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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, 1999 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>
7011 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
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For annual reports, indicate by check mark the information filed with this Form:
[X] Annual information form [X] Audited annual financial statements
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.
43,254,386 common shares as at June 30, 1999
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.
Yes [ ] No [X]
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.
Yes [X] No [ ]
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: October 12, 1999
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LOGO
ANNUAL INFORMATION FORM
INTRAWEST CORPORATION
Suite 800
200 Burrard Street
Vancouver, B.C. V6C 3L6
September 13, 1999
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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................................ 6
The Golf Industry........................................... 7
Resort Management and Development........................... 7
Resort Operations......................................... 7
Mountain Resort Properties............................. 7
Warm-Weather Destination Properties.................... 11
Other Resort Properties................................ 12
Sources of Resort Operations Revenue................... 12
Sponsorship and Special Events......................... 14
Information Technology................................. 14
Resort Marketing and Sales............................. 15
Resort Real Estate Development............................ 15
The Development Process................................ 16
Real Estate Properties................................. 18
Resort Club............................................ 23
Competition............................................... 24
Legal and Regulatory Matters.............................. 24
Non-Resort Assets........................................... 24
Employees................................................... 26
Selected Consolidated Financial Information................. 26
Management's Discussion and Analysis........................ 30
Market for Securities....................................... 40
Directors and Officers...................................... 40
Additional Information...................................... 42
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, 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 or golf industries 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 these industries, including The National
Ski Areas Association, The Canadian Ski Council, the White Book of Ski Areas and
the National Golf Foundation.
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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 the 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 ten mountain 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, Blue Mountain in Ontario,
Tremblant and Mont Ste. Marie in Quebec, Stratton in Vermont, Snowshoe in West
Virginia, Copper in Colorado, Mountain Creek in New Jersey and Mammoth in
California. During the 1998/99 ski season the Company's network of resorts
generated approximately 6.4 million skier visits (including Blue Mountain which
was acquired in January 1999), which is more than the amount generated by any
other North American group of affiliated mountain resorts. Intrawest also holds
a 17.6% equity interest in Compagnie Des Alpes ("CDA"), a French public company
which is the world's largest ski operator in terms of skier visits, and a 45%
equity interest in Alpine Helicopters Ltd. ("Alpine"), the parent company of
Canadian Mountain Holidays Inc. ("CMH"), a provider of helicopter destination
skiing and helicopter-assisted mountaineering and hiking in southeastern British
Columbia.
Intrawest is expanding into the development and operation of warm-weather
destination resorts with the 1998 acquisitions of Sandestin Resorts, Inc.
("Sandestin"), the largest resort and residential community in northwestern
Florida, and of the assets of the Raven Golf Group ("Raven"), including two
resort-quality golf courses in Arizona.
Intrawest is North America's largest mountain resort real estate developer.
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, Squaw Valley in California and Solitude in Utah and has an
exclusive right to purchase sites for multi-family developments at Sun Peaks in
British Columbia. Intrawest owns or has rights to acquire land on which it
expects to develop and sell approximately 22,400 units over the next 12 to 15
years. The Company's resort development formula links the staged expansion of
ski, golf and other resort operations with the planning, design and managed
development of architecturally distinct four-season resort villages. 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. Resort club locations are
in operation at Whistler/Blackcomb and Tremblant, and in Hawaii and Palm Desert,
California.
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CORPORATE STRUCTURE
The following is a list of the Company's principal subsidiaries and
partnerships accounted for as subsidiaries of the Company as at June 30, 1999,
indicating the place of incorporation/registration, and showing the percentage
of equity interest beneficially owned by the Company.
<TABLE>
<CAPTION>
PLACE OF PERCENTAGE
INCORPORATION/ EQUITY INTEREST
REGISTRATION HELD BY THE COMPANY
---------------- -------------------
<S> <C> <C>
Intrawest Resort Corporation............................... British Columbia 100
Blackcomb Skiing Enterprises Limited Partnership........... British Columbia 77
Whistler Mountain Resort Limited Partnership............... British Columbia 77
Mont Tremblant Resorts and Company, Limited Partnership.... Quebec 100
IW Resorts Limited Partnership............................. British Columbia 100
Intrawest Resort Ownership Corporation..................... British Columbia 100
Intrawest U.S. Holdings Inc. .............................. Delaware 100
Intrawest Luxembourg S.A................................... Luxembourg 100
Intrawest Sandestin Company, L.L.C......................... Delaware 95
Keystone/Intrawest L.L.C................................... Delaware 50
Copper Mountain, Inc....................................... Delaware 100
Great Gorge Resort, Inc.................................... New Jersey 100
Snowshoe Mountain, Inc..................................... West Virginia 100
Stratton Ski Corporation................................... Delaware 100
</TABLE>
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.
1995
- In November 1995 Intrawest purchased all of the assets of Snowshoe
Mountain 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.
- 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
- In March 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.
- In March 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.
- In March 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.
- In March 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").
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- In March 1997 the Company's Common Shares were listed for trading on the
New York Stock Exchange.
- In April 1997 the Company raised gross proceeds of $93 million from a
public offering of 4,000,000 Common Shares in Canada and the United
States.
1998
- In November 1997 the Company raised gross proceeds of $125 million from
a public offering of unsecured debentures in Canada.
- In November 1997 Intrawest increased its percentage ownership in Mammoth
Mountain Ski Area from 33% to 51%.
- In January 1998 Intrawest's percentage ownership in Mammoth Mountain Ski
Area increased from 51% to 58%.
- In February 1998 Intrawest completed its acquisition of Mountain Creek
(formerly called Vernon Valley/ Great Gorge), a ski area, summertime
waterpark and family entertainment centre in New Jersey.
- In June 1998 the Company raised gross proceeds of $110 million from a
public offering of 3,850,000 Common Shares in Canada and the United
States.
- In July 1998 Intrawest completed its acquisition of Sandestin, the owner
of a resort and residential community in northwestern Florida.
- In July 1998 Intrawest completed its acquisition of a 15.7% equity
interest in and alliance with CDA, a French public company which is the
world's largest ski operator in terms of skier visits.
- In July 1998 Intrawest completed its acquisition of Raven golf group,
owner of two golf courses in Arizona.
- In August 1998 the Company raised gross proceeds of US$125 million from
a public offering of unsecured notes in Canada and the United States.
- In September 1998 Intrawest completed its acquisition of Breeze, Inc.
("Breeze") and Max Snowboard, Inc. ("Max"), ski and snowboard equipment
rental companies.
- In December 1998 the Company raised gross proceeds of US$75 million from
a private offering of unsecured notes in Canada and the United States.
1999
- In January 1999 Intrawest completed its acquisition of a 50% equity
interest in Blue Mountain Resorts Limited ("Blue Mountain Resorts"), the
owner and operator of the largest mountain resort in Ontario.
- In February 1999 Intrawest completed its acquisition of a 45% equity
interest in Alpine, the parent company of CMH, a provider of helicopter
destination skiing and helicopter-assisted mountaineering and hiking in
southeastern British Columbia.
- In April 1999 the Company raised gross proceeds of $87.6 million from a
public offering of 3,450,000 Common Shares in Canada.
- In April 1999 Intrawest's percentage ownership in Mammoth Mountain Ski
Area increased from 58% to 59.5%.
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THE MOUNTAIN RESORT INDUSTRY
There are approximately 780 ski resorts in North America of which 510 are
located in the United States and 270 are located in Canada. During the 1998/99
ski season, these resorts attracted approximately 69.5 million skier visits
(52.1 million to U.S. ski areas and 17.4 million to Canadian ski areas). The
geographic distribution of North American skier visits during the 1998/99 ski
season was as follows:
<TABLE>
<CAPTION>
PROPORTIONATE
GEOGRAPHIC REGION SKIER VISITS SHARE INTRAWEST RESORT LOCATED IN REGION
----------------- ------------ ------------- ----------------------------------
(MILLIONS) (%)
<S> <C> <C> <C>
Western Canada......................... 8.5 12.2 Whistler/Blackcomb, Panorama
Quebec................................. 5.7 8.2 Tremblant, Mont Ste. Marie
Other Canada........................... 3.2 4.6 Blue Mountain
U.S. Rocky Mountains................... 18.3 26.3 Copper
Northeast U.S.......................... 12.5 18.0 Stratton, Mountain Creek
Pacific West U.S....................... 11.1 16.0 Mammoth
Midwest U.S............................ 5.9 8.5 --
Mid-Atlantic U.S....................... 4.3 6.2 Snowshoe
------- ---------
69.5 100.0
======= =========
</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 1998/99 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
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 780 in 1999. 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 leading edge of the "echo boom"
generation has entered 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 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
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to have a positive impact on the ski industry. In the United States, skier
visits attributable to snowboarders have increased at a compound annual rate of
growth of 18% per year over the past three years and snowboarders are currently
estimated to represent 23% 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.
THE GOLF INDUSTRY
There are approximately 17,500 golf courses in North America -- 15,700 in
the United States and 1,800 in Canada. In 1998 there were approximately 26
million active golfers in the United States and 5 million in Canada,
representing about a 13% participation rate. While participation has been
relatively stable over the last few years, consumer spending on golf has
increased significantly, from US$7.8 billion in the United States in 1986 to
US$22 billion in 1997. Revenue per round has been driven up by increases in
greens fees and higher spending on equipment, lessons, cart rental and other
services.
The same demographic trends that are impacting the mountain resort industry
are affecting golf. The aging of the "baby boom" generation is expected to
increase the number of rounds played and the average revenue per round. Golfers
over the age of 50 currently account for approximately 25% of total golfers but
they play almost 50% of the total rounds each year and they spend over 50% more
per player than younger golfers. In addition, the largest age group of beginners
to golf is the 18-29-year old group and the leading edge of the "echo boom"
generation turned 18 in 1996. Equipment innovations, such as over-sized golf
club heads, are encouraging broader participation by facilitating learning and
enhancing performance.
The ownership of golf courses in North America is highly fragmented. In the
United States there are approximately 11,000 different golf course owners and
the top 15 course owners/managers have only approximately 5% of the market in
aggregate. Similarly in Canada, less than 2% of golf courses are owned or
operated by multi-course operators. Consolidation of the golf industry has begun
as many independent owners lack the necessary capital to improve or maintain
their courses, there is a limited supply of experienced golf operating
personnel, and cost and marketing efficiencies are enhanced by the operation of
multiple golf courses. Intrawest expects to capitalize on this consolidation
trend by acquiring additional golf courses in the future.
RESORT MANAGEMENT AND DEVELOPMENT
RESORT OPERATIONS
MOUNTAIN RESORT PROPERTIES
The following table summarizes certain key statistics of each of the
Company's mountain resort locations.
<TABLE>
<CAPTION>
INTRAWEST AVERAGE SNOW- 1998/99
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/Blackcomb........ 77 7,071 5,280 227 36(15) 360 7 2,160
Mammoth................... 59.5(1) 3,500 3,100 185 36(10) 350 17 957
Copper.................... 100 2,433 2,699 125 21(5) 255 16 850
Tremblant................. 100 602 2,131 92 12(7) 140 75 677
Snowshoe.................. 100 200 1,598 56 14(2) 185 99 432
Blue Mountain............. 50(2) 251 720 39 15(3) 100 94 428
Stratton.................. 100 583 2,003 90 14(2) 180 75 407
Mountain Creek............ 100 168 1,040 47 11(3) 90 100 266
Panorama.................. 100 1,202 4,047 100 10(1) 110 35 164
Mont Ste. Marie........... 100 108 1,250 24 3(2) 120 90 66
</TABLE>
- ---------------
(1) Each of the shareholders of Mammoth Mountain Ski Area ("MMSA") (including
the Company) has a pro rata right of first refusal to purchase any shares of
MMSA to be sold by any other shareholder to third parties.
(2) The Company acquired its 50% equity interest in Blue Mountain Resorts, the
owner and operator of Blue Mountain, on January 28, 1999.
WHISTLER/BLACKCOMB. Whistler/Blackcomb, located approximately 75 miles
northeast of Vancouver, British Columbia, has been rated as North America's
number one ski resort for the past eight years by various North
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American ski industry publications. 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 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 $137 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
1,078,000, a compound annual growth rate of 11%. 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 $108 million, comprised of approximately $63 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
continue to make capital improvements to Whistler's ski facilities including new
lifts and trails, additional snowmaking coverage and expanded restaurant
facilities.
The Company operates a 3,414-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 greatest of any North American ski resort.
Blackcomb, the only major North American mountain resort with two glaciers, is
able to offer skiing and snowboarding until early August. As a result, Blackcomb
is a leading summer 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 greatest 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 the lifts and ski runs, and
some of the buildings, are located on land leased to Whistler by the Province of
British Columbia under a ski area agreement which expires in 2032. An annual
lease payment currently equal to 2% of defined gross revenue is payable by
Whistler under this agreement.
The Company is the largest retailer in Whistler Resort with 28 retail and
equipment rental shops. The Company also has food and beverage operations at 13
restaurants and bars, having a total seating capacity of approximately 6,200.
Whistler/Blackcomb's 1,400-person ski and snowboard school offers classes
for both adults and children. 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 Jr., 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 well-established year-round tourist
attraction.
MAMMOTH. Intrawest acquired a 33% interest in Mammoth effective December
1995, increasing its interest to 51% in November 1997, 58% in January 1998 and
59.5% in April 1999. 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 5,000 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 has 185 trails which are serviced by 36 lifts, including 10
high-speed quad chairlifts. All of Mammoth's lifts, ski trails and related
assets are located on land leased to
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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 six 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 the newly opened Sierra Star Golf Course at Mammoth. Yosemite
National Park, a two-hour drive from Mammoth, draws visitors to the region from
around the world.
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$62 million in capital improvements, including
approximately US$23 million on its restaurant facilities and service buildings
and approximately US$39 million on lifts, vehicles and other equipment. The
Company completed its acquisition of Copper in March 1997 and intends to
continue to make capital improvements at Copper including 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 five 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 125 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 12 retail shops and three equipment rental shops, and food and
beverage operations at ten 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 and Eagle Counties. 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.
TREMBLANT. Tremblant, located in the Laurentians, 90 miles north of
Montreal, Quebec, has been rated as the number one ski resort in the East by SKI
magazine in three of the past four years. 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 significant 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 602-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 greatest vertical drop in eastern Canada. Tremblant has 92 trails which are
serviced by 12 lifts, including seven 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
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<PAGE> 12
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 11
restaurants, cafes and bars, having a total seating capacity of approximately
2,700.
Tremblant has been designed as a four-season resort which emphasizes a
unique French Canadian charm and is a text-book example of staged village
development. Its summer attractions include swimming and boating on nine-mile
long Lac Tremblant at the base of the mountain, golf at Le Geant and Le Diable,
two 18-hole championship golf courses owned by the Company, tennis, hiking and
mountain biking. 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. The 36,000-square foot convention
centre, which can accommodate 1,800 delegates, has increased 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 1998.
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 November 1995 and has invested significantly
in new capital improvements, mainly consisting of lifts, snowmaking and terrain
expansion. 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 56 trails which are serviced by 14 lifts, including two high-speed
chairlifts. 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 ten retail shops, two of which are concessioned to third-party
operators. The resort also owns and operates 11 restaurants and ten bars, having
a total seating capacity of approximately 2,100. 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, 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.
BLUE MOUNTAIN. Blue Mountain, Ontario's largest mountain resort, is
located approximately 100 miles northwest of Toronto on the southern shores of
Georgian Bay. Skiing began at Blue Mountain in 1941. Intrawest acquired its 50%
interest in Blue Mountain in January 1999. Blue Mountain has a 251-acre ski area
facility with a vertical drop of 720 feet. Blue Mountain's 39 trails are
serviced by 15 lifts, including 3 high-speed chairlifts. Blue Mountain has food
and beverage operations at five locations having a total seating capacity of
approximately 2,800.
Blue Mountain's summer amenities include an 18-hole golf course, a driving
range, a waterpark, alpine slides and a waterfront park on Georgian Bay.
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
significantly 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 583-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 14 lifts, including one high-speed chairlift and one high-speed
gondola.
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<PAGE> 13
Stratton has 20 separate retail shops and food and beverage operations at
12 restaurants and bars, having a total seating capacity of approximately 2,300.
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.
MOUNTAIN CREEK. Mountain Creek, located approximately 50 miles from New
York City, is the closest major skiing complex to the metropolitan New York
area.
Intrawest acquired Mountain Creek in February 1998. The ski area includes
1,100 acres of land encompassing three peaks -- Vernon Valley, Great Gorge South
and Great Gorge North -- currently providing approximately 168 acres of skiable
terrain that can be readily expanded, and a vertical drop of 1,040 feet, the
greatest in the New York metropolitan area. The resort offers night skiing on
all of its skiable terrain, and the Company owns all the land on which the ski
facilities are located. Mountain Creek's summer amenities include a 280-acre
theme park, five mountain-top lakes and a 27-hole golf course (not owned by the
Company). Approvals are in place for an additional 27-hole golf course on the
Company's land at the top of the mountain. In the first half of the 1990s,
summer visits to the resort averaged 450,000, about one-third more than winter
skier visits.
PANORAMA. Panorama is located in the Purcell Range of the Canadian Rockies
approximately 12 miles from Invermere, British Columbia. The resort is a
3 1/2-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 greatest in Canada surpassed only by Blackcomb and
Whistler.
The Company operates a 1,202-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
100 trails which are serviced by 10 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 has four retail shops and food and beverage operations at six
restaurants and bars, having a total seating capacity of approximately 850.
Panorama offers access to some of the best heli-skiing in the world. All of
the commercial facilities at the resort, except for the heli-skiing operation,
are owned and operated by the Company. Panorama's summer amenities include an
18-hole championship golf course 50% owned by the Company. Other summer
attractions in the area include whitewater rafting and kayaking, horseback
riding, tennis and hot springs at Radium and Fairmont.
