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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 27, 2000
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) 476-1311
(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 27, 2000, 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 registrant's 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
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PART I
1. Business..................................................... 2
2. Properties................................................... 21
3. Legal Proceedings............................................ 21
4. Submission of Matters to a Vote of Security
Holders...................................................... 23
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters.......................................... 24
6. Selected Financial Data...................................... 24
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 27
7a. Quantitative and Qualitative Disclosures About
Market Risk.................................................. 36
8. Financial Statements and Supplementary Data.................. 37
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................... 37
PART III
10. Directors and Executive Officers of the Registrant........... 38
11. Executive Compensation....................................... 40
12. Security Ownership of Certain Beneficial Owners
and Management............................................... 46
13. Certain Relationships and Related Transactions............... 50
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.......................................... 54
Signatures................................................... 60
Index of Financial Statements................................ F-1
PART I
Item 1. Business
Overview
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"). The Company currently owns and operates seven ski resort
complexes encompassing ten separate resorts, including 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"), Mount
Cranmore ("Mt. Cranmore") and Loon Mountain ("Loon Mountain") ski resorts in
the White Mountains of New Hampshire and the Summit at Snoqualmie (the
"Summit") ski resort complex, which consists of four separate resorts, in the
Cascade Mountains of Northwest Washington. The Company divested the Grand
Targhee ski resort ("Grand Targhee") on June 20, 2000.
The Company is the fourth largest ski resort operator in North America
based on approximately 2.2 million skier days recorded during the 1999/00 ski
season at its resorts (excluding Grand Targhee). Booth Creek primarily operates
regional ski resorts which attract the majority of their guests from their
regional ski markets, within a 200 mile driving radius of each resort. The
Company's properties offer approximately 6,281 acres of skiable terrain, 376
trails, 93 lifts (including 16 high-speed lifts and two gondolas) and
on-mountain capacity to accommodate approximately 53,000 guests daily. For the
year ended October 27, 2000, the Company generated revenues of $139.4 million
and income from operations before depreciation, depletion and amortization
expense and the noncash cost of real estate sales ("EBITDA") of $43.9 million,
and incurred a net loss of $357,000. 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.
The Company's resort properties are 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. The Company's resorts have collectively invested
approximately $58 million (including $5.9 million of equipment acquired through
capital leases and other debt) in capital expenditures during the last three
fiscal years, including the addition of high-speed chairlifts, additional
snowmaking capabilities, improved trail grooming equipment, and enhanced
on-mountain skier service, 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.
On June 20, 2000, the Company sold all of the assets associated with the
Grand Targhee resort for $11.4 million in cash to GT Acquisition I, LLC ("GT
Acquisition"), an entity formed and controlled by the Chairman and Chief
Executive Officer of the Company. At the closing of the transaction, GT
Acquisition also assumed all liabilities relating to the Grand Targhee resort.
The Company obtained a fairness opinion for the transaction from an independent
firm qualified in the subject matter of the transaction.
The following is an organizational chart of Parent, 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) 476-1311. The Company was incorporated in Delaware on
October 8, 1996.
Industry
There are approximately 503 ski areas in the United States which, during
the 1999/00 ski season generated approximately 52 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 estimates, management believes that any resulting differences in
total skier days are immaterial. U.S. ski areas range from small ski resort
operators, 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 1995/96 ski season through the 1999/00 ski season.
U.S. Ski Industry Regions and Skier Days
(In thousands)
Rocky Pacific Lake
Season Northeast Southeast Midwest Mtns West Tahoe Total
- --------------------- --------- --------- ------- ------ ------- ----- ------
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
1999/00.............. 12,025 5,191 6,422 18,109 6,560 3,891 52,198
Five year average.... 12,654 4,744 6,711 18,531 6,811 3,505 52,956
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: 1999/00 Kottke National End of Season Survey
Over the last fifteen years, 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 503 in 2000. 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 503 ski areas, the 1999/00 Kottke National End of
Season Survey estimates the average resort recorded approximately 104,000 skier
days. All of the Company's resorts except Mt. Cranmore 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. During the last three fiscal years, the
Company has invested approximately $58 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 the
recent consolidation in the ski industry, the 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 million
skier days during the 1999/00 ski season. The four largest ski resort
companies, including the Company, accounted for approximately 29% of all U.S.
skier days recorded during the 1999/00 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, continue to move 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). 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 1999/00 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 13.8 million in the 1999/00 ski season, an increase of approximately
116%. Snowboarders tend to be between the ages of 13 and 25 and presently
represent an estimated 26.4% of all domestic ski resort visitors. 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
"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 and snowmaking, trail grooming and lift
technologies 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 1999/00 ski season
were from the San Francisco, Sacramento and Central California Valley
metropolitan areas and the Lake Tahoe region. 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 seven major
resorts, which include Northstar, Sierra, Squaw Valley, Heavenly Valley, Alpine
Meadows, Sugar Bowl 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 2.5 million
annual skier days over the last five years. Management estimates that
approximately 90% of the skiers visiting Southern California resorts during the
1999/00 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 12.7
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 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. The Pacific West market has averaged
approximately 6.8 million skier days over the last five years. Management
estimates that more than 90% of the skier days recorded at Washington state
resorts during the 1999/00 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, Crystal Mountain, White Pass, Mission Ridge and Mt.
Baker. Other ski areas in Washington are moderate to small in size.
Resort Operations
The Company's seven 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- Approx.
Vertical making Beds
Skiable Drop Trail Within
Resort Acres (Feet) Trails Lifts Coverage 12 Miles
- -------------------- ------- -------- ------ ------------- --------- --------
Northstar-at-Tahoe.. 2,420 2,280 70 1 High-Speed 50% 15,000
Gondola
5 High-Speed
Quads (1)
4 Fixed Grip
5 Surface
Sierra-at-Tahoe..... 1,680 2,212 46 3 High-Speed 4% 30,000
Quads
6 Fixed Grip
1 Surface
Bear Mountain....... 195 1,665 32 2 High-Speed 100% 11,000
Quads
7 Fixed Grip
3 Surface
Waterville Valley... 255 2,020 52 2 High-Speed 100% 6,500
Quads
6 Fixed Grip
4 Surface
Mt. Cranmore........ 183 1,270 39 1 High-Speed 100% 16,000
Quad
4 Fixed Grip
4 Surface
Loon Mountain....... 250 2,100 41 1 High-Speed 96% 13,000
Gondola
1 High-Speed
Quad
5 Fixed Grip
1 Surface
The Summit.......... 1,298 2,200 96 2 High-Speed 0% 1,000
Quads
18 Fixed Grip
7 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.
Total skier visits generated by each of the Company's resorts during the
1999/00, 1998/99 and 1997/98 ski seasons were as follows:
1999/00 1998/99 1997/98
----------- ----------- -----------
(In thousands)
Northstar............................ 477 530 537
Sierra............................... 310 355 342
Bear Mountain........................ 251 294 302
Waterville Valley.................... 204 239 231
Mt. Cranmore......................... 100 112 100
Loon Mountain........................ 304 297 350 (a)
The Summit........................... 504 485 410
Grand Targhee........................ 137 121 114
----------- ----------- -----------
2,287 2,433 2,386
=========== =========== ===========
(a) Pro forma for the acquisition of Loon Mountain by the Company on February
26, 1998. Actual skier visits generated by Loon Mountain from the date of
its acquisition through the end of the 1997/98 ski season were 77,000
total skier visits.
Northstar-at-Tahoe
Northstar-at-Tahoe, located near the north end of Lake Tahoe, California,
offers extensive activities and services in both winter and summer. The
resort's 8,600-foot Mt. Pluto features 2,420 acres of skiable terrain and a
2,280 foot vertical drop. Northstar's 70 ski trails are served by 15 operating
lifts, including one gondola, 5 high-speed quads, two triple lifts and two
double lifts, which combine to transport up to 22,375 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. Other facilities at Northstar include a
village consisting of condominium/hotel accommodations, restaurants, bars,
shops, a child-care center and conference facilities, a 22,700 square foot
on-mountain ski lodge, a 9,000 square foot rental equipment facility, 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 swimming
pools. Northstar currently ranks third in total skier days in the Lake Tahoe
area. In 2000, Northstar was ranked by Ski magazine as the 19th best resort in
North America and in the top ten in a number of important categories including
guest service, family programs, grooming and favorable weather.
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 air service to all parts of the United States, Western
Canada and Mexico. Private planes, including jet airplanes, can fly into the
all-weather Truckee Airport, which is located two miles from Northstar, where
Northstar operates transit buses to the resort.
Northstar is within a 200 mile driving radius of the major population
centers of San Francisco, San Jose 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 1999/00 ski season, 65% of the skiers visiting Northstar came
from Northern California, 10% from Southern California, 22% from other states
and 3% from international locales.
Northstar has invested in a number of improvements for the 2000/01 ski
season, including a 200 acre terrain expansion onto Lookout Mountain. The
Lookout expansion provides Northstar with additional advanced terrain, and is
served by a new detachable quad lift. Additionally, the resort has invested in
a new automated snowmaking system which provides coverage to four trails,
including two of the new trails on Lookout Mountain. Northstar also constructed
a new 9,000 square foot rental facility and improved and expanded its rental
fleet.
Northstar's snowmaking system is engineered to cover approximately 50% of
its ski trails. Annual snowfall at the resort has averaged 326 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 sufficient to support the resort's needs. The Company is currently
evaluating alternatives for the expansion and improvement of the existing
snowmaking system at Northstar in order to lessen the influence of unfavorable
weather, which can negatively impact operating conditions at the resort.
Northstar consists of approximately 8,000 acres of land privately owned by
the Company. Management believes that Northstar has significant opportunities
to develop additional ski terrain, as well as certain real estate development
opportunities. Moreover, management believes that the expansion of the existing
on-mountain bed base at the resort from the recently announced East West
development will result in increased skier days, thereby enhancing the value
and profitability of Northstar's resort operations. Such bed base development
is also expected to make additional ski terrain expansion at Northstar even
more attractive. 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 1,680
skiable acres and a 2,212 foot vertical drop. Sierra's 46 ski trails are 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, retail and other skier 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 has been positioned as Lake Tahoe's "value" resort, primarily
targeted to families, teenagers and young adults. Sierra does not own or manage
any lodging 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 514 inches per year
over the past five years, Sierra's snowmaking equipment covers only 4% of
Sierra's total terrain. In 2000, Ski magazine ranked Sierra as one of the ten
best ski resorts in the Pacific region.
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,
Orange County 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
90% of Bear Mountain's skiers are from Southern California. 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 sophisticated 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 - Regulation and Legislation." 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'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), three other base area facilities
comprising approximately 27,500 square feet, 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 proximate to Interstate 93 (a major
north-south thoroughfare for skiers) makes it one of the most accessible of the
larger New England resorts. 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 1999/00
ski season the majority of Waterville Valley's skiers came from New Hampshire
(44%) and Massachusetts (31%), with the remainder coming from Rhode Island,
Connecticut, New York, New Jersey and other regional locations. In 2000,
Waterville Valley was recognized as the fifth best resort in the East 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 seeking 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 183 skiable acres and a 1,270 foot vertical
drop. Mt. Cranmore's 39 trails are served by nine operating lifts, including
one high-speed quad, one triple lift and three double lifts, 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 1999/00 ski
season, management estimates that 52% of the resort's guests were from the
Boston metropolitan area, 22% were from New Hampshire and 6% 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 weather-monitoring and snowmaking system which 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 an additional
reservoir of one million gallons of water for snowmaking. In addition, Mt.
Cranmore's base area pond holds 1.4 million gallons of water.
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 a top ten ranking in North
America for accessibility by Ski magazine in 2000. 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.
In 2000, Loon Mountain was ranked as the seventh best resort in the East by Ski
magazine.
Loon Mountain owns 565 acres and 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."
Loon Mountain has the snowmaking capacity to cover approximately 96% of
its skiable terrain.
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 1,298 acres of skiable terrain. Individually, Alpental has a 5,400 foot
top elevation, a 2,200 foot vertical drop, 170 acres of skiable trails and runs
(93 acres of which are lighted for night skiing) and approximately 600 acres of
backcountry terrain; 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. 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% of its 1999/00
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 30% of its 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 typically enjoys abundant
annual snowfall, averaging 500 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.
Business Segments
The Company operates in two business segments: resort operations and real
estate and other. Business segment information is presented in Note 14 to the
accompanying consolidated financial statements.
Real Estate Development
The Company has certain 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.
Residential/ Approximate
Commercial/ Number Principal
Location How Held Ski Terrain of Acres Uses
- ------------------------- ----------- ------------- ----------- ---------------
Northstar: Single
Family Development..... Owned Residential 62 On-mountain
housing
Northstar: Residential/ 162 On-mountain
Zoned/Undeveloped...... Owned Commercial housing and
expanded
commercial
facilities
Northstar: Mountain
Terrain Expansion -
Lookout Mountain,
Sawtooth Ridge and
Other areas............ Owned Ski Terrain 1,532 Expand ski
terrain
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
Bear Mountain........... Leased: Ski Terrain 114 Expand ski
Forest terrain
Service
Bear Mountain............ Owned Residential/ 6 Develop 56
Ski Terrain condominiums
and 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
The Summit............... Owned Residential 105 On-mountain
housing,
parking lots
and ski terrain
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 lots at Northstar, and (4) to refrain
from investment in vertical or commercial 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 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 undertakes
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, Loon Mountain, Waterville Valley and the
Summit. In management's view, the expansion projects at Northstar and Loon
Mountain represent the Company's highest development opportunities, and would
likely take priority over the pursuit of expansion and development initiatives
at the Company's other resorts.
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 single family home community on Mt. Pluto ("Big Springs")
consisting of 158 private residential lots. The total project was 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. The last
two phases of Big Springs, which consisted of 47 lots, was substantially sold
out during the summer of 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 in three phases
or subdivisions. The Company is currently proceeding with the entitlement
process and pre-construction activities for the first single family lot
subdivision, which is planned to be developed and marketed during the
summer/fall of 2001. The Company has commenced the approval process for the
second lot subdivision, and currently anticipates that such lots would be
available for sale in 2002. The Company has not yet commenced the entitlement
and approval process for the final single family lot subdivision at Northstar.
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. The Company obtained a fairness opinion for the transaction from an
independent firm qualified in the subject matter of the transaction. See Part
II, Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources." Under the terms of
the transaction with TLH, the Company will receive any excess net cash proceeds
over the proceeds received in November 1999 from the subsequent resale of the
lots by TLH.
On February 11, 2000, Trimont Land Company ("TLC"), the owner and operator
of Northstar and a wholly-owned subsidiary of the Company, entered into an
agreement (the "Joint Venture and Sales Agreement") providing for the transfer
and sale of certain developmental real estate at Northstar (the "Joint Venture
Development Property") to a joint venture to be formed by TLC and East West
Partners, Inc. and/or its affiliates (collectively, "East West"). Pursuant to
the terms of the Joint Venture and Sales Agreement, TLC was to receive
$10,000,000 in cash from the joint venture at the closing and the joint venture
was required to deposit $5,000,000 into an escrow account, with such funds to
be used to reimburse TLC for certain capital improvements required to be made
by TLC at Northstar. In addition, TLC would have received additional payments
in the future based on gross sales of the developed real estate (after East
West received priority distributions equal to the sum of the $15,000,000 to be
paid to TLC pursuant to the Joint Venture and Sales Agreement and a preferred
return thereon, plus certain advances by East West to the joint venture and a
preferred return thereon) as well as a 20% profit interest in the joint
venture. Pursuant to the Joint Venture and Sales Agreement, East West was to be
granted (i) a right of first refusal on any sale of Northstar, (ii) a right of
first refusal for a period of ten years to purchase certain undeveloped real
estate at Northstar, and (iii) an option to purchase 50% of the golf course and
property management businesses at Northstar (collectively, the "East West
Options"). The proposed transaction was subject to a number of significant
closing conditions, including the receipt of consents and approvals from the
Company's senior lenders. The Joint Venture and Sales Agreement was terminated
as a result of the Company's failure to satisfy certain of these closing
conditions.
