Vail Resorts Results

Vail Resorts Increases Quarterly Dividend 50%

Net income attributable to Vail Resorts, Inc. was $115.8 million for the second fiscal quarter of 2015, representing a 95.3% increase compared to the same period in the prior year.

Vail Resorts

Vail Resorts, Inc. (NYSE:   MTN) today reported results for the second quarter of fiscal 2015 ended January 31, 2015 and the Company's ski season-to-date metrics through March 8, 2015.

Highlights

  • Resort Reported EBITDA increased 32.2% for the second quarter of fiscal 2015 compared to the same period in the prior year.
  • Net income attributable to Vail Resorts, Inc. was $115.8 million for the second fiscal quarter of 2015, representing a 95.3% increase compared to the same period in the prior year.
  • The Company updated its fiscal 2015 guidance with Resort Reported EBITDA expected to be between $340 million and $350 million, excluding the $16.4 million non-cash gain related to the Park City litigation settlement, which remains within the Company's initial guidance range.
  • The Company has repaid all borrowings under the revolver portion of its credit facility used to finance the $182.5 million acquisition of Park City Mountain Resort ("Park City") in September 2014.
  • The Company's Board of Directors approved a 50% increase in the quarterly cash dividend to $0.6225 per share from $0.4150 per share beginning with the dividend payable on April 15, 2015 to stockholders of record as of March 31, 2015.
  • The Company intends to refinance the remaining $215.0 million of its 6.50% Senior Subordinated Notes due 2019 ("6.50% Notes") and the aggregate $41.2 million of the 6.95% Eagle County Bonds with a $250.0 million term loan under its existing senior credit facility, which we expect will result in approximately $12 million in pre-tax annual interest savings at current rates.

Commenting on the Company's fiscal 2015 second quarter results, Rob Katz, Chief Executive Officer said, "Our results were very strong in the second quarter of fiscal 2015, with Mountain revenue increasing 18.2% compared to the prior year.  Total lift revenue increased 22.5%, primarily driven by a 15.9% growth in visitation and a 5.7% increase in effective ticket price ("ETP") compared to the prior year.  We continue to see robust spending trends that drove a 22.1% increase in ski school revenue and an 18.5% increase in food and beverage revenue compared to the prior year.  We benefited from strong pass sales, increased ancillary yields across our resorts and good conditions at our Colorado resorts. Our mountain performance includes the results of Park City in the second quarter of fiscal 2015, which were in line with our previous public estimates.  Excluding Park City, lift revenue excluding season pass revenue increased 12.7% for the fiscal quarter compared to the prior year, with commensurate growth in our ancillary revenues.  Our Resort Reported EBITDA growth was tempered by challenging conditions in Tahoe with near record-low snowfall that impacted visitation.  Despite varied weather conditions across our three primary regions, results this fiscal quarter demonstrate the benefit of our geographic diversification and the impact of our destination marketing strategies."

Regarding Lodging, Katz said, "Our lodging results were very strong for the fiscal quarter with both occupancy and rate increases compared to the prior year. Revenue (excluding payroll cost reimbursements) increased 6.3% compared to the prior year and revenue per available room ("RevPAR") increased 15.7% compared to the prior year.  Our results were driven by strong demand for our lodging properties with particular strength in our Colorado markets."

Katz continued, "Resort Reported EBITDA was $199.7 million for the fiscal quarter, an increase of 32.2% over the prior year. Importantly, our Resort EBITDA margin for the fiscal quarter improved nearly 450 basis points over the prior year as we continue to leverage our infrastructure and cost structure to drive profitable growth. The results highlight the success of our efforts to grow destination visitation and season pass sales, our ability to capture premium pricing and ancillary spending through consistent reinvestment in our resorts, and the opportunities we create through strategic acquisitions."

Regarding Real Estate, Katz said, "We continue to see strong momentum in our resort real estate markets with solid demand for our remaining condominium inventory and increasing interest in our development parcels.  Net Real Estate Cash Flow for the second quarter of fiscal 2015 was $4.3 million.  We define Net Real Estate Cash Flow as Real Estate Reported EBITDA, plus non-cash real estate cost of sales, plus non-cash stock-based compensation expense, plus change in real estate deposits and recovery of previously incurred project costs less investment in real estate. During the fiscal quarter, we closed on one Ritz-Carlton Residences, Vail and four One Ski Hill Place units.  Since January 31, 2015, we closed on three One Ski Hill Place units and closed on the sale of a property in Breckenridge that will be developed into a Marriott Residence Inn."

