All dollar amounts are in U.S. currency VANCOUVER, Sept. 12
/PRNewswire-FirstCall/ -- Intrawest Corporation, one of the world's
leading destination resort and adventure-travel companies,
announced today its results for the fiscal year ended June 30,
2005. "The strong performance of Abercrombie & Kent, the newest
member of Intrawest's portfolio, was very gratifying and it speaks
to the power of its brand," said Joe Houssian, chairman, president
and chief executive officer. "We are also pleased at the
acceleration and expansion of our partnering strategy in all phases
of real estate development. The joint ventures that we entered into
in the fourth quarter are great examples of how this strategy is
paying off for our shareholders." Fiscal 2005 Year End Highlights -
Record total revenue of $1.68 billion compared with $1.55 billion
in 2004 - Total Company EBITDA of $243.1 million, versus $268.3
million the previous year - Strong contribution from Abercrombie
& Kent and record results at most of our non-British Columbia
resorts offset the impact of the worst weather in 40 years at our
British Columbia resort operations - Net income of $32.6 million
after reflecting a non-recurring expense of $30.2 million to
refinance high interest rate senior notes. Going forward, this
refinancing is expected to save us approximately $15 million per
annum. Net income also reflects a non-recurring write-down of $17.6
million on our non-resort golf properties, resulting from a
strategic decision to focus our golf business on resort-based and
branded operations. This compares with net income of $59.9 million
in 2004 after reflecting a non-recurring call premium of $12.1
million to refinance senior notes - Earnings per share on a diluted
basis were $0.68 ($1.68 before non-recurring items) versus $1.25
($1.48 before non-recurring items) in 2004 - Real estate joint
venture and sale transactions in the fourth quarter contributed to
full year positive free cash flow of $62 million - Strong balance
sheet with year-end Net Debt to EBITDA ratio of 3.6 times, well
within target leverage range "We have made a commitment to our
shareholders to maintain our strong balance sheet and to grow with
financial discipline," said John Currie, chief financial officer.
"Our 2005 results reflect the successful execution of our financial
strategies to deliver on this promise." MANAGEMENT'S DISCUSSION AND
ANALYSIS (All dollar amounts are in United States currency, unless
otherwise indicated) The following is an extract of the operations
and liquidity and capital resources sections of Management's
Discussion and Analysis ("MD&A") for the year ended June 30,
2005. The full text of the MD&A will be included in our Annual
Information Form and other corporate filings. SUMMARY OF FISCAL
2005 OPERATIONS Fiscal 2005 was a year of both challenges and
achievements. Our mountain resorts experienced mixed results as
generally good weather conditions in the East and the U.S. west
were offset by the most unfavourable weather conditions for the ski
industry in 40 years in British Columbia. Sandestin was also tested
by the weather, particularly in our first fiscal quarter when
several hurricanes impacted its operations. The results of
Abercrombie & Kent ("A&K"), during our first year of
ownership, far exceeded our expectations as the luxury travel tour
business rebounded from several years of contraction brought on by
economic and geo-political events. We saw significant growth in our
management services businesses in 2005 and demand for our real
estate was strong across our resorts. Operating profit from real
estate development declined in 2005, as expected, after an
unusually high number of closings in 2004 due to the timing of
project completions. These factors combined to reduce Total Company
EBITDA to $243.1 million in 2005 from $268.3 million in 2004. After
several years of disappointing returns from our stand-alone golf
courses, we made the decision to exit this business and reinvest
our capital in higher returning businesses. As a result, we had our
stand-alone golf operations appraised and recorded a write-down of
$17.6 million. We improved our capital structure and lowered our
borrowing costs by refinancing $394.4 million of senior notes in
2005, on top of the $200 million of senior notes that we refinanced
in 2004. The call premium and other costs to redeem senior notes
amounted to $30.2 million in 2005, up from $12.1 million in 2004.
The golf asset write-down and refinancing expenses lowered our net
income in 2005 to $32.6 million ($0.68 per diluted share) from
$59.9 million ($1.25 per diluted share) in 2004. We were very
successful in 2004 in generating free cash flow and reducing our
debt. This success continued in 2005 as we increased cash flow from
our operating businesses and completed a number of transactions
with real estate partners enabling us to realize $62.1 million of
free cash flow. FISCAL 2005 REVIEW OF RESORT AND TRAVEL OPERATIONS
The following table highlights the results of our resort and travel
operations business. CHANGE 2005 2004 (%)
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Skier visits(1) 7,227,000 7,150,000 1 Revenue (millions) $862.5
$541.3 59 EBITDA (millions) $117.6 $105.1 12 Margin (%) 13.6 19.4
(1) Skier visits for all resorts are at 100% except Mammoth at
59.5% and Blue Mountain at 50%. Revenue from resort and travel
operations was $862.5 million in 2005 compared with $541.3 million
in 2004. Revenue from the mountain segment increased from $488.2
million to $545.4 million while revenue from the non- mountain
segment increased from $53.1 million to $317.1 million. Mountain
Resort and Travel Operations Revenue On December 15, 2004, we
acquired the remaining 55% of Alpine Helicopters that we did not
already own and the incremental revenue in 2005 from our increased
ownership interest was $26.6 million. On a same-business basis
(i.e., excluding the 55% acquisition of Alpine Helicopters),
mountain resort and travel operations revenue increased by $30.6
million in 2005 due to: (MILLIONS)
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Impact of higher Canadian dollar on reported revenue $18.8 Increase
in skier visits 4.4 Increase in revenue per skier visit 2.7
Increase in non-skier visit revenue 4.7
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$30.6
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The rise in the value of the Canadian dollar, from an average rate
of US$0.74 in 2004 to US$0.80 in 2005, increased reported mountain
resort and travel operations revenue by $18.8 million. Our mountain
resorts experienced mixed results in 2005 with a 6% increase in
revenue at our eastern Canadian and U.S. resorts and an 11%
increase in revenue at our western U.S. resorts being partially
offset by a 10% decrease in revenue at our western Canadian
resorts. British Columbia endured the most challenging weather for
the ski industry in 40 years, with heavy rainfall in mid-January
followed by warm, dry conditions through mid-March. Although
conditions improved after mid-March, it was too late to change
market perceptions and the decline in visits continued in the
fourth quarter. As a result, skier visits decreased 14% at Whistler
Blackcomb and 7% at Panorama in 2005. Our eastern and western U.S.
