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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: October 29, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _________________
to _________________
Commission File Number: 333-26091
BOOTH CREEK SKI HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-1359604
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 South Frontage Road West, Suite 100
Vail, Colorado 81657
(970) 476-4030
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
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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 of this Form 10-K or any
amendment to this Form 10-K. [X]
As of December 31, 1999, the number of shares outstanding of the
registrant's Common Stock, par value $.01 per share, was 1,000 shares. There is
no trading market for the Common Stock. Accordingly, the aggregate market value
of the Common Stock held by non-affiliates of the registrant is not
determinable. See Part II, Item 5 of this Report.
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TABLE OF CONTENTS
Item Page Number
- ---- -----------
PART I
1. Business...................................................... 2
2. Properties.................................................... 22
3. Legal Proceedings............................................. 22
4. Submission of Matters to a Vote of Security Holders........... 25
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................... 26
6. Selected Financial Data....................................... 26
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 29
7a. Quantitative and Qualitative Disclosures About
Market Risk................................................... 39
8. Financial Statements and Supplementary Data................... 40
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 40
PART III
10. Directors and Executive Officers of the Registrant............ 41
11. Executive Compensation........................................ 43
12. Security Ownership of Certain Beneficial Owners
and Management................................................ 47
13. Certain Relationships and Related Transactions................ 51
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................................... 57
Signatures.................................................... 62
Index of Financial Statements................................. F-1
PART I
As used in this Report, the "Company" or "Booth Creek" refers to Booth Creek
Ski Holdings, Inc. and its subsidiaries, unless the context otherwise requires.
The Company is a wholly-owned subsidiary of Booth Creek Ski Group, Inc.
("Parent"). Since November 27, 1996 the Company has acquired the
Northstar-at-Tahoe ("Northstar") and Sierra-at-Tahoe ("Sierra") ski resorts in
the Lake Tahoe region of Northern California, the Bear Mountain ski resort
("Bear Mountain") in Southern California, the Waterville Valley ("Waterville
Valley") and Mount Cranmore ("Mt. Cranmore") ski resorts in the White Mountains
of New Hampshire, the Summit at Snoqualmie (the "Summit") ski resort complex in
the Cascade Mountains of Northwest Washington, the Grand Targhee ski resort
("Grand Targhee") in the Grand Tetons in Wyoming and the Loon Mountain ski
resort ("Loon Mountain") in the White Mountains of New Hampshire.
Item 1. Business
Overview
Booth Creek owns and operates eight ski resort complexes encompassing eleven
separate resorts, making the Company the fourth largest operator in North
America based on approximately 2.4 million skier days recorded during the
1998/99 ski season at such resorts. Booth Creek primarily operates regional ski
resorts which, in the aggregate, attract approximately 85% of their guests from
their regional ski markets, within a 200 mile driving radius of each resort.
The Company's properties offer approximately 9,281 acres of skiable terrain,
397 trails, 94 lifts (including 16 high-speed lifts and two Gondolas) and
on-mountain capacity to accommodate approximately 56,000 guests daily. For the
year ended October 29, 1999, the Company generated revenues of $125.7 million
and EBITDA before unusual items of $28.2 million, and incurred a net loss of
$18.8 million. For the year ended October 30, 1998, the Company generated pro
forma revenues of $115.5 million, pro forma EBITDA of $27.4 million, and
incurred a pro forma net loss of $14.8 million.
The Company's resort properties are primarily located near major skiing
populations, including four of the five largest regional ski markets in the
United States: Los Angeles/San Diego, San Francisco/Sacramento, Boston and
Seattle/Tacoma. The Company believes this geographical diversification may help
to limit the Company's exposure to regional economic downturns and unfavorable
weather conditions.
The Company's resorts seek to differentiate themselves in their respective
markets by selectively upgrading on-mountain facilities and guest services,
employing targeted marketing strategies and offering extensive skier
development programs, all of which create a competitively-priced, high-quality
guest experience. Since its formation in October 1996, the Company's resorts
have collectively spent over $42 million in capital expenditures, including the
addition of high-speed chairlifts, additional snowmaking capabilities, improved
trail grooming equipment, and enhanced on-mountain lodging, retail and food
service amenities. The Company believes its existing resorts are well
maintained. The Company also uses targeted advertising, database marketing and
strategic marketing alliances to enhance the image of its resorts and increase
regional market share. The Company also offers extensive development programs
to improve the technical skill level of all types of skiers, which management
believes is important to expand the total skier population and increase skier
visitation frequency.
The following is an organizational chart of Booth Creek Ski Group, Inc.
("Parent") and the Company and the Company's subsidiaries. Each subsidiary of
the Company is, directly or indirectly, wholly-owned by Booth Creek.
[GRAPHIC OF ORGANIZATIONAL CHART OMITTED]
The Company's principal executive offices are located at 1000 South Frontage
Road West, Suite 100, Vail, Colorado 81657. Its telephone number at that
location is (970) 476-4030. The Company was incorporated in Delaware on October
8, 1996.
Industry
There are 509 ski areas in the United States which, during the 1998/99 ski
season generated approximately 52.0 million skier days. A "skier day"
represents one skier or snowboarder visiting one ski resort for one day,
including skiers and snowboarders using complimentary and season passes.
Calculation of skier days requires an estimate of visits by season passholders.
Although different ski resort operators may use different methodologies for
making such estimations, management believes that any resulting differences in
total skier days are immaterial. U.S. ski areas range from small ski resort
operations, which primarily cater to day skiers and regional overnight skiers
from nearby population centers, to larger resorts which, given the scope of
their operations and their accessibility, are able to attract skiers and
snowboarders from their regional ski markets as well as destination resort
guests who are seeking a comprehensive vacation experience. While regional ski
market skiers tend to focus primarily on lift ticket price and round-trip
travel time, destination travelers tend to be heavily influenced by the number
of amenities and activities offered as well as the perceived overall quality of
the vacation experience. The table below summarizes regional skier day
information from the 1994/95 ski season through the 1998/99 ski season.
U.S. Ski Industry Regions and Skier Days
(in thousands)
Rocky Pacific Lake
Season Northeast Southeast Midwest Mtns West Tahoe Total
- --------------------- --------- --------- ------- ------ ------- ----- ------
1994/95.............. 11,265 4,746 6,907 18,412 7,446 3,900 52,676
1995/96.............. 13,825 5,693 7,284 18,148 6,033 3,000 53,983
1996/97.............. 12,407 4,231 7,137 18,904 7,341 2,500 52,520
1997/98.............. 12,712 4,343 6,707 19,191 7,419 3,750 54,122
1998/99.............. 12,300 4,261 6,005 18,305 6,702 4,382 51,955
Five year average.... 12,502 4,655 6,808 18,592 6,988 3,506 53,051
Northeast: CT, MA, ME, NH, NY, VT, RI
Southeast: AL, GA, KY, MD, NC, NJ, PA, TN, VA, WV
Midwest: IA, IL, IN, MI, MN, MO, ND, NE, OH, SD, WI
Rocky Mtns: CO, ID, MT, NM, UT, WY
Pacific West: AK, AZ, CA (excluding Lake Tahoe Region), NV, OR, WA
Source: 1998/99 Kottke National End of Season Survey
Over the past decade, the ski resort industry has been experiencing a period
of consolidation. The number of United States ski areas has declined from 709
in 1986 to 509 in 1999. The number of ski areas may decline further, as many
mountain resorts lack the infrastructure, capital and management capability to
effectively compete in this multi-dimensional and service-intensive industry.
No major new ski resort has opened in the United States since 1989. Of the 509
ski areas, the 1998/99 Kottke National End of Season Survey estimates the
average resort recorded approximately 102,072 skier days. Only 25% of all
resorts typically report more than 200,000 skier days per season. All of the
Company's resorts except Mt. Cranmore and Grand Targhee typically record more
than 200,000 annual skier days. The trend among leading resorts is toward
investing in improving technology and infrastructure, including high-speed
lifts, attractive facilities and extensive snowmaking capabilities to deliver a
more consistent, quality experience. Since its formation, the Company's has
spent over $42 million in capital expenditures at its resorts to improve their
competitive position and to meet sustaining capital requirements. Management
believes the need for increased investment in resorts in general has required a
greater access to capital and has enhanced the position of resorts owned by
larger, better capitalized owners. Despite this consolidation, the ski industry
remains fragmented, with no one resort accounting for more than 3%, and no one
resort operator accounting for more than approximately 10%, of the United
States' 52.0 million skier days during the 1998/99 ski season. The four largest
ski resort companies, including the Company, accounted for approximately 28.9%
of all U.S. skier days recorded during the 1998/99 ski season.
Management believes that changes in demographics and certain ski industry
trends will be favorable for the U.S. ski industry. Members of the Baby Boom
generation, the single largest group of skiers, are moving into an age and
economic cycle when a greater portion of their disposable income is available
for recreational activities and the purchase of vacation homes. The next
largest group of skiers are the Echo Boom generation (children of Baby Boomers)
and the "X" Generation (young adults). With an estimated 114 million people,
members of these generations are beginning to form their recreational habits
and offer the largest potential increase in skiers since the emergence of the
Baby Boom generation in the late 1960's through the mid-1970's.
The emergence and growth of snowboarding, driven primarily by the Echo Boom
and X Generations, has energized interest in "on-snow" recreation. According to
the 1998/99 Kottke National End of Season Survey, the estimated number of
snowboarder visits has increased from 6.4 million in the 1994/95 ski season to
12.1 million in the 1998/99 ski season, an increase of approximately 89%.
Snowboarders tend to be between the ages of 13 and 25 and presently represent
an estimated 23.2% of all domestic ski resort visitors. Regional resorts are
the industry leaders in providing designated snowboarding parks, trails and
specialized trail grooming techniques for snowboarders. All of the Company's
resorts have allocated significant terrain to snowboarders. Management believes
that the growth in snowboarding has had, and will continue to have, a positive
impact on the snow sports industry, especially since it is attracting new age
groups, and will continue to be an important source of lift ticket, snow
school, retail and rental revenue growth for the Company.
The advent of snowboarding has been accompanied by the introduction of new
"shaped", alpine skis which make skiing easier to learn and enjoy. The shaped
skis significantly improve a new skier's learning progression, as well as
enhance the experience of skiers of all abilities through increased technical
ability and control. All of the Company's resorts have replaced all or a
majority of their rental skiing equipment with shaped skis. Further advances
and innovations in skier equipment, trail maintenance and lift technology are
also expected to lead to the greater popularity of skiing.
The Lake Tahoe region has averaged approximately 3.5 million annual skier
days over the last five years. Management estimates that approximately 70% to
75% of the skiers visiting Lake Tahoe resorts during the 1998/99 ski season
were from the San Francisco, Sacramento and Central California Valley
metropolitan areas. Other guests come principally from Southern California and
states with large ski populations, such as Texas, Illinois and Florida. Skiers
in this market can choose from among six major resorts, which include
Northstar, Sierra, Squaw Valley, Heavenly Valley, Alpine Meadows, and Kirkwood.
Northstar, Squaw Valley and Heavenly Valley attract a significantly greater
share of destination skiers than the area's other resorts.
The Southern California market has averaged approximately 2.8 million annual
skier days over the last five years. Management estimates that approximately
77% of the skiers visiting Southern California resorts during the 1998/99 ski
season were drawn primarily from the Los Angeles, Orange County and San Diego
metropolitan areas. Skiers in this market can choose from among four major
resorts, which include Bear Mountain, Snow Summit, Mountain High and Mammoth
Mountain.
The Northeast market (including New York) has averaged approximately 12.5
million annual skier days over the last five years. The Northeast market
consists of a significant percentage of day or weekend skiers due to the
relatively short driving radius to major metropolitan areas. While the
Northeast does not draw significant numbers of vacationing skiers from the
Western regions of the United States, it does compete with the Rocky Mountains
and Pacific West areas for Eastern vacationing skiers. Within the Northeast
region, skiers can choose from among over 50 major ski areas and resorts. The
region's major ski areas and resorts are concentrated in the mountainous areas
of New England and Eastern New York, with the bulk of skiers coming from the
population centers located in eastern Massachusetts, Southern New Hampshire,
Connecticut, Eastern New York, New Jersey and the Philadelphia area. Waterville
Valley, Mt. Cranmore and Loon Mountain all operate in the Northeast market.
The Company's Summit resort complex operates in the Washington state segment
of the Pacific West market, which recorded approximately 6.7 million skier days
during the 1998/99 ski season. Management estimates that more than 90% of the
skier days recorded at Washington state resorts during the 1998/99 ski season
were attributable to residents of the Seattle/Tacoma metropolitan area. Other
guests come primarily from other parts of Washington, Oregon and Western
Canada. Washington state resorts do not attract a significant number of
destination skiers. Within Washington state, skiers can choose from among 14
ski resorts, including the four resorts comprising the Summit. The largest ski
areas in Washington state are the Summit, Stevens Pass and Crystal Mountain.
Other ski areas in Washington are moderate to small in size.
The Rocky Mountains market has averaged approximately 18.6 million skier
days over the last five years, with a high percentage of visitors consisting of
destination skiers. Of the 90 ski areas in the region, 27 are located in
Colorado, accounting for approximately 62% of all recorded skier days in the
region during the 1998/99 ski season. The 40 ski resorts in the northern Rocky
Mountain states of Montana, Idaho and Wyoming, including the Company's Grand
Targhee resort, recorded a total of approximately 3.0 million skier days during
the 1998/99 ski season. Because resorts in this part of the region are
generally less accessible than resorts in Colorado or Utah, they tend to be
smaller and attract fewer destination skiers from outside of the Northern Rocky
Mountain states.
Resort Operations
The Company's eight resort complexes offer a variety of ski and non-ski
activities. The table below provides a summary of each resort's ski operations
and is followed by a more detailed description of each resort.
Approx.
Snow- Snow Beds
Skiable Vertical making Grooming Within
Resort Acres Drop Trails Lifts Coverage Machines 12 Miles
- -------------------- ------- -------- ------ ------------- --------- -------- --------
Northstar-at-Tahoe.. 2,400 2,280 63 1 High-Speed 50% 14 15,000
Gondola
4 High-Speed
Quads (1)
4 Fixed Grip
3 Surface
Sierra-at-Tahoe..... 1,663 2,212 46 3 High-Speed 10% 12 30,000
Quads
6 Fixed Grip
1 Surface
Bear Mountain....... 195 1,665 32 2 High-Speed 100% 8 11,000
Quads
7 Fixed Grip
3 Surface
Waterville Valley... 255 2,020 52 2 High-Speed 100% 8 6,500
Quads
6 Fixed Grip
4 Surface
Mt. Cranmore........ 190 1,167 39 1 High-Speed 100% 3 16,000
Quad
4 Fixed Grip
4 Surface
The Summit at
Snoqualmie........ 1,916 2,200 96 2 High-Speed 0% 14 1,000
Quads
18 Fixed Grip
7 Surface
Grand Targhee....... 2,412 2,200 28 1 High-Speed 0% 7 750
Quad
2 Fixed Grip
1 Surface
Loon Mountain....... 250 2,100 41 1 High-Speed 96% 8 13,000
Gondola
1 High-Speed
Quad
5 Fixed Grip
1 Surface
(1) High-Speed Quads are four-person chairlifts which decelerate and detach
from a cable during passenger loading and unloading and reattach and
accelerate thereafter.
Northstar-at-Tahoe
In management's opinion, Northstar-at-Tahoe, located near the north end of
Lake Tahoe, California, offers more activities and services in both winter and
summer than any of its competitors in the Lake Tahoe area. The resort's
8,600-foot Mt. Pluto features 2,400 acres of skiable terrain and a 2,280 foot
vertical drop. Northstar's 63 ski trails are served by 12 operating lifts,
including one gondola, four high-speed quads, two triple lifts and two double
lifts, which combine to transport up to 19,275 skiers uphill per hour.
Northstar also has approximately 65 kilometers of groomed trails for
cross-country skiing and snowshoeing and several on-mountain terrain parks for
snowboarders and adventurous skiers offering non-traditional bumps, jumps and
turns. Other facilities at Northstar include a village consisting of
condominium/hotel accommodations, restaurants, bars, shops, a child-care center
and convention facilities, a 22,700 square foot on-mountain ski lodge and a
5,800 square foot on-mountain children's ski school facility. Summer recreation
facilities include an 18-hole golf course, ten tennis courts, a horseback
riding
stable, fly fishing, mountain bike rentals and trails and a swimming pool.
Northstar currently ranks third in total skier days in the Lake Tahoe area and
is one of only 18 resorts in the United States to surpass the 500,000 skier
days milestone, which it did during the 1994/95, 1997/98 and 1998/99 ski
seasons. In selected years between 1990 and 1998, Northstar was named one of
the top ten family resorts in the United States by Travel & Leisure, Better
Homes & Gardens and Family Circle, as well as one of the best 50 ski resorts in
North America by Snow Country and Ski magazines. In 1999, Northstar was chosen
as the Best Family Reunion location by Family Tree magazine; Top 10 in the
nation for snow terrain features by Ski magazine and Top Sports Shop in the
nation by Ski magazine.
Northstar provides a full-service skiing experience for its clientele, which
typically includes the upper-income, Baby Boomer population. Northstar's
marketing is focused on the San Francisco Bay and the Sacramento Valley areas
as a destination skier's alternative to Colorado and Utah resorts. Northstar
also markets aggressively in Southern California and states with large ski
populations. Northstar is within a one hour drive of the Reno International
Airport, which offers convenient scheduled air service to all parts of the
United States, Western Canada and Mexico. Small private planes can fly into the
all-weather Truckee Airport, which is located two miles from Northstar, where
Northstar operates transit buses to the resort.
Typical Northstar guests include single male intermediate skiers between the
ages of 25 and 44 and earning between $50,000 and $100,000 and families headed
by professionals or business executives with incomes in excess of $100,000.
Northstar is within a 200 mile driving radius of the major population centers
of San Francisco and Sacramento and, therefore, attracts a significant number
of its guests from Northern California. Northstar has approximately 5,000 beds
at the resort with an additional 40,000 beds in the vicinity, 10,000 of which
are within a 12 mile radius. Management estimates that during the 1998/99 ski
season, 73% of the skiers visiting Northstar came from Northern California, 7%
from Southern California, 16% from other states and 4% from international
locales.
Northstar's snowmaking system is engineered to cover approximately 50% of
its ski trails, which management believes is adequate given the area's heavy
annual snowfall, which averaged approximately 367 inches per year during the
past five years. Northstar has pumping rights from nearby water sources which,
when coupled with its 60 million gallon water storage capacity, have been more
than sufficient to support the resort's needs. Snowmaking during the 1998/99
ski season consumed approximately 34 million gallons of water.
Northstar consists of over 8,000 acres of privately owned land, of which
less than one-third has been developed. Management believes that Northstar has
significant opportunities to develop additional ski terrain as well as
residential and commercial space. See Part I, Item 1. "Business - Real Estate
Development."
Sierra-at-Tahoe
Sierra-at-Tahoe is conveniently located near the large bed base of South
Lake Tahoe, California and is the closest major ski resort to Sacramento and
the Central California Valley. The resort's 8,852-foot peak offers 1,663
skiable acres and a 2,212 foot vertical drop. Sierra's 46 ski trails are
currently served by ten operating lifts, including three high-speed quads, one
triple lift and five double lifts, which combine to transport up to 14,921
skiers uphill per hour. Sierra operates a 46,000 square foot base lodge which
offers a variety of food and beverage services. Management believes that
Sierra's investment in its ski infrastructure has made it the best ski value in
the South Lake Tahoe area. Sierra does not offer summertime activities.
Sierra's demographic characteristics closely parallel Northstar's, although
Sierra's core customer base is slightly younger and less affluent with more
aggressive skiing demands. Sierra does not own or manage any real estate units
in the area but there are approximately 50,000 beds in the South Lake Tahoe
vicinity, including 30,000 beds within a 12 mile radius. Sierra attracts a
larger share of its guests from the Sacramento and Central California Valleys
than the San Francisco Bay area.
Sierra owns 20 acres of its 1,689 gross acreage and leases the remainder
under a Term Special Use Permit from the United States Forest Service. See Part
I, Item 1. "Business - Regulation and Legislation." Sierra's skiable terrain,
notable for its extensive grooming and wind-protected slopes, requires less
snow than other resorts to provide appealing ski conditions. Due to its
abundant annual snowfall, which has averaged approximately 546 inches per year
over the past five years, Sierra is not as dependent upon snowmaking and, as a
result, its snowmaking equipment covers only 10% of Sierra's total acreage.
Sierra also employs a modern fleet of snow
grooming machines which maintain high-quality skiing surfaces. In 1999, Sierra
was ranked as one of the best ten resorts in the Pacific region by Ski
magazine.
Bear Mountain
Bear Mountain is located in the San Bernardino mountains of Southern
California. Its 8,805-foot peak features 195 acres of skiable terrain and a
1,665 foot vertical drop. Bear Mountain's 32 ski trails are served by 12 lifts,
including two high-speed quads, one fixed grip quad, two triple lifts and four
double lifts, which combine to transport up to 16,590 skiers uphill per hour.
Since its acquisition by Booth Creek, Bear Mountain has made significant
improvements to its base lodge facilities, and installed a new high-speed quad
lift to provide improved access to key portions of its beginner and advanced
terrain. Other facilities at Bear Mountain include three lodges which provide
an aggregate of approximately 31,000 square feet of space for food and beverage
services (restaurants and cafeterias), skier services and entertainment. Summer
recreation facilities include a nine-hole golf course.
Bear Mountain is within a one to three hour drive of the Los Angeles and San
Diego metropolitan areas, providing it with access to nearly 16 million
Southern Californians of whom approximately 800,000 actively participate in
skiing and snowboarding. Management estimates that approximately 94% of Bear
Mountain's skiers are from Southern California. Bear Mountain appeals to the
younger generations of skiers, the Echo Boom and "X" Generations, who are
generally less affluent than the targeted customers at the Company's Lake Tahoe
resorts. While Bear Mountain is in the middle of an approximately 11,000 bed
base area, it is primarily a day skiing facility.
Bear Mountain owns 116 of its 819 gross acreage, leases 698 acres of
mountain terrain under a United States Forest Service Term Special Use Permit
and leases five acres from third parties. See Part I, Item 1. "Business -
Regulation and Legislation." Management believes that Bear Mountain has one of
the largest snowmaking capacities per acre of any resort west of the
Mississippi River and incorporates a state-of-the-art system which allows it to
efficiently cover 100% of its ski trails. Bear Mountain also has access to
three reservoirs capable of holding six million gallons of water for
snowmaking. See Part I, Item 1. "Business - Regulatory Matters." Management
believes that the skiing infrastructure at Bear Mountain, including lifts,
snowmaking and trail grooming equipment, is very strong, making it one of the
most attractive ski areas in Southern California. In 1999, Bear Mountain was
rated as one of the top ten resorts in the nation for terrain features and
parks by Ski and Freeze magazines.
Waterville Valley
Waterville Valley has long been recognized as one of the largest and most
picturesque ski resorts in New Hampshire. Waterville Valley's major base
facilities are located on the 4,004 foot high Mt. Tecumseh and offer 255
skiable acres and a vertical drop of 2,020 feet. Waterville Valley's 52 trails
are served by 12 operating lifts, including two high-speed quads, two triple
lifts and four double lifts, which combine to transport up to 15,672 skiers
uphill per hour.
The resort operates a 41,872 square foot base lodge (complete with multiple
food service centers and child care), a mid-mountain lodge featuring a
cafeteria and deli and a mountain-top lodge with snack bar and restaurant
dining.
The Waterville Valley resort has a year-round Adventure Center offering
mountain bikers, cross-country skiers, and hikers access to 105 kilometers of
trails in the White Mountain National Forest. Other resort amenities include an
ice skating arena, golf course, tennis center, sports and fitness center,
horsedrawn sleigh rides, skateboard park, beach and paddle boats. Waterville
Valley's Conference Center has 17,000 square feet of meeting space and provides
banquet facilities for up to 1,000 people. With 11 meeting rooms, a business
center, audio-visual capabilities and a self-contained pub, the Conference
Center's on-site staff supports events year-round.
Waterville Valley has traditionally created an environment conducive to
families comprised of either day skiers, regional overnight skiers or
destination skiers. Its location adjacent to Interstate 93 (a major north-south
thoroughfare for skiers) makes it one of the most accessible of the larger New
England resorts. The resort's facilities, trails and programs can satisfy
adults and children of all abilities. Waterville Valley's proximity to large
East Coast markets (Boston is less than two and one-half hours away by car)
attracts day skiers, while the town's
substantial bed base can accommodate the regional overnight skiers and
vacationers who will stay an average of two to four days. There are
approximately 6,500 beds in the Waterville Valley area, of which approximately
3,000 can be rented. Management estimates that during the 1998/99 ski season
the majority of Waterville Valley's skiers came from Massachusetts (44%) and
New Hampshire (34%), with the remainder coming from Rhode Island, Connecticut,
New York, New Jersey and other regional locations. In 1999, Waterville Valley
was recognized as the third best resort in North America for families by Ski
magazine.
Waterville Valley owns 35 acres on Snow Mountain and two acres at the
Conference Center. It leases 790 acres of land on Mt. Tecumseh under a Term
Special Use Permit issued by the United States Forest Service. See Part I, Item
1. "Business - Regulation and Legislation." Waterville Valley's snowmaking
system is engineered to cover 100% of the ski trails on Mt. Tecumseh. Water for
snowmaking is currently pumped from a local river and a pond. Waterville Valley
is in the process of obtaining permits for additional water sources and water
storage facilities for snowmaking.
Mt. Cranmore
Mt. Cranmore is the oldest continuously operated ski area in the United
States. Located in the hub of New Hampshire's Mount Washington Valley, Mt.
Cranmore's 1,714 foot summit offers 190 skiable acres and a 1,167 foot vertical
drop. Mt. Cranmore's 39 trails are served by nine operating lifts, including
one high-speed quad, one triple lift, three double lifts, three handle tows and
one surface lift, which combine to transport up to 6,420 skiers uphill per
hour. The mountain is serviced by two base lodges, offering multiple eating
locations and pub/restaurant facilities, as well as a restaurant at the summit.
In addition, Mt. Cranmore owns a year-round 46,000 square foot athletic
facility which includes five outdoor tennis courts, four indoor tennis courts,
a pool, a spa, a weight-lifting area, aerobic training rooms, an indoor
climbing wall, locker rooms, a kitchen area and nursery service. Mt. Cranmore
also operates on-site retail and rental shops.
Management believes that Mt. Cranmore has great appeal to young and growing
families due to its intimate size, high percentage of intermediate trails (45%,
with 33% for advanced skiers) and its well-developed children's ski programs.
An additional family attraction is Mt. Cranmore's proximity to the neighboring
town of North Conway, which is within walking distance of the mountain and has
one of New England's largest rural, retail outlet and restaurant centers. North
Conway is part of the White Mountains area, which is the dominant tourist
destination in New Hampshire. Approximately 13 million people live within a
four-hour drive of Mt. Cranmore. During the 1998/99 ski season, management
estimates that 53% of the resort's guests were from the Boston metropolitan
area, 20% were from New Hampshire and 10% were from Rhode Island. To
accommodate destination/vacation skiers there are approximately 16,000 rental
beds in the Mt. Washington Valley, including 76 condominium units at Mt.
Cranmore itself.
Mt. Cranmore owns 754 acres and holds easements enabling it to develop an
additional 500 acres of ski terrain. Mt. Cranmore does not lease any of its
land from the federal government. Mt. Cranmore's snowmaking equipment consists
of a computerized Hydralink weather-monitoring snowmaking system which, when
installed in 1995, increased snowmaking output by 40% and currently covers 100%
of the resort's ski trails. In addition to pumping rights from a nearby stream,
Mt. Cranmore has an agreement with the local water district for unrestricted
access to an additional reservoir of one million gallons of water for
snowmaking. In addition, Mt. Cranmore's base area pond holds 2.5 million
gallons.
The Summit at Snoqualmie
The Summit at Snoqualmie is located in the Cascade Mountains of Northwest
Washington and consists of four separate resorts, Alpental at the Summit
("Alpental"), Summit West, Summit Central, and Summit East, which collectively
offer 1,916 acres of skiable terrain. Individually, Alpental has a 5,400 foot
top elevation, a 2,200 foot vertical drop and 170 acres of skiable trails and
runs (93 acres of which are lighted for night skiing); Summit West has a 3,860
foot top elevation, an 810 foot vertical drop and 172 acres of skiable trails
and runs (166 acres of which are lighted for night skiing); Summit Central has
a 3,860 foot top elevation, a 1,020 foot vertical drop and 246 acres of skiable
trails and runs (176 acres of which are lighted for night skiing); and Summit
East has a 3,760 foot top elevation, a 1,080 foot vertical drop and 110 acres
of skiable trails and runs (58 acres of which are lighted for night skiing). In
total, the Summit complex has 96 designated trails and runs served by 27
operating lifts, including two high-speed quads, four triple lifts, 14 double
lifts and seven surface lifts, which combine to transport up to 32,890
skiers uphill per hour. The Summit Nordic Center also offers approximately 55
kilometers of cross-country skiing on an expert trail system and a lighted
beginner student trail which hosts a season-long night racing series. In
addition, the Summit West, Summit Central, and Summit East areas are
interconnected by a cross-over trail system. Since its acquisition by Booth
Creek in January 1997, the Company has invested approximately $10.5 million at
the Summit to improve base facilities and install additional lifts. In December
1998, the Company completed the installation of new detachable quad lifts at
Alpental and Summit Central for the 1998/99 ski season. The Summit operates
seven lodges which provide an aggregate of approximately 111,175 square feet of
space for food and beverage services (restaurants and cafeterias), skier
services and entertainment.
The Summit is within a one-hour drive of the Seattle/Tacoma metropolitan
area, providing it with access to nearly 450,000 active skiers and
snowboarders. Although the complex offers beginner, intermediate and advanced
skiers a relatively equivalent amount of trail difficulty, each of the separate
properties has been designed to appeal to specific skier profiles: Alpental's
trails are designed primarily for intermediate to expert skiers; Summit West's
open slopes are geared toward beginner and intermediate skiers; Summit
Central's trail systems are primarily designed toward intermediate to advanced
skiers; and Summit East's trails are designed primarily for novice to
intermediate skiers. Overall, the Summit complex is one of the largest
learn-to-ski areas in the United States, with approximately 25% to 30% of its
1998/99 skier days being attributable to guests enrolled in ski school
programs. In addition, the Summit is the largest night skiing complex in the
United States, with approximately 25% to 35% of its 1998/99 skier visits each
season being recorded at night.
The Summit owns 686 acres of its 4,152 gross acreage, leases over 1,400
acres under a private permit and utilizes 1,864 acres of mountain terrain under
a United States Forest Service Term Special Use Permit. See Part I, Item 1.
"Business - Regulation and Legislation." The Summit enjoys abundant annual
snowfall, averaging 493 inches annually over the past five years. As a result,
there are no man-made snowmaking capabilities at any of the Summit resorts. The
Company does, however, possess water rights that would allow it to engage in
snowmaking, if necessary or desired in the long term.
Grand Targhee
Grand Targhee is located in the Grand Teton mountains of Wyoming,
approximately 50 miles northwest of the town of Jackson, Wyoming. Jackson is a
major ski destination resort center, recording an average of 507,000 skier days
annually at the area's three resorts in the last five ski seasons. Grand
Targhee, with a top elevation of 9,873 feet, 2,412 acres of skiable terrain and
a 2,200 foot vertical drop, offers two different mountain ski areas. The first
mountain is served by four operating lifts, including the longest high-speed
quad in the state of Wyoming, which combine to transport up to 5,460 skiers
uphill per hour. The second mountain is currently being used for snowcat
serviced powder skiing. The Company has received approval from the United
States Forest Service for the construction of a lift to service this terrain.
Management expects to install such lift in the next several years. Grand
Targhee also has approximately 15 kilometers of machine groomed trails for
cross-country skiing. Other facilities at Grand Targhee include base lodge
facilities, hotel accommodations, restaurants, shops, a child care center and
retail stores. In addition, Grand Targhee owns and operates a spa, fitness
center and conference facilities.
Grand Targhee competes for day and regional overnight skiers in the northern
Rocky Mountain region as well as national destination skiers traveling to the
greater Jackson, Wyoming area. Guests from Idaho, Utah, Wyoming and Montana
have accounted for approximately 60% of Grand Targhee's total skier days over
the past five ski seasons. Grand Targhee's national destination guests, those
guests residing outside the northern Rocky Mountain region, accounted for the
remaining 40% of the resort's skier days during the same period. A majority of
these guests came from California, Washington, New York and Minnesota. Overall,
approximately 60% of Grand Targhee's skiers reside more than 200 miles from the
resort. Given that Grand Targhee only operates 96 rental units, many of the
resort's overnight regional and destination skiers secure hotel accommodations
at other resorts or hotels in the area. The Company believes that there are in
excess of 5,000 beds in the vicinities of Jackson, Wyoming and Driggs, Idaho.
Management believes that the distinguishing features of Grand Targhee are
well-maintained and uncrowded facilities, excellent ski conditions, attractive
vacation packages and a high quality family ski school.
Grand Targhee is located entirely on land leased under a United States
Forest Service Term Special Use Permit. See Part I, Item 1. "Business -
Regulation and Legislation." Grand Targhee has averaged approximately 544
inches of snowfall annually during the last five years, and historically has
received the second highest snowfall amount of all ski resorts in the United
States. In 1999, Grand Targhee was recognized by Ski magazine in several
categories:
number two for best snow conditions in North America; number five in North
America for best value; and number seven in North America for best scenery.
Management believes that Grand Targhee is currently underutilized, and that
a key component of increasing skier days at the resort will be expanding its
bed base. Grand Targhee has received United States Forest Service approval to
build 590 rental units and has had discussions with the United States Forest
Service that would allow for the future development of private dwellings. See
Part I, Item 1. "Business - Real Estate Development."
