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 April 30, 2007

or

¨ 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 Exchange Act).
¨ Yes x No

As of June 4, 2007, 39,008,077 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.
13
Item 4.
13
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)

     
April 30,
     
July 31,
     
April 30,
 
     
2007
     
2006
     
2006
 
     
(Unaudited)
             
(Unaudited)
 
Assets
                       
Current assets:
                       
Cash and cash equivalents
 
$
316,439
   
$
191,794
   
$
240,116
 
Restricted cash
   
40,408
     
20,322
     
32,307
 
Trade receivables, net
   
35,258
     
35,949
     
35,618
 
Inventories, net
   
42,627
     
42,278
     
36,830
 
Other current assets
   
32,833
     
35,631
     
34,744
 
Total current assets
   
467,565
     
325,974
     
379,615
 
Property, plant and equipment, net (Note 5)
   
868,723
     
851,112
     
848,984
 
Real estate held for sale and investment
   
305,085
     
259,384
     
240,615
 
Goodwill, net
   
135,939
     
135,811
     
135,811
 
Intangible assets, net
   
73,199
     
75,109
     
76,587
 
Other assets
   
44,607
     
40,253
     
31,123
 
Total assets
 
$
1,895,118
   
$
1,687,643
   
$
1,712,735
 
                         
Liabilities and Stockholders’ Equity
                       
Current liabilities:
                       
Accounts payable and accrued expenses (Note 5)
 
$
237,981
   
$
230,762
   
$
206,471
 
Income taxes payable
   
11,739
     
17,517
     
1,324
 
Long-term debt due within one year (Note 4)
   
401
     
5,915
     
4,420
 
Total current liabilities
   
250,121
     
254,194
     
212,215
 
Long-term debt (Note 4)
   
575,162
     
525,313
     
516,871
 
Other long-term liabilities (Note 5)
   
166,382
     
158,490
     
149,881
 
Deferred income taxes
   
130,212
     
73,064
     
118,846
 
Commitments and contingencies (Note 11)
                       
Put option liabilities (Note 9)
   
--
     
1,245
     
113
 
Minority interest in net assets of consolidated subsidiaries
   
30,052
     
32,560
     
35,224
 
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, 39,630,543 (unaudited), 39,036,282 and 38,876,070 (unaudited) shares issued
as of April 30, 2007, July 31, 2006 and April 30, 2006, respectively
   
396
     
390
     
389
 
Additional paid-in capital
   
529,199
     
509,505
     
504,212
 
Retained earnings
   
239,440
     
143,721
     
174,984
 
Treasury stock (Note 12)
   
(25,846
)
   
(10,839
)
   
--
 
Total stockholders’ equity
   
743,189
     
642,777
     
679,585
 
Total liabilities and stockholders’ equity
 
$
1,895,118
   
$
1,687,643
   
$
1,712,735
 

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
 
   
April 30,
 
     
2007
     
2006
 
Net revenue:
               
Mountain
 
$
308,712
   
$
294,773
 
Lodging
   
43,643
     
39,492
 
Real estate
   
17,134
     
7,124
 
Total net revenue
   
369,489
     
341,389
 
Segment operating expense:
               
Mountain
   
152,997
     
149,431
 
Lodging
   
31,126
     
30,515
 
Real estate
   
25,261
     
11,370
 
Total segment operating expense
   
209,384
     
191,316
 
Other operating expense:
               
Depreciation and amortization
   
(23,513
)
   
(22,942
)
Relocation and separation charges (Note 7)
   
(166
)
   
(3,778
)
Loss on disposal of fixed assets, net
   
(242
)
   
(108
)
Income from operations
   
136,184
     
123,245
 
Mountain equity investment income, net
   
1,660
     
780
 
Real estate equity investment loss
   
--
     
(20
)
Investment income
   
4,334
     
3,156
 
Interest expense, net
   
(8,039
)
   
(8,849
)
Loss on sale of business (Note 8)
   
(601
)
   
--
 
Contract dispute charges (Note 11)
   
(184
)
   
(816
)
Gain (loss) on put options, net (Note 9)
   
690
     
(113
)
Minority interest in income of consolidated subsidiaries, net
   
(5,343
)
   
(5,355
)
Income before provision for income taxes
   
128,701
     
112,028
 
Provision for income taxes
   
(50,193
)
   
(43,691
)
Net income
 
$
78,508
   
$
68,337
 
                 
Per share amounts (Note 3):
               
Basic net income per share
 
$
2.02
   
$
1.78
 
Diluted net income per share
 
$
1.99
   
$
1.75
 

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)

   
Nine Months Ended
 
   
April 30,
 
     
2007
     
2006
 
Net revenue:
               
Mountain
 
$
626,902
   
$
581,279
 
Lodging
   
116,848
     
113,321
 
Real estate
   
100,272
     
20,226
 
Total net revenue
   
844,022
     
714,826
 
Segment operating expense:
               
