VAIL RESORTS INC quarterly report, Q1 FY2021

Vail Resorts, Inc. — Form 10-Q Summary

Reporting period: First quarter of fiscal 2021, the three months ended October 31, 2020. Vail Resorts operates Mountain, Lodging and Real Estate businesses. The quarter is seasonally weak because most North American ski operations generally open in November; results were also materially affected by COVID-19.

Financial results

Metric	Q1 FY2021	Q1 FY2020
Net revenue	$131.8 million	$267.8 million
Loss from operations	$164.0 million	$135.5 million
Net loss attributable to Vail Resorts	$153.8 million	$106.5 million
Basic and diluted loss per share	$3.82	$2.64
Operating cash flow	$112.0 million	$209.3 million
Capital expenditures	$30.2 million	$52.6 million
Total Reported EBITDA (non-GAAP)	$(96.0) million	$(77.6) million

Revenue declined approximately 50.8%. Resort revenue fell to $131.5 million from $263.6 million. Mountain Reported EBITDA was $(87.4) million versus $(80.0) million; Lodging was $(7.4) million versus positive $3.3 million; Real Estate was $(1.2) million versus $(0.9) million. The company reported a $37.5 million income tax benefit, compared with $46.6 million.

Cash and cash equivalents were $462.2 million at October 31, 2020, versus $136.3 million a year earlier. Total debt, including current maturities, was $2.452 billion; net debt was $1.989 billion, compared with $1.933 billion a year earlier. Available revolving credit was $418.8 million under the Vail facility and approximately $151.7 million under the Whistler facility. Current assets were $841.6 million and current liabilities were $950.2 million.

Material changes and drivers

COVID-19 restrictions and closures substantially reduced summer, lodging and Australian resort activity. Hotham and Falls Creek closed four days after opening; Perisher winter operations and North American summer operations were also constrained.
Mountain revenue fell 47.6%; ski school, dining and retail/rental revenue declined 76.0%, 85.8% and 53.4%, respectively. Mountain EBITDA worsened despite lower operating costs.
Lodging revenue fell 55.5%, and Lodging EBITDA moved from positive $3.3 million to a $7.4 million loss. Combined owned-hotel and managed-condominium RevPAR declined 55.8%.
The prior-year comparison included Peak Resorts only from its September 2019 acquisition date. The 2020 quarter included incremental off-season costs from those resorts.
Interest expense increased 56.0% to $35.4 million, primarily reflecting the $600 million 6.25% notes issued in May 2020 and debt assumed with Peak Resorts.
Operating cash flow decreased by $97.3 million, chiefly due to lower net season-pass receivable collections and weaker segment results. Deferred revenue rose to $559.3 million from $256.4 million at July 31, 2020, largely reflecting advance pass sales.

Outlook, risks and notable items

Management said COVID-19 was expected to continue materially adversely affecting results for the remainder of fiscal 2021. It did not provide a specific earnings or revenue forecast in this filing.
Management believed cash, credit availability and expected operating cash flow would cover liquidity needs through at least the 2021/2022 ski season, including under extended resort shutdowns; this is subject to pandemic and operating uncertainty.
Through December 6, 2020, North American pass sales were up about 20% in units and flat in sales dollars versus the comparable prior-year period; excluding redeemed credits, sales dollars were up about 19%. The company cautioned that pass sales’ ultimate effect on lift revenue and effective ticket price was uncertain.
The prior-season Credit Offer deferred $120.9 million of pass revenue. The company recognized $15.4 million in this quarter because expected credit redemptions were below the deferred amount; most remaining revenue was expected to be recognized in fiscal Q2 and Q3, subject to performance obligations and possible later recognition.
Epic Coverage provides qualifying refunds for resort closures and personal circumstances, and when pass holders cannot reserve preferred days. Refund estimates reduce revenue and could differ materially from actual claims. Epic Mountain Rewards also requires allocation of pass revenue to qualifying discounted purchases.
Planned resort capital spending was approximately $125–$130 million for calendar 2020 and $125–$130 million for calendar 2021, including specified integration and reimbursable items. Discretionary projects were deferred to preserve liquidity.
The Vail Holdings Credit Agreement temporarily waives leverage and interest-coverage maintenance covenants through January 31, 2022, subject to terms, but requires monthly minimum liquidity of $150 million. Dividends were suspended and none were paid in the quarter; the credit agreement also restricts dividends and share repurchases. Management reported covenant compliance at quarter-end.
Approximately $0.9 billion of variable-rate debt remained after interest-rate swaps. A 100-basis-point rate change would alter annual interest payments by about $9.1 million. Other risks include pandemic-related demand and closures, weather, travel conditions, foreign exchange and debt access.
Ordinary-course litigation accruals were not material, and management did not expect pending or threatened claims to materially affect results. The filing reports letters of credit and other guarantees, but no material off-balance-sheet arrangements.

Most important facts for investors to verify

Whether resort operations, public-health restrictions and guest demand recover sufficiently during the core North American ski quarters.
Actual Epic Coverage refunds, pass-credit redemptions and the timing of deferred pass revenue recognition.
Cash generation, receivable collections, deferred revenue and liquidity against the credit agreement’s minimum-liquidity requirement.
Debt costs, variable-rate exposure and the company’s ability to meet covenants when the temporary waiver period ends.
Execution of capital-spending plans and the continued suspension or resumption of dividends and repurchases.