Form 10-Q



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

FORM 10-Q


x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2007

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from       to

Commission File Number:  1-9614


Vail Resorts, Inc.
(Exact Name of Registrant as Specified in Its Charter)


Delaware
 
51-0291762
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
     
390 Interlocken Crescent, Suite 1000,
Broomfield, Colorado
 
80021
(Address of Principal Executive Offices)
 
(Zip Code)

(303) 404-1800
(Registrant’s Telephone Number, Including Area Code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x     Accelerated filer ¨  Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
¨ Yes x No

As of March 5, 2007, 38,880,704 shares of the registrant’s common stock were outstanding.




Table of Contents
     
PART I
FINANCIAL INFORMATION
 
     
Item 1.
F-1
Item 2.
1
Item 3.
13
Item 4.
13
     
     
PART II
OTHER INFORMATION
 
     
Item 1.
13
Item 1A.
13
Item 2.
13
Item 3.
14
Item 4.
14
Item 5.
14
Item 6.
14







PART I
FINANCIAL INFORMATION
 
     
Item 1.
 
     
F-2
F-3
F-4
F-5
F-6
































Vail Resorts, Inc.
Consolidated Condensed Balance Sheets
(In thousands, except share and per share amounts)

     
January 31,
     
July 31,
     
January 31,
 
     
2007
     
2006
     
2006
 
     
(Unaudited)
             
(Unaudited)
 
Assets
                       
Current assets:
                       
Cash and cash equivalents
 
$
254,866
   
$
191,794
   
$
175,541
 
Restricted cash
   
26,792
     
20,322
     
23,715
 
Trade receivables, net
   
43,728
     
35,949
     
39,712
 
Inventories, net
   
49,825
     
42,278
     
43,977
 
Other current assets
   
38,918
     
35,631
     
43,909
 
Total current assets
   
414,129
     
325,974
     
326,854
 
Property, plant and equipment, net (Note 5)
   
868,185
     
851,112
     
858,200
 
Real estate held for sale and investment
   
293,219
     
259,384
     
221,048
 
Goodwill, net
   
135,811
     
135,811
     
135,811
 
Intangible assets, net
   
73,715
     
75,109
     
77,541
 
Other assets
   
47,557
     
40,253
     
33,226
 
Total assets
 
$
1,832,616
   
$
1,687,643
   
$
1,652,680
 
                         
Liabilities and Stockholders’ Equity
                       
Current liabilities:
                       
Accounts payable and accrued expenses (Note 5)
 
$
305,690
   
$
230,762
   
$
295,092
 
Income taxes payable
   
9,103
     
17,517
     
6,324
 
Long-term debt due within one year (Note 4)
   
440
     
5,915
     
5,673
 
Total current liabilities
   
315,233
     
254,194
     
307,089
 
Long-term debt (Note 4)
   
551,866
     
525,313
     
517,638
 
Other long-term liabilities (Note 5)
   
185,849
     
158,490
     
132,933
 
Deferred income taxes
   
83,967
     
73,064
     
77,037
 
Commitments and contingencies (Note 11)
                       
Put option liabilities (Note 9)
   
1,245
     
1,245
     
--
 
Minority interest in net assets of consolidated subsidiaries
   
36,035
     
32,560
     
31,345
 
Stockholders’ equity:
                       
Preferred stock, $0.01 par value, 25,000,000 shares authorized, zero shares issued and outstanding
   
--
     
--
     
--
 
Common stock, $0.01, 100,000,000 shares authorized, 38,802,817 (unaudited), 39,036,282 and 37,965,853 (unaudited) shares issued and outstanding as of January 31, 2007, July 31, 2006 and January 31, 2006, respectively
   
395
     
390
     
380
 
Additional paid-in capital
   
522,941
     
509,505
     
479,611
 
Retained earnings
   
160,931
     
143,721
     
106,647
 
Treasury stock (Note 12)
   
(25,846
)
   
(10,839
)
   
--
 
Total stockholders’ equity
   
658,421
     
642,777
     
586,638
 
Total liabilities and stockholders’ equity
 
$
1,832,616
   
$
1,687,643
   
$
1,652,680
 

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of these financial statements.


Vail Resorts, Inc.
Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

   
Three Months Ended
 
   
January 31,
 
     
2007
     
2006
 
Net revenue:
               
Mountain
 
$
272,026
   
$
246,228
 
Lodging
   
32,796
     
32,079
 
Real estate
   
56,216
     
9,709
 
Total net revenue
   
361,038
     
288,016
 
Segment operating expense:
               
Mountain
   
159,871
     
150,666
 
Lodging
   
30,757
     
32,894
 
Real estate
   
50,391
     
6,383
 
Total segment operating expense
   
241,019
     
189,943
 
Other operating (expense) income:
               
Depreciation and amortization
   
(21,759
)
   
(21,431
)
Relocation and separation charges (Note 7)
   
(500
)
   
--
 
Mold remediation credit (Note 11)
   
--
     
852
 
Loss on disposal of fixed assets, net
   
(10
)
   
(486
)
Income from operations
   
97,750
     
77,008
 
Mountain equity investment income, net
   
1,496
     
1,455
 
Real estate equity investment income
   
--
     
31
 
Investment income
   
2,417
     
1,046
 
Interest expense, net
   
(7,911
)
   
(9,502
)
Gain on sale of businesses, net (Note 8)
   
--
     
4,625
 
Contract dispute charges (Note 11)
   
(672
)
   
--
 
Gain on put options (Note 9)
   
--
     
1,026
 
Other income, net
   
--
     
51
 
Minority interest in income of consolidated subsidiaries, net
   
(6,152
)
   
(5,231
)
Income before provision for income taxes
   
86,928
     
70,509
 
Provision for income taxes
   
(33,902
)
   
(27,498
)
Net income
 
$
53,026
   
$
43,011
 
                 
Per share amounts (Note 3):
               
Basic net income per share
 
$
1.37
   
$
1.15
 
Diluted net income per share
 
$
1.35
   
$
1.12
 

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of these financial statements.


Vail Resorts, Inc.
Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

   
Six Months Ended
 
   
January 31,
 
     
2007
     
2006
 
Net revenue:
               
Mountain
 
$
318,189
   
$
286,505
 
Lodging
   
73,204
     
73,829
 
Real estate
   
83,138
     
13,102
 
Total net revenue
   
474,531
     
373,436
 
Segment operating expense:
               
Mountain
   
239,358
     
222,957
 
Lodging
   
67,106
     
70,535
 
Real estate
   
76,509
     
12,452
 
Total segment operating expense
   
382,973
     
305,944
 
Other operating (expense) income:
               
Depreciation and amortization
   
(43,344
)
   
(40,354
)
Relocation and separation charges (Note 7)
   
(1,235
)
   
--
 
Asset impairment charge
   
--
     
(136
)
Mold remediation credit (Note 11)
   
--
     
852
 
Loss on disposal of fixed assets, net
   
(91
)
   
(726
)
Income from operations
   
46,888
     
27,128
 
Mountain equity investment income, net
   
2,331
     
2,305
 
Real estate equity investment income
   
--
     
100
 
Investment income
   
4,481
     
2,234
 
Interest expense, net
   
(16,847
)
   
(18,939
)
Gain on sale of businesses, net (Note 8)
   
--
     
4,625
 
Contract dispute charges (Note 11)
   
(4,276
)
   
--
 
Gain on put options (Note 9)
   
--
     
34
 
Other income, net
   
--
     
51
 
Minority interest in income of consolidated subsidiaries, net
   
(4,363
)
   
(3,305
)
Income before provision for income taxes
   
28,214
     
14,233
 
Provision for income taxes
   
(11,004
)
   
(5,551
)
Net income
 
$
17,210
   
$
8,682
 
                 
Per share amounts (Note 3):
               
Basic net income per share
 
$
0.44
   
$
0.23
 
Diluted net income per share
 
$
0.44
   
$
0.23
 

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of these financial statements.


Vail Resorts, Inc.
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)

   
Six Months Ended
   
January 31,
   
2007
 
2006
Net cash provided by operating activities
 
$
196,886
   
$
100,426
 
Cash flows from investing activities:
               
Capital expenditures
   
(62,058
)
   
(55,112
)
Investments in real estate
   
(88,567
)
   
(64,905
)
Proceeds from sale of businesses
   
--
     
30,712
 
Other investing activities, net
   
354
     
(4,018
)
Net cash used in investing activities
   
(150,271
)
   
(93,323
)
Cash flows from financing activities:
               
Repurchases of common stock
   
(15,007
)
   
--
 
Proceeds from borrowings under Non-Recourse Real Estate Financings
   
33,067
     
5,233
 
Payments of Non-Recourse Real Estate Financings
   
(1,493
)
   
--
 
Proceeds from borrowings under other long-term debt
   
48,012
     
20,980
 
Payments of other long-term debt
   
(58,508
)
   
(24,909
)
Proceeds from exercise of stock options
   
6,803
     
27,635
 
Other financing activities, net
   
3,583
     
2,919
 
Net cash provided by financing activities
   
16,457
     
31,858
 
Net increase in cash and cash equivalents
   
63,072
     
38,961
 
Cash and cash equivalents:
               
Beginning of period
   
191,794
     
136,580
 
End of period
 
$
254,866
   
$
175,541
 

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of these financial statements.


Vail Resorts, Inc.
Notes to Consolidated Condensed Financial Statements
(Unaudited)

1. Organization and Business

Vail Resorts, Inc. ("Vail Resorts" or the “Parent Company”) is organized as a holding company and operates through various subsidiaries. Vail Resorts and its subsidiaries (collectively, the "Company") currently operate in three business segments: Mountain, Lodging and Real Estate. In the Mountain segment, the Company owns and operates five world-class ski resorts and related ancillary businesses at Vail, Breckenridge, Keystone and Beaver Creek mountains in Colorado and the Heavenly Ski Resort ("Heavenly") in the Lake Tahoe area of California and Nevada. These resorts use federal land under the terms of Special Use Permits granted by the USDA Forest Service (the “Forest Service”). The Company also holds a 61.7% interest in SSI Venture, LLC ("SSV"), a retail/rental company. In the Lodging segment, the Company owns and operates various hotels, as well as RockResorts International, LLC ("RockResorts"), a luxury hotel management company, and Grand Teton Lodge Company ("GTLC"), which operates three resorts within Grand Teton National Park (under a National Park Service concessionaire contract), and the Jackson Hole Golf & Tennis Club (“JHG&TC”) in Wyoming. Vail Resorts Development Company ("VRDC"), a wholly-owned subsidiary, conducts the operations of the Company's Real Estate segment. The Company's Mountain business and its Lodging properties at or around the Company’s ski resorts are seasonal in nature with peak operating seasons from mid-November through mid-April. The Company's operations at GTLC generally run from mid-May through mid-October. The Company also has non-majority owned investments in various other entities, some of which are consolidated (see Note 6, Variable Interest Entities).

In the opinion of the Company, the accompanying Consolidated Condensed Financial Statements reflect all adjustments necessary to state fairly the Company's financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. Results for interim periods are not indicative of the results for the entire year. The accompanying Consolidated Condensed Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended July 31, 2006. Certain information and footnote disclosures, including significant accounting policies, normally included in fiscal year financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The July 31, 2006 Consolidated Condensed Balance Sheet was derived from audited financial statements.

2. Summary of Significant Accounting Policies

Use of Estimates--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

3. Net Income Per Common Share

Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share” (“EPS”), establishes standards for computing and presenting EPS. SFAS No. 128 requires the dual presentation of basic and diluted EPS on the face of the Consolidated Condensed Statements of Operations and requires a reconciliation of numerators (net income/loss) and denominators (weighted-average shares outstanding) for both basic and diluted EPS in the footnotes. Basic EPS excludes dilution and is computed by dividing net income/loss available to common stockholders by the weighted-average shares outstanding. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, resulting in the issuance of shares of common stock that would then share in the earnings of the Company. Presented below is basic and diluted EPS for the three months ended January 31, 2007 and 2006 (in thousands, except per share amounts):

   
Three Months Ended January 31,
   
2007
 
2006
   
Basic
 
Diluted
 
Basic
 
Diluted
Net income per share:
                               
Net income
 
$
53,026
   
$
53,026
   
$
43,011
   
$
43,011
 
                                 
Weighted-average shares outstanding
   
38,753
     
38,753
     
37,467
     
37,467
 
Effect of dilutive securities
   
--
     
486
     
--
     
855
 
Total shares
   
38,753
     
39,239
     
37,467
     
38,322
 
                                 
Net income per share
 
$
1.37
   
$
1.35
   
$
1.15
   
$
1.12
 

The number of shares issuable on the exercise of stock based awards that were excluded from the calculation of diluted net income per share because the effect of their inclusion would have been anti-dilutive totaled 24,000 and 448,000 for the three months ended January 31, 2007 and 2006, respectively.

Presented below is basic and diluted EPS for the six months ended January 31, 2007 and 2006 (in thousands, except per share amount):

   
Six Months Ended January 31,
   
2007
 
2006
 
 
Basic
 
Diluted
 
Basic
Diluted
Net income per share:
                             
Net income
 
$
17,210
   
$
17,210
   
$
8,682
 
$
8,682
 
                               
Weighted-average shares outstanding
   
38,734
     
38,734
     
37,133
   
37,133
 
Effect of dilutive securities
   
--
     
465
     
--
   
848
 
Total shares
   
38,734
     
39,199
     
37,133
   
37,981
 
                               
Net income per share
 
$
0.44
   
$
0.44
   
$
0.23
 
$
0.23
 

The number of shares issuable on the exercise of stock based awards that were excluded from the calculation of diluted net income per share because the effect of their inclusion would have been anti-dilutive totaled 116,000 and 448,000 for the six months ended January 31, 2007 and 2006, respectively.

4. Long-Term Debt

Long-term debt as of January 31, 2007, July 31, 2006 and January 31, 2006 is summarized as follows (in thousands):

   
January 31,
July 31,
January 31,
 
Maturity (a)
2007
2006
2006
Credit Facility Revolver
2010
$
--
$
--
$
--
SSV Facility
2011
 
--
 
6,261
 
6,233
Industrial Development Bonds
2009-2020
 
57,700
 
61,700
 
61,700
Employee Housing Bonds
2027-2039
 
52,575
 
52,575
 
52,575
Non-Recourse Real Estate Financings (b)
2009
 
44,931
 
13,357
 
5,233
6.75% Senior Subordinated Notes ("6.75% Notes")
2014
 
390,000
 
390,000
 
390,000
Other
2007-2029
 
7,100
 
7,335
 
7,570
Total debt
   
552,306
 
531,228
 
523,311
Less: Current maturities (c)
   
440
 
5,915
 
5,673
Long-term debt
 
$
551,866
$
525,313
$
517,638

   
(a)
Maturities are based on the Company's July 31 fiscal year end.
   
(b)
At January 31, 2007, Non-Recourse Real Estate Financings consist of borrowings under the $175 million construction agreement for Arrabelle at Vail Square, LLC (“Arrabelle”). At July 31, 2006, Non-Recourse Real Estate Financings also included borrowings under the $30 million construction agreement for Gore Creek Place, LLC (“Gore Creek”) which were paid in full during the six months ended January 31, 2007.
   
(c)
Current maturities represent principal payments due in the next 12 months.

Aggregate maturities for debt outstanding as of January 31, 2007 are as follows (in thousands):

Fiscal 2007
 
$
175
Fiscal 2008
   
363
Fiscal 2009
   
60,197
Fiscal 2010
   
262
Fiscal 2011
   
1,738
Thereafter
   
489,571
Total debt
 
$
552,306

The Company incurred gross interest expense of $10.3 million and $9.8 million for the three months ended January 31, 2007 and 2006, respectively, of which $463,000 and $483,000 was amortization of deferred financing costs. The Company incurred gross interest expense of $20.5 million and $19.3 million for the six months ended January 31, 2007 and 2006, respectively, of which $930,000 and $1.0 million was amortization of deferred financing costs. The Company capitalized $2.3 million and $250,000 of interest during the three months ended January 31, 2007 and 2006, respectively. The Company capitalized $3.6 million and $333,000 of interest during the six months ended January 31, 2007 and 2006, respectively.

5. Supplementary Balance Sheet Information

The composition of property, plant and equipment follows (in thousands):

     
January 31,
 
July 31,
 
January 31,
     
2007
 
2006
 
2006
Land and land improvements
 
$
247,997
   
$
248,941
   
$
244,841
 
Buildings and building improvements
   
538,426
     
529,316
     
526,808
 
Machinery and equipment
   
455,382
     
426,457
     
426,726
 
Vehicles
   
27,121
     
25,671
     
25,436
 
Furniture and fixtures
   
124,201
     
113,696
     
111,610
 
Construction in progress
   
41,035
     
39,149
     
21,024
 
 
Gross property, plant and equipment
   
1,434,162
     
1,383,230
     
1,356,445
 
Accumulated depreciation
   
(565,977
)
   
(532,118
)
   
(498,245
)
 
Property, plant and equipment, net
 
$
868,185
   
$
851,112 
   
$
858,200
 

The composition of accounts payable and accrued expenses follows (in thousands):

     
January 31,
 
July 31,
 
January 31,
     
2007
 
2006
 
2006
Trade payables
 
$
103,718
   
$
82,599
   
$
92,565
 
Deferred revenue
   
66,627
     
30,785
     
62,048
 
Deferred credits and deposits
   
27,071
     
24,026
     
43,885
 
Accrued salaries, wages and deferred compensation
   
34,709
     
31,954
     
29,181
 
Accrued benefits
   
26,704
     
24,538
     
20,011
 
Accrued interest
   
14,614
     
14,969
     
14,686
 
Liabilities to complete real estate projects
   
5,262
     
5,951
     
7,575
 
Other accruals
   
26,985
     
15,940
     
25,141
 
 
Total accounts payable and accrued expenses
 
$
305,690
   
$
230,762
   
$
295,092
 

The composition of other long-term liabilities follows (in thousands):

     
January 31,
 
July 31,
 
January 31,
     
2007
 
2006
 
2006
Private club deferred initiation fee revenue
 
$
94,110
   
$
91,438
   
$
90,270
 
Deferred real estate credits
   
62,774
     
54,578
     
33,876
 
Private club initiation deposits
   
9,330
     
1,308
     
1,253
 
Liabilities to complete real estate projects
   
6,301
     
550
     
550
 
Other long-term liabilities
   
13,334
     
10,616
     
6,984
 
 
Total other long-term liabilities
 
$
185,849
   
$
158,490
   
$
132,933
 

6. Variable Interest Entities

The Company has determined that it is the primary beneficiary of four employee housing entities (collectively, the "Employee Housing Entities"), Breckenridge Terrace, LLC (“Breckenridge Terrace”), The Tarnes at BC, LLC ("Tarnes"), BC Housing LLC and Tenderfoot Seasonal Housing, LLC, which are Variable Interest Entities ("VIEs"), and has consolidated them in its Consolidated Condensed Financial Statements. As a group, as of January 31, 2007, the Employee Housing Entities had total assets of $41.4 million (primarily recorded in property, plant and equipment, net) and total liabilities of $65.4 million (primarily recorded in long-term debt as “Employee Housing Bonds”). All of the assets ($7.1 million as of January 31, 2007) of Tarnes serve as collateral for Tarnes' Tranche B Employee Housing Bonds. The Company has issued under its senior credit facility (the “Credit Facility”) $38.3 million letters of credit related to the Tranche A Employee Housing Bonds and $12.6 million letters of credit related to the Tranche B Employee Housing Bonds. The letters of credit would be triggered in the event that one of the entities defaults on required payments. The letters of credit have no default provisions.

The Company has determined that it is the primary beneficiary of Avon Partners II (“APII”), which is a VIE. APII owns commercial space and the Company currently leases substantially all of that space. APII had total assets of $4.5 million (primarily recorded in property, plant and equipment, net) and no debt as of January 31, 2007.

The Company has determined that it is the primary beneficiary of FFT Investment Partners (“FFT”), which is a VIE. FFT owns a private residence in Eagle County, Colorado. The entity had total assets of $5.6 million (primarily recorded in real estate held for sale and investment) and no debt as of January 31, 2007. In March 2007, the private residence owned by FFT was sold for $6.7 million, and as such, FFT is expected to be dissolved.

The Company, through various lodging subsidiaries, manages the operations of several entities that own hotels in which the Company has no ownership interest. The Company also has extended a $1.5 million note receivable to one of these entities. These entities were formed to acquire, own, operate and realize the value in resort hotel properties. The Company managed the day-to-day operations of seven hotel properties as of January 31, 2007. The Company has determined that the entities that own the hotel properties are VIEs, and the management contracts are significant variable interests in these VIEs. The Company has also determined that it is not the primary beneficiary of these entities and, accordingly, is not required to consolidate any of these entities. Based on information provided to the Company by owners of the entities, these VIEs had total assets of approximately $194.5 million and total liabilities of approximately $79.4 million as of January 31, 2007. The Company's maximum exposure to loss as a result of its involvement with these VIEs is limited to the note receivable and accrued interest of approximately $1.7 million and the net book value of the intangible asset associated with the management agreements in the amount of $2.4 million as of January 31, 2007.

7. Relocation and Separation Charges
 
In February 2006, the Company announced a plan to relocate its corporate headquarters; the plan was formally approved by the Company’s Board of Directors in April 2006. The relocation process (which also includes the consolidation of certain other operations of the Company) was substantially completed by January 31, 2007. The Company currently expects that the total charges associated with the relocation that will result in cash expenditures will be approximately $3.8 million (which includes charges for severance and retention of approximately $1.7 million, charges for contract termination costs of approximately $400,000 and facility, employee and other relocation costs of approximately $1.7 million), of which $3.6 million was incurred through January 31, 2007. The above amounts do not reflect any of the anticipated benefits expected to be realized from the relocation and consolidation of offices.
 
 
The following table summarizes the activity and balances of the liability related to future payments of relocation charges, which has been recorded in “accounts payable and accrued expenses” in the accompanying Consolidated Condensed Balance Sheets (in thousands):
 
 
 
 
 
 
 
 
 
 Facility,
 
 
 
 
 
 
 Severance
 
 
 
 
 
 Employee
 
 
 
 
 
 
 and
 
 
 Contact
 
 
 and Other
 
 
 
 
 
 
 Retention
 
 
 Termination
 
 
 Relocation
 
 
 
 
 
 
 Benefits
 
 
 Costs
 
 
 Costs
 
 
 Total
 
 Balance at July 31, 2006
 $
 873
 
 $
 --
 
 $
 283
 
 $
 1,156
 
 Relocation charges
 
 67
 
 
 303
 
 
 865
 
 
 1,235
 
 Payments
 
 (911
)
 
 (106
)
 
 (1,060
)
 
 (2,077
)
 Balance at January 31, 2007
 $
 29
 
 $
 197
 
 $
 88
 
 $
 314
 

8. Sale of Businesses

On January 19, 2006, JHL&S LLC, a limited liability company owned by wholly-owned subsidiaries of the Company, sold the assets constituting Snake River Lodge & Spa ("SRL&S") to Lodging Capital Partners, a private, Chicago-based hospitality investment firm ("LCP"), for $32.5 million, the proceeds of which were adjusted for normal working capital prorations. The carrying value of the assets sold (net of liabilities assumed) was $26.9 million, which were recorded as "assets held for sale" prior to the sale. The Company recorded a $4.7 million gain after consideration of all costs involved, which is included in "gain on sale of businesses, net" in the accompanying Consolidated Condensed Statements of Operations for the three and six months ended January 31, 2006. The Company continues to manage SRL&S pursuant to a 15-year management agreement with LCP.

In conjunction with the December 8, 2004 sale of the Company’s 49% minority equity interest in Bachelor Gulch Resort, LLC (“BG Resort”), the Company had guaranteed payment of certain contingencies of BG Resort upon settlement. At the time of sale, the Company recorded a liability related to these contingencies in the amount of $130,000. In February 2006, the Company reached a settlement of these contingencies and recorded an additional liability in the amount of $82,000, which was recorded as a loss within "gain on sale of businesses, net" in the accompanying Consolidated Condensed Statements of Operations for the three and six months ended January 31, 2006.

9. Put and Call Options

The Company holds an approximate 61.7% ownership interest in SSV. The Company and GSSI, LLC ("GSSI"), the minority shareholder in SSV, have remaining put and call rights with respect to SSV: (1) beginning August 1, 2007 and each year thereafter, each of the Company and GSSI shall have the right to call or put respectively, 100% of GSSI's ownership interest in SSV to the Company during certain periods each year; and (2) GSSI has the right to put to the Company 100% of its ownership interest in SSV at any time after GSSI has been removed as manager of SSV or an involuntary transfer of the Company's ownership interest in SSV has occurred. The put and call pricing is generally based on the trailing twelve month EBITDA (as defined in the operating agreement) of SSV for the fiscal period ended prior to the commencement of the put or call period, as applicable.

In February 2007, the Company and GSSI entered into an amended operating agreement whereby the Company will acquire 20% of GSSI’s ownership interest for $8.4 million, which is expected to close March 31, 2007. As a result of this transaction, the Company will hold an approximate 69.3% ownership interest in SSV. In addition, the put and call rights for GSSI’s remaining interest in SSV were extended to begin August 1, 2010 and the existing management agreement was extended to coincide with the exercise of the remaining put and call rights.

In March 2001, in connection with the Company's acquisition of a 51% ownership interest in RTP, LLC ("RTP"), the Company and RTP's minority shareholder entered into a put agreement whereby the minority shareholder can put up to an aggregate one-third of its original 49% interest in RTP to the Company during the period from August 1 through October 31 annually. The put price is determined primarily by the trailing twelve month EBITDA (as defined in the underlying agreement) for the period ending prior to the beginning of each put period. The Company has determined that this put option should be marked to fair value through earnings. The put period was extended in October 2006, and again in February 2007 (the “Provisional Put Period”). The Provisional Put period will expire no later than June 30, 2007. As a result of the extensions, the Company did not recognize any gain or loss as the estimated fair value of the put option liability did not change during the three and six months ended January 31, 2007. For the three and six months ended January 31, 2006, the Company recorded gains of $1.0 million and $34,000, respectively, representing a decrease in the estimated fair value of the put option liability during those periods. As of January 31, 2007, the Company had a 54.5% interest in RTP. RTP's minority shareholder has the option to put 27.8% of its remaining interest in RTP to the Company as of January 31, 2007.

In March 2007, the Company and RTP’s minority shareholder entered into a definitive agreement under which RTP’s minority shareholder will acquire the Company’s 54.5% interest in RTP for approximately $3.5 million. As part of this agreement the Company will retain source code rights to its internal use software and internet solutions. This transaction is expected to close on or around April 30, 2007. As a result of this transaction, the Company will record a net loss of approximately $100,000 on the sale of its investment in RTP including the elimination of the put option liability and the write-off of the associated put option intangible asset.

10. Related Party Transactions

In June 2006, the Company invested in the purchase of a residence in the Denver/Boulder, Colorado area, for Jeffrey W. Jones, the Company’s Senior Executive Vice President and Chief Financial Officer, and his family in connection with his relocation to the Company’s new headquarters in Broomfield, Colorado. The Company contributed $650,000 towards the purchase price of the residence and thereby obtained a 31.0% undivided ownership interest in such residence. In January 2007, Mr. Jones repurchased the Company’s 31.0% undivided ownership interest for an appraised value of $650,000. The sale of the Company’s undivided ownership interest had been approved by the Board of Directors of the Company, in accordance with the Company's related party transactions policy.

