Intrawest’s First Quarterly Report

Intrawest recently filed their first public report since going public. You’ll remember that they did an initial public offering (IPO) as a way to restructure their balance sheet after the real estate market for mountain properties collapsed. I wrote about that here and here. Fortress was the company that owned most of Intrawest’s debt. Now that the debt has been converted to equity as part of the IPO, “Fortress beneficially owns 60.1% of the voting and economic equity interests of the company.” 

The company’s second quarter ended December 31, 2013. They acknowledged being late getting this report done due to the pressures of the public offering. I’m going to briefly review the numbers they reported, but remember that these numbers are before the conversion of their debt to equity and completion of the IPO that happened in the first quarter of 2014.
Revenue for the quarter fell slightly from $104.3 to $102.1 million. Operating expenses dropped from $109 to $106.7 million. Operating income improved slightly from a loss of $19.6 million to a loss of $18.6 million. They recorded a net loss of $122.2 million compared to a loss of $109.4 million in last year’s quarter. Last year’s quarter included interest expense of $89.6 million compared to $70 million for the quarter ended December 31, 2013. As I discussed in my earlier articles most of that interest expense goes away once the IPO is done because the debt becomes equity.
Let me also show you some other income statement numbers below operating income.
The numbers are in thousands of dollars. The first column is the 2012 quarter and the second for 2013. I’m pretty sure those are all related to restructuring the company and have damned little to do with running a winter resort. But you can see they generate some significant distortions in the income statements and in the year over year comparison.
I don’t spend much time discussing the balance sheets of winter resorts. It’s more about cash flow than the balance sheet at a particular point in time. For example, only on winter resort balance sheets have I seen negative current ratios that don’t seem to bother anybody. Hell, they don’t even bother me much anymore. What they do (and what I’d do) is borrow on their lines of credit when they need to pay expenses not covered by cash flow. No reason to incur interest expense until you have to.
Revenue from Intrawest’s Mountain segment was $76 million during the quarter, up from $72 million in the same quarter last year. “The Mountain segment includes the operations of the Company’s mountain resorts and related ancillary activities, comprising Steamboat, Winter Park, Tremblant, Stratton, Snowshoe, as well as a 50% interest in Blue Mountain.”
Here’s some further information on the Mountain segment. ETP is effective ticket price. RevPar is revenue per available room, and ADR is average daily room rate. They note that the decline in ETP was due to selling more season passes, so that decline is kind of in a good cause. It’s nice to get money up front. They got one-third of their list revenue from season passes or frequency products in fiscal 2013 and the percentage is increasing. 
The Adventure segment revenue fell from $13.1 to $11.5 million. The Adventure segment comprises CMH, which provides heliskiing, mountaineering and hiking adventures, and ancillary aviation services, which include fire suppression, maintenance and repair of aircraft.”
“The Real Estate segment includes a vacation club business, management of condominium hotel properties, real estate management, including marketing and sales activities, as well as ongoing real estate development activities.” Its revenue fell from $17.1 to $13.9 million.”
They also provide what they call “adjusted EBITDA” for each segment. Here are those numbers below the revenue per segment.
I’m not going to spend much time analyzing this report. There’s a lot of noise in the numbers caused by the restructuring and IPO. The key fact is that starting with the June 30 quarter, we’ll start to see how Intrawest can do financially without all the interest and some associated expenses and managerially without the distractions associated with having your balance sheet upside down and having to do an IPO you didn’t really want to do.