142,189
Extraordinary items:
Debt forgiveness related to restructuring transactions........ 435,818
--------
Net income...................................................... $578,007
========
POST-EFFECTIVE DATE
--------------------------------------------------------------
SEPTEMBER
OCTOBER 8, SEPTEMBER 30, 30, SEPTEMBER 30, SEPTEMBER 30,
1992 1993 1994 1995 1996
---------- ------------- --------- ------------- -------------
BALANCE SHEET DATA:
Total assets............ $805,881 $459,131 $450,018 $429,628 $422,612
Long-term debt
(including current
maturities)............ 376,718 250,566 225,654 191,313 144,750
Stockholders' equity ... 132,102 131,973 162,494 167,694 123,907
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements as of September 30, 1996 and 1995 and for the years ended
September 30, 1996, 1995 and 1994, included in Item 8 to this Form 10-K, which
provide additional information regarding financial condition and operating
results.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1996 ("FISCAL 1996") VERSUS FISCAL YEAR ENDED
SEPTEMBER 30, 1995 ("FISCAL 1995")
Resort Revenue. Resort Revenue for fiscal 1996 was $140.3 million, an
increase of $13.9 million, or 11.0%, compared to fiscal 1995. The increase was
attributable primarily to (i) an 8.4% increase in lift ticket revenue due to a
4.3% increase in skier days (a 5.3% increase at Vail Mountain and a 1.5%
increase at Beaver Creek Mountain) and an increase in effective ticket price
(defined as total lift ticket revenue divided by total skier days) ("ETP")
from $29.96 to $31.12, or 3.9%, (ii) a 9.6% increase in ski school revenue due
to increases in lesson prices and increases in lesson volume driven primarily
by snowboarding and children's lessons, (iii) a 9.8% increase in food service
revenues due to price increases and the increase in skier days, (iv) a 19.1%
increase in retail and rental revenues due to favorable changes in product
mix, the growth in popularity of snowboarding and new ski technology, and the
increase in skier days, and (v) a 17.2% increase in hospitality revenues due
primarily to enhanced marketing efforts for the Company's property management
activities.
Resort Operating Expenses. Operating expenses from resort operations
("Resort Operating Expenses") were $89.9 million for fiscal 1996, representing
an increase of $7.6 million, or 9.2%, as compared to fiscal 1995. As a
percentage of Resort Revenue, Resort Operating Expenses declined from 65.1% to
64.1% in fiscal 1996. The increase in Resort Operating Expenses is primarily
attributable to (i) increased variable expenses resulting from the increased
level of Resort Revenue and skier days in fiscal 1996, (ii) a $1.6 million
increase in the accrual for long term incentive compensation associated with
the improvement in the operating results of the resorts segment during fiscal
1996, and (iii) a $1.1 million increase in labor related expenses due to
expanded operations.
Resort Cash Flow. Resort Cash Flow for fiscal 1996 was $50.4 million, an
increase of $6.4 million, or 14.4%, compared to fiscal 1995. Resort Cash Flow
as a percentage of Resort Revenue increased to 35.9% for fiscal 1996 as
compared to 34.9% for fiscal 1995. The increase in Resort Cash Flow is
primarily due to the increase in skier days and ETP as discussed above.
Real Estate Revenues. Revenues from real estate operations for fiscal 1996
were $48.7 million, an increase of $32.1 million, compared to fiscal 1995. The
increase is due primarily to the closings of sales of 30 single family lots in
the Strawberry Park development at Beaver Creek Resort in December 1995 and
February 1996, which generated $30.9 million in gross proceeds.
Real Estate Operating Expenses. Real estate operating expenses for fiscal
1996 were $40.8 million, an increase of $25.8 million, compared to fiscal
1995. The increase resulted primarily from the cost of sales and commissions
associated with the sale of the Strawberry Park lots which totaled $24.7
million.
Corporate Expense. Corporate expense was $12.7 million for fiscal 1996, an
increase of $6.0 million as compared to fiscal 1995. Corporate expense for
fiscal 1996 includes the following nonrecurring charges: (i) $2.1 million
related to the termination of an employment agreement with the Company's
former Chairman and Chief Executive Officer, (ii) $4.5 million related to the
Option Payment, and (iii) $1.9 million of compensation expense related to the
exercise of stock options by the Company's former Chairman and Chief Executive
Officer. Excluding the effect of those items, corporate expense decreased $2.5
million. This decrease was primarily due to the inclusion in fiscal 1995, of
$1.6 million of compensation expense related to shares of Common Stock granted
to the Company's former Chief Executive Officer pursuant to an employment
14
agreement dated October 8, 1992. Those shares were earned over the three year
period beginning on the date of the employment agreement and ending on October
8, 1995. Accordingly, compensation expense was charged to corporate expense
ratably over that period. The remaining decrease was attributable to
reductions in payroll expense and other office expenses related to the partial
closure of the Company's Denver office as of December 31, 1995.
Depreciation and Amortization. Depreciation and amortization expense
increased by $180,000 for fiscal 1996 over fiscal 1995, primarily due to
capital expenditures made in fiscal 1995.
Interest Expense. During fiscal 1996 and fiscal 1995, the Company recorded
interest expense of $14.9 million and $19.5 million, respectively, which
relates primarily to the Company's Senior Subordinated Notes, the Industrial
Development Bonds, and the Company's existing credit facilities. The decrease
in interest expense from fiscal 1995 to fiscal 1996, is attributable to the
redemptions of $30 million and $24.5 million in principal amount of Senior
Subordinated Notes on December 11, 1995 and February 2, 1996, respectively,
offset by call premiums paid in connection with those redemptions. See
"Liquidity and Capital Resources."
Gain (loss) on disposal of fixed assets. The loss on disposal of fixed
assets for fiscal 1996 was $2.6 million compared to $849,000 for fiscal 1995.
The loss for fiscal 1996 consists primarily of a $2.3 million loss on the
retirement of the Lionshead gondola and a $340,000 loss on the retirement of
the Golden Peak chairlift. Both lifts are currently being replaced with
upgraded equipment. The loss for fiscal 1995 consists primarily of a $600,000
loss on the write off of lift equipment which was replaced during an upgrade
of a Vail Mountain chairlift..
Other income (expense). The significant components of other income (expense)
for fiscal 1996 are (i) a $725,000 increase in the reserves related to the
Company's indemnity to the purchaser of a former subsidiary of the Company,
(ii) a $690,000 increase in the estimate of the pension liability related to
three founders of the Company, (iii) a $600,000 increase in reserves related
to a change in the estimate of the Company's obligation to a medical research
foundation, and (iv) $373,000 in income related to a favorable retrospective
adjustment on a worker's compensation insurance policy of a former subsidiary
of the Company. The significant components of other income (expense) for
fiscal 1995 are (i) a $1.2 million gain on the sale of securities, (ii) income
of $687,000 related to the elimination of reserves for pre-petition bankruptcy
claims and (iii) $1.6 million in income related to a change in the estimate of
the Company's obligation to a medical research foundation.
YEAR ENDED SEPTEMBER 30, 1995 ("FISCAL 1995") VERSUS YEAR ENDED SEPTEMBER 30,
1994 ("FISCAL 1994")
Resort Revenue. Resort Revenue for fiscal 1995 was $126.3 million, an
increase of $1.4 million, or 1.1%, compared to fiscal 1994. The increase was
attributable primarily to (i) a 1.1% decrease in lift ticket revenue due to a
3.9% increase in skier days (a 2.7% increase at Vail Mountain and a 7.4%
increase at Beaver Creek Mountain) offset by a decline in ETP from $31.29 to
$29.96, or 4.3%, (ii) a 4.4% increase in ski school revenue due primarily to
increases in corporate group sales at Vail Mountain and private lesson sales
at Beaver Creek Mountain, (iii) a 0.7% increase in food service revenue
attributable to significant decreases in summer sales due to poor weather
conditions during June which delayed the opening of certain mountain
facilities and minimal growth in winter food and beverage sales due to a
higher proportion of local skiers who typically spend less at the Company's
restaurants than destination skiers, (iv) a 20.8% increase in retail and
rental sales due to the opening of two new retail outlets in fiscal 1995, (v)
a 3.2% increase in hospitality revenue due to property management revenues
from four properties which were managed by the Company for a full year in
fiscal 1995 and (vi) increases in revenue from brokerage, commercial leasing,
and licensing and sponsorship activities. The decline in ETP in fiscal 1995
resulted from increased skier days in the early and late season which have
lower ETPs than those in the peak season. The increase in early and late
season skiers was due to incentive programs targeted to attract increased
corporate groups and skiers from the Denver metropolitan area. In addition,
skier days in the peak season, which have higher ETPs, were adversely affected
by a number of factors, including (i) an unusually high number of closings of
Interstate 70 (the main highway from Denver to Vail) due to adverse weather
conditions, and (ii) the December 1994 financial crisis in Mexico, the country
of origin of a significant portion of the Company's international guests who
typically visit the Company's resorts during the peak season. Following the
1994-95 ski season, the Company, working with state and local agencies, took
steps designed to
15
improve snow removal operations on Interstate 70. As a result of these steps,
the number and duration of highway closings were significantly reduced during
the 1995-96 ski season.
Resort Operating Expenses. Resort Operating Expenses were $82.3 million for
fiscal 1995, representing an increase of $3.9 million, or 5.0%, as compared to
fiscal 1994. As a percentage of Resort Revenue, Resort Operating Expenses
increased from 62.7% in fiscal 1994 to 65.1% in fiscal 1995. The increase in
Resort Operating Expenses is primarily attributable to (i) a $2.1 million
increase in marketing expenditures primarily related to increased direct
advertising expenditures, (ii) an increase of $1.3 million in expenses related
to an expansion of the Company's retail operations, write-downs of obsolete
inventory purchased in prior seasons, and costs associated with the
implementation of new point of sale inventory system, (iii) an increase of
$740,000 in rent and occupancy costs due to the relocation of certain of Vail
Associates' offices from Company-owned space in the Town of Vail to leased
office space in the Town of Avon and (iv) increased expenses resulting from
the increased level of Resort Revenue in fiscal 1995.
Resort Cash Flow. Resort Cash Flow for fiscal 1995 was $44.0 million, a
decrease of $2.6 million, or 5.5%, compared to fiscal 1994. Resort Cash Flow
as a percentage of Resort Revenue decreased to 34.9% in fiscal 1995 as
compared to 37.3% in fiscal 1994. The decrease in Resort Cash Flow was
primarily due to the decline in ETP and increase in Resort Operating Expenses
as discussed above.
Real Estate Revenues. Revenues from real estate operations for fiscal 1995
were $16.5 million, a decrease of $5.7 million, compared to fiscal 1994. The
decrease is due primarily to a reduction in the number of closings of
residential lot sales in Beaver Creek Resort due to the Company not having
significant lots available for sale during the period.
Real Estate Operating Expenses. Real estate operating costs and expenses for
fiscal 1995 were $15.0 million, a decrease of $5.4 million, compared to fiscal
1994 due to lower costs of sales associated with the reduced amount of lot
sales activity.
Corporate Expense. Corporate expense decreased $459,000 in fiscal 1995 as
compared to fiscal 1994 due primarily to lower salary and service costs.
Depreciation and Amortization. Depreciation and amortization expense from
continuing operations increased $782,000 in fiscal 1995 as compared to fiscal
1994, primarily as a result of the capital expenditures made during fiscal
1994.
Interest Expense. During fiscal 1995, the Company recorded interest expense
of $19.5 million, which relates primarily to the interest on the Company's
Senior Subordinated Notes and the Industrial Development Bonds and revolving
credit facilities of Vail Associates. See "--Liquidity and Capital Resources."
The decrease in interest expense from $22.5 million during fiscal 1994 to
$19.5 million during fiscal 1995 relates primarily to the redemption of the
Company's Senior Secured Notes on September 29, 1994 and the redemption of
$24.9 million principal amount of Senior Subordinated Notes on December 15,
1994.
Other Income (Expense). The significant components of other income (expense)
for fiscal 1995 are (i) income of $1.6 million related to a reduction in the
estimate of a liability related to the Company's obligation to a medical
research foundation, (ii) a $1.2 million gain on the sale of securities and
(iii) income of $687,000 related to the elimination of reserves for pre-
petition bankruptcy claims.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically provided funds for debt service, capital
expenditures and acquisitions through a combination of cash flow from
operations, short term and long term borrowings and sales of real estate.
At September 30, 1995, the Company had outstanding $117.2 million of Senior
Subordinated Notes maturing on June 30, 2002. On December 11, 1995 and
February 2, 1996, the Company redeemed principal
16
amounts of $30.0 million and $24.5 million, respectively, of the Senior
Subordinated Notes. At September 30, 1996, the outstanding principal amount of
Senior Subordinated Notes was $62.6 million. The Company intends to use a
portion of the net proceeds from the planned public stock offering to redeem
all of the remaining outstanding Senior Subordinated Notes.
The Company has $41.2 million of outstanding Industrial Development Bonds
issued by Eagle County, Colorado which accrue interest at 8% per annum and
mature on August 1, 2009. Interest is payable semi-annually on February 1 and
August 1. The Company has provided the holder of these bonds a debt service
reserve fund of $3.3 million, which has been netted against the principal
amount for financial reporting purposes.
The Company also has two revolving credit facilities ("Existing Credit
Facilities") that provide for total availability of $135 million, consisting
of a $105 million Facility A Revolver ("Facility A") and a $30 million
Facility B Revolver ("Facility B"). The maximum borrowings available under
Facility A will be reduced by $25 million on March 31, 1999 with all
outstanding principal due on March 31, 2000. No borrowings under Facility B
are permitted unless the maximum borrowings under Facility A are outstanding.
The maximum borrowings available under Facility B will be reduced by $10
million on March 31, 1997 and further reduced by an additional $10 million on
March 31, 1998 with all outstanding principal due on March 31, 1999. The
Credit Facilities are available for the seasonal working capital needs of Vail
Associates and for capital expenditures and other general corporate purposes,
including the issuance of up to $50 million of letters of credit. Outstanding
letters of credit at June 30, 1996 totaled $34.3 million and primarily related
to bonds issued by a quasi-governmental entity in connection with the
financing of infrastructure costs in Bachelor Gulch Village. At September 30,
1996, borrowings outstanding under Facility A totaled $44.0 million.
The Company has received a commitment from NationsBank of Texas, N.A., as
agent (the "Agent"), to provide financing for the Acquisition and the working
capital needs of the Company upon the closing of the Acquisition ("New Credit
Facilities"). The New Credit Facilities will provide for debt financing up to
an aggregate principal amount of $340 million. The New Credit Facilities are
comprised of (i) a $175 million Revolving Credit Facility ("Revolving Credit
Facility"), (ii) a $115 million Tranche A Term Loan Facility ("Tranche A") and
(iii) a $50 million Tranche B Term Loan Facility (together with the Tranche A,
the "Term Loan Facilities"). The Term Loan Facilities will be used to
refinance a portion of the $165 million of debt assumed in connection with the
Acquisition. The Revolving Credit Facility matures on April 15, 2003. The
minimum amortization under the Term Loan Facilities will be $11.5 million,
$14.0 million, $19.0 million, $21.5 million, $26.5 million, $31.5 million, and
$41 million during fiscal years ending September 30, 1998, 1999, 2000, 2001,
2002, 2003, and 2004, respectively. The Company will also be required to make
mandatory amortization payments under the Term Loan Facilities with excess
cash flow, as defined, proceeds from asset sales, and proceeds from equity and
debt offerings.
