SEC Filing | Vail Resorts, Inc.

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mtn-20221031

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2022


☐			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

https://cdn.kscope.io/0e278bc775fc47ccc2445f73be00b7a3-mtn-20221031_g1.jpg

Vail Resorts, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		51-0291762
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

390 Interlocken Crescent
Broomfield,	Colorado	80021
(Address of Principal Executive Offices)		(Zip Code)


(303)			404-1800
(Registrant’s telephone number, including area code)

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.

Large accelerated filer

☒

Accelerated filer

☐

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 December 5, 2022, 40,323,914 shares of the registrant’s common stock were outstanding.

Table of Contents



PART I	FINANCIAL INFORMATION	Page

Item 1.	Financial Statements (unaudited).
	Consolidated Condensed Balance Sheets as of October 3 1 , 2022, July 31, 202 2 and October 31 , 2021	2
	Consolidated Condensed Statements of Operations for the Three Months Ended October 31 , 2022 and 2021	3
	Consolidated Condensed Statements of Comprehensive Loss for the Three Months Ended October 31 , 2022 and 2021	4
	Consolidated Condensed Statements of Stockholders’ Equity for the Three Months Ended October 31 , 2022 and 2021	5
	Consolidated Condensed Statements of Cash Flows for the Three Months Ended October 31 , 2022 and 2021	6
	Notes to Consolidated Condensed Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	35

Vail Resorts, Inc.

Consolidated Condensed Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


	October 31, 2022		July 31, 2022		October 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	1,180,942	$	1,107,427	$	1,468,380
Restricted cash	20,121		18,680		14,482
Trade receivables, net	118,491		383,425		108,988
Inventories, net	139,926		108,723		103,697
Other current assets	162,187		173,277		82,307
Total current assets	1,621,667		1,791,532		1,777,854
Property, plant and equipment, net (Note 7)	2,313,061		2,118,052		2,062,322
Real estate held for sale or investment	95,608		95,983		98,833
Goodwill, net (Note 7)	1,688,731		1,754,928		1,790,531
Intangible assets, net	307,410		314,058		319,250
Operating right-of-use assets	192,230		192,070		204,476
Other assets	62,159		51,405		37,285
Total assets	$	6,280,866	$	6,318,028	$	6,290,551
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities (Note 7)	$	1,190,522	$	942,830	$	1,109,652
Income taxes payable	84,372		104,275		43,377
Long-term debt due within one year (Note 5)	67,811		63,749		114,795
Total current liabilities	1,342,705		1,110,854		1,267,824
Long-term debt, net (Note 5)	2,769,698		2,670,300		2,704,583
Operating lease liabilities	176,585		174,567		192,328
Other long-term liabilities	234,301		246,359		243,307
Deferred income taxes, net	205,859		268,464		216,049
Total liabilities	4,729,148		4,470,544		4,624,091
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, 46,789, 46,744 and 46,610 shares issued, respectively	468		467		466
Exchangeable shares, $0.01 par value, 0, 3 and 34 shares issued and outstanding, respectively (Note 4)	—		—		—
Additional paid-in capital	1,106,813		1,184,577		1,192,901
Accumulated other comprehensive (loss) income	(68,908)		10,923		44,689
Retained earnings	705,923		895,889		598,826
Treasury stock, at cost, 6,466, 6,466 and 6,161 shares, respectively (Note 11)	(479,417)		(479,417)		(404,411)
Total Vail Resorts, Inc. stockholders’ equity	1,264,879		1,612,439		1,432,471
Noncontrolling interests	286,839		235,045		233,989
Total stockholders’ equity	1,551,718		1,847,484		1,666,460
Total liabilities and stockholders’ equity	$	6,280,866	$	6,318,028	$	6,290,551

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 October 31,
	2022		2021
Net revenue:
Mountain and Lodging services and other	$	210,386	$	121,860
Mountain and Lodging retail and dining	68,948		53,401
Resort net revenue	279,334		175,261
Real Estate	113		315
Total net revenue	279,447		175,576
Operating expense (exclusive of depreciation and amortization shown separately below):
Mountain and Lodging operating expense	242,286		183,725
Mountain and Lodging retail and dining cost of products sold	35,085		24,229
General and administrative	98,799		77,234
Resort operating expense	376,170		285,188
Real Estate operating expense	1,382		1,470
Total segment operating expense	377,552		286,658
Other operating (expense) income:
Depreciation and amortization	(64,614)		(61,489)
Gain on sale of real property	—		31
Change in estimated fair value of contingent consideration (Note 8)	(636)		(2,000)
(Loss) gain on disposal of fixed assets and other, net	(6)		8,867
Loss from operations	(163,361)		(165,673)
Mountain equity investment income, net	346		1,514
Investment income and other, net	2,886		499
Foreign currency (loss) gain on intercompany loans (Note 5)	(6,135)		831
Interest expense, net	(35,302)		(39,545)
Loss before benefit from income taxes	(201,566)		(202,374)
Benefit from income taxes	58,006		59,853
Net loss	(143,560)		(142,521)
Net loss attributable to noncontrolling interests	6,589		3,189
Net loss attributable to Vail Resorts, Inc.	$	(136,971)	$	(139,332)
Per share amounts (Note 4):
Basic net loss per share attributable to Vail Resorts, Inc.	$	(3.40)	$	(3.44)
Diluted net loss per share attributable to Vail Resorts, Inc.	$	(3.40)	$	(3.44)
Cash dividends declared per share	$	1.91	$	0.88