MONT STE. MARIE. Mont Ste. Marie is located in the Outaouais region 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 108-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. Mont Ste. Marie has food and beverage operations at two locations
having a total seating capacity of approximately 600.
WARM-WEATHER DESTINATION PROPERTIES
SANDESTIN. Sandestin is located in Destin, in northwestern Florida, a
major tourist, second-home and retirement destination. The resort has a one-half
mile of frontage on the Gulf of Mexico and 6 1/2 miles of frontage on
Choctawhatchee Bay, which forms part of the Intracoastal waterway. Sandestin is
the only resort in northwestern Florida that offers both beach and bay access
directly from the property.
Sandestin has 54 holes of golf on three separate courses and an additional
18-hole course is currently under construction. The resort also features 32,300
square feet of conference facilities, a 37,000-square foot retail centre
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<PAGE> 14
which accommodates 31 shops, a 98-slip full-service marina suitable for craft up
to 100 feet in length, 13 tennis courts, management of approximately 700
residential rental units, and various restaurants, bars and other recreational
amenities.
RAVEN. Raven owns and operates two highly rated daily fee golf courses,
The Raven at South Mountain in Phoenix and The Raven at Sabino Springs in
Tucson. In addition, Raven has a management contract for another course to be
constructed in Carlsbad, California.
The Raven concept is to create superior public golf facilities,
complemented by attention to maintenance and service quality. The two Raven
courses were rated 5th and 7th for quality of service among 5,300 golf courses
across North America included in a 1998 survey of subscribers conducted by Golf
Digest magazine. In addition both courses were rated in the top ten public golf
courses in Arizona in 1997 by Golf Digest.
OTHER RESORT PROPERTIES
CANADIAN MOUNTAIN HOLIDAYS. In February 1999 the Company acquired its 45%
equity interest in Alpine, the parent company of CMH, which provides helicopter
destination skiing and helicopter-assisted mountaineering and hiking in
southeastern British Columbia. Alpine also provides non-leisure helicopter
services on a contract basis. Approximately 75% of Alpine's annual revenue is
generated from its leisure business operations.
CMH, a leader in the heli-skiing industry, offers heli-skiing vacations in
11 mountain areas and its operations include 30 helicopters, six remote lodges
and five additional skiing/hiking areas.
SOURCES OF RESORT OPERATIONS REVENUE
Intrawest's resort operations revenue from the ski and resort and
warm-weather segments is derived from a wide variety of sources including lift
ticket sales, retail and rental shops, food and beverage, lodging and property
management, ski school, golf, tennis and other summer activities. Sales of lift
tickets represent the single largest source of resort operations revenue (41%
for fiscal 1999). 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 44% in
fiscal 1995 to 59% in fiscal 1999. This increase is the result of the Company's
expansion into warm-weather destination properties and the ongoing expansion of
the range of services offered by the Company at each resort.
The following chart provides a breakdown of the sources of the Company's
ski and resort operations and warm-weather operations revenue during fiscal
1999. See "Selected Consolidated Financial Information -- Segmented Information"
for segmented information.
<TABLE>
<CAPTION>
REVENUE PROPORTION
----------- ----------
(MILLIONS
OF DOLLARS) (%)
<S> <C> <C>
Lift tickets................................................ $ 235.0 40.7
Retail and rental shops..................................... 98.2 17.0
Food and beverage service................................... 82.8 14.3
Lodging and property management............................. 58.0 10.1
Ski school.................................................. 33.6 5.8
Golf........................................................ 32.1 5.6
Other....................................................... 38.0 6.5
----------- ---------
$ 577.7 100.0
=========== =========
</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,
single- and multi-day tickets, and heli-skiing revenue. 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
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<PAGE> 15
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 fiscal 1995 revenue from lift ticket sales has increased from
$53.9 million to $235.0 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 AND RENTAL SHOPS. The retail and equipment rental operations
contribute significantly to overall resort profitability. Revenue from the
Company's retail division increased from $17.8 million in fiscal 1995 to $98.2
million in fiscal 1999. The increase is attributable primarily to acquisitions
and to increased retail sales and equipment rental revenue at 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 122 retail and ski
rental shops containing approximately 200,000 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.
The Company also owns and operates the 43-store chain of Breeze/Max sport
retail and ski and snowboard rental shops containing approximately 77,000 square
feet of space. This chain has locations in the western United States.
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 mountain 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 107
different food and beverage facilities at its mountain resorts with more than
26,000 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 $11.5 million in fiscal 1995 to $82.8 million in fiscal 1999,
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 5,100 lodging
units at its mountain resorts. The lodging division performs a full complement
of guest services including reservations, property management, housekeeping and
brokerage operations. Each mountain 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 $9.7 million in fiscal 1995 to $58.1 million
in fiscal 1999, principally due to acquisitions and the development of new
rental accommodations at Tremblant.
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<PAGE> 16
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 mountain
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 3,400 instructors on its ski school staff
across all of its mountain resorts. Over the past several years, the Company has
initiated programs to increase its ski school business. Revenue from ski schools
increased from $6.5 million in fiscal 1995 to $33.5 million in fiscal 1999,
principally due to acquisitions and the expansion of ski school programs at
Whistler/Blackcomb and Tremblant.
GOLF. Intrawest entered the golf business with its acquisition of Stratton
in fiscal 1995 and, since that time, annual golf revenue has grown to $32.1
million in 1999. At its mountain resorts, the Company owns and operates
championship golf courses at Tremblant, Mont Ste. Marie, Copper, Stratton,
Snowshoe and Mammoth. The Company also owns an additional five golf courses at
its warm-weather resort properties in Florida and Arizona. Stratton also offers
a golf school which attracts students from throughout eastern North America.
Golf courses are currently under construction at Sandestin in Florida and Three
Peaks in Colorado. Golf is a primary attraction in the summer and shoulder
seasons, providing the Company with revenue from greens 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 continue to be an increasingly significant component
of resort operations revenue in the future.
OTHER. The Company generates additional revenue from diverse sources such
as the waterpark at Mountain Creek, athletic club fees at Sandestin and
community services revenue (e.g. telephone and other utility services) at most
of its mountain resorts.
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 exposure across North America. In addition, the Company's
leading industry position, coupled with the demographics of its customer base,
make it an attractive partner for prospective sponsors. The Company's business
sponsors include Coca Cola, Fuji Films, Nestle, Evian and Telus/Bell/MCI
Worldcom.
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. Whistler,
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
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<PAGE> 17
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 1999 were approximately $23.8 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, strategic
partnering and sponsorship initiatives. The Company has commenced initiatives 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 mountain resort real estate developer.
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 approximately $1.4 billion 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.
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<PAGE> 18
The following table summarizes certain key statistics relating to each of
the Company's resort real estate holdings.
<TABLE>
<CAPTION>
AS AT JUNE 30, 1999
DATE --------------------------------------------------------------------------------
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 DEVELOPMENT DEVELOPMENT
------ ------------ ----------- ----------- ----------- ---------- ----------- -----------
(SQ FT) (SQ FT) (SQ FT)
<S> <C> <C> <C> <C> <C> <C> <C>
Blackcomb(1)................ 1987 2,627 60 77 62,000 -- --
Tremblant................... 1992 1,360 324 2,979 124,000 23,000 10,000
Keystone(2)................. 1995 546 445 2,077 91,000 37,000 190,000
Sun Peaks................... 1995 79 55 142 5,000 -- --
Panorama.................... 1995 145 132 1,249 19,000 -- 10,000
Stratton.................... 1997 102 108 1,088 -- -- 30,000
Snowshoe.................... 1997 112 123 906 9,000 13,000 43,000
Mammoth(3).................. 1998 22 261 1,991 -- 4,000 129,000
Copper...................... 1998 30 306 748 -- 60,000 50,000
Whistler(4)................. 1998 47 47 767 -- -- 108,000
Sandestin(5)................ 1999 164 252 2,200 -- -- 200,000
Solitude(6)................. 1999 -- 83 159 -- 6,000 7,000
Three Peaks(7).............. 2000 -- 75 319 -- -- --
Squaw Valley................ 2000 -- -- 574 -- -- 123,000
Blue Mountain............... 2000 -- -- 1,900 -- -- 148,000
Mountain Creek.............. 2001 -- -- 1,670 -- -- 155,000
----- ----- ------ ------- ------- ---------
5,234 2,271(8) 18,846(8) 310,000 143,000(8) 1,203,000(8)
===== ===== ====== ======= ======= =========
</TABLE>
- ---------------
(1) The Company has a 77% interest in Blackcomb Skiing Enterprises Limited
Partnership. The information on Blackcomb in this table reflects 100% of the
partnership's land holdings.
(2) The Company has a 50% interest in a joint venture that owns and is
developing the land at Keystone (certain projects are at 60%). The
information on Keystone in this table reflects 100% of the joint venture's
land holdings.
(3) The Company owns land at Mammoth for the development of approximately 1,200
residential units and 130,000 square feet of commercial space and
participates in a partnership which owns land for the development of
approximately 1,100 residential units. The Company's interest in this
partnership is 75%. The information on Mammoth in this table reflects 100%
of the partnership's land holdings.
(4) The Company has a 77% interest in Whistler Mountain Resort Limited
Partnership. The information on Whistler in this table reflects 100% of the
partnership's land holdings.
(5) The Company has a 95% interest in Sandestin. The information on Sandestin in
this table reflects 100% of the resort's land holdings.
(6) The Company entered into an option agreement with Solitude Ski Corporation
in September 1998 pursuant to which the Company has the right to acquire
land at the base of Solitude Mountain.
(7) The Company has a 50% interest in a joint venture that owns and is
developing the land at Three Peaks. The information on Three Peaks in this
table reflects 100% of the joint venture's land holdings.
(8) The Company's pipeline of real estate projects comprises residential units
and commercial space under development and held for future development which
aggregate 22,463 units.
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.
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 one of the
primary considerations.
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, Copper and
Mountain Creek were acquired at low cost in
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<PAGE> 19
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 land owner under which land is
only paid for as completed units are sold. At Mammoth, Intrawest secured a
portion of its land holdings by forming a partnership with the land owner under
which land is only paid for as completed units are sold. 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
to $3.0 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 includes
consideration of 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, 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 who oversees the development program at multiple 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, primarily through established revolving credit facilities.
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.
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.
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.
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<PAGE> 20
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. A new marketing approach was
introduced 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. Since fiscal 1995 the Company has pre-sold on average approximately
85% of its units prior to the completion of construction.
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, 1999, Intrawest had developed approximately 310,000 square
feet of commercial space at its resort real estate holdings. The Company manages
or owns certain commercial space at its resorts that is occupied by third party
operators and receives rental revenue, which in fiscal 1999 amounted to
approximately $8.1 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.
BLACKCOMB. Since 1986 the Company has exercised the options on and
developed the majority of its land holdings at the base of Blackcomb. The
Company is developing, or has land planned for the development of, approximately
140 residential units. The Company expects that the development of these lands
will take place over a period of approximately three 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 is developing, or has land planned for the
development of, approximately 3,300 residential units and 33,000 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.
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
neighbourhoods. The Company has developed or plans to develop approximately
1,000 residential units and 208,000 square feet of commercial space in the new
River Run Village, 90 residential units around a planned golf course and 1,900
residential units and 110,000 square feet of commercial space in areas adjacent
to the existing real estate and new mountain village. The Company expects that
the development of these lands will take place over a period of 10 to 15 years.
SUN PEAKS. Since 1995 the Company has exercised the rights to develop 134
residential units from the owner of Sun Peaks. The Company has the right to
develop an additional 142 residential units. This right expires on the earlier
of June 21, 2002 and the date when the Company has purchased eight sites and all
buildings on the sites have been substantially completed.
PANORAMA. Intrawest owns approximately 400 acres of developable land at
Panorama in the resort village and adjacent to the Greywolf Golf Course. The
Company is developing, or has land planned for the development of, approximately
1,400 residential units and 10,000 square feet of commercial space. The Company
expects that the development of these lands will take place over a period of 12
to 15 years.
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<PAGE> 21
STRATTON. The Company is developing, or has land planned for the
development of, approximately 1,200 residential units and 30,000 square feet of
commercial space. The bulk of the development will expand the existing village
at the base of Stratton Mountain. The Company expects that the development of
these lands will take place over a period of 12 to 15 years.
SNOWSHOE. With its acquisition of Snowshoe, the Company acquired
approximately 200 acres of land which may be developed to support the existing
village. The Company is developing, or has land planned for the development of,
approximately 1,000 residential units. The Company expects that the development
of these lands will take place over a period of 12 to 15 years.
MAMMOTH. The Company is developing a new North Village at the base of
Mammoth Mountain which is planned for the development of approximately 800
residential units and 133,000 square feet of commercial space. The Company also
is developing, or has land available for the development of, approximately 350
ski-in, ski-out units and 1,100 residential units on the Sierra Star Golf
Course. The Company expects that the development of these lands will take place
over a period of 10 to 12 years.
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 the
Company is developing, or has land planned for the development of, approximately
1,000 residential units and 110,000 square feet of commercial space on this
site. The Company is developing, or has land planned for the development of,
approximately 100 units on remaining parcels which will either have ski-in,
ski-out access or are adjacent to the Copper Creek Golf Course. The Company
expects that the development of these lands will take place over a period of
eight to ten years.
WHISTLER. The Company owns a 44-acre site at the Creekside base of
Whistler Mountain. The Company is developing, or has lands planned for the
development of, approximately 350 residential units and 68,000 square feet of
commercial space at the Creekside base as well as approximately 450 residential
units and 40,000 square feet of commercial space located at other sites. The
Company expects that the development of these lands will take place over a
period of five to eight years.
SANDESTIN. With its acquisition of Sandestin, the Company acquired 256
units of substantially completed inventory comprised of single-family lots,
townhomes and condominiums, and land for future development of approximately
2,400 residential units and 200,000 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.
SOLITUDE. Through an option with the owner of Solitude Ski Resort, the
Company is developing, or plans to develop, approximately 240 residential units.
The Company expects that the development of these lands will take place over a
period of three to five years.
THREE PEAKS. Through a joint venture, the Company is developing, or has
land planned for the development of, approximately 400 residential units which
surround an 18-hole golf course owned by the Company in Silverthorne, Colorado.
The Company expects that the development of these lands will take place over a
period of five to seven years.
SQUAW VALLEY. Through an option with the owner of Squaw Valley Ski Area,
the Company plans to develop approximately 600 residential units and 123,000
square feet of commercial space. The Company expects that the development of
these lands will take place over a period of eight to ten years.
BLUE MOUNTAIN. Through an agreement with Blue Mountain Resorts, the
Company plans to develop approximately 1,300 residential units and 148,000
square feet of commercial space. Through a joint venture, the Company has land
planned for the development of approximately 600 residential units surrounding
the Monterra Golf Course. The Company expects that the development of these
lands will take place over a period of 10 to 12 years.
MOUNTAIN CREEK. With its acquisition of Mountain Creek, the Company
acquired approximately 390 acres. The Company is developing, or has land planned
for the development of, approximately 1,700 residential units and 155,000 square
feet of commercial space. The Company expects that the development of these
lands will take place over a period of 12 to 15 years.
MONT STE. MARIE. With its acquisition of Mont Ste. Marie, the Company
acquired approximately 900 acres of developable land. The feasibility of the
development of these lands is currently being reviewed.
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<PAGE> 22
PROJECTS RECENTLY COMPLETED OR UNDER ACTIVE DEVELOPMENT
<TABLE>
<CAPTION>
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 1999
------------ --------- ----------- -------------------------
<S> <C> <C> <C>
BLACKCOMB
Pinnacle Heights 77% 9 Exclusive townhomes for sale;
construction started February
1998 with scheduled completion
September 1999; fully
pre-sold.
Horstman House 77% 51 Quarter-share units for sale;
construction started May 1999
with scheduled completion May
2000; 199 of 204 quarters
pre-sold.
TREMBLANT
Le Saint Andrew's Lots 100% 14 Single-family lots for sale;
construction of infrastructure
completed August 1994; 9 lots
sold.
Refuge des Cerfs 100% 66 Single-family lots for sale;
construction started November
1997 with scheduled completion
December 1999; 23 lots
pre-sold.
La Tour des Voyageurs 100% 163 Condominium-hotel units for
sale; construction completed
June 1999; 158 units sold.
Le Plateau 100% 98 Townhomes for sale;
construction started May 1998
with scheduled completion June
2000; 94 units pre-sold.
Le Westin Royal 100% 126 Condominium-hotel units for
Tremblant sale; construction started
April 1999 with scheduled
completion July 2000; 115
units pre-sold.
Les Falaises 100% 24 Townhomes for sale;
construction started July 1999
with scheduled completion
February 2000; 18 units
pre-sold.
La Tour des Voyageurs II 100% 51 Condominium-hotel units for
sale; construction started
August 1999 with scheduled
completion May 2000; 30 units
pre-sold.
</TABLE>
20
<PAGE> 23
PROJECTS RECENTLY COMPLETED OR UNDER ACTIVE DEVELOPMENT (CONTINUED)
<TABLE>
<CAPTION>
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 1999
------------ --------- ----------- -------------------------
<S> <C> <C> <C>
KEYSTONE
Buffalo Lodge & The 55% 157 Condominium-hotel units for
Dakota sale; construction completed
September 1998; 143 units
sold.
Expedition Station 60% 92 Condominium-hotel units for
sale; construction completed
August 1999; 77 units sold.
Elk Run Lots 50% 81 Single-family lots for sale;
construction started May 1998
with scheduled completion
September 1999; 61 lots sold.
Elk Run Villas 60% 10 Townhomes for sale;
construction started May 1999
with scheduled completion May
2000; 4 units pre-sold.
Red Hawk Lodge and 60% 131 Condominium-hotel units and
Townhomes townhomes for sale;
construction started May 1999
with scheduled completion July
2000; 108 units pre-sold.
Lone Eagle 60% 50 Condominium-hotel units for
sale; construction to begin
spring 2000 with scheduled
completion summer 2001.
