Vail Resorts, Inc. — FY2016 Form 10-K
Reporting period: Fiscal year ended July 31, 2016. This is an annual filing, not a standalone Q4 filing; quarterly figures below identify the July 2016 quarter where useful. Unless stated otherwise, financial amounts are in U.S. dollars.
Business context
Vail Resorts operates Mountain, Lodging and Real Estate segments, representing approximately 82%, 17% and 1% of FY2016 revenue, respectively. Mountain operations include nine destination resorts and three urban ski areas. The business is highly seasonal: 79% of combined Mountain and Lodging revenue, excluding payroll reimbursements, was earned in fiscal Q2 and Q3.
Financial performance
| Metric | FY2016 | FY2015 | Change |
|---|---|---|---|
| Total revenue | $1,601.3 million | $1,399.9 million | +14.4% |
| Operating income | $283.0 million | $210.5 million | +34.4% |
| Net income attributable to Vail Resorts | $149.8 million | $114.8 million | +30.5% |
| Diluted EPS | $4.01 | $3.07 | +30.6% |
| Cash from operating activities | $426.8 million | $303.7 million | +$123.1 million |
| Capital expenditures | $109.2 million | $123.9 million | -$14.6 million |
Mountain revenue rose 18.2% to $1,304.6 million and Reported EBITDA, a non-GAAP measure, increased 23.3% to $424.4 million. Lodging revenue rose 7.9% to $274.6 million; Lodging Reported EBITDA increased 30.0% to $28.2 million. Real Estate revenue declined 46.5% to $22.1 million, while Real Estate Reported EBITDA improved to $2.8 million from a $6.9 million loss. Total Reported EBITDA was $455.4 million, up 26.9%.
Mountain results benefited from increased pass sales, higher visitation at Tahoe, Colorado and Park City, improved ancillary spending, and a full year of Perisher results. Skier visits increased 18.5% to 10.0 million and effective ticket price rose 3.5% to $65.59. Lodging’s combined owned-hotel and managed-condominium ADR increased 3.5% to $280.38 and RevPAR increased 8.8% to $122.61.
Fiscal Q4 (quarter ended July 31, 2016) revenue was $179.9 million, versus $162.1 million a year earlier. The quarter recorded a net loss attributable to Vail Resorts of $65.3 million, compared with a $70.1 million loss in Q4 FY2015, reflecting the business’s seasonal pattern.
Cash, debt and liquidity
Cash and cash equivalents were $67.9 million at July 31, 2016, compared with $35.5 million a year earlier. Total debt was $700.3 million, including the $323.1 million present-value Canyons lease obligation; net debt, as defined by the company, was $632.4 million, down from $779.0 million. The company also disclosed approximately $302.4 million of future minimum operating lease payments. Of total debt, $368.2 million was variable-rate; a 100-basis-point LIBOR increase was estimated to raise annual interest expense by approximately $3.7 million.
Available revolver capacity was $252.8 million, after borrowings and letters of credit. The company was in compliance with its debt covenants at year-end and expected to remain compliant through FY2017, while noting there could be no assurance. Operating cash flow less capital expenditures was approximately $317.5 million, calculated from the reported figures.
Changes, outlook and material items
- FY2016 growth included Wilmot, acquired in January 2016, and a full year of Perisher, acquired in June 2015. Comparisons also reflect the Park City resort acquisition and integration in the prior year.
- Prior-year comparisons include a $16.4 million noncash Park City litigation settlement gain and a $23.8 million income-tax benefit from an IRS settlement. FY2016’s effective tax rate was 38.4%, versus 23.2% in FY2015; the prior-year tax benefit materially affects the comparison.
- On August 5, 2016, after fiscal year-end, the company agreed to acquire Whistler Blackcomb for estimated total consideration of approximately $1.1 billion, comprising cash and Vail shares. The expected cash portion was approximately $513 million. Financing plans included cash, revolver capacity and a committed $360 million incremental term loan; closing remained subject to shareholder, court, regulatory and other conditions.
- Preseason U.S. season-pass sales through September 18, 2016 were up approximately 24% in units and 29% in sales dollars year over year. Management cautioned that the trend might not continue and did not provide a specific FY2017 earnings forecast in the supplied filing text.
- Management planned approximately $100 million of resort capital expenditures for calendar 2016, excluding approximately $14 million for Epic Discovery summer activities and approximately $13 million of Wilmot improvements.
- Key risks include snowfall, weather and water availability; seasonality and high fixed costs; travel demand and competition; labor costs and staffing; reliance on government permits and environmental approvals; cybersecurity; foreign-currency exposure; and integration, financing and execution risks related to Whistler Blackcomb. The company does not hedge its foreign-currency exposure.
- The company reported a Kirkwood environmental notice and Colorado air-permitting matters; it did not expect resolution to materially affect results or cash flows. The independent auditor gave an unqualified opinion and reported effective internal control over financial reporting.
Investor verification priorities
- Confirm whether the Whistler Blackcomb acquisition closed, its final consideration and financing, and the resulting dilution, debt and integration costs.
- Track season-pass sales, skier visits, pricing and snowfall conditions, especially whether the reported preseason sales growth translated into operating results.
- Reconcile Reported EBITDA to GAAP earnings and assess the effects of the prior-year tax benefit and litigation gain on year-over-year comparisons.
- Monitor variable-rate debt, revolver capacity, covenant headroom, capital spending, dividends and share repurchases alongside seasonal cash needs.
- Assess the Canyons lease’s escalating payments and contingent consideration, and the company’s ability to meet long-term lease and other contractual commitments.