Loon Mountain
Loon Mountain is located in the White Mountains of New Hampshire in the town
of Lincoln. The resort's 3,050 foot peak features 250 skiable acres and a 2,100
foot vertical drop. Loon Mountain's 41 trails are served by eight operating
lifts, including a four-passenger gondola and a high-speed quad, which combine
to transport over 10,000 skiers uphill per hour. Loon Mountain's trails cater
mostly to intermediate level skiers (64%), with trails provided for beginners
(20%) and experts (16%) as well. Resort amenities include a base lodge with a
cafeteria and coffee shop, a restaurant and deck at the summit, the Governor
Adams lodge (which provides traditional lodge facilities and also serves as a
venue for summer outdoor activities and concerts), trails for cross-country
skiing, horseback riding and mountain biking and a steam engine railroad for
shuttling visitors.
Loon Mountain has traditionally created an environment conducive to families
who are either day skiers, regional overnight skiers or destination skiers. Its
location adjacent to Interstate 93 (a major north-south thoroughfare for
skiers) enabled it to receive the number one ranking in North America east of
the Mississippi River for accessibility by Snow Country magazine in 1997. Loon
Mountain's proximity to large East Coast markets (Boston is less than two and
one-half hours away by car) attracts day skiers, while an approximate bed base
of 13,000 within twelve miles of the resort can accommodate regional overnight
and destination skiers. Loon Mountain received additional national magazine
recognition in 1999, including Gold Medals by Ski magazine for accessibility
and family programs and silver medals for challenge, lift network, service,
lodging, dining, apres ski activities and off-hill activities. Loon Mountain
also was chosen as the best snowboard park in the East by Snowboarding magazine
and one of the top four snowboard parks in the U.S. by Heckler magazine.
Loon Mountain owns 565 acres upon which substantially all of the buildings
and improvements relating to the resort are located. Loon Mountain leases 778
acres of land in the White Mountain National Forest under a Term Special Use
Permit issued by the United States Forest Service permitting year-round
recreational use. See Part I, Item 1. "Business - Regulation and Legislation."
Adjacent to such land, an additional 581 acres are leased on "South Mountain"
under a separate Special Use Permit permitting certain limited activities,
including mountain biking, cross-country skiing and horseback riding. These 581
acres have been designated by management for the eventual development, subject
to permitting, of skiing terrain to complement the current skiing area. See
Part I, Item 1. "Business - Real Estate Development." The average annual
snowfall at Loon Mountain was 131 inches over the last five seasons, although
when necessary Loon Mountain has the snowmaking capacity to cover approximately
96% of its skiable acreage.
Business Segments
The Company operates in two business segments: resort operations and real
estate and other. Business segment information is presented in Note 13 to the
accompanying consolidated financial statements.
Real Estate Development
The Company has significant holdings of land suitable for either the
expansion of ski terrain or the development of residential and commercial
properties. The Company also has terrain expansion opportunities on land within
its current United States Forest Service permits as well as land owned by third
parties. In management's view, increasing the on-mountain bed base, expanding
retail and other commercial services and developing additional skiable terrain
at a resort can accelerate growth in skier days and ski-related revenues. The
following table lists certain owned or leased land that may be available to the
Company for expansion.
Residentia/ Approximate
Commercial/ Number Principal
Location How Held Ski Terrain of Acres Uses
- ------------------------- ----------- ------------- ----------- ---------------
Northstar: Single
Family Development..... Owned Residential 86 On-mountain
housing
Northstar: Residential/ 364 On-mountain
Zoned/Undeveloped...... Owned Commercial housing and
expanded
commercial
facilities
Northstar: Mountain
Terrain Expansion -
North Lookout/
Sawtooth Ridge......... Owned Ski Terrain 937 Expand ski
terrain
Mt. Cranmore: Black Cap.. Easement Ski Terrain 500 Expand ski
terrain
Mt. Cranmore: Base Lands. Owned Residential/ 35 On-mountain
Commercial housing and
expanded
commercial
facilities
Bear Mountain........... Leased: Ski Terrain 114 Expand ski
Forest terrain
Service
Bear Mountain: Big
Bear Lake.............. Owned Residential/ 6 Develop 56
Ski Terrain condominiums
and expand ski
terrain
The Summit............... Owned Residential 105 On-mountain
housing
Grand Targhee............ Leased: Ski Terrain 900 Expand ski
Forest terrain
Service
Grand Targhee............ Leased: Residential/ 108 Develop village
Forest Commercial and expand
Service commercial
facilities
Loon Mountain:
South Mountain......... Leased: Ski Terrain 581 Expand ski
Forest terrain
Service
Loon Mountain: Base
Lands.................. Owned Residential/ 412 On-mountain
Commercial housing and
expanded
commercial
facilities
The Company's real estate development strategy for residential and
commercial properties is comprised of the following components: (1) to build
recurring resort cash flow through increased bed base and diversification of
revenue sources, (2) to partner with proven real estate developers, (3) to
invest on a limited basis in land and infrastructure development in conjunction
with the development of single family product at Northstar and (4) to refrain
from investment in vertical development except in conjunction with the
development of ski related facilities.
The Company's strategy with regard to the expansion of skiable terrain at
its resorts is based on the evaluation of several key factors, including (i)
the anticipated growth of the skier base within the relevant market and the
Company's ability to improve its competitive market position in that market, as
measured by the potential increase in the number of skier days and revenue per
skier on a long-term basis which the Company believes it can capture through
expansion and upgrades and (ii) the return on capital expected to be realized
from an expansion project versus alternative projects. Management is
undertaking extensive planning and pre-development steps prior to investing
significant capital into any development project. Currently, the Company is in
the process of developing comprehensive master plans and obtaining entitlements
(e.g., zoning approvals) for Northstar, Waterville Valley, the Summit, Grand
Targhee and Loon Mountain. However, the Company's high leverage and operating
restrictions under its debt agreements may limit its ability to pursue
development projects. See Part II, Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
The Company's resorts have traditionally taken a conservative approach
toward residential and commercial development and real estate development
efforts have taken place primarily at Northstar. Beginning in 1995, the resort
developed a new single family home community on Mt. Pluto ("Big Springs")
consisting of 158 private residential lots. The total project has been planned
in five phases to spread out infrastructure development costs and
maximize returns by controlling both the timing and inventory of lots on the
market. Prior to fiscal 1998, Northstar sold all of the 44 lots offered in
phase one and all of the 35 lots offered in phase two for an average price of
approximately $154,000. In August 1998, Northstar sold all 32 lots available
for sale in phase three for an average lot price of approximately $212,000. New
homes built by the owners of such properties range in price from approximately
$600,000 to $1.2 million. The last two phases of Big Springs, which consisted
of 47, lots was substantially all sold out in one day during August 1999. The
average price for a one third acre lot was $305,000.
Future single family residential development at Northstar is limited based
on the current real estate master development plan. The plan calls for the
development of approximately 56 additional single family lots. Recently the
Company received preliminary environmental approval from Placer County for a 26
lot development. Final plot plan review and applications for sale with the
California Department of Real Estate are being prepared for submittal. It is
anticipated that the project will be constructed and sold during the year 2000
pending the completion of the entitlement process and timeliness of required
approvals from the California Department of Real Estate. It is the Company's
intent to move forward with the entitlement process for the balance of single
family lots in early 2000. The timing for the final sale of these lots is
predicated on the findings of the environmental report and entitlement process
with Placer County. This approval process could take anywhere from 6 months to
a year to complete. Preliminary estimates of the Company's development costs
for the 56 single family lots are approximately $5 million.
On December 15, 1999, the Company reached an agreement for the proposed sale
of certain developmental real estate (the "Joint Venture Development
Property"), consisting of approximately 250 acres of land at Northstar, to a
newly formed joint venture between the Company and East West Partners, Inc.
("East West"). The Joint Venture Development Property excludes certain single
family developmental parcels that the Company anticipates developing on its
own, as well as other land held for future development and sale at Northstar.
The proposed transaction is subject to a number of significant closing
conditions, including (1) required consents and approvals, including those of
certain of the Company's creditors and (2) completion of title evaluations and
subdivision requirements to effect the transfer of the Joint Venture
Development Property. Further, East West has the right to terminate the
transaction prior to January 31, 2000. Under the terms of the proposed
transaction, the Company would receive an upfront cash payment ranging from $10
million to $15 million depending on the amount of real estate transferred at
the initial closing, the remainder of the upfront cash payment of $15 million
upon the subsequent transfer of parcels not transferred at the initial closing,
additional payments based on gross sales of the developed real estate as well
as a 20% interest in the joint venture. The Company is required to invest $5
million of the upfront cash payment in capital improvements to the Northstar
resort. The Company has retained approval rights over certain components of the
master development plan for the proposed development. However, there can be no
assurances that the conditions to the transaction will be satisfied or that the
transaction will be consummated on the terms described or at all.
A portion of the property underlying the planned single family development
lots at Northstar was sold to Trimont Land Holdings, Inc. ("TLH"), a
wholly-owned subsidiary of Parent and an affiliate of the Company, on November
17, 1999. See Part II, Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity." Under the terms of
the transaction with TLH, Northstar has retained an option to repurchase such
land from TLH, or may receive any excess net cash proceeds over the proceeds
received in November 1999 from the subsequent resale of the lots by TLH.
Additionally, in the event the planned transaction with East West is
consummated, the Company anticipates using a portion of the proceeds therefrom
to repurchase such land from TLH.
The proposed project contemplated by the East West joint venture envisions
the development of approximately 2,000 units that will be a mixture of hotel,
condominium, townhome and time share units, and additional commercial /retail
space in the village core. The Company over the next several months will be
working with East West to develop an updated overall master development plan
for the resort. The need to update the master development plan, undertake an
Environmental Impact Review, develop site specific architectural and
engineering plans for the initial phases of the project, and market and sell
the initial phases is a lengthy process that could take up to several years to
complete. The ultimate build-out of the entire project could take ten to twelve
years.
Following the completion and sale of the 56 single family lots described
above and the receipt of the upfront cash payment for the Joint Venture
Development Property, the Company's management does not anticipate the
receipt of significant cash proceeds from real estate activities at Northstar
for at least the next several years.
The Company also intends to enhance the ski terrain at the Northstar resort
by upgrading the existing trails and lifts, reducing or eliminating on-mountain
bottlenecks and providing better access to and from the resort's existing base
area. Additionally, the Company has identified two potential expansion areas,
North Lookout Mountain and the Sawtooth Ridge, which are adjacent to the
resort's current operations. These areas could provide additional challenging
terrain and bring the resort's terrain mix to a more favorable balance. During
the summer of 1999, four trails were cut on North Lookout Mountain in
preparation for the anticipated installation during the summer of 2000 of a new
lift to service such terrain. There are no immediate plans to expand into the
Sawtooth Ridge area, although this terrain expansion could be pursued by the
Company in the future if market conditions warrant such expansion.
In addition, Northstar has begun a program to harvest timber through third
party contracting. The timber harvesting program, which produced revenues of
$740,000 during the year ended October 29, 1999, is managed carefully to avoid
interference with Northstar's resort operations and prevent any diminution in
the quality of the resort's natural environment.
Mt. Cranmore holds an easement entitling it to develop at least 500 acres of
additional ski terrain known as the "Black Cap Mountain area" or "Black Cap."
The Black Cap easement was granted in 1951 and allows the Company to expand Mt.
Cranmore's existing ski and recreational infrastructure and develop additional
trails. The Black Cap property underlying the Company's easement is privately
owned and therefore, while still subject to laws and regulations, is not
subject to the same governmental regulations which presently restrict the
activities of many New England ski areas that are located on national or state
forest land. The Black Cap land available for development by the Company is
high-quality, mostly north and west-facing ski terrain located in an area that
can accommodate alpine and cross-country trails, ski lifts and snowmaking.
Expansion could increase Mt. Cranmore's skier capacity, and could enhance the
quality and diversity of its skiable terrain. Given the resort's location in
the heart of the Mt. Washington region, the dominant tourist destination in New
Hampshire, the Company believes that expansion into Black Cap could position
Mt. Cranmore as a premier attraction in the White Mountains and one of the
largest and most appealing resorts in New Hampshire. Additionally, Mt. Cranmore
has 35 acres of privately owned land at the southwest flank of the mountain.
This southwest facing ski-in/ski-out land is very suitable for development. The
timing and scope of this development will depend on market conditions, the
Company's financial position and the Company's other expansion opportunities.
Bear Mountain has received final approval from the United States Forest
Service and local governmental authorities of an expansion plan that would,
among other things, increase the resort's skiable terrain by 114 acres and
increase daily skier capacity by approximately 25%. The approval, however, is
subject to numerous mitigation conditions, including a requirement that Bear
Mountain acquire and dedicate to the Forest Service two acres of spotted owl
habitat and one acre of flying squirrel habitat in exchange for each acre
proposed for development. Bear Mountain has also entered into a developer's
agreement with the City of Big Bear Lake that generally authorizes, subject to
certain conditions, the construction of up to 56 condominium units on property
currently owned by Bear Mountain. The Company does not presently have any
imminent expansion or development plans for Bear Mountain, and any future
expansion or development would depend on a variety of factors, including local
market conditions, the Company's financial position and the resolution of
regulatory and United States Forest Service permitting issues.
The Summit owns 66 acres of real property at the base of its mountain, which
is available for residential development. The developmental real estate at the
Summit is owned by DRE, L.L.C. (the "Real Estate LLC"), a subsidiary of the
Company. The Real Estate LLC has executed a deed of trust with respect to the
real property in favor of the holders of the Ski Lifts Preferred Stock (as
defined herein) to secure the Real Estate LLC's obligation to purchase such
preferred stock. In the event the Real Estate LLC defaults under its obligation
to purchase the Ski Lifts Preferred Stock, the holders thereof could foreclose
on the developmental real property and deprive the Company of the benefit
thereof. The Summit also owns 39 acres of real property at Summit East that is
ski-to/ski-from and is zoned as high-density residential and commercial. The
parcel will be studied for future development potential when market conditions
warrant.
At Grand Targhee, the Company, based on a master development plan done in
1994, has identified approximately 900 acres of additional skiable terrain
adjacent to the Grand Targhee resort which has received preliminary United
States Forest Service approval for development. The study also contains
numerous
recommendations for the further development of Grand Targhee's infrastructure,
including the creation of a village center comprising a variety of tightly-knit
structures with central pedestrian streets, plazas, commercial and recreation
facilities and amenity spaces which reflect and complement the sloped mountain
topography. The Company has received preliminary approval for the construction
of the 590 residential units envisioned by the study (which would expand Grand
Targhee's on-mountain bed base by 615%), together with the development of an
additional 900 acres of skiable terrain, subject to certain conditions.
Management believes that the expansion of Grand Targhee's on-mountain bed base
will be an important component in addressing the resort's historic
underutilization. More recently the United States Forest Service requested that
Grand Targhee undertake a land exchange for the base lands at the resort to
assist them in their plans to protect a prime grizzly habitat known as Squirrel
Meadows. This exchange of lands will allow the resort to provide the necessary
amenities as outlined in the above described plan, as well as provide for
additional diverse resort opportunities for destination and regional overnight
guests. It will also enable the resort to have more flexibility in design and
project financing while at the same time taking an administrative burden off
the United States Forest Service and protecting the habitat for an endangered
species. If successful this should allow the resort to build a range of 700 to
970 units at the base, pending local planning and zoning. To date Booth Creek
has protected 421 acres in Squirrel Meadows with land purchase options and the
United States Forest Service is conducting an Environmental Impact Statement
("EIS") on the national forest parcel. The Company hopes that the exchange will
take place in 2000 at which time Grand Targhee would exchange 421 acres of
prime grizzly bear habitat for up to 195 acres at the base of the resort. The
United States Forest Service's decision in this matter could be subject to
administrative and judicial appeals and, while the Company believes the land
exchange will ultimately be approved and the Company would likely prevail in
any administrative and judicial proceedings following such approval, no
assurances can be given regarding the timing and outcome of this matter. Upon
successful completion of the land exchange and exhaustion of opponents remedies
the Company intends to pursue long-term development opportunities with third
parties.
Loon Mountain currently leases approximately 581 acres known as "South
Mountain" from the Forest Service. Although currently limited to recreational
uses not including downhill skiing, this permitted area has been designated by
both Loon Mountain and the Forest Service as an area for expanded skiing
activities and the development of additional trails and lifts. A permit
allowing this expansion was issued by the Forest Service in 1993, but was
subsequently invalidated by the U.S. Court of Appeals. See Part I, Item 3.
"Legal Proceedings." Pending the issuance of additional permits, expansion on
South Mountain depends upon the Company and Forest Service fulfilling the
requirements, including the preparation of supplemental National Environmental
Policy Act ("NEPA") documentation, of a court order issued by the federal
district court to which the related litigation was remanded. Recently, the
Forest Service decided to prepare and issue an EIS versus the supplemental
documentation it agreed to previously. It is anticipated that the decision to
conduct an EIS versus supplemental documentation will not negatively impact the
issuance of the draft EIS, which is scheduled for June 2000, followed by a
final decision scheduled for November 2000. The available South Mountain land
is located in an area directly adjacent to the present Loon Mountain ski area
and will be able to accommodate alpine and cross country trails, ski lifts
(including one connecting the current ski area with South Mountain) and
snowmaking from newly installed snowmaking facilities. Expansion could increase
Loon Mountain's skier capacity and enhance the quality and diversity of its
skiable terrain. Loon Mountain also owns 412 acres at the base of the mountain,
of which 310 acres is located at the base of South Mountain and is zoned as
rural residential and general use. Based on current zoning and subject to
approvals, 930 units could be constructed. The balance of land owned by Loon
Mountain, subject to approvals and zoning, could allow for up to 148 additional
units to be constructed. The timing and scope of development will depend on
market conditions, the Company's financial position and an evaluation of the
Company's other expansion opportunities.
Except for the potential sale of the Joint Venture Development Property, the
Company has no agreements, arrangements or understandings with respect to
financing the development of any of the real estate projects discussed herein.
Any future development would be subject to, among other things, the Company's
ability to obtain the necessary financing and all necessary permits and
approvals. The Senior Credit Facility, the Indenture and the Securities
Purchase Agreements (as defined herein) significantly limit the Company's
ability to incur additional indebtedness, grant liens and make investments. No
assurance can be given that the Company will develop successfully any
additional properties or, if completed, any such projects will be successful.
In addition, there are risks inherent in any expansion project and in the
implementation of the Company's development strategy.
Marketing and Sales
Staff
The Company has a marketing staff of approximately 50 persons, including a
marketing director at each resort who reports to the Vice President of
Marketing and Sales as well as to each resort's general manager. The marketing
staff at each resort is responsible for the development of resort-specific
marketing plans including advertising, sales, public relations, events,
promotions and research. Each resorts' marketing personnel also participate in
the development of the Company's overall marketing strategy.
Strategy
The Company's marketing plans are designed to attract both day skiers and
vacationers by emphasizing the Company's diverse facilities and services and
proximity to approximately 20% of the total skiers in the United States. The
Company has positioned each of its resorts as an attractive alternative to
competing regional resorts and to other forms of leisure and entertainment. The
primary objectives of the Company's marketing efforts are to (i) increase each
of its resorts' relative market share, (ii) expand the number of skiers in each
of its markets, (iii) increase skier visitation frequency, (iv) increase the
expenditures of each of its visitors, (v) influence the vacation destination
choice of its prospective guests by encouraging them to visit other Booth Creek
resorts and (vi) attract and retain new guests to the Company's resorts by
expanding the scope of Booth Creek's resorts to winter recreation centers
offering a multitude of snowsport options in addition to skiing and
snowboarding.
The Company's marketing efforts are predicated on knowing its guests and
understanding the markets in which it competes. Accordingly, the Company's
resorts, typically through professional firms, conduct extensive market
research, including on-site guest surveys, focus groups, advertising tests and
regional phone surveys. Each of the Company's resorts develops its own
resort-specific marketing program based upon its unique qualities and
characteristics as well as the demographics of its skier base. Management
believes that a major benefit of being a multiple resort operator is the
ability to coordinate resort marketing programs in a manner that makes them
more effective. For example, the extension of frequency/loyalty programs to all
of the Company's resorts will, in management's view, reinforce the existing
marketing programs at each resort and create significant cross-marketing
opportunities.
The Company's resorts offer a variety of terrain for alpine skiing and
snowboarding, with most providing a high percentage of intermediate trails and
well developed skier development programs, which can accommodate skiers and
snowboarders of all skill levels. Northstar markets primarily to the upper
income Baby Boom generation and their families residing in the San Francisco
Bay and Sacramento Valley areas as a full service, all season resort for day
and vacation guests. In addition, the resort has been successful in attracting
vacationing skiers from major Southern California markets largely through the
use of targeted marketing programs, including tour packages with major airlines
and tour operators. Management believes that Northstar's diverse year round
activities and services have made it attractive to affluent families interested
in recreation-centered vacation homes. Real estate development and the
resulting increase in on-mountain bed base likewise provide Northstar with
significant opportunities for future growth. Sierra has been positioned as Lake
Tahoe's economical "value" resort, primarily targeted to families, teenagers
and young adults from the Central California Valley. Bear Mountain primarily
targets Generation "X" skiers and snowboarders as well as value-oriented
families from the major Southern California metropolitan areas. Waterville
Valley generally focuses on regional and vacationing families from the Southern
New Hampshire and Boston metropolitan markets by promoting the resort's diverse
year round facilities and New England village atmosphere. Mt. Cranmore targets
vacationing families (including non-skiers) from the Boston metropolitan area
by emphasizing its proximity to the Mt. Washington 16,000 area bed base and
North Conway retail and restaurant district. The Summit's diversity of terrain
among its four resorts and significant night skiing programs allow the resort
to target multiple demographic groups including families, teenagers and young
adults from the Seattle/Tacoma metropolitan area. Grand Targhee primarily
targets destination skiers visiting the Jackson Hole area as well as day skiers
and regional overnight skiers from Wyoming, Idaho and Utah. Loon Mountain has
traditionally targeted families comprised of either day skiers, regional
overnight skiers or destination skiers.
Programs
The Company has developed a number of specific marketing programs to achieve
its objectives, including the following:
o Customer loyalty programs
o Multimedia advertising (including Internet strategies)
o Data-base marketing programs (including e-mail broadcasting)
o Snowsport development programs (programs include a multitude
of snowsport options such as snowbikes, snowscoots and
tubing as well as more traditional skiing and snowboarding)
o Strategic marketing alliances
o School, group and business affiliations
Customer loyalty programs. The Company believes that the success of each of
its resorts depends, in large part, on its ability to retain and increase the
skier visitation frequency of its existing customer base. For example,
approximately 80% of Northstar's 1998/99 ski season skier days were
attributable to guests who had visited the resort on at least one other
occasion. The Company believes a critical component to developing customer
frequency will be the success of its customer loyalty programs, including its
Vertical Plus and Vertical Value frequent skier programs. For an annual
membership fee, Vertical Plus members receive a special, personalized
identification wristband containing a preprogrammed computer microchip which
acts as their lift access for the season. In addition to offering daily ticket
discounts, the system tracks the amount of vertical feet skied at participating
resorts and rewards members with prizes based on the number of vertical feet
skied in a season. Other benefits of the program include members-only lift
lines, direct lift access, the convenience of being able to make cashless
retail transactions and electronic messaging. In addition to Vertical Plus, the
Company has developed Vertical Value, a program that appeals to a broader range
of skiers and offers an incentive for frequent visitation at all of the
Company's resorts. Visitors also receive a welcome packet with targeted offers
and a newsletter which allows the resorts to communicate effective and timely
information to their frequent guests. In addition, several of the resorts
successfully introduced new season pass products for the 1999/00 ski season
that were attractively priced to entice visitation during non-peak periods as
well as develop brand loyalty.
Multimedia advertising. The Company's marketing efforts include print,
broadcast, outdoor, Internet and direct mail advertising, with the particular
method tailored for each resort and existing market opportunities. The Company
is also very active in a variety of promotional programs designed to attract
guests from population centers in and around the Los Angeles, San Diego, San
Francisco, Sacramento, Seattle and Boston metropolitan areas and states with
large skier populations such as Texas, Illinois, Florida and New York. For
example, the Company's Northstar and Sierra resorts have participated in
extensive cooperative marketing with other Lake Tahoe resorts to promote the
region as a premier vacation destination. Market research has shown that the
typical Booth Creek guest utilizes the Internet extensively as a source of
information and additional company resources were recently concentrated towards
this communication vehicle. For the 1999/00 ski season, Booth Creek has
introduced e-commerce "virtual stores" on each resort's website offering
products such as season passes, loyalty program memberships, gift certificates
and lodging/lift packages.
Data-base marketing programs. Through the information obtained from its
customer loyalty programs, extensive market surveys and other market research,
the Company maintains a data-base containing detailed information on its
existing customers. Management believes that data-base marketing is an
effective and efficient method to identify, target and maintain an on-going
relationship with the Company's best customers. For example, the Company has
been successful in the use of targeted direct mailings and e-mail broadcasts,
which are designed to match customer preferences with special ski package
offers to build peak and off-peak volume. Management believes that these types
of relationship-based marketing programs build guest loyalty and play an
important role in solidifying a resort's existing customer base.
Snowsport development programs. The Company's resorts operate a variety of
snowsport development programs designed to improve the skills of children and
beginners, as well as more advanced skiers and snowboarders. Management
believes that these development programs increase skier days at the Company's
resorts by expanding the total market of skiers and making skiing more
enjoyable. Northstar, the Summit, Waterville Valley and Loon Mountain operate
ski schools that are consistently rated among the best in their respective
regions.
In addition, several of the Company's resorts have introduced a development
program, Vertical Improvement, geared toward intermediate and advanced skiers,
which offers free specialized instruction and daily training. This program has
increased customer loyalty and repeat resort visits. In addition, Booth Creek
is expanding the definition of ski and snowboard areas to winter recreation
centers. Resorts are offering a multitude of unique options for sliding on
snow. "Booth Creek Hill Thrill Centers" include snow tubing, snowbikes,
snowfoxes, snowscoots and Zorbs. Many of these are low-skill, high-sensation
activities that even those who have never skied or snowboarded can enjoy. There
are also transferable learning skills from these sliding devices to learning to
ski or snowboard. Other efforts have been instituted at all resorts to embrace
and welcome new participants to the sport of skiing or snowboarding.
Strategic marketing alliances. The Company is a national ski resort operator
with more than 2.4 million skier days recorded during the 1998/99 ski season.
At least one of the Company's resorts is within driving distance of four of the
five largest consumer markets in the United States. These factors, together
with the attractive demographics of the Company's skier base, position the
Company to further develop resort marketing programs with major corporate
sponsors. Sponsorship opportunities include potential relationships with
automobile manufacturers, soft drink companies, and ski and snowboard equipment
manufacturers. For example, Northstar and Sierra have relationships with major
automobile manufacturers that involves over $1 million worth of television
exposure, free use of vehicles for Company purposes and a vehicle give-away
promotion for resort guests. Management believes that the media exposure
generated by these partnerships is important in building market share and the
image of the resorts, and that current joint marketing programs can be
expanded. For the 1999/00 ski season, Booth Creek and Dynastar Skis, Inc.
entered into a unique alliance whereby Dynastar Skis, Inc. included Booth Creek
resorts in a nationwide infomercial that includes a $2 million television media
buy. This provides exposure of Booth Creek resorts to a targeted audience of
skiers in key markets.
School, group and business affiliations. The Company is dedicated to
developing special programs designed to attract school, business and other
groups. By introducing skiing, snowboarding and other methods of sliding on
snow to a wider audience, these programs broaden the Company's customer base
and have proven to be a particularly effective way to build name recognition
and brand loyalty. Ski groups have also emerged as the fastest and most
profitable way of increasing business during non-peak periods. Marketing
personnel at each resort provide year-round assistance to group leaders in
organizing and developing events. Business affiliations are developed and
maintained through corporate ticket programs, whereby participating businesses
are given an opportunity to provide their employees with incentive-based
pricing. Additional emphasis is being placed on the sales effort with a new
national sales director and ongoing training of resort personnel.
Seasonality
The business of the Company is highly seasonal, with the vast majority of
its annual revenues expected to be generated between November and April of each
fiscal year. Management considers it essential to achieve optimal operating
results during key holidays and weekends during this period. The Company's
results of operations are, in turn, significantly dependent on favorable
weather conditions and other factors beyond the Company's control. The Company
has sought to mitigate the downside risk of its seasonal business by purchasing
paid skier day insurance policies for the 1999/00 ski season. However, these
policies would not fully protect the Company against poor weather conditions or
other factors that adversely affect the Company's operations.
During the off-season months of May through October, the Company's resorts
typically experience a substantial reduction in labor and utility expense due
to the absence of ski operations, but make significant expenditures for
maintenance, expansion and capital improvement in preparation for the ensuing
ski season.
Competition
The general unavailability of new developable mountains, regulatory
requirements and the high costs and expertise required to build and operate
resorts present significant barriers to entry in the ski industry. The last
major new ski resort to open in the United States was in 1989, and in the past
15 years, management believes at least 85 proposed resorts have been stalled or
abandoned due to environmental issues and the high costs of entering into the
capital intensive ski industry. The domestic ski industry is currently
comprised of 509 resorts and is highly competitive. The Company's competitive
position in the markets in which it competes is dependent upon many diverse
factors, including proximity to population centers, pricing, snowmaking
capabilities, type and quality of
skiing offered, prevailing weather conditions, quality and price of
complementary services. The Company's Lake Tahoe resorts, Northstar and Sierra,
face strong competition from Lake Tahoe's seven other major ski resorts.
Northstar's primary competition in the North Lake Tahoe area is from Squaw
Valley and Alpine Meadows. Northstar also competes with major ski and non-ski
destination resorts throughout North America. Sierra primarily competes in the
Southern Lake Tahoe area with Heavenly Valley and Kirkwood. The Company's other
California resort, Bear Mountain, competes primarily with Snow Summit, Mountain
High and Mammoth Mountain.
The Company's New England resorts, Waterville Valley, Mt. Cranmore and Loon
Mountain, compete in the highly competitive Northeast ski market, which
consists of Maine, New Hampshire, Vermont, Massachusetts, Connecticut and New
York. Within the Northeast region, skiers can choose from over 50 major resorts
and ski areas, most of which are located in the mountainous areas of New
England and eastern New York. Waterville Valley's primary regional competitors
include Bretton Woods, Attitash/Bear Peak and Gunstock. Mt. Cranmore's primary
regional competitors are the Attitash/Bear Peak ski resort and Gunstock. Loon
Mountain's primary regional competitors are Okemo and Sunday River.
The Summit competes primarily with five local ski areas, including Crystal
Mountain, Stevens Pass, White Pass, Mission Ridge and Mt. Baker. Additional
competition comes from the regional destination resorts at Mt. Bachelor, Mt.
Hood Meadows, Sun Valley and Whistler/Blackcomb, as well as other day and
weekend ski facilities in Washington, Oregon and British Columbia.
Grand Targhee competes for day and regional overnight skiers in the northern
Rocky Mountain region as well as national destination skiers traveling to the
greater Jackson, Wyoming area. Jackson Hole Ski Resort is the resort's largest
single competitor. Grand Targhee has participated in joint marketing programs
with Jackson Hole to promote the Jackson area and many visitors to the region
ski at both resorts. Grand Targhee also competes for day and regional overnight
skiers with Sun Valley and resorts in Utah.
On a regional basis, at least one of the Company's resorts is readily
accessible to four of the five largest ski markets in the United States.
Management estimates that more than 70% of the skiers visiting the Company's
Lake Tahoe resorts are from the San Francisco, Sacramento, Central California
Valley and Lake Tahoe regions, while more than 90% of Bear Mountain's skiers
are from the Los Angeles and San Diego metropolitan areas. Waterville Valley,
Mt. Cranmore and Loon Mountain are estimated to attract more than 70% of their
guests from Massachusetts and New Hampshire, with a large percentage of such
visitors coming from the Boston metropolitan area. The Summit attracts more
than 90% of its skier guests from the Seattle/Tacoma metropolitan region. Grand
Targhee primarily attracts day and regional overnight skiers from the northern
Rocky Mountain region and destination skiers visiting the region.
Regulation and Legislation
The Company's operations are dependent upon its ownership or control over
the real property constituting each resort. The real property presently used at
the Northstar and Mt. Cranmore resorts is owned by the Company. The Company has
the right to use a substantial portion of the real property associated with the
Bear Mountain, Sierra, Summit, Grand Targhee, Loon Mountain and Waterville
Valley resorts under the terms of Term Special Use Permits issued by the United
States Forest Service. The Term Special Use Permits for the Bear Mountain,
Sierra, Waterville Valley, Summit and Grand Targhee resorts were reissued at
the time of the Company's acquisition of such resorts, with the Bear Mountain
permit expiring in 2020, the Sierra permit expiring in 2039, the Waterville
Valley permit expiring in 2034, the Summit permit expiring in 2032 and the
Grand Targhee permit expiring in 2034.
