Variable Interest Entities

9 Months Ended

Apr. 30, 2011

7.	Variable Interest Entities

The Company is the primary beneficiary of four employee housing entities (collectively, the "Employee Housing Entities"), Breckenridge Terrace, LLC, The Tarnes at BC, LLC, 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, 2011, the Employee Housing Entities had total assets of $34.3 million (primarily recorded in property, plant and equipment, net) and total liabilities of $62.3 million (primarily recorded in long-term debt as "Employee Housing Bonds"). The Company's lenders have issued letters of credit totaling $53.4 million under the Credit Agreement related to Employee Housing Bonds. Payments under 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 is the primary beneficiary of Avon Partners II, LLC ("APII"), which is a VIE. APII owns commercial space and the Company currently leases substantially all of that space. APII had total assets of $4.4 million (primarily recorded in property, plant and equipment, net) and no debt as of April 30, 2011.

The Company, through various lodging subsidiaries, manages hotels in which the Company has no ownership interest in the entities that own such hotels. The Company previously extended a $2.0 million note receivable to one of these entities at the time the entity acquired the hotel property that the Company managed. This entity was formed by unrelated third parties to acquire, own, operate and realize the value in a resort hotel property. The Company continues to manage the day-to-day operations of this hotel property as of April 30, 2011. The Company has determined that this entity is a VIE, and the management contract along with the note receivable are significant variable interests in this VIE. The Company has also determined that it is not the primary beneficiary of this entity and, accordingly, is not required to consolidate this entity. Based upon the latest information provided by this third party entity, this VIE had estimated total assets of approximately $62.7 million and total liabilities of approximately $71.9 million. This entity has been in default on certain debt held by the entity and the third party owners of the entity have been unable to reach an agreement to restructure the debt with their creditor, as the creditor initiated foreclosure proceedings in May 2011. If foreclosure were to occur, the Company believes it is probable that its note receivable, including accrued interest, would be impaired. As such, the Company has recorded an asset impairment charge of $2.6 million in its Consolidated Condensed Statements of Operations for the three and nine months ended April 30, 2011. Additionally, the Company has an intangible asset associated with the management of the hotel, with a net carrying amount as of April 30, 2011 of $0.5 million. The Company believes it will continue to manage the hotel if foreclosure were to take place.

- Definition

Disclosure of variable interest entities (VIE), including, but not limited to the nature, purpose, size, and activities of the VIE, the carrying amount and classification of consolidated assets that are collateral for the VIE's obligations, lack of recourse if creditors (or beneficial interest holders) of a consolidated VIE have no recourse to the general credit of the primary beneficiary. An enterprise that holds a significant variable interest in a VIE but is not the primary beneficiary may disclose the nature of its involvement with the VIE and when that involvement began, the nature, purpose, size, and activities of the VIE and the enterprise's maximum exposure to loss as a result of its involvement with the VIE.

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