Listed: NYSE TSX Symbols: IDR (NYSE) ITW (TSX) www.intrawest.com
VANCOUVER, May 10 /PRNewswire-FirstCall/ -- Intrawest Corporation,
a world leader in destination resorts and adventure travel,
announced today the results for its third quarter ended March 31,
2006. All figures referred to herein are stated in US dollars
unless otherwise indicated. For the quarter, the company reported a
25 per cent increase in Total Company EBITDA (earnings before
interest, income taxes, non-controlling interest, depreciation and
amortization and any non-recurring items) to $136.5 million from
$109.5 million during the same period last year due mainly to the
closing of the first phase of the sale of a majority interest in
its real estate at Mammoth Mountain California. A significant
increase in depreciation and amortization expense, due to a change
in estimated useful lives and depreciation rates of resort and
travel operations assets, reduced income from continuing operations
to $61.0 million or $1.23 per diluted share from $62.7 million or
$1.31 per diluted share last year. "Our proven strategy of
partnering on real estate transactions has once again generated
significant value for the company and shareholders alike," said Joe
Houssian, chairman and chief executive officer of Intrawest
Corporation. "The completion of the Mammoth land transaction has
significantly enhanced our financial position and we look forward
to working closely with our partner as we continue the build-out of
the village at this world-class mountain resort." Third Quarter
Highlights - Total revenue increased 18 per cent to $550.9 million;
- Total Company EBITDA increased 25 per cent to $136.5 million; -
Generated $43.2 million pre-tax profit upon completing the first
phase of the Mammoth land transaction. The second phase of the
transaction closed in April 2006; - Abercrombie & Kent selected
by the readers of Travel Weekly as the "World's Best Luxury Travel
Operator"; - Goldman, Sachs & Co. retained to assist in the
review of strategic options for the company; - Alex Wasilov
appointed president and chief operating officer of Intrawest.
Houssian continued, "The diversified nature of our resort network
also proved valuable as record snowfall in Colorado partially
offset the challenging weather conditions experienced at our
eastern resorts and the strike situation at Tremblant. Three of
nine resorts posted record results and although our resort
operations in British Columbia improved year-over-year, Whistler
Blackcomb was impacted by the spill-over effect of the substandard
weather conditions last year and a strong Canadian dollar." On May
9, 2006, the Board of Directors declared a dividend of Cdn.$0.08
per common share payable on July 26, 2006 to shareholders of record
on July 12, 2006. 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 May 9,
2006. THREE MONTHS ENDED MARCH 31, 2006 (THE "2006 QUARTER")
COMPARED WITH THREE MONTHS ENDED MARCH 31, 2005 (THE "2005
QUARTER") Income from continuing operations was $61.0 million
($1.23 per diluted share) in the 2006 quarter compared with $62.7
million ($1.31 per diluted share) in the 2005 quarter. Income in
the 2005 quarter included an income tax recovery of $4.6 million
(refer to REVIEW OF CORPORATE OPERATIONS below) compared with an
income tax expense of $5.9 million in the 2006 quarter. The 2005
quarter also included $2.1 million of call premium and other costs
to redeem senior notes. Total Company EBITDA increased 25% from
$109.5 million to $136.5 million due mainly to the closing of the
first phase of Mammoth lands to a joint venture with an entity
controlled by Starwood Capital Group Global, L.L.C. (Starwood
Capital). This transaction followed on from the sale of the
majority of our interest in Mammoth Mountain Ski Area to Starwood
Capital in the second quarter of fiscal 2006. Mammoth's results for
the 2005 quarter (net income of $3.5 million) have been disclosed
as discontinued operations. REVIEW OF RESORT AND TRAVEL OPERATIONS
Resort and travel operations revenue increased from $356.6 million
in the 2005 quarter to $386.2 million in the 2006 quarter. In
August 2005 we entered into a lease to operate Parque de Nieve, an
indoor snowdome in Spain, and revenue in the 2006 quarter included
$2.2 million from this new business. The rise in the value of the
Canadian dollar from an average rate of US$0.80 in the 2005 quarter
to US$0.85 in the 2006 quarter increased reported resort and travel
operations revenue by $9.5 million. On a same-business, constant
exchange rate basis, resort and travel operations revenue increased
by 5% to $374.5 million. Revenue from our mountain segment
increased from $275.7 million to $289.9 million while revenue from
our non-mountain segment increased from $80.9 million to $84.6
million. Skier visits increased from 4,400,000 in the 2005 quarter
to 4,572,000 in the 2006 quarter with an increase of 11% at our
western resorts being partially offset by a decrease of 6% at our
eastern resorts. In comparing these skier visit changes readers
should note that the timing of Easter in April in 2006 and in March
in 2005 decreased skier visits (as well as resort and travel
operations revenue and EBITDA) in the 2006 quarter but did not have
a similar negative impact on the 2005 quarter. Whistler Blackcomb
saw a 15% increase in skier visits compared with the 2005 quarter
when all our British Columbia operations experienced very
challenging weather conditions, with heavy rainfall in mid-January
followed by warm, dry conditions through mid-March. We continue,
however, to see some spill-over effect from the sub-standard ski
season last year, evidenced by the fact that notwithstanding near
record snowfall, Whistler Blackcomb's skier visits in the 2006
quarter were 3% lower than the comparable period in 2004. In
Colorado, Copper and Winter Park benefited from the best snow
conditions in many years, enabling them to increase skier visits by
9% on a combined basis in the 2006 quarter. In the East, the direct
and lingering impact of the workers' strike over Christmas and
early January as well as seven weekends of either rain or extremely
low temperatures reduced Tremblant's skier visits by 8% in the 2006
quarter. The poor weather also impacted Stratton and to a lesser
extent Snowshoe, where skier visits declined by 11% and 5%,
respectively. Our other eastern resorts, Blue Mountain and Mountain
Creek, were not as impacted by the weather, realizing skier visit
increases of 5% and 2%, respectively. Revenue per skier visit,
adjusted for a constant Canadian dollar exchange rate, increased 1%
in the 2006 quarter. At Whistler Blackcomb, a shift in the mix of
visits from higher-yielding destination visitors to lower-yielding
regional visitors resulted in a 4% decline in revenue per visit at
that resort. A lack of bookings from long-haul U.S. markets, which
were down by 34% compared with last season, was the main reason for
the decline in destination visits. The high Canadian dollar, the
cost of air lift into Vancouver and generally excellent conditions
at resorts in the U.S. West contributed to the reduced bookings. It
is also likely that the lack of snow and generally poor weather at
Whistler Blackcomb in November and December during the prime
booking window for the 2006 quarter enticed potential visitors to
book elsewhere. For the season to the end of April, our skier visit
mix was 49% regional and 51% destination in fiscal 2006 compared
with 42% regional and 58% destination in fiscal 2005. Revenue per
visit also declined in the 2006 quarter at Tremblant (by 1%) as we
discounted many of our prices during the period when the workers'
strike limited our operations and then afterwards to stimulate
demand. Excluding Tremblant, our eastern resorts saw a 6% increase
in revenue per skier visit. At our Colorado resorts, revenue per
skier visit was the same in the 2006 quarter as the 2005 quarter
due mainly to a higher mix of lower-yielding season pass visits as
pass holders took advantage of the excellent snow conditions. The
increase in revenue from the non-mountain segment in the 2006
quarter was primarily due to a 7% increase in adventure-travel tour
revenue at Abercrombie & Kent ("A&K") from $67.8 million to
$72.3 million. A&K saw good growth in tour revenues from most
of its major destinations, particularly East Africa, India and
Egypt. Resort and travel operations revenue at Sandestin decreased
by $0.7 million or 7%, due mainly to a regional downturn related to
last summer's hurricanes. Although Sandestin did not sustain
significant physical damage from the hurricanes its business was
impacted during the 2006 quarter as many potential visitors assumed
that the Florida Panhandle suffered serious damage. The breakdown
of resort and travel operations revenue by major business component
was as follows: 2006 2005 (MILLIONS) QUARTER QUARTER INCREASE
CHANGE(%)
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Mountain operations $173.3 $156.5 $16.8 11 Retail and rental shops
58.1 54.1 4.0 7 Food and beverage 40.6 38.1 2.5 7 Ski school 26.4
25.1 1.3 5 Golf 5.1 5.2 (0.1) (2) Adventure-travel tours 72.3 67.8
4.5 7 Other 10.4 9.8 0.6 6
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$386.2 $356.6 $29.6 8
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Resort and travel operations expenses increased from $273.5 million
in the 2005 quarter to $302.9 million in the 2006 quarter, of which
$2.3 million and $6.8 million, respectively, were due to the lease
of Parque de Nieve and 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 $16.4 million
to $209.5 million, partly due to: - Higher business volumes at our
British Columbia operations (Whistler Blackcomb, Panorama and
Alpine Helicopters) and our Colorado resorts, which increased
mountain segment expenses by $3.6 million. - The opening of nine
new stores by The Intrawest Retail Group in fiscal 2006 resulting
in $2.5 million of incremental costs. - The workers' strike at
Tremblant, which added $1.4 million of direct expenses, mainly
comprising security, marketing and extra costs of the employees who
filled in for the striking workers. - An increase of $0.9 million
in fuel and utility costs. - A new operational excellence
initiative (modeled off Six Sigma) designed to change our work
processes in order to derive cost savings and efficiencies in the
future, which added $1.2 million of costs. - An increase of $1.9
million in divisional operations group overhead, mainly related to
marketing and sales and information technology. Expenses in the
non-mountain segment increased by $3.8 million to $84.3 million.
