AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON June 10, 2011
Registration Statement No. 333-173567
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT UNDER
THE
SECURITIES ACT OF
1933
Peak Resorts, Inc.
(Exact name of registrant as
specified in its charter)
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Missouri
(State or other jurisdiction
of
incorporation or organization)
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7990
(Primary Standard Industrial
Classification Code Number)
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43-1793922
(IRS Employer
Identification No.)
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17409 Hidden Valley Drive
Wildwood, Missouri 63025
(636) 938-7474
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Timothy D. Boyd
17409 Hidden Valley Drive
Wildwood, Missouri 63025
(636) 549-0060
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
With copies to:
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David W. Braswell
Armstrong Teasdale LLP
7700 Forsyth Boulevard, Suite 1800
St. Louis, Missouri 63105
(314) 552-6631
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Carmelo M. Gordian
David M. Kavanaugh
Laurie M. Pompa
Andrews Kurth LLP
111 Congress Avenue, Suite 1700
Austin, Texas 78701
(512) 320-9290
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after this Registration
Statement is declared effective.
If any securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(c) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer x
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the
registration statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and
may be changed. These securities may not be sold until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell nor does it seek an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
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PRELIMINARY PROSPECTUS |
SUBJECT TO COMPLETION, DATED JUNE 10, 2011 |
Shares
Peak Resorts, Inc.
Common Stock
This is the initial public offering of our common stock. We are
offering shares of our common stock. No public
market currently exists for our common stock. We currently
expect the initial public offering price to be between
$ and
$ per share. We have applied to
list our common stock on the NASDAQ Global Market
(NASDAQ) under the symbol PEAK. There is
no assurance that this application will be approved.
Investing in our common stock involves risk. See
Risk Factors beginning on page 7 to read about
risks you should consider before buying our common stock.
Neither the Securities and Exchange Commission (the
SEC), any state securities commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this registration
statement. Any representation to the contrary is a criminal
offense.
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Per
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Share
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Total
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Initial public offering price
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$
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$
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Underwriting discount and
commissions(1)
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$
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$
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Proceeds, before expenses, to us
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$
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$
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(1) The underwriter is also entitled to a common stock
purchase warrant and expense reimbursement. See
Underwriting beginning on page 69 of this
Prospectus to read about underwriting discounts, commissions,
the warrant and expense reimbursement.
The underwriters have an option exercisable within 45 days
from the date of this Prospectus to purchase up
to additional shares of common stock from us at
the initial public offering price, less the underwriting
discount and commissions to cover over-allotments of shares. The
shares of common stock issuable upon exercise of the
underwriters over-allotment option have been registered
under the registration statement of which this Prospectus forms
a part.
In connection with this offering, we have also agreed to issue
to the underwriters a common stock purchase warrant to purchase
up to an aggregate of shares of common stock at
an exercise price of $ per share, assuming an
initial public offering price of $ per share,
which is the mid-point of the range listed above. The warrant is
exercisable commencing on the first anniversary of the date of
this offering and ending on the fifth anniversary of the
effective date of this offering. The warrant is not exercisable
or convertible more than five years from the effective date of
this offering.
The underwriters expect to deliver the common stock against
payment in U.S. dollars in New York, New York on or
about , 2011.
Rodman & Renshaw,
LLC
Prospectus dated , 2011.
TABLE OF
CONTENTS
No dealer, salesperson or other person is authorized to give
any information or to represent anything not contained in this
Prospectus. You must not rely on any unauthorized information or
representations. This Prospectus is an offer to sell only the
shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information
contained in this Prospectus is current only as of its date.
For investors outside the United States: We have not and the
underwriters have not done anything that would permit this
offering or possession or distribution of this Prospectus in any
jurisdiction where action for that purpose is required, other
than in the United States. Persons outside the United States who
come into possession of this Prospectus must inform themselves,
and observe any restrictions relating to, the offering of the
shares of our common stock and the distribution of this
Prospectus outside the United States.
Dealer
Prospectus Delivery Obligation
Through and including , 2011 (the 25th day
after the date of this Prospectus), all dealers effecting
transactions in these securities, whether or not participating
in this offering, may be required to deliver a Prospectus when
acting as an underwriter and with respect to an unsold allotment
or subscription.
i
Trademarks,
Trade Names and Service Marks
Wildcat Mountain Ski
AreaSM,
Mount
Snow®,
Boston Mills Ski
ResortSM,
Hidden
ValleySM
and Crotched Mountain Ski
AreaSM
are trademarks, service marks and trade names owned by certain
subsidiaries of Peak Resorts, Inc. All other brand names,
trademarks, trade names and service marks referred to in this
Prospectus are the property of their respective owners.
Industry
and Market Data
Market data and certain industry forecasts used herein were
obtained from internal surveys, market research, publicly
available information and industry publications. While we
believe that market research, publicly available information and
industry publications we use are reliable, we have not
independently verified market and industry data from third-party
sources. Moreover, while we believe our internal surveys are
reliable, they have not been verified by any independent source.
ii
PROSPECTUS
SUMMARY
This summary highlights information contained elsewhere in
this Prospectus. Because this is only a summary, it does not
contain all of the information that you should consider in
making your investment decision. For a more complete
understanding of us and this offering, you should read and
consider the entire Prospectus, including the information set
forth under Risk Factors, Managements
Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements and related notes
thereto before deciding whether to invest in our common
stock.
Except as otherwise required by the context, references to
Company, Peak, we,
us and our are to Peak Resorts, Inc. and
its subsidiaries. The historical financial statements and
financial data included in this Prospectus are those of Peak
Resorts, Inc. and its consolidated subsidiaries. Unless
otherwise indicated, we have derived industry data from publicly
available sources that we believe are reliable.
Our
Company
We are a leader and innovator in the ski industry with 12 ski
areas through the Midwest, Northeast and Southeast United
States. Our ski areas offer guests high-quality skiable terrain
as well as terrain parks for snowboarding and other snow sports.
We employ modern snowmaking technology on a majority of our
terrain that gives our guests an opportunity to participate in
snow sports even in
less-than-favorable
weather.
Combined, our ski areas had approximately 1.7 million skier
visits in the 2009/2010 ski season and approximately
1.8 million skier visits in the 2010/2011 ski season, which
we believe put us among the top U.S. companies in terms of
number of skier visits during these seasons. We now operate more
ski areas than any other company in the United States. Through
development and acquisitions, our revenues have grown
approximately 205% from fiscal 2006 to fiscal 2010.
Our largest source of revenue is the sale of ski lift tickets,
followed by food and beverage sales, equipment rentals, ski
instruction services, hotel/lodging and merchandise sales. We
generated approximately $98 million in revenue during
fiscal 2011.
Ski
Industry
The United States ski industry divides ski areas into three
categories: overnight fly destination ski areas, overnight drive
ski areas and day ski areas. We own or lease and operate
overnight drive ski areas and day ski areas, which are located
in or near metropolitan areas and target a regional market. Our
resorts appeal to both beginner and advanced skiers and draw on
the younger generation of snowboarders and others participating
in alternative snow sports.
Our
Strengths
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Our ski areas are located in geographically diverse
areas. Adverse weather patterns are challenges
that all ski area operators face. In order to mitigate the
negative effects that adverse weather may have on our overall
financial results, we have strategically acquired or developed
our ski areas in geographically diverse regions of the United
States in order to compensate for any adverse weather that one
region may experience over another during a particular ski
season.
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We own or lease and operate all of our ski
areas. We are unique in the ski industry in that
we not only own or lease our ski areas, but we operate all 12 of
our ski areas, giving us and our employees the specialized
skills and experience necessary to maintain our past success.
With this knowledge, we believe that we are in a better position
to maximize our operational efficiencies and integrate the
businesses of any future ski areas that we may acquire or
develop.
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Our acquisition strategy has proven
successful. Our commitment to efficient
snowmaking and our desire to diversify our ski area locations
have been a key component of our past acquisition strategy. Our
management team has been successful in implementing this
strategy in the past, and as a result, we have enhanced our
presence in certain regions and built a new presence in others,
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while complementing our existing ski area portfolio. The
business and acquisition experience of our management team has
allowed us to integrate these new businesses smoothly and
profitably.
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We utilize modern snowmaking technology. We
are committed to providing our guests quality ski experiences,
but at the same time, are focused on reducing our costs and
energy uses. We have invested in snowmaking technology on a
majority of our terrain that allows us to make a significant
amount of snow while reducing our energy costs.
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Our
Strategy
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We invest in and improve our existing ski
areas. Our financial success depends, in large
part, on maintaining and increasing our skier visits. We have
invested substantial amounts of money to adopt what we believe
to be the most efficient snowmaking system available as standard
equipment at all of our resorts. We believe that our snowmaking
system provides us with a competitive advantage over other ski
area operators. We also continually improve the existing
facilities and equipment at our ski areas and are currently
seeking permits for the redevelopment of our largest ski area,
Mount Snow.
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We monitor potential acquisition targets to build
geographical diversity and increase market
share. We believe that, given our profitable
results at our current resorts and our proven acquisition
history, we are positioned for further growth within the day ski
area and overnight drive ski area markets. Our past acquisitions
have been driven by our goals to diversify our locations and
increase skier visits, which will continue to be the driving
factors of any future acquisitions that we may complete.
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Risk
Factors
Before you invest in our common stock, you should be aware that
there are various risks related to, among other things:
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weather;
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seasonality;
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competition with other leisure activities and ski areas;
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the leases and permits for property underlying certain of our
ski areas;
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new acquisitions;
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environmental laws and regulations;
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our dependence on key personnel;
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the security of our guest information;
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funds for capital expenditures;
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the effect of declining revenues on margins;
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the development of our Mount Snow ski area;
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our reliance on information technology;
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our dependence on a single lender and the lenders option
to purchase certain of our ski areas;
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our dependence on a seasonal workforce; and
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the securities markets.
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For more information about these and other risks, please read
the section titled Risk Factors. You should
carefully consider these risk factors together with all of the
other information in this Prospectus.
2
Corporate
History and Additional Information
Peak Resorts, Inc. was incorporated in Missouri on
September 24, 1997 as a holding company to own or lease and
operate day ski areas and overnight drive destination ski areas
through its wholly-owned subsidiaries. Throughout the history of
the Company, including the development of the Hidden Valley and
Snow Creek ski areas before the incorporation of Peak Resorts,
Inc., the Company has acquired or developed a total number of 12
ski areas.
Our principal executive offices are located at 17409 Hidden
Valley Drive, Wildwood, Missouri 63025, telephone
(636) 938-7474.
We maintain a website at www.peakresorts.com. We will make
available on our website, free of charge, the Companys
future annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K
as soon as practical after we file these reports with the
U.S. Securities and Exchange Commission (the
SEC). The information contained on our website or
that can be accessed through our website neither constitutes
part of this Prospectus nor is incorporated by reference herein.
Summary
of the Offering
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Common stock offered by us |
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shares (or shares if the
underwriters exercise their over-allotment option in full). We
are not registering any shares of common stock held by our
stockholders. |
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Common stock to be outstanding after the offering |
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shares (or shares if the
underwriters exercise their over-allotment option in full).
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Proposed trading symbol on NASDAQ Global Market |
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PEAK |
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Use of proceeds |
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We estimate that we will receive proceeds of approximately
$ million from our offering of our common
stock, after deducting underwriting discounts and commissions
and estimated offering expenses payable by us, assuming the
shares are offered at $ per share, which is
the midpoint of the estimated offering price range shown on the
front cover page of this Prospectus. We will use approximately
$ of the net proceeds from this offering to
repay a portion of the outstanding balance due under a
promissory note in favor of our lender for the development of
our Mount Snow ski area. In addition, we will use approximately
$ million of the proceeds to partially
fund the purchase and construction of a new chair lift at Mount
Snow. We intend to use the remaining proceeds for working
capital and general corporate purposes. See Use of
Proceeds for additional details. |
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Dividend policy |
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We currently expect to pay dividends on a quarterly basis,
subject to the availability of funds during the quarterly
periods. Our ability to pay dividends on our common stock is
also limited by our existing debt agreements and may be further
restricted by the terms of any future debt or preferred
securities. See Dividend Policy for additional
details. |
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Risk factors |
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Investment in our common stock involves a high degree of risk.
You should read and consider the information set forth under the
heading Risk Factors and all other information
included in this Prospectus before deciding to invest in our
common stock. |
The number of shares of common stock shown in this Prospectus to
be outstanding after this offering is based on the number of
shares outstanding as of , 2011 and
excludes shares reserved for issuance pursuant
to the 2011 omnibus incentive plan that we intend to adopt prior
to the completion of this offering. Except as otherwise noted,
all information in this Prospectus:
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assumes no exercise of the underwriters overallotment
option;
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does not give effect to the Companys C-corporation
election to be effected prior to the offering; and
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does not give effect to an assumed 175 for 1 stock split to be
effective as of , 2011.
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Summary
Historical Consolidated Financial Data
The following summary consolidated financial information for
each of the years in the three-year period ended April 30,
2011 is based on our audited consolidated financial statements
included elsewhere in this Prospectus. The information set forth
below should be read together with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and our consolidated historical financial
statements and the notes to our consolidated financial
statements included elsewhere in this Prospectus.
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Year ended April 30,
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2011
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2010
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2009
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(In thousands, except per share information and ski areas
owned/leased and operated)
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Income Statement Information:
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Revenues
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$
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97,586
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$
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89,846
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$
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84,293
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Operating expenses
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80,817
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76,074
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74,393
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Income from operations
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16,769
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13,772
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9,900
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Interest expense, net
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(11,338
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(11,370
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(10,818
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Other income, excluding interest
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973
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431
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426
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Income (loss) before taxes
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6,404
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2,833
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(492
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Income tax expense(1)
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(10,410
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Net Income (loss)
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$
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(4,006
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$
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2,833
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$
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(492
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Basic and diluted earnings (loss) per share
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$
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(100.59
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$
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71.14
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$
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(12.36
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Basic and diluted earnings (loss) per share assuming stock split
prior to pro forma tax adjustment(2)
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$
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(0.57
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$
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0.41
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$
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(0.07
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Pro Forma Adjustments:
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Net Income (loss) before taxes as reported
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$
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6,404
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$
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2,833
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$
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(492
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Pro forma adjustment for income tax expense (benefit)(3)
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2,546
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1,208
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(8
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Pro forma net income (loss)
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$
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3,858
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$
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1,625
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$
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(484
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Pro forma basic and diluted net income (loss) per share assuming
tax adjustment
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$
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96.88
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$
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40.80
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$
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(12.16
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Pro forma basic and diluted net income (loss) per share assuming
pro forma tax adjustment and stock split(2)
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$
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0.55
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$
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0.23
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$
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(0.07
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Other Financial Information (unaudited):
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Reported EBITDAR(4)
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$
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26,770
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$
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23,175
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$
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18,548
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Capital expenditures(5)
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19,116
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6,009
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12,076
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Cash (end of period)(6)
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16,463
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19,508
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10,937
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Total debt (end of period)(7)
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144,058
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138,621
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134,856
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Operating data (unaudited):
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Skier visits
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1,752
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1,669
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1,543
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Ski areas owned/leased and operated(8)
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12
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11
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11
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4
The following table presents a summary of our balance sheet as
of April 30, 2011 on an actual basis and on a pro forma
basis to reflect the sale in this offering
of shares of common stock at an assumed
initial public offering price of $ per share,
which is the mid-point of the range listed on the cover of this
Prospectus, after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us.
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As of April 30, 2011
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(Unaudited)
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Pro Forma
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Actual
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Offering
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(In thousands)
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Balance Sheet Information:
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Cash (6)
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$
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16,463
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$
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Total assets
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180,521
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Net property and equipment
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117,801
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Debt (including current portion)
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144,058
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Stockholders equity
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7,578
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(1) Prior to its C-corporation election, the Company and
its subsidiaries elected and received approval from the Internal
Revenue Service to be taxed as S-corporations for federal tax
purposes. Pursuant to those elections, federal income taxes and
income taxes related to certain other jurisdictions are the
responsibility of the individual stockholders, and therefore,
the consolidated statements of loss included with this
Prospectus do not include provisions for income taxes. One state
in which the Company operates does not recognize the
Companys S-corporation election; however, entity level
income taxes levied by that state are immaterial.
(2) Where noted, per share calculations reflect the assumed
175 for 1 stock split to be effected prior to this
offering.
(3) Effective as of April 30, 2011, the Company terminated
its S-corporation election and is now taxed as a C-corporation.
As a C-corporation, the Company will be liable for federal and
state corporate income taxes on its taxable income. As result of
the termination of the subchapter S-election, the Company
recognized deferred income tax expense, such expense resulting
from the recognition of its deferred tax assets and liabilities
at April 30, 2011, the date it became a C-corporation. For
fiscal 2011, pro forma income tax expense excludes the impact of
the deferred taxes recorded as a result of the
S-corporation
election and, similar to fiscal 2010 and fiscal 2009, assumes
income tax expense as if the Company was a
C-corporation
for the entire year.
(4) We have chosen to specifically include Reported EBITDAR
(defined as net income before interest, income taxes,
depreciation and amortization, gain on sale leaseback,
investment income, other income or expense, property rent and
other non-recurring items) as a measurement of our results of
operations because we consider this measurement to be a
significant indication of our financial performance and
available capital resources. Reported EBITDAR is not a measure
of financial performance under U.S. generally accepted
accounting principles (GAAP). We provide a
reconciliation of Reported EBITDAR to net income, the most
directly-comparable GAAP measurement, below.
Management considers Reported EBITDAR to be a significant
indication of our financial performance and available capital
resources. Because of large depreciation and other charges
relating to our ski areas, it is difficult for management to
fully and accurately evaluate our financial results and
available capital resources using net income. Management
believes that by providing investors with Reported EBITDAR,
investors will have a clearer understanding of our financial
performance and cash flow because Reported EBITDAR: (i) is
widely used in the ski industry to measure a companys
operating performance without regard to items excluded from the
calculation of such measure, which can vary by company primarily
based upon the structure or existence of their financing;
(ii) helps investors to more meaningfully evaluate and
compare the results of our operations from period to period by
removing the effect of our capital structure and asset base from
our operating structure; and (iii) is used by our
management for various purposes, including as a measure of
performance of our operating entities and as a basis for
planning. Furthermore, as noted above, Reported EBITDAR excludes
land and property rent. Financing costs on land and property
that we own are accounted for as interest expense, which is also
excluded in Reported EBITDAR. Rent costs associated with the
land and property that we lease are not, however, accounted for
as interest expense, but have the same effect on our operating
results as the financing costs on property that we own. As such,
we believe
5
that excluding land and property rent from our net income in
Reported EBITDAR provides management and investors with a more
accurate understanding of our cash flow and results of
operations, as noted in this paragraph.
Items excluded from Reported EBITDAR are significant components
in understanding and assessing financial performance or
liquidity. Reported EBITDAR should not be considered in
isolation or as alternative to, or substitute for, net income,
net change in cash and cash equivalents or other financial
statement data presented in the consolidated financial
statements as indicators of financial performance or liquidity.
Because Reported EBITDAR is not a measurement determined in
accordance with GAAP and is susceptible to varying calculations,
Reported EBITDAR as presented may not be comparable to other
similarly titled measures of other companies.
The following table includes a reconciliation of Reported
EBITDAR to net income (loss) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,006
|
)
|
|
$
|
2,833
|
|
|
$
|
(492
|
)
|
Income tax provision
|
|
|
10,410
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
11,338
|
|
|
|
11,370
|
|
|
|
10,818
|
|
Depreciation and amortization
|
|
|
8,054
|
|
|
|
7,545
|
|
|
|
6,813
|
|
Land and building rent
|
|
|
1,948
|
|
|
|
1,858
|
|
|
|
1,835
|
|
Investment income
|
|
|
(241
|
)
|
|
|
(98
|
)
|
|
|
(269
|
)
|
Gain on sale/leaseback
|
|
|
(333
|
)
|
|
|
(333
|
)
|
|
|
(333
|
)
|
Gain on acquisition
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
Reported EBITDAR
|
|
$
|
26,770
|
|
|
$
|
23,175
|
|
|
$
|
18,548
|
|
|
|
|
(5) Capital expenditures include the Wildcat Mountain
acquisition for the year ended April 30, 2011, which was
financed with a seller note.
(6) Cash excludes restricted cash.
(7) Total debt includes current and long-term maturities of
long-term debt and capital lease obligations.
(8) Effective in October 2010, we acquired substantially
all of the assets and business of Wildcat Mountain ski resort.
We have included Wildcat Mountains results of operations
in our financial statements since the date of acquisition.
6
RISK
FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider and evaluate all of the
information in this Prospectus, including the risks and
uncertainties described below, which we believe describe the
most significant risks of an investment in our common stock,
before making a decision to invest in our common stock. The
occurrence of any of the following risks and uncertainties could
harm our business, financial condition, results of operations or
growth prospects. As a result, the trading price of our common
stock could decline, and you could lose all or part of your
investment.
Risks
Related to the Company
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 patterns 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 the end of March. Accordingly,
during the past three fiscal years, we generated, on average,
approximately 91% 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 2010/2011 ski
season, we generated approximately 31% of our revenues on
weekends and approximately 27% 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 necessarily 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 compete with other leisure activities and ski areas, which
makes maintaining our customer base difficult.
The skiing industry is highly competitive and capital intensive.
Our ski resorts located in the Northeastern United States, such
as Mount Snow, Attitash and Wildcat Mountain, and those located
in the Southeastern United States (which includes Pennsylvania
for purposes of ski industry statistics), such as Jack Frost and
Big Boulder, compete against other ski areas in their markets
for both day skiers and extended travel 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.
We believe that while our Midwestern United States 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 United States face similar competition, in
addition to the competition outlined above. Our ability to
maintain our levels of
7
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.
The leases for the land underlying Jack Frost and Big Boulder
may be terminated by the landlord and if terminated, would
eliminate revenues from these resorts.
We do not own the land underlying the Jack Frost and Big Boulder
resorts. We have entered into a lease with Big Boulder
Corporation and a lease with Blue Ridge Real Estate Company,
both of which terminate on December 1, 2033. The terms of
the leases provide that the landlord has a right to terminate
the leases at any time, upon the payment of approximately
$500,000 plus the net book value of the assets relating to the
property. If these leases are terminated, we would not be able
to operate Jack Frost and Big Boulder, and therefore, the
revenues generated by these resorts would be eliminated. Jack
Frost and Big Boulder each generated 6% of our consolidated
revenues for the fiscal year ended April 30, 2011,
respectively.
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 continually evaluate potential acquisitions and intend to
actively pursue acquisition opportunities, some of which could
be significant. For example, our acquisition of Mount Snow in
2007 involved the addition of property and operations that made
up 26% of our revenues during the 2007 ski season. Our failure
to merge the Mount Snow operations with our existing operations
and effectively manage the additional large-scale property would
have had a material negative effect on our results of operations.
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 not be successful and could 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 managements 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
non-amortizable
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 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 areas are subject to environmental review under
the National Environmental Policy Act. Both acts require that
the United States Forest Service study any proposal for
potential environmental impacts and include in its analysis
various alternatives. Our ski area 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.
8
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 would 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 and
accounting officer, and Richard Deutsch, our vice president in
charge of business and real estate development. The loss of the
services of this management team could have a material adverse
effect on our business and operations because of Messers.
Boyds, Muellers and Deutschs specific and
unique knowledge of operating multiple ski resorts, including
day ski areas and overnight drive ski areas.
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.
Our business requires significant capital expenditures to
both maintain and improve our ski areas 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 2011 were
approximately $19 million, and we currently anticipate that
capital expenditures will be approximately $11 million to
$13 million for fiscal 2012. 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.
9
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.
The high fixed cost structure of ski resort operations can
result in significantly lower margins 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 margins, 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 margin, profits and cash
flows.
We may be unable to further develop our Mount Snow property
if we are unable to obtain approval under Vermonts Act
250.
We have plans to further develop our resort at Mount Snow. Such
plans are subject to approval by the Vermont District
Environmental Commission under Vermonts Act 250, the Land
Use and Development Act. Our master plan is currently in the
approval process, but we will also need to submit applications
for the construction phases after the master plan has been
approved. Our master plan contemplates the redevelopment of
skier service buildings, parking lots and ski-in/ski-out real
estate. Failure to obtain approval at any stage of the process
could cause a delay of such plans or prevent us from executing
such redevelopment plans that we expect will enhance a
skiers experience at Mount Snow.
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, Crotched
Mountain, Mad River, Jack Frost and Big Boulder from third
parties. Our lease at Paoli Peaks terminates in 2078, our lease
at Crotched Mountain terminates in 2053 (though we have 10
options to extend the lease for additional periods of
15 years each), and our lease at Mad River terminates in
2026. Currently, the leases for our Jack Frost and Big Boulder
resorts provide that the lessor has a right to terminate the
leases at any time, upon the payment of certain fees. Combined,
these resorts contributed approximately 27.8% of our total
revenues for the year ended April 30, 2011. 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 United States Forest Service. The permits give
the United States 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 United States
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
affect on our results of operations. Currently, our permits
expire as follows:
|
|
|
Ski Area
|
|
Special Use Permit Expiration Date
|
Attitash
|
|
April 4, 2047
|
Mount Snow
|
|
April 4, 2047
|
Wildcat Mountain
|
|
November 18, 2050
|
10
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 financing and credit.
We have historically relied on one lender and its affiliates,
Entertainment Properties Trust, Inc. (EPT), for
substantially all of our financing and credit needs, including
financing relating to our resort acquisitions. EPT 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
EPT 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 EPT. 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 managements 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.
11
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.
Our lender has an option to purchase, or assume our leases
relating to, certain of our ski areas. If our lender exercises
this option, we would incur significant tax obligations.
On October 30, 2007, we entered into an Option Agreement
with EPT Ski Properties, Inc., a subsidiary of our lender, EPT,
pursuant to which EPT Ski Properties, Inc. has the option to
a) purchase Hidden Valley, Snow Creek, Brandywine, Boston
Mills and the portion of Paoli Peaks that we own, at the prices
set forth in the Option Agreement, and b) assume our leases
relating to Big Boulder, Jack Frost and the portion of Paoli
Peaks that we lease. According to the terms of the Option
Agreement, EPT Ski Properties, Inc. may exercise its option
relating to one or more properties on or after April 11,
2011 until we satisfy our obligations under the Amended and
Restated Credit and Security Agreement among certain of our
subsidiaries and EPT Ski Properties, Inc., dated as of
October 30, 2007, as amended. If EPT Ski Properties, Inc.
exercises its option with respect to any of the properties, it
is required under the Option Agreement to immediately lease or
sublease such properties back to us on substantially the same
terms as the existing financing or lease arrangements relating
to the properties.
Over the years, we have depreciated the value of these
properties pursuant to applicable accounting rules, and as such,
we have a low basis in the properties. As a result, we will
realize significant gains on the sale of the properties to EPT
Ski Properties, Inc. if the option is exercised. We will be
required to pay capital gains tax on the difference between the
purchase price of the properties and the tax basis in the
properties, which we expect to be a substantial cost. As of the
date of this Prospectus, EPT Ski Properties, Inc. has not
exercised the option.
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.
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.
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
12
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 this Offering and Ownership of Our Common
Stock
An active, liquid trading market for our common stock may not
develop.
Prior to this offering, there has not been a public market for
our common stock. We cannot predict the extent to which investor
interest in our Company will lead to the development of a
trading market on the NASDAQ Global Market or otherwise or how
active and liquid that market may become. If an active and
liquid trading market does not develop, you may have difficulty
selling any of our common stock that you purchase. The initial
public offering price for the shares will be determined by
negotiations between us and the underwriters and may not be
indicative of prices that will prevail in the open market
following this offering. The market price of our common stock
may decline below the initial offering price, and you may not be
able to sell your shares of our common stock at or above the
price you paid in this offering, or at all.
Our stock price may change significantly following the
offering, and you could lose all or part of your investment as a
result.
We and the underwriters will negotiate to determine the initial
public offering price. You may not be able to resell your shares
at or above the initial public offering price or at all due to a
number of factors such as those listed in
Risks Related to the Company and the
following, some of which are beyond our control:
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quarterly variations in our results of operations;
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results of operations that vary from those of our competitors;
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changes in expectations as to our future financial performance,
including financial estimates by securities analysts and
investors;
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announcements by us, our competitors or our vendors of
significant contracts, acquisitions, joint marketing
relationships, joint ventures or capital commitments;
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announcements by third parties of significant claims or
proceedings against us;
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future sales of our common stock; and
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changes in investor sentiment toward the stock of ski resort and
recreational services companies in general.
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Furthermore, the stock market has recently 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
managements attention, and may affect our ability to
attract and retain qualified board members and executive
officers.
Prior to this offering, we have not been subject to the
reporting requirements of the Securities Exchange Act of 1934
(the Exchange Act) or the other rules and
regulations of the SEC or any securities exchange relating to
public companies. Upon becoming a public company, we will be
required to comply with the SECs rules implementing
Section 302 of the Sarbanes-Oxley Act of 2002, which will
require our management to certify
13
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 will not be required to make our first assessment of our
internal control over financial reporting until the year
following our first annual report required to be filed with the
SEC. Our independent registered public accounting firm will be
required to formally attest to the effectiveness of our internal
control over financial reporting when we become an
accelerated filer as defined in
Rule 12b-2
of the Exchange Act.
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 prepare
adequately for becoming 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 managements 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.
We expect that upon completion of this offering, Timothy D.
Boyd, Stephen J. Mueller and Richard Deutsch, three of our named
executive officers, along with three of Mr. Boyds
siblings will own, together, a majority of our outstanding
stock. Because a limited number of persons may exert substantial
influence over us, transactions could be difficult or impossible
to complete without the support of those persons. It is possible
that these persons will exercise control over us in a manner
adverse to your interests.
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 following this offering, 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. Based
on shares of common stock outstanding as
of , upon completion of this offering, we will
have shares of common stock outstanding. Of
these outstanding shares, all of the shares of our common stock
sold in this offering will be freely tradable in the public
market, except for any shares held by our affiliates as defined
in Rule 144 of the Securities Act.
We, our directors and executive officers and substantially all
of our stockholders have agreed with the underwriters, subject
to certain exceptions, not to dispose of or hedge any shares of
our common stock or any securities convertible into, or
exercisable or exchangeable for, shares of our common stock for
a period of 180 days from the date of this Prospectus,
which may be extended upon the occurrence of specified events,
except with the prior written consent of Rodman &
Renshaw, LLC. Rodman & Renshaw, LLC, in its sole
discretion, may release any of the securities subject to these
lock-up
agreements at any time without notice.
After the expiration of the
lock-up
agreements and other contractual restrictions that prohibit
transfers for at least 180 days after the date of this
Prospectus, up to restricted securities may be
sold into the public market in the future without registration
under the Securities Act to the extent permitted under
Rule 144. Of these restricted securities,
approximately shares will be available for sale
approximately days after the date of this
Prospectus subject to volume or other limits under Rule 144.
14
If securities or industry analysts do not publish research or
reports about our business, if they adversely change their
recommendations regarding our common stock, or if our operating
results do not meet their expectations, our stock price and
trading volume could decline.
The trading market for our common stock will be influenced by
the research and reports that securities or industry analysts
publish about us or our business. Securities analysts may elect
not to provide research coverage of our common stock. This lack
of research coverage could adversely affect the price of our
common stock. We do not have any control over these reports or
analysts. If any of the analysts who cover our Company
downgrades our stock, or if our operating results do not meet
the analysts expectations, our stock price could decline.
Moreover, if any of these analysts ceases coverage of our
Company or fails to publish regular reports on our business, we
could lose visibility in the financial markets, which in turn
could cause our stock price and trading volume to decline.
You will experience immediate and substantial dilution in the
book value of your common stock as a result of this offering.
The initial public offering price of our common stock is
considerably more than the pro forma, net tangible book value
per share of our outstanding common stock. This reduction in the
value of your equity is known as dilution. This dilution occurs
in large part because our earlier investors paid substantially
less than the initial public offering price when they purchased
their shares. Investors purchasing common stock in this offering
will incur immediate dilution of $ in pro
forma, net tangible book value per share of common stock, based
on the assumed initial public offering price of
$ per share which is the midpoint of the price
range listed on the front cover page of this Prospectus. In
addition, following this offering, purchasers in the offering
will have contributed % of the total
consideration paid by our stockholders to purchase shares of
common stock. For a further description of the dilution that you
will experience immediately after this offering, see the section
of this Prospectus entitled Dilution. In addition,
if we raise funds by issuing additional securities, the
newly-issued shares will further dilute your percentage
ownership of our Company.
Our management will have broad discretion over the proceeds
we receive in this offering and might not apply the proceeds in
ways that increase the value of your investment.
Our management will have broad discretion to use our net
proceeds from this offering, and you will be relying on their
judgment regarding the application of these proceeds. Our
management might not apply our net proceeds of this offering in
ways that increase the value of your investment. We expect to
use the net proceeds from this offering to repay existing debt,
to partially fund a new chair lift and for general working
capital purposes. You will not have the opportunity to influence
our decisions on how to use our net proceeds from this offering.
We have anti-takeover provisions in our organizational
documents that may discourage a change of control.
Certain provisions of our amended and restated articles of
incorporation and amended and restated bylaws may have an
anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in
its best interest, including those attempts that might result in
a premium over the market price for the shares held by our
stockholders.
These provisions provide for, among other things:
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advance notice for nominations of directors by stockholders and
for stockholders to include matters to be considered at our
annual meetings;
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certain limitations on convening special stockholder meetings;
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the removal of directors only for cause by our board of
directors or upon the affirmative vote of holders of at least
66-2/3% of the shares of common stock entitled to vote generally
in the election of directors; and
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that the amended and restated bylaws may only be amended by our
board of directors.
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These anti-takeover provisions could make it more difficult for
a third party to acquire our Company, even if the third
partys offer may be considered beneficial by many of our
stockholders. As a result, our stockholders may be limited in
their ability to obtain a premium for their shares.
