**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

### **FORM10-Q**

**x****                             ****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

for the quarterlyperiod ended January 28, 2007

or

**o****                                ****TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

for the transitionperiod from                    to                    .

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**Commission File Number 1-13507**

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#### **AmericanSkiing Company**(Exact name of registrant as specified in its charter)

| **Delaware**                     |   | **04-3373730**                        |
|----------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of |   | (I.R.S. Employer  Identification No.) |
| incorporation or  organization)  |   |                                  |

 

**136 HeberAvenue, #303P.O.  Box 4552Park City, Utah 84060**(Address of principal executive offices)(Zip Code)

**(435)615-0340**(Registrant’s telephone number, including area code)

**Not Applicable**(Former name, former address and former fiscal year, ifchanged since last report.)

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes  x    No  o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Checkone):

| Large accelerated  filer  o |   | Accelerated  filer  o |   | Non-accelerated  filer  x |
|---------------------------------------|--------|---------------------------------|--------|-------------------------------------|

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).  Yes  o    No  x

As of March 1, 2007, 31,738,183 shares of commonstock were issued and outstanding; of which 14,760,530 shares were Class Acommon stock.

 

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**Table of Contents**
| Part I - Financial  Information  |   |
|----------------------------------|--------|
|                             |   |
| Item  1.                         |   | Financial  Statements |   |
|                             |   |   |   |
|                             |   | Condensed Consolidated Statements of Operations and  Changes in Accumulated Deficit for the 13 weeks ended January 29, 2006  and January 28, 2007 (unaudited) |   |
|                             |   |   |   |
|                             |   | Condensed Consolidated Statements of Operations and  Changes in Accumulated Deficit for the 26 weeks ended January 29, 2006  and January 28, 2007 (unaudited) |   |
|                             |   |   |   |
|                             |   | Condensed Consolidated Balance Sheets as of July 30,  2006 and January 28, 2007 (unaudited) |   |
|                             |   |   |   |
|                             |   | Condensed Consolidated Statements of Cash Flows  for the 26 weeks ended January 29, 2006 and January 28, 2007 (unaudited) |   |
|                             |   |   |   |
|                             |   | Notes to Condensed Consolidated Financial Statements  (unaudited) |   |
|                             |   |   |   |
| Item 2.                          |   | Management’s Discussion and Analysis of Financial  Condition and Results of Operations |   |
|                             |   |   |   |
|                             |   | General |   |
|                             |   |   |   |
|                             |   | Liquidity and Capital Resources |   |
|                             |   |   |   |
|                             |   | Results of Operations |   |
|                             |   |   |   |
| Item 3.                          |   | Quantitative and Qualitative Disclosures about Market  Risk |   |
|                             |   |   |   |
| Item  4.                         |   | Controls  and Procedures |   |
|                             |   |   |   |
| Part II —Other  Information |   |
|                             |   |
| Item  1A.                        |   | Other Risk Factors |   |
|                             |   |   |   |
| Item 4.                          |   | Submission of Matters to a Vote of Security Holders |   |
|                             |   |   |   |
| Item 6.                          |   | Exhibits |   |

 

2

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** **

**Part I -Financial Information**

**Item 1 Financial Statements**

**American Skiing Company and SubsidiariesCondensed Consolidated Statements of Operations and Changes in AccumulatedDeficit(In thousands, except per share amounts)**
| ** **                                                                                                              | ** ** | **13 weeks ended**   | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                              | ** ** | **January 29, 2006** | ** ** | **January 28, 2007** | ** ** |
| ** **                                                                                                              | ** ** | **(unaudited)**                | ** ** | **(unaudited)** | ** ** |
| Net revenues:                                                                                                           |       |                           |       |   |   |
| Resort                                                                                                                  |       | $                              | 80,482     |   | $ | 72,594 |   |
| Real estate                                                                                                             |       | 1,466                          |       | 837 |   |
| Total net  revenues                                                                                                     |       | 81,948                         |       | 73,431 |   |
|                                                                                                                    |       |                           |       |   |   |
| Operating expenses:                                                                                                     |       |                           |       |   |   |
| Resort                                                                                                                  |       | 53,025                         |       | 52,380 |   |
| Real estate                                                                                                             |       | 2,247                          |       | 882 |   |
| Marketing,  general and administrative                                                                                  |       | 14,494                         |       | 13,670 |   |
| Depreciation and  amortization                                                                                          |       | 10,940                         |       | 10,270 |   |
| Total operating  expenses                                                                                               |       | 80,706                         |       | 77,202 |   |
|                                                                                                                    |       |                           |       |   |   |
| Income (loss) from  operations                                                                                          |       | 1,242                          |       | (3,771 | ) |
| Interest expense                                                                                                        |       | (15,325                        | )          | (17,336 | ) |
|                                                                                                                    |       |                           |       |   |   |
| Loss from continuing  operations, net of taxes of $0 for 2006 and 2007, respectively                                    |       | (14,083                        | )          | (21,107 | ) |
|                                                                                                                    |       |                           |       |   |   |
| Income from  discontinued operations of Steamboat resort, net of taxes of $0 for 2006 and  2007, respectively (Note 10) |       | 2,762                          |       | 6,154 |   |
|                                                                                                                    |       |                           |       |   |   |
| Net loss                                                                                                                |       | $                              | (11,321    | ) | $ | (14,953 | ) |
|                                                                                                                    |       |                           |       |   |   |
| Accumulated deficit,  beginning of period                                                                               |       | $                              | (659,079   | ) | $ | (727,852 | ) |
|                                                                                                                    |       |                           |       |   |   |
| Net loss                                                                                                                |       | (11,321                        | )          | (14,953 | ) |
|                                                                                                                    |       |                           |       |   |   |
| Accumulated deficit,  end of period                                                                                     |       | $                              | (670,400   | ) | $ | (742,805 | ) |
|                                                                                                                    |       |                           |       |   |   |
| ** **                                                                                                              |       |                           |       |   |   |
| Basic and diluted net  loss per common share                                                                            |       |                           |       |   |   |
|                                                                                                                    |       |                           |       |   |   |
| Loss from continuing  operations                                                                                        |       | $                              | (0.45      | ) | $ | (0.66 | ) |
| Income from  discontinued operations                                                                                    |       | 0.09                           |       | 0.19 |   |
| Loss attributable to  common stockholders                                                                               |       | $                              | (0.36      | ) | $ | (0.47 | ) |
|                                                                                                                    |       |                           |       |   |   |
| Basic and diluted weighted average common shares outstanding                                                            |       | 31,738                         |       | 31,738 |   |

 

See accompanying Notes to Condensed ConsolidatedFinancial Statements

3

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**American Skiing Company and SubsidiariesCondensed Consolidated Statements of Operations and Changes in AccumulatedDeficit(In thousands, except per share amounts)**

** **
| ** **                                                                                                            | ** ** | **26 weeks ended**   | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                            | ** ** | **January 29, 2006** | ** ** | **January 28, 2007** | ** ** |
| ** **                                                                                                            | ** ** | **(unaudited)**                | ** ** | **(unaudited)** | ** ** |
| Net revenues:                                                                                                         |       |                           |       |   |   |
| Resort                                                                                                                |       | $                              | 93,987     |   | $ | 86,528 |   |
| Real estate                                                                                                           |       | 3,041                          |       | 2,179 |   |
| Total net revenues                                                                                                    |       | 97,028                         |       | 88,707 |   |
|                                                                                                                  |       |                           |       |   |   |
| Operating  expenses:                                                                                                  |       |                           |       |   |   |
| Resort                                                                                                                |       | 71,901                         |       | 72,533 |   |
| Real estate                                                                                                           |       | 3,205                          |       | 2,210 |   |
| Marketing, general and administrative                                                                                 |       | 23,719                         |       | 23,761 |   |
| Depreciation and amortization                                                                                         |       | 13,239                         |       | 12,359 |   |
| Total operating expenses                                                                                              |       | 112,064                        |       | 110,863 |   |
|                                                                                                                  |       |                           |       |   |   |
| Loss from  operations                                                                                                 |       | (15,036                        | )          | (22,156 | ) |
| Interest expense                                                                                                      |       | (29,960                        | )          | (33,984 | ) |
| Gain on sale of  property                                                                                             |       | 169                            |       | — |   |
|                                                                                                                  |       |                           |       |   |   |
| Loss from  continuing operations, net of taxes of $0 for 2006 and 2007, respectively                                  |       | (44,827                        | )          | (56,140 | ) |
|                                                                                                                  |       |                           |       |   |   |
| Loss from  discontinued operations of Steamboat resort, net of taxes of $0 for 2006 and  2007, respectively (Note 10) |       | (8,693                         | )          | (4,132 | ) |
|                                                                                                                  |       |                           |       |   |   |
| Net loss                                                                                                              |       | $                              | (53,520    | ) | $ | (60,272 | ) |
|                                                                                                                  |       |                           |       |   |   |
| Accumulated  deficit, beginning of period                                                                             |       | $                              | (616,880   | ) | $ | (682,533 | ) |
|                                                                                                                  |       |                           |       |   |   |
| Net loss                                                                                                              |       | (53,520                        | )          | (60,272 | ) |
|                                                                                                                  |       |                           |       |   |   |
| Accumulated  deficit, end of period                                                                                   |       | $                              | (670,400   | ) | $ | (742,805 | ) |
|                                                                                                                  |       |                           |       |   |   |
| ** **                                                                                                            |       |                           |       |   |   |
| Basic and  diluted net loss per common share                                                                          |       |                           |       |   |   |
|                                                                                                                  |       |                           |       |   |   |
| Loss from  continuing operations                                                                                      |       | $                              | (1.41      | ) | $ | (1.77 | ) |
| Loss from  discontinued operations                                                                                    |       | (0.28                          | )          | (0.13 | ) |
| Net loss  attributable to common stockholders                                                                         |       | $                              | (1.69      | ) | $ | (1.90 | ) |
|                                                                                                                  |       |                           |       |   |   |
|                                                                                                                  |       |                           |       |   |   |
| Basic and  diluted weighted average common shares outstanding                                                         |       | 31,738                         |       | 31,738 |   |

 

See accompanying Notes to Condensed ConsolidatedFinancial Statements

4

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**American Skiing Company and SubsidiariesCondensed Consolidated Balance Sheets(In thousands, except share and per share amounts)**
| ** **                      | ** ** | ** July 30, 2006 ** | ** ** | **January 28, 2007** | ** ** |
|---------------------------------|------------|-----------------------------------------|------------|--------------------------------|------------|
| ** **                      | ** ** | **(unaudited)**                         | ** ** | **(unaudited)**                | ** ** |
| **Assets**                      |       |                                    |       |                           |       |
| Current assets                  |       |                                    |       |                           |       |
| Cash and cash equivalents       |       | $                                       | 6,269      |                           | $          | 10,652 |   |
| Restricted cash                 |       | 2,679                                   |       | 2,595                          |       |
| Accounts receivable, net        |       | 6,273                                   |       | 7,443                          |       |
| Inventory                       |       | 4,115                                   |       | 7,205                          |       |
| Prepaid expenses and other      |       | 2,885                                   |       | 7,153                          |       |
| Assets held for sale (Note 10)  |       | —                                  |       | 94,603                         |       |
| Deferred financing costs, net   |       | —                                  |       | 4,802                          |       |
| Deferred income taxes           |       | 3,923                                   |       | 3,923                          |       |
| Total current assets            |       | 26,144                                  |       | 138,376                        |       |
|                            |       |                                    |       |                           |       |
| Property and  equipment, net    |       | 330,231                                 |       | 253,107                        |       |
| Real estate  developed for sale |       | 2,191                                   |       | 774                            |       |
| Intangible  assets, net         |       | 6,249                                   |       | 6,220                          |       |
| Deferred  financing costs, net  |       | 5,361                                   |       | —                         |       |
| Other assets                    |       | 12,488                                  |       | 9,941                          |       |
| Total assets                    |       | $                                       | 382,664    |                           | $          | 408,418 |   |

 

(continued on next page)

See accompanying Notes to Condensed ConsolidatedFinancial Statements

5

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**American Skiing Company and SubsidiariesCondensed Consolidated Balance Sheets (continued)(In thousands, except share and per share amounts)**
| ** **                                                                                                                                                                                                                                                  | ** ** | **July 30, 2006** | ** ** | ** January 28, 2007 ** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                  | ** ** | **(unaudited)**             | ** ** | **(unaudited)**                            | ** ** |
| **Liabilities  and Stockholders’ Deficit**                                                                                                                                                                                                             |       |                        |       |                                       |       |
| Current  liabilities                                                                                                                                                                                                                                        |       |                        |       |                                       |       |
| Current portion of long-term debt                                                                                                                                                                                                                           |       | $                           | 9,286      |                                       | $          | 198,738 |   |
| Accounts payable and other current liabilities                                                                                                                                                                                                              |       | 42,155                      |       | 47,633                                     |       |
| Deposits and deferred revenue                                                                                                                                                                                                                               |       | 25,144                      |       | 38,353                                     |       |
| Liabilities related to assets held for sale (Note  10)                                                                                                                                                                                                      |       | —                      |       | 32,068                                     |       |
| Total current liabilities                                                                                                                                                                                                                                   |       | 76,585                      |       | 316,792                                    |       |
|                                                                                                                                                                                                                                                        |       |                        |       |                                       |       |
| Long-term debt,  net of current portion                                                                                                                                                                                                                     |       | 198,021                     |       | 10,840                                     |       |
| Subordinated  notes and debentures                                                                                                                                                                                                                          |       | 113,685                     |       | 124,568                                    |       |
| Other long-term  liabilities                                                                                                                                                                                                                                |       | 12,259                      |       | 7,641                                      |       |
| Deferred income  taxes                                                                                                                                                                                                                                      |       | 3,923                       |       | 3,923                                      |       |
| Mandatorily  Redeemable 81⁄2% Series B Convertible Participating Preferred Stock, par value  of $0.01 per share; 150,000 shares authorized, issued, and outstanding  (redemption value of $0)                                                            |       | —                      |       | —                                     |       |
| Mandatorily  Redeemable Convertible Participating 12% Series C-1 Preferred Stock, par  value of $0.01 per share; 40,000 shares authorized, issued, and outstanding,  including cumulative dividends (redemption value of $71,530 and $75,874, respectively) |       | 71,320                      |       | 75,762                                     |       |
| Mandatorily  Redeemable 15% Nonvoting Series C-2 Preferred Stock, par value of $0.01 per  share; 139,453 shares authorized, issued, and outstanding, including cumulative  dividends (redemption value of $287,624 and $309,539, respectively)              |       | 286,801                     |       | 309,094                                    |       |
| Mandatorily  Redeemable Nonvoting Series D Participating Preferred Stock, par value of  $0.01 per share; 5,000 shares authorized; no shares issued or outstanding                                                                                           |       | —                      |       | —                                     |       |
| Total liabilities                                                                                                                                                                                                                                           |       | 762,594                     |       | 848,620                                    |       |
|                                                                                                                                                                                                                                                        |       |                        |       |                                       |       |
| Stockholders’  deficit                                                                                                                                                                                                                                 |       |                        |       |                                       |       |
| Common stock, Class A, par value of $0.01 per share;  15,000,000 shares authorized; 14,760,530 shares issued and outstanding                                                                                                                                |       | 148                         |       | 148                                        |       |
| Common stock, par value of $0.01 per share;  100,000,000 shares authorized;16,977,653 shares issued and outstanding                                                                                                                                         |       | 170                         |       | 170                                        |       |
| Additional paid-in capital                                                                                                                                                                                                                                  |       | 302,285                     |       | 302,285                                    |       |
| Accumulated deficit                                                                                                                                                                                                                                         |       | (682,533                    | )          | (742,805                                   | )          |
| Total stockholders’ deficit                                                                                                                                                                                                                            |       | (379,930                    | )          | (440,202                                   | )          |
| Total liabilities  and stockholders’ deficit                                                                                                                                                                                                           |       | $                           | 382,664    |                                       | $          | 408,418 |   |

 