The New Credit Facilities require that no more than $125.0 million in the
aggregate be outstanding under the Revolving Credit Facility for a period of
30 consecutive days during each fiscal year, such period to include April 15.
The proceeds of the loans made under the Revolving Credit Facilities may be
used to fund the Company's working capital needs, capital expenditures and
other general corporate purposes, including the issuance of letters of credit.
Resort capital expenditures for fiscal 1996 were $13.9 million. Investments
in real estate for fiscal 1996 were $40.6 million, which included $9.1 million
of mountain improvements (such as ski lifts and snowmaking equipment) which
are related to real estate development but will also benefit resort
operations. The primary projects included in resort capital expenditures for
fiscal 1996 are (i) the new Lionshead gondola, (ii) the creation of the Eagles
Nest non-ski activity center and (iii) the allocated cost of the new retail,
restaurant and skier service facilities to be created in the renovated Golden
Peak base facility. The primary projects included in investments in real
estate for fiscal 1996 are (i) the renovation of the Golden Peak base
facility, including a new high speed quad chairlift, (ii) infrastructure
related to Bachelor Gulch Village, including a new high
17
speed quad chairlift and related snowmaking equipment, (iii) construction
related to the Beaver Creek Village Center, the majority of the related
expenses of which will be recouped during fiscal 1996 from the third party
developer of the project and certain homeowner, community and governmental
organizations, (iv) infrastructure related to Arrowhead Village and (v)
infrastructure related to the Strawberry Park development in Beaver Creek
Resort.
The Company estimates that it will make resort capital expenditures totaling
approximately $42 million in fiscal 1997 which includes approximately $18.2
million spent in the first fiscal quarter of 1997 to complete projects
initiated in fiscal 1996. The primary new projects will include (i)
infrastructure for the Category III expansion, (ii) expansion of snowmaking at
Beaver Creek Mountain, (iii) upgrades to and expansions of food service
operations at Beaver Creek Resort and (iv) the purchase of retail space at
Beaver Creek Resort. Investments in real estate are expected to total
approximately $60 million during fiscal 1997. The primary projects included in
these investments are (i) the completion of the Golden Peak base facility,
(ii) intrastructure related to Bachelor Gulch Village and Arrowhead Village
and (iii) completion of the Beaver Creek Village retail and parking
facilities. The Company intends to fund these expenditures through cash flow
from operations, and borrowings under the New Credit Facilities.
In connection with the Distribution, the Company will make payments
aggregating $55 million, which it estimates will be made in January and June
1997. The Company is limited to funding payments made under the Distribution
from proceeds of the Real Estate Contracts.
Based on current levels of operations and cash availability, the Company
believes that it will be able to satisfy its debt service and capital
expenditure requirements from cash flow from operations, and borrowings under
the Existing Credit Facilities.
The Company believes that inflation during the past three years has had
little effect on its results of operations and any impact on costs has been
largely offset by increased pricing.
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
VAIL RESORTS, INC.
Consolidated Financial Statements for the Years Ended September 30, 1994, 1995
and 1996
Report of Independent Public Accountants.................................... F-2
Report of Ernst & Young, LLP Independent Auditors........................... F-3
Consolidated Financial Statements
Consolidated Balance Sheets................................................. F-4
Consolidated Statements of Operations....................................... F-5
Consolidated Statements of Stockholders' Equity ............................ F-6
Consolidated Statements of Cash Flows....................................... F-7
Notes to Consolidated Financial Statements.................................. F-8
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Vail Resorts, Inc.:
We have audited the accompanying consolidated balance sheets of VAIL RESORTS,
INC. formerly known as Gillett Holdings, Inc. (see Note 1) (a Delaware
corporation) and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended September 30, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the consolidated
financial statements of Packerland Packing Company, Inc. ("Packerland"), a
wholly owned subsidiary of Vail Resorts, Inc.; 100% of the stock of Packerland
was sold on August 31, 1994. The net revenues of Packerland included in the
consolidated statements of operations for the year ended September 30, 1994
were $630,928,000. The accompanying consolidated statements of operations for
the year ended September 30, 1994 present the operations of Packerland as
discontinued (see Note 3). Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates
to the amounts included for Packerland, is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Vail Resorts, Inc. and
subsidiaries as of September 30, 1996 and 1995 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1996 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Denver, Colorado,
October 31, 1996
F-2
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
The Board of Directors
Packerland Packing Company, Inc.
We have audited the consolidated statements of income, stockholder's equity
and cash flows for the period from October 4, 1993 through August 31, 1994, of
Packerland Packing Company, Inc. (the Company). These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of the Company's operations and
its cash flows for the period from October 4, 1993 through August 31, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
October 7, 1994
F-3
VAIL RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents........................ $ 47,534 $ 12,712
Receivables...................................... 5,135 5,741
Inventories...................................... 4,221 4,639
Deferred income taxes (Note 8)................... 9,500 17,200
Other current assets............................. 3,716 5,490
-------- --------
Total current assets........................... 70,106 45,782
Property, plant, and equipment, net (Note 6)....... 205,151 192,669
Real estate held for sale.......................... 54,858 88,665
Deferred charges and other assets.................. 6,106 10,440
Intangible assets (Note 6)......................... 93,407 85,056
-------- --------
Total assets................................... $429,628 $422,612
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses (Note 6)... $ 37,419 $ 48,096
Income taxes payable (Note 8).................... 81 325
Rights payable to stockholders (Note 10)......... -- 50,513
Long-term debt due within one year (Notes 1 and
5).............................................. 63 63
-------- --------
Total current liabilities...................... 37,563 98,997
Long-term debt (Note 5)............................ 191,250 144,687
Other long-term liabilities........................ 3,821 15,521
Deferred income taxes (Note 8)..................... 29,300 39,500
Commitments and contingencies (Notes 1, 3, 10, and
12)
Stockholders' equity (Notes 1, 12 and 13):
Preferred stock, $.01 par value 25,000,000 shares
authorized, no shares issued and outstanding.... -- --
Common stock--
Class A common stock, $.01 par value, 20,000,000
shares authorized, 6,408,846 and 6,213,110
shares issued and outstanding as of September
30, 1995 and 1996, respectively................ 64 64
Common Stock, $.01 par value, 40,000,000 shares
authorized, 3,471,992 and 3,786,890 shares
issued and outstanding as of September 30, 1995
and 1996, respectively......................... 35 36
Additional paid-in capital....................... 135,660 123,807
Retained earnings................................ 31,935 --
-------- --------
Total stockholders' equity..................... 167,694 123,907
-------- --------
Total liabilities and stockholders' equity..... $429,628 $422,612
======== ========
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
F-4
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEAR YEAR YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996
------------- ------------- -------------
Net revenues:
Resort............................. $ 124,982 $ 126,349 $ 140,288
Real estate........................ 22,203 16,526 48,655
----------- ----------- -----------
Total net revenues................. 147,185 142,875 188,943
Operating expenses:
Resort............................. 78,365 82,305 89,890
Real estate........................ 20,341 14,983 40,801
Corporate expense.................. 7,160 6,701 12,698
Depreciation and amortization...... 17,186 17,968 18,148
----------- ----------- -----------
Total operating expenses........... 123,052 121,957 161,537
----------- ----------- -----------
Operating income from continuing op-
erations........................... 24,133 20,918 27,406
Other income (expense):
Investment income.................. 1,523 3,295 586
Interest expense .................. (22,468) (19,498) (14,904)
Gain (loss) on disposal of fixed
assets............................ 128 (849) (2,630)
Other (Notes 9 and 10)............. (598) 3,291 (1,500)
----------- ----------- -----------
Income from continuing operations
before income taxes................ 2,718 7,157 8,958
Provision for income taxes (Note
8)................................. (1,957) (3,875) (4,223)
----------- ----------- -----------
Income from continuing operations... 761 3,282 4,735
Income from discontinued operations,
net of applicable income tax provi-
sion of $4,206 for the year ended
September 30, 1994 (Notes 3 and
9)................................. 7,058 -- --
Gain on disposal of subsidiaries op-
erating in discontinued segments,
net of applicable income tax provi-
sion of $13,357 for the year ended
September 30, 1994 (Notes 3 and
9)................................. 20,963 -- --
----------- ----------- -----------
Net income.......................... $ 28,782 $ 3,282 $ 4,735
=========== =========== ===========
Earnings per common share (Note 2):
Income from continuing operations.. $ .08 $ .32 $ .44
Income from discontinued opera-
tions............................. .69 -- --
Gain on disposal of subsidiaries
operating in discontinued seg-
ments............................. 2.05 -- --
----------- ----------- -----------
Net income......................... $ 2.82 $ .32 $ .44
=========== =========== ===========
Weighted average shares outstand-
ing............................... 10,216,578 10,291,388 10,727,676
=========== =========== ===========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK
--------------------------------------
SHARES ADDITIONAL RETAINED TOTAL
------------------------------- PAID-IN EARNINGS STOCKHOLDERS'
CLASS A COMMON TOTAL AMOUNT CAPITAL (DEFICIT) EQUITY
--------- --------- ---------- ------ ---------- --------- -------------
Balance, September 30,
1993................... 7,390,803 2,251,709 9,642,512 $ 96 $132,006 $ (129) $131,973
Net income for the year
ended September 30,
1994................... -- -- -- -- -- 28,782 28,782
Shares issued pursuant
to stock grants (Note
12).................... -- 119,163 119,163 2 1,737 -- 1,739
Shares of Class A Common
Stock converted to Com-
mon Stock (Note 13).... (266,096) 266,096 -- -- -- -- --
--------- --------- ---------- ---- -------- ------- --------
Balance, September 30,
1994................... 7,124,707 2,636,968 9,761,675 98 133,743 28,653 162,494
Net income for the year
ended September 30,
1995................... -- -- -- -- -- 3,282 3,282
Shares issued pursuant
to stock grants (Note
12).................... -- 119,163 119,163 1 1,917 -- 1,918
Shares of Class A Common
Stock converted to Com-
mon Stock (Note 13).... (715,861) 715,861 -- -- -- -- --
--------- --------- ---------- ---- -------- ------- --------
Balance, September 30,
1995................... 6,408,846 3,471,992 9,880,838 99 135,660 31,935 167,694
Net income for the year
ended September 30,
1996................... -- -- -- -- -- 4,735 4,735
Shares issued pursuant
to stock grants (Note
12).................... -- 119,162 119,162 1 1,990 -- 1,991
Rights payable to stock-
holders................ -- -- -- -- (13,843) (36,670) (50,513)
Shares of Class A Common
Stock converted to Com-
mon Stock (Note 13).... (195,736) 195,736 -- -- -- -- --
--------- --------- ---------- ---- -------- ------- --------
Balance, September 30,
1996................... 6,213,110 3,786,890 10,000,000 $100 $123,807 $ -- $123,907
========= ========= ========== ==== ======== ======= ========
The accompanying notes to consolidated financial statements are an integral
part of these statements
F-6
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR YEAR YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996
------------- ------------- -------------
Cash flows from operating activi-
ties:
Net income......................... $28,782 $ 3,282 $ 4,735
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization...... 18,223 17,968 18,148
Deferred compensation payments in
excess of expense................. (1,257) (1,325) (814)
Noncash cost of real estate
sales............................. 13,817 9,208 32,394
Noncash compensation related to
stock grants (Note 12)............ 1,633 1,633 25
Noncash compensation related to
exercise of stock options......... -- -- 1,915
Gain on disposal of subsidiaries
(Notes 3 and 9)................... (34,320) -- --
Bond discount amortized............ 548 -- --
Deferred financing costs amor-
tized............................. 504 237 247
Loss (gain) on disposal of fixed
assets............................ (128) 849 2,630
Deferred real estate revenue....... 1,535 1,500 --
Deferred income taxes (Note 8)..... 16,000 2,900 2,500
Cash received on termination of
pension plan (Note 7)............. 500 -- --
Changes in assets and liabilities:
Accounts receivable, net........... 6,153 (349) (606)
Inventories........................ (455) (1,236) (418)
Accounts payable and accrued ex-
penses............................ 2,742 10,141 9,551
Other assets and liabilities....... 1,830 (3,704) (3,866)
------- -------- --------
Net cash provided by operating
activities...................... 56,107 41,104 66,441
Cash flows from investing activi-
ties:
Resort capital expenditures........ (17,414) (20,320) (13,912)
Investments in real estate......... (22,686) (22,477) (40,604)
Cash payments from GHTV (Note 1)... 39,097 -- --
Cash balances of GHTV acquired..... 3,145 -- --
Net cash proceeds from sale of
Packerland (Note 3)............... 56,260 -- --
Cash balances of Packerland sold... (7,853) -- --
Purchase of Arrowhead (Note 4)..... (30,919) -- --
Investment in joint venture........ (2,978) (400) (200)
Other.............................. (363) 953 --
------- -------- --------
Net cash provided by (used in)
investing activities............ 16,289 (42,244) (54,716)
Cash flows from financing activi-
ties:
Proceeds from borrowings under
long-term debt.................... 69,360 253,400 84,000
Payments on long-term debt......... (94,820) (287,741) (130,547)
Payment of reorganization items,
financing costs and other......... (1,422) -- --
------- -------- --------
Net cash used in financing activ-
ities........................... (26,882) (34,341) (46,547)
------- -------- --------
Net increase (decrease) in cash and
cash equivalents................... 45,514 (35,481) (34,822)
Cash and cash equivalents:
Beginning of period................ 37,501 83,015 47,534
------- -------- --------
End of period...................... $83,015 $ 47,534 $ 12,712
======= ======== ========
Cash paid for interest included as a
use of cash in operating
activities......................... $27,182 $ 13,852 $ 21,880
======= ======== ========
The accompanying notes to consolidated financial statementsare an integral part
of these statements
F-7
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Vail Resorts, Inc. ("VRI"), formerly known as Gillett Holdings, Inc., is
organized as a holding company and operates through various subsidiaries. VRI
and its subsidiaries (collectively, the "Company") currently operate in two
business segments, ski resorts and real estate development. Vail Associates,
Inc. and its subsidiaries (collectively, "Vail Associates") operate one of the
world's largest skiing facilities on Vail Mountain and Beaver Creek Mountain in
Colorado and have related real estate operations. The ski resorts are operated
on United States Forest Service land under Term Special Use Permits expiring in
2031 for Vail Mountain and 2006 for Beaver Creek Mountain. Vail Associates Real
Estate Group ("VAREG") is a wholly-owned subsidiary of Vail Associates, Inc.
and conducts the Company's real estate development activities. The accompanying
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. Investments in joint ventures are accounted for
under the equity method. All significant intercompany transactions have been
eliminated.
On June 6, 1996, the Company filed a Registration Statement on Form S-2 for
an initial public offering ("Offering"). The Company plans to raise $100
million in the Offering with certain selling stockholders raising an additional
$100 million. The consummation of the Offering is contingent upon the closing
of the acquisition of Ralston Resorts, Inc. under a stock purchase agreement
dated July 22, 1996 (see Note 4).
The Company previously owned subsidiaries which were engaged in the beef
products and communications businesses. Packerland Packing Company, Inc. and
its subsidiaries (collectively, "Packerland") operated one of the largest "lean
beef" slaughtering and packing operations in the United States. GHTV, Inc. and
its subsidiaries (collectively, "GHTV") owned and operated various broadcast
stations and other related businesses. In 1991, due to an inability to service
debt incurred in connection with the acquisition of certain assets in the
communications business, the Company and these subsidiaries filed for relief
under Chapter 11 of the Bankruptcy Code. On October 8, 1992 (the "Effective
Date"), the Company, Packerland and GHTV emerged from bankruptcy pursuant to a
plan of reorganization (the "Plan") under which the beef products and
communications businesses were to be sold.
