Vail Resorts, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended July 31, 2020. The filing also reports fourth-quarter results; this is an annual filing, not a standalone quarterly filing. Vail operates Mountain, Lodging and Real Estate segments, representing approximately 87%, 13% and 0% of FY2020 revenue, respectively.
Financial performance
| Metric | FY2020 | FY2019 |
|---|---|---|
| Total revenue | $1.964 billion | $2.272 billion |
| Operating income | $223.4 million | $476.3 million |
| Net income attributable to Vail Resorts | $98.8 million | $301.2 million |
| Diluted EPS | $2.42 | $7.32 |
| Total Reported EBITDA (non-GAAP) | $499.2 million | $702.4 million |
| Cash from operating activities | $395.0 million | $634.2 million |
| Capital expenditures | $172.3 million | $192.0 million |
| Cash and cash equivalents at year-end | $391.0 million | $108.9 million |
| Total debt, including current maturities | $2.451 billion | $1.576 billion |
| Net debt (company-defined, non-GAAP) | $2.060 billion | $1.467 billion |
Revenue declined 13.6% year over year. Operating margin was approximately 11.4%, versus 21.0% in FY2019; net margin was approximately 5.0%, versus 13.3%. Total Reported EBITDA margin was approximately 25.4%, versus 30.9%. These measures reflect materially reduced operations after resort closures and the pass-revenue deferral.
- Mountain: Revenue was $1.710 billion, down 12.6%; Reported EBITDA was $500.1 million, down 26.3%. Skier visits fell 10.1% to 13.483 million and effective ticket price declined 1.7% to $67.72.
- Lodging: Revenue was $248.4 million, down 21.1%; Reported EBITDA fell 88.4% to $3.3 million. Combined owned-hotel and managed-condominium RevPAR declined 25.8% to $90.37.
- Real Estate: Revenue was $4.8 million; Reported EBITDA was a $4.1 million loss.
- Fourth quarter: Revenue was $77.2 million versus $244.0 million in the prior-year quarter; net loss attributable to Vail Resorts was $153.6 million versus a $89.5 million loss. Mountain seasonality and the early closures contributed to the quarter’s results.
Cash from operations declined 37.7% year over year. FY2020 investing cash outflow was $492.7 million, including $327.6 million, net of cash acquired, for the Peak Resorts acquisition. Financing activities provided $376.2 million, including proceeds from the $600 million notes offering. Year-end current assets were $665.1 million and current liabilities were $603.5 million.
Material changes and unusual items
- COVID-19 led to early closure of North American resorts, retail stores and lodging operations in March 2020, restrictions on summer activities, and the closure of Falls Creek and Hotham shortly after their July openings. Management said the pandemic significantly harmed FY2020 results and expected continued negative effects in FY2021.
- The pass-holder Credit Offer caused $120.9 million of pass revenue, and $2.9 million of related costs, to be deferred from FY2020, primarily into FY2021 or potentially FY2022. This is a material timing effect, not an additional reported FY2020 sale.
- The company recorded a $28.4 million impairment related to its Colorado resort ground transportation business, including a $25.7 million goodwill reduction.
- Peak Resorts was acquired in September 2019 for approximately $334.7 million including required debt and lease repayments, adding 17 regional ski areas. Acquisition-related operations and other acquisitions affect year-over-year comparability.
- FY2020 interest expense, net rose 34.2% to $106.7 million, reflecting acquisition debt and the notes offering, among other factors. The effective tax rate was 6.3%; results included CARES Act-related tax benefits and employee wage subsidies.
Liquidity, debt and outlook
At July 31, 2020, Vail reported $391.0 million of cash and $418.8 million available on its Vail Holdings revolver. Whistler Blackcomb had a further C$221.1 million (approximately $165.1 million) of revolver availability. Management said these resources, together with expected operating cash flow less resort capital spending, should fund operations through at least the 2021/2022 ski season, even with extended shutdowns; this is an expectation, not a guarantee.
- In May 2020, Vail issued $600 million of 6.25% senior notes due 2025. Approximately $2.1 billion of its $2.4 billion total debt was not due until FY2025 or later. Net variable-rate debt was approximately $0.9 billion; a 100-basis-point LIBOR change was estimated to alter annual interest payments by $9.1 million.
- A credit amendment waived Vail Holdings’ maximum leverage and minimum interest coverage maintenance covenants through January 2022, subject to stated terms, and imposed a monthly minimum-liquidity test of $150 million. The amendment also restricts dividends, repurchases, capital spending, investments and acquisitions. The company reported compliance with applicable covenants as of year-end.
- Vail suspended its quarterly dividend for at least two quarters beginning April 2020. FY2020 dividends totaled $5.28 per share; future payments remain subject to board decisions and debt restrictions.
- Calendar 2020 resort capital spending guidance was reduced to approximately $125–$130 million, mainly by deferring discretionary projects while maintaining most maintenance spending.
- For the 2020/2021 North American season, Vail introduced reservations for pass holders during the early season, Epic Coverage with qualifying refund provisions, and a 20% Epic Mountain Rewards discount. Season-pass sales through September 18, 2020 were up approximately 18% in units and down 4% in dollars year over year after redeemed credits; excluding credit value, sales dollars were up approximately 24%. This post-year-end sales update is not FY2020 revenue.
Principal risks: COVID-19 disruption and potential Epic Coverage refunds; travel demand and economic weakness; weather, climate and water availability; high fixed operating costs and seasonality; labor availability and cost; reliance on government permits and leases; acquisition integration; foreign exchange exposure; and substantial debt, variable interest rates and covenant limitations. The company identified no pending legal matters expected to have a material adverse effect, while noting ordinary-course litigation and contingencies.
Key investor verification points
- Check how much of the $120.9 million deferred pass revenue was recognized in FY2021 and FY2022, and how pass-credit redemptions affected realized pricing.
- Track Epic Coverage refund estimates and actual claims, resort operating restrictions, reservation access and pass sales versus management’s expectations.
- Assess cash generation, available revolver capacity, debt maturities and compliance with liquidity and covenant requirements as the waiver period progresses.
- Verify execution of the reduced capital plan and the effect of deferred resort improvements on maintenance, competitiveness and future spending needs.
- Monitor lodging recovery and the Colorado ground transportation business following its impairment, alongside integration and performance of acquired resorts.
- Consider the filing’s non-GAAP EBITDA and net-debt definitions, acquisition-related comparability, and the company’s seasonality when evaluating results.