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, 2001 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
TELEPHONE NUMBER : (206) 623-7580
(Name, address (including zip code) and telephone number
(including area code) of agent for service in the United States)
7011 NOT APPLICABLE
(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
Securities registered or to be registered pursuant to Section 12(g) of the
Act. None
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act. None
For annual reports, indicate by check mark the information filed with this Form:
[X] Annual information form [X] Audited annual financial statements
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.
44,026,394 common shares as at June 30, 2001
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 J. MEACHER
-----------------------------------
Name: Ross J. Meacher
Title: Corporate Secretary
Date: October 30, 2001
2
INTRAWEST LOGO
ANNUAL INFORMATION FORM
INTRAWEST CORPORATION
Suite 800, 200 Burrard Street
Vancouver, British Columbia, Canada V6C 3L6
September 12, 2001
INTRAWEST CORPORATION
ANNUAL INFORMATION FORM
TABLE OF CONTENTS
PAGE
----
Certain Definitions, Statistical and Other Information...... 2
The Company................................................. 3
Incorporation............................................. 3
Overview.................................................. 3
Corporate Structure....................................... 4
General Development of the Business....................... 4
The Mountain Resort Industry................................ 5
The Golf Industry........................................... 6
Resort Management and Development........................... 6
Resort Operations......................................... 6
Mountain Resort Properties............................. 6
Warm-Weather Destination Properties.................... 10
Other Resort Properties................................ 11
Sources of Resort Operations Revenue................... 11
Sponsorship and Special Events......................... 13
Information Technology................................. 13
Resort Marketing and Sales............................. 13
Resort Real Estate Development............................ 14
The Development Process................................ 15
Real Estate Properties................................. 16
Resort Club............................................ 23
Competition............................................... 24
Legal and Regulatory Matters.............................. 24
Non-Resort Assets........................................... 24
Employees................................................... 26
Selected Consolidated Financial Information................. 26
Management's Discussion and Analysis........................ 29
Market for Securities....................................... 41
Directors and Executive Officers............................ 41
Additional Information...................................... 42
Consolidated Financial Statements........................... F-1
CERTAIN DEFINITIONS, STATISTICAL AND OTHER 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.
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 and 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.
Unless otherwise indicated, all dollar amounts are stated in United States
dollars.
2
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 village-centered 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 2000/2001 ski season the Company's network of resorts
generated approximately 7.0 million skier visits, which is more than the amount
generated by any other North American group of affiliated mountain resorts.
Intrawest also holds a 16.5% 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 has expanded 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 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, Solitude in Utah, Snowmass in
Colorado and Les Arcs in France. The Company is also developing a resort village
at Lake Las Vegas Resort in Nevada. Intrawest owns or has rights to acquire land
on which it expects to develop and sell approximately 20,500 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 Whistler
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. At all of its major resorts, the Company has
completed the first, most capital-intensive stage of development. 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, Tremblant and Panorama, and in Hawaii, Vancouver and Palm Desert.
3
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, 2001,
indicating the place of incorporation/registration, and showing the percentage
of equity interest beneficially owned by the Company.
PLACE OF PERCENTAGE
INCORPORATION/ EQUITY INTEREST
REGISTRATION HELD BY THE COMPANY
---------------- -------------------
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 100
Keystone/Intrawest L.L.C................................... Delaware 50
Copper Mountain, Inc....................................... Delaware 100
Mountain Creek Resort, Inc................................. New Jersey 100
Snowshoe Mountain, Inc..................................... West Virginia 100
The Stratton Corporation................................... Vermont 100
GENERAL DEVELOPMENT OF THE BUSINESS
During the past three years, the Company has expanded its resort operations
and resort real estate development businesses. Key developments during this
period are set out below.
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 Cdn.$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%.
- In December 1999 the Company announced a normal course issuer bid
through The Toronto Stock Exchange for up to 1,022,000 of the Company's
Non-Resort Preferred ("'NRP") Shares.
2000
- In January 2000 the Company raised gross proceeds of $135 million from a
private offering of unsecured notes in Canada and the United States.
- In June 2000 the Company entered into an agreement to develop the
Village at MonteLago located at Lake Las Vegas Resort in Nevada.
2001
- In July 2000 the Company entered into an agreement to develop a village
at the Les Arcs resort in France.
- In January 2001 the Company announced a normal course issuer bid through
The Toronto Stock Exchange for up to 465,000 NRP Shares.
- In March 2001 the Company raised gross proceeds of $125 million from a
private offering of unsecured notes in Canada and the United States.
4
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 2000/2001
ski season, these resorts attracted approximately 75.1 million skier visits
(57.3 million to United States ski areas and 17.8 million to Canadian ski
areas). The geographic distribution of North American skier visits during the
2000/2001 season was as follows:
PROPORTIONATE
GEOGRAPHIC REGION SKIER VISITS SHARE INTRAWEST RESORT LOCATED IN REGION
----------------- ------------ ------------- ----------------------------------
(MILLIONS) (%)
Western Canada......................... 5.0 6.7 Whistler Blackcomb, Panorama
Quebec................................. 6.8 9.1 Tremblant, Mont Ste. Marie
Other Canada........................... 6.0 8.0 Blue Mountain
U.S. Rocky Mountains................... 19.1 25.4 Copper
Northeast U.S.......................... 13.9 18.5 Stratton, Mountain Creek
Pacific West U.S....................... 11.2 14.9 Mammoth
Midwest U.S............................ 7.6 10.1 --
Southeast U.S.......................... 5.5 7.3 Snowshoe
---- -----
75.1 100.0
==== =====
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 2000/2001 ski
season the largest 20% of ski areas accounted for approximately 80% of the total
skier visits in the United States. The Company has determined that, depending on
customer mix, 80-85% of visits to its resorts are "drive-to" (i.e., the visitor
drives from home to the resort).
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 2001. 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 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 continuing growth of
snowboarding, which is increasing youth and young adult participation in
mountain sports. In the United States, skier visits attributable to snowboarders
have increased at a compound annual rate of growth of 8% per year over the past
three years and snowboarders are currently estimated to represent 28% of all
skier visits in the United States. The Company believes that these trends and
developments
5
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 21,000 golf courses in North America -- 19,000 in
the United States and 2,000 in Canada. In 1999 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 past few years, consumer spending on golf has
increased significantly, from $7.8 billion in the United States in 1986 to over
$30 billion in 1998. Revenue per round has been driven up by increases in greens
fees and higher spending on equipment, lessons, golf 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.
INTRAWEST AVERAGE SNOW- 2000/2001
OWNERSHIP SKIABLE VERTICAL LIFTS ANNUAL MAKING SKIER
RESORT PERCENTAGE TERRAIN DROP TRAILS (HIGH-SPEED) SNOWFALL COVERAGE VISITS
------ ---------- ------- -------- ------ ------------ -------- -------- ---------
(%) (ACRES) (FEET) (INCHES) (%) (000'S)
Whistler Blackcomb...... 77 7,071 5,280 227 33(15) 360 7 2,045
Mammoth................. 59.5(1) 3,500 3,100 185 35(10) 350 17 1,165
Copper.................. 100 2,450 2,699 125 23(5) 255 16 993
Tremblant............... 100 604 2,115 92 14(7) 140 75 743
Blue Mountain........... 50 251 720 34 12(4) 100 94 511
Snowshoe................ 100 224 1,598 57 14(2) 185 100 466
Stratton................ 100 583 2,003 90 16(5) 180 86 448
Mountain Creek.......... 100 168 1,040 44 11(3) 90 100 321
Panorama................ 100 1,500 4,047 100 10(1) 110 35 182
Mont Ste. Marie......... 100 108 1,250 25 3(2) 120 90 96
---------------
(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.
WHISTLER BLACKCOMB. Whistler Blackcomb, located approximately 75 miles
northeast of Vancouver, British Columbia, is North America's most visited ski
resort. 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
6
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
heavily on capital improvements including high-speed lifts, expanded trails,
upgraded snowmaking capabilities, new restaurants and employee housing. Since
1988 Whistler has upgraded and replaced many of its older lifts and has expanded
its restaurant and service facilities. Together Whistler and Blackcomb Mountain
skier visits in 2000/2001 totaled 2,045,000, the largest in North America for a
single resort.
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 mountain.
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 mountain. 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 35 retail and
equipment rental shops. The Company also has food and beverage operations at 16
restaurants and bars, having a total seating capacity of approximately 8,200.
Whistler Blackcomb's 1,400-person ski and snowboard school offers classes
for both adults and children. An 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 and 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 35 lifts, including 10
high-speed quad chairlifts. All of Mammoth's lifts, ski trails and related
assets are located on land leased to Mammoth by the United States Forest Service
under various special use permits which expire at various times during the
period from 2012 to 2024. Pursuant to these permits, Mammoth makes annual
payments based on a percentage of sales.
Mammoth owns and operates 6 sport shops, 5 hotel properties, and food and
beverage operations at 9 restaurants and bars, having a total seating capacity
of approximately 4,600.
7
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 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 significantly in capital improvements including high-speed lifts, new
restaurant facilities and service buildings, and vehicles and other equipment.
The Company completed its acquisition of Copper in 1997 and intends to continue
to make capital improvements at Copper including new lifts and trails and
expanded restaurant facilities.
Copper has a 2,450-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 23 lifts, including five high-speed
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 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 seven retail shops and three equipment rental shops, and food
and beverage operations at 12 restaurants and bars, having a total seating
capacity of approximately 2,400.
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 four of the past five 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 major operating ski area in Canada.
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, six- and eight-passenger gondolas, new trails, a 1,000-seat
mountain-top restaurant, a state-of-the-art snowmaking system, the Edge --
Tremblant's first new peak since 1943, and the new Versant Soleil which is the
largest ski terrain expansion since the initial development of Tremblant.
The Company operates a 604-acre ski area facility at Tremblant which has
elevations at its base of 755 feet and at its peak of 2,870 feet, resulting in
the greatest vertical drop in eastern Canada. Tremblant has 92 trails which are
serviced by 14 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 agreement, Tremblant pays a minimal annual
lease payment.
Tremblant has 17 sports shops and food and beverage operations at 9
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
8
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 Fairmont Hotels & Resorts. 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.
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 34 trails are
serviced by 12 lifts, including 4 high-speed chairlifts. Blue Mountain has food
and beverage operations at 6 locations having a total seating capacity of
approximately 2,800.
Blue Mountain's summer amenities include an 18-hole golf course and a
waterfront park on Georgian Bay.
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 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 57 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 15 retail shops, 5 of which are concessioned to third-party
operators. The resort also owns and operates 13 restaurants and 6 bars, having a
total seating capacity of approximately 2,500. Snowshoe owns 2 lodges having a
total of 250 rooms and manages approximately 1,000 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, various tennis and swimming facilities, horseback riding
and miniature golf. 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.
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 16 lifts, five of which are high-speed.
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.
9
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 75-acre
waterpark and 5 mountain-top lakes.
PANORAMA. Panorama is located in the Purcell Mountains 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 1,500-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 4 retail shops and food and beverage operations at 8
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
Greywolf, an award-winning 18-hole championship golf course 50% owned by the
Company and a mountainside waterpark with hot tubs and slides. Other summer
attractions in the area include mountain biking, 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 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 2 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 73 holes of golf on four separate courses. The resort also
features 32,300 square feet of conference facilities, a 98-slip full-service
marina suitable for craft up to 100 feet in length, 15 tennis courts, management
of approximately 775 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, the Intrawest golf division operates Raven courses at
Snowshoe, Sandestin, Swaneset Bay (Pitt Meadows, British Columbia) and Three
Peaks (Silverthorne, Colorado).
10
The Raven concept is to create superior public golf facilities,
complemented by attention to maintenance and service quality.
OTHER RESORT PROPERTIES
CANADIAN MOUNTAIN HOLIDAYS. The Company has a 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, 6 remote lodges and
5 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
mountain operations (lift-tickets and heli-skiing), 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 (39% for fiscal 2001).
The following chart provides a breakdown of the sources of the Company's
ski and resort operations and warm-weather operations revenue during fiscal
2001. See "Selected Consolidated Financial Information -- Segmented Information"
for segmented information.
REVENUE PROPORTION
------------ ----------
(MILLIONS OF (%)
DOLLARS)
Mountain operations......................................... $192.2 39.0
Retail and rental shops..................................... 84.0 17.1
Food and beverage........................................... 65.4 13.3
Lodging and property management............................. 58.0 11.8
Ski school.................................................. 29.8 6.1
Golf........................................................ 31.7 6.4
Other....................................................... 31.1 6.3
------ -----
$492.2 100.0
====== =====
MOUNTAIN OPERATIONS. 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 is in use at Whistler Blackcomb, Tremblant,
Stratton, Mammoth and Copper. In addition to their other features, frequent
skier cards at Whistler Blackcomb and Stratton offer direct lift access as the
card is scanned at the lift line and a charge is made against the cardholder's
credit card. The Company uses its frequent skier cards to increase skier visits
at non-peak times by offering discounts against the regular day ticket price or
by tying in promotions at its retail stores or food and beverage facilities.
Single- and multi-day tickets constitute the balance of the Company's line of
lift ticket products. These lift tickets are often sold to customers in packages
including accommodations in order to fill beds when occupancy is expected to be
low. Since fiscal 1999 revenue from lift ticket sales has increased from $155.6
million to $192.2 million, primarily because of improvements in ticket yields
and increased skier visits. 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 $65.0 million in fiscal 1999 to $84.0
million in fiscal 2001. The increase is attributable primarily to increased
retail sales and equipment rental revenue at Whistler 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
11
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 150 retail and ski rental shops containing approximately 235,000
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 50-store chain of Breeze/Max sport
retail and ski and snowboard rental shops containing approximately 96,000 square
feet of space. This chain has locations in the western United States.
FOOD AND BEVERAGE. Food and beverage 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 110
different food and beverage facilities at its mountain resorts with more than
28,000 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 $54.8 million in fiscal 1999 to $65.4 million in fiscal 2001.
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 6,200 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 $38.4 million in fiscal 1999 to $58.0 million
in fiscal 2001, principally due to the development of new rental accommodations
at Tremblant, Copper, Snowshoe and Stratton.
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.
The Company, through its subsidiary Resort Reservations Network Inc.
("Rezrez"), offers guests the opportunity to plan and book their vacation over
the telephone or through an online booking engine via the Internet. Travelers
may customize their travel and fully plan and book all of their vacation needs
from accommodation, airline bookings, car rentals, lift passes, ski rentals and
ski lessons. Pre-set packages are also available.
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.
12
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 $22.2 million in fiscal 1999 to $29.8 million in fiscal 2001,
principally due to 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 $31.7
million in 2001. At its mountain resorts, the Company owns and operates
championship golf courses at Panorama, Blue Mountain, Tremblant, Mont Ste.
Marie, Copper, Stratton, Snowshoe and Mammoth. The Company also owns an
additional six golf courses at its warm-weather resort properties in Florida and
Arizona and two golf courses in Pitt Meadows, British Columbia. Stratton also
offers a golf school which attracts students from throughout eastern North
America. Golf is a primary attraction in the summer and shoulder seasons,
providing the Company with revenue from greens fees, golf 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 community services,
such as snow clearing, telephone service, utilities and employee housing, and
revenue from miscellaneous activities.
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, Nike, Fuji Film, Nestle, Evian, Telus/Bell/Worldcom
and The North Face.
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 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.
13
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.
The following table summarizes certain key statistics relating to each of
the Company's resort real estate holdings.