Packerland was sold on August 31, 1994. The results of its operations from
October 1, 1993 through August 31, 1994, are included in income from
discontinued operations in the consolidated statement of operations for the
fiscal year ended September 30, 1994 (see Note 3).
As of the Effective Date, the stock of GHTV was transferred by the Company to
a trust (the "GHTV Trust") due to foreign investment in the Company as of the
Effective Date and FCC regulations which prohibit foreign ownership of
broadcast stations. The beneficial interest in the GHTV Trust was sold to an
independent third party subject to the terms of a repurchase agreement between
the Company and the third party whereby the Company could repurchase the
beneficial interest in the GHTV Trust or the underlying GHTV stock at a later
date. As of September 23, 1994, all of GHTV's communications subsidiaries had
been sold. On September 30, 1994, the Company repurchased the stock of GHTV
from the GHTV Trust. Upon the repurchase, GHTV became a wholly-owned subsidiary
of the Company and accordingly, the consolidated balance sheets of the Company
as of and subsequent to September 30, 1994 include the remaining assets and
liabilities of GHTV.
On the Effective Date, the Company held notes receivable from GHTV in the
aggregate amount of $194.0 million (the "GHTV Subsidiary Notes"). GHTV made
payments on the GHTV Subsidiary Notes with proceeds from the sales of its
subsidiaries. Through September 30, 1994, GHTV made aggregate principal
payments of $182.5 million to the Company. At September 30, 1994, the remaining
principal amount receivable was written off by the Company concurrent with the
write-off by GHTV of the remaining payable under the GHTV Subsidiary Notes
recorded on its books. Since the Company was to be the ultimate recipient of
substantially all gains or losses of GHTV through payments under the GHTV
Subsidiary Notes, and its ability to repurchase the beneficial interest in
GHTV, the operating results of GHTV have been included in the Company's
consolidated statements of operations throughout the periods that the GHTV
Stock was held
F-8
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
by the GHTV Trust. Accordingly, interest expense of GHTV related to the GHTV
Subsidiary Notes was eliminated against the related interest income on the
Company's books. This elimination of interest expense resulted in net income
for GHTV, all of which was deferred and included as a component of the ultimate
gain on the disposal of communications subsidiaries included in the
consolidated statement of operations for the year ended September 30, 1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents--The Company considers all highly liquid debt
instruments with an original maturity of three months or less to be cash
equivalents.
Inventories--The Company's inventories consist primarily of purchased retail
goods, food, and spare parts. Inventories are valued at the lower of cost,
determined using the first-in, first-out (FIFO) method, or market.
Property, Plant and Equipment--Property, plant and equipment is carried at
cost net of accumulated depreciation. Depreciation is calculated generally on
the straight-line method based on the following useful lives:
YEARS
-----
Land improvements...................................................... 40
Buildings and terminals................................................ 40
Ski lifts.............................................................. 15
Ski trails............................................................. 20
Machinery, equipment, furniture and fixtures........................... 3-12
Automobiles and trucks................................................. 3-5
Deferred Financing Costs--Costs incurred with the issuance of debt securities
are included in deferred charges and other assets, net of accumulated
amortization. Amortization is charged to income over the respective original
lives of the applicable issues and is included as an other expense.
Intangible Assets--"Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets" ("Excess Reorganization Value") represents the excess of
the Company's reorganization value over the amounts allocated to the net
tangible and other intangible assets of the Company as of the Effective Date
(see Note 6). The Company amortizes Excess Reorganization Value over 20 years.
The cost of other intangible assets with determinable lives is charged to
operations based on their respective economic lives, which range from 7 to 40
years, using the straight line method.
Long-lived Assets--The Company evaluates potential impairment of long-lived
assets and long-lived assets to be disposed of in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121").
SFAS No. 121 establishes procedures for review of recoverability, and
measurement of impairment if necessary, of long-lived assets and certain
identifiable intangibles held and used by an entity. SFAS No. 121 requires that
those assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. SFAS No. 121 also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less estimated selling costs. As of September 30, 1996,
management believes that there has not been any impairment of the Company's
long-lived assets or other identifiable intangibles.
F-9
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition--Resort Revenue is recognized as services are performed.
Revenues from real estate sales are accounted for as follows:
A. Revenue is not recognized until title has been transferred.
B. Revenue is deferred if the receivable is subject to subordination
until such time as all costs have been recovered.
C. Until the initial down payment and subsequent collection of principal
and interest are by contract substantial, cash received from the buyer is
reported as a deposit on the contract.
The Company capitalizes as land held for sale the original acquisition cost
(or appraised value as of the Effective Date), direct construction and
development costs, property taxes, interest incurred on costs related to land
under development, and other related costs (engineering, surveying,
landscaping, etc.) until the property reaches its intended use. The cost of
sales for individual parcels of real estate or condominium units within a
project is determined using the relative sales value method. Selling expenses
are charged against income in the period incurred. Interest capitalized on real
estate development projects during fiscal years 1994, 1995 and 1996 totalled
$0.8 million, $1.4 million and $2.2 million, respectively.
Advertising Costs--Advertising costs are expensed the first time the
advertising takes place. Advertising expense for the years ended September 30,
1994, 1995 and 1996 was $4.4 million, $6.3 million and $6.9 million,
respectively. At September 30, 1995 and 1996, advertising costs of $1.2 million
and $1.7 million were reported as assets in the Company's consolidated balance
sheet.
Income Taxes--The Company uses the liability method of accounting for income
taxes as prescribed by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, a deferred
tax liability or asset is recognized for the effect of temporary differences
between financial reporting and tax reporting.
Earnings Per Share--Earnings (loss) per common share are based on the
weighted average number of shares outstanding during the period after
consideration of the dilutive effect of stock grants, warrants and options (see
Note 12).
Fair Value of Financial Instruments--The recorded amounts for cash and cash
equivalents, receivables, other current assets, and accounts payable and
accrued expenses approximate fair value due to the short-term nature of these
financial instruments. The fair value of amounts outstanding under the
Company's Credit Facilities approximates book value due to the variable nature
of the interest rate associated with that debt. The fair values of the
Company's Senior Subordinated Notes and Industrial Development Bonds have been
estimated using discounted cash flow analyses based on current borrowing rates
for debt with similar maturities and ratings.
The estimated fair values of the Senior Subordinated Notes and Industrial
Development Bonds at September 30, 1996 are presented below:
CARRYING FAIR
AMOUNT VALUE
-------- -------
Senior Subordinated Notes.................................. $62,647 $76,369
Industrial Development Bonds............................... $37,903 $43,701
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications--Certain reclassifications have been made to the
accompanying consolidated financial statements for the years ended September
30, 1994 and 1995 to conform to the current period presentation.
F-10
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. DISCONTINUED OPERATIONS
On August 31, 1994, the Company sold 100% of the stock of Packerland to PPC
Acquisition Co. ("PPC"), an entity owned in part by the existing management
group of Packerland and the Company's former Chairman and Chief Executive
Officer for net cash proceeds totaling approximately $56,260,000. The net gain
resulting from this transaction of $10,678,000 is included in the gain on
disposal of subsidiaries operating in discontinued segments for the year ended
September 30, 1994, in the accompanying consolidated statements of operations.
The Packerland portion of the gain on disposal of subsidiaries operating in
discontinued segments included in the accompanying consolidated statement of
cash flows for the year ended September 30, 1994 includes the net cash proceeds
from the sale reduced by the net assets of Packerland as of August 31, 1994,
and other costs associated with the transaction. The net revenues of Packerland
included in the consolidated statements of operations were $630,928,000 for the
year ended September 30, 1994.
On September 23, 1994, GHTV sold substantially all of the assets of its
remaining operating subsidiaries to an unaffiliated party for net cash proceeds
totaling approximately $35,372,000. Following this sale, GHTV no longer had an
ownership interest in subsidiaries engaged in the communications business. On
September 30, 1994, the Company repurchased the stock of GHTV from the GHTV
Trust (see Note 1). As discussed in Note 1, the GHTV net income following the
elimination of interest expense was deferred until the remaining GHTV
subsidiaries were sold and then included as a component of the net gain on the
disposal of the related subsidiaries. The net gain resulting from these sales
of $10,285,000 is included in the gain on disposal of subsidiaries operating in
discontinued segments in the accompanying consolidated statements of operations
for the year ended September 30, 1994.
Corporate expense related to the communications segment has been classified
as income from discontinued operations for the year ended September 30, 1994
based upon the corporate expenses directly attributable to GHTV in excess of
the $250,000 expense reimbursement from GHTV during the year (see Note 9).
Corporate expense related to Packerland has been classified as income from
discontinued operations based upon the corporate expenses directly attributable
to Packerland. Corporate expense classified as income from discontinued
operations totaled $762,000 for the year ended September 30, 1994. Corporate
interest expense has been allocated to income from discontinued operations
based upon the ratio of the net assets of Packerland and GHTV to the
consolidated net assets of the Company. Total corporate interest expense
allocated to income from discontinued operations was $4,033,000 for the year
ended September 30, 1994.
Incentive payments to George N. Gillett Jr., the Company's former Chairman
and Chief Executive Officer ("Mr. Gillett"), and certain other members of the
Company's management related to the sales of Packerland and the GHTV
subsidiaries totaling $1.3 million have been included as a component of the net
gain on the disposal of subsidiaries operating in discontinued segments in the
consolidated statement of operations for the year ended September 30, 1994.
In connection with the sales of Packerland and the GHTV subsidiaries, the
Company retained certain contingent liabilities that are customary for
transactions of this nature. The Company does not anticipate that these
contingencies will have a material effect on either future financial results or
liquidity.
4. ACQUISITIONS
On November 30, 1993, Vail Associates purchased substantially all of the
assets of Arrowhead for approximately $31,000,000 in cash. These assets
included (i) approximately 1,200 acres of land on Arrowhead Mountain, including
180 acres of skiable terrain, (ii) approximately 1,000 acres of undeveloped
real estate on, at the base of and adjacent to Arrowhead Mountain and (iii) the
rights to designate, and receive the proceeds from, certain membership
privileges to the Country Club of the Rockies ("CCR") golf club.
F-11
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Arrowhead is currently a year round resort which offers membership to CCR and
skiing as amenities to home owners to promote real estate sales.
On April 5, 1994, Vail Associates purchased SaddleRidge for approximately
$10,400,000 in cash. SaddleRidge is a 12 unit townhouse project with an
adjoining clubhouse. Vail Associates has sold eleven of the townhouse units and
currently operates a restaurant and meeting facilities in the clubhouse.
On July 22, 1996, the Company entered into a Stock Purchase Agreement
("Purchase Agreement") with Ralston Foods, Inc. and its wholly-owned subsidiary
Ralston Resorts, Inc., pursuant to which the Company will acquire the capital
stock of Ralston Resorts, Inc., the operator of the Breckenridge, Keystone and
Arapahoe Basin ski resorts located in Summit County, Colorado (the
"Acquisition"). Under the terms of the Purchase Agreement, the Company will
assume and/or refinance $165 million of indebtedness of Ralston Resorts, Inc.
and will issue approximately 3.8 million shares of Common Stock to Ralston
Foods, Inc. The closing of the Acquisition is dependent upon various
conditions, including obtaining financing to refinance the indebtedness assumed
(see Note 5), the continuing accuracy of representations and warranties made by
the parties to the Purchase Agreement, and the receipt of necessary government
approvals including those required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
5. LONG-TERM DEBT
Long-term debt as of September 30, 1995 and 1996 is summarized as follows (in
thousands):
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------- -------------
Senior Subordinated Notes (a)....................... $117,147 $ 62,647
Industrial Development Bonds (b).................... 37,903 37,903
Credit Facilities (c)............................... 36,000 44,000
Other............................................... 263 200
-------- --------
191,313 144,750
Less--current maturities.......................... 63 63
-------- --------
$191,250 $144,687
======== ========
(a) The Senior Subordinated Notes are unsecured, bear interest at 12 1/4% and
mature on June 30, 2002. Interest is payable semi-annually on March 31 and
September 30.
The Company redeemed $30 million and $24.5 million principal amounts of
Senior Subordinated Notes on December 11, 1995 and February 2, 1996,
respectively, pursuant to the optional redemption provisions of the Senior
Subordinated Note Indenture (the "Indenture"). Under these provisions, the
Company was required to pay a call premium in the amount of 5% of the
principal redeemed for each of these redemptions.
The Company, pursuant to the covenants in the Indenture, may not incur
additional indebtedness unless expressly permitted in the Indenture; make
certain Restricted Payments (as defined in the Indenture); sell assets of
the Company or its subsidiaries unless within the guidelines set forth in
the Indenture; engage in certain transactions with affiliates; or make
certain acquisitions in excess of specific limitations.
(b) The Company has $41.2 million of outstanding Industrial Development Bonds
issued by Eagle County, Colorado which accrue interest at 8% per annum and
mature on August 1, 2009. Interest is payable semi-annually on February 1
and August 1. The Company has provided the holder of these bonds a debt
service reserve fund of $3.3 million, which has been netted against the
principal amount for financial reporting purposes. The Industrial
Development Bonds are secured by the stock of the subsidiaries of Vail
Associates and the United States Forest Service permits.
F-12
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(c) The Company's revolving line of credit provides for total availability of
$135 million which is comprised of a $105 million revolver ("Facility A")
and a $30 million revolver ("Facility B") (collectively, the "Credit
Facilities"). The maximum availability under Facility A will be reduced to
$80 million on March 31, 1999 with the remaining principal balance due on
March 31, 2000. Facility A also requires that no more than $75 million be
outstanding for a 30 day period each year. The maximum availability under
Facility B will be reduced by $10 million on March 31, 1997, 1998 and 1999.
The Credit Facilities are available for the seasonal working capital needs
of the Company and for capital expenditures and other general corporate
purposes, including the issuance of up to $50 million of letters of credit
("LOC"). Interest on outstanding advances under the Credit Facilities is
payable monthly or quarterly at rates based upon either LIBOR plus a margin
ranging from .75% to 2.0% (6.2% at September 30, 1996) or prime plus a
margin of up to .25% (8.25% at September 30, 1996). These rates fluctuate
depending on the ratio of funded debt to resort cash flow as defined in the
Credit Facilities. The Company is also required to pay an unused commitment
fee ranging from .25% to .375%. Of the $50 million of LOC availability,
approximately $45 million will ultimately be used to credit enhance the
Smith Creek Metropolitan District revenue bonds (see Note 10). As of
September 30, 1996, the Company had $27.6 million of LOCs outstanding
related to this credit enhancement and is using approximately $4.1 million
of LOCs for other Vail Associates corporate purposes. Fees for LOCs
outstanding are payable when LOCs are issued at rates ranging from .875% to
2.125%. Vail Associates is permitted under the Credit Facilities to make
(i) quarterly dividend payments to the Company in the amount of net cash
proceeds from real estate sales, (ii) annual dividend payments based upon
annual excess cash flow excluding cash proceeds from real estate sales, and
(iii) management fee payments not to exceed $3 million per year. Borrowings
under the Credit Facilities are secured by the stock of the subsidiaries of
Vail Associates and the permits granted by the United States Forest Service
(see Note 1). Due to the long term nature of the Credit Facilities, all
amounts outstanding are considered to be noncurrent liabilities.
