UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 20072008
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-09614
Vail Resorts, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | | 51-0291762 |
| (State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
| | | |
390 Interlocken Crescent, Suite 1000 Broomfield, Colorado | | 80021 |
| (Address of Principal Executive Offices) | | (Zip Code) |
| | (303) 404-1800 | |
| | (Registrant’s Telephone Number, Including Area Code) | |
| | | |
| Securities registered pursuant to Section 12(b) of the Act: |
| Title of each class: | | Name of each exchange on which registered: |
| Common Stock, $0.01 par value | | New York Stock Exchange |
| |
| Securities registered pursuant to Section 12(g) of the Act: |
| None. |
| (Title of Class) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 daysdays.
x Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a non-accelerated filer.smaller reporting company. See definitionthe definitions of “large accelerated filer,” “accelerated filerfiler” and large accelerated filer”“smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes x No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of $46.25$47.12 per share as reported on the New York Stock Exchange Composite Tape on January 31, 20072008 (the last business day of the Registrant's most recently completed second quarter) was $1,444,083,591.$1,465,211,620.
As of September 21, 2007, 38,860,12022, 2008, 36,921,791 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the Annual Meeting of Shareholders is incorporated by reference herein into Part III, Items 10 through 14.
Table of Contents |
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PART I |
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| Item 1. | | 3 |
| Item 1A. | | 1517 |
| Item 1B. | | 2325 |
| Item 2. | | 2325 |
| Item 3. | | 2427 |
| Item 4. | | 2527 |
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PART II | |
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| Item 5. | | |
| | | 2628 |
| Item 6. | | 2730 |
| Item 7. | | 2932 |
| Item 7A. | | 4749 |
| Item 8. | | F-1 |
| Item 9. | | 4850 |
| Item 9A. | | 4850 |
| Item 9B. | | 4850 |
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| Item 10. | | 4951 |
| Item 11. | | 4951 |
| Item 12. | | |
| | | 4951 |
| Item 13. | | 4951 |
| Item 14. | | 4951 |
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| Item 15. | | 4951 |
FORWARD-LOOKING STATEMENTS
Except for any historical information contained herein, the matters discussed in this Annual Report on Form 10-K (this “Form 10-K”) contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies.
These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will"“anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases, including references to assumptions. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from our forward-looking statements include, but are not limited to:
· | downturn in general economic downturns; conditions, including adverse affects on the overall travel and leisure related industries; |
· | terrorist acts upon the United States; |
· | threat of or actual war; |
· | unfavorable weather conditions; |
· | our ability to obtain financing on terms acceptable to us to finance our real estate investments, capital expenditures and growth strategy; |
· | our ability to continue to grow our resort and real estate operations; |
· | competition in our mountain and lodging businesses; |
· | our ability to hire and retain a sufficient seasonal workforce; |
· | our ability to successfully initiate and/or complete real estate development projects and achieve the anticipated financial benefits from such projects; |
· | adverse changes in real estate markets; |
| · | implications arising from new Financial Accounting Standards Board (“FASB”)/governmental legislation, rulings or interpretations; |
· | our reliance on government permits or approvals for our use of federalFederal land or to make operational improvements; |
· | our ability to integrate and successfully operate future acquisitions; and |
· | adverse consequences of current or future legal claims. |
All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.
If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected. Given these uncertainties, users of the information included in this Form 10-K, including investors and prospective investors, are cautioned not to place undue reliance on such forward-looking statements. TheActual results may differ materially from those suggested by the forward-looking statements that the Company makes for a number of reasons including those described in Part I, Item 1A, “Risk Factors” of this Form 10-K. All forward-looking statements are made only as of the date hereof. Except as may be required by law, the Company does not intend to update these forward-looking statements, even if new information, future events or other circumstances have made them incorrect or misleading.
Vail Resorts, Inc. was organized as a public holding company in 1997 and operates through various subsidiaries (collectively, the "Company"“Company”). The Company's operations are grouped into three business segments: Mountain, Lodging and Real Estate, which represented approximately 71%59%, 17%15% and 12%26%, respectively, of the Company's net revenue for the year ended July 31, 2007.2008. The Company's Mountain segment owns and operates five premierworld-class ski resort properties as well as ancillary businesses, primarily including ski school, dining and retail/rental operations, which provide a comprehensive resort experience to a diverse clientele with an attractive demographic profile. The Company's Lodging segment owns and/or manages a collection of luxury hotels under its RockResorts International, LLC (“RockResorts”) brand, strategic lodging properties and a large number of condominiums located in proximity to the Company's ski resorts, the Grand Teton Lodge Company (“GTLC”), which operates three destination resorts at Grand Teton National Park (the “Park”), and golf courses. Collectively, the Mountain and Lodging segments are considered the Resort segment. The Company's Real Estate segment holdsowns and develops real estate in and around the Company's resort communities. Financial information by segment is presented in Note 15,14, Segment Information, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. Vail Mountain, Beaver Creek, Breckenridge and Keystone, all located in the Colorado Rocky Mountains, and Heavenly, located in the Lake Tahoe area of California/Nevada, are year-round mountain resorts. Each offers a full complement of recreational activities, including skiing, snowboarding, snowshoeing, sight-seeing, mountain biking, guided hiking, children’s activities and other recreational activities. There are significant barriers to entry for new ski areas due to the limited private lands on which ski areas could be built, the difficulty in getting the appropriate governmental approvals to build on public lands and the significant capital needed to construct the necessary infrastructure. While mostAs such, there has been virtually no new supply of major resorts in North American ski areas are individually ownedAmerica for the past 25 years which has and operated,should continue to allow the Company competesbest positioned resorts, including all of the Company’s resorts, to capture a majority of future industry growth. The Company’s resorts compete with other major ski resorts, including Whistler Blackcomb,Aspen/Snowmass, Copper Mountain, Deer Valley, Mammoth Mountain, Northstar-at-Tahoe, Park City Mountain Resort, DeerSquaw Valley Aspen/Snowmass, Mammoth Mountain,USA, Steamboat, Whistler Blackcomb and Winter Park, Steamboat, Northstar-at-Tahoeas well as other ski areas in Colorado and Squaw Valley USA.the Lake Tahoe area, other destination ski areas worldwide and non-ski related vacation destinations. The ski industry is highly competitive. While the ski industry has performed well in recent years with the six best seasons in history, in terms of United States visitation,number of skier visits, with the seven best seasons occurring in the past seveneight years for United States visitation, including a record year this past ski season, a particular ski area's growth is also largely dependent on either attracting skiers away from other resorts or generating more revenue per skier visit. This has spawned a trend of increased spending on resort improvements to ensureBetter capitalized ski resorts, including all five mountain resorts operated by the newestCompany, are expanding their offerings, as well as enhancing the quality and best technology and to createexperience by adding new attractions such ashigh speed chairlifts, gondolas, terrain parks, and half-pipes. Larger ski resort owners, including the Company, generally have a competitive advantage over the individual operator, as the larger owners typically have better access to the capital markets and are also able to create synergies within their operations that enhance profitability. Additionally, given the fixed cost naturestate of the ski resort business,art grooming machines, expanded terrain and amenities at the most visitedbase areas of the resorts can generally produce a significantly higher net cash flow from operations less capital expenditures enabling a higher levelall of investmentwhich are aimed at increasing customer visitation and revenue per skier visit. The Company believes it invests more in capital improvements to further distancethan the experience from other resorts.vast majority of its competitors and can also create synergies by operating multiple resorts thus enhancing the Company’s profitability. All five of the Company’s resorts typically rank in the top ten most visited ski resorts in the United States, and the Company believes it invests more in capital improvements than the vast majority of its competitors. The Company's primary competitors include the ski areas noted above, other ski areas in Colorado and Lake Tahoe and other destination ski areas worldwide, as well as non-ski related vacation destinations.
There are a variety of factors that contribute to a skier's choice of a ski resort, including terrain, challenge, grooming, service, lifts, accessibility, weather, snowfall, lodging and on- and off-mountain amenities. AllStates. Additionally, all of the Company's resorts consistently rank in the top 20 ranked ski resorts in North America according to industry surveys, which the Company attributes to its resorts' ability to provide a high-quality experience in each of the above mentioned categories. experience.
| The Company’s resorts boast some of North America’s most expansive and varied terrain – |
| The Company's resort locations receive significantly higher than average snowfall compared to most other ski resorts in the United States. The Company’s resorts in the Colorado Rocky Mountains receive average yearly snowfall between 20 and 30 feet and Heavenly, located in the Sierra Nevada Mountains, receives average yearly snowfallspectacular views of approximately 23 feet. Even in these abundant snowfall areas, the Company invests in hi-tech snowmaking systems. Additionally, the Company meticulously maintains its slopes with extensive fleets of snow grooming equipment. |
| The Company's resorts are committed to leading the industry in terrain park design, education and events for the growing segment of freestyle skiers and snowboarders. Each resort has multiple terrain parks and half-pipes that include progressively-challenging features. This park structure, coupled with new freestyle ski school programs, promotes systematic learning from basic to professional skills. Keystone’s A51 Terrain Park is one of the largest parks offering night riding in the country. Breckenridge’s Freeway Terrain Park & Pipe is ranked by Transworld SNOWboarding Magazine to be among the top rated terrain park and half-pipes in North America.Lake Tahoe.
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| The Company systematically upgrades its lifts to streamline skier traffic and maximize guest experience. In the past three fiscal years, the Company has installed six high-speed chairlifts or gondolas across its resorts: one four-passenger chairlift and one eight-passenger gondola at Breckenridge, three four-passenger chairlifts at Beaver Creek and one six-passenger chairlift at Heavenly. New for the 2007/2008 ski season, the Company is installing two four-passenger high-speed chairlifts at Vail, one eight-passenger gondola at Beaver Creek and one four-passenger high-speed chairlift at Heavenly. |
| The Company’s mission is to provide quality service at every level of the guest experience. Prior to arrival, guests receive personal assistance through the Company’s full-service, in-house travel center in booking desired lodging accommodations, lift tickets, ski school classes, equipment rentals and air and ground travel. On-mountain hosts engage guests and answer questions and all personnel, from lift operators to ski patrol, convey the guest-oriented culture. The Company solicits guest feedback through a variety of surveys and results are utilized to ensure high levels of customer satisfaction to understand trends and develop future resort programs and amenities. |
| The Company’s resorts are home to some of the world’s finest ski and snowboard schools. New programs, such as beginner terrain park instruction and family group lessons, effectively differentiate the Company’s ski school offerings from those of its competitors. |
| The Company’s resorts provide a variety of quality dining venues, ranging from top-rated fine dining restaurants, to trailside express food service outlets. The dining offerings range from on-mountain lunch and dinner options to base village dining experiences. |
| The Company is an industry leader in providing comprehensive destination vacation experiences, including non-ski activities designed to appeal to a broad range of interests. Each of the Company’s resorts feature an alpine village setting with extensive retail, restaurants, spas, youth activities, cultural events, live music and entertainment. Each resort features village-level gondola access to on-mountain activities. |
| The Company, through SSI Venture, LLC ("SSV"), has over 145 retail/rental locations specializing in sporting goods including ski, snowboard, golf and cycling equipment. In addition to providing a major retail/rental presence at each of the Company's ski resorts, the Company also has retail/rental locations throughout the Colorado Front Range and at other Colorado, California and Utah ski resorts, as well as the San Francisco Bay Area and Salt Lake City. Many of the locations in the Front Range and in the San Francisco Bay Area also offer a prime venue for selling the Company’s season pass products. |
· | Vail Resorts Development Company (“VRDC”) |
Quality lodging options are an integral part of providing a complete resort experience. The Company continually upgradesCompany’s 13 owned and expands available servicesmanaged hotels proximate to its five mountain resorts, including five RockResorts branded hotels, and amenities through capital improvements and real estate development activities.an inventory of approximately 1,500 managed condominium rooms provide numerous accommodation options for the Company’s mountain resort guests. The Company’s real estate development efforts provide the Company with the ability to add profitability to the Company while expanding the destination bed base and upgrading its resorts through the development of amenities such as luxury hotels, private clubs, spas, parking and commercial space for upscale restaurants and retail shops. Current projects under development includeThe Company’s Lodging and Real Estate segments have and continue to invest in resort related assets as part of their initiatives which enhance the major revitalization ofoverall resort experience. Examples include: the primary portals to Vail Mountain at Vail Village and LionsHead, includingnew The Arrabelle at Vail Square hotel (“The Arrabelle Hotel”), a RockResort property in Vail which opened in the 2007/2008 ski season; the major renovation of The Osprey at Beaver Creek (formerly the Inn at Beaver Creek), a RockResort property to open in the 2008/2009 ski season; a new spa, guest rooms and renovated ballroom and meeting spaces at The Lodge at Vail Chalets,for the 2008/2009 ski season; a new spa at The Keystone Lodge opened for the 2007/2008 ski season; the Crystal Peak Lodge in Breckenridge to be open for the 2008/2009 ski season; and new villages at the base of Breckenridge's Peaks 7 and 8.Vail Mountain Club, a private mountain club to be open for the 2008/2009 ski season. As part of athe Company’s long-standing commitment to responsible stewardship of its natural mountain settings, the Company has several initiatives in environmental sustainability which transcend throughout all of the Company’s operations. For example, it has chosen to offset approximately 100% of its energy useelectrical usage by purchasing 145,000152,000 megawatt-hours of wind energy credits annually for its five mountain resorts, its lodging properties including RockResorts, GLTC, all of its retail/rental locations and its corporate headquarters in Broomfield, Colorado. The Company’s headquarters is LEED-certified and the Company also plans on developingCompany’s planned Ever Vail project would be the largest LEED-certified project for resort use in North America announced to date.America. Additionally, the Company is partnering with the National Forest Foundation to raise funds for various conservation projects in the White River National Forest in Colorado and the National Forest of Tahoe Basin in California/Nevada where the Company operates its five mountain resorts. As a result of these efforts, the Company was honored by Conde Nast Traveler as a leader in social responsibility in the travel industry as a winner of the magazine’s 2008 World Savers Awards in the category of environmental protection. | The Colorado Front Range market, with a population of approximately 3.8 million, is within approximately 100 miles from each of the Company's Colorado resorts, with access via a major interstate highway. Additionally, Heavenly is proximate to two large California population centers, the Sacramento/Central Valley and the San Francisco Bay Area. These markets provide the Company with excellent opportunities to market its season pass products which provided approximately 25% of the Company’s total lift revenues for the 2006/2007 ski season. |
The Company promotes its resorts through an extensive marketing and sales program,programs, which includesinclude print media advertising in lifestyle and industry publications, direct marketing to a targeted audience, promotional programs, loyalty programs that reward frequent guests and sales and marketing directed at attracting groups, corporate meetings and convention business. Additionally, the Company markets directly to many of its guests through its websites and internet presence, which provide visitors with information regarding each of the Company's resorts, including services and amenities, reservations information and virtual tours (nothing contained on the websites shall be deemed incorporated herein). The Company also enters into strategic partnershipssponsorships with selected "name brand"“name brand” companies to increase its market exposure and create opportunities for cross-marketing.
| RockResorts--RockResorts -- a luxury hotel management company with a portfolio of threefive Company-owned and four managed, third-party owned resort hotels with locations in Colorado, Wyoming, and New Mexico. Sites currently under development as RockResorts owned or managed properties include; The Arrabelle at Vail Square, The Chateau at Heavenly Village, The LandingsMexico and St. Lucia, West Indies, Rum Cay Resort Marina, Bahamas and the Eleven Biscayne Hotel & Spa, Miami, Florida;Indies; |
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| Vail, | | 149 |
| | | 149 |
The Keystone Lodge | Keystone, CO | Own | 145 |
Hotel Jerome | Aspen, CO | Manage | 92 |
The Pines Lodge | Beaver Creek, CO | Own | 69 |
The Lodge & Spa at Cordillera | Edwards, CO | Manage | 63 |
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Inn at Beaver Creek | Beaver Creek, CO | Own | 46 |
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Additionally, the Company continues to pursue new management contracts, which may include, in addition to management fees, marketing license fees and technical service fees in conjunction with a project’s design, development and sales.
In December 2007, the Company opened The Arrabelle Hotel, which is just steps from Vail’s Eagle Bahn gondola. The hotel reflects the ambiance of the European Alps and features 36 lavish guest rooms and approximately 50 additional condominium lock-off units, a state-of-the-art RockResorts spa and fitness center and fine dining. During the year, RockResorts also added The Landings St. Lucia, in St. Lucia, West Indies to its portfolio of managed luxury hotels. Additionally, current properties under development as RockResorts owned or managed resorts include: Tempo Miami, Miami, Florida; One Ski Hill Place, Breckenridge; Rum Cay Resort Marina, Bahamas and the Third Turtle Club & Spa, Turks & Caicos. Hotels are categorized by Smith Travel Research, a leading lodging industry research firm, as luxury, upper upscale, upscale, mid-price and economy. The service quality and level of accommodations of the RockResorts’ hotels place them in the luxury category, and certain of the Company’s other hotels are categorized in the luxury, as well as, upper upscale segments of the hotel market, which represents hotels achieving the highest average daily rates ("ADR"(“ADR”) in the industry, and includes such brands as the Ritz-Carlton, Four Seasons, Ritz-Carlton and Starwood's Luxury Collection hotels. The Company’s other hotels are categorized in the upper upscale and upscale segments of the hotel market. The luxury and upper upscale segments consist of approximately 630,000853,000 rooms at approximately 1,6903,020 properties in the United States as of July 2007.2008. For the year ended July 31, 2007,2008, the Company's owned hotels, which includes a combination of certain RockResorts, as well as other hotels aroundin proximity to the Company’s ski resorts, had an overall ADR of $167.15,$184.42, a paid occupancy rate of 64.7%64.5% and revenue per available room (“RevPAR”) of $108.10,$118.97, as compared to the upper upscale segment’s ADR of $156.00,$166.79, a paid occupancy rate of 71.1%69.6% and RevPAR of $110.97.$116.16. The Company believes that this comparison to the upper upscale category is appropriate as its mix of owned hotels include those in the luxury and upper upscale categories, as described above, as well as certain of its hotels that fall in the upscale category. The highly seasonal nature of the Company's lodging properties results in lower average occupancy as compared to the general lodging industry. Competition in the hotel industry is generally based on quality and consistency of rooms, restaurant and meeting facilities and services, attractiveness of locations, availability of a global distribution system, price and other factors. The Company's properties compete within their geographic markets with hotels and resorts that include locally owned independent hotels, as well as facilities owned or managed by national and international chains, including such brands as Ritz-Carlton, Four Seasons, Westin,Hilton, Hyatt, Hilton, Marriott, andRitz-Carlton, Starwood's Luxury Collection. The Company's lodging strategy, through RockResorts, is focused on the resort hotel niche within the luxury segment.Collection and Westin. The Company's properties also compete for convention and conference business across the national market. The Company believes it is highly competitive in the resort hotel niche for the following reasons:
| The Company actively upgrades the quality of the accommodations and amenities available at its hotels through capital improvements. Capital funding for third-party owned properties is provided by the owners of those properties. Recently completed projects include extensive upgrades to The Pines Lodge at Vail including a fully renovated ballroom and meeting spaces, room upgrades and the rebuildaddition of a 7,500 square foot spa. Additional projects include renovation of the clubhouse and a number of golf course improvements at JHG&TC and the Beaver Creek Golf Club, remodel of the Village Hotel, five additional suites added to the Snake River Lodge & Spa (“SRL&S”) and room renovationsspa at The Keystone Lodge, room upgrades at Vail.GTLC’s historic Jenny Lake Lodge and system upgrades at both GTLC and La Posada de Santa Fe. Planned and current projects include extensiveadditional facility upgrades at GTLC’s properties within the Grand Teton National Park, further room renovations at The Lodge at Vail, in addition to a new 9,000 square foot spa and guest suites being completed in connection with the "Front Door" project in Vail, expansion and renovation of the spa at The Keystone Lodge,extensive renovations at La Posada de Santa Fe and full renovation and repositioning of The Osprey at Beaver Creek (formerly known as the Inn at Beaver Creek.Creek). |
The Company promotes its luxury and resort hotels and seeks to maximize lodging revenue by using its marketing network established at the Company's ski resorts. The Company's marketing network includes local, national and international travel relationships which provide the Company's central reservation systems with a significant volume of transient customers. Additionally, the hotels and the Company have active sales forces to generate conference and group business.
There are 385390 areas within the National Park System covering approximately 8485 million acres across the United States and its territories. Of the 385390 areas, 58 are classified as National Parks. ThereWhile there are more than 500 NPS concessionaires, ranging from small privately-held businesses to large corporate conglomerates.conglomerates, the Company primarily competes with such companies as Aramark Parks & Resorts, Delaware North Companies Parks & Resorts, Forever Resorts and Xanterra Parks & Resorts in retaining and obtaining National Park Concessionaire agreements. The NPS uses "recreation visits"“recreation visits” to measure visitation within the National Park System. In calendar 2006,2007, areas designated as National Parks received approximately 60.462.3 million recreation visits. The Grand Teton National Park, which spans approximately 310,000 acres, had 2.42.6 million recreation visits during calendar 2006,2007, or approximately 4% of total National Park recreation visits. Four concessionaires provide accommodations within the Grand Teton National Park, including GTLC. GTLC offers three lodging options within the Grand Teton National Park: Jackson Lake Lodge, a full-service, 385-room resort with conference facilities which can accommodate up to 700 people; the Jenny Lake Lodge, a small, rustically elegant retreat with 37 cabins; and Colter Bay Village, a facility with 166 log cabins, 66 tent cabins, 350 campsites and a 112-space RV park. GTLC offers dining options as extensive as its lodging options, with cafeterias, casual eateries and fine dining establishments. GTLC's resorts provide a wide range of activities for guests to enjoy, including cruises on Jackson Lake, boat rentals, horseback riding, guided fishing, float trips, golf and guided Grand Teton National Park tours. Because of the extensive amenities offered as well as the tremendous popularity of the National Park System, GTLC's accommodations within the Grand Teton National Park operate near full capacity during their operating season.
The Company has extensive holdings of real property at its resorts throughout Summit and Eagle Counties in Colorado and in Teton County, Wyoming.Colorado. The Company's real estate operations, through VRDC,Vail Resorts Development Company (“VRDC”), a wholly owned subsidiary of the Company, include the planning, oversight, marketing, infrastructure improvement, development, marketing and developmentsale of the Company's real property holdings. In addition to the substantial cash flow generated from real estate development sales, these development activities benefit the Company's mountain and lodging operations through (i) the creation of additional resort lodging and uniqueother resort related facilities and venues (primarily restaurant,restaurants, spas, commercial space, parking structures and private mountain clubs)clubs, skier services facilities and parking structures) which provide the Company with the opportunity to create new sources of recurring revenue, enhance the guest experience at the resort and expand the destination bed base,base; (ii) the ability to control the architectural themes of the Company's resortsresorts; and (iii) the expansion of the Company's property management and commercial leasing operations. Additionally, in order to facilitate the sale of real estate development projects, these projects often include the construction of amenities for the benefit ofresort assets benefiting the development, such as chairlifts, gondolas, ski trails or golf courses. While these improvements enhance the value of the real estate held for sale (for example, by providing ski-in/ski-out accessibility), they also benefit mountain and lodging operations. The Company in recent years has primarily focused on projects that involve significant vertical development as it is doing or proposesdevelopment. In addition to do for certain projects includingthe substantially completed The Arrabelle at Vail Square (“Arrabelle”),project, current vertical development projects under construction include: Vail’s Front Door, Peaks 7 and 8Crystal Peak Lodge at Breckenridge, One Ski Hill Place at Breckenridge and The Ritz-Carlton Residences, Vail and Ever Vail. The Company attempts to mitigate the risk of vertical development by utilizing guaranteed maximum price contracts (although certain construction costs may not be covered by contractual limitations), pre-selling all or a portion of the project, requiringwhich generally requires significant non-refundable deposits, and obtaining non-recourse financing for certain projects. In some instances as warranted by the Company’s business model, VRDC attempts to minimize the Company's exposure to development risks and maximize the long-term value of the Company's real property holdings by selling improved and entitled land to third partythird-party developers for cash payments while retaining the right to approve the development plans, as well as an interest in the developer's profit. The Company also typically retains the option to purchase, at cost, any retail/commercial space created in a development. The Company is able to secure these benefits from third partythird-party developers because of the high property values and strong demand associated with property in close proximity to the Company's mountain resort facilities.resorts. VRDC's principal activities include (i) the vertical development of certain residential mixed-use projects that consist of both the sales of real estate units to third parties and the construction of resort depreciable assets such as hotels, restaurants, spas, private clubs, commercial space, skier service facilities, parking structures and other amenities that the Company will own and operate and that will benefit the Company’s mountain and lodging operations,operations; (ii) the sale of single-family homesites to individual purchasers,purchasers; (iii) the sale of certain land parcels to third-party developers for condominium, townhome, cluster home, single family home, lodge and mixed use developments,developments; (iv) the zoning, planning and marketing of resort communities,communities; (v) arranging for the construction of the necessary roads, utilities and resort infrastructure for new resort communitiescommunities; and (vi) the purchase of selected strategic land parcels for future development. | The Arrabelle at Vail Square – Currently under construction with an anticipated completion date in the 2007/2008 ski season, Arrabelle is a luxurious 2.27-acre redevelopment site at the base of Vail Mountain. It will include approximately 33,000 square feet of retail and restaurant space, a 36-room RockResorts hotel, a spa, a private mountain club, a winter ice rink and skier-services facilities. This development also features 67 distinctive, privately-owned residences, some of which have “lock-off” capabilities, which provides the potential opportunity for the rental of up to 50 additional hotel-size rooms.
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· | Vail’s Front Door – -- This development consists of thirteen13 chalets at The Lodge at Vail Chalets, which will rangeranging in size from approximately 3,700 to 5,700 square feet.feet, of which five chalets were completed and sold in the year ended July 31, 2008. The Company expects to close on the remaining eight chalets during the year ending July 31, 2009. This project also includes resort assets benefiting the Resort segment, including the Vail Mountain Club, a private ski club, which will offer members exclusive amenities including a spacious member lounge, ski valet concierge services, private lockers and, for full members, valet parking. The ski club will be available to members for the upcoming 2008/2009 ski season. In addition to the Chalets and the Vail Mountain Club, construction also includes a new 7,7007,500 square foot RockResorts spa, two additional guest suites at The Lodge at Vail (both opened in July 2008), new skier services space that will includeincludes a retail/rental shop, ticketing and ski school product sales, a coffee housefood and beverage outlet and ski storage. The Company expectsstorage which were available during the project to be completed in calendar year 2008.2007/2008 ski season. |
| Peaks 7 & 8Crystal Peak Lodge at Breckenridge – These projects encapsulate the-- This development vision forconsists of 45 ski-in/ski-out residences and certain amenities that will include a retail/rental shop, ticket sales counter and outdoor plaza at the base areas of PeaksPeak 7 and 8 at Breckenridge Ski Resort. The master plan includes ski-in/ski-out residential and retail development, which will connect to the Town of Breckenridge via the BreckConnect gondola. The Company expects to close on a vast majority, if not all of the Crystal Peak Lodge a residential offeringunits during the year ending July 31, 2009. |
| One Ski Hill Place at Peak 7,Breckenridge -- This development consists of 4688 ski-in/ski-out residences and certain amenities which include a retail/rental shop, ticket sales counterslopeside skiers' plaza, a skier restaurant, apres-ski bar, owner's ski lounge, parking garage, conference space and outdoor plaza. The projects also includeretail space, all of which are located at the planned redevelopmentbase of Peak 8 and will connect to the Town of Breckenridge via the BreckConnect gondola. This development will be branded a RockResorts property upon completion and the sale of the existing Peak 8 base area. Currently in the planning stage is a multi-use development which includes 325,000 to 350,000 saleable residential square footage (approximately 280 units); approximately 48,000 square feet of skier services and 14,000 square feet of commercial space; and amenities that include restaurant, conference facilities, private club, aquatic area and retail/rental shops.residences. |
| The Ritz-Carlton Residences, Vail –-- Located in LionsHead,the western part of Vail, this project consists of 71 whole ownership luxury residences and 45 Ritz-Carlton Club fractional ownership units.units to be sold. This development will offer exclusive amenities, including a great room with bar, ski valet concierge services, fitness facility and a heated parking garage with valet service. |
· | Ever Vail – This development is being planned to be the largest LEED-certified project for resort use in North America announced to date. The project is planned to transform the 9.5-acre site, currently known as West LionsHead, into a truly “green” multi-use resort village consisting of residences, a hotel, offices, retail/rental shops and restaurants, mountain operations facilities, a public parking garage, a new skier portal and a public park. Ever Vail will encompass approximately 1.4 million square feet and include between 800,000 and 1.0 million saleable square feet of residential and commercial space.
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Under the 1986 Act, the Forest Service has the right to review and approve the location, design and construction of improvements in the permit area and many operational matters. While virtuallyVirtually all of the skiable terrain on Vail Mountain, Breckenridge, Heavenly and Keystone is located on Forest Service land. While Beaver Creek also operates on Forest Service land, a significant portion of the skiable terrain, on Beaver Creek Mountain, primarily in the lower main mountain, Western Hillside, Bachelor Gulch and Arrowhead Mountain areas, is located on Company-owned land. In addition to the use ofHeavenly operates on Forest Service land Heavenlybut operates four separate base areas all of which are located on Company-owned land. Vail Mountain operates under a unified Term Special Use Permitan SUP for the use of 12,226 acres that expires October 31, 2031. Breckenridge operates under a unified Term Special Use Permitan SUP for the use of 5,702 acres that expires December 31, 2029. Keystone operates under a unified Term Special Use Permitan SUP for the use of 8,376 acres that expires December 31, 2032. Beaver Creek operates under a unified Term Special Use Permitan SUP for the use of 3,8013,849 acres that expires December 31, 2038. Heavenly operates under a Term Special Use Permitan SUP for the use of 7,050 acres that expires May 1, 2042. When approving Company applications for development, area expansion and regulations requires various expenditures and may at times require modifications of the Company's development plans and operations. The impact of these modifications and expenditures may have a detrimental effectother activities on the Company’s results of operations. There can be no assurance that new applications of existing laws, regulations and policies, or changesNational Forest lands in such laws, regulations and policies, will not occur in a manner that could have a detrimental effect to the Company, or that material permits, licenses, or approvals will not be terminated, not be renewed or be renewed on terms or interpreted in ways that are materially less favorable to the Company. Although the Company believes that it will be successful in implementing its development plans and operations in ways satisfactory to it, no assurance can be given that any particular permits and approvals will be obtained or upheld on judicial review.
Breckenridge Regulatory Matters
The Company has submitted a programmatic update to the Breckenridge Master Plan toColorado, the Forest Service must adhere to the White River Forest Plan and expectsROD. Any such decision may be subject to judicial review in Federal court if a response this fall. No environmental documentation will be required for this update. However, as specific projects contemplated by such Master Plan are implemented,party, with standing, challenges a Forest Service decision that applies the Company would be required to comply withROD at one of the Company’s four Colorado ski resorts.
snowmaking facilities, or construction of new trails or buildings. The Company must comply with NEPA when seeking Forest Service approval of such improvements. The Forest Service is proceedingresponsible for preparing and compiling the required environmental studies, usually through third-party consultants. NEPA allows for two different types of environmental study, depending on the scope and size of the expected impact of the proposed project. An Environmental Assessment (“EA”) is typically used for projects where the environmental impact is expected to be limited. For projects with more significant expected impacts, an Environmental Impact Statement (“EIS”) is more commonly required. An EIS is more detailed and broader in scope than an EA. The Forest Service usually takes more time to compile, review and issue an EIS. Consequently, projects that require an EIS typically take longer to approve.
Keystone Regulatory Matters
In March 2000, the Company announced that Keystonebeen completed and the Forest Service would conduct a joint water quality study ofis preparing the EIS. It is not possible impacts on four streams from snowmaking operations at Keystone. This study was completed in 2001 and concluded thatthis time to determine whether the levels of tested metals were within applicable Colorado state water quality standards. Because this study only examined one calendar year of measurement, expansion will be approved as proposed.
Vail and Beaver Creek Regulatory Matters
In September of 2007 the Company submitted theupdated Vail Master Development Plan towas accepted by the Forest Service for approval.Service. The Vail Master Development Plan includes, among other things, additional snowmaking on Vail Mountain, additional lifts, and a race facility expansion at Vail's Golden Peak. IfIn October 2007, the Vail Master Development Plan is accepted byCompany submitted to the Forest Service the Company mustCompany’s first comply withproposal under the NEPA before implementing the plan. In 2003, the Company submitted a proposal to the Forest Serviceupdated Master Development Plan to install a new chair lift in Vail's Sundown Bowl and to upgrade the existing Chairchair 5 to a high-speed, detachable quad chair lift. This proposal was put on hold temporarily but has been resubmitted.NEPA requires that an EIS be prepared in connection with the approval of this proposal. The Company anticipates the final EIS and approval of the projects during the winter 2008.
to include, among other things, certain chairlift and snowmaking upgrades and adjustments to visitor capacity parameters in light of prior lift and trail upgrades contemplated in the Master Development Plan. The Record of Decision (“ROD”) approvingCompany intends to submit the new White River National Forest Land Resource Managementupdated Master Development Plan (the "Forest Plan") was issued byto the Forest Service in April of 2002. The Forest Plan sets certain broad regulatory and planning requirements, as well as land use planning, that pertain to recreational, operational and development activities at the Company's four Colorado ski resorts. The ROD was appealed to the Chief offall 2008.
To date, no appellant has filed an action for judicial review of the final decision in Federal court. It is impossible at this time to predict whether an action for judicial review will be filed, and if so, whether the resolution of it would have a material adverse impact on the Company.
Prior to the Company's acquisitionThe Company has been conducting ongoing monitoring of Heavenly,groundwater contamination levels using three existing monitoring wells and a seasonal, downstream seep as required by the State of California Regional Water Quality Control Board, Lahontan Region (“Lahontan”), and the El Dorado County Department of Environmental Management required Heavenly's prior owner to conduct an environmental compliance cleanup at a vehicle maintenance facility at Heavenly.Management. This requirement was imposed in response to an accidental release of waste oil at a vehicle maintenance shop in 1998. All cleanup work has been completed in accordance with the approved work plan and a new underground vault, piping and overflow protection system was installed to prevent any further releases. ANotwithstanding submission of a final report was submitted on March 31, 2003, to the above two agencies. In late 2004, Heavenly was notified by Lahontan thathas required additional monitoring and reporting would be required following snowmelt in 2005 using the three existing monitoring wells. However, because no water was found in the existing monitoring wells, Lahontan required Heavenly to continue sampling for one more year and groundwater was sampled on two separate occasions in spring 2006 pursuant to the approved work plan. A monitoring report was submittedreporting. Monitoring results have been provided to Lahontan which indicated low levels of diesel in the most distant well. No other contaminants were detected during the monitoring period and Heavenly’s position outlined in its report to Lahontan is that the residual petroleum compounds do not represent a threat to human health, do not represent a threat to surface water quality and do not represent a threat to groundwater quality. On May 31, 2007 Lahontan staff requested Heavenly to resample the existing set of underground monitoring wells on two separate occasions, along with a seasonal seep that is located downstream of the monitoring wells. The sampling was completed and a report prepared and submitted to Lahontan on August 9, 2007. The report documented the detectable presence of total petroleum hydrocarbons (TPH), in the diesel range in the most distant well during both sampling events, and in the seep during the first sampling event. The sampling report also documented the presence of TPH in the oil range during the second sampling event only. Nobut no response has been received from Lahontan as of thisto date.In July 2003, Heavenly received updated waste discharge requirements ("WDRs") relating to storm runoff on the California portions of the resort. WDRs are normally valid for all lands and facilities within the resort which are located within the State of California. This includes National Forest lands as well as fee-owned lands. The approval was given by the State of California Water Resources Control Board, Lahontan Region.ten years. The approved WDRs will permit Heavenly to continue winter and summeryear round operations and to continue with implementation of the approved Heavenly Ski Area Master Plan ("Heavenly Master Plan"). WDRs are normally valid for ten years., which is discussed in more detail immediately below. The WDRs require the retrofit of certain existing facilities within California according to specified deadlines. The California Main Lodge and Parking Lot are to be retrofitted with water quality Best Management Practices (BMPs), by October 15, 2007 which are to ensure that the Main Lodge and Parking Lot meet specific surface runoff water quality criteria by November 30, 2008. Due in part to the lengthy time period required to process and approve Heavenly’s Master Plan Amendment on July 23, 2007(as defined below), Heavenly requested and received amendments to the WDRs, that will provideextending the deadline to October 15, 2008 for a one year delay in each deadline. The requests will be consideredcompletion of the California Main Lodge and Parking Lot water quality Best Management Practices (“BMPs”). Under the amendment, the Main Lodge and Parking Lot is required to meet revised surface runoff water quality criteria by the Regional Board at their October 10-11, 2007 meeting.November 30, 2008. The WDRs also contained a requirement to retrofit the Upper Vehicle Maintenance Facility with water quality BMPs, bywhich was completed on October 15, 2006. That project was delayed for one year based on the jurisdiction of the Forest Service over the site. The Forest Service had not approved the BMP retrofit by October 15, 2006, therefore Heavenly was unable2007.
In 1996, the Heavenly Master Plan (the “Master Plan Amendment”) to include new and upgraded trails, lifts, snowmaking, lodges and other facilities was approvedaccepted by the Forest Service and approved by the Tahoe Regional Planning AuthorityAgency (“TRPA”) and the underlying units of local government with jurisdiction. To permit new and upgraded trails, lifts, snowmaking, lodges and other facilities, Heavenly sought to updatePortions of the Heavenly Master Plan Amendment applying to the California side of the resort were subject to the approval of TRPA and submitted a "Master Plan Amendment" to those same agencies in 2005. Initially slated to be completed under an Environmental Assessment, the Forest Service and the TRPA notified Heavenly that an Environmental Impact Report/Statement (“EIR”) would beEl Dorado County, which required for project approval.compliance with CEQA. The Master Plan Amendment was approved in April 2007 by TRPA and El Dorado County after completion of a joint TRPA/Forest Service EIS/Environmental Impact Report to comply with both CEQA and NEPA. Approval of the TRPA. On June 1, 2007Master Plan Amendment included approval by the Forest Service issued a ROD approvingand TRPA of the Phase I projects containedcontemplated in the Master Plan Amendment. On June 19, 2007Phase I projects, including snowmaking, trail and lift upgrades and construction of a new lodge have been or are in the Alpine County Boardprocess of County Commissioners approved the Master Plan Amendmentbeing implemented. Heavenly has begun planning for the portionsimplementation of the resort within the jurisdiction of Alpine County. On August 21, 2007 the El Dorado County Board of County Commissioners approved the Master Plan Amendment for the portions of the resort within the jurisdiction of El Dorado County. Included in the first phase of the capitalPhase II projects containedcontemplated in the Master Plan Amendment, is the construction of a high-speed, detachable quad chair lift. This construction is currently underwaywhich will require compliance with completion expected prior to the start of the 2007/2008 ski season.NEPA, CEQA and TRPA regulations and other local laws.
On March 16, 2006, Heavenly received an extension from the Douglas County Board of County Commissioners for final submittal of a design review application for the 120-unit Planned Development at Stagecoach Lodge in Douglas County, Nevada, originally approved in 2000. This extension is valid for one year after TRPA approval of Heavenly’s Master Plan Amendment or the Forest Service approval of the same, whichever occurs first.
Also, in March 2006, Heavenly received an extension of a 1985 allocation of 55 water units (each water unit equals approximately 500 gallons/day) for the same Stagecoach Lodge Planned Development project from the Kingsbury General Improvement District ("KGID"). KGID is the water and sewer district that services the Stagecoach Lodge. Water allocation units for this service area are limited by the State of Nevada. However, based on KGID's gallons/day consumptive use formula, and an additional 65 in-basin water units held by Heavenly (subject to a recorded parcel boundary consolidation document that was approved by the Nevada State Engineer on September 30, 1998), a total of 120 water allocation units are available to serve the 120 units approved by Douglas County. On February 13, 2007 Heavenly notified KGID that it would be unable to meet the performance timelines attached to the use of the 55 water units, and would allow them to expire. On March 19, 2007 the water units reverted to KGID.
Risks Related to the Company’s Business
The Company’sOur business is highly seasonal. The Company's Our mountain and lodging operations are
highly seasonal in nature. In particular, revenue and profits
for the Company'sfrom our mountain and most of
itsour lodging operations are substantially lower and historically result in losses from late spring to late fall. Conversely, peak operating seasons for GTLC, certain managed hotel properties and
the Company's ownedour golf courses occur during the summer months while the winter season generally results in operating losses.
However, revenueRevenue and profits generated by GTLC's summer operations, management fees from
thosecertain managed
properties, certain other lodging properties and golf operations are not
nearly sufficient to fully offset the Company's off-season losses from its mountain and other lodging operations. For the year ended July 31,
2007, 79%2008, 80% of total combined
mountainMountain and
lodgingLodging segment net revenue was earned during
the Company’sour fiscal second and third quarters. In addition, the timing of major holidays can impact vacation patterns and therefore visitation at
the Company'sour ski resorts. Operating results for any three-month period are not necessarily indicative of the results that may be achieved for any subsequent quarter or for a full fiscal year (see Note
16,15, Selected Quarterly Financial Data, of the Notes to Consolidated Financial Statements).
The Company isWe are vulnerable to the risk of unfavorable weather conditions. The ability to attract visitors to
the Company’sour resorts is influenced by weather conditions and by the amount and timing of snowfall during the ski season. Unfavorable weather conditions can adversely affect skier visits and
the Company'sour revenue and profits. Unseasonably warm weather may result in inadequate natural snowfall and reduce skiable terrain which increases the cost of snowmaking and could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions, including in areas which are not accessible by snowmaking equipment. Excessive natural snowfall may materially increase the costs incurred for grooming trails and may also make it difficult for visitors to obtain access to
the Company'sour mountain resorts. In the past 20 years,
the Company'sour Colorado ski resorts have averaged between 20 and 30 feet of annual snowfall and Heavenly receives average yearly snowfall of approximately 23 feet, both of which are significantly in excess of the average for United States ski resorts. However, there is no assurance that
the Company'sour resorts will receive seasonal snowfalls near the historical average in the future. Also, the early season snow conditions and skier perceptions of early season snow conditions influence the momentum and success of the overall season. In addition, a severe and prolonged drought could affect
the Company’sour otherwise adequate snowmaking water supplies or increase the cost of snowmaking. Unfavorable weather conditions,
such as drought andincluding those which may increase the risk of the occurrence of forest fires, can adversely affect
the Company'sour resorts and lodging properties as vacationers tend to delay or postpone vacations if conditions differ from those that typically prevail at such resorts for a given season. There is no way for
the Companyus to predict future weather patterns or the impact that weather patterns may have on
our results of operations or visitation.
The Company isWe are subject to the risk of economic downturns.downturns including adverse affects on the overall travel and leisure related industries. Periods of economic slowdown or recession, whether
regional, national
regional or international, may decrease the discretionary spending of
the Company’sour guests. Actual or perceived fear of recession may also lead to decreased discretionary spending. Skiing, travel and tourism are discretionary recreational activities that can entail a relatively high cost of participation and can be adversely affected by economic slowdown or recession, which, in turn, could negatively impact
the Company’sour operating results. This could further be exacerbated by the fact that
the Company chargeswe charge some of the highest ticket prices, as well as prices for
itsour ancillary
businessbusinesses including ski school, in the ski industry. While pricing increases historically have not reduced demand, there can be no assurances that demand will remain price inelastic. Similarly, there can be no assurance that a decrease in the amount of discretionary spending by the public would not have an adverse effect on
the Company’sour results of operations.
Additionally, many of our guests travel by air and the impact of higher fuel costs in addition to higher cost and availability of air services may cause a decrease in visitation by destination guests to our resorts. Higher energy costs and gasoline prices may also result in a reduction to in-state visitation.The Company dependsWe depend on a seasonal workforce. The Company's Our mountain and lodging operations are largely dependent on a seasonal workforce.
The Company recruitsWe recruit worldwide to fill staffing needs each season and
utilizesutilize visas to enable the use of foreign workers. In addition,
the Company manageswe manage seasonal wages and the timing of the hiring process to ensure the appropriate workforce is in place.
The CompanyWe cannot guarantee that material increases in the cost of securing
itsour seasonal workforce will not be necessary in the future.
In addition, the CompanyFurthermore, we cannot guarantee that
itwe will be able to obtain the visas necessary to hire foreign workers who are an important source for the seasonal workforce. Increased seasonal wages or an inadequate workforce could have an adverse impact on
the Company'sour results of operations.