AS AT JUNE 30, 2001
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)
Whistler Blackcomb(1)....... 1987 2,988 139 781 109,000 4,000 95,000
Tremblant................... 1992 1,764 227 2,790 147,000 7,000 89,000
Keystone(2)................. 1995 862 108 2,064 95,000 -- 223,000
Panorama.................... 1995 346 -- 1,230 19,000 -- 10,000
Stratton.................... 1997 210 60 888 -- -- 30,000
Snowshoe.................... 1997 236 63 806 25,000 9,000 44,000
Mammoth..................... 1998 249 276 1,800 4,000 53,000 53,000
Copper...................... 1998 376 107 551 78,000 -- 50,000
Sandestin................... 1999 379 418 1,595 -- 49,000 84,000
Solitude(3)................. 1999 79 47 104 6,000 3,000 3,000
Three Peaks(4).............. 2000 162 82 87 -- -- --
Blue Mountain............... 2000 48 278 1,741 -- 18,000 99,000
Squaw Valley................ 2000 -- 290 285 -- 67,000 56,000
Mountain Creek.............. 2001 -- 70 684 -- -- 169,000
Lake Las Vegas.............. 2001 -- -- 800 -- -- 127,000
Les Arcs.................... 2001 -- -- 750 -- -- 50,000
----- ----- ------ ------- ------- ---------
7,699 2,165(5) 16,956(5) 483,000 210,000(5) 1,182,000(5)
===== ===== ====== ======= ======= =========
---------------
(1) The Company has a 77% interest in both Whistler Mountain Resort Limited
Partnership and in Blackcomb Skiing Enterprises Limited Partnership. The
information on Whistler Blackcomb in this table reflects 100% of the
partnerships' 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 55% and 60%). The
information on Keystone in this table reflects 100% of the joint venture's
land holdings.
(3) 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.
(4) 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.
(5) The Company's pipeline of real estate projects comprises residential units
and commercial space under development and held for future development which
aggregate 20,513 units.
14
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 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 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 Cdn.$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.
15
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.
The Company employs its own sales personnel 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.
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 First
Ascent at Squaw Valley, Gateway at Sandestin and Le Westin Royal Tremblant at
Tremblant. Since fiscal 1996 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, 2001, Intrawest had developed approximately 488,000 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 2001 amounted to
approximately $8.9 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
Fairmont Hotels & Resorts.
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.
WHISTLER BLACKCOMB. Since 1986 the Company has exercised options on and
developed the majority of its land holdings at the base of Blackcomb. There are
approximately 360 residential units and 60,000 square feet of commercial space
remaining at the base of Blackcomb being developed or planned for development.
The Company owns a 44-acre site at the Creekside base of Whistler on which it is
developing, or has land planned for the development of, approximately 183
residential units and 34,000 square feet of commercial space. In addition, the
Company is developing, or has land planned for the development of, approximately
378 residential units and 5,000 square feet of commercial space at other sites
in Whistler. The Company expects that the development of these lands will take
place over a period of five to eight 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
16
developing, or has land planned for the development of, approximately 3,000
residential units and 96,000 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 is developing, or plans to develop approximately
2,200 residential units and 223,000 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.
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
1,200 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.
STRATTON. The Company is developing, or has land planned for the
development of, approximately 950 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 900 residential units and 53,000 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.
MAMMOTH. The Company is developing a new North Village at the base of
Mammoth Mountain which is planned for the development of approximately 768
residential units and 106,000 square feet of commercial space. The Company also
is developing, or has land available for the development of, approximately 64
ski-in, ski-out units and 1,158 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
500 residential units and 50,000 square feet of commercial space on this site.
The Company is developing, or has land planned for the development of,
approximately 150 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.
SANDESTIN. The Company is developing, or has land planned for the
development of, approximately 2,000 residential units and 133,000 square feet of
commercial space. Approximately 700 of these residential units will form part of
the new Baytowne Village at Sandestin. 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 150 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 150 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.
BLUE MOUNTAIN. Through an agreement with Blue Mountain Resorts, the
Company is developing, or plans to develop, approximately 1,400 residential
units and 117,000 square feet of commercial space. Through a joint venture, the
Company is developing, or 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.
17
SQUAW VALLEY. Through an option with the owner of Squaw Valley Ski Area,
the Company is developing, or 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.
MOUNTAIN CREEK. With its acquisition of Mountain Creek, the Company
acquired approximately 390 acres. The Company has land planned for the
development of approximately 750 residential units and 169,000 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 Company continues to
review the feasibility of the development of these lands.
LAKE LAS VEGAS. Through an option with the owners of Lake Las Vegas
Resort, the Company has plans to develop approximately 800 residential units and
127,000 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.
LES ARCS. Through an option with the owners of Les Arcs in France, the
Company has plans to develop approximately 750 residential units and 50,000
square feet of commercial space. The Company expects that the development of
these lands will take place over a period of six to eight years.
18
PROJECTS RECENTLY COMPLETED OR UNDER ACTIVE DEVELOPMENT
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 2001
------------ --------- ----------- -------------------------
WHISTLER BLACKCOMB
The Legends 77% 121 Quarter-share units for sale;
construction of Phase I (77
units) completed March 2001;
299 out of 308 quarters sold.
Construction of Phase II (44
units) started March 2001 with
scheduled completion December
2001; fully pre-sold.
First Tracks 77% 84 Condominium-hotel units for
sale; construction started May
2001 with scheduled completion
August 2002; fully pre-sold.
The Lookout at Taluswood 77% 11 Townhomes for sale;
construction started May 2001
with scheduled completion May
2002; fully pre-sold.
TREMBLANT
Le Refuge du Cerf 100% 65 Single-family lots for sale;
construction completed
December 1999; 51 lots sold.
Les Manoirs 100% 140 Townhomes for sale;
construction started October
1999 with scheduled completion
November 2001; 120 units
pre-sold.
L'Equinoxe 100% 91 Townhomes for sale;
construction started March
2000 with scheduled completion
May 2002; 82 units pre-sold.
Le Sommet des Neiges 100% 116 Quarter-share units for sale;
construction of Phase I (67
units) started September 2000
with scheduled completion
November 2001; 212 of 268
quarters pre-sold.
Construction of Phase II (49
units) started June 2001 with
scheduled completion April
2002; 101 of 196 quarters
pre-sold.
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 2001
------------ --------- ----------- -------------------------
KEYSTONE
Buffalo Lodge & The 55% 157 Condominium-hotel units for
Dakota sale; construction completed
September 1998; 153 units
sold.
Expedition Station 60% 92 Condominium-hotel units for
sale; construction completed
August 1999; 85 units sold.
Elk Run Lots 50% 81 Single-family lots for sale;
construction completed
September 1999; 76 lots sold.
Elk Run Villas 60% 10 Townhomes for sale;
construction completed April
2000; 5 units sold.
Red Hawk Lodge 60% 100 Condominium-hotel units for
sale; construction completed
June 2000; 88 units sold.
Ski Tip 4 60% 4 Townhomes for sale;
construction completed
February 2001; 3 units sold.
Lone Eagle 60% 51 Condominium-hotel units for
sale; construction completed
May 2001; 50 units sold.
The Springs at River Run 60% 94 Condominium-hotel units for
sale; construction completed
August 2001; 57 units sold.
Settler's Creek 60% 66 Townhomes for sale;
Townhomes construction of Phase I (42
units) started September 2000
with scheduled completion
December 2001; 28 units
pre-sold. Construction of
Phase II (24 units) to begin
spring 2002 with scheduled
completion winter 2003.
19
PROJECTS RECENTLY COMPLETED OR UNDER ACTIVE DEVELOPMENT (CONTINUED)
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 2001
------------ --------- ----------- -------------------------
PANORAMA
Forest Ridge Estates 100% 33 Single-family lots for sale;
construction completed October
2000; 26 lots sold.
Taynton Lodge 100% 63 Condominium-hotel units for
sale; construction completed
May 2001; 60 units sold.
STRATTON
Solstice 100% 80 Townhomes for sale;
construction of Phase I (40
units) completed June 2001; 38
units sold. Construction of
Phase IIa (20 units) started
April 2001 with scheduled
completion July 2002; 11 units
pre-sold. Construction of
Phase IIb (20 units) started
July 2001 with scheduled
completion July 2002.
SNOWSHOE
Allegheny Springs 100% 146 Condominium-hotel units for
sale; construction of Phase I
(63 units) started May 2001
with scheduled completion June
2002; 44 units pre-sold.
Construction of Phase II (83
units) to begin spring 2002
with scheduled completion
spring 2003; 30 units
pre-sold.
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 2001
------------ --------- ----------- -------------------------
MAMMOTH
The Timbers 100% 32 Townhomes for sale;
construction of Phase I (28
units) completed June 2001; 25
units sold. Construction of
Phase II (4 units) to begin
spring 2003 with scheduled
completion summer 2004; 1 unit
pre-sold.
Sunstone Lodge 100% 77 Condominium-hotel units for
sale; construction completed
January 2001; 74 units sold.
Mammoth Green 100% 46 Townhomes for sale;
construction started June 2000
with scheduled completion
September 2001; 33 units
pre-sold.
Eagle Run 100% 36 Townhomes for sale;
construction started June 2000
with scheduled completion
February 2002; 33 units
pre-sold.
The Village 100% 166 Condominium-hotel units for
sale; construction to begin
fall 2001 with scheduled
completion spring 2003; 72
units pre-sold.
20
PROJECTS RECENTLY COMPLETED OR UNDER ACTIVE DEVELOPMENT (CONTINUED)
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 2001
------------ --------- ----------- -------------------------
COPPER
The Village at Copper 100% 228 Condominium-hotel units for
sale; construction completed
December 2000; 224 units sold.
Union Creek 100% 16 Townhomes for sale;
construction completed August
2001; fully sold.
Passage Point 100% 134 Condominium-hotel units for
sale; construction completed
August 2001; 84 units sold.
BlueWing Lodge 100% 86 Quarter-share units for sale;
construction to begin spring
2002 with scheduled completion
summer 2003; 141 of 344
quarters pre-sold.
SANDESTIN
Magnolia Bay 100% 41 Townhomes for sale;
construction of Phase I (22
units) completed June 2000;
fully sold. Construction of
Phase II (19 units) completed
June 2001; 16 units sold.
Baytowne Village - Le 100% 25 Townhomes for sale;
Jardin construction started April
2001 with scheduled completion
April 2002; 20 units pre-sold.
Baytowne Village - 100% 196 Condominium-hotel units for
Gateway sale; construction started
October 2000 with scheduled
completion April 2002; 183
units pre-sold.
Baytowne Village - Lofts 100% 9 Loft units for sale;
construction started April
2001 with scheduled completion
April 2002.
Baytowne Avenue North 100% 8 Single-family lots for sale;
construction completed June
2001; 6 lots sold.
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 2001
------------ --------- ----------- -------------------------
The Preserve 100% 40 Single-family lots for sale;
construction completed June
2001; 21 lots sold.
Club Estates at Burnt 100% 9 Single-family lots for sale;
Pine construction completed June
2001; 3 lots sold.
Grand Sandestin 100% 168 Condominium-hotel units for
sale; construction to begin
fall 2001 with scheduled
completion winter 2003; 149
units pre-sold.
One Beach Club Drive 50% 102 Condominium-hotel units for
sale; construction started
March 2001 with scheduled
completion October 2002; 50
units pre-sold.
Driftwood Estates 100% 10 Single-family lots for sale;
construction completed June
2001; 1 lot sold.
SOLITUDE
Powderhorn Lodge 100% 83 Condominium-hotel units for
sale; construction completed
June 2000; 80 units sold.
Eagle Springs East 100% 47 Condominium-hotel units for
sale; construction completed
June 2001; 33 units sold.
THREE PEAKS
Estate Lots 50% 250 Single-family lots for sale;
construction of Phase I (102
lots) completed September
2000; 101 lots sold.
Construction of Phase II (63
lots) completed January 2001;
61 lots sold. Construction of
Phase III (85 units) started
May 2001 with scheduled
completion January 2002; 3
lots pre-sold.
21
PROJECTS RECENTLY COMPLETED OR UNDER ACTIVE DEVELOPMENT (CONTINUED)
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 2001
------------ --------- ----------- -------------------------
BLUE MOUNTAIN
Snowbridge Lots 50% 21 Single-family lots for sale;
construction completed
November 1999; 3 lots sold.
Snowbridge Townhomes 50% 52 Townhomes for sale;
construction of Phase I (40
units) completed December
2000; fully sold. Construction
of Phase II (12 units) started
August 2001 with scheduled
completion fall 2002; 5 units
pre-sold.
Grand Georgian 100% 187 Condominium-hotel units for
sale; construction started
July 2000 with scheduled
completion December 2001; 161
units sold.
Weider Lodge 100% 91 Condominium-hotel units for
sale; construction started
April 2001 with scheduled
completion May 2002; 54 units
pre-sold.
OWNERSHIP TOTAL PROJECT DESCRIPTION AND
PROJECT NAME INTEREST UNITS STATUS AT AUGUST 31, 2001
------------ --------- ----------- -------------------------
SQUAW VALLEY
First Ascent 100% 139 Condominium-hotel units for
sale; construction started
June 2000 with scheduled
completion February 2002;
fully pre-sold.
22 Station 100% 151 Condominium-hotel units for
sale; construction started
July 2001 with scheduled
completion December 2002; 98
units pre-sold.
MOUNTAIN CREEK
Whitetail Townhomes 100% 70 Townhomes for sale;
construction started April
2001 with scheduled completion
June 2002; 53 units pre-sold.
Laurels 100% 63 Townhomes for sale;
construction started July 2001
with scheduled completion July
2002; 24 units pre-sold.
22
RESORT CLUB
In 1993 Intrawest entered the vacation ownership business through its
wholly owned subsidiary, Intrawest Resort Ownership Corporation ("IROC").
Vacation ownership is a segment of timeshare, a fast-growing sector of the
leisure industry. IROC differs from traditional timeshare companies in that it
offers equity ownership in a club through an innovative point-based membership
system. Members of the Resort Club have the flexibility to vacation in various
club locations or at more than 3,700 resorts through membership in ExtraOrdinary
Escapes, IROC's owned and operated Exchange Company. Members can enjoy
seven-night Vacation Exchanges with Resort Condominiums International ("RCI").
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 high-quality exchange program.
The number of timeshare resorts throughout the world increased from 631 in
1981 to over 5,300 at the end of 1999 with a total of 6 million owners
worldwide. From 1987 timeshare sales grew by approximately 15% per year,
reaching approximately $6.7 billion in total worldwide sales in 1999. A
significant part of this success is attributable to the growth of timeshare
exchanges which have increased owner flexibility. Exchange companies, such as
RCI, allow timeshare owners to turn the fixed asset of a particular week at a
particular location into a tradeable commodity. Of the more than 5,300 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 The Walt Disney Company, Marriott Hotels &
Resorts, 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 three phases of the Resort Club locations at Whistler
(British Columbia) and Tremblant (Quebec), comprising 122 and 54 units,
respectively, have been completed. In addition, the Resort Club has added units
in Panorama, British Columbia (21 units), Kauai, Hawaii (10 units), Palm Desert,
California (42 units), and Vancouver, British Columbia (29 units). The quality
and service levels of the Company's Resort Club locations have placed the Resort
Club in RCI's highest-rated group of worldwide destination resorts. IROC is
entitled to sell approximately 6 million points in all phases of its projects
when they are fully built. Future locations include Sandestin in Florida (59
units), Blue Mountain in Ontario (100 units), Stowe, Vermont (42 units),
Zihuatanejo, Mexico and Copper Mountain, Colorado (18 units). Through June 30,
2001, approximately 1.5 million points have been sold to over 9,000 Members for
approximately $136 million.
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
23
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
generally 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 Cdn.$88.5 million or Cdn.$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,
within the next year. 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.
In November 1999 the Company's shareholders passed resolutions to reduce
the redemption price of the NRP Shares from Cdn.$3.82 to Cdn.$2.65 per share and
to permit the Company to purchase NRP Shares. During fiscal 2001 the Company
used Cdn.$0.6 million to purchase 330,600 NRP Shares under the Company's normal
course issuer bid at an average cost of Cdn.$1.82.
24
The following redemptions have been made to date.
NUMBER OF NRP
SHARES APPROXIMATE REDEMPTION AMOUNT
DATE OF REDEMPTION REDEEMED PERCENTAGE PER NRP SHARE
------------------ ------------- ----------- -----------------
(%) CDN.$
September 30, 1997....................................... 2,360,000 10 3.82
September 30, 1998....................................... 5,460,000 25 3.82
September 30, 1999....................................... 3,350,000 20 3.82
January 1, 2000.......................................... 4,020,000 30 2.65
April 1, 2000............................................ 1,876,000 20 2.65
October 1, 2000.......................................... 1,200,000 15 2.65
April 1, 2001............................................ 970,000 15 2.65
NON-RESORT PROPERTIES
Set out below is a brief description of each of the Company's remaining
non-resort properties.
AIRCARE, GREATER VANCOUVER, BRITISH COLUMBIA. The Company holds a 50%
interest in a partnership which owns 11 vehicle emission testing stations
located in 9 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
Cdn.$2.7 million. At June 30, 2001, the book value of the Company's interest in
the property and the related debt were Cdn.$7.1 million and Cdn.$5.1 million,
respectively.
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, 2001, the Company's interest in this
property was written down by Cdn.$2.7 million to Cdn.$3.6 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 Cdn.$31.7 million. The Company also provided the
Partnerships with various credit facilities, including a Cdn.$7 million
revolving line of credit and a non-revolving loan for Cdn.$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, 2001 comprised Cdn.$5.7
million from the Partnerships and Cdn.$0.3 million from other parties. The
receivables from the Partnerships at such date consisted of a Cdn.$6 million
revolving line of credit. At September 30, 2001, availability under the line of
credit will be reduced to Cdn.$4 million. Availability under the line terminates
on January 31, 2002.
In addition, the Partnerships owed accrued interest and fees amounting to
Cdn.$0.4 million at June 30, 2001.
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.
NON-RESORT LIABILITIES
At June 30, 2001, the non-resort liabilities totaled Cdn.$6.3 million,
Cdn.$5.1 million of which related to the AirCare property.
25
EMPLOYEES
The Company has approximately 6,100 year-round employees and 13,900
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, 2005 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.
THREE-YEAR SUMMARY
(in millions of dollars except per share amounts)
JUNE 30
--------------------------------
2001 2000 1999
-------- -------- --------
BALANCE SHEET
Total assets.............................................. $1,956.3 $1,717.4 $1,492.2
Bank and other indebtedness............................... 1,010.0 833.2 727.1
Shareholders' equity...................................... 568.4 511.3 538.5
YEARS ENDED JUNE 30
--------------------------------
2001 2000 1999
-------- -------- --------
REVENUE AND EARNINGS
Total revenue............................................. $ 922.8 $ 810.5 $ 609.6
Cash flow from continuing operations...................... 126.9 116.7 90.6
Income from continuing operations......................... 63.5 52.1 38.6
Results of discontinued operations........................ (2.9) (0.1) (4.6)
Net income................................................ 60.6 52.0 34.1
PER COMMON SHARE
Income from continuing operations......................... $ 1.45 $ 1.20 $ 0.96
Net income................................................ 1.45 1.20 0.96
Dividends................................................. 0.11 0.11 0.11
SEGMENTED INFORMATION
(in thousands of dollars)
YEARS ENDED JUNE 30
--------------------------
2001 2000
---------- ----------
INDUSTRY SEGMENTS
Revenue
Ski and resort............................................ $ 433,126 $ 389,839
Real estate............................................... 424,271 348,360
Warm-weather.............................................. 59,076 57,511
Corporate and all other................................... 6,337 14,782
---------- ----------
$ 922,810 $ 810,492
========== ==========
26
YEARS ENDED JUNE 30
--------------------------
2001 2000
---------- ----------
Operating income before interest, depreciation and
amortization, and income taxes
Ski and resort............................................ $ 100,511 $ 85,136
Real estate............................................... 80,989 62,874
Warm-weather.............................................. 7,827 8,552
Corporate and all other................................... 6,337 14,782
---------- ----------
195,664 171,344
Less:
Interest.................................................. (44,490) (35,217)
Depreciation and amortization............................. (57,934) (51,399)
General and administrative................................ (9,793) (7,985)
---------- ----------
(112,217) (94,601)
---------- ----------
$ 83,447 $ 76,743
========== ==========
Segment assets (at period-end)
Ski and resort............................................ $ 886,297 $ 818,485
Real estate............................................... 868,655 676,455
Warm-weather.............................................. 143,343 134,906
Corporate and all other................................... 46,895 68,384
Discontinued operations................................... 11,122 19,125
---------- ----------
$1,956,312 $1,717,355
========== ==========
Capital acquisitions
Ski and resort............................................ $ 85,597 $ 103,822
Warm-weather.............................................. 8,389 15,311
Corporate and all other................................... 15,414 6,501
---------- ----------
$ 109,400 $ 125,634
========== ==========
GEOGRAPHIC INFORMATION
Revenue
Canada.................................................... $ 375,569 $ 331,529
United States............................................. 547,241 478,963
---------- ----------
$ 922,810 $ 810,492
========== ==========
Operating income before income taxes, non-controlling
interest and results of discontinued operations
Canada.................................................... $ 63,201 $ 52,520
United States............................................. 20,246 24,223
---------- ----------
$ 83,447 $ 76,743
========== ==========
Identifiable assets (at period-end)
Canada.................................................... $ 708,438 $ 672,134
United States............................................. 1,236,752 1,026,096
Discontinued operations................................... 11,122 19,125
---------- ----------
$1,956,312 $1,717,355
========== ==========
27
DIVIDEND POLICY
Since 1991 the Company has paid regular, semi-annual dividends of Cdn.$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.
The indentures governing the Company's U.S. notes impose 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 specified dates.
28
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion of the operating results and financial position of
Intrawest should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this Annual Information Form.
KEY FINANCIAL OBJECTIVES
The Company's key financial objectives for fiscal 2001 and the years ahead
are clearly defined.
- Maintain earnings per share growth of about 20% per annum.
- Increase resort operation revenues and profit margins as villages are
built out.
- Move from a high capital investment strategy to a free cash flow
position as resort operations EBITDA increasingly outpaces spending on
capital improvements and the ramp up in real estate production levels
off.
- Leverage in-house expertise and third-party capital to carry out new
business opportunities.
- Maintain a conservative risk profile in both the operations and real
estate businesses.
The Company believes it was successful in meeting each of these financial
objectives in fiscal 2001. Operating results were records for both ski and
resort operations and real estate. Resort operations capital spending declined
again in 2001, as it had in 2000. New investment in real estate reached a peak
in 2001 and is expected to decline in 2002, moving the Company towards a free
cash flow position. The Company's recognized expertise continued to attract
third-party interest, such as the recently announced real estate joint venture
at Snowmass and the expansion of its call center business, Resort Reservations,
to new destinations. This progress has been achieved while the Company has
continued to apply its risk mitigation strategies, for example pre-selling real
estate and reducing seasonality in resort operations.
OPERATING HIGHLIGHTS
The operating highlights for the year include:
- A 13.9% increase in total revenue from $810.5 million to $922.8 million,
with ski and resort revenue increasing 10.0% and real estate sales
revenue increasing 21.6%.
- A 22.0% increase in income from continuing operations to $63.5 million
and a 20.8% increase in income per share from continuing operations to
$1.45.
- A 21.1% increase in Total Company EBITDA from $165.4 million to $200.3
million. Total Company EBITDA is computed as income before interest
(including previously capitalized interest in real estate cost of
sales), taxes, non-controlling interest, depreciation and amortization.
- A 15.6% increase in operating profit from ski and resort operations to
$108.3 million and a 28.4% increase in operating profit from real estate
sales to $76.5 million.
REVIEW OF SKI AND RESORT OPERATIONS
The following table highlights the results of the ski and resort operations
business.
2001 2000 CHANGE
--------- --------- ------
Skier visits(1)............................................. 6,237,000 5,642,000 10.6%
Revenue (millions).......................................... $492.2 $447.4 10.0%
EBITDA (millions)........................................... $108.3 $ 93.7 15.6%
Margin...................................................... 22.0% 20.9%
---------------
(1) All resorts are at 100% except Mammoth at 59.5% and Blue Mountain at 50%.
Revenue from ski and resort operations increased 10.0% from $447.4 million
in 2000 to $492.2 million in 2001. This growth was achieved on a same-resort
basis. Revenue from mountain resorts increased 11.1% from $389.8 million to
$433.1 million while revenue from warm-weather resorts increased 2.8% from $57.5
million to $59.1 million.
29
MOUNTAIN RESORTS
The $43.3 million increase in mountain resort revenue was due to:
($MILLIONS)
Increase in skier visits.................................... $34.1
Increase in revenue per skier visit......................... 7.0
Increase in non-skier visit revenue......................... 9.0
Impact of exchange rate on reported revenue................. (6.8)
-----
$43.3
=====
Skier visits increased 10.6% from 5,642,000 in 2000 to 6,237,000 in 2001. A
number of factors contributed to this growth, including:
- A 12% increase in the available accommodation base across the Company's
resorts.
- A return to more normal Christmas and January travel patterns compared
with the Y2K-impacted travel patterns last year.
- A 23% increase in the number of season passes and frequency cards sold
during the year from 153,000 to 188,000.
- Positive weather conditions in the East that resulted in a 19.6%
increase in skier visits across the Company's six eastern resorts.
Every resort showed an increase in skier visits in 2001 except for Whistler
Blackcomb, which experienced a decline in local and season pass visits. (The
increased proportion of destination visits at Whistler Blackcomb produced a
12.4% increase in revenue per visit at that resort). The opposite trend was
experienced at many of the other resorts, which saw a significant increase in
local and regional visits due to generally excellent snow conditions throughout
the season. The increase in skier visits was estimated to increase mountain
resort revenue by $34.1 million.
Revenue per skier visit increased from $57.29 in 2000 to $58.42 in 2001
(after adjusting prior year revenue for the impact of the reduction in the
Canadian dollar exchange rate). Revenue per skier visit is a function of ticket
prices and ticket yields, and revenue from non-ticket sources such as retail and
rental stores, lodging, ski school and food services. Ticket yields reflect the
mix of ticket types (e.g., adult, child, season pass and group), the proportion
of day versus destination visitors (destination visitors tend to be less price
sensitive), and the amount of discounting of full-price tickets. Revenue per
visit from non-ticket sources is also influenced by the mix of day versus
destination visitors, the affluence of the visitor base, and the quantity and
type of amenities and services offered at the resort.
The increase in revenue per visit in 2001 (i.e., 2.0%) was less than the
increases in revenue per visit the Company has achieved in the past few years
(average annual increase on a same-resort basis of 11.8% from 1997 to 2000), due
substantially to the large increase in regional and local visits, notably at
Tremblant, Blue Mountain, Mountain Creek and Copper. Regional and local guests
typically generate lower revenue per visit since they purchase discounted
tickets and spend less on non-ticket items. The increase in revenue per visit
was estimated to increase mountain resort revenue by $7.0 million in 2001.
For the purposes of this analysis, non-skier visit revenue comprises
revenue from golf and other summer activities and revenue from businesses such
as Resort Reservations, Alpine Helicopters and Breeze/Max, which do not have
skier visits. Revenue from golf and other summer activities increased 8.1%
across the mountain resorts, led primarily by strength at Tremblant, Copper and
Whistler Blackcomb. The Company's central reservations business, Resort
Reservations, expanded its operations into Summit County during the year and
increased its bookings into Whistler, leading to a 49.6% growth in revenue.
Since year end, Resort Reservations has expanded into Puerto Vallarta and St.
Lucia and additional destinations are under review. Revenue at Alpine increased
12.3% due to strong growth in heli-logging and heli-hiking business, and revenue
at Breeze increased by 13.7% due to improved ski conditions in Colorado,
particularly at the start of the season. Overall, non-skier visit revenue
increased by $9.0 million in 2001.
Mountain resort revenue was impacted negatively by $6.8 million in 2001
because of the decline in the value of the Canadian dollar. In 2001 revenue from
the Canadian resorts was translated for financial statement reporting
30
purposes at an average rate of Cdn.$1.52 to U.S.$1.00 compared with an average
rate of Cdn.$1.47 to U.S.$1.00 in 2000.
WARM-WEATHER RESORTS
Revenue from warm-weather resorts (mainly operations at Sandestin and the
Raven golf courses in Arizona) increased by $1.6 million to $59.1 million. The
opening of a new golf course at Three Peaks in Colorado during 2001 added $0.6
million of revenue. Revenue at Sandestin increased 3.5% due mainly to a 4.6%
increase in occupied room nights. Revenue at Raven decreased 3.6% in 2001 due
mainly to abnormally wet and cold weather in Arizona during the period from
October to December. The number of golf rounds played at the Arizona courses
decreased by 7.2% in 2001, however revenue per round was 4.3% higher.
REVENUE BREAKDOWN AND EBITDA
The breakdown of ski and resort operation revenue by source was as follows:
INCREASE
2001 2000 (DECREASE) PERCENTAGE
REVENUE REVENUE IN REVENUE INCREASE
---------- ---------- ---------- ----------
(MILLIONS) (MILLIONS) (MILLIONS) (%)
Mountain operations................................... $192.2 $177.1 $15.1 8.5
Retail and rental shops............................... 84.0 72.8 11.2 15.4
Food and beverage..................................... 65.4 60.1 5.3 8.8
Lodging and property management....................... 58.0 48.8 9.2 18.9
Ski school............................................ 29.8 25.8 4.0 15.5
Golf.................................................. 31.7 30.9 0.8 2.6
Other................................................. 31.1 31.9 (0.8) (2.5)
------ ------ ----- -----
$492.2 $447.4 $44.8 100.0
====== ====== ===== =====
- Mountain operation revenue comprises revenue from lift tickets and from
Alpine's operations. Since 1995 the proportion of revenue from mountain
operations has fallen from 52.6% to 39.0%. This trend is likely to
continue as the villages are built out at the Company's resorts,
expanding the inventory of lodging units and changing the customer mix
in favor of destination visitors who spend more on retail and rental,
ski school, and food and beverage. The 8.5% increase in revenue during
the year reflects the 10.6% increase in skier visits, partially offset
by a 1.9% decline in average revenue per ticket due mainly to the large
increase in regional and local visits.
- The 15.4% increase in retail and rental revenue was due mainly to the
opening of new stores in Copper, Stratton, Snowshoe and Whistler
Blackcomb, and higher rental revenue at the destination-oriented resorts
and at the Breeze/Max stores.
- The 8.8% increase in food and beverage was due to the opening of new
restaurants in Copper and Snowshoe and the increase in skier visits,
tempered somewhat by a reduction in revenue per visit due to changes in
customer mix.
- The 18.9% increase in lodging revenue was driven by a 15.7% increase in
occupied room nights.
- The 15.5% increase in ski school revenue was due to a higher number of
lessons and greater weighting of higher-priced private lessons,
particularly at Whistler Blackcomb, Tremblant, Copper and Mammoth.
- Golf revenue at the mountain resorts increased 4.3% due mainly to
increased rounds at Tremblant, Copper and Mammoth, partially offset by
reduced rounds at Stratton. Golf revenue at the warm-weather resorts
increased 1.7% as revenue from the new course at Three Peaks and
increased revenue at Sandestin were partly offset by reduced revenue at
Raven.
- Other revenue mainly comprises revenue from community services, such as
snow clearing, telephone service, utilities and employee housing, and
revenue from miscellaneous activities. The decline in other revenue in
2001 was mainly due to the waterpark at Mountain Creek, which
experienced the coldest, wettest summer in 40 years resulting in $1.1
million less revenue.
31
Ski and resort operation expenses increased 8.5% from $353.7 million in
2000 to $383.9 million in 2001. Operating expenses at the mountain resorts
increased 9.2% compared with the 11.1% increase in mountain resort revenue. The
Company instituted a number of initiatives in 2001 to reduce or better control
its expenses, particularly in labor which accounts for about 40% of total
expenses. Operating expenses at the warm-weather resorts increased 4.7% compared
with the 2.7% increase in revenue. Start-up expenses at the new golf course at
Three Peaks exceeded revenues generated by the course, and certain costs, for
example group health benefits, irrigation costs and property taxes, increased
significantly in 2001.
EBITDA from ski and resort operations increased 15.6% from $93.7 million in
2000 to $108.3 million in 2001. The EBITDA margin was 22.0% in 2001 compared
with 20.9% in 2000. The margin at the mountain resorts increased from 21.8% to
23.2%, due mainly to improved margins in mountain operations, retail and rental,
and ski school. The increase in visits against a relatively fixed cost structure
led to the improved margin in mountain operations. The increased visits also
impacted the margin in retail and rental and, in addition, there was a shift in
mix from lower-margin retail business to higher-margin rental business in 2001.
The improved ski school margin resulted mainly from increased destination
business to Whistler Blackcomb, Tremblant, Copper and Mammoth. The margin at the
warm-weather resorts decreased from 14.9% to 13.2%. In its first partial year of
operation the golf course at Three Peaks incurred a loss that reduced the
overall warm-weather resort margin in 2001 from 14.3% to 13.2%. The Company
expects margins going forward to increase at both the mountain resorts and the
warm-weather resort as its villages mature, driving higher mid-week destination
visits, and as it takes further advantage of economies of scale.
REVIEW OF RESORT REAL ESTATE OPERATIONS
The following table highlights the results of the real estate business.
2001 2000 CHANGE
------ ------ ------
Units closed................................................ 1,279 1,317 (2.9%)
Revenue (millions).......................................... $415.3 $341.5 21.6%
Operating profit (millions)................................. $ 76.5 $ 59.6 28.4%
Margin...................................................... 18.4% 17.5%
Revenue from the sale of real estate increased 21.6% from $341.5 million in
2000 to $415.3 million in 2001. The increase was due mainly to sales price
increases in the traditional real estate business and to significantly higher
revenue in the resort club (timeshare) business. Real estate revenue increased
44.1% at the Company's Canadian resorts and 14.1% at its U.S. resorts.
A total of 539 units were closed at the Company's Canadian resorts in 2001
compared with 443 units last year. Most of the increase was at Tremblant where
several projects, including the 126-unit Westin Royal, completed construction
during the year. The average price per unit increased 18.5% from Cdn.$286,000 in
2000 to Cdn.$339,000 in 2001, reflecting unit type and resort mix as well as
price escalation.
The Company closed 740 units at its U.S. resorts in 2001 compared with 874
units in 2000. The same resorts contributed revenue in each year, however
relatively more units were closed at Mammoth and Stratton in 2000 because of the
timing of construction completion. In addition, when Intrawest purchased
Sandestin in July 1998 the assets included 249 units under construction, all of
which were closed in 1999 and 2000. The average price per unit was $403,000 at
the U.S. resorts in 2001 (after adjusting the number of units for the impact of
joint ventures at Keystone and Sandestin), up from $292,000 in 2000. Relatively
more units were closed at the resorts with higher real estate prices in 2001. In
addition, a number of deluxe townhome and condo-hotel projects closed in 2001.
The Resort Club generated $36.9 million in sales revenue in 2001, up 26.4%
from $29.2 million in 2000. The increase was attributable to a 25.3% increase in
the number of points sold and a 3.0% increase in the average price per point.
Revenue from member referrals and add-on points increased 45.1% in 2001 to $10.1
million, reflecting high member satisfaction and growing acceptance of the
Resort Club's unique points system.
32
Operating profit from resort real estate sales increased 28.4% from $59.6
million in 2000 to $76.5 million in 2001. The profit margin was 18.4% in 2001
compared with 17.5% in 2000. The improvement in margin was due to a number of
factors, including:
- The closing of relatively more single-family lots in 2001 (21% of units
closed) than in 2000 (13% of units closed). Single-family lots generally
have margins of 30% or more, compared with margins of about 18% for
townhomes and condo-hotel units.
- The high margin achieved on some deluxe townhomes in 2001 at Whistler
Blackcomb and Stratton.
- Improvements in control over construction and development costs. The
Company has continued to enhance its working relationships with general
contractors at its more recently acquired resorts, resulting in
construction cost savings. In addition, a standardized approach to
project design, contract negotiation and construction monitoring has
continued to reduce cost overruns.
- An improvement in the Resort Club margin from 16.9% to 19.4% due to the
increase in member referral and add-on sales, which have a lower
marketing and sales cost than other sales.
As at August 31, 2001, the Company had pre-sold 1,115 units for
approximately $385 million, which it expects to close in fiscal 2002. In
addition, the Company had pre-sold a further 533 units for approximately $230
million due to close in fiscal 2003. Intrawest follows a conservative accounting
policy for real estate sales and does not recognize any revenue until title to a
completed unit has been transferred to a purchaser and the Company has received
the full cash proceeds. The Company's strategy of pre-selling real estate
projects before the start of construction reduces market risk and increases the
predictability of real estate earnings.
CAPITALIZATION OF COSTS TO REAL ESTATE
Standard real estate accounting practice requires that all costs in
connection with the development of real estate be capitalized to properties
under development and then expensed in the period when the properties are closed
and the revenue is recognized. Such costs include land and building costs as
well as overhead costs of personnel directly involved in the development,
construction and sale of real estate, and interest on debt used to fund real
estate costs. The capitalized interest comprises interest on specific real
estate debt (i.e. construction financing) and interest on the portion of general
corporate debt used to fund real estate development expenditures.
The amount of costs capitalized to properties under development and sale
increased from $542.7 million at June 30, 2000 to $658.3 million at June 30,
2001 due to the ramp up in the production of units from approximately 1,500 at
the end of fiscal 2000 to approximately 2,000 at the end of fiscal 2001. The
Company expects the rate of increase in capitalized real estate costs to slow in
2002 as the production of units flattens out and the gap narrows between the
recovery of costs through real estate sales and the amount invested in new real
estate development activity. In 2003 it is anticipated that costs recovered
through sales will exceed new investments in real estate, resulting in a decline
in capitalized real estate costs.
Most of the Company's real estate projects have a relatively short
construction timetable (12 to 24 months) so a large percentage of capitalized
costs are expensed in a short period of time. Furthermore, the risk of
non-recovery of real estate costs is low because the Company pre-sells
substantially all of its real estate projects.
RENTAL PROPERTIES
The majority of the condo-hotel projects that the Company develops contain
ground-level retail space, which is either leased to third-party operators or
used by the Company for its own sports shops. At June 30, 2001, the Company
owned 237,000 square feet of commercial space that was leased to third parties.
Rental revenue derived from third-party operators increased from $6.9 million in
2000 to $8.9 million in 2001. The increase was due mainly to additional leasing
from recently completed condo-hotel properties at Copper, Stratton and Snowshoe.
Operating profit from rental properties increased from $3.3 million in 2000 to
$4.5 million in 2001, in line with the increase in rental revenue.
33
REVIEW OF CORPORATE OPERATIONS
INTEREST AND OTHER INCOME
Interest and other income was $3.5 million in 2001, down from $12.4 million
in 2000. During 2000 the Company sold its investment in a property management
business in Whistler Blackcomb and recorded a gross gain of $5.2 million. The
Company's investment in Compagnie des Alpes generated $2.8 million of earnings
in 2001 compared with $2.3 million in 2000. Revenue and EBITDA increased 7.0%
and 13.9%, respectively, at Compagnie des Alpes' resorts in 2001.
INTEREST COSTS
Interest expense increased 26.4% from $35.2 million in 2000 to $44.5
million in 2001. Interest on the acquisitions and capital expenditures made at
the resorts during 2000 and 2001 accounted for approximately $8 million of the
increase and interest on rental properties completed during the year added a
further $1 million.
The Company incurred total interest costs (including financing fees and
amortization of deferred financing costs) of $89.1 million in 2001 compared with
$66.4 million in 2000. The increase in interest expense, discussed above,
accounts for $9.3 million of the additional cost. The balance of the increase
was due to real estate development activity, as the number of units under
construction increased from approximately 1,500 at June 30, 2000 to
approximately 2,000 at June 30, 2001. In total, $43.3 million of interest was
capitalized to properties, $13.6 million of which was subsequently expensed in
the year the properties were closed.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased from $51.4 million in 2000
to $57.9 million in 2001. The increase was due mainly to depreciation of capital
expenditures made at the resorts during 2001. The annual rate of growth of
depreciation and amortization has slowed from an average of 47.3% during 1996 to
1999, to 27.9% in 2000 to 12.7% in 2001 as spending on acquisitions and capital
expenditures has declined. Capital expenditures are planned to decline by 20-25%
in 2002 and 2003 and as a result the growth in depreciation and amortization
will continue to flatten out in the future.
GENERAL AND ADMINISTRATIVE COSTS
All general and administrative costs incurred by the resorts are included
in ski and resort operation expenses. Similarly, general and administrative
costs incurred in the development of real estate are initially capitalized to
properties, and then expensed to real estate costs in the period when the
properties are closed. Corporate general and administrative costs, which mainly
comprise certain executive employee costs, public company costs, audit and legal
fees, head office occupancy costs and capital taxes are disclosed as a separate
line in the statement of operations. The breakdown of general and administrative
costs for 2001 and 2000 was as follows:
2001 PROPORTION 2000 PROPORTION
----------- ---------- ----------- ----------
($MILLIONS) (%) ($MILLIONS) (%)
Corporate G&A costs................................. $ 9.8 11.0 $ 8.0 9.9
G&A expenses of ski and resort operation business... 54.2 61.0 52.3 64.8
Previously capitalized G&A costs expensed in real
estate cost of sales.............................. 8.8 9.9 6.3 7.8
----- ----- ----- -----
Total G&A costs expensed during the year............ 72.8 81.9 66.6 82.5
Net G&A costs of real estate business capitalized to
properties........................................ 16.1 18.1 14.1 17.5
----- ----- ----- -----
Total G&A costs incurred during the year............ $88.9 100.0 $80.7 100.0
===== ===== ===== =====
The Company expensed approximately 82% of its total general and
administrative costs in both 2000 and 2001. Corporate general and administrative
costs increased from $8.0 million in 2000 to $9.8 million in 2001 due mainly to
higher information technology expenses as the Company has enhanced its
capability in this area and moved increasingly to centralize this function. As a
percentage of revenues, corporate general and administrative costs increased
marginally from 1.0% in 2000 to 1.1% in 2001. The Company continually reviews
its overhead costs and has instituted procedures to reduce or eliminate costs
where appropriate.
34
INCOME TAXES
The Company provided for income taxes of $10.0 million in 2001 compared
with $15.4 million in 2000. This equates to an effective tax rate of 12.0% in
2001 down from 20.1% in 2000. The income tax provision for 2001 included a
non-cash income tax recovery of $5.3 million related to a reduction in the
recorded amount of the Company's future income tax liabilities due to income tax
rate reductions announced in the October 2000 Canadian federal budget. Excluding
this recovery, the effective tax rate in 2001 would have been 18.3%.
NON-CONTROLLING INTEREST
The Company has a 23% limited partner in the two partnerships that own
Whistler Blackcomb and up to June 11, 2001 there was 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 $9.3 million in 2000 to $9.9 million in 2001. Approximately $1.2 million of
the amount for 2000 related to the gain on sale of the property management
business referred to above in "Interest and Other Income." Excluding the
non-controlling interest's share of this gain, non-controlling interest
increased by 22.2%, reflecting increased operations and real estate earnings at
Whistler Blackcomb.
DISCONTINUED OPERATIONS
The consolidated financial statements disclose the results of the Company's
non-resort business as discontinued operations. The discontinued operations
incurred a loss of $2.9 million in 2001 compared with a loss of $0.1 million in
2000. The loss for 2001 included a write-down of $1.8 million related to the
Gateway Lands in Surrey, B.C. and reserves totaling $0.8 million in connection
with three non-resort properties sold in prior years. The Gateway Lands were
written down to their appraised value. The market for commercially zoned land in
this part of metropolitan Vancouver has declined and the size of the site has
made it difficult to attract potential purchasers.
At June 30, 2001, the Company had $11.4 million of remaining non-resort
assets, mainly comprising two properties -- the AirCare vehicle emission testing
centers and the Gateway Lands -- and a receivable of $4.1 million related to an
earlier sale of non-resort properties (see note 19 to the Consolidated Financial
Statements). The Company's goal is to sell these assets during fiscal 2002. The
liquidation of these remaining non-resort assets has no impact on the common
shareholders. The net income or loss generated by the non-resort assets accrues
to the holders of the non-resort preferred ("NRP") shares and the net cash flow
from these assets can only be used to redeem NRP shares. During 2001 the Company
used $3.8 million to redeem 2,170,000 NRP shares and a further $0.4 million to
acquire 330,600 NRP shares under the Company's normal course issuer bid. The
redemption price of NRP shares was fixed in November 1999 at Cdn.$2.65 per
share. On the assumption of recovering book value on the remaining non-resort
assets, the net asset value per share is expected to be distributed by way of
redemption of all remaining NRP shares in the range of Cdn.$1.90 -- $2.00 per
share. The Company currently expects to make the final redemption by July 1,
2002.
LIQUIDITY AND CAPITAL RESOURCES
ANALYSIS OF CASH FLOWS
Two years ago Intrawest announced that it would be moving from a more
capital-intensive business plan to a less capital-intensive plan. By the end of
fiscal 1999 the Company had assembled the network of resorts that satisfied many
of its strategic objectives (i.e. critical mass, geographic diversification,
platform for earnings growth) and future acquisitions were no longer a priority.
At the same time significant expenditures had been made to upgrade and expand
the facilities at the recently acquired resorts. In the five years from 1995 to
1999 the Company spent a total of $732.2 million on acquisitions and resort
operation capital improvements. Fiscal 1999 was the high point in terms of
spending on these items with $326.0 million. In fiscal 2000 and 2001 new
investment in acquisitions and resort operation capital improvements decreased
by 57.7% and 24.2%, respectively, from the year before in accordance with the
Company's lower capital-intensive business plan. Further reductions in capital
spending are expected in 2002 and future years.
All the resorts that the Company acquired had significant real estate
development potential. In addition, during this period, the Company was invited
to develop real estate at a number of resorts that it did not own, including
Keystone, Squaw Valley and Solitude. Generally the most capital-intensive period
in the real estate business is two
35
to four years after the initial acquisition of the resort when construction of
the first major projects is taking place. Prior to this time a master plan must
be prepared, development approvals secured, infrastructure work commenced and
initial project marketing completed. In Intrawest's case, the high point for new
investment in real estate development (measured as the difference between costs
incurred on developing properties and costs recovered from sales of properties)
is expected to be fiscal 2001 levels, when most of the resorts reached "steady
state" production (i.e., construction of 100-200 units per year). In fiscal 2002
net new investment in real estate is expected to decline significantly from 2001
levels and in fiscal 2003 the recovery of costs from property sales is expected
to exceed costs incurred on developing properties, making the real estate
business significantly cash flow positive.
The major sources and uses of cash in 2001 and 2000 were as follows:
2001 2000 CHANGE
------ ------ ------
($MILLIONS)
Funds from continuing operations............................ 126.9 116.7 10.2
Working capital for real estate developed for sale (see
below).................................................... (68.8) (82.2) 13.4
Expenditures on acquisitions, resort operation improvements
and other investments..................................... (121.9) (143.9) 22.0
------ ------ -----
(63.8) (109.4) 45.6
(Increase) decrease in other net assets..................... (43.5) 1.0 (44.5)
------ ------ -----
Net cash outflows before non-construction financing
inflows................................................... (107.3) (108.4) 1.1
Net financing inflows excluding construction financing...... 114.7 104.9 9.8
------ ------ -----
Increase (decrease) in cash................................. 7.4 (3.5) 10.9
====== ====== =====
Net new investment in real estate developed for sale........ (130.9) (83.4) (47.5)
Net proceeds from construction financing.................... 62.1 1.2 60.9
------ ------ -----
Working capital for real estate developed for sale.......... (68.8) (82.2) 13.4
====== ====== =====
In 2001 $126.9 million of funds were provided by continuing operations
compared with $116.7 million in 2000. Funds from continuing operations comprise
income from continuing operations adjusted for non-cash items, such as
depreciation and amortization and future income taxes. The components of, and
year-over-year changes in, funds from continuing operations have been discussed
earlier in the review of operations.
Working capital for real estate is measured as the amount of net new
investment in real estate not funded by construction loans. The Company
considers construction financing low risk since it is fully covered by project
pre-sales. In 2001 the net new investment in real estate was $130.9 million, up
from $83.4 million in 2000, due to a ramp up in production from about 1,500
units at June 30, 2000 to about 2,000 units at June 30, 2001. A greater
proportion of the net new investment in real estate was funded by construction
financing in 2001 than in 2000. Net proceeds from construction financing (i.e.,
construction loan advances less construction loan repayments) were $62.1 million
in 2001 compared with $1.2 million in 2000. This resulted in working capital for
real estate development of $68.8 million in 2001, down from $82.2 million in
2000.
Spending on acquisitions, resort operation capital improvements and other
investments decreased from $143.9 million in 2000 to $121.9 million in 2001, in
line with the Company's plan to reduce these types of expenditures. In 2001 the
Company spent $11.0 million to acquire a marketing and sales organization for
its real estate business and to buy-out the 5% non-controlling interest in
Sandestin. Each year the Company spends $20-25 million on maintenance capital at
its resorts. Spending on expansion capital is expected to continue to decrease
from approximately $75 million in 2001 to $30-40 million by 2004.
In 2001 other assets, net of payables and other liabilities, increased by
$43.5 million whereas in 2000 they decreased by $1.0 million. Most of the change
was due to an $8.3 million reduction in amounts payable and obligations to joint
venture partners in 2001 compared with a $33.1 million increase in these items
in 2000. In other words, $41.4 million more cash was used to settle payables and
other liabilities in 2001 than in 2000.
In total, these sources and uses of cash resulted in net cash outflows of
$107.3 million in 2001, down from $108.4 million in 2000. In both years these
cash outflows were funded by increases in non-construction loan bank and other
indebtedness -- $114.7 million in 2001 and $104.9 million in 2000.
36
Over the next three fiscal years the Company expects to generate
significant free cash flow, for the following reasons.
- Growth in ski and resort operation EBITDA as the villages are built out
at the Company's resorts, changing the mix of customers, increasing
revenues and driving higher margins.
- Continuing decline in resort operation capital improvements from
approximately $94 million in 2001 to $50-60 million by 2004.
- Decrease in working capital for real estate development as the annual
production of units flattens out and less is spent on infrastructure
costs. The real estate business is expected to move from being a user of
cash to being a significant generator of cash.
The Company expects to use a portion of the free cash flow to expand some
of its newer businesses, including the Resort Club and Resort Reservations, with
the majority being used to pay down debt.
ANALYSIS OF DEBT
At June 30, 2001, total debt amounted to $1,010.0 million, an increase of
$176.8 million from June 30, 2000. Most of the increase was used to fund real
estate development activity, as the Company started new developments at Mountain
Creek, Les Arcs and Lake Las Vegas and ramped up its production of units at
other resorts. Project construction financing, which is fully covered by
pre-sales, accounts for $67.6 million of the total increase in debt. In addition
to specific project construction loans, approximately $62 million of the
increase in general corporate debt was used to finance real estate development.
In total, therefore, the increase in real estate development activity accounts
for approximately $130 million or 74% of the increase in total debt. The balance
of the increase in debt was mainly due to capital improvements at the resorts
and investments in new businesses, such as Resort Reservations and Playground.
In addition, the Resort Club factored its notes receivable during the year,
resulting in a $20.3 million increase in debt.
In March 2001 the Company issued $125 million of 10.5% senior unsecured
debentures due 2010. The proceeds were principally used to repay the Company's
revolving credit facility. Since December 1997 the Company has issued $546.1
million of unsecured debentures in the public market. At year end this type of
long-term, unsecured, fixed-rate financing constituted 55.8% of total debt.
At June 30, 2001, 33.9% of total debt bore interest at floating rates, down
from 35.5% at June 30, 2000. 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 pre-sells its
projects and mainly develops wood-frame buildings with a construction period of
12 to 24 months, 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 operation
debt, although a lower proportion may be hedged temporarily in anticipation of a
refinancing. At June 30, 2001, 75% of such debt bore interest at floating rates
and a portion of this debt is expected to be refinanced in the short-term. A 1%
change in the rate of interest on this debt would impact annual earnings by
approximately $1.5 million before income taxes.
The Company has a $200 million corporate credit facility, of which $31.8
million was drawn at June 30, 2001. In addition, several of the Company's
resorts have lines of credit aggregating approximately $25 million that were
undrawn at year end. These credit facilities 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 totaling approximately $200 million available for
real estate construction. At June 30, 2001, $92.8 million was drawn under these
facilities. Since two of these facilities, for $150 million, operate under a
maximum outstanding basis (i.e., the amount drawn cannot exceed $150 million)
and since the timing of individual project draws and repayments is staggered,
these three facilities are sufficient to finance construction of projects with a
cost to complete significantly more than $200 million. The Company believes that
its existing credit facilities, combined with cash on hand and internally
generated cash flow, are adequate to finance all its normal operating needs.
37
BUSINESS RISKS
Intrawest is subject to various risks and uncertainties that can cause
volatility in its earnings. The Company's resort operations and resort real
estate businesses are managed to deal with risks that are common to most
companies, i.e. the risks of severe economic downturn, competition and currency
fluctuations, and the more industry-specific risks of unfavorable weather
conditions, 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 leisure and travel are
discretionary activities that one might expect to be impacted by a significant
economic slowdown, Intrawest's operating results have historically not shown
this to be the case. Since the Company acquired Blackcomb in 1986, cash flow has
increased every year at that resort 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. Approximately
80-85% of visits arrive at the Company's resorts by car, so the impact of the
cost of airline travel is somewhat muted.
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 by generally acquiring land at low cost with the purchase
of a resort or by securing land through options and joint ventures. Completed
inventory risk arises when completed units cannot be sold and construction
financing cannot be repaid. Often this risk arises because many developers are
supplying units to the market and since Intrawest controls most of the supply at
its resorts, this risk is reduced. The Company has also mitigated this risk by
pre-selling a significant portion of its units prior to commencement of, and
during, construction.
At June 30, 2001, the Company had 144 completed units in its resort real
estate inventory (representing 11.3% of the units delivered in 2001) and 75% of
the approximately 2,000 resort units under construction on that date were
pre-sold. Purchasers are required to make a significant non-refundable deposit
(generally in the range of $50,000-$60,000) prior to construction commencement,
which historically has ensured that rescissions have been kept at an extremely
low level. In fact between 1996 and 2000 only 1% of the 3,288 units which were
pre-sold at launches required re-marketing because the purchaser defaulted.
Furthermore, the Company generally 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 (e.g. very
high start-up costs, significant environmental hurdles) that prevent new resorts
from being created. 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, and with other
leisure industry companies, such as cruise lines. 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 (e.g., in terms of
location, vertical drop and quality of terrain) and to enhance those advantages
by investing in capital improvements on the mountain. Since 1997 the Company has
invested a total of $477.5 million 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. Increasingly the village has become
the dominant attraction in generating visits to a resort.
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
38
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. This has made the price of a ski lift
ticket at Intrawest's Canadian resorts 70% or less of the price at comparable
U.S. resorts when denominated in the same currency. 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. A
significant shift in the value of the Canadian dollar, particularly against its
U.S. counterpart, could impact earnings at Canadian resorts.
Intrawest finances its U.S. assets with U.S. dollar debt and its Canadian
assets with Canadian dollar debt. Generally the Company services its debt with
revenue denominated in the same currency. In addition, cash flow generated by
Canadian operations is generally retained in Canada and invested in expansion of
Canadian assets. Similarly cash flow generated at the U.S. resorts is generally
reinvested in the United States. Cross-border cash transactions and currency
exchanges are kept to a minimum.
Since Intrawest reports its earnings in U.S. dollars but its income is
derived 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 Canadian operations will be impacted by changes in exchange rates when
such operations are reported in U.S. 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.
UNFAVORABLE 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 unfavorable weather in three ways: by being
geographically diversified, by seeking to build its visits as evenly as possible
through the season and by investing in snowmaking.
Geographically diversified companies like Intrawest can reduce the risk
associated with a particular region's weather patterns. Every ski season since
1995, favorable and unfavorable weather conditions at different times across
North America have offset one another, allowing the Company to come within 2% of
its budgeted winter season ski and resort operations revenue on a same-resort
basis. The more a resort can attract its visitors evenly through the season the
less vulnerable it is to unfavorable 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 the East due to the number
of competing resorts and less reliable snowfall. Intrawest has invested
approximately $44 million in snowmaking at its resorts since 1997.
SEASONALITY OF OPERATIONS
Ski and resort operations are highly seasonal. In fiscal 2001 72% of the
Company's ski and resort operations revenue was generated during the period from
December to March. Furthermore during this period a significant portion of ski
and resort operations revenue is generated on certain holidays, particularly
Christmas/New Year, Presidents' Day and school spring breaks, and on weekends.
Conversely, Sandestin's peak operating season occurs during the summer months,
partially offsetting the seasonality of the mountain resorts. The Company's real
estate operations tend to be somewhat seasonal as well, with construction
primarily taking place during the summer and the majority of sales closing in
the December to June period. This seasonality of operations impacts reported
quarterly earnings. The operating results for any particular quarter are not
necessarily indicative of the operating results for a subsequent quarter or for
the full fiscal year. The Company has taken steps to smooth its revenue and
earnings throughout the year by investing in four-season amenities (e.g., golf)
and growing its summer and shoulder-season businesses. As a result of these
initiatives, the proportion of ski and resort operations revenue earned outside
the historically strong third fiscal quarter has increased to 45.6% in 2001 from
32.7% in 1997.
39
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. In addition construction contracts are
priced only after the Company has completed full working drawings. The Company
employs 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
identify potential cost overruns early enough to permit corrective action.
OUTLOOK
The Company remains firmly committed to the corporate strategy that it
outlined last year, i.e. increasing returns on its existing asset base,
leveraging expertise to grow its core and emerging businesses, and moving to a
free cash flow position.
Concerns over the economy and the tragic incidents of September 11 in New
York and Washington have introduced greater uncertainty into the future. The
Company is guardedly optimistic that its operations will not be significantly
impacted by these factors, since:
- The greatest percentage (80-85% depending on customer mix) of visits to
the Company's resorts is "drive-to."
- As was the experience during the Gulf War, many vacationers are likely
to replace a planned vacation outside of North America with a vacation
in Canada or the U.S.
- The Company has a large, highly committed customer base comprising its
season pass holders and real estate owners.
- The Company has $385 million of pre-sold real estate due to close in
2002. Historically the default rate on pre-sold contracts has been only
1%.
Meanwhile the fundamental factors underlying the Company's business remain
positive. Demographic trends support strong growth in demand for recreational
real estate, the continued weakness of the Canadian dollar should drive vacation
spending to Canadian resorts and the loyalty and relative affluence of the
Company's customer base should provide earnings stability. The Company continues
to be confident that it will experience revenue and EBITDA growth in 2002.
QUARTERLY FINANCIAL SUMMARY
2001 2000
QUARTERS QUARTERS
-------------------------------- --------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
----- ----- ----- ----- ----- ----- ----- -----
(IN MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
Total Revenue.................. 129.9 207.0 339.0 246.9 125.7 145.2 305.6 234.0
Income (loss) from continuing
operations................... (3.2) 10.7 50.5 6.0 (3.2) 4.3 47.7 3.3
Results of discontinued
operations................... 0.0 0.1 (0.1) (2.9) 0.2 (0.2) 0.4 (0.6)
New income (loss).............. (3.2) 10.8 49.9 3.1 (3.0) 4.1 48.1 2.7
Per common share:
Income (loss) from continuing
operations................ (0.07) 0.25 1.15 0.14 (0.07) 0.10 1.10 0.08
Net income (loss)............ (0.07) 0.25 1.15 0.14 (0.07) 0.10 1.10 0.08
40
MARKET FOR SECURITIES
The Common Shares of the Company are listed and traded on the New York
Stock Exchange and The Toronto Stock Exchange (the "TSE"). The TSE is the
principal market for the Common Shares. The NRP Shares are listed and traded on
the TSE.
DIRECTORS AND EXECUTIVE OFFICERS
The names and municipalities of residence of the directors and executive
officers of the Company and their principal occupations are set forth below.
DIRECTORS
NAME AND MUNICIPALITY OF RESIDENCE PRINCIPAL OCCUPATION DIRECTOR SINCE
---------------------------------- -------------------- --------------
R. Thomas M. Allan(1)................... Vice President, Corporate Investments of Trudell 1990
London, Ontario Medical Limited
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
Toronto, Ontario
Gordon H. MacDougall(2)(3).............. Partner, CC&L Financial Services Group 1990
West Vancouver, British Columbia
Paul M. Manheim(1)(3)................... President of HAL Real Estate Investments, Inc. 1992
Mercer Island, Washington
Paul A. Novelly(2)...................... Chairman and Chief Executive Officer of Apex Oil 1997
St. Louis, Missouri Company, Inc.
Gary L. Raymond......................... President, Resort Development Group of the Company 1998
Whistler, British Columbia
Bernard A. Roy(3)....................... Senior partner, Ogilvy Renault 1992
Montreal, Quebec
Khaled C. Sifri(1)...................... Managing partner, Hadef Al-Dhahiri & Associates 1990
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
London, England RBC Dominion Securities Inc.
------------
(1) Member of the Audit Committee.
(2) Member of the Corporate Governance Committee.
(3) Member of the Human Resources Committee.
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.
EXECUTIVE OFFICERS
NAME AND MUNICIPALITY OF RESIDENCE PRINCIPAL OCCUPATION
---------------------------------- --------------------
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
41
NAME AND MUNICIPALITY OF RESIDENCE PRINCIPAL OCCUPATION
---------------------------------- --------------------
Gary L. Raymond................................ President, Resort Development Group
Whistler, British Columbia
Hugh R. Smythe................................. President, Resort Operations Group
Whistler, British Columbia
As at June 30, 2001, the directors and senior officers of the Company as a
group beneficially owned, directly or indirectly, or exercised control or
direction over, 2.8% 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 executive officer and his spouse are the
shareholders, and in respect of which such director and executive 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. Allan who prior to August 2001 was Executive
Vice-President, Corporate Investments of London Life Insurance Company and 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.
ADDITIONAL INFORMATION
The Company shall provide to any person or company, upon request to the
Corporate Secretary of the Company:
(a) when the securities of the Company are in the course of a distribution
under a short form prospectus or a preliminary short form prospectus:
(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 the most recent interim financial statements of the
Company for any period subsequent to 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
or company 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
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF
INTRAWEST CORPORATION
YEARS ENDED JUNE 30, 2001 AND 2000
F-1
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Intrawest Corporation as
at June 30, 2001 and 2000 and the consolidated statements of operations,
retained earnings, and cash flows 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 Canadian 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, 2001
and 2000 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian 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.
Canadian generally accepted accounting principles vary in certain
significant respects from accounting principles generally accepted in the United
States. Application of accounting principles generally accepted in the United
States would have affected results of operations for each of the years in the
two-year period ended June 30, 2001 and total assets, liabilities and
shareholders' equity as at June 30, 2001 and 2000 to the extent summarized in
note 21 to the consolidated financial statements.
