Vail Resorts, Inc. — FY2012 Form 10-K
Reporting period: Fiscal year ended July 31, 2012. This annual filing also reports the quarter ended July 31, 2012 (fiscal Q4). The company operates Mountain, Lodging and Real Estate segments; Mountain and Lodging together are its Resort business.
Financial and operating performance
| Metric | FY2012 | FY2011 |
|---|---|---|
| Total revenue | $1.024 billion | $1.167 billion |
| Net income attributable to Vail Resorts | $16.5 million | $34.5 million |
| Diluted earnings per share | $0.45 | $0.94 |
| Operating cash flow | $185.4 million | $267.3 million |
| Capital expenditures | $132.6 million | $95.6 million |
| Cash and cash equivalents at year-end | $46.1 million | $70.1 million |
| Total debt | $490.8 million | $491.7 million |
| Net debt | $444.7 million | $421.6 million |
FY2012 Reported EBITDA, a company-defined non-GAAP measure, was $189.3 million versus $216.9 million. Mountain EBITDA was $198.9 million (down 6.7%); Lodging EBITDA was $6.4 million (down 27.4%); and Real Estate EBITDA was a loss of $16.0 million, compared with a $5.0 million loss. The filing states that $332.7 million was available under the $400 million revolving credit facility, net of letters of credit.
Mountain revenue rose 1.9% to $766.6 million, while skier visits fell 12.1% to 6.144 million. Effective ticket price increased 13.8% to $55.75. Lodging revenue declined 1.9% to $210.6 million; combined owned-hotel and managed-condominium RevPAR fell 3.7% to $90.36. Real Estate revenue declined 76.4% to $47.2 million, reflecting fewer condominium closings.
For fiscal Q4, revenue was $113.5 million and net loss attributable to Vail Resorts was $53.8 million, or $1.50 per diluted share. The comparable FY2011 quarter recorded revenue of $108.7 million and a $53.9 million attributable net loss, or $1.49 per diluted share.
Material changes and notable items
- Historic low snowfall and a mild winter reduced visitation; Colorado visits declined 8.9% and Tahoe visits 22.3%. Higher pass sales, pricing and guest spending helped limit the revenue impact.
- Season-pass revenue increased 13.2%, while lift revenue excluding season passes declined 7.1%. Season passes represented approximately 40% of lift-ticket revenue recognized for the 2011/2012 season.
- Operating cash flow fell by $81.9 million, largely because net proceeds from real estate closings declined to $39.3 million from $166.0 million.
- The company acquired Kirkwood in April 2012 and Skiinfo in February 2012. Acquisition timing and related costs weighed on Mountain results.
- FY2011 included a $7.4 million loss on extinguishment of debt and a $2.6 million asset impairment charge; neither recurred in FY2012.
Outlook, risks and contingencies
- Management estimated calendar-year 2012 resort capital expenditures of $85–$95 million, including approximately $25 million for the two phases of Vail’s proposed Epic Discovery summer activities. Plans depended on regulatory approvals; comparable plans for Breckenridge and Heavenly were being developed.
- Through September 23, 2012, advance pass sales for the 2012/2013 season were up approximately 17% in units and 21% in sales dollars year over year. Management cautioned that the trend might not continue and that snowfall, visitation and spending remained uncertain.
- The business is highly seasonal: 76% of combined Mountain and Lodging revenue, excluding payroll reimbursements, was earned in fiscal Q2 and Q3. Weather, travel demand, economic conditions and high fixed operating costs are material risks.
- Real Estate had 73 unsold units at The Ritz-Carlton Residences, Vail and One Ski Hill Place. Management said a roughly 6% decline in estimated net proceeds on remaining units could trigger impairment; no impairment was recorded for FY2012.
- The company was in compliance with debt covenants at year-end and expected to remain compliant through FY2013, but noted no assurance. Nearly all debt principal was not due until FY2019 or later; variable-rate debt was $52.6 million.
- A federal tax dispute over historic net operating loss carryforwards remained unresolved. A district court had ruled in the company’s favor, but the refund amount and any appeal remained uncertain; the company had not recognized the potential tax benefits. The filing describes a possible tax-benefit range of $0–$27.6 million.
- Peak 6 at Breckenridge had received a Forest Service Record of Decision in August 2012 but remained subject to appeal. Other resort expansion and summer projects also required government approvals. The filing identifies ordinary-course litigation and reports no material aggregate accrual for known legal contingencies.
Investor verification priorities
- Verify the audited financial statements and the company’s reconciliation and definition of Reported EBITDA and Net Debt.
- Assess whether advance pass-sale growth translated into FY2013 visitation, ancillary spending and cash flow, particularly under differing snowfall conditions.
- Review the remaining condominium inventory, realized sale prices and any impairment indicators.
- Confirm funding, timing, approvals and returns for planned resort capital spending and summer attractions.
- Track the tax litigation, covenant headroom, revolving-credit availability and dividend capacity.