Greetings and welcome to Intrawest Resorts Holdings Fiscal 2014 Fourth Quarter and Year-end Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) I’d now like to turn the conference over to your host [ph] [Liz Derosier]. Please go ahead..

Thank you, Shay. Good morning everyone and welcome to the Intrawest Resorts Holdings fiscal 2014 year-end earnings conference call. After our prepared remarks, there will be a brief question-and-answer session.

I’d like to remind you that some of the comments made by management during the conference call contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to vary, which are discussed in our public filings filed with the SEC including reports filed under the Securities Exchange Act of 1934.

We caution you not to put undue reliance on forward-looking statements. Forward-looking statements made during this call speak only as of the date of this call and we undertake no duty to update or revise these statements.

In addition, some of the comments made on this call may refer to certain measures, such as adjusted EBITDA, which are non-GAAP measures. Although adjusted EBITDA is not a substitute for net income, for other GAAP measures, management believe adjusted EBITDA is useful in measuring the operating performance of our business.

For a full reconciliation of adjusted EBITDA to GAAP results in accordance with Regulation G, please see our press release furnished as an exhibit to our Form 8-K dated September 12, 2014. This is located in the Investor Relations area on our Web site at www.intrawest.com.

Our call today will include prepared remarks from Bill Jensen, Chief Executive Officer; and Gary Ferrera, Chief Financial Officer and Treasurer. Travis Mayer, Executive Vice President of Operations & Business Development will be joining us for the question-and-answer session. Now, I’ll turn the call over to Intrawest CEO, Bill Jensen..

Thank you, Liz, and welcome everyone. We are very pleased with our full-year 2014 results. Our total reportable segment revenue and adjusted EBITDA were primarily driven by the Mountain Segment and CMH.

The Mountain Segment growth reflects higher visitation and increased market share due to strong Season Pass and Frequency product sales as well as from the impact of targeted growth capital investments.

In addition, we strengthened our capital structure through the completion of our initial public offering in January as well as a refinancing in December. We are also very excited to announce that we’ve negotiated the purchase of the remaining 50% equity interest in Blue Mountain Ski Resort.

Located in Ontario, Canada just 90 miles northwest of the Greater Toronto area’s approximately 5.6 million residents, Blue Mountain is Canada’s third most visited resort.

We expect its large base of Toronto customers to provide strategic cross marketing opportunities to all our existing resorts, specifically we expect more significant benefits at Tremblant due to its geographic proximity to Blue.

14 lifts service Blue’s 42 trails, which is spread out over approximately 360 skiable acres and snowmaking can be found on 93% of the trails. The resort owns and operates a newly expanded 37,000 square foot state-of-the-art year-round conference center.

In addition, it has a vibrant summer business that includes an 18-hole golf course, Ontario’s first alpine coaster, mountain biking, a waterfront park and other popular activities making Blue a true four season resort.

Acquiring the remaining 50% of Blue Mountain unlocks approximately $6 million to $8 million of an annual incremental levered free cash flow and positions us to realize significant cost savings and operating synergies in the coming years as we fully integrate the resort into our portfolio.

Historically, the vast majority of Blue’s cash flow has been reinvested into the business, paid out in taxes, or kept on the balance sheet with very little flowing up to Intrawest. As a result, the underlying assets have been well maintained and the recent significant investments and expansion projects have positioned the resort for continued growth.

Now, with full ownership of Blue Mountain, we anticipate going forward capital spending will be consistent with that at our other resorts at approximately 4% to 5% of revenue and we will be able to utilize a portion of our over $600 million in Canadian NOLs to minimize taxes.

Before I begin a review of our fiscal 2014 results, I’d like to remind everyone that during the year, approximately 40% of our business was conducted in Canada. In the third quarter, our most profitable quarter, the Canadian dollar weakened by approximately 10% versus the U.S. dollar relative to the prior year period.

We delivered solid operating performance throughout the year, particularly, in our Mountain Segment, which Mountain revenue was 5 -- which Mountain revenue grew 5.4% and Mountain adjusted EBITDA grew 8.1% on a constant currency basis, despite periods of extreme cold weather that impacted our Eastern Resorts.

