UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 or 15d-16
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF NOVEMBER 2005
Commission File Number _______________
INTRAWEST CORPORATION
(Registrant’s name)
Suite 800, 200 Burrard Street
Vancouver, British Columbia, Canada V6C 3L6
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [ ] Form 40-F [X]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _______
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(7): _______
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_______________
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 14, 2005
INTRAWEST CORPORATION
| By: | /s/ ROSS MEACHER | ||
| Name: Ross Meacher | |||
| Title: Corporate Secretary and Chief Privacy Officer |
| Intrawest THREE MONTHS ENDED Q1 FIRST QUARTER REPORT |
TO OUR SHAREHOLDERS
Intrawest reported record revenue in the first quarter of fiscal 2006 due to the strong
performance of both our Leisure and Travel Group and our Intrawest Placemaking real estate
operating division. Our first quarter results reflect the continuing rebound in the luxury
adventure-travel industry. As the world leader in this sector, Abercrombie & Kent is in an
enviable position to be the primary beneficiary of this recovery. In the first quarter,
Abercrombie & Kent experienced a 30 per cent increase in core, recurring adventure-travel revenue
due to growth in all its major destination markets including significant growth in tours to East
Africa, India and the Orient. The sale of a 26-acre parcel of beachfront property in Maui also
contributed to our strong first quarter performance. This land sale provides a key example of how
Intrawest Placemaking delivers significant value by seeking out highly profitable real estate
transactions for land that is not scheduled for immediate development.
OPERATING
RESULTS (ALL DOLLAR AMOUNTS ARE IN US CURRENCY)
Total revenue for the first quarter was $301.8 million, an increase of more than 47 per cent
over the same period last year. Net income increased significantly to $9.2 million, resulting in
diluted earnings per share of $0.19. Total Company EBITDA (earnings before interest, income taxes,
non-controlling interest, depreciation and amortization and any non-recurring items) more than
tripled to $56.5 million for the quarter. The increase in revenue, net income and Total Company
EBITDA was due primarily to the sale of the property in Maui, the strong operating results from
Abercrombie & Kent and our increased ownership of Alpine Helicopters, parent company of Canadian
Mountain Holidays. Intrawest increased its ownership in Alpine Helicopters from 45 per cent to 100
per cent in December 2004.
Further information on our operating results (including a reconciliation of Total Company EBITDA
and other non-GAAP measures to the most comparable GAAP measures) is contained in Management’s
Discussion and Analysis to follow.
LATEST COMPANY DEVELOPMENTS
Subsequent
to the quarter’s end, an entity controlled by Starwood Capital Group signed an
agreement to purchase a majority interest in Mammoth Mountain Ski
Area (MMSA) based on an
enterprise value of $365 million. Currently, Intrawest owns
59.5 per cent of MMSA. Upon completion
of the transaction, Intrawest will retain approximately 15 per
cent of MMSA and a 50 per cent
interest in Mammoth Hospitality Management, Intrawest’s lodging company at Mammoth. This
transaction is expected to close in December 2005. Intrawest and Starwood Capital Group also
entered into a preliminary agreement for a joint venture on the development of the majority of
Intrawest’s separately owned real estate in the Town of Mammoth Lakes, CA. This proposed
transaction includes future development of over 1,000 residential units and 30,000 square feet of
commercial space scheduled for build-out over the next five to seven years.
In October, Gary Raymond, president and chief executive officer of Intrawest Placemaking,
announced that he will be resigning later this year to pursue other business interests. On an
interim basis, Drew Stotesbury, chief financial officer of Intrawest Placemaking, will assume the
role of head of the division reporting directly to Joe Houssian.
Whistler Blackcomb opened the 2005/2006 ski season on November 5, 2005, and hosted almost 10,000
skiers on its opening weekend.
DIVIDENDS
On November 7, 2005, the Board of Directors declared a quarterly dividend of Cdn. $0.08 per
common share payable on January 25, 2006 to shareholders of record on January 11, 2006.
NORMAL COURSE ISSUER BID
On November 7, 2005, the Board of Directors approved a normal course issuer bid through the
facilities of the Toronto Stock Exchange (TSX) for up to 4,600,000 Common Shares. The bid, which
is subject to the approval of the TSX, will terminate on the earlier of (i) the expiry of 12
months from the commencement of the bid and (ii) the date upon which Intrawest has acquired the
maximum number of Common Shares permitted under the bid.
OUTLOOK
The impressive growth of Abercrombie & Kent provides a testament to the strength of the Abercrombie
& Kent brand and its leadership status in the luxury adventure-travel market. The combination of
these two powerful attributes positions Abercrombie & Kent extremely well to capitalize on the
continuing recovery of the industry. This presents a significant opportunity for Intrawest to
leverage Abercrombie & Kent’s recent success and take full advantage of the revenue growth
potential this entity provides when combined with our existing portfolio of customer experiences.
We remain focused on accelerating our real estate production. The recently announced developments
of the Honua Kai in Ka’anapali, Maui and the Village of Imagine in Orlando, Florida, will add a
significant number of units to our future annual delivery rate. Scheduled for launch in December
2005, the first phases of these projects consist of approximately 574 units with expected
construction start in early 2006.
The recent sale of the parcel of land in Maui and the pending sale of Mammoth Mountain further
strengthen our financial position and are consistent with our strategy of maximizing our return on
capital. We will continue to explore the many opportunities to grow our core businesses and
maximize shareholder value, including the normal course issuer bid which underscores our belief
that the current market value of our common shares does not reflect the underlying value of our
company.
On behalf of the Board,
|
 |
|
Joe S. Houssian
|
John E. Currie | |
CHAIRMAN. PRESIDENT AND
|
CHIEF FINANCIAL OFFICER | |
CHIEF EXECUTIVE OFFICER |
||
November 7, 2005 |
MANAGEMENT’S |
||||
DISCUSSION
|
(ALL DOLLAR AMOUNTS ARE IN UNITED STATES CURRENCY, | |||
AND ANALYSIS
|
UNLESS OTHERWISE INDICATED) |
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
EBITDA1 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
available on SEDAR at www.sedar.com. The date of this interim MD&A is November 4, 2005.
