As filed with the Securities and Exchange Commission on September 7, 1999March 25, 2004
Registration No.
333-80621
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
--------------
AMENDMENT NO. 1
TO_______________________
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------02010
VAIL RESORTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 7990 51-0291762
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or organization) Classification Code Number)
organization)
_______________________
137 Benchmark Road
Avon, COColorado 81620
(970) 845-2500
(Address, including ZIP Code,zip code, and telephone number,
including area code, of registrant's principal
executive offices)
--------------_______________________
See Table of Additional Registrants
--------------_______________________
Martha D. Rehm, Esq.
Senior Vice President and General Counsel
Vail Resorts, Inc.
137 Benchmark Road
Avon, CO 81620Post Office Box 7
Vail, Colorado 81658
(970) 845-2500
(Name, address, including ZIP Code,zip code, and telephone number,
including area code, of agent for service)
with a copy_______________________
Copy to:
James J. Clark, Esq.
Luis R. Penalver, Esq.
Cahill Gordon & Reindel LLP
80 Pine Street
New York, New York 10005
(212) 701-3000
_______________________
Approximate date of commencement of proposed saleissuance of the securities to
the public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]|_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 426(b)462(b) 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. [_]|_|
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. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------|_|
_______________________
Proposed
MaximumCALCULATION OF REGISTRATION FEE
===================================== ============= ===================== =========================== ====================
Title of Each Class of Amount to be Proposed AggregateMaximum Proposed Maximum Amount of
Securities to beBe Registered MaximumBe Offering Price Per Aggregate Offering Price Registration Fee
Registered Proposed Per Unit (1) Fee (2)
- --------------------------------------------------------------------------------------------------------------------- ------------- --------------------- --------------------------- --------------------
86 3/4% Senior Subordinated
Notes due
2009.................. $200,000,000Due 2014............... $390,000,000 100% $200,000,000 $55,600(4)$390,000,000 $49,413
- --------------------------------------------------------------------------------------------------------------------- ------------- --------------------- --------------------------- --------------------
Guarantees of 86 3/4% Senior
Subordinated Notes due 2009........Due 2014.. (3) (3) (3) (3)
(3)===================================== ============= ===================== =========================== ====================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933, as amended
(the "Securities Act").
(2)Calculated pursuant to Rule 457(f)(2) under the Securities Act.
(3)Pursuant to Rule 457(n), no registration fee is required with respect to
the Guarantees.
(4)Previously Paid.
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 or until thisthe registration statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL REGISTRANTS
Primary
State or other Standard I.R.S.Additional Registrants
Exact name of registrant as State or other jurisdiction of Primary Standard Industrial I.R.S. Employer
as
specified in its charter incorporation or organization Classification Identification
charter File number organization Code Number Identification No.
- ------------------------ ------------ ---------------- -------------- ------------------------------------------- -------------------------- ------------------
Vail Holdings, Inc. 333-80621-05 Colorado 551112 84-0568230
The Vail Corporation 333-80621-06 Colorado 71392 84-0601461
Beaver Creek Associates, Inc. 333-80621-07 Colorado 71392 84-0677537
Beaver Creek Consultants, Inc. 333-80621-08 Colorado 56151 84-0760348
Lodge Properties, Inc. 333-80621-09 Colorado 72111 84-0607010
Piney River Ranch, Inc. 333-80621-10 Colorado 71399 84-1147680
Vail Food Services, Inc. 333-80621-11 Colorado 72231 84-0596378
Vail Resorts Development
Company 333-80621-12 Colorado 23311 84-1242948
Vail Summit Resorts,
Inc. 333-80621-13 Colorado 71392 43-1273996
Vail Trademarks, Inc. 333-80621-14 Colorado 541199 84-1253319
Vail/Arrowhead, Inc. 333-80621-15 Colorado 23311 84-1253320
Vail/Beaver Creek Resort 333-80621-16
Properties, Inc. Colorado 531311 52-1479879
Beaver Creek Food 333-80621-17 Services, Inc. Colorado 72231 84-0815288
Lodge Realty, Inc. 333-80621-18 Colorado 53121 13-3051423
Vail Associates
Consultants, Inc. 333-80621-19 Colorado 53121 84-0738502
Vail Associates
Holdings, Ltd. 333-80621-20 Colorado 53139 84-1214955
Vail Associates 333-80621-21
Management CompanyBreckenridge Resort Properties, Colorado 531311 84-1248614
Vail Associates Real
Estate,N/A
Inc.
333-80621-22Complete Telecommunications, Inc. Colorado 53121 84-1013094
Vail/Battle Mountain,7385 84-1533678
Gillett Broadcasting, Inc. 333-80621-23 Colorado 53139 84-1146997Delaware 551112 37-0920781
Grand Teton Lodge Company Wyoming 7211 83-0161154
Heavenly Valley, Limited Nevada 71392 84-0266125
Partnership
Jackson Hole Golf and Tennis Wyoming 7997 N/A
Club, Inc.
JHL&S LLC Wyoming 7211 83-0332983
Keystone Conference Services, Inc. 333-80621-24 Colorado 72111 84-1075280
Keystone Development Sales, Inc. 333-80621-25 Colorado 53121 43-1463384
Keystone Food and 333-80621-26 Beverage Company Colorado 72231 84-0678950
Keystone Resort Property 333-80621-27
Management Company Colorado 531311 84-0705922
Management Company
Lodge Properties, Inc. Colorado 72111 84-0607010
Lodge Realty, Inc. Colorado 53121 13-3051423
Property Management 333-80621-28Acquisition Tennessee 531311 62-1634422
Corp., Inc.
Rockresorts Casa Madrona, LLC Delaware 7211 84-1606603
Rockresorts Cheeca, LLC Delaware 7211 84-1606605
Rockresorts Equinox, Inc. Vermont 7211 06-1634157
Rockresorts International, LLC Delaware 7211 84-1606606
Rockresorts, LLC Delaware 7211 75-2829919
Rockresorts LaPosada, LLC Delaware 7211 84-1606604
Rockresorts Rosario, LLC Delaware 7211 84-1606602
Rockresorts Wyoming, LLC Wyoming 7211 86-1076452
Teton Hospitality Services, Inc. Wyoming 7211 83-0332998
The Vail Corporation Colorado 71392 84-0601461
The Village at Breckenridge Tennessee 72111 62-1633660
Acquisition Corp., Inc.
TennesseeVail Associates Holdings, Ltd. Colorado 53139 84-1214955
Vail Associates Real Estate, Inc. Colorado 53121 84-1013094
Vail Food Services, Inc. Colorado 72231 84-0596378
Vail Holdings, Inc. Colorado 551112 84-0568230
Vail Resorts Development Company Colorado 23311 84-1242948
Vail Summit Resorts, Inc. Colorado 71392 43-1273996
Vail Trademarks, Inc. Colorado 541199 84-1253320
Vail/Arrowhead, Inc. Colorado 23311 84-1253319
Vail/Beaver Creek Resort Colorado 531311 62-163442252-1479879
Properties, Inc.
VAMHC, Inc. Colorado 7211 N/A
Vail RR, Inc. Colorado 7211 84-1606210
VA Rancho Mirage I, Inc. Colorado 7211 84-1606209
VA Rancho Mirage II, Inc. Colorado 7211 84-1606208
VA Rancho Mirage Resort, L.P. Delaware 7211 78-2578150
VR Heavenly I, Inc. Colorado 71392 33-1039478
VR Heavenly II, Inc. Colorado 71392 33-1039481
The Village at 333-80621-29
Breckenridge
Acquisition Corp., Inc. Tennessee 72111 62-1633660
GHTV, Inc. 333-80621-01 Delaware 551112 39-1284459
Gillett Broadcasting of 333-80621-02
Maryland, Inc. Delaware 53139 52-1480854
Gillett Broadcasting,
Inc. 333-80621-03 Delaware 551112 37-0920781
Gillett Group
Management, Inc. 333-80621-04 Delaware 541618 62-1148746
Grand Teton Lodge
Company Wyoming 72111 83-0161154
Larkspur Restaurant &
Bar, LLC Colorado 72211 84-1510919
The address, including zip code, and telephone number, including area
code, of the principal executive offices of the additional registrants listed
above is: c/o Vail Resorts, Inc., 137 Benchmark Road, Avon, CO 81620, and the
telephone number at that address is (970) 845-2500.
2
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may
+
+notnot consummate the exchange offer until the registration statement filed with
+
+thethe Securities and Exchange Commission is effective. This prospectus is not +
+anan
offer to sell these notes and is not soliciting an offer to buyacquire these +
+notesnotes
in any state where the offer or sale is not permitted.
+
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 7, 1999
[LOGO OFMARCH 25, 2004
VAIL RESORTS, INC.]
Exchange Offer
for
$200,000,000$390,000,000 Aggregate Principal Amount
of
86 3/4% Senior Subordinated Notes Due 2009
--------due 2014
________________________________
Terms of Exchange Offer
.Offer:
o Expires 5:00 p.m., New . The exchange of the
York City time, on outstanding Notes will
1999,, 2004 unless not be a taxable
extended.
exchange for federal
income tax purposes.
.o Subject to certain customary conditions .which may be waived by us.
o All outstanding 6 3/4% Senior Subordinated Notes due 2014 that are
validly tendered and not withdrawn will be exchanged.
o Tenders of outstanding notes may be withdrawn any time prior to the
expiration of this exchange offer.
o The exchange of the outstanding notes will not be a taxable exchange
for U.S. federal income tax purposes.
o We will not receive any which may be waived by cash proceeds from the us. exchange offer.
. All outstanding 8 3/4% .o The terms of the notes Senior Subordinated to be issued in Notes due 2009 that are exchange for the validly tendered and outstanding
Notesnotes are
not withdrawn will be substantially identical
exchanged. to the outstanding Notes,notes, except for
. Tenders of outstanding certain transfer Notes may be withdrawn restrictions and any time prior to the registration rights
expiration of this relating to the
exchange offer. outstanding notes.
.o Any outstanding Notesnotes not validly tendered will remain subject to
existing transfer restrictions.
See "Risk Factors"Factors," beginning on page 136, for a discussion of certain
factors that should be considered by holders who tenderbefore tendering their outstanding
Notesnotes in the exchange offer.
There has not previously been previously any public market for the exchange notes that
will be issued in the exchange offer. We do not intend to list the exchange
notes on any national stock exchange or on the Nasdaq StockNational Market. There can
be no assurance that an active market for such exchange notes will develop.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the notes to be distributed in the
exchange offer, nor have any of these organizationssecurities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------------------------
The date of this prospectus is [ ], 2004.
TABLE OF CONTENTS
Page
Market, Ranking and Other Data..............................................i
Forward-Looking Statements..................................................i
Where You Can Find More Information........................................ii
Documents Incorporated by Reference.......................................iii
Prospectus is , 1999.
Summary..........................................................1
The Exchange Offer..........................................................2
Summary of the Exchange Notes...............................................5
Risk Factors................................................................7
Ratio of Earnings to Fixed Charges.........................................19
Use of Proceeds............................................................19
Capitalization.............................................................19
The Exchange Offer.........................................................21
Description of Exchange Notes..............................................30
Description of Certain Indebtedness........................................58
Plan of Distribution.......................................................59
Certain Federal Income Tax Considerations..................................61
Legal Matters..............................................................64
Experts....................................................................64
_________________
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of outstanding notes in any jurisdiction in which the
exchange offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Market, Ranking and Other Data
The data included or incorporated by reference in this prospectus regarding
markets and ranking, including the size of certain markets and our position and
the position of our competitors within these markets, are based on reports of
published industry sources and our estimates based on our management's knowledge
and experience in the markets in which we operate. Our estimates have been based
on information obtained primarily from trade and business organizations and
other contacts in the markets in which we operate. We believe these estimates to
be accurate as of the date of this prospectus. However, this information may
prove to be inaccurate because of the method by which we obtained some of the
data for our estimates or because this information cannot always be verified
with complete certainty due to the limits on the availability and reliability of
raw data, the voluntary nature of the data gathering process and other
limitations and uncertainties. As a result, you should be aware that market,
ranking and other similar data included in this prospectus, and estimates and
beliefs based on that data, may not be reliable. We cannot guarantee the
accuracy or completeness of such information contained in this prospectus.
Forward-Looking Statements
The prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical fact are "forward-looking statements" for purposes of federal and
state securities laws. Forward-looking statements may include the words "may,"
"will," "plans," "estimates," "anticipates," "believes," "expects," "intends"
and similar expressions. Although we believe that such statements are based on
reasonable assumptions, these forward-looking statements are subject to numerous
factors, risks and uncertainties that could cause actual outcomes and results to
be materially different from those projected or assumed in our forward-looking
statements. These factors, risks and uncertainties include, among others, the
following:
o the existing SEC formal investigation of us;
-i-
o economic downturns;
o terrorist acts upon the United States;
o threat of or actual war;
o unfavorable weather conditions;
o our ability to obtain financing on terms acceptable to us to finance
our capital expenditure and growth strategy;
o our ability to develop our resort and real estate operations;
o competition in our Mountain and Lodging businesses;
o our reliance on government permits for our use of federal land;
o our ability to integrate and successfully operate future acquisitions;
o adverse consequences of current or future legal claims; and
o adverse changes in the real estate market.
Our actual results, performance or achievements could differ materially
from those expressed in, or implied by, the forward-looking statements. We can
give no assurances that any of the events anticipated by the forward-looking
statements will occur or, if any of them do, what impact they will have on our
results of operations and financial condition. We do not intend, and we
undertake no obligation, to update any forward-looking statement. We urge you to
review carefully "Risk Factors" in this prospectus for a more complete
discussion of the risks of an investment in the exchange notes.
WHERE YOU CAN FIND MORE INFORMATION
We are required to file annual, quarterly and special reports, proxy
statements, any amendments to those reports and other information with the
Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended. The Exchange Act file number for our SEC
filings is 001-09614.(the "SEC"). You may read and copy any
document we filedocuments filed by us with the SEC at the following SECSEC's public reference rooms:
Judiciary Plaza 500 West Madison Street 7 World Trade Centerroom at 450
Fifth Street, N.W. 14th Floor Suite 1300
Room 1024 Chicago, Illinois 60661 New York, New York, Washington, D.C. 20549 10048
You may obtain20549. Please call the SEC at
1-800-SEC-0330 for further information on the operationpublic reference room. Reports,
proxy statements and information statements, any amendments to those reports and
other information filed electronically by us with the SEC are available to the
public at the SEC's website at http://www.sec.gov.
We have filed a registration statement on Form S-4 with the SEC relating to
the exchange notes covered by this prospectus. This prospectus is a part of the
registration statement and does not contain all of the information in the
registration statement. Whenever a reference is made in this prospectus to a
contract or other document of Vail Resorts, Inc., please be aware that the
reference is only a summary and that you should refer to the exhibits that are a
part of the registration statement for a copy of the contract or other document.
You may review a copy of the registration statement at the SEC's public
reference room in Washington, D.C. by calling the SEC at 1-800-SEC-0330.
We file information electronically with the SEC. Our SEC filings also are
available from, as well as through the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements, and other information regarding
issuers that file electronically.
The SEC allows us towebsite.
-ii-
DOCUMENTS INCORPORATED BY REFERENCE
In this document, we "incorporate by reference" certain documentsthe information that we
file with it,the SEC, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be a part of this prospectus. We incorporate by reference into
this prospectus the documents listed below and any future filings we make with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act including
any filings after the date of this prospectus, until the completion of the
offering of the exchange notes:
o Annual Report on Form 10-K of Vail Resorts, Inc. for the fiscal year
ended July 31, 2003;
o Quarterly Report on Form 10-Q of Vail Resorts, Inc. for the quarterly
period ended October 31, 2003;
o Quarterly Report on Form 10-Q of Vail Resorts, Inc. for the quarterly
period ended January 31, 2004;
o Current Report on Form 8-K of Vail Resorts, Inc. filed February 2,
2004; and
o Proxy Statement for the 2003 Annual Meeting of Shareholders of Vail
Resorts, Inc.
The information in the documents incorporated by reference is considered to
be part of this prospectus, and information in documents that we file later with
the SECCommission will automatically update and supersede thissuch information.
We incorporateAny statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus is modified or superseded for
purposes of this prospectus to the documents listed
below andextent that a statement contained in this
prospectus or in any future filings we will make with the SEC under Section 13(a),
13(c), 14other subsequently filed document which also is or 15(d)is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded does not, except as so
modified or superseded, constitute a part of the Exchange Act.
. Annual Report on Form 10-K for the fiscal year ended July 31, 1998;
and
. Quarterly Reports on Form 10-Q for the quarters ended October 31,
1998, January 31, 1999 and April 30, 1999.this prospectus.
We will provide a copy of the documents we incorporate by reference, at no
cost, to any person who receives this prospectus, including any beneficial owner
of our common stock. To request a copy of any or all of these documents, you
should write or telephone us at the following address and telephone number:
Vail Resorts, Inc.
Post Office Box 7
Vail, Colorado 81658
Telephone: (970) 845-2500
Attention: Beth McMullen LohmanInvestor Relations
http://www.vailresorts.com
To obtain timely delivery, you must make your request no later than , 1999[ ],
2004 (five business days prior to the expiration date for the exchange offer).
i
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to analyses and other information which are
based on forecasts of future results and estimates of amounts not yet
determinable. These statements also relate to our future prospects,
developments and business strategies.
These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" and similar terms and
phrases, including references to assumptions. These statements are contained in
sections entitled "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and other sections of this prospectus and in the documents
incorporated by reference in this prospectus.
Although we believe that our plans, intentions and expectations reflected
in or suggested by such forward-looking statements are reasonable, we cannot
assure you that such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from our
forward-looking statements are set forth below and elsewhere in this
prospectus, including under the section headed "Risk Factors." Such factors
include, among others, unfavorable weather conditions; our ability to obtain
financing on terms acceptable to us to finance our capital expenditure and
growth strategy; our ability to develop our resort and real estate operations,
including, among other factors, regulatory impediments to such development;
competition in our resort businesses; our reliance on government permits for
our use of federal land; our ability to integrate and successfully operate
future acquisitions; and adverse changes in the real estate market. All
forward-looking statements attributable to us or any persons acting on our
behalf are expressly qualified in their entirety by these cautionary
statements.
Our risks are more specifically described in "Risk Factors" and in our
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are
incorporated by reference in this prospectus. If one or more of these risks or
uncertainties materializes, or if underlying assumptions prove incorrect, our
actual results may vary materially from those expected, estimated or projected.
We will not update these forward-looking statements, even if new information,
future events or other circumstances have made them incorrect or misleading.
ii-iii-
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunctionconnection with, the more detailed information and consolidated financial
statements (including the notes thereto) appearing elsewhere in, or
incorporated by reference into this
prospectus. The terms "the"Vail," " the Company," "we," "us" and "our" as used in
this prospectus refer to Vail Resorts, Inc. and its subsidiaries and
predecessors as a combined entity, except where it is clear from the context
that such term means only the parent company. On September 1,
1997 we changed ourOur fiscal year end from September 30 to July 31. Accordingly,
"fiscal" in connection with a year prior to 1998 refers to the 12 months ended
September 30, while "fiscal" in connection with 1998 refers to the ten months
ended July 31 and "fiscal" in subsequent years refers to the 12 months endedis July 31.
Unless otherwise specified, "ski season" shall mean the period from the opening
of any of our mountains for skiing to the closing of our last mountain for
skiing, typically late Octobermid-November to early May,mid-April, and "skier day"visit" shall mean one
guest accessing a ski mountain onfor all or any one day. "Beaver Creek"part of a day or night and
other designated trademarks are registered trademarks ofincludes both paid and complimentary tickets and ski passes.
COMPANY OVERVIEW
Vail Resorts, Inc. The Companywas organized as a holding company in 1997 and operates
through various subsidiaries. Our operations are grouped into three segments:
Mountain, Lodging and Real Estate. Our Mountain segment owns and operates five
ski resort properties, including:
o Vail Resorts is one of the leading resort operators in North America.
Through our five premier properties we provide a comprehensive resort
experience throughout the year to a diverse clientele with an attractive
demographic profile. Our resorts currently include:
. Vail Mountain--the largest and most popular single ski mountain
complex in North America ("Vail"),
.Mountain;
o Beaver Creek Resort--oneResort;
o Breckenridge Mountain;
o Heavenly Valley Ski Resort; and
o Keystone Resort.
Our Lodging segment owns and/or manages a collection of the world's premier family-oriented
mountain resorts ("Beaver Creek"),
. Breckenridge Mountain--an attractiveluxury hotels, a
destination resort with numerous
apres ski activities and an extensive bed base ("Breckenridge"),
. Keystone Resort--a year-round family vacation destination
("Keystone"), and
. Grand Teton Lodge Company--our first summer destination resort with
four resort properties in and aroundat Grand Teton National Park, ("Grand
Teton").and a series of strategic
lodging properties located in proximity to our mountain operations. Our Real
Estate segment holds, develops, buys and sells real estate in and around our
resort communities.
We are onea publicly-traded company with our common stock listed on the New
York Stock Exchange under the symbol "MTN."
_________________
The address of the most profitable mountain resort operators due to the
following competitive strengths:
. ownership of premium resorts,
. attractive guest demographics,
. strong brand franchise,
. scope, diversity and quality of our complementary activities and guest
services, and
. proximity of our ski resorts to both Denver International Airport and
Vail/Eagle County Airport.
We had an 8.7% share of skier days in the United States for the 1997-98
ski season and are uniquely positioned to attract a broad range of guests due
to our diverse ski terrain, varied price points and numerous activities and
services. Our ski resorts are located within 50 miles of each other, which
enables us to offer guests the opportunity to visit each ski resort during one
vacation stay and participate in common loyalty programs. We also own
substantial real estate proximate to our ski resorts from which we derive
significant strategic benefits and cash flow.
For the twelve months ended April 30, 1999, our revenue from resort
operations ("Resort Revenue") and Resort EBITDA (as hereinafter defined) was
$405.6 million and $87.6 million, respectively.
Our principal executive office is located at 137 Benchmark Road, Avon,
Colorado 81620, and our81620. Our phone number at that address is (970) 845-2500. 1
Resorts
Vail--Located 100 miles from Denver, VailOur Internet website address
is www.vailresorts.com. Our website and the largest and most popular
single ski mountain complexinformation contained in North America, offering over 4,600 acres of
unique and varied ski terrain spanning approximately 20 square miles. Included
init will not
be deemed to be incorporated by reference into this complex are Vail's world-famous Back Bowls, the largest network of high
speed quad chairlifts in the world, a top rated ski school and a wide variety
of dining and retail venues. Vail's skier days were 1.34 million for the 1998-
99 ski season. Vail hosted the World Alpine Ski Championships in January 1999,
the first time a North American ski resort has been selected to host this
prestigious event twice. For the last ten years, Vail has been rated the number
one ski resort in the United States by the Mountain Sports and Living (f/k/a
Snow Country) magazine survey.
Beaver Creek--Located ten miles west of Vail, Beaver Creek is one of the
world's premier family-oriented mountain resorts, offering its guests a
superior level of service in a pristine alpine setting. Since opening in 1980,
Beaver Creek has been one of the fastest growing ski resorts in North America,
with annual skier days increasing from 111,746 in the 1980-81 ski season to
617,000 for the 1998-99 ski season. With the connection (through ski lifts and
trails) of three distinct ski areas--Beaver Creek, Arrowhead(TM) and Bachelor
Gulch(TM)--Beaver Creek provides guests with a European-style village-to-
village ski experience. Beaver Creek offers a distinct and varied vacation
experience from Vail and was ranked number six in the 1998 Mountain Sports and
Living magazine survey. It has consistently been rated among the top ten
resorts in the United States in various other industry surveys.
Breckenridge--Located approximately 85 miles west of Denver and 40 miles
east of Vail, Breckenridge offers over 2,000 acres of skiing on four different
mountain peaks, including open bowl skiing and excellent beginner and
intermediate ski terrain. The ski area is located adjacent to the Town of
Breckenridge, a Victorian mining town, which has numerous apres ski activities
and an extensive and growing bed base, making Breckenridge an attractive
destination resort for national and international skiers. Breckenridge's skier
days were 1.39 million for the 1998-99 ski season, a new record for
Breckenridge.
Keystone--Located 70 miles west of Denver and 15 miles from Breckenridge,
Keystone offers over 1,800 acres of skiable terrain. Keystone's skier days were
1.26 million for the 1998-99 ski season. Keystone has the largest and most
advanced snowmaking capability of any Colorado mountain resort with snowmaking
coverage extending over nearly 50% of Keystone's skiable acreage. Keystone also
provides the largest single-mountain night skiing experience in North America,
with 17 lighted trails covering 2,340 vertical feet, offering a 12 1/2 hour ski
day. Keystone is a planned family-oriented community that offers numerous year-
round activities, the majority of which we operate, including the Keystone
Conference Center, which is the largest convention center in the Colorado Rocky
Mountains.
Grand Teton--On June 14, 1999 we acquired Grand Teton for a total
purchase price of $55 million. Grand Teton is based in Jackson Hole, Wyoming
and operates four premier resort properties in and around Grand Teton National
Park. Within the park, we operate the 37-cabin Jenny Lake Lodge, a AAA four-
diamond lodge; Jackson Lake Lodge, a picturesque 385-room lodge that boasts the
most extensive meeting facilities in any national park; and Colter Bay Village,
a unique family resort with 226 cabins as well as extensive camping and
recreational facilities. Outside the park, we operate the Jackson Hole Golf and
Tennis Club, the top-rated golf course in the State of Wyoming. We also
acquired 30 acres of developable land adjacent to the golf course suitable for
future residential development. For the twelve month period ended December 31,
1998, Grand Teton had Resort Revenues and Resort EBITDA of $26.6 million and
$7.9 million, respectively.
Business Strategy
A key component of the business strategy for our mountain resorts has
been to expand and enhance our core ski operations, while at the same time
increasing the scope, diversity and quality of the complementary activities and
services offered to our skiing and non-skiing guests throughout the year. This
focus has resulted
2
in growth in skier days and lift ticket sales and has also allowed us to expand
our revenue base beyond our core ski operations. As a result of this strategy,
non-lift ticket revenue as a percentage of total Resort Revenue has increased
to over 63% of total Resort Revenue for the twelve months ended January 31,
1999, as compared to 36% in fiscal 1985.
Our focus on developing a comprehensive destination resort experience has
also allowed us to attract a diverse guest population with an attractive
demographic and economic profile, including a significant number of affluent
and family-oriented destination guests, who tend to generate higher and more
diversified revenues per guest than day skiers from local population centers.
While our Resort Revenue per skier day is currently among the highest in the
industry, we estimate that we currently capture only 20% of the total vacation
expenditures of an average destination guest at our resorts. See "Business--
Resorts."
In connection with this strategy, we have completed numerous internal
growth initiatives over the past several years to add "new attractions" and
improve on-mountain facilities, including:
. expanding ski terrain at Beaver Creek by 30%,
. constructing seven high-speed four-passenger chairlifts and a state-
of-the-art gondola,
. building innovative family attractions such as Adventure Ridge(TM) and
Adventure Point(TM),
. introducing snowboarding at Keystone,
. significantly improving snowmaking systems at all of our resorts,
. adding 20 new restaurants and 3 private on-mountain clubs, and
. updating our guest-focused information systems, including introducing
resort-wide charging, which offers guests a cashless on-mountain
experience and "direct-to-lift" convenience.
Our total resort capital spending on these and other internal initiatives
over the past three calendar years has been in excess of $140 million.
As a complement to our internal growth strategy, we also selectively
acquire businesses in and around our resorts to (1) broaden our participation
in the services available to our guests, thereby allowing us to maintain and
improve the quality of our guests' experience, (2) increase our ability to
offer "package" vacation products to our guests, and (3) increase Resort
Revenue per skier day. Over the past 18 months, we have acquired for an
aggregate purchase price of approximately $72 million, five hotels operating a
total of 519 rooms and three property management operations which oversee
approximately 400 units. We have also secured additional contracts to manage
nearly 300 individual condominium units. Since acquiring these hotel
properties, we have significantly improved their occupancy, average daily rate,
operating margins and Resort EBITDA.
We have also recently expanded our retail presence by entering into a
joint venture, SSI Venture, with one of the largest retailers of ski- and golf-
related sporting goods in Colorado. SSI Venture operates approximately 70
retail and rental locations in Vail, Beaver Creek, Breckenridge, Keystone,
Denver, Boulder, Colorado Springs, Aspen and Telluride, thereby expanding our
operations throughout the Colorado market. We hold a 51.9% ownership interest
in SSI Venture.
We intend to acquire additional resorts which we believe can be
successfully integrated into our existing operations, can enhance our ability
to attract destination guests to all of our resorts and can benefit from our
capital investment and management expertise. Our 1997 acquisition of
Breckenridge and Keystone exemplifies this strategy. We believe we have
successfully broadened the appeal of these resorts to destination guests and
improved their operating performance through capital investment, coordinated
marketing, improved central reservations and a common, four-resort lift ticket.
We have also realized efficiencies in our purchasing, information systems,
accounting and legal areas by sharing these functions across all of our
resorts.
3
We believe our recent acquisition of Grand Teton provides us with a
significant new opportunity to further leverage our hospitality, dining, retail
and recreation expertise. With its peak season from the late Spring through
early Fall, Grand Teton will significantly increase our summer Resort Revenue.
In addition, with four premier resort properties in and around Grand Teton
National Park, Grand Teton provides a platform to further grow our business in
the National Parks.
Real Estate
We also benefit from our extensive holdings of real property in proximity
to our resorts and from the activities of Vail Resorts Development Company
("VRDC"), our wholly-owned subsidiary. VRDC manages our real estate operations,
including the planning, oversight, marketing, infrastructure improvement and
development of Vail Resorts' real property holdings. VRDC generated $84.2
million in revenue from real estate operations for the twelve months ended July
31, 1998. As of January 31, 1999, the book value of our real estate held for
sale was approximately $155.0 million. In addition to the substantial cash flow
generated from real estate sales, our resort operations benefit from these
development activities through:
. the creation of additional resort lodging which is available to our
guests,
. the ability to control the architectural theme of our resorts,
. the creation of unique facilities and venues which provide us with the
opportunity to create new sources of recurring revenue, and
. the expansion of our property management and brokerage operations,
which are the preferred providers of these services for developments
on VRDC's land.
In order to facilitate the development and sale of its real estate
holdings, VRDC spends significant amounts on mountain improvements such as ski
lifts, snowmaking equipment and trail construction. While these mountain
improvements enhance the value of the real estate held for sale (for example,
by providing ski-in/ski-out accessibility), they also benefit resort
operations. In most cases, VRDC seeks to minimize our exposure to development
risks and maximize the long-term value of our real property holdings by selling
land to third party developers for cash payments prior to the commencement of
construction, while retaining approval of the development plans as well as an
interest in the developer's profit. We also typically retain the option to
purchase any commercial space created in a development. We are able to secure
these benefits from third party developers as a result of the high property
values and strong demand associated with property in close proximity to our
world class mountain resort facilities. See "Risk Factors--Future changes in
the real estate market could affect the value of our investments."
We also benefit from our interest in a joint venture ("Keystone JV")
which is developing a significant portion of the Keystone resort and has
approvals to add up to 3,400 residential and lodging units and up to 318,000
square feet of retail and restaurant space over the next 20 years. We believe
that the build-out of this real estate will result in increased skier days and
Resort Revenue per skier day and will significantly increase the number of
higher revenue destination guests at Keystone. See "Business--Real Estate."
Recent Results
On May 11, 1999, we sold and issued the outstanding Notes. The proceeds
from this offering were used to repay indebtedness under our credit facility
(which can be reborrowed).
On June 8, 1999, we announced that Resort Revenue for the third quarter
1999 increased 11% to $188.2 million from $170.1 million in the comparable
period last year. Total Revenue for the third quarter (which includes revenue
from real estate operations) grew 16% to $202.2 million from $174.0 in the same
quarter in fiscal 1998.
4
Resort EBITDA for the third quarter were $75.4 million versus $86.1
million in the same quarter of 1998, reflecting the overall weakness in
Colorado ski industry due largely to unfavorable weather conditions during the
1998-1999 ski season.
Net income for the third quarter was $30.2 million, or $0.87 per diluted
share, compared to $41.7 million, or $1.20 per diluted share, in the third
quarter of 1998.
For the nine months ended April 30, 1999, Resort Revenue increased 17% to
$379.3 million compared to $324.2 million in the same period of 1998. Total
Revenue grew to $410.8 million from $390.0 million in the first nine months of
fiscal 1998.
Resort EBITDA for the nine month period was $100.9 million compared to
$119.3 million in 1998.
Net income for the nine month period was $26.3 million, or $0.76 per
diluted share, compared to $46.9 million, or $1.35 per diluted share, in the
same period in fiscal 1998.
In the third quarter of fiscal 1999, revenue per skier day grew 14% to
$75.38 from $66.30 in the comparable quarter last year, despite a 3% decline
in skier days. Total skier days for the third quarter were 2.5 million
compared to 2.6 million last year.
In addition, skier days for the 1998-1999 total ski season for all four
of our ski resorts combined were 4,606,754, a 2% decline from the 4,716,605
skier days reported in the 1997-1998 ski season.
5prospectus.
-1-
The Exchange Offer
Registration Rights.........Rights...................... You are entitled to exchange your
outstanding Notesnotes for freely
tradeable exchange notes with
substantially identical terms. The
exchange offer is intended to
satisfy your exchange rights. After
the exchange offer is complete, you
will no longer be entitled to any
exchange or registration rights
with respect to your outstanding
Notes.notes. Accordingly, if you do not
exchange your outstanding Notes,notes,
you will not be able to reoffer,
resell or otherwise dispose of your
outstanding Notesnotes unless you comply
with the registration and
prospectus delivery requirements of
the Securities Act, or there is an
exemption available.
The Exchange Offer..........Offer....................... We are offering to exchange $1,000
principal amount of our 86 3/4%
Senior Subordinated Notes due 2009,2014,
which have been registered under
the Securities Act, for $1,000
principal amount of our outstanding
86 3/4% Senior Subordinated Notes
due 2009,2014, which were issued in a
private offering on May 11, 1999.January 29,
2004. As of the date of this
prospectus, there are $200.0$390.0
million principal amount at
maturity of outstanding Notes.notes. We
will issue exchange notes promptly
after the expiration of the
exchange offer.
Resales.....................Resales.................................. We believe that the exchange notes
issued in the exchange offer may be
offered for resale, resold or
otherwise transferred by you
without compliance with the
registration and prospectus
delivery requirements of the
Securities Act, provided that:
.o you are acquiring the exchange
notes in the ordinary course of
your business;
.o you are not participating, do not
intend to participate and have no
arrangement or understanding with
any person to participate in a
distribution of the exchange notes;
and
.o you are not an "affiliate" of
ours.
If you do not meet the above
criteria you will have to comply
with the registration and
prospectus delivery requirements of
the Securities Act in connection
with any reoffer, resale or other
disposition of your exchange notes.
Each broker or dealer that receives
exchange notes for its own account
in exchange for outstanding Notesnotes
that were acquired as a result of
market-making or other trading
activities must acknowledge that it
will deliver this prospectus in
connection with any sale of
exchange notes.
Expiration Date.............Date.......................... 5:00 p.m., New York City time, on
, 1999,[ ], 2004, unless we extend the
expiration date.
6
Conditions to the Exchange Offer......... The exchange offer is subject to
certain Conditions to the Exchange customary conditions, which
may be waived by us.
Offer...................... The exchange
offer is not conditioned upon any
minimum principal amount of
outstanding notes
-2-
being tendered.
Procedures for Tendering Outstanding
Notes..........Notes................................. If you wish to tender outstanding
Notes,notes, you must (i) complete, sign
and date the letter of transmittal,
or a facsimile of it, in accordance
with its instructions and transmit
the letter of transmittal, together
with your Notesnotes to be exchanged and
any other required documentation,
to United States Trust CompanyThe Bank of New York, who is the
exchange agent, at the address set
forth in the letter of transmittal
to arrive by 5:00 p.m., New York
City time, on the expiration date.date
or (ii) arrange for The Depository
Trust Company ("DTC") to transmit
certain required information,
including an agent's message
forming part of a book-entry
transfer in which you agree to be
bound by the terms of the letter of
transmittal, to the exchange agent
in connection with a book-entry
transfer. See "The Exchange
Offer--Procedures for Tendering
Outstanding Notes." By executing
the letter of transmittal or making
arrangements with DTC as described
above, you will represent to us
that you are acquiring the exchange
notes in the ordinary course of
your business, that you are not
participating, do not intend to
participate and have no arrangement
or understanding with any person to
participate in the distribution of
exchange notes, and that you are
not an "affiliate" of ours. See
"The Exchange Offer--
ProceduresOffer--Procedures for
Tendering Outstanding Notes."
Special Procedures for Beneficial Holders.........Holders If you are the beneficial holder of
outstanding Notesnotes that are
registered in the name of your
broker, dealer, commercial bank,
trust company or other nominee, and
you wish to tender in the exchange
offer, you should contact the
person in whose name your
outstanding Notesnotes are registered
promptly and instruct such person
to tender on your behalf. See "The
Exchange Offer--Offer--Procedures for
Tendering Outstanding Notes."
Guaranteed Delivery Procedures.................Procedures........... If you wish to tender your
outstanding Notesnotes and you cannot
deliver such Notes,notes, the letter of
transmittal or any other required
documents to the exchange agent
before the expiration date or the
procedures for book-entry transfer
cannot be completed on time, you
may tender your outstanding Notesnotes
according to the guaranteed
delivery procedures set forth in
"The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal Rights...........Rights........................ Tenders may be withdrawn at any
time before 5:00 p.m., New York
City time, on the expiration date.
Acceptance of Outstanding Notes and
Delivery of Exchange Notes............ Subject to certain conditions, we
will accept for Exchange Notes............. exchange any and
all outstanding Notesnotes which are
properly tendered in the exchange
offer before 5:00 p.m., New York
City time, on the expiration date.
The exchange notes will be
delivered promptly after the
expiration date. See "The Exchange
Offer--Terms of the Exchange
Offer."
7
Certain Federal Income Tax Considerations.............Considerations The exchange of outstanding Notesnotes
for exchange notes will not be
-3-
a taxable event for federal income
tax purposes. You will not
recognize any taxable gain or loss
as a result of exchanging
outstanding Notesnotes for exchange
notes, and you will have the same
tax basis and holding period in the
exchange notes as you had in the
outstanding Notesnotes immediately
before the exchange. See "Certain
Federal Income Tax Considerations."
Use of Proceeds.......................... We will not receive any proceeds
from the issuance of the exchange
notes.
Exchange Agent..............
United States Trust CompanyAgent........................... The Bank of New York is serving as
exchange agent in connection with
the exchange offer. The address,
telephone number and facsimile
number of the exchange agent are
set forth in "The Exchange
Offer-- ExchangeOffer--Exchange Agent."
8-4-
Summary of the Exchange Notes
The summary below describes the principal terms of the exchange notes. CertainSome
of the terms and conditions described below are subject to important limitations
and exceptions. The "Description of Exchange Notes" section of this prospectus
contains a more detailed description of the terms and conditions of the exchange
notes.
Issuer......................Issuer..................................... Vail Resorts, Inc.
Notes Offered............... Up to $200,000,000 aggregateSecurities................................. $390.0 million in principal amount
of 8 3/4% Senior Subordinated Notessenior subordinated notes due
2009.
Interest Payment Dates......2014.
Maturity................................... February 15, 2014.
Interest................................... Interest will accrue on the
exchange notes at an annual rate of
6 3/4% from the last interest
payment date on which interest was
paid on the outstanding Notesnotes
surrendered in exchange therefor or
if no interest has been paid on the
outstanding Notes,notes, from May 11, 1999January 29,
2004 and will be payable
semi-annually in arrears on
each MayFebruary 15 and NovemberAugust 15 of each
year, commencing Novemberbeginning on August 15, 1999.
Maturity.................... May 15, 2009.
Guarantees.................. Certain of our subsidiaries other than those
treated as unrestricted subsidiaries will
guarantee2004.
Guarantees................................. Our obligations on the exchange notes on a senior
subordinated basis. Future subsidiaries which are
deemed restricted subsidiaries will also be
required to guarantee the exchange notes if they
guarantee any other of our debt. See "Description
of Notes--Guarantees."
Ranking..................... The exchange
notes will be unsecured senior
subordinated obligationsfully and
will be subordinated
tounconditionally guaranteed by
substantially all of our existingcurrent
and future senior debt.domestic subsidiaries.
Ranking.................................... The
exchange notes will rank equally with all our
other existing and future senior subordinated
debt and will rank senior to all our subordinated
indebtedness.
Our subsidiaries' guarantees with respect to the exchange notes will be general
unsecured senior subordinated obligationsdebt
of such guarantors andVail Resorts, Inc. Accordingly,
they will be subordinatedrank:
o junior to all of such guarantors'our existing and future
senior debt.debt;
o pari passu with all of our
existing and future unsecured
senior subordinated debt;
o senior to all of our existing and
future subordinated debt; and
o effectively junior to all
indebtedness of our existing and
future subsidiaries that are not
guarantors of the exchange notes.
The guarantees will rank equally with anybe general
unsecured senior subordinated
indebtednessobligations of the guarantors.
Accordingly, they will rank junior
to all senior debt of the
guarantors, pari passu with all
unsecured senior subordinated debt
of the guarantors and will rank
senior to such guarantors'all
future subordinated debt.
Because the exchange notes are subordinated, in
the event of bankruptcy, liquidation or
dissolution, holdersdebt of the
exchange notes will
not receive any payment until holdersguarantors.
As of senior
indebtedness have been paid in full. The term
"senior debt" is defined in the "Description of
Notes--Subordination" section of this prospectus.
At April 30, 1999,January 31, 2004, after
giving pro forma effect to the
offeringdischarge of the outstanding Notes and the
applicationportion of the net proceeds,our
$360 million 8.75% senior
subordinated notes ("8.75% Notes")
not tendered in our recent tender
offer ($11.2 million principal
amount), we had $99.6$632.0 million of
senior debt outstanding, on a
consolidated basis.
9
Redemption..................$242.0 million of
which would have been senior debt.
Optional Redemption........................ We may redeem the exchange notes,
in whole or in part, at any time on
or after MayFebruary 15, 2004,2009, at the
declining redemption prices set forthdescribed in this
prospectusthe
section "Description of Exchange
Notes--Optional
-5-
Redemption," plus accrued and
unpaid interest.
Optional Redemption.........
OnIn addition, on or prior to Maybefore February
15, 2002,2007, we may redeem up to 35%
of the exchange notes with the net
cash proceeds offrom certain equity
offerings at 108.75%the redemption price
listed in "Description of the
principal amount thereof, plus accrued interest,Exchange
Notes--Optional Redemption."
However, we may only make such
redemptions if at least 65% of the
aggregate principal amount of notes
issued under the exchange notesindenture remains
outstanding. See
"Descriptionoutstanding immediately after the
occurrence of Notes--Optional Redemption."
On or priorsuch redemption.
Prior to MayFebruary 15, 2004,2009, we may
also redeem the exchange notes, in
whole or in part, upon the
occurrence of a change of control
at a make-whole price as described
under "Description of Notes--
OptionalExchange
Notes--Optional Redemption."
Change of Control........... UponControl.......................... If we experience certain changekinds of
changes of control, events, if we do
not redeemmust offer
to purchase the exchange notes each holder of
exchange notes may require us to repurchase all
or a portion of its exchange notes at a purchase
price equal to
101% of the principaltheir face amount,
thereof, plus
accrued interest.
Our ability to
repurchaseCertain Covenants.......................... The indenture governing the
exchange notes upon a change of
control event will, be limited by the terms of our
debt agreements, including our credit facility.
We cannot assure you that we will have the
financial resources to repurchase the exchange
notes. See "Description of Notes--Repurchase of
the Option of Holders--Change of Control."
Certain Covenants...........
The indenture that will govern the exchange notes
contains covenants that, among other
things, will limit our ability and the
ability of certain of
our restricted
subsidiaries to:
. incur additional indebtedness,
.o borrow money or sell preferred
stock;
o create liens;
o pay dividends on or redeem or
repurchase stock;
o make certain types of
investments;
o sell stock in our capital stock,
.restricted
subsidiaries;
o create restrictions on the
ability of our restricted
subsidiaries to pay dividends or
make investments,
. engage inother payments to us;
o enter into transactions with
affiliates,
. create certain liens,
.affiliates;
o issue guarantees of debt; and
o sell assets or . consolidate, merge or transfer all or
substantially all our assets and the
assets of our subsidiaries on a
consolidated basis.with other
companies.
These covenants are subject tocontain important
exceptions, limitations and
qualifications, which are
described in thequalifications. For more details,
see "Description of Notes" section
of this prospectus.
Risk Factors................ SeeExchange
Notes."
You should refer to "Risk Factors" for a discussionan explanation of factors
youcertain risks of
investing in the exchange notes.
-6-
RISK FACTORS
You should carefully consider the risk factors set forth below as well as
the other information contained in this prospectus before deciding to tenderinvest in
the exchange notes offered pursuant to this prospectus. The risks described
below are not the only risks facing us. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial may also
materially and adversely affect our business operations. Any of the following
risks could materially adversely affect our business, financial condition or
results of operations. In such case, you may lose all or part of your outstanding Notesoriginal
investment.
Risks Related to Our Business
Our business is seasonal.
Our Mountain and Lodging operations are seasonal in nature. In particular,
revenues and profits for exchange notes.
10
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary historical data forall of our Mountain and most of our Lodging operations
are substantially lower, and historically result in losses, from late spring to
late fall. Conversely, Grand Teton Lodge Company ("GTLC") and certain managed
properties' peak operating seasons occur during the summer months while the
winter season generally results in operating losses. However, revenues and
profits generated by GTLC's summer operations and management fees from those
managed properties are not sufficient to fully offset our off-season losses from
our Mountain and other Lodging operations. During the 2003 fiscal years 1996year, 76% of
total Resort (Mountain and 1997 is derived
from actual auditedLodging combined) revenues were earned during the
second and third fiscal quarters. Quarterly results may also be materially
affected by the timing of snowfall and other unforeseen external factors.
Therefore, the operating results for such years. On September 1, 1997, we changed
our fiscal year end from September 30 to July 31. Accordingly, our fiscal year
1998 ended on July 31, 1998 and consisted of ten months. To see the audited
results for the ten months ended July 31, 1998, see "Selected Consolidated
Financial and Operating Data." Also included for comparative purposes are the
unaudited pro forma results for the twelve months ended July 31, 1997 and the
actual unaudited results for the twelve months ended July 31, 1998. These pro
forma resultsany three-month period are not necessarily
indicative of the actualresults that may be achieved for any subsequent fiscal quarter
or for a full fiscal year.
We are subject to unfavorable weather conditions.
The ability to attract visitors to ski resorts is influenced by weather
conditions and by the amount and timing of snowfall during the ski season.
Unfavorable weather conditions can adversely affect skier visits, and adversely
affect our revenues and profits. In the past 20 years, our Colorado ski resorts
have averaged between 20 and 30 feet of annual snowfall and our California ski
resort receives average yearly snowfall of between 25 and 35 feet, significantly
in excess of the average for U.S. ski resorts. However, there is no assurance
that our resorts will receive seasonal snowfalls near the historical average in
the future. Also, the early season snow conditions and skier perceptions of
early season snow conditions influence the momentum and success of the overall
season. In addition, a severe and prolonged drought could affect our otherwise
adequate snowmaking water supplies. Unfavorable weather conditions such as
drought, hurricanes, tropical storms and tornadoes can adversely affect our
other resorts and lodging properties as vacationers tend to delay or postpone
vacations if weather conditions differ from those that typically prevail at such
resorts for a given season. There is no way for us to predict future weather
patterns or the impact that weather patterns may have on results of operations
that would have been achieved noror visitation.
We depend on a seasonal workforce.
Our Mountain and Lodging operations are they necessarily indicativelargely dependent on a seasonal
workforce. We recruit worldwide to fill staffing needs each season and utilize
visas to enable the use of future results of operations. The summary historical data forforeign workers. In addition, we manage seasonal
wages and the nine months
ended April 30, 1998 and 1999 are derived from our unaudited consolidated
financial statements, which included all adjustments management considers
necessary to present fairly the financial results for these interim periods.
All of these adjustments were of a normal recurring nature. The results of such
interim periods are not necessarily indicative of results to be expected for
the full year due to the highly seasonal nature of our business (which
ordinarily produces losses for the first and fourth quarters). See "--Recent
Results" and "Risk Factors--Our resort business is highly seasonal."
Pro Forma
Twelve Month Twelve Twelve
Fiscal Year Ended Months Months Nine Months Ended Twelve
September 30, Ended Ended April 30, Months
---------------------------- July 31, July 31, ------------------ Ended April
1995 1996 1997(1) 1997(2) 1998 1998 1999(3) 30, 1999(3)
-------- -------- -------- ----------- ----------- -------- -------- -----------
(audited) (unaudited) (unaudited) (unaudited) (unaudited)
(In thousands, except ratio data)
Statement of Operations
Data:
Revenues:
Resort................. $126,349 $140,288 $259,038 $292,127 $350,498 $324,195 $379,346 $ 405,649
Real estate............ 16,526 48,655 71,485 74,356 84,177 65,760 31,409 49,826
-------- -------- -------- -------- -------- -------- -------- ----------
Total revenues......... 142,875 188,943 330,523 366,483 434,675 389,955 410,755 455,475
Operating expenses:
Resort................. 82,305 89,890 172,715 200,488 238,889 200,552 273,900 312,237
Real estate............ 14,983 40,801 66,307 64,646 74,057 58,939 26,248 41,366
Corporate expense(4)... 6,701 12,698 4,663 4,236 5,543 4,313 4,555 5,785
Depreciation and
amortization.......... 17,968 18,148 34,044 37,997 42,965 31,163 38,181 49,983
-------- -------- -------- -------- -------- -------- -------- ----------
Total operating
expenses.............. 121,957 161,537 277,729 307,367 361,454 294,967 342,884 409,371
Income from operations.. 20,918 27,406 52,794 59,116 73,221 94,988 67,871 46,104
Interest expense....... (19,498) (14,904) (20,308) (16,799) (20,891) (16,064) (17,593) (22,420)
Net income (loss)...... 3,282 4,735 19,698 25,966 30,073 46,857 26,319 9,535
Other Data:
Skier days(5).......... 2,136 2,228 4,273 4,890 4,717 4,706 4,579 4,590
Resort EBITDA(4)(6).... 37,343 46,200 81,660 87,403 106,066 119,330 100,891 87,627
Real estate operating
income(7)............. 1,543 7,854 5,178 9,710 10,120 6,821 5,161 8,460
-------- -------- -------- -------- -------- -------- -------- ----------
Total EBITDA(4)(8)..... 38,886 54,054 86,838 97,113 116,186 126,151 106,052 96,087
Resort capital
expenditures(9)....... 20,320 13,912 51,020 41,047 93,333 79,853 53,691 67,171
Total debt to Resort
EBITDA................ 5.1x 3.1x 3.2x 2.7x 2.7x 3.4x
Resort EBITDA to
interest expense...... 1.7 3.1 4.0 5.2 5.1 3.9
Resort EBITDA to pro
forma interest
expense(10)........... 3.3
Total debt to Total
EBITDA................ 4.9 2.7 3.1 2.4 2.4 3.1
Total EBITDA to
interest expense...... 1.9 3.6 4.3 5.8 5.6 4.3
Total EBITDA to pro
forma interest
expense(10)........... 3.7
Balance Sheet Data (at
period end):
Total assets........... $912,122 $1,014,810
Real estate held for
sale(11).............. 138,916 152,141
Long term debt
(including current
maturities)........... 284,014 293,862
Stockholders' equity... 462,624 489,972
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(footnotes appear on following page)
11
- --------
(1) Our consolidated statement of operations for the fiscal year ended
September 30, 1997 includes the results of Keystone and Breckenridge for
the 270-day period from January 4, 1997 to September 30, 1997.
(2) The unaudited pro forma results for the twelve months ended July 31, 1997
give effect to our acquisitiontiming of the Keystone and Breckenridge resorts
(which occurred on January 3, 1997) andhiring process to ensure the initial public offering of
our common stock (which occurred on February 4, 1997) as ifappropriate workforce
is in place. While we do not currently foresee the need to increase seasonal
wages to attract employees, we cannot guarantee that such events
occurred on August 1, 1996, and are presented exclusive of a pre-tax $2.2
million reorganization charge and a $8.5 million one-time non-recurring
charge to corporate expense.
(3) Included in the summary consolidated historical data for the nine months
and twelve months ended April 30, 1999, are the results of operations of
our 51.9%-owned joint venture, SSI Venture (which commenced operations on
August 1, 1998). SSI Venturean increase will not
be a guarantor of the Notes. For the
nine months ended April 30, 1999, SSI Venture had revenues of $64.3
million, income from operations of $8.3 million and EBITDA of $11.6
million. At April 30, 1999, SSI Venture had total assets of $38.3 million,
total debt of $9.8 million and stockholders' equity of $20.6 million. For
the nine months ended April 30, 1999, the EBITDA of SSI Venture
represented less than 12% of our Resort EBITDA. See Note 16 to the Audited
Consolidated Financial Statements of the Company and Note 7 to the
Unaudited Consolidated Condensed Financial Statements of the Company.
(4) Corporate expense includes certain executive, tax, legal, directors' and
officers' insurance and other consulting fees. For fiscal 1996, corporate
expense included the costs associated with our holding company structure
and overseeing multiple lines of business, including certain discontinued
operations. For the year ended September 30, 1996, corporate expense
includes the following non-recurring charges: (i) $4.5 million related to
a rights distribution to option holders, (ii) $1.9 million of
compensation expense related to the exercise of certain options held by
our former Chairman and Chief Executive Officer and (iii) $2.1 million
related to the termination of an employment agreement with our former
Chairman and Chief Executive Officer. For purposes of calculating Resort
EBITDA and Total EBITDA for this period, corporate expense excludes these
non-recurring charges.
(5) A skier day represents one guest accessing a ski mountain on any one day
and includes guests using complimentary tickets and ski passes.
(6) Resort EBITDA (earnings before interest expense, income tax expense,
depreciation and amortization) is defined as Resort Revenue less resort
operating expenses and corporate expense. Resort EBITDA is not a term
that has an established meaning under generally accepted accounting
principles ("GAAP"). We have included the information concerning Resort
EBITDA because our management believes it is an indicative measure of a
resort company's operating performance and is generally used by investors
to evaluate companiesnecessary in the resort industry. Resort EBITDA does not
purport to represent cash provided by operating activities, and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. For information regarding
our historical cash flows from operating, investing and financing
activities, see our consolidated financial statements included elsewhere
in this prospectus.
(7) Real estate operating income is defined as revenue from real estate
operations less real estate costs and expenses, which include selling and
holding costs, operating expenses, and an allocation of the land,
infrastructure, mountain improvement and other costs relating to property
sold. Real estate costs and expenses exclude charges for depreciation and
amortization, as we have determined that the portion of those expenses
allocable to real estate are not significant.
(8) Total EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization. EBITDA is presented because
management believes it provides useful information regarding a company's
ability to incur and service debt. EBITDA should not be considered in
isolation or as a substitute for net income or cash flows prepared in
accordance with GAAP, nor should it be used as a measure of our
profitability or liquidity.
(9) We typically categorize approximately $15 million to $20 million per year
of total resort capital expenditures as maintenance capital expenditures,
except for fiscal 1996, during which approximately $7 million was
categorized as maintenance capital expenditures. For the nine months
ended April 30, 1999 and 1998, approximately $12 million for each period
was categorized as maintenance capital expenditures.
(10) Pro forma interest expense gives effect to the private offering of the
outstanding Notes on May 11, 1999 and the repayment of indebtedness under
our credit facility (which can be reborrowed) with the proceeds thereof.
(11) Real estate held for sale includes all land, development costs and other
improvements associated with real estate held for sale, as well as
investments in real estate joint ventures.
12
RISK FACTORSfuture. In addition, to the other information in this prospectus, you should
carefully consider the following factors prior to exchanging outstanding Notes
for exchange notes in the exchange offer.
We are highly leveraged. At April 30, 1999, we had $293.9 million of
indebtedness, representing approximately 37% of our total capitalization. See
"Capitalization." Furthermore, subject to certain restrictions in our credit
facility and the indenture governing the exchange notes, we, along with our
subsidiaries, may incur additional indebtedness from time to time to finance
acquisitions, provide for working capital or capital expenditures or for other
purposes.
Our high level of indebtedness could have important consequences to you,
including limiting our ability to:
. obtain additional financing for acquisitions, working capital,
capital expenditures or other purposes,
. use operating cash flow in other areas of our business because we
must dedicate a substantial portion of these funds to make principal
payments and fund debt service,
. borrow additional funds or dispose of assets,
. compete with others who are not as highly leveraged, and
. react to changing market conditions, changes in our industry and
economic downturns.
We currently expectcannot guarantee that we will be
able to serviceobtain the visas necessary to hire foreign workers who are an important
source for the seasonal workforce. Increased seasonal wages or an inadequate
workforce could have an adverse impact on our indebtedness outresults of cash flow from operations. Ifoperations; however, we
are unable to generate sufficient cash flow
to meet our debt service obligations, wepredict with any certainty whether such situations will have to pursue onearise or
more
alternatives, such as reducing or delaying capital expenditures, refinancing
debt, selling assets or raising equity capital. Eachthe potential impact on results of these alternatives is
dependent upon financial, business and other general economic factors that
affect us, manyoperations.
We are currently the subject of which are beyond our control. We cannot assure you that any
of these alternatives could be accomplishedan SEC investigation.
In October 2002, after voluntary consultation with the SEC staff on satisfactory terms or that they
would yield sufficient funds to retire the
Notes and the indebtedness seniorappropriate accounting for recognizing revenue on initiation fees related to the
exchange notes. Whilesale of memberships in private clubs, we believe thatrestated and reissued our cash flow from operations will
provide an adequate sourcehistorical
financial statements for fiscal 1999 through fiscal 2001, primarily to reflect a
revision in the accounting
-7-
treatment for recognizing revenue on initiation fees related to the sale of
long-term liquidity,memberships in private clubs. In 2002, we engaged our new auditors to do a
significant drop in
operating cash flows resulting from economic conditions, competition or other
uncertainties beyond our control would increase the need for alternative
sourcesre-audit of liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
Our future growth requires additional capital whose availability is not
assured. We intend to make significant investments in our resorts to maintain
our competitive position. We spent approximately $80.5 million and $51.0
million in the fiscal years 1999-2001 and filed an amended Form 10-K for fiscal
2001 reflecting all adjustments made as a result of the re-audit, in addition to
the revision in accounting for the club fees. In February 2003, the SEC informed
us that it had issued a formal order of investigation with respect to us. At
that time, the inquiry related to our previous accounting treatment for the
private club initiation fees.