Colorado House 60% 112 Condominium-hotel units for
sale; construction to begin
spring 2000 with scheduled
completion summer 2001.
SUN PEAKS
Fireside Lodge 100% 72 Condominium-hotel units for
sale; construction completed
April 1998; 37 units sold.
Forest Trails 100% 36 Townhomes for sale;
construction of Phase I (20
units) completed January 1999;
19 units sold. Construction of
Phase II (16 units) started
March 1999 with scheduled
completion October 1999; 7
units pre-sold.
PANORAMA
Tamarack Lodge 100% 46 Condominium-hotel units for
sale; construction completed
June 1998; 43 units sold.
Greywolf Lots 100% 75 Single-family lots for sale;
construction of Phase I (25
lots) infrastructure completed
October 1997; 20 lots sold.
Construction of Phase II (17
lots) infrastructure completed
July 1999; 16 lots sold.
Construction of Phase III (33
lots) infrastructure to begin
fall 1999 with scheduled
completion spring 2000.
Panorama Springs 100% 80 Condominium-hotel units for
sale; construction started May
1999 with scheduled completion
March 2000; 58 units pre-sold.
Riverbend Townhomes 100% 40 Townhomes for sale;
construction started June 1999
with scheduled completion May
2000; 7 units pre-sold.
</TABLE>
21
<PAGE> 24
PROJECTS RECENTLY COMPLETED OR UNDER ACTIVE DEVELOPMENT (CONTINUED)
<TABLE>
<CAPTION>
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 1999
------------ --------- ----------- -------------------------
<S> <C> <C> <C>
STRATTON
Long Trail House -- 100% 75 Condominium-hotel units for
North sale; construction completed
May 1999; 56 units sold.
Long Trail House -- 100% 67 Condominium-hotel units for
South sale; construction started
April 1999 with scheduled
completion June 2000; 25 units
pre-sold.
Stratton Springs 100% 32 Townhomes for sale;
construction started September
1998 with scheduled completion
November 1999; 25 units
pre-sold.
SNOWSHOE
Camp 4 100% 17 Townhomes for sale;
construction completed
December 1997; 16 units sold.
Rimfire 100% 141 Condominium-hotel units for
sale; construction completed
June 1999; 113 units sold.
Highland House 100% 77 Condominium-hotel units for
sale; construction started
June 1999 with scheduled
completion June 2000; 41 units
pre-sold.
MAMMOTH
Juniper Springs 100% 174 Condominium-hotel units for
sale; construction started May
1998 with scheduled completion
November 1999; 161 units
pre-sold.
The Timbers 75% 32 Townhomes for sale;
construction started October
1998 with scheduled completion
January 2001; 9 units
pre-sold.
Sunstone 100% 77 Condominium-hotel units for
sale; construction started May
1999 with scheduled completion
October 2000; fully pre-sold.
COPPER
Copper Springs 100% 108 Condominium-hotel units for
sale; construction started
April 1998 with scheduled
completion September 1999;
fully pre-sold.
The Village at Copper 100% 228 Condominium-hotel units for
sale; construction started
April 1999 with scheduled
completion December 2000; 224
units pre-sold.
WHISTLER
The Bluffs 77% 47 Townhomes for sale;
construction started May 1999
with scheduled completion
March 2000; 23 units pre-sold.
SANDESTIN
Acquired Inventory and 50% 202 Condominium units, townhomes
Property under and single-family lots for
Development sale; 159 units/lots sold.
Acquired Inventory 95% 138 Condominium units, townhomes
and single-family lots for
sale; 19 units/lots sold.
Turnberry II 95% 13 Townhomes for sale;
construction started October
1998 with scheduled completion
September 1999; 5 units
pre-sold.
Magnolia Bay 95% 41 Townhomes for sale;
construction started July 1999
with scheduled completion May
2000; 11 units pre-sold.
Ravenwood 95% 22 Single-family lots for sale;
construction to begin October
1999 with scheduled completion
April 2000.
SOLITUDE
Powderhorn Lodge 100% 83 Condominium-hotel units for
sale; construction started May
1999 with scheduled completion
June 2000; 49 units pre-sold.
THREE PEAKS
Phase 1 Lots 50% 75 Single-family lots for sale;
construction started May 1999
with scheduled completion June
2000; 72 lots pre-sold.
</TABLE>
22
<PAGE> 25
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 1,600 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, is 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. 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 5,160 at the end of 1998 with a total of 5 million owners worldwide.
From 1987 timeshare sales grew by approximately 15% per year, reaching
approximately US$6.1 billion in total worldwide sales in 1998. 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 at a particular location into a tradeable commodity. Of the 5,160 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 Club
Intrawest ("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, the Company has 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.
To date, the first two phases of the resort club locations at Blackcomb and
Tremblant, comprising 85 and 34 units, respectively, have been completed. 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
2.2 million points in all phases when fully built. IROC has acquired 10 units
available for its members in Kauai, Hawaii. IROC is also a 50% partner in a
planned 311-unit resort club location under construction within a 36-hole
municipally owned golf course community in Palm Desert, California. Construction
of Phase I (24 units) is complete. The Company believes that Sandestin will
provide an attractive location for its resort club business. Further resort club
locations are currently in the pre-development stage at Mammoth, Keystone, Blue
Mountain and warm-weather locations. Through June 30, 1999, approximately
823,000 points have been sold to over 5,600 members for approximately $97.1
million.
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<PAGE> 26
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 industries in which the Company operates are 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 visitors. 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, quality of golf
facilities, 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.
There are no financially material environmental protection requirements in
connection with Intrawest's resort operations.
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 the Non-Resort Assets. At a meeting of shareholders of the
Company held in March 1997, the shareholders approved the Share Capital
Reorganization 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 Common Shares which
existed prior to the Share Capital Reorganization and the NRP Shares represented
the net equity of the Non-Resort Assets as at December 31, 1996 (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.
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,
over the next three years. Any gains or losses generated by the disposition of
Non-Resort Assets will be for the account of the NRP Shares only and will not
affect the computation of earnings per Common Share.
On September 30, 1997, the Company redeemed 2,360,000 of the NRP Shares
pursuant to the provisions attaching to the NRP Shares at a redemption amount of
$3.82 per NRP Share. The number of NRP Shares redeemed represented approximately
10% of the outstanding NRP Shares. On September 30, 1998, the Company
24
<PAGE> 27
redeemed 5,460,000 of the NRP Shares at a redemption amount of $3.82 per NRP
Share. The number of NRP Shares redeemed represented approximately 25% of the
outstanding NRP Shares. The Company has announced that it plans to redeem on
September 30, 1999 3,350,000 of the NRP Shares at a redemption amount of $3.82
per NRP Share. The number of NRP Shares to be redeemed on such date represents
approximately 20% of the outstanding NRP Shares. Subject to shareholder approval
at shareholders' meetings scheduled to be held in November 1999, the redemption
amount for the NRP Shares is to be reduced to $2.65 per NRP Share, and the
Company will have the right to redeem NRP Shares quarterly instead of annually.
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.
AIRCARE, GREATER VANCOUVER, BRITISH COLUMBIA. The Company holds a 50%
interest in a partnership which owns 12 vehicle emission testing stations
located in 10 Greater Vancouver municipalities. The partnership leases the
testing stations to an operator which has a contract with the Greater Vancouver
Regional District to provide vehicle emission tests. The contract, which expires
on September 1, 2006, provides for annual rental payments to the partnership of
$2.75 million. At June 30, 1999, the book value of the Company's interest in the
property and the related debt were $8.2 million and $6.7 million, respectively.
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 98% of the centre is leased
with approximately one-third of the space occupied by Cineplex Odeon. The
property is under contract for sale for $10.2 million with a scheduled closing
date of September 30, 1999. At June 30, 1999, the book value of the property was
written down by $2.5 million to its contracted sales value. The Company has $7.4
million of debt against the property which will be repaid from the sales
proceeds.
GATEWAY, SURREY, BRITISH COLUMBIA. The Company holds a 50% interest in
this property which comprises 4.5 acres of vacant land adjacent to the Gateway
SkyTrain rapid transit station. The land, which is zoned for commercial
purposes, can accommodate approximately 975,000 square feet of office
development. The office leasing market in Surrey has slowed in the past few
years with an increase in vacancy rates and a reduction in new development
activity. In addition, the large size of the site limits the number of potential
purchasers. As a result, at June 30, 1999, the Company's interest in this
property was written down by $3 million to $7.1 million. There is no debt
against this property. It may take 18 months or longer to realize on this
property.
COACH HILL, CALGARY, ALBERTA. This townhome project, located in southwest
Calgary, consists of a total of 134 units in three phases. The first two phases,
comprising 45 units each, have been constructed and are fully sold. Construction
of the third phase of 44 units is expected to be completed by September 30, 1999
and 23 units have been pre-sold to date. At June 30, 1999, the book value of the
property was $4.7 million. There is no debt against this 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 and industrial development properties in
British Columbia and 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 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.
The non-resort amounts receivable at June 30, 1999 comprised $21.9 million
from the Partnerships and $1.1 million from other parties. The receivables from
the Partnerships at such date included three major components:
-- $12,040,000 deferred purchase price;
-- $6,971,000 revolving line of credit (maximum available $7,000,000); and
-- $1,800,000 non-revolving loan in connection with the Gateway residential
property.
25
<PAGE> 28
In addition, the Partnerships owed accrued interest and fees amounting to $1.1
million at June 30, 1999.
The terms of repayment of the receivable from the Partnerships have
recently been renegotiated and a letter of intent has been executed which
provides that on completion of modified loan arrangements (expected to be prior
to October 31, 1999), the Partnerships will repay $8.2 million of the deferred
purchase price and the entire balance of the Gateway loan for a total of $10
million. Subsequent repayments of the deferred purchase price will be $1,520,000
on January 31, 2000, $1,320,000 on July 31, 2000 and $1,000,000 on January 31,
2001. Availability under the line of credit will continue with a maximum
borrowing limit of $7 million until January 31, 2001. Thereafter the maximum
limit will be reduced to $6 million until July 31, 2001 and thereafter to $4
million until the availability terminates on January 31, 2002. The deferred
purchase price will bear interest at 10% per annum payable semi-annually on the
same dates as the principal repayments. Interest on the line of credit will be
at prime plus 2% per annum payable monthly.
The other amounts receivable of $1.1 million comprise miscellaneous
mortgages, loans and other amounts that are expected to be recovered primarily
over the next year.
OTHER NON-RESORT ASSETS
The other Non-Resort Assets aggregated $1.5 million at June 30, 1999 and
were comprised of a $1.3 million investment in Cedar Terrace, a residential
rental building in Seattle, Washington, and miscellaneous deposits and prepaid
amounts. The Cedar Terrace investment is under contract for sale for its book
value with an expected closing date in September 1999.
NON-RESORT LIABILITIES
At June 30, 1999, the non-resort liabilities totalled $18.8 million,
comprised of debt of $14.1 million, amounts payable of $3.4 million and deferred
revenue of $1.3 million. The debt relates to the AirCare and Whitemud Crossing
properties and will be repaid when these properties are sold. The payables will
primarily be paid before October 31, 1999.
EMPLOYEES
The Company has approximately 4,700 year-round employees and 14,100
additional peak-season employees. Approximately 100 of Tremblant's and Mont Ste.
Marie's year-round employees and over 90% of their additional peak-season
employees are members of the unions Le Syndicat Des Travailleurs(euses) de La
Station du Mont Tremblant and Le Syndicat Des Travailleurs(euses) du Mont Ste.
Marie. The current contracts with the unions expire on October 31, 2000 for
Tremblant and December 7, 2002 for Mont Ste. Marie. 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>
JUNE 30
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Total assets................................. $2,183.1 $1,466.6 $1,098.0 $753.7 $659.2
Bank and other indebtedness.................. 1,063.7 612.8 489.8 379.8 314.6
Shareholders' equity......................... 787.8 653.5 498.1 290.3 278.0
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
Years ended June 30(1)
---------------------------------------------------
1999 1998 1997 1996 1995
------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
REVENUE AND EARNINGS
Total revenue................................. $920.7 $ 601.7 $ 389.0 $283.3 $152.9
Cash flow from continuing operations.......... 136.8 96.3 57.5 35.8 22.9
Income from continuing operations............. 58.3 43.0 28.3 19.7 9.8
Results of discontinued operations............ (6.9) (2.0) (1.2) (2.1) 1.9
Net income.................................... 51.4 41.0 27.1 17.6 11.7
PER COMMON SHARE
Cash flow from continuing operations.......... $ 3.08 $ 2.60 $ 1.87 $ 1.34 $ 0.80
Income from continuing operations............. 1.45 1.25 1.02 0.85 0.43
Net income.................................... 1.45 1.25 1.05 0.76 0.51
Dividends..................................... 0.16 0.16 0.16 0.16 0.16
</TABLE>
- ------------
(1) 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>
1999 1998
------------------------------------- ------------------------------------
QUARTERS QUARTERS
------------------------------------- ------------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
------- ------- ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue................ $126.8 $155.2 $392.7 $246.0 $46.0 $167.9 $278.9 $ 108.9
Cash flow from continuing
operations................. 3.8 12.1 90.0 30.9 (2.0) 13.5 66.0 18.8
Income (loss) from continuing
operations................. (2.6) 2.9 54.6 3.4 (3.9) 4.2 42.6 0.1
Results of discontinued
operations................. 0.2 (0.2) 0.0 (6.9) (0.4) (0.4) 0.4 (1.6)
Net income (loss)............ (2.4) 2.7 54.6 (3.5) (4.3) 3.7 43.1 (1.5)
Per Common Share:
Cash flow from continuing
operations.............. 0.09 0.28 2.01 0.70 (0.04) 0.29 1.78 0.52
Income (loss) from
continuing operations... (0.07) 0.07 1.38 0.08 (0.11) 0.12 1.24 0.0
Net income (loss).......... (0.07) 0.07 1.38 0.08 (0.11) 0.12 1.24 0.0
</TABLE>
SEGMENTED INFORMATION
(in thousands of dollars)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
INDUSTRY SEGMENTS
Revenue:
Ski and resort............................................ $ 517,050 $ 367,395
Real estate............................................... 334,132 230,734
Warm-weather.............................................. 63,917 --
Corporate and all other................................... 5,618 3,612
---------- ----------
$ 920,717 $ 601,741
========== ==========
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Operating income before interest, depreciation and
amortization, and income taxes:
Ski and resort............................................ $ 117,940 $ 83,166
Real estate............................................... 66,251 45,163
Warm-weather.............................................. 8,514 --
Corporate and all other................................... 5,618 3,610
---------- ----------
198,323 131,939
Less:
Interest.................................................. (37,475) (22,881)
Depreciation and amortization............................. (60,713) (38,043)
General and administrative................................ (11,149) (10,360)
---------- ----------
(109,337) (71,284)
---------- ----------
$ 88,986 $ 60,655
========== ==========
Segment assets (at period end):
Ski and resort............................................ $ 926,791 $ 692,509
Real estate............................................... 674,301 435,838
Warm-weather.............................................. 123,796 --
Corporate and all other................................... 390,116 239,705
Discontinued operations................................... 68,058 98,521
---------- ----------
$2,183,062 $1,466,573
========== ==========
Capital acquisitions:
Ski and resort............................................ $ 209,234 $ 127,487
Real estate............................................... 5,995 --
Warm-weather.............................................. 8,032 --
Corporate and all other................................... 8,271 --
---------- ----------
$ 231,532 $ 127,487
========== ==========
GEOGRAPHIC INFORMATION:
Revenue:
Canada.................................................... $ 393,306 $ 321,518
United States............................................. 527,411 280,223
---------- ----------
$ 920,717 $ 601,741
========== ==========
Operating income before interest, depreciation and
amortization, and income taxes:
Canada.................................................... $ 61,496 $ 37,927
United States............................................. 27,490 22,728
---------- ----------
$ 88,986 $ 60,655
========== ==========
Identifiable assets (at period end):
Canada.................................................... $ 963,698 $ 621,903
United States............................................. 1,151,306 746,149
Discontinued operations................................... 68,058 98,521
---------- ----------
$2,183,062 $1,466,573
========== ==========
</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.
28
<PAGE> 31
The indenture governing the Company's U.S. notes imposes certain
limitations on the declaration or payment of cash dividends and other
distributions on the Common Shares of the Company, including provisions which,
subject to certain adjustments and exceptions, restrict the amount of such
dividends or distributions to an amount, calculated on a cumulative basis, to be
not greater than the sum of, among other items, net cash proceeds from the
issuance of equity and 50% of consolidated net income from January 1, 1998.
29
<PAGE> 32
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 notes thereto included elsewhere in this Annual Information Form.
OPERATING HIGHLIGHTS
The rapid growth in revenue and earnings experienced by the Company over
the past five years, continued in 1999. This growth was fuelled by acquisitions
and by improvements in same-resort operating results. In a challenging year for
weather, the Company significantly outperformed its major ski industry
competitors with increases in visits, revenue per visit and profit margins
across its mountain resorts. The first year results from the newly acquired
warm-weather resorts were largely in line with expectations and support the
Company's confidence in the future potential of these resorts. On the real
estate side, the Company sold 48% more units in 1999 than in 1998 at higher
average prices and increased margins. With its sales launch program and
comprehensive development processes, the Company's real estate business has
continued to provide predictable earnings.
The operating highlights for the year include:
- a 53% increase in total revenue from $601.7 million to $920.7 million,
with ski and resort revenue increasing 57% and real estate sales revenue
increasing 44%.
- a 36% increase in income from continuing operations to $58.3 million and
a 16% increase in income per share from continuing operations to $1.45.
The per share amount reflects a 17% increase in the weighted average
number of shares outstanding in 1999.
- a 48% increase in operating profit from ski and resort operations and a
46% increase in operating profit from real estate sales.
