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Section 1: 10-Q (10-Q)

SKIS - 2019 20190131 10Q (17 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, 2019.

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 every Interactive Data File required to be submitted 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, a 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   Smaller reporting company

Emerging growth 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 11, 2019, 15,165,832 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, 2019 (unaudited) and April 30, 2018

 

3

 



 

 

 

 



Condensed Consolidated Statements of Operations for the Three and Nine Months Ended January 31, 2019 and 2018 (unaudited)

 

5

 



 

 

 

 



Condensed Consolidated Statements of Cash Flows for the Nine Months Ended January 31, 2019 and 2018 (unaudited)

 

6

 



 

 

 

 



Notes to Unaudited Condensed Consolidated Financial Statements

 

8

 



 

 

 

 

Item 2.

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

 

20

 



 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

33

 



 

 

 

 

Item 4.

Controls and Procedures

 

33

 



 

 

 

 

Part II

OTHER INFORMATION

 

 

 



 

 

 

 

Item 1.

Legal Proceedings

 

34

 



 

 

 

 

Item 1A.

Risk Factors

 

34

 



 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

38

 



 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

38

 



 

 

 

 

Item 4.

Mine Safety Disclosures

 

38

 



 

 

 

 

Item 5.

Other Information

 

38

 



 

 

 

 

Item 6.

Exhibits

 

39

 



 

 

 

 

SIGNATURES

 

40

 



 

 

 

EXHIBIT INDEX

 

41

 





 

 

 


 





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,

 

Assets

 

 

2019

 

 

2018

 



 

 

(Unaudited)

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

27,235 

 

$

23,091 

 

Restricted cash

 

 

1,542 

 

 

1,163 

 

Income tax receivable

 

 

3,283 

 

 

 -

 

Accounts receivable

 

 

5,525 

 

 

8,560 

 

Inventory

 

 

4,713 

 

 

1,971 

 

Prepaid expenses and deposits

 

 

8,027 

 

 

12,731 

 

Total current assets

 

 

50,325 

 

 

47,516 

 



 

 

 

 

 

 

 

Property and equipment, net

 

 

293,209 

 

 

204,095 

 

Land held for development

 

 

38,652 

 

 

37,634 

 

Restricted cash, construction

 

 

 -

 

 

12,175 

 

Goodwill

 

 

16,659 

 

 

4,382 

 

Intangible assets, net

 

 

3,163 

 

 

731 

 

Other assets

 

 

1,601 

 

 

1,797 

 

Total assets

 

$

403,609 

 

$

308,330 

 



 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 



 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Revolving lines of credit

 

$

12,415 

 

$

12,415 

 

Current maturities of long-term debt

 

 

2,145 

 

 

2,614 

 

Accounts payable and accrued expenses

 

 

19,884 

 

 

12,079 

 

Accrued salaries, wages and related taxes and benefits

 

 

4,879 

 

 

922 

 

Unearned revenue

 

 

28,641 

 

 

16,084 

 

Current portion of deferred gain on sale/leaseback

 

 

333 

 

 

333 

 

Total current liabilities

 

 

68,297 

 

 

44,447 

 



 

 

 

 

 

 

 

Long-term debt, including related party

 

 

 

 

 

 

 

debt of $50,068 and $0, less current maturities

 

 

216,033 

 

 

165,837 

 

Deferred gain on sale/leaseback

 

 

2,262 

 

 

2,512 

 

Deferred income taxes

 

 

16,296 

 

 

7,809 

 

Other liabilities

 

 

852 

 

 

504 

 

Total liabilities

 

 

303,740 

 

 

221,109 

 



 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

preference per share, 40,000 shares authorized,

 

 

 

 

 

 

 

40,000 and 20,000 shares  issued and outstanding

 

 

33,918 

 

 

17,401 

 



 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

3


 



 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Common stock, $0.01 par value per share, 40,000,000 shares

 

 

 

 

 

 

 

authorized, 15,165,832  and 13,982,400 shares issued

 

 

 

 

 

 

 

and outstanding

 

 

152 

 

 

140 

 

Additional paid-in capital

 

 

96,491 

 

 

86,631 

 

Accumulated deficit

 

 

(30,692)

 

 

(16,951)

 

Total stockholders' equity

 

 

65,951 

 

 

69,820 

 

Total liabilities and stockholders' equity

 

$

403,609 

 

$

308,330 

 

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,



 

2019

 

 

2018

 

 

2019

 

 

2018



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Net revenue

$

83,977 

 

$

59,272 

 

$

98,968 

 

$

75,630 



 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Resort operating costs

 

49,049 

 

 

35,982 

 

 

77,038 

 

 

64,642 

Depreciation and amortization

 

6,809 

 

 

3,379 

 

 

13,541 

 

 

9,678 

General and administrative

 

3,322 

 

 

1,353 

 

 

6,481 

 

 

4,130 

Real estate and other non-income taxes

 

888 

 

 

579 

 

 

2,180 

 

 

1,734 

Land and building rent

 

352 

 

 

362 

 

 

1,024 

 

 

1,054 

Restructuring and impairment charges

 

 -

 

 

1,586 

 

 

190 

 

 

1,586 

Income (loss) from operations

 

23,557 

 

 

16,031 

 

