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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 40-F
(CHECK ONE:)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE
ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1997 COMMISSION FILE NUMBER: 1-14596
INTRAWEST CORPORATION
(Exact name of Registrant as specified in its charter)
BRITISH COLUMBIA
(Province or other jurisdiction of incorporation or organization)
SUITE 800, 200 BURRARD STREET
VANCOUVER, BRITISH COLUMBIA, CANADA V6C 3L6
TELEPHONE NUMBER: (604) 669-9777
(Address and telephone number of Registrant's principal executive offices)
PTSGE CORP.
5000 COLUMBIA SEAFIRST CENTER
701 FIFTH AVENUE
SEATTLE, WASHINGTON 98104
(206) 623-7580
(Name, address (including zip code) and telephone number
(including area code) of agent for service in the United States)
<TABLE>
<S> <C>
7999 N.A.
(Primary Standard Industrial (I.R.S. Employer Identification
Classification Code (if applicable)) Number (if applicable))
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on which registered
Common Shares New York Stock Exchange
</TABLE>
Securities registered or to be registered pursuant to Section 12(g) of the
Act. None
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act. None
For annual reports, indicate by check mark the information filed with this Form:
[X] Annual information form [X] Audited annual financial statements
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Indicate number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
34,281,536 common shares as at June 30, 1997
Indicate by check mark whether the Registrant by filing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
(the "Exchange Act"). If "Yes" is marked, indicate the file number assigned to
the Registrant in connection with such Rule.
[ ]
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
[X]
UNDERTAKING
The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to: the securities in relation to which the obligation to file an
annual report on Form 40-F arises; or transactions in the said securities.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant certifies
that it meets all of the requirements for filing on Form 40-F, and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereto duly authorized.
INTRAWEST CORPORATION
By: /s/ ROSS MEACHER
---------------------------------
Name: Ross J. Meacher
Title: Corporate Secretary
Date: September 19, 1997
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LOGO
ANNUAL INFORMATION FORM
INTRAWEST CORPORATION
Suite 800
200 Burrard Street
Vancouver, B.C. V6C 3L6
September 19, 1997
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INTRAWEST CORPORATION
ANNUAL INFORMATION FORM
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Certain Definitions and Statistical Information..................... 2
The Company......................................................... 3
The Mountain Resort Industry........................................ 5
Resort Management and Development................................... 6
Resort Operations................................................. 6
Resort Properties.............................................. 6
Sources of Resort Operations Revenue........................... 11
Sponsorship and Special Events................................. 13
Information Technology......................................... 13
Resort Marketing and Sales..................................... 13
Resort Real Estate Development.................................... 14
The Development Process........................................ 15
Real Estate Properties......................................... 16
Resort Club.................................................... 20
Competition....................................................... 21
Legal and Regulatory Matters...................................... 21
Non-Resort Assets................................................... 21
Employees........................................................... 23
Selected Consolidated Financial Information......................... 23
Management's Discussion and Analysis................................ 26
Market for Securities............................................... 34
Directors and Officers.............................................. 34
Additional Information.............................................. 36
1997 Consolidated Financial Statements.............................. F-1
</TABLE>
CERTAIN DEFINITIONS AND STATISTICAL INFORMATION
Unless the context otherwise requires, the "Company" or "Intrawest" refers
to Intrawest Corporation, either alone or together with its subsidiaries and
their respective interests in joint ventures and partnerships. Unless otherwise
specified, "fiscal" in connection with a year means, with respect to the
Company, in the case of any year prior to 1995, the 12 months ended September
30, in the case of 1995, the nine months ended June 30 and, in the case of any
year after 1995, the 12 months ended June 30.
As used in this Annual Information Form "skier visit" means one guest
accessing a ski mountain on any one day and "unit" means one condominium-hotel
unit, one townhome unit, one single-family lot or 1,000 square feet of
commercial space.
Statistical information relating to the ski industry included in this
Annual Information Form is derived by the Company from recognized industry
reports regularly published by industry associations and independent consulting
and data compilation organizations in the ski industry, including The National
Ski Areas Association, The Canadian Ski Council and the White Book of Ski Areas.
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THE COMPANY
INCORPORATION
The Company was formed by an amalgamation on November 23, 1979 under, and
is governed by, the Company Act (British Columbia). The registered office of the
Company is located at 1300 - 777 Dunsmuir Street, Vancouver, British Columbia,
Canada V7Y 1K2, its executive office is located at Suite 800, 200 Burrard
Street, Vancouver, British Columbia, Canada V6C 3L6 and its telephone number is
(604) 669-9777. The Company maintains a web site at www.intrawest.com.
OVERVIEW
Intrawest is a leading developer and operator of mountain resorts across
North America. The Company's principal strength is its ability to combine
expertise in resort operations and real estate development. By combining high
quality resort services and amenities with innovative residential and commercial
real estate development, the Company has generated and has implemented
strategies that it expects will continue to generate increases in the number of
visitors, return on assets and average selling prices of real estate at its
resorts.
Intrawest's network of eight resorts, which are geographically diversified
across North America's major ski regions, enables it to provide a wide range of
distinctive vacation experiences. The Company's resorts include
Whistler/Blackcomb and Panorama in British Columbia, Tremblant and Mont Ste.
Marie in Quebec, Stratton in Vermont, Snowshoe in West Virginia, Copper in
Colorado and a 33% interest in Mammoth in California. The acquisition of
Whistler, which is adjacent to Blackcomb, provides the Company with resort
operations at both mountains within North America's number one rated ski resort
in 1996 (as rated by three major ski magazines -- Snow Country, SKI and Skiing).
Whistler/Blackcomb generated a combined total of approximately 1.7 million skier
visits during the 1996/97 ski season. The acquisition of Copper provides the
Company with ownership of a major resort operation in Colorado, the most popular
ski region in North America. During the 1996/97 ski season the Company's network
of resorts generated approximately 5.2 million skier visits, which is greater
than any other North American group of affiliated mountain resorts. For
accounting purposes, the effective date of acquisition of Whistler and Copper
for purposes of recognizing their results of operations was December 18, 1996.
Intrawest is North America's largest mountain resort real estate developer
with real estate sales revenue in fiscal 1997 of $118.2 million. The Company
owns, develops and manages residential and commercial resort real estate at each
of its resorts and is developing mountain resort villages at Keystone in
Colorado and Squaw Valley in California. Intrawest owns or has rights to acquire
land on which it expects to develop and sell approximately 15,000 units over the
next 12 to 15 years. The Company's resort development formula links the staged
expansion of ski and other resort operations with the planning, design and
managed development of architecturally distinct four-season resort villages at
the base of the mountain. The Intrawest formula emphasizes quality of service,
comprehensive amenities, village ambience and other characteristics which
attract visitors and buyers of real estate. Intrawest has successfully employed
this formula at Blackcomb and Tremblant and, as a result, the villages at these
locations have become major attractions, drawing both skiers and non-skiers. The
Company is at various stages of applying its formula to the extensive
developable land holdings at its other resorts. The Company also builds and
operates resort club locations which are marketed as timeshare vacation
ownership resorts.
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CORPORATE STRUCTURE
The following is a list of the Company's principal subsidiaries and
controlled partnerships accounted for as subsidiaries of the Company as at June
30, 1997, indicating the place of incorporation/registration, and showing the
percentage of voting securities beneficially owned by the Company.
<TABLE>
<CAPTION>
PLACE OF
INCORPORATION/ PERCENTAGE INTEREST
REGISTRATION HELD BY THE COMPANY
---------------- -------------------
<S> <C> <C>
Blackcomb Skiing Enterprises Ltd.(1)....................... Canada 96.6
Blackcomb Skiing Enterprises Limited Partnership........... British Columbia 74.38
Whistler Mountain Holdings Limited......................... British Columbia 100(2)
Mont Tremblant Resorts and Company, Limited Partnership.... Quebec 100
IW Resorts Limited Partnership............................. British Columbia 97.55
Mont Ste. Marie (1984) Inc................................. Canada 100
Intrawest Resort Ownership Corporation..................... British Columbia 100
Intrawest U.S.A., Inc...................................... Delaware 100
Intrawest U.S. Holdings Inc. .............................. Delaware 100
Stratton Ski Corporation................................... Delaware 100
Snowshoe Resort, Inc....................................... West Virginia 100
Copper Mountain, Inc....................................... Delaware 100
</TABLE>
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(1) Intrawest also indirectly owns 100% of the issued and outstanding non-voting
shares of Blackcomb Skiing Enterprises Ltd.
(2) In connection with a covenant not to compete with the business activities of
Blackcomb Skiing Enterprises Limited Partnership, the Company has agreed to
grant to Nippon Cable Co., Ltd., one of its minority partners in the
partnership, an option to acquire a 23% interest in Whistler at a price
based on the terms of the Whistler acquisition. The option will be
exercisable during the 30-day period ending November 30, 1997.
GENERAL DEVELOPMENT OF THE BUSINESS
During the past five years, the Company has expanded its resort operations
and resort real estate development businesses. Key developments during this
period are set out below.
1993
- In March 1993 Intrawest acquired Panorama resort, located near
Invermere, British Columbia.
- In September 1993 Intrawest entered into a joint venture to develop the
real estate at Keystone resort in Colorado.
- Intrawest entered the resort vacation club business with the formation
of Intrawest Resort Ownership Corporation.
1994
- Effective April 1994 Intrawest sold substantially all of its industrial
and non-resort residential development properties in British Columbia and
Washington State.
- In October 1994 Intrawest acquired all of the shares of Stratton Ski
Corporation, the owner of Stratton Mountain resort in Vermont.
1995
- In November 1995 Intrawest purchased all of the assets of Snowshoe
Mountain resort in West Virginia.
- In December 1995 Intrawest acquired 33% of the shares of Mammoth
Mountain Ski Area, the owner of Mammoth Mountain in California.
1996
- In April 1996 Intrawest agreed to develop real estate property located
at the base of Mammoth Mountain in California.
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- In November 1996 Intrawest entered into an option agreement with the
owner of Squaw Valley Ski Area to acquire approximately 13 acres of land
at the base of the Squaw Peak ski facilities.
1997
- On March 14, 1997, Intrawest completed its acquisition of all of the
outstanding shares of Whistler Mountain Holdings Limited, the owner of
the ski and resort operations at Whistler Mountain in British Columbia
and certain developable real estate at the base of the mountain.
- On March 14, 1997, Intrawest U.S. Resorts, Inc. (a wholly owned
subsidiary of the Company) completed its merger with Copper Mountain,
Inc. (and its principal shareholder, CMAT, Inc.), the owner of the ski
and resort operations at Copper Mountain in Colorado and certain
developable real estate at the base of the mountain.
- On March 14, 1997, Intrawest completed its acquisition of Mont Ste.
Marie (1984) Inc., the owner of the ski and resort operations at Mont
Ste. Marie in Quebec and certain developable real estate at the base of
the mountain.
- Effective March 14, 1997, the Company effected a reorganization of its
share capital (the "Share Capital Reorganization") designed to separate
the non-resort assets of the Company (the "Non-Resort Assets") from the
rest of the Company's business. Under the Share Capital Reorganization,
each existing Common Share was exchanged for one new Common Share and one
Non-Resort Preferred Share ("NRP Share").
- On March 24, 1997, Intrawest's Common Shares were listed for trading on
the New York Stock Exchange.
- On April 1, 1997, Intrawest raised gross proceeds of $93 million from a
public offering of 4,000,000 Common Shares in Canada and the United
States.
THE MOUNTAIN RESORT INDUSTRY
There are approximately 800 ski resorts in North America of which 520 are
located in the United States and 280 are located in Canada. During the 1996/97
ski season, these resorts attracted approximately 68.5 million skier visits
(52.5 million to U.S. ski areas and 16 million to Canadian ski areas). The
geographic distribution of North American skier visits during the 1996/97 ski
season was as follows:
<TABLE>
<CAPTION>
PROPORTIONATE INTRAWEST RESORT
GEOGRAPHIC REGION SKIER VISITS SHARE LOCATED IN REGION
- ---------------------------------------- ------------ ------------- -----------------------------
(MILLIONS) (%)
<S> <C> <C> <C>
Western Canada.......................... 6.9 10.1 Whistler/Blackcomb, Panorama
Quebec.................................. 5.9 8.6 Tremblant, Mont Ste. Marie
Other Canada............................ 3.2 4.7 --
U.S. Rocky Mountains.................... 19.3 28.2 Copper
Northeast U.S........................... 12.1 17.7 Stratton
Pacific West U.S........................ 9.8 14.3 Mammoth
Midwest U.S............................. 7.0 10.2 --
Mid-Atlantic U.S........................ 4.3 6.2 Snowshoe
---- -----
68.5 100.0
==== =====
</TABLE>
North American ski resorts range from small regional ski areas which
primarily cater to day skiers to large amenity-filled resorts targeted to the
destination visitor. Day visitors tend to focus on lift ticket prices and
accessibility. Destination visitors stay for one or more nights, focus on the
number of amenities and activities offered as well as the perceived overall
quality of their vacation experience, are less price sensitive than day
visitors, spend more on non-lift ticket items and are less likely to change
their skiing plans because of changes in local conditions. As a result of these
differences, destination visitors generate significantly higher revenue per day
for resort owners than day visitors and provide balance to the resort's revenue
mix. The smaller day visitor ski areas predominate in terms of number of
resorts, but capture significantly less traffic than the large destination ski
areas. The National Ski Areas Association estimated that in the 1996/97 ski
season the largest 20% of ski areas accounted for approximately 80% of the total
skier visits in the United States.
Since 1985 the number of active skiers and annual skier visits in North
America has not changed significantly. During the same period, the mountain
resort industry has undergone a period of consolidation and attrition resulting
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in a significant decline in the total number of ski areas in North America. The
number of North American ski resorts has declined from approximately 1,025 in
1985 to approximately 800 in 1997. The Company believes that technological
advances, most notably in the development of high-speed lifts, and rising
infrastructure costs were the driving forces behind this consolidation and will
continue to drive further consolidation as the majority of resorts lack the
capital and management ability to compete with the emerging industry leaders. In
addition, the mountain resort industry is characterized by significant barriers
to entry since the number of attractive sites is limited, the costs of resort
development are high and environmental regulations impose significant
restrictions on new development. The last new major ski facility in North
America was opened in 1981. Despite the recent consolidation trend among
destination resorts, ownership of the smaller regional resorts remains highly
fragmented. The Company believes that the continuing attrition of smaller
regional resorts will also provide growth opportunities for destination resorts
in this segment of the industry. The Company believes that trends in the
mountain resort industry will continue to provide attractive acquisition
opportunities which it will continue to evaluate. The Company may also consider
acquiring smaller regional resorts which have a strong local following and can
provide a customer base for its other resorts and businesses complementary to
its existing mountain resort operations.
The Company is positioned to benefit from certain recent trends and
developments which are favourably affecting the North American mountain resort
industry, including (i) demographic trends under which the large "baby boom"
generation is entering the 45 years and over age category, which is the age
group with the highest average individual skier visit frequency and the largest
number of buyers of vacation property, and the "echo boom" generation is
beginning to enter the teenage years, which is the prime entry age for skiing,
snowboarding and other "on-snow" sports, (ii) societal trends which place a
greater focus on leisure, fitness and outdoor activities, (iii) product
innovations such as parabolic skis and over-sized golf club heads which
encourage broader participation, facilitate learning and enhance performance and
(iv) the rapid growth of snowboarding, which is increasing youth and young adult
participation in mountain sports. The Company expects that the growth in
snowboarding, in particular, will continue to have a positive impact on the ski
industry. In the United States, skier visits attributable to snowboarders have
increased an average of 21% per year over the past three years and snowboarders
are currently estimated to represent 18% of all skier visits in the United
States. The Company believes that these trends and developments will continue to
attract additional destination guests and will result in growing demand from
affluent families for vacation homes in mountain resorts.
RESORT MANAGEMENT AND DEVELOPMENT
RESORT OPERATIONS
RESORT PROPERTIES
The following table summarizes certain key statistics of each of the
Company's mountain resort locations.
<TABLE>
<CAPTION>
INTRAWEST AVERAGE SNOW- 1996/97
OWNERSHIP SKIABLE VERTICAL LIFTS ANNUAL MAKING SKIER
RESORT PERCENTAGE TERRAIN DROP TRAILS (HIGH-SPEED) SNOWFALL COVERAGE VISITS
- --------------------------------- ---------- ------- -------- ------ ------------ -------- -------- -------
(%) (ACRES) (FEET) (INCHES) (%) (000'S)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Whistler......................... 100(1) 3,657 5,020 104 14(5) 360 4 757
Blackcomb........................ 74 3,410 5,280 119 16(7) 360 10 989
Copper........................... 100 2,433 2,699 117 21(3) 255 11 944
Mammoth.......................... 33(2) 4,000 3,100 150 38(4) 350 20 884
Tremblant........................ 100 502 2,131 77 11(6) 140 75 615
Stratton......................... 100 563 2,003 90 12(2) 180 75 405
Snowshoe......................... 100 200 1,598 53 11(1) 185 99 357
Panorama......................... 98 2,000 4,047 80 8(1) 110 50 143
Mont Ste. Marie.................. 100 108 1,250 20 3(2) 120 80 62
</TABLE>
- ---------------
(1) In connection with a covenant not to compete with the business activities of
Blackcomb Skiing Enterprises Limited Partnership, the Company has agreed to
grant to Nippon Cable Co., Ltd., one of its minority partners in the
partnership, an option to acquire a 23% interest in Whistler at a price
based on the terms of the Whistler acquisition. The option will be
exercisable during the 30-day period ending November 30, 1997.
(2) Each of the shareholders of Mammoth (including the Company) has a pro rata
right of first refusal to purchase any shares of Mammoth to be sold by any
other shareholder.
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WHISTLER/BLACKCOMB. Whistler/Blackcomb, located approximately 75 miles
northeast of Vancouver, British Columbia, was rated as North America's number
one ski resort in 1996 by three major ski magazines, Snow Country, SKI and
Skiing. The Resort Municipality of Whistler ("Whistler Resort") is centred
around the downhill ski facilities at Whistler and Blackcomb which have been in
operation since 1966 and 1980, respectively. Whistler Resort is accessible
year-round by car and railroad, as well as by air via Vancouver's international
airport. The recently completed expansion of the Vancouver airport, combined
with the "open skies policy" between Canada and the United States, has increased
direct flights from key population centres, particularly in the United States.
Since Intrawest acquired Blackcomb in 1986, the Company has invested
approximately $120 million on capital improvements including high-speed lifts,
expanded trails, upgraded snowmaking capabilities, new restaurants and employee
housing. During this period, skier visits have increased from 278,000 to 989,000
resulting in a compound annual growth rate of 12%. Since 1988 Whistler has
upgraded and replaced many of its older lifts and has expanded its ancillary
facilities. Over this period, Whistler's capital expenditures have totalled
approximately $70 million, comprised of approximately $50 million spent on lifts
and the balance primarily on expanded restaurant and service facilities. The
Company completed its acquisition of Whistler in March 1997 and intends to make
approximately $35 million in capital improvements to Whistler's ski facilities
over the next five years. These improvements are expected to include new lifts
and trails, additional snowmaking coverage and expanded restaurant facilities.
The Company operates a 3,410-acre ski area facility at Blackcomb which has
elevations at its base of 2,214 feet and at its peak of 7,494 feet, resulting in
a vertical drop of 5,280 feet, the largest of any North American ski resort.
Blackcomb, the only major North American mountain resort with two glaciers, is
able to offer skiing and snowboarding throughout the summer. As a result,
Blackcomb is a leading training site for ski and snowboard competitors. All of
the lifts and ski runs, and some of the buildings, are located on land leased to
Blackcomb by the Province of British Columbia under a ski area agreement which
expires in 2029. An annual lease payment currently equal to 2% of defined gross
revenue is payable by Blackcomb under this agreement.
Whistler has a 3,657-acre ski area facility which has elevations at its
base of 2,140 feet and at its peak of 7,160 feet, resulting in a vertical drop
of 5,020 feet, the second largest of any North American ski resort. Whistler has
one glacier and seven high alpine bowls. Currently, less than two-thirds of the
skiable terrain is serviced by lifts. All of Whistler's lifts and ski runs, and
some of Whistler's buildings, are located on land leased to Whistler by the
Province of British Columbia under a ski area agreement which expires in 2032.
Pursuant to this agreement, Whistler pays an annual lease payment currently
equal to 2% of defined gross revenue.
The Company is the largest retailer in Whistler Resort with 20 retail shops
and 16 equipment rental outlets. The Company also has food and beverage
operations at 13 restaurants and bars, having a total seating capacity of
approximately 6,500.
Blackcomb's 400-person ski and snowboard school was honoured by the
Canadian Ski Council for offering the most beginner ski and snowboard lessons in
Canada during the 1995/96 ski season. The Blackcomb ski school was also rated as
Canada's number one snowboard school for the 1995/96 ski season by Snowboard
Canada magazine. Whistler's ski school offers classes for both adults and
children and employs over 200 instructors. A new 8,000-square foot children's
and youth's lodge was built in 1995 to accommodate the growing demand for this
service. The combined Whistler/Blackcomb ski school offers more Level IV
instructors than any other resort in North America.
Whistler Resort has undergone considerable development over the past
several years and now contains approximately 250 shops and restaurants, lodging
units for approximately 40,000 people and numerous galleries, recreation and
entertainment facilities. With three championship golf courses designed by
Arnold Palmer, Jack Nicklaus and Robert Trent Jones, respectively (none of which
is owned by the Company), lakes for swimming and boating, extensive mountain
biking trails and numerous festival activities, Whistler Resort draws visitors
from around the world and is a popular summer tourist attraction.
Since 1986 the Company has developed the majority of its land holdings at
the base of Blackcomb. The Company is developing, or has land available for the
development of, approximately 670 residential units and 13,000 square feet of
commercial space at the base of Blackcomb and approximately 915 residential
units and 80,000 square feet of commercial space at the base of Whistler.
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COPPER. Copper is located approximately 75 miles west of Denver in Summit
County, the heart of Colorado's ski country. Copper is easily accessible by car
via Interstate 70 and by air through three airports at Denver, Colorado Springs
and Eagle.
Development of the village at Copper began in 1972. Since 1989 Copper has
invested approximately US$21 million in capital improvements, including
approximately US$6 million on its restaurant facilities and service buildings
and approximately US$12 million on lifts, vehicles and other equipment. The
Company completed its acquisition of Copper in March 1997 and intends to make
approximately US$26 million of capital improvements at Copper over the next five
years. These improvements are expected to include new lifts and trails and
expanded restaurant facilities.
Copper has a 2,433-acre ski area facility on three mountains, Copper, Union
Peak and Tucker Mountain. Copper's ski operations were established in 1972.
Copper has elevations at its base of 9,712 feet and at its peak of 12,411 feet.
The skiable terrain is serviced by 21 lifts, including three high-speed quad
chairlifts. Copper owns substantially all of the base area land and facilities.
A significant portion of Copper's lifts, ski trails and related assets are
located on land leased to Copper by the United States Forest Service under a
special use permit which expires in 2037. Pursuant to this permit, Copper makes
monthly payments of between 1.5% and 6.75% of the annual gross revenue generated
from Copper's facilities physically located on the government land.
Copper has 117 interconnected trails located on the front and back of its
three mountains suited to a wide variety of skier ability levels. In addition to
1,366 acres of tree-lined ski trails, Copper offers four high alpine bowls which
provide skiers with 1,067 acres of above-timberline skiing.
Copper has 11 retail shops and three equipment rental shops, and food and
beverage operations at eight restaurants and bars, having a total seating
capacity of approximately 2,900.
The Copper area has four-season appeal. Summer activities include golf on
the highest altitude championship course in North America at the Pete
Dye-designed Copper Creek Golf Course (owned by the Company), tennis, fishing
and bike riding. Bike riders can access a paved bike path system which connects
all resorts located in Summit County. In addition, mountain bikers can access a
variety of trails, including the Colorado Trail which travels from Denver to the
southwestern Colorado town of Durango. Numerous festivals and special events
also support the Copper area as a major summer tourist attraction.
The Company is developing, or has land available for the development of,
approximately 1,100 residential units and 80,000 square feet of commercial space
at Copper. The Company expects that the development of these lands will take
place over a period of approximately 10 years.
MAMMOTH. Intrawest acquired a 33% interest in Mammoth effective December
1995. Mammoth is located in central California in the eastern Sierra Nevada
mountain range 325 miles north of Los Angeles. It is the closest major mountain
resort to the heavily populated southern California market from which it draws
most of its visitors. Mammoth is also located approximately four miles from the
town of Mammoth Lakes which has a permanent population of approximately 6,000
people. Mammoth Lakes has over 50 restaurants and bars and 150 lodging
facilities.
Mammoth consists of two separate ski areas, Mammoth Mountain and June
Mountain, which are approximately 20 miles apart. Mammoth has a 3,500-acre ski
area facility which has elevations at its base of 7,953 feet and at its peak of
11,053 feet. Mammoth and June Mountain have 150 trails which are serviced by 38
lifts, including four high-speed quad chairlifts. All of Mammoth's lifts, ski
trails and related assets are located on land leased to Mammoth by the United
States Forest Service under various special use permits which expire at various
times during the period from 2012 to 2024. Pursuant to these permits, Mammoth
makes annual payments based on a percentage of sales.
Mammoth owns and operates five sport shops, five hotel properties and food
and beverage operations at nine restaurants and bars, having a total seating
capacity of approximately 4,600.
Summer activities at Mammoth include 60 miles of mountain biking trails,
fishing, board-sailing and water skiing on nearby lakes, and hiking through the
Sierra Nevadas. There is a golf course in Mammoth Lakes and Intrawest is a
partner in a second golf course currently under construction at Mammoth.
Yosemite National Park, a two hour drive from Mammoth, draws visitors to the
region from around the world.
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The Company is developing, or has land available for the development of,
approximately 2,400 residential units and 155,000 square feet of commercial
space at Mammoth. The Company expects that the development of these lands will
take place over a period of approximately 10 years, with the first project
commencing in the spring of 1998.
TREMBLANT. Tremblant is located in the Laurentians, 90 miles north of
Montreal, Quebec. The resort is accessible by car via a major four-lane highway
from Montreal and by air through major international airports located in
Montreal and Ottawa. Tremblant draws most of its visitors from Montreal, Ottawa,
Toronto and the northeastern United States.
Opened in 1939, Tremblant is the oldest operating ski area in Canada and
the second oldest in North America. Since acquiring Tremblant in 1991, Intrawest
has carried out a $55 million expansion of the ski facilities, including the
addition of high-speed detachable quad chairlifts, a six-passenger gondola, new
trails, a 1,000-seat mountain top restaurant, a state-of-the-art snowmaking
system and the Edge, Tremblant's first new peak since 1943.
The Company operates a 502-acre ski area facility at Tremblant which has
elevations at its base of 870 feet and at its peak of 3,001 feet, resulting in
the largest vertical drop in eastern Canada. Tremblant has 77 trails which are
serviced by 11 lifts, including six high-speed quad chairlifts. Tremblant has
more high-speed lifts than any other resort in eastern North America. All of
Tremblant's lifts and ski runs, and some of its buildings, are located on land
leased to Tremblant by the Province of Quebec under a ski area agreement that
expires in 2051. Pursuant to this agreement, Tremblant pays an annual lease
payment equal to $5,000, adjusted for changes in the Consumer Price Index.
Tremblant has 17 sports shops and food and beverage operations at ten
restaurants, cafes and bars, having a total seating capacity of approximately
2,670.
Tremblant has been designed as a four-season resort which emphasizes a
unique French Canadian charm. Its summer attractions include swimming and
boating on nine-mile long Lac Tremblant at the base of the mountain, golf at Le
Geant, an 18-hole championship golf course owned by the Company, tennis,
horseback riding and mountain biking. Le Geant, which was named one of Canada's
best new golf courses in 1996 by Golf Digest, drew 28,000 golfers in its first
full season. A second 18-hole championship golf course, Le Diable, is currently
under construction and will be ready for play in the summer of 1998. The new
36,000 square foot convention centre at the Canadian Pacific Chateau Mont
Tremblant, which can accommodate 1,800 delegates, is expected to increase
traffic at the resort year round and particularly during the shoulder seasons.
Tremblant demonstrated its shoulder season potential by selling more than 20,000
panoramic lift rides during the Festival of Colors weekend in October 1996.
The Company is developing, or has land available for the development of,
approximately 1,920 residential units and 61,000 square feet of commercial space
at Tremblant. The Company expects that the development of these lands will take
place over a period of 10 to 15 years.
STRATTON. Stratton is located in southern Vermont and draws most of its
visitors from the affluent markets of metropolitan New York, Connecticut, New
Jersey and Massachusetts. The northeast corridor of the United States represents
the largest concentration of skiers and skier visits in North America.
Stratton, established in 1961, is generally regarded as the birthplace of
snowboarding. Stratton formed the world's first snowboard school and has hosted
snowboarding's U.S. Open, a major snowboard competition, every year since 1985.