resorts benefited from strong season pass programs, the maturing of
their villages and generally good weather conditions, particularly
in the third quarter. Consequently, skier visits increased 7% at
our eastern resorts and 9% at our western U.S. resorts. For the
company as a whole, skier visits increased 1% in 2005, which
increased mountain segment revenue by $4.4 million. Revenue per
skier visit increased moderately from $56.36 in 2004 (after
adjusting for the impact of the improvement in the Canadian dollar
exchange rate) to $56.74 in 2005. Revenue per skier visit is a
function of ticket prices and ticket yields, and revenue from
non-ticket sources such as retail and rental stores, ski school,
and food and beverage services. Ticket yields reflect the mix of
ticket types (e.g., adult, child, season pass and group), the
proportion of day versus destination visitors (destination visitors
tend to be less price sensitive), and the amount of discounting of
full-price tickets in regional markets. Revenue per visit from
non-ticket sources is also influenced by the mix of day versus
destination visitors, the affluence of the visitor base, and the
quantity and type of amenities and services offered at the resort.
Revenue per skier visit from ticket sales (our effective ticket
price) decreased 2% from $29.31 to $28.61 due mainly to a 6%
decline at our British Columbia resorts as we discounted ticket
prices at Whistler Blackcomb and Panorama to compensate for the
sub-standard snow conditions. Revenue per visit from non-ticket
sources increased 4% from $27.06 to $28.13. The impact on
non-ticket revenue per visit of the poor weather at our British
Columbia resorts was mitigated by the fact that many visitors, who
did not access the mountain for skiing, spent on retail, food and
beverage and other services in the base area. The increase in
revenue per visit increased mountain segment revenue by $2.7
million in 2005. For the purposes of this MD&A, non-skier visit
revenue for our mountain segment comprises revenue from sources
that are not driven by skier visits (i.e., golf and other summer
activities at our mountain resorts and revenue from businesses such
as Alpine Helicopters and the Intrawest Retail Group). Revenue from
golf and other summer activities increased 7% across our mountain
resorts from $39.1 million in 2004 to $42.0 million in 2005, led
primarily by Whistler Blackcomb (due to strong events business and
continued growth in mountain bike park visits) and Tremblant (due
to a 32% increase in summer lift rides). Golf rounds at our
mountain resorts in 2005 were 2% below 2004, however this was
offset by higher revenue per round, resulting in a 4% increase in
golf revenue. Revenue at Alpine Helicopters (excluding the impact
of our increased ownership interest) decreased 4% in 2005 due to
reduced heli-skiing revenue in the weather-challenged third quarter
and lower revenue from forest fire-fighting activities in the
summer. Strong visit growth in the western U.S. and the opening of
a new outlet store in Summit County enabled the Intrawest Retail
Group to increase its revenue by 21% in 2005. Overall, on a
same-business basis, non-skier visit revenue increased by $4.7
million in 2005. Non-mountain Resort and Travel Operations Revenue
Non-mountain resort and travel operations revenue increased from
$53.1 million in 2004 to $317.1 million in 2005 with the
acquisition of A&K in July 2004 accounting for $257.0 million
of the increase. The luxury-tour and travel industry experienced a
rebound in 2005 after several years of contraction resulting from
economic pressures and concerns about geo-political events
(terrorism, war and health issues). Revenue at A&K in 2005
increased more than 30% compared with last year, before we acquired
our ownership interest. Most of the balance of the increase in
non-mountain resort and travel operations revenue was due to a 15%
increase in revenue at Sandestin. Food and beverage revenue at
Sandestin increased 42% due to the opening of several new outlets,
a significant increase in banquet business and higher occupancy
levels at the resort. The continued build out of the village and
its growing reputation has positively impacted both individual
traveler and conference business. Golf rounds in 2005 were 10%
lower than 2004 at Sandestin (due in part to the hurricanes) and 3%
lower at our stand-alone golf courses. Demand for golf has not
grown over the past few years and the markets in which our warm-
weather golf courses operate are highly competitive. The shortfall
in rounds was counterbalanced by higher revenue per round,
resulting in a 6% decline in golf revenue at Sandestin and a 5%
increase in golf revenue at our stand-alone courses. As described
elsewhere in this MD&A, we have decided to exit the stand-alone
golf business. Resort and Travel Operations Revenue Breakdown
Resort and travel operations revenue for the mountain and
non-mountain segments combined (as reported and on a same-business,
constant exchange rate basis) was broken down by major business
component as follows: 2005 2005 2004 INCREASE CHANGE (MILLIONS)
REVENUE NOTE(1) ADJUSTED REVENUE (DECREASE) (%)
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Mountain operations $285.4 $(37.5) $247.9 $250.9 $(3.0) (1) Retail
and rental shops 110.4 (3.7) 106.7 101.3 5.4 5 Food and beverage
91.6 (1.9) 89.7 81.9 7.8 10 Ski school 44.4 (1.5) 42.9 41.7 1.2 3
Golf 27.9 (0.4) 27.5 27.3 0.2 1 Adventure-travel tours 257.0
(257.0) - - - - Other 45.8 (0.3) 45.5 38.2 7.3 19
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$862.5 $(302.3) $560.2 $541.3 $18.9 3
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Note (1) Removes the impact of the increase in the value of the
Canadian dollar and the acquisitions of A&K and additional 55%
of Alpine Helicopters. The decrease in mountain operations revenue
was due mainly to declines in ticket revenues at our British
Columbia resorts and lower heli-skiing revenue at Alpine
Helicopters, partially offset by higher ticket revenues at our
other resorts. The increase in retail and rental revenue was due
mainly to a 15% increase at our western U.S. resorts, as a result
of excellent conditions and strong visitor growth. Half of the
increase in food and beverage revenue came from Sandestin where we
opened several new outlets, achieved higher occupancy levels in the
village and increased conference business. The remainder came
mainly from a 13% increase in revenue at our western U.S. resorts.