 

(1,486)

 

 

(7,194)



 

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

Interest, net of amounts capitalized of

 

 

 

 

 

 

 

 

 

 

 

$18 and $516 in 2019 and $206

 

 

 

 

 

 

 

 

 

 

 

and $1,151 in 2018, respectively

 

(4,458)

 

 

(3,529)

 

 

(11,283)

 

 

(9,736)

Gain on sale/leaseback

 

84 

 

 

84 

 

 

250 

 

 

250 

Other income

 

22 

 

 

28 

 

 

69 

 

 

117 



 

(4,352)

 

 

(3,417)

 

 

(10,964)

 

 

(9,369)



 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

19,205 

 

 

12,614 

 

 

(12,450)

 

 

(16,563)

Income tax expense (benefit)

 

5,574 

 

 

3,433 

 

 

(3,283)

 

 

(8,235)

Net income (loss)

$

13,631 

 

$

9,181 

 

$

(9,167)

 

$

(8,328)



 

 

 

 

 

 

 

 

 

 

 

Less declaration and accretion of Series A preferred

 

 

 

 

 

 

 

 

 

 

 

stock dividends

 

(720)

 

 

(400)

 

 

(1,520)

 

 

(1,200)

Net income (loss) attributable to common shareholders

$

12,911 

 

$

8,781 

 

$

(10,687)

 

$

(9,528)



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

0.86 

 

$

0.62 

 

$

(0.74)

 

$

(0.68)



 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share

$

0.66 

 

$

0.53 

 

$

(0.74)

 

$

(0.68)



 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

$

0.07 

 

$

0.07 

 

$

0.21 

 

$

0.21 



 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per preferred share

$

20.00 

 

$

20.00 

 

$

60.00 

 

$

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
October 31,



 

January 31,

 



 

2019

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

 

$

(9,167)

 

$

(8,328)

 

Adjustments to reconcile net loss to net cash

 

 

 

 

 

 

 

provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

 

 

 

 

 

and intangibles

 

 

13,541 

 

 

9,678 

 

Amortization of deferred financing costs

 

 

884 

 

 

754 

 

Loss on disposal of fixed assets

 

 

424 

 

 

 -

 

Stock based compensation

 

 

132 

 

 

205 

 

Amortization of original issue premium

 

 

(6)

 

 

 -

 

Amortization of other liabilities

 

 

(27)

 

 

(27)

 

Gain on sale/leaseback

 

 

(250)

 

 

(250)

 

Non-cash impairment loss

 

 

 -

 

 

1,586 

 

Deferred income tax

 

 

 -

 

 

(10,447)

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Income tax receivable

 

 

(3,283)

 

 

 -

 

Accounts receivable

 

 

3,550 

 

 

(884)

 

Inventory

 

 

(1,773)

 

 

(1,181)

 

Prepaid expenses and deposits

 

 

5,809 

 

 

(8,090)

 

Other assets

 

 

196 

 

 

(27)

 

Accounts payable and accrued expenses

 

 

2,763 

 

 

5,896 

 

Accrued salaries, wages and related taxes and benefits

 

 

3,298 

 

 

1,425 

 

Unearned revenue

 

 

7,058 

 

 

4,898 

 

Net cash provided by (used in) operating activities

 

 

23,149 

 

 

(4,792)

 



 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Business combination, net of cash acquired of $1,026 and $0

 

 

(65,667)

 

 

 -

 

Additions to property and equipment

 

 

(28,461)

 

 

(26,664)

 

Additions to land held for development

 

 

(18)

 

 

(24)

 

Net cash used in investing activities

 

 

(94,146)

 

 

(26,688)

 



 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Borrowings on long-term debt

 

 

50,174 

 

 

102 

 

Proceeds from issuance of preferred stock

 

 

16,197 

 

 

 -

 

Proceeds from issuance of stock warrants

 

 

3,730 

 

 

 -

 

Distributions to stockholders

 

 

(4,137)

 

 

(3,737)

 

Payments on long-term debt and capital lease obligations

 

 

(1,796)

 

 

(13,217)

 

Payment of deferred financing costs

 

 

(823)

 

 

(138)

 

Payments on lines of credit

 

 

 -

 

 

(4,500)

 

Borrowings on lines of credit

 

 

 -

 

 

12,375 

 

6


 

   Net cash provided by (used in) financing activities

 

 

63,345 

 

 

(9,115)

 



 

 

 

 

 

 

 

Net decrease in cash, cash equivalents

 

 

 

 

 

 

 

and restricted cash

 

 

(7,652)

 

 

(40,595)

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

36,429 

 

 

78,478 

 

Cash, cash equivalents, and restricted cash, end of period

 

$

28,777 

 

$

37,883 

 



 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

Cash paid interest, including amounts prepaid

 

 

 

 

 

 

 

of $3,392 and $3,341, respectively.

 

$

5,402 

 

$

13,431 

 



 

 

 

 

 

 

 

Supplemental disclosure of noncash investing

 

 

 

 

 

 

 

and financing activities:

 

 

 

 

 

 

 

Capital lease agreements to acquire equipment

 

$

1,294 

 

$

 -

 

Assets under construction included in accounts payable

 

$

796 

 

$

 -

 

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

 

$

 -

 

$

500 

 

Accretive dividends - Series A preferred stock

 

$

320 

 

$

400 

 

Accrued dividends, common and preferred

 

$

1,379 

 

$

1,379 

 

                          

See accompanying notes to unaudited condensed consolidated financial statements.