Vancouver, British Columbia (signed) KPMG LLP
August 31, 2001 Chartered Accountants
F-2
INTRAWEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
JUNE 30
--------------------------
2001 2000
----------- -----------
(IN THOUSANDS OF
UNITED STATES DOLLARS,
EXCEPT PER SHARE AMOUNTS)
Revenue:
Ski and resort operations................................. $492,202 $447,350
Real estate sales......................................... 415,336 341,455
Rental properties......................................... 8,935 6,905
Interest and other income................................. 3,547 12,449
Income from equity accounted investment................... 2,790 2,333
-------- --------
922,810 810,492
Expenses:
Ski and resort operations................................. 383,864 353,662
Real estate costs......................................... 338,856 281,845
Rental properties......................................... 4,426 3,641
Interest (note 16)........................................ 44,490 35,217
Depreciation and amortization............................. 57,934 51,399
General and administrative................................ 9,793 7,985
-------- --------
839,363 733,749
-------- --------
Income before undernoted.................................... 83,447 76,743
Provision for income taxes (note 13)........................ 10,014 15,394
-------- --------
Income before non-controlling interest and discontinued
operations................................................ 73,433 61,349
Non-controlling interest.................................... 9,904 9,258
-------- --------
Income from continuing operations........................... 63,529 52,091
Results of discontinued operations (note 4)................. (2,942) (99)
-------- --------
Net income.................................................. $ 60,587 $ 51,992
======== ========
Income per common share:
Income from continuing operations......................... $ 1.45 $ 1.20
Net income................................................ 1.45 1.20
======== ========
Weighted average number of common shares outstanding (in
thousands)................................................ 43,665 43,362
======== ========
See accompanying notes to consolidated financial statements.
F-3
INTRAWEST CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30
------------------------
2001 2000
---------- ----------
(IN THOUSANDS OF
UNITED STATES DOLLARS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 86,430 $ 78,985
Amounts receivable (note 7)............................... 82,536 72,233
Other assets (note 8(a)).................................. 105,545 78,966
Properties (note 6):
Resort................................................. 329,177 254,801
Discontinued operations................................ -- 103
Future income taxes (note 13)............................. 4,168 4,445
---------- ----------
607,856 489,533
Ski and resort operations (note 5).......................... 813,741 784,725
Properties (note 6):
Resort.................................................... 371,451 314,481
Discontinued operations................................... 7,080 9,521
---------- ----------
378,531 324,002
Amounts receivable (note 7)................................. 50,416 35,262
Other assets (note 8(b)).................................... 86,640 67,999
Goodwill.................................................... 19,128 15,834
---------- ----------
$1,956,312 $1,717,355
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Amounts payable........................................... $ 146,464 $ 146,648
Deferred revenue (note 10)................................ 81,537 70,832
Bank and other indebtedness, current portion (note 9):
Resort................................................. 201,558 158,144
Discontinued operations................................ 82 84
---------- ----------
429,641 375,708
Bank and other indebtedness (note 9):
Resort.................................................... 804,991 670,539
Discontinued operations................................... 3,363 4,394
---------- ----------
808,354 674,933
Due to joint venture partners (note 14)..................... 8,818 16,963
Deferred revenue (note 10).................................. 26,750 26,974
Future income taxes (note 13)............................... 83,771 82,522
Non-controlling interest in subsidiaries.................... 30,616 28,983
---------- ----------
1,387,950 1,206,083
Shareholders' equity:
Capital stock (note 12)................................... 414,220 413,719
Retained earnings......................................... 187,922 131,953
Foreign currency translation adjustment................... (33,780) (34,400)
---------- ----------
568,362 511,272
---------- ----------
$1,956,312 $1,717,355
========== ==========
Contingencies and commitments (note 15)
Approved on behalf of the Board:
(signed) JOE S. HOUSSIAN (signed) R. THOMAS M. ALLAN
Director Director
See accompanying notes to consolidated financial statements.
F-4
INTRAWEST CORPORATION
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED
JUNE 30
----------------------
2001 2000
--------- ---------
(IN THOUSANDS OF
UNITED STATES DOLLARS)
Retained earnings, beginning of year........................ $131,953 $ 77,088
Net income.................................................. 60,587 51,992
Reduction in redemption price of non-resort preferred shares
(note 12(a)).............................................. -- 7,588
Dividends................................................... (4,618) (4,715)
-------- --------
Retained earnings, end of year.............................. $187,922 $131,953
======== ========
See accompanying notes to consolidated financial statements.
F-5
INTRAWEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
JUNE 30
----------------------
2001 2000
--------- ---------
(IN THOUSANDS OF
UNITED STATES DOLLARS)
Cash provided by (used in):
Operations:
Income from continuing operations......................... $ 63,529 $ 52,091
Items not affecting cash:
Depreciation and amortization.......................... 57,934 51,399
Future income taxes.................................... 1,027 12,109
Income from equity accounted investment................ (2,790) (2,333)
Gain on asset disposals, net of write-offs............. (2,671) (5,777)
Non-controlling interest............................... 9,904 9,258
--------- ---------
Funds from continuing operations.......................... 126,933 116,747
Recovery of costs through real estate sales............... 338,856 281,845
Acquisition and development of properties held for sale... (469,816) (365,249)
Increase in amounts receivable, net....................... (13,670) (8,890)
Changes in non-cash operating working capital (note 20)... (29,948) 34,385
--------- ---------
Cash provided by continuing operating activities.......... (47,645) 58,838
Cash provided by discontinued operations (note 4)......... 2,323 10,699
--------- ---------
(45,322) 69,537
Financing:
Proceeds from bank and other borrowings................... 994,902 341,373
Repayments on bank and other borrowings................... (810,337) (244,285)
Issue of common shares for cash, net of issuance costs.... 4,467 1,007
Redemption and repurchase of non-resort preferred
shares................................................. (3,966) (19,273)
Dividends paid............................................ (4,618) (4,715)
Distributions to non-controlling interests................ (5,773) (3,234)
--------- ---------
174,675 70,873
Investments:
Expenditures on:
Revenue-producing properties........................... (5,642) 1,315
Ski and resort operation assets........................ (93,986) (119,133)
Other assets........................................... (19,545) (11,026)
Business acquisitions, net of cash acquired of $498
(2000 -- $207)........................................ (10,951) (19,281)
Proceeds from asset disposals............................. 8,216 4,243
--------- ---------
(121,908) (143,882)
--------- ---------
Increase (decrease) in cash and cash equivalents............ 7,445 (3,472)
Cash and cash equivalents, beginning of year................ 78,985 82,457
--------- ---------
Cash and cash equivalents, end of year...................... $ 86,430 $ 78,985
========= =========
Supplementary information (note 20)
See accompanying notes to consolidated financial statements.
F-6
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
1. OPERATIONS:
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.
2. 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 ("CICA"). Information
regarding United States generally accepted accounting principles as it
affects the Company's consolidated financial statements is presented in
note 21.
(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, including non-controlled partnerships, to the extent of
the Company's interest in their respective assets, liabilities,
revenues and expenses.
The Company's principal subsidiaries and joint ventures are as follows:
PERCENTAGE INTEREST
HELD BY
SUBSIDIARIES THE COMPANY
------------ -------------------
Blackcomb Skiing Enterprises Limited Partnership............ 77%
Whistler Mountain Resort Limited Partnership................ 77%
Mont Tremblant Resorts and Company, Limited Partnership..... 100%
IW Resorts Limited Partnership.............................. 100%
Swaneset Bay Golf Course Ltd. (note 3)...................... 100%
Intrawest Resort Ownership Corporation...................... 100%
Playground Real Estate Inc. (note 3)........................ 100%
The Stratton Corporation.................................... 100%
Snowshoe Resort, Inc........................................ 100%
Copper Mountain, Inc........................................ 100%
Mountain Creek Resort, Inc.................................. 100%
Intrawest Retail Group, Inc................................. 100%
Intrawest Sandestin Company, L.L.C. (note 3)................ 100%
Intrawest Golf Holdings, Inc................................ 100%
Intrawest/Lodestar Limited Partnership (note 3)............. 100%
Mt. Tremblant Reservations Inc.............................. 100%
Whistler Blackcomb Resorts Inc.............................. 100%
PERCENTAGE INTEREST
HELD BY
JOINT VENTURES AND NON-CONTROLLED PARTNERSHIPS (NOTE 14) THE COMPANY
-------------------------------------------------------- -------------------
Alpine Helicopters Ltd...................................... 45%
Blue Mountain Resorts Limited............................... 50%
Chateau M.T. Inc............................................ 50%
Mammoth Mountain Ski Area................................... 59.5%
Keystone/Intrawest L.L.C.................................... 50%
Intrawest/Lodestar Golf Limited Partnership................. 73.7%
Resort Ventures Limited Partnership......................... 50%
Blue River Land Company L.L.C............................... 50%
All significant intercompany balances and transactions have been
eliminated.
F-7
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
(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 shares is adjusted for the
Company's share of post-acquisition earnings or losses, less dividends.
(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.
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) CASH EQUIVALENTS:
The Company considers all highly liquid investments with terms to
maturity of three months or less when acquired to be cash equivalents.
(f) 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 specific
debt, interest on that portion of total costs financed by the
Company's pooled debt, and general and administrative expenses.
Incidental operations related specifically to properties under
development are 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 are 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 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 and
properties available for sale are classified as current assets.
Related bank and other indebtedness is classified as a current
liability.
(g) SKI AND RESORT OPERATIONS:
The ski and resort operation assets 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 at annual rates as follows:
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%
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.
F-8
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
(h) ADMINISTRATIVE FURNITURE, COMPUTER EQUIPMENT, SOFTWARE AND LEASEHOLD
IMPROVEMENTS:
Administrative furniture, computer equipment and software 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.
(i) DEFERRED FINANCING COSTS:
Deferred financing costs consist of legal and other fees directly
related to the debt financing of the Company's ski and resort
operations. These costs are amortized to interest expense over the term
of the related financing.
(j) GOODWILL:
Goodwill is amortized on the straight-line basis over a period of 3 to
20 years based on the nature of the acquired business. In determining
whether there is a permanent impairment in value, recoverability is
based on undiscounted estimated future cash flows.
(k) DEFERRED REVENUE:
Deferred revenue mainly comprises real estate deposits, season pass
revenue, golf club initiation deposits, government grants and the
exchange gains arising on the translation of long-term monetary items
that are denominated in foreign currencies (note 2(o)). 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 golf club initiation deposits is recognized on
a straight-line basis over the estimated membership terms. Deferred
revenue which relates to government grants for ski and resort operation
assets is recognized on the same basis as the related assets are
amortized. Deferred revenue which relates to government grants for
properties under development is recognized as the properties are sold.
(l) 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.
(m) REVENUE RECOGNITION:
(i) Ski and resort operation revenue is recognized as the service is
provided.
(ii) 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.
(iii) 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.
(iv) 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.
(n) FUTURE INCOME TAXES:
The Company follows the asset and liability method of accounting for
income taxes.
Under such method, future tax assets and liabilities are recognized for
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases.
Future tax assets and liabilities are measured using enacted or
substantively enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on future tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the substantive enactment date. To the extent that it is not
considered to be more likely than not that a future income tax asset
will be realized, a valuation allowance is provided.
(o) FOREIGN CURRENCY TRANSLATION:
These consolidated financial statements are presented in U.S. dollars.
The majority of the Company's operations are located in the United
States and are conducted in U.S. dollars. The Company's Canadian
operations use the Canadian dollar as their functional currency. The
Canadian entities' financial statements have been translated into U.S.
dollars using the exchange rate in effect at the
F-9
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
balance sheet date for asset and liability amounts and at the average
rate for the period for amounts included in the determination of
income.
Cumulative unrealized gains or losses arising from the translation of
the assets and liabilities of these operations are recorded as foreign
currency translation adjustment, 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 to the
applicable currency of measurement 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
realized.
The actual exchange rates used for translation purposes were as
follows:
2001 2000
------ ------
Canadian dollar to U.S. dollar exchange rates
At June 30................................................ 1.5140 1.4806
Average during year....................................... 1.5192 1.4731
====== ======
(p) PER SHARE CALCULATIONS:
Income per common share has 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.
(q) FUNDS FROM CONTINUING OPERATIONS:
Funds from continuing operations is computed as income from continuing
operations adjusted for future income taxes, depreciation and
amortization of capital items, non-controlling interest, income from
equity accounted investment and other non-cash items. Funds from
continuing operations is different from cash flow from continuing
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.
(r) STOCK OPTIONS:
The Company has a stock option plan as described in note 12(c). No
compensation expense is recognized when shares or stock options are
issued. Any consideration paid on the exercise of options or purchase
of shares is credited to capital stock.
(s) EMPLOYEE FUTURE BENEFITS:
The Company accrues its obligations under employee benefit plans and
the related costs, net of plan assets as the underlying services are
provided.
(t) COMPARATIVE FIGURES:
Certain comparative figures for 2000 have been reclassified to conform
with the financial presentation adopted in the current year.
3. ACQUISITIONS:
During the year ended June 30, 2001, 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 November 15, 2000, the Company acquired the shares of Sapera
Real Estate Group (subsequently name changed to Playground Real Estate
Inc.). The purchase price of the shares acquired was $6,699,000 of
which $5,299,000 was assigned to goodwill and the remainder to working
capital. The acquisition was financed primarily through bank
indebtedness.
(b) On June 11, 2001, the Company acquired the 5% non-controlling interest
in the resort operation and real estate assets of Intrawest/Sandestin
Company, L.L.C. for cash consideration of $4,750,000.
F-10
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
During the year ended June 30, 2000, the Company completed the following
acquisitions, each of which was accounted for by the purchase method with
effect from the date of acquisition:
(a) On January 17, 2000, the Company acquired the assets of Swaneset Bay
Resort & Country Club ("Swaneset"), including two golf courses and
developable real estate in British Columbia. The purchase price of the
assets acquired was as follows:
Net assets acquired at assigned values:
Ski and resort operations................................. $ 9,486
Property under development................................ 5,348
Net working capital....................................... 263
Other amounts............................................. 648
Assumption of debt........................................ (4,253)
-------
11,492
Cash...................................................... 207
-------
$11,699
=======
Financed by:
Cash...................................................... $ 5,988
Bank and other indebtedness............................... 5,711
-------
$11,699
=======
(b) In November 1999 the Company increased its interest in
Intrawest/Lodestar Limited Partnership ("Lodestar") in California from
60% to 100% through the acquisition of the other partner's interest for
cash consideration of $13,500,000. Effective from November 1, 1999, the
Company has consolidated the results of Lodestar with the operations of
the Company. Prior to this date the operations were proportionately
consolidated as the partners shared joint control. The net assets
acquired at assigned values consisted primarily of land and properties
under development.
4. DISCONTINUED OPERATIONS:
For reporting purposes, the results of operations and cash flow from
operating activities of the non-resort real estate business have been
disclosed separately from those of continuing operations for the periods
presented.
The results of discontinued operations are as follows:
2001 2000
------- -------
Revenue..................................................... $ 1,209 $13,148
======= =======
Loss before current income taxes............................ $(2,805) $ (99)
Provision for current income taxes.......................... 137 --
------- -------
Loss from discontinued operations........................... $(2,942) $ (99)
======= =======
Assets and liabilities presented in the consolidated balance sheets include
the following assets and liabilities of discontinued operations:
2001 2000
------- -------
Current assets:
Properties................................................ $ -- $ 103
Other non-cash current assets............................. 4,126 2,845
Properties.................................................. 7,080 9,521
Other non-current assets.................................... 166 4,331
Current liabilities......................................... (900) (602)
Non-current liabilities..................................... (3,258) (4,317)
F-11
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
The cash flows from discontinued operations are as follows:
2001 2000
------- --------
Cash provided by (used in):
Operations................................................ $ 2,323 $ 10,699
Financing................................................. (5,004) (24,458)
Investments............................................... 106 6,989
------- --------
Decrease in cash and cash equivalents....................... $(2,575) $ (6,770)
======= ========
The cash flow used for financing activities in fiscal 2001 includes a
$3,788,000 (2000 -- $19,520,000) redemption of non-resort preferred ("NRP")
shares (note 12(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.
5. SKI AND RESORT OPERATIONS:
2001
--------------------------------------
NET
ACCUMULATED BOOK
COST DEPRECIATION VALUE
---------- ------------ --------
Ski operations:
Land...................................................... $ 52,324 $ -- $ 52,324
Buildings................................................. 231,189 39,994 191,195
Ski lifts and area improvements........................... 392,668 101,459 291,209
Automotive, helicopters and other equipment............... 106,901 59,904 46,997
Leased vehicles........................................... 4,499 1,869 2,630
---------- -------- --------
787,581 203,226 584,355
---------- -------- --------
Resort operations:
Land...................................................... 21,711 -- 21,711
Buildings................................................. 52,834 8,280 44,554
Golf courses.............................................. 124,070 10,866 113,204
Area improvements......................................... 65,320 15,403 49,917
---------- -------- --------
263,935 34,549 229,386
---------- -------- --------
$1,051,516 $237,775 $813,741
========== ======== ========
2000
--------------------------------------
NET
ACCUMULATED BOOK
COST DEPRECIATION VALUE
---------- ------------ --------
Ski operations:
Land...................................................... $ 52,533 $ -- $ 52,533
Buildings................................................. 204,796 34,666 170,130
Ski lifts and area improvements........................... 379,323 83,532 295,791
Automotive, helicopters and other equipment............... 98,067 60,355 37,712
Leased vehicles........................................... 5,681 2,388 3,293
---------- -------- --------
740,400 180,941 559,459
---------- -------- --------
Resort operations:
Land...................................................... 21,579 -- 21,579
Buildings................................................. 54,680 7,051 47,629
Golf courses.............................................. 108,967 6,064 102,903
Area improvements......................................... 64,700 11,545 53,155
---------- -------- --------
249,926 24,660 225,266
---------- -------- --------
$ 990,326 $205,601 $784,725
========== ======== ========
The ski and resort operations have been pledged as security for certain of
the Company's bank and other indebtedness (note 9).
F-12
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
6. PROPERTIES:
Summary of properties:
2001 2000
-------- --------
Properties under development and held for sale.............. $658,309 $542,747
Revenue-producing properties................................ 49,399 36,159
-------- --------
$707,708 $578,906
======== ========
Properties are classified for balance sheet purposes as follows:
2001 2000
-------- --------
Current assets:
Resort.................................................... $329,177 $254,801
Discontinued operations................................... -- 103
Long-term assets:
Resort.................................................... 371,451 314,481
Discontinued operations................................... 7,080 9,521
-------- --------
$707,708 $578,906
======== ========
Cumulative costs capitalized to properties under development and held for
sale:
2001 2000
-------- --------
Properties under development and held for sale:
Land and land development costs........................... $178,773 $167,119
Building development costs................................ 368,242 298,415
Interest.................................................. 69,071 46,427
Administrative............................................ 42,223 30,786
-------- --------
$658,309 $542,747
======== ========
Breakdown of revenue-producing properties:
2001
----------------------------------
NET
ACCUMULATED BOOK
COST DEPRECIATION VALUE
------- ------------ -------
Revenue-producing properties:
Land...................................................... $ 5,816 $-- $ 5,816
Buildings................................................. 49,211 7,337 41,874
Leasehold improvements and equipment...................... 3,007 1,298 1,709
------- ------ -------
$58,034 $8,635 $49,399
======= ====== =======
2000
----------------------------------
NET
ACCUMULATED BOOK
COST DEPRECIATION VALUE
------- ------------ -------
Revenue-producing properties:
Land...................................................... $ 6,062 $-- $ 6,062
Buildings................................................. 33,472 5,478 27,994
Leasehold improvements and equipment...................... 3,410 1,307 2,103
------- ------ -------
$42,944 $6,785 $36,159
======= ====== =======
During the year ended June 30, 2001, the Company capitalized interest of
$43,298,000 (2000 -- $30,004,000) (note 16), and administrative expenses of
$24,895,000 (2000 -- $20,418,000) to properties.
Properties have been pledged as security for certain of the Company's bank
and other indebtedness (note 9).
F-13
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
7. AMOUNTS RECEIVABLE:
2001 2000
-------- --------
Receivable from sales of real estate........................ $ 25,405 $ 19,672
Ski and resort operation trade receivables.................. 29,662 29,485
Loans, mortgages and notes receivable (note 20)............. 56,928 37,020
Funded senior employee share purchase Plan (note 12(e))..... 460 560
Other accounts receivable................................... 20,497 20,758
-------- --------
132,952 107,495
Current portion............................................. 82,536 72,233
-------- --------
$ 50,416 $ 35,262
======== ========
Receivables are due approximately as follows:
Year ending June 30, 2002................................... $ 82,536
2003...................................... 7,102
2004...................................... 10,013
2005...................................... 2,769
2006...................................... 2,659
Subsequent to 2006.................................... 27,873
--------
$132,952
========
The loans, mortgages and notes receivable bear interest at both fixed and
floating rates which averaged 11.86% per annum as at June 30, 2001 (2000 --
11.69%). These amounts have been pledged as security for certain of the
Company's bank and other indebtedness (note 9).
8. OTHER ASSETS:
(a) CURRENT:
2001 2000
-------- -------
Ski and resort operation inventories........................ $ 27,286 $23,828
Restricted cash deposits.................................... 62,155 41,952
Prepaid expenses and other.................................. 16,104 13,186
-------- -------
$105,545 $78,966
======== =======
(b) LONG-TERM:
2001 2000
------- -------
Investment in Compagnie des Alpes, at equity................ $33,077 $30,741
Deferred financing costs.................................... 19,294 14,526
Administrative furniture, computer equipment, software and
leasehold improvements, net of accumulated depreciation of
$10,291,000 (2000 -- $7,253,000).......................... 27,950 16,820
Other....................................................... 6,319 5,912
------- -------
$86,640 $67,999
======= =======
F-14
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
9. 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, 2001:
WEIGHTED
MATURITY AVERAGE
DATES INTEREST RATE 2001 2000
----------- ------------- ---------- --------
Ski and resort operations:
Mortgages and bank loans.................................. Demand-2017 5.74% $ 200,121 $211,561
Obligations under capital leases.......................... 2002-2005 7.75% 5,694 3,771
---------- --------
205,815 215,332
---------- --------
Properties:
Interim financing on properties under development and held
for resale.............................................. 2002-2017 7.36% 175,944 110,515
Resort club notes receivable credit facilities............ 2006 7.05% 21,399 1,094
Mortgages on revenue-producing properties................. 2002-2015 7.99% 10,952 12,425
---------- --------
208,295 124,034
---------- --------
General corporate debt...................................... 2002 5.93% 31,803 59,210
Unsecured debentures........................................ 2002-2010 9.61% 564,081 434,585
---------- --------
1,009,994 833,161
Current portion............................................. 201,640 158,228
---------- --------
$ 808,354 $674,933
========== ========
Principal repayments and the components related to either floating or fixed
interest rates are as follows:
INTEREST RATES
-------------------- TOTAL
FLOATING FIXED REPAYMENTS
-------- -------- ----------
Year ending June 30, 2002................................... $180,654 $ 20,986 $ 201,640
2003................................... 146,104 111,362 257,466
2004................................... 1,823 27,723 29,546
2005................................... 245 14,420 14,665
2006................................... 1,933 8,902 10,835
Subsequent to 2006................................... 12,131 483,711 495,842
-------- -------- ----------
$342,890 $667,104 $1,009,994
======== ======== ==========
The Company has entered into a swap agreement to fix the interest rate on a
portion of its floating rate debt. The Company had $14,000,000 (2000 --
$26,262,000) of bank loans swapped against debt with a fixed interest rate
ranging from 5.34% to 7.40% (2000 -- 5.34% to 7.40%) per annum.
Bank and other indebtedness includes indebtedness in the amount of
$342,206,000 (2000 -- $349,277,000) which is repayable in Canadian dollars
of $518,100,000 (2000 -- $517,140,000).
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, 2001.
F-15
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
10. DEFERRED REVENUE:
2001 2000
-------- -------
Deposits on real estate sales............................... $ 66,642 $51,200
Government assistance (note 11)............................. 4,974 8,917
Exchange gains.............................................. 14 3,309
Golf club initiation deposits............................... 14,935 15,463
Season pass revenue......................................... 12,864 11,236
Other deferred amounts...................................... 8,858 7,681
-------- -------
108,287 97,806
-------- -------
Current portion............................................. 81,537 70,832
-------- -------
$ 26,750 $26,974
======== =======
11. 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, totaled $9,445,000 and are
repayable over 17 years starting in 2000. The grants, which will total
$38,318,000 (2000 -- $37,156,000) when they are fully advanced, amounted to
$21,005,000 at June 30, 2001 (2000 -- $18,925,000). During the year ended
June 30, 2001, grants received of $6,268,000 (2000 -- $1,289,000) were
credited as follows: $755,000 (2000 -- $359,000) to ski and resort operation
assets and $5,513,000 (2000 -- $930,000) to properties.
12. 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 non-resort preferred ("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 $64,305,000, net
of costs (based on Cdn.$3.82 per share), equal to the book value of the
net equity of the non-resort assets at December 31, 1996, and the value
assigned to the common shares was reduced by the same amount. The
Company expects that the non-resort assets will be disposed of in an
orderly manner and the net cash flow from these assets distributed to
the NRP shareholders, primarily by way of redemption of their shares as
described in note 4. The amount ultimately realized by the Company and
distributed to the NRP shareholders will be subject to prevailing real
estate market conditions. As at June 30, 2001, the book value of the
net equity of the remaining non-resort assets was $6,964,000 (2000 --
$14,206,000).
In November 1999 shareholders of the Company passed a resolution
reducing the redemption price of the NRP shares from Cdn.$3.82 to
Cdn.$2.65 per share. As a result, the carrying value of the NRP shares
was reduced by $7,588,000 and retained earnings was increased by the
same amount.
(b) CAPITAL STOCK:
The Company's capital stock comprises the following:
2001 2000
-------- --------
Common shares............................................... $400,262 $395,795
NRP shares.................................................. 13,958 17,924
-------- --------
$414,220 $413,719
======== ========
F-16
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
(i) Common shares:
Authorized:
200,000,000 without par value
Issued:
NUMBER OF NUMBER OF
COMMON 2001 COMMON 2000
SHARES AMOUNT SHARES AMOUNT
---------- -------- ---------- --------
Balance, beginning of year................................. 43,463,294 $395,795 43,254,386 $393,153
Issued for cash under stock option plan.................... 563,100 4,467 134,450 1,007
Issued for settlement of bank and other indebtedness....... -- -- 74,458 1,236
Future income tax adjustment............................... -- -- -- 399
---------- -------- ---------- --------
Balance, end of year....................................... 44,026,394 400,262 43,463,294 $395,795
========== ======== ========== ========
(ii) NRP shares:
Authorized:
50,000,000 without par value
Issued:
NUMBER OF NUMBER OF
NRP 2001 NRP 2000
SHARES AMOUNT SHARES AMOUNT
---------- ------- ---------- --------
Balance, beginning of year................................ 7,760,961 $17,924 16,726,586 $ 44,785
Issued for cash under stock option plan................... 253,575 227 343,275 321
Redemption................................................ (2,170,000) (3,788) (9,246,000) (19,520)
Purchased for cancellation................................ (330,600) (405) (62,900) (74)
Reduction in redemption price............................. -- -- -- (7,588)
---------- ------- ---------- --------
Balance, end of year...................................... 5,513,936 $13,958 7,760,961 $ 17,924
========== ======= ========== ========
(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.
The following table summarizes the status of options outstanding under
the Plan:
2001 WEIGHTED 2000 WEIGHTED
SHARE OPTIONS AVERAGE SHARE OPTIONS AVERAGE
OUTSTANDING PRICE OUTSTANDING PRICE
------------- -------- ------------- --------
Outstanding, beginning of year............................ 3,221,600 $14.68 3,257,850 $14.44
Granted................................................... 710,000 17.67 255,500 17.09
Exercised................................................. (563,100) 7.90 (134,450) 9.20
Forfeited................................................. (46,000) 17.52 (157,300) 18.38
--------- ------ --------- ------
Outstanding, end of year.................................. 3,322,500 $15.24 3,221,600 $14.68
========= ====== ========= ======
Exercisable, end of year.................................. 1,805,450 $13.37 1,758,650 $11.94
========= ====== ========= ======
F-17
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
The following table provides details of options outstanding at June 30,
2001:
WEIGHTED
NUMBER AVERAGE LIFE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES JUNE 30, 2001 (YEARS) PRICE JUNE 30, 2001 PRICE
--------------- ------------- ------------ -------- ------------- --------
$6.43-$9.56................................. 704,500 2.4 $ 8.41 704,500 $ 8.41
$10.39-$15.19............................... 208,500 5.8 13.40 160,800 13.33
$15.72-$19.19............................... 2,409,500 7.8 17.40 940,150 17.10
--------- --- ------ --------- ------
3,322,500 6.5 $15.24 1,805,450 $13.37
========= === ====== ========= ======
(d) EMPLOYEE SHARE PURCHASE PLAN:
The employee share purchase plan permits certain 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, 2001, a total of
65,809 (2000 -- 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.
(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, 2001, loans to
employees under the funded senior employee share purchase plan amounted
to $460,000 with respect to 123,050 common shares and 26,939 NRP shares
(2000 -- $560,000 with respect to 131,150 common shares and 37,272 NRP
shares). The loans are interest-free, secured by a promissory note and
a pledge of the shares and mature by 2003. A further 96,400 common
shares have been authorized and reserved for issuance under this plan.
13. INCOME TAXES:
(a) PROVISION FOR INCOME TAXES:
2001 2000
------- -------
Current..................................................... $ 8,987 $ 3,285
Future...................................................... 1,027 12,109
------- -------
$10,014 $15,394
======= =======
The reconciliation of income taxes calculated at the statutory rate to
the actual income tax provision is as follows:
2001 2000
-------- --------
Statutory rate.............................................. 44.7% 45.6%
-------- --------
Income tax charge at statutory rate......................... $ 36,047 $ 34,934
Non-deductible depreciation and amortization................ 1,839 825
Large corporations tax...................................... 1,194 373
Taxes related to non-controlling interest share of
earnings.................................................. (4,427) (4,220)
Reduction for enacted changes in tax laws and rates......... (5,277) --
Taxes related to equity accounted investment................ (1,247) (1,063)
Foreign taxes less than statutory rate...................... (18,046) (15,754)
Other....................................................... 68 299
-------- --------
10,151 15,394
Less: current income taxes related to discontinued
operations................................................ 137 --
-------- --------
Provision for income taxes.................................. $ 10,014 $ 15,394
======== ========
F-18
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
(b) The tax effects of temporary differences that give rise to significant
portions of the future tax assets and future tax liabilities at June
30, 2001 are presented below:
2001 2000
-------- --------
Future tax assets:
Non-capital loss carryforwards............................ $ 27,083 $ 35,573
Share issue and financing costs........................... 1,024 708
Differences in working capital deductions for tax and
accounting purposes..................................... 2,687 1,854
Other..................................................... 1,134 1,321
-------- --------
Total gross future tax assets............................... 31,928 39,456
Valuation allowance......................................... (18,769) (22,910)
-------- --------
Net future tax assets....................................... 13,159 16,546
-------- --------
Future tax liabilities:
Differences in depreciation and undepreciated capital
cost:
Ski and resort assets................................... 87,681 87,472
Properties.............................................. 2,742 6,287
Other..................................................... 2,339 864
-------- --------
Total gross future tax liabilities.......................... 92,762 94,623
-------- --------
Net future tax liabilities.................................. $ 79,603 $ 78,077
======== ========
(c) At June 30, 2001, the Company has non-capital loss carryforwards for
income tax purposes of approximately $98,358,000 (2000 -- $86,049,000)
that are available to offset future taxable income through 2020.
14. JOINT VENTURES:
The following amounts represent the Company's proportionate interest in
joint ventures and non-controlled partnerships (note 2(b)):
2001 2000
-------- --------
Properties, current......................................... $ 60,736 $ 40,977
Other current assets........................................ 26,517 26,638
-------- --------
87,253 67,615
Current liabilities......................................... (62,225) (53,927)
-------- --------
Working capital............................................. 25,028 13,688
Ski and resort operations................................... 144,707 132,589
Properties, non-current..................................... 46,965 78,699
Bank and other indebtedness, non-current.................... (40,753) (41,498)
Other, net.................................................. (11,742) (14,760)
-------- --------
$164,205 $168,718
======== ========
2001 2000
-------- --------
Revenue..................................................... $159,104 $136,557
Expenses.................................................... 143,658 127,496
-------- --------
Income from continuing operations before income taxes....... 15,446 9,061
Results of discontinued operations.......................... 181 97
-------- --------
$ 15,627 $ 9,158
======== ========
2001 2000
-------- --------
Cash provided by (used in):
Operations................................................ $ 28,006 $ 26,107
Financing................................................. (12,985) 483
Investments............................................... (10,835) (28,720)
-------- --------
Increase (decrease) in cash and cash equivalents............ $ 4,186 $ (2,130)
======== ========
F-19
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
Due to joint venture partners is the 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.
15. 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 $363,064,000 at June 30, 2001 (2000 -- $327,788,000).
These costs are substantially covered by existing financing
commitments.
(c) The Company has entered into various operating lease commitments,
payable as follows:
Year ending June 30, 2002................................... $ 4,516
2003...................................... 4,199
2004...................................... 3,231
2005...................................... 2,723
2006...................................... 2,064
Subsequent to 2006.................................... 6,827
-------
$23,560
=======
(d) The Company is contingently liable for indebtedness at June 30, 2001 of
$7,700,000 (2000 -- $8,698,000) which relates to certain non-resort
properties under development sold during the year ended September 30,
1994 (note 19). 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 and its subsidiaries are involved in several lawsuits
arising out of the ordinary course of business. Although the outcome of
such matters cannot be predicted with certainty, management does not
consider the Company's exposure to lawsuits to be material to these
consolidated financial statements.
16. INTEREST EXPENSE:
2001 2000
------- -------
Total interest incurred..................................... $89,092 $66,426
Less:
Interest capitalized to ski and resort operation assets... 988 721
Interest capitalized to properties, net of capitalized
interest included in real estate cost of sales of
$13,642,000 (2000 -- $10,875,000)....................... 29,656 19,129
------- -------
$58,448 $46,576
======= =======
2001 2000
------- -------
Interest was charged to income as follows:
Real estate costs......................................... $13,642 $10,875
Interest expense.......................................... 44,490 35,217
Discontinued operations................................... 316 484
------- -------
$58,448 $46,576
======= =======
Real estate costs also include $7,080,000 (2000 -- $5,892,000) of interest
incurred in prior years.
Interest incurred and interest expense include commitment and other
financing fees and amortization of deferred financing costs.
F-20
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
17. FINANCIAL INSTRUMENTS:
(a) FAIR VALUE:
The Company has various financial instruments including cash and cash
equivalents, amounts receivable, certain 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 their fair value. Debt and
interest swap agreements are also financial instruments. The fair value
of the Company's long-term debt, calculated using current rates offered
to the Company for debt at the same remaining maturities, is not
materially different from amounts included in the consolidated balance
sheets.
(b) INTEREST RATE RISK:
As described in note 9, $342,890,000 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.
18. SEGMENTED INFORMATION:
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. 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.
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:
2001 2000
-------- --------
Revenue:
Ski and resort............................................ $433,126 $389,839
Real estate............................................... 424,271 348,360
Warm-weather.............................................. 59,076 57,511
Corporate and all other................................... 6,337 14,782
-------- --------
$922,810 $810,492
======== ========
2001 2000
--------- --------
Operating profit before interest, depreciation and
amortization, and income taxes:
Ski and resort............................................ $ 100,511 $ 85,136
Real estate............................................... 80,989 62,874
Warm-weather.............................................. 7,827 8,552
Corporate and all other................................... 6,337 14,782
--------- --------
195,664 171,344
Less:
Interest.................................................. (44,490) (35,217)
Depreciation and amortization............................. (57,934) (51,399)
General and administrative................................ (9,793) (7,985)
--------- --------
(112,217) (94,601)
--------- --------
$ 83,447 $ 76,743
========= ========
F-21
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
2001 2000
---------- ----------
Segment assets:
Ski and resort............................................ $ 886,297 $ 818,485
Real estate............................................... 868,655 676,455
Warm-weather.............................................. 143,343 134,906
Corporate and all other................................... 46,895 68,384
Discontinued operations................................... 11,122 19,125
---------- ----------
$1,956,312 $1,717,355
========== ==========
2001 2000
---------- ----------
Capital expenditures:
Ski and resort............................................ $ 85,597 $ 103,822
Warm-weather.............................................. 8,389 15,311
Corporate and all other................................... 15,414 6,501
---------- ----------
$ 109,400 $ 125,634
========== ==========
GEOGRAPHIC INFORMATION:
2001 2000
---------- ----------
Revenue:
Canada.................................................... $ 375,569 $ 331,529
United States............................................. 547,241 478,963
---------- ----------
$ 922,810 $ 810,492
========== ==========
2001 2000
---------- ----------
Operating income before income taxes, non-controlling
interest and results of discontinued operations:
Canada.................................................... $ 63,201 $ 52,520
United States............................................. 20,246 24,223
---------- ----------
$ 83,447 $ 76,743
========== ==========
2001 2000
---------- ----------
Identifiable assets:
Canada.................................................... $ 708,438 $ 672,134
United States............................................. 1,236,752 1,026,096
Discontinued operations................................... 11,122 19,125
---------- ----------
$1,956,312 $1,717,355
========== ==========
19. RELATED PARTY TRANSACTIONS:
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 a 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 $22,926,000, of which $1,567,000 was outstanding at June
30, 2000. During the year ended June 30, 2001, this amount plus interest at
10% per annum was repaid.
The Company committed to provide the partnerships various credit facilities,
including a $4,624,000 revolving line of credit until January 31, 2001,
reducing to $3,963,000 until July 31, 2001 and thereafter to $2,702,000
until the availability terminates on January 31, 2002. The line of credit
earns interest at prime plus 2% per annum. At June 30, 2001, $3,729,000
(2000 -- $4,708,000) was advanced under these facilities and accrued and
unpaid interest amounted to $262,000 (2000 -- $142,000). In addition, the
Company agreed to provide financial assistance by way of continuing
guarantee 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.
F-22
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
20. CASH FLOW INFORMATION:
The changes in non-cash operating working capital balance consist of the
following:
2001 2000
-------- --------
Cash provided by (used in):
Amounts receivable........................................ $ (4,932) $ 531
Other assets.............................................. (25,258) (30,784)
Amounts payable........................................... (4,405) 23,365
Due to joint venture partners............................. (8,143) 5,736
Deferred revenue.......................................... 12,790 35,537
-------- --------
$(29,948) $ 34,385
======== ========
Supplemental information:
Interest paid included in the determination of net
income.................................................. $ 51,744 $ 43,472
Income taxes paid......................................... 4,754 2,575
Non-cash investing and financing activities:
Note received on asset disposal........................... 5,540 --
Capital stock issued for settlement of bank and other
indebtedness............................................ -- 1,236
Bank and other indebtedness incurred on acquisitions...... -- 5,711
21. 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:
2001 2000
-------- --------
Income from continuing operations in accordance with
Canadian GAAP............................................. $ 63,529 $ 52,091
Effects of differences in accounting for:
Depreciation and amortization pursuant to SFAS 109 (d).... (2,861) (549)
Foreign exchange pursuant to FAS 52 (g)................... (3,295) (4,716)
Real estate revenue recognition pursuant to SFAS 66 (i)... (4,089) --
Start-up costs (j)........................................ (788) --
Tax effect of differences................................. 1,182 --
Results of discontinued operations........................ (2,942) (99)
-------- --------
Net income in accordance with United States GAAP............ 50,736 46,727
Opening retained earnings in accordance with United States
GAAP (b).................................................. 177,245 127,645
Reduction in redemption price of non-resort preferred
shares.................................................... -- 7,588
Common share dividends...................................... (4,618) (4,715)
-------- --------
Closing retained earnings in accordance with United States
GAAP...................................................... $223,363 $177,245
======== ========
Weighted average number of shares outstanding (in
thousands)................................................ 43,665 43,362
======== ========
Income per common share
Basic..................................................... $ 1.23 $ 1.08
Diluted................................................... $ 1.22 $ 1.08
======== ========
2001 2000
-------- --------
Comprehensive income:
Net income in accordance with United States GAAP.......... $ 50,736 $ 46,727
Other comprehensive income (loss)......................... $ (260) 1,358
-------- --------
$ 50,476 $ 48,085
======== ========
F-23
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
2001 2000
---------- ----------
Total assets in accordance with Canadian GAAP............... $1,956,312 $1,717,355
Effects of differences in accounting for:
Shareholder loans (c)..................................... (460) (560)
Ski and resort assets (d)................................. 3,226 4,893
Goodwill (d).............................................. 35,916 37,943
Properties (d)............................................ 663 710
Revenue recognition (i)................................... (510) --
Start-up costs (j)........................................ (788) --
Future income taxes on differences........................ 1,182 --
---------- ----------
Total assets in accordance with United States GAAP.......... $1,995,541 $1,760,341
========== ==========
2001 2000
---------- ----------
Total liabilities in accordance with Canadian GAAP.......... $1,387,950 $1,206,083
Effects of differences in accounting for:
Foreign exchange (g)...................................... (14) (3,309)
Revenue recognition (i)................................... 3,579 --
---------- ----------
Total liabilities in accordance with United States GAAP..... $1,391,515 $1,202,774
========== ==========
2001 2000
---------- ----------
Capital stock in accordance with Canadian GAAP.............. $ 414,220 $ 413,719
Effects of differences in accounting for:
Extinguishment of options and warrants (a)................ 1,563 1,563
Shareholder loans (c)..................................... (460) (560)
---------- ----------
Capital stock in accordance with United States GAAP......... 415,323 414,722
Closing retained earnings in accordance with United States
GAAP...................................................... 223,363 177,245
Accumulated other comprehensive income (h).................. (34,660) (34,400)
---------- ----------
Shareholders' equity in accordance with United States
GAAP...................................................... $ 604,026 $ 557,567
========== ==========
(a) 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 years
ended June 30, 2001 and 2000.
(b) RETAINED EARNINGS:
Opening retained earnings in accordance with United States GAAP for the
year ended June 30, 2000 includes the effects of:
(i) adopting SFAS 109 as described in (d). The net increase in
retained earnings was $44,095,000.
(ii) treating payments made to extinguish options and warrants as
income items as described in (a). The net decrease in retained
earnings was $1,563,000.
(iii) including foreign exchange gains and losses in income for the
period in which the exchange rate fluctuates. The net increase in
retained earnings was $8,025,000.
(c) 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, totaling $460,000 and $560,000 as at June 30, 2001 and
2000, respectively, would be deducted from share capital.
(d) INCOME TAXES:
As described in note 2(n), the Company follows the asset and liability
method of accounting for income taxes. Prior to July 1, 1999, the
Company had adopted the 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 future 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, effective
from the Company's year
F-24
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
ended September 30, 1994. The effect of adopting SFAS 109 increases the
carrying values of certain balance sheet amounts at June 30, 2001 and
2000 as follows:
2001 2000
------- -------
Ski and resort assets....................................... $ 3,228 $ 4,893
Goodwill.................................................... 35,918 37,943
Properties.................................................. 663 710
(e) 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 14).
(f) 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 prescribed 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 for option grants in:
2001 2000
------- -------
Dividend yield.............................................. 0.6% 0.6%
Risk-free interest rate..................................... 4.63% 6.25%
Expected option life........................................ 7 years 7 years
Expected volatility......................................... 67% 69%
Using the above assumptions, the Company's net income under United
States GAAP would have been reduced to the pro forma amounts indicated
below:
2001 2000
------- -------
Net income in accordance with United States GAAP:
As reported............................................... $50,736 $46,727
Estimated fair value of option grants..................... (3,975) (2,894)
------- -------
Pro forma................................................... $46,761 $43,833
======= =======
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 7 years (2000 -- 7 years) and compensation
cost for options granted prior to July 1, 1996 is not considered.
(g) 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.
(h) OTHER COMPREHENSIVE INCOME:
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("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.
F-25
INTRAWEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000
(tabular amounts in thousands of United States dollars, unless otherwise
indicated)
The foreign currency translation adjustment in the amount of
$33,780,000 (2000 -- $34,400,000) presented in shareholders' equity
under Canadian GAAP would be considered part of accumulated other
comprehensive income under United States GAAP. The change in the
balance of $260,000 would be other comprehensive loss for the year
(2000 -- income of $1,358,000).
(i) REAL ESTATE REVENUE RECOGNITION:
In accordance with Canadian GAAP, the Company recognizes revenue from
the sale of real estate after receiving an appropriate deposit and
conveying title to the purchaser. Under United States GAAP, the Company
applies the deposit or cost recovery method to sales of retail real
estate where the initial or continuing investment by the purchaser does
not comply with all criteria specified for full revenue recognition.
Under these methods, revenue is not all recognized at the time of sale
and title transfer but subsequently as specified criteria for revenue
recognition are met.
(j) START-UP COSTS:
As described in note 2(f), the Company capitalizes for Canadian GAAP
purposes certain costs incurred in the start-up period of its resort
network. For U.S. GAAP purposes, such cost would be expensed as
incurred.
(k) DERIVATIVES AND HEDGING ACTIVITIES:
For U.S. GAAP purposes, the Company has adopted the provisions of SFAS
133, "Accounting for Derivative Instruments and Hedging Activities", as
amended, effective July 1, 2000. Under this standard, derivative
instruments are initially recorded at cost with changes in fair value
recognized in income except where the derivative is identified,
documented and highly effective as a hedge, in which case the changes
in fair value are excluded from income to be recognized at the time of
the underlying transaction. The only derivative instrument outstanding
at June 30, 2001 and 2000 is the interest swap described in note 9. As
the fair value of this swap is not materially different than its cost
at both dates, no material reconciling item is required.
(l) RECENTLY ANNOUNCED ACCOUNTING PRONOUNCEMENTS:
In May 2001 the Financial Accounting Standards Board announced new
rules relating to the accounting for goodwill. SFAS 141, "Business
Combinations", eliminates the pooling of interests method of accounting
for business combinations and is effective for all transactions
initiated after June 30, 2001. SFAS 142, "Goodwill and Other Intangible
Assets", will require that goodwill no longer be amortized, but the
carrying value of goodwill be subject to a regular impairment test.
SFAS 142 will be effective for the first fiscal quarter beginning after
December 15, 2001.
In June 2001 SFAS 143, "Accounting for Asset Retirement Obligations",
was issued in the United States. This standard, which for the Company
will be effective for its year commencing July 1, 2002, requires an
enterprise to record the fair value of an asset retirement obligation
as a liability in the period in which it incurs a legal obligation
associated with the retirement of tangible long-lived assets.
The Company has not yet assessed the implications of these recently
announced accounting pronouncements to its reported financial position.
(m) COMPARATIVE FIGURES:
Certain comparative figures for 2000 have been reclassified to conform
with the financial presentation adopted in the current year.
F-26