Document


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

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): September 6, 2016

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

Delaware
 
001-09614
 
51-0291762
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
 
 
 
390 Interlocken Crescent
Broomfield, Colorado
 
 
 
80021
(Address of Principal Executive Offices)
 
 
 
(Zip Code)
 
 
 
 
 
Registrant's telephone number, including area code: (303) 404-1800

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ] Soliciting materials pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))








Item 7.01.    Regulation FD Disclosure

On August 5, 2016, as previously announced, Vail Resorts, Inc., a Delaware corporation (the “Company”), entered into an Arrangement Agreement to acquire all of the outstanding common shares of Whistler Blackcomb Holdings Inc. (“Whistler Blackcomb”). The Company is disclosing under Item 7.01 of this Current Report on Form 8-K the information included as Exhibit 99.1, which information is incorporated by reference herein. This information was provided by the Company to Whistler Blackcomb for inclusion in its Management Information Circular that is being disseminated on September 6, 2016 to its shareholders in connection with its special meeting of shareholders to be held on October 5, 2016.

The information included herein, including Exhibit 99.1, shall be deemed furnished and not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, regardless of any incorporation by reference language in any such filing, except as expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.
 
(b)                   Pro forma financial information.
 
The following unaudited pro forma condensed combined financial information of the Company, giving effect to the proposed acquisition of Whistler Blackcomb, is included in Exhibit 99.1 hereto:

Unaudited Pro Forma Condensed Combined Statement of Earnings for the nine months ended April 30, 2016 and the year ended July 31, 2015
Unaudited Pro Forma Condensed Combined Balance Sheet as of April 30, 2016
Notes to Unaudited Pro Forma Condensed Combined Financial Information

(d)                   Exhibits.

See Exhibit Index.
 








SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
Vail Resorts, Inc.
Date:
September 6, 2016
By:
/s/ Michael Z. Barkin
 
 
 
Michael Z. Barkin
 
 
 
Executive Vice President and Chief Financial Officer



EXHIBIT INDEX

Exhibit No.
 
Description
 
 
 
99.1
 
Unaudited Pro Forma Condensed Combined Financial Information of Vail Resorts, Inc.
 




Exhibit

Exhibit 99.1


UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
 
On August 8, 2016, Vail Resorts, Inc. (“Vail Resorts”) and Whistler Blackcomb Holdings, Inc. (“Whistler Blackcomb”) announced that they had entered into an Arrangement Agreement (the “Agreement”) for Vail Resorts to acquire Whistler Blackcomb for a combination of cash and Vail Resorts stock (the “Acquisition”). Whistler Blackcomb owns a 75% interest in each of Whistler Mountain Resort Limited Partnership and Blackcomb Skiing Enterprises Limited Partnership (collectively, “the Partnerships”), which together, operate the resort. The following unaudited pro forma condensed combined financial information (the “pro formas”) is based on the historical consolidated financial statements of Vail Resorts and the historical consolidated financial statements of Whistler Blackcomb, and has been prepared to reflect the Acquisition and the financing structure established to fund the Acquisition. The pro formas are presented for illustrative purposes only and do not necessarily reflect the results of operations or the financial position of Vail Resorts that actually would have resulted had the Acquisition occurred at the date indicated, nor project the results of operations or financial position of Vail Resorts for any future date or period.
 
The unaudited pro forma condensed combined statements of earnings (the “pro forma statements of earnings”) for the nine months ended April 30, 2016 (the “2016 pro forma statement of earnings”) and for the year ended July 31, 2015 (the “2015 pro forma statement of earnings”) assume that the Acquisition was completed on August 1, 2014. Due to differences in each reporting entities’ fiscal year end, the 2016 pro forma statement of earnings includes the nine months ended April 30, 2016 for Vail Resorts and the nine months ended June 30, 2016 for Whistler Blackcomb. The 2015 pro forma statement of earnings includes the twelve month period ended on July 31, 2015 for Vail Resorts combined with the twelve month period ended September 30, 2015 for Whistler Blackcomb. The unaudited pro forma condensed combined balance sheet (the “pro forma balance sheet”) is based on the assumption that the Acquisition occurred on the last day of the most recently published balance sheet of Vail Resorts, April 30, 2016, the acquiring entity, and includes pro forma adjustments to Whistler Blackcomb’s balance sheet as of June 30, 2016. Pro forma adjustments reflected in the pro formas are based on items that are factually supportable and directly attributable to the Acquisition. These pro formas have been prepared in accordance with Article 11 of the Securities and Exchange Commission’s Regulation S-X and, as such, prohibit the pro forma statement of earnings from including the estimated impact of non-recurring integration costs or benefits from the Acquisition including potential synergies that may be derived in future periods.
 
These pro formas should be read in conjunction with:
 
·                  Vail Resorts’ audited consolidated financial statements and related notes as well as “Management’s Discussion and Analysis and Results of Operations,” in each case contained in our Annual Report on Form 10-K as of and for the year ended July 31, 2015, Vail Resorts’ unaudited condensed  consolidated financial statements and related notes as well as “ Management’s Discussion and Analysis and Results of Operations,” in each case contained in our Quarterly Report on Form 10-Q as of and for the nine months ended April 30, 2016; and
 
·                  Whistler Blackcomb’s audited consolidated financial statements as of and for the year ended September 30, 2015, together with related notes, and Whistler Blackcomb’s unaudited condensed interim consolidated financial statements for the nine months ended June 30, 2016, together with related notes.
 
Whistler Blackcomb’s historical consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, which differ in certain respects from the accounting principles generally accepted in the United States of America (“U.S. GAAP”). Adjustments were made to Whistler Blackcomb’s historical financial statements to estimate the conversion from IFRS to U.S. GAAP as well as reclassifications to conform Whistler Blackcomb’s historical presentation to Vail Resorts’ accounting presentation. Adjustments were also made to translate Whistler Blackcomb’s financial statements from Canadian dollars to U.S. dollars based on applicable historical exchange rates, which may differ from future exchange rates. These adjustments reflect Vail Resorts’ best estimates based upon the information available to date and are preliminary and subject to change once more detailed information is obtained.
  
