<PAGE>   1
 
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-Q
 
<TABLE>
<S>                 <C>
[X]                       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                               OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended July 31, 1998 or
 
[ ]                      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                               OF THE SECURITIES EXCHANGE ACT OF 1934
 
COMMISSION FILE NUMBER: 333-26091
</TABLE>
 
                         BOOTH CREEK SKI HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                  DELAWARE                                      84-1359604
        (State or Other Jurisdiction                         (I.R.S. Employer
      of Incorporation or Organization)                     Identification No.)
 
  1000 SOUTH FRONTAGE ROAD WEST, SUITE 100
               VAIL, COLORADO                                      81657
  (Address of Principal Executive Offices)                      (Zip Code)
</TABLE>
 
                                 (970) 476-4030
              (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  X                No ____
 
     As of August 28, 1998, 1,000 shares of the registrant's common stock were
issued and outstanding.
 
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<PAGE>   2
 
                               TABLE OF CONTENTS
 
<TABLE>
<S>        <C>                                                           <C>
PART I -- FINANCIAL INFORMATION
 
Item 1.    Financial Statements........................................    1
Item 2.    Management's Discussion and Analysis of Financial Condition    10
           and Results of Operations...................................
 
PART II -- OTHER INFORMATION
 
Item 1.    Legal Proceedings...........................................   20
Item 2.    Changes in Securities and Use of Proceeds...................   22
Item 3.    Defaults Upon Senior Securities.............................   22
Item 4.    Submission of Matters to a Vote of Security Holders.........   22
Item 5.    Other Information...........................................   22
Item 6.    Exhibits and Reports on Form 8-K............................   23
 
           SIGNATURES..................................................   24
</TABLE>
<PAGE>   3
 
                         PART I. FINANCIAL INFORMATION
 
ITEM I. FINANCIAL STATEMENTS.
 
                         BOOTH CREEK SKI HOLDINGS, INC.
 
                          CONSOLIDATED BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                 JULY 31,         OCTOBER 31,
                                                                   1998              1997
                                                                 --------         -----------
                                                                (UNAUDITED)
<S>                                                             <C>               <C>
ASSETS
Current assets:
  Cash......................................................     $    927          $    462
  Accounts receivable, net of allowances of $32 and $35,
     respectively...........................................        1,372             1,528
  Inventories...............................................        2,778             3,059
  Prepaid expenses and other current assets.................        1,564             1,396
                                                                 --------          --------
     Total current assets...................................        6,641             6,445
Property and equipment, net.................................      153,962           123,154
Real estate held for development and sale...................       12,919            11,335
Deferred financing costs, net of accumulated amortization of
  $1,762 and $782, respectively.............................        6,806             6,229
Timber rights and other assets..............................        6,699             7,402
Goodwill, net of accumulated amortization of $3,625 and
  $1,953, respectively......................................       30,179            31,851
                                                                 --------          --------
     Total assets...........................................     $217,206          $186,416
                                                                 ========          ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
  Senior credit facility....................................     $ 19,414          $ 15,000
  Current portion of long-term debt.........................        1,816               947
  Accounts payable and accrued liabilities..................       19,760            17,132
                                                                 --------          --------
          Total current liabilities.........................       40,990            33,079
Long-term debt..............................................      137,325           120,380
Other long-term liabilities.................................          113               196
Commitments and contingencies
Preferred stock of subsidiary; 28,000 shares authorized,
  22,000 shares issued and outstanding at July 31, 1998
  (25,000 shares at October 31, 1997); liquidation
  preference and redemption value of $2,769 at July 31,
  1998......................................................        2,769             3,354
Shareholder's equity:
  Common stock, $.01 par value; 1,000 shares authorized,
     issued and outstanding.................................           --                --
  Additional paid-in capital................................       57,000            46,500
  Accumulated deficit.......................................      (20,991)          (17,093)
                                                                 --------          --------
     Total shareholder's equity.............................       36,009            29,407
                                                                 --------          --------
Total liabilities and shareholder's equity..................     $217,206          $186,416
                                                                 ========          ========
</TABLE>
 
                            See accompanying notes.
 
                                        1
<PAGE>   4
 
                         BOOTH CREEK SKI HOLDINGS, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                        NINE MONTHS ENDED       THREE MONTHS ENDED
                                                      ---------------------    ---------------------
                                                      JULY 31,    AUGUST 1,    JULY 31,    AUGUST 1,
                                                        1998        1997         1998        1997
                                                      --------    ---------    --------    ---------
                                                                       (UNAUDITED)
<S>                                                   <C>         <C>          <C>         <C>
Revenue:
  Resort operations.................................  $ 91,709    $ 63,753     $  3,861    $  3,284
  Real estate and other.............................       207       1,647          207       1,197
                                                      --------    --------     --------    --------
Total revenue.......................................    91,916      65,400        4,068       4,481
Operating expenses:
  Cost of sales -- resort operations................    54,952      40,778        6,381       4,673
  Cost of sales -- real estate and other............        96       1,146           96         768
  Depreciation and depletion........................    10,675       6,998        4,033       2,571
  Amortization of goodwill..........................     1,672       1,150          556         453
  Selling, general and administrative expense.......    10,902       8,475        2,412       1,957
  Management fees and corporate expenses............     3,386       1,465        1,622         638
                                                      --------    --------     --------    --------
Total operating expenses............................    81,683      60,012       15,100      11,060
                                                      --------    --------     --------    --------
Operating income (loss).............................    10,233       5,388      (11,032)     (6,579)
Other income (expense):
  Interest expense..................................   (12,954)     (8,863)      (4,607)     (3,700)
  Amortization of deferred financing costs..........      (980)     (1,541)        (369)       (345)
  Interest and other income.........................        11         140            4          85
                                                      --------    --------     --------    --------
  Other income (expense), net.......................   (13,923)    (10,264)      (4,972)     (3,960)
                                                      --------    --------     --------    --------
Loss before income taxes............................    (3,690)     (4,876)     (16,004)    (10,539)
Income tax benefit..................................        --       1,219           --       2,635
                                                      --------    --------     --------    --------
Loss before minority interest and extraordinary
  item..............................................    (3,690)     (3,657)     (16,004)     (7,904)
Minority interest...................................      (208)       (157)         (70)        (70)
                                                      --------    --------     --------    --------
Loss before extraordinary item......................    (3,898)     (3,814)     (16,074)     (7,974)
Extraordinary loss on early retirement of debt (net
  of applicable income taxes of $666)...............        --      (1,998)          --          --
                                                      --------    --------     --------    --------
Net loss............................................  $ (3,898)   $ (5,812)    $(16,074)   $ (7,974)
                                                      ========    ========     ========    ========
</TABLE>
 
                            See accompanying notes.
 
                                        2
<PAGE>   5
 
                         BOOTH CREEK SKI HOLDINGS, INC.
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
                  NINE MONTHS ENDED JULY 31, 1998 (UNAUDITED)
                      AND THE YEAR ENDED OCTOBER 31, 1997
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                             NOTE
                                          COMMON STOCK      ADDITIONAL    RECEIVABLE
                                        ----------------     PAID-IN         FROM        ACCUMULATED
                                        SHARES    AMOUNT     CAPITAL      SHAREHOLDER      DEFICIT       TOTAL
                                        ------    ------    ----------    -----------    -----------     -----
<S>                                     <C>       <C>       <C>           <C>            <C>            <C>
Initial capitalization and balance
  at October 31, 1996...............    1,000       $--      $     2          $(2)        $     --      $     --
Payment received on shareholder note
  receivable........................       --       --            --            2               --             2
Capital contributions...............       --       --        46,498           --               --        46,498
Net loss............................       --       --            --           --          (17,093)      (17,093)
                                        -----       --       -------          ---         --------      --------
Balance at October 31, 1997.........    1,000       --        46,500           --          (17,093)       29,407
Capital contributions...............       --       --        10,500           --               --        10,500
Net loss............................       --       --            --           --           (3,898)       (3,898)
                                        -----       --       -------          ---         --------      --------
Balance at July 31, 1998............    1,000       $--      $57,000          $--         $(20,991)     $ 36,009
                                        =====       ==       =======          ===         ========      ========
</TABLE>
 
                            See accompanying notes.
 