Commenting on cash flow, Katz said, "Our operating model continues to drive significant and growing cash flow, augmented by real estate sales, favorable tax attributes and disciplined capital spending.  Our cash flow this fiscal quarter allowed us to pay down the full $182.5 million of borrowings under the revolver portion of our senior credit facility used to finance the Park City acquisition in September 2014."

Regarding capital allocation, Katz said, "Further demonstrating our continued commitment to return capital to our stockholders, we are pleased to announce that the Board of Directors has approved an increase to our quarterly dividend by 50% and declared a quarterly cash dividend on Vail Resorts' common stock of $0.6225 per share, payable on April 15, 2015 to stockholders of record on March 31, 2015. We believe the increase in our dividend demonstrates our confidence in the stability of our business model through varying weather patterns and our consistent strong cash flow generation."  Katz added, "Our balance sheet remains very strong. We ended the fiscal quarter with $36.6 million of cash on hand and our Net Debt, including the capitalized Canyons obligation, was 2.0 times trailing twelve months Total Reported EBITDA, excluding the non-cash gain related to the Park City litigation settlement."

The Company also provided additional details of its 2015 capital plan, including expected spending on summer activities for Epic Discovery. Consistent with prior estimates provided in December 2014, the Company expects to spend approximately $50 million to complete its transformative capital plan to connect the Park City and Canyons resorts, creating the largest ski resort in the United States by skiable acreage.  The remaining capital plan consists of $60 million to $65 million of investments in maintenance spending and prioritized discretionary spending, including (i) upgrading  Vail Mountain's Avanti Chair (Chair 2) to a six-person high-speed chairlift, (ii) expanding the "refreshing" snowmaking system at Beaver Creek, (iii) adding new snowmaking on our recently opened Peak 6 terrain at Breckenridge, (iv) renovating rooms at the Keystone Lodge and (v) investing in technology and marketing systems to drive increased yields and data capture across our resorts in our ski school and rental ancillary services.

The Company is also announcing its plan to spend approximately $10 million in calendar year 2015 for the first major construction efforts for Epic Discovery summer activities.  The summer capital will be focused on a mountain coaster, canopy tours and summer tubing at Vail for which the Company has received the necessary US Forest Service approvals. In addition, the capital will be used to construct kids' activities on private land at Breckenridge and for significant planning investments for the next phase of construction in 2016 at Vail, Breckenridge and Heavenly.

We expect the addition of these activities at Vail and Breckenridge will contribute between $4 million and $5 million of incremental Resort Reported EBITDA during calendar year 2016, which will be reported in both fiscal 2016 and fiscal 2017. In our June earnings call, we will be providing further guidance on potential incremental capital spending at Heavenly for the summer of 2015 as we assess the timing of regulatory approvals for those projects.

Commenting on this announcement, Katz said "Our 2015 capital plan reflects our goal to target high return investments that support a premium experience for our guests while generating significant cash flow. Our investment in Utah will be one of the most transformative ever undertaken in the ski industry and we are pleased with the progress of the local approval processes for those projects. We believe Epic Discovery, our summer initiative, is an incredible opportunity to leverage our existing infrastructure and capitalize on the large number of guests already visiting certain resort destinations during the summer months.  We are excited to begin implementation of this initiative with a significant investment this summer at Vail and begin to invest at Breckenridge and Heavenly."

Operating Results

A complete Management's Discussion and Analysis of Financial Condition and Results of Operations can be found in the Company's Form 10-Q for the second fiscal quarter of 2015 ended January 31, 2015 filed today with the Securities and Exchange Commission.  The following are segment highlights:

Mountain Segment

  • Total lift revenue increased $43.9 million, or 22.5%, compared to the same period in the prior year, to $239.3 million for the three months ended January 31, 2015, driven largely by a $25.2 million, or 23.9%, increase in lift revenue excluding season pass revenue, attributable to increased visitation at our Colorado resorts, as well as incremental revenue of $11.8 million from the addition of Park City.  Season pass revenue increased $18.7 million, or 20.9%.
  • Ski school revenue increased by $10.4 million, or 22.1%, and dining revenue increased $6.0 million, or 18.5%, for the three months ended January 31, 2015 compared to the same period in the prior year, driven by increases in visitation and yields as well as the addition of Park City.
  • Retail/rental revenue increased $9.3 million, or 10.8%, for the three months ended January 31, 2015 compared to the same period in the prior year, due primarily to increases in retail sales and rental revenue in Colorado and Utah and the addition of Park City.
  • Operating expense increased $25.5 million, or 10.5%, for the three months ended January 31, 2015 compared to the three months ended January 31, 2014, primarily due to incremental expenses of $14.1 million from the addition of Park City (including current year Park City integration costs of $0.6 million). Operating expense in the prior year included $3.0 million of Canyons integration and Park City litigation related expenses.
  • Mountain Reported EBITDA increased $46.1 million, or 31.1%, for the fiscal quarter compared to the same period in the prior year.
  • Mountain Reported EBITDA includes $3.0 million of stock-based compensation expense for the three months ended January 31, 2015 compared to $2.5 million in the same period in the prior year.

Lodging Segment

  • Lodging segment net revenue (excluding payroll cost reimbursements) for the three months ended January 31, 2015 increased $3.4 million, or 6.3%, compared to the same period in the prior year.
  • For the three months ended January 31, 2015, average daily rate ("ADR") increased 4.1% and RevPAR increased 15.7% at the Company's owned hotels and managed condominiums compared to the same period in the prior year.
  • Lodging Reported EBITDA increased $2.5 million to $5.4 million for the three months ended January 31, 2015 compared to the same period in the prior year.
  • Lodging Reported EBITDA includes $0.7 million of stock-based compensation expense for the three months ended January 31, 2015 compared to $0.6 million in the same period in the prior year.

Resort - Combination of Mountain and Lodging Segments

  • Resort net revenue increased $74.6 million, or 16.6%, to $522.4 million for the three months ended January 31, 2015 compared to the same period in the prior year.
  • Resort Reported EBITDA was $199.7 million for the three months ended January 31, 2015, an increase of $48.6 million, or 32.2%, compared to the same period in the prior year.

Real Estate Segment

  • Real Estate segment net revenue increased $3.0 million, or 60.8%, to $7.8 million for the three months ended January 31, 2015 compared to the same period in the prior year.
  • Net Real Estate Cash Flow was $4.3 million for the three months ended January 31, 2015, an increase of $2.2 million from the same period in the prior year.
  • Real Estate Reported EBITDA loss improved by $1.1 million, to a loss of $2.0 million for the three months ended January 31, 2015 compared to the same period in the prior year.
  • Real Estate Reported EBITDA includes $0.3 million and $0.4 million of stock-based compensation expense for the three months ended January 31, 2015 and 2014, respectively.

Total Performance

  • Total net revenue increased $77.5 million, or 17.1%, to $530.2 million for the three months ended January 31, 2015 compared to the same period in the prior year.
  • During the fiscal quarter the Company completed a comprehensive settlement agreement with the Internal Revenue Service ("IRS") regarding court proceedings related to net operating loss ("NOL") carryforwards. The Company recorded an income tax benefit of $23.8 million related to the utilization of the NOLs for the fiscal quarter ended January 31, 2015.
  • Net income attributable to Vail Resorts, Inc. was $115.8 million, or $3.10 per diluted share, for the second quarter of fiscal 2015 compared to net income attributable to Vail Resorts, Inc. of $59.3 million, or $1.60 per diluted share, in the second fiscal quarter of the prior year.

Season-to-Date Metrics through March 8, 2015

The Company announced ski season-to-date metrics for the comparative periods from the beginning of the ski season through Sunday, March 8, 2015, and for the similar prior year period through Sunday, March 9, 2014, adjusted as if Park City, which was acquired in September 2014, was owned in both periods.  The reported ski season metrics do not include the results of Afton Alps and Mt. Brighton in either period.  The following data is interim period data and subject to fiscal quarter end review and adjustments.