The Acquisition will be accounted for as a business combination in conformity with U.S. GAAP. Accordingly, the assets acquired and liabilities assumed have been recorded based on preliminary estimates of fair value. The final determination of fair value for purposes of purchase price allocation will be based upon, in part, valuation work performed by independent valuation professionals. At this time, Vail Resorts does not have detailed information to determine preliminary estimates of fair value for purposes of determining purchase price allocation. For purposes of these unaudited combined pro forma financial statements, a preliminary estimate of fair value was determined based on the best available information for the assets acquired and liabilities assumed in connection with the Acquisition. In certain circumstances, such as when better estimates of fair value were unavailable, these pro

1


formas do not reflect adjustments to adjust assets acquired and liabilities assumed to an estimate of fair value. Accordingly, the excess of purchase price over the preliminary estimate of fair value of assets acquired and liabilities assumed is reflected as an indefinite-lived intangible asset, goodwill.
 
The pro forma adjustments are based upon the best available information and certain assumptions that Vail Resorts believes to be reasonable. Further, these adjustments could materially change as the allocation of the purchase price for Whistler Blackcomb has not been finalized. Accordingly, there can be no assurance that the final allocation of the purchase price will not differ from the preliminary allocation reflected in the pro formas.
 




2


Vail Resorts, Inc.
Unaudited Pro Forma Condensed Combined Statement of Earnings
For the nine months ended April 30, 2016
 
 
 
 
 
 
 
Pro Forma Adjustments
 

(U.S.$ in thousands, except per share amounts)
 
Vail Resorts
Historical
 
Whistler Blackcomb
(US GAAP)
Note 2
 
Financing
Note 4
 
Acquisition
Note 3
 
Total
Pro Forma
Combined
Net revenue:
 
 
 
 
 
 
 
 
 
 
Mountain
 
$
1,206,610

 
$
206,801

 
$

 
$

 
$
1,413,411

Lodging
 
200,026

 
2,630

 

 

 
202,656

Real estate
 
14,766

 

 

 

 
14,766

Total net revenue
 
1,421,402

 
209,431

 

 

 
1,630,833

Segment operating expense:
 
 
 
 
 
 
 
 
 


Mountain
 
729,382

 
120,468

 

 

 
849,850

Lodging
 
176,170

 
1,510

 

 

 
177,680

Real estate
 
17,043

 

 

 

 
17,043

Total segment operating expense
 
922,595

 
121,978

 

 

 
1,044,573

Other operating (expense) income:
 
 
 
 
 
 
 
 
 


Depreciation and amortization
 
(120,713
)
 
(24,185
)
 

 
(11,188
)
 
(156,086
)
Gain on sale of real property
 
1,810

 

 

 

 
1,810

Loss on disposal of fixed assets and other, net
 
(3,149
)
 
(1,414
)
 

 

 
(4,563
)
Income from operations
 
376,755

 
61,854

 

 
(11,188
)
 
427,421

Mountain equity investment income, net
 
992

 

 

 

 
992

Investment income, net
 
509

 

 

 

 
509

Interest expense
 
(31,905
)
 
(4,874
)
 
(5,799
)
 
302

 
(42,276
)
Income before (provision) benefit for income taxes
 
346,351

 
56,980

 
(5,799
)
 
(10,886
)
 
386,646

(Provision) benefit for income taxes
 
(131,613
)
 
(11,574
)
 
2,218

 
2,123

 
(138,846
)
Net income
 
214,738

 
45,406

 
(3,581
)
 
(8,763
)
 
247,800

Net loss (income) attributable to noncontrolling interests
 
289

 
(14,252
)
 

 
2,722

 
(11,241
)
Net income attributable to Vail Resorts, Inc.
 
$
215,027

 
$
31,154

 
$
(3,581
)
 
$
(6,041
)
 
$
236,559

Per share amounts:
 
 
 
 
 
 
 
 
 


Basic net income per share attributable to Vail Resorts, Inc.
 
$
5.92

 
 
 
 
 
 
 
$
5.90

Diluted net income per share attributable to Vail Resorts, Inc.
 
$
5.76

 
 
 
 
 
 
 
$
5.76

 
See Notes to Unaudited Pro Forma Condensed Combined Financial Information

3


Vail Resorts, Inc.
Unaudited Pro Forma Condensed Combined Statement of Earnings
For the year ended July 31, 2015
 
 
 
 
 
 
 
Pro Forma Adjustments
 

(U.S.$ in thousands, except per share amounts)
 
Vail Resorts
Historical
 
Whistler Blackcomb
(US GAAP)
Note 2
 
Financing
Note 4
 
Acquisition
Note 3
 
Total
Pro Forma
Combined
Net revenue:
 
 
 
 
 
 
 
 
 
 
Mountain
 
$
1,104,029

 
$
211,331

 
$

 
$

 
$
1,315,360

Lodging
 
254,553

 
3,020

 

 

 
257,573

Real estate
 
41,342

 

 

 

 
41,342

Total net revenue
 
1,399,924

 
214,351

 

 

 
1,614,275

Segment operating expense:
 
 
 
 
 
 
 
 
 


Mountain
 
777,147

 
136,250

 

 

 
913,397

Lodging
 
232,877

 
1,949

 

 

 
234,826

Real estate
 
48,408

 

 

 

 
48,408

Total segment operating expense
 
1,058,432

 
138,199

 

 

 
1,196,631

Other operating (expense) income:
 
 
 
 
 
 
 
 
 


Depreciation and amortization
 
(149,123
)
 
(34,423
)
 

 
(17,173
)
 
(200,719
)
Gain on sale of real property
 
151

 

 

 

 
151

Gain on litigation settlement
 
16,400

 

 

 

 
16,400

Change in fair value of Contingent Consideration
 
3,650

 

 

 

 
3,650

Loss on disposal of fixed assets and other, net
 
(2,057
)
 
(1,020
)
 

 

 
(3,077
)
Income from operations
 
210,513

 
40,709

 

 
(17,173
)
 
234,049

Mountain equity investment income, net
 
822

 

 

 

 
822

Investment income, net
 
246

 

 

 

 
246

Interest expense
 
(51,241
)
 
(9,759
)
 
(6,961
)
 
429

 
(67,532
)
Loss on extinguishment of debt
 
(11,012
)
 

 

 

 
(11,012
)
Income before (provision) benefit for income taxes
 
149,328

 
30,950

 
(6,961
)
 
(16,744
)
 
156,573

(Provision) benefit for income taxes
 
(34,718
)
 
(6,571
)
 
2,663

 
3,265

 
(35,361
)
Net income
 
114,610

 
24,379

 
(4,298
)
 
(13,479
)
 
121,212

Net loss (income) attributable to noncontrolling interests
 
144

 
(7,748
)
 

 
4,186

 
(3,418
)
Net income attributable to Vail Resorts, Inc.
 
