---

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm		3
Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2016 and 2015		4
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2016, 2015 and 2014		5
Consolidated Statements of Equity for the years ended June 30, 2016, 2015 and 2014		6
Consolidated Statements of Cash Flows for the years ended June 30, 2016, 2015 and 2014		8
Notes to Consolidated Financial Statements		10
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts and Reserves		45

 

 

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Intrawest Resorts Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Intrawest Resorts Holdings, Inc. and subsidiaries as of June 30, 2016 and 2015, and the related consolidated statements of operations and comprehensive income (loss), equity, and cash flows for each of the years in the three‑year period ended June 30, 2016. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related consolidated financial statement schedule, Schedule II - Valuation and Qualifying Accounts and Reserves, for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Intrawest Resorts Holdings, Inc. and subsidiaries as of June 30, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three‑year period ended June 30, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, Schedule II - Valuation and Qualifying Accounts and Reserves, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Denver, Colorado

September 8, 2016

 

	June 30, 2016				June 30, 2015
Assets
Current assets:
Cash and cash equivalents	$	107,066			$	90,580
Restricted cash	12,475				10,018
Receivables, net of allowances of $831 and $717, respectively	36,660				36,176
Inventories	23,620				22,913
Prepaid expenses and other assets	21,081				21,701
Current assets held for sale	—				23,156
Total current assets	200,902				204,544
Property, plant and equipment, net	511,486				527,186
Real estate held for development	137,283				139,951
Intangible assets, net	50,226				56,501
Goodwill	105,981				106,469
Equity method investments	26,398				25,394
Other long-term assets, net	5,529				4,991
Long-term assets held for sale	—				29,959
Total assets	$	1,037,805			$	1,094,995
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities	$	64,869			$	62,890
Deferred revenue and deposits	67,937				62,441
Capital lease obligations due within one year	3,345				3,927
Long-term debt due within one year	497				6,919
Current liabilities held for sale	—				9,955
Total current liabilities	136,648				146,132
Deferred revenue and deposits	8,106				8,909
Long-term capital lease obligations	35,061				35,175
Long-term debt	537,295				566,922
Other long-term liabilities	60,660				60,121
Total liabilities	777,770				817,259
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, $0.01 par value; 300,000 shares authorized; no shares issued and outstanding	—				—
Common stock, $0.01 par value; 2,000,000 shares authorized; 39,736 and 45,230 shares issued and outstanding, respectively	453				452
Treasury stock, at cost; 5,556 shares and 0 shares, respectively	(50,643		)		—
Additional paid-in capital	2,900,696				2,897,343
Accumulated deficit	(2,726,074		)		(2,766,947		)
Accumulated other comprehensive income	131,920				145,379
Total stockholders' equity	256,352				276,227
Noncontrolling interest	3,683				1,509
Total equity	260,035				277,736
Total liabilities and equity	$	1,037,805			$	1,094,995

See accompanying notes to consolidated financial statements.

 

 

INTRAWEST RESORTS HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

 

(In thousands, except per share data)

 

		Year Ended June 30,
		2016				2015				2014
Revenue		$	570,912			$	587,589			$	525,253
Operating expenses		474,453				492,917				452,202
Depreciation and amortization		60,123				59,076				55,413
(Gain) on sale of Intrawest Resort Club Group		(40,401		)		—				—
(Gain) loss on disposal of assets		(1,926		)		(2,280		)		267
Impairment of real estate and long-lived assets		—				—				871
Loss on remeasurement of equity method investment		—				1,454				—
Income from operations		78,663				36,422				16,500
Interest income		2,863				4,185				4,728
Interest expense on third party debt		(40,377		)		(43,891		)		(53,004		)
Interest expense on notes payable to affiliates		—				—				(119,858		)
Earnings (loss) from equity method investments		1,933				(3,810		)		(271		)
Loss on extinguishment of debt		—				(676		)		(35,480		)
Other income (expense), net		1,757				(1,231		)		(986		)
Income (loss) before income taxes		44,839				(9,001		)		(188,371		)
Income tax expense (benefit)		1,773				(3,902		)		677
Net income (loss)		43,066				(5,099		)		(189,048		)
Income attributable to noncontrolling interest		2,193				1,821				369
Net income (loss) attributable to Intrawest Resorts Holdings, Inc.		$	40,873			$	(6,920	)		$	(189,417	)
Weighted average shares of common stock outstanding:
Basic		43,236				45,099				43,132
Diluted		43,270				45,099				43,132
Net income (loss) attributable to Intrawest Resorts Holdings, Inc. per share:
Basic		$	0.95			$	(0.15	)		$	(4.39	)
Diluted		$	0.94			$	(0.15	)		$	(4.39	)
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)		$	43,066			$	(5,099	)		$	(189,048	)
Foreign currency translation adjustments		(12,081		)		(54,594		)		(4,040		)
Realized portion on cash flow hedge (net of tax of $0)		1,195				1,486				3,398
Actuarial gain (loss) on pensions (net of tax of $0)		(2,592		)		776				(3,631		)
Comprehensive income (loss)		29,588				(57,431		)		(193,321		)
Comprehensive income attributable to noncontrolling interest		2,174				1,833				430
Comprehensive income (loss) attributable to Intrawest Resorts Holdings, Inc.		$	27,414			$	(59,264	)		$	(193,751	)

 

See accompanying notes to consolidated financial statements.

