Listed: NYSE TSX VANCOUVER, Feb. 7 /PRNewswire-FirstCall/ --
Intrawest Corporation, a world leader in destination resorts and
adventure travel, announced today the results for the second
quarter of fiscal year 2006, ended December 31, 2005. All figures
referred to herein are stated in US dollars unless otherwise
indicated. For the second quarter of fiscal 2006 the company
reported net income, including discontinued operations, of $69.3
million or $1.41 per diluted share compared to a net loss of $7.1
million or $0.15 per diluted share last year. During the second
quarter the company closed on the sale of a majority of its
interest in Mammoth Mountain Ski Area for a net gain of $60.0
million after income taxes of $47.3 million. The gain and Mammoth
Mountain's results to the sale date are classified as discontinued
operations. Income from continuing operations was $11.3 million
compared to a loss of $10.5 million during the same period last
year, resulting in earnings of $0.23 per diluted share versus a
loss of $0.22 per diluted share. Income from continuing operations
in the second quarter of last year included call premium and other
redemption costs of $28.1 million as the company refinanced senior
notes to take advantage of lower interest rates. Total Company
EBITDA (earnings before interest, income taxes, non-controlling
interest, depreciation and amortization and any non-recurring
items) for the quarter decreased to $38.4 million from $52.0
million during the same period last year due mainly to a strike by
unionized employees at Tremblant and reduced destination visitors
in the early winter season at resort operations in British
Columbia. "Completing the sale of Mammoth Mountain Ski Area has
strengthened our balance sheet considerably and we remain focused
on our strategy of maximizing return on capital," said Joe
Houssian, chairman, president and chief executive officer of
Intrawest Corporation. "Although our second quarter operating
results were impacted by the strike at Tremblant and reduced
destination visitors at our resort operations in British Columbia,
other parts of our business such as Abercrombie & Kent
performed extremely well." Quarter Highlights - The sale of a
majority interest in Mammoth Mountain Ski Area resulted in an
after-tax gain of $60 million. Intrawest has retained a 15 per cent
interest in the world-class resort; - Abercrombie & Kent
reported a 42 per cent increase in adventure-travel tour EBITDA; -
A strike at Tremblant and reduced destination visitors in the early
winter season at resort operations in British Columbia led to a
reduction in resort and travel operations EBITDA; - December 2005
was a record month for real estate launches achieving pre-sale
revenues of $534 million. "Our real estate division had an
impressive quarter, achieving record pre-sale revenue of $534
million in December," added Houssian. "With our recent pre-sale
success at Honua Kai on Maui and The Village of Imagine in Orlando,
we will continue to seek out opportunities to add warm-weather
locations to our real estate portfolio." MANAGEMENT'S DISCUSSION
AND ANALYSIS The following management's discussion and analysis
("MD&A") should be read in conjunction with the more detailed
MD&A (which includes a discussion of business risks) contained
in our June 30, 2005 annual report. Statements contained in this
report that are not historical facts are forward-looking statements
that involve risks and uncertainties. Our 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, our ability to
implement our business strategies, seasonality, weather conditions,
competition, general economic conditions, currency fluctuations,
world events and other risks detailed in our filings with the
Canadian securities regulatory authorities and the U.S. Securities
and Exchange Commission. Our financial statements are prepared in
accordance with Canadian generally accepted accounting principles
("GAAP"). We use several non-GAAP measures to assess our financial
performance, such as EBITDA(1) and free cash flow. Such measures do
not have a standardized meaning prescribed by GAAP and they may not
be comparable to similarly titled measures presented by other
companies. We have provided reconciliations between any non-GAAP
measures mentioned in this MD&A and our GAAP financial
statements. These non-GAAP measures are referred to in this
disclosure document because we believe they are indicative measures
of a company's performance and are generally used by investors to
evaluate companies in the resort and travel operations and resort
development industries. Additional information relating to our
company, including our annual information form, is on SEDAR at
http://www.sedar.com/. The date of this interim MD&A is
February 6, 2006. THREE MONTHS ENDED DECEMBER 31, 2005 (THE "2005
QUARTER") COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 2004 (THE
"2004 QUARTER") Net income was $69.3 million ($1.41 per diluted
share) in the 2005 quarter compared with a net loss of $7.1 million
($0.15 per diluted share) in the 2004 quarter. We sold the majority
of our interest in Mammoth Mountain Ski Area in the 2005 quarter
and recognized a gain of $60.0 million on the transaction. This
gain, as well as Mammoth's results to the sale date (including the
2004 quarter comparatives), have been classified as discontinued
operations. Income from continuing operations was $11.3 million
($0.23 per diluted share) in the 2005 quarter compared with a loss
from continuing operations of $10.5 million ($0.22 per diluted
share) in the 2004 quarter. The loss in the 2004 quarter included
$28.1 million of call premium and other costs to redeem $359.9
million of senior notes. Total Company EBITDA decreased from $52.0
million to $38.4 million due mainly to reduced early winter season
EBITDA at our mountain resorts. Income from discontinued operations
was $57.9 million in the 2005 quarter compared with $3.4 million in
the 2004 quarter. The amount in the 2005 quarter comprised the gain
on the Mammoth sale of $60.0 million, net of income taxes of $47.3
million, and a net loss from operations from October 1 to October
31, 2005 (the effective date of the sale) of $2.1 million. The
amount in the 2004 quarter reflects net income from Mammoth for the
full three months, which benefited from seasonal profitability,
particularly in December. ------------------------------------- 1
EBITDA is defined as operating revenues less operating expenses and
therefore reflects earnings before interest, income taxes,
depreciation and amortization, non-controlling interest and any
non-recurring items. REVIEW OF RESORT AND TRAVEL OPERATIONS Resort
and travel operations revenue increased from $178.2 million in the
2004 quarter to $193.4 million in the 2005 quarter. In December
2004 we increased our ownership in Alpine Helicopters from 45% to
100% and the incremental revenue in the 2005 quarter from our
increased ownership interest was $4.3 million. In addition, in
August 2005 we entered into a lease to operate Parque de Nieve, an
indoor snowdome in Spain, and revenue in the 2005 quarter included
$2.5 million from this new business. The rise in the value of the
Canadian dollar from an average rate of US$0.80 in the 2004 quarter
to US$0.85 in the 2005 quarter increased reported resort and travel
operations revenue by $2.8 million. On a same-business (i.e.,
excluding 55% of Alpine Helicopters and Parque de Nieve), constant
exchange rate basis, resort and travel operations revenue increased
by 3% to $183.8 million. Revenue from the mountain segment
decreased slightly from $99.8 million to $99.3 million while
revenue from the non-mountain segment increased from $78.4 million
to $84.5 million. Skier visits increased from 1,387,000 in the 2004
quarter to 1,430,000 in the 2005 quarter with increases of 3% at
both our eastern and western resorts. Generally good early season
snow conditions enabled most of our eastern resorts to open earlier
than planned, however this positive momentum was disrupted by a
strike by 1,500 workers at Tremblant that began on December 17 and
was settled on January 3. Although the resort was able to remain
open during the important holiday season using 200 management
personnel, it operated at significantly reduced capacity and as a
result, skier visits that were running 23% ahead of last year
before the strike, ended the 2005 quarter 17% behind the 2004
quarter. Mixed conditions at Whistler Blackcomb, with the earliest
season opening in 12 years followed by challenging weather in
December, led to a 3% decline in skier visits in the 2005 quarter.
We are seeing some spill-over effect at all our operations in
British Columbia (Whistler Blackcomb, Panorama and Alpine
Helicopters) from the sub-standard ski season last year.