Since Intrawest acquired Stratton in 1994, the Company has invested
approximately US$30 million in capital improvements primarily comprising
upgrades to the snowmaking system, a six-passenger high-speed chairlift and
improvements to the base area facilities.
The Company operates a 563-acre ski area facility at Stratton which has
elevations at its base of 1,933 feet and at its peak of 3,936 feet, the highest
ski peak in southern Vermont. Stratton has 90 trails which are serviced by 12
lifts, including one high-speed chairlift and one high-speed gondola.
Stratton also has 20 separate retail shops and food and beverage operations
at 12 restaurants and bars, having a total seating capacity of approximately
2,330.
9
<PAGE> 12
Stratton's summer amenities include a 27-hole championship golf course, a
22-acre golf school and a sports and tennis complex, all of which are owned and
operated by the Company. The town of Manchester, located approximately 22 miles
from Stratton, is one of Vermont's busiest summer tourist attractions with over
70 designer discount outlets, antique stores and art galleries.
The Company is developing, or has land available for the development of,
approximately 1,350 residential units and 35,000 square feet of commercial
space. The Company expects that the development of these lands will take place
over a period of 10 to 15 years.
SNOWSHOE. Snowshoe, located in West Virginia, is the largest ski resort in
the mid-Atlantic region of the United States and has the greatest vertical drop,
most uphill capacity, most extensive snowmaking coverage and the largest on-site
bed base in the region. Approximately 95% of Snowshoe's annual visitors are
destination skiers who drive from a market that includes North Carolina, South
Carolina, Virginia and Georgia. Snowshoe, established in 1973, consists of two
separate ski areas, Snowshoe Mountain and Silver Creek Mountain, which are one
mile apart and connected by shuttle bus service.
Intrawest acquired Snowshoe in October 1995 and is in the process of
formulating its long-term capital plan for the resort. The Company operates a
200-acre ski area facility at Snowshoe which has elevations at its base of 3,250
feet and at its peak of 4,848 feet. Snowshoe has 53 trails which are serviced by
11 lifts. Snowshoe's elevation is one of the highest among all ski resorts east
of the U.S. Rockies, which enables Snowshoe to have a longer season than its
regional competitors. The Company owns all of the land on which the ski
facilities are located.
Snowshoe has 11 retail shops, seven of which are concessioned to
third-party operators. The resort also owns and operates 13 restaurants and
eight bars, having a total seating capacity of approximately 1,950. Snowshoe
owns three lodges having a total of 300 rooms and manages approximately 900
rental condominiums.
Snowshoe's summer amenities include an 18-hole championship golf course
owned by the Company and designed by Gary Player (rated by Golf Digest as the
second-best course in West Virginia in 1996), over 100 miles of marked mountain
biking trails and various tennis and swimming facilities. The resort also owns a
conference centre with over 10,000 square feet of meeting rooms and banquet
facilities which draw business travellers throughout the year.
The Company is developing, or has land available for the development of,
approximately 850 residential units and 50,000 square feet of commercial space
at Snowshoe. The Company expects that the development of these lands will take
place over a period of approximately 10 years.
PANORAMA. Panorama is located in the Purcell Range of the Canadian Rockies
approximately 12 miles from Invermere, British Columbia. The resort is a three
and a half hour drive from Calgary, Alberta from which Panorama draws many of
its visitors. Skiing and village development began at Panorama in 1968. Since
Intrawest acquired Panorama in 1993, the Company has added approximately 1,000
acres of skiable terrain designed to provide more variety for destination skiers
and installed a summit T-bar lift to increase Panorama's skiable vertical drop
to 4,047 feet, the third largest in Canada surpassed only by Blackcomb and
Whistler.
The Company operates a 2,000-acre ski area facility at Panorama which has
elevations at its base of 3,736 feet and at its peak of 7,783 feet. Panorama has
80 trails which are serviced by eight lifts, including one high-speed quad
chairlift. All of the lifts and ski runs, and some of the buildings, are located
on land leased to Panorama by the Province of British Columbia under a ski area
agreement that expires in 2033. Pursuant to this agreement, Panorama pays an
annual lease payment currently equal to 2% of defined gross revenue.
Panorama offers access to some of the best heli-skiing in the world. All of
the facilities at the resort, except for the heli-skiing operation and 229
condominium units, are owned and operated by the Company. Panorama has four
retail shops and food and beverage operations at eight restaurants and bars,
having a total seating capacity of approximately 830. The Company is completing
a championship golf course at Panorama that will be available for play in 1999.
Other summer attractions in the area include whitewater rafting, boating and hot
springs at Radium and Fairmont.
The Company is developing, or has land available for the development of,
approximately 1,100 residential units and 5,000 square feet of commercial space
at Panorama. The Company expects that the development of these lands will take
place over a period of approximately 10 years.
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<PAGE> 13
MONT STE. MARIE. Mont Ste. Marie is located in the Outaouais 55 miles
north of Ottawa. The resort has the highest elevation of any ski area in the
Outaouais between Toronto and Mont Tremblant.
Intrawest acquired Mont Ste. Marie in March 1997 and is in the process of
formulating its plans for the resort. The Company operates a 100-acre ski area
facility at Mont Ste. Marie which has a vertical drop of 1,250 feet. The Company
owns all of the land on which the ski facilities are located. Mont Ste. Marie's
summer amenities include an 18-hole championship golf course owned by the
Company and four tennis courts. The resort also includes a conference centre
built in 1974 which has been closed since November 1991. Mont Ste. Marie has
food and beverage operations at two locations having a total seating capacity of
600.
SOURCES OF RESORT OPERATIONS REVENUE
Intrawest's resort operations revenue is derived from a wide variety of
sources including lift ticket sales, retail shops, food and beverage, lodging
and property management, ski schools and golf, tennis and other summer
activities. Sales of lift tickets represent the single largest source of resort
operations revenue (49% for fiscal 1997). While revenue from lift ticket sales
has increased each year during the past five years, the proportion of resort
operations revenue accounted for by sources other than lift ticket sales
increased from 40% in fiscal 1991 to 51% in fiscal 1997. This increase is the
result of a broadening of the sources of revenue at each resort as well as the
improved mix of revenue at recently acquired resorts. Management expects this
trend to continue in the future as a result of the ongoing expansion of the
range of services offered by the Company.
The following chart provides a breakdown of the sources of the Company's
ski and resort operations revenue during fiscal 1997.
<TABLE>
<CAPTION>
REVENUE PROPORTION
----------- ----------
(MILLIONS
OF DOLLARS) (%)
<S> <C> <C>
Lift tickets.............................................................. $ 129.8 49.3
Retail shops.............................................................. 39.5 15.0
Food and beverage......................................................... 38.5 14.6
Lodging and property management........................................... 22.5 8.6
Ski school................................................................ 18.1 6.9
Golf, tennis and other.................................................... 14.8 5.6
------- -----
$ 263.2 100.0
======= =====
</TABLE>
LIFT TICKET SALES. The Company sells a wide variety of lift ticket
products at its resorts targeted to particular customer segments at different
times of the season. These products include season passes, frequent skier cards
and single and multi-day tickets. Season pass purchasers are a very important
customer group because generally they are the most frequent visitors, have a
loyalty to the resort and are owners of real estate at the resort. The frequent
skier card was introduced at Blackcomb in fiscal 1994 and was also introduced at
Tremblant, Stratton, Mammoth, Whistler and Copper for the 1996/97 ski season. In
addition to their other features, frequent skier cards at Blackcomb and Stratton
offer direct lift access as the card is scanned at the lift line and a charge is
made against the cardholder's credit card. The Company uses its frequent skier
cards to increase skier visits at non-peak times by offering discounts against
the regular day ticket price or by tying in promotions at its retail stores or
food and beverage facilities. Single and multi-day tickets constitute the
balance of the Company's line of lift ticket products. These lift tickets are
often sold to customers in packages including accommodations in order to fill
beds when occupancy is expected to be low. Revenue from lift ticket sales has
increased every year since 1986 when the Company acquired its interest in
Blackcomb. Since 1994 revenue from lift ticket sales has increased from $38.1
million to $129.8 million, primarily because of acquisitions and improvements in
ticket yields. The Company's goal is to manage its ticket yields to obtain
premium prices during peak periods and maximize aggregate lift ticket revenue
during non-peak periods.
RETAIL SHOPS. The retail and equipment rental operations contribute
significantly to overall resort profitability. In fiscal 1997 the Company's
retail division provided $39.5 million of revenue, 188% more than in fiscal
1994. The increase is attributable primarily to acquisitions and to increased
retail sales and equipment rental revenue at
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<PAGE> 14
Blackcomb, Tremblant and Panorama. Retail revenue aids in stabilizing the
Company's daily and weekly cash flows, as the Company's shops tend to have the
strongest sales on poor weather days. Shopping is generally an important part of
the guest vacation experience and interesting shops are a vital ingredient in
the total resort framework. Across all of its resorts the Company owns 120
retail and ski rental shops containing approximately 164,000 square feet of
sales/service area. The large number of retail locations operated by the Company
allows it to improve margins through large quantity purchase agreements and
sponsorship relationships. These shops are located on the mountains and in the
base areas. On-mountain shops generally sell ski accessories such as goggles,
sunglasses, hats and gloves while base area shops sell these items as well as
hard goods such as skis, snowboards, boots and larger soft goods such as jackets
and snowsuits. In addition, all locations offer the Company's own logo-wear
which generally provides higher profit margins than other retail products. In
the non-winter seasons, most of the on-mountain shops are closed and the base
area shops sell mountain bikes, in-line skates, tennis equipment and warm
weather apparel.
FOOD AND BEVERAGE SERVICE. Food and beverage service has become an
increasingly important component in providing a satisfying guest experience and
has been a significant source of revenue growth for the Company. The
introduction of high-speed lifts in the late 1980s has allowed skiers to ski
more runs in a shorter period, thereby providing more time for other activities,
such as dining in the restaurants.
Each of Intrawest's resorts owns and operates all of its on-mountain food
and beverage facilities. These facilities include restaurants, bars, cafes,
warming huts, cafeterias and fine dining options such as Christine's at
Blackcomb and La Legende at Tremblant. Destination resorts, such as
Whistler/Blackcomb, which cater to visitors from all over the world, offer a
wide variety of ethnic foods in their on-mountain restaurants as well as
specialty menus for different family members. The resorts also own and operate
many of the base area restaurants and bars as well as many of the food service
outlets in their village centres. In total, the Company owns and operates 73
different food and beverage facilities with more than 22,000 seats. The
Company's control of its on-mountain and base area food services allows it to
capture a larger proportion of guest spending as well as to ensure product and
service quality. Revenue from food and beverage services increased from $10.3
million in fiscal 1994 to $38.5 million in fiscal 1997, principally due to
acquisitions and the expansion of facilities at Blackcomb and Tremblant.
LODGING AND PROPERTY MANAGEMENT. The Company's lodging and property
management division manages its own properties as well as properties owned by
third parties. Currently the Company owns or manages approximately 4,000 lodging
units. The lodging division performs a full complement of guest services
including reservations, property management, housekeeping and brokerage
operations. Each resort has a welcome centre to which newly arriving guests are
directed. The centre allocates accommodations and provides guests with
information on all of the resort's activities and services. The Company's
property management operation seeks to maximize the synergies that exist between
lodging and lift ticket promotions. Revenue from lodging and property management
increased from $8.9 million in fiscal 1994 to $22.5 million in fiscal 1997,
principally due to acquisitions and the development of new rental accommodations
at Tremblant.
The Company's real estate development program is designed to ensure the
continued growth of its lodging operation. Typically, newly constructed
condominiums and townhomes are sold to owners who put the units into a rental
pool managed by the Company. The resulting growth in occupancy increases skier
visits and provides an additional source of fee revenue for the Company.
SKI SCHOOL. The Company operates the ski school at each of its resorts,
except at Panorama where this service is concessioned to a third party. A
variety of programs are offered to skiers, targeted to different ability levels
and age groups. Future growth is expected to result from growth in the sport of
snowboarding and technological advances currently taking place in alpine skiing
equipment, for which the ski schools at the Company's resorts have qualified
instructors. The Company's resorts offer packages designed to combine the new
technologies with instructor-led learning sessions.
The Company has approximately 1,700 instructors on its ski school staff
across all of its resorts. Over the past several years, the Company has
initiated programs to increase its ski school business. Revenue from ski schools
increased from $3.9 million in fiscal 1994 to $18.1 million in fiscal 1997,
principally due to acquisitions and the expansion of ski school programs at
Whistler/Blackcomb and Tremblant.
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<PAGE> 15
GOLF. Intrawest entered the golf business with its acquisition of Stratton
in fiscal 1995 and, since that time, annual golf revenue has grown to
approximately $5 million. All of Intrawest's resorts, except Snowshoe, Mammoth
and Mont Ste. Marie, offer visitors four or five golf courses within a short
driving distance and attract golf enthusiasts who are generally more affluent
and provide higher revenue per visit. The Company owns and operates championship
golf courses at Tremblant, Mont Ste. Marie, Copper, Stratton and Snowshoe.
Stratton also offers a golf school which attracts students from throughout
eastern North America. Golf courses are currently under construction at
Panorama, Mammoth and Tremblant which are expected to be ready for play in 1998.
Golf is a primary attraction in the summer and shoulder seasons, providing the
Company with revenue from green-fees, cart rentals and pro-shop sales. In
addition, golf also drives a significant portion of the food and beverage and
lodging revenue during the summer. Golf courses are also a selling feature for
real estate. The Company has significant developable land parcels adjacent to
golf courses at its resorts, which generally command higher selling prices than
other real estate. The Company believes that its golf and other summer revenue
will become an increasingly significant component of resort operations revenue
in the future.
SPONSORSHIP AND SPECIAL EVENTS
An important part of the Company's business strategy is to increase
exposure of the Intrawest brand name and the brand names of the individual
Intrawest resorts by entering into sponsorship relationships with leading
companies and by hosting world-class events to gain international exposure. The
Company's geographically diversified mountain resorts are particularly appealing
to sponsors seeking North American exposure. In addition, the Company's leading
industry position, coupled with the demographics of its customer base, makes it
an attractive partner for prospective sponsors. One of the Company's business
sponsors is General Motors of Canada Limited, which provides vehicles for use by
resort personnel at Blackcomb and Tremblant.
The Company's resorts host a number of world-class sporting events
including annual freestyle World Cup competitions at Whistler/Blackcomb and
Tremblant and snowboarding's U.S. Open championship at Stratton. In fiscal 1996
Whistler signed an agreement continuing its participation as a World Cup
downhill site for the next ten years. Panorama and Mammoth have also been the
sites of several World Cup downhill and slalom races. In addition to these
events, the Company's resorts host numerous high profile music and arts events.
INFORMATION TECHNOLOGY
The Company's information technology systems improve communication with its
guests and enhance guest service and convenience. These systems are intended to
simplify a guest's purchase and use of the Company's services in order to build
guest loyalty and encourage repeat buying. Current information technology
initiatives which have been implemented at certain of the Company's resorts
include (i) direct lift access systems by which skiers can avoid the ticket
window by having their photo identification passes scanned at the lift line
resulting in a charge to their credit cards, (ii) digital imaging systems for
ski passes that prevent season passholders from having to be photographed
annually, (iii) resort-wide guest charging systems whereby an identification
card can be used to charge goods or services at any of the Company's facilities
across the resort, (iv) central reservation systems for use in connection with
the Company's property management business and (v) ski school reservation and
instructor scheduling systems that simplify the booking process for guests and
allow the Company to ensure better utilization of instructors.
RESORT MARKETING AND SALES
The primary objectives of the Company's marketing strategy include (i)
increasing the Company's market share of North American, European and Asian
visitors, (ii) building demand during both peak and non-peak periods, (iii)
increasing existing customers' use of the Company's network of resorts, (iv)
expanding the summer and shoulder season businesses of the Company's resorts and
(v) increasing the Company's total share of customer spending across each
resort. Using market research information from the Company's database and
employee feedback the Company builds marketing programs which are targeted at
particular customer and season segments. The Company's resort marketing expenses
for fiscal 1997 were approximately $18.7 million.
While traditional marketing mediums such as print media in ski industry and
lifestyle publications continue to play a role in the overall marketing mix, the
Company is placing increased emphasis on database marketing,
13
<PAGE> 16
strategic partnering and sponsorship initiatives. The Company plans to exploit
its database to develop programs that identify and target new customers and
increase the visit frequency and spending of existing customers.
RESORT REAL ESTATE DEVELOPMENT
Intrawest is North America's largest developer of mountain resort real
estate. The Company has over 20 years of experience in the real estate industry,
initially in the development of urban residential and commercial properties in
the Pacific Northwest and, beginning in 1986 with its acquisition of Blackcomb,
the development of mountain resort properties. In the past ten fiscal years, the
Company has developed and sold over $800 million of real estate, including
non-resort real estate. In 1994 the Company determined that it would no longer
develop urban real estate and that it would sell its non-resort assets in order
to concentrate on its resort operations and resort development activities.
Intrawest's real estate expertise is a key operating strength which
differentiates the Company from its mountain resort competitors. The Company has
expertise in all aspects of real estate development, including master planning,
project design, construction, sales and marketing and property management.
The following table summarizes certain key statistics relating to each of
the Company's resort real estate holdings.
<TABLE>
<CAPTION>
AS AT JUNE 30, 1997
--------------------------------------------------------------------------------
CONSTRUCTION RESIDENTIAL COMMERCIAL
COMMENCED/ RESIDENTIAL UNITS HELD COMMERCIAL COMMERCIAL SPACE HELD
IS EXPECTED RESIDENTIAL UNITS UNDER FOR FUTURE SPACE SPACE UNDER FOR FUTURE
RESORT TO COMMENCE UNITS SOLD DEVELOPMENT DEVELOPMENT COMPLETED DEVLEOPMENT DEVELOPMENT
- ---------------------------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
(SQ. FT.) (SQ. FT.) (SQ. FT.)
<S> <C> <C> <C> <C> <C> <C> <C>
Blackcomb(1)................ 1987 2,320 341(6) 330 47,000 13,000 --
Tremblant................... 1992 927 229 1,694 109,000 9,000 52,000
Keystone(2)................. 1995 141 430 2,529 34,000 59,000 207,000
Sun Peaks................... 1995 26 108 116 -- 6,000 --
Panorama.................... 1995 8 104 988 -- 5,000 --
Stratton.................... 1997 -- 178 1,172 -- -- 35,000
Snowshoe.................... 1997 -- 17 833 -- -- 50,000
Mammoth(3).................. 1998 -- 215 2,185 -- -- 155,000
Copper...................... 1998 -- -- 1,100 -- -- 80,000
Squaw Valley................ 1998 -- -- 700 -- -- 110,000
Whistler(4)................. 1998 -- -- 915 -- -- 80,000
----- ----- ------ ------- ------ -------
3,422 1,622(5) 12,562(5) 190,000 92,000(5) 769,000(5)
===== ===== ====== ======= ====== =======
</TABLE>
- ---------------
(1) The Company has a 74% interest in Blackcomb Skiing Enterprises Limited
Partnership.
(2) The Company has a 50% interest in a joint venture that owns and is
developing the land at Keystone. The information on Keystone in this table
reflects 100% of the joint venture's land holdings.
(3) At Mammoth, the Company owns land for the development of approximately 400
residential units and participates in two joint ventures which each own land
for the development of approximately 1,000 residential units and 77,000
square feet of commercial space. The Company's interest in these joint
ventures is 89% and 75%, respectively.
(4) In connection with a covenant not to compete with the business activities of
Blackcomb Skiing Enterprises Limited Partnership, the Company has agreed to
grant to Nippon Cable Co., Ltd., one of its minority partners in the
partnership, an option to acquire a 23% interest in Whistler at a price
based on the terms of the Whistler acquisition. The option will be
exercisable during the 30-day period ending November 30, 1997.
(5) The Company's pipeline of real estate projects comprises residential units
and commercial space under development and held for future development which
aggregate 15,045 units.
(6) Includes 60 units of employee housing.
THE DEVELOPMENT PROCESS
Intrawest's approach to real estate development encompasses (i) land
acquisition, (ii) resort master planning, (iii) project development and
construction, (iv) marketing and sales and (v) commercial development and
leasing. The Company carefully manages the number and mix of new projects
brought to the market each year to maximize its returns and support real estate
values. In addition, control over all development activities allows the Company
to more closely align its real estate strategies with resort operations.
14
<PAGE> 17
LAND ACQUISITION. The same factors which drive resort visits, such as
accessibility, four-season attractions and amenities and proximity to major
markets, also enhance real estate values. When Intrawest investigates potential
resort acquisitions, the potential for real estate development is a primary
consideration.
Intrawest believes that it has a conservative approach to the acquisition
of land. The Company typically acquires its land at low cost in conjunction with
the purchase of the resorts or through joint ventures or other arrangements
which typically provide that land payments are due only when units are sold. The
extensive land holdings at Tremblant, Panorama, Stratton, Snowshoe and Copper
were acquired at low cost in conjunction with the acquisition of these resorts.
At Blackcomb, the Company has options which it may exercise for specific project
sites when permits are in place and construction is set to commence. Intrawest
secured its land holdings at Keystone by forming a joint venture with the
landowner under which land is only paid for as completed units are sold. The
majority of the Company's land at Mammoth has been purchased with long-term,
zero interest financing which is repaid from sales proceeds. At Whistler, the
price of the acquired land is deferred until certain real estate development
rights are employed or disposed of, subject to minimum annual payments of $1.5
million. At Squaw Valley the land which Intrawest has the right to acquire is
currently used by the resort owner for visitor parking and, as consideration for
the land, the Company must provide replacement parking stalls for those
displaced by the development.
RESORT MASTER PLANNING. The starting point of the Company's development
program at a resort is the "envisioning process", under which consultants and
members of Intrawest's management plan future developments by envisioning how an
entire resort will appeal to visitors. The envisioning process considers issues
such as the historical significance and unique features of the site, the desired
architectural character of the resort, the ambience of the resort and the
amenities and features that will animate the resort. The end product of this
process is a vision statement which, throughout the build-out of a resort,
serves as a guide to the development of the resort. The highlights of the vision
statement are incorporated into a short multi-media presentation which employs
evocative photography, words and music to communicate the vision to large
audiences, including various levels of government, partners and associates, the
financial community, the media, environmental groups and the general public. The
envisioning process was used to create the French Canadian village theme for
Tremblant and the Colorado Rockies theme for Keystone.
After the envisioning process is complete, the next stage is to achieve the
necessary zoning to allow for the implementation of the master plan. Generally,
this is a very time-consuming process involving close liaison with municipal
approval agencies and multiple public hearings.
PROJECT DEVELOPMENT AND CONSTRUCTION. After the overall master plan has
been designed and the zoning has been approved, the next stage in the
development program is to build the necessary infrastructure for the resort,
such as roads, water, and sewer and utility services, and to create individual
real estate projects. Each of the Company's real estate projects is assigned to
a development manager who is responsible for all aspects of the development
cycle from project conception to ultimate sell-out. The development managers are
based at the resort and report to a local vice president who is responsible for
all the real estate projects at the resort and who reports to a senior vice
president at Intrawest's head office who oversees the development program at two
or more resorts.
The development managers are supported by a team of design, construction,
finance and sales staff at the resort with the assistance of similar staff
members at head office and local consultants. The Company exploits its
successful track record through the transfer of "project templates" to new
developments, subject to modified designs to reflect the resort master plan and
any local market requirements. This practice helps to control costs and reduce
construction risk. The Company also concentrates on woodframe developments which
have a short construction timetable. In addition, the Company does not normally
construct its own projects but rather engages general contractors under
fixed-price contracts which transfer most of the risk of construction overruns
to the contractor. The Company arranges construction financing for both
infrastructure work and projects, generally to cover approximately 75% of total
costs, through a variety of Canadian and U.S. lenders.
MARKETING AND SALES. Market research is an important part of the Company's
development process. Projects are tailored to the needs of prospective customers
by price range, type (condominium-hotel, townhome and single-family residences)
and location (with ski-in, ski-out access, on the golf course or in the
woodlands). With a diversified product line, Intrawest is able to respond to
changing market conditions within an individual resort and to maximize the value
of each product type.
15
<PAGE> 18
Each of the Company's resorts has its own marketing and sales department
under the supervision of a local marketing director. At some resorts the Company
employs its own sales personnel while at others it engages third party agents to
sell its projects on a commission basis. The resorts are supported by marketing
and sales personnel at Intrawest's head office and by external consultants.
The resort real estate development group spent approximately $9.0 million
in fiscal 1997 for real estate marketing and sales (including commissions). The
Company expects these costs to increase in the future as it initiates projects
at Mammoth, Copper, Squaw Valley and Whistler. Marketing and sales costs for an
individual project are generally in the range of 4% to 7% of total project
costs. Real estate marketing also benefits resort operations since it exposes
the resort to potential visitors and skiers. This is particularly the case for
the Company's timeshare vacation business, which distributes thousands of
mailouts every year.
Intrawest generally follows a policy of pre-selling a significant portion
of its real estate projects prior to and during construction in order to
mitigate its risk of unsold completed inventory. Since fiscal 1993 the Company
has pre-sold approximately 83% of its units prior to the completion of
construction. This practice led to the introduction of a new marketing approach
during 1996, whereby properties are marketed to the resort's most loyal
customers through a sophisticated database marketing strategy and the use of a
"national launch team" working across the Company's major markets. This approach
has been applied to large condominium-hotel projects such as One Whistler
Village at Blackcomb, Silver Mill at Keystone and Le Kandahar at Tremblant.
Between March 1996 and May 1997 the Company launched eight projects at four
different resorts in this fashion and sold approximately 85% of the aggregate
sales value of approximately $230 million.
COMMERCIAL DEVELOPMENT AND LEASING. Many of Intrawest's real estate
projects, particularly in its resort villages, comprise residential units
constructed on top of ground floor retail space. The Company occupies some of
the retail space for its own stores, restaurants and bars and it also leases
space to third party operators. The mix of tenants and the quality of their
finished stores are closely managed by the Company so as to maintain the
ambience of the resort. In order to attract top quality retail operators the
Company seeks to ensure that their stores and restaurants have access to
visitors throughout the year. By providing summer and shoulder season activities
and amenities such as summer outdoor recreational activities and cultural
programs, the Company is able to improve year-round utilization of facilities.
As at June 30, 1997, Intrawest had developed approximately 190,000 square
feet of commercial space at Blackcomb, Tremblant and Keystone. At Blackcomb and
Tremblant the Company manages all commercial space that is occupied by third
party operators and receives rental revenue, which in fiscal 1997 amounted to
approximately $3.1 million.
The Company is a partner in Chateau Mont Tremblant, a world-class hotel and
conference centre. The facility was completed in November 1996 and is managed by
Canadian Pacific.
REAL ESTATE PROPERTIES
Set out below is a brief overview of the Company's land holdings followed
by a listing of projects recently completed or under active development. The
Company plans to commence development of its first projects at Mammoth, Copper,
Squaw Valley and Whistler in 1998.
BLACKCOMB. Since acquiring its interest in Blackcomb, Intrawest has
exercised options to acquire 109 developable acres of land adjacent to the base
of Blackcomb Mountain for residential, commercial and resort development. The
Company holds an option to acquire an additional 9 developable acres which it
expects to exercise over the next two years.
TREMBLANT. Intrawest's construction of a French Canadian resort village at
Tremblant is substantially complete and Chateau Mont Tremblant is in operation.
The village core, Chateau Mont Tremblant, Le Geant and Le Diable golf courses
and on-mountain improvements are substantially constructed and the bulk of the
infrastructure is in place to support the development of the remaining real
estate at the resort. The Company has approximately 1,500 acres of land
available for future development at Tremblant.
KEYSTONE. In 1993 Intrawest entered into a joint venture to develop the
real estate at Keystone. The joint venture is developing River Run, a pedestrian
village at the base of the mountain and five additional residential
16
<PAGE> 19
neighbourhoods. The Company plans to develop approximately 1,100 residential
units and 190,000 square feet of commercial space in the new River Run Village,
150 residential units around a planned golf course and 2,000 residential units
and 110,000 square feet of commercial space in areas adjacent to the existing
real estate and new mountain village.
SUN PEAKS. The Company has an exclusive right to purchase sites for
multi-family developments from the owner of Sun Peaks near Kamloops, British
Columbia. This right expires on the earlier of June 21, 2002 and the date when
Intrawest has purchased eight sites and all buildings on the sites have been
substantially completed. To date the Company has purchased, developed and fully
sold one site, consisting of 26 residential units and is currently developing
two additional sites.
PANORAMA. Intrawest owns approximately 420 acres of developable land at
Panorama in the resort village and adjacent to the golf course which is
currently under construction. The Greywolf neighborhood surrounding the golf
course is planned to include approximately 400 townhomes and single-family
homes. The Company expects to build approximately 400 residential units and
5,000 square feet of commercial space in the Ski Tip village neighbourhood.
STRATTON. The process has begun for the approval of approximately 1,350
residential units at the resort. The bulk of the development comprising 570
units and 35,000 square feet of commercial space will expand the existing
village at the base of Stratton Mountain. Construction of the first project,
containing 36 luxury townhomes, commenced in May 1997.