15
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements
within the meaning of the federal securities laws. All
statements other than statements of historical facts included in
this Prospectus, including 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 Managements Discussion
and Analysis of Financial Condition and Results of
Operations, are forward-looking statements. In addition,
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, managements 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
Prospectus. Important factors that could cause actual results to
differ materially from our expectations include, among others
(including the factors described in the section entitled
Risk Factors in this Prospectus):
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unfavorable weather conditions;
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seasonality of operations;
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competition;
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continuation of our property leases;
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future acquisitions;
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environmental regulations;
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maintenance of private guest information;
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capital expenditures;
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development of Mount Snow land;
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continuation of forest service permits;
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dependence on our lender;
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litigation; and
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disruption in our water supply.
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You should also refer to the section of this Prospectus entitled
Risk Factors 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 Prospectus 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.
All written and oral forward-looking statements attributable to
us, or persons acting on our behalf, are expressly qualified in
their entirety by these cautionary statements. You should
evaluate all forward-looking statements made in this Prospectus
in the context of these risks and uncertainties.
We caution you that the important factors referenced above may
not contain all of the factors that are important to you.
16
CORPORATE
ORGANIZATIONAL STRUCTURE
USE OF
PROCEEDS
We estimate that we will receive net proceeds of approximately
$ million from the sale
of shares of our common stock in this offering,
assuming an initial public offering price of $
per share, the mid-point of the estimated price range set forth
on the cover page of this Prospectus, and after deducting the
underwriting discounts and commissions and estimated offering
expenses payable by us.
We intend to use approximately $ million of
the net proceeds from this offering for repayment of a portion
of the outstanding debt relating to the development of our Mount
Snow ski area. On April 4, 2007, we and our subsidiary
Mount Snow, Ltd., as borrowers, entered into a promissory note
in favor of EPT Mount Snow, Inc., as lender, in the amount of
$25.0 million, which was later modified by the Modification
Agreement dated as of April 1, 2010 to increase the amount
of funds available under such loan to $41.0 million. The
outstanding balance under this promissory note accrues interest
at a rate of 10.00% annually.
We intend to use approximately $ million
of the net proceeds to partially fund the purchase and
construction of a new high-speed six-passenger bubble chair lift
at Mount Snow.
The remaining proceeds will be used for working capital and
general corporate purposes.
Pending these uses, we plan to invest the net proceeds in a
variety of capital preservation instruments, including
short-term, interest bearing investment grade securities. The
goal with respect to the investment of these net proceeds is
capital preservation and liquidity so that such funds are
readily available.
DIVIDEND
POLICY
We intend to pay dividends on our common stock quarterly,
subject to the availability of funds during the quarterly
periods. Any decision to pay dividends, however, is at the
discretion of our board of directors and will depend on, among
other things, our results of operations, financial condition,
level of indebtedness, cash requirements, contractual
restrictions and other factors that our board of directors may
deem relevant. In addition, our ability to pay dividends is
limited by our existing debt agreements and may be further
limited by the terms of any future debt or preferred securities.
17
CAPITALIZATION
The following table sets forth our capitalization as of
April 30, 2011 on an actual basis and on a pro forma basis
to reflect the sale in this offering
of shares of common stock at an assumed
initial offering price of per share, which is
the mid-point of the range listed on the cover of this
Prospectus, after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us.
You should read the following table in conjunction with our
consolidated financial statements and related notes,
Selected Historical Consolidated Financial Data and
Managements Discussion and Analysis of Financial
Condition and Results of Operations, included elsewhere in
this Prospectus.
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(in millions)
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As of April 30, 2011
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(unaudited)
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Pro Forma
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Adjusted
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Offering1
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Cash and cash equivalents
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$
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16.5
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$
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Debt:
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Current portion of long-term debt
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$
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34.8
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$
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Long-term debt, less current portion
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109.3
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144.1
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Stockholders
Equity2
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Common Stock, $0.01 par value;
20,000,000 shares authorized,
7,832,4753 shares
issued, actual, 6,969,200 shares issued and outstanding,
pro forma
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-
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Additional paid-in capital
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0.4
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Retained earnings
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7.2
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7.6
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7.6
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Total capitalization
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$
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151.7
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$
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(1) |
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A $1.00 increase (decrease) in the assumed initial public
offering price of $ per share would increase
(decrease) cash and cash equivalents, additional
paid-in-capital,
total stockholders equity and total capitalization by
approximately $ million, assuming the number
of shares offered by us, as set forth on the cover page of this
Prospectus, remains the same and after deducting underwriter
discounts and estimated offering expenses payable by us. |
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(2) |
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In connection with the initial public offering of our common
stock, we have adopted Amended and Restated Articles of
Incorporation. Pursuant to the Amended and Restated Articles of
Incorporation, we have 20,000,000 shares of common stock
authorized for issuance, par value $0.01 per share. |
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(3) |
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Pro forma adjustment assuming 175 for 1 stock split. |
18
DILUTION
If you invest in our common stock, your investment will be
diluted immediately to the extent of the difference between the
public offering price per share of our common stock and the pro
forma net tangible book value per share of our common stock
after this offering. Our pro forma net tangible book value as
of was approximately $
million, or $ per share of common stock. Pro
forma net tangible book value per share represents the amount of
our total tangible assets, less our total liabilities, divided
by the number of shares of common stock outstanding as
of after giving effect to an assumed 175 for 1
stock split as if it had occurred prior to April 30, 2011.
Net tangible book value dilution per share to new investors
represents the difference between the amount per share paid by
purchasers of shares of common stock in this offering and the
pro forma net tangible book value per share of common stock
immediately after the completion of this offering. After giving
effect to our sale of shares of common stock in this offering at
the initial public offering price of $ per
share, after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us and
after giving effect to estimates of certain expenses that we
expect to be reimbursed, our pro forma as adjusted net tangible
book value as of would have been
$ million, or $ per share.
This represents an immediate increase in net tangible book value
of $ per share to existing stockholders and an
immediate dilution in net tangible book value of
$ per share to investors purchasing common
stock in this offering, as illustrated by the following table:
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Initial public offering price per share
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$
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Pro forma net tangible book value per share prior to this
offering as of , 2011
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$
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Increase in net tangible book value per share attributable to
this offering
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$
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Pro forma net tangible book value per share after this offering
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$
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Dilution in net tangible book value per share to new stockholders
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$
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The following table summarizes, on the same pro forma basis as
of , the differences between the existing
stockholders and the new stockholders in this offering with
respect to the number of shares purchased from us, the total
consideration paid, and the average price per share paid before
deducting the underwriting discounts and commissions and
estimated offering expenses payable by us. The calculations,
with respect to shares purchased by new investors in this
offering, reflect an assumed initial public offering price of
$ per share, the midpoint of the price range
set forth on the front cover page of this Prospectus.
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Average Price
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Shares Purchased
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Total Consideration
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Per Share
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Number
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Percent
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Amount
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Percent
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Existing stockholders
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New investors
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Total
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The number of shares of common stock outstanding in the table
above is based on the pro forma number of shares outstanding as
of which assumes no exercise of the
underwriters over-allotment option. If the
underwriters over-allotment option is exercised in full,
the number of shares of common stock held by existing
stockholders will be reduced to % of the total
number of shares of common stock to be outstanding after this
offering, and the number of shares of common stock held by
investors participating in this offering will be increased
to shares or % of the total
number of shares of common stock to be outstanding after this
offering.
19
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA
Effective with the fiscal year ended April 30, 2007, we
changed our fiscal year end from March 31 to April 30. As a
result, our fiscal year ended April 30, 2007 consists of
13 months. The following tables set forth our selected
historical consolidated financial data for the fiscal years
ended April 30, 2011, 2010, 2009 and 2008 and the fiscal
period ended April 30, 2007. The selected historical
financial data for the fiscal years ended April 30, 2011,
2010, 2009 and 2008 and the selected consolidated balance sheet
data as of April 30, 2011 and 2010 has been derived from
our audited consolidated financial statements included elsewhere
in this Prospectus. The selected historical financial data for
the fiscal period ended April 30, 2007 and the selected
consolidated balance sheet data as of April 30, 2007 has
been derived from our audited consolidated financial statements
not included in this Prospectus, which, in the opinion of
management, include all adjustments, consisting only of usual
recurring adjustments, necessary for fair presentation of such
data.
The following table should be read in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the financial
statements included elsewhere in this Prospectus.
The data presented below are in thousands, except for diluted
net income per share attributed to Peak Resorts, Inc. and the
effective ticket price (ETP) amounts.
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(Unaudited)
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Twelve
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Year Ended
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Months
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Period Ended
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April 30,
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Ended
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April 30,
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April 30,
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2011(1)
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2010
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2009
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2008
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April 30, 2007
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2006
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2007(1)(2)
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|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$97,586
|
|
|
|
$89,846
|
|
|
|
$84,293
|
|
|
|
$84,817
|
|
|
|
$49,668
|
|
|
|
$40
|
|
|
|
$49,708
|
|
Operating expense
|
|
|
70,815
|
|
|
|
66,672
|
|
|
|
65,745
|
|
|
|
70,787
|
|
|
|
37,228
|
|
|
|
1,063
|
|
|
|
38,291
|
|
Depreciation and amortization
|
|
|
8,054
|
|
|
|
7,545
|
|
|
|
6,813
|
|
|
|
6,478
|
|
|
|
3,876
|
|
|
|
273
|
|
|
|
4,149
|
|
Land and building rent
|
|
|
1,948
|
|
|
|
1,858
|
|
|
|
1,835
|
|
|
|
1,815
|
|
|
|
1,595
|
|
|
|
124
|
|
|
|
1,719
|
|
Interest expense, net
|
|
|
11,338
|
|
|
|
11,370
|
|
|
|
10,818
|
|
|
|
9,510
|
|
|
|
4,230
|
|
|
|
168
|
|
|
|
4,398
|
|
Gain on sale/leaseback
|
|
|
333
|
|
|
|
333
|
|
|
|
333
|
|
|
|
333
|
|
|
|
333
|
|
|
|
28
|
|
|
|
361
|
|
Gain on acquisition
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense)
|
|
|
|
|
|
|
|
|
|
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income
|
|
|
240
|
|
|
|
98
|
|
|
|
269
|
|
|
|
323
|
|
|
|
119
|
|
|
|
6
|
|
|
|
125
|
|
Income (loss) before income
taxes(3)
|
|
|
6,404
|
|
|
|
2,833
|
|
|
|
(492
|
)
|
|
|
(3,117
|
)
|
|
|
3,191
|
|
|
|
(1,554
|
)
|
|
|
1,637
|
|
Net income
(loss)(4)
|
|
|
$(4,006
|
)
|
|
|
$2,833
|
|
|
|
$(492
|
)
|
|
|
$(3,117
|
)
|
|
|
6,920
|
|
|
|
(1,554
|
)
|
|
|
$5,366
|
|
Basic and diluted earnings (loss) per share
|
|
|
$(100.59
|
)
|
|
|
$71.14
|
|
|
|
$(12.36
|
)
|
|
|
$(78.27
|
)
|
|
|
173.75
|
|
|
|
(39.02
|
)
|
|
|
$134.73
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skier
visits(5)
|
|
|
1,752
|
|
|
|
1,669
|
|
|
|
1,543
|
|
|
|
1,628
|
|
|
|
1,349
|
|
|
|
|
|
|
|
1,349
|
|
ETP(6)
|
|
|
$29.07
|
|
|
|
$27.82
|
|
|
|
$28.16
|
|
|
|
$26.38
|
|
|
|
$27.46
|
|
|
|
N/A
|
|
|
|
$27.46
|
|
Other Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents(7)
|
|
|
$16,463
|
|
|
|
$19,508
|
|
|
|
$10,937
|
|
|
|
$11,233
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$9,498
|
|
Total assets
|
|
|
$180,521
|
|
|
|
$170,254
|
|
|
|
$161,088
|
|
|
|
$152,984
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$136,300
|
|
Long-term debt and capitalized lease obligations (including
long-term debt due within one year)
|
|
|
$144,058
|
|
|
|
$138,621
|
|
|
|
$134,856
|
|
|
|
$124,978
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$104,934
|
|
Net
debt(8)
|
|
|
$127,595
|
|
|
|
$119,113
|
|
|
|
$123,919
|
|
|
|
$113,746
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$95,436
|
|
Total stockholders equity
|
|
|
$7,578
|
|
|
|
$13,733
|
|
|
|
$11,109
|
|
|
|
$11,889
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$15,099
|
|
|
|
|
(1) |
|
We made three acquisitions which impact the comparability from
fiscal year 2007 through fiscal year 2011. During the period
ended April 30, 2007, we acquired Mount Snow, Ltd. (Mount
Snow Ski Resort) and L.B.O. Holding, Inc. (Attitash Ski Resort).
Effective October 20, 2010, we acquired substantially all
of the |
20
|
|
|
|
|
assets of Wildcat Mountain Ski Area. The results of operations
of these acquisitions have been included in our financial
statements since the dates of the acquisitions. |
|
|
|
(2) |
|
We changed our fiscal year end from March 31 to April 30
effective with the fiscal year ended April 30, 2007. The
period ended April 30, 2007 is comprised of 13 months. |
|
|
|
(3) |
|
The Company was an S-corporation for federal and state income
tax purposes until April 30, 2011 when it terminated its
S-corporation election. As a result we did not have a provision
for income taxes, except in fiscal 2007 when we wrote off our
deferred income taxes as noted below during the period ended
April 30, 2007. The Company revoked its S-corporation
election effective April 30, 2011. In connection with the
revocation, deferred income taxes were reinstated for the tax
effect of temporary differences. |
|
|
|
(4) |
|
The deferred income taxes recorded by Mount Snow, Ltd. and L.B.O
Holding, Inc. were written off when they were approved as
qualified S-corporations. |
(5) |
|
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. |
(6) |
|
ETP is calculated by dividing lift ticket revenue by total skier
visits during the respective periods. |
(7) |
|
Cash and cash equivalents excludes restricted cash. |
(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. |
21
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Managements Discussion and Analysis of
Financial Condition and Results of Operations should be read in
conjunction with the consolidated financial statements and notes
related thereto included with this Prospectus. To the extent
that the following Managements Discussion and Analysis
contains statements which are not of a historical nature, such
statements involve risks and uncertainties. These risks include,
but are not limited to, those discussed in the Risk
Factors section on page 7 of this Prospectus. The
following discussion and analysis should be read in conjunction
with the Forward-Looking Statements and the risk factors, each
included in this Prospectus.
Overview
We own or lease and operate 12 ski areas throughout the Midwest,
Northeast and Southeast United States. Our ski areas, which
include both day ski areas and overnight drive ski areas, offer
snow skiing, snowboarding and other snow sports to an average of
1.5 million skiers every year.
The Company and its subsidiaries operate in a single business
segment ski resort operations. The consolidated
financial data for our fiscal years ended April 30, 2010
and 2009 presented in this Prospectus is comprised of the data
of 11 of our ski areas, which includes all but Wildcat Mountain,
as it was acquired after the end of fiscal 2010. The
consolidated financial data for the fiscal year ended
April 30, 2011 includes the data for all 12 of our ski
areas. Also included in the financial information presented are
ancillary services, primarily food and beverage services, ski
equipment rental, ski school, hotel/lodging and retail.
The opening and closing dates of our ski areas are dependent
upon weather conditions, but our peak ski season generally runs
from early December to mid-April. The following table
illustrates the opening and closing dates for the 2007 through
2011 ski seasons for our 12 ski areas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007/2008 Open/Close
|
|
|
2008/2009 Open/Close
|
|
|
2009/2010 Open/Close
|
|
|
2010/2011 Open/Close
|
Ski Area
|
|
|
Dates
|
|
|
Dates
|
|
|
Dates
|
|
|
Dates
|
Attitash
|
|
|
November 18, 2007 /
April 13, 2008
|
|
|
November 22, 2008 /
March 30, 2009
|
|
|
December 12, 2009 /
March 28, 2010
|
|
|
December 11, 2010 /
April 3, 2011
|
Big Boulder
|
|
|
November 10, 2007 /
April 13, 2008
|
|
|
November 21, 2008 /
April 5, 2009
|
|
|
December 6, 2009 /
April 4, 2009
|
|
|
November 29, 2010 /
April 10, 2011
|
Boston Mills
|
|
|
December 7, 2007 /
March 23, 2008
|
|
|
December 12, 2008 /
March 14, 2009
|
|
|
December 12, 2009 /
March 20, 2010
|
|
|
December 10, 2010 /
March 14, 2011
|
Brandywine
|
|
|
December 22, 2007 /
March 16, 2008
|
|
|
December 20, 2008 /
March 1, 2009
|
|
|
December 19, 2009 /
March 20, 2010
|
|
|
December 11, 2010 /
March 13, 2011
|
Crotched Mountain
|
|
|
November 30, 2007 /
March 30, 2008
|
|
|
November 22, 2008 /
March 29, 2009
|
|
|
December 11, 2009 /
March 28, 2010
|
|
|
December 4, 2010 /
April 3, 2011
|
Hidden Valley
|
|
|
December 26, 2007 /
March 9, 2008
|
|
|
December 20, 2008 /
March 8, 2009
|
|
|
December 12, 2009 /
March 7, 2010
|
|
|
December 18, 2010 /
February 27, 2011
|
Jack Frost
|
|
|
December 8, 2007 /
March 23, 2008
|
|
|
December 13, 2008 /
March 22, 2009
|
|
|
December 12, 2009 /
March 21, 2010
|
|
|
December 11, 2010 /
March 13, 2011
|
Mad River
|
|
|
December 7, 2007 /
March 23, 2008
|
|
|
December 12, 2008 /
March 8, 2009
|
|
|
December 11, 2009 /
March 7, 2010
|
|
|
December 10, 2010 /
March 6, 2011
|
Mount Snow
|
|
|
November 10, 2007 /
April 27, 2008
|
|
|
November 22, 2008 /
April 19, 2009
|
|
|
December 7, 2009 /
April 11, 2010
|
|
|
November 25, 2010 /
April 16, 2011
|
Paoli Peaks
|
|
|
December 25, 2007 /
March 9, 2008
|
|
|
December 20, 2008 /
March 7, 2009
|
|
|
December 12, 2009 /
March 7, 2010
|
|
|
December 7, 2010 /
February 27, 2011
|
Snow Creek
|
|
|
December 15, 2007 /
March 16, 2008
|
|
|
December 13, 2008 /
March 8, 2009
|
|
|
December 12, 2009 /
March 7, 2010
|
|
|
December 11, 2010 /
March 6, 2011
|
Wildcat Mountain
|
|
|
November 30, 2007 /
April 27, 2008
|
|
|
November 28, 2008 /
April 20, 2009
|
|
|
December 11, 2009 /
April 19, 2010
|
|
|
December 11, 2010 /
April 24, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Our single largest source of revenue is the sale of lift tickets
(including season passes) which represented approximately 52% of
net revenue for each of fiscal 2011, 2010 and 2009. 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 2010/2011, 2009/2010 and 2008/2009 ski seasons,
approximately 28.6%, 26.3% and 27.7%, respectively, of total
lift revenue recognized was comprised of season pass revenue.
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, profit 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 golf operations are not
sufficient to fully offset our off-season losses from our
operations. During fiscal 2011, approximately 92% 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
Despite the recent economic recession, we experienced improved
operating results as a result of price increases and increased
skier visits mainly due to our acquisition of Wildcat Mountain
Ski Area. Uncertainties still exist surrounding the strength and
duration of the general economic climate, and as such, we cannot
predict whether our favorable trends will continue and what
impact the economy will have on our future operations.
The timing and duration of favorable weather can have an impact
on our revenues in regards 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 areas have
snowmaking capabilities in the event that the natural snowfall
is insufficient. Cold weather, however, is essential to a
successful ski season. The weather was favorable during the
2010/2011 ski season, but 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 2009/2010 and 2010/2011 ski seasons, we have had an increase
in the preseason sales of season passes. There can be no
assurance that future preseason pass sales will be similar to
historical trends.
We have increased the prices of most of our lift tickets, passes
and certain other products and services in each of the last two
seasons. There can be no assurance that we will be able to
increase prices in the future or the impact that pricing
increases may have on visitation or revenue.
Effective October 20, 2010, we acquired Wildcat Mountain
Ski Area through the purchase of the assets of Wildcat Mountain
Ski Area, Inc., Meadow Green-Wildcat Skilift Corp. and Meadow
Green-Wildcat Corp. for a total of approximately
$5 million. Wildcat Mountain is located in northern New
Hampshire and serves the New Hampshire, Boston, Massachusetts
and Rhode Island markets. Wildcat Mountain is located in close
proximity to the Attitash ski area and gives our skiers the
opportunity to use the same lift tickets and season passes for
both Wildcat Mountain and Attitash, thus providing our visitors
in this area with more ski choices and opportunities. The
results of operations of Wildcat Mountain are included in our
consolidated results of operations from the effective date of
the acquisition, October 20, 2010, forward. Our acquisition
of Wildcat Mountain has not had a significant impact on our
overall results of operations.
In March 2011, we entered into an agreement to replace Mount
Snows Summit Local triple chair lift with a new Leitner
Poma high-speed detachable six-passenger bubble chair lift. We
expect that the new lift will reduce the ride time of the
current lift by nearly half. In addition, the new lifts
bubble chairs provide shelter from inclement weather and the
convenience of ski-on ski-off loading and unloading.
Effective April 30, 2011, we terminated our
S-corporation
election and are now operating as a
C-corporation.
23
Results
of Operations
Summary
Our operating results for fiscal 2011, 2010, and fiscal 2009 are
presented by category as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent
|
|
|
|
Year Ended April 30,
|
|
|
Increase/(Decrease)
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2011/2010
|
|
|
2010/2009
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lift tickets
|
|
$
|
50,938
|
|
|
$
|
46,419
|
|
|
$
|
43,447
|
|
|
|
9.7
|
%
|
|
|
6.8
|
%
|
Food and beverage
|
|
|
15,131
|
|
|
|
14,023
|
|
|
|
12,870
|
|
|
|
7.9
|
%
|
|
|
9.0
|
%
|
Rental
|
|
|
8,147
|
|
|
|
8,040
|
|
|
|
6,986
|
|
|
|
1.3
|
%
|
|
|
15.1
|
%
|
Ski school
|
|
|
6,868
|
|
|
|
6,179
|
|
|
|
5,688
|
|
|
|
11.2
|
%
|
|
|
8.6
|
%
|
Hotel/lodging
|
|
|
6,337
|
|
|
|
5,535
|
|
|
|
5,682
|
|
|
|
14.5
|
%
|
|
|
-2.6
|
%
|
Retail
|
|
|
4,282
|
|
|
|
4,084
|
|
|
|
3,897
|
|
|
|
4.8
|
%
|
|
|
4.8
|
%
|
Other
|
|
|
5,883
|
|
|
|
5,565
|
|
|
|
5,723
|
|
|
|
5.7
|
%
|
|
|
-2.8
|
%
|
|
|
|
|
|
|
Total revenue
|
|
|
97,586
|
|
|
|
89,845
|
|
|
|
84,293
|
|
|
|
8.6
|
%
|
|
|
6.6
|
%
|
Operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Labor and labor related expenses
|
|
|
35,163
|
|
|
|
33,505
|
|
|
|
32,924
|
|
|
|
5.5
|
%
|
|
|
1.8
|
%
|
Retail and food and beverage cost of sales
|
|
|
7,803
|
|
|
|
7,205
|
|
|
|
6,915
|
|
|
|
8.3
|
%
|
|
|
4.2
|
%
|
Power and utilities
|
|
|
7,439
|
|
|
|
6,671
|
|
|
|
6,872
|
|
|
|
11.5
|
%
|
|
|
-2.9
|
%
|
Real estate and other taxes
|
|
|
1,946
|
|
|
|
1,697
|
|
|
|
1,829
|
|
|
|
14.7
|
%
|
|
|
-7.2
|
%
|
General and administrative expense
|
|
|
2,319
|
|
|
|
2,403
|
|
|
|
2,070
|
|
|
|
-3.5
|
%
|
|
|
16.1
|
%
|
Other expense
|
|
|
16,145
|
|
|
|
15,191
|
|
|
|
15,135
|
|
|
|
6.3
|
%
|
|
|
0.4
|
%
|
|
|
|
|
|
|
Total operating expense prior to depreciation and amortization
and land and building rent
|
|
|
70,815
|
|
|
|
66,672
|
|
|
|
65,745
|
|
|
|
6.1
|
%
|
|
|
1.4
|
%
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
8,054
|
|
|
|
7,544
|
|
|
|
6,813
|
|
|
|
6.8
|
%
|
|
|
10.7
|
%
|
Land and building rent
|
|
|
1,948
|
|
|
|
1,858
|
|
|
|
1,835
|
|
|
|
4.8
|
%
|
|
|
1.3
|
%
|
|
|
|
|
|
|
Total Operating Expense
|
|
|
80,817
|
|
|
|
76,074
|
|
|
|
74,393
|
|
|
|
6.2
|
%
|
|
|
2.3
|
%
|
|
|
|
|
|
|
Operating Income
|
|
$
|
16,769
|
|
|
$
|
13,771
|
|
|
$
|
9,900
|
|
|
|
21.8
|
%
|
|
|
39.1
|
%
|
|
|
|
Total Reported EBITDAR
|
|
$
|
26,770
|
|
|
$
|
23,175
|
|
|
$
|
18,548
|
|
|
|
15.5
|
%
|
|
|
24.9
|
%
|
|
|
|
Total skier visits
|
|
|
1,752
|
|
|
|
1,669
|
|
|
|
1,543
|
|
|
|
5.0
|
%
|
|
|
8.1
|
%
|
|
|
|
We have chosen to specifically include Reported EBITDAR (defined
as net income before interest, income taxes, depreciation and
amortization, gain on sale leaseback, investment income, other
income or expense, property rent and other non-recurring items)
as a measurement of our results of operations because we
consider this measurement to be a significant indication of our
financial performance and available capital resources. Reported
EBITDAR is not a measure of financial performance under GAAP. We
provide a reconciliation of Reported EBITDAR to net income, the
most directly-comparable GAAP measurement, below.
Management considers Reported EBITDAR to be a significant
indication of our financial performance and available capital
resources. Because of large depreciation and other charges
relating to our ski areas, it is difficult for management to
fully and accurately evaluate our financial results and
available capital resources using net income. Management
believes that by providing investors with Reported EBITDAR,
investors will have a clearer understanding of our financial
performance and cash flow because Reported EBITDAR: (i) is
widely used in the ski industry to measure a companys
operating performance without regard to items excluded from the
calculation of such measure, which can vary by company primarily
based upon the structure or existence of their financing;
(ii) helps investors to more meaningfully evaluate and
compare the results of our operations from period to period by
removing the effect of our capital structure and asset base from
our operating structure; and (iii) is used by our
management for various purposes, including as a measure of
performance of our operating entities and as a basis for
planning. Furthermore, as noted above, Reported EBITDAR excludes
land and property rent. Financing costs on land and property
that we own are accounted for as interest expense, which is also
excluded in Reported EBITDAR. Rent costs associated with the
land and property that we lease are not, however, accounted for
as interest expense,
24
but have the same effect on our operating results as the
financing costs on property that we own. As such, we believe
that excluding land and property rent from our net income in
Reported EBITDAR provides management and investors with a more
accurate understanding of our cash flow and results of
operations, as noted in this paragraph.
Items excluded from Reported EBITDAR are significant components
in understanding and assessing financial performance or
liquidity. Reported EBITDAR should not be considered in
isolation or as alternative to, or substitute for, net income,
net change in cash and cash equivalents or other financial
statement data presented in the consolidated financial
statements as indicators of financial performance or liquidity.
Because Reported EBITDAR is not a measurement determined in
accordance with GAAP and is susceptible to varying calculations,
Reported EBITDAR as presented may not be comparable to other
similarly titled measures of other companies.
The following table includes a reconciliation of Reported
EBITDAR to net income (loss) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,006
|
)
|
|
$
|
2,833
|
|
|
$
|
(492
|
)
|
Income tax provision
|
|
|
10,410
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
11,338
|
|
|
|
11,370
|
|
|
|
10,818
|
|
Depreciation and amortization
|
|
|
8,054
|
|
|
|
7,545
|
|
|
|
6,813
|
|
Land and building rent
|
|
|
1,948
|
|
|
|
1,858
|
|
|
|
1,835
|
|
Investment income
|
|
|
(241
|
)
|
|
|
(98
|
)
|
|
|
(269
|
)
|
Gain on sale/leaseback
|
|
|
(333
|
)
|
|
|
(333
|
)
|
|
|
(333
|
)
|
Gain on acquisition
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
Total Reported EBITDAR
|
|
$
|
26,770
|
|
|
$
|
23,175
|
|
|
$
|
18,548
|
|
|
|
|
Fiscal
2011 Compared to Fiscal 2010
Lift revenue increased $4.5 million, or 9.7%, for fiscal
2011 compared to fiscal 2010. The acquisition of Wildcat
Mountain accounted for $1.9 million in lift revenue. The
balance was due to a $0.7 million, or 2.2%, increase in
lift revenue (excluding season passes) and a $1.9 million,
or 15.5%, increase in season pass revenue. The increase in
season pass revenue was due to an increase in season pass prices
along with an increase in the number of season passes sold. We
believe that this was attributable to public excitement about
snow sports as a result of the 2010 Winter Olympics and
favorable weather during the
2010/2011
ski season that allowed us to open our ski areas early and close
many of the ski areas later in the season. Total skier visits
for fiscal 2011 increased 5.0% compared to fiscal 2010, which
was primarily due to the acquisition of Wildcat Mountain. The
net change of skier visits without taking into account the
Wildcat Mountain acquisition was flat.
Food and beverage revenue increased $1.1 million, or 7.9%,
for fiscal 2011 compared to fiscal 2010, of which
$0.5 million related to Wildcat Mountain, and the balance
of the change was primarily due to a 4.1% increase in yield per
skier visit. Yield is determined by dividing revenue by skier
visits.
Rental revenue increased $0.1, or 1.3%, for fiscal 2011 compared
to fiscal 2010, which is attributable to the acquisition of
Wildcat Mountain.
Ski school revenue increased $0.7 million, or 11.2%, for
fiscal 2011 compared to fiscal 2010, of which $0.3 million
was related to Wildcat Mountain, while the rest is attributable
to an increase in private lessons sold, which generates
increased yield.
Hotel/lodging revenue increased $0.8 million, or 14.5%, for
fiscal 2011 compared to fiscal 2010 primarily due to an increase
in condominium rental units available for rent in fiscal 2011 as
compared to fiscal 2010, an increase in the effective rate
realized at Mount Snows Snow Lake Lodge as a result of the
completion of a large refurbishment project and an increase in
bookings for special events, including weddings.
Retail revenue increased $0.2 million, or 4.8%, for fiscal
2011 compared to fiscal 2010, which is attributable to the
acquisition of Wildcat Mountain.
25
Labor and related benefit expense increased by
$1.7 million, or 5.0%, for fiscal 2011 compared to fiscal
2010, $1.2 million of which is attributable to the
acquisition of Wildcat Mountain. The remaining difference is due
to net increases in seasonal labor costs at our ski areas.
Retail and food and beverage cost of sales increased by
$0.6 million for fiscal 2011, or 8.3%, as compared to
fiscal 2010, $0.2 of which is attributable to the Wildcat
Mountain acquisition. The balance is due to an increase in both
food and beverage prices and sales as a result of our ski areas
remaining open longer during the 2010/2011 ski season and the
acquisition of Wildcat Mountain.
Power and utility expense for fiscal 2011 increased by
$0.8 million, or 11.5%, as compared to fiscal 2010. Wildcat
Mountain accounted for $0.6 million of this increase. The
balance is attributable to a longer season at our larger ski
areas.
Real estate and other taxes increased by $0.2 million, or
11.6%, for fiscal 2011 compared to fiscal 2010, which is
attributable to the acquisition of Wildcat Mountain.
General and administrative expense for fiscal 2011 decreased by
$0.1 million, or 3.5%, as compared to fiscal 2010,
primarily because of favorable closeout of retrospective
workers compensation insurance policies.
Other expense increased by $1.0 million, or 6.3%, for
fiscal 2011 compared to fiscal 2010, of which $0.9 million
is attributable to the acquisition of Wildcat Mountain.
Fiscal
2010 Compared to Fiscal 2009
Lift revenue increased $3.0 million, or 6.8%, for fiscal
2010 compared to fiscal 2009, due to a $2.8 million, or
6.4%, increase in lift revenue (excluding season passes) and a
$0.2 million, or 0.4%, increase in season pass revenue. The
increase in season pass revenue was due to an increase in season
pass prices offset by a decrease in the number of season passes
sold. Total skier visits for fiscal 2010 increased 8.1% compared
to fiscal 2009 led by our day ski areas, which experienced a
20.1% increase, offset by a 1.4% decrease in skier visits to our
overnight drive ski areas. Our day ski areas experienced
increased skier visits during fiscal 2010 because of cold
temperatures through mid-February. Our overnight drive ski areas
experienced a decrease in skier visits during fiscal 2010
principally because of lower than normal snowfall.
Food and beverage revenue increased $1.2 million, or 9.0%,
for fiscal 2010 compared to fiscal 2009, primarily due to
increased skier visits and a 0.8% increase in yield per skier
visit.
Rental revenue increased $1.1 million, or 15.1%, for fiscal
2010 compared to fiscal 2009, primarily due to increased skier
visits and a 6.4% increase in yield per skier visit.
Ski school revenue increased $0.5 million, or 8.6%, for
fiscal 2010 compared to fiscal 2009, primarily due to increased
skier visits, while the yield per skier visit remained unchanged.
Hotel/lodging revenue decreased by $0.1 million, or 2.6%,
for fiscal 2010 compared to fiscal 2009 primarily due to a 9.9%
decrease in yield per skier visit and a decrease in occupancy.
We experienced the decrease in occupancy mainly during the
off-season months, with revenues decreasing by 6.3%. Bookings of
groups and corporate business decreased because of the economic
recession.
