NEWRY, Maine, Nov. 14 /PRNewswire/ — American Skiing Company (NYSE: SKI) today reported on the status of its restructuring efforts and announced its financial results for the 2001 fiscal year and fourth quarter ended July 29, 2001.
“We have aggressively implemented the restructuring plan we announced in May and have signed a non-binding Letter of Intent to sell our Steamboat ski resort,” said American Skiing Company CEO B.J. Fair. “We have successfully completed several of the key initiatives contemplated under the plan and we are focused on achieving the remainder of our objectives prior to the end of the calendar year.”
Over the last five months, American Skiing Company has:
— Implemented a cost reduction and performance enhancement program targeting approximately $5 million in annual financial benefits, which contributed to the best fourth quarter resort operating performance in the Company’s history;
— Closed and funded a financial restructuring that raised additional capital, amended the Company’s senior credit facilities and restructured portions of its existing debt;
— Signed a non-binding Letter of Intent to sell its Steamboat resort, a transaction which is targeted to close prior to the end of the calendar year;
— Completed the sale of Sugarbush ski resort;
— Signed a management consulting agreement with MeriStar Hotels & Resorts
(NYSE: MMH) to improve the operating performance of lodging properties and enhance its national sales network; and
— Aggressively reduced its New England real estate inventory.
“We began to realize the benefits of our cost reduction initiatives during the fourth quarter of fiscal 2001,” said CFO Mark Miller. “As a result, our fourth quarter resort EBITDA loss, excluding non-recurring items, was the lowest in our history with payroll expense 15% below our original business plan and 6% lower than the same period in fiscal 2000. Our focus on controlling costs has not ended and we anticipate additional financial benefits from a renewed effort to market our resorts more effectively.”
On September 4, 2001, the Company announced that it had closed and funded a financial restructuring package. The restructuring included a $30 million financing package from Oak Hill Capital Partners, L.P., and related parties, amendments to senior credit facilities and restructured portions of the Company’s existing debt.
“The importance of the financial restructuring cannot be overstated,” continued Fair. “The package, coupled with other initiatives in the strategic plan, was an important step in addressing immediate financial issues and positioning us to move forward with the primary objective of unlocking the untapped growth potential of our resorts.”
The Company reported that it has signed a non-binding Letter of Intent to sell Steamboat ski resort and continues to target a closing by the end of the calendar year. In addition, the Company has received a commitment letter for a $14 million capital lease for the gondola at Heavenly, which opened in December 2000.
Miller added, “It has taken us several weeks to recover from the disruptions that followed the events of September 11th, but we are now in the advanced stages of negotiations on both transactions and have targeted completion in the next two months. We are solely focused on securing the best outcome for American Skiing Company and its financial partners.”
As a result of the delays in completing these transactions, the Company, consistent with its historical practices, has drawn most of its available credit line and expects to utilize the remainder as it completes preparations for the ski season. The Company expects to begin generating substantial cash flows in the next few weeks with the start of the ski season. Killington and Sunday River are now open and all of the Company’s resorts are expected to be open by Thanksgiving.
The Company also completed several key transactions during the first quarter of fiscal 2002. In September, the Company closed on the sale of its Sugarbush resort in Warren, Vermont. Although the sale was not part of the Company’s original restructuring plan, “the unsolicited offer by a group of local investors was in the best interests of American Skiing Company and its shareholders,” according to Fair. The sale will allow the Company to focus management attention and capital resources on its resorts with the most compelling growth opportunities. The Company reduced the outstanding balance of its senior credit facility by $7.4 million from sale proceeds.
In addition, the Company entered into a management consulting agreement in August with MeriStar Hotels & Resorts to improve performance at its lodging properties. According to Fair, “MeriStar has already improved systems at our lodging centers, and access to its sales network should help us significantly in attracting off-season and conference business.”
Finally, the Company has moved to aggressively reduce inventory in its real estate division. On November 3, 2001, the Company held an auction for the remaining units at its Grand Summit Hotel at Attitash Bear Peak in New Hampshire. Approximately 147 of the remaining 167 units were sold. Upon completion of closings, the Company expects to reduce its real estate debt by approximately $3.0 million.
2001 Fiscal Year End and Fourth Quarter Results
“The Company’s resort operations improved significantly during fiscal 2001 although our reported results were impacted by a number of non-recurring charges,” said Fair. “The Company generated record resort revenues and a 33% increase in EBITDA, excluding non-recurring charges, illustrating the earning potential of our core operations. In addition, as a result of our cost reduction initiatives, we had the best fourth quarter in the Company’s history. With our restructuring program in place, and a portfolio of some of the most modern and popular resorts in the country, we have set the stage for continued performance improvement in the year ahead.”
The Company previously announced a number of non-recurring charges that impacted EBITDA and net income in fiscal 2001 and 2000 and incurred additional non-recurring charges in the fourth quarter of fiscal 2001.
Previously Announced Non-Recurring Items
During the first quarter of fiscal 2001, the Company incurred $800 thousand in hotel start-up costs at the Steamboat Grand Hotel. During the third quarter, the Company incurred a $3.6 million charge related to the withdrawn merger with MeriStar Hotels and Resorts, $2.1 million in restructuring and severance costs and an $830 thousand loss on the sale of development rights for the Heavenly Grand Summit quartershare hotel. This loss does not account for future participation revenues of an estimated $4.8 million which the Company anticipates receiving in fiscal 2003.
During fiscal 2000, a number of non-recurring items also affected to EBITDA including a $1.6 million first quarter gain on the sale of certain non- strategic assets. Charges included $2.2 million in hotel start-up costs at the Steamboat Grand Hotel and The Canyons Grand Summit Hotel, $500 thousand of which was incurred in the fourth quarter, and a $1.5 million fourth quarter write-off of real estate development costs.
The net loss for fiscal 2001 included a $2.5 million benefit, net of taxes, from the cumulative effect of a change in accounting principle related to marking interest rate derivatives to their current market value as a result of the adoption of Statement of Financial Accounting Standards No. 133. In addition, as a result of revision to Company’s strategic plan, the Company re- evaluated its income tax position and has not recognized any income tax expense or benefit for fiscal 2001. By comparison, the net loss for fiscal
2000 included an extraordinary loss from restructuring the Company’s senior credit facility, the cumulative effect of a change in accounting principle and the write-off of certain deferred tax assets.
Fourth Quarter Non-Recurring Items
During the fourth quarter of fiscal 2001, the Company recognized a number of additional non-recurring charges that impacted EBITDA including a $15.1 million write-down of Sugarbush resort, of which $1.1 million was associated with real estate operations. The Company also incurred a $52.0 million write- down as a result of its strategic decision to sell Steamboat resort, of which $2.0 million was associated with real estate operations. The Company incurred an additional $1.9 million in restructuring and severance costs including $231 thousand which was associated with real estate operations. The Company also incurred an additional $234 thousand loss on the sale of development rights for the Heavenly Grand Summit quartershare hotel based on a revised estimate of total development costs. This loss does not account for future participation revenues of an estimated $4.8 million which the Company anticipates receiving in fiscal 2003. Other charges included a $1.3 million charge to write-down existing quartershare inventory at the Attitash Grand Summit Hotel to realizable value and a $1.3 million charge related to the settlement of a contract dispute with the general contractor to real estate projects at The Canyons.
Fiscal 2001 Reported Year-End Results
The net loss available to common shareholders for fiscal 2001, including non-recurring items, was $141.6 million, or $4.64 per basic and diluted share compared to $52.5 million, or $1.73 per basic and diluted share for fiscal 2000.
For fiscal 2001, total revenues were $425.6 million compared with $424.1 million in fiscal 2000. Resort revenue for fiscal 2001 was a record $328.7 million compared with $292.1 million in the previous fiscal year. Real estate revenue was $96.9 million in fiscal 2001 versus $132.1 million in the prior year during which Company generated over $100 million in revenues from the delivery of the Grand Summit Hotel and Sundial Lodge projects at The Canyons Resort in Park City, Utah.
Excellent conditions in the east last season helped to mitigate challenging weather in the west and the impact of the slowing economy. New luxury facilities like the Canyons Grand Summit and Steamboat Grand hotels coupled with resort improvements like the Heavenly gondola and a 30% increase in snowmaking capacity at Killington yielded an increase revenue per skier visit from $58.34 last year to $62.28, an increase of almost 7%.
Total earnings from operations before interest, income taxes, depreciation and amortization (“EBITDA”), including non-recurring items in both years, was a loss of $20.9 million for fiscal 2001 compared to earnings of $47.0 million in the prior year. Resort EBITDA, including non-recurring items, for fiscal 2001 was a loss of $19.7 million versus earnings of $38.8 million in fiscal 2000. Real estate EBITDA, including non-recurring items, was a loss of $1.3 million versus earnings of $8.2 million in fiscal 2000.
The annual fiscal period ended July 29, 2001 was comprised of 52 weeks while the fiscal 2000 period contained 53 weeks. Fourth quarter results included 13 weeks for both periods.
Fourth Quarter Reported Results
Including non-recurring items in both years, the fourth quarter net loss available to common shareholders was $114.2 million for fiscal 2001, or a net loss of $3.73 per basic and diluted share versus $30.8 million., or a net loss of $1.01 per basic and diluted share during the previous year’s fourth quarter.
For the fourth quarter ended July 30, 2001, total revenues were $41.6 million compared with $51.1 million reported for the comparable period last year. Resort revenue for the quarter was $18.1 million versus $16.8 million for the same quarter in 2000 resulting in part from contributions from the Steamboat Grand Hotel, which was not open in the prior year. Real estate revenue for the quarter was $23.5 million compared with $34.2 million for the fourth quarter last year.
Total EBITDA for the fourth quarter of fiscal 2001, including non- recurring charges in both years, was a loss of $90.4 million compared to a loss of $19.4 million in the same quarter of fiscal 2000. Resort EBITDA, including non-recurring charges in both years, was a loss of $82.1 million compared with a loss of $19.0 million in the same period in 2000. Real estate EBITDA, including non-recurring charges was a loss of $8.3 million for the quarter versus a loss of $0.4 million last year.
Losses during the fourth quarter are anticipated due to the seasonality of the Company’s ski resort operations.
Fiscal 2001 Year-End Results Excluding Non-recurring Items
Excluding non-recurring charges in both years, the net loss available to common shareholders for fiscal 2001 was $48.7 million, or $1.60 per basic and diluted share compared to $46.8 million, or $1.54 per basic and diluted share for fiscal 2000.
Total EBITDA, excluding non-recurring charges, was $58.3 million for fiscal 2001 compared to $49.1 million in the prior year. After adjusting for non-recurring charges in both years, resort EBITDA for fiscal 2001 was $52.5 million versus $39.4 million in fiscal 2000. Real estate EBITDA, excluding non-recurring charges in both years was $5.8 million versus $9.7 million in fiscal 2000.
Fourth Quarter Results Excluding Non-recurring Items
Excluding non-recurring items in both years, the fourth quarter net loss available to common shareholders was $28.2 million for fiscal 2001, or a net loss of $0.92 per basic and diluted share versus $29.6 million., or a net loss of $0.97 per basic and diluted share during the previous year’s fourth quarter.
Total EBITDA for the fourth quarter of fiscal 2001, excluding non- recurring charges in both years, was a loss of $18.5 million compared to a loss of $17.4 million in the same quarter of fiscal 2000. Resort EBITDA, excluding charges in both years, was a loss of $16.5 million compared with a loss of $18.5 million in the same period in 2000, reflecting the initial impact of cost saving initiatives which offset overall weaker golf and conference revenues in the current period. Real estate EBITDA, excluding charges was a loss of $2.1 million for the quarter versus earnings of $1.1 million last year.
Fiscal 2002 Business Outlook
“As we look to the coming winter, it is still too early to determine the full impact of recent events,” said Fair. “However, we are seeing improvement in reservation and call activity after a sharp decline following the events of September 11th. Although winter reservations and call volumes are lower than at the same period last year, our season pass sales are tracking well ahead of last year and ridership at the Company’s Heavenly gondola has returned to budgeted levels providing some positive early indications.”
The Company reported that season pass sales increased approximately 12% year-over-year, as of November 11, 2001, with a number of resorts experiencing double digit increases. Season pass revenues are recognized during the 2nd and 3rd quarters.
Reservations for the coming winter are down approximately 8% year-to-date across the resort network, with eastern resorts showing an 8% increase and western resorts showing about a 21% decrease. “In light of recent events,” said Fair, “we’re cautiously optimistic about reservation activity in the East. Call volume and reservation booking trends have recovered steadily in the East and are now running at or near prior year levels. However, call volumes and reservation activities at our Western resorts, which are more heavily dependent on destination visitations, have been recovering at a much slower pace and remain substantially below prior year experience.”
Fair continued, “Economic uncertainty and fear of travel provide a good
indication that in the coming months people may stay closer to home. American Skiing Company is uniquely positioned in the leisure industry to capitalize on this trend with the majority of our resorts only a short drive from major metropolitan areas. A recent resurgence in sightseer visits at the Heavenly and reservations activity in the east suggest some validity to this perception. We have developed contingency plans which address marketing strategies, operating plans and cost levels at each of our resorts. Certain of those plan elements are being implemented as we evaluate and observe demand trends.”
Fair concluded: “Our activities since May clearly show that American Skiing Company is taking the necessary steps to improve its performance. Our announced restructuring plan is nearly complete, and we will continue to implement programs that will strengthen the Company financially and allow us to better serve our customers. We continue to face challenges, but the team and the commitment to meeting those challenges is in place. I’m confident that we’ll be able to do so.”
About American Skiing Company
Headquartered in Newry, Maine, American Skiing Company is the largest operator of alpine ski, snowboard and golf resorts in the United States. Its resorts include Killington and Mount Snow in Vermont; Sunday River and Sugarloaf/USA in Maine; Attitash Bear Peak in New Hampshire; Steamboat in Colorado; The Canyons in Utah; and Heavenly in California/Nevada. More information is available on the Company’s Web site, www.peaks.com.