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

Vail Resorts, Inc.

Consolidated Condensed Statements of Comprehensive Loss

(In thousands)

(Unaudited)


	Three Months Ended October 31,
	2022		2021
Net loss	$	(143,560)	$	(142,521)
Foreign currency translation adjustments	(117,808)		15,137
Change in estimated fair value of hedging instruments, net of tax	8,007		4,345
Comprehensive loss	(253,361)		(123,039)
Comprehensive loss attributable to noncontrolling interests	36,559		597
Comprehensive loss attributable to Vail Resorts, Inc.	$	(216,802)	$	(122,442)

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 Income (Loss)		Retained Earnings		Treasury Stock		Total Vail Resorts, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
	Vail Resorts		Exchangeable
Balance, July 31, 2021	$	466	$	—	$	1,196,993	$	27,799	$	773,752	$	(404,411)	$	1,594,599	$	234,469	$	1,829,068
Comprehensive loss:
Net loss	—		—		—		—		(139,332)		—		(139,332)		(3,189)		(142,521)
Foreign currency translation adjustments	—		—		—		12,545		—		—		12,545		2,592		15,137
Change in estimated fair value of hedging instruments, net of tax	—		—		—		4,345		—		—		4,345		—		4,345
Total comprehensive loss													(122,442)		(597)		(123,039)
Stock-based compensation expense	—		—		6,425		—		—		—		6,425		—		6,425
Issuance of shares under share award plans, net of shares withheld for employee taxes	—		—		(10,517)		—		—		—		(10,517)		—		(10,517)

Dividends (Note 4)	—		—		—		—		(35,594)		—		(35,594)		—		(35,594)
Contributions from noncontrolling interests, net	—		—		—		—		—		—		—		117		117
Balance, October 31, 2021	$	466	$	—	$	1,192,901	$	44,689	$	598,826	$	(404,411)	$	1,432,471	$	233,989	$	1,666,460

Balance, July 31, 2022	$	467	$	—	$	1,184,577	$	10,923	$	895,889	$	(479,417)	$	1,612,439	$	235,045	$	1,847,484
Comprehensive loss:
Net loss	—		—		—		—		(136,971)		—		(136,971)		(6,589)		(143,560)
Foreign currency translation adjustments	—		—		—		(87,838)		—		—		(87,838)		(29,970)		(117,808)
Change in estimated fair value of hedging instruments, net of tax	—		—		—		8,007		—		—		8,007		—		8,007
Total comprehensive loss													(216,802)		(36,559)		(253,361)
Stock-based compensation expense	—		—		6,345		—		—		—		6,345		—		6,345
Issuance of shares under share award plans, net of shares withheld for employee taxes	1		—		(4,043)		—		—		—		(4,042)		—		(4,042)

Dividends (Note 4)	—		—		—		—		(77,018)		—		(77,018)		—		(77,018)
Cumulative effect of adoption of ASU 2020-06 (Notes 2 & 5)	—		—		(80,066)		—		24,023		—		(56,043)		—		(56,043)
Estimated acquisition date fair value of noncontrolling interests (Note 6)	—		—		—		—		—		—		—		91,524		91,524
Distributions to noncontrolling interests, net	—		—		—		—		—		—		—		(3,171)		(3,171)
Balance, October 31, 2022	$	468	$	—	$	1,106,813	$	(68,908)	$	705,923	$	(479,417)	$	1,264,879	$	286,839	$	1,551,718

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)


	Three Months Ended October 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(143,560)	$	(142,521)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	64,614		61,489

Stock-based compensation expense	6,345		6,425
Deferred income taxes, net	(58,006)		(56,603)


Other non-cash expense (income), net	8,615		(2,825)
Changes in assets and liabilities:
Trade receivables, net	264,285		236,748
Inventories, net	(31,924)		(23,105)
Accounts payable and accrued liabilities	2,508		12,164
Deferred revenue	279,221		286,369

