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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended January 31, 2022
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-09614
Vail Resorts, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| | | | | | | | | | | |
Delaware | | 51-0291762 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
| | |
390 Interlocken Crescent | | |
Broomfield, | Colorado | | 80021 |
(Address of Principal Executive Offices) | | (Zip Code) |
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(303) | 404-1800 |
(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, $0.01 par value | MTN | New York Stock Exchange |
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. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
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Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
| | | | | | |
| | | | Emerging growth company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of March 10, 2022, 40,553,539 shares of the registrant’s common stock were outstanding.
Table of Contents
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PART I | FINANCIAL INFORMATION | Page |
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Item 1. | Financial Statements (unaudited). | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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PART II | OTHER INFORMATION | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
Vail Resorts, Inc.
Consolidated Condensed Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | January 31, 2022 | | July 31, 2021 | | January 31, 2021 |
Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 1,407,019 | | | $ | 1,243,962 | | | $ | 1,301,003 | |
Restricted cash | | 15,643 | | | 14,612 | | | 11,001 | |
Trade receivables, net | | 167,088 | | | 345,408 | | | 117,012 | |
Inventories, net | | 104,573 | | | 80,316 | | | 86,876 | |
Other current assets | | 73,104 | | | 61,288 | | | 57,559 | |
Total current assets | | 1,767,427 | | | 1,745,586 | | | 1,573,451 | |
Property, plant and equipment, net (Note 7) | | 2,190,332 | | | 2,067,876 | | | 2,158,863 | |
Real estate held for sale or investment | | 95,331 | | | 95,615 | | | 96,801 | |
Goodwill, net (Note 7) | | 1,764,106 | | | 1,781,047 | | | 1,760,908 | |
Intangible assets, net | | 318,078 | | | 319,110 | | | 318,983 | |
Operating right-of-use assets | | 198,672 | | | 204,716 | | | 215,377 | |
Other assets | | 35,796 | | | 37,106 | | | 41,450 | |
Total assets | | $ | 6,369,742 | | | $ | 6,251,056 | | | $ | 6,165,833 | |
Liabilities and Stockholders’ Equity | | | | | | |
Current liabilities: | | | | | | |
Accounts payable and accrued liabilities (Note 7) | | $ | 1,067,137 | | | $ | 815,472 | | | $ | 831,794 | |
Income taxes payable | | 24,153 | | | 48,812 | | | 37,862 | |
Long-term debt due within one year (Note 5) | | 63,746 | | | 114,117 | | | 112,796 | |
Total current liabilities | | 1,155,036 | | | 978,401 | | | 982,452 | |
Long-term debt, net (Note 5) | | 2,695,589 | | | 2,736,175 | | | 2,768,015 | |
Operating lease liabilities | | 188,797 | | | 190,561 | | | 210,855 | |
Other long-term liabilities (Note 7) | | 254,209 | | | 264,034 | | | 251,913 | |
Deferred income taxes, net | | 282,427 | | | 252,817 | | | 266,152 | |
Total liabilities | | 4,576,058 | | | 4,421,988 | | | 4,479,387 | |
Commitments and contingencies (Note 9) | | | | | | |
Stockholders’ equity: | | | | | | |
Preferred stock, $0.01 par value, 25,000 shares authorized, no shares issued and outstanding | | — | | | — | | | — | |
