S-1 1 s000092x2_s1.htm FORM S-1

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As filed with the Securities and Exchange Commission on November 12, 2013

   

Registration No. 333-        

 

 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM S-1 

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 

 

Intrawest Resorts Holdings, Inc. 

(Exact Name of Registrant as Specified in Its Charter)

 
Delaware 7990 46-3681098
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification No.)
(I.R.S. Employer Identification No.)


1621 18th Street, Suite 300 

Denver, Colorado 80202 

(303) 749-8200 

(Address, Including Zip Code, of Registrant’s Principal Executive Offices)

 

Joshua B. Goldstein, Esq. 

Chief General Counsel 

Intrawest Resorts Holdings, Inc. 

1621 18th Street, Suite 300 

Denver, Colorado 80202 

(303) 749-8200 

(Name, Address and Telephone Number, Including Area Code, of Agent For Service)

 

Copies to

Gregory A. Fernicola, Esq. 

Joseph A. Coco, Esq. 

Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
(212) 735-3000
(212) 735-2000 (facsimile)

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  £

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  £

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  £

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 under the Exchange Act. (check one)

 

Large accelerated filer  £ Accelerated filer  £ Non-accelerated filer  S
(Do not check if a smaller reporting company)
Smaller reporting company  £

 

CALCULATION OF REGISTRATION FEE 

Title of Each Class of Securities
To Be Registered
Proposed Maximum
Aggregate Offering Price (1)
Amount Of
Registration Fee
Common Stock, $0.01 par value per share $ 100,000,000 $ 12,880
(1)Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

 

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE AN AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. 

 
 
 

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The information in this preliminary prospectus is not complete and may be changed. Neither we nor the Initial Stockholder may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED NOVEMBER 12, 2013

 

PRELIMINARY PROSPECTUS

 

Shares

 

Description: C:\Users\rdzierni\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\11MGFHOR\Intrawest_color_2009_large.jpg

 

Intrawest Resorts Holdings, Inc. 

Common Stock

 

$         per share

 

 

 

 

This is an initial public offering of common stock of Intrawest Resorts Holdings, Inc. We are selling              shares of our common stock and the Initial Stockholder identified in this prospectus is selling an additional              shares of our common stock. We will not receive any proceeds from the sale of our common stock by the Initial Stockholder. After this offering, the Initial Stockholder, an entity owned primarily by certain private equity funds managed by an affiliate of Fortress Investment Group LLC, will own approximately         % of our common stock.

 

We expect the public offering price to be between $         and $         per share. Currently, no public market exists for the shares. We intend to apply to list our shares of common stock on the New York Stock Exchange (“NYSE”) under the symbol ”           .”

 

We are an “emerging growth company” under applicable U.S. securities laws and are eligible for certain reduced public company reporting requirements.

 

Investing in our common stock involves risks. See “Risk Factors” beginning on page 15 to read about certain factors you should consider before buying our common stock.

 

    Per share    Total 
Public offering price   $   $ 
Underwriting discount(1)   $   $ 
Proceeds to us before expenses   $   $ 
Proceeds to the Initial Stockholder before expenses   $   $ 

(1)The underwriters will receive compensation in addition to the underwriting discount. See “Underwriting.”

 

We have granted the underwriters the right to purchase up to             additional shares of common stock, and the Initial Stockholder has granted the underwriters the right to purchase up to             additional shares of common stock, in each case at the public offering price, less the underwriting discount, for the purpose of covering over-allotments. Any shares sold pursuant to the over-allotment option will be apportioned between us and the Initial Stockholder pro rata in accordance with the number of shares initially sold by us and the Initial Stockholder.

 

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

The underwriters expect to deliver the shares of common stock against payment on or about             , 2013.

 

 


The date of this prospectus is             , 2013.

 
 

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    Page
Prospectus Summary   1
     
Risk Factors   15
     
Forward-Looking Statements   31
     
Use of Proceeds   33
     
Capitalization   34
     
Dilution   35
     
Dividend Policy   37
     
Selected Historical Consolidated Financial and Operating Information   38
     
Unaudited Pro Forma Condensed Consolidated Financial Information   41
     
Management’s Discussion and Analysis of Financial Condition and Results of Operations   47
     
Industry   67
     
Our Business   71
     
Management   90
     
Principal and Selling Stockholder   95
     
Certain Relationships and Related Party Transactions   96
     
Description of Certain Indebtedness   99
     
Description of Capital Stock   101
     
Shares Eligible for Future Sale   106
     
United States Federal Tax Consequences to Non-U.S. Holders   108
     
Underwriting   110
     
Legal Matters   116
     
Experts   116
     
Market and Industry Data and Forecasts   116
     
Where You Can Find More Information   116
     
Index to Consolidated Financial Statements   F-1

 

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf that we have referred you to. We, the Initial Stockholder and the underwriters have not authorized anyone to provide you with additional or different information. If anyone provides you with additional, different or inconsistent information, you should not rely on it. We and the Initial Stockholder are not making an offer of these securities in any state, country or other jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any free writing prospectus is accurate as of any date other than the date of the applicable document regardless of its time of delivery or the time of any sales of our common stock. Our business, financial condition, results of operations or cash flows may have changed since the date of the applicable document.

 

We have proprietary rights to our trademarks and tradenames used in this prospectus, many of which are registered under applicable intellectual property laws. Solely for convenience, trademarks and tradenames referred to in this prospectus may appear without the “®” or “™” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and tradenames. We do not intend our use or display of other companies’ tradenames, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other company. Each trademark, tradename or service mark of any other company appearing in this prospectus is the property of its respective holder.

 

Until            , 2013 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to each dealer’s obligation to deliver a prospectus when acting as underwriter and with respect to its unsold allotments or subscriptions.

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Prospectus Summary

 

This summary highlights information contained elsewhere in this prospectus. It may not contain all the information that may be important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Condensed Consolidated Financial Information” and the financial statements and related notes included elsewhere in this prospectus, before making a decision to purchase our common stock. Some information in this prospectus contains forward-looking statements. See “Forward-Looking Statements.”

 

Intrawest Resorts Holdings, Inc. (“New Intrawest”) is a newly-formed Delaware corporation that has not, to date, conducted any activities other than those incident to its formation, the Refinancing (as defined below) and the preparation of the registration statement of which this prospectus forms a part. Unless the context suggests otherwise, references in this prospectus to “Intrawest,” the “Company,” “we,” “us” and “our” refer to Intrawest Cayman L.P. (“Cayman L.P.”) and its consolidated subsidiaries prior to the consummation of the Restructuring (as defined below), and to New Intrawest and its consolidated subsidiaries after the consummation of the Restructuring. All amounts in this prospectus are expressed in U.S. dollars, except where noted. Our fiscal year ends on June 30 and references in this prospectus to a “fiscal” year refer to the year ended June 30 of the corresponding year. References in this prospectus to “Fortress” refer to the private equity funds managed by an affiliate of Fortress Investment Group LLC that have an ownership interest in the Initial Stockholder.

 

Overview

 

We are one of North America’s premier mountain resort and adventure companies, delivering distinctive vacation and travel experiences to our guests for over three decades. We own interests in seven iconic mountain resorts with more than 11,000 skiable acres and more than 1,150 acres of land available for real estate development. We also own the leading heli-skiing adventure company in North America, providing helicopter access to more skiable terrain than all lift accessed mountain resorts combined. Additionally, we operate a comprehensive real estate business through which we manage, market and sell vacation club properties; manage condominium hotel properties; and sell and market residential real estate. During fiscal 2013, our portfolio of resorts received more than six million visitors from all 50 states and more than 100 countries, and we generated total revenues of $524.4 million. We believe our decades of experience as a mountain resort operator and real estate developer, together with our ability to scale our operations, positions us for future growth and profitability.

 

We operate within the leisure industry, with a business that benefits from an increase in consumer discretionary spending. As the economy continues to improve, we expect consumers will have more disposable income and a greater inclination to engage in and spend on leisure activities. We also expect recreational adventure and experiential travel to continue to gain in popularity as individuals, including the important “baby boomer” generation, live longer, healthier lives. We believe that our business is well positioned to capitalize on these favorable trends providing significant opportunities for us to increase visitation at our resorts and grow the scale of our businesses through internal growth initiatives and accretive leisure and adventure acquisitions. We intend to evaluate acquisition opportunities where the opportunity would provide a strategic fit within our existing portfolio of businesses. We believe that opportunistically acquiring additional mountain resorts that are proximate to our existing resorts will enable us to enhance product and operational synergies. Additionally, we believe that acquiring resorts in geographies outside our current operating footprint and acquiring additional adventure travel businesses will enable us to expand into new markets and further mitigate our exposure to any single geographic region.

 

Our Business

 

We manage our business through three reportable segments:

 

Mountain (65.5% of fiscal 2013 reportable segment revenue): Our Mountain segment includes our mountain resort and lodging operations at Steamboat Ski & Resort (“Steamboat”), Winter Park Resort (“Winter Park”), Mont Tremblant Resort (“Tremblant”), Stratton Mountain Resort (“Stratton”) and Snowshoe Mountain Resort (“Snowshoe”), as well as our 50% interest in Blue Mountain Ski Resort (“Blue Mountain”).

 

Adventure (22.0% of fiscal 2013 reportable segment revenue): Our Adventure segment includes Canadian Mountain Holidays (“CMH”) and our aviation businesses that support CMH and provide services to third parties.

 

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Real Estate (12.5% of fiscal 2013 reportable segment revenue): Our Real Estate segment includes our real estate development activities, as well as our real estate management, marketing and sales businesses, including Intrawest Resort Club Group (“IRCG”), Intrawest Hospitality Management (“IHM”) and Playground.

 

Our mountain resorts offer a recreational experience for individuals of all ages that combines outdoor adventure and fitness with a wide variety of resort-based amenities, including retail, equipment rental, dining, lodging, ski school and various forms of family entertainment. Our four-season mountain resorts are geographically diversified across North America’s major ski regions, including the Eastern United States, the Rocky Mountains and Canada, which we believe helps reduce our financial exposure to any single geographic area as weather patterns and economic conditions vary across these regions. Each of our mountain resorts is located within convenient driving distance to major metropolitan markets with high concentrations of affluent skiers and major airports, including New York City, Boston, Washington D.C., Pittsburgh, Denver, Montreal and Toronto. In each of our markets, our mountain resorts are established leaders with a reputation for some of the best skiing, amenities and experiences.

 

Our market leading resorts include:

 

Description: http:||replytoall.typepad.com|.a|6a00d8341c607753ef0154382d814d970c-200pi Steamboat Ski & Resort (operating since 1963) is located in the Colorado Rocky Mountains, 157 miles northwest of Denver, with access via direct flights from New York, Los Angeles, Chicago, Houston, Atlanta, Minneapolis, Seattle, Dallas and Denver. Seventy-nine winter Olympians have been trained in Steamboat Springs, Colorado, where Steamboat is located. With the potential to add an additional 430 acres of skiable terrain, the resort features a combination of high-end guest services and amenities, an 1880’s western atmosphere and some of the most consistent snowfall in the Rocky Mountain region. The resort receives an average of nearly 365 inches of light, dry powder snow each ski season, which we refer to in our marketing materials as Champagne Powder® snow. Average snowfall at Steamboat is 25% more than the historical Rocky Mountain regional resort average of 290 inches.  

Winter Park Resort (operating since 1939) is located in the Colorado Rocky Mountains, 67 miles west of Denver, and is one of the closest resorts to the Denver metropolitan area’s nearly three million residents. The resort, which is comprised of Winter Park Mountain, Mary Jane Mountain, Vasquez Cirque and Vasquez Ridge, is the longest operating mountain resort in Colorado and has long been referred to in our marketing materials as Colorado’s Favorite®. The resort receives an average snowfall during the ski season of approximately 322 inches and features six terrain parks and “world-class” mogul skiing, as described by Powder Magazine. Winter Park has the option to add an additional 837 acres, which would expand our skiable terrain by nearly 30%. Each summer, Winter Park transforms into a mountain biking destination, with one of the largest bike parks in the United States.  

Mont Tremblant Resort (operating since 1939) is located in Quebec, within a two hour drive from the Montreal metropolitan area’s nearly four million residents and the Ottawa metropolitan area’s nearly 1.2 million residents. The resort is consistently ranked as one of the top ski resorts in Eastern North America by Ski Magazine. With 2,116 feet of vertical drop and snowmaking on 77% of trails, Tremblant offers guests the opportunity to ski down one of the biggest vertical drops in eastern Canada. In the summer, guests can play golf on two 18-hole golf courses, mountain bike, enjoy the pedestrian village and attractions or take in Tremblant’s free outdoor concerts.  

Stratton Mountain Resort (operating since 1961)is located in Vermont, approximately 220 miles north of New York City and approximately 150 miles northwest of Boston, whose metropolitan areas have a combined population of more than 23 million residents. Situated on one of the tallest peaks in New  

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England, Stratton is widely considered the birthplace of snowboarding. Stratton features a vertical drop of 2,003 feet and snowmaking on 93% of trails. Stratton’s summer amenities feature 27-holes of golf, a 22-acre golf school and a sports and tennis complex. Winter and summer guests are also able to enjoy Stratton’s pedestrian village. 

Snowshoe Mountain Resort (operating since 1974) is located in West Virginia and is one of the largest ski resorts in the Southeast region of the United States. Snowshoe primarily draws guests from the Baltimore-Washington D.C. and Pittsburgh metropolitan area’s combined 11.7 million residents, as well as the Southeastern United States. The 251 acre resort has the biggest vertical drop in the region (1,500 feet) and receives an average snowfall during the ski season of approximately 166 inches while also enjoying 100% snowmaking coverage. The resort’s mountaintop village offers a variety of nightlife, dining and retail options. Snowshoe was named #1 Overall Ski Resort and #1 for Nightlife in the Mid-Atlantic by OnTheSnow.com, a popular skiing website, in 2012. 

Blue Mountain Ski Resort (operating since 1941), of which we own a 50% equity interest, is located in Ontario, approximately 90 miles northwest of Toronto’s approximately 5.6 million residents. With 281 skiable acres and snowmaking on 93% of trails, Blue Mountain is both the largest and most popular resort in Ontario. Blue Mountain also operates a year round conference center and offers a suite of summer amenities, including an 18-hole golf course, an open-air gondola, a mountain biking facility, a waterfront park and a mountain roller coaster. 

Mammoth Mountain (operating since 1955), of which we own a 15% equity interest, is located south of Yosemite National Park in California and primarily draws guests from Southern California’s approximately 22.0 million residents. With the highest summit of any California resort, an average snowfall during the ski season of approximately 418 inches and 3,500 skiable acres, Mammoth Mountain (“Mammoth”) is the fourth most popular mountain resort in North America and has one of the longest ski seasons in North America. 

In addition to our portfolio of four-season mountain resorts, we own and operate CMH, North America’s premier heli-skiing adventure company.

 

Canadian Mountain Holidays has been providing heli-skiing trips for the past 50 years and currently provides helicopter-accessed skiing, mountaineering and hiking on 3.1 million powder-filled acres of terrain in British Columbia, which amounts to more skiable terrain than all lift accessed mountain resorts in North America combined. In addition to providing what we believe is an unparalleled skiing and backcountry experience in North America, CMH provides accommodation, service and dining at its 11 lodges, nine of which are owned by us. During fiscal 2013, CMH earned approximately $1,700 of revenue per guest night, with repeat visitors accounting for the majority of CMH’s guests. In support of CMH’s skiing, guiding and hospitality operations, we own 40 helicopters and operate a helicopter maintenance, repair and overhaul (“MRO”) business. Each ski season, we lease our fleet of helicopters to Alpine Helicopters, Inc. (“Alpine Helicopters”), which acts as the exclusive provider of flight services to CMH. CMH’s integrated operating model enables us to scale the business and increase guest visits with limited reliance on third party providers. In addition, to more efficiently utilize our aircraft and CMH pilots year round, we provide heli-hiking, fire suppression and utility services during the summer months. By utilizing the same pilots each ski season who have an average of over 7,000 hours of experience flying in the high alpine and who possess extensive knowledge of the terrain, we believe CMH is able to provide a more consistent guest experience. With CMH’s industry leading reputation and the rising popularity of adventure travel, we expect to grow our adventure travel offerings both within heli-skiing and beyond.  

Certain of our mountain resorts and CMH operate on federal or Crown land or land owned by other governmental entities pursuant to the terms of governmental permits, leases or other agreements. See “Our Business—

 

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Properties.” Alpine Helicopters employs all of the pilots who fly the helicopters in the CMH land tenures. We own a 20% equity interest in Alpine Helicopters, but consolidate Alpine Helicopters in our financial statements because Alpine Helicopters is substantially dependent on us as a result of leasing its entire helicopter fleet from us. See “Our Business—Business Operations—Adventure.”

 

Prior to 2010, we were actively engaged in the development of resort real estate. As a result, we accumulated a portfolio of more than 1,150 acres of core development parcels surrounding the bases of our Steamboat, Winter Park, Tremblant, Stratton and Snowshoe resorts, much of which is located adjacent or proximate to the ski trails, including ski-in ski-out parcels. See “Our Business—Business Operations—Real Estate.” We believe that our real estate platform and expertise will enable us to capitalize on improving economic conditions related to commercial and residential real estate and create substantial value through future development of our core entitled land. While we do not have any specific plans for the development of our core entitled land, we are focused on designing strategies for future development of this land in concert with planning for on-mountain and base village improvements. In addition to our core land holdings and development planning, we maintain the capability to manage, market and sell real estate through IRCG, our vacation club business, IHM, which manages condominium hotel properties in Maui, Hawaii and in Mammoth Lakes, California, and Playground, our residential real estate sales and marketing business.

 

Our Strengths

 

Iconic, Market Leading Mountain Resorts and North America’s Premier Mountain Adventure Company. Our portfolio of mountain resorts offers distinctive experiences at some of North America’s most popular destinations. We have invested heavily in the development of lifts, trails, snowmaking capabilities and pedestrian villages with a large bed base and a variety of retail and dining options at our mountain resorts. These investments have established our resorts as the market leaders they are today. We are one of the largest mountain resort companies in North America based on skier visits and own CMH, the largest heli-skiing business in North America. CMH’s operating area encompasses 3.1 million acres of high alpine terrain across British Columbia, which we believe offers an unparalleled skiing and backcountry experience. Repeat visitors accounted for the majority of CMH’s guests during fiscal 2013, a testament to the overall experience. With its global brand, portfolio of terrain access, collection of 11 lodges and differentiated aviation support, CMH is North America’s leading heli-skiing platform and is positioned to further grow within the adventure travel industry.

 

Geographically Diversified Portfolio. We benefit from significant diversity in our asset mix, geographic footprint and customer base. Our ownership of mountain resorts, adventure travel assets and real estate provides us geographic and operational diversification, which we believe affords us a strong degree of financial stability and resiliency through varying economic and weather-related conditions. Our mountain resorts are dispersed throughout North America, with locations in the Eastern United States, the Rocky Mountains and Canada. During fiscal 2013, no single resort accounted for more than 16% of our total revenue. In addition, our resorts are located within convenient driving distance to large metropolitan areas with high concentrations of affluent skiers and major airports, such as New York City, Boston, Washington D.C., Pittsburgh, Denver, Montreal and Toronto. This provides us a strong base of regional and destination visitors, which we believe helps reduce our financial exposure to any single geographic region as weather patterns and economic conditions can vary across regions. We believe that this is a differentiating factor from our competitors, many of whom have more geographically concentrated businesses.

 

Strong Competitive Position with High Barriers to Entry. We operate or have an ownership interest in three of the top 10 mountain resorts in the United States as measured by skier visits. We also operate or have an ownership interest in what we believe are two of the top three mountain resorts in Canada as measured by skier visits. Given the significant barriers to entry to new ski resort development in North America resulting from the limited number of remaining suitable sites, the difficulty in obtaining necessary government permits and the significant capital required for development and construction, we believe our iconic mountain resorts will continue to capture a growing share of industry revenues.

 

Customer Base with Significant Discretionary Income. We generally attract a more affluent customer than many other leisure activities, such as theme parks and other attractions. In our Mountain segment, our average revenue per visit was in excess of $107 during fiscal 2013. In our Adventure segment, our average revenue per CMH Guest Night was approximately $1,700 during fiscal 2013. We believe our affluent customer base is more resilient

 

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than the average consumer during an economic downturn. In addition, given the quality of our assets and our affluent customer base, we believe that there is a long-term opportunity to increase revenues through pricing. As our target market continues to live longer, active lives, we believe that we are well positioned to capitalize on increased demand for active, adventure oriented travel experiences.

 

Recurring and Stable Revenue. We have loyal guests who visit our resorts frequently every year. Many of these guests purchase season passes or frequency products and either own real estate at our resorts or are potential future buyers of vacation real estate. Season pass and frequency product revenue contributed $42.5 million, $45.2 million and $48.0 million to lift revenues for fiscal 2011, 2012 and 2013, respectively, and represented 30.7%, 34.4% and 33.2% of our lift revenues during these respective fiscal years. Season pass and frequency product revenue has grown at a compound annual growth rate (“CAGR”) of 6.3% over the three year period ended June 30, 2013. Moreover, 69.8% of our fiscal 2013 season pass holders owned season passes at our resorts during prior ski seasons, representing a strong source of recurring cash flow. This source of recurring and stable revenue reduces our sensitivity to economic conditions and weather, and provides a base line of predictability that allows us to focus on pursuing growth and value creating opportunities for our businesses.

 

Expanding Margins and Strong Cash Flows. Our focus on improving the operating performance of each of our mountain resorts has allowed us to improve our operating profit margins. Additionally, our portfolio provides us with significant economies of scale, creating operational synergies across our resorts and enabling us to consolidate our sales and marketing, human resources, accounting, finance, legal, procurement, insurance and technology departments. Given our ability to both grow our existing resorts and to acquire new resorts without a proportionate increase in our administration functions, we believe we have the ability to increase our profitability as we scale our operations. We also believe we will be positioned to benefit significantly from this operating leverage through any investments and acquisitions that we undertake.

 

Seasoned and Experienced Management Team. Our management team, which is comprised of professionals with wide ranging experience in resort, real estate and leisure operations, has significant experience and a proven track record of mountain resort management and growing companies through acquisitions. Our Chief Executive Officer has over 25 years of experience in our industry. Our management team has demonstrated its ability to adapt and adjust the business during economic downturns and to grow the business. In addition, our management team has extensive experience in identifying and evaluating businesses for acquisition, performing in-depth due diligence, negotiating with owners and management, and structuring, financing and closing acquisition transactions. We have also attracted and retained qualified, dedicated resort chiefs at each of our resorts. Our resort chiefs have an average of 11 years of service with us and 26 years of experience in the ski industry. We believe that the experience of our management team is a significant contributor to our operating performance.

 

Growth Strategies

 

Our strategies to grow our businesses and increase our profitability include the following:

 

Continue to Improve Operating Efficiency and Margins. We continue to focus on driving financial improvement through a variety of cost savings initiatives. To identify and realize cost savings across our portfolio, we have centralized many functions such as our sales and marketing, human resources, accounting, finance, legal, procurement, insurance and technology departments. We believe this strategy enables us to achieve cost and pricing efficiencies as well as leverage the experience of senior management in operational and strategic decisions. We will continue to centralize additional support functions where there is further opportunity to benefit from economies of scale in cost and administration.

 

Continue to Grow our Core Mountain Operations and Profitability. We believe there are significant opportunities to grow our core business by providing our guests new, differentiated experiences and enhanced service offerings. We intend to grow our core mountain operations and profitability as follows:

 

Targeted growth capital investments. We believe visitation at our mountain resorts will increase as a result of our recent investments in lift and snow-making improvements, dining and lodging facilities, and new terrain to enhance the guest experience. To maximize visitation and utilization of our assets during off-peak periods, we are developing new recreational activities, attractions and amenities at our mountain resorts, including adding night skiing at Steamboat as well as mountain biking, zip lines and mountain coasters at our resorts.

 

 

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Enhance pre-sold product offerings. We have grown season pass and frequency product revenue at a 6.3% CAGR over the past three years by offering a wider variety of pass products to appeal to more segments of the market. For example, at certain of our resorts we have introduced passes that are meant to appeal to particular segments of the market, such as children, young professionals and members of the military. We intend to build on this success by offering innovative lift pass products, lodging, bundled vacation packages and special promotions to drive incremental pre-sold revenue.

 

Maximize cross-selling opportunities. We intend to leverage our ability to offer guests a mix of retail, rental equipment, dining, lodging, ski school and various forms of family entertainment. We control prime on-mountain and base area locations giving us a distinct advantage in cross-selling our products and services by leveraging our ability to communicate with visitors during the planning stage of their visit through our call centers and websites. We are also focused on cross-selling our existing destination guests, season pass holders, second home owners and vacation club members on new experiences within our portfolio of resorts and at CMH. For example, we believe that our customers from the Eastern United States and Canada are excellent prospects for experiences at our western ski resorts and CMH. We currently offer pass products that are valid at multiple resorts and intend to expand our suite of multi-resort products in the future.

 

 Drive Growth in our Adventure Segment. With the growing interest in both backcountry powder skiing and experiential adventure travel, we believe we are well positioned to grow our Adventure segment both organically and through accretive acquisitions. While we have no immediate plans to do so, we have the ability to expand our existing lodges and build additional lodges within CMH’s expansive terrain. The recent evolution of ski technology, such as wider skis, allows skiers with less skill and fitness to successfully navigate backcountry skiing, significantly expanding our addressable market. Through additional improvements in sales and marketing and the introduction of additional backcountry offerings that we currently do not offer, such as snowcat-accessed skiing, small group private heli-skiing and ski touring, we believe we have the opportunity to attract customers from new markets and demographics. Through our CMH operations, we have developed expertise in providing complex adventure experiences and marketing to affluent adventurous travelers. We believe these core competencies can be transferred to other complimentary adventure experiences. Given the fragmentation in the adventure travel industry, we believe there are numerous acquisition opportunities to further drive growth in our Adventure segment.  

 

Pursue Strategic Acquisitions and Operating Relationships. The North American ski industry is highly fragmented, with approximately 753 ski areas in North America, of which fewer than 10% are owned by multi-resort operators who operate four or more ski resorts. The adventure travel industry is similarly fragmented. We intend to evaluate acquisition opportunities where the opportunity would provide a strategic fit within our existing portfolio of businesses. We believe that opportunistically acquiring additional mountain resorts that are proximate to our existing resorts will enable us to enhance product and operational synergies. Additionally, we believe that acquiring resorts in geographies outside our current operating footprint and acquiring additional adventure travel businesses will enable us to expand into new markets and further mitigate our exposure to any single geographic region. As a multi-resort operator, we believe we are well positioned to take advantage of economies of scale in administration, purchasing power and access to capital and leverage our ability to offer multi-resort products. In addition, we intend to evaluate “capital light” opportunities such as managing third-party resort assets and entering into real estate development partnerships.

 

Capitalize on “Home Team” Real Estate Advantage. We own more than 1,150 acres of land available for development at our mountain resorts, much of which is adjacent or proximate to the ski trails at the resorts, including ski-in and ski-out parcels. As the “home team” operator in our resort communities, we have the competitive advantage of being able to add additional value to real estate by bundling it with resort amenities and products, something that other developers cannot do at our resorts, since we control many of the amenities and products offered at our resorts. We believe that we can generate significant profits from the future development of our core entitled land at our resorts. Additionally, to the extent that future development increases the number of units and beds at our resorts, we believe that the extra lodging capacity will support incremental visitor growth and profits.  

 

Transactions to Occur Prior to the Consummation of this Offering

 

The Restructuring 

Prior to the consummation of this offering, through a series of restructuring transactions, Cayman L.P. will cause its indirect subsidiaries to contribute 100% of the equity interests in both Intrawest U.S. Holdings Inc. (“Intrawest

 

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U.S.”) and Intrawest ULC (“Intrawest Canada”) to           , an indirect subsidiary of Intrawest Resorts Holdings, Inc., the issuer of the common stock offered hereby. In connection with these restructuring transactions, all of our notes payable to partners, together with all accrued and unpaid interest thereon, will be exchanged for equity or effectively modified to release us and our subsidiaries as guarantors with respect to such loans. As of June 30, 2013, we had notes payable to partners, including accrued and unpaid interest, of approximately $1.4 billion. The transactions described in this paragraph form part of the “Restructuring” described under “Unaudited Pro Forma Condensed Consolidated Financial Information.”

 

See “Unaudited Pro Forma Condensed Consolidated Financial Information” and “Description of Certain Indebtedness—Notes Payable to Partners.”

 

The chart below summarizes our corporate structure after giving effect to the consummation of the Restructuring and this offering. Intrawest Resorts Holdings, Inc. was incorporated in Delaware on August 30, 2013 for the purpose of effecting this offering.

 

 

 

 

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The Refinancing

 

As of June 30, 2013, we were a party to a First Lien Credit Agreement with a syndicate of lenders providing for a $450.0 million First Lien Term Loan, a $20.0 million First Lien Revolver and a $55.0 million First Lien LC Facility. As of June 30, 2013, no borrowings were outstanding under the First Lien Revolver and letters of credit in the amount of $52.4 million had been issued and were outstanding under the First Lien LC Facility. 

 

As of June 30, 2013, we were also a party to a Second Lien Credit Agreement with a syndicate of lenders providing for a $125.0 million Second Lien Term Loan.

