Vail Resorts, Inc. — Form 10-Q Summary
Business context and reporting period
Quarter ended October 31, 2012 (Vail Resorts’ fiscal first quarter of fiscal 2013), compared with the three months ended October 31, 2011. The company operates Mountain, Lodging and Real Estate businesses. Results are highly seasonal: ski operations generally begin in mid-November, and the first fiscal quarter typically generates a loss.
Financial and operating results
| Metric | Q1 FY2013 | Prior period | Change |
|---|---|---|---|
| Revenue | $116.4 million | $116.4 million | Essentially flat |
| Operating loss | $90.3 million | $84.4 million | Loss widened $5.9 million |
| Net loss attributable to Vail Resorts | $60.6 million | $55.7 million | Loss widened $4.9 million |
| Diluted loss per share | $1.70 | $1.54 | Loss increased $0.16 per share |
| Operating cash flow | $34.6 million | $38.3 million | Down $3.8 million |
| Capital expenditures | $35.9 million | $51.0 million | Down $15.1 million |
| Cash and cash equivalents at quarter-end | $44.0 million | $44.7 million | Down $0.8 million |
| Total debt at quarter-end | $490.4 million | $491.4 million | Down $1.1 million |
| Net debt, company-defined | $446.4 million | $446.7 million | Down $0.3 million |
Net cash decreased $2.1 million during the quarter, versus a $25.4 million decrease in the prior-year quarter. The company had $332.7 million available under its $400 million revolving credit facility after letters of credit. Current liabilities were $336.1 million, including $134.963 million of deferred revenue. Long-term debt due within one year was $0.848 million; most debt principal is due in fiscal 2019 or later. The filing reports no separate consolidated profit margin figure.
Segment performance and material changes
- Mountain: Revenue rose 4.5% to $51.9 million, while Reported EBITDA (a non-GAAP measure) worsened to a $55.2 million loss from a $48.5 million loss. Higher operating costs, including acquired Kirkwood and Skiinfo operations, outweighed revenue growth. The acquisitions contributed $1.8 million and $0.5 million of negative EBITDA, respectively.
- Lodging: Revenue declined 2.0% to $52.5 million, largely because reimbursed payroll revenue fell; excluding those reimbursements, revenue increased 7.6%. Reported EBITDA improved to $0.7 million from a $1.7 million loss. Flagg Ranch, a newly awarded concession, contributed $1.9 million of revenue and $0.6 million of EBITDA.
- Real Estate: Revenue declined 9.0% to $11.9 million, while the Reported EBITDA loss narrowed to $3.7 million from $4.7 million. Four Ritz-Carlton Residences, Vail units closed, generating $11.6 million of revenue.
- Total Reported EBITDA was a $58.2 million loss, compared with a $54.9 million loss. Depreciation and amortization increased $2.7 million to $31.7 million, primarily reflecting acquired assets and capital investment.
Outlook, risks and unusual items
- Management expected resort operating cash flow, principally in the second and third fiscal quarters, available revolver capacity and future real estate closings to support near-term liquidity. It anticipated $85 million–$95 million of resort capital expenditures for calendar 2012; approximately $72 million had been spent as of October 31.
- Season-pass sales through December 2, 2012 were up approximately 8% in sales dollars and 5% in units year over year. Management cautioned that it could not predict the ultimate effect on total lift revenue or ticket pricing.
- Key risks include snowfall and weather, economic conditions and travel demand, real estate market weakness and timing of unit closings, impairment risk, dependence on government permits and seasonal labor, and execution and demand for planned summer activities.
- The company had a favorable 2011 district court ruling in an IRS dispute over net operating losses, but settlement discussions continued and appeal remained possible. No tax benefit from the disputed NOLs was reflected in the financial statements. Potential reversal of related liabilities and accrued interest and penalties was estimated at zero to $27.6 million.
- The company reported compliance with debt covenants and expected to meet them through fiscal 2013, while noting there could be no assurance. A 100-basis-point LIBOR change would alter annual interest payments by approximately $0.5 million. No material changes to previously disclosed risk factors were reported.
- The board declared a $0.1875-per-share quarterly dividend payable December 27, 2012. Future dividends remain subject to board discretion and contractual restrictions.
Important facts for investors to verify
- Whether season-pass momentum translated into ski-season visits, lift revenue and realized ticket prices, given the prior season’s poor snowfall.
- Actual capital spending against the $85 million–$95 million calendar-year plan and the effect on liquidity.
- Timing, prices and margins of remaining Ritz-Carlton Residences, Vail and One Ski Hill Place unit sales, including any impairment indicators.
- Developments in the IRS NOL litigation and the potential financial-statement effect of any resolution.
- That Reported EBITDA and Net Debt are company-defined non-GAAP measures and should be assessed alongside GAAP results and cash flows.