We successfully executed our fiscal 2014 Mountain strategy to grow market share as reflected in the 7.9% growth in skier visits versus prior year as compared to an estimated 0.7% decline in skier visits U.S industry wide.

This visitation was driven by a significant growth from our Season Pass and Frequency product sales and successful capital projects that enhanced our customers experience and produce strong returns. Season Pass and Frequency product sales increased more than 18% for fiscal 2014 nearly doubled the estimated growth for the industry nationwide.

Total lift revenue grew 3.7% on a reported basis and 5.4% on a constant currency basis. Our Mountain Segment ancillary businesses also performed well, as improving economic conditions were reflected in our guest continued willingness to spend on ski school, food and beverage, retail, equipment rental, and lodging during their visits.

On a constant currency basis, Mountain revenue excluding lift revenue increased 5.3% over the prior year.

Turning to our Adventure Segment, Canadian Mountain Holidays, our heli-skiing adventure company had a successful year as revenue grew 4.5% on a constant currency basis, reflecting market demand for premium private lodge and small group trip options.

Ancillary aviation services were down 9.7% on a constant currency basis versus prior year due to decreased U.S. firefighting activity and deferred business in our maintenance and repair operations. In fiscal 2014, several medium-term firefighting contracts with the U.S. Forest Service expired.

Therefore, going forward a higher portion of our ancillary flight service revenues will be from as needed or spec contracts and other potentially lower margin, shorter term assignments with revenue based on flight hours.

The overall reduction to ancillary aviation services EBITDA is expected to be approximately $2 million to $3 million in fiscal 2015. In the Real Estate Segment, fiscal 2014 included the sale of a small non-strategic parcel land at Tremblant, which contributed $700,000 to adjusted EBITDA for the year.

Overall, we produced solid results for the year and believe we’re well positioned for growth. In fiscal 2015, we look to build on the initiatives we’ve in place across all our businesses and we continue to grow visitation and drive revenue per visit.

Looking forward to fiscal 2015, Season Pass and Frequency product sales continue its pace well ahead of last year. As of September 7, sales were up more than 20% compared to the same time last year. Season Pass and Frequency product sales are encouraging across all our resorts and are particularly strong in Colorado.

We believe the additions of Eldora and Crested Butte to our premium Colorado multi-mountain season pass have benefit sales by increasing the attractiveness of our pass products to appeal to additional market segments in the growing Front Range of Colorado. CMH bookings for fiscal 2015 season are also pacing ahead of last year.

Winter Guest Night sales are up 10.1% compared to the same period last year, indicating continued strong demand for our premium priced products. Our initial bookings for the fiscal 2015 season also show an increase for CHM trips such as our introductory Powder 101 experience.

This growing interest from new customers indicates that there is a significant opportunity to grow participation levels of CMH going forward. Winter Park’s new on-mountain restaurant, Lunch Rock, will make its debut in the 2014-2015 ski season.

Located at the top of Mary Jane Mountain, the 16,000 square foot restaurant will offer new food and beverage options in a previously underserved area of the Mountain.

This restaurant follows the success of the opening of the new Four Points on-mountain restaurant at Steamboat in fiscal 2014 and demonstrates our focus on investing in double-digit IRR capital projects at our resorts.

While our existing operations provide a strong foundation for growth an important part of our plan also remain centered on acquisitions. As such, we continue to evaluate strategic assets to grow our portfolio. I now like to turn the call over to Gary for a more detailed discussion of our segment operating results and our fiscal 2015 outlook..

Thank you, Bill, and good morning, everyone. As Bill previously mentioned, approximately 40% of both our revenue and expenses were derived from Canada. In fiscal 2015 with the full inclusion of Blue Mountain, we anticipate this will increase to approximately 46% of revenue and expenses.

In fiscal 2014 as compared to fiscal 2013, our total reportable segment revenue and segment adjusted EBITDA were impacted by an unfavorable foreign currency translation adjustment of approximately $14.9 million and $4.4 million respectively. For fiscal 2014, we exceeded the guidance provided during our fiscal third quarter call.

Total reportable segment revenue was $513.3 million and adjusted EBITDA was $103.3 million. On a constant currency basis, total reportable segment revenue was $528.2 million and adjusted EBITDA was $107.7 million.