Common stock, $0.01 par value, 100,000 shares authorized, 46,713, 46,552 and 46,416 shares issued, respectively | | 467 | | | 466 | | | 465 | |
Exchangeable shares, $0.01 par value, 33, 34 and 35 shares issued and outstanding, respectively (Note 4) | | — | | | — | | | — | |
Additional paid-in capital | | 1,172,595 | | | 1,196,993 | | | 1,216,489 | |
Accumulated other comprehensive income | | 10,418 | | | 27,799 | | | 8,226 | |
Retained earnings | | 786,473 | | | 773,752 | | | 639,934 | |
Treasury stock, at cost, 6,161 shares (Note 11) | | (404,411) | | | (404,411) | | | (404,411) | |
Total Vail Resorts, Inc. stockholders’ equity | | 1,565,542 | | | 1,594,599 | | | 1,460,703 | |
Noncontrolling interests | | 228,142 | | | 234,469 | | | 225,743 | |
Total stockholders’ equity | | 1,793,684 | | | 1,829,068 | | | 1,686,446 | |
Total liabilities and stockholders’ equity | | $ | 6,369,742 | | | $ | 6,251,056 | | | $ | 6,165,833 | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended January 31, | | Six Months Ended January 31, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net revenue: | | | | | | | |
Mountain and Lodging services and other | $ | 770,300 | | | $ | 597,110 | | | $ | 892,160 | | | $ | 701,384 | |
Mountain and Lodging retail and dining | 136,055 | | | 87,219 | | | 189,456 | | | 114,477 | |
Resort net revenue | 906,355 | | | 684,329 | | | 1,081,616 | | | 815,861 | |
Real Estate | 180 | | | 315 | | | 495 | | | 569 | |
Total net revenue | 906,535 | | | 684,644 | | | 1,082,111 | | | 816,430 | |
Operating expense (exclusive of depreciation and amortization shown separately below): | | | | | | | |
Mountain and Lodging operating expense | 364,336 | | | 293,971 | | | 548,061 | | | 448,108 | |
Mountain and Lodging retail and dining cost of products sold | 53,715 | | | 37,366 | | | 77,944 | | | 54,498 | |
General and administrative | 91,261 | | | 78,121 | | | 168,495 | | | 137,150 | |
Resort operating expense | 509,312 | | | 409,458 | | | 794,500 | | | 639,756 | |
Real Estate operating expense | 1,511 | | | 1,615 | | | 2,981 | | | 3,065 | |
Total segment operating expense | 510,823 | | | 411,073 | | | 797,481 | | | 642,821 | |
Other operating (expense) income: | | | | | | | |
Depreciation and amortization | (62,070) | | | (62,663) | | | (123,559) | | | (125,291) | |
Gain on sale of real property | 931 | | | — | | | 962 | | | — | |
Change in estimated fair value of contingent consideration (Note 8) | (16,780) | | | (1,000) | | | (18,780) | | | (1,802) | |
Gain (loss) on disposal of fixed assets and other, net | 7,347 | | | (2,192) | | | 16,214 | | | (2,761) | |
Income from operations | 325,140 | | | 207,716 | | | 159,467 | | | 43,755 | |
Mountain equity investment income, net | 818 | | | 1,180 | | | 2,332 | | | 5,166 | |
Investment income and other, net | 257 | | | 167 | | | 756 | | | 510 | |
Foreign currency (loss) gain on intercompany loans (Note 5) | (2,870) | | | 5,135 | | | (2,039) | | | 5,675 | |
Interest expense, net | (37,366) | | | (37,847) | | | (76,911) | | | (73,254) | |
Income (loss) before (provision for) benefit from income taxes | 285,979 | | | 176,351 | | | 83,605 | | | (18,148) | |
(Provision for) benefit from income taxes | (52,049) | | | (27,221) | | | 7,804 | | | 10,257 | |
Net income (loss) | 233,930 | | | 149,130 | | | 91,409 | | | (7,891) | |
Net (income) loss attributable to noncontrolling interests | (10,539) | | | (1,332) | | | (7,350) | | | 1,923 | |
Net income (loss) attributable to Vail Resorts, Inc. | $ | 223,391 | | | $ | 147,798 | | | $ | 84,059 | | | $ | (5,968) | |
Per share amounts (Note 4): | | | | | | | |
Basic net income (loss) per share attributable to Vail Resorts, Inc. | $ | 5.51 | | | $ | 3.67 | | | $ | 2.08 | | | $ | (0.15) | |
