IPO Preview: Peak Resorts

Dec. 6.11 | About: Peak International (PEAK)

Based in Wildwood, Missouri, Peak Resorts (PEAK) scheduled an $85 million IPO with a market capitalization of $153 million at a price range mid-point of $17 for Thursday, December 8, 2011. See the full IPO calendar.


Seasonal day ski resort business with 12 facilities in the U.S. PEAK increased ticket prices the last two seasons to increase revenue, so there is little visible growth, which now depends on the weather conditions and possible acquisitions.

PEAK plans on paying a dividend of 1% at the price range mid-point of $17.


PEAK seems expensive at 30 times earnings for the year ended April 20, 2011. The price-to-book value is 1.9, the same as Vail Resorts (NYSE:MTN)

Wants to sell 56% of the company on the IPO, which is a relatively high percentage. If PEAK runs into trouble and needs further financing then IPO buyers may face considerable dilution.


PEAK operates 12 ski areas through the Midwestern, Northeastern and Southeastern United States. Ski areas offer guests high-quality skiable terrain as well as terrain parks for snowboarding and other snow sports.


PEAK intends to pay quarterly cash dividends at an initial quarterly rate of $0.17 per share, an annualized rate of 1% at the price range mid-point of $17.

PEAK employs modern snowmaking technology on a majority of its terrain that gives guests an opportunity to participate in snow sports even in less-than-favorable weather.


Combined, PEAK’s ski areas had 1.7 million skier visits in the 2009/2010 ski season and 1.8 million skier visits in the 2010/2011 ski season, which PEAK believes put then among the top U.S. companies in terms of number of skier visits during these seasons.

PEAK now operates more ski areas than any other company in the United States.


The largest source of revenue is the sale of ski lift tickets, followed by food and beverage sales, equipment rentals, ski instruction services, hotel/lodging and merchandise sales.


PEAK increased prices of most of its lift tickets, passes and certain other products and services in each of the last two seasons.

Effective October 20, 2010, PEAK acquired Wildcat Mountain Ski Area through the purchase of the assets of Wildcat Mountain Ski Area, Inc., Meadow Green-Wildcat Skilift Corp. and Meadow Green-Wildcat Corp. for $5 million.

Wildcat Mountain is located in northern New Hampshire and serves the New Hampshire, Boston, Massachusetts and Rhode Island markets. Wildcat Mountain is located in close proximity to the Attitash ski area and gives our skiers the opportunity to use the same lift tickets and season passes for both Wildcat Mountain and Attitash, thus providing our visitors in this area with more ski choices and opportunities.

The results of operations of Wildcat Mountain are included in the consolidated results of operations from the effective date of the acquisition, October 20, 2010, forward, and so far the acquisition of Wildcat Mountain has not had a significant impact on PEAK’s overall results of operations.

In March 2011, PEAK entered into an agreement to replace Mount Snow’s Summit Local triple chair lift with a new Leitner Poma high-speed detachable six-passenger bubble chair lift. PEAK expect that the new lift will reduce the ride time of the current lift by nearly half. In addition, the new lift’s bubble chairs provide shelter from inclement weather and the convenience of ski-on ski-off loading and unloading.

On October 31, 2011, PEAK entered into an agreement to purchase the Jack Frost ski area from Blue Ridge Real Estate Company for $5.65 million and on the same date, entered into an agreement to purchase the Big Boulder ski area from Big Boulder Corporation for $3.35 million, which includes all real and personal property affixed to these ski areas and all leases, permits, licenses and other rights and privileges related to these ski areas.

Each of the agreements provides that the transaction will close no later than seven days after the seller provides PEAK with written notice that it is ready to close, but in no event later than December 31, 2011. Until these transactions close, PEAKs leases to use the Jack Frost and Big Boulder properties remain in effect and terminate on December 1, 2033.


Resort operations are highly seasonal. Although the air temperatures and timing and amount of snowfall can influence the number and type of skier visits,

The majority of the skier visits are from mid-December to the end of March.

Accordingly, during the past three fiscal years, PEAK generated, on average, approximately 91% of revenues during the third and fourth fiscal quarters.


PEAK believes that there are high barriers to entry for new ski areas due to the limited private lands on which ski areas can be developed, the difficulty in getting the necessary government approvals and permits to build on public land and the substantial capital resources needed to construct the required ski infrastructure.

As such, PEAK believes that the risk that its market will become saturated with new industry participants is relatively low.

PEAK believes that its resorts do not directly compete with overnight fly destination ski areas, such as the larger ski resorts in Colorado, California, Nevada, Utah and other destination ski areas worldwide.

Rather, PEAK believes that it competes primarily with other existing day ski areas, overnight drive ski areas and non-ski related day vacations. The day ski area and overnight drive ski area industries currently consist of 471 resorts nationwide.

PEAK competes with 135 resorts in the Northeastern United States and 53 resorts in the Southeastern United States.

Based on the number of resorts PEAK operates, it believes it is the largest ski resort operator in the United States.


Income tax provision for fiscal 2011 increased compared to fiscal 2010 because PEAK revoked its S-corporation election effective April 30, 2011. Consequently, PEAK provided for deferred income taxes related to its asset base differences in existence at April 30, 2011. PEAK did not have an income tax provision in fiscal 2010 or fiscal 2009 because it was taxed as an S-corporation during these fiscal years.


Of $79 million:

  • $33.7 million to debt of the Mount Skow ski area
  • $12.5 to repay debt for the Attitash ski area
  • $9.0 million to purchase the land underlying the Jack Frost and Big Boulder ski areas
  • $6.5mm to fund the remaining costs in connection with the purchase and construction of a new chair lift at Mount Snow

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.