Furthermore, all our Canadian businesses (particularly Whistler
Blackcomb) are experiencing a decline in destination visits due to
the high Canadian dollar. Abundant early season snowfall in
Colorado enabled Copper and Winter Park to increase their aggregate
skier visits by 9% in the 2005 quarter. Revenue per skier visit,
adjusted for a constant Canadian dollar exchange rate, decreased 5%
in the 2005 quarter. After the strike began at Tremblant, we
discounted many of our prices to compensate for the limited
operations, resulting in a 34% decline in revenue per visit
compared with the 2004 quarter. We estimate that the workers'
strike at Tremblant reduced resort and travel operations revenue in
the 2005 quarter by $3.8 million. Excluding Tremblant, our eastern
resorts saw a 3% decline in revenue per skier visit due mainly to
early season pricing strategies and pass promotion programs at
Stratton and Snowshoe designed to stimulate visits. At our western
resorts, revenue per skier visit decreased 4% due mainly to a
higher mix of lower-yielding season pass visits at our Colorado
resorts as pass holders took advantage of the excellent early
season conditions. The increase in revenue from the non-mountain
segment in the 2005 quarter was primarily due to a 9% increase in
adventure-travel tour revenue at Abercrombie & Kent ("A&K")
from $66.3 million to $72.2 million. A&K saw good growth in
tour revenues from most of its major destinations, particularly
East Africa, India and the Orient. In addition to its
adventure-travel tour revenue, A&K earned $1.2 million of
licensing fees in the 2004 quarter (versus nil in the 2005 quarter)
on a contract with an operator of destination clubs that was
terminated in August 2005. Resort and travel operations revenue at
Sandestin increased by $1.2 million or 15% due mainly to strong
growth in food and beverage from group and conference visitors. The
breakdown of resort and travel operations revenue by major business
component was as follows: 2005 2004 (MILLIONS) QUARTER QUARTER
INCREASE CHANGE(%)
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Mountain operations $52.5 $44.7 $7.8 17 Retail and rental shops
27.3 25.6 1.7 7 Food and beverage 18.2 15.8 2.4 15 Ski school 10.3
10.2 0.1 1 Golf 4.6 4.6 - - Adventure-travel tours 72.2 66.3 5.9 9
Other 8.3 11.0 (2.7) (25)
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$193.4 $178.2 $15.2 9
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-------------------------------------------------------------- The
growth in mountain operations revenue includes $6.8 million from
our increased ownership interest in Alpine Helicopters and our
lease of Parque de Nieve. The decline in other revenue was due in
part to the decrease in licensing fees earned by A&K. Resort
and travel operations expenses increased from $154.0 million in the
2004 quarter to $178.0 million in the 2005 quarter, of which $5.3
million and $2.2 million, respectively, were due to the acquisition
of the remaining 55% of Alpine Helicopters and the lease of Parque
de Nieve and $2.4 million came from the impact on reported expenses
of the higher Canadian dollar. On a same-business, constant
exchange rate basis expenses in the mountain segment increased by
$7.8 million to $85.3 million. The earlier opening of several of
our eastern resorts and higher business levels at our Colorado
resorts increased expenses by $3.0 million. In addition, we spent
$1.1 million on a new operational excellence initiative designed to
change our work processes in order to derive cost savings in the
future, we increased our reserves for self-insured workers'
compensation and general liability claims by $1.9 million and we
incurred $0.5 million of new rental lease costs as a result of
selling our commercial properties last fiscal year. These cost
increases were partially offset by $1.7 million of expense savings
at Tremblant due to the workers' strike. Expenses at the
non-mountain segment increased by $6.3 million to $82.8 million.
The higher business volumes at A&K increased expenses by $4.3
million and expenses at Sandestin increased by $1.8 million, mainly
labor, rent and utilities and repairs and maintenance. In addition
our decision last year to exit the non-resort golf business
resulted in the payment of $0.7 million of severance and other
termination costs in the 2005 quarter. Resort and travel operations
EBITDA decreased from $24.2 million in the 2004 quarter to $15.4
million in the 2005 quarter. On a combined basis, the acquisition
of 55% of Alpine Helicopters and the lease of Parque de Nieve
reduced EBITDA in the 2005 quarter by $0.7 million due to seasonal
losses. Fewer destination visitors in the early winter season at
our British Columbia operations (due in part to the spillover
effect from the substandard conditions last year and the high
Canadian dollar) reduced EBITDA in the 2005 quarter by $3.6 million
and the workers' strike at Tremblant reduced it by a further $2.1
million. In the non-mountain segment, EBITDA decreased by $0.6
million in the 2005 quarter as higher EBITDA from A&K's
adventure-travel business was offset by lower fees from the
termination of its licensing agreement, costs incurred to exit the
non-resort golf business and reduced EBITDA at Sandestin. REVIEW OF
MANAGEMENT SERVICES Management services revenue and EBITDA in the
2005 and 2004 quarters were broken down as follows: 2005 QUARTER
2004 QUARTER (MILLIONS) REVENUE EBITDA REVENUE EBITDA
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Services related to resort and travel operations Lodging and
property management $15.3 $(2.7) $15.5 $(0.4) Other resort and
travel fees 3.0 0.3 2.8 (0.7)
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18.3 (2.4) 18.3 (1.1)
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Services related to real estate development Real estate services
fees 10.2 7.1 6.7 3.7 Playground sales fees 7.9 1.1 11.5 4.6
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18.1 8.2 18.2 8.3
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$36.4 $5.8 $36.5 $7.2
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The decrease in fees from lodging and property management was due
mainly to a 2% decrease in occupied room nights across our resorts.
The factors that impacted skier visits also affected our occupied
room nights. Lodging and property management EBITDA decreased by
$0.4 million due to the worker's strike at Tremblant, $0.4 million
because of reduced destination visitors in the early winter season
in British Columbia and $0.5 million at Sandestin in the aftermath
of the hurricanes. In addition, we opened the Westin Trillium House
at Blue Mountain in November incurring $0.4 million of start up
losses and the accelerated timing of marketing costs reduced EBITDA
in the 2005 quarter by $0.5 million. Other resort and travel fees,
which comprise reservation fees earned by our central call center,
golf course management fees and club management fees earned by the
Resort Club, increased by $0.2 million in the 2005 quarter with an
increase in Resort Club management fees being partially offset by
lower reservation and golf management fees. We sold our
reservations company in Colorado in August 2005 and we continue to
focus on reservations to our own resorts while reducing our
third-party reservations business. The reduction in golf management
fees reflects our decision to exit the non-resort golf business.
The $1.0 million increase in EBITDA from other resort and travel
fees was due mainly to the decline in losses from our reservations
business resulting from the elimination of seasonal losses in the
Colorado company that was sold as well as the transfer of general
and administrative expenses from third-party business (i.e.,
management services) to internal business (i.e., resort and travel
operations). The increases in real estate services fees revenue and
EBITDA of $3.5 million and $3.4 million, respectively, were due to
increased development fees from managing partnership projects.
These fees are calculated as a percentage of development costs of
managed projects and are recognized on a percentage-of-completion
basis during the course of construction. A significant slow down in
the re-sales market in Florida in the aftermath of the hurricanes
reduced sales fees earned by Playground, our real estate sales
business, by $3.1 million. The balance of the decline in revenue
was due mainly to the timing of project completions as Playground
recognizes the majority of its fees on closing of units after
project completion. These revenue decreases reduced Playground
EBITDA in the 2005 quarter and it was also reduced by an allocation
of $3.6 million of Playground general and administrative costs to
the management services segment. In fiscal 2005 the full annual
allocation of Playground general and administrative costs to
management services of $7.5 million was made in the fourth quarter.
REVIEW OF REAL ESTATE DEVELOPMENT Revenue from real estate
development was $84.2 million in the 2005 quarter compared with
$201.7 million in the 2004 quarter. Revenue for the 2004 quarter
included $109.2 million from the sale of commercial properties and
$14.5 million from the sale of one residential project to
partnerships. Excluding these partnership sales, revenue generated
by Intrawest Placemaking (our resort development business)
increased from $68.4 million to $75.1 million while revenue
generated by Intrawest Resort Club (our vacation ownership
business) decreased from $9.7 million to $9.1 million. Intrawest
Placemaking closed 129 units in the 2005 quarter compared with 179
units in the 2004 quarter. The average price per closed unit was
$582,000 in the 2005 quarter, up significantly from $382,000 in the
2004 quarter mainly due to unit type and resort mix. We closed
$19.2 million of high-end fractional Storied Places properties
(eight whole units) in the 2005 quarter versus $1.8 million (one
whole unit) in the 2004 quarter. Excluding these Storied Places
units, the average price per closed unit increased from $374,000 to
$462,000. In addition, we closed relatively more condo-hotel units
(85% of units versus 66%) and relatively fewer single-family lots
(6% of units versus 25%) in the 2005 quarter than the 2004 quarter.