Retail revenue increased $0.2 million, or 4.8%, for fiscal
2010 compared to fiscal 2009, primarily due to increased skier
visits, offset by a 3.1% decrease in yield per skier visit.
Labor and related benefit expense increased by
$0.6 million, or 1.8%, for fiscal 2010 compared to fiscal
2009 primarily because of bonuses awarded to employees and an
employers contribution to the Companys 401(k)
retirement plan in fiscal 2010 applicable to employees at our
resorts. Neither bonuses nor a 401(k) match were paid in fiscal
2009 as part of our efforts to conserve cash because of the
uncertain economic climate.
Retail and food and beverage cost of sales increased by
$0.3 million for fiscal 2010, or 4.2%, as compared to
fiscal 2009 primarily because of the corresponding increase in
revenue and skier visits.
26
Power and utility expense for fiscal 2010 decreased by
$0.2 million, or 2.9%, as compared to fiscal 2009. The ski
season weather during fiscal 2010 was favorable, and as a result
of more snowfall, we had fewer snowmaking hours and used less
power. This was offset by a utility rate structure change in
Pennsylvania.
Real estate and other taxes decreased by $0.1 million, or
7.2%, for fiscal 2010 compared to fiscal 2009 primarily because
fiscal 2009 included the payment of a $0.2 million
settlement with the state of Vermont regarding a miscalculation
of sales tax due.
General and administrative expense for fiscal 2010 increased by
$0.3 million, or 16.1%, as compared to fiscal 2009
primarily because of bonuses awarded to employees and an
employers contribution to the Companys 401(k)
retirement plan in fiscal 2010 at the Peak Resorts, Inc. level.
Neither bonuses nor a 401(k) match were paid in fiscal 2009 as
part of our efforts to conserve cash because of the uncertain
economic climate.
Other
Expenses
The following table illustrates our other expenses during the
three-year period ended April 30, 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended April 30,
|
|
|
Increase (decrease)
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2011/2010
|
|
|
2010/2009
|
|
|
Depreciation and amortization
|
|
$
|
8,054
|
|
|
$
|
7,544
|
|
|
$
|
6,813
|
|
|
$
|
510
|
|
|
$
|
731
|
|
Investment income
|
|
|
240
|
|
|
|
98
|
|
|
|
269
|
|
|
|
142
|
|
|
|
(171
|
)
|
Interest expense, net
|
|
|
11,338
|
|
|
|
11,370
|
|
|
|
10,818
|
|
|
|
(32
|
)
|
|
|
552
|
|
Land and building rent
|
|
|
1,948
|
|
|
|
1,858
|
|
|
|
1,835
|
|
|
|
90
|
|
|
|
23
|
|
Gain on acquisition
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
|
|
|
|
In addition to operating results, the following material items
contribute to our overall financial performance.
Depreciation and amortization. Depreciation
and amortization expense for fiscal 2011 and 2010 increased due
to the acquisition of Wildcat Mountain, the addition of a new
equipment rental building at Snow Creek, the installation of a
new tube park at Hidden Valley and the full year impact of an
increase in the fixed asset base from placing in service resort
assets in several of our resorts. Depreciation and amortization
expense for fiscal 2009 increased primarily due to the full year
impact of an increase in the fixed asset base from placing in
service significant resort assets, primarily at Mount Snow and
Attitash. This includes the installation of a significant amount
of snowmaking equipment. The increase in depreciation was offset
by savings in electricity and diesel fuel as a result of the
snowmaking equipment update.
Investment income. The increase in investment
income for fiscal 2011 compared to fiscal 2010 is primarily due
to a realized gain on the sale of
available-for-sale
securities of $0.2 million. The decrease in investment
income for fiscal 2010 compared to fiscal 2009 is primarily due
to a reduction in average interest rates and a realized
investment gain of $0.1 million in fiscal 2009.
Interest expense, net. Interest expense for
fiscal 2011 remained relatively consistent with interest expense
for fiscal 2010. The increase in interest expense for fiscal
2010 compared to fiscal 2009 is primarily due to an increase in
interest rates on the debt with EPT as provided for in the loan
agreements which are more fully discussed below.
Liquidity
and Capital Resources
Significant
Sources of Cash
Our available cash is the highest in our fourth quarter
primarily due to the seasonality of our resort business. We had
$16.5 million of cash and cash equivalents at
April 30, 2011 compared to $19.5 million as of
April 30, 2010. We generated $12.2 million of cash
from operating activities during fiscal 2011 compared to
$13.9 million in fiscal 2010. We generate the majority of
our cash from operations during the ski season, which occurs in
our third and fourth quarters. We currently anticipate that
Reported EBITDAR will continue to provide a significant source
of our future operating cash flows.
27
In addition to our $16.5 million of cash and cash
equivalents at April 30, 2011, we have available
$28.3 million under various loan agreements to fund
expansion and capital expenditures at our ski areas. We expect
that our liquidity needs for the near term and the next fiscal
year will be met by continued use of operating cash flows
(primarily those generated in our third and fourth fiscal
quarters) and additional borrowings under our loan arrangements,
as needed.
Long-term debt at April 30, 2011 and 2010 consisted of
borrowings pursuant to the loans and other credit facilities
discussed below, as follows:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Attitash/Mount Snow Debt, payable in monthly interest-only
payments at an increasing interest rate (10.46% and 10.16% at
April 30, 2011 and 2010, respectively), remaining principal
and interest due on April 3, 2027
|
|
$
|
62,500,000
|
|
|
$
|
62,500,000
|
|
Mount Snow Development Debt, payable in monthly interest-only
payments at 10.00%, remaining principal and interest due on
April 1, 2012
|
|
|
33,676,700
|
|
|
|
33,676,700
|
|
Credit Facility Debt, payable in monthly interest-only payments
at an increasing interest rate (9.54% and 9.40% at
April 30, 2011 and 2010, respectively), remaining principal
and interest due on October 29, 2027
|
|
|
32,232,800
|
|
|
|
32,232,800
|
|
Crotched Mountain Debt, payable in monthly interest-only
payments at an increasing interest rate (9.82% and 9.67% at
April 30, 2011 and 2010, respectively), remaining principal
and interest due on March 10, 2027
|
|
|
8,000,000
|
|
|
|
8,000,000
|
|
Wildcat Mountain Debt, payable in monthly installments of
$27,300, including interest at a rate of 4.00%, with remaining
principal and interest due on December 22, 2020
|
|
|
4,438,200
|
|
|
|
|
|
Other debt
|
|
|
847,600
|
|
|
|
292,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,695,300
|
|
|
|
136,701,700
|
|
Less: current maturities
|
|
|
34,071,300
|
|
|
|
93,500
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
107,624,000
|
|
|
$
|
136,608,200
|
|
|
|
|
|
|
|
|
|
|
The Attitash/Mount Snow Debt due April 3, 2027 in the
foregoing table represents amounts borrowed by the Company as
follows:
|
|
|
|
|
$15.7 million borrowed pursuant to a Loan Agreement entered
into by and between the Company, as borrower, and EPT Mount
Attitash, Inc., as lender, dated as of April 4, 2007, as
evidenced by a promissory note in the amount of
$15.7 million dated as of April 4, 2007 and modified
on October 30, 2007 (collectively, the Attitash Loan
Documents); and
|
|
|
|
$59.0 million borrowed pursuant to a Loan Agreement entered
into by and between the Company, as borrower, and EPT Mount
Snow, Inc., as lender, dated as of April 4, 2007, as
modified by the First Modification Agreement by and between such
parties, dated as of June 30, 2009 (the Mount Snow
First Modification Agreement), as evidenced by an amended
and restated promissory note in the amount of
$59.0 million, dated as of June 30, 2009
(collectively, the Mount Snow Loan Documents).
|
The Company entered into the Attitash Loan Documents and Mount
Snow Loan Documents in connection with the 2007 acquisitions of
Attitash and Mount Snow. In addition to the funds borrowed on
the date of the acquisitions, the Attitash Loan Documents and
the Mount Snow Loan Documents provided for $25.0 million of
additional borrowing capacity as of the date of the acquisitions
to be drawn to fund improvements and capital expenditures at
Attitash and Mount Snow, subject to the approval of the lender.
At April 30, 2011, $11.0 million remained to fund
approved capital expenditures and improvements in future years.
The $59.0 million borrowed pursuant to the Mount Snow Loan
Documents includes $1.2 million of additional funds
available under the Mount Snow First Modification Agreement to
be used for purposes stipulated
28
by such agreement or other purposes as approved by the lender.
No borrowings have been made under this arrangement.
Commencing April 1, 2008 and each
April 1st thereafter, the interest rates relating to
the debt outstanding under the Attitash Loan Documents and Mount
Snow Loan Documents will increase from the prior interest rate
measurement date by the lesser of three times the percentage
increase in the Consumer Price Index (CPI) or a
factor of 1.015 (the Capped CPI Index) unless
specified debt service coverage ratios are maintained for a
period of two consecutive years. If the target debt service
coverage ratios are attained and maintained, the interest rate
will be 100 basis points lower than it otherwise would have
been. For the years ended April 30, 2011, 2010 and 2009, we
have not maintained the specified debt service coverage ratios,
and therefore, our interest rates have increased. We continue to
work on meeting these ratios in order to stabilize interest
rates in the future. The table below illustrates the range of
potential interest rates for each of the next five years
assuming rates are to increase by the Capped CPI Index annually:
|
|
|
|
|
|
|
|
|
Attitash/Mount Snow Debt
|
|
|
Rate Effective at
|
|
Specific Debt Service Coverage
|
April 1:
|
|
Attained
|
|
Not Attained
|
|
2011
|
|
|
9.46
|
%
|
|
|
10.46
|
%
|
2012
|
|
|
9.61
|
%
|
|
|
10.61
|
%
|
2013
|
|
|
9.77
|
%
|
|
|
10.77
|
%
|
2014
|
|
|
9.93
|
%
|
|
|
10.93
|
%
|
2015
|
|
|
10.09
|
%
|
|
|
11.09
|
%
|
The Capped CPI Index is an embedded derivative, but the Company
has concluded that the derivative does not require bifurcation
and separate presentation at fair value because the Capped CPI
Index was determined to be clearly and closely related to the
debt instrument.
The Attitash Loan Documents and the Mount Snow Loan Documents
provide for additional interest payments under certain
circumstances. Specifically, if the gross receipts of the
respective property during any fiscal year exceed an amount
determined by dividing the amount of interest otherwise due
during that period by 12%, an additional interest payment equal
to 12% of such excess is required. Similar to the minimum
required interest payments as described above, the parties have
agreed that if specific target debt service coverage ratios are
achieved for two consecutive years and are maintained, the
interest rate used in determining both the amount of the excess
gross receipts and the rate applied thereto would be reduced to
11%. No additional interest payments were due for the years
ended April 30, 2011, 2010 or 2009.
The Mount Snow Development Debt due April 1, 2012
represents obligations incurred to provide financing for the
acquisition of land at Mount Snow that is in development stages.
On April 4, 2007, the Company and Mount Snow, Ltd., as
borrowers, entered into a promissory note in favor of EPT Mount
Snow, Inc., as lender, in the amount of $25.0 million,
which was later modified by the Modification Agreement dated as
of April 1, 2010 to increase the amount of funds available
to $41.0 million (the Mount Snow Development Loan
Documents). Principal payments are required to be made
from all proceeds from any sale of development land at Mount
Snow with any remaining principal due at maturity. The Mount
Snow Development Loan Documents require, commencing May 1,
2010, monthly payments of interest arising after April 1,
2010. The increased amount available under the Mount Snow
Development Loan Documents includes accrued interest to the
effective date of the modification of approximately
$8.7 million and, accordingly, approximately
$7.3 million was available for development purposes at
April 30, 2011.
The Credit Facility Debt due October 29, 2027 represents
amounts due pursuant to the Amended and Restated Credit and
Security Agreement, dated as of October 30, 2007, among the
Company and certain of its affiliates, as borrowers, and EPT Ski
Properties, Inc., as lender (the Credit Facility
Agreement). In connection with entry into the Credit
Facility Agreement, the borrowers executed an amended and
restated promissory note, dated as of October 30, 2007, in
the amount of $31.0 million, which was later modified by as
second amended and restated promissory note, dated as of
August 5, 2008, which increased the amount of funds
available to $41 million (together with the Credit Facility
Agreement, the Credit Facility Documents). At
April 30, 2011, approximately
29
$8.7 million remained available for approved capital
expenditures. The interest rate for borrowings under the Credit
Facility Documents increases each October 1 during the term of
the Credit Facility Documents, such increase to be the lesser of
two times the increase in the CPI or Capped CPI Index.
The Crotched Mountain Debt due March 10, 2027 noted in the
table above represents amounts due to EPT Crotched Mountain,
Inc. pursuant to a promissory note made by SNH Development,
Inc., the Companys wholly owned subsidiary. The promissory
note, dated as of March 10, 2006 (the Crotched
Mountain Note), was made in the principal amount of
$8.0 million, the proceeds of which were used to pay off
all outstanding debt secured by our Crotched Mountain ski area
and for general working capital purposes. The interest rate
applicable to the outstanding debt under the Crotched Mountain
Note increases each April 1 during the term of the Crotched
Mountain Note, such increase to be the lesser of the rate of
interest in the previous year multiplied by the Capped CPI Index
or the sum of the rate of interest in the previous year plus the
product of (x) the rate of interest in the previous year
and (y) the percentage increase in the CPI from the CPI in
effect on April 1 of the current year over the CPI in effect on
the April 1 of the immediately preceding year.
The table below illustrates the potential interest rates
applicable to the Companys fluctuating interest rate debt
for each of the next five years, assuming rates increase by the
Capped CPI Index:
|
|
|
|
|
|
|
|
|
April 1:
|
|
Credit Facility Debt
|
|
Crotched Mountain Debt
|
|
2011
|
|
|
9.54
|
%
|
|
|
9.82
|
%
|
2012
|
|
|
9.68
|
%
|
|
|
9.96
|
%
|
2013
|
|
|
9.83
|
%
|
|
|
10.11
|
%
|
2014
|
|
|
9.98
|
%
|
|
|
10.26
|
%
|
2015
|
|
|
10.13
|
%
|
|
|
10.42
|
%
|
The Wildcat Mountain Debt due December 22, 2020 represents
amounts owed pursuant to a promissory note in the principal
amount of $4.5 million made by WC Acquisition Corp. in
favor of Wildcat Mountain Ski Area, Inc., Meadow
Green Wildcat Skilift Corp. and Meadow
Green Wildcat Corp., (the Wildcat Note).
The Wildcat Note, dated November 22, 2010, was made in
connection with the acquisition of Wildcat Mountain, which was
effective as of October 20, 2010. The interest rate as set
forth in the Wildcat Note is fixed at 4.00%.
Substantially all of the Companys assets serve as
collateral for our long-term debt.
We intend to use approximately $ million of
the net proceeds from this offering for repayment of a portion
of the outstanding debt relating to the development of our Mount
Snow ski area. The agreements entered into in connection with
the Mount Snow Development Debt do not provide for additional
borrowing capacity as we pay down the principal and interest
due. As such, the repayment of this debt will not result in
additional borrowing capacity under these credit facilities but
may create available collateral for future borrowing, if
necessary.
Fiscal
2011 Compared to Fiscal 2010
We generated $12.2 million of cash from operating
activities in fiscal 2011, a decrease of $1.7 million when
compared to the $13.9 million of cash generated in fiscal
2010. The decrease in operating cash flows was primarily a
result of a decrease in deferred revenue from fiscal 2010 to
fiscal 2011 due to the change in the deadline to purchase
advance season passes at Attitash, Crotched Mountain and Mount
Snow from April 30 to June 1 implemented during fiscal
2011. In our experience, our customers generally purchase their
advance season passes close to the purchase deadline. As such,
the cash collections from advance season pass sales after
April 30, 2011 are not included in fiscal 2011 operating
results. As of June 1, 2011, advance season pass sales were
$6.7 million compared to $6.4 million at June 1,
2010. Advanced season pass sales are complete at all of our ski
areas by June 1 each year.
Cash used in investing activities increased by $8.8 million
in fiscal 2011 compared to fiscal 2010 due to an increase in
capital expenditures of $6.2 million, along with a
$2.9 million increase of cash used on the development of
the land at Mount Snow.
30
Cash used in financing activities increased by $1.2 million
for fiscal 2011 compared to fiscal 2010 primarily due the need
to distribute money to the stockholders to pay taxes incurred
before the Company filed the C-Corp election.
Fiscal
2010 Compared to Fiscal 2009
We generated $13.9 million of cash from operating
activities in fiscal 2010, an increase of $7.9 million when
compared to the $6 million of cash generated in fiscal
2009. The increase in operating cash flows was primarily a
result of improved operations, an increase in sales of season
passes of $2.1 million for fiscal 2010 and an increase of
$2.0 million in accrued expenses, of which
$1.0 million was related to salaries, wages and related
benefits with the reinstatement of bonuses and the 401(k)
contribution.
Cash used in investing activities decreased by $7.3 million
in fiscal 2010 compared to fiscal 2009 due to a decrease in
capital expenditures of $6.2 million, partially offset by
the cash used on the development of the Mount Snow master plan.
Cash used in financing activities increased by $6.3 million
for fiscal 2010 compared to fiscal 2009 primarily due to the
borrowings on long-term debt made in fiscal 2009.
Significant
Uses of Cash
Our cash uses currently include operating expenditures and
capital expenditures for assets to be used in operations. We
have historically invested significant cash in capital
expenditures for our resort operations and expect to continue to
invest in the future. Significant investments made in fiscal
2009 and fiscal 2008 for improvements at Attitash, Mount Snow
and Brandywine are not of a recurring nature, such as
substantial upgrades of snowmaking and development of tube
parks. Current capital expenditure levels will primarily include
investments that allow us to maintain our high quality
standards, as well as certain incremental discretionary
improvements at our resorts. Resort capital expenditures for
fiscal 2011 were approximately $19 million. We currently
anticipate we will spend approximately $4.0 to $5.5 million
on resort capital expenditures for fiscal 2012. Included in
these capital expenditures are approximately $2.0 to
$3.0 million which are necessary to maintain the appearance
and level of service appropriate to our resort operations,
including routine replacement of our snow grooming equipment and
rental fleet equipment. In addition to these estimates is
$7.3 million that has already been committed for the
installation of the new six pack chair lift at Mount Snow.
Discretionary expenditures for fiscal 2012 include replacing
diesel generators at Wildcat Mountain and the completion of a
new maintenance building at Hidden Valley. We currently plan to
use cash on hand, available borrowings under our loan
arrangements
and/or cash
flow generated from future operations to provide the cash
necessary to execute our capital plans and believe that these
sources of cash will be adequate to meet our needs.
Although we have no significant third party commitments
currently outstanding, we may incur substantial costs for our
ongoing Mount Snow development, subject to obtaining required
permits and approvals. We plan to finance any future development
activity through operating cash reserves, initial condominium
deposits and bridge loans, which would be paid upon project
completion mostly through the receipt of remaining committed
condominium unit sales.
Contractual
Obligations
As part of our ongoing operations, we enter into arrangements
that obligate us to make future payments under contracts such as
debt agreements, capital lease agreements, construction
contracts and operating lease agreements. Debt agreements and
capital lease obligations are recognized as liabilities in our
consolidated balance sheet as of April 30, 2011.
Obligations under construction contracts are not recorded as
liabilities in our consolidated balance sheet until the goods
and/or
services are received, in accordance with GAAP. Additionally,
operating lease agreements, which totaled $42.5 million as
of April 30, 2011, are not recognized as liabilities in our
31
consolidated balance sheet, in accordance with GAAP. A summary
of our contractual obligations as of April 30, 2011 is as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Fiscal
|
|
|
2-3
|
|
|
4-5
|
|
|
More than
|
|
Contractual
Obligations
|
|
Total
|
|
|
2012
|
|
|
years
|
|
|
years
|
|
|
5 years
|
|
|
|
|
Long-term debt
|
|
$
|
141,695
|
|
|
$
|
34,071
|
|
|
$
|
909
|
|
|
$
|
371
|
|
|
$
|
106,344
|
|
Capitalized lease obligations including interest
|
|
|
2,620
|
|
|
|
820
|
|
|
|
1,465
|
|
|
|
335
|
|
|
|
-
|
|
Operating leases
|
|
|
42,484
|
|
|
|
2,468
|
|
|
|
4,130
|
|
|
|
3,996
|
|
|
|
31,891
|
|
Interest on long-term debt
|
|
|
194,839
|
|
|
|
14,125
|
|
|
|
21,813
|
|
|
|
22,271
|
|
|
|
136,630
|
|
|
|
|
|
|
|
|
|
$
|
381,638
|
|
|
$
|
51,484
|
|
|
$
|
28,317
|
|
|
$
|
26,973
|
|
|
$
|
274,865
|
|
|
|
|
Off
Balance Sheet Arrangements
We do not have off balance sheet transactions that are expected
to have a material effect on our financial condition, revenue,
expense, results of operations, liquidity, capital expenditures
or capital resources.
Critical
Accounting Policies
The preparation of consolidated financial statements in
conformity with GAAP requires us to select appropriate
accounting policies and to make judgments and estimates
affecting the application of those accounting policies. In
applying our accounting policies, different business conditions
or the use of different assumptions may result in materially
different amounts reported in the consolidated financial
statements.
We have identified the most critical accounting policies which
were determined by considering accounting policies that involve
the most complex or subjective decisions or assessments. We also
have other policies considered key accounting policies; however,
these policies do not meet the definition of critical accounting
policies because they do not generally require us to make
estimates or judgments that are complex or subjective. We have
reviewed these critical accounting policies and related
disclosures with our audit committee of the board of directors.
Income
Taxes
Description
We must make certain estimates and judgments in determining
income tax expense for financial statement purposes. These
estimates and judgments occur in the calculation of tax credits
and deductions and in the calculation of certain tax assets and
liabilities, which arise from differences in the timing of
recognition of revenue and expense for tax and financial
statement purposes, as well as the interest and penalties
relating to uncertain tax positions. The calculation of our tax
liabilities involves dealing with uncertainties in the
application of complex tax regulations. We recognize liabilities
for uncertain tax positions based on a two-step process. The
first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that
it is more likely than not that the position will be sustained
on audit, including resolution of related appeals or litigation
processes, if any. The second step requires us to estimate and
measure the tax benefit as the largest amount that is more than
50% likely of being realized upon ultimate settlement. It is
inherently difficult and subjective to estimate such amounts, as
this requires us to determine the probability of various
possible outcomes. This evaluation is based on factors
including, but not limited to, changes in facts or
circumstances, changes in tax law, effectively settled issues
under audit and new audit activity. A significant amount of time
may pass before a particular matter, for which we may have
established a reserve, is audited and fully resolved.
Judgments
and Uncertainties
The estimates of our tax contingencies reserve contains
uncertainty because management must use judgment to estimate the
potential exposure associated with our various filing positions.
32
Effect if
Actual Results Differ From Assumptions
Although we believe the estimates and judgments discussed herein
are reasonable and we have adequate reserves for our tax
contingencies, actual results could differ, and we may be
exposed to increases or decreases in those reserves and tax
provisions that could be material.
An unfavorable tax settlement could require the use of cash and
could possibly result in an increased tax expense and effective
tax rate in the year of resolution. A favorable tax settlement
could possibly result in a reduction in our tax expense,
effective tax rate, income taxes payable, other long-term
liabilities
and/or
adjustments to our deferred tax assets, deferred tax liabilities
or intangible assets in the year of settlement or in future
years.
Depreciable
Lives of Assets
Description
Mountain and lodging operational assets, furniture and fixtures,
computer equipment, software, vehicles and leasehold
improvements are primarily depreciated using the straight-line
method over the estimated useful life of the asset. Assets may
become obsolete or require replacement before the end of their
useful life in which case the remaining book value would be
written-off or we could incur costs to remove or dispose of such
assets no longer in use.
Judgments
and Uncertainties
The estimate of our useful lives of the assets contain
uncertainty because management must use judgment to estimate the
useful life of the asset.
Effect if
Actual Results Differ From Assumptions
Although we believe the estimates and judgments discussed herein
are reasonable, actual results could differ, and we may be
exposed to increased expense related to depreciable assets
disposed of, removed or taken out of service prior to its
originally estimated useful life, which may be material. A 10%
decrease in the estimated useful lives of depreciable assets
would have increased depreciation expense by approximately
$0.9 million for fiscal 2011.
Long-lived
Asset Impairment Evaluation
Description
We evaluate our long-lived assets, including property, equipment
and land held for development, for impairment whenever events or
changes in circumstances indicate the carrying value of an asset
may not be recoverable. If circumstances require a long-lived
asset to be tested for possible impairment, we compare
undiscounted cash flows expected to be generated by the asset to
its carrying value. If the carrying value exceeds the expected
undiscounted cash flow, an impairment adjustment would be made
to reduce the carrying value of the asset to its fair value.
Fair value is determined by application of valuation techniques,
including discounted cash flow models, and independent
appraisals, if considered necessary.
Judgments
and Uncertainties
The determination of whether the carrying value is recoverable
requires management to determine if events have occurred which
could indicate such carrying values could be impaired. Any
evaluation of impairment would require management to use its
judgment regarding the estimated future cash flows generated by
such assets.
Effects if
Actual Results Differ From Assumptions
We believe there have been no events warranting evaluation of
long-lived assets for impairment. If these assumptions are not
correct, this could impact the carrying value of our long-lived
assets if the undiscounted cash flows are less than the carrying
value. If the undiscounted cash flows are less than the carrying
value, an impairment would be recorded to the extent the fair
value of such assets is less than their carrying value. The
estimate of fair
33
value would be a judgment made by management regarding future
cash flows that could differ, possibly materially, from actual
results.
New
Accounting Standards
Refer to Note 1, Summary of Significant Accounting
Policies, of the notes to consolidated financial statements for
the years ended April 30, 2011, 2010 and 2009 for a
discussion of new accounting standards.
Inflation
Although we cannot accurately determine the precise effect of
inflation on our operations, management does not believe
inflation has had a material effect on the results of operations
in the last three fiscal years. When the costs of operating
resorts increase, we generally have been able to pass the
increase on to our customers. However, there can be no assurance
that increases in labor and other operating costs due to
inflation will not have an impact on our future profitability.
Quantitative
and Qualitative Disclosures About Market Risk
As of April 30, 2011, we had $141,695,200 in total debt
owed to our lenders, EPT and its affiliates. Of the total debt,
$38,962,400 million has a fixed rate and, therefore, is not
subject to interest rate risk. The interest rate on the
remaining $102,732,809 is subject to fluctuation, but the
interest rate can only be increased by a maximum of 1.5%
annually. At 1.5%, the interest expense on the variable rate
outstanding debt is $1,540,992. If interest rates increased 1%,
the additional interest cost to the Company would be
approximately $1,027,328 for one year. We do not perform any
interest rate hedging activities related to this debt.
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
Maher & Company PC previously audited the
Companys financial statements from fiscal 1998 through the
fiscal year ended April 30, 2010. On January 13, 2011,
in connection with this offering, the Companys board of
directors terminated the engagement of Maher & Company
PC because it is not registered with the Public Company
Accounting Oversight Board, a requirement of auditors issuing
reports in connection with SEC filings.
Also on January 13, 2011, the Companys board of
directors engaged McGladrey & Pullen, LLP as the
Companys independent registered public accounting firm for
the fiscal year ending April 30, 2011 and for the purposes
of issuing a report on the fiscal year 2011, 2010 and 2009
financial statements filed as a part of this registration
statement. During the Companys two most recent fiscal
years and subsequent interim periods, the Company did not
consult with McGladrey & Pullen, LLP with respect to
any of the matters or reportable events set forth in
Item 304(a)(2)(i) and (ii) of
Regulation S-K.
The reports of Maher & Company PC for the fiscal years
ended April 30, 2010 and 2009 do not contain an adverse
opinion or a disclaimer of opinion, and are not qualified or
modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended April 30, 2010 and 2009, and
through January 13, 2011, there were no disagreements
between the Company and Maher & Company PC on any
matter of accounting principles or practices, financial
statements disclosure, or auditing scope or procedure which
disagreements, if not resolved to the satisfaction of
Maher & Company PC, would have caused
Maher & Company PC to make reference thereto in the
firms reports on the Companys financial statements
for such periods. In addition, no reportable events, as defined
in Item 304 (a)(1)(v) of
Regulation S-K,
occurred during the Companys two most recent fiscal years.
The Company has provided Maher & Company PC with a
copy of the foregoing disclosure and has requested that
Maher & Company PC furnish the Company with a letter
addressed to the SEC stating whether or not Maher &
Company PC agrees with the above statements and, if not, stating
the respects in which it does not agree. A copy of the letter
from Maher & Company PC is filed as an exhibit to the
registration statement of which this Prospectus is a part.
34
BUSINESS
General
We are a leader and innovator in the ski industry with 12 ski
resorts throughout the United States. Our resorts, located in
geographically diverse areas, appeal to a wide range of
visitors. All of our properties employ snowmaking capability on
a majority of their terrain, and all offer terrain parks for
snowboarding and other alternative snow sports in addition to
skiing.
Through both organic growth and acquisitions, we believe that we
have created an efficient, focused and highly profitable
operation. In the past six ski seasons, our revenues have grown
approximately 205%, from $32,045,000 for the fiscal year ended
March 31, 2006 to $97,586,100 for the fiscal year ended
April 30, 2011. One of the primary ski industry statistics
for measuring performance is a skier visit, which
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. During the
2010/2011
ski season, total skier visits for all of the United States ski
areas were approximately 60.1 million. Combined, our ski
areas had approximately 1.7 million skier visits in the
2009/2010
ski season and approximately 1.8 million skier visits in
the
2010/2011
ski season, which we believe put us among the top
U.S. companies in terms of number of skier visits during
these ski seasons.
We are also a recognized leader within the alternative snow
sports industry. To compensate for the steady decline in baby
boom skiers, who are traditionally downhill skiers, the ski
industry began to shift its focus to snowboarding and snow
tubing during the 1990s in order to attract the younger skier
population. This trend is easier for day and overnight drive ski
areas to incorporate and is more likely to interest a novice
participant who may be more likely to visit these ski areas than
an overnight fly destination ski area. Because of our snowmaking
abilities, we have been able to create terrain parks with rails,
jumps and pipes and other snow sport amenities that have won us
35
industry recognition. Transworld Snowboarding magazine named
both Mount Snows Carinthia terrain park and Big
Boulders terrain park in the top five east coast parks for
2011.
As an operator of multiple regional and metropolitan ski resorts
with a proven history of successful business integration, we
believe we are uniquely poised for growth through additional
acquisitions. Unlike large destination resort operators that are
inhibited in their ability to grow due to a limited number of
existing resorts and available mountain space, a portion of our
business operates in the niche market of smaller, more
metropolitan day ski areas. We have the ability to efficiently
operate multiple resorts, as well as the access to funding and
the specialized institutional knowledge that will enable us to
expand our Company both within our existing markets and new
U.S. locations.
While a handful of key participants in the day ski area sector
operate multiple locations, single-property operators still
populate the vast majority of the day ski property owners. Now
with six Midwestern, four Northeastern and two Southeastern
locations in operation, we operate more ski resorts than any
other company in the United States.
To the extent available to us, we have included information and
other results from our operations during our
2010/2011
ski season. However, we have not included the same information
for the United States ski industry as a whole, as final surveys
and other reports on the
2010/2011
ski season are not yet available.
Ski
Industry
The United States ski market is estimated to represent
approximately 59.8 million skier visits in the
2009/2010
ski season. The National Ski Areas Association Kottke National
End of Season Survey reported that there were 471 ski areas
operating during the
2009/2010
ski season in the United States. Given the consistency and
strength of annual skier visits over a substantial time period
and the recovering economy, we believe that participation will
remain strong in the coming seasons.
As noted above, an important measure of ski resort industry
performance is the skier visit. Based on the Preliminary Kottke
End of Season Report for the
2010/2011
ski season, the United States achieved approximately
60.1 million skier visits, which is the second highest
U.S. total ever reported, despite the lingering effects of
the global economic downturn. The three years with the highest
number of skier visits in the United States have occurred in the
past five completed ski seasons. The chart below illustrates the
number of skier visits to U.S. ski resorts, industry-wide,
during the past ten completed ski seasons.
Total US
Ski Resort
Visits
(millions)
Source: National Ski Areas
Association: Kottke Report
36
The following chart shows the aggregate number of skier visits
to our 12 ski areas during the past five completed ski seasons.
Total Ski
VisitsPeak Resorts
(millions)
Calculated on a pro forma basis as
if the Companys current portfolio of 12 resorts was
operated by the Company for the periods shown.
The ski industry divides ski areas into three distinct
categories: overnight fly destination ski areas, overnight drive
ski areas and day ski areas. Overnight fly destination ski areas
are defined as ski areas which primarily serve skiers who fly or
drive considerable distances and stay for multiple nights.
Overnight drive ski areas are ski areas which primarily serve
skiers from the regional drive market who stay overnight. Day
ski areas are those ski areas at which overnight, dining and
after-ski facilities are limited, since the areas primarily
serve a day skier market.
Overnight fly destination ski areas are generally situated in or
amidst major mountainous areas and are typically large
facilities. 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.
Day ski areas are smaller in size and usually located near
metropolitan areas. As an owner and operator of primarily day
ski areas and overnight drive ski areas, we focus on selling
lift tickets, renting ski equipment, selling ski lessons,
selling convenience-oriented food and beverages and capitalizing
on the convenience we provide to the targeted local market. We
believe that our resorts target a wide cross-section of the
skiing public, from beginners who are skiing for the first time
to intermediate and advanced skiers who are honing their skills.
The sale of lift tickets comprises a large portion of the ski
industry revenues. As such, another important measurement of the
ski industrys profitability is the ETP (effective ticket
price), which is calculated by dividing ski related lift ticket
revenue by total skier visits. The pricing for various lift
ticket products is such that
single-day
or multi-day
tickets, which are typically purchased for a holiday or weekend
of skiing, generate a higher ETP than season passes or
discounted frequency cards.