Mountain
   
392,355
     
372,387
 
Lodging
   
98,233
     
101,050
 
Real estate
   
101,770
     
23,823
 
Total segment operating expense
   
592,358
     
497,260
 
Other operating (expense) income:
               
Depreciation and amortization
   
(66,857
)
   
(63,296
)
Relocation and separation charges (Note 7)
   
(1,401
)
   
(3,778
)
Asset impairment charge
   
--
     
(136
)
Mold remediation credit (Note 11)
   
--
     
852
 
Loss on disposal of fixed assets, net
   
(332
)
   
(835
)
Income from operations
   
183,074
     
150,373
 
Mountain equity investment income, net
   
3,990
     
3,085
 
Real estate equity investment income
   
--
     
79
 
Investment income
   
8,815
     
5,390
 
Interest expense, net
   
(24,885
)
   
(27,788
)
(Loss) gain on sale of businesses, net (Note 8)
   
(601
)
   
4,625
 
Contract dispute charges (Note 11)
   
(4,460
)
   
(816
)
Gain (loss) on put options, net (Note 9)
   
690
     
(79
)
Other income, net
   
--
     
50
 
Minority interest in income of consolidated subsidiaries, net
   
(9,707
)
   
(8,660
)
Income before provision for income taxes
   
156,916
     
126,259
 
Provision for income taxes
   
(61,197
)
   
(49,240
)
Net income
 
$
95,719
   
$
77,019
 
                 
Per share amounts (Note 3):
               
Basic net income per share
 
$
2.47
   
$
2.05
 
Diluted net income per share
 
$
2.44
   
$
2.01
 

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)

   
Nine Months Ended
   
April 30,
   
2007
 
2006
Net cash provided by operating activities
 
$
285,425
   
$
177,718
   
Cash flows from investing activities:
                 
Capital expenditures
   
(82,012
)
   
(63,683
)
 
Investments in real estate
   
(121,114
)
   
(88,366
)
 
Proceeds from sale of businesses
   
3,544
     
30,712
   
Purchase of minority interest
   
(8,387
)
   
--
   
Other investing activities, net
   
453
     
(4,419
)
 
Net cash used in investing activities
   
(207,516
)
   
(125,756
)
 
Cash flows from financing activities:
                 
Repurchases of common stock
   
(15,007
)
   
--
   
Proceeds from borrowings under Non-Recourse Real Estate Financings
   
56,413
     
9,596
   
Payments of Non-Recourse Real Estate Financings
   
(1,493
)
   
--
   
Proceeds from borrowings under other long-term debt
   
56,587
     
26,470
   
Payments of other long-term debt
   
(67,171
)
   
(36,781
)
 
Proceeds from exercise of stock options
   
9,594
     
44,036
   
Other financing activities, net
   
7,813
     
8,253
   
Net cash provided by financing activities
   
46,736
     
51,574
   
Net increase in cash and cash equivalents
   
124,645
     
103,536
   
Cash and cash equivalents:
                 
Beginning of period
   
191,794
     
136,580
   
End of period
 
$
316,439
   
$
240,116
   

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 69.3% 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 (“GAAP”) 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 GAAP 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 April 30, 2007 and 2006 (in thousands, except per share amounts):

   
Three Months Ended April 30,
   
2007
 
2006
   
Basic
 
Diluted
 
Basic
 
Diluted
Net income per share:
                               
Net income
 
$
78,508
   
$
78,508
   
$
68,337
   
$
68,337
 
                                 
Weighted-average shares outstanding
   
38,897
     
38,897
     
38,365
     
38,365
 
Effect of dilutive securities
   
--
     
532
     
--
     
659
 
Total shares
   
38,897
     
39,429
     
38,365
     
39,024
 
                                 
Net income per share
 
$
2.02
   
$
1.99
   
$
1.78
   
$
1.75
 

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 zero and 268,000 for the three months ended April 30, 2007 and 2006, respectively.

Presented below is basic and diluted EPS for the nine months ended April 30, 2007 and 2006 (in thousands, except per share amount):

   
Nine Months Ended April 30,
   
2007
 
2006
 
 
Basic
 
Diluted
 
Basic
Diluted
Net income per share:
                             
Net income
 
$
95,719
   
$
95,719
   
$
77,019
 
$
77,019
 
                               
Weighted-average shares outstanding
   
38,787
     
38,787
     
37,535
   
37,535
 
Effect of dilutive securities
   
--
     
502
     
--
   
822
 
Total shares
   
38,787
     
39,289
     
37,535
   
38,357
 
                               
Net income per share
 
$
2.47
   
$
2.44
   
$
2.05
 
$
2.01
 

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 33,000 and 248,000 for the nine months ended April 30, 2007 and 2006, respectively.