In October 2003, the SEC issued a subpoena to us to produce documents
related to several matters, including the sale of memberships in private clubs.
In November 2003, the SEC issued an additional subpoena to us to produce
documents related primarily to the additional restatement items that were first
reported in our Form 10-K for the year ended July 31, 1998 and September 30, 1997,
respectively, on resort capital expenditures and expect to continue making
substantial resort capital expenditures.2003. We could finance future expenditures
from any ofare fully
cooperating with the following sources:
. cash flow from operations,
. bank borrowings,
. public offerings of debt or equity,
. private placements of debt or equity, or
. some combination of the above.SEC in its investigation. We might not be able to obtain financing for future expenditures on
favorable terms.
Our recent or future acquisitions might not be successful. In recent
years, we have acquired several major resorts, including Keystone and
Breckenridge, Grand Teton and a number of real estate developments. Although we
believe we have enhanced our earnings and achieved cost savings by integrating
these acquisitions into our operations, we cannot assure you that we will be
able to continue this successful
13
integration, manage these acquired properties profitably or increase our
profits from these operations. We would face various risks from additional
acquisitions, including:
. inability to integrate acquired businesses into our operations,
. increased goodwill amortization,
. diversion of our management's attention, and
. unanticipated problems or liabilities.
These problems from future acquisitions could adversely affect our
operations and financial performance.
Our resort business is highly seasonal. We currently generate more than
80% of our revenue during the ski season, from November to April. We rely on
borrowings under our credit facility to support our capital requirements during
the unprofitable period between ski seasons, from May to October. If we are unable to complypredict the
outcome of the investigation or any action that the SEC might take, including
the imposition of fines and penalties, or other available remedies. Any adverse
development in connection with the conditions of our credit facility or if the financing
we receive is insufficient for our needs, our inability to obtain adequate
financing outsideinvestigation, including any expansion of the
ski seasonscope of the investigation, could have a material adverse effect on us.
Grand Teton, which we recently acquired, realizes most of its revenues between
Mayus,
including diverting the efforts and October. However, this will only partially offset the seasonal natureattention of our ski business.management team from our
business operations.
We are subject to economic downturns.
Skiing, travel and tourism are discretionary recreational activities that
can be impacted by a significant economic slowdown, which, in turn, could impact
our operating results. The recent extended economic downturn has negatively
impacted our operating results although we had historically been relatively
unaffected by economic downturns. There can be no assurance that a continued or
future decrease in the amount of discretionary spending by the public would not
have an adverse effect on us.
Our future developmentcost reduction plan might fail to achieve anticipated cost savings and
operational efficiencies.
We implemented a plan for fiscal 2004 to achieve approximately $25 million
in year-over-year cost savings and improved profits. We cannot assure you that
this plan will be successful in achieving the anticipated cost savings,
operational efficiencies or profit improvements. We also cannot assure you that
the cost savings will not be successful.cause unanticipated negative impacts to guest
services, which could lead to adverse effects on us.
We haveface significant development plans for ourcompetition.
The ski resort and real estate operations. We could
experience significant difficulties completing these projects, including:
. delays in completion,
. our cost estimates may prove inaccurate,
. difficulty in receiving the necessary regulatory approvals, or
. we may not benefit from the projects as we expected.
We may not be able to fund these projects with cash flow from operations
and borrowings under our credit facility if we faced these difficulties.
Our ski resorts face significant competition.lodging industries are highly competitive. The number of
people who ski in the United States (as measured in skier days)visits) has increased by
approximately 4% sincegenerally
ranged between 52 million and 57 million annually over the 1985-86last decade, with
57.6 million for the 2002/03 ski season and there is substantial
competition among ski resorts for these customers.season. The factors that we believe are
important to these customers include:
.o proximity to population centers,
.centers;
o availability and cost of transportation to ski areas,
.areas;
o ease of travel to ski areas (including direct flights by major
airlines),
.;
o pricing of our products and services,
.services;
o snowmaking facilities,
.facilities;
o type and quality of skiing offered,
.offered;
o duration of the ski season,
.season;
o weather conditions,
.conditions;
o number, quality and price of related services and lodging,lodging; and
.-8-
o reputation.
We have many competitors for our ski vacationers, including ski resorts
in Utah, California, Nevada, New England and the other major
resorts in Colorado.Colorado and throughout North America. Our destination guests can
choose from any of these alternatives, as well as skiing and non-skiing vacation
destinations around the world. Our Colorado day skier customers can choose from
a number of nearby competitors, including Copper Mountain, Telluride, Steamboat Springs,
14
Winter Park, Arapahoe
Basin and the Aspen resorts, as well asLoveland ski areas. In addition, other forms of leisure such as
attendance at movies, sporting events and participation in other indoor and
outdoor recreational activities. This competitionactivities are available to potential guests.
RockResorts International, LLC ("RockResorts") hotels and our other hotels
compete with numerous other hotel companies that may adversely affect our
skier days and the pricinghave greater financial
resources than we do. Many of our productscompetitors in both the Mountain and services.Lodging
segments may be able to adapt more quickly to changes in customer requirements
or devote greater resources to promotion of their offerings than we can. We
rely on government permits. Virtually all of our ski trailsbelieve that developing and related activities on Vail, Breckenridge and Keystone and a substantial portion
on Beaver Creek are located on federal land. The United States Forest Service
has granted us permits to use these lands, but maintains the right to review
and approve the location, design and construction of improvements in these
areas and on many operational matters. The Forest Service can terminate most of
these permits if required in the public interest; however, the permit for a
large part of the Beaver Creek property is terminable at will. Although we do
not know of any permit used by a major ski resort then in operation that has
been terminated by the Forest Service over the opposition of the permitee, a
termination of any of our permits would adversely affect our business and
operations.
We have applied for several new permits for improvements and new
development and to renew and modify an existing permit. We have also sought to
renew and unify our permits for use of large parts of our Beaver Creek
property. While these efforts, if not successful, could impact our expansion
efforts as currently contemplated, we do not believe they would adversely
affect our results of operations or financial condition. Furthermore, Congress
may increase the fees we pay to the Forest Service for use of these federal
lands.
Grand Teton operates three resort properties within Grand Teton National
Park under a concession contract with the National Park Service. The concession
contract expires at the end of 2002, at which time the contract renewal will be
subject tomaintaining a competitive bidding process. Should we not receive the renewal of
the concession contract, we would be compensated for the value of our
"possessory interest"advantage will require
continued investment by us in the assets of the three resort properties operated
under the concession contract, which is generally defined as the replacement
cost of such assets less depreciation.
We are subject to the risk of unfavorable weather conditions. We depend
upon favorable weather conditions and adequate snowfall during the winter ski
season to attract guests to our ski resorts. Our ski resorts have been affected
by aberrant weather patterns during the 1998-1999 ski season, which caused much
of our skiing terrain to be closed during the Christmas and New Year's
holidays. Our operating results could also be adversely affected by unfavorable
weather conditions and inadequate snowfall in future periods.
We are subject to the risk of an economic slowdown. Because our resorts derive a significant portion of their revenues from the worldwide leisure
market, an economic recession or other significant economic slowdown could
adversely affectand in our business.sales and marketing
efforts. We cannot assure you that a decreasewe will have sufficient resources to make the
necessary investments to do so, and we cannot assure you that we will be able to
compete successfully in this market or against such competitors.
In addition, each of our hotels competes with other hotels in its
geographic area. A number of additional hotel rooms have been or may be built in
the amountgeographic areas in which our hotels are located, which could adversely
affect the results of discretionary spending by the publicoperations of these hotels. An oversupply of hotel rooms
could adversely affect both occupancy and rates in the future would notmarkets in which our
hotels are located. A significant increase in the supply of mid-price, upscale,
and upper-upscale hotel rooms and suites, if demand fails to increase
proportionately, could have an adverse effect on our business.
Apollo Ski Partners has influencebusiness, financial
condition and results of operations.
We have identified a material weakness and certain significant deficiencies in
our internal controls over us. Apollo Ski Partners owns
approximately 99.9%financial reporting.
In connection with the issuance of our outstanding shares of Class A Common Stock, giving
them approximately 22% ofaudited financial statements for
fiscal 2003, we identified issues with our internal financial control structure
and restated our historical financial statements. While we have implemented a
specific action plan to address the combined voting power with respectinternal control weaknesses and to all matters
submitted for a vote of all stockholders. The holders of Class A Common Stock
elect a class of directors that constitutes two-thirdsenhance
the reliability and effectiveness of our boardcontrol procedures, we cannot guarantee
that similar or other internal control weaknesses will not be identified in the
future.
Additionally, we are currently reviewing and testing our material internal
control systems, processes and procedures in compliance with the requirements of
directors. Accordingly, Apollo Ski Partners and, indirectly, Apollo Advisors,
L.P. (which indirectly controls Apollo Ski Partners)Sarbanes-Oxley Regulation 404. There can be no assurances that such a review
will not result in the identification of significant control deficiencies or
that our auditors will be able to elect two-
thirdsattest to the adequacy of our board of directorsinternal
controls.
Our recent or future acquisitions might not be successful.
In recent years, we have acquired a major ski resort and control the approval of matters requiring
approval by the board of directors,several other
destination resorts and hotel properties, including mergers, liquidationsHeavenly Ski Resort,
RockResorts and asset
acquisitionsits associated management contracts, The Lodge at Rancho Mirage
and dispositions. In addition, Apollo Ski Partners and Apollo
Advisors, L.P. mayThe Vail Marriott Mountain Resort & Spa, as well as developable land in
proximity to such resorts. We cannot assure you that we will be able to significantly influence decisions on matters
submitted for stockholder consideration.
Future changes in the real estate marketcontinue
to successfully integrate and manage these acquired properties profitably or
increase our profits from these operations. We continually evaluate potential
acquisitions and intend to actively pursue acquisition opportunities, some of
which could affect the valuebe significant. We would face various risks from additional
acquisitions, including:
o inability to integrate acquired businesses into our operations;
o potential goodwill impairment;
o diversion of our investments. We have extensive real estate holdings in proximity tomanagement's attention;
-9-
o potential increased debt leverage; and
o unanticipated problems or liabilities.
Similar problems from future acquisitions could adversely affect our
mountain resorts. We have invested approximately $56.9 millionoperations and $15.7
million in fiscal years 1997 and 1998, respectively, in our real estate
operations. We plan to make significant additional investments in the Keystone
JV and in developing property at all our resorts.
15
The value of our real property and the revenue from related development
activities may be adversely affected by a number of factors, including:
. national and local economic climate,
. local real estate conditions (such as an oversupply of space or a
reduction in demand for real estate in an area),
. attractiveness of the properties to prospective purchasers and
tenants,
. competition from other available property or space,
. our ability to obtain adequate insurance,
. unexpected construction costs,
. government regulations and changes in real estate, zoning or tax
laws,
. interest rate levels and the availability of financing, and
. potential liabilities under environmental and other laws.financial performance. In addition, we run the risk that our new
acquisitions may fail to perform in accordance with our expectations, and that
our estimates of the costs of improvements for such properties may prove
inaccurate. While we
attempt to mitigate our exposure to these risks by selling multi-family
development parcels to third-party developers who assume the risk of
construction or by pre-selling single-family homesites or condominium
residences to individual purchasers prior to the start of our construction
projects, weWe cannot assure you that we will continuebe able to do somitigate exposure to
these markets in the future.
AlthoughOur future development plans might not be successful.
We have significant development plans for our operations. We could
experience significant difficulties initiating or completing these projects,
including:
o delays in completion;
o market or economic downturns impacting our ability to achieve required
revenues from sales;
o inaccurate cost estimates;
o difficulty in finding partners to assist with financing;
o difficulty in receiving the necessary regulatory approvals; and
o difficulty in obtaining qualified subcontractors.
Additionally, we may not benefit from the projects as we expected. Further,
we may not be able to fund these projects with cash flow from operations and
borrowings under our credit facility or third-party non-recourse financing if we
face these difficulties.
In addition, we may decide to alter or abandon a development plan that is
currently underway or under consideration. Consequently, you should not place
undue reliance upon any particular development plan as such plan may not be
consummated, or may not be consummated in the manner described in this
prospectus.
Terrorist acts upon the United States and acts of war (actual or threatened)
could have a material adverse effect on us.
The terrorist acts carried out against the United States on September 11,
2001 have had an adverse effect on the global travel and leisure industry. The
war with Iraq and its aftermath also had a materially adverse effect on us. We
cannot guarantee if or when normal travel and vacation patterns will resume.
Additional terrorist acts against the United States and the threat of or the
actual act of war by or upon the United States could result in further
degradation of discretionary travel, upon which our operations are highly
dependent. Such degradation could have a material adverse impact on our results
of operations.
Unforeseen global events could adversely impact us.
The SARS epidemic in the spring of 2003 adversely impacted the
international travel industry and, consequently, adversely impacted our
business. Other such events of a global nature could also adversely impact
discretionary travel, upon which our operations are highly dependent, which
could have a material adverse impact on our results of operations.
-10-
We rely on government permits.
Virtually all of our ski trails and related activities at Vail,
Breckenridge, Keystone and Heavenly and a substantial portion on Beaver Creek
are located on federal land. The United States Forest Service (the "Forest
Service") has granted us permits to use these lands, but maintains the right to
review and approve many operational matters, as well as the location, design and
construction of improvements in these areas. Currently, our permits expire
October 31, 2031 for Vail, December 31, 2029 for Breckenridge, December 31, 2032
for Keystone, May 1, 2042 for Heavenly and December 31, 2038 for Beaver Creek.
The Forest Service can terminate most of these permits if, in its opinion, such
revocation is required in the public interest. A termination of any of our
permits would adversely affect our business and operations.
We have applied for several new permits or other approvals for improvements
and new development. These efforts, if not successful, could impact our
expansion efforts as currently contemplated. Furthermore, Congress may increase
the fees we pay to the Forest Service for use of these federal lands.
GTLC operates three resort properties within Grand Teton National Park
under a concession contract with the National Park Service that expired on
December 31, 2002. This contract was extended for two years through December 31,
2004, or until such time a new contract is awarded, whichever occurs first. The
new contract for this concession is subject to a competitive bidding process
under the rules promulgated to implement the concession provisions of the
National Park Omnibus Management Act of 1998. The bidding and renewal process is
expected to occur in early to mid-2004. We cannot predict or guarantee the
prospects for success in being awarded a new contract, although we believe thatGTLC
is well-positioned to obtain a new concession contract on satisfactory terms. In
the current marketevent GTLC is not the successful bidder for the salenew concession contract,
under the existing contract, GTLC is required to sell to the new concessionaire
its "possessory interest" in improvements and its other property used in
connection with the concession operations. GTLC would then be entitled to be
compensated by the successful bidder for the value of our resort propertyits "possessory interest"
in the assets, although the matter may be subject to arbitration if the value is
strong,disputed. Under an amendment to the contract, in the summer of 2003, GTLC and
the National Park Service agreed upon the value to be contained in the
prospectus soliciting bids for the contract.
We are subject to litigation in the ordinary course of business.
We are, from time to time, subject to various legal proceedings and claims,
either asserted or unasserted. Any such claims, whether with or without merit,
could be time-consuming and expensive to defend and could divert management's
attention and resources. While management believes we have adequate insurance
coverage and accrued loss contingencies for all known matters, we cannot assure
you that such market conditionsthe outcome of all current or future litigation will continue. See
"Business--Real Estate."
Year 2000.not have a material
adverse effect on us. For a more detailed discussion of our legal proceedings
see Note 12 to "Consolidated Condensed Financial Statements" included in our
Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2004.
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. 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 environmental, health and safety requirements. However, our efforts
to comply do not remove 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 or formerly owned 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. For a more detailed discussion of our mold
remediation
-11-
efforts see Note 13 to "Consolidated Condensed Financial Statements" included in
our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2004.
Implementation of existing and future legislation, rulings, standards and
interpretations from the FASB or other regulatory bodies could affect the
presentation of our financial statements and related disclosures.
The FASB has recently issued FIN No. 46, FIN No. 46R and SFAS No. 150,
which we are currently in the process of evaluatingimplementing. The implementation of
these accounting pronouncements could affect the way we account for our
involvement with variable interest entities and resolvingcould also affect the
potential impactpresentation of the Year 2000 issueliabilities and equity on our computerized systemsbalance sheet, including
potentially recording certain off-balance sheet liabilities on our balance
sheet. These and other infrastructure that contain embedded technology. The Year 2000 issue is a
result of certain computer programs being written using two digits rather than
four to definefuture regulatory requirements could significantly change
our current accounting practices and disclosures. Such changes in the
applicable year. Computer programs which are date-sensitive
may recognize a date using "00" as the year 1900 rather than the year 2000,
which could result in major computer system or program failures or
miscalculations or equipment malfunctions. We recognize that the impact of the
Year 2000 issue extends beyond traditional computer hardware and software to
embedded hardware and software contained in equipment used in operations, such
as chairlifts, alarm systems and elevators, as well as to third parties.
We have committed resources to conduct risk assessments and to correct
problems, where required, within each of the following areas: information
technology, operations equipment, and external parties. We expect to complete
our assessments, remediation, verification and testingpresentation of our information
technologyfinancial statements and operations equipment by the end of November 1999. While we have
initiated communication with significant third parties to determine the extent
to which we are vulnerable to those third parties' failures to remediate their
own Year 2000 issue, we cannot guarantee that their Year 2000 issues would not
adversely affect our operations.
The total costrelated disclosures could change
your interpretation or perception of our Year 2000 efforts is not expected to be material
with respect to our operations, liquidity or capital resources. We estimatefinancial position and results of
operations. For a more detailed discussion on the multi-year costpossible treatment of our
Year 2000 project will be between $900,000variable interest entities see "Off Balance Sheet Arrangements" and $1.1
million. Of the total project cost, approximately $600,000 is attributable to
the purchase of new software or equipment which will be capitalized. The
remaining costs will be expensed as incurred. Fiscal 1998 expensed costs were
approximately $150,000, and expensed costs for the nine months ended April 30,
1999 were approximately $150,000. Approximately $60,000 of Year 2000 costs have
been capitalized as of April 30, 1999. Costs exclude expenditures for systems
which were replaced"New
Accounting Pronouncements" under our regularly planned schedule.
There is still uncertainty around the scope of the Year 2000 issue and
its implications for us. At this time we cannot quantify the potential impact
of these failures. Due to the general uncertainty inherent in the Year 2000
problem, as well as, in part, the uncertainty of the Year 2000 readiness of
suppliers and the current
16
status of our Year 2000 program, we are unable to determine at this time
whether any Year 2000 failures will have material adverse consequences on our
results of operations, liquidity or financial condition. Our Year 2000 program
and contingency plans are being developed to address issues within our control
and to reduce the level of our uncertainty about our Year 2000 issues.
Your claims are subordinated to our and our subsidiaries' senior
debt. Payments on the exchange notes and the guarantees are subordinated to all
of our and the guarantors' existing and future indebtedness, including amounts
under our credit facility, other than future indebtedness that expressly
provides that it is equal to or subordinated in right of payment to the
exchange notes and the guarantees. As a result, upon any distribution to our
creditors in a bankruptcy, liquidation or reorganization or similar proceeding
with respect to us or our property, the holders of our senior debt and our
guarantors' senior debt will be entitled to be paid in full before any payment
may be made with respect to the exchange notes and the guarantees. Claims in
respect of the exchange notes will be effectively subordinated to all
liabilities, including trade payables, of any of our subsidiaries that are not
subsidiary guarantors. At April 30, 1999, after giving effect to the offering
of the outstanding Notes and the application of net proceeds, we had $99.6
million of senior debt outstanding on a consolidated basis.
Our subsidiary, The Vail Corporation, is the borrower under our $450.0
million revolving credit facility and its obligations are guaranteed by us and
certain of our subsidiaries. At April 30, 1999, after giving effect to the
offering of the outstanding Notes and the application of the proceeds, we would
have had $21.8 million outstanding, $64.9 million of letters of credit issued
thereunder and remaining availability of $363.3 million, of which $137.9
million could have been borrowed under the most restrictive of the financial
covenants contained in the credit facility.
At April 30, 1999, SSI Venture had $9.7 million outstanding under the
$20.0 million SSI Venture credit facility, all of which was guaranteed by one
of our subsidiaries.
See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--LiquidityOperations" and Capital Resources"Note 8 to "Consolidated
Condensed Financial Statements" included in our Quarterly Report on Form 10-Q
for the fiscal quarter ended January 31, 2004.
We are subject to the risks of brand concentration.
We are subject to the potential risks associated with concentration of our
hotels under the RockResorts brand. A negative public image or other adverse
event which becomes associated with the RockResorts brand could adversely affect
hotels operated under that brand. Should the RockResorts brand suffer a
significant decline in popularity with the traveling public, it could adversely
affect our revenues and profitability.
Our future growth and real estate development requires additional capital whose
availability is not assured.
We intend to make significant investments in our resorts to maintain our
competitive position. We spent approximately $106.3 million, $76.2 million and
$57.8 million in the fiscal years ended July 31, 2003, 2002 and 2001,
respectively, on capital expenditures and we have made investments of
approximately $22.6 million, $68.7 million and $39.2 million in fiscal years
2003, 2002 and 2001, respectively, in our real estate developments, and we
expect to continue making substantial resort capital expenditures and
investments in real estate development. We estimate that we will make aggregate
capital expenditures and investments in real estate of approximately $50 million
to $70 million during the remainder of fiscal 2004, and approximately $130
million to $140 million for calendar 2004. We could finance future expenditures
from any of the following sources:
o cash flow from operations;
o bank borrowings;
o public offerings of debt or equity;
o private placements of debt or equity;
o non-recourse, sale leaseback or other financing; or
o some combination of the above.
We might not be able to obtain financing for future expenditures on
favorable terms or at all.
-12-
Future changes in the real estate market could affect the value of our
investments.
We have extensive real estate holdings near our mountain resorts and in
Wyoming. We plan to make significant additional investments in developing
property at all of our resorts. The value of our real property and the revenue
from related development activities may be adversely affected by a number of
factors, including:
o national and local economic climate;
o local real estate conditions (such as an oversupply of space or a
reduction in demand for real estate in an area);
o attractiveness of the properties to prospective purchasers and
tenants;
o competition from other available property or space;
o our ability to obtain adequate insurance;
o unexpected construction costs or delays;
o government regulations and changes in real estate, zoning or tax laws;
o interest rate levels and the availability of financing; and
o potential liabilities under environmental and other laws.
If we do not retain our key personnel, our business may suffer.
The success of our business is heavily dependent on the leadership of our
key management personnel. If any of these persons were to leave our company, it
would be difficult to replace them, and our business could be harmed. We do not
have "key-man" life insurance.
Apollo Ski Partners has influence over us.
Apollo Ski Partners owns approximately 99.9% of our outstanding shares of
Class A Common Stock, giving them approximately 21.1% of the combined voting
power with respect to all matters submitted for a vote of all stockholders.
Pursuant to our bylaws, the holders of Class A Common Stock have the right to
elect a class of directors that constitutes up to two-thirds of our board of
directors. Accordingly, Apollo Ski Partners and, indirectly, Apollo Advisors,
L.P. (which indirectly controls Apollo Ski Partners) have the ability to elect
two-thirds of our board of directors and control the approval of matters
requiring approval by the board of directors, including mergers, liquidations
and asset acquisitions and dispositions. However, in order to assist us in
complying with new NYSE rules which require listed companies to have a board of
directors composed of a majority of "independent" directors, Apollo Ski Partners
has agreed that the directors that they are entitled to elect may include as
many independent directors as necessary so that we can comply with this new
rule. However, notwithstanding the above, Apollo Ski Partners will still have
several designees on the board of directors and will be able to influence the
board of directors. In addition, Apollo Ski Partners and Apollo Advisors, L.P.
may be able to significantly influence decisions on matters submitted for
stockholder consideration. The Lead Director on our board of directors is
associated with Apollo Ski Partners. Apollo Ski Partners may freely sell up to
1,500,000 shares of common stock pursuant to an effective registration statement
filed with the Securities and Exchange Commission. After giving pro forma effect
to the sale of these shares as of March 1, 2004, Apollo Ski Partners would own
99.9% of our outstanding Class A common stock, with approximately 16.8% of the
combined voting power with respect to all matters submitted for a vote of
stockholders.
Risks Related to the Exchange Notes
-13-
Our substantial indebtedness could adversely affect our financial health and
prevent us from fulfilling our obligations under the exchange notes.
We have now and, after the offering, will continue to have a significant
amount of indebtedness. On January 31, 2004, after giving pro forma effect to
the discharge of the portion of our 8.75% senior subordinated notes not tendered
in the tender offer (see Note 5 to "Consolidated Condensed Financial Statements"
included in our Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 2004), we would have had total indebtedness of $632.0 million (of
which $390 million would have consisted of the 6.75% senior subordinated notes
and the balance would have consisted of senior debt).
Our substantial indebtedness could have important consequences to you. For
example, it could:
o make it more difficult for us to satisfy our obligations with respect
to the exchange notes;
o increase our vulnerability to general adverse economic and industry
conditions;
o require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general
corporate purposes;
o limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
o place us at a competitive disadvantage compared to our competitors
that have less debt; and
o limit our ability to borrow additional funds.
In addition, both the indenture governing the exchange notes and our Credit
Facility contain financial and other restrictive covenants that limit our
ability to engage in activities that may be in our long-term best interests. Our
failure to comply with those covenants could result in an event of default
which, if not cured or waived, could result in the acceleration of all of our
debts. Despite current indebtedness levels, we and our subsidiaries may still be
able to incur substantially more debt. This could further exacerbate the risks
associated with our substantial leverage.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit us
or our subsidiaries from doing so. Our Credit Facility would permit additional
borrowings of up to $65.1 million (as of January 31, 2004) after completion of
the offering and all of those borrowings would rank senior to the exchange notes
and the subsidiary guarantees. If new debt is added to our and our subsidiaries'
current debt levels, the related risks that we and they now face could
intensify. See "Description of Certain Indebtedness.Indebtedness--Credit Facility."
Guarantees may be unenforceable due to fraudulent conveyance
statutes. Although laws differ among various jurisdictions, in general, under
fraudulent conveyance laws, a court could subordinate or avoid any subsidiary
guarantee if it found that:
. the guarantee was incurred with actual intent to hinder, delay or
defraud creditors, or
. the guarantor did not receive fair consideration or reasonably
equivalent value for the guarantee and the guarantor was any of the
following:
. insolvent or rendered insolvent because of the guarantee,
. engaged in business or transactions for which its remaining
assets constituted unreasonably small capital, or
. intended to incur, or believed that it would incur, debts
beyond its ability to pay at maturity.
If a court avoided a guarantee as a result of fraudulent conveyance, or
held it unenforceable for any other reason, noteholders would cease to have a
claim against the guarantor and would be creditors solely of Vail Resorts and
the remaining guarantors.
There are restrictions imposed by the terms of our indebtedness.
The operating and financial restrictions and covenants in our credit
facility and the indenture governing the exchange notes may adversely affect our
ability to finance future operations or capital needs or to engage in other
business activities. Our credit facility includes covenants
that will require us to meet certain financial ratios and financial conditions
which may requireIn addition, there can be no assurance that we take action to reduce debt or to actwill meet
the financial covenants contained in a manner
contrary to our business objectives.credit facility. If we breach any of
these restrictions or covenants, or suffer a material adverse change which
restricts our borrowing ability under our credit facility, we would be 17
unable to
borrow funds thereunder without a waiver.waiver, which inability could have an adverse
effect on our business, financial condition and results of operations. A breach
could cause a default under the exchange notes and our other debt. Our
indebtedness may then become immediately due and payable. We may not have or be
able to obtain sufficient funds to make these accelerated payments, including
payments on the Notes.exchange notes.
In addition, the indenture governing the exchange notes restricts, among
other things, our ability to:
.o borrow money .or sell preferred stock;
-14-
o create liens;
o pay dividends on stock or redeem or repurchase stock;
o make certain types of investments;
o sell stock in our restricted subsidiaries;
o restrict dividends or other restricted payments . use assets as security in other transactions,
. make investments,
.from subsidiaries;
o enter into certain transactions with our affiliates,affiliates;
o issue guarantees of debt; and
.o sell certain assets or merge with other companies.
If we fail to comply with these covenants, we would be in default under the
indenture governing the exchange notes, and the principal and accrued interest
on the exchange notes would become due and payable. See "Description of Exchange
Notes--Certain Covenants."
We may not be ableTo service our indebtedness, we will require a significant amount of cash,
generation of which depends on many factors beyond our control.
Our ability to purchasemake payments on and to refinance our indebtedness,
including the exchange notes, uponand to fund planned capital expenditures and
development efforts will depend on our ability to generate cash in the future.
This, to a changecertain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control.
Based on our current level of control. Upon certain change of control events, each holder ofoperations, we believe our cash flow from
operations, available cash and available borrowings under our Credit Facility
will be adequate to meet our future liquidity needs for at least the next twelve
months.
We cannot assure you, however, that our business will generate sufficient
cash flow from operations, that currently anticipated cost savings and operating
improvements will be realized on schedule or that future borrowings will be
available to us under our Credit Facility in an amount sufficient to enable us
to pay our indebtedness, including the exchange notes, or to fund our other
liquidity needs. We may require usneed to repurchaserefinance all or a portion of itsour indebtedness,
including the exchange notes, on or before maturity. We cannot assure you that
we will be able to refinance any of our indebtedness, including our Credit
Facility and the exchange notes, on commercially reasonable terms or at all.
Your right to receive payments on the exchange notes is junior to our existing
indebtedness and possibly all of our future borrowings. Further, the guarantees
of the exchange notes are junior to all of our guarantors' existing indebtedness
and possibly to all their future borrowings.
The exchange notes and the subsidiary guarantees rank behind all of our and
the subsidiary guarantors' existing indebtedness (other than trade payables) and
all of our and their future borrowings (other than trade payables), except any
future indebtedness that expressly provides that it ranks equal with, or
subordinated in right of payment to, the exchange notes and the guarantees. As a
purchase price equalresult, upon any distribution to our creditors or the creditors of the
guarantors in a bankruptcy, liquidation or reorganization or similar proceeding
relating to us or the guarantors or our or their property, the holders of our
senior debt and debt of the guarantors will be entitled to be paid in full and
in cash before any payment may be made with respect to the exchange notes or the
subsidiary guarantees.
-15-
In addition, all payments on the exchange notes and the guarantees will be
blocked in the event of a payment default on senior debt and may be blocked for
up to 179 of 360 consecutive days in the event of certain non-payment defaults
on senior debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the guarantors, holders of the exchange notes will
participate with trade creditors and all other holders of our and the
guarantors' subordinated indebtedness in the assets remaining after we and the
subsidiary guarantors have paid all of our senior debt. However, because the
indenture requires that amounts otherwise payable to holders of the exchange
notes in a bankruptcy or similar proceeding be paid to holders of senior debt
instead, holders of the exchange notes may receive less, ratably, than holders
of trade payables in any such proceeding. In any of these cases, we and the
subsidiary guarantors may not have sufficient funds to pay all of our creditors
and holders of notes may receive less, ratably, than the holders of our senior
debt.
As of January 31, 2004, the notes and the subsidiary guarantees were
subordinated to $242.0 million of senior debt and approximately $65.1 million
was available for borrowing as additional senior debt under our Credit Facility.
We are permitted to borrow substantial additional indebtedness, including senior
debt, in the future under the terms of the indenture.
We may not have access to the cash flow and other assets of our subsidiaries
that may be needed to make payment on the exchange notes.
Although much of our business is conducted through our subsidiaries, none
of our subsidiaries is obligated to make funds available to us for payment on
the exchange notes. Accordingly, our ability to make payments on the exchange
notes is dependent on the earnings and the distribution of funds from our
subsidiaries. The terms of the Credit Facility restrict our subsidiaries from
paying dividends and otherwise transferring assets to us. Furthermore, our
subsidiaries are permitted under the terms of the indenture to incur additional
indebtedness that may severely restrict or prohibit the making of distributions,
the payment of dividends or the making of loans by such subsidiaries to us. We
cannot assure you that the agreements governing the current and future
indebtedness of our subsidiaries will permit our subsidiaries to provide us with
sufficient dividends, distributions or loans to fund payments on the exchange
notes when due. See "Description of Certain Indebtedness."
Your right to receive payments on the exchange notes could be adversely affected
if any of our non-guarantor subsidiaries declare bankruptcy, liquidate or
reorganize.
Some of our subsidiaries will not guarantee the exchange notes. In the
event of a bankruptcy, liquidation or reorganization of any of our non-guarantor
subsidiaries, holders of their indebtedness and their trade creditors will
generally be entitled to payment of their claims from the assets of those
subsidiaries before any assets are made available for distribution to us.
As of January 31, 2004, the notes were junior to $111.9 million of
indebtedness and other liabilities (including trade payables) of our
non-guarantor subsidiaries. Our non-guarantor subsidiaries held 9.8% of our
consolidated assets as of January 31, 2004. For a more detailed discussion of
our non-guarantor subsidiaries see Note 16 to "Consolidated Condensed Financial
Statements" included in our Quarterly Report on Form 10-Q for the fiscal quarter
ended January 31, 2004.
We may not have the ability to raise the funds necessary to finance the change
of control offer required by the indenture.
Upon the occurrence of certain kinds of change of control events, we will
be required to offer to repurchase all outstanding notes at 101% of the
principal amount thereof plus accrued interest. Ourand unpaid interest and liquidated
damages, if any, to the date of repurchase. However, it is possible that we will
not have sufficient funds at the time of the change of control to make the
required repurchase of notes or that restrictions in our Credit Facility will
not allow such repurchases. In addition, certain important corporate events,
such as leveraged recapitalizations that would increase the level of our
indebtedness, would not constitute a "Change of Control" under the indenture.
See "Description of Exchange Notes--Repurchase at the Option of Holders."
-16-
Federal and state statutes allow courts, under specific circumstances, to void
guarantees and require note holders to return payments received from guarantors.
Under federal bankruptcy laws and comparable provisions of state fraudulent
transfer laws, a guarantee could be voided, or claims in respect of a guarantee
could be subordinated to all other debts of that guarantor if, among other
things, the guarantor, at the time it incurred the indebtedness evidenced by its
guarantee:
o received less than reasonably equivalent value or fair consideration
for the incurrence of such guarantee; and
o was insolvent or rendered insolvent by reason of such incurrence; or
o was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
o intended to incur, or believed that it would incur, debts beyond its
ability to repurchasepay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could
be voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
o the sum of its debts, including contingent liabilities, was greater
than the fair saleable value of all of its assets; or
o the present fair saleable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
o it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each guarantor, after giving effect to its
guarantee of the exchange notes, upon a change of
control event couldwill not be limited byinsolvent, will not have
unreasonably small capital for the terms of our debt agreements. Upon a
change of control event, we may be requiredbusiness in which it is engaged and will not
have incurred debts beyond its ability to repay the outstanding principal
and any accrued interest on any other amounts owed by us under our credit
facility.pay such debts as they mature. We
cannot assure you, however, as to what standard a court would apply in making
these determinations or that wea court would be able to repay amounts
outstanding underagree with our credit facility or obtain necessary consents under such
facilities to repurchase these exchange notes. Any requirement to offer to
purchase any exchange notes may resultconclusions in our having to refinance our
outstanding indebtedness, which we may not be able to do. In addition, even if
we were able to refinance such indebtedness, such financing may be on terms
unfavorable to us. Certain provisions in our credit facility may delay, defer
or prevent a merger, tender offer or other takeover attempt. The term "Change
of Control" is defined in "Description of Notes--Certain Definitions."
There is currently no trading market for the exchange notes.this
regard.
The exchange notes will be new securities for which there is currently no public
market.
We do not intend to list the exchange notes on any national securities
exchange or quotation system. The Initial Purchasersinitial purchasers in the offering of
outstanding Notesnotes have advised us that they currently intend to make a market in
the exchange notes, but they are not obligated to do so and, if commenced, may
discontinue such market making at any time. Accordingly, no market may develop
for the exchange notes, and if a market does develop, it may have limited or no
liquidity.
As outstanding Notes are tendered and accepted in the
exchange offer, the aggregate principal amount of outstanding Notes will
decrease, which will decrease their liquidity.
Failure to exchange your outstanding Notesnotes will leave them subject to transfer
restrictions.
If you do not exchange your outstanding Notesnotes for exchange notes, you will
continue to be subject to the restrictions on transfer of your outstanding Notesnotes
set forth in their legend because the outstanding Notesnotes were issued pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. In general, outstanding Notesnotes may not be
offered or sold, unless registered under the Securities Act, except pursuant
-17-
to an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. We currently do not anticipate registering the
outstanding Notesnotes under the Securities Act. Blue sky restrictionsAs outstanding notes are tendered
and accepted in the exchange offer, the aggregate principal amount of
outstanding notes will decrease, which will decrease their liquidity.
-18-
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to fixed
charges for each of the periods indicated.
For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of pretax income from continuing operations before adjustment
for (a) minority interest in consolidated subsidiaries and equity method
earnings or losses, (b) fixed charges, (c) amortization of interest capitalized,
(d) distributed income from equity method investees and (e) minority interest in
pre-tax income of subsidiaries that have not incurred fixed charges. From the
total of these items interest capitalized is deducted. Fixed charges include:
(i) interest expense; (ii) loss on resaleextinguishment of exchange notes.debt; (iii) interest
capitalized; (iv) amortization of debt issuance cost and (v) an estimate of the
interest component of rent expense. As of the date of this prospectus, we have
no preferred stock outstanding. The ratio of earnings to fixed charges and
preferred stock dividends is the same as the ratio of earnings to fixed charges
in all periods as we have not had any preferred stock outstanding (all amounts
in thousands of dollars, except ratios). In orderthe calculation of the pro-forma
ratio of earnings to complyfixed charges, we have removed the interest expense,
amortization of deferred finance charges and amortization of issuance discount
associated with the securities laws8.75% Notes and have added back the interest expense and
amortization of certain jurisdictions,deferred finance charges associated with the exchange notes may not
be offered or resold by any holder unless they6.75% Notes. In
addition, we have been registered or
qualified for sale in such jurisdictions or any exemption from registration or
qualifications is available andremoved the requirementsloss on extinguishment of such exemption have been
satisfied. We do not currently intend to register or qualify the resale of the
exchange notes in any such jurisdictions. However, an exemption is generally
available for sales to registered broker-dealers and certain institutional
buyers. Other exemptions under applicable state securities laws may also be
available.
18
debt charge.
Year Ended July 31, Six Months Ended January 31,
1999 2000 2001 2002 2003 Pro-Forma 2003 2004 Pro-Forma 2004
2003
Ratio of Earnings to 1.29 1.43 1.63 1.32 -- -- -- -- 1.43
Fixed Charges
Deficiency of Earnings -- -- -- -- $9,590 $2,961 $15,448 $28,069 --
to Fixed Charges
USE OF PROCEEDS
The exchange offer is intended to satisfy certain of our obligations under
the registration rights agreement. We will not receive any cash proceeds from
the exchange offer.
The net proceeds from the original sale of the outstanding Notesnotes were
$194.3$383.2 million. We used the net proceeds from the sale of the outstanding notes
to purchase the portion of our outstanding 8.75% Senior Subordinated Notes due
2009 (the "8.75% Notes") tendered in our recent tender offer and to repay indebtedness under our credit facility (which can be reborrowed).pay related
premiums, fees and expenses.
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of April 30, 1999January 31, 2004 on an actual basis, and as adjusted to
reflect the saledischarge of all our 8.75% Notes not tendered in the outstanding Notes and the
application of the net proceeds of that offering. See "Description of Certain
Indebtedness."tender offer.
As of January 31, 2004
As
Actual Adjusted ---------- -----------
(In thousands, except
share amounts)(1)
($ in millions)
Cash.....................................................Cash and cash equivalents $ 10,06342.6 $ 10,063
========== ==========
Short-term debt.......................................... 530 530
Industrial Development Bonds............................. 63,200 63,200
Credit facilities........................................ 225,688 31,438
Senior Subordinated Notes................................30.8
Revolving credit facility due 2007 - -
Term loan due 2010 99.3 99.3
Other senior debt 142.7 142.7
Total senior debt $ 242.0 $ 242.0
8.75% senior subordinated notes due 2009(1) 11.2 --
200,000
Other.................................................... 4,444 4,444
---------- ----------
Total debt........................................... 293,862 299,612
Stockholders' equity:
Class A common stock, $0.01 par value, 20,000,000
shares authorized, 7,439,834 shares issued and
outstanding........................................... 74 74
Common stock, $0.01 par value, 80,000,000 shares
authorized, 27,087,701 shares issued and outstanding.. 271 271
Additional paid-in capital............................. 402,592 402,592
Retained earnings...................................... 87,035 87,035
---------- ----------
Total stockholders' equity........................... 489,972 489,972
---------- ----------
Total capitalization..................................... $ 783,834 $ 789,584
========== ==========
19
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents selected historical consolidated financial
data for the periods indicated. The financial data for the twelve month fiscal
years ended September 30, 1996 and 1997 and the ten month fiscal year ended
July 31, 1998 are derived from our consolidated financial statements, which
have been audited by Arthur Andersen LLP, independent accountants, and should
be read in conjunction with those statements and related notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the other financial information included elsewhere in this
prospectus. Also included for comparative purposes are the unaudited pro forma
results for the twelve months ended July 31, 1997 and the actual unaudited
results for the twelve months ended July 31, 1998. These pro forma results are
not necessarily indicative of the actual results of operations that would have
been achieved nor are they necessarily indicative of future results of
operations. The financial data for the nine months ended April 30, 1998 and
1999 are derived from our unaudited consolidated financial statements, which
included all adjustments management considers necessary to present fairly the
financial results for these interim periods. All of these adjustments were of a
normal recurring nature. The results of such interim periods are not
necessarily indicative of results to be expected for the full year due to the
highly seasonal nature of our business (which ordinarily produces losses for
the first and fourth quarters). See "Prospectus Summary--Recent Results" and
"Risk Factors--Our resort business is highly seasonal."
Twelve Ten Pro Forma
Month Month Twelve Twelve
Fiscal Year Ended Fiscal Year Months Months Nine Months Ended
September 30, Ended Ended Ended April 30,
---------------------------- July 31, July 31, July 31, --------------------
1995 1996 1997(1) 1998 1997(2) 1998 1998 1999(3)
-------- -------- -------- ----------- ----------- ----------- -------- ----------
(audited) (audited) (unaudited) (unaudited) (unaudited)
(In thousands, except ratio data)
Statement of Operations
Data:
Revenues:
Resort................. $126,349 $140,288 $259,038 $336,547 $292,127 $350,498 $324,195 $ 379,346
Real estate............ 16,526 48,655 71,485 73,722 74,356 84,177 65,760 31,409
-------- -------- -------- -------- -------- -------- -------- ----------
Total revenues......... 142,875 188,943 330,523 410,269 366,483 434,675 389,955 410,755
Operating expenses:
Resort................. 82,305 89,890 172,715 217,764 200,488 238,889 200,552 273,900
Real estate............ 14,983 40,801 66,307 62,619 64,646 74,057 58,939 26,248
Corporate expense(4)... 6,701 12,698 4,663 4,437 4,236 5,543 4,313 4,555
Depreciation and
amortization.......... 17,968 18,148 34,044 36,838 37,997 42,965 31,163 38,181
-------- -------- -------- -------- -------- -------- -------- ----------
Total operating
expenses.............. 121,957 161,537 277,729 321,658 307,367 361,454 294,967 342,884
Income from operations.. 20,918 27,406 52,794 88,611 59,116 73,221 94,988 67,871
Interest Expense....... (19,498) (14,904) (20,308) (17,789) (16,799) (20,891) (16,064) (17,593)
Net income (loss)....... 3,282 4,735 19,698 41,018 25,966 30,073 46,857 26,319
Other Data:
Skier days(5).......... 2,136 2,228 4,273 4,717 4,890 4,717 4,706 4,579
Resort EBITDA(4)(6).... 37,343 46,200 81,660 114,346 87,403 106,066 119,330 100,891
Real estate operating
income(7)............. 1,543 7,854 5,178 11,103 9,710 10,120 6,821 5,161
-------- -------- -------- -------- -------- -------- -------- ----------
Total EBITDA(4)(8)..... 38,886 54,054 86,838 125,449 97,113 116,186 126,151 106,052
Resort capital
expenditures(9)....... 20,320 13,912 51,020 80,454 41,047 93,333 79,853 53,691Discount on 8.75% senior subordinated notes due 2009 (0.2) --
-19-
6.75% senior subordinated notes due 2014 390.0 390.0
Total debt to Resort
EBITDA................ 5.1x 3.1x 3.2x 2.5x 2.7x 2.7x
Resort EBITDA toincluding current maturities $ 643.0 $ 632.0
Minority interest expense...... 1.9 3.1 4.0 6.4 5.2 5.130.9 30.9
Shareholders' equity 464.5 463.9(2)
Total debt to Total
EBITDA................ 4.9 2.7 3.1 2.3 2.4 2.4
Total EBITDA to
interest expense...... 2.0 3.6 4.3 7.1 5.8 5.6
Ratio of earnings to
fixed charges(10)..... 1.1 1.6 2.6 4.9 3.6 3.4
Balance Sheet Data (at
period end):
Total assets........... $429,628 $422,612 $855,949 $912,122 $814,816 $912,122 $933,967 $1,014,810
Real estate held for
sale(11).............. 54,858 84,055 154,925 138,916 155,672 138,916 134,940 152,141
Long term debt
(including current
maturities)........... 191,313 144,750 265,062 284,014 236,347 284,014 248,338 293,862
Stockholders' equity... 167,694 123,907 405,666 462,624 417,187 462,624 476,981 489,972capitalization $ 1,138.4 $ 1,126.8
- --------
(footnotes appear on following page)
20
- --------
(1) Our consolidated statement of operations for the fiscal year ended
September 30, 1997 includes the results of Keystone and Breckenridge for
the 270-day period from January 4, 1997 to September 30, 1997.
(2) The unaudited pro forma results for the twelve months ended July 31, 1997
give effect to our acquisition of the Keystone and Breckenridge resorts
(which occurred on January 3, 1997) and the initial public offering of our
common stock (which occurred on February 4, 1997) as if such events
occurred on August 1, 1996, and are presented exclusive of a pre-tax $2.2
million reorganization charge and a $8.5 million one-time non-recurring
charge to corporate expense.
(3) Included in the selected consolidated historical data for the nine months
ended April 30, 1999, are the results of operations of our 51.9%-owned
joint venture, SSI Venture (which commenced operations on August 1, 1998).
SSI Venture will not be a guarantor of the Notes. For the nine months ended
April 30, 1999, SSI Venture had revenues of $64.3 million, income from
operations of $8.3 million and EBITDA of $11.6 million. At April 30, 1999,
SSI Venture had total assets of $38.3 million, total debt of $9.8 million
and stockholders' equity of $20.6 million. For the nine months ended April
30, 1999, the EBITDA of SSI Venture represented less than 12% of our Resort
EBITDA. See Note 16 to the Audited Consolidated Financial Statements of the
Company and Note 7 to the Unaudited Consolidated Condensed Financial
Statements of the Company.
(4) Corporate expense includes certain executive, tax, legal, directors' and
officers' insurance and other consulting fees. For fiscal 1996, corporate
expense included the costs associated with our holding company structure
and overseeing multiple lines of business, including certain discontinued
operations. For the year ended September 30, 1996, corporate expense
includes the following non-recurring charges: (i) $4.5 million related to
a rights distribution to option holders, (ii) $1.9 million of compensation
expense related to the exercise of certain options held by our former
Chairman and Chief Executive Officer and (iii) $2.1 million related to the
termination of an employment agreement with our former Chairman and Chief
Executive Officer. For purposes of calculating Resort EBITDA and Total
EBITDA for this period, corporate expense excludes these non-recurring
charges.
(5) A skier day represents one guest accessing a ski mountain on any one day
and includes guests using complimentary tickets and ski passes.
(6) Resort EBITDA (earnings before interest expense, income tax expense,
depreciation and amortization) is defined as Resort Revenue less resort
operating expenses and corporate expense. Resort EBITDA is not a termAssumes that
has an established meaning under generally accepted accounting principles
("GAAP"). We have included the information concerning Resort EBITDA
because our management believes it is an indicative measure of a resort
company's operating performance and is generally used by investors to
evaluate companies in the resort industry. Resort EBITDA does not purport
to represent cash provided by operating activities, and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP. For information regarding our historical
cash flows from operating, investing and financing activities, see our
consolidated financial statements included elsewhere in this prospectus.
(7) Real estate operating income is defined as revenue from real estate
operations less real estate costs and expenses, which include selling and
holding costs, operating expenses, and an allocation of the land,
infrastructure, mountain improvement and other costs relating to property
sold. Real estate costs and expenses exclude charges for depreciation and
amortization, as we have determined that the portion of those expenses
allocable to real estate are not significant.
(8) Total EBITDA represents earnings before interest expense, income tax
expense, depreciation and amortization. EBITDA is presented because
management believes it provides useful information regarding a company's
ability to incur and service debt. EBITDA should not be considered in
isolation or as a substitute for net income or cash flows prepared in
accordance with GAAP, nor should it be used as a measure of our
profitability or liquidity.
(9) We typically categorize approximately $15 million to $20 million per year
of total resort capital expenditures as maintenance capital expenditures,
except for fiscal 1996, during which approximately $7 million was
categorized as maintenance capital expenditures. For the nine months ended
April 30, 1999 and 1998, approximately $12 million for each period was
categorized as maintenance capital expenditures.
(10) The ratio of earnings to fixed charges represents the number of times
fixed charges were covered by pre-tax earnings before provisions for
interest expense. Fixed charges consist of interest expense, capitalized
interest, amortization of debt issuance costs, and a portion of the
operating lease expense deemed to be representative of the interest
factor.
(11) Real estate held for sale includes all land, development costs and other
improvements associated with real estate held for sale, as well as
investments in real estate joint ventures.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements included elsewhere in this prospectus.
Introduction
Our revenues are derived primarily from the operations of our ski resorts
and from the sale of real estate in proximity to our resorts. We have and will
continue to acquire new resorts and properties and to undertake improvements on
existing resort areas to enhance our ability to attract customers for our
resort operations and real estate properties. While the value of our real
estate development is tied to the quality of our ski resorts, the development
of new lodging, conference centers and other facilities also benefits our
resort operations. Therefore, our future results of operations from both of
these sources will be affected by some of the same factors, including
competition in a static market, general economic conditions, consumer trends
and the success of our acquisition strategy.
On January 3, 1997, we acquired the Breckenridge, Keystone and Arapahoe
Basin mountain resorts as well as significant related real estate interests and
developable land. Pursuant to a consent decree with the United States
Department of Justice, the Company divested the Arapahoe Basin ski area on
September 5, 1997.
On September 1, 1997, the Company changed its fiscal year end from
September 30 to July 31. Accordingly, the Company's fiscal year 1998 ended on
July 31, 1998 and consisted of ten months. This Management's Discussion and
Analysis compares actual results for the ten months ended July 31, 1998 and
1997, and for the fiscal years ended September 30, 1997 and 1996. Supplemental
pro forma comparisons are presented for the ten and twelve-month periods ended
July 31, 1998 and 1997. Ten-month comparisons are presented to conform with the
actual ten-month transitional period, while twelve-month comparisons are
presented to compare year to date results for the Company's new fiscal year
ended July 31. Also presented for comparative purposes are the nine months
ended April 30, 1999 and 1998.
Nine Months Ended April 30, 1999 versus Nine Months Ended April 30, 1998
Nine Nine
Months Months
Ended Ended Percentage
April 30, 1999 April 30, 1998 Increase Increase
-------------- -------------- -------- ----------
(dollars in thousands)
(unaudited)
Resort Revenue............... $379,346 $324,195 $55,151 17.0
Resort Operating Expense..... 273,900 200,552 73,348 36.6
22
Resort Revenue. Resort Revenue for the nine months ended April 30, 1999
and 1998 is presented by category as follows:
Nine Nine
Months Months
Ended Ended
April April Percentage
30, 30, Increase Increase
1999 1998 (Decrease) (Decrease)
-------- -------- ---------- ----------
Lift Ticket........................... $135,667 $146,458 $(10,791) (7.4)
Ski School............................ 37,833 38,639 (806) (2.1)
Dining................................ 52,325 45,972 6,353 13.8
Retail/Rental......................... 66,198 19,727 46,471 235.6
Hospitality........................... 50,886 39,057 11,829 30.3
Other................................. 36,437 34,342 2,095 6.1
-------- -------- -------- -----
Total Resort Revenue.................. 379,346 324,195 55,151 17.0
======== ======== ======== =====
Total Skier Days...................... 4,579 4,706 (127) (2.7)
======== ======== ======== =====
ETP................................... $ 29.63 $ 31.12 $(1.49) (4.8)
======== ======== ======== =====
Lift ticket revenue decreased due to a 2.7% decrease in total skier days
as well as a 4.8% decrease in ETP (effective ticket price, "ETP", is defined as
total lift ticket revenue divided by total skier days). The Company attributes
the decrease in skier days to above-average temperatures and below-average
snowfall throughout the majority of the ski season, which had a negative impact
on the entire Colorado market. In addition, the October 19, 1998 fires on Vail
mountain and the Canadian dollar exchange rate which favored the Canadian ski
industry also impacted skier days. The decrease in ETP is the result of a shift
in the proportion of total skier days to local and Front Range (Denver/Colorado
Springs metropolitan areas) skier days. Lift tickets sold to local and Front
Range skiers tend to have a lower ETP than tickets sold to destination guests.
This shift mainly occurred due to the popularity of the Buddy Pass, a
discounted season pass for Breckenridge and Keystone resorts, which accounted
for a significant portion of local and Front Range skier days.
Ski and Snowboard School revenue decreased due to a decrease in skier
days and the shift in the proportion of total skier days to local and Front
Range skier days as Front Range skiers are less likely to purchase lessons than
destination skiers.
Dining revenue increased primarily as a result of the addition of 12
dining operations acquired in four hotel acquisitions, coupled with modest
growth at existing facilities. The Lodge at Vail acquisition added two fine
dining establishments, eight restaurants were added with the acquisition of
VAB, and the Inn at Keystone and the Great Divide Lodge (formerly the
Breckenridge Hilton) each added one dining facility. The Company also added
TenMile Station, the first new on-mountain restaurant at Breckenridge in over
10 years.
The increase in Retail/Rental revenue is due to the addition of
approximately 30 retail and rental outlets provided by SSI Venture LLC.
Hospitality revenue increased as a result of strong performance from
existing operations due in part to a combination of effective yield management
and expansion of the managed property inventory. The acquisitions of the Lodge
at Vail, the Great Divide Lodge, and the Inn at Keystone in fiscal 1998 and VAB
in fiscal 1999 also contributed significantly. In addition to adding lodging
capacity, the Lodge at Vail and the Village at Breckenridge each added
additional property management operations. The Village at Breckenridge also
runs a vacation services operation/travel agency.
Other revenue increased as a result of the increased popularity of the
summer mountain activities including the new Alpine Slide at Breckenridge
mountain, expanded contract services for Beaver Creek,
23
Bachelor Gulch, and Arrowhead Villages, growth in club operations, expanded
licensing and sponsorship contracts, and increases in commercial leasing
revenue.
Resort Operating Expense. Resort Operating Expense for the nine months
ended April 30, 1999 was $273.9 million, an increase of $73.3 million, or
36.6%, compared to the nine months ended April 30, 1998. The increase in resort
operating expense is primarily attributable to the incremental operating
expenses contributed by VAB, SSI Venture L.L.C. the Inn at Keystone, the Lodge
at Vail and the Great Divide Lodge. A portion of the increase can also be
attributed to the increase variable expenses associated with the increased
level of resort revenue derived from non-lift businesses such as dining,
retail/rental and hospitality operations. These operations tend to have a
greater level of variable operating expenses proportionate to revenues as
compared to lift operations. These increases have been partially offset by cost
saving measures that have been implemented at all levels of the Company's
operations throughout the fiscal year.
Real Estate Revenue. Revenue from real estate operations for the nine
months ended April 30, 1999 was $31.4 million, a decrease of $34.4 million, or
52.2%, compared to the nine months ended April 30, 1998. The decrease is
attributed to the sell-out of homesites at Bachelor Gulch Village in fiscal
1998. Revenue for the nine months of fiscal 1999 consists primarily of the
sales of the Bell Tower Mall, one luxury residential penthouse condominium at
the Lodge at Vail, the sale of three development sites at Arrowhead Village,
the sale of two single family homesites and one multi-family homesite at
Bachelor Gulch and the Company's investment in Keystone/Intrawest LLC. Profits
from Keystone/Intrawest LLC during the nine months ended April 30, 1999
included the sale of 137 village condominium units, primarily at the River Run
development, and 57 single-family homesites surrounding an 18-hole golf course
development. Real estate revenue for the nine months ended April 30, 1998
consisted primarily of the sales of 37 single-family homesites at Bachelor
Gulch, two multi-family homesite at Arrowhead, six luxury residential
condominiums at the Golden Peak base area of Vail mountain and the Company's
investment in Keystone/Intrawest LLC.
Real Estate Operating Expense. Real estate operating expense for the nine
months ended April 30, 1999 were $26.2 million, a decrease of $32.7 million, or
55.5%, compared to the nine months ended April 30, 1998. The decrease in real
estate operating expense is due to the sell-out of homesites at Bachelor Gulch
Village in fiscal 1998. Real estate cost of sales for the nine months ended
April 30, 1999 consists primarily of the cost of sales and real estate
commissions associated with the sale of the Bell Tower Mall, one luxury
residential penthouse condominium at the Lodge at Vail, three development sites
at Arrowhead Village, and two single family homesites and one multi-family
homesite at Bachelor Gulch. Real estate cost of sales for the nine months ended
April 30, 1998 consisted primarily of the cost of sales and real estate
commissions associated with the sales of 37 single-family homesites at Bachelor
Gulch, two development sites at Arrowhead, and six luxury residential
condominiums at the Golden Peak base area of Vail mountain. Real estate
operating expenses include selling, general and administrative expenses
associated with the Company's real estate operations.