The Company has received a commitment from its lender, as agent, to provide
financing for the Acquisition and the working capital needs of the Company
upon the closing of the Acquisition ("New Credit Facilities"). The New
Credit Facilities will provide for debt financing up to an aggregate
principal amount of $340 million. The New Credit Facilities are comprised of
(i) a $175 million Revolving Credit Facility ("Revolving Credit Facility"),
(ii) a $115 million Tranche A Term Loan Facility ("Tranche A") and (iii) a
$50 million Tranche B Term Loan Facility (together with the Tranche A, the
"Term Loan Facilities"). The Term Loan Facilities will be used to refinance
a portion of the $165 million of debt assumed in connection with the
Acquisition. The Revolving Credit Facility matures on April 15, 2003. The
minimum amortization under the Term Loan Facilities will be $11.5 million,
$14.0 million, $19.0 million, $21.5 million, $26.5 million, $31.5 million,
and $41 million during the fiscal years ending September 30, 1998, 1999,
2000, 2001, 2002, 2003, and 2004, respectively. The Company will also
required to make mandatory amortization payments under the Term Loan
Facilities with excess cash flow, proceeds from asset sales, and proceeds
from equity and debt offerings.
Aggregate maturities for debt outstanding are as follows (in thousands):
AS OF
SEPTEMBER 30,
1996
-------------
Due during year ending September 30:
1997............................................................ $ 63
1998............................................................ 63
1999............................................................ 63
2000............................................................ 11
2001............................................................ --
Thereafter...................................................... 144,550
--------
Total debt.................................................... $144,750
========
F-13
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. SUPPLEMENTARY BALANCE SHEET INFORMATION (IN THOUSANDS)
The composition of property, plant and equipment follows:
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------- -------------
Land and land improvements.......................... $ 70,172 $ 66,966
Buildings and terminals............................. 65,812 60,928
Machinery and equipment............................. 65,123 68,286
Automobiles and trucks.............................. 2,847 3,729
Furniture and fixtures.............................. 11,152 12,817
Construction in progress............................ 17,421 15,118
-------- --------
232,527 227,844
Accumulated depreciation and amortization........... ( 27,376) (35,175)
-------- --------
$205,151 $192,669
======== ========
Depreciation expense for fiscal years 1994, 1995 and 1996 totaled $10.2
million, $11.3 million and $11.4 million, respectively.
The composition of intangible assets follows:
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------- -------------
Trademarks.......................................... $ 41,096 $ 41,096
Other intangible assets............................. 33,489 32,639
Excess Reorganization Value (Note 2)................ 38,494 37,702
-------- --------
$113,079 $111,415
Accumulated amortization............................ (19,672) (26,381)
-------- --------
$ 93,407 $ 85,056
======== ========
The composition of accounts payable and accrued expenses follows:
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------- -------------
Trade payables..................................... $14,847 $28,263
Accrued interest................................... 8,092 869
Accrued salaries and wages......................... 5,808 5,705
Current portion of option payment payable (see Note
10)............................................... -- 1,629
Other accruals..................................... 8,672 11,630
------- -------
$37,419 $48,096
======= =======
7. RETIREMENT AND PROFIT SHARING PLANS
During 1992, a defined benefit pension plan covering employees of certain
companies which have been sold was terminated. The accrued benefits for those
plan participants became vested as of the date of sale, with no additional
benefits to be accrued. In connection with the termination of the plan, a group
annuity contract was purchased for settlement of substantially all remaining
plan obligations. The Company received the final $500,000 of the total excess
of the plan's assets over the cost of the annuity contract of $7.3 million
during the year ended September 30, 1994.
The Company maintains a defined contribution retirement plan, qualified under
Section 401(k) of the Internal Revenue Code, for its employees. Employees are
eligible to participate in the plan upon attaining the age of 21 and completing
one year of employment with a minimum of 1,000 hours of service. Participants
may
F-14
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
contribute from 2% to 15% of their qualifying annual compensation up to the
annual maximum specified by the Internal Revenue Code. The Company matches an
amount equal to 50% of each participant's contribution up to 6% of a
participant's annual qualifying compensation. The Company's matching
contribution is entirely discretionary and may be reduced or eliminated at any
time.
Total profit sharing plan expense recognized by the Company for the years
ended September 30, 1994, 1995 and 1996 was $784,000, $493,000 and $594,000,
respectively.
8. INCOME TAXES
At October 8, 1992, the Company had net operating loss (NOL) carryforwards
for federal income tax purposes of $575 million ("Effective Date NOLs"). Due to
discharge of indebtedness income relating to the restructuring, these NOLs were
reduced by $214 million. Pursuant to Section 382 of the Internal Revenue Code
(IRC), due to the change in control of the Company as described in Note 1, the
Company will be limited in its use of the NOLs which existed on the Effective
Date. The Company will be able to use Effective Date NOLs to the extent of
approximately $8 million per year in each of the 15 years subsequent to the
Effective Date. In addition, the Company will be able to use Effective Date
NOLs to the extent that built-in gains (excess of fair market value over tax
basis at October 8, 1992) are recognized on asset sales which occur through
October 8, 1997. Accordingly, at October 8, 1992 the financial statements
reflect the benefit of the expected use of $120 million of Effective Date NOLs.
As the likelihood is low that the Company will be able to recognize a
significant portion of the remaining Effective Date NOLs, the accompanying
financial statements and tables of deferred tax items below do not recognize
any benefits related to the remaining Effective Date NOLs, except to the extent
realized. To the extent any additional tax benefits from these Effective Date
NOLs are recognized, there will be a reduction to the reorganization value in
excess of amounts allocable to identifiable assets recorded at October 8, 1992.
During the years ended September 30, 1994, 1995 and 1996, the Company
recognized the benefit of Effective Date tax attributes which were recorded as
reductions to the reorganization value in excess of amounts allocable to
identifiable assets of $2,764,000, $278,000 and $814,000, respectively. At
September 30, 1996, the Company has total federal NOL carryforwards of
approximately $353 million for income tax purposes that expire in the years
2002 through 2008, $49 million of which are not subject to any Section 382
limitation.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes. Significant components of the Company's
deferred tax liabilities and assets as of September 30, 1995 and 1996 are as
follows (in thousands):
SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
--------------------------- ---------------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT
------------- ------------- ------------- -------------
ASSETS ASSETS ASSETS ASSETS
(LIABILITIES) (LIABILITIES) (LIABILITIES) (LIABILITIES)
------------- ------------- ------------- -------------
Fixed assets............ $ -- $(41,578) $ $(35,916)
Interest on notes....... 216 1,822 211 773
Intangible assets....... -- (21,516) (19,928)
Deferred compensation... 124 270 3,018 63
NOL carryover........... 7,182 49,881 10,549 35,807
Valuation allowance..... -- (19,535) (22,544)
Minimum tax credit...... -- 595 1,208
All other............... 1,978 761 3,422 1,037
------ -------- ------- --------
Net total............. $9,500 $(29,300) $17,200 $(39,500)
====== ======== ======= ========
F-15
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant components of the provision for income taxes from continuing
operations are as follows (in thousands):
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996
------------- ------------- -------------
Current:
Federal............................ $ 447 $ 621 $1,502
State.............................. 235 354 221
------ ------ ------
Total current.................... 682 975 1,723
Deferred:
Federal............................ 347 2,066 2,065
State.............................. 928 834 435
------ ------ ------
Total deferred................... 1,275 2,900 2,500
------ ------ ------
$1,957 $3,875 $4,223
====== ====== ======
A reconciliation of the income tax provision from continuing operations and
the amount computed by applying the U.S. federal statutory income tax rate to
income from continuing operations before income taxes is as follows (in
thousands):
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996
------------- ------------- -------------
At U.S. federal income tax rate...... $ 951 $2,505 $3,135
State income tax, net of federal ben-
efit................................ 270 714 426
Excess reorganization value amortiza-
tion................................ 754 727 773
Other................................ (18) (71) (111)
------ ------ ------
$1,957 $3,875 $4,223
====== ====== ======
9. RELATED PARTY TRANSACTIONS
The Company provided administrative and other services to GHTV subsequent to
the Effective Date pursuant to a Reimbursement Agreement between the Company
and GHTV. Under the Reimbursement Agreement, GHTV reimbursed the Company for
all costs incurred directly by the Company on behalf of GHTV, and for its
allocated share of all Company corporate salaries and overhead expenses. In
connection with the sale of a GHTV subsidiary on May 25, 1993, the
Reimbursement Agreement was amended to limit the GHTV reimbursement to the
Company to $250,000 per year. Accordingly, the Company received $250,000 of
expense reimbursements related to the Reimbursement Agreement during the year
ended September 30, 1994. As a result of the repurchase by the Company of the
stock of GHTV (see Note 1), the Reimbursement Agreement was no longer in effect
subsequent to September 30, 1994. During that year, the Company received an
additional $760,000 from GHTV for its allocation of the costs of participating
in certain of the Company's fringe benefit plans and in sharing the cost of
master policies for business insurance coverage.
Packerland utilized related companies for repair, maintenance and leasing of
transportation equipment. Services totaling $881,000 were purchased from
related parties during the year ended September 30, 1994. As a result of the
sale of Packerland on August 31, 1994 (see Note 3), these costs were no longer
incurred subsequent to that date.
F-16
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Corporate expense for each of the years end September 30, 1994, 1995 and 1996
includes an annual fee of $500,000 for management services provided by an
affiliate of the majority holder of the Company's Common Stock. This fee is
generally settled partially through use of the Company's facilities and
partially in cash. At September 30, 1996, the Company's liability with respect
to this arrangement was $319,000.
The Game Creek Club (the "Club") is a private club located at the top of Vail
Mountain which began operations during fiscal 1996. Club members have luncheon
privileges at the Club's facilities during the ski season. The Company operates
the Club under an agreement which requires the Club to reimburse the Company
for any operating losses sustained on the Club's operations. At September 30,
1996, the Club owed the Company $1.0 million pursuant to this agreement.
Vail Associates has effective control of the Beaver Creek Resort Company
(Resort Company), a non-profit entity formed for the benefit of property owners
in Beaver Creek. As of December 31, 1995, Vail Associates relinquished its
right to appoint certain directors, however, as of September 30, 1996, Vail
Associates still controls the Board. Vail Associates has a management agreement
with the Resort Company, renewable for one-year periods, to provide management
services on a fixed fee basis without any profit. In accordance with a cash
flow agreement which is effective through 2000, Vail Associates will fund the
cash needs of the Resort Company that are not otherwise met through the Resort
Company's operations or borrowings. During fiscal years 1991 through 1996, the
Resort Company was able to meet its operating requirements through its own
operations. Management fees paid to the Company under its agreement with the
Resort Company during fiscal years 1994, 1995 and 1996 totaled $5.8 million,
$7.0 million and $5.5 million, respectively. Related amounts due the Company at
September 30, 1995 and 1996 were $34,000 and $599,000, respectively.
In 1991, the Company loaned to Andrew P. Daly, the Company's President,
$300,000, $150,000 of which bears interest at 9% and the remainder of which is
non-interest bearing. The principal sum plus accrued interest is due no later
than one year following the termination, for any reason, of Mr. Daly's
employment with the Company. The proceeds of the loan were used to finance the
purchase and improvement of real property. The loan is secured by a deed of
trust on such property.
In 1995, Mr. Daly's spouse and James P. Thompson, President of VAREG, and his
spouse received financial terms more favorable than those available to the
general public in connection with their purchase of lots in the Bachelor Gulch
development. Rather than payment of an earnest money deposit with the entire
balance due in cash at closing, these contracts provide for no earnest money
deposit with the entire purchase price (which was below fair market value) paid
under promissory notes of $438,750 and $350,000 for Mr. Daly's spouse and Mr.
and Mrs. Thompson, respectively, each secured by a first deed of trust and
amortized over 25 years at 8% per annum interest, with a balloon payment due on
the earlier of five years from the date of closing or one year from the date
employment with the Company is terminated. The promissory notes will be
executed upon the closings of the lot sales which are expected to occur in
December 1996.
10. COMMITMENTS AND CONTINGENCIES
As of September 30, 1996, the Company had entered into real estate contracts
for the sale of certain real estate and related amenities for gross proceeds of
approximately $106.9 million. The Company estimates that subsequent to
September 30, 1996, it will incur additional selling, holding and
infrastructure costs of $24.5 million in connection with the sale of the
properties subject to those contracts. In addition, the Company expects that
subsequent to September 30, 1996 it will make mountain improvements of $17.2
F-17
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
million (a portion of which will be completed in connection with the sale of
the properties subject to the real estate contracts), which will consist
primarily of a high speed quad chairlift, base area improvements and snowmaking
and will benefit the properties subject to the real estate contracts as well as
the Company's remaining real estate holdings in Bachelor Gulch Village and
Arrowhead. The Company has entered into repurchase agreements with certain
developers who have purchased real estate from the Company to repurchase
certain retail and residential space in the completed developments. At
September 30, 1996, the Company has agreed to repurchase various retail and
residential space for amounts totaling $10.9 million.
On September 25, 1996, the Company declared a right to receive up to $4.87
per share of Common Stock (the "Rights") to all stockholders of record on
October 11, 1996, with a maximum aggregate amount payable under the Rights of
$50.5 million. The Company will make payments under the Rights only to the
extent it receives sufficient gross proceeds under the real estate contracts
referred to above to make such payments. The Company currently estimates
payments under the Rights will be made in January and June 1997. Stockholders
who purchase shares in the Company's anticipated Offering will not be entitled
to any payments with respect to the Rights. In addition, the Company amended
certain option agreements held by management of the Company to eliminate the
right of option holders to receive any portion of the payments made under the
Rights. In connection with such amendment, the Company accrued a payable to
option holders of approximately $4.5 million. The related expense is included
in corporate expense in the consolidated statement of operations for the year
ended September 30, 1996.
On July 9, 1996, the Company entered into a Standby Bond Purchase Agreement
which could obligate the Company to purchase $10.1 million of Eagle Country Air
Terminal Corporation Revenue Bonds if certain events occur. The Company entered
into this agreement to facilitate construction of a new terminal to allow
expanded air service to the Eagle County Airport.
In June 1995, Vail Associates entered into an agreement with Cordillera
Valley Club Investors Limited Partnership and Stag Gulch Partners to purchase
100 Cordillera Club memberships for resale to purchasers of residential lots.
The obligation to purchase memberships is secured by a $2.2 million letter of
credit. As of September 30, 1996, Vail Associates has paid $2.6 million in
connection with this agreement and has resold memberships with a cost of
$977,500 to purchasers of residential lots.
In March 1995, the Smith Creek Metropolitan District ("SCMD") and the
Bachelor Gulch Metropolitan District ("BGMD") were organized as quasi-municipal
corporations and political subdivisions of the State of Colorado. The two
districts will cooperate in the financing, construction and operation of basic
public infrastructure serving the BGMD. SCMD was organized primarily to own,
operate and maintain water, street, traffic and safety, transportation, fire
protection, emergency medical, parks and recreation, television relay and
translation, sanitation and certain other facilities and equipment of the BGMD.
