American Skiing Co. Announces Fiscal 2004 Year End Results

By AlpineZone News |
Oct 27 2004 - 07:18 PM

PARK CITY, UT ??” American Skiing Company (OTC: AESK) today announced its financial results for the 2004 fiscal year and fourth quarter ended July 25, 2004. The Company reported significant improvement from ongoing operations. It credited record financial results from its western resorts and effective costs control measures which mitigated adverse weather conditions at its eastern resorts. In addition, the sale of remaining unit inventory at The Canyons Grand Summit Hotel, gains on extinguishment of debt, and gains on transfer of assets associated with extinguishment of debt, led the Company to post a net loss available to common shareholders of $28.5 million in fiscal 2004, a decrease of $53.5 million compared to a net loss available to shareholders of $82.0 million is fiscal 2003.

“Our results out west were nothing short of spectacular,” said CEO B.J. Fair. “The Canyons experienced yet another year of significant growth in skier visits. And both Steamboat and The Canyons noted increased activity from destination markets,” added Fair. Results in the east were positively impacted by the sale of innovative lift ticket products at its Sunday River and Attitash resorts. “Our success with the Sunday River-Attitash season pass helped mitigate the impact of weather and has led us to the creation of the six resort All-For-One season pass. This new product is expected to dramatically impact our business models in the east,” added Fair.

“We took some major steps forward as a company in fiscal 2004,” Fair said. “We have a host of new initiatives in place to build on those successes, particularly in the area of the guest experience. Significant enhancements in our web strategies, including fully automated web-based bookings at four of our resort reservation centers, provide new industry leading tools for increasing sales and managing the vacation experience,” added Fair.

The Company has substantially completed work on its Form 10-K for the fiscal year ended July 25, 2004. On October 25, 2004, the Company’s independent registered public accounting firm, KPMG LLP, advised the Company that it would be unable to deliver its audit report on the Company’s consolidated financial statements for the year ended July 25, 2004 because it had not completed its assessment as to whether substantial doubt exists about the Company’s ability to continue as a going concern. Specifically, KPMG is continuing to assess the facts and circumstances surrounding the Company’s 10.5% Repriced Convertible Exchangeable Preferred Stock (the “Series A Preferred Stock”). Under the terms of the Series A Preferred Stock, the Company was required to redeem the Series A Preferred Stock on November 12, 2002 to the extent that it had legally available funds to effect such redemption. Prior to and since the November 12, 2002 redemption date of the Series A Preferred Stock, based upon all relevant factors, the Company’s Board of Directors has determined that legally available funds do not exist for the redemption of any shares of Series A Preferred Stock. Because the holder of the Series A Preferred Stock has made a demand for redemption and has not agreed to extend the redemption date of the Series A Preferred Stock, KPMG has advised the Company that it needs additional time and information to complete its assessment.

Concurrently with the issuance of this press release, the Company will file a Form 8-K with the SEC which will contain the Company’s unaudited consolidated financial statements as of and for the fiscal year ended July 25, 2004 and other information that is required to be included in Form 10-K. The Company expects to file its Form 10-K for the fiscal year July 25, 2004 within 15 calendar days. The unaudited consolidated financial statements do not address any impact that could or would result from a decision by KPMG LLP to add an explanatory paragraph to its audit opinion to address a going concern issue and, accordingly, the unaudited consolidated financial statements are subject to further change.

As previously disclosed, the Company is in the process of refinancing its existing senior secured credit facility and its senior subordinated notes. As part of this refinancing, the Company entered into an agreement with the holder of the Series A Preferred Stock under which the Company has agreed to issue, and the holder has agreed to accept, new junior subordinated notes in exchange for the Series A Preferred Stock. The exchange of the Series A Preferred Stock for the new junior subordinated notes is subject to the consummation of the refinancing.

Fiscal 2004 Fourth Quarter Results

Net income available to common shareholders for the fourth quarter of fiscal 2004 was $9.9 million, or $0.13 per basic common share (after considering $5.8 million being allocated to participating securities as prescribed by Emerging Issues Task Force Issue No. 03-06, “Participating Securities and the Two Class Method Under FASB Statement No. 128, Earnings Per Share,”(EITF No. 03-06) adopted on April 26, 2004), and $0.13 per diluted common share, compared with net loss available to common shareholders of $39.2 million, or $1.24 per basic and diluted common share for the fourth quarter of fiscal 2003.

Total consolidated revenue was $17.0 million for the fourth quarter of fiscal 2004, compared with $15.9 million for the fourth quarter of fiscal 2003. Resort revenue was $13.6 million for the fourth quarters of both fiscal 2004 and fiscal 2003. Real estate revenue was $3.4 million versus $2.2 million for the comparable period in fiscal 2003. The increase in real estate revenue was primarily due to increased land sales at our eastern resorts.