From the 1998/1999 ski season to 2009/2010 ski season, the
average ETP of ski resorts in the United States has increased at
a compound annual growth rate of 3.2%. Ski resorts in the United
States had an average ETP of $35.71 during the 2009/2010 ski
season, the third highest within the past ten ski seasons
despite the impact of the global economic downturn.
37
Average
Effective Ticket Price of Ski Resorts in the United
States
Source: National Ski Areas
Association: Economic Analysis
The average ETP of our 12 ski resorts combined has increased at
a compound annual growth rate of 2.48% from the
2005/2006
ski season to the
2009/2010
ski season, which compares to an annual compound growth rate of
3.06% for the industry as a whole, over the same five-year
period.
Average
Effective Ticket PricePeak
Resorts1
|
|
|
(1)
|
|
The chart includes data from all of
our resorts, except for Wildcat Mountain, for all periods. The
data of Wildcat Mountain is included from October 20, 2010,
the effective date of acquisition.
|
The ski industry statistics stated in the foregoing sections
have been derived from data published by the Kottke National End
of Season Survey 2009/2010 and other industry publications,
including those of the National Ski Areas Association.
History
In 1982, Timothy Boyd, president of the Company, developed
Hidden Valley, a day ski area near metropolitan St. Louis,
Missouri. In 1986, Mr. Boyd developed a second day ski area
near Kansas City, Missouri, called Snow Creek. After the
development of Hidden Valley and Snow Creek, Mr. Boyd
focused on enhancing snowmaking technology for use at the
resorts and achieving the highest snowmaking capability per acre
of ski-able terrain in the industry.
Peak Resorts, Inc. was incorporated in Missouri on
September 24, 1997 as a holding company to own, through its
wholly-owned subsidiaries, Hidden Valley, Snow Creek and Paoli
Peaks, a third day ski area near Louisville, Kentucky acquired
by the Company in 1997. Since Peak was formed, the Company has
acquired nine additional ski areas, bringing the total number of
resorts owned or leased and operated by the Company to twelve.
Eight of these acquisitions occurred after Stephen Mueller and
Richard Deutsch joined the Company. We believe that the addition
of Messrs. Mueller and Deutsch and their skill sets
relating to executing successful acquisitions and managing
multiple operations, combined with Mr. Boyds unique
knowledge of the ski industry and snowmaking, enabled the
Company to become the industry leader it is today.
38
Effective February 16, 2007, we acquired all of the
outstanding common stock of Mount Snow Ltd. and L.B.O. Holding,
Inc. from American Skiing Company for an aggregate purchase
price of approximately $73.5 million. Mount Snow Ltd. owns
and operates the Mount Snow ski resort, adjacent hotels, a golf
course and parcels of land that offer development opportunities,
all of which are located in West Dover and Wilmington, Vermont.
L.B.O. Holding, Inc. is the owner-operator of the Attitash
resort in the Mount Washington Valley area of New Hampshire, as
well as a hotel and conference center. We believe that the
acquisitions of the Mount Snow and Attitash ski resorts provide
us with additional penetration of the heavily populated New York
and New England regions and incremental revenue sources from
non-ski season activities. Additionally, the locations of the
resorts provide enhanced geographical diversity to the
Companys resorts, thereby lessening the impact of adverse
regional weather patterns on consolidated operating results and,
as equipment is upgraded, allowing us to further leverage our
snowmaking abilities.
In October 2010, we acquired Wildcat Mountain Ski Area through
the purchase of the assets of Wildcat Mountain Ski Area, Inc.,
Meadow Green-Wildcat Skilift Corp. and Meadow Green-Wildcat
Corp. for a total of approximately $5 million. Wildcat
Mountain is located in northern New Hampshire and serves the New
Hampshire, Boston, Massachusetts and Rhode Island markets.
Wildcat Mountain is located within 10 miles of the Attitash
ski area and gives our skiers the opportunity to use the same
lift tickets and season passes for both Wildcat Mountain and
Attitash, thus providing our visitors with more ski choices and
opportunities.
Resorts
Our ski properties are located throughout the Midwest, Northeast
and Southeast United States. For purposes of ski industry
statistics, Pennsylvania is considered to be in the Southeastern
United States. As such, Jack Frost and Big Boulder are our
Southeastern United States ski areas. The map below illustrates
the geographical diversity of our 12 properties.
We operate some or all of certain of our resorts pursuant to
lease agreements with third parties that own the land underlying
these resorts. We lease the land on which we operate Mad River,
Crotched Mountain, Jack Frost, Big Boulder and a portion of
Paoli Peaks from third parties. Our lease at Paoli Peaks
terminates in 2078, our lease at Crotched Mountain terminates in
2053 (though we have 10 options to extend the lease for
additional periods of 15 years each), and our lease at Mad
River terminates in 2026. Currently, the leases for our Jack
Frost and Big Boulder resorts provide that the lessor has a
right to terminate the leases at any time, upon the payment of
certain fees.
39
Some or all of the land underlying certain of our other resorts
is owned by the federal government, and we use this land
pursuant to Forest Service Special Use Permits. All of the land
underlying Wildcat Mountain is owned by the federal government
and used pursuant to a Special Use Permit that expires in 2050.
Additionally, we use a substantial portion of the skiable
terrain at our Attitash and Mount Snow resorts pursuant to
Special Use Permits that each expire in 2047.
We own the remaining land underlying Paoli Peaks, Mount Snow and
Attitash, as well as all of the land underlying Hidden Valley,
Snow Creek, Boston Mills and Brandywine.
The following table illustrates our ski resorts, the number of
visitors to each resort during the fiscal year ended
April 30, 2011 and the revenues each resort contributed to
the Companys overall performance for the fiscal year ended
April 30, 2011.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Revenue figures in millions, Vertical Drop in feet)
|
|
|
Developed/
|
|
FY 2011
|
|
Acres
|
|
Lift
|
|
Vertical
|
|
Snow-
|
|
|
Resort
|
|
Acquired
|
|
Revs
|
|
% Revs
|
|
Visits
|
|
Total
|
|
Skiable
|
|
Count
|
|
Drop
|
|
making(1)
|
|
Resort Uses
|
|
|
Hidden Valley
|
|
1982
|
|
$3.6
|
|
4%
|
|
84,100
|
|
250
|
|
45
|
|
6
|
|
310
|
|
100%
|
|
Ski area,
Tube park
|
Snow Creek
|
|
1985
|
|
$2.9
|
|
3%
|
|
70,900
|
|
460
|
|
40
|
|
5
|
|
300
|
|
100%
|
|
Ski area,
Tube park
|
Paoli Peaks
|
|
1997
|
|
$4.0
|
|
4%
|
|
91,900
|
|
35
|
|
35
|
|
8
|
|
300
|
|
100%
|
|
Ski area,
Tube park
|
Mad River
|
|
2001
|
|
$7.5
|
|
8%
|
|
179,500
|
|
144
|
|
60
|
|
10
|
|
300
|
|
100%
|
|
Ski area,
Tube park
|
Boston Mills
|
|
2002
|
|
$4.9
|
|
5%
|
|
141,300
|
|
100
|
|
61
|
|
8
|
|
240
|
|
100%
|
|
Ski area
|
Brandywine
|
|
2002
|
|
$4.8
|
|
5%
|
|
140,400
|
|
102
|
|
88
|
|
7
|
|
240
|
|
100%
|
|
Ski area,
Tube park
|
Crotched Mountain
|
|
2003
|
|
$3.8
|
|
4%
|
|
104,200
|
|
251
|
|
80
|
|
5
|
|
900
|
|
100%
|
|
Ski area
|
Jack Frost
|
|
2005
|
|
$6.2
|
|
6%
|
|
129,200
|
|
201
|
|
80
|
|
10
|
|
600
|
|
100%
|
|
Ski area,
Tube park
|
Big Boulder
|
|
2005
|
|
$5.5
|
|
6%
|
|
124,900
|
|
107
|
|
65
|
|
9
|
|
400
|
|
100%
|
|
Ski area,
Tube park
|
Attitash
|
|
2007
|
|
$12.0
|
|
12%
|
|
142,600
|
|
1,134
|
|
307
|
|
11
|
|
1,750
|
|
90%
|
|
Ski area,
Summer activity
|
Mount Snow
|
|
2007
|
|
$38.6
|
|
40%
|
|
466,200
|
|
588
|
|
490
|
|
21
|
|
1,700
|
|
80%
|
|
Ski area, Tube park,
Summer activity
|
Wildcat
|
|
2010
|
|
$2.9
|
|
3%
|
|
77,100
|
|
225
|
|
225
|
|
4
|
|
2,100
|
|
90%
|
|
Ski area,
|
Mountain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summer activity
|
|
|
|
|
(1) |
|
Represents the approximate percentage of skiable terrain covered
by our snowmaking capabilities. |
Operational
Goals
Our operational goals include providing a quality ski experience
for both traditional and alternative snow sports and maintaining
maximum snowmaking capability to increase operable business days.
We, like other operators of day ski areas and overnight drive
ski areas, have a high fixed cost basis, attributable to
snowmaking, human resource costs, equipment operation,
maintenance and repairs. As such, day ski areas and overnight
drive ski areas operate with significant operating leverage and
economies of scale. Therefore, increasing skier visits and, to a
lesser extent, increasing revenues per skier visit, has a
substantial impact on revenues.
Adverse weather patterns are one of the core challenges faced by
the entire industry. We anticipate this challenge and employ
snowmaking systems, provide snowmaking capability on
substantially all ski-able areas and budget for complete season
snowmaking rather than rely on natural snowfall at any time
during a ski season that is already relatively short.
40
We believe that we have adopted the most efficient snowmaking
system available, the Polecat, as standard equipment at all of
our resorts. We also have access to abundant free water supplies
at all of our resorts, and through evaporation and melting, the
water pumped to make snow eventually returns to these onsite
water sources. Thus, we pay nothing to operate the Polecat other
than the cost of energy to run the equipment, and the Polecat
system technology operates to make a significant amount of snow
while reducing our energy costs. We average two Polecats per
acre, at a cost of $30,000 per acre, believed to be among the
highest ratios in the industry. We believe that this system
provides us with a competitive advantage over less efficient
operators and resorts with incomplete snowmaking coverage.
The impact that snowmaking has on the ski experience is
significant. Our commitment to snowmaking excellence is an
important component in developing our brand and ongoing market
reputation.
Strategic
Goals
Our strategic goals include continuing to build geographical
diversity, increasing market share by acquiring additional
locations and maximizing per-location results. We believe that
we are uniquely poised for continued growth within the market as
a result of our industry-tested principles, proven and
profitable results at our current resorts, experience with
acquisitions and resort facility revitalization and a portfolio
and financial position strong enough to accommodate investment
in additional properties and development opportunities. We will
continue to monitor attractive acquisition targets throughout
the United States.
Our acquisition strategy is illustrated best by our past resort
acquisitions. Our commitment to snowmaking has been a core
component of our expansion, as we seek to acquire properties
with on-site
water resources sufficient to satisfy snowmaking needs and cover
substantially all of the resort terrain. We currently consider
all potential acquisition targets that would fit within our day
ski area and overnight drive ski area expertise and complement
our current resort portfolio. More specifically, we intend to
actively pursue acquisitions in the regions in which we
currently operate in order to enhance our presence within those
markets and maximize certain operational efficiencies.
Furthermore, in order to mitigate the risk that unfavorable
weather may have on our annual revenues and further diversify
our geographical footprint, we also intend to identify and
monitor potential acquisition targets in new regions of the
United States.
In addition to our acquisition strategies, we are continually
investing in our existing resorts in order to maximize our
revenues and increase our efficiencies within our current
operations. For example, we are currently seeking approval for
the redevelopment of Mount Snow. In October 2010, we submitted
an Act 250 Application for our master plan, which involves
constructing 900 residential units and larger skier service
buildings to house restaurants, ski rental and other retail
shops, guest services and other functions. The Vermont District
Environmental Commission held hearings in November 2010 and
February 2011. In June 2011, we expect the Vermont District
Environmental Commission to issue its findings, which we expect
will include approval of the master plan concept, but not of the
actual construction phases. In June 2011, we intend to submit an
Act 250 permit application for our first phase of construction,
which includes the building of 110 residential units, one of
which will hold an equipment rental facility, and a
33,000 square foot base lodge that will house a cafeteria,
restaurant/bar, retail shop, ticketing and bag check. In August
2011, we intend to submit a permit application for zoning
approval. We expect the permitting process to last through the
end of the calendar year and, depending on financing, permits
and market conditions, we could begin construction as early as
spring 2012. The redevelopment of Mount Snow will not disrupt
any of the skier services provided to our guests. While the
redevelopment will affect the location of some of these
services, we will move affected services on a temporary basis,
as needed.
Mount Snow serves the large population base of metropolitan New
York City and surrounding areas. With a prime Northeast location
and a decades-old tradition, we believe that appropriate
mixed-use property development, including updated skier
services, additional amenities and added occupancy capability,
will create a significant opportunity for us and maximize Mount
Snows profitability potential.
41
Revenue
Components
We, like other day ski area and overnight drive ski area
operators, earn our revenues in five principal categories. In
order of their contribution, they are: lift tickets; food and
beverage sales; equipment rentals; ski instruction;
hotel/lodging; and merchandise sales. We have established
company-wide standards within each key revenue center geared
toward increasing skier visits and providing a quality ski
experience. Key components of our strategy include promoting
advance ticket purchases and group sales, minimizing potential
skier bottlenecks in equipment rental and encouraging
participation in ski lessons, particularly for new skiers. Each
revenue center is discussed in more detail below.
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|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue%
|
|
Fiscal 2011
|
|
% of Total
|
|
Fiscal 2010
|
|
% of Total
|
|
Fiscal 2009
|
|
% of Total
|
|
Lift Tickets
|
|
$50,938
|
|
52.2%
|
|
$46,419
|
|
51.7%
|
|
$43,447
|
|
51.5%
|
Food & Beverage
|
|
15,131
|
|
15.5%
|
|
14,023
|
|
15.6%
|
|
12,870
|
|
15.3%
|
Equipment Rental
|
|
8,147
|
|
8.3%
|
|
8,040
|
|
8.9%
|
|
6,986
|
|
8.3%
|
Ski Instruction
|
|
6,868
|
|
7.0%
|
|
6,179
|
|
6.9%
|
|
5,688
|
|
6.7%
|
Hotel/Lodging
|
|
6,337
|
|
6.5%
|
|
5,535
|
|
6.2%
|
|
5,682
|
|
6.7%
|
Merchandise
|
|
4,282
|
|
4.4%
|
|
4,084
|
|
4.5%
|
|
3,897
|
|
4.6%
|
Miscellaneous(1)
|
|
5,883
|
|
6.0%
|
|
5,565
|
|
6.2%
|
|
5,723
|
|
6.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$97,586
|
|
100.0%
|
|
$89,845
|
|
100.0%
|
|
$84,293
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Miscellaneous includes summer activities and other non-ski
related operations. |
Fiscal
2010, 2009 and 2008 Revenue Composition
(1) Miscellaneous includes summer activities and other
non-ski related operations.
Lift
Ticket Sales
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
on-site ski
visitors and the communities we
42
serve. During the past two fiscal years, we have increased our
pre-sale revenues by 5.5% and 1.4%, excluding the effect of
Wildcat Mountain. Pre-sold lift tickets accounted for
approximately 28.6% and 26.3% of our total lift ticket sales
during the past two fiscal years.
Most of our resorts typically offer two daily ski sessions
during the week and three daily ski sessions on weekends and
holidays. The cost of lift tickets at each of our resorts varies
according to geographic region, session time and day of the
week. The following chart demonstrates the average ETP at each
of our resorts over the past six ski seasons. The data of
Wildcat Mountain is included for comparison purposes but is not
included in Company totals elsewhere in this Prospectus until
the effective date of acquisition. The prices included in the
lift ticket calculation include only the tickets sold and season
pass sales.
Food and
Beverage Sales
The second largest revenue component is generated by food and
beverage sales. 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 related personnel costs.
Equipment
Rentals
The third largest revenue component is generated by equipment
rentals. Day ski areas generally attain a higher percentage of
rental revenue than overnight fly destination ski areas and
overnight drive ski areas because a large majority of day ski
area skiers are novices, who typically do not own ski equipment.
Equipment rental rates generally range between $23.00 and $35.00
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
43
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.
Instruction Services
Skiing lessons do not make up a significant portion of our
consolidated revenues, but are considered important to
operations because of the large numbers of novice or early
intermediate skiers who typically visit day ski areas. We offer
low group lesson prices to encourage participation, which range
from $15.00 to $48.00 per person per lesson. Individual
instructions and private lessons may range from $43.00 to
$100.00 or more per lesson.
Hotel/Lodging
Because we primarily operate day ski areas, 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 and Mount Snow ski areas. Attitash
and Mount Snow each have a Grand Summit Hotel on their
properties, in which individuals purchase quartershare interval
interests while we retain ownership of core hotel and commercial
properties. We derive a revenue stream from operating the Grand
Summit Hotels retail, restaurant and conference facilities
and from renting quartershare interval interests when not in use
by their owners. We also manage certain condominiums located
near the Mount Snow ski area and receive a portion of the rental
fees and property management fees relating to these
condominiums. Finally, a small portion of the hotel/lodging
revenue is comprised of room reservation fees generated by the
Snow Lake Lodge at Mount Snow, fees for spa and health club
services at the Grand Summit Hotels and fees for housekeeping
and other related services.
Merchandise
Sales
Like ski instruction services, merchandise sales also represent
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 area
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.
Marketing
We promote our resorts through both
on-site
marketing and external marketing. As discussed above, 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 free media passes and encourage live radio
and television broadcasts for segments such as weather or
sports, including the following:
|
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|
|
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
|
|
|
U.S. National Mountain Biking Championships
|
44
Finally, local tourist bureaus, lodging providers and travel
agents are contacted regularly to keep the ski experience
offered by our resorts at the forefront of local entertainment
options.
Most marketing efforts drive traffic to our websites, where we
provide guests with information regarding each of our resorts,
including services and amenities, weather conditions, options
for advance lift ticket purchases, live snow-cams, events and
hospitality information.
Competition
We believe that there are high barriers to entry for new ski
areas due to the limited private lands on which ski areas 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 areas, such as the
larger ski resorts in Colorado, California, Nevada, Utah and
other destination ski areas worldwide. Rather, we believe that
we compete primarily with other existing day ski areas,
overnight drive ski areas and non-ski related day vacations. The
day ski area and overnight drive ski area industries currently
consist of 471 resorts nationwide.
Our competition varies by geographical area. While we believe
that our Midwest ski resorts face only limited competition
within their relative metropolitan markets, we are not the only
day ski areas or overnight drive ski areas in our Northeast and
Southeast markets. We compete with approximately 135 resorts in
the Northeast United States and 53 resorts in the Southeast
United States. Based on the number of resorts we operate, we are
the largest ski resort operator in the United States.
Environmental
Protection
The use of energy and environmental sustainability are concerns
to the ski industry as a whole. We are committed to employing
environmentally friendly practices in providing exemplary
service to our guests and community. We continually evaluate and
improve our operations, and we optimize the positive impact of
our sustainable efforts through partnerships with our guests,
local community and suppliers.
As noted in Operational Goals above, we have adopted
the Polecat system of snowmaking, which produces a significant
amount of snow while reducing our energy costs. In addition, we
use Polecat fan guns that are powered by electricity and have
on-board compressors. As a result, we use diesel powered
compressors at our Wildcat Mountain ski area only. We believe
that the significant reduction in our use of compressors
eliminates a substantial amount of diesel exhaust and carbon
dioxide emissions each year.
Additionally, the hotel located on our Attitash resort, the
Attitash Grand Summit Hotel, has been certified as a sustainable
lodging facility by the New Hampshire Lodging and Restaurant
Association. Likewise, the Grand Summit Resort Hotel on our
Mount Snow resort has been certified as a green hotel by
Vermonts Green Hotels in the Green Mountain State program.
The operating systems and practices that we have in place at
these hotels reduce energy use, conserve water and reduce both
hazardous and non-hazardous waste.
Finally, we have implemented recycling and re-use programs at
our resorts and choose environmentally friendly alternatives to
harsher chemicals to operate some of our equipment. For example,
we use 100% Castrol synthetic oil to lubricate the lift cables
on our ski lifts instead of a petroleum-based oil. We also use
an environmentally friendly anti-freeze for ski lift and
snowmaking compressor maintenance.
Seasonality
Ski resort operations are highly seasonal in nature, with our
typical ski season beginning mid-December and running through
the end of March. 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 and zip rides, but these activities do not
comprise a substantial portion of our annual revenues.
We generate a large percentage of our revenues on weekends
(Friday through Sunday) during the ski seasons and three holiday
periods during the ski season Christmas,
Dr. Martin Luther King, Jr. Day and Presidents Day.
45
The following table illustrates the percent of our total
consolidated revenues contributed during these times for the
past three ski seasons:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010/2011 Ski
|
|
2009/2010 Ski
|
|
2008/2009 Ski
|
|
|
Season
|
|
Season
|
|
Season
|
|
Weekends During Ski
Season(1)
|
|
|
31
|
%
|
|
|
33
|
%
|
|
|
38
|
%
|
Christmas
|
|
|
14
|
%
|
|
|
15
|
%
|
|
|
10
|
%
|
Dr. Martin Luther King, Jr. Day
|
|
|
7
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
Presidents Day
|
|
|
6
|
%
|
|
|
8
|
%
|
|
|
7
|
%
|
(1) Excludes Christmas, Dr. Martin Luther King, Jr.
Day and Presidents Day if those days occurred on a Friday,
Saturday or Sunday during the ski seasons reported.
Employees
We, together with our operating subsidiaries, currently employ
approximately 400 year-round employees. During the height
of our ski season, we employ approximately 7,500 seasonal
employees.
Regulation
and Legislation
The 1986 Ski Area Permit Act and Master Development Plans
The 1986 Ski Area Permit Act (the 1986 Act) allows
the Forest Service to grant Term Special Use Permits for the
operation of ski areas and construction of related facilities on
National Forest lands. In addition, the permits granted to our
ski areas under the1986 Act require a Master Development Plan
for each ski area that is granted a Special Use Permit. Of our
12 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
area - April 4, 2047; Mount Snow ski area -
April 4, 2047; and Wildcat Mountain ski area -
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
area 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).
46
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 area 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 Services 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
area properties in Ohio, New Hampshire, 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 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:
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USTs are properly constructed and designed in accordance with
recognized industry standards;
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installations, repairs and removals are conducted and inspected
by qualified and trained individuals;
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active USTs are properly operated and monitored for the release
of substances; and
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upon closure, USTs are properly decommissioned and sites are
assessed for contamination.
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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.
47
MANAGEMENT
Directors
and Executive Officers
Set forth below are the names, ages as of May 31, 2011 and
positions with our Company of the persons who will serve as our
directors and executive officers upon the consummation of this
offering.
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Name
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Age
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Position
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Timothy D. Boyd
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58
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Chief Executive Officer, President, Director
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Stephen J. Mueller
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63
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Chief Financial Officer, Vice President, Secretary, Director
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Richard Deutsch
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57
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Vice President Business and Real Estate Development, Director
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Jesse K. Boyd
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30
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Vice President Resort Operations
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James T. Barry, Jr.
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65
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Director
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Gregory R. Diekemper
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53
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Director
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Stanley W. Hansen
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68
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Director
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Michael Staenberg
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57
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Director
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Timothy D. Boyd is the Chief Executive Officer, President and
Director of the Company, and has served in these roles since the
Company was founded in 1997. In 1982 and 1985, he developed the
Hidden Valley ski area in St. Louis, Missouri and the Snow
Creek ski area in Kansas City, Missouri, respectively, which are
now owned by the Company. Mr. Boyd has extensive experience
in the operation of day ski areas and overnight drive ski areas,
as well as snowmaking. The board believes that this experience
and his positions of Chief Executive Officer and President
provide him with intimate knowledge of the Companys
day-to-day
operations, business and competitive environment, as well as the
Companys opportunities, challenges and risks.
Mr. Boyd graduated from the University of Missouri with a
Bachelor of Science degree in Education and Economics.
Mr. Boyds son, Jesse K. Boyd, is the Companys
Vice President Resort Operations and a named executive officer.
Stephen J. Mueller serves as the Companys Chief Financial
Officer, Vice President, Secretary and Director and has held
these positions since 2001. In these positions, Mr. Mueller
serves as the Companys principal financial officer and is
responsible for all financial and accounting aspects of the
operations. Prior to joining the Company, Mr. Mueller was a
shareholder with a firm of certified public accountants that he
founded in 1991. He has also served as a partner at Touche
Ross & Co. (now Deloitte & Touche LLP) and
as Chief Financial Officer of an environmental services firm.
While in public accounting, Mr. Mueller served a wide
variety of clients in construction, service and recreation
activities. Mr. Mueller received a Bachelor of Science
degree in Accounting from St. Louis University. The board
selected Mr. Mueller because of his experience in finance
and accounting, as well as for his in-depth knowledge of the
Company.
Richard Deutsch is the Companys Vice President Business
and Real Estate Development and a Director. He has served in
these positions for over ten years. As the Vice President
Business and Real Estate Development, Mr. Deutsch is
responsible for developing the Companys growth strategy,
along with Messrs. T. Boyd and Mueller, and identifying and
evaluating acquisition targets and other potential growth
opportunities. The board believes that Mr. Deutschs
successful acquisition experience in the ski industry and his
understanding of the Companys operations will be valuable
in executing the Companys growth strategy.
Jesse K. Boyd is the Vice President Resort Operations of the
Company and has served in this position since 2008. As the Vice
President Resort Operations, Mr. Boyd is responsible for
overseeing the implementation of all of the operating procedures
and policies for our ski areas. Prior to holding this position,
Mr. Boyd was the General Manager of the Jack Frost and Big
Boulder ski areas. Mr. Boyd has held several positions with
the Company since 2003, including Manager of Outside Operations
at the Hidden Valley ski area and Manager of Terrain Park
Development. Mr. Boyd has a Bachelor of Science degree in
Business Administration and Computer Science from Milligan
College. Jesse K. Boyd is the son of Timothy D. Boyd, the
Companys Chief Executive Officer, President and Director.
48
James T. Barry, Jr., now retired, was a principal of The
Barry Law Firm, which he founded in 1980. The Barry Law firm,
which has received the highest legal rating (a v) by
the Martindale Hubbell Law directory, concentrates
on banking, business and commercial matters. Mr. Barry
practiced law for over 40 years and represented numerous
institutions and businesses in the St. Louis, Missouri
area. Mr. Barry is a 1967 graduate of the University of
Notre Dame with a degree in Finance, and he received his juris
doctorate from the St. Louis University School of Law in
1970. Currently, Mr. Barry is a director of the Evans
Scholar Foundation/Western Golf Association and a member of the
Missouri and Illinois Bar Associations, as well as a number of
other professional and civic organizations. The board selected
Mr. Barry because of his legal experience in the areas of
taxation, mergers and acquisitions and general business matters.
Gregory R. Diekemper is the President and Chief Executive
Officer of Swank Audio Visuals and has served in these positions
since November 2005. Mr. Diekemper has served in various
positions at Swank Audio Visuals and an affiliated entity since
1994, including Controller, Chief Financial Officer, Vice
President and Executive Vice President. In these positions,
Mr. Diekemper was responsible for company finances and
accounting, risk management, budgeting, internal control,
marketing and other administrative aspects of operations. Swank
Audio Visuals provides audio visual equipment and related
professional technical services for approximately 330 hotels,
conference centers and resorts in more than 60 cities in
the United States, Canada and the Middle East. From 1985 to
1994, Mr. Diekemper served as Controller, Vice President,
Chief Financial Officer and Treasurer of Guarantee Electrical.
He graduated from the University of Missouri with a
Bachelors Degree in Business Administration (Accountancy).
The board selected Mr. Diekemper because of his financial
and accounting expertise, his experiences as the principal
financial officer of large companies and his work in the
hospitality industry.
Stanley W. Hansen, now retired, has over 40 years of
experience in the operation of ski resorts. From 2008 to 2010,
Mr. Hansen served as a director of Squaw Valley Development
Company, the owner and operator of the Squaw Valley ski area in
Lake Tahoe, California. From 2005 to 2007, he served as Senior
Vice President Real Estate of American Skiing Company, the
former owner of numerous ski areas throughout the United States,
including Mount Snow and Attitash, and a company with a class of
stock formerly registered pursuant to Section 12 of the
Securities Exchange Act of 1934. Mr. Hansen served as
Managing Director of Mount Snow from 2002 to 2005 when it was
owned by American Skiing Company. From 1966 to 2001,
Mr. Hansen held several positions with Heavenly Ski Resort,
including President, General Manager and Senior Vice President.
The board selected Mr. Hansen because of his specialized
knowledge and skills relating to the ownership and operation of
ski areas, his experience relating to past ski area acquisitions
and his first-hand experience in the operations of Mount Snow.
Mr. Hansen graduated from San Jose State University
with a Bachelors degree in Business Management. He was
also a part of the Stanford Executive Program in Finance and
Marketing from 1985 to 1986.
Michael Staenberg is currently the President of THF Realty, a
company he founded in 1991, and has been since 1991. THF Realty
is a real estate developer with over 22 million square feet
of property and retail shopping centers. Mr. Staenberg has
been active in the real estate business for over 27 years,
and he has served as the developer of more than 100 shopping
centers in over 25 states. Mr. Staenberg has won
awards in the St. Louis area recognizing his business
leadership and entrepreneurship. Currently, Mr. Staenberg
is a member of the International Council of Shopping Centers and
the Metropolitan St. Louis Board of Realtors, in addition
to being involved with numerous charitable organizations. He is
a graduate of the University of Arizona with degrees in
Economics and Finance. Mr. Staenberg has extensive
experience in the development and acquisition of property,
especially relating to large commercial property. Furthermore,
Mr. Staenberg has a unique understanding of the property
development process as it relates to zoning, permitting and land
use as a result of his first-hand development experiences. The
board feels that Mr. Staenbergs skills will serve as
an asset to the board when evaluating the Companys growth
and acquisition strategies, as well as its maintenance and
improvement plans.
Composition
and Committees of the Board
Our board currently consists of seven directors. Our board has
established the following committees: an audit committee, a
compensation committee and a nominating and corporate governance
committee. The composition and responsibilities of each
committee are described below. Members serve on these committees
until their resignation or until otherwise determined by our
board.
49
The majority of our board members are independent. The board has
determined that each of Messrs. Barry, Diekemper, Hansen
and Staenberg is an independent director pursuant to the
requirements of NASDAQ, and each of the members of the audit
committee satisfies the additional conditions for independence
for audit committee members required by NASDAQ.
Audit
Committee
Messrs. Barry, Diekemper and Hansen, each an independent
director, serve on our audit committee. Mr. Diekemper is
the chair of the audit committee. The committee assists our
board in its oversight responsibilities relating to (i) the
quality and integrity of our financial statements, (ii) our
accounting and reporting policies and procedures, (iii) our
risk management policies, (iv) our compliance with legal
and regulatory requirements that may have a material impact on
our financial statements, (v) our independent registered
public accounting firms qualifications, independence and
performance, (vi) our disclosure controls and procedures,
and (vii) our internal control over financial reporting.
The board has determined that Mr. Diekemper qualifies as an
audit committee financial expert as that term is
defined in Item 407(d)(5) of
Regulation S-K,
as promulgated by the SEC.
Compensation
Committee
Messrs. Barry, Hansen and Staenberg serve on our
compensation committee. Mr. Barry is the chair of the
compensation committee. The committee is responsible for
designing, approving and evaluating executive compensation and
benefits, as well as reviewing and approving such other
compensation matters as the committee deems appropriate. Each
member of the committee is independent, a non-employee
director for purposes of
Rule 16b-3
under the Exchange Act, and an outside director for
purposes of Section 162(m) of the Internal Revenue Code of
1986.
Nominating
and Corporate Governance Committee
Messrs. Barry, Diekemper and Staenberg, each an independent
director, serve on our nominating and corporate governance
committee. Mr. Staenberg is the chair of this committee.
The committee is responsible for identifying individuals
qualified to become directors and committee members;
recommending director nominees to the board; developing and
recommending approval of policies and guidelines relating to,
and generally overseeing matters of, corporate governance; and
leading the boards annual review of its committee charters.
Compensation
Committee Interlocks and Insider Participation
Though our board did not have a compensation committee during
the entire current or previous fiscal year, none of the
individuals who currently serve on our compensation committee
has served our company or any of our subsidiaries as an officer
or employee. In addition, none of our executive officers serves
as a member of the board of directors or compensation committee
of any entity which has one or more executive officers serving
as a member of our board or compensation committee.
Code of
Ethics
We have adopted a Code of Conduct and Business Ethics applicable
to all employees, including executive officers, and directors. A
copy of the Code of Conduct and Business Ethics is available on
our corporate website at www.peakresorts.com. Any amendments to
the Code of Conduct and Business Ethics, or any waivers of its
requirements, will be disclosed on our website and reported to
the SEC, as may be required.
Director
Compensation
Historically, our directors have not received compensation for
their service. In connection with this offering, we adopted a
new director compensation program pursuant to which our
non-employee directors will receive a $10,000 annual retainer
for service on our board and $2,500 for each board and committee
meeting attended. We reimburse our non-employee directors for
reasonable travel expenses incurred in attending the board and
committee
50
meetings. We also intend to allow our non-employee directors to
participate in any equity compensation plans that we adopt in
the future, on the same terms as other eligible employees.
Our audit committee held one meeting during the fiscal year
ended April 30, 2011, and the members were paid $2,500 each
for participation in this meeting in accordance with our new
director compensation program, as illustrated in the table
below. Otherwise, no directors received compensation for their
service during the year ended April 30, 2011.
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Name
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Fees Earned or Paid in Cash
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Total
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Timothy D. Boyd
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Stephen J. Mueller
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Richard Deutsch
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James T. Barry, Jr.