Corporate expense. Corporate expense increased by $242,000, or 5.6%, for
the nine months ended April 30, 1999 as compared to the nine months ended April
30, 1998. The increase is primarily attributable to an increase in professional
service fees. Corporate expense includes certain executive salaries, directors'
and officers' insurance, investor relations expenses and tax, legal, audit,
transfer agent, and other consulting fees.
Depreciation and Amortization. Depreciation and amortization expense
increased by $7.0 million, or 22.5%, for the nine months ended April 30, 1999
as compared to the nine months ended April 30, 1998. The increase was primarily
attributable to the inclusion of depreciation and amortization associated with
the three hotel acquisitions in fiscal 1998 and one hotel acquisition and the
SSI Venture LLC discussed above in fiscal 1999 and an increased fixed asset
base due to fiscal 1999 capital improvements.
Interest expense. During the nine months ended April 30, 1999, and the
nine months ended April 30, 1998, the Company recorded interest expense of
$17.6 million and $16.1 million, respectively, relating
24
primarily to the Company's Credit Facility and the Industrial Development Bonds
in fiscal 1999 and fiscal 1998, as well as the Company's Credit Facility and
the Industrial Development Bonds. The increase in interest expense for the nine
months ended April 30, 1999 compared to the nine months ended April 30, 1998,
is attributable to a higher average balance outstanding on the Credit Facility
due to amounts borrowed for the VAB acquisition and working capital funding to
SSI Venture LLC made during the first quarter, and the SSV Facility established
in the second quarter. The increase in interest expense was partially offset by
favorable interest rates.
Ten Months Ended July 31, 1998 Compared To Ten Months Ended July 31, 1997
The actual results of the ten months ended July 31, 1998 compared to the
actual results of the ten months ended July 31, 1997 discussed below are not
comparable due to our acquisition of Keystone and Breckenridge on January 3,
1997. Accordingly, the usefulness of the comparisons presented below is
limited, as the ten months ended July 31, 1997 includes the results of such
acquisition for the period from January 4 to July 31 while the ten months ended
July 31, 1998 includes the results of such acquisition for the full ten-month
period. Please see pro forma results of operations included elsewhere in this
Management's Discussion and Analysis.
Resort Revenue. Resort Revenue for the ten months ended July 31, 1998 was
$336.5 million, an increase of $88.0 million, or 35.4%, compared to the ten
months ended July 31, 1997. The increase was primarily attributable to the
inclusion of the acquisition of Keystone and Breckenridge for the full ten-
month period in fiscal 1998 but only for the period from January 4 to July 31
in fiscal 1997, and increases in lift ticket, ski school, dining, retail and
rental, hospitality and other revenues at all four resorts during fiscal 1998.
Resort Operating Expense. Resort Operating Expense was $217.8 million for
the ten months ended July 31, 1998, an increase of $64.6 million, or 42.1%, as
compared to the ten months ended July 31, 1997. The increase in Resort
Operating Expense is attributable to the inclusion of the acquisition of
Keystone and Breckenridge for the full ten months in fiscal 1998 but only for
the period from January 4 to July 31 in fiscal 1997, and increased variable
expenses resulting from the increased level of non-lift Resort Revenue during
the ten months ended July 31, 1998.
Real Estate Revenue. Revenue from real estate operations for the ten
months ended July 31, 1998 was $73.7 million, an increase of $12.6 million,
compared to the ten months ended July 31, 1997. Revenue for the ten months of
fiscal 1998 consisted primarily of the sales of 37 single-family homesites and
five multi-family sites in the Bachelor Gulch Village development ($45.7
million), and the sale of four luxury residential condominiums at the Golden
Peak base area of Vail Mountain ($18.7 million). Revenue for the first ten
months of fiscal 1997 consisted primarily of the sales of 63 single-family
homesites in the Bachelor Gulch Village development ($46.6 million) and eight
residential condominiums.
Real Estate Operating Expense. Real estate operating expense for the ten
months ended July 31, 1998 was $62.6 million, an increase of $7.7 million,
compared to the ten months ended July 31, 1997. Real estate cost of sales for
the first ten months of fiscal 1998 consisted primarily of the cost of sales
and real estate commissions associated with the sale of 37 single-family
homesites and five multi-family sites in the Bachelor Gulch Village development
and four luxury residential condominiums at the Golden Peak base area of Vail
Mountain. Real estate cost of sales for the first ten months of fiscal 1997
consisted primarily of the cost of sales and real estate commissions associated
with the sale of 63 single-family homesites in the Bachelor Gulch Village
development and eight residential condominiums.
Corporate Expense. Corporate expense increased by $880,000 for the ten
months ended July 31, 1998, as compared to the ten months ended July 31, 1997.
Corporate expense includes certain executive salaries, directors' and officers'
insurance, investor relations expenses and tax, legal, audit, transfer agent
and other consulting fees. The increase over fiscal 1997 is primarily
attributable to an increase in investor relations costs, transfer agent fees
and public reporting costs.
25
Depreciation and Amortization. Depreciation and amortization expense
increased by $9.2 million for the ten months ended July 31, 1998. The increase
was primarily attributable to the inclusion of depreciation expense and
amortization of goodwill for the acquisition of Keystone and Breckenridge for
the full ten-month period in fiscal 1998 but only for the period from January 4
to July 31 of fiscal 1997, and capital expenditures made in fiscal 1997 at all
four resorts.
Interest Expense. During the ten months ended July 31, 1998, and the ten
months ended July 31, 1997, the Company recorded interest expense of $17.8
million and $17.2 million, respectively. Interest expense related primarily to
the credit facility (See Note 6(b) of Notes to Consolidated Financial
Statements) and the Industrial Development Bonds (see Note 6(a) of Notes to
Consolidated Financial Statements) in fiscal 1998 and fiscal 1997, as well as
certain then outstanding senior subordinated notes in fiscal 1997. The Company
maintained a higher average balance outstanding under its credit facility in
fiscal 1998 due to amounts drawn for the hotel acquisitions, resort capital
expenditures and investments in real estate. The higher interest on the credit
facility in fiscal 1998 was partially offset by the interest incurred in fiscal
1997 on the $165 million in debt assumed in the acquisition of Keystone and
Breckenridge, higher interest rates on certain outstanding senior subordinated
notes which were outstanding until March 1997, and the one-time contractual
redemption premium on the early redemption of such senior subordinated notes.
Gain/Loss on the Sale of Fixed Assets. During the ten months ended July
31, 1998, the Company recorded a loss on the sale of fixed assets of $1.7
million. This loss was primarily attributable to the removal and write-off of a
fixed grip chairlift at Keystone Mountain. The lift is being replaced with a
new high-speed quad chairlift consistent with the Company's initiative to
increase uphill skier capacity and overall guest service. Additionally, the
Company wrote off certain retail software systems which will not be used by its
new retail joint venture in fiscal 1999.
Fiscal Year Ended September 30, 1997 ("Fiscal 1997") Compared to Fiscal Year
Ended September 30, 1996 ("Fiscal 1996")
Resort Revenue. Resort Revenue for fiscal 1997 was $259.0 million, an
increase of $118.8 million, or 84.6%, compared to fiscal 1996. The increase was
attributable primarily to (i) the inclusion of the results of the Acquired
Resorts from January 4, 1997 ($104.8 million) and (ii) increases in lift
ticket, ski school, food service, retail and rental, hospitality and other
revenues.
Resort Operating Expense. Resort Operating Expense was $172.7 million for
fiscal 1997, representing an increase of $82.8 million, or 92.1%, as compared
to fiscal 1996. The increase in Resort Operating Expense is primarily
attributable to (i) the inclusion of the results of the Acquired Resorts from
January 4, 1997 ($69.1 million), (ii) increased variable expenses resulting
from the increased level of Vail/Beaver Creek Resort Revenue and skier days in
fiscal 1997, (iii) expenses associated with new Vail/Beaver Creek food service
and retail/rental operations and (iv) a one-time reorganization charge of $2.2
million in the third quarter of fiscal 1997.
Real Estate Revenue. Revenue from real estate operations for fiscal 1997
was $71.5 million, an increase of $22.8 million, compared to fiscal 1996.
Revenue for fiscal 1997 consisted primarily of the sales of 65 single-family
homesites in the Bachelor Gulch Village development which totaled $47.5
million, two luxury residential condominiums at the Golden Peak base area of
Vail Mountain totaling $8.0 million, various condominiums in Beaver Creek
Village totaling $4.2 million and Arrowhead Village land sales of approximately
$5.1 million. Revenue for fiscal 1996 consisted primarily of the sales of 30
single-family homesites in the Strawberry Park development at Beaver Creek
Resort which totaled $30.9 million.
Real Estate Operating Expense. Real estate operating expense for fiscal
1997 was $66.3 million, an increase of $25.5 million, compared to fiscal 1996.
Real estate cost of sales for fiscal 1997 consisted primarily of the cost of
sales and real estate commissions associated with the sales of 65 single-family
homesites in the
26
Bachelor Gulch Village development, two luxury residential condominiums at the
Golden Peak base area of Vail Mountain, various condominiums in Beaver Creek
Village, and Arrowhead Village land sales. Real estate cost of sales for fiscal
1996 consisted primarily of the cost of sales and real estate commissions
associated with the sale of 30 single-family homesites in the Strawberry Park
development at Beaver Creek Resort.
Corporate Expense. Corporate expense was $4.7 million for fiscal 1997, a
decrease of $8.0 million as compared to fiscal 1996. For periods prior to
fiscal 1997, corporate expense included the costs associated with the Company's
holding company structure and overseeing multiple lines of business, including
the discontinued operations. In fiscal 1997, corporate expense includes certain
personnel, tax, legal, directors' and officers' insurance and other consulting
fees relating solely to the Company's resort and real estate operations.
Corporate expense for fiscal 1996 includes the following nonrecurring charges:
(i) $2.1 million related to the termination of an employment agreement with the
Company's former Chairman and Chief Executive Officer, (ii) $4.5 million
related to nonrecurring payments to certain holders of employee stock options,
and (iii) $1.9 million of compensation expense related to the exercise of stock
options by the Company's former Chairman and Chief Executive Officer. Excluding
the effect of those items, corporate expense increased by approximately
$400,000.
Depreciation and Amortization. Depreciation and amortization expense was
$34.0 million for fiscal 1997, an increase of $15.9 million, as compared to
fiscal 1996. The increase was primarily attributable to the inclusion of the
results of Keystone and Breckenridge from January 4, 1997 ($14.1 million) and
Vail/Beaver Creek capital expenditures made in fiscal 1996 and the first
quarter of fiscal 1997.
Interest Expense. During fiscal 1997 and fiscal 1996, the Company
recorded interest expense of $20.3 million and $14.9 million, respectively,
which relates primarily to the Company's then outstanding senior subordinated
notes, the Industrial Development Bonds, and the Company's credit facility. The
increase in interest expense from fiscal 1996 to fiscal 1997 is attributable to
the interest incurred on the $165 million in debt assumed in the acquisition of
Keystone and Breckenridge and the contractual redemption premium incurred in
the early redemption of the 12 1/4% senior subordinated notes due 2004,
partially offset by interest reductions due to redemptions totaling $54.5
million in principal amount of senior subordinated notes in the first half of
fiscal 1996.
Pro Forma Results of Operations--Ten Months Ended July 31, 1998 Compared to Ten
Months Ended July 31, 1997
The following unaudited pro forma results of operations of the Company
for the ten months ended July 31, 1997 assume the acquisition of Keystone and
Breckenridge occurred on October 1, 1996. These pro forma results are not
necessarily indicative of the actual results of operations that would have been
achieved nor are they necessarily indicative of future results of operations.
The unaudited pro forma financial information below excludes the results of
Arapahoe Basin, which the Company divested in September 1997. The audited
summarized information for the ten months ended July 31, 1998 are provided for
comparative purposes.
Ten (Pro Forma)
Months Ten Months
Ended Ended
July 31, July 31, Percentage
1998 1997 Increase Increase
-------- ----------- ----------- ----------
(unaudited)
(dollars in thousands)
Resort Revenue.......... $336,547 $280,949 $55,598 19.8%
Resort Operating
Expense................ 217,764 183,086 34,678 18.9%
27
Resort Revenue. Pro forma Resort Revenue for the ten months ended July
31, 1998 and 1997 are presented by category as follows:
Ten (Pro Forma)
Months Ten Months
Ended Ended Percentage
July 31, July 31, Increase Increase
1998 1997 (Decrease) (Decrease)
-------- ----------- ---------- ----------
(dollars in thousands)
Lift Tickets......................... $147,128 $135,827 $11,301 8.3%
Ski School........................... 38,647 34,462 4,185 12.1
Dining............................... 48,246 39,580 8,666 21.9
Retail/Rental........................ 19,975 17,400 2,575 14.8
Hospitality.......................... 43,127 29,967 13,160 43.9
Other................................ 39,424 23,713 15,711 66.3
-------- -------- ------- ----
Total Resort Revenue................. $336,547 $280,949 $55,598 19.8%
======== ======== ======= ====
Total Skier Days..................... 4,717 4,890 (173) (3.5%)
======== ======== ======= ====
ETP.................................. $ 31.19 $ 27.78 $ 3.41 12.3%
======== ======== ======= ====
Lift ticket revenue increased due to a 12.3% increase in ETP partially
offset by a 3.5% decline in the number of total skier days. The increase in ETP
is primarily due to increases in lead ticket prices at each resort, a less
aggressive ticket discounting strategy, and improvement in the proportion of
destination skier days to total skier days. The increase in lead ticket prices
and less aggressive discounting is consistent with the Company's strategy to
provide a high quality guest experience at a premium price. The improvement in
the proportion of destination skier days was driven by an increase in
destination skier days and a decline in local and Colorado Front Range
(Denver/Colorado Springs) skier days (non-destination skier days). The Company
attributes the increase in destination guests to the Company's new and
innovative marketing and loyalty programs and continuous commitment to guest
service. The decline in local and Front Range skier days is primarily
attributable to unusual weather patterns and below average snowfall for much of
the season at the Company's resorts.
Ski school revenue increased primarily due to price increases and an
increase in the number of ski and snowboard lessons sold. The number of lessons
increased due to an increase in the number of destination skiers who have a
greater tendency to purchase lessons than do local and Front Range guests.
Additionally, the Beaver Creek children's program has continued its success due
to a number of initiatives designed to increase participation. Demand continued
to be strong for snowboarding and private lessons driven by the popularity of
snowboarding and the increase in destination guests.
Dining revenue increased as a result of strong performance from existing
operations, the addition of several new dining operations, and dining
operations acquired in three hotel acquisitions. Five dining operations were
new to Vail Mountain in fiscal 1998, including the addition of two fine dining
facilities from The Lodge at Vail acquisition, and two facilities in the newly-
renovated and expanded Golden Peak base facility, resulting in an overall
seating capacity increase of 10%. Beaver Creek opened seven new operations, six
of which are located in the recently completed Beaver Creek Village core,
thereby increasing seating capacity by 29%. Four dining operations were new to
Breckenridge and Keystone resorts during fiscal 1998 including the operations
acquired in the acquisitions of the Great Divide Lodge (formerly Breckenridge
Hilton) and the Inn at Keystone, and two new, on-mountain operations.
Retail and rental revenues increased due to strong performance from
existing operations and the addition of three new operations. Increases in
existing operations were led by the completion of the Beaver Creek Village core
which provided a complementary balance of retailers in Beaver Creek Village,
making it an
28
attractive retail shopping destination, and the newly renovated and expanded
Golden Peak facility at the base of Vail Mountain. Two new rental operations
were opened in Beaver Creek Village and one new retail/rental operation was
opened in a strategic location at the base of Peak 8 in Breckenridge, where the
Company formerly had no presence in the retail/rental market. The Company's
retail and rental business also benefited from continuing improvements in
inventory management and store product mix.
Hospitality revenue increased due to an increasing base of property
management services, growth in the travel and reservations businesses, and the
acquisitions of The Lodge at Vail, the Great Divide Lodge (f/k/a Breckenridge
Hilton), and the Inn at Keystone. Property management services contributed
toward the growth over fiscal 1997 due to an increase in occupancy and average
daily rate (defined as revenue divided by room nights) at Beaver Creek Resort
driven by the increase in skier visits and number of rooms under management.
Other revenue increased as a result of the increased popularity of the
Adventure Ridge activities center at the top of Vail Mountain, expanded
contract services for Beaver Creek, Bachelor Gulch and Arrowhead Villages, the
expansion of the Beaver Creek Club, licensing and sponsorship revenue growth,
and increases in brokerage and commercial leasing revenue.
Resort Operating Expense. Resort Operating Expense was $217.8 million for
the ten months ended July 31, 1998, compared to $183.1 million for the ten
months ended July 31, 1997. As a percentage of Resort Revenue, Resort Operating
Expense decreased from 65.2% to 64.7% in the ten months ended July 31, 1998.
The overall increase in Resort Operating Expense is attributable to increased
variable operating expenses resulting from the increased level of Resort
Revenue derived from non-lift businesses such as dining, retail/rental,
hospitality and other operations.
Pro Forma Results of Operations--Twelve Months Ended July 31, 1998 Compared to
Twelve Months Ended July 31, 1997
The following unaudited pro forma results of operations of the Company
for the twelve months ended July 31, 1997 assume the acquisition of the
Keystone and Breckenridge occurred on August 1, 1996. These pro forma results
are not necessarily indicative of the actual results of operations that would
have been achieved nor are they necessarily indicative of future results of
operations. The unaudited pro forma financial information below excludes the
results of Arapahoe Basin, which the Company divested in September 1997. The
unaudited summarized information for the twelve-months ended July 31, 1998 are
provided for comparative purposes.
Twelve (Pro Forma)
Months Twelve Months
Ended Ended
July 31, July 31, Percentage
1998 1997 Increase Increase
-------- ------------- -------- ----------
(unaudited)
(dollars in thousands)
Resort Revenue....................... $350,498 $292,127 $58,371 20.0%
Resort Operating Expense............. 238,889 200,488 38,401 19.2%
29
Resort Revenue. Pro forma Resort Revenue for the twelve-months ended July
31, 1998 and 1997 is presented by category as follows:
Twelve (Pro Forma)
Months Twelve Months
Ended Ended Percentage
July 31, July 31, Increase Increase
1998 1997 (Decrease) (Decrease)
-------- ------------- ---------- ----------
(unaudited)
(dollars in thousands)
Lift Tickets....................... $147,128 $135,827 $11,301 8.3%
Ski School......................... 38,647 34,462 4,185 12.1
Dining............................. 52,371 43,099 9,272 21.5
Retail/Rental...................... 20,799 17,165 3,634 21.2
Hospitality........................ 47,128 34,065 13,063 38.3
Other.............................. 44,425 27,509 16,916 61.5
-------- -------- ------- ----
Total Resort Revenue............. $350,498 $292,127 $58,371 20.0%
======== ======== ======= ====
Total Skier Days................... 4,717 4,890 (173) (3.5%)
======== ======== ======= ====
ETP................................ $ 31.19 $ 27.78 $ 3.41 12.3%
======== ======== ======= ====
Lift ticket revenue increased due to a 12.3% increase in ETP partially
offset by a 3.5% decline in the number of total skier days. The increase in ETP
is primarily due to increases in lead ticket prices at each resort, a less
aggressive ticket discounting strategy, and improvement in the proportion of
destination skier days to total skier days. The increase in lead ticket prices
and less aggressive discounting is consistent with the Company's strategy to
provide a high quality guest experience at a premium price. The improvement in
the proportion of destination skier days was driven by an increase in
destination skier days and a decline in local and Colorado Front Range
(Denver/Colorado Springs) skier days (non-destination skier days). The Company
attributes the increase in destination guests to the Company's new and
innovative marketing and loyalty programs and continuous commitment to guest
service. The decline in local and Front Range skier days is primarily
attributable to unusual weather patterns and below average snowfall for much of
the season at the Company's resorts.
Ski school revenue increased primarily due to price increases and an
increase in the number of ski and snowboard lessons sold. The number of lessons
increased due to an increase in the number of destination skiers who have a
greater tendency to purchase lessons than do local and Front Range guests.
Additionally, the Beaver Creek children's program has continued its success due
to a number of initiatives designed to increase participation. Demand continued
to be strong for snowboarding and private lessons driven by the popularity of
snowboarding and the increase in destination guests.
Dining revenue increased as a result of strong performance from existing
operations, the addition of several new dining operations, and dining
operations acquired in three hotel acquisitions. Five dining operations were
new to Vail Mountain in fiscal 1998, including the addition of two fine dining
facilities from The Lodge at Vail acquisition, and two facilities in the newly-
renovated and expanded Golden Peak base facility, resulting in an overall
seating capacity increase of 10%. Beaver Creek opened seven new operations, six
of which are located in the recently completed Beaver Creek Village core,
thereby increasing seating capacity by 29%. Four dining operations were new to
Breckenridge and Keystone resorts during fiscal 1998 including the operations
acquired in the acquisitions of the Great Divide Lodge (formerly Breckenridge
Hilton) and the Inn at Keystone, and two new, on-mountain operations.
Retail and rental revenues increased due to strong performance from
existing operations and the addition of three new operations. Increases in
existing operations were led by the completion of the Beaver Creek Village core
which provided a complementary balance of retailers in Beaver Creek Village
making it an attractive retail shopping destination, and the newly renovated
and expanded Golden Peak facility at the base of
30
Vail Mountain. Two new rental operations were opened in Beaver Creek Village
and one new retail/rental operation was opened in a strategic location at the
base of Peak 8 in Breckenridge where the company formerly had no presence in
the retail/rental market. The Company's retail and rental business also
benefited from continuing improvements in inventory management and store
product mix.
Hospitality revenue increased due to an increasing base of property
management services, growth in the travel and reservations businesses, and the
acquisitions of The Lodge at Vail, the Great Divide Lodge (f/k/a Breckenridge
Hilton), and the Inn at Keystone. Property management services contributed
toward the growth over fiscal 1997 due to an increase in occupancy and average
daily rate (defined as revenue divided by room nights) at Beaver Creek Resort
driven by the increase in skier days and number of rooms under management.
Other revenue increased as a result of the increased popularity of the
Adventure Ridge activities center at the top of Vail Mountain, expanded
contract services for Beaver Creek, Bachelor Gulch, and Arrowhead Villages, the
expansion of the Beaver Creek Club, licensing and sponsorship revenue growth,
and increases in brokerage and commercial leasing revenue.
Resort Operating Expense. Resort Operating Expense was $238.9 million for
the twelve months ended July 31, 1998, compared to $200.5 million for the
twelve months ended July 31, 1997. As a percentage of Resort Revenue, Resort
Operating Expense was 68.2% and 68.6% for the twelve months ended July 31, 1998
and 1997, respectively. The overall increase in Resort Operating Expense is
attributable to increased variable expenses resulting from the increased level
of Resort Revenue derived from non-lift businesses such as dining,
retail/rental, hospitality and other operations.
Liquidity and Capital Resources
We have historically provided funds for operating expenditures, debt
service, capital expenditures and acquisitions through a combination of cash
flow from operations, short-term and long-term borrowings and sales of real
estate.
Our cash flows from investing activities have historically consisted of
payments for acquisitions, resort capital expenditures, and investments in real
estate.
On June 14, 1999 the Company purchased 100% of the outstanding shares of
Grand Teton Lodge Company, a Wyoming corporation, from CSX Corporation for a
total purchase price of $55 million. The Grand Teton Lodge Company operates
four resort properties in northwestern Wyoming: Jenny Lake Lodge, Jackson Lake
Lodge, Colter Bay Village and Jackson Hole Golf & Tennis Club. Grand Teton
Lodge Company operates the first three properties, all located within the Grand
Teton National Park, under a concessionaire contract with the National Park
service. Jackson Hole Golf & Tennis Club is located outside the park on
property owned by Grand Teton Lodge Company and includes approximately 30 acres
of developable land.
During the ten months ended July 31, 1998, we acquired three hotel
properties: the Great Divide Lodge (f/k/a Breckenridge Hilton), The Lodge at
Vail, The Inn at Keystone and certain other assets, for an aggregate purchase
price of $54.3 million (net of cash acquired in the transactions). We have
since incurred approximately $7.3 million during the ten months ended July 31,
1998 to substantially complete a new wing of The Lodge at Vail. We sold a
penthouse condominium acquired as part of the acquisition in January 1999 for a
total purchase price of $3.3 million.
On August 1, 1998, we entered into a joint venture with one of the
largest retailers of ski- and golf-related sporting goods in Colorado. We
contributed our retail and rental operations to the joint venture for a 51.9%
ownership interest in SSI Venture. Specialty Sports, Inc. contributed 30 stores
located in Denver, Boulder, Aspen, Telluride, Vail and Breckenridge to the
joint venture and holds a 48.1% share in SSI Venture.
31
Resort capital expenditures for the ten months ended July 31, 1998 were
$80.5 million, of which management estimates approximately $15 million
represented maintenance capital expenditures. Investments in real estate for
that period were $15.7 million, which included $3.1 million of mountain
improvements, including ski lifts and snowmaking equipment, which are related
to real estate development but which also benefit resort operations. The
primary projects included in resort capital expenditures were (i) trail and
infrastructure improvements at Keystone Mountain, (ii) terrain and facilities
improvements at Breckenridge, (iii) expansion of the grooming fleet at Vail and
Beaver Creek Mountains, (iv) retail/rental and restaurant additions in Beaver
Creek Village, (v) new high-speed quad chairlifts at Breckenridge and Keystone,
(vi) upgrades to office and front-line information systems, and (vii) the
addition of a new wing at The Lodge at Vail. The primary projects included in
investments in real estate were (i) continuing infrastructure related to Beaver
Creek, Bachelor Gulch and Arrowhead Villages, (ii) golf course development, and
(iii) investments in developable land at strategic locations at all four
mountain resorts.
During the nine months ended April 30, 1999, we acquired one hotel
property, The Village at Breckenridge, and certain other related assets for a
total purchase price of $33.8 million. We simultaneously entered into a
contract to sell certain of the acquired assets for $10 million which closed in
April 1999.
Resort capital expenditures for the nine months ended April 30, 1999 were
$53.7 million. Investments in real estate for that period were $22.9 million.
The primary projects included in resort capital expenditures were (i) trail and
infrastructure improvements and a new high speed quad chairlift at Keystone
Mountain, (ii) upgrades to the snowmaking system at Keystone, (iii) terrain and
facilities improvements and a new on-mountain restaurant at Breckenridge
Mountain, (iv) expansion of the children's ski school at Beaver Creek, (v)
expansion of Adventure Ridge at Vail, (vi) development of Adventure Point at
Keystone, (vii) expansion of the grooming fleet at all four resorts, (viii)
upgrades to office and front line information systems, (ix) significant
renovations of the Great Divide Lodge as well as minor renovations of the
Company's other hotels, and (x) infrastructure for the Category III expansion
on Vail Mountain. The primary projects included in investments in real estate
were (i) continuing infrastructure related to Beaver Creek, Bachelor Gulch and
Arrowhead Villages, (ii) construction of the Arrowhead Alpine Club, (iii) golf
course development, and (iv) investments in developable land at strategic
locations at all four resorts.
The seasonal nature of our construction activity results in the
concentration of capital expenditures in the May-December periods.
Consequently, we categorize capital expenditures on a calendar rather than
fiscal year basis. For calendar 1999, we anticipate spending between $45 and
$55 million for resort capital expenditures and between $30 and $40 million for
real estate capital expenditures. Management estimates that for calendar 1999,
approximately $15 million to $20 million of resort capital expenditures will be
categorized as resort maintenance capital expenditures for mountain, lodging,
dining and other operations including information systems, with the remainder
of resort capital expenditures being used to fund strategic projects such as
the Category III expansion on Vail Mountain, a new high-speed six-passenger
chairlift at Breckenridge, and trail, hospitality and infrastructure
improvements across all four resorts. Primary real estate projects for calendar
1999 include construction of condominiums at Arrowhead, the Arrowhead Alpine
Club and Bachelor Gulch Club and further development of the Red Sky Ranch
residential golf resort. We plan to fund resort and real estate capital
expenditures with cash flow from operations and borrowings under our revolving
credit facility.
During the ten months ended July 31, 1998, we generated $21.2 million in
cash flow from our financing activities consisting of net borrowings under our
revolving credit facility and other debt of $15.7 million, $8 million received
from the exercise of employee stock options and the refund of a bond reserve
fund of $3.3 million, less the payment of $5.7 million due under a rights
distribution to certain option holders. During the nine months ended April 30,
1999, the Company generated $10.1 million in cash from its financing activities
consisting of net long-term debt borrowings of $9.4 million and $0.6 million
received from the exercise of employee stock options.
At April 30, 1999 we had $41.2 million of outstanding Industrial
Development Bonds issued by Eagle County, Colorado. Interest accrues at 6.95%
per annum and the principal amount matures on August 1, 2019.
32
Interest is payable semi-annually on February 1 and August 1. The bonds are
secured by the Vail and Beaver Creek Mountain United States Forest Service
permits.
We currently have a $450.0 million revolving credit facility maturing on
December 19, 2002. At April 30, 1999, after giving effect to the offering and
the application of the net proceeds, we would have had $21.8 million
outstanding, $64.9 million of letters of credit issued thereunder and remaining
availability of $363.3 million, of which $137.9 million could have been
borrowed under the most restrictive of the financial covenants contained in the
credit facility. Upon the consummation of the offering of outstanding Notes on
May 11, 1999, borrowings under our credit facility bear interest annually at
our option at the rate of (i) LIBOR (the London interbank offered rate for a
given interest period) plus a margin (ranging from .75% to 2.25%) or (ii) the
Base Rate (defined as the higher of the Federal Funds Rate, as published by the
Federal Reserve Bank of New York, plus 0.5%, or the agent's prime lending rate)
plus a margin up to .75%. In addition, we must pay a fee on the face amount of
each letter of credit outstanding at a rate ranging from .75% to 2.25%. We will
pay a quarterly unused commitment fee ranging from 0.20% to 0.50%. The interest
margins and commitment fee fluctuate based upon the ratio of Funded Debt to our
Resort EBITDA (as defined in our credit facility). See "Description of Certain
Indebtedness--Revolving Credit Facility."
At April 30, 1999, SSI Venture had $9.7 million outstanding under the
$20.0 million SSI Venture credit facility, all of which was guaranteed by one
of our subsidiaries. See "Description of Certain Indebtedness--SSI Venture
Credit Facility."
During the ten months ended July 31, 1998, 1,043,271 employee stock
options were exercised at exercise prices ranging from $6.85 to $24.00.
Additionally, 8,260 shares were issued to management under the restricted stock
plan. During the nine months ended April 30, 1999, 62,160 employee stock
options were exercised at exercise prices ranging from $10.00 to $10.75.
Additionally, 8,751 shares were issued to management under the Company's
restricted stock plan.
Based on current levels of operations and cash availability, management
believes we are in a position to satisfy our working capital, debt service and
capital expenditure requirements for at least the next twelve months.
Seasonality
The Company's ski and resort operations are extremely seasonal in nature.
In particular, revenues and profits are substantially lower, historically
resulting in losses, in the first and fourth quarters due to the closure of its
ski operations. Based on the Company's fiscal year ended July 31, 1998, 87% of
total resort revenues were earned during the second and third fiscal quarters.
Inflation
Although the Company cannot accurately determine the precise effect of
inflation on its operations, management does not believe inflation has had a
material effect on the results of operations in the last three fiscal years.
When the cost of operating resorts increases, the Company generally has been
able to pass the increase on to its customers. However, there can be no
assurance that increases in labor and other operating costs due to inflation
will not have an impact on the Company's future profitability.
Year 2000 Compliance
The Year 2000 issue is a result of certain computer programs being
written using two digits rather than four to define the applicable year.
Computer programs which are date-sensitive may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in major computer
system or program failures or miscalculations or equipment malfunctions. The
Company recognizes that the impact of the Year 2000 issue extends beyond
traditional computer hardware and software to embedded hardware and software
contained in equipment used in operations, such as chairlifts, alarm systems
and elevators, as well as to third parties.
33
State of Readiness. The Year 2000 issue is being addressed within the
Company, under the direction of the information systems department, by its
individual business units. The Company has established a Year 2000 task force
consisting of representatives from all major business units to coordinate the
Company's Year 2000 efforts and progress is reported periodically to a Year
2000 executive committee consisting of certain senior management members.
The Company has committed resources to conduct risk assessments and to
take corrective action, where required, within each of the following areas:
information technology, operations equipment, and external parties. Information
technology includes telecommunications as well as traditional computer software
and hardware in the mainframe, midrange and distributed applications
environments. Operations equipment includes all automation and embedded chips
used in business operations. External parties include any third party with whom
the Company interacts, or upon whom the Company relies in the performance of
day-to-day operations. The Company's program for addressing the Year 2000 issue
includes the following phases: (1) inventory; (2) assessment; (3) remediation;
(4) testing; and (5) contingency planning. Approximately 10% of the Company's
normal information technology work has been deferred due to the fact that
personnel of the information systems department have dedicated certain portions
of their time to the Year 2000 issue. However, the Company plans to complete
and implement its information technology projects as planned.
The Company has traditionally upgraded and replaced its information
technology systems on a regular basis. As a result of this process, most of the
Company's information technology systems and applications are currently Year
2000 compliant. In the remaining information technology area, inventory and
assessment audits in the telecommunications, mainframe, midrange and
distributed applications are substantially complete with remediation,
verification and testing expected to be completed by October 31, 1999. With
respect to operations equipment, the Company has identified areas that it
considers "mission critical", in that a Year 2000 failure could impact the
health or safety of employees or resort guests or could have a material adverse
effect on the Company. The Company is engaging a third party consultant to
assist the Company in completing inventory and assessment audits of operations
equipment. The Company has extended its targeted completion date for these
audits to October 31, 1999 to allow the outside consulting firm to perform the
necessary work. Remediation, verification and testing with respect to
operations equipment are now expected to be completed by November 30, 1999.
The Company is communicating with its significant suppliers to determine
the extent to which the Company is vulnerable to those third parties' failure
to remediate their own Year 2000 issue. However, there can be no guarantee that
the systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company. Many of the external parties that the
Company relies on provide commodity goods or service that are widely available
from a range of vendors; therefore, third party impact on the Company is
expected to be minimal. The Company is seeking confirmation of Year 2000
compliance from critical suppliers and is identifying alternative suppliers as
part of its contingency plans. The Company will seek letters of compliance or
other satisfactory evidence of compliance (for example, web site disclosures)
from certain non-critical suppliers based on risk assessment of such suppliers.
Risk assessment with respect to major external vendors has been completed. Risk
assessment with respect to minor vendors is continuing and is expected to be
completed by August 31, 1999. Monitoring of risk in this area will continue
throughout 1999, as many external parties will not have completed their work
with respect to the Year 2000 issue.
Costs. The total estimated multi-year cost of the Year 2000 project is
estimated to be between $900,000 and $1,100,000 and its being funded from
operating cash flow. These costs are not expected to be material to the
Company's consolidated results of operations, liquidity or capital resources.
Of the total project cost, approximately $600,000 is attributable to the
purchase of new software or equipment that will be capitalized. The remaining
costs will be expensed as incurred. In a number of instances, the Company may
decide to install new software or upgraded versions of current software
programs that are Year 2000 compliant.
34
In these instances, the Company may capitalize certain costs of the new system
in accordance with current accounting guidelines. As of April 30, 1999,
$360,000 of the total estimated Year 2000 project costs have been incurred of
which $300,000 has been expensed and $60,000 was capitalized. Fiscal 1998
expensed costs were approximately $150,000 and expensed costs for the nine
months ended April 30, 1999 were approximately $150,000. Costs exclude
expenditures for systems that were replaced under the Company's regularly
planned schedule.
Risks. Failure to address a Year 2000 issue could result in a business
disruption that could materially affect the Company's operations, liquidity or
capital resources. The Company believes that the most reasonably likely worst
case scenario would consist of isolated instances of minor system or equipment
failures, for which the Company will have developed contingency plans.
There is still uncertainty around the scope of the Year 2000 issue and
its implications for the Company. At this time the Company cannot qualify the
potential impact of these failures. Due to the general uncertainty inherent in
the Year 2000 problem, as well as, in part, the uncertainty of the Year 2000
readiness of suppliers and the current status of the Company's Year 2000
program, the Company is unable to determine at this time whether any Year 2000
failures will have material adverse consequences on the Company's results of
operations, liquidity or financial condition. The Company's Year 2000 program
and related contingency plans are being developed to address issues within the
Company's control and to reduce the level of the Company's uncertainty about
its Year 2000 issues. The program minimizes, but does not eliminate, the issues
relating to external parties. Further, there can be no assurance that the
Company will successfully identify or remediate its potential Year 2000
problems and failure to do so may have a material adverse effect on the
Company.
Contingency Plans. The Company is developing contingency plans, and
expects to complete them by October 31, 1999. The Company will consider, among
other factors, the results and responses from its communications with material
third parties in determining the nature and the scope of contingency plans.
However, generally, the Company's contingency plans will include, but are not
limited to, development of manual work-arounds to system failures,
identification of alternative sources for goods and services and reasonable
increases in the amount of on-hand goods and supplies. Typically these plans
address the anticipated consequences of single events, while the scope of the
Year 2000 issues may cause multiple concurrent events for a longer duration.
Development of contingency plans for multiple concurrent events is in progress
and is expected to be completed by November 30, 1999.
The costs of the project, estimated completion dates, worst-case scenario
and other forward-looking statements above are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantees that
these estimates will be achieved, or that events will occur as projected, and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, timely implementation
of, and allocation of resources to, the Company's Year 2000 program, success of
the Company in identifying computer systems and non-information technology
systems that contain two digit date codes, the Company's appropriate risk
assessment and prioritization of such systems, the nature and amount of
programming and testing required and the time it actually takes to upgrade,
replace or otherwise take corrective action with respect to each of the
affected systems and the success of the Company's suppliers and other external
parties with which the Company interacts in addressing their Year 2000 issues.
35
BUSINESS
General
Vail Resorts is one of the leading resort operators in North America.
Through our five premier properties we provide a comprehensive resort
experience throughout the year to a diverse clientele with an attractive
demographic profile. Our resorts currently include:
. Vail Mountain--the largest and most popular single ski mountain
complex in North America ("Vail");
. Beaver Creek Resort--one of the world's premier family-oriented
mountain resorts ("Beaver Creek");
. Breckenridge Mountain--an attractive destination resort with numerous
apres ski activities and an extensive bed base ("Breckenridge");
. Keystone Resort--a year-round family vacation destination
("Keystone"); and
. Grand Teton Lodge Company--our first summer destination resort with
four resort properties in and around Grand Teton National Park
("Grand Teton").
We are one of the most profitable mountain resort operators due to the
following competitive strengths:
. ownership of premium resorts,
. attractive guest demographics,
. strong brand franchise,
. scope, diversity and quality of our complementary activities and
guest services, and
. proximity of our ski resorts to both Denver International Airport and
Vail/Eagle County Airport.
We had an 8.7% share of skier days in the United States for the 1997-98
ski season and are uniquely positioned to attract a broad range of guests due
to our diverse ski terrain, varied price points and numerous activities and
services. Our ski resorts are located within 50 miles of each other, which
enables us to offer guests the opportunity to visit each ski resort during one
vacation stay and participate in common loyalty programs. We also own
substantial real estate from which we derive significant strategic benefits and
cash flow. We expect to develop and expand our non-mountain operations in the
coming years.
Industry
There are approximately 800 ski areas in North America, which generated a
total of approximately 70 million skier days during the 1997-98 ski season.
There are approximately 521 ski areas in the U.S., which generated
approximately 54 million skier days during the 1997-98 ski season. These
resorts range from small ski resort operations, which cater primarily to day
skiers from nearby population centers, to larger resorts which, given the scope
of their operations and their accessibility, are able to attract both day
skiers and destination resort guests who are seeking a comprehensive vacation
experience. While the day skier tends to focus primarily on lift ticket price
and round-trip travel time, destination travelers tend to make their choices
based on the number of amenities and activities offered, as well as the
perceived overall quality of the vacation experience. As a result, destination
guests generate significantly higher Resort Revenue per skier day than day
skiers. We believe we are one of a relatively small number of ski areas in
North America able to attract both the day skier and the destination guest and
provide a comprehensive vacation experience.
Within the United States, regional distribution of skier days during the
1997-98 ski season is estimated to have been as follows: Northeast (12.7
million); Southeast (4.3 million); Midwest (6.7 million); Rocky Mountain (19.1
million); and Pacific West (11.2 million). The 27 ski areas located in Colorado
currently account for 22% of total skier days in the United States, up from
approximately 18% in 1985-86. While total skier days generated by all United
States resorts have increased by a total of 4% since the 1985-86 ski season,
skier days generated by Colorado ski areas have grown by approximately 31%
during the same period. During the same time period, skier days at our resorts
have increased by 39%. We believe that the primary reasons for
36
Colorado's growth relative to the rest of the United States include the quality
of the ski areas located in the state, the accessibility of its resorts from
major transportation centers and the relatively favorable climate of the Rocky
Mountains.
We believe that we benefit from certain trends and developments which
favorably impact the North American ski industry, including (1) advances in ski
equipment technology ("fat" skis and specially shaped skis) which facilitate
learning and make the sport easier to enjoy, thereby increasing an individual's
days skied per year and overall years of skiing, (2) the rapid growth of
snowboarding, which is increasing youth participation in "on-snow" sports, (3)
a greater focus on leisure and fitness and (4) a growing interest among
affluent families in purchasing second homes in mountain resort communities.
There can be no assurance, however, that such trends and developments will have
a favorable impact on the ski industry.
Snowboarding has energized interest in "on-snow" sports, primarily among
males between the ages of 13 and 24. According to the National Sporting Goods
Association (the "NSGA"), the number of snowboarders in the U.S. has increased
from 1.46 million in 1990 to 2.52 million in 1997, an increase of 73%. U.S.
skier days attributable to snowboarders have increased an average of 21% per
year over the past four years and snowboarders are currently estimated to
represent 21% of all U.S. skier days. With international markets believed to be
experiencing similar growth rates, snowboarding is among the fastest growing
sports in the world. Snowboarding was inaugurated as the newest Olympic sport
at the 1998 Winter Olympic Games in Nagano, Japan. Management believes that the
growth in snowboarding has had a positive impact on the ski industry and will
continue to be an important source of our lift ticket, ski school, retail and
rental revenue growth. We believe that the growth in snowboarding among
children and teens, who influence family vacation decisions, allows us to
attract additional family-oriented destination guests. Consequently, we are an
industry leader in the creation of snowboard attractions, programs and events.
The mountain resort industry is in a period of consolidation as the cost
of the infrastructure required to maintain competitiveness has increased,
thereby enhancing the position of larger and better capitalized resort owners.
The number of U.S. ski resorts has declined from approximately 709 in 1986 to
521 in 1998 and, based on industry estimates, the number of mountain resorts is
expected to decline further, as the majority of mountain resorts lack the
infrastructure, capital and management capability to compete in this multi-
dimensional and service-intensive industry. At the same time, the high cost of
mountain resort development and environmental restrictions have prevented new
resorts from being created. Since Beaver Creek opened in 1980, only one other
major ski facility has opened in the United States. Despite this consolidation,
the ski industry remains highly fragmented and we expect that no one resort
operator will account for more than 10% of the United States' 54 million skier
days for the 1997-98 ski season. We believe that the consolidation trend in the
mountain resort industry will continue, and we intend to selectively pursue
acquisition opportunities which we believe will provide attractive investment
returns.
Resorts
Vail
Opened in 1962, Vail is the largest and most popular single ski mountain
complex in North America, offering over 4,600 acres of unique and varied ski
terrain, spanning approximately 20 square miles. Included in this complex is
the largest network of high speed lifts in the world, a top-rated ski school
and a wide variety of dining and retailing establishments. Vail is ideally
suited for all levels of skiers as it has a balanced distribution of beginner,
intermediate and advanced terrain. Perhaps no single physical attribute defines
Vail better than the Back Bowls. More than seven miles wide, the Back Bowls are
one of the most distinctive terrain features found at any ski mountain in North
America and offer some of the finest skiing in the world. Vail typically
receives "dry" snowfall due to its central Rocky Mountain location.. We
recorded 1.34 million skier days for the 1998-99 season, our 36th season. For
the last ten years, Vail has been rated the number one ski resort in the United
States by the Mountain Sports and Living (f/k/a Snow Country) magazine survey.
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While Vail provides the largest and most varied ski terrain of any North
American mountain resort, we have received approval from the Forest Service for
infrastructure development of bowl skiing terrain within its current permit
area known as Category III; such approval is subject to potential appeal.
Category III will add 850 acres of new trails to the Back Bowls, increasing the
ski terrain in the Back Bowls by over 30%. With between 40% and 50% of the
guests at Vail Mountain classified as intermediate skiers, Category III
represents a significant expansion in non-expert bowl skiing for these skiers.
The terrain's high, north facing location typically yields extremely reliable
snow conditions and should allow for earlier and later ski season operations
than Vail's existing Back Bowls which face south. Although we believe that the
completion of this terrain expansion will significantly increase the number of
skier days at Vail, particularly in the early and late season non-peak periods,
there can be no assurance that such an increase will be achieved. See "Risk
Factors--We rely on government permits."
We have also consistently improved and expanded guest amenities at Vail
to increase Resort Revenue and Resort EBITDA. We currently own and operate 26
dining venues on the mountain and in the base villages and over 55,000 square
feet of retail, restaurant and commercial space located throughout the mountain
and at the three primary access points--Golden Peak, Vail Village and
Lionshead. Significant projects already completed include:
. The Golden Peak redevelopment, which replaced the entire base
facility at one of Vail Mountain's primary access points with a new
83,000 square foot facility. Included in the new base lodge are three
dining venues, a retail and rental outlet and skier services
facilities.
. A new high-speed quad chairlift at the Golden Peak base area and a
new 12 passenger gondola at the Lionshead base area, which improved
access to the mountain.
. Adventure Ridge, a non-ski activity center on the top of Vail
Mountain, which offers sledding and tubing, ice skating, snowmobile
tours, snow-biking, laser tag and a snowboard park in addition to
substantial day and evening retail and dining operations.
We are currently planning several additional resort attractions,
including:
. The Category III expansion which, subject to final government
approval, will increase the number of ski trails on Vail's renowned
Back Bowls by 850 acres. See "Risk Factors--We rely on government
permits."
. The redevelopment of our owned property in Lionshead, which will
create significant additional resort lodging and retail and
restaurant space. See "--Real Estate."
Beaver Creek
Beaver Creek, located ten miles west of Vail, consists of the Beaver
Creek, Arrowhead and Bachelor Gulch ski areas, and includes over 1,600 acres of
ski terrain. We acquired Beaver Creek in 1972 and opened the ski facilities
during the 1980-81 ski season. In 1993, we expanded Beaver Creek by acquiring
significant privately owned ski terrain and development property at Arrowhead
and Bachelor Gulch. This purchase allowed us to (1) develop a European style
village-to-village ski experience which interconnects, through ski lifts and
ski trails, the three distinct ski areas, (2) add significant intermediate
terrain, (3) improve skier distribution patterns across Beaver Creek and (4)
add mountain infrastructure capable of supporting anticipated skier growth.
Like Vail, Beaver Creek benefits from "dry" dependable snowfall in addition to
excellent snowmaking capabilities. Since its opening, Beaver Creek has
increased its skier days from 111,746 in 1980-81 to 617,000 in the 1998-99 ski
season, making it one of the fastest growing mountain resorts in North America.
Management believes that the success of Beaver Creek has resulted from its
unique combination of ambiance, architecture and a variety of groomed and
natural terrain providing world-class skiing which appeals to Beaver Creek's
family-oriented destination guests. Beaver Creek operates 14 lifts, including
six high speed quads. We also own and operate 19 restaurants on-mountain and in
the base areas, as well as over 130,000 square feet of retail, restaurant and
commercial space strategically located on and at the base of Beaver Creek. See
"--Resort Operations--Dining."
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We have implemented a number of capital improvements at Beaver Creek,
including the build-out of the Beaver Creek Village core with a final series of
additions to fully integrate Beaver Creek Mountain with the European-style
village at its base. These additions included two residential and retail multi-
use complexes, a series of outdoor escalators to move guests through the
village to the mountain, the 527-seat Vilar Center for the Arts at Beaver Creek
as well as a year-round, outdoor ice-skating area.
One of the primary factors in the growth of Beaver Creek has been an
increase in resort lodging. In addition to the significant growth taking place
at Beaver Creek, there has been substantial development in the surrounding
communities of Avon, Edwards, Eagle and Gypsum, providing additional,
moderately-priced, resort lodging. We anticipate the substantial resort lodging
growth to continue from the buildout of the Bachelor Gulch Village and
Arrowhead Village resort communities, both of which offer unique slopeside
development opportunities due to our fee simple ownership of the mountain land,
and from the significant development taking place in the surrounding
communities. See "--Real Estate."
Breckenridge
Breckenridge is located approximately 85 miles west of Denver and 40
miles east of Vail. Breckenridge's skier days were 1.39 million for the 1998-99
season. Breckenridge offers over 2,000 acres of skiing on four different
mountain peaks, including open bowl skiing and excellent beginner and
intermediate ski terrain. Breckenridge's mountains are interconnected by a
network of 23 lifts, including six high-speed quad chairlifts. Breckenridge
currently operates 15 dining venues, both on- and off-mountain, and over 17,000
square feet of on-mountain retail, restaurant and commercial space.
Breckenridge benefits significantly from its location adjacent to the
Town of Breckenridge, a restored 140 year old Victorian mining town which has
over 20,000 beds, over 70 restaurants and bars and over 130 shops. Significant
apres ski activities and extensive bed base have made Breckenridge an
attractive destination to national and international destination guests. We
anticipate significant additional resort lodging growth will be fueled by third
party developers as well as by the development of our owned properties. See "--
Real Estate."
Since our acquisition of Breckenridge in January 1997, we have made
substantial capital improvements to the resort which we believe have enhanced
all aspects of the overall guest experience. We added two new high-speed quad
chairlifts, increased snowmaking capacity by 50% and opened the first new on-
mountain restaurant at Breckenridge in over 10 years. We also acquired and
completely renovated the Great Divide Lodge and upgraded the Bergenhof Lodge
and Vista Haus restaurant.
Future plans at Breckenridge include substantial upgrades to the newly-
acquired Village at Breckenridge, a primary port of entry to the mountain,
skiing terrain expansion on Peak 7, and residential and commercial development
of the Company's land at the Peak 8 base area and in the Town of Breckenridge.
Keystone
Keystone is located approximately 70 miles west of Denver and 15 miles
from Breckenridge. Keystone's skier days were 1.26 million for the 1998-99 ski
season. Comprised of three mountains and interconnected by a network of 20
lifts, including two high speed gondolas and five high-speed quad chairlifts,
Keystone provides over 1,800 skiable acres suited to a wide variety of skier
ability levels. Keystone has the largest and most advanced snowmaking
capability of any Colorado mountain resort with snowmaking coverage extending
over nearly 50% of Keystone's skiable acreage. As a result, Keystone is
typically among the first mountain resorts in the nation to open each season
and is one of the last to close. Keystone also provides the
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largest single-mountain night skiing experience in North America. With 17
lighted trails covering 2,340 vertical feet from the summit to the base,
Keystone offers a 12 1/2 hour ski day which allows day guests to customize
their ski day and destination guests the opportunity to ski on arrival days.
Keystone is a planned family-oriented community which offers a variety of year
round activities, the majority of which we operate, including 24 on-mountain
and in-valley restaurants and over 94,000 square feet of on-mountain and in-
valley retail, restaurant and commercial space.
In addition, the Keystone JV is developing a significant portion of the
Keystone resort and has master plan approvals to add up to 3,400 residential
and lodging units and up to 318,000 square feet of retail and restaurant space
over the next 20 years. We believe that the build-out of this real estate will
result in increased skier days and Resort Revenue per skier day and will
significantly increase the number of higher revenue destination guests at
Keystone. See "--Real Estate."
Since our purchase of Keystone in January 1997, we have added two new
high-speed quad chairlifts, created Area 51, Colorado's newest snowboard park,
and opened Adventure Point, an on-mountain day and night recreation area. In
addition, a new restaurant was added at the North Peak base area. The Keystone
Lodge, which already carries the AAA Four Diamond rating, has also undergone an
extensive two-phase renovation.
Our continuing plans for Keystone include the installation of Keystone's
sixth high-speed quad chairlift, on-going expansion of Adventure Point,
increased ski terrain and an expansion of the Keystone Conference Center.
Grand Teton
On June 14, 1999, we completed our purchase of Grand Teton for a total
purchase price of $55 million. Based in Jackson Hole, Wyoming, Grand Teton
operates four premier resort properties in and around Grand Teton National
Park. Within the park, Grand Teton operates the 37-cabin Jenny Lake Lodge, a
AAA four-diamond lodge; Jackson Lake Lodge, a picturesque 385-room lodge that
boasts the most extensive meeting facilities in any national park; and Colter
Bay Village, a unique family resort with 226 cabins as well as extensive
camping and recreational facilities. Outside the park, Grand Teton operates the
Jackson Hole Golf and Tennis Club, the top-rated golf course in the state of
Wyoming. We also acquired 30 acres of developable land adjacent to the golf
course suitable for future residential development. Grand Teton has an
operating season generally running from mid-May through mid-October.
Accessibility
Given their close proximity to Vail/Eagle County Airport ("Vail/Eagle
Airport") and the recently-completed Denver International Airport ("DIA"), all
of our ski resorts are easily accessible to national and international
destination resort guests, as well as to day travelers from the Denver
metropolitan area. The Vail/Eagle Airport is located within 25 miles of Beaver
Creek and can accommodate large jet aircraft from major metropolitan areas.
Nearly 45% of the destination guests who traveled by air to ski at Vail and
Beaver Creek during the 1997-98 ski season arrived through Vail/Eagle Airport,
up from only 9% in 1990. We estimate that approximately 55% of the destination
guests flying to Vail and Beaver Creek and a similar percentage of the
destination guests traveling to Breckenridge and Keystone arrive through DIA.
All of Grand Teton's properties are located within approximately thirty miles
of Jackson Hole Airport, which is serviced by three major airlines.
Over the last seven years, we have worked closely with the nation's major
airlines to significantly improve accessibility to our resorts through
Vail/Eagle Airport. As a result of these efforts, the number of daily non-stop
flights, total seats, major airlines and cities served by Vail/Eagle Airport
have increased significantly. Vail/Eagle Airport currently provides direct
flight access from 13 major cities and we expect that Vail/Eagle Airport will
continue to expand its operations and offer more direct flights from more North
American cities.
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Furthermore, we continue to work with the major airlines to increase both
direct and connecting international flights into Vail/Eagle Airport. Presently,
guests from major cities located in Europe, South America, Mexico, New Zealand,
Australia and the Pacific Rim can conveniently fly to the Vail Valley with only
a single stopover or connection through a major U.S. city. We believe that the
proximity of our ski resorts to Vail/Eagle Airport provides us with a
significant competitive advantage relative to other North American destination
ski resorts. In order to induce major air carriers to offer flights from
selected new cities to the Vail/Eagle Airport, we have entered into agreements
guaranteeing the carriers minimum seasonal revenue associated with such
flights. Payments to date under these agreements have not been material.
Weather, Snowmaking and Grooming
Given their location in the Colorado Rocky Mountains, our ski resorts
receive some of the most reliable snowfall experienced anywhere in the world,
averaging between 20 and 30 feet of annual snowfall over the last 20 years,
which is significantly in excess of the average for all ski resorts in the
Rocky Mountains for such period.
Despite the natural snowfall typically received by our mountain resorts,
we continue to invest in the latest technology in snowmaking systems and
actively acquire additional water rights to allow for future snowmaking
expansion. Additionally, we have invested significantly in the most extensive
fleet of snowgrooming equipment in the world. The use of our snowmaking systems
in the early-season and snowgrooming equipment throughout the season, help us
to provide top-to-bottom skiing at all of our mountain resorts in both early-
and late-season, as well as during periods of lower than average snowfall.
For the 1998-1999 ski season, however, we experienced highly aberrant
weather conditions, which negatively impacted our financial performance. See
"Offering Memorandum Summary--Recent Results." Snowfall through New Year's Day
was the second lowest in forty years at Vail Mountain. This resulted in only
38% of our total skiable terrain across our four resorts being open to our
guests on Christmas Day. These weather conditions continued throughout the
winter as snowfall in February and March was the third lowest and temperatures
in March were the second warmest since Vail opened.
Resort Operations
We derive Resort Revenue from a wide variety of sources, including lift
ticket sales, dining, ski school, equipment rental, retail stores, travel
reservation services, lodging, property, club and conference management, real
estate brokerage, licensing and sponsorship activities, recreational activities
(including golf and tennis facilities) and property, club and conference
management. Our ability to appeal to a broad spectrum of guests and offer a
wide selection of activities and services has enabled us to generate Resort
Revenue per skier day that is among the highest in the industry.
Lift Ticket Revenue. Lift ticket revenue represents our single largest
revenue source. Our favorable demographics and world-class resort facilities
have enabled us to achieve premium ticket pricing. The lead ticket price, which
for the 1998-99 ski season was $61 a day for Vail and Beaver Creek Mountains
and $52 a day for Breckenridge and Keystone, is among the highest in the
industry. To maximize skier volume during non-peak periods and attract certain
segments of the market, we also offer a wide variety of incentive ticket
programs, including season passes, student rates, group discounts and senior
discounts. We engage in yield management analysis to maximize our effective
ticket price (defined as total lift ticket revenue divided by total skier
days). During the 1997-98 ski season, we introduced interchangeable lift
tickets which were valid across all four of our resorts and Arapahoe Basin ski
area. This allowed guests to ski and snowboard at any of our resorts with one
lift ticket. We also introduced Peaks at Vail Resorts, a loyalty program
similar to an airline frequent flier program. The program rewards guests who
frequent the resorts with a system of points that can be accumulated and
redeemed for rewards during subsequent visits.