SCMD is comprised of approximately 150 acres of open space land owned by the
Company and members of the Board of Directors of the SCMD. The BGMD is located
adjacent to the SCMD and covers an area of approximately 1,250 acres of land in
an unincorporated portion of Eagle County, Colorado between the Beaver Creek
and Arrowhead ski mountains. All of the land in the BGMD has received final
approval by Eagle County for development as two planned unit developments
including various single family, two-family, cluster home and townhouse units
and related uses. All of the land in the BGMD is currently owned by the
Company. The Company has contracted to sell 94 single family lots, the closings
of which are scheduled for December 1996 and May 1997. The Company is currently
preparing to offer additional land for sale to persons, including builders, who
may construct up to 600 units of various multi-family dwelling types over the
next several years. Of the $50 million of letter of credit availability under
the Company's Credit Facilities (see Note 5), approximately $45 million will
ultimately be used to credit enhance the SCMD revenue bonds in order to secure
the timely payment of principal and interest on the bonds. Currently, SCMD has
issued $26 million of revenue bonds which have been credit enhanced with a
$27.6 million letter of credit issued under the Credit Agreement.
F-18
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The SCMD bonds are variable rate bonds which mature on October 1, 2035. It is
anticipated that as the Bachelor Gulch community expands, the BGMD will begin
to become self supporting and that within 25 to 30 years will issue general
obligation bonds, the proceeds of which will be used to retire the SCMD revenue
bonds. Until that time, the Company has agreed to subsidize the interest
payments on the SCMD revenue bonds. During fiscal 1996, the subsidy totaled
$505,000. The Company estimates that the aggregate undiscounted future interest
subsidy until the revenue bonds are retired will approximate $40.1 million. The
accompanying consolidated financial statements do not reflect this obligation.
Under the Stock Purchase Agreement dated August 31, 1994 for the sale of
Packerland, the Company has agreed to indemnify the purchasers of Packerland
for payments made to settle environmental claims which existed at the sale
date. A liability of $1.0 million related to these claims was recorded on the
sale date. During fiscal 1996, the liability was increased by $725,000 on the
basis of revised estimates of the maximum potential liability. That amount was
included in other income (expense) in the consolidated financial statements.
Under the indemnification provisions of the Stock Purchase Agreement, the
Company is to be reimbursed for any insurance proceeds, any reimbursements
received under various government programs or any recoveries from third parties
for items reimbursable under the Stock Purchase Agreement. Management is unable
to estimate the amounts or likelihood of any potential reimbursements at this
time and, accordingly, the accompanying consolidated financial statements do
not reflect any receivable for such reimbursements.
As of the Effective Date, the Company's consolidated balance sheet included
as a long-term liability an estimated potential obligation of $3 million
related to a fundraising agreement between the Company and Mr. Gillett, and a
medical research foundation located in Vail, Colorado. As of September 30,
1994, the liability had been reduced to $2.1 million on the basis of current
estimates of the Company's maximum potential obligation. During the year ended
September 30, 1995, the Company paid $500,000 related to this agreement. As of
September 30, 1995, the Company believed that it had no further obligation to
the medical research foundation and accordingly, other income (expense) in the
consolidated statement of operations for the year ended September 30, 1995
included related income of $1.6 million. During the year ended September 30,
1996, the Company became aware that the medical research foundation believed
that the Company still had a potential obligation related to this matter. On
the basis of recent discussions between the parties to the agreement, the
Company believes the maximum potential obligation is $1.2 million, the amount
of which is included in accounts payable and accrued expenses in the
consolidated balance sheet at September 30, 1996. A receivable of $600,000 from
Mr. Gillett related to his contractual portion of the potential obligation, is
included in other current assets at September 30, 1996. Other income (expense)
for the year ended September 30, 1996 includes expense of $600,000 related to
the Company's portion of the potential obligation.
The Company has executed operating leases for the rental of office space,
employee residential units, office equipment and snowcats though fiscal 2004.
For the years ended September 30, 1996, 1995 and 1994, lease expense related to
these agreements of $3.8 million, $3.8 million and $3.1 million, respectively,
is included in the accompanying consolidated statements of operations.
Future minimum lease payments under these leases as of September 30, 1996 are
as follows:
Due during fiscal year ending September 30:
1997................................................................ $1,460,395
1998................................................................ 1,030,937
1999................................................................ 1,246,546
2000................................................................ 1,110,696
2001................................................................ 1,029,000
Thereafter.......................................................... 2,486,750
----------
Total............................................................. $8,364,324
==========
F-19
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. BUSINESS SEGMENTS
As a result of the sale of Packerland on August 31, 1994 (see Note 3) and the
sale of the remaining GHTV subsidiaries on September 23, 1994 (see Note 3), the
Company now operates only in the Resorts and Real Estate segments. Segment
information presented below excludes the Communications and Beef Products
segments as their results were reported as discontinued during fiscal 1994 and
they had no operations subsequent to fiscal 1994. Data by segment is as
follows:
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996
------------- ------------- -------------
Net revenues:
Resorts............................. $124,982 $126,349 $140,288
Real Estate......................... 22,203 16,526 48,655
-------- -------- --------
$147,185 $142,875 $188,943
======== ======== ========
Income from operations:
Resorts............................. $ 29,431 $ 26,076 $ 32,250
Real Estate......................... 1,862 1,543 7,854
Corporate........................... (7,160) (6,701) (12,698)
-------- -------- --------
$ 24,133 $ 20,918 $ 27,406
======== ======== ========
Depreciation and amortization:
Resorts............................. $ 17,186 $ 17,968 $ 18,148
Real Estate......................... -- -- --
-------- -------- --------
$ 17,186 $ 17,968 $ 18,148
======== ======== ========
Capital expenditures:
Resorts............................. $ 17,414 $ 20,320 $ 13,912
Real Estate......................... 22,686 22,477 40,604
-------- -------- --------
$ 40,100 $ 42,797 $ 54,516
======== ======== ========
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
------------- -------------
Identifiable assets:
Resorts............................. $205,151 $192,669
Real Estate......................... 54,858 88,665
-------- --------
$260,009 $281,334
======== ========
12. STOCK GRANTS, OPTIONS AND WARRANTS
Pursuant to an employment agreement as of the Effective Date, Mr. Gillett
earned as additional performance-based compensation over the three year period
ending on the third anniversary of the Effective Date, (i) 357,488 shares of
Common Stock and (ii) warrants with an exercise price of $13.70 per share for
an additional 204,082 shares of Common Stock. In addition, on the third
anniversary of the Effective Date, Mr. Gillett earned as additional
performance-based compensation long-term stock options with an exercise price
of $23.67 per share, as of October 8, 1995, increasing 20% per year for 582,404
shares of Common Stock. These shares of Common Stock, warrants and long-term
stock options have all been issued to Mr. Gillett.
Effective September 30, 1996, Mr. Gillett resigned as Chairman of the Board,
Chief Executive Officer, President and Director of the Company. Pursuant to the
terms of an agreement dated October 11, 1996 between Mr. Gillett and the
Company (the "Gillett Agreement"), Mr. Gillett (i) will receive his base salary
(currently $1.7 million per annum) through October 7, 1997, (ii) exchanged the
582,404 long-term stock options for 168,159 shares of Common Stock and (iii)
waived his right to the Distribution with respect to
F-20
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
his 357,488 shares of Common Stock and his warrants to purchase 204,082 shares
of Common Stock in exchange for the payment of the exercise price on those
warrants. In addition, the Company has agreed to pay Mr. Gillett's office
expenses through December 31, 1996. Corporate expense for the fiscal year ended
September 30, 1996 includes $2.1 million related to the base salary and office
expenses of Mr. Gillett payable under the Gillett Agreement and $1.9 million in
compensation expense related to Mr. Gillett's exchange of his long-term stock
options.
The Company has adopted a stock option plan pursuant to which options
covering an aggregate of 1,022,755 shares of Common Stock may be issued to key
employees, directors, consultants, and advisors of the Company or its
subsidiaries. As of September 30, 1996, options covering 916,650 shares of
Common Stock have been issued to various key executives of the Company. All of
the options vest in equal installments over five years, with exercise prices
ranging from $13.70 per share to $21.50 per share. As of September 30, 1996,
403,614 of these options were exercisable. None of the options issued under the
stock option plan have been exercised. Under certain circumstances, the option
plan provides for loans by the Company to employees, collateralized by such
employees' vested options.
In July 1996, the Company's Board of Directors approved a new stock option
plan ("New Option Plan") under which 750,000 shares of Common Stock have been
reserved for various stock and option awards.
Effective July 29, 1996, the Company hired Adam Aron as Chairman and Chief
Executive Officer. Pursuant to the terms of an employment agreement,
approximately 18,750 shares of restricted stock and options to purchase 130,000
shares of Common Stock for $40.00 per share (subject to adjustment in certain
circumstances) will be granted to Mr. Aron under the New Option Plan. The
restricted shares and the options vest in equal increments over five years.
Effective October 28, 1996, the Company hired James P. Donohue as Senior Vice
President and Chief Financial Officer. Pursuant to the terms of an employment
agreement with Mr. Donohue, approximately 6,000 shares of restricted stock and
options to purchase 30,000 shares of Common Stock for $40.00 per share (subject
to adjustment in certain circumstances) will be granted to Mr. Donohue under
the New Option Plan. The restricted shares and the options vest in equal
increments over three years. On September 30, 1996, the Company awarded 6,250
shares of restricted stock and options to purchase 50,000 shares of Common
Stock for $40.00 per share (subject to adjustment in certain circumstances) to
Andrew P. Daly, the Company's President, under the New Option Plan. The
restricted shares and the options vest in equal increments over five years.
Compensation expense related to these restricted stock awards will be charged
ratably over the respective vesting periods.
13. CAPITAL STOCK
On June 3, 1996, the Company's Board of Directors changed the name of the
Company from Gillett Holdings, Inc. to Vail Resorts, Inc. and the name of the
Company's Common Stock from Class 1 and Class 2 to Class A Common Stock and
Common Stock, respectively. In addition the common stock authorized increased
to 20,000,000 shares of Class A Common Stock and 40,000,000 shares of Common
Stock. The Company's Board of Directors also authorized a Common Stock and
Class A Common Stock split of up to 3 for 1 prior to the date of any public
stock offering.
The rights of holders of Class A Common Stock and Common Stock are
substantially identical, except that, while any Class A Common Stock is
outstanding, holders of Class A Common Stock elect a class of directors that
constitutes two-thirds of the Board and holders of Common Stock elect another
class of directors constituting one-third of the Board. The Class A Common
Stock is convertible into Common Stock (i) at the option of the holder, (ii)
automatically, upon transfer to a non-affiliate and (iii) automatically if less
than 2,500,000 shares (as such number shall be adjusted by reason of any stock
split, reclassification or other similar transaction) of Class A Common Stock
are outstanding. The Common Stock is not convertible. Each outstanding share of
Common Stock and Class A Common Stock is entitled to vote on all matters
submitted to a vote of stockholders.
F-21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to the directors and
executive officers of the Company.
NAME AGE POSITION
---- --- --------
Adam M. Aron................... 42 Chairman of the Board of Directors and
Chief Executive Officer of the Company
Frank Biondi................... 51 Director
Leon D. Black.................. 44 Director
Craig M. Cogut................. 42 Director
Stephen C. Hilbert............. 50 Director
Robert A. Katz................. 29 Director
Thomas H. Lee.................. 51 Director
William L. Mack................ 56 Director
Antony P. Ressler.............. 35 Director
Marc J. Rowan.................. 34 Director
John J. Ryan III............... 68 Director
John F. Sorte.................. 49 Director
Bruce H. Spector............... 53 Director
James S. Tisch................. 42 Director
Andrew P. Daly................. 50 President and Director of the Company
James P. Donohue............... 55 Senior Vice President and Chief Financial
Officer of the Company
Gerald E. Flynn................ 45 Senior Vice President of Vail Associates
James S. Mandel................ 46 Senior Vice President, General Counsel
and Secretary of the Company
J. Kent Myers.................. 47 Senior Vice President of Vail Associates
Edward D. O'Brien.............. 56 Senior Vice President and Chief Financial
Officer, Vail Associates Real Estate
Group, Inc.
Christopher P. Ryman........... 44 Senior Vice President and Chief Operating
Officer of Vail Associates
James P. Thompson.............. 52 President, Vail Associates Real Estate
Group, Inc.
Pursuant to the Restated Certificate of Incorporation and Restated Bylaws of
the Company, the Board is divided into two classes of Directors, denoted as
Class 1 and Class 2, each serving one-year terms. Class 1 directors are elected
by a majority vote of the holders of the Class A Common Stock and Class 2
directors are elected by a majority vote of the holders of the Common Stock.
The Class 1 directors are Messrs. Black, Cogut, Daly, Katz, Mack, Ressler,
Rowan, Ryan and Spector, and the Class 2 directors are Messrs. Aron, Biondi,
Hilbert, Lee, Sorte and Tisch.
Adam M. Aron is the Chairman of the Board and Chief Executive Officer of the
Company. Prior to joining the Company, Mr. Aron served as President and Chief
Executive Officer of Norwegian Cruise Line Ltd. from July 1993 until July 1996.
From November 1990 until July 1993 Mr. Aron served as Senior Vice
19
President of Marketing for United Airlines. From 1987-1990, Mr. Aron served as
Senior Vice President of Marketing for the Hyatt Hotels Corporation.
Frank Biondi was appointed a Director of the Company on July 29, 1996. Mr.
Biondi is Chairman and Chief Executive Officer of MCA Inc. Mr. Biondi
previously served as President and Chief Executive Officer of Viacom, Inc. from
July 1987 to January 1996. He has also held executive positions with The Coca-
Cola
Company, Home Box Office Inc. and Time Inc. Mr. Biondi currently is a member of
the Boards of Directors of Leake and Watts Services, The Museum of Television
and Radio, The Bank of New York and the American Health Foundation.
Leon D. Black is one of the founding principals of Apollo Advisors, L.P.,
which was established in August 1990 ("Apollo Advisors"), and which, together
with an affiliate, acts as managing general partner of Apollo Investment Fund,
L.P., AIF II, L.P. and Apollo Investment Fund III, L.P., private securities
investment funds, of Apollo Real Estate Advisors, L.P. ("AREA") which, together
with an affiliate, acts as managing general partner of the Apollo real estate
investment funds and of Lion Advisors, L.P. ("Lion Advisors"), which acts as
financial advisor to and representative for certain institutional investors
with respect to securities investments. Mr. Black is also a director of Big
Flower Press, Inc., Culligan Water Technologies, Inc., Furniture Brands
International, Inc., Samsonite Corporation and Telemundo Group, Inc. Mr. Black
was appointed a director of the Company in October 1992. Mr. Black is Mr.
Ressler's brother-in-law.
Craig M. Cogut is currently a private investor. Prior thereto he was one of
the founding principals of Apollo Advisors and of Lion Advisors. Prior to 1990,
Mr. Cogut was a consultant and legal advisor, principally to Drexel Burnham
Lambert Incorporated and associated entities. Mr. Cogut is also a director of
Envirotest Systems, Inc. and Salant Corporation. Mr. Cogut was appointed a
director of the Company in October 1992.
Stephen C. Hilbert was appointed a director of the Company in December 1995.
Mr. Hilbert founded Conseco, Inc. in 1979, and serves as its Chairman,
President and Chief Executive Officer. Conseco, Inc., is a financial services
holding company based in Carmel, Ind., owns and operates life insurance
companies, provides investment management, administrative and other fee-based
services. Mr. Hilbert serves as a Director of the Indiana State University
Foundation and the Indianapolis Convention and Visitor's Association. He also
serves on the Board of Trustees of both the Indianapolis Parks Foundation and
the U.S. Ski Team Foundation, as a Trustee of the Central Indiana Council on
Aging Foundation, and as a Director of both the Indianapolis Zoo and the St.
