Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended: October 29, 2004

OR

For the Transition Period from                      to                     

Commission File Number: 333-26091

BOOTH CREEK SKI HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

1000 South Frontage Road West, Suite 100

Vail, Colorado 81657

(970) 476-1311

(Address, including zip code and telephone number,

including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

None.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes ¨ No x

As of December 31, 2004, the number of shares outstanding of the registrant’s Common Stock, par value $.01 per share, was 1,000 shares. There is no trading market for the registrant’s Common Stock. Accordingly, the aggregate market value of the Common Stock held by non-affiliates of the registrant is not determinable. See Part II, Item 5 of this Report.

Table of Contents

TABLE OF CONTENTS

Table of Contents

PART I

Overview

As used in this Report, the “Company” or “Booth Creek” refers to Booth Creek Ski Holdings, Inc. and its subsidiaries, unless the context otherwise requires. The Company is a wholly-owned subsidiary of Booth Creek Ski Group, Inc. (“Parent”). The Company currently owns and operates six ski resort complexes encompassing nine separate resorts, including the Northstar-at-Tahoe (“Northstar”) and Sierra-at-Tahoe (“Sierra”) ski resorts in the Lake Tahoe region of Northern California, the Waterville Valley (“Waterville Valley”), Mount Cranmore (“Mt. Cranmore”) and Loon Mountain (“Loon Mountain”) ski resorts in the White Mountains of New Hampshire and the Summit at Snoqualmie (the “Summit”) ski resort complex, which consists of four separate resorts, in the Cascade Mountains of Northwest Washington. The Company divested the Bear Mountain ski resort (“Bear Mountain”) in Southern California on October 10, 2002.

The Company is the fourth largest ski resort operator in North America based on approximately 2.0 million skier visits recorded during the 2003/04 ski season at its resorts. The Company primarily operates regional ski resorts which attract the majority of their guests from within a 200 mile driving radius of each resort. The Company’s resort properties are located near major skiing populations, including three of the five largest regional ski markets in the United States: San Francisco/Sacramento, Boston and Seattle/Tacoma. The Company’s properties offer approximately 6,500 acres of skiable terrain, 355 trails, 85 lifts (including 16 high-speed lifts and two gondolas) and on-mountain capacity to accommodate approximately 45,000 guests daily. For the fiscal year ended October 29, 2004, the Company generated revenues of $115.4 million and operating income of $11.4 million, and incurred a net loss of $1.8 million. For the fiscal year ended October 31, 2003, the Company generated revenues of $115.0 million and operating income of $7.8 million, and incurred a net loss of $5.4 million. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion and analysis of the Company’s financial condition and results of operations.

The Company’s resorts seek to differentiate themselves in their respective markets by selectively upgrading on-mountain facilities and guest services, employing targeted marketing strategies and offering extensive skier development programs, all of which create a competitively-priced, high-quality guest experience. The Company’s current resorts have collectively invested approximately $71 million (including $12 million of equipment acquired through capital leases and other debt) in capital expenditures during the last five fiscal years, including the addition of high-speed chairlifts, additional snowmaking capabilities, improved trail grooming equipment, and enhanced on-mountain skier service, retail and food service amenities. The Company believes its existing resort infrastructure is reasonably well maintained. The Company uses targeted advertising, database marketing and strategic marketing alliances to enhance the image of its resorts and increase regional market share. The Company also offers extensive development programs to improve the technical skill level of all types of skiers, which management believes is important to expand the total skier population and increase skier visitation frequency.

1

Table of Contents

The following is an organizational chart of Parent, the Company and the Company’s subsidiaries. Each subsidiary of the Company is, directly or indirectly, wholly-owned by Booth Creek.

The Company’s principal executive offices are located at 1000 South Frontage Road West, Suite 100, Vail, Colorado 81657. Its telephone number at that location is (970) 476-1311. The Company was incorporated in Delaware on October 8, 1996.

Industry

There are approximately 494 ski areas in the United States which, during the 2003/04 ski season, generated approximately 57.1 million visits days. A “skier visit” represents one skier or snowboarder visiting one ski resort for one day, including skiers and snowboarders using complimentary tickets and season passes. Calculation of skier visits requires an estimate of visits by season passholders. Although different ski resort operators may use different methodologies for making such estimates, management believes that any resulting differences in total skier visits are immaterial. Ski areas in the United States range from small ski resort operators, which primarily cater to day skiers and regional overnight skiers from nearby population centers, to larger resorts, which given the scope of their operations and their accessibility, are able to attract skiers and snowboarders from their regional ski markets as well as destination resort guests who are seeking a comprehensive vacation experience. While regional ski market skiers tend to focus primarily on lift ticket prices and round-trip travel time, destination travelers tend to be heavily influenced by the number of amenities and activities offered as well as the perceived overall quality of the vacation experience. The table below summarizes skier visit information for each region of the United States from the 1999/00 ski season through the 2003/04 ski season.

2

Table of Contents

United States Ski Industry Regions and Skier Visits

(In thousands)

Northeast: CT, MA, ME, NH, NY, VT, RI

Southeast: AL, GA, KY, MD, NC, NJ, PA, TN, VA, WV

Midwest: IA, IL, IN, MI, MN, MO, ND, NE, OH, SD, WI

Rocky Mtns: CO, ID, MT, NM, UT, WY

Pacific West: AK, AZ, CA (excluding Lake Tahoe Region), NV, OR, WA

Source: 2003/04 Kottke National End of Season Survey

Over the last twenty years, the ski resort industry has experienced a period of consolidation. The number of United States ski areas has declined from 735 in 1984 to 494 in 2004. Of the 494 ski areas, the 2003/04 Kottke National End of Season Survey estimates that the average resort recorded approximately 116,000 skier visits. All of the Company’s resorts, except Mt. Cranmore, typically record more than 200,000 annual skier visits. The trend among leading resorts is toward investing in improving technology and infrastructure, including high-speed lifts, attractive facilities and extensive snowmaking capabilities to deliver a more consistent, quality experience. During the last five fiscal years, the Company has invested approximately $71 million in capital expenditures at its current resorts to improve their competitive position and to meet sustaining capital requirements. Management believes the need for increased investment in resorts in general has required a greater access to capital and has enhanced the position of resorts owned by larger, better capitalized owners. Despite the consolidation in the ski industry which occurred during the mid to late 1990s, the industry remains fragmented, with no one resort accounting for more than 3%, and no one resort operator accounting for more than 10%, of the United States’ approximately 57.1 million skier visits during the 2003/04 ski season. The four largest ski resort companies, including the Company, accounted for approximately 28% of all United States skier visits recorded during the 2003/04 ski season.

The Lake Tahoe region has averaged approximately 4.0 million annual skier visits over the last five years. Management estimates that approximately 70% to 75% of the skiers visiting Lake Tahoe resorts during the 2003/04 ski season were from the San Francisco/San Jose, Sacramento and Central California Valley metropolitan areas and the Lake Tahoe region. Other guests were principally from Southern California and states with large ski populations, such as Texas, Illinois and Florida.

The Northeast market (including New York) has averaged approximately 13.0 million annual skier visits over the last five years. The Northeast market consists of a significant percentage of day or weekend skiers due to the relatively short driving radius to major metropolitan areas. While the Northeast does not draw significant numbers of vacationing skiers from the Western regions of the United States, it does compete with the Rocky Mountains and Pacific West areas for Eastern vacationing skiers. The region’s major ski areas and resorts are concentrated in the mountainous areas of New England and Eastern New York, and management believes that the bulk of skiers come from the population centers located in Eastern Massachusetts, Southern New Hampshire, Connecticut, Eastern New York, New Jersey and the Philadelphia area.

The Pacific West market has averaged approximately 7.3 million skier visits over the last five years. Management estimates that the vast majority of the skier visits recorded at Washington state resorts during the 2003/04 ski season were attributable to residents of the Seattle/Tacoma metropolitan area. Other guests were primarily from other parts of Washington, Oregon and Western Canada. Washington state resorts do not attract a significant number of destination skiers.

3

Table of Contents

Resort Operations

The Company’s six resort complexes offer a variety of ski and non-ski activities. The table below provides a summary of each resort’s ski operations and is followed by a more detailed description of each resort.

Northstar-at-Tahoe

Northstar-at-Tahoe, located near the north end of Lake Tahoe, California, offers extensive activities and services in both the winter and summer. The resort’s 8,600-foot Mt. Pluto features 2,420 acres of skiable terrain and a 2,280 foot vertical drop. Northstar’s 71 ski trails are served by 17 operating lifts, including one gondola, 6 high-speed quads, one triple lift and two double lifts, which combine to transport approximately 23,000 skiers uphill per hour. During 2004, the Company installed a new detachable quad chairlift to replace an aged fixed grip triple chairlift that provides access to the mountain from Northstar’s Village. The Company expects that the new lift will enhance the guest experience at Northstar by providing improved base area egress as compared to the prior facilities. Northstar also has approximately 50 kilometers of groomed trails for cross-country skiing and snowshoeing and numerous on-mountain terrain parks for snowboarders and adventurous skiers. Other amenities at Northstar include condominium/hotel accommodations, restaurants, bars, shops, a child-care center, conference facilities, a 22,700 square foot on-mountain ski lodge, a 9,000 square foot rental equipment facility and a 5,800 square foot on-mountain children’s ski school facility. Summer recreation amenities include an 18-hole golf course, extensive mountain biking trails and bike rentals, ten tennis courts, a horseback riding stable, fly fishing and swimming pools. Northstar currently ranks third in total skier days in the Lake Tahoe area. In 2004, Northstar was ranked by Ski magazine as the 25^th best ski resort in North America and received high rankings in a number of important categories, including guest service, family programs, grooming and terrain parks. During 2004, Northstar hosted two of the top snowboarding events in North America, the Vans Triple Crown and Transworld Team Challenge, and was ranked as having the 8^th best halfpipe in North America by Transworld Snowboarding magazine.

4

Table of Contents

Northstar’s snowmaking system is engineered to cover approximately 50% of its ski trails. Annual snowfall at the resort has averaged approximately 235 inches per year during the past five years. Northstar has water rights from various sources which, when coupled with its 60 million gallon water storage capacity, have been sufficient to support the resort’s needs.

Northstar consists of approximately 8,000 acres of land privately owned by the Company. Management believes that Northstar has significant opportunities to develop additional ski terrain, as well as certain other real estate development opportunities. Moreover, management believes that the planned expansion of the existing on-mountain bed base at the resort from the East West development project will result in increased skier days, thereby enhancing the value and profitability of Northstar’s resort operations. Such bed base development is also expected to make additional ski terrain expansion at Northstar even more attractive. See Part I, Item 1. “Business – Real Estate Development.”

Sierra-at-Tahoe

Sierra-at-Tahoe is conveniently located near the large bed base of South Lake Tahoe, California and is the closest major ski resort to Sacramento and the Central California Valley. The resort’s 8,852-foot peak offers 1,680 skiable acres and a 2,212 foot vertical drop. Sierra’s 46 ski trails are served by 12 operating lifts, including three high-speed quads, one triple lift and five double lifts, which combine to transport up to approximately 15,000 skiers uphill per hour. Sierra operates a 46,000 square foot base lodge which offers a variety of food and beverage, retail and other skier services. Sierra does not offer summertime activities.

Sierra owns 20 acres of its 1,689 gross acreage and leases the remainder under a Term Special Use Permit from the United States Forest Service (the “Forest Service”). See Part I, Item 1. “Business – Regulation and Legislation.” Due to its abundant annual snowfall, which has averaged approximately 386 inches per year over the past five years, Sierra’s snowmaking equipment covers only 4% of Sierra’s total trail acreage.

Waterville Valley

Waterville Valley’s major facilities are located on the 4,004 foot high Mt. Tecumseh and offer 255 skiable acres and a vertical drop of 2,020 feet. Waterville Valley’s 52 trails are served by 12 operating lifts, including two high-speed quads, two triple lifts and four double lifts, which combine to transport up to approximately 15,000 skiers uphill per hour. The resort operates a 42,000 square foot base lodge (complete with multiple food and beverage service centers and a child care facility), three other base area facilities comprising approximately 27,500 square feet, a mid-mountain lodge featuring a cafeteria and deli and a mountain-top lodge with a snack bar and restaurant dining.