Dining. Dining is a key component in providing a satisfying guest
experience and has been an important source of revenue growth. We believe that
by owning and operating both on-mountain and base area
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restaurants, we can better ensure the quality of products and services offered
to our guests, as well as capture a greater percentage of the guest's vacation
expenditures. Our strategies with respect to our dining operations include (1)
focusing growth in venues which allow for dining throughout the day and
throughout the year, including breakfast, lunch, apres ski, dinner, evening
entertainment, group functions and summer/non-ski season operations, (2)
creating unique themed environments to maximize guest enjoyment and revenue
opportunities, (3) further expanding on-mountain seating, (4) offering
affordable family lunchtime and evening dining and entertainment and (5)
continuing affiliations with institutions such as Johnson and Wales University,
one of the largest culinary and restaurant management schools in the world. The
large number of dining facilities we operate allow us to improve margins
through large quantity purchasing agreements and sponsorship relationships.
Our existing restaurant operations offer a wide variety of cuisine and
range from top-rated, full service sit-down restaurants to trailside express
food outlets. We operate 26 on-mountain and base restaurants in Vail, 19
restaurants in Beaver Creek, 15 restaurants in Breckenridge and 24 restaurants
in Keystone. Our recent acquisition of Grand Teton added eight dining
facilities, including both in-park and out-of-park operations.
On October 19, 1998, fires on Vail mountain destroyed certain of our
facilities including the ski patrol headquarters, a day skier shelter, the Two
Elk Lodge restaurant and the chairlift drive housing for the High Noon Life
(Chair #5). The fires have been determined to have been deliberately set and
are under investigation by federal, state and local law enforcement officials.
All of the facilities damaged are fully covered by our property insurance
policy. The incident is also covered under our business interruption insurance
policy. Although we are unable to estimate the total amount which will be
recovered through insurance proceeds, we do not believe the incident will have
a material impact on our ongoing financial results.
Hospitality. Our hospitality operations are designed to offer guests a
full complement of quality resort services and provide additional sources of
revenue and profitability. These operations include reservations, tour and
travel operations and hotel, property, club and conference center management.
We operate a consolidated central reservation center servicing our guests
in (1) Vail, Beaver Creek and the surrounding communities, (2) Keystone and (3)
Greater Summit County including Breckenridge and the communities surrounding
both Breckenridge and Keystone. The central reservation center is capable of
booking and selling airline and ground transportation, lodging, lift tickets,
ski school and most other activities at our resorts, earning commissions on
each third party sale. The center historically has handled over 150,000 calls
per year for Vail, Beaver Creek and the surrounding communities, over 300,000
calls per year for Keystone and approximately 60,000 calls per year for Greater
Summit County.
We have significantly improved our central reservation operations by (1)
creating preferred relationships with major travel companies, (2) increasing
purchases of bulk air and large blocks of room nights, (3) capitalizing on the
growth of our customer database, (4) expanding the variety of activities and
services offered and (5) improving cross-selling of our activities and
services, particularly prior to the guest's arrival at the resort.
We have also entered into preferred relationships with travel agent
consortiums representing approximately 9,000 North American travel agents.
These travel agents have agreed to emphasize our resorts as resorts of choice
to their clientele and in return receive certain commission overrides.
We believe there are significant advantages to continuing to grow and
increase the scope of our hotel and property management operations. Our hotel
and property management operations enable us to (1) leverage and enhance our
central reservations operations (2) ensure quality of the guest experience, (3)
offer full service vacation packages to our guests, affording us a competitive
advantage and (4) leverage the existing property management operation for
increased financial performance.
With the recent acquisitions of the Lodge at Vail, the Great Divide
Lodge, the Inn at Keystone and the Village at Breckenridge, we have taken the
first steps toward applying our hotel and property management
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strategy, already in place at Keystone and Beaver Creek, to Vail and
Breckenridge. We intend to continue to expand our property management
operations in Vail, Breckenridge and Beaver Creek by competing for and securing
new management contracts or through acquisitions. Additionally, in Keystone,
the Company expects to secure contracts on additional condominiums and homes
developed by the Keystone JV and third party developers. See "--Real Estate."
Including the recent acquisitions mentioned above we currently own seven
hotels totaling approximately 730 rooms and suites, manage an additional hotel
with 42 rooms and suites and manage approximately 1,800 condominium units
across all four of our resorts. Additionally, our recent acquisition of Grand
Teton added 385 lodge rooms, 263 cabins, and extensive camping facilities.
Additionally, we own and operate the Keystone Conference Center, which is
the largest convention center in the Colorado Rocky Mountains. With meeting
facilities totaling 32,500 square feet and capable of accommodating groups of
up to 1,800, the Keystone Conference Center draws groups throughout the year
and is typically sold-out during the non-ski season.
Ski and Snowboard School. We operate the world's largest ski and
snowboard school operation with over 2,000 instructors across the four ski
resorts. We estimate that it has one of the highest guest participation rates
in the industry. The success of the ski and snowboard school comes from:
. personalizing and enhancing the guest vacation experience,
. creating new teaching and learning systems (many of which we have
historically developed and sold to the Professional Ski Instructors
of America),
. introducing innovative teaching methods for children, including
separate children's centers, mountain-wide attractions and
educational programs like SKE-cology, themed entertainment and
teaching systems geared toward specific age groups, and
. continually creating new techniques to react to technological
advances in ski and snowboard equipment.
In addition, we have adopted a pay incentive program to reward
instructors based on guest satisfaction and repeat clientele. Future growth in
ski school revenue is expected to stem from significant growth in the sport of
snowboarding, for which we have qualified instructors, as well as teaching
opportunities resulting from the technological advances continuously taking
place in alpine skiing equipment.
Retail/Rental Operations. Prior to entering into the SSI Venture joint
venture, our retail division owned and operated all on-mountain locations and
selected base area locations. We operated approximately 40 retail and rental
outlets across our four resorts for the 1997-98 ski season. The on-mountain
retail locations offer ski accessories (i.e., hats, gloves, sunglasses,
goggles, handwarmers) and selected logo merchandise, all in locations which are
conveniently located for skiers. Off-mountain, we operated both ski and
snowboard equipment rental and full service retail locations. Among other
merchandise, our retail operations typically feature resort-related logo
merchandise and products of our sponsors. Our rental operations offer a wide
variety of ski and snowboard equipment for daily and weekly use.
On August 1, 1998, we entered into the SSI Venture joint venture with one
of the largest retailers of ski- and golf-related sporting goods in Colorado.
We contributed 36 of our 40 retail and rental locations in Vail, Breckenridge,
Keystone and Beaver Creek in exchange for a 51.9% interest in SSI Venture. Our
joint venture partners, Specialty Sports, Inc., contributed an additional 30
stores located in Denver, Boulder, Aspen, Telluride, Vail and Breckenridge. SSI
Venture currently owns and operates approximately 70 retail and rental
locations across Colorado. The owners and operators of Specialty Sports, Inc.,
the Gart family, have been operating in the sporting goods industry in Colorado
since 1929. Vail Resorts participates in the strategic and financial management
of the joint venture. We feel the new joint venture will greatly enhance our
guests' experience through increased focus on quality guest service and retail
product selection.
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Other Resort Operations
Adventure Ridge(TM) and Adventure Point(TM). Vail completed the first
ever mountaintop activities center, known as Adventure Ridge(TM), during the
1996-97 season. Adventure Ridge(TM) offers terrain parks and half-pipes for
skiers and snowboarders, as well as activities for non-skiers such as an ice-
skating rink, tubing runs, snow-biking, snowmobile tours, and four dining
operations. Consistent with our strategy to expand our offering of on-mountain
activities, and given the success of Adventure Ridge(TM) at Vail, we are
developing Adventure Point(TM) at Keystone, which currently features a tubing
hill and a variety of children's attractions. These non-traditional attractions
play a large role in the expansion of activities for our guests and create a
competitive advantage for our resorts.
Commercial Leasing Operations. We own significant base area restaurant,
retail and other commercial space. The strategy of our leasing operation is to
secure the commercial locations adjacent to our resorts for retail, restaurant
and entertainment venues and then to carefully select the appropriate tenant
mix for these locations to provide a high quality and diverse selection of
retailers and restauranteurs. Our total leasable commercial space is currently
over 240,000 square feet. For the 1998-99 ski season, approximately 30% of our
commercial space will be used for retail space, 38% for restaurant operations,
and the remaining 32% will be leased for office space and other uses.
Licensing and Sponsorship. An important part of our business strategy is
to leverage our brand name by entering into sponsorship relationships and
strategic alliances with world-class business partners, building our logo and
licensing business and gaining national and international exposure by hosting
special events. Our leading industry position, coupled with the demographics of
our customer base makes us an attractive partner. Our sponsors include America
West, American Airlines, Atlas Snowshoes, Avis Rent-A-Car, Bailey's Irish
Cream, Bolle America, Chevrolet, Coca-Cola, Coors Brewing Company, Compaq
Computers, Continental Airlines, Delta Air Lines, Evian, FILA, Hertz, Kendall-
Jackson, MCI WorldCom, Microsoft, Northwest Airlines, Pepsi-Cola, Sprint
Communications, TAG Heuer, THOR.LO, United Airlines and Yahoo!. Examples of the
types of relationships we have with our partners include Chevy Trucks, which
provides us with mountain vehicles and national marketing exposure, and Pepsi-
Cola, which, among other things, provides substantial marketing benefits. Our
sponsorship arrangements typically have three to five year terms and provide
benefits in the form of cash payments, expense reductions, capital improvements
and/or marketing exposure. We have licensed the use of our trademarks to over
one hundred companies for a variety of products such as apparel and sunglasses.
While terms of each license agreement vary, such agreements generally are for a
two year term and provide for the payment by the licensee of quarterly royalty
payments ranging from 6% to 8% of the gross wholesale price of the licensed
goods.
Private Membership Clubs. We are also active in the creation and
management of private membership clubs, which allows us to provide high-end
services and amenities to our upper-income guests, as well as evening dining
options and other services and activities to our overall guest population. Our
current clubs include (1) the Beaver Creek Club, which offers members luncheon
privileges at Beano's Cabin (which is open to the general public for dinner)
and certain golf, tennis and skiing amenities, (2) Game Creek Club, which
offers members luncheon privileges and is open to the general public for dinner
and (3) the Passport Clubhouse at Golden Peak, which provides members with a
reserved parking space, concierge services, a private dining facility and
locker and club facilities at the base of Vail Mountain. In addition,
construction is currently underway on the Arrowhead Alpine Club and the
Bachelor Gulch Club. We have pre-sold a significant number of memberships for
both of these clubs.
Promotions and Special Events. Our four resorts are frequently the sites
of special events and promotions. In addition to hosting annual World Cup
alpine skiing and World Cup mountain biking events, Vail Mountain and Beaver
Creek Mountain hosted the 1997 World Cup Skiing Finals and the 1999 World
Alpine Ski Championships. Vail previously hosted the World Championships in
1989 and is the first North American host site to have been selected by the
World Cup governing body twice. These events give us
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significant international exposure. Television viewership for the 1999 World
Alpine Ski Championships was estimated to have been in excess of 500 million
viewers worldwide.
Brokerage. Our real estate brokerage operations are conducted through a
joint venture in which we have a 50% interest. The joint venture was created in
June 1994 to facilitate the merger of our brokerage operations, Vail Associates
Real Estate, Inc., with the brokerage operations of Slifer, Smith & Frampton,
which combined the two largest brokerage operations in the Vail Valley. The
joint venture has a large share of both first-time developer sales and resales
throughout the Vail Valley, creating both a significant source of profitability
and a valuable source of information in planning and marketing our real estate
projects. In addition to profit distributions from the joint venture, we will
directly receive certain override payments on all brokerage revenue from sales
of our own property. Brokerage activities at Keystone are conducted by the
Keystone JV.
Other Revenue Sources. In addition to the revenue sources listed above,
we provide security and other village services to the Beaver Creek, Bachelor
Gulch and Arrowhead Villages. We also derive revenue during the non-ski season
by offering guests a variety of activities and services, including (1) golf and
tennis, including the recently acquired Jackson Hole Golf and Tennis Club, (2)
gondola and chair-lift rides for mountain-biking and sight-seeing, (3) on-
mountain and base area bike rentals, (4) on-mountain lunch operations, (5)
wedding and group functions at mountain and village restaurants, (6) white
water rafting and (7) horseback riding.
Marketing and Sales
The primary objectives of our marketing efforts include (1) building
demand during both peak and non-peak periods, (2) increasing overall sales
through targeted promotional programs in national and international markets,
and (3) continuing to increase the recognition and goodwill associated with the
Company's brand names and trademarks.
Our primary marketing method is direct print media advertising in ski
industry publications such as SKI and Mountain Sports and Living (f/k/a Snow
Country) and lifestyle publications such as Conde Nast Traveler and Bon
Appetit, whose readership reflects the demographic profile of our clientele.
Additionally we market directly to many of our guests through our website which
provides information regarding our guest services and amenities, live video of
on-mountain conditions and comprehensive on-line reservation capability. Our
website receives over 2 million visits annually. (Nothing contained on the
website shall be deemed to be incorporated herein.)
We are also very active in a number of promotional programs such as
discount programs offered through local retailers designed to attract day
skiers from local population centers, and loyalty programs which allow guests
to build points for lift ticket usage and participation in other related
activities, throughout each of our four ski resorts. In an effort to target
destination guests, a newspaper and radio advertising campaign is used in
markets which have direct air service to the Vail/Eagle Airport.
In addition to advertisements directed at the vacation guest, an
important part of our marketing activities also focus on attracting ski groups,
corporate meetings and convention business.
Real Estate
We benefit from our extensive holdings of real property at our resorts
throughout Summit and Eagle Counties and from the activities of VRDC, a wholly
owned subsidiary. VRDC manages our real estate operations, including the
planning, oversight, marketing, infrastructure improvement and development of
Vail Resorts' real property holdings. In addition to the substantial cash flow
generated from real estate sales, these development activities benefit the
Company's resort operations through (1) the creation of additional resort
lodging which is available to our guests, (2) the ability to control the
architectural theming of our resorts, (3) the creation of unique facilities and
venues (primarily restaurant and retail operations) which provide us with
45
the opportunity to create new sources of recurring revenue and (4) the
expansion of our property management and brokerage operations, which are the
preferred providers of these services for all developments on our land.
In order to facilitate the development and sale of our real estate
holdings, VRDC also invests in mountain improvements, such as ski lifts,
snowmaking equipment and trail construction. While these mountain improvements
enhance the value of the real estate held for sale (for example, by providing
ski-in/ski-out accessibility), they also benefit resort operations. In most
cases, VRDC seeks to minimize our exposure to development risks and maximize
the long-term value of our real property holdings by selling land to third
party developers for cash payments prior to the commencement of construction,
while retaining approval of the development plans as well as an interest in the
developer's profit. We also typically retain the option to purchase, any
retail/commercial space created in a development. We are able to secure these
benefits from third-party developers because of the high property values and
strong demand associated with property in close proximity to our mountain
resort facilities.
VRDC's principal activities include (1) the sale of single family
homesites to individual purchasers, (2) the sale of certain land parcels to
third-party developers for condominium, townhome, cluster home, lodge and mixed
use developments, (3) the zoning, planning and marketing of new resort
communities (such as Beaver Creek, Bachelor Gulch Village and Arrowhead), (4)
arranging for the construction of the necessary roads, utilities and mountain
infrastructure for new resort communities, (5) the development of certain
mixed-use condominium projects which are integral to resort operations (such as
properties located at a main base facility) and (6) the purchase of selected
strategic land parcels, which we believe can augment our existing land holdings
or resort operations.
Our current development activities are focused on (1) the completion of
three of our resort communities, Beaver Creek, Bachelor Gulch Village and
Arrowhead, (2) preparing for the redevelopment of the Lionshead base area and
adjacent land holdings located within the town of Vail, (3) preparing for the
development of our real estate holdings in the Town of Breckenridge, (4)
participation with our joint venture partner in the development of our base
area land holdings at Keystone, and (5) the planning of our significant real
estate holdings in and around Avon and at the entrance to Beaver Creek.
Beaver Creek
Beaver Creek, which opened in 1980, has emerged as one of the world's
preeminent resort communities. Beaver Creek Village offers a wide array of
shopping, dining, lodging and entertainment options in addition to being the
primary skiing access point to Beaver Creek Mountain.
The Beaver Creek Village core is substantially complete, and our
remaining land holdings in Beaver Creek Resort consist of zoned multi-family
sites (requiring limited additional infrastructure expenditures) expected to
contain approximately 200 multi-family residences located at the entrances to
Beaver Creek Resort and 30 townhome units at the base of Beaver Creek Mountain.
We expect to sell these remaining land holdings over the next five years.
Bachelor Gulch Village
The Bachelor Gulch Village development, which will be the newest village
on Beaver Creek Mountain, is comprised of 1,410 acres of company-owned land
located in a valley between Arrowhead and Beaver Creek. A private residential
resort community zoned for 672 residential units, Bachelor Gulch Village is an
intimate mountain village architecturally modeled after the grand lodges of the
U.S. National Parks. It consists of private, upscale real estate enclaves, and
most of the homesites have ski-in/ski-out access. The village is a skiing
gateway to Beaver Creek Mountain, and plans incorporate approximately 68,000
square feet of retail, restaurant and commercial space.
Infrastructure development at Bachelor Gulch Village commenced in 1994
and was substantially completed in 1998. Through April 30, 1999, we have sold
104 single-family and 52 multi-family homesites,
46
respectively. Our current unsold inventory in Bachelor Gulch Village consists
of 11 cluster homesites and development parcels zoned for 474 condominium,
timeshare and lodge units. We expect to complete the sale of substantially all
of these parcels over the next five years.
Arrowhead
Arrowhead, known as "Vail's Private Address," is comprised of over 1,500
acres of company-owned land and is recognized for its country club approach to
residential and resort amenities. Home of the Country Club of the Rockies, a
private golf club designed by Jack Nicklaus, Arrowhead is already a well-
established private resort consisting of 500 residential units and features
amenities such as swimming, clay tennis courts, hiking, mountain biking and
private fly-fishing on the Eagle River, and privacy gates that assure
controlled access 24 hours a day. Arrowhead contains the westernmost skiing
access point to Beaver Creek Mountain.
Through April 30, 1999, we have sold 26 single-family lots and 188 multi-
family units. Our current development activities are focused on the development
of Arrowhead Village, consisting of a 207 unit staged development centered
around a private alpine club. The current unsold inventory in Arrowhead Village
includes land zoned for 26 single-family homesites, 25 cluster homesites, four
duplex homesites and 50 multi-family units.
Lionshead
We are currently planning the redevelopment of our owned property in
Lionshead, together with related properties owned by third parties. Current
plans contemplate luxury hotel rooms, a significant number of condominiums and
timeshare units, significant additions to restaurant and retail space, an
employee housing complex and an office facility (intended to be used for Vail
Mountain's administrative and operations functions). The redevelopment of
Lionshead will require certain approvals from, and a cooperative partnership
with, the Town of Vail. There can be no assurance that we will receive such
approvals or cooperation, although we have recently received approval from the
Town of Vail on zoning entitlements.
Keystone
In 1994, over 500 acres of developable land at Keystone was contributed
to the Keystone JV. A master development plan has been approved which
contemplates continued development over the next 20 years. The plan calls for
the creation of six separate neighborhoods, each featuring distinctive
amenities and architecture based on the area's mining, ranching and railroad
history. At full buildout, there will be an estimated 4,600 residential homes
and lodging units and 382,000 square feet of commercial space as well as more
than 300 acres of open space at Keystone. A network of pedestrian trails and a
shuttle bus system are planned to link the neighborhoods and amenities.
As residential and commercial projects are completed, we have a priority
right to receive payments of up to $22.6 million for land contributed to the
Keystone JV, of which we have received payments of $2.2 million. An additional
$6.8 million is currently due. We also receive approximately 40% to 50% of the
profits generated by the Keystone JV and will have the opportunity to lease
commercial space created by the Keystone JV. The Keystone JV is involved in a
wide range of real estate development activities, including the planning,
infrastructure improvement, construction and marketing of all real property
improvements on its land. The Keystone JV seeks to minimize its exposure to
development and construction risks by pre-selling a significant portion of the
residential and lodging units prior to the commencement of construction of a
project and by individually financing each project through a secured
construction loan and equity investment.
As of April 30, 1999, the Keystone JV had constructed and sold 451
condominium and townhome units and 57 single-family homesites. Additionally,
there are 92 condominium and townhome units currently under construction and
scheduled for completion in 1999 of which 66 units have already been sold.
Commercial space developed through April 1999 includes 84,000 square feet
completed and an additional 32,000 square feet scheduled for completion in
1999. During the next five years, the Keystone JV expects to develop more than
700 new residential and lodging units and 124,000 square feet of commercial
space. In addition, Keystone's second championship golf course is currently
under construction with an opening planned for Summer 2000.
47
Breckenridge
We own approximately 270 acres of development land at one of the primary
base portals to Breckenridge plus 30 acres of development land near the center
of the Town of Breckenridge. VRDC is engaged in development planning for a new
base village, which is currently envisioned to include approximately 850
residential units, restaurant and retail space, a conference facility, and
other recreational amenities. Residential offerings will include ski-in/ski-out
single family homesites, multi-family condominium units, and townhouse units.
Avon
We own and are currently formulating plans for the development of two key
commercial sites in the Town of Avon. Avon is located at the entrance to Beaver
Creek Mountain and serves as a lodging base for resort guests. Our plans
currently include the construction of two mixed-use complexes which incorporate
lodging, dining, commercial space and a parking facility. The Town of Avon runs
a free shuttle bus service that transports guests throughout the town and up to
Beaver Creek Village, thus making the town an attractive and convenient source
for lodging and dining options. We expect to complete development of these
sites over the next five years.
Red Sky Ranch
We are in the planning stages for the Red Sky Ranch residential golf
resort development on a 700-acre parcel of land we own located approximately 10
miles west of Beaver Creek. Although this land is proximate to our Vail and
Beaver Creek resorts, it sits at a substantially lower elevation and has a
relatively moderate year-round climate, allowing for a longer golf season. We
anticipate the opening of this resort development in Summer 2003.
Grand Teton
Our recent purchase of the Grand Teton Lodge Company included 30 acres of
developable land adjacent to the Jackson Hole Golf and Tennis Club, which is
suitable for residential real estate development. We are currently reviewing
possible development plans for this parcel.
Employees
We currently employ approximately 6,200 year-round and 6,000 seasonal
employees. Approximately 90 of the seasonal employees are unionized. The
acquisition of Grand Teton adds approximately 40 year-round and 1,000 seasonal
employees. We consider our employee relations to be good.
Regulation and Legislation
We have been granted the right to use federal land as the site for ski
lifts and trails and related activities, under the terms of the permits with
the Forest Service. The Forest Service has the right to review and approve the
location, design and construction of improvements in the permit area and many
operational matters. While virtually all of the skiable terrain on Vail
Mountain, Breckenridge, and Keystone is located on Forest Service land, a
significant portion of the skiable terrain on Beaver Creek Mountain, primarily8.75% Notes not tendered in the Bachelor Gulch and Arrowhead Mountain areas, is located on Company-owned
land.
We have received approval from the Forest Service for infrastructure
development of bowl skiing terrain in Category III which is located within the
current Vail Mountain permit area. Certain opponents of the Category III
expansion filed a lawsuit against the Forest Service seeking to overturn this
approval and enjoin the project, and we intervened as an additional defendant
in the lawsuit. The federal district court denied the opponents' request for an
injunction, entered judgment for defendants, and dismissed the case. The
opponents' subsequent request for an injunction pending appeal was denied
without prejudice to the ultimate determinationtender offer were
called at 104.375% of their appeal. Their appeal
was briefed and argued on an expedited basis. In July 1999principal amount. We will call the opponents of
Category III expansion renewed their request8.75% Notes
remaining outstanding in May.
(2) The $564,000 adjustment to enjoin the Category III
expansion, which was again denied. Subsequently, the federal court of appeals
affirmed the federal district court's decision to dismiss the case.
48
In late July 1999, the U.S. Army Corps of Engineers alleged that certain
construction we have undertaken as part of the Category III expansion involved
discharges of fill material into wetlands in violation of the Clean Water Act.
The Corps did not specify the size of the alleged impact, but our own initial
review indicates that it involved approximately one-half acre. Subsequently,
three organizations and one individual collectively notified us and the federal
agencies that if the alleged violations are not remedied within 60 days, they
intend to file a citizen enforcement action under the Act. Under the Clean
Water Act, unauthorized discharges of fill may be resolved through the issuanceshareholders' equity consists of an after-the-fact permit by the Corps of Engineers. They can also give rise
to administrative, civil and criminal enforcement actions seeking monetary
penalties and injunctive relief, including removal of the unauthorized fill. As
of this date, the United States Environmental Protection Agency, the lead
enforcement agency in this matter, has not informed us how it intends to
proceed.
We also received the approval of the Forest Service to develop a
chairlift, other skier facilities and associated skiing terrain on Peak 7 and a
teaching chairlift, two new ski trails and additional snowmaking on Peak 9, all
locatedestimated
$904,000 total charge, tax effected at the Breckenridge. As part of that process, certain federal agencies
expressed concern about the analysis of potential future development on private
land that the Company owns below Peak 7. In response to an administrative
appeal of the Forest Service approval decision by certain individuals and
groups, the Regional Forester upheld the approval of these projects in November
1998. We have subsequently advised the Forest Service that we will postpone the
Peak 7 improvements, which will allow the Town of Breckenridge time to review a
development plan for the private land in question. Based upon the Town's
actions, the Forest Service will consider whether to conduct further
environmental review of the Peak 7 improvements. We have applied to the U.S.
Army Corps of Engineers for a wetlands permit for the Peak 7 improvements, but
the Corps of Engineers has not yet issued a final decision on this application.
We have also sought approval from the Forest Service and other agencies
to develop chairlifts, associated skiing terrain, and snowmaking in Jones
Gulch, which is located within the current Keystone permit area. The Forest
Service has advised us that this development will be the subject of an
environmental impact statement, and work on this statement is currently
underway. Other agencies will conduct related reviews. The initial issues
include the potential effect of the expansion on wildlife and wetlands, and it
is possible that the future resolution of these issues could affect whether, in
what form, and under what conditions the project is approved. In December 1998,
the Corps of Engineers notified Keystone that it had preliminarily determined
that the wetlands permit for Keystone's snowmaking diversion limits such
diversions to 550 acre-feet annually. We disagree that the permit limits
diversions, and discussions with the Corps of Engineers are ongoing. We were
authorized to divert additional water to meet our snowmaking needs during 1998
and we believe that we will be authorized by the Corps of Engineers to continue
to divert sufficient water to meet our snowmaking needs during 1999 and
subsequent years.
Our resort operations require permits and approvals from certain federal,
state, and local authorities, in addition to the Forest Service and Corps of
Engineers approvals discussed above. There can be no assurance that new
applications of existing laws, regulations, and policies, or changes in such
laws, regulations, and policies, will not occur in a manner that could have a
detrimental effect to us, or that material permits, licenses, or approvals will
not be terminated, non-renewed or renewed on terms or interpreted in ways that
are materially less favorable to us. Although we believe that we will be
successful in implementing our development plans and operations, no assurance
can be given that any particular permits and approvals will be obtained or
upheld on judicial review.
The permits originally granted by the Forest Service were (1) Term
Special Use Permits granted for 30-year terms, but which may be terminated upon
30 days written notice by the Forest Service if it determines that the public
interest requires such termination, and (2) Special Use Permits that are
terminable at will by the Forest Service. In November 1986, a new law was
enacted providing that Term Special Use Permits and Special Use Permits may be
combined into a unified single Term Special Use Permit that can be issued for
up to 40 years. Vail Mountain operates under a unified permit for the use of
12,950 acres that expires October 31, 2031. Breckenridge operates under a Term
Special Use Permit for the use of 3,156 acres that expires on December 31,
2029. Keystone operates under a Term Special Use Permit for the use of 5,571
acres that expires
49
on December 31, 2032. The Beaver Creek property is covered by a Term Special
Use Permit covering 80 acres and a Special Use Permit covering the remaining
2,695 acres, both expiring in 2006. We have exercised our statutory right to
convert our dual permits for the Beaver Creek Mountain Resort into a unified
permit for the maximum period of 40 years and we are currently in the process
of negotiating the final terms of the unified permit. The Forest Service can
terminate most of these permits if it determines that termination is required
in the public interest. In addition, a large part of the Beaver Creek property
under permit is terminable at will. However, to our knowledge, no recreational
Special Use Permit or Term Special Use Permit for any major ski resort then in
operation has ever been terminated by the Forest Service over the opposition of
the permitee.
For use of our permits, we pay a fee to the Forest Service. Under
recently enacted legislation, retroactively effective to fiscal 1996, we pay a
fee to the Forest Service ranging from 1.5% to 4.25% of sales occurring on
Forest Service land. However, through fiscal 1998, we must pay the greater of
(1) the fee due under the new legislation or (2) the fees actually paid for
fiscal 1995 that were calculated under the former fee calculation method.
Included in the calculation are sales from, among other things, lift tickets,
ski school lessons, food and beverages, rental equipment and retail merchandise
sales.
Legal Proceedings
The athletic nature of our ski operations subjects us to litigation in
the ordinary course of business, including claims for personal injury and
wrongful death. We are currently defending 12 such lawsuits, all of which are
covered by extensive liability insurance subject to applicable self-insured
retentions. We are defending eight of such lawsuits under the Colorado Ski
Safety Act (the "Act"), a comprehensive assumption-of-risk statute. The Act
delineates the responsibilities of both ski resort operators and skiers. As
long as the ski resort operator complies with the Act's mandates, which consist
of markings in relation to ski lifts and man made obstructions, signage in
relation to closed areas and ski trails and their difficulty, designation of
the ski resort boundaries, closed trails and "danger areas" and flagging and
lighting certain maintenance equipment such as snowmobiles, the operator is
presumed to be not negligent in accidents involving injury to one of its
guests. The Act further provides that a skier injured through one of the
"inherent dangers and risks of skiing," which include weather and snow
conditions and collisions with manmade and natural objects and other skiers, is
barred from suing the mountain resort. Consequently, if we are successful in
asserting that a claim brought against us is covered by the Act, we will face
no liability for such claim (although there may be other claims not covered by
the Act that arise out of the same incident).
Other than the matters discussed in the preceding paragraphs and other
matters with respect to which we believe we have no material liability or as to
which we are adequately insured, we are not currently a defendant in any
material litigation and there are no material legal proceedings pending against
us or to which any of our property is subject and, to the knowledge of
management, no such proceedings have been threatened against us.
50
MANAGEMENT
Directors and Executive Officers
The following table sets forth information with respect to the directors
and executive officers of Vail Resorts.
Name Age Position
---- --- --------
Adam M. Aron............ 44 Chairman of the Board of Directors and Chief Executive Officer
of the Company
Frank J. Biondi, Jr..... 54 Director
Leon D. Black........... 47 Director
Craig M. Cogut.......... 45 Director
Stephen C. Hilbert...... 53 Director
Robert A. Katz.......... 32 Director
Thomas H. Lee........... 55 Director
William L. Mack......... 59 Director
Joe R. Micheletto....... 62 Director
Antony P. Ressler....... 38 Director
Marc J. Rowan........... 36 Director
John J. Ryan III........ 71 Director
John F. Sorte........... 51 Director
Bruce H. Spector........ 56 Director
William P. Stiritz...... 64 Director
James S. Tisch.......... 46 Director
Andrew P. Daly.......... 53 President and Director of the Company
James P. Donohue........ 58 Senior Vice President and Chief Financial Officer of the Company
John McD. Garnsey....... 49 Senior Vice President and Chief Operating Officer for Beaver Creek
James S. Mandel......... 48 Senior Vice President, Vail Resorts Development Company
Paul A. Testwuide....... 58 Senior Vice President of Resort Projects for Vail
James P. Thompson....... 55 President, Vail Resorts Development Company
Martha Dugan Rehm....... 48 Senior Vice President, General Counsel and Secretary of the Company
Bruce Mainzer........... 46 Senior Vice President of Marketing and Sales for the Company
John W. Rutter.......... 47 Senior Vice President and Chief Operating Officer for Keystone
William A. Jensen....... 46 Senior Vice President and Chief Operating Officer for Vail and
Acting Chief Operating Officer for Breckenridge
Porter Wharton III...... 49 Senior Vice President of Public Affairs
Pursuant to the Restated Certificate of Incorporation and Restated Bylaws
of Vail Resorts, the Board is divided into two classes of Directors, denoted as
Class 1 and Class 2, each serving one-year terms. Class 1 directors are elected
by a majority vote of the holders of the Class A Common Stock and Class 2
directors are elected by a majority vote of the holders of the Common Stock.
The Class 1 directors are Messrs. Black, Cogut, Daly, Katz, Mack, Ressler,
Rowan, Ryan and Spector, and the Class 2 directors are Messrs. Aron, Biondi,
Hilbert, Lee, Micheletto, Sorte, Stiritz and Tisch.
Adam M. Aron was appointed the Chairman of the Board and Chief Executive
Officer of the Company in July 1996. Prior to joining the Company, Mr. Aron
served as President and Chief Executive Officer of Norwegian Cruise Line Ltd.
from July 1993 until July 1996. From November 1990 until July 1993, Mr. Aron
served as Senior Vice President of Marketing for United Airlines. From 1987 to
1990, Mr. Aron served as Senior Vice President of Marketing for the Hyatt
Hotels Corporation. Mr. Aron is also a director of Sunterra Corporation,
Florsheim Group, Inc., and Crestline Capital Corporation.
Frank J. Biondi, Jr. was appointed a director of the Company in July
1996. Mr. Biondi is Chairman of Biondi Reiss Capital Management. Mr. Biondi
previously served as Chairman and Chief Executive Officer of Universal Studios
Inc. from April 1996 through November 1998. Mr. Biondi served as President and
Chief
51
Executive Officer of Viacom, Inc. from July 1987 to January 1996. He has also
held executive positions with The Coca-Cola Company, Home Box Office Inc. and
Time Inc. Mr. Biondi currently is a director of Leake and Watts Services, The
Museum of Television and Radio, The Bank of New York and MiningCo.com, Inc.
Leon D. Black was appointed a director of the Company in October 1992.
Mr. Black is one of the founding principals of Apollo Advisors, L.P. ("Apollo
Advisors"), which was established in August 1990, and which, together with an
affiliate, acts as managing general partner of Apollo Investment Fund, L.P.
("Apollo Fund"), AIF II, L.P. and Apollo Investment Fund III, L.P., private
securities investment funds, of Apollo Real Estate Advisors, L.P. ("AREA")
which, together with an affiliate, acts as managing general partner of the
Apollo real estate investment funds and of Lion Advisors, L.P. ("Lion
Advisors"), which acts as financial advisor to and representative for certain
institutional investors with respect to securities investments. Mr. Black is
also a director of Converse, Inc., Samsonite Corporation and Telemundo Group,
Inc. Mr. Black is Mr. Ressler's brother-in-law.
Craig M. Cogut was appointed a director of the Company in October 1992.
Mr. Cogut is currently a senior principal of Pegasus Investors, L.P., which
acts as a managing general partner of private securities investment funds.
Prior thereto he was one of the founding principals of Apollo Advisors and of
Lion Advisors.
Stephen C. Hilbert was appointed a director of the Company in December
1995. Mr. Hilbert founded Conseco, Inc. in 1979 and serves as its Chairman,
President and Chief Executive Officer. Conseco, Inc. is a financial services
holding company based in Carmel, Indiana, which owns and operates life
insurance companies and provides investment management, administrative and
other fee-based services. Mr. Hilbert serves as a director of the Indiana State
University Foundation and the Indianapolis Convention and Visitor's
Association. He also serves on the Board of Trustees of both the Indianapolis
Parks Foundation and the U.S. Ski Team Foundation, as a Trustee of the Central
Indiana Council on Aging Foundation, and as a director of both the Indianapolis
Zoo and the St. Vincent Hospital Foundation.
Robert A. Katz was appointed a director of the Company in June 1996. Mr.
Katz is a principal of Apollo Advisors and Lion Advisors, with which he has
been associated since 1990. Mr. Katz is also a director of MTL, Inc., Aris
Industries, Inc. and Alliance Imaging, Inc.
Thomas H. Lee was appointed a director of the Company in January 1993.
Mr. Lee founded the Thomas H. Lee Company in 1974 and since that time has
served as its President. The Thomas H. Lee Company and the funds which it
advises invest in friendly leveraged acquisitions and recapitalizations. From
1966 through 1974, Mr. Lee was with First National Bank of Boston where he
directed the bank's high technology lending group from 1968 to 1974 and became
a Vice President in 1973. Prior to 1966, Mr. Lee was a Securities Analyst in
the institutional research department of L.F. Rothschild in New York. Mr. Lee
serves as a director of Atlantic Holding Corporation, Finlay Enterprises, Inc.,
First Security Services Corporation, Livent Inc. and Miller Import Corporation.
William L. Mack was appointed a director of the Company in January 1993.
Since 1963, Mr. Mack has been the President and Managing Partner of The Mack
Organization, an owner and developer of and investor in office and industrial
buildings and other commercial properties principally in the New York/New
Jersey metropolitan area as well as throughout the United States. Mr. Mack is a
founding principal of AREA. He has been Director of the Urban Development
Corporation for the State of New York since 1983. Mr. Mack is Chairman Emeritus
and Trustee of the Long Island Jewish Medical Center. Mr. Mack also serves as a
director of Bear Stearns Companies, Inc., the Mack-Cali Realty Corp. and
Metropolis Realty Trust, Inc.
Joe R. Micheletto was appointed a director of the Company in February
1997. Mr. Micheletto has been Chief Executive Officer and President of Ralcorp
Holdings, Inc. ("Ralcorp") since September 1996 and was Co-Chief Executive
Officer and Chief Financial Officer of Ralcorp from January 1994 to September
1996. From 1985 to 1994, he served as Vice President and Controller of Ralston
Purina Company. From 1991 to 1997, Mr. Micheletto served as Chief Executive
Officer of Ralston Resorts, Inc. Mr. Micheletto also serves as a director of
Agribrands International, Inc. and Ralcorp.
52
Antony P. Ressler was appointed a director of the Company in October
1992. Mr. Ressler is one of the founding principals of Apollo Advisors, L.P.,
Lion Advisors, L.P. and Ares Management, L.P. Mr. Ressler is also a director of
Allied Waste Industries, Inc., Berlitz International, Inc., Prandium, Inc.,
United International Holdings, Inc. and United Pan-Europe Communications N.V.
Mr. Ressler is Mr. Black's brother-in-law.
Marc J. Rowan was appointed a director of the Company in October 1992.
Mr. Rowan is one of the founding principals of Apollo Advisors and of Lion
Advisors. Mr. Rowan is also a director of NRT, Inc. and Samsonite Corporation.
John J. Ryan III was appointed a director of the Company in January 1995.
Mr. Ryan has been a financial advisor based in Geneva, Switzerland since 1972.
Mr. Ryan is a director of Artemis S.A. and Financiere Pinault S.A., private
holding companies in Paris, France, and he is also a director of Converse, Inc.
He is a Director of Evergreen Resources Inc., a publicly held oil and gas
exploration company. Mr. Ryan is President of J.J. Ryan & Sons, a closely held
textile trading corporation in Greenville, South Carolina.
John F. Sorte was appointed a director of the Company in January 1993.
Mr. Sorte has been President of New Street Advisors L.P., a merchant bank, and
of New Street Investments L.P., its broker-dealer affiliate, since he co-
founded both companies in March 1994. From 1992 to March 1994, Mr. Sorte was
President and Chief Executive Officer of New Street Capital Corporation, a
merchant banking firm. Mr. Sorte is also a director of WestPoint Stevens Inc.
and serves as Chairman of the Board of Directors of The New York Media Group,
Inc.
Bruce H. Spector was appointed a director of the Company in January 1995.
Mr. Spector has been a consultant to Apollo Advisors since 1992 and since 1995
has been a principal in Apollo Advisors. Prior to October 1992, Mr. Spector, a
reorganization attorney, was a member of the Los Angeles law firm of Stutman
Triester and Glatt. Mr. Spector is also a director of Telemundo Station Group,
Inc., United International Holdings, Inc. and Metropolis Realty Trust, Inc.
William P. Stiritz was appointed a director of the Company in February
1997. Mr. Stiritz became Chairman, CEO and President of Agribrands
International, Inc. in April 1998. Since 1982 he has served as Chairman of
Ralston Purina Company. Mr. Stiritz also serves separately as Chairman of
Ralcorp. Mr. Stiritz also is a director of the following companies: Angelica
Corporation, Ball Corporation, May Department Stores Company and Reinsurance
Group of America, Incorporated.
James S. Tisch was appointed a director of the Company in January 1995.
Mr. Tisch is President and Chief Operating Officer of Loews Corporation. He has
been with Loews Corporation since 1977. Prior to 1977, Mr. Tisch was with CNA
Financial Corporation. Mr. Tisch is Chairman of the Board of Directors of
Diamond Off-shore Drilling, Inc. and is a member of the Board of Directors of
CNA Financial Corporation and Loews Corporation. He is also Chairman of the
Federation Employment and Guidance Service, a member of the Board of Directors
of UJA-Federation of New York, and a Trustee of The Mount Sinai Medical Center.
Andrew P. Daly was appointed a director of the Company in June 1996. Mr.
Daly became President of Vail Associates, Inc. ("Vail Associates") in 1992 and
President of the Company in 1996. He joined Vail Associates in 1989 as
Executive Vice President and President of Beaver Creek Resort Company. Prior to
joining Vail Associates, Mr. Daly owned and was President of Lake Eldora Ski
Corporation, which operated the Eldora Mountain Resort ski area. From 1982 to
1987, Mr. Daly was Chief Executive Officer of Copper Mountain Resort, where he
held several positions from 1972 to 1982.
James P. Donohue became Senior Vice President and Chief Financial Officer
of the Company in October 1996. From 1991 to October 1996, Mr. Donohue served
as Senior Vice President and Chief Financial Officer of Fibreboard Corporation,
a manufacturer and distributor of building products, which also owned and
operated three ski resorts located in California. Prior to 1991, Mr. Donohue
was an Executive Vice President of Continental Illinois Bank., N.A.
John McD. Garnsey joined the Company in May 1999 as Senior Vice President
and Chief Operating Officer for Beaver Creek. Mr. Garnsey served as President
of the Vail Valley Foundation from 1991 through April 1999 and as Vice
President from 1983 to 1991. Mr. Garnsey is also a director of the Vail Valley
53
Foundation, Bravo!Colorado, the Vilar Center for the Performing Arts at Beaver
Creek, Vail Valley Tourism and Convention Bureau and Ski Club Vail. In
addition, Mr. Garnsey was President of the Organizing Committee for the 1999
World Alpine Ski Championships.
William A. Jensen joined Breckenridge as Senior Vice President and Chief
Operating Officer in May 1997 and was appointed Chief Operating Officer for
Vail in May 1999. He remains Acting Chief Operating Officer for Breckenridge
until a successor is appointed. Mr. Jensen was President of the Fibreboard
Resort Group from 1991 to 1996. He was Vice President of Sunday River Ski
Resort from 1989 to 1991 and from 1983 to 1989 Mr. Jensen was Vice President of
Kassbohrer of North America, a grooming vehicle manufacturer.
Bruce W. Mainzer joined the Company in June 1997 as Senior Vice President
of Marketing and was named Senior Vice President of Marketing and Sales in
August 1998. From 1996 to 1997, Mr. Mainzer was the Executive Vice President of
Marketing and Planning at Carnival Airlines in Miami. From 1994 to 1996,
Mr. Mainzer was Vice President of Marketing for Norwegian Cruise Line Ltd. From
1985 to 1994, Mr. Mainzer served in a variety of key marketing positions at
United Airlines including heading the departments of yield management, market
research and brand marketing.
James S. Mandel has served as Senior Vice President of Commercial
Development for Vail Resorts Development Company since April 1, 1999. From 1994
to December 1998, Mr. Mandel was the Senior Vice President and General Counsel,
and served as Secretary of the Company from 1995 to 1998. From January 1999
through March 1999, Mr. Mandel practiced law and was an advisor to and part-
time employee of the Company. From 1978 until joining the Company, Mr. Mandel
was a partner with Brownstein Hyatt Farber & Strickland, P.C., a Denver law
firm, and specialized in real estate development and corporate finance.
Martha Dugan Rehm became Senior Vice President, General Counsel and
Secretary of the Company in May 1999. Prior to joining the Company, Ms. Rehm
served since mid 1998 as Vice President and General Counsel of Corporate
Express. Inc., a supplier of office products and computer supplies to
corporations. Prior to 1998, she was a partner for many years with Holme
Roberts & Owen, LLP, a Denver-based law firm, where her practice included
general corporate law emphasizing corporate finance and securities
transactions. Ms. Rehm began practicing law with that firm in 1983.
John W. Rutter was appointed Senior Vice President and Chief Operating
Officer of Keystone Resort in May 1997. From 1991 to 1997, he was Executive
Vice President of Ski Operations for Ralston Resorts, Inc. From 1980 to 1991,
he was Vice President of Ski Operations for Keystone Resort and Arapahoe Basin.
Mr. Rutter also serves on the Management Committee of Keystone/Intrawest LLC.
Mr. Rutter is Chairman of the Board of Directors of the National Ski Areas
Association and serves on its Public Lands Committee.
Paul A. Testwuide became Senior Vice President of Resort Projects for
Vail in May 1999. Prior to accepting this position, Mr. Testwuide was Chief
Operating Officer for Vail and Beaver Creek in 1998 and from 1992 to 1998, he
was Vice President of Mountain Operations for Vail Associates. Mr. Testwuide
was Managing Director of Vail Mountain Operations from 1989 to 1992, Director
of Mountain Operations from 1976 to 1989 and served as the Director of Ski
Patrol from 1971 to 1976. Mr. Testwuide has held various management positions
in mountain operations since joining Vail Associates in 1963.
James P. Thompson joined Vail Resorts Development Company in 1993 in
connection with Vail Associates' acquisition of the Arrowhead at Vail
development. He joined Arrowhead at Vail in 1989, and served as its President.
Prior to joining Arrowhead at Vail, Mr. Thompson served as Vice President of
Moore and Company in Denver for 14 years, leading their land acquisitions,
syndications and development activities.
Porter Wharton III joined the Company in January 1999 as Senior Vice
President of Public Affairs. From 1985 to January 1999, Mr. Wharton was
Chairman and Chief Executive Officer of The Wharton Group, a Denver-based
national government relations and issues management consulting firm. He also
has served as a consultant to the Company since 1995.
54
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
the Common Stock and Class A Common Stock as of April 30, 1999 by (i) each
person or entity who owns of record or beneficially five percent or more of any
class of capital stock, (ii) each director and named executive officer of the
Company and (iii) all directors and executive officers as a group. To our
knowledge, each of such stockholders has sole voting and investment power as to
the shares shown unless otherwise noted.
Common Stock Class A Common Percent of
Beneficially Owned Stock Beneficially Owned Class A Common
------------------- ---------------------------- Stock and
Name of Percent Percent Common Stock
Beneficial Owner Shares of Class Shares of Class Beneficially Owned
---------------- ---------- -------- -------------- -------------------------------
Apollo Ski Partners,
L.P. (1)(2)............ -- -- 7,439,542 99.9% 21.5%
Ralcorp Holdings, Inc.
(3).................... 7,554,406 27.9% -- -- 21.9%
Ronald Baron (4)........ 11,906,200 44.0% -- -- 34.5%
Capital Research and
Management Company
(5).................... 1,519,600 5.6% -- -- 4.4%
All directors and
officers as a group, 14
persons (6)............ 868,654 3.2% -- -- 2.5%
- --------
(1) Apollo Ski Partners was organized principally for the purpose of holding
Common Stock and Class A Common Stock of the Company. The general partner
of Apollo Ski Partners is Apollo Fund, a Delaware limited partnership and
a private securities investment fund. The managing general partner of
Apollo Fund is Apollo Advisors, a Delaware limited partnership, the
general partner of which is Apollo Capital Management, Inc. ("Apollo
Capital"), a Delaware corporation. Mr. Black, a director of the Company,
is a director of Apollo Capital. All officers, directors and shareholders
of Apollo Capital, including Messrs. Black, Katz, Mack, Ressler, Rowan and
Spector (directors of the Company), disclaim any beneficial ownership of
the Common Stock and Class A Common Stock of the Company owned by Apollo
Ski Partners. The address for Apollo Ski Partners is 2 Manhattanville
Road, Purchase, NY 10577.
(2) The Class A Common Stock is convertible into Common Stock (i) at the
option of the holder, (ii) automatically, upon transfer to a non-affiliate
of such holder and (iii) automatically, if less than 5,000,000 shares (as
such number shall be adjusted by reason of any stock split,
reclassification or other similar transaction) of Class A Common Stock are
outstanding.
(3) As reported by Ralcorp on Schedule 13D filed with the Securities and
Exchange Commission on February 13, 1997. The address for Ralcorp is 800
Market Street, Suite 1600, St. Louis, MO 63101.
(4) As reported by Ronald Baron and related entities on Schedule 13D/A filed
with the Securities and Exchange Commission on May 21, 1999. The address
for Ronald Baron is 767 Fifth Avenue, 24th Floor, New York, NY 10153.
(5) As reported by Capital Research and Management Company on Schedule 13G
filed with the Securities and Exchange Commission on February 11, 1999.
The address for Capital Research and Management Company is 333 South Hope
Street, Los Angeles, CA 90071.
(6) With the exception of 26,000 shares of Common Stock owned by Mr. Ressler,
no directors or officers of the Company directly own shares of Common
Stock (other than options to purchase Common Stock granted to officers of
the Company and as otherwise described in this prospectus).
55
DESCRIPTION OF CERTAIN INDEBTEDNESS
Revolving Credit Facility
Our revolving credit facility (as amended, the "Credit Facility") with
our subsidiary, The Vail Corporation, as borrower, NationsBank, N.A., as agent
(the "Agent"), certain other financial institutions, as lenders, and
NationsBanc Montgomery Securities LLC provides for debt financing up to an
aggregate principal amount of $450.0 million. The proceeds of the loans made
under the Credit Facility may be used to fund our working capital needs,
capital expenditures and other general corporate purposes, including the
issuance of letters of credit.
Borrowings under the Credit Facility bear interest annually at the
borrower's option at the rate of (i) LIBOR (the London interbank offered rate
for a given interest period) plus a margin (ranging from .75% to 2.25%) or (ii)
the Base Rate (defined as the higher of the Federal Funds Rate, as published by
the Federal Reserve Bank of New York, plus 0.5%, or the Agent's prime lending
rate) plus a margin up to .75%. In addition, the borrower must pay a fee on the
face amount of each letter of credit outstanding at a rate ranging from .75% to
2.25%37.6%. The borrower must also pay$904,000 estimated charge
represents a quarterly unused commitment fee ranging
from .20% to .50%. The interest margins$492,000 call premium and $232,000 and $180,000 in unamortized
financing fees described in this paragraph
fluctuate based upon the ratio of Funded Debt (as defined) to Resort EBITDA (as
defined). The Credit Facility matures on December 19, 2002.
The Vail Corporation's obligations under the Credit Facility are
unsecured and are guaranteed by us and certain of our subsidiaries.
The Credit Facility contains various covenants that limit, among other
things, subject to certain exceptions, indebtedness, liens, transactions with
affiliates, restricted payments and investments, mergers, consolidations and
dissolutions, sales of assets, dividends and distributions and certain other
business activities. The Credit Facility also contains certain financial
covenants, including a Funded Debt to Resort EBITDA, Senior Debt to Resort
EBITDA, Minimum Fixed Charge Coverage Ratio and Interest Coverage Ratio (each
as described in the Credit Facility).
At April 30, 1999, the borrower had various letters of credit outstanding
in the aggregate amount of $64.9 million, including letters of credit in the
amount of $47.2 million to secure metro district bonds issued in connection
with infrastructure and other costs at Bachelor Gulch Village. See Note 11 to
our Consolidated Financial Statements.
Industrial Revenue Bonds
Pursuant to an indenture (the "IRB Indenture") dated as of April 1, 1998,
between Eagle County, Colorado, as issuer (the "IRB Issuer"), and U.S. Bank
National Association, as trustee (the "IRB Trustee"), $41.2 million aggregate
principal amount of industrial revenue bonds (the "IRBs") were issued for the
purpose of providing funds to The Vail Corporation d/b/a Vail Associates, Inc.
("VAI") to refinance certain existing industrial revenue bonds. Pursuant to a
financing agreement (the "IRB Agreement") dated as of April 1, 1998, among the
IRB Issuer and VAI, the IRB Issuer loaned to VAI the proceeds of the issuance
of the IRBs and VAI agreed to make payments in the aggregate amount, bearing
interest at rates and payable at times, corresponding to the principal amount
of, interest rates on and due dates under the IRBs. The obligations of VAI
under the IRB Indenture, the IRB Agreement and the IRBs are secured by certain
multi-party agreements between VAI, the IRB Trustee and the U.S. Forest Service
(the "Permit Agreements")unamortized original issue discount, respectively,
relating to the Vail Mountain and Beaver Creek
Mountain Forest Service Permits (the "Permits"). The Permit Agreements provide
that the U.S. Forest Service will cooperate with the IRB Trustee in obtaining a
new holder of the Permits (acceptable to the U.S. Forest Service in its sole
discretion)8.75% Notes not tendered in the event of a default by VAI with respect to its obligations
under the IRBs. However, the Permit Agreements expressly provide that no
security interest is created in or collateral assignment made with respect to
the Permits.
56
The IRBs mature, subject to prior redemption, on August 1, 2019. The IRBs
bear interest at the rate of 6.95% per annum, with interest payable semi-
annually on February 1 and August 1. The IRBs are subject to re-demption at the
option of VAI, at any time and from time to time on or after August 1, 2008,
and are subject to mandatory redemption if interest payments on the IRBs lose
their tax exempt status. Furthermore, in the event that VAI or one of its
affiliates incurs additional indebtedness with (1) senior or superior rights to
the Permits or (2) equivalent rights with respect to the Permits above an
aggregate principal amount of $250,000,000 (including the unpaid principal
amount of the IRBs) the IRBs will bear an interest rate of 7.45% per annum or,
under certain limited circumstances, may be subject to mandatory redemption.
We also have indebtedness in connection with $22.0 million of outstanding
industrial revenue bonds which we assumed in connection with our acquisition of
Keystone and Breckenridge. These IRBs consist of two series of refunding bonds
which were originally issued to finance the cost of sports and recreational
facilities at Keystone. The Series 1990 Sports Facilities Refunding Revenue
Bonds have an aggregate outstanding principal amount of $19.0 million. The
principal matures in installments in 2006 and 2008. These bonds bear interest
at a rate of 7.75% for bonds maturing in 2006 and 7.875% for bonds maturing in
2008. The Series 1991 Sports Facilities Refunding Revenue Bonds have an
aggregate outstanding principal amount of $3 million and bear interest at
7.125% for bonds maturing in 2002 and 7.375% for bonds maturing in 2010.
SSI Venture Credit Facility
On December 30, 1998, SSI Venture established a credit facility that
provides debt financing up to an aggregate principal amount of $20 million. The
SSI Venture credit facility consists of (i) a $10 million Tranche A Revolving
Credit Facility and (ii) a $10 million Tranche B Term Loan Facility. The SSI
Venture credit facility matures on the earlier of December 31, 2003 or the
termination date of the Credit Facility discussed above. The Vail Corporation
guarantees the SSI Venture credit facility. Minimum amortization under the
Tranche B Term Loan Facility is $625,000, $1.38 million, $1.75 million, $2.25
million, $2.63 million, and $1.38 million during the fiscal years 1999, 2000,
2001, 2002, 2003, and 2004, respectively. The SSI Venture credit facility bears
interest annually at the rates prescribed above for the Credit Facility. SSI
Venture also pays a quarterly unused commitment fee at the same rates as the
unused commitment fee for the Credit Facility.
57tender offer.
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
Exchange Offer Registration Statement. We issued the outstanding Notesnotes on
May 11, 1999.January 29, 2004. The Initial Purchasersinitial purchasers have advised us that they subsequently
resold the outstanding Notesnotes to "qualified institutional buyers" in reliance on
Rule 144A under the Securities Act and to certain persons in offshore
transactions in reliance on Regulation S under the Securities Act. As a
condition to the offering of the outstanding Notes,notes, we entered into a
registration rights agreement dated May 11, 1999,January 29, 2004, pursuant to which we
agreed, for the benefit of all holders of the outstanding Notes,notes, at our own
expense, to do the following:
(1) to file the registration statement of which this prospectus is a
part with the SECCommission on or prior to 60 days after the closing date of
the outstanding Notes,notes;
(2) to use our commercially reasonable best commericially reasonable efforts to cause the
registration statement to be declared effective under the Securities Act on
or prior to 180270 days after the closing date of the outstanding Notes,notes;
(3) to use our commercially reasonable best efforts to keep the registration statement
effective until the closing of the exchange offer,offer; and
(4) to use our commericallycommercially reasonable best efforts to issue, on or
prior to 60 business days after the date on which the exchange offer registration
statement was declared effective.
We also agreed that promptly upon the registration statement beingis declared effective we would offer toby the Commission, exchange notes in
exchange for all holders of the outstanding Notes an
opportunity to exchange the outstanding Notes for the exchange notes.notes tendered prior thereto.
Further, we agreed to keep the exchange offer open for acceptance for not
less than the minimum period required under applicable Federal and state
securities laws. For each outstanding Notenote validly tendered pursuant to the
exchange offer and not withdrawn, the holder of the outstanding Notenote will
receive an exchange note having a principal amount equal to that of the tendered
outstanding Note.note. Interest on each exchange note will accrue from the last date
on which interest was paid on the tendered outstanding Notenote in exchange therefor
or, if no interest was paid on such outstanding Note,note, from the issue date.
The following is a summary of the registration rights agreement. It does
not purport to be complete and it does not contain all of the information you
might find useful. For further information you should read the registration
rights agreement, a copy of which has been filed as an exhibit to the
registration statement. The exchange offer is intended to satisfy certain of our
obligations under the registration rights agreement.