 

Prior to the consummation of this offering, we expect one of our subsidiaries to enter into a new first lien credit agreement (the “New Credit Agreement”). At the time the New Credit Agreement is entered into, an affiliate of Fortress will contribute $50.0 million to us. Borrowings under the New Credit Agreement, together with cash on hand and the funds contributed to us by an affiliate of Fortress, will be used to refinance and replace the borrowings under the First Lien Credit Agreement and the Second Lien Credit Agreement (the “Refinancing”). For a description of the New Credit Agreement, see “Description of Certain Indebtedness—Third-Party Long-Term Debt—New Credit Agreement.”

 

See also “Unaudited Pro Forma Condensed Consolidated Financial Information” and “Description of Certain Indebtedness—Third-Party Long-Term Debt.”

 

Corporate Information

 

Our executive offices are located at 1621 18th Street, Suite 300, Denver, Colorado 80202, and our telephone number is (303) 749-8200. Our website address is www.intrawest.com. The information on our website is not a part of this prospectus.

 

Our Principal Stockholder

 

Immediately following the completion of this offering, the Initial Stockholder will own approximately         % of our outstanding common stock, or         % if the underwriters’ over-allotment option is fully exercised. This level of share ownership is sufficient to control the vote on matters and transactions requiring stockholder approval. The Initial Stockholder is owned primarily by Fortress. See “Risk Factors—Risks Related to Our Organization and Structure” and “Principal and Selling Stockholder.” Pursuant to the Stockholders Agreement (as defined below), Fortress and certain of its affiliates and permitted transferees may designate directors for nomination and election to our board of directors. Pursuant to these provisions, Fortress and certain of its affiliates and permitted transferees have the ability to appoint a majority of the members of our board of directors, plus one director, for so long such stockholders continue to beneficially own, directly or indirectly, at least       % of our issued and outstanding common stock (including Fortress’ proportionate interest in shares of our common stock held by the Initial Stockholder).   

 

Risk Factors

 

There are a number of risks that you should carefully consider before making an investment decision regarding this offering. These risks are discussed more fully in the section entitled “Risk Factors” following this prospectus summary. These risks include, but are not limited to:

 

a prolonged weakness in general economic conditions;

 

lack of adequate snowfall and unfavorable weather conditions;

 

adverse events that occur during our peak operating periods combined with the seasonality of our business;

 

the occurrence of natural disasters;

 

the high fixed cost structure of our business;

 

risks associated with not owning all of the land on which we conduct our operations, including the loss of, or inability to renew, our governmental permits and leases;

 

risks related to the fact that we are not the sole property manager at certain of our real estate developments;

 

our ability to complete real estate development projects and achieve the anticipated financial benefits from such projects; and

 

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competition with similar businesses owned by Fortress and its affiliates and the loss of corporate opportunities due to the corporate opportunity provisions in our restated certificate of incorporation.

 

As a result of these risks and the other risks discussed in the section entitled “Risk Factors,” there is no guarantee that we will experience growth and improving profitability in the future. Similarly, there can be no assurance that the number of visitors to our mountain resorts and CMH, including season pass holders at our mountain resorts, will remain constant or increase in future years.

 

Implications of Being an Emerging Growth Company

 

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified exemptions from various requirements that are otherwise applicable generally to public companies in the United States. These provisions include:

 

reduced compensation disclosure requirements;

 

an exemption to include in an initial public offering registration statement less than five years of selected financial data; and

 

an exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting.

 

The JOBS Act also permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies, and exempts an emerging growth company such as us from Section 14A(a) and (b) of the Securities Exchange Act of 1934 (the “Exchange Act”), which require companies to hold shareholder advisory votes on executive compensation and golden parachute compensation.

 

We will remain an emerging growth company until the earliest of:

 

the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion;

 

the last day of our fiscal year following the fifth anniversary of the completion of this offering;

 

the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or

 

the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.

 

We have availed ourselves in this prospectus of the reduced reporting requirements described above with respect to compensation disclosure requirements and selected financial data. As a result, the information that we provide stockholders may be less comprehensive than what you might receive from other public companies. When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. We have not elected to avail ourselves of the exemption that allows emerging growth companies to extend the transition period for complying with new or revised financial accounting standards. This election is irrevocable.

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Summary Historical and Unaudited Pro Forma Condensed 

Consolidated Financial and Operating Information

 

The following summary historical consolidated financial information for the years ended June 30, 2011, 2012 and 2013 and as of June 30, 2012 and 2013 has been derived from the audited consolidated financial statements of Cayman L.P. included elsewhere in this prospectus.

 

The following unaudited pro forma condensed consolidated financial information as of and for the year ended June 30, 2013 gives effect to the Restructuring, the Refinancing and this offering (the “Pro Forma Transactions”). The unaudited pro forma condensed consolidated financial information is based on available information and assumptions that we believe are reasonable, is for illustrative and informational purposes only and should not be considered representative of our future financial condition or results of operations. See “Unaudited Pro Forma Condensed Consolidated Financial Information” for a description of the adjustments reflected in the pro forma condensed consolidated financial information.

 

Prior to the collapse in the housing markets in late 2007 and the global financial crisis that followed, we were actively engaged in large scale development and sales of resort real estate, primarily in North America. In light of the then prevailing market conditions, we ceased new development activities in late 2009. As a result, we were left with a portfolio of real estate assets, high leverage levels and litigation initiated by purchasers of resort real estate seeking to rescind their purchase obligations or otherwise mitigate their losses. This confluence of factors had a material impact on our consolidated financial results for the fiscal years presented below. Through a series of debt refinancings, cost saving initiatives and divestitures of non-core assets, we believe we have streamlined our operations. As of September 30, 2013, we have divested substantially all of our legacy real estate assets and have settled the majority of litigation claims stemming from our pre-2010 development and sales activities. Although the effects of our pre-2010 legacy real estate development and sales activities on our consolidated financial results will continue in future periods, we expect that these effects will continue to diminish over time. After giving effect to the Refinancing and the Restructuring, we believe our financial results in future periods will be materially different from those reflected in the historical consolidated financial information appearing in this prospectus.

 

You should read the following summary historical and unaudited pro forma condensed consolidated financial and operating information in conjunction with the information appearing under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Condensed Consolidated Financial Information” in this prospectus, and in conjunction with the audited consolidated financial statements of Cayman L.P. and the related notes appearing elsewhere in this prospectus.

 

   Historical  Pro Forma
   Year Ended June 30,  Year Ended
June 30,
2013
    2011(1)   2012    2013      
                                 
    (in thousands, except operating statistics)
Statement of Operations Data:                    
Revenues                    
Mountain   $322,194   $310,765   $339,003             
Adventure    96,693    109,496    113,622      
Real Estate    61,165    61,439    64,726      
Total reportable segment revenues    480,052    481,700    517,351      
Legacy, non-core and other(2)    79,471    31,747    7,056      
Total revenues    559,523    513,447    524,407      
Operating expenses(2)    504,005    453,187    448,944      
Depreciation and amortization    76,371    57,655    58,342      
Loss on disposal of assets(1)   26,196    9,443    12,448      
Impairment of long-lived assets    12,140    782    143      
Impairment of real estate    73,230    8,137    1,052      
Goodwill impairment    64,097    3,575    —        
Income (loss) from operations    (196,516)   (19,332)   3,478      
Interest income    9,162    7,467    6,630      
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   Historical  Pro Forma
   Year Ended June 30,  Year Ended
June 30,
2013
    2011(1)   2012    2013      
                                       
    (in thousands, except operating statistics)
Statement of Operations Data:    
Interest expense on third-party debt    (143,463)   (135,929)   (98,437)     
Interest expense on notes payable to partners   (160,943)   (195,842)   (236,598)     
Earnings (loss) from equity method investments(3)    8,299    538    (5,147)     
Gain on disposal of equity method investments(1)    —      —      18,923      
Loss on extinguishment of debt(4)   —      —      (11,152)     
Other income (expense), net(5)    (2,021)   1,199    1,973      
Loss from continuing operations before income taxes    (485,482)   (341,899)   (320,330)     
Income tax (benefit) expense    6,555    (5,836)   (23,616)     
Loss from continuing operations    (492,037)   (336,063)   (296,714)     
Loss from discontinued operations, net of tax    (6,469)   —      —        
Net loss    (498,506)   (336,063)   (296,714)     
Loss (earnings) attributable to noncontrolling interest    (361)   —      757     
Net loss attributable to Cayman L.P.   $(498,867)  $(336,063)  $(295,957)     
                     
Adjusted EBITDA(6)   $94,370   $92,057   $105,260      
                     
Operating Statistics:                    
Skier Visits(7)    3,192,388    2,758,970    3,146,119      
Mountain Segment Revenue Per Visit(8)   $100.93   $112.64   $107.75      
ETP(9)   $43.34   $47.65   $45.92      
CMH Guest Nights(10)    34,479    37,829    36,237      
CMH RevPGN(11)   $1,670   $1,650   $1,693      
                     
Cash Flow Data:                    
Net cash provided by operating activities   $21,140   $43,390   $41,765      
Net cash provided (used) by investing activities   $514,497   $(21,286)  $105,407      
Net cash used by financing activities   $(572,797)  $(41,518)  $(133,683)     

   Historical  Pro Forma
   As of June 30,  As of
June 30,
   2012  2013  2013
                            
Balance Sheet Data:  (in thousands)
Cash and cash equivalents   $46,908   $59,775             
Real estate held for development(12)   $193,806   $164,916      
Total assets   $1,342,793   $1,121,600      
Third-party long-term debt (including current portion)   $736,081   $588,863      
Notes payable to partners (including current portion)   1,109,005    1,358,695      
   Total long-term debt (including current portion)   $1,845,086   $1,947,558      
 
(1)Includes the operations of Whistler Blackcomb prior to their divestiture in November 2010. We sold our interests in the assets of Whistler Blackcomb to Whistler Blackcomb Holdings, Inc. (“Whistler Holdings”) in November 2010 and recognized a loss of $24.4 million. As part of the sale proceeds, we received an equity investment of approximately 24% in Whistler Holdings. Fiscal 2011 includes legacy, non-core and other revenues, operating expenses and depreciation and amortization of $38.6 million, $51.1 million and $10.7 million, respectively, related to Whistler Blackcomb. In December 2012, we sold our investment in Whistler Holdings and recorded a $17.9 million gain related to this disposition.

 

(2)See notes 6(f) and 6(g). See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Legacy, Non-Core and Other Items.”

 

(3)See note 6(b).

 

(4)Represents the loss recognized on the extinguishment of our senior debt facilities in December 2012.
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(5)Other income (expense), net, primarily includes gains or losses on currency rate fluctuations and other non-operating expenses that management does not believe are representative of the underlying performance of our ongoing operations.
(6)Adjusted EBITDA is a non-GAAP performance measure. Our board of directors and management team focus on Adjusted EBITDA as a key performance and compensation measure. Adjusted EBITDA assists us in comparing our performance over various reporting periods because it removes from our operating results the impact of items that our management believes do not reflect our core operating performance. The compensation committee of our board of directors will determine the annual variable compensation for certain members of our management team based, in part, on Adjusted EBITDA. In addition, we expect that Adjusted EBITDA will be a material component of certain financial covenants in the New Credit Agreement and will be an important metric for investors to assess our ability to comply with those covenants.

Adjusted EBITDA is not a substitute for net income (loss), income from continuing operations, cash flows from operating activities or any other measure prescribed by GAAP. There are limitations to using non-GAAP measures such as Adjusted EBITDA. Although we believe that Adjusted EBITDA can make an evaluation of our operating performance more consistent because it removes items that do not reflect our core operations, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA to compare the performance of those companies to our performance. Adjusted EBITDA should not be considered as a measure of the income generated by our business or discretionary cash available to us to invest in the growth of our business. Our management compensates for these limitations by reference to our GAAP results and using Adjusted EBITDA as a supplemental measure. 

We remove the following items from net loss attributable to Cayman L.P. to get to Adjusted EBITDA: 

interest expense, net;
income tax expense or benefit;
depreciation and amortization;
impairments of goodwill, real estate and long-lived assets;
gains and losses on disposal of assets;
earnings and losses from equity method investments;
gains and losses on disposal of equity method investments;
gains and losses on extinguishment of debt;
other expense, net;
discontinued operations, net of tax;
legacy and other non-core expenses, net; and
other operating expenses, which include restructuring charges and associated severance expenses, non-cash compensation and other items, including gains, losses, fees, revenues and expenses of transactions which management believes are not representative of the underlying performance of our ongoing operations and which we will be permitted to exclude from the calculation of Adjusted EBITDA under the New Credit Agreement.

For purposes of calculating Adjusted EBITDA, we also add to net loss attributable to Cayman L.P. our pro rata share of earnings before interest, taxes, depreciation and amortization (“EBITDA”) related to equity method investments included within our reportable segments, which include Blue Mountain Resorts Limited (Mountain), Chateau M.T. Inc. (Real Estate) and Mammoth Hospitality Management, LLC (Real Estate). We believe the EBITDA from these investments is representative of the underlying performance of our ongoing operations. Our pro rata share of EBITDA is calculated based on our economic ownership percentage of the applicable equity method investment. 

Finally, in calculating Adjusted EBITDA, we adjust net loss attributable to Cayman L.P. to include net income and losses attributable to noncontrolling interests within our reportable segments, and then remove Adjusted EBITDA attributable to the noncontrolling interest so that only our share of Adjusted EBITDA is captured within Adjusted EBIDTA. Alpine Helicopters (Adventure) was the only consolidated entity within our reportable segments with a noncontrolling interest during the periods presented. All revenues and expenses of noncontrolling interests not within our reportable segments are removed from net loss attributable to Cayman L.P. to get to Adjusted EBITDA. 

The following table reconciles net loss attributable to Cayman L.P. to Adjusted EBITDA for the periods presented: 

   Year Ended June 30,
   2011  2012  2013
   (in thousands)
Net loss attributable to Cayman L.P.  $(498,867)  $(336,063)  $(295,957)
Interest expense, net(a)    300,016   328,957   333,208
Income tax expense (benefit)    6,555   (5,836)   (23,616)
Depreciation and amortization    76,371   57,655   58,342
Impairments of goodwill, real estate and long-lived assets    149,467   12,494   1,195
Loss on disposal of assets    26,196   9,443   12,448
(Earnings) loss from equity method investments(b)    (8,299)   (538)   5,147
Gain on disposal of equity method investments(c)    —      —      (18,923)
Loss on extinguishment of debt    —      —      11,152
Other (income) expense, net(d)   2,021   (1,199)   (1,973)
(Loss) earnings attributable to noncontrolling interest(e)    361   —      (757)
Discontinued operations, net of tax    6,469   —      —   
Legacy and other non-core expenses, net(f)    19,707   13,762   12,878
Other operating expenses(g)    4,039   4,989   4,416
Pro rata share of EBITDA related to equity method investments(h)    10,334   8,393   8,932
Adjusted EBITDA attributable to noncontrolling interest(i)    —      —      (1,232)
Adjusted EBITDA  $94,370  $92,057  $105,260
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(a)Includes interest expense on third party debt and on notes payable to partners, net of interest income (other than interest income earned from receivables related to our IRCG operations).

(b)Includes (earnings) loss from our equity method investments, including Blue Mountain Resorts Limited ($2.7 million, $1.7 million and $2.3 million in fiscal 2011, 2012 and 2013, respectively), Chateau M.T. Inc. ($0.1 million, $0.4 million and $(0.1) million in fiscal 2011, 2012 and 2013, respectively), Mammoth Hospitality Management, LLC ($(0.5) million, $(0.1) million and $(0.4) million in fiscal 2011, 2012 and 2013, respectively) and MMSA Holdings, Inc., Whistler Holdings and other non-core equity method investments ($6.0 million, $(1.5) million and $(6.9) million in fiscal 2011, 2012 and 2013, respectively).

(c)Fiscal 2013 includes a $17.9 million gain on disposal of our equity method investment in Whistler Holdings in December 2012, and a $1.0 million gain on the sale of our partnership interest in Maui Beach Resort, L.P. in November 2012.

(d)Other (income) expense, net, primarily includes gains or losses on currency rate fluctuations and other non-operating expenses that management does not believe are representative of the underlying performance of our ongoing operations.

(e)

Fiscal 2011 includes $0.4 million of net income attributable to noncontrolling interest in Tower Ranch Developments Partnership (“Tower Ranch”). For purposes of calculating Adjusted EBITDA, we include the net income attributable to noncontrolling interest in Tower Ranch and then remove all income and expenses relating to Tower Ranch from our calculation of Adjusted EBITDA. This adjustment is made in legacy and other non-core, expenses, net. As a result, we have removed all revenues and expenses relating to Tower Ranch from Adjusted EBITDA.

 

Fiscal 2013 includes $(0.8) million of net loss attributable to noncontrolling interest in Alpine Helicopters. We hold a 20% equity interest in Alpine Helicopters. For purposes of calculating Adjusted EBITDA, we adjust net loss attributable to Cayman L.P. to include the net loss attributable to noncontrolling interest in Alpine Helicopters and then remove the Adjusted EBITDA attributable to noncontrolling interest in Alpine Helicopters. Adjusted EBITDA attributable to noncontrolling interest in Alpine Helicopters in fiscal 2013 was $1.2 million. See note (i) below. With this adjustment, only 20% of the Adjusted EBITDA in Alpine Helicopters is captured within Adjusted EBITDA. 

(f)The table below provides a breakdown of items included in legacy and other non-core, expenses, net, for fiscal 2011, 2012 and 2013. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Legacy, Non-Core and Other Items.”

   Year Ended June 30,
   2011  2012  2013
   (in thousands)
Legacy real estate carrying costs and litigation  $(11,193)  $(9,976)  $(8,378)
Divested non-core operations   (8,035)   (3,664)   (3,168)
Remaining non-core operations   (479)   (122)   (1,332)
Legacy and other non-core expenses, net   $(19,707)  $(13,762)  $(12,878)

_________________

(g)Reflects adjustments for other items that are included in operating expenses in our GAAP financial statements. Fiscal 2011 includes $1.9 million of non-cash compensation and $1.6 million of severance charges attributable to the relocation of our corporate headquarters. Fiscal 2012 includes $0.6 million of non-cash compensation, $2.7 million of severance charges attributable to the relocation of our corporate headquarters and $0.9 million of restructuring charges relating to the restructuring of Alpine Helicopters. Fiscal 2013 includes restructuring and severance charges of $3.4 million relating to Alpine Helicopters and $0.2 million of non-cash compensation. Fiscal 2011, 2012 and 2013 also includes $0.5 million, $0.8 million and $0.8 million, respectively, of other operating expenses that management does not believe are representative of the underlying performance of our ongoing operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Legacy Non-Core and Other Items.”
(h)Includes Blue Mountain Resorts Limited ($7.7 million, $5.9 million and $6.9 million in fiscal 2011, 2012 and 2013, respectively), Mammoth Hospitality Management, LLC ($0.9 million, $0.4 million and $0.3 million in fiscal 2011, 2012 and 2013, respectively), and Chateau M.T. Inc. ($1.7 million, $2.1 million and $1.7 million in fiscal 2011, 2012 and 2013, respectively). Represents our pro rata share of EBITDA from these equity method investments based on our economic ownership percentage during the relevant period. The pro rata share of revenue that corresponds to the pro rata share of EBITDA from equity method investments was as follows: Blue Mountain Resorts Limited ($33.3 million, $32.2 million and $36.3 million in fiscal 2011, 2012 and 2013, respectively), Mammoth Hospitality Management, LLC ($3.7 million, $3.3 million and $4.4 million in fiscal 2011, 2012 and 2013, respectively), and Chateau M.T. Inc. ($12.5 million, $13.3 million and $13.2 million in fiscal 2011, 2012 and 2013, respectively). These revenues are not included within our consolidated revenues.

(i)Represents Adjusted EBITDA attributable to the noncontrolling interest in Alpine Helicopters. Our consolidated revenue includes 100% of Alpine Helicopters revenue. The pro rata share of revenue that corresponds to the Adjusted EBITDA attributable to the noncontrolling interest in Alpine Helicopters was $13.8 million in fiscal 2013.

(7)A Skier Visit represents an individual’s use of a paid or complimentary ticket, frequency card or season pass to ski or snowboard at our Steamboat, Winter Park, Tremblant, Stratton and Snowshoe resorts for any part of one day.

 

(8)Mountain Segment Revenue Per Visit is defined as total revenue of our Mountain segment for a given period divided by total Skier Visits during such period.

 

(9)Effective ticket price, or “ETP,” is calculated by dividing lift revenue for a given period by total Skier Visits during such period.

 

(10)CMH Guest Nights represents the number of paid nights skiing or hiking guests spend at our CMH lodges for a given period.

 

(11)CMH RevPGN is total CMH revenue for a given period divided by the total number of CMH Guest Nights during such period.

 

(12)Real estate held for development includes land and infrastructure assets, net of impairments to fair value, intended to be used in the future development of real estate assets for sale and amenity enhancement at our resorts.
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The Offering

 

Common stock we are offering             shares
Common stock the Initial Stockholder is offering             shares
Common stock to be issued and outstanding after this offering             shares  (            shares  if the underwriters exercise their over-allotment option in full).
Common stock to be owned by the Initial Stockholder after this offering             shares  (            shares  if the underwriters exercise their over-allotment option in full).
Use of proceeds We estimate that the net proceeds to us from the sale of shares in this offering, after deducting underwriting discounts and offering expenses payable by us, will be approximately $              million. Our net proceeds will increase by approximately $              million if the underwriters’ over-allotment option is exercised in full. We intend to use the net proceeds to us from this offering for working capital and other general corporate purposes, which may include potential investments and acquisitions. See “Use of Proceeds.” We will not receive any proceeds from the sale of our common stock by the Initial Stockholder, including any shares sold by the Initial Stockholder pursuant to the underwriters’ over-allotment option.
Dividend policy We do not currently anticipate paying dividends on our common stock. Any declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors, including our financial condition, our operating results, our current and anticipated cash needs, the impact on our effective tax rate, our indebtedness, legal requirements and other factors that our board of directors deems relevant.  Because we are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand and any funds we receive from our subsidiaries. Certain of our debt agreements limit our ability to pay dividends. See “Dividend Policy.”
Risk factors See “Risk Factors” for a discussion of factors you should carefully consider before deciding to invest in our common stock.
Stock exchange symbol We intend to apply to have our common stock listed on the NYSE under the symbol “                 .”

 

 

 

Except as otherwise indicated, all of the information in this prospectus:

 

gives retroactive effect to a         -for-1 stock split to be effected immediately prior to the pricing of the offering;

 

assumes no exercise of the underwriters’ option to purchase up to             additional shares of common stock; and

 

assumes an initial offering price of $         per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus.

 

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Risk Factors

 

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as other information contained in this prospectus, before deciding to invest in our common stock. The occurrence of any of the following risks could materially and adversely affect our business, prospects, financial condition, results of operations and cash flows, in which case the trading price of our common stock could decline and you could lose all or part of your investment.

 

 Risks Related to Our Business

 

Our industry is sensitive to weakness in the economy and we are subject to risks associated with the overall leisure industry.

 

Weak economic conditions in the United States and Canada or elsewhere in the world, including high unemployment and erosion of consumer confidence, could have a material adverse effect on our industry. We provide skiing and mountain adventure experiences with a relatively high cost of participation. An economic downturn could reduce consumer spending on recreational activities, resulting in declines in visits to, and spending at, our mountain resorts and CMH, which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. For example, as a result of economic weakness in Europe in recent years, we saw a decline in European guests at CMH. In addition, we may be unable to increase the price of our lift products or other offerings during an economic downturn despite our history of being successful in raising such prices under a variety of economic conditions.

 

Furthermore, our industry is sensitive to the willingness and ability of individuals to travel. Global or regional events, such as acts of terrorism, the spread of contagious diseases, political events or military conflicts, or increases in commercial airfare or gasoline prices could adversely impact an individual’s willingness or ability to travel to our properties, which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

Our industry is vulnerable to lack of adequate snowfall or unseasonable weather conditions.

 

The ability to attract winter guests to mountain resorts is influenced by adequate snowfall and weather conditions. Warm weather may result in rain, snow melt and inadequate natural snowfall and may render snowmaking wholly or partially ineffective in maintaining skiing conditions. For example, the North American 2011/2012 ski season was marked by some of the lowest natural snowfall amounts in 20 years and we saw a decline in skier visits during the 2011/2012 ski season compared to prior years. Conversely, extreme weather conditions may adversely affect the guest experience or result in lift closures and may also make it difficult for guests to access mountain resorts. The early season snow conditions and skier perceptions of early season snow conditions influence the momentum and success of the overall ski season, including pre-season sales of season passes and frequency cards at our mountain resorts. Although heli-skiing is less susceptible to guest fluctuations due to weather conditions than our mountain resorts, as most heli-skiing guests book their visits significantly in advance of the ski season, CMH remains susceptible to risks related to inclement weather because we provide guests with credits, which may be used during future seasons, if weather conditions prevent guests from reaching the guaranteed amount of vertical feet of skiing. As a result, inclement weather at our CMH sites during one ski season may materially adversely affect our CMH results of operations in future years when the credits are used. In addition, unseasonable weather or rain can adversely affect summer visits to our mountain resorts and heli-hiking sites.

 

Our business is highly seasonal and the occurrence of adverse events during our peak periods could have a material adverse effect on our results of operations and cash flows.

 

Although each of our mountain resorts and CMH operates as a four-season business, we generate the highest revenues during our second and third fiscal quarters, which is the peak ski season. As a result of the seasonality of our business, our mountain resorts and CMH typically experience operating losses during the first and fourth fiscal quarters of each fiscal year.  In addition, throughout our peak quarters, we generate the highest daily revenues on weekends, during the Christmas/New Year’s and Presidents’ Day holiday periods and, in the case of our mountain resorts, during school spring breaks. Furthermore, we sell a significant portion of our season pass products, pre-sold destination packages and CMH trips during our first fiscal quarter. The seasonality of our revenues and our dependence on peak operating and selling periods increases the impact of certain events on our results of operations. The occurrence of any of the other risk factors discussed herein during these peak operating or selling periods could have a disproportionate and material adverse effect on our results of operations and cash flows.

 

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Variations in the timing of peak periods, holidays and weekends may affect the comparability of our results of operations.

 

Depending on how peak periods, holidays and weekends fall on the calendar, in any given year we may have more or less peak periods, holidays and weekends in our second fiscal quarter compared to prior years, with a corresponding difference in our third fiscal quarter. These differences can result in material differences in our quarterly results of operations and affect the comparability of our results of operations.

 

We are vulnerable to the risk of natural disasters, including forest fires, avalanches, landslides, drought and hurricanes.

 

A severe natural disaster, such as a forest fire, avalanche, landslide, drought or hurricane, may not be fully covered by our insurance policies and may interrupt our operations, require evacuations, severely damage our properties and impede access to our properties in affected areas, any of which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. In addition, our ability to attract guests to our properties is influenced by the aesthetics and natural beauty of the outdoor environment where our properties are located. A severe forest fire or other natural disaster could damage our properties or surrounding areas and have a long-term negative impact on guest visitation, as it would take several years for the environment to recover. Our insurance policies may not cover lost revenues due to a decline in visitation caused by damage to our properties or surrounding areas. In recent years, the combination of drought conditions and a pine-beetle epidemic has led to an increase in forest fires in the Western United States, including Colorado.

 

The high fixed cost structure of our businesses can result in significantly lower margins if visitation to our resorts declines.

 

Our profitability is highly dependent on visitation. However, the cost structure of our business has significant components that cannot be eliminated when skier visits decline, including costs related to utilities, information technology, insurance, year-round employees and equipment. The occurrence of other risk factors discussed herein could adversely affect visitation at our resorts and we may not be able to reduce fixed costs at the same rate as declining revenues. If cost-cutting efforts are insufficient to offset declines in revenues or are impracticable, we could experience a material decrease in our margins. Accordingly, our profits may be disproportionately reduced during periods of declining revenues.

 

A disruption in our water supply would impact our snowmaking capabilities and impact our operations.

 

Our operations are heavily dependent upon our access to adequate supplies of water to make snow and otherwise conduct our operations. Our mountain resorts are subject to federal, state, provincial and local laws and regulations relating to water rights. Changes in these laws and regulations may adversely affect our operations. In addition, drought conditions may adversely affect our water supply. At our mountain resorts in Colorado, we own or have ownership or leasehold interests in water rights individually or through stock ownership in ditch and reservoir companies, groundwater wells and other sources, and the availability of water through these sources is subject to change. In addition, the United States Forest Service (the “U.S. Forest Service”) is currently seeking to obtain ownership of certain water rights owned by ski resorts located on U.S. Forest Service land. The U.S. Forest Service may seek to impose limitations on the quantity of water used by a ski area and/or uses to which the water may be put. Our inability to access adequate supplies of water to support our current operations or an expansion of our operations would have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

We face significant competition.

 

Our mountain resorts directly compete with other resorts in their respective local and regional markets, as well as with other major destination resorts. We also compete with other large resort operators for the sale of multi-mountain passes. Competition within the ski resort industry is based on multiple factors, including location, price, weather conditions, the uniqueness and perceived quality of the terrain for various levels of skill and ability, the atmosphere of the base village, the quality of food and entertainment and ease of travel to the resort (including direct flights by major airlines). In our Adventure segment, we face competition from heli-skiing and snowcat operators in Canada and the United States. Within our Real Estate segment, our managed properties compete with rental management companies, locally-owned independent hotels, as well as facilities and timeshare companies that are owned or managed by national and international chains. These properties also compete for convention and conference business across the North American market. Competition within the hotel and lodging industry is generally based on

 

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quality and consistency of rooms, restaurants and meeting facilities and services, attractiveness of locations, availability of a global distribution system, price and other factors. Our competitors may have access to greater financial, marketing and other resources and may have access to financing on more attractive terms than us. As a result, they may be able to devote more resources to improving and marketing their offerings or more readily take advantage of acquisitions or other opportunities. If we are unable to compete successfully, our business, prospects, financial condition, results of operations and cash flows will be materially adversely affected.