The single-family lots that we closed in both quarters had a low
average price per unit. Real estate EBITDA decreased from $26.1
million in the 2004 quarter to $23.8 million in the 2005 quarter.
Real estate EBITDA comprises operating profit from real estate plus
interest included in real estate expenses. Interest included in
real estate expenses was much higher in the 2004 quarter because of
the sales to partnerships. Operating profit from real estate
development increased from $15.2 million in the 2004 quarter to
$19.5 million in the 2005 quarter due to closing more higher-margin
units in the 2005 quarter. In addition, profit on land sales to
partnerships and equity income from partnerships, which are
recognized on a percentage-of-completion basis, increased from $8.2
million to $9.4 million due to the stage of construction of
partnership projects. Operating profit in the 2004 quarter was also
reduced by a loss of $1.2 million on the sale of commercial
properties. REVIEW OF CORPORATE OPERATIONS Interest and other
income increased from $1.2 million in the 2004 quarter to $3.7
million in the 2005 quarter due to $1.1 million more interest
income, including interest on notes to partnerships for project
sales and $1.4 million more rental and other miscellaneous income.
Interest expense was $12.4 million in the 2005 quarter, up from
$11.7 million in the 2004 quarter due mainly to capitalizing less
interest to real estate, including $0.8 million in connection with
our commercial properties at Squaw and Lake Las Vegas which were
completed at the end of fiscal 2005. During the 2004 quarter we
expensed $28.1 million of call premium and other costs when we
redeemed $359.9 million of 10.5% senior notes. Corporate general
and administrative ("G&A") expenses increased from $5.5 million
in the 2004 quarter to $6.6 million in the 2005 quarter. We
incurred $0.8 million of costs in the 2005 quarter in connection
with a new branding/business strategy initiative and the impact of
the stronger Canadian dollar increased reported G&A by $0.3
million. Depreciation and amortization expense was $13.8 million in
the 2005 quarter, up from $13.2 million in the 2004 quarter due to
the acquisition of the remaining 55% of Alpine Helicopters in
December 2004. Non-controlling interest decreased from $2.2 million
in the 2004 quarter to $1.0 million in the 2005 quarter due mainly
to lower income before non-controlling interest at A&K. While
EBITDA was higher at A&K in the 2005 quarter, income before
non-controlling interest was lower because of increased tax expense
at the A&K entity level. SIX MONTHS ENDED DECEMBER 31, 2005
(THE "2005 PERIOD") COMPARED WITH SIX MONTHS ENDED DECEMBER 31,
2004 (THE "2004 PERIOD") Income from continuing operations was
$18.6 million ($0.38 per diluted share) in the 2005 period compared
with a loss from continuing operations of $18.7 million ($0.39 per
diluted share) in the 2004 period. The loss in the 2004 period
included $28.1 million of call premium and other costs to redeem
$359.9 million of senior notes. Total Company EBITDA increased from
$68.3 million to $95.7 million as increased EBITDA from real estate
development was partly offset by reduced EBITDA from resort and
travel operations and management services. Results from
discontinued operations, comprising the gain on sale of the
majority of our interest in Mammoth and Mammoth's operating
results, was $59.9 million in the 2005 period compared with $4.5
million in the 2004 period. This resulted in net income of $78.5
million ($1.60 per diluted share) in the 2005 period compared with
a net loss of $14.2 million ($0.30 per diluted share) in the 2004
period. REVIEW OF RESORT AND TRAVEL OPERATIONS Resort and travel
operations revenue increased from $304.5 million in the 2004 period
to $356.0 million in the 2005 period. The acquisition of the
remaining 55% of Alpine Helicopters in December 2004 and the lease
of Parque de Nieve in August 2005 added $13.5 million and $3.5
million, respectively, of incremental revenue and the impact of the
higher Canadian dollar increased reported revenue by a further $6.0
million. On a same-business, constant exchange rate basis, revenue
from our mountain segment increased by $4.4 million due mainly to
improved summer revenues at Whistler Blackcomb, Intrawest Retail
Group and Alpine Helicopters. Revenue from our non-mountain segment
increased by $24.0 million in the 2005 period due mainly to 19%
growth in A&K's adventure-travel tours business. EBITDA from
resort and travel operations decreased from $31.9 million in the
2004 period to $22.5 million in the 2005 period. An increase in
EBITDA of $6.6 million from A&K's adventure-travel tour
business was offset by a $3.6 million decline in its licensing fees
(due to the termination of its licensing agreement), lower EBITDA
from our other businesses primarily due to reduced destination
visitors in the early winter season at our British Columbia
resorts, the workers' strike at Tremblant and the hurricanes in
Sandestin, and increases in general and administrative expenses of
the Leisure and Travel Group. REVIEW OF MANAGEMENT SERVICES
Management services revenue and EBITDA in the 2005 and 2004 periods
were broken down as follows: 2005 PERIOD 2004 PERIOD (MILLIONS)
REVENUE EBITDA REVENUE EBITDA
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Services related to resort and travel operations Lodging and
property management $33.8 $(1.9) $32.9 $0.3 Other resort and travel
fees 6.1 0.9 6.0 (1.5)
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39.9 (1.0) 38.9 (1.2)
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Services related to real estate development Real estate services
fees 15.9 8.2 11.8 5.8 Playground sales fees 16.5 2.5 20.8 8.3
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32.4 10.7 32.6 14.1
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$72.3 $9.7 $71.5 $12.9
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Occupied room nights across all our resorts decreased by 1% in the
2005 period with a 4% increase in the first quarter being offset by
a 2% decrease in the second quarter. The decrease in EBITDA from
lodging and property management occurred mainly at Sandestin, which
declined by $1.4 million due to the hurricanes in the first quarter
and labor cost increases. In addition, the workers' strike at
Tremblant reduced EBITDA in the 2005 period by $0.4 million. The
increase in EBITDA from other resort and travel fees was due mainly
to a decline in losses from our third-party reservations business.
We have significantly curtailed reservations work for third-parties
and sold our Fly4Less and Moguls operations to concentrate on
growing reservations to our own resorts. The increases in revenue
and EBITDA from real estate services fees were due mainly to
increases in construction activity (on which development and sales
fees are based) at projects managed for partnerships. The decrease
in revenue and EBITDA from Playground sales fees was due mainly to
the timing of project completions, as Playground recognizes the
majority of its fees on closing of units after project completion,
and a significant slow down in the re-sales market in Florida in
the aftermath of the hurricanes along the Gulf coast. EBITDA was
further reduced by the timing of allocating Playground G&A
costs to the management services segment. In the 2005 period EBITDA
was reduced by $5.7 million of G&A costs compared with no
reduction in the 2004 period since the full annual allocation of
$7.5 million was made in the fourth quarter of fiscal 2005. REVIEW
OF REAL ESTATE DEVELOPMENT Revenue from real estate development was
$182.9 million in the 2005 period compared with $240.5 million in
the 2005 period. Revenue for the 2004 period included $109.2
million from the sale of commercial properties and $19.8 million
for the sale of two residential projects to partnerships.