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$
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2,500
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$
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2,500
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Gregory R. Diekemper
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$
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2,500
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$
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2,500
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Stanley W. Hansen
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$
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2,500
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$
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2,500
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Michael Staenberg
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51
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
This Compensation Discussion and Analysis describes and explains
our compensation program for the fiscal year ended
April 30, 2011 for our named executive officers, who are
listed as follows:
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Timothy D. Boyd, Chief Executive Officer and President;
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Stephen J. Mueller, Chief Financial Officer, Vice President and
Secretary;
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Richard Deutsch, Vice President Business and Real Estate
Development; and
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Jesse K. Boyd, Vice President Resort Operations.
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This section also explains how we expect the compensation of our
named executive officers will change following this offering.
Historical
Compensation Decisions
Our compensation approach has been tied to our stage of
development as a Company. Before this offering, we were
privately-held and therefore not subject to any stock exchange
or SEC rules relating to compensation, board committees and
independent board representation. We informally considered the
responsibilities connected with each management position and the
available funds for management compensation when making past
compensation decisions. Each year after the financial statements
had been prepared for the prior fiscal year, Messrs. Boyd,
Mueller and Deutsch convened to discuss compensation of
management and certain other employees, including themselves,
and made adjustments to executive pay as they deemed appropriate
and feasible given the Companys financial position.
Though we did not have a formal compensation program in place,
we believe that our informal program and compensation methods
furthered the following objectives:
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to retain talented individuals to contribute to the
Companys sustained progress, growth and
profitability; and
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to reflect the unique qualifications, skills, experiences and
responsibilities of each individual.
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New
Compensation Philosophy and Objectives
We recently formed a compensation committee comprised of board
members who meet the definition of independent as set forth in
applicable NASDAQ rules. As of its inception, the compensation
committee has been tasked with the responsibility to establish
and implement our new compensation philosophy and objectives,
administrate the Companys executive and director
compensation programs and plans, and review and approve the
compensation of our named executive officers. The committee is
currently in the process of evaluating our historical
compensation practices and customizing a new management
compensation program for our specific circumstances.
As we gain experience as a public company, we expect that the
specific direction, emphasis and components of our executive
compensation program will continue to evolve. Accordingly, the
compensation paid to our named executive officers in the past is
not necessarily indicative of how we will compensate them after
this offering.
Compensation
Committee Procedures
The compensation committees responsibilities are specified
in its charter. The compensation committees functions and
authority include, among other things:
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determination of the chief executive officers compensation
and annual evaluation of the chief executive officers
performance;
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approval of the compensation for all other executive officers;
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52
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recommendation and administration of incentive and equity
compensation plans, as well as other employee benefit plans;
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review and recommendation of employment, severance and change of
control agreements for executive officers; and
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management of risk relating to incentive compensation.
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Elements
of Compensation
Historically, our executive officers have received annual
salaries as their compensation for services. We believe that our
key executives compensation is reflective of their
leadership roles in a growing company in relation to our
financial performance. While we do not have access to the
compensation programs of most of our peers within the industry
because they are privately-held, we believe that our executive
compensation is competitive within the industry and adequate to
retain and incentivize our key executives.
As part of the compensation committees review of executive
compensation, the committee determined to raise Mr. J.
Boyds salary to $175,000, effective June 1, 2011. The
compensation committee made this decision in light of an
increase in Mr. J. Boyds responsibilities, as he is
now responsible for the supervision of all resort operations,
and to align his compensation more closely with that of a
supervisory position, creating internal equity among his salary
and those of the resort managers whom he supervises. The fiscal
2011 salaries for Messrs. T. Boyd and Mueller, which are
set forth in their employment agreements discussed below, and
Mr. Deutsch remain the same as their fiscal 2010 salaries.
The compensation committee did not raise the salaries of
Messrs. T. Boyd, Muller and Deutsch, as the committee felt
that the compensation was adequate and appropriate for their
positions and responsibilities.
In the past, we have not included equity compensation as part of
our executive compensation packages because, prior to this
offering, there was no public market for our common stock. In
addition, we did not want to dilute the ownership of the
stockholder group that existed prior to the public offering of
our common stock. In the future, we may provide our named
executive officers both short and long-term incentive
compensation as part of our new compensation practices which may
include cash bonuses, restricted stock and options to purchase
our common stock, as the compensation committee may deem
appropriate. Our compensation committee is in the process of
evaluating various forms of short and long-term compensation and
how such awards will fit into the new compensation program that
it is developing.
Other
Executive Benefits
Our named executive officers are eligible for the following
benefits on the same basis as other eligible employees:
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health insurance;
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vacation, personal holidays and sick days;
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life insurance and supplemental life insurance;
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short-term and long-term disability; and
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a 401(k) plan with matching contributions.
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Employment
Agreements
In connection with this offering, effective June 1, 2011,
the Company entered into an executive employment agreement
(Agreement) with each of Messrs. T. Boyd and
Mueller (each, an Executive). Pursuant to their
respective Agreement, Messrs. T. Boyd and Mueller are paid
the following base salaries, not to be lowered during the term
of the agreement and to be reviewed annually by the compensation
committee: Mr. T. Boyd $442,000 and
Mr. Mueller $416,000.
Each Agreement provides that the Executive shall be eligible to
participate in any incentive, equity or other compensation plans
that the Company may implement relative to executive officers
and to receive cash, equity or other awards as the compensation
committee and board of directors deem appropriate, in their
discretion.
53
Furthermore each executive shall be eligible to participate in
other benefit plans and receive perks on the same terms as other
senior executives of the Company. The Company will provide each
Executive with a travel and entertainment budget that is
reasonable in light of his position and responsibility and
reimburse the Executive for such expenses upon receipt of
appropriate documentation.
The term of each Agreement is for three years, from June 1,
2011 to May 31, 2014, and shall be automatically renewed
for successive one-year periods unless, no later than
60 days before the expiration of the term, either party
gives the other written notice of non-renewal.
Each Agreement provides that the Company or Executive may
terminate the agreement with or without cause and with or
without good reason, respectively. Additionally, each Agreement
contains termination rights in the event of the Executives
death or disability. Please see Payments upon
Termination or a Change in Control for further information
regarding termination rights and payments due to the Executive
upon termination or a change in control.
Each Agreement contains non-competition and non-solicitation
provisions that endure for a period of two years following the
Executives termination of employment with the Company. The
Company will indemnify the Executive in connection with legal
proceedings against the Executive in his capacity as a director,
officer or employee of the Company to the fullest extent
permitted by the Companys amended and restated articles of
incorporation and amended and restated by-laws.
Tax
Considerations
In the past, we have not taken into consideration the tax
consequences to employees and the Company when considering types
and levels of awards and other compensation granted to
executives and directors; however, we anticipate that the
compensation committee will consider these tax implications when
determining executive compensation in the future.
Compensation
Recoupment Policy
Our board recently adopted a compensation recoupment policy that
applies to the Companys current and former executive
officers. The policy provides that in the event the Company is
required to prepare an accounting restatement due to the
material non-compliance of the Company with any financial
reporting requirement under the laws and regulations of the SEC,
the Company will recover from any current or former executive
officer who received cash bonuses, equity awards or other
incentive-based compensation during the three-year period
preceding the date on which the Company is required to prepare
an accounting restatement, based on the erroneous data, the
excess paid to the executive officer due to the erroneous data.
54
2010
Summary Compensation Table
The following table sets forth all compensation paid to our
named executive officers for the years ending April 30,
2010, 2009 and 2008.
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All Other
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Name and Principal Position
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Year
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Salary
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Compensation(1)
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Total
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Timothy D. Boyd, Chief Executive Officer and President
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2011
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$442,000
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$27,807
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$469,807
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2010
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$442,000
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$25,285
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$467,285
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2009
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$442,000
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$12,285
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$454,285
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Stephen J. Mueller, Chief Financial Officer, Vice President
and Secretary
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2011
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$416,000
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$17,543
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$433,543
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2010
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$416,000
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$14,700
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$430,700
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2009
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$416,000
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$416,000
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Richard Deutsch, Vice President Business and Real Estate
Development
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2011
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$416,000
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$416,000
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2010
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|
$416,000
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|
$416,000
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2009
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|
|
$416,000
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|
$416,000
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|
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|
Jesse K. Boyd, Vice President Resort Operations
|
|
|
2011
|
|
|
$96,250
|
|
|
$11,093
|
|
|
$107,343
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|
|
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2010
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$106,250
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|
|
$7,671
|
|
|
$113,921
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|
|
|
|
2009
|
|
|
$105,521
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|
|
$8,018
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|
|
$113,539
|
|
(1) All Other Compensation consists of, for Mr. T.
Boyd, the imputed value of group term life insurance premiums
paid on his behalf and for Messrs. T. Boyd, Mueller and J.
Boyd, for fiscal years 2011 and 2010, the Companys
matching contributions paid to the Companys 401(k) Plan on
behalf of each executive officer. All Other Compensation for
Messrs. T. Boyd, Mueller and J. Boyd also includes an
allowance for personal automobile usage.
Payments
upon Termination or a Change in Control
Each of Messrs. T. Boyd and Mueller has entered into an
Executive Employment Agreement (Agreement) with the
Company regarding his employment. The following is a description
of the termination provisions contained in each Agreement and
the payments due to the Executives upon termination or a change
in control.
The Company may terminate each Agreement at any time for cause,
which is defined as: (i) any conduct related to the Company
involving gross negligence, gross mismanagement, or the
unauthorized disclosure of confidential information or trade
secrets; (ii) dishonesty or a violation of the
Companys Code of Ethics and Business Conduct that has or
reasonably could be expected to result in a detrimental impact
on the reputation, goodwill or business position of any of the
companies (as defined in the Agreement); (iii) gross
obstruction of business operations or illegal or disreputable
conduct by Executive that impairs or reasonably could be
expected to impair the reputation, goodwill or business position
of any of the companies, and any acts that violate any policy of
the Company relating to discrimination or harassment;
(iv) commission of a felony or a crime involving moral
turpitude or the entrance of a plea of guilty or nolo contedere
to a felony or a crime involving moral turpitude; or
(v) any action involving a material breach of the terms of
the Agreement including material inattention to or material
neglect of duties and Executive shall not have remedied such
breach within 30 days after receiving written notice from
the board specifying the details thereof. In the event of a
termination for cause, Executive shall be entitled to receive
only Executives then-current base salary through the date
of such termination. Further, in the event of such a termination
for cause, Executive shall not be entitled to receive any bonus
payment for the year of termination or subsequent years under
any plan in which Executive is then participating.
The Company may also terminate each Agreement at any time
without cause, as defined above. In the event of such
termination without cause, upon execution of a mutual release,
Executive shall be entitled to receive
55
(i) Executives then-current base salary through the
effective date of such termination, (ii) if entitled to
receive a bonus, a pro-rated bonus for the portion of the
Companys fiscal year through the effective date of such
termination, which prorated bonus shall, if applicable, be based
on applying the level of achievement of the performance to
Executives target bonus for the year of such termination
payable in a lump sum at the same time as bonuses are paid to
the Companys senior executives generally (the
Pro-Rated Bonus), and (iii) 24 months of
Executives then current base salary payable in a lump sum.
In addition, provided that both parties have signed a mutual
release, all unvested shares or portions of any equity grant not
yet vested made under any equity compensation plan of the
Company (Unvested Equity Grants) shall automatically
become fully vested upon termination.
Under each Agreement, the Executive may terminate the Agreement
at any time for good reason, which means (i) the Company
has breached its obligations under the Agreement in any material
respect, (ii) the Company has decreased Executives
then current base salary, (iii) the Company has effected a
material diminution in Executives reporting
responsibilities, authority, or duties as in effect immediately
prior to such change,
and/or
(iv) the occurrence of a change in control (as defined
below); provided, however, that Executive shall not have the
right to terminate the Agreement for good reason unless:
(A) Executive has provided notice to the Company of any of
the foregoing conditions within 90 days of the initial
existence of the condition; (B) the Company has been given
at least 30 days after receiving such notice to cure such
condition (other than if good reason is due to a change in
control); and (C) Executive actually terminates employment
within six months following the initial existence of the
condition. In such event, provided that Executive and the
Company have executed a mutual release, Executive shall be
entitled to receive (i) Executives then current base
salary through the effective date of such termination,
(ii) if entitled to receive a bonus, a Pro-Rated Bonus, and
(iii) 24 months of Executives then current base
salary payable in a lump sum. In addition, provided that the
mutual release has been executed, all Unvested Equity Grants, if
any, shall automatically become fully vested upon termination.
An Executive may also terminate the Agreement at any time
without good reason by giving the Company at least sixty
60 days prior written notice. In such event,
Executive shall be entitled to receive only Executives
then current base salary through the date of termination.
In the event that Executive becomes totally and permanently
disabled, the Company shall have the right to terminate the
Agreement upon written notice to Executive; provided, however,
that in the event that Executive and the Company execute a
mutual release, Executive shall be entitled to receive
(i) Executives then current base salary through the
date of such termination, (ii) if entitled to receive a
bonus, a Pro-Rated Bonus, and (iii) Executives
then-current base salary, net of short term disability payments
remitted to Executive by the Company pursuant to the
Companys Short-Term Disability Plan, through the earlier
of (y) the scheduled expiration date of the Agreement (but
in no event less than 12 months from the date of
disability) or (z) the date on which Executives
long-term disability insurance payments commence. In addition,
all Unvested Equity Grants, if any, shall automatically become
fully vested upon termination.
The Agreement shall automatically terminate upon the death of
Executive. In such event, provided Executives personal
representative and the Company execute a mutual release,
Executives personal representative shall be entitled to
receive (i) Executives then current base salary
through such date of termination, and (ii) if entitled to
receive a bonus, a Pro-Rated Bonus. In addition, all Unvested
Equity Grants, if any, shall automatically become fully vested
upon termination.
Upon Executives termination without cause or for good
reason, the Company agrees to pay Executive, in lump sum, one
years COBRA premiums for continuation of health and dental
coverage in existence at the time of such termination.
In the event of a termination of Executives employment by
the Company without cause or by Executive for good reason, 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 and provided that Executive and the Company execute
a mutual release, Executive shall be entitled to receive
(i) Executives then current base salary through the
effective date of such termination or non-renewal, (ii) if
entitled to receive a bonus , a Pro-Rated Bonus, (iii) a
lump sum payment equal to 24 months of Executives
then current base salary plus an amount equal to the cash bonus
paid to Executive in the prior calendar year, if any, and
(iv) full vesting of all Unvested Equity Grants, if any. A
change in control shall mean an event or series of events by
which: (A) any person or group (as such terms are used in
Sections 13(d) and 14(d) of
56
the Exchange Act, but excluding any employee benefit plan of
such person or its subsidiaries, and any person or entity acting
in its capacity as trustee, agent, or other fiduciary or
administrator of any such plan) becomes the beneficial owner (as
defined in
Rules 13d-3
and 13d-5
under the Exchange Act), directly or indirectly, of 35% or more
of the equity securities of the Company entitled to vote for
members of the board or equivalent governing body of the Company
on a fully-diluted basis; or (B) during any period of 24
consecutive months, a majority of the members of the board or
other equivalent governing body of the Company cease to be
composed of individuals (1) who were members of that board
or equivalent governing body on the first day of such period,
(2) whose election or nomination to that board or
equivalent governing body was approved by individuals referred
to in clause (1) above constituting at the time of such
election or nomination at least a majority of that board or
equivalent governing body, or (3) whose election or
nomination to that board or other equivalent governing body was
approved by individuals referred to in clauses (1) and
(2) above constituting at the time of such election or
nomination at least a majority of that board or equivalent
governing body (excluding, in the case of both clause (2)
and clause (3), any individual whose initial nomination for, or
assumption of office as, a member of that board or equivalent
governing body occurs as a result of an actual or threatened
solicitation of proxies or consents for the election or removal
of one or more directors by any person or group other than a
solicitation for the election of one or more directors by or on
behalf of the board); or (C) any person or two or more
persons acting in concert shall have acquired, by contract or
otherwise, control over the equity securities of the Company
entitled to vote for members of the board or equivalent
governing body of the Company on a fully-diluted basis (and
taking into account all such securities that such person or
group has the right to acquire pursuant to any option right)
representing 51% or more of the combined voting power of such
securities; or (D) the Company sells or transfers (other
than by mortgage or pledge) all or substantially all of its
properties and assets to, another person or group (as such terms
are used in Sections 13(d) and 14(d) of the Exchange Act).
The following table illustrates the payments and benefits due to
each of Messrs. T. Boyd and Mueller assuming that the
termination or change in control took place on the last business
day of the Companys last completed fiscal year.
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Termination
|
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in
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Termination
|
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Connection
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Termination
|
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Termination
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Without
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Termination
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Termination
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with
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Termination
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Without
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For Good
|
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Good
|
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Due to
|
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Due to
|
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Change in
|
|
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For Cause
|
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Cause
|
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Reason
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Reason
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Disability
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Death
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Control
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Timothy D. Boyd
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$
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899,262
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|
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$
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899,262
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|
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|
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$
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1,326,000
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$
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899,262
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Stephen J. Mueller
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|
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$
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842,165
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$
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842,165
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|
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|
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$
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1,248,000
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|
|
|
|
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$
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842,165
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57
PRINCIPAL
STOCKHOLDERS
The following table shows the amount of our common stock
beneficially owned as of June 1, 2011 prior to the offering
and after giving effect to this offering by (i) each person
who is known by us to own beneficially more than 5% of our
common stock, (ii) each member of the board of directors,
(iii) each of the named executive officers and
(iv) all members of the board of directors and the
executive officers, as a group. A person is a beneficial
owner of a security if that person has or shares voting or
investment power over the security or if he or she has the right
to acquire beneficial ownership within 60 days. Unless
otherwise noted, these persons, to our knowledge, have sole
voting and investment power over the shares listed. Percentage
computations are based on 6,969,200 shares of our common
stock outstanding as of June 1, 2011, giving effect to the
anticipated 175 for 1 stock split. In addition, all other
information presented in the table below has been adjusted to
reflect the anticipated 175 for 1 stock split. Except as
otherwise noted, the principal address for the stockholders
listed below is
c/o Peak
Resorts, Inc., 17409 Hidden Valley Drive, Wildwood, Missouri
63025.
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Shares Beneficially Owned
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Shares Beneficially Owned
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Name
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Prior to This Offering
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After This Offering
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Number
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|
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Percent
|
|
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Number
|
|
|
Percent
|
|
Timothy D.
Boyd(1)
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2,232,650
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32.0%
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Stephen J. Mueller
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855,925
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12.3%
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Richard Deutsch
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845,950
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12.1%
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Jesse K.
Boyd(2)
|
|
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106,750
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1.5%
|
|
|
|
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James T. Barry, Jr.
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|
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--
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|
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--
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Gregory R. Diekemper
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|
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--
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--
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Stanley W. Hansen
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--
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--
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Michael Staenberg
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|
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--
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--
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Glenn E. Boyd,
Jr.(3)
|
|
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567,700
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|
|
8.1%
|
|
|
|
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Robin B.
Graham(4)
|
|
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954,275
|
|
|
13.7%
|
|
|
|
|
|
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David
Grenier(5)
|
|
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366,800
|
|
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5.3%
|
|
|
|
|
|
|
|
All named directors
and executive officers
as a group (8 persons)
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|
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4,041,275
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|
|
58.0%
|
|
|
|
|
|
|
|
(1) Includes 1,515,150 shares held by Mr. T. Boyd
as Trustee of the Timothy D. Boyd Revocable Trust, dated
August 27, 1996. This amount also includes
188,300 shares held by Mr. T. Boyds wife,
Melissa K. Boyd, as Trustee of the Timothy D. Boyd 2011 Family
Trust u/a, dated January 28, 2011, and 529,200 shares
held by Ms. Boyd as Trustee of the Melissa K. Boyd
Revocable Trust, dated August 27, 1996. Ms. Boyd has
sole voting and investment power as Trustee.
(2) Includes 101,500 shares held by Mr. J. Boyd
in his name and 5,250 shares held by Mr. J. Boyd and
Jessica Boyd, his wife, as tenants by the entirety over which
they share voting and investment power.
(3) Includes 567,700 shares held by Glenn Edward Boyd
and Vickie L. Boyd, Trustees of the 2001 Boyd Family Trust u/a
November 30, 2011, over which Mr. G. Boyd and
Ms. V. Boyd share voting and investment power. Mr. G.
Boyds principal address is 15732 Los Gatos Boulevard,
#406, Los Gatos, California 95032.
(4) Includes 461,475 shares held by Ms. Graham in
her name; 101,500 shares held by Kent D. Graham, her
husband, in his name; 188,300 shares held by
Mr. Graham as Trustee of the Robin B. Graham Family Trust
u/a, dated January 28, 2011; 101,500 shares held by
Kent and Robin Graham as Co-Trustees of the Boyd Family Trust,
f/b/o Ashley E. Graham, dated November 27, 1996; and
101,500 shares held by Kent and Robin Graham as Co-Trustees
of the Boyd Family Trust, f/b/o Lauren G. Graham, dated
November 27, 1996. Mr. Graham has sole voting and
investment power over the shares he owns in his name and as
Trustee, and Mr. and Ms. Graham share voting and investment
power over those shares for which they serve as Co-Trustees. The
principal address for Ms. Graham is
c/o Attitash
Ski Area, P.O. Box 308, Bartlett, New Hampshire 03812.
(5) Includes 366,800 shares held by David Grenier and
Linda S. Grenier, or their Successor(s) as Trustee(s) of the
David Grenier Living Trust, dated August 11, 1994, over
which Mr. and Ms. Grenier share voting and investment
power. Mr. Greniers principal address is
c/o Snow
Creek Ski Area, P.O. Box 567, Weston, Missouri 64098.
58
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Resort Holdings, L.L.C. is a limited liability company
previously owned by Timothy Boyd and Stephen Mueller, two of our
named executive officers and directors. Mr. Boyd and
Mr. Mueller each owned 50% of the interests of Resort
Holdings, L.L.C.
In 2005, the Company loaned Resort Holdings, L.L.C.
approximately $374,000 to purchase a home in Pennsylvania near
the Jack Frost and Big Boulder resorts. The loan accrued
interest at a rate of 6.5%, payable in installments of $1,900
per month for 30 years. On April 1, 2010, the Company
and Resort Holdings, L.L.C. entered into a lease pursuant to
which the Company leased the home from Resort Holdings, L.L.C.
for $33,600 per year for business purposes.
In 2007, Resort Holdings, L.L.C. purchased a condominium in
Vermont. The Company loaned Resort Holdings, L.L.C.
approximately $398,000 to purchase this condominium. The loan
was payable monthly over 30 years at an interest rate of
6.5%. On September 1, 2010, the Company began leasing the
condominium from Resort Holdings, L.L.C. for business purposes
for $48,000 per year pursuant to a lease agreement.
Subsequent to the purchase of the Vermont condominium in 2007,
Resort Holdings, L.L.C. received a mortgage from a third party
financial institution and paid down the aggregate loan amount
owed to the Company.
Information relating to the principal amounts outstanding and
payments made on the loan during the periods presented below is
as follows:
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|
|
|
Fiscal Year Ended April 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Largest aggregate amount of
principal outstanding
|
|
$
|
141,000
|
|
|
$
|
103,000
|
|
|
$
|
119,000
|
|
Amount of principal paid
|
|
|
153,000
|
|
|
|
17,000
|
|
|
|
16,000
|
|
Amount of interest paid
|
|
|
6,000
|
|
|
|
6,000
|
|
|
|
7,000
|
|
Effective as of April 1, 2011, the Company entered into a
Limited Liability Company Membership Interest Sale and
Assignment Agreement with each of Messrs. Boyd and Mueller,
pursuant to which the Company agreed to purchase the membership
interests of Resort Holdings, L.L.C. owned by Messrs. Boyd
and Mueller, which constitute all of the outstanding membership
interests of Resort Holdings, L.L.C. The total purchase price
was $27,869 to each of Messrs. Boyd and Mueller, or an
aggregate of $55,738. As a result of these transactions, Resort
Holdings, L.L.C. became a wholly-owned subsidiary of the
Company. The outstanding liabilities of Resort Holdings, L.L.C.
include approximately $473,000 due on the mortgage relating to
the properties. The disinterested members of the board of
directors, including the audit committee members, reviewed the
facts relating to the Resort Holdings, L.L.C. transaction and
ratified the Companys purchase of Resort Holdings, L.L.C.
On October 30, 2007, the Company and certain of its
subsidiaries entered into an Amended and Restated Credit and
Security Agreement with EPT Ski Properties, Inc. pursuant to
which EPT Ski Properties, Inc. provided the Company with a
$31 million operating loan. This amount was later increased
to $41 million upon the execution of the Second Amended and
Restated Promissory Note, dated August 5, 2008. Messers
Boyd and Mueller and Richard Deutsch, another of our named
executive officers and directors, executed a Consent and
Agreement of Guarantors on October 30, 2007 pursuant to
which they each personally guaranteed payment of the amount due
by the Company under, and satisfaction of all other obligations
pursuant to, the Amended and Restated Credit and Security
Agreement. The largest aggregate amount of principal outstanding
under the Amended and Restated Credit and Security Agreement was
$32.2 million during each of the fiscal years ended
April 30, 2011, 2010 and 2009. As of April 30, 2011,
the Company owed $32.2 million under the Amended and
Restated Credit and Security Agreement. There were no required
principal payments on the outstanding loan amount under the
Amended and Restated Credit and Security Agreement during the
fiscal years ended April 30, 2011, 2010 and 2009, but the
Company made payments of $3.0 million of interest on the
outstanding loan amount during each of these periods. The
Company currently pays interest at a rate of 9.54% on the
outstanding balance owed under the Amended and Restated Credit
and Security Agreement.
59
The Company has occasionally extended credit to Mr. Deutsch
for personal expenses, subject to his repayment. During fiscal
2011, 2010 and 2009, the largest aggregate amounts of principal
outstanding on this debt were approximately $105,000, $135,200
and $158,400, respectively. Mr. Deutsch made payments on
the principal amount of the outstanding debt in the amounts of
approximately $105,000, $30,350 and $30,350 during fiscal years
2011, 2010 and 2009, respectively. No interest payments were
made during fiscal years 2011, 2010 and 2009. On April 12,
2011, Mr. Deutsch repaid this outstanding debt in full.
Policies
and Procedures for Related Party Transactions
As provided by the audit committees charter, the audit
committee must review and approve all transactions between the
Company and any related person that are required to be disclosed
pursuant to Item 404 of
Regulation S-K.
Related person and transaction shall
have the meanings given to such terms in Item 404 of
Regulation S-K,
as amended from time to time. In determining whether to approve
or ratify a particular transaction, the audit committee will
take into account any factors it deems relevant.
60
DESCRIPTION
OF CAPITAL STOCK
The following discussion summarizes the material terms of the
common stock to be issued in connection with the public offering
contemplated by this Prospectus. This discussion does not
purport to be complete and is qualified in its entirety by
reference to our amended and restated articles of incorporation
and our amended and restated by-laws, copies of which have been
filed as exhibits to the registration statement of which this
Prospectus forms a part.
Authorized
capital stock
Our authorized capital stock consists of 20,000,000 shares
of common stock, par value $0.01 per share. As
of , we had outstanding shares of common stock,
held of record by stockholders.
The common stock has the voting rights described below under
Voting, and the dividend rights described
below under Dividends. Holders of common stock
do not have conversion or redemption rights or any preemptive
rights to subscribe for any of our unissued securities.
Voting
Holders of common stock are entitled to one vote per share on
all matters to be voted on by the stockholders.
Dividends
Holders of common stock are entitled to receive such dividends
and other distributions in cash, stock or property of the
Company when, as, and if declared by the board of directors out
of assets or funds of the Company legally available therefor.
Anti-Takeover Effects of Certain Provisions of Our Amended
and Restated Articles of Incorporation and Amended and Restated
By-laws
Certain provisions of our amended and restated articles of
incorporation and amended and restated by-laws may have
anti-takeover effects. These provisions are intended to avoid
costly takeover battles, reduce our vulnerability to a hostile
change of control and enhance the ability of our board of
directors to maximize stockholder value in connection with any
unsolicited offer to acquire us. However, these anti-takeover
provisions, which are summarized below, could also discourage,
delay or prevent (i) the merger or acquisition of our
Company by means of a tender offer, a proxy contest or
otherwise, that a stockholder may consider in its best interest,
and (ii) the removal of incumbent officers and directors.
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Removal of Directors; Vacancies. Our amended
and restated by-laws provide that a director may be removed from
office (i) by action of a majority of the board only if
such director fails to meet the qualifications for director as
stated in the amended and restated by-laws or is in breach of
any agreement between such director and the Company relating to
his or her services as a director or employee of the Company, or
(ii) by a vote of at least
662/3%
of the shares then entitled to vote in the election of
directors, voting as a single class. A vacancy on the board of
directors may be filled only by a majority of the remaining
directors in office.
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|
No Cumulative Voting. Our amended and restated
articles of incorporation prohibit cumulative voting.
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|
Calling of Special Meetings of
Stockholders. The amended and restated by-laws
provide that special meetings of the stockholders may only be
called by the chairman of the board, the president of the
Company, or by resolution of the board of directors upon a vote
of at least 75% of all shares issued and outstanding and
entitled to vote at the special meeting.
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Advance Notice Requirements for Stockholder Proposals and
Director Nominations. Our amended and restated
bylaws establish an advance notice procedure for stockholder
proposals to be brought before an annual meeting of our
stockholders, including proposed nominations of persons for
election to the board of directors. Stockholders at an annual
meeting will only be able to
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consider proposals or nominations specified in the notice of
meeting or brought before the meeting by or at the direction of
the board of directors or by a stockholder who was a stockholder
of record on the record date for the meeting, who is entitled to
vote at the meeting and who has given our secretary timely
written notice, in proper form, of the stockholders
intention to bring that business before the meeting.
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Amendment of Amended and Restated By-laws. Our
amended and restated by-laws can only be amended by the board of
directors.
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Warrant
In connection with the initial public offering of our common
stock, we have agreed to issue to the underwriters a warrant to
purchase up to an aggregate of shares of
common stock at an exercise price of $ per
share, assuming an initial public offering price of
$ per share, which is the mid-point of the
range listed above. The warrant is exercisable commencing on the
first anniversary of the effective date of this offering and
ending on the fifth anniversary of the effective date of this
offering. The warrant agreement provides for a one-time demand
registration right and piggy-back registration rights for a
period of four years, beginning one year from the date of this
Prospectus. The warrant agreement also provides for
anti-dilution rights, such that the amount of common stock
underlying the warrant will be adjusted to reflect stock
dividends, splits and recapitalizations. According to the
warrant agreement, the exercise price of the warrant will be
adjusted proportionately to reflect stock dividends,
split-ups,
consolidations, combinations, reclassifications, reorganizations
or other similar events.
Listing
We have applied to have the common stock listed on the NASDAQ
Global Market under the symbol PEAK.
Transfer
Agent
We have appointed Computershare Investor Services as the
transfer agent and registrar for the common stock.
62
SHARES
ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our
common stock, and we cannot predict what effect, if any, market
sales of shares of common stock or the availability of shares of
common stock for sale will have on the market price of our
common stock. Future sales of substantial amounts of our common
stock in the public market, or the perception that substantial
sales may occur, could materially and adversely affect the
prevailing market price of our common stock and could impair our
future ability to raise capital through the sale of our equity
at a time and price we deem appropriate.
Upon completion of this offering, we will have
shares of common stock outstanding. Of these shares of common
stock, the shares of common stock being sold
in this offering will be freely tradable without restriction
under the Securities Act, except for any such shares which may
be held or acquired by an affiliate of ours, as that
term is defined in Rule 144 promulgated under the
Securities Act, which shares will be subject to the volume
limitations and other restrictions of Rule 144 described
below. The remaining shares of common stock
held by our existing stockholders upon completion of this
offering will be restricted securities, as that
phrase is defined in Rule 144, and may be resold only after
registration under the Securities Act or pursuant to an
exemption from such registration, including, among others, the
exemptions provided by Rule 144 of the Securities Act,
which is summarized below. Taking into account the
lock-up
agreements described below and the provisions of Rule 144,
additional shares of our common stock will be available for sale
in the public market as follows:
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shares of restricted securities will be available for
sale at various times after the date of this Prospectus pursuant
to Rule 144; and
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shares subject to the
lock-up
agreements will be eligible for sale at various times beginning
180 days after the date of this Prospectus pursuant to
Rule 144.
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Rule 144
The availability of Rule 144 will vary depending on whether
shares of our common stock are restricted and whether they are
held by an affiliate or a non-affiliate. For purposes of
Rule 144, a non-affiliate is any person or entity that is
not our affiliate at the time of sale and has not been our
affiliate during the preceding three months.
In general, under Rule 144, once we have been a reporting
company subject to the reporting requirements of Section 13
or Section 15(d) of the Exchange Act for at least
90 days, an affiliate who has beneficially owned shares of
our restricted common stock for at least six months would be
entitled to sell within any three-month period any number of
such shares that does not exceed the greater of:
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1% of the number of shares of our common stock then outstanding,
which will equal approximately shares
immediately after consummation of this offering; or
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the average weekly trading volume of our common stock on the
open market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to that sale.
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In addition, any sales by our affiliates under Rule 144 are
subject to manner of sale provisions and notice requirements and
to the availability of current public information about us. Our
affiliates must comply with all the provisions of Rule 144
(other than the six-month holding period requirement) in order
to sell shares of our common stock that are not restricted
securities, such as shares acquired by our affiliates either in
this offering or through purchases in the open market following
this offering. An affiliate is a person that
directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, an
issuer.
Similarly, once we have been a reporting company for at least
90 days, a non-affiliate who has beneficially owned shares
of our restricted common stock for at least six months would be
entitled to sell those shares without complying with the volume
limitation, manner of sale and notice provisions of
Rule 144, provided that certain public information is
available. Furthermore, a non-affiliate who has beneficially
owned our shares of restricted common stock for at least one
year will not be subject to any restrictions under Rule 144
with respect to such shares, regardless of how long we have been
a reporting company.