The Company facesWe face significant competition. The ski resort and lodging industries are highly competitive. The number of people who ski in the United States (as measured in skier visits) has generally ranged between 52 million and
5961 million annually over the last decade, with approximately
55.160.5 million visits for the
2006/20072007/2008 ski season. The factors that
the Company believeswe believe are important to customers include:
The Company’sOur future acquisitions might not be successful. Historically,
the Company haswe have acquired certain ski resorts and other destination resorts and hotel properties, as well as developable land in proximity to
theseour resorts.
The CompanyWe cannot make assurances that
itwe will be able to continue to successfully integrate and manage these acquired properties profitably or increase
itsour profits from these operations.
The CompanyWe continually
evaluatesevaluate potential acquisitions and
intendsintend to actively pursue acquisition opportunities, some of which could be significant.
The Company wouldWe could face various risks from additional acquisitions, including:
Future changes in the real estate market could affect the value of the Company’sour investments. The Company has We have extensive holdings of real property at
itsour resorts throughout Summit and Eagle Counties in
Colorado and in Teton County, Wyoming. The CompanyColorado. We have plans to make significant additional investments in developing property at all of
itsour mountain resorts. The value of
the Company’sour real estate property and the revenue from related development activities may be adversely affected by a number of factors, including:
| competition from other available property or space; |
· | the Company’s ability to obtain adequate insurance; |
The CompanyWe may not be able to fund resort capital expenditures and investment in real estate. The Company expectsWe expect to continue
makingincurring substantial resort capital expenditures and investments in real estate development.
The CompanyWe currently
anticipatesanticipate resort capital expenditures (primarily related to the Mountain and Lodging segments) will be approximately
$95$105 million to
$100$115 million for calendar year
2007.2008. Based on the status of several specific real estate projects,
the Companywe will continue to invest significant amounts in real estate over the next several years and
we currently
anticipatesanticipate real estate investments to be approximately
$325$260 million to
$345$280 million for calendar year
2007. The Company’s2008. Our ability to fund these investments will depend on
itsour ability to generate sufficient cash flow from operations,
obtain substantial pre-sale deposits and/or
its ability to borrow from third parties.
The CompanyWe cannot
makeprovide assurances that
itsour operations will be able to generate sufficient cash flow to fund such development costs, or that
the Companywe will be able to obtain sufficient financing on adequate terms, or at all.
The Company’sOur ability to generate cash flow and to obtain third-party financing will depend upon many factors, including:
| the Company’s ability to meet its pre-sell targets on its vertical real estate development projects; |
The Company reliesWe rely on government permits. Certain of
the Company'sour resort operations require permits and approvals from certain Federal, state, and local authorities,
in addition to the Forest Service and U.S. Army Corps of
Engineers approvals.Engineers. Virtually all of
the Company’sour ski trails and related activities at Vail
Mountain, Breckenridge, Keystone and Heavenly and a majority of Beaver Creek are located on Federal land. The Forest Service has granted
the Companyus permits to use these lands, but maintains the right to review and approve many operational matters, as well as the location, design and construction of improvements in these areas. Currently,
the Company’sour permits expire December 31, 2029 for Breckenridge, October 31, 2031 for Vail
Mountain, December 31, 2032 for Keystone, December 31, 2038 for Beaver Creek and May 1, 2042 for Heavenly. The Forest Service can terminate
most ofor amend these permits if, in its opinion, such termination is required in the public interest. A termination
or amendment of any of
the Company’sour permits could have a materially adverse affect on
the Company’sour business and operations.
The Company isWe are subject to extensive environmental laws and regulations in the ordinary course of business. The Company’sOur operations are subject to a variety of Federal, state and local environmental laws and regulations including those relating to emissions to the air, discharges to water, storage, treatment and disposal of wastes, land use, remediation of contaminated sites and protection of natural resources such as wetlands. For example, future expansions of certain of
the Company’sour ski facilities must comply with applicable forest plans approved under the National Forest Management Act or local zoning requirements.
The Company’sIn addition, most projects to improve, upgrade or expand our ski areas are subject to environmental review under the National Environmental Policy Act and, for California projects at Heavenly, the California Environmental Quality Act. Both acts require that the Forest Service study any proposal for potential environmental impacts and include in its analysis various alternatives. Our ski area improvement proposals may not be approved or may be approved with modifications that substantially increase the cost or decrease the desirability of implementing the project. Our facilities are subject to risks associated with mold and other indoor building contaminants. From time to time
the Company’sour operations are subject to inspections by environmental regulators or other regulatory agencies.
The Company isWe are also subject to worker health and safety requirements.
The Company believes itsWe believe our operations are in substantial compliance with applicable material environmental, health and safety requirements. However,
the Company’sour efforts to comply do not eliminate the risk that
the Companywe may be held liable, incur fines or be subject to claims for damages, and that the amount of any liability, fines, damages or remediation costs may be material for, among other things, the presence or release of regulated materials at, on or emanating from properties
the Companywe now or formerly owned or operated, newly discovered environmental impacts or contamination at or from any of
itsour properties, or changes in environmental laws and regulations or their enforcement.
The Company isWe are subject to litigation in the ordinary course of business. The Company is,We are, from time to time, subject to various asserted or unasserted legal proceedings and claims. Any such claims, regardless of merit, could be time-consuming and expensive to defend and could divert management’s attention and resources. While management believes
the Company haswe have adequate insurance coverage and accrues loss contingencies for all known matters that are probable and can be reasonably estimated,
the Companywe cannot assure that the outcome of all current or future litigation will not have a material adverse effect on
the Companyus and
itsour results of operations. For a more detailed discussion of
the Company’sour legal proceedings see Legal Proceedings under Item 3 and Note
14,13, Commitments and Contingencies, of the Notes to Consolidated Financial Statements.
The Company isWe are subject to the risks of brand concentration. The Company is We are subject to the potential risks associated with concentration of
itsour hotels under the RockResorts brand and the brand image associated with each of
itsour ski
areas.resorts. A negative public image or other adverse event which becomes associated with one of
the Company’sour brands could adversely affect
itsour revenue and profitability.
If the Company doeswe do not retain itsour key personnel, itsour business may suffer. The success of
the Company’sour business is heavily dependent on the leadership of
its key management personnel, including
itsour Chief Executive Officer,
its Chief Financial Officer,
its PresidentExecutive Vice Presidents of
itsour Mountain Division,
its Chief Operating Officer of RockResorts,
its President of VRDC,
its General Counsel and each of
itsour Senior Vice Presidents. If any of these persons were to leave,
the Company, it could be difficult to replace them, and
the Company’sour business could be harmed.
The Company doesWe do not maintain “key-man” life insurance on any of
itsour employees.
Risks Relating to The Company’s Capital Structure
The Company’sOur stock price is highly volatile. The market price of
the Company’sour stock is highly volatile and subject to wide fluctuations in response to factors such as the following, some of which are beyond
itsour control:
| announcements of new services by the Company or its competitors; |
· | announcements by us or companies in the Company or its competitorstravel, gaming, hospitality and leisure industries of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures, capital commitments, plans, prospects, service offerings or capital commitments;operating results; |
The Company hasWe have not historically paid cash dividends to itsour common stockholders. Other than a rights distribution in October 1996 which gave each stockholder of record the right to receive $2.44 per share of common stock held, the Company has neverWe have not declared or paid any cash dividends on
itsour common shares
of common stock.since becoming publicly traded in 1997. Payment of any future dividends on
itsour common stock will depend upon
the Company’sour earnings and capital requirements, the terms of
itsour debt instruments
and preferred stock and other factors the Board of Directors considers appropriate.
There are restrictions imposed by the terms of the Company’sour indebtedness. The operating and financial restrictions and covenants in the Company’sour senior credit facility (the “Credit Facility”) and the Indenture, dated as of January 29, 2004 among the Company,us, the guarantors therein and the Bank of New York, as Trustee (“Indenture”), governing the 6.75% Senior Subordinated Notes due 2014 (“6.75% Notes”) may adversely affect the Company’sour ability to finance future operations or capital needs or to engage in other business activities that may be in the Company’sour long-term best interests. For example, the Indenture and the Credit Facility contain a number of restrictive covenants that impose significant operating and financial restrictions on the Company,us, including restrictions on itsour ability to, among other things:
The Company may be able to incur substantial additional indebtedness in the future. The terms of the Indenture do not fully prohibit the Company from doing so. The Company’s Credit Facility permits additional borrowings of up to $226.0 million as of July 31, 2007. If new debt is added to the Company’s current debt levels, the related risks that the Company faces could intensify.
None.
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Avon, CO | | Owned | | Warehouse facility |
BC Housing Riveredge, CO | | 26% Owned | | Employee housing facilities |
Bachelor Gulch Village, CO | | Owned | | |
Beaver Creek Mountain, | | | | |
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Inn at Keystone, CO | | Owned | | Lodging, dining and conference facilities |
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Lakewood, CO | | Leased | | Administrative offices |
Red Sky Ranch, CO | | Owned | | Golf course, clubhouses and real estate held for sale or development |
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On February 28, 2007, an arbitrator rendered a decision, awarding $8.5 million in damages in favor of RockResorts and against Cheeca Holdings, LLC,During the ownership entity of Cheeca Lodge & Spa, the former RockResorts managed property located in Islamorada, Florida. Additionally, in accordance with the arbitrator’s ruling, RockResorts is seeking recovery of costs and attorneys’ fees in the last stagefourth quarter of the proceedings. Cheeca Holdings, LLC has filed a motion to stay the arbitration in Florida District Court. In the event that Checca Holdings, LLC is not successful in its motion, upon conclusion of the fees hearing in the arbitration, the total award, which will incorporate the $8.5 million damage award and any additional cost recovery award, is final, binding and not subject to appeal. Upon completion of the cost recovery stage, RockResorts will proceed with the collection of the award and will record the actual amount received, upon receipt, in “contract dispute credit (charges), net” in its Consolidated Statements of Operations. The Company has incurred legal related costs of $4.6 million and $3.3 million in the yearsfiscal year ended July 31, 2007, the Company entered into an agreement with Peninsula Advisors, LLC (“Peninsula”) for the negotiation and 2006, respectively, in connection with this matter which are included in “contract dispute charges” in the Consolidated Statementsmutual acquisition of Operations in the respective period (see Note 14, Commitments and Contingencies, of the Notes to Consolidated Financials Statements, for more information regarding this item).
The Canyons Ski Resort Litigation
ski resort (“The Canyons”) and the land underlying The Canyons. On July 15, 2007, American Skiing Company (“ASC”) entered into an agreement to sell The Canyons to Talisker Corporation and Talisker Canyons Finance Company, LLC (together “Talisker”). On July 27, 2007, the Company filed a complaint and motion for temporary restraining order seeking to enjoin Talisker Corporationin the District Court in Colorado against Peninsula and Talisker Finance Co, LLC from closing on the purchase of ASC Utah pursuant to a purchase agreement with American Skiing Company. In addition, the Company is seeking damages and specific performance forclaiming, among other things, breach of contract by Peninsula and tortious interference. The parties entered into a stipulated agreement to expedite discovery wherebyintentional interference with contractual relations and prospective business relations by Talisker and seeking damages, specific performance and injunctive relief. On October 19, 2007, the Company agreed to withdraw itsCompany’s request for a temporary restraining orderpreliminary injunction to prevent the closing of the acquisition by Talisker of The Canyons from ASC was denied. On November 8, 2007, Talisker filed an answer to the Company’s complaint along with three counterclaims. On November 12, 2007, Peninsula filed a motion to dismiss and the parties agreed to schedule afor partial summary judgment. The Company believes that these counter claims and motions are without merit. These motions were set for hearing on June 20, 2008 but the Company’s motion fordate was vacated upon request of new counsel to Peninsula and a preliminary injunction.new hearing date has not yet been set. The defendants also agreed that they would not close onCompany is unable to predict the purchase agreement untilultimate outcome of the earlier of an order issued by the court on the motion for preliminary injunction, which is scheduled to be heard on October 11, 2007, or October 22, 2007 and thereafter would only do so upon five days notice to the Company.above described actions.
None.
PART II
| | | Vail Resorts |
| | | Common Stock |
| | | High | | Low |
| Year Ended July 31, 2007 | | | | | | |
| 1st Quarter | | $ | 41.55 | | $ | 34.01 |
| 2nd Quarter | | | 47.54 | | | 38.50 |
| 3rd Quarter | | | 59.32 | | | 46.19 |
| 4th Quarter | | | 64.97 | | | 52.06 |
| | | | | | | |
| Year Ended July 31, 2006 | | | | | | |
| 1st Quarter | | $ | 33.66 | | $ | 26.30 |
| 2nd Quarter | | | 38.89 | | | 30.16 |
| 3rd Quarter | | | 39.13 | | | 30.10 |
| 4th Quarter | | | 39.98 | | | 33.58 |
| | | Year Ended July 31, | | |
| | | 2007 (1) | | 2006 (1) | | 2005 (1) | 2004 (1) | | 2003 (1) | | | | | | | | | |
Statement of Operations Data: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mountain | | $ | 665,377 | | | $ | 620,441 | | $ | 540,855 | | $ | 500,995 | | $ | 460,568 | | | | | | | | | | | | | | | | | | |
| Lodging | | | 162,451 | | | 155,807 | | | 196,351 | | 180,525 | | 172,003 | | | | | | | | | | | | | | | |
| Real estate | | | 112,708 | | | 62,604 | | | 72,781 | | 45,123 | | 80,401 | | | | | | | | | | | | | | | |
| Total net revenue | | | 940,536 | | | 838,852 | | | 809,987 | | 726,643 | | 712,972 | | | | | | | | | | | | | | | |
| Segment operating expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mountain | | | 462,708 | | | 443,116 | | | 391,889 | | 368,875 | | 362,131 | | | | | | | | | | | | | | | |
| Lodging | | | 144,252 | | | 142,693 | | | 177,469 | | 165,983 | | 161,846 | | | | | | | | | | | | | | | |
| Real estate | | | 115,190 | | | 56,676 | | | 58,254 | | 16,791 | | 66,642 | | | | | | | | | | | | | | | |
| Total segment operating expense | | | 722,150 | | | 642,485 | | | 627,612 | | 551,649 | | 590,619 | | | | | | | | | | | | | | | |
| Income from operations | | | 128,206 | | | 105,339 | | | 88,329 | | 81,811 | | 34,487 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Mountain equity investment income, net | | | 5,059 | | | 3,876 | | | 2,303 | | 1,376 | | 1,009 | | | | | | | | | | | | | | | |
| Lodging equity investment loss, net | | | -- | | | -- | | | (2,679 | ) | | (3,432 | ) | | (5,995 | ) | | | | | | | | | | | | | | | |
| Investment income | | | 12,403 | | | 7,995 | | | 2,066 | | 1,886 | | 2,011 | | |
| | | | | | | | | | | | | | | |
| Interest expense, net | | | (32,625 | ) | | (36,478 | ) | | | (40,298 | ) | | (47,479 | ) | | (50,001 | ) | | | | | | | | | | | | | | | | | |
| Relocation and separation charges | | | (1,433 | ) | | (5,096 | ) | | | -- | | -- | | -- | | |
| Loss on extinguishment of debt | | | -- | | | -- | | | (612 | ) | | (37,084 | ) | | -- | | | | | | | | | | | | | | | | |
| Contract dispute charges | | | (4,642 | ) | | (3,282 | ) | | | -- | | -- | | -- | | |
| Mold remediation credit (charge) | | | -- | | | 1,411 | | | -- | | (5,500 | ) | | -- | | |
| | | | | | | | | | | | | | | | | |
| (Loss) gain from sale of businesses, net | | | (639 | ) | | 4,625 | | | (7,353 | ) | | -- | | -- | | | | | | | | | | | | | | | | | |
| Net income (loss) | | $ | 61,397 | | | $ | 45,756 | | $ | 23,138 | | $ | (5,959 | ) | | $ | (8,527 | ) | | | | | | | | | | | | | | | | | |
| Diluted per share net income (loss) | | $ | 1.56 | | | $ | 1.19 | | $ | 0.64 | | $ | (0.17 | ) | | $ | (0.24 | ) | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other Data: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mountain | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Skier visits(2) | | | 6,219 | | | 6,288 | | | 5,940 | | 5,636 | | 5,730 | | | | | | | | | | | | | | | |
ETP (3) | | $ | 46.15 | | | $ | 41.83 | | $ | 39.30 | | $ | 37.67 | | $ | 34.13 | | | | | | | | | | | | | | | | | | |
Lodging | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ADR(4) | | $ | 216.83 | | | $ | 202.27 | | $ | 196.26 | | $ | 187.90 | | $ | 184.25 | | | | | | | | | | | | | | | | | | |
RevPAR(5) | | $ | 99.58 | | | $ | 92.41 | | $ | 90.98 | | $ | 81.33 | | $ | 77.86 | | | | | | | | | | | | | | | | | | |
Real Estate | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real estate held for sale and investment(6) | | $ | 357,586 | | | $ | 259,384 | | $ | 154,874 | | $ | 134,548 | | $ | 123,223 | | | | | | | | | | | | | | | | | | |
Other Balance Sheet Data | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents(7) | | $ | 230,819 | | | $ | 191,794 | | $ | 136,580 | | $ | 46,328 | | $ | 7,874 | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,909,123 | | | $ | 1,687,643 | | $ | 1,525,921 | | $ | 1,533,957 | | $ | 1,455,442 | | | | | | | | | | | | | | | | | | |
| Long-term debt (including long-term debt due within one year) | | $ | 594,110 | | | $ | 531,228 | | $ | 521,710 | | $ | 625,803 | | $ | 584,151 | | | | | | | | | | | | | | | | | | |
Net debt(8) | | $ | 363,291 | | | $ | 339,434 | | $ | 385,130 | | $ | 579,475 | | $ | 576,277 | | | | | | | | | | | | | | | | | | |
| Stockholders' equity | | $ | 714,039 | | | $ | 642,777 | | $ | 540,529 | | $ | 491,163 | | $ | 496,246 | | | | | | | | | | | | | | | | | | |
| The Company has made several acquisitions and dispositions which impact comparability between years during the past five years. The more significant of those include the sale of its majority interest in RTP, LLC (“RTP”) (sold in April 2007), Snake River Lodge & Spa (“SRL&S&S”) (sold in January 2006), The Lodge at Rancho Mirage (“Rancho Mirage”) (sold in July 2005), Vail Marriott (sold in June 2005) and its minority interest in Ritz-Carlton, Bachelor Gulch (“BG Resort”) (sold in December 2004). Additionally, the Company acquired 18 retail/rental locations (acquired by SSV in June 2007), two licensed Starbucks stores (acquired in June 2007) and six retail locations (acquired by SSV in August 2006), 18 rental locations (acquired by SSV in June 2007) and two dining businesses (acquired in June 2007). For the acquisitions in June 2007, due to the seasonality of these operations there was not a significant impact to the Company’s operations during the year ended July 31, 2007. In addition, the Company consolidated several entities during the year ended July 31, 2004 as a result of the adoption of FASB Interpretation No. 46, "Consolidation of Variable Interest Entities-an Interpretation of ARB No. 51, Revised" ("FIN 46R"). See Note 7,Variable Interest Entities, of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for information regarding the entities consolidated under FIN 46R. Effective August 1, 2005, the Company adopted Statement of Financial Accounting Standards ("SFAS"(“SFAS”) No. 123R, "Share-Based Payment" ("“Share-Based Payment” (“SFAS 123R"123R”). See Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for the impact to the Consolidated Statements of Operations as a result of the adoption of SFAS 123R. |
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company should be read in conjunction with the Consolidated Financial Statements and notes related thereto included in this Form 10-K. To the extent that the following Management's Discussion and Analysis contains statements which are not of a historical nature, such statements are forward-looking statements which involve risks and uncertainties. These risks include, but are not limited to, changes in the competitive environment of the mountain and lodging industries, real estate development risk, general business and economic conditions, the weather, war, terrorism and other factorsthose discussed in Item 1A, Risk Factors“Risk Factors” in this Form 10-K. The following discussion and analysis should be read in conjunction with the Forward-Looking Statements and Item 1A, Risk Factors“Risk Factors” each included in this Form 10-K. The Company's operations are grouped into three integrated and interdependent segments: Mountain, Lodging and Real Estate, which represented 71%59%, 17%15% and 12%26%, respectively, of the Company's net revenue for the year ended July 31, 2007.2008. The Mountain segment is comprised of the operations of five ski resort properties as well as ancillary businesses, primarily including ski school, dining and retail/rental operations. Mountain segment revenue is seasonal in nature, the majority of which is earned in the Company’s second and third fiscal quarters. Operations within the Lodging segment include (i) ownership/management of a group of sevennine luxury hotels through the RockResorts brand, including fourfive proximate to the Company's ski resorts,resorts; (ii) the ownership/management of non-RockResorts branded hotels and condominiums proximate to the Company's ski resorts,resorts; (iii) GTLCGTLC; and (iv) golf courses. The Resort segment is the combination of the Mountain and Lodging segments. The Real Estate segment is involved with the development of propertyowns and develops real estate in and around the Company's resort properties.communities. The Company's single largest source of Mountain segment revenue is the sale of lift tickets (including season passes), which represented approximately 43%44%, 42%43% and 43%42% of Mountain segment net revenue for the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively. Lift ticket revenue is driven by volume and pricing. Pricing is impacted by both absolute pricing as well as the demographic mix of guests, which impacts the price points at which various products are purchased. The demographic mix of guests is divided into two primary categories: (i) out-of-state and international guests ("Destination"(“Destination”) and (ii) In-State.in-state and local visitors (“In-State”). For the 2006/20072007/2008 ski season, Destination guests comprised approximately 64%an estimated 63% of the Company's skier visits, while the In-State market comprised approximately 36%an estimated 37% of the Company's skier visits. Destination guests generally purchase the Company's higher-priced lift ticket products and utilize more ancillary services such as ski school, lodgingdining and retail/rental.rental as well as the lodging at or around the Company’s resorts. Destination guests are less likely to be impacted by changes in the weather, due to the advance planning required for their trip, but can be impacted by the economygeneral economic conditions and the global geopolitical climate. In-State guests tend to be more weather-sensitive and value-oriented; to address this, the Company markets season passes to In-State guests, generally prior to the start of the ski season. For the 2006/2007 ski season, approximatelyApproximately 26%, 25% and 23% of the total lift revenue was generated from the salecomprised of season passes.pass revenue for the 2007/2008, 2006/2007 and 2005/2006 ski seasons, respectively. The cost structure of ski resort operations once a certain level of visitation is achieved is largely fixed (with the exception of certain variable expenses including Forest Service fees, other resort related fees, credit card fees, retail/rental operations, ski school labor and dining operations); as such, incremental revenue generally has high associated profit margin. Lodging properties at or around the Company's ski resorts which represented approximately 61%63%, 62%61% and 56%62% of the Lodging segment net revenue for the years ended July 31, 2008, 2007 and 2006, respectively, and 2005, respectively, are closely aligned with the performance of the Mountain segment, particularly with respect to visitation by Destination guests. Revenue from hotel management operations under the RockResorts brand is generated through management fees is based upon the revenue of themanaged individual hotel properties within the RockResortslodging portfolio, and to the extent that these managed properties are not proximate to the Company’s ski resorts, they are more subject to the seasonality of those individual hotels more closely resembles the seasonality and trends within the overall travel industry. Revenue of the Lodging segment during the Company's first and fourth fiscal quarters is generated primarily by the operations of GTLC (as GTLC's peak operating season occurs during the summer months), as well as golf operations and seasonally low operations from the Company's other owned and managed properties. | Ownership changes of hotels under RockResorts management, or the inability of RockResorts to meet certain performance requirements for hotels under its management, may result in loss of management agreements and the related recurring management fees. Such terminations, however, may result in the payment of termination fees to RockResorts. For the years ended July 31, 2007, 2006 and 2005, the Company recognized $5.4 million, zero and $417,000, respectively, in revenue from termination fees. The Company continues to pursue and secure new management contracts, which may include, in addition to management fees, marketing license fees and technical service fees in conjunction with a project’s development and sales. For example, the Company recently announced that it began managing the Hotel Jerome in Aspen, Colorado during the Company’s fourth quarter of the year ended July 31, 2007 and will begin managing the Landings St. Lucia, located on Rodney Bay, St. Lucia, in the West Indies, which is anticipated to open during the Company’s second quarter of the year ending July 31, 2008. Additionally, RockResorts will operate The Chateau at Heavenly Village at the base of Heavenly ski resort, and manage the new Rum Cay Resort Marina on Rum Cay, Bahamas and the new Eleven Biscayne Hotel & Spa in Miami, Florida, all of which are currently under construction and are anticipated to open during the years ending July 31, 2009 or beyond. These agreements are generally long-term in nature (generally 10 years with renewal options). However, these agreements generally contain certain performance criteria that cover multiple years and are multi-faceted. In addition to these agreements, RockResorts will earn marketing license fees on the sales of ownership units within the Rum Cay Resort Marina and The Chateau at Heavenly Village. |
· | On February 28, 2007, an arbitrator rendered a decision, awarding $8.5 million in damages in favor of RockResorts and against Cheeca Holdings, LLC, the ownership entity of Cheeca Lodge & Spa, the former RockResorts managed property located in Islamorada, Florida. Additionally, in accordance with the arbitrator’s ruling, RockResorts is seeking recovery of costs and attorneys’ fees in the last stage of the proceedings. Upon conclusion of that stage, the total award, which will incorporate the $8.5 million damage award and any additional cost recovery award, is final, binding and not subject to appeal. Upon completion of the cost recovery stage, RockResorts will proceed with the collection of the award and will record the actual amount received, upon receipt, in “contract dispute credit (charges), net” in its Consolidated Statement of Operations. The Company has incurred legal related costs of $4.6 million and $3.3 million in the years ended July 31, 2007 and 2006, respectively, in connection with this matter which are included in “contract dispute charges” in its Consolidated Statements of Operations in the respective periods. |
· | Real Estate Reported EBITDA is highly dependent on, among other things, the timing of closings on real estate under contract.contract, which determines when revenue and associated cost of sales is recognized. Changes to the anticipated timing of closing on one or more real estate projects, or unit closings within a real estate project, could materially impact Real Estate Reported EBITDA for a particular quarter or fiscal year. Additionally, the magnitude of real estate projects currently under development or contemplated could result in a significant increasefluctuations in Real Estate Reported EBITDA as these projectsbetween periods. For example, the Company closed on 64 of the 66 units at The Arrabelle at Vail Square (“Arrabelle”) during the year ended July 31, 2008 and expects to close expected inon the remaining condominium units during the year ending July 31, 2008 and beyond.2009. The profitability and/or viabilityCompany closed on five of current or proposed real estate development projects have been and could continue to be adversely affected by escalation in construction costs associated with project difficulties, delays, design or construction issues and scope modifications that may arise in the course of construction. Additionally, real estate development projects are also susceptible to a slow-down in market demand. For13 Lodge at Vail Chalets (“Chalets”) during the yearsyear ended July 31, 20072008 and 2006,expects to close on the remaining Chalets during the year ending July 31, 2009. Additionally, the Company recorded charges of $7.6 million and $1.8 million, respectively, for estimated costsexpects to complete the constructionclose on a vast majority, if not all of the JHG&TC cabins that have design and construction issues.45 units at Crystal Peak Lodge during the year ending July 31, 2009. The Company is currentlyhas entered into definitive sales contracts with a value of approximately $448 million related to these projects of which $272.4 million of revenue was recognized in the process of completing construction and attempting to resolve the apportionment of the financial responsibilities for the remediation and construction costsyear ended July 31, 2008, along with the contractors, structural engineers and architects involved in the design and constructionassociated cost of the JHG&TC cabins, and as such the Company’s final costs are subject to change which could impact future operating results.sales. |
| In recent years,The Company has several other real estate projects across its resorts under development and in the planning stages. While the current instability in the capital markets and slowdown in the national real estate market have not, to date, materially impacted the Company’s real estate development, the Company has shifteddoes have elevated risk associated with the selling and/or closing of its real estate focusunder development as a result of the current economic climate. These risks surrounding the Company’s real estate developments are partially mitigated by the fact that the Company’s projects include a relatively low number of luxury and ultra luxury units situated at the base of its resorts, which are unique due to verticalthe relatively low supply of developable land. Additionally, the Company’s real estate projects must meet the Company’s pre-sale requirements, which include substantial non-refundable deposits, before significant development (versus land development), which requires significantbegins; however, there is no guarantee that a sustained downward trend in the capital investment priorand real estate markets would not materially impact the Company’s real estate development activities or operating results. In addition to projectthe expected completion (includingof the constructionArrabelle, Chalets and Crystal Peak Lodge development projects during the year ending July 31, 2009, the Company is also moving forward with the development of resort-related depreciable assets).One Ski Hill Place located at the base of Peak 8 in Breckenridge and The Ritz-Carlton Residences, Vail. The Company expects to incur costs of $435between $335 million to $465$355 million of development costs subsequent to July 31, 20072008 on significant projects under construction that include Arrabelle, Vail’s Front Door,the remaining Chalets, Crystal Peak Lodge, One Ski Hill Place and The Ritz-Carlton Residences, Vail projects. The Company has entered into non-recourse financing agreements to borrow up to $298 million for Arrabelle and Vail’s Front Door and expects to enter into a non-recourse financing agreement for The Ritz-Carlton Residences, Vail project with similar terms as its other non-recourse financing agreements. |
| The Company had $230.8$162.3 million in cash and cash equivalents as of July 31, 2007 (which balance increased by $39.0 million since July 31, 2006)2008 with no borrowings under the revolver component of its credit facilitiesCredit Facility and expects to generate additional cash from operations, including future closures on real estate. Theestate vertical development projects during the 2009 fiscal year. In addition to building excess cash, the Company is currently evaluatingcontinuously evaluates how to utilize its excess cash, including any combination of the following strategic options: increaseself-fund real estate under development; continue recent levels of investment for further development; increasein resort capital expenditures;assets; pursue strategic acquisitions; pay off outstanding debt; repurchase additional common stock of the Company (see Note 17, Capitalization,16, Stock Repurchase Plan, of the Notes to Consolidated Financial Statements for more information regarding the Company’s stock repurchase plan); pay cash dividends; and/or payoff outstanding debt.other options to return value to stockholders. The Company’s debt is long-term in nature and the Company believes its debt generally has favorable fixed interest ratesrates. In determining its uses of excess cash, the Company has some constraints as a result of the Company’s Fourth Amended and is long-term in nature. Additionally,Restated Credit Agreement, dated as of January 28, 2005, as amended, between The Vail Corporation (a wholly-owned subsidiary of the Company), Bank of America, N.A. as administrative agent and the Lenders party thereto (the “Credit Agreement”) underlying the Company’s Credit Facility and the Indenture, governing the 6.75% Notes, which limit the Company’s ability to pay dividends, repurchase stock and pay off certain of its debt, including its 6.75% Notes. |
| On July 27, 2007 the Company made an offer of $110 million to acquire The Canyons ski resort (“The Canyons”) from American Skiing Company (“ASC”). This offer was in excess of a previously undisclosed offer by the Company to acquire The Canyons and in excess of the $100 million offer by Talisker Corporation and Talisker Canyons Finance Company LLC (together “Talisker”) to ASC, in which ASC announced on July 15, 2007 that it had entered into a purchase agreement with Talisker for the sale of The Canyons. The Company has also filed a lawsuit against Talisker and Peninsula Advisors for alleged breaches and interference with the Company’s efforts to acquire The Canyons. Subsequently, on September 10, 2007, the Company supplemented its previous offer to acquire The Canyons by agreeing to grant a 30% interest in the future net cash flow (as defined) to the Company arising from the ownership and development of the real estate development rights included in the acquisition. If the Company is successful in its acquisition of The Canyons it could significantly impact the future results of operations of the Company. |
| | | Year Ended July 31, | | |
| | | 2007 | | 2006 | | 2005 | | | | | | |
| Mountain Reported EBITDA | | $ | 207,728 | | | $ | 181,201 | | | $ | 151,269 | | | | | | | | | | | | | |
| Lodging Reported EBITDA | | 18,199 | | | 13,114 | | | | 16,203 | | | | | | | | | | | |
| Resort Reported EBITDA | | 225,927 | | | 194,315 | | | | 167,472 | | | | | | | | | | | |
| Real Estate Reported EBITDA | | (2,482 | ) | | 6,719 | | | | 14,425 | | | | | | | | | | | |
| Total Reported EBITDA | | 223,445 | | | 201,034 | | | | 181,897 | | | | | | | | | | | | | |
| Income before provision for income taxes | | 100,651 | | | 75,010 | | | | 37,623 | | | | | | | | | | | | | |
| Net income | | $ | 61,397 | | | $ | 45,756 | | | $ | 23,138 | | | | | | | | | | | | | |
Net income for the year ended July 31, 2007 increased by $15.6 million compared to the year ended July 31, 2006, which is primarily attributable to an increase in Resort Reported EBITDA of $31.6 million, a $4.4 million increase in investment income, a $3.9 million decrease in interest expense, net and a $3.7 million decrease in relocation and separation charges, which were partially offset by a $10.0 million increase in provision for income taxes, a decrease in Real Estate Reported EBITDA of $9.2 million, a $5.3 million decrease in the net gain on sale of businesses, a $1.6 million increase in depreciation and amortization, a $1.4 million increase in contract dispute charges, a $1.4 million prior year mold remediation credit and a $1.1 million increase in minority interest in income of consolidated subsidiaries, net.
Net income for the year ended July 31, 2006 increased by $22.6 million, compared to the year ended July 31, 2005, which is primarily attributable to an increase in Resort Reported EBITDA of $26.8 million, a $12.0 million increase in the net gain on sale of businesses, a $5.9 million increase in investment income, a $3.9 million decrease in depreciation and amortization and a $3.8 million decrease in interest expense, net, which were partially offset by a $14.8 million increase in provision for income taxes, a $7.7 million decrease in Real Estate Reported EBITDA, $5.1 million in relocation and separation charges and $3.3 million in contract dispute charges.
| | | | | | | | | | Percentage | | | | | | | | | |
| | | Year Ended July 31, | | Increase/(Decrease) | | | | |
| | | 2007 | | 2006 | | 2005 | | 2007/2006 | | 2006/2005 | | | | | | | | | | |
| Lift tickets | | $ | 286,997 | | $ | 263,036 | | $ | 233,458 | | 9.1 | % | | 12.7 | % | | | | | | | | | | | | | | | |
| Ski school | | 78,848 | | | 72,628 | | 63,915 | | 8.6 | % | | 13.6 | % | | | | | | | | | | | | | |
| Dining | | 59,653 | | | 56,657 | | 53,688 | | 5.3 | % | | 5.5 | % | | | | | | | | | | | | | |
| Retail/rental | | 160,542 | | | 149,350 | | 120,149 | | 7.5 | % | | 24.3 | % | | | | | | | | | | | | | |
| Other | | 79,337 | | | 78,770 | | 69,645 | | 0.7 | % | | 13.1 | % | | | | | | | | | | | | | |
| Total Mountain net revenue | | 665,377 | | | 620,441 | | 540,855 | | 7.2 | % | | 14.7 | % | | | | | | | | | | | | | |
| Total Mountain operating expense | | 462,708 | | | 443,116 | | 391,889 | | 4.4 | % | | 13.1 | % | | | | | | | | | | | | | |
| Mountain equity investment income, net | | 5,059 | | | 3,876 | | 2,303 | | 30.5 | % | | 68.3 | % | | | | | | | | | | | | | |
| Total Mountain Reported EBITDA | | $ | 207,728 | | $ | 181,201 | | $ | 151,269 | | 14.6 | % | | 19.8 | % | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total skier visits | | | 6,219 | | | 6,288 | | 5,940 | | (1.1 | )% | | 5.9 | % | | | | | | | | | | | | | | |
| ETP | | $ | 46.15 | | $ | 41.83 | | $ | 39.30 | | 10.3 | % | | 6.4 | % | | | | | | | | | | | | | | | |
$24.0 million for the years ended July 31, 2008 and July 31, 2007, respectively, primarily as a result of increased ETP excluding season pass products, which was driven by an increase in absolute pricing. Additionally, season pass revenue rose $5.5 million and $10.9 million (an increase of 7.7% and 17.7%), respectively, for the years ended July 31, 2008 and July 31, 2007. For the year ended July 31, 2007, lift2008, almost all of the increase in season pass revenue increasedwas due to increases in pricing, with season pass holders’ average visitation per pass increasing for the 2007/2008 ski season compared to the prior year, partially offsetting the increase in ETP resulting from price increases; whereas, the increase in season pass revenue for the year ended July 31, 2006 due to the significant increase in ETP2007 was impacted by both price increases and higher sales volume. Partially offsetting the above discussed increases in price and season pass sales, partially offset byrevenue was a decreasedecline in visitation. Forskier visits excluding season pass holders of 3.0% and 1.0% for the years ended July 31, 2008 and July 31, 2007, respectively, at the Company’s five ski resorts. The decline for the year ended July 31, 2006, lift revenue increased from2008 was the result of lower skier visitation excluding season pass holders in non-peak periods, including the early season (prior to December 24) due to below average snow conditions, and early March and April due in part to the timing of Easter which was in March for the year ended July 31, 2005 due to an increase2008 versus April in ETP, higher season pass sales and an increase in visitation. Overall, ETP for both the years ended July 31, 2007 and 2006, were positively impactedall of which was partially offset by significant increases in international visitation which was higher by an increaseestimated 26% for the year ended July 31, 2008. The decline in absolute pricing of the Company’s individual lift ticket and pass products as well as an increase in Destination guest visitation (who generally purchase higher priced tickets). Destination guest visitationoverall skier visits for the year ended July 31, 2007 increased on an absolute basis, (includingwas due to a 7.0% increasedecline at the Company’s Heavenly resort primarily attributable to below average snowfall, while visitation excluding season pass holders at the Colorado resorts increased.
The Kottke Survey, a study undertaken annually to track key metrics within the ski industry, classifies the Company’s Colorado resorts in its Rocky Mountain Region, and the Company’s Heavenly resort in its Pacific West Region. Visitation for the 2006/2007 ski season increased 1.0% at the Company’s Colorado resorts as compared to 0.6% for the Rocky Mountain Regionprimarily as a whole due toresult of absolute price increases. However, the strongoverall revenue increase in Destination visitation at the Company’s Colorado resorts in spite of a 23% reduction in snowfall for the region and a decline in the average visitation per season pass holder due to adverse weather conditions in the Denver metropolitan area. Visitation decreased 12.0% at the Company’s Heavenly resort versus a 14.3% decrease in the Pacific West region as a whole due in large part to significantly unfavorable weather conditions throughout thefrom ski season, including a 40% reduction in snowfall for the region for the 2006/2007 season as compared to the 2005/2006 season. Visitation at the Company's Colorado resorts was up 8.0%school for the year ended July 31, 2006 as compared to the year ended July 31, 2005 due2008 was impacted by a decline in part to the strong early season snowfall (which especially impactedskier visitation byexcluding season pass holders), while visitation at Heavenly was down 3.9% for the year ended July 31, 2006 due to unfavorable weather conditions, including during the Christmas holiday period.
Revenue from ski school improved in both the years ended July 31, 2007 and 2006 due to an increase in absolute pricing andholders (as discussed above) as these guests have a higher participation as a result of the increased Destination guest visitation, asrate in ski school participation is impacted more by Destination guest visitation than overall visitation. Diningschool. Additionally, dining revenue for the year ended July 31, 2007 grew commensurate with price increases, partially offset2008 was impacted by a slight decreasedecline in total visitation. Forskier visitation excluding season pass holders, but was favorably impacted by the acquisition of two licensed Starbucks stores in June 2007.
Retail/rental revenue improved by $8.2 million for the year ended July 31, 2006, dining experienced a lower percentage growth than2008 over the other ancillary businessesprior year and was due in part to the reductionoperations of 18 Breeze Ski Rental locations acquired in revenue resulting from the conversion of certain formerly owned restaurants to leased operations and the closing of certain owned restaurants (during the year ended July 31, 2006) due to the redevelopment in LionsHead for the construction of Arrabelle.June 2007. Retail/rental experienced a 7.5%an $11.2 million increase in revenue for the year ended July 31, 2007, despite being negatively impacted by adverse weather conditions, especiallydue to increased visitation at the Company’s Heavenly resort. Additionally,Colorado resorts excluding season pass holders, as the majority of the retail/rental revenue growth was positively impacted for the year ended July 31, 2006 as a result of SSV’s acquisition of six San Francisco Bay Area retail locations are concentrated in the first quarter of the year ended July 31, 2006.Colorado. Other revenue mainly consists of private club revenue (which includes both club dues and amortization of initiation fees), summer visitation and other mountain activities revenue, allocated strategic alliance revenue, commercial leasing revenue, employee housing revenue, technology services revenue (until the disposition of the Company’s investment in RTP in April 2007), municipal services revenue and other recreation activity revenue. For the year ended July 31, 2008 revenues were down $8.4 million compared to the prior year due to the disposition in April 2007 of the Company’s investment in RTP. Excluding this disposition, other revenue would have increased by $0.6 million, or 0.8% for the year ended July 31, 2008 compared to the year ended July 31, 2007. For the year ended July 31, 2007 other revenue was flat compared to the year ended July 31, 2006, primarily due to lost revenue for the lost recurring revenuefourth fiscal quarter in the year ended July 31, 2007 as a result of the disposition of the Company’s investment in RTP offsettingwhich offset increased revenues from commercial leasing and other ancillary mountain activities. For
Mountain operating expense increased 4.4% during the year ended July 31, 2007, compared to the year ended July 31, 2006.respectively. Excluding retail/rental expense which(which has a high variable cost component and therefore increased in relation to the retail/rental revenue increases,revenue) and RTP, operating expense increased 3.4% during2.3% and 3.8% for the yearyears ended July 31, 2008 and 2007, respectively, which was primarily attributable to higher variable costs related to higher revenue, including Forest Service fees, other resort related fees and credit card fees, and certain labor related costs, including higher ski school labor expense to support the higher ski school revenue. Expense increases were partially offset by the elimination of recurring expenses related to the Company’s disposal of its investment in RTP as well as lower workers compensation expense. Mountain operating expense increased 13.1% for the year ended July 31, 2006 as compared to the previous year mainly due to higher retail/rental operations resulting from increased sales volume and the SSV acquisition mentioned above as well as increased costs for stock-based compensation due to the adoption of SFAS 123R in the year ended July 31, 2006. Excluding retail/rental and stock-based compensation attributable to the Mountain segment, expenses increased 7.6%, or $21.9 million, for the year ended July 31, 2006, which was primarily attributable to higher variable costs related to the higher revenue, including, Forest Service fees, credit card fees, and certain labor related costs, including higher ski school labor expense to support the higher ski school revenue, as well as higher absolute energy costs, all of which was partially offset by lower corporate allocated costs including legal costs and Sarbanes-Oxley compliance costs.
The Company currently anticipates that the Mountain segment in the year ending July 31, 2008 and beyond should continue to realize increasing revenue as a result of the Company’s continuing ability to raise prices as well as attract Destination guests and season pass holders, absent any unforeseen material declines in the economy, elevated geopolitical uncertainties and/or significant changes in historical snowfall patterns. The expected higher visitation is due to recent industry trends and the Company’s high quality offerings complemented by continued capital investment including real estate development, which will expand the Destination guest bed base and provide incremental resort assets. Ancillary revenue should grow commensurate with expected lift revenue growth.
| | | | | | | | | | | | | Percentage | | | | | | | | | | | | | |
| | | Year Ended July 31, | | Increase/(Decrease) | | | | |
| | | 2007 | | 2006 | | 2005 | | 2007/2006 | | 2006/2005 | | | | | | | | | | | |
| Total Lodging net revenue | | $ | 162,451 | | | $ | 155,807 | | $ | 196,351 | | | 4.3 | | % | | (20.6 | ) | % | | | | | | | | | | | | | | | | | | | | | |
| Total Lodging operating expense | | 144,252 | | | | 142,693 | | | 177,469 | | | 1.1 | | % | | (19.6 | ) | % | | | | | | | | | | | | | | | | | | | | |
| Lodging equity investment loss, net | | -- | | | | -- | | | (2,679 | ) | | N/A | | | | 100.0 | | % | |
| Total Lodging Reported EBITDA | | $ | 18,199 | | | $ | 13,114 | | $ | 16,203 | | | 38.8 | | % | | (19.1 | ) | % | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ADR | | $ | 216.83 | | | $ | 202.27 | | $ | 196.26 | | | 7.2 | | % | | 3.1 | | % | | | | | | | | | | | | | | | | | | | | | |
| RevPAR | | $ | 99.58 | | | $ | 92.41 | | $ | 90.98 | | | 7.8 | | % | | 1.6 | | % | | | | | | | | | | | | | | | | | | | | | |
In January 2006, the Company sold the assets constituting SRL&S. ForTotal Lodging segment net revenue for the year ended July 31, 2006, Lodging Reported EBITDA includes revenue of $5.22008 increased by $7.6 million and operating expenses of $4.5 million relatedas compared to SRL&S prior to the sale of SRL&S. In the year ended July 31, 2005, the Company sold its minority interest2007. Included in BG Resort and the assets constituting the Vail Marriott and Rancho Mirage. For the year ended July 31, 2005, Lodging Reported EBITDA includesnet revenue of $51.6 million, operating expense of $44.8 million and equity investment loss of $2.7 million related to these entities. Commencing with the sale of the Vail Marriott, SRL&S and Rancho Mirage (until the termination of the Rancho Mirage management agreement during the year ended July 31, 2007 upon the closing of the hotel by its owners for redevelopment), the Company is earning base management fees of approximately 3% of each hotel’s revenue. Accordingly, Lodging Reported EBITDA includes incremental management fee revenue of $1.3 million, $1.6 million and $60,000 for the Vail Marriott, SRL&S and Rancho Mirage (in 2006 and 2005) for the years ended July 31, 2007, 2006 and 2005, respectively.
