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Section 1: 10-Q (10-Q)

20180131 10Q Q3 (16 UGT)



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2018.

OR

   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                   to                  .

Commission file number 001-35363

Peak Resorts, Inc.

(Exact name of registrant as specified in its charter)



 

 

Missouri

 

43-1793922

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)



 

 

17409 Hidden Valley Drive

 

63025

Wildwood, Missouri

 

(Zip Code)

(Address of principal executive offices)

 

 



(636) 938-7474
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer Accelerated filer

Non-accelerated filer    (Do not check if a smaller reporting company)

Emerging growth company Smaller reporting company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

As of March 5, 2018,  13,982,400 shares of the registrant’s common stock were outstanding.


 

TABLE OF CONTENTS

PART I FINANICAL INFORMATION



 

 

 

 



 

 

Page

 

Item 1.

Financial Statements

 

 

 



 

 

 

 



Condensed Consolidated Balance Sheets as of January 31, 2018 (unaudited) and April 30, 2017

 

3

 



 

 

 

 



Condensed Consolidated Statements of Operations for the Three and Nine Months Ended January 31, 2018 and 2017 (unaudited)

 

5

 



 

 

 

 



Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 31, 2018 and 2017 (unaudited)

 

6

 



 

 

 

 



Notes to Unaudited Condensed Consolidated Financial Statements

 

8

 



 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

 



 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

27

 



 

 

 

 

Item 4.

Controls and Procedures

 

27

 



 

 

 

 

Part II

OTHER INFORMATION

 

 

 



 

 

 

 

Item 1.

Legal Proceedings

 

28

 



 

 

 

 

Item 1A.

Risk Factors

 

28

 



 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

28

 



 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

28

 



 

 

 

 

Item 4.

Mine Safety Disclosures

 

28

 



 

 

 

 

Item 5.

Other Information

 

28

 



 

 

 

 

Item 6.

Exhibits

 

28

 



 

 

 

 

SIGNATURES

 

29

 



 

 

 

EXHIBIT INDEX

 

30

 





 

 

 


 





PART I:  FINANCIAL INFORMATION



Item 1.    Financial Statements

Peak Resorts Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)



 

 

 

 

 

 

 



 

 

January 31,

 

 

April 30,

 



 

 

2018

 

 

2017

 

Assets

 

 

(Unaudited)

 

 

 

 



 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

19,086 

 

$

33,665 

 

Restricted cash

 

 

1,338 

 

 

11,113 

 

Accounts receivable

 

 

5,967 

 

 

5,083 

 

Inventory

 

 

3,396 

 

 

2,215 

 

Deferred income taxes

 

 

911 

 

 

591 

 

Prepaid expenses and deposits

 

 

10,273 

 

 

2,183 

 

Total current assets

 

 

40,971 

 

 

54,850 

 



 

 

 

 

 

 

 

Property and equipment, net

 

 

203,044 

 

 

188,143 

 

Land held for development

 

 

37,607 

 

 

37,583 

 

Restricted cash, construction

 

 

17,459 

 

 

33,700 

 

Goodwill

 

 

4,825 

 

 

4,825 

 

Intangible assets, net

 

 

745 

 

 

788 

 

Other assets

 

 

675 

 

 

648 

 

Total assets

 

$

305,326 

 

$

320,537 

 



 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 



 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Revolving lines of credit

 

$

12,375 

 

$

4,500 

 

Accounts payable and accrued expenses

 

 

17,751 

 

 

12,371 

 

Accrued salaries, wages and related taxes and benefits

 

 

2,460 

 

 

1,035 

 

Unearned revenue

 

 

18,990 

 

 

14,092 

 

EB-5 investor funds in escrow

 

 

 -

 

 

500 

 

Current portion of deferred gain on sale/leaseback

 

 

333 

 

 

333 

 

Current portion of long-term debt and capitalized lease obligation

 

 

2,405 

 

 

3,592 

 

Total current liabilities

 

 

54,314 

 

 

36,423 

 



 

 

 

 

 

 

 

Long-term debt

 

 

165,044 

 

 

174,785 

 

Capitalized lease obligations

 

 

1,637 

 

 

2,708 

 

Deferred gain on sale/leaseback

 

 

2,595 

 

 

2,845 

 

Deferred income taxes

 

 

2,347 

 

 

12,474 

 

Other liabilities

 

 

513 

 

 

540 

 

Total liabilities

 

 

226,450 

 

 

229,775 

 



 

 

 

 

 

 

 

Series A preferred stock, $0.01 par value per share, $1,000 liquidation

 

 

 

 

 

 

 

preference per share, 40,000 shares authorized, 20,000 shares

 

 

 

 

 

 

 

issued and outstanding

 

 

17,401 

 

 

17,001 

 

3


 



 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 



 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Common stock, $0.01 par value per share, 20,000,000 shares

 

 

 

 

 

 

 

authorized, 13,982,400 shares issued and outstanding

 

 

140 

 

 

140 

 

Additional paid-in capital

 

 

86,577 

 

 

86,372 

 

Accumulated deficit

 

 

(25,242)

 

 

(12,751)

 

Total stockholders' equity

 

 

61,475 

 

 

73,761 

 

Total liabilities and stockholders' equity

 

$

305,326 

 

$

320,537 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

Peak Resorts, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations 

(dollars in thousands, except per share amounts)

(Unaudited)



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 



 

 

Three months ended
January 31,

 

 

Nine months ended
January 31,



 

 

2018

 

 

2017

 

 

2018

 

 

2017



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

59,272 

 

$

56,385 

 

$

75,630 

 

$

71,986 



 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Resort operating costs

 

 

35,982 

 

 

33,669 

 

 

64,642 

 

 

58,448 

Depreciation and amortization

 

 

3,379 

 

 

3,209 

 

 

9,678 

 

 

9,642 

General and administrative

 

 

1,353 

 

 

1,793 

 

 

4,130 

 

 

4,682 

Real estate and other non-income taxes

 

 

579 

 

 

654 

 

 

1,734 

 

 

1,754 

Land and building rent

 

 

362 

 

 

345 

 

 

1,054 

 

 

998 

Impairment loss

 

 

1,586 

 

 

 -

 

 

1,586 

 

 

 -



 

 

43,241 

 

 

39,670 

 

 

82,824 

 

 

75,524 

Income (loss) from operations

 

 

16,031 

 

 

16,715 

 

 

(7,194)

 

 

(3,538)



 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest, net of amounts capitalized of

 

 

 

 

 

 

 

 

 

 

 

 

$206 and $1,151 in 2018 and $411 and

 

 

 

 

 

 

 

 

 

 

 

 

$1,194 in 2017, respectively

 

 

(3,529)

 

 

(3,289)

 

 

(9,736)

 

 

(9,493)

Gain on sale/leaseback

 

 

84 

 

 

84 

 

 

250 

 

 

250 

Other income

 

 

28 

 

 

 

 

117 

 

 



 

 

(3,417)

 

 

(3,204)

 

 

(9,369)

 

 

(9,239)



 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

12,614 

 

 

13,511 

 

 

(16,563)

 

 

(12,777)

Income tax expense (benefit)

 

 

3,433 

 

 

5,346 

 

 

(8,235)

 

 

(5,056)

Net income (loss)

 

$

9,181 

 

$

8,165 

 

$

(8,328)

 

$

(7,721)



 

 

 

 

 

 

 

 

 

 

 

 

Less declaration and accretion of Series A preferred

 

 

 

 

 

 

 

 

 

 

 

 

stock dividends

 

 

(400)

 

 

 -

 

 

(1,200)

 

 

 -

Net income (loss) attributable to common shareholders

 

$

8,781 

 

$

8,165 

 

$

(9,528)

 

$

(7,721)



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

 

$

0.62 

 

$

0.58 

 

$

(0.68)

 

$

(0.55)



 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share

 

$

0.53 

 

$

0.47 

 

$

(0.68)

 

$

(0.55)



 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.07 

 

$

 -

 

$

0.21 

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per preferred share

 

$

20.00 

 

$

 -

 

$

40.00 

 

$

 -



See accompanying notes to unaudited condensed consolidated financial statements.



5


 



Peak Resorts, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)



 

 

 

 

 

 



 

Nine months ended January 31,



 

 

 

 

 

 



 

2018

 

2017

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(8,328)

 

$

(7,721)

Adjustments to reconcile net loss to net cash

 

 

 

 

 

 

used in operating activities:

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

 

 

 

 

and intangibles

 

 

9,678 

 

 

9,642 

Non-cash impairment loss

 

 

1,586 

 

 

 -

Amortization of deferred financing costs

 

 

754 

 

 

710 

Stock based compensation

 

 

205 

 

 

148 

Amortization of other liabilities

 

 

(27)

 

 

(27)

Gain on sale/leaseback

 

 

(250)

 

 

(250)

Deferred income tax

 

 

(10,447)

 

 

 -

Changes in operating assets and liabilities:

 

 

 

 

 

 

Income tax receivable

 

 

 -

 

 

(5,056)

Accounts receivable

 

 

(884)

 

 

1,469 

Inventory

 

 

(1,181)

 

 

(1,114)

Prepaid expenses and deposits

 

 

(8,090)

 

 

1,449 

Other assets

 

 

(27)

 

 

(22)

Accounts payable and accrued expenses

 

 

5,896 

 

 

(2,601)

Accrued salaries, wages and related taxes and benefits

 

 

1,425 

 

 

1,695 

Unearned revenue

 

 

4,898 

 

 

3,813 

Net cash (used in) provided by operating activities

 

 

(4,792)

 

 

2,135 



 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Additions to property and equipment

 

 

(26,664)

 

 

(5,134)

Additions to land held for development

 

 

(24)

 

 

(27)

Change in restricted cash

 

 

26,016 

 

 

18,781 

Net cash (used in) provided by investing activities

 

 

(672)

 

 

13,620 



 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings on lines of credit

 

 

12,375 

 

 

10,000 

Borrowings on long-term debt and capital lease obligations

 

 

102 

 

 

51,615 

Payment on long-term debt and capital lease obligations

 

 

(13,217)

 

 

(12,558)

Payments on lines of credit

 

 

(4,500)

 

 

 -

Distributions to stockholders

 

 

(3,737)

 

 

 -

Payment of deferred financing costs

 

 

(138)

 

 

(4,473)

Release from EB-5 investor funds held in escrow

 

 

 -

 

 

(51,504)

Net proceeds from issuance of preferred stock and warrants

 

 

 -

 

 

19,650 

   Net cash (used in) provided by financing activities

 

 

(9,115)

 

 

12,730 



 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(14,579)

 

 

28,485 

Cash and cash equivalents, beginning of period

 

 

33,665 

 

 

5,396 

Cash and cash equivalents, end of period

 

$

19,086 

 

$

33,881 



 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid interest, including amounts prepaid

 

 

 

 

 

 

of $3,341 and $0, respectively

 

$

13,431 

 

$

6,789 



 

 

 

 

 

 

Supplemental disclosure of noncash investing

 

 

 

 

 

 

and financing activities:

 

 

 

 

 

 

Assets under construction included in accounts payable

 

$

 -

 

$

942 

Reclassification of EB-5 funds from escrow to long term debt

 

$

500 

 

$

 -

Accretive dividend - Series A preferred stock

 

$

400 

 

$

 -

                          

See accompanying notes to unaudited condensed consolidated financial statements. 

