Vail Resorts, Inc. — Q3 FY2020 Form 10-Q
Reporting period: Three and nine months ended April 30, 2020; unaudited. The company operates Mountain, Lodging and Real Estate businesses. Results were materially affected by COVID-19-related closures beginning March 15, 2020.
Financial performance
| Metric | Three months ended April 30 | Nine months ended April 30 |
|---|---|---|
| Revenue, 2020 | $694.1 million | $1,886.5 million |
| Revenue, 2019 | $958.0 million | $2,027.6 million |
| Net income attributable to Vail Resorts, 2020 | $152.5 million | $252.4 million |
| Net income attributable to Vail Resorts, 2019 | $292.1 million | $390.7 million |
| Diluted EPS, 2020 / 2019 | $3.74 / $7.12 | $6.17 / $9.48 |
| Total Reported EBITDA, 2020 / 2019 | $303.6 million / $479.8 million | $603.0 million / $762.9 million |
Quarterly revenue declined 27.6% and nine-month revenue declined 7.0% year over year. Quarterly net income attributable to Vail Resorts fell 47.8%; nine-month net income fell 35.4%. Reported EBITDA is a non-GAAP measure.
- Segment EBITDA, nine months: Mountain $594.5 million, down 20.1%; Lodging $11.5 million, down 48.5%; Real Estate $(2.9) million versus $(3.3) million.
- Cash flow, nine months: Operating cash flow was $467.0 million versus $665.6 million. Capital expenditures were $145.8 million. Investing cash outflow was $466.5 million, including acquisitions; financing provided $371.4 million.
- Liquidity and debt at April 30: Cash and cash equivalents were $482.7 million; total debt including current maturities was $2.429 billion; reported Net Debt was $1.946 billion. Only $18.9 million remained available on the Vail Holdings revolver and C$1.1 million on the Whistler revolver at that date.
- Margins and interest: Interest expense, net was $24.5 million for the quarter and $73.3 million for nine months. The effective tax rate was 14.2% and 15.0%, respectively. The filing does not provide a clear consolidated operating-margin percentage.
Material changes versus prior comparable periods
- Early resort, lodging and retail closures sharply reduced Mountain and Lodging revenue and EBITDA. Quarterly Mountain Reported EBITDA fell 35.6%; Lodging Reported EBITDA fell 76.8%.
- The company deferred $120.9 million of 2019/2020 pass revenue following a customer credit offer tied to future pass purchases; primarily expected to be recognized in fiscal Q2 and Q3 2021. It also deferred $2.9 million of associated contract-acquisition costs.
- Cash increased from $59.6 million at April 30, 2019, while Net Debt rose from $1.300 billion, reflecting acquisitions and increased borrowings, among other factors.
- Peak Resorts was acquired in September 2019 for total consideration, including debt and lease repayments, of approximately $334.7 million. Its resorts’ results are included prospectively from acquisition.
Outlook, risks and unusual items
- Management said the pandemic’s effect on fourth-quarter results could not yet be fully assessed. It planned for North American summer and Australian ski operations to begin in late June or early July, subject to public-health guidance; two Grand Teton National Park lodges were unlikely to open for summer.
- Management cited uncertainty around 2020/2021 pass sales, guest travel and spending, reopening, and possible refunds under Epic Coverage. The company warned that future resort closures could require significant pass refunds.
- On May 4, 2020, after quarter-end, the company issued $600 million of 6.25% senior notes due 2025 and used part of the proceeds to repay the Vail Holdings revolver in full, restoring that borrowing availability. Management said liquidity sources were expected to cover operations for up to two years in a worst-case scenario of extended resort shutdowns.
- A credit amendment waived Vail Holdings’ leverage and interest-coverage maintenance covenants for fiscal quarters ending July 31, 2020 through January 31, 2022, with restrictions including a $150 million minimum-liquidity test and limits on dividends, repurchases, capital spending, investments and acquisitions. The company reported covenant compliance at April 30.
- The quarterly dividend was suspended for at least the next two quarters. Calendar 2020 resort capital spending was reduced by approximately $80–$85 million; management expected $125–$130 million of resort capital expenditures for the calendar year.
- The company recorded a $28.4 million impairment related to its Colorado resort ground transportation business, including $25.7 million of goodwill. COVID-19-related wage-support credits totaled approximately $9.1 million across the U.S., Canada and Australia.
- Other risks include substantial indebtedness, variable interest rates, foreign-currency exposure, seasonality, high fixed costs, and dependence on permits and seasonal employees. A 100-basis-point change in borrowing rates was estimated to affect annual interest payments by approximately $14.9 million.
Important facts for investors to verify
- How pass-credit redemptions, pass renewals and Epic Coverage refunds affect revenue, cash flow and fiscal 2021 results.
- Actual reopening dates, operating restrictions and demand across North American summer, Australian winter and the next North American ski season.
- Post-note-offering debt, available liquidity, interest expense and compliance with amended credit-facility restrictions.
- Whether the reduced capital plan is maintained and whether dividends or share repurchases remain restricted.
- Assumptions behind the ground-transportation impairment and the contribution and integration of Peak Resorts.