 

We are not the sole property manager at our real estate developments.

 

We manage a significant portion of the bed base at our resorts and manage rental properties through our Real Estate segment. An individual that has purchased a condominium in one of our developments is not obligated to use our rental management services and, in recent years, third-party services that assist condominium owners in leasing their units without our involvement have become more prevalent. As a result, we have experienced a decline in the number of condominium owners using our rental management services.

 

In addition, since we are uninvolved in transactions where the condominium owner uses a third-party manager, we are unable to control the quality of the leased units or the guest experience. If guests are unsatisfied, the reputation of the entire development, including units we manage, may be harmed, as most guests do not distinguish between units managed by us and units managed by third parties. If a development’s reputation for a positive guest experience deteriorates, it may become more challenging for us to attract guests to these developments. A decline in guests at a development located at one of our mountain resorts may also lead to a decline in revenues throughout the resort’s business.

 

Changes in consumer tastes and preferences may affect skier visits at our mountain resorts.

 

Our success depends on our ability to attract skiers to our mountain resorts. Changes in consumer tastes and preferences, particularly those affecting the popularity of skiing, and other social and demographic trends could adversely affect visitation at our mountain resorts. Furthermore, a reduction in average household income in some of the areas near our resorts, compared to historic levels, combined with the increasing cost of skiing, may make skiing unaffordable for a large percentage of that population. A significant decline in skier visits compared to historical levels would have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

We operate on government land pursuant to the terms of governmental permits that may be revoked or not renewed.

 

We do not own all of the land on which we conduct our operations. Certain of our mountain resorts and CMH operate on federal or Crown land or land owned by other governmental entities pursuant to the terms of governmental permits, leases or other agreements. In many cases, the permits, leases or other agreements give the applicable agency, including the U.S. Forest Service, the right to review and comment on the construction of improvements in the applicable area and on certain other operational matters. Certain permits, leases or other agreements may also be terminated or modified by the applicable agency for specific reasons or in the event we fail to perform our obligations under the applicable permits, leases or other agreements. In addition, the permits, leases or other agreements may not be renewed. A termination or modification of any of our permits, leases or other agreements could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. Finally, British Columbia may issue additional permits or licenses to third parties related to the land on which CMH operates, and such additional permits and licenses may deteriorate the heli-skiing experience at CMH and increase competition.

 

Our operations are subject to extensive laws, rules, regulations and policies administered by various federal, state, provincial and other governmental authorities.

 

Our operations are subject to a variety of federal, state, provincial and local laws and regulations, including those relating to lift operations, emissions to the air, discharges to water, storage, treatment and disposal of fuel and wastes, land use, remediation of contaminated sites and protection of the environment, natural resources and wildlife. We are also subject to worker health and safety laws and regulations. From time to time our operations are subject to inspections by environmental regulators or other regulatory agencies. Our efforts to comply with applicable laws and regulations do not eliminate the risk that we may be held liable for breaches of these laws and regulations, which may result in fines and penalties or subject us to claims for damages. Liability for any fines, penalties, damages or remediation costs, or changes in applicable laws or regulations, could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

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Our business is capital intensive.

 

We must regularly expend capital to construct, maintain and renovate our properties in order to remain competitive, maintain the value and brand standards of our properties and comply with applicable laws and regulations. We cannot always predict where capital will need to be expended in any fiscal year and capital expenditures can increase due to forces beyond our control. Further, we cannot be certain that we will have enough capital or that we will be able to raise capital by issuing equity or debt securities or through other financing methods on reasonable terms, if at all, to execute our business plan. A lack of available funds for capital expenditures could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

In addition, our ability to construct, maintain and renovate our properties is subject to a number of risks, including:

 

construction delays or cost overruns, including those related to labor and materials;

 

the requirement to obtain zoning, occupancy and other required permits or authorizations;

 

governmental restrictions on the size or kind of development;

 

force majeure events, including forest fires, avalanches, landslides, drought or hurricanes;

 

design defects; and

 

environmental concerns.

 

If we are not able to complete capital projects on schedule, or if our investments fail to improve the properties in the manner that we expect, our ability to compete effectively would be diminished and our business, prospects, financial condition, results of operations and cash flows could be materially adversely affected.

 

We are dependent on significant infrastructure and equipment.

 

Our infrastructure and equipment, including lifts and helicopters, is costly to maintain, repair and replace and is susceptible to unscheduled maintenance. Much of our infrastructure and equipment will eventually need to be replaced or significantly repaired or modernized, which could result in interruptions to our business, particularly if a key lift at one of our mountain resorts were to require repair during a peak period. The potential interruptions and costs associated with lift replacements may be compounded by the fact there are a limited number of lift manufacturers and a significant portion of the lifts at North American mountain resorts were installed at approximately the same time, and thus may be due for replacement at approximately the same time. In certain cases, the cost of infrastructure or equipment repair or replacement may not be justified by the revenues at the applicable property. As a result, we may close a property, or reduce its offerings, if we determine that it is not cost efficient to replace, maintain or repair our infrastructure and equipment at the property.

 

Our future acquisitions or other growth opportunities may not be successful.

 

We actively evaluate potential acquisitions of, and investments in, businesses, properties or assets and we may actively pursue such opportunities from time to time, some of which could be significant. In addition, we intend to evaluate “capital light” opportunities such as managing third-party resort assets and entering into real estate development partnerships. The success of these strategies will depend, in part, on our ability to:

 

identify suitable businesses, properties and assets;

 

negotiate acquisition or other agreements on acceptable terms;

 

complete the transactions within our expected time frame and budget;

 

improve the results of operations of the acquired businesses and properties and successfully integrate their operations into our own; and

 

respond to any concerns expressed by regulators, including antitrust or competition law concerns.

 

We may fail to properly complete any or all of these steps. In many cases, we will be competing for these opportunities with third parties that may have substantially greater financial resources than we do.

 

In addition to facing competition in identifying and consummating successful transactions, acquisitions and other transactions could involve significant risks, including:

 

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our over-valuation of acquired companies, properties or assets;

 

delays in realizing or a failure to realize the benefits, revenues, cost savings and synergies that we anticipate;

 

failure to retain key personnel or business relationships and maintain the reputation of the acquired company, property or asset;

 

the potential impairment of acquired assets;

 

insufficient, or no, indemnification for legal liabilities;

 

the assumption of known or unknown liabilities and additional risks of the acquired businesses or properties, including environmental liabilities; and

 

operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations.

 

We may not be able to obtain financing for acquisitions or other transactions on attractive terms, or at all, and the ability to obtain financing may be restricted by the terms of our outstanding indebtedness or other indebtedness we may incur. In addition, our competitors may be able to obtain financing on more attractive terms than us.

 

Steamboat is highly dependent on subsidized direct air service from major hub airports.

 

Most of Steamboat’s guests fly directly from large hub airports to the Yampa Valley Regional Airport, which is 25 miles from the resort. Each ski season, we enter into agreements with major airlines to fly these routes and provide the airlines with subsidies if passenger volume falls below certain pre-established levels. If the routes prove unprofitable to the airlines and any of these airlines decides to stop service to this airport, Steamboat’s skier visits would be materially adversely affected.

 

We rely on information technology to operate our businesses and maintain our competitiveness, and any failure to adapt to technological developments or industry trends could harm our business.

 

We depend on the use of information technology and systems, including technology and systems used for reservations, point of sale, e-commerce, accounting, procurement, administration and technologies we make available to our guests. We are currently in the process of updating or replacing many of these systems. Delays or difficulties in implementing these new or enhanced systems may keep us from achieving the desired results in a timely manner or at all. Any interruptions, outages or delays in our systems, or deterioration in their performance, could impair our ability to process transactions and could decrease the quality of service that we offer to our guests.

 

Our future success depends on our ability to adapt our infrastructure to meet rapidly evolving consumer trends and demands and to respond to competitive service and product offerings. The failure to adopt new technologies and systems in the future may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

Non-compliance with Payment Card Industry Data Security Standards (“PCI DSS”) may subject us to fines, penalties and civil liability.

 

We are subject to compliance with PCI DSS, an information security standard for organizations that handle cardholder information from major debit and credit card companies. Currently, we are not fully compliant with PCI DSS. We are currently taking steps to achieve compliance, but our efforts to comply with PCI DSS may result in significant expenses and our ongoing failure to fully comply with PCI DSS may subject us to fines, penalties and civil liability, and may result in the loss of our ability to accept debit and credit card payments or prohibit us from processing transactions through American Express, MasterCard, VISA and other card and payment networks. Even if we become compliant with PCI DSS or other applicable standards, we still may not be able to prevent security breaches involving customer transaction data.

 

Failure to maintain the integrity of guest or employee data could result in damage to our reputation and subject us to fines, penalties and civil liability.

 

We collect and store personally identifiable information from guests and employees in the course of doing business and use it for a variety of business purposes, including marketing to our guests through various forms of media. State, provincial and federal governments have enacted laws and regulations to protect consumers and

 

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employees against identity theft, including laws governing treatment of personally identifiable information. The regulatory environment and increased threats to the data we store has increased our costs of doing business. Any failure on our part to implement appropriate safeguards or to detect and provide prompt notice of breaches or unauthorized access as required by applicable laws could result in damage to our reputation and subject us to fines, penalties and civil liabilities. If we are required to pay any significant amounts in satisfaction of claims under these laws, or if we are forced to cease our business operations for any length of time as a result of our inability to comply fully with any such law, our business, prospects, financial condition, results of operations and cash flows may be materially adversely affected.

 

Our business depends on the quality and reputation of our brands, and any deterioration in the quality or reputation of our brands could have an adverse impact on our business.

 

A negative public image or other adverse events could affect the reputation of one or more of our mountain resorts and other businesses or more generally impact the reputation of our company. If the reputation or perceived quality of our brands declines, our business, prospects, financial condition, results of operations and cash flows could be materially adversely affected. The unauthorized use of our trademarks could also diminish the value of our brands and their market acceptance, competitive advantages or goodwill, which could adversely affect us. In addition, a negative public image or other adverse event occurring in an industry where we operate or a related industry may harm our reputation even if such image or event does directly relate to our brands or business.

 

We are subject to risks related to currency fluctuations.

 

We present our financial statements in United States dollars. Our operating results are sensitive to fluctuations in foreign currency exchange rates, as a significant portion of our revenues and operating expenses are transacted in Canadian dollars, principally at Tremblant and within our Adventure segment. During fiscal 2013, approximately 41.6% of our total revenues and 41.3% of our total operating expenses were denominated in Canadian dollars. A significant fluctuation in the Canada/U.S. exchange rate could therefore have a significant impact on our results of operations after translating our Canadian operations into United States dollars. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Discussion About Market Risk—Foreign Currency Fluctuations.”

 

Currency variations can also contribute to variations in sales at our mountain resorts and CMH because volatility in foreign exchange rates can impact our customers’ willingness to purchase lift passes or CMH packages. For example, an increase in the value of the Canadian dollar compared to the United States dollar or euro may make our CMH packages less attractive to American and European skiers, respectively.  

 

Certain circumstances may exist whereby our insurance coverage may not cover all possible losses and we may not be able to renew our insurance policies on favorable terms, or at all.

 

Although we maintain various property and casualty insurance policies and undertake safety and loss prevention programs to address certain risks, our insurance policies do not cover all types of losses and liabilities and in some cases may not be sufficient to cover the ultimate cost of claims which exceed policy limits. If we are held liable for amounts exceeding the limits of our insurance coverage or for claims outside the scope of our coverage, our business, prospects, financial condition, results of operations and cash flows could be materially adversely affected.

 

In addition, we may not be able to renew our current insurance policies on favorable terms, or at all. Our ability to obtain future insurance coverage at commercially reasonable rates could be materially adversely affected if we or other companies within or outside our industry sustain significant losses or make significant insurance claims.

 

We are subject to litigation in the ordinary course of business and related to our legacy real estate development activities.

 

We are involved in various lawsuits and claims that may include, among other things, claims or litigation relating to personal injury and wrongful death, allegations of violations of laws and regulations relating to our real estate activities, labor and employment, intellectual property and environmental matters, and commercial contract disputes. For example, we are, from time to time, subject to various lawsuits and claims related to injuries occurring at our properties, including due to the use, operation or maintenance of our trails, lifts, aircraft and other facilities.

 

In addition, we are a defendant in lawsuits related to our pre-2010 legacy real estate construction- and sales-phase development activities, including claims related to alleged construction defects and alleged violations of state and federal laws that require providing purchasers with certain mandated disclosures. Any such claims, regardless of

 

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merit, are time consuming and expensive to defend and could divert management’s attention and resources and may materially adversely affect our reputation, even if resolved in our favor. Accordingly, the outcome or existence of current or future litigation may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

We depend on a seasonal workforce.

 

We recruit year-round to fill thousands of seasonal positions. Because much of this hiring is done months in advance of the start of the applicable season, we may not be able to accurately predict our staffing needs. In addition, we may not be able to recruit and hire adequate seasonal personnel or hire such personnel at costs consistent with our costs in prior years. This risk is heightened in periods of economic strength, as the market for seasonal labor may become more competitive.

 

If we do not retain our key personnel or maintain adequate succession plans, our business may suffer.

 

The success of our business depends, in part, on our senior management, including our chief executive officer, William Jensen, and the development of adequate succession plans. The departure of any key member of the management team and the failure to maintain an adequate succession plan could adversely effect our business and the trading price of our common stock.

 

We are subject to risks associated with our workforce.

 

We are subject to various federal, state and provincial laws governing matters such as minimum wage requirements, overtime compensation and other working conditions, citizenship requirements, discrimination and family and medical leave. Our operations in Canada are also subject to laws that may require us to make severance or other payments to employees upon their termination. In addition, we are continuing to assess the impact of U.S. federal healthcare reform law and regulations on our healthcare benefit costs, which will likely increase the amount of healthcare expenses paid by us. Immigration law reform could also impact our workforce because we recruit and hire foreign nationals as part of our seasonal workforce. If our labor-related expenses increase, our operating expenses could increase and our business, financial condition and results of operations could be harmed.

 

From time to time, we have also experienced non-union employees attempting to unionize. While only a small portion of our employees are unionized at present, we may experience additional union activity in the future. In addition, future legislation could make it easier for unions to organize and obtain collectively bargained benefits, which could increase our operating expenses and negatively affect our business, prospects, financial condition, results of operations and cash flows.

 

Our real estate development strategy may not be successful.

 

Our real estate development activities are focused on designing strategies for the development of the land surrounding the base areas of our mountain resorts. Prior to 2010, we were actively engaged in the development of residential real estate, primarily in the United States and Canada. Since 2010, our real estate development activities have been limited to the preservation of core development parcels located at our resorts and, more recently, designing strategies for the future development of this land. Our ability to implement any of these strategies and realize the anticipated benefits of future real estate development projects is subject to a number of risks, including:

 

lack of improvement, or deterioration, in real estate markets;

 

difficulty in selling units or the ability of buyers to obtain necessary funds to close on units;

 

escalation in construction costs due to price increases in commodities, unforeseen conditions, inadequate designs or other causes;

 

work stoppages and inadequate internal resources to manage projects;

 

shortages in building materials;

 

difficulty in financing real estate development projects; and

 

difficulty in receiving necessary regulatory approvals.

 

If these projects are not implemented, in addition to not realizing intended profits from the real estate developments and sales from ancillary products, our guests may choose to go to other resorts that they perceive to have  

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better residential offerings, which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. In addition, even if we increase the number of units or beds at our mountain resorts, the projects may not be successful and we may be unable to realize incremental visitor growth or profits.

 

CMH is dependent on Alpine Helicopters.

 

In January 2013, we restructured our Alpine Helicopters business to comply with Canadian foreign ownership regulations governing aviation flight services in Canada. The restructuring involved the formation of a new flight services company, Alpine Helicopters. We own a 20% equity interest in Alpine Helicopters and the remaining 80% is held in trust for the benefit of the management and employees of Alpine Helicopters, including the pilots and crew members that support our helicopter operations. We consolidate Alpine Helicopters for GAAP purposes because we are the primary beneficiary.

 

Alpine Helicopters employs all the pilots who fly the helicopters in the CMH land tenures. As a result of its reliance on Alpine Helicopters, CMH’s business and operations would be negatively affected if Alpine Helicopters were to experience significant disruption affecting its ability to provide helicopter services to CMH. The partial or complete loss of Alpine Helicopter’s services, or a significant adverse change in our relationship with Alpine Helicopters, could result in lost revenue and added costs and harm the image and reputation of CMH as well as negatively impact the CMH guest experience.

 

Pursuant to a shareholders agreement, we may be required to purchase Blue Mountain Resorts Holdings Inc.’s equity interest in Blue Mountain Resorts Limited.

 

We and Blue Mountain Resorts Holdings Inc. (“Blue Mountain Holdings”) each own a 50% equity interest in Blue Mountain Resorts Limited. Pursuant to a shareholders agreement, we have granted Blue Mountain Holdings a put option pursuant to which Blue Mountain Holdings may, subject to certain limitations, sell to us (i) all of its equity interest in Blue Mountain Resorts Limited or (ii) between 10% and 25% of the total amount of the outstanding equity of Blue Mountain Resorts Limited. In both cases, we would be required to purchase the equity interest at 90% of its fair market value. We may not have sufficient cash available to purchase the equity interest if the put option is exercised and we may be required to obtain financing to fund the purchase. Such financing may be unavailable, or only available on unattractive terms. Accordingly, the exercise of the put right by Blue Mountain Holdings may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

Climate change may adversely impact our results of operations.

 

There is a growing political and scientific consensus that emissions of greenhouse gases continue to alter the composition of the global atmosphere in ways that are affecting and are expected to continue affecting the global climate. The effects of climate change, including any impact of global warming, could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

Warmer overall temperatures and other effects of climate change may adversely affect skier visits and our revenue and profits. In addition, a steady increase in global temperatures could shorten the ski season. Changes to the amount of snowfall and differences in weather patterns may increase our snowmaking expense, inhibit our snowmaking capabilities and negatively impact skier perceptions of the ski season. 

 

We may be required to further write down our assets.

 

Under GAAP, if we determine goodwill, intangible assets or real estate held for development are impaired, we are required to write down these assets and record a non-cash impairment charge. As of June 30, 2013, we had goodwill of $94.6 million, intangible assets of $65.5 million and real estate held for development of $164.9 million. Intangible assets consist primarily of permits and licenses, trademarks and tradenames and customer relationships.

 

We had impairment charges on goodwill, intangible assets and real estate held for development of $149.5 million, $12.5 million and $1.2 million in fiscal 2011, 2012 and 2013, respectively. Determining whether an impairment exists and the amount of the potential impairment involves quantitative data and qualitative criteria that are based on estimates and assumptions requiring significant management judgment. Future events or new information may change management’s valuation of goodwill, intangible assets or real estate held for development in a short amount of time. The timing and amount of impairment charges recorded in our consolidated statements of operations and write-downs recorded in our consolidated balance sheets could vary if management’s conclusions change. Any impairment of goodwill, intangible assets or real estate held for development could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. 

 

 

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We have underfunded pension obligations.

 

As of June 30, 2013, we had underfunded pension plan liabilities in frozen pension plans in the amount of $34.5 million. Significant changes in the market values of the investments held to fund the pension obligations or a change in the discount rate used to measure these pension obligations may result in a significant increase or decrease in the valuation of these pension obligations, and these changes may affect the net periodic pension cost in the year the change is made and in subsequent years. We may not generate sufficient cash flow to satisfy these obligations. Any inability to satisfy these pension obligations could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

 

We may not be able to fully utilize our net operating loss carryforwards. 

 

As of June 30, 2013, after giving effect to the Pro Forma Transactions, we believe we will have net operating loss carryforwards of approximately $       million for United States federal income tax purposes and net operating loss carryforwards of approximately $       million for Canadian federal income tax purposes. We have recorded a full valuation allowance against these net operating loss carryforwards because we believe that uncertainty exists with respect to the future realization of the loss carryforwards as well as with respect to the amount of the loss carryforwards that will be available in future periods. In addition, these loss carryforwards may be reduced as a result of the Restructuring. To the extent available, we intend to use these net operating loss carryforwards to offset future taxable income associated with our operations. There can be no assurance that we will generate sufficient taxable income in the carryforward period to utilize any remaining loss carryforwards before they expire.

 

In addition, Section 382 and related provisions of the Internal Revenue Code of 1986, as amended (the “Code”), contains rules that limit for U.S. federal income tax purposes the ability of a company that undergoes an “ownership change” to utilize its net operating losses and certain other tax attributes existing as of the date of such ownership change. Under these rules, such an ownership change is generally an increase in ownership by one or more “five percent shareholders,” within the meaning of Section 382 of the Code, of more than 50% of a company’s stock, directly or indirectly, within a rolling three-year period. If we undergo one or more ownership changes within the meaning of Section 382 of the Code, or if one has already occurred, our net operating losses and certain other tax attributes existing as of the date of each ownership change may be unavailable, in whole or in part, to offset our income and/or reduce or defer our future taxable income associated with our operations, which could have a negative effect on our financial results. While we believe that we have not undergone such an ownership change as of the date hereof, because such an event is outside of our control, no assurance can be given that an ownership change has not already occurred or that this offering (or subsequent transactions) will not result in an ownership change. Any future offerings of equity securities by us or sales of common stock by the Initial Stockholder would increase the likelihood that we undergo an “ownership change” within the meaning of Section 382 of the Code. If an ownership change occurs, the annual utilization of our net operating loss carryforwards and certain other tax attributes may be materially and adversely affected. Upon completion of this offering, our ability to raise future capital by issuing common stock without causing an ownership change may be materially limited.

 

If we are unable to successfully remediate material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

 

In connection with the audit of the fiscal 2013 consolidated financial statements of Cayman L.P., our auditors noted several significant deficiencies in our controls, principally as a result of our financial reporting system and accounting resources not being adequate for a public reporting company of our size and complexity. Due to the aggregate amount of significant deficiencies noted across our information technology systems and the risk of unauthorized access to financial reporting systems, as well as the lack of resources that existed within our financing and accounting function required to record complex and non-routine transactions in a timely manner, our management believes that the combination of significant deficiencies constitute a material weakness in internal control over financial reporting. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

 

We have incurred, and expect to continue to incur, significant costs to remediate the deficiencies identified in connection with the audit of the fiscal 2013 consolidated financial statements of Cayman L.P. To date, we have hired several senior information technology professionals and additional personnel with public company financial reporting expertise. We have also begun evaluating and implementing system upgrades as well as further developing and

 

 

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documenting our accounting policies and financial reporting procedures. We cannot assure you, however, that these or other measures will fully remediate the deficiencies or material weakness described above. We also cannot assure you that we have identified all of our existing significant deficiencies and material weaknesses, or that we will not in the future have additional significant deficiencies or material weaknesses.

 

Neither we nor our independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act. Commencing with our annual report on Form 10-K for fiscal 2015, we will be required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of the exemption permitting us not to comply with the independent registered public accounting firm attestation requirement. It is possible that, had we or our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act in connection with the audit of the fiscal 2013 consolidated financial statements of Cayman L.P., additional significant deficiencies and material weaknesses may have been identified.

 

Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting expense and expend significant management efforts. If we fail to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, we may be subject to sanctions or investigations by regulatory authorities, including the SEC and the NYSE. Furthermore, if we are unable to conclude that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by regulatory authorities, including the SEC and the NYSE. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. 

 

Risks Related to Our Organization and Structure

 

If the ownership of our common stock continues to be highly concentrated and certain stockholders maintain a right to nominate a majority, plus one, of our directors, it may prevent you and other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest.

 

Immediately following the completion of this offering, the Initial Stockholder will own approximately       % of our outstanding common stock or       % if the underwriters’ over-allotment option is fully exercised. As a result, the Initial Stockholder will own shares sufficient for the majority vote over all matters requiring a stockholder vote, including:

 

the election of directors;

 

mergers, consolidations and acquisitions;

 

the sale of all or substantially all of our assets and other decisions affecting our capital structure;

 

the amendment of our certificate of incorporation and our bylaws; and

 

our winding up and dissolution.

 

In addition, pursuant to the Stockholders Agreement, Fortress and certain of its affiliates and permitted transferees may designate directors for nomination and election to our board of directors. Pursuant to these provisions, Fortress and certain of its affiliates and permitted transferees have the ability to appoint a majority of the members of our board of directors, plus one director, for so long such stockholders continue to beneficially own, in the aggregate, directly or indirectly, at least         % of our issued and outstanding common stock (including Fortress’ proportionate interest in shares of our common stock held by the Initial Stockholder).

 

This concentration of ownership may delay, deter or prevent acts that would be favored by our other stockholders. The interests of the Initial Stockholder may not always coincide with our interests or the interests of our other stockholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of us. Also, the Initial Stockholder may seek to cause us to take courses of action that, in its judgment, could

 

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enhance its investment in us, but which might involve risks to our other stockholders or adversely affect us or our other stockholders, including investors in this offering. As a result, the market price of our common stock could decline or stockholders might not receive a premium over the then-current market price of our common stock upon a change in control. In addition, this concentration of share ownership and the ability of Fortress and certain of its affiliates and permitted transferees to appoint a majority of the members of our board of directors, plus one director, may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders. See “Principal and Selling Stockholder” and “Description of Capital Stock—Anti-Takeover Effects of Delaware Law, Our Restated Certificate of Incorporation and Our Amended and Restated Bylaws.”

 

We do not anticipate paying dividends on our common stock.

 

Any declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors, including our financial condition, our operating results, our current and anticipated cash needs, the impact on our effective tax rate, our indebtedness, legal requirements and other factors that our board of directors deems relevant. Our debt agreements limit our ability to pay dividends.

 

Because we are a holding company, our ability to pay cash dividends on our common stock will depend on the receipt of dividends or other distributions from our subsidiaries. Under Delaware law, dividends may be payable only out of surplus, which is calculated as our net assets less our liabilities and our capital, or, if we have no surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Until such time that we pay a dividend, our investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

 

Future offerings of equity securities by us or sales of our common stock by our Initial Stockholder may adversely affect us.

 

In the future, we may issue additional shares of our common stock or other equity securities in connection with financing transactions or acquisitions. Issuing additional shares of our common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders or reduce the market price of our common stock or both. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock. Holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us. See “Description of Capital Stock.”

 

In addition, any issuances of stock by us or sales of stock by the Initial Stockholder would increase the likelihood that we undergo, or may cause, an “ownership change” within the meaning of Section 382 of the Code. If we undergo one or more ownership changes within the meaning of Section 382 of the Code, our net operating losses and certain other tax attributes existing as of the date of each ownership change may be unavailable, in whole or in part, to offset our income and/or reduce or defer our future taxable income associated with our operations, which could have a negative effect on our liquidity. No assurance can be given that any such stock issuance or sale will not cause us to undergo an ownership change within the meaning of Section 382 of the Code. The Initial Stockholder’s interests may differ from our interests or the interests of our other stockholders and the Initial Stockholder may decide to sell shares of stock following this offering, even if such sale would not be favorable to us or our other stockholders or would result in us undergoing an “ownership change” within the meaning of Section 382 of the Code.

 

Certain provisions of the Stockholders Agreement, our restated certificate of incorporation and our amended and restated bylaws could hinder, delay or prevent a change in control of us, which could adversely affect the price of our common stock.

 

The Stockholders Agreement, our restated certificate of incorporation and our amended and restated bylaws contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors or Fortress. These provisions provide for:

 

a classified board of directors with staggered three-year terms;

 

  removal of directors only for cause and only with the affirmative vote of at least          % of the voting interest of stockholders entitled to vote (provided, however, that for so long as Fortress and certain of its affiliates

 

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and permitted transferees beneficially own, directly or indirectly, at least          % of our issued and outstanding common stock (including Fortress’ proportionate interest in shares of our common stock held by the Initial Stockholder), directors may be removed with or without cause with the affirmative vote of a majority of the voting interest of stockholders entitled to vote);

 

provisions in our restated certificate of incorporation and amended and restated bylaws prevent stockholders from calling special meetings of our stockholders (provided, however, that for so long as Fortress and certain of its affiliates and permitted transferees beneficially own, directly or indirectly, at least      % of our issued and outstanding common stock (including Fortress’ proportionate interest in shares of our common stock held by the Initial Stockholder), any stockholders that collectively beneficially own at least      % of our issued and outstanding common stock may call special meetings of our stockholders);

 

advance notice requirements by stockholders with respect to director nominations and actions to be taken at annual meetings;

 

certain rights to Fortress and certain of its affiliates and permitted transferees with respect to the designation of directors for nomination and election to our board of directors, including the ability to appoint a majority of the members of our board of directors, plus one director, for so long as Fortress and certain of its affiliates and permitted transferees continue to beneficially own, directly or indirectly at least       % of our issued and outstanding common stock (including Fortress’ proportionate interest in shares of our common stock held by the Initial Stockholder). See “Certain Relationships and Related Party Transactions—Stockholders Agreement;”

 

no provision in our restated certificate of incorporation or amended and restated bylaws for cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of our common stock can elect all the directors standing for election;

 

our restated certificate of incorporation and our amended and restated bylaws only permit action by our stockholders outside a meeting by unanimous written consent, provided, however, that for so long as Fortress and certain of its affiliates and permitted transferees beneficially own, directly or indirectly, at least       % of our issued and outstanding common stock (including Fortress’ proportionate interest in shares of our common stock held by the Initial Stockholder), our stockholders may act without a meeting by written consent of a majority of our stockholders; and

 

under our restated certificate of incorporation, our board of directors has the authority to cause the issuance of preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of our stockholders. Nothing in our restated certificate of incorporation precludes future issuances without stockholder approval of the authorized but unissued shares of our common stock.