Income taxes payable - other	(20,460)		(2,198)
Other assets and liabilities, net	(38,647)		(26,922)
Net cash provided by operating activities	332,991		349,021
Cash flows from investing activities:
Capital expenditures	(124,099)		(50,130)
Return of deposit for acquisition of business	114,506		—
Acquisition of business, net of cash acquired	(38,567)		—
Investments in short-term deposits	(86,756)		—
Other investing activities, net	385		10,273
Net cash used in investing activities	(134,531)		(39,857)
Cash flows from financing activities:



Repayments of borrowings under Vail Holdings Credit Agreement	(15,625)		(15,625)
Repayments of borrowings under Whistler Credit Agreement	—		(23,145)

Employee taxes paid for share award exercises	(4,043)		(10,517)
Dividends paid	(77,018)		(35,594)

Other financing activities, net	(7,942)		147
Net cash used in financing activities	(104,628)		(84,734)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(18,876)		(142)
Net increase in cash, cash equivalents and restricted cash	74,956		224,288
Cash, cash equivalents and restricted cash:
Beginning of period	1,126,107		1,258,574
End of period	$	1,201,063	$	1,482,862

Non-cash investing activities:
Accrued capital expenditures	$	21,069	$	8,582

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 41 destination mountain resorts and regional ski areas:

https://cdn.kscope.io/0e278bc775fc47ccc2445f73be00b7a3-mtn-20221031_g2.jpg

*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”) concessioner properties including the Grand Teton Lodge Company (“GTLC”), 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, and typically experience their peak operating seasons primarily from mid-December through mid-April in North America and Europe. The peak operating season at the Company’s Australian resorts, NPS concessioner 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, 2022. 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, 2022 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 recorded amount outstanding under the Company’s NRP Loan (as defined in Note 5, Long-Term Debt), which was assumed by the Company during the three months ended October 31, 2022, approximates fair value as the debt obligation was recorded at estimated fair value in conjunction with the preliminary purchase accounting for the Andermatt-Sedrun acquisition (see Note 6, Acquisitions). 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 October 31, 2022 are presented below (in thousands):


	October 31, 2022
	Carrying Value		Estimated Fair Value
6.25% Notes	$	600,000	$	598,302
0.0% Convertible Notes	$	575,000	$	513,101
EPR Secured Notes	$	133,706	$	156,893

Recently Issued Accounting Standards

Adopted Standards

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 party to various interest rate swap agreements that hedge the variable interest rate component of underlying cash flows of $400.0 million in principal amount of its Vail Holdings Credit Agreement (as defined in Note 5, Long-Term Debt), which are designated as cash flow hedges. During the three months ended October 31, 2022, the Company entered into an amendment to its Vail Holdings Credit Agreement (the “Fifth Amendment”) to modify the calculation of interest under the Vail Holdings Credit Agreement from being calculated based on LIBOR to being calculated based on SOFR (see Note 5, Long-Term Debt, for additional information). In association with the Fifth Amendment, the interest rate swaps were also amended to transition from a hedge of LIBOR to a hedge of SOFR. The Company elected certain optional expedients provided by Topic 848, which allowed the Company to not apply certain modification accounting requirements or reassess the previous accounting designation of the interest rate swap agreements as cash flow hedges.

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.” The guidance removes certain accounting models which required separation of the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815, “Derivatives and Hedging”, or for convertible debt issued at a substantial premium. The guidance also amends 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. This standard is 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). This standard allows for a modified retrospective or fully retrospective method of transition. The Company adopted ASU 2020-06 on August 1, 2022 using the modified retrospective method, and therefore prior period financial information has not been retrospectively adjusted and continues to be reported under the accounting standards in effect for those periods.

Upon adoption of the standard, the Company reclassified the previously bifurcated equity component of its 0.0% Convertible Notes (as defined in Note 5, Long-Term Debt) to long-term debt, net, as the convertible option on the 0.0% Convertible Notes does not qualify as a derivatives under ASC 815 nor were the 0.0% Convertible Notes issued at a substantial premium. This reclassification was partially offset by an increase to retained earnings for the previously recognized non-cash interest expense, net of tax that had been recorded as a result of amortization of the previously recorded debt discount. The adoption of this new guidance eliminates the recognition of non-cash interest expense to be recognized in future periods due to removal of the debt discount associated with the 0.0% Convertible Notes.

The impact of adoption of ASU 2020-06 on the Consolidated Condensed Balance Sheet as of adoption date was as follows (in thousands):


	As of August 1, 2022
Balance Sheet	Balances without the Adoption of ASU 2020-06		Adjustments		Balances with the adoption of ASU 2020-06
Liabilities
Long term debt, net	$	2,670,300	$	74,822	$	2,745,122
Deferred income taxes, net	$	268,464	$	(18,779)	$	249,685
Stockholders’ equity
Additional paid-in capital	$	1,184,577	$	(80,066)	$	1,104,511
Retained earnings	$	895,889	$	24,023	$	919,912

ASU 2020-06 also prohibits the use of the treasury stock method for convertible instruments for the purposes of calculating diluted earnings per share (“EPS”) and instead requires application of the if-converted method. Under the if-converted method, diluted EPS will generally be calculated assuming that all of the convertible debt instruments were converted solely into shares of common stock at the beginning of the reporting period unless the result would be anti-dilutive. Pursuant to the terms of the 0.0% Convertible Notes, the principal amount of the 0.0% Convertible Notes is required to be paid in cash and only the premium due upon conversion, if any, is permitted to be settled in shares, cash or a combination of shares and cash. Consequently, for the Company the if-converted method would produce a similar result as the treasury stock method, which was utilized for the calculation of diluted EPS prior to the adoption of ASU 2020-06 for the 0.0% Convertible Notes.

3. Revenues

Disaggregation of Revenues

The following table presents net revenues disaggregated by segment and major revenue type for the three months ended October 31, 2022 and 2021 (in thousands):


	Three Months Ended October 31,
	2022		2021
Mountain net revenue:
Lift	$	59,540	$	14,329
Ski School	8,927		1,473
Dining	19,442		12,520
Retail/Rental	40,344		28,376
Other	73,464		52,602
Total Mountain net revenue	$	201,717	$	109,300
Lodging net revenue:
Owned hotel rooms	$	23,565	$	21,483
Managed condominium rooms	12,859		13,084
Dining	16,829		10,275

Golf	5,890		5,109
Other	14,797		14,269
	73,940		64,220
Payroll cost reimbursements	3,677		1,741
Total Lodging net revenue	$	77,617	$	65,961
Total Resort net revenue	$	279,334	$	175,261
Total Real Estate net revenue	113		315
Total net revenue	$	279,447	$	175,576

Contract Balances

Deferred revenue balances of a short-term nature were $787.5 million and $511.3 million as of October 31, 2022 and July 31, 2022, respectively. For the three months ended October 31, 2022, the Company recognized approximately $54.5 million of revenue that was included in the deferred revenue balance as of July 31, 2022. Deferred revenue balances of a long-term nature, comprised primarily of long-term private club initiation fee revenue, were $115.6 million and $117.2 million as of October 31, 2022 and July 31, 2022, respectively. As of October 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 15 years. Trade receivables, net were $118.5 million and $383.4 million as of October 31, 2022 and July 31, 2022, respectively.

Costs to Obtain Contracts with Customers

As of October 31, 2022, $19.7 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 2023, commensurate with the revenue recognized for related pass products, and will be recorded within Mountain and Lodging operating expenses on the Company’s Consolidated Condensed Statement of Operations.

4. Net Loss per Share

Earnings per Share

Basic EPS excludes dilution and is computed by dividing net 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”), redeemable preferred shares of the Company’s wholly-owned Canadian subsidiary Whistler Blackcomb Holdings Inc. (“Exchangeco”) or cash (or a combination thereof). Whistler Blackcomb shareholders elected to receive 3,327,719 Vail Shares and 418,095 shares of Exchangeco (the “Exchangeco Shares”). The Exchangeco Shares could be redeemed for Vail Shares at any time until October 2023 or until the Company elected to convert any remaining Exchangeco Shares to Vail Shares, which the Company had the ability to do once total Exchangeco Shares outstanding fell below 20,904 shares (or 5% of the total Exchangeco Shares originally issued). In July 2022, the number of outstanding Exchangeco Shares fell below such threshold and on August 25, 2022, the Company elected to redeem all outstanding Exchangeco Shares, effective September 26, 2022. As of October 31, 2022, all Exchangeco Shares have been exchanged for Vail Shares. Both Vail Shares and Exchangeco Shares have a par value of $0.01 per share, and Exchangeco Shares, while they were outstanding, were substantially the economic equivalent of the 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 October 31, 2022 and 2021 (in thousands, except per share amounts):



	Three Months Ended October 31,
	2022				2021
	Basic		Diluted		Basic		Diluted
Net loss per share:
Net loss attributable to Vail Resorts	$	(136,971)	$	(136,971)	$	(139,332)	$	(139,332)
Weighted-average Vail Shares outstanding	40,296		40,296		40,414		40,414
Weighted-average Exchangeco Shares outstanding	2		2		34		34
Total Weighted-average shares outstanding	40,298		40,298		40,448		40,448
Effect of dilutive securities	—		—		—		—
Total shares	40,298		40,298		40,448		40,448
Net loss per share attributable to Vail Resorts	$	(3.40)	$	(3.40)	$	(3.44)	$	(3.44)

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 0.2 million and 0.5 million for the three months ended October 31, 2022 and 2021, respectively.

On December 18, 2020, the Company completed an offering of $575.0 million in aggregate principal amount of 0.0% Convertible Notes (as defined in Note 5, Long-Term Debt). The Company is required to settle the principal amount of the 0.0% Convertible Notes in cash and has the option to settle the conversion spread in cash or shares. The Company uses the if-converted method to calculate the impact of convertible instruments on diluted EPS when the instruments may be settled in cash or shares. If the conversion value of the 0.0% Convertible Notes exceeds their conversion price, then the Company will calculate its diluted EPS as if all the notes were converted into common stock at the beginning of the period. However, if reflecting the 0.0% Convertible Notes in diluted EPS in this manner is anti-dilutive, or if the conversion value of the notes does not exceed their conversion price for a reporting period, then the shares underlying the notes will not be reflected in the Company’s calculation of diluted EPS. For the three months ended October 31, 2022 and 2021, the price of Vail Shares did not exceed the conversion price and therefore there was no impact to diluted EPS during those periods.

Dividends

During the three months ended October 31, 2022 and 2021, the Company paid cash dividends of $1.91 and $0.88 per share, respectively ($77.0 million and $35.6 million, respectively, including cash dividends paid to Exchangeco shareholders). On December 7, 2022, the Company’s Board of Directors approved a cash dividend of $1.91 per share payable on January 10, 2023 to stockholders of record as of December 27, 2022.

5. Long-Term Debt

Long-term debt, net as of October 31, 2022, July 31, 2022 and October 31, 2021 is summarized as follows (in thousands):


	Maturity	October 31, 2022		July 31, 2022		October 31, 2021
Vail Holdings Credit Agreement term loan (a)	2026	$	1,062,500	$	1,078,125	$	1,125,000
Vail Holdings Credit Agreement revolver (a)	2026	—		—		—
6.25% Notes	2025	600,000		600,000		600,000
0.0% Convertible Notes (b)	2026	575,000		575,000		575,000
Whistler Credit Agreement revolver (c)	2026	11,011		11,717		21,794

EPR Secured Notes (d)	2034-2036	114,162		114,162		114,162
EB-5 Development Notes	2021	—		—		51,500
NRP Loan (e)	2036	36,430		—		—
Employee housing bonds	2027-2039	52,575		52,575		52,575
Canyons obligation	2063	359,052		357,607		353,266
Other	2022-2036	36,587		17,860		17,772
Total debt		2,847,317		2,807,046		2,911,069
Less: Unamortized premiums, discounts and debt issuance costs (b)		9,808		72,997		91,691
Less: Current maturities (f)		67,811		63,749		114,795
Long-term debt, net		$	2,769,698	$	2,670,300	$	2,704,583

(a)On August 31, 2022, Vail Holdings, Inc. (“VHI”) entered into the Fifth Amendment to the Vail Holdings Credit Agreement, which extended the maturity date to September 23, 2026. Additionally, the Fifth Amendment contains customary LIBOR replacement language, including, but not limited to, the use of rates based on the secured overnight financing rate (“SOFR”). SOFR is a broad measure of the cost of borrowing cash in the overnight U.S. Treasury repo market and is administered by the Federal Reserve Bank of New York. The Fifth Amendment modified the calculation of interest under the Vail Holdings Credit Agreement from being calculated based on LIBOR to being calculated based on SOFR. No other material terms of the Vail Holdings Credit Agreement were amended.

The Company is party to various interest rate swap agreements which hedge the SOFR-based variable interest rate component of underlying cash flows of $400.0 million in principal amount of its Vail Holdings Credit Agreement until September 23, 2024. In association with the Fifth Amendment, these interest rate swaps were amended to transition from a hedge of LIBOR to a hedge of SOFR.