$
114,754

 
$
16,631

 
$
(4,298
)
 
$
(9,293
)
 
$
117,794

Per share amounts:
 
 
 
 
 
 
 
 
 
 
Basic net income per share attributable to Vail Resorts, Inc.
 
$
3.16

 
 
 
 
 
 
 
$
2.94

Diluted net income per share attributable to Vail Resorts, Inc.
 
$
3.07

 
 
 
 
 
 
 
$
2.86


 
See Notes to Unaudited Pro Forma Condensed Combined Financial Information


4


Vail Resorts, Inc.
Unaudited Pro Forma Combined Balance Sheet
As of April 30, 2016
 
 
 
 
 
 
Pro Forma Adjustments
 

(U.S.$ in thousands, except per share amounts)
 
Vail Resorts
Historical
 
Whistler Blackcomb
(US GAAP)
Note 2
 
Financing
Note 4
 
Acquisition
Note 3
 
Total
Pro Forma
Combined
Assets
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
68,565

 
$
6,543

 
$
513,365

 
$
(513,365
)
 
$
75,108

Restricted cash
 
5,934

 

 

 

 
5,934

Trade receivables, net
 
145,483

 
3,123

 

 

 
148,606

Inventories, net
 
68,882

 
12,048

 

 

 
80,930

Other current assets
 
57,455

 
2,649

 

 

 
60,104

Total current assets
 
346,319

 
24,363

 
513,365

 
(513,365
)
 
370,682

Property, plant and equipment, net
 
1,370,374

 
238,858

 

 
142,902

 
1,752,134

Real estate held for sale and investment
 
116,874

 
7,152

 

 
 
 
124,026

Goodwill, net
 
509,083

 
110,131

 

 
734,722

 
1,353,936

Intangible assets, net
 
141,222

 
215,402

 

 
72,378

 
429,002

Other assets
 
37,428

 
2,029

 
1,488

 
(1,672
)
 
39,273

Total assets
 
$
2,521,300

 
$
597,935

 
$
514,853

 
$
434,965

 
$
4,069,053

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
 
 

Accounts payable and accrued liabilities
 
$
338,089

 
$
35,370

 
$

 
$

 
$
373,459

Income taxes payable
 
20,059

 
8,334

 

 

 
28,393

Long-term debt due within one year
 
13,349

 

 

 

 
13,349

Total current liabilities
 
371,497

 
43,704

 

 

 
415,201

Long-term debt
 
615,829

 
145,456

 
514,853

 

 
1,276,138

Other long-term liabilities
 
249,298

 
2,793

 

 

 
252,091

Deferred income taxes
 
305,134

 
21,344

 

 
41,980

 
368,458

Total liabilities
 
1,541,758

 
213,297

 
514,853

 
41,980

 
2,311,888

Commitments and contingencies
 
 
 
 
 
 
 
 
 

Stockholders’ equity:
 
 
 
 
 
 
 
 
 

Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and outstanding
 

 

 

 

 

Common stock
 
416

 
344,075

 

 
(344,037
)
 
454

Additional paid-in capital
 
632,148

 
1,499

 

 
541,086

 
1,174,733

Accumulated other comprehensive loss
 
(1,167
)
 

 

 

 
(1,167
)
Retained earnings
 
581,245

 
(59,662
)
 

 
59,662

 
581,245

Treasury stock, at cost
 
(246,979
)
 

 

 

 
(246,979
)
Total entity stockholders’ equity
 
965,663

 
285,912

 

 
256,711

 
1,508,286

 Noncontrolling interests
 
13,879

 
98,726

 

 
136,274

 
248,879

Total stockholders’ equity
 
979,542

 
384,638

 

 
392,985

 
1,757,165

Total liabilities and stockholders’ equity
 
$
2,521,300

 
$
597,935

 
$
514,853

 
$
434,965

 
$
4,069,053



 See Notes to Unaudited Pro Forma Condensed Combined Financial Information 

5







Notes to Unaudited Pro Forma Condensed Combined Financial Statements
 
Note 1. Basis of presentation
 
These pro formas are based on the historical consolidated financial statements of each of Vail Resorts and Whistler Blackcomb, and have been prepared to reflect the Acquisition, including the estimated stock issuance financing structure established to fund the Acquisition. The pro formas are presented for illustrative purposes only and do not necessarily reflect the results of operations or the financial position of Vail Resorts that actually would have resulted had the Acquisition occurred on the dates indicated, nor project the results of operations or financial position of Vail Resorts for any future dates or periods. The pro forma statements of earnings were developed assuming the Acquisition closed on August 1, 2014 while the pro forma balance sheet was developed assuming the transaction closed on April 30, 2016.
 
Pro forma adjustments reflected in the pro forma statements of earnings are based on items that are factually supportable, which are directly attributable to the Acquisition, and which are expected to have a continuing impact on Vail Resorts’ results of operations and/or financial position. Any nonrecurring items directly attributable to the Acquisition are included in the pro forma balance sheet but not in the pro forma statements of earnings. In contrast, any nonrecurring items that were already included in Vail Resorts’ or Whistler Blackcomb’s historical consolidated financial statements that are not directly related to the Acquisition have not been eliminated. These pro formas do not reflect the non-recurring cost of any integration activities or benefits from the Acquisition including potential synergies that may be generated in future periods.
 
The pro formas include adjustments to reflect the cost of the estimated financing structure established to fund the Acquisition.
 