 

In addition, these provisions may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt that is opposed by Fortress, our management or our board of directors. Public stockholders who might desire to participate in these types of transactions may not have an opportunity to do so, even if the transaction is favorable to stockholders. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control or change our management and board of directors and, as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium. See “Description of Capital Stock—Anti-Takeover Effects of Delaware Law, Our Amended and Restated Certificate of Incorporation and Our Amended and Restated Bylaws.”

 

Fortress and its affiliates have the right to engage or invest in the same or similar businesses as us and the corporate opportunity provisions in our restated certificate of incorporation could enable Fortress and certain stockholders to benefit from corporate opportunities that might otherwise be available to us.

 

Fortress has other investments and business activities in addition to their ownership of us, including in the industries in which we operate. Fortress or its affiliates, including the Initial Stockholder, have the right, and have no duty to abstain from exercising such right, to engage or invest in the same or similar businesses as us, do business with any of our customers or vendors or employ or otherwise engage any of our officers, directors or employees.

 

Under our restated certificate of incorporation, if Fortress or its affiliates, including the Initial Stockholder, or any of their officers, directors or employees acquire knowledge of a potential transaction that could be a corporate

 

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opportunity, they have no duty to offer such corporate opportunity to us, our stockholders or affiliates. In addition, we have renounced any interest or expectancy in, or in being offered an opportunity to participate in, such corporate opportunities and in the event that any of our directors and officers who is also a director, officer or employee of any of Fortress or its affiliates, including the Initial Stockholder, acquires knowledge of a corporate opportunity or is offered a corporate opportunity, provided that this knowledge was not acquired solely in such person’s capacity as our director or officer and such person acted in good faith, then such person is deemed to have fully satisfied such person’s fiduciary duty and is not liable to us if any of Fortress or its affiliates, including the Initial Stockholder, pursues or acquires such corporate opportunity or if such person did not present the corporate opportunity to us.

 

Our restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. 

 

Pursuant to our restated certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or (iv) any action asserting a claim governed by the internal affairs doctrine, in each such case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants. In the event that the Court of Chancery lacks jurisdiction over any such action or proceeding, our restated certificate of incorporation will provide that the sole and exclusive forum for such action or proceeding will be another state or federal court located within the State of Delaware. Our restated certificate of incorporation will further provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provision. The forum selection clause in our amended and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

 

Risks Related to our Indebtedness

 

Following the Refinancing, the New Credit Agreement will contain, and future debt agreements may contain, restrictions that may limit our flexibility in operating our business.

 

Following the Refinancing, the New Credit Agreement will contain, and documents governing our future indebtedness may contain, numerous covenants that limit the discretion of management with respect to certain business matters. These covenants will place restrictions on, among other things, our ability and the ability of our subsidiaries to incur or guarantee additional indebtedness, pay dividends and make other distributions and restricted payments, make certain loans, acquisitions and other investments, enter into agreements restricting our subsidiaries’ ability to pay dividends, engage in certain transactions with stockholders or affiliates, sell certain assets or engage in mergers, acquisitions and other business combinations, amend or otherwise alter the terms of our subordinated indebtedness and create liens. The New Credit Agreement will also require, and documents governing our future indebtedness may require, us or our subsidiaries to meet certain financial ratios and tests in order to incur certain additional debt, make certain loans, acquisitions or other investments, or pay dividends or make other distributions or restricted payments. Our ability and the ability of our subsidiaries to comply with these and other provisions of our debt agreements is dependent on our future performance, which will be subject to many factors, some of which are beyond our control. The breach of any of these covenants or noncompliance with any of these financial ratios and tests could result in an event of default under the applicable debt agreement, which, if not cured or waived, could result in acceleration of the related debt and the acceleration of debt under other instruments evidencing indebtedness that may contain cross-acceleration or cross-default provisions. Variable rate indebtedness subjects us to the risk of higher interest rates, which could cause our future debt service obligations to increase significantly.

 

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our indebtedness.

 

Following this offering, we will be significantly leveraged. As of June 30, 2013, our total indebtedness on a pro forma basis after giving effect to the Pro Forma Transactions was $           million. Our significant leverage could have important consequences, including the following: (i) a substantial portion of our cash flow from operations will be dedicated to the payment of principal and interest on indebtedness, thereby reducing the funds available for operations, future business opportunities and capital expenditures; (ii) our ability to obtain additional financing for

 

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working capital, capital expenditures, debt service requirements, acquisitions and general corporate purposes in the future may be limited; (iii) certain of our borrowings are at variable rates of interest, which increase our vulnerability to increases in interest rates; (iv) we will be at a competitive disadvantage to lesser leveraged competitors; (v) we may be unable to adjust rapidly to changing market conditions; (vi) the debt service requirements of our indebtedness could make it more difficult for us to satisfy our financial obligations; and (vii) we may be vulnerable in a downturn in general economic conditions or in our business and we may be unable to carry out activities that are important to our growth.

 

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond our control, including the availability of financing in the international banking and capital markets.

 

Risks Related to this Offering

 

An active trading market for our common stock may never develop or be sustained.

 

Although we intend to apply to have our common stock approved for listing on the NYSE, an active trading market for our common stock may not develop on that exchange or elsewhere or, if developed, that market may not be sustained. Accordingly, if an active trading market for our common stock does not develop or is not maintained, the liquidity of our common stock, your ability to sell your shares of common stock when desired and the prices that you may obtain for your shares of common stock will be adversely affected.

 

The market price and trading volume of our common stock may be volatile, which could result in rapid and substantial losses for our stockholders.

 

Even if an active trading market develops, the market price of our common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. The initial public offering price of our common stock will be determined by negotiation among us, the Initial Stockholder and the representatives of the underwriters based on a number of factors and may not be indicative of prices that will prevail in the open market following completion of this offering. If the market price of our common stock declines significantly, you may be unable to resell your shares at or above your purchase price, if at all. The market price of our common stock may fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include:

 

quarterly variations in our operating results;

 

operating results that vary from the expectations of securities analysts and investors;

 

change in valuations;

 

changes in the industries in which we operate;

 

announcements by us or companies in our industries of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures, capital commitments, plans, prospects, service offerings or operating results;

 

additions or departures of key personnel;

 

future sales of our securities;

 

other risk factors discussed herein; and

 

other unforeseen events.

 

Stock markets in the United States have experienced extreme price and volume fluctuations. Market fluctuations, as well as general political and economic conditions such as acts of terrorism, prolonged economic uncertainty, a recession or interest rate or currency rate fluctuations, could adversely affect the market price of our common stock.

 

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The unaudited pro forma condensed consolidated financial information does not purport to be indicative of what our actual results of operations and financial condition would have been or will be.

 

The unaudited pro forma condensed consolidated financial information included in this prospectus is for illustrative and informational purposes only and does not necessarily reflect our results of operations or financial condition had the Pro Forma Transactions occurred at an earlier date. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project our future results of operations and financial condition.

 

In addition, the pro forma condensed consolidated statement of operations excludes certain non-recurring items that we expect to incur in connection with the Pro Forma Transactions, including costs related to legal, accounting and consulting service. See “Unaudited Pro Forma Condensed Consolidated Financial Information.”

 

The market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public markets.

 

After this offering, there will be                  shares of common stock outstanding, or                  shares outstanding if the underwriters exercise their over-allotment option in full. Of our issued and outstanding shares, all the common stock sold in this offering will be freely transferable, except for any shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act of 1933 (the “Securities Act”). Following completion of the offering, approximately       % of our outstanding common stock (or       % if the underwriters exercise their over-allotment option in full) will be held by the Initial Stockholder and, subject to the lock-up restrictions described below, can be resold into the public markets in the future in accordance with the requirements of Rule 144. See “Shares Eligible For Future Sale.”

 

We and our executive officers, directors and the Initial Stockholder have agreed with the underwriters that, subject to certain exceptions, for a period of        days after the date of this prospectus, we and they will not directly or indirectly offer, pledge, sell, contract to sell, sell any option or contract to purchase or otherwise dispose of any common stock or any securities convertible into or exercisable or exchangeable for common stock, or in any manner transfer all or a portion of the economic consequences associated with the ownership of common stock, or cause a registration statement covering any common stock to be filed, without the prior written consent of                  . See “Underwriting.”

 

Pursuant to the Stockholders Agreement, the Initial Stockholder, certain of its affiliates and permitted third party transferees have the right, in certain circumstances, to require us to register their approximately shares of our common stock under the Securities Act for sale into the public markets. All shares sold pursuant to the registration statement will be freely transferable. See “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

 

The market price of our common stock may decline significantly when the restrictions on resale by our Initial Stockholder lapse. A decline in the price of our common stock might impede our ability to raise capital through the issuance of additional common stock or other equity securities.

 

Investors in this offering will suffer immediate and substantial dilution.

 

The initial public offering price of our common stock will be substantially higher than the pro forma as adjusted net tangible book value per share issued and outstanding immediately after this offering. Investors who purchase common stock in this offering will pay a price per share that substantially exceeds the net tangible book value per share of common stock immediately prior to this offering. If you purchase shares of our common stock in this offering, you will experience immediate and substantial dilution of $         in the pro forma as adjusted net tangible book value per share, based upon the initial public offering price of $         per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus). See “Dilution.”

 

We will have broad discretion in the use of the net proceeds to us from this offering and may not use them effectively.

 

Our management currently intends to use the net proceeds to us from this offering in the manner described under “Use of Proceeds” and will have broad discretion in the application of the net proceeds to us from this offering. The failure by our management to apply these funds effectively could affect our ability to operate and grow our business.

 

As a public company, we will incur additional costs and face increased demands on our management.

 

As a newly public company with shares listed on a U.S. exchange, will need to comply with an extensive body of regulations that did not apply to us previously, including certain provisions of the Sarbanes Oxley Act of 2002 (the

 

 

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“Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act, regulations of the SEC and requirements of the NYSE. We expect these rules and regulations will increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, as a result of becoming a public company, we intend to add independent directors and create additional board committees. In addition, we may incur additional costs associated with our public company reporting requirements and maintaining directors’ and officers’ liability insurance. We are currently evaluating and monitoring developments with respect to these rules, which may impose additional costs on us and have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows. 

 

We are an “emerging growth company” and we cannot be certain whether the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of exemptions from various requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company, which may be for as long as five years following our initial public offering. We cannot predict if investors will find our common stock less attractive because our independent auditors will not have attested to the effectiveness of our internal controls. If some investors find our common stock less attractive as a result of our independent auditors not attesting to the effectiveness of our internal controls or other exemptions of which we plan to take advantage, there may be a less active trading market for our common stock.

 

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Forward-Looking Statements

 

Some of the information contained in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and elsewhere in this prospectus may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “target,” “projects,” “contemplates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this prospectus are based upon our historical performance and our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us, Fortress, the Initial Stockholder, the underwriters or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to:

 

a prolonged weakness in general economic conditions;

 

lack of adequate snowfall and unfavorable weather conditions;

 

adverse events that occur during our peak operating periods combined with the seasonality of our business;

 

the occurrence of natural disasters;

 

the high fixed cost structure of our business;

 

a disruption in our water supply;

 

increased competition in the industries in which we operate;

 

risks related to the fact that we are not the sole property manager at our developments;

 

changes in consumer tastes and preferences;

 

the loss of or inability to renew our governmental permits and leases;

 

risks related to federal, state and provincial government laws, rules and regulations;

 

the capital intensive nature of our business;

 

our dependence on infrastructure and equipment;

 

our ability to integrate and successfully realize anticipated benefits of acquisitions and future acquisitions;

 

Steamboat’s dependence on subsidized direct air service from major hub airports;

 

risks related to our reliance on information technology;

 

implications arising from non-compliance with PCI DSS;

 

our failure to maintain the integrity of our guest or employee data;

 

a deterioration in the quality or reputation of our brands;

 

currency risks;

 

risks related to our insurance coverage;

 

adverse consequences of current or future legal claims;

 

our ability to hire and retain a sufficient seasonal workforce;

 

loss of key personnel;

 

risks related to our workforce, including implications arising from various federal, state and provincial laws that govern our workforce;

 

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our ability to complete our real estate development projects and achieve the anticipated financial benefits from such projects;

 

a partial or complete loss of Alpine Helicopters’ services, or a significant adverse change in our relationship with Alpine Helicopters;

 

  the reduction of our tax attributes as a result of the Restructuring;

 

the effects of climate change;

 

impairments or write downs of our assets;

 

our ability to fund our pension obligations;

 

our inability to fully utilize our net operating loss carryforwards;

 

  our ability to successfully remediate significant deficiencies in our internal control over financial reporting;

 

  the requirement that we must purchase an additional equity interest in Blue Mountain Resorts Limited if our co-owner exercises their put option; and

 

  competition with similar businesses owned by Fortress and its affiliates and the loss of corporate opportunities due to the corporate opportunity provisions in our restated certificate of incorporation.

 

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. You should specifically consider the factors identified in this prospectus that could cause actual results to differ before making an investment decision to purchase our common stock. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

 

The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or revise any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.

 

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Use of Proceeds

 

The net proceeds to us from the sale of the         shares of common stock offered by us hereby are estimated to be approximately $          million, after deducting the estimated underwriting discounts and offering expenses payable by us. Our net proceeds will increase by approximately $           million if the underwriters’ over-allotment option is exercised in full. We will not receive any proceeds from the sale of our common stock by the Initial Stockholder, including any shares sold by the Initial Stockholder pursuant to the underwriters’ over-allotment option. We intend to use the net proceeds to us from this offering for working capital and other general corporate purposes, which may include potential investments in, and acquisitions of, ski and adventure travel businesses and assets.

 

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           Capitalization

 

The following table sets forth cash and cash equivalents and capitalization of Cayman L.P. as of June 30, 2013 on an actual basis, and our cash and cash equivalents and capitalization as of June 30, 2013 on a pro forma basis to give effect to the Restructuring, the Refinancing and the sale of         shares of common stock by us in this offering at an assumed initial public offering price of $        per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), after deducting the underwriting discount and estimated offering expenses payable by us.

 

This table should be read in conjunction with “Selected Historical Consolidated Financial and Operating Information,” “Unaudited Pro Forma Condensed Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements of Cayman L.P. and related notes included elsewhere in this prospectus.

 

   As of June 30, 2013
   Historical  Pro Forma
             
   (in thousands)
Cash and cash equivalents   $59,775    

$

 
           
Long-term debt (including current portion):         
Third-party long-term debt (including current portion)   $588,863   $ 
Notes payable to partners    1,358,695      
     Total long-term debt (including current portion)    1,947,558      
Capital:          
Partners’ (deficit) capital    (1,167,551)   —   
Common stock, par value $0.01 per share;
authorized —             shares, pro forma;
issued and outstanding —             shares, pro forma
   —        
Additional paid-in capital    —        
Accumulated other comprehensive income    148,805      
Total capital    (1,018,746)     
Total capitalization   $928,812    

$

 

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Dilution

 

If you invest in our common stock, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock upon consummation of this offering. Net tangible book value per share represents the book value of our total tangible assets less the book value of our total liabilities divided by the number of shares of common stock then issued and outstanding.

 

Our net tangible book value as of June 30, 2013 was approximately $            , or approximately $         per share based on             shares of common stock issued and outstanding as of such date after giving effect to the         -for-1 stock split of our common stock.

 

After giving effect to the Pro Forma Transactions, other than this offering, our pro forma net tangible book value as of June 30, 2013 would have been approximately $            , or approximately $         per share.

 

After giving effect to the Pro Forma Transactions, including our sale of common stock in this offering at an initial public offering price of $         per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), our pro forma as adjusted net tangible book value as of June 30, 2013 would have been approximately $            , or approximately $         per share (assuming no exercise of the underwriters’ over-allotment option). This represents an immediate and substantial dilution of $         per share to new investors purchasing common stock in this offering. Sales of shares by the Initial Stockholder in this offering do not affect our net tangible book value. The following table illustrates this dilution per share:

 

Assumed initial public offering price per share   $
Net tangible book value per share as of June 30, 2013 $  
Decrease in net tangible book value per share as of June 30, 2013 attributable to the Pro Forma Transactions, other than this offering    
Increase in net tangible book value per share attributable to this offering    
Pro forma as adjusted net tangible book value per share after giving effect to the Pro Forma Transactions, including this offering  
Dilution per share to new investors in this offering  

 

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus) would increase (decrease) our pro forma as adjusted net tangible book value by approximately $            , or approximately $          per share, and the dilution to new investors in this offering by approximately $         per share, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and estimated offering expenses payable by us.

 

The following table summarizes, as of June 30, 2013 on a pro forma basis for the Pro Forma Transactions, the differences between the number of shares of common stock purchased from us and the total price and the average price per share paid by existing stockholders and by the new investors in this offering, before deducting the underwriting discounts and estimated offering expenses payable by us, at an assumed initial public offering price of $         per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus).

 

   Shares Purchased  Total Consideration  Average
Price per Share
   Number  Percent  Amount  Percent   
   (in thousands)  (in thousands)   
Existing stockholders                %        %  $ 
New investors                          
Total         100%       $100%  $      

 

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A $1.00 increase (decrease) in the assumed initial offering price would increase (decrease) total consideration paid by new investors and average price per share paid by new investors by $         and $1.00 per share, respectively. An increase (decrease) of 1.0 million in the number of shares offered by us would increase (decrease) total consideration paid by new investors and average price per share paid by new investors by $         and $         per share, respectively.

 

The sale of             shares of our common stock to be sold by the Initial Stockholder in this offering will reduce the number of shares of our common stock held by existing stockholders to             shares, or            % of the total shares outstanding, and will increase the number of shares of our common stock held by new investors to             shares, or            % of the total shares of our common stock outstanding.

 

If the underwriters’ over-allotment option is fully exercised, pro forma as adjusted net tangible book value per share after giving effect to the Pro Forma Transactions, including this offering, would be approximately $         per share and the dilution to new investors per share after this offering would be approximately $         per share. Furthermore, the percentage of our shares held by existing stockholders after the sale of shares by the Initial Stockholder would decrease to approximately          % and the percentage of our shares held by new investors would increase to approximately          %, based on             shares of common stock outstanding as of June 30, 2013, after giving effect to the         -for-1 stock split and the Pro Forma Transactions.

 

The pro forma information discussed above is for illustrative and informational purposes only. See “Unaudited Pro Forma Condensed Consolidated Financial Information.”

 

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Dividend Policy

 

We do not currently anticipate paying dividends on our common stock. Any declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors, including our financial condition, our operating results, our current and anticipated cash needs, the impact on our effective tax rate, our indebtedness, legal requirements and other factors that our board of directors deems relevant. Certain of our debt agreements limit our ability to pay dividends. See “Description of Certain Indebtedness.”

 

Because we are a holding company, our ability to pay cash dividends on our common stock will depend on the receipt of dividends or other distributions from our subsidiaries. Under Delaware law, dividends may be payable only out of surplus, which is calculated as our net assets less our liabilities and our capital, or, if we have no surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

 

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Selected Historical Consolidated Financial and Operating Information

 

The following selected historical consolidated financial information for the years ended June 30, 2011, 2012 and 2013 and as of June 30, 2012 and 2013 has been derived from the audited consolidated financial statements of Cayman L.P. included elsewhere in this prospectus.

 

Prior to the collapse in the housing markets in late 2007 and the global financial crisis that followed, we were actively engaged in large scale development and sales of resort real estate, primarily in North America. In light of the then prevailing market conditions, we ceased new development activities in late 2009. As a result, we were left with a portfolio of real estate assets, high leverage levels and litigation initiated by purchasers of resort real estate seeking to rescind their purchase obligations or otherwise mitigate their losses. This confluence of factors had a material impact on our consolidated financial results for the fiscal years presented below. Through a series of debt refinancings, cost saving initiatives and divestitures of non-core assets, we believe we have streamlined our operations. As of September 30, 2013, we have divested substantially all of our legacy real estate assets and have settled the majority of litigation claims stemming from our pre-2010 development and sales activities. Although the effects of our pre-2010 legacy real estate development and sales activities on our consolidated financial results will continue in future periods, we expect that these effects will continue to diminish over time. After giving effect to the Refinancing and the Restructuring, we believe our financial results in future periods will be materially different from those reflected in the historical consolidated financial information appearing in this prospectus.

 

You should read the following selected historical consolidated financial and operating information in conjunction with the information appearing under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus, and in conjunction with the audited consolidated financial statements of Cayman L.P. and the related notes appearing elsewhere in this prospectus.

 

   Historical
   Year Ended June 30,
    2011(1)   2012    2013 
    (in thousands, except per unit data and operating statistics)
Statement of Operations Data:               
Revenues               
Mountain   $322,194   $310,765   $339,003 
Adventure    96,693    109,496    113,622 
Real Estate    61,165    61,439    64,726 
Total reportable segment revenues    480,052    481,700    517,351 
Legacy, non-core and other(2)    79,471    31,747    7,056 
Total revenues    559,523    513,447    524,407 
Operating expenses(2)   504,005    453,187    448,944 
Depreciation and amortization    76,371    57,655    58,342 
Loss on disposal of assets(1)   26,196    9,443    12,448 
Impairment of long-lived assets    12,140    782    143 
Impairment of real estate    73,230    8,137    1,052 
Goodwill impairment    64,097    3,575    —   
Income (loss) from operations    (196,516)   (19,332)   3,478 
Interest income    9,162    7,467    6,630 
Interest expense on third-party debt    (143,463)   (135,929)   (98,437)
Interest expense on notes payable to partners   (160,943)   (195,842)   (236,598)
Earnings (loss) from equity method investments(3)    8,299    538    (5,147)
Gain on disposal of equity method investments(1)    —      —      18,923 
Loss on extinguishment of debt(4)   —      —      (11,152)
Other income (expense), net(5)    (2,021)   1,199    1,973 
Loss from continuing operations before income taxes    (485,482)   (341,899)   (320,330)
Income tax (benefit) expense    6,555    (5,836)   (23,616)
Loss from continuing operations    (492,037)   (336,063)   (296,714)
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   Historical
   Year Ended June 30,
    2011(1)   2012    2013 
    (in thousands, except per unit data and operating statistics)
     
Loss from discontinued operations, net of tax    (6,469)   —      —   
Net loss    (498,506)   (336,063)   (296,714)
Loss (earnings) attributable to noncontrolling interest    (361)   —      757
Net loss attributable to Cayman L.P.   (498,867)  (336,063)  (295,957)
Net loss attributable to general partner   —      —      —   
Net loss attributable to limited partners  $(498,867)  $(336,063)  $(295,957)
                
Weighted average units outstanding, basic and diluted   1,348,253    1,348,412    1,350,412 
                
Loss per unit, basic and diluted:               
Loss from continuing operations attributable to Cayman L.P.   $(365.21)  $(249.23)  $(219.16)
Loss from discontinued operations    (4.80)   —      —  
Net loss attributable to limited partners   $(370.01)  $(249.23)  $(219.16)
                
Operating Statistics:               
Skier Visits(6)    3,192,388    2,758,970    3,146,119 
Mountain Segment Revenue Per Visit(7)   $100.93   $112.64   $107.75 
ETP(8)   $43.34   $47.65   $45.92 
CMH Guest Nights(9)    34,479    37,829    36,237 
CMH RevPGN(10)   $1,670   $1,650   $1,693 
                
Cash Flow Data:               
Net cash provided by operating activities   $21,140   $43,390   $41,765 
Net cash provided (used) by investing activities   $514,497   $(21,286)  $105,407 
Net cash used by financing activities   $(572,797)  $(41,518)  $(133,683)
                

 

   Historical
   As of June 30,
   2012  2013
   (in thousands)
Balance Sheet Data:          
Cash and cash equivalents   $46,908   $59,775 
Real estate held for development(11)   $193,806   $164,916 
Total assets   $1,342,793   $1,121,600 
Third-party long-term debt (including current portion)   $736,081   $588,863 
Notes payable to partners (including current portion)   1,109,005   1,358,695 
   Total long-term debt (including current portion)   $1,845,086   $1,947,558 
           
 
(1)Includes the operations of Whistler Blackcomb prior to their divestiture in November 2010. We sold our interest in the assets of Whistler Blackcomb to Whistler Holdings in November 2010 and recognized a loss of $24.4 million. As part of the sale proceeds, we received an equity investment of approximately 24% in Whistler Holdings. Fiscal 2011 includes legacy, non-core and other revenues, expenses and depreciation and amortization of $38.6 million, $51.1 million and $10.7 million, respectively, related to Whistler Blackcomb. In December 2012, we sold our investment in Whistler Holdings and recorded a $17.9 million gain related to this disposition.

 

(2)See notes 6(f) and 6(g) under “Prospectus Summary – Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial and Operating Information.” See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Legacy, Non-Core and Other Items.”

 

(3)See note 6(b) under “Prospectus Summary – Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial and Operating Information.”

 

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(4)Represents the loss recognized in the extinguishment of our senior debt facility in December 2012.

 

(5)Other income (expense), net, primarily includes gains or losses on currency rate fluctuations and other non-operating expenses that management does not believe are representative of the underlying performance of our ongoing operations.

 

(6)A Skier Visit represents an individual’s use of a paid or complimentary ticket, frequency card or season pass to ski or snowboard at our Steamboat, Winter Park, Tremblant, Stratton and Snowshoe resorts for any part of one day.

 

(7)Mountain Segment Revenue Per Visit is defined as total revenue of our Mountain segment for a given period divided by total Skier Visits during such period.

 

(8)ETP is calculated by dividing lift revenue for a given period by total Skier Visits during such period.

 

(9)CMH Guest Nights represents the number of paid nights skiing or hiking guests spend at our CMH lodges for a given period.

 

(10)CMH RevPGN is total CMH revenue for a given period divided by the total number of CMH Guest Nights during such period.

 

(11)Real estate held for development includes land and infrastructure assets, net of impairments to fair value, intended to be used in the future development of real estate assets for sale and amenity enhancement at our resorts.

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed consolidated financial information consists of an unaudited pro forma condensed consolidated statement of operations for the year ended June 30, 2013 and an unaudited pro forma condensed consolidated balance sheet as of June 30, 2013. The unaudited pro forma condensed consolidated financial information has been derived by application of pro forma adjustments to the audited consolidated financial statements of Cayman L.P. included elsewhere in this prospectus.

 

Intrawest Resorts Holdings, Inc was formed on August 30, 2013, and will conduct no activities prior to completion of this offering other than those incident to its formation, the Restructuring, the Refinancing and the preparation of the registration statement of which this prospectus forms a part. Prior to the consummation of this offering, through a series of restructuring transactions, Cayman L.P. will cause its indirect subsidiaries to contribute 100% of the equity interests in both Intrawest U.S. and Intrawest Canada to an indirect subsidiary of the Company.

 

The unaudited pro forma condensed consolidated statement of operations gives effect to the Pro Forma Transactions (as defined below) as if the Pro Forma Transactions had occurred or had become effective as of July 1, 2012. The unaudited pro forma condensed consolidated balance sheet gives effect to the Pro Forma Transactions as if the Pro Forma Transactions had occurred on June 30, 2013.

 

The unaudited pro forma condensed consolidated financial information is based on available information and certain assumptions that we believe are reasonable in the circumstances. The unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and does not necessarily reflect the Company's results of operations or financial condition had the Pro Forma Transactions occurred at an earlier date. The unaudited pro forma condensed consolidated financial information also should not be considered representative of the Company’s future financial condition or results of operations.

 

The unaudited pro forma condensed consolidated financial information has been prepared to reflect adjustments to the historical financial information of Cayman L.P. that are (i) directly attributable to the Pro Forma Transactions, (ii) factually supportable and (iii) with respect to the unaudited pro forma condensed consolidated statement of operations, expected to have a continuing impact on our results. The unaudited pro forma condensed consolidated financial information reflects the following transactions (collectively, the “Pro Forma Transactions”):

 

the Restructuring, including the elimination of the European operations of Cayman L.P. that will not be contributed to the Company in the Restructuring as well as the cancellation of the notes payable to partners and accrued and unpaid interest thereon where $1,028.4 million of the notes payable to partners and accrued and unpaid interest thereon will be exchanged for equity, and the Company and its subsidiary guarantors will be released from their obligations in respect of $330.3 million of the notes payable to partners and accrued interest thereon;

 

the contribution to the Company of $50.0 million from an affiliate of Fortress and the refinancing of the outstanding borrowings under the First Lien Credit Agreement and the Second Lien Credit Agreement using borrowings under the New Credit Agreement, cash on hand and the funds contributed to the Company by an affiliate of Fortress;

 

the receipt by the Company of approximately $          million of net proceeds from the sale of shares of common stock in this offering at an assumed initial public offering price of $          per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), after deducting the underwriting discount and estimated offering expenses payable by the Company; and

 

other adjustments described in the notes to this section.

 

The unaudited pro forma condensed consolidated balance sheet will also reflect an adjustment to present the Company’s capitalization instead of the partners’ capital of Cayman L.P.