Approximately 40% of our revenue in the 2005 period came from the
sale of a 26-acre beachfront property in Maui for proceeds of $73.3
million. The vendor of the property was a partnership in which we
have a 40% interest, however the partnership is a variable interest
entity ("VIE"), which we are required to fully consolidate because
we are its primary beneficiary. Hence real estate development
revenue includes 100% of the sales proceeds to the partnership and
real estate development expenses includes 100% of the partnership's
cost of sales, being $29.4 million. The partner's share of the
profit from this transaction of $18.5 million is included in
non-controlling interest. Excluding the sale of the Maui property
in the 2005 period and the sales of commercial properties and
residential projects to partnerships in the 2004 period, revenue
generated by Intrawest Placemaking decreased from $91.4 million to
$90.1 million while revenue generated by Intrawest Resort Club
decreased from $20.2 million versus $19.5 million. Intrawest
Placemaking closed 152 units in the 2005 period at average price of
$593,000 per unit compared with 221 units at an average price of
$413,000 per unit in the 2004 period. The higher average price was
due to closing more high-end fractional interest townhomes and
fewer single-family lots in the 2005 period and the decline in the
number of closings reflects the timing of construction completions.
For the fiscal year we expect to close about the same number of
units as the 557 units we closed in fiscal 2005. The profit
contribution from real estate development increased significantly
from $20.4 million in the 2004 period to $70.2 million in the 2005
period due mainly to recognizing $43.9 million of profit from the
sale of the Maui property described above. REVIEW OF CORPORATE
OPERATIONS Interest and other income was $4.2 million in the 2005
period, up from $3.3 million in the 2004 period mainly due to
higher interest income, including interest on notes to partnerships
for project sales. Interest expense increased slightly from $22.6
million in the 2004 period to $22.9 million in the 2005 period.
Interest incurred was $2.6 million lower in the 2005 period (due
mainly to redeeming higher-interest senior notes in October 2004),
however we capitalized $2.9 million less interest to real estate.
During the 2004 period we expensed $28.1 million of call premium
and other costs when we redeemed $359.9 million of 10.5% senior
notes. Corporate general and administrative expenses increased from
$9.9 million in the 2004 period to $12.0 million in the 2005
period. We incurred $1.2 million of costs in the 2005 quarter in
connection with a new branding/business strategy initiative and
$0.7 million was due to the impact on reported G&A of the
stronger Canadian dollar. Depreciation and amortization expense
increased from $24.2 million in the 2004 period to $26.4 million in
the 2005 period of which $1.5 million was due to the acquisition of
the remaining 55% of Alpine Helicopters in December 2004. In
addition, the higher Canadian dollar increased reported
depreciation of Canadian assets by $0.8 million in the 2005 period.
We provided for $4.2 million of income taxes, based on $45.3
million of pre-tax income in the 2005 period compared with a
recovery of $0.7 million of income taxes, based on a pre-tax loss
of $16.4 million in the 2004 period. We expect our effective income
tax rate to be approximately 10% for the current fiscal year,
excluding tax on the Mammoth gain, which is included in
discontinued operations. Non-controlling interest was $22.5 million
in the 2005 period, up from $3.1 million in the 2004 period due
mainly to the inclusion of $18.5 million for our partner's profits
on the sale of the property in Maui, as described in Review of Real
Estate Development above. The balance of the increase was due to
improved results of A&K in the 2005 period. LIQUIDITY AND
CAPITAL RESOURCES The following table summarizes the major sources
and uses of cash in the 2005 and 2004 quarters and periods. This
table should be read in conjunction with the Consolidated
Statements of Cash Flows, which are more detailed as prescribed by
GAAP. 2005 2004 2005 2004 (MILLIONS) QUARTER QUARTER CHANGE PERIOD
PERIOD CHANGE
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Funds from continuing operations $31.9 $ 8.5 $ 23.4 $ 73.6 $ 12.9 $
60.7 Cash flow from real estate development, including investments
(47.6) 27.2 (74.8) (58.2) (17.2) (41.0) Cash for resort capex and
other assets (42.3) (34.3) (8.0) (72.7) (56.9) (15.8) Cash flow
from long-term receivables and working capital 0.9 52.1 (51.2)
(42.0) 22.3 (64.3) Funds from discontinued operations (1.9) 4.9
(6.8) 0.3 6.3 (6.0)
-------------------------------------------------------------------------
Free cash flow (59.0) 58.4 (117.4) (99.0) (32.6) (66.4) Cash from
(for) business acquisitions and disposals 128.3 (36.9) 165.2 128.4
(21.3) 149.7
-------------------------------------------------------------------------
Net cash flow from operating and investing activities 69.3 21.5
47.8 29.4 (53.9) 83.3 Net financing inflows (outflows) (37.8) 22.7
(60.5) (20.3) 81.4 (101.7)
-------------------------------------------------------------------------
Increase (decrease) in cash $31.5 $44.2 ($12.7) $9.1 $27.5 ($18.4)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Funds from continuing operations in the 2004 quarter and 2004
period were reduced by the payment of the call premium when we
redeemed senior notes. The other changes in funds from continuing
operations resulted from higher operating profits from real estate
development offset by reduced EBITDA from resort and travel
operations and management services and higher G&A expenses in
the 2005 quarter and 2005 period. For more details see the Review
of Operations sections earlier in this MD&A. Real estate
development used $47.6 million of cash in the 2005 quarter compared
with a cash inflow of $27.2 million in the 2004 quarter. The sale
of commercial properties in the 2004 quarter generated $54.8
million of cash. In the 2005 quarter we spent $23.8 million to
acquire a new property in Hilton Head, South Carolina for the
future development of 1,200 units. Excluding these two transactions
real estate development used $23.8 million of cash in the 2005
quarter, down from $27.6 million in the 2004 quarter. For the 2005
period real estate development used $58.2 million of cash,
including $31.1 million to acquire new land holdings (comprising
the Hilton Head property and $7.3 million in the first quarter for
a property in Napa, California). We did not acquire any new land
holdings in the 2004 period. Expenditures on resort and travel
operations assets ("capex") and other assets used $42.3 million
cash in the 2005 quarter, up from $34.3 million in the 2004
quarter. Approximately half of the expenditures in each quarter
were for maintenance capex to our mountain resort assets in advance
of the winter season. In addition, in the 2005 quarter we spent
$5.8 million on a lodging facility and lift at Winter Park, $2.2
million on a retail building at Copper and $3.1 million to replace
maintenance buildings at Snowshoe. This brought spending on capex
to $69.2 for the 2005 period, up from $41.8 million in the 2004
period. We expect to spend a total of approximately $90 million on
capex during fiscal 2006 (compared with $79.4 million in fiscal
2005), comprising approximately $40 million of maintenance capex
(non-discretionary expenditures required to maintain the existing
service level of our assets) with the balance being discretionary
expansion capex. Long-term receivables and working capital provided
$0.9 million of cash in the 2005 quarter, down from $52.1 million
in the 2004 quarter. This represents the cash flow from changes in
receivables, other assets, payables and deferred revenue. The
change in the quarter was mainly due to a significant increase in
payables in the 2004 quarter. Our businesses generated negative
free cash flow of $59.0 million in the 2005 quarter compared with
positive free cash flow of $58.4 million in the 2004 quarter. Half
of the quarter-over-quarter change was due to the sale of
commercial properties in the 2004 quarter and the balance was due
mainly to changes in working capital. This brought free cash flow
to negative $99.0 million for the 2005 period compared with
negative free cash flow of $32.6 million in the 2004 period. We
expect to generate positive free cash flow in the second half of
the year as we enter the peak season at our mountain resorts in the
third quarter and we close real estate units, which are more
heavily weighted towards the second half of the year. The sale of
the majority of our interest in Mammoth generated $128.3 million of
cash in the 2005 quarter. The purchaser also paid $20.8 million
into escrow to fund potential warranty claims and the unused
balance will be released after 15 months. In addition, prior to the