A substantial portion of the real property associated with the Loon Mountain
resort is likewise used under United States Forest Service permits. In 1993,
the United States Forest Service authorized various lift, trail and snowmaking
improvements on Loon Mountain and an expansion onto South Mountain. In 1996,
the United States Court of Appeals for the First Circuit (the "First Circuit")
overturned this authorization on the ground that the United States Forest
Service had failed to properly address certain environmental issues under the
National Environmental Policy Act ("NEPA"). Certain improvements, including a
snowmaking pipeline and part of the expansion, had been constructed before the
First Circuit ruled. On May 5, 1997, the United States District Court for the
District of New Hampshire (the "District Court") entered a stipulated order
which authorized existing improvements to remain in place and existing
operations to continue but generally prohibited future construction, restricted
use of a major snowmaking water source, and required certain water discharge
permits to be pursued,
pending United States Forest Service reconsideration of the projects under
NEPA. In a December 4, 1998 filing, the United States Forest Service targeted
the Fall of 1999 for issuance of a draft NEPA document regarding the
improvements and the proposed expansion and stated that it intended to combine
such NEPA review with review of the existing snowmaking pipeline. However, the
Forest Service recently revised its target date for when it expects to issue
draft NEPA documentation from the Fall of 1999 to June of 2000. The District
Court entered a final order on December 11, 1998 specifying that the conditions
imposed on operations at Loon Mountain in the May 5, 1997 order will remain in
effect until the United States Forest Service completes its NEPA review and
issues a new decision. On February 12, 1999, the District Court agreed that the
United States Forest Service may combine its evaluation and analysis of the
existing snowmaking pipeline with its NEPA review of the improvements and
proposed expansion.
In August 1997, the United States Forest Service authorized the Loon
Mountain resort to construct a new snowmaking pipeline across permitted land.
The United States Forest Service found that such construction was consistent
with the District Court order and enabled the resort to modify its snowmaking
operations to better protect water resources and replace snowmaking capacity
lost under the order. Although the pipeline was completed, its use was
challenged by private parties who asserted that the United States Forest
Service violated NEPA. On January 20, 1998, the District Court issued a
decision finding that the United States Forest Service violated NEPA in failing
to address the potential for the new pipeline to increase the amount of snow
made and any associated environmental effects. On March 10, 1998, the District
Court issued a series of further orders which, among other things, directed the
United States Forest Service to re-evaluate the pipeline, allowed such
re-evaluation to proceed separate from and prior to the United States Forest
Service's reconsideration of the larger expansion, and enjoined the Loon
Mountain Resort from using the pipeline pending further action by the court. On
July 2, 1998, the United States Forest Service issued a new decision approving
the pipeline and addressing its potential to increase the amount of snow made.
This decision was challenged by several private parties, who again asserted
that it violated NEPA. The United States Forest Service subsequently withdrew
its decision authorizing the pipeline to conduct further review and the
District Court consolidated the lawsuits concerning the pipeline. On November
19, 1998, the District Court modified the injunction allowing Loon Mountain to
use the pipeline to withdraw and convert 159.7 million gallons of water per ski
season into snow while the United States Forest Service further reviews the
pipeline under NEPA. On February 12, 1999, the District Court dismissed the
consolidated lawsuit concerning the pipeline in light of the United States
Forest Service's decision to combine review of the pipeline's construction and
operation with its NEPA review of the improvements and proposed expansion.
Existing use of Loon Mountain is authorized under a Term Special Use Permit,
which covers facilities and expires in 2006; existing non-skiing use of Loon
Mountain's South Mountain area is authorized under an annual permit issued by
the United States Forest Service that is subject to reissuance each year. After
the United States Forest Service reconsiders the pipeline improvements and
expansion under NEPA, it will need to render a new decision and, if
appropriate, issue a new Term Special Use Permit. At that time, the District
Court order will terminate. Based upon the existing administrative record, and
certain proposed modifications to the resort's snowmaking operations which are
intended to better protect water resources, the Company expects that the
pipeline improvements and expansion will be approved by the United States
Forest Service. However, no assurance can be given regarding the timing or
outcome of this process.
The United States Forest Service has the right to approve the location,
design and construction of improvements in permit areas and many operational
matters at resorts with permits. Under the Term Special Use Permits, the
Company is required to pay fees to the United States Forest Service. The fees
range from 1.5% to approximately 4.0% of certain revenues, with the rate
generally rising with increased revenues. The calculation of gross revenues
includes, among other things, revenue from lift ticket, ski school lesson, food
and beverage, rental equipment and retail merchandise sales. Total fees paid to
the United States Forest Service by the Company during the year ended October
29, 1999 were $1,189,000.
The Company believes that its relations with the United States Forest
Service are good, and, to the best of its knowledge, no Term Special Use Permit
for any major ski resort has ever been terminated by the United States Forest
Service. The United States Secretary of Agriculture has the right to terminate
any Term Special Use Permit upon 180-days notice if, in planning for the uses
of the national forest, the public interest requires termination. Term Special
Use Permits may also be terminated or suspended because of non-compliance by
the permitee; however, the United States Forest Service would be required to
notify the Company of the grounds for such action and to provide it with
reasonable time to correct any curable non-compliance.
Employees
As of December 31, 1999, the Company employed a full-time corporate staff of
42 persons. In addition, the Company's resorts employ an aggregate of
approximately 575 full-time and approximately 5,400 seasonal employees. None of
the employees of the Company or its resorts is represented by a labor union,
and the Company considers its employee relations to be good.
Regulatory Matters
The Company's resorts are subject to a wide variety of federal, state and
local laws and regulations relating to land use, water resources, discharge,
storage, treatment and disposal of various materials and other environmental
matters. Management believes that the Company's resorts are presently in
compliance with all land use and environmental laws, except where
non-compliance is not expected to result in a material adverse effect on its
financial condition. The Company also believes that the cost of complying with
known requirements, as well as anticipated investigation and remediation
activities, will not have a material adverse effect on its financial condition
or future results of operations. However, failure to comply with such laws
could result in the imposition of severe penalties and other costs or
restrictions on operations by government agencies or courts that could
materially adversely affect operations.
The operations at the resorts require numerous permits and approvals from
federal, state and local authorities including permits relating to land use,
ski lifts and the sale of alcoholic beverages. In addition, the Company's
operations are heavily dependent on its continued ability, under applicable
laws, regulations, policies, permits, licenses or contractual arrangements, to
have access to adequate supplies of water with which to make snow and service
the other needs of its facilities, and otherwise to conduct its operations.
There can be no assurance that new applications of existing laws, regulations
and policies, or changes in such laws, regulations and policies will not occur
in a manner that could have a detrimental effect on the Company, or that
material permits, licenses or agreements will not be canceled, not renewed, or
renewed on terms materially less favorable to the Company. Major expansions of
any one or more resorts could require, among other things, the filing of an
environmental impact statement or other documentation with the United States
Forest Service and state or local governments under NEPA and certain state or
local NEPA counterparts if it is determined that the expansion may have a
significant impact upon the environment. Although the Company has no reason to
believe that it will not be successful in implementing its operations and
development plans, no assurance can be given that necessary permits and
approvals will be obtained.
Except for certain permitting and environmental compliance matters relating
to the Loon Mountain resort (See Part I, Item 1. - "Business - Regulation and
Legislation" and Part I, Item 3. - "Legal Proceedings"), the Company has not
received any notice of material non-compliance with permits, licenses or
approvals necessary for the operation of its properties or of any material
liability under any environmental law or regulation.
Pursuant to the air emissions reduction program currently in effect in the
area regulated by the South Coast Air Quality Management District in California
where Bear Mountain is located, depending on Bear Mountain's operations and
emissions, Bear Mountain may be required to acquire emission credits from other
facilities which have already implemented nitrogen oxide emission reductions.
When necessary, the Company may purchase "banked" emission credits at
prevailing market rates.
Bear Mountain has a water supply contract for 500 acre-feet per year with
Big Bear Municipal Water District executed January 8, 1988, the initial
fifteen-year term of which expires on January 7, 2003. Big Bear Municipal Water
District's primary source of water is from a portion of the water in Big Bear
Lake shared with Bear Valley Mutual Water Company, the senior water rights
holder. The water supply contract provides for water primarily for snowmaking
and slope irrigation purposes. The obligation of Big Bear Municipal Water
District to supply water is excused only if the level of Big Bear Lake recedes
below 6,735.2 feet above sea level or eight feet below the top of Big Bear Lake
Dam. Bear Valley Mutual Water Company recently claimed that its rights in the
lake are not subject to Big Bear Municipal Water District's obligation to
supply water to Bear Mountain. This claim is being vigorously contested by all
interested parties including Bear Mountain and a two-year moratorium agreement
between Bear Valley Mutual Water Company and Big Bear Municipal Water District
was executed in November 1998, which withdraws Bear Valley's claim for two
years while the issues between Bear Valley and Big Bear Municipal are
resolved. This allows continued service to Bear Mountain on an uncontested
basis during the moratorium period. No assurance can be made regarding the
outcome or timing of resolution of this matter.
Pursuant to the previously described decision of the First Circuit and the
order of the District Court, Loon Mountain applied and was issued, by the
Environmental Protection Agency ("EPA"), a Clean Water Act (the "CWA")
discharge permit covering discharges associated with its snowmaking operations.
Certain ongoing discharges are authorized by the District Court order pending
final action on the permit and subject to the District Court's reserved power
to modify such approval to address any resulting environmental issues.
Certain regulatory approvals associated with the new snowmaking pipeline at
Loon Mountain impose minimum stream flow requirements on the Loon Mountain
resort. These requirements will compel the Loon Mountain resort to construct
water storage facilities within the next ten years, and such construction will
require further regulatory approvals and environmental documentation under
NEPA. No assurances can be given that such regulatory approvals will be
obtained or that the Company will have the financial resources to complete such
construction.
In addition, the Loon Mountain resort was notified in September 1997 that it
had allegedly filled certain wetlands at the resort in violation of the CWA. In
response, Loon Mountain worked with the EPA to remove the alleged fill and
implement certain erosion control measures. On January 15, 1998, an individual
notified the EPA, Loon Mountain, and certain other persons that he intended to
initiate a lawsuit under the CWA regarding the alleged wetland violation. On
February 2, 1998, the EPA wrote to such individual stating that the alleged
fill had been removed and that the EPA does not believe there is a continuing
violation at the site. The Company does not have any further notice of any
threatened lawsuit or other action regarding this matter.
Item 2. Properties
Northstar consists of over 8,000 acres of privately owned land, of which
less than one-third has been developed. Sierra owns 20 acres of its 1,689 gross
acreage and leases the remainder under a Term Special Use Permit with the
United States Forest Service. Bear Mountain owns 116 of its 819 gross acreage,
leases 698 acres of mountain terrain under a Forest Service Term Special Use
Permit and leases five acres from third parties. Waterville Valley owns 35
acres on Snow Mountain and two acres at the Conference Center, and leases 790
acres of land on Mt. Tecumseh from the federal government under a Term Special
Use Permit issued by the Forest Service. Mt. Cranmore owns 754 acres and holds
deeded easements enabling it to develop an additional 500 acres of ski terrain.
The Summit owns 686 acres of its 4,152 gross acreage, leases over 1,400 acres
under a private permit and utilizes 1,864 acres of mountain terrain under a
Forest Service Term Special Use Permit. Grand Targhee leases all of the land on
which the resort is operated under a Term Special Use Permit with the United
States Forest Service. Loon Mountain owns 565 acres upon which substantially
all of the buildings and improvements relating to the resort are located. Loon
Mountain leases 778 acres of land in the White Mountain National Forest under a
Term Special Use Permit issued by the United States Forest Service permitting
year-round recreational use. Adjacent to such land, an additional 581 acres are
leased on "South Mountain" under a separate Special Use Permit permitting
certain limited activities, including mountain biking, cross country skiing and
horseback riding. For further information regarding the Company"s properties,
see Part I, Item 1. "Business - Resort Operations" and "- Regulation and
Legislation."
Item 3. Legal Proceedings
Each of the Company's resorts has pending and is regularly subject to
litigation, and the threat thereof, with respect to personal injury claims
relating principally to skiing activities at its resorts but also relating to
premises and vehicular operations and worker's compensation matters. The
Company maintains extensive liability insurance that the Company considers
adequate to monetarily insure claims related to such usual and customary risks
associated with the operation of four-season recreation resorts.
Killington West, Ltd., formerly known as Bear Mountain, Ltd., ("Killington
West "), filed a breach of contract lawsuit in the Superior Court of the State
of California, San Bernardino County, against Fibreboard Corporation
("Fibreboard") and Bear Mountain, Inc. alleging that Fibreboard and Bear
Mountain, Inc. breached the asset purchase agreement dated October 6, 1995 (the
"Original Bear Mountain Agreement") among Killington West, Fibreboard and Bear
Mountain, Inc. pursuant to which Bear Mountain, Inc. acquired the Bear Mountain
ski resort from Killington West. Killington West's lawsuit concerned an alleged
breach by Fibreboard and Bear Mountain, Inc. of a change of control provision
in the Original Bear Mountain Agreement. In connection with the Company's
acquisition of Bear Mountain, Inc. in December 1996, the Company obtained from
Fibreboard indemnification for any claim that might be made by Killington West,
and further, required that $1 million of the purchase price be held in escrow
pending the outcome of any potential disputes with Killington West. Fibreboard
acknowledged its obligation to indemnify Bear Mountain, Inc. with respect to
the Killington West lawsuit and will defend such lawsuit on behalf of
Fibreboard and Bear Mountain, Inc.
In connection with the merger with Loon Mountain Recreation Corporation
("LMRC"), certain shareholders of LMRC (the "LMRC Shareholder Plaintiffs")
filed a lawsuit against LMRC and its former directors alleging breach of
fiduciary duty and against the Company alleging that the Company failed to
comply with the New Hampshire Security Takeover Disclosure Act (the "Takeover
Statute") in connection with the transaction. The two lawsuits were
consolidated in the Superior Court of Grafton County, New Hampshire. Prior to
the filing of the lawsuit against the Company, the Company received a "no
action" order from the Bureau of Securities Regulation, New Hampshire
Department of State (the "Bureau") finding that the Takeover Statute was
inapplicable to the proposed merger. The LMRC Shareholder Plaintiffs' initial
request for a preliminary injunction prohibiting the Company (or its
affiliates) from proceeding with the LMRC merger was denied by the court.
Before the litigation proceeded further, and prior to the merger, the parties
to the merger agreement amended such agreement. The Company then obtained an
additional order by the Bureau that the Takeover Statute did not apply to the
merger transaction. The Company answered the LMRC Shareholder Plaintiffs'
petition and filed a motion to dismiss the LMRC Shareholder Plaintiffs' action
against the Company asserting that the Takeover Statute did not apply to the
transaction as a matter of law. The court initially denied the Company's motion
to dismiss but granted the motion to dismiss upon reconsideration. LMRC
Shareholder Plaintiffs have appealed the dismissal to the New Hampshire Supreme
Court. The parties have filed briefs in the appeal and requested oral argument,
which has not been scheduled. Potential remedies under the Takeover Statute
include money damages and rescission of the transaction. While the Company does
not believe the LMRC Shareholder Plaintiffs will prevail in their actions, no
assurances can be made regarding the outcome of these actions.
LMRC Shareholder Plaintiffs' breach of fiduciary duty action against LMRC
and its former directors remains pending and limited discovery has been
conducted; a trial date will be set after April 15, 2000. The LMRC Shareholder
Plaintiffs were given leave by the court to amend their complaint to seek money
damages against the Company, LMRC and its former directors. If the LMRC
Shareholder Plaintiffs are successful in obtaining a judgment against the
former LMRC directors, the Company may have certain obligations to indemnify
the former directors pursuant to the former LMRC by-laws. While the Company
does not believe LMRC Shareholder Plaintiffs will prevail in this lawsuit, no
assurances can be made regarding the outcome of this litigation.
Also in connection with the merger with LMRC, the LMRC Shareholder
Plaintiffs exercised dissenters' rights under the New Hampshire Business
Corporation Act (the "Corporation Act"). Under the statutory procedure for
settling the LMRC Shareholder Plaintiffs' dissenters' rights, LMRC paid the
plaintiffs an aggregate of $34,436, or $30.61 per share, as its estimate of the
fair value of their 1,125 shares. The LMRC Shareholder Plaintiffs demanded
additional payments necessary to compensate them for the $71.38 per share
price, plus interest, which they asserted as the fair value of their shares.
Pursuant to the Corporation Act, LMRC commenced a proceeding in the Superior
Court of Grafton County, New Hampshire seeking a judicial appraisal of the
value of the LMRC Shareholder Plaintiffs' shares in LMRC. Discovery in the case
is pending and trial is set for January of 2000. While the Company believes
that the amount paid to the LMRC Shareholder Plaintiffs prior to the
commencement of the appraisal proceeding represents the fair value of their
shares, there can be no assurance as to the value which the appraisal
proceeding will assign to the LMRC Shareholder Plaintiffs' 1,125 shares.
In 1995, an individual sued the United States Forest Service (the "Forest
Service") in the United States District Court for the District of New Hampshire
(the "District Court") alleging that the Forest Service had violated the
National Environmental Policy Act ("NEPA"), the Clean Water Act ("CWA"), and an
executive order in approving improvements to facilities on Loon Mountain and an
expansion of the Loon Mountain resort on to South Mountain. LMRC and an
environmental group intervened in the lawsuit. The District Court entered
summary judgment for the Forest Service on all claims and the original
plaintiff, along with the intervening environmental group, (collectively or
individually, the "Environmental Plaintiffs") appealed. In December 1996, the
United States Court of Appeals for the First Circuit (the "First Circuit")
reversed the District Court decision and ruled that the Forest Service must
reconsider certain environmental issues under NEPA and that LMRC must obtain a
discharge permit under the CWA for certain discharges from its snowmaking
system. The District Court then entered a stipulated order that: enjoins LMRC
from any further construction implementing the project with certain limited
exceptions; imposes
various restrictions on LMRC's existing snowmaking operations and requires LMRC
to apply for a CWA discharge permit for discharges of water and any associated
pollutants associated with its snowmaking; allows existing construction to
remain in place and existing uses to continue; requires LMRC to undertake
certain erosion control and monitoring measures; requires the Forest Service to
prepare supplemental NEPA documentation on the improvements and expansion; and
reserves the right to require restoration of areas developed under the original
Forest Service approval to their preexisting condition if not ultimately
re-approved by the Forest Service. This order remains in effect until the
supplemental NEPA process is completed. The Forest Service recently revised its
target date for when it expects to issue draft NEPA documentation from the Fall
of 1999 to June of 2000. The Company can give no assurance regarding the timing
or outcome of such process. The Environmental Plaintiffs also filed a motion
asking the District Court to impose against LMRC a CWA civil penalty of
$5,550,125 and attorney's fees and costs in connection with LMRC's discharges
into Loon Pond during its snowmaking operations for the 1996/97 ski season and
prior years. The discharge at issue involved water transfers from the East
Branch of the Pemigewasset River and drain back from the snowmaking system into
Loon Pond. The District Court dismissed the claim for civil penalties and
attorney's fees under the CWA and one of the Environmental Plaintiffs appealed
to the First Circuit. The appeal is stayed pending a decision of the United
States Supreme Court in a different case involving the CWA. In connection with
the merger with LMRC, the Company obtained a specific insurance policy
providing $4.5 million of coverage (above a $1.2 million deductible) to cover
any civil penalties, fees and costs that the District Court may assess against
LMRC.
In 1997, the Environmental Plaintiffs filed a second lawsuit against the
Forest Service in the District Court alleging that the Forest Service violated
NEPA in authorizing LMRC to construct and operate a snowmaking pipeline across
permitted land. LMRC intervened in the lawsuit. The District Court held that
the Forest Service had violated NEPA by failing to consider the potential
effects of an increase in snowmaking capacity. The District Court then enjoined
Loon Mountain from using the pipeline but later modified the injunction to
permit LMRC to use the pipeline provided that, among other things, it does not
make snow in excess of the historic production level utilizing 159.7 million
gallons. On February 12, 1999, the District Court dismissed the pipeline
litigation and allowed the Forest Service to combine its NEPA analysis of the
pipeline with the pending NEPA analysis of the South Mountain expansion. The
injunction authorizing LMRC to use the pipeline to supply water for making
historical levels of snow remains in place.
In 1998, the Company, Booth Creek Ski Acquisition, Inc. ("Acquisition Sub")
and Seven Springs Farm, Inc. ("Seven Springs") entered into an Agreement of
Merger (the "Merger Agreement") concerning the acquisition of the Seven Springs
resort in Pennsylvania through merger of Acquisition Sub with Seven Springs. In
connection with the proposed acquisition, certain shareholders of Seven Springs
(the "Seven Springs Shareholder Plaintiffs") filed a lawsuit in the Court of
Common Pleas of Somerset County, Pennsylvania against the Company, Acquisition
Sub, and Seven Springs and certain of its directors, (the "First Pennsylvania
State Action") seeking a declaratory judgment, along with other relief
including the rescission of the Merger Agreement. The Seven Springs Shareholder
Plaintiffs alleged that the terms of a certain shareholders' agreement among
Seven Springs and its shareholders (the "Seven Springs Shareholder Agreement")
banned the consummation of the proposed acquisition. The Company asserted
claims related to the Merger Agreement against Seven Springs in the First
Pennsylvania State Action.
The Merger Agreement provided that the Company's obligations thereunder were
subject to satisfaction of various conditions, including the requirement that
there shall have been a judicial determination that the Seven Springs
Shareholder Agreement was inapplicable to the Merger Agreement. If these
conditions were not satisfied on or before October 31, 1998, the Company was
free to terminate the Merger Agreement, upon which termination the Merger
Agreement required Seven Springs to pay the Company a break-up fee of
$1,000,000. On June 18, 1999, the Company terminated the Merger Agreement and
demanded payment of the break-up fee. Disputes arose between Seven Springs and
the Company concerning the parties' obligations under the Merger Agreement,
including Seven Springs' obligation to pay the Company the break-up fee.
Consequently, the Company commenced an action against Seven Springs on June 30,
1999, in the United States District Court for the Southern District of New
York, seeking damages of $1,000,000 plus interest and costs (the "New York
Federal Action").
On July 2, 1999, Seven Springs filed for a writ of summons against the
Company and Acquisition Sub in the Pennsylvania Court of Common Pleas of
Somerset County (the "Second Pennsylvania State Action"). The Seven Springs
Shareholder Plaintiffs filed a motion seeking leave to intervene in the Second
Pennsylvania State Action, alleging that Seven Springs' payment of the
$1,000,000 break-up fee required by the Merger Agreement would itself violate
the Seven Springs Shareholder Agreement. Thereafter, the Seven Springs
Shareholder Plaintiffs also
moved to amend the complaint in the First Pennsylvania State Action to include
the same claim with respect to the $1,000,000 break-up fee.
On January 10, 2000, the Company, Acquisition Sub and Seven Springs entered
into a full, final and mutual Settlement and Release Agreement (the "Settlement
Agreement") whereby all claims among the parties are released and discharged
without any admission of liability. Furthermore, under the Settlement
Agreement, Booth Creek agreed to cause its claims in the First Pennsylvania
State Action and its complaint in the New York Federal Action to be dismissed
with prejudice and Seven Springs agrees to withdraw and discontinue the Second
Pennsylvania State Action. As part of the Settlement Agreement, Seven Springs
has made a payment of $500,000 to Booth Creek. The Seven Springs Shareholder
Plaintiffs are not a party to the Settlement Agreement. The Company believes
that this matter will not have a significant impact on the Company's financial
condition or future results of operations.
Item 4. Submission Of Matters To A Vote Of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1999.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There is no established trading market for any class of equity securities of
the Company.
Item 6. Selected Financial Data
The following selected financial data should be read in conjunction with the
consolidated financial statements of the Company and related notes thereto
included elsewhere in this Report and Part II, Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The selected
consolidated financial data (except for the pro forma and other financial and
operating data) of the Company as of and for the years ended October 31, 1997,
October 30, 1998 and October 29, 1999 have been derived from the audited
consolidated financial statements of the Company, which have been audited by
Ernst & Young LLP, independent auditors. The Company was formed in October 1996
and had no operations until its acquisition of seven ski resort complexes
during the first six months of fiscal 1997. The selected combined financial
data (except for the other financial and operating data) of the Fibreboard
Resort Group (i) as of and for the year ended December 31, 1995 and as of and
for the ten months ended October 31, 1996 have been derived from the audited
combined financial statements of the Fibreboard Resort Group, which have been
audited by Arthur Andersen LLP, independent accountants, (ii) for the ten
months ended October 31, 1995 have been derived from the unaudited combined
financial statements of the Fibreboard Resort Group and (iii) for the period
from November 1, 1996 to December 2, 1996 have been derived from the audited
combined financial statements of the Fibreboard Resort Group, which have been
audited by Ernst & Young LLP, independent auditors.
The other financial and operating data presented below includes information
on "EBITDA" and "EBITDA margin." "EBITDA" represents income from operations
before depreciation, depletion and amortization expense and the noncash cost of
real estate sales. "EBITDA margin" is EBITDA divided by total revenue. Although
EBITDA is not a measure of performance under United States generally accepted
accounting principles ("GAAP"), the term is presented because management
believes it provides useful information regarding a company's ability to incur
and service debt. EBITDA should not be considered in isolation or as a
substitute for net income, cash flows from operating activities and other
income or cash flow statement data prepared in accordance with GAAP, or as a
measure of profitability or liquidity. In addition, "EBITDA" and "EBITDA
margin" as determined by the Company may not be comparable to related or
similar measures as reported by other companies and do not represent funds
available for discretionary use.
Company
-----------------------------------------------------
Unaudited
Pro
Historical Forma (f)
-------------------------------------- -----------
Year Year Year Year
Ended Ended Ended Ended
October October October October
31, 1997(a) 30, 1998 (b) 29, 1999 30, 1998
----------- ------------ ----------- -----------
(Dollars in Thousands, except Revenue per Skier Day)
Statement of Operations Data:
Revenue:
Resort Operations ................. $ 68,136 $ 97,248 $ 112,980 $ 107,887
Real Estate and Other ............. 3,671 7,608 12,744 7,608
---------- --------- --------- ---------
71,807 104,856 125,724 115,495
Operating Expenses:
Cost of Sales - Resort Operations.. 44,624 61,325 74,404 87,163(g)
Cost of Sales - Real Estate and
Other............................. 2,799 4,671 5,244 4,671
Depreciation, Depletion and
Amortization...................... 11,681 17,752 21,750 18,547
Selling, General and
Administrative ................... 13,719 19,645 22,571 -
Unusual Items, Net ................ - - 487 -
---------- --------- --------- ---------
Operating Income (Loss) ............. (1,016) 1,463 1,268 5,114
Interest Expense and Other, Net ..... 14,912 18,733 19,843 19,612
---------- --------- --------- ---------
Pre-tax (Loss) ...................... (15,928) (17,270) (18,575) (14,498)
Income Tax Benefit .................. (1,728) - - -
---------- --------- --------- ---------
Loss Before Minority Interest and
Extraordinary Item ................ (14,200) (17,270) (18,575) (14,498)
Minority Interest ................... 229 260 218 260
---------- --------- --------- ---------
Loss Before Extraordinary Item ...... (14,429) (17,530) (18,793) (14,758)
Extraordinary Loss on Early
Retirement of Debt ................ (2,664) - - -
---------- --------- --------- ---------
Net Loss ............................ $ (17,093) $ (17,530) $ (18,793) $ (14,758)
========== ========= ========= =========
Other Financial and Operating Data:
Total Skier Days...................... 1,565,917 2,113,56 2,432,845 2,386,478
Revenue per Skier Day (c)............. $ 43.51 $ 46.01 $ 46.44 $ 45.21
Noncash Cost of Real Estate Sales (d) $ 2,237 $ 3,721 $ 4,743 $ 3,721
Capital Expenditures Excluding
Acquisitions and Real Estate
and Other........................... $ 9,459 $ 15,500 $ 14,342 $ 16,721
Net cash provided by (used in):
Operating activities................ $ 1,552 $ 7,559 $ 15,393 NA
Investing activities................ (152,685) (47,718) (18,504) NA
Financing activities................ 151,595 40,322 2,947 NA
EBITDA before unusual items........... $ 12,902 $ 22,936 $ 28,248 $ 27,382
EBITDA Margin......................... 18.0% 21.9% 22.5% 23.7%
Company
--------------------------------------
As of As of As of
October October October
31, 1997(a) 30, 1998 (b) 29, 1999
----------- ------------ -----------
(Dollars in Thousands)
Balance Sheet Data:
Working Capital (Deficit),
Including Senior Credit Facility
Borrowings.......................... $ (26,634) $(33,093) $ (45,309)
Total Assets.......................... 186,416 218,546 210,346
Total Debt............................ 136,327 156,280 160,986
Preferred Stock of Subsidiary (e)..... 3,354 2,634 2,133
Common Shareholder's Equity........... 29,407 37,377 18,584
(see accompanying footnotes)
Fibreboard Resort Group
------------------------------------------------------
Period From
Year 10 Months 10 Months November 1,
Ended Ended Ended 1996 to
December 31, October 31, October 31, December 2,
1995(h) 1995(h) 1996(i) 1996(i)
------------ ------------ ----------- -----------
(Dollars in Thousands, except Revenue per Skier Day)
Statement of Operations Data:
Revenue:
Resort Operations................... $ 39,823 $ 32,072 $ 36,829 $ 1,395
Real Estate and Other............... 5,213 4,659 4,288 304
---------- --------- --------- ---------
45,036 36,731 41,117 1,699
Operating Expenses:
Cost of Sales - Resort Operations... 24,545 18,547 22,596 2,884
Cost of Sales - Real Estate and
Other.............................. 1,989 1,780 2,142 161
Depreciation, Depletion and
Amortization....................... 4,024 2,989 4,354 6
Selling, General
and Administrative................. 5,871 4,399 5,220 1,766
Management Fees and Corporate
Expenses........................... 1,247 513 701 70
---------- --------- --------- ---------
Operating Income (Loss)............... 7,360 8,503 6,104 (3,188)
Interest Expense, Net................. 821 334 1,189 206
---------- --------- --------- ---------
Pre-tax Income (Loss)................. 6,539 8,169 4,915 (3,394)
Income Taxes (Benefit)................ 2,624 3,308 2,018 (1,358)
---------- --------- --------- ---------
Net Income (Loss)..................... $ 3,915 $ 4,861 $ 2,897 $(2,036)
========== ========= ========= =========
Other Financial and Operating Data:
Skier Days............................ 784,964 626,500 706,075 30,818
Revenue per Skier Day (c)............. $ 50.73 $ 51.19 $ 52.16 $ 45.27
Noncash Cost of Real Estate Sales (d). $ 1,618 $ 1,488 $ 1,461 $ 133
Capital Expenditures Excluding
Acquisitions and
Real Estate and Other............... $ 5,226 $ 3,786 $ 5,761 $ 5,587
Net cash provided by (used in):
Operating activities................ $ 7,861 $ 7,506 $ 4,923 $ 5,769
Investing activities................ (29,430) (28,321) (8,467) (6,151)
Financing activities................ 26,071 18,059 (2,778) 1,115
EBITDA................................ $ 13,002 $ 12,980 $ 11,919 $ (3,049)
EBITDA Margin......................... 28.9% 35.3% 29.0% (179.5)%
Fibreboard Resort Group
---------------------------------------
As of As of October 31,
December 31, -------------------------
1995(h) 1995(h) 1996(i)
------------ ------------ -----------
(Dollars in Thousands)
Balance Sheet Data:
Working Capital (Deficit)............. $(35,980) $(36,123) $(36,187)
Total Assets.......................... 73,316 64,125 69,602
Total Debt Including
Intercompany Payable................ 41,493 33,487 38,715
Net Assets............................ 23,667 24,606 26,564
(see accompanying footnotes)
Notes to Selected Financial Data
(a) Reflects the financial results of Waterville Valley and Mt. Cranmore from
November 27, 1996, Northstar, Sierra and Bear Mountain from December 3,
1996, the Summit from January 15, 1997, and Grand Targhee from March 18,
1997, the respective dates of acquisition of each resort by the Company.
(b) Reflects the financial results of Waterville Valley, Mt. Cranmore,
Northstar, Sierra, Bear Mountain, the Summit and Grand Targhee for the
entire period, and Loon Mountain for the period beginning February 26,
1998, the date on which it was acquired by the Company.
(c) Reflects revenue from resort operations divided by total skier days.
(d) Noncash cost of real estate sales represents the allocated portion of
real estate development expenditures previously capitalized (including
acquisition costs allocated to real estate development) which relate to
current year real estate sales.
(e) Represents preferred stock of a subsidiary of the Company which is
subject to mandatory redemption requirements.
(f) Pro forma statement of operations and other financial data for the year
ended October 30, 1998 gives effect to the Loon Mountain acquisition and
related financing transactions as if they had occurred on November 1,
1997.
(g) The historical financial presentations for the Fibreboard Resort Group,
Waterville Valley, Mt. Cranmore, Ski Lifts, Inc., Grand Targhee
Incorporated and Loon Mountain Recreation Corporation are inconsistent in
categorizing cost of sales-resort operations and selling, general and
administrative expenses. For presentation purposes in the pro forma
information, all operating expenses, excluding depreciation, depletion
and amortization, have been aggregated as cost of sales-resort
operations.
(h) Includes the financial results of Northstar and Sierra for the entire
period and of Bear Mountain for the period beginning October 23, 1995,
the date on which it was acquired by Fibreboard Corporation.
(i) Includes the financial results of Northstar, Sierra and Bear Mountain for
the entire period.
As the results of operations of ski resorts are highly seasonal, with the
majority of revenue generated in the period from November through April, the
results of operations for the Fibreboard Resort Group for the 10 months ended
October 31, 1996 and 1995 and the period from November 1, 1996 to December 2,
1996 are not representative of a pro rata year of operations. In addition, the
selection of a December 31 year end by the Fibreboard Resort Group does not
result in the presentation of the results of the resorts for a single ski
season. Accordingly, as the results of a single ski season are split into two
reporting periods, differing trends may develop, as compared to results of
operations for other resorts consisting of a single ski season, which should be
evaluated by the reader.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion and analysis below relates to the historical financial
statements and historical and pro forma results of operations of the Company
and the liquidity and capital resources of the Company. The following
discussion should be read in conjunction with the consolidated financial
statements and related notes thereto included elsewhere in this report. The
following discussion contains certain forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from those discussed herein. Factors that could cause or contribute to the
differences are discussed in "Forward-Looking Statements" and elsewhere in this
report.