- a 51% increase in total Company EBITDA from $129.6 million to $196.0
million. Total Company EBITDA is computed as income before interest,
taxes, and depreciation and amortization and after adding back
previously capitalized interest in real estate cost of sales. It is not
a term that has an established meaning under generally accepted
accounting principles. However, management believes it is an important
measure of operating performance and it is generally used by investors
to evaluate companies in the resort industry.
These results are discussed fully in the segmented analysis that follows.
REVIEW OF SKI AND RESORT OPERATIONS
The following table highlights the results of the ski and resort operations
segment.
<TABLE>
<CAPTION>
1999 1998 CHANGE
--------- --------- ------
<S> <C> <C> <C>
Skier visits(1)............................................. 5,781,000 4,852,000 19.1%
Revenue ($000's)............................................ 577,727 367,395 57.2%
EBITDA ($000's)............................................. 123,214 83,165 48.2%
Margin...................................................... 21.3% 22.6%
</TABLE>
- ---------------
(1) Skier visits for all resorts are at 100% except Mammoth at 58% and Blue
Mountain at 50%.
During 1999 the Company acquired or made significant investments in five
ski and resort operations businesses: a 50% interest in Blue Mountain, a 45%
interest in Alpine, the Breeze and Max rental store chains, Sandestin and the
Raven golf courses. In addition, 1999 was the first year that the results from
Mountain Creek, which was acquired last year, have been included in the
statement of operations. These acquisitions, plus 21% growth in same-resort
revenue, increased total revenue from ski and resort operations from $367.4
million in 1998 to $577.7 million in 1999. The analysis that follows is divided
into a same-resort analysis and a total segment analysis. Same-resorts are the
resorts the Company owned for the full year in both 1998 and 1999 and include
Whistler/ Blackcomb, Tremblant, Panorama, Mont Ste. Marie, Stratton, Snowshoe,
Mammoth and Copper.
SAME-RESORT ANALYSIS
Same-resort revenue increased 21% from $367.4 million in 1998 to $444.4
million in 1999. Since 1994 same-resort revenue has grown at an average annual
compound rate of 23%. The increase in same-resort revenue in
30
<PAGE> 33
1999 resulted from an 18% increase in winter revenue, from $319.6 million to
$377.1 million, and a 37% increase in non-winter revenue, from $49.1 million to
$67.3 million. The increase in winter revenue was due to a 9% increase in skier
visits and an 8% increase in winter revenue per skier visit.
Same-resort skier visits increased from 4,852,000 in 1998 to 5,301,000 in
1999. Skier visits were 22% higher at the Company's Canadian resorts in 1999,
led by Whistler/Blackcomb, which increased 27% to a record 2.1 million visits.
Tremblant and Panorama also experienced record skier visits in 1999, increasing
10% and 11%, respectively, from the previous year. The growth in skier visits at
Canadian resorts was mainly due to continued expansion of the bed base at each
resort (except for Mont Ste. Marie) as well as focused marketing and activity
programs designed to fill non-peak periods. In addition, the decline in the
Canadian dollar exchange rate reduced the cost of vacationing in Canada helping
to attract foreign visitors and encouraging Canadians to vacation in Canada.
Skier visits were 4% lower at the Company's U.S. resorts in 1999 due mainly to a
slow start to the season in the East and in Colorado. Up to the end of January,
skier visits at the U.S. resorts were 13% below last year. However, from
February to the end of the season, visits were 4% ahead.
Same-resort winter revenue per skier visit increased 8% from $65.88 in 1998
to $71.13 in 1999. Winter revenue per skier visit increased 7% at the Canadian
resorts and 10% at the U.S. resorts with every resort showing an improvement.
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 and group) and the amount of discounting of full-price
tickets. The Company's strategy at all of its resorts is to offer the highest
quality product within its market area at a premium ticket price. In addition,
the strong competitive position of each of the Company's resorts, created by the
resort villages and the significant capital investments that have been made over
the past few years, reduces reliance on discounts to attract local visitors in
favour of committed regional and destination visitors. By building resort
villages and animating its resorts, the Company's strategy is to attract more
destination visitors to its resorts and lengthen their average stay.
Same-resort non-winter ski and resort operations revenue increased by $18.2
million or 37% in 1999. Over the past few years, the Company has set out to
expand its revenue base through all four seasons. Non-winter revenue increased
on a same-resort basis to 15% of annual ski and resort revenue in 1999 from 13%
in 1998. Every resort showed an increase except for Copper, which curtailed some
of its summer operations because of the start of its real estate construction
program. The largest increase (60%) was at Tremblant, which opened its second
golf course in June 1998 and experienced record visitors during the summer and
fall period, driving golf, lodging and retail business significantly higher. At
Whistler/Blackcomb non-winter revenue increased 48% as a result of significant
increases in lift, retail, and food and beverage revenue. At Stratton and
Snowshoe non-winter revenue increased 14% and 18%, respectively, mainly due to
improved golf operations and higher lodging revenue.
Same-resort ski and resort operations EBITDA increased 30% from $80.7
million in 1998 to $104.9 million in 1999. EBITDA improved 58% at the Company's
Canadian resorts. This improvement resulted mainly from the positive operating
leverage created by increases in visits, as well as more even loading of visits,
against a relatively fixed cost structure. During 1999 both Whistler/Blackcomb
and Tremblant experienced significant increases in the number of destination
visits and in the number of mid-week visits resulting in higher margins at both
resorts compared with 1998. The same-resort EBITDA margin for the Canadian
resorts increased from 26.1% in 1998 to 31.4% in 1999. The opposite result was
experienced by the U.S. resorts where lower skier visits resulted in a 10%
decline in same-resort EBITDA in 1999. EBITDA was higher at Stratton and lower
at Snowshoe, Mammoth and Copper. The same-resort EBITDA margin for the U.S.
resorts decreased from 18.4% in 1998 to 15.8% in 1999, primarily because of the
impact of poor weather conditions in Colorado on Copper and the price
competition in that market.
TOTAL-RESORT ANALYSIS
Acquisitions increased ski and resort operations revenue by $133.3 million
in 1999, $69.4 million from the mountain resort businesses (Mountain Creek, Blue
Mountain, Alpine and Breeze/Max) and $63.9 million from the warm-weather resort
businesses (Sandestin and Raven). Mountain Creek and Blue Mountain added 480,000
skier visits (with the Company's ownership interest in Blue Mountain at 50%),
bringing the Company's total skier visits for the year to 5,781,000, the highest
of any North American group of affiliated mountain resorts.
31
<PAGE> 34
The following table shows the composition of ski and resort operations
revenue for 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
------------------------- --------------------------
REVENUE PROPORTION REVENUE PROPORTION
----------- ---------- ------------ ----------
(THOUSANDS (THOUSANDS (%)
OF DOLLARS) (%) OF DOLLARS)
<S> <C> <C> <C> <C>
Mountain operations................................. $234,988 40.7 $172,794 47.0
Retail and rental shops............................. 98,182 17.0 54,384 14.8
Food and beverage................................... 82,800 14.3 53,316 14.5
Lodging and property management..................... 58,070 10.1 34,606 9.4
Ski school.......................................... 33,573 5.8 25,872 7.1
Golf................................................ 32,110 5.6 7,942 2.2
Other............................................... 38,004 6.5 18,481 5.0
-------- ----- -------- -----
$577,727 100.0 $367,395 100.0
======== ===== ======== =====
</TABLE>
The acquisitions of Sandestin and Raven, and the opening of the second golf
course at Tremblant, increased the proportion of revenue from golf from 2.2% in
1998 to 5.6% in 1999. Revenue from retail and rental shops increased 81% in 1999
mainly because of the acquisition of the Breeze/Max rental stores, which added
43 new locations. Other revenue doubled in 1999 mainly due to the inclusion of
revenue from the waterpark at Mountain Creek, athletic club fees at Sandestin
and increased community services revenue (e.g. telephone and other utility
services) at most of the mountain resorts. Revenue from lifts increased 36% over
1998 but declined from 47.0% of total revenue in 1998 to 40.7% in 1999 because
of the growth in the other businesses. Alpine's heli-skiing revenue has been
included in the lifts category.
Acquisitions increased EBITDA from ski and resort operations by $18.3
million in 1999, bringing total EBITDA from ski and resort operations to $123.2
million, 48% higher than last year. The EBITDA margin was 21.3% in 1999 compared
with 22.6% in 1998. The improvement in the same-resort margin discussed earlier
was offset by the lower margin (13.7%) for the 1999 acquisitions and Mountain
Creek. The results of the acquired businesses in 1999 generally reflect the
marketing programs and cost structures of the previous owners and hence the
margin is lower than the Company expects to achieve with the changes it has made
in management and the planned changes to the resorts. The process of integrating
the acquisitions into the Company's network of resorts is largely complete and
as a result margins are expected to improve in the future.
REVIEW OF RESORT REAL ESTATE OPERATIONS
The following table highlights the results of the real estate sales
segment.
<TABLE>
<CAPTION>
1999 1998 CHANGE
------- ------- ------
<S> <C> <C> <C>
Units closed................................................ 1,126 763 48%
Revenue ($000's)............................................ 326,024 226,380 44%
Operating profit ($000's)................................... 62,329 42,813 46%
Margin...................................................... 19.1% 18.9%
</TABLE>
Revenue from the sale of real estate increased 44% from $226.4 million in
1998 to $326.0 million in 1999 due mainly to a higher volume of unit closings. A
total of 496 units were sold at Canadian resorts in 1999, compared with 517
units last year. The average revenue per unit at Canadian resorts decreased from
$244,000 in 1998 to $227,000 in 1999 as comparatively more units were sold at
Tremblant and Panorama and comparatively less at higher-priced
Whistler/Blackcomb. Units closed at U.S. resorts increased from 246 in 1998 to
630 in 1999. Sandestin, Mammoth and Copper all closed unit sales for the first
time in 1999 and significantly more units were closed at Keystone and Snowshoe
than in 1998. The average revenue per unit at U.S. resorts was $425,000 in 1999
(after adjusting the number of units for the impact of joint ventures at
Keystone and Sandestin), compared with $487,000 in 1998. The decline was due
mainly to the above-average sales prices achieved at the SnowBridge project at
Stratton in 1998. Excluding this project the average revenue per unit would have
increased from $413,000 in 1998 to $424,000 in 1999.
As of August 31, 1999, the Company had pre-sold 1,014 units for
approximately $344 million which have already closed or are expected to close in
fiscal 2000 and a further 352 units for approximately $150 million of
32
<PAGE> 35
pre-sales due to close in fiscal 2001. The Company's strategy of pre-selling
real estate projects before the start of construction reduces market risk and
helps to maintain margins since sales concessions are not required and holding
costs are more readily determinable. Furthermore, pre-selling real estate
increases the predictability of real estate earnings.
Club Intrawest generated $23.5 million in sales revenue in 1999, up 7% from
$21.9 million in 1998. This increase was due to a 2% increase in the number of
points sold and a 5% increase in revenue per point. Add-on point sales (i.e.
additional points sold to existing club members) and member referral point sales
accounted for about two-thirds of the increase in resort club revenue, and
attest to the high degree of member satisfaction with the Resort Club. In
addition, these programs produce higher margin sales since they incur fewer
marketing expenses. The Resort Club location at Palm Desert was not fully
operational during 1999 and hence no sales revenue was recorded.
Operating profit on resort real estate sales increased 46% (in line with
the percentage increase of real estate revenues) from $42.8 million in 1998 to
$62.3 million in 1999. The average operating profit per unit at Canadian resorts
increased from $48,000 in 1998 to $56,000 in 1999. 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 reduced its costs
through economies of scale in purchasing and by pooling its requirements (for
example with respect to financing or insurance) rather than contracting on a
project-by-project basis. The margin on real estate sales at Canadian resorts
improved from 19.8% in 1998 to 24.7% in 1999. The average operating profit per
unit at U.S. resorts was $69,000 in 1999 (after adjusting for joint venture
units), down from $96,000 in 1998. Again, the decline was mainly attributable to
SnowBridge. Excluding this project, the average operating profit per unit at
U.S. resorts would have increased from $59,000 in 1998 to $67,000 in 1999. The
margin on real estate sales at U.S. resorts was 16.2% in 1999 compared with
19.7% in 1998 (15.8% in 1999 versus 14.2% in 1998 excluding SnowBridge). The
lower margin at U.S. resorts compared with Canadian resorts reflects the
Company's longer track record of development in Canada. In addition, the
Company's strategy during the early stages of development at a resort is to set
a benchmark of quality that will continue throughout the build-out as sales
prices move up. The average margin on real estate sales for the Company as a
whole, including the Resort Club, was 19.1% in 1999, up from 18.9% in 1998 and
well above the industry average for home builders.
RENTAL PROPERTIES
The majority of the condo-hotel projects which the Company develops contain
ground-level retail space, which is either leased to third-party operators or
used by the Company for its own shops. Rental revenue derived from third-party
operators increased from $4.4 million in 1998 to $8.1 million in 1999.
Approximately half of the increase was due to the acquisition of Sandestin,
which owns a 31-store commercial plaza, and the other half resulted from
additional leasing of new condo-hotel properties at Tremblant and Keystone.
Operating profit from rental properties increased from $2.3 million in 1998 to
$3.9 million in 1999.
REVIEW OF CORPORATE OPERATIONS
INTEREST AND OTHER INCOME
Interest and other income increased from $3.6 million in 1998 to $5.6
million in 1999. A foreign exchange gain related to the Company's U.S.$200
million issue of unsecured notes accounted for $1.2 million of the increase and
the balance was due to higher fee income and miscellaneous items.
The Company's 17.6% equity-accounted investment in Compagnie des Alpes,
which was acquired at the beginning of the year, generated $3.2 million of
earnings. Compagnie des Alpes experienced record revenues and profits during
1999.
INTEREST COSTS
The Company incurred total interest costs of $76.3 million in 1999 compared
with $42.0 million in 1998. Interest on the U.S.$125 million note issue in
August 1998 and U.S.$75 million note issue in December 1998 amounted to $22.2
million. Proceeds from these notes were generally used to repay debt that was
incurred to finance the ski and resort acquisitions and to fund the Company's
extensive capital expenditure programs prior to the start of the 1998/99 ski
season. In addition a full year's interest on the $125 million debenture issue,
which closed in
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<PAGE> 36
December 1997, increased interest by $3.9 million. Interest incurred on capital
leases and other loans assumed with the acquired businesses totalled $1.8
million. The balance of the change in interest costs was mainly due to interest
on new debt to fund significantly increased real estate development activity at
the resorts.
Incurred interest is either capitalized to properties and resort assets
under development or charged to income. During 1999, $47.9 million of interest
incurred was charged to income -- $37.5 million as interest expense, $9.1
million as a component of real estate costs and $1.3 million in discontinued
operations. By comparison, in 1998 $31 million of interest incurred was charged
to income. In addition, real estate costs for 1999 and 1998 include $7.2 million
and $6.8 million, respectively, of interest that was incurred, and capitalized
to properties, in prior years.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased from $38 million in 1998 to
$60.7 million in 1999. The acquisitions added $13.2 million of depreciation and
amortization expense in 1999 and the balance of the increase was mainly due to
depreciation of new capital expenditures at the resorts.
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 $10.4 million in 1998
to $11.2 million in 1999. As a percentage of revenues, corporate general and
administrative costs declined from 1.7% in 1998 to 1.2% in 1999. 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 $20.3 million in 1999 compared
with $13.4 million in 1998. This equates to an effective tax rate of 22.9% in
1999, up marginally from 22.1% in 1998. Additional information on the Company's
income taxes is provided in note 12 to the consolidated financial statements
contained elsewhere in this Annual Information Form.
NON-CONTROLLING INTEREST
The Company has a 23% limited partner in the two partnerships which own
Whistler/Blackcomb and there is a 5% non-controlling interest in Sandestin. The
results of all three entities are fully consolidated into the Company's
financial statements with the outside partner's share of earnings shown as
non-controlling interest. Non-controlling interest increased from $4.2 million
in 1998 to $10.3 million in 1999. In 1998 the only non-controlling interest was
the minority limited partner in Blackcomb. In September 1998 the minority
limited partner in Blackcomb exercised its option to acquire a 23% interest in
Whistler and in July 1998 Sandestin was acquired.
DISCONTINUED OPERATIONS
The consolidated financial statements contained elsewhere in this Annual
Information Form disclose the results of the Company's non-resort business as
discontinued operations. The discontinued operations incurred a loss of $6.9
million (including $5.5 million of property write-downs) in 1999 compared with a
loss of $2 million in 1998. Whitemud Crossing Shopping Centre in Edmonton, which
is under contract for sale and is expected to close in September 1999, was
written down by $2.5 million to its contracted sales price. In addition, the
Company's 50% interest in the Gateway commercial land site in Surrey was written
down by $3 million in light of a slowdown in the office leasing market and
corresponding increase in vacancy rates in that area. During 1999 the Company
sold $10.8 million of non-resort properties, consisting of 66 units in the Coach
Hill project in Calgary.
The net income or loss and the net cash flow generated by the Non-Resort
Assets accrues to the holders of the NRP Shares. The Company will use the net
cash flow generated by the Non-Resort Assets during 1999 to redeem approximately
20% of the outstanding NRP Shares on September 30, 1999. After this redemption,
the book value of the net equity of the remaining NRP Shares, reflecting all
currently known liabilities, is expected to be $36.4 million or $2.65 per NRP
Share on a fully diluted basis, after factoring in outstanding stock options.
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<PAGE> 37
LIQUIDITY AND CAPITAL STRUCTURE
ANALYSIS OF CASH FLOWS
The following table summarizes the Company's cash flows during 1999 and
1998.