6


 

PEAK RESORTS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (dollars in thousands, except per share amounts)

(Unaudited)



Note 1. Basis of Presentation

Unaudited Interim Condensed Consolidated Financial Statements



The unaudited interim condensed consolidated financial statements of Peak Resorts, Inc. and its subsidiaries (the “Company”) reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of the Company’s management, necessary for a fair presentation of its financial position, results of operations and cash flows.  The results for the three and nine months ended January 31, 2018 are not necessarily indicative of the results expected for a full fiscal year. Due to the seasonality of the ski industry, the Company typically incurs significant operating losses during its first and second fiscal quarters. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2017, filed with the Securities and Exchange Commission. 

Nature of business

The Company is a leading owner and operator of high-quality, individually branded ski resorts in the United States and operates 14 ski resorts primarily located in the Northeast and Midwest, 13 of which are owned. The majority of the resorts are located within 100 miles of major metropolitan markets, including New York City, Boston, Philadelphia, Cleveland and St. Louis, enabling day and overnight drive accessibility. The Company’s resorts are comprised of nearly 1,859 acres of skiable terrain appropriate to a wide range of ages and abilities. The activities, services and amenities available at the Company’s resorts include skiing, snowboarding, terrain parks, tubing, dining, lodging, equipment rentals and sales, ski and snowboard instruction, zip lines, mountain coasters, mountain biking, hiking and other summer activities. The Company operates in a single business segment—ski resort operations.

Principles of Consolidation



The accompanying condensed consolidated financial statements include the accounts of Peak Resorts, Inc. and its wholly-owned subsidiaries.  All intercompany accounts and transactions have been eliminated in consolidation. 

Note 2. Recently Issued Accounting Standards

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, which provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards. As an emerging growth company, the Company may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.



In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “Simplifying the Measurement of Inventory,” which requires entities to measure inventory at "the lower of cost and net realizable value," simplifying the current guidance under which entities must measure inventory at the lower of cost or market. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of disposal. This ASU requires prospective adoption and will be applicable for the Company as of April 30, 2018. The Company does not expect the adoption of this ASU will have a material impact on its condensed consolidated financial statements.



In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred taxes,” which requires deferred tax assets and liabilities be classified as noncurrent on a classified balance sheet. This ASU may be adopted either prospectively or retrospectively, and will be applicable for the Company as of April 30, 2019, with early adoption permitted. The Company is currently evaluating which adoption method it will elect. As of January 31, 2018, the Company had deferred tax assets of $271 classified as current assets on its condensed consolidated balance sheet, which would be netted with long-term income tax liabilities under the new guidance.



In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize most leases on the balance sheet. This ASU requires modified retrospective adoption and will be applicable for the Company as of April 30, 2020, with early adoption permitted.  The Company is currently evaluating the impact the adoption of this ASU will have on its condensed consolidated financial statements, and expects a  significant impact to be the recognition of lease obligations and right of use assets for operating leases on its condensed consolidated balance sheet.



In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which was subsequently modified by other ASUs from 2015 through 2017. This ASU, as amended, provides new guidance for the recognition of revenue and provides for a five-step analysis of transactions to determine when and how revenue is recognized. This ASU establishes a core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  It also requires additional disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  This ASU may be adopted using either a full or modified retrospective approach and will be applicable for the Company as of April 30, 2020, with early adoption permitted.   The Company expects to adopt this ASU using the full retrospective approach and does not expect the adoption of this ASU will have a material impact on its condensed consolidated financial statements.



In March 2016, the FASB issued ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which provides new guidance related to accounting for share-based payments. This ASU requires entities to record the income tax effect of share-based payments when the awards vest or are settled, and clarifies the cash flow statement presentation of excess tax benefits and withholding tax payments. In addition, the ASU allows for a policy election to account for forfeitures either upon occurrence or by estimating forfeitures. This ASU requires prospective adoption and will be applicable for the Company as of April 30, 2019, with early adoption permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its condensed consolidated financial statements.



In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force),” which clarifies the requirements for the presentation of changes in restricted cash balances on the statement of cash flows. This ASU requires retrospective adoption and will be applicable for the Company as of May 1, 2019, with early adoption permitted.    The Company is currently evaluating the impact the adoption of this ASU will have on the Company’s presentation of its condensed consolidated statements of cash flows. 

   

In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350),” which simplifies the existing guidance for testing goodwill for impairment.  The new standard eliminates the current two-step approach used to test goodwill for impairment and requires an entity to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill. This standard will be applicable for the Company as of May 1, 2020, with early adoption permitted.  The Company does not expect the adoption of this ASU will have a material impact on its consolidated financial position, results of operations or cash flows.

Note 3. Income Taxes

Deferred income tax assets and liabilities are measured at enacted tax rates in the respective jurisdictions where the Company operates. In assessing the ability to realize deferred tax assets, the Company considers whether it is more likely than not that some portion or all deferred tax assets will not be realized, and a valuation allowance would be provided if necessary.

On December 22, 2017, the United States government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act made broad changes to the federal tax code which impacts the Company. The 2017 Tax Act included provisions that, among other things, provides for i) the reduction of the federal corporate tax rate, ii) the elimination of the corporate alternative minimum tax, iii) a new limitation on the deductibility of interest expense, iv) limitations on the ability to carry forward net operating losses generated after December 31, 2017, to 80 percent of taxable income, and v) bonus depreciation that allows for full expensing of qualified property.



Subsequent to the passage the 2017 Tax Act, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the impact of the 2017 Tax Act. SAB 118 provides for a measurement period, not to exceed one year from enactment of the 2017 Tax Act, for companies to complete accounting for the impact of the 2017 Tax Act under the FASB’s Accounting Standards Codification 740, “Income Taxes” (“ASC 740”). In accordance with SAB 118, a company must reflect the income tax effect of those aspects of the 2017 Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for income tax effects of the 2017 Tax Act is incomplete, but the company can determine a reasonable estimate, the company must record a provisional estimate in its financial statement. If a company cannot determine a provisional estimate, it should continue to apply ASC 740 on the basis of the provision of the tax laws that were in effect immediately before the enactment of the 2017 Tax Act.



As of January 31, 2018, the Company recorded, on a provisional basis, an income tax benefit of $8,235 for the nine months ended January 31, 2018, which includes a discrete net tax benefit of $124 for the impact of the 2017 Tax Act



As the Company is a calendar year taxpayer, it calculated the discrete tax benefit as of December 31, 2017 by re-measuring deferred tax assets and liabilities based on the rates at which they are expected to reverse. The computed benefit is considered provisional as the Company has not yet completed a cost segregation study related to certain fixed assets which were placed in service at its Mount Snow resort in November 2017. In addition, the provisional estimate is based on the Company’s current interpretation of the 2017 Tax Act and is subject to change as the Company receives additional information, clarifications and implementation guidance.



As a result of the federal tax rate change as of January 1, 2018, the Company’s income tax expense for the nine months ended January 31, 2018, reflects application of the expiring tax rates through December 31, 2017 and application of the new tax rates to periods after December 31, 2017. This resulted in effective tax rates of approximately 27.2% and 49.7% for the three and nine months ended January 31, 2018, respectively. The disproportionate appearance of the effective tax rate for the nine months ended January 31, 2018, is a result of combining the effect of i) applying the higher expiring tax rate to the Company’s pretax loss for the eight months ended December 31, 2017 and ii) applying the lower new tax rate to a relatively smaller pretax income for the one month ended January 31, 2018. As of January 1, 2018, the Company estimates its expected federal and state tax rate through the end of its fiscal year ending April 30, 2018, to be 27.4%.



The Company does not have any material uncertain tax positions.

Note 4. Fixed Assets

The composition of property and equipment is as follows:





 

 

 

 

 

 



 

January 31,
2018

 

April 30,
2017

Land and improvements

 

$

35,420 

 

$

35,609 

Buildings and improvements

 

 

85,727 

 

 

86,685 

Equipment, furniture and fixtures

 

 

196,770 

 

 

171,934 



 

 

317,917 

 

 

294,228 

Less: accumulated depreciation and amortization

 

 

114,873 

 

 

106,085 



 

$

203,044 

 

$

188,143 







Impairment Loss



During the three and nine months ended January 31, 2018, the Company incurred $1,586 of fixed asset impairment losses in connection with its decision to cease operation of a restaurant and certain hotel-like amenities at a condominium building adjacent to its Attitash ski resort. In connection with the Company’s 2007 acquisition of its Attitash ski resort, the Company acquired property and equipment constituting the commercial core of a condominium building located adjacent to the resort. Since this acquisition, the Company has i) provided management services to the condominium’s owners association under a management services agreement (the “Management Services Agreement”), ii) sponsored a rental management program whereby unoccupied condominium units may be rented as hotel rooms, and iii) operated a restaurant and other hotel-type amenities in the areas of the building which it owns. In December 2017, the Company determined it would not be able to renew the Management Services Agreement upon its expiration on April 30, 2018 and, as a result, decided it would terminate the rental management program and cease operation of the hotel-type amenities as of that date.



Note 5. Credit Facilities and Long‑term Debt

The composition of long-term debt is as follows:

 

 

 

 

 

 

 

 

 



 

January 31,
2018

 

April 30,
2017

 

 

 

Attitash/Mount Snow Debt; payable in monthly interest only payments at an increasing interest rate (11.26% at January 31, 2018 and April 30, 2017); remaining principal and interest due on December 1, 2034 

 

$

51,050 

 

$

51,050 

 

 

 

EPR Credit Facility Debt; payable in monthly interest only payments at an increasing interest rate (10.43% and 10.28% at January 31, 2018 and April 30, 2017, respectively); remaining principal and interest due on December 1, 2034

 

 

37,562 

 

 

37,562 

 

 

 

West Lake Water Project EB-5 Debt; payable in quarterly interest only payments of 1.0%; remaining principal and interest due on December 27, 2021

 

 

30,000 

 

 

30,000 

 

 

 

Carinthia Ski Lodge EB-5 Debt; payable in quarterly interest only payments of 1.0%; remaining principal and interest due on December 27, 2021

 

 

22,000 

 

 

21,500 

 

 

 

Hunter Mountain Debt; payable in monthly interest only payments at an increasing interest rate (8.14% at January 31, 2018 and April 30, 2017); remaining principal and interest due on January 5, 2036

 

 

21,000 

 

 

21,000 

 

 

 

Royal Banks of Missouri Debt; payable in monthly principal payments of $42 and interest payments at prime plus 1.0%  (5.0% at April 30, 2017) with an original maturity in January 2020; paid in full on October 27, 2017

 

 

 -

 

 

9,875 

 

 

 

Sycamore Lake (Alpine Valley) Debt; payable in monthly interest only payments at an increasing interest rate (10.72% at January 31, 2018 and April 30, 2017); remaining principal and interest due on December 1, 2034

 

 

4,550 

 

 

4,550 

 

 

 

Wildcat Mountain Debt; payable in monthly installments of $27, including interest at a rate of 4.00%; remaining principal and interest due on December 22, 2020 

 

 

3,280 

 

 

3,425 

 

 

 

Other debt

 

 

899 

 

 

2,870 

 

 

 

Unamortized debt issuance costs

 

 

(4,624)

 

 

(5,240)

 

 

 



 

 

165,717 

 

 

176,592 

 

 

 

Less: current maturities

 

 

673 

 

 

1,807 

 

 

 



 

$

165,044 

 

$

174,785 

 

 

 

As of January 31, 2018, the Company was in compliance with all debt covenants under its various credit facility and debt agreements.

Royal Banks of Missouri Credit Facilities

On October 27, 2017, the Company renewed and increased its existing credit facility with Royal Banks of Missouri (the “2017 Royal Banks Credit Facility”). The 2017 Royal Banks Credit Facility provides for a $10,000 working capital line of credit to be used for general business purposes and a $15,000 acquisition line of credit to be used i) to pay off $12,415 of principal and accrued interest outstanding under the previous credit agreement with Royal Banks of Missouri (the “Original Credit Facility”) and ii) for the acquisition of additional ski resort properties. On October 27, 2017, the Company used the borrowing capacity available under the acquisition line of credit to pay off the amount outstanding under the Original Credit Facility, including amounts outstanding under term loan described in the table above as Royal Banks of Missouri Debt. As of January 31, 2018,  $12,375 was outstanding under the 2017 Royal Banks Credit Facility and $12,625 was unused and available.

The term of the 2017 Royal Banks Credit Facility is 14 months with loans payable in monthly interest only installments charged at the bank’s prime rate plus 1.00% per annum, with any outstanding principal amounts due in December 2018. Beginning on January 31, 2018, the Company is required to fund a debt service account by depositing in three equal monthly installments an amount equal to the estimated annual interest due in connection with outstanding loans under the 2017 Royal Banks Credit Facility. The Company is required to maintain a minimum debt service coverage ratio (as defined in the credit agreement) of 1.25 to 1.00. In addition, were the Company’s fixed charge coverage ratio (as defined in the credit agreement) to fall below 1.50 to 1.00, the Company would be required to prefund certain other debt service payments, and should the ratio fall below 1.25 to 1.00, the Company would be prohibited from paying dividends. The 2017 Royal Banks Credit Facility is secured by the assets of the Company’s subsidiaries which operate its Hidden Valley, Paoli Peaks, Snow Creek, Crotched Mountain and Attitash resorts.

Note 6. Financial Instruments and Credit Risk

Financial Instruments



The Company’s financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and long-term debt.  For cash and cash equivalents, restricted cash, accounts receivable and accounts payable, the carrying amounts approximate fair value. The fair value of the Company’s long‑term debt is estimated based on quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same remaining maturities. The interest rates on the Company’s long‑term debt are estimated to be consistent with those currently available to the Company for borrowings with similar maturities and terms and, accordingly, their fair values are consistent with their carrying values.

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and restricted cash. The Company’s cash and cash equivalents and restricted cash are on deposit with financial institutions where such balances may, at times, be in excess of federally insured limits. The Company has not experienced any loss as a result of those deposits.

Note 7. Commitments and Contingencies

Loss contingencies

The Company is periodically involved in various claims and legal proceedings, many of which occur in the normal course of business. Management routinely assesses the likelihood of adverse judgments or outcomes, including consideration of its insurance coverage and, in the opinion of the Company’s management, the ultimate liabilities resulting from such claims and proceedings will not have a material adverse effect on its business, financial condition, results of operations or cash flows.



Leases

The Company leases certain land, land improvements, buildings and equipment under noncancelable operating leases. Certain of the leases contain escalation provisions based generally on changes in the consumer price index with maximum annual percentage increases capped at rates between 1.5% to 4.5%. Additionally, certain leases contain contingent rental provisions which are based on revenue. The Company paid no significant contingent rentals in the periods presented.

Restricted cash

The provisions of certain of the Company’s debt instruments require that the Company make and maintain deposits, to be held in escrow for the benefit of the lender, in an amount equal to the estimated minimum interest payment for the upcoming fiscal year.  When funded, these amounts are included in restricted cash on the condensed consolidated balance sheets.

Note 8. Stock-Based Compensation

Stock-based compensation expense was recognized in general and administrative expense in the accompanying consolidated condensed statements of operations for the three and nine months ended January 31, 2018 in the amounts of $48 and $205, respectively, and for the three and nine months ended January 31, 2017, in the amounts of $73 and $148, respectively.

Restricted Stock Units



Under the Company’s 2014 Equity Incentive Plan, the Company granted 47,566 restricted stock units (“RSUs”) during the nine months ended January 31, 2018, with a weighted-average grant date fair value per unit of $4.37; and granted 46,770 RSUs during the nine months ended January 31, 2017, with a weighted-average grant date fair value per unit of $4.74.  As of January 31, 2018,  144,056 RSUs were outstanding, of which 100,456 were vested.

Note 9. Earnings (Loss) Per Share

The computation of basic and diluted loss per share for the three and nine months ended January 31, 2018 and 2017 is as follows:





 

 

 

 

 

 

 

 

 

 

 

 



 

 

Three Months ended January 31,

 

 

Nine Months ended January 31,



 

2018

 

2017

 

2018

 

2017

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common

 

 

 

 

 

 

 

 

 

 

 

 

shareholders (numerator)

 

$

8,781 

 

$

8,165 

 

$

(9,528)

 

$

(7,721)



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

13,982,400 

 

 

13,982,400 

 

 

13,982,400 

 

 

13,982,400 

Vested restricted stock units

 

 

99,885 

 

 

34,503 

 

 

67,807 

 

 

30,947 

Basic average shares outstanding (denominator)

 

 

14,082,285 

 

 

14,016,903 

 

 

14,050,207 

 

 

14,013,347 



 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

 

$

0.62 

 

$

0.58 

 

$

(0.68)

 

$

(0.55)



 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

 

 

8,781 

 

 

8,165 

 

 

(9,528)

 

 

(7,721)

Effect of Series A preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

on numerator

 

 

400 

 

 

 -

 

 

 -

 

 

 -

Numerator for diluted earnings per share calculation

 

$

9,181 

 

$

8,165 

 

$

(9,528)

 

$

(7,721)



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Basic average shares outstanding

 

 

14,082,285 

 

 

14,016,903 

 

 

14,050,207 

 

 

14,013,347 

Dilutive effect of conversion of preferred stock

 

 

3,179,650 

 

 

3,145,089 

 

 

 -

 

 

 -

Dilutive effect of unvested restricted stock units

 

 

43,600 

 

 

60,951 

 

 

 -

 

 

 -

Diluted average shares outstanding (denominator)

 

 

17,305,535 

 

 

17,222,943 

 

 

14,050,207 

 

 

14,013,347 



 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share

 

$

0.53 

 

$

0.47 

 

$

(0.68)

 

$

(0.55)



 

 

 

 

 

 

 

 

 

 

 

 



The Company’s 43,600 and 60,951 outstanding unvested RSUs as of January 31, 2018 and 2017, respectively, have been excluded from the calculations of diluted earnings per share for the nine-month periods then ended because their impact would be anti-dilutive. In addition, the effect of the Company’s Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), issued in November 2016, has been excluded from the calculation of diluted earnings per share for the nine months ended January 31, 2018, because the impact would be antidilutive.

Note 10.  Distributions to Shareholders

Series A Preferred Stock



The terms of the Company’s Series A Preferred Stock provide that cumulative dividends accrue on a daily basis in arrears from August 2017 at the rate of 8.0% per annum on the liquidation value of $1,000 per share.  All accrued and accumulated dividends on the Series A Preferred Stock must be paid prior and in preference to any cash dividend on the Company’s common stock. In addition, until the earlier of i) such date as no Series A Preferred Stock remains outstanding or ii) January 1, 2027, the Company is prohibited from paying any dividend on common stock when there are accrued or unpaid dividends with respect to the Series A Preferred Stock.  On both October 4, 2017 and January 9, 2018, the Company’s board of directors approved a preferred stock cash dividend of $400  ($20.00 per share of Series A Preferred Stock).



Common Stock



During the nine months ended January 31, 2018, the Company paid common stock cash dividends of $2,937  ($0.07 per share of common stock on each of May 12, 2017, August 11, 2017 and November 10, 2017). On January 9, 2018,  the Company’s board of directors approved an additional quarterly cash dividend payment of $979  ($0.07 per share of common stock) payable in February 2018 which, as of January 31, 2018, is included in accounts payable and accrued expenses on the condensed consolidated balance sheets.









7


 

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q (the “Report”) and with the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017 filed with the Securities and Exchange Commission. In addition to historical financial information, the following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Unless the context suggests otherwise, references in this Report to the “Company”, “Peak”, “our”, “us”, or “we” refer to Peak Resorts, Inc. and its consolidated subsidiaries.



Forward-Looking Statements

Except for any historical information contained herein, the matters discussed in this Report contain certain “forward-looking statements'' within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management's Discussion and Analysis of Financial Condition and Results of Operations''.



These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,'' “will,'' “expect,'' “intend,'' “estimate,'' “anticipate,'' “believe,'' “continue'' or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this Report. Important factors that could cause actual results to differ materially from our expectations include, among others:



·

weather, including climate change;

·

seasonality;

·

availability of funds for capital expenditures and operations;

·

competition with other indoor and outdoor winter leisure activities and ski resorts;

·

the leases and permits for property underlying certain of our ski resorts;

·

ability to integrate new acquisitions;

·

environmental laws and regulations;

·

our dependence on key personnel;

·

the effect of declining revenues on margins;

·

the future development and continued success of our Mount Snow and Hunter Mountain ski resorts;

·

our reliance on information technology;

·

our current dependence on our primary lender and the lender's option to purchase certain of our ski resorts;

·

our dependence on a seasonal workforce;

·

our ability to avoid or recover from cyber and other security breaches and other disruptions; and

·

the securities market.

 

 

 

 



 

 

 

You should also refer to Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for a discussion of factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.



Company Overview



We are a leading owner and operator of high-quality, individually branded ski resorts in the U.S.  We currently operate 14 ski resorts primarily located in the Northeast and Midwest, 13 of which we own. The majority of our resorts are located within 100 miles of major metropolitan markets, including New York City, Boston, Philadelphia, Cleveland and St. Louis, enabling day and overnight drive accessibility. Our resorts are comprised of nearly 1,859 acres of skiable terrain that appeal to a wide range of ages and abilities. We offer a breadth of activities, services and amenities, including skiing, snowboarding, terrain parks, tubing, dining, lodging, equipment rentals and sales, ski and snowboard instruction and mountain biking and other summer activities. We believe that both the day and overnight drive segments of the ski industry are appealing given their stable revenue base, high margins and attractive risk-adjusted returns. We have successfully acquired and integrated 11 ski resorts since our incorporation in 1997, and we expect to continue executing this strategy. We and our subsidiaries operate in a single business segment—resort operations.

Business Overview

Capital Projects 

As part of our mission to build value by investing in our current properties through expansions, new products and amenities that will elevate our customers’ skiing and off-season experiences, during the first nine months of fiscal 2018 we continued to move forward with capital improvement projects at our Hunter Mountain, Hidden Valley and Mount Snow resorts.

·

At Hunter Mountain, we plan to increase the resort’s skiable acreage by approximately 25-30% and add a new detachable high-speed chair lift and parking area. We expect to complete the project in time for the 2018/2019 ski season.



·

At Hidden Valley, we plan to construct a zip tour which we anticipate will generate additional sales and diversify that resort’s revenue base.  We hope to complete the project for use beginning in the fall of 2018.



·

At Mount Snow, we completed construction on the West Lake Water project during November 2017, and immediately began using this new snowmaking infrastructure as we opened the resort for the 2017/2018 ski season. The West Lake Water project included i) construction of a new water storage reservoir for snowmaking with capacity of up to 120 million gallons, ii) three new pump houses, iii) installation of snowmaking pipelines, and iv) other related improvements.



·

At Mount Snow, we continued construction on the Carinthia Ski Lodge project. The Carinthia Ski Lodge project includes the construction of a new ski lodge at the ski areas Carinthia base - a three-story, 36,000-square foot skier service building which will include i) a restaurant, cafeteria and bars with seating for over 600 people, ii) retail facilities, and iii) a sales center for lift tickets and equipment rentals. We expect to complete the Carinthia Ski Lodge project prior to the 2018/2019 ski season.



Seasonality of Business

Our resort operations are seasonal in nature and revenue and profits from operations are substantially lower and have historically resulted in losses from late spring to late fall, which occur during our first and second fiscal quarters. Revenue and profits generated by our summer operations have historically not been sufficient to fully offset our operating expenses during the same timeframe. Therefore, our operating results for any interim period are not necessarily indicative of the results that may be achieved for any subsequent quarter or for a full year.

Recent Developments

2017 Tax Act



On December 22, 2017, the United States government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act made broad changes to the federal tax code which impacts us. The 2017 Tax Act included provisions that, among other things, provides for i) the reduction of the federal corporate tax rate, ii) the elimination of the corporate alternative minimum tax, iii) a new limitation on the deductibility of interest expense, iv) changes in the treatment of net operating losses after December 31, 2017, and v) bonus depreciation that allows for full expensing of qualified property.



Subsequent to the passage the 2017 Tax Act, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the impact of the 2017 Tax Act. SAB 118 provides for a measurement period, not to exceed one year from enactment of the 2017 Tax Act, for companies to complete accounting for the impact of the 2017 Tax Act under the Financial Standards Accounting Boards  Accounting Standards Codification 740, “Income Taxes” (“ASC 740”). In accordance with SAB 118, a company must reflect the income tax effect of those aspects of the 2017 Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for income effects of the 2017 Tax Act is incomplete, but the company can determine a reasonable estimate, the company must record a provisional estimate in its financial statement. If a company cannot determine a provisional estimate, it should continue to apply ASC 740 on the basis of the provision of the tax laws that were in effect immediately before the enactment of the 2017 Tax Act.



As of January 31, 2018, we have recorded, on a provisional basis, an income tax benefit of $8,235 for the nine months ended January 31, 2018, which includes a discrete net tax benefit of $124. 



As we are a calendar year taxpayer, we calculated the discrete tax benefit as of December 31, 2017 by re-measuring deferred tax assets and liabilities based on the rates at which they are expected to reverse. The computed benefit is considered provisional as we have not yet completed a cost segregation study related to certain fixed assets which were placed in service at our Mount Snow resort in November 2017. In addition, the provisional estimate is based on our current interpretation of the 2017 Tax Act and is subject to change as we receive additional information, clarifications and implementation guidance.



As of January 1, 2018, we estimate our expected tax rate through the end of our fiscal year ending April 30, 2018, to be 27.4%. The effective tax rate for the nine months ended January 31, 2018, differs from the expected tax rate due to the change in the 2017 Tax Act and the timing of the related income (loss) before income taxes.

Chief Financial Officer Succession Plan 

 

On August 16, 2017, the Company announced its succession plan for its former Chief Financial Officer, Stephen J. Mueller. Mr. Mueller stepped down from his position as the Company’s Chief Financial Officer and Secretary on October 3, 2017 and assumed a new role as Executive Vice President.  In connection with this transition, Christopher J. Bub became our Vice President, Chief Financial Officer and Secretary. Mr. Bub previously served as the Company’s Vice President and Chief Accounting Officer.



