NEWRY, MAINE, May 30 /PRNewswire/ — American Skiing Company (NYSE: SKI) announced a comprehensive strategic plan to improve its capital structure and enhance future operating performance. The plan includes the following key components:
— Strategic redeployment of management and capital resources to emphasize the integration and growth of resort village development and operations
— Intent to sell Steamboat ski resort
— Operational cost savings of approximately $5 million through reorganization and staff reduction.
— Amendments to the Company’s senior credit facilities and an anticipated new capital infusion to enhance financial flexibility
The Company also announced anticipated third quarter operating results and revised earnings guidance for fiscal 2001 below the previously indicated range due to several non-recurring charges related to corporate restructuring and merger activities and weaker than expected results of its real estate subsidiary.
“The plan represents a fundamental change in the way we manage our businesses,” said American Skiing Company CEO B.J. Fair. “It entails a number of significant corporate events, including a strategic asset sale, cost reduction initiatives at every level of the organization and restructuring of the senior debt of our real estate company to reduce interest cost and extend amortization and maturity dates. This plan positions American Skiing Company to deleverage its capital structure and execute on growth opportunities within its portfolio of resort and real estate assets in a manner that maximizes value for our investors and provides the highest quality guest experience for our customers.”
The strategic plan includes a series of steps that are outlined below:
American Skiing Company’s strategic plan will redirect management and capital resources towards high growth opportunities within the existing resort and real estate network. The plan will focus on building out resort villages and integrating real estate development with resort village amenities. The Company’s marketing efforts will emphasize the complete resort experience, targeting increased destination business.
“Over the last several years, American Skiing Company has made significant investments in state-of-the-art lifts, snow-making and skier development programs in order to solidify its reputation for delivering the ultimate skiing and riding experience at all its resorts nationwide,” said Fair. “As part of the strategic plan, we will turn our focus to enhancing the broader resort village experience through the development of core amenities, to improve guest service and strengthen the resort destination experience offered to our customers.”
With an improved capital structure, American Skiing Company Resort Properties, Inc. (“ASCRP”) will pursue its strategy of developing high-return projects internally as well as continue to use partnerships and joint ventures with strategic third party developers in order to create immediate value and speed the build-out of resorts, thereby generating incremental resort revenues.
Proposed Sale of Steamboat
American Skiing Company has retained Credit Suisse First Boston to assist with marketing the Steamboat Ski and Resort Corporation in Steamboat Springs, Colorado, the sale of which is anticipated to close prior to the end of calendar 2001. The sale of the resort may also include certain other real estate assets at Steamboat.
“Steamboat is an outstanding property and premier ski resort destination,” said Fair. “The decision to sell the resort was very difficult, however, it demonstrates our commitment to reduce the Company’s debt and improve its capital structure, as well as refocus human and capital resources on our remaining strategically vital resort properties.”
5 Million of Operational Cost Savings
American Skiing Company is in the process of implementing a staff reorganization at every level of the organization in order to provide greater flexibility in its cost structure. The Company is converting 160 full-time year-round positions to seasonal positions, in order to better match its operating cycle. In addition, the Company has eliminated approximately 70 full time year-round positions.
Prior to the reorganization, the Company had approximately 1,600 full time, year-round positions. At peak employment during the ski season, the Company employs approximately 11,700 people. The reorganization is intended to provide the Company greater flexibility in its cost structure and more appropriately respond to the seasonal nature of the business.
Management estimates that these measures, along with other organizational changes and cost reduction initiatives, will result in approximately $5 million of annual cost savings. Although the impact of the cost savings will be immediate, near-term restructuring costs will likely delay the benefit from cost savings until the first quarter of fiscal 2002.
Capital Structure Improvements
American Skiing Company has entered into an agreement with its resort lenders whereby the lenders have agreed to waive certain financial covenants under the Company’s $165 million Senior Secured Credit Facility, for a specified period of time, while both parties negotiate a comprehensive amendment to the facility. The Company is seeking the approval of its resort lenders for the sale of the Steamboat property, as well as changes to the existing financial covenant package to accommodate the sale, to reflect changes to its revised business plan and to revise financial covenants for the third quarter of fiscal 2001 and beyond.
The Company is revising its real estate business plan and is pursuing discussions with its Senior Lenders regarding near-term liquidity issues and a package of restructuring initiatives designed to significantly improve the capital structure and liquidity of its real estate subsidiary, ASCRP. Components of the business plan that are under consideration include seeking to restructure the $73 million loan facility at ASCRP to substantially reduce interest rates and extend amortization and maturity dates.
The Company is also in advanced discussions with potential sources of additional investment capital for the real estate Company. Additional capital would both address the Company’s near-term liquidity needs and enhance its ability to execute on the growth opportunities within the existing portfolio of assets. The terms of such investments, however, would likely result in dilution to common equity holders.
Preliminary Third Quarter Results
The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions, business combinations, divestitures, asset sales, recapitalizations or any other significant business transactions that may be completed after May 30, 2001.
The Company’s anticipated results for the third quarter of fiscal 2001 excluding non-recurring charges are as follows:
— Resort revenues for the quarter are expected to be approximately $164
million compared with $149.9 million in the third quarter of fiscal
— Resort earnings before interest, taxes, depreciation and amortization
(“EBITDA”) is expected to be approximately $64 million before non- recurring charges of $5.7 million, compared with Resort EBITDA of $62.0
million in the third quarter of fiscal 2000
— Real Estate revenues are expected to be approximately $15 million,
compared with $73.2 million in the third quarter of fiscal 2000, when
the Company began delivering units of the Sundial Lodge and Grand
Summit Hotel at The Canyons
— Real Estate operations are anticipated to generate an EBITDA loss of
3 million, excluding the loss on the sale of
development rights for the Heavenly Grand Summit quartershare hotel of
0.8 million, compared with positive EBITDA of $9.7 million in the
third quarter of fiscal 2000
— Total revenues are expected to be approximately $179 million compared
with $223.1 million in the third quarter of 2000
— The Company expects third quarter fiscal 2001 EBITDA to be
approximately $64 million before non-recurring charges of $6.5 million,
compared with $71.7 million in the third quarter of 2000
— As a result of the proposed restructuring plan and related changes to
the Company’s business plan, the Company has re-evaluated its income
tax position and has determined that it will reverse the income tax
benefits recognized during the first and second quarters of fiscal 2001
and does not expect to recognize any income tax expense or benefit in
the foreseeable future. As a result, the Company expects to incur
income tax expense in the third quarter of approximately $13.7 million.
The Company anticipates reporting several non-recurring charges for the third quarter of fiscal 2001 attributable to corporate restructuring, the terminated merger with MeriStar Hotels & Resorts, and a loss on the sale of development rights for the Heavenly Grand Summit quartershare hotel. In total, these non-recurring charges are expected to be approximately $6.5 million. The Company also anticipates approximately $1.1 million in restructuring charges in the fourth quarter of fiscal 2001. In addition, the Company is evaluating potential asset write-downs that may result from the restructuring transaction and related business plan changes, but does not expect to realize any write-downs for the third quarter. The amount and timing of any write-downs resulting from this process has not yet been determined.
“Although challenged by inconsistent weather and a decline in destination visits at our western resorts, overall skier visits returned to a more normalized level and the Company’s Resort business generated revenues and EBITDA in line with our March 28th revised guidance, excluding non-recurring charges,” Fair said. “Coupled with non-recurring charges related to our corporate restructuring and merger activities, we expect lower Real Estate revenues to result in total company EBITDA performance that will fall short of what we had anticipated to report for the third quarter. Consequently, we are revising the previously provided full-year fiscal 2001 financial guidance.”
Fiscal 2001 Business Outlook
For fiscal 2001, the Company expects resort skier visits of slightly under 5.3 million and growth in revenue per skier visit of 6% to 7% generating resort revenues between $328 and $331 million and resort EBITDA of between $49 and $51 million (excluding approximately $7.6 million in non-recurring charges), in line with its March 28th revised guidance. Real estate revenues are expected to be between $98 and $102 million and real estate EBITDA is expected to be between $7 and $9 million, excluding the loss on the sale of development rights for the Heavenly Grand Summit quartershare hotel, which correlates to the lower than expected visitation at our western resorts.
On a consolidated basis, the Company anticipates revenue of between $426 and $433 million and EBITDA of between $56 and $60 million (excluding approximately $8.4 million in non-recurring charges) as compared to total revenue and EBITDA of $424.1 million and $47.0 million, respectively, for fiscal 2000.
“While we have had a challenging year, looking further ahead, we are confident that this new plan places us on track toward generating steady improvement in our financial performance in fiscal 2002 and beyond. We will continue to focus on improving our capital structure and achieving efficiencies in our resort operations, high return projects in our real estate business and partnership opportunities that leverage our resort network,” Fair concluded.
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 Steamboat in Colorado; Killington, Mount Snow and Sugarbush in Vermont; Sunday River and Sugarloaf/USA in Maine; Attitash Bear Peak in New Hampshire; The Canyons in Utah; and Heavenly in California/Nevada. More information is available on the company’s Web site, www.peaks.com.