The Waterville Valley resort has a year-round Adventure Center offering mountain bikers, cross-country skiers and hikers access to 105 kilometers of trails in the White Mountain National Forest. Other area amenities, which are primarily owned and operated by third parties, include an ice skating arena, golf course, tennis center, sports and fitness center, horsedrawn sleigh rides, skateboard park, beach and paddle boats. Waterville Valley’s Conference Center has 17,000 square feet of meeting space and provides banquet facilities for up to 1,000 people. With 11 meeting rooms, a business center, audio-visual capabilities and a self-contained pub, the Conference Center’s on-site staff supports events year-round.

Waterville Valley owns 11 acres on Snow’s Mountain and two acres at the Conference Center. It leases 790 acres of land on Mt. Tecumseh under a Term Special Use Permit issued by the Forest Service. See Part I, Item 1. “Business – Regulation and Legislation.” Waterville Valley’s snowmaking system is engineered to cover 100% of the ski trails on Mt. Tecumseh. Water for snowmaking is currently pumped from a local river and a pond. Waterville Valley is in the process of seeking permits for additional water sources and water storage facilities for snowmaking.

Mt. Cranmore

Mt. Cranmore is the oldest continuously operated ski area in the United States. Located in the hub of New Hampshire’s Mount Washington Valley, Mt. Cranmore’s 1,714 foot summit offers approximately 200 skiable acres and a 1,270 foot vertical drop. Mt. Cranmore’s 40 trails are served by nine operating lifts, including one high-speed quad, one triple lift and three double lifts, which combine to transport up to approximately 7,000 skiers uphill per

5

Table of Contents

hour. The mountain is serviced by two base lodges and a 5,000 square foot tent facility, offering multiple eating locations and pub/restaurant facilities, as well as a restaurant at the summit. In addition, Mt. Cranmore owns a 41,000 square foot athletic facility which operates year-round. Mt. Cranmore also operates on-site retail and rental shops.

Mt. Cranmore owns 754 acres and holds easements enabling it to develop an additional 500 acres of ski terrain. Mt. Cranmore does not lease any of its land from the federal government. Mt. Cranmore’s snowmaking system covers 100% of the resort’s trails. In addition to pumping rights from a nearby stream, Mt. Cranmore has an understanding with the local water district for an additional reservoir of one million gallons of water for snowmaking. In addition, Mt. Cranmore’s base area pond holds one million gallons of water.

Loon Mountain

Loon Mountain is located in the White Mountains of New Hampshire in the town of Lincoln. The resort’s 3,050 foot peak features 266 skiable acres and a 2,100 foot vertical drop. Loon Mountain’s 50 trails (including five tree skiing trails) are served by 10 operating lifts, including a four-passenger gondola, two high-speed quad lifts, one triple lift and three double lifts, which combine to transport approximately 11,800 skiers uphill per hour. During 2004, Loon Mountain installed a new detachable quad chairlift to replace an aged fixed grip triple lift that serves popular terrain at the resort. Loon Mountain’s trails cater mostly to intermediate level skiers (64%), with trails provided for beginners (20%) and experts (16%) as well. Resort amenities include a base lodge with a cafeteria, coffee shop, bar and deli, a restaurant and deck at the summit, a mid mountain restaurant and bar, the 17,600 square foot Governor Adams lodge and adjacent facilities (which provides traditional lodge facilities and also serves as a venue for summer outdoor activities and concerts), two rental shops and a ski and snowboard tuning facility, a 17,300 square foot children’s center, trails for cross-country skiing, snowshoe tours and horseback riding, indoor and outdoor climbing walls and a steam engine railroad for shuttling visitors. In 2004, Loon Mountain was ranked as the 6^th best ski resort in the East by Ski magazine. Loon Mountain has the snowmaking capacity to cover approximately 96% of its skiable terrain. Water for snowmaking at Loon Mountain is primarily drawn from the Pemigewasset River, and when river flows are below minimum stream flow levels the resort draws water from Loon Pond.

Loon Mountain owns 404 acres and leases 1,366 acres of land in the White Mountain National Forest under a Term Special Use Permit issued by the Forest Service permitting year-round recreational use. During 2002, Loon Mountain received certain approvals from the Forest Service which generally permit the enhancement and expansion of the resort, including new ski terrain and facilities. See Part I, Item 1. “Business – Regulation and Legislation.” Management believes that Loon Mountain has significant real estate development opportunities in connection with the expansion and enhancement of the resort. See Part I, Item 1. “Business – Real Estate Development.”

The Summit at Snoqualmie

The Summit at Snoqualmie is located in the Cascade Mountains of Northwest Washington and consists of four separate resorts, Alpental at the Summit (“Alpental”), Summit West, Summit Central and Summit East, which collectively offer 1,697 acres of skiable terrain. Individually, Alpental has a 5,420 foot top elevation, a 2,280 foot vertical drop, 302 acres of skiable trails and runs (121 acres of which are lighted for night skiing) and approximately 523 acres of backcountry terrain; Summit West has a 3,765 foot top elevation, a 765 foot vertical drop and 197 acres of skiable trails and runs (189 acres of which are lighted for night skiing); Summit Central has a 3,865 foot top elevation, a 1,025 foot vertical drop and 466 acres of skiable trails and runs (231 acres of which are lighted for night skiing); and Summit East has a 3,710 foot top elevation, a 1,100 foot vertical drop and 209 acres of skiable trails and runs. In total, the Summit complex has 96 designated trails and runs served by 25 operating lifts, including two high-speed quads, two fixed grip quads, four triple lifts, 11 double lifts and six surface lifts, which combine to transport up to approximately 33,000 skiers uphill per hour. The Summit Nordic Center also offers approximately 55 kilometers of cross-country skiing on an expert trail system and a lighted beginner student trail which hosts a season-long night racing series. The Summit Tubing Center offers special tubing lifts and multiple groomed lanes. In addition, the Summit West, Summit Central and Summit East areas are interconnected by a cross-over trail system. The Summit operates 10 lodges which provide an aggregate of approximately 122,000 square feet of space for food and beverage services (restaurants and cafeterias), skier services and entertainment.

6

Table of Contents

Overall, the Summit complex is one of the largest learn-to-ski areas in the United States, with approximately 15% to 20% of its annual skier days typically being attributable to guests enrolled in ski school programs. In addition, the Summit is the largest night skiing complex in the United States, with approximately 20% to 25% of its skier visits each season being recorded at night.

The Summit owns 686 acres of its 4,103 gross acreage, leases approximately 440 acres under a private permit, utilizes 1,280 acres for cross-country skiing under an annual operating agreement with the Forest Service and utilizes 1,697 acres of mountain terrain under a Forest Service Term Special Use Permit. See Part I, Item 1. “Business – Regulation and Legislation.” The Summit typically enjoys abundant annual snowfall, averaging approximately 368 inches annually over the past five years. As a result, there are no significant snowmaking capabilities at any of the Summit resorts.

Business Segments and Principal Products

The Company operates in two business segments: resort operations and real estate and other. Business segment information is presented in Note 11 to the accompanying consolidated financial statements.

The Company’s principal products from resort operations include lift tickets, season passes, snow school lessons, equipment rentals, retail sales, food and beverage offerings and other ancillary products and services. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations,” for information regarding the composition of the Company’s resort operations revenues for the last three fiscal years.

Real Estate Development

The Company has certain holdings of land suitable for either the expansion of ski terrain or the development of residential and commercial properties. The Company also has terrain expansion opportunities on land within its current Forest Service permit areas as well as on land owned by third parties. In management’s view, increasing the on-mountain bed base, expanding retail and other commercial services and developing additional skiable terrain at a resort can accelerate growth in skier days and ski-related revenues.

The Company’s real estate development strategy for residential and commercial properties is comprised of the following components: (i) build recurring resort cash flow through increased bed base and diversification of revenue sources, (ii) partner with proven real estate developers, (iii) invest on a limited basis in infrastructure development in conjunction with the development of single family lots at Northstar and Loon Mountain, and (iv) refrain from investment in vertical or commercial development except in conjunction with the development of ski related facilities.

The Company’s strategy with regard to the expansion of skiable terrain at its resorts is based on the evaluation of several key factors, including (i) the anticipated growth of the skier base within the relevant market and the Company’s ability to improve its competitive position in that market, as measured by the potential increase in the number of skier days, revenues and revenue per skier on a long-term basis which the Company believes it can capture through expansion and upgrades, and (ii) the return on capital expected to be realized from an expansion project versus alternative projects. Management undertakes extensive planning and pre-development steps prior to investing significant capital into any development project. Currently, the Company is in the process of developing and refining comprehensive master plans and obtaining entitlements (e.g., zoning approvals) for Northstar, Loon Mountain and the Summit. In management’s view, the expansion projects at Northstar and Loon Mountain represent the Company’s best development opportunities, and would likely take priority over the pursuit of expansion and development initiatives at the Company’s other resorts.

The Company has traditionally taken a conservative approach toward residential and commercial development. Past real estate development efforts have taken place primarily at Northstar. Future single family residential development at Northstar is limited based on the present real estate master development plan, and consists of two subdivisions known as the “Retreat” and “Porcupine Hill.”

In March 2003, Trimont Land Company (“TLC”), the owner and operator of Northstar and a wholly-owned subsidiary of the Company, launched the sale of the Unit 7A subdivision at Northstar, which consists of 15 ski-

7

Table of Contents

in/ski-out single family lots generally ranging in size from one-half to three-quarters of an acre. As of October 31, 2003, TLC closed escrow on 12 of the lots and recognized real estate revenues of $9,184,000 during the fiscal year ended October 31, 2003. TLC closed escrow on the three remaining lots in December 2003 for an aggregate sales price of $2,798,000, which is reflected as real estate revenues during the fiscal year ended October 29, 2004. The average lot sales price achieved for the lots within Unit 7A was approximately $800,000.

The Company is scheduled to appear before the Placer County Planning Commission in February 2005 to obtain final approval for the development of the Retreat subdivision, which is expected to consist of 15 available one-acre single family lots (net of three lots which the Company expects to transfer or sell to certain of its executives in satisfaction of employment contract obligations). In addition, the Company is in the process of developing detailed site improvement plans for the Retreat subdivision for submission to Placer County. Depending upon the timing of further regulatory approvals, the Company is currently evaluating whether to construct the subdivision in 2005 or 2006. Consistent with past practice for the Company’s single family lot subdivisions at Northstar, the lots would typically be marketed prior to and during the construction period, and would generally be available for transfer and sale in September or October of the year of construction. However, no assurances can be given regarding the ultimate timing of lot closings or proceeds therefrom.

The Company is in the planning stages for the Porcupine Hill subdivision and anticipates submitting preliminary development applications for the project in February 2005. As currently contemplated, the Porcupine Hill subdivision is expected to consist of approximately 10 to 12 one and one-half acre to six acre lots. The Company currently anticipates that the Porcupine Hill subdivision would be constructed and marketed for sale in 2006 or 2007. However, no assurances can be given regarding the ultimate timing of regulatory approvals, construction, lot closings or proceeds therefrom.

On September 22, 2000, TLC and Trimont Land Holdings, Inc. (“TLH”), a wholly-owned subsidiary of Parent and an affiliate of the Company, entered into an Agreement for Purchase and Sale of Real Property (the “Northstar Real Estate Agreement”) relating to certain development real estate at Northstar. Pursuant to the Northstar Real Estate Agreement, TLC agreed to sell to TLH certain development real estate consisting of approximately 550 acres of land located at Northstar (the “Development Real Estate”) for a total purchase price of $27,600,000, of which 85% was payable in cash and 15% was payable in the form of convertible secured subordinated promissory notes. The purchase price was based on an appraisal obtained from an independent third party appraiser. In addition to receiving the fair market value for the Development Real Estate, under the terms of the Northstar Real Estate Agreement (i) TLH or its joint venture partner, East West Partners, Inc. (together with its affiliates, “East West”), is required, at its expense, to pay for substantially all mitigation costs associated with the development project, and (ii) TLH is obligated to reconvey to TLC certain excess land following the subdivision of the Development Real Estate. TLC retained significant approval rights over various aspects of the real estate development, including development activities that could impact resort operations at Northstar.