The higher business volumes at A&K increased expenses by $2.4
million and expenses at Sandestin increased by $1.1 million due
mainly to higher labor and resort association costs. Resort and
travel operations EBITDA increased slightly from $83.0 million in
the 2005 quarter to $83.3 million in the 2006 quarter. The lease of
Parque de Nieve and the reporting impact of the higher Canadian
dollar in aggregate increased EBITDA in the 2006 quarter by $2.6
million. On a same-business, constant exchange rate basis EBITDA in
the mountain segment increased by $0.3 million to $82.9 million
while EBITDA from our non-mountain segment was flat at $0.4
million. Superior weather and snow conditions in the 2006 quarter
compared with the 2005 quarter at our British Columbia operations
increased EBITDA by $4.6 million, however this was significantly
below our expectations due to the shortfall in higher-margin
destination visitors at Whistler Blackcomb discussed above. In
Colorado, excellent conditions and record skier visits increased
EBITDA in the 2006 quarter by $4.9 million. These positive factors
were offset by a number of negative factors, including the direct
and lingering impact of the workers' strike at Tremblant, which
reduced EBITDA by $5.8 million in the 2006 quarter and the timing
of Easter being in April this year and in March last year, which
decreased EBITDA in the 2006 quarter by approximately $4.1 million.
In the non-mountain segment, an increase of $2.0 million in EBITDA
at A&K due mainly to tour sales growth and improved tour yields
was offset by a decrease of approximately the same amount in EBITDA
at Sandestin. REVIEW OF MANAGEMENT SERVICES Management services
revenue and EBITDA in the 2006 and 2005 quarters were broken down
as follows: 2006 QUARTER 2005 QUARTER (MILLIONS) REVENUE EBITDA
REVENUE EBITDA
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Services related to resort and travel operations Lodging and
property management $36.1 $14.9 $37.2 $17.3 Other resort and travel
fees 5.4 1.7 10.5 2.9
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41.5 16.6 47.7 20.2
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Services related to real estate development Real estate services
fees 2.4 0.4 2.0 (0.2) Playground sales fees 15.3 4.4 9.4 3.6
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17.7 4.8 11.4 3.4
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$59.2 $21.4 $59.1 $23.6
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The decreases in lodging and property management revenue and EBITDA
in the 2006 quarter were due mainly to a 3% decline in occupied
room nights, with reductions of 25% at Tremblant and 14% at
Sandestin offsetting an increase of 7% across our other resorts.
The factors that impacted resort and travel operations results also
affected our occupied room nights at our resorts. The decrease in
occupied room nights was partially offset by an increase of 2% in
average daily rates. The direct impact of the strike at Tremblant
reduced lodging and property management EBITDA by $1.1 million in
the 2006 quarter. The decrease in other resort and travel fees in
the 2006 quarter was due mainly to a $3.1 million reduction in
reservation fees earned by our central call center as we sold our
reservations company in Colorado in August 2005 and we continued to
focus on reservations to our own resorts while reducing our
third-party reservations business. In addition, Resort Club
management fees decreased by $1.5 million, offsetting a positive
variance of approximately the same amount in the second quarter and
golf management fees declined by $0.6 million, reflecting our
decision last year to exit the non-resort golf business. These
revenue decreases reduced EBITDA from other resort and travel fees
by $1.2 million in the 2006 quarter. The increases in real estate
services fees revenue and EBITDA of $0.4 million and $0.6 million,
respectively, in the 2006 quarter were due to increased development
and marketing fees from managing partnership projects. These fees
are recognized on a percentage-of-completion basis during the
course of construction. The larger increase in EBITDA relative to
revenue in the 2006 quarter reflects a greater proportion of
marketing fees, which have a higher margin than development fees.
The $5.9 million increase in sales fees earned by Playground, our
real estate sales business, was due mainly to the successful sales
launches of two major projects which generated revenues of $5.5
million and the timing of certain project completions. Playground
recognizes revenue either when the purchaser signs a firm contract,
or on closing, depending upon the terms of the listing agreement
with the developer. The additional revenue increased Playground's
EBITDA by $3.1 million in the 2006 quarter, however this was
partially offset by an allocation of $2.3 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 increased from
$48.3 million in the 2005 quarter to $102.4 million in the 2006
quarter. Revenue for the 2006 quarter included $72.1 million from
the sale of the first phase of Mammoth lands to a joint venture in
which an entity controlled by Starwood Capital has an 85% interest
and we have a 15% interest. The second and final phase of the
transaction closed in April 2006. The entire transaction comprises
real estate for the future development of over 1,100 residential
units and 40,000 square feet of commercial space in the town of
Mammoth Lakes. Excluding the sale of Mammoth lands, revenue
generated by Intrawest Placemaking (our resort development
business) decreased from $37.1 million to $20.3 million while
revenue generated by Intrawest Resort Club (our vacation ownership
business) decreased from $11.2 million to $10.0 million. Intrawest
Placemaking closed 33 units in the 2006 quarter compared with 93
units in the 2005 quarter. Since we generally presell our real
estate, the timing of closings is mainly determined by construction
completion and we did not complete any projects in the 2006
quarter. The average price per closed unit was $614,000 in the 2006
quarter, up significantly from $395,000 in the 2005 quarter. In an
effort to sell long-standing inventory at Solitude and Copper we
discounted prices and closed a total of 36 units at an average
price of $321,000 per unit in the 2005 quarter. In addition, we
closed $8.1 million of high-end townhomes, including fractional
Storied Places properties (three whole units) in the 2006 quarter
versus $2.1 million (one whole unit) in the 2005 quarter. Real
estate EBITDA increased from $8.3 million in the 2005 quarter to
$42.2 million in the 2006 quarter. Real estate EBITDA comprises
operating profit from real estate plus interest included in real
estate expenses. Interest is capitalized to real estate properties
during the development process and then is expensed, as part of
real estate development expenses, when the properties are closed.