<TABLE>
<CAPTION>
1999 1998 CHANGE
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Cash flow from continuing operations........................ 136,795 96,285 40,510
Cash flow provided by (used for) other operating
activities................................................ (114,568) 1,547 (116,115)
Cash flow provided by financing activities.................. 518,757 181,672 337,085
Cash flow used for investing activities..................... (537,386) (214,190) (323,196)
-------- -------- --------
3,598 65,314 (61,716)
======== ======== ========
</TABLE>
Cash flow from continuing operations (computed as income before
non-controlling interest and discontinued operations adjusted for deferred
income taxes, depreciation and amortization, and other non-cash items) increased
42% from $96.3 million in 1998 to $136.8 million in 1999. The reasons for the
increase are discussed earlier in the review of operations. Cash flow from other
operating activities constitutes cash provided by or used for non-cash working
capital accounts such as real estate inventory, amounts receivable and amounts
payable. In 1999 $114.6 million of cash flow was used for other operating
activities, $116.1 million more than in 1998 mainly due to the ramp-up in real
estate production and reduced cash flow from discontinued operations. During
1999 the Company used $131.3 million of cash in net new real estate development
compared with $78.3 million in 1998. In the next two or three years, as the
recently acquired resorts produce a higher volume of real estate closings, the
Company expects to generate positive cash flow from its real estate development
activity.
Cash flow from financing activities increased from $181.7 million in 1998
to $518.8 million in 1999, mainly due to a significant increase in debt
financing (see below). During 1999 the Company raised $116.1 million of cash by
issuing a total of 4.6 million common shares, the proceeds of which were
generally used to repay debt. In 1998 the Company had raised $107.3 million in
equity financing. The Company seeks to maintain a balanced capital structure and
has periodically issued equity to match its increases in debt. In 1999 the
Company used $20.9 million of cash generated by the non-resort assets during
1998 to redeem NRP Shares, up from $9.0 million in 1998. The Company will use
the cash flow generated by the non-resort assets during 1999 to redeem $12.8
million of NRP Shares on September 30, 1999.
Cash flow used for investing activities totalled $537.4 million in 1999, up
from $214.2 million in 1998. Acquisitions, including the investment in Compagnie
des Alpes, used $309.7 million of cash in 1999 compared with $72.9 million in
1998. The Company was particularly active in 1999 in investing in new
businesses, including its first warm-weather acquisitions. The Company expects
to be less active in acquiring new resorts in the immediate future as it focuses
more on increasing returns from its existing assets. Capital expenditures on ski
and resort assets used $217.3 million of cash flow in 1999, the majority of
which was invested at Whistler, Copper and Mountain Creek. Historically, the
Company's strategy has been to make significant enhancements at its resorts soon
after they are acquired in order to attract increased destination visitors and
to broaden the revenue base.
The Company estimates that it will make capital expenditures at its
mountain and warm-weather resorts totalling approximately $145 million in fiscal
2000, comprising approximately $25 million of capital maintenance and $120
million of capital expansion. This amount is higher than the Company had
originally planned to make in fiscal 2000 and reflects the acceleration of
certain capital expenditures due to increases in business in 1999. For example,
the significant increase in skier visits at Whistler/Blackcomb in 1999 has
accelerated the installation of two new access lifts out of Whistler Village.
Similarly, the rapid pre-sale of the four real estate projects in the centre of
the village at Copper has accelerated the provision of new retail and restaurant
space, and at Tremblant the growth in skier visits has accelerated the
development of new terrain in the South Bowl area to mitigate crowding.
Approximately $35 million of the capital expenditures will be invested in golf
facilities -- mainly for the conversion of a nine-hole course at Sandestin into
a championship 18-hole course and the substantial remodelling of the golf course
at Three Peaks in Colorado. Cash on hand, cash flow from operations and
available lines of credit will finance the fiscal 2000 capital expenditures.
35
<PAGE> 38
ANALYSIS OF DEBT
At June 30, 1999, total debt amounted to $1,063.7 million, an increase of
$450.8 million from June 30, 1998. During the year the Company issued U.S.$200
million of 9.75% senior unsecured notes due 2008. The proceeds were principally
used to repay bridge financing used to fund the acquisitions and the Company's
extensive capital expenditure program at the resorts prior to the start of the
winter season. At year end the acquired resorts had an additional $28.1 million
of capital leases and other debt and the significant ramp-up in real estate
production increased construction financing by a further $60.2 million. The
balance of the increase in debt primarily resulted from draws on lines of credit
to fund miscellaneous investments and expenses. Since December 1997 the Company
has issued $418.0 million of unsecured debt securities in the public market. At
year end this type of financing constituted 42% of total debt compared with 24%
at the end of the previous year. The Company expects to continue to raise
long-term, unsecured, fixed-rate financing at the corporate level and to reduce
its secured debt at the subsidiary level.
At June 30, 1999, 43% of total debt bore interest at floating rates, down
from 45% at June 30, 1998. Intrawest has developed a hedging policy to manage
its interest rate risk. 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 at least 50% of
its general corporate and ski and resort operations debt, although a lower
proportion may be hedged temporarily in anticipation of a refinancing. At year
end, 38% of such debt bore interest at floating rates. A 1% change in the rate
of interest on this debt would impact annual earnings by approximately $2.3
million before income taxes.
The Company has various operating lines of credit totalling approximately
$285 million, of which $92 million was drawn at June 30, 1999. These lines of
credit are available to fund seasonal cash requirements and capital expenditures
at the resorts, real estate development activity and for general corporate
purposes. In addition, the Company has three revolving credit facilities
totalling approximately $212 million available for real estate construction of
which $74.9 million was drawn at June 30, 1999. Real estate projects must meet
certain conditions (including in some cases pre-sales thresholds) in order to
qualify for funding under these facilities and, once the conditions are
satisfied, up to 85% of costs will be funded. The Company believes that it has
adequate sources of liquidity to satisfy its current working capital, debt
service and capital expenditure requirements.
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, e.g. the risks of severe
economic downturn, competition and currency fluctuations, and the more
industry-specific risks of unfavourable weather patterns, seasonality of
operations 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
economic slowdown, Intrawest's operating results have historically shown this
not to be the case. During 12 years of ownership of Blackcomb, cash flow
increased every year despite widely varying economic conditions. Blackcomb, as
well as Intrawest's other resorts, attracts 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, Panorama, Stratton, Snowshoe
and Mountain Creek 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
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<PAGE> 39
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, 1999, the Company had 134 unsold units in its
resort real estate inventory and 85% of the approximately 1,500 resort units
under construction on that date were pre-sold. Generally the Company has
sufficient pre-sales in place to cover its construction and other real estate
debt by 1.5 to 2 times. In the event of a severe economic downturn in the real
estate business, the Company could complete construction of its pre-sold units,
transfer title to purchasers and repay all of its real estate financing.
COMPETITION
The mountain resort industry has significant barriers to entry which
prevent new resorts from being created. In fact, no new major resort has been
created since 1981. Competition therefore is essentially confined to existing
resorts. 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 making its resorts attractive to all
major customer segments and by investing in capital improvements on the mountain
such as high-speed lifts, restaurants and snowmaking. Over the past five years a
total of $454 million has been invested in such capital improvements. The
Company's principal strength compared with its industry competitors is its
ability to combine expertise in resort operations and real estate development,
particularly in building master-planned resort villages. In terms of the
Company's financial performance, Intrawest's villages stimulate increased
destination visits, increased revenue per visit since destination guests spend
more and stay longer, and increased margins since destination guests tend to
balance the loading on the facilities.
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
master-planning, project design, construction, sales and marketing, and property
management also gives the Company a distinct competitive advantage. In the
resort club business, the Company has established a competitive position through
its ownership of the mountain facilities, and by offering a high standard of
accommodation and a flexible point-based system.
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 70% 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 foreign visitors and it has encouraged Canadians
to vacation at home. The advantage of a low Canadian dollar was particularly
marked during 1999 as the average exchange rate against the U.S. dollar declined
approximately 7% compared with 1998. A significant shift 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.
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<PAGE> 40
Since Intrawest has income from both Canadian and U.S. sources, the Company
is exposed to foreign currency exchange risk in its reported earnings. Revenues
and expenses of the Company's U.S. operations will be impacted by changes in
exchange rates when such operations are reported in Canadian dollars. The impact
of Canadian/ U.S. dollar exchange rate changes on the balance sheet are
reflected in the foreign currency translation amount included in shareholders'
equity and does not affect reported earnings.
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 five ski seasons, favourable and unfavourable weather conditions at
different times across North America have offset one another, helping the
Company to come within two percent of its budgeted revenue on a same-resort
basis. Furthermore, the more a resort can attract its visitors 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. Investing in snowmaking can also mitigate the impact of poor
natural snow conditions. 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 94-100% snowmaking coverage at Snowshoe, Mountain Creek and Blue
Mountain and 75% at Tremblant and Stratton.
SEASONALITY OF OPERATIONS
Ski and resort operations are highly seasonal. In fiscal 1999 approximately
77% of the Company's ski and resort operations revenue was generated during the
period from November to April. Furthermore, during this period a significant
portion of ski and resort operations revenue is generated on certain holidays,
particularly Christmas, President's Day and school spring breaks, and on
weekends. The Company's real estate operations tend to be somewhat seasonal as
well, with construction primarily taking place during the summer with the
majority of sales closings in the December to June period. This seasonality of
operations impacts reported quarterly earnings. Although revenue is recorded
when products or services are delivered, a significant portion of revenue is
pre-committed in the form of season passes, group sales packages and real estate
pre-sales. The Company has taken steps to smooth its revenue and earnings
throughout the year by investing in four-season amenities and growing its
summer- and shoulder-season businesses. In addition the Company's acquisition of
warm-weather resorts, such as Sandestin, has mitigated the traditional
seasonality of ski and resort operations revenue. In 1999 the Company's mountain
resort businesses generated 21% of their revenue during the first and the fourth
quarters compared with 64% for the warm-weather resorts.
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.
YEAR 2000 COMPLIANCE
The Year 2000 issue involves the inability of date-sensitive computer
applications to process dates beyond December 31, 1999. This issue impacts not
only information technology systems but also operating and control systems that
rely on embedded chip technology. If not corrected, this could result in system
failures or miscalculations leading to significant disruptions in the Company's
operations.
Intrawest initiated a formal program to address the Year 2000 issue in
September 1997. The program involved comprehensive system reviews at all of the
Company's resorts and real estate locations, testing of hardware and software,
and modification or replacement of non-compliant systems. To date the system
reviews, testing and
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<PAGE> 41
remedial activities are all substantially complete. The Company remains on
schedule to ensure full compliance of its computer systems by November 30, 1999.
The Company has also endeavoured to ascertain the Year 2000 readiness of its key
customers and suppliers and at the current time it is not aware of any
non-compliant systems at critical third-party vendors that would have a material
adverse effect on the Company's business.
As a precautionary measure, the Company is also developing contingency
plans to mitigate the potential disruptions that may result from the Year 2000
issue. These plans include manual work-arounds for some automated processes,
securing alternative sources for key suppliers and a communications plan in the
event a problem arises. These contingency plans are expected to be complete by
mid-October 1999.
The total estimated costs to deal with the Year 2000 issue are expected to
be approximately $1.5 million and are being expensed as incurred. Although a
final assessment has not been completed, the Company believes that neither the
Year 2000 issue nor the financial impact of the reviews, testing and
modifications is expected to have a material adverse affect on the Company's
business or its financial condition.
OUTLOOK
SKI AND RESORT OPERATIONS
The Company has been in a major expansion phase over the past five years,
having acquired seven mountain resorts, two warm-weather locations and various
other related businesses. The planned integration of the acquired businesses
into the Company's network of resorts is mostly complete and a large portion of
the planned capital expenditures to update the resorts will have been invested
by the start of the 1999/2000 winter season. The primary focus over the next
year will be to increase returns on capital from these existing assets by
filling capacity during non-peak periods, increasing revenue per visit and
continuing to improve margins.
REAL ESTATE OPERATIONS
The Company expects real estate revenues and operating profits to increase
significantly in fiscal 2000 due mainly to higher production levels at
Whistler/Blackcomb, Mammoth and Copper, and sales of the first projects at Blue
Mountain, Solitude and Three Peaks. At August 31, 1999, the Company had
pre-sales of approximately $344 million that it expects to close in fiscal 2000.
In the past few years the Company has invested significantly more in new
real estate development activity than it has realized from the sale of units. In
fiscal 2000 and to a greater extent in fiscal 2001 and 2002, this gap will
lessen and is expected to reverse towards the end of this period. This is
expected to result in positive cash flow from the Company's real estate
activities and a corresponding reduction in the level of the Company's debt.
39
<PAGE> 42
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") and The Montreal Exchange
(the "ME"). 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(1)...................... Executive Vice-President, Corporate Investments 1990
London, Ontario of London Life Insurance Company
Joe S. Houssian............................ President and Chief Executive Officer of the 1976
West Vancouver, British Columbia Company
Daniel O. Jarvis........................... Executive Vice President and Chief Financial 1989
Vancouver, British Columbia 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)(3)...................... Senior Vice President of HAL Real Estate 1992
Mercer Island, Washington Investments, Inc.
Paul A. Novelly(2)......................... Chairman, President and Chief Executive Officer 1997
St. Louis, Missouri of Apex Oil Company, Inc.
Gary L. Raymond............................ Executive Vice President, Development and 1998
Whistler, British Columbia Acquisitions
Bernard A. Roy(3).......................... Senior partner, Ogilvy Renault 1992
Verdun, Quebec
Khaled C. Sifri(1)......................... Managing partner, Hadef Al-Dhahiri & Associates 1990(4)
Dubai, United Arab Emirates
Hugh R. Smythe............................. President, Resort Operations Group 1993
Whistler, British Columbia of the Company
Nicholas C.H. Villiers(2).................. Vice President and Director of 1990(4)
London, England RBC Dominion Securities Inc.
</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.
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............................. Vice President and Corporate Controller
North Vancouver, British Columbia
David C. Brown................................. Vice President, Information Technology
Sardis, British Columbia
Michael F. Coyle............................... Senior Vice President, Marketing
West Vancouver, British Columbia
</TABLE>
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<PAGE> 43
<TABLE>
<CAPTION>
NAME AND MUNICIPALITY OF RESIDENCE PRINCIPAL OCCUPATION
- ---------------------------------- --------------------
<S> <C>
John E. Currie................................. Senior Vice President, Financing and Taxation
North Vancouver, British Columbia
James J. Gibbons............................... President, Resort Club Group
West Vancouver, 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
Gary L. Raymond................................ Executive Vice President, Development and
Whistler, British Columbia Acquisitions
Hugh R. Smythe................................. President, Resort Operations Group
Whistler, British Columbia
</TABLE>
As at June 30, 1999, the directors and senior officers of the Company, as a
group, beneficially owned, directly or indirectly, or exercised control or
direction over 2.3% 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 name in the tables above or with
affiliates thereof, except for Mr. Sifri who was Vice President, Legal Affairs
of Majid Al Futtaim Investments LLC from May 1997 to January 1999 and, prior
thereto, was president of PolyMore Circuit Technologies, L.P.
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<PAGE> 44
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 consolidated 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
unaudited consolidated financial statements of the Company
subsequent to the consolidated 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 consolidated
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, Canada V6C 3L6.
42
<PAGE> 45
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF
INTRAWEST CORPORATION
YEARS ENDED JUNE 30, 1999 AND 1998
F-1
<PAGE> 46
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Intrawest Corporation as
at June 30, 1999 and 1998 and the consolidated statements of operations,
retained earnings, cash flow from continuing 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, 1999
and 1998 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 Company Act (British Columbia), we
report that, in our opinion, these principles have been applied on a consistent
basis.
Significant differences between Canadian and United States accounting
principles as they affect these consolidated financial statements are explained
and quantified in note 20.
