AMERICAN SKIING CO /ME - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended January 25, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from____________ to ____________.

--------------------------------
Commission File Number 1-13507
--------------------------------

American Skiing Company
(Exact name of registrant as specified in its charter)

Delaware 04-3373730
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

136 Heber Avenue, #303
P.O. Box 4552
Park City, Utah 84060
(Address of principal executive offices)
(Zip Code)

(435) 615-0340
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last
report.)

Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares outstanding of each of the issuer's classes of common stock
were 14,760,530 shares of Class A common stock, $.01 par value, and 16,977,653
shares of common stock, $.01 par value, as of February 22, 2004.

1

Table of Contents

Part I - Financial Information

Item 1. Financial Statements

Condensed Consolidated Statements of Operations for the 13 weeks
ended January 26, 2003 and January 25, 2004 (unaudited)..........3

Condensed Consolidated Statements of Operations for the 26 weeks
ended January 26, 2003 and January 25, 2004 (unaudited)..........4

Condensed Consolidated Balance Sheets as of July 27, 2003
and January 25, 2004 (unaudited).................................5

Condensed Consolidated Statements of Cash Flows for the 26 weeks
ended January 26, 2003 and January 25, 2004 (unaudited)..........8

Notes to Condensed Consolidated Financial Statements (unaudited)......9

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations

Executive Summary....................................................18

General..............................................................19

Real Estate Credit Agreement Defaults................................19

Liquidity and Capital Resources......................................19

Results of Operations................................................25

Item 3. Quantitative and Qualitative Disclosures
About Market Risk...............................................29

Item 4. Controls and Procedures..............................................29

Part II - Other Information

Item 1. Legal Proceedings....................................................29

Item 2. Changes in Securities, Use of Proceeds, and
Issuer Purchases of Equity Securities...........................30

Item 3. Defaults Upon Senior Securities......................................30

Item 4. Submission of Matters to a Vote of Security Holders..................30

Item 5. Other Information....................................................31

Item 6. Exhibits and Reports on Form 8-K.....................................32

2

Part I - Financial Information
Item 1 Financial Statements

Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
13 weeks ended 13 weeks ended
January 26, 2003 January 25, 2004
(unaudited) (unaudited)
Net revenues:
Resort $ 98,961 $ 92,904
Real estate 1,325 10,056
----------------- ----------------
Total net revenues 100,286 102,960
----------------- ----------------

Operating expenses:
Resort 65,794 62,410
Real estate 1,898 8,538
Marketing, general and
administrative 16,552 20,490
Depreciation and amortization 11,449 10,631
----------------- ----------------
Total operating expenses 95,693 102,069
----------------- ----------------

Income from operations 4,593 891
Interest expense, net 12,042 22,580
----------------- ----------------

Net loss (7,449) (21,689)

Accretion of discount and dividends
on mandatorily redeemable
preferred stock (9,243) -

----------------- ----------------
Net loss available to common
shareholders $ (16,692) $ (21,689)
================= ================

Accumulated deficit, beginning of
period $ (472,150) $ (556,321)

Net loss available to common
shareholders (16,692) (21,689)
----------------- ----------------

Accumulated deficit, end of period $ (488,842) $ (578,010)
================= ================

Basic and diluted net loss per
common share:
Net loss available to common
shareholders $ (0.53) $ (0.68)
================= ================

Weighted average common shares
outstanding - basic and diluted 31,724,141 31,738,183

See accompanying notes to Condensed Consolidated Financial Statements.

3

Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
26 weeks ended 26 weeks ended
January 26, 2003 January 25, 2004
(unaudited) (unaudited)
Net revenues:
Resort $ 115,872 $ 109,032
Real estate 5,039 12,401
----------------- ----------------
Total net revenues 120,911 121,433
----------------- ----------------

Operating expenses:
Resort 88,294 84,935
Real estate 5,474 10,196
Marketing, general and
administrative 26,585 30,770
Restructuring charges - 137
Depreciation and amortization 13,865 12,934
----------------- ----------------
Total operating expenses 134,218 138,972
----------------- ----------------

Loss from operations (13,307) (17,539)
Interest expense, net 24,316 45,408
----------------- ----------------

Net loss (37,623) (62,947)

Accretion of discount and dividends
on mandatorily redeemable
preferred stock (18,174) -

----------------- ----------------
Net loss available to common
shareholders $ (55,797) $ (62,947)
================= ================

Accumulated deficit, beginning of
period $ (433,045) $ (515,063)

Net loss available to common
shareholders (55,797) (62,947)
----------------- ----------------

Accumulated deficit, end of period $ (488,842) $ (578,010)
================= ================

Basic and diluted net loss per
common share:
Net loss available to common
shareholders $ (1.76) $ (1.98)
================= ================

Weighted average common shares
outstanding - basic and diluted 31,724,141 31,738,183

See accompanying notes to Condensed Consolidated Financial Statements.

4

Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)

July 27, 2003 January 25, 2004
(unaudited) (unaudited)
Assets
Current assets
Cash and cash equivalents $ 6,596 $ 14,636
Restricted cash 3,829 4,496
Accounts receivable, net 5,862 9,974
Inventory 3,653 7,240
Prepaid expenses 3,326 6,840
Deferred income taxes 7,300 7,300
Other current assets 978 928
----------------- ----------------
Total current assets 31,544 51,414

Property and equipment, net 372,926 366,757
Real estate developed for sale 48,234 40,478
Intangible assets, net 7,058 6,893
Deferred financing costs, net 6,705 5,344
Other assets 8,838 8,559
----------------- ----------------
Total assets $ 475,305 $ 479,445
================= ================

(continued on next page)

5

See accompanying notes to Condensed Consolidated Financial Statements.

Condensed Consolidated Balance Sheets (continued)
(In thousands, except share and per share amounts)

July 27, 2003 January 25, 2004
(unaudited) (unaudited)
Liabilities, Mandatorily Redeemable
Preferred Stock, and
Shareholders' Deficit
Current liabilities
Current portion of long-term
debt $ 138,610 $ 97,114
Current portion of subordinated
notes and debentures 1,466 1,466
Accounts payable and other current
liabilities 53,058 83,500
Deposits and deferred revenue 9,723 42,571
Mandatorily Redeemable Convertible
10 1/2% Series A Preferred
Stock, par value of $0.01 per
share; 40,000 shares authorized;
36,626 shares issued and
outstanding, including cumulative
dividends (redemption value of
$70,212) - 70,212
----------------- ----------------
Total current liabilities 202,857 294,863

Long-term debt, excluding current
portion 60,178 83,557
Subordinated notes and debentures,
excluding current portion 140,095 141,157
Other long-term liabilities 3,471 3,503
Deferred income taxes 7,300 7,300
Mandatorily Redeemable 8 1/2%
Series B Preferred Stock;
150,000 shares authorized,
issued and outstanding
(redemption value of $0) - -
Mandatorily Redeemable Convertible
Participating 12% Series C-1
Preferred Stock, par value of
$0.01 per share; 40,000 shares
authorized, issued and
outstanding, including
cumulative dividends
(redemption value of $53,148) - 52,605
Mandatorily Redeemable 15%
Nonvoting Series C-2 Preferred
Stock, par value of $0.01 per
share; 139,453 shares
authorized, issued and
outstanding, including
cumulative dividends
(redemption value of $198,687) - 196,702
Mandatorily Redeemable Nonvoting
Series D Participating Preferred
Stock, par value of $0.01 per
share; 5,000 shares authorized;
no shares issued or outstanding - -
----------------- ----------------
Total liabilities 413,901 779,687
----------------- ----------------

6

Mandatorily Redeemable Convertible
10 1/2% Series A Preferred
Stock, par value of $0.01 per
share; 40,000 shares authorized;
36,626 shares issued and
outstanding, including
cumulative dividends
(redemption value of $66,663) 66,663 -
Mandatorily Redeemable 8 1/2% Series
B Preferred Stock; 150,000
shares authorized, issued and
outstanding (redemption value
of $0) - -
Mandatorily Redeemable Convertible
Participating 12% Series C-1
Preferred Stock, par value of
$0.01 per share; 40,000 shares
authorized, issued and
outstanding, including
cumulative dividends (redemption
value of $50,105) 49,520 -
Mandatorily Redeemable 15% Nonvoting
Series C-2 Preferred Stock, par
value of $0.01 per share; 139,453
shares authorized, issued and
outstanding, including cumulative
dividends (redemption value of
$184,621) 182,516 -
Mandatorily Redeemable Nonvoting
Series D Participating Preferred
Stock, par value of $0.01 per
share; 5,000 shares authorized;
no shares issued or outstanding - -

Shareholders' Deficit
Common stock, Class A, par value
of $0.01 per share; 15,000,000
shares authorized; 14,760,530
shares issued and outstanding 148 148
Common stock, par value of $0.01
per share; 100,000,000 shares
authorized; 16,977,653 shares
issued and outstanding 170 170
Additional paid-in capital 277,450 277,450
Accumulated deficit (515,063) (578,010)
----------------- ----------------
Total shareholders' deficit (237,295) (300,242)
----------------- ----------------
Total liabilities,
mandatorily redeemable
preferred stock, and
shareholders' deficit $ 475,305 $ 479,445
================= ================

See accompanying notes to Condensed Consolidated Financial Statements.

7

Condensed Consolidated Statements of Cash Flows
(In thousands)

26 weeks ended 26 weeks ended
January 26, 2003 January, 25, 2004
(unaudited) (unaudited)
Cash flows from operating
activities
Net loss $ (37,623) $ (62,947)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 15,549 12,934
Amortization of deferred
financing costs,
amortization of original
issue discount, and accretion
of discount and dividends on
mandatorily redeemable preferred
stock 189 22,918
Non-cash interest on junior
subordinated notes 764 848
Gain from sale of assets (486) (302)
Decrease (increase) in assets:
Restricted cash 246 (667)
Accounts receivable, net (177) (4,112)
Inventory (3,305) (3,587)
Prepaid expenses (2,304) (3,514)
Real estate developed for sale 2,661 7,756
Other assets (5,418) 206
Increase in liabilities:
Accounts payable and other
current liabilities 20,116 30,440
Deposits and deferred revenue 30,388 32,848
Other long-term liabilities 2,234 32
----------------- ----------------
Net cash provided by
operating activities 22,834 32,853
----------------- ----------------

Cash flows from investing
activities
Capital expenditures (5,833) (6,623)
Proceeds from sale of
assets 705 451
----------------- ----------------
Net cash used in
investing activities (5,128) (6,172)
----------------- ----------------

Cash flows from financing
activities
Proceeds from resort senior
credit facilities 53,434 31,301
Repayment of resort senior
credit facilities (65,449) (45,443)
Repayment of long-term debt (944) (1,172)
Proceeds from real estate
debt 6,353 3,667
Repayment of real estate
debt (3,088) (6,994)
Payment of deferred financing
costs (490) -
----------------- ----------------
Net cash used in
financing activities (10,184) (18,641)
----------------- ----------------

Net increase in cash and cash
equivalents 7,522 8,040
Cash and cash equivalents,
beginning of period 6,924 6,596
----------------- ----------------
Cash and cash equivalents, end
of period $ 14,446 $ 14,636
================= ================

Supplemental disclosure of cash
flow information:
Accretion of discount and
dividends on mandatorily
redeemable preferred
stock $ 18,174 $ -
Cash paid for interest 22,036 22,820

See accompanying notes to Condensed Consolidated Financial Statements.

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. General

American Skiing Company (ASC) is organized as a holding company and
operates through various subsidiaries (collectively, the Company). The Company
operates in two business segments, resort operations and real estate
development. The Company performs its real estate development principally
through its wholly owned subsidiary, American Skiing Company Resort Properties,
Inc. (Resort Properties), and Resort Properties' subsidiaries, including Grand
Summit Resort Properties, Inc. (Grand Summit). The Company's fiscal year is a
fifty-two week or fifty-three week period ending on the last Sunday of July.
Fiscal 2004 and Fiscal 2003 are fifty-two week reporting periods, with each
quarter consisting of 13 weeks. The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included.

Results for interim periods are not indicative of the results expected for
the year due to the seasonal nature of the Company's business. Due to the
seasonality of the ski industry, the Company typically incurs losses related to
resort operations during its first and fourth fiscal quarters. The unaudited
condensed consolidated financial statements should be read in conjunction with
the following notes and the Company's consolidated financial statements included
in its Form 10-K for the fiscal year ended July 27, 2003 (Fiscal 2003) filed
with the Securities and Exchange Commission on October 27, 2003. The
accompanying condensed consolidated financial statements reflect adjustments and
reclassifications made to the unaudited quarterly financial information
presented in Note 20 of the Company's Fiscal 2003 Form 10-K.

2. Significant Accounting Policies

The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of sales and expenses
during the reporting periods. Areas where significant judgments are made
include, but are not limited to: allowance for doubtful accounts, long-lived
asset valuation, realizability and useful lives, and realizability of deferred
income tax assets. Actual results could differ materially from these estimates.
The following are the Company's significant accounting policies:

Property and Equipment
Property and equipment are carried at cost, net of accumulated depreciation
and impairment charges. Depreciation is calculated using the straight-line
method over the assets' estimated useful lives which range from 9 to 40 years
for buildings, 3 to 12 years for machinery and equipment, 10 to 50 years for
leasehold improvements, and 5 to 30 years for lifts, lift lines and trails.
Assets held under capital lease obligations are amortized over the shorter of
their useful lives or their respective lease lives. Due to the seasonality of
the Company's business, the Company records a full year of depreciation relating
to its resort operating assets during the second and third quarters of the
Company's fiscal year.

Goodwill and Other Intangible Assets
As prescribed in Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets" (SFAS No. 142), certain
indefinite-lived intangible assets, including trademarks, are no longer
amortized but are subject to annual impairment assessments. An impairment loss
is recognized to the extent that the carrying amount exceeds the asset's fair
value. Definite-lived intangible assets continue to be amortized on a
straight-line basis over their estimated useful lives of 16 to 20 years, and
assessed for impairment utilizing guidance provided by SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" (SFAS No. 144).

9

As of July 27, 2003 and January 25, 2004, other intangible assets consist
of the following (in thousands):

------------------------------------------------------------------
July 27, 2003 January 25, 2004
------------------------------------------------------------------
Definite-lived Intangible
Assets:
Lease agreements $ 1,853 $ 1,853
Less accumulated
amortization (288) (318)
---------------- -------------------
1,565 1,535

Indefinite-lived
Intangible Assets:
Trade names 170 170
Water rights 5,323 5,188
---------------- -------------------
Intangible Assets, net $ 7,058 6,893
================ ===================

------------------------------------------------------------------

Amortization expense related to intangible assets was approximately $14,000
for both the 13 weeks ended January 26, 2003 and the 13 weeks ended January 25,
2004 and approximately $29,000 for both the 26 weeks ended January 26, 2003 and
the 26 weeks ended January 25, 2004. Future amortization expense related to
definite-lived intangible assets is estimated to be approximately $58,000 for
each of the next five fiscal years.

Long-Lived Assets
In accordance with SFAS No. 144, long-lived assets, such as property and
equipment, and definite-lived intangibles are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell, and depreciation ceases.

Revenue Recognition
Resort revenues include sales of lift tickets, tuition from ski schools,
golf course and other recreational activities fees, sales from restaurants, bars
and retail and rental shops, and lodging and property management fees (real
estate rentals). Daily lift ticket revenue is recognized on the day of purchase.
Lift ticket season pass revenue is recognized on a straight-line basis over the
ski season, which is the Company's second and third quarters of its fiscal year.
The Company's remaining resort revenues are generally recognized as the services
are performed. Real estate revenues are recognized under the full accrual method
when title has been transferred, adequate initial and continuing investments are
adequate to demonstrate a commitment to pay for the property and no continuing
involvement exists. Amounts received from pre-sales of real estate are recorded
as restricted cash and deposits and deferred revenue in the accompanying
consolidated balance sheets until the earnings process is complete.

Seasonality
The Company's revenues are highly seasonal in nature. For Fiscal 2003, the
Company realized approximately 87% of resort segment revenues and over 100% of
resort segment operating income during the period from November through April.
In addition, a significant portion of resort segment revenue and approximately
21% of annual skier visits were generated during the Christmas and Presidents'
Day vacation weeks in Fiscal 2003. The Company's resorts typically experience
operating losses and negative cash flows for the period from May through
November.

A high degree of seasonality in the Company's revenues increases the impact
of certain events on its operating results. Adverse weather conditions, access
route closures, equipment failures, and other developments of even moderate or
limited duration occurring during peak business periods could reduce revenues.
Adverse weather conditions can also increase power and other operating costs
associated with snowmaking or could render snowmaking wholly or partially
ineffective in maintaining quality skiing conditions. Furthermore, unfavorable
weather conditions, regardless of actual skiing conditions, can result in
decreased skier visits.

Stock Option Plan
Effective August 1, 1997, the Company established a fixed stock option
plan, the American Skiing Company Stock Option Plan (the Plan), to provide for
the grant of incentive and non-qualified stock options for the purchase of up to
8,688,699 shares of the Company's common stock by officers, management
employees, members of the board of directors of the Company and its
subsidiaries, and other key persons (eligible for nonqualified stock options

10

only) as designated by the Compensation Committee. The Compensation Committee,
which is appointed by the Board of Directors, is responsible for the Plan's
administration. The Compensation Committee determines the term of each option,
option exercise price, number of shares for which each option is granted and the
rate at which each option is exercisable. Options granted under the Plan
generally expire ten years from the date of grant and vest either immediately or
over a five-year term. Incentive stock options may not have an exercise price
less than the fair market value of the common stock at the date of grant.
Nonqualified stock options may be granted at an exercise price as determined by
the Compensation Committee. At January 25, 2004, the Company has outstanding
options to purchase 3,821,187 shares at a weighted average exercise price of
$4.25 under the Plan, which has not changed since July 27, 2003.

During Fiscal 1998, the Company granted nonqualified options under the Plan
to certain key members of management to purchase 672,010 shares of common stock
with an exercise price of $2.00 per share when the fair market value of the
stock was estimated to be $18.00 per share. The majority of these options
(511,530 shares) were granted to members of senior management and were 100%
vested on the date of grant. Accordingly, the Company recognized stock
compensation expense of $8.1 million in Fiscal 1998 relating to the grants based
on the intrinsic value of $16.00 per share. Under these senior management grant
agreements, the Company also agreed to pay the optionees a fixed tax "bonus" in
the aggregate of $5.8 million to provide for certain fixed tax liabilities that
the optionees will incur upon exercise. The liability for this fixed tax bonus
has been reduced to reflect $5.3 million in tax bonus payments made through
January 25, 2004 in connection with options exercised. The remaining $0.5
million tax bonus liability is reflected in accounts payable and other current
liabilities in the accompanying consolidated balance sheet as of January 25,
2004. The remainder of these original $2.00 options (160,480 shares) were
granted under the Plan to certain members of management and were vested 20% on
the date of grant and vest ratably to 100% over the following four years. For
the 13 weeks ended January 26, 2003 and January 25, 2004 and the 26 weeks ended
January 26, 2003 and January 25, 2004, the Company recognized no stock
compensation expense relating to these options.

The following table summarizes information about the stock options
outstanding under the Plan as of January 25, 2004:

---------------------------------------------------------------------------------------------
Weighted
Average
Range of Remaining Weighted Weighted
Exercise Contractual Average Average
Prices Outstanding Life (in years) Exercise Price Exercisable Exercise Price
---------------------------------------------------------------------------------------------

$0.72 25,000 7.4 $ 0.72 25,000 $ 0.72
1.75 - 2.50 1,420,337 6.1 2.11 1,371,003 2.11
3.00 - 4.00 1,449,250 6.1 3.17 1,321,750 3.19
7.00 - 8.75 735,750 4.7 7.19 733,050 7.19
14.19 - 18.00 190,850 3.7 17.55 190,850 17.55
----------- -----------
3,821,187 5.7 $ 4.25 3,641,653 $ 4.33
=========== ===========

---------------------------------------------------------------------------------------------

The Company continues to account for stock-based compensation using the
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", under which no compensation expense for stock
options is recognized for stock option awards granted to employees at or above
fair market value. In December 2002, the FASB issued SFAS No. 148, "Accounting
for Stock-Based Compensation -Transition and Disclosure - an amendment of FAS
123" (SFAS No. 148). This statement amends SFAS No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123), to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation, and amends the disclosure requirements to
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The Company
has adopted the disclosure-only provisions of SFAS No. 148. Had stock
compensation expense been determined based on the fair value at the grant dates
for awards granted under the Company's Plan, consistent with the provisions of
SFAS No. 148, the Company's net loss and loss per share would have been changed
to the pro forma amounts indicated below (dollar amounts in thousands):

11

-------------------------------------------------------------------------------------------------------
13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended
January26, January 25, January 26, January 25,
2003 2004 2003 2004
-------------------------------------------------------------------------------------------------------

Net loss available to
common shareholders
As reported $ (16,692) $ (21,689) $ (55,797) $ (62,947)
Stock-based employee
compensation determined
under fair-value method
for all awards, net of
tax (158) (55) (202) (174)
------------- ------------- ------------- --------------
Pro forma $ (16,850) $ (21,744) $ (55,999) $ (63,121)
============= ============= ============= ==============
Basic and diluted net
loss per common share
As reported $ (0.53) $ (0.68) $ (1.76) $ (1.98)
Pro forma (0.53) (0.69) (1.77) (1.99)

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model. There were no option grants during the
13 and 26 weeks ended January 26, 2003 or the 13 and 26 weeks ended January 25,
2004.

Recently Issued Accounting Standards
In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity" (SFAS No. 150). SFAS No. 150 establishes standards
for how financial instruments with characteristics of both liabilities and
equity should be measured and classified and requires that an issuer classify a
financial instrument that is within its scope as a liability. SFAS No. 150 is
implemented prospectively and restatement is not permitted. The Company adopted
SFAS No. 150 effective July 28, 2003. As a result of adopting SFAS No. 150,
approximately $298.7 million of mezzanine-level securities were reclassified to
liabilities in the consolidated balance sheet in the first quarter of Fiscal
2004. This represents the carrying value of all classes of mandatorily
redeemable preferred stock. In addition, approximately $43.1 million of
accretion of discount and dividends on the preferred stock in Fiscal 2004 will
be included in interest expense, whereas previously it was reported as accretion
of discount and dividends on mandatorily redeemable preferred stock. For the 13
and 26 weeks ended January 25, 2004, $10.6 million and $20.8 million,
respectively, of accretion of discount and dividends on the preferred stock was
included in interest expense. For the 13 and 26 weeks ended January 26, 2003,
approximately $9.2 million and $18.2 million of accretion of discount and
dividends on the preferred stock was included in accretion of discount and
dividends on mandatorily redeemable preferred stock.

Reclassifications
Certain amounts in the prior periods' financial statements and related
notes have been reclassified to conform to the current periods' presentation.

3. Net Income (Loss) per Common Share

Net income (loss) per common share for the 13 and 26 weeks ended January
26, 2003 and January 25, 2004, respectively, was determined based on the
following data (in thousands):

-------------------------------------------------------------------------------------------------------------------------
13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended
January 26, 2003 January 25, 2004 January 26, 2003 January 25, 2004
-------------------------------------------------------------------------------------------------------------------------

Loss
Income (loss) from operations before accretion
of discount and dividends on mandatorily
redeemable preferred stock $ (7,449) $ (21,689) $ (37,623) $ (62,947)
Accretion of discount and dividends on
mandatorily redeemable preferred stock (9,243) - (18,174) -
---------------- ---------------- ---------------- ----------------
Income (loss) from operations $ (16,692) $ (21,689) $ (55,797) $ (62,947)
================ ================ ================ ================

Shares
Weighted average common shares outstanding -
basic and diluted 31,724 31,738 31,724 31,738
================ ================ ================ ================

12

As of January 26, 2003 and January 25, 2004, the Company had 14,760,530
shares of its Class A common stock outstanding, which are convertible into
shares of the Company's common stock. The shares of the Company's common stock
issuable upon conversion of the shares of the Company's Class A common stock
have been included in the calculation of the weighted average common shares
outstanding. As of January 26, 2003 and January 25, 2004, the Company had 36,626
shares of its mandatorily redeemable convertible 10 1/2% preferred stock (Series
A Preferred Stock) and 40,000 shares of its mandatorily redeemable convertible
participating 12% preferred stock (Series C-1 Preferred Stock) outstanding, both
of which are convertible into shares of the Company's common stock. If converted
at their liquidation preferences as of January 26, 2003 and January 25, 2004,
these convertible preferred shares would convert into approximately 41,489,000
and 46,624,000 shares of common stock, respectively. For the 13 and 26 weeks
ended January 26, 2003 and January 25, 2004, the common shares into which these
preferred securities are convertible have not been included in the dilutive
share calculation as the impact of their inclusion would be anti-dilutive. The
Company also had 3,891,179 and 3,821,187 options outstanding to purchase shares
of its common stock under the Plan as of January 26, 2003 and January 25, 2004,
respectively. These stock options are excluded from the dilutive share
calculation as the impact of their inclusion would be anti-dilutive.

4. Segment Information

In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131), the Company has classified
its operations into two business segments, resorts and real estate. Revenues at
each of the resorts are derived from the same lines of business which include
lift ticket sales, food and beverage, retail sales including rental and repair,
skier development, lodging and property management, golf, other summer
activities and miscellaneous revenue sources. The performance of the resorts is
evaluated on the same basis of profit or loss from operations. Additionally,
each of the resorts has historically produced similar operating margins and
attracts the same class of customer. Based on the similarities of the operations
at each of the resorts, the Company has concluded that the resorts satisfy the
aggregation criteria set forth in SFAS No. 131. The Company's real estate
revenues are derived from the sale, resale, and leasing of interests in real
estate development projects undertaken by the Company at its resorts and the
sale of other real property interests. Revenues and operating losses for the two
business segments are as follows (in thousands):

13 weeks ended 13 weeks ended 26 weeks ended 26 weeks ended
January 26, 2003 January 25, 2004 January 26, 2003 January 25, 2004
-------------------------------------------------------------------------------------------------------------------

Revenues:
Resort $ 98,961 $ 92,904 $ 115,872 $ 109,032
Real estate 1,325 10,056 5,039 12,401
---------------- ---------------- ---------------- ----------------
Total $ 100,286 $ 102,960 $ 120,911 $ 121,433
================ ================ ================ ================

Income (loss) from operations:
Resort $ (1,282) $ (17,701) $ (26,140) $ (53,573)
Real estate (6,167) (3,988) (11,483) (9,374)
----------------- ---------------- ---------------- ----------------
Total $ (7,449) $ (21,689) $ (37,623) $ (62,947)
================= ================ ================ ================

5. Long-Term Debt

Resort Properties

On March 30, 2002, Resort Properties failed to make a mandatory principal
payment of $3.75 million under its real estate term facility (Real Estate Term
Facility). Resort Properties obtained a temporary waiver of this default on
April 2, 2002. Effective May 20, 2002, the temporary waiver was revoked and
Resort Properties was in default on the facility.

The Real Estate Term Facility is comprised of three tranches, each with
separate interest rates and maturity dates as follows:

o Tranche A is a revolving facility with a current maximum principal
amount of $17.0 million and bears interest at a default interest rate
equal to the Fleet National Bank Base Rate plus 6.0% (10.0% as of
January 25, 2004).

o Tranche B is a term loan facility with a maximum principal amount of
$25.0 million and bears interest at a default interest rate equal to
29% per annum.

13

o Tranche C is a term loan facility with a maximum principal amount of
$12.0 million and bears interest at a default interest rate equal to
29% per annum. Interest accrued is added to the principal balance of
Tranche C and is compounded semi-annually.

On May 31, 2002, the lenders accelerated the due date of the entire
remaining principal and accrued interest under the facility. On November 22,
2002, Resort Properties entered into a forbearance agreement with the lenders
whereby the lenders agreed to not pursue additional foreclosure remedies and to
cease publication of foreclosure notices for a 30-day period. Although this
30-day period expired, management continues discussions with Fleet National Bank
(Fleet) and the other lenders regarding a restructuring of this facility, and
Fleet and the other lenders have not exercised any further foreclosure remedies
since the expiration of the forbearance agreement. Management's ongoing
restructuring efforts with the lenders are aimed towards a restructuring of the
Real Estate Term Facility, with the establishment of a new entity to hold the
assets of Resort Properties which are pledged as collateral under the Real
Estate Term Facility and certain other assets. The equity in the new entity is
expected to be held by a combination of the lenders under the facility and
Resort Properties. The Real Estate Term Facility remains in default pending
completion of these negotiations. As of January 25, 2004, the principal balance
outstanding, including accrued and unpaid interest, under the Real Estate Term
Facility was $78.2 million, which is presented as a current liability in the
accompanying condensed consolidated balance sheet.

There is no assurance that negotiations with the lenders will be
successfully completed. Furthermore, regardless of the outcome of this proposed
restructuring, the Company may lose control of assets pledged as collateral
under the facility and future access to value creation from these real estate
assets. A substantial portion of the Company's developable real estate,
including substantially all of the developable residential real estate at The
Canyons along with certain core village real estate at Killington, and the stock
of the Company's real estate development subsidiaries (including Grand Summit)
is pledged to Fleet and the lenders under the facility. The commercial core
units at the Sundial Lodge at The Canyons and the Mount Snow Grand Summit Hotel
in Vermont are also pledged to Fleet and the lenders. The Grand Summit unit
inventory does not secure the Real Estate Term Facility, although the pledge of
the stock of Grand Summit to secure the Real Estate Term Facility means that the
Company may lose control of the Grand Summit unit inventory to the lenders under
the Real Estate Term Facility. Other remedies available to the lenders include,
but are not limited to, setoff of cash collateral amounts in Resort Properties'
name held at Fleet in the amount of approximately $1.5 million, foreclosure of
real and personal property owned by Resort Properties and pledged to the lenders
(including all of the capital stock of the Company's hotel development
subsidiary, Grand Summit), and other customary secured creditor remedies. As of
January 25, 2004, the carrying value of the total assets that collateralized the
$78.2 million Real Estate Term Facility and the Company's $40.8 million real
estate construction loan facilities described below was approximately $108.0
million. This collateral includes $77.7 million of Grand Summit assets pledged
under the Company's $40.8 million real estate construction loan facilities.

Grand Summit

The Company conducts substantially all of its real estate development
through subsidiaries, each of which is a wholly owned subsidiary of Resort
Properties. Grand Summit owns the existing Grand Summit Hotel projects, which
are primarily financed through a $110 million construction loan facility (Senior
Construction Loan) between Grand Summit and various lenders, including Textron
Financial Corporation (Textron), the syndication and administrative agent. Due
to construction delays and cost increases at the Steamboat Grand Hotel project,
Grand Summit entered into a $10 million subordinated loan tranche with Textron
(Subordinated Construction Loan) on July 25, 2000. The Company used this
facility solely for the purpose of funding the completion of the Steamboat Grand
Hotel. The Senior Construction Loan and the Subordinated Construction Loan are
referred to collectively as the "Construction Loan Facility".

The Senior Construction Loan has an outstanding principal balance of $30.6
million as of January 25, 2004 and was in default as of June 29, 2003 due to the
failure by Grand Summit to reduce the principal balance outstanding to a maximum
of $30.0 million as required under the terms of the agreement. In addition, the
Senior Construction Loan further required that the loan be reduced to a maximum
of $25.0 million by June 30, 2003 and to $20.0 million by September 30, 2003. As
a result, the Subordinated Construction Loan also was in default. Effective
December 31, 2003, Grand Summit and Textron entered into amendments to the
Senior Construction Loan and the Subordinated Construction Loan. The terms of
the revised agreements waive the above referenced defaults, relax the timing of
mandatory principal amortization requirements, provide additional liquidity to
support ongoing sales and marketing activities of the remaining units at The
Canyons Grand Summit and Steamboat Grand hotels, and allow an auction to be held
for the remaining units at The Canyons Grand Summit Hotel. The amendments also
require that Grand Summit pay the lenders a $175,000 default waiver fee from the
proceeds of the auction to satisfy the previous default of not reducing the
Senior Construction Loan balance to $30.0 million by June 29, 2003.

14

The Senior Construction Loan principal is payable incrementally as quarter
and eighth share unit sales are closed based on a predetermined per unit amount,
which approximates between 70% and 80% of the net proceeds of each closing.
Mortgages against the commercial core units and unsold inventory at the Grand
Summit Hotels at The Canyons and Steamboat, a promissory note from the Steamboat
Homeowners Association secured by the Steamboat Grand Summit Hotel parking
garage, and the commercial core unit of the Attitash Bear Peak Grand Summit
Hotel collateralize the Senior Construction Loan. The Senior Construction Loan
is subject to covenants, representations and warranties customary for this type
of construction facility. The Senior Construction Loan is non-recourse to the
Company and its resort operating subsidiaries (although it is collateralized by
substantial assets of Grand Summit, having a total book value of $77.7 million
as of January 25, 2004, which in turn comprise substantial assets of the
Company's business). The maturity date for funds advanced under the Senior
Construction Loan is June 30, 2006. The principal balance outstanding under the
Senior Construction Loan was approximately $30.6 million as of January 25, 2004
and had an interest rate on funds advanced of prime plus 3.5%, with a floor of
9.0% (9.0% as of January 25, 2004). The principal balance outstanding under the
Subordinated Construction Loan was approximately $10.2 million as of January 25,
2004 and is due on November 30, 2007. The interest rate on the funds advanced is
20%.

Upon the repayment of all indebtedness under the Senior Construction Loan,
the Subordinated Construction Loan and all other fees, Textron will receive a
fee equal to 25% of all gross proceeds of sales of the remaining unsold quarter
and eighth share units and commercial units occurring subsequent to repayment.
Grand Summit and the lenders also agreed to use their best efforts to enter into
an escrow agreement pursuant to which the appropriate deed-in-lieu documentation
in respect to the Senior Construction Loan and the Subordinated Construction
Loan shall be placed in escrow. Finally, under the Senior Construction Loan, as
amended, the following maximum principal balances must be outstanding as of the
following dates:

June 30, 2004 $19,000,000
September 30, 2004 $18,000,000
December 31, 2004 $17,000,000
March 31, 2005 $14,000,000
June 30, 2005 $12,000,000
September 30, 2005 $11,000,000
December 31, 2005 $10,000,000
March 31, 2006 $ 5,000,000
June 30, 2006 $ -

In addition, the amendments to the Subordinated Construction Loan provided
additional borrowing availability of approximately $0.6 million for a maximum
borrowing capacity of $10.6 million. The Subordinated Construction Loan will
continue to bear interest at 20%, payable monthly in arrears, provided that 50%
of the interest shall be due and payable in cash and the other 50% of such
interest shall, if no events of default exist under the Subordinated
Construction Loan or the Senior Construction Loan, automatically be deferred
until the final payment date of November 30, 2007.

In late February 2004, an auction was held to sell substantially all of the
remaining units at The Canyons Grand Summit hotel. Closings are still in process
and are expected to close in March 2004. Grand Summit expects to receive
proceeds from auction presales, the auction, and post auction sales of
approximately $15.6 million, of which $10.0 million will be used to pay down the
Senior Construction Loan, $4.5 million will be used for Grand Summit's future
working capital needs, and $1.1 million will be used to pay commissions and
closing costs.

American Skiing Company

The Company entered into an agreement dated February 14, 2003 with General
Electric Capital Corporation (GE Capital) and CapitalSource Finance LLC
(CapitalSource) whereby GE Capital and CapitalSource provided a $91.5 million
senior secured loan facility (the Resort Senior Credit Facility) including a
revolving credit facility (Revolving Credit Facility), tranche A term loan
(Tranche A Term Loan), supplemental term loan (Supplemental Term Loan), and
tranche B term loan (Tranche B Term Loan). The Resort Senior Credit Facility is
secured by substantially all the assets of the Company (except for the stock of
Resort Properties and other real estate subsidiaries) and the assets of its
resort operating subsidiaries. Resort Properties and its subsidiaries are not
guarantors of the Resort Senior Credit Facility nor are their assets pledged as
collateral under the Resort Senior Credit Facility. The Resort Senior Credit
Facility consists of the following:

15

o Revolving Credit Facility - $40.0 million, including letter of credit
(L/C) availability of up to $5.0. The amount of availability under the
Revolving Credit Facility will be correspondingly reduced by the
amount of each L/C issued.

o Tranche A Term Loan - $25.0 million borrowed on the funding date of
February 18, 2003.

o Supplemental Term Loan - $6.5 million borrowed on the funding date of
February 18, 2003.

o Tranche B Term Loan - $20.0 million borrowed on the funding date of
February 18, 2003.

The Revolving Credit Facility, Tranche A Term Loan and Supplemental Term
Loan portions of the Resort Senior Credit Facility mature on April 15, 2006 and
bear interest at JPMorgan Chase Bank's prime rate plus 3.25% payable monthly
(7.25% as of January 25, 2004). The Supplemental Term Loan requires payments of
approximately $1.0 million on January 15 and July 15 of each year, and a final
payment of approximately $1.0 million on April 15, 2006. The Tranche B Term Loan
matures on June 15, 2006 and bears interest at JPMorgan Chase Bank's prime rate
plus 5.0% payable monthly (12.25% as of January 25, 2004) with an interest rate
floor of 12.25%. The Resort Senior Credit Facility contains affirmative,
negative and financial covenants customary for this type of credit facility,
which includes maintaining a minimum level of EBITDA, as defined, places an
annual limit on the Company's capital expenditures, requires the Company to have
a zero balance on the Revolving Credit Facility on April 1 of each year prior to
maturity and contains an asset monetization covenant which requires the Company
to refinance the facility or sell assets sufficient to retire the facility on or
prior to December 31, 2005. The Resort Senior Credit Facility also restricts the
Company's ability to pay cash dividends on or redeem its common and preferred
stock.

As of January 25, 2004, the Company had $13.5 million, $25.0 million, $5.1
million, and $20.0 million of principal outstanding under the Revolving Credit
Facility, Tranche A Term Loan, Supplemental Term Loan, and Tranche B Term Loan
portions of the Resort Senior Credit Facility, respectively. As of January 25,
2004, the Company had $26.2 million available for future borrowings under the
Revolving Credit Facility. As of January 25, 2004, the Company had $0.3 million
of L/C's issued under the Resort Senior Credit Facility.

6. Dividend Restrictions

Borrowers under the Company's Resort Senior Credit Facility, which include
ASC, are restricted from paying cash dividends on any of their preferred or
common stock other than payments to other borrowers or restricted subsidiaries.

Borrowers under the Real Estate Term Facility, which include Resort
Properties and Resort Properties' subsidiaries, including Grand Summit, are
restricted from declaring dividends or advancing funds to ASC by any other
method, unless specifically approved by these lenders.

Under the indenture governing our 12% senior subordinated notes (the Senior
Subordinated Notes), ASC is prohibited from paying cash dividends or making
other distributions to its shareholders.

7. Phantom Equity Plan

The Company has established the American Skiing Company Phantom Equity Plan
(the "LTIP"), which was ratified by the Board of Directors on March 6, 2003.
Certain of ASC's officers participate in this plan. Participants are entitled to
a cash payment on awards granted under the LTIP, upon a Valuation Event, as
defined, or in certain cases to the extent vested upon termination of
employment. The amount of any awards are based ultimately on the Equity Value,
as defined, obtained through a Valuation Event and generally vest over a four or
five-year term as determined by the Compensation Committee. A Valuation Event is
any of the following: (i) a sale or disposition of a significant Company
operation or property as determined by the Board; (ii) a merger, consolidation
or similar event of the Company other than one (A) in which the Company is the
surviving entity or (B) where no Change in Control has occurred; (iii) a public
offering of equity securities by the Company that yields net proceeds to the
Company in excess of $50 million; or (iv) a Change in Control, as defined.
Compensation expense will be estimated and recorded based on the probability of
the Company achieving a Valuation Event. During the 13 and 26 weeks ended
January 25, 2004, the Company recorded a charge of approximately $0.1 million
and $0.2 million, respectively, which is included in marketing, general and
administrative expenses in the accompanying condensed consolidated statements of

16

operations. The total liability for the LTIP of $0.7 million is included in
other long-term liabilities in the January 25, 2004 condensed consolidated
balance sheet.

8. Commitments and Contingencies

As previously reported in the Company's Form 10-K filed on October 27, 2003
with the Securities and Exchange Commission, the Company entered into an
agreement on January 22, 2002 with Triple Peaks, LLC for the sale of the
Steamboat resort. The Company later determined that the sale of its Heavenly
resort more closely achieved the Company's restructuring objectives and
concluded that it would not proceed with the sale of the Steamboat resort. On
April 5, 2002, Triple Peaks, LLC filed a lawsuit against ASC in federal district
court in Denver, alleging breach of contract resulting from the Company's
refusal to close on the proposed sale of the Steamboat resort. The suit seeks
both monetary damages resulting from the breach and specific performance of the
contract. On April 16, 2002, before an answer to its complaint was filed, Triple
Peaks voluntarily dismissed its suit and re-filed a substantially identical
complaint in Colorado State District Court in Steamboat, also naming Steamboat
Ski & Resort Corporation, Resort Properties and Walton Pond Apartments, Inc.
(each direct or indirect subsidiaries of ASC) as additional defendants. On
December 31, 2002, the Colorado State District Court issued summary judgment in
the Company's favor and against Triple Peaks, confirming that the damages the
Company owes Triple Peaks under the contract are limited to $500,000. On January
26, 2003, Triple Peaks appealed the decision of the Colorado State District
Court.

On January 22, 2004, the Colorado Court of Appeals reversed the judgment of
the Colorado State District Court in the Company's favor, finding that the
agreement between the Company and Triple Peaks did not, under the circumstances
of the Company's refusal to close, limit damages to $500,000. The Court of
Appeals remanded the case to the Colorado State District Court with instructions
to determine whether damages or specific performance of the agreement was the
proper remedy for the Company's refusal to close.

The Company has filed a Request for Rehearing with the Colorado Court of
Appeals, which request is currently pending. If the Company's request is denied,
the Company plans to appeal the judgment of the Court of Appeals to the Colorado
Supreme Court and will continue to assert that damages under the agreement are
limited to $500,000. The Company has accrued an amount in the accompanying
consolidated balance sheet that it deems appropriate. It is possible that the
estimated accrual could change significantly due to the inherent uncertainty of
litigation and the wide range of possible outcomes. If the decision of the Court
of Appeals is upheld and leads to a verdict in favor of Triple Peaks granting
either summary judgment or significant monetary damages, or both, the result
could have a material adverse impact on the financial position, results of
operations, and liquidity of the Company.

17

Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations

Forward-Looking Statements

Certain statements contained in this report constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act), and Section 21E of the Securities Exchange Act of
1934, as amended (the Exchange Act). These forward-looking statements are not
based on historical facts, but rather reflect our current expectations
concerning future results and events. Similarly, statements that describe our
objectives, plans or goals are or may be forward-looking statements. We have
tried, wherever possible, to identify such statements by using words such as
"anticipate", "assume", "believe", "expect", "intend", "plan", and words and
terms of similar substance in connection with any discussion of operating or
financial performance. Such forward-looking statements involve a number of risks
and uncertainties. In addition to factors discussed above, other factors that
could cause actual results, performances or achievements to differ materially
from those projected include, but are not limited to, the following: changes in
regional and national business and economic conditions affecting both our resort
operating and real estate segments; competition and pricing pressures; negative
impact on demand for our products resulting from terrorism and availability of
air travel (including the effect of airline bankruptcies); the payment default
under our Real Estate Term Facility and its effects on the results and
operations of our real estate segment; any redemption of or legal requirement to
redeem our Series A Preferred Stock; failure to maintain improvements to resort
operating performance at the covenant levels required by our Resort Senior
Credit Facility; a final determination against the Company in the Steamboat
litigation which leads to material monetary damages or an order for specific
performance for sale of the Steamboat resort; the possibility of domestic
terrorist activities and their respective effects on the ski, golf, resort,
leisure and travel industries; failure of on-mountain improvements and other
capital expenditures to generate incremental revenue; adverse weather conditions
regionally and nationally; seasonality of the business; changes to federal,
state and local regulations affecting both our resort operating and real estate
segments; failure to renew land leases and forest service permits; disruptions
in water supply that would impact snowmaking operations; the impact of global
warming on long and short-term weather patterns and on ski conditions at our
resorts; the loss of any of our executive officers or key operating personnel;
and other factors listed from time to time in our documents we have filed with
the Securities and Exchange Commission. We caution the reader that this list is
not exhaustive. We operate in a changing business environment and new risks
arise from time to time. The forward-looking statements included in this
document are made only as of the date of this document and under Section 27A of
the Securities Act and Section 21E of the Exchange Act, we do not have or
undertake any obligation to publicly update any forward-looking statements to
reflect subsequent events or circumstances.

Executive Summary

We are organized as a holding company and operate through various
subsidiaries. We are one of the largest operators of alpine ski and snowboard
resorts in the United States. We develop, own and operate a range of
hospitality-related businesses, including skier development programs, hotels,
golf courses, restaurants and retail locations. We also develop, market and
operate ski-in/ski-out alpine villages, townhouses, condominiums, and quarter
and eighth share ownership hotels. We manage our operations in two business
segments, ski resort operations and mountainside real estate development.

Our resort operating strategies include taking advantage of multi-resort
network, increasing our revenue per skier, increasing brand awareness and
customer loyalty, expanding our sales and marketing efforts by selecting a
single advertising agency to provide services nationwide, continuing to focus on
cost management, and improving our hotel occupancy and operating margins. Our
current year results have been affected by challenging weather conditions in the
eastern resorts. This has been partially offset by favorable snow conditions at
our western resorts and a company-wide increase in our season pass revenues.

We continue to have discussions with our lenders to restructure our Real
Estate Term Facility aimed towards establishing a new entity to hold our real
estate development assets. During the thirteen weeks ended January 25, 2004, we
have been successful in amending our real estate construction loan facilities.
Subsequent to January 25, 2004, an auction was held to sell the remaining units
at The Canyons Grand Summit hotel.

18

General

The following is our discussion and analysis of financial condition and
results of operations for the 13 and 26 weeks ended January 25, 2004. As you
read the material below, we urge you to carefully consider our Fiscal 2003
Annual Report on Form 10-K filed on October 27, 2003 and our unaudited condensed
consolidated financial statements and related notes contained elsewhere in this
report.

Real Estate Credit Agreement Defaults

On March 30, 2002, our real estate development subsidiary, American Skiing
Company Resort Properties, Inc. (Resort Properties), failed to make a mandatory
principal payment of $3.75 million under its Real Estate Term Facility with
Fleet National Bank (Fleet) and certain other lenders. See "Liquidity and
Capital Resources - Real Estate Liquidity - Real Estate Term Facility" below for
a discussion of the status of our efforts to restructure the Real Estate Term
Facility.

The Senior Construction Loan of Grand Summit was also in payment default as
of June 29, 2003 due to the failure by Grand Summit to reduce the principal
balance outstanding to a maximum of $30.0 million as required under the terms of
the agreement. In addition, the Senior Construction Loan further required that
the loan be reduced to a maximum of $25.0 million by June 30, 2003 and to $20
million by September 30, 2003. As a result, Grand Summit was also in default
under its $10.0 million Subordinated Construction Loan with Textron and various
lenders. Effective December 31, 2003, Grand Summit and Textron entered into
amendments to the Senior Construction Loan and the Subordinated Construction
Loan. The terms of the revised agreements waive the above referenced defaults,
relax mandatory principal amortization requirements, provide additional
liquidity to support ongoing sales and marketing activities of the remaining
units at The Canyons Grand Summit and Steamboat Grand hotels, and allow an
auction to be held for the remaining units at The Canyons Grand Summit hotel.
The amendments also require that Grand Summit pay the lenders a $175,000 default
waiver fee from the proceeds of the auction to satisfy the previous default of
not reducing the Senior Construction Loan balance to $30 million by June 29,
2003.

See "Liquidity and Capital Resources - Real Estate Liquidity - Construction
Loan Facility" below for further discussion of the terms of the amendments to
the Construction Loan Facility.

Liquidity and Capital Resources

Short-Term

Our primary short-term liquidity needs involve funding seasonal working
capital requirements, marketing and selling real estate development projects,
funding our Fiscal 2004 capital improvement program, and servicing our debt. Our
cash requirements for ski-related and real estate development/sales activities
are provided from separate sources.

As described below, we entered into a new $91.5 million senior secured loan
facility (the Resort Senior Credit Facility) on February 14, 2003 and used our
initial borrowings to refinance the prior resort senior credit facility.

Our primary source of liquidity for ski-related working capital and
ski-related capital improvements are cash flows from operations of our non-real
estate subsidiaries and borrowings under our Resort Senior Credit Facility. The
total debt outstanding on our Resort Senior Credit Facility as of January 25,
2004 was approximately $63.6 million.

Real estate development and real estate working capital is funded primarily
through unit inventory sales, short-term rental of remaining unit inventory, as
well as lease payments from long-term commercial tenants. Historically, the
Construction Loan Facility funded such working capital. The Construction Loan
Facility is without recourse to ASC and the resort operating subsidiaries and is
collateralized by significant real estate assets of Resort Properties and its
subsidiaries, including the assets and stock of Grand Summit. As of January 25,
2004, the carrying value of the total assets that collateralized the
Construction Loan Facility and which are included in the accompanying condensed
consolidated balance sheet was approximately $77.7 million. The total debt
outstanding on the Construction Loan Facility as of January 25, 2004 was
approximately $40.8 million. See "Real Estate Liquidity - Real Estate Term
Facility" and "Real Estate Liquidity - Construction Loan Facility" below.

In late February 2004, an auction was held to sell substantially all of the
remaining units at The Canyons Grand Summit hotel. Closings are still in process
and are expected to close in March 2004. Grand Summit expects to receive
proceeds from auction presales, the auction, and post auction sales of
approximately $15.6 million, of which $10.0 million will be used to pay down the

19

Senior Construction Loan, $4.5 million will be used for Grand Summit's future
working capital needs, and $1.1 million will be used to pay commissions and
closing costs.

Resort Liquidity

We entered into an agreement dated February 14, 2003 with General Electric
Capital Corporation (GE Capital) and CapitalSource Finance LLC (CapitalSource)
whereby GE Capital and CapitalSource provided a new $91.5 million senior secured
loan facility (Resort Senior Credit Facility). The Resort Senior Credit Facility
is secured by substantially all of our holding company assets, excluding the
stock of Resort Properties and other real estate subsidiaries, and the assets of
our resort operating subsidiaries. Resort Properties and its subsidiaries are
not guarantors of the Resort Senior Credit Facility nor are their assets pledged
as collateral under the Resort Senior Credit Facility.

The Resort Senior Credit Facility consists of the following:

o Revolving Credit Facility - $40.0 million, including letter of credit
(L/C) availability of up to $5.0 million. The amount of availability
under the Revolving Credit Facility will be correspondingly reduced by
the amount of each L/C issued. As of January 25, 2004, we had
approximately $13.5 million borrowed on this facility and
approximately $0.3 million of outstanding L/Cs, leaving us $26.2
million in availability.

o Tranche A Term Loan - $25.0 million borrowed as of January 25, 2004,
$0 availability;

o Supplemental Term Loan - $5.1 million borrowed as of January 25, 2004,
$0 availability; and

o Tranche B Term Loan - $20.0 million borrowed as of January 25, 2004,
$0 availability.

The Revolving Credit Facility, Tranche A Term Loan, and Supplemental Term
Loan portions of the Resort Senior Credit Facility mature on April 15, 2006 and
bear interest at JPMorgan Chase Bank's prime rate plus 3.25%, payable monthly
(7.25% as of January 25, 2004). The Supplemental Term Loan requires principal
payments of approximately $1.0 million on January 15 and July 15 of each year,
with a final payment of approximately $1.0 million on April 15, 2006. The
Tranche B Term Loan matures on June 15, 2006 and bears interest at JPMorgan
Chase Bank's prime rate plus 5.0%, payable monthly (12.25% as of January 25,
2004) with an interest rate floor of 12.25%. The Resort Senior Credit Facility
contains affirmative, negative and financial covenants customary for this type
of credit facility, which includes maintaining a minimum level of EBITDA, as
defined, places a limit on our annual capital expenditures, requires the Company
to have a zero balance on the Revolving Credit Facility on April 1 of each year
prior to maturity, and contains an asset monetization covenant which requires us
to refinance the facility or sell assets sufficient to retire the facility on or
prior to December 31, 2005. The financial covenants of the Resort Senior Credit
Facility also restrict our ability to pay cash dividends on or redeem our common
and preferred stock.

As of February 22, 2004, we had $0, $25.0 million, $5.1 million, and $20.0
million of principal outstanding under the Revolving Credit Facility, Tranche A
Term Loan, Supplemental Term Loan, and Tranche B Term Loan portions of the
Resort Senior Credit Facility, respectively. Furthermore, as of February 22,
2004, we had approximately $0.3 million in outstanding L/Cs with approximately
$39.7 million available for future borrowings under the Revolving Credit
Facility. We currently anticipate that the remaining borrowing capacity under
the Resort Senior Credit Facility will be sufficient to meet our working capital
needs through the end of Fiscal 2004.

We closely monitor our operating results that impact our ability to meet
the financial covenants under our Resort Senior Credit Facility. We take various
actions to maintain compliance with our financial covenants, including selling
non-core assets to increase revenues, and reducing our cost structure during the
off-season and seasonal low-visitation at our resorts. In the event of a
violation of the financial covenants under our Resort Senior Credit Facility, we
would engage in a discussion with our lenders for a waiver of those covenants
for the period in question. Due to the restrictions under our Resort Senior
Credit Facility and the indenture governing our Senior Subordinated Notes, we
have limited access to alternate sources of funding.

The Company was in compliance with all financial covenants of the Resort
Senior Credit Facility through the end of its second fiscal quarter on January
25, 2004. However, weather conditions at our eastern resorts in the second and
third fiscal quarters of 2004 have not been favorable, and our results of

20

operations at those resorts for such periods have been below management's
expectations. Accordingly, the Company's ability to meet the financial covenants
of the Resort Senior Credit Facility for its third fiscal quarter will be
dependent upon the return of operating revenues to historical levels and there
can be no assurance that the Company will continue to meet all of its financial
covenants under the Resort Senior Credit Facility. The length of the ski
operating season at the Company's eastern resorts will also impact the Company's
operating results for the third fiscal quarter.

Our significant debt levels affect our liquidity. As a result of our highly
leveraged position, we have significant cash requirements to service interest
and principal payments on our debt. Consequently, cash availability for working
capital needs, capital expenditures, and acquisitions is significantly limited,
outside of any availability under the Resort Senior Credit Facility.
Furthermore, our Resort Senior Credit Facility and the indenture governing our
Senior Subordinated Notes contain significant restrictions on our ability to
obtain additional sources of capital and may affect our liquidity. These
restrictions include restrictions on the sale of assets, restrictions on the
incurrence of additional indebtedness, and restrictions on the issuance of
preferred stock.

Real Estate Liquidity

To fund working capital and fund its real estate development plan, Resort
Properties relies primarily on unit inventory sales, short-term rental of
remaining unit inventory, as well as lease payments from long-term commercial
tenants. Resort Properties historically relied on the net proceeds from the sale
of real estate developed for sale, the Real Estate Term Facility, and the
Construction Loan Facility. A substantial portion of our developable real estate
and the commercial core units at the Sundial Lodge at The Canyons and the Mount
Snow Grand Summit Hotel in Vermont are pledged to the lenders under the Real
Estate Term Facility.

Real Estate Term Facility: Effective May 20, 2002, Resort Properties was in
default on its Real Estate Term Facility due to its failure to make a mandatory
principal payment of $3.75 million and the indebtedness was accelerated on May
31, 2002. As a result, all indebtedness under the facility is currently due and
payable.

The Real Estate Term Facility is comprised of three tranches, each with
separate interest rates and maturity dates as follows:

o Tranche A is a revolving facility with a current maximum principal
amount of $17.0 million which bears interest at a variable rate equal
to the Fleet National Bank Base Rate plus 2.0% (payable monthly in
arrears). As a result of the default, the default interest rate on
Tranche A is the Fleet National Bank Base Rate plus 6.0% (10.0% as of
January 25, 2004). Prior to the default, mandatory principal
reductions were required in certain prescribed percentages ranging
from 50% to 75% of net proceeds from any future sales of undeveloped
parcels. Prior to the default, the remaining principal amount
outstanding under Tranche A was scheduled to be paid in full on June
30, 2003.

o Tranche B is a term loan facility that has a maximum principal amount
of $25.0 million, bears interest at a fixed rate of 18% per annum (10%
per annum is payable monthly in arrears and the remaining 8% per annum
accrues, is added to the principal balance of Tranche B, and bears
interest at 18% per annum, compounded annually). As a result of the
default, the default interest rate on Tranche B is 29% per annum.
Mandatory principal payments on Tranche B of $10.0 million were due on
each of December 31, 2003 and June 30, 2004. Prior to the default, the
remaining $5.0 million of principal and all accrued and unpaid
interest on Tranche B was scheduled to be paid in full on December 31,
2004.

o Tranche C is a term loan facility that has a maximum principal amount
of $12.0 million, bears interest at an effective rate of 29% per annum
and, prior to the default, was scheduled to mature on December 31,
2005. As a result of the default, the default interest rate on Tranche
C is 29% per annum. Accrued interest is added to the principal balance
of Tranche C and is compounded semi-annually.

On November 22, 2002, Resort Properties entered into a forbearance
agreement with the lenders whereby the lenders agreed to not pursue additional
foreclosure remedies and to cease publication of foreclosure notices for a
30-day period. Although this 30-day period expired, management continues
discussions with Fleet and the other lenders regarding a restructuring of this
facility, and Fleet and the other lenders have not exercised any further
foreclosure remedies since the expiration of the forbearance agreement.
Management's ongoing efforts with the lenders are aimed towards a restructuring
of the facility with the establishment of a new entity to hold the assets of
Resort Properties' which are pledged as collateral under the facility. The

21

equity in the new entity is expected to be held by a combination of the lenders
under the facility and Resort Properties. The facility remains in default
pending completion of these negotiations.

There is no assurance that negotiations with the lenders will be
successfully completed. Furthermore, regardless of the outcome of this proposed
restructuring, we may lose control of assets pledged as collateral under the
facility and future access to value creation from these real estate assets. A
substantial portion of our developable real estate, including substantially all
of the developable residential real estate at The Canyons along with certain
core village real estate at Killington, and the stock of our real estate
development subsidiaries (including Grand Summit) is pledged to Fleet and the
lenders under the facility. The commercial core units at the Sundial Lodge at
The Canyons and the Mount Snow Grand Summit Hotel in Vermont are also pledged to
Fleet and the lenders. The Grand Summit unit inventory does not secure the Real
Estate Term Facility, although the pledge of the stock of Grand Summit to secure
the Real Estate Term Facility means that we may lose control of the Grand Summit
unit inventory to the lenders under the Real Estate Term Facility. Other
remedies available to the lenders include, but are not limited to, setoff of
cash collateral amounts in Resort Properties' name held at Fleet in the amount
of approximately $1.5 million, foreclosure of real and personal property owned
by Resort Properties and pledged to the lenders (including all of the capital
stock of Grand Summit), and other customary secured creditor remedies. As of
January 25, 2004, the carrying value of the total assets that collateralized the
$78.2 million Real Estate Term Facility and the Company's $40.8 million real
estate construction loan facilities was approximately $108.0 million. This
collateral includes $77.7 million of Grand Summit assets pledged under the
Company's $40.8 million real estate construction loan facilities.

As of January 25, 2004, the principal balances outstanding, including
accrued and unpaid interest, under Tranches A, B and C of the Real Estate Term
Facility were $11.8 million, $41.8 million, and $24.6 million, respectively.

As of February 22, 2004, the principal balances outstanding, including
accrued and unpaid interest, under Tranches A, B and C of the Real Estate Term
Facility were $11.8 million, $42.4 million, and $25.2 million, respectively.

Construction Loan Facility: We conduct substantially all of our real estate
development through subsidiaries, each of which is a wholly owned subsidiary of
Resort Properties. Grand Summit owns our existing Grand Summit Hotel projects at
Steamboat, The Canyons, and Attitash Bear Peak, which are primarily financed
through the $110 million Senior Construction Loan. Due to construction delays
and cost increases at the Steamboat Grand Hotel project, on July 25, 2000, Grand
Summit entered into the $10 million Subordinated Construction Loan. Together
they comprise the Construction Loan Facility. We used the Construction Loan
Facility solely for the purpose of funding the completion of the Steamboat Grand
Hotel.

The Senior Construction Loan of Grand Summit was also in payment default as
of June 29, 2003 due to the failure by Grand Summit to reduce the principal
balance outstanding to a maximum of $30.0 million as required under the terms of
the agreement. In addition, the Senior Construction Loan further required that
the loan be reduced to a maximum of $25.0 million by June 30, 2003 and to $20.0
million by September 30, 2003. As a result, the Subordinated Construction Loan
also was in default. Effective December 31, 2003, Grand Summit and Textron
entered into amendments to the Senior Construction Loan and the Subordinated
Construction Loan. The terms of the revised agreements waive the above
referenced defaults, relax mandatory principal amortization requirements,
provide additional liquidity to support ongoing sales and marketing activities
of the remaining units at The Canyons Grand Summit and Steamboat Grand hotels,
and allow an auction to be held for the remaining units at The Canyons Grand
Summit hotel. The amendments also require that Grand Summit pays the lenders a
$175,000 default waiver fee from the proceeds of the auction to satisfy the
previous default of not reducing the Senior Construction Loan balance to $30
million by June 29, 2003.

As of January 25, 2004, the amount outstanding under the Senior
Construction Loan was $30.6 million and there were no borrowings available under
this facility. The principal is payable incrementally as quarter and eighth
share unit sales are closed based on a predetermined per unit amount, which
approximates between 70% and 80% of the net proceeds of each closing. Mortgages
against the commercial core units and unsold unit inventory at the Grand Summit
Hotels at The Canyons and Steamboat, a promissory note from the Steamboat
Homeowners Association secured by the Steamboat Grand Summit hotel parking
garage, and the commercial core unit of the Attitash Bear Peak Grand Summit
Hotel collateralize the Senior Construction Loan. This facility is subject to
covenants, representations and warranties customary for this type of
construction facility. The Senior Construction Loan is non-recourse to us and
our resort operating subsidiaries (although it is collateralized by substantial
assets of Grand Summit, having a total book value of $77.7 million as of January
25, 2004, which in turn comprise substantial assets of our real estate
business). The maturity date for funds advanced under the Steamboat portion of
the Senior Construction Loan is June 30, 2006. The principal balance outstanding
under the Steamboat portion of the Senior Construction Loan was approximately
$30.6 million as of January 25, 2004 and had an interest rate on funds advanced

22

of prime plus 3.5%, with a floor of 9.0% (9.0% as of January 25, 2004). The
Canyons portion of the Senior Construction Loan was repaid during March 2003
from proceeds from quartershare unit sales.

The Subordinated Construction Loan bears interest at a fixed rate of 20%
per annum, payable monthly in arrears, provided that only 50% of the amount of
this interest is due and payable in cash and the other 50% of such interest
will, if no events of default exist under the Subordinated Construction Loan or
the Senior Construction Loan, automatically be deferred until the final payment
date. The amendments to the Subordinated Construction Loan provided additional
borrowing availability of approximately $0.6 million for a maximum borrowing
capacity of $10.6 million. The maturity date for funds advanced under the
Subordinated Construction Loan, as amended, is November 30, 2007. The principal
balance outstanding under the Subordinated Construction Loan was approximately
$10.2 million as of January 25, 2004 and $0.4 million was available under this
facility. The Subordinated Construction Loan is secured by the same collateral
which secures the Senior Construction Loan.

The Senior Construction Loan, as amended, must have the following maximum
outstanding principal balances as of the following dates:

June 30, 2004 $19,000,000
September 30, 2004 $18,000,000
December 31, 2004 $17,000,000
March 31, 2005 $14,000,000
June 30, 2005 $12,000,000
September 30, 2005 $11,000,000
December 31, 2005 $10,000,000
March 31, 2006 $ 5,000,000
June 30, 2006 $ -

As of February 22, 2004, the amount outstanding under the Senior
Construction Loan was $29.8 million and there were no borrowings available under
this facility. As of February 22, 2004, the amount outstanding under the
Subordinated Construction Loan was $10.6 million and there were no borrowings
available under this facility.

In addition, in late February 2004, an auction was held to sell
substantially all of the remaining units at The Canyons Grand Summit hotel.
Closings are still in process and are expected to close in March 2004. Grand
Summit expects to receive proceeds from auction presales, the auction, and post
auction sales of approximately $15.6 million, of which $10.0 million will be
used to pay down the Senior Construction Loan, $4.5 million will be used for
Grand Summit's future working capital needs, and $1.1 million will be used to
pay commissions and closing costs.

Series A Preferred Stock Redemption

We have 36,626 shares of Series A Preferred Stock outstanding, with an
accreted value of approximately $70.2 million as of January 25, 2004. The Series
A Preferred Stock was redeemable on November 12, 2002 at an aggregate redemption
price of approximately $62 million, to the extent that we had funds legally
available for that redemption. If the Series A Preferred Stock is not permitted
to be redeemed because there are not legally available funds, we must redeem
that number of shares of Series A Preferred Stock which we can lawfully redeem,
and from time to time thereafter, as soon as funds are legally available, we
must redeem shares of our Series A Preferred Stock until we have done so in
full. Prior to the November 12, 2002 redemption date, based on all relevant
factors, our Board of Directors determined not to redeem any shares of stock on
the redemption date. On January 27, 2003, the holders of the Series A Preferred
Stock demanded that we redeem all of the Series A Preferred Stock immediately
and on April 8, 2003, the Series A Preferred Stockholders demanded pursuant to
Delaware law to review certain of our records. We will continue to assess our
obligations with respect to the requirements of the redemption provisions of our
Series A Preferred Stock. Because the Series A Preferred Stock was not redeemed
on November 12, 2002, the certificate of designation for the Series A Preferred
Stock provides that the holders are entitled to elect two new members of our
board of directors. We have not yet been advised by the holders of the Series A
Preferred Stock whether they intend to exercise their right to elect two
directors at or prior to our next annual shareholders meeting or whether they
intend to take any other action, including legal action, to seek to compel our
redemption of the Series A Preferred Stock. If the holders of the Series A
Preferred Stock were to commence any litigation to compel us to redeem the
Series A Preferred Stock, based on present facts and circumstances, we would
vigorously contest that litigation. If we are required to redeem all or any
portion of the Series A Preferred Stock, it could have a material adverse effect
on our business, results of operations, and financial condition.

23

We are not permitted to redeem our Series A Preferred Stock under the terms
of our Resort Senior Credit Facility and the terms of the indenture governing
our Senior Subordinated Notes. If any redemption occurs or the holders of our
Series A Preferred Stock obtain and seek to enforce a final judgment against us
that is not paid, discharged or stayed, this could result in an event of default
under those debt instruments, and the lenders and holders of that debt could
declare all amounts outstanding to be due and payable immediately. If we are
required to redeem all or any portion of our Series A Preferred Stock, either as
a result of a court judgment or otherwise, we would have to consider seeking an
amendment or waiver of the terms of the Resort Senior Credit Facility and the
indenture governing the Senior Subordinated Notes, selling material assets or
operations, refinancing our indebtedness and our Series A Preferred Stock,
seeking to raise additional debt or equity capital, delaying capital
expenditures and other investments in our business and/or restructuring our
indebtedness and preferred stock. No assurance can be given that we would be
successful in taking any of these steps or that we would have the necessary
liquidity or assets to effect any redemption of our Series A Preferred Stock and
any indebtedness required to be repaid. As a result, any redemption of, or legal
requirement to redeem, our Series A Preferred Stock could have a material
adverse effect on us.

Long-Term

Our primary long-term liquidity needs are to fund skiing-related capital
improvements at certain of our resorts. For Fiscal 2004, we anticipate our
annual maintenance capital needs to be approximately $8.5 million (through
January 25, 2004, the Company has expended approximately $6.6 million). There is
a considerable degree of flexibility in the timing and, to a lesser degree,
scope of our growth capital program. Although we can defer specific capital
expenditures for extended periods, continued growth of skier visits, revenues
and profitability will require continued capital investment in on-mountain
improvements.

We finance on-mountain capital improvements through resort cash flows,
capital leases, and our Resort Senior Credit Facility. The size and scope of the
capital improvement program will generally be determined annually depending upon
the strategic importance and expected financial return of certain projects,
future availability of cash flows from each season's resort operations, and
future borrowing availability and covenant restrictions under the Resort Senior
Credit Facility. The Resort Senior Credit Facility places a maximum level of
non-real estate capital expenditures for Fiscal 2004 at $8.5 million, with the
ability to increase this amount in the future if certain conditions are met. We
believe that these capital expenditure amounts will be sufficient to meet our
non-real estate capital improvement needs for Fiscal 2004.

We closely monitor our operating results that impact our ability to meet
the financial covenants under our Resort Senior Credit Facility. We take various
actions to maintain compliance with our financial covenants, including selling
non-core assets to increase revenues, and reducing our cost structure during the
off-season and seasonal low-visitation at our resorts. In the event of a
violation of the financial covenants under our Resort Senior Credit Facilty, we
would engage in a discussion with our lenders for a waiver of those covenants
for the period in question. Due to the restrictions under our Resort Senior
Credit Facility and the indenture governing our Senior Subordinated Notes, we
have limited access to alternate sources of funding.

24

Results of Operations
For the 13 weeks ended January 26, 2003 compared to the 13 weeks ended
January 25, 2004

Resort Operations:

The components of resort operations for the 13 weeks ended January 26, 2003
and January 25, 2004 are as follows (in thousands):

------------------------------------------------------------------------------
13 Weeks ended
------------------------------- ------------
1/26/03 1/25/04 Variance
--------------- --------------- ------------

Total resort revenues $ 98,961 $ 92,904 $ (6,057)
--------------- --------------- ------------

Cost of resort operations 65,794 62,410 (3,384)
Marketing, general and
administrative 16,552 20,490 3,938
Depreciation and amortization 10,981 10,197 (784)
Interest expense 6,916 17,508 10,592
--------------- --------------- ------------
Total resort expenses 100,243 110,605 10,362
--------------- --------------- ------------

Loss from resort operations $ (1,282) $ (17,701) $ (16,419)
=============== =============== ============

------------------------------------------------------------------------------

Resort revenues were approximately $6.1 million, or 6.1%, lower in the 13
weeks ended January 25, 2004 when compared to the 13 weeks ended January 26,
2003. This is a result of a decrease of approximately 16% in skier visits at our
eastern resorts due to extremely challenging weather conditions. This included
warmer than normal weather conditions in November which required us to delay
planned opening dates, followed by alternating record snowfalls and record rains
in early December, rain over the Christmas - New Year's holiday period, and
unrelenting sub-zero temperatures and wind on weekends in January. We are unable
to predict future weather patterns or the impact that weather patterns may have
on our results of operations or visitation.

The decrease in revenues in the east were partially offset by an increase
of approximately 2% in skier visits at our western resorts due to good early
season snowfall, near record snowfall in December, and a company-wide increase
of approximately $1.8 million in season pass revenues for the 13 weeks ended
January 25, 2004. Despite the overall decrease in skier visits in the east, we
have implemented certain initiatives at all of our resorts that have increased
ticket yield per skier visit and increased other on-mountain revenue per skier
visit over the comparable period in Fiscal 2003.

Resort operating expenses (including marketing, general and administrative)
for the 13 weeks ended January 25, 2004 were approximately $5.9 million higher
than the same period of Fiscal 2003, primarily as a result of the following:

(i) $10.6 million increase in interest expense due primarily to $10.6
million of accretion of discount and dividends on mandatorily
redeemable preferred stock for the 13 weeks ended January 25,
2004 that is now classified as interest expense due to the
adoption of SFAS No. 150, whereas these amounts were classified
as accretion of discount and dividends on mandatorily redeemable
preferred stock for the 13 weeks ended January 26, 2003;
(ii) $3.4 million decrease in cost of resort operations due to lower
volume of skier visits and implemented cost savings, which
resulted in payroll savings of approximately $2.1 million;
(iii) $4.0 million increase in marketing, general and administrative
costs due to increased costs associated with compliance with the
Sarbanes-Oxley Act, continuation of building a corporate human
resource group, and an increase due to accruals associated with
our Phantom Equity Plan and other legal matters, offset by a
decrease in marketing costs; and
(iv) $0.8 million decrease in depreciation.

Recent Trends: For the four weeks ended February 22, 2004, our revenues are
approximately $2.0 million ahead of the same period in Fiscal 2003. Our resorts
experienced increased skier visits during the Presidents' Day holiday weekend
due to moderating weather conditions in the east. As of February 22, 2004, our
hotel booking pace for the remainder of the ski season is approximately $0.3
million behind the pace of our bookings at the same time last year. As discussed
above, our season pass revenue for the remainder of the season will continue to
significantly pace ahead of the comparable period of Fiscal 2003.

25

The Company was in compliance with all financial covenants of the Resort
Senior Credit Facility through the end of its second fiscal quarter on January
25, 2004. However, weather conditions at our eastern resorts in the second and
third fiscal quarters of 2004 have not been favorable, and our results of
operations at those resorts for such periods have been below management's
expectations. Accordingly, the Company's ability to meet the financial covenants
of the Resort Senior Credit Facility for its third fiscal quarter will be
dependent upon the return of operating revenues to historical levels, and there
can be no assurance that the Company will be able to meet all of the financial
covenants under the Resort Senior Credit Facility. The length of the ski
operating season at the Company's eastern resorts will also impact the Company's
operating results for the third fiscal quarter.

Real Estate Operations:

The components of real estate operations are as follows:

------------------------------------------------------------------------------
13 weeks ended
-------------------------------- ------------
1/26/03 1/25/04 Variance
--------------- ---------------- ------------

Total real estate revenues $ 1,325 $ 10,056 $ 8,731
--------------- ---------------- ------------

Cost of real estate
operations 1,898 8,538 6,640
Depreciation and
amortization 468 434 (34)
Interest expense 5,126 5,072 (54)
--------------- ---------------- ------------

Total real estate expenses 7,492 14,044 6,552
--------------- ---------------- ------------

Loss from real estate
operations $ (6,167) $ (3,988) $ 2,179
=============== ================ ============

------------------------------------------------------------------------------

Real estate revenues increased by $8.7 million in the 13 weeks ended
January 25, 2004 when compared to the same period in Fiscal 2003, from $1.3
million to $10.1 million. This was primarily due to the sale of three parcels at
our Steamboat resort for $8.9 million and an increase of approximately $0.3
million of Steamboat unit sales, offset by a decrease of approximately $0.7
million in revenues recognized on the closings of quartershare units at The
Canyons due to the announcement of the auction for the remaining units at The
Canyons Grand Summit Hotel described below and the expectation that lower prices
would be available at the auction.

Our loss from real estate operations decreased by $2.2 million, from $6.2
million in the 13 weeks ended January 26, 2003 to $4.0 million in the 13 weeks
ended January 25, 2004. This was a result primarily of the following:

(i) $8.7 million increase in revenues recognized as discussed above,
(ii) $6.6 million increase in cost of real estate operations resulting
from the sale of the three parcels at Steamboat, and
(iii) $0.1 million decrease in interest expense and depreciation
and amortization.

Recent Trends: In late February 2004, an auction was held to sell
substantially all of the remaining units at The Canyons Grand Summit hotel.
Grand Summit expects to receive proceeds from auction presales, the auction, and
post auction sales of approximately $15.6 million, which will result in a gain
of approximately $6.8 million. These sales are expected to close in March 2004.
Sales volumes at our Grand Summit property at Steamboat continue to decrease. We
believe that this is primarily related to the continuing disruptions related to
our real estate restructuring efforts and a continuing decline of the real
estate market for these types of units.

Benefit from income taxes:

We recorded no benefit from income taxes for either the 13 weeks ended
January 26, 2003 or the 13 weeks ended January 25, 2004. We believe it is more
likely than not that we will not realize income tax benefits from operating
losses in the foreseeable future.

26

Accretion of discount and dividends on mandatorily redeemable preferred stock:

The dividends on mandatorily redeemable preferred stock for the 13 weeks
ended January 26, 2003 were $9.2 million. For the 13 weeks ended January 25,
2004, accretion of discount and dividends on mandatorily redeemable preferred
stock of $10.6 million is not recorded as accretion of discount and dividends on
mandatorily redeemable preferred stock but has been included in interest expense
in resort operations due to the adoption of SFAS No. 150. This increase of the
accretion is primarily attributable to the compounding effect of accruing
dividends on the value of the preferred shares.

Results of Operations
For the 26 weeks ended January 26, 2003 compared to the 26 weeks ended
January 25, 2004

Resort Operations:

The components of resort operations for the 26 weeks ended January 26, 2003
and January 25, 2004 are as follows (in thousands):

------------------------------------------------------------------------------
26 Weeks ended
------------------------------- ------------
1/26/03 1/25/04 Variance
--------------- --------------- ------------

Total resort revenues $ 115,872 $ 109,032 $ (6,840)
--------------- --------------- ------------

Cost of resort operations 88,294 84,935 (3,359)
Marketing, general and
administrative 26,585 30,770 4,185
Restructuring charges - 137 137
Depreciation and amortization 13,005 12,067 (938)
Interest expense 14,128 34,696 20,568
--------------- --------------- ------------
Total resort expenses 142,012 162,605 20,593
--------------- --------------- ------------

Loss from resort operations $ (26,140) $ (53,573) (27,433)
=============== =============== ============

------------------------------------------------------------------------------

Resort revenues were approximately $6.8 million, or 5.9%, lower in the 26
weeks ended January 25, 2004 when compared to the 26 weeks ended January 26,
2003. As mentioned previously, this is a result of a decrease in skier visits at
our eastern resorts due to extremely challenging weather conditions. Revenues
also decreased due to lower summer visits caused by poor weather and a soft
economy. These decreases were partially offset by an increase in skier visits at
our western resorts due to good early season snowfall, near record snowfall in
December, and a company-wide increase of approximately $1.8 million in season
pass revenues.

Resort operating expenses (including marketing, general and administrative)
for the 26 weeks ended January 25, 2004 were approximately $16.1 million higher
than the same period of Fiscal 2003, primarily as a result of the following:

(i) $20.6 million increase in interest expense due primarily to $20.8
million of accretion of discount and dividends on mandatorily
redeemable preferred stock for the 26 weeks ended January 25,
2004 that is now classified as interest expense due to the
adoption of SFAS No. 150, whereas these amounts were classified
as accretion of discount and dividends on mandatorily redeemable
preferred stock for the 26 weeks ended January 26, 2003;
(ii) $3.4 million decrease in cost of resort operations due to lower
volumes of revenues and due to implemented cost savings, which
resulted in payroll savings of approximately $2.2 million;
(iii) $4.2 million increase in marketing, general and administrative
costs due to increased costs associated with compliance with the
Sarbanes-Oxley Act, continuation of building a corporate human
resource group, and an increase due to accruals associated with
our Phantom Equity Plan and other legal matters, offset by a
decrease in marketing costs;
(iv) $0.1 million increase in restructuring charges; and
(v) $0.9 million decrease in depreciation.

27

Real Estate Operations:

The components of real estate operations are as follows:

------------------------------------------------------------------------------
26 weeks ended
-------------------------------- ------------
1/26/03 1/25/04 Variance
--------------- ---------------- ------------

Total real estate revenues $ 5,039 $ 12,401 $ 7,362
--------------- ---------------- ------------

Cost of real estate
operations 5,474 10,196 4,722
Depreciation and
amortization 860 867 7
Interest expense 10,188 10,712 524
--------------- ---------------- ------------
Total real estate expenses 16,522 21,775 5,253
--------------- ---------------- ------------

Loss from real estate
operations $ (11,483) $ (9,374) $ 2,109
=============== ================ ============

------------------------------------------------------------------------------

Real estate revenues increased by $7.4 million in the 26 weeks ended
January 25, 2004 when compared to the same period in Fiscal 2003, from $5.0
million to $12.4 million. This was primarily due to the sale of three parcels at
our Steamboat resort for $8.9 million and an increase of $1.2 million in closing
of unit sales at Steamboat, offset by a decrease of $3.1 in revenues recognized
on the closings of quartershare units at The Canyons due to the announcement of
the auction for the remaining units at The Canyons Grand Summit Hotel in
February 2004, continuing disruptions related to our real estate restructuring
efforts, and weakening economic conditions.

Our loss from real estate operations decreased by $2.1 million, from $11.5
million in the 26 weeks ended January 26, 2003 to $9.4 million in the 26 weeks
ended January 25, 2004. This was a result primarily of the following:

(i) $7.4 million increase in revenues recognized as discussed above,
(ii) $4.7 million increase in cost of real estate operations resulting
from the sale of the three parcels at Steamboat, and
(iii) $0.5 million increase in interest expense resulting from an
increase in debt balances.

Benefit from income taxes:

We recorded no benefit from income taxes for either the 26 weeks ended
January 26, 2003 or the 26 weeks ended January 25, 2004. We believe it is more
likely than not that we will not realize income tax benefits from operating
losses in the foreseeable future.

Accretion of discount and dividends on mandatorily redeemable preferred stock:

The dividends on mandatorily redeemable preferred stock for the 26 weeks
ended January 26, 2003 were $18.2 million. For the 26 weeks ended January 25,
2004, accretion of discount and dividends on mandatorily redeemable preferred
stock of $20.8 million is not recorded as accretion of discount and dividends on
mandatorily redeemable preferred stock but has been included in interest expense
due to the adoption of SFAS No. 150. This increase of the accretion is primarily
attributable to the compounding effect of accruing dividends on the value of the
preferred shares.

Recently Issued Accounting Standards:

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity" (SFAS No. 150). SFAS No. 150 establishes standards
for how financial instruments with characteristics of both liabilities and
equity should be measured and classified and requires that an issuer classify a
financial instrument that is within its scope as a liability. SFAS No. 150 is
implemented prospectively and restatement is not permitted. The Company adopted
SFAS No. 150 effective July 28, 2003. As a result of adopting SFAS No. 150,
approximately $298.7 million of mezzanine-level securities were reclassified to
liabilities in the consolidated balance sheet in the first quarter of Fiscal
2004. This represents the carrying value of all of the classes of mandatorily
redeemable preferred stock. In addition, approximately $43.1 million of
accretion of discount and dividends on the preferred stock in Fiscal 2004 will
be included in interest expense, whereas previously it was reported as accretion

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of discount and dividends on mandatorily redeemable preferred stock. For the 13
weeks and 26 weeks ended January 25, 2004, $10.6 million and $20.8 million,
respectively, of accretion of discount and dividends on the preferred stock was
included in interest expense. For the 13 weeks and 26 weeks ended January 26,
2003 approximately $9.2 million and $18.2 million, respectively, of accretion of
discount and dividends on the preferred stock was included in accretion of
discount and dividends on mandatorily redeemable preferred stock.

Item 3
Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in information relating to market risk
since our disclosure included in Item 7A of Form 10-K for the fiscal year ended
July 27, 2003, as filed with the Securities and Exchange Commission on October
27, 2003.

Item 4
Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Our Chief Executive
Officer and our Chief Financial Officer carried out an evaluation of
the effectiveness of our "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and
15d-15(e)). Based on that evaluation, these officers have concluded
that as of the end of the period covered by this report, our
disclosure controls and procedures were effective to ensure that
information required to be disclosed by the Company in the reports
that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms.

(b) Changes in internal controls over financial reporting. No change
occurred in the Company's internal controls over financial reporting
during the quarter ended January 25, 2004 that has materially
affected, or is reasonably likely to materially affect, the Company's
internal controls over financial reporting.

It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system will be met. In addition, the design of any control
system is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of control systems,
there is only reasonable assurance that our controls will succeed in achieving
their stated goals under all potential future conditions.

Part II - Other Information

Item 1
Legal Proceedings

As previously reported in the Company's Form 10-K filed on October 27, 2003
with the Securities and Exchange Commission, the Company entered into an
agreement on January 22, 2002 with Triple Peaks, LLC for the sale of the
Steamboat resort. The Company later determined that the sale of its Heavenly
resort more closely achieved the Company's restructuring objectives and
concluded that it would not proceed with the sale of the Steamboat resort. On
April 5, 2002, Triple Peaks, LLC filed a lawsuit against ASC in federal district
court in Denver, alleging breach of contract resulting from the Company's
refusal to close on the proposed sale of the Steamboat resort. The suit seeks
both monetary damages resulting from the breach and specific performance of the
contract. On April 16, 2002, before an answer to its complaint was filed, Triple
Peaks voluntarily dismissed its suit and re-filed a substantially identical
complaint in Colorado State District Court in Steamboat, also naming Steamboat
Ski & Resort Corporation, Resort Properties and Walton Pond Apartments, Inc.
(each direct or indirect subsidiaries of ASC) as additional defendants. On
December 31, 2002, the Colorado State District Court issued summary judgment in
the Company's favor and against Triple Peaks, confirming that the damages the
Company owes Triple Peaks under the contract are limited to $500,000. On January
26, 2003, Triple Peaks appealed the decision of the Colorado State District
Court.

On January 22, 2004, the Colorado Court of Appeals reversed the judgment of
the Colorado State District Court in the Company's favor, finding that the
agreement between the Company and Triple Peaks did not, under the circumstances
of the Company's refusal to close, limit damages to $500,000. The Court of
Appeals remanded the case to the Colorado State District Court with instructions
to determine whether damages or specific performance of the agreement was the
proper remedy for the Company's refusal to close.

29

The Company has filed a Request for Rehearing with the Colorado Court of
Appeals, which request is currently pending. If the Company's request is denied,
the Company plans to appeal the judgment of the Court of Appeals to the Colorado
Supreme Court and will continue to assert that damages under the agreement are
limited to $500,000. The Company has accrued an amount in the accompanying
consolidated balance sheet that it deems appropriate. It is possible that the
estimated accrual could change significantly due to the inherent uncertainty of
litigation and the wide range of possible outcomes. If the decision of the Court
of Appeals is upheld and leads to a verdict in favor of Triple Peaks granting
either summary judgment or significant monetary damages, or both, the result
could have a material adverse impact on the financial position, results of
operations, and liquidity of the Company.

Item 2
Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity
Securities

None.

Item 3
Defaults upon Senior Securities

On March 30, 2002, our real estate development subsidiary, Resort
Properties, failed to make a mandatory principal payment of $3.75 million under
its Real Estate Term Facility. Resort Properties obtained a temporary waiver of
this default on April 2, 2002. Effective May 20, 2002, the temporary waiver was
revoked and Resort Properties was in default on the facility. On May 31, 2002,
the lenders accelerated the due date of the entire remaining principal and
accrued interest under the facility. On November 22, 2002, Resort Properties
entered into a forbearance agreement with the lenders whereby the lenders agreed
to not pursue additional foreclosure remedies and to cease publication of
foreclosure notices for a 30-day period. Although this 30-day period has
expired, management continues discussions with Fleet and the other lenders
regarding a restructuring of this facility, and Fleet and the other lenders have
not exercised any further foreclosure remedies since the expiration of the
forbearance agreement. Management's ongoing restructuring efforts with the
lenders are aimed towards a restructuring of the facility with the establishment
of a new entity to hold the assets of Resort Properties which are pledged as
collateral under the facility. The equity in the new entity is expected to be
held by a combination of the lenders under the facility and Resort Properties.
The facility remains in default pending completion of these negotiations.

Item 4
Submission of Matters to a Vote of Security Holders

On January 14, 2004, the Company held its 2003 Annual Meeting of its
shareholders to approve:

o The election of the Company's Board of Directors; and
o The ratification of KPMG LLP as the Company's independent
auditors for the 2004 fiscal year.

The Company did solicit proxies with respect to the Annual Meeting, and the
Board of Directors listed in the Company's proxy statement with respect to the
Annual Meeting was re-elected in its entirety.

The results of the Annual Meeting were as follows:

30

Board Election:

Voting For Voting Against or Abstaining Broker Non-Votes
Withheld
William J. Fair 15,443,966(1) 478,012 0 0
David Hawkes 15,442,029(1) 479,949 0 0
Paul Wachter 15,433,316(1) 488,662 0 0
Leslie B. Otten 14,760,530(2) 0 0 0
-------------------------------------------------------------
Gordon Gillies 14,760,530(2) 0 0 0
Alexandra Hess 14,760,530(2) 0 0 0
Robert Branson 14,760,530(2) 0 0 0
Edward Dardani 150,000(3) 0 0 0
Steven Gruber 150,000(3) 0 0 0
Jay Crandall 150,000(3) 0 0 0
William Janes 150,000(3) 0 0 0

(1) Messrs. Fair, Hawkes and Wachter were elected by the holders of the
Company's common stock.
(2) Messrs. Otten, Gillies and Branson and Ms. Hess were elected by the
holders of the Company's Class A common stock.
(3) Messrs. Dardani, Gruber, Crandall and Janes were elected by the holders
of the Company's Series B preferred stock.

Ratification of KPMG LLP:

Voting For Voting Against Abstaining Broker Non-Votes
Common Stock 15,712,180 169,223 40,575 0
Class A Common
Stock 14,760,530 0 0 0
Series C-1 Preferred
Stock 36,586(1) 0 0 0
---------------------------------------------------------
10 1/2% Series A
Preferred Stock 0(2) 0 0 0
---------------------------------------------------------
Total All Classes 68,293,121(1)(2) 169,223 40,575 0

(1) The Series C-1 preferred stock votes together with common stock on an
"as-if-converted" basis. The 36,586 shares of Series C-1 preferred stock, which
were voted at the meeting, together with accrued and unpaid dividends, had a
voting right equal to 37,820,411 shares of common stock as of the date of the
Annual Meeting. The results set forth in the "Total All Classes" row is
calculated using this as-if-converted number.

(2) The 10 1/2% Series A preferred stock votes together with common stock on an
"as-if-converted" basis. The 36,626 shares of 10 1/2% Series A preferred stock,
together with accrued and unpaid dividends, had a voting right equal to
4,008,715 shares of common stock as of the date of the Annual Meeting. The
results set forth in the "Total All Classes" row is calculated using this
as-if-converted number.

Item 5
Other Information

There have been no material changes in the procedures by which security
holders may recommend nominees to the Company's board of directors.

31

Item 6
Exhibits and Reports on Form 8-K
a) Exhibits

Included herewith are the following exhibits:

Exhibit No. Description

4.1 Seventh Amendment Agreement Re: Loan and Security Agreement Among
Grand Summit Resort Properties, Inc., as Borrower and Textron
Financial Corporation, as Administrative Agent dated as of December
31, 2003.

4.2 Third Amendment Agreement to the Statement of Intention and Special
Additional Financing Agreement between Grand Summit Resort Properties,
Inc. and Textron Financial Corporation dated as of December 31, 2003.

10.1 Executive Employment Agreement between the Registrant and Foster A.
Stewart, Jr. dated as of September 1, 2003.

31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

32.2 Certification of Chief Financial Officer pursuant to 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

The Company filed a report on Form 8-K on November 3, 2003 announcing
its Fiscal 2003 Year End Results.

The Company filed a report on Form 8-K on December 10, 2003 announcing
its Fiscal 2004 First Quarter Results.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

American Skiing Company
Date: March 10, 2004

By: /s/ William J. Fair
--------------------------------
William J. Fair
President and Chief Executive Officer
(Principal Executive Officer)

By: /s/ Helen E. Wallace
--------------------------------
Helen E. Wallace
Senior Vice President, Chief
Financial Officer
(Principal Financial Officer)

33