Vincent Hospital Foundation.
Robert A. Katz is an officer of Apollo Capital Management, Inc. and Lion
Capital Management, Inc., the general partners of Apollo Advisors and Lion
Advisors, respectively. Mr. Katz is a limited partner of Apollo Advisors and of
Lion Advisors, with which he has been associated since 1990. Mr. Katz was
appointed a director of the Company in June 1996. Mr. Katz is also a director
of Salant Corporation and Aris Industries, Inc.
Thomas H. Lee was appointed a director of the Company in January 1993. Mr.
Lee founded the Thomas H. Lee Company in 1974 and since that time has served as
its President. The Lee Company and the funds which it advises invest in
friendly leveraged acquisitions and recapitalizations. From 1966 through 1974,
Mr. Lee was with First National bank of Boston where he directed the bank's
high technology lending group from 1968 to 1974 and became a Vice President in
1973. Prior to 1966, Mr. Lee was a Securities Analyst in the institutional
research department of L.F. Rothschild in New York. Mr. Lee serves as a
Director of Autotote Corporation, Finlay Enterprises, Inc., First Security
Services Corporation, Health o meter Products, Inc., Livent Inc., Miller Import
Corporation, Playtex Products, Inc., and Sondik Supply Company.
William L. Mack was appointed a director of the Company in January 1993. Mr.
Mack has been the President and Managing Partner of The Mack Organization, an
owner and developer of and investor in office and industrial buildings and
other commercial properties principally in the New York/New Jersey metropolitan
area as well as throughout the United States, since 1963. Mr. Mack is a
founding principal of AREA and since 1993 has provided consulting services to
Apollo Real Estate Investment Fund II, L.P.
20
Mr. Mack is a Director of Crocker Realty Trust, Inc. and First Capital Holdings
Corp. He has been Director of the Urban Development Corporation for the State
of New York since 1983. Mr. Mack has also been Chairman of the Board of
Directors of the Jacob K. Javits Convention Center Development Corporation of
New York since 1984 and the Chairman of the Board of Directors of New York
Convention Center Operating Corporation since 1988.
Antony P. Ressler. Mr. Ressler is one of the founding principals of Apollo
Advisors and Lion Advisors. Mr. Ressler is also a director of Dominick's
Supermarkets, Family Restaurants, Inc., Packaging Resources, Inc. and United
International Holdings, Inc. He is also a member of the Executive Committee of
the Board of Directors of LEARN, the largest public school reform movement in
the U.S. and of the Jonsson Comprehensive Cancer Center at the UCLA Medical
Center.
Marc J. Rowan is one of the founding principals of Apollo Advisors and of
Lion Advisors. Mr. Rowan is also a director of Culligan Water Technologies,
Inc., Farley, Inc., Furniture Brands International, Inc. and Samsonite
Corporation. Mr. Rowan was appointed a director of the Company in October 1992.
John J. Ryan III has been a financial advisor based in Geneva, Switzerland
since 1972. Mr. Ryan is a director of Artemis S.A. and Financiere Pinault S.A.,
private holding companies in Paris, France and Furniture Brands International,
Inc. He is Vice President and Director of Evergreen Resources Inc., a publicly
held oil and gas exploration company. Mr. Ryan is President of J.J. Ryan &
Sons, a closely held textile trading corporation in Greenville, South Carolina.
Mr. Ryan was appointed a director of the Company in January 1995. Artemis S.A.
is a significant investor in Apollo Ski Partners.
John F. Sorte has been President of New Street Advisors L.P., a merchant
bank, and of New Street Investments L.P., its broker-dealer affiliate, since he
co-founded such entities in March 1994. From 1992 to March 1994, Mr. Sorte was
President and Chief Executive Officer of New Street Capital Corporation, a
merchant banking firm, and from 1990 to 1992, he was President and Chief
Executive Officer of The Drexel Burnham Lambert Group Inc., an investment firm.
Prior to 1990, Mr. Sorte was employed by Drexel Burnham Lambert Incorporated.
Mr. Sorte is also a director of WestPoint Stevens Inc. and serves as Chairman
of the Board of Directors of The New York Media Group, Inc. Mr. Sorte was
appointed a director of the Company in January 1993.
Bruce H. Spector has been a consultant to Apollo Advisors since 1992 and
since 1995 has been a principal in Apollo Advisors II, L.P., an affiliate of
Apollo Advisors which acts as general partner of Apollo Investment Fund III,
L.P. Prior to October 1992, Mr. Spector, a reorganization attorney, was a
member of the Los Angeles law firm of Stutman Triester and Glatt. Mr. Spector
is also a director of Telemundo Group, Inc. and United International Holdings,
Inc. Mr. Spector was appointed a director of the Company in January 1995.
James S. Tisch is President and Chief Operating Officer of Loews Corporation.
He has been with Loews Corporation since 1977. Prior to that he was with CNA
Financial Corporation. Mr. Tisch is Chairman of the Board of Directors of
Diamond Offshore Drilling, Inc., a member of the Board of Directors of Champion
International Corporation, CNA Financial Corporation, and Loews Corporation. He
is also Chairman of the Federation Employment and Guidance Service, a member of
the Board of Directors of UJA-Federation of New York, and a Trustee of The
Mount Sinai Medical Center. Mr. Tisch was appointed a director of the Company
in January 1995.
Andrew P. Daly was appointed a director of the Company in June 1996. Mr. Daly
became President of Vail Associates in 1992 and President of the Company in
1995. He joined Vail Associates in 1989 as Executive Vice President and
President of Beaver Creek Resort. Prior to joining Vail Associates, Mr. Daly
owned and was President of Lake Eldora Ski Corporation, which operated the Lake
Eldora Mountain Resort ski area. From 1982 to 1987, Mr. Daly was Chief
Executive Officer of Copper Mountain Resort, where he held several positions
from 1972 to 1982.
21
James P. Donohue became Senior Vice President and Chief Financial Officer of
the Company in October 1996. From 1991 to October 1996, Mr. Donohue served as
Senior Vice President and Chief Financial Officer of Fibreboard Corporation, a
manufacturer and distributor of building products, which also owns and operates
three ski resorts located in California. Prior to 1991, Mr. Donohue was an
Executive Vice President of Continental Illinois Bank., N.A.
Gerald E. Flynn became Senior Vice President and Chief Financial Officer of
Vail Associates in 1992. Mr. Flynn was formerly Senior Vice President and Chief
Financial Officer of the Company from 1995 until October 1996. Mr. Flynn joined
Vail Associates in 1981 as Manager of Tax and Joint Venture Planning before
being promoted to Director of Corporate Planning in 1983. Mr. Flynn was
promoted to Treasurer in 1984 and to Vice President of Finance in 1986. Prior
to joining Vail Associates, Mr. Flynn was a senior tax accountant for the
Denver office of Deloitte, Haskins & Sells from 1977 to 1981.
James S. Mandel joined the Company and Vail Associates in 1994 as Senior Vice
President and General Counsel of both the Company and Vail Associates, and was
named Secretary of Vail Associates in 1994 and of the Company in 1995. From
1978, until joining the Company, Mr. Mandel was a partner with Brownstein,
Hyatt, Farber and Strickland, a Denver law firm, and specialized in real estate
development and corporate finance.
J. Kent Myers became Senior Vice President of Vail Associates in 1995. Prior
to that, he served as Chief Operating Officer of Beaver Creek Resort from 1992
to 1995, and as Vice President of Marketing for Vail Associates from 1988 to
1992. From 1981 to 1988, Mr. Myers was Vice President of Marketing for
Steamboat Ski Corporation.
Edward D. O'Brien joined Vail Associates Real Estate Group, Inc. in 1993.
Prior to that he was Chief Financial Officer and a Managing General Partner of
Lincoln Property Company, a real estate development and management firm from
1971 to 1991. From 1962 to 1971 Mr. O'Brien was an auditor with Arthur Andersen
LLP.
Christopher P. Ryman became Chief Operating Officer and Senior Vice President
of Vail Associates in 1995. From 1992 to 1995, he was Senior Vice President of
Mountain Operations. Mr. Ryman was managing director of the Vail and Beaver
Creek Ski Schools from 1986 to 1992, served in management positions at the
Beaver Creek Ski School from 1980 to 1985 and was involved in ski school
operations from 1978 to 1980. Prior to joining Vail Associates in 1978, Mr.
Ryman held positions at the Mt. Hood, Snowbird and Alta ski resorts.
James P. Thompson joined Vail Associates Real Estate Group, Inc. in 1993 in
connection with Vail Associates' acquisition of Arrowhead. He joined Arrowhead
in 1989, becoming President in March of 1994. Prior to joining Arrowhead, he
served as Vice-President of Moore and Company in Denver for 14 years.
BOARD OF DIRECTORS AND COMMITTEES
Messrs. Black, Katz, Ressler, Rowan and Spector are associated with Apollo
Advisors, an affiliate of Apollo Ski Partners, L.P. Apollo Ski Partners is
organized principally for the purpose of holding capital stock of the Company.
See "Principal and Selling Stockholders" regarding the shares of Company stock
held by Apollo Ski Partners.
The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee.
The Executive Committee has all powers and rights necessary to exercise the
full authority of the Board of Directors in the management of the business and
affairs of the Company when necessary in between meetings of the Board of
Directors. The members of the Executive Committee are Adam M. Aron, Andrew P.
Daly, Robert A. Katz and Marc J. Rowan.
22
The Audit Committee is primarily concerned with the effectiveness of the
Company's accounting policies and practices, financial reporting and internal
controls. The Audit Committee is authorized to (i) make recommendations to the
Board of Directors regarding the engagement of the Company's independent
accountants, (ii) review the plan, scope and results of the annual audit, the
independent accountants' letter of comments and management's response thereto,
and the scope of any non-audit services which may be performed by the
independent accountants, (iii) manage the Company's policies and procedures
with respect to internal accounting and financial controls, and (iv) review any
changes in accounting policy. The members of the Audit Committee are Stephan C.
Hilbert, John F. Sorte and James S. Tisch.
The Compensation Committee is authorized and directed to (i) review and
approve the compensation and benefits of the executive officers, (ii) to review
and approve the annual salary plans, (iii) to review management organization
and development, (iv) review and advise management regarding the benefits,
including bonuses, and other terms and conditions of employment of other
employees and (v) administer any stock option plans which may be adopted and
the granting of options under such plans. The members of the Compensation
Committee are Leon D. Black, Marc J. Rowan and Thomas H. Lee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to July, 1996, there was no Compensation Committee of the Board of
Directors. During fiscal 1996, executive compensation decisions were made by
the entire Board of Directors.
COMPENSATION OF DIRECTORS
All directors' fees will be determined by the Board of Directors of the
Company. As of the date of this Prospectus, the Company had paid no fees to its
directors, and the Company currently does not intend to pay directors' fees.
The Company pays a management fee of $500,000 per year to Apollo Advisors, L.P.
Messrs. Black, Katz, Mack, Ryan, Ressler, Rowan and Spector are associated with
Apollo Advisors and are directors of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid or to be paid by the
Company or any of its subsidiaries, as well as certain other compensation paid
or accrued, during the years ended September 30, 1994, 1995 and 1996 to the
Chief Executive Officer and the four highest paid executive officers of the
Company whose compensation was at least $100,000 for the year ended September
30, 1996 in all capacities in which they served:
23
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------- ------------------------------
AWARDS PAYOUTS
------------------- ------------
RESTRICTED
SALARY OTHER ANNUAL STOCK LTIP ALL OTHER
NAME, PRINCIPAL AND BONUS COMPENSATION AWARD(S) OPTIONS/ PAYMENTS COMPENSATION
POSITION, AND PERIOD ($) ($)(1) ($) SAR ($)(2) ($)(3)
-------------------- --------- ------------ ---------- -------- -------- ------------
George N. Gillett, Jr.,
(4)
Former Chairman and
Chief Executive Offi-
cer of the Company
1994................... 1,542,000 58,150 1,966,200 -- -- 296,812
1995................... 1,584,000 116,000 2,383,200 -- -- --
1996................... 1,628,400 75,800 2,562,000 -- -- 36,956
Andrew P. Daly,
Chief Executive Officer
and President of Vail
Associates, President
of the Company
1994................... 269,907 34,835 -- -- 113,883 --
1995................... 307,538 32,322 -- -- 113,883 --
1996................... 348,077 24,007 -- -- 113,883 --
J. Kent Myers,
Senior Vice President
of Vail Associates
1994................... 174,462 16,280 -- -- 70,016 --
1995................... 193,618 14,673 -- -- 70,016 --
1996................... 183,192 5,075 -- -- 70,016 --
James S. Mandel,
Senior Vice President,
General Counsel and
Secretary of the Com-
pany
1994................... 174,000 -- -- 89,980(5) -- --
1995................... 311,500 1,716 -- -- -- --
1996................... 329,462 1,924 -- -- -- --
Christopher P. Ryman,
Senior Vice President
and Chief Operating
Officer
1994................... 155,000 16,225 -- -- 70,016 --
1995................... 175,512 14,504 -- -- 70,016 --
1996................... 184,269 15,057 -- -- 70,016 --
- --------
(1) Includes interest on long-term incentive plan compensation paid during the
period indicated to the named executive officer.
(2) Prior to October 8, 1992, the Company and certain of its subsidiaries
offered deferred compensation plans to certain key management employees in
lieu of any type of pension plans, stock options or other retirement
plans. As of October 8, 1992, following payments made on or around October
8, 1992, the outstanding deferred compensation balances for Mr. Daly, Mr.
Myers, and Mr. Ryman were $455,532, $280,063 and $280,063, respectively.
Mr. Daly's, Mr. Myers' and Mr. Ryman's outstanding deferred compensation
balances after October 8, 1992 are being paid to them over a four-year
period, with interest accruing on the balance at a rate of 8% per annum.
As of September 30, 1996, Mr. Daly's, Mr. Myers' and Mr. Ryman's
outstanding deferred compensation balances were $28,471, $17,504 and
$17,504, respectively. Due to the long-term incentive characteristics of
the deferred compensation plans of the Company and its subsidiaries,
payout amounts pursuant to these plans have been included in this column.
(3) In connection with the sale of certain non-ski-related assets of the
Company, Mr. Gillett received incentive payments of $296,812 on September
23, 1994, and $36,956 on January 31, 1996, each pursuant to the terms of
his employment agreement.
(4) Mr. Gillett resigned as Chairman of the Board, Chief Executive Officer and
Director of the Company effective September 30, 1996 in order to pursue
other business interests.
(5) Pursuant to a stock option plan adopted by the Company, these options were
issued on March 21, 1994. The options vest in equal installments over a
five year period and provide for an exercise price of $20.00 per share.
See "Management--Stock Option Plan."
24
AGGREGATE OPTION/SAR EXERCISES DURING YEAR ENDED SEPTEMBER 30, 1996
AND OPTION/SAR VALUES AS OF SEPTEMBER 30, 1996
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)(1)
--------------- -------------------
SHARES
ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ------------------ --------------- -------------------
George N. Gillett, Jr. ....... -- $-- 786,486/ -- $ 5,831,355/$ --
Andrew P. Daly................ -- -- 97,746/115,164 1,788,752/1,192,501
J. Kent Myers................. -- -- 53,988/ 35,992 987,980/ 658,654
James S. Mandel............... -- -- 35,992/ 53,988 431,904/ 647,856
Christopher P. Ryman.......... -- -- 53,988/ 35,992 987,980/ 658,654
- --------
(1) The Company's common stock is not publicly traded and, accordingly, there
is no current market price for the common stock. For purposes of this
calculation, the Company has estimated that the fair value of the Company's
common stock as of September 30, 1996 was $32.00 per share.