4. Long-Term Debt

Long-term debt as of April 30, 2007, July 31, 2006 and April 30, 2006 is summarized as follows (in thousands):

   
April 30,
July 31,
April 30,
 
Maturity (a)
2007
2006
2006
Credit Facility Revolver (b)
2012
$
--
$
--
$
--
SSV Facility
2011
 
--
 
6,261
 
--
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 (c)
2009-2010
 
68,276
 
13,357
 
9,596
6.75% Senior Subordinated Notes ("6.75% Notes")
2014
 
390,000
 
390,000
 
390,000
Other
2007-2029
 
7,012
 
7,335
 
7,420
Total debt
   
575,563
 
531,228
 
521,291
Less: Current maturities (d)
   
401
 
5,915
 
4,420
Long-term debt
 
$
575,162
$
525,313
$
516,871

   
(a)
Maturities are based on the Company's July 31 fiscal year end.
   
(b)
On March 13, 2007, The Vail Corporation (“Vail Corp.”), a wholly-owned subsidiary of the Company, entered into an amendment (the “Third Amendment”) of its existing Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) among Vail Corp., Bank of America, N.A. as administrative agent, U.S. Bank National Association and Wells Fargo Bank, National Association as co-syndication agents, Deutsche Bank Trust Company Americas and LaSalle Bank National Association as co-documentation agents, and the lenders party thereto. The Third Amendment amends the Credit Agreement to, among other things, (i) decrease the total loan commitment from $400 million to $300 million, (ii) improve pricing, including unused commitment fees and letter of credit fees and improve flexibility in the Company’s ability to make investments, (iii) extend the maturity date from January 28, 2010 to February 1, 2012 and (iv) eliminate certain covenant ratios and change, for pricing and covenant purposes, the gross debt leverage ratio to a net debt ratio.
   
(c)
On March 19, 2007, The Chalets at The Lodge at Vail, LLC (the “Chalets”), a wholly-owned subsidiary of the Company, entered into a construction loan agreement (the “Construction Loan Agreement”) in the amount of up to $123 million with Wells Fargo Bank, National Association as administrative agent, book manager, and joint lead arranger, U.S. Bank National Association as joint lead arranger and syndication agent, and the lenders party thereto. Borrowings under the Construction Loan Agreement are non-revolving and must be used for the payment of certain costs associated with the construction and development of The Lodge at Vail Chalets, a residential development consisting of 13 luxury condominium units, as well as the associated private membership club, skier services building and parking structure. The Construction Loan Agreement matures on September 1, 2009, and principal payments are due at maturity, with certain pre-payment requirements, including upon the closing of the condominium units. The Chalets has the option to extend the term of the Construction Loan Agreement for six months, subject to certain requirements. Borrowings under the Construction Loan Agreement bear interest annually at the rate, at the Chalets’ option, of (i) LIBOR plus a margin of 1.35% or (ii) the greater of the (x) administrative agent’s prime commercial lending rate or (y) the Federal Funds Rate in effect on that day as announced by the Federal Reserve Bank of New York, plus 0.5%. Interest is payable monthly in arrears. The Construction Loan Agreement provides for affirmative and negative covenants that restrict, among other things, the Chalets’ ability to dispose of assets, transfer or pledge its equity interest, incur indebtedness and make investments or distributions. The Construction Loan Agreement contains non-recourse provisions to the Company with respect to repayment, whereby under event of default, the lenders have recourse only against the Chalets’ assets and as provided for below the lenders do not have recourse against assets held by the Company or Vail Corp. All assets of the Chalets are provided as collateral under the Construction Loan Agreement. In connection with the Construction Loan Agreement, the Company and Vail Corp. each entered into completion guarantees, pursuant to which each of the Company and Vail Corp. guarantees the completion of the construction of the project (but not the repayment of any amounts drawn under the Construction Loan Agreement). However, Vail Corp. could be responsible to pay damages to the lenders under very limited circumstances. If either the Company or Vail Corp. is required to perform the Chalets’ obligation to complete the project, the lenders will make available to the Company or Vail Corp. any undisbursed commitments under the Construction Loan Agreement for the completion of construction and development of The Lodge at Vail Chalets.
 
At April 30, 2007, Non-Recourse Real Estate Financings consist of borrowings of $59.5 million under the $175 million construction agreement for Arrabelle at Vail Square, LLC (“Arrabelle”) and borrowings of $8.8 million under the $123 million construction agreement for the Chalets. 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 nine months ended April 30, 2007.
   
(d)
Current maturities represent principal payments due in the next 12 months.

Aggregate maturities for debt outstanding as of April 30, 2007 are as follows (in thousands):

Fiscal 2007
 
$
88
Fiscal 2008
   
363
Fiscal 2009
   
74,760
Fiscal 2010
   
9,043
Fiscal 2011
   
1,738
Thereafter
   
489,571
Total debt
 
$
575,563

The Company incurred gross interest expense of $10.6 million and $9.8 million for the three months ended April 30, 2007 and 2006, respectively, of which $603,000 and $599,000 was amortization of deferred financing costs. The Company incurred gross interest expense of $31.1 million and $29.1 million for the nine months ended April 30, 2007 and 2006, respectively, of which $1.5 million and $1.6 million was amortization of deferred financing costs. The Company capitalized $2.6 million and $938,000 of interest during the three months ended April 30, 2007 and 2006, respectively. The Company capitalized $6.2 million and $1.3 million of interest during the nine months ended April 30, 2007 and 2006, respectively.

