Broomfield, CO – Multi-state ski resort operator Vail Resorts today announced results for its fourth quarter and fiscal year ended July 31, 2011, and the numbers reflect solid gains in resort reported EBITDA from the company’s Mountain and Lodging segments, net income and advance season pass sales for the 2011-12 ski and snowboard season.
“I am very pleased with the performance that we delivered for Fiscal 2011, including our fourth quarter results,” said Vail Resorts CEO Rob Katz. “While our loss in the fourth quarter was actually greater than the prior year, due to the inclusion of Northstar-at-Tahoe’s seasonal losses, we saw revenue growth in all of our primary business areas, which continued through August, the first month of Fiscal 2012.
“This was a very successful year for us on many fronts,” Katz continued. “Despite the continued challenges in the overall economy, we reported strong revenue and EBITDA growth in both our Mountain and Lodging Divisions, successfully acquired and integrated Northstar-at-Tahoe, achieved record guest satisfaction scores, generated significant real estate revenue and cash proceeds, favorably refinanced our Senior Subordinated Notes and initiated our first regular quarterly cash dividend.”
MOUNTAIN SEGMENT
Vail Resorts owns and operates six of the busiest ski and snowboard resorts in the U.S.: Vail Mountain, Beaver Creek, Breckenridge and Keystone, all in Colorado, and Northstar-at-Tahoe and Heavenly Resort, both in California. Total Mountain net revenue at the six resorts increased $113.7 million, or 17.8%, in Fiscal 2011 compared to Fiscal 2010, with Fiscal 2011 including $64.4 million of revenue from Northstar-at-Tahoe, which was acquired by Vail Resorts in October 2010. Excluding the impact of the acquisition of Northstar-at-Tahoe, total Mountain net revenue would have increased $49.3 million or 7.7%. Lift revenue increased $53.2 million, or 18.4%, for Fiscal 2011 compared to Fiscal 2010, due to a $34.2 million, or 18.1%, increase in lift revenue excluding season pass revenue and a $19.0 million, or 18.9%, increase in season pass revenue. A large portion of this increase is attributable to the acquisition of Northstar-at-Tahoe. Excluding Northstar-at-Tahoe, lift revenue increased $22.4 million, or 7.7%, compared to the same period in the prior year, due to a $13.2 million, or 7.0%, increase in lift revenue excluding season passes and a $9.2 million, or 9.2%, increase in season pass revenue.
Total skier visitation was up 16.3% and, excluding Northstar-at-Tahoe, skier visitation was up 4.1%, which significantly exceeded skier visitation growth for the U.S. ski industry as a whole, which was up 0.6% in winter 2010-11 according to data from the National Ski Areas Association (NSAA), and visitation for all resorts in the Rocky Mountain and Pacific Southwest regions, which were up 1.7% and down 7.1%, respectively, despite all regions in the U.S. generally having strong snowfall in the current year. Vail Mountain and Keystone in particular showed large increases in visitation in Fiscal 2011, Vail Mountain benefiting from recent capital investments made both on Vail Mountain and in base areas, including an improved lodging bed base, and Keystone benefiting from a broadened family focused marketing initiative.
All resorts were unfavorably impacted by the timing of the Easter holiday, which was in late April in the current fiscal year, versus early April in the prior fiscal year. In addition, Heavenly Resort was impacted by higher than average resort closures due to severe weather in the current fiscal year.
Effective ticket price (“ETP”), excluding season pass holders and Northstar-at-Tahoe, increased $5.31, or 8.3%, due primarily to price increases implemented during the current fiscal year. Total ETP, excluding Northstar-at-Tahoe, increased $1.70, or 3.5%, also due primarily to price increases implemented during the current fiscal year, partially offset by higher average visitation by season pass holders in the current fiscal year.