Transferability. We issued the outstanding notes on May 11, 1999January 29, 2004 in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws. Accordingly, the outstanding notes may not be
offered or sold in the United States unless registered or pursuant to an
applicable exemption under the Securities Act and applicable state securities
laws. Based on no-action letters issued by the staff of the Commission with
respect to similar transactions, we believe that the exchange notes issued
pursuant to the exchange offer in exchange for outstanding Notesnotes may be offered
for resale, resold and otherwise transferred by holders of notes who are not our
affiliates without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that:
(1) any exchange notes to be received by the holder were acquired in
the ordinary course of the holder's business;
(2) at the time of the commencement of the exchange offer the holder
has no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the exchange
notes; and
-21-
(3) the holder is not an "affiliate" of the Company, as defined in
Rule 405 under the Securities Act, or, if it is an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
58
However, we have not sought a no-action letter with respect to the exchange
offer and we cannot assure you that the staff of the Commission would make a
similar determination with respect to the exchange offer. Any holder who tenders
his outstanding Notesnotes in the exchange offer with any intention of participating
in a distribution of exchange notes (1) cannot rely on the interpretation by the
staff of the Commission, (2) will not be able to validly tender outstanding
Notesnotes in the exchange offer and (3) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transactions.
In addition, each broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The letter of
transmittal accompanying this prospectus states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
acting in the capacity of an "underwriter" within the meaning of Section 2(11)
of the Securities Act. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
exchange notes received in exchange for outstanding notes where the outstanding
Notesnotes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. Pursuant to the registration rights
agreement, we agreed to make this prospectus available to any such broker-
dealerbroker-dealer
for use in connection with any such resale.
Shelf Registration Statement. We will, at our cost, (a) as soon as
practicable, file with the
SECCommission a shelf registration statement covering resales of the outstanding
Notes,notes as soon as practicable, but, in any event, on or prior to the 60th day
after the date we become obligated to file the shelf registration statement, (b)
use our commercially reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act on or prior to the
180th270th day after the date we become obligated to file the shelf registration
statement and (c) use our commercially reasonable best efforts to keep the shelf
registration statement continually effective, supplemented and amended to the
extent necessary to ensure that it is available for resales of Notesnotes by the
Holdersholders of Transfer Restricted Securitiestransfer restricted securities for a period of at least two years
following the effective date of such shelf registration statement (or shorter
period that will terminate when all the Notesexchange notes covered by such shelf
registration statement have been sold pursuant to such shelf registration
statement or are otherwise no longer Transfer Restricted Securities)transfer restricted securities), if:
(1) we are not required to file the exchange offer registration
statement or not permitted to consummate the exchange offer because the
exchange offer is not permitted by applicable law or Commission policy or
(2) any Initial Purchaserinitial purchaser that is a Holderholder of Transfer Restricted
Securitiestransfer restricted
securities notifies us prior to the 20th day following consummation of the
exchange offer that (a) it is prohibited by law or Commission policy from
participating in the exchange offer or (b) it may not resell the exchange
notes acquired by it in the exchange offer to the public without delivering
a prospectus and the prospectus contained in the exchange offer
registration statement is not appropriate or available for such resales.
We will, in the event of the filing of the shelf registration statement,
provide to each holder of the outstanding Notesnotes copies of the prospectus which
is a part of the shelf registration statement, notify each such holder when the
shelf registration statement for the outstanding Notesnotes has become effective and
take certain other action as areis required to permit unrestricted resales of the
outstanding Notes.notes. A Holderholder of outstanding Notesnotes who sells such outstanding
Notesnotes pursuant to the shelf registration statement generally will (1) be
required to be named as a selling security holder in the related prospectus, (2)
be required to deliver the prospectus to purchasers, (3) be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales and (4) be bound by the provisions of the registration rights
agreement which are applicable to the Holderholder (including certain indemnification
obligations). In addition, each Holderholder of the outstanding Notesnotes will be required
to deliver information to be used in connection with the shelf registration
59
statement and to provide comments on the shelf registration statement within the
time periods set forth in the registration rights agreement in order to have
their outstanding Notesnotes included in the shelf registration statement and to
benefit from the provisions regarding the increase in interest rate set
forth in the following paragraph.rate.
-22-
Terms of the Exchange Offer
Upon satisfaction or waiver of all the conditions of the exchange offer, we
will accept any and all outstanding Notesnotes properly tendered and not withdrawn
prior to the expiration date and will issue the exchange notes promptly after
acceptance of the outstanding Notes.notes. See "--Conditions to the Exchange Offer"
and "Procedures"--Procedures for Tendering PrivateOutstanding Notes." We will issue $1,000
principal amount of exchange notes in exchange for each $1,000 principal amount
of outstanding Notesnotes accepted in the exchange offer. As of the date of this
prospectus, $200,000,000$390,000,000 aggregate principal amount of the outstanding
Notesnotes are
outstanding. Holders may tender some or all of their outstanding Notesnotes pursuant
to the exchange offer. However, outstanding Notesnotes may be tendered only in
integral multiples of $1,000.
The exchange notes are identical to the outstanding Notesnotes except for the
elimination of certain transfer restrictions, registration rights, restrictions
on holding notes in certificated form and liquidated damages provisions. The
outstanding Notesexchange notes will evidence the same debt as the outstanding Notesnotes and will be
issued pursuant to, and entitled to the benefits of, the indenture pursuant to
which the outstanding Notesnotes were issued and will be deemed one issue of notes,
together with the outstanding Notes.notes.
This prospectus, together with the letter of transmittal, is being sent to
all registered holders and to others believed to have beneficial interests in
the outstanding Notes.notes. Holders of outstanding Notesnotes do not have any appraisal or
dissenters' rights under the indenture in connection with the exchange offer. We
intend to conduct the exchange offer in accordance with the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations of the Commission promulgated thereunder.
For purposes of the exchange offer, we will be deemed to have accepted
validly tendered privateoutstanding notes when, and as if, we have given oral or
written notice thereof to the exchange agent. The exchange agent will act as our
agent for the purpose of distributing the exchange notes from us to the
tendering holders. If we do not accept any tendered outstanding Notesnotes because of
an invalid tender, the occurrence of certain other events set forth in this
prospectus or otherwise, we will return the unaccepted outstanding Notes,notes,
without expense, to the tendering holder thereof as promptly as practicable
after the expiration date.
Holders who tender privateoutstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, except as set forth below
under "--Transfer Taxes," transfer taxes with respect to the exchange of
outstanding Notesnotes pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "expiration date" shall mean 5:00 p.m., New York City time, on , 1999,[
], 2004, unless we, in our sole discretion, extend the exchange offer, in which
case the term "expiration date" shall mean the latest date and time to which the
exchange offer is extended. In order to extend the exchange offer, we will
notify the exchange agent by oral or written notice and each registered holder
by means of press release or other public announcement of any extension, in each
case, prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date. We reserve the right, in our sole
discretion, (1) to delay accepting any outstanding Notes,notes, (2) to extend the
exchange offer, (3) to terminate the exchange offer if the conditions set forth
below under "--Conditions""--Conditions to the Exchange Offer" shall not have been satisfied,
or (4) to amend the terms of the exchange offer in any manner. We will notify
the exchange agent of any delay, extension, termination or amendment by oral or
written notice. We will additionally notify each registered holder of any
amendment. We will give to the exchange agent written confirmation of any oral
notice.
60
Exchange Date
As soon as practicable after the close of the exchange offer we will accept
for exchange all outstanding Notesnotes properly tendered and not validly withdrawn
prior to 5:00 p.m., New York City time, on the expiration date in accordance
with the terms of this prospectus and the lettersletter of transmittal.
-23-
Conditions to the Exchange Offer
Notwithstanding any other provisions of the exchange offer, and subject to
our obligations under the registration rights agreement, we (1) shall not be
required to accept any outstanding Notesnotes for exchange, (2) shall not be required
to issue exchange notes in exchange for any outstanding Notesnotes and (3) may
terminate or amend the exchange offer if, at any time before the acceptance of
such exchange notes for exchange, any of the following events shall occur:
(1)any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or otherwise
materially impair our ability to proceed with the exchange offer;
(2) any change, or any development involving a prospective change, in
our business or financial affairs or any of our subsidiaries has occurred
which, in our sole judgment, might materially impair our ability to proceed
with the exchange offer or materially impair the contemplated benefits of
the exchange offer to us;
(3) any law, statute, rule or regulation is proposed, adopted or
enacted which, in our sole judgment, might materially impair our ability to
proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to us;
(4) any governmental approval has not been obtained, which approval we
shall, in our sole discretion, deem necessary for the consummation of the
exchange offer as contemplated hereby; or
(5) the exchange offer will violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in our sole
discretion. Our failure at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any outstanding Notesnotes
tendered, and no exchange notes will be issued in exchange for any such
outstanding Notes,notes if at such time any stop order shall be threatened by the
Commission or be in effect with respect to the registration statement of which
this prospectus is a part or the qualification of the indenture under the Trust
Indenture Act of 1939, as amended.
The exchange offer is not conditioned on any minimum aggregate principal
amount of outstanding Notesnotes being tendered for exchange.
Consequences of Failure to Exchange
Any outstanding Notesnotes not tendered pursuant to the exchange offer will
remain outstanding and continue to accrue interest. The outstanding Notesnotes will
remain "restricted securities" within the meaning of the Securities Act.
Accordingly, prior to the date that is one year after the later of the issue
date and the last date on which we or any of our affiliates was the owner of the
outstanding Notes,notes, the outstanding Notesnotes may be
61
resold only (1) to us, (2) to a
person whomwho the seller reasonably believes is a "qualified institutional buyer"
purchasing for its own account or for the account of another "qualified
institutional buyer" in compliance with the resale limitations of Rule 144A, (3)
to an Institutional Accredited Investor
that, prior to the transfer, furnishes to the trustee a written certification
containing certain representations and agreements relating to the restrictions
on transfer of the Notes (the form of this letter can be obtained from the
trustee), (4) pursuant to the limitations on resale provided by Rule 144 under the Securities
Act, (5)(4) pursuant to the resale provisions of Rule 904 of Regulation S under the
Securities Act, (6)(5) pursuant to an effective registration statement under the
Securities Act or (7)(6) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to compliance with applicable
-24-
state securities laws. As a result, the liquidity of the market for non-tendered
outstanding Notesnotes could be adversely affected upon completion of the exchange
offer. The foregoing restrictions on resale will no longer apply after the first
anniversary of the issue date of the outstanding Notenote or the purchase of the
outstanding Notesnotes from us or an affiliate.
Fees and Expenses
We will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone by
our officers and employees.
Expenses incurred in connection with the exchange offer will be paid by us.
Such expenses include, among others, the fees and expenses of the trustee and
the exchange agent, accounting and legal fees, printing costs and other
miscellaneous fees and expenses.
Accounting Treatment
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize the expenses of the
exchange offer as additional interest expense over the term of the exchange
notes.
Procedures for Tendering Outstanding Notes
The tender of outstanding Notesnotes pursuant to any of the procedures set forth
in this prospectus and in the letter of transmittal will constitute a binding
agreement between the tendering holder and us in accordance with the terms and
subject to the conditions set forth in this prospectus and in the letter of
transmittal. The tender of outstanding Notesnotes will constitute an agreement to
deliver good and marketable title to all tendered outstanding Notesnotes prior to the
expiration date free and clear of all liens, charges, claims, encumbrances,
interests and restrictions of any kind.
Except as provided in "--Guaranteed Delivery Procedures," unless the
outstanding Notesnotes being tendered are deposited by you with the exchange agent
prior to the expiration date and are accompanied by a properly completed and
duly executed letter of transmittal, we may, at our option, reject the tender.
Issuance of exchange notes will be made only against deposit of tendered
outstanding notes and delivery of all other required documents. Notwithstanding
the foregoing, DTC participants tendering through its Automated Tender Offer
Program ("ATOP") will be deemed to have made valid delivery where the exchange
agent receives an agent's message prior to the expiration date.
Accordingly, to properly tender outstanding notes, the following procedures
must be followed:
Notes held through a Custodian. Each beneficial owner holding outstanding
Notesnotes through a DTC participant must instruct the DTC participant to cause its
outstanding Notesnotes to be tendered in accordance with the procedures set forth in
this prospectus.
Notes held through DTC. Pursuant to an authorization given by DTC to the
DTC participants, each DTC participant holding outstanding Notesnotes through DTC
must (1) electronically transmit its acceptance
62
through ATOP, and DTC will then
edit and verify the acceptance, execute a book-
entrybook-entry delivery to the exchange
agent's account at DTC and send an agent's message to the exchange agent for its
acceptance, or (2) comply with the guaranteed delivery procedures set forth
below and in a notice of guaranteed delivery. See "--Guaranteed Delivery
Procedures--Notes held through DTC."
The exchange agent will (promptly after the date of this prospectus)
establish accounts at DTC for purposes of the exchange offer with respect to
outstanding notes held through DTC. Any financial institution that is a DTC
participant may make book-entry delivery of interests in outstanding Notesnotes into
the exchange agent's account
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through ATOP. However, although delivery of interests in the outstanding Notesnotes
may be effected through book-entry transfer into the exchange agent's account
through ATOP, an agent's message in connection with such book-entry transfer,
and any other required documents, must be, in any case, transmitted to and
received by the exchange agent at its address set forth under "--Exchange
Agent," or the guaranteed delivery procedures set forth below must be complied
with, in each case, prior to the expiration date. Delivery of documents to DTC
does not constitute delivery to the exchange agent. The confirmation of a
book-entry transfer into the exchange agent's account at DTC as described above
is referred to herein as a "Book-
Entry"Book-Entry Confirmation."
The term "agent's message" means a message transmitted by DTC to, and
received by, the exchange agent and forming a part of the book-entry
confirmation, which states that DTC has received an express acknowledgementacknowledgment from
each DTC participant tendering through ATOP that such DTC participants have
received a letter of transmittal and agree to thebe bound by the terms of the
letter of transmittal and that we may enforce such agreement against such DTC
participants.
Cede & Co., as the holder of the global note, will tender a portion of the
global note equal to the aggregate principal amount due at the stated maturity
for which instructions to tender are given by DTC participants.
By tendering, each holder and each DTC participant will represent to us
that, among other things, (1) it is not our affiliate, (2) it is not a
broker-
dealerbroker-dealer tendering outstanding Notesnotes acquired directly from us for its own
account, (3) it is acquiring the exchange notes acquired pursuant to the exchange offer are
being obtained in theits ordinary course of
business of such holder and (4) it is not engaged in, and does not intend to engage in, and has
no understandingsarrangement or understanding with any person to participate in, the exchange offer for the
purposea
distribution of distributing the exchange notes.
We will not accept any alternative, conditional, irregular or contingent
tenders (unless waived by us). By executing a letter of transmittal or
transmitting an acceptance thoughthrough ATOP, as the case may be, each tendering
holder waives any right to receive any notice of the acceptance for purchase of
its outstanding Notes.notes.
We will resolve all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of tendered outstanding Notes,notes, and
such determination will be final and binding. We reserve the absolute right to
reject any or all tenders that are not in proper form or the acceptance of which
may, in the opinion of our counsel, be unlawful. We also reserve the absolute
right to waive any condition to the exchange offer and any irregularities or
conditions of tender as to particular outstanding Notes.notes. Our interpretation of
the terms and conditions of the exchange offer (including the instructions in
the letter of transmittal) will be final and binding. Unless waived, any
irregularities in connection with tenders must be cured within such time as we
shall determine. We, along with the exchange agent, shall be under no duty to
give notification of defects in such tenders and shall not incur liabilities for
failure to give such notification. Tenders of outstanding Notesnotes will not be
deemed to have been made until such irregularities have been cured or waived.
Any outstanding notes received by the exchange agent that are not properly
tendered and as to which the irregularities have not been cured or waived will
be returned by the exchange agent to the tendering holder, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date.
LETTERS OF TRANSMITTAL AND OUTSTANDING NOTES MUST BE SENT ONLY TO THE
EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES TO US OR
DTC.
63
The method of delivery of outstanding Notes,notes, letters of transmittal, any
required signature guaranties and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or letters of
transmittal and, except as otherwise provided in the applicable letter of
transmittal, delivery will be deemed made only when actually received by the
exchange agent. If delivery is by mail, it is suggested that the holder use
properly insured, registered mail with return receipt requested, and that the
mailing be made sufficiently in advance of the expiration date to permit
delivery to the exchange agent prior to the expiration date.
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Guaranteed Delivery Procedures
Notes held through DTC. DTC participants holding outstanding Notesnotes through
DTC who wish to cause their outstanding Notesnotes to be tendered, but who cannot
transmit their acceptances through ATOP prior to the expiration date, may cause
a tender to be effected if:
(1) guaranteed delivery is made by or through a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act, including:
.o a bank;
.o a broker, dealer, municipal securities dealer, municipal
securities broker, government securities dealer or government
securities broker;
.o a credit union;
.o a national securities exchange, registered securities association
or clearing agency; or
.o a savings institution that is a participant in a Securities
Transfer Association recognized program;
(2) prior to the expiration date, the exchange agent receives from any
of the above institutions a properly completed and duly executed notice of
guaranteed delivery (by mail, hand delivery, facsimile transmission or
overnight courier) substantially in the form provided with this prospectus;
and
(3) book-entry confirmation and an agent's message in connection
therewith are received by the exchange agent within three NYSE trading days
after the date of the execution of the notice of guaranteed delivery.
Notes held by Holders. Holders who wish to tender their outstanding Notesnotes
but (1) whose outstanding Notesnotes are not immediately available and will not be
available for tendering prior to the expiration date or (2) who cannot deliver
their outstanding Notes,notes, the letter of transmittal, or any other required
documents to the exchange agent prior to the expiration date, may effect a
tender if:
.o the tender is made by or through any of the above-listed institutions;
.o prior to the expiration date, the exchange agent receives from any
above-listed institution a properly completed and duly executed notice
of guaranteed delivery, whether by mail, hand delivery, facsimile
transmission or overnight courier, substantially in the form provided
with this prospectus; and
.o a properly completed and executed letter of transmittal, as well as
the certificate(s) representing all tendered outstanding Notesnotes in
proper form for transfer, and all other documents required by the
letter of transmittal, are received by the exchange agent within three
NYSE trading days after the date of the execution of the notice of
guaranteed delivery.
Withdrawal Rights
You may withdraw tenders of outstanding Notes,notes, or any portion of your
outstanding Notesnotes, in integral multiples of $1,000 principal amount due at the
stated maturity, at any time prior to 5:00 p.m., New York City 64
time, on the
expiration date. Any outstanding Notesnotes properly withdrawn will be deemed to be
not validly tendered for purposes of the exchange offer.
-27-
Notes held through DTC. DTC participants holding outstanding Notesnotes who have
transmitted their acceptances through ATOP may, prior to 5:00 p.m., New York
City time, on the expiration date, withdraw the instruction given thereby by
delivering to the exchange agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal of such
instruction. Such notice of withdrawal must contain the name and number of the
DTC participant, the principal amount due at the stated maturity of outstanding
Notesnotes to which such withdrawal relatedrelates and the signature of the DTC participant.
Receipt of such written notice of withdrawal by the exchange agent effectuates a
withdrawal.
Notes held by Holders. Holders may withdraw their tender of outstanding
Notes,notes, prior to 5:00 p.m., New York City time, on the expiration date, by
delivering to the exchange agent, at its address set forth under "--Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal. Any such
notice of withdrawal must (1) specify the name of the person who tendered the
outstanding notes to be withdrawn, (2) contain a description of the outstanding
Notesnotes to be withdrawn and identify the certificate number or numbers shown on
the particular certificates evidencing such outstanding notes and the aggregate
principal amount due at the stated maturity represented by such outstanding
notes and (3) be signed by the holder of such outstanding Notesnotes in the same
manner as the original signature on the letter of transmittal by which such
outstanding Notesnotes were tendered (including any required signature guaranties),
or be accompanied by (x) documents of transfer in a form acceptable to us, in
our sole discretion, and (y) a properly completed irrevocable proxy that
authorized such person to effect such revocation on behalf of such holder. If
the outstanding Notesnotes to be withdrawn have been delivered or otherwise
identified to the exchange agent, a signed notice of withdrawal is effective
immediately upon written, telegraphic or facsimile notice of withdrawal even if
physical release is not yet effected.
All signatures on a notice of withdrawal must be guaranteed by a recognized
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program; provided, however, that signatures on the notice of withdrawal need not
be guaranteed if the outstanding Notesnotes being withdrawn are held for the account
of any of the institutions listed above under "--
Guaranteed"--Guaranteed Delivery
Procedures."
A withdrawal of an instruction or a withdrawal of a tender must be executed
by a DTC participant or a holder of outstanding Notes,notes, as the case may be, in
the same manner as the person's name appears on its transmission through ATOP or
letter of transmittal, as the case may be, to which such withdrawal relates. If
a notice of withdrawal is signed by a trustee, partner, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, such person must so indicate
when signing and must submit with the revocation appropriate evidence of
authority to execute the notice of withdrawal. A DTC participant or a holder may
withdraw an instruction or a tender, as the case may be, only if such withdrawal
complies with the provisions of this prospectus.
A withdrawal of a tender of outstanding Notesnotes by a DTC participant or a
holder, as the case may be, may be rescinded only by a new transmission of an
acceptance through ATOP or execution and delivery of a new letter of
transmittal, as the case may be, in accordance with the procedures described
herein.
65
Exchange Agent
United States Trust CompanyThe Bank of New York has been appointed as exchange agent for the exchange
offer. Questions, requests for assistance and requests for additional copies of
this prospectus or of the letter of transmittal should be directed to the
exchange agent addressed as follows:
By Registered or Certified Mail:
United States Trust CompanyThe Bank of New York
as Exchange Agent
P.O. Box 843 Cooper StationCorporate Trust Operations
Reorganization Unit
101 Barclay Street - 7 East
New York, New York 10276
Attention: Corporate Trust Services
By Hand before 4:30 p.m.:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Lower Level Corporate Trust Window
By Hand after 4:30 p.m. or By Overnight Courier:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Facsimile: ByNY 10286
Telephone: (212) 780-0592815-6331
Facsimile: (212) 548-6565298-1915
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Attention: Customer ServiceGiselle Guadalupe
The exchange agent also acts as trustee under the Indenture.
Transfer Taxes
Holders of outstanding Notesnotes who tender their outstanding Notesnotes for
exchange notes will not be obligated to pay any transfer taxes in connection
therewith, except that holders who instruct us to register exchange notes in the
name of, or request that outstanding Notesnotes not tendered or not accepted in the
exchange offer be returned to, a person other than the registered tendering
holder will be responsible for the payment of any applicable transfer tax
thereon.
66-29-
DESCRIPTION OF EXCHANGE NOTES
General
The outstanding Notesnotes were and the exchange notes will be issued pursuant
to an Indenture (the "Indenture"), dated as of May 11, 1999,January 29, 2004, among the
Company, as Issuer, The Vail Corporation, Vail Holdings, Inc. and each of the
other Guarantors, as guarantors, and United States Trust CompanyThe Bank of New York, as trustee (the
"Trustee"). The terms of the exchange notes are identical in all material
respects to the outstanding Notes,notes, except that the exchange notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer and will not contain certain provisions providing for
liquidated damages under certain circumstances described in the Registration
Rights Agreement, the provisions of which will terminate upon the consummation
of the exchange offer. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). The notes are subject to all
such terms, and Holders of notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certainthe material
provisions of the Indenture and the Notes does not purport to be complete and is subject
to, and is qualified in
its entirety by reference to all the provisions of the Indenture, (includingincluding the definitions therein of
certain terms therein and those terms
made a part thereof by the Trust Indenture Act of 1939, as amended) and the
Notes.used below. Copies of the proposed form of Indenture and
Registration Rights Agreement can be requested by prospective investors from the
Company at the address and telephone number set forth under "Where You Can Find
More Information." The definitions of certain terms used in the following
summary are set forth below under "Certain Definitions." For purposes of this
"Description of Exchange Notes," the term "Company" refers only to Vail Resorts,
Inc. and not to any of its Subsidiaries, and the term "Notes" refers to both the
outstanding Notesnotes and the exchange notes.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Debt of the
Company. As of April 30, 1999,January 31, 2004, after giving pro forma effect to the Offering
anddischarge
of all 2009 Notes (as defined below) not tendered in the application oftender offer, the
net proceeds therefrom, the Company and the
Guarantors would have had consolidated Senior Debt of approximately $89.9$242.0 million
outstanding. The Indenture, subject to certain limitations, permits the
incurrence of additional Senior Debt in the future. As of the date of the
Indenture, substantially all of the Company's consolidated Subsidiaries werewill be Restricted
Subsidiaries.Subsidiaries, other than Boulder/Beaver, LLC, Colter Bay Corporation, Eagle Park
Reservoir Company, Forest Ridge Holdings, Inc., Gros Ventre Utility Company,
Jackson Lake Lodge Corporation, Jenny Lake Lodge, Inc., Larkspur Restaurant and
Bar, LLC, Mountain Thunder, Inc., RTP, LLC, RT Partners, Inc., SSI Venture, LLC,
Timber Trail, Inc., Vail Associates Investments, Inc. and VR Holdings, Inc.
However, under certain circumstances, the Company will
beis able to designate current
or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
will not be subject to many of the restrictive covenants set forth in the
Indenture.
The obligations of the Company under the Notes are guaranteed, jointly and
severally on a senior subordinated basis, by the Guarantors. The Subsidiary
Guarantee of each Guarantor will beis subordinated in right of payment to all existing
and future Senior Debt of such Guarantor. See "--Subsidiary Guarantees."
Principal, Maturity and Interest
The Notes are limitedCompany issued $390 million in aggregate principal amount to $300.0 million (of
which $200.0 million is being issuedof notes in
the Offering)offering. The Company may issue additional notes under the Indenture from
time to time after the offering. Any issuance of additional notes is subject to
all of the covenants in the Indenture, including the covenant described below
under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock." The notes and any additional notes subsequently issued
under the Indenture will mature on May
15, 2009.be treated as a single class for all purposes under the
Indenture, including without limitation, waivers, amendments, redemptions and
offers to purchase.
Interest on the Notes will accrue at the rate of 8 3/4%6.75% per annum and will
be payable semi-annually in arrears on MayFebruary 15 and NovemberAugust 15 of each year,
commencing on NovemberAugust 15, 1999,2004, to Holders of record on the immediately preceding
MayFebruary 1 and NovemberAugust 1, respectively. Interest on the Notes will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal of and premium,
if any, interest and Liquidated Damages,liquidated damages, if any, on the Notes will be payable at
the office or agency of the Company maintained for such purpose or, at the
option of the Company, payment of interest and Liquidated Damagesliquidated damages may be made
-30-
by check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all payments of
principal, premium, if any, interest and Liquidated Damages,liquidated damages, if any, with
respect to Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency will be the
office of the Trustee maintained for such purpose. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.
67
Subordination
The payment (by set-off, redemption, repurchase or otherwise) of principal
of and premium, if any, interest and Liquidated Damages,liquidated damages, if any, on the Notes
(including with respect to any repurchases of the Notes) is subordinated in
right of payment, as set forth in the Indenture, to the prior payment in full in
cash or, at the option of the holders of Senior Debt of the Company, in Cash
Equivalents, of all Obligations in respect of Senior Debt of the Company,
whether outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company upon any liquidation,
dissolution or winding up of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, whether voluntary or involuntary, an assignment for the benefit of
creditors or any marshalling of the Company's assets and liabilities, the
holders of Senior Debt of the Company are entitled to receive payment in full in
cash or, at the option of the holders of Senior Debt of the Company, in Cash
Equivalents, of all Obligations due or to become due in respect of such Senior
Debt (including interest after the commencement of any such proceeding, at the
rate specified in the applicable Senior Debt) before the Holders of Notes are
entitled to receive any payment of principal of, or premium, if any, interest or
Liquidated Damages,liquidated damages, if any, on the Notes, and until all Obligations with respect
to Senior Debt of the Company are paid in full in cash or, at the option of the
holders of Senior Debt of the Company, in Cash Equivalents, any distribution of
any kind or character to which the Holders of Notes would be entitled shall be
made to the holders of Senior Debt of the Company (except that Holders of Notes
may receive Permitted Junior Securities and payments made from the trust
described under "--Legal Defeasance and Covenant Defeasance" or "--Satisfaction
and Discharge of the Indenture").
The Company also shall not, directly or indirectly, (1)(x) make any payment of
principal of, or premium, if any, interest or Liquidated Damages,liquidated damages, if any, on the
Notes (except in Permitted Junior Securities or from the trust described under
"--Legal Defeasance and Covenant Defeasance" or "--Satisfaction and Discharge of
the Indenture," if no default of the kind referred to in clause (a)(i) below had
occurred and was continuing, and no Payment Blockage Notice (as defined below)
was in effect, at the time amounts were deposited with the Trustee as described
therein) or (2)(y) acquire any of the Notes for cash or property or otherwise or
make any other distribution with respect to the Notes if (a)(i) any default occurs
and is continuing in the payment when due, whether at maturity, upon any
redemption, by declaration or otherwise, of any principal of, or premium, if
any, or interest on, any Designated Senior Debt of the Company or (b)(ii) any other
default occurs and is continuing with respect to Designated Senior Debt of the
Company that permits holders of the Designated Senior Debt of the Company as to
which such default relates to accelerate its maturity and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the holders of such
Designated Senior Debt of the Company. Payments on the Notes may and shall be
resumed (1)(a) in the case of a payment default, upon the date on which such
default is cured or waived or otherwise has ceased to exist and (2)(b) in the case
of a nonpayment default, upon the earlier of the date on which such nonpayment
default is cured or waived or otherwise has ceased to exist or 179 days after
the date on which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt of the Company has been accelerated and
such acceleration remains in full force and effect. No new period of payment
blockage may be commenced unless and until 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice unless such nonpayment default shall have been waived
for a period of not less than 90 days. Each Holder by such Holder's acceptance
of a Note irrevocably agrees that if any payment or payments shall be made
pursuant to the Indenture and the amount or total amount of such payment or
payments exceeds the amount, if any, that such Holder would be entitled to
receive upon the proper application of the subordination provisions of the
Indenture, then such Holder will be obliged to pay over the amount of such
excess payment to the holders of Senior Debt of the Person that made 68
such
payment or payments
-31-
or their representative or representatives, as instructed in a written notice of
such excess payment, within ten days of receiving such notice.
The Indenture further requires that the Company promptly notify holders of
Senior Debt of the Company and the Guarantors if payment of the Notes is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. On a pro forma basis,
after giving effect to the Offering anddischarge of all 2009 Notes not tendered in the
application of the net proceeds
therefrom,tender offer, the principal amount of consolidated Senior Debt of the Company
and
Guarantors outstanding at April 30, 1999January 31, 2004 would have been approximately $89.9$242.0 million.
The Indenture limits,will limit, through certain financial tests, the amount of
additional Indebtedness, including Senior Debt, that the Company and its
Restricted Subsidiaries can incur. See "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
"Designated Senior Debt" of any Person means (i) any Indebtedness of such
Person outstanding under the Credit Agreement and (ii) any other Senior Debt of
such Person, the principal amount of which is $25 million or more and that has
been designated by the Company as "Designated Senior Debt" of such Person.
"Permitted Junior Securities" means Equity Interests (other than
Disqualified Stock) in the Company or debt securities that are subordinated to
all Senior Debt of the issuer of such debt securities (and any debt securities
issued in exchange for Senior Debt of the issuer of such debt securities) to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt.
"Senior Debt" of any Person means (i) the Obligations of such Person under
the Credit Agreement, including, without limitation, Hedging Obligations and
reimbursement obligations in respect of letters of credit and bankers
acceptances, and (ii) any other Indebtedness of such Person, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Debt of a
Person will not include (v) any obligation to, in respect of or imposed by any
environmental, landfill, waste management or other regulatory governmental
agency, statute, law or court order, (w) any liability for federal, state, local
or other taxes, (x) any Indebtedness of such Person to any of its Subsidiaries
or other Affiliates, (y) any trade payables or (z) any Indebtedness that is
incurred by such Person in violation of the Indenture (except to the extent that
the original holder thereof relied in good faith after being provided with a
copy of the Indenture upon an Officer's Certificate of such Person to the effect
that the incurrence of such Indebtedness did not violate the Indenture).
Subsidiary Guarantees
The Company's payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by all of the Company's consolidated
Subsidiaries existing on the Closing Date, other than Boulder/Beaver, LLC,
Colter Bay Corporation, Eagle Park Reservoir Company, Forest Ridge Holdings,
Inc., Gros Ventre Utility Company, Jackson Lake Lodge Corporation, Jenny Lake
Lodge, Inc., Larkspur Restaurant and Bar ("Larkspur"), LLC, Mountain Thunder,
Inc., RTP, LLC, RT Partners, Inc., SSI Venture, LLC, andTimber Trail, Inc., Vail
Associates Investment,Investments, Inc. Seeand VR Holdings, Inc. Financial information related
to the Guarantors is presented in Note 316 to "Selected Consolidated"Consolidated Condensed Financial
Statements" included in our Quarterly Report on Form 10-Q for the quarter ended
January 31, 2004 and Operating Data."in Note 20 to "Consolidated Financial Statements" included
in our Annual Report on Form 10-K for the year ended July 31, 2003. The
financial information presented in the Company's fiscal 2003 Form 10-K was
presented based on the Subsidiary Guarantees under the 2009 Notes, and therefore
presents financial information for Larkspur separately as a less than 100%-owned
Guarantor. Since Larkspur is not a Guarantor under the Notes, for purposes of
reviewing the Guarantor financial information contained in the Company's fiscal
2003 Form 10-K with respect to the Notes, the financial information presented
for Larkspur should be combined with the financial information contained in the
column titled "Other Subsidiaries".
The Subsidiary Guarantee of each Guarantor are subordinated in right of
payment to the same extent as the obligations of the Company in respect of the
Notes, as set forth in the Indenture, to the prior payment in full in cash or,
at the option of the holders of Senior Debt of such Guarantor, in Cash
Equivalents, of all Senior Debt of such Guarantor, which would include any
Guarantee issued by such Guarantor that constitutes Senior Debt of such
Guarantor, including Guarantees of Indebtedness under the Credit Agreement. The
Indenture provides that if the Company or any of its Restricted Subsidiaries
shall acquire or create another Restricted Subsidiary after the Closing Date, or
any Unrestricted Subsidiary shall cease to be an Unrestricted Subsidiary and
shall become a Restricted Subsidiary, then, unless such Subsidiary is not
required to guarantee and has not guaranteed the Company's Obligations under the
Credit Agreement and has not guaranteed any other Indebtedness of the Company or
any Restricted Subsidiary, such Subsidiary shall become a Guarantor in
accordance with the terms of the Indenture. A Subsidiary
-32-
shall, without limitation, be
69
deemed to have guaranteed Indebtedness of another
Person if such Subsidiary has Indebtedness of the kind described in clause (ii)
or clause (iii) of the definition of the term "Indebtedness." The obligations of
each Guarantor under its Subsidiary Guarantee will be limited to the maximum
amount that would not result in the obligations of such Guarantor under its
Subsidiary Guarantee constituting a fraudulent conveyance under applicable law.
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person) another Person,
whether or not affiliated with such Guarantor, or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to another Person, unless (1)(i) the
Person formed by or surviving such consolidation or merger (if other than such
Guarantor) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a Person organized and existing under
the laws of the United States of America, any state thereof or the District of
Columbia and expressly assumes all the obligations of such Guarantor, pursuant
to a supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notesnotes and the Indenture and (2)(ii) immediately after giving
effect to such transaction, no Default or Event of Default exists. The
provisions of clause (i) of the preceding sentence shall not apply if the Person
formed by or surviving the relevant consolidation or merger or to which the
relevant sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is the Company, a Guarantor or a Person that is not, after
giving effect to such transaction, a Restricted Subsidiary of the Company.
The Indenture provides that in the event of (1)(i) a merger or consolidation
to which a Guarantor is a party, then the Person formed by or surviving such
merger or consolidation (if, after giving effect to such transaction, other than
the Company or a Restricted Subsidiary of the Company) shall be released and
discharged from the obligations of such Guarantor under its Subsidiary
Guarantee, (2)(ii) a sale or other disposition (whether by merger, consolidation or
otherwise) of all of the Equity Interests of a Guarantor at the time owned by
the Company and its Restricted Subsidiaries to any Person that, after giving
effect to such transaction, is neither the Company nor a Restricted Subsidiary
of the Company or (3)(iii) the release and discharge of a Guarantor from all
obligations under Guarantees of (a)(x) Obligations under the Credit Agreement and
(b)(y) any other Indebtedness of the Company or any of its Restricted Subsidiaries,
then in each such case such Guarantor shall be released and discharged from its
obligations under its Subsidiary Guarantee; provided that, in the case of each
of clauses (1)(i) and (2)(ii), (i)(a) the relevant transaction is in compliance with the
Indenture and (ii)(b) the Person being released and discharged shall have been
released and discharged from all obligations it might otherwise have under
Guarantees of Indebtedness of the Company or any of its Restricted Subsidiaries
and, in the case of each of clauses (1)(i), (2)(ii) and (3)(iii), immediately after
giving effect to such transaction, no Default or Event of Default shall exist.
Optional Redemption
Except as described below, the Notes arewill not be redeemable at the
Company's option prior to MayFebruary 15, 2004.2009. Thereafter, the Notes arewill be
subject to redemption at any time at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest and Liquidated Damages,liquidated damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on MayFebruary 15 of the years indicated below:
Year Percentage
---- ----------
2004................................... 104.375%
2005................................... 102.916%
2006................................... 101.458%
2007 and thereafter....................Year Percentage
---- ----------
2009 103.375%
2010 102.250%
2011 101.125%
2012 and thereafter 100.000%
Notwithstanding the foregoing, at any time on or prior to MayFebruary 15, 2002,2007
the Company may on any one or more occasions redeem up to 35% of the aggregate
principal amount of Notes theretofore issued under the 70
Indenture at a redemption
price equal to 108.75%106.750% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages,liquidated damages, if any, thereon to the redemption date, with
the net cash proceeds of one or more Equity Offerings; provided that (1)(i) at
least 65% of the original aggregate principal amount of Notes theretofore issued remain
outstanding
-33-
immediately following each such redemption and (2)(ii) such redemption shall occur
within 60 days of the closing of any such Equity Offering.
In addition, upon the occurrence of a Change of Control (as defined below)
at any time prior to MayFebruary 15, 2004,2009, the Notes will be subject to redemption
at any time at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice given within 30 days following such Change
of Control, at the Make-Whole Price, plus accrued and unpaid interest and
Liquidated Damages,liquidated damages, if any, thereon to the applicable redemption date.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Notenote is to be redeemed in part only, the notice of redemption
that relates to such Notenote shall state the portion of the principal amount
thereof to be redeemed. A new Notenote in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest shall
cease to accrue on Notes or portions of Notes called for redemption.
Mandatory Redemption
Except as set forth below under "--Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, unless notice of redemption of
the Notesnotes in whole has been given pursuant to the provisions of the Indenture
described above under "Optional Redemption",Redemption," the Company iswill be obligated to
make an offer (a "Change of Control Offer") to each Holder of Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages,liquidated
damages, if any, thereon to the date of purchase (the "Change of Control
Payment").
Within 30 days following a Change of Control, the Company will mail a
notice to each Holder with a copy to the Trustee describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. In addition, the Company will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions 71
thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail or deliver to each Holder of Notes
so tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that
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each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Company is not required to make a Change of Control Offer following a
Change of Control if a third party makes such a Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notesnotes validly tendered and not withdrawn pursuant to such Change
of Control Offer.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction. However, restrictions in the Indenture described herein on
the ability of the Company and its Restricted Subsidiaries to incur additional
Indebtedness, to grant Liens on their respective properties, to make Restricted
Payments and to make Asset Sales may also make more difficult or discourage a
takeover of the Company, whether favored or opposed by the management of the
Company. Consummation of any such transaction in certain circumstances may
require repurchase of the Notes, and there can be no assurance that the Company
or the acquiring party will have sufficient financial resources to effect such
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage any
leveraged buyout of the Company or any of its Subsidiaries by their management.
While such restrictions cover a wide variety of arrangements which have
traditionally been used to effect highly leveraged transactions, the Indenture
may not afford the Holders of Notes protection in all circumstances from the
adverse aspects of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction.
The Credit Agreement prohibits the Company from repurchasing any Notes
without the prior written consent of lenders holding a majority of the
commitments under the Credit Agreement. Any other credit agreements or other
agreements governing indebtedness to which the Company becomes a party may
contain similar restrictions and provisions and may, like the Credit Agreement,
provide that certain change of control events with respect to the Company would
constitute events of default thereunder. In the event a Change of Control occurs
at a time when the Company is prohibited from repurchasing Notes, the Company
could seek the consent of its lenders to the repurchase of Notes or could
attempt to refinance or repay the borrowings that contain such prohibition. If
the Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from repurchasing Notes. In such case, the Company's
failure to repurchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute a default under the Credit
Agreement. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the Holders of the Notes.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is case law interpreting the phrase "substantially all," there is
no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to another Person or group may be
uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset
Sale unless (1)(i) the Company (or such Restricted
72
Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced by a Board Resolution )Resolution) of the assets or Equity Interests
issued or sold or otherwise disposed of and (2)(ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of (x) cash or Cash Equivalents or (y) a controlling interest in
another business or fixed or other long-term assets, in each case, in a Similar
Business; provided that the amount of (a) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or such Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Guarantee
thereof) that are assumed by the
-35-
transferee of any such assets or Equity Interests such that the Company or such
Restricted Subsidiary are released from further liability and (b) any
securities, notesNotes or other obligations received by the Company or such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash within 90 days or are guaranteed (by means
of a letter of credit or otherwise) by an institution specified in the
definition of "Cash Equivalents" (to the extent of the cash received or the
obligations so guaranteed) shall be deemed to be cash or Cash Equivalents for
purposes of this provision, subject to application as provided in the following
paragraph.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company, at its option, may (1)(i) apply such Net Proceeds to permanently
prepay, repay or reduce any Senior Debt of the Company (and to correspondingly
reduce commitments with respect thereto in the case of revolving borrowings) or
(2)(ii) apply such Net Proceeds to the acquisition of a controlling interest in
another business, the making of a capital expenditure in or the acquisition of
other long-term assets that are used or useful in each case, in a Similar
Business (or enter into a binding agreement to purchase such business or determineassets
or make such capital expenditure; provided that if such binding agreement ceases
to retainbe in full force and effect during such 365-day period, the Company may enter
into another such binding agreement; provided further that if such binding
agreement ceases to be in full force and effect after such 365-day period, any
portion of the Net Proceeds of such Asset Sale not applied or invested pursuant
to the extent such Net Proceedsbinding agreement shall constitute such a
controlling interest or long-term asset in a Similar Business.Excess Proceeds).
Pending the final application of any such Net Proceeds, the Company may
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10$25 million, the
Company will be required to make an offer to all Holders of Notes (and holders
of other Indebtedness of the Company to the extent required by the terms of such
other Indebtedness) (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes (and such other Indebtedness) that does not exceed the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages,liquidated damages, if any,
thereon to the date of purchase, in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate principal amount of Notes (and
such other Indebtedness) tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes (and such
other Indebtedness) tendered exceeds the amount of Excess Proceeds, the Notes
(and such other Indebtedness) to be purchased will be selected on a pro rata
basis. Upon completion of an Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero. The Asset Sale Offer must be commenced within 60 days
following the date on which the aggregate amount of Excess Proceeds exceeds $10$25
million and remain open for at least 30 and not more than 40 days (unless
otherwise required by applicable law). The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of Notes pursuant to an Asset Sale
Offer.
The Credit Agreement prohibits the Company from repurchasing any Notes
without the prior written consent of lenders holding a majority of the
commitments under the Credit Agreement. Any other credit agreements or other
agreements governing indebtedness to which the Company becomes a party may
contain similar restrictions and provisions. In the event the Company is
required to make an Asset Sale Offer at a time when the Company is prohibited
from repurchasing Notes, the Company could seek the consent of its lenders to
the repurchase of Notes or could attempt to refinance or repay the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from repurchasing
Notes. In such case, the Company's failure to repurchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Credit Agreement. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to the
Holders of the Notes.
73
Any other credit agreements or other agreements governing indebtedness to
which the Company becomes a party may require that the Company and its
Subsidiaries apply all proceeds from certain asset sales to repay in full
outstanding obligations thereunder prior to the application of such proceeds to
repurchase outstanding Notes.
-36-
Certain Covenants
Restricted Payments
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, (1)(i) declare or pay any dividend or
make any other payment or distribution on account of the Company's Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation involving the Company) or to any direct or indirect
holders of the Company's Equity Interests in their capacity as such (other than
dividends or distributions (a) payable in Equity Interests (other than
Disqualified Stock) of the Company, (b) payable in Capital Stock or assets of an
Unrestricted Subsidiary of the Company or (c) payable to the Company or any
Restricted Subsidiary of the Company); (2)(ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company, or any Equity Interests of any of its Restricted Subsidiaries held by
any Affiliate of the Company (other than any such Equity Interests owned by the
Company or any Restricted Subsidiary of the Company, any Equity Interests then
being issued by the Company or a Restricted Subsidiary of the Company or any
Investment in a Person that, after giving effect to such Investment, is a
Restricted Subsidiary of the Company); (3)(iii) make any payment on or with respect
to, or purchase, redeem, repay, defease or otherwise acquire or retire for
value, any Indebtedness of the Company or any Guarantor that is subordinated in
right of payment to the Notes or any Guarantee thereof, except a regularly
scheduled payment of interest or principal or sinking fund payment (other than
the purchase or other acquisition of such subordinated Indebtedness made in
anticipation of satisfying any sinking fund payment due within one year from the
date of acquisition); or (4)(iv) make any Restricted Investment (all such payments
and other actions set forth in clauses (1)(i) through (4)(iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Consolidated Interest Coverage Ratio test set forth in the
first paragraph of the covenant described below under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made by the Company and its
Restricted Subsidiaries after the Closing DateMay 11, 1999 (without duplication and
excluding Restricted Payments permitted by clauses (2)(ii) and (3)(iii) of
the following paragraph), is less than the sum of .(1) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the IndentureMay 11, 1999 to the end of the Company's most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of
such deficit); plus .(2) 100% of the aggregate net cash proceeds and
the fair market value of any assets or property (as determined in good
faith by the Board of Directors of the Company) received by the
Company from the issue or sale since the
Closing
74
DateMay 11, 1999 of Equity Interests
of the Company (other than Disqualified Stock), or of Disqualified
Stock or debt securities of the Company that have been converted into
such Equity Interests (other than Equity Interests or Disqualified
Stock or convertible debt securities sold to a Subsidiary of the
Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock); plus .(3)
with respect to Restricted Investments made after the
Closing Date,May 11, 1999, the
net reduction of such Restricted Investments as a result of (x) any
disposition of any such Restricted Investments sold or otherwise
liquidated or repaid, to the extent of the net cash proceeds and the
fair market value of any assets or property (as determined in good
faith by the Board of Directors of the Company) received, (y)
dividends, repayment of loans or advances or other transfers of assets
to the Company or any Restricted Subsidiary of the Company or (z) the
portion (proportionate to the Company's interest in the equity of a
Person) of the fair market value of the net assets of an Unrestricted
Subsidiary or other Person immediately prior to the time such
Unrestricted Subsidiary or other Person is designated or becomes a
Restricted Subsidiary of the Company (but only to the extent not
included in the first subclause
-37-
(1) of this clause (c)); provided that the sum of items (x), (y) and
(z) of this subclause (3) shall not exceed, in the aggregate, the
aggregate amount of such Restricted Investments made after the Closing Date.May 11,
1999.
The foregoing provisions will not prohibit (1)(i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture, (2)Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, Equity Interests of the
Company (other than any Disqualified Stock, except to the extent that such
Disqualified Stock is issued in exchange for other Disqualified Stock or the net
cash proceeds of such Disqualified Stock isare used to redeem, repurchase, retire
or otherwise acquire other Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from the second clause of clause (c)(2)
of the preceding paragraph; (3)(iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness in exchange for, or out of the
net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4)(iv)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary of the Company held
by any employees, officers or directors of the Company or any of its Restricted
Subsidiaries or, upon the death, disability or termination of employment of such
officers, directors and employees, their authorized representatives in an
aggregate amount not to exceed in any twelve monthtwelve-month period, $2.0$2 million plus the
aggregate net cash proceeds from any issuance during such period of Equity
Interests by the Company to such employees, officers, directors or
representatives plus the aggregate net cash proceeds from any payments on life
insurance policies inof which the Company or any of its Restricted Subsidiaries is
the beneficiary with respect to such employees, officers or directors the
proceeds of which are used to repurchase, redeem or acquire Equity Interests of
the Company held by such employees, officers, directors or representative; (5)(v)
the repurchase of Equity Interests of the Company deemed to occur upon the
exercise of stock options or similar arrangement if such Equity Interests
representsrepresent a portion of the exercise price thereof; or (6)(vi) additional Restricted
Payments in an amount not to exceed $15$25 million; provided, however, that at the
time of, and after giving effect to, any Restricted Payment permitted under
clauses (4)clause (iv) or (6)(vi) no Default or Event of Default shall have occurred and be
continuing.
In the case of any Restricted Payments made other than in cash, the amount
thereof shall be the fair market value on the date of such Restricted Payment of
the asset(s) or securities proposed to be transferred or issued by the Company
or such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment.
75
The fair market value of any such asset(s) or securities shall be
determined in good faith by the Board of Directors of the Company. Where the
amount of any Investment made other than in cash is otherwise required to be
determined for purposes of the Indenture, then unless otherwise specified such
amount shall be the fair market value thereof on the date of such Investment,
and fair market value shall be determined in good faith by the Board of
Directors of the Company.
Designation of Unrestricted Subsidiaries
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments (including without limitation any direct or indirect obligation to
subscribe for additional Equity Interests or maintain or preserve such
subsidiary's financial condition or to cause such person to achieve any
specified level of operating results) by the Company and its Restricted
Subsidiaries (except to the extent repaid) in the Subsidiary so designated will
be deemed to be Investments at the time of such designation and, except to the
extent, if any, that such Investments are Permitted Investments at such time,
will reduce the amount otherwise available for Restricted Payments. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Investment would be
permitted at such time and if such Restricted Subsidiary otherwise meets (or
would meet concurrently with the effectiveness of such designation) the
definition of an Unrestricted Subsidiary.
Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation. The Board of Directors of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
IndebtednessIn-
-38-
debtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (1)(i) such Indebtedness is permitted under the covenant described
under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock,"
and (2)(ii) no Default or Event of Default would be in existence following such
designation.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company's Restricted Subsidiaries will not issue any
shares of Preferred Stock (other than to the Company or a Restricted Subsidiary
of the Company); provided, however, that the Company and the Restricted
Subsidiaries may incur Indebtedness (including Acquired Debt) if the
Consolidated Interest Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
would have been equal to or greater than 2 to 1, determined on a pro forma
basis, as if the additional Indebtedness had been incurred at the beginning of
such four-quarter period and no Event of Default shall have occurred and be
continuing after giving effect on a pro forma basis to such incurrence.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness under the Credit Agreement in an aggregate amount
outstanding (with letters of credit being deemed for all purposes of
the Indenture to have a principal amount equal to the maximum
potential liability of the Company and its Restricted Subsidiaries in
respect thereof) at any time not to exceed the greater of (x) $450$500
million and (y) 3.54.0 times Consolidated Resort
76
EBITDA for the Company's
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on
which such Indebtedness is being incurred less, in each case, the
aggregate amount of such Indebtedness permanently repaid with the Net
Proceeds of any Asset Sale;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness represented by the Notes (including the Exchange Notes)exchange notes),
the Guarantees thereof and the Indenture in the principal amount of
Notes originally issued on the Closing Date;
(iii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company and its Restricted Subsidiaries of
additional Indebtedness (other than Hedging Obligations) in an
aggregate principal amount not to exceed $50 million at any time
outstanding;
(v) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new
Restricted Subsidiary (including Indebtedness that was incurred by the
prior owner of such assets or by such Restricted Subsidiary prior to
such acquisition by the Company and its Restricted Subsidiaries);
provided that the aggregate principal amount of Indebtedness incurred pursuant
to this clause (v) does not exceed $20 million at any time
outstanding;
(vi) the incurrence by the Company and its Restricted Subsidiaries of
Permitted Refinancing Indebtedness;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and its
Restricted Subsidiaries; provided, however, that any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary of the Company, and any sale or other transfer
of any such Indebtedness to a Person that is not the Company or a
Restricted Subsidiary of the Company, shall
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be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the case
may be;
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations incurred for the purpose of hedging against
fluctuations in currency values or for the purpose of fixing or
hedging interest rate risk with respect to any floating rate
Indebtedness of the Company or any of its Restricted Subsidiaries
permitted by the Indenture; provided that the notional principal
amount of any Hedging Obligations does not significantly exceed the
principal amount of Indebtedness to which such agreement relates;
(ix) the Guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or a Restricted Subsidiary of the Company
permitted by the Indenture;
(x) the incurrence of Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price, earn
outearn-out or other
similar obligations, in each case incurred in connection with the
acquisition or disposition of any business or assets or subsidiaries
of the Company permitted by the Indenture; and
(xi) the Indebtedness incurred from time to time under a revolving credit facilityCredit
Facility of SSI Venture in an aggregate amount outstanding at any time
not to exceed $10 million, so long as SSI Venture remains a Restricted
Subsidiary of the Company.Company (as of the Closing Date, SSI Venture is an
Unrestricted Subsidiary).
For purposes of determining the amount of any Indebtedness of any Person
under this covenant, (a) the principal amount of any Indebtedness of such Person
arising by reason of such Person having granted or assumed a Lien on its
property to secure Indebtedness of another Person shall be the lower of the fair
market
77
value of such property and the principal amount of such Indebtedness
outstanding (or committed to be advanced) at the time of determination; (b) the
amount of any Indebtedness of such Person arising by reason of such Person
having Guaranteed Indebtedness of another Person where the amount of such
Guarantee is limited to an amount less than the principal amount of the
Indebtedness so Guaranteed shall be such amount as so limited;limited and (c)
Indebtedness shall not include a non-recourse pledge by the Company or any of
its Restricted Subsidiaries of Investments in any Person that is not a
Restricted Subsidiary of the Company to secure the Indebtedness of such Person.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company, in its sole discretion, either (a) shall classify (and may later
reclassify) such item of Indebtedness in one of such categories in any manner
that complies with this covenant or (b) shall divide and classify (and may later
redivide and reclassify) such item of Indebtedness into more than one of such
categories pursuant to such first paragraph.
Liens
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness on any asset now owned or hereafterhere after
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness or other obligations owed
to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries, (iii) transfer
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any of its properties or assets to the Company or any of its Restricted
Subsidiaries or (iv) guarantee the Notesnotes or any renewals or refinancings
thereof, in each case except for such encumbrances or restrictions (other than
encumbrances and restrictions in respect of clause (iv) of this sentence)
existing under or by reason of (a) Existing Indebtedness, as in effect on the
Closing Date, (b) the Credit
Agreement as in effect as of the Closing Date, and(and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof; provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive with respect to
such dividend and other payment restrictions than those contained in the Credit
Agreement as in effect on the Closing Date,Agreement), (c) the Notes, any Guarantee thereof and the Indenture, (d)
applicable law, (e) any instrument governing Indebtedness or Equity Interests of
a Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
or Equity Interests were incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the Equity Interests, properties or assets of any Person, other than the
Person, or the Equity Interests, property or assets of the Person, so acquired;
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the Indenture, (f) by reason of customary nonassignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired or proceeds therefrom, (h) customary
restrictions in asset or stock sale agreements limiting transfer of such assets
or stock pending the closing of such sale, (i) customary non-assignment
provisions in contracts entered into in the ordinary course of business or (j)
Permitted Refinancing Indebtedness; provided
78
that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving Person), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another Person
unless (i) the Company is the surviving Person or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a Person organized or existing under the laws of the
United States, any state thereof or the District of Columbia; (ii) the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the obligations
of the Company under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after giving effect to such transaction no Default or Event of Default exists;exists
and (iv) except in the case of a merger of the Company with or into a Restricted
Subsidiary of the Company, the Company or the Person formed by or surviving any
such consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made, (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company, immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth
in the first paragraph of the covenant described above under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock."
Nothing contained in the foregoing paragraph shall prohibit (i) any
Restricted Subsidiary from consolidating with, merging with or into or
transferring all or part of its properties and assets to the Company or (ii) the
Company from merging with an Affiliate for the purpose of reincorporating the
Company in another jurisdiction to realize tax or other benefits; provided,
however, that in connection with any such merger, consolidation or asset
transfer no consideration other than common stock (that is not Disqualified
Stock) in the surviving Person or the Company shall be issued or distributed.
Transactions with Affiliates
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such
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Affiliate Transaction is on terms that are no less favorable to Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate payments or consideration in excess of $5.0$5 million, a Board
Resolution authorizing and determining the fairness of such Affiliate
Transaction approved by a majority of the independent members of the Board of
Directors of the Company and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate payments or
consideration in excess of $15.0$25 million, an opinion as to the fairness to the
Company or such Restricted Subsidiary of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing.
The foregoing provisions will not prohibit (i) reasonable fees and
compensation paid to and indemnity provided on behalf of officers, directors,
employees, agents or consultants of the Company or any Restricted Subsidiary of
the Company as determined in good faith by the Company's Board of Directors or
senior 79
management including, without limitation, any issuance of Equity
Interests of the Company pursuant to stock option, stock ownership or similar
plans; (ii) transactions between or among the Company and/or its Restricted
Subsidiaries; (iii) any agreement or arrangement as in effect on the Closing Datedate of the
Indenture and publicly disclosed in a document filed under the Exchange Act or
any amendment thereto or any transaction contemplated thereby (including
pursuant to any amendment thereto) in any replacement agreement or arrangement
thereto so long as any such amendment or replacement agreement or arrangement is
not more disadvantageous to the Company or its Restricted Subsidiaries, as the
case may be, in any material respect than the original agreement as in effect on
the Closing Date;date of the Indenture; (iv) loans or advances to employees and officers of
the Company and its Restricted Subsidiaries not in excess of $5 million at any
time outstanding;outstanding and (v) any Permitted Investment or any Restricted Payment that
is permitted by the provisions of the Indenture described above under the
caption "Restricted Payments".Payments."