Vancouver, Canada (signed) KPMG LLP
September 3, 1999 Chartered Accountants
F-2
<PAGE> 47
INTRAWEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30
---------------------------
1999 1998
----------- -----------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Revenue:
Ski and resort operations................................. $577,727 $367,395
Real estate sales......................................... 326,024 226,380
Rental properties......................................... 8,108 4,354
Interest and other income................................. 5,618 3,612
Income from equity accounted investment (note 1(c))....... 3,240 --
-------- --------
920,717 601,741
Expenses:
Ski and resort operations................................. 454,513 284,231
Real estate costs......................................... 263,696 183,567
Rental properties......................................... 4,185 2,004
Interest (note 15)........................................ 37,475 22,881
Depreciation and amortization............................. 60,713 38,043
General and administrative................................ 11,149 10,360
-------- --------
831,731 541,086
-------- --------
Income before undernoted.................................... 88,986 60,655
Provision for income taxes (note 12)........................ 20,349 13,431
-------- --------
Income before non-controlling interest and discontinued
operations................................................ 68,637 47,224
Non-controlling interest.................................... 10,296 4,236
-------- --------
Income from continuing operations........................... 58,341 42,988
Results of discontinued operations (note 3)................. (6,894) (1,958)
-------- --------
Net income.................................................. $ 51,447 $ 41,030
======== ========
Income per common share:
Income from continuing operations...................... $ 1.45 $ 1.25
Net income............................................. 1.45 1.25
======== ========
Weighted average number of common shares outstanding (in
thousands)................................................ 40,237 34,486
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 48
INTRAWEST CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
--------------------------
1999 1998
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term deposits.............................. $ 120,635 $ 117,037
Amounts receivable (note 6)............................... 116,240 55,664
Other assets (note 7(a)).................................. 67,384 47,709
Properties (note 5):
Resort................................................. 257,063 177,296
Discontinued operations................................ 14,819 8,195
---------- ----------
576,141 405,901
Ski and resort operations (note 4).......................... 1,022,575 691,997
Properties (note 5):
Resort.................................................... 417,238 258,543
Discontinued operations................................... 15,367 31,794
Amounts receivable (note 6)................................. 40,977 43,612
Other assets (note 7(b)).................................... 82,755 34,214
Goodwill.................................................... 28,009 512
---------- ----------
$2,183,062 $1,466,573
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Amounts payable........................................... $ 174,195 $ 125,536
Deferred revenue (note 9)................................. 56,054 17,577
Bank and other indebtedness, current portion (note 8):
Resort................................................. 217,633 96,047
Discontinued operations................................ 8,085 1,843
---------- ----------
455,967 241,003
Bank and other indebtedness (note 8):
Resort.................................................... 831,936 501,341
Discontinued operations................................... 6,052 13,592
Due to joint venture partners (note 13)..................... 16,695 22,250
Deferred revenue (note 9)................................... 29,842 13,602
Deferred income taxes....................................... 21,203 11,100
Non-controlling interest in subsidiaries.................... 33,589 10,151
---------- ----------
1,395,284 813,039
Shareholders' equity:
Capital stock (note 11)................................... 587,331 483,030
Retained earnings......................................... 191,680 146,859
Foreign currency translation adjustment................... 8,767 23,645
---------- ----------
787,778 653,534
Contingencies and commitments (note 14)
---------- ----------
$2,183,062 $1,466,573
========== ==========
</TABLE>
Approved on behalf of the Board:
<TABLE>
<S> <C>
(signed) JOE S. HOUSSIAN (signed) R. THOMAS M. ALLAN
Director Director
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 49
INTRAWEST CORPORATION
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30
---------------------------
1999 1998
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Retained earnings, beginning of year........................ $146,859 $111,649
Net income.................................................. 51,447 41,030
Dividends................................................... (6,626) (5,820)
-------- --------
Retained earnings, end of year.............................. $191,680 $146,859
======== ========
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS FROM CONTINUING OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30
---------------------------
1999 1998
----------- ----------
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Income from continuing operations........................... $ 58,341 $42,988
Items not affecting cash:
Depreciation and amortization............................. 60,713 38,043
Deferred income taxes..................................... 10,685 11,018
Income from equity accounted investment................... (3,240) --
Non-controlling interest.................................. 10,296 4,236
-------- -------
Cash flow from continuing operations........................ $136,795 $96,285
======== =======
Cash flow from continuing operations per common share....... $ 3.08 $ 2.60
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 50
INTRAWEST CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30
----------------------------
1999 1998
------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Cash provided by (used in):
Operations:
Cash flow from continuing operations...................... $ 136,795 $ 96,285
Recovery of costs through real estate sales............... 263,696 183,567
Increase in amounts receivable, net....................... (3,010) (7,436)
Acquisition and development of properties held for sale... (394,993) (261,886)
Changes in non-cash operating working capital............. 10,642 40,284
--------- ---------
Cash provided by continuing operations.................... 13,130 50,814
Cash provided by discontinued operations (note 3)......... 9,097 47,018
--------- ---------
22,227 97,832
Financing:
Bank and other borrowings, net............................ 418,445 91,572
Issue of capital stock for cash, net of issuance costs.... 116,052 107,274
Redemption of non-resort preferred shares................. (20,857) (9,015)
Proceeds on sale of partnership interest.................. 15,980 --
Dividends paid on common shares........................... (6,626) (5,820)
Distributions to non-controlling interests................ (4,237) (2,339)
--------- ---------
518,757 181,672
Investments:
Expenditures on revenue-producing properties, net......... (5,995) (13,853)
Expenditures on ski and resort operation assets, net...... (217,266) (127,487)
Expenditures on other assets.............................. (42,434) --
Expenditures on business acquisitions, net of cash
acquired............................................... (271,691) (72,850)
--------- ---------
(537,386) (214,190)
--------- ---------
Increase in cash and short-term deposits.................... 3,598 65,314
Cash and short-term deposits, beginning of year............. 117,037 51,723
--------- ---------
Cash and short-term deposits, end of year................... $ 120,635 $ 117,037
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 51
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
Intrawest Corporation is incorporated under the Company Act (British Columbia)
and, through its subsidiaries, is engaged in the development and operation of
mountain and golf resorts principally throughout North America.
1. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
The consolidated financial statements are prepared in accordance with
generally accepted accounting principles in Canada as prescribed by The
Canadian Institute of Chartered Accountants. Information regarding United
States generally accepted accounting principles as it affects the
Company's consolidated financial statements is presented in note 20.
(b) Principles of consolidation:
The consolidated financial statements include:
(i) the accounts of the Company and its subsidiaries;
(ii) the accounts of all incorporated and unincorporated joint ventures
to the extent of the Company's interest in their respective assets,
liabilities, revenues and expenses.
The Company's principal subsidiaries and joint ventures are as follows:
<TABLE>
<CAPTION>
PERCENTAGE INTEREST
HELD BY
THE COMPANY
-------------------
<S> <C>
Intrawest Resort Corporation................................ 100%
Blackcomb Skiing Enterprises Limited Partnership............ 77%
Whistler Mountain Resort Limited Partnership................ 77%
Blue Mountain Resorts Limited (note 2)...................... 50%
Alpine Helicopters Ltd. (note 2)............................ 45%
Mont Tremblant Resorts and Company, Limited Partnership..... 100%
IW Resorts Limited Partnership.............................. 100%
Intrawest Resort Ownership Corporation...................... 100%
Stratton Ski Corporation.................................... 100%
Snowshoe Mountain, Inc...................................... 100%
Copper Mountain, Inc........................................ 100%
Great Gorge Resort, Inc. (note 2)........................... 100%
Mammoth Mountain Ski Area (note 2).......................... 59.5%
Keystone/Intrawest L.L.C.................................... 50%
Breeze, Inc. (note 2)....................................... 100%
Max Snowboard, Inc. (note 2)................................ 100%
Intrawest Sandestin Company, L.L.C. (note 2)................ 95%
Intrawest Golf Holdings, Inc. (note 2)...................... 100%
Mt Tremblant Reservations Inc. (note 2)..................... 100%
Whistler Blackcomb Resorts Inc. (note 2).................... 100%
</TABLE>
On September 10, 1998, the Company sold a 23% interest in the property
and assets related to Whistler Mountain Resort Limited Partnership to
Nippon Cable Co., Ltd., its minority partner in Blackcomb. Proceeds on
the sale were $15,980,000 and a gain of $1,368,000 has been recognized in
the consolidated financial statements for the year ended June 30, 1999.
(c) Accounting for investments:
The Company accounts for investments in which it is able to exercise
significant influence in accordance with the equity method. Under the
equity method, the original cost of the investment is adjusted for the
Company's share of post-acquisition earnings, losses and capital
transactions.
Portfolio investments are carried at cost.
(d) Measurement uncertainty:
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.
F-7
<PAGE> 52
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
The significant areas requiring management estimates include useful lives
for depreciation, the impairment of ski and resort operations and
properties, and the recoverability of amounts receivable.
(e) Properties:
(i) 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. Incidental operations related specifically to
such properties is treated as an increase in or a reduction of costs.
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. Incidental operations related specifically to a
location is treated as an increase in or a reduction of costs during
the start-up period. These net 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.
(ii) 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 lease term.
Furniture and equipment are depreciated on a declining balance basis
at 20% per annum.
(iii) Classification:
Properties that are currently under development for sale or available
for sale are classified as current assets. Related bank and other
indebtedness is classified as a current liability.
(f) 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% to 5.0%
Ski lifts................................................... 5.0% to 8.0%
Golf courses................................................ 2.0% to 3.3%
Area improvements........................................... 2.0% to 3.3%
Automotive, helicopters and other equipment................. 10.0% to 50.0%
Leased vehicles............................................. 20.0% to 25.0%
</TABLE>
Inventories are recorded at the lower of cost and net realizable value,
and consist primarily of retail goods, food and beverage products, and
mountain operating supplies.
(g) 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%, respectively.
Leasehold improvements are stated at cost less accumulated amortization.
Amortization is provided using the straight-line method over the lease
term.
(h) Goodwill:
Goodwill is amortized on the straight-line basis over a period of 10 to
40 years based on the nature of the acquired business. In determining
whether there is a permanent impairment in value, recoverability is based
on estimated future cash flows.
(i) 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 related financing.
(j) Deferred revenue:
Deferred revenue mainly comprises real estate deposits, season pass
revenue, government grants, and the exchange gains arising on the
translation of long-term monetary items that are denominated in foreign
currencies (note 1(n)). 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
F-8
<PAGE> 53
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
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.
(k) Government assistance:
The Company periodically applies for financial assistance under available
government incentive programs. Non-repayable government assistance
relating to capital expenditures is reflected as a reduction of the cost
of such assets.
(l) Revenue recognition:
(i) 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.
(ii) Points revenue associated with membership in the vacation ownership
business of Club Intrawest (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.
(iii) Revenue from revenue-producing properties is recognized upon the
earlier of attaining break-even 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 incidental operations related to
such properties are applied to development costs.
(m) Income taxes:
Income taxes are provided at current rates for all items included in the
statements of operations which will ultimately be included in the
calculation of taxable income, regardless of the period when such items
are reported for income tax purposes. The difference in the timing of
recognition for accounting and income tax purposes is recorded as
deferred income taxes. No adjustment is made to deferred income tax
accounts for subsequent changes in income tax rates. The tax benefit of
share issue costs has been recognized as a reduction of the related share
issue costs.
(n) 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 unrealized gains or losses arising from the translation of the
assets and liabilities of these operations are recorded as a separate
component of shareholders' equity.
Exchange gains or losses arising on the translation of long-term monetary
items that are denominated in foreign currencies are deferred and
amortized on a straight-line basis over the remaining terms of the
related monetary item. Other exchange gains or losses are included in
income as incurred.
(o) 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.
(p) Per share calculations:
Income and cash flow per common share have been calculated using the
weighted average number of common shares outstanding during the year.
Fully diluted per common share amounts have not been presented as the
effect of outstanding options is not materially dilutive.
Per share amounts of cash flow from continuing operations are computed
after deducting an amount for non-controlling interest.
(q) Cash flow from continuing operations:
Cash flow from continuing operations is computed as income from
continuing operations adjusted for deferred income taxes, depreciation
and amortization of capital items, non-controlling interest, income from
equity accounted investment, and other non-cash items. Cash flow from
continuing 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 continuing operations is
reconciled to cash flow from operating activities in the consolidated
statements of changes in financial position.
(r) Comparative figures:
Certain comparative figures for 1998 have been reclassified to conform
with the financial presentation adopted in the current year.
F-9
<PAGE> 54
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
2. ACQUISITIONS:
During the year ended June 30, 1999, the Company completed the following
acquisitions, each of which was accounted for by the purchase method with
effect from the date of acquisition:
(a) Effective July 13, 1998, the Company acquired 100% of the shares of
Sandestin Resort & Club, Inc. ("Sandestin"), owner of Sandestin Resort, a
golf, tourist and retirement destination in northwestern Florida. The
purchase price of the shares acquired was U.S.$127,455,000 for which the
Company paid cash. Concurrent with the acquisition, the Company sold at
assigned cost 50% of specific real estate assets and 5% of all other
assets.
(b) Effective July 23, 1998, the Company acquired the assets of the Raven
golf group ("Raven"), that included two golf courses in Arizona. The
purchase price of the assets acquired was U.S.$30,759,000, including
costs, which was settled by the issuance of 125,000 common shares of the
Company, the issuance of a promissory note payable in the amount of
U.S.$4,711,000 and by the payment of cash.
(c) Effective September 3, 1998, the Company acquired all of the shares of
Breeze, Inc. ("Breeze") and Max Snowboard, Inc. ("Max"). Breeze and Max
rent ski and snowboard equipment and also own sports retail stores in the
western United States. The purchase price of the shares acquired was
U.S.$15,160,000, including costs, which was settled through the payment
of cash.
(d) Effective December 27, 1998, the Company acquired a 45% equity interest
in Alpine Helicopters Ltd. ("Alpine"), parent company of Canadian
Mountain Holidays Inc., which provides helicopter skiing, mountaineering
and hiking services in southeastern British Columbia. The purchase price
of the shares acquired was $22,848,000, including costs. The purchase
price was settled by the issuance of 200,000 common shares of the Company
and the balance was paid in cash.
(e) Effective January 27, 1999, the Company acquired a 50% equity interest
in Blue Mountain Resorts Limited ("Blue"), owner and operator of a
mountain resort in Ontario. The purchase price of the shares acquired of
$15,373,000, including costs, was settled through the payment of cash.
(f) Effective March 31, 1999, the Company acquired 100% of the shares of Mt
Tremblant Reservations Inc. and 100% of the shares of Whistler Blackcomb
Resorts Inc. ("MTR/WBR"). Both companies are engaged in the business of
providing vacation rental, real estate and property management services
at the Company's resorts at Mont Tremblant, Quebec, and Whistler, British
Columbia. The purchase price of the shares acquired was $6,340,000,
including costs, and was settled through the payment of cash and the
issuance of 74,458 common shares of the Company subsequent to year end.
The assignment of the purchase prices for the 1999 acquisitions is as
follows:
<TABLE>
<CAPTION>
SANDESTIN RAVEN BREEZE/MAX ALPINE BLUE MTR/WBR TOTAL
--------- ------- ---------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net assets acquired at assigned values:
Ski and resort operations................... $ 77,245 $45,628 $ 4,008 $37,535 $18,508 $ 243 $183,167
Properties under development................ 111,985 -- -- -- -- -- 111,985
Goodwill.................................... -- -- 23,723 -- -- 5,499 29,222
Net working capital......................... (20,976) (385) (605) (3,818) 2,798 (610) (23,596)
Other amounts............................... 22,658 -- -- (3,049) (1,617) (17) 17,975
Assumption of debt.......................... (9,293) (999) (4,128) (9,589) (5,176) (23) (29,208)
-------- ------- ------- ------- ------- ------ --------
181,619 44,244 22,998 21,079 14,513 5,092 289,545
Cash........................................ 7,892 665 464 1,769 860 1,248 12,898
-------- ------- ------- ------- ------- ------ --------
$189,511 $44,909 $23,462 $22,848 $15,373 $6,340 $302,443
======== ======= ======= ======= ======= ====== ========
Financed by:
Cash........................................ $189,511 $34,390 $23,462 $17,358 $15,373 $4,495 $284,589
Bank and other indebtedness................. -- 6,903 -- -- -- 1,845 8,748
Issue of common shares (note 11(b))......... -- 3,616 -- 5,490 -- -- 9,106
-------- ------- ------- ------- ------- ------ --------
$189,511 $44,909 $23,462 $22,848 $15,373 $6,340 $302,443
======== ======= ======= ======= ======= ====== ========
</TABLE>
During the year ended June 30, 1998, the Company completed the following
acquisitions, each of which was accounted for by the purchase method with
effect from the date of acquisition:
(a) Effective February 18, 1998, the Company acquired property and assets
related to Great Gorge Resort, Inc. ("Great Gorge"), owner of Mountain
Creek, in New Jersey, for cash of U.S.$27,959,000. The transaction was
accounted for by the purchase method.
(b) During fiscal 1998 the Company increased its interest in Mammoth
Mountain Ski Area ("Mammoth") in California from 33% to 58.1% through the
acquisition of additional shares and the repurchase by Mammoth of its own
common shares from other
F-10
<PAGE> 55
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
shareholders. Despite a 58.1% ownership interest, the Company has only
joint control over Mammoth due to the existence of special voting rights
of certain of Mammoth's minority shareholders. Therefore, effective from
July 1, 1997, the Company has proportionately consolidated the results of
Mammoth's operations with the operations of the Company. During fiscal
1999 the Company's interest increased to 59.5% as a result of the
repurchase by Mammoth of its own common shares from other shareholders.
The assignment of the purchase prices for the 1998 acquisitions is as
follows:
<TABLE>
<CAPTION>
GREAT GORGE MAMMOTH TOTAL
----------- ------- -------
<S> <C> <C> <C>
Net assets acquired at assigned values:
Ski and resort operations................................. $33,946 $39,254 $73,200
Properties under development.............................. 6,417 932 7,349
Net working capital....................................... (297) 2,554 2,257
Assumption of debt........................................ -- (9,956) (9,956)
------- ------- -------
40,066 32,784 72,850
Cash...................................................... -- 5,916 5,916
------- ------- -------
$40,066 $38,700 $78,766
======= ======= =======
Financed by:
Cash...................................................... $40,066 $28,285 $68,351
Bank and other indebtedness............................... -- 10,415 10,415
------- ------- -------
$40,066 $38,700 $78,766
======= ======= =======
</TABLE>
3. 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 are as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Revenue..................................................... $17,661 $56,895
======= =======
Loss before current income taxes............................ $(6,894) $(1,658)
Provision for current income taxes.......................... -- 300
------- -------
Loss from discontinued operations........................... $(6,894) $(1,958)
======= =======
</TABLE>
Assets and liabilities presented in the consolidated balance sheets include
the following assets and liabilities of discontinued operations:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Current assets
Properties................................................ $14,819 $ 8,195
Other current assets, excluding cash...................... 14,686 13,490
Properties.................................................. 15,367 31,794
Other non-current assets.................................... 9,879 21,273
Current liabilities......................................... 11,709 6,087
Long-term debt and other liabilities........................ 7,112 15,932
</TABLE>
The cash flows from discontinued operations are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Cash provided by (used in):
Operations................................................ $ 9,097 $ 47,018
Financing................................................. (21,670) (36,491)
Investments............................................... 2,111 (364)
-------- --------
Increase (decrease) in cash and short-term deposits......... $(10,462) $ 10,163
======== ========
</TABLE>
F-11
<PAGE> 56
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
The cash flow used for financing activities in 1999 includes a $20,857,000
(1998 -- $9,015,000) redemption of non-resort preferred ("NRP") shares (note
11(a)). The Company has the right to apply the net cash flow from the
discontinued operations from January 1, 1997 to the redemption of NRP
shares. The shares may be redeemed annually 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. Such annual
redemptions are payable on September 30 of each year covering the period
ended on the previous June 30.
The cash available at June 30, 1999 to redeem NRP shares on September 30,
1999 was $12,797,000 (1998 -- $20,857,000), which represents 3,350,000 (1998
-- 5,460,000) NRP shares at $3.82 per share (1998 -- $3.82 per share),
computed as follows:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Cash and short-term deposits, beginning of year............. $ 20,857 $13,606
Increase (decrease) in cash and short-term deposits during
the year.................................................. (10,462) 10,163
Decrease (increase) in the reserve for working capital
requirements at end of year............................... 2,402 (2,912)
-------- -------
$ 12,797 $20,857
======== =======
</TABLE>
Subject to shareholder approval at shareholders' meetings in November 1999,
the redemption amount for the NRP shares is to be reduced to $2.65 per
share, and the Company will have the right to redeem NRP shares quarterly
instead of annually.
