Vail Resorts reports fiscal 2014 third quarter results and spring season pass sales results

Press release:

BROOMFIELD, Colo., June 5, 2014 /PRNewswire/ — Vail Resorts, Inc. (NYSE: MTN) today reported results for the third quarter of fiscal 2014 ended April 30, 2014, as well as the Company’s results of its spring season pass sales for the 2014/2015 ski season.  Additionally, the Company provided its outlook for the full fiscal year ending July 31, 2014.

Highlights

–   Resort Reported EBITDA increased 18.9% for the third quarter of fiscal 2014 compared to the same period in the prior year.

–   Net income attributable to Vail Resorts, Inc. was $117.9 million for the third quarter of fiscal 2014, representing a 20.8% increase compared to the same period in the prior year.

–   Total skier visits for the third quarter of fiscal 2014 increased 11.2% compared to the same period in the prior year, including the addition of Canyons Resort.

–   Skier visits at our Colorado resorts maintained the strong momentum from earlier in the year, growing 5.6% for the third quarter of fiscal 2014 compared to the same period in the period year. The Tahoe resorts experienced a 4.4% decline in skier visitation for the third quarter of fiscal 2014 compared to the same period in the prior year, due to adverse weather conditions.

–   The Company revised its fiscal 2014 guidance range upward to reflect strong results in Colorado in the third quarter of fiscal 2014. Resort Reported EBITDA is now expected to be between $267 million and $273 million, which includes approximately $10 million of estimated Canyons integration and litigation expenses.

–   During the third quarter of fiscal 2014, the Company closed on three units at the Ritz Carlton Residences, Vail, and closed on five units at One Ski Hill Place. Net Real Estate Cash Flow for the third quarter was $11.3 million and was $20.9 million year-to-date. Subsequent to quarter end, three Ritz-Carlton Residences, Vail, units and one One Ski Hill Place unit have closed.

–   Spring season pass sales for the 2014/2015 ski season were up approximately 14% in units and approximately 20% in sales dollars through May 27, 2014 compared with the prior year period ended May 28, 2013.

Commenting on the Company’s fiscal 2014 third quarter results, Rob Katz, Chief Executive Officer said, “We are very pleased with our performance in the third quarter of fiscal 2014.   We saw continued strong performance in Colorado and improved results in Tahoe, leading to an 11.2% increase in total visitation this quarter compared to the prior year.  Total lift revenue increased by 17.1%, ski school revenue increased by 16.8% and total Mountain revenue increased by 14.6% compared to the prior year.  Our mountain performance includes the results of Canyons, which were in line with our previous public estimates, and the results of our Urban ski areas, whose performance was ahead of our expectations.”

“Our results in Colorado were particularly encouraging.  Compared to the prior year, total visitation at our Colorado resorts increased 5.6%, ski school revenue increased 11.3% and dining revenue increased 9.5%, despite the unfavorable late timing of Easter in the current year.  Our overall results continued to be negatively impacted in the quarter by the poor snowfall and warm weather experienced in Tahoethroughout the season.  Late season storms helped mitigate early season declines and brought back more local California visitors with total visitation for the third quarter down only 4.4% compared to the prior year.  Throughout the ski season, our Tahoe resorts consistently delivered some of the best conditions in the marketplace.”

Regarding Lodging, Katz said, “Our lodging business continues to have a great year.  Revenue, excluding payroll cost reimbursements, increased 24.6% compared to the prior year and revenue per available room, or RevPAR, increased 14.5% compared to the prior year.  These results were driven by strong performance in our core Colorado markets with increased occupancy and favorable rate increases, along with the addition of the Canyons lodging properties to our portfolio.  The Tahoe region does not represent a material component of our lodging business and therefore the challenging conditions in the region did not have a significant impact on lodging results.”

Katz continued, “Resort Reported EBITDA was $241.1 million for the quarter, an increase of 18.9% over the prior year.  Canyons integration and Park City Mountain Resort (“PCMR”) litigation related expenses were $2.4 million in the quarter.  We revised guidance upward for Resort Reported EBITDA for fiscal 2014 to $267 million to $273 million reflecting the better than anticipated results in Colorado in the third quarter. This guidance includes approximately $10 million of estimated Canyons integration and PCMR litigation expenses for fiscal 2014.”