These better than anticipated results were due to the fiscal fourth quarter performance of our Real Estate segment and our Ancillary Aviation businesses within our Adventure segment.

Delving into our segment results, Mountain adjusted EBITDA increased 5.3% to $76.2 million for the year, primarily related to a $12.3 million or 3.6% increase in Mountain revenue.

This was partially offset by planned increases in staffing and expenses associated with the higher volume of visitors and an unfavorable foreign currency translation adjustment of approximately $2 million.

Turning to the Adventure segment, the change in Adventure segment revenue was primarily due to an unfavorable foreign currency translation adjustment of approximately $7.8 million. Similarly, Adventure adjusted EBITDA declined due to an unfavorable foreign currency translation adjustment of approximately $2 million.

The decline in Real Estate revenue for the year was partially attributable to a $2.8 million, one-time payment in the prior year related to the accelerated commissions for the sales of the Maui Playground brokerage business.

The Real Estate segment was also impacted by adverse weather conditions in Mammoth Lakes, California where our property, The Westin Monache is located. Real Estate revenue was impacted by an unfavorable foreign currency translation adjustment of approximately $1.2 million.

We also sold a small non-strategic land parcel at Tremblant in February 2014 for approximately $1.4 million, contributing $700,000 to adjusted EBITDA. Real Estate adjusted EBITDA was impacted by an unfavorable foreign currency translation adjustment of approximately $400,000.

The Company's net loss attributable to Intrawest Resorts Holdings improved in fiscal 2014. This is primarily a result of significantly lower interest expense due to our restructuring and refinancing, as well as increased operating income whereas fiscal 2013 included a full-year of related party interest expense.

Fiscal 2014 only included it for six months prior to the December 2013 restructuring. Capital expenditures for fiscal 2014 were $46.6 million versus $29.7 million in the prior year.

While the prior year was primarily focused on resort maintenance CapEx, fiscal 2014 CapEx included approximately $11.3 million of growth CapEx and $1.5 million to begin upgrading our core financial systems.

The Four Points on-mountain restaurant and Night skiing both at Steamboat as well as the renovation of the Stratton Mountain Inn are examples of fiscal 2014 growth capital projects. Fiscal 2014 capital spending also included $4 million of pre-spent primarily related to the new Lunch Rock restaurant at Winter Park.

Given the short on-mountain building season, we began the project as soon as possible in order to open the restaurant prior to the upcoming Christmas holiday period.

Going forward, on a annual basis, including Blue we expect to spend approximately $33 million to $34 million of maintenance capital and between $8 million and $12 million on growth capital. Now turning to the acquisition of Blue Mountain.

As Bill discuss the financial and strategic benefits of owning a 100% of Blue Mountain, I'll focus on the details of the transaction. The CAD$58 million purchase price includes a CAD$5 million partial payment for growth capital related to the newly opened conference center.

The remaining CAD$53 million of the purchase price implies a value of approximately seven times fiscal 2014 acquired EBITDA excluding any potential synergies. To fund the purchase of Blue Mountain, we will be borrowing CAD$60 million of incremental debt through the accordion feature of our senior secured facility.

While the financing is fully committed, we will be launching the syndication of that debt today. As of June 30, we had outstanding long-term debt of approximately $580 million and cash were approximately $56 million. Pro-forma for the Blue acquisition, we expect net leverage to remain relatively flat.

While annual run rate leverage free cash flow from Blue is anticipated to dramatically increase from approximately $700,000 to between $6 million and $8 million a year. Also pro-forma for the Blue acquisition, we estimate on a go-forward basis at current interest rates, our cash interest expense should approximately $40 million annually.

Finally, I’d like to cover our guidance for fiscal 2015. Based on our current estimates in assuming normal weather conditions across our geographically diversified portfolio, we expect that full-year fiscal 2015 reportable segment revenue will be in the range of $570 million to $595 million.

And segment adjusted EBITDA will be in the range of $111 million to $116 million. This includes approximately $4 million in incremental public company expenses and $1.5 million in software expense related to compliance in e-commerce technology. Fiscal 2014 included $1 million related to public company expenses.

Estimates assume an exchange rate of Canadian to U.S dollar of 1.10.