Diluted net income (loss) per share attributable to Vail Resorts, Inc. | $ | 5.47 | | | $ | 3.62 | | | $ | 2.06 | | | $ | (0.15) | |
Cash dividends declared per share | $ | 0.88 | | | $ | — | | | $ | 1.76 | | | $ | — | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
Consolidated Condensed Statements of Comprehensive Income
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended January 31, | | Six Months Ended January 31, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Net income (loss) | | $ | 233,930 | | | $ | 149,130 | | | $ | 91,409 | | | $ | (7,891) | |
Foreign currency translation adjustments | | (48,857) | | | 75,484 | | | (33,720) | | | 77,257 | |
Change in estimated fair value of hedging instruments, net of tax | | 4,483 | | | 1,307 | | | 8,828 | | | 5,962 | |
Comprehensive income | | 189,556 | | | 225,921 | | | 66,517 | | | 75,328 | |
Comprehensive (income) loss attributable to noncontrolling interests | | (436) | | | (17,510) | | | 161 | | | (16,233) | |
Comprehensive income attributable to Vail Resorts, Inc. | | $ | 189,120 | | | $ | 208,411 | | | $ | 66,678 | | | $ | 59,095 | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
Consolidated Condensed Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | Additional Paid in Capital | Accumulated Other Comprehensive (Loss) Income | Retained Earnings | Treasury Stock | Total Vail Resorts, Inc. Stockholders’ Equity | Noncontrolling Interests | Total Stockholders’ Equity |
| | Vail Resorts | Exchangeable | | | | | | | |
Balance, October 31, 2020 | | $ | 464 | | $ | — | | $ | 1,130,318 | | $ | (52,387) | | $ | 492,136 | | $ | (404,411) | | $ | 1,166,120 | | $ | 209,607 | | $ | 1,375,727 | |
Comprehensive income: | | | | | | | | | | |
Net income | | — | | — | | — | | — | | 147,798 | | — | | 147,798 | | 1,332 | | 149,130 | |
Foreign currency translation adjustments | | — | | — | | — | | 59,306 | | — | | — | | 59,306 | | 16,178 | | 75,484 | |
Change in estimated fair value of hedging instruments, net of tax | | — | | — | | — | | 1,307 | | — | | — | | 1,307 | | — | | 1,307 | |
Total comprehensive income | | | | | | | | 208,411 | | 17,510 | | 225,921 | |
Equity component of 0.0% Convertible Notes, net (Note 5) | | — | | — | | 80,066 | | — | | — | | — | | 80,066 | | — | | 80,066 | |
Stock-based compensation expense | | — | | — | | 6,579 | | — | | — | | — | | 6,579 | | — | | 6,579 | |
Issuance of shares under share award plans, net of shares withheld for employee taxes | | 1 | | — | | (474) | | — | | — | | — | | (473) | | — | | (473) | |
| | | | | | | | | | |
| | | | | | | | | | |
Distributions to noncontrolling interests, net | | — | | — | | — | | — | | — | | — | | — | | (1,374) | | (1,374) | |
Balance, January 31, 2021 | | $ | 465 | | $ | — | | $ | 1,216,489 | | $ | 8,226 | | $ | 639,934 | | $ | (404,411) | | $ | 1,460,703 | | $ | 225,743 | | $ | 1,686,446 | |
| | | | | | | | | | |
Balance, October 31, 2021 | | $ | 466 | | $ | — | | $ | 1,192,901 | | $ | 44,689 | | $ | 598,796 | | $ | (404,411) | | $ | 1,432,441 | | $ | 233,989 | | $ | 1,666,430 | |
Comprehensive income: | | | | | | | | | | |
Net income | | — | | — | | — | | — | | 223,391 | | — | | 223,391 | | 10,539 | | 233,930 | |
Foreign currency translation adjustments | | — | | — | | — | | (38,754) | | — | | — | | (38,754) | | (10,103) | | (48,857) | |
Change in estimated fair value of hedging instruments, net of tax | | — | | — | | — | | 4,483 | | — | | — | | 4,483 | | — | | 4,483 | |
Total comprehensive income | | | | | | | | 189,120 | | 436 | | 189,556 | |
| | | | | | | | | | |
Stock-based compensation expense | | — | | — | | 6,479 | | — | | — | | — | | 6,479 | | — | | 6,479 | |
Issuance of shares under share award plans, net of shares withheld for employee taxes | | 1 | | — | | (26,785) | | — | | — | | — | | (26,784) | | — | | (26,784) | |
| | | | | | | | | | |
Dividends (Note 4) | | — | | — | | — | | — | | (35,714) | | — | | (35,714) | | — | | (35,714) | |
Distributions to noncontrolling interests, net | | — | | — | | — | | — | | — | | — | | — | | (6,283) | | (6,283) | |
Balance, January 31, 2022 | | $ | 467 | | $ | — | | $ | 1,172,595 | | $ | 10,418 | | $ | 786,473 | | $ | (404,411) | | $ | 1,565,542 | | $ | 228,142 | | $ | 1,793,684 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | Additional Paid in Capital | Accumulated Other Comprehensive (Loss) Income | Retained Earnings | Treasury Stock | Total Vail Resorts, Inc. Stockholders’ Equity | Noncontrolling Interests | Total Stockholders’ Equity |
| | Vail Resorts | Exchangeable | | | | | | | |
Balance, July 31, 2020 | | $ | 464 | | $ | — | | $ | 1,131,624 | | $ | (56,837) | | $ | 645,902 | | $ | (404,411) | | $ | 1,316,742 | | $ | 214,925 | | $ | 1,531,667 | |
Comprehensive income: | | | | | | | | | | |
Net loss | | — | | — | | — | | — | | (5,968) | | — | | (5,968) | | (1,923) | | (7,891) | |
Foreign currency translation adjustments | | — | | — | | — | | 59,101 | | — | | — | | 59,101 | | 18,156 | | 77,257 | |
Change in estimated fair value of hedging instruments, net of tax | | — | | — | | — | | 5,962 | | — | | — | | 5,962 | | — | | 5,962 | |
Total comprehensive income | | | | | | | | 59,095 | | 16,233 | | 75,328 | |
Equity component of 0.0% Convertible Notes, net (Note 5) | | — | | — | | 80,066 | | — | | — | | — | | 80,066 | | — | | 80,066 | |
Stock-based compensation expense | | — | | — | | 12,333 | | — | | — | | — | | 12,333 | | — | | 12,333 | |
Issuance of shares under share award plans, net of shares withheld for employee taxes | | 1 | | — | | (7,534) | | — | | — | | — | | (7,533) | | — | | (7,533) | |
| | | | | | | | | | |
| | | | | | | | | | |
Distributions to noncontrolling interests, net | | — | | — | | — | | — | | — | | — | | — | | (5,415) | | (5,415) | |
Balance, January 31, 2021 | | $ | 465 | | $ | — | | $ | 1,216,489 | | $ | 8,226 | | $ | 639,934 | | $ | (404,411) | | $ | 1,460,703 | | $ | 225,743 | | $ | 1,686,446 | |
| | | | | | | | | | |
Balance, July 31, 2021 | | $ | 466 | | $ | — | | $ | 1,196,993 | | $ | 27,799 | | $ | 773,752 | | $ | (404,411) | | $ | 1,594,599 | | $ | 234,469 | | $ | 1,829,068 | |
Comprehensive income: | | | | | | | | | | |
Net income | | — | | — | | — | | — | | 84,059 | | — | | 84,059 | | 7,350 | | 91,409 | |
Foreign currency translation adjustments | | — | | — | | — | | (26,209) | | — | | — | | (26,209) | | (7,511) | | (33,720) | |
Change in estimated fair value of hedging instruments, net of tax | | — | | — | | — | | 8,828 | | — | | — | | 8,828 | | — | | 8,828 | |
Total comprehensive income | | | | | | | | 66,678 | | (161) | | 66,517 | |
| | | | | | | | | | |
Stock-based compensation expense | | — | | — | | 12,904 | | — | | — | | — | | 12,904 | | — | | 12,904 | |
Issuance of shares under share award plans, net of shares withheld for employee taxes | | 1 | | — | | (37,302) | | — | | — | | — | | (37,301) | | — | | (37,301) | |
| | | | | | | | | | |
Dividends (Note 4) | | — | | — | | — | | — | | (71,338) | | — | | (71,338) | | — | | (71,338) | |
Distributions to noncontrolling interests, net | | — | | — | | — | | — | | — | | — | | — | | (6,166) | | (6,166) | |
Balance, January 31, 2022 | | $ | 467 | | $ | — | | $ | 1,172,595 | | $ | 10,418 | | $ | 786,473 | | $ | (404,411) | | $ | 1,565,542 | | $ | 228,142 | | $ | 1,793,684 | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | |
| | Six Months Ended January 31, |
| | 2022 | | 2021 |
Cash flows from operating activities: | | | | |
Net income (loss) | | $ | 91,409 | | | $ | (7,891) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 123,559 | | | 125,291 | |
| | | | |
Stock-based compensation expense | | 12,904 | | | 12,333 | |
Deferred income taxes, net | | 9,214 | | | (8,779) | |
Change in estimated fair value of contingent consideration | | 18,780 | | | 1,802 | |
| | | | |
Other non-cash income, net | | (602) | | | (1,698) | |
Changes in assets and liabilities: | | | | |
Trade receivables, net | | 178,252 | | | (9,014) | |
Inventories, net | | (23,627) | | | 16,151 | |
Accounts payable and accrued liabilities | | 89,502 | | | 111,481 | |
Deferred revenue | | 147,614 | | | 220,846 | |
Income taxes payable - excess tax benefit from share award exercises | | (17,018) | | | (1,478) | |
Income taxes payable - other | | (7,581) | | | (2,454) | |
Other assets and liabilities, net | | (11,077) | | | 2,479 | |
Net cash provided by operating activities | | 611,329 | | | 459,069 | |
Cash flows from investing activities: | | | | |
Capital expenditures | | (128,854) | | | (67,338) | |
Acquisition of business, net of cash acquired | | (118,099) | | | — | |
Other investing activities, net | | 21,421 | | | 1,608 | |
Net cash used in investing activities | | (225,532) | | | (65,730) | |
Cash flows from financing activities: | | | | |
| | | | |
Proceeds from borrowings under Whistler Credit Agreement | | — | | | 21,144 | |
Proceeds from borrowings under 0.0% Convertible Notes | | — | | | 575,000 | |
Repayments of borrowings under Vail Holdings Credit Agreement | | (31,250) | | | (31,250) | |
Repayments of borrowings under Whistler Credit Agreement | | (23,145) | | | (22,380) | |
Repayment of EB-5 Development Notes | | (51,500) | | | — | |
Employee taxes paid for share award exercises | | (37,302) | | | (7,534) | |
Dividends paid | | (71,338) | | | — | |
| | | | |
Other financing activities, net | | (6,158) | | | (21,693) | |
Net cash (used in) provided by financing activities | | (220,693) | | | 513,287 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | | (1,016) | | | 3,292 | |
Net increase in cash, cash equivalents and restricted cash | | 164,088 | | | 909,918 | |
Cash, cash equivalents and restricted cash: | | | | |
Beginning of period | | 1,258,574 | | | 402,086 | |
End of period | | $ | 1,422,662 | | | $ | 1,312,004 | |
| | | | |
Non-cash investing activities: | | | | |
Accrued capital expenditures | | $ | 17,388 | | | $ | 12,877 | |
The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.
Vail Resorts, Inc.
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”) operate in three business segments: Mountain, Lodging and Real Estate.
The Company refers to “Resort” as the combination of the Mountain and Lodging segments. In the Mountain segment, the Company operates the following 40 destination mountain resorts and regional ski areas:
*Denotes a destination mountain resort, which generally receives a meaningful portion of skier visits from long-distance travelers, as opposed to the Company’s regional ski areas, which tend to generate skier visits predominantly from their respective local markets.
Additionally, the Mountain segment includes ancillary services, primarily including ski school, dining and retail/rental operations, and for the Company’s Australian ski areas, including lodging and transportation operations.
In the Lodging segment, the Company owns and/or manages a collection of luxury hotels and condominiums under its RockResorts brand; other strategic lodging properties and a large number of condominiums located in proximity to the Company’s North American mountain resorts; National Park Service (“NPS”) concessionaire properties including the Grand Teton Lodge Company, which operates destination resorts in Grand Teton National Park; a Colorado resort ground transportation company and mountain resort golf courses.
Vail Resorts Development Company, a wholly-owned subsidiary, conducts the operations of the Company’s Real Estate segment, which owns, develops and sells real estate in and around the Company’s resort communities.
The Company’s mountain business and its lodging properties at or around the Company’s mountain resorts are seasonal in nature with peak operating seasons primarily from mid-November through mid-April in North America. The peak operating season at the Company’s Australian resorts, NPS concessionaire properties and golf courses generally occurs from June to early October.
2. Summary of Significant Accounting Policies
Basis of Presentation
Consolidated Condensed Financial Statements — In the opinion of the Company, the accompanying Consolidated Condensed Financial Statements reflect all adjustments necessary to state fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. Results for interim periods are not indicative of the results for the entire fiscal year, particularly given the significant seasonality to the Company’s operating cycle. 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, 2021. 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 U.S. (“GAAP”) have been condensed or omitted. The Consolidated Condensed Balance Sheet as of July 31, 2021 was derived from audited financial statements.
Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Fair Value of Financial Instruments — The recorded amounts for cash and cash equivalents, restricted cash, trade receivables, other current assets, accounts payable and accrued liabilities approximate fair value due to their short-term nature. The fair value of amounts outstanding under the Company’s credit agreements and the Employee Housing Bonds (as defined in Note 5, Long-Term Debt) approximate book value due to the variable nature of the interest rate associated with the debt. The estimated fair values of the 6.25% Notes and the 0.0% Convertible Notes (each as defined in Note 5, Long-Term Debt) are based on quoted market prices (a Level 2 input). The estimated fair value of the EPR Secured Notes (as defined in Note 5, Long-Term Debt) has been estimated using analyses based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 2 input). The carrying values, including any unamortized premium or discount, and estimated fair values of the 6.25% Notes, 0.0% Convertible Notes and EPR Secured Notes as of January 31, 2022 are presented below (in thousands):
| | | | | | | | | | | |
| January 31, 2022 |
| Carrying Value | | Estimated Fair Value |
6.25% Notes | $ | 600,000 | | | $ | 623,124 | |
0.0% Convertible Notes | $ | 487,824 | | | $ | 576,466 | |
EPR Secured Notes | $ | 134,909 | | | $ | 203,120 | |
Recently Issued Accounting Standards
Standards Being Evaluated
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional transition guidance, for a limited time, to companies that have contracts, hedging relationships or other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate which is expected to be discontinued because of reference rate reform. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met. The amendments in this update are effective as of March 12, 2020 through December 31, 2022. The amendments in this update may be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. All other amendments should be applied on a prospective basis. The Company is in the process of evaluating the effect that the adoption of this standard will have on its Consolidated Condensed Financial Statements, but does not expect it will have a material effect.
In August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” which simplifies the guidance in Accounting Standards Codifications (“ASC”) 470-20, “Debt – Debt with Conversion and Other Options” by reducing the number of accounting separation models for convertible instruments, amending the guidance in ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity” for certain contracts in an entity’s own equity that are currently accounted for as derivatives, and requiring entities to use the if-converted method for all convertible instruments in the diluted earnings per share (“EPS”) calculation. This standard will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years (the Company’s first quarter of the fiscal year ending July 31, 2023). Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years (the Company’s first quarter of the fiscal year ending July 31, 2022). This standard allows for a modified retrospective or fully retrospective method of transition. The Company will adopt ASU 2020-06 on August 1, 2022 and expects to use the modified retrospective method, and therefore financial information for periods before August 1, 2022 will remain unchanged. As a result of the adoption of ASU 2020-06, the Company expects that it will reclassify the equity component of its 0.0% Convertible Notes (as defined in Note 5, Long-Term Debt) to long-term debt, net and it will no longer record interest expense related to the amortization of the debt discount.
3. Revenues
Revenue Recognition
Revenue from the sale of pass products is recognized as lift revenue throughout the ski season, as the Company's performance obligations are satisfied as control of the service (e.g., access to ski areas throughout the ski season) is transferred to customers. In accordance with Topic 606, the Company estimates progress towards satisfaction of its performance obligations using an output method that best depicts the transfer of control of the service to its customers.
Historically, the output method measured progress toward satisfaction of the Company’s performance obligations based on the estimated number of pass product holder visits relative to total expected visits, based on historical data, which the Company believed to provide a faithful depiction of its customers’ pass product usage. When sufficient historical data to determine usage patterns was not available, such as in the case of new product offerings, progress was measured on a straight-line basis throughout the ski season until sufficient historical usage patterns were available. Beginning August 1, 2021, progress towards satisfaction of the Company’s performance obligations for all passes is measured using an output method based on the skiable days of the season to date relative to the total estimated skiable days of the season, which effectively results in revenue being recorded on a straight-line basis throughout the ski season. Total estimated skiable days is based on actual resort opening and estimated closing dates. The Company believes this method best estimates the value transferred to the customer to date relative to the remaining services promised under the contract. Due to the strong correlation between historical pass product usage and skiable days, the change in the Company’s method of estimating progress toward satisfaction of the performance obligation alone does not have a material effect on the recognition pattern of pass product revenue.
Disaggregation of Revenues
The following table presents net revenues disaggregated by segment and major revenue type for the three and six months ended January 31, 2022 and 2021 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended January 31, | | Six Months Ended January 31, |
| | 2022 | | 2021(1) | | 2022 | | 2021(1) |
Mountain net revenue: | | | | | | | | |
Lift | | $ | 521,582 | | | $ | 430,775 | | | $ | 535,911 | | | $ | 463,866 | |
Ski School | | 92,072 | | | 56,390 | | | 93,545 | | | 58,434 | |
Dining | | 54,049 | | | 32,227 | | | 66,569 | | | 35,295 | |
Retail/Rental | | 126,831 | | | 90,126 | | | 155,207 | | | 112,432 | |
Other | | 39,841 | | | 32,460 | | | 92,443 | | | 71,430 | |
Total Mountain net revenue | | $ | 834,375 | | | $ | 641,978 | | | $ | 943,675 | | | $ | 741,457 | |
Lodging net revenue: | | | | | | | | |
Owned hotel rooms | | $ | 13,584 | | | $ | 6,708 | | | $ | 35,067 | | | $ | 14,073 | |
Managed condominium rooms | | 33,125 | | | 20,336 | | | 46,209 | | | 29,665 | |
Dining | | 8,375 | | | 2,448 | | | 18,650 | | | 3,541 | |
Transportation | | 5,766 | | | 2,947 | | | 7,559 | | | 2,947 | |
Golf | | — | | | — | | | 5,118 | | | 3,691 | |
Other | | 9,269 | | | 7,894 | | | 21,736 | | | 17,266 | |
| | 70,119 | | | 40,333 | | | 134,339 | | | 71,183 | |
Payroll cost reimbursements | | 1,861 | | | 2,018 | | | 3,602 | | | 3,221 | |
Total Lodging net revenue | | $ | 71,980 | | | $ | 42,351 | | | $ | 137,941 | | | $ | 74,404 | |
Total Resort net revenue | | $ | 906,355 | | | $ | 684,329 | | | $ | 1,081,616 | | | $ | 815,861 | |
Total Real Estate net revenue | | 180 | | | 315 | | | 495 | | | 569 | |
Total net revenue | | $ | 906,535 | | | $ | 684,644 | | | $ | 1,082,111 | | | $ | 816,430 | |
(1) Segment results for the three and six months ended January 31, 2021 have been retrospectively adjusted to reflect current period presentation. See Note 10 for additional information.