Whistler Blackcomb’s historical consolidated financial statements (“Whistler Blackcomb’s financial statements”) were prepared in accordance with IFRS, which differs in certain respects from U.S. GAAP. Adjustments were made to Whistler Blackcomb’s financial statements to convert them from IFRS to U.S. GAAP and to Vail Resorts’ existing accounting policies. In addition, reclassifications have been made to align Whistler Blackcomb’s financial statement presentation to Vail Resorts’ financial statement presentation.
 
The following historical exchange rates were used to translate Whistler Blackcomb’s financial statements and calculate certain adjustments to the pro forma financial statements from Canadian dollars (“C$”) to U.S. dollars (“U.S.$” or “$”):
 
Average daily closing exchange rate for the nine months ended June 30, 2016:
 
U.S.$0.75154/C$
Average daily closing exchange rate for the year ended September 30, 2015:
 
U.S.$0.81632/C$
Closing exchange rate as of June 30, 2016:
 
U.S.$0.77370/C$
 
These exchange rates may differ from future exchange rates which would have an impact on the pro forma financial information, and would also impact the final purchase price consideration upon consummation of the Acquisition. As an example, utilizing the daily closing exchange rate at August 8, 2016 of U.S.$0.76000/C$ would increase the translated amounts of net earnings attributable to Vail Resorts for the nine months ended April 30, 2016 by approximately $0.3 million and decrease the translated amounts of net earnings attributable to Vail Resorts for the year ended July 31, 2015 by approximately $1.1 million while total assets as of April 30, 2016 would decrease by approximately $10.6 million.
 
Unless indicated otherwise in the notes to the pro formas, Vail Resorts has applied the enacted statutory tax rates in U.S. or Canada, as applicable, for the respective dates and periods.
 

6







Note 2. Adjustments to Whistler Blackcomb’s financial statements
Unaudited adjusted Whistler Blackcomb statement of earnings
For the nine months ended June 30, 2016 
 
 
 
 
Reclassifications and IFRS to U.S. GAAP Adjustments (in C$)
 
 
 
 
(in thousands)
 
Whistler
Blackcomb
IFRS (in C$)
 
Segments
Note 2
 
Other Income & Expense
Note 2
 
Noncontrolling Interest (“NCI”)
Note 5
 
Whistler Blackcomb
U.S. GAAP
(in C$)
 
Whistler Blackcomb
U.S. GAAP
(in U.S.$)
Net revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Mountain
 
$
278,669

 
$
(3,500
)
 
$

 
$

 
275,169

 
206,801

Lodging
 

 
3,500

 

 

 
3,500

 
2,630

Real estate
 

 

 

 

 

 

Total net revenue
 
278,669

 

 

 

 
278,669

 
209,431

Segment operating expense:
 
 
 
 
 
 
 
 
 

 
 
Mountain
 
133,706

 
26,589

 

 

 
160,295

 
120,468

Lodging
 

 
2,009

 

 

 
2,009

 
1,510

Real estate
 

 

 

 

 

 

Total segment operating expense
 
133,706

 
28,598

 

 

 
162,304

 
121,978

Other operating expense:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
(32,181
)
 

 

 

 
(32,181
)
 
(24,185
)
Selling, general and administrative
 
(28,598
)
 
28,598

 

 

 

 

Gain on sale of real property
 

 

 

 

 

 

Loss on disposal of fixed assets and other, net
 

 

 
(1,882
)
 

 
(1,882
)
 
(1,414
)
Income from operations
 
84,184

 

 
(1,882
)
 

 
82,302

 
61,854

Mountain equity investment income (loss), net
 

 

 

 

 

 

Investment income, net
 

 

 

 

 

 

Other income (expense)
 
(1,882
)
 

 
1,882

 

 

 

Interest expense
 
(14,179
)
 

 

 
7,693

 
(6,486
)
 
(4,874
)
Income before provision for income taxes
 
68,123

 

 

 
7,693

 
75,816

 
56,980

Provision for income taxes
 
(15,400
)
 

 

 

 
(15,400
)
 
(11,574
)
Net income
 
52,723

 

 

 
7,693

 
60,416

 
45,406

Net (income) loss attributable to NCI
 
(11,271
)
 

 

 
(7,693
)
 
(18,964
)
 
(14,252
)
Net income
 
$
41,452

 
$

 
$

 
$

 
$
41,452

 
$
31,154


7







Note 2. Adjustments to Whistler Blackcomb’s financial statements
Unaudited adjusted Whistler Blackcomb statement of earnings
For the fiscal year ended September 30, 2015 
 
 
 
 
Reclassifications and IFRS to U.S. GAAP Adjustments (in C$)
 
 
 
 
(in thousands)
 
Whistler
Blackcomb
IFRS (in C$)
 
Segments
Note 2
 
Other Income & Expense
Note 2
 
Noncontrolling Interest (“NCI”)
Note 5
 
Whistler Blackcomb
U.S. GAAP
(in C$)
 
Whistler Blackcomb
U.S. GAAP
(in U.S.$)
Net revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Mountain
 
$
262,254

 
$
(3,700
)
 
$
329

 
$

 
$
258,883

 
$
211,331

Lodging
 

 
3,700

 

 

 
3,700

 
3,020

Real estate
 

 

 

 

 

 

Total net revenue
 
262,254

 

 
329

 

 
262,583

 
214,351

Segment operating expense:
 
 
 
 
 
 
 
 
 

 
 
Mountain
 
140,122

 
26,786

 

 

 
166,908

 
136,250

Lodging
 

 
2,388

 

 

 
2,388

 
1,949

Real estate
 

 

 

 

 

 

Total segment operating expense
 
140,122

 
29,174

 

 

 
169,296

 
138,199

Other operating expense:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
(42,168
)
 

 

 

 
(42,168
)
 
(34,423
)
Selling, general and administrative
 
(29,174
)
 
29,174

 

 

 

 

Loss on disposal of fixed assets and other, net
 

 

 
(1,249
)
 

 
(1,249
)
 
(1,020
)
Income from operations
 
50,790

 

 
(920
)
 

 
49,870

 
40,709

Mountain equity investment income (loss), net
 

 

 

