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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 1, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 (I.R.S. Employer
of Incorporation or Organization) Identification Number)
1000 South Frontage Road West, 81657
Suite 100 (Zip Code)
Vail, Colorado
(Address of Principal Executive
Offices)
(970) 476-1311
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes[X] No[ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [ ] No [X]
As of August 31, 2003, the number of shares outstanding of the
registrant's Common Stock, par value $.01 per share, was 1,000 shares.
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TABLE OF CONTENTS
Item Page Number
- ---- -----------
PART I - FINANCIAL INFORMATION
1. Financial Statements.............................................. 1
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 11
3. Quantitative and Qualitative Disclosures about Market Risk........ 25
4. Controls and Procedures........................................... 25
PART II - OTHER INFORMATION
1. Legal Proceedings................................................. 27
6. Exhibits and Reports on Form 8-K.................................. 28
Signatures........................................................ 29
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
August 1, November 1, August 2,
2003 2002 2002
------------ ----------- ------------
ASSETS (Unaudited) (Unaudited)
Current assets:
Cash................................... $ 715 $ 664 $ 713
Accounts receivable, net of allowance
of $65, $44 and $50, respectively..... 1,952 1,964 1,334
Insurance proceeds receivable.......... - 800 800
Inventories ........................... 1,697 2,298 1,663
Prepaid expenses and other current
assets ............................... 1,003 1,425 1,176
Assets held for sale................... - - 12,845
------------ ----------- ------------
Total current assets ................... 5,367 7,151 18,531
Property and equipment, net ............ 112,707 119,337 118,133
Real estate held for development
and sale .............................. 8,030 6,966 6,632
Deferred financing costs, net of
accumulated amortization of $4,934,
$4,609 and $4,300, respectively ....... 3,069 4,137 4,435
Timber rights and other assets ......... 6,074 6,071 6,085
Goodwill................................ 22,938 22,938 22,938
------------ ----------- ------------
Total assets ........................... $ 158,185 $ 166,600 $ 176,754
============ =========== ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Revolving credit facility ............. $ 17,800 $ 1,245 $ 2,530
Current portion of long-term debt ..... 6,356 5,717 4,416
Accounts payable and accrued
liabilities .......................... 25,864 36,124 27,183
Liabilities held for sale.............. - - 1,232
------------ ----------- ------------
Total current liabilities .............. 50,020 43,086 35,361
Long-term debt ......................... 99,286 120,195 120,433
Other long-term liabilities ............ 756 756 767
Commitments and contingencies
Shareholder's equity:
Common stock, $.01 par value; 1,000
shares authorized, issued and
outstanding .......................... - - -
Additional paid-in capital ............ 72,000 72,000 72,000
Accumulated deficit ................... (63,877) (69,437) (51,807)
------------ ----------- ------------
Total shareholder's equity ............. 8,123 2,563 20,193
------------ ----------- ------------
Total liabilities and shareholder's
equity ................................ $ 158,185 $ 166,600 $ 176,754
============ =========== ============
See accompanying notes.
1
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
Three Months Ended Nine Months Ended
--------------------- ---------------------
August 1, August 2, August 1, August 2,
2003 2002 2003 2002
--------- --------- --------- ---------
(Unaudited)
Revenue:
Resort operations.......... $ 3,568 $ 3,482 $ 100,514 $ 104,742
Real estate and other
(including revenues with
related parties of $646
for the nine months ended
August 1, 2003, and
$2,400 and $11,300 for
the three and nine months
ended August 2, 2002,
respectively)............. - 2,560 662 11,475
--------- --------- --------- ---------
Total revenue................ 3,568 6,042 101,176 116,217
Operating expenses:
Cost of sales - resort
operations................ 5,872 6,248 56,566 56,268
Cost of sales - real estate
and other................. 11 564 229 2,737
Depreciation and depletion. 3,743 3,939 11,477 12,506
Selling, general and
administrative expense.... 4,163 4,149 17,531 17,751
--------- --------- --------- ---------
Total operating expenses..... 13,789 14,900 85,803 89,262
--------- --------- --------- ---------
Operating income (loss)...... (10,221) (8,858) 15,373 26,955
Other income (expense):
Interest expense........... (3,063) (3,572) (9,523) (11,645)
Amortization of deferred
financing costs........... (276) (307) (839) (817)
Gain on early retirement
of debt................... - - 506 2,761
Minority interest.......... - - - (15)
Other income (expense)..... 17 (81) 43 (39)
--------- --------- --------- ---------
Other income
(expense),net.............. (3,322) (3,960) (9,813) (9,755)
--------- --------- --------- ---------
Income (loss)from continuing
operations before change
in accounting principle.... (13,543) (12,818) 5,560 17,200
Discontinued operations:
Income (loss)from
discontinued operations
of Bear Mountain resort... - (1,290) - 1,960
Impairment loss from
disposal of Bear Mountain
resort.................... - (3,200) - (3,200)
--------- --------- --------- ---------
Loss on discontinued
operations................. - (4,490) - (1,240)
--------- --------- --------- ---------
Income (loss) before change
in accounting principle.... (13,543) (17,308) 5,560 15,960
Change in accounting
principle for goodwill..... - - - (200)
--------- --------- --------- ---------
Net income (loss)............ $ (13,543) $ (17,308) $ 5,560 $ 15,760
========= ========= ========= =========
See accompanying notes.
2
BOOTH CREEK SKI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended
-------------------------------
August 1, August 2,
2003 2002
------------- -------------
(Unaudited)
Cash flows from operating activities:
Net income..................................... $ 5,560 $ 15,760
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion.................. 11,477 13,851
Noncash cost of real estate sales .......... 190 2,492
Amortization of deferred financing costs ... 839 817
Gain on early retirement of debt............ (506) (2,761)
Minority interest........................... - 15
Impairment loss from disposal of Bear
Mountain resort............................ - 3,200
Change in accounting principle for goodwill. - 200
Changes in operating assets and liabilities:
Accounts receivable ....................... 12 588
Insurance proceeds receivable.............. 800 700
Inventories ............................... 601 561
Prepaid expenses and other current assets.. 422 437
Accounts payable and accrued liabilities... (10,260) (7,012)
------------- -------------
Net cash provided by operating activities...... 9,135 28,848
Cash flows from investing activities:
Capital expenditures for property and
equipment .................................... (4,158) (6,637)
Capital expenditures for real estate
held for development and sale ................ (1,254) (904)
Other assets .................................. (10) 223
------------- -------------
Net cash used in investing activities ......... (5,422) (7,318)
Cash flows from financing activities:
Borrowings under revolving credit facility .... 49,350 11,265
Repayments under revolving credit facility ... (32,795) (26,363)
Proceeds of long-term debt..................... - 25,000
Principal payments of long-term debt .......... (20,032) (27,985)
Deferred financing costs ...................... (185) (2,041)
Purchase of preferred stock of subsidiary
and payment of dividends ..................... - (1,151)
------------- -------------
Net cash used in financing activities ......... (3,662) (21,275)
------------- -------------
Increase in cash............................... 51 255
Cash at beginning of period ................... 664 458
------------- -------------
Cash at end of period ......................... $ 715 $ 713
============= =============
See accompanying notes.
3
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 1, 2003
1. Organization, Basis of Presentation and Summary of Significant Accounting
Policies
Booth Creek Ski Holdings, Inc. ("Booth Creek") owns and operates various
ski resorts, including Northstar-at-Tahoe ("Northstar"), Sierra-at-Tahoe
("Sierra"), Waterville Valley, Mt. Cranmore, Loon Mountain and the Summit at
Snoqualmie (the "Summit"). Booth Creek also conducts certain real estate
development activities, primarily at Northstar.
Booth Creek sold the Bear Mountain ski resort ("Bear Mountain") on October
10, 2002. The operating results of Bear Mountain have been reflected as
discontinued operations in the accompanying statements of operations for the
three and nine month periods ended August 2, 2002. Summary operating results for
Bear Mountain for the three and nine month periods ended August 2, 2002 were as
follows:
Three Months Nine Months
Ended Ended
August 2, August 2,
2002 2002
------------- -------------
(In thousands)
Total revenue...................... $ 312 $ 13,820
Total expenses..................... (1,602) (11,860)
------------- -------------
Total income (loss) from
discontinued operations.......... $ (1,290) $ 1,960
============= =============
The consolidated financial statements include the accounts of Booth Creek
and its subsidiaries (collectively referred to as the "Company"), all of which
are wholly-owned. All significant intercompany transactions and balances have
been eliminated.
Booth Creek is a wholly-owned subsidiary of Booth Creek Ski Group, Inc.
The accompanying consolidated financial statements as of August 1, 2003 and
August 2, 2002 and for the three and nine month periods then ended are
unaudited, but include all adjustments (consisting only of normal, recurring
adjustments and adjustments to recognize (a) the gains on early retirement of
debt during the nine month periods ended August 1, 2003 and August 2, 2002, (b)
the impairment loss from the anticipated disposal of the Bear Mountain resort
during the nine months ended August 2, 2002, and (c) the change in accounting
principle for goodwill during the nine months ended August 2, 2002) which, in
the opinion of management of the Company, are considered necessary for a fair
presentation of the Company's financial position at August 1, 2003 and August 2,
2002, and its operating results and cash flows for the three and nine month
periods then ended. Due to the seasonal nature of the Company's business, the
results for the interim periods are not indicative of results for the entire
year. Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to generally accepted accounting
principles applicable for interim periods. Management believes that the
disclosures made are adequate to make the information presented not misleading.