In connection with the execution of the Northstar Real Estate Agreement, TLH and East West entered into a joint venture agreement (the “East West Joint Venture”) providing for the development of the property purchased by TLH and subsequently transferred to the East West Joint Venture. Under the East West Joint Venture, TLH retains financial responsibility for certain costs associated with the development of the infrastructure of the Development Real Estate.

On September 22, 2000, TLC and TLH consummated the sale of the initial land parcels contemplated by the Northstar Real Estate Agreement, and TLC transferred the bulk of the Development Real Estate to TLH for a total purchase price of $21,000,000, of which $17,850,000, or 85%, was paid in cash and $3,150,000, or 15%, was paid in the form of a convertible secured subordinated promissory note.

During the fiscal year ended November 1, 2002, TLH paid $5,610,000 to TLC, which represented the cash portion of the $6,600,000 purchase price for the remaining Development Real Estate subject to the Northstar Real Estate Agreement. The $5,610,000 payment had been deferred as a deposit liability as of October 31, 2003 pending the consummation of the sale of the remaining Development Real Estate under the Northstar Real Estate Agreement. In December 2003, TLC completed the subdivision of the remaining Development Real Estate and transferred such real estate to TLH. Accordingly, TLC relieved the existing $5,610,000 deposit liability and recognized real estate revenues of $5,610,000 for this transaction during the fiscal year ended October 29, 2004. Additionally, the existing convertible secured subordinated promissory note was increased by $990,000 for the 15% noncash portion of the consideration for the remaining Development Real Estate.

8

Table of Contents

The East West Joint Venture has submitted a development application and obtained approvals from Placer County for the development of 213 residential units and approximately 122,000 square feet of commercial and skier services space within the village at Northstar (the “Northstar Village Project”). The Northstar Village Project is expected to be constructed in two phases. The East West Joint Venture commenced construction in April 2004 of the initial phase of the Northstar Village Project, which consists of three lodge buildings and one skier services/commercial building encompassing 100 one, two, three and four bedroom condominiums and related owner amenities, as well as approximately 87,000 square feet of commercial and skier services space. The second phase of the Northstar Village Project, which consists of 113 residential units and approximately 35,000 square feet of commercial and skier services space, is expected to commence construction in Spring of 2005.

In addition to the Northstar Village Project, the proposed development contemplated by the East West Joint Venture includes the planned development of approximately 1,450 ski-in/ski-out condominium, town home, timeshare and hotel units in the mid-mountain area of the Northstar resort (the “Highlands Project”), as well as an additional 137 units and additional commercial space in the vicinity of the Northstar Village Project. The East West Joint Venture has submitted development applications for the Highlands Project, which are currently pending approval. Ultimately, the East West Joint Venture expects to develop a total of 1,800 residential units at Northstar, which will likely occur over an extended period of time.

Management believes that the expected substantial increase in on-mountain bed base and the development of an expanded village and commercial amenities from the East West development will result in increased visitation and skier days at Northstar, thereby enhancing the value and profitability of Northstar’s resort operations. The Company has been able to secure these benefits without incurring the economic risks associated with real estate development.

The Company intends to continue to enhance the ski terrain at the Northstar resort by upgrading the existing trails and lifts, improving circulation and providing better access to and from the resort’s existing base area. During 1999 and 2000, five trails were cut on Lookout Mountain and a new detachable quad lift was constructed to provide new advanced skiing terrain at the resort. In 2000 and 2001, the Company expanded and improved the existing snowmaking system at Northstar in order to lessen the influence of unfavorable weather, which can negatively impact operating conditions at the resort. During 2004, the Company installed a new detachable quad chairlift to replace an aged fixed grip triple chairlift that provides access to the mountain from Northstar’s Village. The Company expects that the new lift will enhance the guest experience at Northstar by providing improved base area egress as compared to the prior facilities. The Company has preliminarily identified a number of other sites within Northstar’s present boundaries that are suitable for future expansion. In general, such expansion is expected to occur concurrently with the anticipated bed base expansion resulting from the East West development. In 2002, the Company submitted applications for permit approvals for various mountain improvements, including new and replacement lifts, additional trails and trail widening and snowmaking infrastructure. These applications were approved by the Placer County Planning Commission in January 2005. Any lift construction or terrain expansion would require customary site specific permits and approvals, and no assurance can be given that the Company will be able to develop any additional terrain at Northstar or, if completed, any such projects will be successful.

In addition, Northstar has a program to harvest timber through third party contracting. The timber harvesting program, which produced revenues of $189,000 during the fiscal year ended October 29, 2004, is managed carefully to avoid interference with Northstar’s resort operations and prevent any diminution in the quality of the resort’s natural environment.

As part of the new Special Use Permit obtained in 2002, Loon Mountain leases approximately 581 acres known as “South Mountain” from the Forest Service. The available South Mountain land is located in an area directly adjacent to the present Loon Mountain ski area and would be able to accommodate alpine and cross country trails, ski lifts (including one connecting the current ski area with South Mountain) and snowmaking from newly installed snowmaking facilities. Expansion and upgrades to the resort would serve to better meet and fulfill the anticipated needs of guests by enhancing the quality and diversity of skiable terrain. Loon Mountain owns 311 acres of land located at the base of South Mountain (the “South Mountain Real Estate”). In March 2003, the Company obtained a favorable rezoning of the bulk of the property comprising the South Mountain Real Estate from rural residential zoning to general use zoning. The general use zoning permits the development of multi-family housing units on the

9

Table of Contents

South Mountain Real Estate and greater flexibility for commercial uses. The Company has undertaken initial studies of the South Mountain Real Estate, and currently estimates that approximately 904 residential units (including an estimated 90 single family lots and 814 multi-family units) and substantial related commercial space could be developed within the South Mountain Real Estate. The Company has submitted an application for the planned development of approximately 67 single family lots within the South Mountain Real Estate, which was approved in November 2004 by the Town of Lincoln, New Hampshire Planning Board. At the same time, the Town of Lincoln, New Hampshire Planning Board also approved a new ski pod interfacing the single family lot subdivision with ski-to access and connection to the main ski area at Loon Mountain. The Company is currently evaluating the single family development opportunity. In addition, the Company is presently assessing potential real estate development partners for development of the South Mountain Real Estate.

In addition to the South Mountain Real Estate, Loon Mountain also owns 21 acres of land at the base of the existing ski area which is zoned rural residential and would allow approximately 61 units, subject to receipt of applicable regulatory approvals.

The timing and scope of development at Loon Mountain will depend on market conditions, receipt of required regulatory approvals, the limitations set out in the Forest Service’s Record of Decision and in the settlement agreements with certain environmental plaintiffs, the Company’s financial position and an evaluation of the Company’s other expansion opportunities. See Part I, Item 1. “Business - Regulation and Legislation.”

Mt. Cranmore owns an existing approximately 82 acre parcel at the southwest flank of the mountain which is suitable for ski-in/ski-out development. Current zoning for this property would permit the development of approximately 350 residential units. Further, Mt. Cranmore has the opportunity to subdivide and create an additional approximately 12 acre development parcel from its existing land holdings, which would also be appropriate for ski-in/ski-out development. Local zoning restrictions would allow for the development of approximately 50 residential units on the 12 acre parcel as currently contemplated. The Company has undertaken preliminary land planning studies to assess the conceptual build-out of the 82 acre and 12 acre parcels. Although the Company’s preliminary assessment indicates that these parcels could accommodate a number of multi-family units generally consistent with the zoning allowances, the actual amount of development could be less based on practical development restrictions and the types and sizes of units that market conditions warrant. The Company is currently in the process of evaluating the real estate development opportunities at Mt. Cranmore. In addition, the Company has other parcels of real estate at Mt. Cranmore which may be suitable for development. The timing and scope of any future real estate development at Mt. Cranmore is dependent upon numerous factors, including market conditions, identification of an appropriate development partner, receipt of customary regulatory approvals, the Company’s financial position and other development priorities.

Mt. Cranmore holds a perpetual easement entitling it to develop at least 500 acres of additional ski terrain known as the “Black Cap Mountain area” or “Black Cap.” The Black Cap easement was granted in 1951 and allows the Company to expand Mt. Cranmore’s existing ski and recreational infrastructure and develop additional trails. The Black Cap property underlying the Company’s easement is privately owned by a third party. The Black Cap land available for development by the Company is high-quality, mostly north and west-facing ski terrain located in an area that can accommodate alpine and cross-country trails, ski lifts and snowmaking. Expansion could increase Mt. Cranmore’s skier capacity, and could enhance the quality and diversity of its skiable terrain. The Company does not have any immediate mountain expansion plans for Mt. Cranmore and the timing and scope of any development will depend on market conditions, receipt of required regulatory approvals, the Company’s financial position and the Company’s other expansion opportunities.

The Company is currently preparing an update of the Forest Service master plan for the Summit resort. The master plan update is intended to provide for the long-term management and development of the resort, and contemplates various expansion elements including new and improved lifts, additional trails, added parking, facilities expansion and other resort amenities. No assurances can be given regarding the timing of receipt of the Forest Service’s approval of the master plan update or the ultimate scope of approved amenities. Further, future expansion of the Summit resort would depend on market conditions and expected customer demand, receipt of site specific permits and approvals, the Company’s financial position and the Company’s other expansion opportunities.

The Summit owns approximately 66 acres of real property on various parcels in and around its resorts, a portion of which is available for residential development. The developmental real estate at the Summit is owned by DRE,

10

Table of Contents

L.L.C. (the “Real Estate LLC”), an indirect subsidiary of the Company. The Summit also owns 39 acres of real property at Summit East that is ski-in/ski-out and is zoned as high-density residential and commercial. Any potential real estate development activities at the Summit could be constrained by existing or future planned resort operations at the Summit. The Summit’s development parcels will be studied for future development potential when market conditions warrant. In addition to market conditions, the development of such parcels will depend on receipt of required regulatory approvals, the Company’s financial position and the Company’s other expansion opportunities.

The Company has no agreements, arrangements or understandings with respect to financing the development of any of the real estate projects discussed herein. Any future development would be subject to, among other things, the Company’s ability to obtain the necessary financing and all necessary permits and approvals. The Senior Credit Facility, the Indenture and the Securities Purchase Agreements (as defined herein) each contain restrictive covenants that may significantly limit the Company’s ability to pursue real estate development opportunities. No assurance can be given that the Company will develop any additional properties or, if completed, any such projects will be successful. Moreover, there can be no assurances that the East West development at Northstar will be successful or be completed as currently planned, or that such development will have the currently anticipated favorable effects on the Company’s resort operations. In addition, there are significant risks inherent in any expansion project and in the implementation of the Company’s development strategy.

Marketing and Sales

Staff

The Company has a marketing and sales staff of approximately 70 persons, including a marketing director at each resort who reports to the Vice President of Marketing and Sales, as well as to each resort’s general manager. The marketing staff at each resort, in concert with corporate marketing personnel, are responsible for the development of resort-specific marketing plans including advertising, sales, public relations, events, promotions, Internet strategies and research. Each resort’s marketing personnel also participate in the development of the Company’s overall marketing strategy.

Strategy

The Company’s marketing plans are designed to attract both day skiers and vacationers by emphasizing the Company’s diverse facilities and services and proximity to three of the five largest regional ski markets in the United States. The Company has positioned each of its resorts as an attractive alternative to competing regional resorts and to other forms of leisure and entertainment. The primary objectives of the Company’s marketing efforts are to (i) increase each of its resorts’ relative market share, (ii) expand the number of skiers in each of its markets, (iii) increase skier visitation frequency, (iv) increase the expenditures of each of its visitors, (v) attract and retain new guests to the Company’s resorts by expanding the scope of Booth Creek’s resorts to winter recreation centers offering a multitude of snowsport options in addition to skiing and snowboarding, and (vi) develop products and execute sales efforts that provide advance bookings and sales.