Upon the termination of the Joint Venture and Sales Agreement, the
Company, TLH and East West entered into discussions with respect to alternative
plans. These discussions culminated in TLC and TLH entering into an Agreement
for Purchase and Sale of Real Property (the "Northstar Real Estate Agreement")
on September 22, 2000. Pursuant to the Northstar Real Estate Agreement, TLC
agreed to sell to TLH certain development real estate consisting of
approximately 550 acres of land located at Northstar (the "Development Real
Estate") for a total purchase price of $27,600,000. The purchase price was
based on an appraisal obtained from an independent third party appraiser. In
addition to receiving the fair market value for the Development Real Estate,
under the terms of the Northstar Real Estate Agreement (i) TLH (or East West)
is required, at their expense to pay for substantially all mitigation costs
associated with the development project, and (ii) TLH is obligated to reconvey
to TLC certain excess land following the subdivision of the Development Real
Estate. In addition, TLC did not grant to East West the East West Options, and
TLC maintained significant approval rights over various aspects of the real
estate development, as well as development activities that could impact resort
operations at Northstar.
In connection with the execution of the Northstar Real Estate Agreement,
TLH and East West entered into (i) an agreement for the sale by TLH to East
West of the Development Real Estate (the "TLH Purchase Agreement") and (ii) a
limited liability company joint venture agreement (the "East West Joint
Venture") providing for the development of the property sold by TLH to the East
West Joint Venture. The proposed project contemplated by the East West Joint
Venture includes the development of a mixture of approximately 1,800 hotel,
condominium, townhome and time share units, as well as significant additional
commercial/retail space in and around Northstar. Under the East West Joint
Venture, TLH retains financial responsibility for approximately $5,000,000 of
costs associated with the development of the infrastructure of the Development
Real Estate.
On September 22, 2000, TLC and TLH consummated the sale of the initial
land parcels (the "Initial Closing") contemplated by the Northstar Real Estate
Agreement. At the Initial Closing, TLC transferred the bulk of the Development
Real Estate to TLH for a total purchase price of $21,000,000, of which
$17,850,000, or 85%, was paid in cash and $3,150,000, or 15%, was paid in the
form of a convertible secured subordinated promissory note (the "Convertible
Secured Note"). The Convertible Secured Note requires quarterly interest
payments at the rate of 10% per annum if paid in cash, or 12% if paid in kind,
and is due in full in September 2005. The Convertible Secured Note is secured
by TLH's membership interest in the East West Joint Venture. The Convertible
Secured Note is convertible at TLC's option into 15% of TLH's membership
interest in the East West Joint Venture, which enables TLC to obtain, at TLC's
option, a profit participation in the Development Real Estate. The sale of the
remaining Development Real Estate under the Northstar Real Estate Agreement is
subject to certain subdivision requirements to effect the transfer of such
property and other normal and customary closing conditions. The cash portion of
the purchase price under the Northstar Real Estate Agreement is being funded in
part from the proceeds of the TLH Purchase Agreement, with the balance being
provided through financing to TLH from John Hancock Life Insurance Company.
Management believes that the expected substantial increase in on-mountain
bed base from the East West development will result in increased visitation to
Northstar and increased skier days, thereby enhancing the value and
profitability of Northstar's resort operations. In addition, the development is
expected to make additional ski terrain expansion at Northstar even more
attractive. The Company has been able to secure these benefits without
incurring the economic risks associated with real estate development.
Moreover, the Northstar Real Estate Agreement has provided the Company
with significantly more upfront net cash proceeds than was contemplated under
the unconsummated Joint Venture and Sales Agreement - while at the same time
giving the Company, through the Convertible Secured Note, the option to acquire
an equity interest in the East West Joint Venture. These additional cash
proceeds largely address the Company's historic liquidity constraints and will
allow the Company to make further investments in resort improvements and to
enhance its ski operations at Northstar and its other resorts. Management also
believes that the East West development will allow the Company to concentrate
its resources on its ski resort operations while at the same time maintaining
control and/or significant influence over the material aspects of the
development of the Northstar property. The Company obtained the required
consent to the Northstar Real Estate Agreement from Fleet National Bank, under
the Company's Senior Credit Facility, and in connection therewith, Fleet
National Bank agreed to release its mortgage lien on the Development Real
Estate. In addition, the Company obtained an opinion from an independent firm
qualified and experienced in the subject matter of the transaction that the
terms of the sale of the Development Real Estate were fair and reasonable to
the Company and TLC and at least as favorable as the terms which could have
been obtained in a comparable transaction made on an arm's-length basis between
unaffiliated parties.
The Company 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. During 1999 and 2000, five trails were cut on Lookout Mountain and a new
detachable quad lift was constructed to provide new advanced skiing terrain at
the resort. The Company has preliminarily identified a number of other sites,
including the Sawtooth Ridge, within Northstar's present boundaries that are
suitable for future expansion. Such expansion is expected to occur concurrently
with the anticipated bed base expansion resulting from the East West
development. In addition, the Company is currently studying alternatives for
the expansion and improvement of its existing snowmaking system at Northstar in
order to lessen the influence of unfavorable weather, which can negatively
impact operating conditions at the resort. Any significant terrain expansion
would require customary permits and approvals, and no assurance can be given
that the Company will be able to develop any additional terrain at Northstar
or, if completed, any such projects will be successful.
In addition, Northstar has a program to harvest timber through third party
contracting. The timber harvesting program, which produced revenues of $669,000
during the year ended October 27, 2000, is managed carefully to avoid
interference with Northstar's resort operations and prevent any diminution in
the quality of the resort's natural environment.
Loon Mountain currently leases approximately 581 acres known as "South
Mountain" from the Forest Service. Although currently limited to recreational
uses other than 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 United States Forest Service in 1993,
but was subsequently invalidated by the U.S. Court of Appeals due to litigation
brought by third parties. See Part I, Item 3. "Legal Proceedings." Pending the
issuance of additional permits, expansion on South Mountain depends upon the
Company and United States 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. Based on discussions with the United
States Forest Service, the Company expects final NEPA documentation to be
issued in the Spring of 2001. The available South Mountain land is located in
an area directly adjacent to the present Loon Mountain ski area and would 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 and upgrades to the resort would
serve to better meet and fulfill the anticipated needs of guests by enhancing
the quality and diversity of 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, up to 930 units could be constructed. The
balance of land owned by Loon Mountain could allow for up to 148 additional
units to be constructed, subject to zoning and other required approvals. 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.
Bear Mountain has received 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 United States 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 resort
operating property owned by Bear Mountain. However, portions of the potential
condominium development property are currently used in the operation of the
existing ski resort, and any proposed development plans could possibly be
constrained by operating requirements at Bear Mountain. The Company does not
presently have any immediate 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.
Mt. Cranmore holds a perpetual 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 by a third party. 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 larger and more 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 Company does not have any immediate
expansion or development plans for Mt. Cranmore and the timing and scope of any
development will depend on market conditions, the Company's financial position
and the Company's other expansion opportunities.
The Summit owns 66 acres of real property on various parcels on and around
its resorts, a portion of 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. Any potential real estate development activities at
the Summit could be constrained by existing or future planned resort operations
at the Summit. The Summit's development parcels will be studied for future
development potential when market conditions warrant.
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) each contain restrictive covenants that
may significantly limit the Company's ability to pursue real estate development
opportunities. No assurance can be given that the Company will develop any
additional properties or, if completed, any such projects will be successful.
Moreover, there can be no assurances that the East West development at
Northstar will be successful or be completed as currently planned, or that such
development will have the currently anticipated favorable effects on the
Company's resort operations. 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, Internet strategies 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, and (v) 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
phone and Internet 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.
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. Management believes that 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 "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. Loon Mountain
has traditionally targeted families comprised of either day skiers, regional
overnight skiers or destination skiers. 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.
Programs
The Company has developed a number of specific marketing programs to
achieve its objectives, including the following:
o Customer loyalty and season pass 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 60% of Northstar's 1999/00 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 frequent skier programs in place at the Company's California
resorts. 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, several of the Company's resorts successfully introduced new season
pass products for the 1999/00 ski season that were attractively priced to
entice visitation during non-peak periods, stimulate demand, attract market
share and develop guest loyalty. The Company is continuing its successful
season pass initiatives for the 2000/01 ski season.
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 have been concentrated towards
this communication vehicle. For the 2000/01 ski season, Booth Creek will
feature e-commerce "virtual stores" on each resort's website offering products
such as season passes, loyalty program memberships, gift certificates and
lodging/lift packages as well as private lessons, child care and lift tickets.
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 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, geared toward intermediate and advanced skiers, which
offers free specialized instruction and daily training. This program has
increased guest loyalty and repeat visitation. 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 and snowscoots. 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 approximately 2.2 million skier days (excluding Grand Targhee)
recorded during the 1999/00 ski season. At least one of the Company's resorts
is within driving distance of four of the five largest ski markets in the
United States. Management believes that 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 involve over $1 million worth of television
exposure, free use of vehicles for Company purposes and a vehicle give-away
promotion for resort guests. For the 2000/01 ski season, Booth Creek and
Dynastar Skis, Inc. have continued a unique alliance whereby Dynastar Skis,
Inc., a major ski and snowboard equipment manufacturer, prominently featured
Northstar in a nationwide infomercial that includes a $2 million television
media buy. This provides exposure of Booth Creek's largest resort to a targeted
audience of skiers in key markets. 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.
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. Sales 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.
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 partially mitigate the downside risk of its seasonal business by
purchasing paid skier visit insurance policies. For the 2000/01 ski season, the
Company purchased paid skier visit policies covering its Bear Mountain,
Waterville Valley, Summit and Loon Mountain resorts. However, these policies
would not fully protect these resorts against poor weather conditions or other
factors that could adversely affect their operations. In addition, the 2000/01
ski season policies are less favorable than the skier visit insurance policies
in place for the 1999/00 ski season. The Company did not obtain coverage for
the Northstar, Sierra and Mt. Cranmore resorts for the 2000/01 ski season as
effective policies were not available on commercially viable terms.
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 improvements in preparation for the ensuing
ski season.
Competition
The general unavailability of new developable ski 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 approximately 503 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
five other major ski resorts. Northstar's primary competition in the North Lake
Tahoe area is from Squaw Valley, Alpine Meadows and Sugar Bowl. Northstar also
competes with major ski and non-ski destination resorts throughout North
America. Sierra primarily competes in the South 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, Rhode Island,
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, Bretton Woods, Cannon Mountain, Mount Sunapee and Sunday River.
The Summit competes primarily with ten other ski resorts in Washington,
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 Oregon and British Columbia.
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, Orange County and San Diego metropolitan areas.
Waterville Valley, Mt. Cranmore and Loon Mountain are estimated to attract more
than 75% 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 guests from the Seattle/Tacoma
metropolitan region.
Regulation and Legislation
The Company's operations are dependent upon its ownership or control over
the real property used in its ski operations at each resort. The real property
presently used at the Northstar and Mt. Cranmore resorts is owned by the
Company or controlled through easements. The Company has the right to use a
substantial portion of the real property associated with the Bear Mountain,
Sierra, Summit and Waterville Valley resorts under the terms of Term Special
Use Permits issued by the United States Forest Service. The Bear Mountain
permit expires in 2020, the Sierra permit expires in 2039, the Waterville
Valley permit expires in 2034 and the Summit permit expires in 2032.
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. These authorizations and
limitations were incorporated into the final order issued by the District Court
on December 11, 1998, and 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 this NEPA review with its evaluation and analysis of the existing
snowmaking pipeline. Based on discussions with the United States Forest
Service, the Company expects final NEPA documentation to be issued in the
Spring of 2001.
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, and enjoined Loon
Mountain 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, which 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 reviewed the
pipeline under NEPA. On February 12, 1999, the District Court issued a final
order, which dismissed the consolidated lawsuit concerning the pipeline in
light of the United States Forest Service's decision to conduct further review
of the pipeline, and specified that the limitation on pipeline usage will
continue until that review is completed and a new decision is issued. On
January 28, 2000, the District Court modified the final order to allow Loon
Mountain to convert up to 190 million gallons of water into snow during the
1999/00 ski season subject to certain additional conditions; such order remains
in effect until the additional NEPA documentation is completed and the United
States Forest Service issues a new decision on the pipeline, which is currently
expected to occur in the Spring of 2001.
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 conditions
imposed by the two District Court orders will terminate. Based upon the
existing administrative record, and certain proposed modifications to the
resort's snowmaking operations that 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
27, 2000 were $1,166,000.
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.
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. Except as described in this section, 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 of the Company's 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.
Bear Mountain operates in an area subject to an air emissions reduction
program and regulated by the South Coast Air Quality Management District
("SCAQMD") in California. For the past several years, the Company anticipated
that Bear Mountain would eventually be required to participate in an emission
credit program whereby Bear Mountain would be permitted to operate its
diesel-fueled snowmaking compressor engines if it acquired "banked" emission
credits from SCAQMD-regulated facilities which had already implemented nitrogen
oxide emission reduction programs. However, the Company has been notified that
SCAQMD will not allow Bear Mountain to participate in the emission credits
program and, further, that Bear Mountain's applications to operate the engines
were denied because they were not equipped with the "Best Available Control
Technology," thus violating SCAQMD rules. Bear Mountain intends to seek
compliance as quickly as feasible by either replacing the engines with electric
motors and taking all steps necessary to acquire or generate the electrical
power therefor, or replacing the engines with otherwise compliant engines (the
"Alternatives"). However, management believes that it will take at least two
seasons to achieve full compliance, and depending on the Alternative selected
and the manner in which it is implemented, the resolution of this matter may
require material capital expenditures for new equipment. Recognizing the
importance of the current compressor engines to Bear Mountain's operations,
SCAQMD and Bear Mountain agreed to a Stipulated Order for Abatement whereby
Bear Mountain is subject to certain requirements including investigating and
implementing the Alternatives according to a particular timeline through 2002,
record keeping and reporting to SCAQMD, payment of certain usage fees, and
particular interim operational dictates concerning the engines. No assurance
can be made regarding the outcome or timing of resolution of this matter.
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 premised on normal conditions prevailing and the absence of droughts,
earthquakes, dam failure or other types of similar calamities that impact the
ability to obtain or supply water. In the past, Bear Valley Mutual Water
Company pursued numerous legal claims against Big Bear Municipal Water District
including a claim that its rights in the lake are not subject to Big Bear
Municipal Water District's obligation to supply water to Bear Mountain. Bear
Valley Mutual Water Company withdrew such claim and water was provided to Bear
Mountain on an uncontested basis while Bear Valley Mutual Water Company and Big
Bear Municipal Water District successfully settled their differences. The
Company believes that Bear Valley will not further pursue its claim regarding
Bear Mountain's water supply, however, no assurance can be made regarding the
outcome of this matter.
Pursuant to the previously described decision of the First Circuit and the
order of the District Court, Loon Mountain applied for 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. On January 18, 2000, in papers filed in connection with
the District Court's modification of the final order in the pipeline
litigation, the same individual again alleged that Loon Mountain had previously
filled wetlands in violation of the CWA. The same individual has orally advised
the Company that he still intends to initiate a lawsuit under the CWA regarding
the alleged wetland fill.
Except for certain permitting and environmental compliance matters
relating to the Loon Mountain and Bear Mountain resorts described above and in
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.
Employees
As of December 31, 2000, the Company employed a full-time corporate staff
of 34 persons. In addition, the Company's resorts employ an aggregate of
approximately 515 full-time and approximately 5,000 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.
Item 2. Properties
Northstar consists of approximately 8,000 acres of land privately owned by
the Company. 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. Loon Mountain owns 565 acres and 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. In
addition, each of the Company's resorts have ski lodges and other facilities
that management believes are suitable for the Company's current operations. 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 as well as to premises
and vehicular operations and worker's compensation matters. The Company
maintains liability insurance that the Company considers adequate to insure
claims related to such usual and customary risks associated with the operation
of four-season recreation resorts.
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. The LMRC
Shareholder Plaintiffs appealed the dismissal to the New Hampshire Supreme
Court and oral arguments were heard in January of 2000; the New Hampshire
Supreme Court's decision has not yet been entered. 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.