The unaudited consolidated financial statements should be read in conjunction
with the following notes and the Company's consolidated financial statements and
accompanying notes included in the Company's Annual Report on Form 10-K for the
fiscal year ended November 1, 2002.
Cash
Included in cash at August 1, 2003 is restricted cash of $551,000, relating
to advance deposits and rental fees due to property owners for lodging and
property rentals.
4
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Inventories
Inventories are valued at the lower of cost (first-in, first-out method) or
market. The components of inventories were as follows:
August 1, November 1, August 2,
2003 2002 2002
---------- ----------- ----------
(In thousands)
Retail products....... $ 922 $ 1,432 $ 858
Supplies.............. 516 618 490
Food and beverage..... 259 248 315
---------- ----------- ----------
$ 1,697 $ 2,298 $ 1,663
========== =========== ==========
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 when
services are provided and products are sold. Sales of season passes are
initially deferred in unearned revenue and recognized ratably over the expected
ski season.
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. The Company evaluates the contractual agreements and
underlying facts and circumstances relating to its real estate transactions,
including the involvement of related parties, to determine the appropriate
revenue recognition treatment of such transactions in accordance with Statement
of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate,"
and related pronouncements.
Recently Adopted Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS No. 143"), which addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and associated asset retirement costs. The new rules apply to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and (or) normal operation
of a long-lived asset. The Company adopted SFAS No. 143 effective as of November
2, 2002. The adoption of SFAS No. 143 did not have any impact on the Company's
consolidated financial position or results of operations.
In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS No. 146"), which addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for
a cost that is associated with an exit or disposal activity be recognized when
the liability is incurred, whereas EITF Issue No. 94-3 required an entity to
recognize a liability for an exit cost on the date that the entity committed
itself to an exit plan. SFAS No. 146 is effective for exit or disposal
activities initiated after December 31, 2002. The adoption of SFAS No. 146 did
not have a material impact on the Company's consolidated financial position or
results of operations.
5
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (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. Paid Skier Visit Insurance Program
For the 2000/01 ski season, the Company entered into four separate paid
skier visit insurance policies covering Bear Mountain, Loon Mountain, Waterville
Valley and the Summit. For the year ended November 2, 2001, the Company recorded
resort operations revenues of $1,500,000 for claims attributable to lower than
agreed upon paid skier visits and snowfall levels under the Summit and
Waterville Valley policies. As a result of the underwriters' failure to properly
process the Company's claims, in November 2001 the Company filed a lawsuit
against the underwriters seeking recovery for breach of contract, breach of
covenant of good faith and unfair and deceptive business practices. In April
2002, the underwriters made a partial offer of settlement of $700,000, which the
Company accepted with a reservation of all rights and remedies under the terms
of the policies and applicable law with respect to its remaining claims. In June
2003, the parties agreed to settle the Company's claims in exchange for a final
claim payment of $683,000 tendered to the Company in July 2003.
3. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
August 1, November 1, August 2,
2003 2002 2002
----------- ----------- -----------
(In thousands)
Accounts payable.................... $ 1,443 $ 4,552 $ 2,751
Accrued compensation and benefits... 2,872 4,031 3,869
Taxes other than income ............ 483 972 663
Unearned revenue and deposits-
resort operations.................. 5,842 15,232 4,903
Unearned deposits from related
party - real estate operations..... 5,610 5,610 5,610
Interest............................ 3,833 1,647 4,567
Other............................... 5,781 4,080 4,820
----------- ----------- -----------
$ 25,864 $ 36,124 $ 27,183
=========== =========== ===========
4. Financing Arrangements
Senior Credit Facility
Effective March 15, 2002, the Company and its subsidiaries entered into an
Amended and Restated Credit Agreement (as amended, the "Senior Credit Facility")
with Fleet National Bank, as administrative agent ("Agent"), and certain
lenders. The following is a summary of certain provisions of the Senior Credit
Facility, as amended to date.
General - The Senior Credit Facility provides for a revolving credit
facility (the "Revolving Credit Facility") with borrowing availability of
up to $25,000,000, and a term loan facility (the "Term Facility") with
outstanding borrowings as of August 1, 2003 of $22,000,000. Borrowings
under the Senior Credit Facility are collectively referred to herein as
"Loans."
6
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (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) the
higher of (i) the Agent's prime rate or (ii) the federal funds rate plus
.5% plus (b) a margin of 1.5%. LIBOR rate loans bear interest at the LIBOR
rate plus a margin of 4%. Interest on Loans outstanding is payable
quarterly or at the end of the Interest Period (as defined in the Senior
Credit Facility) for loans subject to LIBOR rate options. The Senior Credit
Facility also requires commitment fees of .5% based on the unused borrowing
availability of the Revolving Credit Facility. Borrowings outstanding under
the Term Facility bore interest at an annual rate of 5.10% as of August 1,
2003 pursuant to the LIBOR rate option. Borrowings under the Revolving
Credit Facility bore interest at a weighted average annual rate of 5.11% as
of August 1, 2003 pursuant to elections under both the base rate and LIBOR
rate options.
Repayment - Subject to the provisions of the Senior Credit Facility,
the Company may, from time to time, borrow, repay and reborrow under the
Revolving Credit Facility. The Senior Credit Facility requires that the
Company not have any borrowings under the Revolving Credit Facility for a
period of 30 consecutive days commencing sometime between January 15 and
February 28 of each year. The Term Facility provides for quarterly
commitment reductions of $1,000,000 on the last day of January, April, July
and October of each year through October 31, 2005, the maturity date of the
Senior Credit Facility. The Company is required to repay amounts
outstanding under the Term Facility on such dates by an amount equal to the
greater of (i) the amount by which outstanding Term Facility borrowings
exceed the then-applicable term loan commitment and (ii) the Excess Cash
Proceeds (as defined in the Senior Credit Facility) derived from specified
real estate asset sales determined on a cumulative basis. No amount of the
Term Facility which is repaid may be reborrowed. The entire unpaid balance
under the Senior Credit Facility is due and payable on October 31, 2005.
Security - Borrowings under the Senior Credit Facility are secured by
(a) 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 (b) a grant of a security
interest in substantially all of the consolidated assets of Booth Creek and
its subsidiaries.
Use of Proceeds - Borrowings under the Revolving Credit Facility can
be used for working capital and other general corporate purposes including,
with the consent of the lenders, the repurchase of the Company's 12.5%
senior notes due March 15, 2007 (the "Senior Notes"). Borrowings of
$25,000,000 under the Term Facility were used to repurchase Senior Notes,
together with accrued and unpaid interest thereon. As of August 1, 2003,
outstanding borrowings under the Revolving Credit Facility and Term
Facility were $17,800,000 and $22,000,000, respectively.
Covenants - The Senior Credit Facility contains financial covenants
relating to the maintenance of (a) minimum consolidated resort EBITDA
(resort earnings before interest, taxes, depreciation and amortization,
adjusted for certain items specified in the Senior Credit Facility)
measured quarterly on a rolling four quarter basis ("Minimum Resort
EBITDA"), (b) a minimum ratio of (y) consolidated EBITDA (earnings before
interest, taxes, depreciation, depletion, amortization and noncash cost of
real estate sales, adjusted for certain items specified in the Senior
Credit Facility), less $5,000,000, less cash income taxes actually paid
during the period to (z) consolidated debt service (the sum of interest,
cash payments of principal made in respect of capitalized lease obligations
and mandatory reductions under the Term Facility) measured quarterly on a
rolling four quarter basis (the "Leverage Ratio"), and (c) a maximum
adjusted consolidated leverage ratio (the ratio of secured indebtedness of
the Company and its subsidiaries (with certain exceptions specified in the
Senior Credit Facility) to the sum of the Company's consolidated net worth,
as adjusted pursuant to the Senior Credit Facility and the aggregate
principal amount of outstanding Senior Notes ("Adjusted Leverage Ratio")).
On June 13, 2003, the Company obtained an amendment and waiver (the
"Amendment and Waiver") from the lenders under the Senior Credit Facility,
which modified the financial covenants under the Senior Credit Facility.
After giving effect to the Amendment and Waiver, the Company is required to
have a Minimum Resort EBITDA of (i) $19,000,000 during each rolling four
quarter period through January 30, 2004, (ii) $23,500,000 during each
rolling four quarter period from January 31, 2004 through January 28, 2005
and (iii) $26,500,000 during each rolling four quarter period from January
29, 2005 and thereafter. It is also required to maintain (a) a minimum
Leverage Ratio of (i) .75 to 1 from May 3, 2003 through August 1, 2003,
(ii) 1 to 1 from August 2, 2003 through October 31, 2003, (iii) 1.1 to 1
from November 1, 2003 through January 30, 2004, (iv) 1.2 to 1 from January
31, 2004 through January 28, 2005 and (v) 1.3 to 1 thereafter and (b) a
maximum Adjusted Leverage Ratio of (i) .55 to 1 through August 1, 2003,
(ii) .65 to 1 from August 2, 2003 through October 31, 2003, (iii) .55 to 1
from November 1, 2003 through October 29, 2004, (ii) .50 to 1 from October
30, 2004 through October 28, 2005 and (iii) .45 to 1 thereafter. The
Company was in compliance with the covenants under the Senior Credit
Facility as of August 1, 2003.
