Vail Resorts announces record revenues for fourth quarter

Vail Resorts, which saw its stock price surge to record highs following its recent acquisition of Park City Mountain Resort in Utah, announced record resort revenue today. Here’s the company’s press release regarding its fourth-quarter earnings:

Vail Resorts, Inc. (NYSE: MTN) today reported results for its fourth quarter and fiscal year ended July 31, 2014 and provided its outlook for the fiscal year ending July 31, 2015.

Highlights

• Resort Reported EBITDA increased 11.6% to $268.8 million for fiscal 2014 compared to the prior fiscal year.  This includes $9.8 million of expenses related to the Canyons integration and Park City Mountain Resort litigation.
• Net income attributable to Vail Resorts, Inc. was $28.5 million for fiscal 2014.
• Sales of season passes through September 21, 2014 for the upcoming 2014/2015 ski season were up approximately 14% in units and approximately 18% in sales dollars versus the comparable period in the prior year.  Based on historical patterns, approximately 55% to 60% of our total sales are made by this date.
• The Company issued its fiscal 2015 guidance range, including the addition of Park City Mountain Resort.  Resort Reported EBITDA is expected to be between $340 million and $360 million, which includes approximately $5 million of litigation, transaction and integration expense related to Park City Mountain Resort and Canyons.

Commenting on the Company’s fiscal 2014 results, Rob Katz, Chief Executive Officer, said, “We are very pleased with our performance this fiscal year.  We achieved record Resort revenue and Resort Reported EBITDA that reflects an outstanding season in Colorado, with a particularly strong spring break and late season, and significant year-over-year EBITDA growth in our Lodging business.  We achieved these results despite near record low snowfall through January in the Tahoe region.  Canyons and the Urban Ski Areas delivered strong results in line with our expectations.  Our results continue to reflect increases in overall visitation, pricing, average guest spend and season pass sales.  Summer revenue increased over the prior fiscal year as we continue to build out our summer activities, including new zip lines at Vail and Breckenridge, as well as challenge ropes courses at Vail and Heavenly.”

Katz added, “Total Mountain net revenue increased 11.1% for fiscal 2014.  This was primarily driven by a 10.2% increase in total skier visits and a 14.4% increase in lift revenue. This included a 20.1% increase in season pass revenue, which represented approximately 40% of total lift revenue in fiscal 2014.  Our Colorado resorts had a particularly strong year with 8.4% visitation growth, combined with an improvement in yields per skier visit in our ancillary ski school, food and beverage and retail / rental businesses.  The challenging conditions in Tahoe resulted in a 16.2% decline in visits, with modestly lower declines in the ancillary lines of business.  Overall, we are enthusiastic about the trends we saw last year in guest spending which supported our strong results.”

“Additionally, our Lodging business showed strong growth with net revenue increasing 14.8% compared to the prior fiscal year, and an increase in EBITDA of 37.5% primarily driven by increases in both the Average Daily Rate (ADR) and occupancy, leading to a 12.7% increase in Revenue per Available Room (RevPAR).”

Turning to our real estate business, Katz commented, “We are pleased with our Net Real Estate Cash Flow of $32.3 million.  We closed on eleven One Ski Hill Place units and eight Ritz-Carlton Residences, Vail units.  The resort real estate markets where we operate continue to show signs of modest improvement.”

Katz continued, “Our balance sheet continues to be very strong.  We ended the fiscal year with $44.4 million of cash on hand and no borrowings under the revolver of our senior credit facility. Our Net Debt was 2.2 times trailing twelve months Total Reported EBITDA which includes $311.9 million of capitalized long-term obligations associated with the Canyons transaction. We redeemed $175 million in aggregate principal amount of our outstanding 6.50% Senior Subordinated Notes (“6.50% Notes”) using cash on hand.  At fiscal year end, we had $215 million in aggregate principal amount of the 6.50% Notes outstanding.  This reduced our annual cash borrowing cost by approximately $11.4 million (before tax) without an impact to our Net Debt. I am also very pleased to announce that our Board of Directors has declared a quarterly cash dividend on Vail Resorts’ common stock. The quarterly dividend will be $0.4150 per share of common stock and will be payable on October 22, 2014 to shareholders of record on October 7, 2014.

Commenting on the Company’s recent acquisition of Park City Mountain Resort, Katz said, “This is truly a transformative acquisition for Vail Resorts. Park City Mountain Resort is an iconic brand in the ski industry and we are thrilled to welcome the resort, its guests and employees to our Company.  We have added access to Park City Mountain Resort to the Epic Pass and Epic Local Pass, and the Epic Pass now provides skiers and riders unlimited and unrestricted access to the best resorts in Colorado, Utah and Tahoe, as well as five days of skiing in each of Switzerland, France and Japan.

We anticipate that Park City Mountain Resort will contribute approximately $35 million of EBITDA in fiscal 2015, excluding litigation, transaction and integration expenses, which we estimate will be approximately $5 million in fiscal 2015.  We expect to generate significant additional EBITDA growth as we implement our plans to combine the ski experience of Park City Mountain Resort and Canyons into the largest mountain resort in the United States with over 7,000 acres of skiable terrain.  We believe the combined resort, with an unparalleled location in Park City, will attract destination skiers from across the United States and around the world and will drive season pass sales, visitation and ancillary business.  We intend to build the lift and other infrastructure that will connect the two resorts during the summer of 2015 and will be looking to upgrade or add new lifts, restaurants and snowmaking capabilities at both resorts, all subject to regulatory approval.  We intend to provide more detail on our full capital plans in March 2015.  We look forward to working with the Park City community as well as local and county officials to finalize this plan.”