5. Supplementary Financial Statement Information

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

     
April 30,
 
July 31,
 
April 30,
     
2007
 
2006
 
2006
Land and land improvements
 
$
248,275
   
$
248,941
   
$
244,204
 
Buildings and building improvements
   
538,530
     
529,316
     
527,297
 
Machinery and equipment
   
455,200
     
426,457
     
427,550
 
Vehicles
   
27,051
     
25,671
     
25,217
 
Furniture and fixtures
   
125,781
     
113,696
     
112,296
 
Construction in progress
   
59,220
     
39,149
     
30,664
 
 
Gross property, plant and equipment
   
1,454,057
     
1,383,230
     
1,367,228
 
Accumulated depreciation
   
(585,334
)
   
(532,118
)
   
(518,244
)
 
Property, plant and equipment, net
 
$
868,723
   
$
851,112 
   
$
848,984
 

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

     
April 30,
 
July 31,
 
April 30,
     
2007
 
2006
 
2006
Trade payables
 
$
88,938
   
$
82,599
   
$
71,516
 
Deferred revenue
   
21,984
     
30,785
     
23,041
 
Deferred credits and deposits
   
46,348
     
24,026
     
32,881
 
Accrued salaries, wages and deferred compensation
   
25,987
     
31,954
     
26,008
 
Accrued benefits
   
29,239
     
24,538
     
23,501
 
Accrued interest
   
6,965
     
14,969
     
7,214
 
Liabilities to complete real estate projects
   
5,436
     
5,951
     
8,396
 
Other accruals
   
13,084
     
15,940
     
13,914
 
 
Total accounts payable and accrued expenses
 
$
237,981
   
$
230,762
   
$
206,471
 

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

     
April 30,
 
July 31,
 
April 30,
     
2007
 
2006
 
2006
Private club deferred initiation fee revenue
 
$
94,262
   
$
91,438
   
$
89,840
 
Deferred real estate credits
   
37,120
     
54,578
     
50,838
 
Private club initiation deposits
   
16,302
     
1,308
     
1,280
 
Liabilities to complete real estate projects
   
6,301
     
550
     
550
 
Other long-term liabilities
   
12,397
     
10,616
     
7,373
 
 
Total other long-term liabilities
 
$
166,382
   
$
158,490
   
$
149,881
 

In connection with a periodic review by the staff of the Securities and Exchange Commission (the “Staff”) of the Company’s Annual Report on Form 10-K for the year end July 31, 2006, the Company is in discussions with the Staff regarding the Company’s classification of its Real Estate segment cash inflows and outflows within the operating and investing sections of its Statements of Cash Flows. If, as a result of these discussions, it is concluded that an alternative Statement of Cash Flow presentation is more appropriate than the Company’s current presentation, it would impact the operating and investing subtotals within the Statements of Cash Flows, but would not impact the overall net change in cash and cash equivalents in the Company’s Statements of Cash Flows. Furthermore, these discussions do not relate to the presentation of the Company’s previously reported operating results presented in its Statements of Operations or to the Company’s Balance Sheets.

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 April 30, 2007, the Employee Housing Entities had total assets of $40.9 million (primarily recorded in property, plant and equipment, net) and total liabilities of $65.7 million (primarily recorded in long-term debt as “Employee Housing Bonds”). All of the assets ($7.0 million as of April 30, 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 $4.7 million (primarily recorded in property, plant and equipment, net) and no debt as of April 30, 2007.

The Company had determined that it was the primary beneficiary of FFT Investment Partners (“FFT”), which was a VIE. FFT’s sole asset was a private residence in Eagle County, Colorado. In March 2007, the private residence owned by FFT was sold for $6.7 million, and thereafter FFT was 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 five hotel properties as of April 30, 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 $143.0 million and total liabilities of approximately $53.1 million as of April 30, 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 $1.8 million and the net book value of the intangible asset associated with the management agreements in the amount of $973,000 as of April 30, 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 all has been substantially incurred or recorded through April 30, 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
 
 
 Contract
 
 
 and Other
 
 
 
 
 
 
 Retention
 
 
 Termination
 
 
 Relocation
 
 
 
 
 
 
 Benefits
 
 
 Costs
 
 
 Costs
 
 
 Total
 
 Balance at July 31, 2006
 $
 873
 
 $
 --
 
 $
 283
 
 $
 1,156
 
 Relocation charges
 
67
 
 
348
 
 
986
 
 
 1,401
 
 Payments
 
(940
)
 
(157
)
 
(1,259
)
 
(2,235
)
 Balance at April 30, 2007
 $
--
 
 $
191
 
 $
10
 
 $
201
 

In addition, in February 2006, Adam Aron, the former Chairman and Chief Executive Officer of the Company, resigned. In connection with Mr. Aron's resignation, the Company entered into a separation agreement with Mr. Aron, whereby the Company recorded $2.7 million of separation related expenses, which is included in “relocation and separation charges” in the accompanying Consolidated Condensed Statements of Operations for the three and nine months ended April 30, 2006. Payments of Mr. Aron’s separation benefits were made during the nine months ended April 30, 2007.