Excluding the impact of the above sold properties, Lodging revenue increased $11.9 million, or 7.9%, and $5.9 million, or 4.1%, for the years ended July 31, 2007 and July 31, 2006, respectively, compared to the prior years. The revenue increase for the year ended July 31, 2007 was partially due to the recognition of $5.4 million in termination fees primarily associated with the termination of the management agreements at The Equinox and Rancho Mirage (pursuant to the terms of the management agreements). Excluding these termination fees, Lodging segment net revenue would have increased $13.0 million, or 8.3% for the year ended July 31, 2008, compared to the year ended July 31, 2007. ADR increased 6.2% for the year ended July 31, 2008 compared to the prior year due to high demand during peak periods in the year (partially offset by lower visitation during non-peak periods, including the early season and the timing of Easter as described in the Mountain segment discussion) and as a result of the addition of The Arrabelle Hotel. RevPAR increased 6.9% for the year ended July 31, 2008 compared to the year ended July 31, 2007, which, in addition to increases in ADR, was driven by a 6.9% increase in conference and group room nights, occurring primarily at GTLC and Keystone lodging properties during the Company’s fourth fiscal quarter ended July 31, 2008. Additionally, Lodging revenue was impacted by fewer available rooms, down 2.5% for the year ended July 31, 2008 as compared to the prior year, primarily as a result of a reduction in managed condominium units at Keystone.
For the year ended July 31, 2006, Lodging Reported EBITDA includes revenue of $5.2 million and operating expenses of $4.5 million related to SRL&S prior to the sale of SRL&S in January 2006. Excluding the impact of the sale of SRL&S, Lodging revenue increased $11.9 million, or 7.9%, for the year ended July 31, 2007, compared to the year ended July 31, 2006. The revenue increase for the year ended July 31, 2007 was partially due to the recognition of $5.4 million in termination fees as discussed above. ADR and RevPAR, which do not include the impact of the termination fees, and excluding the impact of the SRL&S sale, increased 8.5% and 9.5% for the year ended July 31, 2007, respectively, compared to the year ended July 31, 2006. ADR and RevPAR, excluding the impact of the SRL&S, Vail Marriott and Rancho Mirage sales, increased 3.9% and 10.4% for the year ended July 31, 2006, respectively, compared to the year ended July 31, 2005. The increase in ADR and RevPAR for the yearsyear ended July 31, 2007 and 2006 was driven by the lodging properties proximate to the Company’s ski resorts and was due to increased pricing as well as the higher Destination guest visitation as described in the Mountain segment discussion and increased revenue at GTLC. The overall Lodging revenue increase during the year ended July 31, 2007 was partially impacted by fewer available rooms, primarily as a result of construction at The Lodge at Vail and a reduction in managed condominium units. Excluding the impact of the sale of SRL&S, operating expense increased $6.0 million, or 4.3%, for the year ended July 31, 2007 compared to the year ended July 31, 2006. These increases are commensurate with normal increases in variable operating costs, start-up expenses associated with the Arrabelle hotel (expected to open during the 2007/2008 ski season), higher RockResorts corporate expenses and increased NPS fees paid by GTLC, partially offset by fewer available rooms as discussed above. Excluding the impact of the sales of Vail Marriott, Rancho Mirage, SRL&S and stock-based compensation expense, expenses increased $3.4 million, or 2.5%, for the year ended July 31, 2006 compared to the year ended July 31, 2005, and are commensurate with normal increases in operating costs.rooms. Lodging equity loss primarily consisted of the Company's share of losses from BG Resort. The Company sold its investment in BG Resort in December 2004, and as a result, the equity loss in the year ended July 31, 2005 reflects only five months of operations.
| | | | | | | | | | | | Percentage | | | | | | | | | | | |
| | | Year Ended July 31, | | Increase/(Decrease) | | | | |
| | | 2007 | | 2006 | | 2005 | | 2007/2006 | | 2006/2005 | | | | | | | | | | |
| Total Real Estate net revenue | | $ | 112,708 | | $ | 62,604 | | $ | 72,781 | | 80.0 | | % | | (14.0 | ) | % | | | | | | | | | | | | | | | | | |
| Total Real Estate operating expense | | | 115,190 | | | 56,676 | | | 58,254 | | 103.2 | | % | | (2.7 | ) | % | | | | | | | | | | | | | | | | | |
| Real Estate equity investment income (loss), net | | | -- | | | 791 | | | (102 | ) | (100.0 | ) | % | | 875.5 | | % | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Total Real Estate Reported EBITDA | | $ | (2,482 | ) | $ | 6,719 | | $ | 14,425 | | (136.9 | ) | % | | (53.4 | ) | % | | | | | | | | | | | | | | | | | | |
The Company is currentlyparcels sales that closed in previous periods. Operating expense for the development stageyear ended July 31, 2008 included cost of sales of $225.9 million (including sales commissions) commensurate with revenue recognized, as well as general and administrative costs of approximately $25.4 million. General and administrative costs are primarily comprised of marketing expenses for severalthe major real estate projects including Arrabelle, The Lodge at Vail Chalets, Ritz-Carlton Residences, Vailunder development (including those that have not yet closed), overhead costs such as labor and The Crystal Peak Lodge, among other projects. benefits and allocated corporate costs.
Real Estate segment operatingnet revenue for the year ended July 31, 2007 was driven primarily by the closings of the Mountain Thunder and Gore Creek Place ($42.9 million) and Mountain Thunder ($24.1 million) developments, certain JHG&TC cabins ($14.2 million), the sale of land together with certain related infrastructure improvements in Red Sky Ranch and Breckenridge to third-party developers, the sale of the sole asset in the FFT Investment Partners real estate joint venture and contingent gains on development parcel sales that closed in previous periods. Operating expense for the year ended July 31, 2007 included cost of sales of $83.6 million (including sales commissions) commensurate with revenue recognized, as well as general administrative costs of approximately $24.0 million. General and administrative costs are primarily comprised of marketing costsexpenses for the major real estate projects under development, as well as overhead costs such as labor and benefits as the Company has increased its infrastructure relative to the increased vertical development activity, and professional services fees. In addition, the Company recorded $7.6 million of charges during the year ended July 31, 2007 for constructionincremental remediation costs (including estimates to complete) oncomplete the JHG&TC cabins that havehad design and construction issues. The Company is currently in the process of completing construction and resolving the apportionment of the financial responsibilities for the remediation and construction costs with the contractors, structural engineers and architects involved in the design and construction of the JHG&TC cabins. The Company expects to complete this construction and remediation work by the third quarter of the year ending July 31, 2008. Real Estate segment operating revenue for the year ended July 31, 2005 included the sale of cabins and land parcels at JHG&TC, Vail, Bachelor Gulch and Red Sky Ranch, developer parcel sales in the Beaver Creek area, the sale of parking spaces in Vail's Founders' Garage, the sale of a warehouse facility near Beaver Creek, recognition of a previously deferred land gain associated with the sale of BG Resort in December 2004 and recognition of contingent gains associated with a development parcel sold in prior periods. Operating expense included cost of sales commensurate with revenue recognized, as well as marketing costs, overhead costs such as labor and benefits and professional services fees.
Real Estate equity investment income (loss) primarily includedincludes the Company's share of income or loss from the operations of Keystone/Intrawest, LLC (“KRED”), a joint venture with Intrawest Resorts, Inc. formed to develop land at the base of Keystone, as well as the Company's share of profit associated with the sale of condominiums at BG Resort through the Company's prior investment in BG Resort.Keystone. In the year ended July 31, 2006, the Company received a distribution from KRED in excess of its carrying basis in the amount of $715,000,$0.7 million, which the Company recorded as income. The distribution reflected the final proceeds from the sale of developed real estate. As a result, KRED will be dissolved and the Company does not anticipate any further distributions. Depreciation and amortization. Depreciation and amortization expense for the
yearyears ended July 31,
2008 and 2007 increased primarily as a result of
placing in service resort assets, which for the year ended July 31, 2008 included The Arrabelle Hotel and a new skier services building associated with the Chalet project and for both the years ended July 31, 2008 and 2007, an increase in the fixed asset base due to normal capital expenditures.
Depreciation and amortization expense for the year ended July 31, 2006 decreased $5.8 million from the year ended July 31, 2005 primarily due to the sale of assets constituting the Vail Marriott, Rancho Mirage and SRL&S. This decrease was partially offset by $2.2 million of accelerated amortization associated with the Cheeca management agreement intangible asset and an increase in the fixed asset base due to normal capital expenditures. Additionally, higher depreciation and amortization expense was recorded in the year ended July 31, 2005 due to accelerated depreciation for certain assets which were retired in advance of their previously estimated useful lives. The average depreciation rate was 7.5%, 7.5% and 8.1% for the years ended July 31, 2007, 2006 and 2005, respectively. Relocation and separation charges. In February 2006, the Company announced a plan to relocate its corporate headquarters, and the plan was approved by the Company’s Board of Directors in April 2006. The Company recorded $1.4 million and $2.4 million of relocation charges in the years ended July 31, 2007 and 2006, respectively. The Company’s relocation plan was completed as of July 31, 2007. In addition, in February 2006, Adam Aron, the former Chairman and Chief Executive Officer of the Company, resigned. In connection with Mr. Aron’s resignation, the Company entered into a separation agreement with Mr. Aron, whereby the Company recorded $2.7 million of separation related expenses during the year ended July 31,
2006 (see Note 8, Relocation and Separation Charges, of the Notes to Consolidated Financial Statements, for more information regarding relocation and separation charges).2006. Asset impairment charges. In the year ended July 31, 2006, the Company recorded $210,000 of impairment losses on the write off of construction in progress costs when it was determined that the Company would not receive future benefits from these development efforts. The Company recorded a $1.6 million asset impairment charge in the year ended July 31, 2005 associated with an intangible asset related to the RockResorts call option (see Note 10, Put and Call Options, of the Notes to Consolidated Financial Statements), a $536,000 asset impairment charge associated with the termination of the Casa Madrona management agreement in May 2005 and a $440,000 asset impairment charge related to projects that were abandoned prior to completion (see Note 11, Asset Impairment Charges, of the Notes to Consolidated Financial Statements).
Investment income, net. The Company invests excess cash in
short-termhighly liquid investments, as permitted under the
Company’s Fourth Amended and Restated Credit Agreement
dated as of January 28, 2005, as amended between The Vail Corporation (a wholly owned subsidiary of the Company), Bank of America, N.A., as administrative agent and the Lenders party thereto (the “Credit Agreement”) underlying the Credit Facility and the Indenture relating to the 6.75% Notes. The
decrease in investment income for the year ended July 31, 2008 compared to the previous year is primarily due to a reduction in the average interest earned on investments, a decrease in average invested cash during the period as a result of significant capital investments and common stock repurchases and a $1.0 million impairment on a short-term investment resulting from a commercial paper write-down. Interest expense, net. The Company’s primary sources of interest expense are the 6.75% Notes,
the Credit Facility, incorporatingits credit facilities, including unused commitment fees and letter of credit fees related to the
$300$400 million revolving credit facility (the “Credit Facility Revolver”) thereunder, the outstanding $57.7 million of industrial development bonds (collectively, the “Industrial Development Bonds”) and the series of bonds issued to finance the construction of employee housing facilities (the “Employee Housing Bonds”). Interest expense decreased
$2.0 million for the year ended July 31, 2008 compared to the year ended July 31, 2007 primarily due to a reduction in the average variable borrowing rate of the employee housing bonds and an increase in capitalized interest associated with significant ongoing real estate and related resort development. The $3.8 million decrease in interest expense for the year ended July 31, 2006 compared to the year ended July 31, 2005 is primarily due to the Credit Agreement refinancing in January 2005 which, among other things, resulted in the extinguishment of the $100 million Credit Facility Term Loan and improved pricing for interest rate and commitment fee margins. In addition, the Funded Debt to Adjusted EBITDA ratio (as defined in the Credit Agreement) improved under the refinancing in January 2005, which determined margin levels for pricing on interest rates and commitment fees under the Credit Facility. The reduction in interest expense as a result of a reduction in outstanding debt and margin rates as previously discussed was partially offset by an increase in interest expense on variable rate debt although only 13.6% of the Company’s total debt was exposed to interest rate fluctuations.
Average borrowings under the Credit Facility Revolver were zero in the years ended July, 31, 2007 and 2006 and $6.6 million in the year ended July 31, 2005.
Loss on extinguishment of debt. The Company recorded a $612,000 debt extinguishment charge in the year ended July 31, 2005 in connection with the refinancing in January 2005 of the Credit Facility. The debt extinguishment charge is related to the write-off of unamortized issuance costs associated with the Credit Facility Term Loan, which was completely paid off.
(Loss) gain on sale of businesses, net. The Company recorded a net loss of $601,000$0.6 million in the year ended July 31, 2007 on the sale of its investment in RTP. The Company recorded a $4.7 million gain in the year ended July 31, 2006 associated with the sale of the assets constituting SRL&S. Additionally in the year ended July 31, 2006, the Company recorded an $82,000a $0.1 million loss associated with the December 2004 sale of the Company’s interest in BG Resort due to the settlement of certain contingencies. For the year ended July 31, 2005, the Company recorded a net loss consisting of (i) a $10.9 million loss associated with the sale of the assets constituting Rancho Mirage and (ii) a $2.1 million loss associated with the sale of the assets constituting the Vail Marriott, (iii) which was partially offset by a $5.7 million gain associated with the sale of the Company's interest in BG Resortcontingencies (see Note 9, Sale of Businesses, of the Notes to Consolidated Financial Statements). Contract dispute charges. credit (charges), net. In March 2006, RockResorts was notified by the ownership of Cheeca Lodge & Spa, formerly a RockResorts managed property, that its management agreement was being terminated effective immediately. RockResorts believed that the termination was in violation of the management agreement and pursued its legal rights.
In October 2007, RockResorts received payment from Cheeca Holdings as final settlement of the parties’ management agreement termination dispute in the amount of $13.5 million, of which $11.9 million (net of final attorney’s fees) is recorded in “contract dispute credit (charges), net” in the Consolidated Statements of Operations for the year ended July 31, 2008. The Company
has incurred $4.6 million and $3.3 million of legal related costs related to this matter in the years ended July 31, 2007 and 2006,
respectively. In February 2007, the arbitrator in the Cheeca matter rendered a decision in favor of the Company, awarding $8.5 million in damages to RockResorts. The arbitrator found that the ownership group had wrongfully terminated the management contract and that RockResorts had not breached the contract. In accordance with the arbitrator’s ruling, RockResorts is seeking recovery of costs and attorney’s fees in the last stage of the proceedings. The Company will record the total arbitration award, upon receipt, in “contract dispute credit (charges), net” in its Consolidated Statement of Operationsrespectively (see Note
14,13, Commitments and Contingencies, of the Notes to Consolidated Financial Statements, for more information regarding this
item)settlement).
Gain (loss) on put options, net. The net gain for the year ended July 31, 2007 was related to the elimination of the put option liability
(including(net of the write-off of the associated put option intangible asset) as a result of the sale of the Company’s investment in RTP in April 2007. The net loss in the year ended July 31, 2006 was related to an increase in the estimated fair market value of the RTP put option.
The net gain in the year ended July 31, 2005 was related to decreases in the estimated fair value of the SSV and RTP put options. As a result of the sale of the Company’s investment in RTP in April 2007, the Company currently does not anticipate recognizing further gain (loss) on put options (see Note 10, Put and Call Options, of the Notes to Consolidated Financial Statements, for more information regarding the Company's put options).
Minority interest in income of consolidated subsidiaries. Minority interest in income of consolidated subsidiaries is a function of the performance of the Company's consolidated subsidiaries in which there is minority ownership.
ImprovementThe decrease in minority interest in the year ended July 31, 2008 is primarily due to a decrease in the minority shareholder’s ownership interest in SSV combined with a decrease in SSV's income before provision for income
taxes is primarily responsible for thetaxes. The increase in minority interest in the years ended July 31, 2007 and
2006. Improvements2006 is primarily due to improvement in SSV's
and SRL&S's income before provision for income
taxes are primarily responsible for the increase in minority interest in the year ended July 31, 2005.taxes. Income taxes. The Company's tax provision and effective tax rate are driven primarily by the amount of pre-tax income,
non-deductible executive compensation and other non-deductible items and taxable income generated by state jurisdictions that varies from the consolidated pre-tax
income.income and other non-deductible items. The increase in the Company’s tax provision for the years ended July 31,
2008, 2007
2006 and
20052006 was primarily driven by a significant increase in pre-tax income. The effective tax rate was
39.0%38.0%, 39.0% and
38.5%39.0% in the years ended July 31,
2008, 2007
and 2006,
and 2005, respectively.
The income tax provision recorded in the year ended July 31, 2008 reflects the impact of favorable settlements with state taxing authorities of $1.0 million. | | | Year Ended July 31, | | |
| | | 2007 | | 2006 | | 2005 | | | | | | |
| Mountain Reported EBITDA | | $ | 207,728 | | | $ | 181,201 | | | $ | 151,269 | | | | | | | | | | | | | |
| Lodging Reported EBITDA | | 18,199 | | | 13,114 | | | | 16,203 | | | | | | | | | | | |
| Resort Reported EBITDA | | 225,927 | | | 194,315 | | | | 167,472 | | | | | | | | | | | |
| Real Estate Reported EBITDA | | (2,482 | ) | | 6,719 | | | | 14,425 | | | | | | | | | | | |
| Total Reported EBITDA | | 223,445 | | | 201,034 | | | | 181,897 | | | | | | | | | | | |
| Depreciation and amortization | | (87,664 | ) | | (86,098 | ) | | | (89,968 | ) | | | | | | | | | | |
| Relocation and separation charges | | (1,433 | ) | | (5,096 | ) | | | -- | | | | | | | | | | | |
| Asset impairment charges | | -- | | | (210 | ) | | | (2,550 | ) | | | | | | | | | | |
| Mold remediation credit | | -- | | | 1,411 | | | | -- | | | | | | | | | | | |
| Loss on disposal of fixed assets, net | | (1,083 | ) | | (1,035 | ) | | | (1,528 | ) | | | | | | | | | | |
| Investment income | | 12,403 | | | 7,995 | | | | 2,066 | | |
| | | | | | | | | | | |
| Interest expense, net | | (32,625 | ) | | (36,478 | ) | | | (40,298 | ) | | | | | | | | | | |
| Loss on extinguishment of debt | | -- | | | -- | | | | (612 | ) | |
| (Loss) gain on sale of businesses, net | | (639 | ) | | 4,625 | | | | (7,353 | ) | | | | | | | | | | |
| Contract dispute charges | | (4,642 | ) | | (3,282 | ) | | | -- | | |
| | | | | | | | | | | |
| Gain (loss) on put options, net | | 690 | | | (1,212 | ) | | | 1,158 | | | | | | | | | | | |
| Other income, net | | -- | | | 50 | | | | 50 | | | | | | | | | | | |
| Minority interest in income of consolidated subsidiaries, net | | (7,801 | ) | | (6,694 | ) | | | (5,239 | ) | | | | | | | | | | |
| Income before provision for income taxes | | 100,651 | | | 75,010 | | | | 37,623 | | | | | | | | | | | |
| Provision for income taxes | | (39,254 | ) | | (29,254 | ) | | | (14,485 | ) | | | | | | | | | | |
| Net income | | $ | 61,397 | | | $ | 45,756 | | | $ | 23,138 | | | | | | | | | | | | | |
| | | July 31, | | |
| | | 2007 | | 2006 | | | | |
| Long-term debt | | $ | 593,733 | | $ | 525,313 | | | | | | |
| Long-term debt due within one year | | | 377 | | | 5,915 | | | | | | |
| Total debt | | | 594,110 | | | 531,228 | | | | | | |
| Less: cash and cash equivalents | | | 230,819 | | | 191,794 | | | | | | |
| Net debt | | $ | 363,291 | | $ | 339,434 | |
| | | | | | | |
The Company's liquidity profile continued to improve inremained strong during the year ended July 31, 2007.2008. The Company had no borrowings under its Credit Facility and had $230.8$162.3 million of cash and cash equivalents as of July 31, 2007.2008. For the years ended July 31, 2008, 2007 2006 and 2005,2006, cash and cash equivalents (decreased) increased by $(68.5) million, $39.0 million $55.2 million and $90.3$55.2 million, respectively. The Company generated $118.4$217.0 million of cash from operating activities during the year ended July 31, 2007,2008, compared to $63.7$118.4 million and $148.2$63.7 million generated during the years ended July 31, 20062007 and 2005,2006, respectively. For the last three fiscal years, the Company’s cash flows from operations have been positively impacted by an increase in Resort Reported EBITDA (the combination of Mountain Reported EBITDA and Lodging Reported EBITDA) and. In addition, significant net cash flows from operating activities were generated in the year ended July 31, 2008 due to an increase in Real Estate Reported EBITDA adjusted for non-cash cost of real estate sold (cash expenditures made in previous periods related to the cost of sales recorded in the current period), partially offset by an increase inless investments in real estate. For the years ended July 31, 2007 and 2006 net cash generated from operating activities was negatively impacted as investments in real estate exceeded Real Estate Reported EBITDA adjusted for real estate cost of sales. The Company currently anticipates that Resort Reported EBITDA will continue to provide a significant source of future operating cash flows as it expects to generate increased revenue combined with the generally fixed cost nature of the operations.flows. Additionally, anticipated closings of real estate projects will provide a significant source of future cash flows from operations, offset by further investments in real estate (as further discussed below within Significant Uses of Cash). Net cash provided by financing activities for the year ended July 31, 2008 decreased by $190.1 million compared to the year ended July 31, 2007 due to the decrease in net non-recourse borrowings of $111.0 million as well as an increase in repurchases of $84.6 million of the Company’s common stock during the year ended July 31, 2008 (as further discussed below within Significant Uses of Cash). Additionally, cash proceeds from the exercise of stock options decreased by $14.6 million (including tax benefits) for the year ended July 31, 2008 compared to the year ended July 31, 2007. The Company’s net cash provided by financing activities for the year ended July 31, 2007 was consistent with the prior periods;year ended July 31, 2006; however, cash proceeds from the exercise of stock options decreased by $42.6 million (including tax benefits) for the year ended July 31, 2007 compared to the year ended July 31, 2006. Additionally, the Company repurchased $15.0 million of its common stock during the year ended July 31, 2007 (as further discussed below within Significant Uses of Cash). The Company had2006, which was offset by an increase in netproceeds from non-recourse borrowing proceeds of $60.2 million, which was used to fund a portion of its investments in real estate. The Company’s financing activities generated $53.5 million of cashborrowings in the year ended July 31, 2006 primarily due to cash proceeds from the exercise of stock options of $46.6 million, net proceeds from real estate financings of $13.4 million and the tax benefit from the exercise of stock options as a result of the adoption of SFAS 123R, as discussed above, of $14.3 million, which were partially offset by the repurchase of common stock of $10.8 million (as further discussed below within Significant Uses of Cash).2007. In addition to the Company’s $230.8$162.3 million of cash and cash equivalents atas of July 31, 2007,2008, the Company has available $226.0$306.2 million under its Credit Facility (which represents the total commitment of $300$400 million less certain letters of credit outstanding of $74.0$93.8 million). As of July 31, 20072008 and 2006,2007, total long-term debt (including long-term debt due within one year) was $594.1$556.7 million and $531.2$594.1 million, respectively, with the increase atdecrease as of July 31, 2007 being2008 due to the net repayment of non-recourse financing related to the Company’s vertical real estate projects. Net Debt (defined as long-term debt plus long-term debt due within one year less cash and cash equivalents) increased from $339.4 million as of July 31, 2006 to $363.3 million as of July 31, 2007 to $394.4 million as of July 31, 2008 due to the increase in long-term debt from non-recourse financing partially offset by the increasea reduction in cash and cash equivalents.equivalents as discussed above, partially off-set by a reduction in borrowings under the Company’s non-recourse financings. The Company believes it is in a good positionwell positioned to take advantage of potential strategic options as further discussed below, as the Company has significant cash and cash equivalents on hand and no revolver borrowings under its Credit Facility. The Company expects that its liquidity needs in the near term will be met by continued utilization of operating cash flows and through borrowings under construction loan agreements entered into by the Company’s wholly-owned subsidiaries, Arrabelle at Vail Square, LLC and The Chalets at The Lodge at Vail, LLC(including cash to be generated from anticipated real estate closings net of proceeds used to pay off real estate specific financing) and borrowings, if necessary, under the Credit Facility (see Note 4, Long-Term Debt, ofFacility. In order to provide additional flexibility for the Notes to Consolidated Financial Statements, for more information onCompany’s liquidity needs, the construction loanCompany finalized in March 2008 an agreement with Arrabellethe lenders in its Credit Facility to utilize an accordion feature to expand commitments under the existing facility by $100 million (for a total borrowing capacity of $400 million), at Vail Square, LLC and The Chalets at The Lodge at Vail, LLC).the same terms existing in the current facility. The Company also expects to enter into non-recourse financings on certain otherbelieves the Credit Facility, which matures in 2012, including the expanded commitments would provide added flexibility especially when evaluating future financing needs for its real estate projects such as The Ritz-Carlton Residences, Vail.given the current state of the non-recourse financing available in the capital markets, and is priced favorably, with any new borrowings currently being priced at LIBOR plus 0.50%. TheIn addition to building excess cash, the Company is currently evaluatingcontinuously evaluates how to useutilize its excess cash, including aany combination of the following strategic options: increase resort capital expenditures, increaseself-funded real estate under development, continue recent levels of investment for further development,in resort assets, pursue strategic acquisitions, payoffpay off outstanding debt, repurchase additional common stock of the Company and/or other options to return value to shareholders, including the repurchase of additional stock of the Company.stockholders. The Company’s debt generally has favorable fixed interest rates and is long-term in nature. The Company’s Credit Facility and the Indenture limit the Company’s ability to make investments or distributions, including the payment of dividends and/or the repurchase of the Company’s common stock, and the pay off of certain of its debt, including its 6.75% Notes.The Company expects to spend approximately $325$260 million to $345$280 million in calendar year 20072008 for real estate development projects, including the construction of associated resort-related depreciable assets, of which $146$153 million was spent as of July 31, 2007,2008, leaving approximately $179$107 million to $199$127 million to spend in the remainder of calendar year 2007. As indicated in the table under Contractual Obligations below, the Company has significant cash commitments in the near term. These commitments are primarily related to the completion of several major real estate development projects under construction.2008. The Company has entered into contracts with third parties to provide construction-related services to the Company throughout the course of construction for these projects; commitments for future services to be performed over the next several years under such current contracts total approximately $376$291 million. The primary projects are expected to include continued construction and development costs, as well as planning and infrastructure costs associated with planned development projects in and around each of the Company’s resorts. The Company expects investments in real estate will be higher than historical levelssignificant for the foreseeable future as the Company continues its vertical development efforts. The Company has not finalized its real estate development plan for calendar year 2008. As noted above, the2009. The Company obtained non-recourse financing to partially fund construction of Arrabelle and The Lodge at Vail Chalets projects. The Company expects to utilize similar financing arrangements for certain other development projects, such as The Ritz-Carlton Residences, Vail. In addition to utilizing project-specific financing and cash on hand as appropriate, the Company also pre-sells units requiring deposits in a proposed development prior to committing to the completion of the development. On March 9, 2006, the Company'sCompany’s Board of Directors approved the repurchase of up to 3,000,000 shares of common stock.stock and on July 16, 2008 approved an increase of the Company’s common stock repurchase authorization by an additional 3,000,000 shares. During the year ended July 31, 2007,2008, the Company repurchased 358,4002,330,608 shares of common stock at a cost of $15.0$99.6 million. Since inception of this stock repurchase plan, the Company has repurchased 673,5003,004,108 shares at a cost of approximately $25.8$125.5 million, as ofthrough July 31, 2007.2008. As of July 31, 2007, 2,326,5002008, 2,995,892 shares remained available to repurchase under the existing repurchase authorization. Subsequent to July 31, 2007, the Company repurchased 232,504 additional shares at a cost of approximately $11.7 million. Shares of common stock purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of shares under the Company'sCompany’s employee share award plans. Acquisitions under the sharestock repurchase program willmay be made from time to time at prevailing prices as permitted by applicable laws, and subject to market conditions and other factors. The timing as well as the number of shares that may be repurchased under the program will depend on a number of factors including the Company'sCompany’s future financial performance, the Company'sCompany’s available cash resources and competing uses for cash that may arise in the future, the restrictions in the Credit Facility and in the Indenture, prevailing prices of the Company'sCompany’s common stock and the number of shares that become available for sale at prices that the Company believes are attractive. The stock repurchase program may be discontinued at any time and is not expected to have a significant impact on the Company'sCompany’s capitalization. The Company must abide by certain restrictive financial covenants under its Credit Facility and the Indenture. The most restrictive of those covenants include the following Credit Facility covenants: Net Funded Debt to Adjusted EBITDA ratio, Minimum Net Worth and the Interest Coverage ratio (each as defined in the Credit Agreement). In addition, the Company’s financing arrangements, including the Indenture, limit its ability to incur certain indebtedness, make certain restricted payments, enter into certain investments, make certain affiliate transfers and may limit its ability to enter into certain mergers, consolidations or sales of assets. The Company’s borrowing availability under the Credit Facility is primarily determined by the Net Funded Debt to Adjusted EBITDA ratio, which is based on the Company’s segment operating performance, as defined in the Credit Agreement. As part of its ongoing operations, the Company enters into arrangements that obligate the Company to make future payments under contracts such as debt agreements, construction agreements in conjunction with the Company’s development activities and lease agreements. Debt obligations, which total $594.1$556.7 million as of July 31, 20072008 are recognized as liabilities in the Company's Consolidated Balance Sheet as of July 31, 2007.2008. Obligations under construction contracts are not recognized as liabilities in the Company’s Consolidated Balance Sheet until services and/or goods are received which is in accordance with GAAP. Additionally, operating lease obligations, which total $50.7$68.7 million as of July 31, 2007,2008, are not recognized as liabilities in the Company's Consolidated Balance Sheet, which is in accordance with GAAP. A summary of the Company's contractual obligations as of July 31, 20072008 is as follows (in thousands): | | | | | Payments Due by Period |
| | | | | | | 2-3 | | 4-5 | | | More than |
Contractual Obligations | | Total | | 2008 | | years | | years | | | 5 years |
Long-Term Debt (1) | | $ | 594,110 | | $ | 377 | | $ | 102,425 | | $ | 1,943 | | $ | 489,365 |
Fixed Rate Interest (1) | | | 227,025 | | | 30,833 | | | 59,868 | | | 59,073 | | | 77,251 |
| Operating Leases and Service Contracts | | | 50,670 | | | 12,271 | | | 16,186 | | | 9,833 | | | 12,380 |
Purchase Obligations (2) | | | 669,231 | | | 622,305 | | | 42,626 | | | 4,300 | | | -- |
Other Long-Term Obligations (3) | | | 1,086 | | | 377 | | | -- | | | -- | | | 709 |
| Total Contractual Cash Obligations | | $ | 1,542,122 | | $ | 666,163 | | $ | 221,105 | | $ | 75,149 | | $ | 579,705 |
(1) The fixed-rate interest payments included in the table above assume that all fixed-rate debt outstanding as of July 31, 20072008 will be held to maturity. Interest payments associated with variable-rate debt have not been included in the table. Assuming that the amounts outstanding under variable-rate long-term debt as of July 31, 20072008 are held to maturity, and utilizing interest rates in effect at July 31, 2007,2008, the Company anticipates that its annual interest payments (including commitment fees and letter of credit fees) on variable rate long-term debt as of July 31, 20072008 will be in the range of $4.0$2.0 million to $5.0$3.0 million (excluding interest payments of $5.9 million and $1.9approximately $1.0 million to be paid in the yearsyear ending July 31, 2008 and 2009, respectively, related to non-recourse real estate financings)financing) for at least the next five years. The future annual interest obligations noted herein are estimated only in relation to debt outstanding as of July 31, 2007,2008, and do not reflect interest obligations on potential future debt including non-recourse financing associated with real estate development. The Company frequently acquires intangible assets, including goodwill, primarily through business combinations. The assignment of value to individual intangible assets generally requires the assistance of a specialist, such as an appraiser. The assumptions used in the appraisal process are forward-looking, and thus are subject to significant interpretation. Because individual intangible assets (i) may be expensed immediately upon acquisition; (ii) amortized over their estimated useful life; or (iii) not amortized, the assigned values and lives, when applicable, could have a material effect on current and future period results of operations. Further, intangibles are subject to certain judgments when evaluating impairment pursuant to SFAS No. 142, "Goodwill“Goodwill and Intangible Assets"Assets” (“SFAS 142”), discussed further in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements. The Company tests goodwill and indefinite lived intangible assets annually for impairment under SFAS 142 as of May 1, or whenever events may indicate a possible impairment exists. Additionally, future operating results could trigger significant future non-cash impairment charges. The Company must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties relating to these uncertain tax positions. The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. As a result of the implementation of FIN 48, the Company recognizes liabilities for uncertain tax positions based on the two-step process prescribed within the interpretation. The first step is required to estimate its income taxes in each jurisdiction in whichevaluate the tax position for recognition by determining if the weight of available evidence indicates that it operates. This processis more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires the Company to estimate and measure the actual current tax exposure together with assessing temporary differences resulting from differing treatmentbenefit as the largest amount that is more than 50% likely of items for taxbeing realized upon ultimate settlement. It is inherently difficult and financial reporting purposes. These temporary differences result in deferred tax assets and liabilities on the Company's Consolidated Balance Sheets. The Company must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and,subjective to the extent recovery is not likely, must establish a valuation allowance. This assessment is complicated by the fact thatestimate such amounts, as this requires the Company files itsto determine the probability of various possible outcomes. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax return on a calendar year basis which is different from its fiscal year end. As of July 31, 2007, the Company had total deferred tax assets of $62.5 million (before valuation allowances)law, effectively settled issues under audit and total deferred tax liabilities of $118.0 million. The deferred tax asset contains a valuation allowance representing the portion that management does not believe will be recovered from future taxable income. Management believes that sufficient taxable income will be generated in the future, primarily through the reversal of the deferred tax liabilities, to realize the benefit of the Company's deferred tax assets for which valuation allowances have not been recorded against.
Judgments and Uncertainties
The Company has approximately $2.8 million (tax-effected) of NOLs carryforward as of July 31, 2007 for which it has not recorded a valuation allowance against. The Company is relying on the reversal of deferred tax liabilities and generation of future taxable income to utilize this carryforward.
Effect if Actual Results Differ From Assumptions
If the Company were to incur substantial tax losses, the carryforward for which it has not recorded a valuation allowance against could expire without being utilized resulting in an increased tax expense in the period that the Company believes that it more likely than not the carryforward will not be realized.
Tax Contingencies.
Description
The Company is subject to periodic review by domestic tax authorities fornew audit of the Company's income tax returns. These audits generally include questions regarding the Company's tax filing positions, including the amount and timing of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposures associated with the Company's various tax filing positions, including state and local taxes, the Company recorded reserves for probable exposure. activity. A significant amount of time may pass before a particular matter, for which the Company may have established a reserve, is audited and fully resolved.
In June 2006, the FASB issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The requirements of FIN 48 are effective for the Company beginning August 1, 2007 (its fiscal year ending July 31, 2008). Although the Company has not completed its analysis, the Company does not expect the implementation of FIN 48 will have a significant impact on its financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy which prioritizes the inputs to valuation techniques used to classify the source of the information.measure fair value. The requirements of SFAS 157 are effective for the Company beginning August 1, 2008 (its(the Company’s fiscal year ending July 31, 2009). In February 2008, the FASB issued Staff Position (“FSP”) 157-2, “Effective Date of FASB Statement No. 157.” This FSP delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 (the Company's fiscal year ending July 31, 2010) and interim periods within the fiscal year of adoption. The adoption of SFAS 157 for financial assets and liabilities will not have a material impact on the Company’s financial position or results of operations. The Company is incurrently evaluating the processimpacts, if any, the adoption of evaluating this guidancethe provisions of SFAS 157 for nonfinancial assets and therefore has not yet determined the impact that SFAS 157liabilities will have on the Company’s financial position or results of operations upon adoption.operations. The Company's mountain and lodging operations are seasonal in nature. In particular, revenue and profits for the Company's Mountainmountain and most of its lodging operations are substantially lower and historically result in losses from late spring to late fall. Conversely, peak operating seasons for GTLC, certain managed hotel properties and the Company's owned golf courses occur during the summer months while the winter season generally results in operating losses. However, revenueRevenue and profits generated by GTLC's summer operations, management fees from thosecertain managed properties, certain other lodging properties and golf operations are not nearly sufficient to fully offset the Company's off-season losses from its mountain and other lodging operations. During the year ended July 31, 2007, 79%2008, 80% of total combined Mountain and Lodging segment net revenue was earned during the second and third fiscal quarters. Therefore, the operating results for any three-month period are not necessarily indicative of the results that may be achieved for any subsequent quarter or for a full year (see Note 16,15, Selected Quarterly Financial Data, of the Notes to Consolidated Financial Statements). Interest Rate Risk. The Company's exposure to market risk is limited primarily to the fluctuating interest rates associated with variable rate indebtedness. At July 31,
2007,2008, the Company had
$139.5$102.0 million of variable rate indebtedness, representing
23.5%18.3% of the Company's total debt outstanding, at an average interest rate during the year ended July 31,
20072008 of
6.2%5.2%. Based on variable-rate borrowings outstanding as of July 31,
2007,2008, a 100-basis point (or 1.0%) change in LIBOR
would have causedwill cause the Company's annual interest payments to change by
$1.4$0.8 million. The Company's market risk exposure fluctuates based on changes in underlying interest rates.
Vail Resorts, Inc.
Vail Resorts, Inc.
Consolidated Financial Statements for the Years Ended July 31, 2008, 2007 2006 and 20052006
| F-2 |
| | |
| F-3 |
| | |
Consolidated Financial Statements | |
| F-4 |
| F-5 |
| F-6 |
| F-7 |
| F-8 |
| F-9 |
| | |
Financial Statement Schedule: | |
| The following consolidated financial statement schedule of the Company is filed as part of this Report on Form 10-K and should be read in conjunction with the Company's Consolidated Financial Statements: | |
| | |
| 59 |
To the Shareholders and Board of Directors
of Vail Resorts, Inc.:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Vail Resorts, Inc. and its subsidiaries at July 31, 20072008 and 2006,2007, and the results of their operations and their cash flows for each of the three years in the period ended July 31, 20072008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 20072008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in fiscal 2006.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
September 26, 200724, 2008
(In thousands, except share and per share amounts)
| | | July 31, | | July 31, | |
| | | 2007 | | | 2006 | | 2008 | | | 2007 | |
Assets | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 230,819 | | $ | 191,794 | | $ | 162,345 | | $ | 230,819 | |
| Restricted cash | | 54,749 | | | 20,322 | | 58,437 | | | 54,749 | |
| Trade receivables, net of allowances of $2,118 and $1,388, respectively | | 43,557 | | | 35,949 | |
| Inventories, net of reserves of $826 and $755, respectively | | 48,064 | | | 42,278 | |
| Deferred income taxes (Note 12) | | 15,056 | | | 11,938 | |
| Trade receivables, net of allowances of $1,666 and $2,118, respectively | | | 50,185 | | | 43,557 | |
| Inventories, net of reserves of $1,211 and $826, respectively | | | 49,708 | | | 48,064 | |
| Deferred income taxes (Note 11) | | | 15,142 | | | 15,056 | |
| Other current assets | | 19,392 | | | 23,693 | | 23,078 | | | 19,392 | |
| Total current assets | | 411,637 | | | 325,974 | | 358,895 | | | 411,637 | |
| Property, plant and equipment, net (Note 5) | | 885,926 | | | 851,112 | | 1,056,837 | | | 885,926 | |
| Real estate held for sale and investment | | 357,586 | | | 259,384 | | 249,305 | | | 357,586 | |
| Deferred charges and other assets | | 30,129 | | | 29,615 | | 38,054 | | | 30,129 | |
| Notes receivable | | 8,639 | | | 10,638 | | 8,051 | | | 8,639 | |
| Goodwill, net (Note 5) | | 141,699 | | | 135,811 | | 142,282 | | | 141,699 | |
| Intangible assets, net (Note 5) | | 73,507 | | | 75,109 | | 72,530 | | | 73,507 | |
| Total assets | | $ | 1,909,123 | | $ | 1,687,643 | | $ | 1,925,954 | | $ | 1,909,123 | |
| | | | | | | | | | | | |
Liabilities and Stockholders' Equity | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | |
| Accounts payable and accrued expenses (Note 5) | | $ | 281,779 | | $ | 230,762 | | $ | 294,182 | | $ | 281,779 | |
| Income taxes payable | | 37,441 | | | 17,517 | | 57,474 | | | 37,441 | |
| Long-term debt due within one year (Note 4) | | 377 | | | 5,915 | | 15,355 | | | 377 | |
| Total current liabilities | | 319,597 | | | 254,194 | | 367,011 | | | 319,597 | |
| Long-term debt (Note 4) | | 593,733 | | | 525,313 | | 541,350 | | | 593,733 | |
| Other long-term liabilities (Note 5) | | 181,830 | | | 158,490 | | 183,643 | | | 181,830 | |
| Deferred income taxes (Note 12) | | 72,213 | | | 73,064 | |
| Commitments and contingencies (Note 14) | | | | | | |
| Put option liabilities (Note 10) | | -- | | | 1,245 | |
| Deferred income taxes (Note 11) | | | 75,279 | | | 72,213 | |
| Commitments and contingencies (Note 13) | | | | | | | |
| Minority interest in net assets of consolidated subsidiaries | | 27,711 | | | 32,560 | | 29,915 | | | 27,711 | |
| Stockholders’ equity: | | | | | | | | | | | |
| Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and outstanding | | -- | | | -- | | -- | | | -- | |
| Common stock, $0.01 par value, 100,000,000 shares authorized, and 39,747,976 and 39,036,282 shares issued, respectively (Note 17) | | 397 | | | 390 | |
| Common stock, $0.01 par value, 100,000,000 shares authorized, and 39,926,496 and 39,747,976 shares issued, respectively | | | 399 | | | 397 | |
| Additional paid-in capital | | 534,370 | | | 509,505 | | 545,773 | | | 534,370 | |
| Retained earnings | | 205,118 | | | 143,721 | | 308,045 | | | 205,118 | |
| Treasury stock (Note 17) | | (25,846 | ) | | (10,839) | |
| Treasury stock, at cost; 3,004,108 and 673,500 shares, respectively (Note 16) | | | (125,461 | ) | | (25,846 | ) |
| Total stockholders’ equity | | 714,039 | | | 642,777 | | 728,756 | | | 714,039 | |
| Total liabilities and stockholders’ equity | | $ | 1,909,123 | | $ | 1,687,643 | | $ | 1,925,954 | | $ | 1,909,123 | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
Vail Resorts, Inc.