In January 2007, Robert A. Katz, Chief Executive Officer of the Company, executed a purchase and sale agreement for the purchase of a unit at The Lodge at Vail Chalets project located near the Vista Bahn at the base of Vail Mountain for a total purchase price of $12.5 million. Mr. Katz provided an earnest money deposit of $1.9 million. The earnest money deposits will be used to fund the construction of The Lodge at Vail Chalets project. The sale of the unit has been approved by the Board of Directors of the Company, in accordance with the Company's related party transactions policy.

As of January 31, 2006, the Company had outstanding a $500,000 note receivable from Keystone/Intrawest, LLC, a real estate development venture in which the Company has an equity-method investment. This note was related to the fair market value of the land originally contributed to the partnership, and was repaid in the year ended July 31, 2006, as the underlying land was sold to third parties.

11. Commitments and Contingencies

Metropolitan Districts

The Company credit-enhances $8.5 million of bonds issued by Holland Creek Metropolitan District ("HCMD") through an $8.6 million letter of credit issued against the Company's Credit Facility. HCMD's bonds were issued and used to build infrastructure associated with the Company's Red Sky Ranch residential development. The Company has agreed to pay capital improvement fees to Red Sky Ranch Metropolitan District ("RSRMD") until RSRMD's revenue streams from property taxes are sufficient to meet debt service requirements under HCMD's bonds, and the Company has recorded a liability of $1.1 million, $1.3 million and $1.7 million, primarily within "other long-term liabilities" in the accompanying Consolidated Condensed Balance Sheets, as of January 31, 2007, July 31, 2006 and January 31, 2006, respectively, with respect to the estimated present value of future RSRMD capital improvement fees. The Company estimates that it will make capital improvement fee payments under this arrangement through the year ending July 31, 2008.

Guarantees

As of January 31, 2007, the Company had various other letters of credit outstanding in the amount of $68.9 million, a portion of which are not issued against the Credit Facility, consisting primarily of $51.0 million in support of the Employee Housing Bonds, $4.5 million related to workers' compensation for Heavenly and The Lodge at Rancho Mirage, $9.1 million of construction performance guarantees and $2.9 million for workers' compensation and general liability deductibles related to the construction of Gore Creek and Arrabelle.

In addition to the guarantees noted above, the Company has entered into contracts in the normal course of business which include certain indemnifications within the scope of Financial Interpretations No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" (“FIN 45”) under which it could be required to make payments to third parties upon the occurrence or non-occurrence of certain future events. These indemnities include indemnities to licensees in connection with the licensees' use of the Company's trademarks and logos, indemnities for liabilities associated with the infringement of other parties' technology based upon the Company's software products, indemnities related to liabilities associated with the use of easements, indemnities related to employment of contract workers, the Company's use of trustees, indemnities related to the Company's use of public lands and environmental indemnifications. The duration of these indemnities generally is indefinite and generally do not limit the future payments the Company could be obligated to make.

As permitted under applicable law, the Company and certain of its subsidiaries indemnify their directors and officers over their lifetimes for certain events or occurrences while the officer or director is, or was, serving the Company or its subsidiaries in such a capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that should enable the Company to recover a portion of any future amounts paid.

The Company guarantees the revenue streams associated with selected routes flown by certain airlines into Eagle County, Colorado, Regional Airport; these guarantees are generally capped at certain levels. As of January 31, 2007, the Company has recorded a liability related to the airline guarantees of $850,000, which represents the estimated amount the Company will be required to pay. Payments, if any, under these guarantees are expected to be made during the year ending July 31, 2007.

Unless otherwise noted, the Company has not recorded a liability for the letters of credit, indemnities and other guarantees noted above in the accompanying Consolidated Condensed Financial Statements, either because the Company has recorded on its Consolidated Condensed Balance Sheet the underlying liability associated with the guarantee, the guarantee or indemnification existed prior to January 1, 2003 or the guarantee is with respect to the Company’s own performance and is therefore not subject to the measurement requirements of FIN 45, or because the Company has calculated the fair value of the indemnification or guarantee to be immaterial based upon the current facts and circumstances that would trigger a payment under the indemnification clause. In addition, with respect to certain indemnifications it is not possible to determine the maximum potential amount of liability under these guarantees due to the unique set of facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material.

As noted above, the Company makes certain indemnifications to licensees in connection with their use of the Company's trademarks and logos. The Company does not record any product warranty liability with respect to these indemnifications.

Commitments

In the ordinary course of obtaining necessary zoning and other approvals for the Company's potential real estate development projects, the Company may contingently commit to the completion of certain infrastructure, improvements and other costs related to the projects. Fulfillment of such commitments is required only if the Company moves forward with the development project. The determination of whether the Company ultimately completes a development project is entirely at the Company's discretion, and is generally contingent upon, among other considerations, receipt of satisfactory zoning and other approvals and the current status of the Company's analysis of the economic viability of the project, including the costs associated with the contingent commitments. The Company currently has obligations, recorded as liabilities in the accompanying Consolidated Condensed Balance Sheet, to complete or fund certain improvements with respect to real estate developments; the Company has estimated such costs to be approximately $11.6 million as of January 31, 2007, and anticipates completion of the majority of these commitments within the next two years.

The Company has completed installing a new gondola lift and related infrastructure at Breckenridge for the 2006/07 ski season pursuant to an agreement with the Town of Breckenridge (the “Town”). The Town agreed to contribute $6.7 million to fund construction of the gondola, as well as the already completed skiway. The funds contributed by the Town reduced the book value of the gondola and related infrastructure.

Self Insurance

The Company is self-insured for claims under its health benefit plans and for workers’ compensation claims, subject to a stop loss policy. The self-insurance liability related to workers' compensation is determined actuarially based on claims filed. The self-insurance liability related to claims under the Company’s health benefit plans is determined based on internal and external analysis of actual claims. The amounts related to these claims are included as a component of accrued benefits in accounts payable and accrued expenses (see Note 5, Supplementary Balance Sheet Information).

Legal 

The Company is a party to various lawsuits arising in the ordinary course of business, including Resort (Mountain and Lodging) related cases and contractual and commercial litigation that arises from time to time in connection with the Company's real estate operations. Management believes the Company has adequate insurance coverage or has accrued for loss contingencies for all known matters that are deemed to be probable losses and estimable.

Cheeca Lodge & Spa Contract Dispute

In March 2006, RockResorts was notified by the ownership of Cheeca Lodge & Spa, formerly a RockResorts managed property, that its management agreement was being terminated effective immediately. RockResorts believed that the termination was in violation of the management agreement and sought monetary damages, and recovery of attorney’s fees and costs. Cheeca Holdings, LLC, the entity owner of the hotel property, asserted that RockResorts breached the management contract, among other alleged breaches, and sought a ruling that it had the right to terminate the management contract and sought monetary damages, and recovery of attorneys’ fees and costs. Pursuant to the dispute resolution provisions of the management agreement, the disputed matter went before a single judge arbitrator at the JAMS Arbitration Tribunal in Chicago, Illinois. The Company has incurred $672,000 and $4.3 million of legal related costs related to this matter in the three and six months ended January 31, 2007, respectively, which is included in “contract dispute charges” in the accompanying Consolidated Condensed Statements of Operations for the three and six months ended January 31, 2007. In February 2007, the arbitrator rendered a decision in favor of the Company (see Note 14, Subsequent Event, for more information regarding the arbitrator’s ruling).

Breckenridge Terrace Employee Housing Construction Defect/Water Intrusion Claims

During the year ended July 31, 2004, the Company became aware of water intrusion and condensation problems causing mold damage in the 17 building employee housing facility owned by Breckenridge Terrace, an Employee Housing Entity in which the Company is a member and manager. As a result, the facility was not available for occupancy during the 2003/04 ski season. All buildings at the facility required mold remediation and reconstruction and this work began in the year ended July 31, 2004. Breckenridge Terrace recorded a $7.0 million liability in the year ended July 31, 2004 for the estimated cost of remediation and reconstruction efforts. These costs were funded by a loan to Breckenridge Terrace from the Company member of Breckenridge Terrace. As of July 31, 2006, Breckenridge Terrace had substantially completed all remediation efforts.

Forensic construction experts retained by Breckenridge Terrace determined that the water intrusion and condensation problems were the result of construction and design defects. In accordance with Colorado law, Breckenridge Terrace served separate notices of claims on the general contractor, architect and developer and initiated arbitration proceedings which have since been closed. During the three and six months ended January 31, 2006, the Company recorded a $852,000 mold remediation credit due to Breckenridge Terrace receiving reimbursement from third parties for costs incurred in conjunction with its mold remediation efforts. This credit has been recognized by the Company as reduction of the remediation expense that was originally recognized in the year ended July 31, 2004.

12. Stock Repurchase Plan

On March 9, 2006, the Company's Board of Directors approved the repurchase of up to 3,000,000 shares of common stock. During the three and six months ended January 31, 2007, the Company repurchased 167,700 and 358,400 shares of common stock at a cost of $7.5 million and $15.0 million, respectively. Since inception of this stock repurchase plan, the Company has repurchased 673,500 shares at a cost of approximately $25.8 million. As of January 31, 2007, 2,326,500 shares remained available to repurchase under the existing repurchase authorization. Shares of common stock purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of shares under the Company's employee stock based compensation plans. Acquisitions under the share repurchase program will be made from time to time at prevailing prices as permitted by applicable laws, and subject to market conditions and other factors. The timing as well as the number of shares that may be repurchased under the program will depend on a number of factors including the Company's future financial performance, the Company's available cash resources and competing uses for cash that may arise in the future, the restrictions in the Credit Facility and in the Indenture, dated as of January 29, 2004 among the Company, the guarantors therein and the Bank of New York, as Trustee, prevailing prices of the Company's common stock and the number of shares that become available for sale at prices that the Company believes are attractive. The stock repurchase program may be discontinued at any time and is not expected to have a significant impact on the Company's capitalization.

13. Guarantor Subsidiaries and Non-Guarantor Subsidiaries

The Company's payment obligations under the 6.75% Notes (see Note 4, Long-Term Debt) are fully and unconditionally guaranteed on a joint and several, senior subordinated basis by substantially all of the Company's consolidated subsidiaries (collectively, and excluding Non-Guarantor Subsidiaries (as defined below), the "Guarantor Subsidiaries") except for Boulder/Beaver LLC, Colter Bay Corporation, Eagle Park Reservoir Company, Forest Ridge Holdings, Inc., Gros Ventre Utility Company, Jackson Lake Lodge Corporation, Jenny Lake Lodge, Inc., Mountain Thunder, Inc., RT Partners, Inc. and RTP, SSV, Larkspur Restaurant & Bar, LLC, Vail Associates Investments, Inc., Arrabelle, Gore Creek, Timber Trail, Inc. and VR Holdings, Inc. (together, the "Non-Guarantor Subsidiaries"). APII, FFT and the Employee Housing Entities are included with the Non-Guarantor Subsidiaries for purposes of the consolidated condensed financial information, but are not considered subsidiaries under the indentures governing the 6.75% Notes.

Presented below is the consolidated condensed financial information of the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. Financial information for the Non-Guarantor subsidiaries is presented in the column titled "Other Subsidiaries." Balance sheet data is presented as of January 31, 2007, July 31, 2006 and January 31, 2006. Statement of operations data is presented for the three and six months ended January 31, 2007 and 2006. Statement of cash flows data is presented for the six months ended January 31, 2007 and 2006.

Investments in subsidiaries are accounted for by the Parent Company and Guarantor Subsidiaries using the equity method of accounting. Net income (loss) of Guarantor and Non-Guarantor Subsidiaries is, therefore, reflected in the Parent Company's and Guarantor Subsidiaries' investments in and advances to (from) subsidiaries. Net income (loss) of the Guarantor and Non-Guarantor Subsidiaries is reflected in Guarantor Subsidiaries and Parent Company as equity in consolidated subsidiaries. The elimination entries eliminate investments in Other Subsidiaries and intercompany balances and transactions for consolidated reporting purposes.





Supplemental Condensed Consolidating Balance Sheet
As of January 31, 2007
(in thousands)
(Unaudited)
                                 
             
100% Owned
                 
       
Parent
   
Guarantor
   
Other
   
Eliminating
   
       
Company
   
Subsidiaries
   
Subsidiaries
 
Entries
   
Consolidated
Current assets:
                           
 
Cash and cash equivalents
$
--
 
$
247,083
 
$
7,783
 
$
--
 
$
254,866
 
Restricted cash
 
--
   
25,404
   
1,388
   
--
   
26,792
 
Trade receivables, net
 
--
   
37,578
   
6,150
   
--
   
43,728
 
Inventories, net
 
--
   
9,034
   
40,791
   
--
   
49,825
 
Other current assets
 
13,338
   
23,509
   
2,071
   
--
   
38,918
   
Total current assets
 
13,338
   
342,608
   
58,183
   
--
   
414,129
Property, plant and equipment, net
 
--
   
784,486
   
83,699
   
--
   
868,185
Real estate held for sale and investment
 
--
   
118,917
   
174,302
   
--
   
293,219
Goodwill, net
 
--
   
118,475
   
17,336
   
--
   
135,811
Intangible assets, net
 
--
   
57,168
   
16,547
   
--
   
73,715
Other assets
 
5,001
   
26,948
   
15,608
   
--
   
47,557
Investments in subsidiaries and advances to
(from) parent
 
1,059,064
   
(535,123
)
 
(64,043
)
 
(459,898
)
 
--
 
Total assets
$
1,077,403
 
$
913,479
 
$
301,632
 
$
(459,898
)
$
1,832,616
                                 
Current liabilities:
                           