Royal Banks of Missouri Credit Facilities

On October 27, 2017, we renewed and increased our existing credit facility with Royal Banks of Missouri (the “2017 Royal Banks Credit Facility”). The 2017 Royal Banks Credit Facility provides for a $10 million working capital line of credit to be used for general business purposes and a $15 million acquisition line of credit to be used i) to pay off $12.4 million of principal and accrued interest outstanding under the previous credit agreement with Royal Banks of Missouri (the “Original Credit Facility”) and ii) for the acquisition of additional ski resort properties. On October 27, 2017, we used $12.4 million of the borrowing capacity available under the acquisition line of credit to pay off all outstanding amounts under the Original Credit Facility, including amounts outstanding under a term loan which bore interest at the prime rate plus 1.00% per annum with an original maturity date of January 26, 2020. As of January 31, 2018, approximately $12.4 million was outstanding under the 2017 Royal Banks Credit Facility.

The term of the 2017 Royal Banks Credit Facility is 14 months with loans payable in monthly interest only installments charged at the bank’s prime rate plus 1.00% per annum, with any outstanding principal amounts due at the end of the term. Beginning on January 31, 2018, we are required to fund a debt service account by depositing in three equal monthly installments an amount equal to the estimated annual interest due in connection with outstanding loans under the 2017 Royal Banks Credit Facility. We are required to maintain a minimum debt service coverage ratio (as defined in the credit agreement) of 1.25 to 1.00. In addition, were our fixed charge coverage ratio (as defined in the credit agreement) to fall below 1.50 to 1.00, we would be required to prefund certain other debt service payments, and should the ratio fall below 1.25 to 1.00, we would be prohibited from paying dividends. The 2017 Royal Banks Credit Facility is secured by the assets of our subsidiaries which operate our Hidden Valley, Paoli Peaks, Snow Creek, Crotched Mountain and Attitash resorts.

Impairment Loss



During the three and nine months ended January 31, 2018, we incurred approximately $1.6 million of fixed asset impairment losses in connection with our decision to cease operation of a restaurant and certain hotel-like amenities at a condominium building adjacent to our Attitash ski resort. In connection with our 2007 acquisition of the Attitash ski resort, we acquired property and equipment constituting the commercial core of a condominium building located adjacent to the resort. Since this acquisition, we have i) provided management services to the condominium’s owners association under a management services agreement (the “Management Services Agreement”), ii) sponsored a rental management program whereby unoccupied condominium units may be rented as hotel rooms and iii) operated a restaurant and other hotel-type amenities in the areas of the building which we own. In December 2017, we determined we would not be able to renew the Management Services Agreement upon its expiration on April 30, 2018 and, as a result, decided to terminate the rental management program and cease operation of the hotel-type amenities as of that date. 

Results of Operations



Three Months Ended January 31, 2018, Compared with the Three Months ended January 31, 2017



The following table presents our unaudited condensed consolidated statements of operations for the three months ended January 31, 2018 and 2017 (dollars in thousands):











 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



 

Three months ended
January 31,

 

 

 

 

 



 

2018

 

20171

 

$ change

 

% change



 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

  Lift and tubing tickets

 

$

31,398 

 

$

30,470 

 

$

928 

 

3.0% 

  Food and beverage

 

 

9,248 

 

 

8,946 

 

 

302 

 

3.4% 

  Equipment rental

 

 

6,264 

 

 

4,886 

 

 

1,378 

 

28.2% 

  Ski instruction

 

 

4,866 

 

 

4,683 

 

 

183 

 

3.9% 

  Hotel/lodging

 

 

2,782 

 

 

2,883 

 

 

(101)

 

-3.5%

  Retail

 

 

3,566 

 

 

3,314 

 

 

252 

 

7.6% 

  Other

 

 

1,148 

 

 

1,203 

 

 

(55)

 

-4.6%



 

 

59,272 

 

 

56,385 

 

 

2,887 

 

5.1% 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

Resort operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 Labor and labor related expenses

 

 

18,779 

 

 

18,202 

 

 

577 

 

3.2% 

 Retail and food and beverage cost of sales

 

 

5,271 

 

 

4,876 

 

 

395 

 

8.1% 

 Power and utilities

 

 

3,809 

 

 

3,736 

 

 

73 

 

2.0% 

 Other

 

 

8,123 

 

 

6,855 

 

 

1,268 

 

18.5% 



 

 

35,982 

 

 

33,669 

 

 

2,313 

 

6.9% 



 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,379 

 

 

3,209 

 

 

170 

 

5.3% 

General and administrative expenses

 

 

1,353 

 

 

1,793 

 

 

(440)

 

-24.5%

Real estate and other non-income taxes

 

 

579 

 

 

654 

 

 

(75)

 

-11.5%

Land and building rent

 

 

362 

 

 

345 

 

 

17 

 

4.9% 

Impairment loss

 

 

1,586 

 

 

 -

 

 

1,586 

 

100.0% 



 

 

43,241 

 

 

39,670 

 

 

3,571 

 

9.0% 

Income from operations

 

 

16,031 

 

 

16,715 

 

 

(684)

 

-4.1%



 

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

Interest, net of interest capitalized of $206 and $411 in 2018 and 2017, respectively

 

 

(3,529)

 

 

(3,289)

 

 

(240)

 

7.3% 

Gain on sale/leaseback

 

 

84 

 

 

84 

 

 

 -

 

0.0% 

Other income

 

 

28 

 

 

 

 

27 

 

> 100%



 

 

(3,417)

 

 

(3,204)

 

 

(213)

 

6.6% 



 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

12,614 

 

 

13,511 

 

 

(897)

 

-6.6%

Income tax expense

 

 

3,433 

 

 

5,346 

 

 

(1,913)