 

 

 

Investment income, net
 

 

 

 

 

 

Other income (expense)
 
(920
)
 

 
920

 

 

 

Interest expense
 
(20,536
)
 

 

 
8,581

 
(11,955
)
 
(9,759
)
Income before provision for income taxes
 
29,334

 

 

 
8,581

 
37,915

 
30,950

Provision for income taxes
 
(8,049
)
 

 

 

 
(8,049
)
 
(6,571
)
Net income
 
21,285

 

 

 
8,581

 
29,866

 
24,379

Net (income) loss attributable to NCI
 
(910
)
 

 

 
(8,581
)
 
(9,491
)
 
(7,748
)
Net income
 
$
20,375

 
$

 
$

 
$

 
$
20,375

 
$
16,631



8







Note 2. Adjustments to Whistler Blackcomb’s financial statements
Unaudited adjusted Whistler Blackcomb balance sheet
As of June 30, 2016
 
 
 
 
Reclassifications and IFRS to U.S. GAAP 
Adjustments (in C$)
 
 
 
 
 
 
Whistler
Blackcomb
IFRS (in C$)
 
Software Costs
Note 2
 
Debt Issuance Cost
Note 2
 
NCI
Note 6
 
Whistler Blackcomb
U.S. GAAP
(in C$)
 
Whistler Blackcomb
U.S. GAAP
(in U.S.$)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
8,457

 
$

 
$

 
$

 
$
8,457

 
$
6,543

Trade receivables, net
 
4,037

 

 

 

 
4,037

 
3,123

Inventories, net
 
15,572

 

 

 

 
15,572

 
12,048

Other current assets
 
3,423

 

 

 

 
3,423

 
2,649

Total current assets
 
31,489

 

 

 

 
31,489

 
24,363

Property, plant and equipment, net
 
306,107

 
2,615

 

 

 
308,722

 
238,858

Real estate held for sale and investment
 
9,244

 

 

 

 
9,244

 
7,152

Goodwill, net
 
142,343

 

 

 

 
142,343

 
110,131

Intangible assets, net
 
281,020

 
(2,615
)
 

 

 
278,405

 
215,402

Other assets
 
462

 

 
2,160

 

 
2,622

 
2,029

Total assets
 
$
770,665

 
$

 
$
2,160

 
$

 
$
772,825

 
$
597,935

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 

 

Current liabilities:
 
 
 
 
 
 
 
 
 

 

Accounts payable and accrued liabilities
 
$
45,716

 
$

 
$

 
$

 
$
45,716

 
$
35,370

Income taxes payable
 
10,771

 

 

 

 
10,771

 
8,334

Total current liabilities
 
56,487

 

 

 

 
56,487

 
43,704

Long-term debt
 
258,636

 

 
2,160

 
(72,796
)
 
188,000

 
145,456

Other long-term liabilities
 
3,610

 

 

 

 
3,610

 
2,793

Deferred income taxes
 
27,587

 

 

 

 
27,587

 
21,344

Total liabilities
 
346,320

 

 
2,160

 
(72,796
)
 
275,684

 
213,297

Stockholders’ equity:
 
 
 
 
 
 
 
 
 

 

Common stock
 
444,714

 

 

 

 
444,714

 
344,075

Additional paid-in capital
 
1,938

 

 

 

 
1,938

 
1,499

Retained earnings
 
(77,113
)
 

 

 

 
(77,113
)
 
(59,662
)
Total WBHC stockholders’ equity
 
369,539

 

 

 

 
369,539

 
285,912

Noncontrolling interests
 
54,806

 

 

 
72,796

 
127,602

 
98,726

Total stockholders’ equity
 
424,345

 

 

 
72,796

 
497,141

 
384,638

Total liabilities and stockholders’ equity
 
$
770,665

 
$

 
$
2,160

 
$

 
$
772,825

 
$
597,935



9



Notes to Unaudited Pro Forma Condensed Combined Financial Statements (continued)



Note 2. Adjustments to Whistler Blackcomb’s financial statements

The financial information above illustrates the impact of estimated adjustments made to Whistler Blackcomb’s financial statements prepared in accordance with IFRS, in order to present them on a basis consistent with Vail Resorts’ accounting presentation and policies under U.S. GAAP. These adjustments reflect Vail Resorts’ best estimates based upon the information currently available to Vail Resorts, and could be subject to change once more detailed information is obtained.
 
Segments

The classification of certain items presented by Whistler Blackcomb under IFRS has been modified in order to align with the presentation used by Vail Resorts under U.S. GAAP. Vail Resorts operations are grouped into three integrated and interdependent segments: Mountain, Lodging and Real Estate. Resort is the combination of the Mountain and Lodging segments. In order to present Whistler Blackcomb on a consistent basis, the following modifications to the statement of earnings presentation include:
 
presentation of revenue and related expenses on a segment basis, rather than a single line item for Mountain net revenue and Mountain segment operating expenses. This adjustment includes the reclassification of Lodging related revenue and expenses to the Lodging segment; and
presentation of costs on a segment basis, rather than a single line item for selling, general and administrative operating expenses resulting is a reclassification from selling, general and administrative to the Mountain segment operating expenses.

Other Income and Expenses

Included in other income and expenses are costs associated with the disposal of certain fixed assets, these costs have been reclassified to Loss on disposal of fixed assets and other, net. Any other income or expense not associated with a disposal has been reclassified to the Mountain operating revenue or expense classification to conform the presentation to Vail Resorts’ classifications.

Software Costs

Under IFRS guidance when software is not an integral part of the related hardware, computer software is treated as an intangible asset. Under U.S. GAAP Vail Resorts presents these costs as property, plant and equipment. The classification of software costs presented by Whistler Blackcomb under IFRS has been reclassified from Intangible assets, net to Property, plant and equipment, net; to conform with the presentation used by Vail Resorts under U.S. GAAP.

Debt Issuance Costs

The classification of debt issuance costs presented by Whistler Blackcomb under IFRS has been reclassified from Long-term debt to Other assets to conform the presentation used by Vail Resorts under U.S. GAAP. In April 2015, the FASB issued ASU No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The new standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is consistent with the presentation requirements under IFRS, however, Vail Resorts had not adopted this standard as of June 30, 2016; thus, the reclassification of the debt issuance costs to other assets is required.