Interest in cost of sales increased from $3.9 million in the 2005
quarter to $4.9 million in the 2006 quarter in line with the
increase in real estate development expenses. Operating profit from
real estate development increased from $4.4 million in the 2005
quarter to $37.3 million in the 2006 quarter due mainly to the
closing of the Mammoth land sale, which generated $42.9 million of
operating profit. Profit on land sales to partnerships and equity
income from partnerships, which are recognized on a
percentage-of-completion basis, increased from $4.6 million to $6.2
million due to the stage of construction of partnership projects.
These increases in operating profit were partially offset by a
number of costs, reserves and write downs in the 2006 quarter,
including: - We expensed $2.4 million of costs in connection with
the remediation of deficiencies at a project that we completed
several years ago at Sandestin. We expect to recover most of these
costs from insurance carriers and consultants, however GAAP
restricts these recoveries from being recorded until they are
certain. - In order to stimulate demand for our joint venture lot
development at Three Peaks in Colorado the partners decided to
reduce sales prices and as a result we recorded a write down of
$1.7 million. This strategy has proved to be successful as we have
sold 21 lots so far in fiscal 2006 compared with 10 lots in the
whole of fiscal 2005. - We wrote down the book value of our
Appalachian project at Mountain Creek by $1.6 million as
significant construction delays and disputes with the general
contractor (resulting in the termination of the contractor's
contract), increased costs and caused the project to be
unprofitable. We expect to close units in this project commencing
in the fourth quarter of fiscal 2006. - We expensed $2.0 million of
overhead and other carrying costs related to our undeveloped lands
at Copper. We are negotiating with the planning commissioners to
change the zoning at Copper and we decided to expense holding costs
on a current basis pending resolution of the rezoning application.
We adopted this practice in fiscal 2005, however the entire expense
in that year was recorded in the fourth quarter. REVIEW OF
CORPORATE OPERATIONS Interest and other income increased from $2.4
million in the 2005 quarter to $3.2 million in the 2006 quarter due
mainly to $0.7 million higher gains on asset disposals and higher
interest income on funds held by our insurance captive. Interest
expense was $10.7 million in the 2006 quarter, up from $9.1 million
in the 2005 quarter due mainly to capitalizing less interest to
real estate, including $1.0 million in connection with our
commercial properties at Squaw and Lake Las Vegas which were
completed at the end of fiscal 2005. In addition to interest
expense, during the 2005 quarter we expensed $2.1 million of call
premium and other costs when we redeemed the balance of our 10.5%
senior notes. Corporate general and administrative ("G&A")
expenses increased from $5.4 million in the 2005 quarter to $10.4
million in the 2006 quarter. We have a number of stock-based
executive compensation plans that are marked-to-market each quarter
and the rise in our share price during the 2006 quarter increased
compensation expense by $1.8 million more than the 2005 quarter. We
have entered into a share swap transaction with a major financial
institution that partially mitigates the effect of these
mark-to-market adjustments. We also incurred $1.2 million of costs
in the 2006 quarter in connection with a new branding/business
strategy initiative and the impact of the stronger Canadian dollar
increased reported G&A by $0.6 million. Depreciation and
amortization expense increased significantly from $31.3 million in
the 2005 quarter to $47.8 million in the 2006 quarter. Earlier in
fiscal 2006 we commenced a review of the useful lives and
depreciation methods of our ski and resort operations assets. As a
result of this review we increased depreciation and amortization
expense in the 2006 quarter by $17.7 million. This adjustment
includes both a prospective change from the current period in our
depreciation method from declining balance to straight-line and a
change in the useful lives of the assets to better reflect our
historical operating experience and the remaining service and
earning potential of the assets. We estimate that this change in
the method of recognizing the carrying value of these assets
against their remaining useful lives will increase depreciation and
amortization expense on an ongoing annual basis by approximately $8
million. The provision for income taxes was $5.9 million in the
2006 quarter compared with a recovery of income taxes of $4.6
million in the 2005 quarter. Lower pre-tax income and the
utilization of income tax losses resulted in the recovery in the
2005 quarter. Non-controlling interest increased from $7.3 million
in the 2005 quarter to $9.4 million in the 2006 quarter in line
with the increases in net income at both Whistler Blackcomb and
A&K during the 2006 quarter. NINE MONTHS ENDED MARCH 31, 2006
(THE "2006 PERIOD") COMPARED WITH NINE MONTHS ENDED MARCH 31, 2005
(THE "2005 PERIOD") Income from continuing operations increased
from $44.0 million ($0.92 per diluted share) in the 2005 period to
$79.6 million ($1.62 per diluted share) in the 2006 period. Income
in the 2005 period was reduced by $30.2 million of call premium and
other costs to redeem $394.4 million of 10.5% senior notes and it
was increased by an income tax recovery of $5.3 million compared
with an income tax expense of $10.1 million in the 2006 period.
Total Company EBITDA increased 31% from $177.8 million to $232.2
million as significantly increased EBITDA from real estate
development was partly offset by reduced EBITDA from resort and
travel operations and management services and higher corporate
G&A expenses. Results of discontinued operations, comprising
the gain from the sale of the majority of our interest in Mammoth
Mountain Ski Area in our second quarter and Mammoth's operating
results to the sale date, was $59.9 million in the 2006 period
compared with $8.0 million in the 2005 period. This resulted in net
income of $139.5 million ($2.83 per diluted share) in the 2006
period, up from $52.0 million ($1.09 per diluted share) in the 2005
period. REVIEW OF RESORT AND TRAVEL OPERATIONS Resort and travel
operations revenue increased from $661.1 million in the 2005 period
to $742.2 million in the 2006 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 $5.7
million, respectively, of incremental revenue and the impact of the
higher Canadian dollar increased reported revenue by a further
$15.5 million. On a same-business, constant exchange rate basis,
revenue from our mountain segment increased by $18.6 million to
$434.7 million due mainly to improved revenues (resulting from
superior weather and snow conditions) at our British Columbia
operations and Colorado resorts partially offset by reduced
revenues at Tremblant due to the direct and lingering impact of the
workers' strike and challenging weather. Revenue from our
non-mountain segment increased by $27.8 million to $272.8 million
in the 2006 period due mainly to 15% growth in A&K's adventure-
travel tour business. EBITDA from resort and travel operations
decreased from $115.0 million in the 2005 period to $105.7 million
in the 2006 period. On a same-business, constant exchange rate
basis, EBITDA from our mountain segment decreased by $12.7 million
to $94.3 million. The timing of Easter in March in 2005 and April
in 2006 increased EBITDA in the 2005 period by $4.1 million and the
impact of the worker's strike reduced EBITDA at Tremblant in the
2006 period by $7.9 million. These declines were partially offset
by $1.8 million and $2.3 million, respectively, more EBITDA from
our British Columbia operations and Colorado resorts. EBITDA from
our non-mountain segment decreased by $0.4 million to $7.6 million
as an increase in EBITDA of $8.7 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 a licensing
agreement in August 2005), lower EBITDA from Sandestin in the
aftermath of the hurricanes last summer and severance and other
costs related to our decision to exit the non- resort golf
business. A portion of Sandestin's shortfall is expected to be
recovered through a $2.7 million business interruption claim, which
is currently under review by the insurance companies. REVIEW OF
MANAGEMENT SERVICES Management services revenue and EBITDA in the
2006 and 2005 periods were broken down as follows: 2006 PERIOD 2005
PERIOD (MILLIONS) REVENUE EBITDA REVENUE EBITDA
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Services related to resort and travel operations Lodging and
property management $69.9 $13.0 $70.2 $17.6 Other resort and travel
fees 11.4 2.6 16.5 1.4
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81.3 15.6 86.7 19.0
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Services related to real estate development Real estate services
fees 18.3 8.6 13.7 5.5 Playground sales fees 31.9 6.9 30.2 11.9
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50.2 15.5 43.9 17.4
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$131.5 $31.1 $130.6 $36.4
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The decline in revenue and EBITDA from lodging and property
management in the 2006 period was due mainly to a 2% decrease in
occupied room nights with decreases of 16% at Tremblant and 7% at
Sandestin offsetting an increase of 4% across our other resorts. In
addition, EBITDA was impacted by higher housekeeping costs,
particularly at Sandestin where we upgraded our housekeeping
practices. The decrease in revenue from other resort and travel
fees was due mainly to curtailing our third-party reservations
business, including selling our Fly4Less and Moguls operations, and
terminating most of our golf management contracts in line with our
strategy to exit the non-resort golf business. Our third-party
reservations business was not profitable and winding it down
resulted in the increase in EBITDA from other resort and travel
fees in the 2006 period. 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. Playground sales fees
increased by $1.7 million in the 2006 period as revenue growth from
continued strong markets in most locations was largely offset by a
slower resale market in Florida in the aftermath of the hurricanes.