 
Accounts payable and accrued expenses
$
19,866
 
$
231,873
 
$
53,951
 
$
--
 
$
305,690
 
Income taxes payable
 
9,103
   
--
   
--
   
--
   
9,103
 
Long-term debt due within one year
 
--
   
35
   
405
   
--
   
440
   
Total current liabilities
 
28,969
   
231,908
   
54,356
   
--
   
315,233
Long-term debt
 
390,000
   
57,727
   
104,139
   
--
   
551,866
Other long-term liabilities
 
13
   
124,415
   
61,421
   
--
   
185,849
Deferred income taxes
 
--
   
83,946
   
21
   
--
   
83,967
Put option liabilities
 
--
   
1,245
   
--
   
--
   
1,245
Minority interest in net assets of consolidated
subsidiaries
 
--
   
--
   
36,035
   
--
   
36,035
Total stockholders' equity
 
658,421
   
414,238
   
45,660
   
(459,898
)
 
658,421
   
Total liabilities and stockholders' equity
$
1,077,403
 
$
913,479
 
$
301,632
 
$
(459,898
)
$
1,832,616



Supplemental Condensed Consolidating Balance Sheet
As of July 31, 2006
(in thousands)
                                     
           
100% Owned
                       
   
Parent
 
Guarantor
 
Other
 
Eliminating
       
   
Company
 
Subsidiaries
 
Subsidiaries
 
Entries
 
Consolidated
Current assets:
                                       
Cash and cash equivalents
 
$
--
   
$
179,998
   
$
11,796
   
$
--
   
$
191,794
 
Restricted cash
   
--
     
14,787
     
5,535
     
--
     
20,322
 
Trade receivables, net
   
--
     
31,030
     
4,919
     
--
     
35,949
 
Inventories, net
   
--
     
8,595
     
33,683
     
--
     
42,278
 
Other current assets
   
11,945
     
21,308
     
2,378
     
--
     
35,631
 
Total current assets
   
11,945
     
255,718
     
58,311
     
--
     
325,974
 
Property, plant and equipment, net
   
--
     
782,158
     
68,954
     
--
     
851,112
 
Real estate held for sale and investment
   
--
     
154,330
     
105,054
     
--
     
259,384
 
Goodwill, net
   
--
     
118,475
     
17,336
     
--
     
135,811
 
Intangible assets, net
   
--
     
58,185
     
16,924
     
--
     
75,109
 
Other assets
   
5,356
     
20,510
     
14,387
     
--
     
40,253
 
Investments in subsidiaries and advances to (from) parent
   
1,053,209
     
(541,621
)
   
(51,690
)
   
(459,898
)
   
--
 
Total assets
 
$
1,070,510
   
$
847,755
   
$
229,276
   
$
(459,898
)
 
$
1,687,643
 
                                         
Current liabilities:
                                       
Accounts payable and accrued expenses
 
$
19,857
   
$
161,179
   
$
49,726
   
$
--
   
$
230,762
 
Income taxes payable
   
17,517
     
--
     
--
     
--
     
17,517
 
Long-term debt due within one year
   
--
     
4,045
     
1,870
     
--
     
5,915
 
Total current liabilities
   
37,374
     
165,224
     
51,596
     
--
     
254,194
 
Long-term debt
   
390,000
     
57,734
     
77,579
     
--
     
525,313
 
Other long-term liabilities
   
359
     
121,995
     
36,136
     
--
     
158,490
 
Deferred income taxes
   
--
     
72,919
     
145
     
--
     
73,064
 
Put option liabilities
   
--
     
1,245
     
--
     
--
     
1,245
 
Minority interest in net assets of consolidated subsidiaries
   
--
     
13,285
     
19,275
     
--
     
32,560
 
Total stockholders’ equity
   
642,777
     
415,353
     
44,545
     
(459,898
)
   
642,777
 
Total liabilities and stockholders’ equity
 
$
1,070,510
   
$
847,755
   
$
229,276
   
$
(459,898
)
 
$
1,687,643
 





Supplemental Condensed Consolidating Balance Sheet
As of January 31, 2006
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Current assets:
                             
 
Cash and cash equivalents
$
--
 
$
134,279
 
$
41,262
 
$
--
 
$
175,541
 
 
Restricted cash
 
--
   
20,546
   
3,169
   
--
   
23,715
 
 
Receivables, net
 
--
   
35,038
   
4,674
   
--
   
39,712
 
 
Inventories, net
 
--
   
8,669
   
35,308
   
--
   
43,977
 
 
Other current assets
 
12,769
   
24,764
   
6,376
   
--
   
43,909
 
   
Total current assets
 
12,769
   
223,296
   
90,789
   
--
   
326,854
 
Property, plant and equipment, net
 
--
   
787,860
   
70,340
   
--
   
858,200
 
Real estate held for sale and investment
 
--
   
138,559
   
82,489
   
--
   
221,048
 
Goodwill, net
 
--
   
135,811
   
--
   
--
   
135,811
 
Intangible assets, net
 
--
   
42,902
   
34,639
   
--
   
77,541
 
Other assets
 
5,711
   
16,292
   
11,223
   
--
   
33,226
 
Investments in subsidiaries and advances to
(from) parent
 
979,831
   
(449,031
)
 
(70,902
)
 
(459,898
)
 
--
 
   
Total assets
$
998,311
 
$
895,689
 
$
218,578
 
$
(459,898
)
$
1,652,680
 
                               
Current liabilities:
                             
 
Accounts payable and accrued expenses
$
14,986
 
$
224,339
 
$
55,767
 
$
--
 
$
295,092
 
 
Income taxes payable
 
6,324
   
--
   
--
   
--
   
6,324
 
 
Long-term debt due within one year
 
--
   
4,044
   
1,629
   
--
   
5,673
 
   
Total current liabilities
 
21,310
   
228,383
   
57,396
   
--
   
307,089
 
Long-term debt
 
390,000
   
57,767
   
69,871
   
--
   
517,638
 
Other long-term liabilities
 
363
   
98,648
   
33,922
   
--
   
132,933
 
Deferred income taxes
 
--
   
76,770
   
267
   
--
   
77,037
 
Minority interest in net assets of consolidated
subsidiaries
 
--
   
--
   
31,345
   
--
   
31,345
 
Total stockholders' equity
 
586,638
   
434,121
   
25,777
   
(459,898
)
 
586,638
 
   
Total liabilities and stockholders' equity
$
998,311
 
$
895,689
 
$
218,578
 
$
(459,898
)
$
1,652,680
 



Supplemental Condensed Consolidating Statement of Operations
For the three months ended January 31, 2007
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Total net revenue
$
--
 
$
259,244
 
$
104,346
 
$
(2,552
)
$
361,038
 
Total operating expense
 
4,584
   
181,996
   
79,260
   
(2,552
)
 
263,288
 
 
(Loss) income from operations
 
(4,584
)
 
77,248
   
25,086
   
--
   
97,750
 
Other expense, net
 
(6,751
)
 
1,584
   
(999
)
 