Ski school revenue for Vail Resorts increased $13.1 million, or 18.6%, in Fiscal 2011 compared to Fiscal 2010 with the current year benefiting from the acquisition of Northstar-at-Tahoe. Excluding Northstar-at-Tahoe, ski school revenue increased $5.5 million, or 7.8%, which benefited from a 4.1% increase in skier visitation and a 3.6% increase in yield per skier visit due to higher guest spend. Dining revenue increased $14.7 million, or 27.6%, which also benefited from the acquisition of Northstar-at-Tahoe in Fiscal 2011. Excluding Northstar-at-Tahoe, dining revenues increased $6.1 million, or 11.5%, which is primarily attributable to the increased skier visitation and a 5.8% increase in yield per skier visit for on-mountain dining, as well as the addition of two new on-mountain dining venues. The increases in both ski school and dining revenue were achieved despite the negative impact of the late Easter holiday in the current fiscal year.
Retail/rental operations increased $19.5 million, or 12.6%, in Fiscal 2011 compared to Fiscal 2010, which includes $9.0 million of incremental revenue from Northstar-at-Tahoe in the current fiscal year. Excluding Northstar-at-Tahoe, retail/rental increased $10.5 million, or 6.8%, which was driven primarily by higher revenues at the company’s Colorado Front Range stores and Any Mountain stores (in the San Francisco Bay area), which combined increased by approximately 8.1% as compared to the prior year. Additionally, the company’s mountain resort stores, especially at Vail and Beaver Creek, experienced an increase in revenue primarily driven by retail sales due to higher skier visitation although these increases were tapered by the late Easter holiday in Fiscal 2011.
Other revenue mainly consists of private club revenue (which includes both club dues and amortization of initiation fees), summer visitation and other mountain activities revenue, marketing and internet advertising revenue, commercial leasing revenue, employee housing revenue, municipal services revenue and other recreation activity revenue. For Fiscal 2011, other revenue increased $13.1 million, or 18.7%, compared to Fiscal 2010, which includes $8.3 million of incremental revenue from Northstar-at-Tahoe. Excluding Northstar-at-Tahoe, other revenue increased $4.8 million, or 6.8%, primarily due to an increase in internet advertising due to the company’s acquisition of Mountain News Corporation, which operates OnTheSnow.com, in May 2010, higher strategic alliance marketing revenue as well as increased summer activities revenue primarily at Breckenridge, which is partially due to the addition of an alpine coaster, partially offset by a decrease in municipal services revenue (primarily transportation services provided on behalf of certain municipalities).
Operating expense increased $84.3 million, or 18.5%, for Fiscal 2011 compared to Fiscal 2010, which includes $53.9 million of expenses (including $4.1 million of acquisition related costs included in general and administrative expense) in the current fiscal year associated with Northstar-at-Tahoe. Excluding these expenses, operating expense increased $30.5 million, or 6.7%, for Fiscal 2011 compared to Fiscal 2010, due in part to higher labor and labor-related benefits which increased $15.9 million, or 9.5%, in Fiscal 2011 compared to Fiscal 2010. Overall, operating expenses including labor were impacted by a 3.6% increase in the number of operating days during the 2010/2011 ski season primarily due to the late Easter holiday as discussed above, combined with opening ski terrain earlier due to above average early season snowfall.
Labor and labor-related benefits in the current year also were higher due to the full year impact of the prior year’s partial wage reinstatement and the company’s matching component of the 401(k) plan, and a more normal level of wage increases, partially offset by a decrease in workers compensation costs of $1.5 million due to fewer claims and average cost per claim. Additionally, labor costs were impacted by an increase in staffing levels due to an increase in demand for ancillary services primarily in ski school, dining and retail/rental operations.
Retail cost of sales was relatively flat, excluding Northstar-at-Tahoe, primarily due to improved gross margins. Additionally, resort related fees (including Forest Service fees, other resort-related fees, credit card fees and commissions) increased $3.0 million, or 8.3%, excluding Northstar-at-Tahoe, compared to Fiscal 2010, due to overall increases in revenue upon which those fees are based and general and administrative expenses increased $6.0 million, or 6.8%, excluding Northstar-at-Tahoe, primarily due to expenses associated with the operations of Mountain News Corporation and increased marketing expenditures. Other expense increased $5.1 million, or 5.1%, excluding Northstar-at-Tahoe, in Fiscal 2011 primarily due to increased food and beverage cost of sales due to an increase in dining revenue and higher fuel and supplies expenses.