Regarding Real Estate, Katz said, “Net Real Estate Cash Flow for the third quarter of fiscal 2014 was $11.3 million and was $20.9 millionyear-to-date.  During the quarter, we closed on three Ritz-Carlton Residences, Vail units, and five One Ski Hill Place units.  We are continuing to see strong buyer interest at both of our properties and closed on three Ritz-Carlton Residences, Vail units, and one One Ski Hill Place unit subsequent to April 30, 2014.”

Katz continued, “Our balance sheet remains very strong.  We ended the quarter with $307.4 million of cash on hand, and no borrowings under the revolver of our senior credit facility.  Our Net Debt, which includes $310.5 million of capitalized long-term obligations associated with the Canyons transaction, was 1.8 times trailing twelve months Total Reported EBITDA.  I am pleased to announce that today we provided notice of a redemption for $175 million of our $390 million in outstanding principal amount of 6.50% Senior Subordinated Notes using available cash on hand.  This will reduce our annual cash borrowing cost by approximately $11.4 million (before tax) without an impact to our Net Debt.  Additionally, I am also 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 July 8, 2014 to shareholders of record on June 23, 2014.

Operating Results

A complete Management’s Discussion and Analysis of Financial Condition and Results of Operations can be found in the Company’s Form 10-Q for the third fiscal quarter of 2014 ended April 30, 2014 filed today with the Securities and Exchange Commission.  The following are segment highlights:

Mountain Segment

–   Total lift revenue increased $36.8 million, or 17.1%, compared to the same period in the prior year, to $251.9 million for the three months ended April 30, 2014, driven by an increase in lift revenue excluding season pass revenue of $20.9 million, or 14.5%, as well as a $15.9 million, or 22.3%, increase in season pass revenue. The increase in lift revenue excluding season pass revenue was driven by increases at our Colorado resorts and incremental revenue from Canyons, partially offset by lower lift revenue excluding season pass revenue from our Tahoe resorts driven by a decline in visitation excluding season pass holders in Tahoe.

–   Ski school revenue increased by $9.0 million, or 16.8%, and dining revenue increased $4.4 million, or 11.7%, for the three months ended April 30, 2014 compared to the same period in the prior year.

–   Retail/rental revenue increased $7.5 million, or 11.2%, for the three months ended April 30, 2014 compared to the same period in the prior year, due primarily to increases in rental and retail sales in our Colorado and Utah regions and incremental revenue generated by Hoigaard’s (our mid-west retailer acquired in April 2013); partially offset by a decrease in on-line sales due to the shutdown of our on-line retail platform as we are transitioning to a different approach to on-line sales and rental revenue declines at stores proximate to our Tahoe resorts as a result of the decline in skier visitation due to the poor conditions in the region.

–   Operating expense increased $25.3 million, or 12.2%, for the three months ended April 30, 2014 compared to the three months endedApril 30, 2013, primarily due to incremental expenses from Canyons of $13.0 million (including current year integration and PCMR litigation related expense of $2.4 million, net of prior year Canyons transaction related expense of $2.6 million).

–   Mountain Reported EBITDA increased $33.6 million, or 17.3%, for the third quarter of fiscal 2014 compared to the same period in the prior year.

Lodging Segment

–   Lodging segment net revenue excluding payroll cost reimbursements increased $12.5 million, or 24.6%, for the three months endedApril 30, 2014, as compared to the same period in the prior year. The revenue increase includes $6.7 million from the addition of Canyons.

–   For the three months ended April 30, 2014, average daily rate (“ADR”) increased 0.8% and RevPAR increased 14.5% at the Company’s owned hotels and managed condominiums compared to the same period in the prior year.

–   Lodging Reported EBITDA increased 56.3% as compared to the same period in the prior year, to $13.1 million for the third quarter of fiscal 2014.

Resort – Combination of Mountain and Lodging Segments

–   Resort net revenue was $526.9 million for the third quarter of fiscal 2014, up 15.6% from the same period in the prior year.

–   Resort Reported EBITDA was $241.1 million for the third quarter of fiscal 2014, up 18.9% from the same period in the prior year.

Real Estate Segment

–   Real Estate segment net revenue increased $2.3 million, or 16.8%, as compared to the same period in the prior year, to $16.2 millionfor the three months ended April 30, 2014.