The Company’s consolidated net income was $9.9 million for the fourth quarter of fiscal 2004, compared with a consolidated net loss of $29.3 million for the comparable period in fiscal 2003. The loss from resort operations was $37.4 million for the fourth quarter of fiscal 2004 versus a loss from resort operations of $24.5 million for the fourth quarter of fiscal 2003. Excluding accretion of discount and dividends on preferred stock, the loss from resort operations was $26.0 million for the fourth quarter of fiscal 2004 versus a loss of $24.5 million for the fourth quarter of fiscal 2003. Income from real estate operations was $47.3 million for the fourth quarter of fiscal 2004, compared with a loss of $4.8 million for the fourth quarter of fiscal 2003. Excluding gain on extinguishment of debt and gain on transfer of assets associated with extinguishment of debt, the loss for the fourth quarter of fiscal 2004 was $1.3 million, versus a loss of $4.8 million for the comparable quarter of fiscal 2003. The Company has provided reconciliations from GAAP financial measures to non-GAAP financial measures in the tables following this discussion.

Fiscal 2004 Year End Results

Net loss available to common shareholders for the fiscal year ended July 25, 2004 was $28.5 million, or $0.90 per basic and diluted common share, compared with net loss available to common shareholders of $82.0 million, or $2.59 per basic and diluted common share, for fiscal 2003.

Total consolidated revenue grew seven percent to $284.1 million in fiscal 2004, from $264.5 million in fiscal 2003. Resort revenue was $250.7 million in fiscal 2004, compared with $251.6 million in fiscal 2003, primarily reflecting lower skier visits at the eastern resorts and record high skier visits at The Canyons. Real estate revenue was $33.4 million in fiscal 2004 versus $12.9 million in fiscal 2003, reflecting the successful sale of remaining unit inventory at the Grand Summit Hotel at The Canyons.

The Company’s consolidated net loss for fiscal 2004 was $28.5 million versus $44.4 million for fiscal 2003. Excluding accretion of discount and dividends on preferred stock, gain on extinguishment of debt, and gain on transfer of assets associated with extinguishment of debt, the consolidated net loss was $34.0 million for fiscal 2004 versus $44.4 million for fiscal 2003. The loss from resort operations was $66.6 million for fiscal 2004 compared to a loss of $23.3 million for fiscal 2003. Excluding accretion of discount and dividends on preferred stock, the loss from resort operations was $23.5 million for fiscal 2004 versus $23.3 million for fiscal 2003, mainly due to lower skier visits at the Company’s eastern resorts. Income from real estate operations was $38.1 million for fiscal 2004 compared to a loss of $21.1 million for fiscal 2003. Excluding gain on extinguishment of debt and gain on transfer of assets associated with extinguishment of debt in fiscal 2004, the loss from real estate operations was $10.5 million for fiscal 2004 versus a loss of $21.1 million for fiscal 2003. The Company has provided reconciliations from GAAP financial measures to non-GAAP financial measures in the tables following this discussion.

Adoption of New Statement of Financial Accounting Standards No. 150

Effective July 28, 2003, the Company adopted Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (SFAS No. 150). SFAS No. 150 establishes standards for how financial instruments with characteristics of both liabilities and equity should be measured and classified and requires that an issuer classify a financial instrument that is within its scope as a liability. All public entities are required to adopt SFAS No. 150. As a result of adopting SFAS No. 150, approximately $298.7 million of mezzanine- level preferred stock securities were reclassified to liabilities in the Company’s consolidated balance sheet in the first quarter of fiscal 2004. This represents the carrying value of all of the classes of mandatorily redeemable preferred stock. For the fourth fiscal quarter and fiscal year ended July 25, 2004, respectively, approximately $11.3 million and $43.1 million of accretion of discount and dividends on the preferred stock was included in interest expense, whereas previously it was reported as accretion of discount and dividends on mandatorily redeemable preferred stock. For the fourth fiscal quarter and fiscal year ended July 27, 2003, respectively, approximately $9.9 million and $37.6 million of accretion of discount and dividends on the preferred stock was included in accretion of discount and dividends on mandatorily redeemable preferred stock.

Use of Non-GAAP Financial Information

The Company uses both GAAP and non-GAAP metrics to measure its financial results. Management believes that non-GAAP financial measures which exclude accretion of discount and dividends on preferred stock, gain on extinguishment of debt and gain on transfer of assets associated with extinguishment of debt provide useful information to investors regarding the Company’s financial condition and results of operations. The Company has excluded accretion of discount and dividends on preferred stock from certain non-GAAP financial measures to facilitate a comparison of the Company’s financial results prior to the adoption of SFAS No. 150. Since the Company has historically reported non-GAAP results to the investment community, management also believes the inclusion of non-GAAP measures provides consistency in its financial reporting. However, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In addition to the information contained in this press release, investors should also review information contained in the Company’s Form 8-K, filed on October 26, 2004, as well as other filings on file with the Securities and Exchange Commission when assessing the Company’s financial condition and results of operations. The Company has provided reconciliations from GAAP financial measures to non-GAAP financial measures in the tables following this discussion.

About American Skiing Company

Headquartered in Park City, Utah, American Skiing Company is one of the largest operators 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; and The Canyons in Utah. More information is available on the Company’s Web site, www.peaks.com.

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