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We are unable to estimate the number of shares that will be sold
under Rule 144 since this will depend on the market price
for our common stock, the personal circumstances of the
stockholder and other factors.
Lock-Up
Agreements
We and our officers, directors and holders of all of our common
stock have agreed with the underwriters not to offer, pledge,
sell, contract to sell, grant, lend or otherwise transfer or
dispose of any shares of our common stock or securities
convertible into or exchangeable for shares of our common stock,
subject to specified limited exceptions and extensions described
elsewhere in this Prospectus, during the period continuing
through the date that is 180 days (subject to extension)
after the date of this Prospectus, except with the prior written
consent of Rodman & Renshaw, LLC, on behalf of the
underwriters. See Underwriting. Rodman &
Renshaw, LLC may release any of the securities subject to these
lock-up
agreements at any time without notice.
Immediately following the consummation of this offering,
stockholders subject to
lock-up
agreements will hold shares of our common
stock, representing about % of our outstanding
shares of common stock after giving effect to this offering.
64
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS TO
NON-UNITED
STATES HOLDERS
The following is a summary of material United States federal
income tax consequences of the purchase, ownership and
disposition of our common stock to a
non-United
States holder that purchases shares of our common stock in this
offering. For purposes of this summary, a
non-United
States holder means a beneficial owner of our common stock
that is, for United States federal income tax purposes:
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a nonresident alien individual;
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a foreign corporation (or an entity treated as a foreign
corporation for United States federal income tax
purposes); or
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a foreign estate or foreign trust.
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In the case of a holder that is classified as a partnership for
United States federal income tax purposes, the tax treatment of
a partner in such partnership generally will depend upon the
status of the partner and the activities of the partner and the
partnership. If you are a partner in a partnership holding our
common stock, we urge you to consult your own tax advisor.
This summary is based upon the provisions of the United States
Internal Revenue Code of 1986, as amended, which we refer to as
the Code, the related Treasury regulations and applicable
administrative and judicial interpretations, all as of the date
of this Prospectus. Those authorities may change, perhaps
retroactively, so as to result in United States federal income
tax consequences different than those summarized below. We
cannot assure you that a change in law will not alter
significantly the tax considerations that we describe in this
summary. We have not sought and do not plan to seek any ruling
from the United States Internal Revenue Service, which we refer
to as the IRS, with respect to statements made and the
conclusions reached in the following summary, and there can be
no assurance that the IRS or a court will agree with our
statements and conclusions.
This summary does not address all aspects of United States
federal income and estate taxes that may be relevant to
non-United
States holders in light of their personal circumstances and does
not deal with federal taxes other than the United States federal
income and estate taxes or with state, local or
non-United
States tax considerations. Special rules, not discussed here,
may apply to certain
non-United
States holders, including:
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United States expatriates;
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controlled foreign corporations;
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passive foreign investment companies;
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corporations that accumulate earnings to avoid United States
federal income tax; and
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investors in pass-through entities that are subject to special
treatment under the Code.
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Such
non-United
States holders are urged to consult their own tax advisors to
determine the United States federal, state, local and other tax
consequences that may be relevant to them.
This summary applies only to a
non-United
States holder that holds our common stock as a capital asset
(generally property held for investment).
If you are considering the purchase of our common stock, we urge
you to consult your own tax advisor concerning the United States
federal income and estate tax consequences to you of the
purchase, ownership and disposition of our common stock, as well
as the consequences to you arising under United States tax laws
other than the federal income and estate tax law or under the
laws of any other taxing jurisdiction, in light of your
particular circumstances.
Dividends
We do intend to pay cash distributions on our common stock on a
quarterly basis, subject to the availability of funds. See
Dividend Policy. Distributions on our common stock
will constitute dividends for United States federal income tax
purposes to the extent paid from our current or accumulated
earnings and profits, as determined
65
under United States federal income tax principles. Distributions
in excess of both our current and accumulated earnings and
profits will constitute a return of capital that reduces (but
not below zero) the non-United States holders adjusted tax
basis in our common stock. Any remaining excess will be treated
as gain realized on the sale or other disposition of our common
stock and will be treated as described under Gain on
Disposition of Common Stock below. Dividends paid to a
non-United
States holder generally will be subject to withholding of
United States federal income tax at a 30% rate, or such lower
rate as may be specified by an applicable income tax treaty, of
the gross amount of the dividends paid. However, dividends that
are effectively connected with the conduct of a trade or
business by the
non-United
States holder within the United States (and, if required by
an applicable income tax treaty, are attributable to a United
States permanent establishment of the
non-United
States holder) are not subject to the withholding tax,
provided certain certification and disclosure requirements are
satisfied (usually by providing us with an IRS Form W-8ECI).
Instead, such dividends are subject to United States federal
income tax on a net income basis in the same manner as if the
non-United
States holder were a United States person as defined under
the Code. Any such effectively connected dividends received by a
foreign corporation may be subject to an additional branch
profits tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. If we are a
United States real property holding company (a
USRPHC), as described below, distributions (or
portions of distributions) to non-United States holders that are
not dividends will be subject to withholding of United States
federal income tax at a rate of 10%. However, a non-United
States holder may be able to claim a refund of such withheld tax
imposed on a return of capital distribution (up to its adjusted
tax basis in our shares) by filing a timely United States
federal income tax return.
A non-United
States holder of our common stock who wishes to claim the
benefit of an applicable treaty rate and avoid backup
withholding, as discussed below, for dividends will be required
(a) to complete IRS
Form W-8BEN
(or other applicable form) and certify under penalty of perjury
that such holder is not a United States person as defined under
the Code and is eligible for treaty benefits or (b) if our
common stock is held through certain foreign intermediaries, to
satisfy the relevant certification requirements of applicable
Treasury regulations. Special certification and other
requirements apply to certain
non-United
States holders that are pass-through entities rather than
corporations or individuals.
A non-United
States holder of our common stock eligible for a reduced
rate of United States withholding tax pursuant to an income tax
treaty may obtain a refund of any excess amounts withheld by
timely filing an appropriate claim for refund with the IRS.
Gain on
Disposition of Common Stock
A non-United States holder generally will not be subject to
United States federal income tax with respect to gain realized
on the sale or other taxable disposition of our common stock,
unless:
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the gain is effectively connected with a trade or business
conducted by the non-United States holder in the United States
(and, if required by an applicable income tax treaty, is
attributable to a United States permanent establishment of the
non-United States holder);
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if the non-United States holder is an individual, such
non-United States holder is present in the United States for
183 days or more in the taxable year of the sale or other
taxable disposition, and such non-United States holder has a
tax home (as defined in the Code) in the United
States; or
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we are or have been a USRPHC for United States federal income
tax purposes at any time during the shorter of the period that
the non-United States holder held our common stock and the
five-year period ending on the date the non-United States holder
disposes of our common stock.
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Unless an applicable income tax treaty provides otherwise, a
non-United States holder who has gain that is described in the
first bullet point immediately above will be subject to tax on
the net gain derived from the sale or other taxable disposition
under regular graduated United States federal income tax rates
in the same manner as if it were a United States person as
defined under the Code. In addition, a non-United States holder
described in the first bullet point immediately above that is a
foreign corporation may be subject to the branch profits tax
equal to 30% of its effectively connected earnings and profits
that are not reinvested in its United States trade or business
or at such lower rate as may be specified by an applicable
income tax treaty.
66
An individual non-United States holder who is described in the
second bullet point immediately above will be subject to a flat
30% tax on the gain recognized from the sale or other taxable
disposition (or such lower rate as may be specified by an
applicable income tax treaty), which may be offset by certain
United States-source capital losses. We urge non-United States
holders to consult any potentially applicable income tax
treaties that may provide for different rules.
With respect to the third bullet point above, generally a
corporation is a USRPHC if the fair market value of its United
States real property interests (net of certain debt secured by
such real property) equals or exceeds 50% of the sum of the fair
market value of its worldwide real property interests and its
other assets used or held for use in a trade or business (net of
certain debt secured by such real property and other assets). We
have not determined whether we are a USRPHC, but we believe that
we are now likely a USRPHC and likely will remain a USRPHC for
the foreseeable future. However, so long as our common stock
continues to be regularly traded on an established
securities market, a non-United States holder will be
taxable on gain recognized on the sale or other taxable
disposition of our common stock only if the non-United States
holder actually or constructively holds or held more than 5% of
our common stock at any time during the five-year period ending
on the date of disposition or, if shorter, the non-United States
holders holding period for our common stock. If our common
stock ceases to be regularly traded on an established securities
market, and we are or have been a USRPHC during the
five-year
period ending on the date of disposition or, if shorter, the
non-United
States holders holding period for our common stock, all
non-United States holders would be subject to United States
federal income tax on a disposition of our common stock. There
can be no assurance that our common stock will continue to be
regularly traded on an established securities market.
We urge non-United States holders to consult their tax advisors
with respect to the application of the foregoing rules to their
ownership and disposition of our common stock.
Federal
Estate Tax
Our common stock that is owned (or treated as owned) by an
individual who is not a citizen or resident of the United States
(as specially defined for United States federal estate tax
purposes) at the time of death will be included in such
individuals gross estate for United States federal estate
tax purposes, unless an applicable estate or other tax treaty
provides otherwise, and, therefore, may be subject to United
States federal estate tax.
Information
Reporting and Backup Withholding Tax
We must report annually to the IRS and to each
non-United
States holder the amount of dividends paid to such holder
and the tax withheld with respect to such dividends, regardless
of whether withholding was required. Copies of the information
returns reporting such dividends and withholding may also be
made available to the tax authorities in the country in which
the
non-United
States holder resides under the provisions of an applicable
income tax treaty or agreement.
A non-United
States holder will be subject to backup withholding
(currently at a 28% rate of tax) for dividends paid to such
holder unless such holder certifies under penalty of perjury
that it is a
non-United
States holder (and the payor does not have actual knowledge
or reason to know that such holder is a United States person as
defined under the Code), or such holder otherwise establishes an
exemption.
Information reporting and, depending on the circumstances,
backup withholding will apply to the proceeds of a sale of our
common stock within the United States or conducted through
certain United States-related financial intermediaries, unless
the beneficial owner certifies under penalty of perjury that it
is a
non-United
States holder (and the payor does not have actual knowledge
or reason to know that the beneficial owner is a United States
person as defined under the Code), or such owner otherwise
establishes an exemption.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules may be allowed as a
refund or a credit against a
non-United
States holders United States federal income tax
liability provided the required information is timely furnished
to the IRS.
67
Additional
Withholding Requirements
Recently enacted legislation imposes a United States withholding
tax at a 30% rate on certain distributions and proceeds of sale
in respect of shares of our common stock received by United
States persons who own shares of our common stock through
foreign accounts or foreign intermediaries and certain
non-United States holders if certain disclosure requirements
related to United States accounts or ownership are not
satisfied. If payment of withholding taxes is required,
non-United States holders that are otherwise eligible for an
exemption from, or reduction of, United States withholding taxes
with respect to such distributions and proceeds will be required
to seek a refund from the IRS to obtain the benefit of such
exemption or reduction. We will not pay any additional amounts
in respect of any amounts withheld. These new withholding rules
are generally effective for payments made after December 31,
2012.
THE SUMMARY OF MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES
ONLY. POTENTIAL PURCHASERS OF OUR COMMON STOCK ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE UNITED STATES
FEDERAL, STATE, LOCAL AND
NON-UNITED
STATES TAX CONSIDERATIONS OF PURCHASING, OWNING AND DISPOSING OF
OUR COMMON STOCK.
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UNDERWRITING
Rodman & Renshaw, LLC is acting as the sole managing
underwriter of this offering. Under the terms and subject to the
conditions contained in an underwriting agreement dated the date
of this Prospectus, Rodman & Renshaw, LLC, or the
underwriter, has agreed to purchase, and we have agreed to sell
to them, all shares of common stock offered by
this Prospectus.
Nature of
Underwriting Commitment
The underwriter is offering the shares of common stock subject
to its acceptance of the shares from us and subject to prior
sale. The underwriting agreement provides that the obligations
of the underwriter to pay for and accept delivery of the shares
of common stock offered by this Prospectus are subject to the
approval of certain legal matters by their counsel and to other
conditions. The underwriter is obligated to take and pay for all
of the shares of common stock offered by this Prospectus if any
such shares are taken. However, the underwriter is not required
to take or pay for the shares covered by the over-allotment
option described below. The underwriter initially proposes to
offer part of the shares of common stock directly to the public
at the public offering price listed on the cover page of this
Prospectus, less underwriting discounts and commissions, and
part to certain dealers at a price that represents a concession
not in excess of $ a share under the public
offering price. After the initial offering of the shares of
common stock, the offering price and other selling terms may
from time to time be varied by the underwriter.
Option to
Purchase Additional Shares
We have granted to the underwriter an option, exercisable for
45 days from the date of this Prospectus, to purchase up to
an aggregate of additional shares of common
stock at the public offering price, less underwriting discounts
and commissions. The underwriter may exercise this option, in
whole or in part, solely for the purpose of covering
over-allotments, if any, made in connection with the offering of
the shares of common stock offered by this Prospectus. If the
over-allotment option is exercised in full, the total price to
the public would be $ , the total underwriter
discounts and commissions would be $ and the
total proceeds to us would be $ .
Discounts
and Commissions
The following table shows the per share and total underwriting
discounts and commissions that we are to pay to the underwriter
in connection with this offering. These amounts are shown
assuming both no exercise and full exercise of the
over-allotment option.
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Total
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Per
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No
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Share
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Exercise
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Full Exercise
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Public offering price
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$
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$
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$
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Underwriting
discount1
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$
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$
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$
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Non-accountable expense allowance
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$
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$
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$
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Proceeds, before expenses, to us
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$
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$
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$
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(1) |
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The underwriter is also entitled to
a common stock purchase warrant and expense reimbursements, as
discussed below.
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In addition, we estimate that the expenses of this offering
other than underwriting discounts and commissions payable by us
will be approximately $ million.
We have agreed to pay the underwriter a non-accountable expense
allowance equal to 1% of the public offering price or
$ . We have also agreed to issue to the
underwriter a common stock purchase warrant to purchase up
to shares of our common stock. The warrant
will have an exercise price equal to 125% of the price of the
shares sold in the offering. The warrant is exercisable
commencing on the first anniversary of the effective date of the
offering and ending on the fifth anniversary of the effective
date of this offering. The warrant is not exercisable or
convertible more than five years from the effective date of this
offering. The warrant also provides for unlimited
piggyback registration rights at our expense with
respect to the underlying shares of common stock. Pursuant to
the rules of the Financial Industry Regulatory, Inc., or FINRA,
and in particular Rule 5110, the warrant (and underlying
shares) issued to the underwriter may not be sold, transferred,
assigned, pledged, or hypothecated, or
69
the subject of any hedging, short sale, derivative, put or call
transaction that would result in the effective disposition of
the securities by any person for a period of 180 days
immediately following the date of delivery and payment for the
shares offered; provided, however, that the warrant (and
underlying shares) may be transferred to officers or partners of
the underwriter as long as the warrant (and underlying shares)
remains subject to the lockup.
We have agreed to pay the underwriter its actual and accountable
out of pocket expenses related to the offering. We have also
agreed that the underwriter shall have a right of first refusal
for a period of twelve months from the date the offering is
completed to purchase for its account or sell for the account of
the Company any securities of the Company which it may seek to
sell.
Lock-ups
We, all of our directors and officers and holders of our
outstanding stock have agreed that, subject to specified
exceptions, without the prior written consent of the
underwriter, we and they will not, during the period beginning
on the effective date of this offering and ending 180 days
thereafter:
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offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any
shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock;
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enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences
of ownership of common stock; or
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make any demand for, or exercise any right with respect to, the
registration of any shares of common stock or any security
convertible into or exercisable or exchangeable for common stock;
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whether any such transaction described above is to be settled by
delivery of common stock or such other securities, in cash or
otherwise.
The restrictions described in the preceding paragraphs do not
apply to:
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the sale by us of shares to the underwriter in connection with
the offering;
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the issuance by us of options or shares of stock under any stock
compensation plan;
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transactions relating to shares of common stock or other
securities convertible or exchangeable into common stock
acquired in open market transactions after the completion of the
offering of the shares; provided that no filing with the SEC
shall be required or shall be made voluntarily in connection
with such transaction; or
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the transfer of shares of common stock or any security
convertible or exchangeable into shares of common stock as a
bona fide gift, or by will or intestate succession to a member
of the immediate family of our stockholders, or to a trust for
the benefit of such immediate family member; provided that it
shall be a condition to the transfer or distribution that the
transferee provide prior written notice of such transfer or
distribution to the underwriter and execute a copy of the
lock-up
agreement, that no filing by any donee or transferee with the
SEC shall be required or shall be made voluntarily in connection
with such transfer or distribution, other than a filing on
Form 5, and that no such transfer or distribution may
include a disposition for value.
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The 180-day
restricted period described in the preceding paragraph will be
extended if:
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during the last 17 days of the
180-day
restricted period we issue an earnings release or material news
or a material event relating to us occurs; or
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prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
restricted period,
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in which case the restrictions described in the preceding
paragraph will continue to apply until the expiration of the
180-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
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Stabilization
In order to facilitate this offering of common stock, the
underwriter may engage in transactions that stabilize, maintain
or otherwise affect the price of the common stock. Specifically,
the underwriter may sell more shares than they are obligated to
purchase under the underwriting agreement, creating a short
position. A short sale is covered if the short position is no
greater than the number of shares available for purchase by the
underwriter under the over-allotment option. The underwriter can
close out a covered short sale by exercising the over- allotment
option or by purchasing shares in the open market. In
determining the source of shares to close out a covered short
sale, the underwriter will consider, among other things, the
open market price of shares compared to the price available
under the over-allotment option. The underwriter may also sell
shares in excess of the over-allotment option, creating a naked
short position. The underwriter must close out any naked short
position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriter is
concerned that there may be downward pressure on the price of
the common stock in the open market after pricing that could
adversely affect investors who purchase in this offering. In
addition, to stabilize the price of the common stock, the
underwriter may bid for and purchase shares of common stock in
the open market. These activities may raise or maintain the
market price of the common stock above independent market levels
or prevent or retard a decline in the market price of the common
stock. The underwriter is not required to engage in these
activities and may end any of these activities at any time.
Other
Terms
We will apply to have our common stock approved for quotation on
the NASDAQ Global Market under the symbol PEAK.
We and the underwriter have agreed to indemnify each other
against certain liabilities, including liabilities under the
Securities Act.
Prior to this offering, there has been no public market for the
shares of common stock. The initial public offering price will
be determined by negotiations between us and the underwriter.
Among the factors to be considered in determining the initial
public offering price will be our future prospects and those of
our industry in general; sales, earnings and other financial
operating information in recent periods; and the price-earnings
ratios, price-sales ratios and market prices of securities and
certain financial and operating information of companies engaged
in activities similar to ours. The estimated initial public
offering price range set forth on the cover page of this
preliminary Prospectus is subject to change as a result of
market conditions and other factors. An active trading market
for the shares may not develop, and it is possible that after
the offering the shares will not trade in the market above their
initial offering price. A Prospectus in electronic format may be
made available on a web site maintained by the underwriter, and
the underwriter may distribute Prospectuses electronically.
Foreign
Regulatory Restrictions on Purchase of Our Common
Stock
We have not taken any action to permit a public offering of our
common stock outside the U.S. or to permit the possession
or distribution of this Prospectus outside the U.S. Persons
outside the U.S. who come into possession of this
Prospectus must inform themselves about and observe any
restrictions relating to this offering and the distribution of
the Prospectus outside the U.S. In addition to the public
offering of our common stock in the U.S., the underwriter may,
subject to applicable foreign laws, also offer our common stock
to certain institutions or accredited persons in the following
countries:
Australia
If this document is issued or distributed in Australia it is
issued or distributed to wholesale clients only, not
to retail clients. For the purposes of this
paragraph, the terms wholesale client and
retail client have the meanings given in
section 761 of the Australian Corporations Act 2001 (Cth).
This document is not a disclosure document under the Australian
Corporations Act, has not been lodged with the Australian
Securities & Investments Commission and does not
purport to include the information required of a disclosure
document under the Australian Corporations Act. Accordingly,
(i) the offer of securities under this document is only
made to persons to whom it is lawful to offer such securities
under one or more exemptions set out in the Australian
Corporations Act, (ii) this
71
document is only made available in Australia to those persons
referred to in clause (i) above, and (iii) the offeree
must be sent a notice stating in substance that, by accepting
this offer, the offeree represents that the offeree is such a
person as referred to in clause (i) above, and, unless
permitted under the Australian Corporations Act, agrees not to
sell or offer for sale within Australia any of the securities
sold to the offeree within 12 months after its transfer to
the offeree under this document.
China
THIS PROSPECTUS HAS NOT BEEN AND WILL NOT BE CIRCULATED OR
DISTRIBUTED IN THE PRC, AND SECURITIES MAY NOT BE OFFERED OR
SOLD, AND WILL NOT BE OFFERED OR SOLD TO ANY PERSON FOR
RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, TO ANY RESIDENT
OF THE PRC EXCEPT PURSUANT TO APPLICABLE LAWS AND REGULATIONS OF
THE PRC.
UAE
The offering has not been approved or licensed by the Central
Bank of the United Arab Emirates (the UAE),
Securities and Commodities Authority of the UAE
and/or any
other relevant licensing authority in the UAE including any
licensing authority incorporated under the laws and regulations
of any of the free zones established and operating in the
territory of the UAE, in particular the Dubai Financial Services
Authority (the DFSA), a regulatory authority of the
Dubai International Financial Centre (the DIFC).
The offering does not constitute a public offer of securities in
the UAE, DIFC
and/or any
other free zone in accordance with the Commercial Companies Law,
Federal Law No. 8 of 1984 (as amended), DFSA Offered
Securities Rules and NASDAQ Dubai Listing Rules, accordingly, or
otherwise. The securities offered hereby may not be offered to
the public in the UAE
and/or any
of the free zones, including, in particular, the DIFC.
The securities offered hereby may be offered and issued only to
a limited number of investors in the UAE or any of its free
zones (including, in particular, the DIFC) who qualify as
sophisticated investors under the relevant laws and regulations
of the UAE or the free zone concerned, including, in particular,
the DIFC.
The company represents and warrants that the securities offered
hereby will not be offered, sold, transferred or delivered to
the public in the UAE or any of its free zones, including, in
particular, the DIFC.
Dubai
The issuer is not licensed by the Dubai Financial Services
Authority (DFSA) to provide financial services in
the Dubai International Financial Centre (DIFC). The
offering has not been approved or licensed by the Central Bank
of the United Arab Emirates (the UAE), Securities
and Commodities Authority of the UAE
and/or any
other relevant licensing authority in the UAE including any
licensing authority incorporated under the laws and regulations
of any of the free zones established and operating in the
territory of the UAE, in particular the DFSA, a regulatory of
the DIFC.
The offering does not constitute a public offer of securities in
the UAE, DIFC
and/or any
other free zone in accordance with the Commercial Companies Law,
Federal Law No. 8 of 1984 (as amended), DFSA Offered
Securities Rules and NASDAQ Dubai Listing Rules, accordingly, or
otherwise. The securities offered hereby may not be offered to
the public in the UAE
and/or any
of the free zones, including, in particular, the DIFC.
The securities offered hereby may be offered and issued only to
a limited number of investors in the UAE or any of its free
zones (including, in particular, the DIFC) who qualify as
sophisticated investors under the relevant laws and regulations
of the UAE or the free zone concerned, including, in particular,
the DIFC.
The company represents and warrants that the securities offered
hereby will not be offered, sold, transferred or delivered to
the public in the UAE or any of its free zones, including, in
particular, the DIFC.
Israel
The common stock offered by this Prospectus has not been
approved or disapproved by the Israeli Securities Authority (the
ISA), nor has such common stock been registered for
sale in Israel. The shares may not be offered
72
or sold, directly or indirectly, to the public in Israel, absent
the publication of a prospectus. The ISA has not issued permits,
approvals or licenses in connection with the offering or
publishing of this Prospectus; nor has it authenticated the
details included herein, confirmed their reliability or
completeness, or rendered an opinion as to the quality of the
common stock being offered. Any resale, directly or indirectly,
to the public of the common stock offered by this Prospectus is
subject to restrictions on transferability and must be effected
only in compliance with the Israeli securities laws and
regulations.
Pakistan
The investors/subscribers in Pakistan will be responsible for
ensuring their eligibility to invest under the applicable laws
of Pakistan and to obtain any regulatory consents if required
for such purpose.
Saudi
Arabia
NO OFFERING OF SHARES IS BEING MADE IN THE KINGDOM OF SAUDI
ARABIA, AND NO AGREEMENT RELATING TO THE SALE OF THE
SHARES WILL BE CONCLUDED IN SAUDI ARABIA. THIS DOCUMENT IS
PROVIDED AT THE REQUEST OF THE RECIPIENT AND IS BEING FORWARDED
TO THE ADDRESS SPECIFIED BY THE RECIPIENT. NEITHER THE AGENT NOR
THE OFFERING HAVE BEEN LICENSED BY SAUDI ARABIAS
SECURITIES AND EXCHANGE COMMISSION OR ARE OTHERWISE REGULATED BY
THE LAWS OF THE KINGDOM OF SAUDI ARABIA.
THEREFORE, NO SERVICES RELATING TO THE OFFERING, INCLUDING THE
RECEIPT OF APPLICATIONS AND/OR THE ALLOTMENT OF THE SHARES, MAY
BE RENDERED WITHIN THE KINGDOM OF SAUDI ARABIA BY THE AGENT OR
PERSONS REPRESENTING THE OFFERING.
UK
The content of this Prospectus has not been issued or approved
by an authorised person within the meaning of the United Kingdom
Financial Services and Markets Act 2000 (FSMA).
Reliance on this Prospectus for the purpose of engaging in any
investment activity may expose an investor to a significant risk
of losing all of the property or other assets invested. This
Prospectus does not constitute a Prospectus within
the meaning of the FSMA and is issued in reliance upon one or
more of the exemptions from the need to issue such a prospectus
contained in section 86 of the FSMA.
VALIDITY
OF COMMON STOCK
The validity of the shares of common stock offered hereby will
be passed upon for us by Helfrey, Neiers & Jones P.C.,
St. Louis, Missouri. Certain legal matters in connection
with this offering will be passed upon for the underwriters by
Andrews Kurth LLP, Austin, Texas.
EXPERTS
The consolidated financial statements of Peak Resorts, Inc. and
subsidiaries as of April 30, 2011 and 2010 and for each of
the years in the three-year period ended April 30, 2011
appearing in this Prospectus and the related financial statement
schedules included elsewhere in the registration statement have
been audited by McGladrey & Pullen, LLP, an
independent registered public accounting firm, as stated in
their report appearing elsewhere in the registration statement
(which report expresses an unqualified opinion on the financial
statements and financial statement schedules), and are included
in reliance upon such reports and upon the authority of such
firm as experts in accounting and auditing.
73
WHERE YOU
CAN FIND MORE INFORMATION
We have filed a registration statement, of which this Prospectus
is a part, on
Form S-1
with the SEC relating to this offering. This Prospectus does not
contain all of the information in the registration statement and
the exhibits and financial statements included with the
registration statement. References in this Prospectus to any of
our contracts, agreements or other documents are not necessarily
complete, and you should refer to the exhibits attached to the
registration statement for copies of the actual contracts,
agreements or documents.
The Companys filings with the SEC are available to the
public on the SECs website at
http://www.sec.gov.
Those filings will also be available to the public on, or
accessible through, our corporate web site at
http://www.peakresorts.com.
The information contained on or accessible through our corporate
web site or any other web site that we may maintain is not part
of this Prospectus or the registration statement of which this
Prospectus is a part. You may also read and copy, at SEC
prescribed rates, any document we file with the SEC, including
the registration statement (and its exhibits) of which this
Prospectus is a part, at the SECs Public Reference Room
located at 100 F Street, N.E., Washington D.C. 20549.
You can call the SEC at
1-800-SEC-0330
to obtain information on the operation of the Public Reference
Room. You may also request a copy of these filings, at no cost,
by writing to us at 17409 Hidden Valley Drive, Wildwood,
Missouri 63025 or telephoning us at
(636) 938-7474.
Upon the effectiveness of the registration statement, we will be
subject to the informational requirements of the Exchange Act
and, in accordance with the Exchange Act, will file periodic
reports, proxy and information statements and other information
with the SEC. Such annual, quarterly and current reports; proxy
and information statements; and other information can be
inspected and copied at the locations set forth above. We will
report our financial statements on a year ended April 30.
We intend to furnish our stockholders with annual reports
containing consolidated financial statements audited by our
independent registered public accounting firm and will post on
our website our quarterly reports containing unaudited
consolidated financial statements for each of the first three
quarters of each fiscal year.
74
Report of
Independent Registered Public Accounting Firm
To the Board of Directors
Peak Resorts, Inc. and Subsidiaries
Wildwood, Missouri
We have audited the accompanying consolidated balance sheets of
Peak Resorts, Inc. and Subsidiaries as of April 30, 2011
and 2010, and the related consolidated statements of earnings
(loss), stockholders equity and comprehensive income and
cash flows for the years ended April 30, 2011, 2010 and
2009. Our audits also included the financial statement schedules
of Peak Resorts, Inc. and Subsidiaries listed in Item 16(b).
These consolidated financial statements are the responsibility
of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Peak Resorts, Inc. and Subsidiaries as of
April 30, 2011 and 2010, and the results of their
operations and their cash flows for the years ended
April 30, 2011, 2010 and 2009 in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when
considered in the relation to the basic consolidated financial
statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Note 5 to the financial statements, the
Company terminated its S-corporation election effective
April 30, 2011. Prior to April 30, 2011, federal and
most state income taxes were not required to be recognized. As
of April 30, 2011, the Company will now be responsible for
corporate income taxes and has reported the impact of deferred
income taxes for book and tax bases differences.