Note 3. Pro forma adjustments related to the Acquisition
 
Preliminary purchase consideration and allocation
 
The Acquisition will be accounted for as a business combination in conformity with U.S. GAAP. Under this accounting, the assets acquired and liabilities assumed have been presented based on preliminary estimates of fair value. In accordance with U.S. GAAP, fair value is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The actual fair values will be determined during the measurement period of the transaction and may vary from these estimates.

On August 5, 2016, Vail Resorts entered into the Agreement to acquire all of the outstanding common shares of Whistler Blackcomb. Whistler Blackcomb shareholders will receive consideration per share consisting of (i) C$17.50 in cash, and (ii) 0.0998 shares of Vail Resorts common stock, subject to a currency exchange rate adjustment to be determined based on the applicable exchange

10



Notes to Unaudited Pro Forma Condensed Combined Financial Statements (continued)



rate as of the sixth business day prior to the closing date.  The estimated total consideration to be paid to Whistler Blackcomb shareholders is approximately C$1.39 billion ($1.06 billion) as of August 5, 2016, based on the closing currency exchange rate and Vail Resorts common stock price as of that day. Vail Resorts currently intends to finance the cash portion of the consideration for the Acquisition, estimated to be approximately C$676 million ($513 million), under a new $360.0 million term loan (“Term Loan”) (for which it has received commitments from its lenders) and additional borrowings from remaining available capacity under its existing $400 million revolving credit facility. The stock component is determined by a baseline share exchange ratio of 0.0998 shares of Vail Resorts common stock and is adjusted for currency exchange rate changes if the Canadian dollar is above or below $0.7765/C$ six business days before the closing of the transaction. As of August 5, 2016, the share exchange ratio is 0.0975 shares of Vail Resorts common stock. Whistler Blackcomb shareholders that are Canadian residents for tax purposes will be able to elect to receive, instead of Vail Resorts shares, shares in a Canadian subsidiary of Vail Resorts instead of the Vail Resorts shares to which they would otherwise be entitled. Each whole exchangeable share will be exchangeable into one Vail Resorts share.  Completion of the transaction is subject to certain closing conditions, including approval by Whistler Blackcomb’s shareholders and the British Columbia Supreme Court and regulatory approvals, as well as other customary closing conditions.

The estimated purchase consideration, estimated fair values of assets acquired, liabilities assumed and goodwill are as follows:
 
(in thousands, except exchange ratio and share price amounts)
 
 
Whistler Blackcomb estimated share purchase at June 30, 2016 (a)
 
38,657

Exchange ratio as of August 5, 2016
 
0.0975

Total Vail Resorts shares estimated to be issued to Whistler Blackcomb shareholders
 
3,769

Vail Resorts share price on August 5, 2016
 
$
143.97

Total value of Vail Resorts shares estimated to be issued (b)
 
$
542,623

Total cash consideration paid at C$17.50 ($13.28 on August 5, 2016) per Whistler Blackcomb share
 
513,365

Total estimated purchase consideration to Whistler Blackcomb shareholders
 
$
1,055,988

Estimated fair value of Nippon Cable’s 25% interest in Whistler Blackcomb
 
235,000

Total estimated purchase consideration
 
$
1,290,988

 
 
 
Allocation of Total estimated purchase consideration:
 
 
Estimated fair values of assets acquired:
 
 
Current assets
 
$
24,363

Property, plant and equipment
 
381,760

Real estate held for sale and investment
 
7,152

Goodwill
 
844,853

Intangibles, net
 
287,780

Other assets
 
357

Current Liabilities
 
(43,704
)
Assumed long-term debt
 
(145,456
)
Deferred income taxes
 
(63,324
)
Other long-term liabilities
 
(2,793
)
  Net assets acquired
 
$
1,290,988

 
(a) Represents 38,152 Whistler Blackcomb common shares outstanding as of June 30, 2016, plus an estimated 505 common shares for the exercise of all outstanding Whistler Blackcomb options, restricted share units and performance awards of Whistler Blackcomb employees issued under the Whistler Omnibus Incentive Plan which immediately vest under the Acquisition.

(b) The stock portion of the purchase consideration was estimated using a price of $143.97 for each share of Vail Resorts common stock based on Vail Resorts closing share price on August 5, 2016. Under the terms of the Acquisition, Whistler Blackcomb’s shareholders will receive C$17.50 in cash and 0.0975 of shares of Vail Resorts’ common stock in exchange for each share of Whistler Blackcomb’s stock. The actual purchase consideration will be determined upon consummation of the Acquisition as contemplated in the agreement. A hypothetical $12 change in the price of Vail Resorts’ common stock, all other factors remaining constant, would result in a corresponding increase or decrease in the total purchase consideration of $45.2 million, with a corresponding increase or decrease to the goodwill recognized.


11



Notes to Unaudited Pro Forma Condensed Combined Financial Statements (continued)



The fair values of identified intangible assets were determined using significant estimates and assumptions. As such, a detailed analysis has not been completed and actual results may differ from these estimates. The fair value and estimated useful lives of identifiable intangible assets are estimated as follows:
 
 
 
Fair Value
 
Estimated
Useful Life
 
Nine Months Ended April 30, 2016
 
Year Ended July 31, 2015
 
 
($ in thousands)
 
(in years)
 
($ in thousands)
 
($ in thousands)
Customer Relationships (a)
 
$
36,170

 
5
 
$
(6,171
)
 
$
(12,660
)
Trademarks (b)
 
116,442

 
 

 

Mountain Operating Rights
 
128,506

 
16
 
(6,024
)
 
(8,032
)
Other Intangibles
 
6,662

 
5
 
(999
)
 
(1,332
)
Total acquired identifiable intangible assets
 
287,780

 
 
 
$
(13,194
)
 
$
(22,024
)
Less: Whistler Blackcomb’s historical net book value
 
215,402

 
 
 
 
 
 
Adjustment to intangible assets, net
 
$
72,378

 
 
 
 
 
 
(a) Customer relationships are estimated to be amortized at a rate of 35% per year
(b) These marks are classified as indefinite lived intangible assets
 

The fair values of property, plant and equipment were determined using significant estimates and assumptions. As such, a detailed analysis has not been completed and actual results may differ from these estimates. The fair value and useful lives of property, plant and equipment are estimated as follow:
 
 
 
Fair Value
 
Estimated
Useful Life
 
Annual Depreciation
 
 
($ in thousands)
 
(in years)
 
($ in thousands)
Land
 
$
15,729

 
 
$

Land improvements
 
123,173

 
20
 
(6,159
)
Buildings and building improvements
 
117,216

 
16
 
(7,326
)
Machinery and equipment
 
117,864

 
8
 
(14,733
)
Software
 
4,062

 
3
 
(1,354
)
Construction-in-progress
 
3,716

 
 

Total acquired property, plant and equipment
 
381,760

 
 
 
$
(29,572
)
Less: Whistler Blackcomb’s historical net book value
 
238,858

 
 
 
 
Adjustment to property, plant and equipment, net
 
$
142,902

 
 
 
 


For Vail Resorts the Acquisition is deemed a nontaxable transaction and as such, the historical tax basis of the acquired assets and assumed liabilities, and other tax attributes of Whistler Blackcomb carryover to Vail Resorts. The Canadian statutory tax rate is 26% and this tax rate has been reduced 25% due to the noncontrolling interest held at the Partnerships that is nontaxable at the consolidated level. As a result, based on the adjustments to fair values of identifiable intangible assets and property, plant and equipment, the following adjustment to the deferred tax liability estimated using the rate of 19.5% have been made to the pro forma balance sheet:
  
($ in thousands)
 
Pre-tax
Adjustment
 
Tax Rate
 
Tax Provision Adjustment
Adjustment to intangible assets, net
 
$
72,378

 
19.5
%
 
$
14,114

Adjustment to property, plant and equipment, net
 
142,902

 
19.5
%
 
27,866

  Total adjustments
 
$
215,280

 
 
 
$
41,980



12



Notes to Unaudited Pro Forma Condensed Combined Financial Statements (continued)



Based on the estimated fair values of identifiable, amortizable intangible assets and property, plant and equipment, the following adjustment to depreciation and amortization has been included in the 2016 and 2015 pro forma statements of earnings:
 
($ in thousands)
 
Nine Months Ended April 30, 2016
 
Year Ended July 31, 2015
 
 
 
 
 
Amortization of identifiable definite lived intangible assets
 
$
(13,194
)
 
$
(22,024
)
Depreciation of property, plant and equipment
 
(22,179
)
 
(29,572
)
Total calculated depreciation and amortization
 
(35,373
)
 
(51,596
)
Less: Whistler Blackcomb’s historical depreciation and amortization
 
(24,185
)
 
(34,423
)
Pro forma adjustment to depreciation and amortization
 
$
(11,188
)
 
$
(17,173
)
 
The adjustment to depreciation and amortization that has been included in the 2016 and 2015 pro forma statements of earnings will result in a reduction in income tax expense. The Canadian statutory tax rate is 26% and this tax rate has been reduced 25% due to the noncontrolling interest held at the Partnerships that is nontaxable at the consolidated level.

The estimated impact to the provision for income taxes for the nine months ended April 30, 2016 is summarized as follows:
 
($ in thousands)
 
Pre-tax
Adjustment
 
Tax Rate
 
Tax Provision Adjustment
Depreciation and amortization
 
$
(11,188
)
 
19.5
%
 
$
2,182

 
 
The estimated impact to the provision for income taxes for the twelve months ended July 31, 2015 is summarized as follows:
 
($ in thousands)
 
Pre-tax
Adjustment
 
Tax Rate
 
Tax Provision Adjustment
Depreciation and amortization
 
$
(17,173
)
 
19.5
%
 
$
3,349


Under U.S. GAAP, Whistler Blackcomb’s deferred financing asset would be written off to approximate the fair value of the assumed debt. The deferred financing asset is included in other assets and the adjusted value of Whistler Blackcomb’s other assets is estimated as follows:
 
June 30, 2016
 
(in thousands)
Original Debt issuance costs
C$
2,160

Exchange Rate at June 30, 2016
 
0.7737

Original Debt issuance costs adjustment
$
(1,672
)
Current balance of Whistler Blackcomb other assets
2,029
 
Whistler Blackcomb other assets, as adjusted
$
357
 

Based on the estimated fair values of debt and the write off of the original debt issuance costs, the previously recognized interest expense related to these costs will be adjusted. These adjustments are included in the 2016 and 2015 pro forma statements of earnings as follows:
 
($ in thousands)
 
Nine Months Ended April 30, 2016
 
Year Ended July 31, 2015
 
 
 
 
 
Amortization of original debt issuance costs
 
$
302

 
$
429

Canadian taxes at 19.5%
 
59

 
84

Amortization attributable to noncontrolling interest (25%)
 
76

 
107



13



Notes to Unaudited Pro Forma Condensed Combined Financial Statements (continued)




Adjustments to stockholders equity
 
The estimated adjustments to total stockholders’ equity are summarized as follows:
 
 
 
Acquisition
($ in thousands)
 
Eliminate
Whistler Blackcomb’s
Equity
 
Issuance of Common Stock
 
Noncontrolling Interest at Fair Value
 
Total Acquisition Adjustments to Equity
Common stock
 
$
(344,075
)
 
$
38

 
$

 
$
(344,037
)
Additional paid-in capital
 
(1,499
)
 
542,585

 

 
541,086

Retained earnings
 
59,662

 

 

 
59,662

Total entity stockholders’ equity
 
(285,912
)
 
542,623

 

 
256,711

 Noncontrolling interests
 
(98,726
)
 

 
235,000

 
136,274

Total stockholders’ equity
 
$
(384,638
)
 
$
542,623

 
$
235,000

 
$
392,985

 

Note 4. Pro forma adjustments related to financing
 
Sources of Funding

On August 5, 2016, Vail Resorts entered into the Agreement to acquire all of the outstanding common shares of Whistler Blackcomb. Whistler Blackcomb shareholders will receive consideration per share consisting of (i) C$17.50 in cash, and (ii) 0.0998 shares of Vail Resorts common stock, subject to a currency exchange rate adjustment to be determined based on the applicable exchange rate as of the sixth business day prior to the closing date.  The estimated total consideration to be paid to Whistler Blackcomb shareholders is approximately C$1.39 billion as of August 5, 2016, based on the closing currency exchange rate and Vail Resorts common stock price as of that day. Vail Resorts currently intends to finance the cash portion of the consideration for the Acquisition, estimated to be approximately C$676 million ($513 million), under a new $360 million Term Loan (for which it has received commitments from its lenders) and additional borrowings from remaining available capacity under its existing $400 million revolving credit facility (“Revolver”). At April 30, 2016, Vail Resorts had no borrowings under its Revolver and $327.4 million of available capacity (which represents the total commitment of $400 million less certain letters of credit outstanding of $72.6 million). Vail Resorts does not expect to incur any further issue discounts or financing costs other than the $1.5 million commitment fee paid at the time of acquiring the commitment from the respective banks. Amortization of these financing costs is estimated at five years. Interest rates for the purposes of the pro formas are based on historical rates paid for the borrowings on Vail Resorts’ existing credit agreement at a rate of LIBOR plus 1.125%.

In addition, these Partnerships had debt outstanding as of June 30, 2016 of C$185.8 million ($143.8 million), under their existing C$300 million revolving credit facility which will be assumed or refinanced as part of the transaction. Whistler Blackcomb is a guarantor under the credit facility. The credit facility contains a change in control provision pursuant to which the lenders can elect to require repayment of the outstanding balance upon closing.  Vail Resorts intends to obtain a waiver of the change in control provision in order to maintain the existing facility or to refinance the credit facility if a waiver cannot be obtained. 

The financing adjustments reflected in the pro forma balance sheet are summarized as follows:
 
($ in thousands)
 
Amount
Term Loan proceeds
 
$
360,000

Revolver draw
 
154,853

Total sources of funding
 
514,853

Less: Financing costs on new Term Loan
 
1,488

Total sources of funding, net
 
$
513,365

 

14



Notes to Unaudited Pro Forma Condensed Combined Financial Statements (continued)



 Interest Expense
 
Interest expense in the 2016 pro forma statement of earnings has been adjusted as follows based on the expected sources of funding described above and amortization of the financing costs on the new term loan over a five year period. The 2016 pro forma statement of earnings presents a nine month period:
 
($ in thousands)
 
Principal
 
Interest
Rate
 
Interest Expense
Term Loan
 
$
360,000

 
1.4442
%
 
$
(3,899
)
Revolver
 
154,853

 
1.4442
%
 
(1,677
)
Financing cost and issue discount amortization - Term Loan
 
 
 
 

 
(223
)
Total interest expense
 
 
 
 

 
$
(5,799
)


Interest expense in the 2015 pro forma statement of earnings has been adjusted as follows based on the expected sources of funding described above and amortization of the financing costs on the new term loan over a five year period. The 2015 pro forma statement of earnings presents a twelve month period:

($ in thousands)
 
Principal
 
Interest
Rate
 
Interest Expense
Term Loan
 
$
360,000

 
1.2943
%
 
$
(4,659
)
Revolver
 
154,853

 
1.2943
%
 
(2,004
)
Financing cost and issue discount amortization - Term Loan
 
 
 
 

 
(298
)
Total interest expense
 
 
 
 

 
$
(6,961
)

 
Estimated Impact to the Tax Provision
 
The estimated impact to the provision for income taxes the nine months ended April 30, 2016 is summarized as follows:
 
($ in thousands)
 
Pre-tax
Adjustment
 
Tax Rate
 
Tax Provision Adjustment
Interest expense
 
$
(5,799
)
 
38.25
%
 
$
2,218

 
 
The estimated impact to the provision for income taxes for the twelve months ended July 31, 2015 is summarized as follows:
 
($ in thousands)
 
Pre-tax
Adjustment
 
Tax Rate
 
Tax Provision Adjustment
Interest expense
 
$
(6,961
)
 
38.25
%
 
$
2,663

 
Note 5. Pro forma adjustments related to the Noncontrolling Interests

Nippon Cable maintains a 25% limited partnership interest in each of the Partnerships. For more information on Nippon Cable’s interest, refer to Whistler Blackcomb’s historical consolidated financial statements. Under the Partnership agreements, the limited partner is entitled to a minimum annual distribution equal to 9% per annum of the capital contributions to the Partnerships in respect of the Nippon Cable units from time to time during the immediately preceding fiscal year of the Partnerships, plus the estimated amount of the limited partner’s income taxes payable on its share of the Partnerships’ taxable income for the current fiscal year.


15



Notes to Unaudited Pro Forma Condensed Combined Financial Statements (continued)



Under IFRS, Nippon Cable’s interest in the Partnerships is reflected as a bifurcated instrument, a portion of which is classified as debt and a portion of which is classified as a noncontrolling interest (“NCI”) in stockholders’ equity. Under U.S. GAAP, this interest is reflected entirely as a NCI and, as such, the amounts historically reflected as finance expense limited partner’s interest have been reclassified to Net (income) loss attributable to NCI. In addition, the limited partner’s liability has been reclassified to NCI. The finance expense is not tax deductible and Whistler Blackcomb did not receive any historic tax benefit for this finance expense. Due to the nondeductible nature of the finance expense the reclassification has not been tax adjusted.

Estimated Fair Value of the Limited Partner’s Interest

Nippon Cable’s limited partnership interest is a noncontrolling economic interest containing certain protective rights and no ability to participate in the day to day operations of the Partnerships. In addition, based upon the terms of the Partnership agreements, the minimum annual distribution rights are non-transferable and transfer of the limited partnership interest is limited to Nippon Cable’s entire interest. Accordingly, the estimate of fair value associated with the noncontrolling interest has been determined based on expected underlying cash flows of the Partnerships discounted at a rate commensurate with a market participants expected rate of return for an equity instrument with these associated restrictions. The estimate of fair value is a preliminary estimate and subject to change.


16