Contract Balances
Deferred revenue balances of a short-term nature were $611.5 million and $456.5 million as of January 31, 2022 and July 31, 2021, respectively. Deferred revenue balances of a long-term nature, comprised primarily of long-term private club initiation fee revenue, was $120.6 million and $121.0 million as of January 31, 2022 and July 31, 2021, respectively. For the three and six months ended January 31, 2022, the Company recognized approximately $177.6 million and $223.0 million, respectively, of revenue that was included in the deferred revenue balance as of July 31, 2021. As of January 31, 2022, the weighted average remaining period over which revenue for unsatisfied performance obligations on long-term private club contracts will be recognized was approximately 16 years. Trade receivables, net were $167.1 million and $345.4 million as of January 31, 2022 and July 31, 2021, respectively.
Costs to Obtain Contracts with Customers
As of January 31, 2022, $11.7 million of costs to obtain contracts with customers were recorded within other current assets on the Company’s Consolidated Condensed Balance Sheet. The amounts capitalized are subject to amortization generally beginning in the second quarter of fiscal 2022, commensurate with the revenue recognized for related pass products. The Company recorded amortization of $10.0 million and $10.1 million, respectively, for these costs during the three and six months ended January 31, 2022, which was recorded within Mountain and Lodging operating expenses on the Company’s Consolidated Condensed Statement of Operations.
4. Net Income (Loss) per Share
Earnings per Share
Basic EPS excludes dilution and is computed by dividing net income (loss) attributable to Vail Resorts stockholders by the weighted-average shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, resulting in the issuance of shares of common stock that would then share in the earnings of Vail Resorts.
In connection with the Company’s acquisition of Whistler Blackcomb in October 2016, the Company issued consideration in the form of shares of Vail Resorts common stock (the “Vail Shares”) and shares of the Company’s wholly-owned Canadian subsidiary (“Exchangeco”). Whistler Blackcomb shareholders elected to receive 3,327,719 Vail Shares and 418,095 shares of Exchangeco (the “Exchangeco Shares”). Both Vail Shares and Exchangeco Shares have a par value of $0.01 per share, and Exchangeco Shares, while outstanding, are substantially the economic equivalent of Vail Shares and are exchangeable, at any time prior to the seventh anniversary of the closing of the acquisition, into Vail Shares. The Company’s calculation of weighted-average shares outstanding includes the Exchangeco Shares.
Presented below is basic and diluted EPS for the three months ended January 31, 2022 and 2021 (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended January 31, |
| | 2022 | | 2021 |
| | Basic | | Diluted | | Basic | | Diluted |
Net income per share: | | | | | | | | |
Net income attributable to Vail Resorts | | $ | 223,391 | | | $ | 223,391 | | | $ | 147,798 | | | $ | 147,798 | |
Weighted-average Vail Shares outstanding | | 40,505 | | | 40,505 | | | 40,253 | | | 40,253 | |
Weighted-average Exchangeco Shares outstanding | | 33 | | | 33 | | | 35 | | | 35 | |
Total Weighted-average shares outstanding | | 40,538 | | | 40,538 | | | 40,288 | | | 40,288 | |
Effect of dilutive securities | | — | | | 282 | | | — | | | 521 | |
Total shares | | 40,538 | | | 40,820 | | | 40,288 | | | 40,809 | |
Net income per share attributable to Vail Resorts | | $ | 5.51 | | | $ | 5.47 | | | $ | 3.67 | | | $ | 3.62 | |
The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. The number of shares issuable upon the exercise of share-based awards excluded from the calculation of diluted EPS because the effect of their inclusion would have been anti-dilutive totaled approximately zero and 5,000 for the three months ended January 31, 2022 and 2021, respectively.
Presented below is basic and diluted EPS for the six months ended January 31, 2022 and 2021 (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Six Months Ended January 31, |
| | 2022 | | 2021 |
| | Basic | | Diluted | | Basic | | Diluted |
Net income (loss) per share: | | | | | | | | |
Net income (loss) attributable to Vail Resorts | | $ | 84,059 | | | $ | 84,059 | | | $ | (5,968) | | | $ | (5,968) | |
Weighted-average Vail Shares outstanding | | 40,460 | | | 40,460 | | | 40,233 | | | 40,233 | |
Weighted-average Exchangeco Shares outstanding | | 33 | | | 33 | | | 35 | | | |