/s/ McGladrey & Pullen, LLP
St. Louis, Missouri
June 10, 2011
F-2
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,463,200
|
|
|
$
|
19,508,100
|
|
Restricted cash balances
|
|
|
11,271,400
|
|
|
|
11,138,800
|
|
Marketable securities
|
|
|
-
|
|
|
|
305,600
|
|
Accounts receivable (no allowance for doubtful accounts
considered necessary)
|
|
|
906,400
|
|
|
|
903,800
|
|
Inventory
|
|
|
1,329,600
|
|
|
|
1,431,500
|
|
Deferred Income tax
|
|
|
875,000
|
|
|
|
-
|
|
Prepaid incremental stock issuance cost
|
|
|
468,700
|
|
|
|
-
|
|
Prepaid expenses and other current assets
|
|
|
973,100
|
|
|
|
891,300
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
32,287,400
|
|
|
|
34,179,100
|
|
Property and equipment, net
|
|
|
117,801,300
|
|
|
|
109,146,000
|
|
Land held for development
|
|
|
27,997,800
|
|
|
|
24,525,200
|
|
Other assets, including related party amounts
|
|
|
2,434,600
|
|
|
|
2,403,700
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
180,521,100
|
|
|
$
|
170,254,000
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
3,140,000
|
|
|
$
|
2,998,000
|
|
Accrued stockholder distributions
|
|
|
1,126,900
|
|
|
|
-
|
|
Accrued interest
|
|
|
1,264,000
|
|
|
|
1,250,200
|
|
Accrued salaries, wages and related taxes and benefits
|
|
|
1,560,300
|
|
|
|
1,566,000
|
|
Unearned revenue
|
|
|
4,577,700
|
|
|
|
5,785,800
|
|
Current portion of long-term debt and capitalized lease
obligation
|
|
|
34,767,000
|
|
|
|
586,900
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
46,435,900
|
|
|
|
12,186,900
|
|
Long-term debt
|
|
|
107,624,000
|
|
|
|
136,608,200
|
|
Capitalized lease obligation
|
|
|
1,667,000
|
|
|
|
1,425,500
|
|
Deferred gain on sale/leaseback
|
|
|
5,175,600
|
|
|
|
5,508,400
|
|
Deferred income tax
|
|
|
11,285,000
|
|
|
|
-
|
|
Other liabilities
|
|
|
756,000
|
|
|
|
792,000
|
|
Commitments and Contingencies (Refer to Note 10)
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
Common stock, $.01 and $1 par value, respectively; 20,000,000
and 60,000 shares authorized, respectively; 39,824 and 44,757
shares issued, respectively
|
|
|
398
|
|
|
|
44,757
|
|
Additional paid-in capital
|
|
|
424,826
|
|
|
|
385,400
|
|
Retained earnings
|
|
|
7,152,376
|
|
|
|
13,566,000
|
|
Accumulated other comprehensive income
|
|
|
-
|
|
|
|
191,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,577,600
|
|
|
|
14,187,757
|
|
Less: shares in treasury (4,933 shares at cost in 2010)
|
|
|
-
|
|
|
|
454,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,577,600
|
|
|
|
13,733,000
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
180,521,100
|
|
|
$
|
170,254,000
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Resort Revenues
|
|
$
|
97,586,100
|
|
|
$
|
89,845,800
|
|
|
$
|
84,292,700
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort operating expenses
|
|
|
66,740,200
|
|
|
|
62,572,100
|
|
|
|
61,846,200
|
|
Depreciation and amortization
|
|
|
8,054,100
|
|
|
|
7,544,500
|
|
|
|
6,813,300
|
|
General and administrative expenses
|
|
|
2,129,200
|
|
|
|
2,402,800
|
|
|
|
2,069,700
|
|
Land and building rent
|
|
|
1,948,200
|
|
|
|
1,857,500
|
|
|
|
1,834,700
|
|
Real estate and other taxes
|
|
|
1,945,600
|
|
|
|
1,697,300
|
|
|
|
1,828,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,817,300
|
|
|
|
76,074,200
|
|
|
|
74,392,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from Operations
|
|
|
16,768,800
|
|
|
|
13,771,600
|
|
|
|
9,900,100
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of $2,596,100, $2,205,300 and $2,069,800
capitalized in 2011, 2010 and 2009, respectively
|
|
|
(11,338,100
|
)
|
|
|
(11,369,500
|
)
|
|
|
(10,817,800
|
)
|
Gain on sale/leaseback
|
|
|
332,800
|
|
|
|
332,800
|
|
|
|
332,800
|
|
Gain on acquisition
|
|
|
399,900
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
(176,300
|
)
|
Investment income
|
|
|
240,700
|
|
|
|
98,000
|
|
|
|
269,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,364,700
|
)
|
|
|
(10,938,700
|
)
|
|
|
(10,392,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable Income (Loss)
|
|
|
6,404,100
|
|
|
|
2,832,900
|
|
|
|
(492,200
|
)
|
Income Tax Provision
|
|
|
10,410,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss)
|
|
$
|
(4,005,900
|
)
|
|
$
|
2,832,900
|
|
|
$
|
(492,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share
|
|
$
|
(100.59
|
)
|
|
$
|
71.14
|
|
|
$
|
(12.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical earnings (loss) before income taxes
|
|
$
|
6,404,100
|
|
|
$
|
2,832,900
|
|
|
$
|
(492,200
|
)
|
Pro forma provision (benefit) for income taxes
|
|
|
2,546,000
|
|
|
|
1,208,000
|
|
|
|
(8,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net earnings (loss)
|
|
|
3,858,100
|
|
|
|
1,624,900
|
|
|
|
(484,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted earnings (loss) per share
|
|
$
|
96.88
|
|
|
$
|
40.80
|
|
|
$
|
(12.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Treasury
|
|
|
Comprehensive
|
|
|
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Dollars
|
|
|
Capital
|
|
|
Earnings
|
|
|
Stock
|
|
|
Income
|
|
|
Total
|
|
|
Income (loss)
|
|
|
Balances, May 1, 2008
|
|
|
44,757
|
|
|
|
$44,757
|
|
|
|
$385,400
|
|
|
|
$11,913,700
|
|
|
|
$(454,757
|
)
|
|
|
$-
|
|
|
|
$11,889,100
|
|
|
|
-
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(492,200
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(492,200
|
)
|
|
|
$(492,200
|
)
|
Distributions to Stockholders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(342,400
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(342,400
|
)
|
|
|
-
|
|
Unrealized gain on
available-for-sale
securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54,500
|
|
|
|
54,500
|
|
|
|
54,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$(437,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, April 30, 2009
|
|
|
44,757
|
|
|
|
44,757
|
|
|
|
385,400
|
|
|
|
11,079,100
|
|
|
|
(454,757
|
)
|
|
|
54,500
|
|
|
|
11,109,000
|
|
|
|
-
|
|
Net Earnings
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,832,900
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,832,900
|
|
|
|
$2,832,900
|
|
Distributions to Stockholders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(346,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(346,000
|
)
|
|
|
-
|
|
Unrealized gain on
available-for-sale
securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
137,100
|
|
|
|
137,100
|
|
|
|
137,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$2,970,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, April 30, 2010
|
|
|
44,757
|
|
|
|
44,757
|
|
|
|
385,400
|
|
|
|
13,566,000
|
|
|
|
(454,757
|
)
|
|
|
191,600
|
|
|
|
13,733,000
|
|
|
|
-
|
|
Net Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,005,900
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,005,900
|
)
|
|
|
$(4,005,900
|
)
|
Distributions to Stockholders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,957,900
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,957,900
|
)
|
|
|
-
|
|
Unrealized loss on
available-for-sale
securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,300
|
)
|
|
|
(7,300
|
)
|
|
|
(7,300
|
)
|
Reclassification of cumulative gain, net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(184,300
|
)
|
|
|
(184,300
|
)
|
|
|
(184,300
|
)
|
Retirement of Treasury Stock
|
|
|
(4,933
|
)
|
|
|
(4,933
|
)
|
|
|
-
|
|
|
|
(449,824
|
)
|
|
|
454,757
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Change in par value
|
|
|
-
|
|
|
|
(39,426
|
)
|
|
|
39,426
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$(4,577,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, April 30, 2011
|
|
|
39,824
|
|
|
|
$398
|
|
|
|
$424,826
|
|
|
|
$7,152,376
|
|
|
|
$0
|
|
|
|
$0
|
|
|
|
$7,197,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (loss)
|
|
$
|
(4,005,900
|
)
|
|
$
|
2,832,900
|
|
|
$
|
(492,200
|
)
|
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax
|
|
|
10,410,000
|
|
|
|
-
|
|
|
|
-
|
|
Depreciation and amortization of property and equipment
|
|
|
7,987,800
|
|
|
|
7,475,100
|
|
|
|
6,753,000
|
|
Amortization and write off of deferred financing costs
|
|
|
65,900
|
|
|
|
69,400
|
|
|
|
60,300
|
|
Gain on sale of available-for sale securities
|
|
|
(184,300
|
)
|
|
|
-
|
|
|
|
-
|
|
Interest expense added to outstanding debt
|
|
|
-
|
|
|
|
1,013,400
|
|
|
|
939,800
|
|
Amortization of other liabilities
|
|
|
(36,000
|
)
|
|
|
(36,000
|
)
|
|
|
(36,000
|
)
|
Gain on acquisition
|
|
|
(399,900
|
)
|
|
|
-
|
|
|
|
-
|
|
Gain on sale/leaseback
|
|
|
(332,800
|
)
|
|
|
(332,800
|
)
|
|
|
(332,800
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(2,600
|
)
|
|
|
169,500
|
|
|
|
308,300
|
|
Inventory
|
|
|
101,900
|
|
|
|
184,900
|
|
|
|
(275,300
|
)
|
Prepaid expenses and deposits
|
|
|
386,900
|
|
|
|
(182,500
|
)
|
|
|
103,800
|
|
Other assets
|
|
|
(774,100
|
)
|
|
|
(183,900
|
)
|
|
|
(404,600
|
)
|
Accounts payable and accrued expenses
|
|
|
155,700
|
|
|
|
(295,600
|
)
|
|
|
279,500
|
|
Accrued salaries, wages and related taxes and benefits
|
|
|
(5,700
|
)
|
|
|
915,200
|
|
|
|
(1,050,800
|
)
|
Unearned revenue
|
|
|
(1,208,100
|
)
|
|
|
2,246,100
|
|
|
|
137,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
12,158,800
|
|
|
|
13,875,700
|
|
|
|
5,990,900
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(9,363,300
|
)
|
|
|
(3,918,200
|
)
|
|
|
(10,710,200
|
)
|
Additions to land held for development
|
|
|
(3,472,600
|
)
|
|
|
(582,000
|
)
|
|
|
(24,400
|
)
|
Acquisition of the assets of Wildcat Mountain Ski Area
|
|
|
(600,100
|
)
|
|
|
-
|
|
|
|
-
|
|
Proceeds from sale of
available-for-sale
securities
|
|
|
298,500
|
|
|
|
-
|
|
|
|
-
|
|
Investment in marketable securities
|
|
|
-
|
|
|
|
(17,300
|
)
|
|
|
(96,700
|
)
|
Payments from related parties
|
|
|
208,700
|
|
|
|
36,000
|
|
|
|
23,600
|
|
Change in restricted cash balances
|
|
|
(132,600
|
)
|
|
|
205,400
|
|
|
|
(767,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(13,061,400
|
)
|
|
|
(4,276,100
|
)
|
|
|
(11,575,600
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings
|
|
|
72,100
|
|
|
|
35,400
|
|
|
|
6,232,600
|
|
Payments on long-term debt and capitalized lease obligation
|
|
|
(914,800
|
)
|
|
|
(718,300
|
)
|
|
|
(600,700
|
)
|
Prepaid incremental stock issuance cost
|
|
|
(468,700
|
)
|
|
|
-
|
|
|
|
-
|
|
Distributions to stockholders
|
|
|
(830,900
|
)
|
|
|
(346,000
|
)
|
|
|
(342,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(2,142,300
|
)
|
|
|
(1,028,900
|
)
|
|
|
5,289,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
(3,044,900
|
)
|
|
|
8,570,700
|
|
|
|
(295,200
|
)
|
Cash and Cash Equivalents, May 1
|
|
|
19,508,100
|
|
|
|
10,937,400
|
|
|
|
11,232,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, April 30
|
|
$
|
16,463,200
|
|
|
$
|
19,508,100
|
|
|
$
|
10,937,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-6
Peak
Resorts, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Years ended April 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Supplemental Schedule of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of $2,596,100, $2,205,300 and
$2,069,800 capitalized in 2011, 2010 and 2009, respectively
|
|
$
|
11,324,300
|
|
|
$
|
9,986,300
|
|
|
$
|
9,814,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Noncash Investing and Financing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease agreements to acquire equipment
|
|
$
|
1,172,500
|
|
|
$
|
1,508,900
|
|
|
$
|
1,002,000
|
|
Property and equipment
|
|
|
-
|
|
|
|
-
|
|
|
$
|
339,000
|
|
Acquisition of Wildcat Mountain Ski Area financed with long-term
borrowings
|
|
$
|
4,500,000
|
|
|
|
-
|
|
|
|
-
|
|
Acquisition of land with long-term borrowings
|
|
$
|
135,000
|
|
|
|
-
|
|
|
|
-
|
|
Acquisition of Resort Holdings, L.L.C. with long-term borrowings
|
|
$
|
472,600
|
|
|
|
-
|
|
|
|
-
|
|
See notes to consolidated financial statements.
F-7
Peak
Resorts, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Years Ended April 30, 2011, 2010 and 2009
|
|
Note 1.
|
Summary
of Significant Accounting Policies
|
Description of Business: Peak Resorts, Inc.
(the Company) and its subsidiaries operate in a
single business segment ski resort operations. The
Companys ski resort operations consist of snow skiing,
snowboarding and snow sports areas in Wildwood and Weston,
Missouri; Bellefontaine and Cleveland, Ohio; Paoli, Indiana;
Blakeslee and Lake Harmony, Pennsylvania; Bartlett, Bennington
and Pinkham Notch, New Hampshire; and West Dover, Vermont and an
eighteen-hole golf course in West Dover, Vermont. The Company
also manages hotels in Bartlett, New Hampshire and West Dover,
Vermont and operates a restaurant in Lake Harmony, Pennsylvania.
The Companys 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. Operations occurring outside of the ski season
typically result in losses and negative cash flows.
Additionally, operations on certain holidays contribute
significantly to the Companys revenues, most notably
Christmas, Dr. Martin Luther King, Jr. Day and
Presidents Day.
The seasonality of the Companys revenues amplifies the
effect on the Companys revenues, operating earnings and
cash flows of events that are outside the Companys
control. While the Companys geographically diverse
operating locations help mitigate its effects, adverse weather
conditions could limit customer access to the Companys
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.
In the opinion of management, the accompanying financial
statements are prepared in accordance with generally accepted
accounting principles in the United States of America
(GAAP) and include all adjustments necessary for
fair presentation of the periods presented.
Principles of consolidation: The consolidated
financial statements include the accounts of Peak Resorts, Inc.,
the parent company, and all of its wholly-owned subsidiaries,
hereinafter collectively referred to as the Company:
Boulder View Tavern, Inc., Deltrecs, Inc. (Deltrecs, Inc. has
two wholly-owned subsidiaries: Boston Mills Ski Resort, Inc. and
Brandywine Ski Resort, Inc.), Hidden Valley Golf Course, Inc.,
JFBB Ski Areas, Inc. (doing business as Jack Frost
and Big Boulder), L.B.O. Holding, Inc. (doing
business as Attitash Mountain), Mad River Mountain,
Inc., Mount Snow Ltd., Paoli Peaks, Inc., S N H Development,
Inc. (doing business as Crotched Mountain), Snow
Creek, Inc., and WC Acquisition Corp. (doing business as
Wildcat Mountain Ski Area). All material
intercompany transactions and balances have been eliminated.
Cash and cash equivalents: The Company
considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Additionally, all credit card and debit card transactions that
process in less than seven days are classified as cash and cash
equivalents. The majority of payments due from banks for
third-party credit card and debit card transactions process
within 24 to 48 hours, except for transactions occurring on
a Friday, which are generally processed the following Monday.
The amounts due from banks for these transactions classified as
cash and cash equivalents totaled $501,400 and $1,189,900 at
April 30, 2011 and 2010, respectively.
Restricted cash: The provisions of certain of
the Companys debt instruments generally require that the
Company make and maintain a deposit, to be held in escrow for
the benefit of the lender, in an amount equal to the estimated
minimum interest payment for the upcoming fiscal year. In the
absence of an event of default under the note agreements, the
requirement to maintain such a deposit is eliminated when the
development loan discussed in Note 4 is repaid in full.
Restricted cash at April 30, 2011 and 2010 is comprised
primarily of the interest related escrow balances.
Marketable securities and fair value
measurements: The Company has classified its
investments in common stock as
available-for-sale
securities and, accordingly, has valued such investments at
their fair value.
F-8
Accounting Standards Codification (ASC) Topic 820,
Fair Value Measurements and Disclosures (ASC
820), establishes a fair value hierarchy that prioritizes
the inputs of valuation techniques used to measure fair value.
This hierarchy consists of three broad levels: Level 1
inputs consist of unadjusted quoted prices in active markets for
identical assets and have the highest priority, and Level 3
inputs have the lowest priority. The Company uses appropriate
valuation techniques based on the available inputs to measure
the fair value of its investments. When available, the Company
measures fair value using Level 1 inputs because they
generally provide the most reliable evidence of fair value.
Level 2 inputs are utilized when there are observable
inputs other than quoted market prices for the asset, either
directly or indirectly observable, that reflect assumptions
market participants would use to price the asset based on market
data obtained from sources independent of the Company.
Level 3 inputs are only to be used when Level 1 or
Level 2 inputs are not available.
The Companys investment in common stock is valued using
Level 1 inputs within the fair value hierarchy as the fair
value is based on quoted prices in active markets for identical
instruments.
The unrealized gain on
available-for-sale
securities of $137,100 and $54,500 in the years ended
April 30, 2010 and 2009, respectively, has been recognized
in other comprehensive income. A realized gain on
available-for-sale
securities of $184,300 and $87,000 has been recognized in
investment income in the accompanying 2011 and 2009 consolidated
statement of earnings.
In September 2006, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standard (SFAS) No. 157, Fair Value
Measurements, now included in ASC 820. ASC 820
defines fair value, establishes a framework for measuring fair
value in accordance with GAAP and expands disclosures about fair
value measurements. ASC 820 was effective for the Company
as of May 1, 2008, however FASB Staff Position
157-2,
Effective Date of FASB Statement No. 157 (also
included in ASC 820), permitted a one-year deferral for
nonfinancial assets and liabilities not recognized or disclosed
at fair value in the financial statements on a recurring basis.
The adoption of ASC 820 for nonfinancial assets and
nonfinancial liabilities did not have a material effect on the
Companys financial position, results of operations or cash
flows.
Reserve for uncollectible accounts
receivable: The Company performs ongoing reviews
of the collectability of accounts receivable and, if considered
necessary, establishes a reserve for estimated credit losses. In
assessing the need for and in determining the amount of any
reserve for credit losses, the Company considers the level of
historical bad debts, the credit worthiness of significant
debtors based on periodic credit evaluations and significant
economic developments that could adversely impact upon a
customers ability to pay amounts owed the Company.
Inventory: Inventory is stated at the lower of
cost
(first-in,
first-out method) or market and consists primarily of retail
goods, food and beverage products.
Property and equipment: Property and equipment
is carried at cost net of accumulated depreciation, amortization
and impairment charges, if any. Costs to construct significant
assets include capitalized interest during the construction and
development period. Expenditures for replacements and major
betterments or improvements are capitalized; maintenance and
repair expenditures are charged to expense as incurred.
Depreciation and amortization are determined using both
straight-line and accelerated methods over estimated useful
lives ranging from 3 to 25 years for land improvements, 5
to 40 years for building and improvements and 3 to
25 years for equipment, furniture and fixtures.
Land held for development: The land held for
development is carried in the accompanying consolidated balance
sheets at acquisition cost plus costs attributable to its
development, including capitalized interest.
Deferred development costs: Costs related to
major development projects at the Companys ski resorts,
including planning, engineering and permitting, are capitalized.
Deferred financing costs: Debt issuance
expenses, included in other assets in the accompanying
consolidated balance sheets, incurred in connection with certain
mortgage indebtedness are being amortized under the
straight-line basis which approximates the interest method over
the term of the related debt.
Business combinations: Historical acquisitions
were accounted for as purchase transactions. Accordingly, the
assets and liabilities of acquired entities were recorded at
their estimated fair values at the dates of the acquisitions.
F-9
In December 2007, the FASB issued guidance which is included in
ASC Topic 805, Business Combinations (ASC
805), which replaced SFAS No. 141R,
Business Combinations. ASC 805 establishes
principles and requirements on how an acquirer recognizes and
measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any non-controlling
interest in an acquiree, including the recognition and
measurement of goodwill acquired in a business combination.
ASC 805 also requires that acquisition-related transaction
expenses and restructuring costs be expensed as incurred rather
than capitalized as a component of the business combination.
ASC 805 was effective for the Company for acquisitions
entered into on or after May 1, 2009.
Revenue recognition: Resort revenues are
generated from a wide variety of sources including snow pass
sales, snow sports lessons, equipment rentals, retail product
sales, food and beverage operations, lodging and golf course
operations. Revenues are recognized as services are provided or
products are sold. Sales of season passes are initially deferred
in unearned revenue and recognized ratably over the expected ski
season which typically runs from early December to mid-April.
Advertising costs: Advertising costs are
expensed at the time such advertising commences. Advertising
expense for the years ended April 30, 2011, 2010 and 2009
was $1,901,500, $1,384,800 and $1,673,400, respectively.
Taxes collected from customers: Taxes
collected from customers and remitted to tax authorities are
local and state sales taxes on snow pass sales as well as food
service and merchandise transactions at the Companys
resorts. Sales taxes collected from customers are recognized as
a liability, with such liability being reduced when collected
amounts are remitted to the taxing authority.
Income taxes: Effective April 30, 2011,
in connection with a proposed offering (IPO) of the
Companys common stock, the Company and its subsidiaries
terminated their S-corporation elections and subsequent to that
date will be taxed as a subchapter C-corporation. For each of
the Companys tax reporting periods in the three year
period ended April 30, 2011 the Company and its
subsidiaries were taxed as S-corporations for federal tax
purposes. Federal income taxes and income taxes related to
certain other jurisdictions are the responsibility of the
individual stockholders and, therefore, the accompanying
consolidated statements of earnings (loss) do not include
provisions for income taxes. One state in which the Company
operates does not recognize the Companys S-corporation
election; however, entity level income taxes levied by that
state are immaterial.
By virtue of the termination of their S corporation
elections on April 30, 2011 and in accordance with ASC
Topic 740 Income Taxes, at that date the Company
recognized deferred income tax assets and liabilities for
expected future tax consequences of temporary differences
between the financial reporting and income tax reporting bases
of its assets and liabilities. Deferred income tax assets and
liabilities are measured at enacted tax rates in the respective
jurisdictions where the Company operates. In assessing the
ability to realize deferred tax assets, the Company considers
whether it is more likely than not that some portion or all
deferred tax assets will not be realized and a valuation
allowance would be provided if necessary.
FASB ASC Topic 740 also provides guidance with respect to the
accounting for uncertainty in income taxes recognized in an
enterprises financial statements, and it prescribes a
recognition threshold and measurement attribute criteria for the
financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. The
Company does not have any material uncertain tax positions, and
therefore, the adoption did not have a material impact on the
Companys financial position or results of operations.
At April 30, 2011, the Companys state income tax
returns for the years ended December 31, 2010, 2009 and
2008 are subject to examination by the respective taxing
authorities. The Companys federal income tax returns have
been examined through the tax year ended December 31, 2009.
Pro forma information (unaudited): As
discussed above, the Company has been taxed as a subchapter
S-corporation and will continue to be taxed in that fashion
until its subchapter C-corporation status becomes effective. The
Company has filed a registration statement in connection with a
proposed IPO. The accompanying consolidated statements of
earnings (loss) present pro forma income tax provisions as well
as basic and diluted earnings (loss) per share as if the Company
had been a subchapter C-corporation for each of the periods
presented. The effective tax rates differ from the expected tax
rates due to state income taxes and permanent items.
F-10
Long-lived asset impairment evaluation: The
Company evaluates its long-lived assets, including property,
equipment, and land held for development, for impairment
whenever events or changes in circumstances indicate the
carrying value of an asset may not be recoverable. If
circumstances require a long-lived asset be tested for possible
impairment, the Company compares undiscounted cash flows
expected to be generated by the asset to its carrying value. If
the carrying value exceeds the expected undiscounted cash flow,
an impairment adjustment would be made to reduce the carrying
value of the asset to its fair value. Fair value is determined
by application of valuation techniques, including discounted
cash flow models, and independent appraisals, if considered
necessary.
Use of estimates: The preparation of
consolidated financial statements in conformity with
U.S. GAAP requires management to make estimates and
assumptions that affect the amounts and disclosures reported in
the consolidated financial statements and accompanying notes.
Significant items subject to estimates and assumptions include
the carrying value of property and equipment, land held for
development, reserves for doubtful accounts and inventory
valuation. As future events and their effects cannot be
determined with certainty, actual results could differ
significantly from those estimates.
New accounting standards: In January 2010, the
FASB issued Accounting Standards Update
No. 2010-06,
Fair Value Measurements and Disclosures (Topic
820) Improving Disclosures about Fair Value
Measurements (ASU
2010-06).
ASU 2010-06
amends ASC 820 to require entities to provide new
disclosures and clarify existing disclosures relating to fair
value measurements. New disclosures include requiring an entity
to disclose separately the amounts of significant transfers in
and out of Level 1 and Level 2 fair value measurements
and to describe the reasons for the transfers, as well as to
disclose separately gross purchases, sales, issuances and
settlements in the roll forward activity of Level 3
measurements. Clarifications of existing disclosures include
requiring a greater level of disaggregation of fair value
measurements by class of assets and liabilities, in addition to
enhanced disclosures concerning the inputs and valuation
techniques used to determine Level 2 and Level 3 fair
value measurements. ASU
2010-06 was
effective for the Companys interim and annual periods
beginning May 1, 2010, except for the additional disclosure
of purchases, sales, issuances, and settlements in Level 3
fair value measurements, which is effective for the
Companys fiscal year beginning May 1, 2011. The
Company does not expect the adoption of this update to have a
material impact on its consolidated financial statements.
|
|
Note 2.
|
Property
and Equipment
|
Property and equipment consists of the following at April 30:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Land and land improvements
|
|
$
|
21,476,900
|
|
|
$
|
20,456,900
|
|
Building and improvements
|
|
|
58,041,000
|
|
|
|
54,090,000
|
|
Equipment, furniture and fixtures
|
|
|
86,748,800
|
|
|
|
75,120,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166,266,700
|
|
|
|
149,667,400
|
|
Less: accumulated depreciation and amortization
|
|
|
48,465,400
|
|
|
|
40,521,400
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
117,801,300
|
|
|
$
|
109,146,000
|
|
|
|
|
|
|
|
|
|
|
At April 30, 2011, equipment with a cost of $3,547,400 and
accumulated depreciation of $764,300 was subject to the capital
leases discussed in Note 10.
At April 30, 2010, equipment with a cost of $2,543,700 and
accumulated depreciation of $333,100 was subject to the capital
leases discussed in Note 10.
Depreciation expense for the years ended April 30, 2011,
2010 and 2009 totaled $7,987,800, $7,466,000 and $6,753,000,
respectively.
F-11
The composition of other assets at April 30 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Deferred financing costs (net of accumulated amortization of
$216,900 and $166,200, respectively)
|
|
$
|
820,400
|
|
|
$
|
871,200
|
|
Deferred development costs
|
|
|
1,434,000
|
|
|
|
1,142,400
|
|
Related party receivables
|
|
|
-
|
|
|
|
208,700
|
|
Other
|
|
|
180,200
|
|
|
|
181,400
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,434,600
|
|
|
$
|
2,403,700
|
|
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs will be $48,000 for
each of the years in the five-year period ending April 30,
2016. This amortization is included in interest expense.
Amortization for the years ended April 30, 2011, 2010 and
2009 totaled $50,800, $78,500 and $60,300, respectively.
Long-term debt at April 30, 2011 and 2010 consisted of
borrowings pursuant to the loans and other credit facilities
discussed below, as follows:
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Attitash/Mount Snow Debt, payable in monthly interest-only
payments at an increasing interest rate (10.46% and 10.16% at
April 30, 2011 and 2010, respectively), remaining principal
and interest due on April 3, 2027
|
|
$
|
62,500,000
|
|
|
$
|
62,500,000
|
|
Mount Snow Development Debt, payable in monthly interest-only
payments at 10.00%, remaining principal and interest due on
April 1, 2012
|
|
|
33,676,700
|
|
|
|
33,676,700
|
|
Credit Facility Debt, payable in monthly interest-only payments
at an increasing interest rate (9.54% and 9.40% at
April 30, 2011 and 2010, respectively), remaining principal
and interest due on October 29, 2027
|
|
|
32,232,800
|
|
|
|
32,232,800
|
|
Crotched Mountain Debt, payable in monthly interest-only
payments at an increasing interest rate (9.82% and 9.67% at
April 30, 2011 and 2010, respectively), remaining principal
and interest due on March 10, 2027
|
|
|
8,000,000
|
|
|
|
8,000,000
|
|
Wildcat Mountain Debt, payable in monthly installments of
$27,300, including interest at a rate of 4.00%, with remaining
principal and interest due on December 22, 2020
|
|
|
4,438,200
|
|
|
|
-
|
|
Other debt
|
|
|
847,600
|
|
|
|
292,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,695,300
|
|
|
|
136,701,700
|
|
Less: current maturities
|
|
|
34,071,300
|
|
|
|
93,500
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
107,624,000
|
|
|
$
|
136,608,200
|
|
|
|
|
|
|
|
|
|
|
The Attitash/Mount Snow Debt due April 3, 2027 in the
foregoing table represents amounts borrowed by the Company as
follows:
|
|
|
|
|
$15.7 million borrowed pursuant to a Loan Agreement entered
into by and between the Company, as borrower, and EPT Mount
Attitash, Inc., as lender, dated as of April 4, 2007, as
evidenced by a promissory note in the amount of
$15.7 million dated as of April 4, 2007 and modified
on October 30, 2007 (collectively, the Attitash Loan
Documents); and
|
F-12
|
|
|
|
|
$59.0 million borrowed pursuant to a Loan Agreement entered
into by and between the Company, as borrower, and EPT Mount
Snow, Inc., as lender, dated as of April 4, 2007, as
modified by the First Modification Agreement by and between such
parties, dated as of June 30, 2009 (the Mount Snow
First Modification Agreement), as evidenced by an amended
and restated promissory note in the amount of
$59.0 million, dated as of June 30, 2009
(collectively, the Mount Snow Loan Documents).
|
The Company entered into the Attitash Loan Documents and Mount
Snow Loan Documents in connection with the 2007 acquisitions of
Attitash and Mount Snow. In addition to the funds borrowed on
the date of the acquisitions, the Attitash Loan Documents and
the Mount Snow Loan Documents provided for $25.0 million of
additional borrowing capacity to be drawn to fund improvements
and capital expenditures at Attitash and Mount Snow, subject to
the approval of the lender. At April 30, 2011,
$11.0 million remained to fund approved capital
expenditures and improvements in future years.
The $59.0 million borrowed pursuant to the Mount Snow Loan
Documents includes $1.2 million of additional funds
available under the Mount Snow First Modification Agreement to
be used for purposes stipulated by such agreement or other
purposes as approved by the lender. No borrowings have been made
under this arrangement.
Commencing April 1, 2008 and each
April 1st thereafter, the interest rates relating to
the debt outstanding under the Attitash Loan Documents and Mount
Snow Loan Documents will increase from the prior interest rate
measurement date by the lesser of three times the percentage
increase in the Consumer Price Index (CPI) or a
factor of 1.015 (the Capped CPI Index) unless
specified debt service coverage ratios are maintained for a
period of two consecutive years. If the target debt service
coverage ratios are attained and maintained, the interest rate
will be 100 basis points lower than it otherwise would have
been. For the years ended April 30, 2011, 2010 and 2009,
the Company has not maintained the specified debt service
coverage ratios, and therefore, the interest rates have
increased. The Company continues to work on meeting these ratios
in order to stabilize interest rates in the future. The table
below illustrates the range of potential interest rates for each
of the next five years assuming rates are to increase by the
Capped CPI Index annually:
|
|
|
|
|
|
|
Attitash/Mount Snow Debt
|
Rate Effective at
|
|
Specific Debt Service Coverage
|
April 1:
|
|
Attained
|
|
Not Attained
|
|
2011
|
|
|
9.46%
|
|
|
10.46%
|
2012
|
|
|
9.61%
|
|
|
10.61%
|
2013
|
|
|
9.77%
|
|
|
10.77%
|
2014
|
|
|
9.93%
|
|
|
10.93%
|
2015
|
|
|
10.09%
|
|
|
11.09%
|
The Capped CPI Index is an embedded derivative, but the Company
has concluded that the derivative does not require bifurcation
and separate presentation at fair value because the Capped CPI
Index was determined to be clearly and closely related to the
debt instrument.
The Attitash Loan Documents and the Mount Snow Loan Documents
provide for additional interest payments under certain
circumstances. Specifically, if the gross receipts of the
respective property during any fiscal year exceed an amount
determined by dividing the amount of interest otherwise due
during that period by 12%, an additional interest payment equal
to 12% of such excess is required. Similar to the minimum
required interest payments as described above, the parties have
agreed that if specific target debt service coverage ratios are
achieved for two consecutive years and are maintained, the
interest rate used in determining both the amount of the excess
gross receipts and the rate applied thereto, would be reduced to
11%. No additional interest payments were due for the years
ended April 30, 2011, 2010 or 2009.
The Mount Snow Development Debt due April 1, 2012
represents obligations incurred to provide financing for the
acquisition of land at Mount Snow that is in development stages.
On April 4, 2007, the Company and Mount Snow, Ltd., as
borrowers, entered into a promissory note in favor of EPT Mount
Snow, Inc., as lender, in the amount of $25.0 million,
which was later modified by the Modification Agreement dated as
of April 1, 2010 to increase the amount of funds available
to $41.0 million (the Mount Snow Development Loan
Documents). Principal payments are required to be made
from all proceeds from any sale of development land at Mount
Snow with any remaining
F-13
principal due at maturity. The Mount Snow Development Loan
Documents require, commencing May 1, 2010, monthly payments
of interest arising after April 1, 2010. The increased
amount available under the Mount Snow Development Loan Documents
includes accrued interest to the effective date of the
modification of approximately $8.7 million and,
accordingly, approximately $7.3 million was available for
development purposes at April 30, 2011.
The Credit Facility Debt due October 29, 2027 represents
amounts due pursuant to the Amended and Restated Credit and
Security Agreement, dated as of October 30, 2007, among the
Company and certain of its affiliates, as borrowers, and EPT Ski
Properties, Inc., as lender (the Credit Facility
Agreement). In connection with entry into the Credit
Facility Agreement, the borrowers executed an amended and
restated promissory note, dated as of October 30, 2007, in
the amount of $31.0 million, which was later modified by as
second amended and restated promissory note, dated as of
August 5, 2008, which increased the amount of funds
available to $41 million (together with the Credit Facility
Agreement, the Credit Facility Documents). At
April 30, 2011, approximately $8.7 million remained
available for approved capital expenditures. The interest rate
for borrowings under the Credit Facility Documents increases
each October 1 during the term of the Credit Facility Documents,
such increase to be the lesser of two times the increase in the
CPI or Capped CPI Index.
The Crotched Mountain Debt due March 10, 2027 noted in the
table above represents amounts due to EPT Crotched Mountain,
Inc. pursuant to a promissory note made by SNH Development,
Inc., the Companys wholly owned subsidiary. The promissory
note, dated as of March 10, 2006 (the Crotched
Mountain Note), was made in the principal amount of
$8.0 million, the proceeds of which were used to pay off
all outstanding debt secured by our Crotched Mountain ski area
and for general working capital purposes. The interest rate
applicable to the outstanding debt under the Crotched Mountain
Note increases each April 1 during the term of the Crotched
Mountain Note, such increase to be the lesser of the rate of
interest in the previous year multiplied by the Capped CPI Index
or the sum of the rate of interest in the previous year plus the
product of (x) the rate of interest in the previous year
and (y) the percentage increase in the CPI from the CPI in
effect on April 1 of the current year over the CPI in effect on
the April 1 of the immediately preceding year.
The table below illustrates the potential interest rates
applicable to the Companys fluctuating interest rate debt
for each of the next five years, assuming rates increase by the
Capped CPI Index:
|
|
|
|
|
|
|
|
|
April 1:
|
|
Credit Facility Debt
|
|
|
Crotched Mountain Debt
|
|
|
2011
|
|
|
9.54%
|
|
|
|
9.82%
|
|
2012
|
|
|
9.68%
|
|
|
|
9.96%
|
|
2013
|
|
|
9.83%
|
|
|
|
10.11%
|
|
2014
|
|
|
9.98%
|
|
|
|
10.26%
|
|
2015
|
|
|
10.13%
|
|
|
|
10.42%
|
|
The Wildcat Mountain Debt due December 22, 2020 represents
amounts owed pursuant to a promissory note in the principal
amount of $4.5 million made by WC Acquisition Corp. in
favor of Wildcat Mountain Ski Area, Inc., Meadow
Green Wildcat Skilift Corp. and Meadow
Green Wildcat Corp., (the Wildcat Note).
The Wildcat Note, dated November 22, 2010, was made in
connection with the acquisition of Wildcat Mountain, which was
effective as of October 20, 2010. The interest rate as set
forth in the Wildcat Note is fixed at 4.00%.
Substantially all of the Companys assets serve as
collateral for long-term debt.