PENSION PLANS
The Company has no pension plans.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS OF THE COMPANY
The Company has entered into an employment agreement with Adam Aron (the
"Employment Agreement"). Pursuant to the Employment Agreement, Mr. Aron serves
as Chief Executive Officer of the Company. The initial term of his employment
is for the period from August 1, 1996 through September 30, 1999, with a two-
year automatic renewal thereafter, subject to notice of termination by either
Mr. Aron or the Company. Mr. Aron's base salary is $560,000 per year, and a
bonus is guaranteed at an annualized rate of $250,000 through fiscal 1997,
after which Mr. Aron will participate in the Company's bonus plan.
Pursuant to the Employment Agreement, Mr. Aron will be granted 18,750
restricted shares of Common Stock and options to purchase 130,000 shares of
Common Stock, which restricted stock and options vest over five years. The
Company will provide Mr. Aron a life insurance policy of $5 million and
$500,000 of annual disability income protection. The Company will purchase a
home of Mr. Aron's choice in the Vail Valley (up to a maximum purchase price of
$1.5 million) for his use while employed by the Company. Mr. Aron is subject to
a 12 month non-compete clause upon termination.
The Company has entered into an employment agreement with Andrew P. Daly.
Such agreement provides that Mr. Daly will serve as President of the Company
for a three-year term. Mr. Daly's base salary will be $350,000 per year and Mr.
Daly will participate in the Company's bonus Plan. In addition, pursuant to
such agreement, Mr. Daly was granted 6,250 restricted shares of Common Stock
and options to purchase 50,000 shares of Common Stock, all vesting over five
years. The Company will provide Mr. Daly a life insurance policy of $3 million
and $262,500 of annual disability income protection. Mr. Daly will be subject
to a 12 month non-compete clause upon termination.
The Company will enter into an employment agreement with James P. Donohue.
Such agreement will provide that Mr. Donohue will serve as Senior Vice
President and Chief Financial Officer of the Company for a three-year term. Mr.
Donohue's base salary will be $300,000 per year and Mr. Donohue will
participate in the Company's bonus plan. In addition, pursuant to such
agreement, Mr. Donohue will be granted 6,000 restricted shares of Common Stock
and options to purchase 30,000 shares of Common Stock, which restricted stock
and options vest over three years. Mr. Donohue will be subject to a 12 month
non-compete clause upon termination.
25
Vail Associates is currently negotiating employment contracts with Messrs.
Ryman, Myers, Flynn and Thompson, which will provide for annual salaries, as
well as participation in bonus, stock option and other employee benefit plans.
Each agreement will be for a three-year term expiring May 31, 1999, subject to
automatic renewal for successive one-year terms in the absence of notice of
non-renewal by either party. Each agreement will provide that, in the event of
(i) termination of the officer's employment by Vail Associates without "cause"
as defined in the agreement, (ii) termination of employment by the officer for
"good reason" as defined in the agreement, or (iii) non-renewal of the
agreement by Vail Associates, the officer is entitled to continue to receive
his then-current annual salary for a period of 12 months following such
termination or non-renewal (18 months if such termination or non-renewal occurs
following a "change in control"). Each agreement will further provide that the
officer may resign without good reason upon not less than 120 days' notice.
Following termination of the officer's employment for any reason, the officer
will be subject to a non-competition covenant for a period of one year. For
purposes of the agreements, a "change in control" means the acquisition by any
person or group of affiliated persons (other than Apollo Ski Partners and its
affiliates) of equity securities of Vail Associates or the Company representing
either a majority of the combined ordinary voting power of all outstanding
voting securities of Vail Associates or the Company or a majority of the common
equity interest in Vail Associates or the Company.
The Company and Vail Associates have separate employment agreements with Mr.
Mandel pursuant to which Mr. Mandel receives a current aggregate salary of
$300,000 per year, as well as participation in bonus, stock option and other
employee benefit plans. Mr. Mandel's employment agreements are effective until
March 31, 1997, unless earlier terminated according to their terms. In the
event the Company or Vail Associates terminates Mr. Mandel's employment
agreements without cause, Mr. Mandel will be paid his aggregate salary and
fringe benefits for a period of 12 months following the date of termination or
through March 31, 1997, whichever period is longer. Payment of the severance
benefits is conditioned upon Mr. Mandel's compliance with certain non-
competition, confidentiality and loyalty provisions which survive the
employment agreement.
Mr. Gillett resigned as Chairman of the Board, Chief Executive Officer,
President and Director of the Company effective September 30, 1996. Since
October 8, 1992, in connection with his employment by the Company, Mr. Gillett
was granted (i) 357,488 shares of Common Stock as incentive based compensation
(the "Gillett Stock"), (ii) options to purchase 204,082 shares of Common Stock
at an exercise price of $13.70 per share (the "$13.70 Options") and (iii)
options to purchase 582,404 shares of Common Stock at $23.67 per share (the
"$23.67 Options"). Pursuant to the terms of an agreement dated October 11, 1996
between Mr. Gillett and the Company (the "Gillett Agreement"), Mr. Gillett (i)
will be paid his base salary (currently $1.7 million per annum) through October
7, 1997, (ii) exchanged the $23.67 Options for 168,159 shares of Common Stock
and (iii) waived his right to the Distribution with respect to the Gillett
Stock and the $13.70 Options as payment of the exercise price on the $13.70
Options.
STOCK OPTION PLANS
The Company adopted a stock option plan (the "1992 Plan") pursuant to which
options covering an aggregate of 1,022,755 shares of Common Stock may be issued
to key employees, directors, consultants, and advisors of the Company or its
subsidiaries. Options covering 916,650 shares of Common Stock have been issued
to various key executives and managers of the Company. All of the options vest
in equal installments over five years, with exercise prices ranging from $13.70
per share to $21.50 per share. As of September 30, 1996, 403,614 of these
options were exercisable. The Company has amended certain option agreements
under the 1992 Plan with certain members of the management of the Company to
eliminate the right of those option holders to receive any portion of the
payments made under the Rights. In connection with such amendment, the Company
has accrued the Option Payment. See also "Item 5. Market for Registrant's
Common Equity and Related Stockholder Matters."
26
In July 1996 the Company adopted a long term incentive and share award plan
(the "1996 Plan") to attract, retain and motivate employees and directors of
the Company. The Board of Directors of the Company has approved the 1996 Plan
and the reservation of 750,000 shares of Common Stock for issuance under the
1996 Plan. As of September 30, 1996, under the 1996 Plan 31,000 shares of
Common Stock had been awarded (subject to certain restrictions) and options to
purchase an aggregate of 210,000 shares of Common Stock at an exercise price of
$40.00 per share had been granted to executives of the Company. Of these
awards, 25,000 shares of restricted Common Stock and options to purchase
180,000 shares of Common Stock will vest in equal increments over five years.
The remaining awards vest in equal increments over three years. None of the
options were exercisable as of September 30, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL STOCKHOLDERS
The following table sets forth the number and percentage (if more than 1%) of
the outstanding shares of Common Stock owned beneficially as of December 20,
1996 by each director or nominee, by all directors and officers as a group and
each person (including the address of each such person) who to the knowledge of
the Company, beneficially owned more than 5% of the Company's outstanding
common stock on December 20, 1996.
CLASS A
COMMON COMMON
STOCK STOCK
------------------- -------------------
NAME AND AMOUNT AND AMOUNT AND
ADDRESS OF NATURE OF NATURE OF TOTAL PERCENT OF
BENEFICIAL BENEFICIAL PERCENT BENEFICIAL PERCENT OUTSTANDING
OWNER(1) OWNERSHIP OF CLASS OWNERSHIP OF CLASS COMMON STOCK
- ----------------------- ---------- -------- ---------- -------- ----------------
Apollo Ski Partners,
L.P.(2)
2 Manhattanville Road
Purchase, NY 10577.... 5,958,874 96% 1,325,669 32% 70%
Meadow Walk, L.P.
100 South Bedford Rd.
Mount Kisco, NY 10549. 194,479 3% 1,161,020 28% 13%
George N. Gillett,
Jr.(3)
Gillett Group Manage-
ment, Inc.
1000 S. Frontage Road
West
Vail, CO 81657........ -- -- 729,729 18% 7%
- --------
(1) With the exception of 13,000 shares of Common Stock owned by Mr. Ressler,
no directors or officers of the Company directly own shares of Common
Stock. The Company does not believe that any director or executive officer
of the Company beneficially owns Common Stock. (See "Item 10. Directors and
Executive Officers of the Registrant.")
(2) Apollo Ski Partners, L.P. is a Delaware limited partnership ("Apollo Ski")
organized principally for the purpose of holding Common Stock of the
Company. The general partner of Apollo Ski is Apollo Investment Fund, L.P.,
a Delaware limited partnership ("Apollo Fund"), a securities investment
fund. The managing general partner of Apollo Fund is Apollo Advisors, L.P.,
a Delaware limited partnership, the general partner of which is Apollo
Capital Management, Inc., a Delaware corporation ("Apollo Capital"). Mr.
Black, a director of the Company, is also a director of Apollo Capital. All
officers, directors and shareholders of Apollo Capital, including Messrs.
Black, Katz, Mack, Rowan and Spector (directors of the Company), disclaim
any beneficial ownership of the Common Stock of the Company (See also "Item
10. Directors and Executive Officers of the Registrant.")
27
(3) Mr. Gillett resigned as Chairman of the Board, Chief Executive Officer,
President and Director of the Company effective September 30, 1996. Since
October 8, 1992, in connection with his employment by the Company, Mr.
Gillett was granted (i) 357,488 shares of Common Stock as incentive based
compensation, (ii) options to purchase 204,082 shares of Common Stock at an
exercise price of $13.70 per share (the "$13.70 Options") and (iii) options
to purchase 582,404 shares of Common Stock at $23.67 per share (the "$23.67
Options"). Pursuant to the terms of an agreement dated October 11, 1996
between Mr. Gillett and the Company, Mr. Gillett (i) exchanged the $23.67
Options for 168,159 shares of Common Stock and (ii) exercised the $13.70
Options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Each subsidiary of the Company is wholly-owned, either directly or
indirectly, by the Company, except for minor amounts of stock issued to
employees of various subsidiaries of Vail Associates required in connection
with certain real estate brokerage licenses in Colorado.
The Company has distributed a right to receive up to $4.87 per share of
Common Stock (the "Rights") to all stockholders of record on October 11, 1996,
with a maximum aggregate amount payable under the Rights of $50.5 million.
Under certain option agreements held by management, option holders would have
been entitled to participate in this distribution. The Company has amended
those agreements to eliminate their right of option holders to receive any
portion of the payments made under the Rights. In connection with such
amendment, the Company has accrued a payable to such option holders of
approximately $4.5 million (the "Option Payment"). The option holders will
receive 60% of the Option Payment at the times that payments are made under the
Rights and the remaining 40% at the time the options are exercised.
The Company pays a fee of $500,000 per year to Apollo Advisors, L.P. for
management services and expenses related thereto. This fee has been incurred
each year since 1993 and is paid partly in cash and partly in services rendered
by the Company to Apollo Advisors, L.P. and its affiliates. This arrangement
was approved by the Board of Directors of the Company in March 1993.
In 1995, Mr. Daly's spouse and Mr. Thompson and his spouse received financial
terms more favorable than those available to the general public in connection
with their purchase of homesites at Bachelor Gulch Village. Rather than payment
of an earnest money deposit with the entire balance due in cash at closing,
these contracts provide for no earnest money deposit with the entire purchase
price (which was below fair market value) to be paid under promissory notes of
$438,750 and $350,000 for Mr. Daly's spouse and Mr. and Mrs. Thompson,
respectively, each to be secured by a first deed of trust and amortized over 25
years at 8% per annum interest, with a balloon payment due on the earlier of
five years from the date of closing or one year from the date employment with
the Company is terminated.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Index to Financial Statements and Financial Statement Schedules.
(i) See "Item 8. Financial Statements and Supplementary Data" for the index
to the Financial Statements.
All other schedules are omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements or notes thereto.
28
(b) Index to Exhibits
The following exhibits are either filed herewith or, if so indicated,
incorporated by reference to the documents indicated in parentheses which have
previously been filed with the Securities and Exchange Commission.
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ------------------------------------------------------- ------------
2.1 Stock Purchase Agreement dated August 31, 1994 between
Gillett Holdings, Inc. and PPC Acquisition Co., (with
selected exhibits). (Incorporated by reference to
Exhibit 2.1 of the report on Form 8-K of Gillett
Holdings, Inc. for the reportable event occurring on
August 31, 1994.)
3.1 Amended and Restated Certificate of Incorporation filed
with the Secretary of State of the State of Delaware on
the Effective Date. (Incorporated by reference to
Exhibit 3.1 of the Registration Statement on Form S-4
of Gillett Holdings, Inc. (Registration No. 33-52854)
including all amendments thereto.)
3.2 Amended and Restated By-Laws adopted on the Effective
Date. (Incorporated by reference to Exhibit 3.2 of the
Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all
amendments thereto.)
4.1 Form of Senior Subordinated Indenture by and between
Gillett Holdings, Inc., as Issuer, and the United
States Trust Company of New York, as Trustee.
(Incorporated by reference to Exhibit T3C to
Registrant's Application for Qualification under the
Trust Indenture Act of 1939 on Form T-3 filed September
15, 1992, File No. 22-22538.)
4.2 Form of Class 2 Common Stock Registration Rights
Agreements between the Company and holders of Class 2
Common Stock. (Incorporated by reference to Exhibit
4.13 of the Registration Statement on Form S-4 of
Gillett Holdings, Inc. (Registration No. 33-52854)
including all amendments thereto.)
10.1 Management Agreement by and between Beaver Creek Resort
Company of Colorado and Vail Associates, Inc.
(Incorporated by reference to Exhibit 10.1 of the
Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all
amendments thereto.)
10.2 Forest Service Term Special Use Permit for Beaver Creek
ski area. (Incorporated by reference to Exhibit 10.2 of
the Registration Statement on Form S-4 of Gillett
Holdings, Inc. (Registration No. 33-52854) including
all amendments thereto.)
10.3 Forest Service Special Use Permit for Beaver Creek ski
area. (Incorporated by reference to Exhibit 10.3 of the
Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all
amendments thereto.)
10.4 Forest Service Unified Permit for Vail ski area.
(Incorporated by reference to Exhibit 10.4 of the
Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all
amendments thereto.)
10.5(a) Employment Agreement dated October 8, 1992 by and among
Gillett Holdings, Inc., Vail Associates, Inc., Vail
Associates Real Estate, Inc., Beaver Creek Associates,
Inc., Packerland Packing Company, Inc. and George N.
Gillett, Jr. (Incorporated by reference to Exhibit 10.7
of the Registration Statement on Form S-4 of Gillett
Holdings, Inc. (Registration No. 33-52854) including
all amendments thereto.)
