**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-Q**
| **x**      | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  for the quarterly period ended April 29, 2007**                                                                                                                 |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                                                                                                                                  |
| ** ** | **or**                                                                                                                                                                                                                                                      |
| ** ** | ** **                                                                                                                                                                                                                                                  |
| **o**      | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  for the transition period from        to               .** |

 

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**Commission File Number****1-13507**

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**American Skiing Company**

(Exact name ofregistrant as specified in its charter)

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

 

**136 Heber Avenue, #303**

**P.O.  Box 4552**

**Park City, Utah 84060**

(Address of principalexecutive offices)

(Zip Code)

**(435) 615-0340**

(Registrant’stelephone number, including area code)

**Not Applicable**

(Former name,former address and former fiscal year, if changed 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

Asof June 1, 2007, 31,758,343 shares of common stock were issued and outstanding;of which 14,760,530 shares were Class A common 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 April 30, 2006 and April 29, 2007 (unaudited) | 3 |
|                              |                                                                                                                                                      |   |
|                              | Condensed  Consolidated Statements of Operations and Changes in Accumulated Deficit for  the 39 weeks ended April 30, 2006 and April 29, 2007 (unaudited) | 4 |
|                              |                                                                                                                                                      |   |
|                              | Condensed Consolidated Balance Sheets as of July 30,  2006 and April 29, 2007 (unaudited)                                                                 | 5 |
|                              |                                                                                                                                                      |   |
|                              | Condensed  Consolidated Statements of Cash Flows for the 39 weeks ended April 30, 2006  and April 29, 2007 (unaudited)                                    | 7 |
|                              |                                                                                                                                                      |   |
|                              | Notes to Condensed Consolidated Financial Statements  (unaudited)                                                                                         | 8 |
|                              |                                                                                                                                                      |   |
| Item 2.                           | Management’s Discussion and Analysis of Financial Condition  and Results of Operations                                                               |   |
|                              |                                                                                                                                                      |   |
|                              | General                                                                                                                                                   | 24 |
|                              |                                                                                                                                                      |   |
|                              | Liquidity and Capital Resources                                                                                                                           | 26 |
|                              |                                                                                                                                                      |   |
|                              | Results  of Operations                                                                                                                                    | 27 |
|                              |                                                                                                                                                      |   |
| Item 3.                           | Quantitative and Qualitative Disclosures about Market  Risk                                                                                               | 32 |
|                              |                                                                                                                                                      |   |
| Item 4.                           | Controls and Procedures                                                                                                                                   | 32 |
|                              |                                                                                                                                                      |   |
| Part  II – Other Information |                                                                                                                                                      |
|                              |                                                                                                                                                      |
| Item 1A.                          | Other Risk Factors                                                                                                                                        | 33 |
|                              |                                                                                                                                                      |
| Item 4.                           | Submission of Matters to Security Holders                                                                                                                 | 33 |
|                              |                                                                                                                                                      |   |
| Item 5.                           | Other Information                                                                                                                                         | 33 |
|                              |                                                                                                                                                      |   |
| Item 6.                           | Exhibits                                                                                                                                                  | 34 |
|                                   |                                                                                                                                                           |  |  |

 

2

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**Part I -Financial Information**

**Item 1 Financial Statements**

**AmericanSkiing Company and Subsidiaries**

**CondensedConsolidated Statements of Operations and Changes in Accumulated Deficit**

**(Inthousands, except per share amounts)**
| ** **                                                                                       | ** ** | **13 weeks ended** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                       | ** ** | **April 30, 2006** | ** ** | **April 29, 2007** | ** ** |
| ** **                                                                                       | ** ** | **(unaudited)**              | ** ** | **(unaudited)** | ** ** |
| Net revenues:                                                                                    |       |                         |       |   |   |
| Resort                                                                                           |       | $                            | 46,978     |   | $ | 48,847 |   |
| Real estate                                                                                      |       | 1,173                        |       | 2,867 |   |
| Total net revenues                                                                               |       | 48,151                       |       | 51,714 |   |
|                                                                                             |       |                         |       |   |   |
| Operating  expenses:                                                                             |       |                         |       |   |   |
| Resort                                                                                           |       | 23,305                       |       | 23,108 |   |
| Real estate                                                                                      |       | 1,038                        |       | 1,466 |   |
| Marketing, general and  administrative                                                           |       | 7,628                        |       | 17,603 |   |
| Depreciation and  amortization                                                                   |       | 5,086                        |       | 4,700 |   |
| Total operating  expenses                                                                        |       | 37,057                       |       | 46,877 |   |
|                                                                                             |       |                         |       |   |   |
| Income from operations                                                                           |       | 11,094                       |       | 4,837 |   |
|                                                                                             |       |                         |       |   |   |
| Interest income                                                                                  |       | 161                          |       | 572 |   |
| Interest expense                                                                                 |       | (12,177                      | )          | (14,203 | ) |
|                                                                                             |       |                         |       |   |   |
| Loss from continuing  operations, net of taxes of $0 for 2006 and 2007                           |       | (922                         | )          | (8,794 | ) |
|                                                                                             |       |                         |       |   |   |
| Income from  discontinued operations, net of taxes of $0 for 2006 and $3,127 for 2007  (Note 10) |       | 30,335                       |       | 202,497 |   |
|                                                                                             |       |                         |       |   |   |
| Net income                                                                                       |       | $                            | 29,413     |   | $ | 193,703 |   |
|                                                                                             |       |                         |       |   |   |
| Accumulated deficit,  beginning of period                                                        |       | $                            | (670,400   | ) | $ | (742,805 | ) |
|                                                                                             |       |                         |       |   |   |
| Net income                                                                                       |       | 29,413                       |       | 193,703 |   |
|                                                                                             |       |                         |       |   |   |
| Accumulated deficit,  end of period                                                              |       | $                            | (640,987   | ) | $ | (549,102 | ) |
|                                                                                             |       |                         |       |   |   |
| Basic and diluted net  income (loss) per common share                                            |       |                         |       |   |   |
|                                                                                             |       |                         |       |   |   |
| Loss from continuing  operations                                                                 |       | $                            | (0.03      | ) | $ | (0.28 | ) |
| Income from  discontinued operations                                                             |       | 0.37                         |       | $ | 2.33 |   |
| Net income attributable  to common stockholders                                                  |       | $                            | 0.34       |   | $ | 2.05 |   |
|                                                                                             |       |                         |       |   |   |
| Basic and diluted weighted average common shares outstanding                                     |       | 31,738                       |       | 31,749 |   |

 

See accompanying Notes to Condensed ConsolidatedFinancial Statements

3

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**AmericanSkiing Company and Subsidiaries**

**CondensedConsolidated Statements of Operations and Changes in Accumulated Deficit**

**(Inthousands, except per share amounts)**
| ** **                                                                                       | ** ** | **39 weeks ended** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                       | ** ** | **April 30, 2006** | ** ** | **April 29, 2007** | ** ** |
| ** **                                                                                       | ** ** | **(unaudited)**              | ** ** | **(unaudited)** | ** ** |
| Net revenues:                                                                                    |       |                         |       |   |   |
| Resort                                                                                           |       | $                            | 89,542     |   | $ | 91,307 |   |
| Real estate                                                                                      |       | 2,979                        |       | 4,767 |   |
| Total net  revenues                                                                              |       | 92,521                       |       | 96,074 |   |
|                                                                                             |       |                         |       |   |   |
| Operating expenses:                                                                              |       |                         |       |   |   |
| Resort                                                                                           |       | 55,777                       |       | 57,329 |   |
| Real estate                                                                                      |       | 3,467                        |       | 3,248 |   |
| Marketing,  general and administrative                                                           |       | 22,227                       |       | 32,607 |   |
| Depreciation and  amortization                                                                   |       | 11,365                       |       | 10,290 |   |
| Total operating  expenses                                                                        |       | 92,836                       |       | 103,474 |   |
|                                                                                             |       |                         |       |   |   |
| Loss from operations                                                                             |       | (315                         | )          | (7,400 | ) |
|                                                                                             |       |                         |       |   |   |
| Interest income                                                                                  |       | 173                          |       | 590 |   |
| Interest expense                                                                                 |       | (35,776                      | )          | (40,920 | ) |
| Gain on sale of  property                                                                        |       | 169                          |       | — |   |
|                                                                                             |       |                         |       |   |   |
| Loss from continuing  operations, net of taxes of $0 for 2006 and 2007                           |       | (35,749                      | )          | (47,730 | ) |
|                                                                                             |       |                         |       |   |   |
| Income from  discontinued operations, net of taxes of $0 for 2006 and $3,127 for 2007  (Note 10) |       | 11,642                       |       | 181,161 |   |
|                                                                                             |       |                         |       |   |   |
| Net income (loss)                                                                                |       | $                            | (24,107    | ) | $ | 133,431 |   |
|                                                                                             |       |                         |       |   |   |
| Accumulated deficit,  beginning of period                                                        |       | $                            | (616,880   | ) | $ | (682,533 | ) |
|                                                                                             |       |                         |       |   |   |
| Net income (loss)                                                                                |       | (24,107                      | )          | 133,431 |   |
|                                                                                             |       |                         |       |   |   |
| Accumulated deficit,  end of period                                                              |       | $                            | (640,987   | ) | $ | (549,102 | ) |
|                                                                                             |       |                         |       |   |   |
| Basic and diluted net  income (loss) per common share                                            |       |                         |       |   |   |
|                                                                                             |       |                         |       |   |   |
| Loss from continuing  operations                                                                 |       | $                            | (1.13      | ) | $ | (1.50 | ) |
| Income from  discontinued operations                                                             |       | 0.37                         |       | 2.92 |   |
| Net income (loss)  attributable to common stockholders                                           |       | $                            | (0.76      | ) | $ | 1.42 |   |
|                                                                                             |       |                         |       |   |   |
| Basic and diluted weighted average common shares outstanding                                     |       | 31,738                       |       | 31,742 |   |

 

See accompanying Notes to Condensed ConsolidatedFinancial Statements

4

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**AmericanSkiing Company and Subsidiaries**

**Condensed Consolidated Balance Sheets**

**(Inthousands, except share and per share amounts)**
| ** **                      | ** ** | **July 30, 2006** | ** ** | **April 29, 2007** | ** ** |
|---------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| ** **                      | ** ** | **(unaudited)**             | ** ** | **(unaudited)**              | ** ** |
| **Assets**                      | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| Current assets                  |       |                        |       |                         |       |
| Cash and cash  equivalents      |       | $                           | 6,269      |                         | $          | 64,414 |   |
| Restricted cash                 |       | 2,679                       |       | 232                          |       |
| Accounts  receivable, net       |       | 6,273                       |       | 10,918                       |       |
| Inventory                       |       | 4,115                       |       | 1,398                        |       |
| Prepaid expenses  and other     |       | 2,885                       |       | 2,416                        |       |
| Assets held for  sale (Note 10) |       | —                      |       | 91,400                       |       |
| Deferred income  taxes          |       | 3,923                       |       | 2,015                        |       |
| Total current  assets           |       | 26,144                      |       | 172,793                      |       |
|                            |       |                        |       |                         |       |
| Property and equipment,  net    |       | 330,231                     |       | 117,609                      |       |
| Real estate developed  for sale |       | 2,191                       |       | 1,540                        |       |
| Intangible assets, net          |       | 6,249                       |       | 6,035                        |       |
| Deferred financing costs,  net  |       | 5,361                       |       | —                       |       |
| Other assets                    |       | 12,488                      |       | 7,438                        |       |
| Total assets                    |       | $                           | 382,664    |                         | $          | 305,415 |   |

 

(continued on next page)

See accompanying Notes to Condensed ConsolidatedFinancial Statements

5

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| ** **                                                                                                                                                                                                                                                  | ** ** | **July 30, 2006** | ** ** | **April 29, 2007** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                                                                                                                                  | ** ** | **(unaudited)**             | ** ** | **(unaudited)**              | ** ** |
| **Liabilities and Stockholders’  Deficit**                                                                                                                                                                                                             | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| Current liabilities                                                                                                                                                                                                                                         |       |                        |       |                         |       |
| Current portion  of long-term debt                                                                                                                                                                                                                          |       | $                           | 9,286      |                         | $          | 1,382 |   |
| Accounts payable  and other current liabilities                                                                                                                                                                                                             |       | 42,155                      |       | 39,357                       |       |
| Deposits and  deferred revenue                                                                                                                                                                                                                              |       | 25,144                      |       | 6,352                        |       |
| Liabilities  related to assets held for sale (Note 10)                                                                                                                                                                                                      |       | —                      |       | 18,890                       |       |
| Subordinated  notes and debentures                                                                                                                                                                                                                          |       | —                      |       | 81,200                       |       |
| Total current  liabilities                                                                                                                                                                                                                                  |       | 76,585                      |       | 147,181                      |       |
|                                                                                                                                                                                                                                                        |       |                        |       |                         |       |
| Long-term debt, net of  current portion                                                                                                                                                                                                                     |       | 198,021                     |       | 1,133                        |       |
| Subordinated notes and  debentures                                                                                                                                                                                                                          |       | 113,685                     |       | —                       |       |
| Other long-term  liabilities                                                                                                                                                                                                                                |       | 12,259                      |       | 2,578                        |       |
| Deferred income taxes                                                                                                                                                                                                                                       |       | 3,923                       |       | 2,015                        |       |
| 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 $78,144, respectively) |       | 71,320                      |       | 78,085                       |       |
| 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 $321,115, respectively)              |       | 286,801                     |       | 320,882                      |       |
| 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                     |       | 551,874                      |       |
|                                                                                                                                                                                                                                                        |       |                        |       |                         |       |
| 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;16,977,753 and  16,997,813 shares issued and outstanding, respectively                                                                                                           |       | 170                         |       | 170                          |       |
| Additional  paid-in capital                                                                                                                                                                                                                                 |       | 302,285                     |       | 302,325                      |       |
| Accumulated  deficit                                                                                                                                                                                                                                        |       | (682,533                    | )          | (549,102                     | )          |
| Total  stockholders’ deficit                                                                                                                                                                                                                           |       | (379,930                    | )          | (246,459                     | )          |
| Total liabilities and  stockholders’ deficit                                                                                                                                                                                                           |       | $                           | 382,664    |                         | $          | 305,415 |   |

 

See accompanying Notes to Condensed ConsolidatedFinancial Statements

6

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**AmericanSkiing Company and Subsidiaries**

**CondensedConsolidated Statements of Cash Flows**

**(Inthousands)**
| ** **                                                                                                                   | ** ** | **39 weeks ended** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                   | ** ** | **April 30, 2006** | ** ** | **April 29, 2007** | ** ** |
| ** **                                                                                                                   | ** ** | **(unaudited)**              | ** ** | **(unaudited)** | ** ** |
| **Cash flows from operating  activities**                                                                                    | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Net income (loss)                                                                                                            |       | $                            | (24,107    | ) | $ | 133,431 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities:                         |       |                         |       |   |   |
| Depreciation and  amortization                                                                                               |       | 11,365                       |       | 10,290 |   |
| Amortization of  deferred financing costs and accretion of discount and dividends on  mandatorily redeemable preferred stock |       | 36,169                       |       | 41,491 |   |
| Non-cash  interest on junior subordinated notes                                                                              |       | 9,012                        |       | 9,607 |   |
| Non-cash  (increase) decrease in fair value of interest rate swap agreement                                                  |       | (1,710                       | )          | 1,250 |   |
| Phantom Equity  Plan compensation expense                                                                                    |       | 217                          |       | 10,498 |   |
| Gain from sale  of resort assets                                                                                             |       | (357                         | )          | (10 | ) |
| Cash flows from  discontinued operations (Note 10)                                                                           |       | 33,121                       |       | (188,006 | ) |
| Decrease  (increase) in assets:                                                                                              |       |                         |       |   |   |
| Restricted cash                                                                                                              |       | (107                         | )          | 1,984 |   |
| Accounts  receivable, net                                                                                                    |       | (2,477                       | )          | (3,109 | ) |
| Inventory                                                                                                                    |       | (486                         | )          | 339 |   |
| Prepaid expenses  and other                                                                                                  |       | 883                          |       | 218 |   |
| Real estate  developed for sale                                                                                              |       | 18                           |       | (767 | ) |
| Other assets                                                                                                                 |       | (108                         | )          | 240 |   |
| Increase  (decrease) in liabilities:                                                                                         |       |                         |       |   |   |
| Accounts payable  and other current liabilities                                                                              |       | 2,859                        |       | 4,040 |   |
| Deposits and  deferred revenue                                                                                               |       | (672                         | )          | (5,592 | ) |
| Other long-term  liabilities                                                                                                 |       | (51                          | )          | (3,552 | ) |
| Net cash  provided by operating activities                                                                                   |       | 63,569                       |       | 12,352 |   |
|                                                                                                                         |       |                         |       |   |   |
| **Cash flows from investing activities**                                                                                     | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Capital  expenditures                                                                                                        |       | (4,098                       | )          | (9,655 | ) |
| Proceeds from  sale of property                                                                                              |       | 1,164                        |       | 248 |   |
| Proceeds from  sale of resorts                                                                                               |       | —                       |       | 300,935 |   |
| Investments in  discontinued operations (Note 10)                                                                            |       | (2,594                       | )          | (6,006 | ) |
| Net cash  provided by (used) in investing activities                                                                         |       | (5,528)                      |       | 285,522 |   |
|                                                                                                                         |       |                         |       |   |   |
| **Cash flows from financing  activities**                                                                                    | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Proceeds from  resort senior credit facilities                                                                               |       | 47,475                       |       | 50,340 |   |
| Repayment of  resort senior credit facilities                                                                                |       | (62,068                      | )          | (242,320 | ) |
| Repayment of  long-term debt                                                                                                 |       | (2,022                       | )          | (1,737 | ) |
| Payments of  subordinated debt                                                                                               |       | —                       |       | (39,277 | ) |
| Proceeds from  exercise of stock options                                                                                     |       | —                       |       | 40 |   |
| Financing  activities of discontinued operations (Note 10)                                                                   |       | (23,556                      | )          | (6,775 | ) |
| Net cash used in  financing activities                                                                                       |       | (40,171                      | )          | (239,729 | ) |
|                                                                                                                         |       |                         |       |   |   |
| Net increase in cash  and cash equivalents                                                                                   |       | 17,870                       |       | 58,145 |   |
| Cash and cash  equivalents, beginning of period                                                                              |       | 6,216                        |       | 6,269 |   |
| Cash and cash  equivalents, end of period                                                                                    |       | $                            | 24,086     |   | $ | 64,414 |   |
|                                                                                                                         |       |                         |       |   |   |
| **Supplemental  disclosures of cash flow information:**                                                                      | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Cash paid for interest                                                                                                       |       | $                            | 20,005     |   | $ | 30,452 |   |
| Acquisition of equipment held under capital leases                                                                           |       | 4,637                        |       | 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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**American Skiing Company andSubsidiaries**

**Notes toCondensed Consolidated Financial Statements (unaudited)**

**1.  General**

American SkiingCompany (“ASC”), a Delaware corporation, and its subsidiaries (collectively,the “Company”) own and operate resort facilities, real estate developmentcompanies, golf courses, ski and golf schools, retail shops, and other relatedcompanies. The Company has historically conducted its resort operations throughits wholly owned subsidiaries which operated the following ski resorts duringthe 39 weeks ended April 29, 2007 and the year ended July 30, 2006 (“fiscal2006”): Sugarloaf/USA and Sunday River in Maine, Attitash in New Hampshire,Killington/Pico and Mount Snow in Vermont, The Canyons in Utah, and Steamboatin Colorado.  The Company hashistorically conducted its real estate development operations through itswholly owned subsidiary, American Skiing Company Resort Properties (“ResortProperties”), and Resort Properties’ subsidiaries, including Grand SummitResort Properties, Inc. (“Grand Summit”) 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 2006 and fiscal2007 are fifty-two week reporting periods, with each quarter consisting of 13weeks. The accompanying unaudited condensed consolidated financial statementshave been prepared in accordance with U.S. generally accepted accountingprinciples for interim financial information and with the instructions to Form10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotesrequired by U.S. generally accepted accounting principles for completefinancial statements.  In the opinion ofmanagement, all adjustments (consisting only of normal recurring adjustments)considered necessary for a fair presentation have been included.

On March 1, 2007,the Company completed the sale of its subsidiary Steamboat Ski & ResortCorporation (“Steamboat Corporation”) to Intrawest Holdings S.A.R.L. andSteamboat Acquisition Corp. (the “Steamboat Sale”).  On April 4, 2007, the Company completed thesale of its subsidiaries, Mount Snow, Ltd., the owner and operator of the MountSnow ski resort, and LBO Holding, Inc., the owner and operator of the Attitashski resort, to Peak Resorts, Inc. (the “Mount Snow/Attitash Sale”).  On May11, 2007, the Company completed the sale of the assets of its subsidiaries,Killington, Ltd., and Pico Ski Area Management Company, Inc., to MBTKillington, LLC, AMSC Killington, LLC, and SP II Resort, LLC, astenants-in-common (the “Killington/Pico Sale”). The Company hasaccounted for these sales in accordance with Statement of FinancialAccounting Standards (“SFAS”) No. 144 “*Accounting for the Impairment or Disposal ofLong-Lived Assets*.”Accordingly, all results from operations for Steamboat, Mount Snow, Attitashand Killington/Pico for the 13 and 39 weeks ended have been removed fromcontinuing operations and classified as discontinued operations in theaccompanying condensed consolidated statements of operations.    Because the Killington/Pico Sale occurredsubsequent to periods presented herein, the assets and liabilities related toKillington and Pico have been reclassified as held for sale in the accompanyingcondensed consolidated balance sheets as of April 29, 2007.

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 the ski industry,the Company typically incurs significant operating losses in its resortoperating 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:

8

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*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 financial instruments with an originalmaturity to 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 April 29, 2007, respectively.

*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, the lodgingservices 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 usefullives which range from 9 to 40 years for buildings, 3 to 12 years for machineryand equipment, 5 to 30 years for lifts, lift lines, and trails, and 10 to 50years for land improvements.  Assets heldunder capital lease obligations are amortized over the shorter of their usefullives or their respective lease lives, unless a bargain purchase option existsor title 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 determinedusing the relative sales value method. Selling costs are charged to expense in the period in which the relatedrevenue is recognized.

*Goodwilland Other Intangible Assets*

Asprescribed in SFAS No. 142, “*Goodwill andOther Intangible Assets*,” certain indefinite-lived intangibleassets, including trademarks, are no longer amortized but are subject to annualimpairment assessments.  An impairmentloss is recognized to the extent that the carrying amount exceeds the asset’sfair value.  Definite-lived intangibleassets continue to be amortized on a straight-line basis over their estimateduseful lives of 31 years, and assessed for impairment utilizing guidanceprovided by SFAS No. 144.

As of July 30,2006 and April 29, 2007, other intangible assets consist of the following (inthousands):
|                                          | ** ** | **July 30, 2006** | ** ** | **April 29, 2007** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| **Definite-lived  Intangible Assets:**   | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| Lease agreements                         |       | $                           | 1,853      |                         | $          | 1,853 |   |
| Less accumulated amortization            |       | (462                        | )          | (506                         | )          |
| ** **                               |       | 1,391                       |       | 1,347                        |       |
| ** **                               | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| **Indefinite-lived  Intangible Assets:** | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| Trade names                              |       | 170                         |       | —                       |       |
| Water rights                             |       | 4,688                       |       | 4,688                        |       |
| **Intangible  Assets, net**              | ** ** | **$**                       | **6,249**  | ** **                   | **$**      | **6,035** | ** ** |

 

9

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Amortizationexpense related to intangible assets was approximately $15,000 for both the 13weeks ended April 30, 2006 and the 13 weeks ended April 29, 2007, andapproximately $44,000 for both the 39 weeks ended April 30, 2006 and the 39weeks ended April 29, 2007.  Futureamortization expense related to definite-lived intangible assets is estimatedto be approximately $58,000 for each of the next five fiscal years.

*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 andDiscontinued Operations*

Assets to be disposed of are classifiedseparately as assets held for sale when their sale becomes probable as definedby the provisions of SFAS No. 144, at which time they are reported at the lowerof the carrying amount or fair value less costs to sell, and depreciationceases.  Revenues and expenses fromoperations related to the assets to be sold are classified as results fromdiscontinued operations.  Interestexpense related to debt to be assumed or debt required to be paid off as partof a sale transaction is also classified as results from discontinuedoperations.   No general allocation ofinterest expense on other debt is included in results from discontinuedoperations.

*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.

The following table summarizes stock option activity during the 39 weeks ended April 29, 2007:
|                                       | ** ** | **Options** | ** ** | **Weighted Average  Exercise Price** | ** ** | **Weighted Average  Remaining  Contractual Term** | ** ** |
|---------------------------------------|------------|-------------|------------|------------------------------------------------|------------|-------------------------------------------------------------|------------|
| **Outstanding  at July 30, 2006**     |       | 3,811,187   |       | $                                              | 4.26       |                                                        |       |   |
| **Granted**                           |       | —      |       |                                           |       |                                                        |       |
| **Exercised**                         |       | (20,060     | )          | $                                              | 2.00       |                                                        |       |   |
| **Forfeited**                         |       | —      |       |                                           |       |                                                        |       |
| **Outstanding  at April 29, 2007**    |       | 3,791,127   |       | $                                              | 4.27       |                                                        | 2.49       |   |
| ** **                            | ** ** | ** **  | ** ** | ** **                                     | ** ** | ** **                                                  | ** ** |
| **Options  vested at April 29, 2007** |       | 3,791,127   |       | $                                              | 4.27       |                                                        | 2.49       |   |
| **Exercisable at April 29, 2007**     |       | 3,791,127   |       | $                                              | 4.27       |                                                        | 2.49       |   |

 

10

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Duringfiscal 1998, the Company granted non-qualified options under the Plan tocertain key members of management to purchase 672,010 shares of common stockwith an exercise price of $2.00 per share when the fair value of the stock wasestimated to be $18.00 per share. The majority of these options (511,530shares) were granted to members of senior management and were 100% vested onthe date of grant.  Accordingly, theCompany recognized stock compensation expense of $8.1 million in fiscal 1998relating to the grants based on the intrinsic value of the option of $16.00 pershare.  Under these senior managementgrant agreements, the Company also agreed to pay the optionees a fixed tax “bonus”in the aggregate of $5.8 million to provide for certain fixed tax liabilitiesthat the optionees would incur upon exercise. The liability for this fixed tax bonus has been reduced to reflect $5.6million in tax bonus payments made through April 29, 2007 in connection withoptions exercised, including $0.2 million paid during the 13 weeks then endedassociated with the exercise of options to purchase 20,060 shares.  The remaining $0.2 million tax bonusliability is reflected in accounts payable and other current liabilities in theaccompanying condensed consolidated balance sheet as of April 29, 2007.  The remainder of these original $2.00 options(160,480 shares) were granted under the Plan to certain members of managementand were expensed as they vested through July 30, 2003.

Inall periods presented, the Company’s stock options, including options exercisedduring the quarter and options outstanding and exercisable at April 29, 2007,had no intrinsic value.

*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 13-week period ended April 29, 2007, the Company recognized $0.8million of non-cash loss from market value adjustments to this agreement,compared to $0.7 million of non-cash income in the corresponding period of theprior year.  For the 39-week period endedApril 29, 2007, the Company recognized $1.3 million of non-cash loss frommarket value adjustments to this agreement, compared to $1.7 million ofnon-cash income in the corresponding period of the prior year.  As described in Note 10, the interest rateswap agreement was terminated on March 1, 2007, at which time it had a marketvalue of $0.8 million.

# *Accounting for VariableInterest Entities*

On May 14, 2004, ResortProperties completed the restructuring of its real estate term loan facilityfrom Fleet National Bank, Ski Partners, LLC, and Oak Hill Capital Partners (the“Real Estate Term Facility’).  As aresult of the restructuring, a new business venture called SP Land Company, LLC(“SP Land”) was created by Ski Partners, LLC, Resort Properties, andKillington, Ltd. (“Killington”) (an ASC subsidiary).  As part of the restructuring, certaindevelopmental land parcels at the Killington resort and cash with a combinedcarrying value of approximately $2.2 million were transferred by ResortProperties and Killington into SP Land Company, LLC, together with allindebtedness, including related interest and fees, under the Real Estate TermFacility held by Fleet National Bank and Ski Partners, LLC (Tranche A and B ofthe 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 avariable interest entity and is accounted for on the equity method because itdoes not meet the requirements for consolidation.

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.

11

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In October 2004, the Company, through one of itssubsidiaries, acquired a 49% interest in SS Associates, LLC (“SS Associates”)by contributing its rights to purchase a building to SS Associates and bymaking a refundable security deposit of $0.4 million.  In accordance with FIN No. 46R, “*Consolidation of Variable Interest Entities*”,the Company consolidates SS Associates because it meets the requirements of avariable interest entity for which 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 liabilities related to assets held for sale in the accompanyingcondensed consolidated balance sheet as of April 29, 2007.

In connection withthe Killington/Pico Sale, the Company sold its ownership interests in SP Land,Cherry Knoll and SS Associates.

*Reclassifications*

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

# *Recently Issued Accounting Standards*

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.  The Companyis 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 qualitative 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. The Company is currently reviewing the requirements of SAB No. 108 andhas not yet determined the impact, if any, on its financial position or resultsof operations.

In September 2006,the FASB issued SFAS No. 157, “*Fair ValueMeasurements*”.  SFAS No. 157defines fair value, establishes a framework for measuring fair value, andrequires enhanced disclosures about fair value measurements.  SFAS No. 157 applies when other accountingpronouncements require or permit fair value measurements; it does not requirenew fair value measurements.  SFAS No.157 is effective for financial statements issued for fiscal years beginningafter November 15, 2007, and interim periods within those years.  The Company is currently evaluating theimpact of adopting SFAS No. 157 on its consolidated financial position and resultsof operations.

In February 2007,the FASB issued SFAS No. 159, “*The FairValue Option for Financial Assets and Financial Liabilities*”.  SFAS No. 159 permits entities to choose tomeasure many financial instruments and certain other items at fair value.  SFAS No. 159 is effective for financialstatements issued for fiscal years beginning after November 15, 2007.  The Company is currently evaluating theimpact of adopting SFAS No. 159 on its consolidated financial position andresults of operations.

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**3.  Net Income (loss) per Common Share**

Net income (loss)per common share for the 13 weeks and for the 39 weeks ended April 30, 2006 andApril 29, 2007, respectively, was determined based on the following data (inthousands):
|                                                                   | ** **   | **13 weeks ended  April 30, 2006** | ** **   | **13 weeks ended  April 29, 2007** | ** **   | **39 weeks ended  April 30, 2006** | ** **   | **39 weeks ended  April 29, 2007** | ** **   |
|-------------------------------------------------------------------|--------------|--------------------------------------------------------|--------------|--------------------------------------------------------|--------------|--------------------------------------------------------|--------------|--------------------------------------------------------|--------------|
| ***Income (Loss)***                                               | *** *** | *** ***                                           | *** *** | *** ***                                           | *** *** | *** ***                                           | *** *** | *** ***                                           | *** *** |
|                                                              |         |                                                   |         |                                                   |         |                                                   |         |                                                   |         |
| Loss  from continuing operations                                  |         | $                                                      | (922         | )                                                      | $            | (8,794                                                 | )            | $                                                      | (35,749      | ) | $ | (47,730 | ) |
| Less:  amounts allocated to  participating securities        |         | —                                                 |         | —                                                 |         | —                                                 |         | —                                                 |         |
| Loss  attributable to  common  stockholders                       |         | $                                                      | (922         | )                                                      | $            | (8,794                                                 | )            | $                                                      | (35,749      | ) | $ | (47,730 | ) |
|                                                              |         |                                                   |         |                                                   |         |                                                   |         |                                                   |         |
| Income  from discontinued operations                              |         | 30,335                                                 |         | 202,497                                                |         | 11,642                                                 |         | 181,161                                                |         |
| Less:  amounts allocated to participating securities         |         | (18,720                                                | )            | (128,462                                               | )            | —                                                 |         | (88,497                                                | )            |
| Income  attributable to common stockholders                  |         | $                                                      | 11,615       |                                                   | $            | 74,035                                                 |         | $                                                      | 11,642       |   | $ | 92,664 |   |
|                                                              |         |                                                   |         |                                                   |         |                                                   |         |                                                   |         |
| Net  income (loss)                                                |         | 29,413                                                 |         | 193,703                                                |         | (24,107                                                | )            | 133,431                                                |         |
| Less:  amounts allocated to participating securities         |         | (18,720                                                | )            | (128,462                                               | )            | —                                                 |         | (88,497                                                | )            |
| Net  income (loss) attributable to  common stockholders      |         | $                                                      | 10,693       |                                                   | $            | 65,241                                                 |         | $                                                      | (24,107      | ) | $ | 44,934 |   |
| * *                                                          | * *     | * *                                               | * *     | * *                                               | * *     | * *                                               | * *     | * *                                               | * *     |
| ***Shares***                                                      | *** *** | *** ***                                           | *** *** | *** ***                                           | *** *** | *** ***                                           | *** *** | *** ***                                           | *** *** |
| Basic and diluted weighted average common shares outstanding |         | 31,738                                                 |         | 31,749                                                 |         | 31,738                                                 |         | 31,742                                                 |         |

 

TheCompany accounts for its earnings per share under Emerging Issues Task ForceIssue No. 03-06, “*Participating Securitiesand the Two Class Method Under FAS No. 128, Earnings per Share*”.  The Company’s mandatorily redeemable 12%Series C-1 Convertible Participating Preferred Stock (“Series C-1 PreferredStock”) is a participating security because it may participate in dividendswith common stock.  Accordingly, netincome is allocated to each security based on the ratio of the number of sharesif-converted to the total number of shares. In periods when a net loss is incurred, the net loss is not allocated tothe Series C-1 Preferred Stock because it does not have a contractualobligation to share in the losses of the Company, and the impact of inclusionwould be anti-dilutive.

Asof April 30, 2006 and April 29, 2007, the Company had 14,760,530 shares of itsClass A common stock outstanding, respectively, which are convertible intoshares of 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 April 30, 2006 andApril 29, 2007, the Company had 40,000 shares of its Series C-1 Preferred Stockoutstanding, respectively, which are convertible into shares of the Company’scommon stock.  If converted at theirliquidation preferences as of April 30, 2006 and April 29, 2007, theseconvertible preferred shares would convert into approximately 55,561,000 and62,515,000 shares of common stock, respectively.  For the 13 weeks and 39 weeks ended April 30,2006 and April 29, 2007, the common shares into which these preferredsecurities are convertible have not been included in the dilutive sharecalculation as the impact of their inclusion would be anti-dilutive.  The Company also had options outstanding topurchase 3,811,187 and 3,791,127 shares of its common stock under the Plan asof April 30, 2006 and April 29, 2007, respectively.  These stock options are excluded from thedilutive share calculation, as the impact of their inclusion would beanti-dilutive.

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**4.  Segment Information**

In accordance with SFAS No. 131,“*Disclosures about Segments of an Enterprise andRelated Information*”, theCompany has classified its operations into two business segments; resortoperations and real estate operations. Revenues at each of the resorts are derived from the same lines ofbusiness which include lift ticket sales, food and beverage, retail salesincluding rental and repair, skier development, lodging and propertymanagement, 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 estate at itsresorts and the sale of other real property interests.  Revenues and operating losses from continuingoperations for each of the two business segments excluding discontinuedoperations are as follows (in thousands):
|                                                | ** ** | **13 weeks ended  April 30, 2006** | ** ** | **13 weeks ended  April 29, 2007** | ** ** | **39 weeks ended  April 30, 2006** | ** ** | **39 weeks ended  April 29, 2007** | ** ** |
|------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|
| * *                                       | * *   | * *                                               | * *   | * *                                               | * *   | * *                                               | * *   | * *                                               | * *   |
| **Revenues:**                                  | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** |
| **Resort**                                     |       | $                                                      | 46,978     |                                                   | $          | 48,847                                                 |       | $                                                      | 89,542     |   | $ | 91,307 |   |
| **Real estate**                                |       | 1,173                                                  |       | 2,867                                                  |       | 2,979                                                  |       | 4,767                                                  |       |
| **Total**                                      |       | $                                                      | 48,151     |                                                   | $          | 51,714                                                 |       | $                                                      | 92,521     |   | $ | 96,074 |   |
| ** **                                     | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** |
| **Income  (loss) from continuing operations:** | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** |
| **Resort**                                     |       | $                                                      | (1,057     | )                                                      | $          | (10,195                                                | )          | $                                                      | (35,261    | ) | $ | (49,249 | ) |
| **Real estate**                                |       | 135                                                    |       | 1,401                                                  |       | (488                                                   | )          | 1,519                                                  |       |
| **Total**                                      |       | $                                                      | (922       | )                                                      | $          | (8,794                                                 | )          | $                                                      | (35,749    | ) | $ | (47,730 | ) |

 

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** | ** ** | **April 29, 2007** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| **Identifiable  Assets:**                                               | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| **Resort**                                                              |       | $                           | 347,493    |                         | $          | 202,102 |   |
| **Real estate**                                                         |       | 29,687                      |       | 8,551                        |       |
| ** **                                                              |       | $                           | 377,180    |                         | $          | 210,653 |   |
| **Assets:**                                                             | ** ** | ** **                  | ** ** | ** **                   | ** ** |
| **Identifiable assets for segments**                                    |       | $                           | 377,180    |                         | $          | 210,653 |   |
| **Assets held for sale**                                                |       | —                      |       | 91,400                       |       |
| **Intangible and deferred income tax assets not allocated to segments** |       | 5,484                       |       | 3,362                        |       |
| **Total consolidated assets**                                           |       | $                           | 382,664    |                         | $          | 305,415 |   |

 

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**5. Long-Term Debt**

**Resort Senior Credit Facility**

The Companyentered into agreements dated November 24, 2004 with Credit Suisse, GE Capital,and other lenders whereby the lenders provided the Company with a $230.0million senior secured loan facility (“Resort Senior Credit Facility”)consisting of a revolving 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 expensesrelated to the transaction.  The ResortSenior Credit Facility consisted 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 were provided under a single credit agreement (collectively, the “First Lien Credit Agreement”), maturing in November 2010 and earning 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   The First Lien Term Loan required 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 was 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 was provided under a separate credit agreement (“Second Lien Credit Agreement”), maturing in November 2011, earning 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 and principal was 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 the Company’s assets,other than assets held by Grand Summit, and the Company’s obligations under theSecond Lien Credit Agreement and the Company’s subsidiaries’ obligations underthe related guarantees were secured by a second-priority security interest inthe same assets.

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.

On March 1, 2007, in conjunction with its completion of theSteamboat Sale, the Company permanently repaid all outstanding obligationsunder the $85.0 million First Lien Term Loan and the $105.0 million SecondLien Term Loan.  Additionally, with thepermanent payoff of all outstanding term loan obligations under the ResortSenior Credit Facility, the Company terminated its interest rate swap agreementand received $0.8 million as the result of the termination.  Also, the Company wrote off the remainingbalance of deferred financing costs associated with the Resort Senior CreditFacility, which totaled approximately $4.7 million as of March 1, 2007. Amountsrelated to deferred financing costs are included in discontinued operations inthe accompanying condensed consolidated statements of operations and condensedconsolidated statements of cash flows.

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In addition, the Company entered into an amendment of the$40.0 million Revolving Facility under the First Lien Credit Agreement. Theamendment to the Revolving Facility, effective through July 29, 2007, provides,among other things, for a reduction of the aggregate commitments available underthe facility to $10.0 million and the elimination of the commitment feethereunder, the elimination of the annual EBITDA covenant through July 29,2007, and requires the approval by the Revolving Facility lenders of any futureadvances under the Revolving Facility.  As of April 29, 2007, theCompany had $1.4 million in outstanding Letters of Credit with $8.6 millionavailable for additional borrowings under the Revolving Facility.  The Company was in compliance with allfinancial covenants of the Resort Senior Credit Facility as of April 29, 2007.

**Construction Loan 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 ownedthe existing Grand Summit Hotel project at Steamboat, which was primarilyfinanced through a $110.0 million Senior Construction Loan (“SeniorConstruction Loan”).  Due to constructiondelays and cost increases at the Steamboat Grand Hotel project, on July 25,2000, Grand Summit entered into the $10.0 million Subordinated ConstructionLoan, which was subsequently increased to $10.6 million in December 2003 (“SubordinatedConstruction Loan”).  Together, theSenior Construction Loan and the Subordinated Construction Loan comprise the “ConstructionLoan Facility”.    The Construction LoanFacility was without recourse to ASC and its resort operating subsidiaries andis collateralized by significant real estate assets of Resort Properties andits subsidiaries, including the assets and stock of Grand Summit, the Company’sprimary hotel development 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 the auction.  Mortgages against the commercial core unitsand unsold unit inventory at the Grand Summit Hotel at Steamboat and apromissory note from the Steamboat Homeowners Association secured by theSteamboat Grand Hotel parking garage collateralized the Construction Loan Facility,and were subject to covenants, representations, and warranties customary forthat type of construction facility.

OnFebruary 28, 2007, in anticipation of the Steamboat Sale, the Company’ssubsidiary, Grand Summit, repaid all outstanding obligations (consisting onlyof $3.2 million of deferred interest obligations) under its Construction LoanFacility.  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 $0.7 million in seller financing notespreviously assigned to and serviced by an affiliate of the lenders under theConstruction Loan Facility.

**Other Long-Term Debt**

The Company has$2.5 million of other long-term debt as of April 29,2007, which was comprised of capitallease obligations.  In addition,as described in Note 12, on May 11, 2007 the Company completedthe sale of the assets of Killington.  Aspart of this sale, the purchasers assumed $1.9 million of Killington’s capitallease obligations.  These additionalamounts are classified as liabilities related to assets held for sale in theaccompanying condensed consolidated balance sheet.

**6.  Subordinated Notes and Debentures**

**11.3025%Junior Subordinated Notes**

On July 15, 2001, the Company entered into asecurities purchase agreement with Oak Hill Capital Partners to assist theCompany in meeting its current financing needs. Pursuant to the terms of the securities purchase agreement, which closedon August 31, 2001, the Company issued, and Oak Hill Capital Partnerspurchased, $12.5 million aggregate principal amount of Junior SubordinatedNotes (“Junior Subordinated Notes”), which were convertible into shares of theCompany’s Non-voting Series D Participating Preferred Stock (“Series DPreferred Stock”).  The JuniorSubordinated Notes were unsecured and bear interest at a rate of 11.3025%,which compounds 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.  On April 4, 2007, theoutstanding principal and interest balance due under the Junior SubordinatedNotes, totaling approximately $22.8 million, was repaid in full using proceedsfrom the Mount Snow/Attitash Sale.  Interest expense on these notes is included in discontinued operationsin the accompanying condensed consolidated statements of operations.

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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 areobligated on the New Junior Subordinated Notes, and none of the Company’sassets serve as collateral for repayment of the New Junior SubordinatedNotes.  The indenture governing the NewJunior Subordinated Notes also restricts the Company from paying cash dividendsor making other distributions to its stockholders subject to certain limitedexceptions.  On April 23, 2007, theCompany paid $3.5 million in accrued interest and $16.5 million of principal onthese notes, using a portion of the proceeds from the Mount Snow/AttitashSale.  The outstanding balance andaccrued interest on the New Junior Subordinated Notes were $79.5 million and$1.7 million, respectively, as of April 29, 2007.  As discussed in Note 12, on May 11, 2007, inconjunction with the Killington/Pico sale, the outstanding principal balanceunder the New Junior Subordinated Notes, together with accrued interest of $0.5million, was repaid in full.  Because ofdifferences in the methods of accrual and payment of interest on these notes,the Company realized a gain of approximately $0.3 million upon the partialrepayment, and, subsequent to quarter-end, approximately $1.5 million upon thefinal repayment of these notes.  Interestexpense on these notes is included in discontinued operations in theaccompanying condensed consolidated statements of operations.

**OtherSubordinated Debentures**

Othersubordinated debentures owed by the Company to institutions and individuals totaled $6.2 million as of April 29,2007, are related to Killington/Pico , are unsecuredand are classified as liabilities related to assets held for sale in theaccompanying condensed consolidated balance sheet.  As discussed in Note 12, on May 10, 2007, inconjunction with the Killington/Pico sale, all outstanding obligations dueunder these debentures were repaid in full.

**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 entered into a securities purchase agreement with Oak Hill toassist 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 to OakHill two new series of Preferred Stock: (i) $40.0 million face value of SeriesC-1 Preferred Stock; and (ii) $139.5 million face value of Series C-2 PreferredStock.  The initial face values of theSeries C-1 Preferred Stock and Series C-2 Preferred Stock correspond to theaccrued liquidation preference of the Series B Preferred Stock immediatelybefore being stripped 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 April 29,2007, cumulative dividends in arrears totaled approximately $38.1 million and$181.6 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 April 29, 2007, and to any common stock, Class A common stockand Series D Preferred Stock issued in the future, and rank pari passu witheach other.  The Series C-1 PreferredStock is also participating preferred stock and consequently has the right toparticipate in any dividends paid or payable to the common stock of the Companyon an as-if-converted basis.

On March 1, 2007, the holders of theCompany’s Series C-1 Preferred Stock and Series C-2 Preferred Stock(collectively, the “Holders”) terminated its agreement with the lenders underthe Resort Senior Credit Facility that the Holders would not exercise anyremedies as a result of the failure to redeem the Series C-1 Preferred Stockand the Series C-2 Preferred Stock at their final maturities.

**Series D Preferred Stock**

The Company hasauthorized the issuance of 5,000 shares of Series D Preferred Stock.  As of April 29, 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**

**DividendRestrictions**

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

**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 April 29,2007, 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, thetransferee would own more than 10% of the outstanding shares of common stock ofthe Company (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.

On February 26, 2007, Mr. Otten resigned from the board ofdirectors of the Company.

**9.  Phantom Equity Plan**

ASC has established theAmerican 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.  The Mount Snow/Attitash Sale, together with the Steamboat Sale, both asdiscussed in Note 10, constitute a Valuation Event under the LTIP.  The amounts payable to participants in theLTIP, as determined by the Compensation Committee of the Company’s Board ofDirectors, totaled approximately $12.0 million as of April 29, 2007, and wereincluded in other current liabilities in the accompanying condensedconsolidated balance sheet.  On May 31,2007, this liability was paid in full using proceeds from the Killington Sale.

During the 13 weeks endedApril 30, 2006 and April 29, 2007, the Company recorded expenses relating tothe LTIP of approximately $0.1 million, and $10.4 million, respectively.  During the 39 weeks ended April 30, 2006 andApril 29, 2007, the Company recorded expenses relating to the LTIP ofapproximately $0.2 million and $10.5 million, respectively. These amounts areincluded in marketing, general and administrative expenses in the accompanyingcondensed consolidated statements of operations.

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**10.  Assets/Liabilities Held for Sale andDiscontinued Operations**

**Steamboat**

OnMarch 1, 2007, the Company completed the Steamboat Sale for the agreed uponcash purchase price of $265.0 million, including approximately $4.0 million inassumed debt and subject to working capital and seasonal earningsadjustments.  In addition, in connectionwith the sale, the Company sold certain Steamboat-related assets of itssubsidiary Grand Summit Resort Properties, Inc. (“Grand Summit”) to SteamboatCorporation.

The sales proceedsof $239.1 million were used first to pay off all outstanding balances due underthe Resort Senior Credit Facility, including a 1% fee associated with theprepayment of the Second Lien Term Loan. As of March 1, 2007, the total balance was $189.2 million, including$82.1 million under the First Lien Term Loan, $105.0 million under the SecondLien Term Loan, and $2.1 million in accrued interest and fees.  Repayment in full of the Resort Senior CreditFacility also resulted in the termination of the Company’s interest rate swapagreement, resulting in a payment to the Company of its market value of $0.8million.  Repayment of the Resort SeniorCredit Facility also resulted in the write-off of all remaining deferredfinancing costs, which totaled approximately $4.7 million as of March 1,2007.  The Company also paid theremaining balance of deferred interest due under its Construction Loan Facility($3.2 million as of March 1, 2007), which was collateralized by remainingassets at the Steamboat Grand Hotel which were sold as part of the transaction.

The Company has accounted forthe Steamboat Sale in accordance with SFAS No. 144. Accordingly, the results ofoperations for Steamboat for the periods ended April 30, 2006 and April 29,2007 have been removed from continuing operations and classified asdiscontinued operations.  The $164.6million gain on sale of Steamboat is included in income from discontinuedoperations in the accompanying consolidated statement of operations at April29, 2007.

**Mount Snow/Attitash**

On April 4, 2007,the Company completed the Mount Snow/Attitash Sale.  The purchase price was $73.5million, plus assumption of approximately $2.0 million in debt and other liabilities,and was subject to certain working capital and earnings adjustments.   Total proceeds received by theCompany, subject to final post-closing working capital and earningsadjustments, were $61.9 million.

The Company used aportion of the net sales proceeds to repurchase at par all of its issued andoutstanding Junior Subordinated Notes ($22.8 million, including accruedinterest, at April 4, 2007).  The Company also used a portion of theproceeds from the sale to repay a portion of its New Junior Subordinated Notes($20.0 million, including accrued interest, at April 23, 2007).  TheCompany separately obtained the consent of its senior secured lender, GeneralElectric Capital Corporation, to the Mount Snow/Attitash Sale and theaforementioned redemptions.

The Company has accounted forthe Mount Snow/Attitash Sale in accordance with SFAS No. 144.  Accordingly, the results of operations forMount Snow and Attitash for the periods ended April 30, 2006 and April 29, 2007have been removed from continuing operations and classified as discontinuedoperations.  The $20.8 million gain onsale of Mount Snow/Attitash is included in income from discontinued operationsin the accompanying consolidated statement of operations at April 29, 2007.

**Killington/Pico**

On February 16,2007, the Company and its subsidiaries Killington, Ltd. and Pico Ski AreaManagement Company, Inc. entered into a definitive agreement with SP Land tosell the assets of Killington/Pico (the “Killington/Pico Sale”).  The purchase price to be paid forKillington/Pico is $83.5 million in cash plus the assumption of approximately $5.0 million in debt andother liabilities.  The purchase price issubject to certain customary adjustments, including certain season pass andworking capital adjustments, set forth in the Purchase Agreement.  A closing escrow of $3.0 million will bewithheld from the purchase price until July 1, 2008, to fund any post-closingindemnification obligations of the Seller. On May 11, 2007, the Companycompleted the Killington/Pico Sale (see Note 12 “Subsequent Events” foradditional information).

The Company has accounted for the sale of the Killington and Picoresorts in accordance with SFAS No. 144. Accordingly, the assets and liabilities related to Killington and Picohave been reclassified as held for sale in the accompanying consolidatedbalance sheets as of April 29, 2007, and all results from operations forKillington and Pico for the 13 and 39 weeks ended have been removed fromcontinuing operations and classified as discontinued operations in theaccompanying consolidated statements of operations.  The Company has recorded the disposal groupat its carrying value, which is lower than its fair value less costs to sell.

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The components of the assetsand liabilities held for sale as of April 29, 2007 related to Killington/Picoare as follows (in thousands):
|                               | ** ** | **April 29, 2007** | ** ** |
|-------------------------------|------------|------------------------------|------------|
| **Assets held for sale**      | ** ** | ** **                   | ** ** |
| Cash equivalents              |       | $                            | 210        |   |
| Restricted cash               |       | 1,514                        |       |
| Accounts receivable           |       | 1,462                        |       |
| Inventory                     |       | 992                          |       |
| Prepaid expenses              |       | 727                          |       |
| Property & equipment, net |       | 83,840                       |       |
| Intangibles                   |       | 170                          |       |
| Other assets                  |       | 2,485                        |       |
| ** **                    |       | $                            | 91,400     |   |

 
|                                                 | ** ** | **April 29, 2007** | ** ** |
|-------------------------------------------------|------------|------------------------------|------------|
| **Liabilities related to assets held for sale** | ** ** | ** **                   | ** ** |
| Accounts payable and accrued  liabilities       |       | $                            | 7,576      |   |
| Deposits and deferred revenue                   |       | 138                          |       |
| Current and long term debt                      |       | 3,931                        |       |
| Other subordinated notes and  debentures        |       | 6,208                        |       |
| Other long term liabilities                     |       | 1,037                        |       |
| ** **                                      |       | $                            | 18,890     |   |

 

Summary operating results for the Steamboat, Mount Snow,Attitash, and Killington/Pico resorts, which have historically been included inthe Company’s resort segment in its results of operations, and for GrandSummit, which have historically been included in the Company’s real estate segmentin its results of operations, for the 13- and 39-week periods ended April 30,2006 and April 29, 2007, were as follows (in thousands):
|                                                        | ** ** | **13 weeks ended  April 30, 2006** | ** ** | **13 weeks ended  April 29, 2007** | ** ** | **39 weeks ended  April 30, 2006** | ** ** | **39 weeks ended  April 29, 2007** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** |
| **Total revenues**                                     |       | $                                                      | 108,930    |                                                   | $          | 70,373                                                 |       | $                                                      | 197,323    |   | $ | 153,239 |   |
| ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** | ** **                                             | ** ** |
| **Pre-tax income (loss) from discontinued operations** |       | $                                                      | 30,335     |                                                   | $          | 20,190                                                 |       | $                                                      | 11,642     |   | $ | (1,146 | ) |
| **Gain on sale of discontinued operations**            |       | —                                                 |       | 185,434                                                |       | —                                                 |       | 185,434                                                |       |
| **Provision for income taxes**                         |       | —                                                 |       | (3,127                                                 | )          | —                                                 |       | (3,127                                                 | )          |
| **Net income from discontinued operations**            |       | $                                                      | 30,335     |                                                   | $          | 202,497                                                |       | $                                                      | 11,642     |   | $ | 181,161 |   |

 

The Company expects that the tax effects of the netgain it has generated from the Steamboat Sale, and the Mount Snow/Attitash Salewill be offset by its net operating loss carry-forwards for regular income taxpurposes.  As a result, the Companyanticipates being subject only to the alternative minimum tax and state taxliabilities and has recorded an estimate of taxes payable based on thealternative minimum tax associated with these transactions.

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**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.

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 assets thatare 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.

The Company hasentered into agreements with 54 non-resort employees whereby a monetaryincentive has been offered in exchange for an individual’s continued employmentwith the Company through a specified date (the “Employee Retention Agreements”).  The Company’s estimated financial obligationunder these agreements totals approximately $1.2 million, and is beingamortized over the contracted retention periods (varying from July 2007 throughJuly 2008).  Approximately $0.2 millionattributable to these commitments has been accrued through April 29, 2007, andis included in other current liabilities in the accompanying condensedconsolidated balance sheets.

The Company is inthe process of implementing compensation arrangements with certain of theCompany’s employees, including members of its senior management.   These may include payment of cash bonuses ifall remaining resort properties are under contract for their sale by a givendate and following the closing of all such sales.  The Company is also in the process ofamending certain of the Company’s employment agreements with senior management.

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, its Form 10-Q for the quarter endedOctober 29, 2006 filed with the Securities and Exchange Commission on December8, 2006 and its Form 10-Q for the quarter ended January 28, 2007 filed with theSecurities and Exchange Commission on March 14, 2007.

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**12.  Subsequent Events**

The Companycompleted the Killington/Pico Sale on May 11, 2007.  The purchase price was $83.5 million, plusassumption of approximately $5.0 million in debt and other liabilities, and wassubject to certain working capital adjustments. Total proceeds received by the Company, subject to a final post-closingworking capital adjustment, were $85.2 million, after preliminary adjustmentsfor working capital and debt assumed by the buyer.  Of this amount, $3.0 million will be held inan indemnity escrow account until June 30, 2008.

On May 11, 2007,in connection with the Killington/Pico Sale, the Company fully repaid theremaining principal balance of the Company’s New Junior Subordinated Notes,($80.0 million, including accrued interest). Because of differences in the methods of accrual and payment of intereston these notes, the Company realized a gain upon their final repayment ofapproximately $1.5 million.  Also, inanticipation of the closing, on May 10, 2007, the Company paid the remainingbalances of certain debt obligations of Killington/Pico.  These totaled $6.3 million, includingsubordinated notes and debentures of $6.2 million, and accrued interest of $0.1million.

On June 4, 2007, the Company entered into a definitive agreement (the “SundayRiver/Sugarloaf Sale”) with Boyne USA, Inc. (“Boyne”) to purchase, all of the Company’s stock inSunday River Skiway Corporation, the owner and operator of the Sunday River skiresort and Sugarloaf Mountain Corporation, the owner and operator of theSugarloaf/USA ski resort.  The purchaseprice to be paid by Boyne is $77.0 million in cash, plus the assumption ofapproximately $2.0 million in debt and other liabilities.  Of this amount, $2.0 million will be held inan indemnity escrow account for one year following the closing date.  The purchase price is subject to certaincustomary adjustments, including reimbursement of the Company for pre-closingcapital expenditures as set forth in the Purchase Agreement.  The Company expects the transaction to closeon or before July 31, 2007.

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**Item 2**

**Management’s Discussion and Analysis of Financial**

**Condition 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: recent significant reductionsin the size of our operating business; the failure to redeem all of the sharesof our Series C Preferred Stock in accordance with their terms; the loss ortermination or our leasehold rights at The Canyons as a result of any materialdefaults under governing lease documents that have not been cured withinapplicable cure periods; changes in regional and national business and economicconditions affecting both our resort operating and real estate segments;competition and pricing pressures; negative impact on demand for our productsresulting from terrorism and availability of air travel (including the effectof airline bankruptcies); adverse weather conditions regionally and nationally;changes in weather patterns resulting from global warming; seasonal businessactivity; 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*.*

**General**

Thefollowing is our discussion and analysis of financial condition and results ofoperations for the 13 and 39 weeks ended April 29, 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, our quarter ended January 28, 2007 QuarterlyReport on Form 10-Q filed on March 14, 2007 and our unaudited condensedconsolidated financial statements and related notes contained elsewhere in thisreport.  Historical information containedtherein and herein may not be indicative of results in future periods.

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.

We have mandatorily redeemable convertible participating 12% preferredstock (Series C-1 Preferred Stock) with an accreted redeemable value of $78.1million as of April 29, 2007, and mandatorily redeemable 15% non-votingpreferred stock (Series C-2 Preferred Stock) with an accreted redeemable valueof $321.1 million as of April 29, 2007, each of which mature and are redeemableon July 31, 2007, to the extent that we have legally available funds to effectsuch redemption.   There can be noassurance that we will be able to retire, redeem or refinance our preferredstock on or before its redemption date.

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Since December 2006, we have either sold or entered into contracts forthe sale of all of our resort assets other than The Canyons resort in ParkCity, Utah.  We have used the proceedsfrom completed resort sales to retire substantially all of our indebtedness,with the exception of capital leases and letter of credit obligations relatingto our remaining resorts at The Canyons, Sunday River and Sugarloaf/USA. OnJune 4, 2007, we entered into a binding contract for the sale of Sunday Riverand Sugarloaf/USA to Boyne USA, Inc. Until our remaining resorts are each sold, we intend to continueoperating them in accordance with our historical practices.  We also intend to continue honoring all ofour contractual commitments and we will maintain adequate capitalization of ourresorts through the proceeds available to us from resort sales which we havealready completed.

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.

**Asset Sales and Reductions in Indebtedness**

On March 1, 2007,we completed the sale of Steamboat Ski & Resort Corporation to IntrawestHoldings S.A.R.L. (the “Steamboat Sale”) for the agreed upon cash purchaseprice of $265.0 million, including approximately $4.0 million in assumed debtand subject to working capital and seasonal earnings adjustments. In addition,in connection with the sale, certain Steamboat-related assets of the Company’ssubsidiary Grand Summit Resort Properties, Inc. were also sold.

OnMarch 1, 2007, in conjunction with the completion of the Steamboat Sale, wepermanently repaid all outstanding obligations under the $85.0 million termportion of the first lien loan and the $105.0 million second lien term loan(together with the $40.0 million revolving portion of the first lien term loan,collectively the “Resort Senior Credit Facility”). We terminated all agreementsrelating to the second lien term loan. In addition, we entered into anamendment of the $40.0 million revolving credit portion of the first lien loan(the “Revolving Facility”). The amendment to the Revolving Facility provides,among other things, for a reduction of the aggregate commitments availableunder the facility to $10.0 million and the elimination of the commitment feethereunder, the elimination of the annual EBITDA covenant through July 29,2007, and requires the approval by the Revolving Facility lenders of any futureadvances under the revolving credit facility.  In conjunction with the permanent payoff of all outstanding obligationsunder the Resort Senior Credit Facility, we terminated the interest rate swapagreement with Credit Suisse and received $0.8 million on March 1, 2007, as theresult of the termination.

On April 4, 2007,we completed the sale of Mount Snow, Ltd., the owner and operator of the MountSnow ski resort, and LBO Holding, Inc., the owner and operator of the Attitashski resort, to Peak Resorts, Inc. (the “Mount Snow/Attitash Sale”).  The purchase price was $73.5million, plus assumption of approximately $2.0 million in debt and otherliabilities, and was subject to certain working capital and earningsadjustments.  Total proceeds received, subject to final post-closingworking capital and earnings adjustments, were $61.9 million.

We used a portionof the net proceeds from the Mount Snow/Attitash Sale to repurchase at par allof our issued and outstanding 11.3025% Convertible Subordinated Notes Due 2012(the “Junior Subordinated Notes”) ($22.8 million, including accrued interest, atApril 4, 2007).  We also used a portion of the proceeds from the MountSnow/Attitash Sale to repay a portion of our Junior Subordinated Notes Due 2012(the “ New Junior Subordinated Notes”) ($20.0 million, including accruedinterest, at April 23, 2007).  We separately obtained the consent of thelender under its Senior Resort Credit Facility to the Mount Snow/Attitash Saleand the aforementioned redemptions.

On May 11, 2007, we completed the sale of the assets of Killington, Ltd., and Pico Ski Area Management Company, Inc., to MBT Killington, LLC, AMSC Killington, LLC, and SP II Resort, LLC, as tenants-in-common (the “Killington/Pico Sale”).  The purchase price was $83.5 million, plus assumption of approximately $5.0 million in debt and other liabilities, and was subject to certain working capital adjustments.  Total proceeds received, subject to a final post-closing working capital adjustment, were $85.2 million, after preliminary adjustments for working capital and debt assumed by the buyer.  Of this amount, $3.0 million will be held in an indemnity escrow account until June 30, 2008.

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Also on May 11, 2007, we used $80.0 million of the proceedsfrom the Killington/Pico Sale to repay all of our remaining issued andoutstanding New Junior Subordinated Notes. In anticipation of the closing, we repaid long term notes payable ofKillington, Ltd. of $3.9 million on March 23, 2007.  Also, in connection with the closing, weredeemed subordinated notes and debentures related to Killington totaling $6.2million on May 10, 2007.   We hadpreviously obtained the consent of the lender under its Senior Resort CreditFacility to the Killington/Pico Sale and the aforementioned redemptions

On June 4, 2007, we entered into a definitive agreement (the “SundayRiver/Sugarloaf Sale”) with Boyne USA, Inc. (“Boyne”) topurchase, all of the Company’s stock in Sunday River Skiway Corporation, theowner and operator of the Sunday River ski resort and Sugarloaf MountainCorporation, the owner and operator of the Sugarloaf/USA ski resort.  The purchase price to be paid by Boyne is$77.0 million in cash, plus the assumption of approximately $2.0 million indebt and other liabilities.  Of thisamount, $2.0 million will be held in an indemnity escrow account for one yearfollowing the closing date.  The purchaseprice is subject to certain customary adjustments, including reimbursement ofthe Company for pre-closing capital expenditures as set forth in the PurchaseAgreement.  We expect the transaction toclose on or before July 31, 2007.

**Liquidityand Capital Resources**

***Short-Term Liquidity Needs***

Ourprimary short-term liquidity issue relates to the redemption of our Series C-1and Series C-2 Preferred Stock. Our Series C-1 Preferred Stock has an accretedredeemable value of $78.1 million as of April 29, 2007, and our Series C-2Preferred Stock has an accreted redeemable value of $321.1 million as of April29, 2007.  Each of our Series C-1 andSeries C-2 Preferred Stock mature and are redeemable on July 31, 2007, to theextent that we have legally available funds to effect such redemption.   We do not anticipate that we will be able toretire, redeem or refinance our preferred stock on or before its redemptiondate.  Consequently, cash availabilityfor working capital needs, capital expenditures, and acquisitions, issignificantly limited.

Inaddition to the redemption of our preferred stock, our primary short-term skiresort and real estate liquidity needs involve funding seasonal working capitalrequirements and funding our fiscal 2008 capital improvement program.

Ourprimary source of short term liquidity for working capital, capitalimprovements and any redemption of our Series C Preferred Stock are cash flowsfrom operating activities of our remaining resort operating subsidiaries, thecurrently available net cash proceeds from the sales of the Steamboat, MountSnow, Attitash, Killington and Pico ski resorts and any net cash proceeds to bereceived from the sale of our Sunday River and Sugarloaf ski resorts.

***Long-Term Liquidity Needs***

Our primary long-term liquidity needs areto fund skiing-related capital improvements at certain of our resorts.  For fiscal 2008, we anticipate our on-goingcapital spending to be approximately $6.0 million with the exclusion ofSteamboat, Mount Snow, Attitash, and Killington/ Pico, each year, and $3.0million after further excluding Sunday River and Sugarloaf, excluding thecontractual obligations outlined below. There is a considerable degree of flexibility in the timing and, to alesser 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 sale of Steamboat, Killington, Mount Snow and Attitash.  The size and scope of the capital improvementprogram will generally be determined annually depending upon the strategicimportance and expected financial return of certain projects and futureavailability of cash flows from each season’s resort operations.

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**ContractualObligations**

Our non-cancelable, minimum contractualobligations related to continuing operations as of April 29, 2007, includingestimated interest, where applicable, were as follows (in thousands):

|                                                            | ** ** | **Payments due by period** | ** ** |
|------------------------------------------------------------|------------|-------------------------------------------|------------|
| **Obligation**                                             | ** ** | **Total**                                 | ** ** | **Less than 1 Year** | ** ** | **1 to 3 Years** | ** ** | **3 to 5 Years** | ** ** | **After 5 Years** | ** ** |
| Capital lease obligations                                  |       | $                                         | 3,163      |   | $ | 1,636 |   | $ | 824 |   | $ | 96 |   | $ | 607 |   |
| Mandatorily Redeemable 12% Series C-1 Preferred Stock |       | 80,533                                    |       | 80,533 |   | — |   | — |   | — |   |
| Mandatorily Redeemable 15% Series C-2 Preferred Stock |       | 333,388                                   |       | 333,388 |   | — |   | — |   | — |   |
| Operating leases                                           |       | 3,134                                     |       | 730 |   | 840 |   | 230 |   | 1,334 |   |
| The Canyons infrastructure costs                           |       | 1,159                                     |       | 1,159 |   | — |   | — |   | — |   |
| The Canyons golf course obligations                        |       | 3,291                                     |       | 3,291 |   | — |   | — |   | — |   |
| The Canyons obligation to build ski lifts                  |       | 2,200                                     |       | — |   | 2,200 |   | — |   | — |   |
| Total                                                      |       | $                                         | 426,868    |   | $ | 420,737 |   | $ | 3,864 |   | $ | 326 |   | $ | 1,941 |   |

 

Theoperations of a substantial portion of our resort activities are dependent uponleased real estate.  The Company leasescertain land and facilities used in the operations of its resorts under severaloperating lease arrangements that expire at various times from the year 2010through the year 2060.  The related leasepayments are generally based on a percentage of revenues.  Since these obligations are contingent onfuture revenues, they are not included in the table above. In addition, theCompany is subject to additional one-time payments ranging from $1.0 million to$3.0 million upon achievement of incremental annual skier visit levels.  These amounts are not included in the tableabove since it is unknown as to the timing and probability of these payments.

**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 Steamboat Sale.Inaddition, in connection with the sale, certain Steamboat-related assets of theCompany’s subsidiary Grand Summit Resort Properties, Inc. were also sold.  On April 4, 2007, the Company completed theMount Snow/Attitash Sale and on May 11, 2007, the Company completed theKillington/Pico Sale.  All results of operations related toSteamboat, Mount Snow, Attitash and Killington/Pico have been classified as “Incomefrom discontinued operations” in the accompanying financial statements and aretherefore excluded in the following discussion and analysis of Results ofOperations for the 13 week and 39 week periods ended April 30, 2006 and April29, 2007.

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**Results of Operations**

**For the 13 weeks ended April 30,2006 compared to the 13 weeks ended April 29, 2007**

**ResortOperations:**

The components of resort operations for the 13 weeksended April 30, 2006 and the 13 weeks ended April 29, 2007 are as follows(unaudited, in thousands):
|                                         | ** ** | **13 weeks ended  April 30, 2006** | ** ** | **13 weeks ended  April 29, 2007** | ** ** | **Variance** | ** ** |
|-----------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------|------------|
|                                    |       |                                                   |       |                                                   |       |         |       |
| Net resort revenues                     |       | $                                                      | 46,978     |                                                   | $          | 48,847       |       | $ | 1,869 |   |
|                                    |       |                                                   |       |                                                   |       |         |       |
| Cost of resort operations               |       | 23,305                                                 |       | 23,108                                                 |       | (197         | )          |
| Marketing, general and administrative   |       | 7,628                                                  |       | 17,603                                                 |       | 9,975        |       |
| Depreciation and amortization           |       | 5,086                                                  |       | 4,700                                                  |       | (386         | )          |
| Total resort operating expenses         |       | 36,019                                                 |       | 45,411                                                 |       | 9,392        |       |
|                                    |       |                                                   |       |                                                   |       |         |       |
| Income from resort operations           |       | 10,959                                                 |       | 3,436                                                  |       | (7,523       | )          |
|                                    |       |                                                   |       |                                                   |       |         |       |
| Interest expense, net                   |       | (12,016                                                | )          | (13,631                                                | )          | (1,615       | )          |
|                                    |       |                                                   |       |                                                   |       |         |       |
| Loss  from continuing resort operations |       | $                                                      | (1,057     | )                                                      | $          | (10,195      | )          | $ | (9,138 | ) |

 

Resortrevenues were approximately $48.8 million as compared to $46.9 million, anincrease of $1.9 million, or 4.1%, for the 13 weeks ended April 29, 2007 whencompared to the 13 weeks ended April 30, 2006. Total skier visits increased 6%, due primarily to increases at easternresorts in response to abundant natural snowfall, beginning in mid-February.

Our resort segmentgenerated a $10.2 million loss for the 13 weeks ended April 29, 2007, comparedto a $1.1 million loss for the 13 weeks ended April 30, 2006.  This $9.1 million increase in the lossresulted primarily from the net effect of the following:

| Increases in costs:                                             |
|-----------------------------------------------------------------|
|                                                            | (i) | $10.0 million increase in marketing, general and  administrative expenses, due primarily to a $10.4 million provision for  Phantom Equity Plan compensation; |
|                                                            | (ii) | $1.6 million increase in net interest expense; |
|                                                            |   |
| Partially offset by increases revenues and decreases  in costs: |
|                                                            | (iii) | $1.9 million increase in revenues; |
|                                                            | (iv) | $0.2 million decrease in cost of resort operations;  and |
|                                                            | (v) | $0.4 million decrease in depreciation and amortization  expense. |

 

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**Real Estate Operations:**

Thecomponents of real estate operations for the 13 weeks ended April 30, 2006 andthe 13 weeks ended April 29, 2007 are as follows (unaudited, in thousands):

|                                               | ** ** | **13 weeks ended  April 30, 2006** | ** ** | **13 weeks ended  April 29, 2007** | ** ** | **Variance** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------|------------|
|                                          |       |                                                   |       |                                                   |       |         |       |
| Net real estate revenues                      |       | $                                                      | 1,173      |                                                   | $          | 2,867        |       | $ | 1,694 |   |
|                                          |       |                                                   |       |                                                   |       |         |       |
| Cost of real estate operations                |       | 1,038                                                  |       | 1,466                                                  |       | 428          |       |
|                                          |       |                                                   |       |                                                   |       |         |       |
| Income from resort operations                 |       | 135                                                    |       | 1,401                                                  |       | 1,266        |       |
|                                          |       |                                                   |       |                                                   |       |         |       |
| Interest expense, net                         |       | —                                                 |       | —                                                 |       | —       |       |
| Income from continuing real estate operations |       | $                                                      | 135        |                                                   | $          | 1,401        |       | $ | 1,266 |   |

 

Real estate revenues were approximately $2.9 millionas compared to $1.2 million, an increase of $1.7 million, or 144%, for the 13weeks ended April 29, 2007 when compared to the 13 weeks ended April 30, 2006,primarily due to higher amounts of land sales. 

Our real estate segment generated income of $1.4million for the 13 weeks ended April 29, 2007, compared to income fromoperations of $0.1 million for the 13 weeks ended April 30, 2006.  This $1.3 million improvement resultsprimarily from the net effect of a $1.7 million increase in revenues offset bya $0.4 million increase in cost of real estate operations, both of which areattributable to additional land sales.

**Benefitfrom income taxes:**

We recorded no benefit fromincome taxes for losses from continuing operations for either the 13weeks ended April 30, 2006 or the 13 weeks ended April 29, 2007.  We believe it is more likely than not that wewill not realize income tax benefits from operating losses in the foreseeablefuture, and therefore, have recorded a full valuation allowance against ourexisting deferred income tax assets.

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**For the 39 weeks ended April 30,2006 compared to the 39 weeks ended April 29, 2007**

**Resort Operations:**

The components ofresort operations for the 39 weeks ended April 30, 2006 and April 29, 2007 areas follows (unaudited, in thousands):
|                                         | ** ** | **39 weeks ended** | ** ** |
|-----------------------------------------|------------|------------------------------|------------|
| ** **                              | ** ** | **April 30, 2006** | ** ** | **April 29, 2007** | ** ** | **Variance** | ** ** |
|                                    |       |                         |       |   |   |   |   |
| Net resort revenues                     |       | $                            | 89,542     |   | $ | 91,307 |   | $ | 1,765 |   |
|                                    |       |                         |       |   |   |   |   |
| Cost of resort operations               |       | 55,777                       |       | 57,329 |   | 1,552 |   |
| Marketing, general and administrative   |       | 22,227                       |       | 32,607 |   | 10,380 |   |
| Depreciation and amortization           |       | 11,365                       |       | 10,290 |   | (1,075 | ) |
| Total resort operating expenses         |       | 89,369                       |       | 100,226 |   | 10,857 |   |
|                                    |       |                         |       |   |   |   |   |
| Income (loss) from resort operations    |       | 173                          |       | (8,919 | ) | (9,092 | ) |
|                                    |       |                         |       |   |   |   |   |
| Interest expense, net                   |       | (35,603                      | )          | (40,330 | ) | (4,727 | ) |
| Gain on sale of property                |       | 169                          |       | — |   | (169 | ) |
| Loss  from continuing resort operations |       | $                            | (35,261    | ) | $ | (49,249 | ) | $ | (13,988 | ) |

 

Resortrevenues were approximately $91.3 million as compared to $89.5 million, anincrease of $1.8 million, or 2.0%, for the 39 weeks ended April 29, 2007 whencompared to the 39 weeks ended April 30, 2006.  Total skier visits increased 1%.

Ourresort segment incurred a $49.3 million loss for the 39 weeks ended April 29,2007, compared to a $35.3 million loss for the 39 weeks ended April 30,2006.  This $14.0 million increasein the loss resulted primarily from the net effect of the following:

| Increases in costs and decreases in other  income items:           |
|--------------------------------------------------------------------|
|                                                               | (i) | $1.6 million increase in cost of resort operations; |
|                                                               | (ii) | $10.4 million increase in marketing, general and  administrative expenses, due primarily to a $10.5 million provision for  Phantom Equity Plan compensation; |
|                                                               | (iii) | $4.7 million increase in interest expense; and |
|                                                               | (iv) | $0.2 million decrease in gain on sale of property; |
|                                                               |   |   |
| Partially offset by increases in revenues and  decreases in costs: |
|                                                               |
|                                                               | (v) | $1.8 million increase in resort revenues; and |
|                                                               | (vi) | $1.1 million decrease in depreciation expense. |

 

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**RealEstate Operations:**

The components of real estate operations for the 39weeks ended April 30, 2006 and April 29, 2007 are as follows (unaudited, inthousands):
|                                              | ** ** | **39 weeks ended** | ** ** |
|----------------------------------------------|------------|------------------------------|------------|
| ** **                                   | ** ** | **April 30, 2006** | ** ** | **April 29, 2007** | ** ** | **Variance** | ** ** |
|                                         |       |                         |       |   |   |   |   |
| Net real estate revenues                     |       | $                            | 2,979      |   | $ | 4,767 |   | $ | 1,788 |   |
|                                         |       |                         |       |   |   |   |   |
| Cost of real estate operations               |       | 3,467                        |       | 3,248 |   | (219 | ) |
|                                         |       |                         |       |   |   |   |   |
| Loss from real estate operations             |       | (488                         | )          | 1,519 |   | 2,007 |   |
| Other income (expense):                      |       | —                       |       | — |   | — |   |
| Loss  from continuing real estate operations |       | $                            | (488       | ) | $ | 1,519 |   | $ | 2,007 |   |

 

Realestate revenues increased by $1.8 million in the 39 weeks ended April 29, 2007when compared to the 39 weeks ended April 30, 2006.  The increase was primarily due to higher landsales.

Ourreal estate segment generated net income of $1.5 million for the 39 weeks endedApril 29, 2007, compared to a loss from operations of $0.5 million for the 39weeks ended April 30, 2006.  This $2.0million increase in income from operations results primarily from the neteffect of the following:

Increase in revenues and decreases in costs:

(i)                        $1.8million increase in land sales

(ii)                     $0.2million decrease in cost of real estate operations

**Benefitfrom income taxes:**

We recorded no benefit from income taxes for lossesfrom continuing operations for either the 39 weeks ended April 30, 2006or the 39 weeks ended April 29, 2007.  Webelieve it is more likely than not that we will not realize income tax benefitsfrom operating losses in the foreseeable future, and therefore, have recorded afull valuation allowance against our existing deferred income tax assets.

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**Item 3**

**Quantitativeand Qualitative Disclosures about Market Risk**

Through April 29,2007 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 4**

**Controlsand 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 April 29, 2007 that has materially affected,or is reasonably likely to materially affect, the Company’s internal controlover 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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### **PartII - Other Information**

**Item 1A**

**Other Risk Factors**

**We have significantly reduced the size of our operatingbusiness.**

Followingthe completion of the Steamboat Sale on March 1, 2007 and MountSnow/Attitash Sale on April 4, 2007, and the Killington/Pico Sale on May 11,2007, the size of our operating business has been significantly reduced.   The size of our operating business will befurther reduced following the planned sale of our Sunday River andSugarloaf/USA resorts, currently anticipated to take place on or prior to July31, 2007.  Although the Company intendsto reduce its corporate overhead following these sales, such a reduction maytake some time and may not be proportional to the reduction in the Company’soperating income resulting from these sales. As a result, our operating marginsmay be reduced and we may have less available capital to invest in ourremaining resorts. A failure to invest in capital improvements at our resortscould reduce our ability to attract customers and adversely affect our resultsof operations or ability to sell our remaining resorts on optimal terms.

**Item 4**

**Submissionof Matters to Vote of Security Holders**

On February 15,2007, the holders of the Company’s Series C-1 convertible participatingpreferred stock, the shares of which represented approximately 65.8% of thevoting power of the Company’s outstanding capital stock on such date, executeda written consent approving the sale by the Company to Peak Resorts, Inc. ofall of the outstanding capital stock of Mount Snow, Ltd., (the owner-operatorof the Mount Snow resort) and LBO Holding, Inc., (the owner-operator of the Attitashresort).

On February 16,2007, the holders of the Company’s Series C-1 convertible participatingpreferred stock, the shares of which represented approximately 65.8% of thevoting power of the Company’s outstanding capital stock on such date, executeda written consent approving the sale by the Company and its subsidiariesKillington, Ltd. (the owner-operator of the Killington resort) and Pico SkiArea Management Company, Inc. (the owner-operator of the Pico resort) of all ofthe assets comprising the Killington and Pico resorts to SP Land Company, LLC.

Each of theforegoing consents is more fully described in the Schedule 14C filed with theSecurities and Exchange Commission on March 9, 2007 and mailed by the Companyto its stockholders on or about said date.

**Item 5**

**OtherInformation**

On June 12, 2007, the Compensation Committee of the Board ofDirectors of the Company approved certain incentive bonus awards for certain ofthe Company’s named executive officers, including the chief executive officer.  The incentive bonus awards resulted fromrecently completed sales by the Company of its Steamboat, Mount Snow andAttitash resorts.  Specifically, theapproved incentive bonus payments to the Company’s named executive officerswere William J. Fair (President and Chief Executive Officer) $1,433,258; HelenE. Wallace (Senior Vice President and Chief Financial Officer) $225,000; andFoster Stewart (Senior Vice President and General Counsel) $858,919.  With respect to Mr. Fair and Mr. Stewart, theCommittee determined that the incentive bonus payments will be in lieu of anyannual incentive payments under the Company’s annual incentive bonus plan.

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**Item 6**

**Exhibits**

Included herewithare the following exhibits:
| Exhibit No. | ** ** | **Description**                                                                                                                                                                            |
|-------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                       |
| 10.1        |       | Purchase Agreement, dated as of June 4, 2007, by and  among American Skiing Company, Sunday River Skiway Corporation, Sugarloaf  Mountain Corporation, and S-K-I Ltd., and Boyne USA, Inc. |
|        |       |                                                                                                                                                                                       |
| 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: June 13,  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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