The LMRC Shareholder Plaintiffs' breach of fiduciary duty action against
LMRC, Parent and its former directors remains pending and discovery is being
conducted. The Company's Motion for Summary Judgment was denied by the court.
The matter has been consolidated for trial with the Corporation Act case
described below; trial has not yet been set. 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. By
disclosure dated March 17, 2000 the LMRC Shareholder Plaintiffs' expert has
revised his opinion of fair value to $91.90 per share. 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
the matter has been consolidated for trial with the fiduciary duty case
described above; a trial date has not yet been set. 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 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. Based on discussions with the
Forest Service, the Company expects final NEPA documentation to be issued in
the Spring of 2001. 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
First Circuit has issued a series of orders staying the appeal to permit
settlement negotiations, which are on-going; the parties most recent joint
filing requested an extension of the stay until March 15, 2001, at which time
the parties would file an additional settlement status report with the First
Circuit. 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 per ski season. 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, but was further modified to permit
LMRC to use 190 million gallons of water for snowmaking during the 1999/00 ski
season subject to certain additional conditions; such order remains in effect
until the additional NEPA documentation is completed and the Forest Service
issues a new decision on the pipeline, which is currently expected to occur in
the Spring of 2001.
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., a wholly-owned subsidiary of the
Company, 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.
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 2000.
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. All of the Company's equity securities are owned by Parent.
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 of the Company as of and for the years ended
October 31, 1997, October 30, 1998, October 29, 1999 and October 27, 2000, 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 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 and (ii) 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
-----------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
October October October October
31, 1997(a) 30, 1998 (b) 29, 1999 27, 2000(c)
----------- ------------ ----------- -----------
(Dollars in Thousands, except Revenue per Skier Day)
Statement of Operations Data:
Revenue:
Resort Operations ................. $ 68,136 $ 97,248 $ 112,980 $ 119,685
Real Estate and Other ............. 3,671 7,608 12,744 19,670
---------- --------- --------- ---------
71,807 104,856 125,724 139,355
Operating Expenses:
Cost of Sales - Resort Operations.. 44,624 61,325 74,404 70,394
Cost of Sales - Real Estate and
Other............................. 2,799 4,671 5,244 4,507
Depreciation, Depletion and
Amortization...................... 11,681 17,752 21,750 22,572
Selling, General and
Administrative ................... 13,719 19,645 22,571 22,985
Unusual Items, Net ................ - - 487 -
---------- --------- --------- ---------
Operating Income (Loss) ............. (1,016) 1,463 1,268 18,897
Interest Expense and Other, Net ..... (14,912) (18,733) (19,843) (19,075)
---------- --------- --------- ---------
Pre-tax (Loss) ...................... (15,928) (17,270) (18,575) (178)
Income Tax Benefit .................. 1,728 - - -
---------- --------- --------- ---------
Loss Before Minority Interest and
Extraordinary Item ................ (14,200) (17,270) (18,575) (178)
Minority Interest ................... (229) (260) (218) (179)
---------- --------- --------- ---------
Loss Before Extraordinary Item ...... (14,429) (17,530) (18,793) (357)
Extraordinary Loss on Early
Retirement of Debt ................ (2,664) - - -
---------- --------- --------- ---------
Net Loss ............................ $ (17,093) $ (17,530) $ (18,793) $ (357)
========== ========= ========= =========
Other Financial and Operating Data:
Total Skier Days...................... 1,565,917 2,113,56 2,432,845 2,287,128
Revenue per Skier Day (d)............. $ 43.51 $ 46.01 $ 46.44 $ 49.45
Noncash Cost of Real Estate Sales (e) $ 2,237 $ 3,721 $ 4,743 $ 2,460
Capital Expenditures Excluding
Acquisitions and Real Estate
and Other........................... $ 9,459 $ 15,500 $ 14,342 $ 21,909
Net cash provided by (used in):
Operating activities................ $ 1,552 $ 7,559 $ 15,393 $ 29,737
Investing activities................ (152,685) (47,718) (18,504) (9,124)
Financing activities................ 151,595 40,322 2,947 (20,378)
EBITDA before unusual items........... $ 12,902 $ 22,936 $ 28,248 $ 43,929
EBITDA Margin......................... 18.0% 21.9% 22.5% 31.5%
EBITDA from Resort Operations......... $ 9,793 $ 16,278 $ 16,005 $ 26,396
EBITDA from Real Estate and Other..... $ 3,109 $ 6,658 $ 12,243 $ 17,533
Company
-----------------------------------------------------
As of As of As of As of
October October October October
31, 1997(a) 30, 1998 (b) 29, 1999 27, 2000
----------- ------------ ----------- -----------
(Dollars in Thousands)
Balance Sheet Data:
Working Capital (Deficit),
Including Senior Credit Facility
Borrowings.......................... $ (26,634) $(33,093) $ (45,309) $ (31,628)
Total Assets.......................... 186,416 218,546 210,346 199,063
Total Debt............................ 136,327 156,280 160,986 144,498
Preferred Stock of Subsidiary (f)..... 3,354 2,634 2,133 1,638
Common Shareholder's Equity........... 29,407 37,377 18,584 18,227
Fibreboard Resort Group
----------------------------------
Period From
10 Months November 1,
Ended 1996 to
October 31, December 2,
1996(g) 1996(g)
-------------- --------------
(Dollars in Thousands, except
Revenue per Skier Day)
Statement of Operations Data:
Revenue:
Resort Operations.................... $ 36,829 $ 1,395
Real Estate and Other................ 4,288 304
-------------- -------------
41,117 1,699
Operating Expenses:
Cost of Sales - Resort Operations.... 22,596 2,884
Cost of Sales - Real Estate and
Other............................... 2,142 161
Depreciation, Depletion and
Amortization........................ 4,354 6
Selling, General and Administrative.. 5,220 1,766
Management Fees and Corporate
Expenses............................ 701 70
-------------- --------------
Operating Income (Loss)................ 6,104 (3,188)
Interest Expense, Net.................. (1,189) (206)
-------------- --------------
Pre-tax Income (Loss).................. 4,915 (3,394)
Income Tax (Provision) Benefit......... (2,018) 1,358
-------------- --------------
Net Income (Loss)...................... $ 2,897 $ (2,036)
============== ==============
Other Financial and Operating Data:
Total Skier Days....................... 706,075 30,818
Revenue per Skier Day (d)............. $ 52.16 $ 45.27
Noncash Cost of Real Estate Sales (e) $ 1,461 $ 133
Capital Expenditures Excluding
Acquisitions and
Real Estate and Other............... $ 5,761 $ 5,587
Net cash provided by (used in):
Operating activities................. $ 4,923 $ 5,769
Investing activities................. (8,467) (6,151)
Financing activities................. (2,778) 1,115
EBITDA................................ $ 11,919 $ (3,049)
EBITDA Margin.......................... 29.0% (179.5)%
Fibreboard Resort Group
-----------------------
As of
October 31,
1996(g)
-----------------------
(Dollars in Thousands)
Balance Sheet Data:
Working Capital (Deficit).............. $(36,187)
Total Assets........................... 69,602
Total Debt Including Intercompany
Payable.............................. 38,715
Net Assets............................. 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 the divestiture of the Grand Targhee resort on June 20, 2000.
(d)Reflects revenue from resort operations divided by total skier days. For the
year ended October 27, 2000, the amount presented for revenue per skier
day excludes the effect of paid skier visit insurance policy revenue of
$6,600,000.
(e)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.
(f)Represents preferred stock of a subsidiary of the Company which is subject
to mandatory redemption requirements.
(g)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 the period from November 1, 1996 to December 2, 1996 are
not representative of a pro rata year of operations.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the
consolidated financial statements 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 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, high winds, 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, 138, 142 and 101 days,
respectively, during each of the last five ski seasons, including the 1999/00
ski season. However, the efficiency and effectiveness of snowmaking operations
can be negatively impacted by numerous factors, including temperature
variability, reliability of water sources, restrictions on energy usage and
unfavorable weather events such as heavy rains.
Northstar, Sierra and the Summit generally experience higher natural
snowfall levels, averaging approximately 326, 514 and 500 inches of snowfall,
respectively, per year for the past five ski seasons. As a result of their
historic natural snowfall, their snowmaking capabilities in terms of trail
coverage are considerably less extensive than at Bear Mountain, Waterville
Valley, Loon Mountain or Mt. Cranmore. However, such resorts are dependent upon
early season snowfall to provide necessary terrain for the important Christmas
holiday period, and therefore, the timing and extent of natural snowfall can
significantly impact operating conditions.
The Company's results of operations are also highly dependent on the
Company's ability to compete in each of the large regional ski markets in which
it operates. Management estimates that at Northstar and Sierra approximately
70% of the 1999/00 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 1999/00 ski season total skier
days were attributable to residents of the Los Angeles, Orange County and San
Diego metropolitan regions. At Waterville Valley, Loon Mountain and Mt.
Cranmore, more than 75% of the 1999/00 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 1999/00 ski season
total skier days were attributable to residents of the Seattle/Tacoma
metropolitan region.
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 quality guest
experience and developing effective target marketing programs. See Part I, Item
1. "Business - Marketing and Sales." The Company's resorts have invested
approximately $58 million (including $5.9 million of equipment acquired through
capital leases and other debt) in capital expenditures during the last three
fiscal years to upgrade chairlift capacity, expand terrain, improve skier
service, retail and food and beverage facilities, increase snowmaking
capabilities and to meet sustaining capital requirements, all of which
management believes are important in providing a quality guest experience.
The following table summarizes the sources of the Company's revenues from
resort operations for the years ended October 27, 2000, October 29, 1999 and
October 30, 1998:
Year Ended
------------------------------------------
October 27, October 29, October 30,
2000 1999 1998
------------- ------------- -------------
(In thousands)
Lift Tickets......................... $ 45,037 $ 50,741 $ 43,953
Season Passes........................ 11,691 4,201 2,655
Snow School.......................... 7,990 7,771 6,549
Equipment Rental..................... 8,768 8,806 7,824
Retail............................... 5,805 8,124 7,622
Food and Beverage.................... 17,675 18,626 15,422
Paid Skier Visit Insurance........... 6,600 - -
Other................................ 16,119 14,711 13,223
------------- ------------- -------------
$119,685 $112,980 $ 97,248
============= ============= =============
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.
Results of Operations of the Company
Overview
The Company's results of operations are significantly impacted by weather
conditions. For the 1999/00 ski season, Northstar and Sierra experienced
unseasonably dry weather and a lack of natural snowfall during November and
December. However, snowfall for these resorts returned to more normal levels
during January and February of 2000. Snow conditions were generally favorable
for Northstar and Sierra during the 1998/99 and 1997/98 ski seasons. Bear
Mountain suffered from a lack of natural snowfall during both the 1999/00 and
1998/99 ski seasons, as compared to better than average natural snowfall during
the 1997/98 ski season. The Company's New Hampshire resorts experienced
variable temperatures and a lack of significant natural snowfall through the
middle of January of the 1999/00 ski season. Conditions were generally
favorable for the remainder of the 1999/00 ski season. The New Hampshire
resorts experienced mild temperatures through most of December 1998 and rain on
most weekends in January 1999. Conditions for the New Hampshire resorts for the
1997/98 ski season were generally optimal, with above average early season
snowfall levels. At the Summit, operating conditions were generally favorable
during the 1999/00 ski season, particularly during its peak operating months of
January through March. For the 1998/99 ski season, the Summit experienced a
prolonged period of snowfall, which resulted in increased snow removal and
other operating costs. For the 1997/98 ski season, the Summit experienced a
shorter season than normal due to lower than average snowfall. At Grand
Targhee, the resort had a delayed opening for the 1999/00 ski season due to
lower than normal levels of natural snowfall. Snowfall at Grand Targhee for the
1998/99 and 1997/98 ski seasons was generally consistent with normal levels,
although operations in the 1998/99 ski season were negatively impacted by
unusually high winds on a number of days during December through February.
Year Ended October 27, 2000 Compared to the Year Ended October 29, 1999
Total revenue for the year ended October 27, 2000 was $139,355,000, an
increase of $13,631,000, or 10.8%, over the Company's revenues for the year
ended October 29, 1999. Revenues from resort operations for the year ended
October 27, 2000 were $119,685,000, an increase of $6,705,000, or 5.9%, as
compared to the 1999 period. Revenues from real estate and other operations for
the year ended October 27, 2000 were $19,670,000, an increase of $6,926,000, or
54.3%, as compared to the 1999 period.
For the 1999/00 ski season, the Company introduced new attractively priced
season pass products at Sierra, Bear Mountain, Waterville Valley, Mt. Cranmore,
Loon Mountain, the Summit and Grand Targhee, which were designed to stimulate
demand, attract greater market share and take advantage of off-peak capacity.
This initiative resulted in an increase of approximately $7,500,000 in the
total amount of season pass products sold for the 1999/00 season when compared
to the 1998/99 season.
Due to the unfavorable weather and terrain conditions experienced by most
of the Company's resorts during the first half of the 1999/00 ski season, the
Company experienced significant declines in total skier visits for the 1999/00
season as compared to the 1998/99 season. Total skier visits for the 1999/00
season were 2,287,000, a decrease of 146,000 skier visits from the 1998/99
season.
For the 1999/00 ski season, the Company arranged for four separate paid
skier visit insurance policies covering its Lake Tahoe resorts (Northstar and
Sierra), its New Hampshire resorts (Waterville Valley, Mt. Cranmore and Loon
Mountain), Bear Mountain and the Summit. For the year ended October 27, 2000,
the Company recognized resort operating revenues of $6,600,000 for estimated
claims proceeds attributable to the decline from targeted paid skier visits for
the 1999/00 season. The Company has filed claims under the Lake Tahoe, New
Hampshire and Bear Mountain policies, and has received total payments to date
of $6,456,000. The Company is currently pursuing collection of the remaining
funds due from the underwriters.
Resort operating revenues, excluding the effect of paid skier visit
insurance, were $113,085,000 for the year ended October 27, 2000, an increase
of $105,000 from the 1999 period. Revenues for Northstar increased by $225,000
due to higher per skier revenue yields and improved summer business, partially
offset by lower skier visits. Revenues for Sierra and Bear Mountain declined by
$1,519,000 and $883,000, respectively, due to a decline in skier visits,
partially offset by improvements in per skier revenue yields and higher season
pass revenues. Waterville Valley's revenues declined by $1,548,000 due to the
conversion of its retail operations to a concessionaire arrangement for the
1999/00 season and lower skier visits, partially offset by improved yields and
higher season pass revenues. Revenues for Mt. Cranmore were consistent with the
prior period, as improved yields offset the impact of reduced skier visits.
Loon Mountain generated increased revenues of $1,325,000 due primarily to
improved yields and higher season pass revenues. Revenues for the Summit
increased by $2,876,000 due to increases in season pass revenues and improved
yields. Grand Targhee generated slightly increased revenues during the winter
season due to higher skier visits, which was offset by the effect of the sale
of the resort on June 20, 2000. The improvement in per skier revenue yields at
the Company's resorts was primarily due to price increases, and to a lesser
extent, sales of additional services and products to the Company's guests.
Revenues from real estate and other operations for the year ended October
27, 2000 were $19,670,000, consisting primarily of (1) revenues of $17,850,000
from the sale of certain developmental property at Northstar on September 22,
2000, (2) revenues from the close of escrow on the final four lots in Phases 4
and 4A of the Big Springs development at Northstar, and (3) timber sales of
$669,000. For the 1999 period, revenues from real estate and other operations
consisted of $12,004,000 in revenues from the sale of 43 lots in Phases 4 and
4A of the Big Springs development and timber sales of $740,000. For additional
information on the Company's real estate activities, see Part I, Item 1.
"Business - Real Estate Development."