 

		Year Ended June 30,
		2016				2015				2014
Equity Attributable to Partnership
General Partner
Balance at beginning of year		$	—			$	—			$	—
Balance at end of year		$	—			$	—			$	—
Limited Partners
Balance at beginning of year		$	—			$	—			$	(1,174,706	)
Net loss attributable from July 1, 2013 through December 8, 2013		—				—				(223,692		)
Contribution from affiliates		—				—				1,675
Restructuring transactions on December 9, 2013 (Note 1)		—				—				1,396,723
Balance at end of year		$	—			$	—			$	—
Total equity attributable to partnership		—				—				—
Equity attributable to shareholders of Intrawest Resorts Holdings, Inc.
Number of common shares outstanding
Balance at beginning of year		45,230				45,026				—
Restructuring transactions on December 9, 2013 (Note 1)		—				—				41,882
Issuance of common stock in initial public offering at $12.00 per share, net of issuance costs of $9,020		—				—				3,125
Shares issued under share-based compensation plan, net of shares withheld for employee taxes		62				204				19
Purchases of treasury stock		(5,556		)		—				—
Balance at end of year		39,736				45,230				45,026
Common stock
Balance at beginning of year		$	452			$	450			$	—
Restructuring transactions on December 9, 2013 (Note 1)		—				—				419
Issuance of common stock in initial public offering at $12.00 per share, net of issuance costs of $9,020		—				—				31
Shares issued under share-based compensation plan, net of shares withheld for employee taxes		1				2				—
Balance at end of year		$	453			$	452			$	450
Treasury stock
Balance at beginning of year		$	—			$	—			$	—
Purchases of treasury stock		(50,643		)		—				—
Balance at end of year		$	(50,643	)		$	—			$	—
Additional paid-in capital
Balance at beginning of year		$	2,897,343			$	2,894,072			$	—
Restructuring transactions on December 9, 2013 (Note 1)		—				—				2,864,320
Issuance of common stock in initial public offering at $12.00 per share, net of issuance costs of $9,020		—				—				28,449
Shares issued under share-based compensation plan, net of shares withheld for employee taxes		(510		)		(867		)		—
Share-based compensation		3,863				4,138				1,303
Balance at end of year		$	2,900,696			$	2,897,343			$	2,894,072

See accompanying notes to consolidated financial statements.

 

		Year Ended June 30,
		2016				2015				2014
Accumulated deficit
Balance at beginning of year		$	(2,766,947	)		$	(2,760,027	)		$	—
Restructuring transactions on December 9, 2013 (Note 1)		—				—				(2,794,304		)
Net income attributable from December 9, 2013 through June 30, 2014		—				—				34,277
Net income (loss)		40,873				(6,920		)		—
Balance at end of year		$	(2,726,074	)		$	(2,766,947	)		$	(2,760,027	)
Accumulated other comprehensive income
Balance at beginning of year		$	145,379			$	197,723			$	149,387
Restructuring transactions on December 9, 2013 (Note 1)		—				—				52,670
Other comprehensive income (loss):
Foreign currency translation adjustments		(12,062		)		(54,606		)		(4,101		)
Realized portion on cash flow hedge (net of tax of $0)		1,195				1,486				3,398
Actuarial gain (loss) on pensions (net of tax of $0)		(2,592		)		776				(3,631		)
Balance at end of year		$	131,920			$	145,379			$	197,723
Total equity attributable to shareholders of Intrawest Resorts Holdings, Inc.		$	256,352			$	276,227			$	332,218
Equity attributable to noncontrolling interest
Balance at beginning of year		$	1,509			$	(324	)		$	(754	)
Net loss attributable from July 1, 2013 through December 8, 2013		—				—				(577		)
Net income attributable from December 9, 2013 through June 30, 2014		—				—				946
Net income attributable to noncontrolling interest		2,193				1,821				—
Other comprehensive income (loss):
Foreign currency translation adjustments		(19		)		12				61
Total equity attributable to noncontrolling interest		$	3,683			$	1,509			$	(324	)

See accompanying notes to consolidated financial statements.

