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Goal: Deal by year’s end

Ski area officials 'continue to work the marketplace'

— American Skiing Co. officials said Wednesday they might have already closed on the sale of the Steamboat Ski Area had it not been for the Sept. 11 terrorist attacks.

“We have signed a non-binding letter of intent to sell Steamboat,” American Skiing’s CEO B.J. Fair repeated. “We do not have a signed purchase and sale agreement and until we do, we think it’s premature to discuss the content of the non-binding letter.”

“And,” he added, “we continue to work the marketplace (in search of alternative buyers).”

Fair said the sale of Steamboat, which he describes as a critical piece of his company’s plan to get out from under $400 million in debt, was set back several weeks by the attacks. The impact on the sale process was of a macro nature, Fair said, imposing a chilling effect on everything from the capital markets to the financial world’s perspective on the entire leisure industry.

ASC officials still expect the sale to close by the end of the year. Tim and Diane Mueller, who own Okemo Mountain ski area in Vermont, have confirmed their desire to acquire Steamboat, but the Muellers stopped discussing their bid at the same time ASC announced it had a signed letter of intent.

The Muellers are also among the original investors in Catamount Ranch & Club, a golf/real estate development south of Steamboat.

Fair made his remarks during a conference call timed with the company’s release of its fourth quarter earnings report in which it reported steep losses. ASC Chief Financial Officer Mark Miller said a large share of the losses is attributable to one-time events or “non-recurring items.”

Included among the non-recurring items is a $52 million write-down on the anticipated sale of Steamboat and another $15.1 million attributed to the completed sale of the Sugarbush ski area in Vermont.

Take away those non-recurring items and the company had the lowest fourth-quarter loss in its history, Miller said.

During fiscal 2001, which ended in July, ASC reported losses of $141.6 million, or $4.64 per diluted share against total revenues of $425.6 million. That compares to fiscal 2000 losses of $52.5 million, or $1.73 per share. Revenues in fiscal 2000 totaled $424.1 million.

The write down ASC is taking against the sale of Steamboat is essentially a non-cash accounting write-off against taxable income. But it could also be taken as an indication that ASC does not expect to net as much for Steamboat as the company originally paid for it. Miller said the book value of Steamboat includes $60 million in goodwill and intangibles.

American Skiing purchased Steamboat together with Heavenly, Calif., and a golf course in Orlando, Fla., from Kamori Kanko Ltd. on Nov. 12, 1997. The entire transaction was valued at $300.5 million.

Fair said the fact that his company continues to explore options for other buyers, even as it continues final negotiations with the prospective buyer, should not be interpreted as a sign that ASC is dissatisfied with the agreed upon price. He added that the selling price is sufficient to meet ASC’s goals of ridding itself of some of its debt. In keeping with their unwillingness to discuss the provisions of the letter of intent, ASC executives would not discuss whether the Steamboat Grand Hotel is part of the deal.

ASC real estate chief Hernan Martinez said Wednesday he remains optimistic about future sales of quartershares at the Steamboat Grand. But that does not mean ASC expects to continue to own the hotel beyond the sale of the ski area, Fair said.

Martinez also confirmed that ASC is continuing work on the completion of penthouse units in the Steamboat Grand. Those units were not finished when the hotel opened in October 2000. The units will be completed in two phases, some of them ready for occupancy in December, the balance in January.

“That’s just good business practice,” Fair said of his company’s decision to move ahead with the construction project.

Miller acknowledged ASC has $5 million remaining in a $96 million letter of credit it uses to bridge the gap between the end of ski season and the beginning of the next ski season each year. Those numbers aren’t out of line with other Novembers, Miller said. But the company is relying on the beginning of ski season to provide a fresh infusion of operating cash.

“We have drawn most of our available credit line,” Miller said. “However, we expect to realize substantial cash flow in the next few weeks.”

Two of American Skiing’s resorts in New England, Killington, Vt., and Sunday River, Maine, have opened for the season. Steamboat is expected to make an announcement about whether it will open on time Nov. 21 by Friday.

Among its seven ski areas, Fair said, ASC’s reservations are down 8 percent overall. However, they are up 8 percent in the East and down 21 percent in the West.


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