  • Season-to-date total lift revenue at the Company's nine mountain resorts, including an allocated portion of season pass revenue for each applicable period, was up 8.0% compared to the prior year season-to-date period.
  • Season-to-date ancillary spending outpaced skier visitation, with ski school revenue up 2.1% and dining revenue up 4.8% at the Company's nine mountain resorts compared to the prior year season-to-date period. Additionally, retail/rental revenue for resort store locations was up 2.9%.
  • Season-to-date total skier visits for the Company's nine mountain resorts were down 0.3% compared to the prior year season-to-date period.

Mr. Katz continued, "Our results in February and early March continued the trends we saw in our fiscal second quarter with strength in Colorado offset by shortfalls to our expectations in Tahoe. In addition, in early February, Vail and Beaver Creek had the honor of hosting the 2015 World Alpine Ski Championships.  The event was an extraordinary showcase of both resorts, with outstanding attendance and terrific television and online media coverage both in the United States and around the world.  However, the Championships did depress skier visits and financial performance at both resorts in February compared to the prior year, which was largely in line with our original expectations. Our overall performance through March 8, 2015 has been incorporated in our updated guidance for fiscal 2015."

Outlook

  • We have updated our estimated range of Resort Reported EBITDA for fiscal 2015 within our original range to $340 million to $350 million, excluding the $16.4 million non-cash gain related to the Park City litigation settlement, representing an approximate 27% to 30% increase over fiscal 2014.
  • Our updated guidance range incorporates an approximate $37 million shortfall in revenue at our Tahoe resorts, relative to our original expectations.
  • Our estimates for fiscal 2015 Resort Reported EBITDA include approximately $5 million of integration and litigation expenses related to Park City and Canyons.
  • We expect Resort EBITDA Margin (defined as Resort Reported EBITDA, excluding the impact of the non-cash gain related to the Park City litigation settlement, divided by Resort net revenue) to be approximately 25.5% in fiscal 2015, at the midpoint of our updated guidance range.
  • We expect fiscal 2015 Real Estate Reported EBITDA to be negative $10 million to negative $6 million.
  • We are increasing our Net Real Estate Cash Flow guidance to $20 million to $30 million.
  • Net income attributable to Vail Resorts, Inc. is now expected to be in a range of $109 million to $127 million in fiscal 2015, including the $16.4 million non-cash gain ($10.1 million tax-effected) related to the Park City litigation settlement and the IRS settlement on the utilization of NOL carryforwards which results in a $23.8 million income tax benefit.

The following table reflects the forecasted guidance range for the Company's fiscal year ending July 31, 2015, for Reported EBITDA (after stock-based compensation expense) and reconciles such Reported EBITDA guidance to net income attributable to Vail Resorts, Inc. guidance for fiscal 2015.

Fiscal 2015 Guidance

(In thousands)

For the Year Ending

July 31, 2015

Low End

Range

High End

Range

Mountain Reported EBITDA excluding the non-cash gain on the Park City litigation settlement (1)

$

320,000

$

330,000

Lodging Reported EBITDA (2)

18,000

22,000

Resort Reported EBITDA excluding the non-cash gain on the Park City litigation settlement (3)

340,000

350,000

Non-cash gain on the Park City litigation settlement

16,400

16,400

Resort Reported EBITDA

356,400

366,400

Real Estate Reported EBITDA (4)

(10,000)

(6,000)

Total Reported EBITDA

346,400

360,400

Depreciation and amortization

(147,000)

(140,000)

Loss on disposal of fixed assets and other, net

(2,000)

(800)

Change in fair value of contingent consideration

4,000

5,000

Investment income, net

200

500

Interest expense

(53,000)

(50,000)

Loss on extinguishment of debt

(11,500)

(10,500)

Income before provision for income taxes

137,100

164,600

Provision for income taxes

(28,200)

(37,800)

Net income

108,900

126,800

Net loss attributable to noncontrolling interests

100

200

Net income attributable to Vail Resorts, Inc.

$

109,000

$

127,000

(1) Mountain Reported EBITDA includes approximately $12 million of stock-based compensation.

(2) Lodging Reported EBITDA includes approximately $3 million of stock-based compensation.

(3) The Company provides Reported EBITDA ranges for the Mountain and Lodging segments, as well as for the two combined. The low and high end of the expected ranges provided for the Lodging and Mountain segments, while possible, do not sum to the low or high end of the Resort Reported EBITDA range provided because we do not expect or assume that we will hit the low or high end of both ranges.

(4) Real Estate Reported EBITDA includes approximately $1 million of stock-based compensation.

 Return of Capital to Stockholders

The Company's Board of Directors approved a 50% increase in the quarterly cash dividend to $0.6225 per share from $0.4150 per share beginning with the dividend payable on April 15, 2015 to stockholders of record as of March 31, 2015.

Planned Bond Redemptions

The Company announced today that it intends to redeem the outstanding $215.0 million aggregate principal amount of its 6.50% Notes, together with the $41.2 million aggregate principal amount of 6.95% Eagle County Industrial Development Bonds in May 2015. As a result, the Company expects to pay approximately $8.6 million in early redemption premiums, which will be recorded, along with a write-off of unamortized debt issuance costs, as a loss on extinguishment of debt in the fourth quarter fiscal 2015. The Company plans to amend its existing credit facility to provide for a $250.0 million term loan facility and use borrowings from the term loan facility and cash on hand to fund the redemptions. The Company anticipates this will save approximately $12 million in pre-tax annual interest expense at current rates.

About Vail Resorts, Inc. (NYSE: MTN)

Vail Resorts, Inc., through its subsidiaries, is the leading mountain resort operator in the United States. The Company's subsidiaries operate the mountain resorts of Vail, Beaver Creek, Breckenridge and Keystone in Colorado; Heavenly, Northstar and Kirkwood in the Lake Tahoe area of California and Nevada; Canyons and Park City in Utah; Afton Alps in Minnesota and Mt. Brighton in Michigan; and the Grand Teton Lodge Company in Jackson Hole, Wyoming. The Company's subsidiary, RockResorts, a luxury resort hotel company, manages casually elegant properties. Vail Resorts Development Company is the real estate planning, development and construction subsidiary of Vail Resorts, Inc. Vail Resorts is a publicly held company traded on the New York Stock Exchange (NYSE: MTN). 

Vail Resorts, Inc.

Consolidated Condensed Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

January 31,

Six Months Ended January 

31,

2015

2014

2015

2014

Net revenue:

Mountain

$

463,031

$

391,656

$

523,417

$

448,987

Lodging

59,364

56,187

117,857

113,401

Real estate

7,842

4,877

17,225

13,723

Total net revenue

530,237

452,720

658,499

576,111

Segment operating expense:

Mountain

268,966

243,512

400,918

368,286

Lodging

53,927

53,259

111,681

110,164

Real estate

9,871

8,006

21,485

17,237

Total segment operating expense

332,764

304,777

534,084

495,687

Other operating (expense) income:

Depreciation and amortization

(37,376)

(36,204)

(73,345)

(70,360)

Gain on litigation settlement

16,400

Change in fair value of contingent consideration

4,550

Loss on disposal of fixed assets and other, net

(26)

(1,044)

(781)

(1,473)

Income from operations

160,071

110,695

71,239

8,591

Mountain equity investment income, net

200

14

525

617

Investment income, net

62

70

36

165

Interest expense

(13,807)

(16,239)

(27,375)

(32,337)

Income (loss) before (provision) benefit for income taxes

146,526

94,540

44,425

(22,964)

(Provision) benefit from income taxes

(30,826)

(35,340)

6,951

8,727

Net income (loss)

$

115,700

$

59,200

$

51,376

$

(14,237)

Net loss attributable to noncontrolling interests

62

63

110

124

Net income (loss) attributable to Vail Resorts, Inc.

$

115,762

$

59,263

$

51,486

$

(14,113)

Per share amounts:

Basic net income (loss) per share attributable to Vail Resorts, Inc.

$

3.19

$

1.64

$

1.42

$

(0.39)

Diluted net income (loss) per share attributable to Vail Resorts, Inc.

$

3.10

$

1.60

$

1.38

$

(0.39)

Cash dividends declared per share

$

0.4150

$

0.2075

$

0.8300

$

0.4150

Weighted average shares outstanding:

Basic

36,329

36,130

36,289

36,078

Diluted

37,367

37,120

37,313

36,078

Other Data:

Mountain Reported EBITDA

$

194,265

$

148,158

$

139,424

$

81,318

Lodging Reported EBITDA

$

5,437

$

2,928

$

6,176

$

3,237

Resort Reported EBITDA

$

199,702

$

151,086

$

145,600

$

84,555

Real Estate Reported EBITDA

$

(2,029)

$

(3,129)

$

(4,260)

$

(3,514)

Total Reported EBITDA

$

197,673

$

147,957

$

141,340

$

81,041

Mountain stock-based compensation

$

2,997

$

2,535

$

6,240

$

5,182

Lodging stock-based compensation

$

701

$

593

$

1,303

$

1,012

Resort stock-based compensation

$

3,698

$

3,128

$

7,543

$

6,194

Real Estate stock-based compensation

$

327

$

434

$

683

$

860

Total stock-based compensation

$

4,025

$

3,562

$

8,226

$

7,054

 

 

Vail Resorts, Inc.

Mountain Segment Operating Results

(In thousands, except effective ticket price ("ETP"))

(Unaudited)

Three Months Ended

January 31,

Percentage

Increase

Six Months Ended

January 31,

Percentage

Increase

2015

2014

(Decrease)

2015

2014

(Decrease)

Net Mountain revenue:

Lift

$

239,288

$

195,357

22.5

%

$

239,288

$

195,357

22.5

%

Ski school

57,295

46,930

22.1

%

57,295

46,930

22.1

%

Dining

38,619

32,602

18.5

%

46,658

40,066

16.5

%

Retail/rental

95,012

85,717

10.8

%

124,485

114,616

8.6

%

Other

32,817

31,050

5.7

%

55,691

52,018

7.1

%

Total Mountain net revenue

$

463,031

$

391,656

18.2

%

$

523,417

$

448,987

16.6

%

Mountain operating expense:

Labor and labor-related benefits

$

102,470

$

93,464

9.6

%

$

145,475

$

133,013

9.4

%

Retail cost of sales

35,546

33,989

4.6

%

52,336

50,856

2.9

%

Resort related fees

24,866

20,236

22.9

%

26,150

21,347

22.5

%

General and administrative

43,550

37,291

16.8

%

75,566

66,803

13.1

%

Other

62,534

58,532

6.8

%

101,391

96,267

5.3

%

Total Mountain operating expense

$

268,966

$

243,512

10.5

%

$

400,918

$

368,286

8.9

%

Gain on litigation settlement

%

16,400

nm

Mountain equity investment income, net

200

14

1,328.6

%

525

617

(14.9)

%

Mountain Reported EBITDA

$

194,265

$

148,158

31.1

%

$

139,424

$

81,318

71.5

%

Less: gain on litigation settlement

%

(16,400)

nm

Mountain Reported EBITDA excluding gain on litigation settlement

$

194,265

$

148,158

31.1

%

$

123,024

$

81,318

51.3

%

Total skier visits

4,071

3,512

15.9

%

4,071

3,512

15.9

%

ETP

$

58.78

$

55.63

5.7

%

$

58.78

$

55.63

5.7

%

 

 

Vail Resorts, Inc.

Lodging Operating Results

(In thousands, except ADR and RevPAR)

(Unaudited)

Three Months Ended

January 31,

Percentage

Increase

Six Months Ended

January 31,

Percentage

Increase

2015

2014

(Decrease)

2015

2014

(Decrease)

Lodging net revenue:

Owned hotel rooms

$

11,333

$

10,198

11.1

%

$

26,251

$

24,311

8.0

%

Managed condominium rooms

19,648

18,124

8.4

%

27,759

25,896

7.2

%

Dining

8,222

7,902

4.0

%

21,760

21,248

2.4

%

Transportation

8,497

7,752

9.6

%

10,814

9,624

12.4

%

Golf

%

7,644

7,597

0.6

%

Other

9,059

9,421

(3.8)

%

18,782

19,513

(3.7)

%

56,759

53,397

6.3

%

113,010

108,189

4.5

%

Payroll cost reimbursements

2,605

2,790

(6.6)

%

4,847

5,212

(7.0)

%

Total Lodging net revenue

$

59,364

$

56,187

5.7

%

$

117,857

$

113,401

3.9

%

Lodging operating expense:

Labor and labor-related benefits

$

25,943

$

25,312

2.5

%

$

53,318

$

51,719

3.1

%

General and administrative

8,849

8,601

2.9

%

16,366

15,619

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