sale, Mammoth had paid a dividend to its shareholders with our
share being $19.9 million. We did not make any business
acquisitions in the 2005 quarter or the 2005 period. In the 2004
quarter we spent $36.9 million to acquire the 55% of Alpine
Helicopters that we did not already own (net of cash acquired in
the acquisition), which brought spending on business acquisitions
for the 2004 period to $21.3 million since we had acquired $15.6
million of cash on the acquisition of 67% of A&K, net of our
acquisition cost in the first quarter. In total, our operating and
investing activities provided $69.3 million of cash in the 2005
quarter, up from $21.5 million in the 2004 quarter, which we used
primarily to pay down debt. For the 2005 period, operating and
investing activities generated $29.4 million of cash, which we used
to repay debt compared with a cash outflow of $53.9 million in the
2004 period, which we funded primarily by drawing on our senior
credit facility. At December 31, 2005, we had drawn a total of
$178.0 million under this facility and we had also issued letters
of credit for $51.3 million, leaving $195.7 million available to
cover future liquidity requirements. Liquidity for real estate
construction is generally provided by one-off project-specific
loans. We believe that these credit facilities, combined with cash
on hand and internally generated cash flow, are sufficient to
finance all our normal operating needs. In November 2005 we
announced our intention to buy up to 4.6 million of our common
shares through a normal course issuer bid. We did not purchase any
shares before December 31, 2005 as we deferred commencement of the
plan until the completion of the Mammoth sale and the settlement of
the strike at Tremblant on January 3, 2006. Since January 3, 2006,
we have acquired 48,600 shares at a cost of Cdn$1.6 million and
these shares have been cancelled. Additional Information
---------------------- Total Company EBITDA --------------------
2005 2004 2005 2004 (MILLIONS) Quarter Quarter Period Period
-------------------------------------------------------------------------
Cash flow provided by (used in) continuing operating activities
$(17.1) $ 96.7 $(41.9) $ 28.8 Add (deduct): Changes in non-cash
operating assets and liabilities 49.1 (88.2) 115.5 (16.0) Current
income tax expense (6.1) (2.2) (1.1) (0.7) Interest expense 12.4
11.6 22.8 22.6 Interest in real estate costs 4.3 10.9 5.4 13.1 Call
premium and unamortized costs on senior notes redeemed - 28.1 -
28.1
-------------------------------------------------------------------------
42.6 56.9 100.7 75.9 Interest and other income, net of non-cash
items (4.2) (4.9) (5.0) (7.6)
-------------------------------------------------------------------------
Total Company EBITDA $ 38.4 $ 52.0 $ 95.7 $ 68.3
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Resort and Travel Operations EBITDA
----------------------------------- 2005 2004 2005 2004 (MILLIONS)
Quarter Quarter Period Period
-------------------------------------------------------------------------
Resort and travel operations revenue $193.4 $178.2 $356.0 $304.5
Resort and travel operations expenses 178.0 154.0 333.5 272.6
-------------------------------------------------------------------------
Resort and travel operations EBITDA $ 15.4 $ 24.2 $ 22.5 $ 31.9
-------------------------------------------------------------------------
Management Services EBITDA -------------------------- 2005 2004
2005 2004 (MILLIONS) Quarter Quarter Period Period
-------------------------------------------------------------------------
Management services revenue $ 36.4 $ 36.5 $ 72.3 $ 71.5 Management
services expenses 30.6 29.3 62.6 58.6
-------------------------------------------------------------------------
Management services EBITDA $ 5.8 $ 7.2 $ 9.7 $ 12.9
-------------------------------------------------------------------------
REAL ESTATE DEVELOPMENT EBITDA ------------------------------ 2005
2004 2005 2004 (MILLIONS) Quarter Quarter Period Period
-------------------------------------------------------------------------
Real estate development contribution $ 19.5 $ 15.2 $ 70.2 $ 20.4
Interest in real estate expenses 4.3 10.9 5.4 13.1
-------------------------------------------------------------------------
Real estate development EBITDA $ 23.8 $ 26.1 $ 75.6 $ 33.5
-------------------------------------------------------------------------
Quarterly Financial Summary (in millions, except per share amounts)
Q2-06 Q1-06 Q4-05 Q3-05 Q2-05 Q1-05 Q4-04 Q3-04
-------------------------------------------------------------------------
Total revenue $318.2 $298.2 $523.6 $466.0 $419.8 $202.7 $480.7
$403.2 Income (loss) from continuing operations 11.3 7.3 (18.6)
63.3 (10.5) (8.2) 3.7 52.6 Results of discon- tinued operations
57.9 1.9 (0.6) 3.5 3.4 1.1 0.0 2.5 Net income (loss) 69.3 9.2
(19.2) 66.8 (7.1) (7.1) 3.7 55.1 PER COMMON SHARE: Income (loss)
from continuing operations Basic 0.23 0.15 (0.39) 1.32 (0.22)
(0.17) 0.08 1.11 Diluted 0.23 0.15 (0.39) 1.32 (0.22) (0.17) 0.08
1.10 Net income (loss) Basic 1.43 0.19 (0.40) 1.40 (0.15) (0.15)
0.08 1.16 Diluted 1.41 0.19 (0.40) 1.40 (0.15) (0.15) 0.08 1.15
Several factors impact comparability between quarters: - The timing
of business acquisitions and disposals. 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. In the second quarter of 2006 we sold the majority of our
interest in Mammoth Mountain Ski Area. - 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 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 February 6, 2006, we have issued and
there are outstanding 48,929,426 common shares and stock options
exercisable for 3,108,800 common shares. A conference call is
scheduled for Tuesday, February 7, 2006 at 11:00am ET (8:00am PT)
to review Intrawest's second quarter fiscal 2006 results. To access
the call dial 1-800-921-9431 before the scheduled start time. A
playback version of the conference call will be available until
February 14, 2006 at 1-877-519-4471 with password 6945737. 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/. For additional information, please
contact Mr. John Currie, chief financial officer, at (604) 669-9777
or Mr. Tim McNulty, director, investor relations at (604) 623-6620
or at If you would like to receive future news releases by email,
please contact INTRAWEST CORPORATION CONSOLIDATED BALANCE SHEETS
(in thousands of United States dollars) DECEMBER 31, 2005 JUNE 30,
2005 (UNAUDITED) (AUDITED)
-------------------------------------------------------------------------
(RESTATED) (note 1) ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 149,977 $ 140,878 Amounts receivable 155,347 162,102
Other assets 262,251 188,211 Resort properties 382,255 388,510
Future income taxes 27,618 29,927
-----------------------------------------------------------------------
977,448 909,628 Amounts receivable 109,088 78,877 Resort and travel
operations 1,003,712 1,034,187 Resort properties 519,186 403,252
Other assets 99,020 85,181 Investment in and advances to
partnerships (note 8) 93,210 109,037 Goodwill 23,030 27,483
-------------------------------------------------------------------------
$ 2,824,694 $ 2,647,645
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Amounts
payable $ 309,990 $ 275,176 Deferred revenue and deposits 278,368
201,313 Bank and other indebtedness 85,359 82,144
-----------------------------------------------------------------------
673,717 558,633 Deferred revenue and deposits 113,350 132,866 Bank
and other indebtedness 926,975 941,279 Future income taxes 82,268
92,010 Non-controlling interest in subsidiaries 69,190 76,339
-------------------------------------------------------------------------
1,865,500 1,801,127 SHAREHOLDERS' EQUITY: Capital stock (note 4)
484,221 469,162 Retained earnings 417,168 342,013 Foreign currency
translation adjustment 57,805 35,343
-----------------------------------------------------------------------
959,194 846,518
-------------------------------------------------------------------------
$ 2,824,694 $ 2,647,645
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
INTRAWEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (in thousands of United States dollars except per
share amounts) (unaudited) THREE MONTHS SIX MONTHS ENDED DECEMBER
31 ENDED DECEMBER 31 2005 2004 2005 2004
-------------------------------------------------------------------------
(RESTATED) (RESTATED) (note 1) (note 1) RESORT AND TRAVEL
OPERATIONS: Revenue $ 193,405 $ 178,204 $ 355,980 $ 304,522
Expenses 177,971 153,982 333,520 272,578
-------------------------------------------------------------------------
Resort and travel operations contribution 15,434 24,222 22,460
31,944
-------------------------------------------------------------------------
MANAGEMENT SERVICES: Revenue 36,390 36,505 72,254 71,497 Expenses
30,574 29,319 62,569 58,627
-------------------------------------------------------------------------