See accompanying Notes to Condensed ConsolidatedFinancial Statements

6

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**American Skiing Company and SubsidiariesCondensed Consolidated Statements of Cash Flows(In thousands)**
| ** **                                                                                                                  | ** ** | **26 weeks ended**               | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                                                  | ** ** | ** January 29, 2006 ** | ** ** | **  January 28, 2007  ** | ** ** |
| ** **                                                                                                                  | ** ** | **(unaudited)**                            | ** ** | **(unaudited)** | ** ** |
| **Cash  flows from operating activities**                                                                                   |       |                                       |       |   |   |
| Net loss                                                                                                                    |       | $                                          | (53,520    | ) | $ | (60,272 | ) |
| Adjustments to  reconcile net loss to net cash provided by (used in) operating activities:                                  |       |                                       |       |   |   |
| Depreciation and amortization                                                                                               |       | 13,239                                     |       | 12,359 |   |
| Amortization of deferred financing costs and  accretion of discount and dividends on mandatorily redeemable preferred stock |       | 23,683                                     |       | 27,289 |   |
| Non-cash interest on junior subordinated notes                                                                              |       | 5,793                                      |       | 6,462 |   |
| Non-cash (increase) decrease in fair value of  interest rate swap agreement                                                 |       | (1,036                                     | )          | 487 |   |
| Non-cash Phantom Equity Plan compensation expense                                                                           |       | 149                                        |       | 59 |   |
| Gain from sale of property                                                                                                  |       | (429                                       | )          | — |   |
| Cash flows from discontinued operations                                                                                     |       | 18,420                                     |       | 14,311 |   |
| Decrease (increase) in assets:                                                                                              |       |                                       |       |   |   |
| Restricted cash                                                                                                             |       | (3,402                                     | )          | (26 | ) |
| Accounts receivable, net                                                                                                    |       | (1,816                                     | )          | (2,333 | ) |
| Inventory                                                                                                                   |       | (3,665                                     | )          | (3,468 | ) |
| Prepaid expenses and other                                                                                                  |       | (767                                       | )          | (2,821 | ) |
| Real estate developed for sale                                                                                              |       | 406                                        |       | 81 |   |
| Other assets                                                                                                                |       | 107                                        |       | (16 | ) |
| Increase (decrease) in liabilities:                                                                                         |       |                                       |       |   |   |
| Accounts payable and other current liabilities                                                                              |       | 17,999                                     |       | 15,002 |   |
| Deposits and deferred revenue                                                                                               |       | 19,194                                     |       | 15,912 |   |
| Other long-term liabilities                                                                                                 |       | (35                                        | )          | 111 |   |
| Net cash provided by operating activities                                                                                   |       | 34,320                                     |       | 23,137 |   |
|                                                                                                                        |       |                                       |       |   |   |
| **Cash flows  from investing activities**                                                                                   |       |                                       |       |   |   |
| Capital expenditures                                                                                                        |       | (6,071                                     | )          | (11,444 | ) |
| Proceeds from sale of property                                                                                              |       | 1,396                                      |       | 5 |   |
| Cash flows from discontinued operations                                                                                     |       | 327                                        |       | (2,964 | ) |
| Net cash used in investing activities                                                                                       |       | (4,348                                     | )          | (14,403 | ) |
|                                                                                                                        |       |                                       |       |   |   |
| **Cash  flows from financing activities**                                                                                   |       |                                       |       |   |   |
| Proceeds from resort senior credit facilities                                                                               |       | 46,558                                     |       | 47,830 |   |
| Repayment of resort senior credit facilities                                                                                |       | (58,996                                    | )          | (44,270 | ) |
| Repayment of long-term debt                                                                                                 |       | (1,910                                     | )          | (1,630 | ) |
| Cash flows from discontinued operations                                                                                     |       | (3,084                                     | )          | (291 | ) |
| Net cash (used in) provided by financing activities                                                                         |       | (17,432                                    | )          | 1,639 |   |
|                                                                                                                        |       |                                       |       |   |   |
| Net increase in  cash and cash equivalents                                                                                  |       | 12,540                                     |       | 10,373 |   |
| Cash and cash  equivalents, beginning of period                                                                             |       | 6,216                                      |       | 6,269 |   |
| Cash and cash  equivalents, end of period                                                                                   |       | $                                          | 18,756     |   | $ | 16,642 |   |
|                                                                                                                        |       |                                       |       |   |   |
| **Supplemental disclosures of cash flow information:**                                                                      |       |                                       |       |   |   |
| Cash paid for interest                                                                                                      |       | $                                          | 13,266     |   | $ | 17,731 |   |
| Acquisition of equipment held  under capital leases                                                                         |       | 4,625                                      |       | 4,216 |   |
| Addition of interest to principal outstanding for New Junior  Subordinated Notes                                            |       | 8,728                                      |       | 9,710 |   |

 

See accompanying Notes to Condensed ConsolidatedFinancial Statements

 

7

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** **

**AmericanSkiing Company and SubsidiariesNotes to Condensed Consolidated Financial Statements (unaudited)**

**1.  General**

American SkiingCompany (“ASC”), a Delaware corporation, and its subsidiaries (collectively, “theCompany”) own and operate resort facilities, real estate development companies,golf courses, ski and golf schools, retail shops, and other related companies.The Company has historically conducted its resort operations through its whollyowned subsidiaries which operated the following ski resorts during the 26 weeksended January 28, 2007 and the year ended July 30, 2006 (fiscal 2006):Sugarloaf/USA and Sunday River in Maine, Attitash in New Hampshire, Killington/Picoand Mount Snow in Vermont, The Canyons in Utah, and Steamboat in Colorado.  The Company has historically conducted itsreal estate development operations through its wholly owned subsidiary,American Skiing Company Resort Properties (“Resort Properties”), and ResortProperties’ subsidiaries, including Grand Summit Resort Properties, Inc. (“GrandSummit”) and The Canyons Resort Properties, Inc.

The Companyreports its results of operations in two business segments, resort operationsand real estate operations.  The Company’sfiscal year is a fifty-two week or fifty-three week period ending on the lastSunday of July.  fiscal 2007 is afifty-two week reporting period and fiscal 2006 was a fifty-two week reportingperiod, with each quarter consisting of 13 weeks. The accompanying unauditedcondensed consolidated financial statements have been prepared in accordancewith U.S. generally accepted accounting principles for interim financialinformation and with the instructions to Form 10-Q and Rule 10-01 of RegulationS-X.  Accordingly, they do not includeall of the information and footnotes required by U.S. generally acceptedaccounting principles for complete financial statements.  In the opinion of management, all adjustments(consisting only of normal recurring adjustments) considered necessary for afair presentation have been included.

Resultsfor interim periods are not indicative of the results expected for the year dueto the seasonal nature of the Company’s business. Due to the seasonality of theski industry, the Company typically incurs significant operating losses in itsresort operating segment during its first and fourth fiscal quarters.  The unaudited condensed consolidatedfinancial statements should be read in conjunction with the following notes andthe Company’s consolidated financial statements included in its Form 10-K forthe fiscal year ended July 30, 2006 filed with the Securities and ExchangeCommission on October 30, 2006.

**2.  Significant Accounting Policies**

The preparation offinancial statements requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of sales and expenses during the reporting periods.  Areas where significant judgments are madeinclude, but are not limited to: allowances for doubtful accounts, long-livedasset valuations and useful lives, inventory valuation reserves, litigation andclaims reserves, and deferred income tax asset valuation allowances.  Actual results could differ materially fromthese estimates.  The following are theCompany’s significant accounting policies:

*Principles of Consolidation*

Theaccompanying condensed consolidated financial statements include the accountsof ASC and its wholly owned subsidiaries. All significant intercompany accounts and transactions have beeneliminated in consolidation.

*Cash and Cash Equivalents*

TheCompany considers all highly liquid debt instruments with an original maturityto the Company of three months or less to be cash equivalents.  Cash equivalents, which consisted ofshort-term certificates of deposit, totaled approximately $0.7 million as ofJuly 30, 2006 and January 28, 2007, respectively.

8

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*Restricted Cash*

Restrictedcash consists of deposits received and held in escrow related to pre-sales ofreal estate developed for sale, guest advance deposits for lodgingreservations, and cash held in cash collateral accounts by lenders on behalf ofthe real estate companies.  The cashbecomes available to the Company when the real estate units are sold, thelodging services are provided, or upon approval of expenditures by lenders.

*Inventory*

Inventoryis stated at the lower of cost (first-in, first-out method) or market, andconsists primarily of retail goods, food, and beverage products.

*Property and Equipment*

Propertyand equipment are carried at cost, net of accumulated depreciation,amortization, and impairment charges. Depreciation and amortization arecalculated using the straight-line method over the assets’ estimated useful liveswhich range from 9 to 40 years for buildings, 3 to 12 years for machinery andequipment, 5 to 30 years for lifts, lift lines, and trails, and 10 to 50 yearsfor land improvements.  Assets held undercapital lease obligations are amortized over the shorter of their useful livesor their respective lease lives, unless a bargain purchase option exists ortitle transfers to the Company at the end of the lease, in which case, theassets are amortized over their estimated useful lives. Due to the seasonalityof the Company’s business, the Company records a full year of depreciation andamortization relating to its winter resort operating assets during the secondand third quarters of the Company’s fiscal year.

*Real Estate Developed for Sale*

TheCompany capitalizes as real estate developed for sale the original acquisitioncost of land, direct construction and development costs, property taxes,interest incurred on costs related to real estate under development, and otherrelated costs (engineering, surveying, landscaping, etc.) until the propertyhas been developed to the point it is ready for sale.  The cost of sales for individual parcels ofreal estate or quarter and eighth share units within a project is determined usingthe relative sales value method.  Sellingcosts are charged to expense in the period in which the related revenue isrecognized.

*Goodwill and Other Intangible Assets*

Asprescribed in Statement of Financial Accounting Standards (SFAS) No. 142, “*Goodwill and Other Intangible Assets*,”certain indefinite-lived intangible assets, including trademarks, are no longeramortized but are subject to annual impairment assessments.  An impairment loss is recognized to theextent that the carrying amount exceeds the asset’s fair value.  Definite-lived intangible assets continue tobe amortized on a straight-line basis over their estimated useful lives of 31years, and assessed for impairment utilizing guidance provided by SFAS No. 144,“*Accounting for the Impairment or Disposalof Long-Lived Assets*.”

As of July 30, 2006 and January 28, 2007, other intangible assetsconsist of the following (in thousands):

|                                         | ** ** | **July 30, 2006** | ** ** | **January 28, 2007** | ** ** |
|-----------------------------------------|------------|-----------------------------|------------|--------------------------------|------------|
| **Definite-lived Intangible Assets:**   |       |                        |       |                           |       |
| Lease agreements                        |       | $                           | 1,853      |                           | $          | 1,853 |   |
| Less accumulated amortization           |       | (462                        | )          | (491                           | )          |
| ** **                              |       | 1,391                       |       | 1,362                          |       |
| ** **                              |       |                        |       |                           |       |
| **Indefinite-lived Intangible Assets:** |       |                        |       |                           |       |
| Trade names                             |       | 170                         |       | 170                            |       |
| Water rights                            |       | 4,688                       |       | 4,688                          |       |
| **Intangible Assets, net**              | ** ** | **$**                       | **6,249**  | ** **                     | **$**      | **6,220** | ** ** |

 

Amortization expense related to intangible assets was approximately$15,000 for both the 13 weeks ended January 29, 2006 and the 13 weeks endedJanuary 28, 2007.  Future amortizationexpense related to definite-lived intangible assets is estimated to beapproximately $58,000 for each of the next five fiscal years.

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*Long-Lived Assets*

In accordance with SFAS No. 144, long-lived assets, such as property,equipment, and definite-lived intangibles are reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. Recoverability of assets to be held and used is measured by a comparisonof the carrying amount of an asset to the estimated undiscounted future cashflows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cashflows, an impairment charge is recognized in the amount by which the carryingamount of the asset exceeds the fair value of the asset.

*Assets Held for Sale and Discontinued Operations*

Assetsto be disposed of are classified separately as assets held for sale when theirsale becomes probable as defined by the provisions of SFAS No. 144, at whichtime, they are reported at the lower of the carrying amount or fair value lesscosts to sell, and depreciation ceases. Revenues and expenses from operations related to the assets to be sold,and related cash flows, are classified as results from discontinuedoperations.  Interest expense related todebt to be assumed or debt required to be paid off as part of the saletransaction is also classified as results from discontinued allocations.   No general allocation of interest expense onother debt is included in results from discontinued operations.

*Revenue Recognition*

Resortrevenues include sales of lift tickets, skier development, golf course andother recreational activities fees, sales from restaurants, bars, and retailand rental shops, and lodging and property management fees (real estaterentals). Daily lift ticket revenue is recognized on the day of purchase.  Lift ticket season pass revenue is recognizedon a straight-line basis over the ski season, which is the Company’s second andthird quarters of its fiscal year.  TheCompany’s remaining resort revenues are generally recognized as the servicesare performed.  Real estate revenues arerecognized under the full accrual method when title has been transferred,initial and continuing investments are adequate to demonstrate a commitment topay for the property, and no continuing involvement exists.  Amounts received from pre-sales of realestate are recorded as restricted cash and deposits and deferred revenue in theaccompanying condensed consolidated balance sheets until the earnings processis complete.

# *Stock Option Plan*

Effective August 1, 1997, the Company established a fixed stock option plan, the American Skiing Company Stock Option Plan (the Plan), which is more fully described in Note 2 of the Company’s fiscal 2006 Annual Report on Form 10-K, that provides for the grant of incentive and non-qualified stock options for the purchase of up to 8,688,699 shares of the Company’s common stock by officers, management employees, members of the board of directors of the Company and its subsidiaries, and other key persons (eligible for nonqualified stock options only) as designated by the Compensation Committee.  The Plan has no restricted stock option component.  Additionally, there have been no options granted since July 2001.

Effective August 1, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123(R),*”Share Based Payment”*, using the modified prospective application method.  Under this transition method, compensation cost includes amounts of:  (a) compensation cost of all stock-based payments granted prior to, but not yet vested as of, August 1, 2005 (based on grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and previously presented in the pro-forma footnote disclosures), and (b) compensation cost for all stock-based payments granted subsequent to August 1, 2005 (based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R)).  The effect of adopting SFAS No. 123(R) as of August 1, 2005 for the 26 week period ended January 29, 2006 was less than $1,000 of reported compensation expense.  No compensation expense has been recorded in fiscal 2007, since all outstanding options were fully vested as of October 30, 2005. Accordingly, there is no future compensation cost related to non-vested options or non-vested restricted options not yet recognized.

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The following table summarizes stock option activity during the 26 weeks ended January 28, 2007:

|                                        | ** ** | **Options** | ** ** | **Weighted Average  Exercise Price** | ** ** | **Weighted Average  Remaining  Contractual Term** | ** ** |
|----------------------------------------|------------|-------------|------------|------------------------------------------------|------------|-------------------------------------------------------------|------------|
| **Outstanding at July 30, 2006**       |       | 3,811,187   |       | $                                              | 4.26       |                                                        | 3.23       |   |
| **Granted**                            |       | —      |       |                                           |       |                                                        |       |
| **Exercised**                          |       | —      |       |                                           |       |                                                        |       |
| **Forfeited**                          |       | —      |       |                                           |       |                                                        |       |
| **Outstanding at January 28, 2007**    |       | 3,811,187   |       | $                                              | 4.26       |                                                        | 2.73       |   |
| ** **                             |       |        |       |                                           |       |                                                        |       |
| **Options vested at January 28, 2007** |       | 3,811,187   |       | $                                              | 4.26       |                                                        | 2.73       |   |
| **Exercisable  at January 28, 2007**   |       | 3,811,187   |       | $                                              | 4.26       |                                                        | 2.73       |   |

 

In all periods presented, the Company’s stock options had no intrinsic value.

The following table summarizes information about the stock options outstanding under the Plan as of January 28, 2007:

| Range of  Exercise Prices | ** ** | **Outstanding** | ** ** | **Weighted  Average  Remaining  Contractual  Life (in years)** | ** ** | **Weighted  Average  Exercise Price** | ** ** | **Exercisable** | ** ** | **Weighted  Average  Exercise Price** | ** ** |
|-------------------------------------|------------|-----------------|------------|--------------------------------------------------------------------------|------------|--------------------------------------------|------------|-----------------|------------|--------------------------------------------|------------|
| **$0.72**                           |       | 25,000          |       | 4.40                                                                     |       | $                                          | 0.72       |            | 25,000     |                                       | $          | 0.72 |   |
| **1.75 — 2.50**                |       | 1,420,337       |       | 3.10                                                                     |       | 2.11                                       |       | 1,420,337       |       | 2.11                                       |       |
| **3.00 — 4.00**                |       | 1,439,250       |       | 3.12                                                                     |       | 3.18                                       |       | 1,439,250       |       | 3.18                                       |       |
| **7.00 — 8.75**                |       | 735,750         |       | 1.73                                                                     |       | 7.19                                       |       | 735,750         |       | 7.19                                       |       |
| **14.19 - 18.00**                   |       | 190,850         |       | 0.74                                                                     |       | 17.55                                      |       | 190,850         |       | 17.55                                      |       |
| ** **                          |       | 3,811,187       | ** ** | **2.73**                                                                 | ** ** | **4.26**                                   |       | 3,811,187       |       | **4.26**                                   | ** ** |
|                                     |            |                 |            |                                                                          |            |                                            |            |                 |            |                                            |            |  |  |

 

*Derivative Financial Instruments*

Allderivatives are recognized in the condensed consolidated balance sheets attheir fair values.  During fiscal 2005,the Company entered into an interest rate swap agreement covering a notionalamount of $95.0 million related to its Resort Senior Credit Facility.  The agreement is adjusted to market value ateach reporting period and the increase or decrease is reflected in thecondensed consolidated statement of operations. For the 26-week period ended January 28, 2007, the Company recognized$487,000 of non-cash loss from market value adjustments to this agreement,compared to $1,036,000 of non-cash income in the corresponding period of theprior year.  As described in Note 12, theinterest rate swap agreement was terminated on March 1, 2007, at which time ithad a market value of $825,000.

# *Accounting for VariableInterest Entities*

On May 14, 2004, ResortProperties completed the restructuring of the Real Estate Term Facility fromFleet National Bank, Ski Partners, LLC, and Oak Hill Capital Partners.  As a result of the restructuring, a newbusiness venture called SP Land Company, LLC (SP Land) was created by SkiPartners, LLC, Resort Properties, and Killington, Ltd. (Killington) (an ASCsubsidiary).  As part of therestructuring, certain developmental land parcels at the Killington resort andcash with a combined carrying value of approximately $2.2 million weretransferred by Resort Properties and Killington into SP Land Company, LLC,together with all indebtedness, including related interest and fees, under theReal Estate Term Facility held by Fleet National Bank and Ski Partners, LLC(Tranche A and B of the Real Estate Term Facility) totaling $55.4 million.   Collectively, Killington and ResortProperties own 25% of the membership interests of SP Land.  The remaining 75% of the membership interestsin SP Land is owned by Ski Partners, LLC, together with a preferential interestin SP Land of approximately $37.2 million. In accordance with FIN No. 46R, “*Consolidationof Variable Interest Entities*”, and APB No. 18, SP Land is a variableinterest entity and is accounted for on the equity method because it does notmeet the requirements for consolidation.

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As part of the restructuring of the Real Estate TermFacility, Killington also contributed all of its interest in approximately 256acres of developmental real estate into a joint venture entity called CherryKnoll Associates, LLC (Cherry Knoll).  Each of SP Land and Killington own 50% of the membership interests inCherry Knoll.  In addition, Killingtonmaintains a preferential distribution interest in Cherry Knoll of $1.5million.  In accordance with FIN No. 46Rand APB No. 18, Cherry Knoll is a variable interest entity and is accounted foron the equity method because it does not meet the requirements forconsolidation.

In October 2004, the Company, through one of itssubsidiaries, acquired a 49% interest in SS Associates, LLC (SS Associates) bycontributing its rights to purchase the building to SS Associates and by makinga refundable security deposit of $0.4 million. In accordance with FIN No. 46R, “*Consolidationof Variable Interest Entities*”, the Company consolidates SSAssociates because it meets the requirements of a variable interest entity forwhich the Company is the primary beneficiary.

SS Associates purchased a building in October 2004 for $3.5million (including costs to close) through cash and long-term debt of $2.5million.  The loan is secured by thebuilding and has 59 monthly payments of $29,000 and a final payment in October2009 of $1.5 million and bears interest at 6.5% per year.  SS Associates is obligated on the loan andnone of the Company’s remaining subsidiaries are obligated.  SS Associates leases the building to theCompany for $0.5 million per year.  Thenon-ASC owned interest in SS Associates of $0.6 million (owned in part bycertain members of mid-level management at the Company’s Killington resort) isincluded in other long-term liabilities in the accompanying condensedconsolidated balance sheet as of January 28, 2007.

*Reclassifications*

Certainamounts in the prior period’s financial statements and related notes have beenreclassified to conform to the current period’s presentation.

# *Recently Issued AccountingStandards*

In June 2005, theFASB issued Interpretation No. 48, *“Accounting forUncertainty in Income Taxes — an interpretation of FASB Statement No. 109*”(FIN No. 48), effective for fiscal years beginning after December 15,2006.  This Interpretation clarifies theaccounting for uncertainty in income taxes recognized in accordance with FASBStatement No. 109, “*Accounting for IncomeTaxes.”*  Specifically, itprescribes a recognition threshold and measurement attribute for the financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return, and provides guidance on recognition, classification,interest and penalties, accounting in interim periods, disclosure, andtransition.  The accounting provisions ofFIN No. 48 will become effective beginning with the first quarter of theCompany’s 2008 fiscal year.  Managementis currently reviewing the requirements of FIN No. 48 and has not yetdetermined the impact, if any, on its financial position or results ofoperations.

In 2006, theSecurities and Exchange Commission issued Staff Accounting Bulletin No. 108, *Considering the Effects of Prior Year Misstatementsin Current Year Financial Statements* (SAB No. 108), which requires registrants to consider theeffect of all carry-over and reversing effects of prior-year misstatements whenquantifying errors in current year financial statements.  The SAB does not change the SEC staff’sprevious guidance on evaluating the materiality of errors.  The SAB allows registrants to record theeffects of adopting the guidance as a one-time cumulative-effect adjustment toretained earnings no later than the end of the first year of adoption.  The accounting provisions of SAB No. 108 areeffective no later than the end of the Company’s 2007 fiscal year, at whichtime the Company intends to adopt them. Management is currently reviewing the requirements of SAB No. 108 andhas not yet determined the impact, if any, on its financial position or resultsof operations.

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**3.  Net Loss per Common Share**

Net loss percommon share for the 13 weeks and for the 26 weeks ended January 29, 2006 andJanuary 28, 2007, respectively, was determined based on the following data (inthousands):
| ** **                                                        | ** ** | **13 weeks ended   January 29, 2006 ** | ** ** | **13 weeks ended  January 28, 2007** | ** ** | **26 weeks ended  January 29, 2006** | ** ** | **26 weeks ended   January 28, 2007 ** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| *Loss*                                                            |       |                                                                 |       |                                                     |       |                                                     |       |                                                                 |       |
| Loss from continuing operations                                   |       | $                                                                    | (14,083    | )                                                        | $          | (21,107                                                  | )          | $                                                                    | (44,827    | ) | $ | (56,140 | ) |
| Income (loss) from discontinued operations                        |       | 2,762                                                                |       | 6,154                                                    |       | (8,693                                                   | )          | (4,132                                                               | )          |
| **Net loss**                                                      |       | $                                                                    | (11,321    | )                                                        | $          | (14,953                                                  | )          | $                                                                    | (53,520    | ) | $ | (60,272 | ) |
| * *                                                          |       |                                                                 |       |                                                     |       |                                                     |       |                                                                 |       |
| *Shares*                                                          |       |                                                                 |       |                                                     |       |                                                     |       |                                                                 |       |
| **Basic and  diluted weighted average common shares outstanding** |       | 31,738                                                               |       | 31,738                                                   |       | 31,738                                                   |       | 31,738                                                               |       |

 

Asof January 29, 2006 and January 28, 2007, the Company had 14,760,530 shares ofits Class A common stock outstanding, respectively, which are convertible into sharesof the Company’s common stock. The shares of the Company’s common stockissuable upon conversion of the shares of the Company’s Class A common stockhave been included in the calculation of the weighted average common sharesoutstanding.  As of January 29, 2006 andJanuary 28, 2007, the Company had 40,000 shares of its mandatorily redeemableconvertible participating 12% Series C-1 preferred stock (Series C-1 PreferredStock) outstanding, respectively, which are convertible into shares of theCompany’s common stock.  If converted attheir liquidation preferences as of January 29, 2006 and January 28, 2007,these convertible preferred shares would convert into approximately 53,947,000and 60,699,000 shares of common stock, respectively.  For the 26 weeks ended January 29, 2006 andJanuary 28, 2007, the common shares into which these preferred securities areconvertible have not been included in the dilutive share calculation as theimpact of their inclusion would be anti-dilutive.  The Company also had options outstanding topurchase 3,811,187 shares of its common stock under the Plan as of January 29,2006 and January 28, 2007, respectively. These stock options are excluded from the dilutive share calculation, asthe impact of their inclusion would be anti-dilutive.

**4.  Segment Information**

In accordance with SFAS No. 131,“*Disclosures about Segments of an Enterprise andRelated Information*” (SFASNo. 131), the Company has classified its operations into two businesssegments; resort operations and real estate operations.  Revenues at each of the resorts are derivedfrom the same lines of business which include lift ticket sales, food andbeverage, retail sales including rental and repair, skier development, lodging andproperty management, golf, other summer activities and miscellaneous revenuesources.  The performance of the resortsis evaluated on the same basis of profit or loss from operations.  Additionally, each of the resorts hashistorically produced similar operating margins and attracts the same class ofcustomer.  Based on the similarities ofthe operations at each of the resorts, the Company has concluded that theresorts satisfy the aggregation criteria set forth in SFAS No. 131.  The Company’s real estate revenues arederived from the sale, resale, and leasing of interests in real estatedevelopment projects undertaken by the Company at its resorts and the sale ofother real property interests.  Revenuesand operating losses from continuing operations for each of the two businesssegments excluding discontinued operations are as follows (in thousands):
| ** **                           | ** ** | **13 weeks ended  January 29, 2006** | ** ** | **13 weeks ended  January 28, 2007** | ** ** | **26 weeks ended  January 29, 2006** | ** ** | **26 weeks ended   January 28, 2007 ** | ** ** |
|--------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| * *                             |       |                                                     |       |                                                     |       |                                                     |       |                                                                 |       |
| **Revenues:**                        |       |                                                     |       |                                                     |       |                                                     |       |                                                                 |       |
| **Resort**                           |       | $                                                        | 80,482     |                                                     | $          | 72,594                                                   |       | $                                                                    | 93,987     |   | $ | 86,528 |   |
| **Real estate**                      |       | 1,466                                                    |       | 837                                                      |       | 3,041                                                    |       | 2,179                                                                |       |
| **Total**                            |       | $                                                        | 81,948     |                                                     | $          | 73,431                                                   |       | $                                                                    | 97,028     |   | $ | 88,707 |   |
| ** **                           |       |                                                     |       |                                                     |       |                                                     |       |                                                                 |       |
| **Loss from continuing operations:** |       |                                                     |       |                                                     |       |                                                     |       |                                                                 |       |
| **Resort**                           |       | $                                                        | (13,302    | )                                                        | $          | (21,062                                                  | )          | $                                                                    | (44,663    | ) | $ | (56,109 | ) |
| **Real estate**                      |       | (781                                                     | )          | (45                                                      | )          | (164                                                     | )          | (31                                                                  | )          |
| **Total**                            |       | $                                                        | (14,083    | )                                                        | $          | (21,107                                                  | )          | $                                                                    | (44,827    | ) | $ | (56,140 | ) |

 

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Identifiable assets for the two business segments and a reconciliationof the totals reported for the operating segments to the totals reported in thecondensed consolidated balance sheets is as follows (in thousands):

|                                                                            | ** ** | **July 30, 2006** | ** ** | ** January 28, 2007 ** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------|------------|--------------------------------------------|------------|
| **Identifiable Assets:**                                                   |       |                        |       |                                       |       |
| **Resort**                                                                 |       | $                           | 347,493    |                                       | $          | 301,240 |   |
| **Real estate**                                                            |       | 29,687                      |       | 7,120                                      |       |
| ** **                                                                 |       | $                           | 377,180    |                                       | $          | 308,360 |   |
| **Assets:**                                                                |       |                        |       |                                       |       |
| **Identifiable assets for  segments**                                      |       | $                           | 377,180    |                                       | $          | 308,360 |   |
| **Assets held for sale**                                                   |       | -                           |       | 94,603                                     |       |
| **Intangible and deferred income  tax  assets not allocated to  segments** |       | 5,484                       |       | 5,455                                      |       |
| **Total consolidated assets**                                              |       | $                           | 382,664    |                                       | $          | 408,418 |   |
| ** **                                                                 |       |                        |       |                                       |       |

 

**5. Long-Term Debt**

**Resort Senior Credit Facility**

The Company enteredinto agreements dated November 24, 2004 with Credit Suisse, GE Capital, andother lenders whereby the lenders provided the Company with a $230.0 millionsenior secured loan facility (Resort Senior Credit Facility) consisting of arevolving credit facility and two term loan facilities.  The proceeds of the Resort Senior CreditFacility were used to repay in full the previously existing resort seniorcredit facility and redeem the Company’s $120.0 million senior subordinatednotes (Senior Subordinated Notes), as well as to pay fees and expenses relatedto the transaction.  The Resort SeniorCredit Facility consists of the following:

·                  RevolvingFacility - $40.0 million, including letter of credit (L/C) availability of upto $6.0 million.  The amount of availabilityunder this facility is correspondingly reduced by the amount of each L/Cissued.

·                  FirstLien Term Loan - $85.0 million borrowed on the funding date of November 24,2004.

·                  SecondLien Term Loan - $105.0 million borrowed on the funding date of November 24,2004.

The Revolving Facility and First Lien Term Loan are provided under a single credit agreement (collectively, the First Lien Credit Agreement), mature in November 2010 and bear interest, at the option of the Company, either at a rate equal to the prime rate, as publicly quoted in The Wall Street Journal, plus 3.5%, or at a rate equal to LIBOR (as defined) plus 4.5%, payable quarterly (11.75% based on the prime rate for the Revolving Facility and 9.82% based on the LIBOR rate for the First Lien Term Loan as of January 28, 2007).  The First Lien Term Loan requires 23 quarterly principal payments of $212,500 beginning on January 15, 2005 and a final payment of $80.1 million in November 2010. The Revolving Facility is comprised of two sub-facilities, each in the amount of $20.0 million and each with separate fees for the unused portion of the facilities in the amounts of 1.0% and 4.5% per annum, respectively.  The Second Lien Term Loan is provided under a separate credit agreement (Second Lien Credit Agreement), matures in November 2011, bears interest at a rate equal to the prime rate, as publicly quoted in The Wall Street Journal, plus 7.0%, or at a rate equal to LIBOR (as defined) plus 8.0%, payable quarterly (13.32% as of January 28, 2007 based on the LIBOR rate), and principal is due upon maturity.

The Revolving Facility and the First Lien Term Loan obligations under the First Lien Credit Agreement and the related guarantees are secured by a first-priority security interest in substantially all of the Company’s assets, other than assets held by Grand Summit, and the Company’s obligations under the Second Lien Credit Agreement and the Company’s subsidiaries’ obligations under the related guarantees are secured by a second-priority security interest in the same assets.   Collateral matters between the lenders under the First Lien Credit Agreement and the lenders under the Second Lien Credit Agreement are governed by an intercreditor agreement.

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TheResort Senior Credit Facility contains affirmative, negative, and financialcovenants customary for this type of credit facility, which includesmaintaining a minimum level of EBITDA (as defined), limiting the Company’scapital expenditures, maintaining a minimum ratio of appraised asset value todebt, and having a zero balance on the Revolving Credit Facility (excludingL/Cs) on April 1 of each year.  TheResort Senior Credit Facility also contains events of default customary forsuch financings, including but not limited to nonpayment of amounts when due;violation of covenants; cross default and cross acceleration with respect toother material debt; change of control; dissolution; insolvency; bankruptcyevents; and material judgments.  Some ofthese events of default allow for grace periods or are qualified by materialityconcepts.  The Resort Senior CreditFacility requires the Company to offer to prepay the loans with proceeds ofcertain material asset sales and recovery events, certain proceeds of debt, 50%of excess cash flow, and proceeds from the issuance of capital stock. TheResort Senior Credit Facility also restricts the Company’s ability to pay cashdividends on or redeem its common and preferred stock.

Pursuantto the requirements of the Resort Senior Credit Facility, on May 23, 2005, theCompany entered into an interest rate swap agreement for 50% of the First LienTerm Loan and the Second Lien Term Loan for a notional amount of $95.0million.  Under the swap agreement,during the period from May 16, 2005 to November 15, 2005, the Company paid4.16% and received the 6-month LIBOR rate. During the period from November 16, 2005 to May 15, 2008, the Companypays 4.16% and receives the 3-month LIBOR rate. As a result of entering into this interest rate swap agreement, theCompany has fixed the cash-pay rate on the notional amount until the maturityof the swap agreement in May 2008. Changes in the fair value of the interest rate swap agreement arerecorded in the condensed consolidated statement of operations and changes inaccumulated deficit as increases or decreases in fair value of this interestrate swap agreement at each reporting period-end.  During the 26-week period ended January 28,2007, the Company recognized $487,000 of decrease in fair value of thisagreement due to market value adjustments. The total balance sheet effect as of January 28, 2007 is a net asset of$1.6 million.

Asof January 28, 2007, the Company had $8.0 million, $82.1 million, and $105.0million of principal outstanding under the Revolving Facility, First Lien TermLoan, and Second Lien Term Loan portions of the Resort Senior Credit Facility,respectively.  Furthermore, as of January28, 2007, the Company had $1.6 million in outstanding Letters of Credit with$30.4 million available for additional borrowings under the RevolvingFacility.  The Company was in compliancewith all financial covenants of the Resort Senior Credit Facility as of January28, 2007.

As described in Note 12, on March 1, 2007, inconjunction with its completion of the sale of Steamboat Ski & ResortCorporation (“Steamboat”), the Company permanently repaid all outstandingobligations under the $85.0 million term portion of its first lien loan and$105.0 million second lien term loan, both with Credit Suisse, GE Capital andcertain other lenders (together with the $40.0 million revolving portion of thefirst lien term loan, collectively the “Resort Senior Credit Facility”).  Additionally, with the permanent payoff ofall outstanding term loan obligations under the Resort Senior Credit Facility,the Company terminated its interest rate swap agreement and received $825,000as the result of the termination.  Also,the Company wrote off the remaining balance of deferred financing costsassociated with the Resort Senior Credit Facility, which totalled approximately$4.7 million as of March 1, 2007. In addition, the Company entered into anamendment of the $40.0 million revolving facility of its first lien loan. Theamendment to the revolving facility provides, among other things, for areduction of the aggregate commitments available under the facility to $10.0million and the elimination of the commitment fee thereunder, for theelimination of the annual EBITDA covenant for the fiscal quarter ending April29, 2007, and for the approval by the revolving facility lenders of any futureadvances under the revolving credit facility.

**ConstructionLoan Facility**

TheCompany has historically conducted substantially all of its real estatedevelopment through subsidiaries, each of which is a wholly-owned subsidiary ofResort Properties.  Grand Summit owns theexisting Grand Summit Hotel project at Steamboat, which was primarily financedthrough a $110.0 million Senior Construction Loan (Senior Construction Loan).  Due to construction delays and cost increasesat the Steamboat Grand Hotel project, on July 25, 2000, Grand Summit enteredinto the $10.0 million Subordinated Construction Loan, which was subsequentlyincreased to $10.6 million in December 2003 (Subordinated Construction Loan).  Together, the Senior Construction Loan andthe Subordinated Construction Loan comprise the “Construction Loan Facility”.    The Construction Loan Facility is withoutrecourse to the Company and its resort operating subsidiaries and iscollateralized by significant real estate assets of Resort Properties and itssubsidiaries, including the assets and stock of Grand Summit, the Company’sprimary hotel development subsidiary.

 

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Theoutstanding principal amounts under the Construction Loan Facility were payableincrementally as quarter and eighth share unit sales were closed, based on apredetermined per unit amount, which approximated between 70% and 80% of thenet proceeds of each closing up until the March 18, 2006 auction held atSteamboat and then 85% of the net proceeds from all units sold at theauction.  Mortgages against thecommercial core units and unsold unit inventory at the Grand Summit Hotel atSteamboat and a promissory note from the Steamboat Homeowners Associationsecured by the Steamboat Grand Hotel parking garage collateralize theConstruction Loan Facility, and are subject to covenants, representations, andwarranties customary for that type of construction facility.

OnMarch 18, 2006 Grand Summit conducted an auction for the remaining unsolddeveloper inventory at the Grand Summit Hotel at Steamboat.  The auction, together with subsequent salesactivity, resulted in a near sell-out of the remaining inventory of residentialunits.  As of July 30, 2006, sales of$23.3 million were closed.  As a result,Grand Summit paid off the Senior Construction Loan, including accrued loan feesof $750,000, and the principal balance of the Subordinated Construction Loanduring fiscal 2006.

UntilJuly 31, 2005, the Subordinated Construction Loan carried interest at a fixedrate of 20% per annum, payable monthly in arrears.  Fifty percent of the amount of this interestwas due and payable in cash and the other 50% was automatically deferred untilthe final payment date of the Subordinated Construction Loan.  Subsequent to July 31, 2005, the interestrate under the Subordinated Construction Loan was decreased to 10% per annum,all of which is payable in cash.  Thetotal deferred interest under the Subordinated Construction Loan as of January28, 2007 was $3.2 million.  The remainingdeferred interest balance under the Subordinated Construction Loan matures onNovember 30, 2007.  The SubordinatedConstruction Loan, including the related deferred interest balance, is securedby the same collateral, that secured the Senior Construction Loan and isnon-recourse to the Company and its resort operating subsidiaries other thanGrand Summit.

Asdescribed in Note 12, on February 28,2007, Grand Summit repaid all outstanding obligations (consisting only ofdeferred interest obligations) under the Construction Loan Facility.

**Other Long-Term Debt**

The Company has$18.0 million of other long-term debt as of January 28,2007. This is comprised of $10.2 million of debt in the form of capital leaseobligations and $7.8 million of notes payable with various lenders.  As described in Note 12, on March 1,2007 the Company completed thesale of Steamboat.  As part of this sale,$1.8 million representing Steamboat’s capital lease obligations and $1.7million representing Steamboat’s notes payable, respectively, were assumed bythe purchasers.

**6.  Subordinated Notes and Debentures**

**11.3025% Junior SubordinatedNotes**

On July 15, 2001, theCompany entered into a securities purchase agreement with Oak Hill CapitalPartners to assist the Company in meeting its current financing needs.  Pursuant to the terms of the securitiespurchase agreement, which closed on August 31, 2001, the Company issued, andOak Hill Capital Partners purchased, $12.5 million aggregate principal amountof Junior Subordinated Notes (Junior Subordinated Notes), which are convertibleinto shares of the Company’s Non-voting Series D Participating Preferred Stock(Series D Preferred Stock).  The JuniorSubordinated Notes are unsecured and bear interest at a rate of 11.3025%, whichcompounds annually and is due and payable at the maturity of the JuniorSubordinated Notes.  The JuniorSubordinated Notes were amended in connection with the Company’s entry into theResort Senior Credit Facility on November 24, 2004 to extend their maturity toMay 2012. The proceeds of the Junior Subordinated Notes were used to fundshort-term liquidity needs of Resort Properties by way of the purchase ofcertain real estate assets by ASC from Resort Properties.  As of January 28, 2007, the outstandingbalance on the Junior Subordinated Notes was approximately $22.3 millionincluding compounded interest.

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**New Junior Subordinated Notes**

In connection with therefinancing of the Resort Senior Credit Facility, the Company entered into anexchange agreement with the holder of the Company’s Series A Preferred Stockand issued $76.7 million of new junior subordinated notes due May 2012 (NewJunior Subordinated Notes) to the holder of the Series A Preferred Stock inexchange for all outstanding shares of Series A Preferred Stock.  The New Junior Subordinated Notes accrueinterest at a rate of 11.25%, gradually increasing to a rate of 13.0% in2012.  No principal or interest paymentsare required to be made on the New Junior Subordinated Notes untilmaturity.  However, interest is added tothe principal outstanding on January 1 of each year.  On January 1, 2006, and January 1, 2007, $8.7million and $9.7 million, respectively, of interest was added to the principaloutstanding.  The New Junior SubordinatedNotes are subordinated to all of the Company’s other debt obligations and alltrade payables incurred in the ordinary course of business.  None of the Company’s subsidiaries are obligatedon the New Junior Subordinated Notes, and none of the Company’s assets serve ascollateral for repayment of the New Junior Subordinated Notes.  The indenture governing the New JuniorSubordinated Notes also restricts the Company from paying cash dividends ormaking other distributions to its stockholders subject to certain limitedexceptions.  The outstanding balance onthe New Junior Subordinated Notes was $96.0 million as of January 28, 2007.  Accrued interest on the New JuniorSubordinated Notes was $2.5 million.

**Other Subordinated Debentures**

Other subordinated debentures owed by the Company to institutions and individualsas of January 28,2007 areunsecured and are due as follows (dollars in thousands):

|            | ** ** | **Interest** | ** ** | **Principal** | ** ** |
|------------|------------|--------------|------------|---------------|------------|
| **Year**   | ** ** | **Rate**     | ** ** | **Amount**    | ** ** |
| **2010**   |       | 8            | %          | $             | 1,292      |   |
| **2012**   |       | 6            | %          | 1,155         |       |
| **2013**   |       | 6            | %          | 1,065         |       |
| **2015**   |       | 6            | %          | 1,500         |       |
| **2016**   |       | 6            | %          | 1,196         |       |
| ** ** | ** ** | ** **   | ** ** | **$**         | **6,208**  | ** ** |

 

**7. Mandatorily Redeemable Securities**

**Series A Preferred Stock**

As ofJuly 25, 2004, the Company had 36,626 shares of Series A Preferred Stockoutstanding.  In connection with theCompany’s entry into the Resort Senior Credit Facility on November 24, 2004 alloutstanding shares of the Series A Preferred Stock were exchanged for NewJunior Subordinated Notes in the principal amount of $76.7 million.

**Series B Preferred Stock**

Pursuant to aPreferred Stock Subscription Agreement (the Series B Agreement) dated July 9,1999, the Company sold 150,000 shares of its 8.5% Series B ConvertibleParticipating Preferred Stock (Series B Preferred Stock) on August 9, 1999 toOak Hill for $150.0 million.

On August 31,2001, in connection with a recapitalization transaction, the Series B PreferredStock was stripped of all of its economic and governance rights andpreferences, with the exception of its right to elect up to six directors ofASC.  The Company issued mandatorilyredeemable Series C-1 Preferred Stock and Series C-2 Preferred Stock with anaggregate initial face value of $179.5 million which was equal to the accruedliquidation preference of the Series B Preferred Stock immediately before beingstripped of its right to such accrued liquidation preference.  The Series B Preferred Stock currentlyremains outstanding but will lose its remaining rights, including votingrights, upon redemption of the Series C-1 Preferred Stock and Series C-2Preferred Stock.

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**Series C-1 Preferred Stock and Series C-2Preferred Stock**

On July 15, 2001, the Company enteredinto a securities purchase agreement with Oak Hill to assist the Company inmeeting its current financing needs. Pursuant to the terms of the securities purchase agreement, which closedon August 31, 2001, the Company issued to Oak Hill two new series of PreferredStock: (i) $40.0 million face value of Series C-1 Preferred Stock; and (ii)$139.5 million face value of Series C-2 Preferred Stock.  The initial face values of the Series C-1Preferred Stock and Series C-2 Preferred Stock correspond to the accruedliquidation preference of the Series B Preferred Stock immediately before beingstripped of its right to such accrued liquidation preference.  The Series C-1 Preferred Stock and Series C-2Preferred Stock are entitled to annual preferred dividends of 12% and 15%,respectively.  At the Company’s option,dividends can either be paid in cash or accumulated in arrears.  The Series C-1 Preferred Stock is convertibleinto common stock at a price of $1.25 per share, subject to adjustments.  The Series C-2 Preferred Stock is notconvertible.  Both the Series C-1Preferred Stock and Series C-2 Preferred Stock are mandatorily redeemable onJuly 31, 2007 to the extent that the Company has legally available funds toeffect such redemption.  As of January28, 2007, cumulative dividends in arrears totaled approximately $35.9 millionand $170.0 million for the Series C-1 Preferred Stock and Series C-2 PreferredStock, respectively.  The Series C-1Preferred Stock and Series C-2 Preferred Stock have certain voting rights asdefined in the securities certificates of designation relating thereto and ranksenior in liquidation preference to all common stock and Class A common stockoutstanding as of January 28, 2007, and to any common stock, Class A commonstock and Series D Preferred Stock issued in the future, and rank pari passuwith each other.  The Series C-1Preferred Stock is also participating preferred stock and consequently has theright to participate in any dividends paid or payable to the common stock ofthe Company on an as-if-converted basis.

**Series D Preferred Stock**

The Company hasauthorized the issuance of 5,000 shares of Series D Preferred Stock.  As of January 28, 2007, no shares of Series DPreferred Stock have been issued.  TheSeries D Preferred Stock is junior in right of preference to the Series C-1Preferred Stock and Series C-2 Preferred Stock, is not entitled to preferreddividends, and is redeemable at the option of the shareholders.

**8.  DividendRestrictions and Stockholders Agreement**

**Dividend Restrictions**

Borrowers underthe Resort Senior Credit Facility, which include ASC, are restricted frompaying cash dividends on any of their preferred or common stock.

Grand Summit, theborrower under the Construction Loan Facility, is restricted from declaringdividends or advancing funds to ASC by any other method, unless specificallyapproved by the Construction Loan Facility lenders. As described in Note 12, on February 28, 2007, Grand Summit repaid alloutstanding obligations (consisting only of deferred interest obligations)under the Construction Loan Facility.

**Stockholders Agreement**

The Company, OakHill, and Mr. Leslie B. Otten (Mr. Otten) entered into a StockholdersAgreement, dated as of August 6, 1999, amended on July 31, 2000 (as amended,the Stockholders Agreement), pursuant to which each of Mr. Otten and Oak Hillagreed to vote its capital stock of the Company so as to cause there to be:

·                  Six directors ofthe Company nominated by Oak Hill, so long as Oak Hill owns 80% of the sharesof common stock it owned as of July 30, 2000 on a fully diluted basis, suchnumber of directors decreasing ratably with the percentage of Oak Hill’sownership of the common stock on a fully diluted basis compared to suchownership as of July 30, 2000; and

·                  Two directors ofthe Company nominated by Mr. Otten, so long as Mr. Otten owns 15% of the sharesof common stock outstanding on a fully diluted basis, and one director sonominated, so long as Mr. Otten owns at least 5% of the shares of common stockoutstanding on a fully diluted basis.

As of January 28,2007, Oak Hill owned not less than 80% of the shares of common stock it ownedas of July 30, 2000, on a fully diluted basis, and Mr. Otten owned not lessthan 15% of the shares of common stock outstanding on a fully diluted basis.

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The StockholdersAgreement provides that, so long as Oak Hill owns at least 20% of theoutstanding shares of common stock on a fully diluted basis, the affirmativevote of at least one Oak Hill director is required prior to the approval of (i)the Company’s annual budget, (ii) significant executive personnel decisions,(iii) material actions likely to have an impact of 5% or more on the Company’sconsolidated revenues or earnings, amendments to the Company’s articles ofincorporation or by-laws, (iv) any liquidation, reorganization, or businesscombination of the Company, (v) the initiation of certain material litigation,and (vi) any material financing of the Company.

Under theStockholders Agreement, Oak Hill and Mr. Otten have agreed not to dispose oftheir securities of the Company if, (i) as a result of such transfer, the transfereewould own more than 10% of the outstanding shares of common stock of theCompany (on a fully diluted basis), unless such transfer is approved by theBoard of Directors (x) including a majority of the Common Directors (as definedin the Stockholders Agreement), or (y) the public stockholders of the Companyare given the opportunity to participate in such transfer on equivalent terms,(ii) the transferee is a competitor of the Company or any of its subsidiaries,unless such transfer is approved by the Board of Directors, or (iii) suchtransfer would materially disadvantage the business of the Company.  The Stockholders Agreement provides foradditional customary transfer restrictions applicable to each of Mr. Otten andOak Hill as well as standstill provisions applicable to Oak Hill.

TheStockholders Agreement provides that, upon the Company’s issuance of shares ofcommon stock or securities convertible into common stock, Mr. Otten and OakHill will have the right to purchase at the same price and on the same terms,the number of shares of common stock or securities convertible into commonstock necessary for each of them to maintain individually the same level ofbeneficial ownership of common stock of the Company on a fully diluted basis asit owned immediately prior to the issuance. This anti-dilution provision is subject to customary exceptions.

As described in Note 12, on February 26, 2007,Leslie B. Otten resigned from the board of directors of the Company effectiveimmediately.

**9.  Phantom Equity Plan**

ASC hasestablished the American Skiing Company Phantom Equity Plan (LTIP).  Certain of ASC’s executive officersparticipate in the LTIP.  Participantsare entitled to a payment on awards granted under the LTIP, to the extentvested upon a Valuation Event (as defined below) or in certain cases upontermination of employment.  The amount ofany award is subject to a specified minimum amount, but is based ultimately onthe Equity Value, as defined by the LTIP, obtained through a ValuationEvent.  A Valuation Event is defined inthe LTIP as any of the following: (i) a sale or disposition of a significant asset, or a series ofsales or dispositions of significant assets (disregarding any sales ordispositions prior to November 30, 2006), resulting in proceeds to the Companyequal to or greater than $300 million as determined by the Board of Directors;(ii) a merger, consolidation, or similar event of the Company other thanone (A) in which the Company is the surviving entity or (B) where no Change inControl (as defined in the LTIP) has occurred; (iii) a public offering ofequity securities by the Company that yields net proceeds to the Company inexcess of $50 million; or (iv) a Change in Control.  All awards under the plan expire if aValuation Event has not occurred on or prior to December 21, 2011.  The LTIP was originally ratified by the Boardof Directors on March 6, 2003, and amended on December 11, 2006.  Compensation expense relating to the LTIP isestimated and recorded based on the probability of the Company achieving aValuation Event.

During the 13 weeks endedJanuary 29, 2006 and January 28, 2007, the Company recorded expenses relatingto the LTIP of approximately $0.1 million, respectively. During the 26 weeksended January 29, 2006 and January 28, 2007, the Company recorded expensesrelating to the LTIP of approximately $0.1 million, respectively. These areincluded in marketing, general, and administrative expenses in the accompanyingconsolidated statements of operations. As of January 28, 2007, the totalliability for the LTIP was $1.6 million, which is included in other long-termliabilities in the condensed consolidated balance sheet.

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**10.****       Assets/Liabilities Held for Sale and Discontinuedoperations**

On December 18, 2006, the Company and its subsidiarySteamboat Ski & Resort Corporation (“Steamboat Corporation”) entered into apurchase agreement (the “Purchase Agreement”) with Wintergames Holdings SARLand Steamboat Acquisition Corp. (together, “Wintergames”) pursuant to which theCompany agreed to sell, and Wintergames agreed to purchase, all of the Company’sstock in Steamboat Corporation, the owner and operator of the Steamboat skiresort (“Steamboat”). The purchase price to be paid for Steamboat Corporationby Wintergames was $265.0 million (including the assumption of approximately$4.0 million in debt), payable in cash. The purchase price was subject tocertain customary adjustments, including certain working capital and earningsadjustments, set forth in the Purchase Agreement. In addition, in connectionwith the sale, the Company agreed to sell certain Steamboat-related assets ofits subsidiary Grand Summit Resort Properties, Inc. (“Grand Summit”) toSteamboat Corporation.

On March 1, 2007, the Company completed the sale of SteamboatCorporation to Intrawest Holdings S.A.R.L. (formerly Wintergames Holdings SARL)and Steamboat Acquisition Corp. (the “Steamboat Sale”, see Note 12 “SubsequentEvents” for additional information).

The company has accounted for the planned sale of Steamboatresort in accordance with SFAS No. 144. Accordingly, the Company hasreclassified the assets and liabilities related to Steamboat Corporation andGrand Summit as held for sale in the attached consolidated balance sheet as ofJanuary 28, 2007. The company did not record an impairment charge for the saleof Steamboat because the Company realized a gain upon the closing of the saleof the resort.

The components of the assets and liabilities held for sale asof January 28, 2007 related to Steamboat Corporation and Grand Summit are asfollows (in thousands):

|                                | ** ** | ** January 28, 2007 ** | ** ** |
|--------------------------------|------------|--------------------------------------------|------------|
| **Assets held for sale**       |       |                                       |       |
| Cash equivalents               |       | $                                          | 5,990      |   |
| Accounts receivable            |       | 1,662                                      |       |
| Inventory                      |       | 842                                        |       |
| Prepaid expenses               |       | 435                                        |       |
| Property & equipment, net  |       | 78,671                                     |       |
| Real estate developed for sale |       | 1,217                                      |       |
| Other assets                   |       | 5,786                                      |       |
| ** **                     |       | $                                          | 94,603     |   |

 

|                                                 | ** ** | ** January 28, 2007 ** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------|------------|
| **Liabilities related to assets held for sale** |       |                                       |       |
| Accounts payable and accrued  liabilities       |       | $                                          | 13,165     |   |
| Deposits and deferred revenue                   |       | 14,973                                     |       |
| Current and long term debt                      |       | 3,552                                      |       |
| Other long term liabilities                     |       | 378                                        |       |
| ** **                                      |       | $                                          | 32,068     |   |

 

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Summary operating results for Steamboat Corporation, whichhave historically been included in the Company’s resort segment in its resultsof operations, and for Grand Summit, which have historically been included inthe Company’s real estate segment in its results of operations, for the 26weeks ended January 29, 2006 and January 28, 2007, were as follows (inthousands):

| For the 26 weeks ended  | ** ** | **January 29, 2006** | ** ** | ** January 28, 2007 ** | ** ** |
|---------------------------------------------|------------|--------------------------------|------------|--------------------------------------------|------------|
| ** **                                  |       |                           |       |                                       |       |
| **Total revenues**                          |       | $                              | 35,747     |                                       | $          | 38,537 |   |
| **Total expenses (1)**                      |       | 44,440                         |       | 42,669                                     |       |
| **Total loss from discontinued operations** |       | $                              | (8,693     | )                                          | $          | (4,132 | ) |

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(1)             Includingin total expenses is depreciation of $2.7 million and $1.9 million for the 26weeks ended January 29, 2006 and January 28, 2007, respectively.  The company discontinued depreciation onSteamboat Corporation and Grand Summit assets in accordance with SFAS No. 144when the assets qualified as held for sale. The resort recorded approximately $1.1 million less in depreciationexpense for the 26 weeks ended on January 28, 2007, as a result of theaccounting treatment defined by SFAS No. 144.

The Company has not recorded a provision or benefitfor income taxes attributable to discontinued operations.  The Company expects to record a loss beforeincome taxes for the full year, even including the income from discontinued operationsand does not expect to record a benefit from such loss, since it does notexpect to realize such benefits in the foreseeable future.

**11.****       Commitments and Contingencies**

Certain claims,suits and complaints in the ordinary course of business are pending or mayarise against the Company, including all of its direct and indirectsubsidiaries.  In the opinion ofmanagement, all matters are adequately covered by insurance or, if not covered,are without merit or are of such kind, or involve such amounts as are notlikely to have a material effect on the financial position, results ofoperations or liquidity of the Company if disposed of unfavorably.

In July 2006, theCompany announced that it had initiated a strategic review of business optionsfor its Steamboat ski resort, including the potential sale of the resort. On December 18, 2006, the Company entered intoa definitive agreement to sell Steamboat Ski & Resort Corporation toWintergames Holdings SARL for a cash purchase price of $265.0 million,including approximately $4.0 million in assumed debt and subject to workingcapital and seasonal earnings adjustments. As described in Note 12, the Company completed the sale of theSteamboat ski resort on March 1, 2007.

As described inNote 12, on February 16, 2007, the Company entered into a definitive agreement to sell its Mount Snowand Attitash ski resorts to Peak Resorts Inc. for a total cash purchase priceof $73.5 million for both resorts subject to working capital and seasonalearnings adjustments. In addition, the buyer will assume approximately $2million in debt and other liabilities.

As described inNote 12, on February 16, 2007, the Company entered into a definitive agreement to sell its Killingtonand Pico resorts in Vermont to SP Land Company, LLC for a total cash purchaseprice of $83.5 million subject to a working capital adjustment.  Additionally, the buyer will also assumeapproximately $5.0 million of debt and other liabilities and certaincontractual obligations of ASC.

The completion of either the sale of Killington/Pico or the sale ofMount Snow and Attitash, when considered together with the sale of Steamboat,would constitute a Valuation Event under the Company’s LTIP.  The LTIP provides that within 60 daysfollowing the occurrence of a Valuation Event, the Compensation Committee ofthe Board of Directors shall determine the enterprise value of the Company,using a qualified independent third party, and shall compute and pay the awardsdue to participants under the LTIP.  TheCompany currently estimates that should either sale occur, total payments underthe LTIP would be approximately $13.0 million. The Company has concluded that, as of January 28, 2007, neither sale was“probable” under the provisions of SFAS No. 5, “*Accounting for Contingencies*” and, accordingly, has notaccrued for the excess of estimated total payments over and above the $1.6million already vested and accrued for under the plan’s minimum paymentprovisions.

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As reported in the Company’s consolidated financial statements includedin its Form 10-K for the fiscal year ended July 30, 2006, the Company is currently in dispute with Wolf MountainResorts, LC, one of its landlords at The Canyons, regarding the related leaseagreement.  The Utah District Court has granted a temporary restrainingorder and amended a previous injunction to prohibit Wolf from terminating thelease until the Court finds that the Company has breached the lease and thatWolf is entitled to terminate the lease as a result of such breach.  Even though the Company strongly believesthat it is presently in compliance all material provisions of its lease withWolf, there can be no assurance that the Utah District Court will agree that itis not in default or that it has taken the steps necessary to cure any default. In the event that the District Court finds that the Company is in defaultand the actions it has taken are not sufficient to cure the defaults raised byWolf under the lease, and if the Company is unable to effect a cure of suchdefaults within any remaining cure period, the remedies available to Wolf mayinclude damages to Wolf (which the Company believes to be minimal and/orspeculative) and/or termination of the lease with Wolf.  Termination ofthe lease would significantly reduce the value of the Company’s operation atThe Canyons, and would materially curtail, if not completely eliminate, itsability to obtain recurring revenues from those assets. Wolf may have certainrights to repurchase for fair market value certain of the Company’s assetswhich are used in conjunction with its operation of The Canyons.  Wolf’s right to terminate the lease issubject to certain rights of cure and foreclosure in favor of the Company’slenders.  In addition, termination of thelease by Wolf would likely cause a default under the Resort Senior CreditFacility.

With respect to additionalcommitments and contingencies, reference should be made to the Company’sconsolidated financial statements and disclosures thereto included in its Form10-K for the fiscal year ended July 30, 2006 filed with the Securities andExchange Commission on October 30, 2006 and its Form 10-Q for the quarter endedOctober 29, 2006 filed with the Securities and Exchange Commission on December8, 2006.

**12.  Subsequent Events**

On February 16,2007, the Company enteredinto a definitive purchase agreement with Peak Resorts, Inc. (“Peak Resorts”)to sell all of the Company’s stock in Mount Snow Ltd. (“MSL”), the owner andoperator of the Mount Snow ski resort, and L.B.O. Holding, Inc. (“LBO”), theowner and operator of the Attitash ski resort. The purchase price to be paidfor MSL and LBO by Peak Resorts is $73.5 million in cash, plus the assumptionof approximately $2.0 million in debt and other liabilities. The purchase priceis subject to certain customary adjustments, including certain working capitaland earnings adjustments, set forth in the Purchase Agreement.

On February 16,2007, the Company entered into a definitive purchase agreement with SP LandCompany, LLC (“SP Land”) to sell substantially all of the assets comprising theKillington/Pico ski resorts in Killington, Vermont. The purchase price to be paid for theKillington/Pico resort by SP Land is $83.5 million in cash plus the assumptionof approximately $5.0 million in debt and other liabilities. The purchase priceis subject to certain customary adjustments, including certain season pass andworking capital adjustments, set forth in the Purchase Agreement. A closingescrow of $3.0 million will be withheld from the purchase price until July 1,2008, to fund any post-closing indemnification obligations of the Seller.

On February 26,2007, the Company accepted the resignation of Leslie B. Otten from the Company’s Board of Directors,effective immediately.

On February 28, 2007, the Company’s subsidiary, Grand Summit,repaid all outstanding obligations (consisting only of deferred interestobligations) under its Construction Loan Facility. In conjunction with therepayment of all obligations under the Construction Loan Facility, the Companyterminated all agreements relating to the Construction Loan Facility.     Also in connection with this transaction,Grand Summit re-purchased approximately $740,000 in seller financing notespreviously assigned to and serviced by an affiliate of the lenders under theConstruction Loan Facility.

On March 1, 2007,the Company completed the sale of Steamboat Ski & Resort Corporation toIntrawest Holdings S.A.R.L. (formerly Wintergames Holdings SARL) for the agreedupon cash purchase price of $265.0 million, including approximately $4.0million in assumed debt and subject to working capital and seasonal earningsadjustments. Inaddition, in connection with the sale, certain Steamboat-related assets of theCompany’s subsidiary Grand Summit Resort Properties, Inc. were also sold.

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On March 1, 2007, the holders of the Company’s Series C-1Preferred Stock and Series C-2 Preferred Stock (collectively, the “Holders”)terminated its agreement with the lenders under the Resort Senior CreditFacility that the Holders would not exercise any remedies as a result of thefailure to redeem the Series C-1 Preferred Stock and the Series C-2 PreferredStock prior to their final maturities.

On March 1, 2007, in conjunction with its completion of thesale of Steamboat Ski & Resort Corporation, the Company permanently repaidall outstanding obligations under the $85.0 million term portion of its firstlien loan and $105.0 million second lien term loan (together with the $40.0million revolving portion of the first lien term loan, collectively the “ResortSenior Credit Facility”). The Company terminated all agreements relating to thesecond lien term loan. In addition, the Company entered into an amendment ofthe $40.0 million revolving facility of its first lien loan. The amendment tothe revolving facility provides, among other things, for a reduction of theaggregate commitments available under the facility to $10.0 million and theelimination of the commitment fee thereunder, for the elimination of the annualEBITDA covenant for the fiscal quarter ending April 29, 2007, and for theapproval by the revolving facility lenders of any future advances under therevolving credit facility.   Inconjunction with the permanent payoff of all outstanding obligations under theResort Senior Credit Facility, the Company terminated its interest rate swapagreement with Credit Suisse and received $825,000 on March 1, 2007, as theresult of the termination. In addition, the Company wrote off the remainingbalance of deferred financing costs associated with the Resort Senior CreditFacility, which totalled approximately $4.7 million as of March 1, 2007.

On March 7, 2007, the Company announced that it had initiated astrategic review of business options for its Sugarloaf and Sunday Riverresorts.  The Company expects to retaininvestment advisors to assist in marketing these resorts for possiblesale.   There is currently no contractualagreement between the Company and any potential purchaser, and the terms andlikelihood of any possible sale or sales are unknown.

**Item 2Management’s Discussion and Analysis of FinancialCondition and Results of Operations**

**Forward-Looking Statements**

Certain statements contained in this report constitute forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933, asamended (the Securities Act), and Section 21E of the Securities Exchange Act of1934, as amended (the Exchange Act). These forward-looking statements are not based on historical facts, butrather reflect our current expectations concerning future results andevents.  Similarly, statements thatdescribe our objectives, plans or goals are or may be forward-lookingstatements.  We have tried, whereverpossible, to identify such statements by using words such as “anticipate”, “assume”,“believe”, “expect”, “intend”, “plan”, and words and terms of similar substancein connection with any discussion of operating or financial performance.  Such forward-looking statements involve anumber of risks and uncertainties.  Inaddition to factors discussed above, other factors that could cause actualresults, performances or achievements to differ materially from those projectedinclude, but are not limited to, the following: the loss or termination or ourleasehold rights at The Canyons as a result of any material defaults undergoverning lease documents that have not been cured within applicable cureperiods; failure to satisfy any of the conditions to closing of the purchaseagreements relating to Mount Snow/Attitash and Killington/Pico or the buyers’refusal to close for such agreements; changes in regional and national businessand economic conditions affecting both our resort operating and real estatesegments; competition and pricing pressures; negative impact on demand for ourproducts resulting from terrorism and availability of air travel (including theeffect of airline bankruptcies); failure to maintain improvements to resortoperating performance at the covenant levels required by our Resort SeniorCredit Facility; adverse weather conditions regionally and nationally; changesin weather patterns resulting from global warming; seasonal business activity;increased gas and energy prices; changes to federal, state and localregulations affecting both our resort operating and real estate segments;failure to renew land leases and forest service permits; disruptions in watersupply that would impact snowmaking operations; the loss of any of ourexecutive officers or key operating personnel; and other factors listed fromtime to time in our documents we have filed with the Securities and ExchangeCommission.  We caution the reader thatthis list is not exhaustive.  We operatein a changing business environment and new risks arise from time to time.  The forward-looking statements included inthis document are made only as of the date of this document and under Section27A of the Securities Act and Section 21E of the Exchange Act, we do not haveor undertake any obligation to publicly update any forward-looking statementsto reflect subsequent events or circumstances*.*

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**General**

We are organized as a holding company and operate through varioussubsidiaries.   We develop, own andoperate a range of hospitality-related businesses, including skier developmentprograms, hotels, golf courses, restaurants and retail locations.  We also develop, market and operateski-in/ski-out alpine villages, townhouses, condominiums, and quarter andeighth share ownership hotels.  We reportour results of operations in two business segments: resort operations and realestate operations.

Our operating strategiesinclude taking advantage of our multi-resort network, increasing our revenueper skier, continuing to build brand awareness and customer loyalty, expandingour sales and marketing efforts, continuing to focus on cost management, expandingour golf and convention business, improving our hotel occupancy and operatingmargins, and capitalizing on real estate growth opportunities through jointventures.

Ourrevenues are highly seasonal in nature. In fiscal 2006, we realized approximately 88% of resort operatingsegment revenues and over 100% of resort operating segment operating incomeduring the period from mid-November through April.  In addition, a significant portion of resortoperating segment revenue and approximately 26% of annual skier visits weregenerated during the Christmas and Presidents’ Day vacation weeks in fiscal2006.  Our resorts typically experienceoperating losses and negative cash flows for the period from May throughmid-November.

A high degree of seasonality in our revenues increases the impact ofcertain events on our operating results. Adverse weather conditions, access route closures, equipment failures,and other developments of even moderate or limited duration occurring duringpeak business periods could reduce revenues. Adverse weather conditions can also increase power and other operatingcosts associated with snowmaking or could render snowmaking wholly or partiallyineffective in maintaining quality skiing conditions.  Furthermore, unfavorable weather conditions,regardless of actual skiing conditions, can result in decreased skier visits.

As a result of a stockholders’ agreement and the terms of the preferredstock held by Oak Hill Capital Partners, L.P. and certain related entities (OakHill), and Leslie B. Otten (Mr. Otten), the holder of all of the 14,760,530shares of Class A common stock, Oak Hill has the right to appoint a majority ofour board of directors.  Oak Hill alsoowns all of our outstanding Series C-1 Preferred Stock and Series C-2 PreferredStock.  Oak Hill may have interestsdifferent from the interests of the holders of our common stock.

On February 16,2007, we entered into adefinitive purchase agreement with Peak Resorts, Inc. (“Peak Resorts”) to sellall of the Company’s stock in Mount Snow Ltd. (“MSL”), the owner and operatorof the Mount Snow ski resort, and L.B.O. Holding, Inc. (“LBO”), the owner andoperator of the Attitash ski resort. The purchase price to be paid for MSL andLBO by Peak Resorts is $73.5 million in cash, plus the assumption ofapproximately $2.0 million in debt and other liabilities. The purchase price issubject to certain customary adjustments, including certain working capital andearnings adjustments, set forth in the Purchase Agreement.

On February 16,2007, we entered into a definitive purchase agreement with SP Land Company, LLC(“SP Land”) to sell substantially all of the assets comprising theKillington/Pico ski resorts in Killington, Vermont. The purchase price to be paid for theKillington/Pico resort by SP Land is $83.5 million in cash plus the assumptionof approximately $5.0 million in debt and other liabilities. The purchase priceis subject to certain customary adjustments, including certain season pass andworking capital adjustments, set forth in the Purchase Agreement. A closingescrow of $3.0 million will be withheld from the purchase price until July 1,2008, to fund any post-closing indemnification obligations of the Seller.

On February 26,2007, the Company accepted the resignation of Leslie B. Otten from the Company’s Board of Directors,effective immediately.

On February 28, 2007, our subsidiary, Grand Summit, repaidall outstanding obligations (consisting only of deferred interest obligations)under its Construction Loan Facility. In conjunction with the repayment of allobligations under the Construction Loan Facility, the Company terminated allagreements relating to the Construction Loan Facility. Also in connection withthis transaction, Grand Summit re-purchased approximately $740,000 in sellerfinancing notes previously assigned to and serviced by an affiliate of thelenders under the Construction Loan Facility.

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On March 1, 2007,we completed the sale of Steamboat Ski & Resort Corporation to IntrawestHoldings S.A.R.L. (formerly Wintergames Holdings SARL) for the agreed upon cashpurchase price of $265.0 million, including approximately $4.0 million inassumed debt and subject to working capital and seasonal earnings adjustments. In addition, in connection with thesale, certain Steamboat-related assets of the Company’s subsidiary Grand SummitResort Properties, Inc. were also sold.

On March 1, 2007, the holders of the Company’s Series C-1Preferred Stock and Series C-2 Preferred Stock (collectively, the “Holders”)terminated its agreement with the lenders under the Resort Senior CreditFacility that the Holders would not exercise any remedies as a result of thefailure to redeem the Series C-1 Preferred Stock and the Series C-2 PreferredStock prior to their final maturities.

On March 1, 2007, in conjunction with the completion of thesale of Steamboat Ski & Resort Corporation, we permanently repaid alloutstanding obligations under the $85.0 million term portion of its first lienloan and $105.0 million second lien term loan (together with the $40.0 millionrevolving portion of the first lien term loan, collectively the “Resort SeniorCredit Facility”). We terminated all agreements relating to the second lienterm loan. In addition, the Company entered into an amendment of the $40.0 millionrevolving facility of its first lien loan. The amendment to the revolvingfacility provides, among other things, for a reduction of the aggregatecommitments available under the facility to $10.0 million and the eliminationof the commitment fee thereunder, for the elimination of the annual EBITDAcovenant for the fiscal quarter ending April 29, 2007, and for the approval bythe revolving facility lenders of any future advances under the revolvingcredit facility.   In conjunction withthe permanent payoff of all outstanding obligations under the Resort SeniorCredit Facility, we terminated the interest rate swap agreement with CreditSuisse and received $825,000 on March 1, 2007, as the result of thetermination.

On March 7, 2007, we announced that we had initiated astrategic review of business options for its Sugarloaf and Sunday Riverresorts.  We expect to retain investmentadvisors to assist in marketing these resorts for possible sale.   There is currently no contractual agreementbetween the Company and any potential purchaser, and the terms and likelihoodof any possible sale or sales are unknown.

Thefollowing is our discussion and analysis of financial condition and results ofoperations for the 13 and 26 weeks ended January 28, 2007.  As you read the information below, we urgeyou to carefully consider our fiscal 2006 Annual Report on Form 10-K filed onOctober 30, 2006, our quarter ended October 29, 2006 Quarterly Report on Form10-Q filed on December 8, 2006 and our unaudited condensed consolidatedfinancial statements and related notes contained elsewhere in this report.  Historical information contained therein andherein may not be indicative of results in future periods.

**Liquidityand Capital Resources**

***Short-Term Liquidity Needs***

Ourprimary short-term ski resort and real estate liquidity needs involve fundingseasonal working capital requirements, marketing and selling real estatedevelopment projects and funding our fiscal 2007 capital improvementprogram.  Our cash requirements forski-related and real estate sales activities are provided from separatesources.

As described below, we entered into a $230.0 million ResortSenior Credit Facility on November 24, 2004 and used initial borrowingsthereunder to refinance our prior resort senior credit facility and redeem our$120.0 million senior subordinated notes (Senior Subordinated Notes).  On March 1, 2007, we paid off all obligationsunder this Facility. Additionally, on March 1, 2007, theCompany terminated all agreements relating to the second lien term loan. Inaddition, the Company entered into an amendment of the $40.0 million revolvingfacility of its first lien loan. The amendment to the revolving facilityprovides, among other things, for a reduction of the aggregate amount availableunder the facility to $10.0 million and the elimination of the commitment feethereunder, for the elimination of the annual EBITDA covenant for the fiscalquarter ending April 29, 2007, and for the approval by the revolving facilitylenders of any future advances under the revolving credit facility. The Companydoes not presently anticipate a need for additional advances under therevolving credit facility prior to the end of the fiscal quarter ending April29, 2007.

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Our primary source of short term liquidity forski-related working capital and ski-related capital improvements are cash flowsfrom operating activities of our remaining resort operating subsidiaries, thecurrently available net cash proceeds, net of certain transaction expenses,from the sale of Steamboat ski resort and allowed borrowings under our amendedResort Senior Credit Facility noted above. The total debt outstanding under our Resort Senior Credit Facility as ofJanuary 28, 2007 was $195.1 million. However, all outstanding balances of this Facility were paid off onMarch 1, 2007. Real estate working capital has historically been fundedprimarily through unit inventory sales and short-term rental of remaining unitinventory.  In the past, the ConstructionLoan Facility funded such working capital. The Construction Loan Facility is without recourse to ASC and itssubsidiaries other than Grand Summit and is collateralized by significant realestate assets of Grand Summit.  As ofJanuary 28, 2007, the carrying value of the total assets that collateralizedthe Construction Loan Facility was $26.6 million.  During fiscal 2006, the Company repaid infull the Senior Construction Loan, including accrued loan fees of $750,000, andrepaid all principal amounts outstanding under the Subordinated ConstructionLoan.  The only amount remainingoutstanding under the Construction Loan Facility as of January 28, 2007 was$3.2 million of accrued deferred interest under the Subordinated ConstructionLoan, which amount is due and payable in full in November 2007.** ** See “Real Estate Liquidity — Construction LoanFacility” below. On February 28, 2007, the Company’s subsidiary, Grand Summit, repaid all outstandingobligations (consisting only of deferred interest obligations) under itsConstruction Loan Facility. In conjunction with the repayment of allobligations under the Construction Loan Facility, the Company terminated allagreements relating to the Construction Loan Facility.

***Resort Liquidity***

We entered intoagreements dated November 24, 2004 with Credit Suisse, GE Capital, and otherlenders whereby the lenders provided us with a new $230.0 million Resort SeniorCredit Facility consisting of a revolving credit facility and two term loanfacilities.  The proceeds of the ResortSenior Credit Facility were used to refinance our prior resort senior creditfacility and redeem our Senior Subordinated Notes as well as to pay fees andexpenses related to the transaction.  TheResort Senior Credit Facility consists of the following:

·                  RevolvingFacility - $40.0 million, including letter of credit (L/C) availability of upto $6.0 million.  The amount ofavailability under this facility is correspondingly reduced by the amount ofeach L/C issued.

·                  FirstLien Term Loan - $85.0 million borrowed on the funding date of November 24,2004.

·                  SecondLien Term Loan - $105.0 million borrowed on the funding date of November 24,2004.

The Revolving Facility and First Lien Term Loan are provided under a single credit agreement (collectively, the First Lien Credit Agreement), mature in November 2010 and bear interest, at the option of the Company, either at a rate equal to the prime rate, as publicly quoted in The Wall Street Journal, plus 3.5%, or at a rate equal to LIBOR (as defined) plus 4.5%, payable quarterly (11.75% based on the prime rate for the Revolving Facility and 9.82% based on the LIBOR rate for the First Lien Term Loan as of January 28, 2007).  The First Lien Term Loan requires 23 quarterly principal payments of $212,500 beginning on January 15, 2005 and a final payment of $80.1 million in November 2010. The Revolving Facility is comprised of two sub-facilities, each in the amount of $20.0 million and each with separate fees for the unused portion of the facilities in the amounts of 1.0% and 4.5% per annum, respectively.  The Second Lien Term Loan is provided under a separate credit agreement (Second Lien Credit Agreement), matures in November 2011, bears interest at a rate equal to the prime rate, as publicly quoted in The Wall Street Journal, plus 7.0%, or at a rate equal to LIBOR (as defined) plus 8.0%, payable quarterly (13.32% as of January 28, 2007 based on the LIBOR rate), and principal is due upon maturity.

TheRevolving Facility and the First Lien Term Loan obligations under the FirstLien Credit Agreement and the related guarantees are secured by afirst-priority security interest in substantially all of our assets, other thanassets held by Grand Summit, and our obligations under the Second Lien CreditAgreement and our subsidiaries’ obligations under the related guarantees aresecured by a second-priority security interest in the same assets.  Collateral matters between the lenders underthe First Lien Credit Agreement and the lenders under the Second Lien CreditAgreement are governed by an intercreditor agreement.

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The Resort Senior Credit Facility contains affirmative, negative, and financial covenants customary for this type of credit facility, which includes maintaining a minimum level of EBITDA (as defined), limiting our capital expenditures, maintaining a minimum ratio of appraised asset value to debt, and having a zero balance on the Revolving Credit Facility (excluding L/Cs) on April 1 of each year.  The Resort Senior Credit Facility also contains events of default customary for such financings, including but not limited to nonpayment of amounts when due; violation of covenants; cross default and cross acceleration with respect to other material debt; change of control; dissolution; insolvency; bankruptcy events; and material judgments.  Some of these events of default allow for grace periods or are qualified by materiality concepts.  The Resort Senior Credit Facility requires us to prepay the loans with proceeds of certain material asset sales and recovery events, certain proceeds of debt, 50% of excess cash flow, and proceeds from the issuance of capital stock. The Resort Senior Credit Facility also restricts our ability to pay cash dividends on or redeem our common or preferred stock.

Pursuant to the requirements of the Resort Senior Credit Facility, on May 23, 2005, we entered into an interest rate swap agreement for 50% of the First Lien Term Loan and the Second Lien Term Loan for a notional amount of $95.0 million.  Under the swap agreement, during the period of May 16, 2005 to November 15, 2005, we paid 4.16% and received the 6-month LIBOR rate.  During the period from November 16, 2005 to May 15, 2008, we pay 4.16% and receive the 3-month LIBOR rate.  As a result of entering into this interest rate swap agreement, we have fixed the cash-pay rate on the notional amount until the maturity of the swap agreement in May 2008. Changes in the fair value of the interest rate swap agreement are recorded in the condensed consolidated statement of operations and changes in accumulated deficit as increases or decreases in fair value of this interest rate swap agreement at each reporting period-end.  During the 26-week period ended January 28, 2007, the Company recognized $487,000 of decrease in fair value of this agreement due to market value adjustments.  The total balance sheet effect as of January 28, 2007 is a net asset of $1.6 million.

In connection withentering into the Resort Senior Credit Facility, we entered into an ExchangeAgreement with the holder of the our Series A Preferred Stock and issued $76.7million of new junior subordinated notes (New Junior Subordinated Notes) dueMay 2012 to the holder of our Series A Preferred Stock in exchange for alloutstanding shares of Series A Preferred Stock. The New Junior Subordinated Notes accrue interest at a rate of 11.25%upon issuance, gradually increasing to a rate of 13.0% in 2012.  No principal or interest payments arerequired to be made on the New Junior Subordinated Notes until maturity.  However, interest is added to the principaloutstanding on January 1 of each year. On January 1, 2006 and January 1, 2007, $8.7 million and $9.7 million,respectively, of interest was added to the principal outstanding.  The New Junior Subordinated Notes aresubordinated to all of our other debt obligations and all trade payablesincurred in the ordinary course of our business.  None of our subsidiaries are obligated on theNew Junior Subordinated Notes, and none of our assets serve as collateral forrepayment of the New Junior Subordinated Notes. The indenture governing the New Junior Subordinated Notes also restrictsus from paying cash dividends or making other distributions to our shareholderssubject to certain limited exceptions.

In connection with entering into the Resort Senior CreditFacility, the indenture for our Junior Subordinated Notes was amended to extendtheir maturity to May 2012. The Junior Subordinated Notes bear interest at arate of 11.3025%, compounded annually and had an outstanding balance of $22.3million as of January 28, 2007. All principal and interest is due at maturity.

We have $18.0million of other long-term debt as of January 28, 2007.  This is comprised of $10.2million of debt held under capital leases and $7.8 million under other notespayable with various lenders.  OnMarch 1, 2007 the Company completed thesale of Steamboat.  As part of this sale,$1.8 million representing Steamboat’s capital lease obligations and $1.7million representing Steamboat’s notes payable, respectively, were assumed bythe purchasers.

As of January 28,2007, the Company had $8.0 million, $82.1 million, and $105.0 million ofprincipal outstanding under the Revolving Facility, First Lien Term Loan, andSecond Lien Term Loan portions of the Resort Senior Credit Facility,respectively.  Furthermore, as of January28, 2007, we had $1.6 million in outstanding L/Cs with $30.4 million availablefor additional borrowings under the Revolving Facility.

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On March 1, 2007, in conjunction with its completion of the sale ofSteamboat ski resort, the Company permanently repaid all outstandingobligations under the $85.0 million term portion of its first lien loan and$105.0 million second lien term loan, (together with the $40.0 millionrevolving portion of the first lien term loan, collectively the “Resort SeniorCredit Facility”). The Company terminated all agreements relating to the secondlien term loan and terminated its interest rate swap agreement. In addition,the Company entered into an amendment of the $40.0 million revolving facilityof its first lien loan. The amendment to the revolving facility provides, amongother things, for a reduction of the aggregate commitments available under thefacility to $10.0 million and the elimination of the commitment fee thereunder,for the elimination of the annual EBITDA covenant for the fiscal quarter endingApril 29, 2007, and for the approval by the revolving facility lenders of anyfuture advances under the revolving credit facility.   Additionally, as the result of the sale ofSteamboat, approximately $239.1 million of cash proceeds were received March 1,2007.  After repayments under the ResortSenior Credit Facility and payment of related selling costs, approximately$45.7 million was available to the Company for liquidity needs.

TheCompany’s liquidity is affected by the significant outstanding debt, whichincludes subordinated notes anddebentures and mandatorily redeemable securities (redeemable on July 31,2007).  As a result of the Company’shighly leveraged position, significant cash is required to service payments ondebt and mandatorily redeemable securities. Consequently, cash availability for working capital needs, capitalexpenditures, and acquisitions, is significantly limited.  Furthermore, our amended Resort Senior CreditFacility contains significant restrictions on our ability to obtain additionalsources of capital and may affect our liquidity.  These restrictions include the prepayment of subordinated notes and debentures debtand mandatorily redeemable securities, the sale of assets, the incurrence ofadditional indebtedness, and the issuance of preferred stock.   The Company anticipates that the cash flowsfrom operating activities of its remaining resort operating subsidiaries, thenet cash proceeds from the sale of Steamboat ski resort, and the allowed borrowingsunder its amended Resort Senior Credit Facility noted above will be sufficientto meet its working capital needs through the end of our second quarter offiscal 2008.

***Real Estate Liquidity***

Tofund working capital, Grand Summit relies on the net proceeds from the sale ofreal estate developed for sale, mortgage payments received for the SteamboatGrand Hotel parking facility and the lease of the commercial core at Steamboatto the resort company.

Wehave historically conducted substantially all of our real estate developmentthrough subsidiaries, each of which is a wholly owned subsidiary of ResortProperties.  Grand Summit owns theexisting Grand Summit Hotel project at Steamboat, which was primarily financedthrough a $110.0 million Senior Construction Loan (Senior ConstructionLoan).  Due to construction delays andcost increases at the Steamboat Grand Hotel project, on July 25, 2000, GrandSummit entered into the $10.0 million Subordinated Construction Loan, which wassubsequently increased to $10.6 million in December 2003 (SubordinatedConstruction Loan).  Together, the SeniorConstruction Loan and the Subordinated Construction Loan comprise the “ConstructionLoan Facility”. The Construction Loan Facility is without recourse to theCompany and its resort operating subsidiaries and is collateralized bysignificant real estate assets of Resort Properties and its subsidiaries,including the assets and stock of Grand Summit, the Company’s primary hoteldevelopment subsidiary.

Theoutstanding principal amounts under the Construction Loan Facility were payableincrementally as quarter and eighth share unit sales were closed, based on apredetermined per unit amount, which approximated between 70% and 80% of thenet proceeds of each closing up until the March 18, 2006 auction held atSteamboat, and then 85% of the net proceeds from all units sold at theauction.  Mortgages against thecommercial core units and unsold unit inventory at the Grand Summit Hotel atSteamboat and a promissory note from the Steamboat Homeowners Associationsecured by the Steamboat Grand Hotel parking garage collateralize theConstruction Loan Facility, and are subject to covenants, representations, andwarranties customary for that type of construction facility.

OnMarch 18, 2006 Grand Summit conducted an auction for the remaining unsolddeveloper inventory at the Grand Summit Hotel at Steamboat.  The auction, together with subsequent salesactivity, resulted in a near sell-out of the remaining inventory of residentialunits.  As of July 30, 2006, sales of$23.3 million were closed.  As a result,the Grand Summit paid off the Senior Construction Loan, including accrued loanfees of $750,000, and the principal balance of the Subordinated ConstructionLoan during fiscal 2006.

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UntilJuly 31, 2005, the Subordinated Construction Loan carried interest at a fixedrate of 20% per annum, payable monthly in arrears.  Fifty percent of the amount of this interestwas due and payable in cash and the other fifty percent was automaticallydeferred until the final payment date of the Subordinated ConstructionLoan.  Subsequent to July 31, 2005, theinterest rate under the Subordinated Construction Loan was decreased to 10% perannum, all of which was payable in cash. The total deferred interest under the Subordinated Construction Loan asof January 28, 2007 was $3.2 million. The remaining deferred interest balance under the SubordinatedConstruction Loan matures on November 30, 2007. The Subordinated Construction Loan, including the related deferred interestbalance, is secured by the same collateral that secured the Senior ConstructionLoan and is non-recourse to the Company and its resort operating subsidiariesother than Grand Summit.

On February 28, 2007, the Company’ssubsidiary, Grand Summit, repaid all outstanding obligations (consisting onlyof deferred interest obligations) under its Construction Loan Facility. Inconjunction with the repayment of all obligations under the Construction LoanFacility, the Company terminated all agreements relating to the ConstructionLoan Facility.

***Long-Term Liquidity Needs***

Our primary long-term liquidity needs areto fund skiing-related capital improvements at certain of our resorts.  For fiscal 2006, our annual maintenancecapital requirements were $13.2 million. For each of fiscal 2007 and fiscal 2008, we anticipate our on-goingcapital spending to be approximately $15.5 million or $12.5 million with theexclusion of Steamboat, each year, as allowed under our Resort Senior CreditFacility and excluding any contractually committed capital expenditures alsoallowed under our Resort Senior Credit Facility.  There is a considerable degree of flexibilityin the timing and, to a lesser degree, scope of our growth capital program.  Although we can defer specific capitalexpenditures for extended periods, continued growth of skier visits, revenues,and profitability will require continued capital investment in on-mountainimprovements.

We finance on-mountain capitalimprovements through resort cash flows, capital leases, proceeds from sales ofnon-operating assets along with, on a going forward basis, the net proceedsreceived from the March 1, 2007 sale of Steamboat and our newly amended ResortSenior Credit Facility.  The size andscope of the capital improvement program will generally be determined annuallydepending upon the strategic importance and expected financial return ofcertain projects, future availability of cash flows from each season’s resortoperations, and future borrowing availability and covenant restrictions underthe Resort Senior Credit Facility.

In conjunction with its completion of the sale of SteamboatSki & Resort Corporation, the Company permanently repaid all outstandingobligations under the $85.0 million term portion of its first lien loan and$105.0 million second lien term loan (together with the $40.0 million revolvingportion of the first lien term loan, collectively the “Resort Senior CreditFacility”). The Company terminated all agreements relating to the second lienterm loan. In addition, the Company entered into an amendment of the $40.0million revolving facility of its first lien loan. The amendment to therevolving facility provides, among other things, for a reduction of theaggregate commitments available under the facility to $10.0 million and theelimination of the commitment fee there under, for the elimination of theannual EBITDA covenant for the fiscal quarter ending April 29, 2007, and forthe approval by the revolving facility lenders of any future advances under therevolving credit facility.

The Company alsohas mandatorily redeemable convertible participating 12% preferred stock(Series C-1 Preferred Stock) with an accreted redeemable value of $75.9 millionas of January 28, 2007, and mandatorily redeemable 15% non-voting preferredstock (Series C-2 Preferred Stock) with an accreted redeemable value of $309.5million as of January 28, 2007, which mature and are redeemable on July 31,2007, to the extent that we have legally available funds to effect suchredemption.   There can be no assurancethat we will be able to retire, redeem or refinance our preferred stock on orbefore its redemption date.  Inconjunction with the funding of the Resort Senior Credit Facility, the holdersof the Series C-1 Preferred Stock and Series C-2 Preferred Stock (collectively,the “Holders”) agreed with the lenders under the Resort Senior Credit Facilitythat the Holders would not exercise any remedies available to them as a resultof the failure to redeem the Series C-1 Preferred Stock and the Series C-2Preferred Stock prior to their final maturities.  On March 1, 2007, the Holders of the Company’sSeries C-1 Preferred Stock and Series C-2 Preferred Stock terminated thisagreement with the lenders.

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As a result of a stockholders’ agreement and the terms of the preferredstock held by Oak Hill Capital Partners, L.P. and certain related entities (OakHill), and Leslie B. Otten (Mr. Otten), the holder of all of the 14,760,530shares of Class A common stock, Oak Hill has the right to appoint a majority ofour board of directors.  Oak Hill alsoowns all of our outstanding Series C-1 Preferred Stock and Series C-2 PreferredStock.  Oak Hill may have interestsdifferent from the interests of the holders of our common stock.

**Contractual Obligations**

There have been no material changes outside the Company’s ordinarycourse of business during the quarterly period ended January 28, 2007.

**Off-Balance Sheet Arrangements**

Otherthan as set forth under “Contractual Obligations” above and our interest rateswap agreement described above under “Resort Liquidity”, we do not have anyoff-balance sheet transactions, arrangements, or obligations (includingcontingent obligations) that have, or are reasonably likely to have, a materialcurrent or future effect on our financial position, results of operations,business prospects, liquidity, capital expenditures, or capital resources.

**Results of Operations**

On March 1, 2007, the Company completed the sale of SteamboatSki & Resort Corporation to Intrawest Holdings S.A.R.L. (formerlyWintergames Holdings SARL).In addition, inconnection with the sale, certain Steamboat-related assets of the Company’ssubsidiary Grand Summit Resort Properties, Inc. were also sold.  Allresults of operations related to Steamboat have been classified as “Income fromdiscontinued operations” in the accompanying financial statements and aretherefore excluded in the following discussion and analysis of Results ofOperations for the 13 week and 26 week periods ended January 29, 2006 andJanuary 28, 2007.

**Results of OperationsFor the 13 weeks ended January 29, 2006 compared to the 13 weeks ended January28, 2007**

**ResortOperations:**

The components of resort operations for the 13 weeksended January 29, 2006 and the 13 weeks ended January 28, 2007 are as follows(unaudited, in thousands):

|                                        | ** ** | **13 weeks ended   January 29, 2006 ** | ** ** | **13 weeks ended  January 28, 2007** | ** ** | **Variance** | ** ** |
|----------------------------------------|------------|----------------------------------------------------------------------|------------|----------------------------------------------------------|------------|--------------|------------|
|                                   | * *   | * *                                                             | * *   | * *                                                 | * *   | * *     | * *   |
| Net resort revenues                    |       | $                                                                    | 80,482     |                                                     | $          | 72,594       |       | $ | (7,888 | ) |
|                                   |       |                                                                 |       |                                                     |       |         |       |
| Cost of resort operations              |       | 53,025                                                               |       | 52,380                                                   |       | (645         | )          |
| Marketing, general and administrative  |       | 14,494                                                               |       | 13,670                                                   |       | (824         | )          |
| Depreciation and amortization          |       | 10,940                                                               |       | 10,270                                                   |       | (670         | )          |
| Total resort operating expenses        |       | 78,459                                                               |       | 76,320                                                   |       | (2,139       | )          |
|                                   |       |                                                                 |       |                                                     |       |         |       |
| Income (loss) from resort operations   |       | 2,023                                                                |       | (3,726                                                   | )          | (5,749       | )          |
|                                   |       |                                                                 |       |                                                     |       |         |       |
| Interest expense, net                  |       | (15,325                                                              | )          | (17,336                                                  | )          | (2,011       | )          |
| Loss from continuing resort operations |       | $                                                                    | (13,302    | )                                                        | $          | (21,062      | )          | $ | (7,760 | ) |

 

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Resortrevenues were approximately $72.6 million as compared to $80.5 million, adecrease of $7.9 million, or 9.8%, for the 13 weeks ended January 28, 2007 whencompared to the 13 weeks ended January 29, 2006.  Estimated total skier visits decreased 18.1%for this period over the comparable period of the previous year. Estimatedskier visits at the Company’s eastern resorts were 22.8% lower than last year,primarily as a result of warm weather, rain and lack of natural snowfall.However estimated skier visits increased 4.4% at The Canyons.

Our resort segmentincurred a $21.1 million loss for the 13 weeks ended January 28, 2007, comparedto a $13.3 million loss for the 13 weeks ended January 29, 2006.  This $7.8 million, or 58%, increase in theloss resulted primarily from the net effect of the following:

Decreases in revenues andincreases in costs:

(i)                            $7.9million decrease in revenues;

(ii)                         $2.0million increase in net interest expense;

Partially offset by decreases in costs:

(iii)                      $0.6 milliondecrease in cost of resort operations

(iv)                     $0.8 milliondecrease in marketing, general and administrative expenses; and

(v)                        $0.7million decrease in depreciation and amortization expense.

**RealEstate Operations:**

Thecomponents of real estate operations for the 13 weeks ended January 29, 2006and the 13 weeks ended January 28, 2007 are as follows (unaudited, inthousands):

|                                             | ** ** | **13 weeks ended   January 29, 2006 ** | ** ** | **13 weeks ended  January 28, 2007** | ** ** | **Variance** | ** ** |
|---------------------------------------------|------------|----------------------------------------------------------------------|------------|----------------------------------------------------------|------------|--------------|------------|
|                                        |       |                                                                 |       |                                                     |       |         |       |
| Net real estate revenues                    |       | $                                                                    | 1,466      |                                                     | $          | 837          |       | $ | (629 | ) |
|                                        |       |                                                                 |       |                                                     |       |         |       |
| Cost of real estate operations              |       | 2,247                                                                |       | 882                                                      |       | (1,365       | )          |
| Depreciation and amortization               |       | —                                                               |       | —                                                   |       | —       |       |
| Total real estate operating expenses        |       | 2,247                                                                |       | 882                                                      |       | (1,365       | )          |
|                                        |       |                                                                 |       |                                                     |       |         |       |
| Loss from real estate operations            |       | (781                                                                 | )          | (45                                                      | )          | 736          |       |
|                                        |       |                                                                 |       |                                                     |       |         |       |
| Other income (expense):                     |       | —                                                               |       | —                                                   |       | —       |       |
|                                        |       |                                                                 |       |                                                     |       |         |       |
| Loss from continuing real estate operations |       | $                                                                    | (781       | )                                                        | $          | (45          | )          | $ | 736 |   |

 

Real estate revenues were approximately $0.8 millionas compared to $1.5 million, a decrease of $0.6 million, or 42.9%, for the 13weeks ended January 28, 2007 when compared to the 13 weeks ended January 29,2006, primarily due to lower amounts of land sales.

Our real estate segmentapproximated break-even results for the 13 weeks ended January 28, 2007,compared to a loss from operations of $0.8 million for the 13 weeks endedJanuary 29, 2006.  This $0.7 milliondecrease in loss from operations results primarily from the net effect of thefollowing:

Decreases in costs:

(i)                                          $1.4million decrease in cost of operations due to lower amounts of land sales aswell as a $0.8 million provision for a probable settlement related to realestate development obligations at The Canyons in 2006;

Offset by decreases in revenues described above.

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**Benefit from income taxes:**

We recorded no benefit fromincome taxes for either the 13 weeks ended January 29, 2006 or the 13weeks ended January 28, 2007.  We believeit is more likely than not that we will not realize income tax benefits fromoperating losses in the foreseeable future, and therefore, have recorded a fullvaluation allowance against our existing deferred income tax assets.

**For the 26 weeks ended January29, 2006 compared to the 26 weeks ended January 28, 2007**

**ResortOperations:**

The components ofresort operations for the 26 weeks ended January 29, 2006 and January 28, 2007are as follows (unaudited, in thousands):

|                                         | ** ** | **26 weeks ended**   | ** ** | ** **                     | ** ** |
|-----------------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| ** **                              | ** ** | **January 29, 2006** | ** ** | **January 28, 2007** | ** ** | **Variance** | ** ** |
|                                    | * *   | * *                       | * *   | * *                       | * *   | * * | * * |
| Net resort revenues                     |       | $                              | 93,987     |                           | $          | 86,528 |   | $ | (7,459 | ) |
|                                    |       |                           |       |                           |       |   |   |
| Cost of resort operations               |       | 71,901                         |       | 72,533                         |       | 632 |   |
| Marketing, general and administrative   |       | 23,719                         |       | 23,761                         |       | 42 |   |
| Depreciation and amortization           |       | 13,239                         |       | 12,359                         |       | (880 | ) |
| Total resort operating expenses         |       | 108,859                        |       | 108,653                        |       | (206 | ) |
|                                    |       |                           |       |                           |       |   |   |
| Loss from resort operations             |       | (14,872                        | )          | (22,125                        | )          | (7,253 | ) |
| Other income (expense):                 |       |                           |       |                           |       |   |   |
| Interest expense                        |       | (29,960                        | )          | (33,984                        | )          | (4,024 | ) |
| Gain on sale of property                |       | 169                            |       | —                         |       | (169 | ) |
| Loss  from continuing resort operations |       | $                              | (44,663    | )                              | $          | (56,109 | ) | $ | (11,446 | ) |

 

Resortrevenues were approximately $86.5 million as compared to $94.0 million, adecrease of $7.5 million, or 7.9%, for the 26 weeks ended January 28, 2007 whencompared to the 26 weeks ended January 29, 2006.   Estimated total skier visits decreased 18.1%for this period over the comparable period of the previous year. Estimatedskier visits at the Company’s eastern resorts were 22.8% lower than last year,primarily as a result of warm weather, rain and lack of natural snowfall.However estimated skier visits increased 4.4% at The Canyons.

Ourresort segment incurred a $56.1 million loss for the 26 weeks ended January 28,2007, compared to a $44.7 million loss for the 26 weeks ended January 29,2006.  This $11.4 million increase in theloss resulted primarily from the net effect of the following:

Decreasesin revenues and increases in costs:

(i)                        $7.5million decrease in revenues;

(ii)                     $0.6 millionincrease in cost of resort operations;

(iii)                  $0.2 milliondecrease in net gain on sale of property; and

(iv)                 $4.0 millionincrease in interest expense.

Partially offsetby decreases in costs:

(v)                    $0.9 milliondecrease in depreciation expense.

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*Recent Trends:*

For the four weeks ended February 25, 2007, ourrevenues from continuing resort operations (excluding the results of Steamboat)were approximately $1.6 million, or 4% higher than for the same period inFiscal 2006.  Total skier visitsincreased by 2%. All of the increase in revenues was realized at our easternresorts, where revenues increased $1.7 million, or 5%, and skier visitsincreased 4% in response to significant snowfall in early February. Revenuesfor our remaining western resort decreased $0.1 million, or 1%, while skiervisits declined by 6% as a result of warm weather and a lack of naturalsnowfall in early February.  As of March4, 2007, our hotel booking pace for the remainder of the ski season isapproximately $0.5 million, or 2 % behind the pace of our bookings at the sametime last year.  Based on sales earlierin the year, our season pass revenue for the remainder of the season willcontinue to pace slightly ahead of the comparable period of fiscal 2006.

**RealEstate Operations:**

The components of real estate operations for the 26weeks ended January 29, 2006 and January 28, 2007 are as follows (unaudited, inthousands):

|                                              | ** ** | **26 weeks ended**   | ** ** | ** **                     | ** ** |
|----------------------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| ** **                                   | ** ** | **January 29, 2006** | ** ** | **January 28, 2007** | ** ** | **Variance** | ** ** |
|                                         |       |                           |       |                           |       |   |   |
| Net real estate revenues                     |       | $                              | 3,041      |                           | $          | 2,179 |   | $ | (862 | ) |
|                                         |       |                           |       |                           |       |   |   |
| Cost of real estate operations               |       | 3,205                          |       | 2,210                          |       | (995 | ) |
| Depreciation and amortization                |       | —                         |       | —                         |       | — |   |
| Total real estate operating expenses         |       | 3,205                          |       | 2,210                          |       | (995 | ) |
|                                         |       |                           |       |                           |       |   |   |
| Loss from real estate operations             |       | (164                           | )          | (31                            | )          | 133 |   |
| Other income (expense):                      |       | —                         |       | —                         |       | — |   |
| Loss  from continuing real estate operations |       | $                              | (164       | )                              | $          | (31 | ) | $ | 133 |   |

 

Realestate revenues decreased by $0.9 million in the 26 weeks ended January 28,2007 when compared to the 26 weeks ended January 29, 2006.  The decrease was primarily due to lower landsales.

Ourreal estate segment approximated break-even results for the 26 weeks endedJanuary 28, 2007, compared to a loss from operations of $0.1 million for the 26weeks ended January 29, 2006.  This $0.1million decrease in loss from operations results primarily from the net effectof the following:

Decreases in costs:

(i)                        $1.0million decrease in cost of operations due to lower land sales as well as a$0.8 million provision for a probable settlement related to real estatedevelopment obligations at The Canyons in 2006.

Offset bydecreases in revenues described above.

*Recent Trends:*

On February 28, 2007, Grand Summit repaid alloutstanding obligations (consisting only of deferred interest obligations)under the Construction Loan Facility.  OnMarch 1, 2007, in conjunction with the sale of the Steamboat resort, GrandSummit sold certain of its remaining Steamboat-related assets.  The Company continues to focus its realestate segment activities on master planning, joint venture opportunities andland sales.

**Benefitfrom income taxes:**

We recorded no benefit fromincome taxes for either the 26 weeks ended January 29, 2006 or the 26weeks ended January 28, 2007.  We believeit is more likely than not that we will not realize income tax benefits fromoperating losses in the foreseeable future, and therefore, have recorded a fullvaluation allowance against our existing deferred income tax assets.

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**Item 3Quantitative and Qualitative Disclosures about Market Risk**

Through January 28,2007 there were no material changes in information relating to market risksince our disclosure included in Item 7A of Form 10-K for the fiscal year endedJuly 30, 2006, as filed with the Securities and Exchange Commission on October30, 2006.  On March 1, 2007, inconnection with the sale of Steamboat, the Company paid off all of itsoutstanding variable interest rate debt and terminated its interest rate swapagreement.

**Item 4Controls and Procedures**

(a)            Evaluationof disclosure controls and procedures. Our Chief Executive Officer and our Chief Financial Officer carried outan evaluation of the effectiveness of our “disclosure controls and procedures”(as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and15d-15(e)).  Based on that evaluation,these officers have concluded that as of the end of the period covered by thisreport, our disclosure controls and procedures were effective.

(b)         Changes in internalcontrol over financial reporting.  Nochange occurred in the Company’s internal control over financial reporting (asdefined in the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f))during the quarterly period ended January 28, 2007 that has materiallyaffected, or is reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

It should be noted thatany system of controls, however well designed and operated, can provide onlyreasonable, and not absolute, assurance that the objectives of the system willbe met.  In addition, the design of anycontrol system is based in part upon certain assumptions about the likelihoodof future events.  Because of these andother inherent limitations of control systems, there is only reasonableassurance that our controls will succeed in achieving their stated goals underall potential future conditions.

 

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**Part II - OtherInformation**

**Item 1AOther Risk Factors**

**If we complete the sales of Killington/Pico and MountSnow/Attitash, we will have significantly reduced the size of our operatingbusiness.**

Followingthe completion of the Steamboat sale on March 1, 2007 and the sales of ourMount Snow, Killington, Attitash and Pico resorts, if completed, the size ofour operating business will be significantly reduced. Although the Companyintends to reduce its corporate overhead following the sales of Steamboat, Killington/Picoand Mount Snow/Attitash, such a reduction may take some time and may not beproportional to the reduction in the Company’s operating income resulting fromthese sales. As a result, our operating margins may be reduced and we may haveless available capital to invest in our remaining resorts. A failure to investin capital improvements at our resorts could reduce our ability to attractcustomers and adversely affect our results of operations or ability to sell ourremaining resorts on optimal terms.

**We may not be able to obtain necessary third party consentsto the transfer of certain assets required for the closing of the proposedKillington/Pico and Mount Snow/Attitash transactions.**

Inaddition to the other conditions that must be satisfied prior to closing theproposed Killington/Pico and Mount Snow/Attitash Transactions, we are obligatedto obtain certain third party consents, including consents from the State ofVermont, the Forest Service, the FCC and certain of our landlords, lessors,lenders and debt holders, to the transfer of certain contracts or assets aspart of such sales. If we are unable to obtain these consents, the sales maynot be consummated. The receipt of these consents depends upon third partiesover which we have no control.

**The loss of any of our executive officers or key personnelwould harm our business.**

Ourcontinued success depends to a significant extent upon the performance andcontinued service of various key management and operational personnel and theannouncement of the proposed sale of Killington/Pico and Mount Snow/Attitash,as well as the potential sale of Sunday River and Sugarloaf/USA, may increasethe risk that we may not retain these personnel. We have entered into long-termincentive and retention arrangements with key management and operatingpersonnel and in conjunction with the announcement of the Killington/Pico andMount Snow/Attitash transactions we have put retention packages in place forall or substantially all of the employees of American Skiing who were notemployees of our subsidiary resorts and are not otherwise covered by employmentagreements with the Company. Nevertheless, we cannot assure you that they will continue in suchroles. The loss of the services of these key personnel could have a materialadverse effect on our business and operations.

**Our business currently is substantially leveraged and willcontinue to be substantially leveraged if we do not consummate the sales ofKillington/Pico and Mount Snow/Attitash or if we are unable to use the netproceeds we expect to receive from such sales to reduce our outstandingindebtedness.**

Afterthe consummation of the Steamboat sale on March 1, 2007, we had $137.6million of total indebtedness outstanding, including $12.8 million ofsecured indebtedness. While we intend to use a portion of the net proceeds fromthe Steamboat sale and the proposed Killington/Pico and Mount Snow/Attitashtransactions to repay substantially all of our outstanding indebtedness, wecannot assure you that the sales of Killington/Pico and Mount Snow/Attitashwill be consummated and that we will be able to repay substantially all of ourindebtedness as we currently intend. Until such debt is repaid in full, ourhigh level of debt affects our operations in several important ways. Forinstance, the significant cash requirements to service our debt will continueto reduce funds available for our operations and capital expenditures. Adecrease in the availability of funds will continue to make us more vulnerable toadverse general economic and industry conditions. Failure to manage cashresources or an extraordinary demand for cash outside of our normal course ofbusiness could leave us with no cash availability.

Althoughwe believe we have sufficient liquidity to fund our operations through fiscal2007, our ability to satisfy our preferred stock obligations following thesales of Steamboat, Killington/Pico and Mount Snow/Attitash will depend on theamount of net proceeds from the sales that remain after we have paid down theindebtedness we intend to pay with such proceeds as well as our futurefinancial and operating performance. Our future financial and operatingperformance will be affected by prevailing economic conditions, financial,business, and other factors, including our decreased ability to generatesignificant earnings because of our substantially reduced resort asset base.Some of these factors are beyond our 

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control. There can be noassurance that the remaining net proceeds from the sales after satisfaction ofour outstanding indebtedness, our operating results, cash flows, and capitalresources following the sales of Steamboat, Killington/Pico and MountSnow/Attitash will be sufficient for us to operate our business and to redeemour Series C Preferred Stock pursuant to its terms. If our remaining netproceeds from the sales after satisfaction of our outstanding indebtedness,operating results, cash flows, or capital resources prove inadequate, we couldbe forced to reduce or delay planned expansions and capital expenditures, sellassets, incur new debt or seek additional equity capital. Although we believethat capital expenditures above maintenance levels can be deferred to addresscash flow or other constraints, these activities cannot be deferred forextended periods without adversely affecting our competitive position andfinancial performance.

Ourfinancial performance depends, in part, on our ability to maintain and improvethe quality of our facilities, products and management resources, and to engagein successful real estate development (either directly or through thirdparties). To the extent that we are unable to do so with the remaining netproceeds from the sales after satisfaction of our outstanding indebtedness,cash generated from operating activities, or through borrowed funds oradditional equity investments, the growth and financial health of our businesscould be impaired.

**We believe it is unlikely that we will be able to redeem allof the shares of our Series C Preferred Stock in accordance with theirterms.**

We arerequired to redeem the Series C Preferred Stock on July 31, 2007, forcash in the amount of the aggregate liquidation preference of such shares as ofsuch date to the extent we have funds legally available to do so. OnJuly 31, 2007, the Series C Preferred Stock will have an aggregateliquidation preference of $413.9 million. If we do not redeem all of the sharesof Series C Preferred Stock on such date we would be required to redeemany unredeemed shares from time to time as we have funds legally available todo so and the liquidation preference of unredeemed shares ofSeries C Preferred Stock would continue to accrete at a rate of 12%per annum with respect to the Series C-1 Preferred Stock and 15% per annumwith respect to the Series C-2 Preferred Stock. After satisfaction of ourindebtedness, there will not be sufficient proceeds from the proposedKillington/Pico and Mount Snow/Attitash transactions to redeem all of theSeries C Preferred Stock on July 31, 2007. Following the sales ofSteamboat, Killington/Pico and Mount Snow/Attitash, we will have significantlyfewer assets with which we would be able to generate additional cash flows toredeem the Series C Preferred Stock. We believe, therefore, that it is unlikelythat we will be able to redeem all of the shares of the Series C PreferredStock on the mandatory redemption date and we do not believe that we will beable to redeem all of the shares that will remain outstanding thereafterbecause we do not believe we will be able to generate sufficient cash flows todo so. If the Company is unable to refinance the Series C Preferred Stockor otherwise redeem the Series C Preferred Stock through asset sales orotherwise, the holders of the Series C Preferred Stock may seek to exerciseremedies that may be available to them. In addition, because we are prohibitedfrom paying dividends or making distributions to the holders of ourClass A Common Stock or Common Stock as long any shares of theSeries C Preferred Stock remain outstanding, we do not anticipate beingable to pay dividends or make distributions to the holders of our Class ACommon Stock or Common Stock.

**Our business is highly seasonal and unfavorable weatherconditions can adversely affect our business.**

Skiresort operations are highly seasonal. For fiscal 2006, we realizedapproximately 88% of resort segment revenues and over 100% of resort segmentoperating income during the period from mid-November through April.Approximately 65% of this revenue was derived from Steamboat, Killington/Picoand Mount Snow/Attitash in fiscal 2006. In addition, a significant portion ofresort segment revenues and approximately 26% of annual skier visits weregenerated during the Christmas and Presidents’ Day vacation weeks in fiscal 2006.Also, our resorts typically experience operating losses and negative cash flowsfor the period from May to mid-November. During the seven-month periodfrom May through November 2006, for example, we had operating lossesfrom resort segment operations aggregating $113.2 million and negativecash flows from resort segment operating activities aggregating $26.1 million.These losses from resort segment operations include non-cash interest anddividends on mandatorily redeemable preferred stock of $38.5 million includedin interest expense. Approximately 45% of the remainder of such operatinglosses were attributable to Steamboat, Killington/Pico and Mount Snow/Attitash.There can be no assurances that we will be able to finance our capitalrequirements from external sources during the period from May throughNovember, particularly following the sales of Steamboat, Killington/Pico andMount Snow/Attitash.

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A highdegree of seasonality in our revenues increases the impact of certain events onour operating results. Adverse weather conditions, access route closures,equipment failures and other developments of even moderate or limited durationoccurring during our peak business periods could reduce our revenues. Adverseweather conditions can also increase power and other operating costs associatedwith snowmaking or can render snowmaking wholly or partially ineffective inmaintaining quality skiing conditions. Furthermore, unfavorable weatherconditions, regardless of actual skiing conditions, can result in decreasedskier visits and the early ski season snow conditions and skier perception ofearly ski season snow conditions influence the momentum and success of theoverall ski season. In light of the recently completed Steamboat sale,following the consummation of the proposed Killington/Pico and MountSnow/Attitash transactions, our resort operations will be located in Maine andUtah and adverse weather conditions occurring in those states may have a moresignificant impact on the results of operations and visitation than waspreviously the case. There is no way for us to predict future weather patternsor the impact that weather patterns may have on the results of operations orvisitation.

**Our business requires significant capital expenditures. Theseexpenditures do not, however, guarantee improved results.**

Althoughwe believe that capital expenditures above maintenance levels can be deferredto address cash flow or other constraints, these expenditures cannot bedeferred for extended periods without adversely affecting our competitiveposition and financial performance. Our financial performance depends, in part,on our ability to maintain and improve the quality of our facilities, products,and management resources and to engage in successful real estate development(either directly or through third parties). In addition, one of our creditfacilities limits the amount of non-real estate capital expenditures we canmake. If we are unable to discharge our indebtedness under this creditfacility, to the extent that we are prohibited from making capital expendituresor are unable to obtain the funds to do so with cash generated from operatingactivities or from borrowed funds or additional equity investments, ourfinancial condition and results of operations could be affected.

Historically,a key element of our strategy has been attracting additional skiers throughinvestment in on-mountain capital improvements. These improvements are capitalintensive and a lack of available funds for capital expenditures could have amaterial adverse effect on our ability to implement our operating strategy. Weintend to finance resort capital improvements through internally generatedfunds. Following the consummation of the proposed Killington/Pico and MountSnow/Attitash transactions, our asset base (and operating income) will besignificantly reduced and our ability to generate funds internally to financethese resort capital improvements will be significantly reduced, however, weexpect to retain the remaining net proceeds from the sales, if any, aftersatisfaction of our outstanding indebtedness, if any, to fund our operationsand make capital expenditures as needed. Nevertheless, there can be noassurance that sufficient funds will be available to fund these capitalimprovements or that these capital improvements will attract additional skiersor generate additional revenues.

**Failure to cure the alleged default under theGround Lease at The Canyons could have a material adverse effect on the Companyand could adversely impact our ability to sell that resort.**

We are currentlyin dispute with Wolf Mountain Resorts, LLC (“Wolf”), one of our landlords atThe Canyons, regarding the lease between us. The Utah District Court has granted us a temporary restraining order andamended a previous injunction to prohibit Wolf from terminating the leaseunless and until the Court finds that we have breached the lease and that Wolfis entitled to terminate the lease as a result of our breach.  Even though we strongly believe that we arepresently in compliance with all material provisions of our lease with Wolf,there can be no assurance that the Utah District Court will agree that we arenot in default or that we have taken the steps necessary to cure any default.  In the event that the District Court findsthat we are in default and the actions we have taken are not sufficient to curethe defaults raised by Wolf under the lease, and if we are unable to effect acure of such defaults within any remaining cure period, the remedies availableto Wolf may include damages to Wolf (which we believe to be minimal and/orspeculative) and/or termination of our lease with Wolf.  Termination of the lease would significantlyreduce the value of our operation at The Canyons, and would materially curtail,if not completely eliminate, our ability to obtain recurring revenues fromthose assets.  In the event oftermination of the lease, Wolf may have certain rights to repurchase for fairmarket value certain of our assets which are used in conjunction with our operationof The Canyons.  Wolf’s right toterminate the lease is subject to certain rights of cure and foreclosure infavor of our lenders.  In addition,termination of the lease by Wolf would likely cause a default under our ResortSenior Credit Facility.

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**Item 4Submission of Matters to a Vote of Security Holders**

On January 8,2007, the Company held its Annual Meeting of its shareholders to approve:

·                  Theelection of the Company’s Board of Directors; and

·                  Theratification of KPMG LLP as the Company’s independent auditors for the 2007fiscal year.

The Company didsolicit proxies with respect to the Annual Meeting, and the Board of Directorslisted in the Company’s proxy statement with respect to the Annual Meeting wasre-elected in its entirety.

The results of theAnnual Meeting were as follows:

Board Election:
| ** **      | ** ** | **Voting For** | ** ** | **Voting Against  or Withheld** | ** ** | **Abstaining** | ** ** | **Broker Non-Votes** | ** ** |
|-----------------|------------|---------------------|------------|-------------------------------------------|------------|----------------|------------|---------------------------|------------|
| William J. Fair |       | 14,218,878          | (1)        | 271,832                                   |       | 0              |       |                      |       |
| David Hawkes    |       | 14,213,028          | (1)        | 277,682                                   |       | 0              |       |                      |       |
| Paul Wachter    |       | 13,448,092          | (1)        | 1,042,618                                 |       | 0              |       |                      |       |
| Leslie B. Otten |       | 14,760,530          | (2)        | 0                                         |       | 0              |       | 0                         |       |
| Gordon Gillies  |       | 14,760,530          | (2)        | 0                                         |       | 0              |       | 0                         |       |
| William Janes   |       | 14,760,530          | (2)        | 0                                         |       | 0              |       | 0                         |       |
| Robert Branson  |       | 14,760,530          | (2)        | 0                                         |       | 0              |       | 0                         |       |
| Edward Dardani  |       | 150,000             | (3)        | 0                                         |       | 0              |       | 0                         |       |
| Steven Gruber   |       | 150,000             | (3)        | 0                                         |       | 0              |       | 0                         |       |
| Jay Crandall    |       | 150,000             | (3)        | 0                                         |       | 0              |       | 0                         |       |

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(1)          Messrs. Fair, Hawkes andWachter were elected by the holders of the Company’s common stock.

(2)          Messrs. Otten, Gillies,Janes and Branson were elected by the holders of the Company’s Class A commonstock.

(3)          Messrs. Dardani, Gruberand Crandall were elected by the holders of the Company’s Series B preferredstock.

Ratification ofKPMG LLP:
| ** **                  | ** ** | **Voting For** | ** ** | **Voting Against** | ** ** | **Abstaining** | ** ** | **Broker Non-Votes** | ** ** |
|-----------------------------|------------|---------------------|------------|-------------------------|------------|----------------|------------|---------------------------|------------|
| Common Stock                |       | 14,287,262          |       | 133,512                 |       | 69,936         |       |                      |       |
| Class A Common  Stock       |       | 14,760,530          |       | 0                       |       | 0              |       | 0                         |       |
| Series C-1  Preferred Stock |       | 59,283,583          | (1)        | 0                       |       | 0              |       | 0                         |       |
| Total All Classes           |       | 88,331,375          | (1)        | 133,512                 |       | 69,936         |       |                      |       |

----

(1) The Series C-1preferred stock votes together with common stock on an “as-if-converted”basis.  The 40,000 shares of Series C-1preferred stock, which were voted at the meeting, together with accrued andunpaid dividends, had a voting right equal to 59,283,583 shares of common stockas of the date of the Annual Meeting. The results set forth in the “Total All Classes” row is calculated usingthis as-if-converted number.

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**Item 6Exhibits**

Included herewithare the following exhibits:
| Exhibit  No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                            |
|--------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1         |       | Amendment to American Skiing Company Phantom Equity  Plan. dated December 11, 2006 (incorporated by reference to Exhibit 10.1  to Form 8-K filed December 14, 2006).                                                                                                                                                  |
|         |       |                                                                                                                                                                                                                                                                                                                       |
| 10.2         |       | Purchase Agreement by and among Steamboat Ski &  Resort Corporation, American Skiing Company, Steamboat Acquisition Corp. and  Wintergames Holdings SARL dated December 18, 2006 (incorporated by reference to  Exhibit 10.1 to Form 8-K filed March 1, 2007).                                                    |
|         |       |                                                                                                                                                                                                                                                                                                                       |
| 10.3         |       | First Amendment and Waiver to First Lien Credit  Agreement among American Skiing Company, certain of its subsidiaries as  borrowers, and General Electric Capital Corporation as Agent for the lenders  thereunder, dated March 1, 2007 (incorporated by reference to  Exhibit 10.2 to Form 8-K filed March 1, 2007). |
|         |       |                                                                                                                                                                                                                                                                                                                       |
| 10.4         |       | Purchase Agreement by and among American Skiing  Company, Killington, Ltd., Paico Ski Area Management Company and SP Land  Company, LLC dated February 16, 2007 (incorporated by reference to  Exhibit 10.1 to Form 8-K filed March 6, 2007).                                                                         |
|         |       |                                                                                                                                                                                                                                                                                                                       |
| 10.5         |       | Purchase Agreement by and among American Skiing  Company, Mount Snow, Ltd., LBO Holding, Inc., and Peak Resorts, Inc. dated  February 16, 2007 (incorporated by reference to Exhibit 10.2 to Form 8-K  filed March 6, 2007).                                                                                          |
|         |       |                                                                                                                                                                                                                                                                                                                       |
| 31.1         |       | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                       |
|         |       |                                                                                                                                                                                                                                                                                                                       |
| 31.2         |       | Certification of Chief Financial Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                       |
|         |       |                                                                                                                                                                                                                                                                                                                       |
| 32.1         |       | Certification of Chief Executive Officer pursuant to  18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                                        |
|         |       |                                                                                                                                                                                                                                                                                                                       |
| 32.2         |       | Certification of Chief Financial Officer pursuant to  18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                                        |

** **

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** **

**SIGNATURES**

Pursuant to the requirements of theSecurities Exchange Act of 1934, as amended, the registrant has duly causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.
|                       | American Skiing Company |
|-----------------------|-------------------------|
|                  |                    |   |
| Date: March 14,  2007 |                    |   |
|                  | By:                     | /s/ William J. Fair |
|                  |                    | William J. Fair |
|                  |                    | President and Chief Executive Officer |
|                  |                    | (Principal Executive Officer) |
|                  |                    |   |
|                  | By:                     | /s/ Helen E. Wallace |
|                  |                    | Helen E. Wallace |
|                  |                    | Senior Vice President, Chief |
|                  |                    | Financial  Officer |
|                  |                    | (Principal  Financial Officer) |

 

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