(In thousands, except per share amounts)
| | | Year Ended July 31, | | Year Ended July 31, |
| | | 2007 | | 2006 | | 2005 | | 2008 | | 2007 | | 2006 |
| Net revenue: | | | | | | | | | | | | |
| Mountain | | $ | 665,377 | | | $ | 620,441 | | | $ | 540,855 | | | $ | 685,533 | | | $ | 665,377 | | | $ | 620,441 | |
| Lodging | | | 162,451 | | | 155,807 | | | | 196,351 | | | | 170,057 | | | 162,451 | | | | 155,807 | |
| Real estate | | | 112,708 | | | 62,604 | | | | 72,781 | | | | 296,566 | | | 112,708 | | | | 62,604 | |
| Total net revenue | | | 940,536 | | | 838,852 | | | | 809,987 | | | | 1,152,156 | | | 940,536 | | | | 838,852 | |
| Operating expense: | | | | | | | | | | | | |
| Segment operating expense: | | | | | | | | | | | | |
| Mountain | | | 462,708 | | | 443,116 | | | | 391,889 | | | | 470,362 | | | 462,708 | | | | 443,116 | |
| Lodging | | | 144,252 | | | 142,693 | | | | 177,469 | | | | 159,832 | | | 144,252 | | | | 142,693 | |
| Real estate | | | 115,190 | | | 56,676 | | | | 58,254 | | | | 251,338 | | | 115,190 | | | | 56,676 | |
| Total segment operating expense | | | 722,150 | | | 642,485 | | | | 627,612 | | | | 881,532 | | | 722,150 | | | | 642,485 | |
| Other operating (expense) income: | | | | | | | | | | | | | | | | | | | | | | |
| Gain on sale of real property | | | | 709 | | -- | | | | -- | |
| Depreciation and amortization | | | (87,664 | ) | | (86,098 | ) | | | (89,968 | ) | | | (93,794 | ) | | (87,664 | ) | | | (86,098 | ) |
| Relocation and separation charges (Note 8) | | | (1,433 | ) | | (5,096 | ) | | | -- | | | | -- | | (1,433 | ) | | | (5,096 | ) |
| Asset impairment charges (Note 11) | | | -- | | | (210 | ) | | | (2,550 | ) | |
| Mold remediation credit (Note 14) | | | -- | | | 1,411 | | | | -- | | |
| Asset impairment charges | | | | -- | | -- | | | | (210 | ) |
| Mold remediation credit (Note 13) | | | | -- | | -- | | | | 1,411 | |
| Loss on disposal of fixed assets, net | | | (1,083 | ) | | (1,035 | ) | | | (1,528 | ) | | | (1,534 | ) | | (1,083 | ) | | | (1,035 | ) |
| Income from operations | | | 128,206 | | | 105,339 | | | | 88,329 | | | | 176,005 | | 128,206 | | | | 105,339 | |
| Mountain equity investment income, net | | | 5,059 | | | 3,876 | | | | 2,303 | | | | 5,390 | | 5,059 | | | | 3,876 | |
| Lodging equity investment loss | | | -- | | | -- | | | | (2,679 | ) | |
| Real estate equity investment income (loss) | | | -- | | | 791 | | | | (102 | ) | |
| Investment income | | | 12,403 | | | 7,995 | | | | 2,066 | | |
| Real estate equity investment income | | | | -- | | -- | | | | 791 | |
| Investment income, net | | | | 8,285 | | 12,403 | | | | 7,995 | |
| Interest expense, net | | | (32,625 | ) | | (36,478 | ) | | | (40,298 | ) | | | (30,667 | ) | | (32,625 | ) | | | (36,478 | ) |
| Loss on extinguishment of debt | | | -- | | | -- | | | | (612 | ) | |
| (Loss) gain on sale of businesses, net (Note 9) | | | (639 | ) | | 4,625 | | | | (7,353 | ) | | | -- | | (639 | ) | | | 4,625 | |
| Contract dispute charges (Note 14) | | | (4,642 | ) | | (3,282 | ) | | | -- | | |
| Contract dispute credit (charges), net (Note 13) | | | | 11,920 | | (4,642 | ) | | | (3,282 | ) |
| Gain (loss) on put options, net (Note 10) | | | 690 | | | (1,212 | ) | | | 1,158 | | | | -- | | 690 | | | | (1,212 | ) |
| Other income, net | | | -- | | | 50 | | | | 50 | | | | -- | | -- | | | | 50 | |
| Minority interest in income of consolidated subsidiaries, net | | | (7,801 | ) | | (6,694 | ) | | | (5,239 | ) | | | (4,920 | ) | | (7,801 | ) | | | (6,694 | ) |
| Income before provision for income taxes | | | 100,651 | | | 75,010 | | | | 37,623 | | | | 166,013 | | 100,651 | | | | 75,010 | |
| Provision for income taxes (Note 12) | | | (39,254 | ) | | (29,254 | ) | | | (14,485 | ) | |
| Provision for income taxes (Note 11) | | | | (63,086 | ) | | (39,254 | ) | | | (29,254 | ) |
| Net income | | $ | 61,397 | | | $ | 45,756 | | | $ | 23,138 | | | $ | 102,927 | | $ | 61,397 | | | $ | 45,756 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Per share amounts (Note 3): | | | | | | | | | | | | | | | | | | | | | | |
| Basic net income per share | | $ | 1.58 | | | $ | 1.21 | | | $ | 0.65 | | | $ | 2.67 | | | $ | 1.58 | | | $ | 1.21 | |
| Diluted net income per share | | $ | 1.56 | | | $ | 1.19 | | | $ | 0.64 | | | $ | 2.64 | | | $ | 1.56 | | | $ | 1.19 | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
Vail Resorts, Inc.
(In thousands, except share amounts)
| | | Common Stock | | | Additional | | | | | | | | | | | | Total | | | | | | | | | | | | | | | | | |
| | | Shares | | | | | | | | Paid-in | | | Deferred | Retained | | Treasury | | Stockholders' | | | | | | | | | Additional | | | | | | | | Total |
| | | Class A | | | Common | | | Total | | | Amount | | Capital | | | Compensation | Earnings | | Stock | | Equity | | | | Common Stock | | Paid-in | | | Deferred | Retained | | Treasury | | Stockholders’ |
| Balance, July 31, 2004 | | 6,114,834 | | | 29,222,828 | | | 35,337,662 | | | $ | 353 | | | $ | 416,660 | | | $ | (677 | ) | | $ | 74,827 | | | $ | -- | | $ | 491,163 | | |
| Net income | | -- | | | -- | | | -- | | | | -- | | | | -- | | | | -- | | | | 23,138 | | | -- | | | 23,138 | | |
| Conversion of Class A shares | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| to common shares (Note 17) | | (6,114,834 | ) | | 6,114,834 | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | -- | | | -- | | |
| Amortization of deferred | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| compensation | | -- | | | -- | | | -- | | | | -- | | | | -- | | | | 348 | | | | -- | | | -- | | | 348 | | |
| Issuance of shares | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| under share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| award plans (Note 18) | | -- | | | 1,258,531 | | | 1,258,531 | | | | 13 | | | | 21,928 | | | | -- | | | | -- | | | -- | | | 21,941 | | |
| Tax benefit of stock option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| exercises | | -- | | | -- | | | -- | | | | -- | | | | 3,939 | | | | -- | | | | -- | | | -- | | | 3,939 | | |
| | | | | | Shares | | | Amount | | Capital | | | Compensation | Earnings | | Stock | | Equity |
| Balance, July 31, 2005 | | -- | | | 36,596,193 | | | 36,596,193 | | | | 366 | | | | 442,527 | | | | (329 | ) | | | 97,965 | | | -- | | | 540,529 | | | | | 36,596,193 | | | $ | 366 | | | $ | 442,527 | | | $ | (329 | ) | | $ | 97,965 | | | $ | -- | | $ | 540,529 | |
| Net income | | -- | | | -- | | | -- | | | | -- | | | | -- | | | | -- | | | | 45,756 | | | -- | | | 45,756 | | | | | -- | | | | -- | | | | -- | | | | -- | | | | 45,756 | | | -- | | | 45,756 | |
| Stock-based compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note 18) | | -- | | | -- | | | -- | | | | -- | | | | 6,476 | | | | -- | | | | -- | | | -- | | | 6,476 | | |
| (Note 17) | | | | | -- | | | | -- | | | | 6,476 | | | | -- | | | | -- | | | -- | | | 6,476 | |
| Reversal of deferred | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| compensation due to adoption | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| of SFAS 123R | | -- | | -- | | -- | | -- | | | (329 | ) | | 329 | | | -- | | -- | | -- | | | -- | | -- | | | (329 | ) | | 329 | | | -- | | -- | | -- | |
| Issuance of shares | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| under share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| award plans (Note 18) | | -- | | | 2,440,089 | | | 2,440,089 | | | | 24 | | | | 46,508 | | | | -- | | | | -- | | | -- | | | 46,532 | | |
| Tax benefit of stock option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| exercises | | -- | | | -- | | | -- | | | | -- | | | | 14,323 | | | | -- | | | | -- | | | -- | | | 14,323 | | |
| award plans (Note 17) | | | | | 2,440,089 | | | | 24 | | | | 46,508 | | | | -- | | | | -- | | | -- | | | 46,532 | |
| Tax benefit from share | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| award plans | | | | | -- | | | | -- | | | | 14,323 | | | | -- | | | | -- | | | -- | | | 14,323 | |
| Repurchase of common stock | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note 17) | | -- | | | -- | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | (10,839 | ) | | (10,839 | ) | |
| (Note 16) | | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | (10,839 | ) | | (10,839 | ) |
| Balance, July 31, 2006 | | -- | | | 39,036,282 | | | 39,036,282 | | | | 390 | | | | 509,505 | | | | -- | | | | 143,721 | | | (10,839 | ) | | 642,777 | | | | | 39,036,282 | | | | 390 | | | | 509,505 | | | | -- | | | | 143,721 | | | (10,839 | ) | | 642,777 | |
| Net income | | -- | | | -- | | | -- | | | | -- | | | | -- | | | | -- | | | | 61,397 | | | -- | | | 61,397 | | | | | -- | | | | -- | | | | -- | | | | -- | | | | 61,397 | | | -- | | | 61,397 | |
| Stock-based compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note 18) | | -- | | | -- | | | -- | | | | -- | | | | 6,965 | | | | -- | | | | -- | | | -- | | | 6,965 | | |
| (Note 17) | | | | | -- | | | | -- | | | | 6,965 | | | | -- | | | | -- | | | -- | | | 6,965 | |
| Issuance of shares | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| under share | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| award plans (Note 18) | | -- | | | 711,694 | | | 711,694 | | | | 7 | | | | 10,975 | | | | -- | | | | -- | | | -- | | | 10,982 | | |
| Tax benefit of stock option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| exercises | | -- | | | -- | | | -- | | | | -- | | | | 6,925 | | | | -- | | | | -- | | | -- | | | 6,925 | | |
| award plans (Note 17) | | | | | 711,694 | | | | 7 | | | | 10,975 | | | | -- | | | | -- | | | -- | | | 10,982 | |
| Tax benefit from share | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| award plans | | | | | -- | | | | -- | | | | 6,925 | | | | -- | | | | -- | | | -- | | | 6,925 | |
| Repurchase of common stock | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note 16) | | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | (15,007 | ) | | (15,007 | ) |
| Balance, July 31, 2007 | | | | | 39,747,976 | | | | 397 | | | | 534,370 | | | | -- | | | | 205,118 | | | (25,846 | ) | | 714,039 | |
| Net income | | | | | -- | | | | -- | | | | -- | | | | -- | | | | 102,927 | | | -- | | | 102,927 | |
| Stock-based compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note 17) | | -- | | | -- | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | (15,007 | ) | | (15,007 | ) | | | | -- | | | | -- | | | | 8,414 | | | | -- | | | | -- | | | -- | | | 8,414 | |
| Balance, July 31, 2007 | | -- | | | 39,747,976 | | | 39,747,976 | | | $ | 397 | | | $ | 534,370 | | | $ | -- | | | $ | 205,118 | | | $ | (25,846 | ) | $ | 714,039 | | |
| Issuance of shares | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| under share | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| award plans (Note 17) | | | | | 178,520 | | | | 2 | | | | 1,122 | | | | -- | | | | -- | | | -- | | | 1,124 | |
| Tax benefit from share | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| award plans | | | | | -- | | | | -- | | | | 1,867 | | | | -- | | | | -- | | | -- | | | 1,867 | |
| Repurchase of common stock | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Note 16) | | | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | | (99,615 | ) | | (99,615 | ) |
| Balance, July 31, 2008 | | | | | 39,926,496 | | | $ | 399 | | | $ | 545,773 | | | $ | -- | | | $ | 308,045 | | | $ | (125,461 | ) | $ | 728,756 | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
Vail Resorts, Inc.
(In thousands)
| | | Year Ended July 31, | | Year Ended July 31, |
| | | 2007 | | 2006 | | 2005 | | 2008 | | 2007 | | 2006 |
| Cash flows from operating activities: | | | | | | | | | | | | | | | | | | |
| Net income | | $ | 61,397 | | $ | 45,756 | | $ | 23,138 | | | $ | 102,927 | | $ | 61,397 | | $ | 45,756 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | 87,664 | | | 86,098 | | 89,968 | | | | 93,794 | | | 87,664 | | 86,098 | |
| Non-cash cost of real estate sales | | | 81,176 | | | 35,121 | | 38,425 | | |
| Non-cash stock-based compensation expense | | | 6,998 | | | 6,523 | | 437 | | |
| Real estate cost of sales | | | | 208,820 | | | 81,176 | | 35,121 | |
| Stock-based compensation expense | | | | 8,414 | | | 6,998 | | 6,523 | |
| Asset impairment charges | | | -- | | | 210 | | 2,550 | | | | -- | | | -- | | 210 | |
| Non-cash mold remediation credit | | | -- | | | (559 | ) | | -- | | |
| Mold remediation credit | | | | -- | | | -- | | (559 | ) |
| Loss (gain) on sale of businesses, net | | | 639 | | | (4,625 | ) | | 7,353 | | | | -- | | | 639 | | (4,625 | ) |
| Loss on extinguishment of debt | | | -- | | | -- | | 612 | | |
| Deferred income taxes, net | | | (3,968 | ) | | | 1,322 | | (7,514 | ) | | | 2,980 | | | (3,968 | ) | | 1,322 | |
| Minority interest in net income of consolidated subsidiaries | | | 7,801 | | | 6,694 | | 5,239 | | | | 4,920 | | | 7,801 | | 6,694 | |
| Other non-cash expense (income), net | | | 720 | | | (6,291 | ) | | (3,433 | ) | | | (7,268 | ) | | | 720 | | (6,291 | ) |
| Changes in assets and liabilities: | | | | | | | | | | | | | | | | | | |
| Restricted cash | | | (34,427 | ) | | | (2,069 | ) | | (2,222 | ) | | | (3,688 | ) | | | (34,427 | ) | | (2,069 | ) |
| Accounts receivable, net | | | (4,496 | ) | | | (2,644 | ) | | (3,665 | ) | | | (12,173 | ) | | | (4,496 | ) | | (2,644 | ) |
| Inventories, net | | | (5,171 | ) | | | (4,811 | ) | | (5,074 | ) | | | (1,643 | ) | | | (5,171 | ) | | (4,811 | ) |
| Investments in real estate | | | (179,234 | ) | | | (129,728 | ) | | (72,164 | ) | | | (217,482 | ) | | | (179,234 | ) | | (129,728 | ) |
| Notes receivable | | | (2,590 | ) | | | (1,925 | ) | | 4,052 | | | | 4,429 | | | (2,590 | ) | | (1,925 | ) |
| Accounts payable and accrued expenses | | | 30,691 | | | 26,213 | | 26,443 | | | | 5,946 | | | 30,691 | | 26,213 | |
| Income taxes receivable/payable | | | 19,924 | | | 4,538 | | 21,960 | | | | 20,033 | | | 19,924 | | 4,538 | |
| Deferred real estate credits | | | 25,330 | | | 14,539 | | 29,755 | | |
| Deferred real estate deposits | | | | (2,308 | ) | | | 25,330 | | 14,539 | |
| Private club deferred initiation fees and deposits | | | 21,438 | | | 7,126 | | 8,324 | | | | 15,867 | | | 21,438 | | 7,126 | |
| Other assets and liabilities, net | | | 4,550 | | | (17,812 | ) | | (16,007 | ) | | | (6,572 | ) | | | 4,550 | | (17,812 | ) |
| Net cash provided by operating activities | | | 118,442 | | | 63,676 | | 148,177 | | | | 216,996 | | | 118,442 | | 63,676 | |
| Cash flows from investing activities: | | | | | | | | | | | | | | | | | | |
| Capital expenditures | | | (119,232 | ) | | | (88,901 | ) | | (79,975 | ) | | | (150,892 | ) | | | (119,232 | ) | | (88,901 | ) |
| Distributions from joint ventures | | | - | | | 522 | | 6,588 | | |
| Cash received from disposal of fixed assets | | | 554 | | | 823 | | 2,019 | | |
| Cash received from sale of businesses | | | 3,544 | | | 30,712 | | 108,399 | | | | -- | | | 3,544 | | 30,712 | |
| Purchase of minority interests | | | (8,387 | ) | | | -- | | (9,748 | ) | | | -- | | | (8,387 | ) | | -- | |
| Other investing | | | (8,625 | ) | | | (5,149 | ) | | -- | | | | 2,757 | | | (8,071 | ) | | (3,804 | ) |
| Net cash (used in) provided by investing activities | | | (132,146 | ) | | | (61,993 | ) | | 27,283 | | |
| Net cash used in investing activities | | | | (148,135 | ) | | | (132,146 | ) | | (61,993 | ) |
| Cash flows from financing activities: | | | | | | | | | | | | | | | | | | |
| Repurchases of common stock | | | (15,007 | ) | | | (10,839 | ) | | -- | | | | (99,615 | ) | | | (15,007 | ) | | (10,839 | ) |
| Payment of financing costs | | | (1,294 | ) | | | (1,584 | ) | | (1,774 | ) | | | (695 | ) | | | (1,294 | ) | | (1,584 | ) |
| Proceeds from borrowings under Non-Recourse Real Estate Financings | | | 75,019 | | | 25,548 | | -- | | | | 136,519 | | | 75,019 | | 25,548 | |
| Payments of Non-Recourse Real Estate Financings | | | (1,493 | ) | | | (12,191 | ) | | -- | | | | (174,008 | ) | | | (1,493 | ) | | (12,191 | ) |
| Payment of Credit Facility Term Loan | | | -- | | | -- | | (98,750 | ) | |
| Proceeds from borrowings under other long-term debt | | | 64,612 | | | 38,112 | | 176,423 | | | | 77,641 | | | 64,612 | | 38,112 | |
| Payments of other long-term debt | | | (75,284 | ) | | | (42,248 | ) | | (181,239 | ) | | | (78,121 | ) | | | (75,284 | ) | | (42,248 | ) |
| Distributions from joint ventures to minority shareholders | | | (10,005 | ) | | | (4,239 | ) | | (1,807 | ) | | | (2,939 | ) | | | (10,005 | ) | | (4,239 | ) |
| Proceeds from exercise of stock options | | | 11,496 | | | 46,649 | | 21,939 | | | | 1,994 | | | 11,496 | | 46,649 | |
| Tax benefit from exercise of stock options | | | 6,925 | | | 14,323 | | -- | | |
| Tax benefit from share award plans | | | | 1,867 | | | 6,925 | | 14,323 | |
| Other financing | | | (2,240 | ) | | | -- | | -- | | | | 22 | | | (2,240 | ) | | -- | |
| Net cash provided by (used in) financing activities | | | 52,729 | | | 53,531 | | (85,208 | ) | |
| Net increase in cash and cash equivalents | | | 39,025 | | | 55,214 | | 90,252 | | |
| Net cash (used in) provided by financing activities | | | | (137,335 | ) | | | 52,729 | | 53,531 | |
| Net (decrease) increase in cash and cash equivalents | | | | (68,474 | ) | | | 39,025 | | 55,214 | |
| Cash and cash equivalents: | | | | | | | | | | | | | | | | | | |
| Beginning of period | | | 191,794 | | | 136,580 | | 46,328 | | | | 230,819 | | | 191,794 | | 136,580 | |
| End of period | | $ | 230,819 | | $ | 191,794 | | $ | 136,580 | | | $ | 162,345 | | $ | 230,819 | | $ | 191,794 | |
| | | | | | | | | | | | | | | | | | | |
| Cash paid for interest, net of amounts capitalized | | $ | 23,573 | | $ | 33,550 | | $ | 38,158 | | | $ | 34,298 | | $ | 23,573 | | $ | 33,550 | |
| Taxes paid, net | | | 16,357 | | | 8,617 | | -- | | | $ | 35,483 | | $ | 16,357 | | $ | 8,617 | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
Vail Resorts, Inc.
(In thousands)
| | | Year Ended July 31, |
| | | | 2007 | | | 2006 | | | 2005 |
| Land exchange with the United States Forest Service | | $ | -- | | $ | 5,407 | | $ | -- |
| | | Year Ended July 31, |
| | | | 2008 | | | 2007 | | | 2006 |
| Land exchange with the United States Forest Service | | $ | -- | | $ | -- | | $ | 5,407 |
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
1. Organization and Business
Vail Resorts, Inc. ("(“Vail Resorts"Resorts” or the “Parent Company”) is organized as a holding company and operates through various subsidiaries. Vail Resorts and its subsidiaries (collectively, the "Company"“Company”) currently operate in three business segments: Mountain, Lodging and Real Estate. In the Mountain segment, the Company owns and operates five world-class ski resort properties at the Vail, Breckenridge, Keystone and Beaver Creek mountain resorts in Colorado and the Heavenly Mountain Resort (“Heavenly”) in the Lake Tahoe area of California and Nevada, as well as ancillary businesses, primarily including ski school, dining and retail/rental operations, at Vail, Breckenridge, Keystone and Beaver Creek mountains in Colorado and the Heavenly Ski Resort ("Heavenly") in the Lake Tahoe area of California and Nevada.operations. These resorts useoperate primarily on Federal land under the terms of Special Use Permits granted by the USDA Forest Service (the “Forest Service”). The Company also holds a 69.3% interest in SSI Venture, LLC ("SSV"(“SSV”), a retail/rental company. In the Lodging segment, the Company owns and/or manages a collection of luxury hotels under its RockResorts International, LLC ("RockResorts"(“RockResorts”) brand, as well as other strategic lodging properties and a large number of condominiums located in proximity to the Company’s ski resorts, the Grand Teton Lodge Company ("GTLC"(“GTLC”), which operates three destination resorts at Grand Teton National Park (under a National Park Service concessionaire contract), and golf courses. Vail Resorts Development Company ("VRDC"(“VRDC”), a wholly-owned subsidiary, conducts the operations of the Company's Real Estate segment. The Company’s Real Estate segment, holdswhich owns and develops real estate in and around the Company’s resort communities. The Company's MountainCompany’s mountain business and its Lodginglodging properties at or around the Company’s ski resorts are seasonal in nature with peak operating seasons from mid-November through mid-April. The Company'sCompany’s operations at GTLC and its golf courses generally operate from mid-May through mid-October. The Company also has non-majority owned investments in various other entities, some of which are consolidated (see Note 6, Investments in Affiliates and Note 7, Variable Interest Entities).
2. Summary of Significant Accounting Policies
Principles of Consolidation-- The accompanying Consolidated Financial Statements include the accounts of the Company, its majority-owned subsidiaries and all variable interest entities for which the Company is the primary beneficiary. Investments in which the Company does not have a controlling interest or is not the primary beneficiary are accounted for under the equity method. All significant intercompany transactions have been eliminated in consolidation.
Cash and Cash Equivalents-- The Company considers all highly liquid investments purchased with an original maturitymaturities of three months or less at the date of purchase to be cash equivalents.
Restricted Cash-- Restricted cash represents certain deposits received from real estate development related transactions, amounts held as state-regulated reserves for self-insured workers' compensation claims and owner and guest advance deposits held in escrow for lodging reservations.
Trade Receivables-- The Company records trade accounts receivable in the normal course of business related to the sale of products or services. The Company charges interest on past due accounts at a rate of 18% per annum. The allowance for doubtful accounts is based on a specific reserve analysis and on a percentage of accounts receivable, and takes into consideration such factors as historical write-offs, the economic climate and other factors that could affect collectibility. Write-offs are evaluated on a case by case basis.
Inventories-- The Company's inventories consist primarily of purchased retail goods, food and beverage items and spare parts. Inventories are stated at the lower of cost or fair value, determined using primarily an average weighted cost method. The Company records a reserve for estimated shrinkage and obsolete or unusable inventory.
Property, Plant and Equipment-- Property, plant and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property, plant and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Depreciation is calculated on the straight-line method generally based on the following useful lives:
| | Estimated Life |
| | in Years |
| Land improvements | 20-3510-35 |
| Buildings and building improvements | 7-30 |
| Machinery and equipment | 2-30 |
| Furniture and fixtures | 3-10 |
| Software | 3 |
| Vehicles | 3 |
The Company capitalizes interest on non-real estate construction projects expected to take longer than one year to complete and cost more than $1.0 million. The Company records capitalized interest once construction activities commence and capitalized $1.6 million, $1.1 million $63,000 and zero$0.1 million of interest on non-real estate projects during the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively.
The Company has certain assets being used in resort operations that were constructed as amenities in conjunction with real estate development and included in project costs and expensed as the real estate was sold. Accordingly, there is no carrying value and no depreciation expense related to these assets in the Company's Consolidated Financial Statements. These assets were primarily placed in service from 1995 to 1997 with an original cost of approximately $33.0 million and an average estimated useful life of 15 years.
Real Estate Held for Sale and Investment-- The Company capitalizes as landreal estate held for sale and investment the original land acquisition cost, direct construction and development costs, property taxes, interest incurred on costs related to landreal estate under development and other related costs, including costs that will be capitalized as resort depreciable assets associated with mixed-use real estate development projects for which the Company cannot specifically identify the components at the time of incurring such cash outflows until the property reaches its intended use. The cost of sales for individual parcels of real estate within a project is determined using either specific identification or the relative sales value method, as applicable. Sales and marketing expenses are charged against income in the period incurred. Sales commission expenses are charged against income in the period that the related revenue is recorded. The Company records capitalized interest once construction activities commence and real estate deposits have been utilized in construction. Interest capitalized on real estate development projects during the years ended July 31, 2008, 2007 and 2006 and 2005 was $11.8 million, $8.2 million and $2.2 million, and $14,000, respectively.
The Company is a member in Keystone/Intrawest, LLC (“KRED”), which is a joint venture with Intrawest Resorts, Inc. formed to develop land at the base of Keystone Mountain. The Company's investment in KRED, including the Company's equity earnings from the inception of KRED, is reported as "real“real estate held for sale and investment"investment” in the accompanying Consolidated Balance Sheets. The Company recorded equity investment income (loss) of zero $791,000 and $(102,000) for the years ended July 31, 2008 and 2007, 2006 and 2005, respectively,$0.8 million for the year ended July 31, 2006, related to KRED. During the year ended July 31, 2006, KRED made distributions of $2.2 million related to the sale of final inventory of developed real estate. It is the intent of the members to dissolve KRED.
Deferred Financing Costs-- Costs incurred with the issuance of debt securities are included in deferred charges and other assets, net of accumulated amortization. Amortization is charged to interest expense over the respective term of the applicable debt issues.
Goodwill and Intangible Assets-- The Company has classified as goodwill the cost in excess of fair value of the net assets of companies acquired in purchase transactions. The Company's major intangible asset classes are trademarks, water rights, customer lists, property management contracts, Forest Service permits and excess reorganization value. As prescribed in Statement of Financial Accounting Standards (“SFAS”) No. 142, "Goodwill“Goodwill and Intangible Assets"Assets” (“SFAS 142”), goodwill and certain indefinite lived intangible assets, including excess reorganization value, water rights and certain trademarks, are no longer amortized, but are subject to at least annual impairment testing. The Company tests annually (or more often, if necessary) for impairment under SFAS 142 as of May 1. The Company determined that there was no impairment to goodwill or intangible assets during the years ended July 31, 2008, 2007 2006 and 2005.2006.
Long-lived Assets-- The Company evaluates potential impairment of long-lived assets and long-lived assets to be disposed of in accordance with SFAS No. 144, "Accounting“Accounting for the Impairment or Disposal of Long-Lived Assets"Assets” (“SFAS 144”). SFAS 144 establishes procedures for the review of recoverability and measurement of impairment, if necessary, of long-lived assets held and used by an entity. SFAS 144 requires that those assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. SFAS 144 requires that long-lived assets to be disposed of be reported at the lower of carrying amount or fair value less estimated selling costs (see Note 11, Asset Impairment Charges, for more information related to impaired long-lived assets).costs.
Revenue Recognition-- Mountain and Lodging revenue is derived from a wide variety of sources, including, among other things, sales of lift tickets (including season passes), ski school operations, dining operations, retail sales, equipment rentals, hotel operations, property management services, private club dues technology services and golf course greens fees, and are recognized as products are delivered or services are performed. Revenue from private club initiation fees is recognized over the estimated life of the club facilities. Revenue from arrangements with multiple deliverables is bifurcated into units of accounting based on relative fair values and revenue is separately recognized for each unit of accounting. If fair market value cannot be established for an arrangement, revenue is deferred until all deliverables have been performed.
Revenue from real estate primarily involves the sale of condominiums/townhomes and land parcels (including related improvements). Revenue is not recognized until a sale is fully consummated as evidenced by (i) a binding contract, (ii) receipt of adequate consideration and (iii) transfer to the buyer the usual risks and rewards of ownership. Contingent future profits, if any, are recognized only when received. The Company generally applies the "full accrual"“full accrual” method of revenue recognition thereby recognizing revenue and the related profit upon transfer of title to the buyer. However, if the Company has an obligation to complete improvements to parcels or to construct amenities or other facilities as contractually required by sales that have been consummated, the Company utilizes the "percentage-of-completion"“percentage-of-completion” method of revenue recognition. The Company recorded revenue under the percentage-of-completion method of approximately $1.4 million, $7.1 million $6.4 million and $11.2$6.4 million for the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively. Additionally, the Company uses the "deposit"“deposit” method for sales that have not been completed for which payments have been received from buyers (reflected as deferred creditsreal estate deposits in the Company’s Consolidated Balance Sheets), and as such no profit is recognized until the sale is consummated.
Real Estate Cost of Sales-- Costs of real estate transactions include direct project costs, common cost allocations (primarily determined on relative sales value) and may include accrued commitment liabilities for costs to be incurred subsequent to the sales transaction. The Company utilized the relative sales value method to determine cost of sales for individual parcels of real estate or condominium units sold within a project, when specific identification of costs cannot be reasonably determined. Estimates of project costs and cost allocations are reviewed at the end of each financial reporting period until a project is substantially completed and available for sale. Costs are revised and reallocated as necessary for material changes on the basis of current estimates and are reported as a change in estimate in the current period. The Company recorded changes in estimates that increased (decreased) increased real estate cost of sales by approximately $(636,000), $(214,000)$0.1 million, $(0.6) million and $435,000$(0.2) million for the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively. Additionally, for the years ended July 31, 2007 and 2006, the Company recorded $7.6 million and $1.8 million, respectively, of incremental estimatedremediation costs to complete the construction of the Jackson Hole Golf & Tennis Club (”(“JHG&TC”) cabins that havehad design and construction issues.
Deferred Revenue-- In addition to deferring certain revenue related to private club initiation fees and the real estate sales as noted above, the Company records deferred revenue related to the sale of season ski passes and certain dailyother lift ticket products. The number of season pass holder visits is estimated based on historical data and the deferred revenue is recognized throughout the season based on this estimate.
Reserve Estimates-- The Company uses estimates to record reserves for certain liabilities, including medical claims, workers' compensation, third-party loss contingencies, liabilities for the completion of real estate sold by the Company, allowance for doubtful accounts, and property taxes and loyalty reward programs among other items. The Company estimates the potential costs related to these liabilities that will be incurred and records that amount as a liability in its financial statements. These estimates are reviewed and appropriately adjusted as the facts and circumstances related to the liabilities change. The Company records legal costs related to defending its claims as incurred.
Advertising Costs-- Advertising costs are expensed at the time such advertising commences. Advertising expense for the years ended July 31, 2008, 2007 and 2006 and 2005 was $17.6 million, $17.5 million $17.2 million and $15.1$17.2 million, respectively. At July 31, 20072008 and 2006,2007, prepaid advertising costs of $337,000$0.4 million and $642,000,$0.3 million, respectively, are reported as "other“other current assets"assets” in the Company's Consolidated Balance Sheets.
Income Taxes-- The Company uses the liability method of accounting for income taxes as prescribed by SFAS No. 109, "Accounting“Accounting for Income Taxes"Taxes” (“SFAS 109”). Under SFAS 109, deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying Consolidated Balance Sheets and for operating loss and tax credit carryforwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. The Company's deferred tax assets have been reduced by a valuation allowance to the extent it is deemed to be more likely than not that some or all of the deferred tax assets will not be realized (see Note 12,11, Income Taxes, for more information related to deferred tax assets and liabilities).
On August 1, 2007, the Company adopted the Financial Accounting Standards Board’s (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. FIN 48 prescribes a two-step process to determine the amount of tax benefit to be recognized. However, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then valued to determine the amount of benefit to be recognized in the financial statements (see Note 11, Income Taxes, for more information related to the adoption of FIN 48).
Net Income Per Share-- In accordance with SFAS No. 128, "Earnings“Earnings Per Share"Share” (“EPS”) (“SFAS 128”), the Company computes net income per share on both the basic and diluted basis (see Note 3, Net Income Per Common Share).
Fair Value of Financial Instruments-- The recorded amounts for cash and cash equivalents, receivables, other current assets, and accounts payable and accrued expenses approximate fair value due to the short-term nature of these financial instruments. The fair value of amounts outstanding under the Company's credit facilities, Employee Housing Bonds and Non-Recourse Real Estate Financings (as defined in Note 4, Long-Term Debt) approximate book value due to the variable nature of the interest rate associated with that debt. The fair value of the 6.75% Notes (as defined in Note 4, Long-Term Debt) is based on quoted market price. The fair value of the Company's Industrial Development Bonds (as defined in Note 4, Long-Term Debt) and other long-term debt have been estimated using discounted cash flow analyses based on current borrowing rates for debt with similar remaining maturities and ratings. The estimated fair value of the 6.75% Notes, Industrial Development Bonds and other long-term debt as of July 31, 20072008 and 20062007 is presented below (in thousands):
| | | July 31, 2007 | | July 31, 2006 | | July 31, 2008 | | July 31, 2007 |
| | | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair | | Carrying | | Fair |
| | | Value | | Value | | Value | | Value | | Value | | Value | | Value | | Value |
| 6.75% Notes | | $ | 390,000 | | $ | 377,325 | | $ | 390,000 | | $ | 372,450 | | $ | 390,000 | | $ | 362,700 | | $ | 390,000 | | $ | 377,325 |
| Industrial Development Bonds | | | 57,700 | | | 59,206 | | | 61,700 | | | 63,423 | | $ | 57,700 | | $ | 57,556 | | $ | 57,700 | | $ | 59,206 |
| Other long-term debt | | | 6,953 | | | 6,863 | | | 7,335 | | | 7,211 | | $ | 7,036 | | $ | 6,590 | | $ | 6,953 | | $ | 6,863 |
Stock Compensation--At July 31, 2007,2008, the Company had four stock-based compensation plans, which are described more fully in Note 18,17, Stock Compensation Plans. Prior to August 1, 2005, theThe Company accounted for those plans under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related interpretations, as permitted by SFAS No. 123, "Accounting for Stock Based Compensation" ("SFAS 123").
Effective August 1, 2005, the Company adopteduses the fair value recognition provisions of SFAS No. 123R, "Share-Based Payment" ("“Share-Based Payment” (“SFAS 123R"123R”), using the modified prospective method. Under that transition method, compensation cost recognized in the years ended July 31, 2007 and 2006 includes: (i) compensation cost for all share-based payments granted prior to, but not yet vested as of August 1, 2005, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123 and (ii) compensation cost for all share-based payments granted subsequent to August 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. The grant-date fair value of share-based payments is amortized to expense ratably over the awards' vesting periods. Results for prior periods have not been restated.. The following table shows total stock-based compensation expense for the years ended July 31, 2008, 2007 2006 and 20052006 included in the Consolidated Statements of Operations (in thousands):
| | | Year Ended July 31, | | Year Ended July 31, |
| | | 2007 | 2006 | | 2005 | | 2008 | 2007 | | 2006 |
| Mountain operating expense | | $ | 3,824 | | $ | 3,685 | | | $ | 254 | | | $ | 3,834 | | $ | 3,824 | | | $ | 3,685 | |
| Lodging operating expense | | | 1,091 | | | 1,334 | | | 88 | | | | 1,294 | | | 1,091 | | | 1,334 | |
| Real estate operating expense | | | 2,083 | | | 1,504 | | | 95 | | | | 3,136 | | | 2,083 | | | 1,504 | |
| Pre-tax stock-based compensation expense | | | 6,998 | | | 6,523 | | | 437 | | | | 8,264 | | | 6,998 | | | 6,523 | |
| Less: benefit for income taxes | | | 2,628 | | | 2,450 | | | 164 | | | | 3,134 | | | 2,628 | | | 2,450 | |
| Net stock-based compensation expense | | $ | 4,370 | | $ | 4,073 | | | $ | 273 | | | $ | 5,130 | | $ | 4,370 | | | $ | 4,073 | |
As a result of adopting SFAS 123R on August 1, 2005, the Company's income before income taxes and net income for the year ended July 31, 2007 decreased $6.6 million and $4.1 million, respectively, and for the year ended July 31, 2006 decreased $6.1 million and $3.8 million, respectively as compared to accounting for share-based compensation under APB 25, after considering the change in the Company's compensation strategy to issue a portion of its stock-based compensation as restricted stock to certain levels of employees. The after-tax impact of stock-based compensation expense recorded pursuant to SFAS 123R resulted in a reduction in basic and diluted net income per share of $0.11 for each of the years ended July 31, 2007 and 2006.
Prior to the adoption of SFAS 123R, the Company reported all tax benefits for deductions resulting from the exercise of stock options as operating cash flows in the Consolidated Statements of Cash Flows. SFAS 123R requires that cash flows resulting from the tax benefits to be realized in excess of the compensation expense recognized in the Consolidated Statements of Operations before considering the impact of stock options that expire unexercised or forfeited (the "excess tax benefit") be classified as financing cash flows. The excess tax benefit of $6.9 million and $14.3 million classified as financing cash inflows for the years ended July 31, 2007 and 2006, respectively, would have been classified as operating cash inflows if the Company had not adopted SFAS 123R. The Company has elected to establish its pool of windfall tax benefits under the “long-form” method, and therefore, has calculated such excess amounts as if stock-based compensation expense on an individual grant basis had been recognized under the pro forma method of SFAS 123 and SFAS 123R.
The following table illustrates the effect on net income and net income per share if the Company had recorded in its Consolidated Statement of Operations the fair value recognition provisions of SFAS 123 to stock options granted under the Company's share award plans for the year ended July 31, 2005. For purposes of this pro forma disclosure, stock options granted subsequent to July 31, 2005 are not considered, the value of the stock options is estimated using a Black-Scholes option-pricing formula and the expense is amortized ratably over the options' vesting periods (in thousands, except per share amounts).
Year Ended July 31, |
| | | 2005 |
| Net income | | | | |
| As reported | | $ | 23,138 | |
| | Add: stock-based employee compensation expense included in reported net income, net of related tax effects | | | | 273 | |
| | Deduct: total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects | | | | (2,987 | ) |
| Pro forma | | | $ | 20,424 | |
| | | | | | |
| Basic net income per share | | | | | |
| | As reported | | | $ | 0.65 | |
| | Pro forma | | | $ | 0.57 | |
| | | | | | |
| Diluted net income per share | | | | | |
| | As reported | | | $ | 0.64 | |
| | Pro forma | | | $ | 0.56 | |
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for stock option grants in 2005: dividend yield of 0%; expected volatility of 35.3%; risk-free interest rate of 3.28%; and an expected life of five years. The weighted-average grant-date fair value per share of stock options granted in the year ended July 31, 2005 was $6.83.
Concentration of Credit Risk-- The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and restricted cash. The Company places its cash and temporary cash investments in high quality credit institutions. At times, suchinstitutions, but these investments may be in excess of FDIC insurance limits. The Company does not enter into financial instruments for trading or speculative purposes. Concentration of credit risk with respect to trade and notes receivables is limited due to the wide variety of customers and markets in which the Company transacts business, as well as their dispersion across many geographical areas. As a result, as of July 31, 2007, the Company did not consider itself to have any significant concentrations of credit risk. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains allowances for potential losses,collateral, but does require advance deposits on certain transactions, and historical losses have been within management's expectations. The Company does not enter into financial instruments for trading or speculative purposes.transactions.
Use of Estimates-- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements-- In June 2006, the FASB issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The requirements of FIN 48 are effective for the Company beginning August 1, 2007 (its fiscal year ending July 31, 2008). Although the Company has not completed its analysis, the Company does not expect the implementation of FIN 48 to have a significant impact on its financial position or results of operations.Pronouncements
-- In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, in GAAP, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy which prioritizes the inputs to valuation techniques used to classify the source of the information.measure fair value. The requirements of SFAS 157 are effective for the Company beginning August 1, 2008 (its(the Company’s fiscal year ending July 31, 2009). In February 2008, the FASB issued Staff Position (“FSP”) 157-2, “Effective Date of FASB Statement No. 157.” This FSP delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 (the Company's fiscal year ending July 31, 2010) and interim periods within the fiscal year of adoption. The adoption of SFAS 157 for financial assets and liabilities will not have a material impact on the Company’s financial position or results of operations. The Company is incurrently evaluating the processimpacts, if any, the adoption of evaluating this guidancethe provisions of SFAS 157 for nonfinancial assets and therefore has not yet determined the impact that SFAS 157liabilities will have on the Company’s financial position or results of operations upon adoption.operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 gives the Company the irrevocable option to carry many financial assets and liabilities at fair values,value, with changes in fair value recognized in earnings. The requirements of SFAS 159 are effective for the Company beginning August 1, 2008 (its(the Company’s fiscal year ending July 31, 2009), although early adoption is permitted.. The Company is indoes not expect the processadoption of evaluating this guidance and therefore has not yet determined the impact that SFAS 159 willto have a material effect on the Company’s financial position or results of operations upon adoption.
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. SFAS 141R also requires acquisition-related transaction expenses and restructuring costs be expensed as incurred rather than capitalized as a component of the business combination. SFAS 141R will be applicable prospectively to business combinations consummated after July 31, 2009 (the Company’s fiscal year ending July 31, 2010).
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”), which will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity within the balance sheet. Currently, noncontrolling interests (minority interests) are reported as a liability in the Company’s consolidated balance sheet and the related income (loss) attributable to minority interests is reflected as an expense (credit) in arriving at net income. Upon adoption of SFAS 160, the Company will be required to report its minority interests as a separate component of stockholders’ equity and present net income allocable to the minority interests along with net income attributable to the stockholders of the Company separately in its consolidated statement of operations. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively. The requirements of SFAS 160 are effective for the Company beginning August 1, 2009 (the Company’s fiscal year ending July 31, 2010).
3. Net Income Per Common Share
SFAS 128 establishes standards for computing and presenting EPS. SFAS 128 requires the dual presentation of basic and diluted EPS on the face of the income statementConsolidated Statements of Operations and requires a reconciliation of numerators (net income) and denominators (weighted-average shares outstanding) for both basic and diluted EPS in the footnotes. Basic EPS excludes dilution and is computed by dividing net income available to holders of common stockholdersstock by the weighted-average shares outstanding. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, resulting in the issuance of shares of common stock that would then share in the earnings of the Company. Presented below is basic and diluted EPS for the years ended July 31, 2008, 2007 2006 and 20052006 (in thousands, except per share amounts):
| | | Year Ended July 31, | | Year Ended July 31, |
| | | 2007 | | 2006 | | 2005 | | 2008 | | 2007 | | 2006 |
| | | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted | | Basic | | Diluted |
Net income per share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | $ | 61,397 | | | $ | 61,397 | | | $ | 45,756 | | $ | 45,756 | | $ | 23,138 | | $ | 23,138 | | | $ | 102,927 | | | $ | 102,927 | | | $ | 61,397 | | $ | 61,397 | | $ | 45,756 | | $ | 45,756 | |
| | | | | | | | �� | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted-average shares outstanding | | | 38,849 | | | | 38,849 | | | | 37,866 | | 37,866 | | 35,712 | | | 35,712 | | | | 38,616 | | | | 38,616 | | | | 38,849 | | 38,849 | | 37,866 | | | 37,866 | |
| Effect of dilutive securities | | | -- | | | | 525 | | | | -- | | 701 | | -- | | | 648 | | | | -- | | | | 318 | | | | -- | | 525 | | -- | | | 701 | |
| Total shares | | | 38,849 | | | | 39,374 | | | | 37,866 | | 38,567 | | 35,712 | | | 36,360 | | | | 38,616 | | | | 38,934 | | | | 38,849 | | 39,374 | | 37,866 | | | 38,567 | |
| Net income per share | | $ | 1.58 | | | $ | 1.56 | | | $ | 1.21 | | $ | 1.19 | | $ | 0.65 | | $ | 0.64 | | | $ | 2.67 | | | $ | 2.64 | | | $ | 1.58 | | $ | 1.56 | | $ | 1.21 | | $ | 1.19 | |
The number of shares issuable on the exercise of share based awards that were excluded from the calculation of diluted net income per share because the effect of their inclusion would have been anti-dilutive totaled 63,000, 18,000 334,000 and 631,000334,000 for the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively.