The Company’s marketing efforts are predicated on knowing its guests and understanding the markets in which it competes. Accordingly, the Company’s resorts, typically through professional firms, conduct extensive market research, including on-site guest surveys, focus groups, advertising tests and phone and Internet surveys. Each of the Company’s resorts develops its own resort-specific marketing program based upon its unique qualities and characteristics, as well as the demographics of its visitor base.

Programs

The Company has developed a number of specific marketing and sales programs to achieve its objectives, including the following:

11

Table of Contents

Customer loyalty and season pass programs. The Company believes that the success of each of its resorts depends, in large part, on its ability to retain and increase the skier visitation frequency of its existing customer base. The Company believes a critical component to developing customer frequency will be the success of its customer loyalty programs, including its Vertical Plus frequent skier programs in place at the Company’s Lake Tahoe resorts. For an annual membership fee, Vertical Plus members receive a special, personalized identification wristband containing a preprogrammed computer microchip which acts as their lift access for the season. In addition to offering daily ticket discounts, the system tracks members’ expenditures and the amount of vertical feet skied at participating resorts and rewards members with prizes based on spending activity and the number of vertical feet skied in a season. Other benefits of the program include members-only lift lines, direct lift access, the convenience of being able to make cashless retail transactions and electronic messaging. In addition, over the past several years, the Company’s resorts have successfully introduced new season pass products that are attractively priced to entice visitation during non-peak periods, stimulate demand, attract market share and develop guest loyalty. The Company is continuing its successful season pass initiatives for the 2004/05 ski season.

Sales Initiatives. The Company’s sales initiatives include a variety of programs designed to increase and enhance buying opportunities for its customers in order to provide a complete vacation experience. Through merchandising efforts, increasing sales outlets and channels, sales training for front-line employees, on-site and Internet-based promotions and other marketing efforts, the Company seeks to increase sales of products and services to its customers and generate additional revenue per skier visit.

Multimedia advertising. The Company’s marketing efforts include print, broadcast, outdoor, Internet and direct mail advertising, with the particular method tailored for each resort and existing market opportunities. The Company is also very active in a variety of promotional programs designed to attract guests from population centers in and around the San Francisco, Sacramento, Seattle and Boston metropolitan areas and states with large skier populations such as Texas, Illinois, Florida and New York. For example, the Company’s Northstar and Sierra resorts have participated in extensive cooperative marketing with other Lake Tahoe resorts to promote the region as a premier vacation destination. Market research has shown that the typical Booth Creek guest utilizes the Internet extensively as a source of information and additional Company resources have been concentrated towards this communication vehicle. Booth Creek’s resort websites feature e-commerce “virtual stores” on each resort’s website offering products such as season passes, loyalty program memberships, gift certificates and lodging/lift packages as well as private lessons, child care and lift tickets.

Data-base marketing programs. Through the information obtained from its customer loyalty and season pass programs, extensive market surveys and other market research, the Company maintains a data-base containing detailed information on its existing customers. Management believes that data-base marketing is an effective and efficient method to identify, target and maintain an on-going relationship with the Company’s best customers. For example, the Company has been successful in the use of targeted direct mailings and e-mail broadcasts, which are designed to match customer preferences with special offers to build volume and penetration.

Snowsport development programs. The Company’s resorts operate a variety of snowsport development programs designed to improve the skills of children and beginners, as well as more advanced skiers and snowboarders. The Company’s resorts operate ski schools that are consistently rated among the best in their respective regions. In addition, certain of the Company’s resorts have introduced a development program, geared toward intermediate and advanced skiers, which offers free specialized instruction and daily training. This program has increased guest loyalty and repeat visitation. Other efforts have been instituted at all resorts to embrace and welcome new participants to the sport of skiing or snowboarding.

Strategic marketing alliances. The Company is a national ski resort operator with approximately 2.0 million skier visits recorded during the 2003/04 ski season. At least one of the Company’s resorts is within driving distance of three of the five largest ski markets in the United States. Sponsorship opportunities include potential relationships with automobile manufacturers, soft drink companies, and ski and snowboard equipment manufacturers. For example, Northstar and Sierra have relationships with a major automobile manufacturer that involves over $1.2

12

Table of Contents

million worth of television exposure, free use of vehicles for Company purposes and a vehicle give-away promotion for resort guests. This provides exposure of Booth Creek’s resorts to a targeted audience of skiers in key markets.

School, group and business affiliations. The Company is dedicated to developing special programs designed to attract school, business and other groups. By introducing skiing, snowboarding and other methods of sliding on snow to a wider audience, these programs broaden the Company’s customer base and have proven to be a particularly effective way to build name recognition and brand loyalty. Sales personnel at each resort provide year-round assistance to group leaders in organizing and developing events. Business affiliations are developed and maintained through corporate ticket programs, whereby participating businesses are given an opportunity to provide their employees with incentive-based pricing.

Youth market initiatives. The Company is devoting marketing and operational resources to ensure that its resorts offer selected products and services targeted toward the important youth market segment. These initiatives have focused on the Company’s (i) youth market branding, (ii) terrain park features and amenities, and (iii) music, food, entertainment, events and other products and services oriented to the youth market.

Seasonality

The business of the Company is highly seasonal, with the vast majority of its annual revenues expected to be generated between November and April of each fiscal year. Management considers it essential to achieve optimal operating results during key holidays and weekends during this period. The Company’s results of operations are, in turn, significantly dependent upon favorable weather conditions and other factors beyond the Company’s control.

During the off-season months of May through October, the Company’s resorts typically experience a substantial reduction in labor and utility expense due to the absence of ski operations, but make significant expenditures for maintenance, expansion and capital improvements in preparation for the ensuing ski season.

Competition

The general unavailability of new developable ski mountains, regulatory requirements and the high costs and expertise required to build and operate resorts present significant barriers to entry in the ski industry. In the past 15 years, many proposed resorts have been stalled or abandoned due to environmental issues and the high costs of entering into the capital intensive ski industry. The domestic ski industry is currently comprised of approximately 494 resorts and is highly competitive. The Company’s competitive position in the markets in which it competes is dependent upon many diverse factors, including proximity to population centers, pricing, snowmaking capabilities, type and quality of skiing offered, prevailing weather conditions, local bed base and quality and price of complementary services.

The Company’s Lake Tahoe resorts, Northstar and Sierra, face strong competition from Lake Tahoe’s five other major ski resorts. Northstar’s primary competition in the North Lake Tahoe area is from Squaw Valley, Alpine Meadows and Sugar Bowl. Northstar also competes with major ski and non-ski destination resorts throughout North America. Sierra primarily competes in the South Lake Tahoe area with Heavenly and Kirkwood.

The Company’s New Hampshire resorts, Waterville Valley, Mt. Cranmore and Loon Mountain, compete in the highly competitive Northeast ski market, which consists of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut and New York. Within the Northeast region, skiers can choose from over 50 major resorts and ski areas, most of which are located in the mountainous areas of New England and Eastern New York. The primary competitors of Waterville Valley, Mt. Cranmore and Loon Mountain include Bretton Woods, Mount Sunapee, Attitash/Bear Peak, Gunstock, Cannon Mountain, King Pine and Wildcat Mountain in New Hampshire, as well as other major regional ski resort operators, including Okemo, Sunday River, Killington, Wachusett Mountain, Smuggler’s Notch, Stowe, Stratton Mountain and Shawnee Peak.

The Summit competes primarily with 13 other ski resorts in Washington, including Crystal Mountain, Stevens Pass, White Pass, Mission Ridge and Mt. Baker. Additional competition comes from the regional destination resorts at Mt. Bachelor, Mt. Hood Meadows, Sun Valley and Whistler/Blackcomb, as well as other day and weekend ski facilities in Oregon and British Columbia.

13

Table of Contents

On a regional basis, at least one of the Company’s resorts is readily accessible to three of the five largest ski markets in the United States. Management estimates that approximately 70% of the skiers visiting the Company’s Lake Tahoe resorts are from the San Francisco/San Jose, Sacramento, Central California Valley and Lake Tahoe regions. Waterville Valley, Mt. Cranmore and Loon Mountain are estimated to attract approximately 80% of their guests from Massachusetts and New Hampshire, with a large percentage of such visitors coming from the Boston metropolitan area. The Summit attracts more than 90% of its guests from the Seattle/Tacoma metropolitan region.

Regulation and Legislation

The Company’s operations are dependent upon its ownership or control over the real property used in its ski operations at each resort. The real property presently used at the Northstar and Mt. Cranmore resorts is owned by the Company, leased from third parties or controlled by easements. The Company has the right to use a substantial portion of the real property associated with the Sierra, Summit and Waterville Valley resorts under the terms of Term Special Use Permits issued by the Forest Service. The Sierra permit expires in 2039, the Waterville Valley permit expires in 2034 and the Summit permit expires in 2032.

A substantial portion of the real property associated with the Loon Mountain resort is likewise used under a Forest Service Term Special Use Permit. In 1993, the Forest Service authorized various improvements at Loon Mountain and an expansion onto the adjacent South Mountain. The United States Court of Appeals for the First Circuit overturned this authorization in 1996 on the ground that the Forest Service had failed to properly address certain environmental issues under the National Environmental Policy Act (“NEPA”). On remand from the Court of Appeals, the United States District Court for the District of New Hampshire (the “District Court”) entered a final order dated December 11, 1998 which imposed certain conditions and limitations on the Forest Service and Loon Mountain Recreation Corporation (“LMRC”) until the Forest Service completed an additional environmental review process under NEPA. In response to a separate 1997 action filed by an individual and an environmental group, the District Court entered an injunction on February 12, 1999 which limited LMRC’s snowmaking and use of a snowmaking pipeline until the Forest Service completed the additional environmental review process under NEPA. Effective February 22, 2001, certain plaintiffs in the lawsuits alleging violations of environmental laws by the Forest Service and LMRC entered into settlement agreements with LMRC which resolved all issues among the plaintiffs and LMRC relating to LMRC’s prior operations and its proposal for near term expansion and upgrading of Loon Mountain. Among other things, these agreements impose certain restrictions on the operation of the resort and the future development of certain private land at the resort.

LMRC notified the District Court and interested parties that the December 11, 1998 final order and February 12, 1999 injunction expired under their terms when the Forest Service (i) completed its NEPA process, (ii) issued a Record of Decision (“ROD”) on February 26, 2002 approving the Loon Mountain Final Environmental Impact Statement (the “Final EIS”), and (iii) issued a Term Special Use Permit to LMRC for Loon Mountain on June 24, 2002 (thereby replacing Loon Mountain’s three existing Forest Service permits). The new Loon Mountain Term Special Use Permit expires in 2042.

Two written administrative appeals to the ROD were filed with the Forest Service. One of the two appellants settled with LMRC and withdrew its appeal. The Forest Service denied the other administrative appeal and upheld the ROD in a letter decision dated June 7, 2002. With these actions, the Forest Service has concluded its administrative appeal process for the ROD. The ROD and the Forest Service’s June 7, 2002 letter decision are subject to judicial review in federal court under the Administrative Procedure Act by the appellant whose administrative appeal was denied by the Forest Service. As of the date of this Report, no action for judicial review had been filed. The Company can give no assurance regarding whether such a judicial appeal will be filed or the timing or outcome of such a process.

Elements of the expansion and development activities addressed in the Final EIS that occur on private lands will be subject to separate federal, state and local permitting processes. While the Company believes that it will successfully navigate these remaining steps to undertaking the activities authorized in the ROD, it can give no assurance regarding the timing or outcome of such processes.

The Forest Service has the right to approve the location, design and construction of improvements in permit areas and many operational matters at resorts with permits. Under the Term Special Use Permits, the Company is required to pay fees to the Forest Service. The fees range from 1.5% to approximately 4.0% of certain revenues, with the rate generally rising with increased revenues. The calculation of gross revenues includes, among other

14

Table of Contents

things, revenue from lift ticket, season pass, ski school lesson, food and beverage, rental equipment and retail merchandise sales. Total fees paid to the Forest Service by the Company during the fiscal year ended October 29, 2004 were $1,117,000.

The Company believes that its relations with the Forest Service are good, and, to the best of its knowledge, no Term Special Use Permit for any major ski resort has ever been terminated by the Forest Service. The United States Secretary of Agriculture has the right to terminate any Term Special Use Permit upon 180-days notice if, in planning for the uses of the national forest, the public interest requires termination. Term Special Use Permits may also be terminated or suspended because of non-compliance by the permittee; however, the Forest Service would be required to notify the Company of the grounds for such action and to provide it with reasonable time to correct any curable non-compliance.

The Company’s resorts are subject to a wide variety of federal, state and local laws and regulations relating to land use, water resources, discharge, storage, treatment and disposal of various materials and other environmental matters. Management believes that the Company’s resorts are presently in compliance with all land use and environmental laws, except where non-compliance is not expected to result in a material adverse effect on its financial condition. However, the Company is required from time to time to undertake remediation activities at its resorts to assure compliance with environmental laws or to address instances of non-compliance. The cost of these activities could be significant. The failure by the Company to comply with applicable environmental laws could result in the imposition of severe penalties and other costs or restrictions on operations by government agencies or courts that could materially adversely affect operations.

The operations at the resorts require numerous permits and approvals from federal, state and local authorities, including permits relating to land use, ski lifts and the sale of alcoholic beverages. In addition, the Company’s operations are heavily dependent on its continued ability, under applicable laws, regulations, policies, permits, licenses or contractual arrangements, to have access to adequate supplies of water with which to make snow and service the other needs of its facilities, and otherwise to conduct its operations. There can be no assurance that new applications of existing laws, regulations and policies, or changes in such laws, regulations and policies will not occur in a manner that could have a detrimental effect on the Company, or that material permits, licenses or agreements will not be canceled, or renewed, or will be renewed on terms materially less favorable to the Company. Major expansions of any one or more of the Company’s resorts could require, among other things, the filing of an environmental impact statement or other documentation with the Forest Service and state or local governments under NEPA and certain state or local NEPA counterparts if it is determined that the expansion may have a significant impact upon the environment. Although the Company has no reason to believe that it will not be successful in implementing its operations and development plans, no assurance can be given that necessary permits and approvals will be obtained or renewed.

Certain regulatory approvals associated with a snowmaking pipeline at Loon Mountain, as well as certain contractual obligations, impose minimum stream flow requirements with respect to Loon Mountain’s snowmaking operations. These requirements will compel Loon Mountain to construct water storage facilities within approximately three years, and such construction may require further regulatory approvals and environmental documentation under NEPA. No assurances can be given that such regulatory approvals will be obtained or that the Company will have the financial resources to complete such construction.

Certain regulatory approvals associated with a proposed snowmaking impoundment will impose more stringent minimum stream flow requirements with respect to Waterville Valley’s snowmaking operations in the future. These requirements may require Waterville Valley to construct water storage facilities in the next three years.

Except for certain permitting and environmental compliance matters relating to Loon Mountain described above and in Part I, Item 3. “Legal Proceedings,” the Company has not received any notice of material non-compliance with permits, licenses or approvals necessary for the operation of its properties or of any material liability under any environmental law or regulation.

Employees

As of December 31, 2004, the Company employed a full-time corporate staff of 59 persons. In addition, as of December 31, 2004, the Company’s resorts employed an aggregate of approximately 450 full-time and approximately 3,600 seasonal employees. None of the employees of the Company or its resorts is represented by a labor union, and the Company considers its employee relations to be good.

15

Table of Contents

Northstar consists of approximately 8,000 acres of land privately owned by the Company. Sierra owns 20 acres of its 1,689 gross acreage and leases the remainder under a Term Special Use Permit issued by the Forest Service. Waterville Valley owns 11 acres on Snow’s Mountain and two acres at the Conference Center, and leases 790 acres of land on Mt. Tecumseh from the federal government under a Term Special Use Permit issued by the Forest Service. Mt. Cranmore owns 754 acres and holds deeded easements enabling it to develop an additional 500 acres of ski terrain. Loon Mountain owns 404 acres and leases 1,366 acres of land in the White Mountain National Forest under a Term Special Use Permit issued by the Forest Service. The Summit owns 686 acres of its 4,103 gross acreage, leases approximately 440 acres under a private permit, utilizes 1,280 acres for cross-country skiing under an annual operating agreement with the Forest Service and utilizes 1,697 acres of mountain terrain under a Forest Service Term Special Use Permit. In addition, each of the Company’s resorts have ski lodges and other facilities that management believes are suitable for the Company’s current operations. For further information regarding the Company’s properties, see Part I, Item 1. “Business – Resort Operations” and “– Regulation and Legislation.”

Substantially all of the consolidated assets of the Company are pledged as collateral for outstanding borrowings under the Senior Credit Facility (as defined herein). In addition, the Term Special Use Permits issued by the Forest Service relating to the Sierra, Waterville Valley, Loon Mountain and Summit resorts are encumbered as collateral for the Senior Credit Facility.

Each of the Company’s resorts has pending and is regularly subject to litigation, and the threat thereof, with respect to personal injury claims relating principally to snow sports activities at its resorts as well as to premises and vehicular operations and workers’ compensation matters. The Company maintains liability insurance that the Company considers adequate to insure claims related to such usual and customary risks associated with the operation of four-season recreation resorts.

In connection with the Company’s 1998 acquisition of Loon Mountain Recreation Corporation (“LMRC”), certain shareholders of LMRC filed several lawsuits challenging the transaction and seeking to exercise dissenters’ rights under the New Hampshire Business Corporation Act. Each of these lawsuits has been decided or otherwise resolved in favor of the Company, LMRC and its former directors, resulting in no further liability or obligation relating to the transaction for LMRC, its former directors or the Company and its affiliates. The New Hampshire Superior Court has awarded attorneys fees to the defendants in certain of these cases in the amount of $972,000 (with $420,000 for LMRC and the Company and $552,000 for the insurer that funded certain costs of defending the former LMRC directors), although the likelihood or timing of collection of such amount is uncertain.

In 1995, an individual sued the Forest Service in the United States District Court for the District of New Hampshire (the “District Court”) alleging that the Forest Service had violated the National Environmental Policy Act (“NEPA”), the Clean Water Act (“CWA”), and an executive order in approving improvements to and an expansion at Loon Mountain. The District Court entered a final order dated December 11, 1998 that imposed certain conditions and limitations on LMRC’s operations. Under its terms, the order was effective until the Forest Service completed an additional environmental review process under NEPA and issued a new Term Special Use Permit for Loon Mountain. In 1997, an individual and an environmental group filed a second lawsuit against the Forest Service in the District Court alleging that the Forest Service violated NEPA in authorizing LMRC to construct and operate a snowmaking pipeline. The District Court entered an injunction on February 12, 1999 which limited LMRC’s use of the snowmaking pipeline until the Forest Service completed its additional environmental analysis under NEPA and issued a Record of Decision (“ROD”).

As described in Part I, Item 1. “Business – Regulation and Legislation”, on February 26, 2002, the Forest Service completed its environmental analysis under NEPA and issued a ROD approving the Final Environmental Impact Statement for Loon Mountain. The Forest Service issued a Term Special Use Permit to LMRC for Loon Mountain on June 24, 2002. The Forest Service denied an administrative appeal of the ROD in a June 7, 2002 letter decision. The ROD and the June 7, 2002 letter decision are subject to judicial review in federal court by the appellant whose administrative appeal was denied by the Forest Service. As of the date of this Report, no action for judicial review had been filed. The Company can give no assurance regarding whether such a judicial appeal will be filed or the timing or outcome of such process.

16

Table of Contents

Effective February 22, 2001, certain plaintiffs in lawsuits (each of which have now been dismissed or settled) alleging violations of environmental laws by LMRC entered into settlement agreements with LMRC, which resolve all issues among them and LMRC relating to LMRC’s prior operations and current proposal for near term expansion and upgrading of the Loon Mountain resort. Among other things, these agreements impose certain restrictions on the operation of the resort and the future development of certain private land at the resort.

On September 30, 2004, the Ski Trails Condominium Owners’ Association (“Ski Trails”), the association for a condominium complex located within the Northstar resort, filed a complaint in Placer County Superior Court against Trimont Land Company (“TLC”), Trimont Land Holdings, Inc. (“TLH”), the Company (together with TLC and TLH, the “Booth Creek Parties”) and Northstar Mountain Properties, LLC. The dispute relates to TLC’s easement for aerial tramway facilities over land owned by Ski Trails. TLC has recently completed the replacement of the lift within the easement area. Ski Trails contends that the terms of the easement required TLC to obtain Ski Trails’ permission to install the new lift, and that TLC failed to obtain such permission. The complaint seeks equitable relief including declaratory relief, a request for specific performance of the easement terms, a request for permanent injunction preventing the modification or replacement of the original lift or altering usage of the easement without prior approval and a request for mandatory injunction requiring the removal of any modifications to the original lift that were not approved in advance by Ski Trails. On November 12, 2004, Ski Trails filed a First Amended Complaint, which together with the original complaint, were served on the Booth Creek Parties on January 7, 2005. The First Amended Complaint adds an additional cause of action alleging that TLC’s use of Village Run and Condo Run ski trails constitutes a trespass on property owned by Ski Trails, and Ski Trails requests both declaratory relief and a preliminary and permanent injunction against the use of Village and Condo Runs for skiing or other recreational uses. The Booth Creek Parties intend to defend this litigation vigorously and believe that we have meritorious defenses to the action.

On October 1, 2004, Parent, the sole shareholder of the Company, acting through its President, Christopher P. Ryman, voted to reelect and confirm George N. Gillett, Jr., Dean C. Kehler, Edward Levy, Gary M. Pelletier and Scott A. McFetridge as the members of the Board of Directors of the Company. No other matters were submitted to a vote of security holders of the Company during the fourth quarter of fiscal 2004.

17

Table of Contents

PART II

There is no established trading market for any class of equity securities of the Company. All of the Company’s equity securities are owned by Parent.

The Company’s principal debt agreements contain restrictions on the Company’s ability to pay dividends. The Company has not paid any dividends on its common stock since inception. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity” and Note 4 to the accompanying consolidated financial statements.

The following selected financial data should be read in conjunction with the consolidated financial statements of the Company and related notes thereto included elsewhere in this Report and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The selected consolidated financial data of the Company as of and for the fiscal years ended October 27, 2000, November 2, 2001, November 1, 2002, October 31, 2003 and October 29, 2004, have been primarily derived from the audited consolidated financial statements of the Company.

18

Table of Contents

19

Table of Contents

20

Table of Contents

The following discussion should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Report. The following discussion contains certain forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ materially from those discussed herein. Factors that could cause or contribute to the differences are discussed in “– Risk Factors,” “– Forward-Looking Statements” and elsewhere in this Report.

General

The Company’s ski operations are highly sensitive to weather conditions and the overall strength of the national economy and the regional economies in the areas in which the Company operates. The Company believes that the geographic diversity of its resorts and the use of extensive snowmaking technology coupled with advanced trail grooming equipment, which together can provide consistent skiing conditions, can partially mitigate the risk of both economic downturns and adverse weather conditions in any given region. However, the Company remains vulnerable to warm weather, heavy rains, high winds, drought, extended periods of extreme cold and other types of severe or unusual weather conditions, which can have a significant effect on the operating revenues and profitability at one or more of the Company’s resorts.

The Company’s three resorts with the lowest average natural snowfall, Waterville Valley, Loon Mountain and Mt. Cranmore, have invested heavily in snowmaking capabilities to provide coverage on virtually all of their trails and have been open for skiing at least 135, 139 and 99 days, respectively, during each of the last five ski seasons, including the 2003/04 ski season. However, the efficiency and effectiveness of snowmaking operations can be negatively impacted by numerous factors, including temperature variability, reliability of water sources, availability and cost of adequate energy supplies and unfavorable weather events such as heavy rains.

Sierra and the Summit generally experience higher natural snowfall levels, averaging approximately 386 and 368 inches of snowfall, respectively, per year for the past five ski seasons. As a result of their historic natural snowfall, these resorts do not have any significant snowmaking infrastructure. However, such resorts are dependent upon early season snowfall to provide necessary terrain for the important Christmas holiday period, and therefore, the timing and extent of natural snowfall can significantly impact operating conditions.

Northstar has averaged approximately 235 inches of snowfall per year for the past five ski seasons. The resort has snowmaking capabilities to provide coverage on approximately 50% of its trails. Although the resort’s operations depend significantly on natural snowfall, particularly in the early part of the ski season, in recent years the Company has invested in additional snowmaking facilities to improve Northstar’s snowmaking production capacity.

The Company’s results of operations are also highly dependent on the Company’s ability to compete in each of the large regional ski markets in which it operates. Management estimates that at Northstar and Sierra, approximately 70% of the 2003/04 ski season total skier visits were attributable to residents of the San Francisco/San Jose, Sacramento, Central California Valley and Lake Tahoe regions. At Waterville Valley, Loon Mountain and Mt. Cranmore, approximately 80% of the 2003/04 ski season total skier visits were attributable to residents of Massachusetts and New Hampshire, with a large percentage of such visitors coming from the Boston

21

Table of Contents

metropolitan area. At the Summit, the Company estimates that more than 90% of the 2003/04 ski season total skier visits were attributable to residents of the Seattle/Tacoma metropolitan region.

The Company seeks to maximize revenues and operating income by managing the mix of skier visits and revenue per skier visit. These strategies are also designed to maximize resort cash flow. The strategy for each resort is based on the demographic profile of its market and the physical capacity of its mountain and facilities. The Company seeks to increase skier visits by developing effective ticket pricing and season pass strategies and sales and marketing programs to improve peak and off-peak volume. The Company also seeks to increase skier visits by offering a quality guest experience and developing effective target marketing programs. See Part I, Item 1. “Business – Marketing and Sales.” The Company seeks to improve revenue per skier visit by effectively managing the price, quality and value of each of its ski-related services, including retail shops, equipment rentals, lessons and food and beverage facilities.

The Company’s current resorts have invested approximately $71 million (including $12 million of equipment acquired through capital leases and other debt) in capital expenditures during the last five fiscal years to upgrade chairlift capacity, expand terrain, improve skier service, enhance retail and food and beverage facilities, increase snowmaking capabilities and to meet sustaining capital requirements, all of which management believes are important in providing a quality guest experience.

A significant portion of total operating costs at the Company’s resorts are variable, consisting primarily of retail and food service cost of sales, utilities and labor expense. These variable costs can fluctuate significantly based upon skier days and seasonal factors. With the exception of certain management, administrative and maintenance personnel, substantially all of the Company’s employees are compensated on an hourly basis. Management believes a key element to maximizing profitability during the winter season is to closely monitor staffing requirements and to adjust staffing levels when skier volumes or seasonal needs dictate.

The Company’s real estate and other segment is primarily engaged in the sale of single family lots, development real estate and timber at Northstar and Loon Mountain. The revenues, operating income and cash flows of the real estate and other segment are highly variable.

Results of Operations

Overview

The opening and closing dates for the Company’s resorts for the 2003/04, 2002/03 and 2001/02 ski seasons were as follows:

22

Table of Contents

Total skier visits generated by each of the Company’s resorts during the 2003/04, 2002/03 and 2001/02 ski seasons were as follows:

As a result of early season snowfall in November 2003 and cold temperatures, Northstar opened on schedule for the 2003/04 season and Sierra opened ahead of schedule. However, business volumes at Northstar and Sierra during the 2003/04 season were negatively impacted for several key days between Christmas and New Year’s Day due to two major storms that hit the Lake Tahoe region. Snowfall in Lake Tahoe during January 2004 and the first half of February 2004 was relatively modest compared with historical levels. In March and April 2004, Northern California, the primary market for the Company’s Lake Tahoe resorts, experienced record warm temperatures for a prolonged period, which dampened skier demand and visitation during the later portion of the 2003/04 season. Comparatively, for the 2002/03 season, the Lake Tahoe region experienced relatively dry conditions and a lack of natural snowfall through December 2002. Due to the strength of its snowmaking system, Northstar opened on schedule for the 2002/03 season. However, Sierra did not open for the 2002/03 season until December 16, 2002. During mid-December 2002, the region received a series of powerful storms resulting in over six feet of snowfall at Northstar and Sierra, which provided excellent skiing conditions for the 2002/03 Christmas holiday period. During January through March 2003, the Lake Tahoe region experienced natural snowfall levels that were substantially below long-term historical levels. However, the region received significant snowfall in early April 2003, which stimulated late season visitation. For the 2003/04 ski season, skier visitation for Northstar declined by 35,000 visits, or 6%, as compared to the 2002/03 season, due primarily to shortfalls in late season skier visits as a result of the unusually warm weather in Northern California. For Sierra, skier visitation for the 2003/04 ski season increased by 19,000 visits, or 5%, as compared to the 2002/03 season, as increased skier visits in the early part of the season due to an earlier opening were partially offset by decreased skier visits at the end of the ski season. For the 2001/02 season, Northstar and Sierra opened following Thanksgiving. In early December 2001, the Lake Tahoe region received significant natural snowfall, which provided favorable conditions going into the Christmas holiday period and early January 2002. However, snowfall levels in the Lake Tahoe region in January and February 2002 were below historical levels, and business volumes on several weekends in March 2002 were negatively impacted by disruptive storms.

For the first half of the 2003/04 season, the northeastern United States experienced relatively inconsistent weather patterns, including, at varying times, major snowstorms, warm temperatures, periods of heavy rainfall, and for most of January 2004 and early February 2004, extended periods of bitterly cold temperatures. By comparison, conditions in the Northeast for the early part of the 2002/03 ski season were generally good, with favorable temperatures for snowmaking operations and above average natural snowfall. For the later portion of the 2003/04 season, weather conditions for the Company’s New Hampshire resorts (Waterville Valley, Mt. Cranmore and Loon Mountain) returned to more normal patterns, although late season conditions were generally less favorable than those at the end of the 2002/03 season. For the 2003/04 season, the Company’s New Hampshire resorts experienced a decline of 102,000 skier visits, or 15%, from the level of skier visitation during the 2002/03 season, the bulk of which decline occurred in the first fiscal quarter of 2004. For the 2001/02 season, the Northeast experienced early season drought conditions and one of the warmest winters on record. In addition to difficult early season conditions and below average snowfall, the Company’s New Hampshire resorts experienced an above average number of negative weather events during the 2001/02 season, including periods of warm weather and rain.

As compared to the difficult 2002/03 season, the Pacific Northwest experienced a return to more normal weather patterns for the 2003/04 season, resulting in a significant rebound in visitation at the Company’s Summit

23

Table of Contents

resort in Washington. For the 2003/04 season, the Summit opened slightly ahead of schedule on November 29, 2003. For the 2002/03 season, the Pacific Northwest encountered unseasonably warm temperatures and substantially below average snowfall. Snowfall at the Summit for the 2002/03 season was less than 60% of historical long-term averages. Additionally, average temperatures at the Summit during the 2002/03 season were generally much warmer than normal, and the resort experienced a large amount of rainfall during the course of the season. The Summit commenced partial operations for the 2002/03 season on December 27, 2002 on limited terrain. As a result of the early opening for the 2003/04 season and substantially improved conditions, skier visits for the Summit for the 2003/04 season increased by 146,000 visits, or 44%, as compared to the 2002/03 season. For the 2001/02 season, conditions at the Summit were generally favorable.

Fiscal Year Ended October 29, 2004 Compared to the Fiscal Year Ended October 31, 2003

The Company’s operating results by segment for the fiscal years ended October 29, 2004 and October 31, 2003 were as follows.

Resort Operations:

Revenues from resort operations for the fiscal year ended October 29, 2004 were $105,377,000, an increase of $414,000 as compared to the 2003 period. Skier visits for the 2004 period increased by 28,000 visits, or 1%, from the 2003 period. Season pass revenues, which rose 12% to $22,053,000 for the 2004 period, as well as increased snow school and retail sales, offset the impact of reduced lift ticket sales.

24

Table of Contents

As compared to the fiscal year ended October 31, 2003, resort operations revenues for Northstar decreased by $1,672,000 primarily due to lower skier visits, partially offset by higher revenue per skier visit yields. Resort operations revenues for Sierra increased by $527,000 as compared to the 2003 period due to increased skier visits, partially offset by lower revenue per skier visit yields due to changes in the mix of skiers. Resort operations revenues for Waterville Valley, Mt. Cranmore and Loon Mountain decreased by $1,507,000, $639,000 and $1,187,000, respectively, as compared to the 2003 period due to decreases in skier visits, partially offset by improved revenue per skier visit yields. The Summit’s resort operations revenues increased by $4,892,000 as compared to the 2003 period due primarily to substantially higher visitation, partially offset by lower revenue per skier visit yields.

Cost of sales for resort operations for the fiscal year ended October 29, 2004 was $63,977,000, an increase of $8,000 as compared to the 2003 period. Higher insurance and snowmaking costs for the 2004 period were partially offset by the effect of (i) lower variable operating costs in the 2004 period and (ii) a $475,000 workers’ compensation provision in the 2003 period for two large claims.

In April 2004, construction commenced for the redevelopment of a substantial portion of the Village at Northstar. Cost of sales for resort operations for the fiscal year ended October 29, 2004 included $413,000 in expenses associated with establishing interim facilities and amenities within the Village at Northstar to address customer service needs and maintain winter revenue sources during the 2004/05 season. Such amenities include ticketing and guest service offices, food and beverage venues, locker and ski storage facilities and guest convening areas to minimize any impacts of potential disruption from the Village construction.

Depreciation expense for the fiscal year ended October 29, 2004 was $13,848,000, a decrease of $1,791,000, or 11%, from the 2003 period. The decline in depreciation expense was primarily due to the effect of (i) certain assets acquired in connection with the Company’s resort acquisition in 1998 having become fully depreciated, and (ii) reduced capital expenditures during the 2004 and 2003 periods as compared to historical levels.

Selling, general and administrative expense for resort operations for the fiscal year ended October 29, 2004 was $22,149,000, an increase of $1,457,000, or 7%, as compared to the 2003 period. The increase in selling, general and administrative expense between the 2004 and 2003 periods was primarily due to increased payroll as a result of normal inflationary factors and increased workers’ compensation premium allocations.

Resort operating income for the fiscal year ended October 29, 2004 was $5,403,000, an increase of $740,000, or 16%, from the operating income generated for the 2003 period, as a result of the factors discussed above.

Real Estate and Other:

Revenues from real estate operations for the fiscal year ended October 29, 2004 were $9,844,000, which was due to (i) the sale of the final three lots within the Unit 7A subdivision at Northstar for an aggregate sales price of $2,798,000, (ii) the transfer and sale of the remaining Development Real Estate (as defined herein) at Northstar pursuant to the Northstar Real Estate Agreement (as defined herein) between Trimont Land Company and Trimont Land Holdings, Inc. (see Note 7 to the accompanying consolidated financial statements), which generated revenues of $5,610,000, and (iii) the sale of certain non-strategic development parcels and single family lots at Loon Mountain for $1,436,000. Revenues from real estate operations for the fiscal year ended October 31, 2003 were $9,830,000, which was due to (i) the sale of the final lot within the Unit 7 development at Northstar for $646,000, and (ii) the sale of 12 lots within the Unit 7A development at Northstar for $9,184,000. The average selling price for the Unit 7A lots at Northstar was approximately $800,000. Timber operations at Northstar contributed revenues of $189,000 and $254,000 for the 2004 and 2003 periods, respectively.

Cost of sales for real estate and other operations for the fiscal years ended October 29, 2004 and October 31, 2003 was $2,861,000 and $5,444,000, respectively, which included noncash cost of real estate sales of $2,292,000 and $4,484,000. Cost of sales incurred during the 2004 and 2003 periods was primarily due to the real estate sales transactions discussed above, and, to a lesser extent, costs associated with timber harvesting activities at Northstar.

