UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 30, 2020
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☐ | 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)
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Delaware | | 51-0291762 |
(State or Other Jurisdiction of Incorporation or Organization)
| | (I.R.S. Employer Identification No.)
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390 Interlocken Crescent | | |
Broomfield, | Colorado | | 80021 |
(Address of Principal Executive Offices) | | (Zip Code) |
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(303) | 404-1800 |
(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, $0.01 par value | MTN | New York Stock Exchange |
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 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
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Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
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Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
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Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
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| | | | Emerging growth company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of June 1, 2020, 40,122,2433, 2021, 40,268,257 shares of the registrant’s common stock were outstanding.
Table of Contents
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PART I | FINANCIAL INFORMATION | Page |
PART I | FINANCIAL INFORMATION | Page |
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Item 1. | Financial Statements (unaudited). | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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PART II | OTHER INFORMATION | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
Vail Resorts, Inc.
Consolidated Condensed Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
| | | | April 30, 2020 | | July 31, 2019 | | April 30, 2019 | | April 30, 2021 | | July 31, 2020 | | April 30, 2020 |
Assets | | | | | | | Assets | |
Current assets: | | | | | | | Current assets: | |
Cash and cash equivalents | | $ | 482,656 |
| | $ | 108,850 |
| | $ | 59,636 |
| Cash and cash equivalents | | $ | 1,344,702 | | | $ | 390,980 | | | $ | 482,656 | |
Restricted cash | | 10,459 |
| | 9,539 |
| | 8,876 |
| Restricted cash | | 11,684 | | | 11,106 | | | 10,459 | |
Trade receivables, net | | 100,225 |
| | 270,896 |
| | 273,108 |
| Trade receivables, net | | 208,132 | | | 106,664 | | | 100,225 | |
Inventories, net | | 101,748 |
| | 96,539 |
| | 84,059 |
| Inventories, net | | 73,044 | | | 101,856 | | | 101,748 | |
Other current assets | | 55,790 |
| | 42,116 |
| | 41,177 |
| Other current assets | | 47,253 | | | 54,482 | | | 55,790 | |
Total current assets | | 750,878 |
| | 527,940 |
| | 466,856 |
| Total current assets | | 1,684,815 | | | 665,088 | | | 750,878 | |
Property, plant and equipment, net (Note 8) | | 2,201,803 |
| | 1,842,500 |
| | 1,847,434 |
| |
Property, plant and equipment, net (Note 7) | | Property, plant and equipment, net (Note 7) | | 2,116,795 | | | 2,192,679 | | | 2,201,803 | |
Real estate held for sale and investment | | 96,565 |
| | 101,021 |
| | 101,251 |
| Real estate held for sale and investment | | 96,259 | | | 96,844 | | | 96,565 | |
Goodwill, net (Note 8) | | 1,673,258 |
| | 1,608,206 |
| | 1,596,867 |
| |
Goodwill, net (Note 7) | | Goodwill, net (Note 7) | | 1,801,296 | | | 1,709,020 | | | 1,673,258 | |
Intangible assets, net | | 310,033 |
| | 306,173 |
| | 306,489 |
| Intangible assets, net | | 323,521 | | | 314,776 | | | 310,033 | |
Operating right-of-use assets (Note 4) | | 217,318 |
| | — |
| | — |
| |
Operating right-of-use assets | | Operating right-of-use assets | | 211,497 | | | 225,744 | | | 217,318 | |
Other assets | | 39,797 |
| | 40,237 |
| | 42,837 |
| Other assets | | 42,454 | | | 40,081 | | | 39,797 | |
Total assets | | $ | 5,289,652 |
| | $ | 4,426,077 |
| | $ | 4,361,734 |
| Total assets | | $ | 6,276,637 | | | $ | 5,244,232 | | | $ | 5,289,652 | |
Liabilities and Stockholders’ Equity | | | | | | | Liabilities and Stockholders’ Equity | |
Current liabilities: | | | | | | | Current liabilities: | |
Accounts payable and accrued liabilities (Note 8) | | $ | 449,274 |
| | $ | 607,857 |
| | $ | 543,060 |
| |
Accounts payable and accrued liabilities (Note 7) | | Accounts payable and accrued liabilities (Note 7) | | $ | 567,264 | | | $ | 499,108 | | | $ | 449,274 | |
Income taxes payable | | 42,554 |
| | 62,760 |
| | 23,290 |
| Income taxes payable | | 36,344 | | | 40,680 | | | 42,554 | |
Long-term debt due within one year (Note 6) | | 63,566 |
| | 48,516 |
| | 48,504 |
| |
Long-term debt due within one year (Note 5) | | Long-term debt due within one year (Note 5) | | 113,454 | | | 63,677 | | | 63,566 | |
Total current liabilities | | 555,394 |
| | 719,133 |
| | 614,854 |
| Total current liabilities | | 717,062 | | | 603,465 | | | 555,394 | |
Long-term debt, net (Note 6) | | 2,365,372 |
| | 1,527,744 |
| | 1,310,870 |
| |
Operating lease liabilities (Note 4) | | 209,321 |
| | — |
| | — |
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Other long-term liabilities (Note 8) | | 251,464 |
| | 283,601 |
| | 268,350 |
| |
Long-term debt, net (Note 5) | | Long-term debt, net (Note 5) | | 2,739,981 | | | 2,387,122 | | | 2,365,372 | |
Operating lease liabilities | | Operating lease liabilities | | 196,256 | | | 217,542 | | | 209,321 | |
Other long-term liabilities (Note 7) | | Other long-term liabilities (Note 7) | | 252,451 | | | 270,245 | | | 251,464 | |
Deferred income taxes, net | | 277,841 |
| | 168,759 |
| | 274,306 |
| Deferred income taxes, net | | 344,190 | | | 234,191 | | | 277,841 | |
Total liabilities | | 3,659,392 |
| | 2,699,237 |
| | 2,468,380 |
| Total liabilities | | 4,249,940 | | | 3,712,565 | | | 3,659,392 | |
Commitments and contingencies (Note 10) | |
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Commitments and contingencies (Note 9) | | Commitments and contingencies (Note 9) | | 0 | | 0 | | 0 |
Stockholders’ equity: | | | | | | | Stockholders’ equity: | |
Preferred stock, $0.01 par value, 25,000 shares authorized, no shares issued and outstanding | | — |
| | — |
| | — |
| |
Common stock, $0.01 par value, 100,000 shares authorized, 46,266, 46,190 and 46,105 shares issued, respectively | | 462 |
| | 461 |
| | 461 |
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Exchangeable shares, $0.01 par value, 54, 56 and 56 shares issued and outstanding, respectively (Note 5) | | 1 |
| | 1 |
| | 1 |
| |
Preferred stock, $0.01 par value, 25,000 shares authorized, 0 shares issued and outstanding | | Preferred stock, $0.01 par value, 25,000 shares authorized, 0 shares issued and outstanding | | 0 | | | 0 | | | 0 | |
Common stock, $0.01 par value, 100,000 shares authorized, 46,429, 46,350 and 46,266 shares issued, respectively | | Common stock, $0.01 par value, 100,000 shares authorized, 46,429, 46,350 and 46,266 shares issued, respectively | | 465 | | | 464 | | | 462 | |
Exchangeable shares, $0.01 par value, 34, 36 and 54 shares issued and outstanding, respectively (Note 4) | | Exchangeable shares, $0.01 par value, 34, 36 and 54 shares issued and outstanding, respectively (Note 4) | | 0 | | | 0 | | | 1 | |
Additional paid-in capital | | 1,136,139 |
| | 1,130,083 |
| | 1,140,099 |
| Additional paid-in capital | | 1,220,942 | | | 1,131,624 | | | 1,136,139 | |
Accumulated other comprehensive loss | | (109,576 | ) | | (31,730 | ) | | (36,540 | ) | |
Accumulated other comprehensive income (loss) | | Accumulated other comprehensive income (loss) | | 50,643 | | | (56,837) | | | (109,576) | |
Retained earnings | | 799,508 |
| | 759,801 |
| | 920,327 |
| Retained earnings | | 914,563 | | | 645,902 | | | 799,508 | |
Treasury stock, at cost, 6,161, 5,905, and 5,905 shares, respectively (Note 12) | | (404,411 | ) | | (357,989 | ) | | (357,989 | ) | |
Treasury stock, at cost, 6,161, 6,161, and 6,161 shares, respectively (Note 11) | | Treasury stock, at cost, 6,161, 6,161, and 6,161 shares, respectively (Note 11) | | (404,411) | | | (404,411) | | | (404,411) | |
Total Vail Resorts, Inc. stockholders’ equity | | 1,422,123 |
| | 1,500,627 |
| | 1,666,359 |
| Total Vail Resorts, Inc. stockholders’ equity | | 1,782,202 | | | 1,316,742 | | | 1,422,123 | |
Noncontrolling interests | | 208,137 |
| | 226,213 |
| | 226,995 |
| Noncontrolling interests | | 244,495 | | | 214,925 | | | 208,137 | |
Total stockholders’ equity | | 1,630,260 |
| | 1,726,840 |
| | 1,893,354 |
| Total stockholders’ equity | | 2,026,697 | | | 1,531,667 | | | 1,630,260 | |
Total liabilities and stockholders’ equity | | $ | 5,289,652 |
| | $ | 4,426,077 |
| | $ | 4,361,734 |
| Total liabilities and stockholders’ equity | | $ | 6,276,637 | | | $ | 5,244,232 | | | $ | 5,289,652 | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| | | Three Months Ended April 30, | | Nine Months Ended April 30, | | Three Months Ended April 30, | | Nine Months Ended April 30, |
| 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Net revenue: | | | | | | | | Net revenue: | |
Mountain and Lodging services and other | $ | 582,890 |
| | $ | 800,816 |
| | $ | 1,516,679 |
| | $ | 1,631,957 |
| Mountain and Lodging services and other | $ | 794,393 | | | $ | 582,890 | | | $ | 1,495,777 | | | $ | 1,516,679 | |
Mountain and Lodging retail and dining | 110,799 |
| | 156,930 |
| | 365,032 |
| | 395,017 |
| Mountain and Lodging retail and dining | 93,885 | | | 110,799 | | | 208,362 | | | 365,032 | |
Resort net revenue | 693,689 |
| | 957,746 |
| | 1,881,711 |
| | 2,026,974 |
| Resort net revenue | 888,278 | | | 693,689 | | | 1,704,139 | | | 1,881,711 | |
Real Estate | 398 |
| | 241 |
| | 4,784 |
| | 595 |
| Real Estate | 800 | | | 398 | | | 1,369 | | | 4,784 | |
Total net revenue | 694,087 |
| | 957,987 |
| | 1,886,495 |
|
| 2,027,569 |
| Total net revenue | 889,078 | | | 694,087 | | | 1,705,508 | | | 1,886,495 | |
Operating expense (exclusive of depreciation and amortization shown separately below): | | | | | | | | Operating expense (exclusive of depreciation and amortization shown separately below): | |
Mountain and Lodging operating expense | 285,764 |
| | 349,647 |
| | 902,316 |
| | 894,392 |
| Mountain and Lodging operating expense | 317,836 | | | 285,764 | | | 765,944 | | | 902,316 | |
Mountain and Lodging retail and dining cost of products sold | 42,663 |
| | 59,615 |
| | 147,533 |
| | 157,996 |
| Mountain and Lodging retail and dining cost of products sold | 35,937 | | | 42,663 | | | 90,435 | | | 147,533 | |
General and administrative | 60,818 |
| | 68,213 |
| | 227,175 |
| | 209,954 |
| General and administrative | 73,294 | | | 60,818 | | | 210,444 | | | 227,175 | |
Resort operating expense | 389,245 |
| | 477,475 |
| | 1,277,024 |
| | 1,262,342 |
| Resort operating expense | 427,067 | | | 389,245 | | | 1,066,823 | | | 1,277,024 | |
Real Estate operating expense | 1,128 |
| | 1,382 |
| | 7,926 |
| | 4,141 |
| Real Estate operating expense | 2,023 | | | 1,128 | | | 5,088 | | | 7,926 | |
Total segment operating expense | 390,373 |
| | 478,857 |
| | 1,284,950 |
| | 1,266,483 |
| Total segment operating expense | 429,090 | | | 390,373 | | | 1,071,911 | | | 1,284,950 | |
Other operating (expense) income: | | | | | | | | Other operating (expense) income: | |
Depreciation and amortization | (64,730 | ) | | (55,260 | ) | | (186,387 | ) | | (161,541 | ) | Depreciation and amortization | (64,071) | | | (64,730) | | | (189,362) | | | (186,387) | |
Gain on sale of real property | — |
| | 268 |
| | 207 |
| | 268 |
| Gain on sale of real property | 189 | | | 0 | | | 189 | | | 207 | |
Asset impairments (Notes 2 & 8) | (28,372 | ) | | — |
| | (28,372 | ) | | — |
| |
Change in estimated fair value of contingent consideration (Note 9) | 8,000 |
| | (1,567 | ) | | 5,264 |
| | (3,467 | ) | |
(Loss) gain on disposal of fixed assets and other, net | (380 | ) | | 27 |
| | 1,178 |
| | 505 |
| |
Asset impairments (Notes 2 & 7) | | Asset impairments (Notes 2 & 7) | 0 | | | (28,372) | | | 0 | | | (28,372) | |
Change in estimated fair value of contingent consideration (Note 8) | | Change in estimated fair value of contingent consideration (Note 8) | (10,400) | | | 8,000 | | | (12,202) | | | 5,264 | |
Gain (loss) on disposal of fixed assets and other, net | | Gain (loss) on disposal of fixed assets and other, net | 1,999 | | | (380) | | | (762) | | | 1,178 | |
Income from operations | 218,232 |
| | 422,598 |
| | 393,435 |
| | 596,851 |
| Income from operations | 387,705 | | | 218,232 | | | 431,460 | | | 393,435 | |
Mountain equity investment (loss) income, net | (90 | ) | | 445 |
| | 1,270 |
| | 1,555 |
| |
Mountain equity investment income (loss), net | | Mountain equity investment income (loss), net | 1,011 | | | (90) | | | 6,177 | | | 1,270 | |
Investment income and other, net | 361 |
| | 1,727 |
| | 999 |
| | 2,697 |
| Investment income and other, net | 347 | | | 361 | | | 857 | | | 999 | |
Foreign currency loss on intercompany loans (Note 6) | (7,753 | ) | | (3,319 | ) | | (8,191 | ) | | (5,180 | ) | |
Foreign currency gain (loss) on intercompany loans (Note 5) | | Foreign currency gain (loss) on intercompany loans (Note 5) | 4,157 | | | (7,753) | | | 9,832 | | | (8,191) | |
Interest expense, net | (24,479 | ) | | (19,575 | ) | | (73,303 | ) | | (59,215 | ) | Interest expense, net | (39,033) | | | (24,479) | | | (112,287) | | | (73,303) | |
Income before provision for income taxes | 186,271 |
| | 401,876 |
| | 314,210 |
| | 536,708 |
| Income before provision for income taxes | 354,187 | | | 186,271 | | | 336,039 | | | 314,210 | |
Provision for income taxes | (26,440 | ) | | (93,346 | ) | | (47,190 | ) | | (120,914 | ) | Provision for income taxes | (76,897) | | | (26,440) | | | (66,640) | | | (47,190) | |
Net income | 159,831 |
| | 308,530 |
| | 267,020 |
| | 415,794 |
| Net income | 277,290 | | | 159,831 | | | 269,399 | | | 267,020 | |
Net income attributable to noncontrolling interests | (7,285 | ) | | (16,396 | ) | | (14,579 | ) | | (25,106 | ) | Net income attributable to noncontrolling interests | (2,661) | | | (7,285) | | | (738) | | | (14,579) | |
Net income attributable to Vail Resorts, Inc. | $ | 152,546 |
| | $ | 292,134 |
| | $ | 252,441 |
| | $ | 390,688 |
| Net income attributable to Vail Resorts, Inc. | $ | 274,629 | | | $ | 152,546 | | | $ | 268,661 | | | $ | 252,441 | |
Per share amounts (Note 5): | | | | | | | | |
Per share amounts (Note 4): | | Per share amounts (Note 4): | |
Basic net income per share attributable to Vail Resorts, Inc. | $ | 3.79 |
| | $ | 7.26 |
| | $ | 6.26 |
| | $ | 9.68 |
| Basic net income per share attributable to Vail Resorts, Inc. | $ | 6.82 | | | $ | 3.79 | | | $ | 6.67 | | | $ | 6.26 | |
Diluted net income per share attributable to Vail Resorts, Inc. | $ | 3.74 |
| | $ | 7.12 |
| | $ | 6.17 |
| | $ | 9.48 |
| Diluted net income per share attributable to Vail Resorts, Inc. | $ | 6.72 | | | $ | 3.74 | | | $ | 6.58 | | | $ | 6.17 | |
Cash dividends declared per share | $ | 1.76 |
| | $ | 1.76 |
| | $ | 5.28 |
| | $ | 4.70 |
| Cash dividends declared per share | $ | 0 | | | $ | 1.76 | | | $ | 0 | | | $ | 5.28 | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
Consolidated Condensed Statements of Comprehensive Income
(In thousands)
(Unaudited)
| | | | Three Months Ended April 30, | | Nine Months Ended April 30, | | Three Months Ended April 30, | | Nine Months Ended April 30, |
| | 2020 | | 2019 | | 2020 | | 2019 | | | 2021 | | 2020 | | 2021 | | 2020 |
Net income | | $ | 159,831 |
| | $ | 308,530 |
| | $ | 267,020 |
| | $ | 415,794 |
| Net income | | $ | 277,290 | | | $ | 159,831 | | | $ | 269,399 | | | $ | 267,020 | |
Foreign currency translation adjustments, net of tax | | (69,235 | ) | | (30,089 | ) | | (78,260 | ) | | (44,862 | ) | Foreign currency translation adjustments, net of tax | | 54,910 | | | (69,235) | | | 132,167 | | | (78,260) | |
Change in estimated fair value of hedging instruments | | (16,450 | ) | | — |
| | (21,013 | ) | | — |
| Change in estimated fair value of hedging instruments | | 3,610 | | | (16,450) | | | 9,572 | | | (21,013) | |
Comprehensive income | | 74,146 |
|
| 278,441 |
| | 167,747 |
| | 370,932 |
| Comprehensive income | | 335,810 | | | 74,146 | | | 411,138 | | | 167,747 | |
Comprehensive loss (income) attributable to noncontrolling interests | | 12,924 |
| | (8,898 | ) | | 6,848 |
| | (14,557 | ) | |
Comprehensive (income) loss attributable to noncontrolling interests | | Comprehensive (income) loss attributable to noncontrolling interests | | (18,764) | | | 12,924 | | | (34,997) | | | 6,848 | |
Comprehensive income attributable to Vail Resorts, Inc. | | $ | 87,070 |
| | $ | 269,543 |
| | $ | 174,595 |
| | $ | 356,375 |
| Comprehensive income attributable to Vail Resorts, Inc. | | $ | 317,046 | | | $ | 87,070 | | | $ | 376,141 | | | $ | 174,595 | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
Consolidated Condensed Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | Additional Paid in Capital | Accumulated Other Comprehensive (Loss) Income | Retained Earnings | Treasury Stock | Total Vail Resorts, Inc. Stockholders’ Equity | Noncontrolling Interests | Total Stockholders’ Equity |
| | Vail Resorts | Exchangeable | | | | | | | |
Balance, January 31, 2020 | | $ | 462 | | $ | 1 | | $ | 1,130,906 | | $ | (44,100) | | $ | 717,646 | | $ | (379,433) | | $ | 1,425,482 | | $ | 224,716 | | $ | 1,650,198 | |
Comprehensive income (loss): | | | | | | | | | | |
Net income | | — | | — | | — | | — | | 152,546 | | — | | 152,546 | | 7,285 | | 159,831 | |
Foreign currency translation adjustments, net of tax | | — | | — | | — | | (49,026) | | — | | — | | (49,026) | | (20,209) | | (69,235) | |
Change in estimated fair value of hedging instruments | | — | | — | | — | | (16,450) | | — | | — | | (16,450) | | — | | (16,450) | |
Total comprehensive income (loss) | | | | | | | | 87,070 | | (12,924) | | 74,146 | |
Stock-based compensation expense | | — | | — | | 5,338 | | — | | — | | — | | 5,338 | | — | | 5,338 | |
Issuance of shares under share award plans, net of shares withheld for employee taxes | | 0 | | — | | (105) | | — | | — | | — | | (105) | | — | | (105) | |
Repurchase of common stock (Note 11) | | — | | — | | — | | — | | — | | (24,978) | | (24,978) | | — | | (24,978) | |
Dividends (Note 4) | | — | | — | | — | | — | | (70,684) | | — | | (70,684) | | — | | (70,684) | |
Distributions to noncontrolling interests, net | | — | | — | | — | | — | | — | | — | | — | | (3,655) | | (3,655) | |
Balance, April 30, 2020 | | $ | 462 | | $ | 1 | | $ | 1,136,139 | | $ | (109,576) | | $ | 799,508 | | $ | (404,411) | | $ | 1,422,123 | | $ | 208,137 | | $ | 1,630,260 | |
| | | | | | | | | | |
Balance, January 31, 2021 | | $ | 465 | | $ | 0 | | $ | 1,216,489 | | $ | 8,226 | | $ | 639,934 | | $ | (404,411) | | $ | 1,460,703 | | $ | 225,743 | | $ | 1,686,446 | |
Comprehensive income: | | | | | | | | | | |
Net income | | — | | — | | — | | — | | 274,629 | | — | | 274,629 | | 2,661 | | 277,290 | |
Foreign currency translation adjustments, net of tax | | — | | — | | — | | 38,807 | | — | | — | | 38,807 | | 16,103 | | 54,910 | |
Change in estimated fair value of hedging instruments | | — | | — | | — | | 3,610 | | — | | — | | 3,610 | | — | | 3,610 | |
Total comprehensive income | | | | | | | | 317,046 | | 18,764 | | 335,810 | |
| | | | | | | | | | |
Stock-based compensation expense | | — | | — | | 6,184 | | — | | — | | — | | 6,184 | | — | | 6,184 | |
Issuance of shares under share award plans, net of shares withheld for employee taxes | | 0 | | — | | (1,731) | | — | | — | | — | | (1,731) | | — | | (1,731) | |
| | | | | | | | | | |
| | | | | | | | | | |
Distributions to noncontrolling interests, net | | — | | — | | — | | — | | — | | — | | — | | (12) | | (12) | |
Balance, April 30, 2021 | | $ | 465 | | $ | 0 | | $ | 1,220,942 | | $ | 50,643 | | $ | 914,563 | | $ | (404,411) | | $ | 1,782,202 | | $ | 244,495 | | $ | 2,026,697 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | Additional Paid in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Treasury Stock | Total Vail Resorts, Inc. Stockholders’ Equity | Noncontrolling Interests | Total Stockholders’ Equity |
| Vail Resorts | Exchangeable | | | | | | | |
Balance, January 31, 2019 | $ | 461 |
| $ | 1 |
| $ | 1,135,709 |
| $ | (13,949 | ) | $ | 699,045 |
| $ | (357,989 | ) | $ | 1,463,278 |
| $ | 219,817 |
| $ | 1,683,095 |
|
Comprehensive income: | | | | | | | | | |
Net income | — |
| — |
| — |
| — |
| 292,134 |
| — |
| 292,134 |
| 16,396 |
| 308,530 |
|
Foreign currency translation adjustments, net of tax | — |
| — |
| — |
| (22,591 | ) | — |
| — |
| (22,591 | ) | (7,498 | ) | (30,089 | ) |
Total comprehensive income | | | | | | | 269,543 |
| 8,898 |
| 278,441 |
|
Stock-based compensation expense | — |
| — |
| 4,886 |
| — |
| — |
| — |
| 4,886 |
| — |
| 4,886 |
|
Issuance of shares under share award plans, net of shares withheld for employee taxes | — |
| — |
| (496 | ) | — |
| — |
| — |
| (496 | ) | — |
| (496 | ) |
Dividends (Note 5) | — |
| — |
| — |
| — |
| (70,852 | ) | — |
| (70,852 | ) | — |
| (70,852 | ) |
Distributions to noncontrolling interests, net | — |
| — |
| — |
| — |
| — |
| — |
| — |
| (1,720 | ) | (1,720 | ) |
Balance, April 30, 2019 | $ | 461 |
| $ | 1 |
| $ | 1,140,099 |
| $ | (36,540 | ) | $ | 920,327 |
| $ | (357,989 | ) | $ | 1,666,359 |
| $ | 226,995 |
| $ | 1,893,354 |
|
| | | | | | | | | |
Balance, January 31, 2020 | $ | 462 |
| $ | 1 |
| $ | 1,130,906 |
| $ | (44,100 | ) | $ | 717,646 |
| $ | (379,433 | ) | $ | 1,425,482 |
| $ | 224,716 |
| $ | 1,650,198 |
|
Comprehensive income (loss): | | | | | | | | | |
Net income | — |
| — |
| — |
| — |
| 152,546 |
| — |
| 152,546 |
| 7,285 |
| 159,831 |
|
Foreign currency translation adjustments, net of tax | — |
| — |
| — |
| (49,026 | ) | — |
| — |
| (49,026 | ) | (20,209 | ) | (69,235 | ) |
Change in estimated fair value of hedging instruments | — |
| — |
| — |
| (16,450 | ) | — |
| — |
| (16,450 | ) | — |
| (16,450 | ) |
Total comprehensive income (loss) | | | | | | | 87,070 |
| (12,924 | ) | 74,146 |
|
Stock-based compensation expense | — |
| — |
| 5,338 |
| — |
| — |
| — |
| 5,338 |
| — |
| 5,338 |
|
Issuance of shares under share award plans, net of shares withheld for employee taxes | — |
| — |
| (105 | ) | — |
| — |
| — |
| (105 | ) | — |
| (105 | ) |
Repurchase of common stock (Note 12) | — |
| — |
| — |
| — |
| — |
| (24,978 | ) | (24,978 | ) | — |
| (24,978 | ) |
Dividends (Note 5) | — |
| — |
| — |
| — |
| (70,684 | ) | — |
| (70,684 | ) | — |
| (70,684 | ) |
Distributions to noncontrolling interests, net | — |
| — |
| — |
| — |
| — |
| — |
| — |
| (3,655 | ) | (3,655 | ) |
Balance, April 30, 2020 | $ | 462 |
| $ | 1 |
| $ | 1,136,139 |
| $ | (109,576 | ) | $ | 799,508 |
| $ | (404,411 | ) | $ | 1,422,123 |
| $ | 208,137 |
| $ | 1,630,260 |
|
| | | | | | | | | | | | | | | | | | | | | | | Common Stock | Additional Paid in Capital | Accumulated Other Comprehensive (Loss) Income | Retained Earnings | Treasury Stock | Total Vail Resorts, Inc. Stockholders’ Equity | Noncontrolling Interests | Total Stockholders’ Equity |
| Common Stock | Additional Paid in Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Treasury Stock | Total Vail Resorts, Inc. Stockholders’ Equity | Noncontrolling Interests | Total Stockholders’ Equity | |
| Vail Resorts | Exchangeable | | |
Balance, July 31, 2018 | $ | 460 |
| $ | 1 |
| $ | 1,137,467 |
| $ | (2,227 | ) | $ | 726,722 |
| $ | (272,989 | ) | $ | 1,589,434 |
| $ | 222,229 |
| $ | 1,811,663 |
| |
Comprehensive income: | | |
Net income | — |
| — |
| — |
| — |
| 390,688 |
| — |
| 390,688 |
| 25,106 |
| 415,794 |
| |
Foreign currency translation adjustments, net of tax | — |
| — |
| — |
| (34,313 | ) | — |
| — |
| (34,313 | ) | (10,549 | ) | (44,862 | ) | |
Total comprehensive income | | 356,375 |
| 14,557 |
| 370,932 |
| |
Stock-based compensation expense | — |
| — |
| 14,786 |
| — |
| — |
| — |
| 14,786 |
| — |
| 14,786 |
| |
Cumulative effect for adoption of revenue standard | — |
| — |
| — |
| — |
| (7,517 | ) | — |
| (7,517 | ) | — |
| (7,517 | ) | |
Issuance of shares under share award plans, net of shares withheld for employee taxes | 1 |
| — |
| (12,154 | ) | — |
| — |
| — |
| (12,153 | ) | — |
| (12,153 | ) | |
Repurchase of common stock (Note 12) | — |
| — |
| — |
| — |
| — |
| (85,000 | ) | (85,000 | ) | — |
| (85,000 | ) | |
Dividends (Note 5) | — |
| — |
| — |
| — |
| (189,566 | ) | — |
| (189,566 | ) | — |
| (189,566 | ) | |
Distributions to noncontrolling interests, net | — |
| — |
| — |
| — |
| — |
| — |
| — |
| (9,791 | ) | (9,791 | ) | |
Balance, April 30, 2019 | $ | 461 |
| $ | 1 |
| $ | 1,140,099 |
| $ | (36,540 | ) | $ | 920,327 |
| $ | (357,989 | ) | $ | 1,666,359 |
| $ | 226,995 |
| $ | 1,893,354 |
| |
| | | | Vail Resorts | Exchangeable | |
Balance, July 31, 2019 | $ | 461 |
| $ | 1 |
| $ | 1,130,083 |
| $ | (31,730 | ) | $ | 759,801 |
| $ | (357,989 | ) | $ | 1,500,627 |
| $ | 226,213 |
| $ | 1,726,840 |
| Balance, July 31, 2019 | | $ | 461 | | $ | 1 | | $ | 1,130,083 | | $ | (31,730) | | $ | 759,801 | | $ | (357,989) | | $ | 1,500,627 | | $ | 226,213 | | $ | 1,726,840 | |
Comprehensive income (loss): | | Comprehensive income (loss): | | |
Net income | — |
| — |
| — |
| — |
| 252,441 |
| — |
| 252,441 |
| 14,579 |
| 267,020 |
| Net income | | — | | — | | — | | — | | 252,441 | | — | | 252,441 | | 14,579 | | 267,020 | |
Foreign currency translation adjustments, net of tax | — |
| — |
| — |
| (56,833 | ) | — |
| — |
| (56,833 | ) | (21,427 | ) | (78,260 | ) | Foreign currency translation adjustments, net of tax | | — | | — | | — | | (56,833) | | — | | — | | (56,833) | | (21,427) | | (78,260) | |
Change in estimated fair value of hedging instruments | — |
| — |
| — |
| (21,013 | ) | — |
| — |
| (21,013 | ) | — |
| (21,013 | ) | Change in estimated fair value of hedging instruments | | — | | — | | — | | (21,013) | | — | | — | | (21,013) | | — | | (21,013) | |
Total comprehensive income (loss) | | 174,595 |
| (6,848 | ) | 167,747 |
| Total comprehensive income (loss) | | | 174,595 | | (6,848) | | 167,747 | |
Stock-based compensation expense | — |
| — |
| 16,127 |
| — |
| — |
| — |
| 16,127 |
| — |
| 16,127 |
| Stock-based compensation expense | | — | | — | | 16,127 | | — | | — | | — | | 16,127 | | — | | 16,127 | |
Issuance of shares under share award plans, net of shares withheld for employee taxes | 1 |
| — |
| (10,071 | ) | — |
| — |
| — |
| (10,070 | ) | — |
| (10,070 | ) | Issuance of shares under share award plans, net of shares withheld for employee taxes | | 1 | | — | | (10,071) | | — | | — | | — | | (10,070) | | — | | (10,070) | |
Repurchase of common stock (Note 12) | — |
| — |
| — |
| — |
| — |
| (46,422 | ) | (46,422 | ) | — |
| (46,422 | ) | |
Dividends (Note 5) | — |
| — |
| — |
| — |
| (212,734 | ) | — |
| (212,734 | ) | — |
| (212,734 | ) | |
Repurchase of common stock (Note 11) | | Repurchase of common stock (Note 11) | | — | | — | | — | | — | | — | | (46,422) | | (46,422) | | — | | (46,422) | |
Dividends (Note 4) | | Dividends (Note 4) | | — | | — | | — | | — | | (212,734) | | — | | (212,734) | | — | | (212,734) | |
Distributions to noncontrolling interests, net | — |
| — |
| — |
| — |
| — |
| — |
| — |
| (11,228 | ) | (11,228 | ) | Distributions to noncontrolling interests, net | | — | | — | | — | | — | | — | | — | | — | | (11,228) | | (11,228) | |
Balance, April 30, 2020 | $ | 462 |
| $ | 1 |
| $ | 1,136,139 |
| $ | (109,576 | ) | $ | 799,508 |
| $ | (404,411 | ) | $ | 1,422,123 |
| $ | 208,137 |
| $ | 1,630,260 |
| Balance, April 30, 2020 | | $ | 462 | | $ | 1 | | $ | 1,136,139 | | $ | (109,576) | | $ | 799,508 | | $ | (404,411) | | $ | 1,422,123 | | $ | 208,137 | | $ | 1,630,260 | |
| Balance, July 31, 2020 | | Balance, July 31, 2020 | | $ | 464 | | $ | 0 | | $ | 1,131,624 | | $ | (56,837) | | $ | 645,902 | | $ | (404,411) | | $ | 1,316,742 | | $ | 214,925 | | $ | 1,531,667 | |
Comprehensive income: | | Comprehensive income: | | |
Net income | | Net income | | — | | — | | — | | — | | 268,661 | | — | | 268,661 | | 738 | | 269,399 | |
Foreign currency translation adjustments, net of tax | | Foreign currency translation adjustments, net of tax | | — | | — | | — | | 97,908 | | — | | — | | 97,908 | | 34,259 | | 132,167 | |
Change in estimated fair value of hedging instruments | | Change in estimated fair value of hedging instruments | | — | | — | | — | | 9,572 | | — | | — | | 9,572 | | — | | 9,572 | |
Total comprehensive income | | Total comprehensive income | | | 376,141 | | 34,997 | | 411,138 | |
Equity component of 0.0% Convertible Notes, net (Note 5) | | Equity component of 0.0% Convertible Notes, net (Note 5) | | — | | — | | 80,066 | | — | | — | | — | | 80,066 | | — | | 80,066 | |
Stock-based compensation expense | | Stock-based compensation expense | | — | | — | | 18,517 | | — | | — | | — | | 18,517 | | — | | 18,517 | |
Issuance of shares under share award plans, net of shares withheld for employee taxes | | Issuance of shares under share award plans, net of shares withheld for employee taxes | | 1 | | — | | (9,265) | | — | | — | | — | | (9,264) | | — | | (9,264) | |
| Distributions to noncontrolling interests, net | | Distributions to noncontrolling interests, net | | — | | — | | — | | — | | — | | — | | — | | (5,427) | | (5,427) | |
Balance, April 30, 2021 | | Balance, April 30, 2021 | | $ | 465 | | $ | 0 | | $ | 1,220,942 | | $ | 50,643 | | $ | 914,563 | | $ | (404,411) | | $ | 1,782,202 | | $ | 244,495 | | $ | 2,026,697 | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
| | | | Nine Months Ended April 30, | | Nine Months Ended April 30, |
| | 2020 | | 2019 | | | 2021 | | 2020 |
Cash flows from operating activities: | | | | | Cash flows from operating activities: | |
Net income | | $ | 267,020 |
| | $ | 415,794 |
| Net income | | $ | 269,399 | | | $ | 267,020 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization | | 186,387 |
| | 161,541 |
| Depreciation and amortization | | 189,362 | | | 186,387 | |
Asset impairments | | 28,372 |
| | — |
| Asset impairments | | 0 | | | 28,372 | |
Stock-based compensation expense | | 16,127 |
| | 14,786 |
| Stock-based compensation expense | | 18,517 | | | 16,127 | |
Deferred income taxes, net | | 50,027 |
| | 125,803 |
| Deferred income taxes, net | | 69,063 | | | 50,027 | |
Change in estimated fair value of contingent consideration | | (5,264 | ) | | 3,467 |
| |
Foreign exchange loss on intercompany loans | | 8,191 |
| | 5,180 |
| |
Other non-cash income, net | | (11,532 | ) | | (6,485 | ) | |
| Other non-cash expense (income), net | | Other non-cash expense (income), net | | 580 | | | (8,605) | |
Changes in assets and liabilities: | | | | | Changes in assets and liabilities: | |
Trade receivables, net | | 172,735 |
| | (37,146 | ) | Trade receivables, net | | (99,727) | | | 172,735 | |
Inventories, net | | (3,160 | ) | | 5,170 |
| Inventories, net | | 30,680 | | | (3,160) | |
Accounts payable and accrued liabilities | | (85,346 | ) | | 1,013 |
| Accounts payable and accrued liabilities | | 86,278 | | | (85,346) | |
Deferred revenue | | (132,366 | ) | | (2,746 | ) | Deferred revenue | | (22,434) | | | (132,366) | |
Income taxes payable - excess tax benefit from share award exercises | | (2,837 | ) | | (4,890 | ) | Income taxes payable - excess tax benefit from share award exercises | | (2,423) | | | (2,837) | |
Income taxes payable - other | | (18,580 | ) | | (22,403 | ) | Income taxes payable - other | | (3,073) | | | (18,580) | |
Other assets and liabilities, net | | (2,795 | ) | | 6,512 |
| Other assets and liabilities, net | | 14,915 | | | (2,795) | |
Net cash provided by operating activities | | 466,979 |
| | 665,596 |
| Net cash provided by operating activities | | 551,137 | | | 466,979 | |
Cash flows from investing activities: | |
| | | Cash flows from investing activities: | |
Capital expenditures | | (145,772 | ) | | (146,896 | ) | Capital expenditures | | (85,595) | | | (145,772) | |
Acquisition of businesses, net of cash acquired | | (327,555 | ) | | (419,044 | ) | Acquisition of businesses, net of cash acquired | | 0 | | | (327,555) | |
Other investing activities, net | | 6,849 |
| | 13,286 |
| Other investing activities, net | | 10,579 | | | 6,849 | |
Net cash used in investing activities | | (466,478 | ) | | (552,654 | ) | Net cash used in investing activities | | (75,016) | | | (466,478) | |
Cash flows from financing activities: | |
| | | Cash flows from financing activities: | |
Proceeds from borrowings under Vail Holdings Credit Agreement | | 892,625 |
| | 335,625 |
| Proceeds from borrowings under Vail Holdings Credit Agreement | | 0 | | | 892,625 | |
Proceeds from borrowings under Whistler Credit Agreement | | 202,304 |
| | 7,667 |
| Proceeds from borrowings under Whistler Credit Agreement | | 21,144 | | | 202,304 | |
Proceeds from borrowings under 0.0% Convertible Notes | | Proceeds from borrowings under 0.0% Convertible Notes | | 575,000 | | | 0 | |
Repayments of borrowings under Vail Holdings Credit Agreement | | (396,250 | ) | | (223,750 | ) | Repayments of borrowings under Vail Holdings Credit Agreement | | (46,875) | | | (396,250) | |
Repayments of borrowings under Whistler Credit Agreement | | (39,044 | ) | | (45,060 | ) | Repayments of borrowings under Whistler Credit Agreement | | (44,050) | | | (39,044) | |
Employee taxes paid for share award exercises | | (10,071 | ) | | (12,153 | ) | Employee taxes paid for share award exercises | | (9,265) | | | (10,071) | |
Dividends paid | | (212,734 | ) | | (189,566 | ) | Dividends paid | | 0 | | | (212,734) | |
Repurchases of common stock | | (46,422 | ) | | (85,000 | ) | Repurchases of common stock | | 0 | | | (46,422) | |
Other financing activities, net | | (19,034 | ) | | (12,408 | ) | Other financing activities, net | | (21,638) | | | (19,034) | |
Net cash provided by (used in) financing activities | | 371,374 |
| | (224,645 | ) | |
Net cash provided by financing activities | | Net cash provided by financing activities | | 474,316 | | | 371,374 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | | 2,851 |
| | (4,825 | ) | Effect of exchange rate changes on cash, cash equivalents and restricted cash | | 3,863 | | | 2,851 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | 374,726 |
| | (116,528 | ) | |
Net increase in cash, cash equivalents and restricted cash | | Net increase in cash, cash equivalents and restricted cash | | 954,300 | | | 374,726 | |
Cash, cash equivalents and restricted cash: | | | | | Cash, cash equivalents and restricted cash: | |
Beginning of period | | 118,389 |
| | 185,040 |
| Beginning of period | | 402,086 | | | 118,389 | |
End of period | | $ | 493,115 |
| | $ | 68,512 |
| End of period | | $ | 1,356,386 | | | $ | 493,115 | |
| Non-cash investing activities: | | | | | Non-cash investing activities: | |
Accrued capital expenditures | | $ | 11,727 |
| | $ | 13,508 |
| Accrued capital expenditures | | $ | 7,299 | | | $ | 11,727 | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
Notes to Consolidated Condensed Financial Statements
(Unaudited)
| |
1. | Organization and Business |
1.Organization and Business
Vail Resorts, Inc. (“Vail Resorts”) is organized as a holding company and operates through various subsidiaries. Vail Resorts and its subsidiaries (collectively, the “Company”) operate in three business segments: Mountain, Lodging and Real Estate.
The Company refers to “Resort” as the combination of the Mountain and Lodging segments. In the Mountain segment, the Company operates the following thirty-seven destination mountain resorts and regional ski areas:
*Denotes a destination mountain resort, which generally receives a meaningful portion of skier visits from long-distance travelers, as opposed to the Company’s regional ski areas, which tend to generate skier visits predominantly from their respective local markets.
Additionally, the Mountain segment includes ancillary services, primarily including ski school, dining and retail/rental operations, and for the Company’s Australian resorts,ski areas, including lodging and transportation operations. Several of the resorts located in the United States (“U.S.”) operate primarily on federal land under the terms of Special Use Permits granted by the U.S. Department of Agriculture Forest Service. The operations of Whistler Blackcomb are conducted on land owned by the government of the Province of British Columbia, Canada within the traditional territory of the Squamish and Lil’wat Nations. The operations of the Company’s Australian resorts are conducted pursuant to long-term leases and licenses on land owned by the governments of New South Wales and Victoria, Australia. Okemo, Mount Sunapee and Stowe operate on land leased from the respective states in which the resorts are located and on land owned by the Company.
In the Lodging segment, the Company owns and/or manages a collection of luxury hotels and condominiums under its RockResorts brand; other strategic lodging properties and a large number of condominiums located in proximity to the Company’s North American mountain resorts; National Park Service (“NPS”) concessionaire properties including the Grand Teton Lodge Company (“GTLC”), which operates destination resorts in Grand Teton National Park; a Colorado resort ground transportation company and mountain resort golf courses.
Vail Resorts Development Company (“VRDC”), a wholly-owned subsidiary, conducts the operations of the Company’s Real Estate segment, which owns, develops and sells real estate in and around the Company’s resort communities.
The Company’s mountain business and its lodging properties at or around the Company’s mountain resorts are seasonal in nature with peak operating seasons primarily from mid-November through mid-April in North America. The peak operating season at the Company’s Australian resorts, NPS concessionaire properties and golf courses generally occurs from June to early October.
2. Summary of Significant Accounting Policies
Basis of Presentation
Consolidated Condensed Financial Statements—Statements — In the opinion of the Company, the accompanying Consolidated Condensed Financial Statements reflect all adjustments necessary to state fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. Results for interim periods are not indicative of the results for the entire fiscal year, particularly given the significant seasonality to the Company’s operating cycle. The accompanying Consolidated Condensed Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2019.2020. Certain information and footnote disclosures, including significant accounting policies, normally included in fiscal year financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted. The Consolidated Condensed Balance Sheet as of July 31, 20192020 was derived from audited financial statements.
Use of Estimates— The preparation of financial statements in conformity with 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 periods. Actual results could differ from those estimates.
Goodwill and Intangible Assets— The Company tests goodwill and indefinite-lived intangible assets for impairment annually (or more often, if necessary) as of May 1, and tests definite-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. As a result of the coronavirus (COVID-19) pandemic and the impact it has had on the Company’s operations during the three and nine months ended April 30, 2020, and the expected continuing impact of the pandemic on future operations, the Company determined that it was appropriate to test certain assets within its Colorado resort ground transportation company for impairment as of April 30, 2020. The Company’s testing for goodwill and indefinite-lived intangible asset impairment consists of a comparison of the estimated fair value of those assets with their net carrying values. If the net carrying value of the assets exceed their estimated fair value, an impairment will be recognized for indefinite-lived intangibles, including goodwill, in an amount equal to that excess; otherwise, no impairment loss is recognized. As further discussed in Note 8,7, the Company recorded an impairment of approximately $28.4 million related to its Colorado resort ground transportation company during the three and nine months ended April 30, 2020, which was recorded within asset impairments on the Company’s Consolidated Condensed Statements of Operations, with corresponding reductions to goodwill, net of $25.7 million and to intangible assets, net and property, plant and equipment, net of $2.7 million. See Note 8,7, Supplementary Balance Sheet Information, for additional information.
Fair Value of Financial Instruments— The recorded amounts for cash and cash equivalents, restricted cash, receivables, other current assets and accounts payable and accrued liabilities approximate fair value due to their short-term nature. The fair value of amounts outstanding under the Company’s credit agreements and the Employee Housing Bonds (as defined in Note 6,5, Long-Term Debt) approximate book value due to the variable nature of the interest rate which is a market rate, associated with the debt. The estimated fair values of the 6.25% Notes and the 0.0% Convertible Notes (each as defined in Note 5, Long-Term Debt) are based on quoted market prices (a Level 2 input). The estimated fair value of the EPR Secured Notes and EB-5 Development Notes (each as defined in Note 6,5, Long-Term Debt), which were assumed by the Company during the nine months ended April 30, 2020, have been estimated using analyses based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 32 input).
The carrying values, including any unamortized premium or discount, and estimated fair values of the 6.25% Notes, 0.0% Convertible Notes, EPR Secured Notes and EB-5 Development Notes as of April 30, 20202021 are presented below (in thousands):
|
| | | | | | |
| April 30, 2020 |
| Carrying Value | Estimated Fair Value |
EPR Secured Notes | $ | 137,739 |
| $ | 131,086 |
|
EB-5 Development Notes | $ | 47,139 |
| $ | 45,756 |
|
Income Taxes and Other Taxes— On March 27, 2020, in response to the COVID-19 pandemic, the U.S. government enacted legislation commonly referred to as the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). The CARES Act includes various amendments to the U.S. tax code that impacted the Company’s accounting and reporting for income taxes during the three and nine months ended April 30, 2020 and the Company expects these amendments will continue to impact its accounting and reporting for income taxes in the future. The primary provisions of the CARES Act that the Company is continuing to evaluate include:
Allowing a carryback of the entire amount of eligible Federal net operating losses (“NOLs”) generated in calendar years 2018, 2019 and 2020 for up to five years prior to when such losses were incurred, representing a change from previous rules under the Tax Cuts & Jobs Act of 2017 (the “TCJA”), in which NOLs could not be carried back to prior years and utilization was limited to 80% of taxable income in future years. Under the CARES Act, the Company expects that it will be able to carry back its pre-existing NOLs to tax years prior to the enactment of the TCJA and obtain an incremental benefit related to the differential in federal tax rates between years that NOLs were generated and years that the NOLs will be carried back to.
Treatment of certain qualified improvement property (“QIP”) as 15-year property and allowing such QIP placed in service after December 31, 2017 to be eligible for bonus depreciation, which could incrementally add to its pre-existing NOLs; and
Increases in the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for calendar years 2019 and 2020.
The CARES Act also provides refundable employee retention credits and defers the requirement to remit the employer-paid portion of social security payroll taxes. As a result, during the three and nine months ended April 30, 2020, the Company recorded a credit of approximately $6.5 million, which primarily offset Mountain and Lodging operating expense as a result of wages paid to employees who were not providing services. Additionally, the Company expects to defer payment of the employer-paid portion of social security payroll taxes through the end of calendar year 2020, and will remit such amounts in equal installments during calendar years 2021 and 2022.
The Company also recognized a credit of approximately $2.6 million during the three and nine months ended April 30, 2020 as a result of the recent Canada Emergency Wage Subsidy and Australian JobKeeper legislation for its Canadian and Australian employees, which primarily offset Mountain and Lodging operating expense.
The Company is still in the process of evaluating additional potential benefits that the CARES Act and other COVID-19 related legislation in Canada and Australia will have on the Company’s Consolidated Condensed Financial Statements.
Accounting for Hedging Instruments— From time to time, the Company enters into interest rate swaps (the “Interest Rate Swaps”) to hedge the variability in cash flows associated with variable-rate borrowings by converting the floating interest rate to a fixed interest rate. As of April 30, 2020, the Company hedged the future cash flows associated with $400.0 million of the principal amount outstanding of its Vail Holdings Credit Agreement (as defined in Note 6, Long-Term Debt). The accounting for changes in fair value of hedging instruments depends on the effectiveness of the hedge. In order to qualify for hedge accounting, the underlying hedged item must expose the Company to risks associated with market fluctuations and the financial instrument used must reduce the Company's exposure to market fluctuation throughout the hedge period. Changes in estimated fair value of the Interest Rate Swaps are recorded within change in estimated fair value of hedging instruments on the Company’s Consolidated Condensed Statements of Comprehensive Income, and such changes were recorded as losses of $16.5 million and $21.0 million, respectively, for the three and nine months ended April 30, 2020. As of April 30, 2020, the estimated fair value of the Interest Rate Swaps was a liability of approximately $21.0 million and was recorded within other long-term liabilities on the Company’s Consolidated Condensed Balance Sheet (see Note 9, Fair Value Measurements).
Leases— The Company determines if an arrangement is or contains a lease at inception or modification of the arrangement. An arrangement is or contains a lease if there is one or more assets identified and the right to control the use of any identified asset is conveyed to the Company for a period of time in exchange for consideration. Control over the use of an identified asset means the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset. Generally, the Company classifies a lease as a finance lease if the terms of the agreement effectively transfer control of the underlying asset; otherwise, it is classified as an operating lease. For contracts that contain lease and non-lease components, the Company accounts for these components separately. For leases with terms greater than twelve months, the associated lease right-of-use (“ROU”) assets and lease liabilities are recognized at the estimated present value of the future minimum lease payments over the lease term at commencement date. The Company’s leases do not provide a readily determinable implicit rate; therefore, the Company uses an estimated incremental borrowing rate to discount the future minimum lease payments. For leases containing fixed rental escalation clauses, the escalators are factored into the determination of future minimum lease
payments. The Company includes options to extend a lease when it is reasonably certain that such options will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. See Note 4, Leases for more information.
| | | | | | | | | | | |
| April 30, 2021 |
| Carrying Value | | Estimated Fair Value |
6.25% Notes | $ | 600,000 | | | $ | 638,592 | |
0.0% Convertible Notes | $ | 472,757 | | | $ | 612,553 | |
EPR Secured Notes | $ | 136,112 | | | $ | 199,426 | |
EB-5 Development Notes | $ | 49,774 | | | $ | 51,069 | |
Recently Issued Accounting Standards
Adopted Standards Being Evaluated
In February 2016,March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842),” which supersedes “Leases (Topic 840).” The standard requires lessees to recognize the assets and liabilities arising from all leases on the balance sheet, including those classified as operating leases under previous accounting guidance, and to disclose key information about leasing arrangements. The standard also allows for an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of 12 months or less. Under the new guidance, lessees are required to recognize a lease liability and an ROU asset on their balance sheets, while lessor accounting is largely unchanged. In July 2018, the FASB released ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” which, among other items, provided an additional and optional transition method. Under this method, an entity initially applies the standard at the adoption date, including the election of certain transition reliefs, and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.
The Company adopted ASU No. 2016-02 on August 1, 2019 using the modified retrospective transition method as provided by the standard. In accordance with this transition method, results for reporting periods beginning on August 1, 2019 are presented under the new standard, while prior periods were not adjusted and continue to be reported in accordance with the previously applicable accounting guidance. The Company has elected the package of practical expedients permitted under the transition guidance which allowed the Company to not reassess: (i) whether any existing or expired contracts are or contain leases; (ii) lease classification of any expired or existing leases; or (iii) initial direct costs for any existing leases. The Company has made an accounting policy election to not record leases on the balance sheet with an initial term of 12 months or less. The Company will recognize those lease payments in the Consolidated Condensed Statements of Operations on a straight-line basis over the lease term. Additionally, the Company has elected the practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases. At adoption, the Company was not able to determine the interest rate implicit in its leases; therefore, for existing operating leases, the lease liability was measured using the Company’s estimated incremental borrowing rate. For existing leases, the incremental borrowing rate used was based on the remaining lease term at the adoption date. For leases with minimum lease payments adjusted periodically for inflation, the lease liability was measured using the minimum lease payments adjusted by the inflation index at the adoption date.
On August 1, 2019, as a result of adopting the standard, the Company recorded $225.6 million of operating ROU assets and $258.0 million of related total operating lease liabilities in the Consolidated Condensed Balance Sheet (of which $223.1 million was recorded to operating lease liabilities and $34.9 million was recorded to accounts payable and accrued liabilities). As a result of the adoption, the Company reclassified $32.4 million of unfavorable lease obligations, deferred rent credits and other similar amounts to the operating ROU assets balance, primarily from other long-term liabilities, which reduced the amount recognized as operating ROU assets to $225.6 million. The adoption of the new lease standard did not result in a cumulative effect adjustment to beginning retained earnings, and did not materially affect the Company’s Consolidated Condensed Statements of Operations for the three and nine months ended April 30, 2019 or Consolidated Condensed Statement of Cash Flows for the nine months ended April 30, 2019. The Company’s Canyons finance lease was not affected by the implementation of this standard as the arrangement is classified and recorded as a finance lease arrangement under both the previous and new accounting guidance.
In April 2020, the FASB issued clarifying guidance on accounting for certain lease concessions related to the effects of the COVID-19 pandemic under ASC Topic 842, allowing companies to make an election to either account for such lease concessions (i) in the period that they occur as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract) or (ii) ratably over the remainder of the lease term as modifications to the contract. The Company made a policy election to account for such lease concessions as though enforceable rights and obligations to make those concessions existed in the contracts and as a result, will account for concessions in the period in which they occur. This election did not have a material impact on the Company’s Consolidated Condensed Financial Statements for the three and nine months ended April 30, 2020.
Standards Being Evaluated
In March 2020, the FASB issued ASU 2020-04, "Reference“Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,"Reporting.” The ASU provides optional transition guidance, for a limited time, to companies that have contracts, hedging relationships or other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate which is expected to be discontinued because of reference rate reform. The amendments provide optional expedients
and exceptions for applying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met. The amendments in this update are effective as of March 12, 2020 through December 31, 2022. The amendments in this update may be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. All other amendments should be applied on a prospective basis. The Company is in the process of evaluating the effect that the adoption of this standard will have on its Consolidated Condensed Financial Statements.
In August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” which simplifies the guidance in Accounting Standards Codifications (“ASC”) 470-20, “Debt – Debt with Conversion and Other Options” by reducing the number of accounting separation models for convertible instruments, amending the guidance in ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity” for certain contracts in an entity’s own equity that are currently accounted for as derivatives, and requiring entities to use the if-converted method for all convertible instruments in the diluted earnings per share (“EPS”) calculation. This standard will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years (the Company’s first quarter of the fiscal year ending July 31, 2023). Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years (the Company’s first quarter of the fiscal year ending July 31, 2022), and the guidance allows for a modified retrospective or fully retrospective method of transition. The Company is in the process of evaluating the effect that the adoption of this standard will have on its Consolidated Condensed Financial Statements, and expects to adopt this standard on August 1, 2022.
3. Revenues
Revenue Recognition2020/2021 North American Credit Offer and Epic Coverage
As a result of the COVID-19 pandemic, the Company closed its North American destination mountain resorts, regional ski areas and retail stores early during the 2019/2020 North American ski season, beginning on March 15.15, 2020. To encourage the Company’s pass product holders to renew their pass purchases for next season following the early closures this spring,Subsequently, the Company announced a credit offer on April 27, 2020 for all existing 2019/2020 North American ski season pass product holders to purchase 2020/2021 North American ski season pass products at a discount (the “Credit Offer”). The Credit Offer discounts rangeranged from a minimum of 20% to a maximum of 80% for season pass holders, depending on the number of days the pass holder used their pass product during the 2019/2020 season and a credit, with no minimum, but up to 80% for multi-day pass products, such as the Epic Day Pass, based on total unused days. The Credit Offer was considered a contract modification and constituteswhich constituted a material right to existing2019/2020 North American ski season guests and, as such, representrepresents a separate performance obligation to which the Company allocated a transaction price of approximately $120.9 million. As a result, the Company deferred $120.9 million of pass product revenue, which would have otherwise been recognized as lift revenue during the year endingended July 31, 2020. The Credit Offer expired on September 17, 2020 primarilyand the Company recorded $15.4 million as lift revenue during the quarterthree months ended April 30, 2020.October 31, 2020, which was the amount of Credit Offer discounts that were not redeemed. The remaining deferred revenue will be recognized once the performance obligation associated with the Credit Offer was recognized as lift revenue primarily during the 2020/2021 North American ski season, as the performance obligations were satisfied.
In April 2020, the Company announced Epic Coverage, which is satisfied,included with the purchase of all North American pass products for no additional charge. Epic Coverage offers refunds to North American pass product holders if certain qualifying personal or resort closure events occur before or during the North American ski season. The estimated amount of refunds reduce the amount of pass product revenue recognized by the Company. To estimate the amount of refunds under Epic Coverage, the Company considered (i) historical claims data for personal events, (ii) provincial, state, county and local COVID-19 regulations and public health orders, (iii) the ability for the Company’s pass holders to make reservations on their preferred days (for only the 2020/2021 North American ski season, during which the Company expectsutilized a reservation system), and (iv) the Company’s operating plans for its resorts. The Company believes the estimates of refunds are reasonable; however, actual results could vary materially from such estimates, and such estimates will be primarily inremeasured at each reporting date.
Additionally, for the second2020/2021 North American ski season, the Company introduced Epic Mountain Rewards, a program which provides pass product holders a discount of 20% off on-mountain food and third fiscal quarters ofbeverage, lodging, group ski and ride school lessons, equipment rentals and more at the fiscal year ending July 31, 2021, or earlier if the Credit Offer expires unredeemed. In addition,Company’s North American owned and operated Resorts. Epic Mountain Rewards constitutes a material right to pass product holders and as a result, the Company allocates a portion of the pass product revenue deferral, the Company also deferred approximately $2.9 million of the associated costs of obtaining a contract (primarily credit card processing fees), which will be recognized commensurate with the associated deferred revenue.
The Company estimated the standalone selling price of the Credit Offer by utilizing historical pass holder renewal data to estimate the total amount of credits that are expected to be redeemed. Estimates and assumptions made regarding expected renewal rates impact the estimate of the transaction price allocated to the Credit Offer and could vary materially from the amountthese other lines of revenue deferred depending upon actual customer redemptions.business.
Disaggregation of Revenues
The following table presents net revenues disaggregated by segment and major revenue type for the three and nine months ended April 30, 20202021 and 20192020 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended April 30, | | Nine Months Ended April 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
Mountain net revenue: | | | | | | | | |
Lift | | $ | 577,680 | | | $ | 374,818 | | | $ | 1,041,546 | | | $ | 900,995 | |
Ski School | | 80,390 | | | 76,563 | | | 138,824 | | | 187,840 | |
Dining | | 45,294 | | | 61,632 | | | 80,172 | | | 158,980 | |
Retail/Rental | | 91,286 | | | 78,133 | | | 203,718 | | | 259,761 | |
Other | | 34,533 | | | 44,158 | | | 101,092 | | | 154,105 | |
Total Mountain net revenue | | $ | 829,183 | | | $ | 635,304 | | | $ | 1,565,352 | | | $ | 1,661,681 | |
Lodging net revenue: | | | | | | | | |
Owned hotel rooms | | $ | 10,252 | | | $ | 8,126 | | | $ | 24,325 | | | $ | 39,323 | |
Managed condominium rooms | | 28,726 | | | 23,744 | | | 58,391 | | | 69,984 | |
Dining | | 4,849 | | | 8,099 | | | 8,807 | | | 37,353 | |
Transportation | | 4,663 | | | 5,672 | | | 7,610 | | | 15,748 | |
Golf | | 0 | | | 0 | | | 8,646 | | | 10,606 | |
Other | | 8,652 | | | 9,775 | | | 25,834 | | | 37,411 | |
| | 57,142 | | | 55,416 | | | 133,613 | | | 210,425 | |
Payroll cost reimbursements | | 1,953 | | | 2,969 | | | 5,174 | | | 9,605 | |
Total Lodging net revenue | | $ | 59,095 | | | $ | 58,385 | | | $ | 138,787 | | | $ | 220,030 | |
Total Resort net revenue | | $ | 888,278 | | | $ | 693,689 | | | $ | 1,704,139 | | | $ | 1,881,711 | |
Total Real Estate net revenue | | 800 | | | 398 | | | 1,369 | | | 4,784 | |
Total net revenue | | $ | 889,078 | | | $ | 694,087 | | | $ | 1,705,508 | | | $ | 1,886,495 | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended April 30, | | Nine Months Ended April 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Mountain net revenue: | | | | | | | | |
Lift | | $ | 374,818 |
| | $ | 526,881 |
| | $ | 900,995 |
| | $ | 999,124 |
|
Ski School | | 76,563 |
| | 110,755 |
| | 187,840 |
| | 207,271 |
|
Dining | | 61,632 |
| | 78,928 |
| | 158,980 |
| | 162,629 |
|
Retail/Rental | | 78,133 |
| | 114,082 |
| | 259,761 |
| | 285,860 |
|
Other | | 44,158 |
| | 47,252 |
| | 154,105 |
| | 144,093 |
|
Total Mountain net revenue | | $ | 635,304 |
| | $ | 877,898 |
| | $ | 1,661,681 |
| | $ | 1,798,977 |
|
Lodging net revenue: | | | | | | | | |
Owned hotel rooms | | $ | 8,126 |
| | $ | 12,352 |
| | $ | 39,323 |
| | $ | 43,499 |
|
Managed condominium rooms | | 23,744 |
| | 30,671 |
| | 69,984 |
| | 69,835 |
|
Dining | | 8,099 |
| | 11,067 |
| | 37,353 |
| | 37,385 |
|
Transportation | | 5,672 |
| | 8,578 |
| | 15,748 |
| | 18,774 |
|
Golf | | — |
| | — |
| | 10,606 |
| | 9,628 |
|
Other | | 9,775 |
| | 13,278 |
| | 37,411 |
| | 37,697 |
|
| | 55,416 |
| | 75,946 |
| | 210,425 |
| | 216,818 |
|
Payroll cost reimbursements | | 2,969 |
| | 3,902 |
| | 9,605 |
| | 11,179 |
|
Total Lodging net revenue | | $ | 58,385 |
| | $ | 79,848 |
| | $ | 220,030 |
| | $ | 227,997 |
|
Total Resort net revenue | | $ | 693,689 |
| | $ | 957,746 |
| | $ | 1,881,711 |
| | $ | 2,026,974 |
|
Total Real Estate net revenue | | 398 |
| | 241 |
| | 4,784 |
| | 595 |
|
Total net revenue | | $ | 694,087 |
| | $ | 957,987 |
| | $ | 1,886,495 |
| | $ | 2,027,569 |
|
Contract Balances
Deferred revenue balances of a short-term nature were $219.4$238.1 million and $335.7$256.4 million as of April 30, 20202021 and July 31, 2019,2020, respectively. Deferred revenue balances of a long-term nature, comprised primarily of long-term private club initiation fee revenue, were $124.5$120.8 million and $124.3$121.9 million as of April 30, 20202021 and July 31, 2019,2020, respectively. For the three and nine months ended April 30, 2020,2021, the Company recognized approximately $83.5$89.8 million and $263.4$225.9 million, respectively, of revenue that was included in the deferred revenue balance as of July 31, 2019.2020. As of April 30, 2020,2021, the weighted average remaining period over which revenue for unsatisfied performance obligations on long-term private club contracts will be recognized was approximately 16 years. Trade receivable balancesreceivables, net were $100.2$208.1 million and $270.9$106.7 million as of April 30, 20202021 and July 31, 2019,2020, respectively.
Costs to Obtain Contracts with Customers
As of April 30, 2020, $3.12021, $1.0 million of costs to obtain contracts with customers were recorded within other current assets on the Company’s Consolidated Condensed Balance Sheet. The amounts capitalized are subject to amortization commensurate with the revenue recognized for related skier visits. The Company recorded amortization of $4.0$8.6 million and $11.0$16.4 million, respectively, for these costs during the three and nine months ended April 30, 2020,2021, which was recorded within Mountain and Lodging operating expenses on the Company’s Consolidated Condensed StatementsStatement of Operations.Operations.
4. Leases
The Company’s operating leases consist primarily of commercial and retail space, office space, employee residential units, vehicles and other equipment. The Company determines if an arrangement is or contains a lease at contract inception or modification. The Company’s lease contracts generally range from 1 year to 60 years, with some lease contracts containing one or more lease extension options, exercisable at the Company’s discretion. The Company generally does not include these lease extension options in the initial lease term as it is not reasonably certain that it will exercise such options at contract inception. In addition, certain lease arrangements contain fixed and variable lease payments. The variable lease payments are primarily contingent rental payments based on: (i) a percentage of revenue related to the leased property; (ii) payments based on a percentage of sales over contractual levels; or (iii) lease payments adjusted for changes in an index or market value. These variable lease payments are typically recognized when the underlying event occurs and are included in operating expenses in the Company's Consolidated Condensed Statements of Operations in the same line item as the expense arising from fixed lease payments. The Company’s lease agreements may also include non-lease components, such as common area maintenance and insurance, which are accounted for separately as non-lease components. Future lease payments that are contingent and non-lease components are not included in the measurement of the operating lease liability. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants. Lease expense related to lease payments is recognized on a straight-line basis over the term of the lease.
The Company’s leases do not provide a readily determinable implicit rate. As a result, the Company measures the lease liability using an estimated incremental borrowing rate which is intended to reflect the rate of interest the Company would pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The Company applies the estimated incremental borrowing rates at a portfolio level based on the economic environment associated with the lease.
The Company uses the long-lived assets impairment guidance to determine recognition and measurement of an ROU asset impairment, if any. The Company monitors for events or changes in circumstances that require a reassessment.
The components of lease expense for the three and nine months ended April 30, 2020, were as follows (in thousands):
|
| | | | | | | | |
| | Three Months Ended April 30, 2020 | | Nine Months Ended April 30, 2020 |
Finance leases: | | | | |
Amortization of the finance ROU assets | | $ | 2,438 |
| | $ | 7,314 |
|
Interest on lease liabilities | | $ | 8,509 |
| | $ | 25,526 |
|
Operating leases: | | | | |
Operating lease expense |
| $ | 10,815 |
| | $ | 32,496 |
|
Short-term lease expense1 | | $ | 3,235 |
| | $ | 11,116 |
|
Variable lease (credit) expense |
| $ | (911 | ) | | $ | 1,270 |
|
1 Short-term lease expense is attributable to leases with terms of 12 months or less which are not included within the Company’s Consolidated Condensed Balance Sheet.
The following table presents the supplemental cash flow information associated with the Company’s leasing activities for the nine months ended April 30, 2020 (in thousands):
|
| | | | |
| | Nine Months Ended April 30, 2020 |
Cash flow supplemental information: | | |
Operating cash outflows for operating leases | | $ | 48,252 |
|
Operating cash outflows for finance leases | | $ | 22,245 |
|
Financing cash outflows for finance leases | | $ | 5,387 |
|
4. Net Income per Share
Weighted-average remaining lease terms and discount rates are as follows:
|
| | | |
| | As of April 30, 2020 |
Weighted-average remaining lease term (in years) | | |
Operating leases | | 10.7 |
|
Finance leases | | 43.1 |
|
Weighted-average discount rate | | |
Operating leases | | 4.5 | % |
Finance leases | | 10.0 | % |
Future minimum lease payments for operating and finance leases as of April 30, 2020 reflected by fiscal year (August 1 through July 31) are as follows (in thousands):
|
| | | | | | | |
| Operating Leases | | Finance Leases |
2020 (May 2020 through July 2020) | $ | 9,287 |
| | $ | 7,063 |
|
2021 | 45,370 |
| | 28,818 |
|
2022 | 42,213 |
| | 29,394 |
|
2023 | 37,371 |
| | 29,982 |
|
2024 | 33,628 |
| | 30,582 |
|
Thereafter | 164,626 |
| | 1,805,048 |
|
Total future minimum lease payments | 332,495 |
| | 1,930,887 |
|
Less amount representing interest | (88,234 | ) | | (1,586,296 | ) |
Total lease liabilities | $ | 244,261 |
| | $ | 344,591 |
|
Future minimum lease payments in accordance with Topic 840 as of July 31, 2019, reflected by fiscal year, were as follows (in thousands):
|
| | | | | | | |
| Operating Leases | | Capital Leases |
2020 | $ | 44,984 |
| | $ | 28,253 |
|
2021 | 42,512 |
| | 28,818 |
|
2022 | 39,440 |
| | 29,394 |
|
2023 | 34,840 |
| | 29,982 |
|
2024 | 30,836 |
| | 30,582 |
|
Thereafter | 142,526 |
| | 1,805,048 |
|
Total future minimum lease payments | $ | 335,138 |
| | $ | 1,952,077 |
|
Less amount representing interest | | | (1,611,816 | ) |
Net future minimum lease payments | | | $ | 340,261 |
|
The current portion of operating lease liabilities of approximately $35.0 million as of April 30, 2020 is recorded within accounts payables and accrued liabilities in the Consolidated Condensed Balance Sheet. Finance lease liabilities are recorded within long-term debt, net in the Consolidated Condensed Balance Sheets.
The Canyons finance lease obligation represents the only material finance lease entered into by the Company as of April 30, 2020. As of April 30, 2020, the Company has recorded $120.2 million of finance lease ROU assets in connection with the Canyons lease, net of $63.4 million of accumulated amortization, which is included within property, plant and equipment in the Company’s Consolidated Condensed Balance Sheet.
Earnings per Share
Basic earnings per share (“EPS”)EPS excludes dilution and is computed by dividing net income attributable to Vail Resorts stockholders by the weighted-average shares outstanding during the period. 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 Vail Resorts.
In connection with the Company’s acquisition of Whistler Blackcomb in October 2016, the Company issued consideration in the form of shares of Vail Resorts common stock (the “Vail Shares”) and shares of the Company’s wholly-owned Canadian subsidiary (“Exchangeco”). Whistler Blackcomb shareholders elected to receive 3,327,719 Vail Shares and 418,095 shares of Exchangeco (the “Exchangeco Shares”). Both Vail Shares and Exchangeco Shares have a par value of $0.01 per share, and Exchangeco Shares, while outstanding, are substantially the economic equivalent of Vail Shares and are exchangeable, at any time prior to the seventh anniversary of the closing of the acquisition, into Vail Shares. The Company’s calculation of weighted-average shares outstanding includes the Exchangeco Shares.
Presented below is basic and diluted EPS for the three months ended April 30, 20202021 and 20192020 (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended April 30, |
| | 2021 | | 2020 |
| | Basic | | Diluted | | Basic | | Diluted |
Net income per share: | | | | | | | | |
Net income attributable to Vail Resorts | | $ | 274,629 | | | $ | 274,629 | | | $ | 152,546 | | | $ | 152,546 | |
Weighted-average Vail Shares outstanding | | 40,262 | | | 40,262 | | | 40,183 | | | 40,183 | |
Weighted-average Exchangeco Shares outstanding | | 34 | | | 34 | | | 54 | | | 54 | |
Total Weighted-average shares outstanding | | 40,296 | | | 40,296 | | | 40,237 | | | 40,237 | |
Effect of dilutive securities | | — | | | 600 | | | — | | | 507 | |
Total shares | | 40,296 | | | 40,896 | | | 40,237 | | | 40,744 | |
Net income per share attributable to Vail Resorts | | $ | 6.82 | | | $ | 6.72 | | | $ | 3.79 | | | $ | 3.74 | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended April 30, |
| | 2020 | | 2019 |
| | Basic | | Diluted | | Basic | | Diluted |
Net income per share: | | | | | | | | |
Net income attributable to Vail Resorts | | $ | 152,546 |
| | $ | 152,546 |
| | $ | 292,134 |
| | $ | 292,134 |
|
Weighted-average Vail Shares outstanding | | 40,183 |
| | 40,183 |
| | 40,198 |
| | 40,198 |
|
Weighted-average Exchangeco Shares outstanding | | 54 |
| | 54 |
| | 57 |
| | 57 |
|
Total Weighted-average shares outstanding | | 40,237 |
| | 40,237 |
| | 40,255 |
| | 40,255 |
|
Effect of dilutive securities | | — |
| | 507 |
| | — |
| | 765 |
|
Total shares | | 40,237 |
| | 40,744 |
| | 40,255 |
| | 41,020 |
|
Net income per share attributable to Vail Resorts | | $ | 3.79 |
| | $ | 3.74 |
| | $ | 7.26 |
| | $ | 7.12 |
|
The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. The number of shares issuable upon the exercise of share based awards excluded from the calculation of diluted EPS because the effect of their inclusion would have been anti-dilutive totaled approximately 4,000 and 54,000 for the three months ended April 30, 2020 and 2019, respectively.
Presented below is basic and diluted EPS for the nine months ended April 30, 2020 and 2019 (in thousands, except per share amounts):
|
| | | | | | | | | | | | | | | | |
| | Nine Months Ended April 30, |
| | 2020 | | 2019 |
| | Basic | | Diluted | | Basic | | Diluted |
Net income per share: | | | | | | | | |
Net income attributable to Vail Resorts | | $ | 252,441 |
| | $ | 252,441 |
| | $ | 390,688 |
| | $ | 390,688 |
|
Weighted-average Vail Shares outstanding | | 40,244 |
| | 40,244 |
| | 40,307 |
| | 40,307 |
|
Weighted-average Exchangeco Shares outstanding | | 55 |
| | 55 |
| | 57 |
| | 57 |
|
Total Weighted-average shares outstanding | | 40,299 |
| | 40,299 |
| | 40,364 |
| | 40,364 |
|
Effect of dilutive securities | | — |
| | 601 |
| | — |
| | 837 |
|
Total shares | | 40,299 |
| | 40,900 |
| | 40,364 |
| | 41,201 |
|
Net income per share attributable to Vail Resorts | | $ | 6.26 |
| | $ | 6.17 |
| | $ | 9.68 |
| | $ | 9.48 |
|
The number of shares issuable upon the exercise of share basedshare-based awards excluded from the calculation of diluted EPS because the effect of their inclusion would have been anti-dilutive totaled approximately 1,000 and 48,0004,000 for the three months ended April 30, 2021 and 2020, respectively.
Presented below is basic and diluted EPS for the nine months ended April 30, 2021 and 2020 (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Nine Months Ended April 30, |
| | 2021 | | 2020 |
| | Basic | | Diluted | | Basic | | Diluted |
Net income per share: | | | | | | | | |
Net income attributable to Vail Resorts | | $ | 268,661 | | | $ | 268,661 | | | $ | 252,441 | | | $ | 252,441 | |
Weighted-average Vail Shares outstanding | | 40,242 | | | 40,242 | | | 40,244 | | | 40,244 | |
Weighted-average Exchangeco Shares outstanding | | 35 | | | 35 | | | 55 | | | 55 | |
Total Weighted-average shares outstanding | | 40,277 | | | 40,277 | | | 40,299 | | | 40,299 | |
Effect of dilutive securities | | — | | | 530 | | | — | | | 601 | |
Total shares | | 40,277 | | | 40,807 | | | 40,299 | | | 40,900 | |
Net income per share attributable to Vail Resorts | | $ | 6.67 | | | $ | 6.58 | | | $ | 6.26 | | | $ | 6.17 | |
The number of shares issuable upon the exercise of share-based awards excluded from the calculation of diluted EPS because the effect of their inclusion would have been anti-dilutive totaled approximately 2,000 and 2019,1,000 for the nine months ended April 30, 2021 and 2020, respectively.
On December 18, 2020, the Company completed an offering of $575.0 million in aggregate principal amount of 0.0% Convertible Notes (as defined in Note 5, Long-Term Debt). The Company is required to settle the principal amount of the 0.0% Convertible Notes in cash and has the option to settle the conversion spread in cash or shares. The Company uses the treasury method to calculate diluted EPS, and if the conversion value of the 0.0% Convertible Notes exceeds their conversion price of $407.17 per share of common stock, then the Company will calculate its diluted EPS as if all the notes were converted and the Company issued shares of its common stock to settle the excess value over the conversion price. However, if reflecting the 0.0% Convertible Notes in diluted EPS in this manner is anti-dilutive, or if the conversion value of the notes does not exceed their initial conversion amount for a reporting period, then the shares underlying the notes will not be reflected in the Company’s calculation of diluted EPS. For the three and nine months ended April 30, 2021, the average price of Vail Shares did not exceed the conversion price and therefore there was no impact to diluted EPS during those periods.
Dividends
The Company did not pay cash dividends during the three and nine months ended April 30, 2021. During the three and nine months ended April 30, 2020, the Company paid cash dividends of $1.76 and $5.28 per share, respectively ($70.7 million and $212.7 million, respectively, in the aggregate). During the three and nine months ended April 30, 2019, the Company paid cash dividends of $1.76 and $4.70 per share, respectively ($70.9 million and $189.6 million, respectively, in the aggregate). The Company announced on April 1, 2020 that it would be suspending its quarterly dividend for at least the next two quarters, and will be subject to a dividend limitation under the Financial Covenants Temporary Waiver Period of the Vail Holdings Credit Agreement (as defined in Note 6, Long-Term Debt).
6.
5. Long-Term Debt
Long-term debt, net as of April 30, 2020,2021, July 31, 20192020 and April 30, 20192020 is summarized as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Maturity | | April 30, 2021 | | July 31, 2020 | | April 30, 2020 |
Vail Holdings Credit Agreement term loan (a) | | 2024 | | $ | 1,156,250 | | | $ | 1,203,125 | | | $ | 1,218,750 | |
Vail Holdings Credit Agreement revolver (a) | | 2024 | | 0 | | | 0 | | | 400,000 | |
6.25% Notes | | 2025 | | 600,000 | | | 600,000 | | | 0 | |
0.0% Convertible Notes (b) | | 2026 | | 575,000 | | | 0 | | | 0 | |
Whistler Credit Agreement revolver (c) | | 2024 | | 40,681 | | | 58,236 | | | 214,101 | |
| | | | | | | | |
EPR Secured Notes (d) | | 2034-2036 | | 114,162 | | | 114,162 | | | 114,162 | |
EB-5 Development Notes | | 2021 | | 51,500 | | | 51,500 | | | 51,500 | |
Employee housing bonds | | 2027-2039 | | 52,575 | | | 52,575 | | | 52,575 | |
Canyons obligation | | 2063 | | 350,373 | | | 346,034 | | | 344,591 | |
Other | | 2021-2033 | | 17,647 | | | 18,616 | | | 19,022 | |
Total debt | | | | 2,958,188 | | | 2,444,248 | | | 2,414,701 | |
Less: Unamortized premiums, discounts and debt issuance costs (b) | | | | 104,753 | | | (6,551) | | | (14,237) | |
Less: Current maturities (e) | | | | 113,454 | | | 63,677 | | | 63,566 | |
Long-term debt, net | | | | $ | 2,739,981 | | | $ | 2,387,122 | | | $ | 2,365,372 | |
|
| | | | | | | | | | | | | | |
| | Maturity | | April 30, 2020 | | July 31, 2019 | | April 30, 2019 |
Vail Holdings Credit Agreement term loan (a) | | 2024 | | $ | 1,218,750 |
| | $ | 914,375 |
| | $ | 926,250 |
|
Vail Holdings Credit Agreement revolver (a) | | 2024 | | 400,000 |
| | 208,000 |
| | — |
|
Whistler Credit Agreement revolver (b) | | 2024 | | 214,101 |
| | 45,454 |
| | 26,127 |
|
EPR Secured Notes (c) | | 2034-2036 | | 114,162 |
| | — |
| | — |
|
EB-5 Development Notes (d) | | 2021 | | 51,500 |
| | — |
| | — |
|
Employee housing bonds | | 2027-2039 | | 52,575 |
| | 52,575 |
| | 52,575 |
|
Canyons obligation | | 2063 | | 344,591 |
| | 340,261 |
| | 338,823 |
|
Other | | 2020-2033 | | 19,022 |
| | 19,465 |
| | 19,636 |
|
Total debt | | | | 2,414,701 |
| | 1,580,130 |
| | 1,363,411 |
|
Less: Unamortized premiums, discounts and debt issuance costs | | | | (14,237 | ) | | 3,870 |
| | 4,037 |
|
Less: Current maturities (e) | | | | 63,566 |
| | 48,516 |
| | 48,504 |
|
Long-term debt, net | | | | $ | 2,365,372 |
| | $ | 1,527,744 |
|
| $ | 1,310,870 |
|
| |
(a) | On September 23, 2019, in order to fund the acquisition of Peak Resorts, Inc. (“Peak Resorts”), which included the prepayment of certain portions of the outstanding debt and lease obligations of Peak Resorts contemporaneous with the closing of the transaction (see Note 7, Acquisitions), the Company’s wholly-owned subsidiary,(a)On December 18, 2020, Vail Holdings, Inc. (“VHI”), entered into the Second Amendment to the Eighth Amended and Restated Credit Agreement (the “Vail Holdings Credit Agreement”), with Bank of America, N.A., as administrative agent, and other lenders named therein, through which those lenders agreed to provide an additional $335.6 million in incremental term loans and agreed, on behalf of all lenders, to extend the maturity date for the outstanding term loans and revolver facility under the Vail Holdings Credit Agreement to September 23, 2024. No other material terms of the Vail Holdings Credit Agreement were altered under the amendment. |
On April 28, 2020, VHI, certain subsidiaries of the Company, as guarantors, Bank of America, N.A., as administrative agent, and certain Lenders entered into a ThirdFourth Amendment to the Vail Holdings Credit Agreement (the “Third“Fourth Amendment”). Pursuant to the ThirdFourth Amendment, among other terms, VHI will beis exempt from complying with the Vail Holdings Credit Agreement’s maximum leverage ratio, senior secured leverage ratio and minimum interest coverage ratio financial maintenance covenants for each of the fiscal quarters ending July 31, 2020 through January 31, 2022 (unless VHI makes a one-time irrevocable election to terminate such exemption period prior to such date) (such period, the “Financial Covenants Temporary Waiver Period”), after which VHI will again be required to comply with such covenants starting with the fiscal quarter ending April 30, 2022 (or such earlier fiscal quarter as elected by VHI). After the expiration of the Financial Covenants Temporary Waiver Period:
•the maximum leverage ratio permitted under the maximum leverage ratio financial maintenance covenant reduces each quarter after the expiration of the Financial Covenants Temporary Waiver Period as follows:
(A) first full fiscal quarter:shall be 6.25 to 1.00;
(B) second full fiscal quarter: 5.75 to 1.00;
(C) third full fiscal quarter: 5.25•the maximum ratio permitted under the senior secured leverage ratio financial maintenance covenant shall be 4.00 to 1.00; and
(D) fourth full fiscal quarter and for each fiscal quarter thereafter: 5.00 to 1.00.
•the minimum interest coverage ratio permitted under the minimum interest coverage ratio financial maintenance covenant will be 2.00 to 1.00.
In addition, VHI will be required to comply with a monthly minimum liquidity test (liquidity is defined as unrestricted cash and temporary cash investments of VRI and its restricted subsidiaries and available commitments under the Vail Holdings Credit Agreement revolver) of not less than $150.0 million, during the period beginning July 31, 2020 and ending on the date VHI delivers a compliance certificate for the Company and its subsidiaries’ first fiscal quarter following the end of the Financial Covenants Temporary Waiver Period.
The Company will be prohibited from the following activities during the Financial Covenants Temporary Waiver Period (unless approval is obtained by a majority of the Lenders):
•paying any dividends or making share repurchases, unless (x) no default or potential default exists under the Vail Holdings Credit Agreement and (y) the Company has liquidity (as defined above)below) of at least $400.0$300.0 million, and the aggregate amount of dividends paid and share repurchases made by the Company during the Financial Covenants Temporary Waiver Period may not exceed $38.2 million in any fiscal quarter;
making capital expenditures in excess of $200.0 million per 12-month period ending January 31, other than non-recurring extraordinary capital expenditures incurred in connection with emergency repairs, life safety repairs or ordinary course maintenance repairs;
•incurring any indebtedness secured by the collateral under the Vail Holdings Credit Agreement other than pursuant to the existing revolving commitments under the Credit Agreement;in an amount in excess of $1.75 billion; and
•making certain non-ordinary course investments in similar businesses, joint ventures and unrestricted subsidiaries unless the Company has liquidity (as defined above)below) of at least $300.0 million;million.
making
The Fourth Amendment also removed certain restrictions under the Financial Covenants Temporary Waiver Period, including (i) removing the restriction on acquisitions so long as the Company has liquidity (as defined below) of at least $300.0 million and (ii) removing the $200.0 million annual limit on capital expenditures.
In addition, VHI is required to comply with a monthly minimum liquidity test (liquidity is defined as unrestricted cash and temporary cash investments in non-subsidiaries in excess of $50.0VHI and its restricted subsidiaries and available commitments under the Vail Holdings Credit Agreement revolver) of not less than $150.0 million inuntil the aggregate;date which VHI delivers a compliance certificate for the Company and
acquiring all or a majority its subsidiaries’ first fiscal quarter following the end of the capital stock or all or any substantial portion of the assets of any entity or merging or consolidating with another entity.Financial Covenants Temporary Waiver Period.
During the Financial Covenants Temporary Waiver Period, borrowings under the Vail Holdings Credit Agreement, including the term loan facility, will bear interest annually at LIBOR plus 2.50% and, for amounts in excess of $400.0 million, LIBOR will beis subject to a floor of 0.25% (which has decreased from the floor of 0.75%. In addition, pursuant that was in effect prior to the Third Amendment, the amount by which we are able to increase availability (under the revolver or in the form of term loans) will be increased to an aggregate principal amount not to exceed the greater of (i) $2.25 billion and (ii) the product of 3.25 and the trailing four-quarter Adjusted EBITDA (as defined in the Credit Agreement)Fourth Amendment).
As of April 30, 2020,2021, the Vail Holdings Credit Agreement consists of a $500.0 million revolving credit facility and a $1.25$1.2 billion outstanding term loan facility. The term loan facility is subject to quarterly amortization of principal of approximately $15.6 million (which began in January 2020), in equal installments, for a total of five percent5% of principal payable in each year and the final payment of all amounts outstanding, plus accrued and unpaid interest due in September 2024. The proceeds of the loans made under the Vail Holdings Credit Agreement may be used to fund the Company’s working capital needs, capital expenditures, acquisitions, investments and other general corporate purposes, including the issuance of letters of credit, subject to the Financial Covenants Temporary Waiver Period limitations, as discussed above.limitations. Borrowings under the Vail Holdings Credit Agreement, including the term loan facility, bear interest annually at LIBOR plus 1.50%2.50% as of April 30, 2020 (1.94%2021 (2.61% for the first $400.0 million of borrowings, and for amounts in excess of $400.0 million for which LIBOR is subject to a floor of 0.25% during the Financial Covenants Temporary Waiver Period, 2.75%). Other than as of April 30, 2020). Interestimpacted by the provisions in place during the Financial Covenants Temporary Waiver Period, interest rate margins may fluctuate based upon the ratio of the Company’s Net Funded Debt to Adjusted EBITDA on a trailing four-quarter basis. The Vail Holdings 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 each such term is defined in the Vail Holdings Credit Agreement, multiplied by the daily amount by which the Vail Holdings Credit Agreement commitment exceeds the total of outstanding loans and outstanding letters of credit (0.3%(0.4% as of April 30, 2020)2021). During the nine months ended April 30,
(b)On December 18, 2020, the Company entered into various interest rate swap agreements to hedge the LIBOR-based variable interest rate componentcompleted an offering of underlying cash flows of $400.0$575.0 million in aggregate principal amount of 0.0% Convertible Notes due 2026 in a private placement conducted pursuant to Rule 144A of the Securities Act of 1933, as amended. The 0.0% Convertible Notes were issued under an Indenture dated December 18, 2020 (the “Indenture”) between the Company and U.S. Bank National Association, as Trustee. The 0.0% Convertible Notes do not bear regular interest and the principal amount does not accrete. The 0.0% Convertible Notes mature on January 1, 2026, unless earlier repurchased, redeemed or converted.
The 0.0% Convertible Notes are general senior unsecured obligations of the Company. The 0.0% Convertible Notes rank senior in right of payment to any future debt that is expressly subordinated, equal in right of payment with the Company’s existing and future liabilities that are not so subordinated, and are subordinated to all of the Company’s existing and future secured debt to the extent of the value of the assets securing such debt. The 0.0% Convertible Notes will also be structurally subordinated to all of the existing and future liabilities and obligations of the Company’s subsidiaries, including such subsidiaries’ guarantees of the 6.25% Notes.
The initial conversion rate was 2.4560 shares per $1,000 principal amount of notes (the “Conversion Rate”), which represents an initial conversion price of approximately $407.17 per share (the “Conversion Price”), and is subject to adjustment upon the occurrence of certain specified events as described in the Indenture. The principal amount of the 0.0% Convertible Notes is required to be settled in cash. The Company will settle conversions by paying cash, delivering shares of its Vail Holdingscommon stock, or a combination of the two, at its option.
Holders may convert their notes, at their option, only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 if the last reported sale price per share of our common stock exceeds 130% of the Conversion Price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
•during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “Measurement Period”) in which the trading price per $1,000 principal amount of notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the Conversion Rate on such trading day;
•upon the occurrence of certain corporate events or distributions on our common stock, as described in the Indenture;
•if the Company calls the 0.0% Convertible Notes for redemption; or
•at any time from, and including, July 1, 2025 until the close of business on the scheduled trading day immediately before the maturity date.
The 0.0% Convertible Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after January 1, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the notes to be redeemed, plus accrued and unpaid special and additional interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the Conversion Price for a specified period of time. If the Company elects to redeem less than all of the 0.0% Convertible Notes, at least $50.0 million aggregate principal amount of notes must be outstanding and not subject to redemption as of the relevant redemption notice date. Calling any 0.0% Convertible Notes for redemption will constitute a make-whole fundamental change with respect to such notes, in which case the Conversion Rate applicable to the conversion of such notes will be increased in certain circumstances if such notes are converted after they are called for redemption.
In addition, upon the occurrence of a fundamental change (as defined in the Indenture), holders of the 0.0% Convertible Notes may require the Company to repurchase all or a portion of their notes at a cash repurchase price equal to the principal amount of the notes to be repurchased, plus any accrued and unpaid special and additional interest, if any, to, but excluding, the applicable repurchase date. If certain fundamental changes referred to as make-whole fundamental changes (as defined in the Indenture) occur, the Conversion Rate for the 0.0% Convertible Notes may be increased for a specified period of time.
The Indenture includes customary events of default, including failure to make payment, failure to comply with the obligations set forth in the Indenture, certain defaults on certain other indebtedness, and certain events of bankruptcy, insolvency or reorganization. The Company may elect, at its option, that the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will consist exclusively of the right of the holders of the 0.0% Convertible Notes to receive additional interest on the notes for up to 360 days following such failure.
The Company separately accounts for the liability and equity components of the 0.0% Convertible Notes. The liability component at issuance was recognized at estimated fair value based on the fair value of a similar debt instrument that does not have an embedded convertible feature, and was determined to be $465.3 million and was recorded within long-term debt, net on the Company’s Consolidated Condensed Balance Sheet. The excess of the principal amount of the 0.0% Convertible Notes over the initial fair value of the liability component represents a debt discount of $109.7 million and will be amortized to interest expense, net over the term. The balance of the unamortized debt discount was $102.2 million as of April 30, 2021. The carrying amount of the equity component representing the conversion option was approximately $109.7 million and was determined by deducting the initial fair value of the liability component from the total proceeds of the 0.0% Convertible Notes of $575.0 million. Additionally, the Company recorded deferred tax liabilities of approximately $27.5 million related to the equity component of the 0.0% Convertible Notes on the date of issuance, which decreased the recorded value of the equity component. The equity component is recorded within additional paid-in capital on the Company’s Consolidated Condensed Balance Sheet and is not remeasured as long as it continues to meet the conditions for equity classification.
Deferred financing costs related to the 0.0% Convertible Notes of approximately $14.9 million were allocated between the liability and equity components of the 0.0% Convertible Notes based on the proportion of the total proceeds allocated to the debt and equity components.
(c)Whistler Mountain Resort Limited Partnership (“Whistler LP”) and Blackcomb Skiing Enterprises Limited Partnership (“Blackcomb LP”), together “The WB Partnerships,” are party to a credit agreement, dated as of November 12, 2013 (as amended, the “Whistler Credit Agreement”), by and among Whistler LP, Blackcomb LP, certain subsidiaries of Whistler LP and Blackcomb LP party thereto as guarantors (the “Whistler Subsidiary Guarantors”), the financial institutions party thereto as lenders and The Toronto-Dominion Bank, as administrative agent. The Whistler Credit Agreement forconsists of a C$300.0 million revolving credit facility. As of April 30, 2021, all borrowings under the remaining termWhistler Credit Agreement were made in Canadian dollars and by way of the agreement at an effective rateissuance of 1.46%.
| |
(b) | Whistler Mountain Resort Limited Partnership (“Whistler LP”) and Blackcomb Skiing Enterprises Limited Partnership (“Blackcomb LP”), together “The WB Partnerships,” are party to a credit agreement, datedbankers’ acceptances plus 1.75% (approximately 2.21% as of April 30, 2021). The Whistler Credit Agreement also includes a quarterly unused commitment fee based on the Consolidated Total Leverage Ratio, which as of April 30, 2021 is equal to 0.4% per annum.
(d)November 12, 2013 (as amended, the “Whistler Credit Agreement”), by and among Whistler LP, Blackcomb LP, certain subsidiaries of Whistler LP and Blackcomb LP party thereto as guarantors (the “Whistler Subsidiary Guarantors”), the financial institutions party thereto as lenders and The Toronto-Dominion Bank, as administrative agent. The Whistler Credit Agreement consists of a C$300.0 million revolving credit facility. During the three months ended January 31, 2020, the Company entered into an amendment of the Whistler Credit Agreement which extended the maturity date of the revolving credit facility to December 15, 2024. No other material terms of the Whistler Credit Agreement were altered. As of April 30, 2020, all borrowings under the Whistler Credit Agreement were made in Canadian dollars and by way of the issuance of bankers’ acceptances plus 1.75% (approximately 2.38% as of April 30, 2020). The Whistler Credit Agreement also includes a quarterly unused commitment fee based on the Consolidated Total Leverage Ratio, which as of April 30, 2020 is equal to 0.3937% per annum. |
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(c) | On September 24, 2019, in conjunction with the acquisition of Peak Resorts (see Note 7, Acquisitions), the Company assumed various secured borrowings (the “EPR Secured Notes”) under the master credit and security agreements and other related agreements, as amended, (collectively, the “EPR Agreements”) with EPT Ski Properties, Inc. and its affiliates (“EPR”). The EPR Secured Notes include the following: |
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i. | The Alpine Valley Secured Note. The $4.6 million Alpine Valley Secured Note provides for interest payments through its maturity on December 1, 2034. As of April 30, 2020, interest on this note accrued at a rate of 11.21%.
|
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ii. | The Boston Mills/Brandywine Secured Note. The $23.3 million Boston Mills/Brandywine Secured Note provides for interest payments through its maturity on December 1, 2034. As of April 30, 2020, interest on this note accrued at a rate of 10.75%.
|
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iii. | The Jack Frost/Big Boulder Secured Note. The $14.3 million Jack Frost/Big Boulder Secured Note provides for interest payments through its maturity on December 1, 2034. As of April 30, 2020, interest on this note accrued at a rate of 10.75%.
|
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iv. | The Mount Snow Secured Note. The $51.1 million Mount Snow Secured Note provides for interest payments through its maturity on December 1, 2034. As of April 30, 2020, interest on this note accrued at a rate of 11.78%.
|
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v. | The Hunter Mountain Secured Note. The $21.0 million Hunter Mountain Secured Note provides for interest payments through its maturity on January 5, 2036. As of April 30, 2020, interest on this note accrued at a rate of 8.57%.
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The EPR Secured Notes are secured by all or substantially all of the assets of Peak Resorts and its subsidiaries, including mortgages on the Alpine Valley, Boston Mills, Brandywine, Jack Frost, Big Boulder, Mount Snow and Hunter Mountain ski resorts. The EPR Secured Notes bear interest at specified interest rates, as discussed above, which are subject to increase each year by the lesser of (i) three times the percentage increase in the Consumer Price Index or (ii) a capped index (the “Capped CPI Index”), which is 1.75% for the Hunter Mountain Secured Note and 1.50% for all other notes. The EPR Agreements provide for affirmative and negative covenants that restrict, among other things, the ability of Peak Resorts and its subsidiaries to incur indebtedness, dispose of assets, make distributions and make investments. In addition, the EPR Agreements include restrictive covenants, including maximum leverage ratio and consolidated fixed charge ratio. An additional contingent interest payment would be due to EPR if, on a calendar year basis, the gross receipts from the properties securing any of the individual EPR Secured Notes (the “Gross Receipts”) are more than the result (the “Interest Quotient”) of dividing the total interest charges for the EPR Secured Notes by a specified percentage rate (the “Additional Interest Rate”). In such a case, the additional interest payment would equal the difference between the Gross Receipts and the Interest Quotient multiplied by the Additional Interest Rate. This calculation is made on an aggregated basis for the notes secured by the Jack Frost, Big Boulder, Boston Mills, Brandywine and Alpine Valley ski resorts, where the Additional Interest Rate is 10.0%; on a standalone basis for the note secured by the Company’s Mount Snow ski resort, where the Additional Interest Rate is 12.0%; and on a standalone basis for the note secured by the Company’s Hunter Mountain ski resort, where the Additional Interest Rate is 8.0%. Peak Resorts does not have the right to prepay the EPR Secured Notes. The EPR Secured Notes were recorded at their estimated fair value in conjunction with the acquisition of Peak Resorts on September 24, 2019.(see Note 6, Acquisitions), the Company assumed various secured borrowings (the “EPR Secured Notes”) under the master credit and security agreements and other related agreements, as amended, (collectively, the “EPR Agreements”) with EPT Ski Properties, Inc. and its affiliates (“EPR”). The EPR Agreements grant EPR certain other rights including (i)Secured Notes include the option to purchase thefollowing:
i.The Alpine Valley Secured Note. The $4.6 million Alpine Valley Secured Note provides for interest payments through its maturity on December 1, 2034. As of April 30, 2021, interest on this note accrued at a rate of 11.38%.
ii.The Boston Mills, Mills/Brandywine Secured Note. The $23.3 million Boston Mills/Brandywine Secured Note provides for interest payments through its maturity on December 1, 2034. As of April 30, 2021, interest on this note accrued at a rate of 10.91%.
iii.The Jack Frost, Frost/Big Boulder or Alpine Valley resorts, which is exercisable no sooner than two years and no later than one year prior to the maturity dates of the applicable EPRSecured Note. The $14.3 million Jack Frost/Big Boulder Secured Note provides for such properties, with any closings to be heldinterest payments through its maturity on the applicableDecember 1, 2034. As of April 30, 2021, interest on this note accrued at a rate of 10.91%.
iv.The Mount Snow Secured Note. The $51.1 million Mount Snow Secured Note provides for interest payments through its maturity dates; and, if EPR exercises the purchase option, EPR will enter into an agreement with the Companyon December 1, 2034. As of April 30, 2021, interest on this note accrued at a rate of 11.96%.
v.The Hunter Mountain Secured Note. The $21.0 million Hunter Mountain Secured Note provides for the leaseinterest payments through its maturity on January 5, 2036. As of each acquired property for an initial termApril 30, 2021, interest on this note accrued at a rate of 20 years, plus options to extend the lease for two additional periods of ten years each; (ii) a right of first refusal through 2021, subject to certain conditions, to provide all or a portion of the financing associated with any purchase, ground lease, sale/leaseback, management or financing transaction contemplated by Peak Resorts with respect to any new or existing ski resort properties; and (iii) a right of first refusal through 2021 to purchase the Company’s Attitash ski resort in the event the Company were to desire to sell the Attitash ski resort. To date, EPR has not exercised any such purchase options.8.72%.
In addition, Peak Resorts is required to maintain a debt service reserve account which amounts are applied to fund interest payments and other amounts due and payable to EPR. As of April 30, 20202021 the Company had funded the EPR debt service reserve account in an amount equal to approximately $9.2$8.4 million, which was included in other current assets in the Company’s Consolidated Condensed Balance Sheet.
| |
(d) | Peak Resorts serves as the general partner for two limited partnerships, Carinthia Group 1, LP and Carinthia Group 2, LP (together, the “Carinthia Partnerships”), which were formed to raise $52.0 million through the Immigrant Investor Program administered by the U.S. Citizenship and Immigration Services (“USCIS”), pursuant to the Immigration and Nationality Act (the “EB-5 Program”). The EB-5 Program was created to stimulate the U.S. economy through the creation of jobs and capital investments in U.S. companies by foreign investors. The program allocates immigrant visas to qualified individuals (“EB-5 Investors”) seeking lawful permanent resident status based on their investment in a U.S commercial enterprise. On December 27, 2016, Peak Resorts borrowed $52.0 million from the Carinthia Partnerships to fund two capital projects |
(e)Current maturities represent principal payments due in the next 12 months.
at Mount Snow. The amounts were borrowed through two loan agreements, which provided $30.0 million and $22.0 million (together, the “EB-5 Development Notes”). Amounts outstanding under the EB-5 Development Notes accrue simple interest at a fixed rate of 1.0% per annum until the maturity date, which is December 27, 2021, subject to an extension of up to two additional years at the option of the borrowers, with lender consent. If the maturity date is extended, amounts outstanding under the EB-5 Development Notes will accrue simple interest at a fixed rate of 7.0% per annum during the first year of extension and a fixed rate of 10.0% per annum during the second year of extension. Upon an event of default (as defined), amounts outstanding under the EB-5 Development Notes shall bear interest at the rate of 5.0% per annum, subject to the extension increases. While the EB-5 Development Notes are outstanding, Peak Resorts is restricted from taking certain actions without the consent of the lenders, including, but not limited to, transferring or disposing of the properties or assets financed with loan proceeds. In addition, Peak Resorts is prohibited from prepaying outstanding amounts owed if such prepayment would jeopardize any of the EB-5 Investors from being admitted to the U.S. via the EB-5 Program.
| |
(e) | Current maturities represent principal payments due in the next 12 months. |
Aggregate maturities of debt outstanding as of April 30, 20202021 reflected by fiscal year (August 1 through July 31) are as follows (in thousands):
| | | | | |
| Total |
2021 (May 2021 through July 2021) | $ | 15,832 | |
2022 | 121,345 | |
2023 | 63,740 | |
2024 | 63,798 | |
2025 | 1,594,564 | |
Thereafter | 1,098,909 | |
Total debt | $ | 2,958,188 | |
|
| | | |
| Total |
2020 (May 2020 through July 2020) | $ | 15,873 |
|
2021 | 69,790 |
|
2022 | 115,382 |
|
2023 | 63,750 |
|
2024 | 63,794 |
|
Thereafter | 2,086,112 |
|
Total debt | $ | 2,414,701 |
|
The Company recorded gross interest expense of $24.5$39.0 million and $19.6$24.5 million for the three months ended April 30, 20202021 and 2019,2020, respectively, of which $1.5 million and $0.3 million, respectively, was amortization of deferred financing costs in both periods.costs. The Company recorded gross interest expense of $73.3$112.3 million and $59.2$73.3 million for the nine months ended April 30, 20202021 and 2019,2020, respectively, of which $3.4 million and $1.0 million, respectively, was amortization of deferred financing costs in both periods.costs. 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.
In connection with the Company’s acquisition of Whistler Blackcomb in October 2016, VHI funded a portion of the purchase price through an intercompany loan to Whistler Blackcomb of $210.0 million, which was effective as of November 1, 2016, and requires foreign currency remeasurement to Canadian dollars, the functional currency for Whistler Blackcomb. As a result, foreign currency fluctuations associated with the loan are recorded within the Company’s results of operations. The Company recognized approximately $4.2 million and $9.8 million, respectively, of non-cash foreign currency gains on the intercompany loan to Whistler Blackcomb for the three and nine months ended April 30, 2021 on the Company’s Consolidated Condensed Statements of Operations. The Company recognized approximately $7.8 million and $8.2 million, respectively, of non-cash foreign currency losses on the intercompany loan to Whistler Blackcomb for the three and nine months ended April 30, 2020 on the Company’s Consolidated Condensed Statements of Operations. The Company recognized approximately $3.3 million and $5.2 million, respectively, of non-cash foreign currency losses on the intercompany loan to Whistler Blackcomb for the three and nine months ended April 30, 2019 on the Company’s Consolidated Condensed Statements of Operations.
7.6. Acquisitions
Peak Resorts
On September 24, 2019, the Company, through a wholly-owned subsidiary, acquired 100 percent of the outstanding stock of Peak Resorts, Inc. (“Peak Resorts”) at a purchase price of $11.00 per share or approximately $264.5 million. In addition, contemporaneous with the closing of the transaction, Peak Resorts was required to pay approximately $70.2 million of certain outstanding debt instruments and lease obligations in order to complete the transaction. Accordingly, the total purchase price, including the repayment of certain outstanding debt instruments and lease obligations, was approximately $334.7 million, for which the Company borrowed approximately $335.6 million under the Vail Holdings Credit Agreement (see Note 6,5, Long-Term Debt) to fund the acquisition, repayment of debt instruments and lease obligations, and associated acquisition related expenses. The newly acquired resorts include: Mount Snow in Vermont; Hunter Mountain in New York; Attitash Mountain Resort, Wildcat Mountain and Crotched Mountain in New Hampshire; Liberty Mountain Resort, Roundtop Mountain Resort, Whitetail Resort, Jack Frost and Big Boulder in Pennsylvania; Alpine Valley, Boston Mills, Brandywine and Mad River Mountain in Ohio; Hidden Valley and Snow Creek in Missouri; and Paoli Peaks in Indiana. The Company assumed the Special Use Permits from the U.S. Forest Service for Attitash, Mount Snow and Wildcat Mountain, and assumed the land leases for Mad River and Paoli Peaks. The acquisition included the mountain operations of the resorts, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities), as well as lodging operations at certain resorts.
The following summarizes the purchase consideration and the preliminary purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands):
| | | | | |
| Acquisition Date Estimated Fair Value |
Current assets | $ | 19,578 | |
Property, plant and equipment | 427,793 | |
Goodwill | 135,879 | |
Identifiable intangible assets | 19,221 | |
Other assets | 16,203 | |
Assumed long-term debt | (184,668) | |
Other liabilities | (99,275) | |
Net assets acquired | $ | 334,731 | |
|
| | | |
| Acquisition Date Estimated Fair Value |
Current assets | $ | 19,578 |
|
Property, plant and equipment | 427,793 |
|
Goodwill | 144,526 |
|
Identifiable intangible assets | 19,221 |
|
Other assets | 16,203 |
|
Assumed long-term debt | (184,668 | ) |
Other liabilities | (107,923 | ) |
Net assets acquired | $ | 334,730 |
|
Identifiable intangible assets acquired in the transaction were primarily related to trade names and property management contracts, which had acquisition date estimated fair values of approximately $15.8 million and $3.1 million, respectively. The process of estimating the fair value of the property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition. The excess of the purchase price over the aggregate estimated fair values of the assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of the resorts and other factors, and is not expected to be deductible for income tax purposes. The Company assumed various debt obligations of Peak Resorts, which were recorded at their respective estimated fair values as of the acquisition date (see Note 6,5, Long-Term Debt). The Company recognized $2.8 million of acquisition related expenses associated with the transaction within Mountain and Lodging operating expense in its Consolidated Condensed Statement of Operations for the nine months ended April 30, 2020. The operating results of Peak Resorts are reported within the Mountain and Lodging segments prospectively from the date of acquisition.
Falls Creek and Hotham Resorts
On April 4, 2019, the Company, through a wholly-owned subsidiary, acquired ski field leases and related infrastructure used to operate two resorts in Victoria, Australia. The Company acquired Australian Alpine Enterprises Holdings Pty. Ltd and all related corporate entities that operate the Falls Creek and Hotham resorts from Living and Leisure Australia Group, a subsidiary of Merlin Entertainments, for a cash purchase price of approximately AU$178.9 million ($127.4 million), after adjustments for certain agreed-upon terms, including an increase in the purchase price for operating losses incurred for the period from December 29, 2018 through closing. The acquisition included the mountain operations of both resorts, including base area skier services (ski and snowboard school facilities, retail and rental, reservation and property management operations).
The following summarizes the purchase consideration and the purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands):
|
| | | |
| Acquisition Date Estimated Fair Value |
Current assets | $ | 6,986 |
|
Property, plant and equipment | 54,889 |
|
Goodwill | 71,538 |
|
Identifiable intangible assets and other assets | 5,833 |
|
Liabilities | (11,894 | ) |
Net assets acquired | $ | 127,352 |
|
Identifiable intangible assets acquired in the transaction were primarily related to trade names. The process of estimating the fair value of the property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition. The excess of the purchase price over the aggregate estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of Falls Creek and Hotham and other factors. None of the goodwill is expected to be deductible for income tax purposes under Australian tax law. The Company recognized $4.7 million of acquisition related expenses associated with the transaction, including stamp duty expense of $2.9 million, within Mountain and Lodging operating expense in its Consolidated Condensed Statement of Operations for the nine months ended April 30, 2019. The operating results of Falls Creek and Hotham are reported within the Mountain segment prospectively from the date of acquisition.
Stevens Pass Resort
On August 15, 2018, the Company, through a wholly-owned subsidiary, acquired Stevens Pass Resort in the State of Washington from Ski Resort Holdings, LLC, an affiliate of Oz Real Estate (“Ski Resort Holdings”), for total cash consideration of $64.0 million, after adjustments for certain agreed-upon terms. The Company borrowed $70.0 million on August 15, 2018 under its Vail Holdings Credit Agreement term loan (see Note 6, Long-Term Debt) to fund the transaction and associated acquisition related expenses. The acquisition included the mountain operations of the resort, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities).
The following summarizes the purchase consideration and the purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands):
|
| | | |
| Acquisition Date Estimated Fair Value |
Current assets | $ | 752 |
|
Property, plant and equipment | 34,865 |
|
Goodwill | 28,878 |
|
Identifiable intangible assets | 2,680 |
|
Deferred income taxes, net | 886 |
|
Liabilities | (4,029 | ) |
Net assets acquired | $ | 64,032 |
|
The process of estimating the fair value of the property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition. The excess of the purchase price over the aggregate estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of Stevens Pass and other factors, and is expected to be deductible for income tax purposes. The Company recognized $1.2 million of acquisition related expenses associated with the transaction within Mountain and Lodging operating expense in its Consolidated Condensed Statement of Operations for the nine months ended April 30, 2019. The operating results of Stevens Pass are reported within the Mountain segment prospectively from the date of acquisition.
Triple Peaks
On September 27, 2018, the Company, through a wholly-owned subsidiary, acquired Triple Peaks, LLC (“Triple Peaks”), the parent company of Okemo Mountain Resort in Vermont, Crested Butte Mountain Resort in Colorado, and Mount Sunapee Resort
in New Hampshire, for a cash purchase price of approximately $74.1 million, after adjustments for certain agreed-upon terms. In addition, contemporaneous with the closing of the transaction, Triple Peaks paid $155.0 million to pay the remaining obligations of the leases that all three resorts had with Ski Resort Holdings, with funds provided by the Company. Accordingly, the total purchase price, including the repayment of lease obligations, was $229.1 million, for which the Company utilized cash on hand and borrowed $195.6 million under the Vail Holdings Credit Agreement term loan (see Note 6, Long-Term Debt) to fund the transaction and associated acquisition related expenses. The Company obtained a new Special Use Permit from the U.S. Forest Service for Crested Butte, and assumed the state land leases for Okemo and Mount Sunapee. The acquisition included the mountain operations of the resorts, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities).
The following summarizes the purchase consideration and the purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands):
|
| | | |
| Acquisition Date Estimated Fair Value |
Current assets | $ | 5,197 |
|
Property, plant and equipment | 159,799 |
|
Goodwill | 51,742 |
|
Identifiable intangible assets | 27,360 |
|
Deferred income taxes, net | 3,093 |
|
Liabilities | (18,098 | ) |
Net assets acquired | $ | 229,093 |
|
Identifiable intangible assets acquired in the transaction were primarily related to property management contracts and trade names. The process of estimating the fair value of the property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition. The excess of the purchase price over the aggregate estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of the resorts and other factors, and is expected to be deductible for income tax purposes. The Company recognized $2.8 million of acquisition related expenses associated with the transaction within Mountain and Lodging operating expense in its Consolidated Condensed Statement of Operations for the nine months ended April 30, 2019. The operating results of Triple Peaks are reported within the Mountain and Lodging segments prospectively from the date of acquisition.
The estimated fair values of assets acquired and liabilities assumed in the acquisition of Peak Resorts are preliminary and are based on the information that was available as of the respective acquisition dates. The Company believes that this information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed; however, the Company is obtaining additional information necessary to finalize those estimated fair values. Therefore, the preliminary measurements of estimated fair values reflected are subject to change. The Company expects to finalize the valuation and complete the purchase consideration allocation no later than one year from the respective acquisition dates.
Pro Forma Financial Information
The following presents the unaudited pro forma consolidated financial information of the Company as if the acquisitionsacquisition of Peak Resorts Falls Creek & Hotham, Triple Peaks and Stevens Pass werewas completed at the beginning of the fiscal year preceding the fiscal year in which each respective acquisition occurred.on August 1, 2019. The following unaudited pro forma financial information includes adjustments for (i) depreciation on acquired property, plant and equipment; (ii) amortization of intangible assets recorded at the date of the transactions;transaction; (iii) lease expenses incurred by the prior owners which the Company will not be subject to; (iv) transaction and business integration related costs; and (v)(iv) interest expense associated with financing the transactions.transaction. This unaudited pro forma financial information is presented for informational purposes only and does not purport to be indicative of the results of future operations or the results that would have occurred had the transaction taken place on August 1, 20182019 (in thousands, except per share amounts).
|
| | | |
| Three Months Ended April 30, |
| 2019 |
Pro forma net revenue | $ | 1,043,509 |
|
Pro forma net income attributable to Vail Resorts, Inc. | $ | 306,814 |
|
Pro forma basic net income per share attributable to Vail Resorts, Inc. | $ | 7.62 |
|
Pro forma diluted net income per share attributable to Vail Resorts, Inc. | $ | 7.48 |
|
|
| | | | | | |
| Nine Months Ended April 30, |
| 2020 | 2019 |
Pro forma net revenue | $ | 1,893,154 |
| $ | 2,237,141 |
|
Pro forma net income attributable to Vail Resorts, Inc. | $ | 253,170 |
| $ | 408,986 |
|
Pro forma basic net income per share attributable to Vail Resorts, Inc. | $ | 6.28 |
| $ | 10.13 |
|
Pro forma diluted net income per share attributable to Vail Resorts, Inc. | $ | 6.19 |
| $ | 9.93 |
|
| | | | | | | | |
| | Nine Months Ended April 30, |
| | 2020 |
Pro forma net revenue | | $ | 1,893,154 | |
Pro forma net income attributable to Vail Resorts, Inc. | | $ | 253,170 | |
Pro forma basic net income per share attributable to Vail Resorts, Inc. | | $ | 6.28 | |
Pro forma diluted net income per share attributable to Vail Resorts, Inc. | | $ | 6.19 | |
8.
7. Supplementary Balance Sheet Information
The composition of property, plant and equipment follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | April 30, 2021 | | July 31, 2020 | | April 30, 2020 |
Land and land improvements | | $ | 761,367 | | | $ | 750,714 | | | $ | 745,275 | |
Buildings and building improvements | | 1,502,828 | | | 1,475,661 | | | 1,466,113 | |
Machinery and equipment | | 1,432,137 | | | 1,361,178 | | | 1,351,491 | |
Furniture and fixtures | | 330,530 | | | 308,267 | | | 335,827 | |
Software | | 122,586 | | | 104,223 | | | 130,354 | |
Vehicles | | 82,375 | | | 80,510 | | | 81,408 | |
Construction in progress | | 46,703 | | | 81,967 | | | 57,462 | |
Gross property, plant and equipment | | 4,278,526 | | | 4,162,520 | | | 4,167,930 | |
Accumulated depreciation | | (2,161,731) | | | (1,969,841) | | | (1,966,127) | |
Property, plant and equipment, net | | $ | 2,116,795 | | | $ | 2,192,679 | | | $ | 2,201,803 | |
|
| | | | | | | | | | | | |
| | April 30, 2020 | | July 31, 2019 | | April 30, 2019 |
Land and land improvements | | $ | 745,275 |
| | $ | 619,561 |
| | $ | 618,545 |
|
Buildings and building improvements | | 1,466,113 |
| | 1,284,438 |
| | 1,279,117 |
|
Machinery and equipment | | 1,351,491 |
| | 1,160,817 |
| | 1,157,424 |
|
Furniture and fixtures | | 335,827 |
| | 309,271 |
| | 304,345 |
|
Software | | 130,354 |
| | 118,815 |
| | 118,678 |
|
Vehicles | | 81,408 |
| | 65,556 |
| | 63,443 |
|
Construction in progress | | 57,462 |
| | 79,282 |
| | 48,728 |
|
Gross property, plant and equipment | | 4,167,930 |
| | 3,637,740 |
| | 3,590,280 |
|
Accumulated depreciation | | (1,966,127 | ) | | (1,795,240 | ) | | (1,742,846 | ) |
Property, plant and equipment, net | | $ | 2,201,803 |
| | $ | 1,842,500 |
| | $ | 1,847,434 |
|
The composition of accounts payable and accrued liabilities follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | April 30, 2021 | | July 31, 2020 | | April 30, 2020 |
Trade payables | | $ | 64,412 | | | $ | 59,692 | | | $ | 62,101 | |
Deferred revenue | | 238,075 | | | 256,402 | | | 219,395 | |
Accrued salaries, wages and deferred compensation | | 69,821 | | | 25,588 | | | 16,184 | |
Accrued benefits | | 49,958 | | | 43,704 | | | 44,536 | |
Deposits | | 35,263 | | | 20,070 | | | 27,053 | |
Operating lease liability | | 37,687 | | | 36,604 | | | 34,996 | |
Other liabilities | | 72,048 | | | 57,048 | | | 45,009 | |
Total accounts payable and accrued liabilities | | $ | 567,264 | | | $ | 499,108 | | | $ | 449,274 | |
|
| | | | | | | | | | | | |
| | April 30, 2020 | | July 31, 2019 | | April 30, 2019 |
Trade payables | | $ | 62,101 |
| | $ | 96,377 |
| | $ | 80,218 |
|
Deferred revenue | | 219,395 |
| | 335,669 |
| | 297,874 |
|
Accrued salaries, wages and deferred compensation | | 16,184 |
| | 50,318 |
| | 37,817 |
|
Accrued benefits | | 44,536 |
| | 37,797 |
| | 42,732 |
|
Deposits | | 27,053 |
| | 32,108 |
| | 32,090 |
|
Other liabilities | | 80,005 |
| | 55,588 |
| | 52,329 |
|
Total accounts payable and accrued liabilities | | $ | 449,274 |
| | $ | 607,857 |
| | $ | 543,060 |
|
The composition of other long-term liabilities follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | April 30, 2021 | | July 31, 2020 | | April 30, 2020 |
Private club deferred initiation fee revenue | | $ | 104,747 | | | $ | 105,108 | | | $ | 107,500 | |
Other long-term liabilities | | 147,704 | | | 165,137 | | | 143,964 | |
Total other long-term liabilities | | $ | 252,451 | | | $ | 270,245 | | | $ | 251,464 | |
|
| | | | | | | | | | | | |
| | April 30, 2020 | | July 31, 2019 | | April 30, 2019 |
Private club deferred initiation fee revenue | | $ | 107,500 |
| | $ | 109,749 |
| | $ | 111,294 |
|
Unfavorable lease obligation, net | | 1,567 |
| | 19,017 |
| | 19,733 |
|
Other long-term liabilities | | 142,397 |
| | 154,835 |
| | 137,323 |
|
Total other long-term liabilities | | $ | 251,464 |
| | $ | 283,601 |
| | $ | 268,350 |
|
The changes in the net carrying amount of goodwill allocated between the Company’s segments for the nine months ended April 30, 20202021 are as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Mountain | | Lodging | | Goodwill, net |
Balance at July 31, 2020 | 1,666,809 | | | 42,211 | | | 1,709,020 | |
| | | | | |
| | | | | |
Effects of changes in foreign currency exchange rates | 92,276 | | | — | | | 92,276 | |
Balance at April 30, 2021 | $ | 1,759,085 | | | $ | 42,211 | | | $ | 1,801,296 | |
|
| | | | | | | | | |
| Mountain | Lodging | Goodwill, net |
Balance at July 31, 2019 | $ | 1,540,307 |
| $ | 67,899 |
| $ | 1,608,206 |
|
Acquisitions (including measurement period adjustments) | 144,634 |
| — |
| 144,634 |
|
Asset impairments | — |
| (25,688 | ) | (25,688 | ) |
Effects of changes in foreign currency exchange rates | (53,894 | ) | — |
| (53,894 | ) |
Balance at April 30, 2020 | $ | 1,631,047 |
| $ | 42,211 |
| $ | 1,673,258 |
|
Asset Impairments
The Company recorded asset impairments related to its Colorado resort ground transportation company during the three and nine months ended April 30, 2020 of $28.4 million, with corresponding reductions to goodwill, net of $25.7 million and intangible assets, net and property, plant and equipment, net of $2.7 million. The Company’s non-financial assets, such as property, plant and equipment, goodwill and intangible assets, are adjusted when an asset impairment is recognized. These asset impairments encompassencompassed various estimates and assumptions about fair value, which arewere based predominately on significant unobservable inputs.
As a result of the COVID-19 pandemic and the impact it has had on the Company’s operations during the three and nine months ended April 30, 2020, and the expectedexpectation at that time of the continuing impact of the pandemic on future operations, the Company determined that the estimated fair value of its Colorado resort ground transportation company reporting unit within its Lodging segment no longer exceeded its carrying value. Additionally, the Company determined that certain long-lived assets of its Colorado resort ground transportation company were not recoverable. As a result, the Company recognized impairments of goodwill and long-lived assets of approximately $25.7 million and $2.7 million, respectively, which were recorded within asset impairments on the Company’s Consolidated Condensed Statements of Operations during the three and nine months ended April 30, 2020. Corresponding reductions were made to goodwill, net of $25.7 million and intangible assets, net and property, plant and equipment, net of $2.7 million.
The Company estimated the fair value of its Colorado resort ground transportation company reporting unit based on an analysis of the present value of future cash flows (an income approach). The significant estimates used in the discounted cash flow model included the Company’s weighted average cost of capital for the reporting unit, projected cash flows and the long-term rate of growth, all of which are significant unobservable (Level 3) inputs. The Company’s assumptions were based on the actual historical performance of the reporting unit, taking into account the recent weakening of operating results and the expected continuation of operating results for transportation services. As a result of this impairment, the Company’s Colorado ground transportation company had no remaining goodwill recorded as of April 30, 2020.
9.8. Fair Value Measurements
The FASB issued fair value guidance that establishes how reporting entities should measure fair value for measurement and disclosure purposes. The guidance establishes a common definition of fair value applicable to all assets and liabilities measured at fair value and prioritizes the inputs into valuation techniques used to measure fair value. Accordingly, the Company uses valuation techniques which maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value. The three levels of the hierarchy are as follows:
Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities;
Level 2: Inputs include quoted prices for similar assets and liabilities in active and inactive markets or that are observable for the asset or liability either directly or indirectly; and
Level 3: Unobservable inputs which are supported by little or no market activity.
The table below summarizes the Company’s cash equivalents, other current assets, Interest Rate Swaps and Contingent Consideration measured at estimated fair value (all other assets and liabilities measured at fair value are immaterial) (in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Estimated Fair Value Measurement as of April 30, 2021 |
Description | | Total | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Money Market | | $ | 253,809 | | | $ | 253,809 | | | $ | — | | | $ | — | |
Commercial Paper | | $ | 2,401 | | | $ | — | | | $ | 2,401 | | | $ | — | |
Certificates of Deposit | | $ | 259,111 | | | $ | — | | | $ | 259,111 | | | $ | — | |
Liabilities: | | | | | | | | |
Interest Rate Swaps | | $ | 12,938 | | | $ | — | | | $ | 12,938 | | | $ | — | |
Contingent Consideration | | $ | 27,400 | | | $ | — | | | $ | — | | | $ | 27,400 | |
| | | | | | | | |
| | Estimated Fair Value Measurement as of July 31, 2020 |
Description | | Total | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Money Market | | $ | 203,158 | | | $ | 203,158 | | | $ | — | | | $ | — | |
Commercial Paper | | $ | 2,401 | | | $ | — | | | $ | 2,401 | | | $ | — | |
Certificates of Deposit | | $ | 8,208 | | | $ | — | | | $ | 8,208 | | | $ | — | |
Liabilities: | | | | | | | | |
Interest Rate Swaps | | $ | 22,510 | | | $ | — | | | $ | 22,510 | | | $ | — | |
Contingent Consideration | | $ | 17,800 | | | $ | — | | | $ | — | | | $ | 17,800 | |
| | |
| | Estimated Fair Value Measurement as of April 30, 2020 |
Description | | Total | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Money Market | | $ | 3,054 | | | $ | 3,054 | | | $ | — | | | $ | — | |
Commercial Paper | | $ | 2,401 | | | $ | — | | | $ | 2,401 | | | $ | — | |
Certificates of Deposit | | $ | 7,718 | | | $ | — | | | $ | 7,718 | | | $ | — | |
Liabilities: | | | | | | | | |
Interest Rate Swaps | | $ | 21,013 | | | $ | — | | | $ | 21,013 | | | $ | — | |
Contingent Consideration | | $ | 15,500 | | | $ | — | | | $ | — | | | $ | 15,500 | |
|
| | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Estimated Fair Value Measurement as of April 30, 2020 |
Description | | Total | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Money Market | | $ | 3,054 |
| | $ | 3,054 |
| | $ | — |
| | $ | — |
|
Commercial Paper | | $ | 2,401 |
| | $ | — |
| | $ | 2,401 |
| | $ | — |
|
Certificates of Deposit | | $ | 7,718 |
| | $ | — |
| | $ | 7,718 |
| | $ | — |
|
Liabilities: | | | | | | | | |
Interest Rate Swaps | | $ | 21,013 |
| | $ | — |
| | $ | 21,013 |
| | $ | — |
|
Contingent Consideration | | $ | 15,500 |
| | $ | — |
| | $ | — |
| | $ | 15,500 |
|
| | | | | | | | |
| | Estimated Fair Value Measurement as of July 31, 2019 |
Description | | Total | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Money Market | | $ | 3,043 |
| | $ | 3,043 |
| | $ | — |
| | $ | — |
|
Commercial Paper | | $ | 2,401 |
| | $ | — |
| | $ | 2,401 |
| | $ | — |
|
Certificates of Deposit | | $ | 7,871 |
| | $ | — |
| | $ | 7,871 |
| | $ | — |
|
Liabilities: | | | | | | | | |
Contingent Consideration | | $ | 27,200 |
| | $ | — |
| | $ | — |
| | $ | 27,200 |
|
| | |
| | Estimated Fair Value Measurement as of April 30, 2019 |
Description | | Total | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Money Market | | $ | 3,037 |
| | $ | 3,037 |
| | $ | — |
| | $ | — |
|
Commercial Paper | | $ | 2,401 |
| | $ | — |
| | $ | 2,401 |
| | $ | — |
|
Certificates of Deposit | | $ | 10,092 |
| | $ | — |
| | $ | 10,092 |
| | $ | — |
|
Liabilities: | | | | | | | | |
Contingent Consideration | | $ | 25,300 |
| | $ | — |
| | $ | — |
| | $ | 25,300 |
|
The Company’s cash equivalents, other current assets and Interest Rate Swaps are measured utilizing quoted market prices or pricing models whereby all significant inputs are either observable or corroborated by observable market data. During the nine months ended April 30, 2020, the Company entered into the Interest Rate Swaps to hedge the LIBOR-based variable interest rate component of $400.0 million in principal amount of its Vail Holdings Credit Agreement. Settlements or payments resulting from the Interest Rate Swaps are recognized in interest expense, net on the Company’s Consolidated Condensed Statements of Operations, and changes in the estimated fair value are recognized in change in estimated fair value of hedging instruments on the Company’s Consolidated Condensed Statements of Comprehensive Income. The estimated fair value of the Interest Rate Swaps are included within other long-term liabilities and accumulated other comprehensive income (loss) on the Company’s Consolidated Condensed Balance Sheet as of April 30, 2020.2021.
The changes in Contingent Consideration during the nine months ended April 30, 20202021 and 20192020 were as follows (in thousands):
|
| | | | | | | | |
| | | | |
Balance as of July 31, 2019 and 2018, respectively | | $ | 27,200 |
| | $ | 21,900 |
|
Payments | | (6,436 | ) | | (67 | ) |
Change in estimated fair value | | (5,264 | ) | | 3,467 |
|
Balance as of April 30, 2020 and 2019, respectively | | $ | 15,500 |
| | $ | 25,300 |
|
| | | | | | | | | | | | | | |
Balance as of July 31, 2020 and 2019, respectively | | $ | 17,800 | | | $ | 27,200 | |
Payments | | (2,602) | | | (6,436) | |
Change in estimated fair value | | 12,202 | | | (5,264) | |
Balance as of April 30, 2021 and 2020, respectively | | $ | 27,400 | | | $ | 15,500 | |
The lease for Park City provides for participating contingent payments (the “Contingent Consideration”) to the landlord of 42% of the amount by which EBITDA for the Park City resort operations, as calculated under the lease, exceeds approximately $35 million, as established at the transaction date, with such threshold amount subsequently increased annually by an inflation linked index and a 10% adjustment for any capital improvements or investments made under the lease by the Company.
The estimated fair value of Contingent Consideration includes the future period resort operations of Park City in the calculation of EBITDA on which participating contingent payments are made, which is determined on the basis of estimated subsequent year performance, escalated by an assumed growth factor. The Company estimated the fair value of the Contingent Consideration payments using an option pricing valuation model. Key assumptions included a discount rate of 10.49%approximately 11.0%, volatility of 17.0% and future period Park City EBITDA, which are unobservable inputs and thus are considered Level 3 inputs. The Company prepared a sensitivity analysis to evaluate the effect that changes on certain key assumptions would have on the estimated fair value of the Contingent Consideration. A change in the discount rate of 100 basis points or a 5% change in estimated subsequent year performance would result in a change in the estimated fair value within the range of approximately $2.7$3.9 million to $4.0$5.3 million.
Contingent Consideration is classified as a liability, which is remeasured to fair value at each reporting date until the contingency is resolved. During the nine months ended April 30, 2020,2021, the Company made a payment to the landlord for Contingent Consideration of approximately $6.4$2.6 million and recorded a decreasean increase of approximately $5.3$12.2 million which was primarily related toassociated (i) with the estimated Contingent Consideration payment for the fiscal year ending July 31, 2020.2021 and (ii) changes in market factors primarily associated with an increase in the risk-free interest rate. These changes resulted in an estimated fair value of the Contingent Consideration of approximately $15.5$27.4 million, which is reflected in accounts payable and accrued liabilities and other long-term liabilities in the Company’s Consolidated Condensed Balance Sheet.
10.9. Commitments and Contingencies
Metropolitan Districts
The Company credit-enhances $6.3 million of bonds issued by Holland Creek Metropolitan District (“HCMD”) through a $6.4 million letter of credit issued under the Vail Holdings Credit Agreement. 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 the Red Sky Ranch Metropolitan District (“RSRMD”) until RSRMD’s revenue streams from property taxes are sufficient to meet debt service requirements under HCMD’s bonds. The Company has recorded a liability of $2.0 million, $2.1 million and $2.0 million primarily within other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets, as of April 30, 2020,2021, July 31, 20192020 and April 30, 2019,2020, respectively, with respect tofor the estimated present value of future RSRMD capital improvement fees. The Company estimates it will make capital improvement fee payments under this arrangement through the fiscal year ending July 31, 2031.2031.
Guarantees/Indemnifications
As of April 30, 2020,2021, the Company had various letters of credit outstanding totaling $75.4$75.8 million, consisting of $53.4 million to support the Employee Housing Bonds and $22.0$22.4 million primarily for workers’ compensation, a wind energy purchase agreement and insurance-related deductibles. The Company also had surety bonds of $9.6$14.3 million as of April 30, 2020,2021, primarily to provide collateral for its U.S. workers compensation self-insurance programs.
In addition to the guarantees noted above, the Company has entered into contracts in the normal course of business that include certain indemnifications 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 related to licensees in connection with third-parties’ use of the Company’s trademarks and logos, liabilities associated with the infringement of other parties’ technology and software products, liabilities associated with the use of easements, liabilities associated with employment of contract workers and the Company’s use of trustees, and liabilities associated with the Company’s use of public lands and environmental matters. 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 have agreed to 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 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 Condensed Financial Statements, either because the Company has recorded on its Consolidated Condensed Balance Sheets the underlying liability associated with the guarantee, the guarantee is with respect to the Company’s own performance and is therefore not subject to the measurement requirements as prescribed by GAAP, or because the Company has calculated the estimated fair value of the indemnification or guarantee to be immaterial based on 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 potential obligations due to the unique set of facts and circumstances 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 for their use of the Company’s trademarks and logos. The Company does not record any liabilities with respect to these indemnifications.
Additionally, the Company has entered into strategic long-term season pass alliance agreements with third-party mountain resorts in which the Company has committed to pay minimum revenue guarantees over the remaining terms of these agreements.
Self-Insurance
The Company is self-insured for claims under its U.S. health benefit plans and for the majority of workers’ compensation claims in the U.S. Workers compensation claims in the U.S. are subject to stop loss policies. 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 U.S. health benefit plans is determined based on analysis of actual claims. The amounts related to these claims are included as a component of accrued benefits in accounts payable and accrued liabilities (see Note 8,7, Supplementary Balance Sheet Information).
Legal
The Company is a party to various lawsuits arising in the ordinary course of business. Management believes the Company has adequate insurance coverage and/or has accrued for all loss contingencies for asserted and unasserted matters deemed to be probable and estimable losses. As of April 30, 2020,2021, July 31, 20192020 and April 30, 2019,2020, the accruals for the above loss contingencies were not material individually or in the aggregate.
11.10. Segment Information
The Company has three reportable segments: Mountain, Lodging and Real Estate. The Company refers to “Resort” as the combination of the Mountain and Lodging segments. The Mountain segment includes the operations of the Company’s mountain resorts/ski areas and related ancillary activities. The Lodging segment includes the operations of the Company’s owned hotels, RockResorts, NPS concessionaire properties, condominium management, Colorado resort ground transportation operations and mountain resort golf operations. The Real Estate segment owns, develops and sells real estate in and around the Company’s resort communities. The Company’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, and for the Real Estate segment, plus gain or loss on sale of real property). The Company reports segment results in a manner consistent with management’s internal reporting of operating results to the chief operating decision maker (Chief Executive Officer) for purposes of evaluating segment performance.
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, other indicators of financial performance or liquidity presented in the Consolidated Condensed Financial Statements, such as net income (loss) or net change in cash and cash equivalents.
The Company utilizes Reported EBITDA in evaluating the performance of the Company and in allocating resources to its segments. Mountain Reported EBITDA consists of Mountain net revenue less Mountain operating expense plus or minus Mountain equity investment income or loss. Lodging Reported EBITDA consists of Lodging net revenue less Lodging operating expense. Real Estate Reported EBITDA consists of Real Estate net revenue less Real Estate operating expense plus gain or loss on sale of real property. All segment expenses include an allocation of corporate administrative expense. Assets are not used to evaluate performance, except as shown in the table below.
The following table presents financial information by reportable segment, which is used by management in evaluating performance and allocating resources (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Nine Months Ended April 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Net revenue: | | | | | | | |
Lift | $ | 577,680 | | | $ | 374,818 | | | $ | 1,041,546 | | | $ | 900,995 | |
Ski school | 80,390 | | | 76,563 | | | 138,824 | | | 187,840 | |
Dining | 45,294 | | | 61,632 | | | 80,172 | | | 158,980 | |
Retail/rental | 91,286 | | | 78,133 | | | 203,718 | | | 259,761 | |
Other | 34,533 | | | 44,158 | | | 101,092 | | | 154,105 | |
Total Mountain net revenue | 829,183 | | | 635,304 | | | 1,565,352 | | | 1,661,681 | |
Lodging | 59,095 | | | 58,385 | | | 138,787 | | | 220,030 | |
Total Resort net revenue | 888,278 | | | 693,689 | | | 1,704,139 | | | 1,881,711 | |
Real Estate | 800 | | | 398 | | | 1,369 | | | 4,784 | |
Total net revenue | $ | 889,078 | | | $ | 694,087 | | | $ | 1,705,508 | | | $ | 1,886,495 | |
Segment operating expense: | | | | | | | |
Mountain | $ | 372,205 | | | $ | 333,785 | | | $ | 917,355 | | | $ | 1,068,479 | |
Lodging | 54,862 | | | 55,460 | | | 149,468 | | | 208,545 | |
Total Resort operating expense | 427,067 | | | 389,245 | | | 1,066,823 | | | 1,277,024 | |
Real Estate | 2,023 | | | 1,128 | | | 5,088 | | | 7,926 | |
Total segment operating expense | $ | 429,090 | | | $ | 390,373 | | | $ | 1,071,911 | | | $ | 1,284,950 | |
| | | | | | | |
Gain on sale of real property | $ | 189 | | | $ | 0 | | | $ | 189 | | | $ | 207 | |
Mountain equity investment income (loss), net | $ | 1,011 | | | $ | (90) | | | $ | 6,177 | | | $ | 1,270 | |
Reported EBITDA: | | | | | | | |
Mountain | $ | 457,989 | | | $ | 301,429 | | | $ | 654,174 | | | $ | 594,472 | |
Lodging | 4,233 | | | 2,925 | | | (10,681) | | | 11,485 | |
Resort | 462,222 | | | 304,354 | | | 643,493 | | | 605,957 | |
Real Estate | (1,034) | | | (730) | | | (3,530) | | | (2,935) | |
Total Reported EBITDA | $ | 461,188 | | | $ | 303,624 | | | $ | 639,963 | | | $ | 603,022 | |
| | | | | | | |
Real estate held for sale and investment | $ | 96,259 | | | $ | 96,565 | | | $ | 96,259 | | | $ | 96,565 | |
| | | | | | | |
Reconciliation from net income attributable to Vail Resorts, Inc. to Total Reported EBITDA: | | | | | | | |
Net income attributable to Vail Resorts, Inc. | $ | 274,629 | | | $ | 152,546 | | | $ | 268,661 | | | $ | 252,441 | |
Net income attributable to noncontrolling interests | 2,661 | | | 7,285 | | | 738 | | | 14,579 | |
Net income | 277,290 | | | 159,831 | | | 269,399 | | | 267,020 | |
Provision for income taxes | 76,897 | | | 26,440 | | | 66,640 | | | 47,190 | |
Income before provision for income taxes | 354,187 | | | 186,271 | | | 336,039 | | | 314,210 | |
Depreciation and amortization | 64,071 | | | 64,730 | | | 189,362 | | | 186,387 | |
Asset impairments | 0 | | | 28,372 | | | 0 | | | 28,372 | |
Change in estimated fair value of contingent consideration | 10,400 | | | (8,000) | | | 12,202 | | | (5,264) | |
(Gain) loss on disposal of fixed assets and other, net | (1,999) | | | 380 | | | 762 | | | (1,178) | |
Investment income and other, net | (347) | | | (361) | | | (857) | | | (999) | |
Foreign currency (gain) loss on intercompany loans | (4,157) | | | 7,753 | | | (9,832) | | | 8,191 | |
Interest expense, net | 39,033 | | | 24,479 | | | 112,287 | | | 73,303 | |
Total Reported EBITDA | $ | 461,188 | | | $ | 303,624 | | | $ | 639,963 | | | $ | 603,022 | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Nine Months Ended April 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Net revenue: | | | | | | | |
Lift | $ | 374,818 |
| | $ | 526,881 |
| | $ | 900,995 |
| | $ | 999,124 |
|
Ski school | 76,563 |
| | 110,755 |
| | 187,840 |
| | 207,271 |
|
Dining | 61,632 |
| | 78,928 |
| | 158,980 |
| | 162,629 |
|
Retail/rental | 78,133 |
| | 114,082 |
| | 259,761 |
| | 285,860 |
|
Other | 44,158 |
| | 47,252 |
| | 154,105 |
| | 144,093 |
|
Total Mountain net revenue | 635,304 |
| | 877,898 |
| | 1,661,681 |
| | 1,798,977 |
|
Lodging | 58,385 |
| | 79,848 |
| | 220,030 |
| | 227,997 |
|
Total Resort net revenue | 693,689 |
| | 957,746 |
| | 1,881,711 |
| | 2,026,974 |
|
Real Estate | 398 |
| | 241 |
| | 4,784 |
| | 595 |
|
Total net revenue | $ | 694,087 |
| | $ | 957,987 |
| | $ | 1,886,495 |
| | $ | 2,027,569 |
|
Segment operating expense: | | | | | | | |
Mountain | $ | 333,785 |
| | $ | 410,254 |
| | $ | 1,068,479 |
| | $ | 1,056,625 |
|
Lodging | 55,460 |
| | 67,221 |
| | 208,545 |
| | 205,717 |
|
Total Resort operating expense | 389,245 |
| | 477,475 |
| | 1,277,024 |
| | 1,262,342 |
|
Real Estate | 1,128 |
| | 1,382 |
| | 7,926 |
| | 4,141 |
|
Total segment operating expense | $ | 390,373 |
| | $ | 478,857 |
| | $ | 1,284,950 |
| | $ | 1,266,483 |
|
Gain on sale of real property | $ | — |
| | $ | 268 |
| | $ | 207 |
| | $ | 268 |
|
Mountain equity investment (loss) income, net | $ | (90 | ) | | $ | 445 |
| | $ | 1,270 |
| | $ | 1,555 |
|
Reported EBITDA: | | | | | | | |
Mountain | $ | 301,429 |
| | $ | 468,089 |
| | $ | 594,472 |
| | $ | 743,907 |
|
Lodging | 2,925 |
| | 12,627 |
| | 11,485 |
| | 22,280 |
|
Resort | 304,354 |
|
| 480,716 |
|
| 605,957 |
| | 766,187 |
|
Real Estate | (730 | ) | | (873 | ) | | (2,935 | ) | | (3,278 | ) |
Total Reported EBITDA | $ | 303,624 |
| | $ | 479,843 |
| | $ | 603,022 |
| | $ | 762,909 |
|
Real estate held for sale and investment | $ | 96,565 |
| | $ | 101,251 |
| | $ | 96,565 |
| | $ | 101,251 |
|
Reconciliation from net income attributable to Vail Resorts, Inc. to Total Reported EBITDA: | | | | | | | |
Net income attributable to Vail Resorts, Inc. | $ | 152,546 |
| | $ | 292,134 |
| | $ | 252,441 |
| | $ | 390,688 |
|
Net income attributable to noncontrolling interests | 7,285 |
| | 16,396 |
| | 14,579 |
| | 25,106 |
|
Net income | 159,831 |
| | 308,530 |
| | 267,020 |
| | 415,794 |
|
Provision for income taxes | 26,440 |
| | 93,346 |
| | 47,190 |
| | 120,914 |
|
Income before provision for income taxes | 186,271 |
| | 401,876 |
| | 314,210 |
| | 536,708 |
|
Depreciation and amortization | 64,730 |
| | 55,260 |
| | 186,387 |
| | 161,541 |
|
Asset impairments | 28,372 |
| | — |
| | 28,372 |
| | — |
|
Change in estimated fair value of contingent consideration | (8,000 | ) | | 1,567 |
| | (5,264 | ) | | 3,467 |
|
Loss (gain) on disposal of fixed assets and other, net | 380 |
| | (27 | ) | | (1,178 | ) | | (505 | ) |
Investment income and other, net | (361 | ) | | (1,727 | ) | | (999 | ) | | (2,697 | ) |
Foreign currency loss on intercompany loans | 7,753 |
| | 3,319 |
| | 8,191 |
| | 5,180 |
|
Interest expense, net | 24,479 |
| | 19,575 |
| | 73,303 |
| | 59,215 |
|
Total Reported EBITDA | $ | 303,624 |
| | $ | 479,843 |
| | $ | 603,022 |
| | $ | 762,909 |
|
12.11. Share Repurchase Program
On March 9, 2006, the Company’s Board of Directors approved a share repurchase program, authorizing the Company to repurchase up to 3,000,000 Vail Shares. On July 16, 2008, the Company’s Board of Directors increased the authorization by an additional 3,000,000 Vail Shares, and on December 4, 2015, the Company’s Board of Directors increased the authorization by an additional 1,500,000 Vail Shares for a total authorization to repurchase up to 7,500,000 Vail Shares. The Company did not repurchase any Vail Shares during the three and nine months ended April 30, 2021. The Company repurchased 160,800 and 256,418 Vail Shares, respectively (at a total cost of approximately $25.0 million and $46.4 million, respectively), during the three and nine months ended April 30, 2020. The Company repurchased 0 and 353,007 Vail Shares (at a total cost of approximately $85.0 million), respectively, during the three and nine months ended April 30, 2019. Since inception of its share repurchase program through April 30, 2020,2021, the Company has repurchased 6,161,141 Vail Shares for approximately $404.4 million. As of April 30, 2020,2021, 1,338,859 Vail Shares remained available to repurchase under the existing share repurchase program, which has no expiration date; however, the amount repurchased during the Financial Covenants Temporary Waiver Period will be subject to the restrictions described in Note 6, Long-Term Debt.date. Vail Shares purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of Vail Shares under the Company’s employee share award plan.
13. Subsequent Events
On May 4, 2020, the Company completed its offering of $600 million aggregate principal amount of 6.25% senior notes due 2025 at par (the “Notes”), and a portion of the net proceeds were utilized to pay down the outstanding balance of the revolver component of its Vail Holdings Credit Agreement in its entirety (which will continue to be available to the Company to borrow including throughout the Financial Covenants Temporary Waiver Period), with the remaining net proceeds intended to be used for general corporate purposes and to pay the fees and expenses associated with the offering. The Notes are unsecured senior obligations of the Company and are guaranteed by certain of the Company’s domestic subsidiaries.
The Company will pay interest on the Notes on May 15 and November 15 of each year commencing on November 15, 2020. The Notes will mature on May 15, 2025. The Notes are redeemable, in whole or in part, at any time on or after May 15, 2022 at the redemption prices specified in an Indenture dated as of May 4, 2020 (the “Indenture”) plus accrued and unpaid interest. Prior to May 15, 2022, the Company may redeem some or all of the Notes at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, plus a “make-whole” premium as specified in the Indenture. In addition, prior to May 15, 2022, the Company may redeem up to 35% of the aggregate principal amount of the Notes with an amount not to exceed the net cash proceeds from certain equity offerings at the redemption price of 106.25% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Notes are senior unsecured obligations of the Company and rank equally in right of payment with existing and future senior indebtedness of the Company and the guarantors (as defined in the Indenture).
The Indenture requires that, upon the occurrence of a Change of Control (as defined in the Indenture), the Company shall offer to purchase all of the outstanding Notes at a purchase price in cash equal to 101% of the outstanding principal amount of the Notes, plus accrued and unpaid interest. If the Company or certain of its subsidiaries dispose of assets, under certain circumstances, the Company will be required to either invest the net cash proceeds from such assets sales in its business within a specified period of time, repay certain senior secured debt or debt of its non-guarantor subsidiaries, or make an offer to purchase a principal amount of the Notes equal to the excess net cash proceeds at a purchase price of 100% of their principal amount, plus accrued and unpaid interest.
The Indenture contains covenants that, among other things, restrict the ability of the Company and the guarantors to incur liens on assets; merge or consolidate with another company or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company’s assets or engage in Sale and Leaseback Transactions (as defined in the Indenture). The Indenture does not contain any financial maintenance covenants. Certain of the covenants will not apply to the Notes so long as the Notes have investment grade ratings from two specified rating agencies and no event of default has occurred and is continuing under the Indenture. The Indenture includes customary events of default, including failure to make payment, failure to comply with the obligations set forth in the Indenture, certain defaults on certain other indebtedness, certain events of bankruptcy, insolvency or reorganization, and invalidity of the guarantees of the Notes issued pursuant to the Indenture.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Vail Resorts, Inc., together with its subsidiaries, is referred to throughout this Quarterly Report on Form 10-Q for the period ended April 30, 20202021 (“Form 10-Q”) as “we,” “us,” “our” or the “Company.”
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended July 31, 20192020 (“Form 10-K”) and the
Consolidated Condensed Financial Statements as of April 30, 20202021 and 20192020 and for the three and nine months then ended, included in Part I, Item 1 of this Form 10-Q, which provide additional information regarding our financial position, results of operations and cash flows. To the extent that the following MD&A contains statements which are not of a historical nature, such statements are forward-looking statements, which involve risks and uncertainties. See “Forward-Looking Statements” below. These risks include, but are not limited to, those discussed in this Form 10-Q and in our other filings with the Securities and Exchange Commission (“SEC”), including the risks described in Item 1A “Risk Factors” of Part I of our Form 10-K, which was filed on September 26, 2019.24, 2020, and Item 1A “Risk Factors” of Part II of this Form 10-Q.
The MD&A includes discussion of financial performance within each of our three segments. We have chosen to specifically include segment Reported EBITDA (defined as segment net revenue less segment operating expense, plus or minus segment equity investment income or loss and for the Real Estate segment, plus gain or loss on sale of real property) and Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents), in the following discussion because we consider these measurements to be significant indications of our financial performance and available capital resources. Resort Reported EBITDA, Total Reported EBITDA and Net Debt are not measures of financial performance or liquidity under accounting principles generally accepted in the United States (“GAAP”). We utilize segment Reported EBITDA in evaluating our performance and in allocating resources to our segments. We also believe that Net Debt is an important measurement as it is an indicator of our ability to obtain additional capital resources for our future cash needs. Refer to the end of the Results of Operations section for a reconciliation of net income (loss) attributable to Vail Resorts, Inc. to Total Reported EBITDA and long-term debt, net to Net Debt.
Items excluded from Reported EBITDA and Net Debt are significant components in understanding and assessing financial performance or liquidity. Reported EBITDA and Net Debt should not be considered in isolation or as an alternative to, or substitute for, net income (loss), net change in cash and cash equivalents or other financial statement data presented in the Consolidated Condensed Financial Statements as indicators of financial performance or liquidity. Because Resort Reported EBITDA, Total Reported EBITDA and Net Debt are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations, Resort Reported EBITDA, Total Reported EBITDA and Net Debt, as presented herein, may not be comparable to other similarly titled measures of other companies. In addition, our segment Reported EBITDA (i.e. Mountain, Lodging and Real Estate), the measure of segment profit or loss required to be disclosed in accordance with GAAP, may not be comparable to other similarly titled measures of other companies.
Overview
Our operations are grouped into three integrated and interdependent segments: Mountain, Lodging and Real Estate. We refer to “Resort” as the combination of the Mountain and Lodging segments.
Mountain Segment
In the Mountain segment, the Company operates the following thirty-seven destination mountain resorts and regional ski areas:
*Denotes a destination mountain resort, which generally receives a meaningful portion of skier visits from long-distance travelers, as opposed to our regional ski areas, which tend to generate skier visits predominantly from their respective local markets.
Additionally, we operate ancillary services, primarily including ski school, dining and retail/rental operations, and for our Australian ski areas, including lodging and transportation operations. Mountain segment revenue is seasonal, with the majority of revenue earned from our North American ski operations occurring in our second and third fiscal quarters and the majority of revenue earned from our Australian ski operations occurring in our first and fourth fiscal quarters. Our North American destination mountain resorts and regional ski areas (collectively, “Resorts”) are typically open for business from mid-November through mid-April, which is the peak operating season for the Mountain segment, and our Australian ski areas are typically open for business from June to early October.early October. Consequently, our first fiscal quarter is a seasonally low period as our North American ski operations are generally not open for business until our second fiscal quarter, while the activity of our Australian ski areasareas’ peak season and our North American summer operating results are not sufficient to offset the losses incurred during the seasonally low periods at our North American Resorts. Revenue of the Mountain segment during the first and fourth fiscal quarters is primarily generated from summer and group related visitation at our North American destination mountain resorts, retail/rental operations and peak season Australian ski operations. Our largest source of Mountain segment revenue is the sale of lift tickets (including pass products), which represented approximately 59%70% and 60%59% of Mountain net revenue for the three months ended April 30, 20202021 and 2019,2020, respectively, and approximately 54%,67% and 56%54% of Mountain net revenue for the nine months ended April 30, 2021 and 2020, and 2019, respectively.
On March 14, 2020, we announced a temporary closure The increase in the portion of our Resorts and retail/rental operations as a resultMountain net revenue that is comprised of lift revenue was due to the disproportionate impacts of COVID-19 pandemic and as a precautionary measure for the safetyon our ancillary lines of our guests and employees beginning on March 15, 2020. Subsequently on March 17, 2020, we announced the early closure of the 2019/2020 North American ski season for our Resorts, lodging properties and retail stores. These actions had a significant adverse impact to our results of operations for the three and nine months ended April 30, 2020. Additionally, on April 27, 2020, we announced that we would offer credits to customers who had purchased 2019/2020 North American pass products and who will purchase 2020/2021 North American pass products by September 7, 2020 (the “Credit Offer”). The Credit Offer discounts range from a minimum of 20% to a maximum of 80% for season pass holders, depending on the number of days the pass holder used their pass product during the 2019/2020 season and a credit, with no minimum, but up to 80% for multi-day pass products, such as the Epic Day Pass, based on total unused days. As a result of therevenue.
Credit Offer to 2019/2020 pass product holders, we delayed the recognition of approximately $120.9 million of deferred season pass revenue, as well as approximately $2.9 million of related deferred costs, that would have been recognized in fiscal 2020 and are now expected to be recognized primarily in the second and third quarters of fiscal 2021.
Lift revenue is driven by volume and pricing. Pricing is impacted by both absolute pricing, as well as the mix of resort visitation of guests, which impacts the price points at which various products are purchased. The demographic mix of guests that visit our North American destination mountain resorts is divided into two primary categories: (i) out-of-state and international (“Destination”) guests and (ii) in-state and local (“Local”) guests. For the 2019/20202020/2021 North American ski season, Destination guests comprised approximately 58%52% of our North American destination mountain resort skier visits (excluding complimentary access), while Local guests comprised approximately 42%48% of our North American destination mountain resort skier visits (excluding complimentary access), which compares to 57%58% and 43%42%, respectively, for the 2018/20192019/2020 North American ski season. Skier visitation at our regional ski areas is largely comprised of Local guests. Destination guests generally purchase our higher-priced lift tickets (including pass products) and utilize more ancillary services such as ski school, dining and retail/rental, as well as lodging at or around our mountain resorts. The impacts of COVID-19, including travel restrictions, had an adverse impact on Destination visitation, particularly for international guests, as demand for long-distance travel continues to be lower than normal. Additionally, Destination guest visitation is less likely to be impacted by changes in the weather during the current season, but may be more impacted by willingness to travel subsequent to the COVID-19 pandemic, adverse economic conditions, global outbreaks of infectious diseases such as COVID-19, the global geopolitical climate or weather conditions in the immediately preceding ski season. Local guests tend to be more value-oriented and weather sensitive.
In the prior year, we announced the early closure of the 2019/2020 North American ski season for our Resorts, lodging properties and retail stores beginning on March 15, 2020. These actions had a significant adverse impact on our results of operations for the three and nine months ended April 30, 2020. Additionally, on April 27, 2020, we announced that we would offer credits to customers who had purchased 2019/2020 North American pass products and who purchased 2020/2021 North American pass products by September 17, 2020 (the “Credit Offer”). The Credit Offer discounts ranged from a minimum of 20% to a maximum of 80% for season pass holders, depending on the number of days the pass holder used their pass product during the 2019/2020 season and a credit, with no minimum, but up to 80% for multi-day pass products, such as the Epic Day Pass, based on total unused days. As a result of the Credit Offer to 2019/2020 pass product holders, we delayed the recognition of approximately $120.9 million of deferred season pass revenue, as well as approximately $2.9 million of related deferred costs, that would have been recognized in the year ended July 31, 2020 (“Fiscal 2020”) and which was instead primarily recognized in the second and third quarters of the year ending July 31, 2021 (“Fiscal 2021”).
We offer a variety of pass products for all of our Resorts, marketed towardstoward both Destination and Local guests. Our pass product offerings range from providing access to one or a combination of our Resorts for a certain number of days to our Epic Pass, which allows pass holders unlimited and unrestricted access to all of our Resorts. The Epic Day Pass which we began offering for the 2019/2020 North American ski season, is a customizable one to seven day pass product valid at each of our resorts, purchased in advance of the season, for those skierskiers and riders who expect to ski a certain number of days during the season.season, and which is available in two tiers of resort access offerings. For the upcoming 2020/20212021/2022 North American ski season, we introduced Epic Mountain Rewards; a program which gives pass product holders a discount of 20 percent off on-mountain food and beverage, lodging, group ski and ride school lessons, equipment rentals and more at the Company's North American owned and operated Resorts. Epic Mountain Rewards is available for everyone who purchases an Epic Pass, Epic Local Pass, Epic Day Pass, Epic Military Pass and mostreduced prices of our otherentire portfolio of pass products regardless of whether guests plan to ski one day or every day of the season. Additionally, we introduced Epic Coverage for the 2020/2021 North American ski season, which is free for all pass holders, completely replaces the need for pass insurance, and provides expanded coverage over our historical pass insurance program. Epic Coverage provides refunds in the event of certain resort closures (e.g. for COVID-19), giving pass product holders a refund for any portion of the season that is lost due to qualifying circumstances. Additionally, Epic Coverage provides a refund for personal circumstances that were historically covered by our pass insurance program, such as eligible injuries, job losses and many other personal events.20%. Our pass program provides a compelling value proposition to our guests, which in turn assists us in developing a loyal base of customers who commit to ski at our Resorts generally in advance of the ski season and typically ski more days each season at our Resorts than those guests who do not buy pass products. Additionally, we have entered into strategic long-term season pass alliance agreements with third-party mountain resorts including Telluride Ski Resort in Colorado, Sun Valley Resort in Idaho, Snowbasin Resort in Utah, Hakuba Valley and Rusutsu Resort in Japan, Resorts of the Canadian Rockies in Canada, Les 3 Vallées in France, 4 Vallées in Switzerland, Skirama Dolomiti in Italy and Ski Arlberg in Austria, which further increases the value proposition of our pass products. As such, our pass program drives strong customer loyalty; mitigates exposure to more weather sensitive guests; generates additional ancillary spending; and provides cash flow in advance of winter season operations. In addition, our pass program attracts new guests to our Resorts. All of our pass products, including the Epic Pass and Epic Day Pass, are predominately sold prior to the start of the ski season. Pass product revenue, although primarily collected prior to the ski season, is recognized in the Consolidated Condensed Statements of Operations throughout the ski season primarily based on historical visitation.visitation (excluding visitation data for Fiscal 2020 as the data is non-comparable as a result of the early resort closures associated with COVID-19 in March 2020).
Lift revenue consists of pass product lift revenue (“pass revenue”) and non-pass lift product lift revenue (“non-pass revenue”). For the 2019/20202020/2021 North American ski season (including the impact of the deferral of pass product revenue as a result of the Credit Offer) and 2018/20192019/2020 North American ski season, respectively, approximately 52%61% and 47%52%, respectively, of our total lift revenue recognized was comprised of pass revenue. The increase in the portion of our total lift revenue that was comprised of pass revenue was primarily due to COVID-19 related limitations on our operations, which also resulted in us restricting the sale of non-pass lift products until December 8, 2020.
The cost structure of our mountain resort operations has a significant fixed component with variable expenses including, but not limited to, land use permit or lease fees, credit card fees, retail/rental cost of sales and labor, ski school labor and dining operations; as such, profit margins can fluctuate greatly based on the level of revenues.
The ongoing impacts of the COVID-19 pandemic resulted in reduced visitation and decreased spending for the 2020/2021 North American ski season compared to the prior year through March 14, 2021, which aligns with the Resort Closure date in the prior year, primarily as a result of declines in visitation from non-pass, lift ticket purchases as well as limitations and restrictions on our operations. These declines were primarily driven by reduced demand for Destination visitation at our western resorts and COVID-19 related capacity limitations, which were further impacted by snowfall levels that were well below average at our Colorado, Utah and Tahoe resorts throughout the holiday season. Visitation and spending was also particularly impacted in regions where heightened COVID-19 restrictions exist, including Whistler Blackcomb, Tahoe and Vermont. Whistler Blackcomb’s results were disproportionately impacted as compared to our broader Mountain segment as a result of the Canadian travel restrictions and border closure, which continues to be closed, and were further impacted by the early closure of our Whistler Blackcomb operations on March 30, 2021 following a provincial health order issued by the government of British Columbia due to an increase in COVID-19 cases in the region. In addition, our Australian ski areas were closed or limited during the three months ended October 31, 2020 as a result of the reemergence of COVID-19 in the region. These actions, trends, and the COVID-19 pandemic in general, had a significant adverse impact on our results of operations for the three and nine months ended April 30, 2021, and we expect them to continue to have an impact for the remainder of Fiscal 2021 and potentially into our fiscal year ending July 31, 2022 (“Fiscal 2022”).
Lodging Segment
Operations within the Lodging segment include: (i) ownership/management of a group of luxury hotels through the RockResorts brand proximate to our Colorado and Utah mountain resorts; (ii) ownership/management of non-RockResorts branded hotels and condominiums proximate to our North American Resorts; (iii) National Park Service (“NPS”) concessionaire properties, including
the Grand Teton Lodge Company (“GTLC”); (iv) a Colorado resort ground transportation company; and (v) mountain resort golf courses.
The performance of our lodging properties (including managed condominium unitsrooms) proximate to our mountain resorts, and our Colorado resort ground transportation company) proximate to our mountain resorts iscompany, are closely aligned with the performance of the Mountain segment and generally experiencesexperience similar seasonal trends, particularly with respect to visitation by Destination guests. Revenues from such properties represented approximately 94% and 93% of Lodging segment net revenue (excluding Lodging segment revenue associated with the reimbursement of payroll costs) for both the three months ended April 30, 2021 and 2020, respectively, and 2019,79% and 78% and 79% of Lodging segment revenue (excluding Lodging segment revenue associated with reimbursement of payroll costs) for the nine months ended April 30, 20202021 and 2019,2020, respectively. Management primarily focuses on Lodging net revenue excluding payroll cost reimbursements and Lodging operating expense excluding reimbursed payroll costs (which are not measures of financial performance under GAAP) as the reimbursements are made based upon the costs incurred with no added margin; as such, the revenue and corresponding expense have no effect on our Lodging Reported EBITDA, which we use to evaluate Lodging segment performance. Revenue of the Lodging segment during our first and fourth fiscal quarters is usually generated primarily by the operations of our NPS concessionaire properties (as their peak operating season generally occurs fromduring the months of June to the end of September)October); mountain resort golf operations and seasonally lower volume from our other owned and managed properties and businesses. As discussed above, our North American lodging properties were closed early in March for the season as a result
The ongoing impacts of the COVID-19 pandemic have resulted in reduced occupancy at our lodging properties during the 2020/2021 North American ski season as compared to the prior year. In addition, we made the decision to close our GTLC facilities including Jackson Lake Lodge and its effect may haveJenny Lake Lodge during the summer of 2020, as well as to implement restrictions on guided activities and in-restaurant dining and to temporarily close many facilities, which negatively impacted results for the first quarter of Fiscal 2021. These actions, trends, and the COVID-19 pandemic in general, had a significant adverse impact on our North American summer operations.results of operations for the three and nine months ended April 30, 2021, and we expect them to continue to have a significant adverse impact for the remainder of Fiscal 2021 and potentially into Fiscal 2022.
Real Estate Segment
The principal activities of our Real Estate segment include the sale of land parcels to third-party developers and planning for future real estate development projects, including zoning and acquisition of applicable permits. We continue undertaking preliminary planning and design work on future projects and are pursuing opportunities with third-party developers rather than undertaking our own significant vertical development projects. Additionally, real estate development projects by third-party developers most often result in the creation of certain resort assets that provide additional benefit to the Mountain segment. We believe that, due to our low carrying cost of real estate land investments, we are well situated to promote future projects by third-party developers while limiting our financial risk. Our revenue from the Real Estate segment and associated expense can fluctuate significantly based upon the timing of closings and the type of real estate being sold, causing volatility in the Real Estate segment’s operating results from period to period.
Recent Trends, Risks and Uncertainties
Together with those risk factors we have identified in our Form 10-K and in this Form 10-Q, we have identified the following important factors (as well as risks and uncertainties associated with such factors) that could impact our future financial performance or condition:
Given the escalating concerns surrounding the spread•The timing and amount of COVID-19snowfall can have an impact on Mountain and the potential impact that continuing to operate our resorts would have on our resort communities, we suspended the operations at all of our North American Resorts and retail stores beginning on March 15, 2020. As a result of these closures and the uncertainty regarding when our resorts will be able to reopen safely, we expect that our results in the fourth quarter of fiscal 2020 will be negatively impacted, although we are not able to fully assess that impact at this time. Our primaryLodging revenue, generating businesses in the fourth fiscal quarter are our three ski areas in Australia, our National Park Service (“NPS”) concessionaire properties in Wyoming and our summer mountain and lodging operations at our North American Resorts. In April 2020, with guidance from the NPS, we announced that Jackson Lake Lodge and Jenny Lake Lodge are unlikely to open this summer due to new operating restrictions in Grand Teton National Park. We are planning to be operational for the North American summer and Australian ski season in late June or early July, which could vary by resort, and opening dates for each business are subject to new information and public health guidanceparticularly with regard to COVID-19. Given these operational uncertainties,skier visits and the duration and frequency of guest visitation. To help mitigate this impact, we cannot predictsell a variety of pass products prior to the ultimate impact thatbeginning of the resort closures and other business disruptionsski season, which results in a more stabilized stream of lift revenue. Additionally, our pass products provide a compelling value proposition to our guests, which in turn create a guest commitment predominately prior to the start of the ski season. In March 2021, we began our early season pass sales program for the 2021/2022 North American ski season, which included a 20% reduction in price for all pass products. Pass product sales through June 1, 2021 for the upcoming 2021/2022 North American ski season increased very significantly as compared to sales through June 2, 2020 for the 2020/2021 North American ski season, due to the lack of any spring sales deadlines in 2020 as a result of COVID-19, making the COVID-19 pandemicyear over year comparison to the spring 2020 results not relevant for performance trends. Compared to sales for the 2019/2020 North American ski season through June 4, 2019, pass product sales for the 2021/2022 season through June 1, 2021 increased approximately 50% in units and 33% in sales dollars. Pass product sales include Peak Resorts pass sales in both periods and are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.83 between the Canadian dollar and U.S. dollar in both periods for Whistler Blackcomb. However, we cannot predict if this favorable trend will continue through the fall 2021 North American pass sales campaign or the overall impact that pass sales will have on our resultslift revenue for the fourth quarter of fiscal 2020.2021/2022 North American ski season.
•The global outbreak of COVID-19 has led to global travel restrictions and other adverse global economic impacts including reduced consumer confidence, an increase in unemployment rates and an overall declinevolatility in the global and local economies. Given the escalating concerns surrounding the spread of COVID-19 and the potential impact that continuing to operate our resorts would have on our resort communities, we suspended the operations at all of our North American Resorts and retail stores beginning on March 15, 2020. Although we are uncertain as to the ultimate severity and duration of the COVID-19 pandemic and the impact it may have on our business, we have seen a significant negative change in our performance and expect our future performance will also continue to be negatively impacted. In addition, the North American economy has been and may continue to be impacted by economic challenges in North America or declining or slowing growth in economies outside of North America, accompanied by devaluation of currencies, rising inflation, trade tariffs and lower commodity prices. We cannot predict the ultimate impact thatof the global economic uncertainty as a result of the COVID-19 pandemic on overall
travel and leisure spending or more specifically, on our guest visitation, guest spending or other related trends will have onfor the upcoming 2020/remainder of Fiscal 2021 North American ski season.and potentially into Fiscal 2022.
The impact of COVID-19 has had a significant negative impact on pass product sales through April 30, 2020 in comparison to the prior year comparable pass product sales. •As previously discussed, as a result of the early closure of the 2019/2020 North American ski season, we are providingannounced that we would make the Credit Offer to customers who had purchased 2019/2020 North American pass products towards the purchase of a 2020/2021 North American pass product if such purchase was made by September 17, 2020. The Credit Offer discounts ranged from a minimum of 20% to a maximum of 80% for season pass holders, depending on the number of days the pass holder used their pass product during the 2019/2020 season and a credit, with no minimum, but up to 80% for multi-day pass products, such as the Epic Day Pass, based on total unused days. As a result of the Credit Offer to 2019/2020 pass product holders, to apply towardwe delayed the purchaserecognition of a 2020/approximately $120.9 million of deferred season pass revenue, as well as approximately $2.9 million of related deferred costs, that would have been recognized in Fiscal 2020. The Credit Offer expired on September 17, 2020, and we recorded $15.4 million as lift revenue during the three months ended October 31, 2020, which was the amount of Credit Offer discounts that were not redeemed. The remaining deferred revenue associated with the Credit offer was recognized as lift revenue primarily during the second and third quarters of Fiscal 2021, pass product. Additionally, looking ahead toas the performance obligations were satisfied.
•To address the uncertainty surrounding the 2020/2021 North American ski season, we are optimistic that we will be operational for the ski season, but we also understand that many pass holders are nervous about the future given the current uncertainty. As a result, we introduced Epic Coverage, forwhich is included with the 2020/2021purchase of all North American ski season, which is freepass products for all pass holders and completely replaces the need to purchase pass insurance.no additional charge. Epic Coverage provides refunds in the event of certain resort closures and certain travel restrictions (e.g. for COVID-19), giving pass product holders a refund for any portion of the season that is lost due to qualifying circumstances. Additionally, Epic Coverage provides a refund for qualifying personal circumstances that were historically covered by our pass insurance program for eligible injuries, job losses and many other personal events. In addition to these changes, in order to give ourThe estimated amount of refunds reduces the amount of pass product holders the time they need to make decisions regarding next season, we extended the deadline for pass holders to receive spring benefits (including Buddy Tickets) until September 7, 2020, and we extended the period for pass holders to lock in their purchase with only $49 down. We cannot predict the overall impact that the Credit Offer, Epic Coverage or extended spring benefits and $49 down deadline will have on our North American pass product sales or results of operationsrevenue recognized.
Additionally, for the 2020/2021 North American ski season.
On March 27, 2020, in responseseason, we introduced Epic Mountain Rewards, a program which provides pass product holders a discount of 20% off on-mountain food and beverage, lodging, group ski and ride school lessons, equipment rentals and more at our North American owned and operated Resorts. Epic Mountain Rewards constitutes a material right to the outbreak of the COVID-19 pandemic, the U.S. government enacted legislation commonly referred topass product holders and as the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). The CARES Act includes various amendments to the U.S. tax code that impacted the Company’s accounting and reporting for income taxes during the three and nine months ended April 30, 2020 and for which the Company expects will continue to impact its accounting and reporting for income taxes in the future, including the following: (i) allowing a carryback of the entire amount of eligible Federal net operating losses (“NOLs”) generated in calendar years 2018, 2019 and 2020 for up to five years prior to when such losses were incurred, representing a change from previous rules under the Tax Cuts & Jobs Act of 2017 (the “TCJA”), in which NOLs could not be carried back to prior years and utilization was limited to 80% of taxable income in future years; (ii) treatment of certain qualified improvement property (“QIP”) as 15-year property and allowing such QIP placed in service after December 31, 2017 to be eligible for bonus depreciation, which the Company expects will incrementally add to its pre-existing NOLs; and (iii) increases in the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for calendar years 2019 and 2020. The CARES Act also provides for refundable employee retention tax credits and defers the requirement to remit the employer-paid portion of social security payroll taxes. As a result, we recordedallocate a credit of approximately $6.5 million during the three and nine months ended April 30, 2020, which primarily offset Mountain and Lodging operating expense, as a result of wages paid to employees who were not providing services. We are still in the process of fully evaluating the potential benefits that the amendments discussed above will have on our financial statements. We also recognized a credit of approximately $2.6 million during the three and nine months ended April 30, 2020 as a resultportion of the recent Canada Emergency Wage Subsidy and Australian JobKeeper legislation for our Canadian and Australian employees, which primarily offset Mountain and Lodging operating expense.pass product transaction price to these other lines of business.
•As of April 30, 2020,2021, we had $18.9$1.3 billion of cash and cash equivalents, as well as $418.6 million available under the revolver component of our Eighth Amended and Restated Credit Agreement, dated as of August 15, 2018 and as amended most recently on April 28,December 18, 2020 (the “Vail Holdings Credit Agreement”), which represents the total commitment of $500.0 million less outstanding borrowings of $400.0 million and certain letters of credit outstanding of $81.1$81.4 million. Additionally, we have a credit facility which supports the liquidity needs of Whistler Blackcomb (the “Whistler Credit Agreement”). As of April 30, 2020,2021, we had C$1.1249.1 million ($0.8202.7 million) available under the revolver component of the Whistler Credit Agreement (which represents the total commitment of C$300.0 million ($215.5244.1 million) less outstanding borrowings of C$298.050.0 million ($214.140.7 million) and a letter of credit outstanding of C$0.9 million ($0.60.7 million)). During the three months ended April 30, 2020, we borrowed against substantially all of our available capacity under the revolver components of our Vail Holdings Credit Agreement and Whistler Credit Agreement as a precautionary measure in order to increase our cash position and financial flexibility in light of the financial market conditions resulting from the COVID-19 pandemic.
On April 28,December 18, 2020, we entered into the ThirdFourth Amendment to our Vail Holdings Credit Agreement (the “Third“Fourth Amendment”). Pursuant to the ThirdFourth Amendment, the Company will beamong other terms, we are exempt from complying with the Vail Holdings Credit Agreement’s maximum leverage ratio, senior secured leverage ratio, and minimum interest coverage ratio financial maintenance covenants for each of the fiscal quarters ending July 31, 2020 through January 31, 2022 (unless we make a one-time irrevocable election to terminate such exemption prior to such date) (such period, the “Financial Covenants Temporary Waiver Period”), after which we will again be required to comply with such covenants starting with the fiscal quarter ending April 30, 2022 (or such earlier
fiscal quarter as elected by us). During the Financial Covenants Temporary Waiver Period, we are subject to other restrictions which will limit our ability to make future acquisitions, investments, distributions to stockholders, share repurchases or incur additional debt. See Liquidity and Capital Resources for additional information. Additionally, on May 4,December 18, 2020, we completed an offering of $600.0$575.0 million in aggregate principal amount of 6.25% Senior Notes0.0% convertible senior notes due 20252026 (the “Notes”“0.0% Convertible Notes”) in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended a portion of which was utilized to pay down(the “Securities Act”). The 0.0% Convertible Notes are senior, unsecured obligations that do not bear regular interest, and the outstanding balanceprincipal amount of the revolver component of its Vail Holdings Credit Agreement in its entirety (which0.00% Convertible Notes does not accrete. The notes will continue to be available to the Company to borrow including throughout the Financial Covenants Temporary Waiver Period). The Notes are guaranteedmature on a senior subordinated basis by certain of the Company’s domestic subsidiaries.January 1, 2026, unless earlier repurchased, redeemed or converted. See Liquidity and Capital Resources for additional information.
We expectbelieve that our existing cash and cash equivalents, availability under our credit agreements proceeds from the Notes and the continuedexpected positive cash flow from operating activities of our Mountain and Lodging segments less resort capital expenditures will continue to provide us with sufficient liquidity to fund our operations for up to two years in a worst case scenario of extended resort shutdowns.
On September 24, 2019, through a wholly-owned subsidiary, we acquired 100 percent of the outstanding stock of Peak Resorts, Inc. (“Peak Resorts”) at a purchase price of $11.00 per share or approximately $264.5 million. In addition, contemporaneous with the closing the transaction, Peak Resorts was required to pay approximately $70.2 million of certain outstanding debt instruments and lease obligations in order to complete the transaction. Accordingly, the total purchase price, including the repayment of certain outstanding debt instruments and lease obligations, was approximately $334.7 million, for which we borrowed approximately $335.6 million under the Vail Holdings Credit Agreement to fund the acquisition, repayment of debt instruments and lease obligations, and associated acquisition related expenses. The newly acquired resorts include: Mount Snow in Vermont; Hunter Mountain in New York; Attitash Mountain Resort, Wildcat Mountain and Crotched Mountain in New Hampshire; Liberty Mountain Resort, Roundtop Mountain Resort, Whitetail Resort, Jack Frost and Big Boulder in Pennsylvania; Alpine Valley, Boston Mills, Brandywine and Mad River Mountain in Ohio; Hidden Valley and Snow Creek in Missouri; and Paoli Peaks in Indiana. The acquisition included the mountain operations of the resorts, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities), as well as lodging operations at certain resorts. We expect that the acquisition of Peak Resorts will positively contribute to our annual results of operations; however we cannot predict the ultimate impact the new resorts will have on our future results of operations.
RESULTS OF OPERATIONS
Summary
Below is a summary of operating results for the three and nine months ended April 30, 2020,2021, compared to the three and nine months ended April 30, 20192020 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended April 30, | | Nine Months Ended April 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
Net income attributable to Vail Resorts, Inc. | | $ | 274,629 | | | $ | 152,546 | | | $ | 268,661 | | | $ | 252,441 | |
Income before provision for income taxes | | $ | 354,187 | | | $ | 186,271 | | | $ | 336,039 | | | $ | 314,210 | |
Mountain Reported EBITDA | | $ | 457,989 | | | $ | 301,429 | | | $ | 654,174 | | | $ | 594,472 | |
Lodging Reported EBITDA | | 4,233 | | | 2,925 | | | (10,681) | | | 11,485 | |
Resort Reported EBITDA | | $ | 462,222 | | | $ | 304,354 | | | $ | 643,493 | | | $ | 605,957 | |
Real Estate Reported EBITDA | | $ | (1,034) | | | $ | (730) | | | $ | (3,530) | | | $ | (2,935) | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended April 30, | | Nine Months Ended April 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Net income attributable to Vail Resorts, Inc. | | $ | 152,546 |
| | $ | 292,134 |
| | $ | 252,441 |
| | $ | 390,688 |
|
Income before provision for income taxes | | $ | 186,271 |
| | $ | 401,876 |
| | $ | 314,210 |
| | $ | 536,708 |
|
Mountain Reported EBITDA | | $ | 301,429 |
| | $ | 468,089 |
| | $ | 594,472 |
| | $ | 743,907 |
|
Lodging Reported EBITDA | | 2,925 |
| | 12,627 |
| | 11,485 |
| | 22,280 |
|
Resort Reported EBITDA | | $ | 304,354 |
| | $ | 480,716 |
| | $ | 605,957 |
| | $ | 766,187 |
|
Real Estate Reported EBITDA | | $ | (730 | ) | | $ | (873 | ) | | $ | (2,935 | ) | | $ | (3,278 | ) |
The consolidated condensed results of operations, including any consolidated financial metrics pertaining thereto, include the operations of Peak Resorts (acquired September 24, 2019), Falls Creek and Hotham (acquired April 4, 2019), Triple Peaks (acquired September 27, 2018) and Stevens Pass (acquired August 15, 2018), prospectively from their respective datesthe date of acquisition.
On March 14, 2020, we announced a temporary closure of our Resorts and retail operations beginning on March 15, 2020 asAs a result of the COVID-19 pandemic, and as a precautionary measure for the safetyoutbreak of our guests and employees. Subsequently on March 17, 2020,COVID-19, we announced the early closure of the 2019/2020 North American ski season for our Resorts, lodging properties and retail/rental stores.stores beginning on March 15, 2020. These actions (the “Resort Closures”) had a significant adverse impact toon our results of operations for the three and nine months ended April 30, 2020. Additionally, the COVID-19 pandemic continued to have an adverse impact on our results of operations for the three and nine months ended April 30, 2021, as further described below in our segment results of operations.
Mountain Segment
Three months ended April 30, 20202021 compared to the three months ended April 30, 20192020
Mountain segment operating results for the three months ended April 30, 20202021 and 20192020 are presented by category as follows (in thousands, except effective ticket price (“ETP”)). ETP is calculated as lift revenue divided by total skier visits for each applicable period presented.
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2021 | | 2020 | |
Mountain net revenue: | | | | | | |
Lift | | $ | 577,680 | | | $ | 374,818 | | | 54.1 | % |
Ski school | | 80,390 | | | 76,563 | | | 5.0 | % |
Dining | | 45,294 | | | 61,632 | | | (26.5) | % |
Retail/rental | | 91,286 | | | 78,133 | | | 16.8 | % |
Other | | 34,533 | | | 44,158 | | | (21.8) | % |
Total Mountain net revenue | | 829,183 | | | 635,304 | | | 30.5 | % |
Mountain operating expense: | | | | | | |
Labor and labor-related benefits | | 161,230 | | | 140,839 | | | 14.5 | % |
Retail cost of sales | | 25,314 | | | 23,476 | | | 7.8 | % |
Resort related fees | | 38,122 | | | 31,361 | | | 21.6 | % |
General and administrative | | 61,916 | | | 52,252 | | | 18.5 | % |
Other | | 85,623 | | | 85,857 | | | (0.3) | % |
Total Mountain operating expense | | 372,205 | | | 333,785 | | | 11.5 | % |
Mountain equity investment income (loss), net | | 1,011 | | | (90) | | | 1,223.3 | % |
Mountain Reported EBITDA | | $ | 457,989 | | | $ | 301,429 | | | 51.9 | % |
| | | | | | |
Total skier visits | | 7,188 | | | 5,303 | | | 35.5 | % |
ETP | | $ | 80.37 | | | $ | 70.68 | | | 13.7 | % |
|
| | | | | | | | | | | |
| | Three Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2020 | | 2019 | |
Net Mountain revenue: | | | | | | |
Lift | | $ | 374,818 |
| | $ | 526,881 |
| | (28.9 | )% |
Ski school | | 76,563 |
| | 110,755 |
| | (30.9 | )% |
Dining | | 61,632 |
| | 78,928 |
| | (21.9 | )% |
Retail/rental | | 78,133 |
| | 114,082 |
| | (31.5 | )% |
Other | | 44,158 |
| | 47,252 |
| | (6.5 | )% |
Total Mountain net revenue | | 635,304 |
|
| 877,898 |
| | (27.6 | )% |
Mountain operating expense: | | | | | | |
Labor and labor-related benefits | | 140,839 |
| | 168,144 |
| | (16.2 | )% |
Retail cost of sales | | 23,476 |
| | 38,191 |
| | (38.5 | )% |
Resort related fees | | 31,361 |
| | 49,725 |
| | (36.9 | )% |
General and administrative | | 52,252 |
| | 58,402 |
| | (10.5 | )% |
Other | | 85,857 |
| | 95,792 |
| | (10.4 | )% |
Total Mountain operating expense | | 333,785 |
| | 410,254 |
| | (18.6 | )% |
Mountain equity investment (loss) income, net | | (90 | ) | | 445 |
| | (120.2 | )% |
Mountain Reported EBITDA | | $ | 301,429 |
| | $ | 468,089 |
| | (35.6 | )% |
| | | | | | |
Total skier visits | | 5,303 |
| | 7,183 |
| | (26.2 | )% |
ETP | | $ | 70.68 |
| | $ | 73.35 |
| | (3.6 | )% |
Mountain Reported EBITDA includes $4.4$5.1 million and $4.0$4.4 million of stock-based compensation expense for the three months ended April 30, 20202021 and 2019,2020, respectively.
Mountain Reported EBITDA decreased by $166.7increased $156.6 million, or 35.6%51.9%, primarily dueas a result of the Company operating for the full U.S. ski season in the current year as compared to the impact of the Resort Closures in the prior year, which resulted in significantly reduced visitation and operations at our North American Resorts and retail stores in the prior year period, as well as the deferral of $120.9 million of pass product revenue from Fiscal 2020 to fiscalFiscal 2021 as a result of the Credit Offer to 2019/2020 North American pass product holders,holders. This increase in Mountain Reported EBITDA was partially offset by limitations and restrictions on our North American winter operations in the incremental operationscurrent year as a result of Peak Resorts.the ongoing impacts of COVID-19. Additionally, Whistler Blackcomb’s performance continued to be negatively impacted in the current year due to the continued closure of the Canadian border to international guests and was further impacted by the resort closing earlier than expected on March 30, 2021 following a provincial health order issued by the government of British Columbia. Mountain segment results also include $1.4$0.1 million and $4.9$1.4 million of acquisition and integration related expenses for the three months ended April 30, 20202021 and 2019,2020, respectively, which are recorded within Mountain other operating expense. Additionally, operating results from Whistler Blackcomb, which are translated from Canadian dollars to U.S. dollars, were negatively affected by a decrease in the Canadian dollar exchange rate as compared to the prior year.
Lift revenue decreased $152.1increased $202.9 million, or 28.9%54.1%, primarily due to strong North American pass sales growth for the Resort Closures and2020/2021 ski season, including the deferral impact of the Credit Offer, partially offset by incremental revenue from Peak Resorts. Pass revenue decreased 24.9% primarily as a result of the deferral of approximately $120.9 million of pass product revenue associated with the Credit Offer to 2019/2020 North American pass product holders the majority of which would have been recognized during the three months ended April 30,from Fiscal 2020 and which is now expected to be recognized primarily in the second and third quarters of fiscalFiscal 2021 partially offset by a combination of an increase in pricing and units sold and increased pass sales to Destination guests, as well as the introduction of the Epic Day Pass. Non-pass revenue decreased 31.8% primarily due to significantly reduced skier visitation as a result of the Resort Closures. Pass revenue increased 86.1%, which was primarily driven by the deferral impact of the Credit Offer from Fiscal 2020 to Fiscal 2021 associated with the Resort Closures. Non-pass revenue increased 28.2% primarily due to an increase in non-pass visitation at our Resorts due to the impact of the Resort Closures partially offset byin the prior year as well as an increase in non-pass ETP (excluding Peak Resorts) of 8.0% and incremental9.2% in the current year, partially offset by a decrease in Whistler Blackcomb non-pass revenue from Peak Resorts of approximately $22.6 million. Total non-pass ETP, includingvisitation in the impact of Peak Resorts, decreased 5.4%.
Ascurrent year as a result of the continued Canadian border closure.
Ski school revenue increased $3.8 million, or 5.0%, and retail/rental revenue increased $13.2 million, or 16.8%, both as a result of the Company operating for the full U.S. ski season in the current year as compared to the impact of the Resort Closures ski school revenue decreased $34.2 million, or 30.9%,in the prior year, partially offset by incremental revenue from Peak Resorts of approximately $6.2 million; diningCOVID-19 related limitations and restrictions in the current year. Dining revenue decreased $17.3$16.3 million, or 21.9%26.5%, primarily due to capacity-related limitations and restrictions associated with COVID-19 in the current year as a result of the ongoing impacts of COVID-19, which disproportionately impacted our dining outlets. The declines in dining were partially offset by incremental revenue from Peak Resortsthe benefit of approximately $10.0 million; retail/rental revenue decreased $35.9 million, or 31.5%, partially offset by incremental revenue from Peak Resortsoperating for the full U.S. ski season in the current year as compared to the impact of approximately $10.3 million; and other revenue decreased $3.1 million, or 6.5%, partially offset by incremental revenue from Peak Resorts of approximately $5.6 million.the Resort Closures in the prior year.
Other revenue mainly consists of other mountain activities revenue, employee housing revenue, guest services revenue, commercial leasing revenue, marketing and internet advertising revenue, private club revenue (which includes both club dues and amortization of initiation fees), municipal services revenue and other recreation activity revenue.
Resort Closures Other revenue decreased $9.6 million, or 21.8%, primarily due to decreased mountain activities and employee housing revenue as a result of reduced visitation and the associated actions taken byongoing impacts of COVID-19 in the Companycurrent year, as well as a reduction in ski pass insurance revenue as a result of the replacement of our previous ski pass insurance program with Epic Coverage for the 2020/2021 North American ski season, which is free to reduce costs resulted in a decrease in our operatingall pass product holders.
Operating expense of $76.5increased $38.4 million, or 18.6%11.5%, which was primarily attributable to the Company operating for the full U.S. ski season in the current year as compared to the impact of the Resort Closures in the prior year, partially offset by incremental operating expensescost discipline efforts in the current year associated with lower levels of operations and limitations and restrictions on our North American winter operations resulting from Peak Resorts, Falls Creek and Hotham of approximately $37.6 million.COVID-19. Additionally, operating expense includes $1.4$0.1 million and $4.9$1.4 million of acquisition and integration related expenses for the three months ended April 30, 20202021 and 2019,2020, respectively.
Labor and labor-related benefits decreased 16.2%increased 14.5%, which primarily resulted from cost actions associated withdue to the impacts of the Resort Closures includingin the prior year, which included decreased staffing, employee furloughs, salary reductions and reduced variable compensation accruals, as well as federal tax credits of approximately $6.9 million associated with recent COVID-19 related legislation passed in the U.S., Canada and Australia, partially offset by incremental expenses from Peak Resorts of approximately $16.0 million.accruals. Retail cost of sales decreased 38.5%increased 7.8% compared to a decreasean increase in retail sales of 38.3%.5.2%, reflecting a higher mix of aged retail products sold at reduced margins. Resort related fees decreased 36.9%increased 21.6% primarily due to decreasesincreases in revenue on which those fees are based, partially offset by incremental expenses from Peak Resorts of approximately $2.0 million.based. General and administrative expense decreased 10.5%increased 18.5%, primarily due to a decrease in allocated corporate overhead costs and a decreasean increase in variable compensation accruals primarily as a result of the Resort Closures, partially offset by incremental expenses from Peak Resorts, Falls Creek and Hotham of approximately $5.1 million. Other expense decreased 10.4% primarily due to decreases in variable operating expenses associated with the Resort Closures, as well as a decrease in acquisition and integration related expenses, partially offset by incremental operating expenses from Peak Resorts, Falls Creek and Hotham of approximately $12.0 million.allocated corporate overhead costs.
Mountain equity investment income (loss) income,, net primarily includes our share of income from the operations of a real estate brokerage joint venture.
company. Mountain equity investment income from the real estate brokerage company increased $1.1 million for the three months ended April 30, 2021 compared to the same period in the prior year due to a significant increase in both the number of real estate sales and the average price of those sales.
Nine months ended April 30, 20202021 compared to the nine months ended April 30, 20192020
Mountain segment operating results for the nine months ended April 30, 20202021 and 20192020 are presented by category as follows (in thousands, except ETP):
| | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2021 | | 2020 | |
Mountain net revenue: | | | | | | |
Lift | | $ | 1,041,546 | | | $ | 900,995 | | | 15.6 | % |
Ski school | | 138,824 | | | 187,840 | | | (26.1) | % |
Dining | | 80,172 | | | 158,980 | | | (49.6) | % |
Retail/rental | | 203,718 | | | 259,761 | | | (21.6) | % |
Other | | 101,092 | | | 154,105 | | | (34.4) | % |
Total Mountain net revenue | | 1,565,352 | | | 1,661,681 | | | (5.8) | % |
Mountain operating expense: | | | | | | |
Labor and labor-related benefits | | 371,372 | | | 427,538 | | | (13.1) | % |
Retail cost of sales | | 66,007 | | | 88,740 | | | (25.6) | % |
Resort related fees | | 67,014 | | | 74,175 | | | (9.7) | % |
General and administrative | | 177,637 | | | 194,896 | | | (8.9) | % |
Other | | 235,325 | | | 283,130 | | | (16.9) | % |
Total Mountain operating expense | | 917,355 | | | 1,068,479 | | | (14.1) | % |
Mountain equity investment income, net | | 6,177 | | | 1,270 | | | 386.4 | % |
Mountain Reported EBITDA | | $ | 654,174 | | | $ | 594,472 | | | 10.0 | % |
| | | | | | |
Total skier visits | | 14,191 | | | 13,333 | | | 6.4 | % |
ETP | | $ | 73.39 | | | $ | 67.58 | | | 8.6 | % |
|
| | | | | | | | | | | |
| | Nine Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2020 | | 2019 | |
Net Mountain revenue: | | | | | | |
Lift | | $ | 900,995 |
| | $ | 999,124 |
| | (9.8 | )% |
Ski school | | 187,840 |
| | 207,271 |
| | (9.4 | )% |
Dining | | 158,980 |
| | 162,629 |
| | (2.2 | )% |
Retail/rental | | 259,761 |
| | 285,860 |
| | (9.1 | )% |
Other | | 154,105 |
| | 144,093 |
| | 6.9 | % |
Total Mountain net revenue | | 1,661,681 |
| | 1,798,977 |
| | (7.6 | )% |
Mountain operating expense: | | | | | | |
Labor and labor-related benefits | | 427,538 |
| | 417,212 |
| | 2.5 | % |
Retail cost of sales | | 88,740 |
| | 104,328 |
| | (14.9 | )% |
Resort related fees | | 74,175 |
| | 92,919 |
| | (20.2 | )% |
General and administrative | | 194,896 |
| | 178,952 |
| | 8.9 | % |
Other | | 283,130 |
| | 263,214 |
| | 7.6 | % |
Total Mountain operating expense | | 1,068,479 |
| | 1,056,625 |
| | 1.1 | % |
Mountain equity investment income, net | | 1,270 |
| | 1,555 |
| | (18.3 | )% |
Mountain Reported EBITDA | | $ | 594,472 |
| | $ | 743,907 |
| | (20.1 | )% |
| | | | | | |
Total skier visits | | 13,333 |
| | 14,211 |
| | (6.2 | )% |
ETP | | $ | 67.58 |
| | $ | 70.31 |
| | (3.9 | )% |
Mountain Reported EBITDA includes $13.4$15.4 million and $12.3$13.4 million of stock-based compensation expense for the nine months ended April 30, 20202021 and 2019,2020, respectively.
Mountain Reported EBITDA decreased by $149.4increased $59.7 million, or 20.1%10.0%, primarily due to the impact of the prior year Resort Closures, which resulted in significantly reduced visitation and operations at our North American Resorts and retail stores, in addition toincluding the deferral of $120.9 million of pass product revenue from Fiscal 2020 to fiscalFiscal 2021 as a result of the Credit Offer to 2019/2020 North American pass product holders, as well as cost discipline efforts in the current year associated with lower levels of operations. These increases were partially offset by limitations and restrictions on our North American winter operations and at Perisher in the incremental operationscurrent year due to the impacts of Peak Resorts,COVID-19, as well as our decision to close Mount Hotham and Falls Creek in July 2020 for the remainder of the Australian ski season. Additionally, Whistler Blackcomb’s performance continued to be negatively impacted in the current year due to the continued closure of the Canadian border to international guests and Hotham.was further impacted by the resort closing earlier than expected on March 30, 2021 following a provincial health order issued by the government of British Columbia. Mountain segment results also include $12.3$0.9 million and $14.4$12.3 million of acquisition and integration related expenses for the nine months ended April 30, 20202021 and 2019,2020, respectively, which are recorded within Mountain other operating expense. Additionally, operating results from Whistler Blackcomb, and our Australian ski areas, which are translated from Canadian dollars and Australian dollars, respectively, to U.S. dollars, were negativelyfavorably affected by a decreaseincreases in the respectiveCanadian dollar exchange ratesrate relative to the U.S. dollar as compared to the prior year.year, resulting in an increase in Mountain Reported EBITDA of approximately $2.7 million, which the Company calculated by applying current period foreign exchange rates to the prior period results.
Lift revenue decreased $98.1increased $140.6 million, or 9.8%15.6%, primarily due to the Company operating for the full U.S. ski season in the current year as compared to the impact of the Resort Closures andin the prior year, including the deferral impact of the Credit Offer from Fiscal 2020 to Fiscal 2021, partially offset by incremental revenue from Peak Resorts, Falls Creeklimitations and Hotham.restrictions on our North American winter operations in the current year due to the ongoing impacts of COVID-19, which resulted in a decrease in non-pass visitation. Pass product revenue decreased 1.9%increased 38.2%, primarily as a result of strong North American pass sales growth for the 2020/2021 ski season, including the deferral impact of approximately $120.9 million of pass product revenue associated with the Credit Offer to 2019/2020 North American pass product holders, the majority of which would have beenwas recognized primarily during the nine months ended April 30, 2020 and which is now expected to be recognized primarily in the second and third quarters of fiscal 2021, partially offset by a combination of an increase in pricing and units sold and increased pass sales to Destination guests, as well as the introduction of the Epic Day Pass.2021. Non-pass revenue decreased 16.8% primarily8.1% due to reduced non-pass visitation to our Resorts, which was significantly reduced skier visitation as a result ofimpacted by COVID-19 related capacity limitations and snowfall levels that were well below average at our Colorado, Utah and Tahoe resorts through the Resort Closures,holiday season, partially offset by an increase in non-pass ETP (excluding Peak Resorts, Falls Creekof 12.6% in the current year. Visitation was particularly impacted in regions where heightened COVID-19 related restrictions were in place, including Whistler Blackcomb, Tahoe and Hotham)Vermont. Additionally, Whistler Blackcomb’s results were disproportionately impacted as compared to our broader Mountain segment performance in the current year due to the continued closure of 4.0%the Canadian border to international guests, and incrementalwas further impacted by the resort closing earlier than expected on March 30, 2021 following a provincial health order issued by the government of British Columbia.
Ski school revenue from Peak Resorts, Falls Creekdecreased $49.0 million, or 26.1%, dining revenue decreased $78.8 million, or 49.6%, and Hotham of approximately $61.1 million. Total non-pass ETP, includingretail/rental revenue decreased $56.0 million, or 21.6%, each primarily due to the impact of Peak Resorts, Falls Creekongoing limitations and Hotham decreased 10.3%.
Asrestrictions on our North American operations in the current year as a result of the Resort Closures, ski school revenue decreased $19.4 million, or 9.4%, partially offset by incremental revenue from Peak Resorts, Falls Creek and Hothamimpacts of approximately $18.0 million; dining revenue decreased $3.6 million, or 2.2%, partially offset by incremental revenue from Peak Resorts of approximately $23.3 million; and retail/rental revenue decreased $26.1 million, or 9.1%, partially offset by incremental revenue from Peak Resorts, Falls Creek and Hotham of approximately $26.8 million.COVID-19 on our business.
Other revenue mainly consists of summer visitation and other mountain activities revenue, employee housing revenue, guest services revenue, commercial leasing revenue, marketing and internet advertising revenue, private club revenue (which includes both club dues and amortization of initiation fees), municipal services revenue and other recreation activity revenue. Other revenue is also comprised of Australian ski arearesort lodging and transportation revenue. Other revenue increased $10.0decreased $53.0 million, or 6.9%34.4%, primarily due to decreased mountain activities, mountain services, employee housing and Australian lodging and transportation revenue as a result of incrementallimitations and restrictions on our business in the current year due to COVID-19, as well as a reduction in ski pass insurance revenue from Peak Resorts, Falls Creek, Hotham and Triple Peaks of approximately $15.0 million, partially offset by decreased revenue at our other Resorts as a result of the Resort Closures.replacement of our previous ski pass insurance program with Epic Coverage for the 2020/2021 North American ski season, which is free to all pass product holders.
Operating expense increased $11.9decreased $151.1 million, or 1.1%14.1%, which was primarily attributable to incremental post-acquisition operating expenses from Peak Resorts, Falls Creek, Hotham, Triple Peaks and Stevens Pass of approximately $116.6 million, partially offset by reduced expenses at our other Resortscost discipline efforts in the current year associated with thelower levels of operations and limitations, restrictions and closures of Resort Closures and associated actions taken by the Company to reduce costs.operations resulting from COVID-19. Additionally, operating expense includes $12.3$0.9 million and $14.4$12.3 million of acquisition and integration related expenses for the nine months ended April 30, 20202021 and 2019,2020, respectively.
Labor and labor-related benefits increased 2.5%decreased 13.1%, primarily due to incremental expenses from Peak Resorts, Falls Creek, Hotham, Triple Peaks and Stevens Pass of approximately $50.2 million, partially offset by cost actionsdiscipline efforts in the current year associated with thelimitations, restrictions and closures of our Resort Closures, including decreased staffing, employee furloughs, salary reductions, reduced variable compensation accruals and federaloperations as a result of COVID-19, as well as incremental tax credits of approximately $6.9$12.2 million associated with recent COVID-19 related legislation passed in Canada, Australia and the U.S., Canada and Australia.United States, partially offset by an increase in variable compensation accruals. Retail cost of sales decreased 14.9%,25.6% compared to a decrease in retail sales of 13.5%.30.5%, reflecting a higher mix of aged retail products sold at reduced margins. Resort related fees decreased 20.2%9.7% primarily due to decreases in revenue on which those fees are based, partially offset by incremental expenses from Peak Resorts of approximately $4.2 million.based. General and administrative expense increaseddecreased 8.9% primarily due to incremental expenses from Peak Resorts, Falls Creek and Hotham. Other expense increased 7.6%, primarily due to a decrease in allocated corporate overhead costs, as well as incremental operating expenses from Peak Resorts, Falls Creek, Hotham and Triple Peakstax credits of approximately $40.0$4.5 million associated with COVID-19 related legislation passed in Canada, Australia and the United States, partially offset by an increase in variable compensation accruals. Other expense decreased 16.9% primarily due to decreases in variable operating expenses at our other Resorts associated with the Resort Closures,reduced revenues, as well as a decrease in acquisition and integration related expenses.expenses of $11.4 million.
Mountain equity investment income, net primarily includes our share of income from the operations of a real estate brokerage joint venture.company. Mountain equity investment income from the real estate brokerage company increased $4.9 million (386.4%) for the nine months ended April 30, 2021 compared to the same period in the prior year due to a significant increase in both the number of real estate sales and the average price of those sales.
Lodging Segment
Three months ended April 30, 20202021 compared to the three months ended April 30, 20192020
Lodging segment operating results for the three months ended April 30, 20202021 and 20192020 are presented by category as follows (in thousands, except average daily rates (“ADR”) and revenue per available room (“RevPAR”)):
| | | | | | | | | |
| | Three Months Ended April 30, | | Percentage Increase (Decrease) | | | Three Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2020 | | 2019 | | | | 2021 | | 2020 | |
Lodging net revenue: | | | | | | | Lodging net revenue: | |
Owned hotel rooms | | $ | 8,126 |
| | $ | 12,352 |
| | (34.2 | )% | Owned hotel rooms | | $ | 10,252 | | | $ | 8,126 | | | 26.2 | % |
Managed condominium rooms | | 23,744 |
| | 30,671 |
| | (22.6 | )% | Managed condominium rooms | | 28,726 | | | 23,744 | | | 21.0 | % |
Dining | | 8,099 |
| | 11,067 |
| | (26.8 | )% | Dining | | 4,849 | | | 8,099 | | | (40.1) | % |
Transportation | | 5,672 |
| | 8,578 |
| | (33.9 | )% | Transportation | | 4,663 | | | 5,672 | | | (17.8) | % |
| Other | | 9,775 |
| | 13,278 |
| | (26.4 | )% | Other | | 8,652 | | | 9,775 | | | (11.5) | % |
| | 55,416 |
|
| 75,946 |
| | (27.0 | )% | | 57,142 | | | 55,416 | | | 3.1 | % |
Payroll cost reimbursements | | 2,969 |
| | 3,902 |
| | (23.9 | )% | Payroll cost reimbursements | | 1,953 | | | 2,969 | | | (34.2) | % |
Total Lodging net revenue | | 58,385 |
| | 79,848 |
| | (26.9 | )% | Total Lodging net revenue | | 59,095 | | | 58,385 | | | 1.2 | % |
Lodging operating expense: | | | | | | | Lodging operating expense: | |
Labor and labor-related benefits | | 26,448 |
| | 32,396 |
| | (18.4 | )% | Labor and labor-related benefits | | 26,809 | | | 26,448 | | | 1.4 | % |
General and administrative | | 8,566 |
| | 9,811 |
| | (12.7 | )% | General and administrative | | 11,378 | | | 8,566 | | | 32.8 | % |
Other | | 17,477 |
| | 21,112 |
| | (17.2 | )% | Other | | 14,722 | | | 17,477 | | | (15.8) | % |
| | 52,491 |
| | 63,319 |
| | (17.1 | )% | | 52,909 | | | 52,491 | | | 0.8 | % |
Reimbursed payroll costs | | 2,969 |
| | 3,902 |
| | (23.9 | )% | Reimbursed payroll costs | | 1,953 | | | 2,969 | | | (34.2) | % |
Total Lodging operating expense | | 55,460 |
| | 67,221 |
| | (17.5 | )% | Total Lodging operating expense | | 54,862 | | | 55,460 | | | (1.1) | % |
Lodging Reported EBITDA | | $ | 2,925 |
| | $ | 12,627 |
| | (76.8 | )% | Lodging Reported EBITDA | | $ | 4,233 | | | $ | 2,925 | | | 44.7 | % |
| | | | | | | |
Owned hotel statistics (1): | | | | | | | Owned hotel statistics (1): | |
ADR | | $ | 341.75 |
| | $ | 291.68 |
| | 17.2 | % | ADR | | $ | 274.15 | | | $ | 341.75 | | | (19.8) | % |
RevPAR | | $ | 105.91 |
| | $ | 206.41 |
| | (48.7 | )% | RevPAR | | $ | 147.67 | | | $ | 105.91 | | | 39.4 | % |
Managed condominium statistics (1): | | | | | | | Managed condominium statistics (1): | |
ADR | | $ | 404.57 |
| | $ | 403.04 |
| | 0.4 | % | ADR | | $ | 403.96 | | | $ | 404.57 | | | (0.2) | % |
RevPAR | | $ | 108.08 |
| | $ | 167.49 |
| | (35.5 | )% | RevPAR | | $ | 141.39 | | | $ | 108.08 | | | 30.8 | % |
Owned hotel and managed condominium statistics (combined) (1): | | | | | | | Owned hotel and managed condominium statistics (combined) (1): | |
ADR | | $ | 392.88 |
| | $ | 376.83 |
| | 4.3 | % | ADR | | $ | 374.39 | | | $ | 392.88 | | | (4.7) | % |
RevPAR | | $ | 107.77 |
| | $ | 173.45 |
| | (37.9 | )% | RevPAR | | $ | 142.40 | | | $ | 107.77 | | | 32.1 | % |
(1) RevPAR for the three months ended April 30, 2020 declined2021 increased from the prior comparative period primarily due to the impact of the Resort Closures.Closures in the prior year.
Lodging Reported EBITDA includes $1.0 million and $0.8 million of stock-based compensation expense for both the three months ended April 30, 2021 and 2020, and 2019.respectively. Lodging Reported EBITDA decreased $9.7increased $1.3 million, or 76.8%, primarily as a result of the Company operating for the full U.S. ski season in the current year as compared to the impact of the Resort Closures.
AsClosures in the prior year, partially offset by capacity-related restrictions and limitations in the current year as a result of the Resort Closures, revenueongoing impacts of COVID-19.
Revenue from owned hotel rooms decreased $4.2increased $2.1 million, or 34.2%;26.2%, and revenue from managed condominium rooms decreased $6.9increased $5.0 million, or 22.6%;21.0%, both primarily as a result of increased occupancy in the current year due to the Company operating for the full U.S. ski season in the current year as compared to the impact of the Resort Closures in the prior year, partially offset by capacity-related restrictions and limitations in the current year as a result of the ongoing impacts of COVID-19. Revenue from dining, revenue decreased $3.0 million, or 26.8%; transportation revenue decreased $2.9 million, or 33.9%; and other revenue each decreased $3.5 million, or 26.4%.primarily as a result of the capacity-related restrictions due to the COVID-19 pandemic in the current year, partially offset by the impact of the Resort Closures in the prior year.
Operating expense (excluding reimbursed payroll costs) decreased 17.1%increased 0.8%. Labor and labor related benefits decreased 18.4% primarily due to cost actions associated with the Resort Closures, including decreased staffing, employee furloughs, salary reductions and reduced variable compensation accruals, as well as federal tax credits of approximately $1.2 million associated with recent COVID-19 related legislation passed in the U.S., Canada and Australia. General and administrative expense decreased 12.7%increased 32.8% primarily due to lowerhigher allocated corporate overhead costs primarily associated with a reductionincluding an increase in variable compensation accruals, while other expenses decreased 17.2%, both primarily relateddue to the impact of the Resort Closures.
Closures in the prior year. Other expense decreased 15.8%, primarily related to lower cost of sales associated with lower dining and retail revenue, as well as lower advertising and commissions expense.
Revenue from payroll cost reimbursement and the corresponding reimbursed payroll costs relate to payroll costs at managed hotel properties where we are the employer and all payroll costs are reimbursed by the owners of the properties under contractual arrangements. Since the reimbursements are made based upon the costs incurred with no added margin, the revenue and corresponding expense have no effect on our Lodging Reported EBITDA.
Nine months ended April 30, 20202021 compared to the nine months ended April 30, 20192020
Lodging segment operating results for the nine months ended April 30, 20202021 and 20192020 are presented by category as follows (in thousands, except ADR and RevPAR):
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended April 30, | | Percentage Increase (Decrease) | | | Nine Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2020 | | 2019 | | | | 2021 | | 2020 | |
Lodging net revenue: | | | | | | | Lodging net revenue: | |
Owned hotel rooms | | $ | 39,323 |
| | $ | 43,499 |
| | (9.6 | )% | Owned hotel rooms | | $ | 24,325 | | | $ | 39,323 | | | (38.1) | % |
Managed condominium rooms | | 69,984 |
| | 69,835 |
| | 0.2 | % | Managed condominium rooms | | 58,391 | | | 69,984 | | | (16.6) | % |
Dining | | 37,353 |
| | 37,385 |
| | (0.1 | )% | Dining | | 8,807 | | | 37,353 | | | (76.4) | % |
Transportation | | 15,748 |
| | 18,774 |
| | (16.1 | )% | Transportation | | 7,610 | | | 15,748 | | | (51.7) | % |
Golf | | 10,606 |
| | 9,628 |
| | 10.2 | % | Golf | | 8,646 | | | 10,606 | | | (18.5) | % |
Other | | 37,411 |
| | 37,697 |
| | (0.8 | )% | Other | | 25,834 | | | 37,411 | | | (30.9) | % |
| | 210,425 |
| | 216,818 |
| | (2.9 | )% | | 133,613 | | | 210,425 | | | (36.5) | % |
Payroll cost reimbursements | | 9,605 |
| | 11,179 |
| | (14.1 | )% | Payroll cost reimbursements | | 5,174 | | | 9,605 | | | (46.1) | % |
Total Lodging net revenue | | 220,030 |
| | 227,997 |
| | (3.5 | )% | Total Lodging net revenue | | 138,787 | | | 220,030 | | | (36.9) | % |
Lodging operating expense: | | | | | | | Lodging operating expense: | |
Labor and labor-related benefits | | 97,992 |
| | 98,020 |
| | — | % | Labor and labor-related benefits | | 69,953 | | | 97,992 | | | (28.6) | % |
General and administrative | | 32,279 |
| | 31,002 |
| | 4.1 | % | General and administrative | | 32,807 | | | 32,279 | | | 1.6 | % |
Other | | 68,669 |
| | 65,516 |
| | 4.8 | % | Other | | 41,534 | | | 68,669 | | | (39.5) | % |
| | 198,940 |
| | 194,538 |
| | 2.3 | % | | 144,294 | | | 198,940 | | | (27.5) | % |
Reimbursed payroll costs | | 9,605 |
| | 11,179 |
| | (14.1 | )% | Reimbursed payroll costs | | 5,174 | | | 9,605 | | | (46.1) | % |
Total Lodging operating expense | | 208,545 |
| | 205,717 |
| | 1.4 | % | Total Lodging operating expense | | 149,468 | | | 208,545 | | | (28.3) | % |
Lodging Reported EBITDA | | $ | 11,485 |
| | $ | 22,280 |
| | (48.5 | )% | Lodging Reported EBITDA | | $ | (10,681) | | | $ | 11,485 | | | (193.0) | % |
| | | | | | | |
Owned hotel statistics (1): | | | | | | | Owned hotel statistics (1): | |
ADR | | $ | 269.62 |
| | $ | 257.83 |
| | 4.6 | % | ADR | | $ | 255.25 | | | $ | 269.62 | | | (5.3) | % |
RevPAR | | $ | 141.20 |
| | $ | 177.42 |
| | (20.4 | )% | RevPAR | | $ | 92.27 | | | $ | 141.20 | | | (34.7) | % |
Managed condominium statistics (1): | | | | | | | Managed condominium statistics (1): | |
ADR | | $ | 334.32 |
| | $ | 355.74 |
| | (6.0 | )% | ADR | | $ | 374.72 | | | $ | 334.32 | | | 12.1 | % |
RevPAR | | $ | 102.04 |
| | $ | 125.42 |
| | (18.6 | )% | RevPAR | | $ | 84.53 | | | $ | 102.04 | | | (17.2) | % |
Owned hotel and managed condominium statistics (combined) (1): | | | | | | | Owned hotel and managed condominium statistics (combined) (1): | |
ADR | | $ | 315.62 |
| | $ | 324.21 |
| | (2.6 | )% | ADR | | $ | 344.66 | | | $ | 315.62 | | | 9.2 | % |
RevPAR | | $ | 109.58 |
| | $ | 135.60 |
| | (19.2 | )% | RevPAR | | $ | 86.65 | | | $ | 109.58 | | | (20.9) | % |
(1) RevPAR for the nine months ended April 30, 20202021 declined from the prior comparative period primarily due to limitations and restrictions on our North American operations in the current year resulting from COVID-19, partially offset by the impact of the Resort Closures.Closures in the prior year.
Lodging Reported EBITDA includes $2.6$2.9 million and $2.4$2.6 million of stock-based compensation expense for the nine months ended April 30, 20202021 and 2019,2020, respectively. Lodging Reported EBITDA decreased $10.8$22.2 million, or 48.5%193.0%, primarily due toas a result of limitations and restrictions on our North American operations in the Resort Closures.
Ascurrent year as a result of the Resort Closures, revenueimpacts of
COVID-19, which resulted in reduced occupancy and capacity-related restrictions at our lodging properties compared to the prior year.
Revenue from owned hotel rooms, managed condominium rooms, dining, transportation, golf and other revenue each decreased $4.2 million, or 9.6% and transportation revenue decreased $3.0 million, or 16.1%. Golf revenue increased $1.0 million, or 10.2%, primarily due to incremental revenue from golf operations at Okemo.
as a result of the impacts of COVID-19.
Operating expense (excluding reimbursed payroll costs) increased 2.3%decreased 27.5%. GeneralLabor and administrative expense increased 4.1%labor related benefits decreased 28.6%, primarily due to decreased staffing associated with a $1.3 million accrual during the period for a contingent obligation in additionCOVID-19. Other expense decreased 39.5%, primarily related to higher allocated corporate overhead costs, partially offset by lower variable compensation accrualsexpenses associated with reduced revenues as a result of the Resort Closures. Other expense
increased 4.8% primarily due to incremental expenses from Peak Resorts, Okemo and Crested Butte of approximately $4.5 million, partially offset by lower variable operating expenses at our other lodging properties as a result of the Resort Closures.
COVID-19 pandemic.
Revenue from payroll cost reimbursement and the corresponding reimbursed payroll costs relate to payroll costs at managed hotel properties where we are the employer and all payroll costs are reimbursed by the owners of the properties under contractual arrangements. Since the reimbursements are made based upon the costs incurred with no added margin, the revenue and corresponding expense have no effect on our Lodging Reported EBITDA.
Real Estate Segment
Our Real Estate net revenue is primarily determined by the timing of closings and the mix of real estate sold in any given period. Different types of projects have different revenue and profit margins; therefore, as the real estate inventory mix changes, it can greatly impact Real Estate segment net revenue, operating expense, gain on sale of real property and Real Estate Reported EBITDA.
Three months ended April 30, 20202021 compared to the three months ended April 30, 20192020
Real Estate segment operating results for the three months ended April 30, 20202021 and 20192020 are presented by category as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | Three Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2021 | | 2020 | |
Total Real Estate net revenue | | $ | 800 | | | $ | 398 | | | 101.0 | % |
Real Estate operating expense: | | | | | | |
Cost of sales (including sales commission) | | 544 | | | — | | | nm |
Other | | 1,479 | | | 1,128 | | | 31.1 | % |
Total Real Estate operating expense | | 2,023 | | | 1,128 | | | 79.3 | % |
Gain on sale of real property | | 189 | | | — | | | nm |
Real Estate Reported EBITDA | | $ | (1,034) | | | $ | (730) | | | (41.6) | % |
|
| | | | | | | | | | | |
| | Three Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2020 | | 2019 | |
Total Real Estate net revenue | | $ | 398 |
| | $ | 241 |
| | 65.1 | % |
Real Estate operating expense: | | | | | | |
Cost of sales (including sales commission) | | — |
| | 13 |
| | (100.0 | )% |
Other | | 1,128 |
| | 1,369 |
| | (17.6 | )% |
Total Real Estate operating expense | | 1,128 |
| | 1,382 |
| | (18.4 | )% |
Gain on sale of real property | | — |
| | 268 |
| | (100.0 | )% |
Real Estate Reported EBITDA | | $ | (730 | ) | | $ | (873 | ) | | 16.4 | % |
Other operating expense for both the three months ended April 30, 2021 and 2020 was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs.
Three
Nine months ended April 30, 2021 compared to the nine months ended April 30, 2020
Real Estate segment operating results for the nine months ended April 30, 2021 and 2020 are presented by category as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | Nine Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2021 | | 2020 | |
Total Real Estate net revenue | | $ | 1,369 | | | $ | 4,784 | | | (71.4) | % |
Real Estate operating expense: | | | | | | |
Cost of sales (including sales commission) | | 958 | | | 3,932 | | | (75.6) | % |
Other | | 4,130 | | | 3,994 | | | 3.4 | % |
Total Real Estate operating expense | | 5,088 | | | 7,926 | | | (35.8) | % |
Gain on sale of real property | | 189 | | | 207 | | | (8.7) | % |
Real Estate Reported EBITDA | | $ | (3,530) | | | $ | (2,935) | | | (20.3) | % |
Nine months ended April 30, 2021
Other operating expense of $1.1$4.1 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs.
Three months ended April 30, 2019
Other operating expense of $1.4 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs. Real Estate Reported EBITDA also included a gain on sale of real property of $0.3 million for the sale of land parcels.
Nine months ended April 30, 2020 compared to the nine months ended April 30, 2019
Real Estate segment operating results for the nine months ended April 30, 2020 and 2019 are presented by category as follows (in thousands):
|
| | | | | | | | | | | |
| | Nine Months Ended April 30, | | Percentage Increase (Decrease) |
| | 2020 | | 2019 | |
Total Real Estate net revenue | | $ | 4,784 |
| | $ | 595 |
| | 704.0 | % |
Real Estate operating expense: | | | | | | |
Cost of sales (including sales commission) | | 3,932 |
| | 13 |
| | 30,146.2 | % |
Other | | 3,994 |
| | 4,128 |
| | (3.2 | )% |
Total Real Estate operating expense | | 7,926 |
| | 4,141 |
| | 91.4 | % |
Gain on sale of real property | | 207 |
| | 268 |
| | (22.8 | )% |
Real Estate Reported EBITDA | | $ | (2,935 | ) | | $ | (3,278 | ) | | 10.5 | % |
Nine months ended April 30, 2020
During the nine months ended April 30, 2020, we closed on the sale of a development land parcel for $4.1 million which was recorded within Real Estate net revenue, with a corresponding cost of sale (including sales commission) of $3.9 million.
Other operating expense of $4.0 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs.
Nine months ended April 30, 2019
Other operating expense of $4.1 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs. Real Estate Reported EBITDA also included a gain on sale of real property of $0.3 million for the sale of land parcels.
Other Items
In addition to segment operating results, the following material items contributed to our overall financial results for the three and nine months ended April 30, 20202021 and 20192020 (in thousands).:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Increase (Decrease) | | Nine Months Ended April 30, | | Increase (Decrease) |
| 2021 | | 2020 | | | 2021 | | 2020 | |
Depreciation and amortization | $ | (64,071) | | | $ | (64,730) | | | (1.0) | % | | $ | (189,362) | | | $ | (186,387) | | | 1.6 | % |
Asset impairments | $ | — | | | $ | (28,372) | | | (100.0) | % | | $ | — | | | $ | (28,372) | | | (100.0) | % |
Change in estimated fair value of contingent consideration | $ | (10,400) | | | $ | 8,000 | | | (230.0) | % | | $ | (12,202) | | | $ | 5,264 | | | (331.8) | % |
Foreign currency gain (loss) on intercompany loans | $ | 4,157 | | | $ | (7,753) | | | 153.6 | % | | $ | 9,832 | | | $ | (8,191) | | | 220.0 | % |
Interest expense, net | $ | (39,033) | | | $ | (24,479) | | | 59.5 | % | | $ | (112,287) | | | $ | (73,303) | | | 53.2 | % |
Provision for income taxes | $ | (76,897) | | | $ | (26,440) | | | 190.8 | % | | $ | (66,640) | | | $ | (47,190) | | | 41.2 | % |
Effective tax rate | 21.7 | % | | 14.2 | % | | 7.5 pts | | 19.8 | % | | 15.0 | % | | 4.8 pts |
|
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 30, | | Increase (Decrease) | | Nine Months Ended April 30, | Increase (Decrease) |
| 2020 | | 2019 | | | 2020 | | 2019 | |
Depreciation and amortization | $ | (64,730 | ) | | $ | (55,260 | ) | | 17.1 | % | | $ | (186,387 | ) | | $ | (161,541 | ) | | 15.4 | % |
Asset impairments | $ | (28,372 | ) | | $ | — |
| | nm |
| | $ | (28,372 | ) | | $ | — |
| | nm |
|
Foreign currency loss on intercompany loans | $ | (7,753 | ) | | $ | (3,319 | ) | | 133.6 | % | | $ | (8,191 | ) | | $ | (5,180 | ) | | 58.1 | % |
Interest expense, net | $ | (24,479 | ) | | $ | (19,575 | ) | | 25.1 | % | | $ | (73,303 | ) | | $ | (59,215 | ) | | 23.8 | % |
Provision for income taxes | $ | (26,440 | ) | | $ | (93,346 | ) | | (71.7 | )% | | $ | (47,190 | ) | | $ | (120,914 | ) | | (61.0 | )% |
Effective tax rate expense | 14.2 | % | | 23.2 | % | | (9.0 pts) |
| | 15.0 | % | | 22.5 | % | | (7.5 pts) |
|
Depreciation and amortization. Depreciation and amortization expense for the three and nine months ended April 30, 20202021 increased $9.5$3.0 million and $24.8 million, respectively, compared to the same period in the prior year, primarily due to incremental depreciation and amortization expense associated with assets acquired in the Peak Resorts Falls Creek, Hotham, Triple Peaks and Stevens Pass acquisitions.acquisition.
Asset impairments. We recorded an asset impairment of approximately $28.4 million during the three and nine months ended April 30, 2020 as a result of the effects of the COVID-19 pandemic on our Colorado resort ground transportation company, with corresponding reductions to goodwill, net of $25.7 million and intangible assets, net and property, plant and equipment, net of $2.7 million. See Notes to the Consolidated Condensed Financial Statements for additional information.
Change in estimated fair value of contingent consideration. We recorded losses of $10.4 million and $12.2 million, respectively, for the three and nine months ended April 30, 2021, primarily related to an increase in the estimated contingent consideration payment for Fiscal 2021 as a result of stronger than expected results for Park City. We recorded gains of $8.0 million and $5.3 million, respectively, for the three and nine months ended April 30, 2020, primarily related to a decrease in the estimated contingent consideration payments for Fiscal 2020 and Fiscal 2021 as a result of a decrease in expected results due to the anticipated impacts of COVID-19.
Foreign currency lossgain (loss) on intercompany loans.Foreign currency lossgain (loss) on intercompany loans for the three and nine months ended April 30, 20202021 increased $4.4$11.9 million and $3.0$18.0 million, respectively, as a result of the Canadian dollar fluctuatingincreasing relative to the U.S. dollar compared to the same respective periods in the prior year, and was associated with an intercompany loan from Vail Holdings, Inc. to Whistler Blackcomb in the original amount of $210.0 million that was funded, effective as of November 1, 2016, in connection with the acquisition of Whistler Blackcomb. This intercompany loan requires foreign currency remeasurement to Canadian dollars, the functional currency for Whistler Blackcomb. As a result, foreign currency fluctuations associated with the loan are recorded within our results of operations.
Interest expense, net. Interest expense, net for the three and nine months ended April 30, 20202021 increased $4.9$14.6 million and $14.1$39.0 million, respectively, compared to the same periodperiods in the prior year, primarily due to borrowings under the 6.25% Notes, which were issued in May 2020, and non-cash interest expense associated with incremental term loan borrowings underamortization of the Vail Holdings Credit Agreement of $335.6 million,debt discount for the 0.0% Convertible Notes, which were used to fund the Peak Resorts acquisition; incremental borrowings under the revolver components of our Vail Holdings Credit Agreement and Whistler Credit Agreement, which were almost entirely drawn on during the three months ended April 30, 2020 as a precautionary measureissued in order to increase our cash position and financial flexibility in light of the financial market conditions resulting from the COVID-19 pandemic; and incremental interest expense associated with debt obligations assumed in the Peak Resorts acquisition, partially offset by a decrease in variable interest rates.December 2020.
Provision for income taxes. At the end of each interim period, the Company estimates the annual effective tax rate and applies that rate to its ordinary quarterly earnings. The tax expense or benefit related to significant, unusual or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur. In addition, the effects of changes in enacted tax laws or rates or tax status are recognized in the interim period in which the change occurs. The effective tax rate provision for the three and nine months ended April 30, 20202021 was 21.7% and 19.8%, respectively, compared to 14.2% and 15.0%, compared to 23.2% and 22.5%, respectively, for the three and nine months ended April 30, 2019. The interim period effective tax rate is primarily driven by (i) anticipated pre-tax book income for the full fiscal year, adjusted for items that are deductible/non-deductible for tax purposes only (i.e., permanent items); (ii) excess tax benefits from employee share awards and2020.
enacted tax legislation, which are both recorded as discrete items; (iii) taxable income generated by state and foreign jurisdictions that varies from anticipated consolidated pre-tax book loss, (iv) the amount of net income attributable to noncontrolling interests and (v) discrete items.
The decreaseincrease in the effective tax rate provision during thefor three and nine months ended April 30, 20202021 compared to the three and nine months ended April 30, 20192020 was primarily due to lower estimated full year pre-tax net income, as well as the U.S. federallesser tax reform rate reduction impact of permanent items based on the lapse in the statute of limitations for an uncertain tax position during the three months ended October 31, 2019, partially offset by a decrease in excess tax benefits from employee share awards that were exercised (stock appreciation rights) and that vested (restricted stock awards), which are recorded within provision forhigher estimated pre-tax book income taxes on the Company’s Consolidated Condensed Statements of Operations. Excess tax benefits totaled $2.8 million and $4.9 million, respectively, for the nine months ended April 30, 2020 and 2019.full fiscal year.
Reconciliation of Segment Earnings and Net Debt
The following table reconciles net income attributable to Vail Resorts, Inc. to Total Reported EBITDA for the three and nine months ended April 30, 20202021 and 20192020 (in thousands):
| | | Three Months Ended April 30, | | Nine Months Ended April 30, | | Three Months Ended April 30, | | Nine Months Ended April 30, |
| 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Net income attributable to Vail Resorts, Inc. | $ | 152,546 |
| | $ | 292,134 |
| | $ | 252,441 |
| | $ | 390,688 |
| Net income attributable to Vail Resorts, Inc. | $ | 274,629 | | | $ | 152,546 | | | $ | 268,661 | | | $ | 252,441 | |
Net income attributable to noncontrolling interests | 7,285 |
| | 16,396 |
| | 14,579 |
| | 25,106 |
| Net income attributable to noncontrolling interests | 2,661 | | | 7,285 | | | 738 | | | 14,579 | |
Net income | 159,831 |
| | 308,530 |
| | 267,020 |
| | 415,794 |
| Net income | 277,290 | | | 159,831 | | | 269,399 | | | 267,020 | |
Provision for income taxes | 26,440 |
| | 93,346 |
| | 47,190 |
| | 120,914 |
| Provision for income taxes | 76,897 | | | 26,440 | | | 66,640 | | | 47,190 | |
Income before provision for income taxes | 186,271 |
| | 401,876 |
| | 314,210 |
| | 536,708 |
| Income before provision for income taxes | 354,187 | | | 186,271 | | | 336,039 | | | 314,210 | |
Depreciation and amortization | 64,730 |
| | 55,260 |
| | 186,387 |
| | 161,541 |
| Depreciation and amortization | 64,071 | | | 64,730 | | | 189,362 | | | 186,387 | |
Asset impairments | 28,372 |
| | — |
| | 28,372 |
| | — |
| Asset impairments | — | | | 28,372 | | | — | | | 28,372 | |
Loss (gain) on disposal of fixed assets and other, net | 380 |
| | (27 | ) | | (1,178 | ) | | (505 | ) | |
(Gain) loss on disposal of fixed assets and other, net | | (Gain) loss on disposal of fixed assets and other, net | (1,999) | | | 380 | | | 762 | | | (1,178) | |
Change in fair value of contingent consideration | (8,000 | ) | | 1,567 |
| | (5,264 | ) | | 3,467 |
| Change in fair value of contingent consideration | 10,400 | | | (8,000) | | | 12,202 | | | (5,264) | |
Investment income and other, net | (361 | ) | | (1,727 | ) | | (999 | ) | | (2,697 | ) | Investment income and other, net | (347) | | | (361) | | | (857) | | | (999) | |
Foreign currency loss on intercompany loans | 7,753 |
| | 3,319 |
| | 8,191 |
| | 5,180 |
| |
Foreign currency (gain) loss on intercompany loans | | Foreign currency (gain) loss on intercompany loans | (4,157) | | | 7,753 | | | (9,832) | | | 8,191 | |
Interest expense, net | 24,479 |
| | 19,575 |
| | 73,303 |
| | 59,215 |
| Interest expense, net | 39,033 | | | 24,479 | | | 112,287 | | | 73,303 | |
Total Reported EBITDA | $ | 303,624 |
| | $ | 479,843 |
| | $ | 603,022 |
| | $ | 762,909 |
| Total Reported EBITDA | $ | 461,188 | | | $ | 303,624 | | | $ | 639,963 | | | $ | 603,022 | |
| | | | | | | | |
Mountain Reported EBITDA | $ | 301,429 |
| | $ | 468,089 |
| | $ | 594,472 |
| | $ | 743,907 |
| Mountain Reported EBITDA | $ | 457,989 | | | $ | 301,429 | | | $ | 654,174 | | | $ | 594,472 | |
Lodging Reported EBITDA | 2,925 |
| | 12,627 |
| | 11,485 |
| | 22,280 |
| Lodging Reported EBITDA | 4,233 | | | 2,925 | | | (10,681) | | | 11,485 | |
Resort Reported EBITDA | 304,354 |
| | 480,716 |
| | 605,957 |
| | 766,187 |
| Resort Reported EBITDA | 462,222 | | | 304,354 | | | 643,493 | | | 605,957 | |
Real Estate Reported EBITDA | (730 | ) | | (873 | ) | | (2,935 | ) | | (3,278 | ) | Real Estate Reported EBITDA | (1,034) | | | (730) | | | (3,530) | | | (2,935) | |
Total Reported EBITDA | $ | 303,624 |
| | $ | 479,843 |
| | $ | 603,022 |
| | $ | 762,909 |
| Total Reported EBITDA | $ | 461,188 | | | $ | 303,624 | | | $ | 639,963 | | | $ | 603,022 | |
The following table reconciles long-term debt, net to Net Debt (in thousands):
| | | | | | | | | | | | | | |
| | April 30 |
| | 2021 | | 2020 |
Long-term debt, net | | $ | 2,739,981 | | | $ | 2,365,372 | |
Long-term debt due within one year | | 113,454 | | | 63,566 | |
Total debt | | 2,853,435 | | | 2,428,938 | |
Less: cash and cash equivalents | | 1,344,702 | | | 482,656 | |
Net Debt | | $ | 1,508,733 | | | $ | 1,946,282 | |
|
| | | | | | | | |
| | April 30, |
| | 2020 | | 2019 |
Long-term debt, net | | $ | 2,365,372 |
| | $ | 1,310,870 |
|
Long-term debt due within one year | | 63,566 |
| | 48,504 |
|
Total debt | | 2,428,938 |
| | 1,359,374 |
|
Less: cash and cash equivalents | | 482,656 |
| | 59,636 |
|
Net Debt | | $ | 1,946,282 |
| | $ | 1,299,738 |
|
LIQUIDITY AND CAPITAL RESOURCES
Changes in significant sources of cash for the nine months ended April 30, 20202021 and 20192020 are presented by categories as follows (in thousands).
|
| | | | | | | |
| Nine Months Ended April 30, |
| 2020 | | 2019 |
Net cash provided by operating activities | $ | 466,979 |
| | $ | 665,596 |
|
Net cash used in investing activities | $ | (466,478 | ) | | $ | (552,654 | ) |
Net cash provided by (used in) financing activities | $ | 371,374 |
| | $ | (224,645 | ) |
| | | | | | | | | | | | | | |
| Nine Months Ended April 30, | | |
| 2021 | | 2020 | | | |
Net cash provided by operating activities | $ | 551,137 | | | $ | 466,979 | | | | |
Net cash used in investing activities | $ | (75,016) | | | $ | (466,478) | | | | |
Net cash provided by financing activities | $ | 474,316 | | | $ | 371,374 | | | | |
Nine months ended April 30, 20202021 compared to the nine months ended April 30, 20192020
We generated $467.0$551.1 million of cash from operating activities during the nine months ended April 30, 2020, a decrease2021, an increase of $198.6$84.2 million compared to $665.6$467.0 million of cash generated during the nine months ended April 30, 2019.2020. The decreaseincrease in operating cash flows was primarily a result of decreased Mountain and Lodging segment operating results for the nine months ended April 30, 2020 as compared to the nine months ended April 30, 2019, primarily due to the Resort Closures; a decrease(i) an increase in accounts payable and accrued liabilities (excluding accounts payable and accrued liabilities assumed through acquisitions) primarily associated with a larger increase in accrued trade payables, salaries and wages as of April 30, 2021 as compared to the beginning of the fiscal year relative to the increase in the prior year period, which was due to the impact of the Resort Closures in the prior year; (ii) increased Mountain and Lodging segment operating results for the nine months ended April 30, 2021 as compared to the nine months ended April 30, 2020, which includes the deferral impact of the Credit Offer from Fiscal 2020 to Fiscal 2021 as a result of the Resort Closures in the prior year; and (iii) a decrease in estimated income tax payments of $16.6 million. These increases were partially offset by an increase in cash interest payments of approximately $20.4$18.0 million primarily associated with incremental term loan and revolver borrowings under our Vail Holdings Credit Agreement and debt assumed in the Peak Resorts acquisition. These decreases were partially offset by increased North American pass product sales and receivable collections for the 2019/2020 North American ski season as compared to the prior year. Additionally, we generated approximately $4.4 million of proceeds from real estate development land parcel sales during the nine months ended April 30, 20202021 as compared to $0.1 million in proceeds from real estate development project closings that occurred in the prior year.year, primarily due to incremental cash interest payments on the 6.25% Notes issued in May 2020, for which the first interest payment was made on November 15, 2020.
Cash used in investing activities for the nine months ended April 30, 20202021 decreased by $86.2$391.5 million primarily due to cash payments of $327.6 million, net of cash acquired, related to the acquisition of Peak Resorts during the nine months ended April 30, 2020,2020. Additionally, capital expenditures decreased by $60.2 million primarily as compared to cash paymentsa result of $419.0 million, netthe deferral of cash acquired,discretionary capital projects related to the acquisitions of Triple Peaks, Stevens Pass, Falls Creek and Hotham during the nine months ended April 30, 2019.
Company’s decision to prioritize near-term liquidity.
Cash provided by financing activities increased by $596.0$102.9 million during the nine months ended April 30, 20202021 compared to the nine months ended April 30, 2019,2020, primarily due to (i) an increase in net borrowings underproceeds of $575.0 million from the revolver componentsissuance of our Vail Holdings Credit Agreement and Whistler Credit Agreement of $322.0 million and $200.7 million, respectively,0.0% Convertible Notes during the nine months ended April 30, 2020 compared to the nine months ended April 30, 2019, primarily relating to funds which2021; (ii) a decrease in dividends paid of $212.7 million; and (iii) a decrease in repurchases of common stock of $46.4 million. These increases were drawn aspartially offset by (i) a precautionary measure in order to increase our cash position and financial flexibility in light of the financial market conditions resulting from the COVID-19 pandemic; (ii) an increasedecrease in proceeds from incremental borrowings under the term loan portion of our Vail Holdings Credit Agreement from $265.6of $335.6 million during the nine months ended April 30, 2019, which were used to fund the Triple Peaks and Stevens Pass acquisitions, to $335.6 millionduring the nine months ended April 30, 2020, which werewas used to fund the Peak Resorts acquisition and (iii) a decrease in repurchases of common stock of $38.6 million. These increases in cash provided by financing activities were partially offset by (i) an increase in dividends paid of $23.2 million;acquisition; (ii) an increase in net payments on borrowings under the term loanrevolver portion of our Vail Holdings Credit Agreement of $7.5 million$192.0 million; (iii) an increase in net payments under the revolver component of our Whistler Credit Agreement of $186.2 million; (iv) an increase in quarterly payments on the term loan portion of our Vail Holdings Credit Agreement of $15.6 million; and (iii) a payment for contingent consideration(v) an increase in financing costs primarily associated with regard to our lease for Park City.the issuance of the 0.0% Convertible Notes.
Significant Sources of Cash
We had $482.7$1,344.7 million of cash and cash equivalents as of April 30, 2020,2021, compared to $59.6$482.7 million as of April 30, 2019.2020. The increase was primarily associated with the issuances of our $600.0 million 6.25% Notes in May 2020 and our $575.0 million 0.0% Convertible Notes in December 2020. Although we cannot predict the future impact associated with COVID-19 on our business, we currently anticipate that our Mountain and Lodging segment operating results will continue to provide a significant source of future operating cash flows (primarily those generated in our second and third fiscal quarters).
In addition to our $482.7$1,344.7 million of cash and cash equivalents at April 30, 2020,2021, we had $18.9$418.6 million available under the revolver component of our Vail Holdings Credit Agreement as of April 30, 20202021 (which represents the total commitment of $500.0 million less outstanding borrowings of $400.0 million and certain letters of credit outstanding of $81.1$81.4 million). Additionally, we had C$1.1249.1 million ($0.8202.7 million) available under the revolver component of our Whistler Credit Agreement (which represents the total commitment of C$300.0 million ($215.5244.1 million) less outstanding borrowings of C$298.050.0 million ($214.140.7 million) and a letter of credit outstanding of C$0.9 million ($0.60.7 million). We expect that our liquidity needs in the near term will be met by continued use of our existing cash and cash equivalents, operating cash flows and borrowings under both the Vail Holdings Credit Agreement and Whistler Credit Agreement, if needed. The Vail Holdings Credit Agreement and the Whistler Credit Agreement provide adequate flexibility and are priced favorably with any new borrowings currently priced at LIBOR plus 2.0%2.5% and Bankers Acceptance Rate plus 2.25%2.0%, respectively.
Significant Uses of Cash
Capital Expenditures
We have historically invested significant amounts of cash in capital expenditures for our resort operations, and we expect to continue to do so, subject to operating performance particularly as it relates to discretionary projects. On April 1, 2020, we announced that we would be reducing our capital plan for calendar 2020 as compared to our previously issued guidance by approximately $80 million to $85 million, with the vast majority of these savings coming from the deferral of many of our discretionary capital projects. We are planning to defer all new chair lifts, terrain expansions and other mountain and base area improvements, while continuing with the vast majority of our maintenance capital spending. Accordingly, we now currently anticipate that we will spend approximately $125 million to $130 million on resort capital expenditures during calendar year 2020. In addition, we may incur capital expenditures for retained ownership interests associated with third-party real estate development projects. Normal discretionaryCurrently planned capital expenditures primarily include investments that will allow us to maintain our high-quality standards, as well as certain incremental discretionary improvements at our Resorts, throughout our owned hotels and in technology that can impact the full network. We evaluate additional discretionary capital improvements based on an expected level of return on investment.
We currently anticipate we will spend approximately $115 million to $120 million on resort capital expenditures during calendar year 2021, excluding one-time items associated with integrations of $5 million and $12 million of reimbursable investments, as well as real estate related capital. Including these one-time items, we expect that our total capital plan will be approximately $135 million to $140 million. Included in these estimated capital expenditures are approximately $75 million to $80 million of maintenance capital expenditures, which are necessary to maintain appearance and level of service appropriate to our resort operations. Discretionary expenditures expected for calendar year 2021 include, among other projects, several investments which were previously deferred from calendar year 2020 as a result of COVID-19 and are subject to regulatory approvals, including the 250-acre lift-served terrain expansion in the McCoy Park area of Beaver Creek; a new four-person high speed lift to serve Peak 7 at Breckenridge; replacing the Peru lift at Keystone with a six-person high speed chairlift; replacing the Peachtree lift at Crested Butte with a new three-person fixed-grip lift; and an upgrade of the four-person Quantum lift at Okemo with a six-person high speed chairlift, relocating the existing four-person Quantum lift to replace the Green Ridge three-person fixed-grip chairlift. We will also continue to invest in company-wide technology enhancements to support our data driven approach, guest experience and corporate infrastructure which improve our scalability and efficiency as we work to optimize our processes, business analytics and cost discipline across the network, as well as upgrades to the infrastructure of our guest contact centers. We currently plan to utilize cash on hand, borrowings available under our credit agreements borrowings under the Notes and/or cash flow generated from future operations to provide the cash necessary to complete our capital plans.
Pursuant to the Third Amendment of our Vail Holdings Credit Agreement and discussed in further detail below, we will be prohibited, during the Financial Covenants Temporary Waiver Period, from making capital expenditures in excess of $200.0 million per twelve-month period ending January 31, other than non-recurring extraordinary capital expenditures incurred in connection with emergency repairs, life safety repairs or ordinary course maintenance repairs.
Acquisition of Peak Resorts
On September 23, 2019, we entered into an amendment to our Vail Holdings Credit Agreement in which the term loan was increased by approximately $335.6 million, and we utilized the proceeds to fund the acquisition of 100 percent of the outstanding stock of Peak Resorts on September 24, 2019 at a purchase price of $11.00 per share or approximately $264.5 million, and to prepay certain portions of Peak Resorts outstanding debt and lease obligations that were required to be paid in order to complete the transaction.
Debt
As of April 30, 2020,2021, principal payments on the majority of our long-term debt ($2.12.7 billion of the total $2.4$3.0 billion debt outstanding as of April 30, 2020)2021) are not due until fiscal year 2025 and beyond. As of April 30, 20202021 and 2019,2020, total long-term debt, net (including long-term debt due within one year) was $2,428.9$2,853.4 million and $1,359.4$2,428.9 million, respectively. Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) increaseddecreased from $1,299.7 million as of April 30, 2019 to $1,946.3 million as of April 30, 2020 primarilyto $1,508.7 million as a result of (i) $335.6 million in incremental term loans, as discussed above, resulting from the September 23, 2019 amendment of our Vail Holdings Credit Agreement and the assumption of certain debt obligations of Peak Resorts, which have maturities ranging from 2021 through 2036 and were recorded at their estimated fair values of approximately $184.7 million. See Notes to the Consolidated Condensed Financial Statements for additional information.April 30, 2021.
On April 28,December 18, 2020, through a wholly-owned subsidiary, we entered into a ThirdFourth Amendment to the Vail Holdings Credit Agreement. Pursuant to the ThirdFourth Amendment, among other terms, we will beare exempt from complying with the Vail Holdings Credit Agreement’s maximum leverage ratio, maximum senior secured leverage ratio and minimum interest coverage ratio financial maintenance covenants for each of the Financial Covenants Temporary Waiver Period,fiscal quarters ending through January 31, 2022 (unless we make a one-time irrevocable election to terminate such exemption period prior to such date), after which we will again be required to comply with such covenants starting with the fiscal quarter ending April 30, 2022 (or such earlier fiscal quarter as elected by us). After the expiration of the Financial Covenants Temporary Waiver Period:
•the maximum leverage ratio permitted under the maximum leverage ratio financial maintenance covenant reduces each quarter after the expiration of the Financial Covenants Temporary Waiver Period as follows:
(A) first full fiscal quarter:shall be 6.25 to 1.00;
(B) second full fiscal quarter: 5.75 to 1.00;
(C) third full fiscal quarter: 5.25•the maximum ratio permitted under the senior secured leverage ratio financial maintenance covenant shall be 4.00 to 1.00; and
(D) fourth full fiscal quarter and for each fiscal quarter thereafter: 5.00 to 1.00.
•the minimum interest coverage ratio permitted under the minimum interest coverage ratio financial maintenance covenant will be 2.00 to 1.00.
In addition, we will be required to comply with a monthly minimum liquidity test (liquidity is defined as unrestricted cash and temporary cash investments of VRI and its restricted subsidiaries and available commitments under our Vail Holdings Credit Agreement revolver) of not less than $150.0 million, during the period beginning July 31, 2020 and ending on the date we deliver
a compliance certificate for the Company and its subsidiaries’ first fiscal quarter following the end of the Financial Covenants Temporary Waiver Period.
We will also be prohibited from the following activities during the Financial Covenants Temporary Waiver Period (unless approval is obtained by a majority of the Lenders):
•paying any dividends or making share repurchases, unless (x) no default or potential default exists under the Vail Holdings Credit Agreement and (y) the Company haswe have liquidity (as defined above)below) of at least $400.0$300.0 million, and the aggregate amount of dividends paid and share repurchases made by the Company during the Financial Covenants Temporary Waiver Period may not exceed $38.2 million in any fiscal quarter;
making capital expenditures in excess of $200.0 million per 12-month period ending January 31, other than non-recurring extraordinary capital expenditures incurred in connection with emergency repairs, life safety repairs or ordinary course maintenance repairs;
•incurring any indebtedness secured by the collateral under the Vail Holdings Credit Agreement other than pursuant to the existing revolving commitments under the Credit Agreement;in an amount in excess of $1.75 billion; and
•making certain non-ordinary course investments in similar businesses, joint ventures and unrestricted subsidiaries unless the Company has liquidity (as defined above)below) of at least $300.0 million;million.
making
The Fourth Amendment also removed certain restrictions under the Financial Covenants Temporary Waiver Period, including (i) removing the restriction on acquisitions so long as we have liquidity (as defined below) of at least $300.0 million and (ii) removing the $200.0 million annual limit on capital expenditures.
In addition, we are required to comply with a monthly minimum liquidity test (liquidity is defined as unrestricted cash and temporary cash investments in non-subsidiaries in excess of $50.0VRI and its restricted subsidiaries and available commitments under the Vail Holdings Credit Agreement revolver) of not less than $150.0 million, induring the aggregate;period that began July 31, 2020 and
acquiring all or ending on the date we deliver a majoritycompliance certificate for the Company and its subsidiaries’ first fiscal quarter following the end of the capital stock or all or any substantial portion of the assets of any entity or merging or consolidating with another entity.Financial Covenants Temporary Waiver Period.
During the Financial Covenants Temporary Waiver Period, borrowings under the Vail Holdings Credit Agreement, including the term loan facility, will bear interest annually at LIBOR plus 2.50% and, for amounts in excess of $400.0 million, LIBOR will beis subject to a floor of 0.25% (which has decreased from the floor of 0.75%. In addition, pursuant that was in effect prior to the Third Amendment, the amount by which we are able to increase availability (under the revolver or in the form of term loans) will be increased to an aggregate principal amount not to exceed the greater of (i) $2.25 billion and (ii) the product of 3.25 and the trailing four-quarter Adjusted EBITDA (as defined in the Vail Holdings Credit Agreement)Fourth Amendment).
On May 4,December 18, 2020, we completed our offering of $600$575.0 million in aggregate principal amount of 6.25% senior notes0.0% Convertible Notes due 2025 at par2026 in a private placement conducted pursuant to Rule 144A of the Securities Act. The 0.0% Convertible Notes were issued under an Indenture dated December 18, 2020 (the “Notes”“Indenture”). between us and U.S. Bank National Association, as Trustee. The 0.0% Convertible Notes do not bear regular interest and the principal amount does not accrete. The 0.0% Convertible Notes mature on January 1, 2026, unless earlier repurchased, redeemed or converted.
The 0.0% Convertible Notes are our general senior unsecured obligations. The 0.0% Convertible Notes rank senior in right of payment to any future debt that is expressly subordinated, equal in right of payment with our existing and future liabilities that are not so subordinated, and are subordinated to all of our existing and future secured debt to the extent of the value of the assets securing such debt. The 0.0% Convertible Notes will also be structurally subordinated to all of the existing and future liabilities and obligations of our subsidiaries, including such subsidiaries’ guarantees of the Company6.25% Notes.
The initial conversion rate was 2.4560 shares per $1,000 principal amount of notes (the “Conversion Rate”), which represents an initial conversion price of approximately $407.17 per share (the “Conversion Price”), and is subject to adjustment upon the occurrence of certain specified events as described in the Indenture. The principal amount of the 0.0% Convertible Notes is required to be settled in cash. We will settle conversions by paying cash, delivering shares of our common stock, or a combination of the two, at our option.
Holders may convert their notes, at their option, only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter ending on March 31, 2021 if the last reported sale price per share of our common stock exceeds 130% of the Conversion Price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
•during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “Measurement Period”) in which the trading price per $1,000 principal amount of notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the Conversion Rate on such trading day;
•upon the occurrence of certain corporate events or distributions on our common stock, as described in the Indenture;
•if we call the 0.0% Convertible Notes for redemption; or
•at any time from, and including, July 1, 2025 until the close of business on the scheduled trading day immediately before the maturity date.
The 0.0% Convertible Notes will be guaranteed by certain of our domestic subsidiaries (other than certain excluded subsidiaries). A portion of the net proceeds was utilized to pay down the outstanding balance of the revolver component of its Vail Holdings Credit Agreement in its entirety (which will continue to be available to the Company to borrow including throughout the Financial Covenants Temporary Waiver Period), and we intend to use the remaining net proceeds for general corporate purposes and to pay the fees and expenses associated with the offering. We will pay interest on the Notes on May 15 and November 15 of each year commencing on November 15, 2020. The Notes will mature on May 15, 2025. The Notes are redeemable, in whole or in part, at our option at any time, and from time to time, on or after May 15, 2022 atJanuary 1, 2024 and on or before the redemption prices specified in an Indenture dated as of May 4, 2020 (the “Indenture”) plus accrued and unpaid interest. Prior to May 15, 2022, we may redeem some or all of25th scheduled trading day immediately before the Notesmaturity date, at a cash redemption price of 100% of the principal amount, plus accrued and unpaid interest, plus a “make-whole” premium as specified in the Indenture. In addition, priorequal to May 15, 2022, we may redeem up to 35% of the aggregate principal amount of the Notes with an amount not to exceed the net cash proceeds from certain equity offerings at the redemption price of 106.25% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. The Notes are senior unsecured obligationsspecial and additional interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of our common stock exceeds 130% of the Company and rank equally in rightConversion Price for a specified period of payment with existing and future senior indebtednesstime. If we elect to redeem less than all of the Company0.0% Convertible Notes, at least $50.0 million aggregate principal amount of notes must be outstanding and not subject to redemption as of the guarantorsrelevant redemption notice date. Calling any 0.0% Convertible Notes for redemption will constitute a make-whole fundamental change with respect to such notes, in which case the Conversion Rate applicable to the conversion of such notes will be increased in certain circumstances if such notes are converted after they are called for redemption.
In addition, upon the occurrence of a fundamental change (as defined in the Indenture).
The Indenture contains covenants that, among other things, restrict the ability, holders of the Company and the guarantors0.0% Convertible Notes may require us to incur liens on assets; merge or consolidate with another company or sell, assign, transfer, lease, convey or otherwise dispose ofrepurchase all or substantially alla portion of their notes at a cash repurchase price equal to the principal amount of the Company’s assets or engage in Salenotes to be repurchased, plus any accrued and Leaseback Transactionsunpaid special and additional interest, if any, to, but excluding, the applicable repurchase date. If certain fundamental changes referred to as make-whole fundamental changes (as defined in the Indenture). The Indenture does not contain any financial maintenance covenants. Certain occur, the Conversion Rate for the 0.0% Convertible Notes may be increased for a specified period of the covenants will not apply to the Notes so long as the Notes have investment grade ratings from two specified rating agencies and no event of default has occurred and is continuing under the Indenture. time.
The Indenture includes customary events of default, including failure to make payment, failure to comply with the obligations set forth in the Indenture, certain defaults on certain other indebtedness, and certain events of bankruptcy, insolvency or reorganization, and invalidityreorganization. We may elect, at our option, that the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will consist exclusively of the guaranteesright of the holders of the 0.0% Convertible Notes issued pursuant to receive additional interest on the Indenture.notes for up to 360 days following such failure.
TheAs of April 30, 2021, the Vail Holdings Credit Agreement provides for (i) a revolving loan facility in an aggregate principal amount of $500.0 million and (ii) a term loan facility of $1.25$1.2 billion. We expect that our liquidity needs in the near term will be met by continued use of operating cash flows and borrowings under the 6.25% Notes, the 0.0% Convertible Notes, the Vail Holdings Credit Agreement and the Whistler Credit Agreement.
Our debt service requirements can be impacted by changing interest rates as we had approximately $1.5$0.8 billion of variable-rate debt outstanding as of April 30, 2020, although we repaid $400.0 million of the revolver component of our Vail Holdings Credit
Agreement subsequent to April 30, 2020 with proceeds from the Notes.2021. A 100-basis point change in our borrowing rates would cause our annual interest payments to change by approximately $14.9$8.5 million. Additionally, the annual payments associated with the financing of the Canyons Resort transaction increase by the greater of CPI less 1%, or 2%. The fluctuation in our debt service requirements, in addition to interest rate and inflation changes, may be impacted by future borrowings under our credit agreements or other alternative financing arrangements we may enter into. Our long term liquidity needs depend upon operating results that impact the borrowing capacity under our credit agreements, which can be mitigated by adjustments to capital expenditures, flexibility of investment activities and the ability to obtain favorable future financing. We can continue to respond to liquidity impacts of changes in the business and economic environment, including the effects of the COVID-19 pandemic, by managing our capital expenditures, variable operating expenses, the timing of new real estate development activity and the payment of cash dividends on our common stock.
Dividend Payments
We announced on April 1, 2020 that we would be suspendingsuspended the declaration of our quarterly dividend for at least the next two quarters in response to the COVID-19 pandemic. Subsequently,Additionally, pursuant to the ThirdFourth Amendment, of the Vail Holdings Credit Agreement and as discussed above, we will beare prohibited from paying any dividends during the Financial Covenants Temporary Waiver Period unless (x) no default or potential default exists under the Vail Holdings Credit Agreement and (y) the Company has liquidity (as defined above)below) of at least $400.0$300.0 million, and the aggregate amount of dividends paid and share repurchases made by the Company during the Financial Covenants Temporary Waiver Period may not exceed $38.2 million in any fiscal quarter. For the nine months ended April 30, 2020,2021, we paiddid not pay cash dividends of $5.28 per share ($212.7 million in the aggregate). These dividends were funded through available cash on hand and borrowings under the revolving portion of our Vail Holdings Credit Agreement.dividends. The amount, if any, of the dividends to be paid in the future will depend on our available cash on hand, anticipated cash needs, overall financial condition, restrictions contained in our Vail Holdings Credit Agreement, future prospects for earnings and cash flows, as well as other factors considered relevant by our Board of Directors.
Share Repurchase Program
Our share repurchase program is conducted under authorizations made from time to time by our Board of Directors. On March 9, 2006, our Board of Directors initially authorized the repurchase of up to 3,000,000 shares of Vail Resorts common stock (“Vail Shares”) and later authorized additional repurchases of up to 3,000,000 Vail Shares (July 16, 2008) and 1,500,000 Vail Shares (December 4, 2015), for a total authorization to repurchase up to 7,500,000 Vail Shares. During the nine months ended April 30, 2020 and 2019, respectively, we repurchased 256,418 Vail Shares (at a total cost of approximately $46.4 million) and 353,007 Vail Shares (at a total cost of approximately $85.0 million). Since inception of this stock repurchase program through April 30, 2020, we have repurchased 6,161,141 Vail Shares at a cost of approximately $404.4 million. As of April 30, 2020, 1,338,859 Vail Shares remained available to repurchase under the existing repurchase authorization. Pursuant to the ThirdFourth Amendment, of the Vail Holdings Credit Agreement and as discussed above, we will beare prohibited from repurchasing shares of common stock during the Financial Covenants Temporary Waiver Period unless (x) no default or potential default exists under the Vail Holdings Credit Agreement and (y) the Company has liquidity (as defined above)below) of at least $400.0$300.0 million, and the aggregate amount of dividends paid and share repurchases made by the Company during the Financial Covenants Temporary Waiver Period may not exceed $38.2 million in any fiscal quarter. We did not repurchase Vail Shares during the nine months ended April 30, 2021. During the nine months ended April 30, 2020, we repurchased 256,418 Vail Shares (at a total cost of approximately $46.4 million). Since inception of this stock repurchase program through April 30, 2021, we have repurchased 6,161,141 Vail Shares at a cost of approximately $404.4 million. As of April 30, 2021, 1,338,859 Vail Shares remained available to repurchase under the existing repurchase authorization. Vail Shares purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of shares under our share award plan. Repurchases under the program may 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 Vail Shares that may be repurchased under the program will depend on several factors, including our future financial performance, our available cash resources and competing uses for cash that may arise in the future, the restrictions in our Vail Holdings Credit Agreement, prevailing prices of Vail Shares and the number of Vail Shares that become available for sale at prices that we believe are attractive. The share repurchase program has no expiration date.
Covenants and Limitations
We must abide by certain restrictive financial covenants under our credit agreements. The most restrictive of those covenants include the following covenants: for the Vail Holdings Credit Agreement, Net Funded Debt to Adjusted EBITDA ratio, Secured Net Funded Debt to Adjusted EBITDA and the Interest Coverage ratio (each as defined in the Vail Holdings Credit Agreement); for the Whistler Credit Agreement, Consolidated Total Leverage Ratio and Consolidated Interest Coverage Ratio (each as defined in the Whistler Credit Agreement); and for the EPR Secured Notes, Maximum Leverage Ratio and Consolidated Fixed Charge Ratio (each as defined in the EPR Agreements). In addition, our financing arrangements limit our ability to make certain restricted payments, pay dividends on or redeem or repurchase stock, make certain investments, make certain affiliate transfers and may limit our ability to enter into certain mergers, consolidations or sales of assets and incur certain indebtedness. Our borrowing availability under the Vail Holdings Credit Agreement is primarily determined by the Net Funded Debt to Adjusted EBITDA ratio, which is based on our segment operating performance, as defined in the Vail Holdings Credit Agreement. Our borrowing availability under the Whistler Credit Agreement is primarily determined based on the commitment size of the credit facility and our compliance with the terms of the Whistler Credit Agreement.
Pursuant to the ThirdFourth Amendment, of the Vail Holdings Credit Agreement and discussed above in further detail, the Company will bewe are exempt from complying with the restrictive financial covenants of the Vail Holdings Credit Agreement during the Financial Covenants Temporary Waiver Period, but will beare required to comply with a monthly minimum liquidity test during such period.period (liquidity is defined as unrestricted cash and temporary cash investments of VHI and its restricted subsidiaries and available commitments under the Vail Holdings Credit Agreement revolver).
We were in compliance with all restrictive financial covenants in our debt instruments as of April 30, 2020.2021. We expect that we will meet all applicable financial maintenance covenants in effect in our credit agreements throughoutthrough the fiscal year ending July 31, 2020.next twelve months. However, there can be no assurance we will meet such financial covenants. If such covenants are not met, we would be required to seek a waiver or amendment from the banks participating in the credit agreements. There can be no assurance that such waivers or amendments would be granted, which could have a material adverse impact on our liquidity.
OFF BALANCE SHEET ARRANGEMENTS
We do not have off balance sheet transactions that are expected to have a material effect on our financial condition, revenue,revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
FORWARD-LOOKING STATEMENTS
Except for any historical information contained herein, the matters discussed or incorporated by reference in this Form 10-Q contain certain forward-looking statements within the meaning of the federal securities laws. These statements relate to analyses and other information available as of the date hereof, which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our contemplated 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” 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:
•the ultimate duration of COVID-19 and its short-term and long-term impacts on consumer behaviors, the economy generally, and our business and results of operations, including the ultimate amount of refunds that we would be required to refund to our pass product holders for qualifying circumstances under our recently launched Epic Coverage program;
risks related to our indebtedness and our ability to satisfy our debt service requirements under our outstanding debt including •the Notes, which could reduce our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities and other purposes;
prolonged weakness in general economic conditions, including adverse effects on the overall travel and leisure related industries;
willingness or ability of our guests to travel due to terrorism, the uncertainty of military conflicts or outbreaks of contagious diseases (such as the current outbreak of COVID-19)ongoing COVID-19 pandemic), and the cost and availability of travel options and changing consumer preferences;preferences or willingness to travel;
•prolonged weakness in general economic conditions, including adverse effects on the overall travel and leisure related industries;
•unfavorable weather conditions or the impact of natural disasters;
•risks related to our reliance on information technology, including our failure to maintain the integrity of our customer or employee data and our ability to adapt to technological developments or industry trends;
•risks related to cyber-attacks;
•the seasonality of our business combined with adverse events that may occur during our peak operating periods;
•competition in our mountain and lodging businesses;
•the high fixed cost structure of our business;
•our ability to fund resort capital expenditures;
•risks related to a disruption in our water supply that would impact our snowmaking capabilities and operations;
•our reliance on government permits or approvals for our use of public land or to make operational and capital improvements;
•risks related to federal, state, local and foreign government laws, rules and regulations;
•risks related to changes in security and privacy laws and regulations which could increase our operating costs and adversely affect our ability to market our products, properties and services effectively;
•risks related to our workforce, including increased labor costs, loss of key personnel and our ability to hire and retain a sufficient seasonal workforce;
•adverse consequences of current or future legal claims;
•a deterioration in the quality or reputation of our brands, including our ability to protect our intellectual property and the risk of accidents at our mountain resorts;
•our ability to successfully integrate acquired businesses, or that acquired businesses may fail to perform in accordance with expectations, including Peak Resorts, Hotham, Falls Creek Peak Resorts or future acquisitions;
•our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 with respect to acquired businesses;
•risks associated with international operations;
•fluctuations in foreign currency exchange rates where the Company has foreign currency exposure, primarily the Canadian and Australian dollars;dollars, as compared to the U.S. dollar;
•changes in accounting judgments and estimates, accounting principles, policies or guidelines or adverse determinations by taxing authorities, as well as risks associated with uncertainty of the impact of tax reform legislation in the United States;
•risks related to our indebtedness and our ability to satisfy our debt service requirements under our outstanding debt including our unsecured senior notes, which could reduce our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities and other purposes; and
•a materially adverse change in our financial condition.
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-Q, including investors and prospective investors, are cautioned not to place undue reliance on such forward-looking statements. Actual results may differ materially from those suggested by the forward-looking statements that we make for a number of reasons, including those described in Part I, Item 1A “Risk Factors” of our Form 10-K.10-K and Part II, Item 1A “Risk Factors” of this Form 10-Q for the quarter ended April 30, 2021. All forward-looking statements are made only as of the date hereof. Except as may be required by law, we do not intend to update these forward-looking statements, even if new information, future events or other circumstances have made them incorrect or misleading.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk. Our exposure to market risk is limited primarily to the fluctuating interest rates associated with variable rate indebtedness. As of April 30, 2020,2021, we had approximately $1.5$0.8 billion of variable rate indebtedness (after taking into consideration $400.0 million in interest rate swaps which converts variable-rate debt to fixed-rate debt), representing approximately 61.5%29% of our total debt outstanding, at an average interest rate of 3.7% for bothduring the three and nine months ended April 30, 2020.2021 of approximately 2.6% and 2.9%, respectively. Based on variable-rate borrowings outstanding as of April 30, 2020,2021, a 100-basis point (or 1.0%) change in our borrowing rates would result in our annual interest payments changing by approximately $14.9$8.5 million. Our market risk exposure fluctuates based on changes in underlying interest rates.
During the nine months ended April 30, 2020, we entered into interest rate swap agreements to fix the interest rate on a portion of our Vail Holdings Credit Agreement, which has the effect of fixing the underlying floating interest rate component of $400.0 million of the principal amount outstanding at an effective rate of 1.46%.
Foreign Currency Exchange Rate Risk. We are exposed to currency translation risk because the results of our international entities are reported in local currency, which we then translate to U.S. dollars for inclusion in our Consolidated Condensed Financial Statements. As a result, changes between the foreign exchange rates, in particular the Canadian dollar and Australian dollar compared to the U.S. dollar, affect the amounts we record for our foreign assets, liabilities, revenues and expenses, and could have a negative effect on our financial results. Additionally, we also have foreign currency transaction exposure from an intercompany loan to Whistler Blackcomb that is not deemed to be permanently invested, which has and could materially change due to fluctuations in the Canadian dollar exchange rate. The results of Whistler Blackcomb and our Australian resorts are reported in Canadian dollars and Australian dollars, respectively, which we then translate to U.S. dollars for inclusion in our Consolidated Condensed Financial
Statements. We do not currently enter into hedging arrangements to minimize the impact of foreign currency fluctuations on our operations.
The following table summarizes the amounts of foreign currency translation adjustments, net of tax, representing losses,gains (losses), and foreign currency lossgain (loss) on intercompany loans recognized in comprehensive income (in thousands).
| | | | | | | | | | | |
| Nine Months Ended April 30, |
| 2021 | | 2020 |
Foreign currency translation adjustments, net of tax | $ | 132,167 | | | $ | (78,260) | |
Foreign currency gain (loss) on intercompany loans | $ | 9,832 | | | $ | (8,191) | |
|
| | | | | | | |
| Nine Months Ended April 30, |
| 2020 | | 2019 |
Foreign currency translation adjustments, net of tax | $ | (78,260 | ) | | $ | (44,862 | ) |
Foreign currency loss on intercompany loans | $ | (8,191 | ) | | $ | (5,180 | ) |
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Management of the Company, under the supervision and with participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”), as of the end of the period covered by this report on Form 10-Q.
During the nine months ended April 30, 2020, the Company implemented certain internal controls in connection with its adoption of the new lease accounting standard. There were no other changes in the Company’s internal control over financial reporting that occurred during its most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Based upon their evaluation of the Company’s disclosure controls and procedures, the CEO and the CFO concluded that the disclosure controls and procedures 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 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.
Changes in Internal Controls
There were no changes in the Company’s internal control over financial reporting that occurred during the three and nine months ended April 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a party to various lawsuits arising in the ordinary course of business. We believe that we have adequate insurance coverage and/or have accrued for all loss contingencies for asserted and unasserted matters and that, although the ultimate outcome of such claims cannot be ascertained, current pending and threatened claims are not expected, individually or in the aggregate, to have a material adverse impact on our financial position, results of operations and cash flows.
ITEM 1A. RISK FACTORS
In addition to the information set forth below and elsewhere in this Form 10-Q, you should carefully consider the factors we previously disclosed in our Annual Report on Form 10-K, filed with the SEC on September 26, 2019,24, 2020, as of and for the year ended July 31, 2019,2020, in addition to the risk factorsfactor set forth below. These risks could materially and adversely affect our business, financial condition and results of operations.
The current outbreak of the novel coronavirus, or COVID-19 has had, and is expected tocould continue to have, a significant negative impact on our financial condition and operations. Further, the spread of the COVID-19 outbreak has caused severe disruptions in the U.S. and global economyeconomies and financial markets and could potentially create widespread business continuity issues of an as yet unknown magnitude and duration. Any future outbreak of any other highly infectious or contagious disease could have a similar impact.
In late 2019, a novel strainThe outbreak of coronavirus (COVID-19) was reportedCOVID-19 has disrupted our business, and has had and could continue to have surfaced in Wuhan, China. COVID-19 has since spread globally, including to every state in the United States. In March 2020, the World Health Organization declared COVID-19 a pandemicsignificant negative impact on our business, financial performance and the United States declared a national emergency with respect to COVID-19.
condition, operating results, liquidity and cash flows.Governmental authorities nationallyhave taken and in affected regions are taking increasingly dramaticcontinue to take actions andby mandating various restrictions in an effort to slow the spread of the virus,novel coronavirus (COVID-19), including travel restrictions, border closures, restrictions on public gatherings, ‘‘shelteroccupancy limits, “shelter at home’’ orders and advisories, and quarantining of people who may have been exposed to the virus. For instance, on March 14, 2020, following the Company’s own announcement that it was closing its North American mountain resorts, the governor of Colorado issued an executive order directing all ski area operators to suspend operations at ski areas in the state. The order was extended through the end of April 2020.quarantining. The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. Many experts predict thatmarkets, with particular risk to the outbreak will trigger a period of material global economic slowdown or a global recession.travel and leisure industry, which is disproportionately impacted by travel restrictions and other public health restrictions.
In response to the continued challenges associated with the spread of COVID-19, we closed all of our North American mountain resorts, retail/rental stores and lodging properties early for the remainder of the 2019/2020 North American ski season. The outbreakseason in March 2020. We also closed our Hotham and Falls Creek resorts on July 6, 2020 due to a “stay at home” order put in place by the Victorian government. On March 30, 2021, towards the end of the operating season and following an order from the government of British Columbia as a result of a reemergence of COVID-19 has disruptedcases in the region, we closed Whistler Blackcomb.Other than our businessclosure of Whistler Blackcomb late in the season, our North American resorts were operational throughout the 2020/2021 ski season, and has hadwe are monitoring public health orders and is expected toregulations affecting our summer operations and the 2021 Australian ski season.
Even our operations that have resumed continue to have a significant negative impact on our business, financial performancebe adversely impacted by government mandated restrictions (such as density limitations and condition, operating results, liquiditytravel restrictions); measures we voluntarily implement; the distancing practices and cash flows. health concerns of consumers; hiring and retaining of talent and production of workers; and logistical limitations. Factors that would negatively impact our ability to successfully operate during the current outbreak of COVID-19 or another pandemic include:
•our ability to open and keep open our resorts in season, including our North American resortsResorts for their upcoming summer season or beyond and our Australian resorts for their upcoming winter season in a timely manner, or at all;season;
•our ability to attract and retain guests given the risks, or perceived risks, of gathering in public places;
•the willingness of guests to travel or purchase advanced commitment products, such as our portfolio of season pass products;
•existing or future restrictions imposed by governmental authorities, including quarantine requirements, capacity, indoor dining or other restrictions that may restrictaffect our operations or the ability of our guests to return to our resorts;Resorts;
•actual or perceived deterioration or weakness in economic conditions, unemployment levels, the job or housing markets, consumer debt levels or consumer confidence, as well as other adverse economic or market conditions due to COVID-19 or otherwise, and their collective impacts on demand for travel and leisure;
our ability to adjust capital spending and maintain sufficient liquidity to remain positioned for long-term success;
•our ability to incentivize and retain our current employees, reinstate our furloughedattract and hire sufficient seasonal employees, when we reopen, and attract future seasonal employees;maintain current level of staffing;
•the risk of lawsuits related to COVID-19 or another pandemic;
•our ability to access debt and equity capital on attractive terms, or at all; and
•the impact of disruption and instability in the global financial markets or deteriorationsdeterioration in credit and financing conditions on our access to capital necessary to fund operating costs, including maintenance capital spending, or to address maturing liabilities.
The extent and duration of the impact of the outbreak of COVID-19 on our business, consolidated results of operations, consolidated financial position and consolidated cash flows, will depend largely on future developments, including the duration and spread of the outbreak within, the U.S.,speed and coverage of vaccine rollouts, any continuing travel restrictions or vaccination requirements in connection with travel, the related impact on factors affecting guest behavior, including consumer confidence and spending, and when we will be able to resume normal operations, all of which are highly uncertain and cannot be predicted. In April 2020 we introduced Epic Coverage, for the 2020/2021 North American ski season, which provides refunds to all pass holders in the event of certain resort closures (including closures due to COVID-19) for any portion of the season that is not able to be utilized.utilized, subject to express terms and conditions. Accordingly, to the extent that any of our resortsResorts would need to be closed for all or any portion of the 2020/2021 North American ski season (whether(including due to COVID-19 or otherwise)COVID-19), we could be required to provide a significant amount of refunds to our customers, subject to express terms and conditions, which could have a material negative impact on our financial performance and condition.
We may be required to raise additional capital in the future and our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings. The terms of future debt agreements could include more restrictive covenants, or require incremental collateral, which may further restrict our business operations. There is no guarantee that debt financingsor equity markets will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations. In addition, because of reduced travel demand, certain of our leased properties may not generate revenue sufficient to meet operating expenses.
COVID-19 presents material uncertainty and risk with respect to our business, financial performance and condition, operating results, liquidity and cash flows. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in the Risk Factors presented in our Annual Report on Form 10-K, filed with the SEC on September 26, 2019, as of and for the year ended July 31, 2019, and our subsequent filings with the SEC. Any future outbreak of any other highly infectious or contagious disease could have a similar impact.
Our indebtedness could adversely affect our financial condition, our ability to operate our business, react to changes in the economy or our industry, prevent us from fulfilling our obligations under the notes, pay our other debts and could divert our cash flow from operations for debt payments.
We have a substantial amount of debt following the consummation of the offering of Unsecured Senior Notes (the “Notes”) in May 2020, which requires significant interest and principal payments. As of April 30, 2020, on an as adjusted basis after giving effect to the offering of the Notes and the application of the proceeds, as well as the subsequent pay down of the revolver component of the Vail Holdings Credit Agreement in its entirety, we would have had $2,614.7 million in total indebtedness outstanding. In addition to the Notes, this amount includes (i) $1,218.8 million of indebtedness pursuant to the term loan facility under Vail Holdings, Inc.’s Eighth Amended and Restated Credit Agreement, as amended (the ‘‘Vail Holdings Credit Agreement’’), (ii) $214.1 million of indebtedness under the Whistler Credit Agreement, (iii) $344.6 million with respect to the Canyons Obligation, (v) $114.2 million with respect to the EPR Secured Notes under the master credit and security agreements and other related agreements with EPT Ski Properties, Inc. and its affiliates (‘‘EPR’’), as amended (collectively, the ‘‘EPR Agreements’’ and together with the Vail Holdings Credit Agreement and the Whistler Credit Agreement, the ‘‘Credit Agreements,’’ and such facilities, the ‘‘Credit Facilities’’) and (vi) $51.5 million with respect to the EB-5 Development Notes. Subject to the limits contained in the Credit Agreements, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisition, or for other purposes. If we do so, the risks related to our high level of debt could increase. Specifically, our high level of debt could have important consequences to the holders of the notes, including the following:
it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt, including the Notes;
our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or other general corporate purposes may be impaired;
requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, including the notes, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities and other purposes;
we are more vulnerable to economic downturns and adverse industry conditions and our flexibility to plan for, or react to, changes in our business or industry is more limited;
our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may be compromised due to our high level of debt and the restrictive covenants in the Credit Agreements and the Indenture that will govern the notes;
our ability to borrow additional funds or to refinance debt may be limited; and
it may cause potential or existing customers to not contract with us due to concerns over our ability to meet our financial obligations, such as insuring against our professional liability risks, under such contracts.
Furthermore, our debt under our Credit Facilities bears interest at variable rates.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Exchangeable Shares
On October 17, 2016, the Company acquired all of the outstanding common shares of Whistler Blackcomb. Part of the consideration paid to Whistler Blackcomb shareholders consisted of 3,327,719 Vail Shares and 418,095 shares of the Company’s wholly-owned Canadian subsidiary (the “Exchangeco Shares”). Each Exchangeco Share is exchangeable by the holder thereof for one Vail Share (subject to customary adjustments for stock splits or other reorganizations). In addition, the Company may require all outstanding Exchangeco Shares to be exchanged into an equal number of Vail Shares upon the occurrence of certain events and at any time following the seventh anniversary of the closing of the transaction. Exchangeco Shares, while outstanding, are substantially the economic equivalent of the corresponding Vail Shares. As of April 30, 2020, 54,4832021, 33,882 Exchangeco Shares had not yet been exchanged into Vail Shares.
The shares issued at closing of the Whistler Blackcomb acquisition were issued in reliance upon Section 3(a)(10) of the Securities Act, of 1933, as amended (the “Securities Act”), which exempts from the registration requirements under the Securities Act any securities that are issued in exchange for one or more bona fide outstanding securities where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court expressly authorized by law to grant such approval. Although exempt from the registration requirements under the Securities Act, such shares are listed and freely tradeable on the New York Stock Exchange.
Repurchase of Equity Securities
The following table sets forth our purchases of shares of our common stock during the third quarter of fiscal 2020:
|
| | | | | | | | | | | | |
Period | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) |
February 1, 2020 - February 29, 2020 | — |
| | $ | — |
| | — |
| | 1,499,659 |
|
March 1, 2020 - March 31, 2020 | 160,800 |
| | $ | 155.33 |
| | 160,800 |
| | 1,338,859 |
|
April 1, 2020 - April 30, 2020 | — |
| | $ | — |
| | — |
| | 1,338,859 |
|
Total | 160,800 |
| | $ | 155.33 |
| | 160,800 |
| | 1,338,859 |
|
|
| |
(1) | The share repurchase program is conducted under authorizations made from time to time by our Board of Directors. The Board of Directors initially authorized the repurchase of up to 3,000,000 Vail Shares (March 9, 2006), and later authorized additional repurchases of up to 3,000,000 Vail Shares (July 16, 2008) and 1,500,000 Vail Shares (December 4, 2015), for a total authorization to repurchase up to 7,500,000 Vail Shares. As of April 30, 2020, 1,338,859 Vail Shares remained available to repurchase under the existing repurchase authorization. Repurchases under these authorizations may be made from time to time at prevailing prices as permitted by applicable laws, and subject to market conditions and other factors. These authorizations have no expiration date. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The following exhibits are either filed or furnished herewith or, if so indicated, incorporated by reference to the documents indicated in parentheses, which have previously been filed or furnished with the Securities and Exchange Commission.
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Exhibit Number | Description |
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Exhibit
Number
| Description |
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10.131.1 | |
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31.1 | |
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31.2 | |
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32 | |
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101.INS | XBRL Instance Document - the instance document does not appear in the interactive data file as its XBRL tags are embedded within the inline XBRL document. |
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101.SCH | XBRL Schema Document. |
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101.CAL | XBRL Calculation Linkbase Document. |
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101.DEF | XBRL Definition Linkbase Document. |
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101.LAB | XBRL Label Linkbase Document. |
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101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 | The cover page from this Quarterly Report on Form 10-Q, formatted in inline XBRL. |
SIGNATURES
Pursuant to the requirements 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. |
| | |
| | Vail Resorts, Inc. |
| | |
Date: June 4, 20207, 2021 | By: | /s/ Michael Z. Barkin |
| | Michael Z. Barkin |
| | Executive Vice President and Chief Financial Officer |
| | (Principal Financial Officer) |
| | |
Date: June 4, 20207, 2021 | By: | /s/ Ryan H. SiurekNathan Gronberg |
| | Ryan H. SiurekNathan Gronberg |
| | Senior Vice President, Controller and
Chief Accounting Officer
|
| | (Principal Accounting Officer) |