SNOWSHOE. With its acquisition of Snowshoe, the Company acquired
approximately 8,600 acres of land which may be developed to support the existing
village. The planning and envisioning process has begun and construction of the
first project commenced in May 1997.
MAMMOTH. The planning and approval process is in progress and construction
is expected to commence on the first project in the spring of 1998. The new
North Village at the base of Mammoth Mountain is planned to consist of
approximately 1,000 units and 75,000 square feet of commercial space. Plans for
the other lands in the area include over 400 ski-in, ski-out units, an 18-hole
golf course and over 1,000 single-family, multi-family and hotel units fronting
onto the golf course. The Lodestar golf course, in which the Company has a 35%
interest, is under construction with scheduled completion in spring 1998.
COPPER. The Company owns three major parcels of land at Copper. The
Village Center parcel is located at the main access point to Copper and is
expected to contain approximately 900 residential units and 80,000 square feet
of commercial space when developed. The remaining parcels are zoned for a total
of 219 single and multi-family units and either have ski-in, ski-out access or
are adjacent to the Copper Creek Golf Course.
SQUAW VALLEY. In November 1996 the Company entered into an option
agreement with the owner of the Squaw Valley Ski Area to acquire approximately
13 acres of land at the base of the Squaw Peak ski facilities on which the
Company plans to develop a four-season resort. The land is divided into four
development parcels on which the Company expects to develop approximately 700
residential units and 110,000 square feet of commercial space over the next
eight years.
WHISTLER. The Company owns a 34-acre site at the Creekside base of
Whistler Mountain, zoned for a mixture of commercial and tourist accommodation.
The first two buildings, containing approximately 105 condominium-hotel units
and approximately 60,000 square feet of commercial space, have been submitted
for development approval. The Company owns an additional 70-acre site above the
Creekside base for the development of single and multi-family housing. The
Company also has an option to acquire a 40-acre site, approximately 6 miles
south of Whistler Village.
17
<PAGE> 20
PROJECTS RECENTLY COMPLETED OR UNDER ACTIVE DEVELOPMENT
<TABLE>
<CAPTION>
OWNERSHIP TOTAL PROJECT DESCRIPTION AND STATUS AT
PROJECT NAME INTEREST UNITS AUGUST 31, 1997
- --------------------------- --------- ------- --------------------------------------
<S> <C> <C> <C>
BLACKCOMB
One Whistler Village -- 100% 121 Condominium-hotel units for sale with
Pan Pacific Lodge retail and restaurant space;
construction started June 1996 with
scheduled completion December 1997;
fully pre-sold.
Mountain Star 74% 28 Detached townhomes for sale;
construction started April 1997 with
scheduled completion December 1997;
fully pre-sold.
The Cedars 74% 7 Townhomes for sale; construction to
begin fall 1997 with scheduled
completion summer 1998.
Pinnacle Heights 74% 10 Exclusive townhomes for sale;
construction to begin fall 1997 with
scheduled completion fall 1998.
The Ridge at Taluswood 87% 15 Townhomes for sale; construction
started May 1997 with scheduled
completion February 1998; 11 units
pre-sold.
TREMBLANT
Le Saint Andrew's 100% 14 Single-family lots for sale;
construction of infrastructure
completed August 1994;
9 lots sold.
Les Pignons 100% 15 Detached townhomes for sale;
construction of Phase I (5 units)
completed May 1996; 4 units sold.
Construction of Phase II (10 units)
started June 1997 with scheduled
completion January 1998; 3 units sold.
L'Heritage 100% 18 Townhomes for sale; construction of
Phase I (8 units) completed May 1996;
fully sold. Construction of Phase II
(10 units) completed June 1997; 8
units sold.
Le Kandahar 100% 104 Condominium-hotel units for sale with
retail space; construction completed
May 1997; 99 units sold.
L'Algonquin 100% 36 Townhomes for sale; construction
started May 1997 with scheduled
completion February 1998; 29 units
pre-sold.
Le Lodge de la Montagne 100% 139 Condominium-hotel units for sale;
construction to begin fall 1997 with
scheduled completion fall 1998.
Shops, Restaurants, Retail 50% approx. Construction to begin spring 1998 with
9,000 scheduled completion fall 1998.
KEYSTONE
Arapahoe Lodge 50% 40 Condominium-hotel units for sale with
retail and restaurant space;
construction completed November 1996;
39 units sold.
Trappers Crossing 50% 36 Townhomes for sale; construction of
Phase I (18 units) completed May 1997;
17 units sold. Construction of Phase
II (18 units) started April 1997 with
scheduled completion March 1998; 12
units pre-sold.
Ski Tip Ranch 50% 46 Townhomes for sale; Phase I (28 units)
sold out in 1997. Construction of
Phase II (18 units) started May 1997
with scheduled completion March 1998;
5 units pre-sold.
Silver Mill 50% 130 Condominium-hotel units for sale with
retail and restaurant space;
construction started June 1996 with
scheduled completion December 1997;
112 units pre-sold.
Buffalo Lodge & The Dakota 50% 157 Condominium-hotel units for sale;
construction started May 1997 with
scheduled completion September 1998;
111 units pre-sold.
Expedition Station 50% 92 Condominium-hotel units for sale;
construction to begin spring 1998 with
scheduled completion spring 1999.
Shops, Restaurants, Retail 50% approx. Construction of Phase I (23,000 sq.
66,000 ft.) completed December 1995.
sq. ft. Construction of Phase II (11,000 sq.
ft.) completed January 1997.
Construction of Phase III (32,000 sq.
ft.) started June 1996 with scheduled
completion January 1998.
</TABLE>
18
<PAGE> 21
PROJECTS RECENTLY COMPLETED OR UNDER ACTIVE DEVELOPMENT (CONTINUED)
<TABLE>
<CAPTION>
OWNERSHIP TOTAL PROJECT DESCRIPTION AND STATUS
PROJECT NAME INTEREST UNITS AT AUGUST 31, 1997
- --------------------------- --------- -------------- -------------------------------
<S> <C> <C> <C>
PANORAMA
Toby Creek and Horsethief 100% 47 Renovation and sale of existing
Condominiums condominiums; 40 units sold.
Ski Tip Lodge 100% 33 Condominium-hotel units and
Daylodge with retail and
restaurant space; construction
started April 1997 with
scheduled completion February
1998; 24 units pre-sold.
Tamarack Lodge 100% 46 Condominium-hotel units for
sale; construction started May
1997 with scheduled completion
July 1998; 17 units pre-sold.
Greywolf Lots 100% 25 Single-family lots for sale;
construction of infrastructure
to begin September 1997 with
scheduled completion October
1997.
STRATTON
SnowBridge 100% 36 Duplex townhomes for sale;
construction started May 1997
with scheduled completion
December 1997; 32 units
pre-sold.
Long Trail House 100% 142 Condominium-hotel units for
sale; construction to begin
spring 1998 with scheduled
completion summer 1999.
SNOWSHOE
Camp 4 100% 89 Townhomes for sale;
construction of Phase I (17
units) started May 1997 with
scheduled completion December
1997; 5 units pre-sold. Future
units to be developed over two
to three year period.
MAMMOTH
Eagle Springs 100% 175 Condominium-hotel units for
sale; construction to begin
spring 1998 with scheduled
completion fall 1999.
Sierra Star 100% 40 Townhomes for sale;
construction to begin spring
1998 with scheduled completion
winter 1998.
SUN PEAKS
Fireside Lodge 100% 72 Condominium-hotel units for
sale; construction started May
1997 with scheduled completion
April 1998; 29 units pre-sold.
Forest Trails 100% 36 Townhomes for sale;
construction to begin spring
1998 with scheduled completion
winter 1998.
</TABLE>
19
<PAGE> 22
RESORT CLUB
In 1993 Intrawest entered the vacation ownership business through its
wholly owned subsidiary, Intrawest Resort Ownership Corporation ("IROC").
Vacation ownership is a segment of timeshare, a fast-growing sector of the
leisure industry. IROC differs from traditional timeshare companies in that it
offers equity ownership in a club through an innovative point-based membership
system. This system provides members of the club with the flexibility to
vacation in various club locations or at more than 1,100 international resorts
which are part of an exchange program with Interval International, Inc.
("Interval International"). The flexibility of the point-based system, combined
with a focus on a quality resort experience, was designed to meet the changing
vacation needs of the rapidly growing baby boomer and mature markets. According
to information compiled by the American Resort Development Association, the
prime market for timeshare is customers in the 40 to 55 year age range who are
reaching the peak of their earning power and are rapidly gaining more leisure
time and the median age of a timeshare buyer at the time of purchase is 46. The
Company believes it is well positioned to take advantage of these demographic
trends because of the quality of its resorts and locations, the flexibility of
its point-based system, and its program to allow buyers through the Company's
exchange agreements to exchange intervals with Interval International and Disney
Vacation Club as well as at its own locations.
The number of timeshare resorts throughout the world increased from 631 in
1981 to 4,350 at the end of 1995. Over the past eight years, timeshare sales
have grown by approximately 15% per year, reaching approximately US$5 billion in
total worldwide sales in 1995. A significant part of this success is
attributable to the growth of timeshare exchanges which have increased owner
flexibility. Exchange companies, such as Interval International, allow timeshare
owners to turn the fixed asset of a particular week in a particular location
into a tradable commodity. Of the 4,350 worldwide timeshare resorts,
approximately 95% are affiliated with an exchange company, with such companies
arranging approximately 80% of the timeshare vacations taken worldwide each
year. The Company believes that one of the most significant factors contributing
to the current success of the timeshare industry is the entry into the market of
some of the world's major lodging, hospitality and entertainment companies, such
as Marriott Ownership Resorts, The Walt Disney Company, Hyatt Corporation, Four
Seasons Hotels & Resorts and Inter-Continental Hotels and Resorts.
After constructing a club location, IROC transfers ownership of the
vacation units, free and clear of all encumbrances, to a trustee for the
Intrawest Resort Club ("Resort Club"), a non-profit, non-stock corporation. In
return, IROC receives the right to sell points (vacation time) to the general
public in the Resort Club accommodation. Each individual purchasing points
becomes a member in the Resort Club with the entitlement to stay at any Resort
Club location or at international resorts through an affiliation with one of the
major exchange agencies. In addition, during fiscal 1996, the Company signed a
direct exchange agreement with Disney Vacation Club which allows members of that
club and the Resort Club to enjoy exchange privileges. Each accommodation type
at each Resort Club location is assigned a point value for each day of the year.
The point value assigned to each day depends on the day of the week and season,
with higher demand times carrying a higher point value. The selling price per
point is exclusively controlled by IROC depending upon market conditions.
A member of the Resort Club receives an annual allotment of points in
perpetuity. The points can be utilized in different denominations to vary the
time of year, length of stay, location of vacation and the type of accommodation
used, all subject to availability. Except in the first year of ownership, unused
points may be carried forward (banked) for one year or points may be borrowed
from the next year to complete a vacation reservation. Points may be sold,
transferred or bequeathed, subject to IROC's right of first refusal to purchase
such points.
Phase I (45 units) of the 122-unit Resort Club location at Blackcomb was
completed and sales of points commenced in April 1994. Phase I (24 units) of the
144-unit Resort Club location at Tremblant was completed and sales commenced in
May 1995. Construction of Phase II (40 units) of the Blackcomb location and
Phase II (10 units) of the Tremblant location commenced in the spring of 1997.
The quality of the resort club locations at Blackcomb and Tremblant has placed
both locations in Interval International's highest-rated group of worldwide
destination resorts. These two locations will entitle IROC to sell approximately
583,000 points in Phase I and 2,200,000 points in all phases when they are fully
built. Further resort club locations are currently in the pre-development stage
at Mammoth, Keystone and warm weather locations. Through June 30, 1997,
approximately 450,000 points have been sold to over 3,000 members for
approximately $51 million.
20
<PAGE> 23
Valuable synergies exist between the Resort Club and other Intrawest
operations. Vacation ownership facilities typically have the highest occupancy
rates of any type of resort accommodation which translates into increases in
other revenue sources for Intrawest resorts including lift tickets, food and
beverage, retail and golf. Significant cross-marketing opportunities also exist,
primarily through the sharing of database marketing systems.
COMPETITION
The industry in which the Company operates is highly competitive. The
Company competes with mountain resort areas in the United States, Canada and
Europe for destination visitors and with numerous mountain resorts in each of
the areas in which it operates for day skiers. The Company also competes with
other worldwide recreation resorts, including warm weather resorts, for vacation
guests. The Company's major North American competitors include the major
Colorado and Utah ski areas, the Lake Tahoe mountain resorts in California and
Nevada, the Quebec and New England mountain resorts and the major ski areas in
the Canadian Rockies. In addition, while the Company's skier visits have
increased over the past several years, the numbers of active skiers and annual
skier visits in North America have not changed significantly since 1985. The
competitive position of the Company's resorts is dependent upon many diverse
factors such as proximity to population centres, availability and cost of
transportation to the resorts, including direct flight availability by major
airlines, pricing, snowmaking capabilities, type and quality of skiing offered,
duration of the ski season, prevailing weather conditions, the number, quality
and price of related services and lodging facilities, and the reputation of the
resorts.
LEGAL AND REGULATORY MATTERS
The Company currently and from time to time is involved in litigation in
the ordinary course of its business. The Company does not believe that it is
involved in any litigation that will, individually or in the aggregate, have a
material adverse effect on its financial condition or results of operations or
cash flows.
Many of the Company's resorts are subject to suits with respect to personal
injury claims related principally to skiing activities at each resort. The
Company maintains liability insurance that it considers adequate to insure
claims related to usual and customary risks associated with the operation of a
ski resort.
While there are no financially material environmental protection
requirements in connection with Intrawest's resort operations, Intrawest
emphasizes the protection and enhancement of the natural resources present at
its mountain resorts.
NON-RESORT ASSETS
OVERVIEW
In 1994 the Company determined that it would concentrate its business on
its resort ownership and resort real estate development activities and would
dispose of the Non-Resort Assets. Since that time, the Company has disposed of
the majority of its Non-Resort Assets. At a meeting of shareholders of the
Company held on March 3, 1997, the shareholders approved a reorganization of the
Company's share capital, effective March 14, 1997, designed to separate the
Non-Resort Assets from the rest of the Company's business. Under the Share
Capital Reorganization, each existing Common Share was exchanged, on March 14,
1997, for one new Common Share and one NRP Share. The new Common Shares have the
same attributes as the existing Common Shares and the NRP Shares represent the
net equity of the Non-Resort Assets (that is, the value of these assets less the
liabilities of the non-resort related business operations of the Company). The
book value of the net equity of the Non-Resort Assets as at December 31, 1996
was $88.5 million or $3.82 per NRP Share.
Since December 31, 1996, the Company has sold approximately $17.4 million
of Non-Resort Assets, including its 6th Avenue site in Calgary and the majority
of its residential units in Belltown Court in Seattle and Signal Hill in
Calgary. The Company expects that the remaining Non-Resort Assets will be
disposed of in an orderly manner, and the net cash flow from the Non-Resort
Assets will be distributed to the holders of the NRP Shares, primarily by way of
redemption, within approximately four years. Any gains or losses generated by
the disposition of the Non-Resort Assets will be for the account of the NRP
Shares only and will not affect the computation of earnings per Common Share.
21
<PAGE> 24
On September 30, 1997, the Company will redeem, pursuant to the provisions
attaching to the NRP Shares, 2,360,000 of the NRP Shares at a redemption amount
of $3.82 per NRP Share for each NRP Share to be redeemed. The number of NRP
Shares to be redeemed represents approximately 10% of the outstanding NRP
Shares.
NON-RESORT PROPERTIES
Set out below is a brief description of each of the Company's remaining
non-resort properties and, where applicable, any specific plans the Company has
for their disposition.
COMMERCIAL AND MIXED-USE PROPERTIES
AIRCARE, GREATER VANCOUVER, BRITISH COLUMBIA. In 1991 the Company entered
into a partnership in connection with the construction of the British Columbia
Government AirCare centres. A total of 12 vehicle emission testing stations were
constructed throughout 10 Vancouver Lower Mainland municipalities in 1992 and
1993. The Company holds a 50% interest in the partnership which owns the testing
stations and leases them to the operator for an initial term which expires in
1999.
WHITEMUD CROSSING, EDMONTON, ALBERTA. This non-enclosed 95,000-square foot
shopping centre, located at a major intersection in south Edmonton, was
constructed by the Company in 1987. Approximately 86% of the centre is leased
with approximately one-third occupied by Cineplex Odeon.
GATEWAY, SURREY, BRITISH COLUMBIA. This property comprises 4.5 acres of
vacant land adjacent to the SkyTrain rapid transit line. A SkyTrain station is
located on the site. The land, which is zoned for commercial purposes, can
accommodate approximately 975,000 square feet of office development. A building
permit for Riverpark Place, a planned 88,000-square foot office building, has
been approved and pre-leasing is underway. The Company has a 50% interest in the
property.
ARBOR PLACE, SEATTLE, WASHINGTON. This property, located in downtown
Seattle, consists of a seven-storey building comprising 61,000 square feet of
office space and 7,000 square feet of ground level retail space. The property is
97% leased.
BELLTOWN COURT, SEATTLE, WASHINGTON. This mixed-use property comprises 245
residential apartments configured in two six-storey woodframe buildings and
13,000 square feet of ground level retail space. The apartments were converted
into condominiums in 1996 and are being offered for sale. To June 30, 1997, 225
apartments have been sold. The retail component is fully leased. The Company has
a 50% interest in the property.
THE NEWMARK, SEATTLE, WASHINGTON. This property, located adjacent to Pike
Place Market, one of Seattle's principal tourist attractions, comprises 78,000
square feet of retail space. The property is currently 36% leased. Cineplex
Odeon, the anchor tenant of the property, has recently vacated the premises.
RESIDENTIAL PROPERTIES
SIGNAL HILL, CALGARY, ALBERTA. Construction of these 24 duplex units in
southwest Calgary was completed in June 1997. To June 30, 1997, seven units have
been sold.
COACH HILL, CALGARY, ALBERTA. This 7.5-acre site is located in the Coach
Hill area of southwest Calgary. Construction of the first phase of townhomes
commenced in May 1997. At full build-out, the site is expected to contain 137
townhomes and an amenity building.
PARK HIGHLAND, BELLEVUE, WASHINGTON. This property consists of 250 garden
apartments constructed in 16 buildings configured as a village community with a
plaza, community facilities, day care centre and senior citizen building. The
units are 98% leased. The Company has a 50% interest in the property.
NON-RESORT RECEIVABLES
Effective April 1, 1994, Intrawest sold to two partnerships (the
"Partnerships") substantially all of the direct and indirect interests of the
Company in its non-resort residential development properties in British Columbia
and
22
<PAGE> 25
Washington State. Part of the consideration received by the Company for the bulk
sale of non-resort properties to the Partnerships was a note receivable for
$31.7 million. The Company has also provided the Partnerships with various
credit facilities, including a $7.0 million revolving line of credit and a
non-revolving loan for $1.8 million to fund costs in connection with a specific
property. These loans earn interest at prime plus 2% per annum. Principal
payments on the note receivable were originally scheduled to be fully repaid
with interest at 10.75% per annum, in semi-annual instalments by September 30,
1997. To June 30, 1997, the partnerships had repaid $12,160,000 and the
repayment of the balance, with interest at 10% per annum after September 30,
1997, has been renegotiated as follows:
<TABLE>
<S> <C>
September 30, 1997............................................ $ 3,500
March 31, 1998................................................ 3,500
September 30, 1998............................................ 3,500
March 31, 1999................................................ 3,500
September 30, 1999............................................ 5,540
-------
$19,540
=======
</TABLE>
In addition to the amounts receivable described above, there were $4.9
million of other non-resort receivables as at June 30, 1997, comprising vendor
take-backs on the sale of properties and miscellaneous mortgages, loans and
notes. The Company expects to collect the majority of these receivables by 1999.
For the year ended June 30, 1997, interest income from non-resort receivables
totalled $2.6 million.
OTHER NON-RESORT ASSETS
The $8.8 million of other Non-Resort Assets as at June 30, 1997 includes a
$7.5 million limited partnership interest acquired by the Company as partial
consideration in connection with the sale in 1996 of Station Tower, a Class A
office building in Surrey, British Columbia. The partnership interest is
expected to be fully recoverable out of the available annual cash flow and/or
proceeds from any future sale of Station Tower by the partnership.
EMPLOYEES
The Company has approximately 2,000 year-round employees and 6,300
additional peak-season employees. Approximately 100 of Tremblant's year-round
employees and all of its additional peak-season employees are members of Le
Syndicat Des Travailleurs(euses) de La Station du Mont Tremblant. The current
contract with the union expires on November 1, 1997. All of Mont Ste. Marie's
additional peak-season employees are members of Federation des Travailleurs du
Quebec. The current contract with the union expires on December 6, 1997. None of
the employees in Intrawest's other resorts are members of a union. The Company
believes that its employee relations are good.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information presented below should be
read in conjunction with "Management's Discussion and Analysis" and the
consolidated financial statements and notes thereto included elsewhere in this
Annual Information Form.
FIVE YEAR SUMMARY
(in millions of dollars except per share amounts)
<TABLE>
<CAPTION>
AS AT FISCAL PERIOD END(1)
-----------------------------------------------------------
1997 1996 1995 1994 1993
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Total assets........................... $1,098.0 $753.7 $658.6 $629.0 $614.7
Bank and other indebtedness............ 489.8 379.8 315.6 300.6 346.3
Shareholders' equity................... 498.1 290.3 276.4 265.5 216.5
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
-----------------------------------------------------------
1997 1996 1995 1994 1993
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
REVENUE AND EARNINGS
Total revenue.......................... $ 389.0 $283.3 $152.9 $110.6 $ 84.8
Cash flow.............................. 57.5 35.8 22.9 15.7 11.2
Income from continuing operations...... 28.3 19.7 9.8 4.6 3.8
Results of discontinued operations..... (1.2) (2.1) 1.9 10.5 11.4
Net income............................. 27.1 17.6 11.7 15.1 15.2
PER COMMON SHARE
Cash flow.............................. $ 1.87 $ 1.34 $ 0.80 $ 0.62 $ 0.45
Income from continuing operations...... 1.02 0.85 0.43 0.21 0.19
Net income............................. 1.05 0.76 0.51 0.70 0.75
Dividends.............................. 0.16 0.16 0.16 0.16 0.16
</TABLE>
- ------------
(1) June 30 for 1997, 1996 and 1995 and September 30 for 1994 and 1993. The
Company changed its year end from September 30 to June 30, effective in
1995.
QUARTERLY SUMMARY
(in millions of dollars except per share amounts)
<TABLE>
<CAPTION>
1997 1996
------- -------
QUARTERS QUARTERS
---------------------------------- ----------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
------ ------ ------- ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue................... $39.4 $72.7 $209.2 $67.7 $32.3 $59.3 $118.1 $73.6
Cash flow....................... 0.3 3.1 51.2 2.9 (2.3) 4.5 29.2 4.4
Income from continuing
operations.................... (1.9) (1.2) 30.7 0.8 (3.1) 2.3 17.3 3.1
Results of discontinued
operations.................... 0.7 0.1 (1.5) (0.5) 0.8 0.5 (0.7) (2.7)
Net income...................... (1.2) (1.1) 29.2 0.2 (2.3) 2.8 16.7 0.4
Per common share
Cash flow..................... 0.01 0.12 1.54 0.08 (0.09) 0.19 1.11 0.13
Income from continuing
operations................. (0.08) (0.05) 1.19 0.03 (0.13) 0.10 0.75 0.13
Net income.................... (0.05) (0.05) 1.14 0.01 (0.10) 0.12 0.73 0.02
</TABLE>
SEGMENTED INFORMATION
(in thousands of dollars)
YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
INDUSTRY SEGMENTS
Revenue
Ski and resort operations......................................... $ 265,492 $ 170,986
Real estate operations............................................ 123,483 112,351
--------- ---------
Consolidated...................................................... $ 388,975 $ 283,337
========= =========
Operating profit
Ski and resort operations......................................... $ 46,437 $ 31,030
Real estate operations............................................ 22,682 14,973
--------- ---------
69,119 46,003
Less: unallocated corporate expenses
Interest.................................................. (20,914) (14,017)
General and administrative................................ (8,916) (7,567)
--------- ---------
Consolidated...................................................... $ 39,289 $ 24,419
========= =========
</TABLE>
24
<PAGE> 27
YEARS ENDED JUNE 30
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Identifiable assets
Ski and resort operations......................................... $ 576,991 $ 324,714
Real estate operations............................................ 400,449 263,475
Discontinued operations........................................... 120,511 165,526
--------- ---------
Consolidated...................................................... $1,097,951 $ 753,715
========= =========
Capital acquisitions
Ski and resort operations......................................... $ 51,693 $ 28,098
========= =========
Depreciation and amortization
Ski and resort operations......................................... $ 23,204 $ 16,045
Real estate operations............................................ 1,740 668
Unallocated corporate............................................. 1,022 453
--------- ---------
Consolidated...................................................... $ 25,966 $ 17,166
========= =========
GEOGRAPHIC SEGMENTS
Revenue
Canada............................................................ $ 255,016 $ 193,579
United States..................................................... 133,959 89,758
--------- ---------
Consolidated...................................................... $ 388,975 $ 283,337
========= =========
Operating profit
Canada............................................................ $ 33,143 $ 7,738
United States..................................................... 6,146 16,681
--------- ---------
Consolidated...................................................... $ 39,289 $ 24,419
========= =========
Identifiable assets
Canada............................................................ $ 593,134 $ 395,580
United States..................................................... 384,306 192,609
Discontinued operations........................................... 120,511 165,526
--------- ---------
Consolidated...................................................... $1,097,951 $ 753,715
========= =========
</TABLE>
DIVIDEND POLICY
Since 1991 the Company has paid regular, semi-annual dividends of $0.08 per
common share to its shareholders. Future dividends will be paid at the
discretion of the Company's board of directors and will be subject to the
Company's earnings, financial condition, capital requirements and such other
factors as are deemed relevant by the Company's board of directors.
25
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion of the operating results and financial position of
Intrawest should be read in conjunction with the consolidated financial
statements and related notes included in this Annual Information Form commencing
on page F-1.
FINANCIAL HIGHLIGHTS
1997 was a landmark year in the history of Intrawest. The Company acquired
Whistler Mountain and Copper Mountain, two of the largest destination mountain
resorts in North America, and Mont Ste. Marie, a small regional resort near
Tremblant. The Company also listed its common shares on the New York Stock
Exchange, raised $86.1 million net in a public share offering in Canada and the
U.S., and completed a share capital reorganization resulting in the creation of
separate classes of shares for the resort and the non-resort businesses.
These events, combined with the ongoing management of existing resorts and
real estate properties, produced record financial results during 1997 and
strengthened the Company's balance sheet. The financial highlights compared with
1996 include:
- a 37% increase in total revenue from $283.3 million to $389.0 million,
with ski and resort revenue increasing 59% and real estate sales revenue
increasing 6%.
- a 44% increase in income from continuing operations to $28.3 million and
a 20% increase in income per share from continuing operations to $1.02.
The public offering and shares issued in partial consideration for the
acquisitions of Whistler and Copper increased the weighted average number
of shares outstanding during 1997 by 21%.
- a 63% increase in operating profit from ski and resort operations and a
42% increase in operating profit from real estate sales.
- an increase in cash flow from operations of 61% to $57.5 million and
cash flow per share of 40% to $1.87.
- a 72% increase in shareholders' equity reducing the debt to equity ratio
from 1.31 : 1 to 0.98 : 1 at fiscal year end. This conservative leverage
will facilitate access to new capital in the future.
- an increase in total assets of 46% to $1,098 million, with resort assets
increasing 67% and non-resort assets decreasing 27%.
REVIEW OF SKI AND RESORT OPERATIONS
The acquisitions of Whistler Mountain, Copper Mountain and Mont Ste. Marie
produced significant growth in the Company's ski and resort operations revenue
and operating profits during 1997. With these acquisitions the Company now has a
network of eight resorts, geographically diversified across North America's
major ski regions. All resorts are owned 100%, except for Blackcomb, Panorama
and Mammoth, which are owned 74%, 98% and 33% respectively. Mammoth has been
accounted for as an equity investment and Intrawest's share of Mammoth's net
income has been disclosed as income from equity accounted investment in the
consolidated statement of operations. The discussion in this section of the
Management's Discussion and Analysis therefore excludes the impact of Mammoth.
Revenue from ski and resort operations was $263.2 million in 1997, an
increase of 59% from 1996. The three acquisitions added $86.7 million to
revenue. On a same-resorts basis (excluding the acquisitions), ski and resort
operations revenue increased 7% from $165.3 million to $176.5 million. This
revenue was derived from a marginal increase in same-resorts skier visits from
2,484,000 to 2,509,000 and from 1,764,000 additional skier visits at the
acquired resorts.