4. Long-Term Debt
Long-term debt as of July 31, 20072008 and 20062007 is summarized as follows (in thousands):
| | Fiscal Year | | | July 31, | | | July 31, | Fiscal Year | | | July 31, | | | July 31, |
| | Maturity (i) | | | 2007 | | | 2006 | Maturity (i) | | | 2008 | | | 2007 |
| Credit Facility Revolver (a) | 2012 | | $ | -- | | $ | -- | 2012 | | $ | -- | | $ | -- |
| SSV Facility (b) | 2011 | | | -- | | | 6,261 | 2011 | | | -- | | | -- |
| Industrial Development Bonds (c) | 2009-2020 | | | 57,700 | | | 61,700 | 2009-2020 | | | 57,700 | | | 57,700 |
| Employee Housing Bonds (d) | 2027-2039 | | | 52,575 | | | 52,575 | 2027-2039 | | | 52,575 | | | 52,575 |
| Non-Recourse Real Estate Financings (e) | 2009-2010 | | | 86,882 | | | 13,357 | 2010 | | | 49,394 | | | 86,882 |
| 6.75% Senior Subordinated Notes (f) | 2014 | | | 390,000 | | | 390,000 | 2014 | | | 390,000 | | | 390,000 |
| Other (g) | 2008-2029 | | | 6,953 | | | 7,335 | 2009-2029 | | | 7,036 | | | 6,953 |
| Total debt | | | | 594,110 | | | 531,228 | | | | 556,705 | | | 594,110 |
| Less: Current maturities (h) | | | | 377 | | | 5,915 | | | | 15,355 | | | 377 |
| Long-term debt | | | $ | 593,733 | | $ | 525,313 | | | $ | 541,350 | | $ | 593,733 |
| (a) | On March 13, 2007,20, 2008, The Vail Corporation (“Vail Corp.”), a wholly-owned subsidiary of the Company, entered into an amendment (the “Third Amendment”)exercised the accordion feature under the revolver component of its existing senior credit facility (the “Credit Facility”), as provided in the existing Fourth Amended and Restated Credit Agreement, (the “Credit Agreement”), amongdated as of January 28, 2005, as amended, between The Vail Corp., Bank of America, N.A. as administrative agent U.S. Bank National Association (“U.S. Bank”) and Wells Fargo Bank, National Association (“Wells Fargo”) as co-syndication agents, Deutsche Bank Trust Company Americas and LaSalle Bank National Association as co-documentation agents, and the lendersLenders party thereto. The Third Amendment amendedthereto (the “Credit Agreement”), which expanded the borrowing capacity from $300.0 million to $400.0 million at the same terms existing in the Credit Agreement to, among other things, (i) decrease the total loan commitment with respect to borrowings under the revolving facility (the “Credit Facility Revolver”) and letters of credit from $400 million to $300 million, (ii) improve pricing, including unused commitment fees and letter of credit fees and improve flexibility in the Company’s ability to make investments, (iii) extend the maturity date from January 28, 2010 to February 1, 2012 and (iv) eliminate certain covenant ratios and change, for pricing and covenant purposes, the gross debt leverage ratio to a net debt ratio.Agreement. |
Vail Corp. obligations under the Credit Agreement are guaranteed by the Company and certain of its subsidiaries and are collateralized by a pledge of all of the capital stock of Vail Corp., substantially all of its subsidiaries and the Company's interest in SSV. The proceeds of loans made under the Credit Agreement may be used to fund the Company's working capital needs, capital expenditures, acquisitions and other general corporate purposes, including the issuance of letters of credit. Borrowings under the Credit Agreement bear interest annually at the Company's option currently at the rate of (i) LIBOR plus 0.5% (5.82%(2.96% at July 31, 2007)2008) or (ii) the Agent's prime lending rate plus, in certain circumstances, a margin (8.25%(5.00% at July 31, 2007)2008). Interest rate margins fluctuate based upon the ratio of the Company's Net Funded Debt to Adjusted EBITDA (as defined in the Credit Agreement) on a trailing twelve-month basis. The Credit Agreement also includes a quarterly unused commitment fee, which is equal to a percentage determined by the Net Funded Debt to Adjusted EBITDA ratio, as defined in the Credit Agreement, times the daily amount by which the Credit Agreement commitment exceeds the total of outstanding loans and outstanding letters of credit. The unused amounts are accessible to the extent that the Net Funded Debt to Adjusted EBITDA ratio does not exceed the maximum ratio allowed at quarter-ends.quarter-end. The unused amount available for borrowing under the Credit Agreement was $226.0$306.2 million as of July 31, 2007,2008, net of certain letters of credit of $74.0$93.8 million outstanding under the Credit Agreement. The Credit Agreement provides for affirmative and negative covenants that restrict, among other things, the Company's ability to incur indebtedness, dispose of assets, make capital expenditures, make distributions and make investments. In addition, the Credit Agreement includes the following restrictive financial covenants: Net Funded Debt to Adjusted EBITDA ratio, Minimum Net Worth and the Minimum Interest Coverage ratio (each as defined in the Credit Agreement).
Additionally, the Company amended and restated its then existing senior credit facility in January 2005 to, among other things, (i) expand the total loan commitment and (ii) improve pricing, including unused commitment fees and letter of credit fees and improve flexibility in the Company’s ability to make investments. The Company recorded a $612,000 loss on extinguishment of debt in the year ended July 31, 2005 for the remaining unamortized deferred financing costs associated with the pay off of the term loan under such credit facility.
| (b) | In September 2005, SSV entered into a new credit facility ("(“SSV Facility"Facility”) with U.S. Bank as lender to refinance its existing credit facility and to provide additional financing for future acquisitions. The new facility provides for financing up to an aggregate $33$33.0 million consisting of (i) an $18$18.0 million working capital revolver, (ii) a $10$10.0 million reducing revolver and (iii) a $5$5.0 million acquisition revolver. Obligations under the SSV Facility are collateralized by a first priority security interest in all the assets of SSV ($90.294.3 million at July 31, 2007)2008). Availability under the SSV Facility is based on the book values of accounts receivable, inventories and rental equipment of SSV. The SSV Facility matures September 2010. Borrowings bear interest annually at SSV's option of (i) LIBOR plus 0.875% (6.20%(3.34% at July 31, 2007)2008) or (ii) U.S. Bank's prime rate minus 1.75% (6.50%(3.25% at July 31, 2007)2008). Proceeds under the working capital revolver are for SSV's seasonal working capital needs. No principal payments are due until maturity, and principal may be drawn and repaid at any time. Proceeds under the reducing revolver were used to pay off SSV's existing credit facility. Principal under the reducing revolver may be drawn and repaid at any time. The reducing revolver commitments decrease by $312,500$0.3 million on January 31, April 30, July 31 and October 31 of each year beginning January 31, 2006 ($7.86.6 million available at July 31, 2007)2008). Any outstanding balance in excess of the reduced commitment amount is due on the day of each commitment reduction. The acquisition revolver is to be utilized to make acquisitions subject to U.S. Bank's approval. Principal under the acquisition revolver may be drawn and repaid at any time. The acquisition revolver commitments decrease by $156,250$0.2 million on January 31, April 30, July 31 and October 31 of each year beginning January 31, 2007 ($4.53.9 million available at July 31, 2007)2008). Any outstanding balance in excess of the reduced commitment amount is due on the day of each commitment reduction. The SSV Facility contains certain restrictive financial covenants, including the Consolidated Leverage Ratio and Minimum Fixed Charge Coverage Ratio (each as defined in the underlying credit agreement). |
| (c) | The Company has outstanding $57.7 million of industrial development bonds (collectively, the "Industrial“Industrial Development Bonds"Bonds”), of which $41.2 million were issued by Eagle County, Colorado (the "Eagle“Eagle County Bonds"Bonds”) and mature, subject to prior redemption, on August 1, 2019. These bonds accrue interest at 6.95% per annum, with interest being payable semi-annually on February 1 and August 1. The promissory note with respect to the Eagle County Bonds between Eagle County and the Company is collateralized by the Forest Service permits for Vail and Beaver Creek. In addition, the Company has outstanding two series of refunding bonds (collectively, the "Summit“Summit County Bonds"Bonds”). TheAt July 31, 2008, the Series 1990 Sports Facilities Refunding Revenue Bonds, issued by Summit County, Colorado, have an aggregate outstanding principal amount of $15.0 million maturing in the year ending July 31, 2009 and bear interest at 7.875%. On August 29, 2008 the borrowings under the Series 1990 Sports Facilities Refunding Revenue Bond was paid in full. The Series 1991 Sports Facilities Refunding Revenue Bonds, issued by Summit County, Colorado, have an aggregate outstanding principal amount of $1.5 million maturing in the year ending July 31, 2011 and bear interest at 7.375%. The promissory note with respect to the Summit County Bonds between Summit County and the Company is pledged and endorsed to the Bank of New York as Trustee under the Indenture of Trust underlying the Summit County Bonds. The promissory note is also collateralized in accordance with a guaranty from Ralston Purina Company (subsequently assumed by Vail Corp. to the Trustee for the benefit of the registered owners of the bonds). |
| (d) | As of November 1, 2003, theThe Company began consolidatinghas recorded for financial reporting purposes the outstanding debt of four employee housing entitiesEmployee Housing Entities (each an “Employee Housing Entity” and collectively the "Employee“Employee Housing Entities"Entities”): Breckenridge Terrace, Tarnes, BC Housing and Tenderfoot. The Employee Housing Entities had previously been accounted for under the equity method (see Note 7, Variable Interest Entities). Accordingly, the outstanding indebtedness of the entities (collectively, the "Employee Housing Bonds") is included in the Company's Consolidated Balance Sheets as of July 31, 2007 and 2006. The proceeds of the Employee Housing Bonds were used to develop apartment complexes designated primarily for use by the Company's seasonal employees at its mountain resorts. The Employee Housing Bonds are variable rate, interest-only instruments with interest rates tied to LIBOR plus 0% to 0.05% (5.32%(2.46% to 5.37%2.51% at July 31, 2007)2008). Interest on the Employee Housing Bonds is paid monthly in arrears and the interest rate is adjusted weekly. No principal payments are due on the Employee Housing Bonds until maturity. Each Employee Housing Entity’s bonds were issued in two series. The Series A bonds for each Employee Housing Entity and the Series B bonds for Breckenridge Terrace, BC Housing and Tenderfoot are backed by letters of credit issued under the Credit Facility. The Series B bonds for Tarnes are backed by a letter of credit issued by a bank, for which the assets of Tarnes serve as collateral ($8.27.9 million at July 31, 2007)2008). The table below presents the principal amounts outstanding for the Employee Housing Bonds as of July 31, 20072008 and 20062007 (in thousands): |
| | Maturity | | | Tranche A | | | Tranche B | | | Total | Maturity (i) | | | Tranche A | | | Tranche B | | | Total |
| Breckenridge Terrace | 2039 | | $ | 14,980 | | $ | 5,000 | | $ | 19,980 | 2039 | | $ | 14,980 | | $ | 5,000 | | $ | 19,980 |
| Tarnes | 2039 | | | 8,000 | | | 2,410 | | | 10,410 | 2039 | | | 8,000 | | | 2,410 | | | 10,410 |
| BC Housing | 2027 | | | 9,100 | | | 1,500 | | | 10,600 | 2027 | | | 9,100 | | | 1,500 | | | 10,600 |
| Tenderfoot | 2035 | | | 5,700 | | | 5,885 | | | 11,585 | 2035 | | | 5,700 | | | 5,885 | | | 11,585 |
| Total | | | $ | 37,780 | | $ | 14,795 | | $ | 52,575 | | | $ | 37,780 | | $ | 14,795 | | $ | 52,575 |
| (e) | In January 2006, ArrabelleMarch 2007, The Chalets at The Lodge at Vail, Square, LLC ("Arrabelle"(“Chalets”), a wholly-owned subsidiary of the Company, entered into a construction loan agreement (the "Arrabelle Facility"(“Chalets Facility”) in the amount of up to $175$123.0 million with Wells Fargo, as administrative agent, book manager, and joint lead arranger, U.S. Bank as administrativejoint lead arranger and syndication agent, and U.S. Bank and Wells Fargo, as joint lead arrangers.the lenders party thereto. Borrowings under the ArrabelleChalets Facility are non-revolving and must be used for the payment of certain costs associated with the construction and development of ArrabelleThe Lodge at Vail Square,Chalets, a mixed-useresidential development consisting of 6713 luxury residential condominium units, as well as a 36-room RockResorts hotel, approximately 33,000 square feet of retail and restaurant space, a spa, private mountain club, skating rink anda spa, skier services facilities. The Arrabellebuilding and parking structure. Borrowings under the Chalets Facility matures on August 1, 2008, and principal payments are due at maturity, with certain pre-payment requirements, including upon the earlier of either the closing of the condominium units.units (of which the amount due is determined by the amount of proceeds received upon closing) or the stated maturity date of September 1, 2009. Borrowings under the ArrabelleChalets Facility are required to be paid in full by ArrabelleChalets prior to any distribution of funds from the closingclosings of the luxury condominium units to the Company. ArrabelleChalets has the option to extend the term of the ArrabelleChalets Facility for ninesix months, subject to certain requirements. Borrowings under the ArrabelleChalets Facility bear interest annually at Arrabelle'sthe Chalets’ option, at the rate of (i) LIBOR plus 1.45% (6.77%a margin of 1.35% (3.81% at July 31, 2007)2008) or (ii) the greater of (x) the administrative agent'sagent’s prime commercial lending rate (8.25%(5.00% at July 31, 2007)2008) or (y) the Federal Funds Rate in effect on that day as announced by the Federal Reserve Bank of New York, plus 0.5% (2.59% at July 31, 2008). Interest is payable monthly in arrears. The ArrabelleChalets Facility provides for affirmative and negative covenants that restrict, among other things, Arrabelle'sChalets’ ability to dispose of assets, transfer or pledge its equity interest, incur indebtedness and make investments or distributions. The ArrabelleChalets Facility contains non-recourse provisions to the Company with respect to repayment, whereby under event of default, the lenders have recourse only against Arrabelle'sChalets’ assets ($197.4191.4 million at July 31, 2007)2008) and as provided for below the lenders do not have recourse against assets held by the Company or Vail Corp. All assets of ArrabelleChalets are provided as collateral under the ArrabelleChalets Facility. At July 31, 2007,2008, borrowings under the ArrabelleChalets Facility were $60.5$49.4 million. The investment in the Chalet’s real estate development is recorded in real estate held for sale and investment. Subsequent to July 31, 2008, the Company had net repayments under the Chalets Facility of $6.1 million. |
In March 2007, The Chalets at The Lodge at Vail, LLC (“Chalets”), a wholly-owned subsidiary of the Company, entered into a construction loan agreement (the “Chalets Facility”) in the amount of up to $123 million with Wells Fargo, as administrative agent, book manager, and joint lead arranger, U.S. Bank as joint lead arranger and syndication agent, and the lenders party thereto. Borrowings under the Chalets Facility are non-revolving and must be used for the payment of certain costs associated with the construction and development of The Lodge at Vail Chalets, a residential development consisting of 13 luxury condominium units, as well as a private mountain club, a spa, skier services building and parking structure. The Chalets Facility matures on September 1, 2009, and principal payments are due at maturity, with certain pre-payment requirements, including upon the closing of the condominium units. Borrowings under the Chalets Facility are required to be paid in full by Chalets prior to any distribution of funds from the closings of the luxury condominium units to the Company. Chalets has the option to extend the term of the Chalets Facility for six months, subject to certain requirements. Borrowings under the Chalets Facility bear interest annually at the rate, at the Chalets’ option, of (i) LIBOR plus a margin of 1.35% (6.67% at July 31, 2007) or (ii) the greater of (x) the administrative agent’s prime commercial lending rate (8.25% at July 31, 2007) or (y) the Federal Funds Rate in effect on that day as announced by the Federal Reserve Bank of New York, plus 0.5% (5.78% at July 31, 2007). Interest is payable monthly in arrears. The Chalets Facility provides for affirmative and negative covenants that restrict, among other things, Chalets’ ability to dispose of assets, transfer or pledge its equity interest, incur indebtedness and make investments or distributions. The Chalets Facility contains non-recourse provisions to the Company with respect to repayment, whereby under event of default, the lenders have recourse only against Chalets’ assets ($100.7 million at July 31, 2007) and as provided for below the lenders do not have recourse against assets held by the Company or Vail Corp. All assets of Chalets are provided as collateral under the Chalets Facility. At July 31, 2007, borrowings under the Chalets Facility were $26.4 million.
On July 19, 2005, Gore Creek Place, LLC ("Gore Creek"), a wholly-owned subsidiary of the Company, entered into a construction loan agreement (the "Gore Creek Facility") in the amount of up to $30 million with U.S. Bank, as administrative agent and lender. Borrowings under the Gore Creek Facility were non-revolving and were used for the payment of certain costs associated with the construction and development of Gore Creek Place, a residential development consisting of 16 luxury duplex residences. The Gore Creek Facility had a scheduled maturity of July 19, 2007, and principal payments were due at the earlier of closing of sales for the Gore Creek residences or maturity. At July 31, 2006, borrowings under the Gore Creek Facility were $1.5 million. On August 3, 2006 the borrowings under the Gore Creek Facility were paid in full and the project was completed during the year ended July 31, 2007.
In connection with the Arrabelle Facility, Chalets Facility, and Gore Creek Facility (collectively, "Non-Recourse Real Estate Financings"), the Company and/or certain subsidiaries guaranteesguarantee the completion of the construction of the projectsproject (but not the repayment of any amounts drawn under the facilities)Chalet Facility). However, Vail Corp. could be responsible to pay damages to the lenders under very limited circumstances. If either the Company or Vail Corp. is required to perform Arrabelle’s or Chalets’ obligation to complete the projects,project, the lenders will make available to the Company or Vail Corp. any undisbursed commitments under the facilitiesChalets Facility for the completion of construction and development of the projects.project.
In January 2006, Arrabelle at Vail Square, LLC (“Arrabelle”), a wholly-owned subsidiary of the Company, entered into a construction loan agreement (“Arrabelle Facility”) in the amount of up to $175.0 million with U.S. Bank, as administrative agent, and U.S. Bank and Wells Fargo, as joint lead arrangers. Borrowings under the Arrabelle Facility were non-revolving and must be used for the payment of certain costs associated with the construction and development of The Arrabelle at Vail Square, a mixed-use development consisting of 66 luxury residential condominium units, a 36-room RockResorts hotel, approximately 33,000 square feet of retail and restaurant space, a spa, private mountain club, skating rink and skier services facilities. The Arrabelle Facility had a scheduled maturity of August 1, 2008, and principal payments were due at maturity, with certain pre-payment requirements, including upon the closing of the condominium units. During the year ended July 31, 2008 the borrowings under the Arrabelle Facility were paid in full.
| (f) | The Company has outstanding $390$390.0 million of Senior Subordinated Notes due 2014 (the "6.75% Notes"(“6.75% Notes”) issued in January 2004, the proceeds of which were used to purchase the previously outstanding $360 million principal amount of Senior Subordinated Notes due 2009 (the "8.75% Notes") and pay related premiums, fees and expenses.2004. The 6.75% Notes have a fixed annual interest rate of 6.75% with interest due semi-annually on February 15 and August 15. The 6.75% Notes will mature February 2014 and no principal payments are due to be paid until maturity. The Company has certain early redemption options under the terms of the 6.75% Notes. The premium for early redemption of the 6.75% Notes ranges from 0% to 3.375%, depending on the date of redemption beginning in February 2009. The 6.75% Notes are subordinated to certain of the Company's debts, including the Credit Facility. The Company's payment obligations under the 6.75% Notes are jointly and severally guaranteed by substantially all of the Company's current and future domestic subsidiaries (see Note 20,19, Guarantor Subsidiaries and Non-Guarantor Subsidiaries). The indentureIndenture, dated as of January 29, 2004 among the Company, the guarantors therein and The Bank of New York Mellon Trust Company N.A., as Trustee (the “Indenture”) governing the 6.75% Notes contains restrictive covenants which, among other things, limit the ability of the Company and its Restricted Subsidiaries (as defined in the Indenture) to (i) borrow money or sell preferred stock, (ii) create liens, (iii) pay dividends on or redeem or repurchase stock, (iv) make certain types of investments, (v) sell stock in the Restricted Subsidiaries, (vi) create restrictions on the ability of the Restricted Subsidiaries to pay dividends or make other payments to the Company, (vii) enter into transactions with affiliates, (viii) issue guarantees of debt and (ix) sell assets or merge with other companies. |
| (g) | Other obligations primarily consist of a $6.5$6.3 million note outstanding to the Colorado Water Conservation Board, which matures in the year ending July 31, 2029, and capital leases totaling $473,000.$0.7 million. Other obligations, including the Colorado Water Conservation Board note and the capital leases, bear interest at rates ranging from 3.5% to 6.0% and have maturities ranging from the year ending July 31, 20082009 to the year ending July 31, 2029. |
| (h) | Current maturities represent principal payments due in the next 12 months. |
| (i) | Maturities are based on the Company's July 31 fiscal year end. |
Aggregate maturities for debt outstanding as of July 31, 20072008 reflected by fiscal year are as follows (in thousands):
| | Non-Recourse Real Estate Financings | All Other | | Total | Non-Recourse Real Estate Financings | All Other | | Total |
| 2008 | $ | -- | $ | 377 | $ | 377 | |
| 2009 | | 60,530 | | 15,279 | | 75,809 | $ | -- | $ | 15,355 | $ | 15,355 |
| 2010 | | 26,352 | | 264 | | 26,616 | | 49,394 | | 344 | | 49,738 |
| 2011 | | -- | | 1,738 | | 1,738 | | -- | | 1,831 | | 1,831 |
| 2012 | | -- | | 205 | | 205 | | -- | | 305 | | 305 |
| 2013 | | | -- | | 318 | | 318 |
| Thereafter | | -- | | 489,365 | | 489,365 | | -- | | 489,158 | | 489,158 |
| Total debt | $ | 86,882 | $ | 507,228 | $ | 594,110 | $ | 49,394 | $ | 507,311 | $ | 556,705 |
The Company recorded gross interest expense of $44.1 million, $41.9 million $38.7 million and $40.3$38.7 million for the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively, of which $2.5 million, $1.9 million $1.8 million and $2.1$1.8 million was amortization of deferred financing costs. The Company capitalized $13.4 million, $9.3 million and $2.2 million and $14,000 of interest during the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively. The Company was in compliance with all of its financial and operating covenants required to be maintained under its debt instruments for all periods presented.
5. Supplementary Balance Sheet Information (in thousands)
The composition of property, plant and equipment follows:follows (in thousands):
| | | July 31, | | July 31, |
| | | 2007 | | 2006 | | 2008 | | 2007 |
| Land and land improvements | | $ | 249,291 | | | $ | 248,941 | | | $ | 265,123 | | | $ | 249,291 | |
| Buildings and building improvements | | | 553,958 | | | | 529,316 | | | | 685,393 | | | | 553,958 | |
| Machinery and equipment | | | 420,514 | | | | 393,949 | | | | 457,825 | | | | 420,514 | |
| Furniture and fixtures | | | 114,615 | | | | 113,696 | | | | 149,251 | | | | 114,615 | |
| Software | | | 27,756 | | | | 32,508 | | | | 39,605 | | | | 27,756 | |
| Vehicles | | | 27,179 | | | | 25,671 | | | | 28,829 | | | | 27,179 | |
| Construction in progress | | | 71,666 | | | | 39,149 | | | | 80,601 | | | | 71,666 | |
| Gross property, plant and equipment | | | 1,464,979 | | | | 1,383,230 | | | | 1,706,627 | | | | 1,464,979 | |
| Accumulated depreciation | | | (579,053 | ) | | | (532,118 | ) | | | (649,790 | ) | | | (579,053 | ) |
| Property, plant and equipment, net | | $ | 885,926 | | | $ | 851,112 | | | $ | 1,056,837 | | | $ | 885,926 | |
Depreciation expense for the years ended July 31, 2008, 2007 and 2006 and 2005 totaled $93.3 million, $84.0 million $81.7 million and $87.6$81.7 million, respectively.
The composition of intangible assets follows:follows (in thousands):
| | | July 31, | | July 31, |
| | | 2007 | | 2006 | | | 2008 | | 2007 | |
Indefinite lived intangible assets | | | | | | | | | | | | | | | | |
| Trademarks | | $ | 61,714 | | | $ | 59,379 | | | $ | 61,714 | | | $ | 61,714 | |
| Water rights | | | 11,180 | | | | 11,180 | | | | 10,684 | | | | 11,180 | |
| Excess reorganization value | | | 14,145 | | | | 14,145 | | | | 14,145 | | | | 14,145 | |
| Other intangible assets | | | 6,175 | | | | 6,577 | | | | 6,200 | | | | 6,175 | |
| Gross indefinite lived intangible assets | | | 93,214 | | | | 91,281 | | | | 92,743 | | | | 93,214 | |
| Accumulated amortization | | | (24,713 | ) | | | (24,752 | ) | | | (24,713 | ) | | | (24,713 | ) |
| Indefinite lived intangible assets, net | | | 68,501 | | | | 66,529 | | | | 68,030 | | | | 68,501 | |
| | | | | | | | | | | | | | | | | |
Goodwill | | | | | | | | | | | | | | | | |
| Goodwill | | | 159,053 | | | | 153,165 | | | | 159,636 | | | | 159,053 | |
| Accumulated amortization | | | (17,354 | ) | | | (17,354 | ) | | | (17,354 | ) | | | (17,354 | ) |
| Goodwill, net | | | 141,699 | | | | 135,811 | | | | 142,282 | | | | 141,699 | |
| | | | | | | | | | | | | | | | | |
Amortizable intangible assets | | | | | | | | | | | | | | | | |
| Customer lists | | | 17,814 | | | | 18,087 | | | | 17,814 | | | | 17,814 | |
| Property management contracts | | | 4,412 | | | | 10,869 | | | | 4,412 | | | | 4,412 | |
| Intellectual property | | | -- | | | | 4,348 | | |
| Forest Service permits | | | 5,905 | | | | 5,905 | | | | 5,905 | | | | 5,905 | |
| Other intangible assets | | | 15,308 | | | | 15,320 | | | | 15,159 | | | | 15,308 | |
| Gross amortizable intangible assets | | | 43,439 | | | | 54,529 | | | | 43,290 | | | | 43,439 | |
Accumulated amortization | | | | | | | | | | | | | | | | |
| Customer lists | | | (17,814 | ) | | | (17,851 | ) | | | (17,814 | ) | | | (17,814 | ) |
| Property management contracts | | | (3,643 | ) | | | (8,345 | ) | | | (3,726 | ) | | | (3,643 | ) |
| Intellectual property | | | -- | | | | (3,968 | ) | |
| Forest Service permits | | | (2,000 | ) | | | (1,826 | ) | | | (2,174 | ) | | | (2,000 | ) |
| Other intangible assets | | | (14,976 | ) | | | (13,959 | ) | | | (15,076 | ) | | | (14,976 | ) |
| Accumulated amortization | | | (38,433 | ) | | | (45,949 | ) | | | (38,790 | ) | | | (38,433 | ) |
| Amortizable intangible assets, net | | | 5,006 | | | | 8,580 | | | | 4,500 | | | | 5,006 | |
| | | | | | | | | | | | | | | | | |
| Total gross intangible assets | | | 295,706 | | | | 298,975 | | | | 295,669 | | | | 295,706 | |
| Total accumulated amortization | | | (80,500 | ) | | | (88,055 | ) | | | (80,854 | ) | | | (80,500 | ) |
| Total intangible assets, net | | $ | 215,206 | | | $ | 210,920 | | | $ | 214,812 | | | $ | 215,206 | |
Amortization expense for intangible assets subject to amortization for the years ended July 31, 2008, 2007 and 2006 and 2005 totaled $0.5 million, $3.7 million $4.3 million and $2.3$4.3 million, respectively, and is estimated to be approximately $336,000$0.3 million annually, on average, for the next five fiscal years.
The weighted-average amortization period (in years) for intangible assets subject to amortization is as follows:
| | July 31, | July 31, |
| | 2007 | | 2006 | 2008 | | 2007 |
| Customer lists | 8 | | 8 | 8 | | 8 |
| Property management contracts | 8 | | 10 | 8 | | 8 |
| Intellectual property | -- | | 6 | |
| Forest Service permits | 35 | | 35 | 35 | | 35 |
| Other intangible assets | 8 | | 8 | 8 | | 8 |
The changes in the net carrying amount of goodwill for the years ended July 31, 2008, 2007 2006 and 20052006 are as follows (in thousands):
| Balance at July 31, 2004 | | $ | 145,090 | | |
| Sale of Rancho Mirage | | | (6,396 | ) | |
| Assets held for sale adjustment | | | (185 | ) | |
| Purchase of minority interest | | | (1,775 | ) | |
| Put exercise adjustment | | | (1,227 | ) | |
| Balance at July 31, 2005 | | $ | 135,507 | | | $ | 135,507 | |
| Acquisition | | | 304 | | | | 304 | |
| Balance at July 31, 2006 | | $ | 135,811 | | | $ | 135,811 | |
| Purchase of minority interest | | | 2,955 | | | | 2,955 | |
| Sale of RTP | | | (3,049 | ) | | | (3,049 | ) |
| Acquisitions | | | 5,982 | | | | 5,982 | |
| Balance at July 31, 2007 | | $ | 141,699 | | | | 141,699 | |
| Acquisition | | | | 583 | |
| Balance at July 31, 2008 | | | $ | 142,282 | |
In December 2007, the Company acquired a retail/rental business, resulting in $0.6 million of goodwill. In March 2007, the Company acquired 20% of the minority interest in SSV, resulting in $3.0 million of goodwill. In April 2007, the Company sold its interest in RTP, LLC (“RTP”), resulting in a $3.0 million decrease of associated goodwill. In June 2007, the Company acquired retail/rental and dining businesses, resulting in $6.0 million of goodwill. In the year ended July 31, 2006, the Company acquired a retail/rental business, resulting in $304,000$0.3 million of goodwill. In July 2005, the Company sold the assets constituting The Lodge at Rancho Mirage (“Rancho Mirage”), resulting in a $6.4 million decrease of associated goodwill. The assets held for sale adjustment in the year ended July 31, 2005 relates to the goodwill associated with Snake River Lodge & Spa (“SRL&S”) which had been classified as held for sale. The purchase of minority interest in the year ended July 31, 2005 consists of an adjustment to reduce goodwill for the purchase of the remaining SRL&S minority interest at less than carrying value. The put exercise adjustment in the year ended July 31, 2005 consists of an adjustment to reduce goodwill for the purchase of the remaining RockResorts minority interest.
The composition of accounts payable and accrued expenses follows:follows (in thousands):
| | | July 31, | | July 31, |
| | | 2007 | 2006 | | 2008 | 2007 |
| Trade payables | | $ | 58,292 | | $ | 58,959 | | $ | 53,187 | | $ | 67,517 |
| Real estate development payables | | | 39,807 | | | 23,640 | | | 52,574 | | | 30,582 |
| Deferred revenue | | | 36,179 | | | 30,785 | | | 45,805 | | | 36,179 |
| Deferred credits and deposits | | | 51,351 | | | 24,026 | |
| Deferred real estate and other deposits | | | | 58,421 | | | 51,351 |
| Accrued salaries, wages and deferred compensation | | | 30,721 | | | 31,954 | | | 22,397 | | | 30,721 |
| Accrued benefits | | | 23,810 | | | 24,538 | | | 22,777 | | | 23,810 |
| Accrued interest | | | 14,710 | | | 14,969 | | | 14,552 | | | 14,710 |
| Liability to complete real estate projects, short term | | | 8,500 | | | 5,951 | | | 4,199 | | | 8,500 |
| Other accruals | | | 18,409 | | | 15,940 | | | 20,270 | | | 18,409 |
| Total accounts payable and accrued expenses | | $ | 281,779 | | $ | 230,762 | | $ | 294,182 | | $ | 281,779 |
The composition of other long-term liabilities follows:follows (in thousands):
| | | July 31, | | July 31, |
| | | 2007 | 2006 | | 2008 | 2007 |
| Private club deferred initiation fee revenue | | $ | 94,205 | | $ | 91,438 | | $ | 92,066 | | $ | 94,205 |
| Deferred real estate credits | | | 54,363 | | | 54,578 | |
| Deferred real estate deposits | | | | 45,775 | | | 54,363 |
| Private club initiation deposits | | | 17,767 | | | 1,308 | | | 29,881 | | | 17,767 |
| Liabilities to complete real estate projects | | | 6,301 | | | 550 | |
| Other long-term liabilities | | | 9,194 | | | 10,616 | | | 15,921 | | | 15,495 |
| Total other long-term liabilities | | $ | 181,830 | | $ | 158,490 | | $ | 183,643 | | $ | 181,830 |
6. Investments in Affiliates
The Company held the following investments in equity method affiliates as of July 31, 2007:2008:
Equity Method Affiliates | | Ownership Interest |
Slifer, Smith, and Frampton/Vail Associates Real Estate, LLC ("(“SSF/VARE"VARE”) | | 50 | % |
| KRED | | 50 | % |
| Clinton Ditch and Reservoir Company | | 43 | % |
Eclipse Television & Sports Marketing, LLC (“Eclipse”) | | * | |
Bachelor Gulch Resort, LLC (“BG Resort”) | | ** | |
| | | |
* The Company had a 20% ownership interest in Eclipse which it sold on July 31, 2007. |
** The Company had a 49% ownership interest in BG Resort which it sold on December 8, 2004. |
The Company had total net investments in equity method affiliates of $5.4$8.6 million and $6.4$5.4 million as of July 31, 20072008 and 2006,2007, respectively, classified as "deferred“deferred charges and other assets"assets” in the accompanying Consolidated Balance Sheets. The amount of retained earnings that represent undistributed earnings of 50-percent-or-less-owned entities accounted for by the equity method was $2.4$5.5 million and $2.9$2.4 million as of July 31, 2008 and 2007, respectively. During the years ended July 31, 2008, 2007 and 2006, respectively.distributions in the amounts of $2.3 million, $5.8 million and $5.2 million, respectively, were received from equity method affiliates.
Historically, the Company's carrying amount of the equity method investment in KRED differed from the value of the underlying equity in net assets due to the difference in the book value and fair market value of the land contributed by the Company to the entity. The land basis difference for KRED was $58,000 as of July 31, 2005, which was recognized in the year ended July 31, 2006, as all land was sold. In addition, the Company historically carried a basis difference related to its investment in BG Resort associated with the land beneath BG Resort's hotel facility. The Company recognized a $2.5 million gain in Real Estate revenue in the year ended July 31, 2005 as a result of the sale of the Company's investment in BG Resort.
7. Variable Interest Entities
The Company has determined that it is the primary beneficiary of the Employee Housing Entities, which are variable interest entitiesVariable Interest Entities (“VIEs”), and has consolidated them in its Consolidated Financial Statements. As a group, as of July 31, 2007,2008, the Employee Housing Entities had total assets of $40.1$38.3 million (primarily recorded in property, plant and equipment)equipment, net) and total liabilities of $66.7$68.8 million (primarily recorded in long-term debt)debt as “Employee Housing Bonds”). All of the assets of Tarnes ($8.27.9 million as of July 31, 2007)2008) of Tarnes serve as collateral for Tarnes' Tranche B obligations.Employee Housing Bonds. The Company has issued under its Credit Facility $38.3 million letters of credit related to the Tranche A Employee Housing Bonds and $12.6 million letters of credit related to the Tranche B Employee Housing Bonds. The letters of credit would be triggered in the event that one of the entities defaults on required payments. The letters of credit have no default provisions.
The Company has determined that it is the primary beneficiary of Avon Partners II, LLC ("APII"(“APII”), which is a VIE. APII owns commercial space and the Company currently leases substantially all of that space. APII had total assets of $5.1$5.6 million (primarily recorded in property, plant and equipment) and no debt as of July 31, 2007.2008.
The Company had determined that it was the primary beneficiary of FFT Investment Partners (“FFT”), which was a VIE. FFT’s sole asset was a private residence in Eagle County, Colorado. In March 2007, the private residence owned by FFT was sold for $6.7 million, and thereafter FFT was dissolved.
The Company, through various lodging subsidiaries, manages the operations of several entities that own hotels in which the Company has no ownership interest.interest in the entities that own such hotels. The Company also has extended a $2.0 million note receivable to one of these entities. These entities were formed to acquire, own, operate and realize the value in resort hotel properties. The Company managed the day-to-day operations of six hotel properties as of July 31, 2007.2008. The Company has determined that the entities that own the hotel properties are VIEs, and the management contracts are significant variable interests in these VIEs. The Company has also determined that it is not the primary beneficiary of these entities and, accordingly, is not required to consolidate any of these entities. Based on information provided to the Company by owners of the entities, theseThese VIEs had estimated total assets of approximately $190.0$246.1 million (unaudited) and total liabilities of approximately $50.1$147.2 million (unaudited) as of July 31, 2007.. The Company's maximum exposure to loss as a result of its involvement with these VIEs is limited to the note receivable and accrued interest of approximately $2.0$2.2 million and the net book value of the intangible asset associated with thea management agreementsagreement in the amount of $769,000$0.7 million as of July 31, 2007.2008.
8. Relocation and Separation Charges
In February 2006, the Company announced a plan to relocate its corporate headquarters; the plan was formally approved by the Company’s Board of Directors in April 2006. The relocation process (which also includesincluded the consolidation of certain other operations of the Company) was completed by July 31, 2007. The total chargescharge associated with the relocation was $3.8$1.4 million (which includes chargesand $2.4 million for severance and retention of $1.5 million, charges for contract termination costs of $348,000 and facility, employee and other relocation costs of $1.9 million), all of which has been recorded throughthe years ended July 31, 2007. The above2007 and 2006, respectively. These amounts do not reflectexclude any of the anticipated benefits expected to be realized from the relocation and consolidation of offices.
The following table summarizes the activity and balances of the liability related to future payments of relocation charges, which has been recorded in “accounts payable and accrued expenses” in the accompanying Consolidated Balance Sheets (in thousands):
In addition, in February 2006, Adam Aron, the former Chairman and Chief Executive Officer of the Company, resigned. In connection with Mr. Aron's resignation, the Company entered into a separation agreement with Mr. Aron, whereby the Company recorded $2.7 million of separation related expenses, which is included in “relocation and separation charges” in the accompanying Consolidated Statement of Operations for the year ended July 31, 2006. Payments of Mr. Aron’s separation benefits were made during the year ended July 31, 2007.
9. Sale of Businesses
On April 30, 2007, the Company sold its 54.5% interest in RTP to RTP’s minority shareholder for approximately $3.5 million. As part of this transaction the Company retained source code rights to its internal use software and internet solutions. The net impact to income before provision for income taxes in the accompanying Consolidated Statement of Operations for the year ended July 31, 2007 from this transaction was a gain of $89,000$0.1 million comprised of (i) a net loss of $601,000$0.6 million on the sale of its investment in RTP, which was recorded in “(loss) gain on sale of businesses, net” and (ii) a net gain of $690,000$0.7 million related to the elimination of the put option liability to RTP’s minority shareholder and the write-off of the associated put option intangible asset which was recorded in “gain (loss) on put options, net” (see Note 10, Put and Call Options, for more information on this transaction).
On January 19, 2006, JHL&S LLC, a limited liability company owned by wholly-owned subsidiaries of the Company, sold the assets constituting Snake River Lodge & Spa (“SRL&S&S”) to Lodging Capital Partners, a private, Chicago-based hospitality investment firm ("LCP"(“LCP”), for $32.5 million, the proceeds of which were adjusted for normal working capital pro-rations. The carrying value of the assets sold (net of liabilities assumed) was $26.9 million, which were recorded as "assets“assets held for sale"sale” prior to the sale. The Company recorded a $4.7 million gain after consideration of all costs involved, which is included in "(loss)“(loss) gain on sale of businesses, net"net” in the accompanying Consolidated Statement of Operations for the year ended July 31, 2006. The Company continues to manage SRL&S pursuant to a 15-year management agreement with LCP.
On July 28, 2005, VA Rancho Mirage Resort, L.P., a limited partnership owned by wholly-owned subsidiaries of the Company, sold the assets constituting Rancho Mirage to GENLB-Rancho LLC ("GenLB"), a partnership led by the Gencom Group ("Gencom"), for $33.0 million, the proceeds of which were adjusted for normal working capital prorations. Gencom is an affiliate of GHR, LLC, the company which acquired the Company's interest in BG Resort earlier in the year ended July 31, 2005. An agreement to sell the hotel was reached in early July 2005, after Gencom expressed its interest in acquiring the property. The carrying value of the assets sold (net of liabilities assumed) was $43.3 million. The Company recorded a $10.9 million loss in the year ended July 31, 2005 after consideration of all costs involved, which is included in "(loss) gain from sale of businesses, net" in the accompanying Consolidated Statement of Operations. In connection with the sale of Rancho Mirage, the Company entered into a multi-year management agreement of the hotel with GenLB. The Company continued to manage Rancho Mirage; however, in June 2006, the Company received notification by GenLB that effective August 13, 2006 the hotel would be closed in order to complete an extensive redevelopment of the property and the management agreement was terminated generating a termination fee of $2.4 million (pursuant to the terms of the management agreement).
On June 24, 2005, VAMHC, Inc., a subsidiary of the Company, sold the assets constituting the Vail Marriott Mountain Resort & Spa (the "Vail Marriott") to DiamondRock Hospitality Limited Partnership ("DiamondRock") for $62.0 million, the proceeds of which were adjusted for normal working capital prorations. An agreement to sell the hotel was reached in May 2005, after DiamondRock expressed its interest in acquiring the property. The carrying value of the assets sold (net of liabilities assumed) was $60.1 million. Additionally, the Company was required to complete certain capital projects that were part of the Company's 2005 capital plan as well as fund, in certain circumstances, certain other future improvements, the total of which was not expected to exceed $3.1 million. The Company recorded a $2.1 million loss in the year ended July 31, 2005 after consideration of all costs involved, which is included in "(loss) gain from sale of businesses, net" in the accompanying Consolidated Statement of Operations. The Company continues to manage the Vail Marriott pursuant to a 15-year management agreement with DiamondRock.
On December 8, 2004, the Company sold its 49% minority equity interest in BG Resort, the entity that owns The Ritz-Carlton Bachelor Gulch, for $13.0 million, with net cash proceeds to the Company of $12.7 million. This transaction resulted in a $5.7 million gain on disposal of the investment, which is included in "(loss) gain on sale of businesses, net" in the accompanying Consolidated Statement of Operations for the year ended July 31, 2005. In addition, the Company recognized $2.5 million of Real Estate revenue associated with the recognition of previously deferred revenue for the basis difference in land originally contributed to the entity and $369,000 of deferred interest income related to advances previously made to the entity for the year ended July 31, 2005. In conjunction with the sale, the Company had guaranteed payment of certain contingencies of BG Resort upon settlement. At the time of sale, the Company recorded a liability related to these contingencies in the amount of $130,000.$0.1 million. In February 2006, the Company reached a settlement of these contingencies and recorded an additional liability in the amount of $82,000,$0.1 million, which has been recorded as a loss within "(loss)“(loss) gain on sale of businesses, net"net” in the accompanying Consolidated Statement of Operations for the year ended July 31, 2006. The Company's interest was acquired by GHR, LLC, a new joint venture between Gencom BG, LLC and Lehman BG, LLC.
10. Put and Call Options
On March 31, 2007, the Company acquired 20% of GSSI LLC’s (“GSSI”), the minority shareholder in SSV, ownership interest in SSV for $8.4 million. As a result of this transaction, the Company holds an approximate 69.3% ownership interest in SSV. In addition, the put and call rights for GSSI’s remaining interest in SSV were extended to begin August 1, 2010, as discussed below, and the existing management agreement was extended to coincide with the exercise of the remaining put and call rights.
The Company’s and GSSI’s remaining put and call rights are as follows: (i) beginning August 1, 2010 and each year thereafter, each of the Company and GSSI have the right to call or put, respectively, 100% of GSSI's ownership interest in SSV to the Company during certain periods each year and (ii) GSSI has the right to put to the Company 100% of its ownership interest in SSV at any time after GSSI has been removed as manager of SSV or after an involuntary transfer of the Company's ownership interest in SSV has occurred. The put and call pricing is generally based on the trailing twelve month EBITDA (as defined in the operating agreement) of SSV for the fiscal period ended prior to the commencement of the put or call period, as applicable. As of July 31, 2007,2008, the estimated price at which the put/call option for the remaining interest could be expected to be settled was $36.9$33.2 million.