THREE MONTHS ENDED SEPTEMBER 30, 2005 (THE “2005 QUARTER”) COMPARED WITH THREE MONTHS
ENDED SEPTEMBER 30, 2004 (THE “2004 QUARTER”)
Net income
was $9.2 million ($0.19 per diluted share) in the 2005 quarter compared with a net
loss of $7.1 million ($0.15 per diluted share) in the 2004 quarter. We normally incur a loss in
our first fiscal quarter because of the seasonality of our businesses; however, we closed a major
real estate transaction (the sale of a 26-acre beachfront property in Maui) during the 2005
quarter that generated $21.6 million of net income. Total Company EBITDA increased from $15.7
million to $56.6 million. A significant increase in EBITDA from real estate development was
partially offset by reduced EBITDA from resort and travel operations and management services and
higher corporate general and administrative expenses.
REVIEW OF RESORT AND TRAVEL OPERATIONS
Resort and travel operations revenue increased from $129.3 million in the 2004 quarter to
$166.1 million in the 2005 quarter. In December 2004 we increased our ownership in Alpine
Helicopters from 45% to 100% and the incremental revenue in the 2005 quarter from our increased
ownership interest was $9.1 million. In addition, in August 2005 we entered into a lease to operate
Parque de Nieve, an indoor snowdome in Spain, and revenue in the 2005 quarter included $1.1 million
from this new business. The rise in the value of the Canadian dollar from an average rate of
US$0.76 in the 2004 quarter to US$0.83 in the 2005 quarter increased reported resort and travel
operations revenue by $3.7 million.
On a same-business (i.e., excluding 55% of Alpine Helicopters and Parque de Nieve), constant
exchange rate basis, resort and travel operations revenue increased by $22.8 million to $152.1
million. Adventure-travel tour revenue from Abercrombie & Kent
(“A&K”) increased 30% from $66.3
million to $86.3 million as the industry continued its strong rebound. A&K saw significant growth
in tour revenues from all its major destinations, particularly the Orient and East Africa, which
increased by 120% and 31%, respectively. A&K also earned $1.5 million
1EBITDA 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.
of licensing fees in the 2005 quarter compared with $3.9 million in the 2004 quarter as the
licensing agreement was terminated in August 2005. Revenue from the mountain segment increased by
$5.1 million, or 12%, led primarily by Whistler Blackcomb (due to growth in mountain bike park
and sightseeing visits), Intrawest Retail Group (due to operating eight additional retail stores
during the summer months) and Alpine Helicopters (due to a 22% increase in revenue from
fire-fighting and other forestry activities). Revenue from the non-mountain segment increased by
$0.3 million, or 2%, as the worst hurricane season on record in the Gulf Coast region reduced
visitors to Sandestin, restricting revenue growth to 1% at that resort.
The breakdown of resort and travel operations revenue by major business component was as follows:
| 2005 | 2004 | INCREASE | CHANGE | |||||||||||||
| (MILLIONS) | QUARTER | QUARTER | (DECREASE) | (%) | ||||||||||||
Mountain operations |
$ | 25.8 | $ | 11.7 | $ | 14.1 | 121 | |||||||||
Adventure-travel tours |
86.3 | 66.3 | 20.0 | 30 | ||||||||||||
Retail and rental shops |
13.2 | 10.6 | 2.6 | 25 | ||||||||||||
Food and beverage |
15.1 | 13.4 | 1.7 | 13 | ||||||||||||
Ski school |
0.8 | 1.1 | (0.3 | ) | (27 | ) | ||||||||||
Golf |
11.5 | 11.4 | 0.1 | 1 | ||||||||||||
Other |
13.4 | 14.8 | (1.4 | ) | (9 | ) | ||||||||||
| $ | 166.1 | $ | 129.3 | $ | 36.8 | 28 | ||||||||||
The growth in mountain operations revenue reflects our increased ownership interest in, and
revenue growth at, Alpine Helicopters, our lease of Parque de Nieve and strong year-over-year
growth in summer lift ride revenue, particularly at Whistler Blackcomb. The decline in other
revenue was due mainly to the decrease in licensing fees earned by A&K.
Resort and travel operations expenses increased from $122.2 million in the 2004 quarter to $159.8
million in the 2005 quarter, of which $7.4 million and $1.5 million, respectively, were due to the
acquisition of the remaining 55% of Alpine Helicopters and the lease of Parque de Nieve and $3.3
million came from the impact on reported expenses of the higher Canadian dollar. Expenses of A&K
increased by $14.9 million in response to the higher business volumes and expenses of the mountain
and non-mountain segments increased by $6.8 million and $1.5 million, respectively. The balance of
the increase in resort and travel operations expenses came from increased general and
administrative costs of the Leisure and Travel Group, including $0.5 million in connection with
process improvement initiatives in our retail and food and beverage businesses, $0.4 million in
call center marketing and $0.6 million in advance sales and resort operations information
technology.
Resort and travel operations EBITDA decreased from $7.1 million in the 2004 quarter to $6.3
million in the 2005 quarter. Our additional ownership interest of Alpine Helicopters, the lease of
Parque de Nieve and the impact on reported EBITDA of the higher Canadian dollar in aggregate
increased EBITDA by $1.7 million. EBITDA from A&K grew from $8.2 million to $10.9 million as an
increase in EBITDA from adventure-travel tours from $4.4 million to $9.4 million was partially
offset by a decrease in EBITDA from licensing fees from $3.9 million to $1.5 million. These
positive factors were offset by reduced EBITDA from other businesses and higher general and
administrative costs of the Leisure and Travel Group. The impact of the hurricanes reduced EBITDA
at Sandestin by $1.2 million and we expect to recover some of this shortfall through business
interruption insurance. The EBITDA margins of 3.8% in the 2005 quarter and 5.5% in the 2004
quarter reflect the seasonality of our mountain resort and travel operations, which generate most
of their EBITDA during our third fiscal quarter.
