American Skiing Company Reports Fiscal 2002 Second Quarter Results

NEWRY, Maine, March 18 /PRNewswire-FirstCall/ — American Skiing Company today announced results for its second fiscal quarter and six months ended January 27, 2002.

The Company reported that aggressive cost control and performance enhancements steps taken as part of its previously announced restructuring program, coupled with additional steps and refocused marketing programs following the events of September 11th, bolstered operating performance during the quarter. However, these were offset by a late start to the ski season, particularly in the east, and weakness in the Utah market resulting from the 2002 Winter Olympics, each of which yielded weaker year-over-year performance. Following the late start to the ski season, the Company achieved record results at Heavenly during the crucial Christmas and New Years period as well as strong Martin Luther King and Presidents' Day holidays.

Following the events of September 11th, our resort management teams did an exceptional job of promoting visitation and implementing aggressive cost control measures which helped mitigate the affect on our resort operations, said CEO B.J. Fair. Nationwide call volume and reservation activity continued to improve since the start of the season, however, a lack of snowfall and warm temperatures in the east have hampered a return to last year's levels.

Restructuring Plan Update

To date, the Company has completed all the elements of its previously announced restructuring plan with the exception of closing the Steamboat resort sale to reduce leverage. The Company announced on February 1, 2002 that it had entered into a definitive agreement to sell the resort to Triple Peaks, LLC, a consortium of investors led by Tim and Diane Mueller, the owners of Vermont's Okemo Mountain Resort and operators of Mount Sunapee Resort in New Hampshire. The sale remains subject to a number of contingencies. The Company anticipates that the sale will close within the next thirty days.

The Company also reported that, as a result of the slow start to the ski season and delays in completing the sale of Steamboat, it was not in compliance with several financial covenants under its resort credit facility at the end of the quarter. The Company has obtained a waiver from its lenders for the financial covenant defaults as of the second quarter of fiscal 2002.

Accounting Changes and Non-Recurring Items

During the second quarter and first six months of fiscal 2002, the Company incurred $0.8 million, and $2.4 million, respectively, in non-recurring charges related to its previously announced restructuring program. All of the non-recurring charges relate to resort operations except for $0.2 million associated with real estate operations incurred during the second quarter of fiscal 2002. During the second quarter of fiscal 2002, the Company also took an additional $25.5 million asset impairment charge on Steamboat based on modifications from preliminary estimates to the final purchase and sale agreement and delays in completing the sale. During the first quarter of fiscal 2002, the Company incurred an $18.7 million non-recurring charge from the cumulative effect of a change in accounting principle related to the impairment of goodwill resulting from the adoption of Statement of Financial Accounting Standards No. 142. The net loss for the first quarter of fiscal 2001 included $0.8 million in pre-opening expenses at the Steamboat Grand Hotel, which opened in October 2000, and a $2.5 million benefit, net of taxes, from the cumulative effect of a change in accounting principle related to marking interest rate derivatives to their market value as a result of the adoption of Statement of Financial Accounting Standards No. 133.

Fiscal 2002 Second Quarter Results

The net loss available to common shareholders for the second quarter of fiscal 2002 was $43.5 million, or $1.37 per basic and diluted share, compared with a net loss of $10.4 million, or $0.34 per basic and diluted share for the second fiscal quarter of 2001. Excluding non-recurring items, and adjusting for the Company's previously announced decision not to recognize any tax benefit or expense, the net loss available to common shareholders for the second quarter of fiscal 2002 was $17.3 million, or $0.54 per basic and diluted share compared to a net loss of $12.6 million, or $0.41 per basic and diluted share, during the second quarter of fiscal 2001.

Total revenues were $121.2 million for the second quarter of fiscal 2002, compared with $156.3 million for the previous year's second quarter. Resort revenue was $108.8 million for the quarter, compared with $125.5 million in the second quarter of fiscal 2001. The decline in resort revenues reflects the later start to the ski season in fiscal 2002 and the Company's strategic decision to sell its Sugarbush resort during the first quarter of fiscal 2002. Adjusting for the sale, resort revenue for the second quarter of fiscal 2001 would have been $118.8 million. Real estate revenue from ongoing quartershare sales was $12.3 million, versus $30.7 million for the same period in fiscal 2001. While a decline in real estate revenues was expected due to the Company's strategy to sell it's remaining quartershare inventory prior to commencing any new projects, western real estate sales have been negatively affected by economic weakness following September 11th and weakness in the Utah market resulting from the Olympics. The Company's real estate revenues in the second quarter of fiscal 2001 were also positively affected by the delivery of the Steamboat Grand Hotel in October 2000 and a land sale to Marriott Vacation Club International.

We have essentially eliminated our eastern quartershare inventory as a result of a successful auction at Attitash and improved sales results at Mount Snow, said CFO Mark Miller. We are continuing efforts to reduce our remaining inventory in the west as quickly as possible. We have seen gradual improvement in western real estate sales following the events of September 11th, but sales continue to be weaker than planned.