 

The unaudited pro forma condensed consolidated statement of operations excludes approximately $         million of non-recurring charges that the Company expects to incur in connection with the Pro Forma Transactions, including costs related to legal, accounting and consulting services.

 

The unaudited pro forma condensed consolidated financial information and the related notes should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Certain Indebtedness” as well as the audited consolidated financial statements of Cayman L.P. and the related notes included elsewhere in this prospectus.

 

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Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended June 30, 2013
(in thousands, except share and per share data)

 

   Historical  Pro forma
Adjustments
      Pro Forma    
Revenue
  $524,407   $(428)  (a)   $ 523,979      
Operating expense   448,944    (2,096)  (a)     446,848      
            (d)            
Depreciation and amortization   58,342    (2)  (a)     58,340      
Loss on disposal of assets   12,448    (1,923)  (a)     10,525      
Impairment of long-lived assets   143    —           143      
Impairment of real estate   1,052    (649)  (a)     403      
Income from operations   3,478    4,242         7,720      
Interest income   6,630    (47)  (a)     6,583      
Interest expense on third party debt   (98,437)   53,361  (c)     (45,076 )    
Interest expense on notes payable to partners   (236,598)   236,598  (b)           
Loss from equity method investments   (5,147)   —           (5,147 )    
Gain on disposal of equity method investments   18,923    —           18,923      
Loss on extinguishment of debt   (11,152)   11,152  (c)           
Other income, net   1,973    (38)  (a)     1,935      
Loss before income taxes   (320,330)   305,268         (15,062 )    
Income tax (benefit) expense   (23,616)   —    (e)     (23,616 )    
Net (loss) income  $(296,714)  $305,268       $ 8,554    
Loss per unit, basic and diluted
  $(219.72)                
Weighted average units outstanding, basic and diluted   1,350,412                   
Loss per share, basic and diluted
               $   (g)
Weighted average shares outstanding, basic and diluted                        

 

See notes to unaudited pro forma condensed consolidated financial information

 

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Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2013
(in thousands, except share data)

 

   Historical  Pro forma
Adjustments
     Pro Forma
ASSETS                   
Current assets                   
Cash and cash equivalents  $59,775   $ (1,095)   (a)  $ 
         10,447   (c)     
              (g)     
Other current assets   101,972    (93)   (a)   101,879 
Total current assets   161,747             
Receivables, net of allowances   44,041    (7,823)   (a)   36,218 
Property, plant, and equipment, net   475,856    —          475,856 
Real estate held for development   164,916    (108)   (a)   164,808 
Other assets   114,928    (2,056)   (a)   108,772 
         (4,100)   (c)     
Goodwill and intangible assets   160,112    —          160,112 
Total assets  $1,121,600   $       $ 
                    
LIABILITIES AND STOCKHOLDERS’ EQUITY
                   
Total current liabilities  $122,507   $(1,970)   (a)  $121,047 
         510   (c)     
Long-term debt   580,662    (24,653)   (c)   556,009 
Notes payable to partners   1,358,695    (1,358,695)   (b)   —   
Other long-term liabilities   78,482    —          78,482 
Total liabilities   2,140,346    (1,384,808)       755,538 
Shareholders’ equity:                   
Common stock, $0.01 par value;       shares authorized on a pro forma basis;       shares issued and outstanding on a pro forma basis   —         (g)     
Additional paid-in capital   —         (g)     
Partners’ (deficit) capital:                   
Partnership units, unlimited number authorized                   
General partner   —      —          —   
Limited partner   (1,166,797)   1,379,980   (f)   —  
             (g)     
Accumulated other comprehensive income    148,805   —           148,805  
Total (deficit) equity attributable to Intrawest Resorts Holdings, Inc.   (1,017,992)            
Non-controlling interest   (754)   —          (754)
Total capital   (1,018,746)            
Total liabilities and capital  $1,121,600   $       $ 

 

See notes to unaudited pro forma condensed consolidated financial information

 

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Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

 

(a) Elimination of operations that will not be contributed

 

In connection with the Restructuring, the European operations held by a wholly-owned subsidiary of Cayman L.P. will not be contributed to the Company. As a result, a net adjustment of $4.2 million has been made to the unaudited pro forma condensed consolidated statement of operations for the year ended June 30, 2013. An adjustment to the unaudited pro forma condensed consolidated balance sheet as of June 30, 2013 has been made to reflect the removal of approximately $9.2 million in net assets.

 

The following table summarizes the results of the European operations that will not be contributed to the Company in the Restructuring:

 

    Year ended
June 30, 2013
    (in thousands)
Revenue  $428
Operating expense   2,096
Depreciation and amortization   2
Loss on disposal of assets   1,923
Impairment of real estate   649
Loss from operations   (4,242)
Interest income   47
Other income, net   38
Loss before income taxes  $(4,157)

 

The following table summarizes the financial position of the European operations that will not be contributed to the Company in the Restructuring:

 

      As of
June 30, 2013
      (in thousands)
Current assets    
Cash and cash equivalents  $1,095
Other current assets   93
Total current assets   1,188
Receivables, net of allowances   7,823
Real estate held for development   108
Other assets   2,056
Total assets  $11,175
Total current liabilities
  $1,970
Partners’ deficit: Limited partner   9,205
Total liabilities and partners’ deficit  $11,175

 

 

(b) Cancellation of notes payable to partners

 

An adjustment to the unaudited pro forma condensed consolidated balance sheet as of June 30, 2013 has been made to reflect that (a) $1,028.4 million of the notes payable to partners and accrued and unpaid interest thereon will be exchanged for equity and (b) the Company and its subsidiary guarantors will be released from their obligations in respect of $330.3 million of the notes payable to partners and accrued and unpaid interest thereon.

 

An adjustment to the unaudited pro forma condensed consolidated statement of operations for the year ended June 30, 2013 has been made to eliminate $236.6 million of interest expense on notes payable to partners.

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(c) Refinancing

 

Prior to the consummation of this offering, we expect one of our subsidiaries to enter into the New Credit Agreement. The borrowings under the New Credit Agreement, together with cash on hand and funds contributed to the Company by an affiliate of Fortress, will be used to refinance and replace the borrowings under the First Lien Credit Agreement and the Second Lien Credit Agreement. The following table summarizes the adjustment in the unaudited pro forma condensed consolidated balance sheet to long-term debt:

 

    As of
June 30, 2013
 
    (in thousands)  
New Credit Agreement:
    
Term Loan(1)  $540,000 
FY13 First Lien Term Loan(2)   (441,669)
FY13 Second Lien Term Loan(3)   (122,084)
   (23,753)
Less: Current portion of long-term debt   900 
Long-term debt  $(24,653)

 

 

(1)The New Term Loan is comprised of a current portion of $5.4 million and long-term portion of $534.6 million.

 

(2)The FY13 First Lien Term Loan is comprised of a current portion of $4.5 million and long- term portion of $437.2 million.

 

(3)The FY13 Second Lien Term Loan is comprised of a current portion of $nil and long-term portion of $122.1 million.

 

In addition, as a result of the Refinancing, the unaudited pro forma condensed consolidated balance sheet reflects a net increase in current liabilities of $0.5 million, consisting of a $0.9 million increase in the current portion of long-term debt, offset by the elimination of $0.4 million of accrued interest relating to the FY13 Lien Loans. As a result of the Refinancing, the unaudited pro forma condensed consolidated balance sheet also reflects a net decrease in other assets of $4.1 million, consisting of the elimination of deferred financing costs associated with the FY13 Lien Loans of $19.9 million, partially offset by recording the capitalization of approximately $15.8 million of new deferred financing costs associated with the borrowings under the New Credit Agreement.

 

The unaudited pro forma condensed consolidated balance sheet also reflects cash contributions of $50.0 million from an affiliate of Fortress as part of the Restructuring.

 

The following table summarizes the adjustments in the unaudited pro forma condensed consolidated statement of operations to reflect the adjustments to interest expense on third party debt:

 

   Year Ended June 30, 2013
   Interest Expense  Debt Issuance
Costs
Amortization
  Total
   (in thousands)
New Term Loan  $26,400   $2,257   $28,657 
Less: FY13 First Lien Term Loan   (18,293)   (6,752)   (25,045)
Less: FY13 Second Lien Term Loan   (7,835)   (3,127)   (10,962)
Less: FY10 First Lien Term Loan   (11,646)   —      (11,646)
Less: FY10 Second Lien Term Loan   (23,481)   (10,884)   (34,365)
Total  $(34,855)  $(18,506)  $(53,361)

 

The unaudited pro forma condensed consolidated statement of operations also reflects the elimination of loss on extinguishment of debt recorded in December 2012 related to the full repayment of the FY10 First Lien loans and FY10 Second Lien Loans with the proceeds from the FY13 Lien Loans.

 

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The principle balance, deferred financing costs and interest expense related to the New Credit Agreement are estimated based upon the anticipated terms of the financing. Pro forma interest expense (i) reflects an estimated annual interest rate of 5.0% on indebtedness to be incurred under the New Credit Agreement and (ii) reflects amortization expense on the approximately $15.8 million of deferred financing costs associated with the Company’s borrowings under the New Credit Agreement, using a maturity of seven years. A 1/8% change in the assumed interest rate would change pro forma interest expense by approximately $0.7 million for the year ended June 30, 2013.

 

(d) Transaction costs

 

Reflects an adjustment to eliminate non-recurring transaction costs of approximately $            million which the Company expects to incur in connection with this offering.

 

(e) Resulting tax effects

 

The unaudited pro forma condensed consolidated statement of operations does not include adjustments to the income tax provision as the Company has a full valuation allowance against its net deferred tax assets, excluding certain deferred tax liabilities. Any pro forma tax provision adjustment would be offset by a corresponding adjustment in valuation allowance.  

 

(f) Resulting partners’ (deficit) capital effects

 

Reflects an adjustment to partners’ (deficit) capital for the items noted in (a) through (d).

 

(g) Contribution and offering adjustments

 

Reflects the adjustment from partners’ capital to additional paid-in capital and the required balancing entry to reflect the par value of the Company’s outstanding common stock to reflect the contribution of both Intrawest U.S. and Intrawest Canada to the Company. The issuance of common stock was at a par value of $0.01 per share.

 

Also reflects the receipt by the Company of approximately $          million of net proceeds from the sale of shares of common stock in this offering at an assumed initial public offering price of $           per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus), after deducting the underwriting discount and estimated offering expenses payable by the Company. 

 

The following summarizes the adjustments in the unaudited pro forma condensed consolidated balance sheet:

 

   As of June 30, 2013
   Conversion
of partners’
capital to equity
  Proceeds
from offering
  Net adjustments
   (in thousands)
Cash and cash equivalents          
Partners’ deficit          
Shareholders’ equity:          
Common stock          
Additional paid-in capital          

 

Pro forma loss per share

 

The number of shares used to compute pro forma basic and diluted loss per share is           , which is the number of shares expected to be outstanding upon completion of this offering.

 

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Management’s Discussion and Analysis of
Financial Condition and Results of Operations

 

Intrawest Resorts Holdings, Inc. (“New Intrawest”) is a newly-formed Delaware corporation that has not, to date, conducted any activities other than those incident to its formation, the Refinancing and the preparation of the registration statement of which this prospectus forms a part. Unless the context suggests otherwise, references in this prospectus to “Intrawest,” the “Company,” “we,” “us” and “our” refer to Cayman L.P. and its consolidated subsidiaries prior to the consummation of the Restructuring, and to New Intrawest and its consolidated subsidiaries after the consummation of the Restructuring. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements of Cayman L.P. and the related notes, the unaudited pro forma condensed consolidated financial statements set forth under “Unaudited Pro Forma Condensed Consolidated Financial Information” and the other financial information appearing elsewhere in this prospectus. See “Certain Relationships and Related Party Transactions” and “Description of Certain Indebtedness” for a description of certain of our related party arrangements and debt obligations. This discussion and analysis contains forward- looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including those discussed in “Risk Factors” and elsewhere in this prospectus.

 

Overview

 

We are one of North America’s premier mountain resort and adventure companies, delivering distinctive vacation and travel experiences to our guests for over three decades. We own interests in seven iconic mountain resorts with more than 11,000 skiable acres and more than 1,150 acres of land available for real estate development. We also own the leading heli-skiing adventure company in North America providing helicopter access to more skiable terrain than all lift accessed mountain resorts combined. Additionally, we operate a comprehensive real estate business through which we manage, market and sell vacation club properties; manage condominium hotel properties; and sell and market residential real estate. During fiscal 2013, our portfolio of resorts received more than six million visitors from all 50 states and more than 100 countries. We believe our decades of experience as a mountain resort operator and real estate developer, together with our ability to scale our operations, positions us for future growth and profitability.

 

We conduct our U.S. operations through Intrawest U.S. Holdings Inc., a Delaware corporation, and our Canadian operations through Intrawest ULC, an unlimited liability company organized under the laws of the Province of Alberta. Prior to the consummation of this offering, through a series of restructuring transactions, Cayman L.P. will cause its indirect subsidiaries to contribute 100% of the equity interests in both Intrawest U.S. and Intrawest Canada to an indirect subsidiary of Intrawest Resorts Holdings, Inc., the issuer of the common stock offered hereby. In connection with these restructuring transactions, all of our notes payable to partners, together with all accrued and unpaid interest thereon, will be exchanged for equity or effectively modified to release us and our subsidiaries as guarantors with respect to such loans. As of June 30, 2013, we had notes payable to partners, including accrued and unpaid interest, of approximately $1.4 billion. In addition, prior to the consummation of this offering, we expect one of our subsidiaries to enter into the New Credit Agreement. At the time the New Credit Agreement is entered into, an affiliate of Fortress will contribute $50.0 million to us. The borrowings under the New Credit Agreement, together with cash on hand and the funds contributed to us by an affiliate of Fortress, will be used to refinance and replace the borrowings under the First Lien Credit Agreement and the Second Lien Credit Agreement. See “Description of Certain Indebtedness” and “Unaudited Pro Forma Condensed Consolidated Financial Information.”

 

We manage our business through three reportable segments:

 

Mountain: Our Mountain segment includes our mountain resort and lodging operations at Steamboat, Winter Park, Tremblant, Stratton and Snowshoe, as well as our 50% interest in Blue Mountain.

 

Adventure: Our Adventure segment includes CMH and our aviation businesses that support CMH and provide services to third parties.

 

Real Estate: Our Real Estate segment includes our real estate development activities, as well as our real estate management, marketing and sales businesses.

 

Prior to the collapse in housing markets in late 2007 and the global financial crisis that followed, we were actively engaged in large scale development and sales of resort real estate, primarily in North America. In light of the then prevailing market conditions, we ceased new development activities in late 2009. As a result, we were left with a portfolio of legacy real estate assets, high leverage levels and litigation initiated by purchasers of resort real

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estate seeking to rescind their purchase obligations or otherwise mitigate their losses. This confluence of factors had a material impact on our consolidated financial results for the fiscal years presented below. Through a series of debt refinancings, cost saving initiatives and divestitures of non-core assets, we believe we have streamlined our operations. As of September 30, 2013, we have divested substantially all of our legacy real estate assets and have settled the majority of litigation claims stemming from our pre-2010 development and sales activities. Although the effects of our pre-2010 legacy real estate development and sales activities on our consolidated financial results will continue in future periods, we expect that these effects will continue to diminish over time. For fiscal 2011, 2012 and 2013, the net loss attributable to Cayman L.P. was $498.9 million, $336.1 million and $296.0 million, respectively. After giving effect to the Refinancing and the Restructuring, we believe our financial results in future periods will be materially different from those reflected in the historical consolidated financial information appearing in this prospectus.

 

Factors Affecting our Business

 

Economic Conditions. Our results of operations are affected by consumer discretionary spending. Numerous economic trends support the notion that the health of the general economy is improving. We believe that as the economy continues to improve, consumers will have more disposable income and a greater inclination to engage in and spend on leisure activities, which will positively impact our results of operations.

 

Snowfall and Weather. The timing and amount of snowfall and other weather conditions can have a significant impact on visitation and financial results in our Mountain and Adventure segments. Our resorts are geographically diversified and have strong snowmaking capabilities, which helps to mitigate the impact of localized snow conditions and weather. In addition, our increasing percentage of revenue derived from season pass and frequency products sold prior to the ski season helps to insulate us from snowfall and weather conditions. Season pass and frequency product revenue has grown at a CAGR of 6.3% over the three year period ended June 30, 2013.

 

Resort Real Estate Markets. We intend to resume development of residential vacation homes at our mountain resorts when market conditions are favorable. The value and sales volume of vacation homes fluctuate with macro-economic trends and consumer sentiment. Macroeconomic conditions have improved over the past two years, which has supported a partial recovery in the market for vacation homes in the United States and Canada. However, despite these trends, the median vacation home price and number of vacation homes sold in the most recent year still remain well below the peak in 2005, suggesting ample room for continued growth.

 

Seasonality and Fluctuations in Quarterly Results. Our business is seasonal in nature. Although each of our mountain resorts operates as a four-season resort, based upon historical results, we generate the highest revenues during our second and third fiscal quarters, which is the peak ski season. Similarly, CMH generates the majority of its revenues during our second and third fiscal quarters, which is the peak heli-skiing season. As a result of the seasonality of our business, our mountain resorts and CMH typically experience operating losses during the first and fourth quarters of each fiscal year. In addition, throughout our peak quarters, we generate the highest daily revenues on weekends, during the Christmas/New Year’s and Presidents’ Day holiday periods and, in the case of our mountain resorts, during school spring breaks. Depending on how peak periods, holidays and weekends fall on the calendar, in any given year we may have more or less peak periods, holidays and weekends in our second fiscal quarter compared to prior years, with a corresponding difference in our third fiscal quarter. These differences can result in material differences in our quarterly results of operations and affect the comparability of our results of operations.

 

Significant Transactions

 

The following significant transactions were executed during the periods presented:

 

Whistler Disposition. Prior to November 2010, we held an interest in the assets of Whistler Blackcomb ski resort. In November 2010, we sold our interest in the assets to Whistler Holdings in exchange for cash and shares of Whistler Holdings, a public company. We used the net proceeds from the sale to repay indebtedness. In December 2012, we sold our investment in Whistler Holdings for $116.9 million and recorded a $17.9 million gain on disposal of equity method investments in our consolidated statement of operations. All financial information attributable to Whistler Blackcomb and Whistler Holdings have been excluded from our reportable segments for all periods presented.

 

2012 Refinancing Transaction. In December 2012, we borrowed $575.0 million aggregate principal amount of corporate debt, comprised of a $450.0 million First Lien Term Loan and a $125.0 million Second Lien Term Loan. See “Description of Certain Indebtedness—First Lien Credit Agreement and Second Lien Credit Agreement.” The

 

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net proceeds of these borrowings, together with the proceeds from the sale of our investment in Whistler Holdings, were used to repay $727.4 million of outstanding indebtedness and related fees. As a result, we recorded an $11.2 million loss on extinguishment of debt in fiscal 2013.

 

Our Segments

 

We manage and report operating results through three reportable segments:

 

Mountain (65.5% of fiscal 2013 reportable segment revenue): Our Mountain segment includes our mountain resort and lodging operations at Steamboat, Winter Park, Tremblant, Stratton and Snowshoe, as well as our 50% interest in Blue Mountain.

 

Adventure (22.0% of fiscal 2013 reportable segment revenue): Our Adventure segment includes CMH and our aviation businesses that support CMH and provide services to third parties.

 

Real Estate (12.5% of fiscal 2013 reportable segment revenue): Our Real Estate segment includes our real estate development activities, as well as our real estate management, marketing and sales businesses, including IRCG, IHM and Playground.

 

Each of our reportable segments, although integral to the success of the others, offers distinctly different products and services and requires different types of management focus. As such, these segments are managed separately. In deciding how to allocate resources and assess performance, our Chief Operating Decision Maker (“CODM”) regularly evaluates the performance of our reportable segments on the basis of revenue and segment Adjusted EBITDA. We also evaluate segment Adjusted EBITDA as a key compensation measure. Following the consummation of this offering, the compensation committee of our board of directors will determine the annual variable compensation for certain members of our management team based, in part, on segment Adjusted EBITDA. Segment Adjusted EBITDA assists us in comparing our segment performance over various reporting periods because it removes from our operating results the impact of items that our management believes do not reflect our core operating performance.

 

Our reportable segment measure of Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP. Reportable segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other entities may not calculate segment Adjusted EBITDA in the same manner. See Note 18 to the audited consolidated financial statements of Cayman L.P. included elsewhere in this prospectus.

 

Shown below is a summary of reportable segment revenues and reportable segement Adjusted EBITDA for fiscal 2011, 2012 and 2013:

 

   Year Ended June 30,
   2011  2012  2013
   (in thousands)
Mountain revenues  $322,194   $310,765   $339,003 
Adventure revenues   96,693    109,496    113,622 
Real Estate revenues   61,165    61,439    64,726 
Total reportable segment revenues  $480,052   $481,700   $517,351 
                
Mountain Adjusted EBITDA   $69,805   $66,051   $72,353 
Adventure Adjusted EBITDA    15,563    16,151    19,740 
Real Estate Adjusted EBITDA    9,002    9,855    13,167 
Total(1)   $94,370   $92,057   $105,260 
 
(1)Total segment Adjusted EBITBA equals consolidated Adjusted EBITDA. For a reconciliation of net loss attributable to Cayman L.P. to consolidated Adjusted EBITDA, see “Prospectus Summary—Summary Historical and Unaudited Pro Forma Condensed Consolidated Financial and Operating Information.”

 

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Mountain

 

Our Mountain segment is comprised of all of the mountain resort operations at Steamboat, Winter Park, Tremblant, Stratton and Snowshoe, as well as our ancillary resort businesses. Our Mountain segment also includes our 50% ownership interest in Blue Mountain, which is accounted for using the equity method. Our Mountain segment contributed 67.1%, 64.5% and 65.5% of total reportable segment revenues for fiscal 2011, 2012 and 2013, respectively.

 

Revenue and Mountain Adjusted EBITDA

 

The Mountain segment earns revenue from a variety of business activities conducted at our mountain resorts.

 

Lift revenue. Lift revenue is derived from a variety of lift pass products, including multi-resort and single-resort passes, season pass products, frequency card products of varying durations and single- and multi-day lift tickets. Our season pass products, including our multi-resort products, are predominately sold prior to the start of the ski season. Season pass revenue, although primarily collected prior to the ski season during a fiscal year, is recognized in our consolidated financial statements during such fiscal year based on historical usage patterns. Frequency pass revenue is recognized as used, and unused portions are recognized at the end of the frequency period. For fiscal 2011, 2012 and 2013, approximately 30.7%, 34.4% and 33.2%, respectively, of total lift revenue consisted of season pass and frequency product revenue. 

 

Lodging revenue. Lodging revenue is derived through our management of rental programs for condominium properties located at or in close proximity to our mountain resorts. We typically receive 25% to 50% of the daily room revenue, with the condominium owners receiving the remaining share of the room revenue. We also earn lodging revenue from hotel properties we own at Winter Park, Stratton and Snowshoe.

 

Ski school revenue. Ski school revenue is derived through our operation of ski and ride schools at each of our mountain resorts. We are the exclusive provider of these services at each of our resorts.

 

Retail and rental revenue. Retail and rental revenue is derived from the rental of ski, snowboard and bike equipment and the sale of ski accessories, equipment, apparel, logo wear, gifts and sundries at our on-mountain and base area outlets.

 

Food and beverage revenue. Food and beverage revenue is derived through our operation of restaurants, bars and other food and beverage outlets at our resorts.

 

Other revenue. Other revenue is derived from fees earned through a wide variety of activities and ancillary operations, including private clubs, municipal services, call centers, parking operations, golf, summer base area activities, strategic alliances, entertainment events and other resort activities.

 

Mountain Adjusted EBITDA. Mountain Adjusted EBITDA is Mountain revenue less Mountain operating expenses, adjusted for our pro rata share of EBITDA for our equity method investment in Blue Mountain Resorts Limited. Mountain operating expenses include: wages, incentives and benefits for resort personnel; direct costs of food, beverage and retail inventory; general and administrative expenses; and resort operating expenses, such as contract services, utilities, fuel, permit and lease payments, credit card fees, property taxes, and maintenance and operating supplies.

 

Key Business Metrics Evaluated by Management

 

None of the operating metrics in this section include Blue Mountain, which we account for using the equity method.

 

Skier Visits We measure visitation volume during the ski season, which is when most of our lift revenue is earned, by the number of “Skier Visits” at our resorts, each of which represents an individual’s use of a paid or complimentary ticket, frequency card or season pass to ski or snowboard at our mountain resorts for any part of one day. The number of Skier Visits, viewed in conjunction with ETP (as defined below), is the most important indicator of our lift revenue. Changes in the number of Skier Visits have a significant impact on Mountain revenue. The number of Skier Visits is affected by numerous factors, including the quality of the guest experience, the effectiveness of our marketing efforts, pricing policies, snow and weather conditions, overall industry trends, macroeconomic factors and the relative attractiveness of our resort offerings compared to competitive offerings.

 

ETPWe measure average ticket price during a given period by calculating our “effective ticket price,” or “ETP,” which is determined by dividing lift revenue by Skier Visits. ETP is influenced by lift product mix and other

 

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factors. Season pass products offer unlimited access, subject to certain exceptions and restrictions, for a fixed upfront payment. As a result, season pass holders ski frequently and therefore a higher mix of these products will put downward pressure on ETP. This downward pressure on ETP is more pronounced in ski seasons with higher snowfall, as season pass holders increase their usage. Conversely, single- and multi-day lift ticket products are priced per visit and therefore a higher mix of these products will tend to increase our ETP. Our lift product mix is primarily influenced by pricing incentives for season pass and frequency products and the types of visitors we attract (“destination guests” versus “regional guests”). “Destination guests,” who travel to the resort from a significant distance, often visit a resort once or twice per season for extended stays and are therefore likely to purchase multi-day ticket products. Destination guests tend to make travel plans far in advance of their vacation and do not typically change their plans based on snow and weather conditions. By contrast, “regional guests” that drive to the resort for one-day or overnight trips tend to increase visitation when conditions are favorable. Regional guests tend to visit the resort more frequently at a lower ticket price per visit than destination guests. For fiscal 2013, destination guests comprised approximately 38.7% of our Skier Visits, which compares to approximately 42.7% for fiscal 2012 and 36.7% for fiscal 2011. We define destination guests as guests with an address containing a zip code outside the resort’s region. Our definition may be different than other companies and therefore our statistics may not be comparable. Other factors that influence ETP include the number of complimentary or special promotional passes issued by us, the average age of skiers visiting our resorts, the volume of group or promotional sales and the relative volume of products sold through different sales channels, including our call centers, our e-commerce platform and our network of third-party online and traditional travel companies. Products sold at the ticket counter, which has been a declining percentage of lift revenue in recent years, are typically priced higher relative to other channels because walk-up customers are our least price sensitive guests.

 

Revenue per Visit is total Mountain revenue for a given period divided by total Skier Visits during such period. Revenue per Visit is influenced by our mix of guests. Destination guests are more likely to purchase ancillary products and services than regional guests and a higher percentage of destination guests in our skier mix typically increases Revenue per Visit.

 

Room Nightsis the number of occupied units under management for a given period. Management uses Room Nights to gauge demand for lodging in a given period. The number of Room Nights is affected by numerous factors, including the quality of the guest experience, the effectiveness of our marketing efforts, pricing policies, snow and weather conditions, overall industry trends, macroeconomic factors and the relative attractiveness of our resort offerings compared to competitive offerings.

 

ADRor Average Daily Rate is determined by dividing gross lodging revenue during a given period by Room Nights during such period. ADR is a measure commonly used in the lodging industry and used by our management to track lodging pricing trends. ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a lodging operation. ADR is affected by numerous factors, including the quality of the guest experience, the effectiveness of our marketing efforts, snow and weather conditions, overall industry trends, macroeconomic factors and the relative attractiveness of our resort offerings compared to competing offerings.

 

Adventure

 

Our Adventure segment is comprised of CMH, which provides heli-skiing, mountaineering and hiking at 11 lodges in British Columbia, Canada. To support CMH’s operations, we own 40 helicopters that are also used in the off-season for fire suppression in the United States and Canada and other commercial uses. Our Alpine Aerotech subsidiary provides helicopter maintenance, repair and overhaul services to our fleet of helicopters as well as to aircraft owned by unaffiliated third parties. Our Adventure segment contributed 20.1%, 22.7% and 22.0% of total reportable segment revenue for fiscal 2011, 2012 and 2013, respectively.

 

Revenue and Adventure Adjusted EBITDA

 

Revenue. The Adventure segment earns revenue from a variety of activities conducted at CMH. CMH guest revenue is derived primarily through the sale of adventure packages that include lodging at facilities owned or leased by CMH, food and beverage services and heli-skiing, heli-mountaineering or heli-hiking. In addition to package revenue, CMH earns ancillary revenue from the sale of additional vertical meters of skiing, retail merchandise, massages, alcoholic beverages and the sale of other products and services not included in the vacation package.

 

The Adventure segment also generates ancillary revenue relating to performance of fire suppression services during the summer months in the Western United States and Western Canada. These activities are performed on an

 

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as-needed basis or pursuant to contracts that have a term of one to five years. Ancillary revenue is also derived from MRO services performed by Alpine Aerotech on third-party aircraft, as well as from leasing underutilized aircraft to unaffiliated third parties for short term periods ranging from one to 12 months.