REVIEW OF MANAGEMENT SERVICES
Management
services revenue and EBITDA in the 2005 and 2004 quarters were broken down as follows:
| 2005 QUARTER | 2004 QUARTER | |||||||||||||||
| (MILLIONS) | REVENUE | EBITDA | REVENUE | EBITDA | ||||||||||||
Services related to resort and
travel operations |
||||||||||||||||
Lodging and property management |
$ | 18.6 | $ | 0.8 | $ | 17.6 | $ | 0.8 | ||||||||
Other resort and travel fees |
3.1 | 0.5 | 3.1 | (0.8 | ) | |||||||||||
| 21.7 | 1.3 | 20.7 | — | |||||||||||||
Services related to
real estate development |
||||||||||||||||
Real estate services fees |
5.7 | 1.1 | 5.1 | 2.0 | ||||||||||||
Playground sales fees |
8.6 | 1.5 | 9.3 | 3.7 | ||||||||||||
| 14.3 | 2.6 | 14.4 | 5.7 | |||||||||||||
| $ | 36.0 | $ | 3.9 | $ | 35.1 | $ | 5.7 | |||||||||
The increase in fees from lodging and property management was due mainly to a 3% increase in
occupied room nights and a 1% increase in average daily rate across our resorts. Occupied room
nights at our mountain resorts increased 4%, however this was partially offset by a 2% decline in
occupied room nights at Sandestin due to the hurricanes. Other resort and travel fees, which
comprise reservation fees earned by our central call center, golf course management fees and club
management fees earned by the Resort Club, were unchanged year-over-year with an increase in
Resort Club management fees being offset by lower reservation fees. We sold our reservations
business in Colorado during the 2005 quarter and we continue to focus on reservations to our own
resorts while reducing our third-party reservations business. The increase in real estate services
fees was due mainly to increased sales fees as several partnership projects completed construction
and closed units. The timing of project completions and a somewhat slower resale market in
Sandestin, resulting from the hurricanes, reduced fees earned by Playground, our real estate sales
business.
EBITDA from management services decreased from $5.7 million in the 2004 quarter to $3.9 million in
the 2005 quarter. Playground EBITDA in the 2005 quarter was reduced by an allocation of $2.1
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. The decline in EBITDA from
real estate services reflects the timing of expenses which we expect to reverse in future
quarters. The improvement in EBITDA from other resort and travel fees was due mainly to reducing
our third-party reservations business, which had incurred losses in the 2004 quarter. The EBITDA
margin was 11% in the 2005 quarter compared with 16% in the 2004 quarter. For the fiscal year, we
expect the EBITDA margin to be approximately the same as the 24% we achieved in fiscal 2005.
REVIEW OF REAL ESTATE DEVELOPMENT
Revenue from real estate development increased from $38.8 million in the 2004 quarter to $98.7
million in the 2005 quarter. Revenue generated by Intrawest
Placemaking (our resort development
business) increased from $28.4 million to $88.3 million while revenue generated by Intrawest
Resort Club (our vacation ownership business) was unchanged at $10.4 million.
The majority of Intrawest Placemaking’s revenue in the 2005 quarter came from the sale of a
26-acre beachfront property in Maui for proceeds of $73.3 million. The vendor of the property was
a partnership in which we have a 40% interest, however the partnership is a variable interest
entity (“VIE”), which we are required to fully consolidate because we are the primary beneficiary
of the entity. Hence real estate development revenue includes 100% of the sales proceeds to the
partnership and real estate development expenses includes 100% of the partnership’s cost of sales,
being $29.4 million. The partner’s share of the profit from this transaction of $18.5 million is
included in non-controlling interest.
Excluding the sale of the Maui property, Intrawest Placemaking closed 23 units for $15.0 million
in the 2005 quarter compared with 42 units for $23.1 million in
the 2004 quarter. The timing of
unit closings is tied to a significant degree to construction completion so the number of closings
in any particular quarter may not be indicative of the number of closings in a fiscal year.
Two-thirds of the revenue in the 2005 quarter was derived from high-end townhome projects and this
increased the average revenue per closed unit from $550,000 in the 2004 quarter to $652,000 in the
2005 quarter. In addition to these unit closings, we sold one project to real estate partnerships
in which we hold an investment for $5.3 million in the 2004 quarter. There were no project sales
to such partnerships in the 2005 quarter.
Real estate EBITDA increased from $7.3 million in the 2004 quarter to $51.9 million in the 2005
quarter. Real estate EBITDA comprises operating profit from real estate plus interest included in
real estate expenses. Operating profit from real estate, rather than real estate EBITDA, factors
into the computation of net income. Operating profit from real estate development increased from
$5.1 million in the 2004 quarter to $50.7 million in the 2005 quarter, including $43.9 million
from the sale of the Maui property described above. Excluding the Maui sale, the profit margin on
real estate development increased from 13.3% to 26.6% due mainly to the recognition of increased
deferred land profit on project sales to real estate partnerships (which is recorded as a credit
to real estate expenses) in the 2005 quarter.
REVIEW OF CORPORATE OPERATIONS
Interest and other income decreased from $2.0 million in the 2004 quarter to $0.5 million in
the 2005 quarter. Interest and other income in the 2004 quarter included $0.4 million of rental
income on a property we sold in the fourth quarter of fiscal 2005 and $0.3 million of equity income
from an investment owned by Alpine Helicopters that has now been consolidated because of the VIE
rules. The balance of the change was due mainly to lower interest income in the 2005 quarter.
Interest expense was $10.3 million in the 2005 quarter, down from $11.4 million in the 2004
quarter due mainly to the refinancing of senior notes in the second quarter of our past fiscal
year. During that quarter we redeemed 10.5% senior notes primarily by issuing 7.50% and 6.875%
senior notes.
Corporate general and administrative expenses increased from $4.5 million in the 2004 quarter to
$5.4 million in the 2005 quarter due mainly to higher compensation costs resulting from
mark-to-market adjustments of long-term (stock-based) incentive plans and increased audit and
corporate governance expenses.
Depreciation and amortization expense was $12.9 million in the 2005 quarter, up from $11.3 million
in the 2004 quarter. The acquisition of the remaining 55% of Alpine Helicopters in December 2004
increased depreciation and amortization expense by $0.8 million and the balance of the increase was
due to depreciation of capital expenditures made during fiscal 2005.