--
   
(6,166
)
Equity investment income, net
 
--
   
1,496
   
--
   
--
   
1,496
 
Minority interest in income of
consolidated subsidiaries, net
 
--
   
--
   
(6,152
)
 
--
   
(6,152
)
 
(Loss) income before income taxes
 
(11,335
)
 
80,328
   
17,935
   
--
   
86,928
 
 
Benefit (provision) for income taxes
 
4,420
   
(38,400
)
 
78
   
--
   
(33,902
)
 
Net (loss) income before equity in income
                             
 
(loss) of consolidated subsidiaries
 
(6,915
)
 
41,928
   
18,013
   
--
   
53,026
 
Equity in income (loss) of
consolidated subsidiaries
 
59,941
   
--
   
--
   
(59,941
)
 
--
 
Net income (loss)
$
53,026
 
$
41,928
 
$
18,013
 
$
(59,941
)
$
53,026
 




Supplemental Condensed Consolidating Statement of Operations
For the three months ended January 31, 2006
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Total net revenue
$
--
 
$
226,506
 
$
63,570
 
$
(2,060
)
$
288,016
 
Total operating expense
 
4,082
   
160,439
   
48,547
   
(2,060
)
 
211,008
 
 
(Loss) income from operations
 
(4,082
)
 
66,067
   
15,023
   
--
   
77,008
 
Other expense, net
 
(6,872
)
 
(722
)
 
(811
)
 
--
   
(8,405
)
Equity investment income, net
 
--
   
1,486
   
--
   
--
   
1,486
 
Gain on sale of businesses, net
 
--
   
4,625
   
--
   
--
   
4,625
 
Gain on put options
 
--
   
1,026
   
--
   
--
   
1,026
 
Minority interest in income of
consolidated subsidiaries, net
 
--
   
--
   
(5,231
)
 
--
   
(5,231
)
 
(Loss) income before income taxes
 
(10,954
)
 
72,482
   
8,981
   
--
   
70,509
 
 
Benefit (provision) for income taxes
 
4,272
   
(31,831
)
 
61
   
--
   
(27,498
)
 
Net (loss) income before equity in income
                             
 
(loss) of consolidated subsidiaries
 
(6,682)
   
40,651
   
9,042
   
--
   
43,011
 
Equity in income (loss) of
consolidated subsidiaries
 
49,691
   
--
   
--
   
(49,691
)
 
--
 
Net income (loss)
$
43,009
 
$
40,651
 
$
9,042
 
$
(49,691
)
$
43,011
 




Supplemental Condensed Consolidating Statement of Operations
For the six months ended January 31, 2007
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Total net revenue
$
--
 
$
335,205
 
$
143,641
 
$
(4,315
)
$
474,531
 
Total operating expense
 
7,579
   
303,372
   
121,007
   
(4,315
)
 
427,643
 
 
(Loss) income from operations
 
(7,579
)
 
31,833
   
22,634
   
--
   
46,888
 
Other expense, net
 
(13,508
)
 
(1,089
)
 
(2,045
)
 
--
   
(16,642
)
Equity investment income, net
 
--
   
2,331
   
--
   
--
   
2,331
 
Minority interest in income of
consolidated subsidiaries, net
 
--
   
--
   
(4,363
)
 
--
   
(4,363
)
 
(Loss) income before income taxes
 
(21,087
)
 
33,075
   
16,226
   
--
   
28,214
 
 
Benefit (provision) for income taxes
 
8,223
   
(19,350
)
 
123
   
--
   
(11,004
)
 
Net (loss) income before equity in income
                             
 
(loss) of consolidated subsidiaries
 
(12,864
)
 
13,725
   
16,349
   
--
   
17,210
 
Equity in income (loss) of
consolidated subsidiaries
 
30,074
   
--
   
--
   
(30,074
)
 
--
 
Net income (loss)
$
17,210
 
$
13,725
 
$
16,349
 
$
(30,074
)
$
17,210
 





Supplemental Condensed Consolidating Statement of Operations
For the six months ended January 31, 2006
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Total net revenue
$
--
 
$
287,303
 
$
90,200
 
$
(4,067
)
$
373,436
 
Total operating expense
 
7,850
   
261,145
   
81,380
   
(4,067
)
 
346,308
 
 
(Loss) income from operations
 
(7,850
)
 
26,158
   
8,820
   
--
   
27,128
 
Other expense, net
 
(13,632
)
 
(1,571
)
 
(1,451
)
 
--
   
(16,654
)
Equity investment income, net
 
--
   
2,405
   
--
   
--
   
2,405
 
Gain on sale of businesses, net
 
--
   
4,625
   
--
   
--
   
4,625
 
Gain on put options
 
--
   
34
   
--
   
--
   
34
 
Minority interest in income of
consolidated subsidiaries, net
 
--
   
--
   
(3,305
)
 
--
   
(3,305
)
 
(Loss) income before income taxes
 
(21,482
)
 
31,651
   
4,064
   
--
   
14,233
 
 
Benefit (provision) for income taxes
 
8,378
   
(14,036
)
 
107
   
--
   
(5,551
)
 
Net (loss) income before equity in income
                             
 
(loss) of consolidated subsidiaries
 
(13,104
)
 
17,615
   
4,171
   
--
   
8,682
 
Equity in income (loss) of consolidated
subsidiaries
 
21,785
   
--
   
--
   
(21,785
)
 
--
 
Net income (loss)
$
8,681
 
$
17,615
 
$
4,171
 
$
(21,785
)
$
8,682
 




Supplemental Condensed Consolidating Statement of Cash Flows
For the six months ended January 31, 2007
(in thousands)
(Unaudited)
                               
               
100% Owned
             
         
Parent
   
Guarantor
   
Other
       
         
Company
   
Subsidiaries
   
Subsidiaries
   
Consolidated
 
Net cash (used in) provided by operating activities
$
(35,705
)
$
199,690
 
$
32,901
 
$
196,886
 
Cash flows from investing activities:
                       
 
Capital expenditures
 
--
   
(42,349
)
 
(19,709
)
 
(62,058
)
 
Investments in real estate
 
--
   
(38,721
)
 
(49,846
)
 
(88,567
)
 
Other investing activities, net
 
--
   
2,578
   
(2,224
)
 
354
 
   
Net cash used in investing activities
 
--
   
(78,492
)
 
(71,779
)
 
(150,271
)
Cash flows from financing activities:
                       
 
Repurchases of common stock
 
--
   
(15,007
)
 
--
   
(15,007
)
 
Proceeds from borrowings under long-term debt
 
--
   
1,645
   
79,434
   
81,079
 
 
Payments of long-term debt
 
--
   
(5,662
)
 
(54,339
)
 
(60,001
)
 
Proceeds from exercise of stock options
 
6,803
   
--
   
--
   
6,803
 
 
Other financing activities, net
 
3,432
   
(2,604
)
 
2,755
   
3,583
 
 
Advances from (to) affiliates
 
25,470
   
(32,485
)
 
7,015
   
--
 
   
Net cash (used in) provided by financing activities
 
35,705
   
(54,113
)
 
34,865