Vail Resorts, Inc. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended October 31, 2015 (three months). Results are unaudited. The quarter is seasonally weak for U.S. ski operations, which generally open in the second fiscal quarter; Perisher’s peak season occurs during this quarter.
Financial performance
| Metric | Q1 FY2016 | Q1 FY2015 | Change / context |
|---|---|---|---|
| Total revenue | $174.6 million | $128.3 million | Up 36%; growth includes Perisher and a full quarter of Park City operations versus partial ownership in the prior period. |
| Net loss attributable to Vail Resorts | $(59.6) million | $(64.3) million | Loss narrowed; basic and diluted loss per share improved to $(1.63) from $(1.77). |
| Operating loss | $(86.7) million | $(88.8) million | Includes depreciation and amortization of $38.7 million versus $36.0 million. |
| Reported EBITDA | $(45.4) million | $(56.3) million | Non-GAAP measure; improvement reflects segment results, with prior-year results including a $16.4 million Park City litigation-settlement gain. |
| Cash from operating activities | $74.6 million | $24.5 million | Increase attributed to improved segment results, season-pass receivable collections and sales, and a prior-year $10 million litigation payment. |
| Capital expenditures | $25.1 million | $27.8 million | Quarterly cash outflow. |
Revenue by segment was Mountain $100.9 million (versus $60.4 million), Lodging $64.3 million (versus $58.5 million), and Real Estate $9.3 million (versus $9.4 million). Mountain Reported EBITDA was $(49.4) million, Lodging $2.8 million, and Real Estate $1.2 million; these are non-GAAP segment measures. The net loss margin was approximately 34% of revenue, compared with 50% in the prior-year quarter.
Balance sheet, debt and liquidity
- At October 31, 2015, cash and cash equivalents were $39.6 million; total assets were $2.45 billion; and total stockholders’ equity was $756.6 million.
- Total debt was $830.4 million, including $13.3 million due within one year; net debt was $790.8 million, compared with $790.4 million a year earlier. Most principal payments are due in fiscal 2020 or later.
- The company reported $129.9 million of revolver availability, after $197.5 million of borrowings and $72.6 million of certain letters of credit against the $400 million facility. It was in compliance with debt covenants at quarter-end.
- Variable-rate debt was $500.1 million. Management estimated that a 100-basis-point LIBOR increase would raise annual interest payments by approximately $5 million.
- Cash used in investing activities was $22.1 million, versus $209.6 million in the prior-year quarter, which included the $182.5 million Park City acquisition. Financing activities used $47.6 million, versus $170.6 million provided a year earlier.
Material changes and unusual items
- Perisher, acquired June 30, 2015 for approximately $134.8 million net of cash acquired and assumed working capital, contributed to Mountain revenue, including $20.2 million of lift revenue and $3.4 million of ski-school revenue this quarter. Its purchase-price allocation remains preliminary.
- Mountain revenue rose substantially with Perisher and Park City contributions. Mountain EBITDA improved despite the prior-year period benefiting from a $16.4 million noncash Park City litigation gain.
- Interest expense declined to $10.6 million from $13.6 million, primarily following the May 2015 redemption of $215 million of 6.50% notes and $41.2 million of industrial development bonds.
- The company repurchased 377,830 shares for $40 million during the quarter. It paid a quarterly dividend of $0.6225 per share, up from $0.4150 in the prior-year quarter. Subsequent to quarter-end, the board authorized an additional 1.5 million shares for repurchase and declared another $0.6225-per-share dividend.
- A $6.9 million Canyons lease contingent-consideration liability remains measured using Level 3 inputs; there was no fair-value change in the quarter. The filing reports no material accrual for ordinary-course legal contingencies and no legal proceedings under Part II.
Outlook, management commentary and risks
- Management expected calendar-year 2015 resort capital expenditures of approximately $110–$115 million, excluding summer-activity projects, and approximately $100 million for calendar 2016, also excluding new summer activities. The 2015 plan included about $50 million for Park City improvements and approximately $15 million for Epic Discovery summer activities. About $83 million had been spent by October 31, 2015.
- Season-pass sales for the 2015/2016 U.S. season through December 5, 2015 were up approximately 13% in units and 19% in dollars year over year, excluding Perisher. Management cautioned that the ultimate effect on lift revenue and effective ticket price was uncertain.
- Management anticipated Perisher would contribute positively, but said synergies and its future financial impact were uncertain. The company also anticipated continued dividends, subject to board discretion, cash needs, covenants and other factors.
- Key risks include snowfall and weather, travel and leisure spending, seasonality and high fixed costs, labor availability and costs, competition, reliance on public-land permits, Australian-dollar movements, acquisition integration, capital funding, and potential asset impairments. Management said it expected to meet financial covenants through fiscal 2016, but gave no assurance.
- The company identified no material change in market risk or previously disclosed risk factors. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported.
Investor verification priorities
- Assess how much Mountain revenue growth reflects Perisher and Park City additions versus comparable resort performance.
- Track season-pass sales conversion, snowfall, visitation and margins through the main U.S. ski season.
- Verify operating cash-flow sustainability given seasonality and working-capital movements.
- Monitor debt, revolver capacity, interest-rate sensitivity, capital spending, dividends and buybacks against covenant headroom.
- Follow completion of Perisher’s purchase-price allocation, realization of expected synergies, and the Canyons contingent-payment valuation.