Fiscal 2015 growth is driven primarily by the Mountain segment, which now includes the addition of 100% of Blue’s Mountain -- Blue Mountain’s revenue and the incremental 50% of Blue Mountain’s EBITDA for the period post closing of the acquisition, where the Mountain segment accounted for 68% of total reportable segment revenue and 74% of total adjusted EBITDA in fiscal 2014.

We anticipate it will increase to approximately 73% of total reportable segment revenue and 79% of total adjusted EBITDA in fiscal 2015. We expect that full-year fiscal 2015 Mountain segment revenue will be in the range of $418 million, $434 million, and Mountain adjusted EBITDA will be in the range of $87 million to $91 million.

Our assumptions are based on Mountain organic growth from increased pricing, strong pacing in our Season Pass and Frequency product sales and continued success with growth capital investments.

We expect that full-year of fiscal 2015 Adventure segment revenue will be in the range of $97 million to $101 million, of which we expect CMH to represent approximately 62% versus 57% in fiscal 2014. Adventure adjusted EBITDA will be in the range of $40 million to $60 million.

Significant growth in CMH is expected to be offset by lower Canadian flight hours and fewer fixed U.S Forest Service contracts in our Ancillary Aviation services, as well as continued exposure to variable firefighting business in the fourth fiscal quarter.

We expect that full-year of fiscal 2015 Real Estate segment revenue will be in the range of $55 million to $60 million. And Real Estate adjusted EBITDA will be in the range of $9 million to $10 million. Finally, we expect the net loss attributable to Intrawest Resorts Holdings will improve to be in the range of $16 million to $6 million.

It is also important to note the seasonality of our business. The third fiscal quarter is our largest quarter.

As the Mountain segment is the largest growth driver in fiscal 2015, a higher proportion of adjusted EBITDA is expected to come from the third quarter, which we estimate will account for approximately 140% or more of total fiscal 2015 adjusted EBITDA.

As in the past, we expect the second fiscal quarter to be approximately breakeven, and the first and fourth fiscal quarters to be loss quarters. With that, I’d like to turn the call back over to Bill..

Thank you, Gary. We are looking forward to the upcoming ski season and building on the positive momentum that was generated in fiscal 2014. With the acquisition of the remaining 50% of Blue Mountain and our continued Season Pass and Frequency product growth, fiscal 2015 represents an exciting time for Intrawest.

We are also thrilled to build upon the growth capital investments during fiscal 2014 with more on-mountain improvements and the opening of the new on-mountain restaurant in Winter Park, in fiscal 2015. I’m happy to report that, that restaurant is on track to open in mid-December prior to the Christmas holidays.

In the last year, Intrawest has made tremendous progress with our improved balance sheet, strong operating momentum, and strategic growth initiatives that will be further enhanced with the acquisition of Blue Mountain. We are well positioned for strong growth and are energized to produce another successful year.

With that, operator we’d be happy to take any questions..

Thank you. At this time, we will be conducting a question-and-answer session. (Operator Instructions) Our first question comes from Joe Edelstein from Stifel (sic) [Stephens]..

Hi. Good morning and thanks for taking the questions. Also congrats on executing the Blue Mountain deal..

Thank you..

So my first question just is on Blue Mountain.

I just want to clarify about how much annual revenue is actually coming through? I had about $37 million in my notes, but I assume that’s all going to fully go into the segment revenues once consolidated?.

Sure. We are getting $37 million from -- we don’t typically give specifics for each Mountain. But I’m not really sure what $37 million seems extremely low. I mean historically it’s -- it was in the S1 - the EBITDA back in the S1 that we put in the -- for that resort was in the $7 million range.

When you do the math, the way we explained with the purchase price and what multiple we paid is just north of $7 million again and it runs in a normal margin. So I’m not sure why you have $37 million..

Okay. If we kind of use that normal margin range we can back into maybe a more appropriate number. That's helpful. Thank you.

And then, I'm hopeful you can also give us a sense for just what the broader M&A market looks like today, what your pipeline looks like and just generally how valuations look across the market?.

Well, we’re out in the marketplace, we’re actively talking to people, we’re focused in -- on acquisitions that are strategic to our existing segments both in Mountain and Adventure. I think all along we’ve felt that the opportunities were probably in the Mountain segment in the six to eight times range.