Ski school revenue increased 9% at our western U.S. resorts and 7%
at our eastern resorts. These increases were partly offset by a 4%
decrease in revenue at our British Columbia resorts. The small
increase in golf revenue resulted from a 4% increase at the
mountain resorts partially offset by a 2% decrease at the
non-mountain courses as competitive pressures and poor weather at
key times reduced the number of rounds played. The "other" category
comprises revenue from a host of miscellaneous activities, such as
tubing, tennis, aqua centers, club operations, telephone services
and one-off businesses like the marina at Sandestin and the service
station at Copper. The 2005 amount included $1.1 million of
business interruption insurance for Sandestin due to the hurricanes
in the first quarter. The balance of the increase was mainly due to
higher club operations revenue, particularly at Stratton and Copper
and increased activities and events revenues across most of our
resorts. Resort and Travel Operations Expenses and EBITDA Resort
and travel operations expenses increased from $436.2 million in
2004 to $744.9 million in 2005. The mountain segment increased by
$63.2 million to $445.8 million while the non-mountain segment
increased by $245.5 million to $299.1 million. Our acquisition of
the remaining 55% of Alpine Helicopters increased mountain resort
and travel expenses by $19.7 million and the translation effect of
the stronger Canadian dollar increased it by a further $13.8
million. Excluding these two factors, mountain resort and travel
expenses increased by $29.7 million (8%) in 2005 due mainly to
increased business volumes at our eastern resorts and our western
U.S. resorts and higher insurance, marketing and administrative
costs. In order to control our third- party costs of insurance, we
have a program of self insurance for all our major lines of
coverage. In 2005, we chose to adopt a more conservative position
and increased our estimated reserves for unreported workers'
compensation and general liability claims by $3.0 million.
Following on from the formation of the Leisure and Travel Group in
May 2004, we introduced several new cross-resort marketing programs
that increased mountain segment expenses by $3.5 million in 2005.
In addition, as described under Review of Corporate Operations
below, we transferred personnel from corporate operations to the
Leisure and Travel Group, which increased resort and travel
expenses by approximately $5 million in 2005. The acquisition of
A&K added $236.6 million of non-mountain resort and travel
operations expenses in 2005. The balance of the increase of $8.9
million in the non-mountain segment was almost entirely due to
Sandestin as increased business volumes, and the opening of new
retail and food and beverage outlets resulted in higher labor costs
and costs of goods sold. In addition, fixed costs at Sandestin rose
by $2.1 million resulting mainly from increased resort association
fees, workers' compensation insurance, utility costs and rent
expense for the new outlets. EBITDA from resort and travel
operations increased 12% from $105.1 million in 2004 to $117.6
million in 2005. The acquisitions of A&K and 55% of Alpine
Helicopters increased EBITDA by $20.4 million and $6.9 million,
respectively. In addition, the translation effect of the higher
Canadian dollar increased EBITDA by a further $5.0 million. On a
same-business, constant exchange rate basis, EBITDA from the
mountain segment decreased from $105.6 million to $87.7 million
while EBITDA from the non-mountain segment declined from a loss of
$0.5 million to a loss of $2.4 million. The poor ski season in
British Columbia reduced EBITDA in the mountain segment by $17.7
million. Given the fixed cost nature of many operating expenses at
a resort, we had limited ability to reduce costs in response to the
decline in revenue. Furthermore, we chose to spend more on grooming
and snow management in order to maintain the quality of the limited
terrain and on guest services to compensate for the substandard
conditions. The decline in EBITDA at our British Columbia resorts
was partially offset by a 12% increase in EBITDA from our eastern
and western U.S. resorts, as several resorts achieved record
results. The decrease in EBITDA from the non-mountain segment was
due mainly to the higher fixed costs at Sandestin, as described
above. A&K's EBITDA in 2005 was augmented by $6.5 million of
licensing fees from an operator of destination clubs, who was given
the right to use A&K's brand name for marketing the clubs. The
licensing agreement terminated in August 2005. While replacement
licensing arrangements may be negotiated in the future, EBITDA of
$13.9 million from A&K's tour business is a more indicative
base for projecting EBITDA in the future. The margin on resort and
travel operations decreased from 19.4% in 2004 to 13.6% in 2005 due
to the inclusion of A&K and lower profitability from our
British Columbia operations. Excluding A&K, the margin in 2005
was 16.1%. FISCAL 2005 REVIEW OF MANAGEMENT SERVICES Management
services revenue increased by 46% from $124.4 million in 2004 to
$180.7 million in 2005. The breakdown of management services
revenue and EBITDA was as follows: 2005 2004 -----------------
----------------- (MILLIONS) Revenue EBITDA Revenue EBITDA
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Lodging and property management $87.7 $16.4 $71.2 $11.2 Other
resort and travel fees 18.8 0.2 18.7 0.9 Real estate development
services fees 24.3 13.2 12.5 5.4 Playground sales fees 49.9 13.2
22.0 10.0
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$180.7 $43.0 $124.4 $27.5
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The $16.5 million increase in revenue from lodging and property
management was due mainly to increases in the occupied room nights
and average daily rates (ADR). The growth in occupied room nights
came both from increased supply of available room nights, as we
continued to build out our resort villages, and higher average
occupancy rates during the year. At our mountain resorts, occupied
room nights increased 8% and ADR increased 4%, with particularly
strong growth at Mammoth, Copper and Stratton. Since we do not have
a portfolio of managed lodging units at Whistler Blackcomb, the
decline in visitors to that resort did not have a significant
impact on the management services segment. We also saw growth of
23% and 6%, respectively, in occupied room nights and ADR at our
warm-weather locations (Sandestin and Lake Las Vegas). In addition
to higher occupancy levels, revenue in 2005 was augmented by $1.4
million of reservation fees (these fees were not charged in 2004)
and increased charges for housekeeping and miscellaneous lodging
services. The translation effect of the stronger Canadian dollar
also increased reported lodging and property management revenue by
$1.6 million in 2005. Higher revenues increased EBITDA from lodging
and property management services by $5.2 million. Our margin
increased from 15.7% in 2004 to 18.7% in 2005, reflecting improved
operating leverage from managing more units and spreading our costs
over a higher number of occupied room nights. Other resort and
travel fees comprise reservation fees earned by our central call
center, RezRez, golf course management fees and club management
fees earned by Intrawest Resort Club. An increase of $1.9 million
in club management fees was offset by a decrease of the same amount
in reservation fees. RezRez continues to expand its role as our
internal call center and to move away from selling to third
parties. Golf course management fees increased by $0.1 million to
$2.1 million in 2005. At June 30, 2005, we managed 17 third-party
golf courses, a decrease of one from the end of the previous year.