Blackcomb, Whistler and Tremblant all experienced record winter skier
visits in 1997. At Tremblant skier visits increased 15% principally due to
growth of the bed base at the resort (the available bed base doubled during the
1996/97 ski season as a result of the opening of Chateau Tremblant and the
Marriott Residence Inn) and to the continued establishment of the resort. Skier
visits declined at Stratton and Snowshoe compared with 1996 mainly due to
inconsistent weather conditions throughout the season.
Maximizing resort operations revenue requires the simultaneous management
of both skier visits and revenue per visit. Historically, ski resort companies,
including Intrawest, have calculated revenue per skier visit as total annual ski
and resort revenue divided by winter skier visits. As the volume of summer and
shoulder season business
26
<PAGE> 29
has expanded, this methodology is no longer appropriate. Accordingly, the
analysis in this section will examine revenue per skier visit for the winter ski
season only and then address non-winter ski and resort operations revenue as a
whole. Intrawest's resorts currently derive between 70% and 90% of their ski and
resort operation revenue during the winter season.
While skier visits increased by 1% on a same-resorts basis in 1997, winter
revenue per skier visit increased by 5% from $56.83 to $59.76. Revenue per skier
visit is a function of ticket prices and ticket yields, and revenue from
non-ticket sources such as ski school, food services and retail and rental
shops. Ticket yields reflect the mix of ticket types (e.g. adult, child, season
pass, group) and the amount of discounting of full price tickets. The Company
actively manages its ticket yields in order to drive the volume, timing and mix
of visits and thereby maximize its ticket revenues. The Company also seeks to
capture a high proportion of visitor spending by expanding and enhancing its
range of non-ticket services and activities.
The improvement in same-resorts winter revenue per visit was mainly due to
an increase in non-ticket revenue per visit. While ticket revenue per visit
increased 2%, non-ticket winter revenue per visit increased 9%, with ski school
and retail showing the largest increases. Each resort showed an increase in both
ticket and non-ticket winter revenue per visit. The inclusion of the three
acquisitions reduced the Company's overall winter revenue per visit in 1997 from
$59.76 to $57.50. This was partly due to the timing of the acquisitions after
the start of the winter season and partly to Copper's lower ticket yield and
Whistler's lower non-ticket revenue per visit compared with the Company's other
resorts. The opportunity to increase revenue per visit at the acquired resorts
is significant.
Same-resorts non-winter ski and resort operations revenue was $27.1 million
in 1997 compared with $24.5 million in 1996. The increase was partly due to the
timing of the acquisition of Snowshoe midway through 1996 and partly to higher
summer and shoulder season revenue at the other resorts. The acquisitions added
a further $1.8 million to non-winter ski and resort operations revenue in 1997.
The following table shows the composition of ski and resort operations
revenue for 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
REVENUE PROPORTION REVENUE PROPORTION
---------- ---------- ---------- ----------
(MILLIONS) (%) (MILLIONS) (%)
<S> <C> <C> <C> <C>
Lifts.............................................. $129.8 49.3 $ 76.6 46.3
Retail shops....................................... 39.5 15.0 27.8 16.8
Food and beverage.................................. 38.5 14.6 22.2 13.4
Lodging and property management.................... 22.5 8.4 21.4 13.0
Ski school......................................... 18.1 6.9 9.1 5.5
Golf, tennis and other............................. 14.8 5.8 8.2 5.0
------ ----- ------ -----
$263.2 100.0 $165.3 100.0
====== ===== ====== =====
</TABLE>
The changes in the proportion of revenues accounted for by the various
operating departments reflect the impact of the acquisitions. Both Whistler and
Copper derived more than half of their revenue from lift ticket sales during
1997 and they had proportionately more food and beverage revenue and less retail
and rental revenue compared with the Company's other resorts. In addition,
Whistler does not have any lodging and property management operations.
One of Intrawest's key operating objectives over the past few years has
been to increase the utilization of its ski and resort operations assets. One
measure of the utilization of assets is the ratio of ski and resort operations
revenue to fixed assets. An improvement in the revenue to assets ratio can be
achieved by lengthening the operating season, increasing visits at non-peak
times when there is excess capacity and increasing revenue per visit. On a
same-resorts basis, the ratio of revenue to assets improved from 67% in 1996 to
69% in 1997. This increase was due mainly to the 5% rise in same-resorts winter
revenue per skier visit.
Operating profit from ski and resort operations increased 63% to $67.4
million in 1997 from $41.4 million in 1996. Operating profit was higher at
Blackcomb, Tremblant and Panorama than in 1996 and lower at Stratton and
Snowshoe. Snowshoe's operating profit was higher in 1996 partly because normal
seasonal losses during the July to November period occurred prior to the
acquisition date. Similarly, operating profit generated by Whistler, Copper and
Mont Ste. Marie was higher in 1997 than it would be in a normal year due to the
mid-year timing of their acquisitions. The Company's operating margin improved
from 25.0% in 1996 to 25.6% in 1997 and is expected to
27
<PAGE> 30
improve further in the future as Intrawest realizes economies of scale at the
combined Whistler and Blackcomb operation and capitalizes on the bulk purchasing
power of its network of resorts. The operating margin will also improve as the
Company increases the utilization of its ski and resort operations assets across
the winter season and throughout the year, and thereby achieves a more efficient
cost structure.
REVIEW OF RESORT REAL ESTATE OPERATIONS
Revenue from the sale of resort real estate increased 6% to $118.2 million
from $111.4 million in 1996. The breakdown by resort was as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Blackcomb/Whistler.......................................................... $ 38.0 $ 51.8
Tremblant................................................................... 39.1 26.3
Keystone.................................................................... 12.0 15.8
Copper...................................................................... 3.5 --
Panorama.................................................................... 3.0 0.7
Sun Peaks................................................................... 1.1 2.6
Resort Club................................................................. 21.5 14.2
------ ------
$118.2 $111.4
====== ======
</TABLE>
In total, excluding the resort club, Intrawest closed 465 sales
transactions in 1997 in 20 different projects compared with 474 transactions in
15 different projects in 1996. The majority of the sales at Blackcomb/Whistler
were generated by Blackcomb Springs and Treeline. In addition, Intrawest sold
its first units at Taluswood on the Creekside base of Whistler Mountain. At
Tremblant the Company sold out the Chateau Tremblant condominiums as well as its
remaining inventory of Marriott and Johannsen/Deslauriers units and closed
approximately 70% of the units in Le Kandahar on construction completion.
Approximately 50% of the sales closings at Keystone were provided by Arapahoe
Lodge, the third building in River Run Village, and the Company also sold out
the first phase of the Ski Tip and Jackpine/Black Bear projects.
Since Intrawest's policy is to recognize real estate sales at the time
title is conveyed to the purchaser and the purchaser becomes entitled to
occupancy, and because the Company heavily pre-sells its projects prior to and
during construction, the timing of construction completion is the largest
determinant of recorded sales. At June 30, 1997, the Company had pre-sold 574
units for approximately $148 million which it expects to close in fiscal 1998
and a further $22 million of pre-sales due to close in fiscal 1999. The majority
of these pre-sales were attained through the project sales launch strategy the
Company first introduced in 1996. Under this approach properties are heavily
marketed to a resort's database of most loyal customers and then qualified
potential customers are invited to major sales launches where orders are taken.
Use of this approach has generally resulted in pre-sales of 75% to 100% of the
available units at the time of the sales launch.
In November 1996 Intrawest entered into an option agreement with the owner
of Squaw Valley Ski Area at Lake Tahoe in California to acquire approximately
13.4 acres of land at the base of the ski facilities on which it plans to
develop a four-season resort village. This is the Company's second real estate
venture at a major U.S. resort that the Company does not own and Intrawest's
selection by the resort owner points to the Company's stature as the leading
developer of mountain resort real estate in North America. Including Squaw
Valley, the Company has land available to develop and sell approximately 15,000
units, a land position that is significantly larger than that controlled by any
other North American mountain resort developer. Construction is underway on the
Company's first projects at Stratton and Snowshoe and predevelopment work is
proceeding at Mammoth, Whistler, Copper and Squaw Valley. As these new locations
come on stream, the Company expects to deliver significantly more units per year
than the 465 units sold in fiscal 1997. The Company's current supply of land can
support this increased level of activity for the next 15 to 20 years and the
Company's objective is to add to its supply of land at a faster rate than
production but to do so on a risk mitigated basis.
The resort club contributed $21.5 million in sales revenue in 1997 compared
with $14.2 million in 1996. This increase was due to significant improvements in
the sales efficiency ratio (sales revenue per tour) and closing rates (the
proportion of sales contracts written per tour) -- key measures in the marketing
oriented resort club business. Both of these measures improved 30% during 1997
compared with 1996, that is each tour resulted in 30% more
28
<PAGE> 31
revenue and 30% more sales transactions in 1997 than in the previous year. The
Company's approach is to use direct mail and telemarketing as well as on-site
marketing to generate tours of the resort club facilities which leads to sales.
The improvements were due to increased acceptance of the resort club product,
more focused marketing programs, and changes in sales management personnel.
Operating profit on resort real estate sales increased 42% from $15.7
million in 1996 to $22.3 million in 1997. The resort club generated operating
profit of $1.2 million in 1997 compared with a loss of $2.8 million in 1996.
This turnaround was due to the sales improvements discussed above combined with
reduced general and administrative costs resulting from the Company's decision
to expand the business less rapidly than originally planned. Excluding the
resort club, operating profit on resort real estate increased 14% from $18.5
million in 1996 to $21.1 million in 1997. The operating margin on these sales
improved from 18.9% in 1996 to 21.8% in 1997 due to higher sales prices and
effective cost control. Increasingly the Company has transferred successful
"project templates" to new developments and this practice has helped to control
costs by reducing design and engineering fees and eliminating construction
uncertainties. The Company has also continued to enhance its project reporting
systems so that potential cost overruns are detected at an early stage and
remedial action taken.
REVIEW OF CORPORATE OPERATIONS
INCOME FROM EQUITY ACCOUNTED INVESTMENT
The Company's 33% share of Mammoth's net income was $1.2 million compared
with $4.6 million in 1996. Mammoth was acquired in mid-December 1995, after the
start of the ski season and therefore provided a disproportionately high
contribution in fiscal 1996. The contribution this year includes normal losses
prior to the start of the ski season as well as a full year's depreciation and
interest charges. In addition Mammoth's effective income tax rate was 27% in
1996 compared with 40% in 1997 because of the application of tax loss carry
forwards.
INTEREST AND OTHER INCOME
Interest and other income increased by $2.0 million in 1997 to $3.2
million. Interest income on cash balances and receivables was $2.1 million in
1997, including $0.5 million from Whistler and Copper, compared with $1.3
million in 1996. Other income, which mainly comprises fee income and
miscellaneous gains and losses, was $1.1 million in 1997 compared with a net
loss of $0.1 million in 1996.
INTEREST COSTS
The Company incurred total interest costs of $35.5 million in 1997 compared
with $32.4 million in 1996. The acquisitions of Whistler, Copper and Mont Ste.
Marie increased interest by $3.0 million and a full year's interest at Snowshoe
compared with seven months in 1996 added a further $1.5 million. Interest on new
debt to fund capital improvements and real estate development activity at the
resorts was offset by reduced interest on non-resort debt and generally lower
interest rates in 1997.
Incurred interest is either capitalized to properties and resort assets
under development or charged to income. During 1997 $26.4 million of interest
was charged to income - $20.9 million as interest expense, $1.3 million as a
component of real estate costs, $0.9 million within ski and resort operation
expenses and $3.3 million in discontinued operations. By comparison, in 1996
$24.3 million of interest was charged to income. As Intrawest has expanded its
ski and resort operations and started to generate real estate sales at more
resorts, the proportion of interest incurred charged to income has increased -
from 60% in 1995 to 74% in 1997.
Interest coverage measures a company's ability to fund interest costs from
operations. Intrawest targets to cover its expensed interest by at least 2.0
times and its incurred interest by more than 1.2 times. Expensed interest
coverage was 2.4 times (based on total interest charged to income) in 1997
compared with 1.9 times in 1996 and incurred interest coverage increased from
1.4 times in 1996 to 1.8 times in 1997.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased from $17.2 million in 1996
to $26.0 million in 1997. The acquisitions of Whistler, Copper and Mont Ste.
Marie increased depreciation and amortization by $5.1 million and 12 months of
depreciation at Snowshoe versus seven months in 1996 added a further $1.0
million. The balance of the increase was attributable primarily to depreciation
on new capital expenditures at the resorts and amortization of deferred charges.
29
<PAGE> 32
GENERAL AND ADMINISTRATIVE COSTS
All general and administrative costs incurred by the resorts are included
in ski and resort operation expenses. Similarly, general and administrative
costs related to the development of real estate are initially capitalized to
properties, and then expensed to real estate costs when the properties are sold.
Corporate general and administrative costs increased from $7.6 million in 1996
to $8.9 million in 1997. The increase was due mainly to incentive-based
compensation. As a percentage of revenues, corporate general and administrative
costs declined from 2.7% in 1996 to 2.3% in 1997. The Company continually
reviews its overhead costs and has instituted procedures to reduce or eliminate
costs where appropriate.
INCOME TAXES
The Company provided for income taxes of $7.1 million in 1997 compared with
$1.2 million in 1996. The tax provision was higher in 1997 because of income
taxes on increased taxable income earned in the United States due mainly to
Copper. Additional information is provided in Note 12 of the consolidated
financial statements.
DISCONTINUED OPERATIONS
The consolidated financial statements disclose the Company's non-resort
business as discontinued operations. Effective March 14, 1997, Intrawest
completed a reorganization of its share capital designed to separate the
Company's remaining non-resort assets from the rest of its business. Under the
share capital reorganization each existing common share was exchanged for one
new common share and one non-resort preferred (NRP) share. The NRP shares were
capitalized at a value of $88.5 million, equal to the net equity of the
non-resort assets at December 31, 1996, and the book value of the common shares
was reduced by the same amount. From January 1, 1997, the net income or loss and
the net cash flow generated by these assets has accrued to the NRP shareholders.
The discontinued operations incurred a loss of $1.2 million in 1997
compared with a loss of $2.1 million in 1996. During 1997 the Company sold $40.8
million of non-resort properties including the majority of the residential units
at Belltown Court in Seattle, the Shaughnessy Station shopping centre in
metropolitan Vancouver and the 6th Avenue site in Calgary. Given current market
conditions, Intrawest expects that its remaining non-resort properties will, in
aggregate, be sold at approximately book value.
REVIEW OF ASSETS
Total assets grew by 46% to $1,098 million during 1997 with an increase in
resort assets of $391.2 million being partially offset by a decline in
discontinued non-resort assets of $45.0 million. The discontinued non-resort
assets now constitute 11% of the Company's total assets compared with 22% at the
end of fiscal 1996.
The increase in resort assets during 1997 was substantially due to the
acquisitions of Whistler and Copper which respectively added $137.3 million and
$118.3 million to assets at fiscal year end. Both of these resorts are among the
largest in North America, and with the acquisition of the resort operations, the
Company also acquired approximately 2,000 units of developable real estate.
These land holdings will be developed over the next 10 to 15 years.
The $45.0 million decrease in non-resort assets comprises $26.2 million of
net property disposals (principally Belltown Court and Shaughnessy Station) and
$18.8 million of net reductions to receivables and other assets.
CAPITAL STRUCTURE AND LIQUIDITY
Intrawest's debt to equity ratio was 0.98: 1 at June 30, 1997 compared with
1.31: 1 at June 30, 1996. The reduction resulted from a 72% increase in
shareholders' equity partially offset by a 29% increase in debt. These changes
have combined to strengthen the Company's balance sheet thereby improving its
access to new capital to aid future growth.
On March 24, 1997, the Company listed its common shares on the New York
Stock Exchange and on April 1, 1997 raised $86.1 million net in a public
offering of 4 million common shares in Canada and the United States. The Company
also issued 6.87 million common shares for $94.5 million in partial
consideration for the Whistler and Copper acquisitions. These events, combined
with proceeds from the exercise of stock options in the normal course, increased
capital stock by 93% from $198.2 million at the end of fiscal 1996 to $382.3
million at June 30, 1997.
At June 30, 1997, total debt amounted to $489.8 million, an increase of
$110.0 million from June 30, 1996. The increase was primarily attributable to
the acquisitions of Whistler and Copper which together added $89.1 million of
new resort and real estate debt at year end. Approximately $50.0 million of the
share offering proceeds were used to
30
<PAGE> 33
repay acquisition financing and now both Whistler and Copper have capacity to
take on increased debt for capital improvements. The balance of the increase in
debt was mainly due to the refinancing of Stratton's and Snowshoe's ski and
resort operations debt and increased construction financing at Keystone and
Whistler/Blackcomb.
At June 30, 1997, 57% of total debt bore interest at floating rates, down
slightly from 59% at June 30, 1996. Interim financing for real estate
construction is normally arranged on a floating rate basis. Since the Company is
engaged primarily in the development of projects with a short construction and
sell-out timetable, exposure to higher interest rates on construction financing
is not significant. Debt on defined-income stream properties (for example,
commercial rental properties) is normally arranged on a longer-term, fixed --
rate basis with the objective of matching the financing with the duration
characteristics of the property. It is also the Company's policy to fix the
interest on approximately 50% of its ski and resort operation debt, although a
lower proportion may be hedged temporarily in anticipation of a refinancing. At
year end, approximately 48% of ski and resort operation debt bore interest at
floating rates. A 1% change in the rate of interest on this debt would impact
annual earnings by about $1.5 million before income taxes.
The Company requires liquidity for debt service, capital expenditures and
acquisitions. Funds for these purposes are provided by a combination of cash
flow from operations and short and long-term borrowings (and, depending on the
size of the acquisition, by equity capital). In addition, the Company's resorts
generally have negative cash flows from May to October and revolving lines of
credit are needed to finance working capital requirements during this period.
Cash flow from operations was $57.5 million in 1997, 61% higher than in 1996.
The reasons for this increase are described in the review of operations above.
During fiscal 1997 resort capital expenditures were $51.7 million, mainly
comprising upgrades and expansion of Stratton's snowmaking system, the buyout of
the ski operation land lease at Stratton, a second golf course at Tremblant, new
trails at Blackcomb and information systems and grooming equipment at all
resorts. The Company estimates that it will make capital expenditures totalling
approximately $55 million in fiscal 1998. The major projects include two
highspeed quad chairlifts at Whistler and one at Snowshoe, new trails and
additional terrain park acreage at Blackcomb, employee housing at
Whistler/Blackcomb and Snowshoe, completion of the golf courses at Tremblant and
Panorama, and expansion of Snowshoe's snowmaking system. The majority of these
expenditures will be financed by cash on hand.
The Company successfully retired or refinanced $121.3 million of debt which
matured in 1997. During 1998, $90.7 million of debt is scheduled to be repaid,
$46.0 million of ski and resort operations debt and $44.7 million of debt on
properties. A portion of the ski and resort operations debt is expected to be
refinanced and the balance of the debt repayments will be funded from cash flow
from operations. Subsequent to year end, approximately $65 million of debt at
Tremblant was refinanced for a term of five years and the majority of this debt
has been classified as long-term. The Company expects to fund most of the debt
on properties repayments from property sales after completion of construction.
Intrawest plans to sell its remaining non-resort properties and to collect
its non-resort receivables and other assets in an orderly manner over the next
three to four years. The net cash flow generated by these assets, which is
expected to be approximately $88 million, must be distributed to the NRP
shareholders to redeem their shares. The first redemption, amounting to $9.0
million, and representing 10% of the number of NRP shares outstanding, will be
made on September 30, 1997.
Intrawest's target is to retain approximately $40 million of cash balances
and unused lines of credit at all times. At June 30, 1997, the Company held cash
and unused lines of $77.9 million compared with $35.7 million at June 30, 1996.
Subsequent to year end the Company obtained a $30.0 million increase in its
corporate operating line of credit.
RISK AND RISK MANAGEMENT
Intrawest's resort operations and resort real estate businesses are managed
to deal with risks that are common to most companies, i.e. the risks of severe
economic downturn, competition and currency fluctuations, and the more
industry-specific risks of unfavourable weather patterns and construction
overruns.
ECONOMIC DOWNTURN
A severe economic downturn could reduce spending on resort vacations and
weaken sales of recreational real estate. Although skiing is a discretionary
recreational activity that one might expect to be impacted by a significant
31
<PAGE> 34
economic slowdown, Intrawest's operating results have historically not shown
this to be the case. During 10 years of ownership of Blackcomb, cash flow
increased every year despite widely varying economic conditions. Blackcomb, as
well as Intrawest's other resorts, attract customers who have incomes well above
the national average and are therefore less likely to have their vacation plans
impacted by an economic recession. In addition, Intrawest's resorts draw their
visitors from a wide variety of locations and this diversity shelters these
resorts somewhat from regional economic conditions.
Real estate developers face two major risks from an economic downturn: land
risk and completed inventory risk. Land risk arises when land is purchased with
debt and economic conditions deteriorate resulting in higher holding costs and
reduced profitability, or worse, loan defaults and foreclosure. Intrawest has
reduced its land risk at certain of its resorts by acquiring land at low cost
with the purchase of a resort or by securing land through options and joint
ventures. The extensive land holdings at Tremblant, Stratton, Snowshoe and
Panorama were all low cost acquisitions with the resort. At Blackcomb and Squaw
Valley, the Company secured its land holdings through options rather than
outright purchases. Options are exercised for specific project sites only when
permits are in place and construction is set to start. Similarly at Whistler the
land acquisition financing is repaid when building permits are issued, subject
to minimum annual repayments. Intrawest secured its land holdings at Keystone by
forming a joint venture with the land owner under which land is only paid for as
completed units are sold and construction financing is repaid.
Completed inventory risk arises when completed units cannot be sold and
construction financing cannot be repaid. Intrawest has mitigated this risk by
pre-selling a significant portion of its units prior to commencement of, and
during, construction. At June 30, 1997 the Company had only 51 unsold units in
its resort real estate inventory and 80% of the approximately 795 resort units
under construction were pre-sold. The Company also reduces the risk of carrying
surplus inventory by primarily constructing woodframe buildings. This type of
product has a short construction timetable which means that it is less
vulnerable to market shifts prior to completion. It also allows units to be
delivered to market on a phased basis as demand dictates.
COMPETITION
Intrawest's resorts compete for destination visitors with other mountain
resorts in Canada, the United States, Europe and Japan. They also compete for
day skiers with other ski areas within each resort's local market area. Skier
visits in North America have been relatively flat over the past 10 years which
has increased competition between resort owners. The Company's strategy is to
acquire resorts that have natural competitive advantages, for example in terms
of location, vertical drop and quality of terrain. The Company also enhances its
competitive position by investing in capital improvements, such as snowmaking,
high-speed lifts and on-mountain restaurants, and by ensuring high quality of
service.
Intrawest also faces competition from other leisure industry companies, for
example cruise ship lines and amusement parks. The Company's strategy is to
build and establish a network of resorts and promote brand recognition to
strengthen its competitive position vis-a-vis such competitors. The diversity of
Intrawest's resorts in terms of vacation experience which provides guests with a
variety of vacation choices within the Intrawest network also enhances the
Company's competitive position.
The Company owns substantially all of the supply of developable land at the
base of its resorts and hence competition in real estate is somewhat restricted.
Expertise in all aspects of the development process, including resort
masterplanning, project design, construction, sales and marketing and property
management also gives the Company a distinct competitive advantage. In the
resort club business, Intrawest faces competition at Whistler from other
timeshare operators. The Company has established a competitive position by
offering a flexible point-based system and a high standard of accommodation. At
Tremblant, the Company is the only provider of vacation ownership product. The
Company is exposed to competition from vacation ownership offerings at other
resorts but is able to distinguish itself by its resorts' amenities, the quality
of its real estate, and its unique relationships, for example its direct
exchange program with Disney Vacation Club.
CURRENCY FLUCTUATIONS
Over the past several years the Company's Canadian resort operations have
benefited from the lower Canadian dollar relative to the U.S. dollar, the
Japanese yen and European currencies. The price of a lift ticket at Intrawest's
Canadian resorts has been 75% or less of the price at comparable U.S. resorts.
Along with accommodation and food and beverage costs, this has made vacationing
in Canada more affordable for destination visitors. A significant shift
32
<PAGE> 35
in the value of the Canadian dollar, particularly against its U.S. counterpart,
could impact the Company's earnings from its Canadian assets.
Intrawest finances its U.S. dollar assets with U.S. dollar debt and hence
is not exposed to foreign exchange risk with respect to its debt servicing. In
addition, cash flow generated by U.S. operations is generally retained in the
United States and invested in expansion of U.S. assets. Similarly cash flow
generated at the Canadian resorts is generally reinvested in Canada. Cross
border cash transactions and currency exchanges are kept to a minimum.
UNFAVOURABLE WEATHER CONDITIONS
The Company's ability to attract visitors to its resorts is influenced by
weather conditions and the amount of snowfall during the ski season. Intrawest
manages its exposure to unfavourable weather in three ways: by being
geographically diversified, by seeking to build its visits as evenly as possible
through the seasons, and by investing in snowmaking.
Geographically diversified companies like Intrawest can reduce the risk
associated with a particular region's economic and weather patterns. During the
past three ski seasons, favourable and unfavourable weather conditions at
different times at the eastern and western resorts offset one another, allowing
the Company to meet its overall budgets for the resort operations group. The
more a resort can attract its visits evenly through the season the less
vulnerable it is to unfavourable weather at a particular time. Intrawest seeks
to spread its visits by marketing to destination visitors who book in advance,
stay several days and are less likely than day visitors to change their vacation
plans, and by attempting to increase traffic mid-week and at non-peak times. The
impact of poor natural snow conditions can also be mitigated by investing in
snowmaking. Snowmaking is particularly important in eastern North America due to
the number of competing resorts and less reliable snowfall. Intrawest has
invested heavily in snowmaking over the past few years and currently has 99%
snowmaking coverage at Snowshoe and 75% at each of Tremblant and Stratton.
CONSTRUCTION OVERRUNS
Intrawest is not in the construction business but rather engages general
contractors to construct its real estate projects. The Company's practice is to
structure its construction contracts on a fixed-price basis so that cost
overruns are at the contractor's risk. The Company does employ construction
experts who oversee the general contractors and ensure that problems are
properly and quickly resolved. The Company has also developed a comprehensive
and sophisticated project reporting system which helps to prevent potential cost
overruns from going undetected.
OUTLOOK
SKI AND RESORT OPERATIONS
Intrawest now has a network of resorts that provides a solid foundation for
future growth in earnings and cash flow. The merger of Whistler and Blackcomb
into a single operating unit represents a significant opportunity to enhance
revenues and realize cost efficiencies at the combined resort. At Copper, the
Company's immediate-term focus is to increase its revenue and profit per visit
to a level closer to its other resorts. The continued growth of the bed base at
Tremblant, primarily due to the completion of the Kandahar just before year end,
and the momentum of the resort, is expected to increase skier visits and revenue
per visit in 1998. The capital improvements currently underway at both Snowshoe
and Panorama are expected to increase revenues and operating profits through all
four seasons. The emphasis at Stratton is on improving margins by achieving a
more balanced utilization of the resorts' assets through the season.
These individual resort initiatives will be augmented by a number of
company-wide initiatives. The addition of Whistler and Copper significantly
increases the purchasing power of the Company's network of resorts and
strengthens its marketing opportunities. With eight resorts strategically
located across North America's major ski areas, Intrawest is an attractive
partner for corporate sponsors and for tour operators. The Company expects to
reduce its costs and increase its visits and revenues by capitalizing on such
relationships. Furthermore by banding its resorts together under the Intrawest
brand name, the Company believes it can enhance customer loyalty and more
effectively exploit cross-marketing opportunities.
The Company's resorts should also benefit from certain demographic and
societal trends including the entry of the "echo boom" generation into their
teenage years -- the prime age for skiing and snowboarding -- and the increasing
popularity of mountain resort leisure activities.
33
<PAGE> 36
REAL ESTATE
The Company expects real estate revenues and operating profits to increase
significantly in 1998 due to higher production levels at Whistler/Blackcomb,
Panorama and Keystone, and sales of the first projects at Stratton and Snowshoe.
At year end the Company already had pre-sales of approximately $148 million that
it expects to close by June 30, 1998. Demographic trends are impacting mountain
resort real estate in a similar fashion to resort operations. In particular, the
"baby boom" generation is entering the 45 year and over age category, which is
the age group with the largest number of buyers of recreation property. The
resort club returned to profitability in 1997 and the Company expects this
progress to continue during 1998. The second phases of the Blackcomb and
Tremblant club locations are under construction and several other potential club
locations are under review.
MARKET FOR SECURITIES
The Common Shares of the Company are listed and traded on the New York
Stock Exchange, The Toronto Stock Exchange (the "TSE"), The Montreal Exchange
(the "ME") and the Vancouver Stock Exchange. The NRP Shares are listed and
traded on the TSE and ME. The TSE is the principal market for the Common Shares
and the NRP Shares.
DIRECTORS AND OFFICERS
The names and municipalities of residence of the directors and officers of
the Company and their principal occupations are set forth below.