Management services contribution 5,816 7,186 9,685 12,870
-------------------------------------------------------------------------
REAL ESTATE DEVELOPMENT: Revenue 84,173 201,718 182,867 240,510
Expenses 65,264 188,632 113,850 222,743
-----------------------------------------------------------------------
18,909 13,086 69,017 17,767 Income from equity accounted
investments 553 2,128 1,142 2,588
-----------------------------------------------------------------------
Real estate development contribution 19,462 15,214 70,159 20,355
-----------------------------------------------------------------------
Income before undernoted items 40,712 46,622 102,304 65,169
Interest and other income 3,706 1,228 4,230 3,313 Interest expense
(12,438) (11,659) (22,861) (22,585) Corporate general and
administrative expenses (6,596) (5,488) (11,971) (9,941)
Depreciation and amortization (13,765) (13,155) (26,423) (24,249)
Call premium and unamortized costs of senior notes redeemed -
(28,069) - (28,069)
-------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes and
non-controlling interest 11,619 (10,521) 45,279 (16,362) Provision
for income taxes 764 2,167 (4,228) 695 Non-controlling interest
(1,048) (2,172) (22,480) (3,051)
-------------------------------------------------------------------------
Income (loss) from continuing operations 11,335 (10,526) 18,571
(18,718) Results of discontinued operations (note 3) 57,948 3,401
59,879 4,525
-------------------------------------------------------------------------
Net income (loss) for the period 69,283 (7,125) 78,450 (14,193)
-------------------------------------------------------------------------
Retained earnings, beginning of period, as previously stated
351,180 312,205 345,348 318,883 Prior period adjustment (note 1) -
(3,926) (3,335) (3,536)
-------------------------------------------------------------------------
Retained earnings, beginning of period, as restated 351,180 308,279
342,013 315,347 Dividends (3,295) (3,037) (3,295) (3,037)
-------------------------------------------------------------------------
Retained earnings, end of period $ 417,168 $ 298,117 $ 417,168 $
298,117
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income (loss) from continuing operations per common share: Basic $
0.23 $ (0.22) $ 0.38 $ (0.39) Diluted $ 0.23 $ (0.22) $ 0.38 $
(0.39) Net income (loss) per common share Basic $ 1.43 $ (0.15) $
1.62 $ (0.30) Diluted $ 1.41 $ (0.15) $ 1.60 $ (0.30)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average number of common shares outstanding (in thousands)
Basic 48,523 47,645 48,379 47,634 Diluted 49,123 47,645 48,979
47,634
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
INTRAWEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands of United States dollars) (unaudited) THREE MONTHS SIX
MONTHS ENDED DECEMBER 31 ENDED DECEMBER 31 2005 2004 2005 2004
-------------------------------------------------------------------------
(RESTATED) (RESTATED) (note 1) (note 1) CASH PROVIDED BY (USED IN):
OPERATIONS: Income (loss) from continuing operations $ 11,335 $
(10,526) $ 18,571 $ (18,718) Items not affecting cash: Depreciation
and amortization 13,765 13,155 26,423 24,249 Future income taxes
5,345 - 5,345 - Non-cash costs of senior notes redeemed - 4,371 -
4,371 Income from equity accounted investments (553) (2,128)
(1,142) (2,588) Amortization of financing costs 654 685 1,303 1,275
Stock-based compensation 252 230 535 440 Amortization of benefit
plan - 296 - 573 Non-controlling interest 1,048 2,172 22,480 3,051
Gain on asset disposals 85 208 60 208
-------------------------------------------------------------------------
Funds from operations 31,931 8,463 73,575 12,861 Recovery of costs
through real estate sales 65,264 143,632 113,850 177,743
Acquisition and development of properties held for sale (115,286)
(107,518) (187,311) (184,112) Changes in long-term amounts
receivable, net (1,538) 3,766 (9,665) (1,319) Changes in non-cash
operating working capital (note 7) 2,500 48,310 (32,347) 23,612
-------------------------------------------------------------------------
Funds from continuing operations (17,129) 96,653 (41,898) 28,785
Funds from discontinued operations (note 3) (1,916) 4,932 265 6,299
-------------------------------------------------------------------------
(19,045) 101,585 (41,633) 35,084 FINANCING: Proceeds from bank and
other borrowings (24,943) 428,223 60,684 532,927 Repayments of bank
and other borrowings (41,529) (400,050) (84,560) (443,987) Issue of
common shares for cash 10,361 663 14,524 937 Dividends received
19,862 - 19,862 - Dividends paid (3,295) (3,037) (3,295) (3,037)
Distributions to non- controlling interest 1,695 (3,131) (27,498)
(5,446)
-------------------------------------------------------------------------
(37,849) 22,668 (20,283) 81,394 INVESTMENTS: Proceeds from
(expenditures on): Resort and travel operations assets (41,022)
(24,373) (69,164) (41,795) Investment in partnerships 2,412 (8,944)
15,241 (10,847) Other assets (1,223) (9,859) (3,494) (15,104)
Business acquisitions, net of cash acquired - (36,974) - (21,297)
Proceeds on sale of business, net of cash disposed of (note 3)
128,274 - 128,274 - Asset disposals (16) 59 158 59
-------------------------------------------------------------------------
88,425 (80,091) 71,015 (88,984)
-------------------------------------------------------------------------
Increase in cash and cash equivalents 31,531 44,162 9,099 27,494
Cash and cash equivalents, beginning of period 118,446 93,148
140,878 109,816
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 149,977 $ 137,310 $
149,977 $ 137,310
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Supplemental information (note 7)) See accompanying notes to
consolidated financial statements. INTRAWEST CORPORATION NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (in thousands of United States
dollars, unless otherwise indicated)
-------------------------------------------------------------------------
1. BASIS OF PRESENTATION: These interim consolidated financial
statements do not include all disclosures required by Canadian
generally accepted accounting principles ("GAAP") for annual
financial statements and should be read in conjunction with the
Company's consolidated financial statements for the year ended June
30, 2005. In the opinion of Management, all adjustments necessary
for a fair presentation are reflected in these interim financial
statements. Such adjustments are of a normal and recurring nature.
The results of operations for the interim periods reported are not
necessarily indicative of the operating results expected for the
year. Except as disclosed below, the significant accounting
policies used in preparing these consolidated financial statements
are consistent with those used in preparing the Company's
consolidated financial statements for the year ended June 30, 2005.
Since there is no specific Canadian GAAP guidance that deals with
accounting for timeshare operations, the Company has adopted
relevant US GAAP guidance. Effective July 1, 2005, the Company
retroactively adopted the new Financial Accounting Standards Board
Statement No. 152, "Accounting for Real-Estate Time-Sharing
Transactions: an amendment of FASB Statements No. 66 and 67." The
new standard sets out specific guidelines for assessing whether the
buyers' initial and continuing investments are adequate to
demonstrate a commitment to pay for the property. Under the amended
rules, the Company has deferred profit on transactions until these
requirements are met. In addition, the standard prohibits the
deferral of marketing costs. The retroactive accounting application
and restatement of prior periods has caused the following increases
(decreases): DECEMBER 31, JUNE 30, 2005 2005 (UNAUDITED) (AUDITED)
---------------------------------------------------------------------
ASSETS Current other assets $ 2,764 $ 3,351
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY Current deferred revenue $
6,304 $ 6,946 Retained earnings (3,335) (3,335) Foreign currency
translation adjustment (205) (260)
---------------------------------------------------------------------
$ 2,764 $ 3,351
---------------------------------------------------------------------
---------------------------------------------------------------------
THREE MONTHS SIX MONTHS ENDED DECEMBER 31 ENDED DECEMBER 31
(UNAUDITED) 2005 2004 2005 2004
---------------------------------------------------------------------
REAL ESTATE DEVELOPMENT: Revenue $ 2,076 $ 768 $ 907 $ (61)
Expenses 1,369 (131) 711 (570)
---------------------------------------------------------------------
Real estate development contribution $ 707 $ 899 $ 196 $ 509
---------------------------------------------------------------------
---------------------------------------------------------------------
Certain comparative figures have been reclassified to conform with
the financial statement presentation adopted in the current year.