Cost of sales for resort operations for the year ended October 27, 2000
was $70,394,000, a decrease of $4,010,000, or 5.4%, as compared to the 1999
period. The decline was primarily due to the combined effects of the following:
(1) elimination of certain nonrecurring maintenance, operations, snow removal
and other costs incurred at the Summit in the 1999 period, (2) lower business
volumes and aggressive variable cost management at most of the resorts during
the first quarter of 2000, (3) elimination of $1,200,000 in retail costs of
sales at Waterville Valley due to the conversion of the resort's retail
operations to a concessionaire arrangement for the 1999/00 ski season, and (4)
the divestiture of the Grand Targhee resort on June 20, 2000. Selling, general
and administrative expense for the year ended October 27, 2000 was $22,985,000,
which was generally consistent with the 1999 period.
Cost of sales for real estate and other operations for the year ended
October 27, 2000 of $4,507,000 consisted of land basis, development and
transaction costs associated with the sale of developmental real estate at
Northstar on September 22, 2000 and the final four lot sales in Phases 4 and 4A
of the Big Springs development at Northstar, and cost of sales for timber
operations of $486,000. Cost of sales for real estate and other operations for
the year ended October 29, 1999 was $5,244,000, consisting of land basis,
development and other costs associated with the sale of 43 lots in Phases 4 and
4A of the Big Springs development at Northstar, and cost of sales for timber
operations of $502,000. Noncash cost of real estate sales were $2,460,000 and
$4,743,000 for the 2000 and 1999 periods, respectively.
Operating income for the year ended October 27, 2000 totaled $18,897,000,
an increase of $17,629,000 over the operating income generated for the 1999
period, as a result of the factors discussed above.
Interest expense for the year ended October 27, 2000 totaled $18,215,000,
a decrease of $492,000 from the Company's interest expense for the year ended
October 29, 1999. The decrease in interest expense was the result of lower
borrowing levels under the Company's Senior Credit Facility, offset by slightly
higher borrowing rates.
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 27, 2000 and
October 29, 1999 due to continued operating losses.
The Company's net loss for the year ended October 27, 2000 was $357,000,
an improvement of $18,436,000 from the net loss of $18,793,000 incurred for the
year ended October 29, 1999, as a result of the factors discussed above.
"EBITDA" represents income from operations before depreciation, depletion
and amortization expense and the noncash cost of real estate sales. EBITDA for
the year ended October 27, 2000 was $43,929,000, an increase of $15,681,000, or
55.5%, over EBITDA before unusual items of $28,248,000 for the year ended
October 29, 1999. Resort operations contributed EBITDA of $26,396,000 for the
2000 period as compared to $16,005,000 for the 1999 period, an increase of
$10,391,000 or 64.9%. EBITDA from real estate and other operations was
$17,533,000 for the 2000 period, an increase of $5,290,000, or 43.2%, from the
EBITDA of $12,243,000 for the 1999 period.
Year Ended October 29, 1999 Compared to the Year Ended October 30, 1998
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 was 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 per skier revenue 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 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
visits 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, Trimont Land Company ("TLC"), the owner and operator of
Northstar and a wholly-owned subsidiary of the Company, 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 TLC
consisted of $8,500,000 in cash and a promissory note (the "TLH Note") for
$1,500,000, subject to adjustment. The Company obtained a fairness opinion for
the transaction from an independent firm qualified in the subject matter of the
transaction. Under the terms of the TLH Note, TLC was entitled to receive the
greater of (a) $1,500,000 plus accrued interest at 7% per annum, or (b) the Net
Cash Proceeds (as defined) from the resale of the lots within Phases 4 and 4A.
Pursuant to the terms of the sale, TLC retained the obligation to complete the
scheduled construction of the development in accordance with the approved site
development plan. TLC recognized 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 TLC had substantially completed the scheduled
construction of the development. In accordance with the terms of the
transaction between TLH and TLC, the Company received proceeds and recorded
real estate sales of $12,004,000 during the year ended October 29, 1999. The
average gross sales price of $305,000 for the 1999 real estate sales at
Northstar represented 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. 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 customer 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 also added certain key
corporate personnel and functional expertise to enhance its management team.
The Company recorded certain unusual items in the fourth quarter of 1999,
which amounted to a net charge of $487,000. See Note 3 to the Company's
consolidated financial statements included elsewhere in this Report for a
description of these items.
Operating income for the year ended October 29, 1999 was $1,268,000, or
$195,000 less than the operating income generated for the 1998 period, as a
result of the factors discussed above.
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.
The Company's net loss for the year ended October 29, 1999 was
$18,793,000, or $1,263,000 more than the net loss of $17,530,000 for the 1998
period, as a result of the factors discussed above.
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. Resort operations contributed EBITDA of
$16,005,000 for the 1999 period as compared to $16,278,000 for the 1998 period,
a decrease of $273,000 or 1.7%. EBITDA from real estate and other operations
was $12,243,000 for the 1999 period, an increase of $5,585,000, or 83.9%, from
the EBITDA of $6,658,000 for the 1998 period.
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 currently amended, provides
for borrowing availability of up to $25 million during the term of such
facility. 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 Senior Credit Facility matures on March 31, 2002. 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 ski season and for other cash
requirements. As of October 27, 2000, outstanding borrowings under the Senior
Credit Facility totaled approximately $6.4 million. As of January 17, 2001,
there were no borrowings outstanding under the Senior Credit Facility as the
Company had temporarily paid off previously existing borrowing with cash flows
from operations and the receipt of paid skier visit insurance proceeds.
On November 17, 1999, TLC 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 TLC consisted of $6,000,000 in cash and a promissory note
(the "Second TLH Note") for $1,050,000, subject to adjustment. The Company
obtained a fairness opinion for the transaction from an independent firm
qualified in the subject matter of the transaction. Under the terms of the
Second TLH Note, TLC is entitled to receive the greater of (a) $1,050,000 plus
accrued interest at 7% per annum, or (b) the Net Cash Proceeds (as defined)
from the resale of TLH's 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 31, 2002 or the date on which the last of the lots owned by TLH has
been sold. Pursuant to the terms of the sale, TLC retained the obligation to
complete the scheduled construction of the development in accordance with the
tentative site development plan. The Company will recognize revenue and related
costs of sales for this real estate transaction upon substantial completion of
construction and the close of escrow for lot sales between TLH and third party
buyers, and has reflected the cash received as a deposit.
On June 20, 2000, the Company sold all of the assets associated with the
Grand Targhee resort for $11.4 million in cash to GT Acquisition I, LLC ("GT
Acquisition"), an entity formed and controlled by the Chairman and Chief
Executive Officer of the Company. At the closing of the transaction, GT
Acquisition also assumed all liabilities relating to the Grand Targhee resort.
The Company obtained a fairness opinion for the transaction from an independent
firm qualified in the subject matter of the transaction.
On September 22, 2000, TLC and TLH entered into an Agreement for Purchase
and Sale of Real Property (the "Northstar Real Estate Agreement") pursuant to
which TLC agreed to sell to TLH certain development real estate consisting of
approximately 550 acres of land located at Northstar (the "Development Real
Estate") for a total purchase price of $27,600,000. The purchase price was
based on an appraisal obtained from an independent third party appraiser.
Concurrently therewith, TLC and TLH consummated the sale of the initial land
parcels (the "Initial Closing") contemplated by the Northstar Real Estate
Agreement. At the Initial Closing, TLC transferred the bulk of the Development
Real Estate to TLH for a total purchase price of $21,000,000, of which
$17,850,000, or 85%, was paid in cash and $3,150,000, or 15%, was paid in the
form of a convertible secured subordinated promissory note (the "Convertible
Secured Note"). The Convertible Secured Note requires quarterly interest
payments at the rate of 10% per annum if paid in cash, or 12% if paid in kind,
and is due in full in September 2005. The Convertible Secured Note is secured
by TLH's membership interest in a real estate joint venture (the "East West
Joint Venture") to which TLH is a party. The Convertible Secured Note is
convertible at TLC's option into 15% of TLH's membership interest in the East
West Joint Venture, which enables TLC to obtain, at TLC's option, a profit
participation in the Development Real Estate. The Company obtained an opinion
from an independent firm qualified and experienced in the subject matter of the
transaction that the terms of the sale of Development Real Estate were fair and
reasonable to the Company and TLC and at least as favorable as the terms which
could have been obtained in a comparable transaction made on an arm's-length
basis between unaffiliated parties. The sale of the remaining Development Real
Estate under the Northstar Real Estate Agreement is subject to certain
subdivision requirements to effect the transfer of such property and other
normal and customary closing conditions. See Part I, Item 1. "Business - Real
Estate Development," for a further description of this transaction.
The Company had a working capital deficit of $22.0 million (including $6.4
million in outstanding borrowings under the Senior Credit Facility, and
excluding $9.6 million of unearned revenue from resort operations which will
not require cash spending to settle such liabilities) as of October 27, 2000,
which will negatively affect liquidity during 2001. The Company's working
capital deficit at October 29, 1999, determined in a consistent manner as
described above, was $35.4 million.
The Company generated cash from operating activities of $29.7 million for
the year ended October 27, 2000 as compared to $15.4 million for the year ended
October 29, 1999. The cash flow benefit of the $18.4 million reduction in net
loss for the 2000 period as compared to the 1999 period was partially offset by
the effect of lower noncash cost of real estate sales and the increase in
insurance proceeds receivable during the 2000 period for expected claims under
paid skier visit insurance policies.
Cash used in investing activities totaled $9.1 million and $18.5 million
for the years ended October 27, 2000 and October 29, 1999, respectively. The
results for the 2000 and 1999 periods primarily reflect capital expenditures
for property and equipment and real estate held for development and sale. In
addition, investing cash flows for the 2000 period reflects $11.4 million in
proceeds from the sale of the Grand Targhee resort on June 20, 2000.
Cash used in financing activities for the year ended October 27, 2000 was
$20.4 million, and principally consisted of Senior Credit Facility net
repayments of $16.7 million, principal payments on long-term debt of $2.7
million and payments on preferred stock of $674,000. Cash provided by financing
activities for the year ended October 29, 1999 was $2.9 million, and primarily
reflected net borrowings under the Senior Credit Facility of $5.9 million,
principal payments on long-term debt of $1.7 million and payments on preferred
stock of $719,000.
The Company's capital expenditures for property and equipment for the year
ended October 27, 2000 were approximately $24.8 million (including $2.9 million
of equipment acquired through capital leases and other debt). Commitments for
future capital expenditures at October 27, 2000 were approximately $3.3
million, and primarily relate to the construction of a new detachable quad
chairlift and snowmaking system at Northstar, point of sale systems projects at
Northstar and Loon Mountain and certain other projects.
Management anticipates that maintenance capital expenditures for its
fiscal 2001 and 2002 capital programs will range from $5.0 million to $6.0
million per year. Remaining capital expenditures for the Company's fiscal 2000
capital program which will be incurred in fiscal 2001 are approximately $4.2
million. In addition, acquisitions of grooming equipment, which are typically
financed under capital leases, are expected to range from $1.5 million to $2.0
million annually. Expenditures for project planning and approvals, primarily at
Northstar and Loon Mountain, are expected to range from $1.5 million to $2.0
million in fiscal 2001. Depending upon the timing of construction of the Unit 7
and 7A single family developments at Northstar, expenditures for real estate
held for development and sale are anticipated to range from $1.5 million to
$3.5 million in fiscal 2001. The Company is currently finalizing its plans for
expansion capital projects for fiscal 2001, which are currently contemplated to
include the following projects at Northstar: (a) snowmaking system
improvements, (b) expanded rental equipment and skier services facilities, (c)
completion of additional infrastructure for the Lookout Mountain expansion
terrain, and (d) the first phase of an on-mountain restaurant facility. 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.
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.
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 expects to continue to pursue
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.
In December 2000, the Company repurchased $4,000,000 in principal amount
of its outstanding 12 1/2% Senior Notes due 2007 ("Senior Notes") for
$2,880,000. After giving effect to the write-off of related deferred financing
costs, the Company expects to recognize an extraordinary gain of approximately
$1,000,000 for the early retirement of debt.
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 governing the
Company's Senior Notes 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
satisfy those covenants.
The Company currently has $129.5 million aggregate principal amount of
Senior Notes outstanding, which will result in annual cash interest
requirements of approximately $16.2 million. The Company expects that cash
generated from operations, cash proceeds of planned real estate sales at
Northstar, 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. In order
to focus the Company's resources on attractive investment opportunities at
certain of its resorts and to satisfy short-term and long-term liquidity
requirements, the Company may in the future consider divestitures of
non-strategic assets, including resorts and certain real estate assets, if such
transactions can be completed on favorable terms.
For the year ended October 27, 2000, the Company's earnings would have
been inadequate to cover fixed charges by $357,000. Any decline in the
Company's expected operating performance or the inability of management to
successfully implement the Company's business strategy, 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.
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 partially mitigate the downside risk of its seasonal business by
purchasing paid skier visit insurance policies. For the 2000/01 ski season, the
Company purchased paid skier visit policies covering its Bear Mountain,
Waterville Valley, Summit and Loon Mountain resorts. However, these policies
would not fully protect these resorts against poor weather conditions or other
factors that could adversely affect their operations. In addition, the 2000/01
ski season policies are less favorable than the skier visit insurance policies
in place for the 1999/00 ski season. The Company did not obtain coverage for
the Northstar, Sierra and Mt. Cranmore resorts for the 2000/01 ski season as
effective policies were not available on commercially viable terms.
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 improvements 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 the Company's business and expected operating 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:
o Uncertainty as to future financial results,
o The substantial leverage and liquidity constraints of the Company,
o Significant operating restrictions under the Company's debt
agreements,
o The capital intensive nature of development of the Company's ski
resorts,
o Uncertainties associated with obtaining financing for future real
estate projects and to undertake future capital improvements,
o Uncertainties regarding the timing and success of our real estate
development projects and their ultimate impact on our operating
results,
o Demand for and costs associated with real estate development,
o The discretionary nature of consumers' spending for skiing and resort
real estate,
o Regional and national economic conditions,
o Weather conditions,
o Natural disasters (such as earthquakes and floods),
o Availability and terms of paid skier visit insurance coverage,
o Industry competition,
o Governmental regulation and litigation and other risks associated
with expansion and development,
o The adequacy of the water and power supplies at each of the Company's
resorts, and
o The occupancy of leased property and property used pursuant to the
United States Forest Service permits.
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 27, 2000, the Company had debt outstanding
(including the Senior Credit Facility) with a carrying value of $144.5 million
and an estimated fair value of $104 million.
Fixed interest rate debt outstanding as of October 27, 2000, which
excludes the Senior Credit Facility, was $138.1 million, carried an average
interest rate of approximately 12%, and matures as follows (in thousands):
2001 2002 2003 2004 2005 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
Senior Notes $ - $ - $ - $ - $ - $133,500 $133,500
Other Debt 1,356 1,195 480 1,277 117 221 4,646
------------------------------------------------------------------
$1,356 $1,195 $ 480 $1,277 $ 117 $133,721 $138,146
==================================================================
The amount of borrowings under the Senior Credit Facility as of October
27, 2000 was approximately $6.4 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 27,
2000, the borrowings outstanding under the Senior Credit Facility bore interest
at an annual rate of 9.5%, pursuant to the Base Rate Loan option. A 10%
increase or decrease in interest rates would have an immaterial effect on the
Company's future pretax earnings and cash flows.
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........ 62 Chairman of the Board of
Directors; Chief Executive
Officer, Assistant
Secretary, and Director of
the Company and Parent
Christopher P. Ryman......... 49 President, Chief Operating
Officer and Assistant
Secretary of the Company,
and President and Assistant
Secretary of Parent
Elizabeth J. Cole............ 40 Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary of
the Company and Parent
Timothy H. Beck.............. 50 Executive Vice President,
Planning of the Company
Brian J. Pope................ 38 Vice President of Accounting
and Finance, Assistant
Treasurer and Assistant
Secretary of the Company,
and Vice President and
Assistant Secretary of Parent
David G. Corbin.............. 48 Vice President of Resort
Development of the Company
Julianne Maurer.............. 44 Vice President of Marketing
and Sales of the Company
Mark St. J. Petrozzi......... 41 Vice President of Risk
Management of the Company
Laura B. Moriarty............ 45 Vice President of Human
Resources of the Company
Daniel C. Budde.............. 39 Director of the Company and
Parent
Dean C. Kehler............... 44 Director of the Company and
Parent
Edward Levy.................. 37 Director of the Company and
Parent
Timothy Silva................ 49 General Manager - Northstar
John A. Rice................. 45 General Manager - Sierra
Brent G. Tregaskis........... 40 General Manager - Bear
Mountain
Thomas H. Day................ 46 General Manager - Waterville
Valley
Ted M. Austin................ 40 General Manager - Mt.
Cranmore
Rick F. Kelley............... 45 General Manager - Loon
Mountain
Dan Brewster................. 40 General Manager - Summit
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. From
January 1997 to February 2000, Mr. Gillett served as Chairman of Corporate
Brand Foods America, Inc., a processor and marketer of meat and poultry
products based in Houston, Texas, which was acquired by IBP in February 2000.
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., a leading ski resort and real
estate consulting and appraisal firm, since January 1991.
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.
David G. Corbin. Mr. Corbin became the Vice President of Resort
Development of the Company in August 2000. Prior to this time, he served as
Vice President with Vail Resorts Development Company since 1993.
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. Between July 1988 and
January 1998, 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 since
October 1994.
Daniel C. Budde. Mr. Budde has been with John Hancock Life Insurance
Company ("John Hancock") since 1989 and currently serves as a Manager Director
with the Bond and Corporate Finance Group. Mr. Budde is responsible for a
portfolio of investments, including various mezzanine and private equity
transactions, and has investment responsibilities with respect to Hancock
Mezzanine Partners L.P.
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
(the "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 Argosy Group, L.P., an investment banking firm.
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.
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.
Dan Brewster. Mr. Brewster became the General Manager of the Summit in
September 2000. Prior to this time, he served in a variety of other positions
at the Summit since 1979, including Director of Operations, Director of
Planning and Development, Vice President of Ski Lifts, Inc. (the owner and
operator of the Summit) and Director of Human Resources.
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, Edward Levy and Daniel C. Budde were elected to serve as the
sole members of the Board of Directors of Parent and the Company, and 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 2000
(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.... 2000 - - - -
Chairman of the Board, 1999 - - - -
Chief Executive Officer 1998 - - - -
and Director (1
Christopher P. Ryman..... 2000 315,000 315,000 - 11,032 (3)
President, Chief 1999 240,000 50,000 - 3,738 (4)
Operating Officer and 1998 103,385 30,000 - -
Assistant Secretary (2)
Elizabeth J. Cole........ 2000 250,000 250,000 - 7,720 (5)
Executive Vice President, 1999 175,000 100,000 - 4,821 (6)
Chief Financial Officer, 1998 87,500 26,000 - -
Treasurer and Secretary (2)
Timothy H. Beck.......... 2000 185,000 110,000 - 6,568 (7)
Executive Vice 1999 175,000 35,000 - 7,520 (8)
President, Planning 1998 143,268 45,000 - 4,040 (9)
Brian J. Pope............ 2000 165,000 110,000 - 5,997 (4)
Vice President of 1999 125,000 45,000 - -
Accounting and 1998 26,040 15,000 - -
Finance, Assistant (2)
Treasurer,
Assistant Secretary
- --------------------------
(1)Mr. Gillett is the sole shareholder, sole director and Chief Executive
Officer of Booth Creek Management Corporation (formerly 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 Management Corporation."
(2) Mr. Ryman, Ms. Cole and Mr. Pope commenced their employment with the
Company on May 28, 1998, May 4, 1998, and August 15, 1998, respectively.
Accordingly, their compensation amounts for fiscal 1998 do not reflect a
full year of compensation.
(3) Consists of a 401(k) matching contribution of $7,087 and term life
insurance premiums of $3,945.
(4) Consists of a 401(k) matching contribution.
(5) Consists of a 401(k) matching contribution of $5,625 and term life
insurance premiums of $2,095.
(6) Consists of a 401(k) matching contribution of $2,726 and term life
insurance premiums of $2,095.
(7) Consists of a 401(k) matching contribution of $4,803 and term life
insurance premiums of $1,765.
(8) Consists of a 401(k) matching contribution of $5,755 and term life
insurance premiums of $1,765.
(9) Consists of a 401(k) matching contribution of $2,275 and term life
insurance premiums of $1,765.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 2000 AND
2000 FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth, for the Named Executives,
certain information concerning stock options granted under the
1997 BCSG Stock Option Plan described below, including the
year-end value of unexercised options. No stock options were
granted during fiscal 2000.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARS at Options/SARS at
Acquired Fiscal Year-End, Fiscal Year-End,
on Value Exercisable/ Exercisable/
Exercise (#) Realized Unexercisable Unexercisable
Name (1) ($) (#) (2)
- ------------------------ ------------ --------- ---------------- -----------------
Timothy H. Beck ....... - - 48/32 $-/$-
- ----------------------------
(1) No options were exercised during the fiscal year ended October 27, 2000.
(2) There is no public market for the shares of common stock underlying the
stock options granted pursuant to the 1997 BCSG Stock Option Plan.
However, the Company has determined that, as of October 27, 2000, the fair
market value of the underlying securities is less than the applicable
exercise prices under the options.
1997 BCSG Stock Option Plan
Parent has established the Booth Creek Ski Group, Inc. 1997 Stock Option
Plan (the "1997 BCSG Stock 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 1997 BCSG Stock Option Plan to
executive officers and key employees of the Company at the discretion of the
Board of Directors of Parent.
Under the 1997 BCSG Stock 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."
Presently, Parent has entered into a Stock Option Agreement under the 1997
BCSG Stock Option Plan with, and has granted options to purchase shares of
Parent's Class A Common Stock to, each of Timothy H. Beck, Timothy Silva and
John A. Rice, with respect to 80, 10 and 10 shares, respectively. Mr. Beck's
options were granted on October 1, 1997, and Mr. Silva's and Mr. Rice's options
were each granted on February 28, 1998.
Proposed Stock Plan of Parent
On June 23, 2000, the Board of Directors of Parent resolved to establish a
new stock plan for the issuance of restricted stock and stock option grants to
executives and key employees of Parent and the Company. The proposed new stock
plan (the "Proposed Stock Plan"), together with the existing grants under the
1997 BCSG Stock Option Plan, are intended to encompass a number of shares of
Class B Common Stock comprising 15% of the fully diluted shares of Class A and
Class B Common Stock of Parent assuming conversion or exercise of all
securities convertible into Parent's common stock. Parent is currently
formulating the Proposed Stock Plan, and expects to formally adopt the plan and
make the initial awards thereunder in fiscal 2001.
Employment and Other Agreements
Christopher P. Ryman
The Company and Parent are parties to an employment agreement with
Christopher P. Ryman, President and Chief Operating Officer of the Company and
Parent. Mr. Ryman's employment under such agreement commenced on May 1, 2000,
and the agreement is scheduled to expire on October 31, 2003, unless sooner
terminated. For the year ended October 27, 2000, Mr. Ryman received a base
salary of $315,000 per annum from the Company, which is subject to annual
review and increase as Mr. Ryman and the Company may agree. The agreement
provides that the Company's Board of Directors will establish reasonable
performance incentive goals for Mr. Ryman for each fiscal year, with a bonus
target of 50% of base salary if such goals are obtained. Mr. Ryman is also
eligible for separate incentive compensation from Parent. Under the terms of
his employment agreement, Mr. Ryman is eligible to participate in the health,
disability and retirement plans offered to executives of the Company, at
participation levels and with benefits not less favorable than those provided
to the plans' respective highest ranking participants. In addition, Mr. Ryman
is entitled to certain supplemental disability and life insurance benefits. Mr.
Ryman and a designee of his choice shall be eligible for certain membership
benefits in clubs owned or controlled by the Company or its affiliates, or
clubs in which the Company or its affiliates may have an interest, as further
described in the employment agreement. The employment agreement also provides
that the Company shall convey to Mr. Ryman a single family lot from two
alternative sites at the Northstar resort. Further, the Company and Parent are
required to reimburse Mr. Ryman for all reasonable and necessary expenses
incurred by him in the discharge of his duties and have agreed to indemnify him
to the maximum extent permitted by Delaware law. In the event that the Company
requires Mr. Ryman to relocate his residence, the employment agreement provides
that the Company and Mr. Ryman shall agree upon a reasonable relocation
package.
Mr. Ryman's employment agreement provides that, promptly following
adoption of the Proposed Stock Plan by Parent, Parent shall issue to Mr. Ryman
a number of shares of its Class B Common Stock equal to 5% of the fully diluted
shares of Class A and Class B Common Stock of Parent (including for this
purpose shares reserved for issuance under the Proposed Stock Plan). It is
intended that the shares to be issued to Mr. Ryman will be in the form of
restricted stock. The employment agreement further provides that portions of
the restricted stock will be forfeitable under certain circumstances. The
restricted stock will be subject to the Stockholders Agreement (as defined).
See Part III, Item 13. "Certain Relationships and Related Transactions -
Stockholders Agreement." Mr. Ryman's employment agreement further provides that
upon the future sale of the restricted stock by Mr. Ryman, Parent shall pay him
a bonus per share based on a specified formula.
Under the terms of his employment agreement, Mr. Ryman's employment may be
terminated prior to October 31, 2003 upon:
o His death or disability,
o Notice from the Company or Parent for cause (as described in his
agreement),
o Notice from the Company or Parent of termination other than for
cause,
o 60 days' prior notice from Mr. Ryman given within six months from the
date that the CIBC Merchant Fund and John Hancock and their
respective affiliates together own beneficially capital stock of
Parent entitling them to cast less than a majority of the votes
entitled to be cast on any matter upon which a holder of a share of
stock of a Delaware corporation of which only one class of stock is
outstanding would be entitled to vote, treating any Parent
outstanding nonvoting stock that is convertible into Parent voting
stock as if it had been so converted, or
o 30 days' prior notice from Mr. Ryman given within two months of the
date on which his duties and authority having been materially reduced
from those existing on May 1, 2000, unless such duties and authority
are restored within a 30 day period.
In the event Mr. Ryman's employment shall be terminated pursuant to the
last three items described above, the Company will provide Mr. Ryman with a
payment equal to one and one-half times his base salary, and provide
continuation of insurance benefits until the earlier of (a) 18 months, or (b)
the date on which Mr. Ryman becomes eligible for comparable health, disability
and life insurance benefits from new employment. During the term of his
employment and for certain specified periods thereafter, Mr. Ryman will be
subject to provisions prohibiting (1) his competition with the Company and
Parent, (2) solicitation of certain of Parent or Company management personnel,
(3) diversion of Parent or Company vendors, customers or others doing business
with Parent or the Company, and (4) disparaging Parent, the Company or any of
their personnel or revealing any information that might impair the reputation
or goodwill of Parent, the Company or their personnel. Mr. Ryman's employment
agreement also contains provisions relating to non-disclosure of certain
confidential information of Parent and the Company (as described in the
agreement).
Elizabeth J. Cole
The Company and Parent are parties to an employment agreement with
Elizabeth J. Cole, Executive Vice President and Chief Financial Officer of the
Company and Parent. Ms. Cole's employment under such agreement commenced on May
1, 2000, and the agreement is scheduled to expire on October 31, 2003, unless
sooner terminated. For the year ended October 27, 2000, Ms. Cole received a
base salary of $250,000 per annum from the Company, which is subject to annual
review and increase as Mr. Cole and the Company may agree. The agreement
provides that the Company's Board of Directors will establish reasonable
performance incentive goals for Ms. Cole for each fiscal year, with a bonus
target of 50% of base salary if such goals are obtained. Ms. Cole is also
eligible for separate incentive compensation from Parent. Under the terms of
her employment agreement, Ms. Cole is eligible to participate in the health,
disability and retirement plans offered to executives of the Company, at
participation levels and with benefits not less favorable than those provided
to the plans' respective highest ranking participants. In addition, Ms. Cole is
entitled to certain supplemental disability and life insurance benefits. Ms.
Cole and a designee of her choice shall be eligible for certain membership
benefits in clubs owned or controlled by the Company or its affiliates, or
clubs in which the Company or its affiliates may have an interest, as further
described in the employment agreement. The employment agreement also provides
that the Company shall convey to Ms. Cole a single family lot from two
alternative sites at the Northstar resort. Further, the Company and Parent
reimburse Ms. Cole for all reasonable and necessary expenses incurred by her in
the discharge of her duties and have agreed to indemnify her to the maximum
extent permitted by Delaware law. In the event that the Company requires Ms.
Cole to relocate her residence, the employment agreement provides that the
Company and Ms. Cole shall agree upon a reasonable relocation package.
Ms. Cole's employment agreement provides that, promptly following adoption
of the Proposed Stock Plan by Parent, Parent shall issue to Ms. Cole a number
of shares of its Class B Common Stock equal to 5% of the fully diluted shares
of Class A and Class B Common Stock of Parent (including for this purpose
shares to be reserved for issuance under the Proposed Stock Plan). It is
intended that the shares to be issued to Ms. Cole will be in the form of
restricted stock. The employment agreement further provides that portions of
the restricted stock will be forfeitable under certain circumstances. The
restricted stock will be subject to the Stockholders Agreement (as defined).
See Part III, Item 13. "Certain Relationships and Related Transactions -
Stockholders Agreement." Ms. Cole's employment agreement further provides that
upon the future sale of the restricted stock by Ms. Cole, Parent shall pay her
a bonus per share based on a specified formula.
Under the terms of her employment agreement, Ms. Cole's employment may be
terminated prior to October 31, 2003 upon:
o Her death or disability,
o Notice from the Company or Parent for cause (as described in her
agreement),
o Notice from the Company or Parent of termination other than for
cause,
o 60 days' prior notice from Ms. Cole given within six months from the
date that the CIBC Merchant Fund and John Hancock and their
respective affiliates together own beneficially capital stock of
Parent entitling them to cast less than a majority of the votes
entitled to be cast on any matter upon which a holder of a share of
stock of a Delaware corporation of which only one class of stock is
outstanding would be entitled to vote, treating any Parent
outstanding nonvoting stock that is convertible into Parent voting
stock as if it had been so converted, or
o 30 days' prior notice from Ms. Cole given within two months of the
date on which her duties and authority having been materially reduced
from those existing on May 1, 2000, unless such duties and authority
are restored within a 30 day period.
In the event Ms. Cole's employment shall be terminated pursuant to the
last three items described above, the Company will provide Ms. Cole with a
payment equal to one and one-half times her base salary, and provide
continuation of insurance benefits until the earlier of (a) 18 months, or (b)
Ms. Cole becomes eligible for comparable health, disability and life insurance
benefits from new employment. During the term of her employment and for certain
specified periods thereafter, Ms. Cole will be subject to provisions
prohibiting (1) her competition with the Company or Parent, (2) solicitation of
certain of Parent or Company management personnel, (3) diversion of Parent or
Company vendors, customers or others doing business with Parent or the Company,
and (4) disparaging Parent, the Company or any of their personnel or revealing
any information that might impair the reputation or goodwill of Parent, the
Company and their personnel. Ms. Cole's employment agreement also contains
provisions relating to non-disclosure of certain confidential information of
Parent and the Company (as described in the agreement).
Timothy H. Beck
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 the agreement is scheduled to
expire on June 30, 2002, subject to automatic annual one-year extensions,
unless sooner terminated. For the year ended October 27, 2000, Mr. Beck
received a base salary of $185,000 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 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 for a period of not less than 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, which currently
consists of George N. Gillett, Jr., Daniel C. Budde, Dean C. Kehler and Edward
Levy. Mr. Gillett is the Chief Executive Officer of the Company and is the sole
shareholder, sole director and Chief Executive Officer of Booth Creek
Management Corporation (formerly Booth Creek, Inc.), which provides the Company
with management services. Messrs. Kehler and Levy are Managing Directors of
CIBC Oppenheimer Corp., whose affiliate has provided 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 December
31, 2000 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 and Named
Executive of the Company and (iii) all directors and executive officers of the
Company as a group. The table also includes information pertaining to Parent
Class B Common Stock issuable to Christopher P. Ryman and Elizabeth J. Cole
pursuant to their respective employment agreements. See Part III, Item 11.
"Executive Compensation - Employment and Other Agreements." 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............................... 825.70 (1) 100% 182.90 (2) 2%
6755 Granite Creek Road
Teton Village, Wyoming 83025
John Hancock Mutual Life Insurance
Company............................... 9,160.21 (3) 93% 9,160.21 (3) 76%
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
CIBC WG Argosy Merchant Fund 2, L.L.C... 3,147.36 (4) 83% 3,147.36 (4) 31%
425 Lexington Avenue, 3rd Floor
New York, New York 10017
George N. Gillett, Jr................... 825.70 (5) 100% - -
Chairman of the Board of the Company
Rose Gillett............................ 825.70 (5) 100% - -
6755 Granite Creek Road
Teton Village, Wyoming 83025
Jeffrey J. Joyce........................ 96.42 (6) 15% - -
1950 Spectrum Circle, Suite 400
Marietta, Georgia 30067
Hancock Mezzanine Partners L.P.......... 529.03 (7) 45% 529.03 (7) 6%
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Co-Investment Merchant Fund, LLC........ 349.70 (8) 35% 349.70 (8) 4%
425 Lexington Ave., 3rd Floor
New York, New York 10017
Daniel C. Budde......................... 9,689.24 (9) 94% 9,689.24 (9) 80%
Director of the Company and Parent
Dean C. Kehler.......................... 3,497.06 (10) 84% 3,497.06 (10) 35%
Director of the Company and Parent
Edward Levy............................. 3,497.06 (11) 84% 3,497.06 (11) 35%
Director of the Company and Parent
Christopher P. Ryman.................... 824.25 (12) 56% 824.25 (12) 8%
President, Chief Operating Officer
and Assistant Secretary of the
Company; President and Assistant
Secretary of Parent
Elizabeth J. Cole....................... 824.25 (13) 56% 824.25 (13) 8%
Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary of the Company and Parent
Timothy H. Beck......................... 48.00 (14) 7% - -
Executive Vice President, Planning
of the Company
Brian J. Pope........................... - - - -
Vice President of Accounting and
Finance, Assistant Treasurer and
Assistant Secretary of the Company;
Vice President and Assistant
Secretary of Parent
Total Executive Officers and
Directors as a Group.................. 15,708.50 (15) 100% - -
- ---------------------
(1)Comprised of 642.80 shares of Class A Common Stock of Parent and Warrants to
purchase 182.90 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 182.90 shares of Class B Common Stock of
Parent.
(3)Comprised of 6,268.31 shares of Class B Common Stock of Parent and Warrants
to purchase 2,891.90 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 2,227.92 shares of Class B Common Stock of Parent and Warrants
to purchase 919.44 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 642.80 shares of
Class A Common Stock of Parent and Warrants to purchase 182.90 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, as amended. 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 364.73 shares of Class B Common Stock of Parent and Warrants
to purchase 164.30 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 247.54 shares of Class B Common Stock of Parent and Warrants
to purchase 102.16 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 6,633.04 shares of Class B Common Stock of
Parent and Warrants to purchase 3,056.20 shares of Class B Common Stock of
Parent held of record by John Hancock 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. Budde disclaims beneficial
ownership of the securities held by the Hancock Entities.
(10) Represents an aggregate of 2,475.46 shares of Class B Common Stock of
Parent and Warrants to purchase 1,021.60 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.
(11) Represents an aggregate of 2,475.46 shares of Class B Common Stock of
Parent and Warrants to purchase 1,021.60 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.
(12) Represents 824.25 shares of restricted Class B Common Stock of Parent
issuable to Mr. Ryman pursuant to his employment agreement upon adoption
of the Proposed Stock Plan. See Part III, Item II. "Executive Compensation
- Employment and Other Agreements." 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.
(13) Represents 824.25 shares of restricted Class B Common Stock of Parent
issuable to Ms. Cole pursuant to her employment agreement upon adoption of
the Proposed Stock Plan. See Part III, Item II. "Executive Compensation -
Employment and Other Agreements." 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.
(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 - 1997 BCSG Stock Option Plan."
(15) Represents (i) 642.80 shares of Class A Common Stock of Parent and
Warrants to purchase 182.90 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, (ii) 6,633.04 shares of
Class B Common Stock of Parent and Warrants to purchase 3,056.20 shares of
Class B Common Stock of Parent owned by the Hancock Entities, of which
Daniel C. Budde may be deemed to be the beneficial owner as described in
note (9) above, (iii) 2,475.46 shares of Class B Common Stock of Parent
and Warrants to purchase 1,021.60 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 (10)
and (11) above, (iv) 824.25 shares of Class B Common Stock of Parent
issuable to Christopher P. Ryman as described in note (12) above, (v)
824.25 shares of Class B Common Stock of Parent issuable to Elizabeth J.
Cole as described in note (13) above, and (vi) 48.00 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.
Item 13. Certain Relationships and Related Transactions
Securities Purchase Agreements
Since its formation in October 1996, the Company and Parent have each
engaged in a series of transactions with the principal securityholders of
Parent for the purpose of raising capital to finance the acquisitions of the
Company's resorts and for general corporate purposes. In connection with these
transactions, the principal securityholders of Parent (comprised of Booth Creek
Partners Limited II, L.L.L.P., the Hancock Entities and the CIBC Entities) and
Parent have entered into Securities Purchase Agreements dated November 27,
1996, as amended and restated on February 26, 1998, September 14, 1998 and May
28, 2000 (the "Securities Purchase Agreements"). Pursuant to the Securities
Purchase Agreements, Parent has issued shares of Class A and Class B Common
Stock, warrants to purchase Class B Common Stock (the "Warrants") and Parent
Notes. The Parent Notes mature on November 27, 2008 and bear 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 latest amendment and restatement of the Securities
Purchase Agreements, Parent and its principal securityholders effected a
restructuring of Parent's existing capital structure (the "Capital
Restructuring"). Pursuant to the Capital Restructuring, all of Parent's
outstanding Class A and Class B Common Stock was converted into Parent Notes in
a principal amount equal to 20% of the paid-in capital relating thereto. The
Parent Notes issued in connection with the Capital Restructuring have the same
terms as the existing Parent Notes. In addition, new shares of Class A and
Class B Common Stock of Parent were issued to the holders of Parent Notes on a
pro rata basis in proportion to the respective ownership of Parent Notes.
Following the Capital restructuring, George N. Gillett, Jr., and affiliates
continue to own 100% of the outstanding Class A Common Stock.
The Securities Purchase Agreements, which govern the Parent Notes, 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 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 the Company be pledged to
secure the Parent Notes, and provide that Parent shall cause the Company 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 Notes.
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 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
85% of the Purchased Common Shares (as defined in the Securities Purchase
Agreements) and shares issuable upon exercise of the Warrants 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 Securities Purchase Agreements described above,
Parent, Booth Creek Partners Limited II, L.L.L.P., John Hancock, Hancock
Mezzanine Partners L.P., the CIBC Merchant Fund and Co-Investment Fund, have
entered into the Stockholders Agreement dated November 27, 1996, as amended and
restated on February 26, 1998, August 5, 1998 and May 28, 2000 (the
"Stockholders Agreement").
Pursuant to the Stockholders Agreement, the Board of Directors of Parent
shall consist of three individuals selected by Booth Creek Partners Limited II,
L.L.L.P. and two individuals designated by John Hancock. A majority of the
members of the current Board of Directors were selected by Booth Creek Partners
Limited II, L.L.L.P. The Board of Directors of Parent and the Company currently
consists of George N. Gillett, Jr., 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 owners of 75% or more of
Parent's equity securities (the "Required Owners"), neither Parent nor any
subsidiary of Parent, including the Company, may issue any equity securities
except for certain enumerated permitted issuances. With respect to issuance of
equity securities of Parent requiring the approval of the Required Owners, the
Required Owners 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), or sell or otherwise dispose of all or substantially all of the
assets of any resort or the stock of any subsidiary, without the consent of the
Required Owners.
The Stockholders Agreement requires that, under certain circumstances,
Parent grant to Booth Creek Partners Limited II, L.L.L.P. registration rights
with respect to its equity securities which are in all material respects the
same as those provided to the Institutional Investors (as defined) 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 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).
Sales of Real Estate to Trimont Land Holdings, Inc.
Phases 4 and 4A of the Big Springs Development
On July 28, 1999, Trimont Land Company ("TLC"), the owner and operator of
Northstar and a wholly-owned subsidiary of the Company, 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. The consideration initially paid to TLC consisted of $8,500,000
in cash and a promissory note for $1,500,000. The Company obtained a fairness
opinion for the transaction from an independent firm qualified in the subject
matter of the transaction. The financing for TLH's purchase of the property
from TLC was provided by John Hancock pursuant to certain senior secured notes,
which bore interest at LIBOR plus 1.5%, payable quarterly. See Note 10 to the
Company's consolidated financial statements included elsewhere in this Report
for a further description of this transaction.
Unit 7 and 7A Development
On November 17, 1999, TLC 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. The consideration paid to TLC
consisted of $6,000,000 in cash and a promissory note for $1,050,000. The
Company obtained a fairness opinion for the transaction from an independent
firm qualified in the subject matter of the transaction. The financing for
TLH's purchase of the property from TLC was provided by John Hancock pursuant
to certain senior secured notes, which bear interest at LIBOR plus 1.5%,
payable quarterly. See Note 10 to the Company's consolidated financial
statements included elsewhere in this Report for a further description of this
transaction.
Sale of Development Real Estate
On September 22, 2000, TLC and TLH entered into an Agreement for Purchase
and Sale of Real Property (the "Northstar Real Estate Agreement") pursuant to
which TLC agreed to sell to TLH certain development real estate consisting of
approximately 550 acres of land located at Northstar (the "Development Real
Estate") for a total purchase price of $27,600,000. The purchase price was
based on an appraisal obtained from an independent third party appraiser.
Concurrently therewith, TLC and TLH consummated the sale of the initial land
parcels (the "Initial Closing") contemplated by the Northstar Real Estate
Agreement. At the Initial Closing, TLC transferred the bulk of the Development
Real Estate to TLH for a total purchase price of $21,000,000, of which
$17,850,000, or 85%, was paid in cash and $3,150,000, or 15%, was paid in the
form of a convertible secured subordinated promissory note (the "Convertible
Secured Note"). The Convertible Secured Note requires quarterly interest
payments at the rate of 10% per annum if paid in cash, or 12% if paid in kind,
and is due in full in September 2005. The Convertible Secured Note is secured
by TLH's membership interest in a real estate joint venture (the "East West
Joint Venture") to which TLH is a party. The Convertible Secured Note is
convertible at TLC's option into 15% of TLH's membership interest in the East
West Joint Venture, which enables TLC to obtain, at TLC's option, a profit
participation in the Development Real Estate. The Company obtained an opinion
from an independent firm qualified and experienced in the subject matter of the
transaction that the terms of the sale of Development Real Estate were fair and
reasonable to the Company and TLC and at least as favorable as the terms which
could have been obtained in a comparable transaction made on an arm's-length
basis between unaffiliated parties. The sale of the remaining Development Real
Estate under the Northstar Real Estate Agreement is subject to certain
subdivision requirements to effect the transfer of such property and other
normal and customary closing conditions. See Part I, Item 1. "Business - Real
Estate Development," for further description of this transaction.
Sale of Grand Targhee
On June 20, 2000, the Company sold all of the assets associated with the
Grand Targhee resort for $11.4 million in cash to GT Acquisition I, LLC ("GT
Acquisition"), an entity formed and controlled by the Chairman and Chief
Executive Officer of the Company. At the closing of the transaction, GT
Acquisition also assumed all liabilities relating to the Grand Targhee resort.
The Company obtained a fairness opinion for the transaction from an independent
firm qualified in the subject matter of the transaction.
Management Agreement with Booth Creek Management Corporation
On May 26, 2000, the Company and Parent entered into an Amended and
Restated Management Agreement (the "Management Agreement") with Booth Creek
Management Corporation (formerly Booth Creek, Inc.) (the "Management Company")
pursuant to which the Management Company agreed to provide Parent, Booth Creek
and its subsidiaries with management advice with respect to, among other
things, (i) formulation and implementation of financial, marketing and
operating strategies, (ii) development of business plans and policies, (iii)
corporate finance matters, including acquisitions, divestitures, debt and
equity financings and capital expenditures, (iv) administrative and operating
matters, including unified management of the Company's ski resorts, (v)
research, marketing and promotion, and (vi) other general business matters.
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 $100,000, plus a discretionary operating
bonus.
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, Parent and 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.
Financial Advisory Services
CIBC World Markets Corp., an affiliate of CIBC Oppenheimer Corp., has
provided financial advisory services to the Company from time to time. In
connection therewith, during fiscal 2000 the Company reimbursed CIBC World
Markets Corp. for certain of its out-of-pocket expenses and provided customary
indemnification.
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. Financial Statements:
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.
*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 Articles of Incorporation of LMRC Holding Corp.
**3.18 Amended and Restated Articles of Incorporation of Loon
Mountain Recreation Corporation.
**3.19 Amended and Restated Bylaws of Loon Mountain Recreation
Corporation.
**3.20 Amended and Restated Articles of Incorporation of Loon
Realty Corp.
**3.21 Amended and Restated Bylaws of Loon Realty Corp.
**3.22 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 Second Amended and Restated Securities Purchase Agreement
and certain related agreements dated as of May 28, 2000,
among Booth Creek Ski Group, Inc., Booth Creek Ski
Holdings, Inc., the Subsidiary Guarantors as defined
therein and each of John Hancock Life Insurance Company,
CIBC WG Argosy Merchant Fund 2, L.L.C., Hancock Mezzanine
Partners, L.P., Co-Investment Merchant Fund, L.L.C. and
Booth Creek Partners Limited II, L.L.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 Fleet National Bank (formerly 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 Fleet National Bank (formerly
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 Fleet National Bank
(formerly 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
Fleet National Bank (formerly BankBoston, N.A.).
##10.5 Second Amendment dated May 28, 2000 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 Fleet National Bank.
##10.6 Third Amendment dated May 28, 2000 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., LMRC Holding
Corp., Loon Mountain Recreation Corporation, Loon Realty
Corp. and Fleet National Bank.
####10.7 Fourth Amendment dated September 22, 2000 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.,
LMRC Holding Corp., Loon Mountain Recreation Corporation,
Loon Realty Corp. and Fleet National Bank.
*10.8 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.
*10.9 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.
*10.10 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.
*10.11 Escrow Agreement dated December 3, 1996 by and among
Fibreboard Corporation, Booth Creek Ski Holdings, Inc. and
First Trust of California.
*10.12 Purchase Agreement dated February 11, 1997 among Booth
Creek Ski Holdings, Inc., Grand Targhee Incorporated,
Moritz O. Bergmeyer and Carol Mann Bergmeyer.
*10.13 Promissory Note dated February 11, 1997 issued by Grand
Targhee Incorporated to Booth Creek Ski Holdings, Inc.
*10.14 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.
*10.15 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.
#10.16 Asset Purchase Agreement dated as of March 21, 2000, as
modified and amended, by and between Booth Creek Ski
Holdings, Inc., a Delaware corporation, as Seller, and GT
Acquisition I, LLC, a Delaware limited liability company,
as Buyer.
###10.17 Agreement for Purchase and Sale of Real Property and
certain related agreements dated September 22, 2000 between
Trimont Land Company and Trimont Land Holdings, Inc.
##10.18 Amended and Restated Management Agreement dated as of May
26, 2000 by and between Booth Creek Ski Holdings, Inc. and
Booth Creek Management Corporation.
*10.19 Ski Area Term Special Use Permit No. 4002/01 issued by the
United States Forest Service to Waterville Valley Ski
Resort, Inc.
*10.20 Ski Area Term Special Use Permit No. 5123/01 issued by the
United States Forest Service to Bear Mountain, Inc.
*10.21 Ski Area Term Special Use Permit No. 4033/01 issued by the
United States Forest Service to Grand Targhee Incorporated.
*10.22 Ski Area Term Special Use Permit No. 4127/09 issued by the
United States Forest Service to Ski Lifts, Inc.
*10.23 Annual Special Use Permit Nos. 4127/19 & 4127/19 issued by
the United States Forest Service to Ski Lifts, Inc.
++10.24 Ski Area Term Special Use Permit No. 4031/01 issued by the
United States Forest Service to Loon Mountain Recreation
Corporation.
++10.25 Amendment Number 2 for Special Use Permit No. 4008/1 issued
by the United States Forest Service to Loon Mountain
Recreation Corporation.
++10.26 Amendment Number 5 for Special Use Permit No. 4008/1 issued
by the United States Forest Service to Loon Mountain
Recreation Corporation.
+++++10.27 Ski Area Term Special Use Permit No. 4186 issued by the
United States Forest Service to Sierra-at-Tahoe, Inc.
**10.28 Employment Agreement dated as of July 1, 1997, by and
between Booth Creek Ski Holdings, Inc. and Timothy H. Beck.
+++10.29 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and Timothy Silva.
++++10.30 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and Timothy H. Beck.
++++10.31 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and John A. Rice.
####10.32 Employment Agreement by and between Booth Creek Ski Group,
Inc., Booth Creek Ski Holdings, Inc. and Christopher P.
Ryman.
####10.33 Employment Agreement by and between Booth Creek Ski Group,
Inc., Booth Creek Ski Holdings, Inc. and Elizabeth J. Cole.
####21.1 Subsidiaries of the Registrant.
- --------------------------
* 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 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 Annual Report on Form 10-K for the Fiscal
Year Ended October 30, 1998 and incorporated herein by reference.
+++++ Filed with the Company's Annual Report on Form 10-K for the Fiscal
Year Ended October 29, 1999 and incorporated herein by reference.
# Filed with the Company's Current Report on Form 8-K dated March 21,
2000 and incorporated herein by reference.
## Filed with the Company's Quarterly Report on Form 10-Q for the
Quarterly Period Ended July 28, 2000 and incorporated herein by
reference.
### Filed with the Company's Current Report on Form 8-K dated September
22, 2000 and incorporated herein by reference.
#### Filed herewith as an Exhibit to this Form 10-K.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated September 22, 2000,
reporting under Item 2 thereof the sale of certain developmental property from
Trimont Land Company to Trimont Land Holdings, Inc.
(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 23, 2001.
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 23, 2001
- ---------------------------- Directors and Chief
George N. Gillett, Jr. Executive Officer
(Principal Executive
Officer)
/s/ DEAN C. KEHLER Member of the Board of January 23, 2001
- ---------------------------- Directors
Dean C. Kehler
/s/ EDWARD LEVY Member of the Board of January 23, 2001
- ---------------------------- Directors
Edward Levy
/s/ DANIEL C. BUDDE Member of the Board of January 23, 2001
- ---------------------------- Directors
Daniel C. Budde
/s/ CHRISTOPHER P. RYMAN President and Chief January 23, 2001
- ---------------------------- Operating Officer
Christopher P. Ryman
/s/ ELIZABETH J. COLE Executive Vice President January 23, 2001
- ---------------------------- and Chief Financial
Elizabeth J. Cole Officer (Principal
Financial Officer)
/s/ BRIAN J. POPE Vice President of January 23, 2001
- ---------------------------- 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 27, 2000 and October 29, 1999, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for each of the three years in the period ended October 27, 2000. 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 auditing standards generally
accepted in the United States. 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 27, 2000 and October 29, 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended October 27, 2000 in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Sacramento, California
December 15, 2000
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
October 27, October 29,
2000 1999
--------------- ---------------
ASSETS
Current assets:
Cash.................................... $ 696 $ 461
Accounts receivable, net of allowance
of $28 and
$65, respectively...................... 1,929 1,709
Insurance proceeds receivable........... 4,070 1,799
Inventories............................. 2.106 2,786
Prepaid expenses and other current
assets................................. 1,194 1,032
--------------- ---------------
Total current assets...................... 9,995 7,787
Property and equipment, net............... 145,746 152,316
Real estate held for development and
sale...................................... 6,566 8,851
Deferred financing costs, net of
accumulated amortization
of $4,162 and $3,078, respectively...... 5,338 6,071
Timber rights and other assets............ 5,937 7,246
Goodwill, net of accumulated
amortization of $8,937 and $6,581,
respectively............................ 25,481 28,075
--------------- ---------------
Total assets.............................. $ 199,063 $ 210,346
=============== ===============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Senior credit facility.................. $ 6,352 $ 23,035
Current portion of long-term debt....... 1,356 1,468
Accounts payable and accrued
liabilities............................ 33,915 28,593
--------------- ---------------
Total current liabilities................. 41,623 53,096
Long-term debt............................ 136,790 136,483
Other long-term liabilities............... 785 50
Commitments and contingencies
Preferred stock of subsidiary; 28,000
shares authorized,
13,000 shares issued and outstanding
at October 27, 2000
(17,000 shares at October 29, 1999);
liquidation preference
and redemption value of $1,638 at
October 27, 2000........................ 1,638 2,133
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..................... (53,773) (53,416)
--------------- ---------------
Total shareholder's equity................ 18,227 18,584
--------------- ---------------
Total liabilities and
shareholder's equity.................... $ 199,063 $ 210,346
=============== ===============
See accompanying notes.
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
Year Ended
----------------------------------------------
October 27, October 29, October 30,
2000 1999 1998
-------------- -------------- --------------
Revenue:
Resort operations............ $ 119,685 $ 112,980 $ 97,248
Real estate and other........ 19,670 12,744 7,608
-------------- -------------- --------------
Total revenue.................. 139,355 125,724 104,856
Operating expenses:
Cost of sales - resort
operations.................. 70,394 74,404 61,325
Cost of sales - real estate
and other................... 4,507 5,244 4,671
Depreciation and depletion... 20,172 19,320 15,515
Amortization of goodwill and
other intangible
assets...................... 2,400 2,430 2,237
Selling, general and
administrative expense...... 22,985 22,571 19,645
Unusual items, net........... - 487 -
-------------- -------------- --------------
Total operating expenses....... 120,458 124,456 103,393
-------------- -------------- --------------
Operating income............... 18,897 1,268 1,463
Other income (expense):
Interest expense............. (18,215) (18,707) (17,510)
Amortization of deferred
financing costs.............. (1,084) (1,093) (1,203)
Gain on sale of Grand
Targhee resort............... 369 - -
Other income (expense)....... (145) (43) (20)
-------------- -------------- --------------
Other income (expense), net.. (19,075) (19,843) (18,733)
-------------- -------------- --------------
Loss before minority interest . (178) (18,575) (17,270)
Minority interest.............. (179) (218) (260)
-------------- -------------- --------------
Net loss....................... $ (357) $ (18,793) $ (17,530)
============== ============== ==============
See accompanying notes.
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(In thousands, except shares)
Common Stock Additional
------------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
-------- ------- ----------- ------------ -----------
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
Net loss ............... - - - (357) (357)
-------- ------- ---------- ----------- ---------
Balance at October 27,
2000 ................... 1,000 $ - $ 72,000 $ (53,773) $ 18,227
======== ======= ========== =========== ==========
See accompanying notes.
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
----------------------------------------------
October 27, October 29, October 30,
2000 1999 1998
-------------- -------------- --------------
Cash flows from operating
activities:
Net loss.......................... $ (357) $ (18,793) $ (17,530)
Adjustments to reconcile net loss
to net cash
provided by operating
activities:
Depreciation and depletion..... 20,172 19,320 15,515
Amortization of goodwill and
other
intangible assets............. 2,400 2,430 2,237
Noncash cost of real estate
sales......................... 2,460 4,743 3,721
Amortization of deferred
financing costs............... 1,084 1,093 1,203
Minority interest.............. 179 218 260
Gain on sale of Grand Targhee
resort........................ (369) - -
Changes in operating assets
and liabilities,
net of acquisitions and
divestiture:
Accounts receivable......... (366) (136) 279
Insurance proceeds
receivable................. (2,271) (1,799) -
Inventories................. 394 1,584 (785)
Prepaid expenses and other
current assets............. (264) 345 103
Accounts payable and
accrued liabilities........ 5,940 6,483 2,707
Other long-term liabilities. 735 (95) (151)
-------------- -------------- ------------
Net cash provided by operating
activities........................ 29,737 15,393 7,559
Cash flows from investing
activities:
Capital expenditures for property
and equipment..................... (21,909) (14,342) (15,500)
Capital expenditures for real
estate held for
development and sale............ (175) (3,439) (1,717)
Acquisition of businesses......... - (726) (30,211)
Proceeds on sale of Grand Targhee
resort.......................... 11,422 - -
Proceeds on sale of property and
equipment....................... 1,060 - -
Other assets...................... 478 3 (290)
-------------- -------------- ------------
Net cash used in investing
activities........................ (9,124) (18,504) (47,718)
Cash flows from financing
activities:
Net (repayments) borrowings under
senior credit facility........ (16,683) 5,892 2,143
Proceeds of long-term debt........ - - 17,500
Principal payments of long-term
debt............................ (2,670) (1,711) (2,218)
Deferred financing costs.......... (351) (515) (1,623)
Purchase of preferred stock of
subsidiary and
payment of dividends............ (674) (719) (980)
Capital contributions............. - - 25,500
-------------- -------------- ------------
Net cash (used in) provided by
financing activities............ (20,378) 2,947 40,322
-------------- -------------- ------------
Increase (decrease) in cash....... 235 (164) 163
Cash at beginning of year......... 461 625 462
-------------- -------------- ------------
Cash at end of year............... $ 696 $ 461 $ 625
============== ============== ============
See accompanying notes.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 27, 2000
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,
Loon Mountain and the Summit at Snoqualmie (the "Summit"). Booth Creek divested
the Grand Targhee ski resort ("Grand Targhee") on June 20, 2000. 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 2000, 1999 and 1998 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.
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 and the Summit lack significant snowmaking capability but
generally experience 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 27, 2000 and October 29, 1999 is restricted
cash of $612,000 and $334,000, 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 27, October 29,
2000 1999
--------------- ---------------
(In thousands)
Retail products........................ $ 1,263 $ 1,888
Supplies............................... 566 647
Food and beverage...................... 277 251
--------------- ---------------
$ 2,106 $ 2,786
=============== ===============
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, 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 prepare the property 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 27, 2000, October 29, 1999 and October 30, 1998 was
$28,000, $169,000 and $162,000, respectively.
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.
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
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies - (Continued)
Long-Lived Assets (Continued)
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 27, 2000,
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 $93 million and $98 million at October 27, 2000
and October 29, 1999, respectively, which is based on the market price of such
debt.
Revenue Recognition
Revenues from resort operations are generated from a wide variety of
sources, including lift ticket sales, snow school lessons, equipment rentals,
retail product sales, food and beverage operations, lodging and property
management services and other recreational activities, and 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 and promotions is expensed when the services are rendered. The
cost of brochures and other winter marketing collateral is expensed over the
ski season. Advertising expenses for the years ended October 27, 2000, October
29, 1999 and October 30, 1998 were $3,611,000, $3,525,000 and $3,193,000,
respectively.
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. As of and for the years ended
October 27, 2000, October 29, 1999 and October 30, 1998, the Company does not
have any transactions that would necessitate disclosure of comprehensive
income.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
1.Organization, Basis of Presentation and Summary of Significant Accounting
Policies - (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. Insurance Proceeds Receivable
For the 1999/00 ski season, the Company arranged for four separate paid
skier visit insurance policies covering its Lake Tahoe resorts (Northstar and
Sierra), its New Hampshire resorts (Waterville Valley, Mt. Cranmore and Loon
Mountain), Bear Mountain and the Summit. The policies had a deductible for the
initial decline from targeted paid skier visit levels, coinsurance for a
portion of the next 10% decline in paid skier visits, and stated maximum
coverage levels. The policies provided coverage for substantially all risks
relating to paid skier visit levels, including adverse weather conditions, road
and airport closures, downturns in the economy, strikes and most other events
that reduce the targeted number of paid skier visits. For the year ended
October 27, 2000, the Company recognized resort operating revenues of
$6,600,000 for estimated claims proceeds attributable to the decline from
targeted paid skier visits for the 1999/2000 season. The Company has filed
claims under the Lake Tahoe, New Hampshire and Bear Mountain policies, and has
received total payments to date of $6,456,000. The Company is currently
pursuing collection of the remaining funds due from the underwriters. For the
2000/01 ski season, the Company has arranged for paid skier visit insurance
policies covering its Bear Mountain, Waterville Valley, Summit and Loon
Mountain resorts, although such policies are less favorable than the policies
in place for the 1999/00 ski season.
3. 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 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 included business
interruption proceeds of $206,000.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. Property and Equipment
Property and equipment consist of the following:
October 27, October 29,
2000 1999
--------------- ---------------
(In thousands)
Land and improvements.................. $ 37,901 $ 37,846
Buildings and improvements............. 47,727 51,932
Lift equipment......................... 45,900 44,023
Other machinery and equipment.......... 57,526 52,036
Construction in progress............... 14,062 8,529
--------------- ---------------
Less accumulated depreciation and 203,116 194,366
amortization......................... 57,370 42,050
--------------- ---------------
$ 145,746 $ 152,316
=============== ===============
5. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
October 27, October 29,
2000 1999
--------------- ---------------
(In thousands)
Accounts payable....................... $ 7,958 $ 10,072
Accrued compensation and benefits...... 4,002 3,279
Taxes other than income taxes.......... 1,157 1,099
Unearned revenue and deposits.......... 15,582 9,887
Interest............................... 2,234 2,492
Other.................................. 2,982 1,764
--------------- ---------------
$ 33,915 $ 28,593
=============== ===============
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 currently amended,
among Booth Creek, its subsidiaries, the financial institutions party thereto
and Fleet National Bank, 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 "Loans." Total borrowings outstanding
under the Senior Credit Facility at October 27, 2000 were
$6,352,000.
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, 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 27, 2000, the borrowings
outstanding under the Senior Credit Facility bore interest at
9.5%, 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 ratios of (a) financing
debt to consolidated cash flow, and (b) adjusted consolidated
cash flow to consolidated fixed charges. 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 27, October 29,
2000 1999
--------------- ---------------
(In thousands)
Senior Notes........................... $ 133,500 $ 133,500
Other debt............................. 4,646 4,451
--------------- ---------------
138,146 137,951
Less current portion................... 1,356 1,468
--------------- ---------------
$ 136,790 $ 136,483
=============== ===============
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Financing Arrangements - (Continued)
Long-Term Debt (Continued)
Senior Notes
As of October 27, 2000, 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) 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 significant operations, assets or
cash flows separate from its investments in its subsidiaries. In addition, the
assets, equity, revenues, income and cash flow of DRE, L.L.C., Booth Creek's
only non-guarantor subsidiary, are inconsequential and the membership interest
in 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.
In December 2000, the Company repurchased $4,000,000 in principal amount
of Senior Notes for $2,880,000. After giving effect to the write-off of related
deferred financing costs, the Company expects to recognize an extraordinary
gain of approximately $1,000,000 for the early retirement of debt.
Other Debt
Other debt of $4,646,000 and $4,451,000 at October 27, 2000 and October
29, 1999, respectively, consists of various capital lease obligations, notes
payable, 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 $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.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Financing Arrangements - (Continued)
Long-Term Debt (Continued)
For the years ended October 27, 2000, October 29, 1999 and October 30,
1998, the Company entered into long-term debt and capital lease obligations of
$2,874,000, $525,000 and $2,500,000, respectively, for the purchase of
equipment.
During the years ended October 27, 2000, October 29, 1999 and October 30,
1998, the Company paid cash for interest costs of $18,473,000, $18,564,000 and
$17,176,000, respectively, net of amounts capitalized of $149,000, $332,000 and
$162,000, respectively.
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 27, 2000 are as follows:
Year
Ending
October (In thousands)
--------
2001......................................... $ 1,269
2002......................................... 774
2003......................................... 426
2004......................................... 211
2005......................................... 104
Thereafter................................... 2,411
---------------
$ 5,195
===============
Total rent expense for all operating leases amounted to $3,279,000,
$3,714,000 and $2,675,000 for the years ended October 27, 2000, October 29,
1999 and October 30, 1998, respectively.