7
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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, letters of credit, liens, investments,
distributions, capital expenditures, mergers, acquisitions, asset sales,
fundamental corporate changes, transactions with affiliates, optional
payments and modification of debt instruments and issuances of stock.
The Company has entered into two interest rate cap agreements for an
aggregate notional amount of $15,000,000 through July 31, 2005, declining to
$14,000,000 through October 31, 2005. These interest rate cap agreements are
designed to limit the Company's exposure to the effects of rising interest rates
with respect to borrowings outstanding under the Term Facility. In exchange for
upfront payments of $179,000, the Company is entitled to receive floating rate
payments from the counterparties to the interest rate cap agreements during
those periods in which the three month LIBOR rate exceeds 6%. These agreements
are accounted for at their fair value, with fluctuations recorded through the
statement of operations. As of August 1, 2003, the fair value of these
agreements was $22,000.
Senior Notes
As of August 1, 2003, the Company had outstanding $80,175,000 aggregate
principal amount of its 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 a current redemption price (expressed as a percentage of
the principal amount redeemed) of 104.167%, declining to 102.083% as of March
15, 2004 and 100% as of March 15, 2005, plus, in each case, accrued and unpaid
interest to the redemption date. 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 unconditionally guaranteed, on an unsecured senior
basis, as to the payment of principal, premium, if any, and interest, jointly
and severally, by all Restricted Subsidiaries of the Company, as defined in the
indenture for the Senior Notes (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.
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 contains covenants for the benefit of the holders of
the Senior Notes that, among other things, limit 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 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.
8
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 minor and the membership interests in DRE,
L.L.C. are 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.
During the nine months ended August 1, 2003, the Company repurchased
$16,000,000 aggregate principal amount of Senior Notes for $15,080,000. After
giving effect to the write-off of related deferred financing costs of $414,000,
the Company recognized a gain on early retirement of debt of $506,000.
During the nine months ended August 2, 2002, the Company repurchased
$29,325,000 aggregate principal amount of Senior Notes for $25,588,000. After
giving effect to the write-off of related deferred financing and other costs of
$976,000, the Company recognized a gain on early retirement of debt of
$2,761,000.
Other Debt
During the nine months ended August 1, 2003 and August 2, 2002, the Company
entered into capital lease obligations of $682,000 and $1,644,000, respectively,
for the purchase of equipment.
As of August 1, 2003, the maturities of long-term debt, including capital
lease obligations, were as follows:
(In thousands)
Three months ending October 2003................ $ 1,000
Year ending October 2004........................ 6,327
Year ending October 2005........................ 18,020
Year ending October 2006........................ 99
Year ending October 2007........................ 80,196
-----------
Total long-term debt............................ 105,642
Less current portion............................ 6,356
-----------
Long-term debt.................................. $ 99,286
===========
5. Income Taxes
As of November 1, 2002, the Company had net operating loss carryforwards of
approximately $90,000,000 for federal income tax reporting purposes, which
expire between 2012 and 2022. The tax benefits of such net operating losses are
fully offset by a valuation reserve. Based on the Company's current tax
attributes, no income tax provision or benefit is expected for the year ending
October 31, 2003. Accordingly, during the three and nine month periods ended
August 1, 2003, no income tax provision has been provided.
9
BOOTH CREEK SKI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
6. Business Segments
The Company currently operates in two business segments, resort operations
and real estate and other. Data by segment is as follows:
Three Months Ended Nine Months Ended
----------------------- -----------------------
August 1, August 2, August 1, August 2,
2003 2002 2003 2002
---------- ----------- ----------- ----------
(In thousands)
Revenue:
Resort operations.... $ 3,568 $ 3,482 $ 100,514 $ 104,742
Real estate and
other.............. - 2,560 662 11,475
---------- ----------- ----------- -----------
$ 3,568 $ 6,042 $ 101,176 $ 116,217
========== =========== =========== ===========
Operating income (loss):
Resort operations.... $ (9,985) $ (10,579) $ 16,025 $ 18,987
Real estate and
other............. (236) 1,721 (652) 7,968
---------- ----------- ----------- -----------
$ (10,221) $ (8,858) $ 15,373 $ 26,955
========== =========== =========== ===========
August 1, November 1,
2003 2002
------------- -------------
(In thousands)
Segment assets:
Resort operations.................. $ 140,130 $ 148,427
Real estate and other.............. 11,996 10,939
Corporate and other
nonidentifiable assets........... 6,059 7,234
------------- -------------
$ 158,185 $ 166,600
============= =============
A reconciliation of combined operating income for resort operations and
real estate and other to consolidated income (loss) from continuing operations
before change in accounting principle is as follows:
Three Months Ended Nine Months Ended
---------------------- --------------------
August 1, August 2, August 1, August 2,
2003 2002 2003 2002
--------- --------- --------- ---------
(In thousands)
Operating income (loss) for
reportable segments....... $(10,221) $ (8,858) $ 15,373 $ 26,955
Interest expense........... (3,063) (3,572) (9,523) (11,645)
Amortization of deferred
financing costs........... (276) (307) (839) (817)
Gain on early retirement
of debt................... - - 506 2,761
Minority interest.......... - - - (15)
Other income (expense)..... 17 (81) 43 (39)
--------- --------- --------- ---------
Income (loss) from
continuing operations
before change in
accounting principle ..... $(13,543) $(12,818) $ 5,560 $ 17,200
========= ========= ========= =========
7. Northstar Unit 7A Real Estate Sales
In March 2003, the Company launched the sale of the Unit 7A subdivision at
Northstar, which consists of fifteen ski-in/ski-out single family lots. As of
September 12, 2003, the Company entered into binding contracts for the sale of
thirteen of the lots at an average lot price of approximately $780,000. The
Company is continuing efforts to market and sell the remaining two lots within
the subdivision. As of September 12, 2003, the Company closed escrow on ___ of
the thirteen lots under contract. The remaining ___ lots currently under
contract are expected to close escrow prior to the end of 2003, and are subject
to normal and customary closing conditions.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
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 as well as in Part II, Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Risk Factors" in
the Company's Annual Report on Form 10-K for its fiscal year ended November 1,
2002.
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 its resorts and
the use of extensive 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 of the Company's resorts. Moreover, since
2000, the Company has sold two resorts (Grand Targhee and Bear Mountain),
thereby reducing its geographic diversity.
The Company's three resorts with the lowest average natural snowfall,
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 136, 139 and 99 days, respectively, during
each of the last five ski seasons, including the 2002/03 ski season. However,
the efficiency and effectiveness of snowmaking operations can be negatively
impacted by numerous factors, including temperature variability, reliability of
water sources, availability and cost of adequate energy supplies and unfavorable
weather events such as heavy rains.
Sierra and the Summit generally experience higher natural snowfall levels,
averaging approximately 430 and 425 inches of snowfall per year, respectively,
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 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.
For example, as a result of a lack of natural snowfall, the Summit was unable to
open until after Christmas in the 2002/03 ski season, and conditions remained
poor for much of the season.
Northstar has averaged approximately 253 inches of snowfall per year for
the past five ski seasons. The resort has snowmaking capabilities to provide
coverage on approximately 50% of its trails. Although the resort's operations
depend significantly on natural snowfall, particularly in the early part of the
ski season, in recent years the Company has invested in additional snowmaking
facilities to improve Northstar's snowmaking production capacity.
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 2002/03 ski season total skier days were attributable to residents of the
San Francisco/San Jose, Sacramento, Central California Valley and Lake Tahoe
regions. At Waterville Valley, Loon Mountain and Mt. Cranmore, approximately 80%
of the 2002/03 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 2002/03 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 sales and marketing programs to
improve peak and off-peak volume. The Company also seeks to increase skier days
by offering a quality guest experience and developing effective target marketing
programs. 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.
11
The Company's current resorts have invested approximately $54 million
(including $8.8 million of equipment acquired through capital leases and other
debt) in capital expenditures since October 1999 to upgrade chairlift capacity,
expand terrain, improve skier service, enhance 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.
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 adjust staffing levels when skier volumes or
seasonal needs dictate.
Each of the Company's resorts is subject to the threat of personal injury
claims relating principally to snow sports activities as well as premises and
vehicular operations and workers' compensation matters. The Company maintains
various forms of insurance covering claims related to its properties and usual
and customary risks associated with the operation of four-season recreation
resorts. As a result of the terrorist attacks on September 11, 2001, the
insurance industry has experienced significant losses and a substantial
reduction in underwriting capacity, which has generally resulted in
significantly higher renewal premiums for companies seeking insurance. In
connection with its annual renewal of insurance coverage for 2003, the Company
experienced an increase in insurance premium costs of approximately $1,500,000
over the level of such costs in 2002. In addition, the elimination of paid skier
visit insurance coverage is likely to lead to more variability in the Company's
operating results.