As of October 31, 2022, the Vail Holdings Credit Agreement consists of a $500.0 million revolving credit facility and a term loan facility with $1.1 billion outstanding. The term loan facility is subject to quarterly amortization of principal of approximately $15.6 million, in equal installments, for a total of 5% of principal payable in each year and the final payment of all amounts outstanding, plus accrued and unpaid interest due in September 2026. The proceeds of the loans made under the Vail Holdings Credit Agreement may be used to fund the Company’s working capital needs, capital expenditures, acquisitions, investments and other general corporate purposes, including the issuance of letters of credit. Borrowings under the Vail Holdings Credit Agreement, including the term loan facility, bear interest annually at SOFR plus a spread of 0.1% plus 1.25% as of October 31, 2022 (5.08% as of October 31, 2022). Interest rate margins may fluctuate based upon the ratio of the Company’s Net Funded Debt to Adjusted EBITDA on a trailing four-quarter basis. The Vail Holdings Credit Agreement also includes a quarterly unused commitment fee, which is equal to a percentage determined by the Net Funded Debt to Adjusted EBITDA ratio, as each such term is defined in the Vail Holdings Credit Agreement, multiplied by the daily amount by which the Vail Holdings Credit Agreement commitment exceeds the total of outstanding loans and outstanding letters of credit (0.25% as of October 31, 2022).

(b)The Company issued $575.0 million in aggregate principal amount of 0.0% Convertible Notes due 2026 (the “0.0% Convertible Notes) under an indenture dated December 18, 2020. Under previous accounting guidance, the Company bifurcated the proceeds of the 0.0% Convertible Notes by estimating the fair value of the 0.0% Convertible Notes at issuance and allocating that portion to long-term debt, net, with the excess being recorded within additional paid-in capital. The Company adopted ASU 2020-06 on August 1, 2022 using the modified retrospective method, and as a result, the Company reclassified the equity component of its 0.0% Convertible Notes to long-term debt, net, and will no longer record non-cash interest expense related to the amortization of the debt discount. Refer to Note 2, Summary of

Significant Accounting Policies, for further information on ASU 2020-06. As of October 31, 2022, the conversion price of the 0.0% Convertible Notes, adjusted for cash dividends paid since the issuance date, was $395.11.

(c)Whistler Mountain Resort Limited Partnership (“Whistler LP”) and Blackcomb Skiing Enterprises Limited Partnership (“Blackcomb LP”), together “The WB Partnerships,” are party to a credit agreement, dated as of November 12, 2013 (as amended, the “Whistler Credit Agreement”), by and among Whistler LP, Blackcomb LP, certain subsidiaries of Whistler LP and Blackcomb LP party thereto as guarantors (the “Whistler Subsidiary Guarantors”), the financial institutions party thereto as lenders and The Toronto-Dominion Bank, as administrative agent. The Whistler Credit Agreement consists of a C$300.0 million revolving credit facility. As of October 31, 2022, all borrowings under the Whistler Credit Agreement were made in Canadian dollars and by way of the issuance of bankers’ acceptances plus 1.75% (approximately 5.98% as of October 31, 2022). The Whistler Credit Agreement also includes a quarterly unused commitment fee based on the Consolidated Total Leverage Ratio, which as of October 31, 2022 is equal to 0.39% per annum.

(d)On September 24, 2019, in conjunction with the acquisition of Peak Resorts, Inc. (”Peak Resorts”), the Company assumed various secured borrowings (the “EPR Secured Notes”) under the master credit and security agreements and other related agreements, as amended, (collectively, the “EPR Agreements”) with EPT Ski Properties, Inc. and its affiliates (“EPR”). The EPR Secured Notes include the following:

i.The Alpine Valley Secured Note. The $4.6 million Alpine Valley Secured Note provides for interest payments through its maturity on December 1, 2034. As of October 31, 2022, interest on this note accrued at a rate of 11.55%.

ii.The Boston Mills/Brandywine Secured Note. The $23.3 million Boston Mills/Brandywine Secured Note provides for interest payments through its maturity on December 1, 2034. As of October 31, 2022, interest on this note accrued at a rate of 11.24%.

iii.The Jack Frost/Big Boulder Secured Note. The $14.3 million Jack Frost/Big Boulder Secured Note provides for interest payments through its maturity on December 1, 2034. As of October 31, 2022, interest on this note accrued at a rate of 11.24%.

iv.The Mount Snow Secured Note. The $51.1 million Mount Snow Secured Note provides for interest payments through its maturity on December 1, 2034. As of October 31, 2022, interest on this note accrued at a rate of 12.14%.

v.The Hunter Mountain Secured Note. The $21.0 million Hunter Mountain Secured Note provides for interest payments through its maturity on January 5, 2036. As of October 31, 2022, interest on this note accrued at a rate of 8.88%.

In addition, Peak Resorts is required to maintain a debt service reserve account which amounts are applied to fund interest payments and other amounts due and payable to EPR. As of October 31, 2022, the Company had funded the EPR debt service reserve account in an amount equal to approximately $2.1 million, which was included in other current assets in the Company’s Consolidated Condensed Balance Sheet.