Mountain equity investment income primarily includes the company’s share of income from the operations of a real estate brokerage joint venture. The decrease in equity investment income for Fiscal 2011 compared to Fiscal 2010 is primarily due to decreased commissions earned by the brokerage compared to Fiscal 2010.
LODGING SEGMENT
Net revenue from Vail Resorts’ Lodging segment was $214.7 million for Fiscal 2011 compared to $195.3 million for the same period in the prior year, a 9.9% increase. For Fiscal 2011, average daily rate (“ADR”) increased 3.8% and revenue per available room (“RevPAR”) increased 6.4% at the company’s owned hotels and managed condominiums compared to the same period in the prior year. Lodging Reported EBITDA was $8.8 million for Fiscal 2011 compared to $2.4 million for the same period in the prior year, an increase of 266.0%, including a $2.9 million benefit from a legal settlement in the first fiscal quarter of 2011 and $2.1 million of stock-based compensation expense for Fiscal 2011 compared to $2.0 million in Fiscal 2010.
Revenue from Vail Resorts-owned hotel rooms increased $1.8 million, or 4.5%, for Fiscal 2011 compared to Fiscal 2010, which was driven by an increase in occupancy of 3.2 percentage points due to higher group business and transient guest visitation primarily at properties proximate to the company’s resorts as a result of increased skier visitation. Grand Teton Lodging Company (GTLC) room revenue in Wyoming for Fiscal 2011 was relatively flat compared to Fiscal 2010 as occupancy was negatively impacted in the fourth quarter of Fiscal 2011 compared to the same period in the prior year due to unfavorable weather conditions in May and June 2011, resulting in a decline in revenue of $0.5 million. Revenue from managed condominium rooms increased $7.2 million, or 22.3%, for Fiscal 2011 compared to the Fiscal 2010, and was primarily due to the addition of managed condominium rooms in the Lake Tahoe region, which generated $3.8 million in revenue and the addition of managed condominium rooms at One Ski Hill Place in Breckenridge, which generated $1.5 million in revenue. Excluding the additional managed condominium rooms in the Lake Tahoe region and One Ski Hill Place in Breckenridge, revenue from managed condominium rooms increased by $1.9 million, or 5.9%, primarily due to an increase in group business at Keystone Resort and transient guest visitation at our other managed condominiums proximate to the company’s ski resorts.
Dining revenue for Fiscal 2011 increased $2.7 million, or 9.7%, as compared to Fiscal 2010, due to increased group visitation, primarily at Keystone Resort ($0.9 million increase in revenue), the addition of a new restaurant located at One Ski Hill Place in Breckenridge, and as a result of a restaurant that was closed for renovation for a portion of the prior year at the Arrabelle at Vail Square. GTLC dining revenue was relatively flat during Fiscal 2011 compared to Fiscal 2010 as revenues were negatively impacted by lower occupancy as discussed above. Transportation revenues increased $0.8 million, or 4.1%, primarily due to an increase in passengers of 5.0% driven by increased visitation to the company’s Colorado-based resorts. Golf revenues increased $0.7 million, or 5.0%, for Fiscal 2011 compared to Fiscal 2010, primarily due to the addition of a golf course at Northstar-at-Tahoe in Fiscal 2011 and an increase of 3.9% in the number of golf rounds played at the company’s other golf courses. Other revenue increased $3.8 million, or 10.6%, for Fiscal 2011 compared to Fiscal 2010 primarily due to an increase in management fee revenue from managed hotel properties, including new managed properties located in the Caribbean, higher commissions earned from reservations booked through the central reservation system and an increase in conference services provided to group business.
