Vail Resorts, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and first six months ended January 31, 2021, compared with the corresponding 2020 periods. Vail Resorts operates Mountain, Lodging and Real Estate businesses. Results are highly seasonal, and the quarter’s performance was materially affected by COVID-19 restrictions and related changes in travel and resort operations.
Financial performance
| Metric | Three months ended Jan. 31, 2021 | Three months ended Jan. 31, 2020 | Six months ended Jan. 31, 2021 | Six months ended Jan. 31, 2020 |
|---|---|---|---|---|
| Total revenue | $684.6 million | $924.6 million | $816.4 million | $1,192.4 million |
| Operating income | $207.7 million | $310.7 million | $43.8 million | $175.2 million |
| Net income (loss) attributable to Vail Resorts | $147.8 million | $206.4 million | $(6.0) million | $99.9 million |
| Diluted EPS | $3.62 | $5.04 | $(0.15) | $2.44 |
| Total Reported EBITDA (non-GAAP) | $274.8 million | $377.0 million | $178.8 million | $299.4 million |
| Cash provided by operating activities | Not presented for quarter | Not presented for quarter | $459.1 million | $537.7 million |
Quarterly revenue declined about 26%; six-month revenue declined about 32%. Total Reported EBITDA, a company-defined non-GAAP measure, fell about 27% for the quarter and 40% for the half year. No comparable quarterly cash-flow figure is provided in the filing excerpt.
- Mountain: Quarterly revenue fell 24% to $641.5 million and Reported EBITDA fell 24% to $283.6 million. Skier visits declined 5.4% and effective ticket price declined 6.0%. For six months, visits fell 12.8% while effective ticket price rose 1.1%.
- Lodging: Quarterly revenue fell 46% to $42.9 million; Reported EBITDA was a loss of $7.5 million versus income of $5.3 million. Combined owned-hotel and managed-condominium RevPAR fell 38% for the quarter.
- Real Estate: Quarterly revenue was $0.3 million and Reported EBITDA was a loss of $1.3 million. Six-month revenue fell 87%, largely reflecting the prior-year sale of a development land parcel.
- Interest and taxes: Quarterly net interest expense rose 45% to $37.8 million; six-month expense rose 50% to $73.3 million. The six-month tax benefit was $10.3 million, versus tax expense of $20.8 million in the prior-year period.
Cash, debt and liquidity
- Cash and cash equivalents were $1.301 billion at January 31, 2021, versus $126.8 million a year earlier. The increase primarily reflected issuance of $600 million of 6.25% notes in May 2020 and $575 million of 0.0% convertible notes in December 2020.
- Six-month operating cash flow was $459.1 million, down $78.6 million year over year. Capital expenditures were $67.3 million, compared with $121.8 million. Investing cash outflow was $65.7 million; financing cash inflow was $513.3 million.
- Total debt was approximately $2.992 billion; debt including current maturities was $2.881 billion. Net Debt, the company-defined measure, was $1.580 billion, down from $1.754 billion a year earlier. Debt levels rose materially, while cash issuance proceeds reduced net debt.
- Available revolver capacity was $418.6 million under the Vail Holdings facility and C$222.1 million (reported as $173.8 million) under the Whistler facility. Management said cash, credit availability and expected operating cash flow should meet near-term liquidity needs.
- Current liabilities included $480.4 million of deferred revenue, up from $256.4 million at July 31, 2020, principally reflecting advance sales and other obligations to customers.
- No cash dividends were paid in the six-month period; the dividend suspension began in April 2020. No shares were repurchased during the period.
Material changes and management commentary
- COVID-19 restrictions, reduced destination travel, capacity limits, and below-average early-season snowfall at Colorado, Utah and Tahoe resorts weighed on visitation and spending. Canadian border restrictions particularly affected Whistler Blackcomb. The company also reported Australian resort closures or limitations early in the fiscal year.
- Non-pass visitation and ancillary spending weakened. Quarterly lift revenue fell 11%, while ski school, dining and retail/rental revenue fell 45%, 58% and 33%, respectively. Pass revenue increased 7.9%, supported by pass sales and recognition of deferred revenue from the prior-season credit offer.
- The company introduced Epic Coverage, which may require refunds for qualifying personal events, resort closures or other specified circumstances. Estimated refunds reduce pass revenue; actual claims could differ materially from estimates. Epic Mountain Rewards also allocates some pass transaction price to discounted ancillary services.
- In December 2020, the company issued $575 million of 0.0% convertible senior notes due 2026. Principal must be settled in cash; conversion spread settlement may be in cash, shares or both, at the company’s option. The notes’ initial conversion price is approximately $407.17 per share.
- A credit-agreement amendment waived specified Vail Holdings leverage and interest-coverage maintenance covenants through quarters ending January 31, 2022, subject to terms. It imposes a monthly minimum liquidity test of $150 million and restrictions on dividends, repurchases, certain investments and secured debt. The filing reports covenant compliance at January 31, 2021.
- Management expects calendar-year 2021 resort capital expenditures of $115–$120 million, excluding specified integration and reimbursable items; including those items, the total capital plan is estimated at $135–$140 million. The plan includes $75–$80 million of maintenance spending. The filing does not provide a clear full-year revenue, earnings or EBITDA forecast.
Risks, contingencies and unusual items
- Management expected COVID-19 and associated travel, operating and capacity restrictions to continue to adversely affect results for the remainder of fiscal 2021. The duration and financial effects remained uncertain.
- Key risks include Epic Coverage refund exposure, snowfall and other weather, travel demand, labor availability and costs, the business’s high fixed-cost structure, public-land permits, foreign exchange, variable-rate borrowing costs, cyber and technology risks, and access to capital.
- Approximately $0.9 billion of variable-rate debt was outstanding after interest-rate swaps; a 100-basis-point rate change was estimated to change annual interest payments by about $8.8 million.
- Letters of credit totaled $75.8 million and surety bonds $14.2 million. Ordinary-course litigation accruals were not material, and management did not expect pending or threatened claims to have a material adverse effect.
- The company recorded a $5.7 million six-month foreign-currency gain on intercompany loans, versus a $0.4 million loss in the prior-year period. It also recorded $1.8 million of six-month expense from remeasurement of contingent consideration.
Important facts for investors to verify
- How visitation, ancillary spending, snowfall and travel restrictions developed after January 31, 2021, particularly at Whistler Blackcomb and other constrained resorts.
- Actual Epic Coverage claims and the resulting impact on recognized pass revenue and deferred revenue.
- Liquidity under the credit-agreement definitions, ongoing compliance with the monthly liquidity test, and the terms governing any future dividends or repurchases.
- Debt service, refinancing and conversion terms for the 0.0% convertible notes, as well as exposure to variable interest rates and foreign exchange.
- Whether planned 2021 capital expenditures, including projects subject to regulatory approval, proceeded as expected and were funded without undue strain on liquidity.