 

	Year Ended June 30,
	2016				2015				2014
Cash provided by (used in):
Operating activities:
Net income (loss)	$	43,066			$	(5,099	)		$	(189,048	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	60,123				59,076				55,413
Gain on sale of Intrawest Resort Club Group	(40,401		)		—				—
Transaction costs related to sale of Intrawest Resort Club Group	(4,679		)		—				—
Impairment of real estate and long-lived assets	—				—				871
Loss on remeasurement of equity method investment	—				1,454				—
(Earnings) loss from equity method investments	(1,933		)		3,810				271
Dividends from equity method investments	1,162				—				1,726
Deferred income taxes	70				(3,786		)		105
Provision for doubtful accounts	434				187				1,584
Loss on extinguishment of debt	—				676				35,480
Amortization of deferred financing costs, facility fees, and discount	3,573				3,154				5,534
Non-cash changes to accumulated other comprehensive income	(1,397		)		2,262				(233		)
Share-based compensation	3,863				4,138				1,303
(Gain) loss on disposal of equity method investments and assets	(1,926		)		(2,280		)		267
Accrued interest on notes payable to affiliates	—				—				119,858
Funding of pension plans	(3,089		)		(3,011		)		(1,101		)
Changes in assets and liabilities, net of business acquisitions:
Restricted cash	(2,511		)		2,392				2,170
Receivables	2,187				1,094				(420		)
Inventories	(3,182		)		(1,078		)		(5,935		)
Prepaid expenses and other assets	(116		)		2,334				(1,416		)
Real estate held for development	985				2,690				10,499
Accounts payable and accrued liabilities	3,343				(570		)		3,035
Deferred revenue and deposits	5,609				11,694				2,921
Net cash provided by operating activities	65,181				79,137				42,884
Investing activities:
Capital expenditures	(51,079		)		(41,873		)		(45,242		)
Proceeds from sale of Intrawest Resorts Club Group	84,613				—				—
Acquisition of businesses, net of cash received	—				(41,467		)		(2,524		)
Purchase of land for development	—				—				(2,941		)
Contributions to equity method investments	(575		)		(4,115		)		(3,751		)
Distributions of capital from equity method investments	150				—				—
Proceeds from the sale of long-lived assets	4,340				3,436				772
Proceeds from insurance reimbursements	1,951				1,415				—
Net cash provided by (used in) investing activities	39,400				(82,604		)		(53,686		)
See accompanying notes to consolidated financial statements.

 

	Year Ended June 30,
	2016				2015				2014
Financing activities:
Proceeds from issuance of long-term debt	—				59,925				534,600
Repayments of bank and other borrowings	(42,286		)		(11,323		)		(588,251		)
Purchase of treasury stock	(50,643		)		—				—
Net proceeds from initial public offering	—				—				28,480
Financing costs paid	(1,640		)		(2,773		)		(16,950		)
Contributions from affiliates	—				—				49,984
Net cash (used in) provided by financing activities	(94,569		)		45,829				7,863
Effect of exchange rate changes on cash	6,474				(7,802		)		(816		)
Increase (decrease) in cash and cash equivalents	16,486				34,560				(3,755		)
Cash and cash equivalents, beginning of year	90,580				56,020				59,775
Cash and cash equivalents, end of year	$	107,066			$	90,580			$	56,020
Supplemental information:
Cash paid for interest	$	31,348			$	34,633			$	40,958
Cash paid for income taxes	$	2,349			$	1,131			$	279
Non-cash investing and financing activities
Property, plant and equipment received not invoiced	$	1,302			$	2,838			$	—
Property, plant and equipment financed by capital lease obligations	$	270			$	107			$	19,565
Exchange of Tranche B Term Loans and Affiliate Loans for equity interest	$	—			$	—			$	1,471,627

See accompanying notes to consolidated financial statements.

 

 

 

 

 

Formation of the Company

 

Intrawest Resorts Holdings, Inc. is a Delaware corporation that was formed on August 30, 2013, and had not, prior to the completion of the restructuring transactions in which it acquired substantially all of the assets, liabilities and operations of Intrawest Cayman L.P. (the "Partnership"), which is described below under “Restructuring”, conducted any activities other than those incident to its formation for the preparation of its initial public offering, which was consummated on February 5, 2014. The Partnership was formed on February 22, 2007 as a holding company that operated through various subsidiaries primarily engaged in the operation of mountain resorts, adventure, and real estate businesses, principally throughout North America.

 

Unless the context suggests otherwise, references in the notes to consolidated financial statements to the “Company”, “our”, “us”, or “we” refer to the Partnership and its consolidated subsidiaries prior to the consummation of the restructuring transactions described below under “Restructuring” and to Intrawest Resorts Holdings, Inc. and its consolidated subsidiaries after the consummation of the restructuring transactions described below under “Restructuring”.

 

Business Operations

 

The Company conducts business through three segments: Mountain, Adventure and Real Estate. The Mountain segment includes the Company's mountain resort and lodging operations at Steamboat Ski & Resort (“Steamboat”) and Winter Park Resort (“Winter Park”) in Colorado, Stratton Mountain Resort (“Stratton”) in Vermont, Snowshoe Mountain Resort (“Snowshoe”) in West Virginia, Mont Tremblant Resort (“Tremblant”) in Quebec, and Blue Mountain Ski Resort (“Blue Mountain”) in Ontario, of which the Company owned a 50.0% equity interest for all relevant periods prior to the Company's acquisition of the remaining 50.0% equity interest on September 19, 2014 (the "Blue Mountain Acquisition"). The Mountain segment derives revenue mainly from sales of lift products, lodging, ski school services, retail and rental merchandise, food and beverage, and other ancillary services.

The Real Estate segment is comprised of Intrawest Hospitality Management, Inc. (“IHM”), which principally manages condominium hotel properties in Maui, Hawaii and Mammoth Lakes, California, Playground, a residential real estate sales and marketing business, the Company’s 50.0% interest in Mammoth Hospitality Management L.L.C., the Company's 57.1% economic interest in Chateau M.T. Inc. ("Chateau") and included Intrawest Resort Club Group ("IRCG"), a vacation club business, until the business was sold on January 29, 2016. The Real Estate segment is also comprised of real estate development activities and includes costs associated with these activities, such as planning activities and land carrying costs. 

Restructuring

 

On December 9, 2013, the Company was party to a series of transactions in which the Partnership caused its indirect subsidiaries to contribute 100% of their equity interest in both Intrawest U.S. Holdings Inc., a Delaware corporation (“Intrawest U.S.”), and Intrawest ULC, an unlimited liability company organized under the laws of the Province of Alberta (“Intrawest ULC”), to an indirect subsidiary of the Company. Concurrently, $1.1 billion of notes payable to affiliates, including $723.8 million of accrued and unpaid interest thereon, were exchanged for 42,999,900 shares of the Company's common stock (or 41,881,903 shares after giving effect to the 0.974-for-1 reverse stock split) and subsequently canceled. The Company's subsidiaries were released from all obligations, including guarantor obligations, in respect of an additional $355.6 million of notes payable to affiliates (the "Third Lien Loan"), including $145.6 million of accrued and unpaid interest thereon. These transactions are collectively referred to as the “Restructuring”. The accompanying consolidated statements of operations include interest expense related to the notes payable to affiliates of $119.9 million for the year ended June 30, 2014.

 

 

 

Basis of Presentation and Use of Estimates

 

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of financial statements in conformity with GAAP 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 revenue and expenses during each reporting period. Actual results could differ from those estimates. Certain previously reported amounts have been reclassified to conform to the current period financial statement presentation.

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and a variable interest entity ("VIE") for which the Company is the primary beneficiary. All significant intercompany transactions are eliminated in consolidation. Investments in which the Company does not have a controlling interest or is not the primary beneficiary, but over which the Company is able to exercise significant influence, are accounted for under the equity method. Under the equity method, the original cost of the investment is adjusted for the Company’s share of post-acquisition earnings or losses increased by contributions less distributions received.

 

On January 29, 2016 (the "Disposition Date"), the Company, through its wholly owned indirect subsidiaries, Intrawest U.S. Holdings Inc. and Intrawest ULC, entered into a definitive agreement (the “Purchase Agreement”) to sell IRCG to Diamond Resorts Corporation (the “Purchaser”) and Diamond Resorts International, Inc. (together with the Purchaser, “Diamond”) as described in Note 3, "Acquisitions and Dispositions". The results of IRCG were included in the Company's consolidated financial statements until the Disposition Date. Subsequent to the Disposition Date, IRCG was no longer consolidated in the Company's consolidated financial statements.

 

 

Cash and Cash Equivalents

Cash and cash equivalents are held in highly liquid investments, primarily demand deposit accounts with highly rated U.S. and Canadian financial institutions, with remaining terms to maturity of three months or less at acquisition.

Restricted Cash

Restricted cash is comprised primarily of deposits to settle future claims related to self-insurance. Additionally, restricted cash includes guest lodging deposits in jurisdictions that require down payments or deposits to be retained in a trust account, and deposits to secure certain letters of credit.

Receivables

Trade receivables are recorded in the normal course of business related to the sale of products or services and presented net of an allowance for doubtful accounts. In the determination of the allowance, the Company considers specific accounts, accounts receivable aging reports, customer past repayment history, the economic environment, and other factors that could affect collectability. Write-offs are evaluated on a case by case basis.

Inventories

Inventories consisting of retail goods, food and beverage products are recorded at the lower of cost or net realizable value, determined using the weighted-average cost method. The Company records an estimate for shrinkage and obsolete or unusable inventory. Aviation part inventories are recorded at the lower of cost or net realizable value, determined using the specific identification method.

Vacation points inventories are stated at the lower of cost or market value less cost to sell. Inventory costs are allocated to cost of point sales using a method that approximates the relative sales value method. The Company periodically reviews the carrying value of the inventory for impairment.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost less accumulated depreciation less any impairment loss. Repairs and maintenance are expensed as incurred. Expenditures that improve the service capacity or extend the useful life of an asset are capitalized. When property, plant and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income (loss). Depreciation is calculated using the straight-line method over the estimated useful life of each asset. The estimated useful lives of each asset category are as follows:

Asset Category	Estimated Life in Years
Buildings and building improvements	5-40
Ski lifts and area improvements	5-30
Automotive, helicopters and other equipment	2-20
Golf course improvements	20

Certain buildings, area improvements and equipment are located on leased or licensed land and are amortized over the lesser of the lease or license term or the assets' estimated useful life.

Real Estate Held for Development

Real estate held for development is recorded at the lower of cost or net realizable value. Land and infrastructure development costs include all expenditures incurred in connection with the acquisition, development and construction of real estate. These expenditures consist of all direct costs, interest on specific debt, interest on total costs financed by the Company's pooled debt and property taxes during the development period. The Company expenses costs directly related to the acquisition of new real estate properties and resort businesses. Costs incurred in connection with operating properties classified as real estate held for development, including indirect and general and administrative overhead costs, are recorded to operating expenses when incurred. Sales commission expenses are recorded in the same period that the related revenue is recorded.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment annually as of June 30th and at any time when events or circumstances suggest impairment may have occurred. The Company has reporting units with allocated goodwill in both the Mountain and Real Estate segments.

The testing for impairment consists of a comparison of the fair value of the reporting unit with its carrying amount. If the carrying amount of the reporting unit, including goodwill, exceeds the fair value, an impairment will be recognized equal to the difference between the carrying value of the reporting unit goodwill and the implied fair value of the goodwill. In testing goodwill for impairment, the Company determines the estimated fair value of its reporting units based upon a discounted future cash flow analysis.

Goodwill is the Company's only indefinite-lived intangible asset. Definite-lived intangible assets are amortized using the straight line method over the shorter of their contractual term or estimated useful lives.

The Company's major finite-lived intangible asset categories and estimated useful lives are as follows:

Intangible Asset Category	Estimated Life in Years
Permits and licenses	20-45
Trademarks and trade names	10-20
Customer relationships	4-8
Other	8-20

Long-lived Assets

The Company evaluates potential impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. An impairment will be recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

Deferred Revenue and Deposits

Deferred revenue and deposits are comprised primarily of season pass revenue, lodging and tour deposits, deposits on real estate sales and mountain club initiation deposits. Deferred revenue relating to the sale of season passes is recognized throughout the season based on historical usage patterns. Lodging and tour deposits deferred revenue is recognized when the related service is provided. Deferred revenue relating to real estate deposits is recognized upon closing of the sale or upon fulfillment of any future obligations. Deferred revenue relating to mountain club initiation deposits is recognized on a straight-line basis over the estimated life of the club.

 

Self-Insured Liabilities

The Company has a policy of self-insuring when the expected losses from self-insurance are low relative to the cost of purchasing third-party insurance at various deductible levels. The self-insurance program includes workers’ compensation benefits in the United States and medical, property, automobile and general liability coverage in the United States and Canada. An accrual for self-insured liabilities is recorded based on management’s best estimate of the ultimate cost to settle claims considering historical claims experience, claims filed and the advice of actuaries and plan administrators.

Revenue Recognition

The Company earns revenue from a variety of sources. Revenue is recognized when the following criteria have been met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable and the collection of funds is reasonably assured. The following describes revenue recognition for the Company's three segments:

    

Commission revenue from brokerage operations for the Company owned real estate is included in Real Estate revenue and is recognized at the time an offer of sale is closed by the purchaser or all other contractual obligations have been satisfied. Commission revenue for third-party projects from real estate brokerage operations is included in Real Estate revenue and is recognized when the deal's listing agreement is executed.

Advertising Costs

 

 

 

Income Taxes

Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between tax basis of assets and liabilities and book basis reported in the consolidated balance sheets and for operating loss and tax credit carryforwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. To the extent that it is considered to be more likely than not that some or all of the deferred tax assets will not be realized, a valuation allowance is provided.

The Company recognizes accrued interest related to uncertain tax positions as a component of income tax expense. Penalties, if incurred, are recorded in operating expenses in the consolidated statements of operations.

Foreign Currency

 

The consolidated financial statements are presented in United States dollars (“USD”). The Company’s Canadian subsidiaries generally have the Canadian dollar (“CAD”) as their functional currency.

 

The accounts of entities where the USD is not the functional currency are translated into USD using the exchange rate in effect at the balance sheet date for asset and liability amounts and at the monthly average rate in effect for the period for amounts included in the determination of income. Cumulative unrealized gains or losses arising from the translation of the financial position of these subsidiaries into USD are included in equity as a component of accumulated other comprehensive income (loss) (“AOCI”).

 

Exchange gains or losses arising from transactions that are denominated in foreign currencies into the applicable functional currency are included in the determination of income and are classified in other income (expense), net in the consolidated statements of operations.

Share-Based Compensation

On January 30, 2014, the Company’s compensation committee of the board of directors approved the terms of the 2014 Omnibus Incentive Plan (the “Plan”), which allows the Company to grant share-based compensation awards in a variety of forms such as options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses, other stock-based awards and cash awards as part of the Company’s long-term incentive compensation plan.

Awards granted under the Plan generally vest based on a service condition as defined in each award. Unless otherwise determined or evidenced in an award agreement, in the event that (i) a change in control occurs, as defined in the Plan, and (ii) a participant’s employment or service is terminated without cause within 12 months following the change in control, then (a) any unvested or unexercisable portion of any award carrying a right to exercise shall become fully vested and exercisable, and (b) the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to any award will lapse and such unvested awards will be deemed fully vested and any performance conditions imposed with respect to such awards will be deemed to be fully achieved.

Compensation expense is measured based on the fair value of the award on the date of grant, net of estimated forfeitures, and is recognized as expense on a straight-line basis over the requisite service period.

Employee Benefit Plans

Substantially all of the Company’s employees are covered by Company-sponsored defined contribution plans in the U.S. and Canada. The Company’s contributions to these plans are based on a percentage of employee compensation. These plans are funded on a current basis.

In addition, certain current and former employees are covered by noncontributory defined benefit pension plans. These plans are funded in conformity with the funding requirements of applicable government regulations. Generally, benefits are based on age, years of service and level of compensation during the final years of employment. The Company accounts for these defined benefit plans by accruing its obligations under the employee benefit plans and the related costs as the underlying services are provided. The Company has frozen the plans and no further service benefits are being earned by plan participants in the defined benefit plans.

 

The funded status of defined benefit plans is recognized entirely on the consolidated balance sheets. The amount recognized as an asset or liability for pension and other postretirement benefit plans is measured as the difference between the benefit obligation and the fair value of plan assets. Overfunded plans are aggregated and recognized as an asset while underfunded plans are aggregated and recognized as a liability. Actuarial gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net pension expense are recognized in AOCI, net of income tax effects. Actuarial gains and losses are comprised of changes in the amount of either the projected benefit obligation (for pension plans), the accumulated benefit obligation (for other postretirement plans) or differences between actual and expected return on plan assets and from changes in assumptions. The Company measures its pension assets and liabilities as of June 30th of each year.

Fair Value of Financial Instruments

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy, which is described below, prioritizes the inputs used in measuring fair value:

 

The Company has various short-term financial instruments, including cash and cash equivalents, restricted cash, receivables, accounts payable and accrued liabilities. Due to their short-term nature, the instruments’ book value approximates fair value.

The fair value of the Senior Debt (as defined in Note 9, “Long-Term Debt”) was estimated using quoted prices for the Company's instruments in markets that are not active and was considered a Level 2 measure. The fair value of other debt obligations was estimated based on Level 3 inputs using discounted cash flow analyses based on assumptions that management believes are consistent with market participant assumptions.

The Company’s long-term debt obligations are not measured and carried at fair value on a recurring basis. The Company’s debt is initially recorded based upon historical cost. The fair value of debt does not represent the amounts that will ultimately be paid upon the maturities of the loans.

 

Concentration of Credit Risk

 

  

Recent Accounting Pronouncements

 

 

 

3.     Acquisitions and Dispositions

IRCG Transaction

The following table shows the components of assets and liabilities of IRCG classified as held for sale in the Company's consolidated balance sheet as of June 30, 2015 (in thousands):

		June 30, 2015
Restricted cash		$	228
Receivables, net		6,592
Inventories		14,329
Other current assets		2,007
Property, plant and equipment, net of accumulated depreciation		2,071
Real estate held for development		3,085
Long-term receivables and other assets, net		24,803
Total assets classified as held for sale		$	53,115
Accounts payable and accrued liabilities		$	4,334
Deferred revenue and deposits		5,621
Total liabilities classified as held for sale		$	9,955

Prior to the IRCG Transaction, IRCG allowed deferred payment terms that exceeded one year for customers purchasing vacation points. A note receivable existed when all contract documentation had been executed. Notes receivable primarily consisted of nonrecourse installment loans. The Company performed a credit review of its notes receivable individually each reporting period to determine if an allowance for credit losses was required. As of June 30, 2015, gross notes receivable were $29.9 million, of which $5.1 million was included in current receivables on the consolidated balance sheet prior to being classified as held for sale. As of June 30, 2015, the allowance for credit losses on the notes receivable was $1.9 million, of which $0.9 million was included in current receivables on the consolidated balance sheet prior to being classified as held for sale.

Blue Mountain Acquisition

On September 19, 2014, the Company acquired the remaining 50.0% equity interest in Blue Mountain that the Company did not already own from Blue Mountain Resorts Holdings Inc. The Company has included the financial results of Blue Mountain in the accompanying condensed consolidated financial statements since the Acquisition Date. The total consideration transferred to acquire Blue Mountain was $109.6 million, which consisted of $54.8 million in cash and $54.8 million for the previously held equity interest. The valuation of the Company's previously held equity interest resulted in a loss of $1.5 million included within loss on remeasurement of equity method investment in the accompanying consolidated statements of operations for the year ended June 30, 2015.

The primary assets acquired and liabilities assumed as of the Acquisition Date included $85.8 million of property, plant and equipment, $13.8 million of accounts payable and accrued liabilities, $13.3 million of cash and cash equivalents, $8.7 million of identifiable intangibles and $13.2 million of residual goodwill. The goodwill recorded is primarily attributable to economies of scale, opportunities for synergies and any intangible assets that do not qualify for separate recognition. None of the goodwill is deductible for tax purposes.