 

7


 



PEAK RESORTS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)



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 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, 2019 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, 2018, 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 U.S. and, as of January 31, 2019, operated 17 ski resorts primarily located in the Northeast, Mid-Atlantic and Midwest United States, 16 of which are owned. The majority of the resorts are located within 100 miles of major metropolitan markets, including New York City, Boston, Philadelphia, Baltimore, Washington D.C., Cleveland and St. Louis, enabling day and overnight drive accessibility. The Company’s resorts are comprised of nearly 2,200 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. On November 21, 2018, the Company completed its acquisition of all of the issued and outstanding shares of common stock of Snow Time, Inc. (“Snow Time”) for consideration of cash and shares of the Company’s common stock. See Note 3 for a description of the consideration and acquisition terms. These financial statements reflect the activity of Snow Time for the period since its acquisition.

Dividends

The declaration and payment of future dividends to holders of the Company’s common stock will be at the sole discretion of the Company’s board of directors, and will depend on many factors, including the Company’s actual results of operations, financial condition, capital requirements, contractual restrictions, restrictions in the Company’s outstanding debt agreements, preference of the Company’s Series A Preferred Stock, economic conditions and other factors that could differ materially from the Company’s current expectations.



Cumulative dividends accrue on the outstanding shares of Series A Preferred Stock on a daily basis in arrears at the rate of 8% per annum on the liquidation value of $1,000 per share. All accrued and accumulated dividends on the Series A Preferred Stock shall be paid prior and in preference to any dividend or distribution on any junior securities, including the Company’s common stock, provided that the Company may declare or pay any dividend

8


 

or distribution payable on the common stock in shares of common stock.   The Certificate of Designation of the Series A Preferred Stock provides that, until the earlier of (i) such date as no Series A Preferred Stock remains outstanding and (ii) January 1, 2027, the Company is prohibited from paying any dividend on capital stock when there are accrued or unpaid dividends with respect to the Series A Preferred Stock.



Cash and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the condensed consolidated balance sheet to the total of the same such amounts shown in the consolidated statements of cash flow:





 

 

 

 

 

 



 

January 31,



 

2019

 

2018

Cash and cash equivalents

 

$

27,235 

 

$

19,086 

Restricted cash

 

 

1,542 

 

 

1,338 

Restricted cash, construction

 

 

 -

 

 

17,459 

  Total cash, cash equivalents, and restricted

 

 

 

 

 

 

     cash, end of period

 

$

28,777 

 

$

37,883 



D







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 February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 consolidated financial statements. While the Company expects the pattern of expense for leases it currently classifies as operating will be similar under the old and new guidance, it expects adoption of the new standard will result in a significant increase in assets and liabilities for right of use assets and lease obligations, respectively, for leases it currently classifies as operating. As of January 31, 2019, future minimum lease payments under operating leases was approximately $13,019.



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 modified retrospective approach and does not expect the adoption of this ASU will have a material impact on its consolidated financial statements.



9


 

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 consolidated financial statements. 

Note 3. The Snow Time Acquisition

On November 21, 2018, the Company completed its acquisition of all of the issued and outstanding shares of common stock of Snow Time pursuant to the Stock Purchase Agreement (the “Purchase Agreement”) entered into with the stockholders of Snow Time (the “Sellers”), dated as of September 24, 2018 (the  “Snow Time Acquisition). Consideration for the Snow Time Acquisition totaled $71,643, which consisted of $65,667 in cash, net of cash acquired of $1,026, and 1,183,432 shares of common stock with a value of $5,976 based on the Company’s closing stock price on the day the transaction closed. The number of shares issued to the Sellers was determined pursuant to the Purchase Agreement, which provided that the Sellers had the right to receive $6,000 of common stock as determined using the average closing price of the common stock for the 20 trading days immediately preceding the closing, which was $5.07. The Company acquired Snow Time in order to expand its portfolio of resorts. See Note 5 for a description of the financing for the Snow Time Acquisition.

Snow Time’s resort properties include Liberty Mountain Resort, Roundtop Mountain Resort and Whitetail Resort, which are day and overnight drive ski resorts located in southern Pennsylvania serving the Baltimore and Washington, D.C. metropolitan areas. The acquired resorts also include two 18-hole golf courses, a 115-room hotel and conference center and more than 20 food and beverage locations across the three resorts, among other amenities. Net revenue and earnings before income tax from the resorts acquired in the Snow Time Acquisition of $18,984 and $3,266, respectively, was included in the condensed consolidated statements of operations for three and nine months ended January 31, 2019.

Purchase price allocation

The following table summarizes the Company’s preliminary estimate of the fair value of the assets acquired and liabilities assumed in the Snow Time Acquisition as of November 21, 2018. The Company is in the process of completing various valuation studies which, when completed, may impact the estimated fair value of property and equipment, identifiable intangible assets, goodwill, unearned revenue, deferred taxes, and other assets and liabilities.





 

 

Tangible assets and liabilities:

 

 

Accounts receivable

$

515 

Inventories

 

969 

Property and equipment

 

72,670 

Land held for development

 

1,000 

Other current assets

 

1,105 

Accounts payable and accrued expenses

 

(4,473)

Accrued salaries, wages and related taxes and benefits

 

(659)

Unearned revenue

 

(5,499)

Deferred income taxes

 

(8,487)

Other long-term liabilities

 

(300)

Intangible assets:

 

 

Identifiable intangible asset

 

2,525 

Goodwill

 

12,277 

Total preliminary purchase price allocation

$

71,643 

Goodwill and Identifiable Intangible Assets

10


 

As of the date of these unaudited interim condensed consolidated financial statements, the Company has not completed certain valuation studies necessary to estimate the value of identifiable intangibles assets. Accordingly, the Company has established provisional values for the identifiable intangible assets which may be revised as the valuation studies are completed. The actual value of the identifiable intangible assets may differ from the provisional values, and the differences may be material. Identifiable intangible assets acquired include Snow Time’s customer relationships, trade names, liquor licenses, and water and land use agreements; and provisional values established for these items were $944,  $689,  $490 and $402, respectively. The liquor licenses and certain of the water rights agreements are considered indefinite lived intangible assets, and the provisional estimated useful lives of the customer lists, trade names and the remaining favorable agreements are 5 years, 15 years and 11 years, respectively. The Company expects the valuation studies will be completed during the fourth quarter of fiscal 2019.

Goodwill is calculated as the excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired. Based upon the preliminary estimated fair value of the net tangible assets acquired and the provisional values of the identifiable intangible assets acquired, the goodwill recognized in the Snow Time Acquisition was $12,131, and represents the value of the assembled workforce, the additional value to the Company expected to be derived from synergies in combining the business and other intangible benefits. Approximately $646 of the goodwill is expected to be deductible for income tax purposes. 

The Following is a summary of the Company’s finite-lived and indefinite-lived intangible assets and goodwill as of January 31, 2019 and April 30, 2018.

 





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



January 31, 2019

 

 

April 30, 2018



 

Gross carrying amount

 

 

Accumulated amortization

 

 

Net book value

 

 

Gross carrying amount

 

 

Accumulated amortization

 

 

Net book value



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade name

$

1,457 

 

$

166 

 

$

1,291 

 

$

768 

 

$

120 

 

$

648 

Customer relationships

 

1,041 

 

 

50 

 

 

991 

 

 

97 

 

 

14 

 

 

83 

Water rights agreements

 

132 

 

 

11 

 

 

121 

 

 

 -

 

 

 -

 

 

 -

Total finite

 

2,630 

 

 

227 

 

 

2,403 

 

 

865 

 

 

134 

 

 

731 

Liquor licenses

 

490 

 

 

 -

 

 

490 

 

 

 -

 

 

 -

 

 

 -

Water and land use agreements

 

270 

 

 

 -

 

 

270 

 

 

 -

 

 

 -

 

 

 -

Total indefinite

 

760 

 

 

 -

 

 

760 

 

 

 -

 

 

 -

 

 

 -



$

3,390 

 

$

227 

 

$

3,163 

 

$

865 

 

$

134 

 

$

731 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Nine months ended January 31, 2019

 

 

 

 

 

 

 

 

 



 

Beginning Balance

 

 

Additions

 

 

Ending Balance

 

 

 

 

 

 

 

 

 

Goodwill

$

4,825 

 

$

12,277 

 

$

17,102 

 

 

 

 

 

 

 

 

 

Accumulated impairment losses

 

(443)

 

 

 -

 

 

(443)

 

 

 

 

 

 

 

 

 



$

4,382 

 

$

12,277 

 

$

16,659 

 

 

 

 

 

 

 

 

 

Pro Forma Information

The following unaudited pro forma information presents the combined results of operations of Peak Resorts, Inc. and Snow Time for the three and nine months ended January 31, 2019 and 2018, as if the Snow Time Acquisition had been completed on May 1, 2017, with adjustments to give effect to pro forma events that are directly attributable to the Snow Time Acquisition. The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings which may result from the consolidation of the operations of the companies. Accordingly, these unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been

11


 

achieved had the acquisition occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations.

12


 

The following table summarizes the unaudited pro forma revenues and earnings of the combined companies:







 

 

 

 

 

 

 

 

 

 

 



Three months ended

 

Nine months ended



January 31,

 

January 31,



2019

 

2018

 

2019

 

2018

Net revenue

$

84,665 

 

$

83,607 

 

$

107,069 

 

$

107,414 

Income (loss) before income taxes

$

17,800 

 

$

19,876 

 

$

(24,633)

 

$

(18,685)

The pro forma net income was adjusted to give effect to pro forma events which are directly attributable to the Snow Time Acquisition. Adjustments to the pro forma net income for the three months ended January 31, 2019 included: i) the exclusion of $295 of acquisition-related costs incurred by Peak Resorts, Inc, ii) the addition of interest and financing cost amortization of $213 and iii) the reduction of $211 of net expense related to fair value adjustments to acquisition-date net assets acquired. Adjustments to the pro forma net income for the three months ended January 31, 2018 included the addition of interest and financing cost amortization of $971 and the reduction of $211 of net expense related to fair value adjustments to acquisition-date net assets acquired. Adjustments to the pro forma net income for the nine months ended January 31, 2019 included: i) the exclusion of $626 and $29 of acquisition-related costs incurred by Peak Resorts, Inc. and Snow Time, respectively, ii) the addition of interest and financing cost amortization of $2,171 and iii) the reduction of $349 of net expense related to fair value adjustments to acquisition-date net assets acquired. Adjustments to the pro forma net income for the nine months ended January 31, 2018 included the addition of interest and financing cost amortization of $2,913 and the reduction of $285 of net expense related to fair value adjustments to acquisition-date net assets acquired.