 

Adventure Adjusted EBITDA. Adventure Adjusted EBITDA is Adventure revenue less Adventure operating expenses, adjusted for Adjusted EBITDA attributable to noncontrolling interests. Adventure operating expenses consist primarily of compensation and benefits, fuel, aircraft and facility maintenance expenses, insurance, utilities, permit and lease payments, credit card fees, food and beverage costs, and general and administrative expenses.

 

Key Business Metrics Evaluated by Management

 

CMH Guest Nights is the number of paid nights skiing or hiking guests spend at our CMH lodges for a given period. The number of CMH Guest Nights is affected by numerous factors, including the quality of the guest experience, the effectiveness of our sales efforts, pricing policies, global macroeconomic factors and the relative attractiveness of our CMH offering compared to competitive offerings. Management uses CMH Guest Nights to gauge utilization of CMH assets in a given period. 

 

CMH RevPGNis total CMH revenue for a given period divided by the number of CMH Guest Nights for such period. CMH RevPGN trends provide useful information concerning the pricing environment and our effectiveness at cross-selling extra vertical meters and ancillary products and services.

 

Real Estate

 

Our Real Estate segment is comprised of our core ongoing real estate development activities and our real estate management, marketing and sales businesses. The segment includes IRCG, our vacation club business, IHM, which manages condominium hotel properties in Maui, Hawaii and in Mammoth Lakes, California, and Playground, our core residential real estate sales and marketing business. Our Real Estate segment also includes costs associated with our ongoing development activities, including planning activities and land carrying costs. Our Real Estate segment contributed 12.7%, 12.8% and 12.5% of total reportable segment revenue for fiscal 2011, 2012 and 2013, respectively.

 

Revenue and Real Estate Adjusted EBITDA

 

Revenue. The Real Estate segment earns revenue from IRCG, IHM and Playground. During the fiscal years presented, we did not have any active development projects. IRCG generates revenue from selling vacation club points in Club Intrawest, managing Club Intrawest properties and running a private exchange company for Club Intrawest’s members. IHM generates revenue from managing rental operations at the Honua Kai Resort and Spa in Maui, Hawaii and the Westin Monache Resort in Mammoth Lakes, California. Playground earns revenue from the commissions on the sales of real estate. We also manage commercial and residential real estate for our properties and third parties through our Real Estate segment.

 

Real Estate Adjusted EBITDA. Real Estate Adjusted EBITDA is Real Estate revenue less Real Estate operating expenses, plus interest income earned from receivables related to IRCG’s operations, adjusted for our pro rata share of EBITDA for our equity method investments in Mammoth Hospitality Management, LLC and Chateau M.T. Inc. Real Estate operating expenses include: compensation and benefits; insurance; general and administrative expenses; and land carrying costs and development planning and appraisal expenses related to the core developable land surrounding the bases of our Steamboat, Winter Park, Tremblant, Stratton and Snowshoe resorts.

 

Legacy, Non-Core and Other Items

 

Legacy and other non-core. Certain activities and assets, and the resulting expenses, gains and losses from such activities and assets, are deemed to be non-core by our CODM when they are not sufficiently related to our ongoing business, we plan to divest or wind them down and they are not reviewed by our CODM in evaluating the performance of our business. Non-core activities and assets that influenced our consolidated results during the financial periods presented in this prospectus but that have not been allocated to our reportable segments include:

 

  legacy real estate carrying costs and litigation;

 

  divested non-core operations, including the results of Whistler Blackcomb prior to our divestiture of the assets of Whistler Blackcomb in November 2010; and

 

 

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  remaining non-core operations, including management of non-core commercial properties owned by third parties and our equity method investment in MMSA Holdings, Inc.

 

Prior to 2010, in addition to our mountain resort and other operations, we were actively engaged in large scale development of resort real estate, primarily in the United States and Canada. In late 2009, in light of the then-existing poor economic environment for real estate development, we ceased new development activities, but were left with a portfolio of real estate assets consisting of development land and other legacy real estate assets that are not located at or near our mountain resorts, the vast majority of which have been divested over the past few years, particularly in recent periods as real estate markets have strengthened. We consider these legacy real estate assets, and the gains, losses, revenue and expenses related to these assets, to be non-core.

 

We recognized significant losses on disposal of our legacy real estate assets and from impairments to the carrying value of our real estate portfolio during the fiscal years described in this prospectus. During fiscal 2011, 2012 and 2013, we recognized real estate impairments of $73.2 million, $8.1 million and $1.1 million, respectively. As of September 30, 2013, we have divested substantially all of our legacy real estate. 

 

Expenses related to legacy real estate development activities include the carrying costs of legacy real estate assets and legacy litigation consisting of claims for damages related to alleged construction defects, purported disclosure violations and allegations that we failed to construct planned amenities. 

 

Many of the claims brought against us were similar to claims brought against residential developers industry-wide in the wake of the 2008 housing market collapse. The vast majority of these claims were filed in 2009 and 2010 when we began litigating hundreds of cases with purchasers who had entered into pre-sale contracts prior to 2010, failed to close on their purchases, and were seeking a return of their security deposits.  We have been settling these  and other legacy real estate claims on a consistent basis in fiscal 2012 and fiscal 2013 and settled our last two security deposit cases in September 2013.  New claims filings relating to legacy real estate litigation are infrequent due to the amount of time that has passed since our last construction project. 

 

We believe expenses associated with our legacy real estate development activities will diminish in future periods. We expect any remaining costs and expenses that we incur in future periods to principally relate to ongoing real estate litigation in which we are either the defendant or plaintiff. We also expect to incur additional remediation expenses related to pre-2009 construction projects. 

 

Other.  We incur certain additional costs that we do not allocate to our operating segments because they relate to items that management does not believe are representative of the underlying performance of our ongoing operations. These items include restructuring costs, severance expenses and non-cash compensation.

 

Results of Operations

 

Comparison of Operating Results in Fiscal Years 2012 and 2013

 

The following table presents our consolidated statements of operations for fiscal 2012 and 2013:

 

   Year Ended June 30,      
   2012  2013  $ Change  % Change
   (dollars in thousands)
             
Revenues   $513,447   $524,407   $10,960    2.1%
Operating expenses    453,187    448,944    (4,243)   (0.9)%
Depreciation and amortization    57,655    58,342    687    1.2%
Loss on disposal of assets    9,443    12,448    3,005    31.8%
Impairment of long-lived assets    782    143    (639)   (81.7)%
Impairment of real estate    8,137    1,052    (7,085)   (87.1)%
Goodwill impairment    3,575    —      (3,575)   (100.0)%
     Income (loss) from operations    (19,332)   3,478    22,810    118.0%
Interest income    7,467    6,630    (837)   (11.2)%
Interest expense on third party debt    (135,929)   (98,437)   37,492    (27.6)%
Interest expense on notes payable to partners    (195,842)   (236,598)   (40,756)   20.8%
Earnings (loss) from equity method investments    538    (5,147)   (5,685)   * 

 

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   Year Ended June 30,      
   2012  2013  $ Change  % Change
   (dollars in thousands)
             
Gain on disposal of equity method investments    —      18,923    18,923   * 
Loss on extinguishment of debt    —      (11,152)   (11,152)   * 
Other income, net    1,199    1,973    774    64.6%
   Loss from continuing operations before
   income taxes
   (341,899)   (320,330)   21,569    (6.3)%
Income tax benefit    (5,836)   (23,616)   (17,780)   304.7%
     Net loss    (336,063)   (296,714)   39,349    (11.7)%
Loss attributable to noncontrolling interest    —      757    757   * 
Net loss attributable to Intrawest Cayman L.P.   $(336,063)  $(295,957)  $40,106    (11.9)%

 

Total revenue. Total revenue increased $11.0 million, or 2.1%, from $513.4 million in fiscal 2012 to $524.4 million in fiscal 2013, primarily as a result of an increase in our total reportable segment revenue of $35.7 million, which included increases of $28.2 million, $4.1 million and $3.3 million in Mountain, Adventure and Real Estate revenue, respectively. These increases were partially offset by a decrease in legacy, non-core and other revenue of $24.7 million, or 77.8%, from $31.7 million in fiscal 2012 to $7.1 million in fiscal 2013. This decrease is primarily a result of the wind down of legacy businesses, including Madrid SnowZone and certain non-core commercial property management businesses.

 

Operating expenses. Operating expenses decreased $4.2 million, or 0.9%, from $453.2 million in fiscal 2012 to $448.9 million in fiscal 2013. Total reportable segment operating expenses increased by $21.9 million in fiscal 2013 compared to fiscal 2012. Mountain operating expenses increased by $23.0 million in fiscal 2013, while Adventure and Real Estate operating expenses decreased $0.7 million and $0.4 million, respectively. Offsetting these increases in reportable segment operating expenses was a $26.1 million decrease in legacy and other non-core operating expenses, which decreased from $50.5 million in fiscal 2012 to $24.4 million in fiscal 2013. Contributing to the decrease in legacy and other non-core operating expenses was a $25.7 million decrease in operating expenses associated with non-core operations, such as Madrid SnowZone and certain non-core commercial property management businesses.

 

Loss on disposal of assets. In fiscal 2012, the loss of $9.4 million was related to the sale of non-core land at Copper Mountain. In fiscal 2013, the loss was primarily related to the sale of certain wholly-owned interests in commercial real estate and development land at Blue Mountain and development land at Mammoth.

 

Impairments. Goodwill impairments, impairments of long-lived assets and impairments of real estate decreased $11.3 million, or 90.4%, from $12.5 million in fiscal 2012 to $1.2 million in fiscal 2013. In fiscal 2012, we recognized an $8.1 million real estate impairment due to a downturn in the real estate market, which caused the carrying value of our real estate assets held for development to be higher than the fair value. In fiscal 2013, we recognized a $1.1 million real estate impairment as a result of a decline in the fair value of legacy real estate assets. In fiscal 2012, we also recognized a goodwill impairment of $3.6 million related to a real estate reporting unit. There were no goodwill impairments in fiscal 2013.

 

Interest income. Interest income decreased $0.8 million, or 11.2%, from $7.5 million in fiscal 2012 to $6.6 million in fiscal 2013. The decrease is primarily the result of lower interest rates earned on our available cash in fiscal 2013 and repayment of certain real estate notes receivable.

 

Interest expense on third party debt. Interest expense on third party debt decreased $37.5 million, or 27.6%, from $135.9 million in fiscal 2012 to $98.4 million in fiscal 2013. The decrease was a result of the refinancing of our senior debt facilities in December 2012, which lowered the average effective interest rate on our senior debt facilities from approximately 11.0% to approximately 8.0%, as well as a lower average outstanding principal balance in fiscal 2013.

 

Interest expense on notes payable to partners. Interest expense on notes payable to partners increased $40.8 million, or 20.8%, from $195.8 million in fiscal 2012 to $236.6 million in fiscal 2013 due to a higher principal amount of indebtedness outstanding in fiscal 2013. Interest on notes payable to partners accrues without payment and is added to the principal balance of the notes on a quarterly basis.

 

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Earnings (loss) from equity method investments. Earnings (loss) from equity method investments decreased $5.7 million, from earnings of $0.5 million in fiscal 2012 to a loss of $5.1 million in fiscal 2013. The change in fiscal 2013 is primarily a result of recording our share of net loss from our investment in Whistler Holdings prior to the sale in December 2012.

 

Gain on disposal of equity method investments. The gain on disposal of equity method investments in fiscal 2013 resulted from the sale of our investment in Whistler Holdings in December 2012.

 

Loss on extinguishment of debt. In December 2012, we refinanced our senior debt facilities and recognized a $11.2 million loss on extinguishment, which reflects the write-off of unamortized debt issuance costs and related fees.

 

Other income, net. Other income, net increased $0.8 million from $1.2 million in fiscal 2012 to $2.0 million in fiscal 2013 principally as a result of gains on foreign currency in fiscal 2013.

 

Income tax benefit. We realized an income tax benefit of $5.8 million in fiscal 2012 compared to a benefit of $23.6 million in fiscal 2013. The 2013 tax benefit is primarily due to a decrease in the valuation allowance attributable to a restructuring of our Canadian operations that will allow us to utilize additional deferred tax assets.

 

Mountain

 

   Fiscal Year Ended
June 30,
   
   2012  2013  Change  % Change
Skier Visits    2,758,970    3,146,119    387,149    14.0%
Revenue per Visit   $112.64   $107.75   $(4.89)   (4.3)%
ETP   $47.65   $45.92   $(1.73)   (3.6)%
Room Nights    365,742    392,572    26,830    7.3%
ADR   $157.57   $157.28   $(0.29)   (0.2)%
                     
Mountain revenue:   (dollars in thousands) 
Lift   $131,453   $144,480   $13,027    9.9%
Lodging    39,380    41,982    2,602    6.6%
Ski School    24,669    27,042    2,373    9.6%
Retail and Rental    40,208    44,385    4,177    10.4%
Food and Beverage    38,464    43,711    5,247    13.6%
Other    36,591    37,403    812    2.2%
Total Mountain Revenue   $310,765   $339,003   $28,238    9.1%
                     
Mountain Adjusted EBITDA   $66,051   $72,353   $6,302    9.5%

 

Total Mountain revenue. Total Mountain revenue increased $28.2 million, or 9.1%, from $310.8 million in fiscal 2012 to $339.0 million in fiscal 2013, primarily as a result of a 14.0% increase in Skier Visits in fiscal 2013. Increased visitation for fiscal 2013 was driven by improved snowfall and conditions, increased leisure travel interest and favorable spring break schedules.

 

Lift revenue. Lift revenue increased $13.0 million, or 9.9%, from $131.5 million in fiscal 2012 to $144.5 million in fiscal 2013. This increase in fiscal 2013 was attributable to an increase in Skier Visits.

 

Lodging revenue. Lodging revenue increased $2.6 million, or 6.6%, from $39.4 million in fiscal 2012 to $42.0 million in fiscal 2013. The increase in fiscal 2013 was attributable to the increase in Room Nights partially offset by a slight decrease in ADR. The increase in Room Nights was driven by the same factors that led to increased visitation levels.

 

Ski school revenue. Ski school revenue increased $2.4 million, or 9.6%, from $24.7 million in fiscal 2012 to $27.0 million in fiscal 2013. The increase in fiscal 2013 was primarily attributable to an increase in Skier Visits.

 

Retail and rental revenue. Retail and rental revenue increased $4.2 million, or 10.4%, from $40.2 million in fiscal 2012 to $44.4 million in fiscal 2013. The increase in fiscal 2013 was primarily attributable to an increase in Skier Visits.

 

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Food and beverage revenue. Food and beverage revenue increased $5.2 million, or 13.6%, from $38.5 million in fiscal 2012 to $43.7 million in fiscal 2013. The increase in fiscal 2013 was primarily attributable to an increase in Skier Visits.

 

Other revenue. Other revenue increased $0.8 million, or 2.2%, from $36.6 million in fiscal 2012 to $37.4 million in fiscal 2013. The increase in other revenue is primarily attributable to an increase in our summer mountain biking operations and summer visitation at our resorts.

 

Mountain Adjusted EBITDA. Mountain Adjusted EBITDA increased $6.3 million, or 9.5%, from $66.1 million in fiscal 2012 to $72.4 million in fiscal 2013. The increase in Mountain Adjusted EBITDA was related to a $28.2 million increase in Mountain revenue and a $1.0 million increase in our pro rata share of EBITDA for our equity method investment in Blue Mountain Resorts Limited, which increased from $5.9 million in fiscal 2012 to $6.9 million in fiscal 2013. Partially offsetting these increases was a $23.0 million increase in Mountain operating expenses, which increased from $250.6 million in fiscal 2012 to $273.6 million in fiscal 2013, primarily as a result of higher Skier Visits in fiscal 2013, the absence in fiscal 2013 of temporary cost control measures that were implemented in fiscal 2012 and higher incentive compensation expense in fiscal 2013.

 

Adventure

 

   Year Ended
June 30,
      
   2012  2013  Change  % Change
             
CMH Guest Nights    37,829    36,237    (1,592)   (4.2)%
CMH RevPGN   $1,650   $1,693   $43    2.6%
                    
    (dollars in thousands) 
Adventure revenue   $109,496   $113,622   $4,126    3.8%
Adventure Adjusted EBITDA   $16,151   $19,740   $3,589    22.2%

 

Adventure revenue. Adventure revenue increased $4.1 million, or 3.8%, from $109.5 million in fiscal 2012 to $113.6 million in fiscal 2013. This increase was primarily due to an increase in revenue from ancillary services partially offset by a decrease in CMH revenue. CMH revenue decreased $1.1 million, or 1.8%, in fiscal 2013 compared to fiscal 2012. The decrease was primarily attributable to a decrease of 4.2% in CMH Guest Nights, partially offset by the elimination of early booking discounts in fiscal 2013. The decline in CMH Guest Nights was primarily attributable to a decline in European guests as a result of weak European economic conditions. European guests historically have comprised more than 40% of our total CMH winter guests.

 

Revenue from ancillary services increased $5.2 million, or 11.2%, in fiscal 2013 compared to fiscal 2012. This increase was primarily attributable to increased fire suppression activities resulting from above average forest fire activity in the Western United States and Western Canada.

 

Adventure Adjusted EBITDA. Adventure Adjusted EBITDA increased $3.6 million, or 22.2%, from $16.2 million in fiscal 2012 to $19.7 million in fiscal 2013. The increase in Adventure Adjusted EBITDA was related to a $4.1 million increase in Adventure revenue and a $0.7 million decrease in Adventure operating expenses, which decreased from $93.3 million in fiscal 2012 to $92.7 million in fiscal 2013, partially offset by $1.2 million of Adjusted EBITDA attributable to noncontrolling interest in Alpine Helicopters as a result of the restructuring of those operations in fiscal 2013.

 

Real Estate

 

   Year Ended
June 30,
      
   2012  2013  Change  % Change
   (dollars in thousands)
Real Estate Revenue   $61,439   $64,726   $3,287    5.4%
Real Estate Adjusted EBITDA   $9,855   $13,167   $3,312    33.6%

 

Real Estate revenue. Real Estate revenue increased $3.3 million, or 5.4%, from $61.4 million in fiscal 2012 to $64.7 million in fiscal 2013. The increase included a $1.2 million increase in Playground revenues as a result of the

 

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acceleration of commissions relating to the exit of our brokerage engagement at Honua Kai Resort and Spa in Maui. Additionally, revenues from IHM increased $1.1 million due to higher room nights and ADR, and IRCG revenues increased $1.1 million due to higher point sales stemming from improved economic conditions and enhanced marketing initiatives.

 

Real Estate Adjusted EBITDA. Real Estate Adjusted EBITDA increased $3.3 million, or 33.6%, from $9.9 million in fiscal 2012 to $13.2 million in fiscal 2013. Real Estate revenues increased $3.3 million in fiscal 2013, while real estate operating expenses decreased $0.4 million, from $58.8 million in fiscal 2012 to $58.4 million in fiscal 2013. Of this total, IRCG operating expenses decreased $1.7 million in fiscal 2013 as a result of lower marketing and business development expenses, while IHM operating expenses increased $1.7 million in fiscal 2013 to support the increased occupancy and room nights at Westin Monache. We also recognized a $0.5 million decrease in our pro rata share of EBITDA for our equity method investments in Mammoth Hospitality Management, LLC and Chateau M.T. Inc. in fiscal 2013. Interest income from IRCG remained flat in fiscal 2013 at $4.8 million.

 

Comparison of Operating Results in Fiscal Years 2011 and 2012

 

The following table presents our consolidated statements of operations for fiscal 2011 and 2012:

 

   Year Ended
June 30,
      
   2011  2012  $ Change  % Change
   (dollars in thousands)
Revenue   $559,523   $513,447   $(46,076)   (8.2)%
Operating expenses    504,005    453,187    (50,818)   (10.1)%
Depreciation and amortization    76,371    57,655    (18,716)   (24.5)%
Loss on disposal of assets    26,196    9,443    (16,753)   (64.0)%
Impairment of long-lived assets    12,140    782    (11,358)   (93.6)%
Impairment of real estate    73,230    8,137    (65,093)   (88.9)%
Goodwill impairment    64,097    3,575    (60,522)   (94.4)%
     Income (loss) from operations    (196,516)   (19,332)   177,184    90.2%
Interest income    9,162    7,467    (1,695)   (18.5)%
Interest expense on third party debt    (143,463)   (135,929)   7,534    (5.3)%
Interest expense on notes payable to partners    (160,943)   (195,842)   (34,899)   21.7%
Earnings (loss) from equity method investments    8,299    538    (7,761)   (93.5)%
Other income (expense), net    (2,021)   1,199    3,220    159.3%
Loss from continuing operations before income taxes
   (485,482)   (341,899)   143,583    (29.6)%
Income tax (benefit) expense    6,555    (5,836)   (12,391)   (189.0)%
    Loss from continuing operations    (492,037)   (336,063)   155,974    (31.7)%
Loss from discontinued operations, net of tax    (6,469)   —      6,469    (100.0)%
Net loss    (498,506)   (336,063)   162,443    (32.6)%
Earnings attributable to noncontrolling interest    (361)   —      361    (100.0)%
Net loss attributable to Intrawest Cayman L.P.    (498,867)   (336,063)   162,804    (32.6)%

 

Total revenue. Total revenue decreased $46.1 million, or 8.2%, from $559.5 million in fiscal 2011 to $513.4 million in fiscal 2012. Total reportable segment revenue increased $1.7 million as a result of increases of $12.8 million and $0.3 million in Adventure and Real Estate revenues, respectively, partially offset by a $11.4 million decrease in Mountain revenues. The increase in total reportable segment revenue was offset by a $47.8 million decrease in legacy, non-core and other revenue, which decreased from $79.5 million in fiscal 2011 to $31.7 million in fiscal 2012. $38.6 million of this decrease is attributable to the inclusion of Whistler Blackcomb revenue in fiscal 2011 prior to our disposition of our ownership interest in the assets of Whistler Blackcomb in November 2010, with the remaining $9.2 million decrease attributable to a $4.8 million decrease associated with legacy real estate development at Winter Park, a $4.1 million decrease from divested non-core hospitality operations and a net decrease of $0.3 million in other non-core operations.

 

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Operating expenses. Operating expenses decreased $50.8 million, or 10.1%, from $504.0 million in fiscal 2011 to $453.2 million in fiscal 2012. Total reportable segment operating expenses increased $1.9 million as a result of an increase of $12.2 million in Adventure operating expenses, partially offset by decreases of $9.5 million and $0.8 million in Mountain and Real Estate operating expenses, respectively. Offsetting the increase in total reportable segment operating expenses was a $52.7 million decrease in legacy and other non-core operating expenses, which decreased from $103.2 million in fiscal 2011 to $50.5 million in fiscal 2012. $51.1 million of this decrease is attributable to the inclusion of Whistler Blackcomb operating expenses in fiscal 2011 prior to our disposition of our ownership interest in the assets of Whistler Blackcomb in November 2010.

 

Depreciation and amortization. Depreciation and amortization expense decreased $18.7 million, or 24.5%, from $76.4 million in fiscal 2011 to $57.7 million in fiscal 2012, due primarily to the inclusion of depreciation and amortization on Whistler Blackcomb’s assets in fiscal 2011 prior to our divestiture of these assets in November 2010.

 

Loss on disposal of assets. In fiscal 2011, the loss on disposal of assets was primarily related to a loss of $24.4 million on the sale of our interest in the assets of Whistler Blackcomb in November 2010. In fiscal 2012, the loss of $9.4 million was related to the sale of legacy real estate at Copper Mountain.

 

Impairments. Goodwill impairments, impairments of long-lived assets and impairments of real estate decreased $137.0 million, or 91.6%, from $149.5 million in fiscal 2011 to $12.5 million in fiscal 2012. We recognized a $73.2 million real estate impairment in fiscal 2011 and a $8.1 million real estate impairment in fiscal 2012 due to a downturn in the real estate market, which caused the carrying value of our real estate assets held for development to be higher than the fair value. In fiscal 2011, we recognized a goodwill impairment of $64.1 million related to the change in expectations associated with two of our resorts. In fiscal 2012, we recognized a goodwill impairment of $3.6 million related to a real estate reporting unit.

 

Interest income. Interest income decreased $1.7 million, or 18.5%, from $9.2 million in fiscal 2011 to $7.5 million in fiscal 2012. The decrease is primarily attributable to a $0.1 million decrease in income from our IRCG receivables portfolio, a $0.6 million decrease in interest earned from legacy real estate sales where we provide seller financing and a $1.0 million decrease in other interest income.

 

Interest expense on third party debt. Interest expense on third party debt decreased $7.5 million, or 5.3%, from $143.5 million in fiscal 2011 to $135.9 million in fiscal 2012. The decrease in interest expense was associated with a decrease in our third party senior debt in fiscal 2012 compared to fiscal 2011 after giving effect to the application of the net proceeds from the sale of our ownership interest in the assets of Whistler Blackcomb in November 2010.

 

Interest expense on notes payable to partners. Interest expense on notes payable to partners increased $34.9 million, or 21.7%, from $160.9 million in fiscal 2011 to $195.8 million in fiscal 2012 due to a higher principal amount of indebtedness outstanding. Interest on notes payable to partners accrues without payment and is added to the principal balance of the notes on a quarterly basis.

 

Earnings (loss) from equity method investments. Earnings from equity method investments decreased $7.8 million, or 93.5%, from $8.3 million in fiscal 2011 to $0.5 million in fiscal 2012. The decrease was primarily associated with lower earnings from our resort investments, which were negatively affected by the poor weather conditions during fiscal 2012.

 

Other income (expenses), net. Other income (expense), net increased $3.2 million from other expense, net of $2.0 million in fiscal 2011 to other income of $1.2 million in fiscal 2012 principally as a result of gains on foreign currency in fiscal 2012 of $1.9 million.

 

Income taxes. We incurred income tax expense of $6.6 million in fiscal 2011 compared to a benefit of $5.8 million in fiscal 2012. The tax benefit is primarily due to a decrease in our reserve for unrecognized tax benefits of $6.0 million attributable to the lapse of the statute of limitations related to a state tax matter.

 

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Mountain

 

   Year Ended
June 30,
   
   2011  2012  Change  % Change
             
Skier Visits    3,192,388    2,758,970    (433,418)   (13.6)%
Revenue per Visit   $100.94   $112.64   $11.70    11.6%
ETP   $43.34   $47.65   $4.31    9.9%
Room Nights    373,815    365,742    (8,073)   (2.2)%
ADR   $157.35   $157.57   $0.22    0.1%
                     
Mountain revenue:   (dollars in thousands) 
Lift   $138,364   $131,453   $(6,911)   (5.0)%
Lodging    40,647    39,380    (1,267)   (3.1)%
Ski School    25,614    24,669    (945)   (3.7)%
Retail and Rental    40,777    40,208    (569)   (1.4)%
Food and Beverage    39,368    38,464    (904)   (2.3)%
Other    37,424    36,591    (833)   (2.2)%
Total Mountain Revenue   $322,194   $310,765   $(11,429)   (3.5)%
Mountain Adjusted EBITDA   $69,805   $66,051   $(3,754)   (5.4)%

 

Total revenue. Total revenue from the Mountain segment decreased $11.4 million, or 3.5%, from $322.2 million in fiscal 2011 to $310.8 million in fiscal 2012. This decrease was primarily attributable to a decrease in Skier Visits of 13.6%, from 3.2 million in fiscal 2011 to 2.8 million in fiscal 2012, due to poor weather conditions during the 2011/2012 ski season.

 

Lift revenue. Lift revenue decreased $6.9 million, or 5.0%, from $138.4 million in fiscal 2011 to $131.5 million to fiscal 2012. This decrease in fiscal 2012 was attributable to a decrease in Skier Visits.

 

Lodging revenue. Lodging revenue decreased $1.2 million, or 3.1%, from $40.6 million in fiscal 2011 to $39.4 million in fiscal 2012. The decrease in fiscal 2012 was attributable to a decrease in Room Nights partially offset by a slight increase in ADR. The decrease in Room Nights was driven by the same factors that led to decreased visitation levels.

 

Ski school revenue. Ski school revenue decreased $0.9 million, or 3.7%, from $25.6 million in fiscal 2011 to $24.7 million in fiscal 2012. The decrease in fiscal 2012 was primarily attributable to a decrease in Skier Visits offset by an increase in Revenue per Visit. The increase in Revenue per Visit was primarily the result of a greater percentage of destination guests in the skier mix.

 

Retail and rental revenue. Retail and rental revenue decreased $0.6 million, or 1.4%, from $40.8 million in fiscal 2011 to $40.2 million in fiscal 2012. The decrease in fiscal 2012 was primarily attributable to a decrease in Skier Visits offset almost entirely by an increase in Revenue per Visit as a result of a greater percentage of destination guests in the skier mix.

 

Food and beverage revenue. Food and beverage revenue decreased $0.9 million, or 2.3%, from $39.4 million in fiscal 2011 to $38.5 million in fiscal 2012. The decrease in fiscal 2012 was primarily attributable to a decrease in Skier Visits offset slightly by an increase in Revenue per Visit as a result of a greater percentage of destination guests in the skier mix.

 

Other revenue. Other revenue decreased $0.8 million, or 2.2%, from $37.4 million in fiscal 2011 to $36.6 million in fiscal 2012. The decrease in fiscal 2012 was primarily attributable to a decrease in Skier Visits, which resulted in a decrease in revenues from other winter activities at our resorts.