 

 

 

Basic earnings (loss) per share ("EPS") is calculated by dividing net income (loss) attributable to the Company by the weighted average number of shares of common stock outstanding. Diluted EPS is calculated by dividing net income (loss) attributable to the Company by the weighted average number of shares of common stock outstanding, plus potentially dilutive securities. Potentially dilutive securities include unvested restricted common stock, restricted stock units, and stock options, the dilutive effect of which is calculated using the treasury stock method.

As of June 30, 2016, 2015 and 2014, the effect of 1.2 million, 1.0 million and 0.1 million potentially dilutive securities, respectively, were not included in the calculation of EPS as the effect would be anti-dilutive. The calculation of basic and diluted EPS is presented below (in thousands, except per share data):

		Year Ended June 30,
		2016				2015				2014
Basic earnings (loss) per share:
Net income (loss) attributable to Intrawest Resorts Holdings, Inc.		$	40,873			$	(6,920	)		$	(189,417	)
Weighted average common shares outstanding		43,236				45,099				43,132
Basic earnings (loss) per share		$	0.95			$	(0.15	)		$	(4.39	)
Diluted earnings (loss) per share:
Net income (loss) attributable to Intrawest Resorts Holdings, Inc.		$	40,873			$	(6,920	)		$	(189,417	)
Weighted average common shares outstanding		43,236				45,099				43,132
Dilutive effect of share-based payment awards		34				—				—
Weighted average dilutive shares outstanding		43,270				45,099				43,132
Diluted earnings (loss) per share		$	0.94			$	(0.15	)		$	(4.39	)

5.    Supplementary Balance Sheet Information

 

Current receivables

 

	June 30,
	2016				2015
Trade receivables	$	37,441			$	36,458
Loans, mortgages and notes receivable	50				435
Allowance for doubtful accounts	(831		)		(717		)
Total current receivables	$	36,660			$	36,176

 

 

 

Prepaid expenses and other assets

	June 30,
	2016				2015
Capital spares	$	11,628			$	11,640
Prepaid insurance	4,813				5,345
Prepaid expenses and other assets	4,640				4,716
Total prepaid expenses and other assets	$	21,081			$	21,701

Accounts payable and accrued liabilities

 

	June 30,
	2016				2015
Trade payables	$	48,353			$	52,372
Accrued liabilities	16,516				10,518
Total accounts payable and accrued liabilities	$	64,869			$	62,890

Current deferred revenue and deposits

 

	June 30,
	2016				2015
Season pass and other deferred revenue	$	42,343			$	39,216
Lodging and tour deposits	25,548				23,178
Deposits on real estate sales	46				47
Total current deferred revenue and deposits	$	67,937			$	62,441

Other long-term liabilities

 

	June 30,
	2016				2015
Pension liability, net of funded assets	$	33,550			$	33,150
Forgivable government grants	7,719				8,950
Other long-term liabilities	19,391				18,021
Total other long-term liabilities	$	60,660			$	60,121

 

	June 30,
	2016				2015
Land	$	47,257			$	47,856
Buildings and building improvements	310,344				300,942
Ski lifts and area improvements	276,343				272,032
Automotive, helicopters and other equipment	292,776				284,271
Golf course improvements	23,757				23,638
Gross property, plant and equipment	950,477				928,739
Less: accumulated depreciation	(438,991		)		(401,553		)
Property, plant and equipment, net	$	511,486			$	527,186

As of June 30, 2016 and 2015, the carrying value of leased assets was $32.2 million and $31.9 million, respectively, net of accumulated amortization of $8.0 million and $6.8 million, respectively. Amortization of assets under capital leases is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

Equity Method Affiliates	Ownership Interest
Chateau M.T. Inc.	49.5	%
Mammoth Hospitality Management, LLC	50.0	%
MMSA Investors, LLC	14.8	%
Mammoth Resorts LLC	14.9	%

The Company holds less than a 20% ownership interest in MMSA Investors, LLC and Mammoth Resorts LLC, (together with MMSA Investors, LLC collectively referred to herein as the "Mammoth family of resorts"); however, the equity method is used to account for these investments because the Company believes it exercises significant influence over the Mammoth family of resorts in part by holding a seat on each of the boards of directors, which have eight members and three members, respectively.

The Company holds a 49.5% voting interest in Chateau with a non-voting debt interest that can be converted to voting interest, resulting in up to a 57.1% economic interest in Chateau.

Financial information for the Company's equity method investments in the aggregate is summarized below and includes the Company's 50.0% equity investment in Blue Mountain Resorts Limited prior to the Blue Mountain Acquisition for all relevant periods presented (in thousands):

 

	June 30,
	2016				2015
Current assets	$	110,054			$	45,461
Noncurrent assets	423,671				455,994
Total assets	533,725				501,455
Current liabilities	79,929				59,054
Noncurrent liabilities	271,868				251,172
Total liabilities	351,797				310,226
Equity attributable to shareholders of investees	172,870				183,695
Equity attributable to noncontrolling interest	9,058				7,534
Total equity	181,928				191,229
Intrawest Resorts Holdings, Inc. equity investment	$	26,398			$	25,394

The Company's carrying amount of its equity method investments reflects its expectation of cash to be realized from its interests in the net assets of the affiliate, taking into account the return order of equity distribution per the respective agreements. The difference between the carrying value and the underlying equity in net assets is primarily comprised of goodwill.