Operating Results

A complete “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section can be found in the Company’s Form 10-K for the fiscal year ended July 31, 2014 filed today with the Securities and Exchange Commission.  The following are segment highlights:

Mountain Segment

• Total skier visits for fiscal 2014 increased to 7.7 million, from 7.0 million in fiscal 2013, a 10.2% increase.
• Season pass revenue increased $29.6 million, or 20.1%, compared to the prior fiscal year.
• Effective Ticket Price (“ETP”), excluding season pass holders, increased $3.72, or 4.9%, compared to the prior fiscal year.
• Mountain Reported EBITDA for fiscal 2014 increased $23.4 million, or 10.2%, to $252.1 million, compared to the prior fiscal year.
• Mountain Reported EBITDA includes $10.3 million and $9.0 million of stock-based compensation expense for fiscal 2014 and fiscal 2013, respectively.

Lodging Segment

• Lodging segment net revenue was $242.3 million for fiscal 2014 compared to $211.0 million for the prior fiscal year, a 14.8% increase. Excluding the operations of Canyons and payroll cost reimbursements related to managed hotel properties, total Lodging revenues increased 7.8% over the prior fiscal year.
• For fiscal 2014, ADR increased 2.6% and RevPAR increased 12.7% at the Company’s owned hotels and managed condominiums, excluding Canyons, compared to the prior fiscal year.
• Lodging Reported EBITDA increased 37.5% to $16.7 million for fiscal 2014 compared to the prior fiscal year.
• Lodging Reported EBITDA includes $2.2 million and $1.9 million of stock-based compensation expense for fiscal 2014 and fiscal 2013, respectively.

Resort – Combination of Mountain and Lodging Segments

• Resort net revenue was $1,205.9 million for fiscal 2014, an increase of 11.8%, compared to the prior fiscal year.
• Resort Reported EBITDA increased 11.6% to $268.8 million for fiscal 2014, compared to the prior fiscal year.

Real Estate Segment

• Real Estate segment net revenue increased $6.5 million, or 15.3%, compared to the prior fiscal year, to $48.8 million in fiscal 2014.
• Net Real Estate Cash Flow (a non-GAAP measure defined as Real Estate Reported EBITDA, plus non-cash real estate cost of sales, non-cash stock-based compensation expense, and change in real estate deposits and recovery of previously incurred project costs less investment in real estate) was $32.3 million for fiscal 2014.
• Real Estate Reported EBITDA was negative $7.0 million for fiscal 2014, compared to negative $9.1 million for the prior fiscal year.  Real Estate Reported EBITDA includes $1.7 million and $1.4 million of stock-based compensation expense for fiscal 2014 and fiscal 2013, respectively.

Total Performance

• Total net revenue was $1,254.6 million for fiscal 2014 compared to $1,120.8 million in the prior fiscal year, an 11.9% increase.
• Net income attributable to Vail Resorts, Inc. was $28.5 million, or $0.77 per diluted share, for fiscal 2014, compared to net income attributable to Vail Resorts, Inc. of $37.7 million, or $1.03 per diluted share, in the prior fiscal year.  Net income was impacted by a loss on extinguishment of debt of $10.8 million for the early redemption of $175 million of our 6.50% Notes.

Season Pass Sales and Other Indicators

Commenting on season pass sales, Katz said, “We are incredibly pleased with our season pass sales to date.  Through September 21, 2014, season pass sales are up 14% in units and 18% in sales dollars, compared to the prior year period ended September 22, 2013.  It is a very good sign that we have been able to maintain our growth rates from the spring, reflecting strong guest enthusiasm for our pass products, which we believe represents the best value in the entire ski industry.  As always, we do expect our season pass growth rates to come down by the end of our selling season, given that some of our increase is driven by our efforts to encourage guests to purchase their passes earlier in the year. Typically at this point in the year, we have sold approximately 55% to 60% of our season passes for the upcoming ski season.”

Guidance

Commenting on guidance for fiscal 2015, Katz said, “We estimate Resort Reported EBITDA for fiscal 2015 will be between $340 million and $360 million, which includes approximately $5 million of litigation, transaction and integration expense.  Included in our estimates for fiscal 2015 Resort Reported EBITDA is approximately $35 million of incremental Resort Reported EBITDA from the addition of Park City Mountain Resort.  We expect Resort EBITDA Margin (defined as Resort Reported EBITDA divided by Resort net revenue) to be approximately 25.3% in fiscal 2015, using the midpoint of the guidance range.  This is an estimated 3.0 percentage point increase over fiscal 2014.  We estimate fiscal 2015 Real Estate Reported EBITDA to be between negative $13 million and negative $6 million.  Net Real Estate Cash Flow is expected to be between $10 million and $20 million.  Net income attributable to Vail Resorts, Inc. is expected to be between $75.5 million and $100.5 million in fiscal 2015.