DIRECTORS
<TABLE>
<CAPTION>
NAME AND MUNICIPALITY OF RESIDENCE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------------------------- ---------------------------------------- --------------
<S> <C> <C>
R. Thomas M. Allan(2)(3)................... Executive Vice-President, Investments of 1990
London, Ontario London Life Insurance Company
Joe S. Houssian............................ President and Chief Executive Officer of 1976
West Vancouver, British Columbia the Company
Daniel O. Jarvis........................... Executive Vice President and Chief 1989
Vancouver, British Columbia Financial Officer of the Company
David A. King(1)(2)........................ President of David King Corporation 1990
Islington, Ontario
Gordon H. MacDougall(2)(3)................. Partner, CC&L Financial Services Group 1990
West Vancouver, British Columbia
Paul M. Manheim(1)(2)...................... Vice President Corporate Development, 1992
Mercer Island, Washington HAL Investments Inc.
Paul A. Novelly............................ Chairman, President and Chief Executive 1997
St. Louis, Missouri Officer of Apex Oil Company, Inc.
Bernard A. Roy(1)(3)....................... Senior partner, Ogilvy Renault 1992
Verdun, Quebec
Khaled C. Sifri(1)......................... Vice President, Legal Affairs 1990(4)
Dubai, United Arab Emirates Majid Al Futtaim Investments LLC
Hugh R. Smythe............................. President, Resort Operations Group 1993
Whistler, British Columbia of the Company
Nicholas C.H. Villiers(3).................. Vice President and Director of 1990(4)
London, England RBC Dominion Securities Inc.
Charles E. Young........................... President of Marin Investments Limited 1997
Vancouver, British Columbia
</TABLE>
- ------------
(1) Member of the Audit Committee.
(2) Member of the Corporate Governance Committee.
(3) Member of the Human Resources Committee.
(4) Prior to the reorganization which took place in connection with the
Company's public offering of common shares in March 1990, both Messrs. Sifri
and Villiers were directors of Intrawest N.V., a former holding company of
the Company. Messrs. Sifri and Villiers were directors of Intrawest N.V.
from 1986 to 1990.
34
<PAGE> 37
The Company does not have an Executive Committee and is required to have an
Audit Committee. Each director will serve as a director until the next annual
general meeting or until his successor is elected or appointed.
OFFICERS
<TABLE>
<CAPTION>
NAME AND MUNICIPALITY OF RESIDENCE PRINCIPAL OCCUPATION
- ----------------------------------------------- -----------------------------------------------
<S> <C>
David C. Blaiklock............................. Corporate Controller
North Vancouver, British Columbia
Michael F. Coyle............................... Senior Vice President, Marketing
West Vancouver, British Columbia
John E. Currie................................. Senior Vice President, Financing and Taxation
North Vancouver, British Columbia
Michael W. Davis............................... Vice President, Marketing, Resort Operations
Vancouver, British Columbia Group
James J. Gibbons............................... President, Resort Club Group
West Vancouver, British Columbia
David S. Greenfield............................ Senior Vice President, Resort Development Group
Whistler, British Columbia
Joe S. Houssian................................ President and Chief Executive Officer
West Vancouver, British Columbia
Daniel O. Jarvis............................... Executive Vice President and Chief Financial
Vancouver, British Columbia Officer
Ross J. Meacher................................ Corporate Secretary
North Vancouver, British Columbia
Diane R. Rabbani............................... Vice President, People and Organizational
North Vancouver, British Columbia Development
Gary L. Raymond................................ President, Resort Development Group
Whistler, British Columbia
Hugh R. Smythe................................. President, Resort Operations Group
Whistler, British Columbia
</TABLE>
As at June 30, 1997, the directors and senior officers of the Company, as a
group, beneficially owned, directly or indirectly, or exercised control or
direction over 3.0% of the outstanding common shares of the Company (including
common shares beneficially owned by a company, the shares of which are owned by
companies of which a director and senior officer and his spouse are the
shareholders and in respect of which such director and senior officer disclaims
beneficial ownership and common shares over which a director shares voting power
and investment power and in respect of which such director disclaims beneficial
ownership).
During the past five years, each of the directors and officers of the
Company has been associated in various capacities with Intrawest or the company
or organization indicated opposite his or her name in the tables above or with
affiliates thereof, except for Mr. Sifri who, prior to May 1997, was president
of PolyMore Circuit Technologies, L.P. and Mr. Davis who, prior to September
1995, was president of M. Davis & Associates Consulting Ltd.
35
<PAGE> 38
ADDITIONAL INFORMATION
The Company shall provide to any person, upon request to the Corporate
Secretary of the Company:
(a) when the securities of the Company are in the course of a distribution
pursuant to a short form prospectus or a preliminary short form
prospectus has been filed in respect of a distribution of its
securities;
(i) one copy of this Annual Information Form, together with one copy
of any document, or the pertinent pages of any document,
incorporated by reference in this Annual Information Form;
(ii) one copy of the comparative financial statements of the Company
for its most recently completed financial year together with the
accompanying report of the auditor and one copy of any interim
financial statements of the Company subsequent to the financial
statements for the Company's most recently completed financial year;
(iii) one copy of the Information Circular of the Company in respect of
its most recent annual meeting of shareholders that involved the
election of directors; and
(iv) one copy of any other documents that are incorporated by reference
into the preliminary short form prospectus or the short form
prospectus and are not required to be provided under (i) to (iii)
above; or
(b) at any other time, one copy of any of the documents referred to in
(a)(i), (ii) and (iii) above, provided that the Company may require the
payment of a reasonable charge if the request is made by a person who is
not a security holder of the Company.
Additional information, including directors' and officers' remuneration and
indebtedness, principal holders of the Company's securities, options to purchase
securities and interests of insiders in material transactions, where applicable,
is contained in the Company's Information Circular for its most recent annual
meeting of shareholders that involved the election of directors, and additional
financial information is provided in the Company's comparative financial
statements for its most recently completed financial year.
Copies of these documents may be obtained upon request from the Corporate
Secretary of the Company, Suite 800, 200 Burrard Street, Vancouver, British
Columbia V6C 3L6.
36
<PAGE> 39
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF
INTRAWEST CORPORATION
YEARS ENDED JUNE 30, 1997 AND 1996
F-1
<PAGE> 40
AUDITORS' REPORT
To the Shareholders of Intrawest Corporation
We have audited the consolidated balance sheets of Intrawest Corporation as
at June 30, 1997 and 1996 and the consolidated statements of operations,
retained earnings, cash flow from operations and changes in financial position
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at June 30, 1997
and 1996 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles. As required by the British Columbia Company Act, we
report that, in our opinion, these principles have been applied, after giving
retroactive effect to the change in the method of accounting for financial
instruments as explained in note 2 to the consolidated financial statements, on
a consistent basis.
Vancouver, British Columbia (Signed) Coopers & Lybrand
September 5, 1997 Chartered Accountants
F-2
<PAGE> 41
INTRAWEST
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30
-----------------------
1997 1996
-------- --------
(IN THOUSANDS OF
DOLLARS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
REVENUE
Ski and resort operations.............................................. $263,239 $165,282
Real estate sales...................................................... 118,190 111,397
Rental properties...................................................... 3,143 856
Income from equity accounted investment (note 3(d)).................... 1,190 4,621
Interest and other income.............................................. 3,213 1,181
-------- --------
388,975 283,337
-------- --------
EXPENSES
Ski and resort operations.............................................. 195,851 123,910
Real estate costs...................................................... 95,858 95,699
Rental properties...................................................... 2,181 559
Interest (note 15)..................................................... 20,914 14,017
Depreciation and amortization.......................................... 25,966 17,166
General and administrative............................................. 8,916 7,567
-------- --------
349,686 258,918
-------- --------
Income before income taxes, non-controlling interest and discontinued
operations........................................................... 39,289 24,419
Provision for income taxes (note 12)................................... 7,067 1,172
-------- --------
Income before non-controlling interest and discontinued operations..... 32,222 23,247
Non-controlling interest............................................... 3,927 3,590
-------- --------
Income from continuing operations...................................... 28,295 19,657
Results of discontinued operations (note 4)............................ (1,202) (2,056)
-------- --------
Net income for the year................................................ $ 27,093 $ 17,601
======== ========
Income per common share
Income from continuing operations.................................... $ 1.02 $ 0.85
Net income*.......................................................... $ 1.05 $ 0.76
======== ========
Weighted average number of common shares outstanding (in thousands).... 27,809 23,048
======== ========
</TABLE>
- ---------------
*Net income per common share for the year ended June 30, 1997 includes income
per common share from discontinued operations for the six months ended December
31, 1996, amounting to $0.03. From January 1, 1997, the results of discontinued
operations accrue to the holders of the Company's non-resort preferred shares
(note 11(a)).
F-3
<PAGE> 42
INTRAWEST
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS AT JUNE 30
----------------------
1997 1996
--------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
ASSETS
Current assets
Cash and short-term deposits (note 14(b))............................. $ 59,718 $ 28,761
Other assets (note 8(a)).............................................. 18,585 11,510
Amounts receivable (note 7)........................................... 53,573 61,369
Properties (note 6)
Resort............................................................. 115,062 80,613
Discontinued operations............................................ 12,606 34,828
---------- --------
259,544 217,081
Ski and resort operations (note 5)...................................... 406,643 254,811
Goodwill (note 3(b) and (e))............................................ 79,275 23,220
Properties (note 6)
Resort................................................................ 207,478 126,470
Discontinued operations............................................... 63,556 67,539
Amounts receivable (note 7)............................................. 41,080 29,748
Other assets (note 8(b))................................................ 40,375 34,846
---------- --------
$1,097,951 $753,715
========== ========
LIABILITIES
Current liabilities
Amounts payable....................................................... $ 71,290 $ 50,016
Deferred revenue...................................................... 4,191 3,137
Bank and other indebtedness, current portion (note 9)
Resort............................................................. 88,565 111,148
Discontinued operations............................................ 2,173 10,151
---------- --------
166,219 174,452
Bank and other indebtedness (note 9)
Resort................................................................ 357,438 215,058
Discontinued operations............................................... 41,580 43,481
Due to joint venture partners (note 13)................................. 14,963 15,069
Deferred revenue........................................................ 5,793 5,373
Deferred income taxes................................................... 2,583 --
Non-controlling interest in subsidiaries................................ 11,307 9,959
---------- --------
599,883 463,392
---------- --------
SHAREHOLDERS' EQUITY
Capital stock (note 11)................................................. 382,270 198,179
Retained earnings....................................................... 111,649 89,148
Foreign currency translation adjustment................................. 4,149 2,996
---------- --------
498,068 290,323
---------- --------
$1,097,951 $753,715
========== ========
</TABLE>
Contingencies and commitments (note 14)
Approved on behalf of the Board
<TABLE>
<S> <C>
(signed) Joe S. Houssian (signed) Paul M. Manheim
Director Director
</TABLE>
F-4
<PAGE> 43
INTRAWEST
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30
-----------------------
1997 1996
-------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Retained earnings -- beginning of year
As previously reported............................................... $ 90,385 $75,233
Adoption of new accounting standard (note 2)......................... (1,237) --
-------- -------
As restated.......................................................... 89,148 75,233
Net income for the year................................................ 27,093 17,601
Dividends.............................................................. (4,592) (3,686)
-------- -------
Retained earnings -- end of year....................................... $111,649 $89,148
======== =======
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOW FROM OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30
----------------------
1997 1996
------- -------
(IN THOUSANDS OF
DOLLARS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Income before non-controlling interest and discontinued operations...... $32,222 $23,247
Items not affecting cash
Depreciation and amortization......................................... 25,966 17,166
Income from equity accounted investment............................... (1,190) (4,621)
Deferred income taxes................................................. 487 --
------- -------
Cash flow from operations............................................... $57,485 $35,792
======= =======
Cash flow per common share.............................................. $ 1.87 $ 1.34
======= =======
</TABLE>
F-5
<PAGE> 44
INTRAWEST
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30
-----------------------
1997 1996
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Cash flow from operations.............................................. $ 57,485 $ 35,792
Recovery of costs through real estate sales............................ 95,858 95,699
Increase in amounts receivable, net.................................... (13,567) (12,870)
Acquisition and development of properties for sale..................... (143,980) (149,935)
Other changes in non-cash operating working capital.................... (13,241) 10,989
Cash provided by discontinued operations............................... 41,962 57,420
-------- --------
24,517 37,095
-------- --------
FINANCING ACTIVITIES
Bank and other borrowings, net......................................... 30,096 64,607
Issue of capital stock................................................. 184,394 411
Extinguishment of warrants, options and conversion privilege........... (303) (1,850)
Dividends paid......................................................... (4,592) (3,686)
Distributions to non-controlling interests............................. (2,579) (2,339)
-------- --------
207,016 57,143
-------- --------
INVESTING ACTIVITIES
Proceeds from revenue-producing properties, net........................ 1,375 7,817
Expenditures on ski and resort operation assets........................ (51,693) (28,098)
Acquisition of ski resort assets and investments....................... (150,258) (63,073)
-------- --------
(200,576) (83,354)
-------- --------
Increase in cash and short-term deposits............................... 30,957 10,884
Cash and short-term deposits -- beginning of year...................... 28,761 17,877
-------- --------
Cash and short-term deposits -- end of year............................ $ 59,718 $ 28,761
======== ========
</TABLE>
F-6
<PAGE> 45
INTRAWEST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
(tabular amounts in thousands of dollars unless otherwise indicated)
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The consolidated financial statements are prepared in accordance with
generally accepted accounting principles in Canada as prescribed by The Canadian
Institute of Chartered Accountants ("CICA"). Information regarding United States
generally accepted accounting principles as it affects the Company is presented
in note 20.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include:
(a) the accounts of the Company and its subsidiaries;
(b) the accounts of all incorporated and unincorporated joint ventures and
non-controlled partnerships, to the extent of the Company's interest in
their respective assets, liabilities, revenues and expenses.
The Company's principal subsidiaries and controlled partnerships accounted
for as subsidiaries are as follows:
<TABLE>
<CAPTION>
PERCENTAGE
INTEREST HELD BY
THE COMPANY
----------------
<S> <C>
Blackcomb Skiing Enterprises Ltd............................................ 96.60
Blackcomb Skiing Enterprises Limited Partnership............................ 74.38
Whistler Mountain Holdings Limited (note 3)................................. 100.00
Mont Tremblant Resorts and Company, Limited Partnership..................... 100.00
IW Resorts Limited Partnership.............................................. 97.55
Mont Ste. Marie (1984) Inc. (note 3)........................................ 100.00
Intrawest Resort Ownership Corporation...................................... 100.00
Intrawest U.S.A., Inc....................................................... 100.00
Intrawest U.S. Holdings Inc................................................. 100.00
Stratton Ski Corporation.................................................... 100.00
Snowshoe Resort, Inc. (note 3).............................................. 100.00
Copper Mountain, Inc. (note 3).............................................. 100.00
</TABLE>
The Company accounts for its 33% participating investment in Mammoth
Mountain Ski Area by the equity method (note 3).
In connection with a covenant not to compete with Blackcomb Skiing
Enterprises Limited Partnership, the Company has agreed to provide Nippon Cable
Co., Ltd. ("Nippon"), one of the minority partners in Blackcomb, with an option
to acquire a 23% interest in property and assets related to Whistler Mountain at
a price based on the terms of the Whistler acquisition (note 3). The terms of
the option and the structure of Nippon's investment are under negotiation. The
option will be exercisable during the 30-day period ending November 30, 1997.
SKI AND RESORT OPERATIONS
The assets of the ski and resort operations are stated at cost less
accumulated depreciation. Costs of ski lifts, area improvements and buildings
are capitalized. Certain buildings, area improvements and equipment are located
on leased or licensed land. Depreciation is provided over the estimated useful
lives of each asset category using the declining balance method as follows.
<TABLE>
<S> <C>
Buildings.................................................................... 3.3% -- 5%
Ski lifts.................................................................... 5% -- 8%
Area improvements............................................................ 2% -- 3.3%
Automotive, furniture and other equipment.................................... 10% -- 50%
Leased vehicles.............................................................. 20% -- 25%
</TABLE>
Inventories are recorded at the lower of cost and net realizable value.
F-7
<PAGE> 46
PROPERTIES
(a) Properties under development and held for sale
Properties under development and held for sale are recorded at the lower of
cost and net realizable value. Cost includes all expenditures incurred in
connection with the acquisition, development and construction of these
properties. These expenditures consist of all direct costs, interest on
general and specific debt and general and administrative expenses. Revenue
related specifically to such properties is treated as a reduction of costs.
Costs associated with the development and investigation of the vacation
ownership business, including research, consulting, legal and other costs
associated with the registration of the product and program, are
capitalized. These costs are amortized on a straight-line basis over ten
years.
Costs associated with the development of sales locations of the vacation
ownership business, including operating and general and administrative costs
incurred until a location is fully operational, are capitalized. Revenue
related specifically to a location is treated as a reduction of costs during
the start-up period. These costs are amortized on a straight-line basis over
seven years. The Company provides for write-downs where the carrying value
of a particular property exceeds its net realizable value.
(b) Revenue-producing properties
Revenue-producing properties are stated at the lower of cost, net of
accumulated depreciation, and the net recoverable amount. Buildings are
depreciated using the declining balance method at annual rates of 3.3% to
5%. Leasehold improvements and other tenant inducements are amortized using
the straight-line method over the term of the lease, plus one renewal
period. Furniture and equipment are depreciated on a declining balance basis
at 20% per annum.
(c) Classification
Properties that are currently under development for sale and properties
available for sale are classified as current assets. Related bank and other
indebtedness is classified as a current liability.
REVENUE RECOGNITION
(a) Revenue from the sale of properties is recorded when title to the completed
unit is conveyed to the purchaser and the purchaser becomes entitled to
occupancy.
(b) Points revenue associated with membership in the vacation ownership business
of the Intrawest Resort Club (which revenue is included in real estate
sales) is recognized when the purchaser has paid the amount due on closing,
all contract documentation has been executed and all other significant
conditions of sale are met.
(c) Revenue from revenue-producing properties is recognized upon the earlier of
attaining a break-even point in cash flow after debt servicing or the
expiration of a reasonable period of time following substantial completion.
Prior to this time, the properties are categorized as properties under
development, and revenue related to such properties is applied to reduce
development costs.
ADMINISTRATIVE FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Administrative furniture and equipment are stated at cost less accumulated
depreciation. Depreciation is provided using the declining balance method at
annual rates of 20% and 30%.
Leasehold improvements are stated at cost less accumulated amortization.
Amortization is provided using the straight-line method over the term of the
lease, plus one renewal period.
DEFERRED FINANCING COSTS
Deferred financing costs consist of legal and other fees related to the
financing of the Company's ski and resort operations. These costs are amortized
over the term of the financing.
GOODWILL
Goodwill is amortized on the straight-line basis over a period of 40 years.
In determining whether there is a permanent impairment in value, recoverability
is based on estimated future cash flows.
DEFERRED REVENUE
Deferred revenue mainly comprises season pass revenue and government grants.
Deferred revenue which relates to the sale of season passes is recognized
throughout the season based on the number of skier visits. Deferred revenue
which relates to government grants for ski and resort operation assets is
recognized on the same basis as the related assets are amortized. Deferred
revenue which relates to government grants for properties under development is
recognized as the properties are sold.
INCOME TAXES
Income taxes are provided at current rates for all items included in the
statements of operations, regardless of the period when such items are reported
for income tax purposes. No adjustment is made to deferred income tax accounts
for subsequent changes in income tax rates.
F-8
<PAGE> 47
FOREIGN CURRENCY TRANSLATION
The Company's operations in the United States are of a self-sustaining
nature. Assets and liabilities are translated into Canadian dollars at the rate
of exchange in effect at the balance sheet date. Revenue and expenses are
translated at the weighted average rate for the year.
Cumulative gains or losses arising from the translation of the assets and
liabilities of these operations are recorded as a separate component of
shareholders' equity.
INTEREST ALLOCATED TO DISCONTINUED OPERATIONS
Interest allocated to discontinued operations is the total of interest on
debt directly attributable to the discontinued operations and an allocation of
interest on general corporate debt not directly attributable to continuing
operations.
PER SHARE CALCULATION
Income per common share has been calculated using the weighted average
number of common shares outstanding during the year.
CASH FLOW FROM OPERATIONS
Cash flow from operations is computed as income before non-controlling
interest and discontinued operations adjusted for deferred income taxes,
depreciation and amortization of capital items and other non-cash items. Cash
flow from operations is different from cash flow from operating activities since
it excludes the cash provided by or used for non-cash operating working capital
accounts such as real estate inventory, amounts receivable and amounts payable.
Cash flow from operations is reconciled to cash flow from operating activities
in the consolidated statements of changes in financial position.
NOTE 2 ADOPTION OF NEW ACCOUNTING STANDARD
Effective July 1, 1996, the Company has adopted, on a retroactive basis, the
new CICA pronouncement on financial instruments as it affects convertible debt
(note 11(c)), resulting in a decrease in results of discontinued operations for
the year ended June 30, 1996 of $1,237,000, an increase in capital stock of
$1,627,000 and a decrease in bank and other indebtedness of $390,000. This
change in accounting policy has increased the loss from discontinued operations
for the year ended June 30, 1997 by $118,000.
NOTE 3 ACQUISITIONS
(a) Effective December 18, 1996, the Company acquired property and assets
related to Copper Mountain, Inc. ("Copper") in Colorado, U.S.A. The
transaction was accounted for by the purchase method. Copper's results of
operations have been consolidated with the operations of the Company from
the effective date of purchase.
<TABLE>
<S> <C>
Net assets acquired at fair market value
Ski and resort operations...................................................... $ 69,417
Properties under development and held for sale................................. 41,789
Net working capital............................................................ (7,702)
Assumption of debt............................................................. (26,989)
--------
76,515
Cash........................................................................... 1,067
--------
$ 77,582
========
Financed by
Cash........................................................................... $ 19,704
New bank and other indebtedness................................................ 18,003
Issue of 2,900,000 common shares............................................... 39,875
--------
$ 77,582
========
</TABLE>
F-9
<PAGE> 48
(b) Effective December 18, 1996, the Company acquired property and assets
related to Whistler Mountain Holdings Limited ("Whistler") in British
Columbia, Canada. The transaction was accounted for by the purchase method.
Whistler's results of operations have been consolidated with the operations
of the Company from the effective date of purchase.
<TABLE>
<S> <C>
Net assets acquired at fair market value
Ski and resort operations...................................................... $ 49,926
Properties under development and held for sale................................. 25,072
Goodwill....................................................................... 56,009
Net working capital............................................................ (7,499)
Assumption of debt............................................................. (51,789)
-------
$ 71,719
=======
Financed by
Cash........................................................................... $ 1,031
New bank and other indebtedness................................................ 16,100
Issue of 3,970,000 common shares............................................... 54,588
-------
$ 71,719
=======
</TABLE>
(c) Effective December 21, 1996, the Company acquired property and assets for
$957,000 cash related to Mont Ste. Marie (1984) Inc. ("Mont Ste. Marie") in
Quebec, Canada. The transaction was accounted for by the purchase method.
Mont Ste. Marie's results of operations have been consolidated with the
operations of the Company from the effective date of purchase.
<TABLE>
<S> <C>
Net assets acquired at fair market value
Ski and resort operations........................................................ $2,685
Net working capital.............................................................. (300)
Assumption of debt............................................................... (1,428)
------
$ 957
======
</TABLE>
(d) Effective December 22, 1995, the Company acquired 33% of Mammoth Mountain
Ski Area ("MMSA") in California, U.S.A. The Company's proportionate share of
income from the date of acquisition as reported by MMSA, net of amortization
of excess purchase price over net assets acquired, is included in income and
added to the cost of the investment. The excess purchase price,
U.S.$8,170,000, is attributable to the ski and resort operation assets and
is being amortized over the estimated useful lives of these assets at the
average rate of 6% per annum using the declining balance method.
(e) On November 27, 1995, the Company acquired property and assets related to
Snowshoe Mountain Resort and Silver Creek Resort ("Snowshoe") in West
Virginia, U.S.A. The transaction was accounted for by the purchase method.
Snowshoe's results of operations have been consolidated with the operations
of the Company from the effective date of purchase.
<TABLE>
<S> <C>
Net assets acquired at fair market value
Ski and resort operations..................................................... $26,583
Goodwill...................................................................... 23,385
Net working capital........................................................... (4,071)
-------
45,897
Cash.......................................................................... 4,771
-------
$50,668
=======
Financed by
Cash.......................................................................... $ 6,353
New bank and other indebtedness............................................... 43,390
Working capital adjustment.................................................... 925
-------
$50,668
=======
</TABLE>
NOTE 4 DISCONTINUED OPERATIONS
The Company plans to sell all of its remaining non-resort properties. For
reporting purposes, the results of operations and cash flow from operating
activities of this business have been disclosed separately from those of
continuing operations for the periods presented.
The results of discontinued operations, including an allocation of interest
expense, are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Revenue.............................................................. $51,095 $98,000
------- -------
Loss before current income taxes..................................... (872) (1,886)
Provision for current income taxes................................... 330 170
------- -------
Loss from discontinued operations.................................... $(1,202) $(2,056)
======= =======
</TABLE>
F-10
<PAGE> 49
The remaining assets and liabilities of discontinued operations are as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Current Assets
Properties......................................................... $12,606 $34,828
Other current assets................................................. 13,877 36,437
Properties........................................................... 63,556 67,539
Non-current assets................................................... 30,472 26,722
Current liabilities.................................................. 6,121 15,168
Long-term debt and other liabilities................................. 41,361 41,514
</TABLE>
The cash flows from discontinued operations are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Cash provided by (used for)
Operating activities
Results of discontinued operations................................. $(1,202) $(2,056)
Depreciation and amortization...................................... 1,626 1,555
------- -------
Cash flow from operations.......................................... 424 (501)
Recovery of costs through real estate sales........................ 44,018 91,366
Decrease (increase) in amounts receivable, net..................... 17,287 (2,710)
Development of properties.......................................... (20,520) (24,080)
Changes in other non-cash operating working capital................ 753 (6,655)
------- -------
41,962.. 57,420
------- -------
Financing activity
Bank and other borrowings, net..................................... (10,269) (48,892)
------- -------
Investing activity
Proceeds from revenue-producing properties, net.................... 888 8,129
------- -------
Increase in cash and short-term deposits............................. $32,581 $16,657
======= =======
</TABLE>
The holders of the non-resort preferred ("NRP") shares (note 11(a)) are
entitled to receive the net cash flow from the discontinued operations from
January 1, 1997 primarily by way of redemption of their NRP shares. Annual
distributions of such cash flows are payable on September 30 of each year
covering the period ended on the previous June 30. The net cash flow from the
discontinued operations for the period from January 1, 1997 to June 30, 1997 was
$13,606,000. After deducting a reserve of $4,591,000 (to cover potential working
capital requirements as provided for in the rights and restrictions attached to
the NRP shares), the net cash flow available to redeem NRP shares on September
30, 1997 was $9,015,000, representing 2,360,000 NRP shares at $3.82 per share.
NOTE 5 SKI AND RESORT OPERATIONS
<TABLE>
<CAPTION>
1997
-------------------------------------
ACCUMULATED
COST DEPRECIATION NET
-------- ----------- --------
<S> <C> <C> <C>
Ski operations
Land.............................................. $ 43,121 $-- $ 43,121
Buildings......................................... 101,770 17,824 83,946
Ski lifts and area improvements................... 195,074 32,312 162,762
Automotive, furniture and other equipment......... 49,951 18,107 31,844
Leased vehicles................................... 13,340 5,861 7,479
-------- ------- --------
403,256 74,104 329,152
-------- ------- --------
Resort operations
Land.............................................. 8,171 -- 8,171
Buildings......................................... 47,039 4,929 42,110
Area improvements................................. 29,926 2,716 27,210
-------- ------- --------
85,136 7,645 77,491
-------- ------- --------
$488,392 $81,749 $406,643
======== ======= ========
</TABLE>
F-11
<PAGE> 50
<TABLE>
<CAPTION>
1996
-------------------------------------
ACCUMULATED
COST DEPRECIATION NET
-------- ----------- --------
<S> <C> <C> <C>
Ski operations
Land.............................................. $ 11,015 $-- $ 11,015
Buildings......................................... 61,490 13,813 47,677
Ski lifts and area improvements................... 140,966 25,271 115,695
Automotive, furniture and other equipment......... 31,414 13,808 17,606
Leased vehicles................................... 8,241 4,024 4,217
-------- ------- --------
253,126 56,916 196,210
-------- ------- --------
Resort operations
Land.............................................. 7,931 -- 7,931
Buildings......................................... 26,184 4,528 21,656
Area improvements................................. 30,967 1,953 29,014
-------- ------- --------
65,082 6,481 58,601
-------- ------- --------
$318,208 $63,397 $254,811
======== ======= ========
</TABLE>
The ski and resort operations have been pledged as security for certain of
the Company's bank and other indebtedness (note 9).
