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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K

          (Mark One)

  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2017.

OR

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                   to                  

Commission file number 001-35363

Peak Resorts, Inc.

(Exact name of registrant as specified in its charter)



 

 

Missouri

 

43-1793922

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)



 

 

17409 Hidden Valley Drive

 

63025

Wildwood, Missouri

 

(Zip Code)

(Address of principal executive offices)

 

 



(636) 938-7474
(Registrant’s telephone number, including area code)

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

                          Title of each class                                                           Name of each exchange on which registered

            Common Stock, $0.01 par value per share                                                    NASDAQ Global Market    

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐   No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐   No  

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   No


 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth companySee the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.    

Large accelerated filer Accelerated filer

Non-accelerated filer    (Do not check if a smaller reporting company)Smaller reporting company 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   No

As of October 31, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $50.1 million.



As of July 13, 2017,  13,982,400 shares of the registrant’s common stock were outstanding.



Documents incorporated by reference:



Portions of the registrant’s Definitive Proxy Statement for its 2017 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K, to be filed within 120 days of the registrant’s fiscal year ended April 30, 2017.





 

 

 


 



Table of Contents





 

 





 

 

PART I

 

 

 

Item 1.

Business.

Item 1A.

Risk Factors.

15 

Item 1B.

Unresolved Staff Comments.

28 

Item 2.

Properties.

28 

Item 3.

Legal Proceedings.

29 

Item 4.

Mine Safety Disclosures.

30 

 

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

30 

Item 6.

Selected Financial Data.

32 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

33 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

51 

Item 8.

Financial Statements and Supplementary Data.

F - 1

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

53 

Item 9A.

Controls and Procedures.

53 

Item 9B.

Other Information.

53 

 

PART III

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance.

54 

Item 11.

Executive Compensation.

54 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

54 

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

55 

Item 14.

Principal Accounting Fees and Services.

55 

 

PART IV

Item 15.

Exhibits and Financial Statement Schedules.

                         55

 

 

 





















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Forward-Looking Statements

Except for any historical information contained herein, the matters discussed in this Form 10-K contain certain “forward-looking statements'' within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management's Discussion and Analysis of Financial Condition and Results of Operations''.

These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,'' “will,'' “expect,'' “intend,'' “estimate,'' “anticipate,'' “believe,'' “continue'' or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this Form 10-K. Important factors that could cause actual results to differ materially from our expectations include, among others:

·

weather, including climate change;

·

seasonality;

·

availability of funds for capital expenditures and operations;

·

competition with other indoor and outdoor winter leisure activities and ski resorts;

·

the leases and permits for property underlying certain of our ski resorts;

·

ability to integrate new acquisitions;

·

environmental laws and regulations;

·

our dependence on key personnel;

·

the effect of declining revenues on margins;

·

the future development and continued success of our Mount Snow and Hunter Mountain ski resorts;

·

our reliance on information technology;

·

our current dependence on our primary lender and the lender's option to purchase certain of our ski resorts;

·

our dependence on a seasonal workforce;

·

our ability to avoid or recover from cyber and other security breaches and other disruptions; and

·

the securities markets.

You should also refer to Part I, Item 1A, “Risk Factors”, of this Form 10-K for a discussion of factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements, As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-K will prove to be accurate, Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material, In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.













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PART I



Item 1. Business.



General

Peak Resorts, Inc. was incorporated in Missouri on September 24, 1997 as a holding company to own or lease and operate day ski and overnight drive ski resorts through its wholly owned subsidiaries. Throughout the history of the Company, including the development of the Hidden Valley and Snow Creek ski resorts before the incorporation of Peak Resorts, Inc., the Company has acquired or developed a total of 14 ski resorts. In this annual report, Peak Resorts, Inc., together with its subsidiaries, is referred to as “we,” “us,” “our” or the “Company.”

On November 20, 2014, we completed our initial public offering of our common stock, selling 10 million shares at $9.00 per share. After deducting $6.3 million of underwriting discounts and commissions and $1.4 million of offering expenses payable by us, we received net proceeds of $82.3 million. Our common stock is traded on the NASDAQ Global Market under the symbol “SKIS”.

We are a leading owner and operator of high-quality, individually branded ski resorts in the U.S.  We currently operate 14 ski resorts primarily located in the Northeast and Midwest, 13 of which we own. The majority of our resorts are located within 100 miles of major metropolitan markets, including New York City, Boston, Philadelphia, Cleveland and St. Louis, enabling day and overnight drive accessibility. Our resorts are comprised of nearly 1,860 acres of skiable terrain that appeal to a wide range of ages and abilities. We offer a breadth of activities, services and amenities, including skiing, snowboarding, terrain parks, tubing, dining, lodging, equipment rentals and sales, ski and snowboard instruction and mountain biking, zip tours and other summer activities. We believe that both the day and overnight drive segments of the ski industry are appealing given their stable revenue base, high margins and attractive risk-adjusted returns. We have successfully acquired and integrated 11 ski resorts since our incorporation in 1997, and we expect to continue executing this strategy.



We have built an award-winning portfolio of individually branded entertainment properties, most of which are recognized as leading ski resorts in their respective markets. Our devotion to maintaining high quality standards across our portfolio through strategic investments and upgrades has created a loyal customer base that contributes to a significant number of repeat visits at each of our resorts. In particular, our investment over the last decade in the latest high-efficiency snowmaking equipment has earned us the reputation as an industry leader in snowmaking efficiency, capacity and quality. Our strong branding reinforces customer loyalty and serves to attract new visitors through focused marketing campaigns and word of mouth.



Combined, our ski resorts generated approximately 1.7 million visits in the 2016/2017 ski season.  Despite unfavorable weather during the 2016/2017 ski season, we recorded record revenue of $123.2 million for fiscal 2017, an increase of 28.7% over fiscal 2016.  Revenue for fiscal 2017 was up from the prior year due to growth in visits and season pass sales, as well as the contribution of a full year of revenues from Hunter Mountain, which we acquired in January 2016. As the U.S. economy continues to improve, our resorts are well-positioned to benefit from increased consumer spending on leisure activities, and we expect to continue to increase our lift ticket prices and drive more skier visits to our resorts.

The U.S. ski industry is highly fragmented, with less than 15% of the 479 ski resorts being owned by companies with four or more ski resorts. We believe that our proven ability to efficiently operate multiple resorts as well as our track record of successful acquisitions has created our reputation in the marketplace as a preferred buyer. We believe that our extensive experience in acquiring ski resorts and investing in snowmaking, lifts and other skier services, as well as the synergies we create by operating multiple resorts, drives increased revenues and profitability. Our capabilities serve as a competitive advantage in sourcing and executing investment opportunities as sellers will often provide us a "first look" at opportunities outside of a broader marketing process, allowing us to expand both within our existing markets and into new markets.

We operate in a single business segment—resort operations. We are not dependent on any single customer, the loss of which would have a material impact on our financial statements, and we derive no revenue from foreign sources.



Our Resorts

Our 14 ski resorts consist of six overnight drive ski resorts and eight day ski resorts located across seven states, ranging from Missouri to New Hampshire, and appeal to a wide range of visitors. All of our ski resorts employ high-capacity

5

 


 

snowmaking capabilities on over 90% of their terrain as well as food and beverage, equipment rental and retail outlets. All of our properties offer alternative snow activities, such as terrain parks and tubing, in addition to skiing and snowboarding. The diversity of our services and amenities allows us to capture a larger proportion of customer spending as well as ensure product and service quality at our resorts.

New for the 2016/2017 ski season, the Company introduced the Peak Pass, a new season pass which features a total of six pass options valid at seven different mountain locations across four states in the Northeast. Participating resorts include Mount Snow in Vermont; Attitash, Wildcat and Crotched Mountains in New Hampshire; Hunter Mountain in New York; and Jack Frost and Big Boulder in Pennsylvania.  The Company believes the variety of each resort's on-mountain experience, as well as the proximity of these resorts, makes the Peak Pass a unique and affordable product for the vast majority of skiers and riders in the Northeastern U.S.

The following table summarizes key statistics relating to each of our resorts as of April 30, 2017:



 

 

 

 

 

 

 

 

 

 

Property

State

Developed/ Acquired

Nearest Metro MSA

Population Base (millions)

Skiable Acres

Total Lifts

Vertical Drop

(ft.)

Hidden Valley

MO

1982 

St Louis

3.9  60  310 

Snow Creek

MO

1985 

Kansas City

2.9  40  300 

Paoli Peaks

IN

1997 

Louisville, Nashville

3.0  65  300 

Mad River*

OH

2001 

Columbus, Dayton

2.8  60  12  300 

Boston Mills

OH

2002 

Cleveland, Akron, Canton

7.1  40  264 

Brandywine

OH

2002 

**

**

48  10  264 

Crotched Mountain

NH

2003 

Boston

13.9  105  1,000 

Jack Frost

PA

2005 

Philadelphia, New York City

27.3  80  12  600 

Big Boulder

PA

2005 

***

***

65  11  475 

Attitash

NH

2007 

Boston

13.9  307  11  1,750 

Mount Snow

VT

2007 

New York City, Boston, Albany

27.4  490  20  1,700 

Wildcat Mountain

NH

2010 

Boston

13.9  225  2,112 

Alpine Valley

OH

2012 

Cleveland, Akron, Canton

7.1  54  260 

Hunter Mountain

NY

2016 

New York City, Boston, Albany

27.4  220 

                12

              1,600



* Leased property
** Marketed with Boston Mills
*** Marketed with Jack Frost



We operate portions or all of certain of our resorts pursuant to lease agreements with third parties or pursuant to Forest Service Special Use Permits with the federal government.  We own the remaining land underlying our resorts. For a description of our ownership and use of the land underlying our resorts, see Item 2, “Properties” of this annual report.

In December 2011, we acquired the Jack Frost ski resort through the purchase of the assets of Blue Ridge Real Estate Company for $5.65 million. Also in December 2011, we purchased the assets of Big Boulder Corporation to acquire the Big Boulder ski resort, for total consideration of $3.35 million. Prior to that time, we had operated these resorts pursuant to leases since 2005.

In October 2012, we purchased the outstanding common stock of Sycamore Lake, Inc. (doing business as Alpine Valley Ski Area in Cleveland, Ohio) for $2.6 million. This acquisition enables us to employ pricing strategies and cost synergies with Boston Mills and Brandywine, our other two Cleveland resorts.

On January 6, 2016, we completed the acquisition of the Hunter Mountain ski resort located in Hunter, New York, through the purchase of all of the outstanding stock of each of Hunter Mountain Ski Bowl, Inc., Hunter Mountain Festivals, Ltd., Hunter Mountain Rentals, Inc., Hunter Resort Vacations, Inc., Hunter Mountain Base Lodge, Inc., and Frosty Land, Inc. (collectively, “Hunter Mountain”) pursuant to the terms of the Stock Purchase Agreement (the “Hunter Mountain Purchase Agreement”) with Paul Slutzky, Charles B. Slutzky, David Slutzky, Gary Slutzky and Carol Slutzky-Tenerowicz entered into on November 30, 2015.  The Company acquired Hunter Mountain for total cash consideration of $35.0 million plus the assumption of two capital leases estimated at approximately $1.7 million.

A portion of the Hunter Mountain acquisition price was financed pursuant to the Master Credit and Security Agreement (the “Hunter Mountain Credit Agreement”) entered into between the Company and EPR Properties, the Company’s primary lender (“EPR”), on January 6, 2016. The remainder was financed with funds drawn on the Company’s line of credit with Royal Banks of Missouri pursuant to the Credit Facility, Loan and Security Agreement (the “Line of Credit Agreement”) between the Company and Royal Banks of Missouri, effective as of December 22, 2015. See Part II, Item

6

 


 

7A,“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Significant Sources of Cash” for additional information.

Private Placement and Financings

At the beginning of fiscal 2017, the Company experienced lower than normal liquidity levels. The unfavorably warm weather during the 2015/2016 ski season resulted in fewer ski days and lower profitability for the Company. Furthermore, the Company experienced unexpected delays in the release of funds raised pursuant to the U.S. government’s Immigrant Investor Program (the “EB-5 Program”), as more fully discussed in Part II, Item 7A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources – Significant Uses of Cash,” to finance the development of two capital projects at our Mount Snow resort—the West Lake Water Project and the Carinthia Ski Lodge Project. We raised $52.0 million for the Mount Snow development projects, which was sitting in escrow pending the approval of the first program investor’s I-526 Petition, as defined herein, at the beginning of fiscal 2017.

Based on the timeline originally anticipated for approval of the first investor’s I-526 Petition and corresponding release of EB-5 Program funds from escrow, we commenced construction of the West Lake Water Project in the second half of calendar year 2015. Through the second quarter of fiscal 2017, we had funded approximately $15.0 million of the West Lake Water Project costs, for which we were reimbursed in full once the EB-5 Program funds were released from escrow in December 2016.

Due to our constrained liquidity position and delay in the release of EB-5 Program funds, the Company took a number of steps in fiscal 2017 to manage cash flow and improve the Company’s liquidity position. The Company borrowed additional funds for working capital and received significant capital in connection with a private placement, as discussed in more detail below. See Part II, Item 7A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Significant Sources of Cash” for additional information regarding the Company’s additional borrowings during fiscal 2017.

On August 22, 2016, the Company entered into the securities purchase agreement (the “Securities Purchase Agreement”) with CAP 1 LLC (the “Investor”) in connection with the sale and issuance (the “Private Placement”) of $20 million in Series A Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and three warrants (the “Warrants”) to purchase shares of the Company’s common stock, as follows: (i) 1,538,462 shares of common stock at $6.50 per share; (ii) 625,000 shares of common stock at $8.00 per share; and (iii) 555,556 shares of common stock at $9.00 per share. In order to close the Private Placement, the Company’s stockholders were required to approve amendments to the Company’s amended and restated articles of incorporation to provide for an increase in the number of authorized shares of common stock and authorize the creation of preferred stock. Pursuant to applicable rules of The Nasdaq Stock Market, the Company’s stockholders were also required to approve the issuance of the Series A Preferred Stock and the Warrants, as well as the issuance of shares of common stock upon the conversion of the Series A Preferred Stock and exercise of the Warrants pursuant to the terms of the Private Placement. The Company’s stockholders approved these matters on October 24, 2016 at the Company’s 2016 Annual Meeting of Stockholders. On November 2, 2016, the Company completed the sale and issuance of the Series A Preferred Stock and the Warrants to the Investor in the Private Placement. 

