Vail Resorts, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2020, the three months ended October 31, 2019; filed December 9, 2019. Financial statements are unaudited. The company operates Mountain, Lodging and Real Estate businesses. Results are highly seasonal, and the first fiscal quarter is typically a low period before most North American ski areas open.
Financial performance and position
| Metric | Q1 FY2020 | Q1 FY2019 |
|---|---|---|
| Net revenue | $267.8 million | $220.0 million |
| Operating loss | $135.5 million | $127.6 million |
| Net loss attributable to Vail Resorts | $106.5 million; $2.64 per diluted share | $107.8 million; $2.66 per diluted share |
| Total Reported EBITDA (non-GAAP) | $(77.6) million | $(73.8) million |
| Cash provided by operating activities | $209.3 million | $177.1 million |
| Cash used in investing activities | $376.8 million | $340.7 million |
| Cash provided by financing activities | $198.4 million | $135.9 million |
Mountain revenue rose to $180.8 million from $145.0 million, while Mountain Reported EBITDA declined to $(80.0) million from $(76.4) million. Skier visits increased 84.2% to 934,000, while effective ticket price fell 8.0% to $44.78. Lodging revenue rose 10.5% to $82.8 million, but Lodging Reported EBITDA declined 16.2% to $3.3 million. Real Estate revenue was $4.2 million versus $0.1 million; Real Estate Reported EBITDA was $(0.9) million.
At October 31, 2019, cash and cash equivalents were $136.3 million. Total debt, including current maturities, was $2.069 billion and management-defined Net Debt was $1.933 billion, compared with $1.535 billion and $1.394 billion, respectively, a year earlier. The company reported $231.4 million available on its Vail Holdings revolver and $189.1 million on its Whistler revolver. Current assets were $428.3 million and current liabilities were $971.5 million; season pass-related deferred revenue was a significant component of current liabilities.
Gross interest expense was $22.7 million versus $18.6 million. The company reported a $46.6 million income tax benefit. No consolidated profit margin is presented here; the quarter’s seasonal operating losses make a quarter-to-quarter margin comparison less informative.
Material changes versus prior year
- Revenue and skier visits increased, reflecting acquired resorts, Falls Creek and Hotham’s Australian ski season, and Keystone’s October opening. The filing also attributes revenue gains to improved summer activity and other acquired operations.
- Peak Resorts was acquired on September 24, 2019. The transaction’s total purchase price, including repayment of certain debt and lease obligations, was approximately $334.7 million; the company borrowed approximately $335.6 million to fund the transaction and related costs.
- Mountain Reported EBITDA weakened despite higher revenue, reflecting off-season losses at acquired resorts, higher general and administrative expense, acquisition/integration costs, and an approximately $2 million adverse Australian-dollar translation effect. Lodging EBITDA also declined as expenses rose.
- Operating cash flow increased by $32.3 million, mainly due to season pass sales and receivable collections. Investing outflows included $327.6 million for Peak Resorts, net of cash acquired.
- Net debt increased substantially, primarily due to acquisition financing and debt assumed with Peak Resorts. The company also adopted lease accounting on August 1, 2019, recognizing operating right-of-use assets and lease liabilities; prior periods were not restated.
Outlook, risks and unusual items
- Management reported North American season pass sales through December 2, 2019 up approximately 22% in units and 17% in sales dollars year over year, on its stated comparable basis. It cautioned that the eventual effect on lift revenue and effective ticket price is uncertain.
- No full-year earnings guidance is provided in the supplied filing text. Management expected Peak Resorts to contribute positively to annual results but said the ultimate impact could not be predicted.
- Estimated calendar 2019 capital spending was $190–$195 million in total, including resort capital spending of $139–$143 million and integration, real estate, summer and reimbursable items. Estimated calendar 2020 total capital spending was $210–$215 million, including specified integration, acquisition, real estate and reimbursable items.
- Management cited weather and snowfall, economic and travel conditions, seasonality, labor costs and availability, high fixed costs, foreign exchange, interest rates, technology and cybersecurity, permits and public-land regulation, and acquisition integration as risks. Approximately $1.4 billion of variable-rate debt was outstanding; a 100-basis-point rate change would alter annual interest payments by about $14.3 million. A $100 million portion of debt was hedged with an interest-rate swap.
- Peak Resorts brought assumed secured notes with stated interest rates of 8.43%–11.61%, restrictive covenants and resort collateral. The company said it was in compliance with debt covenants and expected to meet applicable maintenance covenants through fiscal 2020, while cautioning there is no assurance.
- The board declared a $1.76-per-share quarterly dividend payable January 9, 2020. The company repurchased 95,618 shares for approximately $21.4 million during the quarter. Routine lawsuits and disclosed contingencies were not expected to have a material impact, according to management.
Important facts for investors to verify
- Whether season pass growth translates into skier visits, lift revenue and effective ticket pricing over the full ski season.
- Peak Resorts’ subsequent operating contribution, integration costs, purchase-price allocation and ability to meet assumed-debt covenants.
- Debt, liquidity and interest-rate exposure, including the availability of revolving credit after seasonal cash needs and capital spending.
- Actual capital expenditures against the disclosed 2019 and 2020 plans, and the sustainability of dividends and repurchases relative to cash generation.
- Weather, foreign-currency effects and other seasonal factors, particularly for the Australian and Whistler operations.