 

Mountain Adjusted EBITDA. Mountain Adjusted EBITDA decreased $3.7 million, or 5.4%, from $69.8 million in fiscal 2011 to $66.1 million in fiscal 2012. The decrease in Mountain Adjusted EBITDA was related to a $11.4 million decrease in Mountain revenue and a $1.8 million decrease in our pro rata share of EBITDA for our equity method investment in Blue Mountain Resorts Limited, which decreased from $7.7 million in fiscal 2011 to $5.9 million in fiscal 2012 due to decreased visitation as a result of poor weather conditions during the 2011/2012 ski season. Partially offsetting these decreases was a $9.5 million decrease in Mountain operating expenses, which

 

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decreased from $260.1 million in fiscal 2011 to $250.6 million in fiscal 2012, primarily due to temporary cost control measures in fiscal 2012 in response to decreased visitation, decreased resort compensation and benefits as a result of lower bonus expenses and lower staffing levels across our resorts in fiscal 2012, as well as fewer operating days during the 2011/2012 ski season.

 

Adventure

 

   Year Ended
June 30,
      
   2011  2012  Change  % Change
             
CMH Guest Nights    34,479    37,829    3,350    9.7%
CMH RevPGN   $1,670   $1,650   $(20)   (1.2)%
                     
    (dollars in thousands) 
Adventure revenue   $96,693   $109,496   $12,803    13.2%
Adventure Adjusted EBITDA   $15,563   $16,151   $588    3.8%

 

Adventure revenue. Adventure revenue increased $12.8 million, or 13.2%, from $96.7 million in fiscal 2011 to $109.5 million in fiscal 2012. CMH revenue increased $4.9 million, or 8.4%, in fiscal 2012 compared to fiscal 2011. The increase was primarily attributable to an increase in CMH Guest Nights, partially offset by a slight decrease in CMH RevPGN. Total Guest Nights during fiscal 2012 increased 9.7% over fiscal 2011. In contrast to most of North America, snow and weather conditions in British Columbia were favorable during most of the 2011/2012 ski season.

 

Revenue from ancillary services increased $8.2 million, or 19.7%, in fiscal 2012 compared to fiscal 2011. The increase was primarily attributable to increased MRO revenues associated with an increase in third party job volume.

 

Adventure Adjusted EBITDA. Adventure Adjusted EBITDA increased $0.6 million, or 3.8%, from $15.6 million in fiscal 2011 to $16.2 million in fiscal 2012. The increase in Adventure Adjusted EBITDA was related to a $12.8 million increase in Adventure revenue, partially offset by a $12.2 million increase in Adventure operating expenses, which increased from $81.1 million in fiscal 2011 to $93.3 million fiscal 2012. Adventure operating expenses increased as a result of the increase in CMH Guest Nights and an increase in ancillary services.

 

Real Estate

 

   Year Ended
June 30,
      
   2011  2012  Change  % Change
   (dollars in thousands)
Real Estate Revenue   $61,165   $61,439   $274    0.4%
Real Estate Adjusted EBITDA   $9,002   $9,855   $853    9.5%

 

Real Estate revenue. Real Estate revenue increased $0.3 million, or 0.4%, from $61.2 million in fiscal 2011 to $61.4 million in fiscal 2012. IHM revenues increased $5.1 million due to higher room nights and higher ADR and a $1.0 million increase in commercial revenues. Partially offsetting the increase in revenues was a decrease in IRCG revenues of $3.6 million related to lower point sales and a decrease in Playground revenues of $1.3 million related to a smaller number of units sold at Honua Kai.

 

Real Estate Adjusted EBITDA. Real Estate Adjusted EBITDA increased $0.9 million, or 9.5%, from $9.0 million in fiscal 2011 to $9.9 million in fiscal 2011. The increase in Real Estate Adjusted EBITDA was primarily related to a $0.3 million increase in Real Estate revenue and a $0.8 million decrease in Real Estate operating expenses, which decreased from $59.6 million in fiscal 2011 to $58.8 million in fiscal 2012. In addition, our income earned from receivables decreased $0.1 million while our pro rata share of EBITDA from our equity method investments in Mammoth Hospitality Management, LLC and Chateau M.T. Inc. increased by $0.1 million.

 

Liquidity and Capital Resources

 

Overview

 

Our primary goal as it relates to liquidity and capital resources is to attain and retain the optimal level of debt and cash to maintain and fund expansions, replacement projects and other capital investments and to ensure that we

 

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are poised for external growth in our industries. Our principal sources of liquidity are cash generated from operations, funds from borrowings and existing cash on hand. Our principal uses of cash include the funding of working capital obligations, capital expenditures and servicing our debt.

 

Due to the seasonality of our business cycle, there are significant fluctuations in our cash and liquidity throughout the year. Our cash balances are typically at their highest at the end of our third fiscal quarter, following the ski season, and at their lowest toward the middle of our second fiscal quarter, before the start of the ski season.

 

Over the next 12 months, we anticipate cash flows from operations to be the principal source of cash and believe current assets and cash generated from operations will be sufficient to meet anticipated working capital needs, planned capital expenditures and debt service obligations. We intend to use the net proceeds to us from this offering for working capital and other general corporate purposes, which may include potential investments in, and acquisitions of, ski and adventure travel businesses and assets. We may also elect to use cash from operations, debt or equity proceeds or a combination thereof to finance future acquisition opportunities.

 

Significant Sources of Cash

 

Historically, we have financed our capital expenditures and other cash needs through cash generated from operations. We generated $21.1 million, $43.4 million and $41.8 million of cash from operating activities during fiscal 2011, 2012 and 2013, respectively. We currently anticipate that our ongoing operations will continue to provide a significant source of future operating cash flows. We have also generated significant cash flows in the fiscal years presented from asset sales, including our sale of the assets of Whistler Blackcomb and legacy real estate assets. These transactions generated $542.0 million, $4.8 million and $135.9 million of cash for fiscal 2011, 2012 and 2013, respectively. Following this offering, we do not expect to generate significant cash flows from non-core asset sales, as we have divested substantially all of our non-core real estate assets.

 

Our cash and cash equivalents balance as of June 30, 2013 was $59.8 million. As of June 30, 2013, after giving effect to the Pro Forma Transactions, we expect to have $         million of available borrowings under the New Credit Agreement. See “Unaudited Pro Forma Condensed Consolidated Financial Information.”

 

Significant Uses of Cash

 

Our current cash requirements include providing for our working capital requirements, capital expenditures and servicing our debt. We generate the majority of our cash during the ski season, which is in our second and third fiscal quarters, primarily due to the seasonality of our business.

 

We make capital expenditures to maintain the high quality of our operations within our Mountain, Adventure and Real Estate segments. Many of these capital expenditures are non-discretionary, including snow grooming machine replacement, snowmaking equipment upgrades and building refurbishments. We also make capital expenditures that are discretionary in nature that are intended to improve our level of service or increase the scale of our operations, such as our commencement of construction of a new on-mountain restaurant and night skiing at Steamboat. We maintain a data driven approach to investment selection and the allocation of capital between competing opportunities. We have a centralized process to complete net present value, internal rate of return and sensitivity analyses for each investment idea. Senior management then reviews a prioritized list of potential investments to allocate capital to the ideas with the highest expected returns and the largest strategic benefits. Capital expenditures were $27.6 million, $30.1 million and $29.7 million in fiscal 2011, 2012 and 2013, respectively, or 4.9%, 5.9% and 5.7% of total revenue for fiscal 2011, 2012 and 2013, respectively.

 

We paid principal, interest and fees to our lenders of $671.2 million, $92.2 million and $819.8 million for fiscal 2011, 2012 and 2013, respectively. At the consummation of this offering, we expect to have approximately $        million aggregate principal amount of long-term debt outstanding under the New Credit Agreement. In connection with the Restructuring, all of the notes payable to partners, together with all accrued and unpaid interest thereon, will be exchanged for equity or effectively modified to release us and our subsidiaries as guarantors with respect to such loans. For more information, see “—Debt,” “Description of Certain Indebtedness” and “Unaudited Pro Forma Condensed Consolidated Financial Information.”

 

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Cash Flows in Fiscal 2012 compared with Fiscal 2013

 

The table below sets forth for the periods indicated our net cash flow from operating, investing and financing activities, as well as the effect of exchange rates on cash:

 

   Year Ended
June 30,
   
   2012  2013  Change
   (in thousands)   
Net cash provided by (used in):               
    Operating activities   $43,390   $41,765   $(1,625)
    Investing activities    (21,286)   105,407    126,693 
    Financing activities    (41,518)   (133,683)   (92,165)
Effect of exchange rate on cash    609    (622)   (1,231)
Net (decrease) increase  in cash and cash equivalents   $(18,805)  $12,867   $31,672 

 

Cash provided by operating activities decreased $1.6 million, from $43.4 million in fiscal 2012 to $41.8 million in fiscal 2013. The change was primarily a result of additional interest paid in fiscal 2013 as well as the timing of cash flows related to the change in working capital.

 

Cash provided by investing activities increased $126.7 million, from cash used in investing activities of $21.3 million in fiscal 2012 to cash provided by investing activities of $105.4 million in fiscal 2013. The increase in cash provided by investing activities was primarily related to the sale of our equity investment in Whistler Holdings and certain non-core commercial properties in fiscal 2013.

 

Cash used in financing activities increased $92.2 million, from $41.5 million in fiscal 2012 to $133.7 million in fiscal 2013. In December 2012, we entered into the First Lien Credit Agreement and the Second Lien Credit Agreement, the borrowings under which were used to refinance and replace the borrowings under our outstanding senior indebtedness, including the payment of related prepayments fees, issuance costs, transaction and legal fees. Total costs of the debt refinancing were $21.9 million, which were recorded as deferred financing costs, and $11.2 million was recorded as a loss on extinguishment of debt.

 

Cash Flows in Fiscal 2011 compared with Fiscal 2012

 

The table below sets forth for the periods indicated our net cash flow from operating, investing and financing activities, as well as the effect of exchange rates on cash:

 

   Year Ended
June 30,
   
   2011  2012  Change
   (in thousands)   
Net cash provided by (used in):               
    Operating activities   $21,140   $43,390   $22,250 
    Investing activities    514,497    (21,286)   (535,783)
    Financing activities    (572,797)   (41,518)   531,279 
Effect of exchange rate on cash    6,694    609    (6,085)
Net decrease in cash and cash equivalents   $(30,466)  $(18,805)  $11,661 

 

Cash provided by operating activities increased $22.3 million, from $21.1 million in fiscal 2011 to $43.4 million in fiscal 2012. The change was primarily a result of a decrease in interest paid in fiscal 2012.

 

Cash used in investing activities increased $535.8 million, from cash provided by investing activities of $514.5 million in fiscal 2011 to cash used by investing activities of $21.3 million in fiscal 2012. In fiscal 2011, we disposed of our interest in the assets of Whistler Blackcomb and received proceeds of $513.0 million.

 

Cash used in financing activities decreased $531.3 million, from $572.8 million in fiscal 2011 to $41.5 million in fiscal 2012. The decrease was primarily related to the repayment of debt from the proceeds from the Whistler Blackcomb asset sale in fiscal 2011.

 

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Debt

 

As of June 30, 2013, we were a party to the First Lien Credit Agreement, the Second Lien Credit Agreement and various credit agreements governing the notes payable to partners. As of June 30, 2013, $1.9 billion of borrowings were outstanding under these debt agreements. Our total remaining borrowing capacity under these debt agreements as of June 30, 2013 was $20.0 million. The First Lien Credit Agreement and the Second Lien Credit Agreement have a weighted average effective interest rate of approximately 8.0%. Notes payable to partners accrue interest without payment and unpaid interest is added on a quarterly basis to the principal balance.

 

Prior to the consummation of this offering, we expect one of our subsidiaries to enter into the New Credit Agreement. The borrowings under the New Credit Agreement, together with cash on hand and funds contributed to us by an affiliate of Fortress, will be used to refinance and replace the borrowings under the First Lien Credit Agreement and the Second Lien Credit Agreement. In addition, on the date the New Credit Agreement is entered into all of the notes payable to partners, together with all accrued and unpaid interest thereon, will be exchanged for equity or effectively modified to release us and our subsidiaries as guarantors with respect to such loans. See “Description of Certain Indebtedness” and “Unaudited Pro Forma Condensed Consolidated Financial Information.”

 

The New Credit Agreement will provide for affirmative and negative covenants that restrict, among other things, the ability of our subsidiaries to incur indebtedness, dispose of property and make investments or distributions. We were in compliance with all financial covenants in our debt agreements as of June 30, 2013. We expect our subsidiaries to meet all applicable covenants in our New Credit Agreement. However, there can be no assurance that our subsidiaries will meet such covenants. If such covenants are not met, we would be required to seek a waiver or amendment from the lenders who are parties to the New Credit Agreement. There can be no assurance that such waiver or amendment would be granted. The failure to obtain a waiver or amendment could result in the acceleration of the related debt, which could have a material adverse impact on our liquidity.

 

Contractual Obligations

 

As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as debt agreements, lease agreements and construction agreements in conjunction with our resort capital expenditures. A summary of our contractual obligations as of June 30, 2013 on a pro forma basis for the Pro Forma Transactions is set forth below:

 

Contractual Obligations(1)  Total  Fiscal 2014  2-3 years  4-5 years  More than 5 years
   (dollars in thousands)
New Credit Agreement  $          $            $              $            $          
Estimated interest on New Credit Agreement                         
Capital lease obligations   26,082    2,658    22,641    289    494 
Operating leases   39,715    11,568    13,670    7,383    7,094 
Construction contract   2,041    2,041    —      —      —   
Pension obligations   31,978    3,460    6,514    6,513    15,491 
Purchase obligations and service contracts (2)   8,601    7,609    950    42    —   
Total contractual obligations  $           $          $            $           $        

 

 

(1)We do not expect any significant cash payments related to uncertain tax positions.
(2)Includes Steamboat’s contract with airlines that guarantees payment if minimum revenue goals are not attained by the airlines. For obligations with cancellation provisions, the amounts were limited to the non-cancelable portion of the agreement terms or the minimum cancellation fee. Also includes payments under a contract with a third-party provider of information technology services and payments under a guarantee of a loan agreement at Tremblant.

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Off Balance Sheet Arrangements

 

We do not have off balance sheet transactions that are expected to have a material effect on our financial condition, revenue, expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Quantitative and Qualitative Disclosures About Market Risk

 

Inflation

 

Inflation and changing prices have not had a material impact on our revenues, income (loss) from operations and net loss during any of our three most recent fiscal years. However, to the extent inflationary trends affect short-term interest rates, a portion of our debt service costs, as well as the rates we charge on our consumer loans, may be affected.

 

Interest Rate Fluctuations

 

Our exposure to market risk is limited primarily to the fluctuating interest rates associated with variable rate indebtedness. At June 30, 2013, we had $572.8 million of variable rate indebtedness, representing approximately 30% of our total debt outstanding, at an average interest rate for fiscal 2013 of 8%. As of June 30, 2013, LIBOR was 0.2%. As our variable-rate borrowings have a LIBOR floor of 1.25%, a 100 basis point change in LIBOR would not affect our interest payments. Our market risk exposure fluctuates based on changes in underlying interest rates. In addition, prior to October 2008, we had outstanding interest rate swap contracts that were accounted for as cash flow hedges. The outstanding swap contracts were terminated, and the terminated swap liability is currently being recognized as an adjustment to interest expense.

 

Foreign Currency Fluctuations

 

In addition to our operations in the United States, we conduct operations in Canada from which we receive revenues in foreign currencies. Because our financial results are reported in U.S. dollars, fluctuations in the value of the Canadian dollar against the U.S. dollar have had and will continue to have an effect, which may be significant, on our reported financial results. A decline in the value of the Canadian dollar or any of the other foreign currencies in which we receive revenues against the U.S. dollar will reduce our reported revenues and expenses from operations in foreign currencies, while an increase in the value of any such foreign currencies against the U.S. dollar will tend to increase our reported revenues and expenses from operations in foreign currencies. Total Canadian dollar denominated revenues comprised approximately 46.1%, 44.3% and 41.6% of our total revenues for fiscal 2011, 2012 and 2013, respectively. Total Canadian dollar denominated operating expenses comprised approximately 54.8%, 47.1% and 41.3% of our operating expenses for such periods, respectively. We believe that a weaker Canadian dollar as measured against the U.S. dollar tends to have a positive effect on visitation at our Canadian resorts and CMH and acts a natural hedge, as it increases the relative attractiveness of the pricing at these resorts among American guests and customers. Variations in exchange rates can significantly affect the comparability of our financial results between financial periods. We do not currently perform any foreign currency hedging activities related to this exposure. For additional information on the potential impact of exchange rate fluctuations on our financial results, see “Risk Factors—Risks Related to Our Business—We are subject to risks related to currency fluctuations.”

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions we believe to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions or conditions, and the impact of such differences may be material to our consolidated financial statements. The most significant estimates and judgments are reviewed on an ongoing basis and are revised when necessary. Those critical accounting policies and estimates that require the most significant judgment are discussed further below.

 

Real Estate Held for Development

 

Real estate held for development is recorded at the lower of cost and net realizable value. We provide for impairment charges where the carrying value of a particular real estate property exceeds its estimated net realizable value. We periodically obtain third party valuations and record impairment charges when the carrying values of the properties are higher than fair value. We recorded impairment charges on real estate held for development in fiscal 2011, 2012 and 2013.

 

 

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Long-Lived Assets

 

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of each asset category. Certain buildings, area improvements and equipment are located on leased or licensed land and are depreciated over the lesser of the lease or license term or its estimated useful life. These estimated useful lives range from three to 40 years. Finite-lived intangible assets consisting of permits and licenses, trademarks, customer relationships and other intangibles are amortized on a straight-line basis over their estimated useful lives, which is the period over which the assets are expected to contribute directly or indirectly to our future cash flows.

 

We must make estimates and assumptions when accounting for capital expenditures as either a maintenance expense or a capital asset. We capitalize costs incurred to renew or extend the term of a recognized intangible asset, such as permits and licenses, and amortize such costs over the remaining estimated life of the asset. In addition, depreciation and amortization expense on long-lived assets is dependent on the assumptions we make about the assets’ estimated useful lives. We determine the estimated useful lives based on our experience with similar assets and our estimate of the usage of the asset.

 

Long-lived assets subject to depreciation and amortization, including property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Considerable management judgment is necessary to evaluate the impact of operating changes and to estimate future cash flows. If actual results are not consistent with our estimates and assumptions used to calculate estimated future cash flows, we may be exposed to impairment charges. We recorded impairment charges on long-lived assets including finite-lived intangible assets in fiscal 2011, 2012 and 2013.

 

Goodwill

 

Goodwill is evaluated or tested for impairment annually as of June 30th, and at any time when events or conditions suggest impairment may have occurred. We perform a qualitative assessment to assess whether it is more likely than not that the fair value of a reporting unit exceeds its carrying value. If the assessment indicates that a reporting unit may be impaired, we perform a two-step impairment test. For purposes of goodwill impairment testing, we compare the fair value of each reporting unit with its carrying amount, including goodwill. The fair value of each reporting unit is determined based on expected discounted future cash flows. If the carrying amount of a reporting unit exceeds its fair value, the goodwill within the reporting unit may be potentially impaired. An impairment loss is recognized if the carrying amount of the goodwill exceeds implied fair value of that goodwill.

 

Considerable management judgment is necessary to initially value goodwill and to continually evaluate goodwill for impairment going forward, including the estimation of future cash flows, which is dependent on internal forecasts, available industry/market data (to the extent available), estimation of the long-term rate of growth for our business including expectations and assumptions regarding the impact of the timing and degree of any economic recovery, estimation of the useful life over which cash flows will occur (including terminal multiples), determination of the respective weighted average cost of capital and market participant assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and impairment for each reporting unit.

 

While historical performance and current expectations have resulted in fair values of our reporting units in excess of carrying values for fiscal 2013, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future. We recorded impairment charges on goodwill in fiscal 2011 and 2012.

 

Self-Insured Liabilities

 

We have a policy of self-insurance 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 in the United States and 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. Actual insurance assessments may differ from our estimates and require us to record additional expense.

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Income Taxes

 

Through June 30, 2013, we have recorded a valuation allowance against our net operating losses for all of the deferred tax asset due to uncertainty of their realization as a result of our earnings history, the number of years our net operating losses and tax credits can be carried forward, the existence of taxable temporary differences and near-term earnings expectations. The amount of the valuation allowance could decrease if facts and circumstances change that materially increase taxable income prior to the expiration of the loss carryforwards. Any reduction would reduce (increase) the income tax expense (benefit) in the period such determination is made by us.

 

Recent Accounting Pronouncements

 

Refer to note 2, Summary of Significant Accounting Policies, of the notes to the audited consolidated financial statements of Cayman L.P. for a discussion of new accounting standards.

 

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Industry

 

We are a ski and adventure company operating within the leisure industry. Our results of operations are affected by consumer discretionary spending. We compete primarily with other leisure, lifestyle, entertainment and travel related businesses and activities, for both consumers’ discretionary time and spend.

 

Macro-Economic and Consumer Trends

 

Our industry and business are generally affected by macro-economic conditions and trends and their impact on the consumer. As such, we believe that our industry will benefit from the continued recovery in the economy following the recessionary challenges that began in 2008. Numerous economic trends support the notion that the health of the general economy is improving, which we believe will enhance consumer discretionary spending. U.S. equity markets, as represented by the S&P 500 Index, are up 44.2% over the five year period ending September 30, 2013. Disposable personal income increased 4.0% during the same five year period. As of April 26, 2013, consumer confidence, as measured by the Consumer Sentiment Index, was up 38.2% from its five-year low experienced in November 2008 and has been consistently above its five-year average since January 2012. In addition, household net worth increased 30.8% since 2008.

 

 

 

 

It is our belief that as the economy continues to improve, consumers will have more disposable income and a greater inclination to engage in and spend on leisure activities, which will positively impact the leisure industry. Since experiencing a trough in 2009, leisure industry GDP growth has outpaced broader U.S. GDP growth in each of the past three years, driven in part by a steady increase in the U.S. consumer’s time and expenditures devoted to leisure activities.

 

 

 

Mountain Resort Industry

 

The North American mountain resort industry is an established industry with significant barriers to entry. The barriers for new ski resort development result from the difficulty in obtaining necessary government permits and the significant capital required for development and construction. As such, no major ski resorts have been developed in the past 30 years, with the last major resorts opened being Blackcomb Mountain and Beaver Creek in 1980 and Deer

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Valley in 1981. Preliminary reports estimate that in the 2012/2013 ski season, there were 753 mountain resorts operating in North America, approximately 478 of which were located in the United States. The mountain resort industry is fragmented, as evidenced by the fact that companies that owned or operated four or more resorts made up less than 10% of the North American market.

 

North American mountain resorts range from small regional ski areas primarily attracting day visitors to large resorts offering a comprehensive vacation experience for both regional and destination guests. Resorts located near major metropolitan areas benefit from both large local populations and easy access to international airports. Local populations provide a stable source of season pass customers, which helps reduce the risks associated with adverse weather conditions and creates a base of loyal repeat visitors. Destination guests are often less price sensitive than regional guests, preferring to visit during weekend and peak holiday periods that generate higher ETP and higher lodging room rates.

 

Skier Visits and Effective Ticket Price

 

One of the principal measures of ski industry performance is the “skier visit,” which represents a person utilizing a ski ticket or ski pass to access a ski mountain for any part of one day, and includes both paid and complimentary access.

 

During the 10 years leading up to the 2008 financial crisis, skier visits grew at a CAGR of 1.7%, outpacing average United States and Canadian combined population growth of 1.2%, and ETP grew at a CAGR of 4.4%, outpacing core inflation of 2.2% during the same period.

 

Following the peak of the financial crisis in 2008, skier visits decreased by a mere 6.3% from the 2007/2008 ski season historical record of 80.8 million. In the following seasons, skier visits began a sustained recovery and nearly reached record levels again during the 2010/2011 ski season with 79.4 million visits. Although skier visits were down during the 2011/2012 ski season as a result of the lowest amount of snowfall in 20 years, skier visits increased again in the 2012/2013 ski season. In addition, during the past five years, despite high unemployment and fragile economic conditions, the industry has maintained the ability to increase ETP, with a CAGR of 2.7%, outpacing core inflation of 1.6%.

 

North American Ski Resort Visits and U.S. Effective Ticket Price (Visits in Millions)

 

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Market Trends

 

Over the last several decades, there has been a trend of consolidation within the mountain resort industry. The number of mountain resorts in North America has declined from 1,025 in the 1984/1985 ski season to an estimated 753 in the 2012/2013 ski season. Smaller mountain operators have underperformed and become less competitive than their larger multi-resort peers as a result of funding pressures from significant capital requirements. As a result, many smaller mountain operators have been forced to close. We believe this trend will continue and create an opportunity for increased mergers and acquisitions activity as larger multi-resort operators benefit from economies of scale in administration, access to capital and the ability to offer customers attractive multi-resort products.

 

In addition, the introduction of high-speed lifts, innovations in ski equipment, the growing popularity of snowboarding, improved snowmaking capabilities and changes in industry demographics have all played a significant role in the growth, stability and long-term sustainability of the ski industry. Along with improving the on-mountain ski experience, resorts have sought to address demands from consumers to provide a broader winter experience beyond skiing activities through the development of nightlife, entertainment, shopping, dining and spa amenities aimed at creating a higher-end, luxury resort experience. This trend became a source of growth as many resorts looked to real estate sales and development to create ancillary operations such as luxury lodges, condos and base villages with retail shops, restaurants and hotels. Eventually, this expansion led to the creation of the four-season resort experience, which allowed for year-round activities at many of the large destination ski resorts. Operators began adding amenities like golf courses, tennis courts and mountain biking trails, and offering warm weather activities such as sightseeing, river rafting, hiking, fishing, zip lining and horseback riding, all of which have served to mitigate the seasonality of the ski business.

 

Adventure Travel Industry

 

The Adventure Travel Trade Association and George Washington University define “adventure travel” as tourism activities involving two of the following three attributes: physical activity, interaction with nature, and cultural learning or exchange.

 

We believe the adventure travel industry is large, profitable, growing rapidly and highly fragmented. Compared to prior years, consumers are more cognizant of their health and general well-being, and are both living longer and leading more active lifestyles. In recent years, consumers have been spending a greater proportion of their income on wellness and have taken a more holistic approach to their health, including making a conscious effort to participate in leisure and recreational activities that also provide many of the benefits of traditional exercise. We believe that the industry’s growth profile allows for expansion as well as the opportunity for larger operators to leverage their scale through consolidation.

 

We believe that there are currently less than 75 heli-skiing and snowcat-accessed skiing operators in North America, with most heli-skiing and catskiing occurring in British Columbia due to the vast alpine wilderness and consistent annual snowfall. The demographic of participants in the heli-ski industry has evolved over the past few decades, in large part due to improvements in ski equipment technology that have made the activity accessible to less fit and less skilled skiers. Today, intermediate skiers who can confidently navigate the advanced slopes at lift-accessed resorts have sufficient skill and physical conditioning to participate in heli-skiing. Given the growing popularity of backcountry skiing, we believe heli-skiing will continue to become an increasingly popular activity.

 

Real Estate

 

We own land available for development in and around our mountain resorts. This land is primarily reserved for residential vacation home as well as commercial development, such as the build-out of village areas and hotels. We believe the demand for vacation homes is reliant on the overall health of the U.S. real estate market and, in particular, the housing market.

 

The health of the housing market fluctuates with macro-economic trends and consumer sentiment. Key factors that influence consumer perception towards housing include stock market performance, unemployment levels and mortgage interest rates. As the broader economy has improved, so too has the housing market. For the three years ending August 31, 2013, new housing starts have increased by 24.1%. The Housing Price Index has risen 9.9% for the four years ending June 30, 2013. Increasing home prices give consumers the confidence to invest in home ownership. According to the National Realtors Association, existing single family home sales have increased by 10.9% in the last year.

 

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Along with the recovery in the housing market, vacation home sales have increased 10% year-over-year in 2012 to represent 11% of all home sale transactions in 2012, while the median sales price for vacation homes in 2012 increased 24% over the prior year. However, despite these strong trends, the median vacation home price and the number of vacation homes sold in the most recent year still remain well below the peak in 2005/2006, suggesting room for continued growth. Mountain home sales values and volumes in select resort destinations have outpaced the overall vacation home market. In Steamboat, median prices during December 2012 and January 2013 were up 36% over the prior year periods. Other major destination resort markets across the western United States experienced similar gains with unit sales at Vail up 29%, Lake Tahoe up 18% and Sun Valley up 51%.

 

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Our Business

 

Overview

 

We are one of North America’s premier mountain resort and adventure companies, delivering distinctive vacation and travel experiences to our guests for over three decades. We own interests in seven iconic mountain resorts with more than 11,000 skiable acres and more than 1,150 acres of land available for real estate development. We also own the leading heli-skiing adventure company in North America, providing helicopter access to more skiable terrain than all lift accessed mountain resorts combined. Additionally, we operate a comprehensive real estate business through which we manage, market and sell vacation club properties; manage condominium hotel properties; and sell and market residential real estate. During fiscal 2013, our portfolio of resorts received more than six million visitors from all 50 states and more than 100 countries, and we generated total revenues of $524.4 million. We believe our decades of experience as a mountain resort operator and real estate developer, together with our ability to scale our operations, positions us for future growth and profitability.

 

We manage our business through three reportable segments: Mountain, which accounted for 65.5% of fiscal 2013 reportable segment revenue; Adventure, which accounted for 22.0% of fiscal 2013 reportable segment revenue; and Real Estate, which accounted for 12.5% of fiscal 2013 reportable segment revenue.