2. SEASONALITY OF OPERATIONS: Resort and travel operations are
highly seasonal which impacts reported quarterly earnings. The
majority of the Company's resort and travel operations revenue is
generated during the period from November to April. Furthermore,
during this period a significant portion of resort and travel
operations revenue is generated on certain holidays (particularly
Christmas, Presidents' Day and school spring breaks) and on
weekends. The Company's real estate operations tend to be somewhat
seasonal as well, with construction primarily taking place during
the summer and the majority of sales closing in the December to
June period. 3. DISCONTINUED OPERATIONS: On October 4, 2005, the
Company signed an agreement to sell a majority of its 59.5%
interest in Mammoth Mountain Ski Area ("Mammoth Mountain"). The
Company's retained interest is 15%. Pre-tax net proceeds to the
Company after transaction costs and reinvestment in Mammoth
Mountain were $149,087,000, including funds held in escrow of
$20,813,000, and net of Mammoth Mountain's cash balances sold of
$1,423,000. For reporting purposes, the results of operations of
Mammoth Mountain have been disclosed separately from those of
continuing operations for the periods presented. Earnings from
discontinued operations and the results of the gain relating to
discontinued operations are as follows: THREE MONTHS SIX MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31 (UNAUDITED) 2005 2004 2005 2004
---------------------------------------------------------------------
Revenue $ 2,519 $ 17,153 $ 6,086 $ 20,183
---------------------------------------------------------------------
---------------------------------------------------------------------
Income (loss) from discontinued operations, net of income tax
recovery (expense) of $(254), $(1,226), $2,602 and $1,247
respectively $ (2,031) $ 3,401 $ (100) $ 4,525 Gain on sale of
discontinued operations, net of income tax expense of $47,260
59,979 - 59,979 -
---------------------------------------------------------------------
Results of discontinued operations $ 57,948 $ 3,401 $ 59,879 $
4,525
---------------------------------------------------------------------
---------------------------------------------------------------------
Results of discontinued operations per share Basic $ 1.20 $ 0.07 $
1.24 $ 0.09 Diluted $ 1.18 $ 0.07 $ 1.22 $ 0.09
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash from discontinued operations: Income from discontinued
operations $ 57,948 $ 3,401 $ 59,879 $ 4,525 Adjustments for:
Amortization 115 1,531 365 1,774 Gain on sale (59,979) - (59,979) -
---------------------------------------------------------------------
$ (1,916) $ 4,932 $ 265 $ 6,299
---------------------------------------------------------------------
---------------------------------------------------------------------
4. CAPITAL STOCK: DECEMBER 31, JUNE 30, 2005 2005 (UNAUDITED)
(AUDITED)
---------------------------------------------------------------------
Common shares $ 479,852 $ 465,328 Contributed surplus 4,369 3,834
---------------------------------------------------------------------
$ 484,221 $ 469,162
---------------------------------------------------------------------
---------------------------------------------------------------------
(i) Common shares: NUMBER OF 2005 COMMON SHARES AMOUNT (UNAUDITED)
(UNAUDITED)
---------------------------------------------------------------------
Balance, June 30, 2005 47,957,110 $ 465,328 Issued for cash under
stock option plan 685,850 14,524 Amortization of benefit plan, net
162,816 -
---------------------------------------------------------------------
Balance, December 31, 2005 48,805,776 $ 479,852
---------------------------------------------------------------------
---------------------------------------------------------------------
In addition to the stock options exercised during the six months
ended December 31, 2005, 42,300 stock options were forfeited. A
total of 3,276,050 stock options remain outstanding as at December
31, 2005. (ii) Stock compensation: Effective July 1, 2003, the
Company adopted, on a prospective basis, the fair value measurement
of stock-based compensation. Under the fair value method,
compensation cost for options is measured at fair value at the date
of grant and is expensed over the vesting period. No options were
granted in the six months ended December 31, 2005. The total stock
compensation expense for the six months ended December 31, 2005 was
$535,000 (2004 - $440,000). Had compensation expense for stock
options granted between July 1, 2001 and June 30, 2003 been
determined by a fair value method, the Company's net income would
have been reduced to the pro forma amount indicated below: THREE
MONTHS SIX MONTHS ENDED DECEMBER 31 ENDED DECEMBER 31 (UNAUDITED)
2005 2004 2005 2004
---------------------------------------------------------------------
(RESTATED) (RESTATED) (note 1) (note 1) Net income (loss), as
reported $ 69,283 $ (7,125) $ 78,450 $ (14,193) Estimated fair
value of option grants, net of tax (618) (560) (1,222) (1,085)
---------------------------------------------------------------------
Net income (loss), pro forma $ 68,665 $ (7,685) $ 77,228 $ (15,278)
---------------------------------------------------------------------
---------------------------------------------------------------------
PRO FORMA INCOME PER COMMON SHARE: Basic $ 1.42 $ (0.16) $ 1.60 $
(0.32) Diluted $ 1.40 $ (0.16) $ 1.58 $ (0.32)
---------------------------------------------------------------------
---------------------------------------------------------------------
The estimated fair value of option grants excludes the effect of
those granted before July 1, 2001. 5. EARNINGS PER SHARE: Basic
earnings per common share ("EPS") is calculated by dividing net
income attributable to common shareholders ("numerator") by the
weighted average number of common shares outstanding
("denominator"). Diluted EPS reflects the potential dilution that
could occur if outstanding dilutive options were exercised and the
cash received was used to repurchase common shares at the average
market price for the period. The numerator for basic and diluted
EPS was the same for both periods presented. The reconciliation of
the denominators used is as follows: THREE MONTHS SIX MONTHS ENDED
DECEMBER 31 ENDED DECEMBER 31 2005 2004 2005 2004
---------------------------------------------------------------------
Denominator (in thousands of shares): Weighted average number of
common shares outstanding - basic 48,523 47,645 48,379 47,634
Effect of dilutive options 600 - 600 -
---------------------------------------------------------------------
Weighted average number of common shares outstanding - diluted
49,123 47,645 48,979 47,634
---------------------------------------------------------------------
---------------------------------------------------------------------
For the six months ended December 31, 2005, there are no
anti-dilutive options (2004 - 4,176,300). 6. SEGMENTED INFORMATION:
The following table presents the Company's results from continuing
operations by reportable segment: THREE MONTHS ENDED DECEMBER 31,
2005 MOUNTAIN NON- REAL (UNAUDITED) RESORT MOUNTAIN ESTATE
CORPORATE TOTAL
-------------------------------------------------------------------------
SEGMENT REVENUE: Resort and travel operations $108,805 $ 84,600 $ -
$ - $193,405 Management services 15,085 3,236 18,069 - 36,390 Real
estate development - - 84,726 - 84,726 Corporate and all other - -
- 3,706 3,706
-------------------------------------------------------------------------
$123,890 $ 87,836 $102,795 $ 3,706 $318,227
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SEGMENT OPERATING PROFIT: Resort and travel operations $ 14,216 $
1,218 $ - $ - $ 15,434 Management services (2,067) (282) 8,165 -
5,816 Real estate development - - 19,462 - 19,462 Corporate and all
other - - - 3,706 3,706
-------------------------------------------------------------------------
$ 12,149 $ 936 $ 27,627 $ 3,706 44,418
---------------------------------------------------------------
---------------------------------------------------------------
LESS: Interest expense (12,438) Corporate general and
administrative (6,596) Depreciation and amortization (13,765)
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Income from continuing operations before income taxes and
non-controlling interest $ 11,619
-------------------------------------------------------------------------
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SIX MONTHS ENDED DECEMBER 31, 2005 MOUNTAIN NON- REAL (UNAUDITED)
RESORT MOUNTAIN ESTATE CORPORATE TOTAL
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SEGMENT REVENUE: Resort and travel operations $167,673 $188,307 $ -