The Company's total earnings from operations before interest, income taxes, depreciation, and amortization (EBITDA), was a loss of $7.4 million in the second fiscal quarter of 2002, compared with earnings of $27.9 million in the same period in fiscal 2001. Resort EBITDA for the quarter was a loss of $7.5 million versus earnings of $23.4 million for the previous year's second quarter. After adjusting for non-recurring items and results from Sugarbush, resort EBITDA from core operations was $18.5 million compared to $22.4 million for the comparable period in fiscal 2001. Real estate EBITDA was $0.1 million, or $0.3 million after adjusting for non-recurring items, compared with $4.5 million in the second fiscal quarter of 2001 when the Company benefited from a land sale to Marriott Vacation Club International.

Fiscal 2002 Six Month Results

The net loss available to common shareholders for the six months ended January 27, 2002 was $109.0 million, or $3.45 per basic and diluted share, compared with a loss of $34.6 million, or $1.14 per basic and diluted share, in the corresponding period of fiscal 2001. Excluding non-recurring items in both periods and adjusting for the decision not to recognize any tax benefit or expense, the net loss available to common shareholders for the first six months of fiscal 2002 was $62.4 million, or $1.98 per basic and diluted share versus a net loss of $50.0 million, or $1.64 per basic and diluted share, during the comparable period in fiscal 2001.

Total revenues were $144.3 million for the first six months of fiscal 2002, compared with $204.4 million for the first six months of fiscal 2001. Resort revenue was $129.2 million compared with $146.5 million in fiscal 2001. Excluding results from Sugarbush, resort revenue was $128.5 million for the first six months of fiscal 2002 versus $138.6 million in the prior year. Real estate revenue was $15.1 million, versus $57.9 million during the same period last year. The expected decline in real estate revenues primarily reflects the delivery of the Steamboat Grand Hotel in October 2000 and a land sale to Marriott Vacation Club International, which generated $31.8 million and $8.5 million in real estate revenue, respectively, during the first half of fiscal 2001.

Total EBITDA for the first six months of fiscal 2002 was a loss of $28.6 million versus earnings of $11.7 million in the comparable period in fiscal 2001. Resort EBITDA was a loss of $27.4 million compared to earnings of $3.5 million last year. After adjusting for non-recurring items and results from Sugarbush, resort EBITDA from core operations was $1.2 million compared to $4.8 million during the same period in fiscal 2001. Real estate EBITDA was a loss of $1.2 million, or a loss of $1.0 million after adjusting for non- recurring items, compared to earnings of $8.1 million in fiscal 2001.

Debt Reclassification

As a result of the slow start to the ski season and delays in completing the sale of Steamboat, the Company was not in compliance with several financial covenants under its $156.1 million resort senior credit facility as of the end of the second quarter of fiscal 2002. On March 18, 2002, the Company obtained a waiver from its resort senior lenders that waived the financial covenant defaults as of the end of its second fiscal quarter. However, since several of the Company's covenants are based on a rolling 12 month EBITDA calculation, and therefore will include results from its recently completed second quarter, management expects that, based on projected covenant calculations for the Company's third fiscal quarter which will end on April 28, 2002, the Company will again be in default under several financial covenants unless it is successful in completing the sale of Steamboat and negotiating new covenants with its lenders. As a result of these projected covenant defaults, the Company has reclassified all of its long term debt as current since most of its debt obligations have cross-default provisions that will accelerate the maturity of these obligations unless the default is corrected or waived by the holder of the obligation.

We are actively engaged in negotiations with our lenders and expect to revise the terms of our senior resort credit facility, in conjunction with the closing of Steamboat, in order to accommodate ongoing operations consistent with our business plan, said Fair. We remain focused on reducing our leverage and positioning the company for future growth.

In addition, the Company has experienced a significant reduction in real estate sales activity from the previous year, and its business plan for the current year, as a result of the events of September 11th and the related economic slowdown. Although conditions have improved in recent weeks, the Company's ability to meet scheduled amortization requirements under lending agreements for its real estate subsidiary, American Skiing Company Resort Properties, Inc. is dependent on completing the Steamboat transaction prior to March 31, 2002. The Company also believes that its hotel development subsidiary, Grand Summit Resort Properties, Inc., will not be able to meet scheduled amortization requirements under its lending agreement absent concessions from lenders. The Company is engaged in discussions with its lenders to revise the terms of the agreement.

The Company anticipates that if it is successful in completing a significant asset sale and restructuring its credit facilities, and can reasonably expect to remain in compliance with its covenants based on internally developed forecasts, it will reclassify the appropriate portion of debt to long term.

About American Skiing Company

Headquartered in Newry, Maine, American Skiing Company is one of the largest operator of alpine ski, snowboard and golf resorts in the United States. Its resorts include Killington and Mount Snow in Vermont; Sunday River and Sugarloaf/USA in Maine; Attitash Bear Peak in New Hampshire; Steamboat in Colorado; The Canyons in Utah; and Heavenly in California/Nevada. More information is available on the Company's Web site, http://www.peaks.com/.