Vail Resorts(MTN) - 2023 Q3 - Quarterly Report

PART I Item 1. Financial Statements (unaudited) The unaudited consolidated financial statements present the company's financial position, results of operations, and cash flows for the interim periods Consolidated Condensed Balance Sheets The balance sheet as of April 30, 2023, shows a decrease in total assets and stockholders' equity, alongside an increase in total liabilities Consolidated Condensed Balance Sheets (In thousands) | | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $896,089 | $1,401,168 | | Total current assets | $1,482,428 | $1,845,401 | | Total assets | $6,199,451 | $6,397,294 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $986,361 | $829,872 | | Long-term debt, net | $2,773,747 | $2,687,488 | | Total liabilities | $4,599,954 | $4,332,114 | | Total stockholders' equity | $1,599,497 | $2,065,180 | | Total liabilities and stockholders' equity | $6,199,451 | $6,397,294 | Consolidated Condensed Statements of Operations The statements of operations for the nine months ended April 30, 2023, show increased total net revenue but a decline in net income and diluted EPS Consolidated Condensed Statements of Operations (In thousands, except per share amounts) | | Nine Months Ended April 30, 2023 | Nine Months Ended April 30, 2022 | | :--- | :--- | :--- | | Total net revenue | $2,619,596 | $2,258,776 | | Income from operations | $665,198 | $699,846 | | Net income attributable to Vail Resorts, Inc. | $396,714 | $456,609 | | Diluted net income per share | $9.87 | $11.20 | | Cash dividends declared per share | $5.88 | $3.67 | Consolidated Condensed Statements of Cash Flows The statements of cash flows for the nine months ended April 30, 2023, indicate a decrease in operating cash flow and a significant increase in cash used for financing activities Consolidated Condensed Statements of Cash Flows (In thousands) | | Nine Months Ended April 30, 2023 | Nine Months Ended April 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $726,883 | $772,984 | | Net cash used in investing activities | $(221,260) | $(255,565) | | Net cash used in financing activities | $(703,176) | $(352,653) | | Net (decrease) increase in cash | $(207,474) | $163,389 | Notes to Consolidated Condensed Financial Statements The notes provide detailed information on accounting policies, revenue streams, debt structure, recent acquisitions, and other significant financial events - The company operates in three segments: Mountain, Lodging, and Real Estate, with the Mountain segment being the largest, operating 41 resorts[23][24] - The company adopted ASU 2020-06 on August 1, 2022, reclassifying the equity component of its 0.0% Convertible Notes to long-term debt and eliminating future non-cash interest expense[35][36] - On August 3, 2022, the company acquired a 55% controlling interest in Andermatt-Sedrun Sport AG for $155.4 million[56] - The fair value of the contingent consideration liability for the Park City lease increased by $47.6 million due to an improved long-term EBITDA performance outlook[67][69] - The company repurchased 1,777,730 shares for approximately $400.0 million during the nine months ended April 30, 2023, with the Board increasing the share repurchase authorization by 2.5 million shares[83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, highlighting record Resort Reported EBITDA, segment performance, liquidity, and capital resources Recent Trends, Risks and Uncertainties The company identifies economic challenges and highlights strong early pass sales, successful navigation of weather challenges, and the integration of a new acquisition - Pass product sales for the upcoming 2023/2024 North American ski season increased approximately 6% in units and 11% in sales dollars through May 30, 2023[99] - Despite significant weather challenges, the company achieved record visitation, resort net revenue, and Resort Reported EBITDA for the 2022/2023 North American ski season[100] - The company acquired a 55% controlling interest in Andermatt-Sedrun on August 3, 2022, expanding its European presence and Epic Pass offerings[100] Results of Operations The results of operations for the nine months ended April 30, 2023, show increased Resort Reported EBITDA, driven by the Mountain segment, despite a decline in Lodging segment EBITDA Resort and Total Reported EBITDA (In thousands) | | Nine Months Ended April 30, 2023 | Nine Months Ended April 30, 2022 | | :--- | :--- | :--- | | Mountain Reported EBITDA | $913,644 | $873,529 | | Lodging Reported EBITDA | $7,986 | $26,458 | | Resort Reported EBITDA | $921,630 | $899,987 | | Real Estate Reported EBITDA | $(559) | $(2,815) | | Total Reported EBITDA | $921,071 | $897,172 | - Mountain segment revenue for the nine months increased 16.3% to $2.36 billion, driven by an 8.9% increase in lift revenue and strong growth in ancillary services[112] - Lodging segment EBITDA for the nine months decreased by $18.5 million (69.8%), primarily due to a 20.4% increase in labor costs and a 21.5% increase in general and administrative expenses[126][127][129] - The company recorded a non-cash expense of $47.6 million for the nine months ended April 30, 2023, related to an increase in the estimated fair value of contingent consideration for the Park City resort lease[137] Liquidity and Capital Resources The company's liquidity and capital resources as of April 30, 2023, indicate decreased operating cash flow, increased net debt, and significant capital expenditure plans - Net cash used in financing activities increased by $350.5 million, driven by a $362.5 million increase in share repurchases and an $86.8 million increase in dividends paid[147] - The company anticipates spending approximately $180 million to $185 million on resort capital expenditures in calendar year 2023, with a total capital plan of $206 million to $211 million[151] Net Debt (In thousands) | | April 30, 2023 | April 30, 2022 | | :--- | :--- | :--- | | Total debt | $2,842,717 | $2,751,224 | | Less: cash and cash equivalents | $896,089 | $1,401,168 | | Net Debt | $1,946,628 | $1,350,056 | - On June 7, 2023, the Board of Directors approved a quarterly cash dividend of $2.06 per share[157] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include interest rate fluctuations on its variable-rate debt and foreign currency exchange rate changes from international operations - The company has approximately $0.7 billion of variable-rate debt, where a 100-basis point change in rates would alter annual interest payments by approximately $6.9 million[168] - The company is exposed to foreign currency risk from the Canadian dollar, Australian dollar, and Swiss franc, recognizing a $72.0 million loss from translation adjustments and a $5.6 million loss on an intercompany loan[169][171] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of April 30, 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures are effective to provide reasonable assurance of timely information recording, processing, and reporting[173] - No material changes occurred during the quarter that affected the company's internal control over financial reporting[175] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various lawsuits arising from the ordinary course of business, which management believes will not have a material adverse impact on its financial position - The company is a party to various lawsuits but does not expect them to have a material adverse impact on its financial results[176] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended July 31, 2022 - No material changes to risk factors were reported since the last Form 10-K filing[177] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of fiscal 2023, the company repurchased common stock for approximately $400.0 million, and the Board increased the share repurchase authorization Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Feb 1 - Feb 28, 2023 | — | $— | | Mar 1 - Mar 31, 2023 | 1,317,925 | $221.95 | | Apr 1 - Apr 30, 2023 | 459,805 | $233.76 | | Total | 1,777,730 | $225.01 | - On March 7, 2023, the Board authorized an additional 2.5 million shares for repurchase, with 1,756,562 shares remaining available as of April 30, 2023[179] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including an amended credit agreement and certifications from the CEO and CFO - Filed exhibits include the Second Amended and Restated Credit Agreement for Whistler Mountain Resort and CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906[185]