Intrawest shows small profit as visitor numbers to Whistler dip 

Whistler-Blackcomb operator Intrawest Corp. achieved significant revenue profits in the latest quarter.

However, a business decision to pay a penalty to refinance its bonds at a lower interest rates cut into the company’s profits, reducing them from 22 cents a share to just one cent per share.

"It wasn’t really related to the business, it was more a decision that we made," said Michael Hannan, senior vice president of strategic and corporate development.

"We didn’t have to make that decision... but economically it made more sense for us to pay less interest over the long term, so that is what we did.

"The analysts in the stock market understand that because if you look at our stock today it is trading up and the primary reason it is trading up is because they see our earnings are quite strong and they also see that our cash flow is extremely strong."

Indeed, Intrawest stock prices have almost doubled in the last eight months.

The company released its second quarter results Tuesday.

By business unit resort revenues rose to $111.3 million (all figures in US dollars) from $98.6 million thanks to the added operation of Winter Park, which Intrawest took over in December 2002. Management services revenue rose to $24.4 million from $14.7 million while real estate development revenues jumped to $262.5 million from $99.4 million.

However the company paid out $12.3 million in interest costs, $11.5 million in depreciation and amortization and $12.1 million in bond redemption costs, resulting in a net income of $238,000, which amounted to a penny a share.

This is down from the year-earlier profit of $2.8 million or seven cents a share.

Paying visitor numbers are down at Whistler-Blackcomb, said Hannan, but not significantly.

He attributes the drop in numbers to the strong Canadian dollar, which has made the resort less attractive to American tourists than it has been in the past.

Poor weather at the beginning of last season may also be affecting travellers, as they are hesitant to book a holiday to Whistler with that in mind .

"We are getting a lot of visits but it is the regional seasons pass holders," said Hannan.

"What we are really off on is U.S. long haul destination visits.

"It is not down dramatically. But at the same time we are watching it very closely and we are working with all the hotel partners to come up with attractive packaging and we are working very hard to promote Whistler.

"It is still the number one destination in North America."

Hannan believes the current trend for travellers to wait until the last minute to book is also playing a role.

That’s why the resort’s move to offer competitive packages such as the one just launched through Tourism Whistler, which offers rooms for $69 US per person ($89 Cdn) based on double occupancy, is so important said Hannan.

"I think what it is, is a strategy to get people to book in advance, and what it allows us to do is fill in and guarantee business," said Hannan.

"What has happened in the travel market, unfortunately across North America and the world, is that people are getting conditioned to wait.

"It should be the opposite, where you book early and you get a deal and as you get closer and closer availability starts to decline and so prices go up.

"I think that it is a good strategy to work hard, to work together, to work as partners… and market Whistler because it is a first class product.

"So we are very comfortable with what is happening."

Hannan said Intrawest is also pleased with its performance in its real estate segment, although the market is still slow for the high-end single family lots in Whistler.

However, he said, since the bulk of the company’s real estate assets and development are in the condo/hotel area the current position of Intrawest is strong.

This is all good news for investors who have been looking for some time for Intrawest to generate positive cash flow.

Some might argue that part of the turn around might be due to Intrawest’s decision to reduce its negative cash flow and offload the cost of future resort development to third party financiers. To do this Leisura Developments U.S and Leisura Developments Canada were created a year ago. They will carry out most of Intrawest’s real estate development in North America.

The company was also able to pay off $60 million in debt in the first half of the year.

"We are very pleased with the results," said Hannan.

"We promised something to the investment community and we feel that we have delivered on that.

"That hasn’t always been the case in the past so we are proud and positive with these earnings and the reduction of debt."


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