MTN 2014.04.30 Q3


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2014
 
¨
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)
 
Delaware
 
51-0291762
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
390 Interlocken Crescent
Broomfield, Colorado
 
80021
(Address of Principal Executive Offices)
 
(Zip Code)
(303) 404-1800
(Registrant’s Telephone Number, Including Area Code)
 
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.    ý  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ý  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    ý  No
As of May 30, 2014, 36,180,785 shares of the registrant’s common stock were outstanding.




Table of Contents
 
 
 
 
PART I
FINANCIAL INFORMATION
 
 
 
 
Item 1.
Item 2.
Item 3.
Item 4.
 
 
 
PART II
OTHER INFORMATION
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.




PART I FINANCIAL INFORMATION
Item 1. Financial Statements — Unaudited
 

F-1





Vail Resorts, Inc.
Consolidated Condensed Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
 
 
 
April 30, 2014
 
July 31, 2013
 
April 30, 2013
Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
307,431

 
$
138,604

 
$
237,735

Restricted cash
 
13,057

 
12,624

 
11,991

Trade receivables, net
 
79,815

 
79,037

 
73,733

Inventories, net
 
60,409

 
68,318

 
61,201

Other current assets
 
58,696

 
44,886

 
50,478

Total current assets
 
519,408

 
343,469

 
435,138

Property, plant and equipment, net (Note 6)
 
1,164,387

 
1,169,288

 
1,039,907

Real estate held for sale and investment
 
170,818

 
195,230

 
201,861

Goodwill, net
 
378,220

 
381,699

 
271,855

Intangible assets, net
 
118,507

 
121,344

 
92,039

Other assets
 
97,104

 
97,267

 
38,869

Total assets
 
$
2,448,444

 
$
2,308,297

 
$
2,079,669

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Accounts payable and accrued liabilities (Note 6)
 
$
264,777

 
$
269,519

 
$
246,352

Income taxes payable
 
39,043

 
42,822

 
13,173

Long-term debt due within one year (Note 4)
 
879

 
994

 
518

Total current liabilities
 
304,699

 
313,335

 
260,043

Long-term debt (Note 4)
 
799,223

 
795,928

 
489,240

Other long-term liabilities (Note 6)
 
239,934

 
242,906

 
226,145

Deferred income taxes
 
183,473

 
118,259

 
201,511

Commitments and contingencies (Note 9)
 

 

 

Stockholders’ equity:
 
 
 
 
 
 
Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and outstanding
 

 

 

Common stock, $0.01 par value, 100,000,000 shares authorized, 41,129,041, 40,903,731 and 40,861,919 shares issued, respectively
 
411

 
409

 
409

Additional paid-in capital
 
608,153

 
598,675

 
596,167

Accumulated other comprehensive loss
 
(101
)
 
(67
)
 
(4
)
Retained earnings
 
491,878

 
418,043

 
485,368

Treasury stock, at cost, 4,949,111 shares (Note 11)
 
(193,192
)
 
(193,192
)
 
(193,192
)
Total Vail Resorts, Inc. stockholders’ equity
 
907,149

 
823,868

 
888,748

Noncontrolling interests
 
13,966

 
14,001

 
13,982

Total stockholders’ equity (Note 2)
 
921,115

 
837,869

 
902,730

Total liabilities and stockholders’ equity
 
$
2,448,444

 
$
2,308,297

 
$
2,079,669

The accompanying Notes are an integral part of these consolidated condensed financial statements.


F-2



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,
 
2014
 
2013
 
2014
 
2013
Net revenue:
 
 
 
 
 
 
 
Mountain
$
460,587

 
$
402,017

 
$
909,574

 
$
815,670

Lodging
66,293

 
53,834

 
179,694

 
152,885

Real estate
16,167

 
13,840

 
29,890

 
39,937

Total net revenue
543,047

 
469,691

 
1,119,158

 
1,008,492

Segment operating expense (exclusive of depreciation and amortization shown separately below):
 
 
 
 
 
 
 
Mountain
233,301

 
207,953

 
601,587

 
536,498

Lodging
53,182

 
45,446

 
163,346

 
142,055

Real estate
18,445

 
16,996

 
35,682

 
49,349

Total segment operating expense
304,928

 
270,395

 
800,615

 
727,902

Other operating expense:
 
 
 
 
 
 
 
Depreciation and amortization
(35,588
)
 
(33,730
)
 
(105,948
)
 
(98,827
)
Gain (loss) on disposal of fixed assets, net
634

 
(224
)
 
(839
)
 
(757
)
Income from operations
203,165

 
165,342

 
211,756

 
181,006

Mountain equity investment income, net
665

 
266

 
1,282

 
799

Investment income, net
124

 
153

 
289

 
306

Interest expense
(16,408
)
 
(8,359
)
 
(48,745
)
 
(25,268
)
Income before provision for income taxes
187,546

 
157,402

 
164,582

 
156,843

Provision for income taxes
(69,680
)
 
(59,814
)
 
(60,953
)
 
(59,329
)
Net income
117,866

 
97,588

 
103,629

 
97,514

Net loss attributable to noncontrolling interests
80

 
52

 
204

 
97

Net income attributable to Vail Resorts, Inc.
$
117,946

 
$
97,640

 
$
103,833

 
$
97,611

Per share amounts (Note 3):
 
 
 
 
 
 
 
Basic net income per share attributable to Vail Resorts, Inc.
$
3.26

 
$
2.72

 
$
2.88

 
$
2.72

Diluted net income per share attributable to Vail Resorts, Inc.
$
3.18

 
$
2.66

 
$
2.80

 
$
2.66

Cash dividends declared per share
$
0.4150

 
$
0.2075

 
$
0.8300

 
$
0.5825

The accompanying Notes are an integral part of these consolidated condensed financial statements.



F-3




Vail Resorts, Inc.
Consolidated Condensed Statements of Comprehensive Income
(In thousands)
(Unaudited)

 
 
Three Months Ended April 30,
 
Nine Months Ended April 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
117,866

 
$
97,588

 
$
103,629

 
$
97,514

Foreign currency translation adjustments, net of tax
 
85

 
(202
)
 
(34
)
 
251

Comprehensive income
 
117,951

 
97,386

 
103,595

 
97,765

Comprehensive loss attributable to noncontrolling interests
 
80

 
52

 
204

 
97

Comprehensive income attributable to Vail Resorts, Inc.
 
$
118,031

 
$
97,438

 
$
103,799

 
$
97,862

The accompanying Notes are an integral part of these consolidated condensed financial statements.


F-4



Vail Resorts, Inc.
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
 
Nine Months Ended April 30,
 
 
2014
 
2013
Cash flows from operating activities:
 
 
 
 
Net income
 
$
103,629

 
$
97,514

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
105,948

 
98,827

Cost of real estate sales
 
22,635

 
30,282

Stock-based compensation expense
 
10,539

 
9,544

Deferred income taxes, net
 
60,953

 
59,329

Other non-cash income, net
 
(2,423
)
 
(5,697
)
Changes in assets and liabilities:
 
 
 
 
Trade receivables, net
 
(822
)
 
(7,354
)
Inventories, net
 
8,089

 
5,944

Investments in real estate
 
(601
)
 
(1,662
)
Accounts payable and accrued liabilities
 
326

 
12,231

Other assets and liabilities, net
 
(2,076
)
 
(7,613
)
Net cash provided by operating activities
 
306,197

 
291,345

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(108,100
)
 
(65,461
)
Acquisition of businesses
 

 
(19,958
)
Other investing activities, net
 
920

 
861

Net cash used in investing activities
 
(107,180
)
 
(84,558
)
Cash flows from financing activities:
 
 
 
 
Proceeds from borrowings under long-term debt
 

 
96,000

Payments of long-term debt
 
(977
)
 
(96,989
)
Dividends paid
 
(29,998
)
 
(20,905
)
Other financing activities, net
 
732

 
6,778

Net cash used in financing activities
 
(30,243
)
 
(15,116
)
Effect of exchange rate changes on cash and cash equivalents
 
53

 
11

Net increase in cash and cash equivalents
 
168,827

 
191,682

Cash and cash equivalents:
 
 
 
 
Beginning of period
 
138,604

 
46,053

End of period
 
$
307,431

 
$
237,735

The accompanying Notes are an integral part of these consolidated condensed financial statements.


F-5



Vail Resorts, Inc.
Notes to Consolidated Condensed Financial Statements
(Unaudited)
 

1.
Organization and Business
Vail Resorts, Inc. (“Vail Resorts” or the “Parent Company”) is organized as a holding company and operates through various subsidiaries. Vail Resorts and its subsidiaries (collectively, the “Company”) currently operate in three business segments: Mountain, Lodging and Real Estate.
In the Mountain segment, the Company operates eight world-class ski resort properties at the Vail, Breckenridge, Keystone and Beaver Creek mountain resorts in Colorado; the Heavenly, Northstar, and Kirkwood mountain resorts in the Lake Tahoe area of California and Nevada; the Canyons mountain resort in Park City, Utah; and the ski areas of Afton Alps in Minnesota and Mount Brighton in Michigan ("Urban" ski areas); as well as ancillary services, primarily including ski school, dining and retail/rental operations. These resorts (with the exception of Northstar, Canyons and the Urban ski areas) operate primarily on Federal land under the terms of Special Use Permits granted by the USDA Forest Service (the “Forest Service”).
In the Lodging segment, the Company owns and/or manages a collection of luxury hotels and condominiums under its RockResorts brand, as well as other strategic lodging properties and a large number of condominiums located in proximity to the Company’s ski resorts, National Park Service (“NPS”) concessionaire properties including the Grand Teton Lodge Company (“GTLC”), which operates destination resorts in the Grand Teton National Park, Colorado Mountain Express (“CME”), 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 and develops 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 ski resorts are seasonal in nature with peak operating seasons primarily from mid-November through mid-April. The Company’s operations at its NPS concessionaire properties and its golf courses generally operate from mid-May through mid-October. The Company also has non-majority owned investments in various other entities, some of which are consolidated (see Note 7, Variable Interest Entities).
 

2.
Summary of Significant Accounting Policies
Basis of Presentation
Consolidated Condensed Financial 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. 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 year ended July 31, 2013. 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 United States of America (“GAAP”) have been condensed or omitted. The Consolidated Condensed Balance Sheet as of July 31, 2013 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 period. Actual results could differ from those estimates.

Noncontrolling Interests in Consolidated Condensed Financial Statements— Net loss attributable to noncontrolling interests along with net income attributable to the stockholders of the Company are reported separately in the Consolidated Condensed Statement of Operations. Additionally, noncontrolling interests in the consolidated subsidiaries of the Company are reported as a separate component of equity in the Consolidated Condensed Balance Sheet, apart from the Company’s equity. The following table summarizes the changes in total stockholders’ equity (in thousands):

F-6



 
 
 
For the Nine Months Ended April 30,
 
 
2014
 
2013
 
 
Vail Resorts
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders' Equity
 
Vail Resorts
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total
Stockholders' Equity
Balance, beginning of period
 
$
823,868

 
$
14,001

 
$
837,869

 
$
802,311

 
$
14,017

 
$
816,328

Net income (loss)
 
103,833

 
(204
)
 
103,629

 
97,611

 
(97
)
 
97,514

Stock-based compensation expense
 
10,539

 

 
10,539

 
9,544

 

 
9,544

Issuance of shares under share award plans, net of shares withheld for taxes
 
(4,797
)
 

 
(4,797
)
 
(3,832
)
 

 
(3,832
)
Tax benefit from share award plans
 
3,738

 

 
3,738

 
3,768

 

 
3,768

Cash dividends paid on common stock
 
(29,998
)
 

 
(29,998
)
 
(20,905
)
 

 
(20,905
)
Contributions from noncontrolling interests, net
 

 
169

 
169

 

 
62

 
62

Foreign currency translation adjustments, net of tax
 
(34
)
 

 
(34
)
 
251

 

 
251

Balance, end of period
 
$
907,149

 
$
13,966

 
$
921,115

 
$
888,748

 
$
13,982

 
$
902,730


Fair Value Instruments— The recorded amounts for cash and cash equivalents, trade 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 Employee Housing Bonds (Note 4, Long-Term Debt) approximate book value due to the variable nature of the interest rate associated with that debt. The fair value of the 6.50% Senior Subordinated Notes due 2019 (“6.50% Notes”) (Note 4, Long-Term Debt) are based on quoted market prices (a Level 1 input). The fair value of the Canyons obligation (Note 4, Long-Term Debt) has been estimated using discounted cash flow analyses based on the discount rate established under the initial purchase accounting (Note 5, Acquisitions) (a Level 3 input). The fair value of the Company’s Industrial Development Bonds (Note 4, Long-Term Debt) and other long-term debt have been estimated using discounted cash flow analyses based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 3 input). The estimated fair values of the 6.50% Notes, Canyons obligation, Industrial Development Bonds and other long-term debt as of April 30, 2014 are presented below (in thousands):
 
 
 
April 30, 2014
 
 
Carrying
Value
 
Fair
Value
6.50% Notes
 
$
390,000

 
$
409,988

Canyons obligation
 
$
310,472

 
$
310,472

Industrial Development Bonds
 
$
41,200

 
$
47,286

Other long-term debt
 
$
5,855

 
$
6,366


New Accounting Standards— In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, “Revenue Recognition”. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The standard will be effective for the first interim period within fiscal years beginning after December 15, 2016 (the Company's 2018 first fiscal quarter), using one of two retrospective application methods. The Company is evaluating the impacts, if any, the adoption of ASU No. 2014-09 will have on the Company's financial position or results of operations.


F-7



 
3.
Net Income Per Common Share
Basic earnings per share (“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. Presented below is basic and diluted EPS for the three months ended April 30, 2014 and 2013 (in thousands, except per share amounts):
 
 
 
Three Months Ended April 30,
 
 
2014
 
2013
 
 
Basic
 
Diluted
 
Basic
 
Diluted
Net income per share:
 
 
 
 
 
 
 
 
Net income attributable to Vail Resorts
 
$
117,946

 
$
117,946

 
$
97,640

 
$
97,640

Weighted-average shares outstanding
 
36,159

 
36,159

 
35,911

 
35,911

Effect of dilutive securities
 

 
895

 

 
863

Total shares
 
36,159

 
37,054

 
35,911

 
36,774

Net income per share attributable to Vail Resorts
 
$
3.26

 
$
3.18

 
$
2.72

 
$
2.66


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 on the exercise of share based awards that were excluded from the calculation of diluted net income per share because the effect of their inclusion would have been anti-dilutive totaled 4,000 and 25,000 for the three months ended April 30, 2014 and 2013, respectively.

Presented below is basic and diluted EPS for the nine months ended April 30, 2014 and 2013 (in thousands, except per share amounts):
 
 
 
Nine Months Ended April 30,
 
 
2014
 
2013
 
 
Basic
 
Diluted
 
Basic
 
Diluted
Net income per share:
 
 
 
 
 
 
 
 
Net income attributable to Vail Resorts
 
$
103,833

 
$
103,833

 
$
97,611

 
$
97,611

Weighted-average shares outstanding
 
36,105

 
36,105

 
35,835

 
35,835

Effect of dilutive securities
 

 
920

 

 
846

Total shares
 
36,105

 
37,025

 
35,835

 
36,681

Net income per share attributable to Vail Resorts
 
$
2.88

 
$
2.80

 
$
2.72

 
$
2.66


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 on the exercise of share based awards that were excluded from the calculation of diluted net income per share because the effect of their inclusion would have been anti-dilutive totaled 11,000 and 10,000 for the nine months ended April 30, 2014 and 2013, respectively.

During the three and nine months ended April 30, 2014, the Company paid cash dividends of $0.4150 and $0.8300 per share, respectively ($15.0 million and $30.0 million, respectively, in the aggregate). During the three and nine months ended April 30, 2013, the Company paid cash dividends of $0.2075 and $0.5825 per share, respectively ($7.5 million and $20.9 million, respectively, in the aggregate). On June 3, 2014 the Company’s Board of Directors declared a quarterly cash dividend of $0.4150 per share payable on July 8, 2014 to stockholders of record as of June 23, 2014.
 


F-8




4.
Long-Term Debt
Long-term debt as of April 30, 2014July 31, 2013 and April 30, 2013 is summarized as follows (in thousands):
 
 
 
Maturity (a)
 
April 30, 2014
 
July 31, 2013
 
April 30, 2013
Credit Facility Revolver (b)
 
2019
 
$

 
$

 
$

Industrial Development Bonds
 
2020
 
41,200

 
41,200

 
41,200

Employee Housing Bonds
 
2027-2039
 
52,575

 
52,575

 
52,575

6.50% Notes (c)
 
2019
 
390,000

 
390,000

 
390,000

Canyons obligation (d)
 
2063
 
310,472

 
306,320

 

Other
 
2014-2029
 
5,855

 
6,827

 
5,983

Total debt
 
 
 
800,102

 
796,922

 
489,758

Less: Current maturities (e)
 
 
 
879

 
994

 
518

Long-term debt
 
 
 
$
799,223

 
$
795,928

 
$
489,240

 
(a)
Maturities are based on the Company’s July 31 fiscal year end.
(b)
On March 13, 2014, The Vail Corporation, a wholly-owned subsidiary of the Company, amended and restated its senior credit facility.  As part of this amendment and restatement, Vail Holdings, Inc. (“VHI”), a wholly-owned subsidiary of the Company, assumed the rights and obligations of The Vail Corporation, the former borrower under the senior credit facility.  The Company continues to be a guarantor under the amended credit facility.
Key modifications to the senior credit facility included, among other things, the extension of the maturity on the revolving credit facility from January 2016 to March 2019; decreased grid pricing for interest rate margins (as of April 30, 2014, under the amended credit facility, at LIBOR plus 1.50%) and commitment fees (as of April 30, 2014, under the amended credit facility, at 0.30%); increased letter of credit availability (under the amended credit facility, to $200 million); increased swing line loan availability (under the amended credit facility, to $75 million); and the expansion of baskets for improved flexibility in the Company’s ability to incur debt, pay, prepay, redeem and repurchase unsecured debt, dispose of assets, and make investments and distributions.  In addition, under the amended credit facility and subject to VHI meeting all compliance restrictions, VHI has the ability to increase availability (under the revolver or in the form of term loans) to an aggregate amount not to exceed the greater of (i) $700 million and (ii) the product of 2.75 and the trailing twelve-month Adjusted EBITDA, as defined in the Credit Agreement.
The amended credit facility is now referred to as the Sixth Amended and Restated Credit Agreement (the “Credit Agreement”) among VHI, Bank of America, N.A., as administrative agent (the “Agent”), U.S. Bank National Association and Wells Fargo Bank, National Association, as co-syndication agents, BBVA Compass, as documentation agent, Merrill Lynch Pierce, Fenner & Smith Incorporated and U.S. Bank National Association, as joint lead arrangers and joint bookrunners, Wells Fargo Securities, LLC, as joint lead arranger, and the Lenders (as defined in the Credit Agreement) party thereto, and consists of a $400 million revolving credit facility.  VHI’s obligations under the Credit Agreement are guaranteed by the Company and certain of its subsidiaries and are collateralized by a pledge of all of the capital stock of VHI and substantially all of its subsidiaries (with certain additional exceptions for the pledge of the capital stock of foreign subsidiaries).  The proceeds of loans made under the 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.  The Credit Agreement matures in March 2019.  Borrowings under the Credit Agreement bear interest annually at a rate of (i) LIBOR plus a margin or (ii) the Agent’s prime lending rate plus a margin.  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 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 Credit Agreement, times the daily amount by which the Credit Agreement commitment exceeds the total of outstanding loans and outstanding letters of credit.  The unused amounts are accessible to the extent that the Net Funded Debt to Adjusted EBITDA ratio does not exceed the maximum ratio allowed at quarter-ends and the Adjusted EBITDA to interest on Funded Debt (as defined in the Credit Agreement) ratio does not fall below the minimum ratio allowed at quarter-ends.  The Credit Agreement provides for affirmative and negative covenants that restrict, among other things, the Company’s ability to incur indebtedness, dispose of assets, make capital expenditures, make distributions and make investments.  In addition, the Credit Agreement includes the following restrictive financial covenants: Net Funded Debt to Adjusted EBITDA ratio and Adjusted EBITDA to interest on Funded Debt ratio.


F-9



(c)
On June 5, 2014, the Company submitted a redemption notice to the trustee for its 6.50% Notes to redeem $175.0 million of the 6.50% Notes.  The redemption price for the notes is 104.875%, plus accrued and unpaid interest to the redemption date of July 7, 2014.  As a result, the Company expects to incur an early redemption premium of 4.875%, or approximately $8.5 million, for the portion of the principal redeemed, which will be recorded, along with a write-off of approximately $2.3 million of unamortized debt issuance costs, as a loss on extinguishment of debt in the year ending July 31, 2014. Upon completion of the partial redemption, $215.0 million of the 6.50% Notes will remain outstanding.
(d)
On May 24, 2013, VR CPC Holdings, Inc. (“VR CPC”), a wholly-owned subsidiary of the Company, entered into a transaction agreement (the "Transaction Agreement") with affiliate companies of Talisker Corporation ("Talisker") pursuant to which the parties entered into a master lease agreement (the "Lease") and certain ancillary transaction documents on May 29, 2013 related to the Canyons mountain resort (see Note 5, Acquisitions). The obligation at April 30, 2014 represents future fixed lease payments for the remaining initial lease term of 50 years (including annual increases at the floor of 2%) discounted using an interest rate of 10%, and includes accumulated accreted interest expense of $5.1 million.
(e)
Current maturities represent principal payments due in the next 12 months.

Aggregate maturities for debt outstanding as of April 30, 2014 reflected by fiscal year are as follows (in thousands):
 
 
Total
2014
$
21

2015
867

2016
266

2017
270

2018
271

Thereafter
798,407

Total debt
$
800,102

 
 
The Company incurred gross interest expense of $16.4 million and $8.4 million for the three months ended April 30, 2014 and 2013, respectively, of which $0.5 million was amortization of deferred financing costs for both periods. The Company had no capitalized interest during the three months ended April 30, 2014 and 2013. The Company incurred gross interest expense of $48.7 million and $25.3 million for the nine months ended April 30, 2014 and 2013, respectively, of which $1.5 million was amortization of deferred financing costs for both periods. The Company had no capitalized interest during the nine months ended April 30, 2014 and 2013.
 
5.
Acquisitions

Canyons
In May 2013, VR CPC and Talisker entered into the Transaction Agreement, the Lease and ancillary transaction documents, pursuant to which the Company assumed the resort operations of Canyons mountain resort in Park City, Utah, which includes the ski area, property management and related amenities. Canyons is a year round mountain resort providing a comprehensive offering of recreational activities, including both snow sports and summer activities. The Lease between VR CPC and Talisker has an initial term of 50 years with six 50-year renewal options. The Lease provides for $25 million in annual fixed payments, which increase each year by an inflation linked index of the consumer price index ("CPI") less 1%, with a floor of 2% per annum. In addition, the Lease includes participating contingent payments to Talisker of 42% of the amount by which EBITDA for the resort operations, as calculated under the Lease, exceeds approximately $35 million, with such threshold amount increased by an inflation linked index and a 10% adjustment for any capital improvements or investments made under the Lease by the Company (the "Contingent Consideration"). The Parent Company has guaranteed the payments under the Lease.
The following summarizes the preliminary estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands).

F-10



 
Estimates of Fair Value at Effective Date of Transaction
Accounts receivable
$
2,187

Other current assets
1,698

Property, plant and equipment
5,475

Property, plant and equipment (under capital lease)
127,885

Deferred income tax assets, net
11,869

Intangible assets
30,700

Park City Mountain Resort ("PCMR") deposit
57,800

Goodwill
106,414

Total identifiable assets acquired
$
344,028

Accounts payable and accrued liabilities
$
6,699

Deferred revenue
1,134

Other liabilities
21,766

Canyons obligation
305,329

Contingent Consideration
9,100

Total liabilities assumed
$
344,028


The estimated fair values of assets acquired and liabilities assumed in the Canyons transaction are preliminary and are based on the information that was available as of the transaction date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the Company is obtaining additional information necessary to finalize those fair values. Therefore, the preliminary measurements of fair value reflected are subject to change. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the transaction date.

Land and certain improvements under the PCMR ski area was subject to litigation at the transaction date. As such, the Company has recorded a deposit ("PCMR deposit") for the potential future interests in the land and associated improvements at its estimated fair value. The excess of the aggregate fair values of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, including the potential inclusion of a portion of the ski terrain of PCMR in the Lease, the assembled workforce of Canyons and other factors. The Company believes that for income tax purposes the lease payments should primarily be treated as payments of a debt obligation and that the tax basis of the goodwill is deductible. As a result, the Company recorded an adjustment to its preliminary purchase price allocation of $32.9 million, which reduced deferred income tax assets, net with a corresponding increase to goodwill and has reflected this as a retrospective adjustment as of July 31, 2013 (including the Supplemental Consolidating Condensed Balance Sheet - see Note 12, Guarantor Subsidiaries and Non-Guarantor Subsidiaries). The intangible assets have a weighted-average amortization period of approximately 50 years. The operating results of Canyons which are recorded in the Mountain and Lodging segments contributed $33.1 million and $60.9 million of net revenue, including an allocated portion of season pass revenue based on skier visits, for the three and nine months ended April 30, 2014, respectively. As of April 30, 2014, there were no changes to the Contingent Consideration liability.

The following presents the unaudited pro forma consolidated financial information of the Company as if the Canyons transaction was completed on August 1, 2012. 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 transaction; and (iii) interest expense relating to the Canyons obligation. 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, 2012 (in thousands, except per share amounts).


F-11



 
 
Three Months Ended
April 30,
 
Nine Months Ended
April 30,
 
 
2013
 
2013
Pro forma net revenue
 
$
498,477

 
$
1,059,125

Pro forma net income attributable to Vail Resorts, Inc.
 
$
96,499

 
$
80,107

Pro forma basic net income per share attributable to Vail Resorts, Inc.
 
$
2.69

 
$
2.24

Pro forma diluted net income per share attributable to Vail Resorts, Inc.
 
$
2.62

 
$
2.18


6.
Supplementary Balance Sheet Information
The composition of property, plant and equipment follows (in thousands):
 
 
April 30, 2014
 
July 31, 2013
 
April 30, 2013
Land and land improvements
 
$
350,674

 
$
343,982

 
$
295,559

Buildings and building improvements
 
908,829

 
884,307

 
852,483

Machinery and equipment
 
701,825

 
646,102

 
599,199

Furniture and fixtures
 
273,202

 
259,693

 
254,671

Software
 
99,958

 
92,553

 
91,987

Vehicles
 
55,324

 
49,356

 
48,592

Construction in progress
 
19,453

 
49,102

 
27,273

Gross property, plant and equipment
 
2,409,265

 
2,325,095

 
2,169,764

Accumulated depreciation
 
(1,244,878
)
 
(1,155,807
)
 
(1,129,857
)
Property, plant and equipment, net
 
$
1,164,387

 
$
1,169,288

 
$
1,039,907

The composition of accounts payable and accrued liabilities follows (in thousands): 
 
 
April 30, 2014
 
July 31, 2013
 
April 30, 2013
Trade payables
 
$
48,406

 
$
61,364

 
$
59,515

Deferred revenue
 
93,135

 
93,759

 
81,092

Accrued salaries, wages and deferred compensation
 
35,221

 
27,946

 
28,563

Accrued benefits
 
25,468

 
19,787

 
24,002

Deposits
 
17,772

 
14,331

 
12,173

Accrued interest
 
13,549

 
8,018

 
13,543

Other accruals
 
31,226

 
44,314

 
27,464

Total accounts payable and accrued liabilities
 
$
264,777

 
$
269,519

 
$
246,352

The composition of other long-term liabilities follows (in thousands):
 
 
April 30, 2014
 
July 31, 2013
 
April 30, 2013
Private club deferred initiation fee revenue
 
$
130,543

 
$
131,760

 
$
133,578

Unfavorable lease obligation, net
 
32,034

 
34,037

 
34,055

Other long-term liabilities
 
77,357

 
77,109

 
58,512

Total other long-term liabilities
 
$
239,934

 
$
242,906

 
$
226,145

 


F-12



7.    Variable Interest Entities
The Company is the primary beneficiary of four employee housing entities (collectively, the “Employee Housing Entities”), Breckenridge Terrace, LLC, The Tarnes at BC, LLC, BC Housing, LLC and Tenderfoot Seasonal Housing, LLC, which are variable interest entities (“VIEs”), and the Company has consolidated them in its Consolidated Condensed Financial Statements. As a group, as of April 30, 2014, the Employee Housing Entities had total assets of $28.4 million (primarily recorded in property, plant and equipment, net) and total liabilities of $63.3 million (primarily recorded in long-term debt as “Employee Housing Bonds”). The Company’s lenders have issued letters of credit totaling $53.4 million under the Company's Credit Agreement related to Employee Housing Bonds. Payments under the letters of credit would be triggered in the event that one of the entities defaults on required payments. The letters of credit have no default provisions.

The Company is the primary beneficiary of Avon Partners II, LLC (“APII”), which is a VIE. APII owns commercial space and the Company currently leases substantially all of that space. APII had total assets of $4.3 million (primarily recorded in property, plant and equipment, net) and no debt as of April 30, 2014.
 
8.    Fair Value Measurements
The Financial Accounting Standards Board 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 and Contingent Consideration (see Note 5) measured at fair value (all other assets and liabilities measured at fair value are immaterial) (in thousands):
 

F-13



 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Measurement as of April 30, 2014
 
Description
 
Balance at April 30, 2014
 
Level 1
 
Level 2
 
Level 3
 
 
Assets:
 
 
 
 
 
 
 
 
 
Money Market
 
$
78,851

 
$
78,851

 
$

 
$

 
Commercial Paper
 
$
630

 
$

 
$
630

 
$

 
Certificates of Deposit
 
$
630

 
$

 
$
630

 
$

 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Contingent Consideration (Note 5)
 
$
9,100

 
$

 
$

 
$
9,100

 
 
 
 
 
 
 
Fair Value Measurement as of July 31, 2013
 
Description
 
Balance at July 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
Money Market
 
$
34,029

 
$
34,029

 
$

 
$

 
Commercial Paper
 
$
630

 
$

 
$
630

 
$

 
Certificates of Deposit
 
$
630

 
$

 
$
630

 
$

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Contingent Consideration (Note 5)
 
$
9,100

 
$

 
$

 
$
9,100

 
 
 
 
 
 
 
Fair Value Measurement as of April 30, 2013
 
Description
 
Balance at April 30, 2013
 
Level 1
 
Level 2
 
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
Money Market
 
$
49,025

 
$
49,025

 
$

 
$

 
Commercial Paper
 
$
630

 
$

 
$
630

 
$

 
Certificates of Deposit
 
$
630

 
$

 
$
630

 
$


The Company’s cash equivalents are measured utilizing quoted market prices or pricing models whereby all significant inputs are either observable or corroborated by observable market data. The Company used discounted cash flow projection valuation models and Level 3 inputs to estimate the fair value of Contingent Consideration in connection with the Canyons transaction.

9.    Commitments and Contingencies
Metropolitan Districts
The Company credit-enhances $8.0 million of bonds issued by Holland Creek Metropolitan District (“HCMD”) through an $8.1 million letter of credit issued under the 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 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, and the Company has recorded a liability of $1.8 million primarily within “other long-term liabilities” in the accompanying Consolidated Condensed Balance Sheets, as of April 30, 2014July 31, 2013 and April 30, 2013, respectively, with respect to the estimated present value of future RSRMD capital improvement fees. The Company estimates that it will make capital improvement fee payments under this arrangement through the year ending July 31, 2028.

Guarantees/Indemnifications
As of April 30, 2014, the Company had various other letters of credit in the amount of $58.7 million, consisting primarily of $53.4 million in support of the Employee Housing Bonds and $3.4 million for workers’ compensation and general liability deductibles related to construction and development activities.
In addition to the guarantees noted above, the Company has entered into contracts in the normal course of business which 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 to licensees in connection with the licensees’

F-14



use of the Company’s trademarks and logos, indemnities for liabilities associated with the infringement of other parties’ technology and software products, indemnities related to liabilities associated with the use of easements, indemnities related to employment of contract workers, the Company’s use of trustees, indemnities related to the Company’s use of public lands and environmental indemnifications. 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 future 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 fair value of the indemnification or guarantee to be immaterial based upon 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 that are 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 in connection with their use of the Company’s trademarks and logos. The Company does not record any liabilities with respect to these indemnifications.

Self Insurance
The Company is self-insured for claims under its health benefit plans and for the majority of workers’ compensation claims, 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 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 6, 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 loss contingencies for all known matters that are deemed to be probable losses and estimable. As of April 30, 2014July 31, 2013 and April 30, 2013, the accrual for the above loss contingencies was not material individually and in the aggregate.
 
10.    Segment Information
The Company has three reportable segments: Mountain, Lodging and Real Estate. The Mountain segment includes the operations of the Company’s ski resorts/areas and related ancillary services. The Lodging segment includes the operations of all of the Company’s owned hotels, RockResorts, NPS concessionaire properties, condominium management, CME and mountain resort golf operations. The Real Estate segment owns and develops real estate in and around the Company’s resort communities. The Company’s reportable segments, although integral to the success of each other, 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), which is a non-GAAP financial measure. The Company reports segment results in a manner consistent with management’s internal reporting of operating results to the chief operating decision maker (the Chief Executive Officer) for purposes of evaluating segment performance.
Reported EBITDA is not a measure of financial performance under GAAP. 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, net income, 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 Reported EBITDA is not a measurement determined in accordance with GAAP and thus is susceptible to varying calculations, Reported EBITDA as presented may not be comparable to other similarly titled measures of other companies.

F-15




The Company utilizes Reported EBITDA in evaluating 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. All segment expenses include an allocation of corporate administrative expenses. Assets are not allocated between segments, or 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,
 
2014
 
2013
 
2014
 
2013
Net revenue:
 
 
 
 
 
 
 
Lift
$
251,914

 
$
215,163

 
$
447,271

 
$
390,820

Ski school
62,512

 
53,531

 
109,442

 
95,254

Dining
42,303

 
37,876

 
82,369

 
74,075

Retail/rental
73,785

 
66,329

 
188,401

 
176,802

Other
30,073

 
29,118

 
82,091

 
78,719

Total Mountain net revenue
460,587

 
402,017

 
909,574

 
815,670

Lodging
66,293

 
53,834

 
179,694

 
152,885

Total Resort net revenue
526,880

 
455,851

 
1,089,268

 
968,555

Real estate
16,167

 
13,840

 
29,890

 
39,937

Total net revenue
$
543,047

 
$
469,691

 
$
1,119,158

 
$
1,008,492

Operating expense:
 
 
 
 
 
 
 
Mountain
$
233,301

 
$
207,953

 
$
601,587

 
$
536,498

Lodging
53,182

 
45,446

 
163,346

 
142,055

Total Resort operating expense
286,483

 
253,399

 
764,933

 
678,553

Real estate
18,445

 
16,996

 
35,682

 
49,349

Total segment operating expense
$
304,928

 
$
270,395

 
$
800,615

 
$
727,902

Mountain equity investment income, net
$
665

 
$
266

 
$
1,282

 
$
799

Reported EBITDA:
 
 
 
 
 
 
 
Mountain
$
227,951

 
$
194,330

 
$
309,269

 
$
279,971

Lodging
13,111

 
8,388

 
16,348

 
10,830

Resort
241,062

 
202,718

 
325,617

 
290,801

Real estate
(2,278
)
 
(3,156
)
 
(5,792
)
 
(9,412
)
Total Reported EBITDA
$
238,784

 
$
199,562

 
$
319,825

 
$
281,389

 
 
 
 
 
 
 
 
Real estate held for sale and investment
$
170,818

 
$
201,861

 
$
170,818

 
$
201,861

 
 
 
 
 
 
 
 
Reconciliation to net income attributable to Vail Resorts, Inc.:
 
 
 
 
 
 
 
Total Reported EBITDA
$
238,784

 
$
199,562

 
$
319,825

 
$
281,389

Depreciation and amortization
(35,588
)
 
(33,730
)
 
(105,948
)
 
(98,827
)
Gain (loss) on disposal of fixed assets, net
634

 
(224
)
 
(839
)
 
(757
)
Investment income, net
124

 
153

 
289

 
306

Interest expense
(16,408
)
 
(8,359
)
 
(48,745
)
 
(25,268
)
Income before provision for income taxes
187,546

 
157,402

 
164,582

 
156,843

Provision for income taxes
(69,680
)
 
(59,814
)
 
(60,953
)
 
(59,329
)
Net income
$
117,866

 
$
97,588

 
$
103,629

 
$
97,514

Net loss attributable to noncontrolling interests
80

 
52

 
204

 
97

Net income attributable to Vail Resorts, Inc.
$
117,946

 
$
97,640

 
$
103,833

 
$
97,611


F-16





11.     Stock Repurchase Plan
On March 9, 2006, the Company’s Board of Directors approved the repurchase of up to 3,000,000 shares of common stock and on July 16, 2008 approved an increase of the Company’s common stock repurchase authorization by an additional 3,000,000 shares. During both the three and nine months ended April 30, 2014 and 2013, the Company did not repurchase any shares of common stock. Since inception of its stock repurchase program through April 30, 2014, the Company has repurchased 4,949,111 shares at a cost of approximately $193.2 million. As of April 30, 2014, 1,050,889 shares remained available to repurchase under the existing repurchase authorization. Shares of common stock purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of shares under the Company’s employee share award plan.
 

12.    Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company’s payment obligations under the 6.50% Notes (see Note 4, Long-Term Debt) are fully and unconditionally guaranteed on a joint and several, senior subordinated basis by substantially all of the Company’s consolidated subsidiaries (collectively, and excluding Non-Guarantor Subsidiaries (as defined below), the “Guarantor Subsidiaries”), except for Eagle Park Reservoir Company, Larkspur Restaurant & Bar, LLC, Black Diamond Insurance, Inc., Skiinfo AS and certain other insignificant entities (together, the “Non-Guarantor Subsidiaries”). APII and the Employee Housing Entities are included with the Non-Guarantor Subsidiaries for purposes of the consolidated financial information, but are not considered subsidiaries under the indenture governing the 6.50% Notes.
Presented below is the consolidated financial information of the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. Financial information for the Non-Guarantor Subsidiaries is presented in the column titled “Other Subsidiaries.” Balance sheets are presented as of April 30, 2014, July 31, 2013, and April 30, 2013. Statements of operations and statements of comprehensive income (loss) are presented for the three and nine months ended April 30, 2014 and 2013. Statements of cash flows are presented for the nine months ended April 30, 2014 and 2013. As of April 30, 2013, the Company revised its classification of advances from affiliates in the amount of $386.0 million to present it separately in the Supplemental Consolidating Condensed Balance Sheet from advances to affiliates. The Company has determined that this revision is not material to the Supplemental Consolidating Condensed Balance Sheet.
Investments in subsidiaries are accounted for by the Parent Company and Guarantor Subsidiaries using the equity method of accounting. Net income (loss) of Guarantor Subsidiaries and Non-Guarantor Subsidiaries is, therefore, reflected in the Parent Company’s and Guarantor Subsidiaries’ investments in and advances to (from) subsidiaries. Net income (loss) of the Guarantor Subsidiaries and Non-Guarantor Subsidiaries is reflected in Guarantor Subsidiaries and Parent Company as equity in consolidated subsidiaries. The elimination entries eliminate investments in Other Subsidiaries and intercompany balances and transactions for consolidated reporting purposes.

F-17



Supplemental Consolidating Condensed Balance Sheet
As of April 30, 2014
(in thousands)
(Unaudited)
 
 
 
Parent
Company
 
100%
Owned
Guarantor
Subsidiaries
 
Other
Subsidiaries
 
Eliminating
Entries
 
Consolidated
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$
298,642

 
$
8,789

 
$

 
$
307,431

Restricted cash
 

 
11,285

 
1,772

 

 
13,057

Trade receivables, net
 

 
77,108

 
2,707

 

 
79,815

Inventories, net
 

 
60,229

 
180

 

 
60,409

Other current assets
 
29,217

 
28,961

 
518

 

 
58,696

Total current assets
 
29,217

 
476,225

 
13,966

 

 
519,408

Property, plant and equipment, net
 

 
1,121,251

 
43,136

 

 
1,164,387

Real estate held for sale and investment
 

 
170,818

 

 

 
170,818

Goodwill, net
 

 
376,491

 
1,729

 

 
378,220

Intangible assets, net
 

 
99,149

 
19,358

 

 
118,507

Other assets
 
5,274

 
97,136

 
4,154

 
(9,460
)
 
97,104

Investments in subsidiaries
 
2,046,019

 
(4,984
)
 

 
(2,041,035
)
 

Advances to affiliates
 

 
516,717

 
3,379

 
(520,096
)
 

Total assets
 
$
2,080,510

 
$
2,852,803

 
$
85,722

 
$
(2,570,591
)
 
$
2,448,444

Current liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
13,014

 
$
243,284

 
$
8,479

 
$

 
$
264,777

Income taxes payable
 
39,043

 

 

 

 
39,043

Long-term debt due within one year
 

 
648

 
231

 

 
879

Total current liabilities
 
52,057

 
243,932

 
8,710

 

 
304,699

Advances from affiliates
 
520,096

 

 

 
(520,096
)
 

Long-term debt
 
390,000

 
351,716

 
57,507

 

 
799,223

Other long-term liabilities
 
27,673

 
211,136

 
10,585

 
(9,460
)
 
239,934

Deferred income taxes
 
183,535

 

 
(62
)
 

 
183,473

Total Vail Resorts, Inc. stockholders’ equity (deficit)
 
907,149

 
2,046,019

 
(4,984
)
 
(2,041,035
)
 
907,149

Noncontrolling interests
 

 

 
13,966

 

 
13,966

Total stockholders’ equity
 
907,149

 
2,046,019

 
8,982

 
(2,041,035
)
 
921,115

Total liabilities and stockholders’ equity
 
$
2,080,510

 
$
2,852,803

 
$
85,722

 
$
(2,570,591
)
 
$
2,448,444



F-18



Supplemental Consolidating Condensed Balance Sheet
As of July 31, 2013
(in thousands)
(Unaudited)
 
 
 
Parent
Company
 
100%
Owned
Guarantor
Subsidiaries
 
Other
Subsidiaries
 
Eliminating
Entries
 
Consolidated
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$
130,970

 
$
7,634

 
$

 
$
138,604

Restricted cash
 

 
10,890

 
1,734

 

 
12,624

Trade receivables, net
 

 
77,725

 
1,312

 

 
79,037

Inventories, net
 

 
68,101

 
217

 

 
68,318

Other current assets
 
25,190

 
18,475

 
1,221

 

 
44,886

Total current assets
 
25,190

 
306,161

 
12,118

 

 
343,469

Property, plant and equipment, net
 

 
1,124,004

 
45,284

 

 
1,169,288

Real estate held for sale and investment
 

 
195,230

 

 

 
195,230

Goodwill, net
 

 
379,953

 
1,746

 

 
381,699

Intangible assets, net
 

 
101,913

 
19,431

 

 
121,344

Other assets
 
6,057

 
96,337

 
4,332

 
(9,459
)
 
97,267

Investments in subsidiaries
 
1,861,509

 
(3,510
)
 

 
(1,857,999
)
 

Advances to affiliates
 

 
480,408

 
2,906

 
(483,314
)
 

Total assets
 
$
1,892,756

 
$
2,680,496

 
$
85,817

 
$
(2,350,772
)
 
$
2,308,297

Current liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
6,600

 
$
256,094

 
$
6,825

 
$

 
$
269,519

Income taxes payable
 
42,822

 

 

 

 
42,822

Long-term debt due within one year
 

 
775

 
219

 

 
994

Total current liabilities
 
49,422

 
256,869

 
7,044

 

 
313,335

Advances from affiliates
 
483,314

 

 

 
(483,314
)
 

Long-term debt
 
390,000

 
348,190

 
57,738

 

 
795,928

Other long-term liabilities
 
27,851

 
213,928

 
10,586

 
(9,459
)
 
242,906

Deferred income taxes
 
118,301

 

 
(42
)
 

 
118,259

Total Vail Resorts, Inc. stockholders’ equity (deficit)
 
823,868

 
1,861,509

 
(3,510
)
 
(1,857,999
)
 
823,868

Noncontrolling interests
 

 

 
14,001

 

 
14,001

Total stockholders’ equity
 
823,868

 
1,861,509

 
10,491

 
(1,857,999
)
 
837,869

Total liabilities and stockholders’ equity
 
$
1,892,756

 
$
2,680,496

 
$
85,817

 
$
(2,350,772
)
 
$
2,308,297



F-19



Supplemental Consolidating Condensed Balance Sheet
As of April 30, 2013
(in thousands)
(Unaudited) 
 
 
Parent
Company
 
100%
Owned
Guarantor
Subsidiaries
 
Other
Subsidiaries
 
Eliminating
Entries
 
Consolidated
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$
230,429

 
$
7,306

 
$

 
$
237,735

Restricted cash
 

 
10,894

 
1,097

 

 
11,991

Trade receivables, net
 

 
70,424

 
3,309

 

 
73,733

Inventories, net
 

 
61,014

 
187

 

 
61,201

Other current assets
 
28,699

 
20,543

 
1,236

 

 
50,478

Total current assets
 
28,699

 
393,304

 
13,135

 

 
435,138

Property, plant and equipment, net
 

 
993,813

 
46,094

 

 
1,039,907

Real estate held for sale and investment
 

 
201,861

 

 

 
201,861

Goodwill, net
 

 
270,076

 
1,779

 

 
271,855

Intangible assets, net
 

 
72,563

 
19,476

 

 
92,039

Other assets
 
6,319

 
37,661

 
4,348

 
(9,459
)
 
38,869

Investments in subsidiaries
 
1,885,121

 
(2,153
)
 

 
(1,882,968
)
 

Advances to affiliates
 

 
382,375

 
3,622

 
(385,997
)
 

Total assets
 
$