                                        3
<PAGE>   6
 
                         BOOTH CREEK SKI HOLDINGS, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                      NINE MONTHS ENDED
                                                              ---------------------------------
                                                              JULY 31, 1998      AUGUST 1, 1997
                                                              -------------      --------------
                                                                         (UNAUDITED)
<S>                                                           <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................    $ (3,898)          $  (5,812)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
  Depreciation and depletion................................      10,675               6,998
  Amortization of goodwill..................................       1,672               1,150
  Noncash cost of real estate sales.........................          --                 851
  Amortization of deferred financing costs..................         980               1,541
  Deferred income tax benefit...............................          --              (1,219)
  Minority interest.........................................         208                 157
  Extraordinary loss on early retirement of debt............          --               1,998
  Changes in operating assets and liabilities:
     Accounts receivable....................................         480                 145
     Inventories............................................         806                 826
     Prepaid expenses and other current assets..............         (47)                262
     Accounts payable and accrued liabilities...............         482               1,747
     Other long-term liabilities............................         (83)                 --
                                                                --------           ---------
Net cash provided by operating activities...................      11,275               8,644
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of ski resorts, net of cash acquired............     (30,016)           (141,222)
Capital expenditures for property and equipment.............      (8,604)             (4,550)
Capital expenditures for real estate held for development
  and sale..................................................        (684)               (282)
Other, net..................................................         643                 488
                                                                --------           ---------
Net cash used in investing activities.......................     (38,661)           (145,566)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under Senior Credit Facility.................       4,414               7,000
Proceeds of long-term debt..................................      17,500             216,000
Principal payments of long-term debt........................      (2,213)           (114,288)
Deferred financing costs....................................      (1,557)            (10,484)
Purchase of preferred stock of subsidiary and payment of
  dividends.................................................        (793)               (375)
Payment received on shareholder note receivable.............          --                   2
Capital contributions.......................................      10,500              46,498
                                                                --------           ---------
Net cash provided by financing activities...................      27,851             144,353
                                                                --------           ---------
Increase in cash............................................         465               7,431
Cash at beginning of period.................................         462                  --
                                                                --------           ---------
Cash at end of period.......................................    $    927           $   7,431
                                                                ========           =========
</TABLE>
 
                            See accompanying notes.
 
                                        4
<PAGE>   7
 
                         BOOTH CREEK SKI HOLDINGS, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JULY 31, 1998
 
1. ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
     Booth Creek Ski Holdings, Inc. ("Booth Creek") was organized on October 8,
1996 in the State of Delaware for the purpose of acquiring and operating various
ski resorts, including Northstar-at-Tahoe ("Northstar"), Sierra-at-Tahoe
("Sierra"), Bear Mountain, Waterville Valley, Mt. Cranmore, the Summit at
Snoqualmie Pass (the "Summit" -- formerly Snoqualmie Pass), Grand Targhee and
Loon Mountain.
 
     The consolidated financial statements include the accounts of Booth Creek
and its subsidiaries (collectively referred to as the "Company"). Booth Creek
owns all of the common stock of its subsidiaries. Ski Lifts, Inc. (the operator
of the Summit) has shares of preferred stock owned by a third party. All
significant intercompany transactions and balances have been eliminated.
 
     Booth Creek is a wholly-owned subsidiary of Booth Creek Ski Group, Inc.
("Parent").
 
     The accompanying consolidated financial statements as of July 31, 1998 and
for the three and nine month periods ended July 31, 1998 and August 1, 1997 are
unaudited, but include all adjustments (consisting only of normal, recurring
adjustments) which, in the opinion of management of the Company, are considered
necessary for a fair presentation of the Company's financial position at July
31, 1998, and its operating results and cash flows for the three and nine month
periods ended July 31, 1998 and August 1, 1997. Due to the highly seasonal
nature of the Company's business and the effect of acquisitions (Note 2), the
results for the interim periods are not necessarily indicative of results for
the entire year. Certain information and footnote disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles ("GAAP") have been omitted pursuant to GAAP applicable for
interim periods. Management believes that the disclosures made are adequate to
make the information presented not misleading.
 
REPORTING PERIODS
 
     The Company's reporting periods end on the Friday closest to the end of
each month.
 
USE OF ESTIMATES
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those results.
 
2. ACQUISITIONS
 
1997 ACQUISITIONS
 
     During the year ended October 31, 1997, the Company made the following
acquisitions (the "1997 Acquisitions"), which have been included in the
accompanying statements of operations since the effective dates of such
acquisitions, and accounted for using the purchase method.
 
<TABLE>
<CAPTION>
                          RESORT                              ACQUISITION DATE
                          ------                              ----------------
<S>                                                           <C>
Waterville Valley.........................................    November 27, 1996
Mt. Cranmore..............................................    November 27, 1996
Northstar.................................................    December 3, 1996
Sierra....................................................    December 3, 1996
Bear Mountain.............................................    December 3, 1996
The Summit................................................    January 15, 1997
Grand Targhee.............................................    March 18, 1997
</TABLE>
 
                                        5
<PAGE>   8
                         BOOTH CREEK SKI HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
2. ACQUISITIONS (CONTINUED)

LOON MOUNTAIN ACQUISITION
 
     On February 26, 1998, the Company acquired Loon Mountain Recreation
Corporation ("LMRC"), the owner and operator of the Loon Mountain ski resort
located in New Hampshire. The acquisition of LMRC (the "Loon Mountain
Acquisition") was effected pursuant to an Agreement and Plan of Merger, dated
September 18, 1997, as amended as of December 22, 1997, by and among the
Company, as assignee of Parent, LMRC Acquisition Corp. and LMRC.
 
     The aggregate net purchase price for the Loon Mountain Acquisition,
determined through negotiations between the Company and LMRC, was approximately
$30.0 million (including the assumption of debt which was repaid in connection
with the acquisition and acquisition costs). The Loon Mountain Acquisition was
financed through (i) proceeds from the offering at par of $17.5 million
aggregate principal amount of the Company's 12.5% Series C Senior Notes due 2007
(see Note 4), issued under the Indenture, dated as of March 18, 1997, as amended
and supplemented among the Company, the Guarantors named therein, and the
trustee, (ii) a capital contribution of $10.5 million to the Company by Parent
(the "Equity Financing"), and (iii) available cash on hand and borrowings under
the Company's Amended and Restated Credit Agreement dated March 18, 1997, as
amended (the "Senior Credit Facility").
 
PRO FORMA FINANCIAL INFORMATION
 
     The following table represents unaudited pro forma financial information
which presents the Company's consolidated results of operations for the nine
month periods ended July 31, 1998 and August 1, 1997 as if the 1997
Acquisitions, Loon Mountain Acquisition and related financing transactions
occurred on November 1, 1996.
 
<TABLE>
<CAPTION>
                                                               NINE MONTHS ENDED
                                                            ------------------------
                                                            JULY 31,       AUGUST 1,
                                                              1998           1997
                                                            --------       ---------
                                                                 (IN THOUSANDS)
<S>                                                         <C>            <C>
Statement of operations data:
  Revenue...............................................    $102,555        $90,066
  Operating income......................................    $ 13,885        $ 4,005
  Net loss..............................................    $ (1,125)       $(8,841)
Other data:
  EBITDA................................................    $ 27,026        $16,656
  Noncash cost of real estate and other.................    $     --        $   984
</TABLE>
 
     EBITDA represents income from operations before depreciation, depletion and
amortization expense and the noncash cost of real estate sales. EBITDA is not
intended to represent cash flow from operations or net income as defined by
generally accepted accounting principles and should not be considered as a
measure of liquidity or an alternative to, or more meaningful than, operating
income or operating cash flow as an indication of the Company's operating
performance.
 
     The pro forma information does not purport to be indicative of results that
actually would have occurred had the acquisitions been made on the dates
indicated or of results which may occur in the future.
 
                                        6
<PAGE>   9
                         BOOTH CREEK SKI HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
3. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 
     Accounts payable and accrued liabilities consist of the following at July
31, 1998 and October 31, 1997:
 
<TABLE>
<CAPTION>
                                                            JULY 31,       OCTOBER 31,
                                                              1998            1997
                                                            --------       -----------
                                                                  (IN THOUSANDS)
<S>                                                         <C>            <C>
Accounts payable........................................    $ 5,603          $ 7,618
Accrued compensation and benefits.......................      2,629            1,575
Taxes other than income.................................        644              545
Unearned income and customer deposits...................      1,626            3,341
Interest................................................      6,400            2,027
Other...................................................      2,858            2,026
                                                            -------          -------
                                                            $19,760          $17,132
                                                            =======          =======
</TABLE>
 
4. FINANCING ARRANGEMENTS
 
SENIOR CREDIT FACILITY
 
     Effective February 26, 1998, the borrowing availability under the Senior
Credit Facility was increased to $25 million (the "Senior Credit Facility
Amendment"). The Senior Credit Facility requires that the Company not have
borrowings thereunder in excess of $6.0 million between February 15 and two
business days preceding March 15 of each year, have no borrowings on the
business day preceding March 15 of each year and cannot have borrowings in
excess of $6.0 million between March 15 and April 15 of each year. Total
borrowings outstanding under the Senior Credit Facility at July 31, 1998 were
approximately $19.4 million, which bore interest at 8.5%.
 
LONG-TERM DEBT
 
     On February 26, 1998, the Company consummated an offering (the "Offering")
of $17.5 million of its 12.5% Series C Senior Notes due 2007 (the "Series C
Notes"). The net proceeds of the Offering, the $10.5 million Equity Financing,
and available cash on hand and borrowings under the Senior Credit Facility, were
used to finance the Loon Mountain Acquisition (Note 2). Pursuant to a registered
exchange offer which expired on July 31, 1998, the Series C Notes were exchanged
for a like principal amount of the Company's 12.5% Series B Senior Notes (the
"Notes"). On July 31, 1998, after giving effect to such exchange, $133.5 million
aggregate principal amount of the Notes were outstanding. The Notes mature on
March 15, 2007, and bear interest at 12.5% per annum, payable semiannually on
each March 15 and September 15.
 
     The Notes are unconditionally guaranteed, on an unsecured senior basis, as
to the payment of principal, premium, if any, and interest, jointly and
severally (the "Guarantees"), by all Restricted Subsidiaries of the Company (as
defined in the Indenture) having either assets or shareholders' equity in excess
of $20,000 (the "Guarantors"). All of the Company's direct and indirect
subsidiaries are Restricted Subsidiaries, except the Real Estate LLC. Each
Guarantee is effectively subordinated to all secured indebtedness of such
Guarantor. The Notes are general senior unsecured obligations of the Company
ranking equally in right of payment with all other existing and future senior
indebtedness of the Company and senior in right of payment to any subordinated
indebtedness of the Company. The Notes are effectively subordinated in right of
payment to all secured indebtedness of the Company and the Guarantors, including
indebtedness under the Senior Credit Facility. In addition, the Notes are
structurally subordinated to any indebtedness of the Company's subsidiaries that
are not Guarantors. The Guarantors are wholly-owned subsidiaries of Booth Creek
and have fully and unconditionally guaranteed the Notes on a joint and several
basis. Booth Creek is a holding company and has no operations, assets or cash
flows separate from its investments in its subsidiaries. In addition, the
 
                                        7
<PAGE>   10
                         BOOTH CREEK SKI HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
4. FINANCING ARRANGEMENTS (CONTINUED)
LONG-TERM DEBT (CONTINUED)
assets, equity, income and cash flow of the Real Estate LLC, Booth Creek's only
non-guarantor subsidiary, are inconsequential and the common stock of the Real
Estate LLC is entirely owned by Booth Creek. Accordingly, Booth Creek has not
presented separate financial statements and other disclosures concerning the
Guarantors or its non-guarantor subsidiary because management has determined
that such information is not material to investors.
 
     For the nine months ended July 31, 1998, the Company entered into long-term
debt and capital lease obligations of approximately $2.5 million for the
purchase of equipment.
 
5. INCOME TAXES
 
     During the year ended October 31, 1997, the Company recorded tax benefits
for current operating losses to the extent of recorded deferred tax liabilities.
Due to the Company's lack of profitable history, the tax benefits of excess
operating losses were fully offset by a valuation reserve. Similarly, no federal
income tax provision is expected for the year ended October 30, 1998 due to
continued operating losses. Accordingly, during the three and nine month periods
ended July 31, 1998, no federal income tax provision has been provided.
 
     Based on preliminary purchase price allocations for the 1997 Acquisitions
as described in Note 2, deferred tax liabilities of approximately $4.4 million
were recorded in the preliminary opening balance sheets. This resulted in an
expected effective income tax rate of approximately 25%, which was used by the
Company in preparing its consolidated financial statements for the three and
nine month periods ended August 1, 1997. Final purchase price allocations,
primarily for the Summit acquisition, resulted in less value being assigned to
property and equipment, more to goodwill and a corresponding reduction in the
original deferred tax liabilities. Accordingly, the actual income tax rate for
the year ended October 31, 1997 was 10.8%, and was adjusted for in the fourth
quarter of 1997 on a catch-up basis as a change in estimate.
 
6. SUBSEQUENT EVENTS
 
CAPITAL CONTRIBUTIONS FROM PARENT
 
     On September 14, 1998, the Company received a $15 million capital
contribution from Parent, which will be utilized to fund certain expansion
related capital expenditures planned for fiscal 1998 and fiscal 1999, working
capital and other general corporate purposes. After giving effect to such
capital contribution and the receipt of expected net proceeds of approximately
$6.3 million from the recent sale of real estate at Northstar (described below),
outstanding borrowings under the Senior Credit Facility at September 14, 1998
are expected to be approximately $1.6 million, which would provide the Company
with borrowing availability of approximately $23.4 at such date.
 
REAL ESTATE AUCTION
 
     On August 16, 1998, Northstar conducted an auction of certain real estate
parcels as part of the third phase of an ongoing real estate development
project. All of the lots available for sale were sold at an average lot price of
approximately $210,000 as compared to an average lot price of $154,000 for the
two prior phases. Such sales are expected to result in net proceeds to the
Company of approximately $6.3 million after deduction for sales commissions and
other selling costs. The proceeds from the sales are expected to be received in
September 1998 upon the close of escrow and the transfer of title. The revenues
and costs of sales associated with these transactions will be recognized in the
fourth quarter of fiscal 1998.
 
                                        8
<PAGE>   11
                         BOOTH CREEK SKI HOLDINGS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6. SUBSEQUENT EVENTS (CONTINUED)
PROPOSED ACQUISITION
 
     On August 28, 1998, the Company, Booth Creek Ski Acquisition, Inc., a
wholly-owned subsidiary of Booth Creek ("Acquisition Sub"), and Seven Springs
Farm, Inc. ("Seven Springs"), the owner and operator of the Seven Springs
Mountain Resort, a ski resort and conference center, entered into an Agreement
of Merger (the "Merger Agreement"), pursuant to which the Company would acquire
Seven Springs through the merger of Acquisition Sub with and into Seven Springs.
The aggregate merger consideration and related payments will be approximately
$83.0 million plus certain deferred payments, subject to certain price
adjustments. The proposed acquisition is conditioned on the receipt of a
judicial determination that the terms of a certain shareholders' agreement among
Seven Springs and its shareholders (the "Seven Springs Shareholder Agreement")
does not apply to the transactions contemplated by the Merger Agreement, as well
as customary closing conditions. In connection with the proposed acquisition,
certain shareholders of Seven Springs filed a lawsuit in the Court of Common
Pleas of Somerset County, Pennsylvania against the Company, Acquisition Sub, and
Seven Springs and certain of its directors, seeking a declaratory judgment,
along with other relief including the rescission of the Merger Agreement.
Plaintiffs allege that the terms of the Seven Springs Shareholder Agreement ban
the consummation of the proposed acquisition. While the Company believes that
Seven Springs' position will prevail that the Seven Springs Shareholders
Agreement does not apply to the transactions contemplated by the Merger
Agreement, no assurance can be made regarding the timing or the outcome of this
litigation.
 
                                        9
<PAGE>   12
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.
 
     The discussion and analysis below relates to the historical financial
statements and historical and pro forma results of operations of the Company and
the liquidity and capital resources of the Company. The following discussion
should be read in conjunction with the consolidated financial statements and
related notes thereto included elsewhere in this report.
 
     Except for historical matters, the matters discussed in Part I, Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are forward-looking statements that involve risks and uncertainties.
Forward-looking statements are based on management's current views and
assumptions and involve risks and uncertainties that could significantly affect
expected results. The Company wishes to caution the reader that certain factors
below could significantly and materially affect the Company's actual results,
causing results to differ materially from those in any forward-looking
statement. These factors include: regional and national economic conditions, the
successful or unsuccessful integration of acquired businesses, weather
conditions, natural disasters (such as earthquakes), industry competition and
governmental regulation, risks associated with expansion, leased property and
property used pursuant to the United States Forest Service permits, and the
ability of the Company to make its information technology assets and systems
year 2000 compliant and the costs of any modifications necessary in this regard.
 
GENERAL
 
     The Company's ski operations are highly sensitive to regional weather
conditions and the overall strength of the regional economies in the areas in
which the Company operates. The Company believes that the geographic diversity
of the Company's resorts and the use of extensive snowmaking technology coupled
with advanced trail grooming equipment, which together can provide consistent
skiing conditions, can partially mitigate the risk of both economic downturns
and adverse weather conditions in any given region. However, the Company remains
vulnerable to warm weather, heavy rains and drought conditions, which can have a
significant effect on the operating revenues and profitability at any one of the
Company's resorts.
 
     The Company's four most weather-sensitive resorts, Bear Mountain,
Waterville Valley, Loon Mountain and Mt. Cranmore, have invested heavily in
snowmaking capabilities to provide coverage on virtually all of their trails and
have been open for skiing at least 123, 144, 145, and 105 days, respectively,
during each of the last five ski seasons. The Company's Northstar, Sierra,
Summit and Grand Targhee resorts are less weather-sensitive based on their
historical natural snowfall, averaging approximately 326, 518, 422, and 512
inches of snow, respectively, per year for the past five ski seasons. As a
result of their historic natural snowfall, their snowmaking capabilities are
considerably less extensive than at Bear Mountain, Waterville Valley, Loon
Mountain or Mt. Cranmore.
 
     The Company's results of operations are also highly dependent on its
ability to compete in each of the large regional ski markets in which it
operates. At Northstar and Sierra, more than 70% of the 1997/98 ski season total
skier days were attributable to residents of the San Francisco, Sacramento,
Central California Valley and Lake Tahoe regions. At Bear Mountain, more than
90% of the 1997/98 ski season total skier days were attributable to residents of
the Los Angeles and San Diego metropolitan regions. At Waterville Valley, Loon
Mountain and Mt. Cranmore, approximately 80% of the 1997/98 ski season total
skier days were attributable to residents of Massachusetts and New Hampshire,
with a large percentage of such visitors coming from the Boston metropolitan
area. At the Summit, the Company estimates that more than 90% of the 1997/98 ski
season total skier days were attributable to residents of the Seattle/Tacoma
metropolitan region. The Company's Grand Targhee resort attracts approximately
50% of its skiers from outside its local skiing population.
 
     In addition to revenue generated from skiing operations, the Company's
resorts generate significant revenue from non-ski operations, including lodging,
conference center services, health and tennis clubs and summer activities such
as mountain biking rentals and golf course fees.
 
                                       10
<PAGE>   13
 
     A significant portion of total operating costs at the Company's resorts are
variable, consisting primarily of retail and food service cost of sales,
utilities and labor expense. These variable costs can fluctuate significantly
based upon skier days and other seasonal factors. With the exception of certain
management, marketing, administrative and maintenance personnel, all of the
Company's employees are compensated on an hourly basis.
 
RESULTS OF OPERATIONS OF THE COMPANY
 
  Historical Nine Months Ended July 31, 1998 as Compared to the Historical Nine
Months Ended August 1, 1997
 
     The Company was formed October 8, 1996. Since inception, the Company made
the following acquisitions which are included in the results of operations of
the Company from the respective purchase dates and were accounted for using the
purchase method:
 
<TABLE>
<CAPTION>
                          RESORT                              ACQUISITION DATE
                          ------                              ----------------
<S>                                                           <C>
Waterville Valley.........................................    November 27, 1996
Mt. Cranmore..............................................    November 27, 1996
Northstar.................................................    December 3, 1996
Sierra....................................................    December 3, 1996
Bear Mountain.............................................    December 3, 1996
The Summit................................................    January 15, 1997
Grand Targhee.............................................    March 18, 1997
Loon Mountain.............................................    February 26, 1998
</TABLE>
 
     Total revenue for the nine months ended July 31, 1998 was $91,916,000, an
increase of $26,516,000 or 40.5%, over the Company's revenues for the nine
months ended August 1, 1997. Due to the timing of the acquisitions, the 1997
period does not reflect a full period of operating revenues for the resorts,
which accounts for a significant part of the increase. The increase in revenue
is also due to more typical weather conditions in the Lake Tahoe region in the
current period than during the comparable period in the 1996/97 ski season,
which resulted in increased revenues at Sierra and Northstar of 65.1% and 24.5%,
respectively. During the 1996/97 ski season, revenue was negatively impacted by
a mudslide which shut down the highway which provides primary access to Sierra
and poor weather conditions during the Christmas holiday period at many of the
Company's other resorts. Total skier visits at Sierra and Northstar increased by
62.7% and 21.9% or approximately 132,000 and 97,000, respectively, in the 1998
period as compared to the 1997 period.
 
     Total operating expenses for the nine months ended July 31, 1998 were
$81,683,000, an increase of $21,671,000 or 36.1%, over the Company's total
operating expenses for the nine months ended August 1, 1997. Due to the timing
of the acquisitions, the 1997 period does not reflect a full period of operating
expenses for the resorts, which accounts for a significant part of the increase.
Payroll related costs, the single largest component of operating expenses, were
approximately $32,084,000 for the nine months ended July 31, 1998, as compared
to $22,398,000 for the 1997 period.
 
     Interest expense for the nine months ended July 31, 1998 totaled
$12,954,000, an increase of $4,091,000 over the Company's interest expense for
the nine months ended August 1, 1997, reflecting generally higher levels of
borrowings in the 1998 period and a slightly higher interest rate on the Senior
Notes as compared to the interest rates on the bridge financing facilities in
place through March 17, 1997.
 
     During the year ended October 31, 1997, the Company recorded tax benefits
for current operating losses to the extent of recorded deferred tax liabilities.
Due to the Company's lack of profitable history, the tax benefits of excess
operating losses were fully offset by a valuation reserve. Similarly, no federal
income tax provision is expected for the year ended October 30, 1998 due to
continued operating losses. Accordingly, during the nine months ended July 31,
1998, no federal income tax provision has been provided.
 
     For the nine months ended August 1, 1997, income taxes were based on
preliminary purchase price allocations for the Company's acquisitions of the
resorts. Deferred tax liabilities of approximately $4.4 million
 
                                       11
<PAGE>   14
 
were recorded in the preliminary opening balance sheets. This resulted in an
expected income tax benefit rate of approximately 25%, which was used by the
Company in preparing its financial statements through the third quarter of 1997.
Final purchase allocations, primarily for the Summit acquisition, resulted in
less value being assigned to fixed assets, more to goodwill and a corresponding
reduction in the original deferred tax liabilities. Accordingly, the actual
income tax benefit rate for the year ended October 31, 1997 was 10.8%, and was
adjusted for in the fourth quarter on a catch-up basis as a change in estimate.
 
  Historical Three Months Ended July 31, 1998 as Compared to the Historical
Three Months Ended August 1, 1997
 
     Total revenue for the three months ended July 31, 1998 was $4,068,000, a
decrease of $413,000 or 9.2%, over the Company's revenues for the three months
ended August 1, 1997. Revenue from resort operations increased $577,000 or
17.6%, due primarily to the impact of the Loon Mountain Acquisition, as Loon
Mountain generated $715,000 in resort operating revenue for the three months
ended July 31, 1998. Revenues from real estate and timber operations declined
$990,000 in the 1998 period due to the timing of real estate sales.
 
     Total operating expenses for the three months ended July 31, 1998 were
$15,100,000, an increase of $4,040,000 or 36.5%, over the Company's total
operating expenses for the three months ended August 1, 1997. Approximately
$2,300,000 of the increase is due to the inclusion of Loon Mountain in the 1998
period as a result of the timing of the Loon Mountain Acquisition. Payroll
related costs were $5,923,000 for the three months ended July 31, 1998, as
compared to $4,438,000 for the 1997 period.
 
     Interest expense for the three months ended July 31, 1998 totaled
$4,607,000, an increase of $907,000 over the level of interest expense for the
comparable 1997 period, reflecting generally higher levels of borrowings in the
1998 period.
 
     During the year ended October 31, 1997, the Company recorded tax benefits
for current operating losses to the extent of recorded deferred tax liabilities.
Due to the Company's lack of profitable history, the tax benefits of excess
operating losses were fully offset by a valuation reserve. Similarly, no federal
income tax provision is expected for the year ended October 30, 1998 due to
continued operating losses. Accordingly, during the three months ended July 31,
1998, no federal income tax provision has been provided.
 
     For the three months ended August 1, 1997, income taxes were based on
preliminary purchase price allocations for the Company's acquisitions of the
resorts. Deferred tax liabilities of approximately $4.4 million were recorded in
the preliminary opening balance sheets. This resulted in an expected income tax
benefit rate of approximately 25%, which was used by the Company in preparing
its financial statements through the third quarter of 1997. Final purchase price
allocations, primarily for the Summit acquisition, resulted in less value being
assigned to fixed assets, more to goodwill and a corresponding reduction in the
original deferred tax liabilities. Accordingly, the actual income tax benefit
rate for the year ended October 31, 1997 was 10.8%, and was adjusted for in the
fourth quarter on a catch-up basis as a change in estimate.
 
  Pro Forma Nine Months Ended July 31, 1998 as Compared to the Pro Forma Nine
Months Ended August 1, 1997
 
     The following unaudited pro forma results of operations of the Company for
the nine months ended July 31, 1998 and August 1, 1997 assume that all the
resort acquisitions and related financings had occurred on November 1, 1996.
These unaudited pro forma results of operations are not necessarily indicative
of the actual results of operations that would have been achieved nor are they
necessarily indicative of future results of operations.
 
                                       12
<PAGE>   15
 
<TABLE>
<CAPTION>
                                                                PRO FORMA               PRO FORMA
                                                            NINE MONTHS ENDED       NINE MONTHS ENDED
                                                              JULY 31, 1998          AUGUST 1, 1997
                                                            -----------------       -----------------
                                                                         (IN THOUSANDS)
<S>                                                         <C>                     <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
  Resort operations.....................................        $102,348                 $88,115
  Real estate and other.................................             207                   1,951
                                                                --------                 -------
                                                                 102,555                  90,066
Operating expenses:
  Resort operations.....................................          75,433                  73,087
  Cost of sales -- real estate and other................              96                   1,307
  Depreciation, depletion and amortization..............          13,141                  11,667
                                                                --------                 -------
Operating income........................................          13,885                   4,005
Interest expense, net...................................          14,802                  13,680
                                                                --------                 -------
Loss before income taxes................................            (917)                 (9,675)
Income tax benefit......................................              --                   1,045
                                                                --------                 -------
Loss before minority interest...........................            (917)                 (8,630)
Minority interest.......................................            (208)                   (211)
                                                                --------                 -------
Net loss................................................        $ (1,125)                $(8,841)
                                                                ========                 =======
OTHER DATA:
EBITDA..................................................        $ 27,026                 $16,656
Noncash cost of real estate sales.......................        $     --                 $   984
</TABLE>
 
     Total pro forma revenues for the nine months ended July 31, 1998 would have
been $102,555,000, an increase of $12,489,000 or 13.9% over the comparable
period in 1997. Sierra, Northstar, Grand Targhee, Bear Mountain and Waterville
Valley generated increased revenues in the 1998 period of 65.1%, 22.4%, 11.1%,
12.5%, and 9.1%, respectively, due primarily to skier day increases. The
increase in revenue is primarily due to more typical weather conditions in the
Lake Tahoe region in the current period than during the comparable period in the
1996/97 ski season. Pro forma revenues for Mt. Cranmore, the Summit and Loon
Mountain for the 1998 period were generally comparable to the level of revenues
in the 1997 period. Total skier visits would have increased 9.2%, or
approximately 200,000, in the 1998 period as compared to the 1997 period
primarily due to improved weather conditions during the holiday periods which
allowed travelers to reach the Company's resorts. During the 1996/97 ski season,
revenues were negatively impacted by a mudslide which shut down the highway
which provides primary access to Sierra and poor weather conditions during the
holiday period at many of the Company's other resorts. Sales of real estate and
timber during the nine months ended July 31, 1998 were $207,000, as compared to
$1,951,000 in the comparable 1997 pro forma period. The decline in real estate
sales in the 1998 period was due to the timing of lot sales.
 
     Pro forma resort operating expenses, excluding depreciation, depletion and
amortization, for the nine months ended July 31, 1998 would have been
$75,433,000, an increase of $2,346,000, or 3.2%, over the comparable period in
1997. Pro forma payroll related costs would have been $34,534,000, an increase
of $2,984,000 or 9.5%, over the comparable 1997 period. The increase in pro
forma payroll related costs was due primarily to higher seasonal employment at
Northstar and Sierra due to the improved operating conditions and extended
season.
 
     Pro forma depreciation, depletion and amortization for the pro forma nine
month period ended July 31, 1998 would have been $13,141,000. The increase of
$1,474,000 or 12.6% over the 1997 period was due to higher average asset
balances in the 1998 period.
 
     Net interest expense for the pro forma nine months ended July 31, 1998
would have totaled $14,802,000, an increase of $1,122,000 or 8.2% from the
comparable period in 1997. The increase was due to interest
 
                                       13
<PAGE>   16
 
expense on borrowings under the Senior Credit Facility used to fund capital
expenditures, maintenance activities and normal seasonal working capital
requirements in the off-season periods.
 
     Income tax benefit for the pro forma nine months ended August 1, 1997 of
$1,045,000 reflects the effective tax rate of 10.8% utilized for the year ended
October 31, 1997. As it was assumed that the effective rate for the year ended
October 30, 1998 will be zero, no income tax benefit was recorded during the pro
forma nine month period ended July 31, 1998.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's primary liquidity needs are to fund capital expenditures,
service indebtedness and support seasonal working capital requirements. The
Company's primary sources of liquidity are cash flow from operations and
borrowings under the Senior Credit Facility. Virtually all of the Company's
operating income is generated by its subsidiaries. As a result, the Company is
dependent on the earnings and cash flow of, and dividends and distributions or
advances from, its subsidiaries to provide the funds necessary to meet its debt
service obligations. The Senior Credit Facility currently provides for borrowing
availability of up to $25 million during the term of such facility, which
expires in March 1999. The Senior Credit Facility requires that the Company not
have borrowings thereunder in excess of $6.0 million between February 15 and two
business days preceding March 15 of each year, have no borrowings on the
business day preceding March 15 of each year and not have borrowings in excess
of $6.0 million between March 15 and April 15 of each year. The Company intends
to use borrowings under the Senior Credit Facility to meet seasonal fluctuations
in working capital requirements, primarily related to off-season operations and
maintenance activities during the months of May through November, to fund
capital expenditures for lifts, trail work, grooming equipment and other
on-mountain equipment and facilities and to build retail and other inventories
prior to the start of the skiing season and for other cash requirements. As of
July 31, 1998, outstanding borrowings under the Senior Credit Facility totaled
$19.4 million.
 
     While the Company's ski resorts typically generate significant amounts of
cash during the ski season, the Company had a working capital deficit of $34.3
million as of July 31, 1998 which will negatively affect liquidity during the
remainder of 1998.
 
     The Company generated cash from operating activities of $11.3 million for
the nine months ended July 31, 1998 as compared to $8.6 million for the nine
months ended August 1, 1997. This increase is due to the significantly improved
operating results in the 1998 period and the inclusion of all resorts for the
full period in 1998 (except for Loon Mountain which has been included in 1998
operations since February 26, 1998).
 
     Cash used in investing activities totaled $38.7 million and $145.6 million
for the nine months ended July 31, 1998 and August 1, 1997, respectively. The
results for the 1998 period reflect primarily capital expenditures and the Loon
Mountain Acquisition, whereas the results for the 1997 period include $141.2
million of cash used for the acquisition of the Company's other ski resorts.
 
     Cash provided by financing activities totaled $27.9 million and $144.4
million for the nine months ended July 31, 1998 and August 1, 1997,
respectively. The results for the 1998 period reflect net borrowings and receipt
of additional capital contributions to fund the Loon Mountain Acquisition. The
results for the 1997 period reflect borrowings on long-term debt and capital
contributions used to fund the 1997 ski resort acquisitions.
 
     The Company's capital expenditures for property and equipment for the nine
months ended July 31, 1998 and August 1, 1997 were approximately $11.1 million
(including approximately $2.5 million financed through capital leases and
deferred payment obligations) and $4.6 million, respectively, and were funded by
cash provided by operating activities and borrowings under the Senior Credit
Facility. Management anticipates that annual capital expenditures for property
and equipment in each of fiscal 1998 and 1999 will be approximately $18 million
and $5 million, respectively, for resort maintenance, safety and planned
return-based upgrades that management has deemed appropriate. The Company plans
to fund these capital expenditures from the $15 million capital contribution
received from Parent on September 14, 1998, available operating cash flows,
vendor financing to the extent permitted under the Senior Credit Facility and
the Indenture and borrowings
 
                                       14
<PAGE>   17
 
under the Senior Credit Facility. In addition, capital expenditures for real
estate development activities at Northstar are expected to be approximately $1.5
million for fiscal 1998, and approximately $1.0 million to $2.0 million for
fiscal 1999.
 
     Management believes that there is a considerable degree of flexibility in
the timing (and, to a lesser degree, the scope) of its capital expenditure
program, and even greater flexibility as to its real estate development
objectives. While the capital expenditure program described above is regarded by
management as important, both as to timing and scope, discretionary capital
spending above maintenance levels can be deferred, in some instances for
substantial periods of time, in order to address cash flow or other constraints.
With respect to the Company's potential real estate development opportunities,
management believes that such efforts will enhance ski-related revenues and will
contribute independently to earnings. In addition, with respect to significant
development projects, the Company anticipates entering into joint venture
arrangements that would reduce infrastructure and other development costs.
Nonetheless, existing lodging facilities in the vicinity of each resort are
believed to be adequate to support current skier volumes, and a deferral or
curtailment of these development efforts is not regarded by management as likely
to adversely affect skier days and ski-related revenues or profitability. The
Company also believes that its current infrastructure is sufficient, and that
development of real estate opportunities is not presently necessary, to support
its existing operations.
 
     The Company's liquidity has been and will continue to be significantly
affected by its high leverage. As a result of its leveraged position, the
Company has significant cash requirements to service debt and funds available
for working capital, capital expenditures, acquisitions and general corporate
purposes are limited. In addition, the Company's high level of debt may increase
its vulnerability to competitive pressures and the seasonality of the skiing and
recreational industries. Any decline in the Company's expected operating
performance could have a material adverse effect on the Company's liquidity and
on its ability to service its debt and make required capital expenditures.
Further, upon the occurrence of a Change of Control (as defined in the
Indenture), the Company may be required to repurchase the Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest. The occurrence of a
Change of Control may also constitute a default under the Senior Credit
Facility. No assurance can be given that the Company would be able to finance a
Change of Control repurchase offer.
 
     In addition, the Senior Credit Facility and the Indenture each contain
covenants that significantly limit the Company's ability to obtain additional
sources of capital and may affect the Company's liquidity. These covenants
restrict the ability of the Company and its restricted subsidiaries to, among
other things, incur additional indebtedness, create liens, make investments,
consummate certain asset sales, create subsidiaries, issue subsidiary stock,
consolidate or merge with any other person, or transfer all or substantially all
of the assets of the Company.
 
     The Company currently has $133.5 million aggregate principal amount of
Notes outstanding, which will result in annual cash interest requirements of
approximately $16.7 million. On September 14, 1998 the Company received a $15
million capital contribution from Parent and expects to receive approximately
$6.3 million from the recent sale of real estate at Northstar (see Note 6 to
Consolidated Financial Statements included herein). Taking into consideration
the receipt of such funds, the Company expects that cash generated from
operations, together with borrowing availability, will be adequate to fund the
interest requirements on the Notes and the Company's other cash operating and
debt service requirements over the next twelve months. However, any decline in
the Company's expected operating performance could have a material adverse
effect on the Company's liquidity. In such case, the Company could be required
to attempt to refinance all or a portion of its existing debt, sell assets or
obtain additional financing. No assurance can be given of the Company's ability
to do so or the terms of any such transaction. In addition, the Company would
require additional financing for future acquisitions.
 
IMPACT OF THE YEAR 2000 ISSUE
 
     The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or
 
                                       15
<PAGE>   18
 
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in normal
business activities.
 
     The Company has conducted an assessment of its information and
telecommunications technology ("IT") assets and systems. Substantially all of
the Company's IT systems, except for a portion of the Company's ticketing and
sales systems, operate using software developed and supported by third party
vendors. The Company is in the process of implementing its planned program to
remedy such third party developed systems, which will entail either
modifications to or replacement of certain existing IT systems. The cost of
modifications will be expensed as incurred and is not expected to be
significant. The cost of purchased replacements will be capitalized and is
expected to range from $500,000 to $700,000.
 
     The Company is currently performing an assessment of the necessary efforts
to make its primary ticketing and sales system year 2000 compliant, and expects
to complete this assessment by December 1998. The cost of necessary
modifications to the ticketing and sales software will be expensed as incurred.
Purchases of replacement hardware, if any, will be capitalized. The expected
cost of necessary software modifications and hardware replacements is not
currently known.
 
     The Company has commenced a program to ensure that significant vendors and
service providers with which it does business are year 2000 compliant. In
addition, the Company has conducted an assessment of its operating assets and
has determined that there will be no significant financial impacts to ensure
year 2000 compliance for operating assets.
 
     The Company intends to complete its year 2000 assessments and remediation
program by the third calendar quarter of 1999. However, if the Company or its
vendors are unable to resolve the year 2000 issue in a timely manner, or the
Company's assessment of the extent of year 2000 issues surrounding its IT
systems, operating assets or significant vendors or service providers were to be
incorrect, the year 2000 issue could have a material impact on the operations of
the Company. The Company does not presently have a contingency plan in the event
its year 2000 compliance program is unsuccessful or not completed on a timely
basis.
 
     The cost of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no guarantee that these estimates will
be achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.
 
SEASONALITY
 
     The business of the Company is highly seasonal, with the vast majority of
its annual revenues expected to be generated between November and April of each
fiscal year. Management considers it essential to achieve optimal operating
results during key holidays and weekends during this period. During the
off-season months of May through October, the Company's resorts typically
experience a substantial reduction in labor and utility expense due to the
absence of ski operations, but make significant expenditures for maintenance,
expansion and capital improvement in preparation for the ensuing ski season.
 
REGULATION AND LEGISLATION
 
     The Company's operations are dependent upon its ownership or control over
the real estate constituting each resort. The real property presently used at
the Northstar and Mt. Cranmore resorts is owned by the Company. The Company has
the right to use a substantial portion of the real property associated with the
Bear Mountain, Sierra, the Summit, Grand Targhee and Waterville Valley resorts
under the terms of special use permits issued by the United States Forest
Service (the "Forest Service" or the "USFS"). The special use permits for the
Bear Mountain, Sierra, Waterville Valley, the Summit and Grand Targhee resorts
were reissued at the time of the Company's acquisition of such resorts, with the
Bear Mountain permit expiring in
 
                                       16
<PAGE>   19
 
2020, the Sierra permit expiring in 2008, the Waterville Valley permit expiring
in 2034, the Summit permit expiring in 2032 and the Grand Targhee permit
expiring in 2034.
 
     A substantial portion of the real property associated with the Loon
Mountain resort is likewise used under Forest Service permits. In 1993, the
Forest Service authorized various lift, trail and snowmaking improvements on
Loon Mountain and an expansion onto South Mountain. In 1996, the United States
Court of Appeals for the First Circuit overturned this authorization on the
ground that the Forest Service had failed to properly address certain
environmental issues under the National Environmental Policy Act ("NEPA").
Certain improvements and part of the expansion had been constructed before the
First Circuit ruled. On May 5, 1997, the United States District Court for the
District of New Hampshire entered a stipulated order which authorizes existing
improvements to remain in place and existing operations to continue but
generally prohibits future construction, restricts use of a major snowmaking
water source, and requires certain water discharge permits to be pursued,
pending Forest Service reconsideration of the projects under NEPA. In August
1998, the Forest Service announced that it expects to complete this NEPA process
and issue a new decision on the improvements sometime in the Spring of 1999. See
Part II -- Item 1 for a further discussion.
 
     Existing use of Loon Mountain is authorized under a term permit, which
covers facilities and expires in 2006, and a supplemental permit, which covers
the balance of Loon Mountain; existing, non-skiing, use of South Mountain is
authorized under an annual permit which expires in February 1999, but is
expected to be reissued. After the Forest Service reconsiders the improvements
and expansion under NEPA, it will need to render a new decision and, if
appropriate, issue a new permit. At that time, the District Court order will
terminate. Based upon the existing administrative record, and certain proposed
modifications to the resort's snowmaking operations which are intended to better
protect water resources, the Company expects that the improvements and expansion
will be approved by the Forest Service. However, no assurance can be given
regarding the timing or outcome of this process.
 
     In August 1997, the Forest Service authorized the Loon Mountain resort to
construct a new snowmaking pipeline across permitted land. The Forest Service
found that such construction is consistent with the District Court order and
will enable the resort to modify its snowmaking operations to better protect
water resources and replace snowmaking capacity lost under the order. Although
the pipeline has been completed, its use was challenged by private parties who
assert that the Forest Service violated NEPA. On January 20, 1998, the United
States District Court for the District of New Hampshire issued a decision
finding that the Forest Service violated NEPA in failing to address the
potential for the new pipeline to increase the amount of snow made and any
associated environmental effects. On March 10, 1998, the District Court issued a
series of further orders which, among other things, direct the Forest Service to
re-evaluate the pipeline, allow such re-evaluation to proceed separate from and
prior to the Forest Service's reconsideration of the larger expansion, and
preclude LMRC from using the pipeline pending further action by the Court.
 
     On July 2, 1998, the Forest Service issued a new decision reapproving the
pipeline and addressing its potential to increase the amount of snow made. This
decision was challenged by several of the same private parties, who, again,
asserted that it violated NEPA. At this time, briefing on these challenges has
been completed and they are awaiting decision by the District Court. In
addition, the Forest Service is currently considering the potential effect on
its decision of certain additional information relating to one of the studies
that it relied upon; it is possible that this could lead to further analysis or
modification of the decision. Finally, two of the parties whose challenge to the
new pipeline decision is pending before the District Court filed a new lawsuit
on August 20, 1998, in the same Court, challenging the same decision on the same
grounds, as well as additional grounds that another party has asserted in that
case or that were previously addressed by the District Court in its January 20,
1998 decision. No assurances can be given regarding the timing or outcome of
this process. See Part II -- Item I for a further discussion.
 
     The Forest Service has the right to approve the location, design and
construction of improvements in the permit area and many operational matters.
Under the permits, the Company is required to pay fees to the Forest Service.
Under recently enacted legislation, retroactively effective to the 1995/96 ski
season, the fees range from 1.5% to approximately 4.0% of certain revenues, with
the rate generally rising with increased revenues. However, through fiscal 1998,
the Company is required to pay the greater of (i) the fees due under
 
                                       17
<PAGE>   20
 
the new legislation and (ii) the fees actually paid for the 1994/95 ski season,
unless gross revenue in a ski season falls more than 10% below that of the
1994/95 ski season, in which case the fees due are calculated solely under the
new legislation. The calculation of gross revenues includes, among other things,
lift tickets, ski school lessons, food and beverages, rental equipment and
retail merchandise revenues. Total fees paid to the Forest Service by the
Company during the year ended October 31, 1997 were approximately $665,000. The
new legislation is not expected to have a material effect on fees payable in
future periods.
 
     The Company believes that its relations with the Forest Service are good,
and, to the best of its knowledge, no special use permit for any major ski
resort has ever been terminated by the Forest Service. Prior to permit
termination, the USFS would be required to notify the Company of the grounds for
such action and to provide it with reasonable time to correct any curable
non-compliance.
 
REGULATORY MATTERS
 
     The Company's resorts are subject to a wide variety of federal, state and
local laws and regulations relating to land use, water resources, discharge,
storage, treatment and disposal of various materials and other environmental
matters. Management believes that the Company's resorts are presently in
compliance with all land use and environmental laws, except where non-compliance
is not expected to result in a material adverse effect on its financial
condition. The Company also believes that the cost of complying with known
requirements, as well as anticipated investigation and remediation activities,
will not have material adverse effect on its financial condition or future
results of operations. However, failure to comply with such laws could result in
the imposition of severe penalties and other costs or restrictions on operations
by government agencies or courts that could adversely affect operations.
 
     The Company has not received any notice of material non-compliance with
permits, licenses or approvals necessary for the operation of its properties or
of any material liability under any environmental law or regulation. However, at
Grand Targhee, the Wyoming Department of Environmental Quality (the "DEQ") has
issued a Notice of Violation of state water pollution requirements based on
alleged discharge from a wastewater lagoon without a permit. The Company has
entered into a negotiated compliance order with the DEQ requiring construction
and operation of a new wastewater facility by November 1998 at a cost of
approximately $1.0 million. In November 1997, the concrete construction of the
footings, walls and treatment tanks of such facility was completed.
 
     Pursuant to the air emissions reduction program currently in effect in the
area regulated by the South Coast Air Quality Management District, where Bear
Mountain is located, Bear Mountain will be required to "bank" emission credits
from other facilities which have already implemented NO(x) emission reductions.
The Company may purchase "banked" emission credits in a one-time transaction at
the current market rate of approximately $700,000 or over time up to the year
2010 at prevailing market rates.
 
     The operations at the resorts require permits and approvals from certain
federal, state and local authorities. In addition, the Company's operations are
heavily dependent upon its continued ability, under applicable laws,
regulations, policies, permits, licenses or contractual arrangements, to have
access to adequate supplies of water with which to make snow and service the
other needs of its facilities, and otherwise to conduct its operations. There
can be no assurance that new applications of existing laws, regulations and
policies, or changes in such laws, regulations and policies will not occur in a
manner that could have a detrimental effect on the Company, or that material
permits, licenses or agreements will not be canceled, non-renewed, or renewed on
terms materially less favorable to the Company. Major expansions of any one or
more resorts could require, among other things, the filing of an environmental
impact statement or other documentation with the Forest Service and state or
local governments NEPA and certain state or local counterparts if it is
determined that the expansion may have a significant impact upon the
environment. Although the Company has no reason to believe that it will not be
successful in implementing its operations and development plans, no assurance
can be given that necessary permits and approvals will be obtained.
 
     Pursuant to the First Circuit's decision and the District Court order, each
discussed under Part II -- Item 1, LMRC has applied to the Environmental
Protection Agency ("EPA") for a Clean Water Act (the "CWA") discharge permit
covering discharges associated with its snowmaking operations. Certain ongoing
                                       18
<PAGE>   21
 
discharges are authorized by the District Court order pending final action on
the permit and subject to the Court's reserved power to modify such approval to
address any resulting environmental issues. The Company expects the EPA to issue
a permit addressing future discharges prior to the 1998/99 ski season. LMRC does
not expect this permit to involve costs or restrictions that have a material
adverse effect on the resort's operations, but no assurances may be given as to
the outcome or timing of this process.
 
     Certain regulatory approvals associated with the new snowmaking pipeline at
Loon Mountain impose minimum stream flow requirements on LMRC. These
requirements will compel LMRC to construct water storage facilities within the
next ten years, and such construction will require further regulatory approvals
and environmental documentation under the NEPA.
 
     In addition, LMRC was notified in September 1997 that it had allegedly
filled certain wetlands at the resort in violation of the CWA. In response, LMRC
worked with the EPA to remove the alleged fill and implement certain erosion
control measures. On January 15, 1998, an individual notified the EPA, LMRC, and
certain other persons that he intends to instigate within 60 days thereof a
lawsuit under the CWA regarding the alleged wetland violation. On February 2,
1998, the EPA wrote such individual that the alleged fill had been removed and
that it does not believe there is a continuing violation at the site. While the
Company believes that its position will prevail, no assurance can be given
regarding the outcome.
 
                                       19
<PAGE>   22
 
                           PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS.
 
     Each of the Company's resorts has pending and is regularly subject to
litigation with respect to personal injury claims relating principally to skiing
activities at its resorts. The Company and each of its resorts maintain
extensive liability insurance that the Company considers adequate to insure
claims related to usual and customary risks associated with the operation of ski
resorts. However, the outcome of any litigation is inherently uncertain and no
assurances can be given as to the effects that any litigation in which the
Company is involved will have on the Company's future results of operations or
financial condition.
 
     On March 25, 1997, Killington West, Ltd., a California corporation formerly
known as Bear Mountain, Ltd. ("Killington"), filed a breach of contract lawsuit
in the Superior Court of the State of California (County of San Bernardino)
against Fibreboard Corporation ("Fibreboard") and Bear Mountain, Inc. alleging
that Fibreboard and Bear Mountain, Inc. breached the asset purchase agreement
dated October 6, 1995 (the "Original Bear Mountain Agreement") among Killington,
Fibreboard and Bear Mountain, Inc., pursuant to which Bear Mountain, Inc.
acquired the Bear Mountain ski resort from Killington. Killington's lawsuit
concerns an alleged breach by Fibreboard and Bear Mountain, Inc. of a change of
control provision in the Original Bear Mountain Agreement. In connection with
the Company's acquisition of Bear Mountain, Inc. in December 1996, the Company
obtained from Fibreboard indemnification for any claim that might be made by
Killington, and further, required that $1.0 million of the purchase price be
held in escrow pending the outcome of any potential disputes with Killington.
Fibreboard has acknowledged its obligation to indemnify Bear Mountain, Inc. with
respect to the Killington lawsuit and has commended the defense of such lawsuit
on behalf of Fibreboard and Bear Mountain, Inc. However, no assurances can be
given regarding the outcome of this litigation.
 
     In connection with the Loon Mountain Acquisition, certain shareholders (the
"Plaintiffs") of LMRC filed a lawsuit in New Hampshire state court against LMRC
and its former directors alleging breach of fiduciary duty and against the
Company alleging that the Company failed to comply with the New Hampshire
Security Takeover Disclosure Act (the "Takeover Statute"). Prior to the filing
of the lawsuit against the Company, the Company had sought and received a "no
action" order from the Bureau of Securities Regulation, New Hampshire Department
of State (the "Bureau") finding that the Takeover Statute was inapplicable to
the proposed merger. The two lawsuits were consolidated in the Superior Court in
Grafton County, New Hampshire. The Plaintiffs' initial request for a preliminary
injunction prohibiting the Company (or its affiliates) from proceeding with the
Loon Mountain Acquisition based on allegations that the Company failed to comply
with the Takeover Statute was denied on October 28, 1997. Before the litigation
proceeded further, both parties amended the merger agreement relating to the
Loon Mountain Acquisition. The Company then sought and obtained an additional
order by the Bureau that the Takeover Statue did not apply. On January 30, 1998,
the Company filed its answer to the Plaintiffs' petition and, on February 10,
1998, filed a motion to dismiss the action against the Company under the
Takeover Statute in its entirety, asserting, inter alia, that the Takeover
Statute did not apply to the transaction as a matter of law. On June 11, 1998,
the Court denied the Company's motion to dismiss. On July 2, 1998, the Company
filed a motion to reconsider the Court's decision. On August 1, 1998, the Court
granted the Company's motion for reconsideration and dismissed Plaintiffs'
claims under the Takeover Statute. Plaintiffs have filed a motion for
reconsideration as to the Court's dismissal of the Takeover Statute claim, and
they retain appeal rights with respect to the issue. Plaintiffs' breach of
fiduciary duty action against LMRC and its directors remains pending. Plaintiffs
have conducted limited discovery and a trial date has not been set. Plaintiffs'
potential remedies include monetary damages for the directors' alleged failure
to maximize the consideration to LMRC shareholders in the Loon Mountain
Acquisition. If Plaintiffs are successful in pursuing their claims against the
former LMRC directors, LMRC has certain indemnity obligations to the former
directors and is currently involved in such directors' defense. The Company may
have available to it as a defense the exclusive remedy provisions of the New
Hampshire statute on dissenters' rights, which rights the Plaintiffs have
exercised. While management of the Company believes that the former LMRC
directors will prevail against Plaintiffs' claims, no assurance can be given
regarding the outcome of this litigation.
 
                                       20
<PAGE>   23
 
     In 1995, an individual sued the Forest Service in the United States
District Court for the District of New Hampshire alleging that the Forest
Service had violated NEPA, the CWA, and an executive order in 1993 approving
improvements to facilities on Loon Mountain and an expansion of the Loon
Mountain resort onto South Mountain. LMRC and an environmental group intervened.
The District Court entered summary judgment for the Forest Service on all claims
and the original plaintiff along with an intervening party appealed. In December
1996, the United States Court of Appeals for the First Circuit reversed the
District Court and ruled that the Forest Service must reconsider certain
environmental issues under NEPA and that LMRC must obtain a discharge permit
under the CWA for certain discharges from its snowmaking system. On May 5, 1997,
the District Court entered a stipulated order that: enjoins LMRC from any
further construction implementing the project, with certain limited exceptions;
imposes various restrictions on LMRC's existing snowmaking operations and
requires LMRC to apply for a CWA discharge permit for discharges of water and
any associated pollutants associated with its snowmaking: allows existing
construction to remain in place and existing uses to continue; requires LMRC to
undertake certain erosion control and monitoring measures; requires the Forest
Service to prepare supplemental NEPA documentation on the improvements and
expansion; and reserves the right to require restoration of areas developed
under the 1993 Forest Service decision to their preexisting condition if not
ultimately approved by the Forest Service. This order will remain in effect
until the supplemental NEPA process is completed and the Forest Service issues a
new special use permit. The Forest Service currently expects to complete this
process in the Spring of 1999. The Company has applied for requisite permits
under the CWA for its snowmaking system and expects them to be issued upon
acceptable terms. However, no assurance can be provided on the timing or terms
of these permitting proceedings.
 
     Following the First Circuit's decision, the plaintiffs filed a motion with
the District Court asking it to impose a civil penalty under the CWA of
$5,550,125 and attorney fees and costs against LMRC for unpermitted discharges
into Loon Pond without a discharge permit during its snowmaking operations in
the 1996/97 ski season and preceding years. The discharge at issue involves
water transfers from the East Branch of the Pemigewasset River and drain back
from the snowmaking system into Loon Pond. In connection with the Loon Mountain
Acquisition, the Company obtained environmental pollution insurance for
$4,500,000 of coverage above a $1.2 million deductible to cover any penalties,
fees, and costs that the Court assesses against LMRC. LMRC has asserted various
defenses to the merits and amount of penalty sought. However, no assurances can
be given regarding the outcome of this litigation.
 
     On August 29, 1997, the plaintiffs filed a second lawsuit against the
Forest Service in the United States District Court for the District of New
Hampshire alleging that the Forest Service violated NEPA in authorizing LMRC to
construct and operate a snowmaking pipeline across permitted land. Another party
intervened as plaintiff, and LMRC intervened as defendant. The Forest Service
and LMRC asserted various defenses. On January 20, 1998, the District Court held
that the pipeline may be analyzed and approved by the Forest Service separately
from the South Mountain expansion, but that the Forest Service violated NEPA by
failing to consider the potential environmental effects of the alleged increase
in snowmaking capacity. On March 10, 1998, the District Court issued a series of
further orders which establish a schedule for the Forest Service's
reconsideration of the pipeline and any resulting challenges, deny plaintiffs'
request that such reconsideration be deferred until the Forest Service's
decision on the larger expansion, and preclude Loon Mountain from using the
pipeline pending further action by the Court. Three of the plaintiffs have
appealed the District Court's denial of their claim that reconsideration of the
pipeline be deferred until the Forest Service's decision on the larger
expansion, but briefing on these appeals has not yet commenced in the United
States Court of Appeals for the First Circuit.
 
     On July 2, 1998, the Forest Service issued a new decision reauthorizing the
pipeline and addressing the potential environmental effects of the projected
increase in snowmaking capacity. Three of the prior plaintiffs filed challenges
to this decision with the District Court, alleging that it, too, violated NEPA.
The Forest Service and LMRC have asserted various defenses, and the challenges
are currently awaiting decision by the District Court. In addition, the Forest
Service is currently considering the potential effect on its decision of certain
additional documentation relating to one of the studies that it relied upon; it
is possible that this could
 
                                       21
<PAGE>   24
 
lead to further analysis or modification by the Forest Service of its decision.
No assurances can be given regarding the timing or outcome of this process.
 
     On August 20, 1998, two of the plaintiffs who have challenges to the new
pipeline decision pending before the District Court filed a separate lawsuit
against the Forest Service in the same Court challenging the pipeline decision
on the same grounds, as well as additional grounds that another party has
asserted in that case or that are identical to claims that the Court addressed
in its January 20, 1998 decision. The government has not yet responded to the
complaint and LMRC is not a party to the case. The Company believes that there
are defenses to the new complaint, but no assurances can be given regarding the
outcome or timing of this litigation.
 
     On August 1, 1997, two plaintiffs filed a lawsuit against the Town of
Lincoln Planning Board and LMRC in the Grafton County Superior Court in the
State of New Hampshire alleging that the Lincoln Planning Board had improperly
approved various facilities associated with the snowmaking pipeline. On
September 30, 1997, LMRC moved to dismiss the claims against it, but sought to
remain in the case as in intervenor. Also on September 30, 1997, the Planning
Board answered the complaint, denying most of the allegations and raising
various defenses. On February 23, 1998, the court granted LMRC's motion to
dismiss. However, in the event that the plaintiffs are successful, the Planning
Board would be requested to reconsider the facilities and issue a new decision.
No assurance can be given regarding the outcome or timing of this litigation or
any resulting Planning Board review.
 
     In connection with the Seven Springs Acquisition certain shareholders of
Seven Springs filed a lawsuit in the Court of Common Pleas of Somerset County,
Pennsylvania against the Company, Acquisition Sub, and Seven Springs and certain
of its directors, seeking a declaratory judgment, along with other relief
including the rescission of the Merger Agreement by and among the Company,
Acquisition Sub and Seven Springs. Plaintiffs allege that the terms of the Seven
Springs Shareholder Agreement ban the consummation of the Seven Springs
Acquisition. While the Company believes that Seven Springs' position will
prevail that the Seven Springs Shareholders Agreement does not apply to the
transactions contemplated by the Merger Agreement, no assurance can be made
regarding the timing or the outcome of this litigation. See Part II -- Item 5.
 
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
 
     None.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
 
     There has been no material default with respect to any of the Company's
senior securities which has not been waived or cured.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     None.
 
ITEM 5. OTHER INFORMATION.
 
     On August 28, 1998, Booth Creek, Acquisition Sub, and Seven Springs, the
owner and operator of the Seven Springs Mountain Resort, a ski resort and
conference center, entered into the Merger Agreement, pursuant to which Booth
Creek would acquire Seven Springs through the merger of Acquisition Sub with and
into Seven Springs. The aggregate merger consideration and related payments will
be approximately $83.0 million plus certain deferred payments, subject to
certain price adjustments. The Seven Springs Acquisition is conditioned on the
receipt of a judicial determination that the Seven Springs Shareholder Agreement
does not apply to the transactions contemplated by the Merger Agreement, as well
as various customary closing conditions. Booth Creek has been made a party to
the litigation seeking a declaratory judgment as to the foregoing. See Part
II -- Item 1.
 
                                       22
<PAGE>   25
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
 
     a. Exhibits
 
<TABLE>
<CAPTION>
EXHIBIT
  NO.                        DESCRIPTION OF EXHIBIT
-------                      ----------------------
<C>       <S>
  2.1     Agreement of Merger dated as of August 28, 1998 by and among
          Booth Creek Ski Holdings, Inc., Booth Creek Ski Acquisition,
          Inc. and Seven Springs Farm, Inc.
 27.1     Financial Data Schedule regarding 1998 Financial Statements
</TABLE>
 
     b. Reports on Form 8-K
 
          No reports on Form 8-K were filed during the quarterly period ended
     July 31, 1998.
 
                                       23
<PAGE>   26
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
Undersigned, thereunto duly authorized.
 
                                          BOOTH CREEK SKI HOLDINGS, INC.
                                          (Registrant)
 
                                                 /s/ ELIZABETH J. COLE
 
                                          --------------------------------------
                                                    Elizabeth J. Cole
                                             Executive Vice President, Chief
                                                    Financial Officer
 
                                                   /s/ BRIAN J. POPE
 
                                          --------------------------------------
                                                      Brian J. Pope
                                             Vice President of Accounting and
                                                         Finance
                                                (Chief Accounting Officer)
 
September 14, 1998
Date
 
                                       24
<PAGE>   27
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
  NO.                             DESCRIPTION
-------                           -----------
<S>       <C>
  2.1     Agreement of Merger dated as of August 28, 1998 by and among
          Booth Creek Ski Holdings, Inc., Booth Creek Ski Acquisition,
          Inc. and Seven Springs Farm, Inc.
 27.1     Financial Data Schedule regarding 1998 Financial Statements
</TABLE>