The decrease of $0.7 million in EBITDA from other resort and travel
fees was due to incurring a higher loss at RezRez, principally from
its Fly4Less and Moguls business units, both of which have now been
sold. Real estate development services fees increased by $11.8
million as we managed more projects for partnerships and the value
of construction expenditures, on which the fees are based, was much
higher in 2005. We also realized higher marketing fees from
partnerships as projects completed construction in 2005 and units
closed. We expect the rate of growth of real estate development fee
revenue and EBITDA to level off somewhat now that we have completed
the ramp-up stage of our partnering strategy. Approximately half of
the increase of $27.9 million in Playground sales fees was due to
executing additional sales contracts on behalf of Leisura. Leisura
is categorized as a third-party developer and therefore the fees
that Playground earns on sales for Leisura are included in the
management services segment. Prior to implementing our partnering
strategy for real estate, Playground would have sold more units for
Intrawest and the sales fees that it charged to Intrawest would not
have been recorded in the management services segment. Instead,
they would have been eliminated on consolidation against the
corresponding commission expenses included in real estate cost of
sales. The other half of the increase in Playground sales fees was
due to new business with third-party developers and strong resales
markets, particularly at Sandestin and Stratton. Playground's
profile as a leader in recreational property sales and marketing
continues to grow, resulting in new opportunities across North
America and abroad. The rate of growth in EBITDA of $3.2 million in
2005 was less than the rate of growth in revenue because of the
lower commission structure on sales for Leisura and a greater
allocation of Playground general and administrative costs to
management services expenses from real estate development expenses.
FISCAL 2005 REVIEW OF REAL ESTATE DEVELOPMENT The following table
highlights the results of our real estate business in 2005 compared
with 2004. CHANGE 2005 2004 (%)
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Units closed(1) 557 1,334 (58) Revenue (millions) $628.8 $879.9
(29) Operating profit (millions) $67.7 $91.4 (26) Margin (%) 10.8
10.4 (1) Units closed excludes units in projects sold to
partnerships. In 2005 Leisura closed an additional 467 units.
Revenue for 2005 includes $200.5 million for sales of 10 projects
and one land parcel to partnerships compared with $193.0 million
for sales of 14 projects and one land parcel to partnerships in
2004. These sales proceeds comprise the fair market value of the
land for the projects as well as accumulated development costs. In
addition, in 2005, we sold commercial properties at seven of our
resort villages for a total of $109.5 million to a partnership in
which CNL Income Properties, Inc., a real estate investment trust,
is an 80% partner and we are a 20% partner. Excluding these sales
to partnerships, revenue from real estate development decreased
from $686.9 million in 2004 to $318.8 million in 2005. Revenue
generated by Intrawest Placemaking decreased from $642.4 million to
$274.1 million while revenue generated by Intrawest Resort Club
increased from $44.5 million to $44.7 million. Intrawest
Placemaking Revenue We closed a total of 557 units in 2005 down
from 1,334 in 2004 due to the implementation of our partnering
strategy. Closings of units in projects sold to partnerships are
excluded from our reported closings. In 2005 Leisura closed 467
units. The number of closings in 2004 does not reflect our strategy
of using partnerships for vertical development and therefore our
closings in 2005 represent a more indicative base of closings for
future years. The translation effect of the higher Canadian dollar
increased reported real estate development revenue by $3.2 million
in 2005. The average price per closed unit increased from $480,000
in 2004 to $483,000 (on a constant exchange rate basis) in 2005. In
an effort to sell long-standing inventory at Solitude and Copper we
discounted prices and closed 62 units at an average price of
$286,000 per unit. Excluding these units, the average price per
closed unit in 2005 was $507,000, 6% higher than in 2004. The
average price per closed unit was also impacted by the mix of
product types (i.e., condo-hotel, townhome and single-family lot).
Closings were weighted more towards townhomes and lots and less
towards condo-hotels in 2005, reflecting our strategy of selling
the most capital-intensive projects (typically condo-hotels) to
partnerships. In total, 46% of the closings in 2005 were
condo-hotel units, 31% were townhomes and 23% were lots, compared
with 78% condo-hotel units, 17% townhomes and 5% lots in 2004.
Intrawest Resort Club Revenue The resort club group generated $44.7
million in sales revenue in 2005, up slightly from $44.5 million in
2004. The translation effect of the higher Canadian dollar
increased reported resort club revenue by $2.6 million in 2005. The
decline in visitors to Whistler Blackcomb reduced revenue at that
club location by 20%, however, increases in sales at the Blue
Mountain club and higher add-on points sales to existing resort
club members offset the decline. We had expected stronger revenue
growth from the resort club over the past few years, however, sales
were impacted by the slow economy and the uncertainty created by
recent world events. This product type appears to be more of a
consumer purchase than our other real estate products and
confidence is an important factor in the purchase consideration.
Furthermore, resort club product does not have the same sense of
scarcity as other types of real estate so purchasers are under less
pressure to buy. Sales to Partnerships As mentioned above, revenue
from sales of projects and land parcels to partnerships totaled
$200.5 million in 2005, up from $193.0 million in 2004. The nature
of our investment in these partnerships determines how we account
for them. Profits on sales of projects and land parcels to
partnerships that we account for using the equity method are
initially deferred under Canadian GAAP and then recognized on the
same basis as the partnership recognizes its real estate revenue.