General
The Company's ski operations are highly sensitive to regional weather
conditions and the overall strength of the regional economies in the areas in
which the Company operates. The Company believes that the geographic diversity
of the Company's resorts and the use of snowmaking technology coupled with
advanced trail grooming
equipment, which together can provide consistent skiing conditions, can
partially mitigate the risk of both economic downturns and adverse weather
conditions in any given region. However, the Company remains vulnerable to warm
weather, heavy rains, drought and other types of severe or unusual weather
conditions, which can have a significant effect on the operating revenues and
profitability at any one of the Company's resorts.
The Company's four most weather-sensitive resorts, Bear Mountain, Waterville
Valley, Loon Mountain and Mt. Cranmore, have invested heavily in snowmaking
capabilities to provide coverage on virtually all of their trails and have been
open for skiing at least 123, 143, 142 and 103 days, respectively, during each
of the last five ski seasons, including the 1998/99 ski season. The Company's
Northstar, Sierra, the Summit and Grand Targhee resorts are less
weather-sensitive based on their historical natural snowfall, averaging
approximately 367, 546, 493, and 544 inches of snowfall, respectively, per year
for the past five ski seasons. As a result of their historic natural snowfall,
their snowmaking capabilities are considerably less extensive than at Bear
Mountain, Waterville Valley, Loon Mountain or Mt. Cranmore, and therefore, such
resorts are more dependent upon early season snowfall to provide necessary
terrain for the important Christmas holiday period.
For the 1999/00 ski season, the Company has obtained four separate paid
skier day insurance policies covering its Lake Tahoe resorts, Bear Mountain,
the Summit and the New Hampshire resorts. Subject to stated deductibles the
policies provide coverage for substantially all risks including weather perils,
road and airport closures, downturns in the economy, strikes and any other
event that reduces the targeted number of paid skier visits.
The Company's results of operations are also highly dependent on its ability
to compete in each of the large regional ski markets in which it operates. At
Northstar and Sierra more than 70% of the 1998/99 ski season total skier days
were attributable to residents of the San Francisco, Sacramento, Central
California Valley and Lake Tahoe regions. At Bear Mountain, more than 90% of
the 1998/99 ski season total skier days were attributable to residents of the
Los Angeles and San Diego metropolitan regions. At Waterville Valley, Loon
Mountain and Mt. Cranmore, more than 70% of the 1998/99 ski season total skier
days were attributable to residents of Massachusetts and New Hampshire, with a
large percentage of such visitors coming from the Boston metropolitan area. At
the Summit, the Company estimates that more than 90% of the 1998/99 ski season
total skier days were attributable to residents of the Seattle/Tacoma
metropolitan region. The Company's Grand Targhee resort attracts more than 40%
of its skiers from outside its regional skiing population.
The Company seeks to maximize revenues and operating income by managing the
mix of skier days and revenue per skier day. These strategies are also designed
to maximize resort cash flow. The strategy for each resort is based on the
demographic profile of its market and the physical capacity of its mountain and
facilities. The Company seeks to increase skier days by developing effective
ticket pricing and season pass strategies and marketing programs to improve
peak and off-peak volume. The Company seeks to improve revenue per skier day by
effectively managing the price, quality and value of each of its ski-related
services, including retail shops, equipment rentals, lessons and food and
beverage facilities.
The Company seeks to increase skier days by offering a consistent, quality
guest experience and developing effective target marketing programs. See Part
I, Item 1. "Business - Marketing and Sales." The Company's resorts have spent
more than $42 million (including $3.0 million of equipment acquired through
capital leases and other debt) in capital expenditures during the last three
years to upgrade chairlift capacity, expand terrain, improve rental lodging and
retail facilities, increase snowmaking capabilities and to meet sustaining
capital requirements, all of which management believes are important in
providing a consistent, quality guest experience.
In addition to revenues generated from skiing operations, the Company's
resorts generate significant revenues from non-ski operations, including
lodging, conference center services, health and tennis clubs and summer
activities such as mountain biking rentals and golf course fees. During the
year ended October 29, 1999, approximately 48.6%, 39.5% and 11.9% of the
Company's revenues were generated from lift ticket and season pass sales, other
ski-related sales and non-ski related sales (excluding real estate and timber
sales), respectively. During the year ended October 30, 1998, approximately
47.9%, 39.9% and 12.2% of the Company's revenues were generated from lift
ticket and season pass sales, other ski-related sales and non-ski related sales
(excluding real estate and timber sales), respectively. Moreover, real estate
and timber sales at Northstar were $12.7 million and $7.4 million during the
years ended October 29, 1999 and October 30, 1998, accounting for 26.5% and
18.0% of Northstar's total revenue during such periods.
A significant portion of total operating costs at the Company's resorts are
variable, consisting primarily of retail and food service cost of sales,
utilities and labor expense. These variable costs can fluctuate significantly
based upon skier days and seasonal factors. With the exception of certain
management, administrative and maintenance personnel, all of the Company's
employees are compensated on an hourly basis. Management believes a key element
to maximizing profitability during the winter season is to closely monitor
staffing requirements and to redirect or lay-off employees when skier volumes
or seasonal needs dictate. In addition to financial performance, the advanced
management information system currently in place at all of the Company's
resorts provides detailed statistics regarding staffing utilization which is
instrumental in adjusting personnel requirements.
Results of Operations of the Company
Overview
The Company was formed on October 8, 1996. Since inception, the Company made
the following acquisitions, which are included in the results of operations of
the Company from the respective purchase dates and accounted for using the
purchase method:
Resort Acquisition Date
---------------------------------- ----------------------
Waterville Valley............. November 27, 1996
Mt. Cranmore.................. November 27, 1996
Northstar..................... December 3, 1996
Sierra........................ December 3, 1996
Bear Mountain................. December 3, 1996
The Summit.................... January 15, 1997
Grand Targhee................. March 18, 1997
Loon Mountain................. February 26, 1998
Historical Year Ended October 29, 1999 as Compared to the Historical Year
Ended October 30, 1998
The Company's results of operations are significantly impacted by weather
conditions. Northstar and Sierra experienced generally favorable snow
conditions during the 1998/99 ski season. While Bear Mountain enjoyed cold
temperatures in early November which facilitated an early opening on man-made
snow, the resort suffered from a lack of natural snowfall throughout the
season. Snowfall at Bear Mountain for the 1998/99 ski season was 30% of its
five year average for the five preceding ski seasons. The East experienced mild
temperatures through mid December and rainfall on most weekends during January.
These conditions negatively impacted snow conditions, terrain availability and
skier days at Waterville Valley, Mt. Cranmore and Loon Mountain during the
Company's first fiscal quarter of 1999. Conditions and momentum for the New
Hampshire resorts improved in February and March, although the resorts closed
earlier than anticipated due to declining demand and Spring-like conditions in
April. The Summit experienced a prolonged period of continual snowfall during
the 1998/99 ski season, which resulted in increased snow removal and other
operating costs. While Grand Targhee enjoyed favorable snow conditions during
the 1998/99 ski season, its operations were negatively impacted by unusually
high winds on a number of days during December through February.
Total revenue for the year ended October 29, 1999 was $125,724,000, an
increase of $20,868,000, or 19.9%, over the Company's revenue for the year
ended October 30, 1998. Revenues from resort operations increased $15,732,000,
or 16.2%, for the 1999 period as compared to the prior year. Revenues from real
estate and timber operations increased $5,136,000, or 67.5%, for the 1999
period as compared to the 1998 period.
The increase in resort operations revenue is principally due to the
inclusion of Loon Mountain for the entire 1999 period, which accounted for
$9,849,000 of the increase in revenues for the year ended October 29, 1999 as
compared to the 1998 period. In addition, Northstar and Sierra generated
increased revenues of $1,511,000 and $1,161,000, respectively, or 4.5% and
8.5%, primarily due to improved yields in terms of revenues per skier visit.
Bear Mountain's revenues declined slightly due to lower skier visits as a
result of the lack of natural snowfall, partially offset by improved yields.
Revenues for Waterville Valley were slightly lower due to poor weather and snow
conditions in the first quarter, partially offset by improved yields. Revenues
for Mt. Cranmore increased $430,000, or 11.4%, due to improved yields and
higher skier visits as a result of new pricing strategies. The Summit
generated $2,419,000, or 22.7%, in additional revenues due to an earlier
opening, extended season, higher skier days and improved yields in its food and
beverage, snow school and retail businesses. Revenues for Grand Targhee
increased by $371,000, or 5.0%, due to slightly higher skier visits.
On July 28, 1999, Northstar consummated the sale of the property comprising
Phases 4 and 4A of the Big Springs development to Trimont Land Holdings, Inc.
("TLH"), a wholly-owned subsidiary of Parent and an affiliate of the Company,
for an aggregate sales price of $10,000,000, subject to adjustment as described
below. The consideration initially paid to Northstar consisted of $8,500,000 in
cash and a promissory note (the "TLH Note") for a minimum of $1,500,000. Under
the terms of the TLH Note, Northstar will receive the greater of (a) $1,500,000
plus accrued interest at 7% per annum, or (b) the Net Cash Proceeds of the
resale of the lots within Phases 4 and 4A. "Net Cash Proceeds" is defined as
gross proceeds received by TLH from the subsequent resale of the lots, after
deduction for (i) the proceeds applied to repay any indebtedness incurred by
TLH in connection with its financing of the purchase of the lots, (ii) any fees
or other costs incurred by TLH in connection with its financing of the purchase
or sales of the lots, and (iii) any corporate overhead costs incurred by TLH
attributable to the purchase, maintenance, marketing or sale of the lots. The
TLH Note is prepayable at any time, and is due on the earlier to occur of
January 15, 2001 or the date on which the last of the lots owned by TLH has
been sold. Pursuant to the terms of the sale, Northstar retained the obligation
to complete the scheduled construction of the development in accordance with
the approved site development plan. Northstar will recognize revenue and
related cost of sales for these real estate transactions upon the substantial
completion of construction and the close of escrow for the sales between TLH
and third party buyers.
Through October 29, 1999, TLH had closed escrow on 43 of the available 47
lots within Phases 4 and 4A, and Northstar had substantially completed the
scheduled construction of the development. In accordance with the terms of the
transaction between TLH and Northstar, the Company received proceeds and
recorded real estate sales of approximately $12,000,000 during the year ended
October 29, 1999, which is net of (1) TLH's financing costs of approximately
$253,000, (2) third party sales commissions of $788,000 and (3) other closing
costs and expenses of $95,000. An additional three lots closed escrow in
November and December 1999, and TLH is currently marketing the remaining lot
for a list price of $265,000. The average sales price of $305,000 for the 1999
real estate sales at Northstar represents a 44% increase over the average lot
price of $212,000 for the 32 lots sold in the 1998 period.
Total operating expenses for the year ended October 29, 1999 were
$124,456,000, an increase of $21,063,000 over the Company's total operating
expenses for the year ended October 30, 1998. The principal causes of the
increase are as follows:
(In thousands)
Total operating expenses - year ended
October 30, 1998................................... $103,393
Acquisition of Loon Mountain:
Cost of sales - resort operations.................. 5,128
Selling, general and administrative................ 382
Depreciation and amortization...................... 1,101
----------
6,611
Additional maintenance, operations, snow removal
and severance costs, and increased costs
associated with an earlier opening, extended
season and revenue penetration efforts and new
operations during the winter season at the Summit.. 4,197
Costs of new corporate initiatives and process
improvements and increased costs associated with
new management personnel and functional expertise.. 1,472
Increased depreciation due to higher average
asset balances..................................... 2,754
Increased snowmaking costs at Bear Mountain due
to the lack of natural snowfall.................... 480
Lease costs for three new lifts at the
Summit and Bear Mountain........................... 494
Labor associated with earlier openings at
Northstar, Sierra and Bear Mountain................ 197
Increased cost of sales - real estate and
other.............................................. 573
Unusual items, net.................................. 487
Inflation and other changes, net.................... 3,798
----------
Total operating expenses - year ended
October 29, 1999................................... $124,456
==========
As reflected above, the inclusion of Loon Mountain for the entire 1999
period resulted in an increase of $6,611,000 in operating expenses as compared
to the 1998 period.
At the Summit, the Company incurred significant nonrecurring costs during
the year ended October 29, 1999 to appropriately prepare its facilities,
vehicle and snow grooming fleet, communications infrastructure and processes
and systems for the operation of the resort. In addition, record levels of
snowfall severely hampered operating efforts and resulted in significant
increases in snow removal, grounds maintenance and related costs. The Company
also accrued severance costs associated with certain personnel changes at the
Summit. Management believes that approximately $2,500,000 of the cost increases
at the Summit would not be incurred in a typical year of operation. Further,
the resort opened thirteen days earlier for the 1998/99 ski season as compared
to the prior season, and operated for an additional six days in April 1999 as
compared to April 1998. Also, the resort implemented various revenue
penetration efforts and operated a new ski school business that was previously
operated by a third party, which contributed to the cost increases at the
Summit. The earlier opening, extended season, revenue penetration efforts and
new ski school generated an increase in revenues of $2,419,000 for the year
ended October 29, 1999 as compared to the 1998 period.
During fiscal 1999, the Company initiated various efforts to improve its
marketing collateral and data-base, establish strategic marketing alliances,
introduce new service offerings, evaluate potential revenue growth
opportunities and strategies, install public relations channels, implement
enhanced guest service training for employees, institute performance management
systems and evaluate technology related tools and methodologies. Further, the
Company has been conducting system and process improvements in substantially
all key administrative and operations areas. The Company has also added certain
key corporate personnel and functional expertise to enhance its management
team. Management believes that these initiatives, process improvements and
personnel additions have begun to favorably impact the Company's operations
through improved yields and higher guest service survey scores. In addition,
the Company is evaluating its corporate and general and administrative cost
structure for the year ending October 28, 2000, for possible cost reduction
opportunities.
The Company recorded certain unusual items in the fourth quarter of 1999,
which amounted to $487,000. See Note 2 to the Company's consolidated financial
statements included elsewhere in this Report for a description of these items.
Interest expense for the year ended October 29, 1999 totaled $18,707,000, an
increase of $1,197,000 over the Company's interest expense for the year ended
October 30, 1998, reflecting generally higher levels of borrowings in the 1999
period due principally to debt incurred to finance the Loon Mountain
acquisition.
Due to the Company's lack of profitable history, the tax benefits of
operating losses are fully offset by a valuation reserve. Accordingly, no
income tax provision was recorded for the years ended October 29, 1999 and
October 30, 1998 due to continued operating losses.
EBITDA before unusual items for the year ended October 29, 1999 was
$28,248,000, an increase of $5,312,000 or 23.2% over EBITDA of $22,936,000 for
the year ended October 30, 1998.
Historical Year Ended October 30, 1998 as Compared to the Historical Year
Ended October 31, 1997
Total revenue for the year ended October 30, 1998 was $104,856,000, an
increase of $33,049,000 or 46.0%, over the Company's revenue for the year ended
October 31, 1997. Due to the timing of the Company's acquisitions, the 1997
period does not reflect a full period of operating revenues for any of the
resorts, which accounts for a significant part of the increase. The increase in
revenue is also due to more typical weather conditions in the Lake Tahoe region
in the 1998 period than during the comparable period in the 1996/97 ski season,
which resulted in increased revenues at Sierra and Northstar of 67.9% and
23.2%, respectively. During the 1996/97 ski season, revenue was negatively
impacted by a mudslide which shut down the highway which provides primary
access to Sierra and poor weather conditions during the Christmas holiday
period at many of the Company's other resorts. Total skier visits at Sierra and
Northstar increased by 62.7% and 21.9% or approximately 132,000 and 97,000,
respectively, in the 1998 period as compared to the 1997 period. Real estate
and timber sales for the year ended October 30, 1998 were $7,608,000, an
increase of $3,937,000 or 107.2%, over real estate and timber sales for the
year ended October 31, 1997. In August 1998, Northstar conducted an auction of
certain real estate parcels as part
of the third phase of an ongoing real estate development project. All of the 32
lots available for sale were sold at an average lot price of $212,000 as
compared to an average lot price of $154,000 for the two prior phases.
Total operating expenses for the year ended October 30, 1998 were
$103,393,000, an increase of $30,570,000 or 42.0%, over the Company's total
operating expenses for the year ended October 31, 1997. Due to the timing of
the acquisitions, the 1997 period does not reflect a full period of operating
expenses for any of the resorts, which accounts for a significant part of the
increase. Payroll related costs, the single largest component of operating
expenses, were approximately $37,628,000 for the year ended October 30, 1998,
as compared to $27,555,000 for the 1997 period. Cost of sales for real estate
and timber sales increased by $1,872,000 due to an increase in the number of
lots sold in 1998 as compared to the 1997 period.
Interest expense for the year ended October 30, 1998 totaled $17,510,000, an
increase of $4,241,000 over the Company's interest expense for the year ended
October 31, 1997, reflecting generally higher levels of borrowings in the 1998
period and a slightly higher interest rate on the Senior Notes as compared to
the interest rates on the bridge financing facilities in place through March
17, 1997.
During the year ended October 31, 1997, the Company recorded tax benefits
for current operating losses to the extent of recorded deferred tax
liabilities. Due to the Company's lack of profitable history, the tax benefits
of excess operating losses in the 1997 period were fully offset by a valuation
reserve. Similarly, no income tax provision was recorded for the year ended
October 30, 1998 due to continued operating losses.
EBITDA for the year ended October 30, 1998 was $22,936,000, an increase of
$10,034,000 or 78% from the year ended October 31, 1997, primarily as a result
of the factors identified above.
Historical Year Ended October 29, 1999 as Compared to the Pro Forma Year
Ended October 30, 1998
The following unaudited pro forma results of operations of the Company for
the year ended October 30, 1998 assume that the Loon Mountain acquisition and
related financing transactions had occurred on November 1, 1997. These
unaudited pro forma results of operations are not necessarily indicative of the
actual results of operations that would have been achieved nor are they
necessarily indicative of future results of operations.
Historical Pro forma
Year Ended Year Ended
October 29, 1999 October 30, 1998
---------------- ----------------
(In thousands)
Statement of Operations Data:
Revenue:
Resort Operations ................... $ 112,980 $ 107,887
Real Estate and Other ............... 12,744 7,608
--------- ---------
125,724 115,495
Operating Expenses:
Resort Operations ................... 96,975 87,163
Real Estate and Other ............... 5,244 4,671
Depreciation, Depletion and
Amortization........................ 21,750 18,547
Unusual Items, Net .................. 487 -
--------- ---------
Operating Income ...................... 1,268 5,114
Interest Expense and Other, Net ....... 19,843 19,612
--------- ---------
Loss Before Minority Interest ......... (18,575) (14,498)
Minority Interest ..................... 218 260
--------- ---------
Net Loss .............................. $ (18,793) $ (14,758)
========= =========
Other Data:
EBITDA Before Unusual Items ........... $ 28,248 $ 27,382
Noncash Cost of Real Estate Sales ..... $ 4,743 $ 3,721
Total historical revenues for the year ended October 29, 1999 were
$125,724,000, an increase of $10,229,000, or 8.9%, over the comparable pro
forma period in 1998. Revenues from resort operations increased $5,093,000, or
4.7%, for the 1999 period as compared to the 1998 period.
Total skier days for the year ended October 29, 1999 were 2,433,000, an
increase of 46,000 days, or 2%, over the comparable pro forma period in 1998.
Total skier days increased due to significantly higher skier days at the Summit
and a larger number of skier visits attributable to season pass sales and
promotional offerings. Northstar and Sierra generated increased revenues of
$1,511,000 and $1,161,000, respectively, or 4.5% and 8.5%, due to improved
yields. Bear Mountain's revenues declined slightly due to lower skier visits as
a result of the lack of natural snowfall, partially offset by improved yields.
Revenues for Waterville Valley and Loon Mountain declined by $87,000 and
$790,000, respectively, due to poor weather and snow conditions in the first
quarter, partially offset by improved yields. Revenues for Mt. Cranmore
increased $430,000, or 11.4%, due to improved yields and higher skier visits as
a result of new pricing strategies. The Summit generated $2,419,000, or 22.7%,
in additional revenues due to an earlier opening, extended season, higher skier
days and improved yields. Revenues for Grand Targhee increased by $371,000, or
5.0%, due to slightly higher skier visits.
Revenues from real estate and timber operations increased $5,136,000 for the
1999 historical period as compared to the 1998 pro forma period. As previously
discussed, Northstar recorded real estate sales of approximately $12,000,000 in
the 1999 period for the sale of 43 lots, as compared to approximately $6.8
million in the 1998 period for the sale of 32 lots.
Historical resort operating expenses, excluding depreciation, depletion and
amortization, for the year ended October 29, 1999 were $96,975,000, an increase
of $9,812,000, or 11.3%, over the comparable pro forma period in 1998.
Increased costs of winter operations at the Summit of $4,197,000 and higher
corporate expenses of $1,472,000 for corporate initiatives, process
improvements and new management personnel as previously discussed were the
principal contributors to the increase. Increased snowmaking costs at Bear
Mountain of $480,000 due to the lack of natural snowfall, lease costs in the
amount of $494,000 for three new lifts at the Summit and Bear Mountain,
$197,000 of incremental labor costs associated with earlier openings at
Northstar, Sierra and Bear Mountain and normal inflationary impacts also
contributed to the increase.
Cost of sales for real estate and timber operations increased by $573,000 to
$5,244,000 for the 1999 period due primarily to an increase in the number of
lots sold and increased infrastructure costs.
Historical depreciation, depletion and amortization for the year ended
October 29, 1999 was $21,750,000. The increase of $3,203,000 over the 1998 pro
forma period was due to higher average asset balances in the 1999 period.
The Company recorded certain unusual items in the fourth quarter of 1999,
which amounted to $487,000. See Note 2 to the Company's consolidated financial
statements included elsewhere in this Report for a description of these items.
Interest expense and other income (expense), net for the historical year
ended October 29, 1999 totaled $19,843,000, an increase of $231,000 or 1.2%
from the comparable pro forma period in 1998. The increase was principally due
to interest expense on borrowings under the Senior Credit Facility used to fund
capital expenditures, maintenance activities and normal seasonal working
capital requirements in the off-season periods.
EBITDA before unusual items for the historical year ended October 29, 1999
was $28,248,000, an increase of $866,000, or 3.2%, from the pro forma year
ended October 30, 1998.
Liquidity and Capital Resources
The Company's primary liquidity needs are to fund capital expenditures,
service indebtedness and support seasonal working capital requirements. The
Company's primary sources of liquidity are cash flow from operations and
borrowings under the Senior Credit Facility. Virtually all of the Company's
operating income is generated by its subsidiaries. As a result, the Company is
dependent on the earnings and cash flow of, and dividends and distributions or
advances from, its subsidiaries to provide the funds necessary to meet its debt
service obligations. The Senior Credit Facility, as amended and restated on
January 28, 1999, currently provides for borrowing availability of up to $25
million during the term of such facility. On May 18, 1999, the final maturity
date of the
Senior Credit Facility was extended to March 31, 2002. The Senior Credit
Facility requires that the Company not have borrowings thereunder in excess of
$8 million in addition to amounts maintained by the Company in certain
depository accounts with the Agent for a period of 60 consecutive days each
year commencing sometime between February 1 and February 28. The Company
intends to use borrowings under the Senior Credit Facility to meet seasonal
fluctuations in working capital requirements, primarily related to off-season
operations and maintenance activities during the months of May through
November, to fund capital expenditures for lifts, trail work, grooming
equipment and other on-mountain equipment and facilities and to build retail
and other inventories prior to the start of the skiing season and for other
cash requirements. As of October 29, 1999, outstanding borrowings under the
Senior Credit Facility totaled approximately $23.0 million.
On November 17, 1999, Northstar consummated the sale to TLH of certain
single family development property (the "Unit 7 and 7A Development") for an
aggregate sales price of $7,050,000, subject to adjustment as described below.
The consideration paid to Northstar consisted of $6,000,000 in cash and a
promissory note (the "Second TLH Note") for a minimum of $1,050,000. The
proceeds of the sale were applied against the outstanding borrowings under the
Senior Credit Facility in order to provide the Company with additional
liquidity for early 1999/00 ski season operations. Under the terms of the
Second TLH Note, Northstar will receive the greater of (a) $1,050,000 plus
accrued interest at 7% per annum, or (b) the Net Cash Proceeds (as defined) of
the resale of the lots within the Unit 7 and 7A Development. The Second TLH
Note is prepayable at any time, and is due on the earlier to occur of January
30, 2001 or the date on which the last of the lots owned by TLH has been sold.
Pursuant to the terms of the sale, Northstar retained the obligation to
complete the scheduled construction of the development in accordance with the
tentative site development plan. Northstar has retained an option to repurchase
the Unit 7 and 7A Development from TLH. The Company will recognize revenue and
related costs of sales for this real estate transaction upon approval of the
site development plan, substantial completion of construction and the close of
escrow for the sales between TLH and third party buyers.
The Company had a working capital deficit of $35.4 million (including $23.0
million in outstanding borrowings under the Senior Credit Facility, and
excluding $9.9 million of unearned revenue from resort operations which will
not require cash spending to settle such liabilities) as of October 29, 1999,
which will negatively affect liquidity during 2000.
The Company generated cash from operating activities of $15.4 million for
the year ended October 29, 1999 as compared to $7.6 million for the year ended
October 30, 1998. This increase is due primarily to the introduction of new
season pass products during the summer of 1999 and reductions in inventories
(principally at Waterville Valley due to conversion to a concession arrangement
for retail operations for the 1999/00 ski season).
Cash used in investing activities totaled $18.5 million and $47.7 million
for the years ended October 29, 1999 and October 30, 1998, respectively. The
results for the 1999 period reflect primarily capital expenditures for property
and equipment and real estate held for development and sale, whereas the
results for the 1998 period also reflect the acquisition of Loon Mountain.
Cash provided by financing activities totaled $2.9 million and $40.3 million
for the years ended October 29, 1999 and October 30, 1998, respectively. The
results for both periods reflect net borrowings and, for the 1998 period,
receipt of additional capital contributions to fund the Loon Mountain
acquisition and certain planned capital expenditures.
The Company's capital expenditures for property and equipment for the year
ended October 29, 1999 were approximately $14.9 million (including $525,000 of
equipment acquired through capital leases and other debt). Subject to
availability of capital resources, management anticipates that expenditures for
its fiscal 2000 and fiscal 2001 capital programs will be approximately $18
million to $20 million in the aggregate, including approximately $4 million in
resort maintenance for each year. The Company plans to fund these capital
expenditures from available cash flow, vendor financing to the extent permitted
under the Senior Credit Facility and the Indenture and borrowings under the
Senior Credit Facility.
There were no significant commitments for future capital expenditures at
October 29, 1999. However, the Company has an early buy-out option in January
2000 for the purchase of three high speed detachable quad lifts that were
installed at the Summit and Bear Mountain at the start of the 1998/99 ski
season. The lifts were obtained under an operating lease arrangement. In the
event the early buy-out option is exercised, the Company would be
required to pay approximately $5.1 million to purchase the lifts. While the
Company is currently involved in negotiations with the lessor for deferment of
the early buy-out option, there can be no assurance that it will be able to
obtain such deferment on economically viable terms or at all.
Management believes that there is a considerable degree of flexibility in
the timing (and, to a lesser degree, the scope) of its capital expenditure
program, and even greater flexibility as to its real estate development
objectives. While the capital expenditure program described above is regarded
by management as important, both as to timing and scope, discretionary capital
spending above maintenance levels can be deferred, in some instances for
substantial periods of time, in order to address cash flow or other
constraints. As a result of the Company's recent operating performance and
liquidity constraints, it may be required to defer or abandon certain of its
capital expenditure projects.
With respect to the Company's potential real estate development
opportunities, management believes that such efforts would enhance ski-related
revenues and contribute independently to earnings. In addition, with respect to
significant development projects, the Company anticipates entering into joint
venture arrangements that would reduce infrastructure and other development
costs. Nonetheless, existing lodging facilities in the vicinity of each resort
are believed to be adequate to support current skier volumes and a deferral or
curtailment of development efforts is not regarded by management as likely to
adversely affect skier days and ski-related revenues or profitability. The
Company also believes that its current infrastructure is sufficient, and that
development of real estate opportunities is not presently necessary to support
its existing operations.
The Company's liquidity has been and will continue to be significantly
affected by its high leverage. As a result of its leveraged position, the
Company will have significant cash requirements to service debt and funds
available for working capital, capital expenditures, acquisitions and general
corporate purposes are limited. In addition, the Company's high level of debt
may increase its vulnerability to competitive pressures and the seasonality of
the skiing and recreational industries. Any decline in the Company's expected
operating performance could have a material adverse effect on the Company's
liquidity and on its ability to service its debt and make required capital
expenditures.
In addition, the Senior Credit Facility and the Indenture each contain
covenants that, among other things, significantly limit the Company's ability
to obtain additional sources of capital and may affect the Company's liquidity.
These covenants restrict the ability of the Company and its Restricted
Subsidiaries to, among other things, incur additional indebtedness, create
liens, make investments, consummate certain asset sales, create subsidiaries,
issue subsidiary stock, consolidate or merge with any other person, or transfer
all or substantially all of the assets of the Company. Further, upon the
occurrence of a Change of Control (as defined in the Indenture), the Company
may be required to repurchase the Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest. The occurrence of a Change of
Control may also constitute a default under the Senior Credit Facility. No
assurance can be given that the Company would be able to finance a Change of
Control repurchase offer.
The Senior Credit Facility also requires the Company to maintain specified
consolidated financial ratios and satisfy certain consolidated financial tests.
The Company's ability to meet these financial covenants may be affected by
events beyond its control, and there can be no assurance that the Company will
meet those covenants.
On December 15, 1999, the Company reached an agreement for the proposed sale
of certain developmental real estate (the "Joint Venture Development
Property"), consisting of approximately 250 acres of land at Northstar, to a
newly formed joint venture between the Company and East West Partners, Inc.
("East West"). The Joint Venture Development Property excludes certain single
family developmental parcels that the Company anticipates developing on its
own, as well as other land held for future development and sale at Northstar.
The proposed transaction is subject to a number of significant closing
conditions, including (1) required consents and approvals, including those of
certain of the Company's creditors and (2) completion of title evaluations and
subdivision requirements to effect the transfer of the Joint Venture
Development Property. Further, East West has the right to terminate the
transaction prior to January 31, 2000. Under the terms of the proposed
transaction, the Company would receive an upfront cash payment ranging from $10
million to $15 million depending on the amount of real estate transferred at
the initial closing, the remainder of the upfront cash payment of $15 million
upon the subsequent transfer of parcels not transferred at the initial closing,
additional payments based on gross sales of the developed real estate as well
as a 20% interest in the joint venture. The Company is required to invest $5
million of the upfront cash payment in capital improvements to the Northstar
resort. Additionally, in the event the planned
transaction with East West is consummated, the Company anticipates using a
portion of the proceeds therefrom to repurchase the Unit 7 and 7A Development
property from TLH.The Company has retained approval rights over certain
components of the master development plan for the proposed development.
However, there can be no assurances that the conditions to the transaction will
be satisfied or that the transaction will be consummated on the terms described
or at all.
The Company currently has $133.5 million aggregate principal amount of
Senior Notes outstanding, which will result in annual cash interest
requirements of approximately $16.7 million. The Company expects that cash
generated from operations, cash proceeds of planned real estate sales at
Northstar and planned divestitures of other real estate and non-strategic
assets, together with borrowing availability, will be adequate to fund the
interest requirements on the Senior Notes and the Company's other cash
operating and debt service requirements over the next twelve months. However,
for the year ended October 29, 1999, the Company's ratio of EBITDA before
unusual items to interest expense was 1.51, and as of October 29, 1999, the
ratio of the Company's total debt to EBITDA before unusual items for the last
twelve months was 5.70. For the year ended October 29, 1999, the Company's
earnings would have been inadequate to cover fixed charges by $18.8 million.
Any decline in the Company's expected operating performance or the failure to
sell real estate at Northstar or achieve planned divestitures of other real
estate and non-strategic assets, in each case on the terms anticipated, could
have a material adverse effect on the Company's financial position and
liquidity. In such case, the Company could be required to attempt to refinance
all or a portion of its existing debt, sell other assets or obtain additional
financing. No assurance can be given of the Company's ability to do so or the
terms of any such transaction. In addition, the Company would require
additional financing for expansion of its existing properties or for future
acquisitions, if any. No assurances can be given that any such financing would
be available on commercially reasonable terms. See "Forward-Looking Statements"
herein.
The Company believes that inflation has had little effect on its results of
operations and any impact on costs has been largely offset by increased
pricing.
Impact of the Year 2000 Issue
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in normal
business activities.
The Company has conducted an assessment of its information and
telecommunications technology ("IT") assets and systems. Substantially all of
the Company's IT systems, except for a portion of the Company's ticketing and
sales systems, operate using software developed and supported by third party
vendors. The Company has completed its program to remedy such third party
developed systems, which entailed either modifications to or replacement of
certain existing IT systems. The cost of modifications will be expensed as
incurred and was not significant. The cost of purchased replacements will be
capitalized and is expected to be approximately $700,000, of which $642,000 had
been incurred through October 29, 1999.
In October 1999, the Company completed modifications necessary to make its
primary ticketing and sales system year 2000 compliant. The cost of
modifications to the ticketing and sales software were expensed as incurred and
was performed using primarily existing internal resources. Purchases of
replacement hardware were capitalized. The cost of software modifications
totaled approximately $155,000. Hardware replacements required capital spending
of approximately $25,000.
The Company has completed a program to ensure that significant vendors and
service providers with which it does business are year 2000 compliant. In
addition, the Company has conducted an assessment of its operating assets to
determine whether there will be any significant year 2000 compliance issues for
such assets.
The Company completed its year 2000 assessments and remediation efforts
during December 1999 and has not experienced any significant effects relating
to year 2000 issues as of the filing date of this Report. During the remainder
of 2000, the Company will continue to monitor its IT systems, ticketing and
sales systems, operating assets and vendors for any indications of year 2000
issues. In the event the Company's assessment of the extent of
year 2000 issues surrounding its IT systems, operating assets or significant
vendors or service providers were to be incorrect, the year 2000 issue could
have a material impact on the operations of the Company. The Company has a
contingency plan to address the potential of future year 2000 issues in the
event its year 2000 compliance program is unsuccessful.
The cost of the project and the Company's assessment of the extent of year
2000 issues were based on management's best estimates and judgments, which were
derived utilizing numerous assumptions of future events, including the
continued availability of certain resources, third party modification plans and
other factors. However, there can be no guarantee that these estimates and
expected outcomes will be achieved and actual results could differ materially
from those anticipated.
Seasonality
The business of the Company is highly seasonal, with the vast majority of
its annual revenues expected to be generated between November and April of each
fiscal year. Management considers it essential to achieve optimal operating
results during key holidays and weekends during this period. The Company's
results of operations are, in turn, significantly dependent on favorable
weather conditions and other factors beyond the Company's control. The Company
has sought to mitigate the downside risk of its seasonal business by purchasing
paid skier day insurance policies for the 1999/00 ski season. However, these
policies would not fully protect the Company against poor weather conditions or
other factors that adversely affect the Company's operations.
During the off-season months of May through October, the Company's resorts
typically experience a substantial reduction in labor and utility expense due
to the absence of ski operations, but make significant expenditures for
maintenance, expansion and capital improvement in preparation for the ensuing
ski season.
Forward-Looking Statements
Except for historical matters, the matters discussed in Part II, Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this Report are forward-looking statements that
involve risks and uncertainties. The forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are based on management's
current views and assumptions and involve risks and uncertainties that could
significantly affect expected results. The Company wishes to caution the reader
that certain factors, including those described below, could significantly and
materially affect the Company's actual results, causing results to differ
materially from those in any forward-looking statement. These factors include,
but are not limited to: uncertainty as to future financial results, the
substantial leverage and liquidity constraints of the Company, significant
operating restrictions under the Company's debt agreements, the capital
intensive nature of development of the Company's ski resorts, uncertainties
associated with obtaining financing for future real estate projects and to
undertake future capital improvements, demand for and costs associated with
real estate development, the discretionary nature of consumers' spending for
skiing and resort real estate, regional and national economic conditions, the
successful or unsuccessful integration of acquired businesses, weather
conditions, natural disasters (such as earthquakes and floods), industry
competition, governmental regulation and other risks associated with expansion
and development, the adequacy of the water supply at each of the Company's
resorts, the occupancy of leased property and property used pursuant to the
United States Forest Service permits, and the ability of the Company to make
its information technology assets and systems year 2000 compliant and the costs
of any modifications necessary in this regard.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
The Company's market risk sensitive instruments do not subject the Company
to material market risk exposures, except for such risks related to interest
rate fluctuations. As of October 29, 1999, the Company had debt outstanding
(including the Senior Credit Facility) with a carrying value of $161.0 million
and an estimated fair value of $125.6 million.
Fixed interest rate debt outstanding as of October 29, 1999, which excludes
the Senior Credit Facility, was $138 million, carries an average interest rate
of approximately 12%, and matures as follows (in thousands):
2000 2001 2002 2003 2004 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
Senior Notes $ - $ - $ - $ - $ - $133,500 $133,500
Other Debt 1,468 504 429 461 1,269 320 4,451
------------------------------------------------------------------
$1,468 $ 504 $ 429 $ 461 $1,269 $133,820 $137,951
==================================================================
The amount of borrowings under the Senior Credit Facility as of October 29,
1999 was approximately $23 million. For purposes of calculating interest,
borrowings under the Senior Credit Facility can be, at the election of the
Company, Base Rate Loans or LIBOR Rate Loans or a combination thereof. Base
Rate Loans bear interest at the sum of (a) a margin of between 0% and .5%,
depending on the level of consolidated EBITDA of the Company and its
subsidiaries (as determined pursuant to the Senior Credit Facility), plus (b)
the higher of (i) the Agent's base rate or (ii) the federal funds rate plus
.5%. LIBOR Rate Loans bear interest at the LIBOR rate plus a margin of between
2% and 3%, depending on the level of consolidated EBITDA. As of October 29,
1999, the borrowings outstanding bore interest at 8.25%, pursuant to the Base
Rate Loan option.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary financial information that are
required to be included pursuant to this Item 8 are listed in Item 14 of this
Report under the caption "(a)1." and follow Item 14. The financial statements
and supplementary financial information specifically referenced in such list
are incorporated in this Item 8 by reference.
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
Directors, Executive Officers and Key Employees
The following table sets forth information with respect to the directors,
executive officers and other key employees of the Company and Booth Creek Ski
Group, Inc., a Delaware corporation ("Parent"), of which the Company is a
wholly-owned subsidiary.
Name Age Position
- ---------------------------------- ----- -----------------------------
George N. Gillett, Jr............ 61 Chairman of the Board of
Directors; Chief Executive
Officer; Assistant Secretary;
Director of the Company and
Parent
Christopher P. Ryman............. 48 President, Chief Operating
Officer and Assistant
Secretary of the Company;
President and Assistant
Secretary of Parent
Elizabeth J. Cole................ 39 Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary of
the Company and Parent
Timothy H. Beck.................. 49 Executive Vice President,
Planning of the Company
Timothy M. Petrick............... 44 Executive Vice President,
Branding of the Company
Brian J. Pope.................... 37 Vice President of Accounting
and Finance, Assistant
Treasurer and Assistant
Secretary of the Company;
Vice President and Assistant
Secretary of Parent
Julianne Maurer.................. 43 Vice President of Marketing
and Sales of the Company
Mark St. J. Petrozzi............. 40 Vice President of Risk
Management of the Company
Laura B. Moriarty................ 44 Vice President of Human
Resources of the Company
Sandeep D. Alva.................. 38 Director of the Company and
Parent
Dean C. Kehler................... 43 Director of the Company and
Parent
Edward Levy...................... 37 Director of the Company and
Parent
Daniel C. Budde.................. 38 Director of the Company and
Parent
Timothy Silva.................... 48 General Manager - Northstar
John A. Rice..................... 44 General Manager - Sierra
Brent G. Tregaskis............... 39 General Manager - Bear
Mountain
Thomas H. Day.................... 45 General Manager - Waterville
Valley
Ted M. Austin.................... 39 General Manager - Mt. Cranmore
Chris Nyberg..................... 48 General Manager - Summit
Larry H. Williamson.............. 58 General Manager - Grand
Targhee
Rick F. Kelley................... 45 General Manager - Loon
Mountain
George N. Gillett, Jr. Mr. Gillett has been the Chairman of the Board of
Directors of the Company since its formation in October 1996 and Chief
Executive Officer since February 1997. Mr. Gillett served as Chairman from 1977
until September 1996 of Gillett Holdings, Inc. (which was renamed Vail Resorts,
Inc. in 1996). Gillett Holdings, Inc. owned Packerland Packing Company, Inc.
until its sale in 1994, the Vail ski resort since 1985 and various media
properties, including a controlling interest in SCI Television, Inc. from 1987
until 1993. Since August 1994 he has served as Chairman of Packerland Packing
Company, Inc., a meatpacking company based in Green Bay, Wisconsin. Since
January 1997, Mr. Gillett has served as Chairman of Corporate Brand Foods
America, Inc. a processor and marketer of meat and poultry products based in
Houston, Texas. From October 1987 until May 1993,
Mr. Gillett served as Chairman and Chief Executive Officer of SCI Television,
Inc. and from May 1993 until May 1996 as President of New World Television,
Inc. (renamed from SCI Television, Inc. in 1993). Mr. Gillett filed a petition
of voluntary bankruptcy under Chapter 7 of the United States Bankruptcy Code on
August 13, 1992 and was discharged from bankruptcy on July 27, 1993. In
addition, certain entities for which Mr. Gillett has served as an executive
officer or director, including Gillett Holdings, Inc., SCI Television, Inc. and
their respective subsidiaries, filed bankruptcy petitions, or had bankruptcy
petitions filed against them, in 1991 and 1993 under Chapter 11 of the United
States Bankruptcy Code. All of these entities have since been discharged from
bankruptcy.
Christopher P. Ryman. Mr. Ryman became President, Chief Operating Officer
and Assistant Secretary of the Company in May 1998. Mr. Ryman was Chief
Operating Officer and Senior Vice President of Vail Associates, Inc. from 1995
to May 1998. Prior to that time, from 1992 to 1995, he was Senior Vice
President of Mountain Operations at Vail Associates, Inc.
Elizabeth J. Cole. Ms. Cole has held the positions of Executive Vice
President, Chief Financial Officer, Treasurer and Secretary of the Company
since May 1998. From May 1995 until May 1998, Ms. Cole worked at Vail Resorts
with her most recent position there being that of Vice President, Business
Development. Prior to this time Ms. Cole was affiliated with Aurora Capital
Partners, a private equity fund. During her employment with Aurora Capital
Partners, she served as the Chief Financial Officer of Petrowax PA, Inc., a
manufacturer of petroleum waxes.
Timothy H. Beck. Mr. Beck has held the position of Executive Vice President,
Planning of the Company since July 1997. Prior to this time he served as
President of Sno-engineering, Inc. since January 1991.
Timothy M. Petrick. Mr. Petrick has held the position of Executive Vice
President of the Company since May 1997. Prior to this time he served as Vice
President and General Manager of K2 North America since July 1992.
Brian J. Pope. Mr. Pope has held the position of Vice President of
Accounting and Finance of the Company since August 1998. In December 1998, Mr.
Pope was also named to the positions of Assistant Treasurer and Assistant
Secretary of the Company. Prior to August 1998, he served as Senior Manager in
the Assurance and Advisory Business Services unit of Ernst & Young LLP.
Julianne Maurer. Ms. Maurer has held the position of Vice President of
Marketing and Sales of the Company since December 1996. Prior to this time she
served as Director of Marketing of the Fibreboard Resort Group as well as
Director of Marketing for Northstar.
Mark St. J. Petrozzi. Mr. Petrozzi has held the position of Vice President
of Risk Management of the Company since January 1998. Prior to this time Mr.
Petrozzi held various management positions with Willis Corroon, a national
insurance brokerage and consulting firm.
Laura B. Moriarty. Ms. Moriarty has held the position of Vice President of
Human Resources of the Company since September 1997. Prior to this time Ms.
Moriarty was the Training Development Director at Harvey's Resort Casino.
Sandeep D. Alva. Mr. Alva has been the President of Hancock Mezzanine
Investments LLC, a private investment fund established to provide subordinated
debt and equity capital to middle market companies and an affiliate of John
Hancock Mutual Life Insurance Company ("John Hancock") since 1998. Mr. Alva is
also currently a Second Vice President of John Hancock. Mr. Alva has been with
John Hancock since 1985, except for 1990/91 when he was a Principal at Joseph,
Littlejohn and Levy.
Dean C. Kehler. Mr. Kehler has been a Managing Director of CIBC Oppenheimer
Corp., an affiliate of CIBC WG Argosy Merchant Fund 2, L.L.C. (the "CIBC
Merchant Fund") since August 1995, and has investment responsibilities with
respect to the CIBC Merchant Fund and the Co-Investment Merchant Fund, LLC
("Co-Investment Fund"). From February 1990 to August 1995, Mr. Kehler was a
Managing Director of Argosy Group, L.P., an investment banking firm.
Edward Levy. Mr. Levy has been a Managing Director of CIBC Oppenheimer
Corp., an affiliate of CIBC Merchant Fund since August 1995, and has investment
responsibilities with respect to the CIBC Merchant Fund and the Co-Investment
Fund. From February 1990 to August 1995, Mr. Levy was a Managing Director of
the Argosy Group, L.P., an investment banking firm.
Daniel C. Budde. Mr. Budde has been with John Hancock since 1989 and
currently serves as a Senior Investment Officer with the Bond and Corporate
Finance Group. Mr. Budde is responsible for a portfolio of investments,
including various mezzanine and private equity transactions.
Timothy Silva. Mr. Silva has been the General Manager of Northstar since
January 1995. Prior to this time he served as Director of Operations of
Northstar, since February 1992.
John A. Rice. Mr. Rice has been the General Manager of Sierra since July
1993. Prior to this time he served as Vice President of Administration of Bear
Mountain, Ltd. (the predecessor of Bear Mountain, Inc.) since July 1988.
Brent G. Tregaskis. Mr. Tregaskis became the General Manager of Bear
Mountain in February 1998. Prior to this time he served as Food and Beverage
and Facilities Director of Jackson Hole Mountain Resort since July 1996. From
1985 until July 1996, he served in a variety of positions at Snow Summit
Mountain Resort, including Profit Centers Manager and General Manager of the
Food and Beverage Department.
Thomas H. Day. Mr. Day has been the General Manager of Waterville Valley
since May 1997. Prior to this time he served as Mountain Manager of Waterville
Valley since 1986.
Ted M. Austin. Mr. Austin became the General Manager of Mt. Cranmore in
September 1997. Prior to this time he served as Director of Marketing at Sierra
since August 1993.
Chris Nyberg. Mr. Nyberg became the General Manager of the Summit in May
1999. Prior to this time he served at Bombardier Motor Corporation, from 1996
to 1999, as worldwide Vice President of Sales, Service, Parts and Customer
Support and, from 1990 to 1996, as Director of Sales and Marketing for North
America.
Larry H. Williamson. Mr. Williamson has held the position of General Manager
of Grand Targhee since March 1996. Prior to this time he served as Director of
Mountain Operations of Grand Targhee since 1989.
Rick F. Kelley. Mr. Kelley became the General Manager of Loon Mountain in
March 1998. Prior to this time he served as Manager of Operations, Director of
Mountain Operations, Director of Skiing Operations, Director of Technical
Operations and Director of Maintenance Operations as well as serving in a
variety of other positions at Loon Mountain since 1978.
Directors
All directors of Booth Creek and Parent hold office until the respective
annual meeting of stockholders next following their election, or until their
successors are elected and qualified. On July 28, 1999, George N. Gillett, Jr.,
Dean C. Kehler, Sandeep D. Alva, Edward Levy and Daniel C. Budde were elected
to serve as the sole members of the Board of Directors of Parent and the
Company. George N. Gillett, Jr. was re-appointed as Chairman of the Board of
Directors of the Company. See Part III, Item 13. "Certain Relationships and
Related Transactions - Stockholders Agreement." No director of Booth Creek or
Parent receives compensation for acting in such capacity.
Item 11. Executive Compensation
Compensation of Executive Officers
The following table sets forth the compensation paid by Booth Creek to (i)
its Chairman of the Board and Chief Executive Officer and (ii) each of the four
most highly compensated executive officers of the Company in fiscal 1999
(collectively, the "Named Executives"), for services rendered in all capacities
to the Company during the periods indicated.
SUMMARY COMPENSATION TABLE
Annual Compensation
---------------------------------
Other All
Annual Other
Salary Bonus Compensation Compensation
Name and Principal Position Year ($) ($) ($) ($)
- --------------------------- ------- ----------- ------ ------------ ---------------
George N. Gillett, Jr...... 1999 - - - -
Chairman of the Board, 1998 - - - -
Chief Executive Officer 1997 3,333 (2) - - -
and Director (1)
Christopher P. Ryman....... 1999 240,000 50,000 - 3,738 (4)
President, Chief 1998 (3) 103,385 30,000 - -
Operating Officer and 1997 - - - -
Assistant Secretary
Elizabeth J. Cole.......... 1999 175,000 100,000 - 4,821 (5)
Executive Vice President, 1998 (3) 87,500 26,000 - -
Chief Financial Officer, 1997 - - - -
Treasurer and Secretary
Timothy H. Beck............ 1999 175,000 35,000 - 7,520 (6)
Executive Vice President 1998 143,268 45,000 - 4,040 (7)
1997 (3) 46,415 16,000 - 1,762 (9)
Timothy M. Petrick......... 1999 175,000 7,500 - 7,875 (4)
Executive Vice President 1998 175,000 45,000 - 4,192 (8)
1997 (3) 87,950 30,625 - 1,837 (9)
- ----------------------------
(1) Mr. Gillett is the sole shareholder, sole director and Chief Executive
Officer of Booth Creek, Inc., which, pursuant to the Management Agreement
(as defined), provides the Company with management services. See Part
III, Item 13. "Certain Relationships and Related Transactions -
Management Agreement with Booth Creek, Inc."
(2) Mr. Gillett was only compensated by the Company during January and
February of 1997.
(3) Mr. Ryman, Ms.Cole, Mr. Beck and Mr. Petrick commenced their employment
with the Company on May 28, 1998, May 4, 1998, July 1, 1997 and May 1,
1997, respectively. Accordingly, their compensation amounts for such
years do not reflect a full year of compensation.
(4) Consists of a 401(k) matching contribution.
(5) Consists of a 401(k) matching contribution of $2,726 and term life
insurance premiums of $2,095.
(6) Consists of a 401(k) matching contribution of $5,755 and term life
insurance premiums of $1,765.
(7) Consists of a 401(k) matching contribution of $2,275 and term life
insurance premiums of $1,765.
(8) Consists of a 401(k) matching contribution of $2,427 and term life
insurance premiums of $1,765.
(9) Consists of term life insurance premiums.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1999 AND
1999 FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth, for each of the Executive Officers, certain
information concerning the exercise of stock options granted under the BCSG
Option Plan described below during fiscal 1999, including the year-end value of
unexercised options.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARS at Options/SARS at
Acquired Fiscal Year-End, Fiscal Year-End,
on Value Exercisable/ Exercisable/
Exercise (#) Realized Unexercisable Unexercisable
Name (1) ($) (#) (2)
- ------------------------ ------------ --------- ---------------- -----------------
George N.Gillett, Jr... - - -/- $-/$-
Timothy M.Petrick ..... - - 40/60 $-/$-
Timothy H. Beck ....... - - 32/48 $-/$-
Timothy Silva ......... - - 4/6 $-/$-
John A. Rice .......... - - 4/6 $-/$-
(1) No options were exercised during the fiscal year ended October 29, 1999.
(2) There is no public market for the shares of common stock underlying the
stock options granted pursuant to the BCSG Option Plan. However, the
Company has determined that, as of October 29, 1999, the fair market
value of the underlying securities is less than the applicable exercise
prices under the options.
Parent Stock Options
Parent has established the Booth Creek Ski Group, Inc. 1997 Stock Option
Plan (the "BCSG Option Plan"), pursuant to which options with respect to a
maximum of 400 shares of Parent's Class A Common Stock may be granted. Options
may be granted under the BCSG Option Plan to executive officers and key
employees of the Company at the discretion of the Board of Directors of Parent.
Under the BCSG Option Plan, Parent has entered into several stock option
agreements (each, a "Stock Option Agreement" and collectively, the "Stock
Option Agreements") pursuant to which certain executive officers and key
employees of the Company (each a "Holder") have been granted options, subject
to vesting, to purchase from Parent a specified number of shares of Parent's
Class A Common Stock at an exercise price of $500 per share, subject to
adjustment under certain circumstances. Each Holder's option vested with
respect to 20% of the related shares on the date of grant, and will vest with
respect to an additional 20% of the related shares on each of the second,
third, fourth and fifth anniversaries of such date. Upon the occurrence of
certain events resulting in the termination of such Holder's employment (for
example, the Holder's death, disability or for reasons other than for "cause"
(as defined in the Stock Option Agreement)) during a year in which vesting
would have taken place, such vesting will occur on a monthly, pro rata basis. A
Holder's option will become fully vested with respect to all of the related
shares upon a "change of control" (as defined in the Stock Option Agreement) or
if he terminates his employment within 45 days following certain occurrences
relating to the continued control and ownership of Parent by George N. Gillett,
Jr. and his family. Upon the termination of the Holder's employment, all of his
unvested options will be canceled and, depending on the reason for such
termination, certain percentages of his vested options will be canceled.
Following any termination of his employment, the Holder must, subject to
certain exceptions, exercise his option to purchase shares within 120 days
following such termination. In addition, the Holder generally may not exercise
his option after 10 years from the date of grant.
Pursuant to each Stock Option Agreement, if the Holder's employment is
terminated other than for "cause," he will have the right to require Parent to
purchase any shares of stock issued or issuable pursuant to his option at the
fair market value of such shares, as described therein. In addition, Parent
will have the right following the termination of the Holder's employment for
"cause" or his resignation without "good reason" to purchase all shares of
stock acquired by him pursuant to an exercise of his option at the fair market
value of such shares, as described in
the Stock Option Agreement. Any shares of stock issued pursuant to the options
granted under the Stock Option Agreements will be subject to the Stockholders
Agreement (as defined). See Part III, Item 13. "Certain Relationships and
Related Transactions - Stockholders Agreement."
To date, Parent has entered into a Stock Option Agreement with, and has
granted options to purchase shares of Parent's Class A Common Stock to, each of
Timothy M. Petrick, Timothy H. Beck, Timothy Silva and John A. Rice, with
respect to 100, 80, 10 and 10 shares, respectively.
Employment and Other Agreements
The Company is a party to an employment agreement with Timothy M. Petrick,
Executive Vice President, Branding of the Company. Mr. Petrick's employment
agreement commenced on May 5, 1997 and will expire on April 30, 2002, unless
sooner terminated. Under such agreement, Mr. Petrick initially received a base
salary of $175,000 per annum, subject to certain increases as Mr. Petrick and
the Company may agree. Mr. Petrick will also be entitled to receive a bonus
following an initial public offering by the Company and, beginning with the
Company's fiscal year 1998, an annual incentive bonus of up to 50% of his base
salary based upon the Company's attainment of certain targeted financial,
business and personal goals. Under the terms of his employment agreement, Mr.
Petrick is eligible to participate in the health, disability and retirement
plans offered to other executives of the Company. In addition, pursuant to his
agreement, the Company provides Mr. Petrick with a $1,000,000 term life
insurance policy, reimburses him for all reasonable and necessary expenses
incurred by him in the discharge of his duties and indemnifies him to the
maximum extent permitted by Delaware law. In the event that Mr. Petrick is
required to relocate his residence due to a relocation of the Company's
executive offices (as described in his agreement), the Company shall reimburse
Mr. Petrick for certain costs related to such relocation.
Under the terms of his agreement, Mr. Petrick's employment may be terminated
by the Company at any time, with or without cause, or upon his death or
disability. In the event Mr. Petrick's employment agreement is terminated
"without cause" or by Mr. Petrick for "good reason" (as described in his
agreement), the Company will provide Mr. Petrick with salary continuation and
continuation of health and disability insurance coverage for a period of 18
months or until Mr. Petrick is eligible for comparable benefits from another
entity, whichever date is sooner. During the term of his employment and for a
period of one year thereafter, Mr. Petrick will be subject to provisions
prohibiting his competition with the Company, solicitation of certain of the
Company's executives or diversion of the Company's customers. Mr. Petrick's
employment agreement also contains provisions relating to non-disclosure of the
Company's proprietary information.
The Company is a party to an employment agreement with Timothy H. Beck,
Executive Vice President, Planning of the Company. Mr. Beck's employment under
such agreement commenced on July 1, 1997 and will expire on June 30, 2002,
subject to automatic annual one-year extensions, unless sooner terminated. For
the year ended October 29, 1999, Mr. Beck received a base salary of $175,000
per annum, which is subject to annual review and discretionary increase by the
Company. Mr. Beck will also be entitled to receive a bonus following an initial
public offering by the Company and, beginning with the Company's fiscal year
1998, an annual incentive bonus of up to 50% of his base salary based upon the
Company's attainment of certain targeted financial, business and personal
goals. Under the terms of his employment agreement, Mr. Beck is entitled to
four weeks paid vacation per year and is eligible to participate in the health,
disability, retirement, profit sharing, equity award and savings plans offered
to other executives of the Company. In addition, pursuant to his agreement, the
Company provides Mr. Beck with a $1,000,000 term life insurance policy,
reimburses him for all reasonable and necessary expenses incurred by him in the
discharge of his duties and indemnifies him to the maximum extent permitted by
Delaware law. In the event that the Company requires Mr. Beck to relocate his
residence to the community in which the Company's executive offices are located
(as described in his agreement), the Company shall reimburse Mr. Beck for
certain costs related to such relocation.
Under the terms of his employment agreement, Mr. Beck's employment may be
terminated by the Company at any time, with or without cause, or upon his
death, disability or resignation. In the event Mr. Beck's employment is
terminated "without cause" or by Mr. Beck for "good reason" (as described in
his agreement), the Company will provide Mr. Beck with salary continuation and
continuation of health and disability insurance coverage for a period of 18
months or until such time as Mr. Beck is eligible for comparable benefits from
another entity, whichever date is sooner. In the event Mr. Beck's employment is
terminated "without cause" within six months of a "change of control" (as
described in his agreement), the Company will provide Mr. Beck with salary
continuation and
continuation of health and disability insurance coverage until the earlier of
(i) June 30, 2002 or (ii) the third anniversary of such termination, but at
least for a period of 18 months. However, such salary continuation shall be
reduced by any compensation received for services as an employee or independent
contractor during such periods and such benefit continuation will cease at such
time as Mr. Beck is eligible for comparable benefits from another entity.
During the term of his employment and for a period of one year thereafter, Mr.
Beck will be subject to provisions prohibiting his competition with the
Company, solicitation of certain of the Company's executives or diversion of
the Company's customers. Mr. Beck's employment agreement also contains
provisions relating to non-disclosure of certain confidential information of
the Company (as described in his agreement).
Compensation Committee Interlocks and Insider Participation
The Company's compensation policies are determined and executive officer
compensation decisions are made by the Board of Directors. Mr. George N.
Gillett, Jr. was the sole director of the Company since its formation in
October 1996 through July 28, 1999, at which date Sandeep D. Alva, Dean C.
Kehler, Edward Levy and Daniel C. Budde were also elected to serve as members
of the Board of Directors of the Company. Mr. Gillett is the Chief Executive
Officer of the Company and is the sole shareholder, sole director and Chief
Executive Officer of Booth Creek, Inc., which provides the Company with
management services. Messrs. Kehler and Levy are Managing Directors of CIBC
Oppenheimer Corp., which has provided investment banking and financial advisory
services to the Company. See Part III, Item 13. "Certain Relationships and
Related Transactions."
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The Company is a wholly-owned subsidiary of Parent. The following table sets
forth information concerning the beneficial ownership of Parent's Common Stock
(including Class A Common Stock and Class B Common Stock) as of October 29,
1999 by (i) each person known to the Company to own beneficially more than 5%
of the outstanding Common Stock of Parent, (ii) by each director of the Company
and each Named Executive and (iii) all directors and executive officers of the
Company as a group. Each share of Parent's Class B Common Stock is non-voting
(except with respect to certain amendments to the certificate of incorporation
and bylaws of Parent and as otherwise required by the General Corporation Law
of the State of Delaware) and is convertible into one share of voting Class A
Common Stock of Parent at any time, subject to applicable regulatory approvals.
All shares are owned with sole voting and investment power, unless otherwise
indicated.
The percentages of beneficial ownership in the accompanying table represents
the relative interests assuming that only such individual holder's respective
Class B Common Stock or Warrants were converted with respect to the existing
number of outstanding Class A or Class B shares.
Parent's Class A Parent's Class B
Common Stock Common Stock
Beneficially Owned Beneficially Owned
---------------------- ----------------------
Beneficial Owner Shares % Shares %
- ------------------------------------- ------------- -------- ------------- --------
Booth Creek Partners Limited II,
L.L.L.P............................... 4,763.4 (1) 100% 182.9 (2) 3%
6755 Granite Creek Road
Teton Village, Wyoming 83025
John Hancock Mutual Life Insurance
Company............................... 6,192.9 (3) 57% 6,192.9 (3) 77%
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
CIBC WG Argosy Merchant Fund 2, L.L.C... 2,397.9 (4) 34% 2,397.9 (4) 39%
425 Lexington Avenue, 3rd Floor
New York, New York 10017
George N. Gillett, Jr................... 4,763.4 (5) 100% - -
Chairman of the Board of the Company
Rose Gillett............................ 4,763.4 (5) 100% - -
6755 Granite Creek Road
Teton Village, Wyoming 83025
Jeffrey J. Joyce........................ 687.1 (6) 15% - -
1950 Spectrum Circle, Suite 400
Marietta, Georgia 30067
Hancock Mezzanine Partners L.P.......... 391.4 (7) 8% 391.4 (7) 7%
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Co-Investment Merchant Fund, LLC........ 266.4 (8) 5% 266.4 (8) 5%
425 Lexington Ave., 3rd Floor
New York, New York 10017
Sandeep D. Alva......................... 6,584.3 (9) 59% 6,584.3 (9) 80%
Director of the Company and Parent
Daniel C. Budde......................... 6,584.3 (10) 59% 6,584.3 (10) 80%
Director of the Company and Parent
Dean C. Kehler.......................... 2,664.3 (11) 37% 2,664.3 (11) 43%
Director of the Company and Parent
Edward Levy............................. 2,664.3 (12) 37% 2,664.3 (12) 43%
Director of the Company and Parent
Christopher P. Ryman.................... - - - -
President, Chief Operating Officer
and Assistant Secretary of the
Company; President and Assistant
Secretary of Parent
Elizabeth J. Cole....................... - - - -
Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary of the Company and Parent
Timothy M. Petrick...................... 40 (13) * - -
Executive Vice President, Branding
of the Company
Timothy H. Beck......................... 32 (14) * - -
Executive Vice President, Planning
of the Company
Timothy Silva........................... 4 (15) * - -
General Manager - Northstar
John A. Rice............................ 4 (16) * - -
General Manager - Sierra
Total Executive Officers and
Directors as a Group.................. 14,092 (17) 100% - -
- --------------------------
* Less than 1%.
(1) Comprised of 4,580.5 shares of Class A Common Stock of Parent and
Warrants to purchase 182.9 shares of Class B Common Stock of Parent. Each
share of Parent's Class B Common Stock is convertible into one share of
Class A Common Stock of Parent at any time, subject to applicable
regulatory approvals. Each warrant may be exercised for one share of
Parent's Class B Common Stock at an exercise price of $.01 per share.
(2) Represents Warrants to purchase 182.9 shares of Class B Common Stock of
Parent.
(3) Comprised of 3,301 shares of Class B Common Stock of Parent and Warrants
to purchase 2,891.9 shares of Class B Common Stock of Parent. Each share
of Parent's Class B Common Stock is convertible into one share of Class A
Common Stock of Parent at any time, subject to applicable regulatory
approvals. Each Warrant may be exercised for one share of Parent's Class
B Common Stock at an exercise price of $.01 per share.
(4) Comprised of 1,478.4 shares of Class B Common Stock of Parent and
Warrants to purchase 919.5 shares of Class B Common Stock of Parent. Each
share of Parent's Class B Common Stock is convertible into one share of
Class A Common Stock of Parent at any time, subject to applicable
regulatory approvals. Each Warrant may be exercised for one share of
Parent's Class B Common Stock at an exercise price of $.01 per share.
(5) Booth Creek Partners Limited II, L.L.L.P. owns directly 4,580.5 shares of
Class A Common Stock of Parent and Warrants to purchase 182.9 shares of
Class B Common Stock of Parent. Each share of Parent's Class B Common
Stock is convertible into one share of Class A Common Stock of Parent at
any time, subject to applicable regulatory approvals. Each warrant may be
exercised for one share of Parent's Class B Common Stock at an exercise
price of $.01 per share. George N. Gillett, Jr. is the managing general
partner and Rose Gillett is a co-general partner of Booth Creek Partners
Limited II, L.L.L.P. and each may be deemed to possess shared voting
and/or investment power with respect to the interests held therein.
Accordingly, the beneficial ownership of such interests may be attributed
to George N. Gillett, Jr. and Rose Gillett. Rose Gillett is the wife of
George N. Gillett, Jr.
(6) Represents shares of Class A Common Stock of Parent that Mr. Joyce has an
option to purchase from Booth Creek Partners Limited II, L.L.L.P. (the
"Option") pursuant to that certain Option Letter Agreement dated December
3, 1996 which was amended in connection with the Equity Financing (as
defined herein). The Option is exercisable, in whole or in part, at any
time on or prior to December 1, 2006 at an initial exercise price equal
to $2,066.12 per share, which exercise price shall increase by $55.10 on
each December 1. The shares subject to the Option and the per share
exercise price are subject to adjustment under certain circumstances, and
the obligation of Booth Creek Partners Limited II, L.L.L.P. to sell
shares of Class A Common Stock of Parent upon exercise of the Option is
subject to compliance with applicable securities laws.
(7) Comprised of 227.1 shares of Class B Common Stock of Parent and Warrants
to purchase 164.3 shares of Class B Common Stock of Parent. Each share of
Parent's Class B Common Stock is convertible into one share of Class A
Common Stock of Parent at any time, subject to applicable regulatory
approvals. Each Warrant may be exercised for one share of Parent's Class
B Common Stock at an exercise price of $.01 per share.
(8) Comprised of 164.3 shares of Class B Common Stock of Parent and Warrants
to purchase 102.1 shares of Class B Common Stock of Parent. Each share of
Parent's Class B Common Stock is convertible into one share of Class A
Common Stock of Parent at any time, subject to applicable regulatory
approvals. Each Warrant may be exercised for one share of Parent's Class
B Common Stock at an exercise price of $.01 per share.
(9) Represents an aggregate of 3,528.1 shares of Class B Common Stock of
Parent and Warrants to purchase 3,056.2 shares of Class B Common Stock of
Parent held of record by John Hancock Mutual Life Insurance Company and
Hancock Mezzanine Partners L.P. (the "Hancock Entities"). Each share of
Parent's Class B Common Stock is convertible into one share of Class A
Common Stock of Parent at any time, subject to applicable regulatory
approvals. Each Warrant may be exercised for one share of Parent's Class
B Common Stock at an exercise price of $.01 per share. Mr. Alva disclaims
beneficial ownership of the securities held by the Hancock Entities.