(e)On August 3, 2022 in conjunction with the acquisition of Andermatt-Sedrun (see Note 6, Acquisitions), the Company assumed the New Regional Policy loan between Andermatt-Sedrun and the Canton of Uri and Canton of Graubünden dated June 24, 2016 (the “NRP Loan”), with an initial principal balance of CHF 40.0 million. Amounts outstanding under the NRP Loan bear interest at 0.63% per annum until the maturity date, which is September 30, 2036, with semi-annual required payments of principal amortization and accrued interest. In addition, the NRP Loan agreement includes restrictive covenants requiring certain minimum financial results (as defined in the agreement).

(f)Current maturities represent principal payments due in the next 12 months.

Aggregate maturities of debt outstanding as of October 31, 2022 reflected by fiscal year (August 1 through July 31) are as follows (in thousands):


	Total
2023 (November 2022 through July 2023)	$	57,111
2024	69,054
2025	668,394
2026	642,712
2027	855,036
Thereafter	555,010
Total debt	$	2,847,317

The Company recorded interest expense of $35.3 million and $39.5 million for the three months ended October 31, 2022 and 2021, respectively, of which $1.6 million and $1.4 million, respectively, was amortization of deferred financing costs. The Company was in compliance with all of its financial and operating covenants required to be maintained under its debt instruments for all periods presented.

In connection with the acquisition of Whistler Blackcomb, VHI funded a portion of the purchase price through an intercompany loan to Whistler Blackcomb of $210.0 million, which was effective as of November 1, 2016, and requires foreign currency remeasurement to Canadian dollars, the functional currency for Whistler Blackcomb. As a result, foreign currency fluctuations associated with the loan are recorded within the Company’s results of operations. The Company recognized approximately $(6.1) million and $0.8 million, respectively, of non-cash foreign currency (losses) gains on the intercompany loan to Whistler Blackcomb for the three months ended October 31, 2022 and 2021 on the Company’s Consolidated Condensed Statements of Operations.

6. Acquisitions

Andermatt-Sedrun

On August 3, 2022, through a wholly-owned subsidiary, the Company acquired a 55% controlling interest in Andermatt-Sedrun Sport AG (“Andermatt-Sedrun”) from Andermatt Swiss Alps AG (“ASA”). The consideration paid consisted of an investment of $114.4 million (CHF 110.0 million) into Andermatt-Sedrun for use in capital investments to enhance the guest experience on mountain (which was prepaid to fund the acquisition and was recorded in other current assets on the Company’s Consolidated Condensed Balance Sheet as of July 31, 2022) and $41.3 million (CHF 39.3 million) paid to ASA (which was paid on August 3, 2022, commensurate with closing). As of August 3, 2022 the total fair value of the consideration paid was $155.4 million (CHF 149.3 million).

Andermatt-Sedrun operates mountain and ski-related assets, including lifts, most of the restaurants and a ski school operation at the ski area. Ski operations are conducted on land owned by ASA as freehold or leasehold properties, land owned by Usern Corporation, land owned by the municipality of Tujetsch and land owned by private property owners. ASA retained a 40% ownership stake, with a group of existing shareholders comprising the remaining 5% ownership stake. ASA and the other noncontrolling economic interests contain certain protective rights pursuant to a shareholder agreement (the “Andermatt Agreement”) and no ability to participate in the day-to-day operations of Andermatt-Sedrun. The Andermatt Agreement provides that no dividend distributions be made by Andermatt-Sedrun until the end of the fiscal year ending July 31, 2026, after which time there shall be annual distributions of 50% of the available cash (as defined in the Andermatt Agreement) for the most recently completed fiscal year. In addition, the distribution rights are non-transferable and transfer of the noncontrolling interests are limited.

The following summarizes the purchase consideration and the preliminary purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands):


	Acquisition Date Estimated Fair Value
Total cash consideration paid by Vail Resorts, Inc.	$	155,365
Estimated fair value of noncontrolling interests	91,524
Total estimated purchase consideration	$	246,889

Allocation of total estimated purchase consideration:
Current assets	$	119,867
Property, plant and equipment	176,805
Goodwill	1,363
Identifiable intangible assets and other assets	7,476
Assumed long-term debt	(44,130)
Other liabilities	(14,492)
Net assets acquired	$	246,889

Identifiable intangible assets acquired in the transaction were primarily related to a trade name. The process of estimating the fair value of the property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition. The excess of the purchase price over the aggregate estimated fair values of the assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of the resorts and other factors, and is not expected to be deductible for income tax purposes. The operating results of Andermatt-Sedrun are reported within the Mountain segment prospectively from the date of acquisition.