We provided for $2.1 million of income taxes, based on $32.7 million of pre-tax income in the
2005 quarter compared with a recovery of $1.0 million of income taxes, based on a pre-tax loss of
$7.2 million in the 2004 quarter. We expect our income tax rate to be in the range of 10% to 15%
for the current fiscal year. This rate will increase if we complete the sale of the majority of
our interest in Mammoth (see liquidity and capital resources below) since the gain on sale will
be taxed for accounting purposes at about 40%.
Non-controlling interest increased from $0.9 million in the 2004 quarter to $21.4 million in the
2005 quarter due mainly to the inclusion of $18.5 million for our partner’s profits on the sale
of the property in Maui, as described in Review of Real Estate Development above. The balance of
the increase was due to improved results of A&K in the 2005 quarter.
LIQUIDITY
AND CAPITAL RESOURCES
Last year we completed several important transactions, including selling the majority of our
commercial properties and extending our partnering strategy for real estate development, and we
renewed our senior credit facility and refinanced higher interest-bearing senior notes. This put
us in a strong financial position as we entered the current fiscal year. The normal seasonality
of our businesses resulted in negative free cash flow for the 2005 quarter and higher debt levels
at the end of the quarter, in line with our expectations.
The following table summarizes the major sources and uses of cash in the 2005 and 2004 quarters.
This table should be read in conjunction with the Consolidated Statements of Cash Flows, which
are more detailed as prescribed by GAAP.
| (MILLIONS) | 2005 QUARTER | 2004 QUARTER | CHANGE | |||||||||
Funds from operations |
$ | 43.8 | $ | 5.8 | $ | 38.0 | ||||||
Cash for real estate development, including
investments in partnerships |
(10.6 | ) | (44.4 | ) | 33.8 | |||||||
Cash for resort and travel operations capex
and other assets |
(30.4 | ) | (22.7 | ) | (7.7 | ) | ||||||
Cash for long-term receivables and
working capital |
(43.0 | ) | (29.8 | ) | (13.2 | ) | ||||||
Free cash flow |
(40.2 | ) | (91.1 | ) | 50.9 | |||||||
Cash from business acquisitions and asset disposals |
0.2 | 15.7 | (15.5 | ) | ||||||||
Net cash flow from operating and investing activities |
(40.0 | ) | (75.4 | ) | 35.4 | |||||||
Net financing inflows |
17.6 | 58.7 | (41.1 | ) | ||||||||
Decrease in cash |
$ | (22.4 | ) | $ | (16.7 | ) | $ | (5.7 | ) | |||
We generated $43.8 million of funds from operations in the 2005 quarter, up from $5.8 million
in the 2004 quarter due mainly to higher operating profits from real estate development. For more
details see the Review of Operations sections earlier in this MD&A.
Real estate development used $10.6 million of cash in the 2005 quarter, down from $44.4 million
in the 2004 quarter due mainly to the sale of the Maui property and the return of $12.8 million
of equity invested in real estate partnerships as projects completed construction, units closed
and distributions were made to the partners. In the 2005 quarter, we spent $7.3 million to
acquire a new property in Napa, California for the future development of 160 units. We did not
acquire any new land holdings in the 2004 quarter.
Expenditures
on resort and travel operations assets (“capex”) and other assets used $30.4 million
cash in the 2005 quarter compared with $22.7 million in the 2004 quarter. The majority of the
expenditures in each period were for maintenance capex to our mountain resort assets in advance of
the winter season. In addition, in the 2005 quarter we spent
$4.6 million on new lifts at Winter Park and $3.8 million on building a new golf course adjacent
to Blue Mountain. We expect to spend a total of approximately $90 million on resort and travel
operations capex during fiscal 2006, comprising approximately $40 million of maintenance capex
(non-discretionary expenditures required to maintain the existing
service level of our assets)
with the balance being discretionary expansion capex. This compares with $79.4 million in fiscal
2005.
Long-term receivables and working capital used $43.0 million of cash in the 2005 quarter, up from
$29.8 million in the 2004 quarter. This represents the cash flow from changes in receivables,
other assets, payables and deferred revenue. Working capital requirements fluctuate by quarter due
to the seasonality of our businesses. We generally consume cash for working capital in our first
fiscal quarter as we prepare our mountain resort businesses for the upcoming winter season.
The seasonality of businesses resulted in negative free cash flow of $40.2 million in the 2005
quarter compared with negative free cash flow of $91.1 million in the 2004 quarter. On an ongoing
basis, our goal is to manage each of our divisions (Leisure and Travel Group and Intrawest
Placemaking) to generate positive annual free cash flow.
Proceeds from asset disposals amounted to $0.2 million in the 2005 quarter. We expect this source
of funds to increase significantly since we signed an agreement in October 2005 to sell the
majority of our 59.5% interest in Mammoth for pre-tax net proceeds of approximately $166 million,
including a pre-transaction dividend. We expect to retain an interest of approximately 15%. The
transaction is expected to close in our second or third fiscal quarter and is subject to customary
closing conditions. There are no assurances, however, that all the closing conditions will be
satisfied or that the transaction will be completed. We are evaluating various options for the use
of the proceeds. In the 2004 quarter we acquired $15.7 million of cash on the acquisition of 67%
of A&K, net of our acquisition cost.
In total, our operating and investing activities used $40.0 million of cash in the 2005 quarter,
down from $75.4 million in the 2004 quarter. In both periods we funded these activities primarily
by drawing on our $425 million senior credit facility. At September 30, 2005, we had drawn $205.3
million under this facility and we had also issued letters of credit for $49.8 million, leaving
$169.9 million available to cover future liquidity requirements. Several of our resorts also have
lines of credit in the range of $5 million to $10 million each to fund seasonal cash requirements.
Financing 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
flows, are sufficient to finance all our normal operating needs.