 

 

 

 

Goodwill

Intangible Assets Other Than Goodwill

	June 30, 2016
	Cost				Accumulated Amortization				Net Book Value
Permits and licenses	$	12,732			$	4,866			$	7,866
Trademarks and trade names	73,561				33,388				40,173
Customer relationships	18,331				16,159				2,172
Other	8,906				8,891				15
	$	113,530			$	63,304			$	50,226

	June 30, 2015
	Cost				Accumulated Amortization				Net Book Value
Permits and licenses	$	13,278			$	4,558			$	8,720
Trademarks and trade names	74,645				30,183				44,462
Customer relationships	18,987				15,700				3,287
Other	9,172				9,140				32
	$	116,082			$	59,581			$	56,501

Amortization expense for intangible assets for the next five fiscal years is estimated to be as follows (in thousands):

2017	$	5,170
2018	5,155
2019	4,387
2020	4,174
2021	4,174

 

 

 

			June 30,
	Maturity		2016				2015
Senior Debt	2020		$	554,480			$	591,297
Other debt obligations	2016-2023		1,172				2,096
Less: unamortized OID and debt issuance costs			(17,860		)		(19,552		)
Total			537,792				573,841
Less: Long-term debt due within one year			497				6,919
Total long-term debt			$	537,295			$	566,922

 

 

Senior Debt

In conjunction with the Restructuring, one of the Company’s subsidiaries, as borrower, and several of the Company's U.S. subsidiaries, as guarantors, entered into a credit agreement (the “Credit Agreement”) with a syndicate of lenders, Goldman Sachs Bank USA, as issuing bank, and Goldman Sachs Lending Partners LLC, as administrative agent, providing for a $540.0 million term loan facility (the “Term Loan"), a $25.0 million senior secured first-lien revolving loan facility (the “Revolver”), and a $55.0 million senior secured first-lien letters of credit facility (the “LC Facility” and, together with the Term Loan and Revolver, collectively referred to herein as the “Senior Debt”). Pursuant to an Incremental Amendment to the Credit Agreement, dated September 19, 2014 (the "Incremental Amendment"), the Company borrowed an incremental $60.0 million under the Term Loan, primarily to finance the Blue Mountain Acquisition described in Note 3, "Acquisitions and Dispositions". The proceeds were also used to pay certain fees, commissions and expenses related to the Blue Mountain Acquisition and for working capital. The Incremental Amendment has the same terms and maturity date as the original Term Loan. While the Fourth Amendment resulted in certain changes to the Company's incremental borrowing capacity, the Company continues to have the ability to increase the borrowings on the Term Loan under certain circumstances and subject to certain criteria as outlined in the Fourth Amendment; so long as, after giving effect to any additional amounts borrowed, the Company remains compliant with all covenants of the Credit Agreement.

On April 29, 2015, certain of the subsidiaries of the Company that guarantee the Company’s Senior Debt executed the second amendment (the “Second Amendment”) to the Company’s existing Credit Agreement.  The Second Amendment adjusted the Company’s Term Loan to reduce the applicable margin for borrowings under the Term Loan from 4.50% to 3.75% for Eurodollar rate loans. All other terms and conditions of the Second Amendment are consistent with the Credit Agreement.

On June 1, 2015, certain of the subsidiaries of the Company that guarantee the Company’s Senior Debt entered into the third amendment (the “Third Amendment”) to the Company’s existing Credit Agreement. The Third Amendment adjusted the terms of the Company's Revolver to decrease the Company's applicable margin for Eurodollar rate loans from 4.50% to 3.75%, if the total secured debt leverage ratio is greater than or equal to 4.50:1.00, and from 4.25% to 3.50% if the total secured debt leverage ratio is less than 4.50:1.00. The Third Amendment also decreased the Company's applicable margin for base rate loans from 3.50% to 2.75%, if the total secured debt leverage ratio is greater than or equal to 4.50:1.00, and from 3.25% to 2.50% if the total secured debt leverage ratio is less than 4.50:1.00. All other terms and conditions of the Third Amendment are consistent with the Credit Agreement.

On April 8, 2016, certain of the Company's subsidiaries, that are borrowers or guarantors of the Company’s Senior Debt, entered into the Fourth Amendment (the "Fourth Amendment") to the Company’s existing Credit Agreement. Upon execution of the Fourth Amendment, the Company repaid $25.0 million of Term Loan borrowings with cash on hand. The Fourth Amendment secured financial and strategic flexibility for the Company, among other items, and increased the applicable margins for base rate loans and Eurodollar rate loans under the Term Loan from 2.75% to 3.00% and from 3.75% to 4.00%, respectively.