Vail Resorts, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended April 30, 2016; unaudited. The company operates Mountain, Lodging and Real Estate businesses. Results are seasonal, with U.S. mountain operations concentrated in the second and third fiscal quarters.
Financial performance and liquidity
Amounts below are in millions except per-share data and operating statistics. Comparisons are with the corresponding 2015 period.
| Metric | Three months | Nine months |
|---|---|---|
| Revenue | $647.5, up 11.8% | $1,421.4, up 14.8% |
| Net income attributable to Vail Resorts | $157.6, up 18.1% | $215.0, up 16.3% |
| Diluted EPS | $4.23, versus $3.56 | $5.76, versus $4.95 |
| Reported EBITDA (non-GAAP) | $305.2, versus $265.9 | $501.6, versus $407.3 |
| Cash provided by operating activities | Not presented separately for the quarter | $455.4, versus $394.5 |
Third-quarter revenue and earnings growth reflected stronger Mountain results, with skier visits up 13.9% and effective ticket price up 3.1%. Mountain Reported EBITDA increased 14.2% to $291.0 million. Lodging Reported EBITDA rose 23.1% to $15.5 million, including a $3.5 million management-agreement termination fee. Real Estate Reported EBITDA remained negative at $1.3 million; real estate revenue fell 86.1% to $1.7 million, largely reflecting the timing and mix of closings.
For the nine months, Mountain Reported EBITDA rose 21.3% to $478.2 million and Lodging Reported EBITDA rose 27.1% to $23.9 million. Real Estate Reported EBITDA improved to a $0.5 million loss from a $5.7 million loss. Reported EBITDA is a company-defined non-GAAP measure and is not a substitute for GAAP results or cash flow.
Cash and cash equivalents were $68.6 million at April 30, 2016, versus $125.2 million a year earlier. Current assets of $346.3 million were below current liabilities of $371.5 million. Total debt was $629.2 million and net debt (company-defined) was $560.6 million, compared with $636.7 million and $511.5 million, respectively, a year earlier. The company reported $327.4 million of available revolver capacity and compliance with debt covenants. Most debt principal is due in fiscal 2020 or later; $296.3 million was variable-rate debt. Management estimated a 100-basis-point LIBOR move would change annual interest payments by about $3.0 million.
Nine-month investing cash outflow was $107.7 million, including $88.3 million of capital expenditures and $20.2 million for the Wilmot acquisition. Financing cash outflow was $315.1 million, including $74.5 million of dividends and $53.8 million of share repurchases. The board increased the quarterly dividend approximately 30% to $0.81 per share in March; a further $0.81 dividend was declared June 8, payable July 13, 2016.
Material changes and notable items
- Mountain performance benefited from stronger Tahoe weather and visitation, improved Colorado and Park City results, pass sales and ancillary spending. Perisher, acquired in June 2015, contributed revenue and costs; Wilmot was acquired in January 2016.
- Interest expense declined to $31.9 million for nine months from $41.1 million, primarily following redemption of the 6.50% notes and industrial development bonds in May 2015.
- The prior-year nine-month comparison included a $16.4 million non-cash Park City litigation-settlement gain and a $23.8 million income-tax benefit from an IRS settlement over net operating losses. The current-year nine-month effective tax rate was 38.0%, versus 28.5% in the prior year; this affects comparison of net income.
- At April 30, the company had a $6.9 million Level 3 contingent-consideration liability tied to the Canyons lease; its estimated fair value did not change during the current nine-month period.
Outlook, management commentary and risks
- The filing does not provide a specific full-year earnings or revenue forecast. Management expected Mountain and Lodging operations to remain important sources of cash and said liquidity should support planned investment and shareholder returns, subject to operating results and credit-agreement limits.
- Early U.S. pass sales for the 2016/2017 season, through May 31, were up approximately 29% in units and 34% in sales dollars against the prior-year comparison period. Management cautioned that the trend might not continue through the fall sales campaign or predict full-season lift revenue.
- Planned 2016 calendar-year resort capital expenditures were approximately $100 million, excluding summer-activity spending and one-time Wilmot transformation investments. The company also expected about $14 million for Epic Discovery summer activities and about $13 million for Wilmot improvements.
- Key risks include snowfall and weather variability, economic and travel conditions, a strong U.S. dollar affecting international visitation and Australian operations, seasonality and fixed costs, labor availability and cost, public-land permits, competition, integration of acquisitions, and potential asset impairments. The company said no material changes had occurred in previously disclosed risk factors.
- Legal proceedings in the ordinary course were described as not material individually or in aggregate; the filing reports no material off-balance-sheet arrangements.
Important facts for investors to verify
- Whether pass-sales momentum persisted through the 2016/2017 fall sales campaign and translated into visitation, lift revenue and ancillary spending.
- How much reported earnings growth depended on acquired operations and unusual items, including the Half Moon termination fee and prior-year tax and litigation gains.
- Whether planned capital spending, dividends and repurchases remain supported by seasonal operating cash flow, liquidity and covenant headroom.
- Exposure to variable interest rates, the Canyons contingent-payment arrangement and the company’s substantial seasonal and fixed-cost structure.
- Timing and proceeds from remaining real estate inventory and any changes to preliminary acquisition valuations, particularly Perisher.