UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended April 30, 2006
¨ 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: 1-9614
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.)
|
|
|
137
Benchmark Road, Avon, Colorado
|
81620
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(970)
845-2500
|
|
(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.
x Yes ¨ No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer x Accelerated
filer ¨ Non-accelerated
filer ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
¨ Yes x No
As
of June 2, 2006, 38,979,404 shares of Common Stock were issued and
outstanding.
Table
of Contents
|
PART
I
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
|
|
Item
2.
|
|
|
Item
3.
|
|
|
Item
4.
|
|
|
1. PART
II
|
OTHER
INFORMATION
|
|
Item
1.
|
|
|
Item
2.
|
|
|
Item
3.
|
|
|
Item
4.
|
|
|
Item
5.
|
|
|
Item
6.
|
|
PART
I
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
|
Consolidated
Condensed Balance Sheets
(In
thousands, except share and per share amounts)
|
April
30,
|
July
31,
|
April
30,
|
||||||||||
|
2006
|
2005
|
2005
|
||||||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||||||
|
Assets
|
||||||||||||
|
Current
assets:
|
||||||||||||
|
Cash
and cash equivalents
|
$
|
240,116
|
$
|
136,580
|
$
|
41,068
|
||||||
|
Restricted
cash
|
32,307
|
18,253
|
17,709
|
|||||||||
|
Receivables,
net
|
35,618
|
33,136
|
33,493
|
|||||||||
|
Inventories,
net
|
36,830
|
36,078
|
31,098
|
|||||||||
|
Other
current assets
|
34,744
|
32,102
|
27,985
|
|||||||||
|
Assets
held for sale
|
--
|
26,735
|
--
|
|||||||||
|
Total
current assets
|
379,615
|
282,884
|
151,353
|
|||||||||
|
Property,
plant and equipment, net (Note 5)
|
848,984
|
843,047
|
978,464
|
|||||||||
|
Real
estate held for sale and investment
|
240,615
|
154,874
|
140,009
|
|||||||||
|
Goodwill,
net
|
135,811
|
135,507
|
145,090
|
|||||||||
|
Intangible
assets, net
|
76,587
|
76,974
|
81,325
|
|||||||||
|
Other
assets
|
31,123
|
32,635
|
34,044
|
|||||||||
|
Total
assets
|
$
|
1,712,735
|
$
|
1,525,921
|
$
|
1,530,285
|
||||||
|
Liabilities
and Stockholders’ Equity
|
||||||||||||
|
Current
liabilities:
|
||||||||||||
|
Accounts
payable and accrued expenses (Note 5)
|
$
|
206,471
|
$
|
209,369
|
$
|
188,349
|
||||||
|
Income
taxes payable
|
1,324
|
12,979
|
--
|
|||||||||
|
Long-term
debt due within one year (Note 4)
|
4,420
|
2,004
|
2,178
|
|||||||||
|
Total
current liabilities
|
212,215
|
224,352
|
190,527
|
|||||||||
|
Long-term
debt (Note 4)
|
516,871
|
519,706
|
520,349
|
|||||||||
|
Other
long-term liabilities
|
149,881
|
140,421
|
102,016
|
|||||||||
|
Deferred
income taxes
|
118,846
|
71,209
|
116,638
|
|||||||||
|
Commitments
and contingencies (Note 11)
|
--
|
--
|
--
|
|||||||||
|
Put
option liabilities (Note 9)
|
113
|
34
|
451
|
|||||||||
|
Minority
interest in net assets of consolidated subsidiaries
|
35,224
|
29,670
|
39,142
|
|||||||||
|
Stockholders’
equity:
|
||||||||||||
|
Preferred
stock, $0.01 par value, 25,000,000 shares authorized, zero shares
issued
and outstanding
|
--
|
--
|
--
|
|||||||||
|
Common
stock, $0.01 par value, 100,000,000 shares authorized, 38,876,070
(unaudited), 36,596,193 and 35,946,776 (unaudited) shares issued
and
outstanding, respectively (Note 13)
|
389
|
366
|
359
|
|||||||||
|
Additional
paid-in capital
|
504,212
|
442,527
|
426,819
|
|||||||||
|
Deferred
compensation
|
--
|
(329
|
)
|
(415
|
)
|
|||||||
|
Retained
earnings
|
174,984
|
97,965
|
134,399
|
|||||||||
|
Total
stockholders’ equity
|
679,585
|
540,529
|
561,162
|
|||||||||
|
Total
liabilities and stockholders’ equity
|
$
|
1,712,735
|
$
|
1,525,921
|
$
|
1,530,285
|
The
accompanying
Notes
to
Consolidated Condensed
Financial Statements are an integral part of these financial
statements.
Consolidated
Condensed Statements of Operations
(In
thousands, except per share amounts)
(Unaudited)
|
Three
Months Ended
|
||||||||
|
April
30,
|
||||||||
|
2006
|
2005
|
|||||||
|
Net
revenue:
|
||||||||
|
Mountain
|
$
|
294,773
|
$
|
256,825
|
||||
|
Lodging
|
39,492
|
56,285
|
||||||
|
Real
estate
|
7,124
|
14,341
|
||||||
|
Total
net revenue
|
341,389
|
327,451
|
||||||
|
Segment
operating expense:
|
||||||||
|
Mountain
|
149,431
|
132,399
|
||||||
|
Lodging
|
30,515
|
43,164
|
||||||
|
Real
estate
|
11,370
|
16,165
|
||||||
|
Total
segment operating expense
|
191,316
|
191,728
|
||||||
|
Other
operating expense:
|
||||||||
|
Depreciation
and amortization
|
(22,942
|
)
|
(25,039
|
)
|
||||
|
Relocation
and separation charges (Note 7)
|
(3,778
|
)
|
--
|
|||||
|
Asset
impairment charge
|
--
|
(1,573
|
)
|
|||||
|
Loss
on disposal of fixed assets, net
|
(108
|
)
|
(38
|
)
|
||||
|
Income
from operations
|
123,245
|
109,073
|
||||||
|
Mountain
equity investment income, net
|
780
|
438
|
||||||
|
Real
estate equity investment loss, net
|
(20
|
)
|
(48
|
)
|
||||
|
Investment
income, net
|
3,156
|
141
|
||||||
|
Interest
expense
|
(8,849
|
)
|
(9,349
|
)
|
||||
|
Loss
on sale of businesses, net
|
--
|
(3
|
)
|
|||||
|
Contract
dispute charges (Note 11)
|
(816
|
)
|
--
|
|||||
|
Loss
on put options, net
|
(113
|
)
|
(447
|
)
|
||||
|
Minority
interest in income of consolidated subsidiaries, net
|
(5,355
|
)
|
(4,216
|
)
|
||||
|
Income
before provision for income taxes
|
112,028
|
95,589
|
||||||
|
Provision
for income taxes
|
(43,691
|
)
|
(36,801
|
)
|
||||
|
Net
income
|
$
|
68,337
|
$
|
58,788
|
||||
|
Per
share amounts (Note 3):
|
||||||||
|
Basic
net income per share
|
$
|
1.78
|
$
|
1.64
|
||||
|
Diluted
net income per share
|
$
|
1.75
|
$
|
1.61
|
||||
The
accompanying Notes to Consolidated Condensed Financial Statements are an
integral part of these financial statements.
Consolidated
Condensed Statements of Operations
(In
thousands, except per share amounts)
(Unaudited)
|
Nine
Months Ended
|
||||||||
|
April
30,
|
||||||||
|
2006
|
2005
|
|||||||
|
Net
revenue:
|
||||||||
|
Mountain
|
$
|
581,279
|
$
|
505,484
|
||||
|
Lodging
|
113,321
|
145,148
|
||||||
|
Real
estate
|
20,226
|
39,329
|
||||||
|
Total
net revenue
|
714,826
|
689,961
|
||||||
|
Segment
operating expense:
|
||||||||
|
Mountain
|
372,387
|
329,210
|
||||||
|
Lodging
|
101,050
|
127,282
|
||||||
|
Real
estate
|
23,823
|
32,939
|
||||||
|
Total
segment operating expense
|
497,260
|
489,431
|
||||||
|
Other
operating (expense) income:
|
||||||||
|
Depreciation
and amortization
|
(63,296
|
)
|
(69,387
|
)
|
||||
|
Relocation
and separation charges (Note 7)
|
(3,778
|
)
|
--
|
|||||
|
Asset
impairment charge
|
(136
|
)
|
(1,573
|
)
|
||||
|
Mold
remediation credit (Note 11)
|
852
|
--
|
||||||
|
Loss
on disposal of fixed assets, net
|
(835
|
)
|
(1,519
|
)
|
||||
|
Income
from operations
|
150,373
|
128,051
|
||||||
|
Mountain
equity investment income, net
|
3,085
|
2,003
|
||||||
|
Lodging
equity investment loss, net
|
--
|
(2,679
|
)
|
|||||
|
Real
estate equity investment income (loss), net
|
79
|
(107
|
)
|
|||||
|
Investment
income, net
|
5,390
|
1,443
|
||||||
|
Interest
expense
|
(27,788
|
)
|
(30,734
|
)
|
||||
|
Loss
on extinguishment of debt
|
--
|
(612
|
)
|
|||||
|
Gain
on sale of businesses, net (Note 8)
|
4,625
|
5,690
|
||||||
|
Contract
dispute charges (Note 11)
|
(816
|
)
|
--
|
|||||
|
(Loss)
gain on put options, net
|
(79
|
)
|
741
|
|||||
|
Other
income, net
|
50
|
49
|
||||||
|
Minority
interest in income of consolidated subsidiaries, net
|
(8,660
|
)
|
(6,980
|
)
|
||||
|
Income
before provision for income taxes
|
126,259
|
96,865
|
||||||
|
Provision
for income taxes
|
(49,240
|
)
|
(37,293
|
)
|
||||
|
Net
income
|
$
|
77,019
|
$
|
59,572
|
||||
|
Per
share amounts (Note 3):
|
||||||||
|
Basic
net income per share
|
$
|
2.05
|
$
|
1.68
|
||||
|
Diluted
net income per share
|
$
|
2.01
|
$
|
1.65
|
||||
The
accompanying Notes to Consolidated Condensed Financial Statements are an
integral part of these financial statements.
Consolidated
Condensed Statements of Cash Flows
(In
thousands)
(Unaudited)
|
Nine
Months Ended
|
||||||||
|
April
30,
|
||||||||
|
2006
|
2005
|
|||||||
|
Net
cash provided by operating activities
|
$
|
177,718
|
$
|
178,676
|
||||
|
Cash
flows from investing activities:
|
||||||||
|
Capital
expenditures
|
(63,683
|
)
|
(68,015
|
)
|
||||
|
Investments
in real estate
|
(88,366
|
)
|
(33,789
|
)
|
||||
|
Proceeds
from sale of businesses
|
30,712
|
12,736
|
||||||
|
Other
investing activities, net
|
(4,419
|
)
|
1,575
|
|||||
|
Net
cash used in investing activities
|
(125,756
|
)
|
(87,493
|
)
|
||||
|
Cash
flows from financing activities:
|
||||||||
|
Proceeds
from borrowings under long-term debt
|
36,066
|
116,901
|
||||||
|
Payments
of long-term debt
|
(36,781
|
)
|
(220,161
|
)
|
||||
|
Proceeds
from exercise of stock options
|
44,036
|
10,073
|
||||||
|
Other
financing activities, net
|
8,253
|
(3,256
|
)
|
|||||
|
Net
cash provided by (used in) financing activities
|
51,574
|
(96,443
|
)
|
|||||
|
Net
increase (decrease) in cash and cash equivalents
|
103,536
|
(5,260
|
)
|
|||||
|
Cash
and cash equivalents:
|
||||||||
|
Beginning
of period
|
136,580
|
46,328
|
||||||
|
End
of period
|
$
|
240,116
|
$
|
41,068
|
||||
The
accompanying Notes to Consolidated Condensed Financial Statements are an
integral part of these financial statements.
Notes
to Consolidated Condensed Financial Statements
(Unaudited)
1. Organization
and Business
Vail
Resorts, Inc. ("Vail Resorts") 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 owns and operates five
world-class ski resorts and related amenities at Vail, Breckenridge, Keystone
and Beaver Creek mountains in Colorado and the Heavenly Ski Resort ("Heavenly")
in the Lake Tahoe area of California and Nevada. The Company also holds a
61.7%
interest in SSI Venture LLC ("SSV"), a retail/rental company. In the Lodging
segment, the Company owns and operates various hotels, RockResorts International
LLC ("RockResorts"), a luxury hotel management company, and Grand Teton Lodge
Company ("GTLC"), which operates three resorts within Grand Teton National
Park
(under a National Park Service concessionaire contract) and the Jackson Hole
Golf & Tennis Club ("JHG&TC") in Wyoming. Vail Resorts Development
Company ("VRDC"), a wholly-owned subsidiary of the Company, conducts the
operations of the Company's Real Estate segment. The Company's Mountain
businesses and those Lodging properties at or around the Company’s ski resorts
are seasonal in nature with peak operating seasons from mid-November through
mid-April. The Company's operations at GTLC generally run 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 6, Variable Interest
Entities).
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 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 fiscal year ended July 31, 2005.
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 have been condensed or omitted. The July 31, 2005 consolidated condensed
balance sheet was derived from audited financial statements.
2. Summary
of Significant Accounting Policies
Use
of Estimates--The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications--Certain
reclassifications have been made to the accompanying consolidated condensed
financial statements as of and for the three and nine months ended April
30,
2005 to conform to the current period presentation.
Stock
Compensation--At
April 30, 2006, the Company had four stock-based compensation plans, which
are
described more fully in Note 12, Stock Compensation Plans. Prior to August
1,
2005, the Company accounted for those plans under the recognition and
measurement provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations, as permitted by Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock Based Compensation" ("SFAS 123").
Effective
August 1, 2005, the Company adopted the fair value recognition provisions
of
SFAS No. 123R, "Share-Based Payment" ("SFAS 123R"), using the modified
prospective method. Under that transition method, compensation cost recognized
in fiscal 2006 includes: (a) compensation cost for all stock-based payments
granted prior to, but not yet vested as of August 1, 2005, based on the
grant-date fair value estimated in accordance with the original provisions
of
SFAS 123, and (b) compensation cost for all stock-based payments granted
subsequent to August 1, 2005, based on the grant-date fair value estimated
in
accordance with the provisions of SFAS 123R. The grant-date fair value of
share-based payments is amortized to expense ratably over the awards' vesting
periods. Results for prior periods have not been restated. The following
table
shows total stock-based compensation expense for the three and nine months
ended
April 30, 2006 and 2005 included in the consolidated condensed statements
of
operations (in thousands):
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
April
30,
|
April
30,
|
|||||||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||||||
|
Mountain
operating expense
|
$
|
698
|
$
|
50
|
$
|
2,653
|
$
|
206
|
||||||||
|
Lodging
operating expense
|
162
|
17
|
983
|
70
|
||||||||||||
|
Real
estate operating expense
|
283
|
18
|
1,064
|
76
|
||||||||||||
|
Pre-tax
stock-based compensation expense
|
1,143
|
85
|
4,700
|
352
|
||||||||||||
|
Less:
benefit for income taxes
|
429
|
32
|
1,765
|
132
|
||||||||||||
|
Net
stock-based compensation expense
|
$
|
714
|
$
|
53
|
$
|
2,935
|
$
|
220
|
||||||||
As
a result of adopting SFAS 123R on August 1, 2005, the Company's income before
income taxes and net income for the three months ended April 30, 2006 decreased
$1.1 million and $661,000, respectively, and for the nine months ended April
30,
2006 decreased $4.3 million and $2.7 million, respectively, as compared to
accounting for share-based compensation under APB 25, after considering the
change in the Company's compensation strategy to issue a portion of its
stock-based compensation as restricted stock to certain levels of employees.
The
after-tax impact of stock-based compensation recorded pursuant to SFAS 123R
resulted in a reduction in basic and diluted net income per share of $0.02
and
$0.07 for the three and nine months ended April 30, 2006,
respectively.
Prior
to the adoption of SFAS 123R, the Company reported all tax benefits for
deductions resulting from the exercise of stock options as operating cash
flows
in the consolidated condensed statements of cash flows. SFAS 123R requires
that
cash flows resulting from the tax benefits to be realized in excess of the
compensation expense recognized in the consolidated condensed statements
of
operations before considering the impact of stock options that expire
unexercised or forfeited (the "excess tax benefit") be classified as financing
cash flows. The excess tax benefit of $13.5 million classified as a financing
cash inflow for the nine months ended April 30, 2006 would have been classified
as an operating cash inflow if the Company had not adopted SFAS 123R.
The
following table illustrates the effect on net income and net income per share
if
the Company had recorded in its consolidated condensed statements of operations
the fair value recognition provisions of SFAS 123 to options granted under
the
Company's stock option plans for the three and nine months ended April 30,
2005.
For purposes of this pro forma disclosure, options granted subsequent to
April
30, 2005 are not considered, the value of the options is estimated using
a
Black-Scholes option-pricing formula and the expense is amortized ratably
over
the options' vesting periods (in thousands, except per share
amounts).
|
Three
Months
|
Nine
Months
|
|||||||
|
Ended
|
Ended
|
|||||||
|
April
30,
|
April
30,
|
|||||||
|
2005
|
2005
|
|||||||
|
Net
income
|
||||||||
|
As
reported
|
$
|
58,788
|
$
|
59,572
|
||||
|
Add:
stock-based employee compensation expense included in reported
net income,
net of related tax effects
|
53
|
220
|
||||||
|
Deduct:
total stock-based employee compensation expense determined under
fair
value-based method for all awards, net of related tax
effects
|
(769
|
)
|
(2,283
|
)
|
||||
|
Pro
forma
|
$
|
58,072
|
$
|
57,509
|
||||
|
Basic
net income per share
|
||||||||
|
As
reported
|
$
|
1.64
|
$
|
1.68
|
||||
|
Pro
forma
|
$
|
1.62
|
$
|
1.62
|
||||
|
Diluted
net income per share
|
||||||||
|
As
reported
|
$
|
1.61
|
$
|
1.65
|
||||
|
Pro
forma
|
$
|
1.59
|
$
|
1.60
|
||||
3. Net
Income Per Share
SFAS
No. 128, "Earnings Per Share" ("EPS"), establishes standards for computing
and
presenting EPS. SFAS No. 128 requires the dual presentation of basic and
diluted
EPS on the face of the consolidated condensed statements of operations and
requires a reconciliation of numerators (net income/loss) and denominators
(weighted-average shares outstanding) for both basic and diluted EPS in the
footnotes. Basic EPS excludes dilution and is computed by dividing net
income/loss available to common shareholders by the weighted-average shares
outstanding. 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 common stock that would then share in the earnings of the
Company. Presented below is basic and diluted EPS for the three months ended
April 30, 2006 and 2005 (in thousands, except per share amounts):
|
Three
Months Ended April 30,
|
|||||||||||||
|
2006
|
2005
|
||||||||||||
|
Basic
|
Diluted
|
Basic
|
Diluted
|
||||||||||
|
Net
income per share:
|
|||||||||||||
|
Net
income
|
$
|
68,337
|
$
|
68,337
|
$
|
58,788
|
$
|
58,788
|
|||||
|
Weighted-average
shares outstanding
|
38,365
|
38,365
|
35,744
|
35,744
|
|||||||||
|
Effect
of dilutive securities
|
--
|
659
|
--
|
749
|
|||||||||
|
Total
shares
|
38,365
|
39,024
|
35,744
|
36,493
|
|||||||||
|
Net
income per share
|
$
|
1.78
|
$
|
1.75
|
$
|
1.64
|
$
|
1.61
|
|||||
The
number of shares issuable on the exercise of common stock options that were
excluded from the calculation of diluted net income per share because the
effect
of their inclusion would have been anti-dilutive totaled 268,000 and 598,000
for
the three months ended April 30, 2006 and 2005, respectively.
Presented
below is basic and diluted EPS for the nine months ended April 30, 2006 and
2005
(in thousands, except per share amounts):
|
Nine
Months Ended April 30,
|
||||||||||||
|
2006
|
2005
|
|||||||||||
|
Basic
|
Diluted
|
Basic
|
Diluted
|
|||||||||
|
Net
income per share:
|
||||||||||||
|
Net
income
|
$
|
77,019
|
$
|
77,019
|
$
|
59,572
|
$
|
59,572
|
||||
|
Weighted-average
shares outstanding
|
37,535
|
37,535
|
35,526
|
35,526
|
||||||||
|
Effect
of dilutive securities
|
--
|
822
|
--
|
495
|
||||||||
|
Total
shares
|
37,535
|
38,357
|
35,526
|
36,021
|
||||||||
|
Net
income per share
|
$
|
2.05
|
$
|
2.01
|
$
|
1.68
|
$
|
1.65
|
||||
The
number of shares issuable on the exercise of common stock options that were
excluded from the calculation of diluted net income per share because the
effect
of their inclusion would have been anti-dilutive totaled 248,000 and 743,000
for
the nine months ended April 30, 2006 and 2005, respectively.
4. Long-Term
Debt
Long-term
debt as of April 30, 2006, July 31, 2005 and April 30, 2005 is summarized
as
follows (in thousands):
|
April
30,
|
July
31,
|
April
30,
|
||||||||
|
Maturity
(d)
|
2006
|
2005
|
2005
|
|||||||
|
Credit
Facility Revolver (a)
|
2010
|
$
|
--
|
$
|
--
|
$
|
--
|
|||
|
SSV
Facility (b)
|
2011
|
--
|
9,429
|
9,714
|
||||||
|
Industrial
Development Bonds
|
2007-2020
|
61,700
|
61,700
|
61,700
|
||||||
|
Employee
Housing Bonds
|
2027-2039
|
52,575
|
52,575
|
52,575
|
||||||
|
Non-Recourse
Real Estate Financings (c)
|
2007-2009
|
9,596
|
--
|
--
|
||||||
|
6.75%
Senior Subordinated Notes ("6.75% Notes")
|
2014
|
390,000
|
390,000
|
390,000
|
||||||
|
Other
|
2006-2029
|
7,420
|
8,006
|
8,538
|
||||||
|
Total
debt
|
521,291
|
521,710
|
522,527
|
|||||||
|
Less:
current maturities (e)
|
4,420
|
2,004
|
2,178
|
|||||||
|
Long-term
debt
|
$
|
516,871
|
$
|
519,706
|
$
|
520,349
|
||||
(a) In
January 2005, the Company amended its senior credit facility ("Credit Facility")
to expand its revolving credit facility ("Credit Facility Revolver") to $400
million and paid off the $100 million term loan ("Credit Facility Term
Loan").
(b) In
September 2005, SSV entered into a new credit facility ("SSV Facility"),
with
U.S. Bank National Association ("U.S. Bank") as lender, to refinance its
existing credit facility and to provide additional financing for future
acquisitions. The new facility provides for financing up to an aggregate
$33
million, consisting of (i) an $18 million working capital revolver, (ii)
a $10
million reducing revolver and (iii) a $5 million acquisition revolver.
Obligations under the SSV Facility are collateralized by a first priority
security interest in all the assets of SSV. Availability under the SSV Facility
is based on the book values of accounts receivable, inventories and rental
equipment of SSV. The SSV Facility matures September 2010. Borrowings bear
interest annually at SSV's option of (i) LIBOR plus 0.875% (5.92% at April
30,
2006) or (ii) U.S. Bank's prime rate minus 1.75% (6.00% at April 30, 2006).
Proceeds under the working capital revolver are for SSV's seasonal working
capital needs. No principal payments are due until maturity, and principal
may
be drawn and repaid at any time. Proceeds under the reducing revolver were
used
to pay off SSV's existing credit facility. Principal under the reducing revolver
may be drawn and repaid at any time. The reducing revolver commitments decrease
by $312,500 on January 31, April 30, July 31 and October 31 of each year
beginning January 31, 2006. Any outstanding balance in excess of the reduced
commitment amount will be due on the day of each commitment reduction. The
acquisition revolver is to be utilized to make acquisitions subject to U.S.
Bank's approval. Principal under the acquisition revolver may be drawn and
repaid at any time. The acquisition revolver commitments decrease by $156,250
on
January 31, April 30, July 31 and October 31 of each year beginning January
31,
2007. Any outstanding balance in excess of the reduced commitment amount
will be
due on the day of each commitment reduction. The SSV Facility contains certain
restrictive financial covenants, including the Consolidated Leverage Ratio
and
Minimum Fixed Charge Coverage Ratio (each as defined in the underlying credit
agreement).
(c) In
July 2005, Gore Creek Place, LLC ("Gore Creek"), a wholly-owned subsidiary
of
the Company, entered into a Construction Loan Agreement (the "Gore Creek
Facility") in the amount of up to $30 million. Borrowings under the Gore
Creek
Facility are non-revolving and must be used for the payment of certain costs
associated with the construction and development of Gore Creek Place. At
April
30, 2006, borrowings under the
Gore Creek Facility were $9.6 million.
In
January 2006, Arrabelle at Vail Square, LLC ("Arrabelle"), a wholly-owned
subsidiary of the Company entered into a Construction Loan Agreement (the
"Arrabelle Facility") in the amount of up to $175 million with U.S. Bank,
as
administrative agent and U.S. Bank and Wells Fargo, N.A., as joint lead
arrangers. Borrowings under the Arrabelle Facility are non-revolving and
must be
used for the payment of certain costs associated with the construction and
development of Arrabelle at Vail Square, a mixed-use development consisting
of
67 luxury residential condominium units, a 36-room RockResorts hotel,
approximately 33,000 square feet of retail and restaurant space, a spa, private
membership club and skier services facilities. The Arrabelle Facility matures
on
August 1, 2008, and principal payments are due at maturity, with certain
pre-payment requirements, including upon the closing of the condominium units.
Arrabelle has the option to extend the term of the Arrabelle Facility for
nine
months, subject to certain requirements. Borrowings under the Arrabelle Facility
bear interest annually at Arrabelle's option at the rate of (i) LIBOR plus
1.45%
(6.49% at April 30, 2006) or (ii) the administrative agent's prime commercial
lending rate (7.75% at April 30, 2006). Interest is payable monthly in arrears.
The Arrabelle Facility provides for affirmative and negative covenants that
restrict, among other things, Arrabelle's ability to dispose of assets, transfer
or pledge its equity interest, incur indebtedness and make investments or
distributions. The Arrabelle Facility contains non-recourse provisions to
the
Company with respect to repayment, whereby under event of default, U.S. Bank
has
recourse only against Arrabelle's assets ($44.5 million at April 30, 2006).
U.S.
Bank does not have recourse against assets held by the Company or The Vail
Corporation, a wholly-owned subsidiary of the Company. All assets of Arrabelle
are provided as collateral under the Arrabelle Facility. At April 30, 2006,
the
Company did not have any borrowings under the Arrabelle Facility.
In
connection with the Gore Creek Facility and the Arrabelle Facility
(collectively, "Non-Recourse Real Estate Financings"), the Company and/or
certain subsidiaries entered into completion guarantees, pursuant to which
the
Company and/or certain subsidiaries guarantee the completion of the construction
of the projects (but not the repayment of any amounts drawn under the
facilities). However, certain subsidiaries could be responsible to pay damages
under very limited circumstances. If either the Company or certain subsidiaries
are required to perform Gore Creek or Arrabelle's obligations to complete
the
projects, any undisbursed commitments under the facilities for the completion
of
construction and development of the projects will be made available to the
Company.
(d) Maturities
are based on the Company's July 31 fiscal year end.
(e) Current
maturities represent principal payments due in the next 12 months.
Aggregate
maturities for debt outstanding as of April 30, 2006 are as follows (in
thousands):
|
Fiscal
2006
|
$
|
85
|
|
Fiscal
2007
|
14,007
|
|
|
Fiscal
2008
|
363
|
|
|
Fiscal
2009
|
15,266
|
|
|
Fiscal
2010
|
262
|
|
|
Thereafter
|
491,308
|
|
|
Total
debt
|
$
|
521,291
|
The
Company incurred gross interest expense of $9.8 million and $9.3 million
for the
three months ended April 30, 2006 and 2005, respectively, of which $599,000
and
$466,000 was amortization of deferred financing costs. The Company incurred
gross interest expense of $29.1 million and $30.7 million for the nine months
ended April 30, 2006 and 2005, respectively, of which $1.6 million and $1.5
million was amortization of deferred financing costs. The Company capitalized
$938,000 and $1.3 million of interest during the three and nine months ended
April 30, 2006, respectively, primarily related to real estate projects,
and
capitalized zero interest during the three and nine months ended April 30,
2005.
5. Supplementary
Balance Sheet Information (in thousands)
The
composition of property, plant and equipment follows:
|
April
30,
|
July
31,
|
April
30,
|
|||||||||
|
2006
|
2005
|
2005
|
|||||||||
|
Land
and land improvements
|
$
|
244,204
|
$
|
236,424
|
$
|
247,757
|
|||||
|
Buildings
and building improvements
|
527,297
|
504,662
|
624,106
|
||||||||
|
Machinery
and equipment
|
427,550
|
398,342
|
398,139
|
||||||||
|
Vehicles
|
25,217
|
24,449
|
24,069
|
||||||||
|
Furniture
and fixtures
|
112,296
|
97,780
|
117,385
|
||||||||
|
Construction
in progress
|
30,664
|
47,973
|
48,768
|
||||||||
|
Gross
property, plant and equipment
|
1,367,228
|
1,309,630
|
1,460,224
|
||||||||
|
Accumulated
depreciation
|
(518,244
|
)
|
(466,583
|
)
|
(481,760
|
)
|
|||||
|
Property,
plant and equipment, net
|
$
|
848,984
|
$
|
843,047
|
$
|
978,464
|
|||||
The
composition of accounts payable and accrued expenses follows:
|
April
30,
|
July
31,
|
April
30,
|
|||||||
|
2006
|
2005
|
2005
|
|||||||
|
Trade
payables
|
$
|
71,516
|
$
|
67,368
|
$
|
61,822
|
|||
|
Deferred
revenue
|
23,041
|
32,474
|
22,514
|
||||||
|
Deposits
|
32,881
|
21,609
|
30,308
|
||||||
|
Accrued
salaries, wages and deferred compensation
|
26,008
|
26,571
|
19,859
|
||||||
|
Accrued
benefits
|
23,501
|
19,379
|
22,837
|
||||||
|
Accrued
interest
|
7,214
|
14,274
|
6,573
|
||||||
|
Liabilities
to complete real estate projects, short term
|
8,396
|
5,188
|
7,128
|
||||||
|
Other
accruals
|
13,914
|
22,506
|
17,308
|
||||||
|
Total
accounts payable and accrued expenses
|
$
|
206,471
|
$
|
209,369
|
$
|
188,349
|
|||
6. Variable
Interest Entities
The
Company has determined that it is the primary beneficiary of four employee
housing entities (collectively, the "Employee Housing Entities"), Breckenridge
Terrace, LLC ("Breckenridge Terrace"), The Tarnes at BC, LLC ("Tarnes"),
BC
Housing LLC ("BC Housing") and Tenderfoot Seasonal Housing, LLC ("Tenderfoot"),
which are Variable Interest Entities ("VIEs"), and has consolidated them
in its
consolidated condensed financial statements. As a group, as of April 30,
2006,
the Employee Housing Entities had total assets of $43.5 million (primarily
recorded in property, plant and equipment, net) and total liabilities of
$64.5
million (primarily recorded in long-term debt as "Employee Housing Bonds")).
All
of the assets of Tarnes serve as collateral for Tarnes' Tranche B obligations
($2.4 million as of April 30, 2006). The Company has issued under its Credit
Facility $38.3 million in letters of credit related to the Tranche A Employee
Housing Bonds and $12.6 million in letters of credit related to the Tranche
B
Employee Housing Bonds. 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 has determined that it is the primary beneficiary of Avon Partners
II
("APII"), which is a VIE. APII owns commercial space and the Company currently
leases substantially all of that space for its corporate headquarters. APII
had
total assets of $3.9 million (primarily recorded in property, plant and
equipment, net) and no debt as of April 30, 2006.
The
Company has determined that it is the primary beneficiary of FFT Investment
Partners ("FFT"), which is a VIE. FFT owns a private residence in Eagle County,
Colorado. The entity had total assets of $5.6 million (primarily recorded
in
real estate held for sale and investment) and no debt as of April 30,
2006.
The
Company, through various lodging subsidiaries, manages the operations of
several
entities that own hotels in which the Company has no ownership interest.
The
Company also has extended a $1.5 million note receivable to one of these
entities. These entities were formed to acquire, own, operate and realize
the
value in resort hotel properties. The Company has managed the day-to-day
operations of three of the hotel properties since November 2001, began managing
three of the properties during the fourth quarter of fiscal 2005 and began
managing two of the properties during the second quarter of fiscal 2006.
The
Company has determined that the entities that own the hotel properties are
VIEs,
and the management contracts are significant variable interests in these
VIEs.
The Company has also determined that it is not the primary beneficiary of
these
entities and, accordingly, is not required to consolidate any of these entities.
Based on information provided to the Company by owners of the entities, these
VIEs had total assets of approximately $225.8 million and total liabilities
of
approximately $79.1 million as of April 30, 2006. The Company's maximum exposure
to loss as a result of its involvement with these VIEs is limited to the
note
receivable and accrued interest of approximately $1.6 million and the net
book
value of the intangible asset associated with the management agreements in
the
amount of $2.6 million at April 30, 2006.
7. Relocation
and Separation Charges
In
February 2006, the Company announced a plan to relocate its corporate
headquarters; the plan was formally approved by the Company’s Board of Directors
in April 2006. The relocation process (which also includes the consolidation
of
certain other operations of the Company) is expected to be completed by the
end
of the second quarter of fiscal year 2007. The Company currently expects
that
the total charges associated with the relocation that will result in cash
expenditures will be approximately $3.8 million to $4.4 million (which includes
charges for severance and retention of $1.3 million to $1.5 million, charges
for
contract termination costs of $200,000 to $400,000 and facility, employee
and
other relocation costs of $2.3 million to $2.5 million), of which $1.1 million
was incurred through April 30, 2006. In addition, the Company anticipates
it
will record total accelerated depreciation on the early retirement of certain
assets of approximately $900,000, to be recorded in “depreciation and
amortization” expense, of which $340,000 has been recorded through April 30,
2006. The above amounts do not reflect any of the anticipated benefits expected
to be realized from the relocation and consolidation of offices.
The
following table summarizes the activity and balances of the liability related
to
future payments of relocation charges, which has been recorded in “accounts
payable and accrued expenses” in the accompanying consolidated condensed balance
sheets (in thousands):
|
Severance
and
|
Facility,
Employee and Other
|
|||||||||||
|
Retention
Benefits
|
Relocation
Costs
|
Total
|
||||||||||
|
Balance
at 7/31/05
|
$
|
--
|
$
|
--
|
$
|
--
|
||||||
|
Relocation
charges
|
950
|
101
|
1,051
|
|||||||||
|
Payments
|
(239
|
)
|
(101
|
)
|
(340
|
)
|
||||||
|
Balance
at 4/30/06
|
$
|
711
|
$
|
--
|
$
|
711
|
||||||
In
addition, in February 2006, Adam Aron, the former Chairman and Chief Executive
Officer of the Company, resigned. In connection with Mr. Aron's resignation,
the
Company entered into a separation agreement with Mr. Aron, whereby the
Company recorded $2.7 million of separation related expenses, which is
included in “relocation and separation charges” in the accompanying consolidated
condensed statements of operations for the three and nine months ended April
30,
2006. Payments of Mr. Aron’s separation benefits will occur in the first quarter
of fiscal 2007.
8. Sale
of Businesses
On
January 19, 2006, JHL&S LLC, a limited liability company owned by
wholly-owned subsidiaries of the Company, sold the assets constituting Snake
River Lodge & Spa ("SRL&S") to Lodging Capital Partners, a private,
Chicago-based hospitality investment firm ("LCP"), for $32.5 million, the
proceeds of which were adjusted for normal working capital pro-rations. The
carrying value of the assets sold (net of liabilities assumed) was $26.9
million, which were recorded as "assets held for sale" prior to the sale.
The
Company recorded a $4.7 million gain after consideration of all costs involved,
which is included in "gain on sale of businesses, net" in the accompanying
consolidated condensed statement of operations for the nine months ended
April
30, 2006. The Company will continue to manage SRL&S pursuant to a 15-year
management agreement with LCP.
On
December 8, 2004, the Company sold its 49% minority equity interest in Bachelor
Gulch Resort, LLC ("BG Resort"), the entity that owns The Ritz-Carlton Bachelor
Gulch, for $13.0 million, with net cash proceeds to the Company of $12.7
million. This transaction resulted in a $5.7 million gain on disposal of
the
investment, which is included in "gain on sale of businesses, net" in the
accompanying consolidated condensed statement of operations for the nine
months
ended April 30, 2005. In addition, the Company recognized $2.5 million of
Real
Estate revenue associated with the recognition of previously deferred revenue
for the basis difference in land originally contributed to the entity and
$369,000 of deferred interest income related to advances previously made
to the
entity for the nine months ended April 30, 2005. In conjunction with the
sale,
the Company had guaranteed payment of certain contingencies of BG Resort
upon
settlement. At the time of sale, the Company recorded a liability related
to
these contingencies in the amount of $130,000. In February 2006, the Company
reached a settlement of these contingencies and recorded an additional liability
in the amount of $82,000; which has been recorded as a loss within "gain
on sale
of businesses, net" in the accompanying consolidated condensed statement
of
operations for the nine months ended April 30, 2006. The Company's interest
was
acquired by GHR, LLC, a new joint venture between Gencom BG, LLC and Lehman
BG,
LLC.
9. Put
and Call Options
In
November 2004, GSSI LLC ("GSSI"), the minority shareholder in SSV, notified
the
Company of its intent to exercise its put (the "2004 Put") for 20% of its
ownership interest in SSV; in January 2005, the 2004 Put was exercised and
settled for a price of $5.8 million. As a result, the Company now holds an
approximate 61.7% ownership interest in SSV. The Company had determined that
the
price to settle the 2004 Put should be marked to fair value through earnings.
During the nine months ended April 30, 2005, the Company recorded a gain
of
$612,000 related to the decrease in the estimated fair value of the liability
associated with the 2004 Put.
The
Company and GSSI have the remaining put and call rights with respect to SSV:
a)
beginning August 1, 2007 and each year thereafter, each of the Company and
GSSI
shall have the right to call or put 100% of GSSI's ownership interest in
SSV
during certain periods each year; b) GSSI has the right to put to the Company
100% of its ownership interest in SSV at any time after GSSI has been removed
as
manager of SSV or an involuntary transfer of the Company's ownership interest
in
SSV has occurred. The put and call pricing is generally based on the trailing
twelve month EBITDA (as defined in the operating agreement) of SSV for the
fiscal period ended prior to the commencement of the put or call period,
as
applicable.
In
March 2001, in connection with the Company's acquisition of a 51% ownership
interest in RTP, LLC ("RTP"), the Company and RTP's minority shareholder
entered
into a put agreement whereby the minority shareholder can put up to an aggregate
one-third of its original 49% interest in RTP to the Company during the period
from August 1 through October 31 annually. The put price is determined primarily
by the trailing twelve month EBITDA (as defined in the underlying agreement)
for
the period ending prior to the beginning of each put period. The Company
has
determined that this put option should be marked to fair value through earnings.
For the three and nine months ended April 30, 2006, the Company recorded
losses
of $113,000 and $79,000, respectively, representing increases in the estimated
fair value of the put option liability during those periods. For the three
months ended April 30, 2005, the Company recorded a loss of $447,000
representing an increase in the estimated fair value of the put option liability
during the period. For the nine months ended April 30, 2005, the Company
recorded a gain of $129,000 representing a decrease in the estimated fair
value
of the put option liability during the period. As of April 30, 2006, the
Company
had a 54.5% interest in RTP. RTP's minority shareholder has the option to
put
27.8% of its remaining 45.5% interest in RTP to the Company as of April 30,
2006.
10. Related
Party Transactions
Historically,
the Company had paid a fee to Apollo Advisors for management services and
expenses related thereto. In connection with the conversion by Apollo Ski
Partners, L.P. ("Apollo") of its Class A common stock into shares of common
stock, this arrangement was terminated effective October 1, 2004. The Company
recorded $83,000 of expense related to this fee in the nine months ended
April
30, 2005. See Note 13, Class A Common Stock Conversion, for more information
regarding this matter.
In
August 2004, BG Resort repaid the $4.9 million principal balance note receivable
which was outstanding to the Company as of July 31, 2004 from funds obtained
by
BG Resort in a debt refinancing.
In
September 2004, James P. Thompson, the former President of VRDC, repaid the
$350,000 principal balance note receivable and associated accrued interest
which
was outstanding to the Company as of July 31, 2004 under a note originally
extended to Mr. Thompson and his wife in 1995.
As
of April 30, 2006, the Company had outstanding a $500,000 note receivable
from
Keystone/Intrawest, LLC ("KRED"), a real estate development venture in which
the
Company has an equity-method investment. This note is related to the fair
market
value of the land originally contributed to the partnership, and is repaid
as
the underlying land is sold to third parties. KRED repaid $24,000 and $269,000
of this receivable, including $12,000 for interest during the three and nine
months ended April 30, 2005. KRED made no repayments under this note during
the
three and nine months ended April 30, 2006. The Company has recorded this
note
receivable as an investment in KRED.
In
December 2004, Adam Aron, the former Chairman of the Board of Directors and
Chief Executive Officer of the Company, and Ronald Baron, an affiliate of
a
significant shareholder in the Company, reserved the purchase of condominium
units at the planned "Arrabelle" project located in the core of LionsHead
(Vail). In April 2005, Mr. Aron executed a purchase and sale agreement for
the
purchase of a condominium unit for a total purchase price of $4.6 million.
Mr.
Aron provided earnest money deposits totaling $690,000 and upgrade deposits
totaling $154,000. In May 2005, Mr. Baron and his wife executed a purchase
and
sale agreement for the purchase of a condominium unit for a total purchase
price
of $14.0 million. Mr. and Mrs. Baron provided earnest money deposits totaling
$2.1 million and upgrade deposits totaling $40,000. The earnest money deposits
will be used to fund the construction of the Arrabelle project, which began
in
May 2005. The earnest money deposits are only refundable at the Company's
discretion or if the Company fails to complete the project. The sale of the
condominiums has been approved by the Board of Directors of the Company,
in
accordance with the Company's related party transactions policy.
11. Commitments
and Contingencies
Metropolitan
Districts
The
Company credit-enhances $8.5 million of bonds issued by Holland Creek
Metropolitan District ("HCMD") through an $8.6 million letter of credit issued
against the Company's Credit Facility. 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 $1.7 million, $1.7 million
and $1.9 million, primarily within "other long-term liabilities" in the
accompanying consolidated condensed balance sheets, as of April 30, 2006,
July
31, 2005 and April 30, 2005, 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
fiscal
2008.
Guarantees
As
of April 30, 2006, the Company had various other letters of credit outstanding
in the amount of $67.6 million, a portion of which are not issued against
the
Credit Facility, consisting primarily of $51.0 million in support of the
Employee Housing Bonds, $4.5 million related to workers' compensation for
Heavenly and The Lodge at Rancho Mirage ("Rancho Mirage"), $8.5 million of
construction performance guarantees and $2.3 million for workers' compensation
and general liability deductibles related to the construction of Gore Creek
Place and Arrabelle at Vail Square.
In
addition to the guarantees noted above, the Company has entered into contracts
in the normal course of business which include certain indemnifications within
the scope of FIN 45, "Guarantor's Accounting and Disclosure Requirements
for
Guarantees, Including Indirect Guarantees of Indebtedness of Others" 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' use of the Company's trademarks
and logos, indemnities for liabilities associated with the infringement of
other
parties' technology based upon the Company's 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
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 limits exposure and should enable the Company to recover
a
portion of any future amounts paid. The Company has not recorded a liability
associated with these indemnifications as of April 30, 2006 because the Company
has assessed the fair market value associated with potential payment obligations
under the indemnifications to be immaterial or because the indemnifications
were
entered into prior to January 1, 2003 and is therefore not subject to the
measurement requirements of FIN 45.
The
Company guarantees the revenue streams associated with selected routes flown
by
certain airlines into Eagle County, Colorado, Regional Airport; these guarantees
are generally capped at certain levels. As of April 30, 2006, the Company
has
recorded a liability related to the airline guarantees of $630,000, which
represents the estimated amount the Company will be required to pay. Payments
under these guarantees are expected to be made in the fourth quarter of fiscal
2006.
Unless
otherwise noted, the Company has not recorded a liability 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 sheet the underlying liability
associated with the guarantee, the guarantee or indemnification existed prior
to
January 1, 2003 and is therefore not subject to the measurement requirements
of
FIN 45, 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 guarantees
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 product warranty liability with respect to these
indemnifications.
Commitments
In
the ordinary course of obtaining necessary zoning and other approvals for
the
Company's potential real estate development projects, the Company may
contingently commit to the completion of certain infrastructure, improvements
and other costs related to the projects. Fulfillment of such commitments
is
required only if the Company moves forward with the development project.
The
determination of whether the Company ultimately moves forward with a development
project is entirely at the Company's discretion, and is generally contingent
upon, among other considerations, receipt of satisfactory zoning and other
approvals and the current status of the Company's analysis of the economic
viability of the project, including the costs associated with the contingent
commitments. The Company currently has obligations, recorded as liabilities
in
the accompanying consolidated condensed balance sheets, to complete or fund
certain improvements with respect to real estate developments; the Company
has
estimated such costs to be approximately $8.9 million as of April 30, 2006,
and
anticipates completion of the majority of these commitments within the next
two
years.
The
Company agreed to install two new chairlifts and related infrastructure at
Beaver Creek for the 2004/05 ski season and one chairlift and related
infrastructure by the 2005/06 ski season pursuant to agreements with Bachelor
Gulch Village Association ("BGVA"), Beaver Creek Resort Company ("BCRC")
and
Beaver Creek Property Owner Association. BGVA and BCRC collectively contributed
$9 million to fund construction of the chairlifts, which reduced the book
value
of the chairlifts and related infrastructure. The Company completed the
chairlifts and related infrastructure as required for the 2004/05 and 2005/06
ski seasons.
The
Company has agreed to install a new gondola lift and related infrastructure
at
Breckenridge for the 2006/07 ski season pursuant to an agreement with the
Town
of Breckenridge (“Town”). The Town has agreed to contribute $6.7 million to fund
construction of the gondola, as well as the already completed skyway. The
funds
that will be contributed by the Town will reduce the book value of the gondola
and related infrastructure. The estimated net cost to the Company to complete
the gondola and related infrastructure as of April 30, 2006 is $5.9
million.
Self
Insurance
The
Company is self-insured for medical and worker's compensation under a stop
loss
arrangement. The self-insurance liability related to workers' compensation
is
determined actuarially based on claims filed. The self-insurance liability
related to medical claims is determined based on internal and external analysis
of actual claims. The amounts related to these claims are included as a
component of accrued benefits in accounts payable and accrued expenses (see
Note
5, Supplementary Balance Sheet Information).
Legal
The
Company is a party to various lawsuits arising in the ordinary course of
business, including resort related (Mountain and Lodging) cases and contractual
and commercial litigation that arises from time to time in connection with
the
Company's real estate operations. Management believes the Company has adequate
insurance coverage or has accrued for loss contingencies for all known matters
that are deemed to be probable losses and estimable. See
also “Cheeca Lodge & Spa Contract Dispute” discussion below.
Cheeca
Lodge & Spa Contract Dispute
In
March 2006, RockResorts was notified by the ownership of Cheeca Lodge & Spa,
formerly a RockResorts managed property, that its management agreement was
being
terminated effective immediately. RockResorts believes that the termination
is
in violation of the management agreement and is seeking monetary damages.
Pursuant to the dispute resolution provisions of the management agreement,
the
disputed matter is pending before the JAMS Arbitration Tribunal in Chicago,
Illinois, and is scheduled for a multi-week arbitration hearing beginning
in
late July 2006. Cheeca Holdings, LLC, the entity owner of the hotel property,
asserts that RockResorts breached the management contract, among other alleged
breaches, and seeks a ruling that it had the right to terminate the management
contract and monetary damages. The Company has incurred $816,000 of legal
related costs related to this matter through April 30, 2006, which is included
in “contract dispute charges” in the accompanying consolidated condensed
statements of operations for the three and nine months ended April 30, 2006.
Breckenridge
Terrace Employee Housing Construction Defect/Water Intrusion
Claims
During
fiscal 2004, the Company became aware of water intrusion and condensation
problems causing mold damage in the 17 building employee housing facility
owned
by Breckenridge Terrace, an employee housing entity in which the Company
is a
member and manager. As a result, the facility was not available for occupancy
during the 2003/04 ski season. All buildings at the facility required mold
remediation and reconstruction and this work began in fiscal 2004. Breckenridge
Terrace recorded a $7.0 million liability in fiscal 2004 for the estimated
cost
of remediation and reconstruction efforts. These costs were funded by a loan
to
Breckenridge Terrace from the Company member of Breckenridge Terrace. As
of
April 30, 2006, Breckenridge Terrace had a remaining liability of $885,000
for
future remaining remediation and reconstruction costs. With the exception
of one
building which has been kept in its original design and construction for
evidentiary purposes (see discussion below), the remaining 16 buildings became
available for occupancy in the second quarter of fiscal 2005. The Company
anticipates it will incur the remaining amount of remediation and reconstruction
costs before the end of fiscal 2006.
Forensic
construction experts retained by Breckenridge Terrace have determined that
the
water intrusion and condensation problems are the result of construction
and
design defects. In accordance with Colorado law, Breckenridge Terrace served
separate notices of claims on the general contractor, architect and developer
and initiated arbitration proceedings. During the second fiscal quarter of
2006,
Breckenridge Terrace received reimbursement from third parties for costs
incurred in conjunction with its mold remediation efforts in the amount of
$852,000 which has been recognized as "mold remediation credit" in the
accompanying consolidated condensed statement of operations for the nine
months
ended April 30, 2006.
Securities
and Exchange Commission ("SEC") Investigation Terminated
In
February 2003, the SEC issued a formal order of investigation with respect
to
the Company. On September 19, 2005, the Central Regional Office of the SEC
informed the Company that its investigation has been terminated, and that
no
enforcement action has been recommended regarding the Company. The Company
has
also been informed that no enforcement action has been recommended with respect
to any present or former directors, officers or employees of the Company
in
regard to the matters that had been under investigation.
12. Stock
Compensation Plans
The
Company has four stock-based compensation plans which have been approved
by the
Company's shareholders: the 1993 Stock Option Plan ("1993 Plan"), the 1996
Long
Term Incentive and Share Award Plan ("1996 Plan"), the 1999 Long Term Incentive
and Share Award Plan ("1999 Plan") and the 2002 Long Term Incentive and Share
Award Plan ("2002 Plan"). Under the 1993 Plan, incentive stock options (as
defined under Section 422 of the Internal Revenue Code of 1986) or non-incentive
stock options covering an aggregate of 2,045,510 shares of common stock were
available to be issued to key employees, directors, consultants, and advisors
of
the Company or its subsidiaries. Exercise prices and vesting dates for options
granted under the 1993 Plan were set by the Compensation Committee of the
Company's Board of Directors ("Compensation Committee"), except that the
vesting
period was required to be at least six months and exercise prices for incentive
stock options could not be less than the stock's market price on the date
of
grant. The terms of the options granted under the 1993 Plan were determined
by
the Compensation Committee, provided that all incentive stock options granted
had a maximum life of ten years. Under the 1996 Plan, the 1999 Plan and the
2002
Plan, awards may be granted to employees, directors or consultants of the
Company or its subsidiaries or affiliates. The terms of awards granted under
the
1996 Plan, the 1999 Plan and the 2002 Plan, including exercise price, vesting
period and life, are set by the Compensation Committee. All stock-based awards
granted under these plans have a life of ten years. Most awards vest ratably
over three years; however some have been granted with different vesting
schedules. 1,500,000, 2,500,000 and 2,500,000 shares of common stock may
be
issued in the form of options, stock appreciation rights, restricted shares,
restricted share units, performance shares, performance share units, dividend
equivalents or other share-based awards under the 1996 Plan, the 1999 Plan
and
the 2002 Plan, respectively. To date, no options have been granted to
non-employees (except those granted to non-employee members of the Board
of
Directors of the Company and of a consolidated subsidiary) under any of the
four
plans. At April 30, 2006, approximately 155,000, 240,000 and 369,000 stock-based
awards were available to be granted under the 1996 Plan, 1999 Plan and 2002
Plan, respectively.
The
fair value of each option award granted prior to August 1, 2005 was estimated
on
the date of grant using a Black-Scholes option-pricing model that uses the
assumptions noted in the table below. With the adoption of SFAS 123R, the
Company has decided that a lattice-based option valuation model will be used
for
grants subsequent to August 1, 2005 if sufficient historical data is available
by type of equity awards to estimate the fair value of the equity awards
granted. A lattice-based model considers factors such as exercise behavior,
and
assumes employees will exercise equity awards at different times over the
contractual life of the equity awards. As a lattice-based model considers
these
factors, and is more flexible, the Company considers it to be a better method
of
valuing equity awards than a closed-form Black-Scholes model.
The
fair value of most option awards and stock-settled stock appreciation rights
(“SARs”) granted in the nine months ended April 30, 2006 were estimated on the
date of grant using a lattice-based option valuation model that applies the
assumptions noted in the table below. The fair value of other equity awards
with
cliff vesting was estimated on the date of grant using a Black-Scholes
option-pricing model, due to the lack of historical employee exercise behavior,
which applies assumptions within the ranges as noted in the table below.
Because
lattice-based option valuation models incorporate ranges of assumptions for
inputs, those ranges are disclosed. Expected volatilities are based on
historical volatility of the Company's stock. The Company uses historical
data
to estimate equity awards exercise and employee termination within the valuation
model; separate groups of employees that have similar historical exercise
behavior are considered separately for valuation purposes. The expected term
of
equity awards granted is derived from the output of the option valuation
model
and represents the period of time that equity awards granted are expected
to be
outstanding; the range given below results from certain groups of employees
exhibiting different behavior. The risk-free rate for periods within the
contractual life of the equity award is based on the U.S. Treasury yield
curve
in effect at the time of grant.
|
Nine
Months Ended
|
||||||
|
April
30,
|
||||||
|
2006
|
2005
|
|||||
|
Expected
volatility
|
38.9
|
%
|
35.3
|
%
|
||
|
Expected
dividends
|
--
|
%
|
--
|
%
|
||
|
Expected
term (in years)
|
5.8-7.0
|
5.0
|
||||
|
Risk-free
rate
|
4.0-4.6
|
%
|
3.3
|
%
|
||
The
Company has estimated forfeiture rates that range from 6.5% to 9.1% in its
calculation of stock-based compensation expense for the nine months ended
April
30, 2006. These estimates are based on historical forfeiture behavior exhibited
by employees of the Company.
A
summary of aggregate option and SARs award activity under the stock-based
compensation plans as of April 30, 2006, and changes during the nine months
then
ended is presented below (in thousands, except exercise price and contractual
term):
|
Weighted-Average
|
Weighted-Average
|
Aggregate
|
|||||||||||
|
Exercise
|
Remaining
|
Intrinsic
|
|||||||||||
|
Shares
|
Price
|
Contractual
Term
|
Value
|
||||||||||
|
Outstanding
at August 1, 2005
|
3,880
|
$
|
18.64
|
||||||||||
|
Granted
|
778
|
29.65
|
|||||||||||
|
Exercised
|
(2,276
|
)
|
19.45
|
||||||||||
|
Forfeited
or expired
|
(470
|
)
|
21.18
|
||||||||||
|
Outstanding
at April 30, 2006
|
1,912
|
$
|
21.53
|
7.9
years
|
$
|
30,728
|
|||||||
|
Exercisable
at April 30, 2006
|
795
|
$
|
17.67
|
6.5
years
|
$
|
15,845
|
|||||||
The
weighted-average grant-date fair value of options and SARs granted during
the
nine months ended April 30, 2006 and 2005 was $12.63 and $6.83, respectively.
The total intrinsic value of options exercised during the nine months ended
April 30, 2006 and 2005 was $34.3 million and $4.1 million, respectively.
The
Company granted 199,000 restricted stock awards during the nine months ended
April 30, 2006 with a weighted-average grant-date fair value of $28.78. No
restricted stock awards were granted during the nine months ended April 30,
2005. The Company had 16,000 and 14,000 restricted stock awards that vested
during the nine months ended April 30, 2006 and 2005, respectively.
A
summary of the status of the Company's nonvested options as of April 30,
2006,
and changes during the nine months then ended, is presented below (in thousands,
except fair value amounts):
|
Weighted-Average
|
||||||
|
Grant-Date
|
||||||
|
Shares
|
Fair
Value
|
|||||
|
Outstanding
at August 1, 2005
|
1,472
|
$
|
6.17
|
|||
|
Granted
|
778
|
12.63
|
||||
|
Vested
|
(726
|
)
|
6.15
|
|||
|
Forfeited
|
(407
|
)
|
8.21
|
|||
|
Nonvested
at April 30, 2006
|
1,117
|
$
|
9.93
|
|||
A
summary of the status of the Company's nonvested restricted stock awards
as of
April 30, 2006, and changes during the nine months then ended, is presented
below (in thousands, except fair value amounts):
|
Weighted-Average
|
||||||
|
Grant-Date
|
||||||
|
Shares
|
Fair
Value
|
|||||
|
Outstanding
at August 1, 2005
|
31
|
$
|
15.16
|
|||
|
Granted
|
199
|
28.78
|
||||
|
Vested
|
(16
|
)
|
17.37
|
|||
|
Forfeited
|
(27
|
)
|
24.28
|
|||
|
Nonvested
at April 30, 2006
|
187
|
$
|
28.15
|
|||
As
of April 30, 2006, there was $12.6 million of total unrecognized compensation
expense related to nonvested share-based compensation arrangements granted
under
the stock-based compensation plans, of which $1.8 million is expected to
be
recognized in the last quarter of fiscal 2006 and $5.6 million, $4.2 million
and
$1.0 million of expense is expected to be recognized in fiscal 2007, fiscal
2008
and fiscal 2009, respectively, assuming no future stock-based awards are
granted.
Cash
received from option exercises under all share-based payment arrangements
was
$44.0 million and $10.1 million for the nine months ended April 30, 2006
and
2005, respectively. The actual tax benefit to be realized for the tax deductions
from options exercised and restricted stock awards vested totaled $13.5 million
and $4.0 million for the nine months ended April 30, 2006 and 2005,
respectively.
The
Company has a policy of using either authorized and unissued shares or treasury
shares (if any) including shares acquired by purchase in the open market
or in
private transactions to satisfy equity award exercises.
13. Capitalization
Class
A Common Stock Conversion
In
September 2004, the Company and Apollo entered into a Conversion and
Registration Rights Agreement (the "Conversion Agreement"). Pursuant to the
Agreement, Apollo converted all of its Class A common stock into shares of
the
Company's common stock. Apollo distributed the shares to its partners in
proportion to each partner's interest in the partnership. Apollo did not
dissolve after this distribution and continues to exist as a partnership.
The
Company, pursuant to the Conversion Agreement, filed a shelf registration
statement in November 2004 (which has since been withdrawn), covering certain
of
the shares owned by the limited partners of Apollo. Before the conversion,
Apollo owned 6.1 million shares of Class A common stock or 99.9% of the
Company's Class A common stock.
As
a result of the above Conversion Agreement, the Company no longer has any
Class
A common stock outstanding and therefore only has one class of directors.
Previously, the holders of the Company’s Class A common stock elected the Class
1 directors and the holders of the Company’s common stock elected the Class 2
directors. Additionally, as a result of the above Conversion Agreement, as
of
the date of the Conversion Agreement, the Company's consolidated condensed
balance sheet no longer presents any Class A common stock and the full balance
of the Company's common stock outstanding is presented under "common
stock".
Stock
Repurchase Plan
On
March 9, 2006, the Company's Board of Directors approved the repurchase of
up to
three million shares of common stock. As of April 30, 2006, the Company has
not
repurchased any shares. 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 stock plans. Acquisitions
under
the share repurchase program will be made from time to time at prevailing
prices
as permitted by applicable laws, and subject to market conditions and other
factors. The Company is under no obligation to purchase any shares under
the
stock repurchase program and the timing as well as the number of shares that
may
be repurchased under the program will depend on a number of factors including
the Company's future financial performance, the Company's available cash
resources and competing uses for cash that may arise in the future, the
restrictions in the Credit Facility and in the Indenture, prevailing prices
of
the Company's common stock, and the number of shares that become available
for
sale at prices that the Company believes are attractive. The stock repurchase
program may be discontinued at any time and is not expected to have a
significant impact on the Company's capitalization.
14. Guarantor
Subsidiaries and Non-Guarantor Subsidiaries
The
Company's payment obligations under the 6.75% 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 Boulder/Beaver LLC, Colter
Bay
Corporation, Eagle Park Reservoir Company, Forest Ridge Holdings, Inc., Gros
Ventre Utility Company, Jackson Lake Lodge Corporation, Jenny Lake Lodge,
Inc.,
Mountain Thunder, Inc., RT Partners, Inc and RTP, SSV, Larkspur Restaurant
&
Bar, LLC ("Larkspur"), Vail Associates Investments, Inc., Arrabelle, Gore
Creek,
Timber Trail, Inc. and VR Holdings, Inc. (together, the "Non-Guarantor
Subsidiaries"). APII, FFT and the Employee Housing Entities are included
with
the Non-Guarantor Subsidiaries for purposes of the consolidated condensed
financial information, but are not considered subsidiaries under the indentures
governing the 6.75% Notes.
Presented
below is the consolidated condensed financial information of Vail Resorts
(or
the "Parent Company"), the Guarantor Subsidiaries and the Non-Guarantor
Subsidiaries. Financial information for Larkspur is presented separately
as the
Company owns less than 100% of this Guarantor Subsidiary. Financial information
for RockResorts and JHL&S, LLC is no longer presented separately as the
Company acquired the remaining minority interest in these Guarantor Subsidiaries
during fiscal 2005, and reclassifications have been made to the financial
information as of and for the three and nine months ended April 30, 2005
to
conform to the current period presentation. Financial information for the
Non-Guarantor subsidiaries is presented in the column titled "Other
Subsidiaries". Balance sheet data is presented as of April 30, 2006, July
31,
2005 and April 30, 2005. Statements of operations are presented for the three
and nine months ended April 30, 2006 and 2005. Statements of cash flows are
presented for the nine months ended April 30, 2006 and 2005.
Investments
in subsidiaries are accounted for by the Parent Company and Guarantor
Subsidiaries using the equity method of accounting. Net income (loss) of
Guarantor 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 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.
Supplemental
Condensed Consolidating Balance Sheet
As
of April 30, 2006
(in
thousands)
|
100%
Owned
|
|||||||||||||||||||||||||
|
Parent
|
Guarantor
|
Other
|
Eliminating
|
||||||||||||||||||||||
|
Company
|
Subsidiaries
|
Larkspur
|
Subsidiaries
|
Entries
|
Consolidated
|
||||||||||||||||||||
|
Current
assets:
|
|||||||||||||||||||||||||
|
Cash
and cash equivalents
|
$
|
--
|
$
|
231,814
|
$
|
181
|
$
|
8,121
|
$
|
--
|
$
|
240,116
|
|||||||||||||
|
Restricted
cash
|
--
|
28,776
|
--
|
3,531
|
--
|
32,307
|
|||||||||||||||||||
|
Receivables,
net
|
--
|
30,482
|
103
|
5,033
|
--
|
35,618
|
|||||||||||||||||||
|
Inventories,
net
|
--
|
7,434
|
156
|
29,240
|
--
|
36,830
|
|||||||||||||||||||
|
Other
current assets
|
13,191
|
15,494
|
50
|
6,009
|
--
|
34,744
|
|||||||||||||||||||
|
Total
current assets
|
13,191
|
314,000
|
490
|
51,934
|
--
|
379,615
|
|||||||||||||||||||
|
Property,
plant and equipment, net
|
--
|
781,039
|
448
|
67,497
|
--
|
848,984
|
|||||||||||||||||||
|
Real
estate held for sale and investment
|
--
|
142,101
|
--
|
98,514
|
--
|
240,615
|
|||||||||||||||||||
|
Goodwill,
net
|
--
|
135,811
|
--
|
--
|
--
|
135,811
|
|||||||||||||||||||
|
Intangible
assets, net
|
--
|
42,137
|
--
|
34,450
|
--
|
76,587
|
|||||||||||||||||||
|
Other
assets
|
5,534
|
14,456
|
--
|
11,133
|
--
|
31,123
|
|||||||||||||||||||
|
Investments
in subsidiaries and advances to (from) parent
|
1,065,247
|
(561,556
|
)
|
2
|
(43,795
|
)
|
(459,898
|
)
|
--
|
||||||||||||||||
|
Total
assets
|
$
|
1,083,972
|
$
|
867,988
|
$
|
940
|
$
|
219,733
|
$
|
(459,898
|
)
|
$
|
1,712,735
|
||||||||||||
|
Current
liabilities:
|
|||||||||||||||||||||||||
|
Accounts
payable and accrued expenses
|
$
|
12,705
|
$
|
143,768
|
$
|
159
|
$
|
49,839
|
$
|
--
|
$
|
206,471
|
|||||||||||||
|
Income
taxes payable
|
1,324
|
--
|
--
|
--
|
--
|
1,324
|
|||||||||||||||||||
|
Long-term
debt due within one year
|
--
|
4,044
|
--
|
376
|
--
|
4,420
|
|||||||||||||||||||
|
Total
current liabilities
|
14,029
|
147,812
|
159
|
50,215
|
--
|
212,215
|
|||||||||||||||||||
|
Long-term
debt
|
390,000
|
57,742
|
--
|
69,129
|
--
|
516,871
|
|||||||||||||||||||
|
Other
long-term liabilities
|
358
|
115,215
|
--
|
34,308
|
--
|
149,881
|
|||||||||||||||||||
|
Deferred
income taxes
|
--
|
118,641
|
--
|
205
|
--
|
118,846
|
|||||||||||||||||||
|
Put
option liabilities
|
--
|
113
|
--
|
--
|
--
|
113
|
|||||||||||||||||||
|
Minority
interest in net assets of consolidated subsidiaries
|
--
|
--
|
100
|
35,124
|
--
|
35,224
|
|||||||||||||||||||
|
Total
stockholders’ equity
|
679,585
|
428,465
|
681
|
30,752
|
(459,898
|
)
|
679,585
|
||||||||||||||||||
|
Total
liabilities and stockholders’ equity
|
$
|
1,083,972
|
$
|
867,988
|
$
|
940
|
$
|
219,733
|
$
|
(459,898
|
)
|
$
|
1,712,735
|
||||||||||||
Supplemental
Condensed Consolidating Balance Sheet
As
of July 31, 2005
(in
thousands)
|
100%
Owned
|
|||||||||||||||||||||||||
|
Parent
|
Guarantor
|
Other
|
Eliminating
|
||||||||||||||||||||||
|
Company
|
Subsidiaries
|
Larkspur
|
Subsidiaries
|
Entries
|
Consolidated
|
||||||||||||||||||||
|
Current
assets:
|
|||||||||||||||||||||||||
|
Cash
and cash equivalents
|
$
|
--
|
$
|
92,879
|
$
|
105
|
$
|
43,596
|
$
|
--
|
$
|
136,580
|
|||||||||||||
|
Restricted
cash
|
--
|
7,390
|
--
|
10,863
|
--
|
18,253
|
|||||||||||||||||||
|
Receivables,
net
|
--
|
27,867
|
103
|
5,166
|
--
|
33,136
|
|||||||||||||||||||
|
Inventories,
net
|
--
|
8,491
|
157
|
27,430
|
--
|
36,078
|
|||||||||||||||||||
|
Other
current assets
|
11,418
|
15,109
|
40
|
5,535
|
--
|
32,102
|
|||||||||||||||||||
|
Assets
held for sale
|
--
|
26,735
|
--
|
--
|
--
|
26,735
|
|||||||||||||||||||
|
Total
current assets
|
11,418
|
178,471
|
405
|
92,590
|
--
|
282,884
|
|||||||||||||||||||
|
Property,
plant and equipment, net
|
--
|
776,425
|
530
|
66,092
|
--
|
843,047
|
|||||||||||||||||||
|
Real
estate held for sale and investment
|
--
|
106,777
|
--
|
48,097
|
--
|
154,874
|
|||||||||||||||||||
|
Goodwill,
net
|
--
|
118,475
|
--
|
17,032
|
--
|
135,507
|
|||||||||||||||||||
|
Intangible
assets, net
|
--
|
60,482
|
--
|
16,492
|
--
|
76,974
|
|||||||||||||||||||
|
Other
assets
|
6,067
|
16,320
|
--
|
10,248
|
--
|
32,635
|
|||||||||||||||||||
|
Investments
in subsidiaries and advances to (from) parent
|
942,888
|
(424,752
|
)
|
(202
|
)
|
(58,036
|
)
|
(459,898
|
)
|
--
|
|||||||||||||||
|
Total
assets
|
$
|
960,373
|
$
|
832,198
|
$
|
733
|
$
|
192,515
|
$
|
(459,898
|
)
|
$
|
1,525,921
|
||||||||||||
|
Current
liabilities:
|
|||||||||||||||||||||||||
|
Accounts
payable and accrued expenses
|
$
|
16,600
|
$
|
161,452
|
$
|
273
|
$
|
31,044
|
$
|
--
|
$
|
209,369
|
|||||||||||||
|
Income
taxes payable
|
12,979
|
--
|
--
|
--
|
--
|
12,979
|
|||||||||||||||||||
|
Long-term
debt due within one year
|
--
|
467
|
--
|
1,537
|
--
|
2,004
|
|||||||||||||||||||
|
Total
current liabilities
|
29,579
|
161,919
|
273
|
32,581
|
--
|
224,352
|
|||||||||||||||||||
|
Long-term
debt
|
390,000
|
61,789
|
--
|
67,917
|
--
|
519,706
|
|||||||||||||||||||
|
Other
long-term liabilities
|
265
|
102,228
|
--
|
37,928
|
--
|
140,421
|
|||||||||||||||||||
|
Deferred
income taxes
|
--
|
70,819
|
--
|
390
|
--
|
71,209
|
|||||||||||||||||||
|
Put
option liabilities
|
--
|
34
|
--
|
--
|
--
|
34
|
|||||||||||||||||||
|
Minority
interest in net assets of consolidated subsidiaries
|
--
|
--
|
100
|
29,570
|
--
|
29,670
|
|||||||||||||||||||
|
Total
stockholders’ equity
|
540,529
|
435,409
|
360
|
24,129
|
(459,898
|
)
|
540,529
|
||||||||||||||||||
|
Total
liabilities and stockholders’ equity
|
$
|
960,373
|
$
|
832,198
|
$
|
733
|
$
|
192,515
|
$
|
(459,898
|
)
|
$
|
1,525,921
|
||||||||||||
Supplemental
Condensed Consolidating Balance Sheet
As
of April 30, 2005
(in
thousands)
|
100%
Owned
|
|||||||||||||||||||||||||
|
Parent
|
Guarantor
|
Other
|
Eliminating
|
||||||||||||||||||||||
|
Company
|
Subsidiaries
|
Larkspur
|
Subsidiaries
|
Entries
|
Consolidated
|
||||||||||||||||||||
|
Current
assets:
|
|||||||||||||||||||||||||
|
Cash
and cash equivalents
|
$
|
--
|
$
|
28,652
|
$
|
93
|
$
|
12,323
|
$
|
--
|
$
|
41,068
|
|||||||||||||
|
Restricted
cash
|
--
|
17,709
|
--
|
--
|
--
|
17,709
|
|||||||||||||||||||
|
Receivables,
net
|
4,857
|
23,117
|
75
|
5,444
|
--
|
33,493
|
|||||||||||||||||||
|
Inventories,
net
|
--
|
7,168
|
139
|
23,791
|
--
|
31,098
|
|||||||||||||||||||
|
Other
current assets
|
10,564
|
15,941
|
4
|
1,476
|
--
|
27,985
|
|||||||||||||||||||
|
Total
current assets
|
15,421
|
92,587
|
311
|
43,034
|
--
|
151,353
|
|||||||||||||||||||
|
Property,
plant and equipment, net
|
1
|
911,591
|
560
|
66,312
|
--
|
978,464
|
|||||||||||||||||||
|
Real
estate held for sale and investment
|
--
|
128,727
|
--
|
11,282
|
--
|
140,009
|
|||||||||||||||||||
|
Goodwill,
net
|
--
|
128,342
|
--
|
16,748
|
--
|
145,090
|
|||||||||||||||||||
|
Intangible
assets, net
|
--
|
64,328
|
--
|
16,997
|
--
|
81,325
|
|||||||||||||||||||
|
Other
assets
|
6,244
|
17,622
|
--
|
10,178
|
--
|
34,044
|
|||||||||||||||||||
|
Investments
in subsidiaries and advances to (from) parent
|
986,811
|
(533,350
|
)
|
7
|
6,430
|
(459,898
|
)
|
--
|
|||||||||||||||||
|
Total
assets
|
$
|
1,008,477
|
$
|
809,847
|
$
|
878
|
$
|
170,981
|
$
|
(459,898
|
)
|
$
|
1,530,285
|
||||||||||||
|
Current
liabilities:
|
|||||||||||||||||||||||||
|
Accounts
payable and accrued expenses
|
$
|
25,138
|
$
|
139,395
|
$
|
133
|
$
|
23,683
|
$
|
--
|
$
|
188,349
|
|||||||||||||
|
Long-term
debt due within one year
|
--
|
587
|
--
|
1,591
|
--
|
2,178
|
|||||||||||||||||||
|
Total
current liabilities
|
25,138
|
139,982
|
133
|
25,274
|
--
|
190,527
|
|||||||||||||||||||
|
Long-term
debt
|
390,000
|
62,089
|
--
|
68,260
|
--
|
520,349
|
|||||||||||||||||||
|
Other
long-term liabilities
|
282
|
101,634
|
--
|
100
|
--
|
102,016
|
|||||||||||||||||||
|
Deferred
income taxes
|
31,895
|
84,291
|
--
|
452
|
--
|
116,638
|
|||||||||||||||||||
|
Put
option liabilities
|
--
|
451
|
--
|
--
|
--
|
451
|
|||||||||||||||||||
|
Minority
interest in net assets of consolidated subsidiaries
|
--
|
7,406
|
100
|
31,636
|
--
|
39,142
|
|||||||||||||||||||
|
Total
stockholders’ equity
|
561,162
|
413,994
|
645
|
45,259
|
(459,898
|
)
|
561,162
|
||||||||||||||||||
|
Total
liabilities and stockholders’ equity
|
$
|
1,008,477
|
$
|
809,847
|
$
|
878
|
$
|
170,981
|
$
|
(459,898
|
)
|
$
|
1,530,285
|
||||||||||||
Supplemental
Condensed Consolidating Statement of Operations
For
the three months ended April 30, 2006
(in
thousands)
|
100%
Owned
|
||||||||||||||||||||||||
|
Parent
|
Guarantor
|
Other
|
Eliminating
|
|||||||||||||||||||||
|
Company
|
Subsidiaries
|
Larkspur
|
Subsidiaries
|
Entries
|
Consolidated
|
|||||||||||||||||||
|
Total
revenue
|
$
|
--
|
$
|
284,472
|
$
|
1,686
|
$
|
57,807
|
$
|
(2,576
|
)
|
$
|
341,389
|
|||||||||||
|
Total
operating expense
|
7,742
|
167,605
|
1,334
|
44,039
|
(2,576
|
)
|
218,144
|
|||||||||||||||||
|
(Loss)
income from operations
|
(7,742
|
)
|
116,867
|
352
|
13,768
|
--
|
123,245
|
|||||||||||||||||
|
Other
(expense) income, net
|
(6,758
|
)
|
921
|
(1
|
)
|
(671
|
)
|
--
|
(6,509
|
)
|
||||||||||||||
|
Equity
investment income, net
|
--
|
760
|
--
|
--
|
--
|
760
|
||||||||||||||||||
|
Loss
on put options, net
|
--
|
(113
|
)
|
--
|
--
|
--
|
(113
|
)
|
||||||||||||||||
|
Minority
interest in income of consolidated subsidiaries, net
|
--
|
--
|
--
|
(5,355
|
)
|
--
|
(5,355
|
)
|
||||||||||||||||
|
(Loss)
income before income taxes
|
(14,500
|
)
|
118,435
|
351
|
7,742
|
--
|
112,028
|
|||||||||||||||||
|
Benefit
(provision) for income taxes
|
5,655
|
(49,408
|
)
|
--
|
62
|
--
|
(43,691
|
)
|
||||||||||||||||
|
Net
(loss) income before equity in income of consolidated
subsidiaries
|
(8,845
|
)
|
69,027
|
351
|
7,804
|
--
|
68,337
|
|||||||||||||||||
|
Equity
in income of consolidated subsidiaries
|
77,182
|
--
|
--
|
--
|
(77,182
|
)
|
--
|
|||||||||||||||||
|
Net
income (loss)
|
$
|
68,337
|
$
|
69,027
|
$
|
351
|
$
|
7,804
|
$
|
(77,182
|
)
|
$
|
68,337
|
|||||||||||
Supplemental
Condensed Consolidating Statement of Operations
For
the three months ended April 30, 2005
(in
thousands)
|
100%
Owned
|
||||||||||||||||||||||||
|
Parent
|
Guarantor
|
Other
|
Eliminating
|
|||||||||||||||||||||
|
Company
|
Subsidiaries
|
Larkspur
|
Subsidiaries
|
Entries
|
Consolidated
|
|||||||||||||||||||
|
Total
revenue
|
$
|
--
|
$
|
282,456
|
$
|
1,416
|
$
|
47,468
|
$
|
(3,889
|
)
|
$
|
327,451
|
|||||||||||
|
Total
operating expense
|
5,148
|
179,689
|
1,177
|
36,253
|
(3,889
|
)
|
218,378
|
|||||||||||||||||
|
(Loss)
income from operations
|
(5,148
|
)
|
102,767
|
239
|
11,215
|
--
|
109,073
|
|||||||||||||||||
|
Other
expense, net
|
(6,146
|
)
|
(2,124
|
)
|
(2
|
)
|
(936
|
)
|
--
|
(9,208
|
)
|
|||||||||||||
|
Equity
investment income, net
|
--
|
390
|
--
|
--
|
--
|
390
|
||||||||||||||||||
|
Loss
on sale of businesses, net
|
--
|
(3
|
)
|
--
|
--
|
--
|
(3
|
)
|
||||||||||||||||
|
Loss
on put options, net
|
--
|
(447
|
)
|
--
|
--
|
--
|
(447
|
)
|
||||||||||||||||
|
Minority
interest in loss (income) of consolidated subsidiaries,
net
|
--
|
400
|
--
|
(4,616
|
)
|
--
|
(4,216
|
)
|
||||||||||||||||
|
(Loss)
income before income taxes
|
(11,294
|
)
|
100,983
|
237
|
5,663
|
--
|
95,589
|
|||||||||||||||||
|
Benefit
(provision) for income taxes
|
3,775
|
(40,458
|
)
|
--
|
(118
|
)
|
--
|
(36,801
|
)
|
|||||||||||||||
|
Net
(loss) income before equity in income of consolidated
subsidiaries
|
(7,519
|
)
|
60,525
|
237
|
5,545
|
--
|
58,788
|
|||||||||||||||||
|
Equity
in income of consolidated subsidiaries
|
66,307
|
--
|
--
|
--
|
(66,307
|
)
|
--
|
|||||||||||||||||
|
Net
income (loss)
|
$
|
58,788
|
$
|
60,525
|
$
|
237
|
$
|
5,545
|
$
|
(66,307
|
)
|
$
|
58,788
|
|||||||||||
Supplemental
Condensed Consolidating Statement of Operations
For
the nine months ended April 30, 2006
(in
thousands)
|
100%
Owned
|
||||||||||||||||||||||||
|
Parent
|
Guarantor
|
Other
|
Eliminating
|
|||||||||||||||||||||
|
Company
|
Subsidiaries
|
Larkspur
|
Subsidiaries
|
Entries
|
Consolidated
|
|||||||||||||||||||
|
Total
revenue
|
$
|
--
|
$
|
571,776
|
$
|
3,376
|
$
|
146,317
|
$
|
(6,643
|
)
|
$
|
714,826
|
|||||||||||
|
Total
operating expense
|
15,592
|
428,751
|
3,155
|
123,598
|
(6,643
|
)
|
564,453
|
|||||||||||||||||
|
(Loss)
income from operations
|
(15,592
|
)
|
143,025
|
221
|
22,719
|
--
|
150,373
|
|||||||||||||||||
|
Other
expense, net
|
(20,389
|
)
|
(652
|
)
|
(14
|
)
|
(2,109
|
)
|
--
|
(23,164
|
)
|
|||||||||||||
|
Equity
investment income, net
|
--
|
3,164
|
--
|
--
|
--
|
3,164
|
||||||||||||||||||
|
Gain
on sale of businesses, net
|
--
|
4,625
|
--
|
--
|
--
|
4,625
|
||||||||||||||||||
|
Loss
on put options, net
|
--
|
(79
|
)
|
--
|
--
|
--
|
(79
|
)
|
||||||||||||||||
|
Minority
interest in income of consolidated subsidiaries, net
|
--
|
--
|
--
|
(8,660
|
)
|
--
|
(8,660
|
)
|
||||||||||||||||
|
(Loss)
income before income taxes
|
(35,981
|
)
|
150,083
|
207
|
11,950
|
--
|
126,259
|
|||||||||||||||||
|
Benefit
(provision) for income taxes
|
14,033
|
(63,442
|
)
|
--
|
169
|
--
|
(49,240
|
)
|
||||||||||||||||
|
Net
(loss) income before equity in income of consolidated
subsidiaries
|
(21,948
|
)
|
86,641
|
207
|
12,119
|
--
|
77,019
|
|||||||||||||||||
|
Equity
in income of consolidated subsidiaries
|
98,967
|
--
|
--
|
--
|
(98,967
|
)
|
--
|
|||||||||||||||||
|
Net
income (loss)
|
$
|
77,019
|
$
|
86,641
|
$
|
207
|
$
|
12,119
|
$
|
(98,967
|
)
|
$
|
77,019
|
|||||||||||
Supplemental
Condensed Consolidating Statement of Operations
For
the nine months ended April 30, 2005
(in
thousands)
|
100%
Owned
|
||||||||||||||||||||||||
|
Parent
|
Guarantor
|
Other
|
Eliminating
|
|||||||||||||||||||||
|
Company
|
Subsidiaries
|
Larkspur
|
Subsidiaries
|
Entries
|
Consolidated
|
|||||||||||||||||||
|
Total
revenue
|
$
|
1
|
$
|
578,367
|
$
|
2,847
|
$
|
118,754
|
$
|
(10,008
|
)
|
$
|
689,961
|
|||||||||||
|
Total
operating expense
|
11,117
|
456,704
|
2,681
|
101,416
|
(10,008
|
)
|
561,910
|
|||||||||||||||||
|
(Loss)
income from operations
|
(11,116
|
)
|
121,663
|
166
|
17,338
|
--
|
128,051
|
|||||||||||||||||
|
Other
expense, net
|
(20,334
|
)
|
(7,138
|
)
|
(18
|
)
|
(2,364
|
)
|
--
|
(29,854
|
)
|
|||||||||||||
|
Equity
investment loss, net
|
--
|
(783
|
)
|
--
|
--
|
--
|
(783
|
)
|
||||||||||||||||
|
Gain
on sale of businesses, net
|
--
|
5,690
|
--
|
--
|
--
|
5,690
|
||||||||||||||||||
|
Gain
on put options, net
|
--
|
741
|
--
|
--
|
--
|
741
|
||||||||||||||||||
|
Minority
interest in loss (income) of consolidated subsidiaries,
net
|
--
|
476
|
--
|
(7,456
|
)
|
--
|
(6,980
|
)
|
||||||||||||||||
|
(Loss)
income before income taxes
|
(31,450
|
)
|
120,649
|
148
|
7,518
|
--
|
96,865
|
|||||||||||||||||
|
Benefit
(provision) for income taxes
|
12,108
|
(49,351
|
)
|
--
|
(50
|
)
|
--
|
(37,293
|
)
|
|||||||||||||||
|
Net
(loss) income before equity in income of consolidated
subsidiaries
|
(19,342
|
)
|
71,298
|
148
|
7,468
|
--
|
59,572
|
|||||||||||||||||
|
Equity
in income of consolidated subsidiaries
|
78,914
|
--
|
--
|
--
|
(78,914
|
)
|
--
|
|||||||||||||||||
|
Net
income (loss)
|
$
|
59,572
|
$
|
71,298
|
$
|
148
|
$
|
7,468
|
$
|
(78,914
|
)
|
$
|
59,572
|
|||||||||||
Supplemental
Condensed Consolidating Statement of Cash Flows
For
the nine months ended April 30, 2006
(in
thousands)
|
100%
Owned
|
||||||||||||||||||||
|
Parent
|
Guarantor
|
Other
|
||||||||||||||||||
|
Company
|
Subsidiaries
|
Larkspur
|
Subsidiaries
|
Consolidated
|
||||||||||||||||
|
Cash
flows from operating activities
|
$
|
(33,877
|
)
|
$
|
171,180
|
$
|
201
|
$
|
40,214
|
$
|
177,718
|
|||||||||
|
Cash
flows from investing activities
|
||||||||||||||||||||
|
Capital
expenditures
|
--
|
(56,879
|
)
|
(35
|
)
|
(6,769
|
)
|
(63,683
|
)
|
|||||||||||
|
Investments
in real estate
|
--
|
(37,949
|
)
|
--
|
(50,417
|
)
|
(88,366
|
)
|
||||||||||||
|
Proceeds
from sale of businesses
|
--
|
30,712
|
--
|
--
|
30,712
|
|||||||||||||||
|
Other
investing activities, net
|
--
|
6
|
--
|
(4,425
|
)
|
(4,419
|
)
|
|||||||||||||
|
Net
cash used in investing activities
|
--
|
(64,110
|
)
|
(35
|
)
|
(61,611
|
)
|
(125,756
|
)
|
|||||||||||
|
Cash
flows from financing activities:
|
||||||||||||||||||||
|
Proceeds
from borrowings under long-term debt
|
--
|
26,645
|
--
|
9,421
|
36,066
|
|||||||||||||||
|
Payments
of long-term debt
|
--
|
(27,129
|
)
|
--
|
(9,652
|
)
|
(36,781
|
)
|
||||||||||||
|
Advances
to (from) affiliates
|
(23,613
|
)
|
34,953
|
(90
|
)
|
(11,250
|
)
|
--
|
||||||||||||
|
Proceeds
from exercise of stock options
|
44,036
|
--
|
--
|
--
|
44,036
|
|||||||||||||||
|
Other
financing activities, net
|
13,454
|
(2,604
|
)
|
--
|
(2,597
|
)
|
8,253
|
|||||||||||||
|
Net
cash provided by (used in) financing activities
|
33,877
|
31,865
|
(90
|
)
|
(14,078
|
)
|
51,574
|
|||||||||||||
|
Net
increase (decrease) in cash and cash equivalents
|
--
|
138,935
|
76
|
(35,475
|
)
|
103,536
|
||||||||||||||
|
Cash
and cash equivalents
|
||||||||||||||||||||
|
Beginning
of period
|
--
|
92,879
|
105
|
43,596
|
136,580
|
|||||||||||||||
|
End
of period
|
$
|
--
|
$
|
231,814
|
$
|
181
|
$
|
8,121
|
$
|
240,116
|
||||||||||
Supplemental
Condensed Consolidating Statement of Cash Flows
For
the nine months ended April 30, 2005
(in
thousands)
|
100%
Owned
|
||||||||||||||||||||
|
Parent
|
Guarantor
|
Other
|
||||||||||||||||||
|
Company
|
Subsidiaries
|
Larkspur
|
Subsidiaries
|
Consolidated
|
||||||||||||||||
|
Cash
flows from operating activities
|
$
|
24,122
|
$
|
135,714
|
$
|
272
|
$
|
18,568
|
$
|
178,676
|
||||||||||
|
Cash
flows from investing activities
|
||||||||||||||||||||
|
Capital
expenditures
|
--
|
(61,554
|
)
|
16
|
(6,477
|
)
|
(68,015
|
)
|
||||||||||||
|
Investments
in real estate
|
--
|
(33,739
|
)
|
--
|
(50
|
)
|
(33,789
|
)
|
||||||||||||
|
Other
investing activities, net
|
--
|
13,942
|
--
|
369
|
14,311
|
|||||||||||||||
|
Net
cash (used in) provided by investing activities
|
--
|
(81,351
|
)
|
16
|
(6,158
|
)
|
(87,493
|
)
|
||||||||||||
|
Cash
flows from financing activities:
|
||||||||||||||||||||
|
Proceeds
from borrowings under long-term debt
|
--
|
116,901
|
--
|
--
|
116,901
|
|||||||||||||||
|
Payments
of long-term debt
|
--
|
(215,937
|
)
|
--
|
(4,224
|
)
|
(220,161
|
)
|
||||||||||||
|
Advances
to (from) affiliates
|
(34,195
|
)
|
33,742
|
(366
|
)
|
819
|
--
|
|||||||||||||
|
Other
financing activities, net
|
10,073
|
(1,773
|
)
|
--
|
(1,483
|
)
|
6,817
|
|||||||||||||
|
Net
cash used in financing activities
|
(24,122
|
)
|
(67,067
|
)
|
(366
|
)
|
(4,888
|
)
|
(96,443
|
)
|
||||||||||
|
Net
(decrease) increase in cash and cash equivalents
|
--
|
(12,704
|
)
|
(78
|
)
|
7,522
|
(5,260
|
)
|
||||||||||||
|
Cash
and cash equivalents
|
||||||||||||||||||||
|
Beginning
of period
|
--
|
41,356
|
171
|
4,801
|
46,328
|
|||||||||||||||
|
End
of period
|
$
|
--
|
$
|
28,652
|
$
|
93
|
$
|
12,323
|
$
|
41,068
|
||||||||||
The
following Management's Discussion and Analysis of the financial condition
and
results of operations of Vail Resorts, Inc. ("Vail Resorts") and its
subsidiaries (collectively, the "Company") should be read in conjunction
with
the Company's Annual Report on Form 10-K for the year ended July 31, 2005
("Form
10-K") and the Consolidated Condensed Financial Statements as of April 30,
2006
and 2005 and for the three and nine months then ended, included in Part I,
Item
1 of this Form 10-Q, which provide additional information regarding the
financial position, results of operations and cash flows of the Company.
To the
extent that the following Management's Discussion and Analysis contains
statements which are not of a historical nature, such statements are
forward-looking statements, which involve risks and uncertainties. These
risks
include, but are not limited to, changes in the competitive environment of
the
mountain and lodging industries, general business and economic conditions,
the
weather, war, terrorism and other factors discussed elsewhere herein and
in the
Company's filings with the Securities and Exchange Commission
("SEC").
The
following Management's Discussion and Analysis includes discussion of financial
performance within each of the Company's segments. The Company has chosen
to
specifically address the non-GAAP measures, Reported EBITDA (defined as segment
net revenues less segment specific operating expenses plus gain on transfer
of
property, as applicable, plus segment equity income or loss) and Reported
EBITDA
excluding stock-based compensation, in the following discussion because
management considers these measurements to be significant indications of
the
Company's financial performance. The Company evaluates performance and allocates
resources to its segments based on Reported EBITDA and Reported EBITDA excluding
stock-based compensation. The Company primarily uses Reported EBITDA excluding
stock-based compensation targets in determining management bonuses.
Additionally, the Company believes that Reported EBITDA excluding stock-based
compensation is an important measurement for comparability purposes as prior
periods do not reflect the impact of the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 123R, "Share-Based Payment" ("SFAS 123R").
Refer to the end of the Results of Operations section for a reconciliation
of
Reported EBITDA and Reported EBITDA excluding stock-based compensation to
net
income.
Reported
EBITDA and Reported EBITDA excluding stock-based compensation are not measures
of financial performance under accounting principles generally accepted in
the
United States of America. Items excluded from Reported EBITDA and Reported
EBITDA excluding stock-based compensation are significant components in
understanding and assessing financial performance. Reported EBITDA and Reported
EBITDA excluding stock-based compensation should not be considered in isolation
or as an alternative to, or substitute for, net income, cash flows generated
by
operations, investing or financing activities or other financial statement
data
presented in the consolidated condensed financial statements as indicators
of
financial performance or liquidity. Because Reported EBITDA and Reported
EBITDA
excluding stock-based compensation are not measurements determined in accordance
with accounting principles generally accepted in the United States of America
and are thus susceptible to varying calculations, Reported EBITDA and Reported
EBITDA excluding stock-based compensation as presented may not be comparable
to
other similarly titled measures of other companies.
OVERVIEW
The
Company's operations are grouped into three integrated and interdependent
segments: Mountain, Lodging and Real Estate. The Mountain segment is comprised
of the operations of five ski resort properties as well as ancillary businesses,
primarily including ski school, dining and retail/rental operations. Operations
within the Lodging segment include 1) ownership/management of a group of
ten
luxury hotels through the RockResorts International, LLC ("RockResorts")
brand,
including five proximate to the Company's ski resorts, 2) the operations
of
Grand Teton Lodge Company ("GTLC"), 3) the ownership/management of
non-RockResorts branded hotels and condominiums proximate to the Company's
ski
resorts and 4) golf course operations. The Real Estate segment is involved
with
the development of property in and around the Company's resort
properties.
The
Company's five ski resorts opened for business in November, which falls in
the
Company's second fiscal quarter and virtually all of the Company’s ski
operations have been concluded for the fiscal year as of the end of the
Company’s third fiscal quarter. Consequently, the period during which the ski
resorts are open (generally November through April) is the peak operating
season
for the Mountain segment. The Company’s largest source of revenue for the three
and nine months ended April 30, 2006 is the sale of lift tickets (including
season passes), which represented approximately 44% and 37%, respectively,
of
total Company net revenue. Lift ticket revenues are driven by volume (skier
visits) and average pricing. Pricing is impacted by both absolute pricing
as
well as the demographic mix of guests, which impacts the price points at
which
various products are purchased. The demographic mix of guests is divided
into
two primary categories: 1) out-of-state and international guests ("Destination")
and 2) in-state and local visitors ("In-State"). Destination guests comprised
approximately 60% of the Company's skier visits, while the In-State market
comprised approximately 40% of the Company's skier visits for the recently
completed ski season. Destination guests generally purchase the Company's
higher-priced lift ticket products and utilize more ancillary services and
lodging. Destination guests are less likely to be impacted by changes in
the
weather, due to the advance planning required for their trip, but can be
impacted by the economy (including the strength of the U.S. dollar) and the
global geopolitical climate. In-State guests tend to be more weather-sensitive
and value-oriented; to mitigate against the impacts of both of these factors,
approximately 23% of total lift revenue was generated from the sale of season
passes, which are marketed primarily to In-State guests. The cost structure
of
ski resort operations is largely fixed (with the exception of retail/rental,
ski
school and dining); as such, incremental revenue generally has high associated
profit margin.
Revenues
of the Lodging properties at or around the Company's ski resorts are closely
aligned with the performance of the Mountain segment; therefore, these
properties benefit from ski operations in the Mountain segment in the Company's
second and third fiscal quarters. Revenues from hotel management operations
under the RockResorts brand are generated through management fees based upon
the
revenue of the individual hotel properties within the RockResorts portfolio,
and
to the extent that these managed properties are not proximate to the Company’s
ski resorts are more subject to the seasonality of those hotels and trends
within the overall travel industry. Revenues of the Lodging segment during
the
Company's first and fourth fiscal quarters are generated primarily by the
operations of GTLC (as GTLC's peak operating season occurs during the summer
months), golf operations, and seasonally low operations from the Company's
owned
and managed properties.
The
Company's Real Estate segment engages in both 1) the sale of land to developers,
which generally includes the retention of some control in the oversight and
design of the projects and a contingent revenue structure based on the sale
of
the developed units, and 2) in a growing trend, vertical development of
projects. The Company attempts to mitigate the risk of vertical development
by
utilizing fixed price contracts, pre-selling all or a portion of the project,
requiring significant non-refundable deposits and obtaining non-recourse
financing for certain projects. The Company's Real Estate projects generally
are
geared to provide additional benefit to the Mountain and Lodging segments.
The
Company’s Real Estate revenues fluctuate based upon the timing of closings and
the type of real estate being sold, thus increasing the volatility of Real
Estate operating results from period to period.
TRENDS,
RISKS AND UNCERTAINTIES
Together
with those factors identified in the Company's Form 10-K, the Company's
management has identified the following important factors (as well as risks
and
uncertainties associated with such factors) that could impact the Company's
future financial performance:
| · |
In
fiscal 2006 and 2005, the Company successfully executed its strategy
to
reduce hotel ownership in favor of selectively increasing its managed
property portfolio with the sales of the assets constituting the
Snake
River Lodge & Spa ("SRL&S") in January 2006, The Lodge at Rancho
Mirage ("Rancho Mirage") in July 2005, Vail Marriott Mountain Resort
&
Spa ("Vail Marriott") in June 2005 and the sale of the Company's
investment in the Ritz-Carlton, Bachelor Gulch ("BG Resort") in December
2004. The Company retained management contracts for SRL&S, Rancho
Mirage and Vail Marriott. The Company continues to evaluate potential
sales and other strategic initiatives which could involve the conversion
of hotel rooms to real estate projects with respect to some of its
Lodging
properties. The sale of owned hotel properties results in Lodging
Reported
EBITDA no longer reflecting the operating results of the hotels,
but
includes management fee revenue in cases where the management contract
is
retained. See "Results of Operations" for information regarding the
financial impacts of these transactions.
|
| · |
Potential
ownership changes of hotels currently under RockResorts management
could
result in the termination of existing RockResorts management contracts,
which could impact the results of operations of the Lodging segment.
However, the Company continues to pursue new management
contracts.
|
| · |
On
March 6, 2006, RockResorts, a wholly-owned indirect subsidiary of
Vail
Resorts, Inc., was notified by the ownership of Cheeca Lodge & Spa
(“Cheeca”), formerly a RockResorts managed property, that its management
agreement was being terminated effective immediately. RockResorts
recorded
$0.7 million in revenue related to the management of this property
in
fiscal year 2005. RockResorts believes and asserts that the termination
is
in violation of the management agreement and is seeking monetary
damages
for the loss of the remaining twenty-seven years inclusive of renewal
periods under the contract, and recovery of attorneys’ fees and costs.
Pursuant to the dispute resolution provisions of the management agreement,
the disputed matter is pending before the JAMS Arbitration Tribunal
in
Chicago, Illinois, and is scheduled for a multi-week arbitration
hearing
beginning in late July 2006. Cheeca Holdings, LLC, the entity owner
of the
hotel property, asserts that RockResorts breached the management
contract,
among other alleged breaches, and seeks a ruling that it had a right
to
terminate the management agreement and monetary damages, and recovery
of
attorneys’ fees and costs. The Company is vigorously prosecuting its case
for unlawful termination, and the Company is vigorously defending
the
alleged claims of the owner entity. The Company has recorded $816,000
in
legal related costs (classified as “contract dispute charges” in the
accompanying consolidated condensed statements of operations) through
April 30, 2006 as a result of legal action against the hotel owner
and
anticipates incurring substantially more legal related costs until
this
matter is resolved.
|
| · |
GTLC
operates three lodging properties, food and beverage services, retail,
camping and other services within Grand Teton National Park under
a
concession contract with the National Park Service (the “Park Service”).
The Park Service had considered bids for a new concession contract
as the
Company’s contract had expired, and in May 2006, the Company was informed
it was awarded a new 15 year agreement to continue as the concessionaire
for GTLC. The Company expects to execute the contract in the next
several
months. Provisions of the new agreement include an increase in the
Park
Service franchise fee. On an annual basis, effective January 1, 2007,
assuming final approval by the United States Congress and the Park
Service, the Company will pay approximately $2 million more in franchise
fees to the Park Service than it has previously incurred. Additionally,
the Company will have capital requirements in excess of historical
expenditures.
|
| · |
Real
Estate Reported EBITDA is highly dependent on, among other things,
the
timing of closings on real estate under contract. Changes to the
anticipated timing of closing on one or more real estate units could
materially impact Real Estate Reported EBITDA for a particular quarter
or
fiscal year. Additionally, the magnitude of real estate projects
currently
under development or contemplated could result in a significant increase
in Real Estate Reported EBITDA as these projects close, expected
in fiscal
2007 and beyond. However, recent increases in construction costs,
including construction-related commodities, have resulted in increases
in
the total costs for certain of the Company's current development
projects.
Additionally, the profitability and/or viability of current or proposed
real estate development projects could be adversely affected by continued
escalation in construction costs and/or a slow-down in market demand,
as
well as project difficulties or delays and the resulting potential
negative financial impact associated with design or construction
issues
that may arise in the course of
construction.
|
| · |
Due
to the adoption of SFAS 123R, the Company's operating expenses have
increased by $1.1 million and $4.3 million for the three and nine
months
ended April 30, 2006, as compared to same periods in fiscal 2005,
after
considering the change in the Company's compensation strategy to
issue a
portion of its stock-based compensation as restricted stock to certain
levels of employees.
The Company cannot predict the impact to future operating results
of
expensing stock-based compensation as the expense is predicated on
the
amount and type of future stock-based compensation awards granted
and the
fair value of those awards to be determined at the time of
grant.
|
| · |
The
Company announced on February 28, 2006 that the Company's corporate
and
administrative operations that are currently located in Avon, Colorado
will relocate to new offices in the Denver metro area, with some
positions
moving to a location near Keystone Resort in Summit County, Colorado.
The
Company currently expects that the total charges associated with
the
relocation, which the Company anticipates to incur by the end of
the
second quarter of fiscal 2007, will result in cash expenditures of
approximately $3.8 million to $4.4 million (which includes charges
for
severance and retention of $1.3 million to $1.5 million, charges
for
contract termination costs of $200,000 to $400,000 and facility,
employee
and other relocation costs of $2.3 million to $2.5 million), of which
$1.1
million was incurred through April 30, 2006. In addition, the Company
anticipates it will record total accelerated depreciation on the
early
retirement of certain assets of approximately $900,000, of which
$340,000
has been recorded through April 30, 2006. The above amounts do not
reflect
any of the anticipated benefits expected to be realized from the
relocation and consolidation of offices. (See Note 7, Relocation
and
Separation Charges, of the notes to consolidated condensed financial
statements, for more information regarding this
item.)
|
The
data provided in this section should be read in conjunction with the risk
factors identified elsewhere in this document and within the Company's Form
10-K.
RESULTS
OF OPERATIONS
Summary
The
Company recorded net income of $68.3 million for the three months ended April
30, 2006 as compared to net income of $58.8 million for the three months
ended
April 30, 2005, representing a $9.5 million increase. Income before provision
for income taxes increased by $16.4 million compared to the same period last
year and is primarily attributable to a $21.9 million improvement in Mountain
Reported EBITDA excluding stock-based compensation partially offset by a
$4.0
million decrease in Lodging Reported EBITDA excluding stock-based compensation
and a $2.1 million decrease in Real Estate Reported EBITDA excluding stock-based
compensation in the three months ended April 30, 2006 as compared to the
same
period last year. Additionally, income before provision for income taxes
for the
three months ended April 30, 2006 was impacted by an increase in investment
income, net of $3.0 million and a reduction in depreciation and amortization
expense of $2.1 million offset by relocation and separation charges of $3.8
million and a $1.1 million increase in stock-based compensation expense recorded
pursuant to the adoption of SFAS 123R.
The
Company recorded net income of $77.0 million for the nine months ended April
30,
2006 as compared to net income of $59.6 million for the nine months ended
April
30, 2005, representing a $17.4 million increase. Income before provision
for
income taxes increased by $29.4 million compared to the same period last
year
and is primarily attributable to a $36.1 million improvement in Mountain
Reported EBITDA excluding stock-based compensation partially offset by a
$2.0
million decrease in Lodging Reported EBITDA excluding stock-based compensation
and an $8.8 million decrease in Real Estate Reported EBITDA excluding
stock-based compensation in the nine months ended April 30, 2006 as compared
to
the same period last year. Additionally, income before provision for income
taxes for the nine months ended April 30, 2006 was impacted by a reduction
in
depreciation and amortization expense of $6.1 million, an increase in investment
income, net of $3.9 million and a decrease in interest expense of $2.9 million,
partially offset by a $4.3 million increase in stock-based compensation expense
recorded pursuant to the adoption of SFAS 123R, relocation and separation
charges of $3.8 million and a $1.1 million reduction in gain on sale of
businesses, net.
Presented
below is more detailed comparative data and discussion regarding the Company's
results of operations for the three and nine months ended April 30, 2006
versus
the three and nine months ended April 30, 2005.
Mountain
Segment
Mountain
segment operating results for the three and nine months ended April 30, 2006
and
2005 are presented by category as follows (in thousands, except effective
ticket
price, "ETP", amounts):
|
Three
Months Ended
|
|||||||||
|
April
30,
|
Percentage
|
||||||||
|
2006
|
2005
|
Increase
|
|||||||
|
Lift
tickets
|
$
|
149,563
|
$
|
130,200
|
14.9
|
%
|
|||
|
Ski
school
|
41,851
|
36,727
|
14.0
|
%
|
|||||
|
Dining
|
27,973
|
25,951
|
7.8
|
%
|
|||||
|
Retail/rental
|
53,091
|
42,772
|
24.1
|
%
|
|||||
|
Other
|
22,295
|
21,175
|
5.3
|
%
|
|||||
|
Total
Mountain net revenue
|
294,773
|
256,825
|
14.8
|
%
|
|||||
|
Total
Mountain operating expense
|
149,431
|
132,399
|
12.9
|
%
|
|||||
|
Mountain
equity investment income, net
|
780
|
438
|
78.1
|
%
|
|||||
|
Total
Mountain Reported EBITDA
|
$
|
146,122
|
$
|
124,864
|
17.0
|
%
|
|||
|
Total
Mountain Reported EBITDA excluding stock-based
compensation
|
$
|
146,820
|
$
|
124,914
|
17.5
|
%
|
|||
|
Total
skier visits
|
3,412
|
3,269
|
4.4
|
%
|
|||||
|
ETP
|
$
|
43.83
|
$
|
39.83
|
10.0
|
%
|
|||
Total
Mountain Reported EBITDA includes $698,000 and $50,000 of stock-based
compensation expense for the three months ended April 30, 2006 and 2005,
respectively.
|
Nine
Months Ended
|
|||||||||
|
April
30,
|
Percentage
|
||||||||
|
2006
|
2005
|
Increase
|
|||||||
|
Lift
tickets
|
$
|
263,036
|
$
|
233,109
|
12.8
|
%
|
|||
|
Ski
school
|
72,628
|
63,842
|
13.8
|
%
|
|||||
|
Dining
|
52,745
|
49,353
|
6.9
|
%
|
|||||
|
Retail/rental
|
131,708
|
105,747
|
24.6
|
%
|
|||||
|
Other
|
61,162
|
53,433
|
14.5
|
%
|
|||||
|
Total
Mountain net revenue
|
581,279
|
505,484
|
15.0
|
%
|
|||||
|
Total
Mountain operating expense
|
372,387
|
329,210
|
13.1
|
%
|
|||||
|
Mountain
equity investment income, net
|
3,085
|
2,003
|
54.0
|
%
|
|||||
|
Total
Mountain Reported EBITDA
|
$
|
211,977
|
$
|
178,277
|
18.9
|
%
|
|||
|
Total
Mountain Reported EBITDA excluding stock-based
compensation
|
$
|
214,630
|
$
|
178,483
|
20.3
|
%
|
|||
|
Total
skier visits
|
6,288
|
5,933
|
6.0
|
%
|
|||||
|
ETP
|
$
|
41.83
|
$
|
39.29
|
6.5
|
%
|
|||
Total
Mountain Reported EBITDA includes $2.7 million and $206,000 of stock-based
compensation expense for the nine months ended April 30, 2006 and 2005,
respectively.
Certain
reclassifications have been made within the Mountain segment operating results
for the three and nine months ended April 30, 2005 to conform to current
period
presentation.
Lift
revenues increased 14.9% and 12.8% for the three and nine months ended April
30,
2006, respectively, as compared to the same periods last year due to increased
ticket pricing, as well as an increase in visitation and season pass sales.
Overall, ETP increased by 10.0% and 6.5% for the three and nine months ended
April 30, 2006. The increases in ETP were due to increased pricing which
was
partially offset by increased visitation by season pass holders due in part
to
favorable early season snow conditions in Colorado. ETP excluding season
pass
revenue and visitation increased 11.4% and 9.4% for the three and nine months
ended April 30, 2006, respectively, as compared to the same periods last
year
due primarily to absolute price increases. Total season pass revenue recognized
increased by approximately $3.8 million and $6.8 million for the three and
nine
months ended April 30, 2006, respectively, compared to the same periods last
year due to increases in passes sold and average pass price. Visitation at
the
Company's Colorado resorts was up 5.2% and 8.0% for the three and nine months
ended April 30, 2006, respectively, due in part to the strong early season
snowfall and the timing of Easter in mid-April as compared to late March
in the
prior year, while visitation at the Company's Heavenly Ski Resort (“Heavenly”)
was up 0.7% for the three months ended April 30, 2006 and down 3.3% for the
nine
months ended April 30, 2006 due to unfavorable weather conditions, including
during the Christmas holiday period.
Revenues
from ancillary businesses improved as a result of increased skier visitation
and
increased pricing similar to lift revenues. Additionally, retail/rental revenue
grew incrementally as a result of the acquisition by SSI Venture LLC ("SSV")
in
the first quarter of fiscal 2006 of six retail locations in the San Francisco
Bay Area. Excluding the impact of the acquisition made by SSV, retail/rental
revenues increased by 10.6% and 10.2% for the three and nine months ended
April
30, 2006, respectively, compared to the same periods last year. Dining
experienced a lower percentage growth than the other ancillary businesses
due to
the reduction in revenue resulting from the conversion of certain formerly
owned
restaurants to leased operations and the closing of certain owned restaurants
due to the redevelopment in LionsHead for the construction of Arrabelle at
Vail
Square.
Mountain
operating expense increased 12.9% and 13.1% during the three and nine months
ended April 30, 2006, respectively, as compared to the same periods last
year
due in part to the higher retail/rental operations resulting from increased
sales volume and the acquisition previously mentioned above. Excluding
retail/rental and stock-based compensation attributable to the Mountain segment,
expenses increased 8.5%, or $8.7 million during the three months ended April
30,
2006 and increased 7.6%, or $18.8 million during the nine months ended April
30,
2006, due primarily to higher variable costs related to the higher revenues,
including: United States Forest Service (“USFS”) fees, credit card fees and
other fees associated with revenue; increased cost of sales supporting higher
dining revenues; higher fuel and utilities costs (due to higher absolute
energy
and related costs) and certain labor related costs, including ski school
labor
to support the higher ski school revenue.
Lodging
Segment
Lodging
segment operating results for the three and nine months ended April 30, 2006
and
2005 are presented by category as follows (in thousands, except Average Daily
Rate "ADR"):
|
Three
Months Ended
|
Percentage
|
|||||||||
|
April
30,
|
Increase
|
|||||||||
|
2006
|
2005
|
(Decrease)
|
||||||||
|
Total
Lodging net revenue
|
$
|
39,492
|
$
|
56,285
|
(29.8
|
)
|
%
|
|||
|
Total
Lodging operating expense
|
30,515
|
43,164
|
(29.3
|
)
|
%
|
|||||
|
Total
Lodging Reported EBITDA
|
$
|
8,977
|
$
|
13,121
|
(31.6
|
)
|
%
|
|||
|
Total
Lodging Reported EBITDA excluding stock-based compensation
|
$
|
9,139
|
$
|
13,138
|
(30.4
|
)
|
%
|
|||
|
ADR
|
$
|
247.32
|
$
|
238.19
|
3.8
|
%
|
||||
Total
Lodging Reported EBITDA includes $162,000 and $17,000 of stock-based
compensation expense for the three months ended April 30, 2006 and 2005,
respectively.
|
Nine
Months Ended
|
Percentage
|
|||||||||
|
April
30,
|
Increase
|
|||||||||
|
2006
|
2005
|
(Decrease)
|
||||||||
|
Total
Lodging net revenue
|
$
|
113,321
|
$
|
145,148
|
(21.9
|
)
|
%
|
|||
|
Total
Lodging operating expense
|
101,050
|
127,282
|
(20.6
|
)
|
%
|
|||||
|
Lodging
equity investment loss, net
|
--
|
(2,679
|
)
|
100.0
|
%
|
|||||
|
Total
Lodging Reported EBITDA
|
$
|
12,271
|
$
|
15,187
|
(19.2
|
)
|
%
|
|||
|
Total
Lodging Reported EBITDA excluding stock-based compensation
|
$
|
13,254
|
$
|
15,257
|
(13.1
|
)
|
%
|
|||
|
ADR
|
$
|
218.83
|
$
|
208.26
|
5.1
|
%
|
||||
Total
Lodging Reported EBITDA includes $983,000 and $70,000 of stock-based
compensation expense for the nine months ended April 30, 2006 and 2005,
respectively.
In
fiscal 2005, the Company sold its minority interest in BG Resort and the
assets
constituting the Vail Marriott and Rancho Mirage. Additionally, the Company
sold
the assets constituting SRL&S in January 2006. For the prior year’s three
and nine months ended April 30, 2005, Lodging Reported EBITDA includes revenues
of $18.7 million and $42.6 million, operating expenses of $12.8 million and
$35.0 million, and equity investment losses of zero and $2.7 million related
to
these entities, respectively. For the nine months ended April 30, 2006, Lodging
Reported EBITDA includes revenues of $5.2 million and operating expenses
of $4.9
million related to SRL&S prior to the sale of SRL&S in January 2006.
Commencing with the sale of Vail Marriott, Rancho Mirage and SRL&S, the
Company is earning base management fees of approximately 3% of each hotel’s
revenue. Accordingly, Lodging Reported EBITDA includes incremental management
fee revenues of $631,000 and $1.2 million for the Vail Marriott, Rancho Mirage
and SRL&S for the three and nine months ended April 30, 2006, respectively.
Excluding
the impact of the sales of the Vail Marriott, Rancho Mirage, SRL&S and the
interest in BG Resort, revenue (including incremental management fees) increased
$1.9 million, or 5.0%, for the three months ended April 30, 2006, and increased
$5.5 million, or 5.4%, for the nine months ended April 30, 2006, while expenses
increased $178,000, or 0.6%, for the three months ended April 30, 2006, and
increased $3.8 million, or 4.2%, for the nine months ended April 30, 2006.
The
revenue increases were due to increases in ADR of 5.5% and 4.8% and occupancy
rates of 6.3% and 8.0% for the three and nine months ended April 30, 2006,
respectively. The increases for the three months ended April 30, 2006 were
driven by increases in business from leisure travelers primarily in the
properties at or around the Company’s ski resorts. For the nine months ended
April 30, 2006, the increases in ADR and occupancy rates were primarily driven
by the properties at or around the Company’s ski resorts and increases in both
leisure travelers and group business, particularly in the Keystone markets.
The
increased group business is a result of the overall improvement in the lodging
industry and the Company’s ability to capture and maximize the improved group
business market. Excluding the impact of the sales of Vail Marriott, Rancho
Mirage, SRL&S and stock-based compensation expense, expenses increased less
than 0.1% for the three months ended April 30, 2006, and increased 3.2%,
for the
nine months ended April 30, 2006, respectively.
Real
Estate Segment
Real
Estate segment operating results for the three and nine months ended April
30,
2006 and 2005 are presented by major project categories as follows (in
thousands):
|
Three
Months Ended
|
Percentage
|
|||||||||
|
April
30,
|
Increase
|
|||||||||
|
2006
|
2005
|
(Decrease)
|
||||||||
|
Single
family land sales
|
$
|
319
|
$
|
2,343
|
(86.4
|
)
|
%
|
|||
|
Multi-family
land sales
|
972
|
1,587
|
(38.8
|
)
|
%
|
|||||
|
Parking
unit sales
|
--
|
10,185
|
(100.0
|
)
|
%
|
|||||
|
Other
|
5,833
|
226
|
2,481.0
|
%
|
||||||
|
Total
Real Estate net revenue
|
7,124
|
14,341
|
(50.3
|
)
|
%
|
|||||
|
Total
Real Estate operating expense
|
11,370
|
16,165
|
(29.7
|
)
|
%
|
|||||
|
Real
Estate equity investment loss, net
|
(20
|
)
|
(48
|
)
|
58.3
|
%
|
||||
|
Total
Real Estate Reported EBITDA
|
$
|
(4,266
|
)
|
$
|
(1,872
|
)
|
(127.9
|
)
|
%
|
|
|
Total
Real Estate Reported EBITDA excluding stock-based
compensation
|
$
|
(3,983
|
)
|
$
|
(1,854
|
)
|
(114.8
|
)
|
%
|
|
Real
Estate Reported EBITDA includes $283,000 and $18,000 of stock-based compensation
expense for the three months ended April 30, 2006 and 2005,
respectively.
|
Nine
Months Ended
|
Percentage
|
|||||||||
|
April
30,
|
Increase
|
|||||||||
|
2006
|
2005
|
(Decrease)
|
||||||||
|
Single
family land sales
|
$
|
2,424
|
$
|
21,848
|
(88.9
|
)
|
%
|
|||
|
Multi-family
land sales
|
11,460
|
6,755
|
69.7
|
%
|
||||||
|
Parking
unit sales
|
--
|
10,220
|
(100.0
|
)
|
%
|
|||||
|
Other
|
6,342
|
506
|
1,153.4
|
%
|
||||||
|
Total
Real Estate net revenue
|
20,226
|
39,329
|
(48.6
|
)
|
%
|
|||||
|
Total
Real Estate operating expense
|
23,823
|
32,939
|
(27.7
|
)
|
%
|
|||||
|
Real
Estate equity investment income (loss), net
|
79
|
(107
|
)
|
173.8
|
%
|
|||||
|
Total
Real Estate Reported EBITDA
|
$
|
(3,518
|
)
|
$
|
6,283
|
(156.0
|
)
|
%
|
||
|
Total
Real Estate Reported EBITDA excluding stock-based
compensation
|
$
|
(2,454
|
)
|
$
|
6,359
|
(138.6
|
)
|
%
|
||
Real
Estate Reported EBITDA includes $1.1 million and $76,000 of stock-based
compensation expense for the nine months ended April 30, 2006 and 2005,
respectively.
Certain
reclassifications have been made within the Real Estate segment operating
results for the three and nine months ended April 30, 2005 to conform to
current
period presentation.
The
Company's Real Estate operating revenues are primarily driven by the timing
of
closings and the mix of real estate sold in any given period. Different types
of
projects have different revenue and expense volumes and margins; therefore,
as
the real estate inventory mix changes it can greatly impact Real Estate segment
net revenues, operating expenses and Real Estate Reported EBITDA.
The
Company is currently in the development stage for several major real estate
projects, including Arrabelle at Vail Square, Gore Creek Place Townhomes,
the
Peaks of Breckenridge, the Jackson Hole Golf & Tennis residential
development and the second phase of the Mountain Thunder condominiums in
Breckenridge, among other projects. Accordingly, there were minimal closings
on
real estate sales in the three and nine months ended April 30, 2006. Revenues
in
the three and nine months ended April 30, 2006 were primarily generated from
a
land exchange with the USFS and contingent gains on development parcel sales
that closed in prior periods. Operating expense included cost of sales
commensurate with revenue recognized, as well as overhead costs such as labor
and benefits (including stock-based compensation expense), marketing costs
and
professional services fees. Additionally, the Company recorded $1.1 million
in
unanticipated incremental cost of sales during the quarter ended April 30,
2006
related to the Jackson Hole Golf & Tennis development. Real Estate Reported
EBITDA in the prior year’s three and nine months ended April 30, 2005 were
driven primarily by percentage of completion recognition on Jackson Hole
Golf
& Tennis lot sales and recognition of contingent gains associated with
development parcels sold in prior periods, and for the nine months ended
April
30, 2005, the sale of four single-family homesites in the LionsHead area
of Vail
which closed in the first quarter of fiscal 2005.
Other
Items
In
addition to segment operating results, the following material items contributed
to the Company's overall financial position.
Depreciation
and amortization.
Depreciation and amortization expense for the three and nine months ended
April
30, 2006 decreased primarily as a result of a decrease in depreciation of
$1.6
million and $5.1 million for the three and nine months ended April 30, 2006,
respectively, due to the sale of assets constituting the Vail Marriott, Rancho
Mirage and SRL&S. The above mentioned decreases for the three and nine
months ended April 30, 2006, were partially offset by $1.3 million of
accelerated amortization associated with the Cheeca management agreement
intangible. Additionally, higher fiscal 2005 accelerated depreciation for
certain assets which were retired in advance of their previously estimated
useful lives as a result of fiscal 2005 decisions related to redevelopment
and
capital improvements was mostly offset by an increased fixed asset base due
to
capital additions in the current year. The average annualized depreciation
rate
for the three and nine months ended April 30, 2006 was 7.7% and 7.4%,
respectively, as compared to an average annualized depreciation rate for
the
three and nine months ended April 30, 2005 of 8.4% and 7.8%,
respectively.
Relocation
and separation charges.
In February 2006, the Company announced a plan to relocate its corporate
headquarters, and the plan was approved by the Company’s Board of Directors in
April 2006. The relocation process (which also includes the consolidation
of
certain other operations of the Company) is expected to be completed by the
end
of the second quarter of fiscal year 2007. The Company recorded $1.1 million
of
relocation charges in the three and nine months ended April 30, 2006. In
addition, in February 2006, Adam Aron, the former Chairman and Chief Executive
Officer of the Company, resigned. In connection with Mr. Aron's resignation,
the
Company entered into a separation agreement with Mr. Aron, whereby the
Company recorded $2.7 million of separation related expenses. See Note 7,
Relocation and Separation Charges, of the notes to consolidated condensed
financial statements, for more information regarding relocation and separation
charges.
Asset
impairment charge.
The Company recorded a $1.6 million asset impairment charge in the three
and
nine months ended April 30, 2005 associated with the intangible asset related
to
the RockResorts call option.
Mold
remediation credit.
During the nine months ended April 30, 2006, Breckenridge Terrace, LLC received
reimbursement from third parties for costs incurred in conjunction with its
mold
remediation efforts in the amount of $852,000, which has been recognized
by the
Company as reduction of the remediation expense that was recognized in previous
periods. See Note 11, Commitments and Contingencies, of the notes to
consolidated condensed financial statements, for more information regarding
this
item.
Investment
income, net.
The Company invests excess cash in short-term investments, as permitted under
the Company’s Fourth Amended and Restated Credit Agreement, dated as of January
28, 2005, between the Vail Corporation (a wholly owned subsidiary of the
Company), Bank of America, N.A., as administrative agent and the Lenders
party
thereto (“Credit Agreement”) underlying the senior credit facility (“Credit
Facility”) and the Indenture,
dated as of January 29, 2004 among the Company, the guarantors therein and
the
Bank of New York, as Trustee (“Indenture”), relating to the Senior
Subordinated Notes due 2014 (“6.75% Notes”).
The increase in investment income for the three and nine months ended April
30,
2006 is due to significant increases in average invested cash balances during
the respective periods.
Interest
expense.
The Company’s primary sources of interest expense are the 6.75% Notes, the
Credit Facility, including the $400 million revolving credit facility (“Credit
Facility Revolver”) thereunder, the Industrial Development Bonds, and the
Employee Housing Bonds. Interest expense decreased $0.5 million and $2.9
million
for the three and nine months ended April 30, 2006, respectively, versus
the
same period in the prior year due to the January 2005 Credit Facility
refinancing which, among other things, resulted in the extinguishment of
the
$100 million Credit Facility term loan and improved pricing for interest
rate
and commitment fee margins. In addition, the Funded Debt to Adjusted EBITDA
ratio (as defined in the Credit Agreement) improved, which determines margin
levels for pricing on interest rates and commitment fees under the Credit
Facility, and average borrowings under the Credit Facility Revolver were
zero
for the three and nine months ended April 30, 2006, respectively, versus
$6.2
million for the three and nine months ended April 30, 2005. The reduction
in
interest expense as a result of a reduction in outstanding debt and margin
rates
as previously discussed, was partially offset by an increase in interest
expense
on variable rate debt.
Gain
on sale of businesses, net.
The Company recorded a $4.7 million gain in the nine months ended April 30,
2006
associated with the sale of the assets constituting SRL&S. Additionally, the
Company recorded an $82,000 loss in the nine months ended April 30, 2006
associated with the sale of the Company’s interest in BG Resort due to the
settlement of certain contingencies. The Company recorded a $5.7 million
gain in
the nine months ended April 30, 2005 associated with the sale of the Company’s
interest in BG Resort. See Note 8, Sale of Businesses, of the notes to
consolidated condensed financial statements, for more information regarding
the
sale of businesses.
Contract
dispute charges. In
March 2006, RockResorts was notified by the ownership of Cheeca, formerly
a
RockResorts managed property, that its management agreement was being terminated
effective immediately. RockResorts believes that the termination is in violation
of the management agreement and is pursuing its legal rights. The Company
has
incurred $816,000 of legal related costs related to this matter through April
30, 2006. See Note 11, Commitments and Contingencies, of the notes to
consolidated condensed financial statements, for more information regarding
this
item.
Gain/loss
on put option.
The value of put options fluctuates based on the estimated fair market value
of
the put options as of the end of each period. The net loss in the three and
nine
months ended April 30, 2006 was related to the increase in the estimated
fair
market value of the liability associated with the RTP, LLC (“RTP”) put option.
The net loss in the three months ended April 30, 2005 was related to the
increase in the estimated fair market value of the liability associated with
the
RTP put option. The net gain in the nine months ended April 30, 2005 was
primarily related to the decrease in the estimated fair market value of the
liabilities associated with the SSV and RTP put options. See Note 9, Put
and
Call Options, of the notes to consolidated condensed financial statements,
for
more information regarding the Company’s put options.
Income
taxes.
The effective tax rate for the three and nine months ended April 30, 2006
was
39.0% compared to 38.5% for the same periods last year. The interim period
effective tax rate for the current and prior year is primarily driven by
the
anticipated pre-tax book income for the full fiscal year and an estimate
of the
amount of non-deductible items for tax purposes.
The
Internal Revenue Service has completed its exam of the Company’s tax returns for
tax years 2001 through 2003 and has issued a report of its findings. The
examiner’s primary finding is the disallowance of the Company’s position to
remove the restrictions under Section 382 of the Internal Revenue Code of
approximately $73.8 million of net operating losses (“NOLs”). These restricted
NOLs relate to fresh start accounting from the Company’s reorganization in 1992.
The Company has appealed the examiner’s disallowance of these NOLs to the Office
of the Appeals. If the Company is unsuccessful in its appeals process, it
will
not negatively impact the Company’s financial position or results of
operations.
Reconciliation
of Non-GAAP Measures
The
following table reconciles from segment Reported EBITDA and Reported EBITDA
excluding stock-based compensation to net income (in thousands):
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
April
30,
|
April
30,
|
|||||||||||||||
|
2006
|
2005
|
2006
|
2005
|
|||||||||||||
|
Mountain
Reported EBITDA excluding stock-based compensation
|
$
|
146,820
|
$
|
124,914
|
$
|
214,630
|
$
|
178,483
|
||||||||
|
Mountain
segment stock-based compensation
|
(698
|
)
|
(50
|
)
|
(2,653
|
)
|
(206
|
)
|
||||||||
|
Mountain
Reported EBITDA
|
146,122
|
124,864
|
211,977
|
178,277
|
||||||||||||
|
Lodging
Reported EBITDA excluding stock-based compensation
|
9,139
|
13,138
|
13,254
|
15,257
|
||||||||||||
|
Lodging
segment stock-based compensation
|
(162
|
)
|
(17
|
)
|
(983
|
)
|
(70
|
)
|
||||||||
|
Lodging
Reported EBITDA
|
8,977
|
13,121
|
12,271
|
15,187
|
||||||||||||
|
Real
Estate Reported EBITDA excluding stock-based compensation
|
(3,983
|
)
|
(1,854
|
)
|
(2,454
|
)
|
6,359
|
|||||||||
|
Real
Estate segment stock-based compensation
|
(283
|
)
|
(18
|
)
|
(1,064
|
)
|
(76
|
)
|
||||||||
|
Real
Estate Reported EBITDA
|
(4,266
|
)
|
(1,872
|
)
|
(3,518
|
)
|
6,283
|
|||||||||
|
Total
Reported EBITDA
|
150,833
|
136,113
|
220,730
|
199,747
|
||||||||||||
|
Depreciation
and amortization
|
(22,942
|
)
|
(25,039
|
)
|
(63,296
|
)
|
(69,387
|
)
|
||||||||
|
Relocation
and separation charges
|
(3,778
|
)
|
--
|
(3,778
|
)
|
--
|
||||||||||
|
Asset
impairment charge
|
--
|
(1,573
|
)
|
(136
|
)
|
(1,573
|
)
|
|||||||||
|
Mold
remediation credit
|
--
|
--
|
852
|
--
|
||||||||||||
|
Loss
on disposal of fixed assets, net
|
(108
|
)
|
(38
|
)
|
(835
|
)
|
(1,519
|
)
|
||||||||
|
Investment
income, net
|
3,156
|
141
|
5,390
|
1,443
|
||||||||||||
|
Interest
expense
|
(8,849
|
)
|
(9,349
|
)
|
(27,788
|
)
|
(30,734
|
)
|
||||||||
|
Loss
on extinguishment of debt
|
--
|
--
|
--
|
(612
|
)
|
|||||||||||
|
(Loss)
gain on sale of businesses, net
|
--
|
(3
|
)
|
4,625
|
5,690
|
|||||||||||
|
Contract
dispute charges
|
(816
|
)
|
--
|
(816
|
)
|
--
|
||||||||||
|
(Loss)
gain on put options, net
|
(113
|
)
|
(447
|
)
|
(79
|
)
|
741
|
|||||||||
|
Other
income, net
|
--
|
--
|
50
|
49
|
||||||||||||
|
Minority
interest in income of consolidated subsidiaries, net
|
(5,355
|
)
|
(4,216
|
)
|
(8,660
|
)
|
(6,980
|
)
|
||||||||
|
Income
before provision for income taxes
|
112,028
|
95,589
|
126,259
|
96,865
|
||||||||||||
|
Provision
for income taxes
|
(43,691
|
)
|
(36,801
|
)
|
(49,240
|
)
|
(37,293
|
)
|
||||||||
|
Net
income
|
$
|
68,337
|
$
|
58,788
|
$
|
77,019
|
$
|
59,572
|
||||||||
SEC
INVESTIGATION TERMINATED
In
February 2003, the SEC issued a formal order of investigation with respect
to
the Company. On September 19, 2005, the Central Regional Office of the SEC
informed the Company that its investigation has been terminated, and that
no
enforcement action has been recommended regarding the Company. The Company
has
also been informed that no enforcement action has been recommended with respect
to any present or former directors, officers or employees of the Company
in
regard to the matters that had been under investigation.
LIQUIDITY
AND CAPITAL RESOURCES
Significant
Sources of Cash
Historically,
the Company’s second and third fiscal quarters are seasonally high for cash on
hand as the Company’s ski
resorts are generally open for ski operations from mid-November to
mid-April.
The Company generated $177.7 million of cash from operating activities during
the nine months ended April 30, 2006, compared to $178.7 million generated
during the nine months ended April 30, 2005. The significant increase in
Resort
Reported EBITDA (the combination of Mountain Reported EBITDA and Lodging
Reported EBITDA), was offset by a decrease in cash being generated from Real
Estate sales, as well as collection of income tax refunds in the prior year.
Additionally, the Company generated $30.7 million of cash from investing
activities in the nine months ended April 30, 2006 from the sale of SRL&S.
The Company’s financing activities generated $51.6 million of cash in the nine
months ended April 30, 2006 primarily due to cash proceeds from the exercise
of
stock options, as compared to using $96.4 million in the same period last
year,
which was primarily related to the prior year repayment of the Credit Facility
term loan.
At
April 30, 2006, the Company had $240.1 million of cash and cash equivalents
and
anticipates that, in the near-term, it will continue to have excess cash.
On
March 9, 2006, the Company’s Board of Directors approved a share repurchase
program, which is described below in Significant Uses of Cash. As
of April 30, 2006, the Company has not repurchased any shares. The
Credit Agreement and the Indenture contain restrictions that limit the Company’s
ability to make investments or distributions (including the payment of
dividends). In addition, the Indenture restricts how the funds from sales
of
businesses can be used and the timing of the use of such funds, generally
requiring the net proceeds from such transactions to be invested in capital
improvements, acquisitions, retirement of debt senior to the 6.75% Notes
or used
to tender for a portion of the 6.75% Notes outstanding. The Company does
not
believe it will be obligated to tender for a portion of the 6.75% Notes
outstanding with the proceeds on asset sales to date as a result of the actual
or anticipated reinvestment of such proceeds for capital
expenditures.
In
addition to continued utilization of operating cash flows (including sales
of
real estate) and borrowings, if necessary, under the Credit Facility, the
Company expects that its liquidity needs over the next few years will also
be
met through borrowings under a Construction Loan Agreement with Gore Creek
Place, LLC (“Gore Creek Place”) and Construction Loan Agreement with Arrabelle
at Vail Square, LLC (“Arrabelle”) (collectively, the “Non-Recourse Real Estate
Financings”). See
Note 4, Long-Term Debt, of the notes to consolidated condensed financial
statements, for more information on Non-Recourse
Real Estate Financings.
The
Company cannot predict whether cash generated from stock option exercises
will
continue at the level generated in the first nine months of fiscal 2006 ($44.0
million); however, as of April 30, 2006, there were 778,000 exercisable options
outstanding with a weighted-average exercise price of $17.37 per share. In
September 2005, the Company’s Compensation Committee altered its compensation
philosophy by making restricted share awards a more significant portion of
total
incentive compensation and reducing the aggregate number of stock options
granted. This change in compensation strategy could have a long-term impact
on
cash generated from the exercise of stock options, with an offset of less
shares
issued upon exercise.
Significant
Uses of Cash
For
the nine months ended April 30, 2006, the Company used $125.8 million in
cash
for investing activities, which represents a $38.3 million increase over
the
same period in the prior year. This increase is primarily a result of the
significant vertical development underway in the Company’s real estate
operations, partially offset by an increase in net proceeds from the sale
of
businesses of $18.0 million.
The
Company’s cash needs typically include providing for operating expenditures,
debt service requirements and capital expenditures for both assets to be
used in
operations and real estate development projects. In addition, the Company
expects it will incur significant cash income tax expense (generally expected
to
approximate its statutory income tax rate) due to the improved operating
results
and the limitations on the usage of NOLs generated in prior periods.
Historically, the Company has not been a significant cash income tax payer.
The
Company currently has several major real estate development projects under
construction. The Company has entered into contracts with third parties to
provide construction-related services to the Company throughout the course
of
construction for these projects; commitments for future services under such
contracts total approximately $178 million. The Company expects to spend
approximately $185 million to $195 million in calendar year 2006 for real
estate
development projects, including the construction of associated resort-related
depreciable assets. The primary projects are expected to include continued
construction and development costs, as well as planning and infrastructure
costs
associated with planned development projects in and around each of the Company’s
ski areas. Of the calendar 2006 estimate, the Company expects to incur
approximately $65 million to $75 million for real estate development projects
during the remainder of fiscal 2006. The Company expects real estate capital
expenditures will be higher than historical levels for the next several years
as
the Company continues its vertical development efforts. As noted above, the
Company obtained non-recourse financing to fund construction of the Arrabelle
and Gore Creek Place projects; the Company expects to utilize similar financing
arrangements for certain other development projects. In addition to utilizing
project-specific financing, the Company also pre-sells units requiring deposits
in a proposed development prior to committing to the completion of the
development, thereby helping to ensure sufficient funds are available to
complete the project.
The
Company has historically invested significant cash in capital expenditures
for
its resort-related (Mountain and Lodging) operations, and expects to continue
to
invest significant cash in the future. The Company evaluates additional capital
improvements based on expected strategic impacts and/or expected return on
investment. The Company currently anticipates it will spend $75 million to
$80
million of resort-related capital expenditures for calendar 2006 excluding
projects arising from real estate activities noted above. This capital
investment will allow the Company to maintain its high quality standards,
as
well as for incremental discretionary improvements including those at the
Company’s five ski resorts and throughout its hotels. Included in these annual
capital expenditures are approximately $30 million to $40 million which are
necessary to maintain the appearance and level of service appropriate to
the
Company’s resort-related operations. Highlights of these proposed discretionary
expenditures include a new gondola at Breckenridge to connect the Town to
Peaks
7 and 8; an expanded spa at the Keystone Lodge; snowmaking upgrades at Vail,
Beaver Creek, Keystone and Breckenridge; on-mountain restaurant upgrades
at
Vail, Beaver Creek and Heavenly; marketing and sales related technology
enhancements; and build-out of the new corporate headquarters, among other
projects. Of the calendar 2006 estimate, the Company expects to incur
approximately $10 million to $20 million in capital expenditures for Resort
operations during the remainder of fiscal 2006. The Company plans to utilize
cash flow from operations, cash on hand and, as necessary, borrowings under
its
Credit Facility to provide the cash necessary to execute its capital
plan.
Principal
payments on the vast majority of the Company’s long-term debt ($491.3 million of
the total $521.3 million debt outstanding as of April 30, 2006) are not due
until fiscal 2011 and beyond.
The
Company’s debt service requirements can be impacted by changing interest rates
as the Company had $62.2 million of variable-rate debt outstanding as of
April
30, 2006. A 100-basis point (or 1.0%) change in LIBOR would cause the Company’s
annual interest payments to change by approximately $622,000. The fluctuation
in
the Company’s debt service requirements, in addition to interest rate changes,
may be impacted by future borrowings under its Credit Facility or other
alternative financing arrangements it may enter into. The Company’s long term
liquidity needs are dependent upon operating results which impact the borrowing
capacity under the Credit Facility, which can be mitigated by adjustments
to
capital expenditures, flexibility of investment activities and the ability
to
obtain favorable future financing. The Company manages changes in the business
and economic environment by managing its capital expenditures and real estate
development activities.
On
March 9, 2006, the Company’s Board of Directors approved the repurchase of up to
three million shares of common stock. As of April 30, 2006, the Company has
not
repurchased any shares. 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 stock plans. Acquisitions under
the share repurchase program will be made from time to time at prevailing
prices
as permitted by applicable laws, and subject to market conditions and other
factors. The Company is under no obligation to purchase any shares under
the
stock repurchase program and the timing as well as the number of shares that
may
be repurchased under the program will depend on a number of factors including
the Company’s future financial performance, the Company’s available cash
resources and competing uses for cash that may arise in the future, the
restrictions in the Credit Facility and in the Indenture, prevailing prices
of
the Company’s common stock, and the number of shares that become available for
sale at prices that the Company believes are attractive. The stock repurchase
program may be discontinued at any time and is not expected to have a
significant impact on the Company’s capitalization.
Covenants
and Limitations
The
Company must abide by certain restrictive financial covenants in relation
to its
Credit Facility and the Indenture. The most restrictive of those covenants
include the Funded Debt to Adjusted EBITDA ratio, Senior Debt to Adjusted
EBITDA
ratio, Minimum Fixed Charge Coverage ratio, Minimum Net Worth and the Interest
Coverage ratio (each as defined in the underlying credit agreements). In
addition, the Company’s financing arrangements limit its ability to incur
certain indebtedness, make certain restricted payments, make certain
investments, make certain affiliate transfers and may limit its ability to
enter
into certain mergers, consolidations or sales of assets. The Company’s borrowing
availability under the Credit Facility is primarily determined by the Funded
Debt to Adjusted EBITDA ratio, which is based on the Company’s segment operating
performance, as defined in the Credit Agreement.
The
Company was in compliance with all relevant covenants in its debt instruments
as
of April 30, 2006. The Company expects it will meet all applicable quarterly
financial covenants in its debt instruments, including the Funded Debt to
Adjusted EBITDA ratio, in fiscal 2006. However, there can be no assurance
that
the Company will meet its financial covenants. If such covenants are not
met,
the Company would be required to seek a waiver or amendment from the banks
participating in the Credit Facility. While the Company anticipates that
it
would obtain such waiver or amendment, if any were necessary, there can be
no
assurance that such waiver or amendment would be granted, which could have
a
material adverse impact on the liquidity of the Company.
Capital
Structure
In
September 2004, the Company and Apollo Ski Partners, L.P. (“Apollo”) entered
into a Conversion and Registration Rights Agreement (the “Conversion
Agreement”), pursuant to which Apollo converted all of its Class A common stock
into shares of the Company’s common stock. Apollo distributed the shares to its
partners in proportion to each partner’s interest in the partnership. Apollo did
not dissolve after this distribution and continues to exist as a partnership.
The Company, pursuant to the Conversion Agreement, filed a shelf registration
statement in November 2004 (which has since been withdrawn) covering certain
of
the shares to be owned by the limited partners of Apollo. As a result of
this
agreement, the Company now has only one class of directors. Previously, the
holders of the Company’s Class A common stock elected the Class 1 directors and
the holders of the Company’s common stock elected the Class 2
directors.
OFF
BALANCE SHEET ARRANGEMENTS
The
Company does not have off balance sheet transactions that are expected to
have a
material effect on the Company’s financial condition, revenues, expenses,
results of operations, liquidity, capital expenditures or capital
resources.
NEW
ACCOUNTING PRONOUNCEMENTS
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
123R, which replaces SFAS No. 123, “Accounting for Stock-Based Compensation”
(“SFAS 123”) and supersedes Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees” (“APB 25”). SFAS 123R requires
the measurement of all employee share-based payments to employees, including
grants of employee stock options, using a fair-value-based method and the
recording of such expense in the consolidated statements of operations. The
accounting provisions of SFAS 123R are effective for fiscal years beginning
after June 15, 2005, with early adoption permitted. The pro forma
disclosures previously permitted under SFAS 123 no longer will be an
alternative to financial statement recognition.
SFAS
123R permits public companies to adopt its requirements using one of two
methods. Under the “modified prospective” method, compensation cost is
recognized beginning with the effective date (a) based on the requirements
of SFAS 123R for all share-based payments granted after the effective date
and
(b) based on the requirements of SFAS 123 for all awards granted to
employees prior to the effective date of SFAS 123R that remain unvested on
the
effective date. The “modified retrospective” method includes the requirements of
the modified prospective method described above, but also permits entities
to
restate based on the amounts previously recognized under SFAS 123 for purposes
of pro forma disclosures for either (a) all prior periods presented or
(b) prior interim periods of the year of adoption.
Effective
August 1, 2005, the Company adopted the fair value recognition provisions
of
SFAS 123R, using the modified prospective method. Under that method,
compensation cost recognized in fiscal 2006 includes: (a) compensation cost
for
all share-based payments granted prior to, but not yet vested as of August
1,
2005, based on the grant date fair value estimated in accordance with the
original provisions of SFAS 123, and (b) compensation cost for all share-based
payments granted subsequent to August 1, 2005, based on the grant date fair
value estimated in accordance with the provisions of SFAS 123R. Results for
prior periods have not been restated.
As
a result of adopting SFAS 123R on August 1, 2005, the Company’s income before
income taxes and net income for the three months ended April 30, 2006 decreased
$1.1 million and $661,000, respectively, and for the nine months ended April
30,
2006 decreased $4.3 million and $2.7 million, respectively, as compared to
accounting for share-based compensation under APB 25, after considering the
change in the Company’s compensation strategy to issue a portion of its
stock-based compensation as restricted stock to certain levels of employees.
The
after-tax impact of stock-based compensation recorded pursuant to SFAS 123R
resulted in a reduction in basic and diluted net income per share of $0.02
and
$0.07 for the three and nine months ended April 30, 2006, respectively. See
Notes 2, Summary of Significant Accounting Policies, and 12, Stock Compensation
Plans, of the notes to consolidated condensed financial statements, for more
information regarding the implementation of SFAS 123R.
CAUTIONARY
STATEMENT
Statements
in this Form 10-Q, other than statements of historical information, are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. You can identify
these
statements by forward-looking words such as “may”, “will”, “expect”, “plan”,
“intend”, “anticipate”, “believe”, “estimate”, and “continue” or similar words.
Such forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Such risks and uncertainties
include, but are not limited to:
| · |
economic
downturns;
|
| · |
terrorist
acts upon the United States;
|
| · |
threat
of or actual war;
|
| · |
our
ability to obtain financing on terms acceptable to us to finance
our real
estate investments, capital expenditures and growth
strategy;
|
| · |
our
ability to develop our resort and real estate
operations;
|
| · |
competition
in our Mountain and Lodging
businesses;
|
| · |
failure
to commence or complete the planned real estate development
projects;
|
| · |
failure
to achieve the anticipated short and long-term financial benefits
from the
planned real estate development
projects;
|
| · |
implications
arising from new FASB/governmental legislation, rulings or
interpretations;
|
| · |
termination
of existing hotel management
contracts;
|
| · |
our
reliance on government permits or approvals for our use of federal
land or
to make operational improvements;
|
| · |
our
ability to integrate and successfully operate future
acquisitions;
|
| · |
expenses
or adverse consequences of current or future legal
claims;
|
| · |
shortages
or rising costs in construction
materials;
|
| · |
adverse
changes in the real estate market;
|
| · |
unfavorable
weather conditions; and
|
| · |
our
ability to efficiently complete the relocation of the Company’s corporate
and administrative operations.
|
Readers
are also referred to the uncertainties and risks identified in the Company’s
Annual Report on Form 10-K for the year ended July 31, 2005.
Interest
Rate Risk. The
Company’s exposure to market risk is limited primarily to the fluctuating
interest rates associated with variable rate indebtedness. At April 30, 2006,
the Company had $62.2 million of variable rate indebtedness, representing
11.9%
of total debt outstanding, at an average interest rate during the nine months
ended April 30, 2006 of 5.1%. Based on the variable-rate borrowings outstanding
as of April 30, 2006, a 100 basis-point (or 1.0%) change in LIBOR would have
caused the Company’s interest payments to change by approximately $52,000
calculated on a monthly basis.
Disclosure
Controls and Procedures
Management
of the Company, including the Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by
this
report on Form 10-Q. The term “disclosure controls and procedures” means
controls and other procedures established by the Company that are designed
to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Securities Exchange Act or 1934, as amended
(the “Act”), is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed
to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Act is accumulated and communicated to
the
Company’s management, including its CEO and CFO, as appropriate, to allow timely
decisions regarding required disclosure.
Based
upon their evaluation of the Company’s disclosure controls and procedures, the
CEO and the CFO concluded that the disclosure controls are effective as of
the
end of the period covered by this report on Form 10-Q to provide reasonable
assurance that information required to be disclosed by the Company in the
reports that it files or submits under the Act is accumulated and communicated
to management, including the CEO and CFO, as appropriate, to allow timely
decisions regarding required disclosure and are effective to provide reasonable
assurance that such information is recorded, processed, summarized and reported
within the time periods specified by the SEC’s rules and forms.
The
Company, including its CEO and CFO, does not expect that the Company’s internal
controls and procedures will prevent or detect all error and all fraud. A
control system, no matter how well conceived or operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met.
Changes
in Internal Control over Financial Reporting
There
were no changes in the Company’s internal control over financial reporting
during the period covered by this Form 10-Q that have materially affected,
or
are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
PART
II OTHER
INFORMATION
None.
None.
None.
None.
ITEM
5. OTHER
INFORMATION
None.
ITEM
6. EXHIBITS
The
following exhibits are either filed herewith or, if so indicated, incorporated
by reference to the documents indicated in parentheses, which have previously
been filed with the Securities and Exchange Commission.
|
Exhibit
Number
|
Description
|
Sequentially
Numbered Page
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of Vail Resorts, Inc.
dated
January 5, 2005. (Incorporated by reference to Exhibit 3.1 on Form
10-Q of
Vail Resorts, Inc. dated as of January 31, 2005.)
|
|
|
3.2
|
Amended
and Restated By-Laws. (Incorporated by reference to Exhibit 3.1
on Form
8-K of Vail Resorts, Inc. filed September 30, 2004.)
|
|
|
4.1(a)
|
Purchase
Agreement, dated as of January 15, 2004 among Vail Resorts, Inc.,
the
guarantors named on Schedule I thereto, Banc of America Securities
LLC,
Deutsche Banc Securities, Inc., Bear, Stearns & Co. Inc., Lehman
Brothers Inc., Piper Jaffray & Co. and Wells Fargo Securities LLC.
(Incorporated by reference to Exhibit 4.2(c) on Form 10-Q of Vail
Resorts,
Inc. dated as of January 31, 2004.)
|
|
|
4.1(b)
|
Supplemental
Purchase Agreement, dated as of January 22, 2004 among Vail Resorts,
Inc.,
the guarantors named thereto, Banc of America Securities LLC, Deutsche
Banc Securities, Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc.,
Piper Jaffray & Co. and Wells Fargo Securities LLC. (Incorporated by
reference to Exhibit 4.2(d) on Form 10-Q of Vail Resorts, Inc.
dated as of
January 31, 2004.)
|
|
|
4.2(a)
|
Indenture,
dated as of January 29, 2004, among Vail Resorts, Inc., the guarantors
therein and the Bank of New York as Trustee. (Incorporated by reference
to
Exhibit 4.1 on Form 8-K of Vail Resorts, Inc. dated as of February
2,
2004.)
|
|
|
4.3(b)
|
Form
of Global Note (Included in Exhibit 4.2(c) by reference to Exhibit
4.1 on
Form 8-K of Vail Resorts, Inc. dated as of February 2,
2004.)
|
|
|
4.4
|
Registration
Rights Agreement dated as of January 29, 2004 among Vail Resorts,
Inc.,
the guarantors signatory thereto, Banc of America Securities LLC,
Deutsche
Banc Securities, Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc.,
Piper Jaffray & Co. and Wells Fargo Securities LLC. (Incorporated by
reference to Exhibit 4.5(c) on Form 10-Q of Vail Resorts, Inc.
dated as of
January 31, 2004.)
|
|
|
10.1
|
Management
Agreement by and between Beaver Creek Resort Company of Colorado
and Vail
Associates, Inc. (Incorporated by reference to Exhibit 10.1 of
the
registration statement on Form S-4 of Gillett Holdings, Inc. (File
No.
33-52854) including all amendments thereto.)
|
|
|
10.2
|
Forest
Service Unified Permit for Heavenly ski area. (Incorporated by
reference
to Exhibit 99.13 of the report on Form 10-Q of Vail Resorts, Inc.
for the
quarter ended April 30, 2002.)
|
|
|
10.3(a)
|
Forest
Service Unified Permit for Keystone ski area. (Incorporated by
reference
to Exhibit 99.2(a) on Form 10-Q of Vail Resorts, Inc. for the quarter
ended October 31, 2002.)
|
|
|
10.3(b)
|
Amendment
No. 2 to Forest Service Unified Permit for Keystone ski area.
(Incorporated by reference to Exhibit 99.2(b) on Form 10-Q of Vail
Resorts, Inc. for the quarter ended October 31, 2002.)
|
|
|
10.3(c)
|
Amendment
No. 3 to Forest Service Unified Permit for Keystone ski area.
(Incorporated by reference to Exhibit 10.3 (c) on Form 10-K of
Vail
Resorts, Inc. for the year ended July 31, 2005.)
|
|
|
10.3(d)
|
Amendment
No. 4 to Forest Service Unified Permit for Keystone ski area.
(Incorporated by reference to Exhibit 10.3 (d) on Form 10-K of
Vail
Resorts, Inc. for the year ended July 31, 2005.)
|
|
|
10.3(e)
|
Amendment
No. 5 to Forest Service Unified Permit for Keystone ski area.
(Incorporated by reference to Exhibit 10.3 (e) on Form 10-K of
Vail
Resorts, Inc. for the year ended July 31, 2005.)
|
|
|
10.4(a)
|
Forest
Service Unified Permit for Breckenridge ski area. (Incorporated
by
reference to Exhibit 99.3(a) on Form 10-Q of Vail Resorts, Inc.
for the
quarter ended October 31, 2002.)
|
|
|
10.4(b)
|
Amendment
No. 1 to Forest Service Unified Permit for Breckenridge ski area.
(Incorporated by reference to Exhibit 99.3(b) on Form 10-Q of Vail
Resorts, Inc. for the quarter ended October 31, 2002.)
|
|
|
10.4(c)
|
Amendment
No. 2 to Forest Service Unified Permit for Breckenridge ski area.
(Incorporated by reference to Exhibit 10.4 (c) on Form 10-K of
Vail
Resorts, Inc. for the year ended July 31, 2005.)
|
|
|
10.4(d)
|
Amendment
No. 3 to Forest Service Unified Permit for Breckenridge ski area.
(Incorporated by reference to Exhibit 10.4 (d) on Form 10-K of
Vail
Resorts, Inc. for the year ended July 31, 2005.)
|
|
|
10.4(e)
|
Amendment
No. 4 to Forest Service Unified Permit for Breckenridge ski area.
(Incorporated by reference to Exhibit 10.4 (e) on Form 10-K of
Vail
Resorts, Inc. for the year ended July 31, 2005.)
|
|
|
10.4(f)
|
Amendment
No. 5 to Forest Service Unified Permit for Breckenridge ski area.
(Incorporated by reference to Exhibit 10.4(f) on Form 10-Q of Vail
Resorts, Inc. for the quarter ended January 31, 2006.)
|
|
|
10.5(a)
|
Forest
Service Unified Permit for Beaver Creek ski area. (Incorporated
by
reference to Exhibit 99.4(a) on Form 10-Q of Vail Resorts, Inc.
for the
quarter ended October 31, 2002.)
|
|
|
10.5(b)
|
Exhibits
to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated
by reference to Exhibit 99.4(b) on Form 10-Q of Vail Resorts, Inc.
for the
quarter ended October 31, 2002.)
|
|
|
10.5(c)
|
Amendment
No. 1 to Forest Service Unified Permit for Beaver Creek ski area.
(Incorporated by reference to Exhibit 10.5 (c) on Form 10-K of
Vail
Resorts, Inc. for the year ended July 31, 2005.)
|
|
|
10.5(d)
|
Amendment
No. 2 to Forest Service Unified Permit for Beaver Creek ski area.
(Incorporated by reference to Exhibit 10.5 (d) on Form 10-K of
Vail
Resorts, Inc. for the year ended July 31, 2005.)
|
|
|
10.5(e)
|
Amendment
to Forest Service Unified Permit for Beaver Creek ski area. (Incorporated
by reference to Exhibit 10.5 (e) on Form 10-K of Vail Resorts,
Inc. for
the year ended July 31, 2005.)
|
|
|
10.6(a)
|
Forest
Service Unified Permit for Vail ski area. (Incorporated by reference
to
Exhibit 99.5(a) on Form 10-Q of Vail Resorts, Inc. for the quarter
ended
October 31, 2002.)
|
|
|
10.6(b)
|
Exhibits
to Forest Service Unified Permit for Vail ski area. (Incorporated
by
reference to Exhibit 99.5(b) on Form 10-Q of Vail Resorts, Inc.
for the
quarter ended October 31, 2002.)
|
|
|
10.6(c)
|
Amendment
No. 2 to Forest Service Unified Permit for Vail ski area. (Incorporated
by
reference to Exhibit 99.5(c) on Form 10-Q of Vail Resorts, Inc.
for the
quarter ended October 31, 2002.)
|
|
|
10.6(d)
|
Amendment
No. 3 to Forest Service Unified Permit for Vail ski area. (Incorporated
by
reference to Exhibit 10.6 (d) on Form 10-K of Vail Resorts, Inc.
for the
year ended July 31, 2005.)
|
|
|
10.6(e)
|
Amendment
No. 4 to Forest Service Unified Permit for Vail ski area. (Incorporated
by
reference to Exhibit 10.6 (e) on Form 10-K of Vail Resorts, Inc.
for the
year ended July 31, 2005.)
|
|
|
10.7
|
1993
Stock Option Plan of Gillett Holdings, Inc. (Incorporated by reference
to
Exhibit 10.20 of the report on Form 10-K of Gillett Holdings, Inc.
for the
period from October 9, 1992 through September 30, 1993.)
|
|
|
10.8(a)*
|
Employment
Agreement dated October 30, 2001 by and between RockResorts International,
LLC and Edward Mace. (Incorporated by reference to Exhibit 10.21
of the
report on Form 10-K of Vail Resorts, Inc. for the year ended July
31,
2002.)
|
|
|
10.8(b)*
|
Addendum
to the Employment Agreement dated October 30, 2001 by and between
RockResorts International, LLC and Edward Mace. (Incorporated by
reference
to Exhibit 10.21 of the report on Form 10-K of Vail Resorts, Inc.
for the
year ended July 31, 2002.)
|
|
|
10.9(a)*
|
Employment
Agreement dated July 29, 1996 between Vail Resorts, Inc. and Adam
M. Aron.
(Incorporated by reference to Exhibit 10.21 of the registration
statement
on Form S-2/A of Vail Resorts, Inc. (File No. 333-5341) including
all
amendments thereto.)
|
|
|
10.9(b)*
|
Amendment
to the Employment Agreement dated May 1, 2001 between Vail Resorts,
Inc.
and Adam M. Aron. (Incorporated by reference to Exhibit 10.14(b)
of the
report on Form 10-K of Vail Resorts, Inc. for the year ended July
31,
2001.)
|
|
|
10.9(c)*
|
Second
Amendment to Employment Agreement of Adam M. Aron, as Chairman
of the
Board and Chief Executive Officer of Vail Resorts, Inc. dated July
29,
2003. (Incorporated by reference to Exhibit 10.14(c) on Form 10-K
of Vail
Resorts, Inc. for the year ended July 31, 2003.)
|
|
|
10.10*
|
Amended
and Restated Employment Agreement of Jeffrey W. Jones, as Chief
Financial
Officer of Vail Resorts, Inc. dated September 29, 2004. (Incorporated
by
reference to Exhibit 10.9 of Form 10-K of Vail Resorts, Inc. for
the year
ended July 31, 2004.)
|
|
|
10.11(a)*
|
Employment
Agreement of William A. Jensen as Senior Vice President and Chief
Operating Officer - Breckenridge Ski Resort dated May 1, 1997.
(Incorporated by reference to Exhibit 10.9(a) on Form 10-Q of Vail
Resorts, Inc. for the quarter ended October 31, 2004.)
|
|
|
10.11(b)*
|
First
Amendment to the Employment Agreement of William A. Jensen as Senior
Vice
President and Chief Operating Officer - Vail Ski Resort dated August
1,
1999. (Incorporated by reference to Exhibit 10.9(b) on Form 10-Q
of Vail
Resorts, Inc. for the quarter ended October 31, 2004.)
|
|
|
10.11(c)*
|
Second
Amendment to the Employment Agreement of William A. Jensen as Senior
Vice
President and Chief Operating Officer - Vail Ski Resort dated July
22,
1999. (Incorporated by reference to Exhibit 10.9(c) on Form 10-Q
of Vail
Resorts, Inc. for the quarter ended October 31, 2004.)
|
|
|
10.12*
|
Employment
Agreement and Addendum of Roger McCarthy as Senior Vice President
and
Chief Operating Officer - Breckenridge Ski Resort dated July 17,
2000.
(Incorporated by reference to Exhibit 10.10 on Form 10-Q of Vail
Resorts,
Inc. for the quarter ended October 31, 2004.)
|
|
|
10.13*
|
1996
Stock Option Plan (Incorporated by reference to the Exhibit 10.26
of the
registration statement on Form S-2/A, File No. 333-5341.)
|
|
|
10.14*
|
2002
Long Term Incentive and Share Award Plan. (Incorporated by reference
to
Exhibit 10.17 on Form 10-Q of Vail Resorts, Inc. for the quarter
ended
October 31, 2002.)
|
|
|
10.15(a)
|
Sports
and Housing Facilities Financing Agreement between the Vail Corporation
(d/b/a “Vail Associates, Inc.”) and Eagle County, Colorado, dated April 1,
1998. (Incorporated by reference to Exhibit 10 of the report on
Form 10-Q
of Vail Resorts, Inc. for the quarter ended April 30, 1998.)
|
|
|
10.15(b)
|
Trust
Indenture dated as of April 1, 1998 securing Sports and Housing
Facilities
Revenue Refunding Bonds by and between Eagle County, Colorado and
U.S.
Bank, N.A., as Trustee. (Incorporated by reference to Exhibit 10.1
of the
report on Form 10-Q of Vail Resorts, Inc. for the quarter ended
April 30,
1998.)
|
|
|
10.16(a)
|
Fourth
Amended and Restated Credit Agreement dated as of January 28, 2005
among
The Vail Corporation (d/b/a Vail Associates, Inc.), as borrower,
Bank of
America, N.A., as Administrative Agent, U.S. Bank National Association
and
Wells Fargo Bank, National Association as Co-Syndication Agents,
Deutsche
Bank Trust Company Americas and LaSalle Bank National Association
as
Co-Documentation Agents and the Lenders party thereto. (Incorporated
by
reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. dated
as of
January 28, 2004.)
|
|
|
10.16(b)
|
First
Amendment to Fourth Amended and Restated Credit Agreement dated
as of June
29, 2005 among The Vail Corporation (d/b/a Vail Associates, Inc.),
as
borrower and Bank of America, N.A., as Administrative Agent. (Incorporated
by reference to Exhibit 10.16(b) on Form 10-K of Vail Resorts,
Inc. for
the year ended July 31, 2005.)
|
|
|
10.16(c)
|
Second
Amendment to Fourth Amended and Restated Credit Agreement among
The Vail
Corporation, the Required Lenders and Bank of America, as Administrative
Agent. (Incorporated by reference to Exhibit 10.3 of Form 8-K of
Vail
Resorts, Inc. filed on March 3, 2006.)
|
|
|
10.17*
|
Vail
Resorts, Inc. 1999 Long Term Incentive and Share Award Plan. (Incorporated
by reference to the registration statement on Form S-8 of Vail
Resorts,
Inc., File No. 333-32320.)
|
|
|
10.18*
|
Vail
Resorts Deferred Compensation Plan effective as of October 1, 2000.
(Incorporated by reference to Exhibit 10.23 of the report on Form
10-K of
Vail Resorts, Inc. for the fiscal year ended July 31,
2000.)
|
|
|
10.19
|
Conversion
and Registration Rights Agreement between Vail Resorts, Inc. and
Apollo
Ski Partners, L.P. dated as of September 30, 2004. (Incorporated
by
reference to Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. dated
as of
September 30, 2004.)
|
|
|
10.20(a)
|
Purchase
and Sale Agreement by and between VAHMC, Inc. and DiamondRock Hospitality
Limited Partnership, dated May 3, 2005. (Incorporated by reference
to
Exhibit 10.18(a) of the Company’s Quarterly Report on Form 10-Q for the
period ending April 30, 2005.)
|
|
|
10.20(b)
|
First
Amendment to Purchase and Sale Agreement by and between VAHMC,
Inc. and
DiamondRock Hospitality Limited Partnership, dated May 10, 2005.
(Incorporated by reference to Exhibit 10.18(b) of the Company’s Quarterly
Report on Form 10-Q for the period ending April 30, 2005.)
|
|
|
10.21
|
Purchase
and Sale Agreement by and between VA Rancho Mirage Resort L.P.,
Rancho
Mirage Concessions, Inc. and GENLB-Rancho, LLC, dated July 1, 2005.
(Incorporated by reference to Exhibit 10.21 on Form 10-K of Vail
Resorts,
Inc. for the year ended July 31, 2005.)
|
|
|
10.22(a)
|
Construction
Loan Agreement by and between Gore Creek Place, LLC and U.S. Bank
National
Association dated July 19, 2005. (Incorporated by reference to
Exhibit
10.22(a) on Form 10-K of Vail Resorts, Inc. for the year ended
July 31,
2005.)
|
|
|
10.22(b)
|
Completion
Guaranty Agreement by and between The Vail Corporation and U.S.
Bank
National Association dated July 19, 2005. (Incorporated by reference
to
Exhibit 10.22 (b) on Form 10-K of Vail Resorts, Inc. for the year
ended
July 31, 2005.)
|
|
|
10.23
|
Amended
and Restated Revolving Credit and Security Agreement between SSI
Venture,
LLC and U.S. Bank National Association dated September 23, 2005
(Incorporated by reference to Exhibit 10.1 on Form 8-K of Vail
Resorts,
Inc. dated September 29, 2005.)
|
|
|
10.24(a)*
|
Employment
Agreement of Martha D. Rehm as Senior Vice President and General
Counsel
of Vail Resorts, Inc. dated May 10, 1999. (Incorporated by reference
to
Exhibit 10.24 (a) on Form 10-K of Vail Resorts, Inc. for the year
ended
July 31, 2005.)
|
|
|
10.24(b)*
|
First
Amendment to Employment Agreement of Martha D. Rehm as Senior Vice
President and General Counsel of Vail Resorts, Inc. dated April
8, 2004.
(Incorporated by reference to Exhibit 10.24 (b) on Form 10-K of
Vail
Resorts, Inc. for the year ended July 31, 2005.)
|
|
|
10.25*
|
Employment
Agreement, dated as of February 28, 2006, between Vail Resorts,
Inc. and
Robert A. Katz. (Incorporated by reference to Exhibit 10.1 on Form
8-K of
Vail Resorts, Inc. filed on March 3, 2006.)
|
|
|
10.26*
|
Separation
Agreement and General Release, dated as of February 27, 2006, between
Adam
M. Aron and Vail Resorts, Inc. (Incorporated by reference to Exhibit
10.2
on Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.)
|
|
|
10.27*
|
Form
of Restricted Share Agreement. (Incorporated by reference to Exhibit
10.4
on Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.)
|
|
|
10.28*
|
Form
of Stock Option Agreement. (Incorporated by reference to Exhibit
10.5 on
Form 8-K of Vail Resorts, Inc. filed on March 3, 2006.)
|
|
|
10.29*
|
Stock
Option Letter Agreement between Vail Resorts, Inc. and Jeffrey
W. Jones.
(Incorporated by reference to Exhibit 10.6 on Form 8-K of Vail
Resorts,
Inc. filed on March 3, 2006.)
|
|
|
10.30*
|
Restricted
Share Agreement between Vail Resorts, Inc. and Jeffrey W. Jones.
(Incorporated by reference to Exhibit 10.6 on Form 8-K of Vail
Resorts,
Inc. filed on March 3, 2006.)
|
|
|
10.31
|
Purchase
and Sale Contract between JHL&S, LLC and Lodging Capital Partners,
LLC, dated December 22, 2005. (Incorporated by reference to Exhibit
10.32
on Form 10-Q of Vail Resorts, Inc. for the quarter ended January
31,
2006.)
|
|
|
10.32(a)
|
Construction
Loan Agreement dated January 31, 2006 among Arrabelle at Vail Square,
LLC,
U.S. Bank National Association and Wells Fargo Bank, N.A. (Incorporated
by
reference to Exhibit 33(a) on Form 10-Q of Vail Resorts, Inc. for
the
quarter ended January 31, 2006.)
|
|
|
10.32(b)
|
Completion
Guaranty Agreement by and between The Vail Corporation and U.S.
Bank
National Association dated January 31, 2006. (Incorporated by reference
to
Exhibit 10.33(b) on Form 10-Q of Vail Resorts, Inc. for the quarter
ended
January 31, 2006.)
|
|
|
10.32(c)
|
Completion
Guaranty Agreement by and between Vail Resorts, Inc. and U.S. Bank
National Association dated January 31, 2006. (Incorporated by reference
to
Exhibit 10.33(c) on Form 10-Q of Vail Resorts, Inc. for the quarter
ended
January 31, 2006.)
|
|
|
10.33
|
Supplemental
Indenture dated as of March 10, 2006 to Indenture dated as of January
29,
2004 among Vail Resorts, Inc., as Issuer, the Guarantors named
therein, as
Guarantors, and The Bank of New York, as Trustee. (Incorporated
by
reference to Exhibit 10.34 on Form 10-Q of Vail Resorts, Inc. for
the
quarter ended January 31, 2006.)
|
|
|
10.34*
|
Relocation
and Separation Policy for Executives. (Incorporated by reference
to
Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on April 14,
2006.)
|
|
|
10.35*
|
Separation
Agreement and General Release, dated as of April 15, 2006, between
Edward
E. Mace and RockResorts International, LLC. (Incorporated by reference
to
Exhibit 10.1 on Form 8-K of Vail Resorts, Inc. filed on April 20,
2006.)
|
|
|
10.36*
|
Employment
Agreement, dated as of May 4, 2006, between Keith Fernandez and
Vail
Resorts Development Company. (Incorporated by reference to Exhibit
10.1 on
Form 8-K of Vail Resorts, Inc. filed on May 9, 2006.)
|
|
|
31
|
Certifications
of Robert A. Katz and Jeffrey W. Jones Pursuant to Section 302
of the
Sarbanes-Oxley Act of 2002.
|
21
|
|
32
|
Certifications
of Robert A. Katz and Jeffrey W. Jones Pursuant to Section 906
of the
Sarbanes-Oxley Act of 2002.
|
23
|
|
99.1
|
Termination
Agreement, dated as of October 5, 2004, by and among Vail Resorts,
Inc.,
Ralcorp Holdings, Inc. and Apollo Ski Partners, L.P. (Incorporated
by
reference to Exhibit 99.6 on Form 10-Q of Vail Resorts, Inc. for
the
quarter ended October 31, 2004.)
|
|
|
99.2
|
Purchase
and Sale Agreement between VR Holdings, Inc. as Seller and GHR,
LLC as
Purchaser dated December 8, 2004. (Incorporated by reference to
Exhibit
99.2 on Form 8-K of Vail Resorts, Inc. dated December 8,
2004.)
|
|
|
*Management
contracts and compensatory plans and arrangements.
|
||
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized on June 7, 2006
|
Vail
Resorts, Inc.
|
||
|
By:
|
/s/
JEFFREY W. JONES
|
|
|
Jeffrey
W. Jones
|
||
|
Senior
Executive Vice President and
|
||
|
Chief
Financial Officer
|
||
|
Dated:
|
June
7, 2006
|
Exhibit
31
CERTIFICATION
OF THE CHIEF EXECUTIVE OFFICER
PURSUANT
TO SECTION 302 OF THE
SARBANES-OXLEY
ACT OF 2002
I,
Robert A. Katz, certify that:
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of Vail Resorts,
Inc.;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such
statements
were made, not misleading with respect to the period covered by
this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including
its
consolidated subsidiaries, is made known to us by others within
those
entities, particularly during the period in which this report is
being
prepared;
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such
internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
d)
|
Disclosed
in this report any change in the registrant's internal control
over
financial reporting that occurred during the registrant's most
recent
fiscal quarter (the registrant's fourth fiscal quarter in the case
of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting; and
|
|
|
5.
|
The
registrant's other certifying officer and I have disclosed, based
on our
most recent evaluation of internal control over financial reporting,
to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
|
|
a)
|
All
significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability
to record,
process, summarize and report financial information;
and
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control
over financial reporting.
|
|
Date:
June
7, 2006
|
/s/
Robert A.
Katz
|
|
Robert
A. Katz
|
|
Chief
Executive Officer
|
CERTIFICATION
OF THE CHIEF FINANCIAL OFFICER
PURSUANT
TO SECTION 302 OF THE
SARBANES-OXLEY
ACT OF 2002
I,
Jeffrey W. Jones, certify that:
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of Vail Resorts,
Inc.;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such
statements
were made, not misleading with respect to the period covered by
this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including
its
consolidated subsidiaries, is made known to us by others within
those
entities, particularly during the period in which this report is
being
prepared;
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such
internal
control over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
d)
|
Disclosed
in this report any change in the registrant's internal control
over
financial reporting that occurred during the registrant's most
recent
fiscal quarter (the registrant's fourth fiscal quarter in the case
of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant's internal control over financial
reporting; and
|
|
|
5.
|
The
registrant's other certifying officer and I have disclosed, based
on our
most recent evaluation of internal control over financial reporting,
to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
|
|
a)
|
All
significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability
to record,
process, summarize and report financial information;
and
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control
over financial reporting.
|
|
Dated:
June
7, 2006
|
/s/
Jeffrey W.
Jones
|
|
Jeffrey
W. Jones
|
|
Senior
Executive Vice President and
|
|
Chief
Financial Officer
|
Exhibit
32
CERTIFICATION
OF THE CHIEF EXECUTIVE OFFICER
AND
THE CHIEF FINANCIAL OFFICER
PURSUANT
TO SECTION 906
OF
THE SARBANES-OXLEY ACT OF 2002
Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned
hereby
certifies in his capacity as an officer of Vail Resorts, Inc. (the “Company”)
that the quarterly report of the Company on Form 10-Q for the quarter ended
April 30, 2006 (the “Report”) fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information
contained in such Report fairly presents, in all material respects, the
financial condition and the results of operations of the Company at the end
of
and for the periods covered by such Report.
Date:
June
7, 2006
|
/s/
Robert A.
Katz
|
|
Robert
A. Katz
|
|
Chief
Executive Officer
|
Date:
June
7, 2006
|
/s/
Jeffrey W.
Jones
|
|
Jeffrey
W. Jones
|
|
Senior
Executive Vice President and
|
|
Chief
Financial Officer
|
This
certification is being furnished solely pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, is not a part of the Form 10-Q to which it refers,
and is, to the extent permitted by law, provided by each of the above
signatories to the extent of his respective knowledge. A signed original
of this
written statement required by Section 906 has been provided to Vail Resorts,
Inc. and will be furnished to the Securities and Exchange Commission or its
staff upon request.