(10) Represents an aggregate of 3,528.1 shares of Class B Common Stock of
Parent and Warrants to purchase 3,056.2 shares of Class B Common Stock of
Parent held of record by the Hancock Entities. Each share of
Parent's Class B Common Stock is convertible into one share of Class A
Common Stock of Parent at any time, subject to applicable regulatory
approvals. Each Warrant may be exercised for one share of Parent's Class
B Common Stock at an exercise price of $.01 per share. Mr. Budde
disclaims beneficial ownership of the securities held by the Hancock
Entities.
(11) Represents an aggregate of 1,642.7 shares of Class B Common Stock of
Parent and Warrants to purchase 1,021.6 shares of Class B Common Stock of
Parent held of record by CIBC WG Argosy Merchant Fund 2, L.L.C. and
Co-Investment Merchant Fund, L.L.C. (the "CIBC Entities"). Each share of
Parent's Class B Common Stock is convertible into one share of Class A
Common Stock of Parent at any time, subject to applicable regulatory
approvals. Each Warrant may be exercised for one share of Parent's Class
B Common Stock at an exercise price of $.01 per share. Mr. Kehler
disclaims beneficial ownership of the securities held by the CIBC
Entities.
(12) Represents an aggregate of 1,642.7 shares of Class B Common Stock of
Parent and Warrants to purchase 1,021.6 shares of Class B Common Stock of
Parent held of record by the CIBC Entities. Each share of Parent's Class
B Common Stock is convertible into one share of Class A Common Stock of
Parent at any time, subject to applicable regulatory approvals. Each
Warrant may be exercised for one share of Parent's Class B Common Stock
at an exercise price of $.01 per share. Mr. Levy disclaims beneficial
ownership of the securities held by the CIBC Entities.
(13) Represents vested shares of Class A Common Stock of Parent that Mr.
Petrick has an option to purchase from Parent pursuant to that certain
Stock Option Agreement, by and between Parent and Mr. Petrick. See Part
III, Item 11. "Executive Compensation - Parent Stock Options."
(14) Represents vested shares of Class A Common Stock of Parent that Mr. Beck
has an option to purchase from Parent pursuant to that certain Stock
Option Agreement, by and between Parent and Mr. Beck. See Part III, Item
11. "Executive Compensation - Parent Stock Options."
(15) Represents vested shares of Class A Common Stock of Parent that Mr. Silva
has an option to purchase from Parent pursuant to that certain Stock
Option Agreement, by and between Parent and Mr. Silva. See Part III, Item
11. "Executive Compensation - Parent Stock Options."
(16) Represents vested shares of Class A Common Stock of Parent that Mr. Rice
has an option to purchase from Parent pursuant to that certain Stock
Option Agreement, by and between Parent and Mr. Rice. See Part III, Item
11. "Executive Compensation - Parent Stock Options."
(17) Represents (i) 4,580.5 shares of Class A Common Stock of Parent and
Warrants to purchase 182.9 shares of Class B Common Stock of Parent owned
by Booth Creek Partners Limited II, L.L.L.P., of which George N. Gillett,
Jr. may be deemed to be the beneficial owner. Each share of Parent's
Class B Common Stock is convertible into one share of Class A Common
Stock of Parent at any time, subject to applicable regulatory approvals.
Each warrant may be exercised for one share of Parent's Class B Common
Stock at an exercise price of $.01 per share, (ii) 3,528.1 shares of
Class B Common Stock of Parent and Warrants to purchase 3,056.2 shares of
Class B Common Stock of Parent owned by the Hancock Entities, of which
each of Sandeep D. Alva and Daniel C. Budde may be deemed to be the
beneficial owners as described in notes (9) and (10) above, (iii) 1,642.7
shares of Class B Common Stock of Parent and Warrants to purchase 1,021.6
shares of Class B Common Stock of Parent owned by the CIBC Entities, of
which each of Dean C. Kehler and Edward Levy may be deemed to be the
beneficial owners as described in notes (11) and (12) above, (iv) 40
shares of Class A Common Stock of Parent that Timothy M. Petrick has an
option to purchase from Parent pursuant to the option described in note
(13) above, (v) 32 shares of Class A Common Stock of Parent that Timothy
H. Beck has an option to purchase from Parent pursuant to the option
described in note (14) above, (vi) 4 shares of Class A Common Stock of
Parent that Timothy Silva has an option to purchase from Parent pursuant
to the option described in note (15) above and (vii) 4 shares of Class A
Common Stock of Parent that John A. Rice has an option to purchase from
Parent pursuant to the option described in note (16) above. Jeffrey J.
Joyce may be deemed to be the beneficial owner of 687.1 of the shares
owned by Booth Creek Partners Limited II, L.L.L.P. pursuant to the Option
described in note (6) above.
Item 13. Certain Relationships and Related Transactions
The Financing Transactions
Since its formation in October 1996, the Company has engaged in a series of
related transactions for the purpose of raising capital to finance the
acquisitions of its resorts. As part of these transactions, (i) in November and
December 1996, the Gillett Family Partnership contributed an aggregate of $7.5
million to Parent in exchange for 3,630 shares of Class A Common Stock of
Parent; (ii) on November 27, 1996, Parent entered into a Securities Purchase
Agreement (as amended and restated on February 26, 1998 and further amended on
September 14, 1998, the "Hancock Securities Purchase Agreement") with John
Hancock pursuant to which John Hancock purchased for an aggregate consideration
of $42.5 million (a) 2,558 shares of Parent's Class B Common Stock (the
"Hancock Purchased Common Shares"), (b) warrants (the "Hancock Warrants") to
purchase an additional 2,500 shares of Parent's Class B Common Stock (the
"Hancock Underlying Shares") and (c) $35.0 million aggregate principal amount
of Parent's notes, including the Hancock Option Notes referred to below (the
"Hancock Parent Financing Debt"); (iii) on November 27, 1996, Parent entered
into a Securities Purchase Agreement (as amended and restated on February 26,
1998 and further amended on September 14, 1998, the "CIBC Merchant Fund
Securities Purchase Agreement" and, together with the Hancock Securities
Purchase Agreement, the "Securities Purchase Agreements") with the CIBC
Merchant Fund pursuant to which the CIBC Merchant Fund purchased for an
aggregate consideration of $6.5 million (a) 512 shares of Parent's Class B
Common Stock (the "CIBC Merchant Fund Purchased Common Shares" and, together
with the Hancock Purchased Common Shares, the "Purchased Common Shares"), (b)
warrants (the "CIBC Merchant Fund Warrants" and, together with the Hancock
Warrants, the "Warrants") to purchase an additional 400 shares of Parent's
Class B Common Stock (the "CIBC Merchant Fund Underlying Shares" and, together
with the Hancock Underlying Shares, the "Underlying Shares") and (c) $5.0
million aggregate principal amount of Parent's notes (the "CIBC Merchant Fund
Parent Financing Debt"); and (iv) in December 1996, using the proceeds of the
foregoing, Parent made an equity contribution of $40.0 million and a loan of
$10.0 million to the Company, which was used to consummate the acquisitions of
certain of the Company's resorts (the foregoing transactions are collectively
referred to herein as the "Financing Transactions"). The loan from Parent to
the Company had terms identical to the Hancock Option Notes and was repaid in
connection with the consummation of the Company's offering of $110 million of
its 12.5% Senior Notes in March 1997 (the "Note Offering").
In connection with the consummation of the Note Offering, the Hancock Option
Notes were exchanged for notes of the Company with substantially identical
terms and repaid with a portion of the proceeds of the Note Offering. The
remaining portion of the Hancock Parent Financing Debt and the CIBC Merchant
Fund Parent Financing Debt (collectively, the "Parent Financing Debt") matures
on November 27, 2008 and bears interest at 12% per annum, if paid in cash, or
14% per annum, if paid in kind, payable semi-annually on each May 27 and
November 27.
In connection with the consummation of the equity financing for the
acquisition of Loon Mountain on February 26, 1998 (the "Equity Financing"), (i)
the Gillett Family Partnership contributed an aggregate of $1.1 million to
Parent in exchange for 536 shares of Class A Common Stock of Parent; (ii) John
Hancock purchased for an aggregate consideration of $4.8 million (a) a senior
note which has been converted into 378 shares of Parent's Class B Common Stock,
(b) warrants to purchase an additional 295 shares of Parent's Class B Common
Stock and (c) $3.7 million aggregate principal amount of Parent's notes (the
"1998 Hancock Parent Financing Debt") and (iii) the CIBC Merchant Fund
purchased for an aggregate consideration of $4.6 million (a) 361 shares of
Parent's Class B Common Stock, (b) warrants to purchase an additional 282
shares of Parent's Class B Common Stock and (c) $3.5 million aggregate
principal amount of Parent's notes (the "1998 CIBC Parent Financing Debt").
On August 11, 1998, John Hancock transferred ownership of 189 shares of
Class B Common Stock of Parent and warrants to purchase an additional 147.5
shares of Class B Common Stock of Parent to Hancock Mezzanine Partners L.P.
The Securities Purchase Agreements were each amended pursuant to a
Securities Purchase and Amendment Agreement dated as of September 14, 1998 by
and among Parent and the Gillett Family Partnership, John Hancock, CIBC
Merchant Fund and Hancock Mezzanine Partners L.P. (an affiliate of John
Hancock) whereby: (i) the Gillett Family Partnership contributed an aggregate
of $3.5 million to Parent in exchange for 414.5 shares of the Class A Common
Stock of Parent, warrants to purchase an additional 182.9 shares of Class B
Common stock of Parent and
$2.3 million aggregate principal amount of Parent's notes, (ii) John Hancock
contributed an aggregate of $4,678,278 to Parent in exchange for 554 shares of
the Class B Common Stock of Parent, warrants to purchase an additional 244.4
shares of Class B Common Stock of Parent, and $3.1 million aggregate principal
amount of Parent's notes, (iii) Hancock Mezzanine Partners L.P. contributed an
aggregate of $321,722 to Parent in exchange for 38.1 shares of the Class B
Common Stock of Parent, warrants to purchase an additional 16.8 shares of Class
B Common Stock of Parent, and $210,102 aggregate principal amount of Parent's
notes; and (iv) the CIBC Merchant Fund contributed an aggregate of $6.5 million
to Parent in exchange for 769.7 shares of the Class B Common Stock of Parent,
warrants to purchase an additional 339.6 shares of Class B Common Stock of
Parent, and $4.2 million aggregate principal amount of Parent's notes. The
Parent notes issued on February 26, 1998 and September 14, 1998 are
collectively referred to herein as "Additional Parent Financing Debt."
On October 19, 1999, CIBC Merchant Fund transferred ownership of 164.3
shares of Class B Common Stock of Parent and warrants to purchase an additional
102.1 shares of Class B Common Stock of Parent to Co-Investment Merchant Fund,
LLC.
The Securities Purchase Agreements, which govern the Parent Financing Debt
and the Additional Parent Financing Debt, contain financial covenants relating
to the maintenance of ratios of (a) consolidated total debt to consolidated
cash flow, (b) consolidated cash flow to consolidated fixed charges and (c)
consolidated cash flow to consolidated interest charges. The Securities
Purchase Agreements also contain restrictive covenants pertaining to the
management and operation of Parent and its subsidiaries, including the Company.
The covenants include, among others, significant limitations on discounts or
sales of receivables, funded debt and current debt, dividends and other stock
payments, redemption, retirement, purchase or acquisition of equity interests
in Parent and its subsidiaries, transactions with affiliates, investments,
liens, issuances of stock, asset sales, acquisitions, mergers, fundamental
corporate changes, tax consolidation, modifications of certain documents and
leases. The Securities Purchase Agreements further required that all of the
issued and outstanding common stock of Booth Creek be pledged upon consummation
of the Note Offering to secure the Parent Financing Debt and provide that
Parent shall cause Booth Creek to pay cash dividends to Parent in the maximum
amount permitted by law, subject to restrictions contained in the Company's
debt agreements, in order to satisfy Parent's interest payment obligations
under the Parent Financing Debt and the Additional Parent Financing Debt.
The Securities Purchase Agreements provide for events of default customary
in agreements of this type, including: (i) failure to make payments when due;
(ii) breach of covenants; (iii) bankruptcy defaults; (iv) breach of
representations or warranties in any material respect when made; (v) default by
Parent or any of its subsidiaries under any agreement relating to debt for
borrowed money in excess of $1.0 million in the aggregate; (vi) final judgments
for the payment of money against Parent or any of its subsidiaries in excess of
$1.0 million in the aggregate; (vii) ERISA defaults; (viii) any operative
document ceasing to be in full force and effect; (ix) any enforcement of liens
against Parent or any of its subsidiaries; and (x) a change of control of
Parent. The Securities Purchase Agreements also contain financial and operating
covenants, and other provisions customary for agreements of this type. As of
October 29, 1999, Parent was in default of certain provisions of the Securities
Purchase Agreements, which defaults had not been cured or waived as of the
filing date of this Report.
The Warrants are exercisable, subject to certain conditions, at a per share
price of $0.01 (as adjusted by certain anti-dilution provisions) at any time
prior to November 27, 2008, on which date all unexercised Warrants will be
deemed automatically exercised. The Securities Purchase Agreements provide that
the holders of at least two-thirds of the Purchased Common Shares and the
Underlying Shares will each be entitled to require Parent to register their
shares under the Securities Act for resale to the public. The holders of
Registrable Shares (as defined in the Securities Purchase Agreements) are also
entitled to certain piggyback and other registration rights, subject in all
cases to certain qualifications.
Stockholders Agreement
In connection with the consummation of the Financing Transactions, Parent,
the Gillett Family Partnership, John Hancock and the CIBC Merchant Fund entered
into a Stockholders Agreement dated November 27, 1996, and which was amended
and restated of February 26, 1998 and further amended on August 5, 1998 (the
"Stockholders Agreement"). Pursuant to the Stockholders Agreement, the Board of
Directors of Parent shall consist of three individuals selected by the Gillett
Family Partnership and two individuals designated by John Hancock. The Board of
Directors of Parent and the Company currently consists of George N. Gillett,
Jr., Sandeep D. Alva, Dean C.
Kehler, Edward Levy and Daniel C. Budde. See Part III, Item 10. "Directors and
Executive Officers of the Registrant - Directors." Without the consent of John
Hancock and the CIBC Merchant Fund (or their respective transferees)
(collectively, the "Institutional Investors"), neither Parent nor any
subsidiary of Parent, including the Company, may issue any equity securities
except, in the case of Parent, for certain enumerated permitted issuances and,
in the case of any subsidiary of Parent, issuances to Parent or to any
wholly-owned subsidiary of Parent. With respect to issuance of equity
securities of Parent requiring the approval of the Institutional Investors, the
Institutional Investors also are entitled to certain preemptive rights. In
addition, the Stockholders Agreement provides that neither Parent nor any of
its subsidiaries, including the Company, may acquire any assets or business
from any other person (other than inventory and equipment in the ordinary
course of business) without the consent of the Required Institutional Investors
(as defined in the Stockholders Agreement).
The Stockholders Agreement further provides that, subject to certain
exceptions, the Gillett Family Partnership may not sell, assign, gift, pledge
or otherwise transfer any equity securities of Parent beneficially owned by it
(other than to an affiliate of the Gillett Family Partnership that becomes a
party to the Stockholders Agreement) prior to November 27, 1999. In the event
that at any time after such date, the Gillett Family Partnership shall not hold
a majority of the outstanding Class A Common Stock of Parent as a result of the
conversion of shares of Class B Common Stock into Class A Common Stock, the
Stockholders Agreement requires that Parent grant to the Gillett Family
Partnership registration rights with respect to its equity securities which are
in all material respects the same as those provided to the Institutional
Investors under the Securities Purchase Agreements.
In addition to the foregoing, the Stockholders Agreement gives each party
thereto certain co-sale rights and rights of first offer upon the sale or other
transfer of any equity securities of Parent by any other party, and requires
that, as a condition to the issuance or transfer of any equity securities of
Parent to any third party (other than a person who acquires such securities
pursuant to an effective registration statement under the Securities Act) that
such person become a party to the Stockholders Agreement and agree to be bound
by all the terms and conditions thereof.
The provisions of the Stockholders Agreement relating to the composition of
the Board of Directors of Parent terminate following any transfer or transfers
of equity securities of Parent by the Gillett Family Partnership, John Hancock
and the CIBC Merchant Fund (other than a transfer by any of them to any of
their respective affiliates) if after giving effect to any such transfer or
transfers the Gillett Family Partnership, John Hancock and the CIBC Merchant
Fund have transferred in the aggregate 20% or more of the equity securities of
Parent, as calculated in the Stockholders Agreement. The Stockholders Agreement
shall terminate, and be of no force or effect, upon the consummation of a
Qualified Public Offering (as defined in the Stockholders Agreement).
Sale of Real Estate to Trimont Land Holdings, Inc.
On July 28, 1999, Northstar consummated the sale of the property comprising
Phases 4 and 4A of the Big Springs development to Trimont Land Holdings, Inc.
("TLH"), a wholly-owned subsidiary of Parent and an affiliate of the Company.
See Part II, Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations of the Company."
The financing for TLH's purchase of the property from Northstar was provided by
John Hancock pursuant to certain senior secured notes due January 15, 2001,
which bear interest at LIBOR plus 1.5%, payable quarterly.
Initial Offering
CIBC Oppenheimer Corp. was the Initial Purchaser in the Note Offering and in
the offering of $17.5 million of Senior Notes in connection with the Loon
Mountain acquisition and received customary compensation in such capacity. In
addition, CIBC Oppenheimer Corp. acted as a financial advisor to the Company
with respect to the Senior Note consent solicitation undertaken in conjunction
with the Loon Mountain acquisition. In connection therewith, the Company
reimbursed CIBC Oppenheimer Corp. for its out-of-pocket expenses and provided
customary indemnification.
CIBC Oppenheimer Corp. is an affiliate of Canadian Imperial Bank of
Commerce, which was the lender for certain bridge financing provided to the
Company in 1996, and is an affiliate of the CIBC Merchant Fund, which owns
1,478.4 shares, and Warrants to acquire an additional 919.5 shares, of Class B
Common Stock of Parent and $11.2 million aggregate principal amount of notes
issued by Parent. Additionally, the Co-Investment Fund, an
affiliate of CIBC Oppenheimer Corp., owns 164.3 shares, and Warrants to acquire
an additional 102.1 shares, of Class B Common Stock of Parent and $1.6 million
aggregate principal amount of notes issued by Parent. Dean C. Kehler and Edward
Levy, each of whom is a Managing Director of CIBC Oppenheimer Corp. and has
investment responsibilities with respect to the CIBC Merchant Fund and the
Co-Investment Fund, serves on the Board of Directors of Parent and the Company.
Management Agreement with Booth Creek, Inc.
Booth Creek has in effect a management agreement with Booth Creek, Inc. (the
"Management Company") dated November 27, 1996 (the "Management Agreement")
pursuant to which the Management Company provides Parent, Booth Creek and its
subsidiaries with financial advice with respect to, among other matters, cash
management, accounting and data processing systems and procedures, budgeting,
equipment purchases, business forecasts, treasury functions and investor
relations. The Management Company also provides general supervision and
management advice concerning tax, legal and corporate finance matters,
administration and operation, personnel matters, business insurance and the
employment of consultants, contractors and agents.
Under the terms of the Management Agreement, the Company provides customary
indemnification, reimburses certain costs and owes the Management Company an
annual management fee of $350,000 plus an operating bonus (the "Operating
Bonus") (not to exceed $400,000) equal to 2.5% of the excess of Consolidated
EBITDA (as defined below) for such year over $25 million. Booth Creek pays the
Management Company certain permitted reimbursable costs.
The term "Consolidated EBITDA," as used in the Management Agreement, means
the EBITDA of Booth Creek and its subsidiaries consolidated in accordance with
GAAP, and after giving appropriate effect to outside minority interests, if
any, in subsidiaries, and taking into account certain exclusions, including
without limitation (a) the net income of any person (other than a subsidiary of
Booth Creek) in which Booth Creek or any such subsidiary has an ownership
interest; (b) any undistributed net income of a subsidiary of Booth Creek which
for any reason is unavailable for distribution to Booth Creek or any other
subsidiary; (c) the net income of any person accrued prior to the date it
becomes a subsidiary of Booth Creek or is merged into or consolidated with
Booth Creek or a subsidiary; (d) in the case of a successor to Booth Creek by
consolidation, merger or transfer of assets, the net income of such successor
accrued prior to such consolidation, merger or transfer; (e) any deferred or
other credit representing the excess of the equity in any subsidiary of Booth
Creek at the date of acquisition thereof over the cost of the investment in
such subsidiary; (f) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of income
accrued during the same period; (g) any aggregate net gain and any aggregate
net loss arising from the sale, conversion, exchange or other disposition of
capital assets; (h) any gains resulting from any write-up of any assets (but
not any loss resulting from any write-down); (i) any net gain from the
collection of any proceeds of life insurance policies; (j) any gain arising
from the acquisition of any shares or other securities or the extinguishment,
under GAAP, of any indebtedness, of Booth Creek or any subsidiary of Booth
Creek; (k) any net income or gain (but not any net loss) from (1) any change in
accounting principles in accordance with GAAP, (2) any prior period adjustments
resulting from any change in accounting principles in accordance with GAAP and
(3) any discontinued operations or the disposition thereof; and (l) any portion
of net income that cannot be freely converted into United States Dollars. In
determining Consolidated EBITDA, the net income of any person for any period
shall be (x) increased by the amount deducted therefrom in respect of "noncash
costs of real estate sales" incurred during such period and (y) decreased by
the amount of "cash real estate development costs" to the extent capitalized
during such period.
Certain obligations of Booth Creek to make payments under the Management
Agreement are subject to the provisions of the Securities Purchase Agreements
(described herein under "- The Financing Transactions"). Booth Creek may make
payments under the Management Agreement so long as (i) both at the time of
making such payments and after giving effect thereto, no default or event of
default shall have occurred and be continuing under the Securities Purchase
Agreements and (ii) the aggregate amount of such management fees paid during
any fiscal year of the Parent shall not exceed the lesser of (1) $750,000 and
(2) the sum of (x) $350,000 plus (y) 2.5% of Consolidating EBITDA in excess of
$25,000,000 for the then most recently completed fiscal year of Parent.
Management fees that are not permitted to be paid due to the creation of a
default or event of default under the Securities Purchase Agreements will
accrue without interest and may be paid at such time as no default or event of
default shall exist. Certain defaults currently exist under the Securities
Purchase Agreements. The Management Company has agreed to the deferral of
management fees payable under the Management Agreement. Since June
1999, such fees will be accrued without interest and be payable by Parent upon
the prior payment in full of the indebtedness incurred under the Securities
Purchase Agreements.
The management fees and the calculation of the Operating Bonus may be
amended only by the mutual consent of both Booth Creek and the Management
Company. To the fullest extent permitted by law, with certain limitations, the
Management Company and any officer, director, employee, agent or attorney of
the Management Company (collectively, the "Indemnities") shall not have any
liability to any of the Parent, Booth Creek or any of their subsidiaries for
any loss, damage, cost or expense (including, without limitation, any court
costs, attorneys' fees and any special, indirect, consequential or punitive
damages) allegedly arising out of the Management Company's management services
rendered to the Parent, Booth Creek or any of their subsidiaries or
Indemnities' acts, conduct or omissions in connection with the Management
Company's management services rendered to Booth Creek or any of their
subsidiaries.
In addition, to the fullest extent permitted by law, Booth Creek indemnifies
the Indemnitees and holds the Indemnitees harmless against, any loss, damage,
cost or expense (including, without limitation, court costs and reasonable
attorneys' fees) which the Indemnitees may sustain or incur by reason of any
threatened, pending or completed investigation, action, claim, demand, suit,
proceeding or recovery by any person (other than the Indemnitees) allegedly
arising out of the Management Company's management services rendered to the
Parent, Booth Creek or any of their subsidiaries or the Indemnitees' acts,
conduct or omissions in connection with the Management Company's management
services rendered to the Parent, Booth Creek or any of their subsidiaries.
Since the formation of Booth Creek, the Management Company and certain of
its affiliates have made advances and deposits, and have incurred fees and
expenses, in connection with certain of the acquisitions of Booth Creek's
resorts for which they were later reimbursed by Booth Creek pursuant to the
Management Agreement.
The Management Agreement will terminate automatically upon consummation of a
sale of all or substantially all of the assets or stock of Parent and its
subsidiaries on a consolidated basis, and may be terminated earlier for cause
by either Booth Creek or the Management Company.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) List of Documents Filed as Part of This Report:
1. The financial statements listed on page F-1 are filed as part of
this Report.
2. Financial Statement Schedules:
All schedules are omitted because they are not applicable, not
required or the information is included elsewhere in the
consolidated financial statements or notes thereto.
3. List of Exhibits:
+2.1 Agreement and Plan of Merger dated as of September 18,
1997 by and among Booth Creek Ski Group, Inc., LMRC
Acquisition Corp. and Loon Mountain Recreation
Corporation.
+2.2 First Amendment to Merger Agreement, dated December 22,
1997, by and among Booth Creek Ski Group, Inc., LMRC
Acquisition Corp. and Loon Mountain Recreation
Corporation.
++++2.3 Agreement of Merger dated as of August 28, 1998 by and
among Booth Creek Ski Holdings, Inc., Booth Creek Ski
Acquisition, Inc. and Seven Springs Farm, Inc.
*3.1 Certificate of Incorporation of Booth Creek Ski Holdings,
Inc.
*3.2 Bylaws of Booth Creek Ski Holdings, Inc.
*3.3 Restated Articles of Incorporation of Trimont Land
Company.
*3.4 Bylaws of Trimont Land Company.
*3.5 Certificate of Incorporation of Sierra-at-Tahoe, Inc.
*3.6 Bylaws of Sierra-at-Tahoe, Inc.
*3.7 Certificate of Incorporation of Bear Mountain, Inc.
*3.8 Bylaws of Bear Mountain, Inc.
*3.9 Certificate of Incorporation of Booth Creek Ski
Acquisition Corp.
*3.10 Bylaws of Booth Creek Ski Acquisition Corp.
*3.11 Amended and Restated Certificate of Incorporation of
Waterville Valley Ski Resort, Inc.
*3.12 Bylaws of Waterville Valley Ski Resort, Inc.
*3.13 Amended and Restated Certificate of Incorporation of
Mount Cranmore Ski Resort, Inc.
*3.14 Bylaws of Mount Cranmore Ski Resort, Inc.
*3.15 Amended and Restated Articles of Incorporation of Ski
Lifts, Inc.
*3.16 Bylaws of Ski Lifts, Inc.
*3.17 Certificate of Incorporation of Grand Targhee
Incorporated.
*3.18 Bylaws of Grand Targhee Incorporated.
*3.19 Articles of Incorporation of B-V Corporation.
*3.20 Bylaws of B-V Corporation.
*3.21 Certificate of Incorporation of Targhee Company.
*3.22 Bylaws of Targhee Company.
*3.23 Certificate of Incorporation of Targhee Ski Corp.
*3.24 Bylaws of Targhee Ski Corp.
****3.25 Articles of Incorporation of LMRC Holding Corp.
****3.26 Amended and Restated Articles of Incorporation of Loon
Mountain Recreation Corporation.
****3.27 Amended and Restated Bylaws of Loon Mountain Recreation
Corporation.
****3.28 Amended and Restated Articles of Incorporation of Loon
Realty Corp.
****3.29 Amended and Restated Bylaws of Loon Realty Corp.
****3.30 Bylaws of LMRC Holding Corp.
*4.1 Indenture dated as of March 18, 1997 by and among Booth
Creek Ski Holdings, Inc., as Issuer, Trimont Land
Company, Sierra-at-Tahoe, Inc., Bear Mountain, Inc.,
Waterville Valley Ski Resort, Inc., Mount Cranmore Ski
Resort, Inc., Booth Creek Ski Acquisition Corp., Ski
Lifts, Inc., Grand Targhee Incorporated, B-V Corporation,
Targhee Company and Targhee Ski Corp., as Subsidiary
Guarantors, and HSBC Bank USA (formerly Marine Midland
Bank), as trustee (including the form of 12 1/2% Senior
Note due 2007 and the form of Guarantee).
*4.2 Supplemental Indenture No. 1 to Indenture dated as of
April 25, 1997 by and among Booth Creek Ski Holdings,
Inc., as Issuer, Trimont Land Company, Sierra-at-Tahoe,
Inc., Bear Mountain, Inc., Waterville Valley Ski Resort,
Inc., Mount Cranmore Ski Resort, Inc., Booth Creek Ski
Acquisition Corp., Ski Lifts, Inc., Grand Targhee
Incorporated, B-V Corporation, Targhee Company and
Targhee Ski Corp., as Subsidiary Guarantors, HSBC Bank
USA (formerly Marine Midland Bank), as trustee.
+4.3 Supplemental Indenture No. 2 to Indenture dated as of
February 20, 1998 by and among Booth Creek Ski Holdings,
Inc., as Issuer, Trimont Land Company, Sierra-at-Tahoe,
Inc., Bear Mountain, Inc., Waterville Valley Ski Resort,
Inc., Mount Cranmore Ski Resort, Inc., Booth Creek Ski
Acquisition Corp., Ski Lifts, Inc, Grand Targhee
Incorporated, B-V Corporation, Targhee Company and
Targhee Ski Corp, as Subsidiary Guarantors, and HSBC Bank
USA (formerly Marine Midland Bank), as Trustee.
+4.4 Supplemental Indenture No. 3 to Indenture dated as of
February 26, 1998, by and among Booth Creek Ski Holdings,
Inc., as Issuer, LMRC Holding Corp., Loon Mountain
Recreation Corporation and Loon Realty Corp., as
Subsidiary Guarantors, and HSBC Bank USA (formerly Marine
Midland Bank), as Trustee.
+++++4.5 Supplemental Indenture No. 4 to Indenture dated as of
October 8, 1998 by and among Booth Creek Ski Holdings,
Inc., as Issuer, Booth Creek Ski Acquisition, Inc. and
HSBC Bank USA (formerly Marine Midland Bank), as Trustee.
+4.6 Securities Purchase Agreement, dated as of February 23,
1998, by and among Booth Creek Ski Holdings, Inc.,
Trimont Land Company, Sierra-at-Tahoe, Inc., Bear
Mountain, Inc., Booth Creek Ski Acquisition Corp.,
Waterville Valley Ski Resort, Inc., Mount Cranmore Ski
Resort, Inc., Ski Lifts, Inc., Grand Targhee
Incorporated, B-V Corporation, Targhee Company, Targhee
Ski Corp., LMRC Holding Corp., Loon Mountain Recreation
Corporation and Loon Realty Corp and CIBC Oppenheimer
Corp.
+++++4.7 Amended and Restated Securities Purchase Agreement, dated
as of September 14, 1998, among Booth Creek Ski Group,
Inc., Booth Creek Ski Holdings, Inc., the Subsidiary
Guarantors as defined therein and each of John Hancock
Mutual Life Insurance Company, CIBC WG Argosy Merchant
Fund 2, L.L.C. and Hancock Mezzanine Partners L.P.
+++++10.1 Amended and Restated Credit Agreement dated as of October
30, 1998 among Booth Creek Ski Holdings, Inc., Booth
Creek Ski Acquisition Corp., Trimont Land Company,
Sierra-at-Tahoe, Inc., Bear Mountain, Inc., Waterville
Valley Ski Resort, Inc., Mount Cranmore Ski Resort, Inc.,
Ski Lifts, Inc., Grand Targhee Incorporated, LMRC Holding
Corp., Loon Mountain Recreation Corporation, Loon
Mountain Realty Corp. and BankBoston, N.A.
*****10.2 Waiver Agreement dated March 12, 1999, to Credit
Agreement dated as of October 30, 1998 among Booth Creek
Ski Holdings, Inc., Booth Creek Ski Acquisition Corp.,
Trimont Land Company, Sierra-at-Tahoe, Inc., Bear
Mountain, Inc., Waterville Valley Ski Resort, Inc., Mount
Cranmore Ski Resort, Inc., Ski Lifts, Inc., Grand Targhee
Incorporated, LMRC Holding Corp., Loon Mountain
Recreation Corporation, Loon Realty Corp. and BankBoston,
N.A.
******10.3 First Amendment dated May 18, 1999, to Amended and
Restated Credit Agreement dated as of October 30, 1998
among Booth Creek Ski Holdings, Inc., Booth Creek Ski
Acquisition Corp., Trimont Land Company, Sierra-at-Tahoe,
Inc., Bear Mountain, Inc., Waterville Valley Ski Resort,
Inc., Mount Cranmore Ski Resort, Inc., Ski Lifts, Inc.,
Grand Targhee Incorporated, LMRC Holding Corp., Loon
Mountain Recreation Corporation, Loon Realty Corp. and
BankBoston, N.A.
******10.4 Waiver Agreement dated June 14, 1999, to Amended and
Restated Credit Agreement dated as of October 30, 1998
among Booth Creek Ski Holdings, Inc., Booth Creek Ski
Acquisition Corp., Trimont Land Company, Sierra-at-Tahoe,
Inc., Bear Mountain, Inc., Waterville Valley Ski Resort,
Inc., Mount Cranmore Ski Resort, Inc., Ski Lifts, Inc.,
Grand Targhee Incorporated, LMRC Holding Corp., Loon
Mountain Recreation Corporation, Loon Realty Corp. and
BankBoston, N.A.
*10.5 Purchase and Sale Agreement dated as of August 30, 1996
by and between Waterville Valley Ski Area, Ltd.,
Cranmore, Inc., American Skiing Company and Booth Creek
Ski Acquisition Corp.
*10.6 Subordinated Promissory Note dated November 27, 1996
issued by Booth Creek Ski Acquisition Corp., Waterville
Valley Ski Resort, Inc. and Mount Cranmore Ski Resort,
Inc. to American Skiing Company.
*10.7 Stock Purchase and Indemnification Agreement dated as of
November 26, 1996 among Booth Creek Ski Holdings, Inc.,
Fibreboard Corporation, Trimont Land Company,
Sierra-at-Tahoe, Inc. and Bear Mountain, Inc.
*10.8 Escrow Agreement dated December 3, 1996 by and among
Fibreboard Corporation, Booth Creek Ski Holdings, Inc.
and First Trust of California.
*10.9 Purchase Agreement dated February 11, 1997 among Booth
Creek Ski Holdings, Inc., Grand Targhee Incorporated,
Moritz O. Bergmeyer and Carol Mann Bergmeyer.
*10.10 Promissory Note dated February 11, 1997 issued by Grand
Targhee Incorporated to Booth Creek Ski Holdings, Inc.
*10.11 Stock Purchase Agreement dated as of February 21, 1997 by
and between Booth Creek Ski Holdings, Inc., William W.
Moffett, Jr., David R. Moffett, Laurie M. Padden,
individually and as custodian for Christina Padden,
Jennifer Padden and Mary M. Padden, Stephen R. Moffett,
Katharine E. Moffett, Frances J. DeBruler, individually
and as representative of the Estate of Jean S. DeBruler,
Jr., deceased, and Peggy Westerlund, and David R.
Moffett, as representative.
*10.12 Preferred Stock Purchase Agreement dated as of February
21, 1997 by and between DRE, L.L.C., William W. Moffett,
Jr., David R. Moffett, Laurie M. Padden, individually and
as custodian for Christina Padden, Jennifer Padden and
Mary M. Padden, Stephen R. Moffett, Katharine E. Moffett,
Frances J. DeBruler, individually and as representative
of the Estate of Jean S. DeBruler, Jr., deceased, and
Peggy Westerlund and David R. Moffett, as representative.
*10.13 Management Agreement dated as of November 27, 1996 by and
between Booth Creek Ski Holdings, Inc. and Booth Creek,
Inc.
*10.14 Ski Area Term Special Use Permit No. 4002/01 issued by
the United States Forest Service to Waterville Valley Ski
Resort, Inc.
*10.15 Ski Area Term Special Use Permit No. 5123/01 issued by
the United States Forest Service to Bear Mountain, Inc.
*10.16 Ski Area Term Special Use Permit No. 4033/01 issued by
the United States Forest Service to Grand Targhee
Incorporated.
*10.17 Ski Area Term Special Use Permit No. 4127/09 issued by
the United States Forest Service to Ski Lifts, Inc.
*10.18 Annual Special Use Permit Nos. 4127/19 & 4127/19 issued
by the United States Forest Service to Ski Lifts, Inc.
++10.19 Ski Area Term Special Use Permit No. 4031/01 issued by
the United States Forest Service to Loon Mountain
Recreation Corporation.
++10.20 Amendment Number 2 for Special Use Permit No. 4008/1
issued by the United States Forest Service to Loon
Mountain Recreation Corporation.
++10.21 Amendment Number 5 for Special Use Permit No. 4008/1
issued by the United States Forest Service to Loon
Mountain Recreation Corporation.
++++++10.22 Ski Area Term Special Use Permit No. 4186 issued by the
United States Forest Service to Sierra-at-Tahoe, Inc.
****10.23 Employment Agreement dated as of July 1, 1997, by and
between Booth Creek Ski Holdings, Inc. and Timothy H.
Beck.
***10.24 Employment Agreement dated May 5, 1997 by and between
Booth Creek Ski Holdings, Inc. and Timothy M. Petrick.
***10.25 Stock Option Agreement dated as of October 1, 1997
between Booth Creek Ski Group, Inc. and Timothy M.
Petrick.
+++10.26 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and Timothy Silva.
+++++10.27 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and Timothy H. Beck.
+++++10.28 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and John A. Rice.
+++++21.1 Subsidiaries of the Registrant.
++++++27.1 Financial Data Schedule.
- ----------------------------
* Filed with Registration Statement on Form S-4 (Reg. No. 333-26091) and
incorporated herein by reference.
** Filed with the Company's Quarterly Report on Form 10-Q for the
Quarterly Period Ended August 1, 1997 and incorporated herein by
reference.
*** Filed with the Company's Annual Report on Form 10-K for the Fiscal
Year Ended October 31, 1997 and incorporated herein by reference.
**** Filed with the Company's Quarterly Report on Form 10-Q for the
Quarterly Period Ended January 30, 1998 and incorporated herein by
reference.
***** Filed with the Company's Quarterly Report on Form 10-Q for the
Quarterly Period Ended January 29, 1999 and incorporated herein by
reference.
****** Filed with the Company's Quarterly Report on Form 10-Q for the
Quarterly Period Ended April 30, 1999 and incorporated herein by
reference.
+ Filed with the Company's Current Report on Form 8-K dated February 26,
1998 and incorporated herein by reference.
++ Filed with Registration Statement on Form S-4 (Reg. No. 333-48619) and
incorporated herein by reference.
+++ Filed with the Company's Quarterly Report on Form 10-Q for the
Quarterly Period Ended May 1, 1998 and incorporated herein by
reference.
++++ Filed with the Company's Quarterly Report on Form 10-Q for the
Quarterly Period Ended July 31, 1998 and incorporated herein by
reference.
+++++ Filed with the Company's Annual Report on Form 10-K for the Fiscal
Year Ended October 30, 1998 and incorporated herein by reference.
++++++ Filed herewith as an Exhibit to this Form 10-K.
(b) Reports on Form 8-K: None.
(c) Exhibits: See (a)(3) above for a listing of Exhibits filed as a part
of this Report.
(d) Additional Financial Statement Schedules: None.
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant
to Section 12 of the Act
Neither an annual report covering the Registrant's last fiscal year nor
proxy materials with respect to any annual or other meeting of security holders
have been sent to security holders.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Truckee, State of California, as of January 18, 2000.
BOOTH CREEK SKI HOLDINGS, INC.
(Registrant)
By: /s/ CHRISTOPHER P. RYMAN
----------------------------------
Christopher P. Ryman
President and Chief Operating
Officer
By: /s/ ELIZABETH J. COLE
----------------------------------
Elizabeth J. Cole
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ BRIAN J. POPE
----------------------------------
Brian J. Pope
Vice President of Accounting
and Finance (Principal
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed by the following persons in the capacities
and as of the dates indicated.
Signature Title Date
--------- ----- ----
/s/ GEORGE N. GILLETT, JR. Chairman of the Board of January 18, 2000
- ----------------------------- Directors and Chief
George N. Gillett, Jr. Executive Officer
/s/ SANDEEP D. ALVA Member of the Board of January 18, 2000
- ----------------------------- Directors
Sandeep D. Alva
/s/ DEAN C. KEHLER Member of the Board of January 18, 2000
- ----------------------------- Directors
Dean C. Kehler
/s/ EDWARD LEVY Member of the Board of January 18, 2000
- ----------------------------- Directors
Edward Levy
/s/ DANIEL C. BUDDE Member of the Board of January 18, 2000
- ----------------------------- Directors
Daniel C. Budde
/s/ CHRISTOPHER P. RYMAN President and Chief January 18, 2000
- ----------------------------- Operating Officer
Christopher P. Ryman
/s/ ELIZABETH J. COLE Executive Vice President January 18, 2000
- ----------------------------- and Chief Financial
Elizabeth J. Cole Officer (Principal
Financial Officer)
/s/ BRIAN J. POPE Vice President of January 10, 2000
- ----------------------------- Accounting and Finance
Brian J. Pope (Principal Accounting
Officer)
BOOTH CREEK SKI HOLDINGS, INC.
ANNUAL REPORT ON FORM 10-K
INDEX OF FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Shareholder's Equity.......................... F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7
REPORT OF INDEPENDENT AUDITORS
Booth Creek Ski Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Booth Creek
Ski Holdings, Inc. as of October 29, 1999 and October 30, 1998, and the related
consolidated statements of operations, shareholder's equity, and cash flows for
each of the three years in the period ended October 29, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Booth Creek
Ski Holdings, Inc. at October 29, 1999 and October 30, 1998, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended October 29, 1999 in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Sacramento, California
December 17, 1999
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
October 29, October 30,
1999 1998
---------- ----------
ASSETS
Assets
Current assets:
Cash ............................................ $ 461 $ 625
Accounts receivable, net of allowance
of $65 and $54, respectively ................... 1,709 1,573
Insurance proceeds receivable ................... 1,799 -
Inventories ..................................... 2,786 4,370
Prepaid expenses and other current assets ....... 1,032 1,377
--------- ---------
Total current assets .............................. 7,787 7,945
Property and equipment, net ....................... 152,316 156,469
Real estate held for development and sale ......... 8,851 10,155
Deferred financing costs, net of accumulated
amortization of $3,078 and $1,985, respectively.. 6,071 6,649
Timber rights and other assets .................... 7,246 7,428
Goodwill, net of accumulated amortization
of $6,581 and $4,190, respectively .............. 28,075 29,900
--------- ---------
Total assets ...................................... $ 210,346 $ 218,546
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Senior credit facility .......................... $ 23,035 $ 17,143
Current portion of long-term debt ............... 1,468 1,785
Accounts payable and accrued liabilities ........ 28,593 22,110
--------- ---------
Total current liabilities ......................... 53,096 41,038
Long-term debt .................................... 136,483 137,352
Other long-term liabilities ....................... 50 145
Commitments and contingencies
Preferred stock of subsidiary; 28,000 shares
authorized, 17,000 shares issued and
outstanding at October 29, 1999
(21,000 shares at October 30, 1998);
liquidation preference and redemption
value of $2,133 at October 29, 1999 ............. 2,133 2,634
Shareholder's equity:
Common stock, $.01 par value; 1,000
shares authorized, issued and outstanding ...... - -
Additional paid-in capital ...................... 72,000 72,000
Accumulated deficit ............................. (53,416) (34,623)
--------- ---------
Total shareholder's equity ........................ 18,584 37,377
--------- ---------
Total liabilities and shareholder's equity ........ $ 210,346 $ 218,546
========= =========
See accompanying notes.
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
Year Ended
---------------------------------------
October 29, October 30, October 31,
1999 1998 1997
----------- ----------- -----------
Revenue:
Resort operations ................. $ 112,980 $ 97,248 $ 68,136
Real estate and other ............ 12,744 7,608 3,671
--------- --------- ---------
Total revenue ....................... 125,724 104,856 71,807
Operating expenses:
Cost of sales - resort
operations ....................... 74,404 61,325 44,624
Cost of sales - real estate
and other ........................ 5,244 4,671 2,799
Depreciation and depletion ........ 19,320 15,515 9,728
Amortization of goodwill and
other intangible assets .......... 2,430 2,237 1,953
Selling, general and
administrative expense ........... 22,571 19,645 13,719
Unusual items, net ................ 487 - -
--------- --------- ---------
Total operating expenses ............ 124,456 103,393 72,823
--------- --------- ---------
Operating income (loss) ............. 1,268 1,463 (1,016)
Other income (expense):
Interest expense .................. (18,707) (17,510) (13,269)
Amortization of deferred
financing costs ................... (1,093) (1,203) (1,809)
Other income (expense) ............ (43) (20) 166
--------- --------- ---------
Other income (expense), net ....... (19,843) (18,733) (14,912)
--------- --------- ---------
Loss before income taxes, minority
interest and extraordinary item ... (18,575) (17,270) (15,928)
Income tax benefit .................. - - 1,728
--------- --------- ---------
Loss before minority interest
and extraordinary item ............ (18,575) (17,270) (14,200)
Minority interest ................... (218) (260) (229)
--------- --------- ---------
Loss before extraordinary item ...... (18,793) (17,530) (14,429)
Extraordinary loss on early
retirement of debt ................ - - (2,664)
--------- --------- ---------
Net loss ............................ $ (18,793) $(17,530) $(17,093)
========= ========= =========
See accompanying notes.
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(In thousands, except shares)
Note
Common Stock Additional Receivable
------------------ Paid-in from Accumulated
Shares Amount Capital Shareholder Deficit Total
-------- ------- ----------- ----------- ----------- --------
Initial capitalization
and balance at October
31, 1996 ............. 1,000 $ - $ 2 $ (2) $ - $ -
Payment received on
shareholder note
receivable ........... - - - 2 - 2
Capital contributions .. - - 46,498 - - 46,498
Net loss ............... - - - - (17,093) (17,093)
-------- ------- ---------- ----------- ----------- --------
Balance at October 31,
1997 ................. 1,000 - 46,500 - (17,093) 29,407
Capital contributions .. - - 25,500 - - 25,500
Net loss ............... - - - - (17,530) (17,530)
-------- ------- ---------- ----------- ---------- --------
Balance at October 30,
1998 ................... 1,000 - 72,000 - (34,623) 37,377
Net loss ............... - - - - (18,793) (18,793)
-------- ------- ---------- ----------- ---------- --------
Balance at October 29,
1999 ................... 1,000 $ - $ 72,000 $ - $ (53,416) $ 18,584
======== ======= ========== =========== ========== ========
See accompanying notes.
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
------------------------------------
October 29, October 30, October 31,
1999 1998 1997
---------- ---------- ----------
Cash flows from operating
activities:
Net loss ............................... $ (18,793) $ (17,530) $ (17,093)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and depletion .......... 19,320 15,515 9,728
Amortization of goodwill and
other intangible assets ............ 2,430 2,237 1,953
Noncash cost of real estate sales.... 4,743 3,721 2,237
Amortization of deferred
financing costs .................... 1,093 1,203 1,809
Deferred income tax benefit ......... - - (1,548)
Minority interest ................... 218 260 229
Extraordinary loss on early
retirement of debt ................. - - 2,664
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable .............. (136) 279 (914)
Insurance proceeds receivable .... (1,799) - -
Inventories ...................... 1,584 (785) 1,115
Prepaid expenses and other
current assets .................. 345 103 303
Accounts payable and accrued
liabilities ..................... 6,483 2,707 1,003
Other long-term liabilities ...... (95) (151) 66
--------- --------- ---------
Net cash provided by operating
activities ........................... 15,393 7,559 1,552
Cash flows from investing activities:
Acquisition of businesses .............. (726) (30,211) (142,028)
Capital expenditures for property
and equipment ......................... (14,342) (15,500) (9,459)
Capital expenditures for real estate
held for development and sale ......... (3,439) (1,717) (72)
Other assets ........................... 3 (290) (1,126)
--------- --------- ---------
Net cash used in investing
activities ........................... (18,504) (47,718) (152,685)
Cash flows from financing activities:
Net borrowings under senior credit
facility ............................. 5,892 2,143 15,000
Proceeds of long-term debt ............. - 17,500 216,000
Principal payments of long-term debt ... (1,711) (2,218) (114,827)
Deferred financing costs ............... (515) (1,623) (10,703)
Purchase of preferred stock of
subsidiary and payment of dividends... (719) (980) (375)
Payment received on shareholder
note receivable ...................... - - 2
Capital contributions .................. - 25,500 46,498
--------- --------- ---------
Net cash provided by financing
activities ........................... 2,947 40,322 151,595
--------- --------- ---------
Increase (decrease) in cash ............ (164) 163 462
Cash at beginning of year .............. 625 462 -
--------- --------- ---------
Cash at end of year .................... $ 461 $ 625 $ 462
========= ========= =========
See accompanying notes.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 29, 1999
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies
Booth Creek Ski Holdings, Inc. ("Booth Creek") was organized on October 8,
1996 in the State of Delaware for the purpose of acquiring and operating
various ski resorts, including Northstar-at-Tahoe ("Northstar"),
Sierra-at-Tahoe ("Sierra"), Bear Mountain, Waterville Valley, Mt. Cranmore, the
Summit at Snoqualmie (the "Summit"), Grand Targhee and Loon Mountain. Booth
Creek also conducts certain real estate development activities, primarily at
Northstar.
The consolidated financial statements include the accounts of Booth Creek
and its subsidiaries (collectively referred to as the "Company"). Booth Creek
owns all of the common stock of its subsidiaries. Ski Lifts, Inc. (the operator
of the Summit) has shares of preferred stock owned by a third party. All
significant intercompany transactions and balances have been eliminated.
Booth Creek is a wholly-owned subsidiary of Booth Creek Ski Group, Inc.
("Parent").
Reporting Periods
The Company's reporting periods end on the Friday closest to the end of each
month. Fiscal 1999, 1998 and 1997 were all 52 week years.
Business and Principal Markets
Northstar is a year-round destination resort including ski and golf
facilities. Sierra is a regional ski area which attracts both day and
destination skiers. Both Northstar and Sierra are located near Lake Tahoe,
California. Bear Mountain is primarily a day ski area located approximately two
hours from Los Angeles, California. Waterville Valley, Mt. Cranmore and Loon
Mountain are regional ski areas attracting both day and destination skiers, and
are located in New Hampshire. The Summit is located in Northwest Washington and
is a day ski area. Grand Targhee is a destination ski resort located in
Wyoming.
Operations are highly seasonal at all locations with the majority of
revenues realized during the ski season from late November through early April.
The length of the ski season and the profitability of operations are
significantly impacted by weather conditions. Although Northstar, Bear
Mountain, Waterville Valley, Loon Mountain and Mt. Cranmore have snowmaking
capacity to mitigate some of the effects of adverse weather conditions,
abnormally warm weather or lack of adequate snowfall can materially affect
revenues. Sierra, the Summit and Grand Targhee lack significant snowmaking
capability but generally benefit from higher annual snowfall.
Other operational risks and uncertainties that face the Company include
competitive pressures affecting the number of skier visits and ticket prices;
the success of marketing efforts to maintain and increase skier visits; the
possibility of equipment failure; and continued access to water supplies for
snowmaking.
Cash
Included in cash at October 29, 1999 and October 30, 1998 is restricted cash
of $334,000 and $533,000, respectively, relating to advance deposits and rental
fees due to property owners for lodging and property rentals.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies - (Continued)
Inventories
Inventories are valued at the lower of cost (first-in, first-out method) or
market. The components of inventories are as follows:
October 29, October 30,
1999 1998
---------- ----------
(In thousands)
Retail products ..................... $1,888 $3,199
Supplies ............................ 647 916
Food and beverage ................... 251 255
------ ------
$2,786 $4,370
====== ======
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method based upon the estimated service lives, which are as
follows:
Land improvements........................... 20 years
Buildings and improvements.................. 20 years
Lift equipment.............................. 15 years
Other machinery and equipment............... 3 to 15 years
Amortization of assets recorded under capital leases is included in
depreciation expense.
Real Estate Activities
The Company capitalizes as real estate held for development and sale the
original acquisition cost (or appraised value in connection with purchase
business combinations), direct construction and development costs, and other
related costs. Property taxes, insurance and interest incurred on costs related
to real estate under development are capitalized during periods in which
activities necessary to get the property ready for its intended use are in
progress. Land costs and other common costs incurred prior to construction are
allocated to each land parcel benefited. Construction related costs are
allocated to individual units in each development phase using the relative
sales value method. Selling expenses are charged against income in the period
incurred. Interest capitalized on real estate development projects for the
years ended October 29, 1999 and October 30, 1998 was $169,000 and $162,000,
respectively (none for the year ended October 31, 1997).
Sales and profits on real estate sales are recognized using the full accrual
method at the point that the Company's receivables from land sales are deemed
collectible and the Company has no significant remaining obligations for
construction or development, which typically occurs upon transfer of title. If
such conditions are not met, the recognition of all or part of the sales and
profit is postponed.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies - (Continued)
Costs of Computer Software Developed or Obtained for Internal Use
In March 1998, the Accounting Standards Executive Committee issued Statement
of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1, which has been adopted
prospectively by the Company as of October 31, 1998, requires the
capitalization of certain costs incurred in connection with developing or
obtaining internal use software. Prior to the adoption of SOP 98-1, the Company
expensed development, production and maintenance costs associated with computer
software developed for internal use. The adoption of SOP 98-1 did not have a
significant impact on the net loss for the year ended October 29, 1999.
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, goodwill and certain
identifiable intangibles held and used by an entity. SFAS No. 121 requires that
those assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. SFAS No. 121 also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less estimated selling costs. As of October 29, 1999,
except for certain technology related projects for which impairment charges
have been provided for (Note 2), management believes that there has not been
any impairment of the Company's long-lived assets or goodwill.
Fair Value of Financial Instruments
The fair value of amounts outstanding under the Company's Senior Credit
Facility approximates book value, as the interest rate on such debt generally
varies with changes in market interest rates. The fair value of the Company's
Senior Notes was approximately $98 million and $124 million at October 29, 1999
and October 30, 1998, respectively, which is based on the market price of such
debt.
Revenue Recognition
Revenues are recognized as services are provided and products are sold.
Sales of season passes are initially deferred in unearned income and recognized
ratably over the ski season.
Amortization
The excess of the purchase price over the fair values of the net assets
acquired (goodwill) is being amortized using the straight-line method over a
period of 15 years.
Deferred financing costs are being amortized over the lives of the related
obligations.
Advertising Costs
The production cost of advertisements is expensed when the advertisement is
initially released. The cost of professional services for advertisements, sales
campaigns, promotions, and public relations is expensed when the services are
rendered. The cost of brochures and other marketing collateral is expensed over
the ski season. Advertising expenses for the years ended October 29, 1999,
October 30, 1998 and October 31, 1997 were $3,525,000, $3,193,000 and
$1,983,000, respectively.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies - (Continued)
Income Taxes
Deferred income taxes are provided for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
The Company is included in the federal and state tax returns of Parent. The
provision for federal and state income tax is computed as if the Company filed
separate consolidated tax returns.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") requires that comprehensive income and
its components, as defined in the pronouncement, be reported within the
consolidated financial statements of the Company. The Company adopted SFAS No.
130 during the year ended October 30, 1998. As of and for the years ended
October 29, 1999 and October 30, 1998, the Company does not have any
transactions that would necessitate disclosure of comprehensive income.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Unusual Items
During the fourth quarter of fiscal 1999, the Company recorded the following
unusual items:
(In thousands)
Unusual Gains and (Losses):
Gain on involuntary conversion of restaurant
facility ......................................... $ 1,300
Impairment charges for technology projects that will
not be pursued.................................... (524)
Severance........................................... (340)
Write-off of business pursuit costs................. (482)
Environmental reserves.............................. (216)
Inventory obsolescence upon conversion of retail
operations at Waterville Valley to a
concessionaire arrangement....................... (225)
--------
Unusual items, net.................................. $ (487)
========
On February 26, 1999, the Company experienced an electrical fire which
destroyed the restaurant facility located at the peak of Northstar's ski
terrain. Upon the consummation of negotiations with its insurer in the fourth
quarter of fiscal 1999, the Company recorded a gain of $1,300,000 for the
difference between the net book value of the facility and contents and the
amount of insurance proceeds expected to be received. The Company's insurance
policies also provide coverage for earnings lost as a result of the fire, as
well as reimbursement of costs incurred in mitigating the operating impacts of
the fire. Operating income for the year ended October 29, 1999 includes
business interruption proceeds of $206,000. As a result of this coverage, the
Company does not believe that the fire will have a material impact on the
Company's results of operations.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. Unusual Items - (Continued)
The Company has recorded a charge of $524,000 for certain technology related
projects that it will no longer be pursuing.
The Company has recorded reserves of $340,000 for severance and other
benefit arrangements and $482,000 for costs of various business transactions
that will no longer be pursued.
The Company has recorded a charge of $216,000 to investigate and remediate
soils and groundwater contamination resulting from prior and existing
underground storage tanks at one of its facilities. Based on currently known
facts, the Company does not believe that the ultimate resolution of this matter
will have a material affect on the Company's financial condition or future
results of operations.
The Company has converted its retail operations at Waterville Valley to a
concessionaire arrangement. As part of the conversion, the Company has recorded
a charge of $225,000 to liquidate existing inventories.
3. Acquisitions
Completed Acquisitions
Booth Creek acquired Northstar, Sierra, Bear Mountain, Waterville Valley,
Mt. Cranmore, the Summit and Grand Targhee during the year ended October 31,
1997, and Loon Mountain during the year ended October 30, 1998. These
acquisitions have been accounted for using the purchase method of accounting.
The results of operations of the resorts have been included in the accompanying
consolidated statements of operations since the effective dates of such
acquisitions.
The following table represents unaudited pro forma financial information
which presents the Company's consolidated results of operations for the years
ended October 30, 1998 and October 31, 1997 as if the acquisitions and related
financing transactions occurred on November 1, 1996.
1998 1997
---------- ----------
(In thousands)
Statement of operations data:
Revenues ............................. $ 115,495 $ 97,825
Operating income (loss) .............. $ 5,114 $ (3,929)
Net loss ............................. $ (14,758) $ (21,241)
Other data:
EBITDA ............................... $ 27,382 $ 14,236
Noncash cost of real estate sales .... $ 3,721 $ 2,370
EBITDA represents income from operations before depreciation, depletion and
amortization expense and the noncash cost of real estate sales.
The pro forma information does not purport to be indicative of results that
actually would have occurred had the acquisitions been made on the date
indicated or of results which may occur in the future.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
3. Acquisitions - (Continued)
Proposed Seven Springs Acquisition
In 1998, the Company, Booth Creek Ski Acquisition, Inc. ("Acquisition Sub")
and Seven Springs Farm, Inc. ("Seven Springs") entered into an Agreement of
Merger (the "Merger Agreement") concerning the acquisition of the Seven Springs
resort in Pennsylvania through merger of Acquisition Sub with Seven Springs. In
connection with the proposed acquisition, certain shareholders of Seven Springs
(the "Seven Springs Shareholder Plaintiffs") filed a lawsuit in the Court of
Common Pleas of Somerset County, Pennsylvania against the Company, Acquisition
Sub, and Seven Springs and certain of its directors, (the "First Pennsylvania
State Action") seeking a declaratory judgment, along with other relief
including the rescission of the Merger Agreement. The Seven Springs Shareholder
Plaintiffs alleged that the terms of a certain shareholders' agreement among
Seven Springs and its shareholders (the "Seven Springs Shareholder Agreement")
banned the consummation of the proposed acquisition. The Company asserted
claims related to the Merger Agreement against Seven Springs in the First
Pennsylvania State Action.
The Merger Agreement provided that the Company's obligations thereunder were
subject to satisfaction of various conditions, including the requirement that
there shall have been a judicial determination that the Seven Springs
Shareholder Agreement was inapplicable to the Merger Agreement. If these
conditions were not satisfied on or before October 31, 1998, the Company was
free to terminate the Merger Agreement, upon which termination the Merger
Agreement required Seven Springs to pay the Company a break-up fee of
$1,000,000. On June 18, 1999, the Company terminated the Merger Agreement and
demanded payment of the break-up fee. Disputes arose between Seven Springs and
the Company concerning the parties' obligations under the Merger Agreement,
including Seven Springs' obligation to pay the Company the break-up fee.
Consequently, the Company commenced an action against Seven Springs on June 30,
1999, in the United States District Court for the Southern District of New
York, seeking damages of $1,000,000 plus interest and costs (the "New York
Federal Action").
On July 2, 1999, Seven Springs filed for a writ of summons against the
Company and Acquisition Sub in the Pennsylvania Court of Common Pleas of
Somerset County (the "Second Pennsylvania State Action"). The Seven Springs
Shareholder Plaintiffs filed a motion seeking leave to intervene in the Second
Pennsylvania State Action, alleging that Seven Springs' payment of the
$1,000,000 break-up fee required by the Merger Agreement would itself violate
the Seven Springs Shareholder Agreement. Thereafter, the Seven Springs
Shareholder Plaintiffs also moved to amend the complaint in the First
Pennsylvania State Action to include the same claim with respect to the
$1,000,000 break-up fee.
On January 10, 2000, the Company, Acquisition Sub and Seven Springs entered
into a full, final and mutual Settlement and Release Agreement (the "Settlement
Agreement") whereby all claims among the parties are released and discharged
without any admission of liability. Furthermore, under the Settlement
Agreement, Booth Creek agreed to cause its claims in the First Pennsylvania
State Action and its complaint in the New York Federal Action to be dismissed
with prejudice and Seven Springs agrees to withdraw and discontinue the Second
Pennsylvania State Action. As part of the Settlement Agreement, Seven Springs
has made a payment of $500,000 to Booth Creek. The Seven Springs Shareholder
Plaintiffs are not a party to the Settlement Agreement. The Company believes
that this matter will not have a significant impact on the Company's financial
condition or future results of operations.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. Property and Equipment
Property and equipment consist of the following:
October 29, October 30,
1999 1998
----------- -----------
(In thousands)
Land and improvements .................. $ 37,846 $ 36,933
Buildings and improvements ............. 51,932 45,309
Lift equipment ......................... 44,023 42,807
Other machinery and equipment .......... 52,036 45,099
Construction in progress ............... 8,529 10,670
-------- --------
194,366 180,818
Less accumulated depreciation and
amortization .......................... 42,050 24,349
-------- --------
$152,316 $156,469
======== ========
5. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
October 29, October 30,
1999 1998
----------- -----------
(In thousands)
Accounts payable ...................... $10,072 $10,652
Accrued compensation and benefits ...... 3,279 3,164
Taxes other than income taxes .......... 1,099 973
Unearned income and deposits ........... 9,887 4,017
Interest ............................... 2,492 2,349
Other .................................. 1,764 955
------- -------
$28,593 $22,110
======= =======
6. Financing Arrangements
Senior Credit Facility
The following is a summary of certain provisions of the Amended and Restated
Credit Agreement (the "Senior Credit Facility") as amended and restated on
January 28, 1999 and May 18, 1999, among Booth Creek, its subsidiaries, the
financial institutions party thereto and BankBoston, N.A., as administrative
agent ("Agent").
General - The Senior Credit Facility provides for
borrowing availability of up to $25 million. The Senior
Credit Facility requires that the Company not have
borrowings thereunder in excess of $8.0 million in addition
to certain amounts maintained by the Company in certain
depository accounts with the Agent for a period of 60
consecutive days each year commencing sometime between
February 1 and February 28. Borrowings under the Senior
Credit Facility are collectively referred to herein as the
"Loans." Total borrowings outstanding under the Senior
Credit Facility at October 29, 1999 were $23,035,000.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Financing Arrangements - (Continued)
Senior Credit Facility (continued)
Interest - For purposes of calculating interest, the
Loans can be, at the election of the Company, Base Rate
Loans or LIBOR Rate Loans or a combination thereof. Base
Rate Loans bear interest at the sum of (a) a margin of
between 0% and .5%, depending on the level of consolidated
EBITDA of the Company and its subsidiaries (as determined
pursuant to the Senior Credit Facility), plus (b) the
higher of (i) the Agent's base rate or (ii) the federal
funds rate plus .5%. LIBOR Rate Loans bear interest at the
LIBOR rate plus a margin of between 2% and 3%, depending on
the level of consolidated EBITDA. The Senior Credit
Facility also requires a commitment fee of .375% based on
the unused borrowing base. As of October 29, 1999 the
borrowings outstanding bore interest at 8.25%, pursuant to
the Base Rate Loan option.
Repayment - Subject to the provisions of the Senior
Credit Facility, the Company may, from time to time,
borrow, repay and reborrow under the Senior Credit
Facility. The entire unpaid balance under the Senior Credit
Facility is due and payable on March 31, 2002.
Security - Borrowings under the Senior Credit Facility
are secured by (i) a pledge to the Agent for the ratable
benefit of the financial institutions party to the Senior
Credit Facility of all of the capital stock of Booth
Creek's principal subsidiaries and (ii) a grant of a
security interest in substantially all of the consolidated
assets of Booth Creek and its subsidiaries (excluding DRE,
L.L.C.).
Covenants - The Senior Credit Facility contains
financial covenants relating to the maintenance of (i)
ratios of (a) financing debt to consolidated cash flow, and
(b) adjusted consolidated cash flow to consolidated fixed
charges, and (ii) consolidated net worth. The Senior Credit
Facility also contains restrictive covenants pertaining to
the management and operation of Booth Creek and its
subsidiaries. The covenants include, among others,
significant limitations on indebtedness, guarantees,
mergers, acquisitions, fundamental corporate changes,
capital expenditures, asset sales, leases, investments,
loans and advances, liens, dividends and other stock
payments, transactions with affiliates, optional payments
and modification of debt instruments and issuances of
stock.
Long-Term Debt
Long-term debt consists of the following instruments, which are described
below:
October 29, October 30,
1999 1998
--------------------------
(In thousands)
Senior Notes ......................... $133,500 $133,500
Other debt ........................... 4,451 5,637
-------- --------
137,951 139,137
Less current portion ................. 1,468 1,785
-------- --------
$136,483 $137,352
======== ========
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Financing Arrangements - (Continued)
Long-Term Debt (continued)
Senior Notes
As of October 29, 1999, the Company had outstanding $133.5 million aggregate
principal amount of its senior debt securities (the "Senior Notes"). The Senior
Notes mature on March 15, 2007, and bear interest at 12.5% per annum, payable
semi-annually on March 15 and September 15. The Senior Notes are redeemable at
the option of the Company, in whole or in part, at any time after March 15,
2002, with an initial redemption price of 106.25% declining through maturity,
plus accrued and unpaid interest to the redemption date.
The Senior Notes are unconditionally guaranteed, on an unsecured senior
basis, as to the payment of principal, premium, if any, and interest, jointly
and severally (the "Guarantees"), by all Restricted Subsidiaries of the Company
(as defined in the Indenture) having either assets or shareholders' equity in
excess of $20,000 (the "Guarantors"). All of the Company's direct and indirect
subsidiaries are Restricted Subsidiaries, except DRE, L.L.C. Each Guarantee is
effectively subordinated to all secured indebtedness of such Guarantor. The
Senior Notes are general senior unsecured obligations of the Company ranking
equally in right of payment with all other existing and future senior
indebtedness of the Company and senior in right of payment to any subordinated
indebtedness of the Company.
The Senior Notes are effectively subordinated in right of payment to all
secured indebtedness of the Company and the Guarantors, including indebtedness
under the Senior Credit Facility. In addition, the Senior Notes are
structurally subordinated to any indebtedness of the Company's subsidiaries
that are not Guarantors. The indenture for the Senior Notes (the "Indenture")
contains covenants for the benefit of the holders of the Senior Notes that,
among other things, restrict the ability of the Company and any Restricted
Subsidiaries to: (i) incur additional indebtedness; (ii) pay dividends and make
other distributions; (iii) issue stock of subsidiaries; (iv) make certain
investments; (v) repurchase stock; (vi) create other liens; (vii) enter into
transactions with affiliates, (viii) enter into sale and leaseback
transactions, (ix) create dividend or other payment restrictions affecting
Restricted Subsidiaries; (x) merge or consolidate the Company or any
Guarantors; and (xi) transfer and sell assets.
The Guarantors are wholly-owned subsidiaries of Booth Creek and have fully
and unconditionally guaranteed the Senior Notes on a joint and several basis.
Booth Creek is a holding company and has no operations, assets or cash flows
separate from its investments in its subsidiaries. In addition, the assets,
equity, income and cash flow of DRE, L.L.C., Booth Creek's only non-guarantor
subsidiary, are inconsequential and the common stock of DRE, L.L.C. is entirely
owned by Booth Creek. There are no significant restrictions on the ability of
the Guarantors to pay dividends or otherwise transfer funds to Booth Creek.
Accordingly, Booth Creek has not presented separate financial statements and
other disclosures concerning the Guarantors or its non-guarantor subsidiary
because management has determined that such information is not material to
investors.
On March 18, 1997, the Company consummated an offering of $110 million in
Senior Notes. A portion of the proceeds from the offering were used to repay
$90 million in bridge notes bearing interest at approximately 11%. Existing
deferred financing costs at March 18, 1997 of $2,664,000 relating principally
to the bridge notes repaid, were charged off in connection with the early
extinguishment of debt, and have been reflected as an extraordinary item in the
accompanying statement of operations for the year ended October 31, 1997.
Other Debt
Other debt of $4,451,000 and $5,637,000 at October 29, 1999 and October 30,
1998, respectively, consists of various capital lease obligations, notes
payables, improvement bond obligations and amounts owed under the American
Skiing Company ("ASC") Seller Note for a portion of the purchase price for the
acquisitions of Waterville Valley and Mt. Cranmore. The ASC Seller Note
requires annual principal payments at an initial level of $100,000 per year and
increasing to $350,000 by January 31, 2003, with the remaining principal
balance of
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Financing Arrangements - (Continued)
Long-Term Debt (continued)
$1,150,000 due on June 30, 2004. The ASC Seller Note bears interest at 12% per
annum payable semi-annually on each June 30 and December 31.
For the years ended October 29, 1999 and October 30, 1998, the Company
entered into long-term debt and capital lease obligations of approximately
$525,000 and $2.5 million, respectively, for the purchase of equipment.
During the years ended October 29, 1999, October 30, 1998 and October 31,
1997, the Company paid cash for interest costs of $18,564,000, $17,176,000 and
$11,243,000, respectively, net of amounts capitalized of $332,000 and $162,000,
respectively (none for the year ended October 31, 1997).
7. Commitments and Contingencies
Lease Commitments
The Company leases certain machinery, equipment and facilities under
operating leases. Aggregate future minimum lease payments as of October 29,
1999 are as follows:
Year
Ending
October (In thousands)
-------
2000 ............................................ $ 3,297
2001 ............................................ 2,091
2002 ............................................ 1,710
2003 ............................................ 1,493
2004 ............................................ 144
Thereafter ...................................... 165
----------
$ 8,900
==========
Total rent expense for all operating leases amounted to $3,714,000,
$2,675,000 and $2,882,000 for the years ended October 29, 1999, October 30,
1998 and October 31, 1997, respectively.
The Company leases certain machinery and equipment under capital leases.
Aggregate future minimum lease payments as of October 29, 1999 for years ending
October 2000 and October 2001 were $1,113,000 and $181,000, respectively. The
cost and accumulated amortization of equipment recorded under capital leases at
October 29, 1999 were $3,026,000 and $1,260,000, respectively.
In addition, the Company leases property from the U.S. Forest Service under
Term Special Use Permits for all or certain portions of the operations of
Sierra, Bear Mountain, Waterville Valley, Loon Mountain, the Summit and Grand
Targhee. These leases are effective through 2039, 2020, 2034, 2006, 2032 and
2034, respectively. Lease payments are based on a percentage of revenues, and
were $1,189,000, $1,014,000 and $665,000 for the years ended October 29, 1999,
October 30, 1998 and October 31, 1997, respectively.
Other Commitments
The Company has certain option contracts for the purchase of real estate and
other rights. The Company has made deposits of $551,000 in connection with such
option contracts, which are reflected in other assets in the
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. Commitments and Contingencies - (Continued)
Other Commitments (continued)
accompanying consolidated balance sheet as of October 29, 1999. Depending on
certain circumstances, in the event the options are not ultimately exercised,
some or all of the option deposits may be forfeited by the Company.
As a result of the acquisition of Grand Targhee, the Company is required to
pay a specified commission based on the number of dwelling units developed at
the resort through 2012.
Litigation
The nature of the ski industry includes the risk of skier injuries.
Generally, the Company has insurance to cover potential claims; in some cases
the amounts of the claims may be substantial. The Company is also involved in a
number of other claims arising from its operations.
Management, in consultation with legal counsel, believes resolution of these
claims will not have a material adverse impact on the Company's consolidated
financial condition or results of operations.
Pledge of Stock
The stock of the Company is pledged to secure $61.3 million of indebtedness
of Parent.
8. Income Taxes
The income tax benefit (provision) consists of the following:
Year Ended
-------------------------------------------------------
October 29, 1999 October 30, 1998 October 31, 1997
---------------- ---------------- ----------------
(In thousands)
Current:
Federal ............. $ - $ - $ 200
State ............... - - (20)
--------------- --------------- ---------------
- - 180
--------------- --------------- ---------------
Deferred:
Federal ............. - - 1,442
State ............... - - 106
--------------- --------------- ---------------
- - 1,548
--------------- --------------- ---------------
$ - $ - $ 1,728
=============== =============== ===============
The difference between the statutory federal income tax rate and the
effective tax rate is attributable to the following:
Year Ended
----------------------------------------------------
October 29, 1999 October 30, 1998 October 31, 1997
---------------- ---------------- ----------------
(In thousands)
Tax benefit computed
at federal statutory
rate of 35% of
pre-tax loss ........ $ 6,501 $ 6,045 $ 5,575
Net change in
valuation allowance.... (6,235) (6,073) (3,691)
Other, net ............. (266) 28 (156)
------------- ------------- --------------
$ - $ - $ 1,728
============= ============= ==============
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8. Income Taxes - (Continued)
As all of the income tax benefit for the year ended October 31, 1997 was
attributable to the losses from continuing operations, none of the benefit was
allocated to the extraordinary loss on early retirement of debt (Note 6).
Accordingly, the extraordinary loss increased the Company's net operating
losses by $2,664,000 and the valuation allowance by $972,000.
In connection with the purchase accounting for the Loon Mountain
acquisition, approximately $13 million of the Company's existing net operating
losses were used to offset net taxable temporary differences relating
principally to Loon Mountain's long-term assets. Accordingly, the Company's
valuation allowance for net deferred tax assets was reduced by $4,639,000.
After consideration for the Loon Mountain acquisition, the net increase in the
Company's valuation allowance for the year ended October 30, 1998 was $826,000,
which included the effect of adjustments to the prior year's estimated net
operating loss.
At October 29, 1999, the Company has net operating loss carryforwards of
approximately $72 million for federal income tax reporting purposes, which
expire between 2012 and 2019.
Significant components of the Company's deferred tax assets and liabilities
are as follows:
October 29, October 30,
1999 1998
----------- ------------
(In thousands)
Deferred tax assets:
Accruals and reserves ...................... $ 1,558 $ 1,216
Alternative minimum tax credit
carryforwards ............................. 549 545
Net operating loss carryforwards ........... 26,310 15,806
----------- -----------
Total deferred tax assets ................ 28,417 17,567
Deferred tax liabilities:
Property and equipment ..................... (15,129) (10,514)
----------- -----------
Total deferred tax liabilities ........... (15,129) (10,514)
----------- -----------
Net deferred tax assets ..................... 13,288 7,053
Valuation allowance ......................... (13,288) (7,053)
----------- -----------
Net deferred tax assets reflected in the
accompanying consolidated balance sheets.... $ - $ -
=========== ===========
9. Preferred Stock of Subsidiary
In connection with the consummation of the Summit acquisition, Ski Lifts,
Inc. transferred certain owned real estate held for development purposes and
related buildings into a Delaware limited liability company, DRE, L.L.C. (the
"Real Estate LLC"), of which Ski Lifts, Inc. is a member and 99% equity
interest holder and Booth Creek is the other member and 1% equity interest
holder. In addition, Ski Lifts, Inc. granted the Real Estate LLC an option (the
"Real Estate Option") to purchase acreage of developmental real estate for
nominal consideration. Ski Lifts, Inc. also issued 28,000 shares of non-voting
preferred stock (the "Ski Lifts Preferred Stock") to its prior owners having an
aggregate liquidation preference equal to $3.5 million, the aggregate estimated
fair market value of the real estate transferred to the Real Estate LLC and the
real estate subject to the Real Estate Option. Concurrently with these
transactions, the Real Estate LLC entered into an agreement to purchase (the
"Preferred Stock Purchase Agreement") the Ski Lifts Preferred Stock, on a
quarterly basis over the five years following the date of the Summit
Acquisition, at a purchase price equal to the liquidation preference thereof
plus accrued dividends to the date of purchase. Through October 29, 1999, the
Company has paid $1,375,000, excluding dividends, under the Preferred Stock
Purchase Agreement. Real Estate LLC's purchase requirements for the years
ending October 2000, 2001 and 2002 under the Preferred Stock Purchase
Agreement, excluding dividends, are $500,000, $500,000 and $1,125,000,
respectively. The Real Estate LLC's obligations under the Preferred Stock
Purchase Agreement are secured by a first priority lien on the developmental
real estate held by the Real Estate LLC and substantially all of its other
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
9. Preferred Stock of Subsidiary - (Continued)
assets. The Ski Lifts Preferred Stock provides for a 9% cumulative dividend and
is redeemable at the option of Ski Lifts, Inc. without premium. In addition,
pursuant to the terms of the Ski Lifts Preferred Stock, the holders thereof
have no redemption rights.
10. Northstar Real Estate Sales
On July 28, 1999, Northstar consummated the sale of the property comprising
Phases 4 and 4A of the Big Springs development to Trimont Land Holdings, Inc.
("TLH"), a wholly-owned subsidiary of Parent and an affiliate of the Company,
for an aggregate sales price of $10,000,000, subject to adjustment as described
below. The consideration initially paid to Northstar consisted of $8,500,000 in
cash and a promissory note (the "TLH Note") for a minimum of $1,500,000. Under
the terms of the TLH Note, Northstar will receive the greater of (a) $1,500,000
plus accrued interest at 7% per annum, or (b) the Net Cash Proceeds of the
resale of the lots within Phases 4 and 4A. "Net Cash Proceeds" is defined as
gross proceeds received by TLH from the subsequent resale of the lots, after
deduction for (1) the proceeds applied to repay any indebtedness incurred by
TLH in connection with its financing of the purchase of the lots, (2) any fees
or other costs incurred by TLH in connection with its financing of the purchase
or sales of the lots, and (3) any corporate overhead costs incurred by TLH
attributable to the purchase, maintenance, marketing or sale of the lots. The
TLH Note is prepayable at any time, and is due on the earlier to occur of
January 15, 2001 or the date on which the last of the lots owned by TLH has
been sold. Pursuant to the terms of the sale, Northstar retained the obligation
to complete the scheduled construction of the development in accordance with
the approved site development plan. Northstar will recognize revenue and
related cost of sales for these real estate transactions upon the substantial
completion of construction and the close of escrow for the sales between TLH
and third party buyers.
Through October 29, 1999, TLH had closed escrow on 43 of the available 47
lots within Phases 4 and 4A, and Northstar has substantially completed the
scheduled construction of the development. In accordance with the terms of the
transaction between TLH and Northstar, the Company received proceeds and
recorded real estate sales of approximately $12,000,000 during the year ended
October 29, 1999, which is net of (1) TLH's financing costs of approximately
$253,000, (2) third party sales commissions of $788,000 and (3) other closing
costs and expenses of $95,000. An additional three lots closed escrow in
November and December 1999, and TLH is currently marketing the remaining lot
for a list price of $265,000.
On November 17, 1999, Northstar consummated the sale of certain single
family development property (the "Unit 7 and 7A Development") for an aggregate
sales price of $7,050,000, subject to adjustment as described below. The
consideration paid to Northstar consisted of $6,000,000 in cash and a
promissory note (the "Second TLH Note") for a minimum of $1,050,000. Under the
terms of the Second TLH Note, Northstar will receive the greater of (a)
$1,050,000 plus accrued interest at 7% per annum, or (b) the Net Cash Proceeds
(as defined) of the resale of the lots within the Unit 7 and 7A Development.
The TLH Note is prepayable at any time, and is due on the earlier to occur of
January 30, 2001 or the date on which the last of the lots owned by TLH has
been sold. Pursuant to the terms of the sale, Northstar retained the obligation
to complete the scheduled construction of the development in accordance with
the tentative site development plan.
On December 15, 1999, the Company reached an agreement for the proposed sale
of certain developmental real estate (the "Joint Venture Development
Property"), consisting of approximately 250 acres of land at Northstar, to a
newly formed joint venture between the Company and East West Partners, Inc.
("East West"). The Joint Venture Development Property excludes certain single
family developmental parcels that the Company anticipates developing on its
own, as well as other land held for future development and sale at Northstar.
The proposed transaction is subject to a number of significant closing
conditions, including (1) required consents and approvals, including those of
certain of the Company's creditors and (2) completion of title evaluations and
subdivision requirements to effect the transfer of the Joint Venture
Development Property. Further, East West has the right to terminate the
transaction prior to January 31, 2000. Under the terms of the proposed
transaction, the Company would receive an upfront cash payment ranging from $10
million to $15 million depending on the amount of real
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10. Northstar Real Estate Sales - (Continued)
estate transferred at the initial closing, the remainder of the upfront cash
payment of $15 million upon the subsequent transfer of parcels not transferred
at the initial closing, additional payments based on gross sales of the
developed real estate as well as a 20% interest in the joint venture. The
Company is required to invest $5 million of the upfront cash payment in capital
improvements to the Northstar resort. Additionally, in the event the planned
transaction with East West is consummated, the Company anticipates using a
portion of the proceeds therefrom to repurchase the Unit 7 and 7A Development
property from TLH. The Company has retained approval rights over certain
components of the master development plan for the proposed development.
However, there can be no assurances that the conditions to the transaction will
be satisfied or that the transaction will be consummated on the terms described
or at all.
11. Management Agreement and Related Party Transactions
Booth Creek has in effect a management agreement with Booth Creek, Inc. (the
"Management Company") dated November 27, 1996 (the "Management Agreement")
pursuant to which the Management Company provides Parent, Booth Creek and its
subsidiaries with financial advice with respect to, among other matters, cash
management, accounting and data processing systems and procedures, budgeting,
equipment purchases, business forecasts, treasury functions and investor
relations. The Management Company also provides general supervision and
management advice concerning tax, legal and corporate finance matters,
administration and operation, personnel matters, business insurance and the
employment of consultants, contractors and agents.
Under the terms of the Management Agreement, the Company provides customary
indemnification, reimburses certain costs and owes the Management Company an
annual management fee of $350,000 plus an operating bonus (the "Operating
Bonus"), not to exceed $400,000, equal to 2.5% of the excess of Consolidated
EBITDA (as defined in the Management Agreement) for such year over $25 million.
Management fees and reimbursable expenses during the years ended October 29,
1999, October 30, 1998 and October 31, 1997 were $370,000, $646,000 and
$350,000, respectively.
During the years ended October 29, 1999 and October 30, 1998, the Management
Company incurred fees and expenses of approximately $51,000 and $119,000,
respectively, in connection with certain of the acquisitions. For the year
ended October 31, 1997, the Management Company and certain of its affiliates
made advances and deposits of approximately $1,400,000, and incurred expenses
of approximately $1,000,000, in connection with certain of the acquisitions.
All of these costs were later reimbursed by the Company pursuant to the
Management Agreement.
Certain obligations of Booth Creek to make payments under the Management
Agreement are subject to the provisions of the agreements relating to
outstanding indebtedness of Parent. As of October 29, 1999, Parent was in
default of certain provisions of the Parent indebtedness. Accordingly, the
Management Company has agreed to the deferral of management fees payable under
the Management Agreement since June 1999. Such fees will accrue without
interest and be payable by Parent upon the prior payment in full of certain
Parent indebtedness.
12. Employee Benefit Plan
The Company maintains a defined contribution retirement plan (the "Plan"),
qualified under Section 401(k) of the Internal Revenue Code, for certain
eligible employees. Pursuant to the Plan, eligible employees may contribute a
portion of their compensation, subject to a maximum amount per year as
specified by law. The Company provides a matching contribution based on
specified percentages of amounts contributed by participants. The Company's
contribution expense for the years ended October 29, 1999, October 30, 1998 and
October 31, 1997 was $538,000, $490,000 and $215,000, respectively.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
13. Business Segments
During the year ended October 29, 1999, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). This statement
established standards for reporting information on operating segments in
interim and annual financial statements. The Company had previously disclosed
segment information under SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise." The adoption of SFAS No. 131 did not result in a change
in the composition of the Company's operating segments, or in the previously
reported financial results for each segment.
The Company currently operates in two business segments, Resort Operations
and Real Estate and Other. Data by segment is as follows:
October 29, October 30, October 31,
1999 1998 1997
----------- ----------- -----------
(In thousands)
Revenue:
Resort operations .............. $ 112,980 $ 97,248 $ 68,136
Real estate and other .......... 12,744 7,608 3,671
----------- ----------- -----------
$ 125,724 $ 104,856 $ 71,807
=========== =========== ===========
Operating income (loss):
Resort operations............... $ (5,954) $ (1,201) $ (1,628)
Real estate and other .......... 7,222 2,664 612
----------- ----------- -----------
$ 1,268 $ 1,463 $ (1,016)
=========== =========== ===========
Depreciation, depletion and
amortization:
Resort operations .............. $ 21,472 $ 17,479 $ 11,421
Real estate and other .......... 278 273 260
----------- ----------- -----------
$ 21,750 $ 17,752 $ 11,681
=========== =========== ===========
Capital expenditures:
Resort operations .............. $ 14,342 $ 15,042 $ 8,918
Real estate and other .......... 3,439 1,717 72
----------- ----------- -----------
$ 17,781 $ 16,759 $ 8,990
=========== =========== ===========
Identifiable assets:
Resort operations .............. $ 188,870 $ 192,696 $ 159,560
Real estate and other .......... 13,363 15,240 16,559
----------- ----------- -----------
$ 202,233 $ 207,936 $ 176,119
=========== =========== ===========
Exhibit Index
EXHIBIT
NUMBER DESCRIPTION
------- -----------
+2.1 Agreement and Plan of Merger dated as of September
18, 1997 by and among Booth Creek Ski Group, Inc.,
LMRC Acquisition Corp. and Loon Mountain Recreation
Corporation.
+2.2 First Amendment to Merger Agreement, dated December
22, 1997, by and among Booth Creek Ski Group, Inc.,
LMRC Acquisition Corp. and Loon Mountain Recreation
Corporation.
++++2.3 Agreement of Merger dated as of August 28, 1998 by
and among Booth Creek Ski Holdings, Inc., Booth Creek
Ski Acquisition, Inc. and Seven Springs Farm, Inc.
*3.1 Certificate of Incorporation of Booth Creek Ski
Holdings, Inc.
*3.2 Bylaws of Booth Creek Ski Holdings, Inc.
*3.3 Restated Articles of Incorporation of Trimont Land
Company.
*3.4 Bylaws of Trimont Land Company.
*3.5 Certificate of Incorporation of Sierra-at-Tahoe, Inc.
*3.6 Bylaws of Sierra-at-Tahoe, Inc.
*3.7 Certificate of Incorporation of Bear Mountain, Inc.
*3.8 Bylaws of Bear Mountain, Inc.
*3.9 Certificate of Incorporation of Booth Creek Ski
Acquisition Corp.
*3.10 Bylaws of Booth Creek Ski Acquisition Corp.
*3.11 Amended and Restated Certificate of Incorporation of
Waterville Valley Ski Resort, Inc.
*3.12 Bylaws of Waterville Valley Ski Resort, Inc.
*3.13 Amended and Restated Certificate of Incorporation of
Mount Cranmore Ski Resort, Inc.
*3.14 Bylaws of Mount Cranmore Ski Resort, Inc.
*3.15 Amended and Restated Articles of Incorporation of Ski
Lifts, Inc.
*3.16 Bylaws of Ski Lifts, Inc.
*3.17 Certificate of Incorporation of Grand Targhee
Incorporated.
*3.18 Bylaws of Grand Targhee Incorporated.
*3.19 Articles of Incorporation of B-V Corporation.
*3.20 Bylaws of B-V Corporation.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*3.21 Certificate of Incorporation of Targhee Company.
*3.22 Bylaws of Targhee Company.
*3.23 Certificate of Incorporation of Targhee Ski Corp.
*3.24 Bylaws of Targhee Ski Corp.
****3.25 Articles of Incorporation of LMRC Holding Corp.
****3.26 Amended and Restated Articles of Incorporation of
Loon Mountain Recreation Corporation.
****3.27 Amended and Restated Bylaws of Loon Mountain
Recreation Corporation.
****3.28 Amended and Restated Articles of Incorporation of
Loon Realty Corp.
****3.29 Amended and Restated Bylaws of Loon Realty Corp.
****3.30 Bylaws of LMRC Holding Corp.
*4.1 Indenture dated as of March 18, 1997 by and among
Booth Creek Ski Holdings, Inc., as Issuer, Trimont
Land Company, Sierra-at-Tahoe, Inc., Bear Mountain,
Inc., Waterville Valley Ski Resort, Inc., Mount
Cranmore Ski Resort, Inc., Booth Creek Ski
Acquisition Corp., Ski Lifts, Inc., Grand Targhee
Incorporated, B-V Corporation, Targhee Company and
Targhee Ski Corp., as Subsidiary Guarantors, and HSBC
Bank USA (formerly Marine Midland Bank), as trustee
(including the form of 12 1/2% Senior Note due 2007
and the form of Guarantee).
*4.2 Supplemental Indenture No. 1 to Indenture dated as of
April 25, 1997 by and among Booth Creek Ski Holdings,
Inc., as Issuer, Trimont Land Company,
Sierra-at-Tahoe, Inc., Bear Mountain, Inc.,
Waterville Valley Ski Resort, Inc., Mount Cranmore
Ski Resort, Inc., Booth Creek Ski Acquisition Corp.,
Ski Lifts, Inc., Grand Targhee Incorporated, B-V
Corporation, Targhee Company and Targhee Ski Corp.,
as Subsidiary Guarantors, HSBC Bank USA (formerly
Marine Midland Bank), as trustee.
+4.3 Supplemental Indenture No. 2 to Indenture dated as of
February 20, 1998 by and among Booth Creek Ski
Holdings, Inc., as Issuer, Trimont Land Company,
Sierra-at-Tahoe, Inc., Bear Mountain, Inc.,
Waterville Valley Ski Resort, Inc., Mount Cranmore
Ski Resort, Inc., Booth Creek Ski Acquisition Corp.,
Ski Lifts, Inc, Grand Targhee Incorporated, B-V
Corporation, Targhee Company and Targhee Ski Corp, as
Subsidiary Guarantors, HSBC Bank USA (formerly Marine
Midland Bank), as Trustee.
+4.4 Supplemental Indenture No. 3 to Indenture dated as of
February 26, 1998, by and among Booth Creek Ski
Holdings, Inc., as Issuer, LMRC Holding Corp., Loon
Mountain Recreation Corporation and Loon Realty
Corp., as Subsidiary Guarantors, and HSBC Bank USA
(formerly Marine Midland Bank), as Trustee.
+++++4.5 Supplemental Indenture No. 4 to Indenture dated as of
October 8, 1998 by and among Booth Creek Ski
Holdings, Inc., as Issuer, Booth Creek Ski
Acquisition, Inc. HSBC Bank USA (formerly Marine
Midland Bank), as Trustee.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
+4.6 Securities Purchase Agreement, dated as of February
23, 1998, by and among Booth Creek Ski Holdings,
Inc., Trimont Land Company, Sierra-at-Tahoe, Inc.,
Bear Mountain, Inc., Booth Creek Ski Acquisition
Corp., Waterville Valley Ski Resort, Inc., Mount
Cranmore Ski Resort, Inc., Ski Lifts, Inc., Grand
Targhee Incorporated, B-V Corporation, Targhee
Company, Targhee Ski Corp., LMRC Holding Corp., Loon
Mountain Recreation Corporation and Loon Realty Corp
and CIBC Oppenheimer Corp.
+++++4.7 Amended and Restated Securities Purchase Agreement,
dated as of September 14, 1998, among Booth Creek Ski
Group, Inc., Booth Creek Ski Holdings, Inc., the
Subsidiary Guarantors as defined therein and each of
John Hancock Mutual Life Insurance Company, CIBC WG
Argosy Merchant Fund 2, L.L.C. and Hancock Mezzanine
Partners L.P.
+++++10.1 Amended and Restated Credit Agreement dated as of
October 30, 1998 among Booth Creek Ski Holdings,
Inc., Booth Creek Ski Acquisition Corp., Trimont Land
Company, Sierra-at-Tahoe, Inc., Bear Mountain, Inc.,
Waterville Valley Ski Resort, Inc., Mount Cranmore
Ski Resort, Inc., Ski Lifts, Inc., Grand Targhee
Incorporated, LMRC Holding Corp., Loon Mountain
Recreation Corporation, Loon Realty Corp. and
BankBoston, N.A.
*****10.2 Waiver Agreement dated March 12, 1999, to Credit
Agreement dated as of October 30, 1998 among Booth
Creek Ski Holdings, Inc., Booth Creek Ski Acquisition
Corp., Trimont Land Company, Sierra-at-Tahoe, Inc.,
Bear Mountain, Inc., Waterville Valley Ski Resort,
Inc., Mount Cranmore Ski Resort, Inc., Ski Lifts,
Inc., Grand Targhee Incorporated, LMRC Holding Corp.,
Loon Mountain Recreation Corporation, Loon Realty
Corp. and BankBoston, N.A.
******10.3 First Amendment dated May 18, 1999, to Amended and
Restated Credit Agreement dated as of October 30,
1998 among Booth Creek Ski Holdings, Inc., Booth
Creek Ski Acquisition Corp., Trimont Land Company,
Sierra-at-Tahoe, Inc., Bear Mountain, Inc.,
Waterville Valley Ski Resort, Inc., Mount Cranmore
Ski Resort, Inc., Ski Lifts, Inc., Grand Targhee
Incorporated, LMRC Holding Corp., Loon Mountain
Recreation Corporation, Loon Realty Corp. and
BankBoston, N.A.
******10.4 Waiver Agreement dated June 14, 1999, to Amended and
Restated Credit Agreement dated as of October 30,
1998 among Booth Creek Ski Holdings, Inc., Booth
Creek Ski Acquisition Corp., Trimont Land Company,
Sierra-at-Tahoe, Inc., Bear Mountain, Inc.,
Waterville Valley Ski Resort, Inc., Mount Cranmore
Ski Resort, Inc., Ski Lifts, Inc., Grand Targhee
Incorporated, LMRC Holding Corp., Loon Mountain
Recreation Corporation, Loon Realty Corp. and
BankBoston, N.A.
*10.5 Purchase and Sale Agreement dated as of August 30,
1996 by and between Waterville Valley Ski Area, Ltd.,
Cranmore, Inc., American Skiing Company and Booth
Creek Ski Acquisition Corp.
*10.6 Subordinated Promissory Note dated November 27, 1996
issued by Booth Creek Ski Acquisition Corp.,
Waterville Valley Ski Resort, Inc. and Mount Cranmore
Ski Resort, Inc. to American Skiing Company.
*10.7 Stock Purchase and Indemnification Agreement dated as
of November 26, 1996 among Booth Creek Ski Holdings,
Inc., Fibreboard Corporation, Trimont Land Company,
Sierra-at-Tahoe, Inc. and Bear Mountain, Inc.
*10.8 Escrow Agreement dated December 3, 1996 by and among
Fibreboard Corporation, Booth Creek Ski Holdings,
Inc. and First Trust of California.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*10.9 Purchase Agreement dated February 11, 1997 among
Booth Creek Ski Holdings, Inc., Grand Targhee
Incorporated, Moritz O. Bergmeyer and Carol Mann
Bergmeyer.
*10.10 Promissory Note dated February 11, 1997 issued by
Grand Targhee Incorporated to Booth Creek Ski
Holdings, Inc.
*10.11 Stock Purchase Agreement dated as of February 21,
1997 by and between Booth Creek Ski Holdings, Inc.,
William W. Moffett, Jr., David R. Moffett, Laurie M.
Padden, individually and as custodian for Christina
Padden, Jennifer Padden and Mary M. Padden, Stephen
R. Moffett, Katharine E. Moffett, Frances J.
DeBruler, individually and as representative of the
Estate of Jean S. DeBruler, Jr., deceased, and Peggy
Westerlund, and David R. Moffett, as representative.
*10.12 Preferred Stock Purchase Agreement dated as of
February 21, 1997 by and between DRE, L.L.C., William
W. Moffett, Jr., David R. Moffett, Laurie M. Padden,
individually and as custodian for Christina Padden,
Jennifer Padden and Mary M. Padden, Stephen R.
Moffett, Katharine E. Moffett, Frances J. DeBruler,
individually and as representative of the Estate of
Jean S. DeBruler, Jr., deceased, and Peggy Westerlund
and David R. Moffett, as representative.
*10.13 Management Agreement dated as of November 27, 1996 by
and between Booth Creek Ski Holdings, Inc. and Booth
Creek, Inc.
*10.14 Ski Area Term Special Use Permit No. 4002/01 issued
by the United States Forest Service to Waterville
Valley Ski Resort, Inc.
*10.15 Ski Area Term Special Use Permit No. 5123/01 issued
by the United States Forest Service to Bear Mountain,
Inc.
*10.16 Ski Area Term Special Use Permit No. 4033/01 issued
by the United States Forest Service to Grand Targhee
Incorporated.
*10.17 Ski Area Term Special Use Permit No. 4127/09 issued
by the United States Forest Service to Ski Lifts, Inc.
*10.18 Annual Special Use Permit Nos. 4127/19 & 4127/19
issued by the United States Forest Service to Ski
Lifts, Inc.
++10.19 Ski Area Term Special Use Permit No. 4031/01 issued
by the United States Forest Service to Loon Mountain
Recreation Corporation.
++10.20 Amendment Number 2 for Special Use Permit No. 4008/1
issued by the United States Forest Service to Loon
Mountain Recreation Corporation.
++10.21 Amendment Number 5 for Special Use Permit No. 4008/1
issued by the United States Forest Service to Loon
Mountain Recreation Corporation.
++++++10.22 Ski Area Term Special Use Permit No. 4186 issued by
the United States Forest Service to Sierra-at-Tahoe,
Inc.
****10.23 Employment Agreement dated as of July 1, 1997, by and
between Booth Creek Ski Holdings, Inc. and Timothy H.
Beck.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
***10.24 Employment Agreement dated May 5, 1997 by and between
Booth Creek Ski Holdings, Inc. and Timothy M. Petrick.
***10.25 Stock Option Agreement dated as of October 1, 1997
between Booth Creek Ski Group, Inc. and Timothy M.
Petrick.
+++10.26 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and Timothy Silva.
+++++10.27 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and Timothy H. Beck.
+++++10.28 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and John A. Rice.
+++++21.1 Subsidiaries of the Registrant.
++++++27.1 Financial Data Schedule.
- -------------------
* Filed with Registration Statement on Form S-4 (Reg. No.
333-26091) and incorporated herein by reference.
** Filed with the Company's Quarterly Report on Form 10-Q for
the Quarterly Period Ended August 1, 1997 and incorporated
herein by reference.
*** Filed with the Company's Annual Report on Form 10-K for the
Fiscal Year Ended October 31, 1997 and incorporated herein
by reference.
**** Filed with the Company's Quarterly Report on Form 10-Q for
the Quarterly Period Ended January 30, 1998 and
incorporated herein by reference.
***** Filed with the Company's Quarterly Report on Form 10-Q for
the Quarterly Period Ended January 29, 1999 and
incorporated herein by reference.
****** Filed with the Company's Quarterly Report on Form 10-Q for
the Quarterly Period Ended April 30, 1999 and incorporated
herein by reference.
+ Filed with the Company's Current Report on Form 8-K dated
February 26, 1998 and incorporated herein by reference.
++ Filed with Registration Statement on Form S-4 (Reg. No.
333-48619) and incorporated herein by reference.
+++ Filed with the Company's Quarterly Report on Form 10-Q for
the Quarterly Period Ended May 1, 1998 and incorporated
herein by reference.
++++ Filed with the Company's Quarterly Report on Form 10-Q for
the Quarterly Period Ended July 31, 1998 and incorporated
herein by reference.
+++++ Filed with the Company's Annual Report on Form 10-K for the
Fiscal Year Ended October 30, 1998 and incorporated herein
by reference.
++++++ Filed herewith as an Exhibit to this Form 10-K.