–   Net Real Estate Cash Flow was $11.3 million for the three months ended April 30, 2014, up $5.3 million from the same period in the prior year.

–   Real Estate Reported EBITDA improved by $0.9 million, or 27.8%, as compared to the same period in the prior year, to a loss of $2.3 million for the three months ended April 30, 2014.

Total Performance

–   Total net revenue increased $73.4 million, or 15.6%, as compared to the same period in the prior year, to $543.0 million for the three months ended April 30, 2014.

–   Net income attributable to Vail Resorts, Inc. was $117.9 million, or $3.18 per diluted share, for the third quarter of fiscal 2014, compared to net income attributable to Vail Resorts, Inc. of $97.6 million, or $2.66 per diluted share, in the third fiscal quarter of the prior year.

Spring Pass Sales

Commenting on the Company’s spring season pass sales for the upcoming 2014/2015 ski season, Katz said, “We are extremely pleased that our spring season pass sales through May 27, 2014 for the upcoming 2014/2015 ski season, increased approximately 14% in units and approximately 20% in sales dollars, as compared to the prior year period through May 28, 2013.  These strong season pass results followed record sales last spring and are driven by our successful marketing efforts, the compelling value of our products and our ability to drive the purchase decision earlier in the year.  The results include very good momentum in Colorado, which was partially offset by softer results in Tahoe.  Most importantly, we saw very strong growth from our destination markets, which represented more than half of our total growth for the spring selling period and remains the largest area of untapped potential for our season pass program.  We saw continuing success expanding the pass holder base in our Urban ski area markets in Minneapolis and Detroit, with both metropolitan areas growing faster than any of our other major destination markets.”

Katz continued, “Our effort to drive spring pass sales continues to accelerate the timing of when our guests purchase their passes for skiing and riding.  As always, it is important to note that we do not believe that the growth rates from this spring will be maintained through the fall, as our spring growth includes pass holders who purchased last fall.  However, we believe the earlier we can move our guest’s purchase decision in the year, the more opportunity it provides us for stable and consistent growth. It is also important to remember that nearly all of the 2014 spring pass sales will be recorded as revenue in fiscal 2015, over the course of the 2014/2015 ski season.”

Updated Guidance

–   We now estimate Resort Reported EBITDA for fiscal 2014 will be $267 million to $273 million, representing an approximate 11% to 13% increase over fiscal 2013.

–   Included in our estimates for fiscal 2014 Resort Reported EBITDA is approximately $10 million of integration and litigation related expenses, including approximately $9 million in fees associated with the PCMR litigation.

–   We expect Resort EBITDA Margin (defined as Resort Reported EBITDA divided by Resort net revenue) to be approximately 22.4% in fiscal 2014 at the midpoint of the revised guidance range.

–   We have narrowed our estimate of fiscal 2014 Real Estate Reported EBITDA to negative $7 million to negative $9 million.

–   We have increased our Net Real Estate Cash Flow guidance to $27 million to $32 million (defined as Real Estate Reported EBITDA, plus non-cash real estate cost of sales, plus non-cash stock-based compensation expense, plus change in real estate deposits and recovery of previously incurred project costs less investment in real estate).

–   Net income attributable to Vail Resorts, Inc. is now expected to be in a range of $26 million to $33.5 million in fiscal 2014 after the loss on extinguishment of debt.

About Vail Resorts, Inc. (NYSE: MTN)

Vail Resorts, Inc., through its subsidiaries, is the leading mountain resort operator in the United States. The Company’s subsidiaries operate the mountain resorts of Vail, Beaver Creek, Breckenridge and Keystone in Colorado; Heavenly, Northstar and Kirkwood in the Lake Tahoearea of California and Nevada; Canyons in Park City, Utah; Afton Alps in Minnesota and Mt. Brighton in Michigan; and the Grand Teton Lodge Company in Jackson Hole, Wyoming. The Company’s subsidiary, RockResorts, a luxury resort hotel company, manages casually elegant properties. Vail Resorts Development Company is the real estate planning, development and construction subsidiary of Vail Resorts, Inc. Vail Resorts is a publicly held company traded on the New York Stock Exchange (NYSE: MTN). The Vail Resorts company website is www.vailresorts.com and consumer website is www.snow.com.