Playground EBITDA was reduced by the timing of allocating
Playground G&A costs to the management services segment. In the
2006 period EBITDA was reduced by $8.0 million of G&A costs
compared with no reduction in the 2005 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 decreased from $288.8 million in the 2005 period to
$285.2 million in the 2006 period. Revenue for the 2005 period
included $109.5 million from the sale of commercial properties and
$19.9 million from the sale of two residential projects to
partnerships. In addition to the closing of the first phase of
Mammoth lands to the joint venture with Starwood Capital for
revenue of $72.1 million in the 2006 period we also closed a
26-acre beachfront property in Maui for proceeds of $73.3 million
in our first quarter. 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
sales of the Mammoth lands and the Maui property in the 2006 period
and the sales of commercial properties and residential projects to
partnerships in the 2005 period, revenue generated by Intrawest
Placemaking decreased from $128.1 million to $110.4 million while
revenue generated by Intrawest Resort Club decreased from $31.3
million to $29.6 million. Intrawest Placemaking closed 185 units in
the 2006 period at average price of $597,000 per unit compared with
314 units at an average price of $408,000 per unit in the 2005
period. The higher average price was due to closing more high-end
fractional interest townhomes and fewer single-family lots in the
2006 period and the decline in the number of closings reflects the
timing of construction completions. For the fiscal year we expect
to close about 500 units compared with the 557 units we closed in
fiscal 2005. The profit contribution from real estate development
increased significantly from $24.7 million in the 2005 period to
$107.4 million in the 2006 period due mainly to recognizing $43.9
million and $42.9 million, respectively, of profit from the sales
of the Maui property and the Mammoth lands. REVIEW OF CORPORATE
OPERATIONS Interest and other income was $7.5 million in the 2006
period, up from $5.7 million in the 2005 period due mainly to $0.8
million of increased gains on asset disposals and higher interest
income, including interest on notes to partnerships for project
sales. Interest expense increased from $31.7 million in the 2005
period to $33.6 million in the 2006 period. Interest incurred was
$1.3 million lower in the 2005 period (partly due to redeeming
higher-interest senior notes during fiscal 2005), however we
capitalized $3.2 million less interest to real estate, including
$2.7 million in connection with our commercial properties at Squaw
and Lake Las Vegas which were completed at the end of fiscal 2005.
In addition to interest expense, during the 2005 period we expensed
$30.2 million of call premium and other costs when we redeemed
$394.4 million of 10.5% senior notes. Corporate general and
administrative expenses increased from $15.3 million in the 2005
period to $22.4 million in the 2006 period. We have a number of
executive stock-based compensation plans that are marked-to-market
each quarter and the 34% rise in our share price during the 2006
period compared with an 8% increase in the 2005 period increased
compensation expense by $2.8 million. In addition, we incurred $2.9
million of costs in connection with a new branding/business
strategy initiative and the impact on reported G&A of the
stronger Canadian dollar added a further $1.3 million in the 2006
period. Depreciation and amortization expense increased from $55.6
million in the 2005 period to $74.2 million in the 2006 period due
mainly to the adjustment of $17.7 million discussed above to change
the depreciation method and useful lives of our ski and resort
operations assets. We provided for $10.1 million of income taxes in
the 2006 period compared with a recovery of $5.3 million of income
taxes in the 2005 period. Lower pre- tax income and the utilization
of income tax losses resulted in the recovery in the 2005 period.
We expect our effective income tax rate to be approximately 12% for
the current fiscal year, excluding tax on the Mammoth Mountain Ski
Area gain, which is included in discontinued operations.
Non-controlling interest was $31.9 million in the 2006 period, up
from $10.4 million in the 2005 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 and Whistler Blackcomb in the 2006 period. LIQUIDITY AND
CAPITAL RESOURCES In February 2006 we announced that we had
initiated a review of strategic options for enhancing shareholder
value, including, but not limited to, a capital structure review,
strategic partnerships or business combinations. We engaged
Goldman, Sachs & Co. to assist in the review, which is
currently underway with no set timetable for its completion. There
can be no assurance that the review will result in any specific
strategic or financial transaction. The following table summarizes
the major sources and uses of cash in the 2006 and 2005 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. 2006 2005 2006 2005 (MILLIONS) QUARTER QUARTER
CHANGE PERIOD PERIOD CHANGE
-------------------------------------------------------------------------
Funds from continuing operations $89.3 $103.5 ($14.2) $162.9 $116.3
$46.6 Cash flow for real estate including partnership investments
(48.1) (48.9) 0.8 (106.3) (66.7) (39.6) Cash for resort capex and
other assets (30.3) (23.1) (7.2) (103.0) (80.0) (23.0) Cash flow
from long-term receivables and working capital 10.7 (34.9) 45.6
(31.3) (12.0) (19.3) Funds from discontinued operations - 7.4 (7.4)
0.3 13.7 (13.4)
-------------------------------------------------------------------------
Free cash flow 21.6 4.0 17.6 (77.4) (28.7) (48.7) Cash from (for)
business acquisitions and disposals 0.9 (0.1) 1.0 129.3 (21.3)
150.6
-------------------------------------------------------------------------
Net cash flow from operating and investing activities 22.5 3.9 18.6
51.9 (50.0) 101.9 Net financing inflows (outflows) (19.8) (11.7)
(8.1) (40.1) 69.7 (109.8)
-------------------------------------------------------------------------
Increase (decrease) in cash $2.7 ($7.8) $10.5 $11.8 $19.7 ($7.9)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Funds from continuing operations in the 2005 quarter and 2005
period were reduced by the payment of the call premium when we
redeemed senior notes and increased by the recovery of income
taxes. 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 2006 quarter
and 2006 period. For more details see the Review of Operations
sections earlier in this MD&A. Real estate development used
$48.1 million of cash in the 2006 quarter, down slightly from $48.9
million in the 2005 quarter as we recovered more costs through real
estate sales, including the Mammoth land transaction with Starwood
Capital, however this was offset by increased expenditures to
develop new projects. For the 2006 period real estate development
used $106.3 million of cash compared with $66.7 million in the 2005
period. The sale of commercial properties in the 2005 period
generated $54.8 million of cash. We spent $31.1 million in the 2006
period to acquire new land holdings at Hilton Head, South Carolina
and Napa, California for the future aggregate development of 1,400
units. We did not acquire any new land holdings in the 2005 period.
Expenditures on resort and travel operations assets ("capex") and
other assets used $30.3 million cash in the 2006 quarter, up from
$23.1 million in the 2005 quarter. We spent approximately $10
million on maintenance capex in the 2006 quarter and our major
expansion capex projects included the acquisition of the Stratton
Mountain Inn and the renovation of the Baytowne golf course at
Sandestin. We had not planned to purchase the Inn, however it is an
important source of lodging for Stratton and the previous owner
wanted to demolish it for condominiums. We also spent $8.1 million
on other assets in the 2006 quarter, mainly comprising the
acquisition of a lodging operation near Sandestin and information
technology improvements. This brought spending on capex and other
assets to $103.0 million for the 2006 period, up from $80.0 million
in the 2005 period. Each year we spend approximately $40 million on
maintenance capex at our resorts. We had expected our expansion
capex to total $50 million for fiscal 2006, however we now expect
it to be closer to $60 million. Long-term receivables and working
capital provided $10.7 million of cash in the 2006 quarter compared
with a use of $34.9 million cash in the 2005 quarter. This
represents the cash flow from changes in receivables, other assets,
payables and deferred revenue. These items used $31.3 million of
cash in the 2006 period, up from $12.0 million in the 2005 period.
Funds from discontinued operations, being cash flow from Mammoth
Mountain Ski Area prior to its sale, amounted to $0.3 million in
the 2006 period compared with $7.4 million and $13.7 million,
respectively, in the 2005 quarter and 2005 period. We continue to
own 15% of the resort, however we are not expecting our investment
to generate significant cash flow in the near term. Our businesses
generated free cash flow of $21.6 million in the 2006 quarter, up
from $4.0 million in the 2005 quarter. This brought free cash flow
to negative $77.4 million for the 2006 period compared with
negative free cash flow of $28.7 million in the 2005 period.
Business acquisitions and disposals generated or used minimal cash
in the 2006 and 2005 quarters. In the 2006 period the sale of the
majority of our interest in Mammoth generated $128.3 million of
cash. The purchaser also paid $20.8 million into escrow to fund
potential warranty claims, $1.8 million of which we recovered in
the 2006 quarter, with the unused balance scheduled for release
after 15 months. In the 2005 period we spent $21.7 million on
business acquisitions, being $36.9 million on the acquisition of
55% of Alpine Helicopters that we did not already own net of $15.2
million cash acquired on the acquisition of 67% of A&K. In
total, our operating and investing activities provided $22.5
million of cash in the 2006 quarter, up from $3.9 million in the
2005 quarter, which we used primarily to pay down debt. For the
2006 period, operating and investing activities generated $51.9
million of cash, which we used to repay debt compared with a cash
outflow of $50.0 million in the 2005 period, which we funded
primarily by drawing on our senior credit facility. At March 31,
2006, we had drawn $147.1 million under this facility and we had
also issued letters of credit for $53.7 million, leaving $224.2
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. During the 2006
quarter we acquired 86,900 shares for $2.4 million and then
suspended the buy back program after we initiated our review of
strategic options. Additional Information Total Company EBITDA 2006
2005 2006 2005 (MILLIONS) Quarter Quarter Period Period
-------------------------------------------------------------------------
Cash flow provided by (used in) continuing operating activities
$65.0 $19.7 $23.1 $48.5 Add (deduct): Changes in non-cash operating
assets and liabilities 24.3 83.8 139.8 67.9 Current income tax
expense 35.4 (4.6) 34.3 (5.3) Interest expense 10.7 9.1 33.6 31.7
Interest in real estate costs 4.9 3.9 10.3 16.9 Call premium and
unamortized costs on senior notes redeemed - 2.1 - 30.2
-------------------------------------------------------------------------
140.3 114.0 241.1 189.9 Interest and other income, net of non-cash
items (3.8) (4.5) (8.9) (12.1)
-------------------------------------------------------------------------
Total Company EBITDA $136.5 $109.5 $232.2 $177.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Resort and Travel Operations EBITDA 2006 2005 2006 2005 (MILLIONS)
Quarter Quarter Period Period
-------------------------------------------------------------------------
Resort and travel operations revenue $386.2 $356.6 $742.2 $661.1
Resort and travel operations expenses 302.9 273.6 636.5 546.1
-------------------------------------------------------------------------
Resort and travel operations EBITDA $83.3 $83.0 $105.7 $115.0
-------------------------------------------------------------------------
Management Services EBITDA 2006 2005 2006 2005 (MILLIONS) Quarter
Quarter Period Period
-------------------------------------------------------------------------
Management services revenue $59.2 $59.1 $131.5 $130.6 Management
services expenses 37.8 35.5 100.4 94.2
-------------------------------------------------------------------------
Management services EBITDA $21.4 $23.6 $31.1 $36.4
-------------------------------------------------------------------------
Real Estate Development EBITDA 2006 2005 2006 2005 (MILLIONS)
Quarter Quarter Period Period
-------------------------------------------------------------------------
Real estate development contribution $37.3 $4.4 $107.4 $24.7
Interest in real estate expenses 4.9 3.9 10.3 16.9
-------------------------------------------------------------------------
Real estate development EBITDA $42.2 $8.3 $117.7 $41.6
-------------------------------------------------------------------------
Quarterly Financial Summary (in millions, except per share amounts)
Q3-06 Q2-06 Q1-06 Q4-05 Q3-05 Q2-05 Q1-05 Q4-04
-------------------------------------------------------------------------
Total revenue $550.9 $318.2 $298.2 $523.6 $466.0 $419.8 $202.7
$480.7 Income (loss) from continuing operations 61.0 11.3 7.3
(18.6) 62.7 (10.5) (8.2) 3.7 Results of discontinued operations -
57.9 1.9 (0.6) 3.5 3.4 1.1 0.0 Net income (loss) 61.0 69.3 9.2
(19.2) 66.2 (7.1) (7.1) 3.7 PER COMMON SHARE: Income (loss) from
continuing operations Basic 1.25 0.23 0.15 (0.39) 1.31 (0.22)
(0.17) 0.08 Diluted 1.23 0.23 0.15 (0.39) 1.31 (0.22) (0.17) 0.08
Net income (loss) Basic 1.25 1.43 0.19 (0.40) 1.39 (0.15) (0.15)
0.08 Diluted 1.23 1.41 0.19 (0.40) 1.38 (0.15) (0.15) 0.08 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 May 9, 2006, we have issued and there
are outstanding 49,059,126 common shares and stock options
exercisable for 2,860,400 common shares. A conference call is
scheduled for Wednesday, May 10, 2006 at 11:00am ET (8:00am PT) to
review Intrawest's third 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 May
17, 2006 at 1-877-519-4471 with password 7285144. The call will
also be web cast 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 -------------------------------- (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. INTRAWEST CORPORATION CONSOLIDATED BALANCE
SHEETS (in thousands of United States dollars) MARCH 31, JUNE 30,
2006 2005 (UNAUDITED) (AUDITED)
-------------------------------------------------------------------------
(RESTATED) (note 1) ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 152,639 $ 140,878 Amounts receivable 163,991 162,102
Other assets 222,424 188,211 Resort properties 474,579 388,510
Future income taxes 27,618 29,927
-------------------------------------------------------------------------
1,041,251 909,628 Amounts receivable 81,559 78,877 Resort and
travel operations 979,249 1,034,187 Resort properties 465,339
403,252 Other assets 104,259 85,181 Investment in and advances to
real estate partnerships (note 8) 105,658 109,037 Goodwill 22,450
27,483
-------------------------------------------------------------------------
$ 2,799,765 $ 2,647,645
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Amounts
payable $ 322,066 $ 275,176 Deferred revenue and deposits 233,198
201,313 Bank and other indebtedness 84,077 82,144
-------------------------------------------------------------------------
639,341 558,633 Deferred revenue and deposits 104,266 132,866 Bank
and other indebtedness 908,299 941,279 Future income taxes 52,714
92,010 Non-controlling interest in subsidiaries 76,802 76,339
-------------------------------------------------------------------------
1,781,422 1,801,127 SHAREHOLDERS' EQUITY: Capital stock (note 4)
489,319 469,162 Retained earnings 473,242 342,013 Foreign currency
translation adjustment 55,782 35,343
-------------------------------------------------------------------------
1,018,343 846,518
-------------------------------------------------------------------------
$ 2,799,765 $ 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 NINE MONTHS ENDED MARCH 31
ENDED MARCH 31 2006 2005 2006 2005
-------------------------------------------------------------------------
(RESTATED) (RESTATED) (note 1) (note 1) RESORT AND TRAVEL
OPERATIONS: Revenue $ 386,217 $ 356,569 $ 742,197 $ 661,091
Expenses 302,942 273,523 636,462 546,101
-------------------------------------------------------------------------
Resort and travel operations contribution 83,275 83,046 105,735
114,990
-------------------------------------------------------------------------
MANAGEMENT SERVICES: Revenue 59,230 59,109 131,484 130,606 Expenses
37,849 35,559 100,418 94,186
-------------------------------------------------------------------------
Management services contribution 21,381 23,550 31,066 36,420
-------------------------------------------------------------------------
REAL ESTATE DEVELOPMENT: Revenue 102,375 48,267 285,242 288,777
Expenses 64,988 43,608 178,838 266,351
-----------------------------------------------------------------------
37,387 4,659 106,404 22,426 Income (loss) from equity accounted
investments (119) (278) 1,023 2,310
-------------------------------------------------------------------------
Real estate development contribution 37,268 4,381 107,427 24,736
-------------------------------------------------------------------------
Income before undernoted items 141,924 110,977 244,228 176,146
Interest and other income 3,231 2,359 7,461 5,672 Interest expense
(10,723) (9,071) (33,584) (31,656) Corporate general and
administrative expenses (10,393) (5,395) (22,364) (15,336)
Depreciation and amortization (47,751) (31,329) (74,174) (55,578)
Call premium and unamortized costs of senior notes redeemed -
(2,104) - (30,173)
-------------------------------------------------------------------------
Income from continuing operations before income taxes and
non-controlling interest 76,288 65,437 121,567 49,075 Provision for
income taxes (5,862) 4,577 (10,090) 5,272 Non-controlling interest
(9,393) (7,304) (31,873) (10,355)
-------------------------------------------------------------------------
Income from continuing operations 61,033 62,710 79,604 43,992
Results of discontinued operations (note 3) - 3,498 59,879 8,023
-------------------------------------------------------------------------
Net income for the period 61,033 66,208 139,483 52,015
-------------------------------------------------------------------------
Retained earnings, beginning of period, as previously stated
417,168 301,150 345,348 318,883 Prior period adjustment (note 1) -
(3,027) (3,335) (3,536)
-------------------------------------------------------------------------
Retained earnings, beginning of period, as restated 417,168 298,123
342,013 315,347 Share repurchase adjustment (1,245) - (1,245) -
Dividends (3,714) - (7,009) (3,031)
-------------------------------------------------------------------------
Retained earnings, end of period $ 473,242 $ 364,331 $ 473,242 $
364,331
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income from continuing operations per common share: Basic $ 1.25 $
1.31 $ 1.64 $ 0.92 Diluted $ 1.23 $ 1.31 $ 1.62 $ 0.92 Net income
per common share Basic $ 1.25 $ 1.39 $ 2.87 $ 1.09 Diluted $ 1.23 $
1.38 $ 2.83 $ 1.09
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average number of common shares outstanding (in thousands)
Basic 48,945 47,790 48,565 47,736 Diluted 49,746 47,873 49,231
47,784
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
INTRAWEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands of United States dollars) (unaudited) THREE MONTHS NINE
MONTHS ENDED MARCH 31 ENDED MARCH 31 2006 2005 2006 2005
-------------------------------------------------------------------------
(RESTATED) (RESTATED) (note 1) (note 1) CASH PROVIDED BY (USED IN):
OPERATIONS: Net income $ 61,033 $ 66,208 $ 139,483 $ 52,015 Items
not affecting cash: Results of discontinued operations - (3,498)
(59,879) (8,023) Depreciation and amortization 47,751 31,329 74,174
55,578 Future income taxes (29,553) - (24,208) - Non-cash costs of
senior notes redeemed - 471 - 4,842 Loss (income) from equity
accounted investments 119 278 (1,023) (2,310) Amortization of
deferred financing costs 645 546 1,948 1,821 Stock-based
compensation 256 214 791 654 Amortization of benefit plan - 294 -
867 Non-controlling interest 9,393 7,304 31,873 10,355 Loss (gain)
on asset disposals (355) 341 (295) 549
-------------------------------------------------------------------------
Funds from continuing operations 89,289 103,487 162,864 116,348
Recovery of costs through real estate sales 64,988 43,608 178,838
221,351 Acquisition and development of properties held for sale
(100,015) (92,519) (287,326) (277,201) Changes in long-term amounts
receivable, net 26,878 210 17,213 (1,109) Changes in non-cash
operating working capital (note 7) (16,173) (35,067) (48,520)
(10,891)
-------------------------------------------------------------------------
64,967 19,719 23,069 48,498 Funds from discontinued operations
(note 3) - 7,376 265 13,675
-------------------------------------------------------------------------
64,967 27,095 23,334 62,173 FINANCING: Proceeds from bank and other
borrowings 21,839 17,176 82,523 550,103 Repayments of bank and
other borrowings (40,256) (19,296) (124,816) (463,283) Issue of
common shares for cash 5,710 936 20,234 1,873 Purchase of common
shares (2,423) - (2,423) - Dividends received - - 19,862 -
Dividends paid (3,714) - (7,009) (3,031) Distributions to non-
controlling interest (968) (10,487) (28,466) (15,933)
-------------------------------------------------------------------------
(19,812) (11,671) (40,095) 69,729 INVESTMENTS: Proceeds from
(expenditures on): Resort and travel operations assets (22,242)
(23,796) (91,406) (65,591) Investment in real estate partnerships
(13,073) (15) 2,168 (10,864) Other assets (8,080) 678 (11,574)
(14,424) Business acquisitions, net of cash acquired - (447) -
(21,744) Proceeds on sale of business, net of cash disposed of
(note 3) - - 128,274 - Asset disposals 902 324 1,060 383
-------------------------------------------------------------------------
(42,493) (23,256) 28,522 (112,240)
-------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 2,662 (7,832)
11,761 19,662 Cash and cash equivalents, beginning of period
149,977 137,310 140,878 109,816
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 152,639 $ 129,478 $
152,639 $ 129,478
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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): MARCH 31, JUNE 30, 2006 2005
(UNAUDITED) (AUDITED)
---------------------------------------------------------------------
ASSETS Current other assets $ 3,821 $ 3,351
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY Current deferred revenue $
8,485 $ 6,946 Retained earnings (4,270) (3,335) Foreign currency
translation adjustment (394) (260)
---------------------------------------------------------------------
$ 3,821 $ 3,351
---------------------------------------------------------------------
---------------------------------------------------------------------
THREE MONTHS NINE MONTHS ENDED MARCH 31 ENDED MARCH 31 (UNAUDITED)
2006 2005 2006 2005
---------------------------------------------------------------------
REAL ESTATE DEVELOPMENT: Revenue $ (2,188)$ (3,846)$ (1,281)$
(3,907) Expenses (1,057) (1,219) (346) (1,789)
---------------------------------------------------------------------
Real estate development contribution $ (1,131)$ (2,627)$ (935)$
(2,118)
---------------------------------------------------------------------
---------------------------------------------------------------------
Earlier in fiscal 2006 the Company commenced a review of the useful
lives and depreciation methods of resort and travel operations
assets. As a result of this review the Company increased
depreciation and amortization expense by $17,700,000. This
adjustment includes both a prospective change in the current period
in our depreciation method from declining balance to straight-line
and a change in the estimated useful lives of the assets to better
reflect the remaining service and earning potential of the assets
and the Company's historical operating experience. 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 NINE MONTHS ENDED MARCH 31 ENDED MARCH 31
(UNAUDITED) 2006 2005 2006 2005
---------------------------------------------------------------------
Revenue $ - $ 34,962 $ 6,086 $ 55,145
---------------------------------------------------------------------
---------------------------------------------------------------------
Income (loss) from discontinued operations, net of income tax
recovery (expense) of nil, $(1,226), $2,602 and $1,247 respectively
$ - $ 3,498 $ (100)$ 8,023 Gain on sale of discontinued operations,
net of income tax expense of $47,260 - - 59,979 -
---------------------------------------------------------------------
Results of discontinued operations $ - $ 3,498 $ 59,879 $ 8,023
---------------------------------------------------------------------
---------------------------------------------------------------------
Results of discontinued operations per share Basic $ - $ 0.08 $
1.23 $ 0.17 Diluted $ - $ 0.07 $ 1.21 $ 0.17
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash from discontinued operations: Income from discontinued
operations $ - $ 3,498 $ 59,879 $ 8,023 Adjustments for:
Amortization - 3,878 365 5,652 Gain on sale - - (59,979) -
---------------------------------------------------------------------
$ - $ 7,376 $ 265 $ 13,675
---------------------------------------------------------------------
---------------------------------------------------------------------
4. CAPITAL STOCK: MARCH 31, JUNE 30, 2006 2005 (UNAUDITED)
(AUDITED)
---------------------------------------------------------------------
Common shares $ 484,697 $ 465,328 Contributed surplus 4,622 3,834
---------------------------------------------------------------------
$ 489,319 $ 469,162
---------------------------------------------------------------------
---------------------------------------------------------------------
(a) Common shares: NUMBER OF 2006 COMMON SHARES AMOUNT (UNAUDITED)
(UNAUDITED)
---------------------------------------------------------------------
Balance, June 30, 2005 47,957,110 $ 465,328 Issued for cash under
stock option plan 961,100 20,234 Repurchase of common shares
(86,900) (865) Amortization of benefit plan, net 162,816 -
---------------------------------------------------------------------
Balance, March 31, 2006 48,994,126 $ 484,697
---------------------------------------------------------------------
---------------------------------------------------------------------
In addition to the stock options exercised during the nine months
ended March 31, 2006, 117,700 stock options were forfeited. A total
of 2,925,400 stock options remain outstanding as at March 31, 2006.
(b) Normal Course Issuer Bid: The Company received regulatory
approval under Canadian securities laws to purchase common shares
under a normal course issuer bid which commenced on November 18,
2005 and continues up to November 17, 2006. The Company is entitled
to purchase, for cancellation, up to a maximum of 4,600,000 common
shares under the current bid. During the three months ended March
31, 2006, the Company purchased 86,900 common shares under the bid
for total consideration of $2,423,000. The amount paid was charged
$865,000 to share capital, $3,000 to contributed surplus,
$1,245,000 to retained earnings and the balance to foreign currency
translation adjustment. (c) 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 issued in the nine months ended March 31, 2006. The
total stock compensation expense for the nine months ended March
31, 2006 was $791,000 (2005 - $655,000). 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 NINE MONTHS ENDED MARCH 31 ENDED MARCH 31 (UNAUDITED)
2006 2005 2006 2005
---------------------------------------------------------------------
(RESTATED) (RESTATED) (note 1) (note 1) Net income, as reported $
61,033 $ 66,208 $ 139,483 $ 52,015 Estimated fair value of option
grants, net of tax (602) (547) (1,797) (1,631)
---------------------------------------------------------------------
Net income, pro forma $ 60,431 $ 65,661 $ 137,686 $ 50,384
---------------------------------------------------------------------
---------------------------------------------------------------------
PRO FORMA INCOME PER COMMON SHARE: Basic $ 1.23 $ 1.37 $ 2.84 $
1.06 Diluted $ 1.21 $ 1.37 $ 2.80 $ 1.05
---------------------------------------------------------------------
---------------------------------------------------------------------
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 NINE MONTHS ENDED
MARCH 31 ENDED MARCH 31 2006 2005 2006 2005
---------------------------------------------------------------------
Denominator (in thousands of shares): Weighted average number of
common shares outstanding - basic 48,945 47,790 48,565 47,736
Effect of dilutive options 801 83 666 48
---------------------------------------------------------------------
Weighted average number of common shares outstanding - diluted
49,746 47,873 49,231 47,784
---------------------------------------------------------------------
---------------------------------------------------------------------
For the nine months ended March 31, 2006, there are no
anti-dilutive options (2005 - 2,561,000). 6. SEGMENTED INFORMATION:
The following table presents the Company's results from continuing
operations by reportable segment: THREE MONTHS ENDED MARCH 31, 2006
MOUNTAIN NON- REAL CORPO- (UNAUDITED) RESORT MOUNTAIN ESTATE RATE
TOTAL
---------------------------------------------------------------------
SEGMENT REVENUE: Resort and travel operations $ 301,572 $ 84,645 $
- $ - $ 386,217 Management services 37,795 3,711 17,724 - 59,230
Real estate development - - 102,256 - 102,256 Corporate and all
other - - - 3,231 3,231
---------------------------------------------------------------------
$ 339,367 $ 88,356 $ 119,980 $ 3,231 $ 550,934
---------------------------------------------------------------------
---------------------------------------------------------------------
SEGMENT OPERATING PROFIT: Resort and travel operations $ 82,856 $
419 $ - $ - $ 83,275 Management services 15,315 1,262 4,804 -
21,381 Real estate development - - 37,268 - 37,268 Corporate and
all other - - - 3,231 3,231
---------------------------------------------------------------------
$ 98,171 $ 1,681 $ 42,072 $ 3,231 145,155
----------------------------------------------------------
---------------------------------------------------------- LESS:
Interest expense (10,723) Corporate general and administrative
expenses (10,393) Depreciation and amortization (47,751)
---------------------------------------------------------------------
Income from continuing operations before income taxes and
non-controlling interest $ 76,288
---------------------------------------------------------------------
---------------------------------------------------------------------
NINE MONTHS ENDED MARCH 31, 2006 MOUNTAIN NON- REAL CORPO-
(UNAUDITED) RESORT MOUNTAIN ESTATE RATE TOTAL
---------------------------------------------------------------------
SEGMENT REVENUE: Resort and travel operations $ 469,245 $ 272,952 $
- $ - $ 742,197 Management services 67,432 13,931 50,121 - 131,484
Real estate development - - 286,265 - 286,265 Corporate and all
other - - - 7,461 7,461
---------------------------------------------------------------------
$ 536,677 $ 286,883 $ 336,386 $ 7,461 $1,167,407
---------------------------------------------------------------------
---------------------------------------------------------------------
SEGMENT OPERATING PROFIT: Resort and travel operations $ 97,412 $
8,323 $ - $ - $ 105,735 Management services 11,929 3,623 15,514 -
31,066 Real estate development - - 107,427 - 107,427 Corporate and
all other - - - 7,461 7,461
---------------------------------------------------------------------
$ 109,341 $ 11,946 $ 122,941 $ 7,461 251,689
----------------------------------------------------------
---------------------------------------------------------- LESS:
Interest expense (33,584) Corporate general and administrative
expenses (22,364) Depreciation and amortization (74,174)
---------------------------------------------------------------------
Income from continuing operations before income taxes and
non-controlling interest $ 121,567
---------------------------------------------------------------------
---------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 2005 MOUNTAIN NON- REAL CORPO-
(UNAUDITED) RESORT MOUNTAIN ESTATE RATE TOTAL
---------------------------------------------------------------------
(RESTATED) (note 1) SEGMENT REVENUE: Resort and travel operations $
275,712 $ 80,857 $ - $ - $ 356,569 Management services 43,334 4,444
11,331 - 59,109 Real estate development - - 47,989 - 47,989
Corporate and all other - - - 2,359 2,359
---------------------------------------------------------------------
$ 319,046 $ 85,301 $ 59,320 $ 2,359 $ 466,026
---------------------------------------------------------------------
---------------------------------------------------------------------
SEGMENT OPERATING PROFIT: Resort and travel operations $ 81,395 $
1,651 $ - $ - $ 83,046 Management services 17,357 2,850 3,343 -
23,550 Real estate development - - 4,381 - 4,381 Corporate and all
other - - - 2,359 2,359
---------------------------------------------------------------------
$ 98,752 $ 4,501 $ 7,724 $ 2,359 113,336
----------------------------------------------------------
---------------------------------------------------------- LESS:
Interest expense (9,071) Corporate general and administrative
expenses (5,395) Depreciation and amortization (31,329) Call
premium and unamortized costs of senior notes redeemed (2,104)
---------------------------------------------------------------------
Loss from continuing operations before income taxes and
non-controlling interest $ 65,437
---------------------------------------------------------------------
---------------------------------------------------------------------
NINE MONTHS ENDED MARCH 31, 2005 MOUNTAIN NON- REAL CORPO-
(UNAUDITED) RESORT MOUNTAIN ESTATE RATE TOTAL
---------------------------------------------------------------------
(RESTATED) (note 1) SEGMENT REVENUE: Resort and travel operations $
416,097 $ 244,994 $ - $ - $ 661,091 Management services 71,673
14,994 43,939 - 130,606 Real estate development - - 291,087 -
291,087 Corporate and all other - - - 5,672 5,672
---------------------------------------------------------------------
$ 487,770 $ 259,988 $ 355,026 $ 5,672 $1,088,456
---------------------------------------------------------------------
---------------------------------------------------------------------
SEGMENT OPERATING PROFIT: Resort and travel operations $ 104,324 $
10,666 $ - $ - $ 114,990 Management services 12,285 6,734 17,401 -
36,420 Real estate development - - 24,736 - 24,736 Corporate and
all other - - - 5,672 5,672
---------------------------------------------------------------------
$ 116,609 $ 17,400 $ 42,137 $ 5,672 181,818
----------------------------------------------------------
---------------------------------------------------------- LESS:
Interest expense (31,656) Corporate general and administrative
expenses (15,336) Depreciation and amortization (55,578) Call
premium and unamortized costs of senior notes redeemed (30,173)
---------------------------------------------------------------------
Loss from continuing operations before income taxes and
non-controlling interest $ 49,075
---------------------------------------------------------------------
---------------------------------------------------------------------
7. CASH FLOW INFORMATION: The changes in non-cash operating working
capital balance consist of the following: THREE MONTHS NINE MONTHS
ENDED MARCH 31 ENDED MARCH 31 (UNAUDITED) 2006 2005 2006 2005
---------------------------------------------------------------------
(RESTATED) (RESTATED) (note 1) (note 1) CASH PROVIDED BY (USED IN):
Amounts receivable $ (9,621)$ (17,710)$ (3,433)$ 11,008 Other
assets 41,927 9,114 (42,051) (125,322) Amounts payable 12,080
22,817 7,157 47,451 Deferred revenue and deposits (60,559) (49,288)
(10,193) 55,972
---------------------------------------------------------------------
$ (16,173)$ (35,067)$ (48,520)$ (10,891)
---------------------------------------------------------------------
---------------------------------------------------------------------
SUPPLEMENTAL INFORMATION: Interest paid $ 7,894 $ 6,785 $ 50,216 $
63,077 Income, franchise and withholding taxes paid 45,993 2,993
65,453 9,176 NON-CASH INVESTING AND FINANCING ACTIVITIES: Notes
received on sale of properties to real estate partnerships - - -
45,406 Notes received on sale of business - - 20,813 - Bank and
other indebtedness incurred on acquisition - - - 20,659
---------------------------------------------------------------------
---------------------------------------------------------------------
8. RELATED PARTY TRANSACTIONS: INVESTMENT IN AND ADVANCES TO REAL
ESTATE PARTNERSHIPS: MARCH 31, JUNE 30, 2006 2005 (UNAUDITED)
(AUDITED)
---------------------------------------------------------------------
Residential partnerships $ 97,676 $ 99,904 Commercial partnership
7,982 9,133
---------------------------------------------------------------------
$ 105,658 $ 109,037
---------------------------------------------------------------------
---------------------------------------------------------------------
(a) Investment in Residential Partnerships The Company sells
certain real estate properties to partnerships in which it holds an
investment. During the nine months ended March 31, 2006, the
Company sold four real estate properties to the partnerships for
proceeds of $72,062,000 (2005 - two properties were sold for
proceeds of $19,878,000) and a gain of $42,866,000 (2005 -
$3,149,000). Total proceeds on the sales consisted of cash and an
equity contribution. The Company also extended bridge financing of
$6,911,000 to the partnerships. Development and sales management
fees earned during the nine months ended March 31, 2006 totaled
$18,270,000 (2005 - $13,727,000) and have been included in
management services revenue. Interest income related to notes
receivable and working capital loans to the partnerships of
$1,967,000 has been included in interest and other income for the
nine months ended March 31, 2006 (2005 - $559,000). INVESTMENT IN
AND ADVANCES TO RESIDENTIAL PARTNERSHIPS: MARCH 31, JUNE 30, 2006
2005 (UNAUDITED) (AUDITED)
---------------------------------------------------------------------
Equity contributions $ 77,534 $ 82,847 Formation costs 3,752 3,869
Advances 11,662 9,483 Equity income, net of amortization of
formation costs 4,728 3,705
---------------------------------------------------------------------
$ 97,676 $ 99,904
---------------------------------------------------------------------
---------------------------------------------------------------------
At March 31, 2006, deferred revenue includes $53,828,000 (2005 -
$19,005,000) relating to the sale of properties to the partnerships
and amounts receivable includes $46,408,000 (2005 - $13,785,000)
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 $4,586,000 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 $1,785,000 (2005 - $3,421,000). At March
31, 2006, deferred revenue includes $7,234,000 (2005 - $10,064,000)
relating to the deferred gain on sale of properties to the
partnership. Management fees earned during the nine months ended
March 31, 2006 totaled $336,000 (2005 - 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 ; If you would like to receive future news releases
by email, please contact
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