In 2005 revenue from sales to such partnerships totaled $170.7
million and we recorded real estate expenses of the same amount,
comprising land and accumulated development costs of $97.7 million
and deferred profits of $73.0 million. Subsequently, when the
partnership recognizes its real estate revenue, we record a portion
of the deferred land profit as a credit to real estate development
expenses in our statement of operations. Any properties that are
sold at a loss to an equity accounted partnership are recognized at
the closing date. Profits on sales to partnerships that we account
for using the cost method are recognized in full on the closing
date. Real Estate EBITDA Real estate EBITDA decreased, as expected,
from $156.1 million to $103.1 million. Real estate EBITDA comprises
operating profit from real estate plus interest included in real
estate expenses. During the development process, interest is
capitalized to properties and the interest is expensed when the
properties are closed. Operating profit from real estate, rather
than real estate EBITDA, factors into the computation of net
income. Operating profit from real estate development decreased
from $91.4 million in 2004 to $67.7 million in 2005. The 58%
decrease in unit closings reduced operating profit from Intrawest
units from $82.2 million in 2004 to $38.0 million in 2005. The
margin on these sales was 12.0% in both years. Operating profit
from sales to partnerships (land profit and equity income)
increased from $9.2 million in 2004 to $33.9 million in 2005. The
2005 amount includes a loss of $3.4 million on the sale of
commercial properties to the CNL partnership. We have now sold the
majority of our commercial properties at all resorts except for
Lake Las Vegas and Squaw Valley. We wrote-down the carrying value
of our Lake Las Vegas commercial properties by $4.2 million in 2005
to maintain a more conservative book value as we prepare the
properties for sale. Real Estate Pre-sales At August 31, 2005, real
estate pre-sales amounted to $218 million for delivery in fiscal
2006 and an additional $77 million for delivery in fiscal 2007. In
addition, the real estate partnerships had pre-sales of $300
million and $196 million, respectively, to close in fiscal 2006 and
fiscal 2007. FISCAL 2005 REVIEW OF CORPORATE OPERATIONS Interest
and Other Income Interest and other income was $5.2 million in
2005, down from $6.1 million in 2004 due mainly to the recovery in
2004 of $2.6 million of fuel spill remediation costs at Mammoth
partially offset by higher interest income in 2005, including $1.1
million earned by A&K. Interest Costs Interest incurred
decreased from $94.6 million in 2004 to $80.9 million in 2005 due
mainly to the refinancing of senior notes in both 2004 and 2005 and
lower interest on construction debt as a result of our real estate
partnering strategy, partially offset by $1.5 million of interest
incurred at A&K. In the second quarter of 2004 we redeemed our
$200 million, 9.75% senior notes by issuing $350 million, 7.5%
senior notes and using the surplus proceeds to pay down our senior
credit facility. Then in the second and third quarters of 2005 we
redeemed our $394.4 million, 10.5% senior notes by issuing $329.9
million of 7.5% and 6.875% senior notes and drawing on our senior
credit facility. These refinancings have helped to reduce the
weighted average cost of our bank and other indebtedness from 8.2%
at June 30, 2004 to 6.7% at June 30, 2005. In total, $62.2 million
of the interest incurred in 2005 was expensed ($44.6 million as
interest expense and $17.6 million of interest within real estate
expenses), down from $71.3 million in 2004 ($45.8 million as
interest expense and $25.5 million within real estate expenses). We
expensed call premiums and unamortized deferred financing costs of
$30.2 million in 2005 and $12.1 million in 2004 to redeem the
senior notes. General and Administrative Costs All general and
administrative ("G&A") costs incurred by our resorts and other
Leisure and Travel Group businesses are included in resort and
travel operations and management services expenses. Similarly,
G&A costs incurred in the development of real estate are
initially capitalized to properties, and then expensed as part of
real estate costs in the period when the properties are closed.
Corporate G&A expenses, which mainly comprise executive
employee costs, public company costs, audit and legal fees,
corporate information technology costs and head office occupancy
costs are disclosed as a separate line in the statement of
operations. Corporate G&A expenses increased from $20.4 million
in 2004 to $20.6 million in 2005. This small change is the net
result of a number of larger increases and decreases that offset
each other. The unification of our resort and travel operations
businesses into the Leisure and Travel Group in May 2004 and the
transfer of personnel from corporate operations to the Leisure and
Travel Group reduced corporate G&A (and increased resort and
travel operations expenses) by approximately $5 million in 2005.
This reduction in corporate G&A was offset by an increase of
approximately $4 million primarily for higher internal and external
audit costs, higher compensation costs (including the cost of
expensing stock options and mark-to-market adjustments of long-term
incentive plans) and increased corporate governance and privacy
compliance expenses. In addition, the higher Canadian dollar
increased reported corporate G&A by $1.3 million. Depreciation
and Amortization Depreciation and amortization expense increased
from $68.6 million in 2004 to $78.3 million in 2005. The
acquisitions of A&K and the remaining 55% of Alpine Helicopters
increased depreciation and amortization expense by $6.6 million and
the translation effect of the higher Canadian dollar added a
further $2.2 million. The balance of the increase was attributable
to our increased fixed asset base due to normal capital
expenditures. Write-down of Stand-alone Golf Course Assets We own
five stand-alone golf courses - Swaneset in British Columbia (two),
Three Peaks in Colorado, South Mountain in Arizona and Big Island
Country Club in Hawaii. We have decided that these courses no
longer serve our financial or strategic objectives and we plan to
sell them. In preparation for sale, we engaged independent
appraisers to value the operations and as a result we have written
down the golf assets by $17.6 million. We remain committed to the
golf business at our resorts where golf adds to the diversity of
activities we can offer our visitors, drives multiple sources of
revenue (e.g., lodging, food and beverage, retail as well as golf)
and enhances real estate values. Income Taxes Income tax expense
was $0.1 million in 2005 compared with $10.4 million in 2004. We
had expected that our effective income tax rate in 2005 would be in
the range of 10% to 15%, however the decline in our pre-tax income,
mainly from lower resort and travel operations EBITDA in British
Columbia and the write-down of our stand-alone golf courses,
reduced the amount of income taxed at higher marginal rates,
lowering our overall tax rate. Our income tax provision was further
reduced by the utilization of income tax losses that we had
previously expected to expire unutilized. We expect our effective
tax rate to be approximately 15% in fiscal 2006. Non-Controlling
Interest We fully consolidate the results of Whistler Blackcomb and
A&K and record the third-party owner's share of income in
non-controlling interest. We also fully consolidate three variable
interest entities, however they have not yet started to generate
income and therefore do not impact non-controlling interest in the
statement of operations. Non-controlling interest decreased from
$12.9 million in 2004 to $9.4 million in 2005. Lower resort and
travel operations EBITDA and significantly reduced real estate
closings at Whistler Blackcomb reduced non-controlling interest by
$8.3 million, while the acquisition of A&K increased it by $4.8
million. 2005 FOURTH QUARTER RESULTS Total Company EBITDA was $43.5
million in the fourth quarter of 2005 (the "2005 quarter"), down
from $62.7 million in the fourth quarter of 2004 (the "2004
quarter") mainly due to lower profits from real estate development.