In November 2004, GSSI notified the Company of its intent to exercise its put (the "2004 Put") for 20% of its ownership interest in SSV; in January 2005, the 2004 Put was exercised and settled for a price of $5.8 million. As a result, the Company then held an approximate 61.7% ownership interest in SSV. The Company had determined that the price to settle the 2004 Put should be marked to fair value through earnings. During the year ended July 31, 2005, the Company recorded a gain of $612,000 related to the decrease in the estimated fair value of the liability associated with the 2004 Put.
In March 2001, in connection with the Company's acquisition of a 51% ownership interest in RTP, the Company and RTP's minority shareholder entered into a put agreement whereby the minority shareholder could put up to an aggregate one-third of its original 49% interest in RTP to the Company during the period from August 1 through October 31 annually. The put price was determined primarily by the trailing twelve month EBITDA (as defined in the underlying agreement) for the period ending prior to the beginning of each put period. The Company had determined that this put option should be marked to fair value through earnings. The put period was extended in October 2006, and again in February 2007. In connection with the Company’s sale of its 54.5% interest in RTP (see Note 9, Sale of Businesses, for more information on this transaction) the put agreement with RTP’s minority shareholder was terminated resulting in the Company recording a net gain of $690,000$0.7 million for the year ended July 31, 2007 related to the elimination of its put option liability net of the write-off of the associated put option intangible asset. For the year ended July 31, 2006, the Company recorded a loss of $1.2 million representing an increase in the estimated fair value of the put option liability during the period. For the year ended
11. Income Taxes
As of July 31, 2005,2008, the Company recorded a gain of $546,000 representing a decrease in the estimated fair value of the put option liability during the period.
In November 2001, the Company entered into a written put option in conjunction with its purchase of an interest in RockResorts. The minority shareholder in RockResorts ("Olympus"has utilized all available Federal net operating loss (“NOL”) had the option to put to the Company its equity interest in RockResorts at a price based on management fees generated by certain properties under RockResorts management on a trailing twelve month basis. The put option was exercisable between October 1, 2004 and September 30, 2005. If the put option was not exercised, then the Company had a call option on Olympus' equity interest which was valued at $1.6 million and recorded as an intangible asset at the time that the written option was entered into. The Company marked the put option to fair value through earnings each period. There was no impact on earnings related to changes in the fair market value of the put liability for the year ended July 31, 2005 as the estimated fair market value of the put option did not exceed the book value of the minority shareholder's interest during that period. Olympus notified the Company of its intent to exercise the put option for 100% of its interest in RockResorts in October 2004; however, due to a dispute over the settlement price of the put, the parties did not agree on a settlement price until April 2005. In May 2005, the put was settled for a price of $1.3 million. As a result, the Company now holds a 100% ownership interest in RockResorts. When the put price was settled, the call option no longer had value, and the Company recorded a $1.6 million chargecarryforwards. These NOL carryforwards expired in the year ended July 31, 2005 to write the value of the call option to zero.
11. Asset Impairment Charges
During the year ended July 31, 2006, the Company recorded $210,000 of impairment losses for the write off of construction in progress costs, as it was determined that the Company would not receive future benefits from these development efforts.
During the year ended July 31, 2005, the Company recorded $2.6 million of impairment losses on long-lived assets consisting of (i) $1.6 million to write-off the value of the RockResorts call option intangible upon settlement of the Olympus put in May 2005 (see Note 10, Put and Call Options), (ii) $536,000 to write-off the intangible asset associated with the Casa Madrona property management contract which was terminated in May 2005, (iii) $273,000 to write-off construction in progress costs related to a water rights expansion project resulting from the termination of a cooperation agreement in June 2005 after failing to obtain a necessary permit and (iv) $167,000 to write off construction in progress costs associated with a Keystone water reservoir project which management decided to abandon due to difficulty in obtaining necessary permits and the high cost of continuing the project.
12. Income Taxes
At July 31, 2007, the Company has total Federal net operating loss ("NOL") carryforwards of approximately $70.8 million for income tax purposes, all of which expire in the year ending July 31, 2008 and arewere limited in deductibility each year under Section 382 of the Internal Revenue Code. The Company willhad only bebeen able to use these NOLsNOL carryforwards to the extent of approximately $8.0 million per year through December 31, 2007 (the "Section“Section 382 Amount"Amount”). However, during the year ended July 31, 2005, the Company amended previously filed tax returns (for tax years 1997-2002) in an effort to remove the restrictions under Section 382 of the Internal Revenue Code on approximately $73.8 million of the above NOLsNOL carryforwards to reduce itsfuture taxable income. These NOLsNOL carryforwards relate to fresh start accounting from the Company's reorganization in 1992. During the year ended July 31, 2006, the Internal Revenue Service (“IRS”) completed its examexamination of the Company’s filing position in these amended returns and disallowed the Company’s position to remove the restrictions under Section 382 of the Internal Revenue Code of approximately $73.8 million.Code. Consequently, the accompanying Consolidated Financial Statementsfinancial statements and table of deferred items and components of the tax provision have only recognized benefits related to the NOLsNOL carryforwards to the extent of the Section 382 Amount reported in its tax returns prior to its amendments. The Company has appealed the examiner’sexaminer's disallowance of these NOLsNOL carryforwards to the Office of Appeals. To the Appeals. Ifextent that the Company is successful in its appeal and able to reduce taxable income from the utilization of these NOL carryforwards, it will result in a corresponding reduction in intangible assets existing at the date of fresh start accounting to the extent that the Company is able to reduce taxable income from the utilization of the NOLs currently restricted.start. If the Company is unsuccessful in its appeals process, it will not negatively impact the Company’sCompany's financial position or results of operations. Additionally, theThe Company has state NOLsNOL carryforwards (primarily California) totaling $25.1 million. The state NOLsNOL carryforwards primarily expire by the year ending July 31, 2015.
At July 31, 2007,2008, the Company has recorded a valuation allowance of $1.6 million, primarily due to California NOLsNOL carryforwards generated in prior years. ManagementThe Company has determined that it is more likely than not that a portion of its deferred tax assets, those primarily generated from California NOL carryovers,carryforwards, will not be realized.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of July 31, 2007 and July 31, 2006 are as follows (in thousands):
| | | July 31, | | July 31, |
| | | 2007 | | 2006 | | 2008 | | 2007 |
| Deferred income tax liabilities: | | | | | | | | | | | | | | | | |
| Fixed assets | | $ | 90,984 | | | $ | 94,411 | | | $ | 89,343 | | | $ | 90,984 | |
| Intangible assets | | | 22,330 | | | | 19,884 | | | | 26,542 | | | 22,330 | |
| Other, net | | | 4,705 | | | | 4,147 | | | | 2,455 | | | 4,705 | |
| Total | | | 118,019 | | | | 118,442 | | | | 118,340 | | | 118,019 | |
| Deferred income tax assets: | | | | | | | | | | | | | | | |
| Deferred membership revenue | | | | 30,807 | | | 30,942 | |
| Real estate and other investments | | | 11,407 | | | | 8,440 | | | | 11,007 | | | 11,407 | |
| Deferred compensation and other accrued expenses | | | 15,965 | | | | 13,474 | | | | 14,083 | | | 15,965 | |
| Net operating loss carryforwards and minimum and | | | | | | | | | | | | | | | |
| other tax credits | | | 2,775 | | | | 5,584 | | | | 2,775 | | | 2,775 | |
| Deferred membership revenue | | | 30,942 | | | | 29,519 | | |
| Other, net | | | 1,361 | | | | 1,904 | | | | 1,119 | | | 1,361 | |
| Total | | | 62,450 | | | | 58,921 | | | | 59,791 | | | 62,450 | |
| Valuation allowance for deferred income taxes | | | (1,588 | ) | | | (1,605 | ) | | | (1,588 | ) | | (1,588 | ) |
| Deferred income tax assets, net of valuation allowance | | | 60,862 | | | | 57,316 | | | | 58,203 | | | 60,862 | |
| Net deferred income tax liability | | $ | 57,157 | | | $ | 61,126 | | | $ | 60,137 | | | $ | 57,157 | |
The net current and non-current components of deferred income taxes recognized in the Consolidated Balance Sheets are as follows (in thousands):
| | | July 31, | | July 31, |
| | | 2007 | | 2006 | | 2008 | | 2007 |
| Net current deferred income tax asset | | $ | 15,056 | | $ | 11,938 | | | $ | 15,142 | | $ | 15,056 | |
| Net non-current deferred income tax liability | | | 72,213 | | | 73,064 | | | | 75,279 | | | 72,213 | |
| Net deferred income tax liability | | $ | 57,157 | | $ | 61,126 | | | $ | 60,137 | | $ | 57,157 | |
Significant components of the provision for income taxes are as follows (in thousands):
| | | Year Ended July 31, | | Year Ended July 31, |
| | | 2007 | | 2006 | | 2005 | | 2008 | | 2007 | | 2006 |
| Current: | | | | | | | | | | | | | | | | | | | | | | | | |
| Federal | | $ | 37,962 | | | $ | 22,757 | | | $ | 18,987 | | | $ | 50,169 | | | $ | 37,962 | | | $ | 22,757 | |
| State | | | 5,566 | | | | 4,196 | | | | 2,873 | | | | 6,710 | | | | 5,566 | | | | 4,196 | |
| Total current | | | 43,528 | | | | 26,953 | | | | 21,860 | | | | 56,879 | | | | 43,528 | | | | 26,953 | |
| Deferred: | | | | | | | | | | | | | | | | | | | | | | | | |
| Federal | | | (4,125 | ) | | | 3,383 | | | | (6,731 | ) | | | 5,533 | | | | (4,125 | ) | | | 3,383 | |
| State | | | (149 | ) | | | (1,082 | ) | | | (644 | ) | | | 674 | | | | (149 | ) | | | (1,082 | ) |
| Total deferred | | | (4,274 | ) | | | 2,301 | | | | (7,375 | ) | | | 6,207 | | | | (4,274 | ) | | | 2,301 | |
| Provision for income taxes | | $ | 39,254 | | | $ | 29,254 | | | $ | 14,485 | | | $ | 63,086 | | | $ | 39,254 | | | $ | 29,254 | |
The Company recorded a tax benefit upon the exercise of stock options and issuance of restricted stock of $1.9 million, $6.9 million $14.3 million and $3.9$14.3 million for the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively.
A reconciliation of the income tax provision from continuing operations and the amount computed by applying the United States federalFederal statutory income tax rate to income before income taxes is as follows:
| | | Year Ended July 31, | | Year Ended July 31, |
| | | 2007 | 2006 | | 2005 | | 2008 | 2007 | | 2006 |
| At U.S. federal income tax rate | | 35.0 | | % | 35.0 | | % | | 35.0 | | % | |
| State income tax, net of federal benefit | | 3.5 | | % | 2.7 | | % | | 3.3 | | % | |
| At U.S. Federal income tax rate | | | 35.0 | | % | 35.0 | | % | | 35.0 | | % |
| State income tax, net of Federal benefit | | | 2.9 | | % | 3.5 | | % | | 2.7 | | % |
| Nondeductible compensation | | 0.4 | | % | 1.4 | | % | | 0.7 | | % | | -- | | % | 0.4 | | % | | 1.4 | | % |
| Nondeductible meals or entertainment | | 0.2 | | % | 0.2 | | % | | 0.6 | | % | | 0.1 | | % | 0.2 | | % | | 0.2 | | % |
| General business credits | | (0.6 | ) | % | (1.0 | ) | % | | (1.2 | ) | % | | (0.4 | ) | % | (0.6 | ) | % | | (1.0 | ) | % |
| Tax exempt interest | | | (0.2 | ) | % | -- | | % | | -- | | % |
| Other | | 0.5 | | % | 0.7 | | % | | 0.1 | | % | | 0.6 | | % | 0.5 | | % | | 0.7 | | % |
| | | 39.0 | | % | 39.0 | | % | | 38.5 | | % | | 38.0 | | % | 39.0 | | % | | 39.0 | | % |
13. Related Party TransactionsThe Company adopted the provisions of FIN 48 on August 1, 2007. As of the date of adoption, the accrual for uncertain tax positions was $13.1 million. The adoption of FIN 48 did not impact the amount of the Company’s unrecognized tax benefits. However, the adoption did result in a reclassification of $2.8 million of liabilities for unrecognized tax benefits from deferred income tax liabilities to other long-term liabilities to conform to the balance sheet presentation requirements of FIN 48. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Historically,| | | Unrecognized Tax Benefits |
| Balance as of August 1, 2007 | $ | 12,257 | |
| Additions based on tax positions related to the current year | | -- | |
| Additions for tax positions of prior years | | 6,331 | |
| Reductions for tax positions of prior years | | (237 | ) |
| Settlements | | (555 | ) |
| Balance as of July 31, 2008 | $ | 17,796 | |
As of July 31, 2008, the amount of unrecognized tax benefits was $17.8 million, of which $1.2 million would, if recognized, decrease the Company’s effective tax rate. As allowed under FIN 48, the Company is continuing its policy of accruing income tax related interest and penalties, if applicable, within income tax expense. As of July 31, 2008, accrued interest and penalties, net of tax, is $2.3 million and for the years ended July 31, 2008 and 2007, the Company recognized $1.5 million and $0.8 million of interest expense and penalties, net of tax, respectively.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The IRS has completed its examination of the Company’s tax returns for tax years 2001 through 2003 and has issued a report of its findings. As discussed above, the examiner’s primary finding is the disallowance of the Company’s position to remove the restrictions under Section 382 of the Internal Revenue Code of approximately $73.8 million of NOL carryforwards; however, the Company has paid a feeappealed the examiner’s disallowance of these NOL carryforwards to Apollo Advisors for management services and expenses related thereto. In connection with the conversion by Apollo Ski Partners, L.P. ("Apollo")Office of its Class A common stock into shares of common stock, this arrangement was terminated effective October 1, 2004. The Company recorded $83,000 of expenseAppeals. Upon ultimate resolution, the unrecognized tax benefit related to this feematter will be resolved as it will result in either payment by the Company, recognition of the tax benefits through the utilization of NOL carryforwards, or a combination of both. The Company anticipates that this matter will be resolved in the next twelve months. Upon final resolution, the unrecognized tax benefits of $17.8 million shown above would decrease by approximately $16.6 million.
As reflected in the table above, the Company recorded a decrease to unrecognized tax benefits during the fiscal year of $0.6 million as a result of the Company entering into an agreement with the Colorado Department of Revenue covering calendar year tax returns from 2001 through 2005. Additionally, the IRS commenced an examination of the Company's U.S. income tax return for 2006 during the year ended July 31, 2005 (see Note 17, Capitalization,2008 that is anticipated to be completed in the year ending July 31, 2009. The Company’s Federal calendar year tax returns for more information regarding this matter).2000 and beyond remain subject to examination.
12. Related Party Transactions
The Company has the right to appoint 4 of 9 directors of the Beaver Creek Resort Company of Colorado ("BCRC"(“BCRC”), a non-profit entity formed for the benefit of property owners and certain others in Beaver Creek. The Company has a management agreement with the BCRC, renewable for one-year periods, to provide management services on a fixed fee basis. Management fees and reimbursement of operating expenses paid to the Company under its agreement with the BCRC during the years ended July 31, 2007, 2006 and 2005 totaled $7.1 million, $6.7 million and $6.3 million, respectively. The Company had a receivable with respect to this arrangement of $49,000 and $16,000 as of July 31,2008, 2007 and 2006 respectively.
The Company previously had a 49% ownership interest in BG Resort, which it sold in December 2004. In August 2004, BG Resort repaid the $4.9totaled $7.5 million, principal balance note receivable which was outstanding to the Company as of July 31, 2004 from funds obtained by BG Resort in a debt refinancing.
Between August 2003 and May 2005, the Company was the bookkeeper for BG Resort. The Company's responsibilities included maintaining the books and records of BG Resort and overseeing the annual financial statement audit. The Company recorded revenue of $85,000 during the year ended July 31, 2005 related to this agreement.
In November 2002, the Company purchased an approximately 20,000 square foot spa and skier services area and 30 parking spaces from BG Resort for $13.3 million. The Company recorded revenue of $768,000, $2.6$7.1 million and $2.5$6.7 million, during the years ended July 31, 2007, 2006 and 2005, respectively, related to use of the spa by guests of the Ritz-Carlton, Bachelor Gulch (the "Ritz"). In October 2006, the Company converted the mountain club spa from an owned and operated club to a leased facility and now leases this facility to BG Resort, under which the Company recorded revenue of $214,000 in the year ended July 31, 2007.
On December 7, 2000, the Company and BG Resort entered into a Golf Course Access Agreement (the "Golf Agreement") which gave Ritz guests preferential tee times at Red Sky Ranch Golf Course (the "Course"). For this privilege, BG Resort paid a one-time access fee of $3.0 million to the Company. The term of the Golf Agreement commenced with the opening date of the Course and will expire on the later of (i) 50 years after the opening date of the Course or (ii) the date on which the Golf Agreement expires or is terminated. The Company recognized approximately $60,000 in revenue related to the Golf Agreement during each of the years ended July 31, 2007, 2006 and 2005.
respectively.
For the year ended July 31, 2006, KRED, an entity in which the Company has a 50% ownership interest, made distributions to the Company in the amount of $2.2 million related to the sale of inventory of developed real estate. In connection with this distribution, the Company recorded a $715,000$0.7 million gain during the year ended July 31, 2006 for distributions in excess of the Company’s basis in the KRED investment.
As of July 31, 2005, the Company had outstanding a $500,000 long-term note receivable from KRED. This note was related to the fair market value of the land originally contributed to the partnership, and was repaid as the underlying land was sold to third parties. KRED made principal payments totaling $2.0 million in the year ended July 31, 2005 related to this note. This note was fully paid off during the year ended July 31, 2006. In addition, the Company previously had a receivable from KRED in the amount of $355,000 related to advances used for development project funding. In the fourth quarter of the year ended July 31, 2005, this receivable, including accrued interest, was converted to equity in KRED in lieu of payment of the receivable by KRED. The Company received interest payments from KRED of $49,000 during the year ended July 31, 2005.
SSF/VARE is a real estate brokerage with multiple locations in Eagle and Summit Counties, Colorado in which the Company has a 50% ownership interest. SSF/VARE is the broker for several of the Company's developments. The Company recorded net real estate commissions expense of approximately $14.7 million, $3.4 million and $1.0 million and $375,000 for payments made to SSF/VARE during the years ended July 31, 2007, 2006 and 2005, respectively. In addition, the Company had prepaid commission expense of $6.4 million and $5.9 million at July 31,2008, 2007 and 2006, respectively, for amounts paid to SSF/VARE.respectively. SSF/VARE leases several spaces for real estate offices from the Company. The Company recognized approximately $416,000, $406,000 and $370,000$0.4 million in revenue related to these leases during each of the years ended July 31, 2008, 2007 2006 and 2005, respectively.2006.
In January 2007, Robert A. Katz, Chief Executive Officer of the Company, executed a purchase and sale agreement for the purchase of a unit at The Lodge at Vail Chalets project located near the Vista Bahn at the base of Vail Mountain for a total purchase price of $12.5 million. Mr. Katz has provided an earnest money deposit of $1.9 million, a framing deposit of $1.2 million and upgrade deposits totaling $63,000.$1.4 million. The earnest money depositsdeposit will be used to fund the construction of The Lodge at Vail Chalets project. The sale of the unit by the Company to Mr. Katz was approved by the Board of Directors of the Company in accordance with the Company's related party transactions policy.
In September 2003, the Company invested in the purchase of a residence in Eagle County, Colorado for Jeffrey W. Jones, the Company's Senior Executive Vice President and Chief Financial Officer, and his family. The Company contributed $650,000$0.7 million toward the purchase price of the residence and thereby obtained a 46.1% undivided ownership interest in such residence. In May 2006, Mr. Jones’ former residence was sold, in connection with the Company’s relocation of its corporate headquarters to Broomfield, Colorado, for $2.0 million. The net proceeds to the Company for its 46.1% ownership interest were approximately $851,000, $201,000$0.9 million, $0.2 million in excess of the Company’s investment. In June 2006, the Company invested in the purchase of a residence in the Denver/Boulder, Colorado area, for Mr. Jones and his family in connection with his relocation to the Company’s new headquarters in Broomfield, Colorado. The Company contributed $650,000$0.7 million towards the purchase price of the residence and thereby obtained a 31.0% undivided ownership interest in such residence. In January 2007, Mr. Jones purchased the Company’s ownership interest for an appraised value of $650,000.$0.7 million. The sale of the Company’s ownership interest was approved by the Board of Directors of the Company in accordance with the Company's related party transactions policy.
In July 2002, RockResorts entered into an agreement with Edward E. Mace, former President of RockResorts and of Vail Resorts Lodging Company, whereby RockResorts invested in the purchase of a residence for Mr. Mace and his family in Eagle County, Colorado. RockResorts contributed $900,000$0.9 million towards the purchase price of the residence and thereby obtained an approximate 47% undivided ownership in such residence. In April 2006, Mr. Mace ceased to be an employee of the Company. In October 2006, RockResorts sold its proportionate share of the residence to Mr. Mace. The net proceeds to the Company for its 47% ownership interest after certain deductions was $893,000, $7,000 less than RockResorts’ investment.$0.9 million.
In November 2002, Heavenly Valley Limited Partnership ("(“Heavenly LP"LP”), a wholly owned subsidiary of the Company, invested in the purchase of a residence in the greater Lake Tahoe area for Blaise Carrig, Chief Operating Officer for Heavenly. Heavenly LP contributed $449,500$0.4 million toward the purchase price of the residence and thereby obtained a 50% undivided ownership interest in such residence. Heavenly LP shall be entitled to receive its proportionate share of the fair value of the residence, less certain deductions, upon the earlier of the resale of the residence or within approximately 18 months after Mr. Carrig's termination of employment from Heavenly LP.
In February 2001, the Company invested in the purchase of a primary residence in Breckenridge, Colorado for Roger McCarthy, former Co-President of the Mountain Division and Chief Operating Officer for Breckenridge. The Company contributed $400,000$0.4 million towards the purchase price of the residence and thereby obtained an approximate 40% undivided ownership interest in such residence. In May 2007, Mr. McCarthy ceased to be an employee of the Company. The Company shall be entitled to receive its proportionate share of the fair value of the residence, less certain deductions, upon the earlier of the resale of the residence or within approximately 18 months from Mr. McCarthy's termination of employment from the Company.
In 1999, the Company entered into an agreement with William A. Jensen, former President of the Mountain Division and Chief Operating Officer for Vail Mountain, whereby the Company invested in the purchase of a primary residence for Mr. and Mrs. Jensen in Vail, Colorado. The Company contributed $1.0 million towards the purchase price of the residence and thereby obtained an approximate 49% undivided ownership interest in such residence. In July 2007, Mr. Jensen purchased the Company’s ownership interest for an appraised value of $1.5 million. The net proceeds to the Company for its ownership interest were approximately $1.4 million, $406,000$0.4 million in excess of the Company’s investment. The sale of the Company’s ownership interest was approved by the Board of Directors of the Company in accordance with the Company's related party transactions policy.
In December 2004, Adam Aron, the former Chairman of the Board of Directors and Chief Executive Officer of the Company, and Ronald Baron, an affiliate of a significant shareholder in the Company, reserved the purchase of condominium units at the planned "Arrabelle" project located in the core of LionsHead (Vail).The Arrabelle at Vail Square project. In April 2005, Mr. Aron executed a purchase and sale agreement for the purchase of a condominium unit for a total purchase price of $4.6 million. In July 2008, Mr. Aron provided earnest money deposits totaling $690,000 and upgrade deposits totaling $154,000.purchased the completed condominium unit for $4.6 million. In May 2005, Mr. Baron and his wife executed a purchase and sale agreement for the purchase of a condominium unit for a total purchase price of $14.0 million. In July 2008, Mr. Baron and Mrs. Baron provided earnest money deposits totaling $2.1his wife purchased the completed condominium unit for $15.6 million, and upgrade deposits totaling $1.0 million. The earnest money deposits are only refundable at the Company's discretion or if the Company fails to complete the project.including purchase upgrades. The sale of the condominiums was approved by the Board of Directors of the Company in accordance with the Company's related party transactions policy.
14.13. Commitments and Contingencies
Metropolitan Districts
The Company credit-enhances $8.5 million of bonds issued by Holland Creek Metropolitan District ("HCMD"(“HCMD”) through an $8.6 million letter of credit issued against the Company's Credit Facility. HCMD's bonds were issued and used to build infrastructure associated with the Company's Red Sky Ranch residential development. The Company has agreed to pay capital improvement fees to Red Sky Ranch Metropolitan District ("RSRMD"(“RSRMD”) until RSRMD's revenue streams from property taxes are sufficient to meet debt service requirements under HCMD's bonds, and the Company has recorded a liability of $1.1$1.6 million and $1.3$1.1 million, primarily within "other“other long-term liabilities"liabilities” in the accompanying Consolidated Balance Sheets as of July 31, 20072008 and 2006,2007, respectively, with respect to the estimated present value of future RSRMD capital improvement fees. The Company estimates that it will make capital improvement fee payments under this arrangement through the year ending July 31, 2014.2016.
Guarantees
As of July 31, 2007,2008, the Company had various other guarantees, primarily in the form of letters of credit outstanding in the amount of $67.2$94.3 million, consisting primarily of $51.0 million in support of the Employee Housing Bonds, $4.5 million related to workers' compensation for Heavenly and Rancho Mirage, $7.5$34.5 million of construction performanceand development related guarantees and $2.9$7.6 million for workers'workers’ compensation and general liability deductibles related to the construction of Gore Creek Place and Arrabelle at Vail Square.development activities.
In addition to the guarantees noted above, the Company has entered into contracts in the normal course of business which include certain indemnifications within the scope of FASB Financial InterpretationsInterpretation No. 45, "Guarantor's“Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others"Others” (“FIN 45”) under which it could be required to make payments to third parties upon the occurrence or non-occurrence of certain future events. These indemnities include indemnities to licensees in connection with the licensees'licensees’ use of the Company'sCompany’s trademarks and logos, indemnities for liabilities associated with the infringement of other parties'parties’ technology and software products, indemnities related to liabilities associated with the use of easements, indemnities related to employment of contract workers, the Company'sCompany’s use of trustees, indemnities related to the Company'sCompany’s use of public lands and environmental indemnifications. The duration of these indemnities generally is indefinite and generally do not limit the future payments the Company could be obligated to make.
As permitted under applicable law, the Company and certain of its subsidiaries indemnify their directors and officers over their lifetimes for certain events or occurrences while the officer or director is, or was, serving the Company or its subsidiaries in such a capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that should enable the Company to recover a portion of any future amounts paid.
Unless otherwise noted, the Company has not recorded any significant liabilities for the letters of credit, indemnities and other guarantees noted above in the accompanying Consolidated Financial Statements, either because the Company has recorded on its Consolidated Balance Sheets the underlying liability associated with the guarantee, the guarantee or indemnification existed prior to January 1, 2003, the guarantee is with respect to the Company’s own performance and is therefore not subject to the measurement requirements of FIN 45, or because the Company has calculated the fair value of the indemnification or guarantee to be immaterial based upon the current facts and circumstances that would trigger a payment under the indemnification clause. In addition, with respect to certain indemnifications it is not possible to determine the maximum potential amount of liability under these guarantees due to the unique set of facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material.
As noted above, the Company makes certain indemnifications to licensees in connection with their use of the Company'sCompany’s trademarks and logos. The Company does not record any product warranty liability with respect to these indemnifications.
Commitments
In the ordinary course of obtaining necessary zoning and other approvals for the Company's potential real estate development projects, the Company may contingently commit to the completion of certain infrastructure, improvements and other costs related to the projects. Fulfillment of such commitments is required only if the Company moves forward with the development project. The determination whether to complete a development project is entirely at the Company's discretion, and is generally contingent upon, among other considerations, receipt of satisfactory zoning and other approvals and the current status of the Company's analysis of the economic viability of the project, including the costs associated with the contingent commitments. The Company currently has obligations, recorded as liabilities in the accompanying Consolidated Balance Sheet, to complete or fund certain improvements with respect to real estate developments; the Company has estimated such costs to be approximately $14.8$4.8 million as of July 31, 2007,2008, and anticipates completion of the majority of these commitments within the next two years.
The Company installed a new gondola lift and related infrastructure at Breckenridge for the 2006/2007 ski season pursuant to an agreement with the Town of Breckenridge (the “Town”). The Town contributed $6.7 million to fund construction of the gondola, as well as the already completed skiway. The funds contributed by the Town reduced the book value of the gondola and related infrastructure.
The Company has executed as lessee operating leases for the rental of office and commercial space, employee residential units and office equipment through fiscal 2019. Certain of these leases have renewal terms at the Company's option, escalation clauses, rent holidays and leasehold improvement incentives. Rent holidays and rent escalation clauses are recognized on a straight-line basis over the lease term. Leasehold improvement incentives are recorded as leasehold improvements and amortized over the shorter of their economic lives or the term of the lease. For the years ended July 31, 2008, 2007 2006 and 2005,2006, the Company recorded lease expense related to these agreements of $24.8 million, $22.3 million $17.4 million and $13.7$17.4 million, respectively, which is included in the accompanying Consolidated Statements of Operations.
Future minimum lease payments under these leases as of July 31, 20072008 are as follows (in thousands):
| 2008 | $ | 12,271 | |
| 2009 | | 8,810 | $ | 13,214 |
| 2010 | | 7,376 | | 11,715 |
| 2011 | | 5,779 | | 9,739 |
| 2012 | | 4,054 | | 7,660 |
| 2013 | | | 7,301 |
| Thereafter | | 12,380 | | 19,110 |
| Total | $ | 50,670 | $ | 68,739 |
Self Insurance
The Company is self-insured for claims under its health benefit plans and for workers’ compensation claims, subject to a stop loss policy. The self-insurance liability related to workers' compensation is determined actuarially based on claims filed. The self-insurance liability related to claims under the Company’s health benefit plans is determined based on internal and external analysis of actual claims. The amounts related to these claims are included as a component of accrued benefits in accounts payable and accrued expenses (see Note 5, Supplementary Balance Sheet Information).
Legal
The Company is a party to various lawsuits arising in the ordinary course of business, including resort (mountainResort (Mountain and lodging)Lodging) related cases and contractual and commercial litigation that arises from time to time in connection with the Company'sCompany’s real estate operations. Management believes the Company has adequate insurance coverage or has accrued for loss contingencies for all known matters that are deemed to be probable losses and estimable. As of July 31, 2008 and 2007, the accrual for the above loss contingencies was not material individually and in the aggregate.
Cheeca Lodge & Spa Contract Dispute
In March 2006, RockResorts was notified by the ownership of Cheeca Lodge & Spa, formerly a RockResorts managed property, that its management agreement was being terminated effective immediately. RockResorts believed that the termination was in violation of the management agreement and sought monetary damages, and recovery of attorney’s fees and costs. Cheeca Holdings, LLC (“Cheeca Holdings”), the entity owner of the hotel property, asserted that RockResorts breached the management contract, among other alleged breaches, and sought a ruling that it had the right to terminate the management contract and sought monetary damages, and recovery of attorneys’ fees and costs. Pursuant to the dispute resolution provisions of the management agreement, the disputed matter went before a single judge arbitrator at the JAMS Arbitration Tribunal in Chicago, Illinois. On February 28, 2007, the arbitrator rendered a decision, awarding $8.5 million in damages in favor of RockResorts and against Cheeca Holdings, LLC (“Cheeca Holdings”) and recovery of costs and attorney’s fees to be determined in the last stage of the proceedings. Prior to the ruling by the arbitrator in the last stage of the proceeding, the Company reached a comprehensive settlement with Cheeca Holdings which included damages, attorney’s fees and expenses. On October 19, 2007, RockResorts received payment of the final settlement from Cheeca Holdings in the amount of $13.5 million, of which $11.9 million (net of final attorney’s fees) is recorded in “contract dispute credit (charges), net” in the Consolidated Statement of Operations for the year ended July 31, 2008. The Company has incurred $4.6 million and $3.3 million of legal related costs related to this matter in the years ended July 31, 2007 and 2006, respectively, which is included in “contract dispute charges” in the accompanying Consolidated Statements of Operations in the respective periods.respectively.
On February 28, 2007, the arbitrator rendered a decision, awarding $8.5 million in damages in favor of RockResorts and against Cheeca Holdings. The arbitrator found that the ownership group had wrongfully terminated the hotel management contract without good cause, as RockResorts had maintained in the proceedings, and that RockResorts had not breached the management contract, as the ownership group had alleged. In accordance with the arbitrator’s ruling, RockResorts is seeking recovery of costs and attorneys’ fees in the last stage of the proceedings. Upon conclusion of that stage, the total award, which will incorporate the $8.5 million damage award and any additional cost recovery award, is final, binding and not subject to appeal. Upon completion of the cost recovery stage, RockResorts will proceed with the collection of the award and will record the actual amount received, upon receipt, in “contract dispute credit (charges), net” in its Consolidated Statement of Operations.
Breckenridge Terrace Employee Housing Construction Defect/Water Intrusion Claims
During the year ended July 31, 2004, the Company became aware of water intrusion and condensation problems causing mold damage in the 17 building employee housing facility owned by Breckenridge Terrace, an Employee Housing Entity in which the Company is a member and manager. As a result, the facility was not available for occupancy during the 2003/2004 ski season. All buildings at the facility required mold remediation and reconstruction and this work began in the year ended July 31, 2004. Breckenridge Terrace recorded a $7.0 million liability in the year ended July 31, 2004 for the estimated cost of remediation and reconstruction efforts. These costsefforts which were fundedsubstantially completed by a loan to Breckenridge Terrace from the Company member of Breckenridge Terrace. As of July 31, 2006, Breckenridge Terrace had substantially completed all remediation efforts.2006.
Forensic construction experts retained by Breckenridge Terrace determined that the water intrusion and condensation problems were the result of construction and design defects. In accordance with Colorado law, Breckenridge Terrace served separate notices of claims on the general contractor, architect and developer and initiated arbitration proceedings. During the year ended July 31, 2006, the Company recorded a $1.4 million mold remediation credit due to Breckenridge Terrace receiving reimbursement from third parties for costs incurred in conjunction with its mold remediation efforts and a true-up adjustment as the remediation project is complete. This credit was recognized by the Company as reduction of the remediation expense that was originally recognized in the year ended July 31, 2004.
15.14. Segment Information
The Company has three reportable segments: Mountain, Lodging and Real Estate. The Mountain segment includes the operations of the Company'sCompany’s ski resorts and related ancillary activities. The Lodging segment includes the operations of all of the Company'sCompany’s owned hotels, RockResorts, GTLC, condominium management and golf operations. The Resort segment is the combination of the Mountain and Lodging segments. The Real Estate segment holdsowns and develops real estate in and around the Company'sCompany’s resort communities. The Company'sCompany’s reportable segments, although integral to the success of the others, offer distinctly different products and services and require different types of management focus. As such, these segments are managed separately.
The Company reports its segment results using Reported EBITDA (defined as segment net revenue less segment operating expenses, plus or minus segment equity investment income or loss)loss, and for the Real Estate segment, plus gain on sale of real property) which is a non-GAAP financial measure. SFAS No. 131, "Disclosures“Disclosures about Segments of an Enterprise and Related Information"Information” requires the Company to report segment results in a manner consistent with management'smanagement’s internal reporting of operating results to the chief operating decision maker (Chief Executive Officer) for purposes of evaluating segment performance. Therefore, since the Company uses Reported EBITDA to measure performance of segments for internal reporting purposes, the Company will continue to use Reported EBITDA to report segment results.
Reported EBITDA is not a measure of financial performance under GAAP. Items excluded from Reported EBITDA are significant components in understanding and assessing financial performance. Reported EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, net change in cash flows generated by operations, investing or financing activitiesand cash equivalents or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Reported EBITDA is not a measurement determined in accordance with GAAP and thus is susceptible to varying calculations, Reported EBITDA as presented may not be comparable to other similarly titled measures of other companies.
The Company utilizes Reported EBITDA in evaluating performance of the Company and in allocating resources to its segments. Mountain Reported EBITDA consists of Mountain net revenue less Mountain operating expense plus Mountain equity investment income less Mountain operating expense.income. Lodging Reported EBITDA consists of Lodging net revenue less Lodging equity investment loss less Lodging operating expense. Real Estate Reported EBITDA consists of Real Estate net revenue less Real Estate operating expense plus (less) Real Estate equity investment income (loss) less Real Estate operating expense.plus gain on sale of real property. All segment expenses include an allocation of corporate administrative expense. Assets are not allocated between segments, or used to evaluate performance, except as shown in the table below. The accounting policies specific to each segment are the same as those described in Note 2, Summary of Significant Accounting Policies.
Following is key financial information by reportable segment which is used by management in evaluating performance and allocating resources (in thousands):
| | | Year Ended July 31, | | Year Ended July 31, |
| | | 2007 | | 2006 | | 2005 | | 2008 | | 2007 | | 2006 |
| Net revenue: | | | | | | | | | | | | | | | | | | | | | | | | |
| Lift tickets | | $ | 286,997 | | | $ | 263,036 | | | $ | 233,458 | | | $ | 301,914 | | | $ | 286,997 | | | $ | 263,036 | |
| Ski school | | | 78,848 | | | | 72,628 | | | | 63,915 | | | | 81,384 | | | | 78,848 | | | | 72,628 | |
| Dining | | | 59,653 | | | | 56,657 | | | | 53,688 | | | | 62,506 | | | | 59,653 | | | | 56,657 | |
| Retail/rental | | | 160,542 | | | | 149,350 | | | | 120,149 | | | | 168,765 | | | | 160,542 | | | | 149,350 | |
| Other | | | 79,337 | | | | 78,770 | | | | 69,645 | | | | 70,964 | | | | 79,337 | | | | 78,770 | |
| Total Mountain net revenue | | | 665,377 | | | | 620,441 | | | | 540,855 | | | | 685,533 | | | | 665,377 | | | | 620,441 | |
| Lodging | | | 162,451 | | | | 155,807 | | | | 196,351 | | | | 170,057 | | | | 162,451 | | | | 155,807 | |
| Resort | | | 827,828 | | | | 776,248 | | | | 737,206 | | | | 855,590 | | | | 827,828 | | | | 776,248 | |
| Real estate | | | 112,708 | | | | 62,604 | | | | 72,781 | | | | 296,566 | | | | 112,708 | | | | 62,604 | |
| Total net revenue | | $ | 940,536 | | | $ | 838,852 | | | $ | 809,987 | | | $ | 1,152,156 | | | $ | 940,536 | | | $ | 838,852 | |
| Operating expense: | | | | | | | | | | | | | |
| Segment operating expense: | | | | | | | | | | | | | |
| Mountain | | $ | 462,708 | | | $ | 443,116 | | | $ | 391,889 | | | $ | 470,362 | | | $ | 462,708 | | | $ | 443,116 | |
| Lodging | | | 144,252 | | | | 142,693 | | | | 177,469 | | | | 159,832 | | | | 144,252 | | | | 142,693 | |
| Resort | | | 606,960 | | | | 585,809 | | | | 569,358 | | | | 630,194 | | | | 606,960 | | | | 585,809 | |
| Real estate | | | 115,190 | | | | 56,676 | | | | 58,254 | | | | 251,338 | | | | 115,190 | | | | 56,676 | |
| Total segment operating expense | | $ | 722,150 | | | $ | 642,485 | | | $ | 627,612 | | | $ | 881,532 | | | $ | 722,150 | | | $ | 642,485 | |
| Equity investment income (loss): | | | | | | | | | | | | | |
| Mountain | | $ | 5,059 | | | $ | 3,876 | | | $ | 2,303 | | |
| Lodging | | | -- | | | | -- | | | | (2,679 | ) | |
| Resort | | | 5,059 | | | | 3,876 | | | | (376 | ) | |
| Real estate | | | -- | | | | 791 | | | | (102 | ) | |
| Total equity investment income (loss) | | $ | 5,059 | | | $ | 4,667 | | | $ | (478 | ) | |
| | | | | | | | | | | | | | |
| Gain on sale of real property | | | $ | 709 | | | $ | -- | | | $ | -- | |
| Mountain equity investment income, net | | | $ | 5,390 | | | $ | 5,059 | | | $ | 3,876 | |
| Real estate equity investment income | | | $ | -- | | | $ | -- | | | $ | 791 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Reported EBITDA: | | | | | | | | | | | | | | | | | | | | | | | | |
| Mountain | | $ | 207,728 | | | $ | 181,201 | | | $ | 151,269 | | | $ | 220,561 | | | $ | 207,728 | | | $ | 181,201 | |
| Lodging | | | 18,199 | | | | 13,114 | | | | 16,203 | | | | 10,225 | | | | 18,199 | | | | 13,114 | |
| Resort | | | 225,927 | | | | 194,315 | | | | 167,472 | | | | 230,786 | | | | 225,927 | | | | 194,315 | |
| Real estate | | | (2,482 | ) | | | 6,719 | | | | 14,425 | | | | 45,937 | | | | (2,482 | ) | | | 6,719 | |
| Total Reported EBITDA | | $ | 223,445 | | | $ | 201,034 | | | $ | 181,897 | | | $ | 276,723 | | | $ | 223,445 | | | $ | 201,034 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Real estate held for sale and investment | | $ | 357,586 | | | $ | 259,384 | | | $ | 154,874 | | |
| | | | | | | | | | | | | | |
| Reconciliation to net income: | | | | | | | | | | | | | | | | | | | | | | | | |
| Mountain Reported EBITDA | | | 207,728 | | | | 181,201 | | | | 151,269 | | |
| Lodging Reported EBITDA | | | 18,199 | | | | 13,114 | | | | 16,203 | | |
| Resort Reported EBITDA | | | 225,927 | | | | 194,315 | | | | 167,472 | | |
| Real Estate Reported EBITDA | | | (2,482 | ) | | | 6,719 | | | | 14,425 | | |
| Total Reported EBITDA | | | 223,445 | | | | 201,034 | | | | 181,897 | | | $ | 276,723 | | | $ | 223,445 | | | $ | 201,034 | |
| Depreciation and amortization | | | (87,664 | ) | | | (86,098 | ) | | | (89,968 | ) | | | (93,794 | ) | | | (87,664 | ) | | | (86,098 | ) |
| Relocation and separation charges | | | (1,433 | ) | | | (5,096 | ) | | | -- | | | | -- | | | | (1,433 | ) | | | (5,096 | ) |
| Asset impairment charges | | | -- | | | | (210 | ) | | | (2,550 | ) | | | -- | | | | -- | | | | (210 | ) |
| Mold remediation credit | | | -- | | | | 1,411 | | | | -- | | | | -- | | | | -- | | | | 1,411 | |
| Loss on disposal of fixed assets, net | | | (1,083 | ) | | | (1,035 | ) | | | (1,528 | ) | | | (1,534 | ) | | | (1,083 | ) | | | (1,035 | ) |
| Investment income | | | 12,403 | | | | 7,995 | | | | 2,066 | | |
| Investment income, net | | | | 8,285 | | | | 12,403 | | | | 7,995 | |
| Interest expense, net | | | (32,625 | ) | | | (36,478 | ) | | | (40,298 | ) | | | (30,667 | ) | | | (32,625 | ) | | | (36,478 | ) |
| Loss on extinguishment of debt | | | -- | | | | -- | | | | (612 | ) | |
| (Loss) gain from sale of businesses, net | | | (639 | ) | | | 4,625 | | | | (7,353 | ) | | | -- | | | | (639 | ) | | | 4,625 | |
| Contact dispute charges | | | (4,642 | ) | | | (3,282 | ) | | | -- | | |
| Contact dispute credit (charges), net | | | | 11,920 | | | | (4,642 | ) | | | (3,282 | ) |
| Gain (loss) on put options, net | | | 690 | | | | (1,212 | ) | | | 1,158 | | | | -- | | | | 690 | | | | (1,212 | ) |
| Other income, net | | | -- | | | | 50 | | | | 50 | | | | -- | | | | -- | | | | 50 | |
| Minority interest in income of consolidated subsidiaries, net | | | (7,801 | ) | | | (6,694 | ) | | | (5,239 | ) | | | (4,920 | ) | | | (7,801 | ) | | | (6,694 | ) |
| Income before provision for income taxes | | | 100,651 | | | | 75,010 | | | | 37,623 | | | | 166,013 | | | | 100,651 | | | | 75,010 | |
| Provision for income taxes | | | (39,254 | ) | | (29,254 | ) | | | (14,485 | ) | | (63,086 | ) | | (39,254 | ) | | | (29,254 | ) |
| Net income | | $ | 61,397 | | $ | 45,756 | | $ | 23,138 | | | $ | 102,927 | | $ | 61,397 | | $ | 45,756 | |
| | | | | | | | | | | | | | |
| Real estate held for sale and investment | | | $ | 249,305 | | | $ | 357,586 | | | $ | 259,384 | |
16.15. Selected Quarterly Financial Data (Unaudited--in thousands, except per share amounts)
| | | 2007 | | 2008 |
| | | Year | | Quarter | | Quarter | | Quarter | | Quarter | | Year | | Quarter | | Quarter | | Quarter | | Quarter |
| | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended |
| | | July 31, | | July 31, | | April 30, | | January 31, | | October 31, | | July 31, | | July 31, | | April 30, | | January 31, | | October 31, |
| | | 2007 | | 2007 | | 2007 | | 2007 | | 2006 | | 2008 | | 2008 | | 2008 | | 2008 | | 2007 |
| Mountain revenue | | $ | 665,377 | | $ | 38,475 | | $ | 308,712 | | $ | 272,026 | | | $ | 46,164 | | | $ | 685,533 | | $ | 37,549 | | $ | 325,726 | | $ | 279,722 | | | $ | 42,536 | |
| Lodging revenue | | | 162,451 | | 45,604 | | 43,643 | | | 32,796 | | | | 40,408 | | | | 170,057 | | 48,323 | | 43,590 | | | 34,827 | | | | 43,317 | |
| Real estate revenue | | | 112,708 | | 12,436 | | 17,134 | | | 56,216 | | | | 26,922 | | | | 296,566 | | 184,587 | | 54,474 | | | 45,471 | | | | 12,034 | |
| Total net revenue | | | 940,536 | | 96,515 | | 369,489 | | | 361,038 | | | | 113,494 | | | | 1,152,156 | | 270,459 | | 423,790 | | | 360,020 | | | | 97,887 | |
| Income (loss) from operations | | | 128,206 | | (54,867 | ) | | 136,184 | | | 97,750 | | | | (50,861 | ) | | | 176,005 | | (15,824 | ) | | 151,461 | | | 92,572 | | | | (52,204 | ) |
| Loss on sale of businesses, net | | | (639 | ) | | (38 | ) | | (601 | ) | | | -- | | | | -- | | |
| Contract dispute charges | | | (4,642 | ) | | (181 | ) | | (184 | ) | | | (672 | ) | | | (3,605 | ) | |
| Contract dispute credit, net | | | | 11,920 | | -- | | -- | | | -- | | | | 11,920 | |
| Net income (loss) | | | 61,397 | | (34,322 | ) | | 78,508 | | | 53,026 | | | | (35,815 | ) | | | 102,927 | | (11,123 | ) | | 87,341 | | | 51,319 | | | | (24,610 | ) |
| Basic net income (loss) per common share | | | 1.58 | | (0.88 | ) | | 2.02 | | | 1.37 | | | | (0.93 | ) | | | 2.67 | | (0.29 | ) | | 2.26 | | | 1.32 | | | | (0.63 | ) |
| Diluted net income (loss) per common share | | $ | 1.56 | | $ | (0.88 | ) | | $ | 1.99 | | $ | 1.35 | | | $ | (0.93 | ) | | $ | 2.64 | | $ | (0.29 | ) | | $ | 2.24 | | $ | 1.31 | | | $ | (0.63 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 |
| | | Year | | Quarter | | Quarter | | Quarter | | Quarter | | Year | | Quarter | | Quarter | | Quarter | | Quarter |
| | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended | | Ended |
| | | July 31, | | July 31, | | April 30, | | January 31, | | October 31, | | July 31, | | July 31, | | April 30, | | January 31, | | October 31, |
| | | 2006 | | 2006 | | 2006 | | 2006 | | 2005 | | 2007 | | 2007 | | 2007 | | 2007 | | 2006 |
| Mountain revenue | | $ | 620,441 | | $ | 39,163 | | $ | 294,773 | | $ | 246,228 | | | $ | 40,277 | | | $ | 665,377 | | $ | 38,475 | | $ | 308,712 | | $ | 272,026 | | | $ | 46,164 | |
| Lodging revenue | | | 155,807 | | 42,486 | | 39,492 | | | 32,079 | | | | 41,750 | | | | 162,451 | | 45,604 | | 43,643 | | | 32,796 | | | | 40,408 | |
| Real estate revenue | | | 62,604 | | 42,378 | | 7,124 | | | 9,709 | | | | 3,393 | | | | 112,708 | | 12,436 | | 17,134 | | | 56,216 | | | | 26,922 | |
| Total net revenue | | | 838,852 | | 124,027 | | 341,389 | | | 288,016 | | | | 85,420 | | | | 940,536 | | 96,515 | | 369,489 | | | 361,038 | | | | 113,494 | |
| Income (loss) from operations | | | 105,339 | | (45,034 | ) | | 123,245 | | | 77,008 | | | | (49,880 | ) | | | 128,206 | | (54,867 | ) | | 136,184 | | | 97,750 | | | | (50,861 | ) |
| Gain on sale of businesses, net | | | 4,625 | | -- | | -- | | | 4,625 | | | | -- | | | | (639 | ) | | (38 | ) | | (601 | ) | | | -- | | | | -- | |
| Contract dispute charges | | | (3,282 | ) | | (2,466 | ) | | (816 | ) | | | -- | | | | -- | | | | (4,642 | ) | | (181 | ) | | (184 | ) | | | (672 | ) | | | (3,605 | ) |
| Net income (loss) | | | 45,756 | | (31,263 | ) | | 68,337 | | | 43,011 | | | | (34,329 | ) | | | 61,397 | | (34,322 | ) | | 78,508 | | | 53,026 | | | | (35,815 | ) |
| Basic net income (loss) per common share | | | 1.21 | | (0.80 | ) | | 1.78 | | | 1.15 | | | | (0.93 | ) | | | 1.58 | | (0.88 | ) | | 2.02 | | | 1.37 | | | | (0.93 | ) |
| Diluted net income (loss) per common share | | $ | 1.19 | | $ | (0.80 | ) | | $ | 1.75 | | $ | 1.12 | | | $ | (0.93 | ) | | $ | 1.56 | | $ | (0.88 | ) | | $ | 1.99 | | $ | 1.35 | | | $ | (0.93 | ) |
17. Capitalization
Class A Common Stock Conversion
In September 2004, the Company and Apollo entered into a Conversion and Registration Rights Agreement (the "Conversion Agreement"). Pursuant to the Conversion Agreement, Apollo converted all of its Class A common stock into shares of the Company's common stock. Apollo distributed the shares to its partners in proportion to each partner's interest in the partnership. Apollo did not dissolve after this distribution and continues to exist as a partnership. The Company, pursuant to the Conversion Agreement, filed a shelf registration statement in November 2004 (which has since been withdrawn), covering certain of the shares owned by the limited partners of Apollo. Before the conversion, Apollo owned 6.1 million shares of Class A common stock or 99.9% of the Company's Class A common stock. As a result of the above Conversion Agreement, the Company no longer has any Class A common stock outstanding and the Company's Consolidated Balance Sheet no longer presents any Class A common stock and the full balance of the Company's common stock outstanding is presented under "common stock."