 

Through our Mountain segment, we operate five four-season mountain resorts: Steamboat Ski & Resort in Colorado; Winter Park Resort in Colorado; Mont Tremblant Resort in Quebec; Stratton Mountain Resort in Vermont; and Snowshoe Mountain in West Virginia. Through this segment, we also hold a 50% interest in Blue Mountain Ski Resort in Ontario. Our mountain resorts offer a recreational experience for individuals of all ages that combines outdoor adventure and fitness with a wide variety of resort-based amenities, including retail, equipment rental, dining, lodging, ski school and various forms of family entertainment. Our four-season mountain resorts are geographically diversified across North America’s major ski regions, including the Eastern United States, the Rocky Mountains and Canada, which we believe helps reduce our financial exposure to any single geographic area as weather patterns and economic conditions vary across these regions. Each of our mountain resorts is located within convenient driving distance to major metropolitan markets with high concentrations of affluent skiers and major airports, including New York City, Boston, Washington D.C., Pittsburgh, Denver, Montreal and Toronto. In each of our markets, our mountain resorts are established leaders with a reputation for some of the best skiing, amenities and experiences.

 

Through our Adventure segment, we own and operate CMH, the premier heli-skiing adventure company in North America. CMH has been providing heli-skiing trips for the past 50 years and currently provides helicopter accessed skiing, mountaineering and hiking on 3.1 million powder-filled acres of terrain in British Columbia, which amounts to more skiable terrain than all lift accessed mountain resorts in North America combined. In addition to providing what we believe is an unparalleled skiing and backcountry experience in North America, CMH provides accommodation, service and dining at its lodges, nine of which are owned by us. In support of CMH’s skiing, guiding and hospitality operations, we own a modified fleet of 40 helicopters and operate a helicopter maintenance, repair and overhaul business. CMH’s integrated operating model enables us to scale the business and increase guest visits with limited reliance on third party providers. In addition, to more efficiently utilize our aircraft and CMH pilots year round, we provide heli-hiking, fire suppression and utility services during the summer months. By utilizing the same pilots each ski season who have an average of over 7,000 hours of experience flying in the high alpine and who possess extensive knowledge of the terrain, we believe CMH is able to provide a more consistent guest experience.

 

Prior to 2010, we were actively engaged in the development of resort real estate. As a result, we accumulated a portfolio of more than 1,150 acres of core development parcels surrounding the bases of our Steamboat, Winter Park, Tremblant, Stratton and Snowshoe resorts, much of which is located adjacent or proximate to the ski trails, including ski-in ski-out parcels. We believe that our real estate platform and expertise will enable us to capitalize on improving economic conditions related to commercial and residential real estate and create substantial value through future development of our core entitled land. While we do not have any specific plans for the development of our core entitled land, we are focused on designing strategies for future development of this land in concert with planning for on-mountain and base village improvements. In addition to our core entitled land holdings and development planning, we maintain the capability to manage, market and sell real estate through IRCG, our vacation club business, IHM, which manages condominium hotel properties in Maui, Hawaii and in Mammoth Lakes, California, and Playground, our residential real estate sales and marketing business.

 

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Our Strengths

 

Iconic, Market Leading Mountain Resorts and North America’s Premier Mountain Adventure Company. Our portfolio of mountain resorts offers distinctive experiences at some of North America’s most popular destinations. We have invested heavily in the development of lifts, trails, snowmaking capabilities and pedestrian villages with a large bed base and a variety of retail and dining options at our mountain resorts. These investments have established our resorts as the market leaders they are today. We are one of the largest mountain resort companies in North America based on skier visits and own CMH, the largest heli-skiing business in North America. CMH’s operating area encompasses 3.1 million acres of high alpine terrain across British Columbia, which we believe offers an unparalled skiing and backcountry experience. Repeat visitors accounted for the majority of CMH’s guests during fiscal 2013, a testament to the overall experience. With its global brand, portfolio of terrain access, collection of 11 lodges and differentiated aviation support, CMH is North America’s leading heli-skiing platform and is positioned to further grow within the adventure travel industry.

 

Geographically Diversified Portfolio. We benefit from significant diversity in our asset mix, geographic footprint and customer base. Our ownership of mountain resorts, adventure travel assets and real estate provides us geographic and operational diversification, which we believe affords us a strong degree of financial stability and resiliency through varying economic and weather-related conditions. Our mountain resorts are dispersed throughout North America, with locations in the Eastern United States, the Rocky Mountains and Canada. During fiscal 2013, no single resort accounted for more than 16% of our total revenue. In addition, our resorts are located within convenient driving distance to large metropolitan areas with high concentrations of affluent skiers and major airports, such as New York City, Boston, Washington D.C., Pittsburgh, Denver, Montreal and Toronto. This provides us a strong base of regional and destination visitors, which we believe helps reduce our financial exposure to any single geographic region as weather patterns and economic conditions can vary across regions. We believe that this is a differentiating factor from our competitors, many of whom have more geographically concentrated businesses.

 

Strong Competitive Position with High Barriers to Entry. We operate or have an ownership interest in three of the top 10 mountain resorts in the United States as measured by skier visits. We also operate or have an ownership interest in what we believe are two of the top three mountain resorts in Canada as measured by skier visits. Given the significant barriers to entry to new ski resort development in North America resulting from the limited number of remaining suitable sites, the difficulty in obtaining necessary government permits and the significant capital required for development and construction, we believe our iconic mountain resorts will continue to capture a growing share of industry revenues.

 

Customer Base with Significant Discretionary Income. We generally attract a more affluent customer than many other leisure activities, such as theme parks and other attractions. In our Mountain segment, our average revenue per visit was in excess of $107 during fiscal 2013. In our Adventure segment, our average revenue per CMH Guest Night was approximately $1,700 during fiscal 2013. We believe our affluent customer base is more resilient than the average consumer during an economic downturn. In addition, given the quality of our assets and our affluent customer base, we believe that there is a long-term opportunity to increase revenues through pricing. As our target market continues to live longer, active lives, we believe that we are well positioned to capitalize on increased demand for active, adventure oriented travel experiences.

 

Recurring and Stable Revenue. We have loyal guests who visit our resorts frequently every year. Many of these guests purchase season passes or frequency products and either own real estate at our resorts or are potential future buyers of vacation real estate. Season pass and frequency product revenue contributed $42.5 million, $45.2 million and $48.0 million to lift revenues for fiscal 2011, 2012 and 2013, respectively, and represented 30.7%, 34.4% and 33.2% of our lift revenues during these respective fiscal years. Season pass and frequency product revenue has grown at a CAGR of 6.3% over the three year period ended June 30, 2013. Moreover, 69.8% of our fiscal 2013 season pass holders owned season passes at our resorts during prior ski seasons, representing a strong source of recurring cash flow. This source of recurring and stable revenue reduces our sensitivity to economic conditions and weather, and provides a base line of predictability that allows us to focus on pursuing growth and value creating opportunities for our businesses.

 

Expanding Margins and Strong Cash Flows. Our focus on improving the operating performance of each of our mountain resorts has allowed us to improve our operating profit margins. Additionally, our portfolio provides us with significant economies of scale, creating operational synergies across our resorts and enabling us to consolidate our sales and marketing, human resources, accounting, finance, legal, procurement, insurance and technology departments. Given our ability to both grow our existing resorts and to acquire new resorts without a proportionate increase

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in our administration functions, we believe we have the ability to increase our profitability as we scale our operations. We also believe we will be positioned to benefit significantly from this operating leverage through any investments and mergers and acquisitions that we undertake.

 

Seasoned and Experienced Management Team. Our management team, which is comprised of professionals with wide ranging experience in resort, real estate and leisure operations, has significant experience and a proven track record of mountain resort management and growing companies through acquisitions. Our Chief Executive Officer has over 25 years of experience in our industry. Our management team has demonstrated its ability to adapt and adjust the business during economic downturns and to grow the business. In addition, our management team has extensive experience in identifying and evaluating businesses for acquisition, performing in-depth due diligence, negotiating with owners and management, and structuring, financing and closing acquisition transactions. We have also attracted and retained qualified, dedicated resort chiefs at each of our resorts. Our resort chiefs have an average of 11 years of service with us and 26 years of experience in the ski industry. We believe that the experience of our management team is a significant contributor to our operating performance.

 

Growth Strategies

 

Our strategies to grow our businesses and increase our profitability include the following:

 

Continue to Improve Operating Efficiency and Margins. We continue to focus on driving financial improvement through a variety of cost savings initiatives. To identify and realize cost savings across our portfolio, we have centralized many functions such as our sales and marketing, human resources, accounting, finance, legal, procurement, insurance and technology departments. We believe this strategy enables us to achieve cost and pricing efficiencies as well as leverage the experience of senior management in operational and strategic decisions. We will continue to centralize additional support functions where there is further opportunity to benefit from economies of scale in cost and administration.

 

Increase Visitation and Guest Revenue. We believe there are significant opportunities to increase our revenues and profitability through targeted growth capital investments in our resorts that enhance the guest experience. We have recently invested in lift and snow making improvements, dining and lodging facilities, and new terrain. We also continue to invest in technology solutions, such as customer relationship management and marketing automation, to create a more customized and convenient guest experience. We believe that customer relationship management will enable front line employees to provide a higher level of guest service as they will have the guest’s pertinent information on-hand, which will allow our employees to immediately cater to that guest’s needs. Using marketing automation, we will be able to individualize messaging so that it is relevant to the individual recipient, which we believe will enhance the guest experience by providing guests with timely information about what is happening at the resorts while they are on the property. We are also focused on developing new recreational activities, attractions and amenities at our mountain resorts to maximize visitation and utilization of our assets during off-peak periods, including non-winter seasons, weekdays and evenings. We have a pipeline of projects that are actionable in the near-term, including adding night skiing at Steamboat this season with the goal of keeping guests on the slopes and at our venues longer into the evening and the expansion of our skiable terrain at Winter Park and Steamboat, which we believe will increase visitor volume and revenue per visit. We have also greatly increased the summer offerings at our resorts with the recent additions of mountain biking, zip lines, mountain coasters and other activities, and we believe we have the opportunity to expand our summer offerings further in the future. In addition, we are increasingly hosting special events and entertainment, such as the IRONMAN® 70.3 World Championship at Tremblant and MusicFest at Steamboat, to stimulate visitation during off-peak periods.

 

Enhance Pre-sold Product Offerings. Pre-selling our products and services provides benefits to us and value to our guests. We sell the bulk of our season pass products during the spring, summer and fall, which helps smooth the seasonality of our cash flows. Pre-sold revenues also increase the predictability of our ski season revenues and hedge our exposure to economic conditions and weather. During fiscal 2013, season pass and frequency product revenue represented 33.2% of our lift revenues. We have grown season pass and frequency product revenue at a 6.3% CAGR over the past three years by offering a wider variety of pass products to appeal to more segments of the market. For example, certain of our resorts have introduced passes that are meant to appeal to particular segments of the market, such as children, young professionals and members of the military. We believe that season pass and frequency product holders visit our resorts more frequently, which provides us with more opportunities to sell them ancillary products and services. We intend to continue to drive growth in pre-sold revenues by offering innovative lift pass, lodging, bundled vacation packages and special promotions.

 

 

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Maximize Cross-Selling Opportunities Within Each Resort and Across our Platform. We seek to increase our share of guest spending at our resorts by providing an appealing mix of ancillary products and services. In addition to our core lift pass products, we offer guests a mix of retail, rental equipment, dining, lodging, ski school and various forms of family entertainment. In addition, we control prime on-mountain and base area locations, giving us a distinct advantage in cross-selling our products and services by leveraging our ability to communicate with visitors during the planning stage of their visit through our call centers and websites. We are also uniquely positioned to offer bundled vacation packages that include lift pass products and ski school lessons as we are the exclusive provider of those services at our resorts. In addition, we are focused on cross-selling our existing destination guests, season pass holders, second home owners and vacation club members on new experiences within our portfolio of resorts and at CMH. For example, we believe that our customers from the Eastern United States and Canada are excellent prospects for experiences at our western ski resorts and CMH.We currently offer pass products that are valid at multiple resorts and intend to expand our suite of multi-resort products in the future.

 

Drive Growth in our Adventure Segment. With the growing interest in both backcountry powder skiing and experiential adventure travel, we believe we are well positioned to grow our Adventure segment both organically and through accretive acquisitions. While we have no immediate plans to do so, we have the ability to expand our existing lodges and build additional lodges within CMH’s expansive terrain. The recent evolution of ski technology, such as wider skis, allows skiers with less skill and fitness to successfully navigate backcountry skiing, significantly expanding our addressable market. Through additional improvements in sales and marketing and the introduction of additional backcountry offerings that we currently do not offer, such as snowcat- accessed skiing, small group private heli-skiing and ski touring, we believe we have the opportunity to attract customers from new markets and demographics. Through our CMH operations, we have developed expertise in providing complex adventure experiences and marketing to affluent, adventurous travelers. We believe these core competencies can be transferred to other complimentary adventure experiences. Given the fragmentation in the adventure travel industry, we believe there are numerous acquisition opportunities to further drive growth in our Adventure segment.  

 

Pursue Strategic Acquisitions and Operating Relationships. The North American ski industry is highly fragmented, with approximately 753 ski areas in North America, of which fewer than 10% are owned by multi-resort operators who operate four or more ski resorts. The adventure travel industry is similarly fragmented. We intend to evaluate acquisition opportunities where the opportunity would provide a strategic fit within our existing portfolio of businesses. We believe that opportunistically acquiring additional mountain resorts that are proximate to our existing resorts will enable us to enhance product and operational synergies. Additionally, we believe that acquiring resorts in geographies outside our current operating footprint and acquiring additional adventure travel businesses will enable us to expand into new markets and further mitigate our exposure to any single geographic region. As a multi-resort operator, we believe we are well positioned to take advantage of economies of scale in administration, purchasing power and access to capital and leverage our ability to offer multi-resort products. In addition, we intend to evaluate “capital light” opportunities such as managing third-party resort assets and entering into real estate development partnerships.

 

Capitalize on “Home Team” Real Estate Advantage. We own more than 1,150 acres of land available for development at our mountain resorts, much of which is adjacent or proximate to the ski trails at our resorts, including ski-in and ski-out parcels. As the “home team” operator in our resort communities, we have the competitive advantage of being able to add additional value to real estate by bundling it with resort amenities and products, something that other developers cannot do at our resorts, since we control many of the amenities and products offered at our resorts. We believe that we can generate significant profits from the future development of our core entitled land at our resorts. Additionally, to the extent that future development increases the number of units and beds at our resorts, we believe that the extra lodging capacity will support incremental visitor growth and profits.

 

Business Operations

 

We operate our business through three reportable segments: Mountain, Adventure and Real Estate.

 

Mountain

 

Our four-season mountain resorts are geographically diversified across North America’s major ski regions, including the Eastern United States, the Rocky Mountains and Canada, which we believe reduces our financial exposure to any single geographic area as weather pattern and economic conditions vary across these regions. Each of our mountain resorts is located within convenient driving distance to major metropolitan markets with high

 

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concentrations of affluent skiers and major airports, including New York City, Boston, Washington D.C., Pittsburgh, Denver, Montreal and Toronto. In each of our markets, our mountain resorts are established leaders with a reputation for some of the best skiing, amenities and experiences. 

Our mountain resorts offer a recreational experience for individuals of all ages that combines outdoor adventure and fitness with a wide variety of resort-based amenities, including retail, equipment rental, dining, lodging, ski school and various forms of family entertainment. We own and/or manage many of these services and amenities, which allows us to capture a larger proportion of guest spending as well as ensure product and service quality at our resorts. In this way, each of our mountain resorts operates as a collection of small businesses allowing us to derive revenues from a wide variety of sources, including the following:

 

Lift Pass Products. We offer guests a wide variety of lift pass products targeted to particular customer segments. These products include season passes, frequency passes and single- and multi-day tickets. Season pass products are available for purchase prior to and during the ski season. We offer both unlimited and restricted season passes, the latter blocking out pre-determined periods (i.e., certain holidays). Season pass products provide a value option to our guests, which in turn assists us in developing a loyal base of customers who commit to ski at our resorts in advance of the ski season and typically ski more days each season at our resorts than those guests who do not buy season passes. As such, our season pass program drives strong customer loyalty, mitigates our exposure to weather and generates ancillary guest spending. Frequency pass products are valid for a specific period of time, providing our guests with flexibility as to when they visit our resorts during that timeframe. Single- and multi-day tickets constitute the balance of our lift pass products. Compared to frequency pass products, multi-day tickets have a shorter timeframe for their use. Most lift pass products are valid at a specific resort, although we also offer some products, such as our Rocky Mountain Super Pass PlusTM and our Rocky Mountain Super PassTM, that are valid across multiple resorts owned by us and third parties with whom we have contractual relationships.

 

Lodging. We manage lodging properties and condominiums at and in close proximity to our mountain resorts. Historically, newly constructed townhomes and condominiums were sold to owners who placed the units into a rental pool managed by us. We perform a full complement of guest services for third-party property owners, including reservations, property management and housekeeping. In return for performing these services, we receive a portion of the revenue from the rental of these properties.

 

Ski School. We are the exclusive operator of the ski school at each of our mountain resorts. Our ski schools offer a wide variety of private and group ski and snowboard lessons, which cater to all ages and skill levels. In the summer months, several of our resorts provide mountain biking lessons.

 

Rental and Retail Shops. We offer a large rental fleet of ski, snowboard and mountain biking equipment at our mountain resorts. We also operate a range of retail shops at our mountain resorts. Shopping is generally an important part of the guest vacation experience and an appropriate mix of retail options is important to the total resort framework. Retail revenue also helps stabilize our daily and weekly cash flows, as our shops tend to have the strongest sales on poor weather days. Our retail 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 other winter outerwear. In addition, our resorts offer our own logo-wear. In the non-winter seasons, most of the on-mountain shops are closed and the base-area shops sell mountain bikes, hiking and other outdoor products, and warm-weather apparel. The large number of retail locations operated by us allows us to improve margins through large quantity purchase agreements.

 

Food and Beverage. Food and beverage is an important component in providing a satisfying guest experience. 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. We own and operate the on-mountain food and beverage facilities at our mountain resorts. These facilities include restaurants, bars, cafes, warming huts, cafeterias and upscale dining options. At each of our mountain resorts, we also own and operate many of the base-area restaurants and bars as well as many of the food service outlets in the village centers.

 

Other. We generate additional revenue from a wide variety of activities and ancillary operations, including private clubs, municipal services (e.g., plowing roads), call centers, parking operations, golf courses, summer base area activities, strategic alliances, entertainment events and other resort activities.

 

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The following table summarizes certain key statistics relating to each of our mountain resorts as of June 30, 2013.

 

Resort  Location  Year
Opened
  Average
Snowfall(1)
  Maximum
Vertical
Drop
  Skiable
Terrain
  Snowmaking
Coverage
  # of
Trails
  # of
Lifts
  Lodging
Units
Under
Mgmt.
  Food &
Berverage
Outlets
Operated
  Retail &
Rental
Outlets
Operated
         (inches)  (feet)  (acres)  (acres)               
Steamboat  Colorado   1963    363    3,668    2,965    375    165    18    317    18    16 
Winter Park  Colorado   1939    322    3,060    3,081    313    143    25    348    14    11 
Tremblant  Quebec   1939    163    2,116    654    465    95    14    896    11    20 
Stratton  Vermont   1961    151    2,003    624    474    94    11    415    11    10 
Snowshoe  West Virginia   1974    166    1,500    251    251    57    14    1,149    16    13 
Blue Mountain (50%)  Ontario   1941    78    720    281    236    36    14    1,027    9    9 
 
(1)Based on the eight-year historical average of snowfall during the 2005/2006 ski season through the 2012/2013 ski season.

 

Description: http:||replytoall.typepad.com|.a|6a00d8341c607753ef0154382d814d970c-200pi Steamboat Ski & Resort  (operating since 1963) is located in the Colorado Rocky Mountains, 157 miles northwest of Denver, with access via direct flights from New York, Los Angeles, Chicago, Houston, Atlanta, Minneapolis, Seattle, Dallas and Denver. Seventy-nine winter Olympians have been trained in Steamboat Springs, Colorado, where Steamboat is located. With the potential to add an additional 430 acres of skiable terrain, the resort features a combination of high-end guest services and amenities, an 1880’s western atmosphere and some of the most consistent snowfall in the Rocky Mountain region. The resort receives an average of nearly 365 inches of light, dry powder snow each ski season, which we refer to in our marketing materials as Champagne Powder® snow. Average snowfall at Steamboat is 25% more than the historical Rocky Mountain regional resort average of 290 inches.

 

We acquired Steamboat in 2007 from the American Skiing Company and have invested more than $25.0 million on mountain and base area improvements, such as terrain and snowmaking upgrades, two new high speed chairlifts and food court remodels. For the 2013/2014 ski season, Steamboat will open a new on-mountain lodge with a seating capacity of over 250 in the main dining level of its restaurant. In addition, we are adding night skiing at Steamboat for the 2013/2014 ski season.

 

Winter Park Resort (operating since 1939) is located in the Colorado Rocky Mountains, 67 miles west of Denver, and is one of the closest resorts to the Denver metropolitan area’s nearly three million residents. The resort, which is comprised of Winter Park Mountain, Mary Jane Mountain, Vasquez Cirque and Vasquez Ridge, is the longest operating mountain resort in Colorado and has long been referred to in our marketing materials as Colorado’s Favorite®. The resort receives an average snowfall during the ski season of approximately 322 inches and features six terrain parks and “world-class” mogul skiing, as described by Powder Magazine. Winter Park has the option to add an additional 837 acres, which would expand our skiable terrain by nearly 30%. Each summer, Winter Park transforms into a mountain biking destination, with one of the largest bike parks in the United States.

 

The City of Denver opened Winter Park in 1939 to provide a winter recreational area to the public. In 2002, we entered into a long-term lease with the WPRA, an instrumentality of the City of Denver, to operate the resort and develop land at the base area. See “—Properties—Winter Park Operations.”

 

Mont Tremblant Resort (operating since 1939) is located in Quebec, within a two hour drive from the Montreal metropolitan area’s nearly four million residents and the Ottawa metropolitan area’s nearly 1.2 million residents. The resort is consistently ranked as one of the top ski resorts in Eastern North America by Ski Magazine. With 2,116 feet of vertical drop and snowmaking on 77% of trails, Tremblant offers guests the opportunity to ski down one of the biggest vertical drops in eastern Canada. In the summer, guests can play golf on two 18-hole golf courses, mountain bike, enjoy the pedestrian village and attractions or take in Tremblant’s free outdoor concerts.

 

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Since acquiring Tremblant in 1991, we have significantly expanded the ski facilities and terrain, including the addition of high-speed detachable quad chairlifts, eight-passenger gondolas, a 1,000-seat mountain-top restaurant and an upgraded snowmaking system.

 

Stratton Mountain Resort (operating since 1961)is located in Vermont approximately 220 miles north of New York City and approximately 150 miles northwest of Boston, whose metropolitan areas have a combined population of more than 23 million residents. Situated on one of the tallest peaks in New England, Stratton is widely considered the birthplace of snowboarding. Stratton features a vertical drop of 2,003 feet and snowmaking on 93% of trails. Stratton’s summer amenities feature 27-holes of golf, a 22-acre golf school and a sports and tennis complex. Winter and summer guests are also able to enjoy Stratton’s pedestrian village.

 

We acquired Stratton in 1994 and have made significant capital improvements, including a private club, upgraded snowmaking capabilities and lift infrastructure.

 

Snowshoe Mountain Resort (operating since 1974) is located in West Virginia and is one of the largest ski resorts in the Southeast region of the United States. Snowshoe primarily draws guests from the Baltimore-Washington D.C. and Pittsburgh metropolitan area’s combined 11.7 million residents, as well as the Southeastern United States. The 251 acre resort has the biggest vertical drop in the region (1,500 feet) and receives an average snowfall during the ski season of approximately 166 inches while also enjoying 100% snowmaking coverage. The resort’s mountaintop village offers a variety of nightlife, dining and retail options. Snowshoe was named #1 Overall Ski Resort and #1 for Nightlife in the Mid-Atlantic by OnTheSnow.com, a popular skiing website, in 2012.

 

We acquired Snowshoe in 1995 and have made significant capital improvements, including new lifts, snowmaking, terrain expansion and a zipline located in the village.

 

Blue Mountain Ski Resort (operating since 1941) is located in Ontario, approximately 90 miles northwest of Toronto’s approximately 5.6 million residents. With 281 skiable acres and snowmaking on 93% of trails, Blue Mountain is both the largest and most popular resort in Ontario. Blue Mountain also operates a year round conference center and offers a suite of summer amenities, including an 18-hole golf course, an open-air gondola, a mountain biking facility, a waterfront park and a mountain roller coaster

 

We acquired a 50% interest in Blue Mountain Resorts Limited in 1999. Since then, the resort has undergone major renovations, including installation of advanced snowmaking systems, service buildings, lodge upgrades, a conference center and the ongoing development of a 40-acre pedestrian village located at the base of the mountain. We expect to add six new trails and an additional high-speed chairlift at Blue Mountain in the 2013/2014 ski season.

 

We are party to a shareholders agreement with Blue Mountain Holdings, the owner of the other 50% interest in Blue Mountain Resorts Limited. The agreement provides for certain board of directors nomination rights, pre-emptive rights, rights of first offer between the shareholders, as well as drag along and tag along rights. In addition, subject to certain requirements, we have a call option on the equity interest held by Blue Mountain Holdings at 110% of fair market value and Blue Mountain Holdings has a put option, which would require us to purchase up to all of the equity interests held by Blue Mountain Holdings at 90% of fair market value. See “Risk Factors—Risks Related to Our Business—Pursuant to a shareholders agreement, we may be required to purchase Blue Mountain Resorts Holdings Inc.’s equity interest in Blue Mountain Resorts Limited.”

 

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The following table shows historical snowfall at our resorts compared to their corresponding regional resort averages:

 

    Historical Average Snowfall(1)  
    Resort vs. Region(2)   % Difference  
    (inches)   (inches)      
    363   290   25.2%  
    322   290   11.0%  
    163   140   16.4%  
    151   140   7.9%  
    166   58   186.2%  
    78   (3)    
               

 

 

(1)Based on eight-year historical average of snowfall during the 2005/2006 ski season through the 2012/2013 ski season.
(2)Source: Kottke National End of Season Survey. Note Tremblant is compared to the Northeast U.S. regional resort average.
(3)Comparable data for Blue Mountain not available.

 

Competition

 

There are significant barriers to entry for new ski resort development in North America resulting from the limited number of remaining suitable sites, the difficulty in obtaining necessary government permits and the significant capital required for development and construction. As such, no major ski resorts have been developed in the past 30 years, with the last major resorts opened being Blackcomb Mountain and Beaver Creek in 1980 and Deer Valley in 1981.

 

Competition within the ski resort industry is based on multiple factors, including location, price, weather conditions, the uniqueness and perceived quality of the terrain for various levels of skill and ability, the atmosphere of the base village, the quality of food and entertainment and ease of travel to the resort (including direct flights by major airlines). We believe we compete effectively and our competitive position is protected, due to the unique attributes and geographic diversity among our portfolio of mountain resorts. We believe that our mountain resorts feature a sufficient quality and variety of terrain and activities to make them highly competitive with other mountain resorts.

 

Our resorts directly compete with other mountain resorts in their respective local and regional markets, as well as with other major destination resorts. Our individual mountain resorts primarily compete as follows:

 

Steamboat’s primary competition is from Breckenridge Ski Resort in Colorado, Park City Mountain Resort in Utah and other large international ski destinations.

 

Winter Park’s primary competition is from Copper Mountain Resort, Keystone Resort and other ski resorts located in Colorado’s Front Range.

 

Tremblant’s primary competition is from Mont-Sainte-Anne, Mont Blanc, Le Massif and Mont Saint-Sauveur, all located in Quebec, other resorts in the Laurentian Mountains, and both Jay Peak and Stowe Mountain in Northern Vermont.

 

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Stratton’s primary competition is from other mid-to-large size ski resorts in Southern Vermont, including Okemo, Mount Snow and Killington Resort.

 

Snowshoe’s primary competition is from ski resorts in the mid-Atlantic, such as Seven Springs Mountain Resort located in Pennsylvania, and Bryce Resort and Wintergreen Resort, both located in Virginia.

 

Blue Mountain’s primary competition is from Horseshoe Valley Resort and Mount St. Louis, both located in Ontario, and Holiday Valley Resort in western New York.

 

 Adventure

 

Through our Adventure segment, we own and operate Canadian Mountain Holidays, the leading heli-skiing adventure company in North America. CMH has been providing heli-skiing trips for the past 50 years and currently operates in the Purcell, Selkirk, Monashee and Cariboo mountains of eastern British Columbia from 11 lodges, nine of which are owned by us. CMH’s operating area encompasses 3.1 million acres of terrain granted under renewable 10 to 30 year licenses from the government of British Columbia for heli-ski/heli-hiking operations. CMH’s acreage amounts to more skiable terrain than all lift access mountain resorts in North America combined. Guests at CMH typically ski more than 18,000 vertical feet per day, with some runs providing up to 7,820 vertical feet.

 

The following is a summary of CMH’s existing tenures:

 

Lodges Associated with Tenure  Mountain Range  Skiing Terrain
       (acres) 
Adamant  Selkirks   259,559 
Bobbie Burns  Purcells & Selkirks   260,111 
Bugaboo  Purcells   251,274 
Cariboo(1)  Cariboos   346,462 
Galena  Selkirks   288,4