4. SKI AND RESORT OPERATIONS:
<TABLE>
<CAPTION>
1999
-----------------------------------------
ACCUMULATED NET
COST DEPRECIATION BOOK VALUE
---------- ------------- ----------
<S> <C> <C> <C>
Ski operations:
Land...................................................... $ 61,650 $ -- $ 61,650
Buildings................................................. 266,851 43,860 222,991
Ski lifts and area improvements........................... 520,429 107,069 413,360
Automotive, helicopters and other equipment............... 122,900 75,057 47,843
Leased vehicles........................................... 6,997 2,487 4,510
---------- -------- ----------
978,827 228,473 750,354
Resort operations:
Land...................................................... 29,663 -- 29,663
Buildings................................................. 74,238 8,101 66,137
Golf courses.............................................. 109,180 4,636 104,544
Area improvements......................................... 82,503 10,626 71,877
---------- -------- ----------
295,584 23,363 272,221
---------- -------- ----------
$1,274,411 $251,836 $1,022,575
========== ======== ==========
</TABLE>
F-12
<PAGE> 57
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
<TABLE>
<CAPTION>
1998
-----------------------------------------
ACCUMULATED NET
COST DEPRECIATION BOOK VALUE
---------- ------------- ----------
<S> <C> <C> <C>
Ski operations:
Land...................................................... $ 70,564 $ -- $ 70,564
Buildings................................................. 150,868 40,455 110,413
Ski lifts and area improvements........................... 423,132 85,119 338,013
Automotive, furniture and other equipment................. 111,099 58,996 52,103
Leased vehicles........................................... 16,158 8,979 7,179
---------- -------- ----------
771,821 193,549 578,272
Resort operations:
Land...................................................... 11,431 -- 11,431
Buildings................................................. 64,298 7,738 56,560
Golf courses.............................................. 20,554 1,319 19,235
Area improvements......................................... 30,125 3,626 26,499
---------- -------- ----------
126,408 12,683 113,725
---------- -------- ----------
$ 898,229 $206,232 $ 691,997
========== ======== ==========
</TABLE>
During 1999 the Company reclassified from goodwill to ski and resort
operations $76,100,000 relating to the acquisitions in prior years of the
Whistler and Snowshoe resorts. This reclassification properly reflects the
characteristics and fair values of the acquired businesses, and is
consistent with the accounting for the Copper Mountain acquisition. The
reclassification results in no change to income or the amortization period,
as the useful life of the acquired assets under both classifications is 40
years.
The ski and resort operations have been pledged as security for certain of
the Company's bank and other indebtedness (note 8).
5. PROPERTIES:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Properties under development and held for sale:
Acquisition costs......................................... $275,494 $199,650
Interest.................................................. 52,277 20,754
Development costs......................................... 258,786 179,130
Administrative............................................ 36,684 22,164
-------- --------
$623,241 $421,698
======== ========
</TABLE>
<TABLE>
<CAPTION>
1999
-------------------------------------
ACCUMULATED NET
COST DEPRECIATION BOOK VALUE
------- ------------ ----------
<S> <C> <C> <C>
Revenue-producing properties:
Land...................................................... $ 8,933 $-- $ 8,933
Buildings................................................. 78,805 10,416 68,389
Leasehold improvements and equipment...................... 7,473 3,549 3,924
------- ------- -------
$95,211 $13,965 $81,246
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1998
-------------------------------------
ACCUMULATED NET
COST DEPRECIATION BOOK VALUE
------- ------------ ----------
<S> <C> <C> <C>
Revenue-producing properties:
Land...................................................... $ 9,535 $-- $ 9,535
Buildings................................................. 50,497 7,836 42,661
Leasehold improvements and equipment...................... 3,555 1,621 1,934
------- ------- -------
$63,587 $ 9,457 $54,130
======= ======= =======
</TABLE>
F-13
<PAGE> 58
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
Summary of properties:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Properties under development and held for sale.............. $623,241 $421,698
Revenue-producing properties................................ 81,246 54,130
-------- --------
$704,487 $475,828
======== ========
</TABLE>
Properties are classified for balance sheet purposes as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Resort.................................................... $257,063 $177,296
Discontinued operations................................... 14,819 8,195
Long-term assets:
Resort.................................................... 417,238 258,543
Discontinued operations................................... 15,367 31,794
-------- --------
$704,487 $475,828
======== ========
</TABLE>
During the year ended June 30, 1999, the Company capitalized interest of
$34,706,000, (1998 -- $14,491,000) (note 15) and administrative expenses of
$27,708,000 (1998 -- $10,935,000) to properties.
Properties have been pledged as security for certain of the Company's bank
and other indebtedness (note 8).
6. AMOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Receivable from sales of real estate........................ $39,328 $ 6,024
Ski and resort operation receivables........................ 37,497 16,136
Loans, mortgages and notes receivable (note 19(a)).......... 58,369 55,093
Funded senior employee share purchase plan (note 11(e))..... 990 1,206
Other accounts receivable................................... 21,033 20,817
------- -------
157,217 99,276
Less: current portion....................................... 116,240 55,664
------- -------
$40,977 $43,612
======= =======
</TABLE>
Receivables are due approximately as follows:
<TABLE>
<S> <C> <C>
Year ending June 30, 2000................................... $116,240
2001...................................... 10,005
2002...................................... 5,309
2003...................................... 1,127
2004...................................... 7,883
Subsequent to 2004.................................... 16,653
--------
$157,217
========
</TABLE>
The loans, mortgages and notes receivable bear interest at both fixed and
floating rates which averaged 11.15% per annum as at June 30, 1999 (1998 --
10.39%). These amounts have been pledged as security for certain of the
Company's bank and other indebtedness (note 8).
F-14
<PAGE> 59
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
7. OTHER ASSETS:
(a) Current:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Ski and resort operation inventories........................ $26,637 $17,036
Restricted cash deposits.................................... 24,965 17,357
Prepaid expenses and other.................................. 15,782 13,316
------- -------
$67,384 $47,709
======= =======
</TABLE>
(b) Long-term:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Investment in Compagnie des Alpes, at equity................ $38,656 $ --
Deferred financing costs.................................... 21,033 8,318
Portfolio investments....................................... 8,915 4,545
Administrative furniture, equipment and leasehold
improvements, net of accumulated depreciation of
$5,989,000 (1998 -- $4,202,000)........................... 9,091 5,458
Other....................................................... 5,060 15,893
------- -------
$82,755 $34,214
======= =======
</TABLE>
8. BANK AND OTHER INDEBTEDNESS:
The Company has obtained financing for its ski and resort operations and
properties 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, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
MATURITY DATES INTEREST RATE 1999 1998
-------------- ------------- ---------- --------
<S> <C> <C> <C> <C>
Ski and resort operations:
Mortgages and bank loans.................................. Demand -- 2017 6.45% $ 335,898 $285,520
Obligations under capital leases.......................... 2000 -- 2002 9.04% 6,299 7,415
---------- --------
342,197 292,935
Properties:
Interim financing on properties under development and held
for resale.............................................. 2000 -- 2006 7.41% 170,506 109,123
Mortgages on revenue-producing properties................... 2000 -- 2015 7.87% 23,026 24,223
---------- --------
193,532 133,346
General corporate debt...................................... Demand -- 2002 6.97% 84,965 36,542
Unsecured debentures........................................ 2002 -- 2008 9.12% 443,012 150,000
---------- --------
1,063,706 612,823
Less current portion........................................ 225,718 97,890
---------- --------
$ 837,988 $514,933
========== ========
</TABLE>
F-15
<PAGE> 60
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
Principal repayments and the components related to either floating or fixed
interest rates are as follows:
<TABLE>
<CAPTION>
INTEREST RATES
-------------------- TOTAL
FLOATING FIXED REPAYMENTS
-------- -------- ----------
<S> <C> <C> <C>
Year ending June 30, 2000................................... $198,429 $ 27,290 $ 225,718
2001...................................... 19,870 27,767 47,637
2002...................................... 4,383 13,632 18,014
2003...................................... 229,377 150,724 380,101
2004...................................... 677 32,335 33,012
Subsequent to 2004.................................... 7,610 351,612 359,224
-------- -------- ----------
$460,346 $603,360 $1,063,706
======== ======== ==========
</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 6.5% per annum, plus
applicable stamping fees, under an agreement expiring in 2001 (note 16(a)).
Bank and other indebtedness includes indebtedness in the amount of
$522,958,000 (1998 -- $98,026,000), which is repayable in United States
dollars of $357,456,000 (1998 -- $66,784,000).
The Company is subject to certain covenants in respect of some of the bank
and other indebtedness which require the Company to maintain certain
financial ratios. The Company is in compliance with these covenants at June
30, 1999.
9. DEFERRED REVENUE:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Deposits on real estate sales............................... $30,890 $13,299
Government assistance (note 10)............................. 12,763 8,105
Exchange gains.............................................. 11,741 --
Golf club initiation deposits............................... 9,919 1,354
Season pass revenue......................................... 8,604 807
Other deferred amounts...................................... 11,979 7,614
------- -------
85,896 31,179
Less: current portion....................................... 56,054 17,577
------- -------
$29,842 $13,602
======= =======
</TABLE>
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 are fully advanced, totalled $14,300,000 and are
repayable over seven years starting in 2000. The grants, which will total
$57,946,000 (1998 -- $22,315,000) when they are fully advanced, amounted to
$28,643,000 at June 30, 1999 (1998 -- $19,781,000). During the year ended
June 30, 1999, grants received of $4,203,000 (1998 -- $1,069,000) were
credited as follows: $471,000 (1998 -- $302,000) to ski and resort operation
assets, $3,733,000 (1998 -- $339,000) to properties and $nil (1998 --
$428,000) to cost of real estate sales.
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 initially recorded at a value of $88,543,000 ($3.82
per share) before deduction of issue costs of $329,000, 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, by way of redemption of their shares as described in
note 3. The amount ultimately realized by the Company and distributed to
the NRP shareholders will be subject to prevailing real estate market
conditions. As at June 30, 1999, the book value of the net equity of the
remaining non-resort assets was $49,237,000 (1998 -- $76,502,000).
F-16
<PAGE> 61
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
(b) Capital stock:
The Company's capital stock comprises the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Common shares............................................... $527,255 $402,582
NRP shares.................................................. 60,076 80,448
-------- --------
$587,331 $483,030
======== ========
</TABLE>
(i) Common shares:
Authorized:
200,000,000 without par value
Issued:
<TABLE>
<CAPTION>
NUMBER OF 1999 NUMBER OF 1998
COMMON SHARES AMOUNT COMMON SHARES AMOUNT
------------- -------- ------------- --------
<S> <C> <C> <C> <C>
Balance, beginning of year......................... 38,359,786 $402,582 34,281,536 $293,649
Issued for cash, net of issue costs................ 4,450,000 114,077 3,850,000 106,268
Issued for acquisitions (note 2)................... 325,000 9,106 -- --
Funded senior employee share purchase and
stock option plans............................... 119,600 1,490 228,250 2,665
---------- -------- ---------- --------
Balance, end of year............................... 43,254,386 $527,255 38,359,786 $402,582
========== ======== ========== ========
</TABLE>
(ii) NRP shares:
Authorized:
50,000,000 without par value
Issued:
<TABLE>
<CAPTION>
NUMBER OF 1999 NUMBER OF 1998
NRP SHARES AMOUNT NRP SHARES AMOUNT
---------- -------- ---------- -------
<S> <C> <C> <C> <C>
Balance, beginning of year................................ 21,811,911 $ 80,448 23,547,936 $88,621
Stock option plan......................................... 374,675 485 623,975 842
Redemption................................................ (5,460,000) (20,857) (2,360,000) (9,015)
---------- -------- ---------- -------
Balance, end of year...................................... 16,726,586 $ 60,076 21,811,911 $80,448
========== ======== ========== =======
</TABLE>
(iii) Preferred shares:
Authorized:
20,000,000 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 may not be exercised except in accordance with such
limitations as the Company's Human Resources Committee may determine. At
June 30, 1999, stock options outstanding totalled 3,257,850 common
shares, exercisable at prices from $9.51 to $29.05, expiring up to 2009
and 713,450 NRP shares exercisable at prices from $1.08 to $2.20,
expiring up to 2001. During the year ended June 30, 1999, options were
exercised for 119,600 common shares and 374,675 NRP shares. The Company
granted options for the purchase of 542,500 common shares during the year
ended June 30, 1999.
(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, 1999, a total of 65,809 (1998
-- 65,809) common shares have been issued from treasury under this plan.
A further 100,000 common shares have been authorized and reserved for
issuance under this plan.
F-17
<PAGE> 62
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
(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, 1999, loans to employees
under the funded senior employee share purchase plan amounted to $990,000
with respect to 131,150 common shares and 83,160 NRP shares (1998 --
$1,206,000 with respect to 134,750 common shares and 110,737 NRP shares).
The loans are interest-free, secured by a promissory note and a pledge of
the shares and mature by 2005. A further 96,400 common shares have been
authorized and reserved for issuance under this plan.
12. INCOME TAXES:
(a) Provision for income taxes:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Current..................................................... $ 9,664 $ 2,413
Deferred.................................................... 10,685 11,018
------- -------
$20,349 $13,431
======= =======
</TABLE>
The reconciliation of income taxes calculated at the statutory rate to
the actual income tax provision is as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Statutory rate.............................................. 45.58% 45.58%
------- -------
Income tax charge at statutory rate......................... $37,418 $26,903
Non-deductible depreciation and amortization................ 5,028 6,242
Large corporations tax...................................... 2,440 1,061
Taxes related to non-controlling interest share of
earnings.................................................. (4,693) (1,931)
Taxes related to equity accounted investment................ (1,477) --
Foreign taxes different from statutory rate................. (20,058) (5,755)
Additional amounts related to properties and ski and resort
operation assets (see (b) below).......................... 288 (13,674)
Other....................................................... 1,403 885
------- -------
20,349 13,731
Less: income taxes related to discontinued operations....... -- 300
------- -------
Provision for income taxes.................................. $20,349 $13,431
======= =======
</TABLE>
(b) Certain properties and ski and resort operation assets were acquired
having a tax value in excess of their recorded value and 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, 1999, approximately $24,554,000 of related
benefits have not been recognized for accounting purposes (1998 --
$10,191,000).
13. JOINT VENTURES:
The following amounts represent the Company's proportionate interest in
joint ventures and non-controlled partnerships including Mammoth, Alpine,
Blue and Keystone/Intrawest L.L.C.:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Properties, current......................................... $ 67,989 $ 37,853
Other current assets........................................ 27,225 26,630
-------- --------
95,214 64,483
Current liabilities......................................... (50,303) (38,627)
-------- --------
Working capital............................................. 44,911 25,856
Ski and resort operations................................... 152,500 77,315
Properties, non-current..................................... 132,718 122,163
Long-term debt.............................................. (84,916) (67,202)
Other, net.................................................. 11,450 (9,706)
-------- --------
$256,663 $148,426
======== ========
</TABLE>
F-18
<PAGE> 63
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Revenue..................................................... $186,193 $ 89,934
Expenses.................................................... 166,983 75,886
-------- --------
Income from continuing operations before income taxes....... 19,210 14,048
Results of discontinued operations.......................... 670 (216)
-------- --------
$ 19,880 $ 13,832
======== ========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Cash provided by (used in):
Operations................................................ $ 35,585 $(20,076)
Financing................................................. 6,055 29,410
Investments............................................... (39,589) (6,797)
-------- --------
Increase in cash and short-term deposits.................... $ 2,051 $ 2,537
======== ========
</TABLE>
Due to joint venture partners is the net amount payable to the Company's
joint venture partners in various properties for costs they have incurred on
the Company's behalf. Payments to the joint venture partners are governed by
the terms of the respective joint venture agreement.
14. CONTINGENCIES AND COMMITMENTS:
(a) The Company holds licenses and land leases with respect to certain 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) The Company has estimated costs to complete ski and resort operation
assets and properties currently under construction and held for sale
amounting to $366,223,000 at June 30, 1999 (1998 -- $286,632,000). These
costs are substantially covered by existing financing commitments.
(c) The Company has entered into various operating lease commitments,
payable as follows:
<TABLE>
<C> <S> <C>
Year ending June 30, 2000........................................................ $ 4,734
2001........................................................ 4,751
2002........................................................ 3,570
2003........................................................ 3,357
2004........................................................ 1,794
Subsequent to 2004........................................................ 2,304
-------
$20,510
=======
</TABLE>
(d) The Company is contingently liable for indebtedness at June 30, 1999 of
$20,076,000 which relates to certain non-resort properties under
development sold during the year ended September 30, 1994 (note 19(a)).
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.
(e) 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.
(f) 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
$8,012,000 which is composed of current taxes of $4,367,000, including
interest, and deferred income taxes of $3,645,000. 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 non-current amounts receivable as the outcome of these reassessments
cannot be determined at this time.
(g) The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Data-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on
F-19
<PAGE> 64
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
operations and financial reporting may range from minor errors to
significant systems failure which could affect an entity's ability to
conduct normal business operations. It is not possible to be certain that
all aspects of the Year 2000 Issue affecting the Company, including those
related to the efforts of customers, suppliers, or other third parties,
will be fully resolved.