16. Stock Repurchase Plan
On March 9, 2006, the Company'sCompany’s Board of Directors approved the repurchase of up to 3,000,000 shares of common stock.stock and on July 16, 2008 approved an increase of the Company’s common stock repurchase authorization by an additional 3,000,000 shares. During the year ended July 31, 2007,2008, the Company repurchased 358,4002,330,608 shares of common stock at a cost of $15.0$99.6 million. Since inception of this stock repurchase plan through July 31, 2007,2008, the Company has repurchased 673,5003,004,108 shares at a cost of approximately $25.8$125.5 million. As of July 31, 2007, 2,326,5002008, 2,995,892 shares remained available to repurchase under the existing repurchase authorization. Shares of common stock purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of shares under the Company's employee share award plans. Acquisitions under the share repurchase program will be made from time to time at prevailing prices as permitted by applicable laws, and subject to market conditions and other factors. The timing as well as the number of shares that may be repurchased under the program will depend on a number of factors including the Company's future financial performance, the Company's available cash resources and competing uses for cash that may arise in the future, the restrictions in the Credit Facility and in the Indenture, prevailing prices of the Company's common stock and the number of shares that become available for sale at prices that the Company believes are attractive. The stock repurchase program may be discontinued at any time and is not expected to have a significant impact on the Company's capitalization.
18.17. Stock Compensation Plans
The Company has four share award plans which have been approved by the Company's shareholders: the 1993 Stock Option Plan ("(“1993 Plan"Plan”), the 1996 Long Term Incentive and Share Award Plan ("(“1996 Plan"Plan”), the 1999 Long Term Incentive and Share Award Plan ("(“1999 Plan"Plan”) and the 2002 Long Term Incentive and Share Award Plan ("(“2002 Plan"Plan”). On January 4, 2007, the Company’s shareholders approved to amend the Company’s 2002 Plan to, among other things, (i) rollover to the 2002 Plan an amount equal to the number of shares of common stock remaining for issuance under the 1999 Plan as of November 6, 2006 and a number of shares of common stock that is equal to any shares of common stock that are forfeited pursuant to the terms of the 1999 Plan after November 6, 2006; and (ii) increase the number of shares of common stock authorized for issuance under the 2002 Plan from 2,500,000 to 5,000,000 shares (“Amended 2002 Plan”). Under the Amended 2002 Plan, 5,000,000 shares of common stock could be issued in the form of options, stock appreciation rights, restricted shares, restricted share units, performance shares, performance share units, dividend equivalents or other share-based awards to employees, directors or consultants of the Company or its subsidiaries or affiliates. The terms of awards granted under the Amended 2002 Plan, including exercise price, vesting period and life, are set by the Compensation Committee.Committee of the Board of Directors. All share-based awards (except for restricted shares and restricted share units) granted under these plans have a life of ten years. Most awards vest ratably over three years; however some have been granted with different vesting schedules. To date, no awards have been granted to non-employees (except those granted to non-employee members of the Board of Directors of the Company and of a consolidated subsidiary) under any of the four plans. At July 31, 2007,2008, approximately 2.92.7 million share-based awards were available to be granted under the Amended 2002 Plan. Under the 1993 Plan, 1996 Plan and 1999 Plan no share-based awards are available for grant.
The fair value of each option award granted prior to August 1, 2005 was estimated on the date of grant using a Black-Scholes option-pricing model that uses the assumptions noted in the table below. With the adoption of SFAS 123R, the Company has decided that a lattice-based option valuation model will be used for equity award grants subsequent to August 1, 2005 if sufficient historical data is available by type of equity award to estimate the fair value of the equity awards granted. A lattice-based model considers factors such as exercise behavior, and assumes employees will exercise equity awards at different times over the contractual life of the equity awards. As a lattice-based model considers these factors, and is more flexible, the Company considers it to be a better method of valuing equity awards than a closed-form Black-Scholes model.
The fair value of most option awards and stock-settled stock appreciation rights (“SARs”) granted in the years ended July 31, 2008, 2007 and 2006 were estimated on the date of grant using a lattice-based option valuation model that applies the assumptions noted in the table below. In the year ended July 31, 2006 the fair value of equity awards with cliff vesting was estimated on the date of grant using a Black-Scholes option-pricing model due to the lack of historical employee exercise behavior, which applies assumptions within the ranges as noted in the table below. Because lattice-based option valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatility is based on historical volatility of the Company's stock. The Company uses historical data to estimate equity awards exerciseaward exercises and employee terminationterminations within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of equity awards granted is derived from the output of the option valuation model and represents the period of time that equity awards granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the equity award is based on the United States Treasury yield curve in effect at the time of grant.
| | | Year Ended July 31, | | Year Ended July 31, |
| | | 2007 | | 2006 | 2005 | | 2008 | | 2007 | 2006 |
| Expected volatility | | 37.4 | % | | 38.9 | % | 35.3 | % | | 36.6 | % | | 37.4 | % | 38.9 | % |
| Expected dividends | | -- | % | | -- | % | -- | % | | -- | % | | -- | % | -- | % |
| Expected term (in years) | | 5.3 | | | 5.8-7.0 | | 5.0 | | | 5.4 | | | 5.3 | | 5.8-7.0 | |
| Risk-free rate | | 4.3-4.8 | % | | 4.0-4.6 | % | 3.3 | % | | 4.0-5.1 | % | | 4.3-4.8 | % | 4.0-4.6 | % |
The Company has estimated forfeiture rates that range from 12.0%11.2% to 12.1%11.4% in its calculation of stock-based compensation expense for the year ended July 31, 2007.2008. These estimates are based on historical forfeiture behavior exhibited by employees of the Company.
A summary of aggregate option and SARs award activity under the share-based compensation plans as of July 31, 2005, 2006, 2007 and 2007,2008, and changes during the years then ended is presented below (in thousands, except exercise price and contractual term):
| | | | | Weighted-Average | | Weighted-Average | | Aggregate | | | | Weighted-Average | | Weighted-Average | | Aggregate |
| | | | | Exercise | | Remaining | | Intrinsic | | | | Exercise | | Remaining | | Intrinsic |
| | | Awards | | Price | | Contractual Term | | Value | | Awards | | Price | | Contractual Term | | Value |
| Outstanding at July 31, 2004 | | 4,453 | | $ | 18.32 | | | | | | | | |
| Granted | | 790 | | | 18.76 | | | | | | | | |
| Exercised | | (1,244 | ) | | | 17.70 | | | | | | | | |
| Forfeited or expired | | (119 | ) | | | 17.21 | | | | | | | | |
| Outstanding at July 31, 2005 | | 3,880 | | $ | 18.64 | | | | | | | | | 3,880 | | $ | 18.64 | | | | | | | |
| Granted | | 805 | | | 29.86 | | | | | | | | | 805 | | | 29.86 | | | | | | | |
| Exercised | | (2,433 | ) | | | 19.27 | | | | | | | | | (2,433 | ) | | | 19.27 | | | | | | | |
| Forfeited or expired | | (469 | ) | | | 21.18 | | | | | | | | | (469 | ) | | | 21.18 | | | | | | | |
| Outstanding at July 31, 2006 | | 1,783 | | $ | 22.18 | | | | | | | | | 1,783 | | $ | 22.18 | | | | | | | |
| Granted | | 227 | | | 42.37 | | | | | | | | | 227 | | | 42.37 | | | | | | | |
| Exercised | | (649 | ) | | | 17.71 | | | | | | | | | (649 | ) | | | 17.71 | | | | | | | |
| Forfeited or expired | | (165 | ) | | | 28.63 | | | | | | | | | (165 | ) | | | 28.63 | | | | | | | |
| Outstanding at July 31, 2007 | | 1,196 | | $ | 27.55 | | | 7.9 years | | $ | 31,185 | | | 1,196 | | $ | 27.55 | | | | | | | |
| Exercisable at July 31, 2007 | | 532 | | $ | 22.36 | | | 7.1 years | | $ | 16,579 | | |
| Granted | | | 221 | | | 59.56 | | | | | | | |
| Exercised | | | (117 | ) | | | 20.40 | | | | | | | |
| Forfeited or expired | | | (81 | ) | | | 45.71 | | | | | | | |
| Outstanding at July 31, 2008 | | | 1,219 | | $ | 32.83 | | | 7.3 years | | $ | 13,358 | |
| Exercisable at July 31, 2008 | | | 722 | | $ | 25.21 | | | 6.6 years | | $ | 11,026 | |
The weighted-average grant-date fair value of options and SARs granted during the years ended July 31, 2008, 2007 and 2006 was $21.64, $16.18 and 2005 was $16.18, $12.71, and $6.83, respectively. The total intrinsic value of options exercised during the years ended July 31, 2008, 2007 and 2006 and 2005 was $4.1 million, $19.8 million and $37.6 million, and $10.3 million, respectively. The Company granted 97,000 restricted share awards/units during the year ended July 31, 2008 with a weighted-average grant-date fair value of $57.72. The Company granted 102,000 restricted share awards/units during the year ended July 31, 2007 with a weighted-average grant-date fair value of $41.76. The Company granted 208,000 restricted share awards/units during the year ended July 31, 2006 with a weighted-average grant-date fair value of $29.08. No restricted share awards/units were granted during the year ended July 31, 2005. The Company had 79,000, 75,000 19,000 and 22,00019,000 restricted share awards/units that vested during the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively. These awards/units had a total fair value of $4.8 million, $3.0 million $675,000 and $519,000$0.7 million at the date of vesting for the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively.
A summary of the status of the Company's nonvested options and SARs as of July 31, 2007,2008, and changes during the year then ended, is presented below (in thousands, except fair value amounts):
| | | | | Weighted-Average | | | | Weighted-Average |
| | | | | Grant-Date | | | | Grant-Date |
| | | Awards | | Fair Value | | Awards | | Fair Value |
| Outstanding at August 1, 2006 | | 1,108 | | $ | 9.99 | | |
| Outstanding at August 1, 2007 | | | 664 | | $ | 12.87 | |
| Granted | | 227 | | | 16.18 | | | 221 | | | 59.56 | |
| Vested | | (508 | ) | | 8.56 | | | (308 | ) | | 38.37 | |
| Forfeited | | (163 | ) | | 11.33 | | | (80 | ) | | 17.95 | |
| Nonvested at July 31, 2007 | | 664 | | $ | 12.87 | | |
| Nonvested at July 31, 2008 | | | 497 | | $ | 16.98 | |
A summary of the status of the Company's nonvested restricted share awards/units as of July 31, 2007,2008, and changes during the year then ended, is presented below (in thousands, except fair value amounts):
| | | | | Weighted-Average | | | | Weighted-Average |
| | | | | Grant-Date | | | | Grant-Date |
| | | Awards | | Fair Value | | Awards | | Fair Value |
| Outstanding at August 1, 2006 | | 193 | | $ | 28.43 | | |
| Outstanding at August 1, 2007 | | | 195 | | $ | 34.94 | |
| Granted | | 102 | | | 41.76 | | | 97 | | | 57.72 | |
| Vested | | (75 | ) | | 27.94 | | | (79 | ) | | 38.32 | |
| Forfeited | | (25 | ) | | 33.26 | | | (27 | ) | | 48.91 | |
| Nonvested at July 31, 2007 | | 195 | | $ | 34.94 | | |
| Nonvested at July 31, 2008 | | | 186 | | $ | 43.32 | |
As of July 31, 2007,2008, there was $9.5$8.4 million of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the share-based compensation plans, of which $5.9$5.3 million, $3.0$2.9 million and $619,000$0.3 million of expense is expected to be recognized in the years ending July 31, 2008, 2009, 2010 and 2010,2011, respectively, assuming no future share-based awards are granted.
Cash received from option exercises under all share-based payment arrangements was $2.0 million, $11.5 million $46.6 million and $21.9$46.6 million for the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively. The actual tax benefit realized or to be realized for the tax deductions from options/SARs exercised and restricted stock awards/units vested was $1.9 million, $6.9 million $14.3 million and $3.9$14.3 million for the years ended July 31, 2008, 2007 2006 and 2005,2006, respectively.
The Company has a policy of using either authorized and unissued shares or treasury shares (if any), including shares acquired by purchase in the open market or in private transactions, to satisfy equity award exercises.
19.18. Retirement and Profit Sharing Plans
The Company maintains a defined contribution retirement plan (the "plan"“Retirement Plan”), qualified under Section 401(k) of the Internal Revenue Code, for its employees. Under this plan,Retirement Plan, employees are eligible to make before-tax contributions on the first day of the calendar month following the later of: (i) their employment commencement date or (ii) the date they turn 21. Participants may contribute up to 100% of their qualifying annual compensation up to the annual maximum specified by the Internal Revenue Code. The Company matches an amount equal to 50% of each participant's contribution up to 6% of a participant's bi-weekly qualifying compensation upon obtaining the later of: (i) 12 consecutive months of employment and 1,000 service hours or (ii) 1,500 service hours since the employment commencement date. The Company's matching contribution is entirely discretionary and may be reduced or eliminated at any time.
Total retirement planRetirement Plan expense recognized by the Company for the years ended July 31, 2008, 2007 and 2006 and 2005 was $2.8$2.9 million, $2.8 million and $2.6$2.8 million, respectively.
20.19. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company'sCompany’s payment obligations under the 6.75% Notes (see Note 4, Long-Term Debt) are fully and unconditionally guaranteed on a joint and several, senior subordinated basis by substantially all of the Company'sCompany’s consolidated subsidiaries (collectively, and excluding Non-Guarantor Subsidiaries (as defined below), the "Guarantor Subsidiaries"“Guarantor Subsidiaries”) except for Boulder/Beaver LLC, Colter Bay Corporation, Eagle Park Reservoir Company, Forest Ridge Holdings, Inc., Gros Ventre Utility Company, Jackson Lake Lodge Corporation, Jenny Lake Lodge, Inc., Mountain Thunder, Inc., SSV, Larkspur Restaurant & Bar, LLC, Vail Associates Investments, Inc., Arrabelle, Gore Creek Place, LLC, Chalets RCR Vail, LLC, Crystal Peak Lodge of Breckenridge, Inc., Timber Trail, Inc. and VR Holdings, Inc.certain other insignificant entities (together, the "Non-Guarantor Subsidiaries"“Non-Guarantor Subsidiaries”). APII and the Employee Housing Entities are included with the Non-Guarantor Subsidiaries for purposes of the consolidated financial information, but are not considered subsidiaries under the indenturesIndenture governing the 6.75% Notes.
Presented below is the consolidated financial information of the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. Financial information for the Non-Guarantor subsidiaries is presented in the column titled "Other“Other Subsidiaries."” Balance sheet data is presented as of July 31, 20072008 and 2006.2007. Statement of operations and statement of cash flows data are presented for the years ended July 31, 2008, 2007 2006 and 2005.2006.
Investments in subsidiaries are accounted for by the Parent Company and Guarantor Subsidiaries using the equity method of accounting. Net income (loss) of Guarantor and Non-Guarantor Subsidiaries is, therefore, reflected in the Parent Company's and Guarantor Subsidiaries' investments in and advances to (from) subsidiaries. Net income (loss) of the Guarantor and Non-Guarantor Subsidiaries is reflected in Guarantor Subsidiaries and Parent Company as equity in consolidated subsidiaries. The elimination entries eliminate investments in Other Subsidiaries and intercompany balances and transactions for consolidated reporting purposes.
Supplemental Condensed Consolidating Balance Sheet
As of July 31, 2008
(in thousands)
| | | | | | | 100% Owned | | | | | | | | | | | | |
| | | Parent | | Guarantor | | Other | | Eliminating | | | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Entries | | Consolidated |
| Current assets: | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | -- | | | $ | 156,782 | | | $ | 5,563 | | | $ | -- | | | $ | 162,345 | |
| Restricted cash | | | -- | | | | 10,526 | | | | 47,911 | | | | -- | | | | 58,437 | |
| Trade receivables, net | | | -- | | | | 47,953 | | | | 2,232 | | | | -- | | | | 50,185 | |
| Inventories, net | | | -- | | | | 11,786 | | | | 37,922 | | | | -- | | | | 49,708 | |
| Other current assets | | | 15,142 | | | | 19,205 | | | | 3,873 | | | | -- | | | | 38,220 | |
| Total current assets | | | 15,142 | | | | 246,252 | | | | 97,501 | | | | -- | | | | 358,895 | |
| Property, plant and equipment, net | | | -- | | | | 806,696 | | | | 250,141 | | | | -- | | | | 1,056,837 | |
| Real estate held for sale and investment | | | -- | | | | 204,260 | | | | 45,045 | | | | -- | | | | 249,305 | |
| Goodwill, net | | | -- | | | | 123,034 | | | | 19,248 | | | | -- | | | | 142,282 | |
| Intangible assets, net | | | -- | | | | 56,650 | | | | 15,880 | | | | -- | | | | 72,530 | |
| Other assets | | | 3,936 | | | | 34,922 | | | | 7,247 | | | | -- | | | | 46,105 | |
| Investments in subsidiaries and advances to (from) parent | | | 1,248,019 | | | | 599,199 | | | | (61,968 | ) | | | (1,785,250 | ) | | | -- | |
| Total assets | | $ | 1,267,097 | | | $ | 2,071,013 | | | $ | 373,094 | | | $ | (1,785,250 | ) | | $ | 1,925,954 | |
| | | | | | | | | | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 12,446 | | | $ | 196,360 | | | $ | 85,376 | | | $ | -- | | | $ | 294,182 | |
| Income taxes payable | | | 57,474 | | | | -- | | | | -- | | | | -- | | | | 57,474 | |
| Long-term debt due within one year | | | -- | | | | 15,022 | | | | 333 | | | | -- | | | | 15,355 | |
| Total current liabilities | | | 69,920 | | | | 211,382 | | | | 85,709 | | | | -- | | | | 367,011 | |
| Long-term debt | | | 390,000 | | | | 42,722 | | | | 108,628 | | | | -- | | | | 541,350 | |
| Other long-term liabilities | | | 3,142 | | | | 149,557 | | | | 30,944 | | | | -- | | | | 183,643 | |
| Deferred income taxes | | | 75,279 | | | | -- | | | | -- | | | | -- | | | | 75,279 | |
| Minority interest in net assets of consolidated subsidiaries | | | -- | | | | -- | | | | -- | | | | 29,915 | | | | 29,915 | |
| Total stockholders’ equity | | | 728,756 | | | | 1,667,352 | | | | 147,813 | | | | (1,815,165 | ) | | | 728,756 | |
| Total liabilities and stockholders’ equity | | $ | 1,267,097 | | | $ | 2,071,013 | | | $ | 373,094 | | | $ | (1,785,250 | ) | | $ | 1,925,954 | |
Supplemental Condensed Consolidating Balance Sheet
As of July 31, 2007
(in thousands)
| | | | | | | 100% Owned | | | | | | | | | | | | |
| | | Parent | | Guarantor | | Other | | Eliminating | | | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Entries | | Consolidated |
| Current assets: | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | -- | | | $ | 225,952 | | | $ | 4,867 | | | $ | -- | | | $ | 230,819 | |
| Restricted cash | | | -- | | | | 11,437 | | | | 43,312 | | | | -- | | | | 54,749 | |
| Trade receivables, net | | | -- | | | | 41,804 | | | | 1,753 | | | | -- | | | | 43,557 | |
| Inventories, net | | | -- | | | | 9,805 | | | | 38,259 | | | | -- | | | | 48,064 | |
| Other current assets | | | 15,056 | | | | 13,545 | | | | 5,847 | | | | -- | | | | 34,448 | |
| Total current assets | | | 15,056 | | | | 302,543 | | | | 94,038 | | | | -- | | | | 411,637 | |
| Property, plant and equipment, net | | | -- | | | | 784,458 | | | | 101,468 | | | | -- | | | | 885,926 | |
| Real estate held for sale and investment | | | -- | | | | 86,837 | | | | 270,749 | | | | -- | | | | 357,586 | |
| Goodwill, net | | | -- | | | | 123,033 | | | | 18,666 | | | | -- | | | | 141,699 | |
| Intangible assets, net | | | -- | | | | 57,087 | | | | 16,420 | | | | -- | | | | 73,507 | |
| Other assets | | | 4,646 | | | | 24,225 | | | | 9,897 | | | | -- | | | | 38,768 | |
| Investments in subsidiaries and advances to (from) parent | | | 1,206,709 | | | | 337,716 | | | | (82,219 | ) | | | (1,462,206 | ) | | | -- | |
| Total assets | | $ | 1,226,411 | | | $ | 1,715,899 | | | $ | 429,019 | | | $ | (1,462,206 | ) | | $ | 1,909,123 | |
| | | | | | | | | | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 12,718 | | | $ | 161,456 | | | $ | 107,605 | | | $ | -- | | | $ | 281,779 | |
| Income taxes payable | | | 37,441 | | | | -- | | | | -- | | | | -- | | | | 37,441 | |
| Long-term debt due within one year | | | -- | | | | 49 | | | | 328 | | | | -- | | | | 377 | |
| Total current liabilities | | | 50,159 | | | | 161,505 | | | | 107,933 | | | | -- | | | | 319,597 | |
| Long-term debt | | | 390,000 | | | | 57,724 | | | | 146,009 | | | | -- | | | | 593,733 | |
| Other long-term liabilities | | | -- | | | | 108,582 | | | | 73,248 | | | | -- | | | | 181,830 | |
| Deferred income taxes | | | 72,213 | | | | -- | | | | -- | | | | -- | | | | 72,213 | |
| Minority interest in net assets of consolidated subsidiaries | | | -- | | | | -- | | | | -- | | | | 27,711 | | | | 27,711 | |
| Total stockholders’ equity | | | 714,039 | | | | 1,388,088 | | | | 101,829 | | | | (1,489,917 | ) | | | 714,039 | |
| Total liabilities and stockholders’ equity | | $ | 1,226,411 | | | $ | 1,715,899 | | | $ | 429,019 | | | $ | (1,462,206 | ) | | $ | 1,909,123 | |
Supplemental Condensed Consolidating Balance Sheet
As of July 31, 2006
(in thousands)
| | | | | | | 100% Owned | | | | | | | | | | | | | |
| | | Parent | | Guarantor | | | Other | | Eliminating | | | | |
| | | Company | | Subsidiaries | | | Subsidiaries | | Entries | | Consolidated |
| Current assets: | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | -- | | | $ | 179,998 | | | | $ | 11,796 | | | $ | -- | | | $ | 191,794 | |
| Restricted cash | | | -- | | | | 14,787 | | | | | 5,535 | | | | -- | | | | 20,322 | |
| Trade receivables, net | | | -- | | | | 31,030 | | | | | 4,919 | | | | -- | | | | 35,949 | |
| Inventories, net | | | -- | | | | 8,595 | | | | | 33,683 | | | | -- | | | | 42,278 | |
| Other current assets | | | 11,945 | | | | 21,308 | | | | | 2,378 | | | | -- | | | | 35,631 | |
| Total current assets | | | 11,945 | | | | 255,718 | | | | | 58,311 | | | | -- | | | | 325,974 | |
| Property, plant and equipment, net | | | -- | | | | 782,158 | | | | | 68,954 | | | | -- | | | | 851,112 | |
| Real estate held for sale and investment | | | -- | | | | 154,330 | | | | | 105,054 | | | | -- | | | | 259,384 | |
| Goodwill, net | | | -- | | | | 118,475 | | | | | 17,336 | | | | -- | | | | 135,811 | |
| Intangible assets, net | | | -- | | | | 58,185 | | | | | 16,924 | | | | -- | | | | 75,109 | |
| Other assets | | | 5,356 | | | | 20,510 | | | | | 14,387 | | | | -- | | | | 40,253 | |
| Investments in subsidiaries and advances to (from) parent | | | 1,053,209 | | | | (541,621 | ) | | | | (51,690 | ) | | | (459,898 | ) | | | -- | |
| Total assets | | $ | 1,070,510 | | | $ | 847,755 | | | | $ | 229,276 | | | $ | (459,898 | ) | | $ | 1,687,643 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | | | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 19,857 | | | $ | 161,179 | | | | $ | 49,726 | | | $ | -- | | | $ | 230,762 | |
| Income taxes payable | | | 17,517 | | | | -- | | | | | -- | | | | -- | | | | 17,517 | |
| Long-term debt due within one year | | | -- | | | | 4,045 | | | | | 1,870 | | | | -- | | | | 5,915 | |
| Total current liabilities | | | 37,374 | | | | 165,224 | | | | | 51,596 | | | | -- | | | | 254,194 | |
| Long-term debt | | | 390,000 | | | | 57,734 | | | | | 77,579 | | | | -- | | | | 525,313 | |
| Other long-term liabilities | | | 359 | | | | 121,995 | | | | | 36,136 | | | | -- | | | | 158,490 | |
| Deferred income taxes | | | -- | | | | 72,919 | | | | | 145 | | | | -- | | | | 73,064 | |
| Put option liabilities | | | -- | | | | 1,245 | | | | | -- | | | | -- | | | | 1,245 | |
| Minority interest in net assets of consolidated subsidiaries | | | -- | | | | 13,285 | | | | | 19,275 | | | | -- | | | | 32,560 | |
| Total stockholders’ equity | | | 642,777 | | | | 415,353 | | | | | 44,545 | | | | (459,898 | ) | | | 642,777 | |
| Total liabilities and stockholders’ equity | | $ | 1,070,510 | | | $ | 847,755 | | | | $ | 229,276 | | | $ | (459,898 | ) | | $ | 1,687,643 | |
Supplemental Condensed Consolidating Statement of Operations
For the year ended July 31, 2008
(in thousands)
| | | | | 100% Owned | | | | | | |
| | | Parent | | Guarantor | | Other | | Eliminating | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Entries | | Consolidated |
| Total net revenue | | $ | -- | | | $ | 709,572 | | | $ | 453,741 | | | $ | (11,157 | ) | | $ | 1,152,156 | |
| Total operating expense | | | 127 | | | | 599,954 | | | | 387,075 | | | | (11,005 | ) | | | 976,151 | |
| (Loss) income from operations | | | (127 | ) | | | 109,618 | | | | 66,666 | | | | (152 | ) | | | 176,005 | |
| Other (expense) income, net | | | (27,015 | ) | | | 20,740 | | | | (4,339 | ) | | | 152 | | | | (10,462 | ) |
| Equity investment income, net | | | -- | | | | 5,390 | | | | -- | | | | -- | | | | 5,390 | |
| Minority interest in income of consolidated subsidiaries, net | | | -- | | | | -- | | | | -- | | | | (4,920 | ) | | | (4,920 | ) |
| (Loss) income before income taxes | | | (27,142 | ) | | | 135,748 | | | | 62,327 | | | | (4,920 | ) | | | 166,013 | |
| Benefit (provision) for income taxes | | | 10,341 | | | | (73,401 | ) | | | (26 | ) | | | -- | | | | (63,086 | ) |
| Net (loss) income before equity in income of consolidated subsidiaries | | | (16,801 | ) | | | 62,347 | | | | 62,301 | | | | (4,920 | ) | | | 102,927 | |
| Equity in income of consolidated subsidiaries | | | 119,728 | | | | 46,449 | | | | -- | | | | (166,177 | ) | | | -- | |
| Net income | | $ | 102,927 | | | $ | 108,796 | | | $ | 62,301 | | | $ | (171,097 | ) | | $ | 102,927 | |
Supplemental Condensed Consolidating Statement of Operations
For the year ended July 31, 2007
(in thousands)
| | | | | 100% Owned | | | | | | | | | | 100% Owned | | | | | | |
| | | Parent | | Guarantor | | Other | | Eliminating | | | | Parent | | Guarantor | | Other | | Eliminating | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Entries | | Consolidated | | Company | | Subsidiaries | | Subsidiaries | | Entries | | Consolidated |
| Total net revenue | | $ | -- | | | $ | 719,258 | | | $ | 234,780 | | | $ | (13,502 | ) | | $ | 940,536 | | | $ | -- | | | $ | 719,258 | | | $ | 234,780 | | | $ | (13,502 | ) | | $ | 940,536 | |
| Total operating expense | | | 510 | | | 612,972 | | | | 210,301 | | | | (11,453 | ) | | | 812,330 | | | | 510 | | | 612,972 | | | | 210,301 | | | | (11,453 | ) | | | 812,330 | |
| (Loss) income from operations | | | (510 | ) | | 106,286 | | | | 24,479 | | | | (2,049 | ) | | | 128,206 | | | | (510 | ) | | 106,286 | | | | 24,479 | | | | (2,049 | ) | | | 128,206 | |
| Other (expense) income, net | | | (27,037 | ) | | 5,950 | | | | (3,929 | ) | | | 152 | | | | (24,864 | ) | | | (27,037 | ) | | 5,950 | | | | (3,929 | ) | | | 152 | | | | (24,864 | ) |
| Equity investment income, net | | | -- | | | 5,059 | | | | -- | | | | -- | | | | 5,059 | | | | -- | | | 5,059 | | | | -- | | | | -- | | | | 5,059 | |
| Loss on sale of businesses, net | | | -- | | | (639 | ) | | | -- | | | | -- | | | | (639 | ) | | | -- | | | (639 | ) | | | -- | | | | -- | | | | (639 | ) |
| Gain on put options, net | | | -- | | | 690 | | | | -- | | | | -- | | | | 690 | | | | -- | | | 690 | | | | -- | | | | -- | | | | 690 | |
| Minority interest in income of consolidated subsidiaries, net | | | -- | | | -- | | | | -- | | | | (7,801 | ) | | (7,801 | ) | | | -- | | | -- | | | | -- | | | | (7,801 | ) | | | (7,801 | ) |
| (Loss) income before income taxes | | | (27,547 | ) | | 117,346 | | | | 20,550 | | | | (9,698 | ) | | | 100,651 | | | | (27,547 | ) | | 117,346 | | | | 20,550 | | | | (9,698 | ) | | | 100,651 | |
| Benefit (provision) for income taxes | | | 10,743 | | | (50,124 | ) | | | 127 | | | | -- | | | | (39,254 | ) | | | 10,743 | | | (50,124 | ) | | | 127 | | | | -- | | | | (39,254 | ) |
| Net (loss) income before equity in income of consolidated subsidiaries | | | (16,804 | ) | | 67,222 | | | | 20,677 | | | | (9,698 | ) | | 61,397 | | | | (16,804 | ) | | 67,222 | | | | 20,677 | | | | (9,698 | ) | | | 61,397 | |
| Equity in income of consolidated subsidiaries | | | 78,201 | | | -- | | | | -- | | | | (78,201 | ) | | -- | | | | 78,201 | | | -- | | | | -- | | | | (78,201 | ) | | | -- | |
| Net income (loss) | | $ | 61,397 | | | $ | 67,222 | | | $ | 20,677 | | | $ | (87,899 | ) | | $ | 61,397 | | |
| Net income | | | $ | 61,397 | | | $ | 67,222 | | | $ | 20,677 | | | $ | (87,899 | ) | | $ | 61,397 | |
Supplemental Condensed Consolidating Statement of Operations
For the year ended July 31, 2006
(in thousands)
| | | | | 100% Owned | | | | | | | | | | 100% Owned | | | | | | |
| | | Parent | | Guarantor | | Other | | Eliminating | | | | Parent | | Guarantor | | Other | | Eliminating | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Entries | | Consolidated | | Company | | Subsidiaries | | Subsidiaries | | Entries | | Consolidated |
| Total net revenue | | $ | -- | | | $ | 649,743 | | | $ | 197,656 | | | $ | (8,547 | ) | | $ | 838,852 | | | $ | -- | | | $ | 649,743 | | | $ | 197,656 | | | $ | (8,547 | ) | | $ | 838,852 | |
| Total operating expense | | | 18,204 | | | 551,923 | | | | 171,933 | | | | (8,547 | ) | | | 733,513 | | | | 18,204 | | | 551,923 | | | | 171,933 | | | | (8,547 | ) | | | 733,513 | |
| (Loss) income from operations | | | (18,204 | ) | | 97,820 | | | | 25,723 | | | | -- | | | | 105,339 | | | | (18,204 | ) | | 97,820 | | | | 25,723 | | | | -- | | | | 105,339 | |
| Other expense, net | | | (27,149 | ) | | (1,857 | ) | | | (2,709 | ) | | | -- | | | | (31,715 | ) | | | (27,149 | ) | | (1,857 | ) | | | (2,709 | ) | | | -- | | | | (31,715 | ) |
| Equity investment income, net | | | -- | | | 4,667 | | | | -- | | | | -- | | | | 4,667 | | | | -- | | | 4,667 | | | | -- | | | | -- | | | | 4,667 | |
| Gain on sale of businesses, net | | | -- | | | 4,625 | | | | -- | | | | -- | | | | 4,625 | | | | -- | | | 4,625 | | | | -- | | | | -- | | | | 4,625 | |
| Loss on put options, net | | | -- | | | (1,212 | ) | | | -- | | | | -- | | | | (1,212 | ) | | | -- | | | (1,212 | ) | | | -- | | | | -- | | | | (1,212 | ) |
| Minority interest in income of consolidated subsidiaries, net | | | -- | | | -- | | | | (6,694 | ) | | -- | | | (6,694 | ) | | | -- | | | -- | | | | (6,694 | ) | | | -- | | | | (6,694 | ) |
| (Loss) income before income taxes | | | (45,353 | ) | | 104,043 | | | | 16,320 | | | | -- | | | | 75,010 | | | | (45,353 | ) | | 104,043 | | | | 16,320 | | | | -- | | | | 75,010 | |
| Benefit (provision) for income taxes | | | 17,688 | | | (47,172 | ) | | | 230 | | | | -- | | | | (29,254 | ) | | | 17,688 | | | (47,172 | ) | | | 230 | | | | -- | | | | (29,254 | ) |
| Net (loss) income before equity in income of consolidated subsidiaries | | | (27,665 | ) | | 56,871 | | | | 16,550 | | | -- | | | 45,756 | | | | (27,665 | ) | | 56,871 | | | | 16,550 | | | | -- | | | | 45,756 | |
| Equity in income of consolidated subsidiaries | | | 73,421 | | | -- | | | | -- | | | (73,421 | ) | | -- | | | | 73,421 | | | -- | | | | -- | | | | (73,421 | ) | | | -- | |
| Net income (loss) | | $ | 45,756 | | | $ | 56,871 | | | $ | 16,550 | | | $ | (73,421 | ) | | $ | 45,756 | | |
| Net income | | | $ | 45,756 | | | $ | 56,871 | | | $ | 16,550 | | | $ | (73,421 | ) | | $ | 45,756 | |
Supplemental Condensed Consolidating Statement of Operations
For the year ended July 31, 2005
(in thousands)
| | | | | 100% Owned | | | | | | |
| | | Parent | | Guarantor | | Other | | Eliminating | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Entries | | Consolidated |
| Total net revenue | | $ | 48 | | | $ | 675,176 | | | $ | 143,579 | | | $ | (8,816 | ) | | $ | 809,987 | |
| Total operating expense | | | 15,515 | | | | 581,632 | | | | 133,327 | | | | (8,816 | ) | | | 721,658 | |
| (Loss) income from operations | | | (15,467 | ) | | | 93,544 | | | | 10,252 | | | | -- | | | | 88,329 | |
| Other expense, net | | | (27,706 | ) | | | (7,921 | ) | | | (3,167 | ) | | | -- | | | | (38,794 | ) |
| Equity investment loss, net | | | -- | | | | (478 | ) | | | -- | | | | -- | | | | (478 | ) |
| Loss on sale of businesses, net | | | -- | | | | (7,353 | ) | | | -- | | | | -- | | | | (7,353 | ) |
| Gain on put options, net | | | -- | | | | 1,158 | | | | -- | | | | -- | | | | 1,158 | |
| Minority interest in loss (income) of consolidated subsidiaries, net | | | -- | | | | 476 | | | | (5,715 | ) | | | -- | | | | (5,239 | ) |
| (Loss) income before income taxes | | | (43,173 | ) | | | 79,426 | | | | 1,370 | | | | -- | | | | 37,623 | |
| Benefit (provision) for income taxes | | | 16,622 | | | | (31,291 | ) | | | 184 | | | | -- | | | | (14,485 | ) |
| Net (loss) income before equity in income of consolidated subsidiaries | | | (26,551 | ) | | | 48,135 | | | | 1,554 | | | | -- | | | | 23,138 | |
| Equity in income of consolidated subsidiaries | | | 49,689 | | | | -- | | | | -- | | | | (49,689 | ) | | | -- | |
| Net income (loss) | | $ | 23,138 | | | $ | 48,135 | | | $ | 1,554 | | | $ | (49,689 | ) | | $ | 23,138 | |
Supplemental Condensed Consolidating Statement of Cash Flows
For the year ended July 31, 2008
(in thousands)
| | | | | | | 100% Owned | | | | | | | | |
| | | Parent | | Guarantor | | Other | | | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Consolidated |
| Net cash provided by operating activities | | $ | 9,792 | | | $ | 103,610 | | | $ | 103,594 | | | $ | 216,996 | |
| | | | | | | | | | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | | | | | |
| Capital expenditures | | | -- | | | | (95,291 | ) | | | (55,601 | ) | | | (150,892 | ) |
| Other investing activities, net | | | -- | | | | 2,956 | | | | (199 | ) | | | 2,757 | |
| Net cash used in investing activities | | | -- | | | | (92,335 | ) | | | (55,800 | ) | | | (148,135 | ) |
| | | | | | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | | | | | |
| Repurchase of common stock | | | (99,615 | ) | | | -- | | | | -- | | | | (99,615 | ) |
| Proceeds from exercise of stock options | | | 1,994 | | | | -- | | | | -- | | | | 1,994 | |
| Proceeds from borrowings under Non-Recourse Real Estate Financings | | | -- | | | | -- | | | | 136,519 | | | | 136,519 | |
| Payments of Non-Recourse Real Estate Financings | | | -- | | | | -- | | | | (174,008 | ) | | | (174,008 | ) |
| Proceeds from borrowings under other long-term debt | | | -- | | | | -- | | | | 77,641 | | | | 77,641 | |
| Payments of other long-term debt | | | -- | | | | (65 | ) | | | (78,056 | ) | | | (78,121 | ) |
| Tax benefit from exercise of stock options | | | 1,867 | | | | -- | | | | -- | | | | 1,867 | |
| Distributions from joint ventures from (to) minority shareholders | | | -- | | | | 5,638 | | | | (8,577 | ) | | | (2,939 | ) |
| Advances from (to) affiliates | | | 85,962 | | | | (85,048 | ) | | | (914 | ) | | | -- | |
| Other financing activities, net | | | -- | | | | (970 | ) | | | 297 | | | | (673 | ) |
| Net cash used in financing activities | | | (9,792 | ) | | | (80,445 | ) | | | (47,098 | ) | | | (137,335 | ) |
| | | | | | | | | | | | | | | | | |
| Net (decrease) increase in cash and cash equivalents | | | -- | | | | (69,170 | ) | | | 696 | | | | (68,474 | ) |
| Cash and cash equivalents | | | | | | | | | | | | | | | | |
| Beginning of period | | | -- | | | | 225,952 | | | | 4,867 | | | | 230,819 | |
| End of period | | $ | -- | | | $ | 156,782 | | | $ | 5,563 | | | $ | 162,345 | |
Supplemental Condensed Consolidating Statement of Cash Flows
For the year ended July 31, 2007
(in thousands)
| | | | | | | 100% Owned | | | | | | | | | | | | | | 100% Owned | | | | | | | | |
| | | Parent | | Guarantor | | Other | | | | | | Parent | | Guarantor | | Other | | | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Consolidated | | Company | | Subsidiaries | | Subsidiaries | | Consolidated |
| Net cash (used in) provided by operating activities | | $ | (41,046 | ) | | $ | 191,441 | | | $ | (31,953 | ) | | $ | 118,442 | | | $ | (41,046 | ) | | $ | 191,441 | | | $ | (31,953 | ) | | $ | 118,442 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Capital expenditures | | | -- | | | | (76,563 | ) | | | (42,669 | ) | | | (119,232 | ) | | | -- | | | | (76,563 | ) | | | (42,669 | ) | | | (119,232 | ) |
| Cash received from sale of businesses | | | -- | | | | 3,544 | | | | -- | | | | 3,544 | | | | -- | | | | 3,544 | | | | -- | | | | 3,544 | |
| Purchase of minority interest | | | -- | | | | (8,387 | ) | | | -- | | | | (8,387 | ) | | | -- | | | | (8,387 | ) | | | -- | | | | (8,387 | ) |
| Other investing activities, net | | | -- | | | | (2,561 | ) | | | (5,510 | ) | | | (8,071 | ) | | | -- | | | | (2,561 | ) | | | (5,510 | ) | | | (8,071 | ) |
| Net cash used in investing activities | | | -- | | | | (83,967 | ) | | | (48,179 | ) | | | (132,146 | ) | | | -- | | | | (83,967 | ) | | | (48,179 | ) | | | (132,146 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Repurchase of common stock | | | (15,007 | ) | | | -- | | | | -- | | | | (15,007 | ) | | | (15,007 | ) | | | -- | | | | -- | | | | (15,007 | ) |
| Net proceeds (payments) from borrowings under long-term debt | | | -- | | | (9,898 | ) | | | 72,752 | | | | 62,854 | | | | -- | | | | (9,898 | ) | | | 72,752 | | | | 62,854 | |
| Proceeds from exercise of stock options | | | 11,496 | | | | -- | | | | -- | | | | 11,496 | | | | 11,496 | | | | -- | | | | -- | | | | 11,496 | |
| Tax benefit from exercise of stock options | | | 6,925 | | | | -- | | | | -- | | | | 6,925 | | | | 6,925 | | | | -- | | | | -- | | | | 6,925 | |
| Distributions from joint ventures from (to) minority shareholders | | | -- | | | 3,986 | | | | (13,991 | ) | | | (10,005 | ) | | | -- | | | | 3,986 | | | | (13,991 | ) | | | (10,005 | ) |
| Advances (from) to affiliates | | | 38,926 | | | | (53,384 | ) | | | 14,458 | | | | -- | | |
| Advances from (to) affiliates | | | | 38,926 | | | | (53,384 | ) | | | 14,458 | | | | -- | |
| Other financing activities, net | | | (1,294 | ) | | | (2,224 | ) | | | (16 | ) | | | (3,534 | ) | | | (1,294 | ) | | | (2,224 | ) | | | (16 | ) | | | (3,534 | ) |
| Net cash provided by (used in) financing activities | | | 41,046 | | | (61,520 | ) | | | 73,203 | | | | 52,729 | | | | 41,046 | | | | (61,520 | ) | | | 73,203 | | | | 52,729 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | -- | | | 45,954 | | | | (6,929 | ) | | | 39,025 | | | | -- | | | | 45,954 | | | | (6,929 | ) | | | 39,025 | |
| Cash and cash equivalents | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Beginning of period | | | -- | | | | 179,998 | | | | 11,796 | | | | 191,794 | | | | -- | | | | 179,998 | | | | 11,796 | | | | 191,794 | |
| End of period | | $ | -- | | | $ | 225,952 | | | $ | 4,867 | | | $ | 230,819 | | | $ | -- | | | $ | 225,952 | | | $ | 4,867 | | | $ | 230,819 | |
Supplemental Condensed Consolidating Statement of Cash Flows
For the year ended July 31, 2006
(in thousands)
| | | | | | | 100% Owned | | | | | | | | |
| | | Parent | | Guarantor | | Other | | | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Consolidated |
| Net cash (used in) provided by operating activities | | $ | (13,000 | ) | | $ | 92,568 | | | $ | (15,892 | ) | | $ | 63,676 | |
| | | | | | | | | | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | | | | | |
| Capital expenditures | | | -- | | | | (78,380 | ) | | | (10,521 | ) | | | (88,901 | ) |
| Cash received from sale of businesses | | | -- | | | | 30,712 | | | | -- | | | | 30,712 | |
| Other investing activities, net | | | -- | | | | 277 | | | | (4,081 | ) | | | (3,804 | ) |
| Net cash used in investing activities | | | -- | | | | (47,391 | ) | | | (14,602 | ) | | | (61,993 | ) |
| | | | | | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | | | | | |
| Repurchase of common stock | | | -- | | | | (10,839 | ) | | | -- | | | | (10,839 | ) |
| Net proceeds from borrowings under long-term debt | | | -- | | | | 5,769 | | | | 3,452 | | | | 9,221 | |
| Proceeds from exercise of stock options | | | 46,649 | | | | -- | | | | -- | | | | 46,649 | |
| Tax benefit from exercise of stock options | | | 14,323 | | | | -- | | | | -- | | | | 14,323 | |
| Advances (from) to affiliates | | | (47,972 | ) | | | 49,590 | | | | (1,618 | ) | | | -- | |
| Other financing activities, net | | | -- | | | | (2,578 | ) | | | (3,245 | ) | | | (5,823 | ) |
| Net cash provided by (used in) financing activities | | | 13,000 | | | | 41,942 | | | | (1,411 | ) | | | 53,531 | |
| | | | | | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | -- | | | | 87,119 | | | | (31,905 | ) | | | 55,214 | |
| Cash and cash equivalents | | | | | | | | | | | | | | | | |
| Beginning of period | | | -- | | | | 92,879 | | | | 43,701 | | | | 136,580 | |
| End of period | | $ | -- | | | $ | 179,998 | | | $ | 11,796 | | | $ | 191,794 | |
Supplemental Condensed Consolidating Statement of Cash Flows
For the year ended July 31, 2005
(in thousands)
| | | | | | | 100% Owned | | | | | | | | | | | | | | 100% Owned | | | | | | | |
| | | Parent | | Guarantor | | Other | | | | | | Parent | | Guarantor | | Other | | | | |
| | | Company | | Subsidiaries | | Subsidiaries | | Consolidated | | Company | | Subsidiaries | | Subsidiaries | | Consolidated |
| Net cash (used in) provided by operating activities | | $ | (4,690 | ) | | $ | 147,928 | | | $ | 4,939 | | | $ | 148,177 | | | $ | (13,000 | ) | | $ | 92,568 | | | $ | (15,892 | ) | | $ | 63,676 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Capital expenditures | | | -- | | | | (71,532 | ) | | | (8,443 | ) | | | (79,975 | ) | | | -- | | | | (78,380 | ) | | | (10,521 | ) | | | (88,901 | ) |
| Cash received from sale of businesses | | | | | | | 108,399 | | | | -- | | | | 108,399 | | | | -- | | | | 30,712 | | | | -- | | | | 30,712 | |
| Other investing activities, net | | | -- | | | | (1,511 | ) | | | 370 | | | | (1,141 | ) | | | -- | | | | 277 | | | | (4,081 | ) | | | (3,804 | ) |
| Net cash provided by (used in) investing activities | | | -- | | | | 35,356 | | | | (8,073 | ) | | | 27,283 | | |
| Net cash used in investing activities | | | | -- | | | | (47,391 | ) | | | (14,602 | ) | | | (61,993 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Repurchase of common stock | | | | -- | | | | (10,839 | ) | | | -- | | | | (10,839 | ) |
| Net proceeds from borrowings under long-term debt | | | | -- | | | | 5,769 | | | | 3,452 | | | | 9,221 | |
| Proceeds from exercise of stock options | | | 21,939 | | | | -- | | | | -- | | | | 21,939 | | | | 46,649 | | | | -- | | | | -- | | | | 46,649 | |
| Net payments on long-term debt | | | -- | | | | (98,945 | ) | | | (4,621 | ) | | | (103,566 | ) | |
| Advances (from) to affiliates | | | (17,249 | ) | | | (30,562 | ) | | | 47,811 | | | | -- | | |
| Tax benefit from exercise of stock options | | | | 14,323 | | | | -- | | | | -- | | | | 14,323 | |
| Advances (to) from affiliates | | | | (47,972 | ) | | | 49,590 | | | | (1,618 | ) | | | -- | |
| Other financing activities, net | | | -- | | | | (1,973 | ) | | | (1,608 | ) | | | (3,581 | ) | | | -- | | | | (2,578 | ) | | | (3,245 | ) | | | (5,823 | ) |
| Net cash provided by (used in) financing activities | | | 4,690 | | | | (131,480 | ) | | | 41,582 | | | | (85,208 | ) | | | 13,000 | | | | 41,942 | | | | (1,411 | ) | | | 53,531 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net increase in cash and cash equivalents | | | -- | | | | 51,804 | | | | 38,448 | | | | 90,252 | | |
| Net increase (decrease) in cash and cash equivalents | | | | -- | | | | 87,119 | | | | (31,905 | ) | | | 55,214 | |
| Cash and cash equivalents | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Beginning of period | | | -- | | | | 41,075 | | | | 5,253 | | | | 46,328 | | | | -- | | | | 92,879 | | | | 43,701 | | | | 136,580 | |
| End of period | | $ | -- | | | $ | 92,879 | | | $ | 43,701 | | | $ | 136,580 | | | $ | -- | | | $ | 179,998 | | | $ | 11,796 | | | $ | 191,794 | |
None.
Disclosure Controls and Procedures
Management of the Company, including the Chief Executive Officer ("CEO"(“CEO”) and Chief Financial Officer ("CFO"(“CFO”), have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this Form 10-K. The term "disclosure“disclosure controls and procedures"procedures” means controls and other procedures established by the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company's management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Based upon their evaluation of the Company's disclosure controls and procedures, the CEO and the CFO concluded that the disclosure controls are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms.
The Company, including its CEO and CFO, does not expect that the Company's internal controls and procedures will prevent or detect all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Management's Annual Report on Internal Control Over Financial Reporting
The report of management required under this Item 9A is contained in Item 8 of this Form 10-K under the caption "Management's“Management's Report on Internal Control over Financial Reporting.”
Attestation Report of Registered Public Accounting Firm
The attestation report required under this Item 9A is contained in Item 8 of this Form 10-K under the caption "Report“Report of Independent Registered Public Accounting Firm."”
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal control over financial reporting during the quarter ended July 31, 20072008 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
None.On September 23, 2008, the Board of Directors of the Company approved the Amended and Restated Bylaws (“Amended Bylaws”) filed as Exhibit 3.2 in this Annual Report on Form 10-K. The director election provisions in the Amended Bylaws supplement and clarify the requirement that the Company’s directors be elected by majority vote. The Amended Bylaws also contemplate, consistent with recent amendments to Delaware law, that directors may tender advance, irrevocable resignations conditioned upon the failure to receive a specified vote. In addition, the Amended Bylaws provide that, to bring appropriate business before an annual meeting or nominate a person for election as a director, a stockholder must provide advance notice in a window of time determined based on the prior year’s annual meeting date, which provides for better predictability and clarity in planning for both stockholders and the Company.
PART III
Code of Ethics.Ethics and Business Conduct. The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The code of ethics and business conduct is posted in the corporate governance section of the Company's website at www.vailresorts.com. The Company will post any waiver to the code of ethics and business conduct granted to any of its officers on its website.
The New York Stock Exchange requires chief executive officers of listed corporations to certify that they are not aware of any violations by their company of the exchange’s corporate governance listing standards. Following the 2007 annual meeting of stockholders, the Company submitted the annual certification by the Chief Executive Officer to the New York Stock Exchange.
The Company has filed with the Securities and Exchange Commission, as an exhibit to this Form 10-K for the year ended July 31, 2008, the Sarbanes-Oxley Act Section 302 certification regarding the quality of the Company’s public disclosure.
The additional information required by this item is incorporated herein by reference from the Company's proxy statement for the 20072008 annual meeting of stockholders.
The information required by this item is incorporated herein by reference from the Company's proxy statement for the 20072008 annual meeting of stockholders.
The information required by this item is incorporated herein by reference from the Company's proxy statement for the 20072008 annual meeting of stockholdersstockholders.
The information required by this item is incorporated herein by reference from the Company's proxy statement for the 20072008 annual meeting of stockholdersstockholders.
The information required by this item is incorporated herein by reference from the Company's proxy statement for the 20072008 annual meeting of stockholdersstockholders.
PART IV
PART IV
a) Index to Financial Statements and Financial Statement Schedules.
| (1) | See "Item“Item 8. Financial Statements and Supplementary Data"Data” for the index to the Financial Statements. |
| (2) | All other schedules have been omitted because the required information is not applicable or because the information required has been included in the financial statements or notes thereto. |
(3) Index to Exhibits.
The following exhibits are either filed herewith or, if so indicated, incorporated by reference to the documents indicated in parentheses, which have previously been filed with the Securities and Exchange Commission.
| Posted Exhibit Number | Description | Sequentially Numbered Page |
| 3.1 | Amended and Restated Certificate of Incorporation of Vail Resorts, Inc., dated January 5, 2005. (Incorporated by reference to Exhibit 3.1 on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2005.) | |
| 3.2 | Amended and Restated Bylaws. | 59 |
| 4.1(a) | Indenture, dated as of January 29, 2004, among Vail Resorts, Inc., the guarantors therein and the Bank of New York as Trustee (Including Exhibit A, Form of Global Note). (Incorporated by reference to Exhibit 4.1 on Form 8-K of Vail Resorts, Inc. filed on February 2, 2004.) | |
| 4.1(b) | Supplemental Indenture, dated as of March 10, 2006 to Indenture dated as of January 29, 2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee. (Incorporated by reference to Exhibit 10.34 on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 4.1(c) | Form of Global Note. (Incorporated by reference to Exhibit 4.1 on Form 8-K of Vail Resorts, Inc. filed February 2, 2004.) | |
| 4.1(d) | Supplemental Indenture, dated as of April 26, 2007 to Indenture dated as of January 29, 2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee. | 77 |
| 4.1(e) | Supplemental Indenture, dated as of July 11, 2008 to Indenture dated as of January 29, 2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York Mellon Trust Company, N.A., as Trustee. | 84 |
| 10.1 | Forest Service Unified Permit for Heavenly ski area, dated April 29, 2002. (Incorporated by reference to Exhibit 99.13 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2002.) | |
| 10.2(a) | Forest Service Unified Permit for Keystone ski area, dated December 30, 1996. (Incorporated by reference to Exhibit 99.2(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.2(b) | Amendment No. 2 to Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 99.2(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.2(c) | Amendment No. 3 to Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 10.3 (c) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.2(d) | Amendment No. 4 to Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 10.3 (d) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.2(e) | Amendment No. 5 to Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 10.3 (e) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.3(a) | Forest Service Unified Permit for Breckenridge ski area, dated December 30, 1996. (Incorporated by reference to Exhibit 99.3(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.3(b) | Amendment No. 1 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 99.3(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.3(c) | Amendment No. 2 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 10.4 (c) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.3(d) | Amendment No. 3 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 10.4 (d) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.3(e) | Amendment No. 4 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 10.4 (e) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.3(f) | Amendment No. 5 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 10.4(f) on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 10.4(a) | Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 99.4(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.4(b) | Exhibits to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 99.4(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.4(c) | Amendment No. 1 to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 10.5(c) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.4(d) | Amendment No. 2 to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 10.5(d) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.4(e) | Amendment to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 10.5(e) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.4(f) | Amendment No. 3 to Forest Service Unified Permit for Beaver Creek ski area. | 91 |
| 10.5(a) | Forest Service Unified Permit for Vail ski area, dated November 23, 1993. (Incorporated by reference to Exhibit 99.5(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.5(b) | Exhibits to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 99.5(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.5(c) | Amendment No. 2 to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 99.5(c) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.5(d) | Amendment No. 3 to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 10.6 (d) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.5(e) | Amendment No. 4 to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 10.6 (e) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.6(a) | Purchase and Sale Agreement by and between VAHMC, Inc. and DiamondRock Hospitality Limited Partnership, dated May 3, 2005. (Incorporated by reference to Exhibit 10.18(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2005.) | |
| 10.6(b) | First Amendment to Purchase and Sale Agreement by and between VAHMC, Inc. and DiamondRock Hospitality Limited Partnership, dated May 10, 2005. (Incorporated by reference to Exhibit 10.18(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2005.) | |
| 10.7(a) | Sports and Housing Facilities Financing Agreement between the Vail Corporation (d/b/a “Vail Associates, Inc.”) and Eagle County, Colorado, dated April 1, 1998. (Incorporated by reference to Exhibit 10 on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 1998.) | |
| 10.7(b) | Trust Indenture, dated as of April 1, 1998 securing Sports and Housing Facilities Revenue Refunding Bonds by and between Eagle County, Colorado and U.S. Bank, N.A., as Trustee. (Incorporated by reference to Exhibit 10.1 on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 1998.) | |
| 10.8(a) | Fourth Amended and Restated Credit Agreement, dated as of January 28, 2005 among The Vail Corporation (d/b/a Vail Associates, Inc.), as borrower, Bank of America, N.A., as Administrative Agent, U.S. Bank National Association and Wells Fargo Bank, National Association as Co-Syndication Agents, Deutsche Bank Trust Company Americas and LaSalle Bank National Association as Co-Documentation Agents the Lenders party thereto and Banc of America Securities LLC, as Sole Lead Arranger and Sole Book Manager. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on January 31, 2005.) | |
| 10.8(b) | First Amendment to Fourth Amended and Restated Credit Agreement, dated as of June 29, 2005 among The Vail Corporation (d/b/a Vail Associates, Inc.), as borrower and Bank of America, N.A., as Administrative Agent. (Incorporated by reference to Exhibit 10.16(b) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.8(c) | Second Amendment to Fourth Amended and Restated Credit Agreement among The Vail Corporation, the Required Lenders and Bank of America, as Administrative Agent. (Incorporated by reference to Exhibit 10.3 of Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.) | |
| 10.8(d) | Limited Waiver, Release, and Third Amendment to Fourth Amended and Restated Credit Agreement, dated March 13, 2007. (Incorporated by reference to Exhibit 10.2 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.8(e) | Fourth Amendment to Fourth Amended and Restated Credit Agreement, dated April 30, 2008, among The Vail Corporation (d/b/a Vail Associates, Inc.) as borrower, the lenders party thereto and Bank of America, N.A., as Administrative Agent. (Incorporated by reference to Exhibit 10.1 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2008.) | |
| 10.9(a) | Construction Loan Agreement, dated January 31, 2006 among Arrabelle at Vail Square, LLC, U.S. Bank National Association and Wells Fargo Bank, N.A.. (Incorporated by reference to Exhibit 10.33(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 10.9(b) | Completion Guaranty Agreement by and between The Vail Resorts Corporation and U.S. Bank National Association, dated January 31, 2006. (Incorporated by reference to Exhibit 10.33(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 10.9(c) | Completion Guaranty Agreement by and between Vail Resorts, Inc. and U.S. Bank National Association dated January 31, 2006. (Incorporated by reference to Exhibit 10.33(c) on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 10.10(a)** | Construction Loan Agreement, dated March 19, 2007 among The Chalets at The Lodge at Vail, LLC, and Wells Fargo Bank, N.A. (Incorporated by reference to Exhibit 10.3 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.10(b) | Completion Guaranty Agreement by and between The Vail Corporation and Wells Fargo Bank, N.A., dated March 19, 2007. (Incorporated by reference to Exhibit 10.4 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.10(c) | Completion Guaranty Agreement by and between Vail Resorts, Inc. and Wells Fargo Bank, N.A., dated March 19, 2007. (Incorporated by reference to Exhibit 10.5 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.10(d) | Development Agreement Guaranty by and between The Vail Corporation and Wells Fargo Bank, N.A., dated March 19, 2007. (Incorporated by reference to Exhibit 10.6 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.10(e) | Development Agreement Guaranty by and between Vail Resorts, Inc. and Wells Fargo Bank, N.A., dated March 19, 2007. (Incorporated by reference to Exhibit 10.7 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.11 | Amended and Restated Revolving Credit and Security Agreement between SSI Venture, LLC and U.S. Bank National Association, dated September 23, 2005. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on September 29, 2005.) | |
| 10.12* | Vail Resorts, Inc. 1993 Stock Option Plan (Incorporated by reference to Exhibit 4.A of the registration statement on Form S-8 of Vail Resorts, Inc., dated October 21, 1997, File No. 333-38321.) | |
| 10.13* | Vail Resorts, Inc. 1996 Long Term Incentive and Share Award Plan (Incorporated by reference to the Exhibit 4.B of the registration statement on Form S-8 of Vail Resorts, Inc., dated October 21, 1997, File No. 333-38321.) | |
| 10.14* | Vail Resorts, Inc. 1999 Long Term Incentive and Share Award Plan. (Incorporated by reference to Exhibit 4.1 of the registration statement on Form S-8 of Vail Resorts, Inc., dated September 7, 2007, File No. 333-145934.) | |
| 10.15* | Vail Resorts, Inc. Amended and Restated 2002 Long Term Incentive and Share Award Plan. (Incorporated by reference to Exhibit 4.2 of the registration statement on Form S-8 of Vail Resorts, Inc., dated September 7, 2007, File No. 333-145934.) | |
| 10.16* | Form of Stock Option Agreement. (Incorporated by reference to Exhibit 10.20 of Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2007.) | |
| 10.17* | Form of Restricted Share [Unit] Agreement. | 92 |
| 10.18* | Form of Share Appreciation Rights Agreement. | 98 |
| 10.19* | Stock Option Agreement between Vail Resorts, Inc. and Jeffrey W. Jones, dated September 30, 2005. (Incorporated by reference to Exhibit 10.6 on Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.) | |
| 10.20* | Restricted Share Agreement between Vail Resorts, Inc. and Jeffrey W. Jones, dated September 30, 2005. (Incorporated by reference to Exhibit 10.7 on Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.) | |
| 10.21* | Summary of Vail Resorts, Inc. Director Compensation, effective October 15, 2007. (Incorporated by reference to Exhibit 10.7 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2007.) | |
| 10.22* | Vail Resorts Deferred Compensation Plan, effective as of October 1, 2000. (Incorporated by reference to Exhibit 10.23 on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2000.) | |
| 10.23* | Vail Resorts, Inc. Executive Perquisite Fund Program. (Incorporated by reference to Exhibit 10.27 on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2007.) | |
| 10.24* | Vail Resorts, Inc. Management Incentive Plan. (Incorporated by reference to Schedule 14A of Vail Resorts, Inc. as filed on October 26, 2007.) | |
| 10.25(a)* | Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer – Breckenridge Ski Resort, dated May 1, 1997. (Incorporated by reference to Exhibit 10.9(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) | |
| 10.25(b)* | First Amendment to the Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer – Vail Ski Resort, dated August 1, 1999. (Incorporated by reference to Exhibit 10.9(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) | |
| 10.25(c)* | Second Amendment to the Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer – Vail Ski Resort, dated July 22, 1999. (Incorporated by reference to Exhibit 10.9(c) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) | |
| 10.25(d)* | Third Amendment to the Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer – Vail Ski Resort, dated July 19, 2007. (Incorporated by reference to Exhibit 10.29(d) of Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2007.) | |
| 10.25(e)* | Agreement, dated January 7, 2008, by and among Vail Associates, Inc., William A. Jensen and Intrawest ULC. (Incorporated by reference to Exhibit 10.1 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2008.) | |
| 10.26* | Separation Agreement and General Release, dated December 7, 2006 between Martha D. Rehm and Vail Resorts, Inc. and Amendment No. 1 thereto dated March 9, 2007. (Incorporated by reference to Exhibit 10.2 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2007.) | |
| 10.27* | Employment Agreement, dated as of February 28, 2006, between Vail Resorts, Inc. and Robert A. Katz. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.) | |
| 10.28(a)* | Amended and Restated Employment Agreement of Jeffrey W. Jones, as Chief Financial Officer of Vail Resorts, Inc. dated September 29, 2004. (Incorporated by reference to Exhibit 10.9 of Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2004.) | |
| 10.28(b)* | Restated First Amendment to Amended and Restated Employment Agreement, dated September 18, 2008, by and between Vail Resorts, Inc. and Jeffrey W. Jones. | 105 |
| 10.29* | Employment Agreement, dated as of May 4, 2006, between Keith Fernandez and Vail Resorts Development Company. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on May 9, 2006.) | |
| 10.30* | Employment Agreement, dated May 17, 1999, between John McD. Garnsey and Vail Associates, Inc. | 108 |
| 10.31(a)* | Employment Agreement, dated June 23, 2002, between Blaise Carrig and Heavenly Valley, Limited Partnership. | 121 |
| 10.31(b)* | Addendum to the Employment Agreement, dated September 1, 2002, between Blaise Carrig and Heavenly Valley, Limited Partnership. | 129 |
| 21 | Subsidiaries of Vail Resorts, Inc. | 134 |
| 22 | Consent of Independent Registered Public Accounting Firm. | 140 |
| 23 | Power of Attorney. Included on signature pages hereto. | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | 141 |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | 142 |
| 32 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | 143 |
| *Management contracts and compensatory plans and arrangements. | |
| **Portions of this Exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. | |
Posted Exhibit Number | Description | Sequentially Numbered Page |
| 3.1 | Amended and Restated Certificate of Incorporation of Vail Resorts, Inc., dated January 5, 2005. (Incorporated by reference to Exhibit 3.1 on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2005.) | |
| 3.2 | Amended and Restated By-Laws of Vail Resorts, Inc., dated September 28, 2004. (Incorporated by reference to Exhibit 3.1 on Form 8-K of Vail Resorts, Inc. filed on September 30, 2004.) | |
| 4.1(a) | Indenture, dated as of January 29, 2004, among Vail Resorts, Inc., the guarantors therein and the Bank of New York as Trustee (Including Exhibit A, Form of Global Note). (Incorporated by reference to Exhibit 4.1 on Form 8-K of Vail Resorts, Inc. filed on February 2, 2004.) | |
| 4.1(b) | Supplemental Indenture, dated as of March 10, 2006 to Indenture dated as of January 29, 2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as Guarantors, and The Bank of New York, as Trustee. (Incorporated by reference to Exhibit 10.34 on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 4.1(c) | Form of Global Note. (Incorporated by reference to Exhibit 4.1 on Form 8-K of Vail Resorts, Inc. filed February 2, 2004.) | |
| 10.1 | Forest Service Unified Permit for Heavenly ski area, dated April 29, 2002. (Incorporated by reference to Exhibit 99.13 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2002.) | |
| 10.2(a) | Forest Service Unified Permit for Keystone ski area, dated December 30, 1996. (Incorporated by reference to Exhibit 99.2(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.2(b) | Amendment No. 2 to Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 99.2(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.2(c) | Amendment No. 3 to Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 10.3 (c) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.2(d) | Amendment No. 4 to Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 10.3 (d) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.2(e) | Amendment No. 5 to Forest Service Unified Permit for Keystone ski area. (Incorporated by reference to Exhibit 10.3 (e) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.3(a) | Forest Service Unified Permit for Breckenridge ski area, dated December 30, 1996. (Incorporated by reference to Exhibit 99.3(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.3(b) | Amendment No. 1 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 99.3(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.3(c) | Amendment No. 2 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 10.4 (c) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.3(d) | Amendment No. 3 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 10.4 (d) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.3(e) | Amendment No. 4 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 10.4 (e) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.3(f) | Amendment No. 5 to Forest Service Unified Permit for Breckenridge ski area. (Incorporated by reference to Exhibit 10.4(f) on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 10.4(a) | Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 99.4(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.4(b) | Exhibits to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 99.4(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.4(c) | Amendment No. 1 to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 10.5 (c) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.4(d) | Amendment No. 2 to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 10.5 (d) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.4(e) | Amendment to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated by reference to Exhibit 10.5 (e) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.5(a) | Forest Service Unified Permit for Vail ski area, dated November 23, 1993. (Incorporated by reference to Exhibit 99.5(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.5(b) | Exhibits to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 99.5(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.5(c) | Amendment No. 2 to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 99.5(c) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2002.) | |
| 10.5(d) | Amendment No. 3 to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 10.6 (d) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.5(e) | Amendment No. 4 to Forest Service Unified Permit for Vail ski area. (Incorporated by reference to Exhibit 10.6 (e) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.6 | Purchase and Sale Agreement between VR Holdings, Inc., as Seller and GHR, LLC, as Purchaser dated December 8, 2004. (Incorporated by reference to Exhibit 99.2 on Form 8-K of Vail Resorts, Inc., dated December 14, 2004.) | |
| 10.7(a) | Purchase and Sale Agreement by and between VAHMC, Inc. and DiamondRock Hospitality Limited Partnership, dated May 3, 2005. (Incorporated by reference to Exhibit 10.18(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2005.) | |
| 10.7(b) | First Amendment to Purchase and Sale Agreement by and between VAHMC, Inc. and DiamondRock Hospitality Limited Partnership, dated May 10, 2005. (Incorporated by reference to Exhibit 10.18(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2005.) | |
| 10.8 | Purchase and Sale Agreement by and between VA Rancho Mirage Resort L.P., Rancho Mirage Concessions, Inc. and GENLB-Rancho, LLC, dated July 1, 2005. (Incorporated by reference to Exhibit 10.21 on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.9 | Purchase and Sale Contract between JHL&S LLC and Lodging Capital Partners, LLC, dated December 22, 2005. (Incorporated by reference to Exhibit 10.32 on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 10.10(a) | Sports and Housing Facilities Financing Agreement between the Vail Corporation (d/b/a “Vail Associates, Inc.”) and Eagle County, Colorado, dated April 1, 1998. (Incorporated by reference to Exhibit 10 on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 1998.) | |
| 10.10(b) | Trust Indenture, dated as of April 1, 1998 securing Sports and Housing Facilities Revenue Refunding Bonds by and between Eagle County, Colorado and U.S. Bank, N.A., as Trustee. (Incorporated by reference to Exhibit 10.1 on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 1998.) | |
| 10.11(a) | Fourth Amended and Restated Credit Agreement, dated as of January 28, 2005 among The Vail Corporation (d/b/a Vail Associates, Inc.), as borrower, Bank of America, N.A., as Administrative Agent, U.S. Bank National Association and Wells Fargo Bank, National Association as Co-Syndication Agents, Deutsche Bank Trust Company Americas and LaSalle Bank National Association as Co-Documentation Agents the Lenders party thereto and Banc of America Securities LLC, as Sole Lead Arranger and Sole Book Manager. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on January 31, 2005.) | |
| 10.11(b) | First Amendment to Fourth Amended and Restated Credit Agreement, dated as of June 29, 2005 among The Vail Corporation (d/b/a Vail Associates, Inc.), as borrower and Bank of America, N.A., as Administrative Agent. (Incorporated by reference to Exhibit 10.16(b) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.11(c) | Second Amendment to Fourth Amended and Restated Credit Agreement among The Vail Corporation, the Required Lenders and Bank of America, as Administrative Agent. (Incorporated by reference to Exhibit 10.3 of Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.) | |
| 10.11(d) | Limited Waiver, Release, and Third Amendment to Fourth Amended and Restated Credit Agreement, dated March 13, 2007. (Incorporated by reference to Exhibit 10.2 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.12(a) | Construction Loan Agreement, dated January 31, 2006 among Arrabelle at Vail Square, LLC, U.S. Bank National Association and Wells Fargo Bank, N.A.. (Incorporated by reference to Exhibit 10.33(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 10.12(b) | Completion Guaranty Agreement by and between The Vail Resorts Corporation and U.S. Bank National Association, dated January 31, 2006. (Incorporated by reference to Exhibit 10.33(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 10.12(c) | Completion Guaranty Agreement by and between Vail Resorts, Inc. and U.S. Bank National Association dated January 31, 2006. (Incorporated by reference to Exhibit 10.33(c) on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2006.) | |
| 10.13(a) | Construction Loan Agreement by and between Gore Creek Place, LLC and U.S. Bank National Association, dated July 19, 2005. (Incorporated by reference to Exhibit 10.22(a) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2005.) | |
| 10.13(b) | First Amendment to Construction Loan Agreement by and between Gore Creek Place, LLC and U.S. Bank National Association, dated December 1, 2005. (Incorporated by reference to Exhibit 10.11(b) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2006.) | |
| 10.13(c) | Second Amendment to Construction Loan Agreement by and between Gore Creek Place, LLC and U.S. Bank National Association, dated July 5, 2006. (Incorporated by reference to Exhibit 10.11(c) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2006.) | |
| 10.13(d) | Amended and Restated Completion Guaranty Agreement among Vail Resorts, Inc., The Vail Corporation and U.S. Bank National Association, dated December 1, 2005. (Incorporated by reference to Exhibit 10.11(d) on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2006.) | |
| 10.14(a)** | Construction Loan Agreement, dated March 19, 2007 among The Chalets at The Lodge at Vail, LLC, and Wells Fargo Bank, N.A. (Incorporated by reference to Exhibit 10.3 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.14(b) | Completion Guaranty Agreement by and between The Vail Corporation and Wells Fargo Bank, N.A., dated March 19, 2007. (Incorporated by reference to Exhibit 10.4 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.14(c) | Completion Guaranty Agreement by and between Vail Resorts, Inc. and Wells Fargo Bank, N.A., dated March 19, 2007. (Incorporated by reference to Exhibit 10.5 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.14(d) | Development Agreement Guaranty by and between The Vail Corporation and Wells Fargo Bank, N.A., dated March 19, 2007. (Incorporated by reference to Exhibit 10.6 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.14(e) | Development Agreement Guaranty by and between Vail Resorts, Inc. and Wells Fargo Bank, N.A., dated March 19, 2007. (Incorporated by reference to Exhibit 10.7 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended April 30, 2007.) | |
| 10.15 | Amended and Restated Revolving Credit and Security Agreement between SSI Venture, LLC and U.S. Bank National Association, dated September 23, 2005. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on September 29, 2005.) | |
| 10.16* | Vail Resorts, Inc. 1993 Stock Option Plan (Incorporated by reference to Exhibit 4.A of the registration statement on Form S-8 of Vail Resorts, Inc., dated October 21, 1997, File No. 333-38321.) | |
| 10.17* | Vail Resorts, Inc. 1996 Long Term Incentive and Share Award Plan (Incorporated by reference to the Exhibit 4.B of the registration statement on Form S-8 of Vail Resorts, Inc., dated October 21, 1997, File No. 333-38321.) | |
| 10.18* | Vail Resorts, Inc. 1999 Long Term Incentive and Share Award Plan. (Incorporated by reference to Exhibit 4.1 of the registration statement on Form S-8 of Vail Resorts, Inc., dated September 7, 2007, File No. 333-145934.) | |
| 10.19* | Vail Resorts, Inc. Amended and Restated 2002 Long Term Incentive and Share Award Plan. (Incorporated by reference to Exhibit 4.2 of the registration statement on Form S-8 of Vail Resorts, Inc., dated September 7, 2007, File No. 333-145934.) | |
| 10.20* | Form of Stock Option Agreement. | |
| 10.21* | Form of Restricted Share [Unit] Agreement. | 65 |
| 10.22* | Form of Share Appreciation Rights Agreement. | 71 |
| 10.23* | Stock Option Agreement between Vail Resorts, Inc. and Jeffrey W. Jones, dated September 30, 2005. (Incorporated by reference to Exhibit 10.6 on Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.) | |
| 10.24* | Restricted Share Agreement between Vail Resorts, Inc. and Jeffrey W. Jones, dated September 30, 2005. (Incorporated by reference to Exhibit 10.7 on Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.) | |
| 10.25* | Summary of Vail Resorts, Inc. Director Compensation, effective February 27, 2006. (Incorporated by reference to Exhibit 10.38 of the report on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2006.) | |
| 10.26* | Vail Resorts Deferred Compensation Plan, effective as of October 1, 2000. (Incorporated by reference to Exhibit 10.23 on Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2000.) | |
| 10.27* | Vail Resorts, Inc. Executive Perquisite Fund Program. | 77 |
| 10.28* | Relocation and Separation Policy for Executives 2006. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on April 14, 2006.) | |
| 10.29(a)* | Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer – Breckenridge Ski Resort, dated May 1, 1997. (Incorporated by reference to Exhibit 10.9(a) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) | |
| 10.29(b)* | First Amendment to the Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer – Vail Ski Resort, dated August 1, 1999. (Incorporated by reference to Exhibit 10.9(b) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) | |
| 10.29(c)* | Second Amendment to the Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer – Vail Ski Resort, dated July 22, 1999. (Incorporated by reference to Exhibit 10.9(c) on Form 10-Q of Vail Resorts, Inc. for the quarter ended October 31, 2004.) | |
| 10.29(d)* | Third Amendment to the Employment Agreement of William A. Jensen as Senior Vice President and Chief Operating Officer – Vail Ski Resort, dated July 19, 2007. | 78 |
| 10.30* | Amended and Restated Employment Agreement of Jeffrey W. Jones, as Chief Financial Officer of Vail Resorts, Inc. dated September 29, 2004. (Incorporated by reference to Exhibit 10.9 of Form 10-K of Vail Resorts, Inc. for the year ended July 31, 2004.) | |
| 10.31* | Employment Agreement, dated as of February 28, 2006, between Vail Resorts, Inc. and Robert A. Katz. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.) | |
| 10.32(a)* | Employment Agreement, dated as of May 4, 2006, between Keith Fernandez and Vail Resorts Development Company. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on May 9, 2006.) | |
| 10.32(b) * | First Amendment to the Employment Agreement of Keith Fernandez as Chief Operating Officer of Vail Resorts Development Company, dated August 6, 2007. (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on August 8, 2007). | |
| 10.33* | Separation Agreement and General Release, dated as of February 27, 2006, between Adam M. Aron and Vail Resorts, Inc. (Incorporated by reference to Exhibit 10.2 on Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.) | |
| 10.34* | Separation Agreement and General Release, dated as of April 15, 2006, between Edward E. Mace and RockResorts International., LLC (Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on April 20, 2006.) | |
| 10.35* | Separation Agreement and General Release, dated December 7, 2006 between Martha D. Rehm and Vail Resorts, Inc. and Amendment No. 1 thereto dated March 9, 2007. (Incorporated by reference to Exhibit 10.2 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31, 2007.) | |
| 21 | Subsidiaries of Vail Resorts, Inc. | 80 |
| 22 | Consent of Independent Registered Public Accounting Firm. | 82 |
| 23 | Power of Attorney. Included on signature pages hereto. | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | 83 |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | 84 |
| 32 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | 85 |
| *Management contracts and compensatory plans and arrangements. | |
| **Portions of this Exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. | |
b) Exhibits
The exhibits filed herewith as indicated in the exhibit listed above following the Signatures section of this report.
c) Financial Statement Schedules
Consolidated Financial Statement Schedule | Consolidated Financial Statement Schedule | Consolidated Financial Statement Schedule |
| | |
(in thousands) | (in thousands) | (in thousands) |
For the Years Ended July 31, | For the Years Ended July 31, | For the Years Ended July 31, |
| | | | | | | | | | | | | | | | | |
| | | Balance at | | Charged to | | | | Balance at | | Balance at | | Charged to | | | | Balance at |
| | | Beginning of | | Costs and | | | | End of | | Beginning of | | Costs and | | | | End of |
| | | Period | | Expenses | | Deductions | | Period | |
| 2005 | | | | | | | | | | | | |
| Inventory Reserves | | $ | 738 | | $ | 1,754 | | $ | (1,773 | ) | | $ | 719 | |
| Valuation Allowance on Income Taxes | | | 686 | | 919 | | | -- | | | 1,605 | |
| Trade Receivable Allowances | | | 1,265 | | 766 | | | (696 | ) | | | 1,335 | |
| | | | | | | | | | | | | | Period | | Expenses | | Deductions | | Period |
| 2006 | | | | | | | | | | | | | | | | | | | | | | |
| Inventory Reserves | | | 719 | | 2,139 | | | (2,103 | ) | | | 755 | | $ | 719 | | $ | 2,139 | | $ | (2,103 | ) | | $ | 755 |
| Valuation Allowance on Income Taxes | | | 1,605 | | -- | | | -- | | | 1,605 | | | 1,605 | | -- | | | -- | | | 1,605 |
| Trade Receivable Allowances | | | 1,335 | | 694 | | | (641 | ) | | | 1,388 | | | 1,335 | | 694 | | | (641 | ) | | | 1,388 |
| | | | | | | | | | | | | | | | | | | | | | | |
| 2007 | | | | | | | | | | | | | | | | | | | | | | |
| Inventory Reserves | | | 755 | | 2,202 | | | (2,131 | ) | | | 826 | | | 755 | | 2,202 | | | (2,131 | ) | | | 826 |
| Valuation Allowance on Income Taxes | | | 1,605 | | -- | | | (17 | ) | | | 1,588 | | | 1,605 | | -- | | | (17 | ) | | | 1,588 |
| Trade Receivable Allowances | | $ | 1,388 | | $ | 1,638 | | $ | (908 | ) | | $ | 2,118 | | | 1,388 | | 1,638 | | | (908 | ) | | | 2,118 |
| | | | | | | | | | | | | |
| 2008 | | | | | | | | | | | | |
| Inventory Reserves | | | | 826 | | 2,729 | | | (2,344 | ) | | | 1,211 |
| Valuation Allowance on Income Taxes | | | | 1,588 | | -- | | | -- | | | 1,588 |
| Trade Receivable Allowances | | | $ | 2,118 | | $ | 670 | | $ | (1,122 | ) | | $ | 1,666 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Vail Resorts, Inc. |
| | |
| By: | /s/ Jeffrey W. Jones |
| | Jeffrey W. Jones |
| | Senior Executive Vice President and |
| | Chief Financial Officer and (Chief Accounting Officer and Duly Authorized Officer) |
| | |
| Date: | September 27, 200725, 2008 |
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Jeffrey W. Jones or Fiona E. Arnold his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments or supplements to this Form 10-K and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary or appropriate to be done with this Form 10-K and any amendments or supplements hereto, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on September 27, 2007.25, 2008.
Signature | Title |
| /s/ Robert A. Katz | Chief Executive Officer and Director |
| Robert A. Katz | (Principal Executive Officer) |
| |
| /s/ Jeffrey W. Jones | Senior Executive Vice President, and |
| Jeffrey W. Jones | Chief Financial Officer and Director |
| | (Principal Financial and Accounting Officer) |
| |
| /s/ Joe R. Micheletto | |
| Joe R. Micheletto | Chairman of the Board |
/s/ John J. Hannan | |
John J. Hannan | Director |
| /s/ Roland A. Hernandez | |
| Roland A. Hernandez | Director |
| |
| /s/ Thomas D. Hyde | |
| Thomas D. Hyde | Director |
| |
| /s/ Richard D. Kincaid | |
| Richard D. Kincaid | Director |
| |
| /s/ John T. Redmond | |
| John T. Redmond | Director |
| |
| /s/ John F. Sorte | |
| John F. Sorte | Director |
| |
| /s/ William P. Stiritz | |
| William P. Stiritz | Director |
| | |