Transaction Costs

During the three and nine months ended January 31, 2019, the Company incurred $295 and $626, respectively, of acquisition related costs which have been included in general and administrative costs in the condensed consolidated statements of operations. 





Note 4. Income Taxes

The Company’s effective income tax rates were 29.1% and 26.4% for the three and nine months ended January 31, 2019, respectively. The 2019 effective rates give effect to the expected operating results of the resort properties acquired in the Snow Time Acquisition and the discrete tax effects of non-deductible costs incurred in connection with that acquisition. The November 2018 acquisition of the Snow Time resort properties will result in the inclusion of their operating results only for the ski season, the profitable period of their annual operations.

Income tax receivable of $3,283 as of January 31, 2019, is a result of the expected tax rate for the Company’s fiscal year ending April 30, 2019, applied to its loss before income tax for the nine months ended January 31, 2019. Due to the seasonality of the ski industry, the Company typically incurs significant operating losses during its first and second fiscal quarters.

The 2018 tax rates reflect the enactment of the Tax Cuts and Job Act of 2017, which made broad changes to the federal tax code, including permanent reduction of the U.S. corporate statutory rate from 35.0% to 21.0% as of January 1, 2018.   As the Company is a calendar year taxpayer, the income tax benefit for the nine months ended January 31, 2018 reflects the application of expiring tax rates through December 31, 2017 and the then newly enacted tax rates for the period after that date. This resulted in effective tax rates of 27.2% and 49.7% for the three and nine months ended January 31, 2018, respectively. The disproportionate appearance of the effective tax rate is a result of the seasonality of the Company’s earnings. In addition, the income tax benefit of $8,235 for the nine months ended January 31, 2018, included a discrete benefit of $124 resulting from re-measurement of deferred tax assets and liabilities as of December 31, 2017, based on the lower, newly enacted rates at which they were expected to reverse.

13


 

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.

In connection with the acquisition of Snow Time, the Company recognized $8,487 of deferred tax liabilities as a result of the difference in the tax basis and estimated fair values of the net assets acquired. The tax effect of significant temporary differences representing deferred tax assets and liabilities at January 31, 2019 and April 30, 2018, are as follows:







 

 

 

 

 

 



 

January 31,

 

April 30,



 

2019

 

2018

Deferred tax assets:

 

 

 

 

 

 

 Deferred gain on sale/leaseback

 

$

598 

 

$

598 

 Accrued compensation

 

 

226 

 

 

226 

 Unearned revenue

 

 

637 

 

 

637 

 Net operating loss carryforwards

 

 

7,028 

 

 

7,028 



 

 

8,489 

 

 

8,489 

 Valuation allowance

 

 

(350)

 

 

(350)



 

 

8,139 

 

 

8,139 

Deferred tax liabilities:

 

 

 

 

 

 

 Property and equipment

 

 

(23,621)

 

 

(15,948)

 Intangible assets

 

 

(587)

 

 

 -

 Prepaid expenses

 

 

(128)

 

 

 -

 Unearned revenue

 

 

(99)

 

 

 -



 

 

(24,435)

 

 

(15,948)



 

$

(16,296)

 

$

(7,809)



The Company does not have any material uncertain tax positions.





Note 5. Property and Equipment

The composition of property and equipment is as follows:













 

 

 

 

 

 



 

January 31,

 

April 30,



 

2019

 

2018

Land and improvements

 

$

70,488 

 

$

54,785 

Buildings and improvements

 

 

149,020 

 

 

75,321 

Equipment, furniture and fixtures

 

 

196,765 

 

 

175,532 

Construction in progress

 

 

8,692 

 

 

16,787 



 

 

424,965 

 

 

322,425 

Less: accumulated depreciation and amortization

 

 

131,756 

 

 

118,330 



 

$

293,209 

 

$

204,095 



Property and equipment balances as of January 31, 2019, reflect the preliminary estimate of the fair value of  property and equipment acquired from Snow Time.







14


 

Note 6. Credit Facilities, Long‑term Debt and Preferred Stock Issuance

The composition of long-term debt is as follows:



 

 

 

 

 



 

 

 

 

 



January 31,

 

April 30,



2019

 

2018

EPR Secured Notes due 2034

$

93,162 

 

$

93,162 

EPR Secured Notes due 2036

 

21,000 

 

 

21,000 

EB-5 Development Notes due 2021

 

52,000 

 

 

52,000 

Term Loan due 2020

 

50,068 

 

 

 -

Wildcat Mountain Note due 2020

 

3,081 

 

 

3,231 

Capital Leases

 

2,394 

 

 

2,426 

Other borrowings

 

964 

 

 

1,184 

Less: Unamortized debt issuance costs

 

(4,491)

 

 

(4,552)



 

218,178 

 

 

168,451 

Less: Current maturities

 

(2,145)

 

 

(2,614)



$

216,033 

 

$

165,837 

Term Loan due 2020



The Company financed part of the cash consideration paid in the Snow Time Acquisition with a $50,000 senior secured term loan (the “Term Loan”) from Cap 1 LLC (“Cap 1”) pursuant to the terms of the Credit Agreement entered into with Cap 1 on November 21, 2018 (the “Credit Agreement”). Amounts due under the Term Loan are referred to in the table above as the “Term Loan due 2020.”

The Term Loan has an initial term of two years and bears interest at 6.95%, payable quarterly, subject to a 2.0% increase upon an event of default. The Term Loan is secured by all real property on which the Snow Time resorts are located and improvements thereon.  Amounts due under the Term Loan may be prepaid without penalty.

The Term Loan matures on November 30, 2020 and may be extended for an additional one-year period at the Company’s option, so long as no event of default has occurred. If extended, the Company has agreed to issue Cap 1 a warrant to purchase 666,667 shares of common stock, exercisable immediately from the issuance date and for up to ten years from the date of issuance, at $7.50 per share (the “Extension Warrant”). The Extension Warrant was not issued upon closing the Term Loan and will only be issued if the Company exercises the one-year Term Loan extension right.

As consideration for the Term Loan and in lieu of fees, the Company also issued Cap 1 a warrant to purchase 1,750,000 shares of common stock at $10.00 per share, which is exercisable immediately and expires ten years from the date of issuance (the “Financing Warrant”).

During the three and nine months ended January 31, 2019, the Company paid Cap 1 $386 of interest related to the Term Loan. As of January 31, 2019, $290 of interest was accrued and payable to Cap 1 related to the Term loan.

Issuance of Preferred Stock and Option Warrants

As a condition to the funding of the Term Loan, and for aggregate consideration of $20,000, the Company exercised its existing option (the “Cap 1 Option”) to issue to Cap 1 an additional 20,000 shares of Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), along with additional warrants (the “Option Warrants”) to purchase shares of common stock  that expire 12 years from the date of issuance, as follows: i) 1,538,462 shares of common stock at $6.50 per share; ii) 625,000 shares of common stock at $8.00 per share; and iii) 555,556 shares of common stock at $9.00 per share.  The Cap 1 Option is provided for in the terms of the Securities Purchase Agreement between the Company and Cap 1, dated as of August 22, 2016, entered into

15


 

in connection with the issuance of the initial 20,000 shares of Series A Preferred Stock and accompanying warrants to Cap 1 in November 2016. The Company used the Cap 1 Option proceeds to fund the remainder of the cash portion of the Snow Time Acquisition purchase price.

The exercise prices of the Option Warrants must be paid in cash. At the Company’s option, the exercise price of the Financing Warrant may be paid in whole or in part in cash or settled through a cashless exercise. 

The rights and preferences of the Series A Preferred Stock include, among other things, the following:

Seniority. The Series A Preferred Stock generally rank, with respect to liquidation, dividends and redemption, i) senior to common stock and to any other junior capital stock; ii) on parity with any parity capital stock; iii) junior to any senior capital stock; and iv) junior to all of the Company’s existing and future indebtedness (as defined). Until the earlier of the date that no Series A Stock remains outstanding and January 1, 2027, the Company is prohibited from paying cash dividends on common stock if there are accrued and unpaid dividends with respect to the Series A Preferred Stock.

Dividend Rights.  From and after the date that is nine months from the date of issuance, cumulative dividends accrue on the Series A Preferred Stock on a daily basis in arrears at the rate of 8% per annum on the liquidation value of $1,000 per share.  All accrued and accumulated dividends on the Series A Preferred Stock shall be paid prior and in preference to any dividend or distribution on or redemption of any junior securities, provided that the Company may, prior to the payment of all accrued and accumulated dividends on the Series A Preferred Stock, i) declare or pay any dividend or distribution payable on the common stock in shares of common stock; or ii) repurchase common stock held by employees or consultants of the Company upon termination of their employment or services pursuant to agreements providing for such repurchase.  The Company may also redeem or repurchase junior securities at any time when there are no accrued or accumulated unpaid dividends on the Series A Preferred Stock.

Liquidation.  In the event of any liquidation (as defined), dissolution or winding up of the Company, the holders of Series A Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of junior securities, and subject to the rights of any parity or senior securities, an amount in cash equal to $1,000 per share plus all unpaid accrued and accumulated dividends.

Redemption. The Series A Preferred Stock is subject to redemption at the option of the Company at a price of $1,250 per share, plus all unpaid accrued and accumulated dividends, at any time on or after the third anniversary of the issuance of the Series A Preferred Stock that the average closing price of the Company’s common stock on the 30 trading days preceding notice of the exercise of the redemption right is greater than $8.18.

Conversion. Upon the earlier of a change of control or the nine-month anniversary of the date of issuance, the holders of the Series A Preferred Stock have the right to convert the Series A Preferred Stock into shares of common stock equal to the number of shares to be converted, times the liquidation value, divided by the conversion price and receive in cash all accrued and unpaid dividends. The initial conversion price per share is $6.29, subject to adjustment pursuant to the terms of the Certificate of Designation. Holders of the Series A Preferred Stock also have basic anti-dilution rights.

Voting Rights. Each holder of Series A Preferred Stock shall be entitled to vote, on an as-converted basis, with holders of outstanding shares of common stock, voting together as a single class, with respect to any and all matters presented to the stockholders of the Company.

The Company entered into a Registration Rights Agreement with Cap 1, dated November 21, 2018, granting certain registration rights with respect to the shares of common stock underlying the Series A Preferred Stock, Option Warrants and Financing Warrant. The terms and registration rights applicable to the Extension Warrant, if issued, are expected to be substantially the same as those applicable to the Financing Warrant.

16


 

Also on November 21, 2018, in connection with the closing of the Term Loan and the Snow Time Acquisition, the Company, Cap 1 and Timothy D. Boyd, Stephen J. Mueller and Richard K. Deutsch (the “Management Stockholders”) entered into the Amended and Restated Stockholders’ Agreement (the “Stockholders’ Agreement”) which added the new shares of Series A Preferred Stock, Option Warrants, Financing Warrant and Extension Warrant, and the shares of Common Stock underlying such securities, to the scope of Stockholders’ Agreement entered into by the parties in 2016. The Stockholders’ Agreement otherwise remains unchanged and  i) provides Cap 1 a right to nominate a director to sit on the Company’s board of directors so long as Cap 1 beneficially owns, on a fully diluted, as-converted basis, at least 20% of the outstanding equity securities of the Company, ii) restricts transfers of the Company’s securities by Cap 1 and the Management Stockholders, iii) provides Cap 1 with a right of first offer to purchase shares of the Company’s common stock from the Management Stockholders, iv) grants Cap 1 preemptive rights with respect to future issuances of securities, and v) requires Cap 1’s approval, so long as it meets certain ownership requirements (as defined), in order for the Company to a) materially change the nature of its business or b) acquire or dispose of any resorts, assets or properties for aggregate consideration equal to or greater than 30% of the enterprise value (as defined) of the Company and its subsidiaries.

Valuation of Term Loan, Preferred Stock and Stock Warrants



The Company accounts for stock warrants as either equity or liability awards based upon the characteristics and provisions of each instrument. Warrants classified as equity are recorded at fair value as of the date of issuance with no further adjustments to their valuations made. When multiple financial instruments are issued in conjunction with other financial instruments, the amounts recognized for each instrument is recorded based on the proceeds received allocated to each instrument based on its relative fair value. The aggregate $70,000 received as consideration for the Term Loan due 2020, the additional 20,000 shares of Series A Preferred Stock and the associated common stock warrants have been allocated in the amount of $50,073,  $16,197, and $3,730, respectively. The difference between the face amount of the Term Loan due 2020 and its fair value has been recorded as an original issue premium and will be amortized to interest expense over its term. No value has been assigned to the Extension Warrant as it was not issued.



Royal Banks of Missouri Credit Facility

In addition to the credit facilities listed above, the Company maintains a $10,000 working capital line of credit and a $15,000 acquisition line of credit with Royal Banks of Missouri pursuant to a credit agreement that was renewed by the Company and Royal Banks of Missouri on December 27, 2018 (the “Royal Banks Credit Facility”). The Royal Banks Credit Facility expires on December 27, 2019.

As of January 31, 2019, nothing was outstanding under the working capital line of credit and $12,415 was outstanding under the acquisition line of credit, and $10,000 and $2,585 was unused and available under the lines of credit, respectively.

As of January 31, 2019, the Company was in compliance will all debt covenants under its various credit facility and debt agreements.

Note 7. Concentrations of Credit Risk and Fair Value Measurements

Concentrations of Credit Risk

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

Fair Value of Measurements



17


 

The Company measures the fair value of assets and liabilities using a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1 - observable inputs such as quoted prices in active markets; Level 2 - inputs, other than quoted market prices in active markets, which are observable, either directly or indirectly; and Level 3 - valuations derived from valuation techniques in which one or more significant inputs are unobservable.  In addition, the Company may use various valuation techniques, including the market approach, using comparable market prices; the income approach, using present value of future income or cash flow; and the cost approach, using the replacement cost of assets.



The Company’s financial instruments consist of cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, long-term debt and preferred stock.  For cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair market value due to their short-term nature. 



The estimated fair values of the Company’s debt instruments and preferred stock as of January 31, 2019, is as follows:







 

 

 

 

 

 

 



January 31, 2019

 

 



Fair Value

 

Carrying Amount

 

Balance Sheet Classification

EPR Secured Notes due 2034

$

98,502 

 

$

93,162 

 

Long-term debt, less current maturities

EPR Secured Notes due 2036

 

16,982 

 

 

21,000 

 

Long-term debt, less current maturities

Term Loan due 2020

 

50,000 

 

 

50,068 

 

Long-term debt, less current maturities

EB-5 Development Notes due 2021

 

43,068 

 

 

52,000 

 

Long-term debt, less current maturities

Wildcat Mountain Note due 2020

 

2,976 

 

 

3,081 

 

Long-term debt, including current maturities

Capital leases and other borrowings

 

3,358 

 

 

3,358 

 

Long-term debt, including current maturities

Series A Preferred Stock

 

29,613 

 

 

33,918 

 

Series A preferred stock



The Company estimated the fair value of the EPR Secured Notes, Term Note due 2020, EB-5 Development Notes and Wildcat Mountain Note using a discounted cash flow approach and Level 2 inputs, including market borrowing yields for instruments of similar maturities and Level 3 inputs, including the Company’s credit rating. The Company estimated the fair value of the Series A Preferred Stock using Level 2 inputs, including market yields for similar instruments. The Company estimated the fair value of capital leases and other borrowings to approximate their carrying value.

Note 8. 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 contingent rentals in the periods presented.

18


 

Note 9. 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, 2019 in the amounts of $25 and $132, respectively; and for the three and nine months ended January 31, 2018 in the amounts of $48 and $205, respectively.

Restricted Stock Units



Under the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), the Company granted 36,195 restricted stock units (“RSUs”) during the nine months ended January 31, 2019, with a weighted-average grant date fair value per unit of $5.18; and granted 43,600 RSUs during the nine months ended January 31, 2018, with a weighted-average grant date fair value per unit of $4.30. The 2014 Plan requires that whenever the Company pays a cash dividend on its common shares it also pay an equivalent dividend in the form of RSUs on any RSUs outstanding as of the dividend date. During the nine months ended January 31, 2019 and 2018, the Company issued 6,672 RSUs and 4,644 RSUs, respectively, as payment of dividends on outstanding RSUs. As of January 31, 2019, 189,647 RSUs were outstanding, of which 152,958 were vested.

 





Note 10. Earnings (Loss) Per share

The computation of basic and diluted loss per share for the three and nine months ended January 31, 2019 and 2018 is as follows:







 

 

 

 

 

 

 

 

 

 

 



 

Three Months ended January 31,

 

 

Nine Months ended January 31,



2019

 

2018

 

2019

 

2018

Basic earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common

 

 

 

 

 

 

 

 

 

 

 

shareholders (numerator)

$

12,911 

 

$

8,781 

 

$

(10,687)

 

$

(9,528)



 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

14,908,564 

 

 

13,982,400 

 

 

14,291,121 

 

 

13,982,400 

Vested restricted stock units

 

152,706 

 

 

99,885 

 

 

126,035 

 

 

67,807 

Basic average shares outstanding (denominator)

 

15,061,270 

 

 

14,082,285 

 

 

14,417,156 

 

 

14,050,207 



 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

$

0.86 

 

$

0.62 

 

$

(0.74)

 

$

(0.68)



 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

 

12,911 

 

 

8,781 

 

 

(10,687)

 

 

(9,528)

Effect of 2016 issued Series A preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

on numerator

 

400 

 

 

400 

 

 

 -

 

 

 -

Effect of 2018 issued Series A preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

on numerator

 

320 

 

 

 -

 

 

 -

 

 

 -

Numerator for diluted earnings per share calculation

$

13,631 

 

$

9,181 

 

$

(10,687)

 

$

(9,528)



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Basic average shares outstanding

 

15,061,270 

 

 

14,082,285 

 

 

14,417,156 

 

 

14,050,207 

Dilutive effect of conversion of preferred stock (2016 issue)

 

3,179,650 

 

 

3,179,650 

 

 

 -

 

 

 -

Dilutive effect of conversion of preferred stock (2018 issue)

 

2,488,422 

 

 

 -

 

 

 -

 

 

 -

Dilutive effect of unvested restricted stock units

 

36,195 

 

 

43,600 

 

 

 -

 

 

 -

Diluted average shares outstanding (denominator)

 

20,765,537 

 

 

17,305,535 

 

 

14,417,156 

 

 

14,050,207 



 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share

$

0.66 

 

$

0.53 

 

$

(0.74)

 

$

(0.68)

19


 





The Company’s outstanding unvested RSUs as of January 31, 2019 and 2018, 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, 2019 and 2018, because the impact would be antidilutive.  Additionally, the Company’s Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), issued in November 2018, has been excluded from the calculation of diluted earnings per share for the nine months ended January 31, 2019, because the impact would be antidilutive. In addition, warrants to purchase shares of common stock have been excluded from the calculation of diluted earnings per share for the three and nine months ended January 31, 2019 and 2018, because the impact would be anti-dilutive.





Note 11. Restructuring and Impairment

As of April 30, 2018, the Company closed a restaurant and certain hotel-like amenities at a condominium building adjacent to its Attitash ski resort and terminated a related rental management agreement (the “Attitash Hotel Closure”).  For the three and nine months ended January 31, 2019, the Company incurred restructuring charges of $0 and $190, respectively, in connection with the Attitash Hotel Closure, which included professional service fees and costs to maintain the facility until the date of its disposal in August 2018.



Total costs through January 31, 2019, associated with the Attitash Hotel Closure include $1,586 of asset impairment charges, $36 of severance expense and $260 of other costs. As of January 31, 2019, the Company expects it will not incur future additional charges related to the Attitash Hotel Closure.



20


 

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, 2018 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 and transition acquired operations, systems and personnel;

·

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.

 

 

 

 



 

 

 

21


 

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