$ - $355,980 Management services 29,637 10,220 32,397 - 72,254 Real
estate development - - 184,009 - 184,009 Corporate and all other -
- - 4,230 4,230
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$197,310 $198,527 $216,406 $ 4,230 $616,473
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-------------------------------------------------------------------------
SEGMENT OPERATING PROFIT: Resort and travel operations $ 12,692 $
9,768 $ - $ - $ 22,460 Management services (3,386) 2,361 10,710 -
9,685 Real estate development - - 70,159 - 70,159 Corporate and all
other - - - 4,230 4,230
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$ 9,306 $ 12,129 $ 80,869 $ 4,230 106,534
---------------------------------------------------------------
---------------------------------------------------------------
LESS: Interest expense (22,861) Corporate general and
administrative (11,971) Depreciation and amortization (26,423)
-------------------------------------------------------------------------
Income from continuing operations before income taxes and
non-controlling interest $ 45,279
-------------------------------------------------------------------------
-------------------------------------------------------------------------
THREE MONTHS ENDED DECEMBER 31, 2004 MOUNTAIN NON- REAL (UNAUDITED)
RESORT MOUNTAIN ESTATE CORPORATE TOTAL
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(RESTATED) (note 1) SEGMENT REVENUE: Resort and travel operations $
99,850 $ 78,354 $ - $ - $178,204 Management services 16,200 3,251
17,054 - 36,505 Real estate development - - 203,846 - 203,846
Corporate and all other - - - 1,228 1,228
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$116,050 $ 81,605 $220,900 $ 1,228 $419,783
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-------------------------------------------------------------------------
SEGMENT OPERATING PROFIT: Resort and travel operations $ 21,852 $
2,370 $ - $ - $ 24,222 Management services (1,776) 1,040 7,922 -
7,186 Real estate development - - 15,214 - 15,214 Corporate and all
other - - - 1,228 1,228
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$ 20,076 $ 3,410 $ 23,136 $ 1,228 47,850
---------------------------------------------------------------
---------------------------------------------------------------
LESS: Interest expense (11,659) Corporate general and
administrative (5,488) Depreciation and amortization (13,155) Call
premium and unamortized costs of senior notes redeemed (28,069)
-------------------------------------------------------------------------
Loss from continuing operations before income taxes and
non-controlling interest $(10,521)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SIX MONTHS ENDED DECEMBER 31, 2004 MOUNTAIN NON- REAL (UNAUDITED)
RESORT MOUNTAIN ESTATE CORPORATE TOTAL
-------------------------------------------------------------------------
(RESTATED) (note 1) SEGMENT REVENUE: Resort and travel operations
$140,385 $164,137 $ - $ - $304,522 Management services 28,339
10,550 32,608 - 71,497 Real estate development - - 243,098 -
243,098 Corporate and all other - - - 3,313 3,313
-------------------------------------------------------------------------
$168,724 $174,687 $275,706 $ 3,313 $622,430
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SEGMENT OPERATING PROFIT: Resort and travel operations $ 22,929 $
9,015 $ - $ - $ 31,944 Management services (5,072) 3,884 14,058 -
12,870 Real estate development - - 20,355 - 20,355 Corporate and
all other - - - 3,313 3,313
-------------------------------------------------------------------------
$ 17,857 $ 12,899 $ 34,413 $ 3,313 68,482
---------------------------------------------------------------
---------------------------------------------------------------
LESS: Interest expense (22,585) Corporate general and
administrative (9,941) Depreciation and amortization (24,249) Call
premium and unamortized costs of senior notes redeemed (28,069)
-------------------------------------------------------------------------
Loss from continuing operations before income taxes and
non-controlling interest $(16,362)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
7. CASH FLOW INFORMATION: The changes in non-cash operating working
capital balance consist of the following: THREE MONTHS SIX MONTHS
ENDED DECEMBER 31 ENDED DECEMBER 31 (UNAUDITED) 2005 2004 2005 2004
---------------------------------------------------------------------
(RESTATED) (RESTATED) (note 1) (note 1) CASH PROVIDED BY (USED IN):
Amounts receivable $ 26 $ 3,515 $ 6,188 $ 28,718 Other assets
(35,543) (86,591) (83,978) (135,000) Amounts payable (7,274) 51,091
(4,923) 24,634 Deferred revenue and deposits 45,291 80,295 50,366
105,260
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$ 2,500 $ 48,310 $ (32,347) $ 23,612
---------------------------------------------------------------------
---------------------------------------------------------------------
SUPPLEMENTAL INFORMATION: Interest paid $ 33,795 $ 28,543 $ 42,322
$ 56,292 Income, franchise and withholding taxes paid 8,143 2,540
19,460 6,183 NON-CASH INVESTING AND FINANCING ACTIVITIES: Notes
received on sale of properties to partnerships - 45,406 - 45,406
Notes received on sale of business 20,813 - 20,813 - Bank and other
indebtedness incurred on acquisition - 2,007 - 20,659
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---------------------------------------------------------------------
8. RELATED PARTY TRANSACTIONS: INVESTMENT IN AND ADVANCES TO
PARTNERSHIPS: DECEMBER 31, JUNE 30, 2005 2005 (UNAUDITED) (AUDITED)
---------------------------------------------------------------------
Real estate partnerships $ 85,228 $ 99,904 Commercial partnership
7,982 9,133
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$ 93,210 $ 109,037
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(a) Investment in Real Estate Partnerships The Company sells
certain real estate properties to partnerships in which it holds an
investment. During the six months ended December 31, 2005, the
Company sold no real estate properties to the partnerships (2004 -
two properties were sold for proceeds of $19,824,000). Development
and sales management fees earned during the six months ended
December 31, 2005 totaled $15,856,000 (2004 - $11,775,000) and have
been included in management services revenue. Interest income
related to notes receivable and working capital loans to the
partnerships of $1,276,000 has been included in interest and other
income for the six months ended December 31, 2005 (2004 -
$555,000). INVESTMENT IN AND ADVANCES TO REAL ESTATE PARTNERSHIPS:
DECEMBER 31, JUNE 30, 2005 2005 (UNAUDITED) (AUDITED)
---------------------------------------------------------------------
Equity contributions $ 71,867 $ 82,847 Formation costs 3,742 3,869
Advances 4,772 9,483 Equity income, net of amortization of
formation costs 4,847 3,705
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$ 85,228 $ 99,904
---------------------------------------------------------------------
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At December 31, 2005, deferred revenue includes $60,134,000 (2004 -
$24,330,000) relating to the sale of properties to the partnerships
and amounts receivable includes $56,204,000 (2004 - $17,099,000)
due from the partnerships. (b) Commercial Partnership During the
year ended June 30, 2005, the Company sold commercial properties at
seven of its resorts to a partnership (the "Commercial
Partnership") for cash proceeds of $109,504,000. The Company has a
20% interest in the Commercial Partnership for an equity
contribution of $9,133,000. The Company has leased approximately
30% of the space within the properties for its resort and travel
operations for terms up to 20 years with aggregate rental payments
approximating $87,766,000. In addition, the Company has committed
to head-lease premises that were vacant at the time of closing for
up to four years. The gross amount payable under these commitments
is estimated at $5,003,000 from 2006 to 2009. These commitments
will be reduced by any revenue earned by the Company from
subleasing the vacant space. The net present value of this
estimated net liability is $1,942,000 (2004 - $2,962,000). At
December 31, 2005, deferred revenue includes $7,276,000 (2004 -
$10,421,000) relating to the deferred gain on sale of properties to
the partnership. Management fees earned during the six months ended
December 31, 2005 totaled $202,000 (2004 - nil) and have been
included in management services revenue. DATASOURCE: Intrawest
Corporation CONTACT: Mr. John Currie, chief financial officer, at
(604) 669-9777 or Mr. Tim McNulty, director, investor relations at
(604) 623-6620 or at ; http://www.intrawest.com/
Copyright