CHANGE IN ACCOUNTING POLICY
Since
there is no specific Canadian GAAP guidance that deals with accounting for timeshare
operations, effective July 1, 2005 we retroactively adopted the new U.S. GAAP guidance 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 contains specific guidelines for assessing whether the buyers’ initial and
continuing investments are adequate to demonstrate a commitment to pay for the property. The new
rules change the timing of our recognition of revenues and selling and product costs. The impact of
this change in accounting policy on our statement of operations was to reduce net income by $0.5
million in the 2005 quarter and increase net loss by $0.4 million in the 2004 quarter. The
information contained in the Quarterly Financial Summary below has been restated to reflect the
retroactive application of this change.
ADDITIONAL INFORMATION
TOTAL COMPANY EBITDA
| 2005 | 2004 | |||||||
| (MILLIONS) | QUARTER | QUARTER | ||||||
Cash flow used in operating activities |
$ | (22.6 | ) | $ | (66.5 | ) | ||
Add (deduct): |
||||||||
Changes in non-cash operating assets and liabilities |
66.4 | 72.3 | ||||||
Income tax expense |
2.1 | (1.0 | ) | |||||
Interest expense |
10.3 | 11.4 | ||||||
Interest in real estate expenses |
1.2 | 2.2 | ||||||
| 57.4 | 18.4 | |||||||
Interest and other income, net of non-cash items |
(0.8 | ) | (2.7 | ) | ||||
Total Company EBITDA |
$ | 56.6 | $ | 15.7 | ||||
RESORT AND TRAVEL OPERATIONS EBITDA
| 2005 | 2004 | |||||||
| (MILLIONS) | QUARTER | QUARTER | ||||||
Resort and travel operations revenue |
$ | 166.1 | $ | 129.3 | ||||
Resort and travel operations expenses |
159.8 | 122.2 | ||||||
Resort and travel operations EBITDA |
$ | 6.3 | $ | 7.1 | ||||
MANAGEMENT SERVICES EBITDA
| 2005 | 2004 | |||||||
| (MILLIONS) | QUARTER | QUARTER | ||||||
Management services revenue |
$ | 36.0 | $ | 35.1 | ||||
Management services expenses |
32.1 | 29.4 | ||||||
Management services EBITDA |
$ | 3.9 | $ | 5.7 | ||||
REAL ESTATE DEVELOPMENT EBITDA
| 2005 | 2004 | |||||||
| (MILLIONS) | QUARTER | QUARTER | ||||||
Real estate development contribution |
$ | 50.7 | $ | 5.1 | ||||
Interest in real estate expenses |
1.2 | 2.2 | ||||||
Real estate development EBITDA |
$ | 51.9 | $ | 7.3 | ||||
QUARTERLY FINANCIAL SUMMARY
IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
| Q1-06 | Q4-05 | Q3-05 | Q2-05 | Q1-05 | Q4-04 | Q3-04 | Q2-04 | |||||||||||||||||||||||||
Total revenue |
$ | 301.8 | $ | 533.7 | $ | 501.0 | $ | 437.0 | $ | 205.7 | $ | 490.3 | $ | 435.4 | $ | 399.9 | ||||||||||||||||
Net income
(loss) |
9.2 | (19.2 | ) | 66.8 | (7.7 | ) | (7.1 | ) | 3.7 | 55.1 | 1.0 | |||||||||||||||||||||
PER COMMON SHARE: |
||||||||||||||||||||||||||||||||
Net
income (loss) |
||||||||||||||||||||||||||||||||
Basic |
0.19 | (0.40 | ) | 1.40 | (0.16 | ) | (0.15 | ) | 0.08 | 1.16 | 0.02 | |||||||||||||||||||||
Diluted |
0.19 | (0.40 | ) | 1.39 | (0.16 | ) | (0.15 | ) | 0.08 | 1.15 | 0.02 | |||||||||||||||||||||
Several factors impact comparability between quarters:
| • | The timing of acquisitions. In the first quarter of 2005 we acquired 67% of A&K and in the second quarter of 2005 we acquired the 55% of Alpine Helicopters that we did not already own. | ||
| • | The seasonality of our resort and travel operations. Revenue and EBITDA from this business are weighted disproportionately to our third quarter. | ||
| • | The timing of project completions and real estate closings. Generally we close more units in the fourth quarter. | ||
| • | The timing of refinancings. In the second quarter of both 2004 and 2005 we redeemed senior notes and expensed call premium and unamortized financing costs. | ||
| • | The timing of recording reserves and valuation adjustments. In the fourth quarter of 2005 we wrote down the value of our stand-alone golf courses. |
OUTSTANDING SHARE DATA
As at November 4, 2005, we have issued and there are outstanding 48,338,526 common
shares and stock options exercisable for 3,785,600 common shares.
CONSOLIDATED BALANCE SHEETS |
| SEPTEMBER 30, 2005 | JUNE 30, 2005 | |||||||
| (IN THOUSANDS OF UNITED STATES DOLLARS) | (UNAUDITED) | (AUDITED) | ||||||
| (RESTATED) | ||||||||
| (note 1) | ||||||||
Assets |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 118,446 | $ | 140,878 | ||||
Amounts receivable |
155,940 | 162,102 | ||||||
Other assets |
224,574 | 188,211 | ||||||
Resort properties |
405,747 | 388,510 | ||||||
Future income taxes |
29,938 | 29,927 | ||||||
| 934,645 | 909,628 | |||||||
Amounts receivable |
87,004 | 78,877 | ||||||
Resort and travel operations |
1,074,886 | 1,034,187 | ||||||
Resort properties |
441,771 | 403,252 | ||||||
Other assets |
87,552 | 85,181 | ||||||
Investment in and advances to partnerships (note 7) |
96,658 | 109,037 | ||||||
Goodwill |
24,275 | 27,483 | ||||||
| $ | 2,746,791 | $ | 2,647,645 | |||||
Liabilities and Shareholders’ Equity |
||||||||
CURRENT LIABILITIES: |
||||||||
Amounts payable |
$ | 277,527 | $ | 275,176 | ||||
Deferred revenue and deposits |
227,356 | 201,313 | ||||||
Bank and other indebtedness |
119,095 | 82,144 | ||||||
| 623,978 | 558,633 | |||||||
Deferred revenue and deposits |
122,995 | 132,866 | ||||||
Bank and other indebtedness |
960,475 | 941,279 | ||||||
Future income taxes |
88,514 | 92,010 | ||||||
Non-controlling interest in subsidiaries |
67,662 | 76,339 | ||||||
| 1,863,624 | 1,801,127 | |||||||
SHAREHOLDERS’ EQUITY: |
||||||||
Capital stock (note 3) |
473,608 | 469,162 | ||||||
Retained earnings |
351,180 | 342,013 | ||||||
Foreign currency translation adjustment |
58,379 | 35,343 | ||||||
| 883,167 | 846,518 | |||||||
| $ | 2,746,791 | $ | 2,647,645 | |||||
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS |
|||
| FOR THE THREE MONTHS ENDED SEPTEMBER 30 (IN THOUSANDS OF UNITED STATES DOLLARS EXCEPT PER SHARE AMOUNTS) (UNAUDITED) |
2005 | 2004 | ||||||
| (restated) | ||||||||
| (note 1) | ||||||||
RESORT AND TRAVEL OPERATIONS: |
||||||||
Revenue |
$ | 166,083 | $ | 129,300 | ||||
Expenses |
159,806 | 122,224 | ||||||
Resort and travel operations contribution |
6,277 | 7,076 | ||||||
MANAGEMENT SERVICES: |
||||||||
Revenue |
35,968 | 35,080 | ||||||
Expenses |
32,107 | 29,370 | ||||||
Management services contribution |
3,861 | 5,710 | ||||||
REAL ESTATE DEVELOPMENT: |
||||||||
Revenue |
98,694 | 38,792 | ||||||
Expenses |
48,586 | 34,111 | ||||||
| 50,108 | 4,681 | |||||||
Income from equity accounted investments |
589 | 460 | ||||||
Real estate development contribution |
50.697 | 5,141 | ||||||
Income before undernoted items |
60,835 | 17,927 | ||||||
Interest and other income |
479 | 2,045 | ||||||
Interest expense |
(10,296 | ) | (11,372 | ) | ||||
Corporate general and administrative expenses |
(5,375 | ) | (4,453 | ) | ||||
Depreciation and amortization |
(12,908 | ) | (11,337 | ) | ||||
Income (loss) before income taxes and non-controlling interest |
32,735 | (7,190 | ) | |||||
Provision for income taxes |
(2,136 | ) | 1,001 | |||||
Non-controlling interest |
(21,432 | ) | (879 | ) | ||||
Net income (loss) for the period |
9,167 | (7,068 | ) | |||||
Retained earnings, beginning of period,
as previously stated |
345,348 | 318,883 | ||||||
Prior period
adjustment (note 1) |
(3,335 | ) | (3,536 | ) | ||||
Retained earnings, beginning of period, as restated |
342,013 | 315,347 | ||||||
Retained earnings, end of period |
$ | 351,180 | $ | 308,279 | ||||
NET INCOME (LOSS) PER COMMON SHARE: |
||||||||
Basic |
$ | 0.19 | $ | (0.15 | ) | |||
Diluted |
0.19 | (0.15 | ) | |||||
Weighted average number of common shares
outstanding (in thousands) |
||||||||
Basic |
48,151 | 47,622 | ||||||
Diluted |
48,770 | 47,622 | ||||||
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| FOR THE THREE MONTHS ENDED SEPTEMBER 30 | ||||||||
| (IN THOUSANDS OF UNITED STATES DOLLARS) (UNAUDITED) | 2005 | 2004 | ||||||
| (RESTATED) | ||||||||
| (note 1) | ||||||||
Cash
provided by (used in): |
||||||||
OPERATIONS: |
||||||||
Net income (loss) |
$ | 9,167 | $ | (7,068) | ||||
Items not affecting cash: |
||||||||
Depreciation and amortization |
12,908 | 11,337 | ||||||
Income from equity accounted investments |
(589 | ) | (460 | ) | ||||
Amortization of financing costs |
649 | 590 | ||||||
Stock-based compensation |
283 | 210 | ||||||
Amortization of benefit plan |
— | 277 | ||||||
Non-controlling interest |
21,432 | 879 | ||||||
Gain on asset disposals |
(25 | ) | — | |||||
Funds from operations |
43,825 | 5,765 | ||||||
Recovery of costs through real estate sales |
48,586 | 34,111 | ||||||
Acquisition and development of properties held for sale |
(72,025 | ) | (76,594 | ) | ||||
Changes in long-term amounts receivable, net |
(8,127 | ) | (5,085 | ) | ||||
Changes in non-cash operating working capital (note 6) |
(34,847 | ) | (24,698 | ) | ||||
| (22,588 | ) | (66,501 | ) | |||||
FINANCING: |
||||||||
Proceeds from bank and other borrowings |
85,627 | 104,704 | ||||||
Repayments of bank and other borrowings |
(43,031 | ) | (43,937 | ) | ||||
Issue of common shares for cash |
4,163 | 274 | ||||||
Distributions to non-controlling interest |
(29,193 | ) | (2,315) | |||||
| 17,566 | 58,726 | |||||||
INVESTMENTS: |
||||||||
Proceeds from (expenditures on): |
||||||||
Resort and travel operations assets |
(28,142 | ) | (17,422 | ) | ||||
Investment in partnerships |
12,829 | (1,903 | ) | |||||
Other assets |
(2,271 | ) | (5,245 | ) | ||||
Cash acquired in acquisition, net of acquisition cost |
— | 15,677 | ||||||
Asset disposals |
174 | — | ||||||
| (17,410 | ) | (8,893 | ) | |||||
Decrease in cash and cash equivalents |
(22,432 | ) | (16,668) | |||||
Cash and cash equivalents, beginning of period |
140,878 | 109.816 | ||||||
Cash and cash equivalents, end of period |
$ | 118,446 | $ | 93,148 | ||||
(Supplemental information (note 6))
See accompanying notes to consolidated financial statements.
See accompanying notes to consolidated financial statements.
(IN THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED) |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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):
| SEPTEMBER 30, 2005 | JUNE 30. 2005 | |||||||
| (UNAUDITED) | (AUDITED) | |||||||
ASSETS |
||||||||
Current other assets |
$ | 4,162 | $ | 3,351 | ||||
| $ | 4,162 | $ | 3,351 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current deferred revenue |
$ | 8,425 | $ | 6,946 | ||||
Retained earnings |
(3,335 | ) | (3,335 | ) | ||||
Foreign currency translation adjustment |
(928 | ) | (260 | ) | ||||
| $ | 4,162 | $ | 3,351 | |||||
| 2005 | 2004 | |||||||
| THREE MONTHS ENDED SEPTEMBER 30 | (UNAUDITED) | (UNAUDITED) | ||||||
REAL ESTATE DEVELOPMENT: |
||||||||
Revenue |
$ | (1,169 | ) | $ | (829 | ) | ||
Expenses |
(659 | ) | (439 | ) | ||||
| $ | (510 | ) | $ | (390 | ) | |||
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
2. SEASONALITY OF OPERATIONS (CONTINUED):
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. CAPITAL STOCK:
| SEPTEMBER 30, 2005 | JUNE 30, 2005 | |||||||
| (UNAUDITED) | (AUDITED) | |||||||
Common shares |
$ | 469,491 | $ | 465,328 | ||||
Contributed surplus |
4,117 | 3,834 | ||||||
| $ | 473,608 | $ | 469,162 | |||||
(a) COMMON SHARES:
| NUMBER OF | 2005 | |||||||
| COMMON SHARES | AMOUNT | |||||||
| (UNAUDITED) | (UNAUDITED) | |||||||
Balance, June 30, 2005 |
47,957,110 | $ | 465,328 | |||||
Issued for cash under stock option plan |
196,700 | 4,163 | ||||||
Amortization of benefit plan, net |
77,970 | — | ||||||
Balance,
September 30, 2005 |
48,231,780 | $ | 469,491 | |||||
No stock options were granted or forfeited during the three months ended September 30, 2005. A
total of 3,807,500 stock options remain outstanding as at September 30, 2005.
(b) 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 three months ended September 30, 2005. The total stock compensation
expense for the three months ended September 30, 2005 was $283,000 (2004 — $210,000).
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:
| 2005 | 2004 | |||||||
| THREE MONTHS ENDED SEPTEMBER 30 | (UNAUDITED) | (UNAUDITED) | ||||||
| (RESTATED) (note 1) |
||||||||
Net income (loss), as reported |
$ | 9,167 | $ | (7,068 | ) | |||
Estimated fair value of option grants, net of tax |
(570 | ) | (617 | ) | ||||
Net income (loss), pro forma |
$ | 8,597 | $ | (7,685 | ) | |||
PRO FORMA INCOME PER COMMON SHARE: |
||||||||
Basic |
$ | 0.18 | $ | (0.16 | ) | |||
Diluted |
0.18 | (0.16 | ) | |||||
The
estimated fair value of option grants excludes the effect of those
granted before July 1, 2001.
4. 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:
| 2005 | 2004 | |||||||
| THREE MONTHS ENDED SEPTEMBER 30 | (UNAUDITED) | (UNAUDITED) | ||||||
Denominator (in thousands of shares): |
||||||||
Weighted average number of
common shares outstanding — basic |
48,151 | 47,622 | ||||||
Effect of dilutive options |
619 | — | ||||||
Weighted average number of
common shares outstanding — diluted |
48,770 | 47,622 | ||||||
For the
three months ended September 30, 2005, there are no anti-dilutive options (2004-4,220,150).
5. SEGMENTED INFORMATION:
The following table presents the Company’s results from continuing operations by reportable
segment:
| THREE MONTHS ENDED | MOUNTAIN | NON- | REAL | |||||||||||||||||
| SEPTEMBER 30, 2005 (UNAUDITED) | RESORT | MOUNTAIN | ESTATE | CORPORATE | TOTAL | |||||||||||||||
SEGMENT REVENUE: |
||||||||||||||||||||
Resort and travel
operations |
$ | 62,376 | $ | 103,707 | $ | — | $ | — | $ | 166,083 | ||||||||||
Management services |
14,656 | 6,984 | 14,328 | — | 35,968 | |||||||||||||||
Real estate development |
— | — | 99,283 | — | 99,283 | |||||||||||||||
Corporate and all other |
— | — | — | 479 | 479 | |||||||||||||||
| $ | 77,032 | $ | 110,691 | $ | 113,611 | $ | 479 | $ | 301,813 | |||||||||||
SEGMENT OPERATING PROFIT: |
||||||||||||||||||||
Resort and travel
operations |
$ | (2,273 | ) | $ | 8,550 | $ | — | $ | — | $ | 6,277 | |||||||||
Management services |
(1,327 | ) | 2,643 | 2,545 | — | 3,861 | ||||||||||||||
Real estate development |
— | — | 50,697 | — | 50,697 | |||||||||||||||
Corporate and all other |
— | — | — | 479 | 479 | |||||||||||||||
| $ | (3,600 | ) | $ | 11,193 | $ | 53,242 | $ | 479 | 61,314 | |||||||||||
LESS: |
||||||||||||||||||||
Interest expense |
(10,296 | ) | ||||||||||||||||||
Corporate general and administrative expenses |
(5,375 | ) | ||||||||||||||||||
Depreciation and amortization |
(12,908 | ) | ||||||||||||||||||
Income before income taxes and non-controlling interest |
$ | 32,735 | ||||||||||||||||||
5. SEGMENTED INFORMATION (CONTINUED):
| THREE MONTHS ENDED | MOUNTAIN | NON- | REAL | |||||||||||||||||
| SEPTEMBER 30, 2004 (UNAUDITED) | RESORT | MOUNTAIN | ESTATE | CORPORATE | TOTAL | |||||||||||||||
| (RESTATED) | ||||||||||||||||||||
| (note 1) | ||||||||||||||||||||
SEGMENT REVENUE: |
||||||||||||||||||||
Resort and travel operations |
$ | 43,517 | $ | 85,783 | $ | — | $ | — | $ | 129,300 | ||||||||||
Management services |
13,341 | 7,299 | 14,440 | — | 35,080 | |||||||||||||||
Real estate development |
— | — | 39,252 | — | 39,252 | |||||||||||||||
Corporate and all other |
— | — | — | 2,045 | 2,045 | |||||||||||||||
| $ | 56,858 | $ | 93,082 | $ | 53,692 | $ | 2,045 | $ | 205,677 | |||||||||||
SEGMENT OPERATING PROFIT: |
||||||||||||||||||||
Resort and travel operations |
$ | 431 | $ | 6,645 | $ | — | $ | — | $ | 7,076 | ||||||||||
Management services |
(2,968 | ) | 2,943 | 5,735 | — | 5,710 | ||||||||||||||
Real estate development |
— | — | 5,141 | — | 5,141 | |||||||||||||||
Corporate and all other |
— | — | — | 2,045 | 2,045 | |||||||||||||||
| $ | (2,537 | ) | $ | 9,588 | $ | 10,876 | $ | 2,045 | 19,972 | |||||||||||
LESS: |
||||||||||||||||||||
Interest expense |
(11,372 | ) | ||||||||||||||||||
Corporate general and
administrative expenses |
(4,453 | ) | ||||||||||||||||||
Depreciation and amortization |
(11,337 | ) | ||||||||||||||||||
Loss before income taxes
and non-controlling interest |
$ | (7,190 | ) | |||||||||||||||||
6. CASH FLOW INFORMATION:
The changes in non-cash operating working capital balance consist of the following:
| 2005 | 2004 | |||||||
| THREE MONTHS ENDED SEPTEMBER 30 | (UNAUDITED) | (UNAUDITED) | ||||||
| (RESTATED) | ||||||||
| (note 1) | ||||||||
CASH PROVIDED BY (USED IN): |
||||||||
Amounts receivable |
$ | 6,162 | $ | 25,203 | ||||
Other assets |
(48,435 | ) | (48,408 | ) | ||||
Amounts payable |
2,351 | (26,458 | ) | |||||
Deferred revenue and deposits |
5,075 | 24,965 | ||||||
| $ | (34,847 | ) | $ | (24,698 | ) | |||
SUPPLEMENTAL INFORMATION: |
||||||||
Interest paid |
$ | 8,527 | $ | 27,749 | ||||
Income, franchise and withholding taxes paid |
11,317 | 3,643 | ||||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES: |
||||||||
Notes received on sale of properties to partnerships |
— | 392 | ||||||
Bank and other indebtedness incurred on acquisition |
— | 18,652 | ||||||
7. RELATED PARTY TRANSACTIONS:
INVESTMENT IN AND ADVANCES TO PARTNERSHIPS:
| SEPTEMBER 30, 2005 | JUNE 30, 2005 | |||||||
| (UNAUDITED) | (AUDITED) | |||||||
Real estate partnerships |
$ | 87,525 | $ | 99,904 | ||||
Commercial partnership |
9,133 | 9,133 | ||||||
| $ | 96,658 | $ | 109,037 | |||||
7. RELATED PARTY TRANSACTIONS (CONTINUED):
(a) INVESTMENT IN REAL ESTATE PARTNERSHIPS
The
Company sells certain real estate properties to partnerships in which it holds an
investment. During the three months ended September 3D, 2005, the Company sold no real estate
properties to the partnerships (2004 — one property was sold for
proceeds of $5,293,000).
Development and sales management fees earned during the three months ended September 30, 2005
totaled $5,679,000 (2004 — $5,132,000) and have been included in management services revenue.
Interest income related to notes receivable and working capital loans to the partnerships of
$204,000 has been included in interest and other income for the three
months ended September 30,
2005 (2004 — $303,000).
| SEPTEMBER 30, 2005 | JUNE 30. 2005 | |||||||
| INVESTMENT IN AND ADVANCES TO REAL ESTATE PARTNERSHIPS: | (UNAUDITED) | (AUDITED) | ||||||
Equity contributions |
$ | 74,282 | $ | 82,847 | ||||
Formation costs |
3,869 | 3,869 | ||||||
Advances |
4,774 | 9,483 | ||||||
Equity income, net of amortization of formation costs |
4,600 | 3,705 | ||||||
| $ | 87,525 | $ | 99,904 | |||||
At September 30, 2005, deferred revenue includes $69,182,000 (2004 — $25,750,000) relating to
the sale of properties to the partnerships and amounts receivable includes $53,925,000 (2004 —
$13,390,000) due from the partnerships.
(b) COMMERCIAL PARTNERSHIP
During the year ended June 30, 2005, the Company sold commercial properties at seven of its
resorts to a partnership (the “Commercial Partnership”) for cash proceeds of $109,504,000. The
Company has a 20% interest in the Commercial Partnership for an equity contribution of $9,133,000.
The Company has leased approximately 30% of the space within the properties for its resort and
travel operations for terms up to 20 years with aggregate rental payments approximating
$87,766,000. In addition, the Company has committed to head-lease premises that were vacant at the
time of closing for up to four years. The gross amount payable under these commitments is
estimated at $5,418,000 from 2006 to 2009. These commitments will be reduced by any revenue earned
by the Company from subleasing the vacant space.
Management fees earned during the three months ended September 30, 2005 totaled $162,000 (2004 —
nil) and have been included in management services revenue.
At September 30, 2005, deferred revenue includes $7,308,000 (2004 — nil) relating to the deferred
gain on sale of properties to the partnership. This is net of the estimated cost of the commitment
to head-lease vacant premises of $2,453,000 (2004 — nil).
8.
SUBSEQUENT EVENT:
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 expected to be
approximately 15%. The proposed transaction is expected to result in a pre-tax profit to the
Company of approximately $101,000,000. Pre-tax net proceeds to the Company after estimated debt
assumed, working capital adjustments, transaction costs and reinvestment in Mammoth Mountain are
expected to be approximately $166,000,000, including a pre-transaction dividend. The transaction
is expected to close within 90 days and is subject to customary closing conditions.
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