Vail Resorts, Inc. — FY2018 Form 10-K Summary
Reporting period: Fiscal year ended July 31, 2018. This is an annual filing, not a standalone quarterly report; FY2018 fourth-quarter results are also disclosed. Vail Resorts operates Mountain, Lodging and Real Estate segments, with Mountain generating about 85.6% of FY2018 revenue. Its results are highly seasonal, with most North American mountain revenue earned in the second and third fiscal quarters.
Key financial results
| Metric | FY2018 | FY2017 |
|---|---|---|
| Total revenue | $2.012 billion | $1.907 billion |
| Income from operations | $408.8 million | $379.3 million |
| Income before taxes | $340.1 million | $348.4 million |
| Net income attributable to Vail Resorts | $379.9 million | $210.6 million |
| Diluted EPS | $9.13 | $5.22 |
| Cash from operating activities | $551.6 million | $473.2 million |
| Capital expenditures | $140.6 million | $144.4 million |
- Revenue increased 5.5%. Mountain revenue rose 6.9% to $1.723 billion and Mountain Reported EBITDA, a non-GAAP segment measure, increased 4.5% to $591.6 million. Lodging revenue rose 2.2% to $284.6 million, while Lodging Reported EBITDA fell 7.7% to $25.0 million. Real Estate revenue declined to $4.0 million from $16.9 million; Real Estate Reported EBITDA was $1.0 million versus a $0.4 million loss.
- Total Reported EBITDA increased 4.1% to $617.6 million. Its margin on revenue was approximately 30.7%, compared with 31.1% in FY2017; Reported EBITDA is not a GAAP measure.
- Net income attributable to the company rose sharply despite lower pretax income, chiefly reflecting tax benefits. FY2018 included a provisional $61.0 million net benefit related to U.S. tax reform and $71.1 million of excess tax benefits from employee share awards.
- Mountain operating indicators improved: skier visits rose 2.5% to 12.345 million and effective ticket price increased 5.0% to $71.31. Season passes contributed approximately 47% of lift revenue, up from 43%.
- Operating cash flow increased 16.6%. Cash and cash equivalents were $178.1 million at year-end. Gross debt was $1.276 billion and net debt was $1.095 billion, down from $1.155 billion. Debt includes the $334.5 million Canyons lease obligation.
- At July 31, available revolver capacity was $185.1 million under the Vail Holdings facility and $164.6 million under Whistler’s facility. These are disclosed facility availabilities, not cash balances.
- FY2018 fourth-quarter revenue was $211.6 million, versus $209.1 million; the company reported a net loss attributable to Vail Resorts of $83.7 million, versus a $57.1 million loss. The filing identifies substantial seasonal losses outside peak operating periods.
Material changes and developments
- FY2018 Mountain performance benefited from strong pass sales, the first full year of Whistler Blackcomb operations, and Stowe operations. Historically low early-season snowfall at western U.S. resorts, including during the Christmas holiday period, hurt visitation and results; conditions improved later in the season.
- After year-end, Vail acquired Stevens Pass on August 15, 2018, and Triple Peaks—parent of Okemo, Crested Butte and Mount Sunapee—on September 27, 2018. These resorts were not included in FY2018 results. The acquisitions were funded with additional term-loan borrowing; the company also funded $155 million to retire Triple Peaks’ resort leases.
- FY2018 dividends paid totaled $204.2 million, or $5.046 per share. The board raised the indicated annual dividend rate to $5.88 per share in March 2018, subject to quarterly declarations. The company repurchased 115,422 shares for $25.8 million during FY2018.
Outlook, risks and unusual items
- Management reported North American season-pass sales through September 23, 2018 up about 25% in units and 15% in sales dollars year over year, excluding Stevens Pass and Triple Peaks and adjusting Whistler currency effects. Excluding military passes sold to new purchasers, sales were up about 9% in units and 12% in dollars. Management cautioned that the campaign was ongoing and future visitation and revenue were uncertain.
- Management expected approximately $40 million of incremental calendar-year 2018 cash flow from the lower federal tax rate and accelerated capital deductions, intended for employee wages, resort investment and shareholder returns. The company planned about $150 million of 2018 resort capital expenditures, excluding summer and specified acquisition/integration spending, plus additional integration and resort investments.
- Key risks include snowfall and climate variability, drought or water-supply disruption, seasonality and high fixed costs, competition, labor availability and wage inflation, travel and economic conditions, cyber and data-security incidents, dependence on permits and public-land agreements, and acquisition integration. Foreign-exchange exposure is unhedged; a 100-basis-point LIBOR change was estimated to alter annual interest payments by about $9.3 million.
- Tax reform accounting was provisional at filing and subject to further analysis. The company reported $83.4 million of reserves for uncertain tax positions, including related interest and penalties, tied principally to treatment of Canyons lease payments and deductibility of Canyons goodwill.
- A Kirkwood environmental settlement required approximately $0.8 million in penalties and agency costs; the amounts were paid by third-party insurance. Remaining remediation work was expected to be completed in 2018. The company did not expect a material effect from the matter.
Important facts for investors to verify
- How much of FY2018 earnings growth is repeatable after excluding tax-reform and employee-share-award tax benefits.
- Whether pass-sales momentum translates into skier visits, ancillary spending and margins, particularly if snowfall is unfavorable.
- Post-acquisition debt, lease obligations, integration spending and operating performance of Stevens Pass and Triple Peaks.
- Actual capital spending and cash returns to shareholders relative to operating cash flow, debt covenants and seasonal liquidity needs.
- Final tax-reform accounting and any developments in the uncertain tax positions or required remediation obligations.