Selling, general and administrative expense for real estate and other operations for the fiscal year ended October 29, 2004 was $1,042,000, a decrease of $329,000 from the 2003 period, primarily as a result of sales launch costs incurred in the 2003 period for the Unit 7A development at Northstar.

Operating income from real estate and other operations was $6,034,000 for the fiscal year ended October 31, 2004, an increase of $2,892,000 from the operating income of $3,142,000 generated during the fiscal year ended October 31, 2003, as a result of the factors discussed above.

25

Table of Contents

Interest Expense and Other Items:

Interest expense for the fiscal year ended October 29, 2004 totaled $12,071,000, a decrease of $421,000, or 3%, from the Company’s interest expense for the fiscal year ended October 31, 2003, as a result of reduced average borrowings outstanding during the 2004 period.

The Company recognized a gain on the early retirement of debt of $506,000 for the fiscal year ended October 31, 2003, relating to the repurchase of $16,000,000 aggregate principal amount of its 12.5% senior notes due March 15, 2007 (the “Senior Notes”) during the 2003 period.

As of October 29, 2004 and October 31, 2003, the Company had estimated net operating loss carryforwards of approximately $119,000,000 and $100,000,000, respectively, for federal income tax reporting purposes, which expire between 2012 and 2024. The tax benefits of such net operating losses are fully offset by a valuation reserve because the Company believes that it is more likely than not that we will not realize income tax benefits from operating losses in the foreseeable future. Accordingly, during the fiscal years ended October 29, 2004 and October 31, 2003, no income tax benefit has been recorded.

The Company’s net loss for the fiscal year ended October 29, 2004 was $1,831,000, an improvement of $3,530,000 from the net loss of $5,361,000 generated for the fiscal year ended October 31, 2003, as a result of the factors discussed above.

Fiscal Year Ended October 31, 2003 Compared to the Fiscal Year Ended November 1, 2002

The Company’s operating results by segment for the fiscal years ended October 31, 2003 and November 1, 2002 were as follows. Such results exclude the operating results for the Bear Mountain resort, which was sold on October 10, 2002.

26

Table of Contents

Resort Operations:

Revenues from resort operations for the fiscal year ended October 31, 2003 were $104,963,000, a decrease of $3,864,000, or 4%, as compared to the 2002 period. Skier visits for the 2003 period declined by 201,000 visits, or 9%, from the 2002 period. Increased sales of season passes, which rose 31% to $19,772,000 for the 2003 period, as well as improved revenue per skier visit yields, partially offset the impact of reduced skier visitation. As compared to the fiscal year ended November 1, 2002, resort operations revenues for Northstar increased by $1,621,000, primarily due to higher skier visits and season pass sales, partially offset by lower revenue per skier visit yields due to changes in the mix of skiers. Revenues for Sierra decreased by $1,872,000 due to reduced skier visits, partially offset by higher revenue per skier visit yields. Revenues for Waterville Valley and Mt. Cranmore increased by $730,000 and $955,000, respectively, due to increases in skier visits. Revenues for Loon Mountain increased by $408,000 due to increased skier visits, partially offset by lower yields due to a greater proportion of season pass visits in the 2003 period. The Summit’s revenues decreased by $5,706,000 due primarily to substantially lower visitation.

Cost of sales for resort operations for the fiscal year ended October 31, 2003 was $63,969,000, an increase of $832,000, or 1%, as compared to the 2002 period. The increase was primarily the result of normal inflationary factors and higher insurance costs, partially offset by (i) lower snowmaking costs, (ii) the effect of higher workers’ compensation provisions in the 2002 period for exposures at the Company’s Lake Tahoe and Washington resorts, and (iii) lower summer payroll in the 2003 period as a result of cost savings initiatives.

Depreciation expense for the fiscal year ended October 31, 2003 was $15,639,000, a decrease of $1,253,000, or 7%, from the 2002 period. The decline in depreciation expense was primarily due to certain assets acquired in connection with the Company’s resort acquisitions in 1996 and 1997 having become fully depreciated.

Selling, general and administrative expense for resort operations for the fiscal year ended October 31, 2003 was $20,692,000, a decrease of $708,000, or 3%, as compared to the 2002 period. The decrease in selling, general and administrative expense between the 2003 and 2002 periods was primarily due to reduced provisions under incentive compensation arrangements in 2003, partially offset by normal inflationary factors.

Resort operating income for the fiscal year ended October 31, 2003 was $4,663,000, a decrease of $2,735,000 from the operating income generated for the 2002 period, primarily as a result of lower revenues in the 2003 period.

Real Estate and Other:

Revenues from real estate operations for the fiscal year ended October 31, 2003 were $9,830,000, which was due to (i) the sale of the final lot within the Unit 7 subdivision at Northstar for $646,000, and (ii) the sale of 12 lots within the Unit 7A subdivision at Northstar for $9,184,000. Revenues from real estate sales during the fiscal year ended November 1, 2002 were $11,300,000, which was due to the sale of 25 lots within the Unit 7 subdivision at Northstar. Due to slightly larger average lot sizes, better lot views and amenities and continued improvements in the

27

Table of Contents

local real estate market, the Company was able to realize significantly higher average lot prices for the Unit 7A subdivision as compared to the Unit 7 subdivision. Timber operations at Northstar contributed revenues of $254,000 and $405,000 during the 2003 and 2002 periods, respectively.

Cost of sales for real estate and other operations was $5,444,000 (including noncash cost of real estate sales of $4,484,000) for the fiscal year ended October 31, 2003, as compared to $2,920,000 for the fiscal year ended November 1, 2002. The increase in cost of sales was primarily due to expanded infrastructure requirements for the Unit 7A subdivision, including related water system improvements and a lift to access Northstar’s ski terrain from the subdivision.

Selling, general and administrative expense related to real estate operations increased by $157,000, or 13%, to $1,371,000 for the fiscal year ended October 31, 2003, due principally to sales launch costs for the Unit 7A subdivision.

Operating income from real estate and other operations was $3,142,000 for the fiscal year ended October 31, 2003, a decrease of $4,227,000 from the fiscal year ended November 1, 2002, as a result of the factors discussed above.

Interest Expense and Other Items:

Interest expense for the fiscal year ended October 31, 2003 totaled $12,492,000, a decrease of $2,789,000, or 18%, from the Company’s interest expense for the fiscal year ended November 1, 2002, as a result of reduced borrowings and lower average interest rates.

The Company recognized gains on the early retirement of debt of $506,000 and $2,761,000 for the fiscal years ended October 31, 2003 and November 1, 2002, respectively, relating to repurchases of $16,000,000 and $29,325,000 aggregate principal amount of its Senior Notes during the 2003 and 2002 periods, respectively.

As of October 31, 2003 and November 1, 2002, the Company had net operating loss carryforwards of approximately $100,000,000 and $90,000,000, respectively, for federal income tax reporting purposes, which expire between 2012 and 2023. The tax benefits of such net operating losses are fully offset by a valuation reserve because the Company believes that it is more likely than not that we will not realize income tax benefits from operating losses in the foreseeable future. Accordingly, during the fiscal years ended October 31, 2003 and November 1, 2002, no income tax benefit has been recorded.

On October 10, 2002, the Company consummated the sale of all of the capital stock of Bear Mountain, Inc., the owner and operator of the Bear Mountain ski resort, to Snow Summit Ski Corporation for a purchase price of $12,000,000 in cash, subject to certain adjustments for working capital, assumed debt and allocations of off-season operating losses and capital expenditures. The purchase price was determined through arms-length negotiations. As a result of the disposal, the Company has reflected the historical operating results of Bear Mountain as discontinued operations in its consolidated statements of operations. Based on the terms of the transaction, the Company recognized a loss on sale of $3,235,000 during the fiscal year ended November 1, 2002. Additionally, the Company generated income from the discontinued operations of the Bear Mountain resort of $549,000 during the fiscal year ended November 1, 2002.

The Company’s net loss for the fiscal year ended October 31, 2003 was $5,361,000, an increase of $3,491,000 from the net loss of $1,870,000 generated for the fiscal year ended November 1, 2002, as a result of the factors discussed above.

Liquidity and Capital Resources

The Company’s primary liquidity needs are to fund capital expenditures, service indebtedness and support seasonal working capital requirements. The Company’s primary sources of liquidity are cash flow from operations and borrowings under the Senior Credit Facility (as defined below). Virtually all of the Company’s operating income is generated by its subsidiaries. As a result, the Company is dependent on the earnings and cash flow of, and dividends and distributions or advances from, its subsidiaries to provide the funds necessary to meet its debt service obligations.

28

Table of Contents

Effective March 15, 2002, the Company and its subsidiaries entered into an Amended and Restated Credit Agreement (as amended, the “Senior Credit Facility”). On September 22, 2004, the Company and its subsidiaries entered into the Fifth Amendment (the “Fifth Amendment”) to the Senior Credit Facility. In general, the Fifth Amendment resulted in the following principal modifications to the Senior Credit Facility: (i) an increase in the outstanding borrowings under the term loan facility (the “Term Facility”) from $18,000,000 to $25,000,000, (ii) a decrease in the quarterly commitment reductions under the Term Facility from the prior level of $1,000,000 per quarter to a level of $417,000 for each of the quarterly periods ending October 31, 2004, January 31, 2005, April 30, 2005 and July 31, 2005, (iii) modifications to certain of the financial covenants under the Senior Credit Facility, and (iv) certain other changes to the definitions, terms and conditions of the Senior Credit Facility. In connection with the Fifth Amendment, U.S. Bank National Association became the sole lender and administrative agent (“Agent”) under the Senior Credit Facility. The following summary of the terms of the Senior Credit Facility is qualified by reference to the complete agreement governing the Senior Credit Facility, a copy of which has been filed as an exhibit to our periodic reports.

The Senior Credit Facility provides a revolving credit facility (the “Revolving Credit Facility”) with borrowing availability of up to $25,000,000, and a Term Facility with outstanding borrowings as of October 29, 2004 of $25,000,000. The Senior Credit Facility requires that the Company not have any borrowings under the Revolving Credit Facility for a period of 30 consecutive days commencing sometime between January 15 and February 28 of each year. The Term Facility provides for quarterly commitment reductions of $417,000 on October 31, 2004, January 31, 2005, April 30, 2005 and July 31, 2005. In addition, the Company is required to repay amounts outstanding under the Term Facility on such dates by an amount equal to the Excess Cash Proceeds (as defined in the Senior Credit Facility) derived from specified real estate asset sales determined on a cumulative basis from October 2, 2004. No amount of the Term Facility which is repaid may be reborrowed. The entire unpaid balance under the Senior Credit Facility is due and payable on October 31, 2005, the maturity date of the Senior Credit Facility. Additionally, the Company’s Senior Notes mature on March 15, 2007. As a result, we have commenced the process of identifying possible refinancing alternatives to address the pending maturity of these obligations. We have received financing proposals from a number of financial institutions, including our existing lender under the Senior Credit Facility. We are currently in the process of evaluating the merits of the various proposals received to date. Once we have identified a viable refinancing alternative, we will need to negotiate the terms and conditions for applicable definitive financing agreements for the intended structure. Although we intend to aggressively pursue a comprehensive refinancing of the Company’s capital structure, no assurances can be given that any such financing would be available or on commercially reasonable terms.

Borrowings under the Senior Credit Facility are secured by (a) a pledge to the Agent for the ratable benefit of the financial institutions party to the Senior Credit Facility of all of the capital stock of Booth Creek’s principal subsidiaries and (b) a grant of a security interest in substantially all of the consolidated assets of Booth Creek and its subsidiaries.

The Senior Credit Facility contains financial covenants relating to the maintenance of (a) minimum consolidated resort EBITDA (resort earnings before interest, taxes, depreciation and amortization, adjusted for certain items specified in the Senior Credit Facility) measured quarterly on a rolling four quarter basis (“Minimum Resort EBITDA”), (b) a minimum ratio of (y) consolidated EBITDA (earnings before interest, taxes, depreciation, depletion, amortization and noncash cost of real estate sales, adjusted for certain items specified in the Senior Credit Facility), less $4,000,000, less cash income taxes actually paid during the period to (z) consolidated debt service (the sum of interest, cash payments of principal made in respect of capitalized lease obligations and mandatory reductions under the Term Facility, adjusted for certain items specified in the Senior Credit Facility) measured quarterly on a rolling four quarter basis (the “Leverage Ratio”), and (c) a maximum adjusted consolidated leverage ratio (the ratio of secured indebtedness of the Company and its subsidiaries (with certain exceptions specified in the Senior Credit Facility) to the sum of the Company’s consolidated net worth, as adjusted pursuant to the Senior Credit Facility, and the aggregate principal amount of outstanding Senior Notes (“Adjusted Leverage Ratio”).

The Company is required to have a Minimum Resort EBITDA of (i) $19,500,000 during each rolling four quarter period from October 29, 2004 through April 29, 2005, and (ii) $20,500,000 during each rolling four quarter period from April 30, 2005 and thereafter. It is also required to maintain (a) a minimum Leverage Ratio of (i) 1 to 1 through October 29, 2004, (ii) 1.1 to 1 from October 30, 2004 through July 29, 2005, and (iii) 1.3 to 1 thereafter and (b) a maximum Adjusted Leverage Ratio of .65 to 1.

29

Table of Contents

The Senior Credit Facility also contains restrictive covenants pertaining to the management and operation of Booth Creek and its subsidiaries. The covenants include, among others, significant limitations on indebtedness, guarantees, letters of credit, liens, investments, distributions, capital expenditures, mergers, acquisitions, asset sales, fundamental corporate changes, transactions with affiliates, optional payments and modification of debt instruments and issuances of stock. The Company was in compliance with the covenants under the Senior Credit Facility as of October 29, 2004.

For purposes of calculating interest, loans under the Senior Credit Facility can be, at the election of the Company, base rate loans or LIBOR rate loans or a combination thereof. Base rate loans bear interest at the sum of (a) the higher of (i) the Agent’s prime rate or (ii) the federal funds rate plus ..5% plus (b) a margin of 1.5%. LIBOR rate loans bear interest at the LIBOR rate plus a margin of 4%. Interest on loans outstanding is payable quarterly or at the end of the Interest Period (as defined in the Senior Credit Facility) for loans subject to LIBOR rate options. The Senior Credit Facility also requires commitment fees of .5% based on the unused borrowing availability of the Revolving Credit Facility. Borrowings outstanding under the Revolving Credit Facility and Term Facility as of October 29, 2004 bore interest at weighted average annual rates of 5.95% and 5.92%, respectively, pursuant to elections under both the base rate and LIBOR rate options.

Borrowings under the Revolving Credit Facility can be used for working capital and other general corporate purposes including, with the consent of the lenders, the repurchase of the Company’s Senior Notes. As of October 29, 2004, outstanding borrowings under the Revolving Credit Facility and Term Facility were $17,250,000 and $25,000,000, respectively. Following October 29, 2004, outstanding borrowings under the Revolving Credit Facility peaked at $17,600,000 on November 15, 2004. As of January 26, 2005, borrowings outstanding under the Revolving Credit Facility were $3,350,000.

The Company had a net working capital deficit of $71,228,000 as of October 29, 2004 (including $17,250,000 and $25,000,000 in outstanding borrowings under the Revolving Credit Facility and Term Facility, respectivley), which will negatively affect liquidity during 2005. The Company’s net working capital deficit as of October 29, 2004 was due in part to unearned revenue and deposits from resort operations of $14,602,000 for season pass and membership product sales, lodging deposits and other prepaid products. The Company’s working capital deficit as of October 31, 2003 was $52,233,000 (including $17,750,000 and $4,000,000 in outstanding borrowings under the Revolving Credit Facility and Term Facility, respectively).

The Company generated cash from operating activities of $13,461,000 for the fiscal year ended October 29, 2004 as compared to $13,684,000 for the fiscal year ended October 31, 2003. The cash flow effect of the improvement in net loss for the 2004 period was offset by reduced noncash charges for depreciation, depletion and cost of real estate sales.

Cash used in investing activities totaled $13,124,000 and $8,787,000 for the fiscal years ended October 29, 2004 and October 31, 2003, respectively. The results for the 2004 and 2003 periods primarily reflect capital expenditures for the purchase of property and equipment and real estate held for development and sale.

Cash used in financing activities totaled $300,000 for the fiscal year ended October 29, 2004, which primarily reflects net repayments of the Revolving Credit Facility of $500,000, borrowings of $7,000,000 under the Term Facility and scheduled principal payments of long-term debt of $5,864,000. Cash used in financing activities totaled $4,752,000 for the fiscal year ended October 31, 2003, which reflects net borrowings under the Revolving Credit Facility of $16,505,000, scheduled principal payments of long-term debt of $5,991,000 and the repurchase of $16,000,000 aggregate principal amount of the Company’s Senior Notes for $15,080,000.

The Company’s capital expenditures for property and equipment during the fiscal year ended October 29, 2004 were $14,384,000 (including $3,371,000 of equipment acquired through capital leases and other debt). As of October 29, 2004, the portion of fiscal 2004 capital programs which will be expended in fiscal 2005 is estimated to be approximately $2,600,000, which excludes grooming equipment to be acquired under capital leases. The Company has not yet determined the scope of potential expansion capital or real estate development projects that may be undertaken as part of its 2005 capital cycle. Maintenance capital spending for the Company’s 2005 capital cycle is preliminarily estimated to be in the range of $5,000,000 to $6,000,000. The Company plans to fund fiscal 2005 capital expenditures from available cash flow, vendor financing to the extent permitted under the Senior Credit Facility and the Indenture for the Company’s Senior Notes and/or borrowings under the Revolving Credit Facility.

30

Table of Contents

Commitments for future capital expenditures for property and equipment and real estate development were approximately $6,600,000 at October 29, 2004.

During the fiscal year ended October 29, 2004, the Company entered into purchase commitments for the construction of detachable quad chairlifts at Northstar and Loon Mountain for a total cost of approximately $7,000,000. The Company also obtained a commitment to finance the lifts under operating lease arrangements. As of October 29, 2004, lift construction progress payments of $1,689,000 have been funded by the leasing company pursuant to interim financing arrangements entered into in contemplation of the intended operating lease financing. Under generally accepted accounting principles, the interim fundings have been reflected as a component of property and equipment and current portion of long-term debt in the Company’s consolidated balance sheet as of October 29, 2004. In December 2004, the capital expenditures and debt associated with the interim fundings were removed from the Company’s consolidated balance sheet in conjunction with the origination of the permanent operating lease financing for the two lifts.

Management believes that there is a considerable degree of flexibility in the timing (and, to a lesser degree, the scope) of its capital expenditure program, and even greater flexibility as to its real estate development objectives. While the capital expenditure program described above is regarded by management as important, both as to timing and scope, discretionary capital spending above maintenance levels can be deferred, in some instances for substantial periods of time, in order to address cash flow or other constraints.

With respect to the Company’s potential real estate development opportunities, management believes that such efforts would enhance ski-related revenues and contribute independently to earnings. In addition, with respect to significant development projects, the Company expects to continue to pursue arrangements that would reduce infrastructure and other development costs. Nonetheless, existing lodging facilities in the vicinity of each resort are believed to be adequate to support current skier volumes and a deferral or curtailment of development efforts is not regarded by management as likely to adversely affect skier days and ski-related revenues or profitability. The Company also believes that its current infrastructure is sufficient, and that development of real estate opportunities is not presently necessary to support its existing operations.

The Company’s liquidity has been and will continue to be significantly affected by its high leverage. As a result of its leveraged position, the Company will have significant cash requirements to service debt and funds available for working capital, capital expenditures, acquisitions and general corporate purposes will be limited. In addition, the Company’s high level of debt may increase its vulnerability to competitive pressures and the seasonality of the skiing and recreational industries. During the 2002/03 and 2003/04 ski seasons, the Company experienced a significant decline in its resort operating performance as compared to the level of its operating performance for the 2000/01 and 2001/02 ski seasons due primarily to weather challenges at certain of its resorts, which will negatively affect liquidity in future periods. Any further significant decline in the Company’s expected operating performance could have a material adverse effect on the Company’s ability to service its debt and make required capital expenditures.

In addition, the Senior Credit Facility and the Indenture governing the Company’s Senior Notes each contain covenants that, among other things, significantly limit the Company’s ability to obtain additional sources of capital and may affect the Company’s liquidity. These covenants restrict the ability of the Company and its Restricted Subsidiaries to, among other things, incur additional indebtedness, create liens, make investments, consummate certain asset sales, create subsidiaries, issue subsidiary stock, consolidate or merge with any other person, or transfer all or substantially all of the assets of the Company. Further, upon the occurrence of a Change of Control (as defined in the Indenture), the Company may be required to repurchase the Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest. The occurrence of a Change of Control may also constitute a default under the Senior Credit Facility. No assurance can be given that the Company would be able to finance a Change of Control repurchase offer. The Senior Credit Facility also requires the Company to maintain specified consolidated financial ratios and satisfy certain consolidated financial tests. On June 14, 2004, the Company obtained an amendment from the lenders under the Senior Credit Facility modifying these covenants prospectively and a waiver of defaults that had arisen as a result of the Company’s operating performance through April 30, 2004. The Company was in compliance with the amended covenants under the Senior Credit Facility as of October 29, 2004.

Due to weather challenges experienced at the Company’s Summit resort during the first half of the 2004/05 season, the Company believes that it will not achieve the Minimum Resort EBITDA and Leverage Ratio covenants

31

Table of Contents

under the Senior Credit Facility for the fiscal quarter ending January 28, 2005. See “– Recent Trends and Outlook.” The Company has initiated discussions with the Agent to obtain a waiver or other form of cure for the expected covenant breaches. Although the Agent under the Senior Credit Facility has historically granted waivers or other modifications to address past covenant compliance issues, no assurances can be given that the Company will be able to obtain an appropriate cure for the expected covenant breaches for the first fiscal quarter of 2005. Accordingly, in the Company’s consolidated financial statements as of October 29, 2004, the Company has classified the scheduled amount due under the Term Facility on October 31, 2005 in the amount of $23,333,000 as a component of current portion of long-term debt.

As of October 29, 2004, the Company had $109,318,000 of total long-term debt. The Company expects that existing cash, cash generated from operations and cash proceeds of real estate sales, together with borrowing availability, will be adequate to fund the Company’s debt service and other cash operating requirements during fiscal 2005. The Company is currently in the process of evaluating refinancing alternatives for its Senior Credit Facility, which matures on October 31, 2005. In order to focus the Company’s resources on attractive investment opportunities at certain of its resorts and to satisfy short-term and long-term liquidity requirements, the Company may in the future consider divestitures of non-strategic assets, including resorts, if such transactions can be completed on favorable terms.

Any decline in the Company’s expected operating performance or the inability of management to successfully implement the Company’s business strategy could have a material adverse effect on the Company’s financial position and liquidity. In such case, the Company could be required to attempt to refinance all or a portion of its existing debt, sell other assets or obtain additional financing. No assurance can be given of the Company’s ability to do so or pursuant to satisfactory terms. In addition, the Company would require additional financing for expansion of its existing properties or for future acquisitions, if any. No assurances can be given that any such financing would be available on commercially reasonable terms. See “Forward-Looking Statements” herein.

While the Company cannot precisely determine the effect of inflation on its operations, management does not believe that inflation has had a material effect on the Company’s historical results of operations. In general, when the costs of operating our resorts increases, the Company has been able to effect price increases in its products and services. However, there can be no assurance that future increases in resort operating costs due to inflation will not have an impact on the Company’s profitability.

Contractual Obligations and Off-Balance Sheet Arrangements

The Company’s significant contractual obligations include long-term debt (including capital lease obligations), operating leases, purchase obligations and other long-term liabilities. As of October 29, 2004, the Company’s scheduled maturities of long-term debt (including capital lease obligations), operating lease commitments, purchase obligations and other long-term liabilities for the periods indicated were as follows: