Vail Resorts, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended January 31, 2012; filed March 6, 2012. Unaudited results. The company operates Mountain, Lodging and Real Estate businesses. Ski operations are seasonal, generally peaking from mid-November through mid-April. Amounts below are in millions unless noted.
Financial performance and liquidity
| Metric | Three months 2012 | Three months 2011 | Six months 2012 | Six months 2011 |
|---|---|---|---|---|
| Revenue | $373.3 | $395.1 | $489.7 | $636.3 |
| Operating income (loss) | $84.2 | $97.1 | $(0.2) | $32.8 |
| Net income (loss) attributable to Vail Resorts | $46.4 | $54.6 | $(9.3) | $11.5 |
| Diluted EPS | $1.27 | $1.48 | $(0.26) | $0.31 |
| Reported EBITDA (non-GAAP) | $118.4 | $127.9 | $63.5 | $92.0 |
- Drivers: Second-quarter Mountain revenue was $315.9, down 0.7%; Mountain Reported EBITDA fell 5.2% to $120.6. Lodging revenue was $48.3, down 6.5%, while Lodging Reported EBITDA increased to $1.2 from $0.9. Real Estate revenue fell to $9.1 from $25.1, and the segment recorded a $3.5 EBITDA loss.
- Cash flow: Six-month operating cash flow was $137.4, down from $243.7. Capital expenditures were $93.2, versus $61.9; investing cash outflow was $93.7. Cash increased $25.5 during the half to $95.6.
- Balance sheet and debt: At January 31, cash was $95.6, restricted cash $16.2, total debt $491.4 and net debt $395.7. Total assets were $1,999.2. The $400 million revolver had $332.5 available after letters of credit. Most debt principal is not due until fiscal 2019 or later. The company reported compliance with debt covenants.
Material changes and management commentary
- Management attributed weaker Mountain results to historically low snowfall: skier visits declined 14.6% year over year. Higher effective ticket price—$53.00, up 15.9%—and season-pass revenue growth of 13.5% partly offset lower visitation. Management said snowfall’s effect on the rest of the season was uncertain.
- Six-month revenue and EBITDA comparisons were heavily affected by prior-year Real Estate closings, including 63 Ritz-Carlton Residences, Vail units. The current half closed five units there and six at One Ski Hill Place. Management cited 80 units available for sale across the two projects and warned that weak property and credit markets could delay sales, require price concessions or lead to impairment.
- Operating cash flow declined largely because real estate closing proceeds were $18.7, compared with $144.6 in the prior-year half. Management expected resort operations, available revolver capacity and future property closings to support liquidity.
- Management forecast calendar 2012 resort capital expenditures of $75–$85, including $40–$45 for maintenance. Subsequent to quarter-end, the company agreed to acquire Kirkwood Mountain Resort for approximately $18.0 and acquired Skiinfo for approximately $6.5.
- The board raised the expected annual dividend 25%, from $0.60 to $0.75 per share, subject to quarterly declaration; a $0.1875 quarterly dividend was declared after quarter-end. The company also repurchased 203,377 shares for $7.9 during the half.
Risks, contingencies and unusual items
- Weather, seasonal operating concentration, travel demand, competition, seasonal staffing, resort permits and economic conditions are key risks. Real Estate results are sensitive to closing timing and pricing.
- The company had $52.6 of variable-rate debt; a 100-basis-point LIBOR change would alter annual interest expense by approximately $0.5. Letters of credit totaled $59.7, primarily supporting employee housing bonds; certain guarantees and indemnities may have uncapped potential payments.
- A tax dispute concerning net operating loss carryforwards remained unresolved. A court had ruled in the company’s favor, but appeal and related proceedings remained possible; no disputed NOL benefits were recorded. Potential reversal of certain tax liabilities and accrued interest or penalties ranged from zero to $27.6.
- Prior-year Lodging payroll reimbursements were reclassified to gross revenue and expense; the change had no effect on operating income or net income. Management said known legal loss contingencies were not material.
Investor verification points
- Track snowfall, skier visits, season-pass sales and whether improved ancillary spending persists.
- Verify real estate unit closings, realized prices, remaining inventory and any impairment indicators.
- Reconcile operating cash flow and capital spending against seasonal expectations and the stated 2012 capex range.
- Confirm revolver availability, covenant compliance, acquisition closing details and the company’s capacity to sustain dividends and repurchases.
- Monitor the tax litigation, potential appeals and any resulting financial-statement recognition.