15. INTEREST EXPENSE:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Total interest incurred..................................... $76,349 $42,006
Less:
Interest capitalized to ski and resort operation assets... 2,844 1,479
Interest capitalized to properties, net of capitalized
interest included in real estate cost of sales of
$9,068,000 and in discontinued operations of $nil (1998
-- $4,830,000 and $120,000, respectively)............... 25,638 9,541
------- -------
$47,867 $30,986
======= =======
Interest was charged to income as follows:
Real estate costs......................................... $ 9,068 $ 4,830
Interest expense.......................................... 37,475 22,881
Discontinued operations................................... 1,324 3,275
------- -------
$47,867 $30,986
======= =======
</TABLE>
16. FINANCIAL INSTRUMENTS:
(a) Fair value:
The Company has various financial instruments including cash and
short-term deposits, amounts receivable, amounts payable and accrued
liabilities. Due to their short-term maturity or, in the case of amounts
receivable, their market comparable interest rates, the instruments' book
value approximates fair value. Debt and interest swap agreements are also
financial instruments. The fair values at June 30, 1999 and 1998 were
estimated by discounting future cash flows at estimated market rates and
are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fixed interest rate debt and interest swap agreements....... $1,063,706 $1,055,718 $612,823 $605,153
========== ========== ======== ========
</TABLE>
(b) Interest rate risk:
As described in note 8, certain of the Company's debt instruments bear
interest at floating rates. Fluctuations in these rates will impact the
cost of financing incurred in the future.
(c) Credit risk:
The Company's products and services are purchased by a wide range of
customers in different regions of North America and elsewhere. Due to the
nature of its operations, the Company has no concentrations of credit
risk.
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, 1999 and the present value of the accrued pension
benefits attributed to services rendered up to June 30, 1999 are $2,950,000
and $5,563,000, respectively (1998 -- $2,134,000 and $5,031,000,
respectively). The pension expense recognized during the year ended June 30,
1999 totalled $667,000 (1998 -- $516,000).
18. SEGMENT DISCLOSURES:
The Company has four reportable segments: ski and resort operations, real
estate operations, warm-weather operations, and corporate and all other. The
ski and resort segment includes all of the Company's mountain resorts and
associated activities, including the equity investment in Compagnie des
Alpes. The real estate segment includes all of the Company's real estate
activities. The warm-weather operations include all of the Company's
stand-alone golf courses that are not located at mountain resorts.
The Company evaluates performance based on profit or loss from operations
before interest, depreciation and amortization, and income taxes.
Intersegment sales and transfers are accounted for as if the sales or
transfers were to third parties.
F-20
<PAGE> 65
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
The Company's reportable segments are strategic business units that offer
distinct products and services, and that have their own identifiable
marketing strategies. Each of the reportable segments has senior level
executives responsible for the performance of the segment.
The following table presents the Company's results from continuing
operations by reportable segment:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Revenue:
Ski and resort............................................ $ 517,050 $ 367,395
Real estate............................................... 334,132 230,734
Warm-weather.............................................. 63,917 --
Corporate and all other................................... 5,618 3,612
---------- ----------
$ 920,717 $ 601,741
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Operating income before interest, depreciation and
amortization, and income taxes:
Ski and resort............................................ $ 117,940 $ 83,166
Real estate............................................... 66,251 45,163
Warm-weather.............................................. 8,514 --
Corporate and all other................................... 5,618 3,610
----------- ----------
198,323 131,939
Less:
Interest.................................................. (37,475) (22,881)
Depreciation and amortization............................. (60,713) (38,043)
General and administrative................................ (11,149) (10,360)
----------- ----------
(109,337) (71,284)
----------- ----------
$ 88,986 $ 60,655
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Segment assets:
Ski and resort............................................ $ 926,791 $ 692,509
Real estate............................................... 674,301 435,838
Warm-weather.............................................. 123,796 --
Corporate and all other................................... 390,116 239,705
Discontinued operations................................... 68,058 98,521
---------- ----------
$2,183,062 $1,466,573
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Capital acquisitions:
Ski and resort............................................ $ 209,234 $ 127,487
Real estate............................................... 5,995 --
Warm-weather.............................................. 8,032 --
Corporate and all other................................... 8,271 --
---------- ----------
$ 231,532 $ 127,487
========== ==========
</TABLE>
Geographic information:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Revenue:
Canada.................................................... $ 393,306 $ 321,518
United States............................................. 527,411 280,223
---------- ----------
$ 920,717 $ 601,741
========== ==========
</TABLE>
F-21
<PAGE> 66
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Operating income before interest, depreciation and
amortization, and income taxes:
Canada.................................................. $ 61,496 $ 37,927
United States........................................... 27,490 22,728
---------- ----------
$ 88,986 $ 60,655
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Identifiable assets:
Canada.................................................... $ 963,698 $ 621,903
United States............................................. 1,151,306 746,149
Discontinued operations................................... 68,058 98,521
---------- ----------
$2,183,062 $1,466,573
========== ==========
</TABLE>
19. RELATED PARTY TRANSACTIONS:
(a) 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. An officer and director of the Company is the
majority shareholder of corporations that invested in a 20% interest in
the partnerships. Such corporations are also the managing general
partners of the partnerships.
The consideration for the sale included a vendor take-back note
originally for $31,700,000. During the year ended June 30, 1999, the
partnerships repaid $4,000,000 of the $7,000,000 principal repayments
required for the year, bringing the total repayments to date to
$19,660,000. Subsequently, the repayment of the balance, with interest at
10% per annum, has been renegotiated as follows:
<TABLE>
<S> <C>
September 30, 1999.......................................... $ 8,200
January 31, 2000............................................ 1,520
July 31, 2000............................................... 1,320
January 31, 2001............................................ 1,000
-------
$12,040
=======
</TABLE>
The partnerships have the right to defer any principal payment for up to
six months (other than the payment due on September 30, 1999). The
partnerships paid $1,342,000 of interest on the note receivable during
the year ended June 30, 1999, and at June 30, 1999, $306,000 (1998 --
$405,000) of interest was accrued and outstanding.
The Company has committed to provide the partnerships various credit
facilities, including a non-revolving loan for $1,800,000, to fund costs
in connection with a specific project, which is to be repaid by September
30, 1999, and a $7,000,000 revolving line of credit until January 31,
2001. Thereafter, the limit will be $6,000,000 until July 31, 2001,
reducing to $4,000,000 from August 1, 2001 until the availability
terminates on January 31, 2002. The loan and facilities earn interest at
prime plus 2%. At June 30, 1999, $6,971,000 (1998 -- $6,971,000) was
advanced under these facilities and accrued and unpaid interest amounted
to $702,000 (1998 -- $62,000). In addition, the Company will continue to
provide financial assistance by way of liability in respect of certain
indebtedness and liabilities of the partnerships. 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 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, 1999,
the Company incurred net costs of $158,000 (1998 -- $1,465,000) in
respect of these services.
(b) 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-22
<PAGE> 67
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
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 and the rules and regulations
promulgated by the Securities and Exchange Commission ("SEC") except as
summarized below:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Income from continuing operations in accordance with
Canadian GAAP............................................. $ 58,341 $ 42,988
Effects of differences in accounting for:
Investment income (c)................................... (1,296) --
Cost of sales pursuant to SFAS 109 (g).................. (5,527) (1,234)
Depreciation pursuant to SFAS 109 (g)................... (1,703) (831)
Amortization of negative goodwill pursuant to SFAS 109
(g).................................................... -- 5,920
Provision for deferred income taxes pursuant to SFAS 109
(g).................................................... 2,854 (9,942)
Foreign exchange pursuant to SFAS 52 (k)................ 11,741 --
---------- ----------
Income from continuing operations in accordance with United
States GAAP............................................... 64,410 36,901
Results of discontinued operations in accordance with
Canadian GAAP............................................. (6,894) (1,958)
Effects of differences in accounting for:
Depreciation (a)........................................ -- (60)
Financial instruments (f)............................... -- 272
Income tax effect of depreciation adjustment............ -- 24
---------- ----------
Results of discontinued operations in accordance with United
States GAAP............................................... (6,894) (1,722)
---------- ----------
Net income in accordance with United States GAAP............ 57,516 35,179
Opening retained earnings in accordance with United States
GAAP (d).................................................. 130,140 100,781
Common share dividends...................................... (6,626) (5,820)
---------- ----------
Closing retained earnings in accordance with United States
GAAP...................................................... $ 181,030 $ 130,140
========== ==========
Weighted average number of shares outstanding (in
thousands)................................................ 40,237 35,575
========== ==========
Income per common share (basic and diluted; in dollars)
Income from continuing operations......................... $ 1.60 $ 1.04
Net income................................................ $ 1.60 $ 1.04
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Total assets in accordance with Canadian GAAP............... $2,183,062 $1,466,573
Effects of differences in accounting for:
Depreciation (a).......................................... -- (3,759)
Shareholder loans (e)..................................... (991) (1,206)
Ski and resort assets (g)................................. 18,853 20,143
Goodwill (g).............................................. 11,277 3,465
Properties (g)............................................ (20,593) 2,551
---------- ----------
Total assets in accordance with United States GAAP.......... $2,191,608 $1,487,768
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Total liabilities in accordance with Canadian GAAP.......... $1,395,284 $ 813,039
Effects of differences in accounting for:
Depreciation (a).......................................... -- (1,504)
Investment income (c)..................................... 1,296 --
Future income taxes (g)................................... 27,209 39,632
Foreign exchange (k)...................................... (11,741) --
---------- ----------
Total liabilities in accordance with United States GAAP..... $1,412,048 $ 851,167
========== ==========
</TABLE>
F-23
<PAGE> 68
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Capital stock in accordance with Canadian GAAP.............. $ 587,331 $ 483,030
Effects of differences in accounting for:
Extinguishment of options and warrants (b)................ 2,153 2,153
Shareholder loans (e)..................................... (991) (1,206)
Financial instruments (f)................................. -- (1,627)
---------- ----------
Capital stock in accordance with United States GAAP......... 588,493 482,350
Closing retained earnings in accordance with United States
GAAP...................................................... 181,030 130,140
Accumulated other comprehensive income (l).................. 8,767 23,645
---------- ----------
Shareholders' equity in accordance with United States
GAAP...................................................... $ 778,290 $ 636,135
========== ==========
</TABLE>
(a) Depreciation:
In the prior year, certain of the Company's revenue-producing properties
were depreciated using the sinking fund method of depreciation. This
method is not allowed under United States GAAP, and accordingly,
depreciation has been recalculated over the estimated useful life (25-40
years) of each property using the straight-line method for the prior
year. All of these properties were sold or written off during the year
ended June 30, 1998.
(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. As a result, payments made to
extinguish options in prior years impact the current year's capital stock
and retained earnings. No payments were made during the year ended June
30, 1999.
(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. Based on United States tax regulations, additional tax of
$1,296,000 would have been recognized in the year ended June 30, 1999
(1998 -- $nil).
(d) Retained earnings:
Opening retained earnings in accordance with United States GAAP for the
year ended June 30, 1998 includes the effects of:
(i) recalculating depreciation expense as described in (a). The net
decrease in retained earnings was $1,763,000.
(ii) adopting SFAS 109 as described in (g). The net decrease in retained
earnings was $7,348,000.
(iii) tax effecting the earnings of equity accounted investees as
described in (c). The net decrease in retained earnings was $370,000.
(iv) treating payments made to extinguish options and warrants as income
items as described in (b). The net decrease in retained earnings was
$2,153,000.
(v) classifying convertible debt instruments as liabilities rather than
as equity as described in (f). The net increase in retained earnings
was $1,237,000.
(e) Shareholder loans:
The Company accounts for loans provided to senior employees for the
purchase of shares as amounts receivable. Under United States GAAP, these
loans, totalling $991,000 and $1,206,000 as at June 30, 1999 and 1998,
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. The interest expense included in the loss
from discontinued operations would not exist under United States GAAP as
there is no such requirement. As the debt was repaid during the year
ended June 30, 1998, there is no GAAP difference at June 30, 1999.
F-24
<PAGE> 69
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
(g) Income taxes:
The Company has adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109"), 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 at June
30, 1999 and 1998 as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Ski and resort assets....................................... $18,853 $20,143
Goodwill.................................................... 11,277 3,465
Properties.................................................. (20,593) 2,551
Deferred income tax asset................................... 25,532 4,404
Deferred income tax liability............................... 52,742 44,036
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities calculated under
United States GAAP at June 30, 1999 and June 30, 1998 are presented
below:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Capital assets with tax basis in excess of book values.... $ 25,532 $ 4,404
Operating loss carryforwards and other available
deductions, net......................................... 8,358 10,110
-------- --------
33,890 14,514
Less valuation allowance.................................. (8,358) (10,110)
-------- --------
Net deferred tax assets..................................... 25,532 4,404
Deferred tax liabilities:
Capital assets with tax basis in excess of book values.... $(61,001) $(41,429)
Differing year ends of subsidiaries....................... (12,630) (13,406)
Other..................................................... (314) (301)
-------- --------
(73,945) (55,136)
-------- --------
Net deferred tax liability.................................. $(48,413) $(50,732)
======== ========
</TABLE>
(h) Information relating to cash flow:
Under United states GAAP, the consolidated statement of changes in
financial position would be replaced with a consolidated statement of
cash flows.
The bank and other indebtedness and issue of common shares related to the
financing of the acquisitions described in notes 2(b), (d) and (f) are
non-cash components of the acquisitions and, under United States GAAP,
would not be included as financing and investing activities. The total
amount of $17,854,000 has been excluded from the investing and financing
sections of the consolidated statement of changes in financial position
for Canadian GAAP purposes at June 30, 1999. However, financing and
investing cash flows would each be decreased by $10,415,000 at June 30,
1998.
United States GAAP requires the following additional disclosures:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Cash taxes paid............................................. $ 2,016 $ 2,434
Cash interest paid.......................................... 43,005 29,840
</TABLE>
F-25
<PAGE> 70
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
The changes in non-cash operating working capital from continuing
operations are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
(Increase) decrease in assets:
Amounts receivable........................................ $(46,023) $ 200
Other assets.............................................. (12,558) (33,555)
Increase (decrease) in liabilities:
Amounts payable........................................... 25,086 48,650
Due to joint venture partners............................. 20,545 7,287
Deferred revenue.......................................... 24,898 21,162
Foreign currency translation adjustment................... (1,486) (3,460)
-------- --------
$ 10,642 $ 40,284
======== ========
</TABLE>
(i) Joint ventures:
In accordance with Canadian GAAP, joint ventures are required to be
proportionately consolidated regardless of the legal form of the entity.
Under United States GAAP, incorporated joint ventures are required to be
accounted for by the equity method. However, in accordance with practices
prescribed by the SEC, the Company has elected for the purpose of this
reconciliation to account for incorporated joint ventures by the
proportionate consolidation method (note 13).
(j) Stock compensation:
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), requires that stock-based
compensation be accounted for based on a fair value methodology, although
it allows an entity to elect to continue to measure stock-based
compensation costs using the intrinsic value based method of accounting
proscribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"). The Company has elected to account
for stock-based compensation in accordance with APB 25. Accordingly, no
compensation expense has been recognized for the years presented.
Had compensation expense been determined in accordance with the
provisions of SFAS 123 using the Black-Scholes option pricing model at
the date of the grant, the following weighted average assumptions would
be used:
<TABLE>
<S> <C>
Dividend yield.............................................. 0.7%
Risk-free interest rate..................................... 5.0%
Expected option life........................................ 5 years
Expected volatility......................................... 39.4%
</TABLE>
Using the above assumptions, the Company's net income under United States
GAAP would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Net income in accordance with United States GAAP:
As reported............................................... $57,516 $35,179
Estimated fair value of option grants..................... (3,629) (2,193)
------- -------
Pro forma................................................. $53,887 $32,986
======= =======
</TABLE>
Pro forma net income reflects only options granted since June 30, 1996.
Therefore, the full impact of calculating compensation costs for stock
options under SFAS 123 is not reflected in the pro forma net income
amounts presented above because compensation cost is reflected over the
options' vesting period of 5 years and compensation cost for options
granted prior to July 1, 1996 is not considered.
F-26
<PAGE> 71
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
(tabular amounts in thousands of dollars unless otherwise indicated)
Stock option activity during the periods presented is as follows:
<TABLE>
<CAPTION>
NUMBER COMMON SHARE NUMBER NRP SHARE
OF COMMON WEIGHTED AVERAGE OF NRP WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Balance at June 30, 1997........................... 1,960,800 $12.83 1,824,400 $1.42
Granted.......................................... 1,201,000 25.63 -- --
Exercised........................................ (224,650) 11.47 (623,975) 1.35
Expired.......................................... (42,500) 12.79 (42,500) 1.40
--------- ------ --------- -----
Balance at June 30, 1998........................... 2,894,650 18.25 1,157,925 1.46
Granted.......................................... 542,500 27.80 -- --
Exercised........................................ (119,600) 12.46 (374,675) 1.29
Forfeited........................................ -- -- (61,400) 1.94
Expired.......................................... (59,700) 22.96 (8,400) 1.41
--------- ------ --------- -----
Balance at June 30, 1999........................... 3,257,850 $19.98 713,450 $1.48
========= ====== ========= =====
</TABLE>
(k) Foreign exchange on bank and other indebtedness:
Under Canadian GAAP the Company defers and amortizes foreign exchange
gains and losses on bank and other indebtedness denominated in foreign
currencies over the remaining term of the debt. Under United States GAAP,
foreign exchange gains and losses are included in income in the period in
which the exchange rate fluctuates.
(l) Other comprehensive income:
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), was issued by the Financial
Accounting Standards Board in June 1997 and is effective for fiscal years
beginning after December 15, 1997. SFAS 130 requires that a company
classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and capital stock
in the equity section of the balance sheet.
The foreign currency translation adjustment in the amount of $8,767,000
(1998 -- $23,645,000) presented in shareholders' equity under Canadian
GAAP would be considered accumulated other comprehensive income under
United States GAAP. The change in the balance of $14,878,000 (1998 --
$(19,496,000)) would be other comprehensive income (loss) for the year.
(m) Recent accounting standards:
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is applicable for fiscal years
beginning after June 15, 2000. The Company has not yet determined the
impact of this standard on its consolidated financial statements.
F-27