The Company sold the Bear Mountain ski resort ("Bear Mountain") on October
10, 2002. The operating results of Bear Mountain have been reflected as
discontinued operations in the Company's statements of operations for the three
and nine month periods ended August 2, 2002. Summary operating results for Bear
Mountain for the three and nine month periods ended August 2, 2002 were as
follows:
Three Months Nine Months
Ended Ended
August 2, August 2,
2002 2002
------------- -------------
(In thousands)
Total revenue................. $ 312 $ 13,820
Total expenses................ (1,602) (11,860)
------------- -------------
Total income (loss) from
discontinued operations...... $ (1,290) $ 1,960
============= =============
The Company's real estate and other segment is primarily engaged in the
sale of single family lots, development real estate and timber at Northstar. The
revenues, operating income and cash flows of the real estate and other segment
are highly variable.
12
Results of Operations of the Company
Overview
The opening and closing dates for the Company's resorts for the 2002/03 and
2001/02 ski seasons were as follows:
Opening Dates
--------------------------------------------
2002/03 Season 2001/02 Season
--------------------------------------------
Northstar............. November 22, 2002 November 29, 2001
Sierra................ December 16, 2002 November 25, 2001
Waterville Valley*.... November 22, 2002 November 16, 2001
Mt. Cranmore.......... November 29, 2002 December 15, 2001
Loon Mountain*........ November 15, 2002 November 16, 2001
The Summit............ December 27, 2002 November 30, 2001
* Following their openings for the 2001/02 season, Waterville Valley and
Loon Mountain ceased operations in December 2001 for six and ten days,
respectively, due to eroding conditions as a result of warm weather.
Closing Dates
--------------------------------------------
2002/03 Season 2001/02 Season
--------------------------------------------
Northstar............. April 20, 2003 April 21, 2002
Sierra................ April 27, 2003 April 15, 2002
Waterville Valley..... April 6, 2003 April 7, 2002
Mt. Cranmore.......... March 30, 2003 March 24, 2002
Loon Mountain......... April 20, 2003 April 14, 2002
The Summit............ April 13, 2003 May 5, 2002
The Lake Tahoe region experienced relatively dry conditions and a lack of
natural snowfall through mid-December 2002. Due to its snowmaking system,
Northstar opened on schedule. However, Sierra did not open until December 16,
2002 due to its dependence on natural snowfall. During the period from December
14th to the 21st, the region received a number of powerful storms resulting in
over six feet of snowfall at Northstar and Sierra. While the storms provided
excellent skiing conditions for the Christmas holiday season, the storms caused
prolonged power outages prior to Christmas, difficult road conditions and other
factors which negatively affected skier visitation on a number of days during
mid-December 2002. For the 2001/02 season, the Lake Tahoe region received
significantly above average snowfall in the first half of December 2001, which
allowed Northstar and Sierra to open 100% of their terrain earlier than usual,
and provided favorable conditions going into the Christmas holiday period and
the first half of January 2002. During January, February and March 2003, the
Lake Tahoe region experienced natural snowfall levels that were substantially
below both long-term historical and prior season levels, which negatively
impacted customer perception of skiing conditions in Lake Tahoe. Despite these
weather challenges, skier visits at Northstar for the 2002/03 season increased
by 49,000 visits, or 9%, due to the relative competitive advantage of its
snowmaking system and the introduction of new season pass products. Skier
visitation at Sierra for the 2002/03 season declined by 66,000 visits, or 16%,
due primarily to the delayed opening for the 2002/03 season and skier visit
shortfalls in the latter part of January and February 2003 due to the lack of
natural snowfall.
During the first half of the 2002/03 ski season, the northeastern United
States experienced much colder temperatures and increased natural snowfall as
compared to the record warm winter of 2001/02. As a result, the Company's New
Hampshire resorts experienced generally good operating conditions for the early
part of the 2002/03 ski season. Bitterly cold temperatures during the second
half of January and the first half of February 2003, as well as several major
disruptive storms (including over the important Presidents' Day holiday) in
Boston and other major cities in the Northeast, dampened mid-season skier
visitation. Late season conditions at the Company's New Hampshire resorts were
generally improved over the prior season. For the 2002/03 ski season, skier
visits at the Company's New Hampshire resorts increased by 99,000 visits, or
16%, from the prior season.
13
For the 2002/03 season, the Pacific Northwest experienced unseasonably warm
temperatures and substantially below average snowfall. Snowfall at the Summit
for the 2002/03 season was less than 60% of historical long-term averages and
prior season levels. Additionally, average temperatures at the Summit during the
2002/03 ski season were generally warmer than normal, and the resort experienced
a number of rain events during the course of the season. The Summit commenced
partial operations on December 27, 2002 on limited terrain, as compared to a
November 30, 2001 opening for the 2001/02 ski season. Skiing conditions remained
poor at the Summit throughout the 2002/03 season. Conversely, operating
conditions at the Summit were generally favorable throughout the 2001/02 ski
season. As a result of these conditions, total skier visits at the Summit for
the 2002/03 season were down 283,000 visits, or 46%, as compared to the 2001/02
season.
Three Months Ended August 1, 2003 Compared to the Three Months Ended August
2, 2002
Total revenue for the three months ended August 1, 2003 was $3,568,000, a
decrease of $2,474,000, or 41%, from the Company's revenues for the three months
ended August 2, 2002. Revenues from resort operations for the 2003 period were
$3,568,000, an increase of $86,000, or 2%, as compared to the 2002 period. There
were no revenues from real estate and other operations for the three months
ended August 1, 2003. Five lots within the Unit 7 development at Northstar
closed during the 2002 period, which generated revenues of $2,400,000. Timber
operations contributed revenues of $160,000 in the 2002 period.
Cost of sales for resort operations for the three months ended August 1,
2003 were $5,872,000, a decrease of $376,000, or 6%, as compared to the 2002
period, primarily due to labor cost savings initiatives.
Cost of sales for real estate and timber operations for the three months
ended August 1, 2003 were $11,000. Cost of sales for real estate and timber
operations for the three months ended August 2, 2002 were $564,000, including
(i) noncash cost of real estate sales of $363,000 related to the close of escrow
on five lots within the Unit 7 development, and (ii) timber operations costs of
$201,000.
Depreciation and depletion expense for the three months ended August 1,
2003 was $3,743,000, a decrease of $196,000, or 5%, from the 2002 period. The
decline in depreciation and depletion expense was primarily due to certain
assets acquired in connection with the Company's resort acquisitions in 1996 and
1997 having become fully depreciated combined with the lack of timber harvesting
activity during the 2003 period.
Selling, general and administrative expense for the three months ended
August 1, 2003 were $4,163,000, an increase of $14,000 as compared to the 2002
period. Selling, general and administrative expense for the 2003 and 2002
periods include $225,000 and $184,000, respectively, relating to the Company's
real estate segment.
Operating loss for the three months ended August 1, 2003 was $10,221,000, a
decline of $1,363,000 from the 2002 period, primarily as a result of the effect
of the $2,400,000 in real estate sales reflected in the 2002 period.
Interest expense for the three months ended August 1, 2003 totaled
$3,063,000, a decrease of $509,000, or 14%, from the Company's interest expense
for the three months ended August 2, 2002, as a result of lower average interest
rates and reduced borrowing levels.
As of November 1, 2002, the Company had net operating loss carryforwards of
approximately $90,000,000 for federal income tax reporting purposes, which
expire between 2012 and 2022. The tax benefits of such net operating losses are
fully offset by a valuation reserve. Based on the Company's current tax
attributes, no income tax provision or benefit is expected for the year ending
October 31, 2003. Accordingly, during the three months ended August 1, 2003, no
income tax provision has been provided.
The Company's net loss for the three months ended August 1, 2003 was
$13,543,000, a reduction of $3,765,000 from the net loss of $17,308,000
generated for the three months ended August 2, 2002, primarily as a result of
the $1,290,000 loss from discontinued operations of Bear Mountain and the
$3,200,000 impairment loss from the disposal of Bear Mountain, partially offset
by the $2,400,000 in real estate sales reflected in the 2002 period.
14
The financial information presented below includes information on "Total
EBITDA," "Noncash Cost of Real Estate Sales" and "Total EBITDA (Excluding
Noncash Cost of Real Estate Sales)." "Total EBITDA" represents income from
operations before depreciation and depletion expense. "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 real estate sales. Although
EBITDA is not a measure of performance under accounting principles generally
accepted in the United States ("GAAP"), the information is presented because
management believes it provides useful information regarding a company's ability
to incur and service debt. In addition, management uses EBITDA measures to
assess the Company's operating performance and to make capital investment
decisions. Further, Total EBITDA (Excluding Noncash Cost of Real Estate Sales)
is calculated consistent with the manner that "EBITDA" is calculated under the
indenture governing the Company's 12.5% senior notes due 2007 (the "Senior
Notes"), and therefore, management believes this measure is meaningful to
holders of the Senior Notes. EBITDA should not be considered in isolation or as
a substitute for net income, operating 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, the
EBITDA measures 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. The following table reconciles operating income
from the Company's consolidated statements of operations to Total EBITDA and
Total EBITDA (Excluding Noncash Cost of Real Estate Sales) for the periods
indicated:
Three Months Ended
---------------------
August 1, August 2, Percentage
2003 2002 (Decrease) (Decrease)
-------- -------- -------- --------
(In thousands)
Reported Operating
Income................. $ (10,221) $ (8,858) $ (1,363) (15)%
Depreciation and
Depletion.............. 3,743 3,939 (196) (5)
--------- --------- -------
Total EBITDA............ (6,478) (4,919) (1,559) (32)
Noncash Cost of Real
Estate Sales........... - 363 (363) (100)
--------- --------- -------
Total EBITDA (Excluding
Noncash Cost of Real
Estate Sales).......... $ (6,478) $ (4,556) $ (1,992) (42)
========= ========= ========
Nine Months Ended August 1, 2003 Compared to the Nine Months Ended August
2, 2002
Total revenue for the nine months ended August 1, 2003 was $101,176,000, a
decrease of $15,041,000, or 13%, from the Company's revenues for the nine months
ended August 2, 2002. Revenues from resort operations for the 2003 period were
$100,514,000, a decrease of $4,228,000, or 4%, as compared to the 2002 period.
Revenues from real estate operations for the nine months ended August 1, 2003
were $646,000, due to the close of escrow on the final lot within the Unit 7
development at Northstar. Twenty-five lots within the Unit 7 development closed
during the 2002 period, which generated revenues of $11,300,000. Timber
operations contributed revenues of $16,000 and $175,000 for the 2003 and 2002
periods, respectively.
The following table summarizes the sources of the Company's revenues from
resort operations for the nine months ended August 1, 2003 and August 2, 2002:
Nine Months Ended
---------------------- Percentage
August 1, August 2, Increase Increase
2003 2002 (Decrease) (Decrease)
--------- --------- --------- ---------
(In thousands)
Lift Tickets............... $ 37,514 $ 42,930 $ (5,416) (13)%
Season Passes.............. 19,168 14,521 4,647 32
Snow School................ 7,517 8,118 (601) (7)
Equipment Rental........... 7,849 8,931 (1,082) (12)
Retail..................... 4,195 4,408 (213) (5)
Food and Beverage.......... 14,505 14,972 (467) (3)
Other...................... 9,766 10,862 (1,096) (10)
--------- --------- ---------
Total Resort Operations
Revenues................. $100,514 $104,742 $ (4,228) (4)
========= ========= =========
15
Total skier visits generated by each of the Company's resorts for the nine
months ended August 1, 2003 and August 2, 2002 were as follows:
Nine Months Ended
---------------------- Percentage
August 1, August 2, Increase Increase
2003 2003 (Decrease) (Decrease)
--------- --------- --------- ---------
(Skier visits in thousands)
Northstar.................. 570 521 49 9%
Sierra..................... 353 419 (66) (16)
Waterville Valley.......... 223 205 18 9
Mt. Cranmore............... 119 96 23 24
Loon Mountain.............. 359 301 58 19
The Summit................. 329 612 (283) (46)
------- ------- -------
1,953 2,154 (201) (9)
======= ======= =======
As compared to the nine months ended August 2, 2002, resort operations
revenues for Northstar increased by $1,309,000, primarily due to higher skier
visits and season pass sales, partially offset by lower revenue per skier visit
yields due to changes in the mix of skiers. Revenues for Sierra decreased by
$1,866,000 due to reduced skier visits, partially offset by higher revenue per
skier visit yields. Revenues for Waterville Valley and Mt. Cranmore increased by
$839,000 and $940,000, respectively, due to increases in skier visits. Revenues
for Loon Mountain increased by $495,000 due to increased skier visits, partially
offset by lower yields due to a greater proportion of season pass visits in the
2003 period. The Summit's revenues decreased by $5,945,000 due primarily to
substantially lower visitation.
Cost of sales for resort operations for the nine months ended August 1,
2003 were $56,566,000, an increase of $298,000, or 1%, as compared to the 2002
period. The increase was primarily the result of normal inflationary factors and
higher insurance costs, partially offset by (i) lower snowmaking costs, (ii)
reduced United States Forest Service permit fees in the 2003 period, (iii) the
effect of higher workers' compensation provisions in the 2002 period for
exposures at the Company's Lake Tahoe and Washington resorts, and (iv) lower
summer payroll in the 2003 period as a result of cost savings initiatives.
Cost of sales for real estate and timber operations for the nine months
ended August 1, 2003 was $229,000, including noncash cost of real estate sales
of $190,000, primarily as a result of the close of escrow on the final lot
within the Unit 7 development at Northstar. Cost of sales for real estate and
timber operations for the nine months ended August 2, 2002 was $2,737,000,
including noncash cost of real estate sales of $2,492,000, primarily as a result
of the close of escrow on 25 lots within the Unit 7 development at Northstar.
Depreciation and depletion expense for the nine months ended August 1, 2003
was $11,477,000, a decrease of $1,029,000, or 8%, from the 2002 period. The
decline in depreciation and depletion expense was primarily due to certain
assets acquired in connection with the Company's resort acquisitions in 1996 and
1997 having become fully depreciated combined with the lack of timber harvesting
activity in the 2003 period.
Selling, general and administrative expense for the nine months ended
August 1, 2003 were $17,531,000, a decrease of $220,000, or 1%, as compared to
the 2002 period. Selling, general and administrative expense for the 2003 and
2002 periods include $1,078,000 and $679,000, respectively, relating to the
Company's real estate segment. The decrease in selling, general and
administrative expenses between the 2003 and 2002 periods was primarily due to a
reduction in legal fees of $282,000 as a result of significant activity during
the 2002 period for various lawsuits involving Loon Mountain which have been
resolved and reduced provisions under incentive compensation arrangements,
partially offset by normal inflationary factors and sales launch costs for the
Unit 7A development at Northstar.
Operating income for the nine months ended August 1, 2003 was $15,373,000,
a decrease of $11,582,000 from the operating income generated for the 2002
period, primarily as a result of the significant real estate revenues during the
2002 period and lower revenues from resort operations in the 2003 period.
16
Interest expense for the nine months ended August 1, 2003 totaled
$9,523,000, a decrease of $2,122,000, or 18%, from the Company's interest
expense for the nine months ended August 2, 2002, as a result of reduced
borrowings and lower average interest rates.
The Company recognized gains on the early retirement of debt of $506,000
and $2,761,000 for the nine months ended August 1, 2003 and August 2, 2002,
respectively, relating to repurchases of $16,000,000 and $29,325,000 aggregate
principal amount of its Senior Notes during the 2003 and 2002 periods,
respectively.
As of November 1, 2002, the Company had net operating loss carryforwards of
approximately $90,000,000 for federal income tax reporting purposes, which
expire between 2012 and 2022. The tax benefits of such net operating losses are
fully offset by a valuation reserve. Based on the Company's current tax
attributes, no income tax provision or benefit is expected for the year ending
October 31, 2003. Accordingly, during the nine months ended August 1, 2003, no
income tax provision has been provided.
The Company's net income for the nine months ended August 1, 2003 was
$5,560,000, a reduction of $10,200,000 from the net income of $15,760,000
generated for the nine months ended August 2, 2002. The decline in net income
was primarily a result of the $11,300,000 in real estate sales and $2,761,000
gain on the early retirement of debt reflected in the 2002 period, and lower
resort operations revenues in the 2003 period.
The financial information presented below includes information on "Total
EBITDA," "Noncash Cost of Real Estate Sales" and "Total EBITDA (Excluding
Noncash Cost of Real Estate Sales)." "Total EBITDA" represents income from
operations before depreciation and depletion expense. "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 real estate sales. Although
EBITDA is not a measure of performance under accounting principles generally
accepted in the United States ("GAAP"), the information is presented because
management believes it provides useful information regarding a company's ability
to incur and service debt. In addition, management uses EBITDA measures to
assess the Company's operating performance and to make capital investment
decisions. Further, Total EBITDA (Excluding Noncash Cost of Real Estate Sales)
is calculated consistent with the manner that "EBITDA" is calculated under the
indenture governing the Company's Senior Notes, and therefore, management
believes this measure is meaningful to holders of the Senior Notes. EBITDA
should not be considered in isolation or as a substitute for net income,
operating 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, the EBITDA measures 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. The
following table reconciles operating income from the Company's consolidated
statements of operations to Total EBITDA and Total EBITDA (Excluding Noncash
Cost of Real Estate Sales) for the periods indicated:
Nine Months Ended
---------------------
August 1, August 2, Percentage
2003 2002 (Decrease) (Decrease)
-------- -------- -------- --------
(In thousands)
Reported Operating
Income................. $ 15,373 $ 26,955 $(11,582) (43)%
Depreciation and
Depletion.............. 11,477 12,506 (1,029) (8)
--------- --------- --------
Total EBITDA............ 26,850 39,461 (12,611) (32)
Noncash Cost of Real
Estate Sales........... 190 2,492 (2,302) (92)
--------- --------- --------
Total EBITDA (Excluding
Noncash Cost of Real
Estate Sales).......... $ 27,040 $ 41,953 $(14,913) (36)
========= ========= =========
17
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 (as defined below). 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.
Effective March 15, 2002, the Company and its subsidiaries entered into an
Amended and Restated Credit Agreement with Fleet National Bank, as
administrative agent ("Agent"), and certain lenders. The Senior Credit Facility
has since been amended three times, most recently on June 13, 2003 (as so
amended, the "Senior Credit Facility"). The following summary of the terms of
the Senior Credit Facility is qualified by reference to the complete agreement
governing the Senior Credit Facility, a copy of which has been filed as an
exhibit to our periodic reports.
The Senior Credit Facility provides a revolving credit facility (the
"Revolving Credit Facility") with borrowing availability of up to $25,000,000,
and a term loan facility (the "Term Facility") with outstanding borrowings as of
August 1, 2003 of $22,000,000. The Senior Credit Facility requires that the
Company not have any borrowings under the Revolving Credit Facility for a period
of 30 consecutive days commencing sometime between January 15 and February 28 of
each year. The draw period under the Term Facility has expired. The Term
Facility provides for quarterly commitment reductions of $1,000,000 on the last
day of January, April, July and October of each year through October 31, 2005,
the maturity date of the Senior Credit Facility. The Company is required to
repay amounts outstanding under the Term Facility on such dates by an amount
equal to the greater of (i) the amount by which outstanding Term Facility
borrowings exceed the then-applicable term loan commitment and (ii) the Excess
Cash Proceeds (as defined in the Senior Credit Facility) derived from specified
real estate asset sales determined on a cumulative basis. No amount of the Term
Facility which is repaid may be reborrowed. The entire unpaid balance under the
Senior Credit Facility is due and payable on October 31, 2005. Borrowings under
the Senior Credit Facility are secured by (a) 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
(b) a grant of a security interest in substantially all of the consolidated
assets of Booth Creek and its subsidiaries.
The Senior Credit Facility contains financial covenants relating to the
maintenance of (a) minimum consolidated resort EBITDA (resort earnings before
interest, taxes, depreciation and amortization, adjusted for certain items
specified in the Senior Credit Facility) measured quarterly on a rolling four
quarter basis ("Minimum Resort EBITDA"), (b) a minimum ratio of (y) consolidated
EBITDA (earnings before interest, taxes, depreciation, depletion, amortization
and noncash cost of real estate sales, adjusted for certain items specified in
the Senior Credit Facility), less $5,000,000, less cash income taxes actually
paid during the period to (z) consolidated debt service (the sum of interest,
cash payments of principal made in respect of capitalized lease obligations and
mandatory reductions under the Term Facility) measured quarterly on a rolling
four quarter basis (the "Leverage Ratio"), and (c) a maximum adjusted
consolidated leverage ratio (the ratio of secured indebtedness of the Company
and its subsidiaries (with certain exceptions specified in the Senior Credit
Facility) to the sum of the Company's consolidated net worth, as adjusted
pursuant to the Senior Credit Facility and the aggregate principal amount of
outstanding Senior Notes ("Adjusted Leverage Ratio").
On June 13, 2003, the Company obtained an amendment and waiver (the
"Amendment and Waiver") from the lenders under the Senior Credit Facility, which
modified the financial covenants under the Senior Credit Facility. After giving
effect to the Amendment and Waiver, the Company is required to have a Minimum
Resort EBITDA of (i) $19,000,000 during each rolling four quarter period through
January 30, 2004, (ii) $23,500,000 during each rolling four quarter period from
January 31, 2004 through January 28, 2005 and (iii) $26,500,000 during each
rolling four quarter period from January 29, 2005 and thereafter. It is also
required to maintain (a) a minimum Leverage Ratio of (i) .75 to 1 from May 3,
2003 through August 1, 2003, (ii) 1 to 1 from August 2, 2003 through October 31,
2003, (iii) 1.1 to 1 from November 1, 2003 through January 30, 2004, (iv) 1.2 to
1 from January 31, 2004 through January 28, 2005 and (v) 1.3 to 1 thereafter and
(b) a maximum Adjusted Leverage Ratio of (i) .55 to 1 through August 1, 2003,
(ii) .65 to 1 from August 2, 2003 through October 31, 2003, (iii) .55 to 1 from
November 1, 2003 through October 29, 2004, (ii) .50 to 1 from October 30, 2004
through October 28, 2005 and (iii) .45 to 1 thereafter under the Senior Credit
Facility.
18
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, letters of credit, liens, investments, distributions, capital
expenditures, mergers, acquisitions, asset sales, fundamental corporate changes,
transactions with affiliates, optional payments and modification of debt
instruments and issuances of stock.
For purposes of calculating interest, loans 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)
the higher of (i) the Agent's prime rate or (ii) the federal funds rate plus .5%
plus (b) a margin of 1.5%. LIBOR rate loans bear interest at the LIBOR rate plus
a margin of 4%. Interest on loans outstanding is payable quarterly or at the end
of the Interest Period (as defined in the Senior Credit Facility) for loans
subject to LIBOR rate options. The Senior Credit Facility also requires
commitment fees of .5% based on the unused borrowing availability of the
Revolving Credit Facility. Borrowings outstanding under the Term Facility bore
interest at an annual rate of 5.10% as of August 1, 2003 pursuant to the LIBOR
rate option. Borrowings under the Revolving Credit Facility bore interest at a
weighted average annual rate of 5.11% as of August 1, 2003 pursuant to elections
under both the base rate and LIBOR rate options.
Borrowings under the Revolving Credit Facility can be used for working
capital and other general corporate purposes including, with the consent of the
lenders, the repurchase of the Company's Senior Notes. Borrowings under the Term
Facility were used to repurchase the Company's Senior Notes, together with
accrued and unpaid interest thereon. As of August 1, 2003, outstanding
borrowings under the Revolving Credit Facility and Term Facility were
$17,800,000 and $22,000,000, respectively.
The Company had a net working capital deficit of $44,653,000 as of August
1, 2003 (including $17,800,000 in outstanding borrowings under the Revolving
Credit Facility), which will negatively affect liquidity in future periods. The
Company's net working capital deficit as of August 1, 2003 was due in part to
unearned revenue and deposits from resort operations of $5,842,000 for season
pass and membership product sales, lodging deposits and other prepaid products,
as well as real estate deposits of $5,610,000.
The Company generated cash from operating activities of $9,135,000 for the
nine months ended August 1, 2003 as compared to $28,848,000 for the nine months
ended August 2, 2002. The decrease in operating cash flows, which was primarily
due to reduced revenues and operating income in the 2003 period, timing
differences in accounts payable and accrued liabilities and the effect of the
divestiture of Bear Mountain on operating cash flows, will negatively affect
liquidity in future periods.
Cash used in investing activities totaled $5,422,000 and $7,318,000 for the
nine months ended August 1, 2003 and August 2, 2002, respectively. The results
for the 2003 and 2002 periods primarily reflect capital expenditures for the
purchase of property and equipment and real estate held for development and
sale.
Cash used in financing activities totaled $3,662,000 for the nine months
ended August 1, 2003, which reflects net borrowings under the Revolving Credit
Facility of $16,555,000, scheduled payments of long-term debt of $4,952,000 and
the repurchase of $16,000,000 aggregate principal amount of the Company's Senior
Notes for $15,080,000. Cash used in financing activities totaled $21,275,000 for
the nine months ended August 2, 2002, which reflects net repayments under the
Revolving Credit Facility of $15,098,000, and scheduled repayments of long-term
debt and preferred stock of $2,397,000 and $1,151,000, respectfully.
Additionally, financing activities for the 2002 period reflect borrowings of
$25,000,000 under the Term Facility, which together with available cash
resources, were used to repurchase $29,325,000 aggregate principal amount of
Senior Notes for $25,588,000.
The Company's capital expenditures for property and equipment during the
nine months ended August 1, 2003 were $4,840,000 (including $682,000 of
equipment acquired through capital leases), and consisted primarily of the
remaining portion of the Company's 2002 capital programs, acquisitions of
grooming equipment and the initial stages of the Company's 2003 capital
programs. In response to the Company's recent operating performance, the Company
has reduced planned capital expenditures for fiscal year 2003 resort capital
programs to a current range from $5,000,000 to $6,000,000. Capital expenditures
for real estate development projects in fiscal year 2003 are estimated to be
approximately $4,000,000. The Company plans to fund future capital expenditures
from available cash flow, vendor financing to the extent permitted under the
Senior Credit Facility and the Indenture for the Company's Senior Notes and/or
borrowings under the Revolving Credit Facility. Commitments for future capital
expenditures were approximately $3,000,000 at August 1, 2003.
19
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.
However, the Company is required to make capital expenditures to satisfy
existing and future regulatory requirements, which in some cases may be
significant. See "- Regulation and Legislation."
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 March 2003, the Company launched the sale of the Unit 7A subdivision at
Northstar, which consists of fifteen ski-in/ski-out single family lots. As of
September 12, 2003, the Company entered into binding contracts for the sale of
thirteen of the lots at an average lot price of approximately $780,000. The
Company is continuing efforts to market and sell the remaining two lots within
the subdivision. As of September 12, 2003, the Company closed escrow on ____ of
the thirteen lots under contract. The remaining ___ lots currently under
contract are expected to close escrow prior to the end of 2003, and are subject
to normal and customary closing conditions.
The Company's significant contractual obligations include long-term debt
(including capital lease obligations), other long-term liabilities and operating
leases. As of August 1, 2003, the Company's scheduled maturities of long-term
debt, other long-term liabilities and operating lease commitments for the
periods indicated were as follows:
Three Months
Ending Year Ending October
October ----------------------------------
2003 2004 2005 2006 2007 Thereafter Total
------ ------ ------ ------ ------ ---------- ------
Long-term
Debt $ 1,000 $ 6,327 $ 18,020 $ 99 $ 80,196 $ - $105,642
======= ======= ======== ======== ========= ========= ========
Other
Long-term
Liabilities $ 28 $ 31 $ 214 $ 75 $ 75 $ 333 $ 756
======= ======= ======== ======== ========= ========= ========
Operating
Leases $ 135 $ 1,159 $ 937 $ 392 $ 110 $ 2,120 $ 4,853
======= ======= ======== ======== ========= ========= ========
In connection with certain single family real estate development projects
at Northstar, self-insured workers' compensation arrangements for the Summit and
certain other aspects of its operations, the Company has arranged for surety
bonds from third-party surety bonding companies or letters of credit from
financial institutions. The aggregate amount of surety bonds and letters of
credit in place at August 1, 2003 were approximately $4,500,000 and $600,000,
respectively.
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. During the nine months ended August 1,
2003, the Company experienced a significant decline in its operating
performance, which will negatively affect liquidity in future periods. In
response, the Company has reduced its planned level of resort capital
expenditures to a current range of $5,000,000 to $6,000,000. Additionally, the
Company is undertaking cost-cutting initiatives in an effort to improve its
financial performance in future periods. Any further significant decline in the
Company's expected operating performance could have a material adverse effect on
the Company's ability to service its debt and make required capital
expenditures.
20
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 for the Senior Notes), the Company may be required to
repurchase the Senior 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.
On June 13, 2003, the Company obtained an amendment from the lenders under the
Senior Credit Facility modifying these covenants prospectively and a waiver of
defaults that had arisen as a result of the Company's operating performance
through May 2, 2003. The Company was in compliance with the covenants under the
Senior Credit Facility as of August 1, 2003. The Company's ability to meet these
financial covenants in the future may be affected by events beyond its control,
and there can be no assurance that the Company will meet those covenants.
As of August 1, 2003, the Company had $105,642,000 of total long-term debt
outstanding. The Company expects that existing cash, cash generated from
operations and cash proceeds of planned real estate sales at Northstar, together
with borrowing availability, will be adequate to fund the Company's debt service
and other cash operating 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, if such transactions can be completed on favorable terms.
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 pursuant to satisfactory terms. 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.
Critical Accounting Policies
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires the selection
of appropriate accounting policies, as well as the use of judgment by management
in applying such accounting policies and formulating financial estimates. These
judgments and estimates are based on historical experience, terms of existing
contracts and customer arrangements and information available from other
sources, as appropriate. By their nature, these judgments and estimates are
subject to an inherent degree of uncertainty. In applying the Company's
accounting policies and determining financial estimates, different business
conditions or the use of different assumptions may result in materially
different amounts reported in the Company's consolidated financial statements.
The Company has identified its most critical accounting policies, which
relate to (i) revenue recognition for resort operations, (ii) revenue
recognition for real estate sales, (iii) valuation of long-lived assets and
goodwill, and (iv) evaluation of contingencies and reserve estimates. The
critical accounting policies were determined by considering which policies
involved the most complexity, subjective decisions or estimation.
21
Revenue Recognition for Resort Operations - 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 when services are provided and products are sold.
Sales of season passes are initially deferred in unearned revenue and recognized
ratably over the expected ski season. Revenues relating to paid skier visit
insurance arrangements in prior years were recognized based on an evaluation of
the policy arrangements, actual and forecasted skier visits, actual snowfall
amounts and other relevant factors. The Company also periodically evaluates the
collectibility of all of its receivables, and, if necessary, provides for an
adequate allowance for doubtful accounts.
Revenue Recognition for Real Estate Sales - 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. The Company
evaluates contractual agreements and the underlying facts and circumstances
relating to its real estate transactions, including the involvement of related
parties, to determine the appropriate revenue recognition treatment of such
transactions in accordance with Statement of Financial Accounting Standards No.
66, "Accounting for Sales of Real Estate," and related pronouncements.
Valuation of Long-Lived Assets and Goodwill - The Company periodically
evaluates whether there are facts and circumstances that indicate potential
impairment of its long-lived assets. If impairment indicators are present, the
Company reviews the carrying value of its long-lived assets for continued
appropriateness. The Company also performs periodic impairment tests for
recorded goodwill. The impairment evaluations for long-lived assets and goodwill
are based upon projections of future cash flows, estimated purchase multiples
and other relevant factors. While the Company believes its estimates are
reasonable, different assumptions could materially affect these evaluations.
Evaluation of Contingencies and Reserve Estimates - The Company's
operations are affected by various contingencies, including commercial
litigation, personal injury claims relating principally to snow sports
activities, self-insured workers' compensation matters and self-insured employee
health and welfare arrangements. The Company performs periodic evaluations of
these contingencies and, based on the advice of counsel, information provided by
third-party claims administrators and other pertinent information, provides
reserves for its best estimate of the eventual outcome of these matters. These
estimated liabilities are reviewed and appropriately adjusted as the facts and
circumstances related to these contingencies change. While the Company believes
its estimates are reasonable, different assumptions could materially affect
these evaluations
Recently Adopted Accounting Pronouncements
In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143"), which
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and associated asset retirement costs.
The new rules apply to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and (or) normal operation of a long-lived asset. The Company adopted SFAS No.
143 effective as of November 2, 2002. The adoption of SFAS No. 143 did not have
any impact on the Company's consolidated financial position or results of
operations.
In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS No. 146"), which addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for
a cost that is associated with an exit or disposal activity be recognized when
the liability is incurred, whereas EITF Issue No. 94-3 required an entity to
recognize a liability for an exit cost on the date that the entity committed
itself to an exit plan. SFAS No. 146 is effective for exit or disposal
activities initiated after December 31, 2002. The adoption of SFAS No. 146 did
not have a material impact on the Company's consolidated financial position or
results of operations.
22
Seasonality
The business of the Company is 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.
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.
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, leased from third parties or controlled by easements. The Company has
the right to use a substantial portion of the real property associated with the
Sierra, Summit and Waterville Valley resorts under the terms of Term Special Use
Permits issued by the United States Forest Service (the "Forest Service"). 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 a Forest Service Term Special Use Permit.
In 1993, the Forest Service authorized various improvements at Loon Mountain and
an expansion onto the adjacent South Mountain. The United States Court of
Appeals for the First Circuit overturned this authorization in 1996 on the
ground that the Forest Service had failed to properly address certain
environmental issues under the National Environmental Policy Act ("NEPA"). On
remand from the Court of Appeals, the United States District Court for the
District of New Hampshire (the "District Court") entered a final order dated
December 11, 1998 which imposed certain conditions and limitations on the Forest
Service and Loon Mountain Recreation Corporation ("LMRC") until the Forest
Service completed an additional environmental review process under NEPA. In
response to a separate 1997 action filed by an individual and an environmental
group, the District Court entered an injunction on February 12, 1999 which
limited LMRC's snowmaking and use of a snowmaking pipeline until the Forest
Service completed the additional environmental review process under NEPA.
Effective February 22, 2001, certain plaintiffs in the lawsuits alleging
violations of environmental laws by the Forest Service and LMRC entered into
settlement agreements with LMRC which resolved all issues among the plaintiffs
and LMRC relating to LMRC's prior operations and its proposal for near term
expansion and upgrading of Loon Mountain. Among other things, these agreements
impose certain restrictions on the operation of the resort and the future
development of certain private land at the resort.
LMRC notified the District Court and interested parties that the December
11, 1998 final order and February 12, 1999 injunction expired under their terms
when the Forest Service (i) completed its NEPA process, (ii) issued a Record of
Decision ("ROD") on February 26, 2002 approving the Loon Mountain Final
Environmental Impact Statement (the "Final EIS"), and (iii) issued a Term
Special Use Permit to LMRC for Loon Mountain on June 24, 2002 (thereby replacing
Loon Mountain's three existing Forest Service permits). The new Loon Mountain
Term Special Use Permit expires in 2042.
Two written administrative appeals to the ROD were filed with the Forest
Service. One of the two appellants settled with LMRC and withdrew its appeal.
The Forest Service denied the other administrative appeal and upheld the ROD in
a letter decision dated June 7, 2002. With these actions, the Forest Service has
concluded its administrative appeal process for the ROD. The ROD and the Forest
Service's June 7, 2002 letter decision are subject to judicial review in federal
court under the Administrative Procedure Act by the appellant whose
administrative appeal was denied by the Forest Service. As of the date of this
Report, no action for judicial review had been filed. The Company can give no
assurance regarding whether such a judicial appeal will be filed or the timing
or outcome of such a process.
23
Elements of the expansion and development activities addressed in the Final
EIS that occur on private lands will be subject to separate federal, state and
local permitting processes. While the Company believes that it will successfully
navigate these remaining steps to undertaking the activities authorized in the
ROD, it can give no assurance regarding the timing or outcome of such processes.
The 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 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, season pass, ski school lesson, food and
beverage, rental equipment and retail merchandise sales. Total fees paid to the
Forest Service by the Company during the year ended November 1, 2002 were
$1,352,000.
The Company believes that its relations with the 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 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 permittee; however, the
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. 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. However, the Company is required from time to time to undertake
remediation activities at its resorts to assure compliance with environmental
laws or to address instances of non-compliance. The cost of these activities
could be significant. The failure by the Company to comply with applicable
environmental 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, or renewed, or
will be 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 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 or renewed.
Certain regulatory approvals associated with a snowmaking pipeline at Loon
Mountain, as well as certain contractual obligations, impose minimum stream flow
requirements on Loon Mountain. These requirements will compel Loon Mountain to
construct water storage facilities within approximately four years, and such
construction may 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.
Except for certain permitting and environmental compliance matters relating
to Loon Mountain described above and in Part II, Item 1. "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.
24
Forward-Looking Statements
Except for historical matters, the matters discussed in Part I, Item 2.
"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. The reader can identify these statements by forward-looking
words such as "may," "will," "expect," "plan," "intend," "anticipate,"
"believe," "estimate," and "continue" or similar words. 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 Negative demand for our services and products resulting from potential
terrorism threats,
o Availability and cost of commercial air service,
o The threat, commencement or continuation of wars,
o Availability and terms of insurance coverage, as well as increases in
the cost of insurance coverage,
o Natural disasters (such as earthquakes and floods),
o Competition and pricing pressures,
o Governmental regulation and litigation and other risks associated with
expansion and development,
o The adequacy of the water supplies at each of the Company's resorts,
o Availability of adequate energy supplies for the operation of the
Company's resorts, including snowmaking operations, and volatility in
the prices charged for energy and fuel,
o The occupancy of leased property and property used pursuant to the
United States Forest Service permits, and
o Other factors identified under "- Risk Factors" in Part II, Item 7.
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's Annual Report on Form 10-K for
the year ended November 1, 2002.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the nine months ended August 1, 2003, there have been no material
changes in information relating to market risk from the Company's disclosure in
Item 7a. of the Company's Annual Report on Form 10-K for the year ended November
1, 2002 as filed with the Securities and Exchange Commission.
ITEM 4. CONTROLS AND PROCEDURES
a) The Company, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer,
President and Chief Operating Officer and Chief Financial Officer,
carried out an evaluation of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (the
"Evaluation") as of the end of the period covered by this Report.
Based upon the Evaluation, the Company's Chief Executive Officer,
President and Chief Operating Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed in our
periodic reports filed with the Securities and Exchange Commission is
recorded, processed, summarized and reported as and when required. In
addition, they concluded that there were no significant deficiencies
or material weaknesses in the design or operation of internal controls
which could significantly affect the Company's ability to record,
process, summarize and report financial information. It should be
noted that the design of any system of controls is based in part upon
certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how
remote.
25
b) There were no significant changes in the Company's internal control
over financial reporting during the quarterly period ended August 1,
2003 that have materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial
reporting.
26
PART II. OTHER INFORMATION
ITEM 1. 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 snow sports activities at its resorts as well as to
premises and vehicular operations and workers' 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 Company's acquisition of Loon Mountain Recreation
Corporation ("LMRC") in 1998, certain shareholders of LMRC filed several
lawsuits challenging the transaction and seeking to exercise dissenters' rights
under the New Hampshire Business Corporation Act. Each of these lawsuits has
been decided or otherwise resolved in favor of the Company, LMRC and its former
directors, resulting in no further liability or obligation relating to the
transaction for LMRC, its former directors or the Company and its affiliates.
The New Hampshire Superior Court has awarded attorneys fees to the defendants in
certain of these cases in the amount of $972,000 (with $420,000 for LMRC and the
Company and $552,000 for the insurer that funded certain costs of defending the
former LMRC directors), although the amount of such award remains subject to
appeal and the likelihood or timing of collection of such amount is uncertain.
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 and an expansion at Loon Mountain.
The District Court entered a final order dated December 11, 1998 that imposed
certain conditions and limitations on LMRC's operations. Under its terms, the
order was effective until the Forest Service completed an additional
environmental review process under NEPA and issued a new Term Special Use Permit
for Loon Mountain. In 1997, an individual and an environmental group 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. The District Court entered an injunction on February 12,
1999 which limited LMRC's use of the snowmaking pipeline until the Forest
Service completed its additional environmental analysis under NEPA and issued a
Record of Decision ("ROD").
As described in Part I, Item 2. "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Regulation and Legislation," on
February 26, 2002, the Forest Service completed its environmental analysis under
NEPA and issued a ROD approving the Final Environmental Impact Statement for
Loon Mountain. The Forest Service issued a Term Special Use Permit to LMRC for
Loon Mountain on June 24, 2002. The Forest Service denied an administrative
appeal of the ROD in a June 7, 2002 letter decision. The ROD and the June 7,
2002 letter decision are subject to judicial review in federal court. As of the
date of this Report, no action for judicial review had been filed. The Company
can give no assurance regarding whether such a judicial appeal will be filed or
the timing or outcome of such process.
Effective February 22, 2001, certain plaintiffs in lawsuits (each of which
have now been dismissed or settled) alleging violations of environmental laws by
LMRC entered into settlement agreements with LMRC, which resolve all issues
among them and LMRC relating to LMRC's prior operations and current proposal for
near term expansion and upgrading of the Loon Mountain resort. Among other
things, these agreements impose certain restrictions on the operation of the
resort and the future development of certain private land at the resort.
On November 13, 2001, the Company filed a lawsuit against ASU International
LLC, Essex Insurance Company and Certain Underwriters, Lloyd's London
(collectively, the "Insurers") in Superior Court in Massachusetts. The Company
had placed with the Insurers weather/income stabilization coverage for the
2000/01 ski season for certain of its resorts. During the applicable period of
the policies, the Company incurred losses at two of its resorts which the
Company believes were covered under the terms of such policies. The Company
believed that it complied with its obligations under the policies and properly
reported and made claims in accordance with the policies for losses aggregating
in excess of $1,500,000. In response to the Insurers' failure to properly
process the Company's claims, the Company sought recovery for breach of
contract, breach of covenant of good faith and unfair and deceptive business
practices.
27
Partial resolution of the claims was reached and a payment of $700,000 was
made by the Insurers in April 2002. Full and final settlement of this lawsuit
was reached on July 25, 2003 upon receipt from the Insurers of an additional
payment of $683,000.
ITEM 6. EXHIBITS AND REPORTS ON FORM-8-K
a. Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
31.1 Certification of George N. Gillett, Jr., Chief
Executive Officer, pursuant to Securities and Exchange
Commission ("SEC") Rule 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Christopher P. Ryman, President and
Chief Operating Officer, pursuant to SEC Rule
15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.3 Certification of Elizabeth J. Cole, Executive Vice
Presisdent and Chief Financial Officer, pursuant to SEC
Rule 15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of George N. Gillett, Jr., Chief
Executive Officer, pursuant to SEC Rule 15d-14(b) and
18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Christopher P. Ryman, President and
Chief Operating Officer, pursuant to SEC Rule 15d-14(b)
and 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.3 Certification of Elizabeth J. Cole, Executive Vice
President and Chief Financial Officer, pursuant to SEC
Rule 15d-14(b) and 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarterly period ended August
1, 2003.
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BOOTH CREEK SKI HOLDINGS, INC.
(Registrant)
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)
September 12, 2003
29
Exhibit 31.1
CERTIFICATION
I, George N. Gillett, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Booth Creek Ski
Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation;
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
September 12, 2003
By:/s/ GEORGE N. GILLETT, JR.
----------------------------------------
George N. Gillett, Jr.
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Christopher P. Ryman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Booth Creek Ski
Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation;
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
September 12, 2003
By:/s/ CHRISTOPHER P. RYMAN
----------------------------------------
Christopher P. Ryman
President and Chief Operating Officer
Exhibit 31.3
CERTIFICATION
I, Elizabeth J.Cole, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Booth Creek Ski
Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation;
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
September 12, 2003
By:/s/ ELIZABETH J. COLE
----------------------------------------
Elizabeth J. Cole
Executive Vice President and
Chief Financial Officer
Exhibit 32.1
CERTIFICATION
In connection with the Quarterly Report of Booth Creek Ski Holdings, Inc.
(the "Company") on Form 10-Q for the period ended August 1, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, as the Chief Executive Officer of the Company, hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
September 12, 2003
By:/s/ GEORGE N. GILLETT, JR.
----------------------------------------
George N. Gillett, Jr.
Chief Executive Officer
Exhibit 32.2
CERTIFICATION
In connection with the Quarterly Report of Booth Creek Ski Holdings, Inc.
(the "Company") on Form 10-Q for the period ended August 1, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, as the President and Chief Operating Officer of the Company, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
September 12, 2003
By:/s/ CHRISTOPHER P. RYMAN
----------------------------------------
Christopher P. Ryman
President and Chief Operating Officer
Exhibit 32.3
CERTIFICATION
In connection with the Quarterly Report of Booth Creek Ski Holdings, Inc.
(the "Company") on Form 10-Q for the period ended August 1, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, as the Executive Vice President and Chief Financial Officer of the
Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
September 12, 2003
By:/s/ ELIZABETH J. COLE
----------------------------------------
Elizabeth J. Cole
Executive Vice President and
Chief Financial Officer