The Company leases certain machinery and equipment under capital leases.
Aggregate future minimum lease payments as of October 27, 2000 for the years
ending October 2001 and October 2002 were $1,077,000 and $839,000,
respectively. The cost and accumulated amortization of equipment recorded under
capital leases at October 27, 2000 were $3,566,000 and $1,433,000,
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 and the Summit. These
leases are effective through 2039, 2020, 2034, 2006 and 2032, respectively.
Lease payments are based on a percentage of revenues, and were $1,166,000,
$1,189,000 and $1,014,000 for the years ended October 27, 2000, October 29,
1999 and October 30, 1998, respectively.
Other Commitments
Commitments for future capital expenditures totaled approximately
$3,300,000 at October 27, 2000.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. Commitments and Contingencies (Continued)
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 $75.6 million of
indebtedness of Parent.
8. Income Taxes
The difference between the statutory federal income tax rate and the
effective tax rate is attributable to the following:
Year Ended
-------------------------------------
October 27, October 29, October 30,
2000 1999 1998
----------- ----------- -----------
(In thousands)
Tax benefit computed at
federal statutory
rate of 35% of pre-tax loss.... $ 62 $ 6,501 $ 6,045
Net change in valuation
allowance...................... (55) (6,235) (6,073)
Other, net....................... (7) (266) 28
----------- ----------- -----------
$ - $ - $ -
=========== =========== ===========
Significant components of the Company's deferred tax assets and
liabilities are as follows:
October 27, October 29,
2000 1999
--------------- ---------------
(In thousands)
Deferred tax assets:
Accruals and reserves................ $ 1,220 $ 1,558
Alternative minimum tax credit
carryforwards....................... 546 549
Net operating loss carryforwards..... 27,187 26,310
--------------- ---------------
Total deferred tax assets.......... 28,953 28,417
Deferred tax liabilities:
Property and equipment............... (15,610) (15,129)
--------------- ---------------
Total deferred tax liabilities..... (15,610) (15,129)
--------------- ---------------
Net deferred tax assets................ 13,343 13,288
Valuation allowance.................... (13,343) (13,288)
Net deferred tax assets reflected --------------- ---------------
in the accompanying consolidated
balance sheets....................... $ - $ -
=============== ===============
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8. Income Taxes (Continued)
In connection with the purchase accounting for the Loon Mountain
acquisition in fiscal 1998, 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 27, 2000, the Company has net operating loss carryforwards of
approximately $74.5 million for federal income tax reporting purposes, which
expire between 2012 and 2020.
9. Preferred Stock of Subsidiary
In connection with the consummation of the Summit acquisition in fiscal
1997, 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 27,
2000, the Company has paid $1,875,000, excluding dividends, under the Preferred
Stock Purchase Agreement. Real Estate LLC's purchase requirements for the years
ending October 2001 and 2002 under the Preferred Stock Purchase Agreement,
excluding dividends, are $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 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
Phases 4 and 4A of the Big Springs Development
On July 28, 1999, Trimont Land Company ("TLC"), the owner and operator of
Northstar and a wholly-owned subsidiary of the Company, 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 TLC
consisted of $8,500,000 in cash and a promissory note (the "TLH Note") for
$1,500,000, subject to adjustment. Under the terms of the TLH Note, TLC
obtained the right to 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. The Company obtained a fairness opinion for the
transaction from an independent firm qualified in the subject matter of the
transaction. "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. Pursuant to the terms of the sale,
TLC retained the obligation to complete the scheduled construction of the
development in accordance with the approved site development plan. The Company
recognized revenue and related cost of sales for these real estate transactions
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10.Northstar Real Estate Sales (Continued)
Phases 4 and 4A of the Big Springs Development (Continued)
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 TLC
had substantially completed the construction of the development. The remaining
four lots closed escrow during the year ended October 27, 2000. In accordance
with the terms of the transaction between TLH and TLC, the Company received
proceeds and recorded real estate sales of $1,055,000 and $12,004,000 during
the years ended October 27, 2000 and October 29, 1999, respectively.
Unit 7 and 7A Development
On November 17, 1999, TLC 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 TLC consisted of $6,000,000 in cash and a promissory note
(the "Second TLH Note") for $1,050,000, subject to adjustment. Under the terms
of the Second TLH Note, TLC 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 TLH's lots within the Unit 7 and 7A Development. The Company
obtained a fairness opinion for the transaction from an independent firm
qualified in the subject matter of the transaction. The Second TLH Note is
prepayable at any time, and is due on the earlier to occur of January 30, 2002
or the date on which the last of the lots owned by TLH has been sold. Pursuant
to the terms of the sale, TLC retained the obligation to complete the scheduled
construction of the development in accordance with the tentative site
development plan. The Company will recognize revenue and related costs of sales
for this real estate transaction upon substantial completion of construction
and the close of escrow for lot sales between TLH and third party buyers, and
has reflected the cash received as a deposit.
Development Real Estate
On September 22, 2000, TLC and TLH entered into an Agreement for Purchase
and Sale of Real Property (the "Northstar Real Estate Agreement") pursuant to
which TLC agreed to sell to TLH certain development real estate consisting of
approximately 550 acres of land located at Northstar (the "Development Real
Estate") for a total purchase price of $27,600,000. The purchase price was
based on an appraisal obtained from an independent third party appraiser.
Concurrently therewith, TLC and TLH consummated the sale of the initial land
parcels (the "Initial Closing") contemplated by the Northstar Real Estate
Agreement. At the Initial Closing, TLC transferred the bulk of the Development
Real Estate to TLH for a total purchase price of $21,000,000, of which
$17,850,000, or 85%, was paid in cash and $3,150,000, or 15%, was paid in the
form of a convertible secured subordinated promissory note (the "Convertible
Secured Note"). In accordance with generally accepted accounting principles for
real estate transactions, the Company has recorded revenues for the sale to the
extent of cash received by TLC. The Company will recognize revenues and profits
on the portion of the sales price represented by the Convertible Secured Note
as collections are made, and accordingly, has reflected $3,150,000 of deferred
revenue as an offset to the Convertible Secured Note in the accompanying
consolidated balance sheet as of October 27, 2000. The Convertible Secured Note
requires quarterly interest payments at the rate of 10% per annum if paid in
cash, or 12% if paid in kind, and is due in full in September 2005. The
Convertible Secured Note is secured by TLH's membership interest in a real
estate joint venture (the "East West Joint Venture") to which TLH is a party.
The Convertible Secured Note is convertible at TLC's option into 15% of TLH's
membership interest in the East West Joint Venture, which enables TLC to
obtain, at TLC's option, a profit participation in the Development Real Estate.
The Company obtained an opinion from an independent firm qualified and
experienced in the subject matter of the transaction that the terms of the sale
of Development Real Estate were fair and reasonable to the Company and TLC and
at least as favorable as the terms which could have been obtained in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. The sale of the remaining Development Real Estate under the Northstar
Real Estate Agreement is subject to certain subdivision requirements to effect
the transfer of such property and other normal and customary closing
conditions.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11.Sale of Grand Targhee
On June 20, 2000, the Company sold all of the assets associated with the
Grand Targhee resort for $11.4 million in cash to GT Acquisition I, LLC ("GT
Acquisition"), an entity formed and controlled by the Chairman and Chief
Executive Officer of the Company. At the closing of the transaction, GT
Acquisition also assumed all liabilities relating to the Grand Targhee resort.
The sale of the Grand Targhee resort resulted in a gain of $369,000 during the
year ended October 27, 2000. The Company obtained a fairness opinion for the
transaction from an independent firm qualified in the subject matter of the
transaction.
12. Management Agreement
On May 26, 2000, the Company and Parent entered into an Amended and
Restated Management Agreement (the "Management Agreement") with Booth Creek
Management Corporation (formerly Booth Creek, Inc.) (the "Management Company")
pursuant to which the Management Company agreed to provide Parent, Booth Creek
and its subsidiaries with management advice with respect to, among other
things, (i) formulation and implementation of financial, marketing and
operating strategies, (ii) development of business plans and policies, (iii)
corporate finance matters, including acquisitions, divestitures, debt and
equity financings and capital expenditures, (iv) administrative and operating
matters, including unified management of the Company's ski resorts, (v)
research, marketing and promotion, and (vi) other general business matters.
Under the terms of the amended Management Agreement, the Company provides
customary indemnification, reimburses certain costs and owes the Management
Company an annual management fee of $100,000, plus a discretionary operating
bonus. Management fees and reimbursable expenses during the years ended October
27, 2000, October 29, 1999 and October 30, 1998 were $246,000, $370,000 and
$646,000, respectively.
13. 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 27, 2000, October 29, 1999 and
October 30, 1998 were $615,000, $538,000 and $490,000, respectively.
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
14.Business Segments
The Company currently operates in two business segments, Resort Operations
and Real Estate and Other. The Company's resort operations segment is currently
comprised of seven ski resorts, which provide lift access, snow school lessons,
retail, equipment rental, food and beverage offerings, lodging and property
management services and ancillary products and services. The real estate and
other segment is primarily engaged in the development and sale of real estate
at Northstar and the harvesting of timber rights. Given the distinctive nature
of their respective products, these segments are managed separately. Data by
segment is as follows:
October 27, October 29, October 30,
2000 1999 1998
----------- ----------- -----------
(In thousands)
Revenue:
Resort operations............... $ 119,685 $ 112,980 $ 97,248
Real estate and other........... 19,670 12,744 7,608
----------- ----------- -----------
$ 139,355 $ 125,724 $ 104,856
=========== =========== ===========
Operating income (loss):
Resort operations............... $ 4,070 $ (5,954) $ (1,201)
Real estate and other........... 14,827 7,222 2,664
----------- ----------- -----------
$ 18,897 $ 1,268 $ 1,463
=========== =========== ===========
Depreciation, depletion,
amortization and noncash cost
of real estate sales:
Resort operations............... $ 22,326 $ 21,472 $ 17,479
Real estate and other........... 2,706 5,021 3,994
----------- ----------- -----------
$ 25,032 $ 26,493 $ 21,473
=========== =========== ===========
Capital expenditures:
Resort operations............... $ 21,909 $ 14,342 $ 15,042
Real estate and other........... 175 3,439 1,717`
----------- ----------- -----------
$ 22,084 $ 17,781 $ 16,759
=========== =========== ===========
Segment assets:
Resort operations............... $ 180,984 $ 188,870
Real estate and other........... 10,819 13,363
Corporate and other
nonidentifiable assets......... 7,260 8,113
----------- -----------
$ 199,063 210,346
=========== ===========
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.
*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 Articles of Incorporation of LMRC Holding Corp.
**3.18 Amended and Restated Articles of Incorporation of Loon
Mountain Recreation Corporation.
**3.19 Amended and Restated Bylaws of Loon Mountain Recreation
Corporation.
**3.20 Amended and Restated Articles of Incorporation of Loon
Realty Corp.
**3.21 Amended and Restated Bylaws of Loon Realty Corp.
**3.22 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 Second Amended and Restated Securities Purchase Agreement
and certain related agreements dated as of May 28, 2000,
among Booth Creek Ski Group, Inc., Booth Creek Ski
Holdings, Inc., the Subsidiary Guarantors as defined
therein and each of John Hancock Life Insurance Company,
CIBC WG Argosy Merchant Fund 2, L.L.C., Hancock Mezzanine
Partners, L.P., Co-Investment Merchant Fund, L.L.C. and
Booth Creek Partners Limited II, L.L.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 Fleet National Bank (formerly 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 Fleet National Bank (formerly
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 Fleet National Bank
(formerly 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
Fleet National Bank (formerly BankBoston, N.A.).
##10.5 Second Amendment dated May 28, 2000 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 Fleet National Bank.
##10.6 Third Amendment dated May 28, 2000 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., LMRC Holding
Corp., Loon Mountain Recreation Corporation, Loon Realty
Corp. and Fleet National Bank.
####10.7 Fourth Amendment dated September 22, 2000 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.,
LMRC Holding Corp., Loon Mountain Recreation Corporation,
Loon Realty Corp. and Fleet National Bank.
*10.8 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.
*10.9 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.
*10.10 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.
*10.11 Escrow Agreement dated December 3, 1996 by and among
Fibreboard Corporation, Booth Creek Ski Holdings, Inc. and
First Trust of California.
*10.12 Purchase Agreement dated February 11, 1997 among Booth
Creek Ski Holdings, Inc., Grand Targhee Incorporated,
Moritz O. Bergmeyer and Carol Mann Bergmeyer.
*10.13 Promissory Note dated February 11, 1997 issued by Grand
Targhee Incorporated to Booth Creek Ski Holdings, Inc.
*10.14 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.
*10.15 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.
#10.16 Asset Purchase Agreement dated as of March 21, 2000, as
modified and amended, by and between Booth Creek Ski
Holdings, Inc., a Delaware corporation, as Seller, and GT
Acquisition I, LLC, a Delaware limited liability company,
as Buyer.
###10.17 Agreement for Purchase and Sale of Real Property and
certain related agreements dated September 22, 2000 between
Trimont Land Company and Trimont Land Holdings, Inc.
##10.18 Amended and Restated Management Agreement dated as of May
26, 2000 by and between Booth Creek Ski Holdings, Inc. and
Booth Creek Management Corporation.
*10.19 Ski Area Term Special Use Permit No. 4002/01 issued by the
United States Forest Service to Waterville Valley Ski
Resort, Inc.
*10.20 Ski Area Term Special Use Permit No. 5123/01 issued by the
United States Forest Service to Bear Mountain, Inc.
*10.21 Ski Area Term Special Use Permit No. 4033/01 issued by the
United States Forest Service to Grand Targhee Incorporated.
*10.22 Ski Area Term Special Use Permit No. 4127/09 issued by the
United States Forest Service to Ski Lifts, Inc.
*10.23 Annual Special Use Permit Nos. 4127/19 & 4127/19 issued by
the United States Forest Service to Ski Lifts, Inc.
++10.24 Ski Area Term Special Use Permit No. 4031/01 issued by the
United States Forest Service to Loon Mountain Recreation
Corporation.
++10.25 Amendment Number 2 for Special Use Permit No. 4008/1 issued
by the United States Forest Service to Loon Mountain
Recreation Corporation.
++10.26 Amendment Number 5 for Special Use Permit No. 4008/1 issued
by the United States Forest Service to Loon Mountain
Recreation Corporation.
+++++10.27 Ski Area Term Special Use Permit No. 4186 issued by the
United States Forest Service to Sierra-at-Tahoe, Inc.
**10.28 Employment Agreement dated as of July 1, 1997, by and
between Booth Creek Ski Holdings, Inc. and Timothy H. Beck.
+++10.29 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and Timothy Silva.
++++10.30 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and Timothy H. Beck.
++++10.31 Stock Option Agreement by and between Booth Creek Ski
Group, Inc. and John A. Rice.
####10.32 Employment Agreement by and between Booth Creek Ski Group,
Inc., Booth Creek Ski Holdings, Inc. and Christopher P.
Ryman.
####10.33 Employment Agreement by and between Booth Creek Ski Group,
Inc., Booth Creek Ski Holdings, Inc. and Elizabeth J. Cole.
####21.1 Subsidiaries of the Registrant.
- --------------------------
* 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 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 Annual Report on Form 10-K for the Fiscal
Year Ended October 30, 1998 and incorporated herein by reference.
+++++ Filed with the Company's Annual Report on Form 10-K for the Fiscal
Year Ended October 29, 1999 and incorporated herein by reference.
# Filed with the Company's Current Report on Form 8-K dated March 21,
2000 and incorporated herein by reference.
## Filed with the Company's Quarterly Report on Form 10-Q for the
Quarterly Period Ended July 28, 2000 and incorporated herein by
reference.
### Filed with the Company's Current Report on Form 8-K dated September
22, 2000 and incorporated herein by reference.
#### Filed herewith as an Exhibit to this Form 10-K.