8. Sale of Businesses

On April 30, 2007, the Company sold its 54.5% interest in RTP, LLC (“RTP”) to RTP’s minority shareholder for approximately $3.5 million. As part of this transaction the Company retained source code rights to its internal use software and internet solutions. The Company recorded a net loss of $601,000 on the sale of its investment in RTP, which was included in “(loss) gain on sale of businesses, net” in the accompanying Consolidated Condensed Statements of Operations for the three and nine months ended April 30, 2007. Additionally, as a result of this transaction the Company recorded a net gain of $690,000 related to the elimination of the put option liability to RTP’s minority shareholder and the write-off of the associated put option intangible asset (see Note 9, Put and Call Options, for more information on this transaction).

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 "(loss) gain on sale of businesses, net" in the accompanying Consolidated Condensed Statement of Operations for the nine months ended April 30, 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 "(loss) gain on sale of businesses, net" in the accompanying Consolidated Condensed Statement of Operations for the nine months ended April 30, 2006.

9. Put and Call Options

On March 31, 2007, the Company acquired 20% of GSSI LLC’s (“GSSI”), the minority shareholder in SSV, ownership interest in SSV for $8.4 million. As a result of this transaction, the Company holds 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, as discussed below, and the existing management agreement was extended to coincide with the exercise of the remaining put and call rights.

The Company’s and GSSI’s remaining put and call rights are as follows: (1) beginning August 1, 2010 and each year thereafter, each of the Company and GSSI 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. As of April 30, 2007, the estimated price at which the put/call option for the remaining interest could be expected to be settled was $33.5 million.

In March 2001, in connection with the Company's acquisition of a 51% ownership interest in RTP, the Company and RTP's minority shareholder entered into a put agreement whereby the minority shareholder could 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 was 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 had 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. In connection with the Company’s sale of its 54.5% interest in RTP (see Note 8, Sale of Businesses, for more information on this transaction) the put agreement with RTP’s minority shareholder was terminated resulting in the Company recording a net gain of $690,000 for the three and nine months ended April 30, 2007 related to the elimination of its put option liability net of the write-off of the associated put option intangible asset. For the three and nine months ended April 30, 2006, the Company recorded losses of $113,000 and $79,000, respectively, representing an increase in the estimated fair value of the put option liability during those periods.

10. Related Party Transactions

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 and upgrade deposits totaling $63,000. The earnest money deposits will be used to fund the construction of The Lodge at Vail Chalets project. The sale of the unit by the Company to Mr. Katz has been approved by the Board of Directors of the Company, in accordance with the Company's related party transactions policy.

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.

As of April 30, 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 $964,000, $1.3 million and $1.7 million, primarily within "other long-term liabilities" in the accompanying Consolidated Condensed Balance Sheets, as of April 30, 2007, July 31, 2006 and April 30, 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 April 30, 2007, the Company had various other letters of credit outstanding in the amount of $66.0 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, $6.2 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 April 30, 2007, the Company has recorded a liability related to the airline guarantees of $200,000, 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 whether to complete 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 $11.7 million as of April 30, 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 contributed $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 Financial Statement 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 (“Cheeca Holdings”), 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 $184,000 and $816,000 of legal related costs related to this matter in the three months ended April 30, 2007 and 2006, respectively, and has incurred $4.5 million and $816,000 of legal related costs related to this matter in the nine months ended April 30, 2007 and 2006, respectively, which is included in “contract dispute charges” in the accompanying Consolidated Condensed Statements of Operations for the three and nine months ended April 30, 2007 and 2006.

On February 28, 2007, the arbitrator rendered a decision, awarding $8.5 million in damages in favor of RockResorts and against Cheeca Holdings. The arbitrator found that the ownership group had wrongfully terminated the hotel management contract without good cause, as RockResorts had maintained in the proceedings, and that RockResorts had not breached the management contract, as the ownership group had alleged. In accordance with the arbitrator’s ruling, RockResorts will seek recovery of costs and attorneys’ fees in the last stage of the proceedings. Upon conclusion of that stage, the total award, which will incorporate the $8.5 million damage award and any additional cost recovery award, is final, binding and not subject to appeal. Upon completion of the cost recovery stage, RockResorts will proceed with the collection of the award and will record the actual amount received, upon receipt, in “contract dispute credit (charges), net.”

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. Breckenridge Terrace recorded a $7.0 million liability in the year ended July 31, 2004 for the estimated cost of remediation and reconstruction efforts. 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 nine months ended April 30, 2006, the Company recorded an $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 nine months ended April 30, 2007, the Company repurchased 358,400 shares of common stock at a cost of $15.0 million. The Company did not repurchase any shares of common stock during the three months ended April 30, 2007. Since inception of this stock repurchase plan, the Company has repurchased 673,500 shares at a cost of approximately $25.8 million. As of April 30, 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., SSV, Larkspur Restaurant & Bar, LLC, Vail Associates Investments, Inc., Arrabelle, Gore Creek, Chalets, Timber Trail, Inc. and VR Holdings, Inc. (together, the "Non-Guarantor Subsidiaries"). APII 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 April 30, 2007, July 31, 2006 and April 30, 2006. Statement of operations data is presented for the three and nine months ended April 30, 2007 and 2006. Statement of cash flows data is presented for the nine months ended April 30, 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 April 30, 2007
(in thousands)
(Unaudited)
                                 
             
100% Owned
                 
       
Parent
   
Guarantor
   
Other
   
Eliminating
   
       
Company
   
Subsidiaries
   
Subsidiaries
 
Entries
   
Consolidated
Current assets:
                           
 
Cash and cash equivalents
$
--
 
$
273,103
 
$
43,336
 
$
--
 
$
316,439
 
Restricted cash
 
--
   
27,673
   
12,735
   
--
   
40,408
 
Trade receivables, net
 
--
   
32,769
   
2,489
   
--
   
35,258
 
Inventories, net
 
--
   
7,855
   
34,772
   
--
   
42,627
 
Other current assets
 
13,991
   
13,207
   
5,635
   
--
   
32,833
   
Total current assets
 
13,991
   
354,607
   
98,967
   
--
   
467,565
Property, plant and equipment, net
 
--
   
798,591
   
70,132
   
--
   
868,723
Real estate held for sale and investment
 
--
   
112,253
   
192,832
   
--
   
305,085
Goodwill, net
 
--
   
121,611
   
14,328
   
--
   
135,939
Intangible assets, net
 
--
   
56,729
   
16,470
   
--
   
73,199
Other assets
 
4,824
   
27,691
   
12,092
   
--
   
44,607
Investments in subsidiaries and advances to (from) parent
 
1,261,952
   
295,497
   
(53,028
)
 
(1,504,421
)
 
--
 
Total assets
$
1,280,767
 
$
1,766,979
 
$
351,793
 
$
(1,504,421
)
$
1,895,118
                                 
Current liabilities:
                           
 
Accounts payable and accrued expenses
$
5,627
 
$
152,999
 
$
79,355
 
$
--
 
$
237,981
 
Income taxes payable
 
11,739
   
--
   
--
   
--
   
11,739
 
Long-term debt due within one year
 
--
   
35
   
366
   
--
   
401
   
Total current liabilities
 
17,366
   
153,034
   
79,721
   
--
   
250,121
Long-term debt
 
390,000
   
57,718
   
127,444
   
--
   
575,162
Other long-term liabilities
 
--
   
120,029
   
46,353
   
--
   
166,382
Deferred income taxes
 
130,212
   
--
   
--
   
--
   
130,212
Minority interest in net assets of consolidated subsidiaries
 
--
   
--
   
--
   
30,052
   
30,052
Total stockholders' equity
 
743,189
   
1,436,198
   
98,275
   
(1,534,473
)
 
743,189
   
Total liabilities and stockholders' equity
$
1,280,767
 
$
1,766,979
 
$
351,793
 
$
(1,504,421
)
$
1,895,118



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 April 30, 2006
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Current assets:
                             
 
Cash and cash equivalents
$
--
 
$
231,814
 
$
8,302
 
$
--
 
$
240,116
 
 
Restricted cash
 
--
   
28,776
   
3,531
   
--
   
32,307
 
 
Receivables, net
 
--
   
30,482
   
5,136
   
--
   
35,618
 
 
Inventories, net
 
--
   
7,434
   
29,396
   
--
   
36,830
 
 
Other current assets
 
13,191
   
15,494
   
6,059
   
--
   
34,744
 
   
Total current assets
 
13,191
   
314,000
   
52,424
   
--
   
379,615
 
Property, plant and equipment, net
 
--
   
781,039
   
67,945
   
--
   
848,984
 
Real estate held for sale and investment
 
--
   
142,101
   
98,514
   
--
   
240,615
 
Goodwill, net
 
--
   
135,811
   
--
   
--
   
135,811
 
Intangible assets, net
 
--
   
42,137
   
34,450
   
--
   
76,587
 
Other assets
 
5,534
   
14,456
   
11,133
   
--
   
31,123
 
Investments in subsidiaries and advances to (from) parent
 
1,065,247
   
(561,556
)
 