10.5(b) First Amendment to GNG Employment Agreement dated as of
September 1, 1993 by and among the Company, Vail
Associates, Inc., Vail Associates Real Estate, Inc.,
Beaver Creek Associates, Inc., Packerland Packing
Company, Inc., and George N. Gillett, Jr. (Incorporated
by reference to Exhibit 10.7(b) of the report on Form
10-K of Gillett Holdings, Inc. for the period from
October 9, 1992 through September 30, 1993.)
29
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------------------------------------------------- ------------
10.6 Employment Agreement dated October 8, 1992 between
Vail Associates, Inc. and Andrew P. Daly.
(Incorporated by reference to Exhibit 10.15 of the
Registration Statement on Form S-4 of Gillett
Holdings, Inc. (Registration No. 33-52854) including
all amendments thereto.)
10.7 Employment Agreement dated October 30, 1992 between
Vail Associates, Inc. and James Kent Myers.
(Incorporated by reference to Exhibit 10.10 of the
report on Form 10-K of Gillett Holdings, Inc. for the
period from October 9, 1992 through September 30,
1993.)
10.8 Joint Liability Agreement by and among Gillett
Holdings, Inc. and the subsidiaries of Gillett
Holdings, Inc. (Incorporated by reference to Exhibit
10.10 of the Registration Statement on Form S-4 of
Gillett Holdings, Inc. (Registration No. 33-52854)
including all amendments thereto.)
10.9(a) Management Agreement between Gillett Holdings, Inc.
and Gillett Group Management, Inc. dated as of the
Effective Date. (Incorporated by reference to Exhibit
10.11 of the Registration Statement on Form S-4 of
Gillett Holdings, Inc. (Registration No. 33-52854)
including all amendments thereto.)
10.9(b) Amendment to Management Agreement by and among the
Company and its subsidiaries dated as of November 23,
1993. (Incorporated by reference to Exhibit 10.12(b)
of the report on Form 10-K of Gillett Holdings, Inc.
for the period from October 9, 1992 through September
30, 1993.)
10.10(a) Tax Sharing Agreement between Gillett Holdings, Inc.
dated as of the Effective Date. (Incorporated by
reference to Exhibit 10.12 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No. 33-52854) including all amendments
thereto.)
10.10(b) Amendment to Tax Sharing Agreement by and among the
Company and its subsidiaries dated as of November 23,
1993. (Incorporated by reference to Exhibit 10.13(b)
of the report on Form 10-K of Gillett Holdings, Inc.
for the period from October 9, 1992 through September
30, 1993.)
10.11 Form of Gillett Holdings, Inc. Deferred Compensation
Agreement for certain GHTV employees. (Incorporated
by reference to Exhibit 10.13(b) of the Registration
Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No. 33-52854) including all amendments
thereto.)
10.12(a) Credit Agreement dated as of March 31, 1995 among The
Vail Corporation, the Banks named therein and
NationsBank of Texas, N.A., as issuing banks and
agent. (Incorporated by reference to Exhibit 10.12(a)
of the report on Form 10-Q of Gillett Holdings, Inc.
for the quarterly period ended March 31, 1995.)
10.12(b) Second Amended and Restated Credit Agreement dated as
of March 31, 1995 among The Vail Corporation, the
banks named therein and NationsBank of Texas, N.A.,
as issuing banks and agent. (Incorporated by
reference to Exhibit 10.12(b) of the report on Form
10-Q of Gillett Holdings, Inc. for the quarterly
period ended March 31, 1995.)
10.12(c) Pledge Agreement dated as of March 31, 1995 among
Gillett Holdings, Inc. and NationsBank of Texas, N.A.
as agent. (Incorporated by reference to Exhibit
10.12(c) of the report on Form 10-Q of Gillett
Holdings, Inc. for the quarterly period ended March
31, 1995.)
30
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------------------------------------------------- ------------
10.12(d) Guaranty dated as of November 23, 1993 by
subsidiaries named therein for the benefit of
NationsBank of Texas, N.A., as agent. (Incorporated
by reference to Exhibit 10.17(b) of the report on
Form 10-K of Gillett Holdings, Inc. for the period
from October 9, 1992 through September 30, 1993.)
10.12(e) Collateral Agency Agreement dated as of November 23,
1993 among Vail Associates, Inc., The Vail
Corporation, Beaver Creek Associates, Inc.,
NationsBank of Texas, N.A., as Collateral agent and
agent, Colorado National Bank as Beaver Creek
Indenture Trustee and Vail Indenture Trustee.
(Incorporated by reference to Exhibit 10.17(c) of the
report on Form 10-K of Gillett Holdings, Inc. for the
period from October 9, 1992 through September 30,
1993.)
10.12(f) Pledge Agreement dated as of November 23, 1993 among
The Vail Corporation, Vail Associates, Inc., Beaver
Creek Associates, Inc., Vail Associates Real Estate
Group, Inc., Vail Associates Real Estate, Inc., as
obligors and NationsBank of Texas, N.A., as
collateral agent. (Incorporated by reference to
Exhibit 10.17(d) of the report on Form 10-K of
Gillett Holdings, Inc. for the period from October 9,
1992 through September 30, 1993.)
10.12(g) Trust Indenture dated as of September 1, 1992 between
Eagle County, Colorado, and Colorado National Bank,
as Trustee, securing Sports Housing Facilities
Revenue Refunding Bonds. (Incorporated by reference
to Exhibit 10.16(g) of the Registration Statement on
Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
10.12(h) First Amendment to Trust Indenture dated as of
November 23, 1993 between Eagle County, Colorado and
Colorado National Bank, as Trustee, securing Sports
and Housing Facilities Revenue Refunding Bonds.
(Incorporated by reference to Exhibit 10.17(f) of the
report on Form 10-K of Gillett Holdings, Inc. for the
period from October 9, 1992 through September 30,
1993.)
10.12(i) Trust Indenture dated as of September 1, 1992 between
Eagle County, Colorado, and Colorado National Bank,
as Trustee, securing Sports Facilities Revenue
Refunding Bonds. (Incorporated by reference to
Exhibit 10.16(h) of the Registration Statement on
Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
10.12(j) First Amendment to Trust Indenture dated as of
November 23, 1993 between Eagle County, Colorado and
Colorado National Bank, as Trustee, securing Sports
Facilities Revenue Refunding Bonds. (Incorporated by
reference to Exhibit 10.17(h) of the report on Form
10-K of Gillett Holdings, Inc. for the period from
October 9, 1992 through September 30, 1993.)
10.12(k) Sports and Housing Facilities Financing Agreement
dated as of September 1, 1992 between Eagle County,
Colorado and Vail Associates, Inc. (Incorporated by
reference to Exhibit 10.16(i) of the Registration
Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No. 33-52854) including all amendments
thereto.)
10.12(l) First Amendment to Sports and Housing Facilities
Financing Agreement and Assignment and Assumption
Agreement dated as of November 23, 1993 between Eagle
County, Colorado, Vail Associates, Inc. and The Vail
Corporation. (Incorporated by reference to Exhibit
10.17(j) of the report on Form 10-K of Gillett
Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)
31
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------------------------------------------------- ------------
10.12(m) Sports Facilities Financing Agreement dated as of
September 1, 1992 between Eagle County, Colorado and
Beaver Creek Associates, Inc., with Vail Associates,
Inc. as Guarantor. (Incorporated by reference to
Exhibit 10.16(j) of the Registration Statement on
Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
10.12(n) First Amendment to Sports Facilities Financing
Agreement and Assignment and Assumption Agreement
dated as of November 23, 1993 by and among Eagle
County, Colorado, Beaver Creek Associates, Inc., Vail
Associates, Inc., and The Vail Corporation.
(Incorporated by reference to Exhibit 10.17(l) of the
report on Form 10-K of Gillett Holdings, Inc. for the
period from October 9, 1992 through September 30,
1993.)
10.12(0) Guaranty dated as of September 1, 1992, by Vail Associates,
Inc. delivered to Colorado National Bank, as Trustee.
(Incorporated by reference to Exhibit 10.16(k) of the
Registration Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No. 33-52854) including all amendments thereto.)
10.13(a) Agreement for Purchase and Sale dated as of August 25, 1993 by
and among Arrowhead at Vail, Arrowhead Ski Corporation,
Arrowhead at Vail Properties Corporation, Arrowhead Property
Management Company and Vail Associates, Inc. (Incorporated by
reference to Exhibit 10.19(a) of the report on Form 10-K of
Gillett Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)
10.13(b) Amendment to Agreement for Purchase and Sale dated September
8, 1993 by and between Arrowhead at Vail, Arrowhead Ski
Corporation, Arrowhead at Vail Properties Corporation,
Arrowhead Property Management Company and Vail Associates,
Inc. (Incorporated by reference to Exhibit 10.19(b) of the
report on Form 10-K of Gillett Holdings, Inc. for the period
from October 9, 1992 through September 30, 1993.)
10.13(c) Second Amendment to Agreement for Purchase and Sale dated
September 22, 1993 by and between Arrowhead at Vail, Arrowhead
Ski Corporation, Arrowhead at Vail Properties Corporation,
Arrowhead Property Management Company and Vail Associates,
Inc. (Incorporated by reference to Exhibit 10.19(c) of the
report on Form 10-K of Gillett Holdings, Inc. for the period
from October 9, 1992 through September 30, 1993.)
10.13(d) Third Amendment to Agreement for Purchase and Sale dated
November 30, 1993 by and between Arrowhead at Vail, Arrowhead
Ski Corporation, Arrowhead at Vail Properties Corporation,
Arrowhead Property Management Company and Vail/Arrowhead, Inc.
(Incorporated by reference to Exhibit 10.19(d) of the report
on Form 10-K of Gillett Holdings, Inc. for the period from
October 9, 1992 through September 30, 1993.)
10.14 1992 Stock Option Plan of Gillett Holdings, Inc. (Incorporated
by reference to Exhibit 10.20 of the report on Form 10-K of
Gillett Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)
10.15 Agreement to Settle Prospective Litigation and for Sale of
Personal Property dated May 10, 1993, between the Company,
Clifford E. Eley, as Chapter 7 Trustee of the Debtor's
Bankruptcy Estate, and George N. Gillett, Jr. (Incorporated by
reference to Exhibit 10.21 of the report on Form 10-K of
Gillett Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)
32
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ------------------------------------------------------ ------------
10.16 Employment Agreement dated April 1, 1994 between
Gillett Holdings, Inc. and James S. Mandel
(Incorporated by reference to Exhibit 10.22 of the
report on Form 10-K of Gillett Holdings, Inc. for the
year ended September 30, 1994.)
10.17 Employment Agreement dated April 1, 1994 between Vail
Associates, Inc. and James S. Mandel (Incorporated by
reference to Exhibit 10.23 of the report on Form 10-K
of Gillett Holdings, Inc. for the year ended September
30, 1994.)
10.18 Employment Agreement dated October 1, 1996 between
Vail Associates, Inc. and Andrew P. Daly.
10.19 Employment Agreement dated July 29, 1996 between Vail
Resorts, Inc. and Adam M. Aron.
10.20 Stock Purchase Agreement Among Vail Resorts, Inc.,
Ralston Foods, Inc., and Ralston Resorts, Inc. dated
July 22, 1996. (Incorporated by reference to Exhibit
2.1 of the report on Form 8-K of Vail Resorts, Inc.
dated July 23, 1996.)
16. Letter from Ernst & Young LLP regarding change in
certifying accountant. (Incorporated by reference to
Exhibit 16 of the report on Form 8-K of Gillett
Holdings, Inc. for the reportable event occurring on
October 25, 1994.)
21.1 Subsidiaries of Vail Resorts, Inc. (Incorporated by
reference to Exhibit 21 of the report on Form 10-K of
Gellett Holdings, Inc. for the year ended September
30, 1995.)
99.1(a) Debtor's Second Amended Joint Disclosure Statement
Pursuant to Section 1125 of the Bankruptcy Code for
the Second Amended Joint Plan of Reorganization of the
Debtors. (Incorporated by reference to Exhibit T3E.1
of Registrant's Application for Qualification under
the Trust Indenture Act of 1939 on Form T-3 filed
September 15, 1992, File No. 22-22538.)
99.1(b) Exhibits to Debtor's Second Amended Joint Disclosure
Statement Pursuant to Section 1125 of the Bankruptcy
Code for the Second Amended Joint Plan of
Reorganization of the Debtors. (Incorporated by
reference to Exhibit T3E.1 of Registrant's Application
for Qualification under the Trust Indenture Act of
1939 on Form T-3 filed September 15, 1992, File No.
22-22538.)
99.2 Supplement to Debtor's Second Amended Joint Disclosure
Statement Pursuant to Section 1125 of the Bankruptcy
Code for the Second Amended Joint Plan of
Reorganization of the Debtors. (Incorporated by
reference to Exhibit 28.2 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No. 33-52854) including all amendments
thereto.)
99.3 Exhibits to the Second Amended Joint Plan of
Reorganization of the Debtors. (Incorporated by
reference to Exhibit 28.3 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No. 33-52854) including all amendments
thereto.)
(c) A report on Form 8-K was filed on July 23, 1996 related to the proposed
acquisition by the Company of Ralston Resorts, Inc. pursuant to a stock
purchase agreement dated July 22, 1996.
33
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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 ON DECEMBER 23,
1996.
Vail Resorts, Inc.
/s/ James P. Donohue
By __________________________________
James P. Donohue
Senior Vice President and Chief
Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON DECEMBER 23, 1996.
SIGNATURE TITLE
--------- -----
/s/ Adam M. Aron* Chairman of the Board and Chief
- ------------------------------------- Executive Officer (Principal Chief
ADAM M. ARON Executive Officer)
/s/ Andrew P. Daly* Director
- -------------------------------------
ANDREW P. DALY
/s/ Leon D. Black* Director
- -------------------------------------
LEON D. BLACK
/s/ Craig M. Cogut* Director
- -------------------------------------
CRAIG M. COGUT
/s/ Stephen C. Hilbert* Director
- -------------------------------------
STEPHEN C. HILBERT
/s/ Robert A. Katz* Director
- -------------------------------------
ROBERT A. KATZ
/s/ Thomas H. Lee* Director
- -------------------------------------
THOMAS H. LEE
/s/ William L. Mack* Director
- -------------------------------------
WILLIAM L. MACK
/s/ Antony P. Ressler* Director
- -------------------------------------
ANTONY P. RESSLER
/s/ Marc J. Rowan* Director
- -------------------------------------
MARC J. ROWAN
II-1
SIGNATURE TITLE
--------- -----
/s/ John J. Ryan III* Director
- -------------------------------------
JOHN J. RYAN III
/s/ John F. Sorte* Director
- -------------------------------------
JOHN F. SORTE
/s/ Bruce H. Spector* Director
- -------------------------------------
BRUCE H. SPECTOR
/s/ James S. Tisch* Director
- -------------------------------------
JAMES S. TISCH
/s/ James P. Donohue* Senior Vice President and Chief
- ------------------------------------- Financial Officer
JAMES P. DONOHUE
/s/ Robert A. Katz Attorney-in-Fact
- -------------------------------------
ROBERT A. KATZ
* By Attorney-in-Fact
II-2
EXHIBIT INDEX
The following exhibits are included herewith. Refer to Item 14 of the Form
10-K for the year ended September 30, 1996 for additional exhibits to the Form
10-K that are incorporated by reference to documents which have previously been
filed with the Securities and Exchange Commission.
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
10.18 Employment Agreement dated October 1, 1996 between Vail
Associates, Inc. and
Andrew P. Daly.
10.19 Employment Agreement dated July 29, 1996 between Vail
Resorts, Inc. and
Adam M. Aron.