NOTE 6 PROPERTIES
<TABLE>
<CAPTION>
1997
--------
<S> <C>
Properties under development and held for sale
Acquisition costs............................................................ $140,652
Interest..................................................................... 18,230
Development costs............................................................ 157,174
Administrative expenses...................................................... 15,807
Net rental income............................................................ (1,430)
-------
330,433
-------
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION NET
------- ----------- --------
<S> <C> <C> <C>
Revenue-producing properties
Land............................................... $ 9,664 $-- 9,664
Buildings.......................................... 60,720 6,328 54,392
Leasehold improvements and equipment............... 7,868 3,655 4,213
------- ------ --------
$78,252 $ 9,983 68,269
======= ======
--------
$398,702
========
</TABLE>
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Properties under development and held for sale
Acquisition costs............................................................ $106,951
Interest..................................................................... 25,675
Development costs............................................................ 103,484
Administrative expenses...................................................... 21,195
Net rental income............................................................ (1,675)
-------
255,630
-------
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION NET
------- ----------- --------
<S> <C> <C> <C>
Revenue-producing properties
Land............................................... $ 9,570 $-- 9,570
Buildings.......................................... 42,840 3,779 39,061
Leasehold improvements and equipment............... 9,370 4,181 5,189
------- ------ --------
$61,780 $ 7,960 53,820
======= ======
--------
$309,450
========
</TABLE>
F-12
<PAGE> 51
Properties are classified as follows for balance sheet purposes:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current assets
Resort........................................................... $115,062 $ 80,613
Discontinued operations.......................................... 12,606 34,828
Long-term assets
Resort........................................................... 207,478 126,470
Discontinued operations.......................................... 63,556 67,539
-------- --------
$398,702 $309,450
======== ========
</TABLE>
During the year ended June 30, 1997, $10,412,000 (1996 -- $13,668,000) of
interest (note 15) and $8,941,000 (1996 -- $5,240,000) of administrative
expenses were capitalized to properties.
Properties have been pledged as security for certain of the Company's bank
and other indebtedness (note 9).
NOTE 7 AMOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Receivable from sales of real estate................................. $15,132 $15,294
Ski and resort operation receivables................................. 12,906 7,145
Loans, mortgages and notes receivable (note 19 (b)).................. 53,053 49,221
Funded senior employee share purchase plan (note 11(e)).............. 1,236 1,606
Other accounts receivable............................................ 12,326 17,851
------- -------
94,653 91,117
Less: current portion................................................ 53,573 61,369
------- -------
$41,080 $29,748
======= =======
</TABLE>
Receivables are due approximately as follows:
<TABLE>
<S> <C>
Year ending June 30, 1998....................................................... $53,573
1999.......................................................... 16,361
2000.......................................................... 7,156
2001.......................................................... 2,258
2002.......................................................... 2,578
Subsequent to 2002........................................................ 12,727
-------
$94,653
=======
</TABLE>
The loans, mortgages and notes receivable bear interest at both fixed and
floating rates which averaged 8.51% per annum as at June 30, 1997 (1996 --
9.88%). These amounts have been pledged as security for certain of the Company's
bank and other indebtedness (note 9).
NOTE 8 OTHER ASSETS
(a) Current
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Ski operation inventories.......................................... $ 11,978 $ 6,514
Prepaid expenses and other......................................... 6,607 4,996
-------- --------
$ 18,585 $ 11,510
======== ========
</TABLE>
(b) Long-term
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Administrative furniture, equipment and leasehold improvements, at
cost less accumulated depreciation of $4,696,000 (1996 --
$2,952,000)...................................................... $ 5,169 $ 3,597
Deferred financing and other costs................................. 4,701 4,277
Investment in Mammoth Mountain Ski Area, at equity................. 18,511 17,002
Investments, at cost............................................... 8,794 8,824
Other.............................................................. 3,200 1,146
-------- --------
$ 40,375 $ 34,846
======== ========
</TABLE>
Investments include a limited partnership interest in the amount of
$7,500,000 acquired as partial consideration in connection with the sale of a
non-resort property. The partnership interest is expected to be fully
recoverable out of the available annual cash flow and/or proceeds from the
ultimate sale of the property.
F-13
<PAGE> 52
NOTE 9 BANK AND OTHER INDEBTEDNESS
The Company has obtained financing for its operations from various financial
institutions by pledging individual assets as security for such financing.
Security for general corporate debt is provided by general security which
includes a floating charge on the Company's assets and undertakings, fixed
charges on real estate properties, and assignment of mortgages and notes
receivable. The following table summarizes the primary security provided by the
Company, where appropriate, and indicates the applicable type of financing,
maturity dates and the weighted average interest rate at June 30, 1997.
<TABLE>
<CAPTION>
WEIGHTED
MATURITY AVERAGE
DATES INTEREST RATE 1997 1996
----------- -------------- -------- --------
<S> <C> <C> <C> <C>
Ski and resort operations
Mortgages and bank loans........... Demand-2017 6.16% $279,732 $197,913
Obligations under capital leases... 1998-2001 8.77% 9,370 8,608
-------- --------
289,102 206,521
-------- --------
Properties
Interim financing on properties
under development and held for
sale............................. 1998-2009 5.96% 133,743 85,067
Mortgages on revenue-producing
properties....................... 1998-2034 7.60% 37,865 38,884
-------- --------
171,608 123,951
-------- --------
General corporate debt............... 1998-1999 8.00% 4,046 24,366
-------- --------
Unsecured debenture.................. 2003 9.32% 25,000 25,000
-------- --------
6.44% 489,756 379,838
Less: current portion................ 90,738 121,299
-------- --------
$399,018 $258,539
======== ========
</TABLE>
Principal repayments and the components related to either floating or fixed
interest rates are as follows:
<TABLE>
<CAPTION>
INTEREST RATES
---------------------
FLOATING FIXED REPAYMENTS
-------- -------- ----------
<S> <C> <C> <C>
Year ending June 30, 1998............................ $ 59,956 $ 30,782 $ 90,738
1999............................ 23,603 41,740 65,343
2000............................ 16,039 16,200 32,239
2001............................ 20,526 39,496 60,022
2002............................ 65,122 13,393 78,515
Subsequent to 2002............................ 91,526 71,373 162,899
-------- -------- --------
$276,772 $212,984 $489,756
======== ======== ========
</TABLE>
The Company has entered into a swap agreement to fix the interest rate on a
portion of its floating rate debt. The Company has $30,000,000 of bank loans
swapped against debt with a fixed interest rate of 8.25%, including applicable
stamping fees, under an agreement expiring in 2002.
Certain amounts owing to banks are evidenced by demand notes which are
classified for repayment according to expected or agreed settlement dates.
Bank and other indebtedness of $194,447,000 (1996 -- $149,165,000) is
guaranteed by the Company in addition to being secured by the specific property
or asset.
Bank and other indebtedness includes indebtedness in the amount of
$207,800,000 (1996 -- $141,642,000), which is repayable in United States dollars
of $150,525,000 (1996 -- $103,866,000).
The Company is committed to capital lease obligations as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Minimum lease payments............................................... $10,526 $10,053
Less: interest....................................................... 1,156 1,445
------- -------
Lease principal obligation........................................... $ 9,370 $ 8,608
======= =======
</TABLE>
F-14
<PAGE> 53
Future minimum lease payments are as follows:
<TABLE>
<S> <C>
Year ending June 30, 1998....................................................... $ 4,952
1999....................................................... 3,431
2000....................................................... 1,290
2001....................................................... 550
2002....................................................... 296
Subsequent to 2002....................................................... 7
-------
$10,526
=======
</TABLE>
NOTE 10 GOVERNMENT ASSISTANCE
The federal government and the Province of Quebec have granted financial
assistance to the Company in the form of interest-free loans and grants for the
construction of specified four-season tourist facilities at Mont Tremblant. The
loans, which will total $20,100,000 when they are fully advanced, are repayable
over seven years starting in 2000. At June 30, 1997, the Company had received
$17,693,000 of interest-free loans (1996 -- $17,338,000) which amounts are
included in bank and other indebtedness. The grants, which will total
$11,600,000 when they are fully advanced, amounted to $9,642,000 at June 30,
1997 (1996 -- $8,137,000). The grants received during the year ended June 30,
1997 amounting to $1,505,000 (1996 -- $3,177,000) have been credited as follows:
$nil (1996 -- $567,000) to ski and resort operation assets, $nil (1996 --
$919,000) to properties and $1,505,000 (1996 -- $1,691,000) to cost of real
estate sales.
NOTE 11 CAPITAL STOCK
(a) Share Capital Reorganization
Effective March 14, 1997, the Company completed a reorganization of its
share capital designed to separate the remaining non-resort real estate
assets from the rest of the Company's business. Under the reorganization,
each existing common share was exchanged for one new common share and one
NRP share. The new common shares have the same attributes as the old common
shares.
The NRP shares were recorded at a value of $88,543,000 before deduction of
issue costs of $329,000 ($3.82 per share), equal to the book value of the
net equity of the non-resort assets at December 31, 1996, and the book value
of the common shares was reduced by the same amount. The Company expects
that the non-resort assets will be disposed of in an orderly manner and the
net cash flow from these assets distributed to the NRP shareholders,
primarily by way of redemption of their shares as described in note 4. The
amount ultimately realized will be subject to prevailing real estate market
conditions. As at June 30, 1997, the book value of the net equity of the
non-resort assets was $86,635,000.
All stock option information is stated to reflect the share capital
reorganization.
(b) Capital Stock
The Company's capital stock comprises the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Common shares...................................................... $293,649 $198,179
NRP shares......................................................... 88,621 --
-------- --------
$382,270 $198,179
======== ========
</TABLE>
i. Common Shares
Authorized -- 50,000,000 without par value.
Issued --
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
NUMBER OF NUMBER OF
COMMON COMMON
SHARES AMOUNT SHARES AMOUNT
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Balance at beginning of year............. 23,063,490 $198,179 23,026,790 $197,991
Adoption of new accounting standard (note
2)..................................... -- -- -- 1,627
Reorganization of shares................. -- (88,543) -- --
Issued for acquisitions (note 3)......... 6,870,000 94,463 -- --
Issued for cash, net of issue costs...... 4,000,000 86,129 -- --
Issued on exercise of option............. 123,146 1,236 -- --
Funded senior employee share purchase and
stock option plans..................... 224,900 2,488 36,700 411
Extinguishment of warrants, options and
conversion privilege................... -- (303) -- (1,850)
---------- -------- ---------- --------
Balance at end of year................... 34,281,536 $293,649 23,063,490 $198,179
========== ======== ========== ========
</TABLE>
F-15
<PAGE> 54
ii. NRP Shares
Authorized -- 50,000,000 without par value, redeemable at $3.82 per share
except for the final redemption which shall be subject to a premium or
discount based on available cash flow relating to the non-resort assets.
Issued --
<TABLE>
<CAPTION>
1997
---------------------
NUMBER OF
NRP
SHARES AMOUNT
---------- -------
<S> <C> <C>
Issued on reorganization of share capital, net of issue costs...... 23,198,190 $88,214
Issued on exercise of option....................................... 123,146 134
Stock option plan.................................................. 226,600 273
---------- -------
Balance at end of year............................................. 23,547,936 $88,621
========== =======
</TABLE>
iii. Preferred Shares
Authorized -- 10,000,000 without par value.
Issued -- nil
(c) Stock Options
The Company has a stock option plan which provides for grants to officers
and employees of the Company and its subsidiaries of options to purchase
common shares and NRP shares of the Company. Options granted under the stock
option plan vest equally over a period of five years. At June 30, 1997,
stock options outstanding totalled 1,960,800 common shares, exercisable at
prices from $9.51 to $20.15, expiring up to 2007 and 1,824,400 NRP shares
exercisable at prices from $1.04 to $2.20, expiring up to 2007. During the
year ended June 30, 1997, options were exercised for 224,900 common shares
and 226,600 NRP shares. In addition, options for 35,000 common shares were
extinguished.
In 1993 the Company issued a warrant in connection with an unsecured
debenture. The warrant holder had the right to acquire 450,000 common shares
at $14.375 per share, expiring in September 1996. During the year ended June
30, 1996, the Company extinguished the warrant.
During the year ended September 30, 1992, the Company granted an option to
purchase 123,146 common shares at a price of $10.035 per common share and
123,146 NRP shares at a price of $1.09 per NRP share in connection with a
loan guarantee for the financing of certain capital improvements. During the
year ended June 30, 1997, this option was exercised. In addition, the
Company granted to a property lender (note 19(c)) the right to convert its
loan of $8,600,000 on August 31, 1999 into 637,037 common shares at a
conversion price of $12.18 per common share and 637,037 NRP shares at a
conversion price of $1.32 per NRP share. During the year ended June 30,
1996, the property was sold and the Company repaid half of the debt as well
as an accrued return of $1,158,000 and this extinguished the conversion
privilege with respect to 318,518 common and NRP shares.
(d) Employee Share Purchase Plan
The employee share purchase plan permits full-time employees of the Company
and its subsidiaries and limited partnerships to purchase common shares
through payroll deductions. The Company contributes $1 for every $3
contributed by an employee. To June 30, 1997, a total of 65,809 (1996 --
65,809) common shares have been issued from treasury under this plan. The
board of directors has authorized and reserved a further 100,000 common
shares for issuance under this plan.
(e) Funded Senior Employee Share Purchase Plan
The Company has a funded senior employee share purchase plan which provides
for loans to be made to designated eligible employees to be used to
subscribe for common shares. At June 30, 1997, loans to employees under the
funded senior employee share purchase plan amounted to $1,236,000 with
respect to 136,850 common shares and 128,750 NRP shares (1996 -- $1,606,000
with respect to 171,350 common shares). The loans are interest-free, secured
by a promissory note and a pledge of the shares and mature by 2005. The
board of directors has authorized and reserved a further 100,000 common
shares for issuance under this plan.
NOTE 12 INCOME TAXES
(a) Provision for income taxes
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Current................................................................ $6,580 $1,172
Deferred............................................................... 487 --
------ ------
$7,067 $1,172
====== ======
</TABLE>
F-16
<PAGE> 55
The reconciliation of income taxes calculated at the statutory rate to the
actual income tax provision is as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Statutory rate....................................................... 45.6% 45.6%
Income tax charge at statutory rate.................................. $17,510 $10,275
Non-deductible depreciation and amortization......................... 782 --
Large Corporations Tax............................................... 1,437 848
Taxes related to non-controlling interest share of earnings.......... (1,532) (1,427)
Taxes related to equity accounted investment......................... (542) (2,106)
Foreign taxes different from statutory rate.......................... (5,576) (1,870)
Realization of tax losses of subsidiary.............................. -- (2,287)
Additional amounts deductible related to properties and ski and
resort operation assets (see (b) below)............................ (5,735) (2,585)
Other................................................................ 1,053 494
------- -------
7,397 1,342
Less: current income taxes related to discontinued operations........ 330 170
------- -------
Provision for income taxes........................................... $ 7,067 $ 1,172
======= =======
</TABLE>
(b) Certain properties and ski and resort operation assets were acquired at a
tax value in excess of their recorded value, with the result that a deferred
income tax provision was not required. In addition, certain subsidiaries of
the Company have losses available to carry forward for income tax purposes
for which the potential income tax benefits have not been recognized. At
June 30, 1997, approximately $31,370,000 has not been recognized for
accounting purposes.
NOTE 13 JOINT VENTURES
The following amounts represent the Company's proportionate interest in
joint ventures and non-controlled partnerships:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Properties, current................................................ $ 28,671 $ 55,386
Other current assets............................................... 8,572 18,088
-------- --------
37,243 73,474
Current liabilities................................................ (31,469) (31,761)
-------- --------
Working capital.................................................... 5,774 41,713
Properties, non-current............................................ 101,223 75,113
Long-term debt..................................................... (59,434) (32,173)
Other, net......................................................... 379 (15,047)
-------- --------
$ 47,942 $ 69,606
======== ========
</TABLE>
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revenue............................................................ $ 21,457 $ 30,320
Expenses........................................................... 19,646 28,358
-------- --------
Income from continuing operations.................................. 1,811 1,962
Results of discontinued operations................................. 996 222
-------- --------
$ 2,807 $ 2,184
======== ========
</TABLE>
Cash provided by (used for)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Operating activities
Income........................................................... $ 1,811 $ 1,962
Depreciation and amortization.................................... 1,078 316
Other non-cash items net of changes in operating working
capital........................................................ (21,489) (28,848)
Cash provided by discontinued operations......................... 32,856 1,036
-------- --------
14,256 (25,534)
-------- --------
Financing activity
Bank and other borrowings, net................................... 6,324 1,655
-------- --------
Investing activity
Proceeds from (expenditures on) revenue-producing properties,
net............................................................ (1,064) 108
-------- --------
Increase (decrease) in cash and short-term deposits................ $ 19,516 $(23,771)
======== ========
</TABLE>
F-17
<PAGE> 56
The amount payable to the Company's joint venture partners in various
properties, net of amounts receivable, results from the use of the proportionate
consolidation method of accounting. Payments to the joint venture partners are
governed by the terms of the respective joint venture agreement.
NOTE 14 CONTINGENCIES AND COMMITMENTS
(a) The Company holds the licences and land leases with respect to six of its
ski operations. These leases expire at various times between 2032 and 2051
and provide for annual payments generally in the range of 2% of defined
gross revenues.
(b) Cash and short-term deposits include amounts totalling $7,995,000 (1996 --
$4,050,000) that can only be used for specific purposes or held as security.
(c) The Company has estimated costs to complete ski and resort operation assets
and properties currently under construction and held for sale amounting to
$154,654,000 at June 30, 1997 (1996 -- $118,246,000). The Company has
financing commitments of $128,372,000 (1996 -- $100,738,000) related to
these costs.
(d) The Company has entered into various operating lease commitments,
aggregating $15,110,000 (1996 -- $8,889,000), payable as follows:
<TABLE>
<S> <C>
Year ending June 30, 1998....................................................... $ 3,344
1999....................................................... 2,803
2000....................................................... 2,536
2001....................................................... 2,336
2002....................................................... 1,513
Subsequent to 2002....................................................... 2,578
-------
$15,110
=======
</TABLE>
(e) The Company is contingently liable for $44,496,000 of indebtedness at June
30, 1997, of which $41,496,000 relates to certain non-resort properties
under development sold during the year ended September 30, 1994 (note
19(b)). The purchasers of these properties have provided guarantees to the
Company in respect of the indebtedness and have indemnified the Company for
any potential losses resulting from the contingent liability.
(f) The Company is contingently liable for the obligations of certain joint
ventures and limited partnerships. The assets of these joint ventures and
limited partnerships, which in all cases exceed the obligations, are
available to satisfy such obligations.
(g) The Company has received reassessments for the 1986 to 1989 taxation years
that significantly increase Blackcomb Skiing Enterprises Ltd.'s income for
tax purposes. The Company has filed notices of objection to the
reassessments. In addition, Blackcomb Skiing Enterprises Ltd. has filed
amendments to its 1982 to 1991 income tax returns to claim additional
capital cost allowance to reduce the proposed increase in income for tax
purposes. The potential tax liability is approximately $4,900,000, which is
composed of current taxes of $2,200,000, including interest, and deferred
income taxes of $2,700,000. In March 1994 the Company paid $1,585,000 to
Revenue Canada, Taxation as required by legislation when a notice of
objection is filed. This amount is included in amounts receivable as the
outcome of these reassessments cannot be determined at this time.
NOTE 15 INTEREST EXPENSE
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Total interest incurred.............................................. $35,535 $32,406
Less: interest capitalized to ski and resort operation assets........ 771 459
interest capitalized to properties, net of capitalized interest
recorded in real estate cost of sales of $1,271,000 and in
discontinued operations of $784,000 (1996 -- $2,551,000 and
$3,463,000, respectively)...................................... 8,357 7,654
------- -------
$26,407 $24,293
======= =======
Interest was charged to income as follows:
Real estate costs.................................................. $ 1,271 $ 2,371
Ski operations -- employee housing................................. 945 920
Interest expense................................................... 20,914 14,017
Discontinued operations............................................ 3,277 6,985
------- -------
$26,407 $24,293
======= =======
</TABLE>
Real estate costs and discontinued operations also include $3,430,000 (1996
- -- $517,000) and $3,518,000 (1996 -- $8,545,000), respectively, of interest
incurred in prior years.
F-18
<PAGE> 57
NOTE 16 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has various financial instruments including cash and cash
equivalents, amounts receivable, loans, mortgages and notes receivable, amounts
payable and accrued liabilities. Due to their short-term maturity or, in the
case of loans, mortgages and notes receivable, their market comparable interest
rates, the book value approximates fair value. Debt and interest swap agreements
are also financial instruments. The fair values at June 30, 1997 and 1996 were
estimated by discounting future cash flows at estimated market rates and are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Debt and interest swap agreements... $489,756 $475,063 $380,228 $360,271
</TABLE>
NOTE 17 PENSION PLANS
Effective January 1, 1995, the Company introduced two defined benefit
pension plans for certain of its senior executives. The value of the pension
fund assets at June 30, 1997 and the present value of the accrued pension
benefits attributed to services rendered up to June 30, 1997 are $1,386,000 and
$3,764,000, respectively (1996 -- $862,000 and $3,376,000, respectively).
NOTE 18 SEGMENTED INFORMATION
Industry and geographical information related to the Company's continuing
operations is as follows:
(a) Industry Segments
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Revenue
Ski and resort operations..................................................................... $ 265,492 $170,986
Real estate operations........................................................................ 123,483 112,351
--------- --------
Consolidated.................................................................................. $ 388,975 $283,337
========= ========
Operating profit after deducting depreciation and amortization
Ski and resort operations..................................................................... $ 46,437 $ 31,030
Real estate operations........................................................................ 22,682 14,973
--------- --------
$ 69,119 $ 46,003
Less: unallocated corporate expenses
Interest...................................................................................... (20,914) (14,017)
General and administrative.................................................................... (8,916) (7,567)
--------- --------
Consolidated.................................................................................. $ 39,289 $ 24,419
========= ========
Identifiable assets
Ski and resort operations..................................................................... $ 576,991 $324,714
Real estate operations........................................................................ 400,449 263,475
Discontinued operations....................................................................... 120,511 165,526
---------- ---------
Consolidated.................................................................................. $1,097,951 $753,715
========== =========
Capital acquisitions
Ski and resort operations..................................................................... $ 51,693 $ 28,098
========= ========
Depreciation and amortization
Ski and resort operations..................................................................... $ 23,204 $ 16,045
Real estate operations........................................................................ 1,740 668
Unallocated corporate......................................................................... 1,022 453
--------- --------
Consolidated.................................................................................. $ 25,966 $ 17,166
========= ========
</TABLE>
F-19
<PAGE> 58
(b) Geographic Segments
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Revenue
Canada........................................................................................ $ 255,016 $193,579
United States................................................................................. 133,959 89,758
--------- --------
Consolidated.................................................................................. $ 388,975 $283,337
========= ========
Operating profit after deducting depreciation and amortization
Canada........................................................................................ $ 33,143 $ 7,738
United States................................................................................. 6,146 16,681
--------- --------
Consolidated.................................................................................. $ 39,289 $ 24,419
========= ========
Identifiable assets
Canada........................................................................................ $ 593,134 $395,580
United States................................................................................. 384,306 192,609
Discontinued operations....................................................................... 120,511 165,526
---------- --------
Consolidated.................................................................................. $1,097,951 $753,715
========== ========
</TABLE>
NOTE 19 RELATED PARTY TRANSACTIONS
(a) Amounts receivable include loans of $1,490,000 (1996 -- $1,490,000)
advanced, in connection with the Canadian tax liabilities incurred as a
result of the reorganization of the Company in 1990, to shareholders which
are holding companies controlled by a director of the Company. The loans are
interest-free and mature in December 1997.
(b) Effective April 1, 1994, the Company sold substantially all of its
industrial and non-resort residential properties under development in
British Columbia and Washington State to two partnerships formed by a group
of investors. The managing general partners of the partnerships are
corporations controlled by a director of the Company.
The consideration for the sale included a vendor takeback note for
$31,700,000 which was originally scheduled to be fully repaid, with interest
at 10.75% per annum, in semi-annual instalments by September 30, 1997. To
June 30, 1997, the partnerships had repaid $12,160,000 and the repayment of
the balance, with interest at 10% per annum, has been renegotiated as
follows:
<TABLE>
<S> <C>
September 30, 1997.............................................................. $ 3,500
March 31, 1998.................................................................. 3,500
September 30, 1998.............................................................. 3,500
March 31, 1999.................................................................. 3,500
September 30, 1999.............................................................. 5,540
-------
$19,540
=======
</TABLE>
Subject to full repayment by September 30, 1999 and a 1% extension fee, the
partnerships have the right to defer any principal payment for up to six
months so long as only one payment is deferred at any one time. The
partnerships paid $2,627,000 of interest on the note receivable during the
year ended June 30, 1997, and at June 30, 1997, $523,000 (1996 -- $775,000)
of interest was accrued and outstanding.
The Company has committed to provide the partnerships various credit
facilities up to September 30, 1999, including a $7,000,000 (reducing to
$5,500,000 at September 30, 1998) revolving line of credit and a
non-revolving loan for $1,800,000, to fund costs in connection with a
specific project. These loans earn interest at prime plus 2%. At June 30,
1997, $8,421,000 (1996 -- $8,015,000) was advanced under these facilities
and accrued and unpaid interest amounted to $46,000. In addition, the
Company has agreed to provide financial assistance by way of continuing
liability under the assumed bank indebtedness and liability in respect of
certain letters of credit. The Company earns fees in consideration for this
financial assistance. The partnerships have guaranteed repayment of these
facilities and indemnified the Company for any losses under them.
The Company has engaged the partnerships to provide specified services in
connection with the development, property management, marketing and sale of
its remaining non-resort properties. For the year ended June 30, 1997, the
Company incurred net costs of $2,353,000 (1996 -- $1,719,000) in respect of
these services.
(c) Bank and other indebtedness at June 30, 1997 includes the following amounts
due to significant corporate shareholders of the Company who are represented
on the Company's Board of Directors:
i. a convertible loan of $4,300,000 (1996 -- $4,300,000), which bears
interest at 8% per annum, is collateralized by a second mortgage over a
non-resort property and the limited partnership interest (note 8) and is
due on August 31, 1999;
ii. a loan of U.S. $1,284,000 (1996 -- U.S. $1,284,000), which bears
interest at prime plus 1.25% per annum, is collateralized by a property
under development and is due on April 30, 1998.
(d) All related party transactions described above have been recorded at the
amounts paid or received as established and agreed upon by the Company and
the related party.
F-20
<PAGE> 59
NOTE 20 DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in Canada. The principles
adopted in these financial statements conform in all material respects to those
generally accepted in the United States except as summarized below:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net income from continuing operations in accordance with Canadian GAAP........................... $ 28,295 $ 19,657
Effects of differences in accounting for:
Extinguishment of options and warrants (b)..................................................... (303) (399)
Investment income (c).......................................................................... (95) (370)
Cost of sales pursuant to SFAS 109 (g)......................................................... (258) --
Depreciation pursuant to SFAS 109 (g).......................................................... (335) --
Amortization of negative goodwill pursuant to SFAS 109 (g)..................................... 1,457 --
Provision for deferred taxes pursuant to SFAS 109 (g).......................................... (652) --
-------- --------
Net income from continuing operations in accordance with United States GAAP...................... 28,109 18,888
-------- --------
Results of discontinued operations in accordance with Canadian GAAP.............................. (1,202) (2,056)
Effects of differences in accounting for:
Depreciation (a)............................................................................... (760) (854)
Extinguishment of options and warrants (b)..................................................... -- (1,451)
Financial instruments (f)...................................................................... 118 1,237
Income tax effect of depreciation adjustment................................................... 304 --
-------- --------
Results of discontinued operations in accordance with United States GAAP......................... (1,540) (3,124)
-------- --------
Net income in accordance with United States GAAP................................................. 26,569 15,764
Opening retained earnings in accordance with United States GAAP (d).............................. 85,225 73,147
Common share dividends........................................................................... (4,592) (3,686)
-------- --------
Closing retained earnings in accordance with United States GAAP.................................. $107,202 $ 85,225
======== ========
Weighted average number of common shares outstanding and common stock equivalents (in
thousands)..................................................................................... 28,674 23,388
Income per common share (primary and fully diluted; in dollars)
Income from continuing operations.............................................................. $ 0.98 $ 0.81
Net income..................................................................................... $ 1.01 $ 0.67
Capital stock in accordance with Canadian GAAP................................................... $382,270 $198,179
Effects of differences in accounting for:
Extinguishment of options and warrants (b)..................................................... 2,153 1,850
Shareholder loans (e).......................................................................... (1,236) (1,606)
Financial instruments.......................................................................... (1,627) (1,627)
-------- --------
Capital stock in accordance with United States GAAP.............................................. 381,560 196,796
Closing retained earnings in accordance with United States GAAP.................................. 107,202 85,225
Foreign currency translation adjustment.......................................................... 4,149 2,996
-------- --------
Shareholders' equity in accordance with United States GAAP....................................... $492,911 $285,017
======== ========
</TABLE>
(a) Depreciation
Certain of the Company's revenue producing properties are depreciated using
the sinking fund method of depreciation. This method is not allowed under
United States GAAP, accordingly depreciation has been recalculated over the
estimated useful life (25 -- 40 years) of each property using the
straight-line method.
The net impact is a reduction of $938,000 at June 30, 1997 (1996 --
$938,000) in resort properties and a reduction of $2,761,000 at June 30,
1997 (June 30, 1996 -- $2,002,000) in non-resort properties.
(b) Extinguishment of Options and Warrants
Payments made to extinguish options and warrants can be treated as capital
items under Canadian GAAP. These payments would be treated as income items
under United States GAAP.
(c) Investment Income
Earnings of equity accounted investees have not been fully tax effected for
Canadian GAAP. Under United States GAAP, these earnings must be tax
effected, normally using capital gains rates. Based on United States tax
regulations, additional tax of $95,000 would be recognized in the year ended
June 30, 1997 (June 30, 1996 -- $370,000).
(d) Retained Earnings
Opening retained earnings in accordance with United States GAAP for the year
ended June 30, 1996 includes the effect of recalculating depreciation
expense as described in (a) above. The net decrease in retained earnings was
$2,085,000.
F-21
<PAGE> 60
(e) Shareholders' Equity
The Company accounts for loans provided to senior employees for the purchase
of shares as amounts receivable. Under United States GAAP, these loans,
totalling $1,236,000 and $1,606,000 as at June 30, 1997 and 1996,
respectively, would be deducted from share capital.
(f) Financial Instruments
Under Canadian GAAP, the components of convertible debt instruments are
classified as a liability or as equity in accordance with the substance of
the contractual arrangement (note 2). The interest expense included in the
loss from discontinued operations would not exist under United States GAAP
as there is no such requirement.
(g) Income Taxes
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
109, Accounting for Income Taxes, for the financial statement amounts
presented under United States GAAP. SFAS 109 requires that deferred tax
liabilities or assets be recognized for the difference between assigned
values and tax bases of assets and liabilities acquired pursuant to a
business combination except for non-tax deductible goodwill and unallocated
negative goodwill. The effect of adopting SFAS 109 increases the carrying
values of certain balance sheet amounts as follows:
<TABLE>
<S> <C>
Ski and resort assets....................................................... $12,959
Negative goodwill........................................................... 4,786
Properties.................................................................. 4,589
Deferred income tax asset................................................... 8,277
Deferred income tax liability............................................... 20,831
</TABLE>
(h) Information Relating to Cash Flow
The bank and other indebtedness and issue of common shares related to the
financing of the acquisitions described in Notes 3(a), (b) and (c) are
non-cash components of the acquisitions and under United States GAAP would
not be included as financing and investing activities. Accordingly,
financing cash flows would be decreased by $128,566,000 (1996 --
$44,315,000) and investing cash flows would be similarly decreased for both
years.
F-22
<PAGE> 61
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use of the following report filed with the Form 40-F (the
"Form 40-F") of Intrawest Corporation (the "Company") dated September 19, 1997
to be filed with the United States Securities and Exchange Commission:
1. Auditors' Report to the Shareholders of the Company dated September
5, 1997 included in the Consolidated Audited Financial Statements of the
Company for the Years ended June 30, 1997 and June 30, 1996.
Vancouver, Canada (Signed) COOPERS & LYBRAND
September 25, 1997 Chartered Accountants
<PAGE> 62
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF
INTRAWEST CORPORATION
YEARS ENDED JUNE 30, 1997 AND 1996
F-1
<PAGE> 63
AUDITORS' REPORT
To the Shareholders of Intrawest Corporation
We have audited the consolidated balance sheets of Intrawest Corporation as
at June 30, 1997 and 1996 and the consolidated statements of operations,
retained earnings, cash flow from operations and changes in financial position
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at June 30, 1997
and 1996 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles. As required by the British Columbia Company Act, we
report that, in our opinion, these principles have been applied, after giving
retroactive effect to the change in the method of accounting for financial
instruments as explained in note 2 to the consolidated financial statements, on
a consistent basis.
Vancouver, British Columbia (Signed) Coopers & Lybrand
September 5, 1997 Chartered Accountants
F-2
<PAGE> 64
INTRAWEST
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30
-----------------------
1997 1996
-------- --------
(IN THOUSANDS OF
DOLLARS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
REVENUE
Ski and resort operations.............................................. $263,239 $165,282
Real estate sales...................................................... 118,190 111,397
Rental properties...................................................... 3,143 856
Income from equity accounted investment (note 3(d)).................... 1,190 4,621
Interest and other income.............................................. 3,213 1,181
-------- --------
388,975 283,337
-------- --------
EXPENSES
Ski and resort operations.............................................. 195,851 123,910
Real estate costs...................................................... 95,858 95,699
Rental properties...................................................... 2,181 559
Interest (note 15)..................................................... 20,914 14,017
Depreciation and amortization.......................................... 25,966 17,166
General and administrative............................................. 8,916 7,567
-------- --------
349,686 258,918
-------- --------
Income before income taxes, non-controlling interest and discontinued
operations........................................................... 39,289 24,419
Provision for income taxes (note 12)................................... 7,067 1,172
-------- --------
Income before non-controlling interest and discontinued operations..... 32,222 23,247
Non-controlling interest............................................... 3,927 3,590
-------- --------
Income from continuing operations...................................... 28,295 19,657
Results of discontinued operations (note 4)............................ (1,202) (2,056)
-------- --------
Net income for the year................................................ $ 27,093 $ 17,601
======== ========
Income per common share
Income from continuing operations.................................... $ 1.02 $ 0.85
Net income*.......................................................... $ 1.05 $ 0.76
======== ========
Weighted average number of common shares outstanding (in thousands).... 27,809 23,048
======== ========
</TABLE>
- ---------------
*Net income per common share for the year ended June 30, 1997 includes income
per common share from discontinued operations for the six months ended December
31, 1996, amounting to $0.03. From January 1, 1997, the results of discontinued
operations accrue to the holders of the Company's non-resort preferred shares
(note 11(a)).
F-3
<PAGE> 65
INTRAWEST
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS AT JUNE 30
----------------------
1997 1996
--------- --------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
ASSETS
Current assets
Cash and short-term deposits (note 14(b))............................. $ 59,718 $ 28,761
Other assets (note 8(a)).............................................. 18,585 11,510
Amounts receivable (note 7)........................................... 53,573 61,369
Properties (note 6)
Resort............................................................. 115,062 80,613
Discontinued operations............................................ 12,606 34,828
---------- --------
259,544 217,081
Ski and resort operations (note 5)...................................... 406,643 254,811
Goodwill (note 3(b) and (e))............................................ 79,275 23,220
Properties (note 6)
Resort................................................................ 207,478 126,470
Discontinued operations............................................... 63,556 67,539
Amounts receivable (note 7)............................................. 41,080 29,748
Other assets (note 8(b))................................................ 40,375 34,846
---------- --------
$1,097,951 $753,715
========== ========
LIABILITIES
Current liabilities
Amounts payable....................................................... $ 71,290 $ 50,016
Deferred revenue...................................................... 4,191 3,137
Bank and other indebtedness, current portion (note 9)
Resort............................................................. 88,565 111,148
Discontinued operations............................................ 2,173 10,151
---------- --------
166,219 174,452
Bank and other indebtedness (note 9)
Resort................................................................ 357,438 215,058
Discontinued operations............................................... 41,580 43,481
Due to joint venture partners (note 13)................................. 14,963 15,069
Deferred revenue........................................................ 5,793 5,373
Deferred income taxes................................................... 2,583 --
Non-controlling interest in subsidiaries................................ 11,307 9,959
---------- --------
599,883 463,392
---------- --------
SHAREHOLDERS' EQUITY
Capital stock (note 11)................................................. 382,270 198,179
Retained earnings....................................................... 111,649 89,148
Foreign currency translation adjustment................................. 4,149 2,996
---------- --------
498,068 290,323
---------- --------
$1,097,951 $753,715
========== ========
</TABLE>
Contingencies and commitments (note 14)
Approved on behalf of the Board
<TABLE>
<S> <C>
(signed) Joe S. Houssian (signed) Paul M. Manheim
Director Director
</TABLE>
F-4
<PAGE> 66
INTRAWEST
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30
-----------------------
1997 1996
-------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Retained earnings -- beginning of year
As previously reported............................................... $ 90,385 $75,233
Adoption of new accounting standard (note 2)......................... (1,237) --
-------- -------
As restated.......................................................... 89,148 75,233
Net income for the year................................................ 27,093 17,601
Dividends.............................................................. (4,592) (3,686)
-------- -------
Retained earnings -- end of year....................................... $111,649 $89,148
======== =======
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOW FROM OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30
----------------------
1997 1996
------- -------
(IN THOUSANDS OF
DOLLARS EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Income before non-controlling interest and discontinued operations...... $32,222 $23,247
Items not affecting cash
Depreciation and amortization......................................... 25,966 17,166
Income from equity accounted investment............................... (1,190) (4,621)
Deferred income taxes................................................. 487 --
------- -------
Cash flow from operations............................................... $57,485 $35,792
======= =======
Cash flow per common share.............................................. $ 1.87 $ 1.34
======= =======
</TABLE>
F-5
<PAGE> 67
INTRAWEST
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
JUNE 30
-----------------------
1997 1996
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Cash flow from operations.............................................. $ 57,485 $ 35,792
Recovery of costs through real estate sales............................ 95,858 95,699
Increase in amounts receivable, net.................................... (13,567) (12,870)
Acquisition and development of properties for sale..................... (143,980) (149,935)
Other changes in non-cash operating working capital.................... (13,241) 10,989
Cash provided by discontinued operations............................... 41,962 57,420
-------- --------
24,517 37,095
-------- --------
FINANCING ACTIVITIES
Bank and other borrowings, net......................................... 30,096 64,607
Issue of capital stock................................................. 184,394 411
Extinguishment of warrants, options and conversion privilege........... (303) (1,850)
Dividends paid......................................................... (4,592) (3,686)
Distributions to non-controlling interests............................. (2,579) (2,339)
-------- --------
207,016 57,143
-------- --------
INVESTING ACTIVITIES
Proceeds from revenue-producing properties, net........................ 1,375 7,817
Expenditures on ski and resort operation assets........................ (51,693) (28,098)
Acquisition of ski resort assets and investments....................... (150,258) (63,073)
-------- --------
(200,576) (83,354)
-------- --------
Increase in cash and short-term deposits............................... 30,957 10,884
Cash and short-term deposits -- beginning of year...................... 28,761 17,877
-------- --------
Cash and short-term deposits -- end of year............................ $ 59,718 $ 28,761
======== ========
</TABLE>
F-6
<PAGE> 68
INTRAWEST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
(tabular amounts in thousands of dollars unless otherwise indicated)
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The consolidated financial statements are prepared in accordance with
generally accepted accounting principles in Canada as prescribed by The Canadian
Institute of Chartered Accountants ("CICA"). Information regarding United States
generally accepted accounting principles as it affects the Company is presented
in note 20.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include:
(a) the accounts of the Company and its subsidiaries;
(b) the accounts of all incorporated and unincorporated joint ventures and
non-controlled partnerships, to the extent of the Company's interest in
their respective assets, liabilities, revenues and expenses.
The Company's principal subsidiaries and controlled partnerships accounted
for as subsidiaries are as follows:
<TABLE>
<CAPTION>
PERCENTAGE
INTEREST HELD BY
THE COMPANY
----------------
<S> <C>
Blackcomb Skiing Enterprises Ltd............................................ 96.60
Blackcomb Skiing Enterprises Limited Partnership............................ 74.38
Whistler Mountain Holdings Limited (note 3)................................. 100.00
Mont Tremblant Resorts and Company, Limited Partnership..................... 100.00
IW Resorts Limited Partnership.............................................. 97.55
Mont Ste. Marie (1984) Inc. (note 3)........................................ 100.00
Intrawest Resort Ownership Corporation...................................... 100.00
Intrawest U.S.A., Inc....................................................... 100.00
Intrawest U.S. Holdings Inc................................................. 100.00
Stratton Ski Corporation.................................................... 100.00
Snowshoe Resort, Inc. (note 3).............................................. 100.00
Copper Mountain, Inc. (note 3).............................................. 100.00
</TABLE>
The Company accounts for its 33% participating investment in Mammoth
Mountain Ski Area by the equity method (note 3).
In connection with a covenant not to compete with Blackcomb Skiing
Enterprises Limited Partnership, the Company has agreed to provide Nippon Cable
Co., Ltd. ("Nippon"), one of the minority partners in Blackcomb, with an option
to acquire a 23% interest in property and assets related to Whistler Mountain at
a price based on the terms of the Whistler acquisition (note 3). The terms of
the option and the structure of Nippon's investment are under negotiation. The
option will be exercisable during the 30-day period ending November 30, 1997.
SKI AND RESORT OPERATIONS
The assets of the ski and resort operations are stated at cost less
accumulated depreciation. Costs of ski lifts, area improvements and buildings
are capitalized. Certain buildings, area improvements and equipment are located
on leased or licensed land. Depreciation is provided over the estimated useful
lives of each asset category using the declining balance method as follows.
<TABLE>
<S> <C>
Buildings.................................................................... 3.3% -- 5%
Ski lifts.................................................................... 5% -- 8%
Area improvements............................................................ 2% -- 3.3%
Automotive, furniture and other equipment.................................... 10% -- 50%
Leased vehicles.............................................................. 20% -- 25%
</TABLE>
Inventories are recorded at the lower of cost and net realizable value.
F-7
<PAGE> 69
PROPERTIES
(a) Properties under development and held for sale
Properties under development and held for sale are recorded at the lower of
cost and net realizable value. Cost includes all expenditures incurred in
connection with the acquisition, development and construction of these
properties. These expenditures consist of all direct costs, interest on
general and specific debt and general and administrative expenses. Revenue
related specifically to such properties is treated as a reduction of costs.
Costs associated with the development and investigation of the vacation
ownership business, including research, consulting, legal and other costs
associated with the registration of the product and program, are
capitalized. These costs are amortized on a straight-line basis over ten
years.
Costs associated with the development of sales locations of the vacation
ownership business, including operating and general and administrative costs
incurred until a location is fully operational, are capitalized. Revenue
related specifically to a location is treated as a reduction of costs during
the start-up period. These costs are amortized on a straight-line basis over
seven years. The Company provides for write-downs where the carrying value
of a particular property exceeds its net realizable value.
(b) Revenue-producing properties
Revenue-producing properties are stated at the lower of cost, net of
accumulated depreciation, and the net recoverable amount. Buildings are
depreciated using the declining balance method at annual rates of 3.3% to
5%. Leasehold improvements and other tenant inducements are amortized using
the straight-line method over the term of the lease, plus one renewal
period. Furniture and equipment are depreciated on a declining balance basis
at 20% per annum.
(c) Classification
Properties that are currently under development for sale and properties
available for sale are classified as current assets. Related bank and other
indebtedness is classified as a current liability.
REVENUE RECOGNITION
(a) Revenue from the sale of properties is recorded when title to the completed
unit is conveyed to the purchaser and the purchaser becomes entitled to
occupancy.
(b) Points revenue associated with membership in the vacation ownership business
of the Intrawest Resort Club (which revenue is included in real estate
sales) is recognized when the purchaser has paid the amount due on closing,
all contract documentation has been executed and all other significant
conditions of sale are met.
(c) Revenue from revenue-producing properties is recognized upon the earlier of
attaining a break-even point in cash flow after debt servicing or the
expiration of a reasonable period of time following substantial completion.
Prior to this time, the properties are categorized as properties under
development, and revenue related to such properties is applied to reduce
development costs.
ADMINISTRATIVE FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Administrative furniture and equipment are stated at cost less accumulated
depreciation. Depreciation is provided using the declining balance method at
annual rates of 20% and 30%.
Leasehold improvements are stated at cost less accumulated amortization.
Amortization is provided using the straight-line method over the term of the
lease, plus one renewal period.
DEFERRED FINANCING COSTS
Deferred financing costs consist of legal and other fees related to the
financing of the Company's ski and resort operations. These costs are amortized
over the term of the financing.
GOODWILL
Goodwill is amortized on the straight-line basis over a period of 40 years.
In determining whether there is a permanent impairment in value, recoverability
is based on estimated future cash flows.
DEFERRED REVENUE
Deferred revenue mainly comprises season pass revenue and government grants.
Deferred revenue which relates to the sale of season passes is recognized
throughout the season based on the number of skier visits. Deferred revenue
which relates to government grants for ski and resort operation assets is
recognized on the same basis as the related assets are amortized. Deferred
revenue which relates to government grants for properties under development is
recognized as the properties are sold.
INCOME TAXES
Income taxes are provided at current rates for all items included in the
statements of operations, regardless of the period when such items are reported
for income tax purposes. No adjustment is made to deferred income tax accounts
for subsequent changes in income tax rates.
F-8
<PAGE> 70
FOREIGN CURRENCY TRANSLATION
The Company's operations in the United States are of a self-sustaining
nature. Assets and liabilities are translated into Canadian dollars at the rate
of exchange in effect at the balance sheet date. Revenue and expenses are
translated at the weighted average rate for the year.
Cumulative gains or losses arising from the translation of the assets and
liabilities of these operations are recorded as a separate component of
shareholders' equity.
INTEREST ALLOCATED TO DISCONTINUED OPERATIONS
Interest allocated to discontinued operations is the total of interest on
debt directly attributable to the discontinued operations and an allocation of
interest on general corporate debt not directly attributable to continuing
operations.
PER SHARE CALCULATION
Income per common share has been calculated using the weighted average
number of common shares outstanding during the year.
CASH FLOW FROM OPERATIONS
Cash flow from operations is computed as income before non-controlling
interest and discontinued operations adjusted for deferred income taxes,
depreciation and amortization of capital items and other non-cash items. Cash
flow from operations is different from cash flow from operating activities since
it excludes the cash provided by or used for non-cash operating working capital
accounts such as real estate inventory, amounts receivable and amounts payable.
Cash flow from operations is reconciled to cash flow from operating activities
in the consolidated statements of changes in financial position.
NOTE 2 ADOPTION OF NEW ACCOUNTING STANDARD
Effective July 1, 1996, the Company has adopted, on a retroactive basis, the
new CICA pronouncement on financial instruments as it affects convertible debt
(note 11(c)), resulting in a decrease in results of discontinued operations for
the year ended June 30, 1996 of $1,237,000, an increase in capital stock of
$1,627,000 and a decrease in bank and other indebtedness of $390,000. This
change in accounting policy has increased the loss from discontinued operations
for the year ended June 30, 1997 by $118,000.
NOTE 3 ACQUISITIONS
(a) Effective December 18, 1996, the Company acquired property and assets
related to Copper Mountain, Inc. ("Copper") in Colorado, U.S.A. The
transaction was accounted for by the purchase method. Copper's results of
operations have been consolidated with the operations of the Company from
the effective date of purchase.
<TABLE>
<S> <C>
Net assets acquired at fair market value
Ski and resort operations...................................................... $ 69,417
Properties under development and held for sale................................. 41,789
Net working capital............................................................ (7,702)
Assumption of debt............................................................. (26,989)
--------
76,515
Cash........................................................................... 1,067
--------
$ 77,582
========
Financed by
Cash........................................................................... $ 19,704
New bank and other indebtedness................................................ 18,003
Issue of 2,900,000 common shares............................................... 39,875
--------
$ 77,582
========
</TABLE>
F-9
<PAGE> 71
(b) Effective December 18, 1996, the Company acquired property and assets
related to Whistler Mountain Holdings Limited ("Whistler") in British
Columbia, Canada. The transaction was accounted for by the purchase method.
Whistler's results of operations have been consolidated with the operations
of the Company from the effective date of purchase.
<TABLE>
<S> <C>
Net assets acquired at fair market value
Ski and resort operations...................................................... $ 49,926
Properties under development and held for sale................................. 25,072
Goodwill....................................................................... 56,009
Net working capital............................................................ (7,499)
Assumption of debt............................................................. (51,789)
-------
$ 71,719
=======
Financed by
Cash........................................................................... $ 1,031
New bank and other indebtedness................................................ 16,100
Issue of 3,970,000 common shares............................................... 54,588
-------
$ 71,719
=======
</TABLE>
(c) Effective December 21, 1996, the Company acquired property and assets for
$957,000 cash related to Mont Ste. Marie (1984) Inc. ("Mont Ste. Marie") in
Quebec, Canada. The transaction was accounted for by the purchase method.
Mont Ste. Marie's results of operations have been consolidated with the
operations of the Company from the effective date of purchase.
<TABLE>
<S> <C>
Net assets acquired at fair market value
Ski and resort operations........................................................ $2,685
Net working capital.............................................................. (300)
Assumption of debt............................................................... (1,428)
------
$ 957
======
</TABLE>
(d) Effective December 22, 1995, the Company acquired 33% of Mammoth Mountain
Ski Area ("MMSA") in California, U.S.A. The Company's proportionate share of
income from the date of acquisition as reported by MMSA, net of amortization
of excess purchase price over net assets acquired, is included in income and
added to the cost of the investment. The excess purchase price,
U.S.$8,170,000, is attributable to the ski and resort operation assets and
is being amortized over the estimated useful lives of these assets at the
average rate of 6% per annum using the declining balance method.
(e) On November 27, 1995, the Company acquired property and assets related to
Snowshoe Mountain Resort and Silver Creek Resort ("Snowshoe") in West
Virginia, U.S.A. The transaction was accounted for by the purchase method.
Snowshoe's results of operations have been consolidated with the operations
of the Company from the effective date of purchase.
<TABLE>
<S> <C>
Net assets acquired at fair market value
Ski and resort operations..................................................... $26,583
Goodwill...................................................................... 23,385
Net working capital........................................................... (4,071)
-------
45,897
Cash.......................................................................... 4,771
-------
$50,668
=======
Financed by
Cash.......................................................................... $ 6,353
New bank and other indebtedness............................................... 43,390
Working capital adjustment.................................................... 925
-------
$50,668
=======
</TABLE>
NOTE 4 DISCONTINUED OPERATIONS
The Company plans to sell all of its remaining non-resort properties. For
reporting purposes, the results of operations and cash flow from operating
activities of this business have been disclosed separately from those of
continuing operations for the periods presented.
The results of discontinued operations, including an allocation of interest
expense, are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Revenue.............................................................. $51,095 $98,000
------- -------
Loss before current income taxes..................................... (872) (1,886)
Provision for current income taxes................................... 330 170
------- -------
Loss from discontinued operations.................................... $(1,202) $(2,056)
======= =======
</TABLE>
F-10
<PAGE> 72
The remaining assets and liabilities of discontinued operations are as
follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Current Assets
Properties......................................................... $12,606 $34,828
Other current assets................................................. 13,877 36,437
Properties........................................................... 63,556 67,539
Non-current assets................................................... 30,472 26,722
Current liabilities.................................................. 6,121 15,168
Long-term debt and other liabilities................................. 41,361 41,514
</TABLE>
The cash flows from discontinued operations are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Cash provided by (used for)
Operating activities
Results of discontinued operations................................. $(1,202) $(2,056)
Depreciation and amortization...................................... 1,626 1,555
------- -------
Cash flow from operations.......................................... 424 (501)
Recovery of costs through real estate sales........................ 44,018 91,366
Decrease (increase) in amounts receivable, net..................... 17,287 (2,710)
Development of properties.......................................... (20,520) (24,080)
Changes in other non-cash operating working capital................ 753 (6,655)
------- -------
41,962.. 57,420
------- -------
Financing activity
Bank and other borrowings, net..................................... (10,269) (48,892)
------- -------
Investing activity
Proceeds from revenue-producing properties, net.................... 888 8,129
------- -------
Increase in cash and short-term deposits............................. $32,581 $16,657
======= =======
</TABLE>
The holders of the non-resort preferred ("NRP") shares (note 11(a)) are
entitled to receive the net cash flow from the discontinued operations from
January 1, 1997 primarily by way of redemption of their NRP shares. Annual
distributions of such cash flows are payable on September 30 of each year
covering the period ended on the previous June 30. The net cash flow from the
discontinued operations for the period from January 1, 1997 to June 30, 1997 was
$13,606,000. After deducting a reserve of $4,591,000 (to cover potential working
capital requirements as provided for in the rights and restrictions attached to
the NRP shares), the net cash flow available to redeem NRP shares on September
30, 1997 was $9,015,000, representing 2,360,000 NRP shares at $3.82 per share.
NOTE 5 SKI AND RESORT OPERATIONS
<TABLE>
<CAPTION>
1997
-------------------------------------
ACCUMULATED
COST DEPRECIATION NET
-------- ----------- --------
<S> <C> <C> <C>
Ski operations
Land.............................................. $ 43,121 $-- $ 43,121
Buildings......................................... 101,770 17,824 83,946
Ski lifts and area improvements................... 195,074 32,312 162,762
Automotive, furniture and other equipment......... 49,951 18,107 31,844
Leased vehicles................................... 13,340 5,861 7,479
-------- ------- --------
403,256 74,104 329,152
-------- ------- --------
Resort operations
Land.............................................. 8,171 -- 8,171
Buildings......................................... 47,039 4,929 42,110
Area improvements................................. 29,926 2,716 27,210
-------- ------- --------
85,136 7,645 77,491
-------- ------- --------
$488,392 $81,749 $406,643
======== ======= ========
</TABLE>
F-11
<PAGE> 73
<TABLE>
<CAPTION>
1996
-------------------------------------
ACCUMULATED
COST DEPRECIATION NET
-------- ----------- --------
<S> <C> <C> <C>
Ski operations
Land.............................................. $ 11,015 $-- $ 11,015
Buildings......................................... 61,490 13,813 47,677
Ski lifts and area improvements................... 140,966 25,271 115,695
Automotive, furniture and other equipment......... 31,414 13,808 17,606
Leased vehicles................................... 8,241 4,024 4,217
-------- ------- --------
253,126 56,916 196,210
-------- ------- --------
Resort operations
Land.............................................. 7,931 -- 7,931
Buildings......................................... 26,184 4,528 21,656
Area improvements................................. 30,967 1,953 29,014
-------- ------- --------
65,082 6,481 58,601
-------- ------- --------
$318,208 $63,397 $254,811
======== ======= ========
</TABLE>
The ski and resort operations have been pledged as security for certain of
the Company's bank and other indebtedness (note 9).
NOTE 6 PROPERTIES
<TABLE>
<CAPTION>
1997
--------
<S> <C>
Properties under development and held for sale
Acquisition costs............................................................ $140,652
Interest..................................................................... 18,230
Development costs............................................................ 157,174
Administrative expenses...................................................... 15,807
Net rental income............................................................ (1,430)
-------
330,433
-------
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION NET
------- ----------- --------
<S> <C> <C> <C>
Revenue-producing properties
Land............................................... $ 9,664 $-- 9,664
Buildings.......................................... 60,720 6,328 54,392
Leasehold improvements and equipment............... 7,868 3,655 4,213
------- ------ --------
$78,252 $ 9,983 68,269
======= ======
--------
$398,702
========
</TABLE>
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Properties under development and held for sale
Acquisition costs............................................................ $106,951
Interest..................................................................... 25,675
Development costs............................................................ 103,484
Administrative expenses...................................................... 21,195
Net rental income............................................................ (1,675)
-------
255,630
-------
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION NET
------- ----------- --------
<S> <C> <C> <C>
Revenue-producing properties
Land............................................... $ 9,570 $-- 9,570
Buildings.......................................... 42,840 3,779 39,061
Leasehold improvements and equipment............... 9,370 4,181 5,189
------- ------ --------
$61,780 $ 7,960 53,820
======= ======
--------
$309,450
========
</TABLE>
F-12
<PAGE> 74
Properties are classified as follows for balance sheet purposes:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current assets
Resort........................................................... $115,062 $ 80,613
Discontinued operations.......................................... 12,606 34,828
Long-term assets
Resort........................................................... 207,478 126,470
Discontinued operations.......................................... 63,556 67,539
-------- --------
$398,702 $309,450
======== ========
</TABLE>
During the year ended June 30, 1997, $10,412,000 (1996 -- $13,668,000) of
interest (note 15) and $8,941,000 (1996 -- $5,240,000) of administrative
expenses were capitalized to properties.
Properties have been pledged as security for certain of the Company's bank
and other indebtedness (note 9).
NOTE 7 AMOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Receivable from sales of real estate................................. $15,132 $15,294
Ski and resort operation receivables................................. 12,906 7,145
Loans, mortgages and notes receivable (note 19 (b)).................. 53,053 49,221
Funded senior employee share purchase plan (note 11(e)).............. 1,236 1,606
Other accounts receivable............................................ 12,326 17,851
------- -------
94,653 91,117
Less: current portion................................................ 53,573 61,369
------- -------
$41,080 $29,748
======= =======
</TABLE>
Receivables are due approximately as follows:
<TABLE>
<S> <C>
Year ending June 30, 1998....................................................... $53,573
1999.......................................................... 16,361
2000.......................................................... 7,156
2001.......................................................... 2,258
2002.......................................................... 2,578
Subsequent to 2002........................................................ 12,727
-------
$94,653
=======
</TABLE>
The loans, mortgages and notes receivable bear interest at both fixed and
floating rates which averaged 8.51% per annum as at June 30, 1997 (1996 --
9.88%). These amounts have been pledged as security for certain of the Company's
bank and other indebtedness (note 9).
NOTE 8 OTHER ASSETS
(a) Current
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Ski operation inventories.......................................... $ 11,978 $ 6,514
Prepaid expenses and other......................................... 6,607 4,996
-------- --------
$ 18,585 $ 11,510
======== ========
</TABLE>
(b) Long-term
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Administrative furniture, equipment and leasehold improvements, at
cost less accumulated depreciation of $4,696,000 (1996 --
$2,952,000)...................................................... $ 5,169 $ 3,597
Deferred financing and other costs................................. 4,701 4,277
Investment in Mammoth Mountain Ski Area, at equity................. 18,511 17,002
Investments, at cost............................................... 8,794 8,824
Other.............................................................. 3,200 1,146
-------- --------
$ 40,375 $ 34,846
======== ========
</TABLE>
Investments include a limited partnership interest in the amount of
$7,500,000 acquired as partial consideration in connection with the sale of a
non-resort property. The partnership interest is expected to be fully
recoverable out of the available annual cash flow and/or proceeds from the
ultimate sale of the property.
F-13
<PAGE> 75
NOTE 9 BANK AND OTHER INDEBTEDNESS
The Company has obtained financing for its operations from various financial
institutions by pledging individual assets as security for such financing.
Security for general corporate debt is provided by general security which
includes a floating charge on the Company's assets and undertakings, fixed
charges on real estate properties, and assignment of mortgages and notes
receivable. The following table summarizes the primary security provided by the
Company, where appropriate, and indicates the applicable type of financing,
maturity dates and the weighted average interest rate at June 30, 1997.
<TABLE>
<CAPTION>
WEIGHTED
MATURITY AVERAGE
DATES INTEREST RATE 1997 1996
----------- -------------- -------- --------
<S> <C> <C> <C> <C>
Ski and resort operations
Mortgages and bank loans........... Demand-2017 6.16% $279,732 $197,913
Obligations under capital leases... 1998-2001 8.77% 9,370 8,608
-------- --------
289,102 206,521
-------- --------
Properties
Interim financing on properties
under development and held for
sale............................. 1998-2009 5.96% 133,743 85,067
Mortgages on revenue-producing
properties....................... 1998-2034 7.60% 37,865 38,884
-------- --------
171,608 123,951
-------- --------
General corporate debt............... 1998-1999 8.00% 4,046 24,366
-------- --------
Unsecured debenture.................. 2003 9.32% 25,000 25,000
-------- --------
6.44% 489,756 379,838
Less: current portion................ 90,738 121,299
-------- --------
$399,018 $258,539
======== ========
</TABLE>
Principal repayments and the components related to either floating or fixed
interest rates are as follows:
<TABLE>
<CAPTION>
INTEREST RATES
---------------------
FLOATING FIXED REPAYMENTS
-------- -------- ----------
<S> <C> <C> <C>
Year ending June 30, 1998............................ $ 59,956 $ 30,782 $ 90,738
1999............................ 23,603 41,740 65,343
2000............................ 16,039 16,200 32,239
2001............................ 20,526 39,496 60,022
2002............................ 65,122 13,393 78,515
Subsequent to 2002............................ 91,526 71,373 162,899
-------- -------- --------
$276,772 $212,984 $489,756
======== ======== ========
</TABLE>
The Company has entered into a swap agreement to fix the interest rate on a
portion of its floating rate debt. The Company has $30,000,000 of bank loans
swapped against debt with a fixed interest rate of 8.25%, including applicable
stamping fees, under an agreement expiring in 2002.
Certain amounts owing to banks are evidenced by demand notes which are
classified for repayment according to expected or agreed settlement dates.
Bank and other indebtedness of $194,447,000 (1996 -- $149,165,000) is
guaranteed by the Company in addition to being secured by the specific property
or asset.
Bank and other indebtedness includes indebtedness in the amount of
$207,800,000 (1996 -- $141,642,000), which is repayable in United States dollars
of $150,525,000 (1996 -- $103,866,000).
The Company is committed to capital lease obligations as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Minimum lease payments............................................... $10,526 $10,053
Less: interest....................................................... 1,156 1,445
------- -------
Lease principal obligation........................................... $ 9,370 $ 8,608
======= =======
</TABLE>
F-14
<PAGE> 76
Future minimum lease payments are as follows:
<TABLE>
<S> <C>
Year ending June 30, 1998....................................................... $ 4,952
1999....................................................... 3,431
2000....................................................... 1,290
2001....................................................... 550
2002....................................................... 296
Subsequent to 2002....................................................... 7
-------
$10,526
=======
</TABLE>
NOTE 10 GOVERNMENT ASSISTANCE
The federal government and the Province of Quebec have granted financial
assistance to the Company in the form of interest-free loans and grants for the
construction of specified four-season tourist facilities at Mont Tremblant. The
loans, which will total $20,100,000 when they are fully advanced, are repayable
over seven years starting in 2000. At June 30, 1997, the Company had received
$17,693,000 of interest-free loans (1996 -- $17,338,000) which amounts are
included in bank and other indebtedness. The grants, which will total
$11,600,000 when they are fully advanced, amounted to $9,642,000 at June 30,
1997 (1996 -- $8,137,000). The grants received during the year ended June 30,
1997 amounting to $1,505,000 (1996 -- $3,177,000) have been credited as follows:
$nil (1996 -- $567,000) to ski and resort operation assets, $nil (1996 --
$919,000) to properties and $1,505,000 (1996 -- $1,691,000) to cost of real
estate sales.
NOTE 11 CAPITAL STOCK
(a) Share Capital Reorganization
Effective March 14, 1997, the Company completed a reorganization of its
share capital designed to separate the remaining non-resort real estate
assets from the rest of the Company's business. Under the reorganization,
each existing common share was exchanged for one new common share and one
NRP share. The new common shares have the same attributes as the old common
shares.
The NRP shares were recorded at a value of $88,543,000 before deduction of
issue costs of $329,000 ($3.82 per share), equal to the book value of the
net equity of the non-resort assets at December 31, 1996, and the book value
of the common shares was reduced by the same amount. The Company expects
that the non-resort assets will be disposed of in an orderly manner and the
net cash flow from these assets distributed to the NRP shareholders,
primarily by way of redemption of their shares as described in note 4. The
amount ultimately realized will be subject to prevailing real estate market
conditions. As at June 30, 1997, the book value of the net equity of the
non-resort assets was $86,635,000.
All stock option information is stated to reflect the share capital
reorganization.
(b) Capital Stock
The Company's capital stock comprises the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Common shares...................................................... $293,649 $198,179
NRP shares......................................................... 88,621 --
-------- --------
$382,270 $198,179
======== ========
</TABLE>
i. Common Shares
Authorized -- 50,000,000 without par value.
Issued --
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
NUMBER OF NUMBER OF
COMMON COMMON
SHARES AMOUNT SHARES AMOUNT
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Balance at beginning of year............. 23,063,490 $198,179 23,026,790 $197,991
Adoption of new accounting standard (note
2)..................................... -- -- -- 1,627
Reorganization of shares................. -- (88,543) -- --
Issued for acquisitions (note 3)......... 6,870,000 94,463 -- --
Issued for cash, net of issue costs...... 4,000,000 86,129 -- --
Issued on exercise of option............. 123,146 1,236 -- --
Funded senior employee share purchase and
stock option plans..................... 224,900 2,488 36,700 411
Extinguishment of warrants, options and
conversion privilege................... -- (303) -- (1,850)
---------- -------- ---------- --------
Balance at end of year................... 34,281,536 $293,649 23,063,490 $198,179
========== ======== ========== ========
</TABLE>
F-15
<PAGE> 77
ii. NRP Shares
Authorized -- 50,000,000 without par value, redeemable at $3.82 per share
except for the final redemption which shall be subject to a premium or
discount based on available cash flow relating to the non-resort assets.
Issued --
<TABLE>
<CAPTION>
1997
---------------------
NUMBER OF
NRP
SHARES AMOUNT
---------- -------
<S> <C> <C>
Issued on reorganization of share capital, net of issue costs...... 23,198,190 $88,214
Issued on exercise of option....................................... 123,146 134
Stock option plan.................................................. 226,600 273
---------- -------
Balance at end of year............................................. 23,547,936 $88,621
========== =======
</TABLE>
iii. Preferred Shares
Authorized -- 10,000,000 without par value.
Issued -- nil
(c) Stock Options
The Company has a stock option plan which provides for grants to officers
and employees of the Company and its subsidiaries of options to purchase
common shares and NRP shares of the Company. Options granted under the stock
option plan vest equally over a period of five years. At June 30, 1997,
stock options outstanding totalled 1,960,800 common shares, exercisable at
prices from $9.51 to $20.15, expiring up to 2007 and 1,824,400 NRP shares
exercisable at prices from $1.04 to $2.20, expiring up to 2007. During the
year ended June 30, 1997, options were exercised for 224,900 common shares
and 226,600 NRP shares. In addition, options for 35,000 common shares were
extinguished.
In 1993 the Company issued a warrant in connection with an unsecured
debenture. The warrant holder had the right to acquire 450,000 common shares
at $14.375 per share, expiring in September 1996. During the year ended June
30, 1996, the Company extinguished the warrant.
During the year ended September 30, 1992, the Company granted an option to
purchase 123,146 common shares at a price of $10.035 per common share and
123,146 NRP shares at a price of $1.09 per NRP share in connection with a
loan guarantee for the financing of certain capital improvements. During the
year ended June 30, 1997, this option was exercised. In addition, the
Company granted to a property lender (note 19(c)) the right to convert its
loan of $8,600,000 on August 31, 1999 into 637,037 common shares at a
conversion price of $12.18 per common share and 637,037 NRP shares at a
conversion price of $1.32 per NRP share. During the year ended June 30,
1996, the property was sold and the Company repaid half of the debt as well
as an accrued return of $1,158,000 and this extinguished the conversion
privilege with respect to 318,518 common and NRP shares.
(d) Employee Share Purchase Plan
The employee share purchase plan permits full-time employees of the Company
and its subsidiaries and limited partnerships to purchase common shares
through payroll deductions. The Company contributes $1 for every $3
contributed by an employee. To June 30, 1997, a total of 65,809 (1996 --
65,809) common shares have been issued from treasury under this plan. The
board of directors has authorized and reserved a further 100,000 common
shares for issuance under this plan.
(e) Funded Senior Employee Share Purchase Plan
The Company has a funded senior employee share purchase plan which provides
for loans to be made to designated eligible employees to be used to
subscribe for common shares. At June 30, 1997, loans to employees under the
funded senior employee share purchase plan amounted to $1,236,000 with
respect to 136,850 common shares and 128,750 NRP shares (1996 -- $1,606,000
with respect to 171,350 common shares). The loans are interest-free, secured
by a promissory note and a pledge of the shares and mature by 2005. The
board of directors has authorized and reserved a further 100,000 common
shares for issuance under this plan.
NOTE 12 INCOME TAXES
(a) Provision for income taxes
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Current................................................................ $6,580 $1,172
Deferred............................................................... 487 --
------ ------
$7,067 $1,172
====== ======
</TABLE>
F-16
<PAGE> 78
The reconciliation of income taxes calculated at the statutory rate to the
actual income tax provision is as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Statutory rate....................................................... 45.6% 45.6%
Income tax charge at statutory rate.................................. $17,510 $10,275
Non-deductible depreciation and amortization......................... 782 --
Large Corporations Tax............................................... 1,437 848
Taxes related to non-controlling interest share of earnings.......... (1,532) (1,427)
Taxes related to equity accounted investment......................... (542) (2,106)
Foreign taxes different from statutory rate.......................... (5,576) (1,870)
Realization of tax losses of subsidiary.............................. -- (2,287)
Additional amounts deductible related to properties and ski and
resort operation assets (see (b) below)............................ (5,735) (2,585)
Other................................................................ 1,053 494
------- -------
7,397 1,342
Less: current income taxes related to discontinued operations........ 330 170
------- -------
Provision for income taxes........................................... $ 7,067 $ 1,172
======= =======
</TABLE>
(b) Certain properties and ski and resort operation assets were acquired at a
tax value in excess of their recorded value, with the result that a deferred
income tax provision was not required. In addition, certain subsidiaries of
the Company have losses available to carry forward for income tax purposes
for which the potential income tax benefits have not been recognized. At
June 30, 1997, approximately $31,370,000 has not been recognized for
accounting purposes.
NOTE 13 JOINT VENTURES
The following amounts represent the Company's proportionate interest in
joint ventures and non-controlled partnerships:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Properties, current................................................ $ 28,671 $ 55,386
Other current assets............................................... 8,572 18,088
-------- --------
37,243 73,474
Current liabilities................................................ (31,469) (31,761)
-------- --------
Working capital.................................................... 5,774 41,713
Properties, non-current............................................ 101,223 75,113
Long-term debt..................................................... (59,434) (32,173)
Other, net......................................................... 379 (15,047)
-------- --------
$ 47,942 $ 69,606
======== ========
</TABLE>
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revenue............................................................ $ 21,457 $ 30,320
Expenses........................................................... 19,646 28,358
-------- --------
Income from continuing operations.................................. 1,811 1,962
Results of discontinued operations................................. 996 222
-------- --------
$ 2,807 $ 2,184
======== ========
</TABLE>
Cash provided by (used for)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Operating activities
Income........................................................... $ 1,811 $ 1,962
Depreciation and amortization.................................... 1,078 316
Other non-cash items net of changes in operating working
capital........................................................ (21,489) (28,848)
Cash provided by discontinued operations......................... 32,856 1,036
-------- --------
14,256 (25,534)
-------- --------
Financing activity
Bank and other borrowings, net................................... 6,324 1,655
-------- --------
Investing activity
Proceeds from (expenditures on) revenue-producing properties,
net............................................................ (1,064) 108
-------- --------
Increase (decrease) in cash and short-term deposits................ $ 19,516 $(23,771)
======== ========
</TABLE>
F-17
<PAGE> 79
The amount payable to the Company's joint venture partners in various
properties, net of amounts receivable, results from the use of the proportionate
consolidation method of accounting. Payments to the joint venture partners are
governed by the terms of the respective joint venture agreement.
NOTE 14 CONTINGENCIES AND COMMITMENTS
(a) The Company holds the licences and land leases with respect to six of its
ski operations. These leases expire at various times between 2032 and 2051
and provide for annual payments generally in the range of 2% of defined
gross revenues.
(b) Cash and short-term deposits include amounts totalling $7,995,000 (1996 --
$4,050,000) that can only be used for specific purposes or held as security.
(c) The Company has estimated costs to complete ski and resort operation assets
and properties currently under construction and held for sale amounting to
$154,654,000 at June 30, 1997 (1996 -- $118,246,000). The Company has
financing commitments of $128,372,000 (1996 -- $100,738,000) related to
these costs.
(d) The Company has entered into various operating lease commitments,
aggregating $15,110,000 (1996 -- $8,889,000), payable as follows:
<TABLE>
<S> <C>
Year ending June 30, 1998....................................................... $ 3,344
1999....................................................... 2,803
2000....................................................... 2,536
2001....................................................... 2,336
2002....................................................... 1,513
Subsequent to 2002....................................................... 2,578
-------
$15,110
=======
</TABLE>
(e) The Company is contingently liable for $44,496,000 of indebtedness at June
30, 1997, of which $41,496,000 relates to certain non-resort properties
under development sold during the year ended September 30, 1994 (note
19(b)). The purchasers of these properties have provided guarantees to the
Company in respect of the indebtedness and have indemnified the Company for
any potential losses resulting from the contingent liability.
(f) The Company is contingently liable for the obligations of certain joint
ventures and limited partnerships. The assets of these joint ventures and
limited partnerships, which in all cases exceed the obligations, are
available to satisfy such obligations.
(g) The Company has received reassessments for the 1986 to 1989 taxation years
that significantly increase Blackcomb Skiing Enterprises Ltd.'s income for
tax purposes. The Company has filed notices of objection to the
reassessments. In addition, Blackcomb Skiing Enterprises Ltd. has filed
amendments to its 1982 to 1991 income tax returns to claim additional
capital cost allowance to reduce the proposed increase in income for tax
purposes. The potential tax liability is approximately $4,900,000, which is
composed of current taxes of $2,200,000, including interest, and deferred
income taxes of $2,700,000. In March 1994 the Company paid $1,585,000 to
Revenue Canada, Taxation as required by legislation when a notice of
objection is filed. This amount is included in amounts receivable as the
outcome of these reassessments cannot be determined at this time.
NOTE 15 INTEREST EXPENSE
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Total interest incurred.............................................. $35,535 $32,406
Less: interest capitalized to ski and resort operation assets........ 771 459
interest capitalized to properties, net of capitalized interest
recorded in real estate cost of sales of $1,271,000 and in
discontinued operations of $784,000 (1996 -- $2,551,000 and
$3,463,000, respectively)...................................... 8,357 7,654
------- -------
$26,407 $24,293
======= =======
Interest was charged to income as follows:
Real estate costs.................................................. $ 1,271 $ 2,371
Ski operations -- employee housing................................. 945 920
Interest expense................................................... 20,914 14,017
Discontinued operations............................................ 3,277 6,985
------- -------
$26,407 $24,293
======= =======
</TABLE>
Real estate costs and discontinued operations also include $3,430,000 (1996
- -- $517,000) and $3,518,000 (1996 -- $8,545,000), respectively, of interest
incurred in prior years.
F-18
<PAGE> 80
NOTE 16 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has various financial instruments including cash and cash
equivalents, amounts receivable, loans, mortgages and notes receivable, amounts
payable and accrued liabilities. Due to their short-term maturity or, in the
case of loans, mortgages and notes receivable, their market comparable interest
rates, the book value approximates fair value. Debt and interest swap agreements
are also financial instruments. The fair values at June 30, 1997 and 1996 were
estimated by discounting future cash flows at estimated market rates and are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Debt and interest swap agreements... $489,756 $475,063 $380,228 $360,271
</TABLE>
NOTE 17 PENSION PLANS
Effective January 1, 1995, the Company introduced two defined benefit
pension plans for certain of its senior executives. The value of the pension
fund assets at June 30, 1997 and the present value of the accrued pension
benefits attributed to services rendered up to June 30, 1997 are $1,386,000 and
$3,764,000, respectively (1996 -- $862,000 and $3,376,000, respectively).
NOTE 18 SEGMENTED INFORMATION
Industry and geographical information related to the Company's continuing
operations is as follows:
(a) Industry Segments
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Revenue
Ski and resort operations..................................................................... $ 265,492 $170,986
Real estate operations........................................................................ 123,483 112,351
--------- --------
Consolidated.................................................................................. $ 388,975 $283,337
========= ========
Operating profit after deducting depreciation and amortization
Ski and resort operations..................................................................... $ 46,437 $ 31,030
Real estate operations........................................................................ 22,682 14,973
--------- --------
$ 69,119 $ 46,003
Less: unallocated corporate expenses
Interest...................................................................................... (20,914) (14,017)
General and administrative.................................................................... (8,916) (7,567)
--------- --------
Consolidated.................................................................................. $ 39,289 $ 24,419
========= ========
Identifiable assets
Ski and resort operations..................................................................... $ 576,991 $324,714
Real estate operations........................................................................ 400,449 263,475
Discontinued operations....................................................................... 120,511 165,526
---------- ---------
Consolidated.................................................................................. $1,097,951 $753,715
========== =========
Capital acquisitions
Ski and resort operations..................................................................... $ 51,693 $ 28,098
========= ========
Depreciation and amortization
Ski and resort operations..................................................................... $ 23,204 $ 16,045
Real estate operations........................................................................ 1,740 668
Unallocated corporate......................................................................... 1,022 453
--------- --------
Consolidated.................................................................................. $ 25,966 $ 17,166
========= ========
</TABLE>
F-19
<PAGE> 81
(b) Geographic Segments
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Revenue
Canada........................................................................................ $ 255,016 $193,579
United States................................................................................. 133,959 89,758
--------- --------
Consolidated.................................................................................. $ 388,975 $283,337
========= ========
Operating profit after deducting depreciation and amortization
Canada........................................................................................ $ 33,143 $ 7,738
United States................................................................................. 6,146 16,681
--------- --------
Consolidated.................................................................................. $ 39,289 $ 24,419
========= ========
Identifiable assets
Canada........................................................................................ $ 593,134 $395,580
United States................................................................................. 384,306 192,609
Discontinued operations....................................................................... 120,511 165,526
---------- --------
Consolidated.................................................................................. $1,097,951 $753,715
========== ========
</TABLE>
NOTE 19 RELATED PARTY TRANSACTIONS
(a) Amounts receivable include loans of $1,490,000 (1996 -- $1,490,000)
advanced, in connection with the Canadian tax liabilities incurred as a
result of the reorganization of the Company in 1990, to shareholders which
are holding companies controlled by a director of the Company. The loans are
interest-free and mature in December 1997.
(b) Effective April 1, 1994, the Company sold substantially all of its
industrial and non-resort residential properties under development in
British Columbia and Washington State to two partnerships formed by a group
of investors. The managing general partners of the partnerships are
corporations controlled by a director of the Company.
The consideration for the sale included a vendor takeback note for
$31,700,000 which was originally scheduled to be fully repaid, with interest
at 10.75% per annum, in semi-annual instalments by September 30, 1997. To
June 30, 1997, the partnerships had repaid $12,160,000 and the repayment of
the balance, with interest at 10% per annum, has been renegotiated as
follows:
<TABLE>
<S> <C>
September 30, 1997.............................................................. $ 3,500
March 31, 1998.................................................................. 3,500
September 30, 1998.............................................................. 3,500
March 31, 1999.................................................................. 3,500
September 30, 1999.............................................................. 5,540
-------
$19,540
=======
</TABLE>
Subject to full repayment by September 30, 1999 and a 1% extension fee, the
partnerships have the right to defer any principal payment for up to six
months so long as only one payment is deferred at any one time. The
partnerships paid $2,627,000 of interest on the note receivable during the
year ended June 30, 1997, and at June 30, 1997, $523,000 (1996 -- $775,000)
of interest was accrued and outstanding.
The Company has committed to provide the partnerships various credit
facilities up to September 30, 1999, including a $7,000,000 (reducing to
$5,500,000 at September 30, 1998) revolving line of credit and a
non-revolving loan for $1,800,000, to fund costs in connection with a
specific project. These loans earn interest at prime plus 2%. At June 30,
1997, $8,421,000 (1996 -- $8,015,000) was advanced under these facilities
and accrued and unpaid interest amounted to $46,000. In addition, the
Company has agreed to provide financial assistance by way of continuing
liability under the assumed bank indebtedness and liability in respect of
certain letters of credit. The Company earns fees in consideration for this
financial assistance. The partnerships have guaranteed repayment of these
facilities and indemnified the Company for any losses under them.
The Company has engaged the partnerships to provide specified services in
connection with the development, property management, marketing and sale of
its remaining non-resort properties. For the year ended June 30, 1997, the
Company incurred net costs of $2,353,000 (1996 -- $1,719,000) in respect of
these services.
(c) Bank and other indebtedness at June 30, 1997 includes the following amounts
due to significant corporate shareholders of the Company who are represented
on the Company's Board of Directors:
i. a convertible loan of $4,300,000 (1996 -- $4,300,000), which bears
interest at 8% per annum, is collateralized by a second mortgage over a
non-resort property and the limited partnership interest (note 8) and is
due on August 31, 1999;
ii. a loan of U.S. $1,284,000 (1996 -- U.S. $1,284,000), which bears
interest at prime plus 1.25% per annum, is collateralized by a property
under development and is due on April 30, 1998.
(d) All related party transactions described above have been recorded at the
amounts paid or received as established and agreed upon by the Company and
the related party.
F-20
<PAGE> 82
NOTE 20 DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in Canada. The principles
adopted in these financial statements conform in all material respects to those
generally accepted in the United States except as summarized below:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net income from continuing operations in accordance with Canadian GAAP........................... $ 28,295 $ 19,657
Effects of differences in accounting for:
Extinguishment of options and warrants (b)..................................................... (303) (399)
Investment income (c).......................................................................... (95) (370)
Cost of sales pursuant to SFAS 109 (g)......................................................... (258) --
Depreciation pursuant to SFAS 109 (g).......................................................... (335) --
Amortization of negative goodwill pursuant to SFAS 109 (g)..................................... 1,457 --
Provision for deferred taxes pursuant to SFAS 109 (g).......................................... (652) --
-------- --------
Net income from continuing operations in accordance with United States GAAP...................... 28,109 18,888
-------- --------
Results of discontinued operations in accordance with Canadian GAAP.............................. (1,202) (2,056)
Effects of differences in accounting for:
Depreciation (a)............................................................................... (760) (854)
Extinguishment of options and warrants (b)..................................................... -- (1,451)
Financial instruments (f)...................................................................... 118 1,237
Income tax effect of depreciation adjustment................................................... 304 --
-------- --------
Results of discontinued operations in accordance with United States GAAP......................... (1,540) (3,124)
-------- --------
Net income in accordance with United States GAAP................................................. 26,569 15,764
Opening retained earnings in accordance with United States GAAP (d).............................. 85,225 73,147
Common share dividends........................................................................... (4,592) (3,686)
-------- --------
Closing retained earnings in accordance with United States GAAP.................................. $107,202 $ 85,225
======== ========
Weighted average number of common shares outstanding and common stock equivalents (in
thousands)..................................................................................... 28,674 23,388
Income per common share (primary and fully diluted; in dollars)
Income from continuing operations.............................................................. $ 0.98 $ 0.81
Net income..................................................................................... $ 1.01 $ 0.67
Capital stock in accordance with Canadian GAAP................................................... $382,270 $198,179
Effects of differences in accounting for:
Extinguishment of options and warrants (b)..................................................... 2,153 1,850
Shareholder loans (e).......................................................................... (1,236) (1,606)
Financial instruments.......................................................................... (1,627) (1,627)
-------- --------
Capital stock in accordance with United States GAAP.............................................. 381,560 196,796
Closing retained earnings in accordance with United States GAAP.................................. 107,202 85,225
Foreign currency translation adjustment.......................................................... 4,149 2,996
-------- --------
Shareholders' equity in accordance with United States GAAP....................................... $492,911 $285,017
======== ========
</TABLE>
(a) Depreciation
Certain of the Company's revenue producing properties are depreciated using
the sinking fund method of depreciation. This method is not allowed under
United States GAAP, accordingly depreciation has been recalculated over the
estimated useful life (25 -- 40 years) of each property using the
straight-line method.
The net impact is a reduction of $938,000 at June 30, 1997 (1996 --
$938,000) in resort properties and a reduction of $2,761,000 at June 30,
1997 (June 30, 1996 -- $2,002,000) in non-resort properties.
(b) Extinguishment of Options and Warrants
Payments made to extinguish options and warrants can be treated as capital
items under Canadian GAAP. These payments would be treated as income items
under United States GAAP.
(c) Investment Income
Earnings of equity accounted investees have not been fully tax effected for
Canadian GAAP. Under United States GAAP, these earnings must be tax
effected, normally using capital gains rates. Based on United States tax
regulations, additional tax of $95,000 would be recognized in the year ended
June 30, 1997 (June 30, 1996 -- $370,000).
(d) Retained Earnings
Opening retained earnings in accordance with United States GAAP for the year
ended June 30, 1996 includes the effect of recalculating depreciation
expense as described in (a) above. The net decrease in retained earnings was
$2,085,000.
F-21
<PAGE> 83
(e) Shareholders' Equity
The Company accounts for loans provided to senior employees for the purchase
of shares as amounts receivable. Under United States GAAP, these loans,
totalling $1,236,000 and $1,606,000 as at June 30, 1997 and 1996,
respectively, would be deducted from share capital.
(f) Financial Instruments
Under Canadian GAAP, the components of convertible debt instruments are
classified as a liability or as equity in accordance with the substance of
the contractual arrangement (note 2). The interest expense included in the
loss from discontinued operations would not exist under United States GAAP
as there is no such requirement.
(g) Income Taxes
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
109, Accounting for Income Taxes, for the financial statement amounts
presented under United States GAAP. SFAS 109 requires that deferred tax
liabilities or assets be recognized for the difference between assigned
values and tax bases of assets and liabilities acquired pursuant to a
business combination except for non-tax deductible goodwill and unallocated
negative goodwill. The effect of adopting SFAS 109 increases the carrying
values of certain balance sheet amounts as follows:
<TABLE>
<S> <C>
Ski and resort assets....................................................... $12,959
Negative goodwill........................................................... 4,786
Properties.................................................................. 4,589
Deferred income tax asset................................................... 8,277
Deferred income tax liability............................................... 20,831
</TABLE>
(h) Information Relating to Cash Flow
The bank and other indebtedness and issue of common shares related to the
financing of the acquisitions described in Notes 3(a), (b) and (c) are
non-cash components of the acquisitions and under United States GAAP would
not be included as financing and investing activities. Accordingly,
financing cash flows would be decreased by $128,566,000 (1996 --
$44,315,000) and investing cash flows would be similarly decreased for both
years.
F-22