Limitation on Layering Debt
The Indenture provides that (A)(a) the Company will not, directly or
indirectly, incur, create, issue, assume, guarantee or otherwise become liable
for any Indebtedness that is by its terms subordinate or junior in right of
payment to any Senior Debt of the Company and senior in any respect in right of
payment to the Notes and (B)(b) no Guarantor will, directly or indirectly, incur,
create, issue, assume, guarantee or otherwise become liable for any Indebtedness
that is by its terms subordinate or junior in right of payment to any Senior
Debt of such Guarantor and senior in any respect in right of payment to the
Subsidiary Guarantee of such Guarantor.
Additional Subsidiary Guarantees
The Indenture provides that if any Restricted Subsidiary of the Company
after the date of the Indenture shall become or be required to become a
guarantor under the Credit Agreement or shall become a guarantor of any other
Indebtedness of the Company or any Restricted Subsidiary, then such Restricted
Subsidiary shall become a Guarantor, in accordance with the terms orof the
Indenture; provided that if such Restricted Subsidiary is released and
discharged from all obligations under such guarantees, it shall be released and
discharged from its obligations under its Subsidiary Guarantee as described
under "--Subsidiary Guarantees" above.
Payments for Consent
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or is paid to all Holders of the Notes that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual
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financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
forms and, with respect to the annual information only, a report thereon by the
Company's certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Company
were required to file such reports. In addition, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability (unless
the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Company and its Restricted Subsidiaries will agree that, for so
long as any Notes remain outstanding, they will furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
80
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages,liquidated damages, if any, with respect to, the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due (whether payable at maturity, upon redemption or repurchase or
otherwise) of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Company or any of its Restricted Subsidiaries to comply with the provisions
described under the caption "Merger, Consolidation or Sale of Assets"; (iv)
failure by the Company to comply with the provisions described under the captionscaption
"Change of Control" or "Asset Sale"Sales" (whether or not prohibited by the
subordination provisions of the Indenture) (other than a failure to purchase
Notes pursuant to an offer commenced under such provisions, which shall be
subject to clause (ii) above) for 30 days after written notice by the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes;
(v) failure by the Company or any of its Restricted Subsidiaries for 60 days
after written notice by the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes to comply with any of its other agreements
in the Indenture or the Notes other than those referred to in clausesclause (i), (ii),
(iii) or (iv) above; (vi) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Significant
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Significant Subsidiaries), whether such Indebtedness or guarantee now exists or
is created after the Closing Date, which default (a) is caused by a failure to
pay principal after final maturity of such Indebtedness prior to the expiration
of the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10 million or more without such Indebtedness being
discharged or such acceleration having been cured, waived or rescinded within 30
days of acceleration; (vii) failure by the Company or any of its Significant
Subsidiaries to pay final judgments aggregating in excess of $10 million and
either (a) any creditor commences enforcement proceedings upon any such judgment
or (b) such judgments are not paid, discharged or stayed for a period of 60
days; (viii) except as permitted by the Indenture, any Guarantee of the Notes by
a Significant Subsidiary shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect, or any Guarantor which is a Significant Subsidiary or any Person acting
on behalf of any such Guarantor shall deny or disaffirm its obligations under
its Guarantee of the Notes; and (ix) certain events of bankruptcy or insolvency
with respect to the Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes and all other Obligations thereunder to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to the
Company, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal, premium, if any, interest or Liquidated Damages,liquidated damages, if any,)any) if it
determines that withholding notice is in their interest.
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In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company or any
Guarantor with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to the optional redemption provisions of the Indenture, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
81
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notesnotes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
principal, premium, if any, interest or Liquidated Damages,liquidated damages, if any, on the
Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees, Incorporators and
Stockholders
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or such Guarantor under the Notes, the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of and premium, if any, interest
and Liquidated Damages,liquidated damages, if any, on the Notes when such payments are due from the
trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment,nonpayment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of and premium, if any, interest and Liquidated Damages,liquidated damages, if
any, on the outstanding Notes on the Stated Maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
Notesnotes are being defeased to maturity or to a particular redemption date; (ii) in
the case of Legal Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (a) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (b) since the Closing Date, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding
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Notes will not recognize income, gain or loss for federal income tax purposes,
as a result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would
82
have been the case if such Covenant Defeasance
had not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit); (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under, any material agreement or instrument (other
than the Indenture) to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries is bound; (vi) the Company
shall have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust fund will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) the Company must deliver to
the Trustee an Officers' Certificate stating that the deposit was not made by
the Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Satisfaction and Discharge of the Indenture
The obligations of the Company and the other Guarantors under the Indenture
will terminate when (i) either (a) all outstanding Notes have been delivered to
the Trustee for cancellation, or (b) all such Notes not theretofore delivered to
the Trustee for cancellation have become due and payable, will become due and
payable within one year or are to be called for redemption within one year under
irrevocable arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name and at the expense of the Company and the
Company has irrevocably deposited or caused to be deposited with the Trustee, in
trust, funds in an amount sufficient to pay and discharge the entire
indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of (and premium, if any, on)any) and interest and Liquidated Damages,liquidated
damages, if any, to the date of maturity or date of redemption, (ii) the Company
has paid or caused to be paid all sums payable by the Company under the
Indenture, and (iii) the Company has delivered an Officers' Certificate and an
Opinion of Counsel relating to compliance with the conditions set forth in the
Indenture.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes thereof may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver; (ii) reduce the principal of or change the fixed maturity of any Note
83
note
or alter the provisions with respect to the price to be paid, or the timing of
redemption or payment, upon redemption of the Notesnotes or, after the Company has
become obligated to make a Change of Control Offer or an Asset Sale Offer,
amend, change or modify the obligation of the Company to make or consummate such
Change of Control Offer or Asset
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Sale Offer; (iii) reduce the rate of or change the time for payment of interest
or Liquidated Damages,liquidated damages, if any, on any Note; (iv) waive a Default or Event of
Default in the payment of principal of or premium, interest or Liquidated Damages,liquidated
damages, if any, on the Notes (except a rescission of acceleration of the Notesnotes
by the Holders of at least a majority in aggregate principal amount of the Notes
and a waiver of the payment default that resulted from such acceleration); (v)
make any Note payable in money other than that stated in the Notes; (vi) except
pursuant to the terms of the Indenture, release any Guarantor from its Guarantee
of the Notes; (vii) make any change in the subordination provisions in the
Indenture that adversely affects the rights of any Holder of any Notes in any
material respect or any change to any other provision thereof that adversely
affects the rights of any Holder of Notes under the subordination provisions of
the Indenture in any material respect (it being understood that amendments to
the provisions of the Indenture described above under the caption "Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" which may
have the effect of increasing the amount of Senior Debt that the Company and its
Restricted Subsidiaries may incur shall not, for purposes of this clause (vii),
be deemed to be a change that adversely affects in a material respect the rights
of any Holder of Notes under the subordination provisions of the Indenture;Indenture); or
(viii) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture and the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of Notesnotes in the case of a merger, consolidation or sale
of assets, to provide security for the Notes, to add a Guarantor, to make any
change that would provide any additional rights or benefits to the Holders of
Notes or that does not adversely affect the legal rights under the Indenture of
any such Holder in any material respect, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
The consent of the Holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
Concerning the Trustee
The Trustee has been appointed by the Company as Registrar and Paying Agent
with respect to the Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days and apply to the Commission for permission to
continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to the Trustee against any loss,
liability or expense.
84Global Notes and Book-Entry System
The Global Securities
The exchange notes will be issued in the form of one or more registered
notes in global form, without interest coupons. Such global notes will be
deposited on the issue date with the Trustee as custodian for DTC. Beneficial
interests in the global notes may not be exchanged for certificated notes except
in the circumstances described below. All interests in global notes may be
subject to the procedures and requirements of DTC.
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Exchanges of beneficial interest in one global security for interest in
another global security will be subject to the applicable rules and procedures
of DTC and its direct and indirect participants. Any beneficial interest in one
of the global notes that is transferred to a person who takes delivery in the
form of an interest in another global security will, upon transfer, cease to be
an interest in that global security and become an interest in the global
security to which the beneficial interest is transferred and accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in the global security to which the
beneficial interest is transferred for as long as it remains an interest in that
global security.
Certain Book-Entry Procedures for the Global Notes
The descriptions of the operations and procedures of DTC, as set forth
below, are provided solely as a matter of convenience. These operations and
procedures are solely within the control of DTC and are subject to change from
time to time. The Company takes no responsibility for these operations and
procedures and urges investors to contact DTC or their participants directly to
discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interests
in, and transfers of ownership interests in, each security held by or on behalf
of DTC are recorded on the records of the Participants and Indirect
Participants. The rules applicable to DTC and its Participants are on file with
the Commission. Upon the issuance of the global note representing the exchange
notes, DTC or its custodian will credit, on its internal system, the respective
principal amount of the individual beneficial interests represented by the
global note to the accounts of persons who have accounts with DTC. Ownership of
beneficial interest in the global notes will be shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of Participants) and the records of
Participants and Indirect Participants (with respect to interests of persons
other than Participants).
So long as DTC or its nominee is the registered owner or holder of the
global note, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the exchange notes represented by the global note
for all purposes under the Indenture and the exchange notes. Except as set forth
herein, owners of beneficial interest in the global note will not be entitled to
have exchange notes represented by the global note registered in their names,
will not receive or be entitled to receive physical delivery of exchange notes
in definitive certificated form, and will not be considered holders of the
exchange notes for any purposes under the Indenture. Accordingly, each person
owning a beneficial interest in the global note must rely on the procedures of
DTC and, if such person is not a Participant, on the procedures of the
Participant through which such person directly or indirectly owns its interest,
to exercise any rights of a holder under the Indenture. We understand that under
existing industry practices, if we request any action of holders or any owner of
a beneficial interest in the global note desires to give any notice or take
action that a holder is entitled to give or take under the indenture, DTC would
authorize the Participants holding the relevant beneficial interests to give
such notice to take such action, and such Participants would authorize
beneficial owners owning through such Participants to give such notice or take
action or would otherwise act upon the instructions of beneficial owners owning
through them.
Payments in respect of the principal of, premium, if any, and interest on
the global note will be made to DTC or its nominee, as the case may be, as the
registered owner. Neither we, the trustee nor any paying agent will have any
responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the exchange global note or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the exchange global notes; or
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(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
We expect that DTC or its nominee, upon receipt of any payment of principal
of, premium, if any, or interest in respect of the global note will credit
Participants' accounts in the global note, as shown in the records of DTC, in
the principal amount of the relevant security as shown on the records of DTC or
its nominee. We also expect that payments by Participants to owners of
beneficial interests in the global note held through such Participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. The Participants will be responsible for such
payments.
A global note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the global notes or (b) has ceased to be a
clearing agency registered under the Exchange Act and, in either case,
the Company fails to appoint a successor depositary;
(2) the Company, at its option, notifies the trustee in writing that it
elects to cause the issuance of the certificated notes; or
(3) there has occurred and is continuing a Default or Event of Default
with respect to the notes.
In addition, beneficial interests in a global note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes
delivered in exchange for any global note or beneficial interests in global
notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures).
Although DTC has agreed to the procedures described above in order to
facilitate transfers of interests in the global note among Participants of DTC,
it is under no obligation to perform such procedures and such procedures may be
discontinued at any time. Neither we nor the trustee have any responsibility for
the performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
According to DTC, the foregoing information with respect to DTC has been
provided by it for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind. The information
contained herein concerning DTC and its book-entry-system has been obtained from
sources that we believe are reliable, although DTC has declined to pass upon the
accuracy of the statements contained herein.
Same Day Funds
We will make the payments of principal, premium, if any, and interest on
the global notes in immediately available funds to DTC.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness or preferred stock of any other Person existing at the time such
other Person is merged with or into or becamebecomes a Subsidiary of such specified
Person, including, without limitation, Indebtedness or preferred stock incurred
in connection with, or in contemplationcontempla-
-48-
tion of, such other Person merging with or into or becoming a Subsidiary of such
specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Apollo" means Apollo Ski Partners, L.P., subsidiary of Apollo Advisors,
L.P., a Delaware limited partnership.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
(collectively, "dispositions") of any assets or rights (including, without
limitation, by way of a Sale and Leaseback Transaction), other than dispositions
of inventory or sales or leases of real estate constituting Real Estate Held for
Sale in the ordinary course of business, and (ii) the issuance of Equity
Interests by any Restricted Subsidiary or the disposition by the Company or a
Restricted Subsidiary of Equity Interests in any of the Company's Restricted
Subsidiaries (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Restricted
Subsidiary of the Company), in the case of either clause (i) or (ii), whether in
a single transaction or a series of related transactions (a) that havehas a fair
market value in excess of $3.0$5 million or (b) for net proceeds in excess of $3.0$5
million. Notwithstanding the foregoing, the following will be deemed not to be
Asset Sales: (i) a transfer of assets by the Company to a Restricted Subsidiary
or by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary; (ii) an issuance of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary; (iii) a Permitted Investment or
Restricted Payment that is permitted by the covenant described above under the
caption "Restricted Payments;"Payments"; (iv) a disposition of Cash Equivalents solely for
cash or other Cash Equivalents; (v) a disposition in the ordinary course of
business of used, worn-out, obsolete, damaged or replaced equipment; (vi) the
grant of licenses to third parties in respect of intellectual property in the
ordinary course of business of the Company or any of its Restricted
Subsidiaries, as applicable; (vii) any disposition of properties or assets that
is governed by the provisions described under "Change of Control" or "Merger,
Consolidation or Sale of Assets;"Assets"; and (viii) the granting or incurrence of any
Permitted Lien.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of the Company in full force and effect at the time of determination
and certified as such by the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
85
"Cash Equivalents" means (a) marketable obligations issued or
unconditionally guaranteed by the U.S. or issued by any of its agencies and
backed by the full faith and credit of the U.S., in each case maturing within
one year from the date of acquisition; (b) short-term investment grade domestic
and eurodollar certificates of deposit or time deposits that are fully insured
by the Federal Deposit Insurance Corporation or are issued by commercial banks
organized under the laws of the U.S. or any of its states having combined
capital, surplus and undivided profits of not less than $100,000,000 (as shown
on its most recently published statement of condition); (c) commercial paper and
similar obligations rated "P-1" by Moody's Investors Service, Inc. ("Moody's")
or "A-1" by Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc. ("S&P"); (d) readily marketable tax-free municipal bonds of
domestic issuerissuers rated "A-2" or better by Moody's or "A" or better by S&P, and
maturing within one year
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from the date of issuance; and (e) mutual funds or money market accounts
investing primarily in items described in clauses (a) through (d) above.
"Change of Control" means, with respect to the Company or any successor
Person permitted under the covenant "Merger, Consolidation or Sale of Assets,"
the occurrence of any of the following: (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than
Apollo and its Affiliates, acquires "beneficial ownership" (as determined in
accordance with Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than 50% of the total outstanding shares of Voting Stock (as defined)
except to the extent that, and so long as, Apollo and its affiliates hold the
right, by voting power, contract or otherwise, to elect or designate, and do so
elect or designate, a majority of the Company's Board of Directors; (b) the
Company consolidates with or merges into any other corporation, or conveys,
transfers or leases all or substantially all of its assets to any person, or any
other corporation merges into the Company and, in the case of any such
transaction, the outstanding common stock of the Company is changed or exchanged
as a result, unless the shareholders of the Company immediately before such
transaction own, directly or indirectly, at least 51% of the outstanding shares
of Voting Stock of the corporation resulting from such transaction in
substantially the same proportion as their ownership of the Voting Stock
immediately before such transaction (except to the extent that, and so long as,
Apollo and its affiliates hold the right, by voting power or otherwise, to elect
or designate, and do so elect or designate, a majority of the Board of Directors
of the corporation resulting from such transaction); or (c) the first day on
which more than a majority of the members of the Board of Directors of the
Company are not Continuing Directors.
"Closing Date" means the date of the closing of the sale of the Notes
initially issued pursuant to the Indenture.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing such Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, (iii) Consolidated Interest Expense,
and (iv) depreciation and amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-
cashnon-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, amortization and other non-
cashnon-cash
expenses were deducted in computing such Consolidated Net Income, minus (v)
non-cash items increasing such Consolidated Net Income, in each case, for such
period without duplication on a consolidated basis and determined in accordance
with GAAP.
"Consolidated Interest Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Resort EBITDA of such Person for such
period to the Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period. In the event that the Company or any of its
Restricted Subsidiaries incurs, assumes, Guarantees, redeems, repays or
otherwise retires any Indebtedness (other than revolving credit borrowings)
subsequent to the commencement of the period for which the Consolidated Interest
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Consolidated Interest Coverage Ratio is made (the
"Calculation Date"), then the Consolidated Interest
86
Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
redemption, repayment or retirement of Indebtedness as if the same had occurred
at the beginning of the applicable four-quarter reference period. In addition,
for purposes of making the computation referred to above, (i) (a) acquisitions
that have been made by the Company or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any related financing
transactions and (b) other transactions consummated by the Company or any of its
Restricted Subsidiaries with respect to which pro forma effect may be given
pursuant to Article 11 of Regulation S-X under the Securities Act, in each case
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Resort EBITDA
for such reference period shall be calculated without giving effect to clause
(iii) of the proviso set forth in the definition of Consolidated"Consolidated Net Income,Income",
(ii) the Consolidated Resort EBITDA attributable to discontinued operations, as
determineddeter-
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mined in accordance with GAAP, and operations or businesses disposed of prior to
the Calculation Date, shall be excluded and (iii) the Consolidated Interest
Expense attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, but only to the extent (x) that the obligations giving
rise to such Consolidated Interest Expense will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date, or (without duplication) (y) such Consolidated Interest Expense is less
than the Consolidated Resort EBITDA attributable to such discontinued operations
for the same period.
"Consolidated Interest Expense" means with respect to any Person for any
period the sum, without duplication, of (i) the consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs and
original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations)Obligations but excluding amortization of debt
issuance costs), (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, (iii) any
interest expense for such period on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such Guarantee or Lien is called upon), in each case, on a consolidated
basis and in accordance with GAAP, and (iv) any Preferred Stock dividends paid
in cash by the Company or any of its Restricted Subsidiaries to a Person other
than the Company or any of its Restricted Subsidiaries, determined, in each
case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the net income (but not loss) of any Person that is not a
Restricted Subsidiary of such Person or that is accounted for by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash by such Person during such period to the
referent Person or a Restricted Subsidiary thereof, (ii) premiums paid and the
net income
(but not loss)write-off of any Restricted Subsidiary shall be excluded tounamortized balance of original issue discount in connection
with a redemption of, or tender offer for, the extent
thatNotes or the declaration or payment2009 Notes by the
Company and amortization of dividends or similar distributions by that
Restricted Subsidiary of that net income is not at the date of determination
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisitiondebt issuance costs shall be excluded and (iv)(iii) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the consolidated stockholders' equity of such Person and its consolidated
Restricted Subsidiaries as of such date, less (without duplication) amounts
attributable to Disqualified Stock of such Person, in each case determined in
accordance with GAAP.
87
"Consolidated Resort EBITDA" means, with respect to any Person for any
period, the Consolidated EBITDA of such Person for such period minus
consolidated real estate revenue of such Person and its Restricted Subsidiaries
for such period plus consolidated real estate operating expenses of such Person
and its Restricted Subsidiaries for such period minus any portion of such
Consolidated EBITDA attributable to Unrestricted Subsidiaries of such Person for
such period, in each case as reported on such Person's consolidated statement of
operations and determined on a consolidated basis and in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Closing Datedate of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Agreement" means that certain amendedThird Amended and restated credit
agreement,Restated Revolving
Credit and Term Loan Agreement, dated as of May 1, 1999,June 10, 2003 by and among the Company,The Vail
Corporation, the Lenders named therein, Nationsbank,Bank of America, N.A., as Administrative
Agent, and NationsBanc MontgomeryBanc of America Securities LLC, including any related notes,Notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the Notes
mature;ma-
-51-
ture; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring on or prior to 91
days after the date on which the Notes mature shall not constitute Disqualified
Stock if (1) the "asset sale" or "change of control" provisions applicable to
such Capital Stock are not more favorable in any respect to the holders of such
Capital Stock than the terms applicable to the Notes and described under the
captions "Repurchase at the Option of Holders--Asset Sales" and "Repurchase at
the Option of Holders--Change of Control"; and (2) any such requirement only
becomes operative after compliance with such terms applicable to the Notes,
including the purchase of any Notes tendered pursuant thereto.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means (1)(i) a public or private sale of Capital Stock of
the Company and (ii) the sale of other securities convertible or exchangeable
into Capital Stock (other than Disqualified Stock) of the Company; provided that
an Equity Offering shall be deemed to occur with respect to all or a portion of
such securities only upon the conversion or exchange of such securities into
Capital Stock.
"Existing Indebtedness" means Indebtedness of the Company and the Company's
Subsidiaries (other than Indebtedness under the Credit Agreement and
the Notes)Agreement) in existence
on the Closing Date, until suchdate of the Indenture and Indebtedness of Affiliates of the Company in
existence on the date of the Indenture that is repaid.or will be required to be
consolidated on the Company's balance sheet in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect in the United States from time to time.
88
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means (i) each of the Company's Restricted Subsidiaries that
is aare party to the Indenture on the date of execution and delivery of the
Indenture and (ii) each other Person that becomes a guarantor of the obligations
of the Company under the Notes and the Indenture from time to time in accordance
with the provisions of the Indenture described under the caption "Certain
Covenants--Additional Affiliate Guarantees"Subsidiary Guarantees,", and their respective successors
and assigns; provided, however, that "Guarantor" shall not include any Person
that is released from its Guarantee of the obligations of the Company under the
Notes and the Indenture as described under "Subsidiary"--Subsidiary Guarantees."
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap, cap or collar
agreements and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in currency exchange or interest rates.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes,Notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
bankers' acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property (which purchase price
is due more than one year after taking title to such property) or services or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP; (ii) all indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such Person, the amount
of such obligation, to the extent it is without recourse to such Person, being
deemed to be the lesser of the value of such property
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or assets or the amount of the obligation so secured); (iii) to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person; provided, however, that (1) the amount outstanding at any time of
any Indebtedness issued with original issue discount is the face amount of such
indebtednessIndebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP; and (2) Indebtedness shall not include any liability for federal, state,
local or other taxes; and (iv) with respect to any Restricted Subsidiary of the
Company, Preferred Stock of such Person (in an amount equal to the greater of
(x) the sum of all obligations of such Person with respect to redemption,
repayment or repurchase thereof and (y) the book value of such Preferred Stock
as reflected on the most recent financial statements of such Person).
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP,
excluding, however, trade accounts receivable and bank deposits made in the
ordinary course of business consistent with past practice. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Restricted Subsidiary of the Company, the Company or such Restricted
Subsidiary shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the penultimate paragraph of the covenant described above under the
caption "Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under 89
applicable law
(including any conditional, sale or other title retention agreement, any lease
in the nature thereof, and any option or other agreement to sell or give a
Lien).
"Make-Whole Amount" means, with respect to any Note,note, an amount equal to the
excess, if any, of (a) the present value of the remaining principal, premium, if
any, and interest (other than accrued interest otherwise payable upon
redemption) payments that would be payable with respect to such Notenote if such
Notenote were redeemed on MayFebruary 15, 2004,2009, computed using a discount rate equal to
the Treasury Rate plus 50 basis points, over (b) the principal amount of such
Note.note.
"Make-Whole Average Life" means, with respect to any date of redemption of
Notes, the number of years (calculated to the nearest one-twelfth) from such
redemption date to MayFebruary 15, 2004.2009.
"Make-Whole Price" means, with respect to any Note, the greater of (a) the
sum of the principal amount of and Make-Whole Amount with respect to such Note,
and (b) the redemption price of such Notenote on MayFebruary 15, 2004.2009.
"Net Income" means, with respect to any Person, the net income (or loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, (i) any gain (or
loss), together with any related provision for taxes on such gain (or loss),
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to Sale and Leaseback Transactions) or (b) the disposition
of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (or loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (or loss).
"Net Proceeds" means the aggregate cash proceeds or Cash Equivalents
proceeds received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any cash received upon
the sale or other disposition of any non-cash consideration received in any
Asset Sale, but only as and when received, and any proceeds deemed to be cash or
Cash Equivalents pursuant to clause (b) of the first paragraph under the caption
"Asset Sales"), net of (i) the direct costs relating to such Asset Sale
(including, without limitation,
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legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, (ii) taxes paid or payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), (iii) amounts required to be
applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that were the subject of such Asset Sale, (iv) all distributions and
other payments required to be made to minority interest holders of a Restricted
Subsidiary or joint venture as a result of such Asset Sale, and (v) any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Obligations" means any principal, interest (including post-petition
interest), penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Holder" means Apollo Advisors, L.P., a Delaware limited
partnership, or any fund, investment vehicle or account managed, advised or
controlled by Apollo Advisors, L.P., or any of its Affiliates.
"Permitted Investments" means (i) any Investment in the Company or a
Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Restricted Subsidiary of the Company
in a Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Company and, to the extent required under the
Indenture, a Guarantor or (b) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company; (iv) any
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "Repurchase at the Option of Holders--Asset
Sales"; (v) any 90
acquisition of assets received solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Company;
(vi) any Investment in a Similar Business (including any Investment made in any
Unrestricted Subsidiaries in a Similar Business) if, after giving effect to such
Investment, the aggregate amount of all Investments made pursuant to this clause
(vi) then constituting Unrestricted Investments Outstanding does not exceed the
greatersum of (x) $75 million and (y) 7.5%10% of Total Consolidated Assets of the Company at the
time of such Investment; (vii) contributions of Real Estate Held for Sale to
Real Estate Joint Ventures; provided, in the case of any Investment made
pursuant to this clause (vii) or the preceding clause (vi), that after giving
effect to such Investment (a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof, and (b) the
Company would, at the time of such Investment and after giving pro forma effect
thereto as if such Investment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set
forth in the first paragraph of the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock;"thereof; and (viii) Investments
received in connection with the settlement of any ordinary course obligations
owed to the Company or any of its Restricted Subsidiaries.
"Permitted Liens" means (i) Liens in favor of the Company or any of its
Restricted Subsidiaries; (ii) Liens securing Senior Debt of the Company or any
Restricted Subsidiary of the Company; (iii) Liens on property or Equity
Interests of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets or Equity Interests
other than those of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens
incurred or pledges and deposits made in connection with worker's compensation,
unemployment insurance and other social security benefits, statutory
obligations, bid, surety or appeal bonds, performance bonds or other obligations
of a like nature incurred in the ordinary course of business (other than
contracts in respect of borrowed money and other Indebtedness); (vi) Liens
existing on the Closing Date;date of the Indenture; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded; provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefore;therefor;
(viii) Liens securing the Notes or any Guarantee thereof; (ix) Liens securing
Permitted Refinancing Indebtedness to the extent that the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded was permitted to
be secured by a Lien; provided that such Liens do not extend to any assets other
than those that secured the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (x) Liens incurred in the ordinary course of
business of the Company or any Restricted Subsidiary of the Company with respect
to obligations that do not exceed $5.0$5 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary; (xi) Liens securing
Capital Lease Obligations; provided that such Liens do not extend to any
property or assets which are not leased property subject to such Capitalized
Lease Obligation; (xii) judgment liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal proceedings
that may have been duly initiated for the review of such
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judgment, degree or order shall not have been finally terminated or the period
within such proceedings may be initiated shall not have expired; (xiii) Liens
securing obligations of the Company under Hedging Obligations; (xiv) purchase
money Liens securing Purchase Money Obligations; provided that the related
Indebtedness shall not be secured by any property or assets of the Company or
any Restricted Subsidiary other than the property or assets so acquired pursuant
to such Purchase Money Obligation; (xv) Liens upon specific items of inventory
or other goods and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account of such Person
to facilitate the purchase, shipment or storage of such inventory or other
goods; (xvi) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty
91
requirements of the Company or
any of its Restricted Subsidiaries, including rights of offset and set-off;
(xvii) Liens arising from filing Uniform Commercial Code financing statements
regarding leases; provided that such Liens do not extend to any property or
assets which are not leased property subject to such leases or subleases; and
(xviii) Liens created for the benefit of all of the Notes and/or any Guarantees
thereof.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness (other than Hedging Obligations and other than
Indebtedness permitted to be incurred pursuant to clause (i), clause (iv) or
clause (vii) of the second paragraph under "--Incurrence of Indebtedness and
Issuance of Preferred Stock") of the Company or any of its Restricted
Subsidiaries; provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus premium and accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date equal to or later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes or any Guarantee thereof, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes or such Guarantee
on terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary that is an obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means an individual, limited or general partnership, corporation,
limited liability company, association, unincorporated organization, trust,
joint stock company, joint venture or other entity, or a government or any
agency or political subdivisionssubdivision thereof.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Purchase Money Obligations" of any Person means any obligations of such
Person or any of its Subsidiaries to any seller or any other person incurred or
assumed in connection with the purchase of real or personal property to be used
in the business of such person or any of its subsidiaries within 180 days of
such purchase.
"Real Estate Held for Sale" means, with respect to any Person, the real
estate of such Person and its Restricted Subsidiaries classified for financial
reporting purposes as Real Estate Held for Sale on the Closing Datedate of the Indenture or
thereafter acquired as Real Estate Held for Sale.
"Real Estate Joint Venture" means any Person engaged exclusively in the
acquisition, development and operation or resale of any real estate asset or
group of related real estate assets (and directly related activities).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
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"Sale and Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
92
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation iswas in effect on
the date hereof.of the Indenture.
"Similar Business" means any business conducted by the Company or any of
its Subsidiaries ason the date of the Closing DateIndenture or any other recreation, leisure
and/or hospitality business including without limitation ski mountain resort
operations, or any business or activity that is reasonably similar thereto or a
reasonable extension, development or expansion thereof or is reasonably
ancillary thereto.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of at least a majority of the
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of thatsuch Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).
"Total Consolidated Assets" means, with respect to any Person as of any
date, the book value of the assets of such Person and its Restricted
Subsidiaries as shown on the most recent consolidated balance sheet of such
Person.
"Treasury Rate" means, at any time of computation, the yield to maturity at
such time (as compiled by and published in the most recent statistical release
(or any successor release) of the Federal Reserve Bank of New York which has
become publicly available at least two business days prior to the date of the
redemption notice or, if such statistical release (or successor release) is no
longer published, any generally recognized publicly available source of similar
market data) of United States Treasury securities with a constant maturity most
nearly equal to the Make-Whole Average Life; provided, however, that if the
Make-Whole Average Life is not equal to the constant maturity of the United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Make-Whole
Average Life is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"2009 Notes" means the Company's 8.75% Senior Subordinated Notes due 2009
issued under (i) the indenture dated as of May 11, 1999 between the Company and
The Bank of New York, as trustee or (ii) the indenture dated as of November 21,
2001 between the Company and the Bank of New York, as trustee.
"Unrestricted Investments Outstanding" means, at any time of determination,
in respect of all Permitted Investments made pursuant to clause (vi) of the
definition of the term Permitted"Permitted Investments," the excess, if any, of (i) the
sum of all Permitted Investments theretofore made by the Company or any
Restricted Subsidiary on or after the date of the Indenture pursuant to clause (vi) of the definition of Permitted Investments"Permitted
Investments" over (ii) the amount of all cash, and the fair market value of any
assets or property, distributed as dividends and distributions to the Company or
a Restricted Subsidiary of the Company (to the extent that the Company does not
elect to include the amount of such dividends and distributions in the
computation of Consolidated Net Income pursuant to the parenthetical of clause
(i) of the definition thereof at the time of determination), and all repayments
of the principal amount of loans or advances, the net cash proceeds, and the
fair market value of assets or property, received from sales or transfers, in
respect of such Investments to the
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Company or any of its Restricted Subsidiaries and any other reduction made in
cash of such Investments in such Person.
"Unrestricted Subsidiary" means Boulder/Beaver, LLC, Colter Bay
Corporation, Eagle Park Reservoir Company, Forest Ridge Holdings, Inc., Gros
Ventre Utility Company, Jackson Lake Lodge Corporation, Jenny Lake Lodge, Inc.,
Larkspur Restaurant and Bar, LLC, Mountain Thunder, Inc., RTP, LLC, RT Partners,
Inc., SSI Venture, LLC, Timber Trail, Inc., Vail Associates Investments, Inc.
and VR Holdings, Inc. and any other Subsidiary that is designated by the Board
of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but
only to the extent that such Subsidiary is not party
93
to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding comply with the covenant set forth under "Transactions with
Affiliates."
"Voting Stock" of any Person as of any date means classes of the Capital
Stock of such Person that is at the time entitled to vote in the election of at
least a majority of the directors, managers, trustees or other governing body of
such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
94-57-
Description of Certain Indebtedness
Credit Facility
In June 2003, we amended and restated our Credit Facility to provide debt
financing up to an aggregate principal amount of $425 million. The Credit
Facility, as amended, consists of (i) a $325 million revolving credit facility
and (ii) a $100 million term loan. Our subsidiary, The Vail Corporation, is the
borrower under the Credit Facility, with Bank of America, N.A. as agent and
certain other financial institutions as lenders. The proceeds of loans made
under the Credit Facility may be used to fund our working capital needs, capital
expenditures, acquisitions and other general corporate purposes, including the
issuance of letters of credit. In connection with the offering of the Notes, the
Credit Facility was amended in January 2004 to extend the maturity date of the
term loan under the Credit Facility from December 2008 to December 2010, and to
reduce the applicable interest rate margin on the term loan. In addition, the
amendment provides that the term loan may be increased on a one-time basis by up
to $60 million.
The revolving Credit Facility matures June 2007. Borrowings under the
revolving Credit Facility bear interest annually at our option at the rate of
(i) LIBOR (the London interbank offered rate for a given interest period) plus a
margin (3.60% total rate at January 31, 2004) or (ii) the agent's prime lending
rate plus a margin (5.00% total rate at January 31, 2004). The revolving Credit
Facility also includes a quarterly unused commitment fee. The unused commitment
fee is equal to a percentage determined by the Funded Debt to Adjusted EBITDA
ratio (as defined), times the daily amount by which the revolving Credit
Facility commitment exceeds the total of outstanding loans and outstanding
letters of credit. The unused amounts are accessible to the extent that the
Funded Debt to Adjusted EBITDA ratio does not exceed the maximum ratio allowed
at quarter-ends. Interest rates on the revolving Credit Facility fluctuate based
upon the ratio of our Funded Debt to Adjusted EBITDA on a trailing twelve-month
basis. The term loan matures December 2010 and bears interest at a rate of LIBOR
plus a margin (3.91% total rate at January 31, 2004). The term loan is subject
to annual amortization based upon 1% per annum of the original principal amount
of the term loan facility. We have the option to prepay the term loan at any
time without any pre-payment penalty; however, such repayments cannot
subsequently be re-borrowed under the term loan facility.
The Vail Corporation's obligations under the Credit Facility are guaranteed
by us and certain of our subsidiaries and are collateralized by a pledge of all
of the capital stock of The Vail Corporation, substantially all of its
subsidiaries and our interest in SSV.
The Credit Facility provides for affirmative and negative covenants that
restrict, among other things, our ability to incur indebtedness, dispose of
assets, make capital expenditures and make investments. In addition, the
agreement includes certain restrictive financial covenants, the most restrictive
of which are the Funded Debt to Adjusted EBITDA ratio, Senior Debt to Adjusted
EBITDA ratio, Minimum Fixed Charge Coverage ratio, Minimum Net Worth and the
Interest Coverage ratio (as defined).
Industrial Revenue Bonds
Pursuant to an indenture (the "IRB Indenture") dated as of April 1, 1998,
between Eagle County, Colorado, as issuer (the "IRB Issuer"), and U.S. Bank
National Association, as trustee (the "IRB Trustee"), $41.2 million aggregate
principal amount of industrial revenue bonds (the "IRBs") were issued for the
purpose of providing funds to The Vail Corporation d/b/a Vail Associates, Inc.
("VAI") to refinance certain existing industrial revenue bonds. Pursuant to a
financing agreement (the "IRB Agreement") dated as of April 1, 1998, among the
IRB Issuer and VAI, the IRB Issuer loaned to VAI the proceeds of the issuance of
the IRBs and VAI agreed to make payments in the aggregate amount, bearing
interest at rates and payable at times, corresponding to the principal amount
of, interest rates on and due dates under the IRBs. The obligations of VAI under
the IRB Indenture, the IRB Agreement and the IRBs are secured by certain
multi-party agreements between VAI, the IRB Trustee and the U.S. Forest Service
(the "Permit Agreements") relating to the Vail Mountain and Beaver Creek
Mountain Forest Service Permits (the "Permits"). The Permit Agreements provide
that the U.S. Forest Service will cooperate with the IRB Trustee in obtaining a
new holder of the Permits (acceptable to the U.S. Forest Service in its sole
discretion) in the event of a default by VAI with respect to its obligations
under the IRBs. However, the Permit Agreements expressly provide that no
security interest is created in or collateral assignment made with respect to
the Permits.
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The IRBs mature, subject to prior redemption, on August 1, 2019. The IRBs
bear interest at the rate of 6.95% per annum, with interest payable
semi-annually on February 1 and August 1. The IRBs are subject to redemption at
the option of VAI, at any time and from time to time on or after August 1, 2008,
and are subject to mandatory redemption if interest payments on the IRBs lose
their tax exempt status. Furthermore, in the event that VAI or one of its
affiliates incurs additional indebtedness with (1) senior or superior rights to
the Permits or (2) equivalent rights with respect to the Permits above an
aggregate principal amount of $250,000,000 (including the unpaid principal
amount of the IRBs) the IRBs will bear an interest rate of 7.45% per annum or,
under certain limited circumstances, may be subject to mandatory redemption.
We also have indebtedness in connection with $19.0 million of outstanding
IRBs which we assumed in connection with our acquisition of Keystone and
Breckenridge. These IRBs consist of two series of refunding bonds which were
originally issued to finance the cost of sports and recreational facilities at
Keystone. The Series 1990 Sports Facilities Refunding Revenue Bonds have an
aggregate outstanding principal amount of $19.0 million. The principal matures
in installments in 2006 and 2008. These bonds bear interest at a rate of 7.75%
for bonds maturing in 2006 and 7.875% for bonds maturing in 2008. The Series
1991 Sports Facilities Refunding Revenue Bonds have an aggregate outstanding
principal amount of $1.5 million maturing in 2010 and bear interest at 7.375%.
SSI Venture Credit Facility
SSI Venture LLC ("SSV"), a retail/rental joint venture in which we have a
51.9% ownership interest, has a credit facility ("SSV Facility") which was
amended and restated in May 2003. The SSV Facility is a three-year credit
facility which provides for debt financing up to an aggregate principal amount
of $32.0 million. The SSV Facility, as amended, consists of (i) a $20.0 million
revolving credit facility, (ii) an $8.0 million term loan A and (iii) a $4.0
million term loan B. Keybank N.A. is agent with certain other financial
institutions as lenders. SSV's obligations under the SSV Facility are
collateralized by substantially all of SSV's assets. The proceeds of the loans
made under the SSV Facility may be used to fund SSV's working capital needs,
capital expenditures, acquisitions and other general corporate purposes,
including the issuance of letters of credit.
Borrowings bear interest annually at SSV's option at the rate of (i) LIBOR
plus a margin or (ii) the agent's prime lending rate plus a margin. Interest
rates on the borrowings fluctuate based upon the Consolidated Leverage ratio (as
defined). The revolving Credit Facility matures May 2006. The revolving Credit
Facility also includes a quarterly unused commitment fee. The term loan A
matures May 2006. SSV must make quarterly principal payments on the term loan A
in the amount of $285,715. SSV has the option to prepay the term loan A at any
time; however, such repayments cannot subsequently be re-borrowed under the term
loan A facility. The term loan B matures May 2006. SSV has the option to prepay
the term loan B at any time; however, such repayments cannot subsequently be
re-borrowed under the term loan B facility. The term loan B is backed by a $4.2
million letter of credit issued against our Credit Facility. The SSV Facility
provides for negative covenants that restrict, among other things, SSV's ability
to incur indebtedness, dispose of assets, make capital expenditures and make
investments. In addition, the SSV Facility includes certain restrictive
financial covenants, including the Consolidated Leverage ratio, Minimum Fixed
Charge Coverage ratio and Minimum Net Worth (as defined).
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for outstanding Notesnotes where such outstanding Notesnotes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. We have agreed that for a period of 30 days after effectiveness of
the exchange offer registration statement, we will make this prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at
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market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any
broker-
dealerbroker-dealer that resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of exchange notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. By
acceptance of the exchange offer, each broker-dealer that receives exchange
notes pursuant to the exchange offer hereby agrees to notify us prior to using
this prospectus in connection with the sale or transfer of exchange notes, and
acknowledges and agrees that, upon receipt of notice from us of the happening of
any event which makes any statement in this prospectus untrue in any material
respect or which requires the making of any changes in this prospectus in order
to make the statements herein not misleading (which notice we agree to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of this
prospectus until we have amended or supplemented the prospectus to correct such
misstatement or omission and hashave furnished copies of the amended or
supplemented prospectus to such broker-dealer.
For a period of 30 days after effectiveness of the exchange offer
registration statement, we will promptly upon request send additional copies of
this prospectus and any amendment or supplement thereto to any broker-dealer
that requests such documents in the letter of transmittal. We have agreed to pay
all expenses incident to the exchange offer (including the expenses of any one
special counsel for the holdersHolders of the Notes)notes) other than commissions or
concessions of any brokers or dealers and will indemnify the holdersHolders of the
Notesnotes participating in the exchange offer (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
95-60-
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a discussion of certain U.S. federal income tax
and
estate tax consequences of (i)associated with the exchange of outstanding Notesnotes for exchange
notes and (ii) the beneficial ownership and disposition of the exchange notes. For
purposes of this discussion, a "U.S. Holder" is a Holderbeneficial owner of a note
that is for U.S. federal income tax purposes an individual who is a citizen or
resident of the United States, a corporation or a
partnership that is organized in or under the
laws of the United States or any state thereof, an estate the income of which is
includibleincludable in gross income for U.S. tax purposes regardless of its source or a
trust (1) the administration of which is subject to the primary supervision of a
United States court and as to which one or more United States persons have the
authority to control all substantial decisions of the trust.trust or (2) which has
made a valid election to be treated as a U.S. person. A "Non-U.S. Holder" is a
Holderbeneficial owner of a note that for U.S. federal income tax purposes is a
non-resident alien or a corporation, estate or trust that is not a U.S. Holder.
This summary applies only to Notes heldholders who hold the notes and the exchange notes
received therefor as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code"). It does not discuss all
of the tax consequences that may be relevant to a Holderholder in light of its
particular circumstances or to Holdersholders subject to special rules, such as
tax-exempt organizations, dealers in securities or foreign currencies, financial
institutions, partnerships or other pass-through entities, life insurance
companies, or regulated investment companies, expatriates, holders subject to
the alternative minimum tax, holders deemed to sell the notes under the
constructive sale provisions of the Code, or to Holdersholders whose functional
currency is not the United States dollar or who hold the Notesexchange notes as part
of a synthetic security, conversion transaction, or certain "straddle" or
hedging transactions.
It also does not deal with holders other than Holders
participating in the exchange offer (except where otherwise specifically
noted). Persons considering participation in the exchange offer should consult
their own tax advisors concerning the application of United States federal
income tax laws to their particular situations as well as any consequences of
the exchange of outstanding Notes for exchange notes, and the ownership and
disposition of the exchange notes arising under the laws of any other taxing
jurisdiction.
The U.S. federal income tax and estate tax considerations set forth below are based upon
the Code and regulations, rulings and judicial decisions thereunder as of the
date hereof, and such authorities may be repealed, revoked or modified, possibly
with retroactive effect, so as to result in U.S. federal income tax consequences
different from those presented below.
Federal Income Tax ConsequencesTHE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INTENDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A PARTICULAR HOLDER'S SITUATION.
PERSONS CONSIDERING EXCHANGING OUTSTANDING NOTES FOR EXCHANGE NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES OF THE
EXCHANGE AND OF OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES, INCLUDING THE
TAX CONSEQUENCES UNDER STATE, LOCAL OR FOREIGN LAWS AND OTHER FEDERAL TAX LAWS
(INCLUDING ESTATE AND GIFT TAX LAWS) AND THE POSSIBLE EFFECTS OF CHANGES
(POSSIBLY INCLUDING RETROACTIVE CHANGES) IN U.S. FEDERAL INCOME AND OTHER
FEDERAL TAX LAWS.
Exchange of Tendering Outstanding Notes for Exchange
Notes
Exchange Offer.
The exchange of outstanding Notesnotes for exchange notes pursuant to the exchange offer shouldwill not be treated as an exchange or othera taxable
event for United StatesU.S. federal income tax purposes because under
Treasury regulations, the exchange notes shouldpurposes. A holder will not be considered to differ
materially in kindrecognize any
taxable gain or extent from the outstanding Notes. Rather, the exchange
notes received by a holder should be treatedloss as a continuationresult of theexchanging outstanding Notes in the hands of such holder. As a result, there should be no
United States federal income tax consequences to holders who exchange
outstanding Notesnotes for exchange
notes, pursuant toand the exchange offer and any
such holder shouldwill have the same tax basis and holding period in the
exchange notes as ithe had in the outstanding Notesnotes immediately before the exchange.
Federal Income Tax ConsequencesOwnership and Disposition of Owning Exchange Notes
U.S. Holders
Stated Interest. InterestStated interest on an exchange note will be taxable to a
U.S. Holder as ordinary interest income in accordance with the U.S. Holder's
method of accounting for U.S. federal income tax purposes.
-61-
Market Discount. Under the market discount rules of the Code, a U.S. Holder
who purchases an exchange note at a market discount will generally be required
to treat any gain recognized on the sale, exchange, retirement or other taxable
disposition of the exchange note as ordinary income to the extent of the accrued
market discount during the U.S. Holder's holding period that has not been
previously included in income. Market discount is generally defined as the
amount by which a U.S. Holder's purchase price for an exchange note is less than
the exchange note's stated redemption price at maturity (generally, the exchange
note's principal amount) of the exchange note on the date of purchase, subject
to a statutory de minimis exception. In general, market discount accrues on a
ratable basis over the remaining term of the exchange note unless a U.S. Holder
makes an irrevocable election to accrue market discount on a constant yield to
maturity basis.
A U.S. Holder who acquires an exchange note at a market discount may be
required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or continued to purchase or carry such
exchange note until the U.S. Holder disposes of the exchange note in a taxable
transaction. A U.S. Holder who has elected under applicable Code provisions to
include market discount in income annually as such discount accrues will not,
however, be required to treat any gain recognized as ordinary income or to defer
any deductions for interest expense under these rules. This election to include
market discount in income currently, once made, applies to all market discount
obligations acquired on or after the first day of the taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service (the "IRS").
Holders should consult their tax advisors as to the portion of any gain
that would be taxable as ordinary income under the market discount rules and any
other consequences of the market discount rules that may apply to them in
particular.
Amortizable Bond Premium. A U.S. Holder who purchases an exchange note for
an amount in excess of its principal amount will be considered to have purchased
the exchange note at a premium. A U.S. Holder may elect to amortize the premium
over the remaining term of the exchange note on a constant yield method. The
amount amortized in any year will be treated as a reduction of the U.S. Holder's
interest income from the exchange note. A U.S. Holder who elects to amortize the
premium on an exchange note must reduce its tax basis in the exchange note by
the amount of the premium amortized in any year. An election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the U.S. Holder and may be revoked only with the consent of the IRS.
Bond premium on an exchange note held by a U.S. Holder who does not make such an
election will decrease the capital gain or increase the capital loss otherwise
recognized on the disposition of the exchange note.
Sale, Exchange or Redemption of an Exchange Note. A U.S. Holder will
recognize gain or loss, if any, on the sale, redemption or other taxable
disposition of an exchange note in an amount equal to the difference, if any,
between the U.S. Holder's adjusted tax basis in the exchange note and the amount
received therefor (other than amounts attributable to accrued and unpaid
interest on the exchange notes, which will be treatedtaxable as interest forordinary income unless
previously included in income). A U.S. federal incomeHolder's adjusted tax purposes).basis in an
exchange note generally will equal the cost of the exchange note to the U.S.
Holder. Subject to the market discount rules noted under
"--U.S. Holders--Market Discount and Bond Premium" below,summarized above, such gain or loss
if any,
recognized on the sale,
96
redemption or other taxable disposition of a Note generally shouldwill be long-term capital gain or loss if the exchange was held as a capital asset andnote was held
for more than one year as of the date of disposition. Market Discount and Bond Premium. If aLong-term capital gains
recognized by an individual or non-corporate U.S. Holder acquires an exchange
note subsequentare generally subject
to its original issuance and the exchange note's principal
amount exceeds thea reduced U.S. Holder's initialfederal income tax basis in the exchange note by more
than a de minimis amount, the U.S. Holder will be treated as having acquired
the exchange note at a "market discount" equalrate. Capital losses are subject to such excess. In addition, if
a U.S. Holder's initial tax basis in an exchange note exceeds the principal
amount of the exchange note, the U.S. Holder will generally be treated as
having acquired the exchange note with "bond premium" in an amount equal to
such excess. U.S. Holders should consult their tax advisers regarding the
existence, if any, and the tax consequences of market discount and bond
premium.limits
on deductibility.
Backup Withholding and Information Reporting. A U.S. Holder of an exchange
note may be subject to information reporting and possible backup withholding. If
applicable, backup withholding would apply at a rate of 31%28% (31% after December
31, 2010) with respect to interest on, or the proceeds of a sale, exchange,
redemption, retirement, or other disposition of, such exchange note, unless such
U.S. Holder (i) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact, or (ii) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable backup withholding rules.
Any amount withheld under the backup withholding rules from a payment to a
U.S. Holder generally will be allowed as a refund or a credit against such U.S.
Holder's U.S. federal income tax liability, provided that the required
procedures are followed.
-62-
Non-U.S. Holders
The Exchange Notes.Payment of Interest. The payment of interest on an exchange note will
generally not be subject to U.S. federal income tax (or to withholding of tax),
if (1) the interest is not effectively connected with the conduct of a trade or
business within the United States or, if a tax treaty applies, the interest is
not attributable to a permanent establishment in the United States, (2) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of our stock entitled to vote, (3) the Non-U.S. Holder is not a controlled
foreign corporation that is related to us actually or constructively through
stock ownership and (4) either (i) the beneficial owner of the exchange note
certifies to us or our agent, under penalties of perjury, that it is not a U.S.
Holder and provides its name and address on U.S. TreasuryIRS Form W-8 BEN (or on a suitable
substitute form) or, (ii) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") and holds the exchange note
certifies under penalties of perjury that such a Form W-8 BEN (or suitable
substitute form) has been received from the beneficial owner by it or by a financial institution between it and
the beneficial owner and furnishes
the payer with a copy thereof.
Recently adopted Treasury Regulations (the "Final Withholding
Regulations") will changethereof or (iii) the methods for satisfyingbeneficial owner holds its exchange
notes directly through a "qualified intermediary" and certain conditions are
satisfied.
If the certification
requirement described in clause (4) above. The Final Withholding Regulations
also will require, inpayments of interest are effectively connected with the case of Notes heldconduct by a
foreign partnershipNon-U.S. Holder of a trade or business within the U.S., such Non-U.S. Holder
will not be subject to U.S. federal withholding tax on such interest payments
provided that (i)
this certificationthe Non-U.S. Holder satisfies certain documentation requirements.
However, such Non-U.S. Holder will generally be subject to the rules described
above for a U.S. Holder (subject to any modification provided under an
applicable income tax treaty). Such Non-U.S. Holder may also be subject to the
"branch profits tax" if such holder is a corporation.
If the payments of interest are not effectively connected with the conduct
by a Non-U.S. Holder of a trade or business within the partners rather than byU.S., but the
foreign partnership and (ii)requirements described above under clauses (2), (3) or (4) are not satisfied
with respect to such Non-U.S. Holder, a 30% withholding tax (or a reduced rate
under an applicable income tax treaty) will apply to interest paid on the
partnership provide certain information,
including a United States employer identification number. A look-through rule
would apply in the caseexchange notes to such Non-U.S. Holder.
Sale, Exchange or Redemption of tiered partnerships. The Final Withholding
Regulations will become effective for payments made after December 31, 1999.an Exchange Note. A Non-U.S. Holder will
generally not be subject to U.S. federal income or withholding tax on any gain
realized in connection with the sale, exchange, retirement, or other disposition
of a Note,an exchange note, unless (i) the gain is effectively connected with a trade
foror business of the Non-U.S. Holder in the United States (or,(and, if a tax treaty
applies, the gain is attributable to a permanent establishment or a fixed base
in the United States); or (ii) in the case of a Non-U.S. Holder who is an
individual and holds the Noteexchange note as a capital asset, such holder is
present in the United States for 183 or more days in the taxable year of the
disposition and either (a) has
a "tax home" for United States federal income tax purposes in the United States
or (b) has an office orcertain other fixed place of business in the United States to
whichconditions are met.
If the gain is attributable; or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of United States federal income tax laws applicable
to certain United States expatriates.
97
An exchange note held directly by an individual who, at the time of
death, is not a citizen or resident of the United States should not be
includible in such individual's gross estate for U.S. estate tax purposes as a
result of such individual's death if the individual does not actually or
constructively own 10% or more of the total combined voting power of all
classes of our stock entitled to vote and, at the time of the individual's
death, if payments with respect to such Note would not have been effectively connected with the conduct by such individuala Non-U.S. Holder
of a trade or business within the U.S., such Non-U.S. Holder generally will be
subject to U.S. federal income tax with respect to such gain in the United States. Even ifsame manner
as U.S. Holders, as described above, unless an applicable income tax treaty
provides otherwise. In addition, Non-U.S. Holders that are corporations could be
subject to a branch profits tax with respect to such gain at a rate of 30% (or
at a reduced rate under an applicable income tax treaty). If the foregoing 183
days rule applies, a Non-U.S. Holder generally will be subject to U.S. federal
income tax at a rate of 30% (or at a reduced rate under an applicable income tax
treaty) on the net gain derived from the sale.
Backup Withholding and Information Reporting. We must report annually to
the IRS and to each Non-U.S. Holder the amount of interest paid on an exchange
note, regardless of whether withholding was includible inrequired, and any tax withheld with
respect to the gross estate
under the foregoing rules, the Note may be excluded underinterest. Under the provisions of an income tax treaty and other
applicable estateagreements, copies of these information returns may be made available
to the tax treaty.
Backup Withholding and Information Reporting.authorities of the country in which the Non-U.S. Holder resides.
Interest payments on the exchange notes made by us or any paying agent of
ours to certain noncorporate
Non-U.S. Holders generally will not be subject to information reporting or
"backup withholding"
if the certification described under "--Non-U.S. Holders--
The exchange note""--Ownership and Disposition of Exchange
Notes--Non-U.S. Holders--Payment of Interest" above is received provided in each case that the payer does
not have actual knowledge that the Holderor an exemption
is a U.S. Holder.otherwise established.
-63-
Payment of proceeds from a sale or redemption of an exchange note to or through theeffected
at a U.S. office of a broker is subject to information reporting and backup
withholding unless the Non-U.S. Holder certifies as to its non-U.S. status or
otherwise establishes an exemption from information reporting and backup
withholding. Payment outside the United States of the proceeds of the sale or redemption of an exchange
note to or througheffected at a foreign office of a "broker" (as defined in
applicable U.S. Treasury Regulations)broker generally should not be subject to
information reporting or backup withholding, except that, if the broker is a
U.S. person a
controlled foreign corporation for U.S. federal income tax purposes or a foreign person 50% or more of whose gross income is fromrelated to a U.S. trade or
business,person, information reporting
should apply to such payment unless the broker has documentary evidence in its
records that the beneficial owner is not a U.S. Holder and certain other
conditions are met or the beneficial owner otherwise establishes an exemption.
THEAny amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder generally will be allowed as a refund or a credit against such
Non-U.S. Holder's U.S. FEDERAL INCOME TAX AND ESTATE TAX DISCUSSION SET FORTH ABOVE IS
INTENDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A PARTICULAR
HOLDER'S SITUATION. PERSONS CONSIDERING PARTICIPATING IN THE EXCHANGE OFFER
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES
OF EXCHANGING THE OUTSTANDING NOTES AND, OWNING AND DISPOSING OF THE EXCHANGE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL OR FOREIGN LAWS AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES (POSSIBLY INCLUDING
RETROACTIVE CHANGES) IN U.S. FEDERAL AND OTHER TAX LAWS.federal income tax liability, provided that the required
procedures are followed.
LEGAL MATTERS
Certain legal matters with respect to the Notesexchange notes and the Guaranteesguarantees
will be passed upon for us by Cahill Gordon & Reindel (a partnership including a
professional corporation),LLP, New York, New York
and by Martha D. Rehm, Esq., General Counsel to the Company.
EXPERTS
The consolidated financial statements of Vail Resorts, Inc. and subsidiaries as of July 31, 1998 and September 30, 1997 andthe related financial statement
schedule incorporated in this prospectus by reference to the Annual Report on
Form 10-K for the ten-month
periodyear ended July 31, 1998 and for the years ended September 30, 1997 and 1996,
included in this prospectus and elsewhere in the registration statement,2003 have been audited by Arthur Andersenso incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent public accountants, as
indicated in their report with respect thereto, and included herein in reliance
upongiven on
the authority of said firm as experts in accountingauditing and auditing.
98accounting.
-64-
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS================================================================================
$390,000,000
VAIL RESORTS, INC.
Audited Consolidated Financial Statements
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of July 31, 1998 and September 30, 1997... F-3
Consolidated Statements of Operations for the ten months ended July 31,
1998 and the years ended September 30, 1997 and 1996.................... F-4
Consolidated Statements of Stockholders' Equity for the ten months ended
July 31, 1998 and the years ended September 30, 1997 and 1996........... F-5
Consolidated Statements of Cash Flows Operations for the ten months ended
July 31, 1998 and the years ended September 30, 1997 and 1996........... F-6
Notes to Consolidated Financial Statements............................... F-7
Unaudited Consolidated Condensed Interim Financial Statements
Consolidated Condensed Balance Sheets as of April 30, 1999 and July 31,
1998.................................................................... F-24
Consolidated Condensed Statements of Operations for the Three Months
Ended
April 30, 1999 and 1998................................................. F-25
Consolidated Condensed Statements of Operations for the Nine Months Ended
April 30, 1999 and 1998................................................. F-26
Consolidated Condensed Statements of Cash Flows for the Nine Months Ended
April 30, 1999 and 1998................................................. F-27
Notes to Consolidated Condensed Financial Statements..................... F-28
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vail Resorts, Inc.:
We have audited the accompanying consolidated balance sheetsExchange Offer for $390,000,000 Aggregate Principal Amount of VAIL
RESORTS, INC., formerly known as Gillett Holdings, Inc. (a Delaware
corporation), and subsidiaries as of July 31, 1998 and September 30, 1997 and
the related consolidated statements of operations, stockholders' equity and
cash flows for the ten-month period ended July 31, 1998 and for the years ended
September 30, 1997 and 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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 financial statements referred to above present fairly,
in all material respects, the financial position of Vail Resorts, Inc. and
subsidiaries as of July 31, 1998 and September 30, 1997 and the results of
their operations and their cash flows for the ten-month period ended July 31,
1998 and for the years ended September 30, 1997 and 1996.
Arthur Andersen LLP
Denver, Colorado
October 15, 1998
F-2
VAIL RESORTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
July 31, September 30,
1998 1997
-------- -------------
Assets
Current assets:
Cash and cash equivalents............................. $ 13,366 $ 8,142
Restricted cash....................................... 6,146 6,561
Trade Receivables, net of allowances of $1,220 and
$742, respectively................................... 22,224 17,638
Notes receivable...................................... 4,263 4,469
Inventories........................................... 8,893 10,789
Deferred income taxes (Note 9)........................ 12,126 24,500
Other current assets.................................. 4,708 4,253
-------- --------
Total current assets................................ 71,726 76,352
Property, plant and equipment, net (Note 7)............. 501,371 411,117
Real estate held for sale............................... 138,916 154,925
Deferred charges and other assets....................... 12,605 12,217
Notes receivable, noncurrent portion.................... 1,372 1,073
Intangible assets, net (Note 7)......................... 186,132 200,265
-------- --------
Total assets........................................ $912,122 $855,949
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses (Note 7)........ $ 55,012 $ 70,171
Income taxes payable.................................. 2,239 325
Rights payable to stockholders........................ -- 5,707
Long-term debt due within one year (Note 6)........... 1,734 1,715
-------- --------
Total current liabilities........................... 58,985 77,918
Long-term debt (Note 6)................................. 282,280 263,347
Other long-term liabilities............................. 28,886 23,281
Deferred income taxes (Note 9).......................... 79,347 85,737
Commitments and contingencies (Note 11)
Stockholders' equity (Notes 1 and 14):
Preferred stock, $.01 par value, 25,000,000 shares
authorized, no shares issued and outstanding......... -- --
Common stock--
Class A common stock, $.01 par value, 20,000,000
shares authorized, 7,639,834 and 11,639,834 shares
issued and outstanding as of July 31, 1998 and
September 30, 1997, respectively................... 76 116
Common Stock, $.01 par value, 80,000,000 shares
authorized, 26,817,346 and 21,765,815 shares issued
and outstanding as of July 31, 1998 and September
30, 1997, respectively............................. 269 218
Additional paid-in capital............................ 401,563 385,634
Retained earnings..................................... 60,716 19,698
-------- --------
Total stockholders' equity........................ 462,624 405,666
-------- --------
Total liabilities and stockholders' equity........ $912,122 $855,949
======== ========
See accompanying notes to consolidated financial statements.
F-3
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Ten
Months Ended Year Ended Year Ended
July 31, September 30, September 30,
1998 1997 1996
------------ ------------- -------------
Net revenues:
Resort............................. $336,547 $259,038 $140,288
Real estate........................ 73,722 71,485 48,655
-------- -------- --------
Total net revenues............... 410,269 330,523 188,943
Operating expenses:
Resort............................. 217,764 172,715 89,890
Real estate........................ 62,619 66,307 40,801
Corporate expense.................. 4,437 4,663 12,698
Depreciation and amortization...... 36,838 34,044 18,148
-------- -------- --------
Total operating expenses......... 321,658 277,729 161,537
-------- -------- --------
Income from operations............... 88,611 52,794 27,406
Other income (expense):
Investment income.................. 1,784 1,762 586
Interest expense................... (17,789) (20,308) (14,904)
Loss on disposal of fixed assets... (1,706) (182) (2,630)
Other expense...................... (736) (383) (1,500)
-------- -------- --------
Income before income taxes........... 70,164 33,683 8,958
Provision for income taxes (Note 9).. (29,146) (13,985) (4,223)
-------- -------- --------
Net income........................... $ 41,018 $ 19,698 $ 4,735
======== ======== ========
Net income per common share (Notes 2
and 4):
Basic.............................. $ 1.20 $ 0.66 $ 0.23
======== ======== ========
Diluted............................ $ 1.18 $ 0.64 $ 0.22
======== ======== ========
See accompanying notes to consolidated financial statements.
F-4
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
Common Stock Additional Retained Total
---------------------------------------- Paid-in Earnings Stockholders'
Class A Common Total Amount Capital (Deficit) Equity
---------- ---------- ---------- ------ ---------- --------- -------------
Balance, September 30,
1995................... 12,817,692 6,943,984 19,761,676 $198 $135,561 $31,935 $ 167,694
Net income for the year
ended September 30,
1996................... -- -- -- -- -- 4,735 4,735
Shares issued pursuant
to stock grants
(Note 13).............. -- 238,324 238,324 2 1,989 -- 1,991
Rights payable to
stockholders........... -- -- -- -- (13,843) (36,670) (50,513)
Shares of Class A Common
Stock converted to
Common Stock (Note
14).................... (391,472) 391,472 -- -- -- -- --
---------- ---------- ---------- ---- -------- ------- ---------
Balance, September 30,
1996................... 12,426,220 7,573,780 20,000,000 200 123,707 -- 123,907
Net income for the year
ended September 30,
1997................... -- -- -- -- -- 19,698 19,698
Issuance of shares
pursuant to options
exercised (Note 13).... -- 744,482 744,482 7 10,212 -- 10,219
Issuance of shares in
acquisition of resort,
net (Note 5)........... -- 7,554,406 7,554,406 76 151,012 -- 151,088
Issuance of shares in
initial public
offering, net.......... -- 5,000,000 5,000,000 50 98,100 -- 98,150
Issuance of shares in
acquisitions of retail
space, net............. -- 106,761 106,761 1 2,348 -- 2,349
Compensation expense
related to employee
stock options.......... -- -- -- -- 255 -- 255
Shares of Class A Common
Stock Converted to
Common Stock (Note
14).................... (786,386) 786,386 -- -- -- -- --
---------- ---------- ---------- ---- -------- ------- ---------
Balance, September 30,
1997................... 11,639,834 21,765,815 33,405,649 334 385,634 19,698 405,666
Net income for the ten-
month period ended July
31, 1998............... -- -- -- -- -- 41,018 41,018
Issuance of shares
pursuant to options
exercised (Note 13).... -- 1,043,271 1,043,271 11 7,990 -- 8,001
Tax effect of stock
option excercises...... -- -- -- -- 7,669 -- 7,669
Restricted stock issue
(Note 13).............. -- 8,260 8,260 -- 270 -- 270
Shares of Class A Common
Stock Converted to
Common Stock (Note
14).................... (4,000,000) 4,000,000 -- -- -- -- --
---------- ---------- ---------- ---- -------- ------- ---------
Balance, July 31, 1998.. 7,639,834 26,817,346 34,457,180 $345 $401,563 $60,716 $ 462,624
========== ========== ========== ==== ======== ======= =========
See accompanying notes to consolidated financial statements.
F-5
VAIL RESORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Ten Year Year
Months Ended Ended Ended
July 31, September 30, September 30,
1998 1997 1996
------------ ------------- -------------
Cash flows from operating activities:
Net income.......................... $ 41,018 $ 19,698 $ 4,735
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization....... 36,838 34,044 18,148
Deferred compensation payments in
excess of expense.................. -- (331) (814)
Noncash cost of real estate sales... 49,112 52,647 32,394
Noncash compensation related to
stock grants (Note 13)............. 285 306 25
Noncash compensation related to
stock options...................... -- 255 1,915
Noncash equity income............... (2,973) (701) --
Deferred financing costs
amortized.......................... 448 389 247
Loss on disposal of fixed assets.... 1,706 182 2,630
Deferred income taxes, net (Note
9)................................. 29,146 7,413 2,500
Changes in assets and liabilities:
Restricted cash..................... (415) 529 (575)
Accounts receivable, net............ (4,358) 2,089 475
Notes receivable, net............... (93) (4,469) --
Inventories......................... 2,497 (835) (418)
Accounts payable and accrued
expenses........................... (16,226) (10,712) 9,551)
Other assets and liabilities........ (2,642) 2,867 (4,947)
--------- --------- ---------
Net cash provided by operating
activities....................... 134,343 103,371 65,866
Cash flows from investing activities:
Cash paid in resort acquisition,
net of cash acquired............... -- (146,386) --
Cash paid in hotel acquisitions,
net of cash acquired............... (54,250) -- --
Resort capital expenditures......... (80,454) (51,020) (13,912)
Investments in real estate.......... (15,661) (56,947) (40,604)
Investments in joint venture........ -- 2,511 (200)
--------- --------- ---------
Net cash used in investing
activities....................... (150,365) (251,842) (54,716)
Cash flows from financing activities:
Proceeds from initial public
offering........................... -- 98,150 --
Proceeds from the exercise of stock
options............................ 8,001 -- --
Payments under Rights............... (5,707) (42,175) --
Refund of bond reserve fund......... 3,297 -- --
Proceeds from borrowings under
long-term debt..................... 334,000 235,000 84,000
Payments on long-term debt.......... (318,345) (139,984) (130,547)
--------- --------- ---------
Net cash provided by (used in)
financing activities............. 21,246 150,991 (46,547)
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents.................... 5,224 2,520 (35,397)
Cash and cash equivalents:
Beginning of period................. 8,142 5,622 41,019
--------- --------- ---------
End of period....................... $ 13,366 $ 8,142 $ 5,622
========= ========= =========
Cash paid for interest............... $ 16,336 $ 20,166 $ 21,880
========= ========= =========
Taxes paid, net of refunds........... $ -- $ 1,925 $ 400
========= ========= =========
Supplemental disclosure of non-cash
transactions:
Issuance of common stock in resort
acquisition (Note 5)................ $ 151,088
=========
Assumption of liabilities in resort
acquisition (Note 5)................ $ 91,480
=========
Option exercise (Note 13)............ $ 2,740
=========
Issuance of common stock in purchase
of retail space..................... $ 2,349
=========
See accompanying notes to consolidated financial statements.
F-6
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Vail Resorts, Inc. ("Vail Resorts") is organized as a holding company and
operates through various subsidiaries. Vail Resorts and its subsidiaries
(collectively, the "Company") currently operate in two business segments,
mountain resorts and real estate development. Vail Associates, Inc., an
indirect wholly-owned subsidiary of Vail Resorts, and its subsidiaries,
(collectively, "Vail Associates") operate four of the world's largest skiing
facilities on Vail, Breckenridge, Keystone and Beaver Creek mountains in
Colorado. The Breckenridge and Keystone mountain resorts (collectively, the
"Acquired Resorts"), together with the Arapahoe Basin mountain resort and
significant related real estate interests and developable land, were acquired
by the Company on January 3, 1997 (the "Acquisition"). The Company divested the
Arapahoe Basin mountain resort on September 5, 1997. Vail Resorts Development
Company ("VRDC"), a wholly-owned subsidiary of Vail Associates, Inc., conducts
the Company's real estate development activities. The Company's mountain resort
business, which is primarily composed of ski operations and related amenities,
is seasonal in nature with a typical ski season beginning in mid-October and
continuing through mid-May.
On September 1, 1997, the Company announced the change of its fiscal year
end from September 30 to July 31. Accordingly, the Company's fiscal year 1998
ended on July 31, 1998 and consisted of ten months. For fiscal 1998, the
Company filed a transitional interim report for the four months ended January
31, 1998, a quarterly report for the three months ended April 30, 1998 and will
file this annual report for the ten-months ended July 31, 1998. This annual
report for the ten-months ended July 31, 1998 includes statements of financial
position as of July 31, 1998, and September 30, 1997, results of operations and
statements of cash flows for the ten-months ended July 31, 1998 and twelve-
months ended September 30, 1997 and 1996.
2. Summary of Significant Accounting Policies
Principles of Consolidation--The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. Investments in joint ventures are accounted for under the equity
method. All significant intercompany transactions have been eliminated.
Cash and Cash Equivalents--The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents. The carrying amounts reported in the balance sheet for cash
equivalents are at fair value.
Restricted Cash--Restricted cash represents amounts held as reserves for
self-insured worker's compensation claims, and owner and guest advance deposits
held in escrow for lodging reservations.
Inventories--The Company's inventories consist primarily of purchased retail
goods, food, and spare parts. Inventories are stated at the lower of cost,
determined using the first-in, first-out (FIFO) method, or market.
Property, Plant and Equipment--Property, plant and equipment is carried at
cost net of accumulated depreciation. Depreciation is calculated generally on
the straight-line method based on the following useful lives:
Estimated
Life
---------
Land improvements..................................................... 40
Buildings and terminals............................................... 40
Ski lifts............................................................. 15
Machinery, equipment, furniture and fixtures.......................... 3-12
Automobiles and trucks................................................ 3-5
Ski trails are depreciated over the life of their respective United States
Forest Service permits.
F-7
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Real Estate Held for Sale--The Company capitalizes as land held for sale the
original acquisition cost (or appraised value as of the effective date, as
defined below), direct construction and development costs, property taxes,
interest incurred on costs related to land under development, and other related
costs (engineering, surveying, landscaping, etc.) until the property reaches
its intended use. The cost of sales for individual parcels of real estate or
condominium units within a project is determined using the relative sales value
method. Selling expenses are charged against income in the period incurred.
Interest capitalized on real estate development projects during fiscal years
1997 and 1996 totaled $0.5 million and $2.2 million, respectively. There was no
interest capitalized on real estate development projects during fiscal 1998.
The Company is a partner in the Keystone/Intrawest LLC ("Keystone JV"),
which is a joint venture with Intrawest Resorts, Inc. formed to develop land at
the base of Keystone Mountain. The Company contributed 500 acres of development
land as well as certain other funds to the joint venture. The Company's
investment in the Keystone JV including the Company's equity earnings from the
inception of the Keystone JV, are reported as real estate held for sale in the
accompanying balance sheet as of July 31, 1998. The Company recorded $2.9
million and $0.7 million in equity income for the ten-month period ended July
31, 1998 and fiscal year ended September 30, 1997, respectively.
Deferred Financing Costs--Costs incurred with the issuance of debt
securities are included in deferred charges and other assets, net of
accumulated amortization. Amortization is charged to interest expense over the
respective original lives of the applicable debt issues.
Interest Rate Agreements--Interest rate exchange agreements, defined as
swaps, are effective at creating synthetic instruments and thereby modifying
the Company's interest rate exposures. The Company enters into interest rate
swaps to minimize the impact of interest rate movements on the expense
associated with its floating rate debt. Net interest is accrued as either
interest receivable or payable with the offset recorded in interest expense.
Any premium paid is amortized over the life of the agreement.
Intangible Assets--"Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets" ("Excess Reorganization Value") represents the excess of
the Company's reorganization value over the amounts allocated to the net
tangible and other intangible assets of the Company upon emergence from
bankruptcy on October 8, 1992 (the "Effective Date"). The Company has
classified as goodwill the cost in excess of fair value of the net assets of
companies acquired in purchase transactions. Intangible assets are recorded net
of accumulated amortization in the accompanying consolidated balance sheet and
amortized using the straight-line method over their estimated useful lives as
follows:
Excess reorganization value.................................... 20 years
Goodwill....................................................... 40 years
Trademarks..................................................... 40 years
Other intangibles.............................................. 3-15 years
Long-lived Assets--The Company evaluates potential impairment of long-lived
assets and long-lived assets to be disposed of in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No.
121"). SFAS No. 121 establishes procedures for the review of recoverability,
and measurement of impairment, if necessary, of long-lived assets, goodwill and
certain identifiable intangibles held and used by an entity. SFAS No. 121
requires that those assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. SFAS No. 121 also requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less estimated selling costs. As of July 31,
1998, management believes that there has not been any impairment of the
Company's long-lived assets, goodwill or other identifiable intangibles.
F-8
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Recognition--Resort Revenues are derived from a wide variety of
sources, including sales of lift tickets, ski school tuition, dining, retail
stores, equipment rental, hotel operations, property management services,
travel reservation services, club management, real estate brokerage,
conventions, licensing and sponsoring activities and other recreational
activities, and are recognized as services are performed. Revenues from real
estate sales are not recognized until title has been transferred, and revenue
is deferred if the receivable is subject to subordination until such time as
all costs have been recovered. Until the initial down payment and subsequent
collection of principal and interest are by contract substantial, cash received
from the buyer is reported as a deposit on the contract.
Deferred Revenue--The Company records deferred revenue related to the sale
of season ski passes. The number of season pass holder visits is estimated
based on historical data and the deferred revenue is recognized throughout the
season based on this estimate. During the ski season the estimated visits are
compared to the actual visits and adjustments are made if necessary.
Advertising Costs--Advertising costs are expensed the first time the
advertising takes place. Advertising expense for the ten-month period ended
July 31, 1998 and the fiscal years ended September 30, 1997 and 1996 was $8.7
million, $8.8 million and $6.9 million, respectively. At fiscal years ended
July 31, 1998 and September 30, 1997, advertising costs of $0.9 million and
$1.3 million are reported as current assets in the Company's consolidated
balance sheets.
Income Taxes--The Company uses the liability method of accounting for income
taxes as prescribed by SFAS No. 109, "Accounting for Income Taxes." Under SFAS
No. 109, a deferred tax liability or asset is recognized for the effect of
temporary differences between financial reporting and income tax reporting.
(See Note 9).
Net Income Per Share--In accordance with SFAS No. 128, "Earnings Per Share",
the company computes net income per share on both the basic and diluted basis
(See Note 4).
Fair Value of Financial Instruments--The recorded amounts for cash and cash
equivalents, receivables, other current assets, and accounts payable and
accrued expenses approximate fair value due to the short-term nature of these
financial instruments. The fair value of amounts outstanding under the
Company's Credit Facilities approximates book value due to the variable nature
of the interest rate associated with that debt. The fair values of the
Company's Industrial Development Bonds and other long-term debt have been
estimated using discounted cash flow analyses based on current borrowing rates
for debt with similar maturities and ratings. The estimated fair values of the
Industrial Development Bonds and other long-term debt at July 31, 1998 and
September 30, 1997 are presented below (in thousands):
September 30,
July 31, 1998 1997
---------------- ----------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------- -------- -------
Industrial Development Bonds........... $64,560 $76,935 $61,263 $65,910
Other Long-Term Debt................... $ 1,370 $ 1,414 $ 1,662 $ 1,615
Stock Compensation--The Company's stock option plans are accounted for in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". The Company has adopted the disclosure requirements
of SFAS No.123, "Accounting for Stock-Based Compensation" (See Note 13).
F-9
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the balance sheet date and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications--Certain reclassifications have been made to the
accompanying consolidated financial statements for the years ended September
30, 1997 and 1996 to conform to the current period presentation.
New Accounting Standards--During fiscal year 1998, the Company adopted the
provisions of SFAS No. 128, "Earnings Per Share," which requires that the
company discloses both basic earnings per share and diluted earnings per share.
The Company adopted the provisions of SFAS No. 128 retroactively for 1997 and
1996, as required.
The Company is required to adopt SFAS No. 130, "Reporting Comprehensive
Income", in the first quarter of fiscal 1999. Upon adoption of SFAS No. 130,
the Company will report all changes in the Company's stockholders' equity other
than transactions with stockholders on the face of the income statement. The
Company currently does not have any transactions that would necessitate
disclosure of comprehensive income, however the Company will continue to
evaluate the impact of the pronouncement.
The Company is required to adopt SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", for fiscal year 1999. SFAS No. 131
will supercede the business segment disclosure requirements currently in effect
under SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise".
SFAS No. 131, among other things, establishes standards regarding the
information a company is required to disclose about its operating segments and
provides guidance regarding what constitutes a reportable operating segment.
The Company is currently evaluating disclosures under SFAS No. 131 compared to
current disclosures.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", will not have an effect on the Company because it
does not have a defined benefit pension plan.
The Accounting Standards Executive Committee ("AcSEC") issued Statement of
Position ("SOP") 98-1 providing guidance on accounting for the costs of
computer software developed or obtained for internal use. The effective date
for this pronouncement is for fiscal years beginning after December 15, 1998.
The Company is in the process of reviewing its current policies for accounting
for costs associated with internal software development projects and how they
may be affected by SOP 98-1.
The AcSEC issued SOP 98-5 which requires that all non-governmental entities
expense costs of start-up activities as incurred. The effective date for this
pronouncement is for fiscal years beginning after December 15, 1998. The
Company is in the process of reviewing its current policies for accounting for
costs associated with start-up activities and how they may be affected by SOP
98-5.
F-10
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Change in Fiscal Year End
On September 1, 1997, the Company changed its fiscal year end from September
30 to July 31, beginning with fiscal year 1998. Comparative results of
operations of the Company for the ten-months ended July 31, 1998 and 1997 are
as shown below. Also presented is the Company's 1998 fiscal year restated for
the July 31, 1998 year end.
Ten-Months Ended
July 31, Twelve-Months
---------------------- Ended July
1998 1997 31, 1998
--------- ----------- -------------
(audited) (unaudited) (unaudited)
Net Revenue:
Resort.................................... $336,547 $248,511 $350,498
Real estate............................... 73,722 61,104 84,177
-------- -------- --------
Net Revenues................................ 410,269 309,615 434,675
Operating Expenses:
Resort.................................... 217,764 153,212 238,889
Real Estate............................... 62,619 54,944 74,057
Corporate expense......................... 4,437 3,557 5,543
Depreciation and amortization............. 36,838 27,604 42,965
Reorganization charge..................... -- 2,200 --
-------- -------- --------
Total operating expenses.................... 321,658 241,517 361,454
-------- -------- --------
Income from operations...................... 88,611 68,098 73,221
Other income (expense):
Investment income......................... 1,784 1,372 2,174
Interest expense.......................... (17,789) (17,236) (20,891)
Gain (loss) on sale of fixed assets....... (1,706) (100) (1,788)
Other..................................... (736) 87 (1,217)
-------- -------- --------
Income before income taxes.................. 70,164 52,221 51,499
Credit (provision) for income taxes......... (29,146) (21,781) (21,426)
-------- -------- --------
Net income.................................. $ 41,018 $ 30,440 $ 30,073
======== ======== ========
Basic net income per common share........... $ 1.20 $ 1.06 $ 0.88
======== ======== ========
Diluted net income per common share......... $ 1.18 $ 1.02 $ 0.87
======== ======== ========
F-11
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Net Income Per Common Share
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" ("EPS"), effective for periods ending after December
15, 1997, including interim periods. SFAS No. 128 establishes standards for
computing and presenting earnings per share. SFAS No. 128 requires the dual
presentation of basic (replaces primary EPS) and diluted EPS on the face of the
income statement and requires a reconciliation of numerators (net income) and
denominators (weighted average shares outstanding) for both basic and diluted
EPS in the footnotes. Basic EPS excludes dilution and is computed by dividing
net income available to common shareholders by the weighted average shares
outstanding. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised resulting in
the issuance of common shares that would then share in the earnings of the
Company. The Company has adopted the requirements of SFAS No. 128 for the ten-
month period ended July 31, 1998. Pro forma presentation and disclosure
requirements are supplied for prior period comparisons in accordance with the
statement.
Ten
Months Ended September 30, September 30,
July 31, 1998 1997 1996
---------------- ----------------- ---------------
Basic Diluted Basic Diluted Basic Diluted
------- -------- -------- -------- ------- -------
Net Income Per Common Share
Net Income................. $41,018 $ 41,018 $ 19,698 $ 19,698 $ 4,735 $ 4,735
Weighted average shares
outstanding............... 34,204 34,204 30,067 30,067 20,266 20,266
Effect of dilutive stock
options................... -- 547 -- 912 -- 1,189
------- -------- -------- -------- ------- -------
Total shares............... 34,204 34,751 30,067 30,979 20,266 21,455
------- -------- -------- -------- ------- -------
Net Income Per Common
Share..................... $ 1.20 $ 1.18 $ 0.66 $ 0.64 $ 0.23 $ 0.22
======= ======== ======== ======== ======= =======
5. Acquisitions
On January 3, 1997, the Company acquired from Ralston Foods, Inc. 100% of
the stock of Ralston Resorts, Inc., ("Ralston Resorts") the owner and operator
of the Breckenridge, Keystone and Arapahoe Basin mountain resorts located in
Summit County, Colorado, for a total purchase price, including direct costs, of
$297.3 million. In connection with the Acquisition, the Company refinanced
$139.7 million of indebtedness, issued 7,554,406 shares of Common Stock valued
at $151.1 million to Ralston Foods, Inc., assumed liabilities of $59.8 million
and incurred $9.0 million in acquisition costs. Pursuant to a consent decree
with the United States Department of Justice and the Attorney General of the
State of Colorado (the "Consent Decree"), the Company sold the assets
constituting the Arapahoe Basin mountain resort on September 5, 1997 for a sum
of $4.0 million.
The Acquisition was accounted for as a purchase combination. Under purchase
accounting, the acquisition cost was allocated to the assets and liabilities of
the Acquired Resorts based on their relative fair values.
The following unaudited pro forma results of operations of the Company for
the ten-months ended July 31, 1997 assume that the Acquisition occurred on
October 1, 1996. The unaudited pro forma results of operations include the
effects of the Company's initial public offering only from its effective date
of February 7, 1997. These pro forma results are not necessarily indicative of
the actual results of operations that would have been achieved nor are they
necessarily indicative of future results of operations. The unaudited pro forma
financial information below excludes the results of Arapahoe Basin, which the
Company divested. The audited summarized financial information for the ten-
months ended July 31, 1998 are provided for comparative purposes.
F-12
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Pro Forma)
Ten Months Ten Months
Ended Ended
July 31, 1998 July 31, 1997
------------- -------------
(Unaudited)
Resort revenue...................................... $ 336,547 $ 280,949
Real estate revenue................................. 73,722 63,025
Total revenues...................................... 410,269 343,974
Net income.......................................... 41,018 29,572
Basic net income per common share................... $ 1.20 $ 0.95
Diluted net income per common share................. $ 1.18 $ 0.91
During the ten months ended July 31, 1998, the Company acquired three hotel
properties. On October 1, 1997, the Company purchased the assets constituting
the Great Divide Lodge (f/k/a Breckenridge Hilton) for a total purchase price
of $18.6 million. The Great Divide Lodge is a 208-room full service hotel,
located at the base of Breckenridge Mountain, and includes dining, conference
and fitness facilities. On October 7, 1997, the Company purchased 100% of the
outstanding stock of Lodge Properties, Inc., a Colorado corporation, ("LPI"),
for a total purchase price of $30.9 million. LPI owns and operates The Lodge at
Vail, a 59-room hotel with dining and conference facilities. LPI also provides
management services to an additional 40 condominiums and owns a parcel of
developable land strategically located at the primary base area of Vail
Mountain. On January 15, 1998 the Company purchased the assets constituting the
Inn at Keystone for a total purchase price of $9.3 million. The Inn at Keystone
is a 103-room full service hotel, located near Keystone Mountain, and includes
dining, conference and spa facilities. All acquisitions were accounted for as
purchase combinations and funded with cash from operations or proceeds from the
Revolving Credit Facility.
6. Long-Term Debt
Long-term debt as of July 31, 1998 and September 30, 1997 is summarized as
follows (in thousands):
(d)
(e) Average September
Maturity Rate July 31, 1998 30, 1997
--------- ------- ------------- ---------
Industrial Development Bonds (a)..... 1999-2020 7.38% $ 64,560 $ 61,263
Credit Facilities (b)................ 2003 7.39% 218,000 202,000
Other (c)............................ 1998-2002 6.09% 1,454 1,799
--------- ---------
284,014 265,062
Less: Current Maturities............. 1,734 1,715
--------- ---------
$ 282,280 $ 263,347
========= =========
- --------
(a) At September 30, 1997 the Company had $41.2 million of outstanding
Industrial Development Bonds issued by Eagle County, Colorado which accrued
interest at 8% per annum and matured on August 1, 2009. Interest was
payable semi-annually on February 1 and August 1. The Company provided the
holder of these bonds a debt service reserve fund of $3.3 million, which
was netted against the principal amount for financial reporting purposes.
The Industrial Development Bonds were secured by the stock of the
subsidiaries of Vail Associates, Inc. and the Vail and Beaver Creek
Mountain United States Forest Service Permits. On April 9, 1998, the
Industrial Development Bonds issued by Eagle County, Colorado were
refinanced. Under the terms of the new agreement interest accrues at 6.95%
per annum and the $41.2 million bond principal amount matures on August 1,
2019. Interest is payable semi-annually on February 1 and August 1. The
previous debt service fund of $3.3 million was refunded to the company. The
bonds are secured by the Vail and Beaver Creek Mountain United States
Forest Service Permits. In connection with the Acquisition, the Company
assumed two series of refunding bonds. The Series 1990 Sports Facilities
Refunding Revenue Bonds have an aggregate principal amount of $20.4
million, bear interest at rates
F-13
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
ranging from 7.2% to 7.875% and mature in installments in 1998, 2006 and
2008. The Series 1991 Sports Facilities Refunding Revenue Bonds have an
aggregate principal amount of $3 million and bear interest at 7.125% for
bonds maturing in 2002 and 7.375% for bonds maturing in 2010.
(b) On September 30, 1997, the Company's Credit Facilities consisted of (i) a
$175 million Revolving Credit Facility, (ii) a $115 million Tranche A Term
Loan Facility and (iii) a $50 million Tranche B Term Loan Facility
(together with Tranche A, the "Term Loan Facilities") thereby providing
for aggregate debt financing of $340 million (collectively, the "Credit
Facilities"). The Revolving Credit Facility would have matured on April
15, 2003 and the Term Loan Facilities required minimum amortization
payments ranging from $11.5 to $41.0 million annually from 1998 to 2004.
On December 19, 1997, the Company refinanced its Credit Facilities to
provide an increase in aggregate debt financing from $340.0 million to
$450.0 million and to eliminate the required minimum amortization payments
under the Term Loan Facilities. All amounts outstanding under the
Revolving Credit Facility and the Term Loan Facilities at December 19,
1997 were refinanced under a single revolving credit facility maturing on
December 19, 2002. Interest on outstanding borrowings under the new
Revolving Credit Facility is payable at rates based upon either LIBOR
(5.69% at July 31, 1998) plus a margin ranging from .50% to 1.25% or prime
(8.5% at July 31, 1998) plus a margin of up to .125%. The Company also
pays a quarterly unused commitment fee ranging from .125% to .30%. The
interest margins fluctuate based upon the ratio of Funded Debt to the
Company's Resort EBITDA (as defined in the underlying Revolving Credit
Facility agreement).
(c) Other obligations bear interest at rates ranging from 0.0% to 6.5% and
have maturities ranging from 1998 to 2002.
(d) Average borrowing rate for the ten months ended July 31, 1998.
(e) Maturity based on fiscal year end July 31, 1998.
Aggregate maturities for debt outstanding are as follows (in thousands):
Due during twelve-months ending July 31:
As of
July 31,
1998
--------
1999................................................................ $ 1,734
2000................................................................ 352
2001................................................................ 353
2002................................................................ 375
2003................................................................ 219,500
Thereafter.......................................................... 61,700
--------
Total Debt........................................................ $284,014
========
7. Supplementary Balance Sheet Information (in thousands)
The composition of property, plant and equipment follows:
July 31, September 30,
1998 1997
-------- -------------
Land and land improvements............................... $115,516 $95,124
Buildings and terminals.................................. 227,956 152,171
Machinery and equipment.................................. 175,453 146,741
F-14
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
July 31, September 30,
1998 1997
-------- -------------
Automobiles and trucks.................................. 10,900 14,958
Furniture and fixtures.................................. 35,968 28,282
Construction in progress................................ 21,851 33,691
-------- --------
587,644 470,967
Accumulated depreciation and amortization............... (86,273) (59,850)
-------- --------
$501,371 $411,117
======== ========
Depreciation expense for the ten months ended July 31, 1998 and for the
fiscal years of 1997 and 1996 totaled $28.4 million, $25.1 million and $11.4
million, respectively.
The composition of intangible assets follows:
July 31, September 30,
1998 1997
-------- -------------
Trademarks.............................................. $ 42,611 $ 42,611
Other intangible assets................................. 38,802 38,244
Goodwill................................................ 125,307 118,469
Excess Reorganization Value (See Note 2)................ 24,593 37,702
-------- --------
$231,313 $237,026
Accumulated amortization................................ (45,181) (36,761)
-------- --------
$186,132 $200,265
======== ========
Significant additions to intangible assets during the ten-months ended July
31, 1998 were primarily related to the acquisitions of three hotel properties
(See Note 5).
Amortization expense for the ten months ended July 31, 1998 and for the
fiscal years of 1997 and 1996 totaled $8.4 million, $8.9 million and $6.8
million, respectively.
The composition of accounts payable and accrued expenses follows:
July
31, September 30,
1998 1997
------- -------------
Trade payables............................................ $24,637 $25,236
Deposits.................................................. 4,516 10,050
Accrued salaries and wages................................ 8,930 9,026
Accrued interest.......................................... 3,051 1,448
Property taxes............................................ 4,144 5,943
Liability to complete real estate sold.................... 2,910 7,336
Other accruals............................................ 6,824 11,132
------- -------
$55,012 $70,171
======= =======
8. Retirement and Profit Sharing Plans
The Company maintains a defined contribution retirement plan, qualified
under Section 401(k) of the Internal Revenue Code, for its employees. Employees
are eligible to participate in the plan upon attaining the age of 21 and
completing 1,500 hours of service since their employment commencement date or
one year of employment with a minimum of 1,000 hours of service. Participants
may contribute from 2% to 22% of their
F-15
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
qualifying annual compensation up to the annual maximum specified by the
Internal Revenue Code. The Company matches an amount equal to 50% of each
participant's contribution up to 6% of a participant's annual qualifying
compensation. The Company's matching contribution is entirely discretionary and
may be reduced or eliminated at any time.
Total profit sharing plan expense recognized by the Company for the ten
months ended July 31, 1998 and for the fiscal years of 1997 and 1996 was
$844,000, $731,000 and $594,000, respectively.
9. Income Taxes
At July 31, 1998, the Company has total federal net operating loss ("NOL")
carryovers of approximately $337 million for income tax purposes that expire in
the years 2004 through 2008. The Company will be able to use these NOLs to the
extent of approximately $8.0 million per year through October 8, 2007
(Section 382 amount). Consequently, the accompanying financial statements and
table of deferred items only recognize benefits related to the NOLs to the
extent of the Section 382 amount.
At July 31, 1998 the Company has approximately $2.8 million in unused
minimum tax credit carryovers. These tax credits have an unlimited carryforward
period.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes. Significant components of the Company's
deferred tax liabilities and assets as of July 31, 1998 and September 30, 1997
are as follows (in thousands):
July 31, September 30,
1998 1997
-------- -------------
Deferred income tax liabilities:
Fixed assets................................... $ 64,508 $ 66,324
Intangible assets.............................. 18,165 20,600
Other, net..................................... 745 --
-------- --------
Total........................................ 83,418 86,924
Gross deferred income tax assets:
Accrued expenses............................... 5,094 5,468
Net operating loss carryfowards................ 23,643 45,649
Minimum tax credit............................. 2,761 1,729
Other, net..................................... -- 963
-------- --------
Total........................................ 31,498 53,809
Valuation allowance for deferred income tax
assets.......................................... (15,301) (28,122)
-------- --------
Deferred income tax assets, net of valuation
allowance....................................... 16,197 25,687
-------- --------
Net deferred income tax liability................ $ 67,221 $ 61,237
======== ========
The net current and noncurrent components of deferred income taxes
recognized in the July 31, 1998 and September 30, 1997 balance sheets are as
follows (in thousands):
July 31, September 30,
1998 1997
-------- -------------
Net current deferred income tax asset............... $12,126 $24,500
Net noncurrent deferred income tax liability........ 79,347 85,737
------- -------
Net deferred income tax liability................... $67,221 $61,237
======= =======
F-16
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Significant components of the provision for income taxes from continuing
operations are as follows (in thousands):
Ten Months Year Ended Year Ended
Ended July September 30, September 30,
31, 1998 1997 1996
---------- ------------- -------------
Current:
Federal......................... $ 1,157 $ 622 $1,193
State........................... 1,082 277 175
------- ------- ------
Total current................. 2,239 899 1,368
Deferred:
Federal......................... 17,173 6,850 2,065
State........................... 1,920 727 435
------- ------- ------
Total deferred................ 19,093 7,577 2,500
Tax Benefit Related to Exercise of
Stock Options and Restricted
Stock............................ 7,814 5,509 355
------- ------- ------
$29,146 $13,985 $4,223
======= ======= ======
A reconciliation of the income tax provision from continuing operations and
the amount computed by applying the U.S. federal statutory income tax rate to
income from continuing operations before income taxes is as follows:
Ten Months
Ended Year Ended Year Ended
July 31, September 30, September 30,
1998 1997 1996
---------- ------------- -------------
At U.S. federal income tax rate... 35.0 % 35.0 % 35.0 %
State income tax, net of federal
benefit.......................... 4.8 % 3.3 % 4.7 %
Goodwill and Excess Reorganization
Value amortization............... 1.8 % 3.8 % 8.6 %
Other............................. (0.1)% (0.6)% (1.2)%
---- ---- ----
41.5 % 41.5 % 47.1 %
==== ==== ====
10. Related Party Transactions
Corporate expense includes an annual fee of $500,000 for management services
provided by an affiliate of the majority holder of the Company's Class A Common
Stock. This fee is generally settled partially through use of the Company's
facilities and partially in cash. The fee for the ten-months ended July 31,
1998 and the years ended September 30, 1997 and 1996 was $417,000, $500,000 and
$500,000, respectively. At July 31, 1998, the Company's liability with respect
to this arrangement was $960,000.
Vail Associates has the right to appoint 4 of 9 directors of the Beaver
Creek Resort Company of Colorado ("Resort Company"), a non-profit entity formed
for the benefit of property owners and certain others in Beaver Creek. Vail
Associates has a management agreement with the Resort Company, renewable for
one-year periods, to provide management services on a fixed fee basis. During
fiscal years 1991 through 1998, the Resort Company was able to meet its
operating requirements through its own operations. Management fees and
reimbursement of operating expenses paid to the Company under its agreement
with the Resort Company during fiscal years 1998, 1997 and 1996 totaled $4.7
million, $4.9 million and $5.5 million, respectively. Related amounts due the
Company at July 31, 1998 were $109,000.
F-17
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In 1991, the Company loaned to Andrew P. Daly, the Company's President,
$300,000, $150,000 of which bears interest at 9% and the remainder of which is
non-interest bearing. The principal sum plus accrued interest is due no later
than one year following the termination, for any reason, of Mr. Daly's
employment with the Company. The proceeds of the loan were used to finance the
purchase and improvement of real property. The loan is secured by a deed of
trust on such property.
In 1995, Mr. Daly's spouse and James P. Thompson, President of VRDC, and his
spouse received financial terms more favorable than those available to the
general public in connection with their purchase of lots in the Bachelor Gulch
development. Rather than payment of an earnest money deposit with the entire
balance due in cash at closing, these contracts provide for no earnest money
deposit with the entire purchase price (which was below fair market value) paid
under promissory notes of $438,750 and $350,000 for Mr. Daly's spouse and Mr.
and Mrs. Thompson, respectively. Each are secured by a first deed of trust and
amortized over 25 years at 8% per annum interest, with a balloon payment due on
the earlier of five years from the date of closing or one year from the date
employment with the Company is terminated. The promissory notes were executed
upon the closings of the lot sales in December 1996.
11. Commitments and Contingencies
Smith Creek Metropolitan District ("SCMD") and Bachelor Gulch Metropolitan
District ("BGMD") were organized in November 1994 to cooperate in the
financing, construction and operation of basic public infrastructure serving
the Company's Bachelor Gulch Village development. SCMD was organized primarily
to own, operate and maintain water, street, traffic and safety, transportation,
fire protection, parks and recreation, television relay and translation,
sanitation and certain other facilities and equipment of the BGMD. SCMD is
comprised of approximately 150 acres of open space land owned by the Company
and members of the Board of Directors of the SCMD. In two planned unit
developments, Eagle County has granted zoning approval for 1,395 dwelling units
within Bachelor Gulch Village, including various single family homesites,
cluster homes and townhomes, and lodging units. As of July 31, 1998, the
Company has sold 102 single family homesites and 5 parcels to developers for
the construction of various types of dwelling units. Currently, SCMD has
outstanding $44.5 million of variable rate revenue bonds maturing on October 1,
2035, which have been enhanced with a $47.2 million letter of credit issued
against the Company's Revolving Credit Facility. It is anticipated that as the
Bachelor Gulch community expands, BGMD will become self supporting and that
within 25 to 30 years will issue general obligation bonds, the proceeds of
which will be used to retire the SCMD revenue bonds. Until that time, the
Company has agreed to subsidize the interest payments on the SCMD revenue
bonds. The Company has estimated that the present value of this aggregate
subsidy to be $15.6 million at July 31, 1998. The Company has allocated $9.6
million of that amount to the Bachelor Gulch Village homesites which were sold
as of July 31, 1998 and has recorded that amount as a liability in the
accompanying financial statements. The total subsidy incurred as of July 31,
1998 and 1997 was $2.9 million and $1.4 million, respectively.
At July 31, 1998, the Company had various other letters of credit
outstanding in the aggregate amount of $17.2 million.
The Company has executed as lessee operating leases for the rental of office
space, employee residential units and office equipment though fiscal 2008. For
the ten-month period ended July 31, 1998, and the years ended September 30,
1997 and 1996, lease expense related to these agreements of $6.4 million, $6.2
million and $3.8 million, respectively, which is included in the accompanying
consolidated statements of operations.
F-18
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future minimum lease payments under these leases as of July 31, 1998 are as
follows:
Due during fiscal year ending July 31:
1999............................................................. $ 4,334,493
2000............................................................. 2,992,051
2001............................................................. 2,563,510
2002............................................................. 1,743,934
2003............................................................. 1,689,097
Thereafter....................................................... 6,174,261
-----------
Total.......................................................... $19,497,346
===========
The Company is a party to various lawsuits arising in the ordinary course of
business. In the opinion of management, all matters are adequately covered by
insurance or, if not covered, are without merit or are of such kind, or involve
such amounts as would not have a material effect on the financial position,
results of operations and cash flows of the Company if disposed of unfavorably.
12. Business Segments
The Company currently operates in two business segments, Resort and Real
Estate. Data by segment is as follows:
Ten Months
Ended Year Ended Year Ended
July 31, September 30, September 30,
1998 1997 1996
---------- ------------- -------------
Net Revenues:
Resort........................... $336,547 $259,038 $140,288
Real Estate...................... 73,722 71,485 48,665
-------- -------- --------
$410,269 $330,523 $188,943
======== ======== ========
Income from operations:
Resort........................... $ 81,945 $ 52,279 $ 32,250
Real Estate...................... 11,103 5,178 7,854
Corporate........................ (4,437) (4,663) (12,698)
-------- -------- --------
$ 88,611 $ 52,794 $ 27,406
======== ======== ========
Depreciation and amortization:
Resort........................... $ 36,838 $ 34,044 $ 18,148
Real Estate...................... -- -- --
-------- -------- --------
$ 36,838 $ 34,044 $ 18,148
======== ======== ========
Capital expenditures:
Resort........................... $ 80,454 $ 51,020 $ 13,912
Real Estate...................... 15,661 56,947 40,604
-------- -------- --------
$ 96,115 $107,967 $ 54,516
======== ======== ========
July 31, September 30, September 30,
1998 1997 1996
---------- ------------- -------------
Identifiable assets:
Resort........................... $501,371 $411,117 $197,279
Real Estate...................... 138,916 154,925 84,055
-------- -------- --------
$640,287 $566,042 $281,334
======== ======== ========
F-19
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Stock Compensation Plans
At July 31, 1998, the Company has two stock-based compensation plans, which
are described below. The Company applies APB Opinion No. 25 and related
Interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock option plans. Had compensation cost for
the Company's two stock-based compensation plans been determined consistent
with SFAS No. 123, "Accounting for Stock Based Compensation", the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
July
31, September 30, September 30,
1998 1997 1996
------- ------------- -------------
Net income
As Reported.......................... $41,018 $19,698 $4,735
Pro forma............................ $39,320 $18,211 $4,420
Basic net income per share
As Reported.......................... $ 1.20 $ 0.66 $ 0.23
Pro forma............................ $ 1.15 $ 0.61 $ 0.22
Diluted net income per share
As Reported.......................... $ 1.18 $ 0.64 $ 0.22
Pro forma............................ $ 1.13 $ 0.59 $ 0.21
The Company has two fixed option plans. Under the 1993 Plan, options
covering an aggregate of 2,045,510 shares of Common Stock may be issued to key
employees, directors, consultants, and advisors of the Company or its
subsidiaries and vest in equal installments over five years. Under the 1996
Plan, 1,500,000 shares of Common Stock may be issued to key employees,
directors, consultants, and advisors of the Company or its subsidiaries and
vest in equal installments over three to five years. Under both plans, the
exercise price of each option equals the market price of the Company's stock on
the date of the grant, and an option's maximum term is ten years.
F-20
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively: dividend
yield of 0% for each year, and expected volatility of 14.7%, 29.8% and 29.8%;
risk-free interest rates ranging from 5.49% to 6.61%, 5.66% to 6.68% and 5.66%
to 6.68%; and expected lives ranging from 6 to 8 years for each year. A summary
of the status of the Company's two fixed stock option plans as of July 31, 1998
and September 30, 1997 and 1996 and changes during the years ended on those
dates is presented below (in thousands, except per share amounts):
Weighted
Shares Average
Subject Exercise
Fixed Options to Option Price
-------------------------------------------------------- --------- --------
Balance at September 30, 1995........................... 2,033 $ 8
Granted............................................... 1,711 13
Exercised............................................. -- --
Forfeited............................................. (18) 7
------
Balance at September 30, 1996........................... 3,726 10
Granted............................................... 795 23
Exercised............................................. (1,573) 11
Forfeited............................................. (39) 10
------
Balance at September 30, 1997........................... 2,909 15
Granted............................................... 96 28
Exercised............................................. (1,043) 8
Forfeited............................................. (125) 17
------
Balance at July 31, 1998................................ 1,837 $18
======
The following table summarizes information about fixed stock options
outstanding at July 31, 1998:
Options Outstanding Options Exercisable
-------------------------------------------- --------------------------
Weighted-Average Weighted- Weighted-
Exercise Shares Remaining Average Shares Average
Price Range Outstanding Contractural Life Exercise Price Exercisable Exercise Price
- ----------- ----------- ----------------- -------------- ----------- --------------
$ 6-11 701,963 5.6 $ 9.06 616,363 $ 8.84
$20-25 1,065,000 8.6 22.44 353,667 22.00
$26-29 70,000 9.7 27.47 --
--------- -------
$ 6-29 1,836,963 7.5 $17.55 970,030 $13.64
========= =======
During fiscal years 1997 and 1996, the Company granted restricted stock to
certain executives under the 1996 Plan. The aggregate number of shares granted
totaled 12,000 and 62,000 in fiscal 1997 and 1996, respectively. The shares
vest in equal increments over periods ranging from three to five years.
Compensation expense related to these restricted stock awards is charged
ratably over the respective vesting periods. No restricted stock was granted
during fiscal 1998, however 8,260 vested shares were issued.
14. Capital Stock
The Company has two classes of Common Stock outstanding, Class A Common
Stock and Common Stock. The rights of holders of Class A Common Stock and
Common Stock are substantially identical, except that, while any Class A Common
Stock is outstanding, holders of Class A Common Stock elect a class of
directors that constitutes two-thirds of the Board and holders of Common Stock
elect another class of directors
F-21
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
constituting one-third of the Board. At July 31, 1998 and September 30, 1997,
one shareholder owned substantially all of the Class A Common Stock and as a
result, has effective control of the Company's Board of Directors. The Class A
Common Stock is convertible into Common Stock (i) at the option of the holder,
(ii) automatically, upon transfer to a non-affiliate and (iii) automatically if
less than 5,000,000 shares (as such number shall be adjusted by reason of any
stock split, reclassification or other similar transaction) of Class A Common
Stock are outstanding. The Common Stock is not convertible. Each outstanding
share of Class A Common Stock and Common Stock is entitled to vote on all
matters submitted to a vote of stockholders. A 4,000,000 share block of Class A
Common stock was converted to Common Stock during Fiscal 1998 as they were sold
to a non-affiliated company of the prior holder.
15. Selected Quarterly Financial Data (Unaudited)
Fiscal 1998 ten-month transition period
-----------------------------------------
Three Three
Ten Months Months Months Four Months
Ended Ended Ended Ended
July 31, July 31, April January 31,
1998 1998 30, 1998 1998
---------- -------- -------- -----------
Resort revenue...................... $336,547 $ 26,303 $170,051 $140,193
Real estate revenue................. 73,722 18,417 3,912 51,393
Total revenue....................... 410,269 44,720 173,963 191,586
Income from operations.............. 88,611 (21,767) 75,226 35,152
Net income (loss)................... 41,018 (16,784) 41,663 16,139
Basic net income (loss) per common
share.............................. $ 1.20 $ (0.49) $ 1.21 $ 0.47
Diluted net income (loss) per common
share.............................. $ 1.18 $ (0.48) $ 1.20 $ 0.47
Fiscal 1997
--------------------------------------------------------------
Three
Twelve Months Three Months Months Three Three Months
Ended Ended Ended Months Ended
September 30, September 30, June 30, Ended March December 31,
1997 1997 1997 31, 1997 1996
------------- ------------- -------- ----------- ------------
Resort revenue.......... $259,038 $ 22,840 $ 28,031 $173,056 $ 35,111
Real estate revenue..... 71,485 9,596 9,878 2,229 49,782
Total revenue........... 330,523 32,436 37,909 175,285 84,893
Income from operations.. 52,794 (22,578) (17,701) 81,407 11,666
Net income (loss)....... 19,698 (15,937) (13,895) 44,463 5,067
Basic net income (loss)
per common share....... $ 0.66 $ (0.48) $ (0.42) $ 1.42 $ 0.24
Diluted net income
(loss)
per common share....... $ 0.64 $ (0.47) $ (0.40) $ 1.38 $ 0.23
During fiscal year 1998, the Company changed its fiscal year end from
September 30 to July 31. Quarterly results restated for twelve-months ended
July 31, 1998 are as follows:
Fiscal 1998
--------------------------------------------------------------
Three- Three-
Months Months Three-
Twelve-Months Three- Months Ended Ended Months Ended
Ended Ended April January 31, October 31,
July 31, 1998 July 31, 1998 30, 1998 1998 1997
------------- ------------- -------- ----------- ------------
Resort revenue.......... $350,498 $ 26,303 $170,051 $136,322 $ 17,822
Real estate revenue..... 84,177 18,417 3,912 51,158 10,690
Total revenue........... 434,675 44,720 173,963 187,480 28,512
Income from operations.. $ 73,221 $(21,767) $ 75,226 $ 50,045 $(30,283)
Net income (loss)....... 30,073 (16,784) 41,663 25,946 (20,752)
Basic net income (loss)
per common share....... $ 0.88 $ (0.49) $ 1.21 $ 0.76 $ (0.61)
Diluted net income
(loss) per common
share.................. $ 0.87 $ (0.48) $ 1.20 $ 0.75 $ (0.59)
F-22
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company's payment obligations under the 8 3/4%
Senior Subordinated Notes due 2009, are fully and unconditionally guaranteed on a joint and
several, senior subordinated basis by all of the Company's consolidated
subsidiaries (collectively, and excluding the Non-Guarantor Subsidiaries (as
defined below) the "Guarantor Subsidiaries") except for SSI Venture LLC and
Vail Associates Investments, Inc. (together, the "Non-Guarantor Subsidiaries").
SSI Venture LLC is a 51.9% owned joint venture which owns and operates certain
retail and rental operations. Vail Associates Investments, Inc. is a 100% owned
corporation which owns real estate held for sale.
As SSI Venture LLC began operations on August 1, 1998, no financial
information for SSI Venture LLC existed prior to that date. In addition, in the
Company's opinion, the financial information of Vail Associates Investments,
Inc. as of and prior to July 31, 1998 is immaterial to the financial position
of the Company and would not have provided additional meaningful information to
investors. Therefore, the Company has not presented herein comparative
consolidated financial information of the Guarantor Subsidiaries and Non-
Guarantor Subsidiaries.
17. Subsequent Events
On August 1, 1998 the Company entered into a joint venture with one of the
largest retailers of ski and golf-related sporting goods in Colorado. The two
companies merged their retail operations into a joint venture to be known as
SSI Venture LLC. The Company contributed its retail and rental operations to
the joint venture for a 51.9% share of the joint venture. Specialty Sports,
Inc. contributed an additional 30 stores located in Denver, Boulder, Aspen,
Telluride, Vail and Breckenridge. The owners and operators of Specialty Sports,
Inc.2014
______________
PROSPECTUS
______________
, the Gart family, have been operating in the sporting goods industry in
Colorado since 1929 and will run the day-to-day operations of SSI Venture LLC.
Vail Resorts will participate in the strategic and financial management of the
joint venture.
On August 13, 1998 the Company purchased 100% of the outstanding stock of
The Village at Breckenridge Acquisition Corp., Inc. and Property Management
Acquisition Corp., Inc. (collectively, "VAB"), for a total purchase price of
$33.8 million. VAB owns and operates The Village at Breckenridge, which is
strategically located at the base of Peak 9 at Breckenridge Mountain Resort.
Included in the acquisition were the 60-room Village Hotel, the 71-room
Breckenridge Mountain Lodge, two property management companies which currently
hold contracts for 360 condominium units, eight restaurants, approximately
28,000 square-feet of retail space leased to third parties, and approximately
32,000 square feet of convention and meeting space. In addition, the
acquisition includes the Maggie Building, that is generally considered to be
the prime base lodge of Breckenridge Mountain Resort, but until now, has
neither been owned nor managed by the Company. This transaction also included
VAB's other Breckenridge assets, including the Bell Tower Mall and certain
other real estate parcels for near-term development. Simultaneously, the
Company has entered into a contract to sell these same assets for $10 million
to East West Partners of Avon, Colorado, a highly-experienced mountain resort
real estate developer. The acquisition was funded with proceeds from our credit
facility.
F-23
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
April 30, July 31,
1999 1998
---------- --------
Assets
Current assets:
Cash and cash equivalents................................ $ 10,063 $ 19,512
Receivables.............................................. 47,917 26,487
Inventories.............................................. 19,581 8,893
Deferred income taxes.................................... 12,126 12,126
Other current assets..................................... 4,717 4,708
---------- --------
Total current assets................................. 94,404 71,726
Property, plant and equipment, net....................... 553,104 501,371
Real estate held for sale................................ 152,141 138,916
Deferred charges and other assets........................ 19,028 13,977
Intangible assets, net................................... 196,133 186,132
---------- --------
Total assets......................................... $1,014,810 $912,122
========== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses.................... $ 89,419 $ 55,012
Income taxes payable..................................... 2,239 2,239
Long-term debt due within one year (Note 6).............. 530 1,734
---------- --------
Total current liabilities............................ 92,188 58,985
Long-term debt (Note 6).................................. 293,332 282,280
Other long-term liabilities.............................. 28,398 28,886
Deferred income taxes.................................... 101,338 79,347
Commitments and contingencies (Note 3)................... -- --
Minority interest in net assets of consolidated joint
venture................................................. 9,582 --
Stockholders' equity:
Common stock
Class A common stock, $.01 par value, 20,000,000 shares
authorized, 7,439,834 and 7,639,834 shares issued and
outstanding at April 30, 1999 and July 31, 1998,
respectively.......................................... 74 76
Common stock, $.01 par value, 80,000,000 shares
authorized, 27,087,701 and 26,817,346 shares issued
and outstanding at April 30, 1999 and July 31, 1998,
respectively.......................................... 271 269
Additional paid-in capital............................... 402,592 401,563
Retained earnings........................................ 87,035 60,716
---------- --------
Total stockholders' equity........................... 489,972 462,624
---------- --------
Total liabilities and stockholders' equity........... $1,014,810 $912,122
========== ========
See accompanying notes to consolidated condensed financial statements.
F-24
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Three Months
Ended Ended
April 30, 1999 April 30, 1998
-------------- --------------
Net revenues:
Resort......................................... $188,220 $170,051
Real estate.................................... 14,022 3,912
-------- --------
Total net revenues........................... 202,242 173,963
Operating expenses:
Resort......................................... 111,097 82,413
Real estate.................................... 14,108 3,292
Corporate expense.............................. 1,733 1,544
Depreciation and amortization.................. 13,434 11,488
-------- --------
Total operating expenses..................... 140,372 98,737
-------- --------
Income from operations........................... 61,870 75,226
Other income (expense):
Investment income.............................. 738 570
Interest expense............................... (5,755) (4,869)
Gain on disposal of fixed assets............... 18 378
Other expense.................................. (9) (101)
Minority interest in consolidated joint
venture....................................... (1,914) --
-------- --------
Income before income taxes..................... 54,948 71,204
Provision for income taxes..................... (24,701) (29,541)
-------- --------
Net income..................................... $ 30,247 $ 41,663
======== ========
Net income per common share (Note 4):
Basic.......................................... $ 0.87 $ 1.21
-------- --------
Diluted........................................ $ 0.87 $ 1.20
======== ========
See accompanying notes to consolidated condensed financial statements.
F-25
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Nine Months Nine Months
Ended Ended
April 30, April 30,
1999 1998
----------- -----------
Net revenues:
Resort................................................ $379,346 $324,195
Real estate........................................... 31,409 65,760
-------- --------
Total net revenues.................................. 410,755 389,955
Operating expenses:
Resort................................................ 273,900 200,552
Real estate........................................... 26,248 58,939
Corporate expense..................................... 4,555 4,313
Depreciation and amortization......................... 38,181 31,163
-------- --------
Total operating expenses............................ 342,884 294,967
-------- --------
Income from operations.................................. 67,871 94,988
Other income (expense):
Investment income..................................... 1,643 1,665
Interest expense...................................... (17,593) (16,064)
Gain on disposal of fixed assets...................... 44 296
Other income (expense)................................ 130 (802)
Minority interest in consolidated joint venture....... (3,715) --
-------- --------
Income before income taxes.............................. 48,380 80,083
Provision for income taxes.............................. (22,061) (33,226)
-------- --------
Net income.............................................. $ 26,319 $ 46,857
======== ========
Net income per common share (Note 4):
Basic................................................. $ 0.76 $ 1.37
======== ========
Diluted............................................... $ 0.76 $ 1.35
======== ========
See accompanying notes to consolidated condensed financial statements.
F-26
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Nine Months
Ended Ended
April 30, 1999 April 30, 1998
-------------- --------------
Cash flows from operating activities:
Net income.................................... $ 26,319 $ 46,857
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 38,181 31,163
Non-cash cost of real estate sales............ 8,326 47,397
Non-cash compensation related to stock
grants....................................... 268 268
Non-cash equity (income) loss................. 1,424 (2,769)
Deferred financing costs amortized............ 448 440
Gain on disposal of fixed assets.............. (44) (296)
Deferred income taxes, net.................... 22,061 33,226
Minority interest in consolidated joint
venture...................................... 3,715 --
Changes in assets and liabilities:
Accounts receivable, net...................... (20,420) (10,166)
Inventories................................... (6,074) (989)
Accounts payable and accrued expenses......... 29,652 588
Other assets and liabilities.................. (2,550) (9,496)
-------- --------
Net cash provided by operating activities... 101,306 136,223
Cash flows from investing activities:
Cash paid in hotel acquisitions, net of cash
acquired..................................... (33,800) (54,250)
Cash paid by consolidated joint venture in
acquisition of retail operations............. (10,516) --
Resort capital expenditures................... (53,691) (79,853)
Investments in real estate.................... (22,850) (17,403)
-------- --------
Net cash used in investing activities....... (120,857) (151,506)
Cash flows from financing activities:
Refund of development bond reserve fund....... -- 3,297
Proceeds from the exercise of stock options... 628 6,919
Payments under Rights......................... -- (5,707)
Proceeds from borrowings under long-term
debt......................................... 132,866 331,297
Payments on long-term debt.................... (123,392) (319,058)
-------- --------
Net cash provided by financing activities... 10,102 16,748
-------- --------
Net (decrease) increase in cash and cash
equivalents.................................... (9,449) 1,465
Cash and cash equivalents:
Beginning of period........................... 19,512 10,217
-------- --------
End of period................................. $ 10,063 $ 11,682
======== ========
See accompanying notes to consolidated condensed financial statements.
F-27
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Vail Resorts, Inc., a Delaware corporation ("Vail Resorts"), is a holding
company and operates through various subsidiaries. Vail Resorts and its
subsidiaries (collectively, the "Company") currently operate in two business
segments: resorts and real estate development. The Vail Corporation, a wholly-
owned subsidiary of Vail Resorts, and its subsidiaries (collectively, "Vail
Associates") operate four of the world's largest skiing facilities on Vail,
Breckenridge, Keystone and Beaver Creek mountains in Colorado. Vail Resorts
Development Company ("VRDC"), a wholly owned subsidiary of Vail Associates,
conducts the Company's real estate development activities. The Company's resort
business, which is currently composed primarily of ski operations and related
amenities, is seasonal in nature with a typical ski season beginning in mid-
October to early November and continuing through late April to mid-May.
In the opinion of the Company, the accompanying consolidated condensed
financial statements reflect all adjustments necessary to present fairly the
Company's financial position, results of operations and cash flows for the
interim periods presented. All such adjustments are of a normal recurring
nature. Results for interim periods are not indicative of the results for the
entire year. The accompanying consolidated financial statements should be read
in conjunction with the audited consolidated financial statements for the year
ended July 31, 1998, included in the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 1998.
2. Accounting Policies
The Company adopted the provisions of SFAS 130, "Reporting Comprehensive
Income" as of August 1, 1998. SFAS 130 establishes standards for reporting and
display of comprehensive income and its components in a full set of general-
purpose financial statements. The adoption of this statement had no impact on
the Company's financial statements, as there are no differences between net
income and comprehensive income for the periods reported herein.
3. Commitments and Contingencies
Smith Creek Metropolitan District ("SCMD") and Bachelor Gulch Metropolitan
District ("BGMD") were organized in November 1994 to cooperate in the
financing, construction and operation of basic public infrastructure serving
the Company's Bachelor Gulch Village development. SCMD was organized primarily
to own, operate and maintain water, street, traffic and safety, transportation,
fire protection, parks and recreation, television relay and translation,
sanitation and certain other facilities and equipment of BGMD. SCMD is
comprised of approximately 150 acres of open space land owned by the Company
and members of the Board of Directors of SCMD. In two planned unit
developments, Eagle County has granted zoning approval for 1,395 dwelling units
within Bachelor Gulch Village, including various single family homesites,
cluster homes, townhomes, and lodging units. As of April 30, 1999, the Company
has sold 104 single-family homesites and six parcels to developers for the
construction of various types of dwelling units. Currently, SCMD has
outstanding $44.5 million of variable rate revenue bonds maturing on October 1,
2035, which have been enhanced with a $47.2 million letter of credit issued
against the Company's Credit Facility as defined herein. It is anticipated that
as the Bachelor Gulch community expands, BGMD will become self supporting and
that within 25 to 30 years will issue general obligation bonds, the proceeds of
which will be used to retire the SCMD revenue bonds. Until that time, the
Company has agreed to subsidize the interest payments on the SCMD revenue
bonds. The Company has estimated that the present value of this aggregate
subsidy to be $14.3 million at April 30, 1999. The Company has allocated $10.3
million of that amount to the Bachelor Gulch Village homesites which were sold
as of April 30, 1999 and has recorded that amount as a liability in the
accompanying financial statements. The total subsidy incurred as of April 30,
1999 and July 31, 1998 was $3.6 million and $2.9 million, respectively.
F-28
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
At April 30, 1999, the Company had various other letters of credit
outstanding in the aggregate amount of $17.7 million.
On October 19, 1998, fires on Vail Mountain destroyed certain of the
Company's facilities including the Ski Patrol Headquarters, a day skier
shelter, the Two Elk Lodge restaurant and the chairlift drive housing for the
High Noon Lift (Chair #5). Chair #5 and three other chairlifts, which sustained
minor damage, have been repaired and are currently fully operational. All of
the facilities damaged are fully covered by the Company's property insurance
policy. Although the Company is unable to estimate the total amount which will
be recovered through insurance proceeds, the Company does not expect to record
a loss related to the property damage. The incident is also covered under the
Company's business interruption insurance policy. The Company is unable to
estimate at this time the impact the incident will have in terms of business
interruption, however the Company expects the incident will not have a material
impact on its results of operations and cash flows due to mitigating measures
being undertaken by the Company and the insurance coverage.
The Company has executed as lessee operating leases for the rental of office
space, employee residential units and office equipment though fiscal 2008. For
the nine months ended April 30, 1999, and April 30, 1998, lease expense related
to these agreements of $4.8 million and $5.4 million, respectively, was
recorded and is included in the accompanying consolidated statements of
operations.
Future minimum lease payments under these leases as of April 30, 1999 are as
follows:
Due during fiscal year ending July 31:
1999............................................................. $ 1,332,451
2000............................................................. 2,992,051
2001............................................................. 2,563,510
2002............................................................. 1,743,934
2003............................................................. 1,689,097
Thereafter....................................................... 6,174,261
-----------
Total.......................................................... $16,495,304
===========
The Company is a party to various lawsuits arising in the ordinary course of
business. In the opinion of management, all matters are adequately covered by
insurance or, if not covered, are without merit or are of such kind, or involve
such amounts as would not have a material effect on the financial position,
results of operations and cash flows of the Company if disposed of unfavorably.
F-29
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
4. Net Earnings Per Common Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income available to common shareholders by the weighted average
shares outstanding. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised
resulting in the issuance of common shares that would then share in the
earnings of the Company.
Three Months Ended Nine Months Ended
April 30, 1999 April 30, 1999
--------------------------------------------
(In thousands, except per share amounts)
Basic Diluted Basic Diluted
---------- --------------------- -----------
Net earnings per common share:
Net earnings..................... $ 30,247 $ 30,247 $ 26,319 $ 26,319
Weighted average shares
outstanding..................... 34,571 34,571 34,557 34,557
Effect of dilutive stock
options......................... -- 196 -- 252
---------- ---------- ---------- ----------
Total shares................... 34,571 34,767 34,557
34,809
---------- ---------- ---------- ----------
Net earnings per common share.... $ 0.87 $ 0.87 $ 0.76 $ 0.76
========== ========== ========== ==========
Three Months Ended Nine Months Ended
April 30, 1998 April 30, 1998
--------------------------------------------
(In thousands, except per share amounts)
Basic Diluted Basic Diluted
---------- --------------------- -----------
Net earnings per common share:
Net earnings..................... $ 41,663 $ 41,663 $ 46,857 $ 46,857
Weighted average shares
outstanding..................... 34,303 34,303 34,183 34,183
Effect of dilutive stock
options......................... -- 480 -- 458
---------- ---------- ---------- ----------
Total shares................... 34,303 34,783 34,183 34,641
---------- ---------- ---------- ----------
Net earnings per common share.... $ 1.21 $ 1.20 $ 1.37 $ 1.35
========== ========== ========== ==========
5. Acquisitions and Business Combinations
On August 1, 1998, the Company entered into a joint venture with one of the
largest retailers of ski- and golf-related sporting goods in Colorado. The two
companies merged their retail operations into a joint venture named SSI Venture
LLC. The Company contributed its retail and rental operations to the joint
venture and holds a 51.9% share of the joint venture. Specialty Sports, Inc.
contributed 30 stores located in Denver, Boulder, Aspen, Telluride, Vail and
Breckenridge to the joint venture and holds a 48.1% share in the joint venture.
The owners and operators of Specialty Sports, Inc., the Gart family, have been
operating in the sporting goods industry in Colorado since 1929 and run the
day-to-day operations of SSI Venture LLC. Vail Resorts participates in the
strategic and financial management of the joint venture. SSI Venture LLC is a
fully consolidated entity in the Company's accompanying financial statements
with the minority interest in earnings and net assets appropriately reflected
on the financial statements.
On August 13, 1998, the Company purchased 100% of the outstanding stock of
The Village at Breckenridge Acquisition Corp., Inc. and Property Management
Acquisition Corp., Inc. (collectively, "VAB") for a total purchase price of
$33.8 million. VAB owned and operated The Village at Breckenridge, which is
strategically located at the base of Peak 9 at Breckenridge Mountain Resort.
Included in the acquisition were the 60-room Village Hotel, the 71-room
Breckenridge Mountain Lodge, two property management companies
F-30
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
which currently hold contracts for approximately 360 condominium units, eight
restaurants, approximately 28,000 square feet of retail space leased to third
parties, and approximately 32,000 square feet of convention and meeting space.
In addition, the acquisition includes the Maggie Building, which is generally
considered to be the primary base lodge of Breckenridge Mountain Resort, but
until now had neither been owned nor managed by the Company. This transaction
also included VAB's other Breckenridge assets, including the Bell Tower Mall
and certain other real estate parcels which the Company sold on April 10, 1999,
to East West Partners of Avon, Colorado for $10 million. The acquisition was
funded with proceeds from the Company's revolving credit facility.
6. Long-Term Debt
Long-term debt as of April 30, 1999 and July 31, 1998 is summarized as
follows (in thousands):
April
30, July 31,
Maturity(d) 1999 1998
----------- -------- --------
Industrial Development Bonds (a)................. 1999-2020 $ 63,200 $ 64,560
Credit Facilities (b)............................ 2003 266,688 218,000
Other (c)........................................ 1999-2028 4,974 1,454
-------- --------
293,862 284,014
Less: Maturities within 12 months................ 530 1,734
-------- --------
$293,332 $282,280
======== ========
- --------
(a) The Company has $41.2 million of outstanding Industrial Development Bonds
(the "Industrial Development Bonds") issued by Eagle County, Colorado that
mature, subject to prior redemption, on August 1, 2019. These bonds accrue
interest at 6.95% per annum, with interest being payable semi-annually on
February 1 and August 1. In addition, the Company has outstanding two
series of refunding bonds. The Series 1990 Sports Facilities Refunding
Revenue Bonds have an aggregate outstanding principal amount of $19.0
million, which matures in installments in 2006 and 2008. These bonds bear
interest at a rate of 7.75% for bonds maturing in 2006 and 7.875% for bonds
maturing in 2008. The Series 1991 Sports Facilities Refunding Revenue Bonds
have an aggregate outstanding principal amount of $3 million and bear
interest at 7.125% for bonds maturing in 2002 and 7.375% for bonds maturing
in 2010.
(b) The Company's credit facilities consist of a revolving credit facility
("Credit Facility") that provides for debt financing up to an aggregate
principal amount of $450 million. Borrowings under the Credit Facility bear
interest annually at the Company's option at the rate of (i) LIBOR (4.90%
at April 30, 1999) plus a margin ranging from 0.50% to 1.25% or (ii) the
agent's prime lending rate, (7.75% at April 30, 1999) plus a margin of up
to 0.125%. The Company also pays a quarterly unused commitment fee ranging
from 0.125% to 0.30%. The interest margins fluctuate based upon the ratio
of the Company's total Funded Debt to the Company's Resort EBITDA (as
defined in the underlying Credit Facility). The Credit Facility matures on
December 19, 2002.
On December 30, 1998, SSI Venture LLC established a credit facility ("SSV
Facility") that provides debt financing up to an aggregate principal amount of
$20 million. The SSV Facility consists of (i) a $10 million Tranche A Revolving
Credit Facility and (ii) a $10 million Tranche B Term Loan Facility. The SSV
Facility matures on the earlier of December 31, 2003 or the termination date of
the Credit Facility discussed above. Vail Associates guarantees the SSV
Facility. Minimum amortization under the Tranche B Term Loan Facility is
$625,000, $1.38 million, $1.75 million, $2.25 million, $2.63 million, and $1.38
million during the fiscal years
F-31
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
1999, 2000, 2001, 2002, 2003, and 2004 respectively. The SSV Facility bears
interest annually at the rates prescribed above for the Credit Facility. SSI
Venture LLC also pays a quarterly unused commitment fee at the same rates as
the unused commitment fee for the Credit Facility.
(c) Other obligations bear interest at rates ranging from 0.0% to 6.5% and have
maturities ranging from 1999-2028.
(d) Maturity years based on fiscal year end July 31.
Aggregate maturities for debt outstanding are as follows (in thousands):
As of
April
30,
1999
Due during fiscal years ending July 31: --------
1999................................................................ $ 340
2000................................................................ 548
2001................................................................ 430
2002................................................................ 439
2003................................................................ 227,243
Thereafter.......................................................... 64,862
--------
Total Debt........................................................ $293,862
========
7. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company's payment obligations under the 8 3/4% Senior Subordinated Notes
due 2009 (see Note 8), are fully and unconditionally guaranteed on a joint and
several, senior subordinated basis by all of the Company's consolidated
subsidiaries (collectively, and excluding the Non-Guarantor Subsidiaries (as
defined below), the "Guarantor Subsidiaries") except for SSI Venture, LLC and
Vail Associates Investments, Inc. (together, the Non-Guarantor Subsidiaries").
SSI Venture, LLC is a 51.9%-owned joint venture which owns and operates certain
retail and rental operations. Vail Associates Investments, Inc. is a 100%-owned
corporation which owns certain real estate held for sale.
Presented below is the consolidated condensed financial information of Vail
Resorts, Inc. (the "Parent Company"), the Guarantor Subsidiaries and the Non-
Guarantor Subsidiaries as of April 30, 1999 and for the nine months then ended.
As SSI Venture LLC began operations on August 1, 1998, no financial information
for SSI Venture, LLC existed prior to that date. In addition, in the Company's
opinion, the financial information of Vail Associates Investments, Inc. as of
and prior to July 31, 1998 is immaterial to the financial position of the
Company and would not provide additional meaningful Information to investors.
Therefore, the Company has not presented herein comparative consolidated
condensed financial information for the nine months ended April 30, 1998.
Investments in Subsidiaries are accounted for by the Parent Company and
Guarantor Subsidiaries using the equity method of accounting. Net income of
Guarantor and Non-Guarantor Subsidiaries is, therefore, reflected in the Parent
Company's and Guarantor Subsidiaries' investments in and advances to (from)
Subsidiaries. Net income of the Guarantor and Non-Guarantor Subsidiaries is
reflected in Guarantor Subsidiaries and Parent Company as equity in
consolidated subsidiaries. The elimination entries eliminate investments in
Non-Guarantor Subsidiaries and intercompany balances and transactions.
F-32
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Supplemental Condensed Consolidating Balance Sheet
April 30, 1999
(in thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
Current assets:
Cash and cash equiva-
lents................ $ -- $ 9,246 $ 817 $ -- $ 10,063
Receivables........... 321 47,395 201 -- 47,917
Inventories, net...... -- 5,871 13,710 -- 19,581
Deferred income tax-
es................... 1,634 10,492 -- -- 12,126
Other current assets.. -- 4,454 657 -- 5,111
-------- ---------- ------- ---------- ----------
Total current
assets............. 1,955 77,458 15,385 -- 94,798
Property, plant and
equipment, net......... -- 541,758 11,346 -- 553,104
Real estate held for
sale................... -- 147,815 4,326 -- 152,141
Deferred charges and
other assets........... 373 18,111 544 -- 19,028
Intangible assets, net.. -- 183,898 12,235 -- 196,133
Investments in
subsidiaries and
advances to (from)
subsidiaries........... 492,091 195,112 (5,780) (681,423) --
-------- ---------- ------- ---------- ----------
Total assets........ $494,419 $1,164,152 $38,056 $ (681,423) $1,015,204
======== ========== ======= ========== ==========
Current liabilities:
Accounts payable and
accrued expenses..... $ 1,080 $ 80,409 $ 7,930 $ -- $ 89,419
Income taxes payable.. 2,239 -- -- -- 2,239
Long-term debt due
within one year...... -- 464 66 -- 530
-------- ---------- ------- ---------- ----------
Total current
liabilities........ 3,319 80,873 7,996 -- 92,188
Long-term debt.......... -- 283,644 9,688 -- 293,332
Other long-term
liabilities............ 1,128 27,270 -- -- 28,398
Deferred income taxes... -- 101,732 -- -- 101,732
Minority interest in net
assets of consolidated
joint venture.......... -- -- 9,582 -- 9,582
Total stockholders'
equity............. 489,972 670,633 10,790 (681,423) 489,972
-------- ---------- ------- ---------- ----------
Total liabilities
and stockholders'
equity............. $494,419 $1,164,152 $38,056 $ (681,423) $1,015,204
======== ========== ======= ========== ==========
F-33
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Supplemental Condensed Consolidating Statement of Operations
For the Nine Months Ended April 30, 1999
(in thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
Total revenues ......... $ -- $348,017 $64,326 $ (1,588) $410,755
Total operating expenses
....................... 916 287,545 56,011 (1,588) 342,884
------- -------- ------- --------- --------
Income (loss) from op-
erations ............ (916) 60,472 8,315 -- 67,871
Other income (expense)
....................... 187 (15,371) (592) -- (15,776)
Minority interest in net
income of consolidated
joint venture ......... -- -- (3,715) -- (3,715)
------- -------- ------- --------- --------
Income (loss) before
income taxes ........ (729) 45,101 4,008 -- 48,380
Benefit (provision)
for income taxes..... 332 (22,393) -- -- (22,061)
------- -------- ------- --------- --------
Net income (loss) be-
fore equity in income
of consolidated sub-
sidiaries ........... (397) 22,708 4,008 -- 26,319
Equity in income of con-
solidated subsidiaries
....................... 26,716 4,008 -- (30,724) --
------- -------- ------- --------- --------
Net income (loss) .... $26,319 $ 26,716 $ 4,008 $ (30,724) $ 26,319
======= ======== ======= ========= ========
F-34
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Supplemental Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended April 30, 1999
(in thousands)
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------- ------------ ------------
Cash flows provided by
(used in) operating
activities............. $(397) $ 92,142 $ 9,561 $ -- $ 101,306
Cash flows from
investing activities:
Cash paid in hotel
acquisitions, net of
cash acquired ....... -- (33,800) -- -- (33,800)
Cash paid by
consolidated joint
venture in
acquisition of retail
operations .......... -- -- (10,516) -- (10,516)
Resort capital
expenditures ........ -- (49,370) (4,321) -- (53,691)
Investments in real
estate .............. -- (22,850) -- -- (22,850)
----- --------- -------- ----- ---------
Net cash used in
investing
activities ........ -- (106,020) (14,837) -- (120,857)
Cash flows from
financing activities:
Proceeds from the
exercise of stock
options ............. 628 -- -- -- 628
Proceeds from
borrowings under
long-term debt ...... -- 128,020 4,846 -- 132,866
Payments on long-term
debt ................ -- (123,392) -- -- (123,392)
Advances to (from)
affiliates .......... (231) (1,016) 1,247 -- --
----- --------- -------- ----- ---------
Net cash provided by
financing
activities ........ 397 3,612 6,093 -- 10,102
----- --------- -------- ----- ---------
Net increase (decrease)
in cash and cash
equivalents ........... -- (10,266) 817 -- (9,449)
Cash and cash
equivalents:
Beginning of period .. -- 19,512 -- -- 19,512
----- --------- -------- ----- ---------
End of period ........ $ -- $ 9,246 $ 817 $ -- $ 10,063
===== ========= ======== ===== =========
F-35
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
8. Subsequent Events
On June 14, 1999, the Company purchased 100% of the outstanding shares of
Grand Teton Lodge Company, a Wyoming corporation, from CSX Corporation for a
total purchase price of $50 million. The Grand Teton Lodge Company operates
four resort properties in northwestern Wyoming: Jenny Lake Lodge, Jackson Lake
Lodge, Colter Bay Village and Jackson Hole Golf & Tennis Club. Grand Teton
Lodge Company operates the first three properties, all located within Grand
Teton National Park, under a concessionaire contract with the National Park
Service. Jackson Hole Golf & Tennis Club is located outside the park on
property owned by Grand Teton Lodge Company and includes approximately 30 acres
of developable land.
The Company completed a $200 million private debt offering of Senior
Subordinated Notes (the "Notes") on May 11, 1999. The Notes have a fixed annual
interest rate of 8.75% which will be paid every six months on May 15 and
November 15, beginning November 15, 1999. The Notes will mature on May 15, 2009
and no principal payments are due to be paid until maturity. The Company has
certain early redemption options under the terms of the Notes. Substantially
all of the Company's subsidiaries have guaranteed the Notes. The Notes are
subordinated to certain of the Company's debts, including the Credit Facility,
and will be subordinated to certain of the Company's future debts. The proceeds
of the offering were used to reduce the Company's outstanding debt under the
Credit Facility. The private debt offering is not registered with the
Securities and Exchange Commission. Pursuant to the terms of the offering, the
Company will register with the Securities and Exchange Commission exchange
notes with substantially the same terms as the Notes to enable holders of the
Notes to make a market in the Notes.
In conjunction with the private debt offering the Company amended its Credit
Facility effective May 1, 1999. The amended Credit Facility provides the
Company additional financial flexibility. Borrowings under the amended Credit
Facility bear interest annually at the Company's option at the rate of (i)
LIBOR (4.90% at April 30, 1999) plus a margin ranging from 0.75% to 2.25% or
(ii) the agent's prime lending rate, (7.75% at April 30, 1999) plus a margin of
up to 0.75%. The Company also pays a quarterly unused commitment fee ranging
from 0.20% to 0.50%. The interest margins fluctuate based upon the ratio of the
Company's total Funded Debt to the Company's Resort EBITDA (as defined in the
underlying Credit Facility). The Credit Facility matures on December 19, 2002.
F-36
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus doesis not an offer to sell or buy
any securities in any jurisdiction where it is unlawful. The infor-
mationinformation in this
prospectus is current as of , 1999.
--------------------
TABLE OF CONTENTS
--------------------
Page
----
Where You Can Find More Information...................................... i
Prospectus Summary....................................................... 1
Risk Factors............................................................. 13
Use of Proceeds ......................................................... 19
Capitalization........................................................... 19
Selected Consolidated Financial and Operating Data ...................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 36
Management............................................................... 51
Principal Stockholders................................................... 55
Description of Certain Indebtedness ..................................... 56
The Exchange Offer....................................................... 58
Description of Notes..................................................... 67
Plan of Distribution .................................................... 95
Certain Federal Income Tax Considerations................................ 96
Legal Matters ........................................................... 98
Experts.................................................................. 98
Index to Consolidated Financial Statements............................... F-1
[ ], 2004.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$200,000,000
[LOGO OF VAIL RESORTS, INC.]
Exchange Offer for $200,000,000 Aggregate Principal Amount of 8 3/4% Senior
Subordinated Notes due 2009
------------
PROSPECTUS
------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") makes
provision for the indemnification of officers and directors of corporations in
terms sufficiently broad to indemnify the officers and directors of the
registrant under certain circumstances for liabilities (including reimbursement
of expenses incurred) arising under the Securities Act.
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") provides that to the fullest extent permitted by Delaware Law or
another applicable law, a director of the Company shall not be liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director. Under current Delaware Law, liability of a director may not be
limited (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchasespurchases and (iv)
for any transaction from which the director derives an improper personal
benefit. The effect of the provision of the Certificate is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior) except in the situations
described in clauses (i) through (iv) above. This provision does not limit or
eliminate the rights of the Company or any stockholder to seek nonmonetarynon-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care. In addition, the Company's Restated Bylaws (the
"Bylaws") provide that the Company shall indemnify its directors, officers and
employees to the fullest extent permitted by applicable law.
The Bylaws provide that the Company may indemnify any person who is or was
involved in any manner or is threatened to be made so involved in any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
any action, suit or proceeding by or in the right of the registrant to procure a
judgment in its town)favor), by reason of the fact that he is or was or had agreed to
become a director, officer or employee of the registrant or is or was or had
agreed to become at the request of the board or an officer of the registrant a
director, officer or employee of another corporation, partnership, joint
venture, trust or other entity against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such Proceeding.proceeding.
Item 21. Exhibits
Exhibit No. Description
4.1(a) Purchase Agreement, dated as of January 15, 2004 among Vail Resorts,
Inc., the guarantors named on Schedule I thereto, Banc of America
Securities LLC, Deutsche Banc Securities, Inc., Bear, Stearns & Co. Inc.,
Lehman Brothers Inc., Piper Jaffray & Co. and Financial Statement Schedules.
(a) Exhibits
The following exhibits are either filed herewith or, if so indicated,
incorporatedWells Fargo Securities LLC
(Incorporated by reference to Exhibit 4.2(c) on Form 10-Q of Vail Resorts,
Inc. for the documents indicated in parentheses which have
previously beenquarter ended January 31, 2004).
4.1(b) Supplemental Purchase Agreement, dated as of January 22, 2004 among Vail
Resorts, Inc., the guarantors named thereto, Banc of America Securities
LLC, Deutsche Banc Securities, Inc., Bear, Stearns & Co. Inc., Lehman
Brothers Inc., Piper Jaffray & Co. and Wells Fargo Securities LLC
(Incorporated by reference to Exhibit 4.2(d) on Form 10-Q of Vail Resorts,
Inc. for the quarter ended January 31, 2004).
4.2 Indenture, dated as of January 29, 2004 among Vail Resorts, Inc., the
guarantors named therein and The Bank of New York, as trustee (Incorporated
by reference to Exhibit 4.1 on Form 8-K of Vail Resorts, Inc. filed
with the Securities and Exchange Commission.
Exhibit No. Description
----------- -----------
3.1 Amended and Restated Certificate of Incorporation filed with the
Secretary of State of the State of Delaware on the Effective Date.
(Incorporated by reference to Exhibit 3.1 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
3.2 Amended and Restated By-Laws adopted on the Effective Date.
(Incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
February 2, 2004).
II-1
Exhibit No. Description
----------- -----------
4.1 Form of Class 2 Common Stock Registration Rights Agreements
between the Company and holders of Class 2 Common Stock.
(Incorporated by reference to Exhibit 4.13 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
4.2 Purchase Agreement, dated as of May 6, 1999 among the Vail
Resorts, Inc., the guarantors named on Schedule I thereto, and
Bear, Stearns & Co. Inc., Nationsbanc Montgomery Securities LLC,
BT Alex. Brown Incorporated, Lehman Brothers Inc. and Salomon
Smith Barney Inc.*
4.3 Indenture, dated as of May 11, 1999 among Vail Resorts, Inc., the
guarantors named therein and the United States Trust Company of
New York, as trustee.*
4.4 Form of Global Note (to be included in Exhibit 4.3).*
4.5 Registration Rights Agreement, dated as of May 11, 1999 among Vail
Resorts, Inc., the guarantors signatory thereto and Bear, Stearns
& Co. Inc., Nationsbanc Montgomery Securities LLC, BT Alex. Brown
Incorporated, Lehman Brothers Inc. and Salomon Smith Barney Inc.*
4.6 First Supplemental Indenture, dated as of August 27, 1999, among
the Company, the guarantors named therein and the United States
Trust Company of New York, as trustee.
5.1 Opinion of Cahill Gordon & Reindel as to the legality of the
exchange notes.*
5.2 Opinion of General Counsel to the Company as to the legality of
the guarantees.
12 Computation of Ratio of Earnings to Fixed Charges*
23.1 Consent of Arthur Andersen LLP, independent public accountants.
24.1 Power of Attorney (set forth on the signature pages to this
Registration Statement).*
25.1 Statement regarding eligibility of Trustee on Form T-1.
99.1 Form of Letter of Transmittal.
99.24.3 Form of Global Note (included in Exhibit 4.2).
4.4 Registration Rights Agreement dated as of January 29, 2004 among Vail
Resorts, Inc., the guarantors signatory thereto, Banc of America Securities
LLC, Deutsche Banc Securities, Inc., Bear, Stearns & Co. Inc., Lehman
Brothers Inc., Piper Jaffray & Co. and Wells Fargo Securities LLC
(Incorporated by reference to Exhibit 4.5(c) on Form 10-Q of Vail Resorts,
Inc. for the quarter ended January 31, 2004).
5.1* Opinion of Cahill Gordon & Reindel LLP as to the legality of the Exchange
Notes and the Guarantees of certain of the Guarantors.
5.2* Opinion of General Counsel to the Company as to the legality of the
Exchange Notes and the Guarantees of certain of the Guarantors.
12.1* Computation of Ratio of Earnings to Fixed Charges.
23.1(a)* Consent of PricewaterhouseCoopers LLP, independent accountants.
23.1(b)* Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2* Consent of Cahill Gordon & Reindel LLP (included in Exhibit 5.1).
23.3* Consent of General Counsel to the Company (included in Exhibit 5.2).
24.1* Power of Attorney for the Company.
24.2* Powers of Attorney for the Guarantors (set forth on the signature pages to
this Registration Statement).
25.1* Statement regarding eligibility of Trustee on Form T-1.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
- --------_________________
* Previously filed.Filed Herewith
Item 22. Undertakings.Undertakings
The undersigned Registrants hereby undertake:
(1)(a) For purposes of determining any liability under the Securities Act of
1933, each filing of the Company'sregistrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that itis incorporated by reference
in the registration statement 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.
(2) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(3)(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the undersigned registrants (the "Registrants")registrant pursuant to the foregoing provisions, or otherwise, the
Registrants haveregistrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrantsregistrant of expenses
incurred or paid by a director,
II-2
officer or controlling person of the Registrantsregistrant in the successful defense of any
action, suit or proceeding) is asserted
II-2
by such director, officer or controlling
person in connection with the securities being registered, the Registrantsregistrant will,
unless in the opinion of theirits counsel the matter has been settled by controlling
precedent, subjectsubmit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(4)(c) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, S-4 within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(5)(d) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 7th25th day of September, 1999.March, 2004.
VAIL RESORTS, INC.
By: /s/ James P. Donohue
By:
----------------------------------
James P. DonohueJEFFREY W. JONES
-------------------------------------
Name: Jeffrey W. Jones
Title: Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, September 7, 1999
______________________________________ Chief Executive Officer
Adam M. Aron and Director
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ (Principal Accounting
James P. Donohue Officer)
Director September 7, 1999
______________________________________
Antony P. Ressler
* Director September 7, 1999
______________________________________
Bruce H. Spector
Director September 7, 1999
______________________________________
Craig M. Cogut
Director September 7, 1999
______________________________________
Frank Biondi
* Director September 7, 1999
______________________________________
James S. Tisch
II-4
Signature Title Date
--------- ----- ----
* Director September 7, 1999
______________________________________
John F. Sorte
* Director September 7, 1999
______________________________________
John J. Ryan III
* Director September 7, 1999
______________________________________
Joseph M. Micheletto
* Director September 7, 1999
______________________________________
Leon D. Black
* Director September 7, 1999
______________________________________
Marc J. Rowan
* Director September 7, 1999
______________________________________
Robert A. Katz
* Director September 7, 1999
______________________________________
Stephen C. Hilbert
Director September 7, 1999
______________________________________
Thomas H. Lee
* Director September 7, 1999
______________________________________
William L. Mack
Director September 7, 1999
______________________________________
William Stiritz
* By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the Town of Avon, State of Colorado,
on the 7th day of September, 1999.
BEAVER CREEK ASSOCIATES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ADAM M. ARON Chairman of the Board, Chief Executive Officer March 25, 2004
- ---------------------------------- and Director (Principal Executive Officer)
Adam M. Aron
/S/JEFFREY W. JONES Senior Vice President and Chief Financial March 25, 2004
- ---------------------------------- Officer (Principal Financial Officer)
Jeffrey W. Jones
/S/FRANK BIONDI* Director March 25, 2004
- ----------------------------------
Frank Biondi
/S/JOHN J. HANNAN* Director March 25, 2004
- ----------------------------------
John J. Hannan
/S/JOHN R. HAUGE* Director March 25, 2004
- ----------------------------------
John R. Hauge
/S/ROLAND A. HERNANDEZ* Director March 25, 2004
- ----------------------------------
Roland A. Hernandez
/S/ROBERT A. KATZ* Director March 25, 2004
- ----------------------------------
Robert A. Katz
/S/THOMAS H. LEE* Director March 25, 2004
- ----------------------------------
Thomas H. Lee
/S/WILLIAM L. MACK* Director March 25, 2004
- ----------------------------------
William L. Mack
/S/JOE R. MICHELETTO* Director March 25, 2004
- ----------------------------------
Joe R. Micheletto
II-4
Signature Title Date
/S/JOHN F. SORTE* Director March 25, 2004
- ----------------------------------
John F. Sorte
/S/WILLIAM P. STIRITZ* Director March 25, 2004
- ----------------------------------
William P. Stiritz
/S/JAMES S. TISCH* Director March 25, 2004
- ----------------------------------
James S. Tisch
/S/JEFFREY W. JONES Attorney-in-Fact March 25, 2004
- ----------------------------------
Jeffrey W. Jones
- ----------------------------------
* By Attorney-in-Fact
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
BEAVER CREEK ASSOCIATES, INC.
By: /s/ JEFFREY W. JONES
------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
/s/ Adam M. Aron Chairman of the Board and September 7, 1999
______________________________________ Director (PrincipalMarch 25, 2004
- ---------------------------------------
Adam M. Aron
Executive Officer)
*/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
September 7, 1999
______________________________________
Andrew P. DalyJeffrey W. Jones
/s/ James P. DonohueMartha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
----------------------------
Attorney-in-Fact
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.March, 2004.
BEAVER CREEK CONSULTANTS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJEFFREY W. JONES
--------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board and September 7, 1999
______________________________________ Director (PrincipalMarch 25, 2004
- ---------------------------------------
Adam M. Aron
Executive Officer)
*/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
September 7, 1999
______________________________________
Andrew P. DalyJeffrey W. Jones
/s/ James P. DonohueMartha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
----------------------------
Attorney-in-Fact
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.March, 2004.
BEAVER CREEK FOOD SERVICES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJEFFREY W. JONES
--------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ John McD. Garnsey Chairman of the Board, September 7, 1999
______________________________________ President and Director Paul A. Testwuide (Principal Executive
Officer)March 25, 2004
- ---------------------------------------
John McD. Garnsey
/s/ James P. DonohueJeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
GHTV,March, 2004.
BRECKENRIDGE RESORT PROPERTIES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief FinancialJEFFREY W. JONES
---------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, September 7, 1999
______________________________________/s/ James P. Thompson President and Director Andrew P. Daly (Principal Executive
Officer)
/s/March 25, 2004
- ---------------------------------------
James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ andThompson
/s/ Eric Thompson Director (Principal
James P. Donohue Accounting Officer)
*March 25, 2004
- ---------------------------------------
Eric Thompson
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and September 7, 1999
______________________________________ Director
Martha Dugan RehmJeffrey W. Jones
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
GILLETT BROADCASTING,March, 2004.
COMPLETE TELECOMMUNICATIONS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief FinancialJeffrey W. Jones
----------------------------------------
Name: Jeffrey W. Jones
Title: Principal Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ James P. Donohue Chairman of the Board, September 7, 1999
______________________________________Senior Vice President March 25, 2004
- --------------------------------------- and Director
James P. Donohue
/s/ Jeffrey W. Jones Principal Accounting Officer March 25, 2004
- ---------------------------------------
Jeffrey W. Jones
/s/ R. Keith Gwinn President and Director Andrew P. Daly (Principal Executive
Officer)March 25, 2004
- ---------------------------------------
R. Keith Gwinn
/s/ James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
* SeniorNanci N. Northway Vice President and September 7, 1999
______________________________________ Director Martha Dugan RehmMarch 25, 2004
- ---------------------------------------
Nanci N. Northway
/s/ John Uhley Director March 25, 2004
- ---------------------------------------
John Uhley
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.March, 2004.
GILLETT BROADCASTING, OF MARYLAND, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
--------------------------------------------------
Name: Jeffrey W. Jones
Title: Chief Financial Officer and Senior Vice
President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board, September 7, 1999
______________________________________ President and Director Andrew P. Daly (Principal Executive
Officer)March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ James P. DonohueJeffrey W. Jones Chief Financial Officer, September 7, 1999
______________________________________Senior Vice March 25, 2004
- --------------------------------------- President and Director
(Principal
James P. Donohue Accounting Officer)
*Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
GILLETT GROUP MANAGEMENT, INC.March, 2004.
GRAND TETON LODGE COMPANY
By: /s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Chief FinancialJeffrey W. Jones
-------------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board September 7, 1999
______________________________________ President and Director Andrew P. Daly (Principal Executive
Officer)March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ James P. Donohue Chief FinancialJeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer September 7, 1999
______________________________________ and Director
(Principal
James P. Donohue Accounting Officer)
*Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
KEYSTONE CONFERENCE SERVICES,March, 2004.
HEAVENLY VALLEY, LIMITED PARTNERSHIP
BY: VR HEAVENLY I, INC., GENERAL PARTNER
By: /s/ James P. Donohue
By:
----------------------------------
James P. DonohueJeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, September 7, 1999
______________________________________/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Andrew P. Daly (Principal Executive
Officer)Jeffrey W. Jones
/s/ James P. DonohueMartha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Senior Vice President and September 7, 1999
______________________________________ Director
John W. Rutter
*By:
/s/March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
KEYSTONE DEVELOPMENT SALES,March, 2004.
JACKSON HOLE GOLF AND TENNIS CLUB, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board and September 7, 1999
______________________________________ Director (PrincipalMarch 25, 2004
- ---------------------------------------
Adam M. Aron
Executive Officer)
*/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. Donohue Senior Vice President September 7, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
* Senior Vice President September 7, 1999
______________________________________
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
James P. Thompson
* Director September 7, 1999
______________________________________
John W. Rutter
*By:
/s/March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
KEYSTONE FOOD & BEVERAGE COMPANYMarch, 2004.
JHL&S, LLC.
By: /s/ James P. Donohue
By:
----------------------------------
James P. Donohue
Senior Vice PresidentJeffrey W. Jones
---------------------------------------------
Name: Jeffrey W. Jones
Title: Chief Financial Officer and Chief
Accounting Officer for SEC purposes
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, September 7, 1999
______________________________________ President/s/ Edward E. Mace Manager March 25, 2004
- ---------------------------------------
Edward E. Mace
/s/ Clayton James Manager March 24, 2004
- ---------------------------------------
Clayton James
/s/ Anton Piringer Manager March 23, 2004
- ---------------------------------------
Anton Piringer
/s/ Joseph Byron Manager March 22, 2004
- ---------------------------------------
Joseph Byron
/s/ Jerry Johnson Manager March 25, 2004
- ---------------------------------------
Jerry Johnson
Chief Financial Officer and Director
JohnChief Accounting March 25, 2004
/s/ Jeffrey W. Rutter (Principal Executive
Officer)
/s/ James P. DonohueJones Officer for SEC purposes
- ---------------------------------------
Jeffrey W. Jones
Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Directorfor SEC purposes March 25, 2004
/s/ Martha Dugan Rehm
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.March, 2004.
KEYSTONE RESORT PROPERTY MANAGEMENT,CONFERENCE SERVICES, INC.
By: /s/ James P. Donohue
By:
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board and September 7, 1999
______________________________________ Director (PrincipalMarch 25, 2004
- ---------------------------------------
Adam M. Aron
Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. DonohueJeffrey W. Jones Senior Vice President, September 7, 1999
______________________________________ (Principal FinancialPrincipal Accounting March 25, 2004
- --------------------------------------- Officer and James P. Donohue Accounting Officer)
*Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director John W. Rutter
* Director September 7, 1999
______________________________________
James P. Thompson
*By:
/s/March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
LODGE PROPERTIES,March, 2004.
KEYSTONE DEVELOPMENT SALES, INC.
By: /s/ James P. Donohue
By:
----------------------------------
James P. DonohueJeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board and September 7, 1999
______________________________________ Director (PrincipalMarch 25, 2004
- ---------------------------------------
Adam M. Aron
Executive Officer)
* President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/ James P. DonohueMartha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (PrincipalMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
/s/ James P. Donohue Financial and Accounting
Officer)
*Thompson Director March 25, 2004
- ---------------------------------------
James P. Thompson
/s/ Jeffrey W. Jones Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan RehmPrincipal March 25, 2004
- --------------------------------------- Accounting Officer
Jeffrey W. Jones
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
LODGE REALTY, INC.March, 2004.
KEYSTONE FOOD & BEVERAGE COMPANY
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Roger D. McCarthy Chairman of the Board, and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
* President and Director September 7, 1999
______________________________________
James P. ThompsonMarch 25, 2004
- ---------------------------------------
Roger D. McCarthy
/s/ James P. DonohueJeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
Victor Charles Viola
* Director September 7, 1999
______________________________________
Andrew P. Daly
*By:
/s/March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
PINEY RIVER RANCH, INC.March, 2004.
KEYSTONE RESORT PROPERTY MANAGEMENT Company
By: /s/ James P. Donohue
By:
----------------------------------
James P. DonohueJeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board September 7, 1999
______________________________________ President and Director Andrew P. Daly (Principal Executive
Officer)March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ James P. DonohueThompson Director March 25, 2004
- ---------------------------------------
James P. Thompson
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
James P. Thompson
*By:
/s/March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
PROPERTY MANAGEMENT ACQUISITION
CORP.,March, 2004.
LODGE PROPERTIES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board, President and September 7, 1999
______________________________________ Director (Principal
Andrew P. Daly Executive Officer)
*March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ Jeffrey W. Jones Senior Vice President, September 7, 1999
______________________________________
William A. JensenPrincipal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ James P. DonohueMartha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL/ARROWHEAD,March, 2004.
LODGE REALTY, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board and September 7, 1999
______________________________________ Director (PrincipalMarch 25, 2004
- ---------------------------------------
Adam M. Aron
Executive Officer)
* President and Director September 7, 1999
______________________________________March 25, 2004
/s/ James P. Thompson
/s/- ---------------------------------------
James P. DonohueThompson
Senior Vice President, Principal Accounting March 25, 2004
/s/ Jeffrey W. Jones Officer and Director
- ---------------------------------------
Jeffrey W. Jones
Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
/s/ Martha Dugan Rehm
* Director September 7, 1999
______________________________________
Andrew P. Daly
*By:
/s/- ---------------------------------------
Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL ASSOCIATES CONSULTANTS,March, 2004.
PROPERTY MANAGEMENT ACQUISITION
CORP., INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board September 7, 1999
______________________________________ President and Director Andrew P. Daly (Principal Executive
Officer)March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ James P. DonohueJeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL ASSOCIATES HOLDINGS, LTD.March, 2004.
ROCKRESORTS CASA MADRONA, LLC
By: ROCKRESORTS INTERNATIONAL, LLC
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
*/s/ Martha Dugan Rehm Manager March 25, 2004
- ---------------------------------------
Rockresorts International, LLC
By: Martha Dugan Rehm
Senior Vice President
/s/ Edward E. Mace President and Director September 7, 1999
______________________________________
James P. ThompsonChief Executive Officer March 25, 2004
- ---------------------------------------
Edward E. Mace
/s/ James P. DonohueJeffrey W. Jones Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial andPrincipal March 25, 2004
- --------------------------------------- Accounting Officer)
*Officer
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
Andrew P. Daly
*By:
/s/March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL ASSOCIATES INVESTMENTS, INC.March, 2004.
ROCKRESORTS CHEECA, LLC
By: ROCKRESORTS INTERNATIONAL, LLC
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, September 7, 1999
______________________________________/s/ Martha Dugan Rehm Manager March 25, 2004
- ---------------------------------------
Rockresorts International, LLC
By: Martha Dugan Rehm
Senior Vice President
/s/ Edward E. Mace President and Director
Andrew P. Daly (PrincipalChief Executive Officer)Officer March 25, 2004
- ---------------------------------------
Edward E. Mace
/s/ James P. DonohueJeffrey W. Jones Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial andPrincipal March 25, 2004
- --------------------------------------- Accounting Officer)
*Officer
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director
James P. Thompson
* Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL ASSOCIATES MANAGEMENT COMPANYMarch, 2004.
ROCKRESORTS EQUINOX, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
------------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board/s/ Edward E. Mace President, Chief Executive Officer and September 7, 1999
______________________________________March 25, 2004
- --------------------------------------- Director
(Principal
Adam M. Aron Executive Officer)
* President andEdward E. Mace
/s/ Janice McGill Director September 7, 1999
______________________________________
James P. ThompsonMarch 25, 2004
- ---------------------------------------
Janice McGill
/s/ James P. DonohueJohn Alexopoulos Director March 25, 2004
- ---------------------------------------
John Alexopoulos
/s/ Jeffrey W. Jones Senior Vice President September 7, 1999
______________________________________ (Principal Financial and James P. DonohuePrincipal March 25, 2004
- --------------------------------------- Accounting Officer)
* Director September 7, 1999
______________________________________
Andrew P. DalyOfficer
Jeffrey W. Jones
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL ASSOCIATES REAL ESTATE, INC.March, 2004.
ROCKRESORTS INTERNATIONAL, LLC
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal/s/ Adam M. Aron Executive Officer)
* PresidentClass "A" Manager March 25, 2004
- ---------------------------------------
Adam M. Aron, Chairman
/s/ Martha Dugan Rehm Class "A" Manager and Director September 7, 1999
______________________________________
James P. Thompson
/s/ James P. Donohue Senior Vice President September 7, 1999
______________________________________ (Principal FinancialMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
/s/ Robert Katz Class "A" Manager March 25, 2004
- ---------------------------------------
Robert Katz
/s/ Jeffrey W. Jones Class "A" Manager, Senior Vice President and James P. DonohueMarch 25, 2004
- --------------------------------------- Principal Accounting Officer)
* Director September 7, 1999
______________________________________
Theodore E. Ryczek
* Director September 7, 1999
______________________________________
Andrew P. DalyOfficer
Jeffrey W. Jones
/s/ Edward Mace Class "A" Manager, Chief Executive Officer March 25, 2004
- --------------------------------------- and President
Edward Mace
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL/BATTLE MOUNTAIN, INC.March, 2004.
ROCKRESORTS, LLC
By: ROCKRESORTS INTERNATIONAL, LLC
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, September 7, 1999
______________________________________/s/ Martha Dugan Rehm Manager March 25, 2004
- ---------------------------------------
Rockresorts International, LLC
By: Martha Dugan Rehm
Senior Vice President
/s/ Edward E. Mace President and Director
Andrew P. Daly (PrincipalChief Executive Officer)Officer March 25, 2004
- ---------------------------------------
Edward E. Mace
/s/ James P. DonohueJeffrey W. Jones Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial andPrincipal March 25, 2004
- --------------------------------------- Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
James P. ThompsonOfficer
Jeffrey W. Jones
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September 1999.
VAIL/BEAVER CREEK RESORTPROPERTIES,
INC.March, 2004.
ROCKRESORTS LAPOSADA, LLC
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
*/s/ Martha Dugan Rehm Manager March 25, 2004
- ---------------------------------------
Rockresorts International, LLC
By: Martha Dugan Rehm
Senior Vice President
/s/ Edward E. Mace President and Director September 7, 1999
______________________________________
Andrew P. DalyChief Executive Officer March 25, 2004
- ---------------------------------------
Edward E. Mace
/s/ James P. DonohueJeffrey W. Jones Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James. P. Donohue Financial andPrincipal March 25, 2004
- --------------------------------------- Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan Rehm
* Director September 7, 1999
______________________________________
James P. ThompsonOfficer
Jeffrey W. Jones
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
THE VAIL CORPORATIONMarch, 2004.
ROCKRESORTS ROSARIO, LLC
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board/s/ Martha Dugan Rehm Manager March 25, 2004
- ---------------------------------------
Rockresorts International, LLC
By: Martha Dugan Rehm
Senior Vice President
/s/ Edward E. Mace President and September 7, 1999
______________________________________ Director
Adam M. Aron
* President, Chief Executive September 7, 1999
______________________________________ Officer and Director
Andrew P. DalyMarch 25, 2004
- ---------------------------------------
Edward E. Mace
/s/ James P. DonohueJeffrey W. Jones Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial andPrincipal March 25, 2004
- --------------------------------------- Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan RehmOfficer
Jeffrey W. Jones
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL FOOD SERVICES, INC.March, 2004.
ROCKRESORTS WYOMING, LLC
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
------------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board, September 7, 1999
______________________________________/s/ Martha Dugan Rehm Managing Member March 25, 2004
- ---------------------------------------
Rockresorts International, LLC
By: Martha Dugan Rehm
Senior Vice President
and Director
Paul A. Testwuide (Principal Executive
Officer)
/s/ James P. DonohueEdward E. Mace President March 22, 2004
- ---------------------------------------
Edward E. Mace
/s/ Jeffrey W. Jones Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial andPrincipal March 25, 2004
- --------------------------------------- Accounting Officer)
* Senior Vice President and September 7, 1999
______________________________________ Director
Martha Dugan RehmOfficer
Jeffrey W. Jones
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL HOLDINGS,March, 2004.
TETON HOSPITALITY SERVICES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. Donohue
Chief FinancialJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board September 7, 1999
______________________________________ Chief Executive Officerand Director March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
* President and Director September 7, 1999
______________________________________
Andrew P. DalyJeffrey W. Jones
/s/ James P. Donohue Chief Financial Officer September 7, 1999
______________________________________ and Director (Principal
James P. Donohue Accounting Officer)
*Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.March, 2004.
THE VAIL RESORTS DEVELOPMENT COMPANYCORPORATION
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board, Chief Executive March 25, 2004
- --------------------------------------- Officer, President and September 7, 1999
______________________________________ Director
Adam M. Aron
* Chief Executive/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer September 7, 1999
______________________________________and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and Director James P. Thompson
/s/ James P. Donohue Senior Vice President September 7, 1999
______________________________________ (Principal Financial and
James P. Donohue Accounting Officer)
* Director September 7, 1999
______________________________________
Andrew P. Daly
* Director September 7, 1999
______________________________________
Marc J. Rowan
* Director September 7, 1999
______________________________________
Robert A. Katz
* Director September 7, 1999
______________________________________
James S. Mandel
*By:
/s/March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
------------------------------
Attorney-in-Fact
II-32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
VAIL SUMMIT RESORTS,March, 2004.
THE VILLAGE AT BRECKENRIDGE ACQUISITION CORP., INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
*/s/ Roger McCarthy President and Director September 7, 1999
______________________________________
Andrew P. DalyMarch 25, 2004
- ---------------------------------------
Roger McCarthy
/s/ James P. DonohueJeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-33
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.March, 2004.
VAIL TRADEMARKS, INC.ASSOCIATES HOLDINGS, LTD.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
------------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board and September 7, 1999
______________________________________ Director (PrincipalMarch 25, 2004
- ---------------------------------------
Adam M. Aron
Executive Officer)
*/s/ James P. Thompson President and Director September 7, 1999
______________________________________
Andrew P. Daly
/s/March 25, 2004
- ---------------------------------------
James P. DonohueThompson
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director (Principal
James P. Donohue Financial and Accounting
Officer)
* Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
THE VILLAGE AT BRECKENRIDGE
ACQUISITION CORP.,March, 2004.
VAIL ASSOCIATES REAL ESTATE, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
*/s/ Adam M. Aron Chairman of the Board September 7, 1999
______________________________________and Director March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ James P. Thompson President and Director William A. Jensen (Principal Executive
Officer)
/s/March 25, 2004
- ---------------------------------------
James P. DonohueThompson
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and September 7, 1999
______________________________________ Director
(Principal
James P. Donohue Financial and Accounting
Officer)
*Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ DirectorMarch 25, 2004
- ---------------------------------------
Martha Dugan Rehm
*By:
/s/ Martha Dugan Rehm
-----------------------------
Attorney-in-Fact
II-35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
GRAND TETON LODGE COMPANYMarch, 2004.
VAIL FOOD SERVICES, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Adam M. AronWilliam Jensen Chairman of the Board, and September 7, 1999
______________________________________ Director (Principal
Adam M. Aron Executive Officer)
/s/ Andrew P. Daly President and Director September 7, 1999
______________________________________
Andrew P. DalyMarch 25, 2004
- ---------------------------------------
William Jensen
/s/ James P. DonohueJeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and September 7, 1999
______________________________________ Director
(Principal
James P. Donohue Financial and Accounting
Officer)Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and September 7, 1999
______________________________________ Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
II-36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the TownCity of Avon,New York, State of Colorado,New
York, on the 7th25th day of September, 1999.
LARKSPUR RESTAURANT & BAR, LLCMarch, 2004.
VAIL HOLDINGS, INC.
By: /s/ James P. Donohue
----------------------------------
James P. DonohueJeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Chief Financial Officer, Senior Vice
President and Principal Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm, and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Andrew P. DalyAdam M. Aron Chairman of the Board, Chief Executive March 25, 2004
- --------------------------------------- Officer, September 7, 1999
______________________________________ (Principal Executive
Andrew P. Daly Officer)
______________________________________ President and Member, September 7, 1999
Thomas Salamunovich Board of GovernorsDirector
Adam M. Aron
/s/ James P. DonohoeJeffrey W. Jones Senior Vice President, Chief Financial March 25, 2004
- --------------------------------------- Officer, September 7, 1999
______________________________________ (PrincipalPrincipal Accounting James P. Donohue Officer)Officer and
Jeffrey W. Jones Director
/s/ Martha Dugan Rehm Member,Senior Vice President and Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
II-37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
VAIL RESORTS DEVELOPMENT COMPANY
By: /s/ Jeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
/s/ Adam M. Aron Chairman of the Board and Director March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ James P. Thompson Chief Executive Officer, President and March 25, 2004
- --------------------------------------- Director
James P. Thompson
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Robert A. Katz Director March 25, 2004
- ---------------------------------------
Robert A. Katz
II-38
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
VAIL SUMMIT RESORTS, INC.
By: /s/ Jeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
/s/ Adam M. Aron Chairman of Governors September 7, 1999
______________________________________the Board and Director March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
II-39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
VAIL TRADEMARKS, INC.
By: /s/ Jeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
/s/ Adam M. Aron Chairman of the Board and Director March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
II-40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
VAIL/ARROWHEAD, INC.
By: /s/ Jeffrey W. Jones
----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
/s/ Adam M. Aron Chairman of the Board and Director March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ James P. Thompson President and Director March 25, 2004
- ---------------------------------------
James P. Thompson
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
II-41
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
VAIL/BEAVER CREEK RESORT PROPERTIES, INC.
By: /s/ Jeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
/s/ Adam M. Aron Chairman of the Board and Director March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
/s/ William Jensen Member,James P. Thompson Vice President and Director March 25, 2004
- ---------------------------------------
James P. Thompson
II-42
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
VAMHC, INC.
By: /s/ Jeffrey W. Jones
--------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
/s/ Adam M. Aron Chairman of the Board and Director March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ Jeffrey W. Jones Senior Vice President and Director March 25, 2004
- ---------------------------------------
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
II-43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
VAIL RR, INC.
By: /s/ Jeffrey W. Jones
------------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
/s/ Adam M. Aron Chairman of Governors September 7, 1999
______________________________________
William Jensenthe Board, President and Director March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ Eric Resnick Member,Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
II-44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
VA RANCHO MIRAGE I, INC.
By: /s/ Jeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date
/s/ Adam M. Aron Chairman of the Board and President March 25, 2004
- ---------------------------------------
Adam M. Aron
/s/ Jeffrey W. Jones Senior Vice President, Principal Accounting March 25, 2004
- --------------------------------------- Officer and Director
Jeffrey W. Jones
/s/ Martha Dugan Rehm Senior Vice President and Director March 25, 2004
- ---------------------------------------
Martha Dugan Rehm
II-45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 25th day of March, 2004.
VA RANCHO MIRAGE II, INC.
By: /s/ Jeffrey W. Jones
-----------------------------------------------
Name: Jeffrey W. Jones
Title: Senior Vice President and Principal
Accounting Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jeffrey W. Jones and Martha Dugan Rehm and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements 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 full power and authority to do and perform
each and every act and thing necessary or appropriate to be done with this
Registration Statement and any amendments or supplements hereto, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, 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 and on the dates indicated.
Signature Title Date