The Securities Purchase Agreement grants to the Company the right to require the Investor to purchase an additional 20,000 shares of Series A Preferred Stock for $1,000 per share, along with additional warrants, all on the same terms and conditions as the Private Placement, as long as (i) there is no material adverse effect; (ii) the average closing price of the common stock for the ten trading days prior to the execution of the documents for such additional shares is not less than the average closing price of the common stock for the ten trading days prior to the execution of the Securities Purchase Agreement; (iii) the Investor is reasonably satisfied with the manner in which the Company intends to use the net cash proceeds of such issuance; and (iv) the Company has successfully implemented an EB-5 Program with respect to Mount Snow and one investor’s application has been approved.  The Company’s right to require the additional purchase expires two years from the closing of the Private Placement.

The terms of the Series A Preferred Stock are set forth in the Certificate of Designation filed by the Company with the Missouri Secretary of State on October 26, 2016. The key terms of the Series A Preferred Stock are as follows:

·

$1,000 per share liquidation value (the “Liquidation Value”);

·

Convertible upon a change of control, or after nine months, into a number of shares of common stock equal to the number of shares to be converted times the Liquidation Value, divided by $6.29 (the “Conversion Price”);

·

Initial nine-month, dividend-free period with a subsequent cumulative dividend of 8.0% per annum on the Liquidation Value;

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·

Redeemable by the Company after three years at 125% of the Liquidation Value, plus accrued and unpaid dividends if the common stock trades at more than 130% of the Conversion Price for a 30-day period;

·

Senior as to dividends, liquidation and redemption, with limitations on the Company’s ability to issue convertible debt and senior securities; and

·

Voting rights on an as-converted basis with holders of outstanding shares of common stock, voting together as a single class, with respect to any and all matters presented to the stockholders of the Company.

The terms of the Warrants issued in the Private Placement are all identical except for the number of shares for which the Warrants are exercisable and the exercise prices of each of the Warrants. Each of the Warrants may be exercised in whole or in part at any time for a period of 12 years from the date of issuance. The exercise price must be paid in cash. The exercise price of the Warrants and the number of shares of common stock issuable upon exercise of the Warrants are subject to adjustment in the event of a stock split, stock dividend, reorganization, reclassification, consolidation, merger, sale and similar transaction.

Concurrently with the closing of the Private Placement, the Company entered into the Registration Rights Agreement with the Investor providing the Investor with certain on-demand and piggy-back registration rights with respect to the common stock issuable upon conversion of the Series A Preferred Stock and exercise of the Warrants. In addition, the Company, management stockholders and the Investor executed the Stockholders’ Agreement upon the Private Placement closing, generally granting the Investor pre-emptive rights, rights of first offer, director nomination rights and approval rights over certain changes in the Company’s business and certain acquisitions and divestitures.

The Company used approximately $5.5 million of the proceeds from the offering to pay down a portion of its outstanding debt. The remainder is intended to be used for working capital purposes.

On November 2, 2016, the board of directors appointed Rory A. Held to serve as a director of the Company upon the nomination of the Investor pursuant to the terms of the Stockholders’ Agreement and the recommendation of the Nominating and Corporate Governance Committee.

Capital Improvement Projects

As part of our mission to build value by investing in our current properties through expansions, new products, and amenities that will elevate our customers’ skiing and off-season experiences, we recently announced our intent to undertake two new capital improvement projects. We intend to apply for construction permits at Hunter Mountain to increase the resort’s skiable acreage by approximately 25-30%. The new area will feature a parking area and a detachable high speed chair lift and will consist of predominantly intermediate terrain. We are working to complete the project in time for the 2018/2019 ski season.

We also intend to apply for a permit to construct a zip tour at Hidden Valley in an effort to leverage underutilized capacity in the spring, summer and fall to generate additional sales and diversify Hidden Valley’s revenue base.  Our goal is to complete the project for use beginning in the fall of 2018.

Upon release of the EB-5 Program funds from escrow, as described above, we continued construction on the West Lake Water Project and Carinthia Ski Lodge Project at Mount Snow. The West Lake Water Project, expected to be completed prior to the 2017/2018 ski season, includes the construction of a new water storage reservoir for snowmaking with capacity of up to 120 million gallons, three new pump houses and the installation of snowmaking pipelines, trail upgrades and expansion, new ski lift and ancillary equipment. The Carinthia Ski Lodge Project, expected to be completed prior to the 2018/2019 ski season, includes the construction of Carinthia Ski Lodge, a new three-story, approximately 36,000-square foot skier service building located at the base of the Carinthia slopes. Carinthia Ski Lodge will include a restaurant, cafeteria and bars with seating for over 600 people, a retail store, convenience store and sales center for lift tickets and rentals.



Debt Restructure

On November 10, 2014, in connection with our initial public offering, we entered into a Restructure Agreement (the “Restructure Agreement”) with certain affiliates of EPR, providing for the (i) prepayment of approximately $75.8 million of formerly non-prepayable debt secured by the Crotched Mountain, Attitash, Paoli Peaks, Hidden Valley and Snow Creek resorts and (ii) retirement of one of the notes associated with the future development of Mount Snow (the “Debt Restructure”). On December 1, 2014, we entered into various agreements in order to effectuate the Debt Restructure, as more fully described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on December 5, 2014.  Pursuant to the Debt Restructure, we paid a defeasance fee of $5 million to EPR in addition to the consideration described below.

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In exchange for the prepayment right, we granted EPR a purchase option on the Boston Mills, Brandywine, Jack Frost, Big Boulder and Alpine Valley properties, subject to certain conditions.  If EPR exercises a purchase option, EPR will enter into an agreement with the Company for the lease of each such acquired property for an initial term of 20 years, plus options to extend the lease for two additional periods of ten years each. All previously existing option agreements between the Company and EPR were terminated.

Additionally, we agreed to extend the maturity dates on all non-prepayable notes and mortgages secured by the Mount Snow, Boston Mills, Brandywine, Jack Frost, Big Boulder and Alpine Valley properties remaining after the Debt Restructure by seven years to December 1, 2034, and to extend the lease for the Mad River property, previously terminating in 2026, until December 31, 2034.

We also granted EPR a right of first refusal to provide all or a portion of the financing associated with any purchase, ground lease, sale/leaseback, management or financing transaction contemplated by the Company with respect to any new or existing ski resort property for a period of seven years or until financing provided by EPR for such transactions equals or exceeds $250 million in the aggregate. Proposed financings from certain types of institutional lenders providing a loan to value ratio of less than 60% (as relates to the applicable property being financed) are excluded from the right of first refusal. We granted EPR a separate right of first refusal in the event that the Company wishes to sell, transfer, convey or otherwise dispose of any or all of the Attitash ski resort for seven years.  The Attitash right excludes the financing or mortgaging of Attitash.

In connection with the Debt Restructure, we entered into a Master Credit and Security Agreement with EPR containing additional terms and conditions governing our restructure debt with EPR, including restrictions on certain transactions and the payment of dividends and required financial covenants.    See Part II, Item 7A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Significant Sources of Cash” for additional information regarding the Company’s debt agreements in general and modifications to the Master Credit and Security Agreement.



Ski Industry

        The National Ski Areas Association (“NSAA”) Kottke National End of Season Survey (Preliminary Report) estimated the U.S. ski industry had approximately 54.7 million skier visits in the 2016/2017 ski season. The U.S. ski industry reported total skier visits of 52.8 million in the 2015/2016 ski season.  The NSAA Kottke National End of Season Survey (Preliminary Report) also reported that there were 479 ski resorts operating during the 2016/2017 ski season in the U.S. Given the consistency and strength of annual skier visits over the last 30 years as well as the state of the recovering economy, we believe that skier participation will remain strong in the coming years.

        The ski industry divides ski resorts into three distinct categories: overnight fly, overnight drive and day ski resorts. Overnight fly ski resorts are defined as ski resorts which primarily serve skiers who fly or drive considerable distances and stay for multiple nights. These resorts depend, in large part, on long-distance travel by their visitors and on the development of adjacent real estate for housing, hospitality and retail uses. Overnight drive ski resorts are ski resorts which primarily serve skiers from the regional drive market who stay overnight. Day ski resorts are typically located within 50 miles of a major metropolitan statistical area (“MSA”) and do not generally offer dedicated lodging.

        Day and overnight drive ski resorts tend to be smaller in size and are usually located near metropolitan areas. As an owner and operator of primarily day and overnight drive ski resorts, we focus on selling lift tickets, renting ski equipment, selling ski lessons, offering food and beverage services and catering to the targeted local market. We target skiers of all levels from beginners who are skiing for the first time to intermediate and advanced skiers who are honing their skills.

        An important statistic used to gauge the performance of companies operating within the ski industry is revenue per skier visit. The revenue per skier visit of our resorts for the 2007/2008 ski season (the first season subsequent to the Mount Snow and Attitash acquisitions) to the 2015/2016 ski season (the most current ski season for which data is available) increased at a compounded annual growth rate of 5.6% compared to an increase of 4.0% for the U.S. ski industry for the same period. Revenue per skier visit is calculated as total resort revenue divided by skier visits. 

        The ski industry statistics stated in the foregoing sections have been derived from data published by the Kottke National End of Season Survey 2015/2016 and other industry publications, including those of the NSAA. 

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Revenue Components

We, like other day ski resorts and overnight drive ski resorts operators, earn our revenues in seven principal categories. In order of their contribution, they are: (i) lift and tubing tickets; (ii) food and beverage sales; (iii) equipment rentals; (iv) ski instruction; (v) hotel/lodging; (vi) retail; and (vii) summer activities. Each revenue center is discussed in more detail below:









 

 

 

 

 

 

 

 

 



 

Year ended April 30,



 

 

2017

 

 

2016

 

 

2015



 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

  Lift and tubing tickets

$

58,100 

 

$

45,541 

 

$

50,821 

  Food and beverage

 

23,078 

 

 

15,816 

 

 

18,927 

  Equipment rental

 

8,582 

 

 

7,036 

 

 

8,017 

  Ski instruction

 

8,562 

 

 

6,580 

 

 

7,242 

  Hotel/lodging

 

9,731 

 

 

7,972 

 

 

7,623 

  Retail

 

6,196 

 

 

4,560 

 

 

5,261 

  Summer activities

 

4,748 

 

 

4,302 

 

 

3,671 

  Other

 

4,252 

 

 

3,922 

 

 

3,296 



 

$

123,249 

 

$

95,729 

 

$

104,858 







·

Lift and Tubing Tickets— Lift tickets are our most important source of operating revenues. We place heavy emphasis on sales of season passes and advance group ticket sales to schools, religious organizations and other social groups at a discount. We market our season passes and advance group ticket sales to our ski visitors and the communities we serve. The cost of lift tickets at each of our resorts varies according to geographic region, session time and day of the week.

·

Food and Beverage—Our facilities generally employ cafeteria-style and self-service options to provide a limited menu of simple foods, liquor, beer and wine. We try to maximize revenues and simplify operations by focusing on a limited menu that requires minimal special preparation and related personnel costs.

·

Equipment Rentals— Day ski resorts generally attain a higher percentage of rental revenue than overnight fly destination ski resorts and overnight drive ski resorts because a large majority of day ski resort skiers are novices, who typically do not own ski equipment. Equipment rental rates generally range between $30 and $41 per person per session. We have focused on improving our equipment rental facilities to provide quick access to new and high quality equipment, self-service options with expert advice and fitting available, and immediate access to the lifts and ski instruction areas from the rental facility. By eliminating the equipment rental bottleneck, we believe that we have significantly enhanced the skiers' resort experience, which corresponds to increased rental revenues.

·

Ski Instruction— Ski instruction is considered important to operations because of the large numbers of novice or early intermediate skiers who typically visit day ski resorts. We offer low group lesson prices to encourage participation, which range from $15 and $49 per person per lesson. Individual instructions and private lessons may range from $45 to $105 or more per lesson.

·

Hotel/Lodging— Because we primarily operate day ski resorts, not all of our resorts offer hotel or other lodging services. Our hotel/lodging revenue is comprised of the revenue generated by the lodging facilities at our Attitash, Hunter Mountain and Mount Snow ski resorts. Each has a  hotel on their properties, in which individuals have purchased 100% of all available quartershare interval interests, while we retain ownership of common areas of the hotel and commercial properties. We derive a revenue stream from operating the hotels' retail, restaurant and conference facilities, fees for spa and health club services at the hotels and fees for housekeeping and other related services, and from renting quartershare interval interests when not in use by their owners. We also manage certain condominiums located near the Mount Snow ski resort and receive a portion of the rental fees and property management fees relating to these condominiums. Finally, we own 100% of the Snow Lake Lodge at Mount Snow, which we operate as a traditional hotel.

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·

Retail— Like ski instruction services, retail also represents a relatively small percentage of our total revenues. Some of our resorts offer a selection of more substantial ski-related equipment, such as boots, skis and snowsuits, while others maintain only a minimal selection of smaller items, such as gloves and goggles. Merchandise selection and pricing decisions must be made in light of the local demographic conditions. To facilitate this level of detailed management, local ski resort employees oversee their merchandise operations as they see fit for their markets. We also lease merchandise operations to third-party merchants at Boston Mills, Brandywine and Paoli Peaks.

·

Summer Activities— Although the majority of our resorts do not have material operations during the summer months, we do operate several resorts during the summer.  Activities include zip tours, water parks, mountain coasters, horseback riding, conferences, camps, and festivals.

Seasonality



The Company's revenues are highly seasonal in nature. The vast majority of reported revenues are generated during the ski season, which occurs during the third and fourth fiscal quarters.  In an effort to partially counterbalance the concentration of revenue during the winter months, some of our properties offer non-ski attractions, such as golf, roller coasters, swimming, summer concerts and zip rides, but these activities do not comprise a substantial portion of our annual revenues.   Our resorts typically experience operating losses and negative cash flows during the first and second quarters of each fiscal year, as a result of the seasonality of our business.

Additionally, operations on certain holidays contribute significantly to the Company's revenues, most notably Christmas, Dr. Martin Luther King, Jr. Day and Presidents Day. The seasonality of the Company's revenues amplifies the effect on the Company's revenues, operating earnings and cash flows of events that are outside the Company's control. While the Company's geographically diverse operating locations help mitigate its effects, adverse weather conditions could limit customer access to the Company's resorts, render snowmaking wholly or partially ineffective in maintaining ski conditions, cause increased energy use and other operating costs related to snowmaking efforts and, in general, can result in decreased skier visits regardless of ski conditions.

The opening and closing dates of our ski resorts are dependent upon weather conditions, but our peak ski season generally runs from early December to mid-April.  The weather impact during the current ski season resulted in every resort except one having an earlier opening date compared to the prior ski season. The following tables illustrate the opening and closing dates for the 2012/2013 through 2016/2017 ski seasons for our 14 ski resorts:

-

 

 

 

 

 

 

 

 

 

 

Ski Resort

 

2012/2013
Open Dates

 

2013/2014
Open Dates

 

2014/2015
Open Dates

 

2015/2016
Open Dates

 

2016/2017
Open Dates

Attitash

 

Dec 7 - Apr 11

 

Dec 7 - Apr 6

 

Dec 6 - Apr 5

 

Dec 26 - Mar 27

 

Dec 26 - Apr 20

Alpine Valley

 

Dec 30 - Mar 3

 

Dec 28 - Mar 16

 

Dec 30 - Mar 22

 

Jan 3 - Mar 6

 

Dec 11 - Mar 17

Big Boulder

 

Nov 28 - Apr 20

 

Nov 14 - Apr 6

 

Nov 20 - Apr 19

 

Jan 2 - Mar 27

 

Nov 25 - Apr 9

Boston Mills

 

Dec 28 - Mar 10

 

Nov 29 - Mar 16

 

Jan 1 - Mar 22

 

Jan 4 - Mar 8

 

Dec 16 - Mar 19

Brandywine

 

Dec 29 - Mar 30

 

Dec 14 - Mar 16

 

Jan 2 - Apr 1

 

Jan 5 - Mar 11

 

Dec 16 - Mar 5

Crotched Mountain

 

Dec 1 - Apr 7

 

Nov 30 - Mar 30

 

Nov 28 - Apr 5

 

Dec 29 - Mar 20

 

Dec 10 - Apr 9

Hidden Valley

 

Dec 23 - Mar 17

 

Dec 14 - Mar 15

 

Jan 2 - Mar 8

 

Jan 10 - Mar 6

 

Dec 10 - Feb 20

Hunter Mountain (1)

 

 

 

 

Dec 13 - Mar 27

 

Nov 25 - Apr 9

Jack Frost

 

Dec 22 - Mar 31

 

Dec 7 - Mar 23

 

Dec 12 - Mar 29

 

Dec 26 - Mar 13

 

Dec 10 - Mar 19

Mad River

 

Dec 23 - Mar 17

 

Nov 30 - Mar 16

 

Dec 20 - Mar 22

 

Jan 2 - Mar 8

 

Dec 16 - Mar 19

Mount Snow

 

Nov 22 - Apr 21

 

Nov 15 - Apr 13

 

Nov 21 - Apr 19

 

Nov 26 - Apr 3

 

Nov 23 - Apr 16

Paoli Peaks

 

Dec 23 - Mar 10

 

Dec 14 - Mar 9

 

Dec 31 - Mar 8

 

Jan 4 - Mar 6

 

Dec 16 - Feb 20

Snow Creek

 

Dec 22 - Mar 17

 

Dec 14 - Mar 9

 

Dec 31 - Mar 8

 

Dec 31 - Mar 6

 

Dec 16 - Mar 5

Wildcat Mountain

 

Nov 22 - Apr 21

 

Nov 28 - Apr 27

 

Nov 9 - Apr 30

 

Nov 26 - Apr 24

 

Nov 24 - Apr 29




(1) Data for Hunter Mountain is included beginning in the 2015/2016 ski season, as we acquired the ski resort in January 2016.





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Marketing

We promote our resorts through both on-site marketing and external marketing. We encourage visitors to return to our resorts by offering complimentary skier orientations at our resorts. We also have marketing programs in place directed at attracting groups, such as religious organizations, social clubs, corporate entities, schools and civic organizations, and we offer discounts to active military personnel. We believe that these group discounts encourage new participants to try snow sports. Student passes are also sold through schools, and season passes are promoted through targeted direct mail marketing, the internet and local sporting goods stores.

Each of our resorts also maximizes community awareness through radio, special events and promotions and “free media” advertising, when possible. We host charity events and tournaments, issue media passes and encourage live radio and television broadcasts for segments such as weather or sports. For example, events we have hosted include the following: Dew Tour, X-Games, Tough Mudder, SAM Cutters Camp, Transworld Trans-am Snowboard Event, Mountain Dew Vertical Challenge, NCAA National Downhill Championships, Special Olympics Games, Military Salutes, Taste of Country Music Festival, and U.S. National Mountain Biking Championships.

Competition 

        We believe that there are high barriers to entry for new ski resorts due to the limited private lands on which ski resorts can be developed, the difficulty in getting the necessary government approvals and permits to build on public land and the substantial capital resources needed to construct the required ski infrastructure. As such, we believe that the risk that our market will become saturated with new industry participants is relatively low. We believe that our resorts do not directly compete with overnight fly destination ski resorts, such as the larger ski resorts in Colorado, California, Nevada, Utah and other destination ski resorts worldwide. Rather, we believe that we compete primarily with other existing day ski resorts, overnight drive ski resorts and non-ski related day vacations. 

        Our competition varies by geographical area. While we believe that our Midwestern ski resorts face only limited competition within their relative metropolitan markets, we are not the only day ski resorts or overnight drive ski resorts in our Northeastern and Southeastern markets (as defined by the NSAA). We compete with approximately 146 resorts in the Northeastern market and 46 resorts in the Southeastern market.

Competitive Strengths

        We believe our strengths are as follows:

We own a high-quality branded portfolio.  We own 13 and operate 14 high-quality ski resorts, each of which is individually branded and recognized to be a leading ski resort in its respective regional market. Our devotion to maintaining high quality standards through strategic investments and upgrades has created a loyal customer base at each of our resorts. Our strong branding reinforces customer loyalty and serves to attract new guests through focused marketing campaigns and word of mouth.



We have a history of investing in targeted capital projects to increase profitability.  We are continuously evaluating our property-level performance and are committed to increasing our profitability. Many ski resort operators are unwilling to invest in improvements due to capital constraints and the perceived risk of such investments. Since 2008, we have invested $68.9 million throughout our portfolio in an effort to improve the profitability of our ski resorts through energy-efficient snowmaking machinery, high-speed/high-capacity lifts and additional features such as terrain parks and various other infrastructure investments. The costs of these improvements are significantly outweighed by the benefits realized, which include higher quality and less costly snow, shorter lift lines, terrain expansion and customer appreciation. We have found that the ability to transport customers up the mountain on high-speed chairlifts and to reduce lift lines not only attracts skiers and promotes a better skiing experience but also leads to higher restaurant and retail sales and increased customer satisfaction.



We are an experienced and successful acquirer and integrator.  We have grown our Company significantly since inception by acquiring strategically located ski resorts with the potential for increased revenue growth and margin expansion. We have successfully acquired and integrated 11 ski resorts since 1997. We adhere to a disciplined acquisition strategy by pursuing opportunities at attractive acquisition prices that can create additional value through operational improvements and efficiencies. After acquiring a ski resort, we implement a strategic repositioning program designed during the underwriting process and integrate the resort into our portfolio. We believe that our

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track record for acquiring and integrating ski resorts makes us an industry leader and gives us a competitive advantage over other buyers.



Our experienced senior management team is dedicated to providing a reliable and enjoyable ski experience.    Three of our senior executives have almost 60 years of combined experience owning, operating and acquiring ski resorts in the U.S. Since 1982, it has been our vision to offer a reliable and enjoyable skiing experience to our customers. As a result of this vision, our management team constantly strives to enhance and improve our snowmaking capabilities to ensure our ski resorts maintain high-quality snow throughout the season. In addition, our management team strives to provide our ski resorts with a full range of amenities to augment our customers' overall skiing experience.



Overnight drive and day ski resorts experience lower sensitivity to the economy.  We believe our portfolio provides more attractive risk-adjusted returns than overnight fly resorts due to the stability in our visits. Furthermore, we believe that customers are more likely to visit overnight drive and day ski resorts during an economic downturn as compared to other higher cost overnight fly ski resorts, resulting in less sensitivity to downturns in the economy. The revenue per skier visit of our resorts from the 2007/2008 ski season (the first season subsequent to the Mount Snow and Attitash acquisitions) to the 2015/2016 ski season (the most current ski season for which data is available) increased at a compounded annual growth rate of 5.6% compared to an increase of 4.0% for the U.S. ski industry for the same period. 

 

The ski industry possesses high barriers to entry.  A limited number of ski resorts have been developed in the past 30 years. Skiable land is scarce and demanding to develop due to the difficulty in aggregating suitable terrain, obtaining government permitting, resolving accessibility issues and addressing heightened environmental concerns. Operating a ski resort requires a high level of expertise and strict regulatory and environmental compliance. Additionally, many resorts have built significant customer loyalty and brand awareness over multiple generations, which can be difficult for a new entrant to overcome. These factors have contributed to the number of ski resorts decreasing 35%, from 735 in 1984 to 479 in 2017 as smaller, poorly capitalized resorts have been unable to compete effectively. With our large existing portfolio, proven capital investment strategy and strong customer loyalty, we believe our Company is competitively well-positioned.



Our ski resort portfolio is diverse.  Our portfolio of 14 ski resorts consists of six overnight drive ski resorts and eight day ski resorts located across seven states ranging from Missouri to New Hampshire. We believe that our portfolio mix enables us to reach a large customer base seeking high-quality ski resorts within driving distance of major metropolitan areas. Each of our ski resorts is located within reasonable drive times from major metropolitan areas such as New York City, Boston, Philadelphia, Cleveland and St. Louis, which we believe provides us with a consistent repeat customer base and increases our new customer outreach potential. We believe that the size and geographic diversity of our portfolio helps insulate the Company's financial performance against adverse economic and weather conditions.

 

We are a proven operator of ski resorts.  We have operated numerous ski resorts since our incorporation in 1997. Due to our extensive operating expertise, we believe we have a profitable and efficient platform that positions us to take advantage of growth initiatives and cost controls.



Management’s and stockholders’ interests are aligned.  Our management team owns approximately 16% of our outstanding shares. We believe that this substantial ownership position aligns the interest of our operating team with that of our new stockholders.

Intellectual Property

        We understand the importance to the sales and marketing of our resorts that a strong brand can maintain. Wildcat Mountain Ski AreaSM,  Mount Snow®, Boston Mills Ski ResortSM,  Hidden ValleySM,  Crotched Mountain Ski AreaSMAlpine Valley and Hunter MountainSM are trademarks, service marks and trade names owned by certain subsidiaries of Peak Resorts, Inc.   

Regulation and Legislation

       The 1986 Ski Area Permit Act and Master Development Plans

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        The 1986 Ski Area Permit Act (the "1986 Act") allows the Forest Service to grant Term Special Use Permits for the operation of ski resorts and construction of related facilities on National Forest lands. In addition, the permits granted to our ski resorts under the 1986 Act require a Master Development Plan for each ski resort that is granted a Special Use Permit. Of our 14 resorts, only portions of Attitash and Mount Snow and all of Wildcat Mountain operate under Special Use Permits. The ski-able terrain at our other resorts is located on land that we own or lease from non-government third parties.

        Each area of National Forest land is required by the National Forest Management Plan to develop and maintain a Land and Resource Management Plan, which establishes standards and guidelines for the Forest Service to follow and consider in reviewing and approving our proposed actions. Under the 1986 Act, the Forest Service has the right to review and approve the locations, design and construction of improvements in the permit area and many operational matters.

        The Special Use Permits expire as follows: Attitash ski resort—April 4, 2047; Mount Snow ski resort—April 4, 2047; and Wildcat Mountain ski resort—November 18, 2050. We intend to request a new Special Use Permit for each resort as provided by the Forest Service regulations and terms of each existing Special Use Permit. To our knowledge, the Forest Service has never refused to issue a new Special Use Permit to replace an existing Special Use Permit for a ski resort in operation at the time of expiration.

        Each Special Use Permit contains requirements and obligations on our part, including that we indemnify the Forest Service from third-party claims arising out of our operation under the Special Use Permit and that we comply with all applicable laws. We pay a fee to the Forest Service for the Special Use Permit which, pursuant to the terms of each Special Use Permit, could range from 1.5% to 4.0% of sales for services on Forest Service land. Historically we have paid fees ranging from 1.5% to 2.5% of sales for services on Forest Service land and do not expect that this will change in the near future. Included in the calculation are sales from lift tickets, season passes, ski instructions, food and beverages, equipment rental, merchandise, and other ancillary services.

        The Special Use Permits may be amended by mutual agreement between us and the Forest Service to change the applicable ski resort or permitted uses. The Forest Service may also modify the Special Use Permit to accommodate changes in plans or operations. Permit amendments must be consistent with the Forest Plan and are subject to the provisions of the National Environmental Policy Act ("NEPA").

        The Forest Service may also terminate a Special Use Permit if it determines that termination is required for specific compelling reasons. However, to our knowledge, no Special Use Permit has ever been terminated by the Forest Service without the consent of the operator.

        We must propose a Master Development Plan for all improvements that we intend to make on National Forest lands and submit such plans to the Forest Service for review and acceptance. Once the Forest Service accepts a Master Development Plan, individual projects contemplated by the Master Development Plan will only be approved by the Forest Service upon separate applications that meet the requirements set forth by the Forest Service, including the requirements contained in the Special Use Permit.

       National Environmental Policy Act

        Under NEPA, our major proposed actions on all National Forest land, such as the expansion of a ski resort or installation of new snowmaking equipment, must be assessed to determine the environmental impacts of such actions. Upon our application to the Forest Service to undertake major projects, the Forest Service must conduct an environmental study, which can impact the time it takes to complete a project. During these studies, the Forest Service is required to consider alternatives to proposed actions and the impacts that may be unavoidable. We may not get the Forest Service's approval to undertake a project or may be required to take alternative action, depending on the results of the environmental studies.

       Underground Storage Tank Regulations

        We have underground storage tanks ("USTs") on our ski resort properties in Ohio, New Hampshire, New York Pennsylvania and Vermont for the purpose of storing gasoline, fuel oil and propane that we use in the operation of our resorts, lodges and skier service buildings. The federal Solid Waste Disposal Act gives the Environmental Protection Agency ("EPA") the authority to regulate USTs. State UST programs that are at least as strict as the federal regulations and that have

14

 


 

been approved by the EPA govern the USTs in lieu of the federal regulations. The objectives of the state UST programs are to ensure that:

•USTs are properly constructed and designed in accordance with recognized industry standards;

•installations, repairs and removals are conducted and inspected by qualified and trained individuals;

•active USTs are properly operated and monitored for the release of substances; and

•upon closure, USTs are properly decommissioned and sites are assessed for contamination.

        We believe that the USTs at our facilities meet all state and federal construction and operation standards. Compliance with these UST regulations has not had a material impact on our capital expenditures, earnings or competitive position, and we do not expect it to have a material impact in the future.

Employees 

        We, together with our operating subsidiaries, currently employ approximately 600 year-round employees. During the height of our ski season, we employ approximately 6,200 seasonal employees. 

Availability of Information



Our principal executive offices are located at 17409 Hidden Valley Drive, Wildwood, Missouri 63025, telephone (844) 513-7325. We maintain a website at www.peakresorts.com. We make available on our website, free of charge, the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K as soon as practicable after we file these reports with the SEC. Reports filed with the SEC can be read or copied at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov).



Item 1A. Risk  Factors.

You should carefully read and consider the risks described below, together with all of the other information set forth in this annual report on Form 10-K. Our business, results of operations, financial condition, cash flows and the trading price of our common stock could be materially and adversely harmed by any of the following risks. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations.

Risks Related to the Company

         Our industry is sensitive to weakness in the economy, and we are subject to risks associated with the overall leisure industry.

        Weak economic conditions in the U.S. could have a material adverse effect on our industry. An economic downturn could reduce consumer spending on recreational activities such as those our resorts offer, resulting in decreased skier visits and consumer spending at our ski resorts. Such events could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. In addition, we may be unable to increase the price of our lift tickets, season passes or other offerings during an economic downturn despite our history of being successful in raising such prices under a variety of economic conditions.

         Our business is vulnerable to the risk of unseasonably warm weather conditions and skier perceptions of weather conditions.

        The ability to attract visitors to our resorts is influenced by weather conditions and by the number of cold weather days during the ski season. Unseasonably warm weather can adversely affect skier visits and our revenue and profits. For example, warm weather may result in inadequate natural snowfall and render snowmaking wholly or partially ineffective in maintaining quality skiing conditions. Also, the early season snow conditions and skier perceptions of early season snow conditions influence the momentum and success of the overall season. There is no way for us to predict future weather

15

 


 

patterns, including any such patterns caused by climate change, or the impact that weather patterns may have on our results of operations or visitation.

         Our business is highly seasonal and the occurrence of certain events during our peak times could have a negative effect on our revenues.

        Our resort operations are highly seasonal. Although the air temperatures and timing and amount of snowfall can influence the number and type of skier visits, the majority of the skier visits are from mid-December to early April. Accordingly, during the past two fiscal years, we generated, on average, 87.6 % of our revenues during the third and fourth fiscal quarters. In addition, throughout our peak quarters, we generate the highest revenues on weekends and during three major holiday periods: Christmas, Dr. Martin Luther King, Jr. Day and Presidents Day. During the 2016/2017 ski season, we generated 30.8% of our revenues on weekends and 23.9% of our revenues during these three major holiday periods. Our resorts typically experience operating losses and negative cash flows during the first and second quarters of each fiscal year, as a result of the seasonality of our business. Operating results for any three-month period are not indicative of the results that may be achieved for any subsequent quarter or for a full fiscal year.

        A high degree of seasonality in our revenues and our dependence on weekends and the three major ski holidays increases the impact of certain events on our operating results. Adverse weather conditions, equipment failures, and other developments of even moderate or limited duration occurring during these peak business periods could significantly reduce our revenues.

We may not be able to fully utilize our net operating loss carryforwards.

        We believe that uncertainty exists with respect to the future realization of the loss carryforwards as well as with respect to the amount of the loss carryforwards that will be available in future periods. To the extent available, we intend to use these net operating loss carryforwards to offset future taxable income associated with our operations. There can be no assurance that we will generate sufficient taxable income in the carryforward period to utilize any remaining loss carryforwards before they expire.

        In addition, Section 382 and related provisions of the Internal Revenue Code of 1986, as amended (the "Code"), contains rules that limit for U.S. federal income tax purposes the ability of a company that undergoes an "ownership change" to utilize its net operating losses and certain other tax attributes existing as of the date of such ownership change. Under these rules, such an ownership change is generally an increase in ownership by one or more "five percent shareholders," within the meaning of Section 382 of the Code, of more than 50% of a company's stock, directly or indirectly, within a rolling three-year period. In connection with our initial public offering in November 2014, a change of ownership in the Company occurred pursuant to the provisions of the Tax Reform Act of 1986. As a result, usage of our net operating loss carryforwards will be limited each year; however, we believe the full benefit of those carryforwards will be realized prior to their respective expiration dates.        

Variations in the timing of peak periods, holidays and weekends may affect the comparability of our results of operations.

        Depending on how peak periods, holidays and weekends fall on the calendar, in any given year we may have more or fewer peak periods, holidays and weekends in our third fiscal quarter compared to prior years, with a corresponding difference in our fourth fiscal quarter. These differences can result in material differences in our quarterly results of operations and affect the comparability of our results of operations.

         We compete with other leisure activities and ski resorts, which makes maintaining our customer base difficult.

        The skiing industry is highly competitive and capital intensive. Our ski resorts located in the Northeastern U.S., such as Hunter Mountain, Mount Snow, Attitash and Wildcat Mountain, and those located in the Southeastern U.S. (which includes Pennsylvania for purposes of ski industry statistics), such as Jack Frost and Big Boulder, compete against other ski resorts in their markets for both day and overnight drive skiers. Our competitive position depends on a number of factors, such as the quality and coverage of snowmaking operations, resort size, the attractiveness of terrain, lift ticket prices, prevailing weather conditions, the appeal of related services and resort reputation. Some of our competitors have stronger competitive positions in respect of one or more of these factors, which may adversely affect our ability to maintain or grow our customer base.

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        We believe that while our Midwestern U.S. ski resorts face only limited competition from other ski resorts in the area, our competitors in the Midwest primarily include other recreation resorts, including warm weather resorts and various alternative leisure activities. Our resorts in the Northeastern and Southeastern U.S. face similar competition, in addition to the competition outlined above. Our ability to maintain our levels of skier visits depends on, among other things, weather conditions, costs of lift tickets and related skier services relative to the costs of other leisure activities and our ability to attract people interested in recreational sports.

         Changes in consumer tastes and preferences may affect skier visits at our ski resorts.

        Our success depends on our ability to attract visitors to our ski resorts. Changes in consumer tastes and preferences, particularly those affecting the popularity of skiing, snowboarding and tubing, and other social and demographic trends could adversely affect the number of skier visits during a ski season. Furthermore, a reduction in average household income in some of the areas near our resorts, compared to historic levels, combined with the increasing cost of skiing, snowboarding and tubing, may make these activities unaffordable for a large percentage of that population. A significant decline in skier visits compared to historical levels would have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

         We may not be able to pay dividends on our common stock.

        We declared our first quarterly cash dividend on our common stock in January 2015 and continued to declare quarterly dividends through January 2016 at a quarterly rate of $0.1375 per share. The board made the decision in April 2016 that it would not be prudent to declare a dividend due to lower cash levels primarily caused by the delay in approval of our EB-5 Program, as well as the unseasonably warm weather during the 2015/2016 ski season which drove down revenue compared to the prior season.  Additionally debt covenant compliance restricted the Company from being able to declare dividends during a portion of fiscal 2017.  Though the board approved the reinstatement of the dividend in February 2017 at the lower quarterly rate of $0.07 per share, we cannot assure you that this dividend rate will be sustained or that we will continue to pay dividends in the future. The declaration and payment of future dividends to holders of our common stock will be at the sole discretion of our board of directors and will depend on many factors, including our actual results of operations, financial condition, capital requirements, contractual restrictions, restrictions in our debt agreements, economic conditions and other factors that could differ materially from our current expectations.

Furthermore, from and after the date that is nine months from the date of issuance, cumulative dividends shall accrue on the Series A Preferred Stock on a daily basis in arrears at the rate of 8% per annum on the liquidation value of $1,000 per share.  The Series A Preferred Stock held by the Investor was issued on November 2, 2016, and as such, the Investor will be due such cumulative dividends beginning August 2, 2017.  Pursuant to the terms of the Certificate of Designation of the Series A Preferred Stock, all accrued and accumulated dividends on the Series A Preferred Stock shall be paid prior and in preference to any cash dividend on our common stock. In addition, until the earlier of (i) such date as no Series A Preferred Stock remains outstanding and (ii) January 1, 2027, the Company is prohibited from paying any dividend on capital stock when there are accrued or unpaid dividends with respect to the Series A Preferred Stock.

The board may also suspend the payment of dividends on common stock at any time if it deems such action to be in the best interests of the Company and its stockholders. If we do not pay dividends, the price of our common stock must appreciate for investors to realize a gain on their investment. This appreciation may not occur and our stock may depreciate in value.

         Our ability to declare and pay dividends is dependent on cash flow generated by our subsidiaries because we are a holding company.

        We are a holding company with no operations. Our subsidiaries own most of the assets that will generate income. Therefore, our ability to declare and pay dividends is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, distribution or otherwise. Our subsidiaries may not be able or permitted to make distributions to enable us to make dividend payments in respect of our common stock. Each of our subsidiaries is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from them. In addition, any future financing or other arrangements that our subsidiaries enter into could limit their ability to make distributions to us. In addition, the Master Credit Agreement, as modified by the Modification Agreement, limits certain of our subsidiaries' ability to make distributions to us in the event of a default, or if the Company's

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Consolidated Fixed Charge Coverage Ratio falls below 1.25:1.00. In the event that we do not receive distributions from our subsidiaries, we may be unable to make dividend payments on our common stock.

         We may engage in acquisitions that could harm our business, operating results or financial condition.

        A key component of our business strategy is to identify and acquire properties that are complementary to our core business. We frequently evaluate potential acquisitions and intend to actively pursue acquisition opportunities, some of which could be significant.  We cannot make assurances that we will be able to successfully integrate and manage acquired properties and businesses and increase our profits from these operations.

The integration of acquired businesses may result in disruption to other parts of our business. In addition, the integration may require that we incur significant restructuring charges. To integrate acquired businesses, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the acquired operations. The difficulties of the integrations may be further complicated by such factors as geographic distances, lack of experience operating in the geographic market or industry sector of the acquired business, delays and challenges associated with integrating the business with our existing businesses, diversion of management's attention from daily operations of the business, potential loss of key employees and customers of the acquired business, the potential for deficiencies in internal controls at the acquired business, performance problems with the acquired business' technology, exposure to unanticipated liabilities of the acquired business, insufficient revenues to offset increased expenses associated with the acquisition, and our ability to achieve the growth prospects and synergies expected from any such acquisition. Even when an acquired business has already developed and marketed products and services, there can be no assurance that product or service enhancements will be made in a timely fashion or that all pre-acquisition due diligence will have identified all possible issues that might arise with respect to such acquired assets.

        Future acquisitions may also cause us to assume liabilities, record goodwill and intangible assets that will be subject to impairment testing and potential impairment charges, incur amortization expense related to certain intangible assets and increase our expenses and working capital requirements, which would reduce our return on invested capital. Failure to manage and successfully integrate the acquisitions we make could materially harm our business and operating results.

         We may be unsuccessful in identifying suitable acquisition candidates which may negatively impact our growth strategy.

        There can be no assurance given that we will be able to identify additional suitable acquisition candidates or consummate future acquisitions or strategic transactions on acceptable terms. Our failure to successfully identify additional suitable acquisition candidates or consummate future acquisitions or strategic transactions on acceptable terms could have an adverse effect on our prospects, business activities, cash flow, financial condition, results of operations and stock price.

If we experience any service interruptions, data corruption, cyber or other security breaches, our operations could be disrupted.



We rely on our information technology systems, which may be susceptible to damage, disruptions or shutdowns as a result of, for example, failures during the process of upgrading or replacing technology, power outages, hardware failures, computer viruses, computer hackers, telecommunication failures, user errors, or even catastrophic events.  If our information technology systems suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, our business maybe disrupted, resulting in an inability to operate the effected resorts.

We also possess sensitive customer and employee information and may provide such data to third parties for analysis, benefit distribution or compliance purposes. While we believe we have taken reasonable and appropriate steps to protect that information, hackers and data thieves operate sophisticated, large-scale attacks that could breach our information systems, despite ongoing security measures. Consequently, a security breach could result in unauthorized disclosure of confidential information.   In addition, we are required to comply with increasingly complex regulations designed to protect our business and personal data. 

Any breach of our network security, a third-party’s network security or failure to comply with applicable regulations may result in (a) the loss of valuable business data and/or our customers’ or employees’ personal information, (b) increased costs to implement additional protections and processes, (c) a disruption of our business and a loss of revenue, (d) damage to

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our relationships and reputation, and (e) fines or lawsuits.  In addition, the costs related to cyber or other security threats or breaches may not be fully insured or indemnified.

         We are subject to extensive environmental laws and regulations in the ordinary course of business.

        Our operations are subject to a variety of federal, state and local environmental laws and regulations, including those relating to emissions to the air; discharges to water; storage, treatment and disposal of wastes; land use; remediation of contaminated sites; and protection of natural resources such as wetlands. For example, future expansions of certain of our ski facilities must comply with applicable forest plans approved under the National Forest Management Act or local zoning requirements. In addition, most projects to improve, upgrade or expand our ski resorts are subject to environmental review under the National Environmental Policy Act. Both acts require that the U.S. Forest Service study any proposal for potential environmental impacts and include in its analysis various alternatives. Our ski resort improvement proposals may not be approved or may be approved with modifications that substantially increase the cost or decrease the desirability of implementing the project.

        Our facilities are subject to risks associated with mold and other indoor building contaminants. From time to time our operations are subject to inspections by environmental regulators or other regulatory agencies. We are also subject to worker health and safety requirements.

        We believe our operations are in substantial compliance with applicable material environmental, health and safety requirements. However, our efforts to comply do not eliminate the risk that we may be held liable, incur fines or be subject to claims for damages, and that the amount of any liability, fines, damages or remediation costs may be material for, among other things, the presence or release of regulated materials at, on or emanating from properties we now own or lease and operate, or formerly owned, leased or operated, newly discovered environmental impacts or contamination at or from any of our properties, or changes in environmental laws and regulations or their enforcement.

         The loss of our key executive officers could harm our business.

        Our success depends to a significant extent upon the performance and continued service of our key management team which includes Timothy Boyd, our President and principal executive officer, Stephen Mueller, our Vice President and principal financial officer, and Richard Deutsch, our Vice President in charge of business and real estate development. The loss of the services of this management team and the failure to develop and maintain an adequate succession plan could have a material adverse effect on our business and operations because of Messrs. Boyd's, Mueller's and Deutsch's specific and unique knowledge of acquiring and operating multiple ski resorts, including day ski resorts and overnight drive ski resorts.

         Failure to maintain the integrity of guest data could result in damage to our reputation and/or subject us to costs, fines or lawsuits.

        We collect personally identifiable information relating to our guests for various business purposes, including marketing and promotional purposes. The integrity and privacy of our guests’ information is important to us, and our guests have a high expectation that we will adequately protect their personal information. The regulatory environment governing privacy laws is increasingly demanding, and privacy laws continue to evolve and, on occasion, may be inconsistent from one jurisdiction to another. Maintaining compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our ability to market our products, properties and services to our guests. Furthermore, non-compliance with applicable privacy regulations by us (or in some circumstances non-compliance by third parties engaged by us), a breach of security on systems storing our guest data, a loss of guest data or fraudulent use of guest data could adversely impact our reputation or result in fines or other damages and litigation.

         We are subject to risks related to certain payment methods.

        We accept payments using a variety of methods, including credit cards, debit cards and gift cards. As we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We are also subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult for us to comply. As our business changes, we may also

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be subject to different rules under existing standards, which may require new assessments that involve costs above what we currently pay for compliance. While we are currently in compliance with all applicable rules and certification requirements, we may be subject to fines, higher transaction fees or loss of or restrictions on our ability to accept credit and debit card payments from customers if we are not in compliance with new rules and regulations or if the volume of fraud in our transactions rises to certain levels. If any of these events were to occur, our business, financial condition and operating results could be materially adversely affected.

         Our business requires significant capital expenditures to both maintain and improve our ski resorts and expand our business through acquisitions. The lack of available funds for these capital expenditures could have a material adverse effect on our operating strategy.

        Sustaining our successful financial performance depends, in part, on our ability to maintain and improve the quality of our facilities, products, and management resources (either directly or through third parties), which requires significant capital expenditures. Capital expenditures for fiscal 2017 were approximately $8.6 million. To the extent that we are unable to obtain the funds necessary to maintain and grow our business with cash generated from operating activities, or from borrowed funds or additional equity investments, our financial condition and results of operations could be affected. Although we believe that capital expenditures above maintenance levels can be deferred to address cash flow or other constraints, these expenditures cannot be deferred for extended periods without adversely affecting our competitive position and financial performance.

        Historically, a key element of our strategy has been attracting additional skiers through investment in on-mountain capital improvements. These improvements are capital intensive, and a lack of available funds for capital expenditures could have a material adverse effect on our ability to implement our operating strategy. We intend to finance resort capital improvements through internally generated funds and proceeds from the offering of debt and equity. There can be no assurance that sufficient funds will be available to fund these capital improvements or that these capital improvements will sustain our customer base, attract additional skiers or generate additional revenues.

        Future acquisitions may require additional debt or equity financing, which in the case of debt financing, will increase our leverage and, in the case of equity financing, would be dilutive to our existing stockholders. Any decline in our perceived credit-worthiness associated with an acquisition could adversely affect our ability to borrow and result in more restrictive borrowing terms. As a result of the foregoing, we also may not be able to complete acquisitions or strategic transactions in the future to the same extent as in the past, or at all. These and other factors could harm our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely affect our business, financial condition and results of operations.

         We are dependent on significant infrastructure and equipment.

        Our infrastructure and equipment, including snowmaking equipment and ski lifts, are costly to maintain, repair and replace and are susceptible to unscheduled maintenance. Much of our infrastructure and equipment will eventually need to be replaced or significantly repaired or modernized, which could result in interruptions to our business, particularly during our peak periods. In certain cases, the cost of infrastructure or equipment repair or replacement may not be justified by the revenues at the applicable resort.

         The high fixed cost structure of ski resort operations can result in significantly lower operating income if revenues decline.

        The cost structure of ski resort operations has a significant fixed component with variable expenses including, but not limited to, resort related fees, credit card fees, retail/rental cost of sales and labor, ski school labor and dining operations. Any material declines in the economy, elevated geopolitical uncertainties and/or significant changes in historical snowfall patterns, as well as other risk factors discussed herein, could adversely affect revenue. As such, our operating income, profits and cash flows may be materially reduced due to declines in revenue given our relatively high fixed cost structure. In addition, increases in wages and other labor costs, energy, healthcare, insurance, transportation, fuel, and other expenses included in our fixed cost structure may also reduce our margins, profits and cash flows.

         We generate a significant portion of our annual revenues from Mount Snow and Hunter Mountain. Conditions or events that could negatively impact Mount Snow or Hunter Mountain could have a material adverse effect on our financial condition and results of operations.

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        Revenue generated from Mount Snow and Hunter Mountain in fiscal 2017 represented approximately 55.1% of our total fiscal 2017 revenues. Mount Snow and Hunter Mountain, like our other resorts, are subject to various risks such as those described in this “Risk Factors” section, including natural disasters, changes in consumer leisure tastes, competition from other area ski resorts, decreased water supply and regional weather. The occurrence of such events or conditions that negatively impact Mount Snow and Hunter Mountain would have a material adverse effect on our financial condition and results of operations. 

        

Cancellation of or modifications to the Immigrant Investor Program, or our failure to successfully raise capital under the program's guidelines, could adversely affect our ability to execute our growth strategy and improve our resorts.

We intend to continue to fund our Mount Snow development by raising funds under the Immigrant Investor Program, referred to herein as the EB-5 Program, administered by the United States Citizenship and Immigration Services (“USCIS”) pursuant to the Immigration and Nationality Act, as more fully discussed herein. This program was created to stimulate the U.S. economy through the creation of jobs and capital investments in U.S. companies by foreign investors. Congress has allocated 10,000 immigrant visas (‘‘EB-5 Visas’’) per year to qualified individuals seeking lawful permanent resident status on the basis of their investment in a new commercial enterprise that generates jobs.

The majority of EB-5 investors, and therefore EB-5 Visa recipients, are from China.    Recently, the demand for the annual allocation of the EB-5 Visas has exceeded the supply, and nationals of China are now subject to lengthy waiting periods for such visas. These waiting periods could exceed five to ten years. Furthermore, raising funds pursuant to EB-5 Programs could become significantly more difficult if primary EB-5 investor markets in Asia are impacted by an economic downturn or military conflict, or if the United States government continues to subject EB-5 investor green card applicants to lengthy adjudications.

In addition, the EB-5 Program has been extended by Congress until September 30, 2017 for new programs. The continuity of the EB-5 Program is dependent on future action by lawmakers. For several years, the EB-5 Program has been extended for temporary periods only and not made permanent by Congress. Congress may continue to approve the EB-5 Program for only temporary periods and/or may materially modify aspects of the EB-5 Program that would make it unfeasible for the Company to rely on EB-5 financing for future development.

We cannot guarantee that we will be able to successfully raise additional sufficient funds under the EB-5 Program in order to implement future plans to improve our resorts. In this case, conventional financing options, such as loans, may prove too costly or may not be available, which could result in cancellation of our development and improvement plans and have a material adverse effect on our business.

         We lease all or some of the land underlying certain of our resorts from third parties.

        We lease some or all of our property at Paoli Peaks and Mad River from third parties. Our lease at Paoli Peaks terminates in 2078 and our lease at Mad River terminates in 2034. Combined, these resorts contributed 5.4% of our total revenues for the year ended April 30, 2017. A termination of any of these leases could negatively impact our results of operations.

         A substantial portion of the skiable terrain at certain of our resorts is used under the terms of Forest Service permits.

        A substantial portion of the skiable terrain at our Attitash and Mount Snow resorts and all of the land underlying the Wildcat Mountain resort is federal land that is used under the terms of permits with the U.S. Forest Service. The permits give the U.S. Forest Service the right to review and comment on the location, design, and construction of improvements in the permit area and on certain other operational matters. The permits can also be terminated or modified by the U.S. Forest Service for specific compelling reasons or in the event we fail to perform any of our obligations under the permits. Otherwise, the permits may be renewed. A termination or modification of any of our permits could have a material adverse effect on our results of operations. Currently, our permits expire as follows:



 

 



 

 

Ski Resort

 

Special Use Permit Expiration Date

Attitash

 

April 4, 2047

Mount Snow

 

April 4, 2047

Wildcat Mountain

 

November 18, 2050

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         We rely on information technology to operate our businesses and maintain our competitiveness, and any failure to adapt to technological developments or industry trends could harm our business.

        We depend on the use of information technology and systems, including technology and systems used for central reservations, point of sale, procurement and administration. We must continuously improve and upgrade our systems and infrastructure to offer enhanced products, services, features and functionality, while maintaining the reliability and integrity of our systems and infrastructure. Our future success also depends on our ability to adapt our infrastructure to meet rapidly evolving consumer trends and demands and to respond to competitive service and product offerings.

        In addition, we may not be able to maintain our existing systems or replace or introduce new technologies and systems as quickly as we would like or in a cost-effective manner. Delays or difficulties in implementing new or enhanced systems may keep us from achieving the desired results in a timely manner, to the extent anticipated, or at all. Any interruptions, outages or delays in our systems, or deterioration in their performance, could impair our ability to process transactions and could decrease our quality of service that we offer to our guests. Also, we may be unable to devote financial resources to new technologies and systems in the future. If any of these events occur, our business and financial performance could suffer.

         We currently rely on one lender and its affiliates as a source for the majority of our financing and credit.

        We have historically relied on one lender and its affiliates, EPR, for substantially all of our financing and credit needs, including financing relating to our resort acquisitions. EPR is an entertainment, entertainment-related, recreation and specialty real estate company with its common stock listed on the New York Stock Exchange under the symbol "EPR". In the event EPR is not available to extend us credit, we may not be able to obtain financing on terms as favorable to us as those under our arrangements with EPR. As a result, we may be subject to more stringent financial covenants and higher interest rates.

         We depend on a seasonal workforce.

        Our mountain and lodging operations are highly dependent on a large seasonal workforce. We recruit year-round to fill thousands of seasonal staffing needs each season and work to manage seasonal wages and the timing of the hiring process to ensure the appropriate workforce is in place. We cannot guarantee that material increases in the cost of securing our seasonal workforce will not be necessary in the future. Furthermore, we cannot guarantee that we will be able to recruit and hire adequate seasonal personnel as the business requires. Increased seasonal wages or an inadequate workforce could have an adverse impact on our results of operations.

         We are subject to litigation in the ordinary course of business because of the nature of our business.

        The safety of guests and employees is a major concern and focus for all managers and employees of the Company. By the nature of our activities, we are exposed to the risk that guests or employees may be involved in accidents during the use, operation or maintenance of ski lifts, rides and other resort facilities. As a result, we are, from time to time, subject to various asserted or unasserted legal proceedings and claims. Any such claims, regardless of merit, could be time-consuming and expensive to defend and could divert management's attention and resources. While we believe we have adequate insurance coverage and/or accrue for loss contingencies for all known matters that are probable and can be reasonably estimated, we cannot assure that the outcome of all current or future litigation will not have a material adverse effect on us and our results of operations.

         If we fail to manage future growth effectively, our business could be harmed.

        We have experienced, and expect to continue to experience, rapid growth. This growth has placed significant demands on our management, operational and financial infrastructure. To manage growth effectively, we must continue to improve and enhance our managerial, operational and financial controls, train and manage our employees, and expand our employee base. We must also manage new and existing relationships with vendors, business partners and other third parties. These activities will require significant expenditures and allocation of valuable management resources. If we fail to maintain the efficiency of our organization as we grow, our profit margins may decrease, and we may be unable to achieve our business objectives.

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         A disruption in our water supply would impact our snowmaking capabilities and impact our operations.

        Our operations are heavily dependent upon our access to adequate supplies of water with which to make snow and otherwise conduct our operations. Our resorts in New Hampshire and Vermont are subject to state laws and regulations regarding our use of water. There can be no assurance that applicable laws and regulations will not change in a manner that could have an adverse effect on our operations, or that important permits, licenses, or agreements will not be canceled or will be renewed on terms as favorable as the current terms. Any failure to have access to adequate water supplies to support our current operations and anticipated expansion would have a material adverse effect on our financial condition and results of operations.

         EPR has an option to purchase, or assume our leases relating to, certain of our ski resorts. If EPR exercises this option, we would incur significant tax obligations.

        On December 1, 2014, in connection with the Debt Restructure, we entered into an Option Agreement with EPT Ski Properties, Inc. providing EPR a purchase option on the Boston Mills, Brandywine, Jack Frost, Big Boulder and Alpine Valley ski resorts. The Option Agreement provides that the purchase option will be exercisable as to any one or more of such properties on the maturity date of the applicable promissory notes for such properties upon (i) proper notice by EPR and (ii) payment of a purchase price for each such property calculated in accordance with the Option Agreement. Upon the closing of any sale under the option, EPR will enter into an agreement with the Company or one of its subsidiaries for the lease of each such acquired property for an initial term of 20 years, plus options to extend the lease for two additional periods of 10 years each.

Over the years, we have depreciated the value of these properties pursuant to applicable accounting rules, and as such, we have a low adjusted tax basis in the properties. As a result, we will realize significant taxable gains on the sale of the properties to EPT Ski Properties, Inc. if the option is exercised. We may be required to pay income taxes on the taxable gains from such sale, which we expect to be a substantial cost.

         Under certain circumstances, our insurance coverage may not cover all possible losses, and we may not be able to renew our insurance policies on favorable terms, or at all.

        Although we maintain various property and casualty insurance policies, our insurance policies do not cover all types of losses and liabilities and in some cases may not be sufficient to cover the ultimate cost of claims which exceed policy limits. If we are held liable for amounts exceeding the limits of our insurance coverage or for claims outside the scope of our coverage, our business, prospects, financial condition, results of operations and cash flows could be materially adversely affected.

        In addition, we may not be able to renew our current insurance policies on favorable terms, or at all. Our ability to obtain future insurance coverage at commercially reasonable rates could be materially adversely affected if we or other companies within or outside our industry sustain significant losses or make significant insurance claims.

         We are subject to risks associated with our workforce.

        We are subject to various federal and state laws governing matters such as minimum wage requirements, overtime compensation and other working conditions, discrimination and family and medical leave. In addition, we are continuing to assess the impact of U.S. federal healthcare reform law and regulations on our healthcare benefit costs, which will likely increase the amount of healthcare expenses paid by us. Immigration law reform could also impact our workforce because we recruit and hire foreign nationals as part of our seasonal workforce. If our labor-related expenses increase, our operating expenses could increase and our business, financial condition and results of operations could be harmed.

         We are structured as a holding company and have no assets other than the common stock of our subsidiaries.

        We are a holding company and we do not currently have any material assets other than the common stock we own in our direct and indirect subsidiaries. Our working capital needs are dependent, in part, upon the receipt of dividends and other distributions from our subsidiaries. Certain laws may restrict or limit such payments to us by our subsidiaries, in which case we may need to seek other sources of funding.

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         A natural disaster could damage our property and reduce the number of guests who visit our resorts.

        A severe natural disaster, such as a forest fire, flood or landslide, may interrupt our operations, damage our properties and reduce the number of guests who visit our resorts in affected areas. Damage to our properties could take a long time to repair and there is no guarantee that we would have adequate insurance to cover the costs of repair or the expense of the interruption to our business. Furthermore, such a disaster may interrupt or impede access to our affected properties or require evacuations and may cause visits to our affected properties to decrease for an indefinite period. The ability to attract visitors to our resorts is also influenced by the aesthetics and natural beauty of the outdoor environment where our resorts are located. A severe forest fire or other severe impacts from naturally occurring events could negatively impact the natural beauty of our resorts and have a long-term negative impact on our overall guest visitation as it would take several years for the environment to recover.

         We will not be required by Section 404 of the Sarbanes-Oxley Act to have our independent registered public accounting firm formally attest to the effectiveness of our internal controls while we qualify as an "emerging growth company." If we are unable to establish and maintain effective internal controls, or those controls are not identified during management review of our internal controls, our financial condition and operating results could be adversely affected.

        In fiscal year 2016, management hired a consulting firm to assist us in our evaluation and implementation of an internal control structure to comply with the SEC rules for implementing Section 404 of the Sarbanes-Oxley Act.  The Company continued working with our consultant in fiscal year 2017.  We, as management, are required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. Our independent registered public accounting firm, however, is not required to formally attest to the effectiveness of our internal control over financial reporting until we are no longer an "emerging growth company" as defined in the Jumpstart Our Business Startup Act of 2012 (the “JOBS Act”). At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Further, we may take advantage of other accounting and disclosure related exemptions afforded to "emerging growth companies" from time to time. If we are unable to establish and maintain effective internal controls, our financial condition and operating results could be adversely affected.

         Climate change and greenhouse effects may adversely impact our results of operations.

        There is a growing political and scientific consensus that emissions of greenhouse gases continue to alter the composition of the global atmosphere in ways that are affecting and are expected to continue affecting the global climate. The effects of climate change, including any impact of global warming, could have a material adverse effect on our results of operations.

        Warmer overall temperatures would likely adversely affect skier visits and our revenue and profits. As noted above, warm weather may result in inadequate natural snowfall and render snowmaking wholly or partially ineffective in maintaining quality skiing conditions. In addition, a steady increase in global temperatures could shorten the ski season in the future.

        Physical risks from climate change may also include an increase in changes to precipitation and extreme weather events in ways we cannot currently predict. Such changes to the amount of natural snowfall and extreme differences in weather patterns may increase our snowmaking expense, inhibit our snowmaking capabilities and negatively impact skier perceptions of the ski season.

Risks Related to Ownership of Our Common Stock

The issuance of shares of our Series A Preferred Stock reduces the relative voting power of holders of our common stock, may dilute the ownership of such holders and may adversely affect the market price of our common stock.  

As holders of our Series A Preferred Stock are entitled to vote, on an as-converted basis, together with holders of our common stock on all matters submitted to a vote of the holders of our common stock, the issuance of the Series A Preferred Stock effectively reduces the relative voting power of the holders of our common stock.  Current stockholders (other than the Investor) will have no preemptive rights to purchase any shares of Series A Preferred Stock and/or Warrants,

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which means that current stockholders do not have a prior right to purchase any issue of Series A Preferred Stock and/or Warrants in order to maintain their proportionate interest in the Company. 

In addition, the conversion of the Series A Preferred Stock to common stock would dilute the ownership interest of existing holders of our common stock, and any sales in the public market, following registration pursuant to the registration rights granted to the Investor, of the common stock issuable upon conversion of the Series A Preferred Stock and/or exercise of the Warrants could adversely affect prevailing market prices of our common stock. Sales by such holders of a substantial number of shares of our common stock in the public market, or the perception that such sales might occur, could have a material adverse effect on the price of our common stock. 

The holders of shares of the Series A Preferred Stock may exercise significant influence over us.

The Investor and its affiliates currently own approximately 10.0% of our shares of common stock and, assuming the conversion of the Series A Preferred Stock and exercise of the Warrants, would own 36.7% of our shares of common stock.  Additional pre-emptive rights and rights of first offer in the documents governing the Private Placement help the Investor to maintain its ownership position.  Holders of our Series A Preferred Stock are entitled to vote, on an as-converted basis, together with holders of our common stock on all matters submitted to a vote of the holders of our common stock.  As a result, the holders of shares of the Series A Preferred Stock have the ability to significantly influence the outcome of any matter submitted for the vote of the holders of our common stock.

In addition, under the terms of the Certificate of Designation governing the Series A Preferred Stock, the Series A Preferred Stock generally ranks, with respect to the liquidation, dividends and redemption, senior to other securities until the earlier of (i) such date as no Series A Preferred Stock remains outstanding and (ii) January 1, 2027.  The Stockholders’ Agreement  executed by the Company, the Investor and the management stockholders in connection with the closing of the Private Placement also requires, that, so long as the Investor beneficially owns, on an as-converted basis, at least 11.4% of the outstanding  equity securities of the Company,  the Investor’s approval is required in order for the Company or any subsidiary to (i) materially change the nature of its business from owning, operating and managing ski resorts or (ii) acquire or dispose of any resorts, assets or properties for aggregate consideration equal to or greater than 30% of the enterprise value of the Company and its subsidiaries, or (iii) agree to do any of the foregoing. 

Last, the Stockholders’ Agreement grants to the Investor the right to nominate a director so long as it beneficially owns, on an as-converted basis, at least 20% of the outstanding equity securities of the Company, subject to satisfaction of reasonable qualification standards and Nominating and Corporate Governance Committee approval of the nominee.  Notwithstanding the fact that all directors will be subject to fiduciary duties to us and to applicable law, the interests of the directors designated by the Investor may differ from the interests of our security holders as a whole or of our other directors.

Our Series A Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to, the rights of our common stockholders, which could adversely affect our liquidity and financial condition, and may result in the interests of the holders of our Series A Preferred Stock differing from those of our common stockholders.

The holders of Series A Preferred Stock have the right to receive a liquidation preference entitling them to be paid out of our assets available for distribution to stockholders before any payment may be made to holders of any other class or series of capital stock as well as a preferential right to receive cumulative dividends at the rate of 8% per annum on the Liquidation Value of $1,000 per share. The holders of our Series A Preferred Stock also have certain redemption and conversion rights, and there are limitations on the Company’s ability to redeem other securities. 

These dividend obligations could impact our liquidity and reduce the amount of cash flows available for working capital, capital expenditures, growth opportunities, acquisitions, and other general corporate purposes. Our obligations to the holders of Series A Preferred Stock could also limit our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our financial condition. The preferential rights could also result in divergent interests between the holders of shares of Series A Preferred Stock and holders of our common stock. 

Provisions in our amended and restated articles of incorporation, our amended and restated bylaws and Missouri law might discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.

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Provisions of our amended and restated articles of incorporation approved by stockholders in connection with the Private Placement, our amended and restated bylaws and Missouri law might discourage, delay, or prevent a merger, acquisition, or other change in control that stockholders consider favorable, including transactions in which our stockholders might otherwise receive a premium for shares of our common stock. These provisions might also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:

·

The additional authorized shares of common stock and preferred stock could be used to dilute the stock ownership or voting rights of persons seeking to obtain control of us or could be issued to persons allied with the board of directors or management and thereby have the effect of making it more difficult to remove directors or members of management by diluting the stock ownership or voting rights of persons seeking to effect such a removal.

·

The blank check preferred stock could be used by the board of directors for adoption of a stockholder rights plan or “poison pill.”

·

Existing provisions of our governing documents, including the limitations on director removal, the threshold vote required for stockholders to call a special meeting of the stockholders or act by written consent, the advance notice required for stockholder proposals and director nominations, the limitations on the increase in the number of directors and the inability of stockholders to amend the bylaws, may have anti-takeover effects. 

·

Similarly, applicable provisions of Missouri law, such as the business combination and control share acquisition statutes, may have anti-takeover effects, making it more difficult for or preventing a third party from acquiring control of us or changing our board of directors and management. These provisions may also have the effect of deterring hostile takeovers or delaying changes in control of us or in our management.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors are willing to pay in the future for shares of our common stock. They could also deter potential acquirers of the Company, thereby reducing the likelihood that our stockholders could receive a premium for our common stock in an acquisition.

The board of directors does not believe that the issuance of the Series A Preferred Stock, the Warrants and the common stock issuable upon conversion or exercise thereof will have a significant impact on any attempt to gain control of the Company. It is possible, however, that the existence of a single stockholder with a significant ownership percentage and director nomination rights could discourage third parties from attempting to gain control. It should be noted that any action taken by the Company to discourage an attempt to acquire control of the Company might result in stockholders not being able to participate in any possible premiums which might be obtained in the absence of anti-takeover provisions. Any transaction which may be so discouraged or avoided could be a transaction that the Company's stockholders might consider to be in their best interests. However, the board of directors has a fiduciary duty to act in the best interests of the Company's stockholders at all times. 

In addition, pursuant to each of the Executive Employment Agreements dated effective as of June 1, 2014 between the Company each of Messrs. Boyd, Mueller and Deutsch (each, an "Executive"), each Executive is entitled to change of control payments in the event of a termination of Executive's employment by the Company without cause or notice by the Company of non-renewal of the agreement, all within 365 days of a consummation of a change in control of the Company. A “change in control” includes an event or series of events by which any person or group becomes the beneficial owner, directly or indirectly, of 35% or more of the equity securities of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company on a fully-diluted basis.  Upon the exercise of Warrants to purchase additional shares of common stock, the Investor may become the beneficial owner, directly or indirectly, of 36.4% or more of the equity securities of the Company entitled to vote for members of the board of directors, thereby triggering the change in control provisions in the Executive Employment Agreements. 

The market price of our common stock has been and will likely continue to be volatile, and you could lose all or part of your investment.

The market price of our common stock has been and may continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this annual  report on Form 10-K, factors that could cause fluctuations in the market price of our common stock include the following:

26

 


 

·

quarterly variations in our results of operations;

·

results of operations that vary from those of our competitors;

·

changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;

·

announcements by us, our competitors or our vendors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments;

·

announcements by third parties of significant claims or proceedings against us;

·

fluctuations in trading volume;

·

future sales of our common stock; and

·

changes in investor sentiment toward the stock of ski resort and recreational services companies in general.

        Furthermore, the stock market has experienced extreme volatility that in some cases has been unrelated or disproportionate to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.

        In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could be a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

Requirements associated with being a public company will increase our costs, as well as divert Company resources and management's attention, particularly after we are no longer an "emerging growth company," and may affect our ability to attract and retain qualified board members and executive officers.

As a public company, we are required to comply with the SEC's rules implementing Section 302 of the Sarbanes-Oxley Act of 2002, which requires our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. We are required to make our first assessment of our internal control over financial reporting in fiscal 2016. Our independent registered public accounting firm, however, will not be required to formally attest to the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth company.

        We are working with our legal, independent accounting, and financial advisors to identify those areas in which changes or enhancements should be made to our financial and management control systems to manage our growth and obligations as a public company. Some such areas include corporate governance, corporate control, internal audit, disclosure controls and procedures, and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, the expenses that will be required in order to function adequately as a public company could be material.

        Compliance with the various reporting and other requirements applicable to public companies will also require considerable time and attention of management. We cannot predict or estimate the amount of the additional costs we may incur, the timing of such costs or the impact that our management's attention to these matters will have on our business. In addition, the changes we make may not be sufficient to satisfy our obligations as a public company on a timely basis or at all.

        In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors' and officers' liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees and our executive team.

            Our principal stockholders may exert substantial influence over us and may exercise their control in a manner adverse to your interests.

        Timothy D. Boyd, Stephen J. Mueller and Richard K. Deutsch, three named executive officers, own approximately 16% of our outstanding common stock. Furthermore, as the holder of our Series A Preferred Stock, the Investor is entitled to vote, on an as-converted basis, together with holders of our common stock on all matters submitted to a vote of the common stockholders. On an as-converted basis, the Investor would own approximately 36.7% of the common stock. As a result, the management stockholders together with the Investor will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our amended and restated articles of incorporation and approval of significant corporate transactions. This ability could have the effect of delaying or preventing a

27

 


 

change of control of the Company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders. It is possible that these persons will exercise control over us in a manner adverse to your interests.

         We are an "emerging growth company" with reduced reporting requirements that may make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies generally. For so long as we remain an emerging growth company, we may elect not to have our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting, as would otherwise be required by Section 404(b) of the Sarbanes-Oxley Act. This may increase the risk that we fail to detect and remedy any weaknesses or deficiencies in our internal control over financial reporting.

        In general, these reduced reporting requirements may allow us to refrain from disclosing information that you may find important. It is also possible that investors may generally find our common stock less attractive because of our status as an emerging growth company and our more limited disclosure. Any of the foregoing could adversely affect the price and liquidity of our common stock.

        We may take advantage of these disclosure exemptions until we are no longer an "emerging growth company." We could be an emerging growth company until the last day of the fiscal year in which the Company celebrates the fifth anniversary of its first sale of registered common equity securities, although circumstances could cause us to lose that status earlier if our annual revenues exceed $1.0 billion, if we issue more than $1.0 billion in non-convertible debt in any three-year period or if we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act.

         Future sales of our common stock may cause our stock price to decline.

        If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the market price of our common stock could decline. These sales might also make it more difficult for us to sell additional equity securities at a time and price that we deem appropriate. All of the shares of our common stock sold in our initial public offering are freely tradable in the public market, except for any shares held by our affiliates as defined in Rule 144 of the Securities Act.

        We also registered all 559,296 shares of common stock that we may issue under the Peak Resorts, Inc. 2014 Equity Incentive Plan that has been adopted by the board of directors and stockholders.  These shares can be freely sold in the public market upon issuance, subject to vesting conditions.  As of April 30, 2017, 463,842 shares remained available for issuance.        



Item 1B. Unresolved Staff Comments.



              None





Item 2. Properties.



The following table sets forth the principal properties that we own or lease for use in our operations at fiscal year end:





 

 

Ski Resort/Location

Ownership

Usage

Hidden Valley (250 total acres; 60 skiable acres)

Wildwood, MO

Owned

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities and food/beverage facilities; headquarters offices

Snow Creek (460 total acres; 40 skiable acres)

Weston, MO

Owned

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities and food/beverage facilities

28

 


 

Paoli Peaks (65 total and skiable acres)

Paoli, IN

 Partially leased/partially owned (1) 

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities and food/beverage facilities

Mad River (324 total acres; 60 skiable acres)

Zanesfield, OH

Leased (2)

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities and food/beverage facilities

Boston Mills (100 total acres; 40 skiable acres)

Sagamore Hills, OH

Owned

Ski resort operations, including ski lifts, ski trails, terrain park, rental/retail facilities and food/beverage facilities

Brandywine (102 total acres; 48 skiable acres)

Sagamore Hills, OH

Owned

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities and food/beverage facilities

Crotched Mountain (251 total acres; 105 skiable acres)

Bennington, NH

Owned

Ski resort operations, including ski lifts, ski trails, terrain park, rental/retail facilities and food/beverage facilities

Jack Frost (201 total acres; 80 skiable acres)

Blakeslee, PA

Owned

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities and food/beverage facilities

Big Boulder (107 total acres; 65 skiable acres)

Blakeslee, PA

Owned

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities and food/beverage facilities

Attitash (1,134 total acres; 307 skiable acres)

Bartlett, NH

Partially owned/partially used per terms of a Special Use Permit (3)

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities, food/beverage facilities, hotel/lodging facilities and conference/meeting rooms

Mount Snow (588 total acres; 490 skiable acres)

West Dover, VT

Partially owned/partially used per terms of a Special Use Permit (3)

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities, food/beverage facilities, hotel/lodging facilities, conference/meeting rooms and developable land

Wildcat Mountain (225 total and skiable acres)

Jackson, NH

Used per terms of a Special Use Permit(4)

Ski resort operations, including ski lifts, ski trails, terrain park, rental/retail facilities and food/beverage facilities

Alpine Valley (135 total acres; 54 skiable acres)

Chesterland, OH

Owned

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities and food/beverage facilities

Hunter Mountain (1,537 total acres, 220 skiable acres)

Hunter, NY

Owned

Ski resort operations, including ski lifts, ski trails, terrain park, tubing, rental/retail facilities, food/beverage facilities, hotel/lodging facilities and conference/meeting rooms



(1) The Paoli Peaks lease terminates in 2078.

(2) The Mad River lease terminates in 2034. The Company has the right of first refusal should the Mad River lessor put the property up for sale. In addition, the Company has the right to acquire the Mad River property at specified prices in December 2019 and December 2026.

(3)  A substantial portion of the skiable terrain at Attitash and Mount Snow is federal land that we use pursuant to the terms of renewable permits with the U.S. Forest Service. The Attitash and Mount Snow Special Use Permits expire on April 4, 2047.

(4) All of the land underlying Wildcat Mountain is federal land that we use pursuant to the terms of a renewable permit with the U.S. Forest Service. The Wildcat Mountain Special Use Permit expires on November 18, 2050.



Item 3. Legal Proceedings



       We are not aware of any pending or threatened legal proceedings against us that could have a material adverse effect on our business, operating results or financial conditions. The ski industry is characterized by periodic litigation and as a result, we may be involved in various additional legal proceedings from time to time.

29

 


 



Item 4. Mine Safety Disclosures



       None.





PART II



Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



Our common stock has been listed on the NASDAQ Global Market under the symbol “SKIS” since November 21, 2014 following the completion of our initial public offering. Prior to that time, there was no public market for our common stock. As of July 13, 2017, 13,982,400 shares of our common stock were outstanding, held by approximately 10 holders of record. 

The following table sets forth information on the high and low sales prices of our common stock on the NASDAQ Global Market and the quarterly cash dividends declared per share of common stock for each quarterly period during the past two fiscal years:









 

 

 

 

 

 

 

 

 

 



 

 

Market price per share

 

 

 

 

Quarter ended

 

 

High

 

 

Low

 

 

Cash dividends declared per share

 

April 30, 2017

 

$

6.20 

 

$

5.20 

 

$

0.1400 

 

January 31, 2017

 

$

5.90 

 

$

3.90 

 

$

 -

 

October 31, 2016

 

$

5.30 

 

$

4.30 

 

$

 -

 

July 31, 2016

 

$

4.95 

 

$

3.02 

 

$

 -

 

April 30, 2016

 

$

5.58 

 

$

2.60 

 

$

 -

 

January 31, 2016

 

$

7.70 

 

$

5.04 

 

$

0.1375 

 

October 31, 2015

 

$

7.75 

 

$

6.50 

 

$

0.1375 

 

July 31, 2015

 

$

7.73 

 

$

6.25 

 

$

0.1375 

 



In fiscal 2015, the Company’s board of directors approved the commencement of a regular quarterly cash dividend on our common stock at a quarterly rate of $0.1375 per share.  The board made the decision in April 2016 that it would not be prudent to declare a dividend due to the lower cash levels experienced by the Company during fiscal 2016 as a result of unseasonably warm weather during the 2015-2016 ski season, which drove down revenues compared to the prior year, and an unexpected delay in the approval of the Company’s EB-5 Program. In addition, certain debt covenant compliance ratios did not allow the payment of a dividend during a period of fiscal year 2017.  The board approved the reinstatement of the dividend in February 2017 at the lower quarterly rate of $0.07 per share and declared dividends during the quarter ended April 30, 2017 as follows: (i) on February 15, 2017, the board declared a dividend of $0.07 per share of common stock payable on March 13, 2017 to shareholders of record on February 27, 2017; and (ii) on April 4, 2017, the board declared a dividend of $0.07 per share of common stock payable on May 12, 2017 to holders of record on April 18, 2017.  We cannot assure you that this dividend rate will be sustained or that we will continue to pay dividends in the future.

The declaration and payment of future dividends to holders of our common stock will be at the sole discretion of our board of directors, subject to applicable state law, and will depend on many factors, including our actual results of operations, financial condition, capital requirements, contractual restrictions, restrictions in our debt agreements, economic conditions and other factors that could differ materially from our current expectations. As a holding company, our ability to declare and pay dividends is also dependent on our subsidiaries’ ability to make cash available to us by dividend, distribution or otherwise. Each of our subsidiaries is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from them.

30

 


 

Provisions included in the agreements governing certain of our debt prohibit and/or limit the Company and its subsidiary borrowers from paying dividends or otherwise making distributions under certain circumstances. For example, we are prohibited from paying dividends if the fixed charge coverage ratio, as defined by the applicable agreements, is below 1.25:1.00 and during default situations. For a more complete description of the dividend restrictions included in our debt agreements, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Significant Sources of Cash” and Note 4, “Long-term Debt/Line of Credit” to our consolidated financial statements.  As of April 30, 2017, the Company is in compliance with all debt covenants.

On November 2, 2016, the Company issued $20 million of Series A Preferred Stock to the Investor in the Private Placement. From and after the date that is nine months from the date of issuance (in the case of the Investor, August 2, 2017), cumulative dividends accrue on the outstanding shares of Series A Preferred Stock on a daily basis in arrears at the rate of 8% per annum on the liquidation value of $1,000 per share. All accrued and accumulated dividends on the Series A Preferred Stock shall be paid prior and in preference to any dividend or distribution on any junior securities, including the Company’s common stock, provided that the Company may declare or pay any dividend or distribution payable on the common stock in shares of common stock.   The Certificate of Designation of the Series A Preferred Stock provides that, until the earlier of (i) such date as no Series A Preferred Stock remains outstanding and (ii) January 1, 2027, the Company is prohibited from paying any dividend on capital stock when there are accrued or unpaid dividends with respect to the Series A Preferred Stock. For a more complete description of the dividend restrictions included in the Certificate of Designation relating to the Series A Preferred Stock, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Significant Sources of Cash” and Note 5, “Private Placement” to our consolidated financial statements.

Stock Performance Graph



Set forth below is a line graph comparing the percentage change in the cumulative total shareholder return on our common stock with the cumulative total return of the Russell 200 Index and the S&P Small Cap 600 Consumer Discretionary Index from November 21, 2014, following the completion of our initial public offering, through April 30, 2017, our fiscal year end.  The following is based on an investment of $100 in our common stock, the Russell 2000 Index and the S&P Small Cap 600 Consumer Discretionary Index, with dividends reinvested where applicable.









31

 


 



Source: Bloomberg







 

 



Period Ending

Index

11/21/2014

4/30/2017

Peak Resorts

100.00

73.87

Russell 2000

100.00

123.67

S&P Small Cap 600 Consumer Discretionary

100.00

110.82











Item 6. Selected Financial Data.



The table below summarizes our selected consolidated financial information as of and for the periods indicated. You should read the following selected consolidated financial data together with our consolidated financial statements and related notes filed as part of this annual report.  Our historical results for any prior period are not necessarily indicative of results to be expected in any future period. The data presented in the table and footnotes below are in thousands, except per share and per visit amounts.   







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Year ended April 30,



 

2017

 

2016

 

2015

 

2014

 

2013



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Statement Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

123,249 

 

$

95,729 

 

$

104,858 

 

$

105,205 

 

$

99,688 

Operating expense (1)

 

 

95,072 

 

 

78,660 

 

 

78,586 

 

 

78,833 

 

 

72,437 

Depreciation and amortization

 

 

12,713 

 

 

10,709 

 

 

9,450 

 

 

9,155 

 

 

8,850 

Land and building rent

 

 

1,395 

 

 

1,386 

 

 

1,440 

 

 

1,464 

 

 

1,428 

Settlement of lawsuits

 

 

 -

 

 

 -

 

 

(2,100)

 

 

700 

 

 

 -

Gain on involuntary conversion

 

 

 -

 

 

195 

 

 

 -

 

 

 -

 

 

 -

Interest expense, net

 

 

12,473 

 

 

10,814 

 

 

15,458 

 

 

17,359 

 

 

12,785 

Defeasance fee paid with debt restructure

 

 

 -

 

 

 -

 

 

5,000 

 

 

 -

 

 

 -

Gain on sale/leaseback

 

 

333 

 

 

333 

 

 

333 

 

 

333 

 

 

333 

Other income

 

 

61 

 

 

 

 

11 

 

 

11 

 

 

Income (loss) before income tax

 

 

1,990 

 

 

(5,304)

 

 

(2,632)

 

 

(1,962)

 

 

4,530 

Net income (loss)

 

$

1,241 

 

$

(3,226)

 

$

(1,854)

 

$

(1,501)

 

$

2,707 

Basic earnings (loss) per share

 

$

0.03 

 

$

(0.23)

 

$

(0.22)

 

$

(0.38)

 

$

0.68 

Diluted earnings (loss) per share

 

$

0.03 

 

$

(0.23)

 

$

(0.22)

 

$

(0.38)

 

$

0.68 

Other Financial Information (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported EBITDA (2)

 

$

26,782 

 

$

16,240 

 

$

25,400 

 

$

25,365 

 

$

25,939 

Capital expenditures

 

$

8,620 

 

$

15,866 

 

$

14,144 

 

$

10,028 

 

$

14,900 

Other Data (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Skier visits (3)

 

 

1,538 

 

 

1,166 

 

 

1,554 

 

 

1,570 

 

 

1,520 

Revenue per skier visit (4)

 

$

80.14 

 

$

82.11 

 

$

67.45 

 

$

67.02 

 

$

65.53 

Revenue per visit (5)

 

$

71.95 

 

$

73.32 

 

$

61.34 

 

$

60.06 

 

$

59.14 

Tube visits

 

 

175 

 

 

140 

 

 

155 

 

 

182 

 

 

166 

Total visits

 

 

1,713 

 

 

1,306 

 

 

1,709 

 

 

1,752 

 

 

1,686 

Other Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

33,665 

 

$

5,396 

 

$

16,849 

 

$

13,186 

 

$

11,971 

Restricted cash (6)

 

$

44,813 

 

$

61,099 

 

$

37,519 

 

$

13,063 

 

$

12,141 

32

 


 

Total assets

 

$

320,537 

 

$

313,963 

 

$

241,540 

 

$

206,537 

 

$

201,749 

Long-term debt and capitalized lease obligations (including current portions and line of credit) (7)

 

$

185,585 

 

$

140,718 

 

$

100,062 

 

$

175,148 

 

$

171,525 

Net debt (8)

 

$

151,920 

 

$

135,322 

 

$

83,213 

 

$

161,962 

 

$

159,554 

Dividends declared

 

$

1,958 

 

$

5,768 

 

$

3,449 

 

$

 -

 

$

 -

Total stockholders' equity

 

$

73,761 

 

$

71,634 

 

$

80,438 

 

$

3,488 

 

$

4,990 

________________________

(1)

Operating expenses before depreciation and amortization and land and building rent.

(2)

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a definition of Reported EBITDA and reconciliation to net income (loss).

(3)

A skier visit represents a person utilizing a ticket or pass to access a mountain resort for any part of one day and includes both paid and complimentary access and excludes tube visits.

(4)

Revenue per skier visit is calculated by dividing total revenue by total skier visits during the respective periods.

(5)

Revenue per visit is calculated by dividing total revenue by total visits (ski and tube) during the respective periods.

(6)

As of April 30 of each year, the end of our fiscal year, we are required to include in restricted cash interest due on our outstanding debt with EPR, our primary lender, rent under the lease for the Mad River resort for the 10 months following April 30 and a letter of credit associated with certain covenants.  The Company also is required to include restricted cash associated with our borrowings with Royal Banks of Missouri.  In addition, in prior years, the Company was holding funds in escrow in connection with its efforts to raise funds under the EB-5 investor program for the development of Mount Snow. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Significant Uses of Cash” for a discussion of the EB-5 Program.  The Company also maintains long term restricted cash associated with the funds received for the construction of the West Lake Water Project and Carinthia Ski Lodge.

(7)

The Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, and no longer permits recording these costs as assets. The new guidance is effective for annual periods beginning after December 15, 2015. The Company has incorporated the adoption of this guidance into our financial statement presented herein, including applying the guidance retrospectively to all prior periods presented.   

(8)

Net debt is defined as long-term debt and capital lease obligations plus long-term debt and capital lease obligations due within one year, less cash and cash equivalents.





Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this annual report on Form 10-K.  In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See “Cautionary Note About Forward-Looking Statements” included elsewhere in this annual report on Form 10-K.



Overview

We own or lease and operate 14 ski resorts throughout the Midwestern, Northeastern and Southeastern U.S. Our ski resorts, which include both day ski resorts and overnight drive ski resorts, offer snow skiing, snowboarding and other snow sports. During the last two ski seasons, we had an average of 1.4 million skier visits each year.

We and our subsidiaries operate in a single business segment—resort operations. The consolidated financial data for our fiscal years ended April 30, 2017, 2016,  and 2015 presented in this annual report is comprised of the data of our 14 ski resorts. Also included in the financial information presented are ancillary services, primarily consisting of food and beverage services, equipment rental, ski instruction, hotel/lodging and retail.

The opening and closing dates of our ski resorts are dependent upon weather conditions, but our peak ski season generally runs from early December to mid-April. See Item 1, “Business—Seasonality” for an illustration of the opening and closing dates for the 2012/2013 through 2016/2017 ski seasons for our 14 ski resorts.

33

 


 

We, like other day ski resort and overnight drive ski resort operators, earn our revenues in six principal categories. In order of their contribution, they are: lift and tubing tickets, food and beverage sales, equipment rentals, ski instruction, hotel/lodging, and retail. For more detailed information about each revenue category, see "Business—Revenue Components."

Our single largest source of revenue is the sale of lift tickets (including season passes) which represented approximately 47.1%, 47.6% and 48.5% of net revenue for fiscal 2017, 2016 and 2015, respectively. Lift ticket revenue is driven by the volume of lift tickets and season passes sold and the pricing of these items. Most of our season pass products are sold before the start of the ski season. Season pass revenue, although collected prior to the ski season, is recognized in the consolidated statement of earnings (loss) over the ski season based upon the estimated length of the season. For the 2016/2017, 2015/2016,  and 2014/2015 ski seasons, approximately 34.5%, 38.1% and 29.9%, respectively, of total lift revenue recognized was comprised of season pass revenue. There can be no assurance that future season pass sales will be similar to historical trends.

The cost structure of our operations has a significant fixed component with variable expenses including, but not limited to, retail and food and beverage cost of sales, labor, power and utilities. As such, operating margins can fluctuate based on the level of revenues.

Seasonality and Quarterly Results

Our resort operations are seasonal in nature. In particular, revenue and profits for our operations are substantially lower and historically result in losses from late spring to late fall, which occur during our first and second fiscal quarters. Revenue and profits generated by our summer operations are not sufficient to fully offset our off-season expenses from our operations. During fiscal 2017, 2016 and 2015 87.3%, 87.9% and 89.0%, respectively, of resort revenues were recognized in the third and fourth fiscal quarters. Therefore, the operating results for any interim period are not necessarily indicative of the results that may be achieved for any subsequent quarter or for a full year.

Recent Trends

The timing and duration of favorable weather conditions impact our revenues in regard to the timing and number of skier visits. Though the amount of snowfall early in the ski season does encourage skier visits, all of our ski resorts have snowmaking capabilities in the event that the natural snowfall is insufficient. Cold weather, however, is essential to a successful ski season. There is no way to predict favorable weather conditions in the future. We sell season passes prior to the start of the ski season to help mitigate any negative effects that unfavorable weather may have on our revenues.   For the 2016/2017 ski season, we introduced the Peak Pass, which contributed to the increased sales revenue experienced during fiscal 2017 as compared to the previous fiscal year. Pre-season season pass sales for the 2017/2018 increased 8.6% in both revenue and units as compared to the same for the 2016/2017 ski season in line with the consistent pre-season growth experienced by the Company.

We faced significant weather challenges during the 2016/2017 ski season due to unseasonably warm weather in the Midwest midway through the ski season. Despite these weather challenges, fiscal 2017  Reported EBITDA was $26.8 million, up $10.5 million from fiscal 2016, and revenue for fiscal 2017 was up $27.5 million from fiscal 2016, both driven by strong sales of our Peak Pass and increased visits to our resorts. Though we have increased the prices of most of our lift tickets, passes and other products and services in each of the last two ski seasons, there can be no assurance that we will be able to increase prices in the future or predict the impact that pricing increases may have on visitation or revenue.

Our skier visits of 1.5 million in fiscal 2017 were up 31.9% from fiscal 2016. This compares to a 15.6% increase in total U.S. skier visits to Northeast and Midwest  resorts as reported by the NSAA’s Kottke National End Season Survey 2016/2017 Preliminary Report. Our total resort visits, which include tube visits, were up 31.2% from fiscal 2016. Total visits to our Northeast resorts, in particular, increased to 1.22 million in fiscal 2017 from 0.85 million in fiscal 2016. Total visits to our Midwest resorts increased to 0.49 million in fiscal 2017 from 0.45 million in fiscal 2016.    

Recent Events

Private Placement and Financing

At the beginning of fiscal 2017, the Company experienced lower than normal liquidity levels. The unfavorably warm weather during the 2015/2016 ski season resulted in fewer ski days and lower profitability for the Company. Furthermore, the Company experienced unexpected delays in the release of the EB-5 Program Funds, as more fully discussed in “Liquidity and Capital Resources – Significant Uses of Cash,” to finance the development of two capital projects at our Mount Snow resort—the West Lake Water Project and the Carinthia Ski Lodge Project. We raised $52.0 million for the Mount Snow development projects, which was sitting in escrow pending the approval of the first program investor’s I-526 Petition, as defined herein, at the beginning of fiscal 2017.

34

 


 

Based on the timeline originally anticipated for approval of the first investor’s I-526 Petition and corresponding release of EB-5 Program funds from escrow, we commenced construction of the West Lake Water Project in the second half of calendar year 2015. Through the second quarter of fiscal 2017, we had funded approximately $15.0 million of the West Lake Water Project costs, for which we were reimbursed in full when the EB-5 Program funds were released from escrow in December 2016. We now estimate the West Lake Water Project will be substantially completed in advance of the 2017/2018 ski season, and the Carinthia Lodge Project will be substantially completed in advance of the 2018/2019 ski season.       

Due to our constrained liquidity position as a result of the unfavorable weather during the prior ski season and delay in the release of EB-5 Program funds, the Company took a number of steps in fiscal 2017 to manage cash flow and improve the Company’s liquidity position. The Company borrowed additional funds for working capital. See “Liquidity and Capital Resources—Significant Sources of Cash” for additional information regarding the Company’s additional borrowings and modification of its debt agreements during fiscal 2017. In addition, on November 2, 2016, the Company completed the sale and issuance of the Series A Preferred Stock and the Warrants to the Investor in the Private Placement. See Part I, Item 1, “Business—Private Placement and Financings” for additional information. The Company used approximately $5.5 million of the proceeds from the Private Placement to pay down a portion of its outstanding debt. The remainder is intended to be used for working capital purposes.

As a result of these steps, and with the release of EB-5 Program funds from escrow, we believe that we are now in a strong cash position to carry us through the 2017/2018 ski season.



Resort Acquisition

On January 6, 2016, the Company completed the acquisition of the Hunter Mountain ski resort located in Hunter, New York, through the purchase of all of the outstanding stock of each of Hunter Mountain Ski Bowl, Inc., Hunter Mountain Festivals, Ltd., Hunter Mountain Rentals, Inc., Hunter Resort Vacations, Inc., Hunter Mountain Base Lodge, Inc., and Frosty Land, Inc. pursuant to the terms of the Hunter Mountain Purchase Agreement entered into on November 30, 2015.  The Company acquired Hunter Mountain for total cash consideration of $35.0 million plus the assumption of two capital leases estimated at approximately $1.7 million.

A portion of the Hunter Mountain acquisition price was financed pursuant to the Hunter Mountain Credit Agreement, and the remainder was financed with funds drawn on the Company’s Line of Credit Agreement with Royal Banks of Missouri. See “Liquidity and Capital Resources—Significant Sources of Cash” for additional information.

We have included Hunter Mountain’s results of operations in our financial statements since the date of acquisition.

Initial Public Offering and Debt Restructure

During fiscal 2015, we completed the initial public offering of our common stock, selling 10,000,000 shares at $9.00 per share. After deducting $6.3 million of underwriting discounts and commissions and $1.4 million of offering expenses payable by us, we received net proceeds of $82.3 million.  With the proceeds from the offering, we (i) repaid approximately $75.8 million of our outstanding debt; (ii) paid approximately $0.4 million to acquire the portion of the land underlying Crotched Mountain that we previously leased; and (iii) paid a defeasance fee to our lender of $5.0 million in connection with the prepayment of a portion of our debt. We used the remaining proceeds for working capital and general corporate purposes.

On November 10, 2014, in connection with our initial public offering, we entered into a Restructure Agreement EPR, our primary lender, providing for the Debt Restructure as follows: (i) prepayment of approximately $75.8 million of formerly non-prepayable debt secured by the Crotched Mountain, Attitash, Paoli Peaks, Hidden Valley and Snow Creek resorts with proceeds from our in initial public offering; and (ii) retirement of one of the notes associated with the future development of Mount Snow. On December 1, 2014, we entered into various agreements in order to effectuate the Debt Restructure.  See “—Liquidity and Capital Resources—Significant Sources of Cash” for a more detailed description of the Debt Restructure and related documents.

In exchange for the prepayment right, we granted EPR a purchase option on the Boston Mills, Brandywine, Jack Frost, Big Boulder and Alpine Valley properties. The Option Agreement provides that the purchase option will be exercisable as to any one or more of such properties on the maturity date of the applicable promissory notes for such properties upon (i) proper notice by EPR and (ii) payment of a purchase price for each such property calculated in accordance with the Option Agreement. Upon the closing of any sale under the option, EPR will enter into an agreement with the Company or one of its subsidiaries for the lease of each such acquired property for an initial term of 20 years, plus options to extend the lease for two additional periods of 10 years each. All previously existing option agreements between the Company and EPR were terminated.



35

 


 

Additionally, we agreed to extend the maturity dates on all non-prepayable notes and mortgages secured by the Mount Snow, Boston Mills, Brandywine, Jack Frost, Big Boulder and Alpine Valley properties remaining after the Debt Restructure by seven years to December 1, 2034, and to extend the lease for the Mad River property, previously terminating in 2026, until December 31, 2034.

We also granted EPR a right of first refusal to provide all or a portion of the financing associated with any purchase, ground lease, sale/leaseback, management or financing transaction contemplated by the Company with respect to any new or existing ski resort property for a period of seven years or until financing provided by EPR for such transactions equals or exceeds $250 million in the aggregate. Proposed financings from certain types of institutional lenders providing a loan to value ratio of less than 60% (as relates to the applicable property being financed) are excluded from the right of first refusal. We granted EPR a separate right of first refusal in the event that the Company wishes to sell, transfer, convey or otherwise dispose of any or all of the Attitash ski resort for seven years.  The Attitash right excludes the financing or mortgaging of Attitash.

In connection with the Debt Restructure, we entered into a Master Credit and Security Agreement with EPR containing additional terms and conditions governing our restructure debt with EPR, including restrictions on certain transactions and the payment of dividends and required financial covenants.

Capital Projects

We had one major capital project in fiscal 2017 and 2016. We began construction of the West Lake Water Project, which is being financed with funds raised through the EB-5 Program. The West Lake Water Project includes the construction of a new water storage reservoir for snowmaking with capacity of up to 120 million gallons, three new pump houses and the installation of snowmaking pipelines, trail upgrades and expansion, new ski lift and ancillary equipment.

We had three major capital projects in fiscal 2015. We replaced aging and inefficient snow making equipment at our Attitash, Mount Snow and Wildcat resorts with new high efficiency equipment.

Results of Operations



The following table sets forth, for the periods indicated, our results of operations (dollars in thousands):





 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

Year ended April 30,

 

Percent increase (decrease)

 

Percent increase (decrease)



 

 

2017

 

 

2016

 

 

2015

 

2017/2016

 

2016/2015



 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

  Lift and tubing tickets

 

$

58,100 

 

$

45,541 

 

$

50,821 

 

27.6% 

 

-10.4%

  Food and beverage

 

 

23,078 

 

 

15,816 

 

 

18,927 

 

45.9% 

 

-16.4%

  Equipment rental

 

 

8,582 

 

 

7,036 

 

 

8,017 

 

22.0% 

 

-12.2%

  Ski instruction

 

 

8,562 

 

 

6,580 

 

 

7,242 

 

30.1% 

 

-9.1%

  Hotel/lodging

 

 

9,731 

 

 

7,972 

 

 

7,623 

 

22.1% 

 

4.6% 

  Retail

 

 

6,196 

 

 

4,560 

 

 

5,261 

 

35.9% 

 

-13.3%

  Summer activities

 

 

4,748 

 

 

4,302 

 

 

3,671 

 

10.4% 

 

17.2% 

  Other

 

 

4,252 

 

 

3,922 

 

 

3,296 

 

8.4% 

 

19.0% 



 

 

123,249 

 

 

95,729 

 

 

104,858 

 

28.7% 

 

-8.7%

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Resort operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 Labor and labor related expenses

 

 

48,253 

 

 

39,331 

 

 

38,744 

 

22.7% 

 

1.5% 

 Retail and food and beverage cost of sales

 

 

10,820 

 

 

7,735 

 

 

9,571 

 

39.9% 

 

-19.2%

 Power and utilities

 

 

7,843 

 

 

6,839 

 

 

6,950 

 

14.7% 

 

-1.6%

 Other

 

 

20,403 

 

 

18,310 

 

 

17,405 

 

11.4% 

 

5.2% 



 

 

87,319 

 

 

72,215 

 

 

72,670 

 

20.9% 

 

-0.6%

Depreciation and amortization

 

 

12,713 

 

 

10,709 

 

 

9,450 

 

18.7% 

 

13.3% 

General and administrative expenses

 

 

5,431 

 

 

4,513 

 

 

4,088 

 

20.3% 

 

10.4% 

36

 


 

Land and building rent

 

 

1,395 

 

 

1,386 

 

 

1,440 

 

0.6% 

 

-3.8%

Real estate and other taxes

 

 

2,322 

 

 

1,932 

 

 

1,828 

 

20.2% 

 

5.7% 



 

 

109,180 

 

 

90,755 

 

 

89,476 

 

20.3% 

 

1.4% 

Other operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on settlement of lawsuit

 

 

 -

 

 

 -

 

 

2,100 

 

0.0% 

 

-100.0%

Gain on involuntary conversion

 

 

 -

 

 

195 

 

 

 -

 

-100.0%

 

100.0% 

Income from operations

 

 

14,069 

 

 

5,169 

 

 

17,482 

 

172.2% 

 

-70.4%



 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest, net of interest capitalized of $1,545, $867 and $488 in 2017, 2016 and 2015, respectively

 

 

(12,473)

 

 

(10,814)

 

 

(15,458)

 

15.3% 

 

-30.0%

Defeasance fee paid with debt restructure

 

 

 -

 

 

 -

 

 

(5,000)

 

0.0% 

 

-100.0%

Gain on sale/leaseback

 

 

333 

 

 

333 

 

 

333 

 

0.0% 

 

0.0% 

Other income

 

 

61 

 

 

 

 

11 

 

662.5% 

 

-27.3%



 

 

(12,079)

 

 

(10,473)

 

 

(20,114)

 

15.3% 

 

-47.9%



 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) before income tax (benefit)

 

 

1,990 

 

 

(5,304)

 

 

(2,632)

 

-137.5%

 

101.5% 

Income tax (benefit)

 

 

749 

 

 

(2,078)

 

 

(778)

 

-136.0%

 

167.1% 

Net earnings (loss)

 

$

1,241 

 

$

(3,226)

 

$

(1,854)

 

-138.5%

 

74.0% 

Total reported EBITDA

 

$

26,782 

 

$

16,240 

 

$

25,400 

 

64.9% 

 

-36.1%



Non-GAAP Financial Measures

Reported EBITDA is not a measure of financial performance under U.S. GAAP.  The following table includes a reconciliation of Reported EBITDA to net income (loss) (in thousands):





 

 

 

 

 

 

 

 

 



 

 

 



 

 

Year ended April 30



 

 

2017

 

2016

 

 

2015



 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1,241 

 

$

(3,226)

 

$

(1,854)

Income tax benefit

 

 

749 

 

 

(2,078)

 

 

(778)

Interest expense, net

 

 

12,473 

 

 

10,814 

 

 

15,458 

Defeasance fee paid with debt restructure