As described above, we wrote-down our stand-alone golf assets by
$17.6 million and this contributed to a net loss of $21.5 million
($0.45 per diluted share) in the 2005 quarter compared with net
income of $2.6 million ($0.05 per diluted share) in the 2004
quarter. Excluding this unusual item, the loss in the 2005 quarter
was $4.0 million ($0.08 loss per diluted share). Resort and travel
operations revenue increased from $76.2 million in the 2004 quarter
to $146.5 million in the 2005 quarter. The acquisitions of A&K
in the first quarter and the remaining 55% of Alpine Helicopters in
the second quarter increased resort and travel operations revenue
by $50.9 million and $11.5 million, respectively, and the impact of
the higher Canadian dollar increased reported revenue by a further
$7.9 million. Declines in revenue at our British Columbia resorts
due to the continuation of trends from the third quarter were
offset by increases at our other resorts. Resort and travel
operations incurred an EBITDA loss of $17.0 million in the 2005
quarter compared with a $20.7 million loss in the 2004 quarter.
Increases in EBITDA of $4.2 million for A&K and $3.4 million
for our additional interest in Alpine Helicopters were partially
offset by a $2.8 million decline in EBITDA at our British Columbia
resorts. In addition, higher insurance, marketing and G&A
expenses in the 2005 quarter reduced EBITDA by $1.1 million.
Management services revenue increased from $29.2 million in the
2004 quarter to $49.8 million in the 2005 quarter due mainly to
increases of $11.9 million in fees charged by Playground and $6.5
million in development and sales service fees charged to
partnerships. In the 2005 quarter, we allocated $7.5 million of
Playground G&A costs, which included a catch-up for the first
three quarters, to management services expenses. The reallocation
of these G&A costs from real estate expenses reflects the
categorization of Playground revenue and expenses related to
Leisura projects as third-party business. This limited the growth
in management services EBITDA to $6.5 million in the 2005 quarter
from $5.7 million in the 2004 quarter. Revenue from real estate
development decreased from $379.7 million in the 2004 quarter to
$334.0 million in the 2005 quarter. We sold nine properties to
partnerships for $180.7 million in the 2005 quarter compared with
five properties for $84.2 million in the 2004 quarter. We closed
243 units in the 2005 quarter at an average price per unit of
$592,000 compared with 540 units in the 2004 quarter at an average
price per unit of $531,000. The higher average price per unit
reflects a much greater weighting of closings at Canadian resorts
in 2004. The reduced closings lowered operating profit from real
estate development from $49.0 million in the 2004 quarter to $40.8
million in the 2005 quarter. Interest and other income was a loss
of $0.4 million in the 2005 quarter compared with income of $1.3
million in the 2004 quarter. The amount in the 2005 quarter was
reduced by foreign exchange losses recorded by A&K and a
provision against a loss on sale after the quarter of a
Colorado-based reservations company. Interest expense increased
from $11.1 million to $12.3 million as reduced interest due to the
refinancing of senior notes in the second quarter was offset by
capitalizing less interest to real estate properties. Corporate
G&A expenses decreased from $6.7 million to $5.2 million due
mainly to the transfer of personnel to the Leisure and Travel Group
and the inclusion of their costs in resort and travel operations
expenses. Depreciation and amortization expense increased from
$13.9 million to $17.1 million due to the acquisitions of A&K
and Alpine, adjustments to accelerate depreciation of certain
technology systems and depreciation related to capital expenditures
during the year. LIQUIDITY AND CAPITAL RESOURCES We achieved a
number of important objectives in 2005 that improved our liquidity
and capital structure: - We generated $62.1 million of free cash
flow. - We sold more projects to real estate partners and extended
our partnering strategy to include the horizontal development
phase. - We sold our commercial properties at seven of our resorts
for $109.5 million and used the majority of the proceeds to repay
debt. - We renewed our senior credit facility for a three-year
term, increasing its credit availability by $75 million to $425
million and improving its covenant patterns and definitions to give
us greater flexibility. - We redeemed our $394.4 million, 10.5%
senior notes due 2010 by issuing Cdn$125 million, 6.875% senior
notes due 2009 and US$230.3 million, 7.5% senior notes due 2013 and
drawing on our senior credit facility. This reduced our weighted
average cost of debt to 6.7% at June 30, 2005. - We finished the
fiscal year with our net debt to EBITDA ratio at 3.6 times,
comfortably within our target range of below 4.0 times. Cash Flows
in 2005 compared with 2004 The major sources and uses of cash in
2005 and 2004 are summarized in the table below. This table should
be read in conjunction with the Consolidated Statements of Cash
Flows, which are more detailed as prescribed by GAAP. (MILLIONS)
2005 2004 CHANGE
-------------------------------------------------------------------------
Funds from operations $116.2 $148.7 ($32.5) Cash flow from real
estate development, including investments in partnerships (13.0)
218.3 (231.3) Cash for resort and travel operations capex and other
assets (101.6) (92.6) (9.0) Net cash flow from long-term
receivables and working capital 60.5 18.5 42.0
-------------------------------------------------------------------------
Free cash flow 62.1 292.9 (230.8) Cash for business acquisitions,
net of asset disposals (20.3) 15.9 (36.2)
-------------------------------------------------------------------------
Net cash flow from operating and investing activities 41.8 308.8
(267.0) Net financing outflows (10.7) (325.8) 315.1
-------------------------------------------------------------------------
Increase (decrease) in cash $31.1 ($17.0) $48.1
-------------------------------------------------------------------------
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We generated $116.2 million of funds from operations in 2005, down
from $148.7 million in 2004 due mainly to lower real estate profits
partially offset by increased resort and travel operations and
management services EBITDA. In addition, we spent $15.6 million
more in 2005 to redeem senior notes. For more details see the
Review of Operations sections above. The most significant
year-over-year change in our cash flows was in real estate, where
we invested $13.0 million in 2005 versus a recovery of $218.3
million in 2004. These amounts include cash requirements for real
estate that we develop on our own as well as our net investment in
real estate partnerships. The significant shift was due mainly to
the first year impact of selling projects to partnerships in 2004.
Since 2004 was the first year that we implemented our strategy of
selling our most capital-intensive projects to partnerships, we
benefited from recovering the book value of several major
condo-hotel projects that pre-date this strategy, while restricting
our capital requirements for new projects to our investment in the
partnerships. Real estate cash flow in 2005 was improved by $100.4
as a result of selling our commercial properties. Resort and travel
operations capital expenditures ("capex") and other assets used
$101.6 million of cash in 2005, up from $92.6 million in 2004.
Capex comprised $79.4 million and $69.3 million, respectively, in
2005 and 2004 of these amounts. Each year we spend about $40
million on maintenance capex at our resorts and in our other
businesses. Maintenance capex is considered non-discretionary
(since it is required to maintain the existing level of service)
and comprises such things as snow grooming machine or golf cart
replacement, snowmaking equipment upgrades and building
refurbishments. Expansion capex (e.g., new lifts or new
restaurants) is considered discretionary and the annual amount
varies year by year. In 2005 our major expansion capex items
included a conference center and second golf course at Blue
Mountain, employee housing and a new lift at Mammoth and an
administration building at Tremblant. We expect maintenance and
expansion capex to be about the same in 2006 as 2005. Our planned
expansion capex for 2006 includes approximately $20 million for new
lifts, buildings and equipment at our mountain resorts and $13
million for resort operations IT infrastructure. We spent $22.2
million on other assets in 2005, slightly below the $23.3 million
that we spent in 2004. These expenditures mainly comprise
furniture, fixtures and equipment outside of our resorts,
information technology systems, long-term financing costs and
miscellaneous investments. Long-term receivables and working
capital generated $60.5 million of cash in 2005, up from $18.5
million in 2004. This represents the cash flow from changes in
receivables, other assets, payables and deferred revenue. Cash from
pre-booked revenue for next fiscal year (mainly season passes and
lodging deposits) was $15.9 million higher at June 30, 2005 than
the end of last year. The balance of the change was mainly due to
increasing payables and deferred revenue. We generated $62.1
million of free cash flow in 2005, down from $292.9 million in
2004. Our free cash flow in 2004 was unusually high because of the
large volume of real estate closings and the first-year impact of
our strategy of developing real estate with partners. On an ongoing
basis, we manage both of our divisions (Leisure and Travel Group
and Intrawest Placemaking) to generate positive annual free cash
flow. We used $21.8 million of our free cash flow in 2005 for
acquisitions. We spent $36.9 million (net) to acquire 55% of Alpine
Helicopters but we gained $15.1 million (net) on the acquisition of
67% of A&K. Proceeds from asset sales generated $1.5 million of
cash in 2005, down from $15.9 million in 2004 when we sold our
investment in Compagnie des Alpes. We plan to sell our stand- alone
golf courses in fiscal 2006 and we have identified other non-core
assets for disposal. In total, our operating and investing
activities generated $41.8 million of cash in 2005, which we mainly
used to pay dividends and distributions to non-controlling
interests. By comparison, in 2004 we generated $308.8 million from
operating and investing activities that we mainly used to repay
debt. ADDITIONAL INFORMATION Total Company EBITDA (MILLIONS) 2005
2004
-------------------------------------------------------------------------
Cash flow provided by operating activities $223.6 $422.9 Add
(deduct): Changes in non-cash operating assets and liabilities
(107.4) (274.2) Current income tax expense 29.5 11.6 Interest
expense 44.6 45.8 Interest in real estate costs 35.4 64.7 Call
premium and unamortized costs on senior notes redeemed 30.2 12.1
Write-down of stand-alone golf course assets 17.6 -
-------------------------------------------------------------------------
273.5 282.9 Interest and other income net of non-cash items (30.4)
(14.6)
-------------------------------------------------------------------------
Total Company EBITDA $243.1 $268.3
-------------------------------------------------------------------------
Resort and Travel Operations EBITDA (MILLIONS) 2005 2004
-------------------------------------------------------------------------
Resort operations revenue $862.5 $541.3 Resort operations expenses
744.9 436.2
-------------------------------------------------------------------------
Resort operations EBITDA $117.6 $105.1
-------------------------------------------------------------------------
Management Services EBITDA (MILLIONS) 2005 2004
-------------------------------------------------------------------------
Management services revenue $180.7 $124.4 Management services
expenses 137.7 96.9
-------------------------------------------------------------------------
Management services EBITDA $43.0 $27.5
-------------------------------------------------------------------------
Selected Annual Information (in millions of dollars, except per
share amounts)
-------------------------------------------------------------------------
2005 2004 2003
-------------------------------------------------------------------------
Total revenue $1,677.1 $1,551.7 $1,103.2 Income from continuing
operations 32.6 59.9 34.8 Results of discontinued operations - -
(0.6) Net income 32.6 59.9 34.2 Total assets 2,644.3 2,255.8
2,515.7 Total long-term liabilities 1,794.2 1,468.4 1,804.6 PER
COMMON SHARE Income from continuing operations Basic 0.68 1.26 0.73
Diluted 0.68 1.25 0.73 Net income Basic 0.68 1.26 0.73 Diluted 0.68
1.25 0.73 Cash dividends declared (Canadian dollars) 0.16 0.16 0.16
Quarterly Financial Summary (in millions, except per share amounts)
2005 Quarters 2004 Quarters
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1st 2nd 3rd 4th 1st 2nd 3rd 4th
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Total revenue $206.5 $436.2 $504.8 $529.6 $276.6 $350.0 $437.9
$487.2 Net income (loss) (6.7) (8.0) 68.8 (21.5) 0.9 0.2 56.2 2.6
Per common share: Net income (loss) Basic (0.14) (0.17) 1.44 (0.45)
0.02 0.01 1.18 0.05 Diluted (0.14) (0.17) 1.44 (0.45) 0.02 0.01
1.17 0.05 Several factors impact comparability between quarters: -
The timing of acquisitions. In the first quarter of 2005 we
acquired 67% of A&K and in the second quarter of 2005 we
acquired the 55% of Alpine Helicopters that we did not already own.
- The seasonality of our resort and travel operations. Revenue and
EBITDA from this business are weighted disproportionately to our
third quarter. - The timing of project completions and real estate
closings. Generally we close more units in the fourth quarter. -
The timing of refinancings. In the second quarter of both 2004 and
2005 we redeemed senior notes and expensed call premium and
unamortized financing costs. - The timing of recording reserves and
valuation adjustments. In the fourth quarter of 2005 we wrote down
the value of our stand-alone golf courses. OUTSTANDING SHARE DATA
As at September 2, 2005, we have issued and there are outstanding
48,298,026 common shares and stock options exercisable for
3,826,100 common shares. A conference call is scheduled for
Tuesday, September 13, 2005 at 11:00am ET (8:00am PT) to review
Intrawest's fiscal 2005 results. To access this call dial
1-888-896-0863 before the scheduled start time. A playback version
of the conference call will be available until September 20, 2005
at 1-877-519-4471 with password 6334993. The call will also be
webcast live on http://www.intrawest.com/. Intrawest Corporation
(IDR:NYSE; ITW:TSX) is a world leader in destination resorts and
adventure travel. The company has interests in 10 resorts at North
America's most popular mountain destinations, including Whistler
Blackcomb, a host venue for the 2010 Winter Olympic and Paralympic
Games. Intrawest owns Canadian Mountain Holidays, the largest
heli-skiing operation in the world, and an interest in Abercrombie
& Kent, the world leader in luxury adventure travel. The
Intrawest network also includes Sandestin Golf and Beach Resort in
Florida and Club Intrawest - a private resort club with nine
locations throughout North America. Intrawest develops real estate
at its resorts and at other locations across North America and in
Europe. Intrawest is headquartered in Vancouver, British Columbia.
For more information, visit http://www.intrawest.com/. Statements
contained in this release that are not historical facts are
forward-looking statements that involve risks and uncertainties.
Intrawest's actual results could differ materially from those
expressed or implied by such forward-looking statements. Factors
that could cause or contribute to such differences include, but are
not limited to, Intrawest's ability to implement its business
strategies, seasonality, weather conditions, competition, general
economic conditions, currency fluctuations and other risks detailed
in the company's filings with the Canadian securities regulatory
authorities and the U.S. Securities and Exchange Commission. If you
would like to receive future news releases by email, please contact
INTRAWEST CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands of
United States dollars) JUNE 30, JUNE 30, 2005 2004 (AUDITED)
(AUDITED)
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ASSETS CURRENT ASSETS: Cash and cash equivalents $ 140,878 $
109,816 Amounts receivable 162,102 142,427 Other assets 184,860
94,105 Resort properties 388,510 412,343 Future income taxes 29,927
18,638
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906,277 777,329 Resort and travel operations 1,034,187 940,949
Resort properties 403,252 368,309 Amounts receivable 78,877 52,958
Investment in and advances to partnerships 109,037 50,899 Other
assets 85,181 65,306 Goodwill 27,483 -
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$2,644,294 $2,255,750
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LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Amounts
payable $ 275,176 $ 209,037 Deferred revenue and deposits 194,367
87,649 Bank and other indebtedness 82,144 109,685
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551,687 406,371 Bank and other indebtedness 941,279 849,132
Deferred revenue and deposits 132,866 82,211 Future income taxes
92,010 87,461 Non-controlling interest 76,339 43,266
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1,794,181 1,468,441 SHAREHOLDERS' EQUITY: Capital stock 469,162
463,485 Retained earnings 345,348 318,883 Foreign currency
translation adjustment 35,603 4,941
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850,113 787,309
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$2,644,294 $2,255,750
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INTRAWEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (in thousands of United States dollars, except
per share amounts) THREE MONTHS ENDED JUNE 30 YEAR ENDED JUNE 30
2005 2004 2005 2004 (UNAUDITED) (UNAUDITED) (AUDITED) (AUDITED)
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RESORT AND TRAVEL OPERATIONS: Revenue $ 146,517 $ 76,224 $ 862,537
$ 541,315 Expenses 163,491 96,906 744,946 436,184
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Resort and travel operations contribution (16,974) (20,682) 117,591
105,131
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MANAGEMENT SERVICES: Revenue 49,764 29,200 180,659 124,394 Expenses
43,284 23,539 137,703 96,909
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Management services contribution 6,480 5,661 42,956 27,485
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REAL ESTATE DEVELOPMENT: Revenue 334,044 379,707 626,728 878,195
Expenses 292,958 331,581 561,098 788,504
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41,086 48,126 65,630 89,691 Income (loss) from equity accounted
investments (271) 837 2,039 1,683
-------------------------------------------------------------------------
Real estate development contribution 40,815 48,963 67,669 91,374
-------------------------------------------------------------------------
Income before undernoted items 30,321 33,942 228,216 223,990
Interest and other income (expense) (407) 1,285 5,192 6,117
Interest expense (12,338) (11,054) (44,605) (45,766) Corporate
general and administrative expenses (5,235) (6,713) (20,571)
(20,369) Depreciation and amortization (17,093) (13,908) (78,323)
(68,626) Call premium and unamortized costs of senior notes
redeemed - - (30,173) (12,074) Write-down of golf course assets
(17,568) - (17,568) -
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Income (loss) before income taxes and non- controlling interest
(22,320) 3,552 42,168 83,272 Provision for income taxes (106) 1,063
(106) (10,434) Non-controlling interest 907 (2,009) (9,448)
(12,889)
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Net income (loss) (21,519) 2,606 32,614 59,949 Retained earnings,
beginning of period 369,985 319,147 318,883 264,640 Dividends
(3,118) (2,870) (6,149) (5,706)
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Retained earnings, end of period $ 345,348 $ 318,883 $ 345,348 $
318,883
-------------------------------------------------------------------------
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Net income (loss) per common share Basic $ (0.45) $ 0.05 $ 0.68 $
1.26 Diluted $ (0.45) $ 0.05 $ 0.68 $ 1.25
-------------------------------------------------------------------------
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Weighted average number of common shares outstanding (in thousands)
Basic 47,882 47,591 47,814 47,588 Diluted 48,175 47,783 47,924
47,798
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INTRAWEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands of United States dollars) THREE MONTHS ENDED JUNE 30 YEAR
ENDED JUNE 30 2005 2004 2005 2004 (UNAUDITED) (UNAUDITED) (AUDITED)
(AUDITED)
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CASH PROVIDED BY (USED IN): OPERATIONS: Net income $ (21,519) $
2,605 $ 32,614 $ 59,949 Items not affecting cash: Depreciation and
amortization 17,093 13,908 78,323 68,626 Future income taxes
(29,447) (1,240) (29,447) (1,240) Non-cash costs of senior notes
redeemed - - 4,842 2,324 Income from equity accounted investment
271 (837)
Copyright