Seven Springs Mountain Resort, Hidden Valley Resort & Laurel Mountain Ski Area

On December 31, 2021, the Company, through a wholly-owned subsidiary, acquired Seven Springs Mountain Resort, Hidden Valley Resort and Laurel Mountain Ski Area (together, the “Seven Springs Resorts”) in Pennsylvania from Seven Springs Mountain Resort, Inc. and its affiliates for a cash purchase price of approximately $116.5 million, after adjustments for certain agreed-upon terms, which the Company funded with cash on hand. The acquisition included the mountain operations of the resorts, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities), as well as a hotel, conference center and other related operations.


	Acquisition Date Estimated Fair Value
Current assets	$	2,932
Property, plant and equipment	118,415
Goodwill	4,991
Identifiable intangible assets and other assets	5,335
Liabilities	(15,172)
Net assets acquired	$	116,501

Identifiable intangible assets acquired in the transaction were primarily related to advanced lodging bookings and trade names. The process of estimating the fair value of the property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition. The excess of the purchase price over the aggregate estimated fair values of the assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of the resorts and other factors, and is not expected to be deductible for income tax purposes. The Company recognized $2.8 million of acquisition related expenses associated with the transaction within Mountain and Lodging operating expense for the year ended July 31, 2022. The operating results of the acquired resorts are reported within the Mountain and Lodging segments prospectively from the date of acquisition.

The estimated fair values of assets acquired and liabilities assumed for Andermatt-Sedrun and the Seven Springs Resorts are preliminary and are based on the information that was available as of the respective acquisition dates. The Company believes that this information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed; however, the Company is obtaining additional information necessary to finalize those estimated fair values. Therefore, the preliminary measurements of estimated fair values reflected are subject to change. The Company expects to finalize the valuation and complete the purchase consideration allocation no later than one year from the acquisition date.

7. Supplementary Balance Sheet Information

The composition of property, plant and equipment follows (in thousands):


	October 31, 2022		July 31, 2022		October 31, 2021
Land and land improvements	$	780,977	$	763,432	$	757,625
Buildings and building improvements	1,574,931		1,545,571		1,492,863
Machinery and equipment	1,594,588		1,505,236		1,422,110
Furniture and fixtures	316,350		307,867		309,119
Software	139,522		138,058		123,228
Vehicles	82,239		81,927		80,921
Construction in progress	221,990		127,282		113,854
Gross property, plant and equipment	4,710,597		4,469,373		4,299,720
Accumulated depreciation	(2,397,536)		(2,351,321)		(2,237,398)
Property, plant and equipment, net	$	2,313,061	$	2,118,052	$	2,062,322

The composition of accounts payable and accrued liabilities follows (in thousands):


	October 31, 2022		July 31, 2022		October 31, 2021
Trade payables	$	162,366	$	151,263	$	116,501
Deferred revenue	787,514		511,306		743,809
Accrued salaries, wages and deferred compensation	41,239		64,570		43,773
Accrued benefits	44,008		45,202		45,439
Deposits	35,491		37,731		43,875
Operating lease liabilities	35,331		34,218		36,036
Other liabilities	84,573		98,540		80,219
Total accounts payable and accrued liabilities	$	1,190,522	$	942,830	$	1,109,652

The changes in the net carrying amount of goodwill allocated between the Company’s segments for the three months ended October 31, 2022 are as follows (in thousands):


	Mountain		Lodging		Goodwill, net
Balance at July 31, 2022	$	1,709,922	$	45,006	$	1,754,928
Acquisition	1,363		—		1,363

Effects of changes in foreign currency exchange rates	(67,560)		—		(67,560)
Balance at October 31, 2022	$	1,643,725	$	45,006	$	1,688,731

8. Fair Value Measurements

The Company utilizes FASB-issued fair value guidance that establishes how reporting entities should measure fair value for measurement and disclosure purposes. The guidance establishes a common definition of fair value applicable to all assets and liabilities measured at fair value and prioritizes the inputs into valuation techniques used to measure fair value. Accordingly, the Company uses valuation techniques which maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value. The three levels of the hierarchy are as follows:

Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities;

Level 2: Inputs include quoted prices for similar assets and liabilities in active and inactive markets or that are observable for the asset or liability either directly or indirectly; and

Level 3: Unobservable inputs which are supported by little or no market activity.

The table below summarizes the Company’s cash equivalents, other current assets, interest rate swaps and Contingent Consideration (defined below) measured at estimated fair value (all other assets and liabilities measured at fair value are immaterial) (in thousands).


	Estimated Fair Value Measurement as of October 31, 2022
Description	Total		Level 1		Level 2		Level 3
Assets:
Money Market	$	509,165	$	509,165	$	—	$	—
Commercial Paper	$	2,401	$	—	$	2,401	$	—