(43,793
)
 
(459,898
)
 
--
 
     
$
1,083,972
 
$
867,988
 
$
220,673
 
$
(459,898
)
$
1,712,735
 
                               
Current liabilities:
                             
 
Accounts payable and accrued expenses
$
12,705
 
$
143,768
 
$
49,998
 
$
--
 
$
206,471
 
 
Income taxes payable
 
1,324
   
--
   
--
   
--
   
1,324
 
 
Long-term debt due within one year
 
--
   
4,044
   
376
   
--
   
4,420
 
   
Total current liabilities
 
14,029
   
147,812
   
50,374
   
--
   
212,215
 
Long-term debt
 
390,000
   
57,742
   
69,129
   
--
   
516,871
 
Other long-term liabilities
 
358 
   
115,215
   
34,308
   
--
   
149,881
 
Deferred income taxes
 
--
   
118,641
   
205
   
--
   
118,846
 
Put option liabilities
 
--
   
113
   
--
   
--
   
113
 
Minority interest in net assets of consolidated subsidiaries
 
--
   
--
   
35,224
   
--
   
35,224
 
Total stockholders' equity
 
679,585
   
428,465
   
31,433
   
(459,898
)
 
679,585
 
   
Total liabilities and stockholders' equity
$
1,083,972
 
$
867,988
 
$
220,673
 
$
(459,898
)
$
1,712,735
 



Supplemental Condensed Consolidating Statement of Operations
For the three months ended April 30, 2007
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Total net revenue
$
--
 
$
304,899
 
$
67,994
 
$
(3,404
)
$
369,489
 
Total operating expense
 
175
   
181,201
   
54,789
   
(2,860
)
 
233,305
 
 
(Loss) income from operations
 
(175
)
 
123,698
   
13,205
   
(544
)
 
136,184
 
Other (expense) income, net
 
(6,757
)
 
3,397
   
(1,071
)
 
542
   
(3,889
)
Equity investment income, net
 
--
   
1,660
   
--
   
--
   
1,660
 
Loss on sale of business
 
--
   
(601
)
 
--
   
--
   
(601
)
Gain on put options, net
 
--
   
690
   
--
   
--
   
690
 
Minority interest in income of
consolidated subsidiaries, net
 
--
   
--
   
--
   
(5,343
)
 
(5,343
)
 
(Loss) income before income taxes
 
(6,932
)
 
128,844
   
12,134
   
(5,345
)
 
128,701
 
 
Benefit (provision) for income taxes
 
2,704
   
(52,901
)
 
4
   
--
   
(50,193
)
 
Net (loss) income before equity in income
                             
 
(loss) of consolidated subsidiaries
 
(4,228
)
 
75,943
   
12,138
   
(5,345
)
 
78,508
 
Equity in income (loss) of
consolidated subsidiaries
 
82,736
   
--
   
--
   
(82,736
)
 
--
 
Net income (loss)
$
78,508
 
$
75,943
 
$
12,138
 
$
(88,081
)
$
78,508
 




Supplemental Condensed Consolidating Statement of Operations
For the three months ended April 30, 2006
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Total net revenue
$
--
 
$
284,472
 
$
59,493
 
$
(2,576
)
$
341,389
 
Total operating expense
 
7,742
   
167,605
   
45,373
   
(2,576
)
 
218,144
 
 
(Loss) income from operations
 
(7,742
)
 
116,867
   
14,120
   
--
   
123,245
 
Other (expense) income, net
 
(6,758
)
 
921
 
 
(672)
   
--
   
(6,509
)
Equity investment income, net
 
--
   
760
   
--
   
--
   
760
 
Loss on put options, net
 
--
   
(113
)
 
--
   
--
   
(113
)
Minority interest in income of
consolidated subsidiaries, net
 
--
   
--
   
(5,355
)
 
--
   
(5,355
)
 
(Loss) income before income taxes
 
(14,500
)
 
118,435
   
8,093
   
--
   
112,028
 
 
Benefit (provision) for income taxes
 
5,655
   
(49,408
)
 
62
   
--
   
(43,691
)
 
Net (loss) income before equity in income
 
 
 
 
 
   
 
           
 
(loss) of consolidated subsidiaries
  (8,845 )   69,027     8,155     --      68,337  
Equity in income (loss) of
consolidated subsidiaries
 
77,182
   
--
   
--
   
(77,182
)
 
--
 
Net income (loss)
$
68,337
 
$
69,027
 
$
8,155
 
$
(77,182
)
$
68,337
 




Supplemental Condensed Consolidating Statement of Operations
For the nine months ended April 30, 2007
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Total net revenue
$
--
 
$
639,972
 
$
213,097
 
$
(9,047
)
$
844,022
 
Total operating expense
 
525
   
491,364
   
177,667
   
(8,608
)
 
660,948
 
 
(Loss) income from operations
 
(525
)
 
148,608
   
35,430
   
(439
)
 
183,074
 
Other (expense) income, net
 
(20,276
)
 
2,319
   
(3,115
)
 
542
   
(20,530
)
Equity investment income, net
 
--
   
3,990
   
--
   
--
   
3,390
 
Loss on sale of business
 
--
   
(601
)
 
--
   
--
   
(601
)
Gain on put options, net
 
--
   
690
   
--
   
--
   
690
 
Minority interest in income of
consolidated subsidiaries, net
 
--
   
--
   
--
   
(9,707
)
 
(9,707
)
 
(Loss) income before income taxes
 
(20,801
)
 
155,006
   
32,315
   
(9,604
)
 
156,916
 
 
Benefit (provision) for income taxes
 
8,113
   
(69,437
)
 
127
   
--
   
(61,197
)
 
Net (loss) income before equity in income
                             
 
(loss) of consolidated subsidiaries
 
(12,688
)
 
85,569
   
32,442
   
(9,604
)
 
95,719
 
Equity in income (loss) of
consolidated subsidiaries
 
108,407
   
--
   
--
   
(108,407
)
 
--
 
Net income (loss)
$
95,719
 
$
85,569
 
$
32,442
 
$
(118,011
)
$
95,719
 





Supplemental Condensed Consolidating Statement of Operations
For the nine months ended April 30, 2006
(in thousands)
(Unaudited)
                                   
             
100% Owned
                   
       
Parent
   
Guarantor
   
Other
   
Eliminating
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Entries
   
Consolidated
 
Total net revenue
$
--
 
$
571,776
 
$
149,693
 
$
(6,643
)
$
714,826
 
Total operating expense
 
15,592
   
428,751
   
126,753
   
(6,643
)
 
564,453
 
 
(Loss) income from operations
 
(15,592
)
 
143,025
   
22,940
   
--
   
150,373
 
Other expense, net
 
(20,389
)
 
(652
)
 
(2,123
)
 
--
   
(23,164
)
Equity investment income, net
 
--
   
3,164
   
--
   
--
   
3,164
 
Gain on sale of businesses, net
 
--
   
4,625
   
--
   
--
   
4,625
 
Loss on put options
 
--
   
(79
)
 
--
   
--
   
(79
)
Minority interest in income of
consolidated subsidiaries, net
 
--
   
--
   
(8,660
)
 
--
   
(8,660
)
 
(Loss) income before income taxes
 
(35,981
)
 
150,083
   
12,157
   
--
   
126,259
 
 
Benefit (provision) for income taxes
 
14,033
   
(63,442
)
 
169
   
--
   
(49,240
)
 
Net (loss) income before equity in income
                             
 
(loss) of consolidated subsidiaries
 
(21,948
)
 
86,641
   
12,326
   
--
   
77,019
 
Equity in income (loss) of consolidated subsidiaries
 
98,967
   
--
   
--
   
(98,967
)
 
--
 
Net income (loss)
$
77,019
 
$
86,641
 
$
12,326
 
$
(98,967
)
$
77,019
 






Supplemental Condensed Consolidating Statement of Cash Flows
For the nine months ended April 30, 2007
(in thousands)
(Unaudited)
                             
             
100% Owned
             
       
Parent
   
Guarantor
   
Other
       
       
Company
   
Subsidiaries
   
Subsidiaries
   
Consolidated
 
Net cash (used in) provided by operating activities
$
(7,730
)
$
204,319
 
$
88,836
 
$
285,425
 
Cash flows from investing activities:
                       
Capital expenditures
 
--
   
(72,270
)
 
(9,742
)
 
(82,012
)
Investments in real estate
 
--
   
(53,462
)
 
(67,652
)
 
(121,114
)
Proceeds from sale of businesses
 
--
   
3,544
   
--
   
3,544
 
Purchase of minority interest
 
--
   
(8,387
)
 
--
   
(8,387
)
Other investing activities, net
 
--
   
(333
)
 
786
   
453
 
Net cash used in investing activities
 
--
   
(130,908
)
 
(76,608
)
 
(207,516
)
Cash flows from financing activities:
                       
Repurchases of common stock
 
(15,007
)
 
--
   
--
   
(15,007
)
Proceeds from borrowings under long-term debt
 
--
   
1,242
   
111,758
   
113,000
 
Payments of long-term debt
 
--
   
(5,263
)
 
(63,401
)
 
(68,664
)
Proceeds from exercise of stock options
 
9,594
   
--
   
--
   
9,594
 
Other financing activities, net
 
3,892
   
15,755
   
(11,834
)
 
7,813
 
Advances (to) from affiliates
 
9,251
   
7,960
   
(17,211
)
 
--
 
Net cash provided by (used in) financing activities
 
7,730
   
19,694
   
19,312
   
46,736
 
Net increase (decrease) in cash
and cash equivalents
 
--
   
93,105
   
31,540
   
124,645
 
Cash and cash equivalents: