IDR Idaho Strategic Resources Inc

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(%) ------------------------------------------------------------------------- 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 --------------------------------------------------------------- $386.2 $356.6 $29.6 8 --------------------------------------------------------------- --------------------------------------------------------------- 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 ------------------------------------------------------------------------- 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 ------------------------------------------------------------------------- 41.5 16.6 47.7 20.2 ------------------------------------------------------------------------- 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 ------------------------------------------------------------------------- 17.7 4.8 11.4 3.4 ------------------------------------------------------------------------- $59.2 $21.4 $59.1 $23.6 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 ------------------------------------------------------------------------- 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 ------------------------------------------------------------------------- 81.3 15.6 86.7 19.0 ------------------------------------------------------------------------- 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 ------------------------------------------------------------------------- 50.2 15.5 43.9 17.4 ------------------------------------------------------------------------- $131.5 $31.1 $130.6 $36.4 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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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