I think in the Adventure segment maybe that range is a bit lower..

Thank you. If I can maybe just ask one more question, I will turn it over to the others in the queue. I was curious about just your Colorado market, I mean that did pick up share this past season and you did highlight some of the Season Pass and Frequency sales, looks like you're off to a good start with those up 20% across the board.

But do you think you’re going to be able to retain a high proportion of those destination customers that came to you this past year and get them to come back to your Denver locations to the Colorado locations again this year?.

Yes. Steamboat in Colorado is -- its business is primarily destination. And I think we are very confident about our ability to maintain and grow our visitation at Steamboat this year. We’ve got a lot of momentum there.

But the significant majority of our Colorado Season Pass sales are generated here in the Front Range of Colorado and the growth that we’re seeing here in Colorado again this year is significant, but that growth is really attributable to the growing Front Range market here in Colorado..

Sounds great and good luck this next year..

Thank you..

Thank you. (Operator Instructions) Our next question comes from Joel Simkins from Credit Suisse..

Hey, guys. It’s Ben Chaiken on for Joel. First, just a quick one here, I think you guys mentioned $4 million in incremental public company cost.

Pretty sure this is what we were already modeling S1 to confirm this is not you’re not deploying $8 million total for the year, this is just you’re just pointing out $4 million for the whole year, correct?.

Correct..

Okay.

And then, additionally when you think about kind of Blue Mountain, I guess kind of total this would be generally in the -- I guess call it $12 million to $14 million range in EBITDA, because what you guys acquired was just a -- and you talk about seven times to 53, that’s just the incremental that you’re acquiring, correct?.

Correct..

So I think that was the revenue to -- mix up back there, but I think that when you kind -- and this thing about the guidance, I guess, is there a one part of your business that is slowing down or just kind of guidance a little bit conservative, so that when you back out this $6 million or $7 million incremental EBITDA you get, I guess, so if you could provide some color there?.

I think the answer I think would be no. I think when you look at the guidance compared to maybe what you might have is we’re talking on actual dollars. Remember, historically the Canadian versus U.S. was around a $1, now it’s at a $1.10.

Everything we’ve done as I mentioned in the script, our budgets and everything are all at a $1.10, our guidance is at a $1.10 Canadian to the U.S. So obviously that has a few million dollar impact..

Okay. That’s helpful. That’s all for me..

Thank you. (Operator Instructions) Our next question comes from Afua Ahwoi from Goldman Sachs..

Hello, can you hear me?.

Yes, we can..

Yes..

Hey, so just two questions from me.

First on the Blue Mountain, I know the numbers you gave were excluding any synergies, do you think there is an opportunity there to get some synergies out of it given the proximity as you mentioned with some resorts? If there is, is there any numbers you can put around that? And then also I thought -- I’m not sure Gary on the drivers for the Mountain resort, I definitely heard you mentioned price, I didn’t really hear you mention anything on actual skier visits growing.

So is that just an assumed that it’s growing or is there -- do you not expect growth in skier visits? Thank you..

No, I will let Bill override me here. I think in general what you noticed last year was the growth was heavily skewed towards growth in skier visits. I think this year it’s more of a balance between price and skier visits. Pretty -- fairly evenly weighted..

Yes, I mean, I would add and I think we’ve shared with our investors that we’re really targeting 3% to 4% price growth and we’re targeting 2%, 2.5% skier visit growth and help you guys with our numbers..

And on synergies we excluded all synergies just to make it nice and clean for everybody. But right out of the bat there is immediate synergies with -- they had a Board of Directors, they had a CEO, that’s something we don’t needed.

So right away there is dollars to be saved and then I will let Travis continue as far as operational synergies and things like that..

Yes, I mean, I think down the road they’re not all going to happen within fiscal ’15, but there could be in a ballpark $1 million additional synergies on the cost side.

I don’t think a lot of them originate from the fact that it’s close to our other assets, but bringing them into our shared services and we provide a lot of administrative support from here in Denver, much more efficiently than a single resort can deal.

And then there is a potential upside on the revenue side from kind of harnessing the power of that Toronto database to market Tremblant, CMH and then the rest of our portfolio..

Got it.

So the immediate synergies you will get is that, first of all, can you quantify that for us and is that in your guidance number just to finish up there?.

Yes, the low hanging fruit is in the guidance number. The additional million, I talked about is probably not going to happen within fiscal ’15, it will be fiscal ’16..

Got it. Okay.

All right and maybe just actually one more from me, just on the real estate front, I know for a while you talk about maybe looking at some of the land parcels and whether starting up some condos or residential developments, where do you stand on that right now?.

I think we’re still looking at that. Obviously, the majority of our land value sits at Tremblant and Steamboat, which is where we’re focused.

So we also think that there is still some interesting opportunities down the road for us at Stratton and then Winter Park, but our focus in the near-term continues to be on Steamboat and Tremblant and we’re looking at different opportunities or possibilities and we’re starting -- we're seeing a gradual recovery really across all our resorts and the resort real estate market.

But it’s a gradual recovery and to get to appropriate margins on real estate development, it's still a bit out in front of us. I think we’ve been -- we’re hoping to see that recovery continue over the next year or so and if it does, I think it will help us move closer to some development opportunities on those real estate parcels..

Okay. Thank you..

And Afua, just so everybody is clear I know, others ask question too, I just want to reiterate that when we -- in the guidance we’re including just the actual -- just the actual numbers, it’s not pro-forma, so it’s just the nine months that we will actually own the full 100% of those and just to give you some general background, Blue had a very strong summer business.

So they are pretty breakeven for the first three months, so hopefully that will help you a little bit in understanding kind of how it plays out..

Yes, that’s helpful. Thank you..

Thank you..

(Operator Instructions) Our next question comes from Bob LaFleur from JMP Securities..

Hi, guys.

Just wanted to ask you little more about the market dynamics of Ontario and Quebec? How are those resorts operate differently under consolidated ownership? How much cross marketing is there now? How many of the customers do you share? Are you going to package -- Season Pass products definitely, maybe just kind of talk about how those resorts interact now versus how you see that going forward?.

Sure. So this is Travis Mayer. Thanks for the question. Right now there is not a lot joint ownership or joint marketing of products between Ontario and Québec specifically. Despite that fact, Ontario is our biggest market for Mont Tremblant outside of the Province of Québec itself.

This year we marketed for the first time an Intrawest wide Frequency card product called the Intrawest Passport, which provides six days of skiing at all of our resorts. Our first couple campaigns we saw a lot of sales in the Ontario market.

We think that people intend -- Blue customers intend to use some basic Blue and then likely the other days at Mont Tremblant. Historically, we haven’t had access to the Blue database of customers which are largely Toronto folks.

And going forward we intend to market through that database of customers not only Blue more heavily, but multi-resort products in our other resorts.

And within Ontario, the vast majority of ski resorts are private clubs, there are not that many for private -- for profit ski resorts and Blue stands out as the dominant player in the Ontario market with kind of a strong position in the Toronto market..

Okay. Thank you..

Thank you. Our last question is a follow-up from Joe Edelstein from Stephens..

Hi. Thanks for entertaining the follow-up here. You did call out the software expense as you’re starting to build out the e-commerce platform.

I was hoping you could give us an update really as to what's been done to date, how much of the booking process is getting done through this method and really ultimately how the economics from online booking you’re going to compare to how you have done this in the past?.

So the vast majority of the increase in the operating expenses is associated with e-commerce as it related to the installation of a new shopping cart and online booking technology for our Web site. We are adopting a platform called Inntopia, which is used by a lot of the large ski resorts and operations throughout North America.

We currently have that installed everywhere except Steamboat. Steamboat will be shortcoming; I think May is the installation date. The goal was to make a buying process, a whole lot more intuitive in [ph] [EV] for our customers. The online channels are growing as a proportion of our total distribution.

There is still some (indiscernible) in the call centers, but we think long-term the big opportunity is online, because more people are shopping that way. So we're making investments and making sure that we’re on the cutting edge of that trend..

That's helpful. Thank you..

Welcome..

Thank you. I will now turn the call back over to Bill Jensen for closing comments..

We just want to thank everybody for taking the time to join us today and we look forward to speaking with you soon..

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation..