Vail Resorts(MTN) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The company presents its unaudited condensed financial statements and related notes for the period Consolidated Condensed Balance Sheets Total Assets (in thousands) | Date | Amount | | :--- | :--- | | April 30, 2022 | $6,397,294 | | July 31, 2021 | $6,251,056 | | April 30, 2021 | $6,276,637 | Total Liabilities (in thousands) | Date | Amount | | :--- | :--- | | April 30, 2022 | $4,332,114 | | July 31, 2021 | $4,421,988 | | April 30, 2021 | $4,249,940 | Total Stockholders' Equity (in thousands) | Date | Amount | | :--- | :--- | | April 30, 2022 | $2,065,180 | | July 31, 2021 | $1,829,068 | | April 30, 2021 | $2,026,697 | Consolidated Condensed Statements of Operations Total Net Revenue (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $1,176,665 | $889,078 | +32.35% | | Nine Months Ended April 30 | $2,258,776 | $1,705,508 | +32.44% | Net Income Attributable to Vail Resorts, Inc. (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $372,550 | $274,629 | +35.64% | | Nine Months Ended April 30 | $456,609 | $268,661 | +70.03% | Diluted Net Income Per Share | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $9.16 | $6.72 | +36.31% | | Nine Months Ended April 30 | $11.20 | $6.58 | +70.21% | Consolidated Condensed Statements of Comprehensive Income Comprehensive Income Attributable to Vail Resorts, Inc. (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $372,891 | $317,046 | +17.62% | | Nine Months Ended April 30 | $439,569 | $376,141 | +16.87% | - Foreign currency translation adjustments resulted in a loss of $15.2 million for the three months ended April 30, 2022, compared to a gain of $54.9 million in the prior year, and a loss of $48.9 million for the nine months ended April 30, 2022, compared to a gain of $132.2 million in the prior year[13] Consolidated Condensed Statements of Stockholders' Equity - Total Vail Resorts, Inc. stockholders' equity increased from $1,565,542 thousand as of January 31, 2022, to $1,829,317 thousand as of April 30, 2022[16] - The Company repurchased common stock totaling $37.5 million during the three and nine months ended April 30, 2022[16][17] - Cash dividends declared per share were $1.91 for the three months ended April 30, 2022, and $3.67 for the nine months ended April 30, 2022, with no dividends paid in the prior year periods[11][16][17] Consolidated Condensed Statements of Cash Flows Net Cash Provided by Operating Activities (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Nine Months Ended April 30 | $772,984 | $551,137 | +40.25% | Net Cash Used in Investing Activities (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Nine Months Ended April 30 | $(255,565) | $(75,016) | +240.68% | Net Cash (Used in) Provided by Financing Activities (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Nine Months Ended April 30 | $(352,653) | $474,316 | -174.35% | Notes to Consolidated Condensed Financial Statements Note 1. Organization and Business - The Company operates in three segments: Mountain (40 destination mountain resorts and regional ski areas, ancillary services), Lodging (luxury hotels, condominiums, NPS concessionaire properties, transportation, golf courses), and Real Estate (owns, develops, and sells real estate)[22][23][24][25] - The business is seasonal, with peak operating seasons primarily from mid-November to mid-April in North America and June to early October in Australia[26] - The Company announced an agreement to acquire a 55% ownership stake in Andermatt-Sedrun Sport AG for CHF149 million, expected to close later in calendar year 2022[27] Note 2. Summary of Significant Accounting Policies - The financial statements are condensed and unaudited, reflecting normal recurring adjustments, and interim results are not indicative of the full fiscal year due to seasonality[28] - The Company is evaluating ASU 2020-04 (Reference Rate Reform) but does not expect a material effect[31] - The Company will adopt ASU 2020-06 (Convertible Instruments) on August 1, 2022, using the modified retrospective method, which will reclassify the equity component of 0.0% Convertible Notes to long-term debt and eliminate related interest expense amortization[32] Note 3. Revenues - Revenue from pass products is recognized on a straight-line basis throughout the ski season, based on skiable days[34] Total Mountain Net Revenue (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $1,084,635 | $829,912 | +30.69% | | Nine Months Ended April 30 | $2,028,310 | $1,571,369 | +29.08% | Total Lodging Net Revenue (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $91,901 | $58,366 | +57.48% | | Nine Months Ended April 30 | $229,842 | $132,770 | +73.12% | Note 4. Net Income per Share Basic Net Income Per Share Attributable to Vail Resorts, Inc. | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $9.18 | $6.82 | +34.60% | | Nine Months Ended April 30 | $11.27 | $6.67 | +69.00% | Diluted Net Income Per Share Attributable to Vail Resorts, Inc. | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $9.16 | $6.72 | +36.31% | | Nine Months Ended April 30 | $11.20 | $6.58 | +70.21% | - Cash dividends declared per share were $1.91 for the three months and $3.67 for the nine months ended April 30, 2022, with no dividends in the prior year[43] Note 5. Long-Term Debt Total Debt (in thousands) | Date | Amount | | :--- | :--- | | April 30, 2022 | $2,830,366 | | July 31, 2021 | $2,948,514 | | April 30, 2021 | $2,958,188 | - The Vail Holdings Credit Agreement term loan facility has $1.1 billion outstanding, with quarterly principal amortization of approximately $15.6 million, maturing in September 2024[45] - The Company recognized non-cash foreign currency losses of $1.0 million and $3.1 million for the three and nine months ended April 30, 2022, respectively, on an intercompany loan to Whistler Blackcomb, compared to gains in the prior year[48] Note 6. Acquisitions - On December 31, 2021, the Company acquired Seven Springs Mountain Resort, Hidden Valley Resort, and Laurel Mountain Ski Area for approximately $116.5 million cash[49] - The acquisition included mountain operations, base area skier services, a hotel, and a conference center[49] - Goodwill of $4.991 million was recognized, primarily attributable to expected synergies and the assembled workforce[51] Note 7. Supplementary Balance Sheet Information Property, Plant and Equipment, Net (in thousands) | Date | Amount | | :--- | :--- | | April 30, 2022 | $2,143,285 | | July 31, 2021 | $2,067,876 | | April 30, 2021 | $2,116,795 | Total Accounts Payable and Accrued Liabilities (in thousands) | Date | Amount | | :--- | :--- | | April 30, 2022 | $742,245 | | July 31, 2021 | $815,472 | | April 30, 2021 | $567,264 | - Goodwill decreased by $33.5 million due to foreign currency exchange rates, from $1,781,047 thousand at July 31, 2021, to $1,752,533 thousand at April 30, 2022, partially offset by acquisition-related goodwill of $4.991 million[54] Note 8. Fair Value Measurements - Contingent Consideration, classified as a Level 3 liability, increased from $29.6 million at July 31, 2021, to $43.7 million at April 30, 2022, primarily due to an estimated increase in the Fiscal 2022 payment[59][61] - The estimated fair value of Contingent Consideration is determined using an option pricing valuation model with key unobservable inputs including a discount rate of 11.1% and volatility of 17.0%[60] Note 9. Commitments and Contingencies - The Company credit-enhances $6.3 million of bonds issued by Holland Creek Metropolitan District through a $6.4 million letter of credit[62] - As of April 30, 2022, the Company had $77.4 million in letters of credit outstanding and $13.2 million in surety bonds[63] - The Company is self-insured for U.S. health benefit plans and most U.S. workers' compensation claims, with liabilities included in accrued benefits[68] Note 10. Segment Information - The Company revised its segment reporting on August 1, 2021, moving certain dining and golf operations from Lodging to Mountain, with prior periods retrospectively adjusted[71] - Reported EBITDA is used to evaluate segment performance and allocate resources, defined as segment net revenue less segment operating expenses, plus segment equity investment income or loss (and gain/loss on real property for Real Estate)[72][74] Total Reported EBITDA (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $609,248 | $461,188 | +32.09% | | Nine Months Ended April 30 | $897,172 | $639,963 | +40.19% | Note 11. Share Repurchase Program - The Board of Directors authorized repurchases of up to 7,500,000 Vail Shares in total[76] - The Company repurchased 144,875 Vail Shares for approximately $37.5 million during the three and nine months ended April 30, 2022[76] - As of April 30, 2022, 1,193,984 Vail Shares remained available for repurchase under the program, which has no expiration date[76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, segment performance, and liquidity Overview Mountain Segment - Mountain segment revenue is seasonal, with the majority earned in the second and third fiscal quarters from North American ski operations[82] - Lift tickets (including pass products) are the largest source of Mountain segment revenue, representing approximately 62% of net revenue for the nine months ended April 30, 2022[82][85] - Pass product sales for the 2022/2023 North American ski season increased approximately 9% in units and 11% in sales dollars through May 31, 2022, compared to the prior year[94] Lodging Segment - Lodging segment performance is closely aligned with the Mountain segment and experiences similar seasonal trends, particularly with Destination guests[89] - Revenues from properties proximate to mountain resorts and ground transportation represented approximately 82% of Lodging segment net revenue (excluding payroll cost reimbursements) for the nine months ended April 30, 2022[89] - The COVID-19 pandemic has led to reduced occupancy at lodging properties, though results significantly improved compared to the prior year[90] Real Estate Segment - The Real Estate segment primarily focuses on selling land parcels to third-party developers and planning future development projects, limiting financial risk[91] - Revenue and associated expenses in this segment can fluctuate significantly based on the timing and type of real estate transactions[91] Recent Trends, Risks and Uncertainties - COVID-19 continues to negatively impact operations due to travel restrictions, vaccination requirements, and other mandates, though conditions have improved relative to the prior year[92] - The Company acquired Seven Springs Mountain Resort, Hidden Valley Resort, and Laurel Mountain Ski Area for approximately $116.5 million on December 31, 2021, expecting a positive contribution to annual results[94] - The Company plans to invest CHF 149 million to acquire a 55% ownership stake in Andermatt-Sedrun Sport AG, with the transaction expected to close later in calendar year 2022[95] Results of Operations Summary Net Income Attributable to Vail Resorts, Inc. (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $372,550 | $274,629 | +35.64% | | Nine Months Ended April 30 | $456,609 | $268,661 | +70.03% | Resort Reported EBITDA (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $610,539 | $462,222 | +32.09% | | Nine Months Ended April 30 | $899,987 | $643,493 | +39.86% | Mountain Segment (Detailed Analysis) Three months ended April 30, 2022 compared to 2021 - Mountain Reported EBITDA increased by $139.1 million (30.4%) to $596.0 million, driven by strong North American pass sales and fewer COVID-19 restrictions[100][101] - Lift revenue increased by $137.0 million (23.7%), with pass revenue up 30.2% and non-pass revenue up 16.1%[100][102] - Total skier visits increased by 21.1% to 8,702 thousand, and Effective Ticket Price (ETP) increased by 2.2% to $82.13[100] Nine months ended April 30, 2022 compared to 2021 - Mountain Reported EBITDA increased by $219.3 million (33.5%) to $873.5 million, primarily due to strong North American pass sales growth and fewer COVID-19 limitations[109][110] - Lift revenue increased by $209.1 million (20.1%), with pass revenue up 20.8% and non-pass revenue up 18.8%[109][111] - Total skier visits increased by 14.7% to 16,279 thousand, and ETP increased by 4.7% to $76.82[109] Lodging Segment (Detailed Analysis) Three months ended April 30, 2022 compared to 2021 - Lodging Reported EBITDA increased by $9.2 million (173.1%) to $14.5 million, driven by fewer COVID-19 restrictions and increased occupancy and ADR[118] - Owned hotel and managed condominium combined ADR increased by 26.9% to $475.21, and RevPAR increased by 50.6% to $214.40[118] - Dining revenue increased by 251.9% to $14.6 million, and owned hotel rooms revenue increased by 78.5% to $18.3 million[118] Nine months ended April 30, 2022 compared to the nine months ended April 30, 2021 - Lodging Reported EBITDA increased by $37.2 million (345.6%) to $26.5 million, primarily due to fewer COVID-19 restrictions, increased occupancy, and higher ADR[123][124] - Owned hotel and managed condominium combined ADR increased by 17.0% to $403.31, and RevPAR increased by 72.2% to $149.20[123] - Owned hotel rooms revenue increased by 119.4% to $53.4 million, and dining revenue increased by 332.2% to $33.3 million[123] Real Estate Segment (Detailed Analysis) Three months ended April 30, 2022 compared to 2021 - Total Real Estate net revenue decreased by 83.9% to $129 thousand, as no significant real estate transactions closed in either period[130] - Real Estate Reported EBITDA decreased by 24.9% to $(1,291) thousand[130] Nine months ended April 30, 2022 compared to 2021 - Total Real Estate net revenue decreased by 54.4% to $624 thousand, with no significant real estate transactions closed[131] - Real Estate Reported EBITDA improved by 20.3% to $(2,815) thousand, partly due to a significant gain on sale of real property ($1.151 million in 2022 vs. $189 thousand in 2021)[131] Other Items - Losses from the change in estimated fair value of contingent consideration were $2.8 million and $21.6 million for the three and nine months ended April 30, 2022, respectively, primarily due to an increase in the estimated Fiscal 2022 payment[132] - Foreign currency losses on intercompany loans were $1.0 million and $3.1 million for the three and nine months ended April 30, 2022, respectively, due to the Canadian dollar decreasing relative to the U.S. dollar[133] - Gain on disposal of fixed assets and other, net, for the nine months ended April 30, 2022, included $7.9 million from an administrative building sale and proceeds from NPS for leasehold surrender interest[134] - The effective tax rate for the three and nine months ended April 30, 2022, was 23.4% and 18.8%, respectively, compared to 21.7% and 19.8% in the prior year periods[135] Reconciliation of Segment Earnings and Net Debt Total Reported EBITDA (in thousands) | Period | 2022 | 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Three Months Ended April 30 | $609,248 | $461,188 | +32.09% | | Nine Months Ended April 30 | $897,172 | $639,963 | +40.19% | Net Debt (in thousands) | Date | Amount | | :--- | :--- | | April 30, 2022 | $1,350,056 | | April 30, 2021 | $1,508,733 | Liquidity and Capital Resources Nine months ended April 30, 2022 compared to 2021 - Net cash provided by operating activities increased by $221.9 million to $773.0 million, driven by improved Mountain and Lodging segment results and increased pass product sales[140] - Cash used in investing activities increased by $180.5 million to $255.6 million, primarily due to the $116.3 million acquisition of Seven Springs Resorts and a $76.2 million increase in capital expenditures[141] - Cash used in financing activities increased by $827.0 million to $352.7 million, mainly due to prior year proceeds from 0.0% Convertible Notes, increased dividends, debt repayment, and share repurchases[142] Significant Sources of Cash - The Company had $1.4 billion in cash and cash equivalents as of April 30, 2022[143] - Available credit included $417.3 million under the Vail Holdings Credit Agreement and C$272.1 million ($211.8 million) under the Whistler Credit Agreement as of April 30, 2022[144] Significant Uses of Cash Capital Expenditures - Anticipated resort capital expenditures for calendar year 2022 are $315 million to $325 million, excluding one-time items[146] - The plan includes approximately $180 million for 21 new or replacement lifts and a terrain expansion at Keystone, which is $150 million above the typical annual capital plan[146] Acquisitions - Acquired Seven Springs Resorts for approximately $116.5 million on December 31, 2021, funded with cash on hand[147] - Entered an agreement to purchase a majority stake in Andermatt-Sedrun Sport AG for CHF 149 million, expected to close in calendar year 2022, funded with cash on hand[148] Debt - Total long-term debt, net (including current maturities) was $2.8 billion as of April 30, 2022[149] - Net Debt decreased from $1.5 billion as of April 30, 2021, to $1.4 billion as of April 30, 2022[149] - Approximately $0.8 billion of variable-rate debt was outstanding as of April 30, 2022; a 100-basis point change in borrowing rates would alter annual interest payments by approximately $7.7 million[152] Dividend Payments - The Board approved a cash dividend of $1.91 per share payable on July 12, 2022[153] - For the nine months ended April 30, 2022, $3.67 per share ($148.9 million total) in cash dividends were paid[153] Share Repurchase Program - The Company repurchased 144,875 shares for approximately $37.5 million during the nine months ended April 30, 2022[154] - As of April 30, 2022, 1,193,984 Vail Shares remained available for repurchase under the existing authorization[154] Covenants and Limitations - The Company was in compliance with all restrictive financial covenants under its debt instruments as of April 30, 2022[156] - Covenants include Net Funded Debt to Adjusted EBITDA ratio, Secured Net Funded Debt to Adjusted EBITDA ratio, and Interest Coverage ratio for the Vail Holdings Credit Agreement[155] OFF BALANCE SHEET ARRANGEMENTS - The Company has no off-balance sheet transactions expected to have a material effect on its financial condition or results[157] FORWARD-LOOKING STATEMENTS - Forward-looking statements are subject to risks and uncertainties, including the ultimate duration and impact of COVID-19, economic conditions, weather, and operational disruptions[158][160] - The Company does not intend to update these statements, even if new information or future events make them incorrect or misleading[161] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company discusses its exposure to interest rate and foreign currency exchange rate risks - As of April 30, 2022, approximately $0.8 billion (27% of total debt) was variable-rate debt; a 100-basis point change in borrowing rates would alter annual interest payments by approximately $7.7 million[162] - The Company is exposed to foreign currency translation risk, particularly with the Canadian and Australian dollars, and foreign currency transaction exposure from an intercompany loan to Whistler Blackcomb[163] - Foreign currency translation adjustments resulted in a loss of $48.9 million for the nine months ended April 30, 2022, compared to a gain of $132.2 million in the prior year[165] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and notes changes in internal controls Disclosure Controls and Procedures - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of April 30, 2022, providing reasonable assurance for timely and accurate reporting[167] Changes in Internal Controls over Financial Reporting - The assessment of internal control over financial reporting as of April 30, 2022, did not include certain elements of the recently acquired Seven Springs Resorts[169] - Excluding the Seven Springs Resorts, there were no material changes in internal control over financial reporting during the three and nine months ended April 30, 2022[170] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no material impact is expected from current ordinary course lawsuits - The Company is a party to various lawsuits in the ordinary course of business, but management believes these are not expected to have a material adverse impact on financial position, results of operations, and cash flows[171] Item 1A. Risk Factors No material changes to previously disclosed risk factors are reported for the period - No material changes to the risk factors previously disclosed in the Company's Form 10-K (September 23, 2021) and Form 10-Q (March 14, 2022)[172] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details exchangeable shares and stock repurchase activities during the fiscal quarter Exchangeable Shares - In connection with the Whistler Blackcomb acquisition in October 2016, 418,095 shares of the Canadian subsidiary ("Exchangeco Shares") were issued, which are substantially equivalent to Vail Shares and exchangeable[173] - As of April 30, 2022, 31,294 Exchangeco Shares had not yet been exchanged into Vail Shares[173] Repurchase of Equity Securities - The Company repurchased 144,875 Vail Shares at an average price of $258.86 per share during April 2022[176] - As of April 30, 2022, 1,193,984 Vail Shares remained available for repurchase under the existing authorization[176] Item 3. Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None[177] Item 4. Mine Safety Disclosures This section is confirmed as not applicable to the company's operations - Not applicable[178] Item 5. Other Information The company reports no other information for this period - None[179] Item 6. Exhibits This section lists all exhibits filed with the quarterly report - Exhibits include certifications from the CEO and CFO (31.1, 31.2, 32) and various XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[181] SIGNATURES - The report was signed by Michael Z. Barkin (Executive Vice President and Chief Financial Officer) and Nathan Gronberg (Vice President, Controller and Chief Accounting Officer) on June 9, 2022[185]