Future aggregate annual principal payments under all
indebtedness at April 30, 2011 are as follows:
|
|
|
|
|
2012
|
|
$
|
34,071,200
|
|
2013
|
|
|
254,100
|
|
2014
|
|
|
655,000
|
|
2015
|
|
|
191,300
|
|
2016
|
|
|
179,600
|
|
Thereafter
|
|
|
106,344,000
|
|
|
|
|
|
|
|
|
$
|
141,695,200
|
|
|
|
|
|
|
F-14
Prior to April 30, 2011, the effective date of the
Companys election to terminate its subchapter
S corporation election, federal income taxes and most state
income taxes were the personal responsibility of the
Companys stockholders. Under ASC
Section 740-10-45-19,
the Company is required to recognize, at the effective date of
the aforementioned election, deferred income taxes for bases
differences that exist between the carrying value of its assets
and liabilities for financial reporting purposes and their bases
for income tax purposes with the effect of recognition of those
deferred taxes being included in income from continuing
operations.
The provision for income taxes consists of the following for the
year ended April 30, 2011:
|
|
|
|
|
Deferred recognition of effect of termination of
S corporation election:
|
|
|
|
|
Federal
|
|
$
|
9,047,000
|
|
State
|
|
|
1,363,000
|
|
|
|
|
|
|
|
|
$
|
10,410,000
|
|
|
|
|
|
|
The provision for income taxes differs from the expected federal
statutory rate due to an election to be taxed as a subchapter
S corporation being in effect for the full fiscal year and
the effect of the recognition of deferred income taxes at the
date that election was terminated.
Deferred income taxes consist of the following at April 30,
2011:
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
Deferred gain on sale leaseback
|
|
$
|
1,818,000
|
|
Accrued compensation
|
|
|
277,000
|
|
Unearned revenue
|
|
|
493,000
|
|
Other
|
|
|
105,000
|
|
|
|
|
|
|
|
|
|
2,693,000
|
|
Deferred tax liabilities:
|
|
|
|
|
Property and equipment
|
|
|
(13,103,000
|
)
|
|
|
|
|
|
|
|
$
|
(10,410,000
|
)
|
|
|
|
|
|
Deferred income taxes are included in the April 30, 2011
consolidated balance sheet as follows:
|
|
|
|
|
Current asset
|
|
$
|
875,000
|
|
Non-current liability
|
|
|
(11,285,000
|
)
|
|
|
|
|
|
|
|
$
|
(10,410,000
|
)
|
|
|
|
|
|
The Company has evaluated the deferred tax assets and believes
that they will be more likely than not to be realized, and
therefore, there has not been any valuation allowance recorded
against the deferred tax assets.
Effective in October 2010, the Company acquired substantially
all of the assets and business of Wildcat Mountain ski resort
located in Pinkham Notch, New Hampshire for approximately
$5 million, such price being subject to certain adjustments
which are not expected to be significant. Of the total purchase
price, $4.5 million was financed under a 4% promissory note
to the seller. The note requires monthly payments of principal
and interest to its maturity in December 2020 when a final
principal payment of $2.675 million is due. The Company
made the acquisition in order to offer a combined ski product
with its Attitash ski area. This strengthens the Companys
F-15
pricing policies and offers cost synergies. Wildcat
Mountains results of operations are included in the
accompanying 2011 financial statements since the date of
acquisition. The allocation of purchase price is as follows:
|
|
|
|
|
Buildings and improvements
|
|
$
|
2,962,000
|
|
Land improvements
|
|
|
438,000
|
|
Equipment
|
|
|
2,100,000
|
|
Gain
|
|
|
(399,900
|
)
|
|
|
|
|
|
|
|
$
|
5,100,100
|
|
|
|
|
|
|
The following presents the unaudited pro forma consolidated
financial information as if the acquisition of Wildcat Mountain
was completed on May 1, 2008, the beginning of the
Companys 2009 fiscal year. The following pro forma
financial information includes adjustments for depreciation and
interest for the acquisition note and property and equipment
recorded at the date of acquisition. This pro forma financial
information is presented for informational purposes only and
does not purport to be indicative of the results of future
operations or the results that would have occurred had the
acquisition taken place on May 1, 2008 (in thousands,
except per share amounts).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
2011
|
|
2010
|
|
2009
|
|
Net Revenues
|
|
$
|
98,436
|
|
|
$
|
94,003
|
|
|
$
|
88,313
|
|
Net Earnings (Loss)
|
|
$
|
5,920
|
|
|
$
|
3,087
|
|
|
$
|
(204)
|
|
Pro forma basic and diluted loss per share
|
|
$
|
148.65
|
|
|
$
|
77.52
|
|
|
$
|
(5.12)
|
|
The Company determined the amounts in the purchase price
allocation by identifying all of the assets acquired. There were
no material liabilities assumed. The real and personal property
was valued at fair value utilizing a third party appraiser
experienced in the ski industry. The gain on acquisition is the
result of the difference between an appraisal of the real and
personal property acquired in the transaction and the purchase
price. Management believes the bargain purchase occurred because
the seller was very motivated to sell.
In November 2005, the Company sold Mad River Mountain and
simultaneously leased the property back for a period of
21 years. The resultant gain was deferred and is being
ratably recognized in income over the term of the lease.
|
|
Note 8.
|
Employee
Benefit Plan
|
The Company maintains a tax-deferred savings plan for all
eligible employees. Employees become eligible to participate
after attaining the age of 21 and completing one year of
service. Employee contributions to the plan are tax-deferred
under Section 401(k) of the Internal Revenue Code. Company
matching contributions are made at the discretion of the Board
of Directors. Contributions of $406,300 and $409,300 were made
in 2011 and 2010, respectively. The Company made no contribution
in 2009.
|
|
Note 9.
|
Financial
Instruments and Concentrations of Credit Risk
|
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments to which Peak
Resorts, Inc. is a party:
Cash and cash equivalents, restricted
cash: Due to the highly liquid nature of the
Companys short-term investments, the carrying values of
cash and cash equivalents and restricted cash approximate their
fair values.
Marketable securities: As further disclosed at
Note 1, the Companys investment in common stock is
carried at fair value based on quoted prices in active markets.
Accounts and notes receivable: The carrying
value of accounts receivable approximate their fair value
because of their short-term nature. Notes receivable are due on
demand and require interest be paid at the prime rate. The
F-16
demand nature of the notes and high credit quality of the note
issuers make them highly liquid and as such, their carrying
value approximates their fair value.
Accounts payable and accrued liabilities: The
carrying value of accounts payable and accrued liabilities
approximates fair value due to the short-term maturities of
these amounts.
Long-term debt: The fair value of Peak Resorts
Inc.s long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current
rates offered to the Company for debt of the same remaining
maturities. The interest rates on the Companys long-term
debt instruments are consistent with those currently available
to the Company for borrowings with similar maturities and terms
and, accordingly, their fair values are consistent with their
carrying values.
Concentrations of credit risk: The
Companys financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and cash
equivalents. The Companys cash and cash equivalents are on
deposit with a major domestic financial institution. At times,
bank deposits are in excess of federally insured limits. The
Company has not experienced any loss as a result of those
deposits.
|
|
Note 10.
|
Commitments
and Contingencies
|
Restricted cash: The provisions of certain of
the Companys debt instruments generally require that the
Company make and maintain a deposit, to be held in escrow for
the benefit of the lender, in an amount equal to the estimated
minimum interest payment for the upcoming fiscal year. In the
absence of an event of default under the note agreements, the
requirement to maintain such a deposit is eliminated when the
development loan discussed in Note 4 is repaid in full.
Restricted cash at April 30, 2010 and 2009 is comprised
primarily of the interest related escrow balances.
Purchase Commitments: In March 2011, the
Company entered into an agreement to replace the Summit Local
triple chair lift at Mount snow with a new Leitner Poma
high-speed detachable six-passenger bubble chair lift. The cost
of the contract is $7.3 million and includes the lift and
installation at Mount Snow.
Leases: The Company leases certain land, land
improvements, buildings and equipment under non-cancelable
operating leases. Certain of the leases contain escalation
provisions based generally on changes in the Consumer Price
Index with maximum annual percentage increases capped at 1.5% to
4.5%. Additionally, certain leases contain contingent rental
provisions which are based on revenue. The amount of contingent
rentals was insignificant in all periods presented. Total rent
expense under such operating leases was $2,540,000, $2,339,000
and $2,410,000 in 2011, 2010 and 2009, respectively. The Company
also leases certain equipment under capital leases.
Future minimum rentals under all non-cancelable leases with
remaining lease terms of one year or more for years subsequent
to April 30, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
|
|
Leases
|
|
|
Leases
|
|
|
2012
|
|
$
|
819,900
|
|
|
$
|
2,467,900
|
|
2013
|
|
|
819,900
|
|
|
|
2,089,900
|
|
2014
|
|
|
645,500
|
|
|
|
2,039,600
|
|
2015
|
|
|
334,600
|
|
|
|
1,982,800
|
|
2016
|
|
|
-
|
|
|
|
2,013,000
|
|
Thereafter
|
|
|
-
|
|
|
|
31,891,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,619,900
|
|
|
$
|
42,484,200
|
|
|
|
|
|
|
|
|
|
|
Less amount representing interest
|
|
|
257,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,362,700
|
|
|
|
|
|
Less current portion
|
|
|
695,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
1,667,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-17
The Company leases the land underlying its Jack Frost and Big
Boulder resorts. The terms of the leases, each effective since
December 2005, provide that the landlord has a right to
terminate the leases at any time, upon the payment of certain
fees. The lease payments are included in the amounts reported in
the Operating Lease column above and are set forth
below through their expiration in November 2030, unless
cancelled:
|
|
|
|
|
2012
|
|
$
|
482,000
|
|
2013
|
|
|
501,200
|
|
2014
|
|
|
521,300
|
|
2015
|
|
|
542,200
|
|
2016
|
|
|
563,900
|
|
Thereafter
|
|
|
13,896,500
|
|
|
|
|
|
|
|
|
$
|
16,507,100
|
|
|
|
|
|
|
If these leases are terminated, Jack Frost and Big Boulder would
no longer be operational and therefore, the revenues generated
by these resorts would be eliminated. Revenues of the Jack Frost
and Big Boulder resorts for each of the years ended April 30
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
|
Resort revenues
|
|
$
|
11,721,000
|
|
|
$
|
11,658,300
|
|
|
$
|
11,703,200
|
|
|
|
Note 11.
|
Earnings
(Loss) Per Share
|
The computation of basic and diluted earnings (loss) per share
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended April 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Net earnings (loss)
|
|
$
|
(4,385,900)
|
|
|
$
|
2,832,900
|
|
|
$
|
(492,200)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding for basic and diluted earnings (loss)
per share
|
|
|
39,824
|
|
|
|
39,824
|
|
|
|
39,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share
|
|
$
|
(110.13)
|
|
|
$
|
71.14
|
|
|
$
|
(12.36)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12.
|
Related
Party Transactions
|
Resort Holdings, L.L.C. is a limited liability company
previously owned by Timothy Boyd and Stephen Mueller, two of the
Companys named executive officers and directors.
Mr. Boyd and Mr. Mueller each owned 50% of the
interests of Resort Holdings, L.L.C.
In 2005, the Company loaned Resort Holdings, L.L.C.
approximately $374,000 to purchase a home in Pennsylvania near
the Jack Frost and Big Boulder resorts. The loan accrued
interest at a rate of 6.5%, payable in installments of $1,900
per month for 30 years. The outstanding balances due from
Resort Holdings, L.L.C. to the Company as of April 30, 2011
and 2010 were $0 and $87,800, respectively. On April 1,
2010, the Company and Resort Holdings, L.L.C. entered into a
lease pursuant to which the Company leased the home from Resort
Holdings, L.L.C. for $33,600 per year for business purposes.
Additionally, in 2007, Resort Holdings, L.L.C. purchased a
condominium in Vermont. The Company loaned Resort Holdings,
L.L.C. approximately $398,000 to purchase this condominium. The
loan was payable monthly over 30 years at an interest rate
of 6.5%. On September 1, 2010, the Company began leasing
the condominium from Resort Holdings, L.L.C. for business
purposes for $48,000 per year pursuant to a lease agreement. For
both leases, $21,000 was due to Resort Holdings, L.L.C. by the
Company as of April 30, 2010. There were no amounts due to
Resort Holdings, L.L.C. by the Company as of April 30,
2011. Subsequent to the purchase of the Vermont condominium in
2007, Resort Holdings, L.L.C. received a mortgage from a third
party financial institution and paid down the aggregate loan
amount owed to the Company.
F-18
Effective as of April 1, 2011, the Company entered into a
Limited Liability Company Membership Interest Sale and
Assignment Agreement with each of Messrs. Boyd and Mueller,
pursuant to which the Company agreed to purchase the membership
interests of Resort Holdings, L.L.C. owned by Messrs. Boyd
and Mueller, which constitute all of the outstanding membership
interests of Resort Holdings, L.L.C. The total purchase price
was $27,869 to each of Messrs. Boyd and Mueller, or an
aggregate of $55,738. As a result of these transactions, Resort
Holdings, L.L.C. became a wholly-owned subsidiary of the
Company. The outstanding liabilities of Resort Holdings, L.L.C.
include approximately $473,000 due on the mortgage relating to
the properties. The disinterested members of the board of
directors, including the audit committee members, reviewed the
facts relating to the Resort Holdings, L.L.C. transaction and
ratified the Companys purchase of Resort Holdings, L.L.C.
On October 30, 2007, the Company and certain of its
subsidiaries entered into an Amended and Restated Credit and
Security Agreement with EPT Ski Properties, Inc. pursuant to
which EPT Ski Properties, Inc. provided the Company with a
$31 million operating loan. This amount was later increased
to $41 million upon the execution of the Second Amended and
Restated Promissory Note, dated August 5, 2008. Messers
Boyd and Mueller and Richard Deutsch, another of our named
executive officers and directors, executed a Consent and
Agreement of Guarantors on October 30, 2007 pursuant to
which they each personally guarantee payment of the amount due
by the Company under, and satisfaction of all other obligations
pursuant to, the Amended and Restated Credit and Security
Agreement. The largest aggregate amount of principal outstanding
under the Amended and Restated Credit and Security Agreement was
$32.2 million during each of the fiscal years ended
April 30, 2011, 2010 and 2009. As of April 30, 2011,
the Company owed $32.2 million under the Amended and
Restated Credit and Security Agreement. There were no required
principal payments on the outstanding loan amount under the
Amended and Restated Credit and Security Agreement during the
fiscal years ended April 30, 2011, 2010 and 2009, but the
Company made payments of $3.0 million of interest on the
outstanding loan amount during each of these periods. The
Company currently pays interest at a rate of 9.54% on the
outstanding balance owed under the Amended and Restated Credit
and Security Agreement.
The Company has occasionally extended credit to Mr. Deutsch
for personal expenses, subject to his repayment. At
April 30, 2011 and April 30, 2010, $0 and
approximately $133,700, respectively, of this debt was
outstanding. As of April 12, 2011, Mr. Deutsch has
repaid the outstanding amount in full.
F-19
Peak Resorts, Inc.
Common Stock
PROSPECTUS
Rodman & Renshaw,
LLC
[ ],
2011
Part II:
Information Not Required in Prospectus
Item 13. Other
Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other
than underwriting discounts and commissions, payable solely by
Peak Resorts, Inc. (the Company) and expected to be
incurred in connection with the offer and sale of the securities
being registered. All amounts are estimates, except the SEC
registration fee and the FINRA filing fee.
|
|
|
|
|
|
|
Amount to be Paid
|
|
|
SEC registration fee
|
|
$
|
4,674.00
|
|
FINRA filing fee
|
|
$
|
4,525.00
|
|
Blue Sky fees and expenses*
|
|
|
|
|
NASDAQ listing fee*
|
|
|
|
|
Printing and engraving expenses*
|
|
|
|
|
Legal fees and expenses*
|
|
|
|
|
Accounting fees and expenses*
|
|
|
|
|
Transfer agent fees*
|
|
|
|
|
Miscellaneous*
|
|
|
|
|
Total*
|
|
|
|
|
|
|
|
* |
|
To be completed by amendment. |
Item 14. Indemnification
of Directors and Officers
The following summary is qualified in its entirety by reference
to the complete text of Sections 351.355 of the Revised
Statutes of Missouri and the amended and restated articles of
incorporation and amended and restated by-laws of the Company.
The Company is a Missouri corporation. Section 351.355(1)
of the Revised Statutes of Missouri provides that a corporation
may indemnify a director, officer, employee or agent of the
corporation in any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the
corporation, against expenses, including attorneys fees,
judgments, fines and settlement amounts actually and reasonably
incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. Section 351.355(2) provides that
the corporation may indemnify any such person in any threatened,
pending or completed action or suit by or in the right of the
corporation against expenses, including attorneys fees and
settlement amounts actually and reasonably incurred by him or
her in connection with the defense or settlement of the action
or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best
interests of the corporation, except that he or she may not be
indemnified in respect of any claim, issue or matter in which he
or she has been adjudged liable for negligence or misconduct in
the performance of his or her duty to the corporation, unless,
and only to the extent, authorized by the court.
Section 351.355(3) provides that a corporation shall
indemnify any such person against expenses, including
attorneys fees, actually and reasonably incurred by him or
her in connection with the action, suit or proceeding if he or
she has been successful in defense of such action, suit or
proceeding and if such action, suit or proceeding is one for
which the corporation may indemnify him or her under
Section 351.355(1) or (2). Section 351.355(7) provides
that a corporation shall have the power to give any further
indemnity to any such person, in addition to the indemnity
otherwise authorized under Section 351.355, provided such
further indemnity is either (i) authorized, directed or
provided for in the articles of incorporation of the corporation
or any duly adopted amendment thereof or (ii) is
authorized, directed or provided for in any bylaw or agreement
of the corporation which has been adopted by a vote of the
stockholders of the corporation, provided that no such indemnity
shall indemnify any person from or on account of such
persons conduct which was finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful
misconduct.
II-1
The Companys amended and restated articles of
incorporation provide that the Company shall indemnify its
directors and officers to the fullest extent authorized or
permitted by law; provided, however, that the Company shall not
be obligated to indemnify any director or officer in connection
with a proceeding initiated by such person unless such
proceeding was authorized or consented to by the board of
directors, except for proceedings to enforce rights to
indemnification. The amended and restated articles of
incorporation also state that the Company may, to the extent
authorized from time to time by the board of directors, provide
rights to indemnification to employees and agents of the Company
similar to those provided to directors and officers.
The Companys amended and restated by-laws state that the
Company shall indemnify directors and officers against any
claim, liability or expense incurred as a result of their
service as directors or officers, or as a result of another
other service on behalf of the Company, or service at the
request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or
other enterprise, to the maximum extent permitted by law. The
Company shall indemnify any such person who was or is a party
(other than a party plaintiff suing on his or her own behalf or
in the right of the Company), or is threatened to be made a
party, to any threatened, pending or completed action, suit or
proceeding by reason of such services against expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or
her in connection with such action, suit or proceeding.
The Companys amended and restated by-laws also provide
that the Company may, if it deems appropriate, indemnify any
employee or agent of the Company against any claim, liability or
expense incurred as a result of his or her service as an
employee or agent or as a result of any other service on behalf
of the Company, or service at the request of the Company as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, to the
maximum extent permitted by law or to such lesser extent as the
Company, in its discretion, may deem appropriate. The Company
may indemnify any such person who was or is a party (other than
a party plaintiff suing on his or her own behalf or in the right
of the Company), or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding by
reason of such services against expenses (including
attorneys fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding. To the extent
that an officer, employee or agent of the Company has been
successful on the merits or otherwise in defense of any action,
suit or proceeding described above, he or she shall be
indemnified against expenses (including attorneys fees)
actually and reasonably incurred by him or her in connection
with the action, suit or proceeding.
Any indemnification required or permitted pursuant to the
Companys amended and restated by-laws, unless ordered by
the court, shall be made by the Company only as authorized in
the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standard
of conduct set forth in the amended and restated by-laws. Such
determination shall be made (i) by the board of directors
by a majority vote of a quorum consisting of directors who were
not parties to such action, suit or proceeding; or (ii) if
such quorum is not obtainable, or if a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion; or (iii) by the stockholders.
Expenses incurred by a person who is or was a director or
officer of the Company in defending a civil or criminal action,
suit or proceeding shall be paid by the Company in advance of
the final disposition of such action, suit or proceeding, and
expenses incurred by a person who is or was an officer, employee
or agent of the Company in defending a civil or criminal action,
suit or proceeding may be paid by the Company in advance of the
final disposition of such action, suit or proceeding as
authorized by the Board of Directors, in either case upon
receipt of an undertaking by or on behalf of the director or the
officer to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the
Company as authorized.
Except as may otherwise be permitted by law, no person shall be
indemnified from or on account of such persons conduct
which is finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct. The Company may
adopt a more restrictive standard of conduct with respect to the
indemnification of any employee or agent of the Company.
The Company has obtained directors and officers
liability insurance.
II-2
Item 15. Recent
Sales of Unregistered Securities
The Company has not had any unregistered sales or other
issuances of securities during the past three fiscal years.
Item 16. Exhibits
and Financial Statement Schedules
(a) Exhibits.
See the Exhibit Index on the page immediately preceding the
exhibits for a list of exhibits filed as part of this
registration statement on
Form S-1,
which Exhibit Index is incorporated herein by reference.
(b) Financial Statement Schedules.
Schedule I, Real Estate and Accumulated Depreciation, is
included herein.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the Securities
Act), may be permitted to directors, officers and
controlling persons pursuant to the provisions described in
Item 14 above, or otherwise, it is the opinion of the
Securities and Exchange Commission that such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by us of expenses incurred or paid by a director, officer or
controlling person of us in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
We hereby undertake that:
(i) for purposes of determining any liability under the
Securities Act, the information omitted from the form of
Prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as
of the time it was declared effective; and
(ii) for purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of Prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
Signatures
Pursuant to the requirements of the Securities Act of 1933, as
amended, Peak Resorts, Inc. has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Wildwood, State of
Missouri, on June 10, 2011.
Peak Resorts, Inc.
Timothy D. Boyd
Chief Executive Officer, President and Director
Power
of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Timothy D. Boyd
and Stephen J. Mueller as his true and lawful attorneys-in-fact
and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including
post-effective amendments and registration statements filed
pursuant to Rule 462(b) under the Securities Act of
1933) to this Registration Statement and to file the same,
with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that
each of said attorneys-in-fact and agents or their substitutes
or substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities indicated on June 10, 2011.
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|
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Signature
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Title
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/s/ Timothy
D. Boyd
Timothy
D. Boyd
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Chief Executive Officer, President and Director
(Principal Executive Officer)
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/s/ Stephen
J. Mueller
Stephen
J. Mueller
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Chief Financial Officer, Vice President,
Secretary and Director
(Principal Financial and Accounting Officer)
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*
James
T. Barry, Jr.
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Director
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*
Richard
Deutsch
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Vice President Business and Real Estate Development and Director
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*
Gregory
R. Diekemper
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Director
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*
Stanley
W. Hansen
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Director
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*
Michael
Staenberg
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Director
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*By:
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/s/ Timothy
D. Boyd
Attorney-in-fact
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II-4
Exhibit Index
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Exhibit Number
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Description
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1.1*
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Form of Underwriting Agreement
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2.1**
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Purchase Agreement by and among Mount Snow, Ltd., L.B.O.
Holding, Inc. and American Skiing Company, as sellers, and Peak
Resorts, Inc., as buyer, dated February 16, 2007.
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2.2**
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Agreement of Sale and Purchase between Wildcat Mountain Ski
Area, Inc., Meadow Green-Wildcat Skilift Corp. and Meadow
Green-Wildcat Corp., as sellers, and WC Acquisition Corp., as
purchaser, effective as of October 20, 2010.
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3.1**
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Amended and Restated Articles of Incorporation
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3.2**
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Amended and Restated By-laws
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5.1*
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Form of Opinion of Helfrey, Neiers & Jones P.C.
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10.1**
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Loan Agreement by and between Peak Resorts, Inc. and L.B.O.
Holding, Inc., as borrowers, and EPT Mount Attitash, Inc., as
lender, dated April 4, 2007.
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10.2**
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Promissory Note from Peak Resorts, Inc. and L.B.O. Holding, Inc.
in favor of EPT Mount Attitash, Inc. dated April 4, 2007.
|
10.3**
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Note Modification Agreement by and between Peak Resorts, Inc.
and L.B.O. Holding, Inc., as borrowers, and EPT Mount Attitash,
Inc. as lender, dated October 30, 2007.
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10.4**
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Agreement Concerning a Loan for a Holder of a Special Use Permit
by and between the United States Department of Agriculture,
Forest Service; EPT Mount Attitash, Inc. and L.B.O. Holding,
Inc., dated April 4, 2007.
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10.5**
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|
Agreement Concerning a Loan for a Holder of a Special Use Permit
by and between the United States Department of Agriculture,
Forest Service; EPT Mount Snow, Inc. and Mount Snow, Ltd., dated
April 4, 2007.
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10.6**
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|
Promissory Note from Peak Resorts, Inc. and Mount Snow, Ltd. in
favor of EPT Mount Snow, Inc., dated April 4, 2007.
|
10.7**
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|
Modification Agreement by and between Peak Resorts, Inc. and
Mount Snow, Ltd., as borrowers, and EPT Mount Snow, Inc. as
lender, dated April 1, 2010.
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10.8**
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|
Loan Agreement by and between Peak Resorts, Inc. and Mount Snow,
Ltd., as borrowers, and EPT Mount Snow, Inc., as lender, dated
April 4, 2007.
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10.9**
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First Modification Agreement by and between Peak Resorts, Inc.
and Mount Snow, Ltd., as borrowers, and EPT Mount Snow, Inc., as
lender, dated June 30, 2009.
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10.10**
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|
Amended and Restated Promissory Note from Peak Resorts, Inc. and
Mount Snow, Ltd. in favor of EPT Mount Snow, Inc., dated June
30, 2009.
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10.11**
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|
Letter Agreement by and between Peak Resorts, Inc. and Mount
Snow, Ltd., as borrowers, and EPT Mount Snow, Inc., as lender,
dated June 20, 2009.
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10.12**
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|
Amended and Restated Credit and Security Agreement among Mad
River Mountain, Inc.; SNH Development, Inc.; L.B.O. Holding,
Inc.; Mount Snow, Ltd.; Peak Resorts, Inc.; Hidden Valley Golf
and Ski, Inc.; Snow Creek, Inc.; Paoli Peaks, Inc.; Deltrecs,
Inc.; Brandywine Ski Resort, Inc.; Boston Mills Ski Resort,
Inc.; and JFBB Ski Areas, Inc., as borrowers, and EPT Ski
Properties, Inc., as lender, dated October 30, 2007.
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10.13**
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|
Option Agreement between Hidden Valley Golf and Ski, Inc.; Snow
Creek, Inc.; Paoli Peaks, Inc.; Brandywine Ski Resort, Inc.;
Boston Mills Ski Resort, Inc.; and JFBB Ski Areas, Inc., as
sellers, and EPT Ski Properties, Inc. as purchaser, dated
October 30, 2007.
|
10.14**
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|
Second Amended and Restated Promissory Note from Peak Resorts,
Inc.; JFBB Ski Areas, Inc.; Mad River Mountain, Inc.; SNH
Development, Inc.; L.B.O. Holding, Inc.; Mount Snow, Ltd.;
Hidden Valley Golf and Ski, Inc.; Paoli Peaks, Inc.; Deltrecs,
Inc.; Brandywine Ski Resort, Inc.; and Boston Mills Ski Resort,
Inc. in favor of EPT Ski Properties, Inc., dated August 5, 2008.
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10.15**
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|
Blanket Conveyance, Bill of Sale and Assignment between Wildcat
Mountain Ski Area, Inc., Meadow Green-Wildcat Skilift Corp. and
Meadow Green-Wildcat Corp., as assignors, and WC Acquisition
Corp., as assignee, dated November 19, 2010.
|
II-5
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10.16**
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Agreement Concerning a Loan for a Holder of a Special Use Permit
by and between the United States Department of Agriculture,
Forest Service; Meadow Green-Wildcat Corp, as lender, and WC
Acquisition Corp., as borrower, dated November 19, 2010.
|
10.17**
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|
Promissory Note from WC Acquisition Corp. in favor of Wildcat
Mountain Ski Area, Inc.; Meadow Green-Wildcat Skilift Corp.; and
Meadow Green-Wildcat Corp., dated November 22, 2010.
|
10.18**
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|
Unconditional Guaranty of Peak Resorts, Inc., dated November 12,
2010.
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10.19**
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|
Lease Agreement by and between EPT Mad River, Inc. and Mad River
Mountain, Inc., dated November 17, 2005.
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10.20**
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|
First Amendment to Lease Agreement by and between EPT Mad River,
Inc. and Mad River Mountain, Inc., dated June 30, 2006.
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10.21**
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|
Ground Lease by and between Crotched Mountain Properties, L.L.C.
and SNH Development, Inc., dated May 27, 2003.
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10.22**
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First Amendment to Ground Lease by and between Crotched Mountain
Properties, L.L.C. and SNH Development, Inc., dated April 3,
2004.
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10.23**
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Second Amendment to Ground Lease by and between Crotched
Mountain Properties, L.L.C. and SNH Development, Inc., dated
January 31, 2008.
|
10.24**
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|
Lease by and between Big Boulder Corporation and JFBB Ski Areas,
Inc., dated December 1, 2005.
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10.25**
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Lease by and between Blue Ridge Real Estate Company and JFBB Ski
Areas, Inc., dated December 1, 2005.
|
10.26**
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Lease Agreement by and between Resort Holdings, LLC and Peak
Resorts, Inc., dated April 1, 2010.
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10.27**
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Lease Agreement by and between Resort Holdings, LLC and Peak
Resorts, Inc., dated September 1, 2010.
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10.28**
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|
Lease by and between the Estate of Charles Marvin Weeks and
Paoli Peaks, Inc., dated September 26, 1990.
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10.29**
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U.S. Department of Agriculture Forest Service Special Use Permit
for Attitash.
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10.30**
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U.S. Department of Agriculture Forest Service Special Use Permit
for Mount Snow.
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10.31**
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U.S. Department of Agriculture Forest Service Special Use Permit
for Wildcat Mountain.
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10.32**
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Promissory Note from SNH Development, Inc. in favor of EPT
Crotched Mountain, Inc., dated March 10, 2006.
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10.33**
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Guaranty of Payment made by Peak Resorts, Inc. for the benefit
EPT Crotched Mountain, Inc., dated March 10, 2006.
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10.34**
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Form of Peak Resorts, Inc. Indemnification Agreement.
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10.35**
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Limited Liability Company Membership Interest Sale and
Assignment Agreement by and between Timothy D. Boyd and Peak
Resorts, Inc., dated as of April 1, 2011.
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10.36**
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|
Limited Liability Company Membership Interest Sale and
Assignment Agreement by and between Stephen J. Mueller and Peak
Resorts, Inc., dated as of April 1, 2011.
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10.37**
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Agreement by and between Mount Snow, Ltd. and Leitner-Poma of
America, dated as of March 24, 2011.
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10.38
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Executive Employment Agreement by and between Peak Resorts, Inc.
and Timothy D. Boyd, dated as of June 1, 2011.
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10.39
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Executive Employment Agreement by and between Peak Resorts, Inc.
and Stephen J. Mueller, dated as of June 1, 2011.
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16.1**
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Letter from Maher & Company PC to Peak Resorts, Inc.
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21.1**
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List of Subsidiaries.
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23.1*
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Consent of Helfrey, Neiers & Jones P.C. (included in
Exhibit 5.1).
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23.2
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Consent of McGladrey & Pullen, LLP.
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II-6
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23.3
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Consent of The National Ski Areas Association.
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24.1**
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Power of Attorney (included on signature page).
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99.1**
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Audit Committee Charter.
|
99.2**
|
|
Compensation Committee Charter.
|
99.3**
|
|
Nominating and Corporate Governance Committee Charter.
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* |
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To be filed by amendment. |
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Indicates a management contract or compensatory plan or
arrangement. |
II-7
Schedule I
Peak
Resorts, Inc.
Schedule Pursuant
to
Regulation S-X
Rule 12-28
Real Estate and Accumulated Depreciation
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|
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|
|
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Life on
|
|
|
|
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|
|
|
|
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which
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Cost
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depreciation
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capitalized
|
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Gross amount
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in latest
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subsequent
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at which carried
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income
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Initial cost
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to
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a close of
|
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Accumulated
|
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Date of
|
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Date
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statement is
|
Description
|
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Encumbrances
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to Company
|
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acquisition
|
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period
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depreciation
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construction
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acquired
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computed
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Land held for development
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Mortgage
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|
$17,800,000
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$10,197,800
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$27,997,800
|
|
$ -
|
|
N/A
|
|
April,
2007
|
|
Not
applicable
|
Peak
Resorts, Inc.
Footnote
to Schedule Pursuant to
Regulation S-X
Rule 12-28
Real Estate and Accumulated Depreciation
|
|
|
|
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|
|
Year Ended April 30,
|
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|
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2011
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2010
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2009
|
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|
Balance at beginning of period
|
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$
|
24,525,200
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|
$
|
21,737,900
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|
$
|
19,738,400
|
|
Additions during the period:
|
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Acquisitions through foreclosure
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-
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-
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-
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Other acquisitions
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|
-
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|
-
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|
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-
|
|
Improvements, etc.
|
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913,700
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|
|
|
582,000
|
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|
|
24,400
|
|
Other (describe)
|
|
|
|
|
|
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|
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|
|
Capitalized interest
|
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2,558,900
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2,205,300
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|
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1,975,100
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,472,600
|
|
|
|
2,787,300
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|
|
1,999,500
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|
|
|
|
|
|
|
|
|
|
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|
|
Deductions during the period:
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|
|
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Cost of real estate sold
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|
-
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|
-
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|
|
|
-
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|
Other (describe)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at close of period
|
|
$
|
27,997,800
|
|
|
$
|
24,525,200
|
|
|
$
|
21,737,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|