Operating expense (excluding reimbursed payroll costs) increased $10.5 million, or 6.3%, for Fiscal 2011 compared to Fiscal 2010. Operating expense in the current year benefited from the receipt of $2.9 million, net of legal expenses for the settlement of alleged damages related to the CME acquisition (included as a credit in other expense). Excluding the impact of the legal settlement, operating expense increased $13.5 million, or 8.1%, during Fiscal 2011, compared to the same period in the prior year. Labor and labor-related benefits increased $7.9 million, or 10.0%, for Fiscal 2011 compared to Fiscal 2010. Labor and labor-related benefits increased primarily due to higher staffing levels associated with increased occupancy and labor associated with the addition of managed condominiums in the Lake Tahoe region and at One Ski Hill Place in Breckenridge, the full year impact of the prior year’s partial wage reinstatement and the company’s matching component of the 401(k) plan, as well as a more normal level of wage increases for Fiscal 2011. General and administrative expense increased $1.9 million, or 6.5%, primarily due to an increase in central reservation costs, and the Lodging segment component of corporate costs including labor, labor-related benefits and marketing. Other expense, excluding the legal settlement, increased $3.7 million, or 6.2%, primarily due to increased fuel costs, as well as other variable operating costs associated with increased occupancy and volume including higher food and beverage cost of sales, credit card fees and other operating expense.
REAL ESTATE SEGMENT
Real Estate segment net revenue was $200.2 million for Fiscal 2011 compared to $61.0 million in the same period in the prior year. Real Estate Reported EBITDA was a negative $5.0 million for Fiscal 2011 compared to a negative $4.3 million in the prior year, including $3.3 million of stock-based compensation expense for Fiscal 2011 compared to $4.5 million in Fiscal 2010.
Real Estate segment net revenue for Fiscal 2011 was driven primarily by the closing of 71 condominium units (45 units sold to The Ritz-Carlton Development Company and 26 units sold to individuals) at The Ritz-Carlton Residences, Vail ($186.4 million of revenue with an average selling price per unit of $2.6 million and an average price per square foot of $1,216). The Ritz-Carlton Residences, Vail average price per square foot is driven by The Ritz-Carlton brand, its premier Lionshead location at the base of Vail, its proximity to the ski resort’s Eagle Bahn gondola and the comprehensive and exclusive amenities related to the project. Additionally, during Fiscal 2011, Vail Resorts recognized $7.8 million of revenue related to deposits from buyers who defaulted on units under contract at The Ritz-Carlton Residences, Vail and the company closed on four condominium units at One Ski Hill Place ($4.3 million of revenue with an average selling price per unit of $1.1 million and an average price per square foot of $982). The One Ski Hill Place average price per square foot is driven by its premier ski-in/ski-out location at the base of Peak 8 in Breckenridge, its close proximity to the BreckConnect gondola and other lifts and the comprehensive offering of amenities resulting from this project.
Operating expense for Fiscal 2011 included cost of sales of $171.1 million primarily resulting from the closing of 71 condominium units at The Ritz-Carlton Residences, Vail (average cost per square foot of $1,090) and from the closing of four condominium units at One Ski Hill Place (average cost per square foot of $769). Additionally, sales commissions of approximately $7.2 million were incurred. Other operating expense of $26.9 million (including $3.3 million of stock-based compensation expense) was primarily comprised of general and administrative costs which include marketing expense for the real estate available for sale (including those units that have not yet closed), carrying costs for units available for sale and overhead costs, such as labor and labor related benefits and the Real Estate segment component of corporate costs.
OVERALL PERFORMANCE
Total net revenue was $1,167.0 million for Fiscal 2011 compared to $894.8 million in the prior year, a 30.4% increase. Net income attributable to Vail Resorts, Inc. was $34.5 million, or $0.94 per diluted share, for Fiscal 2011 compared to net income attributable to Vail Resorts, Inc. of $30.4 million, or $0.83 per diluted share, in the prior year. Net income attributable to Vail Resorts, Inc. included a pretax charge of $7.4 million, or $4.6 million aftertax, in Fiscal 2011 for extinguishment of debt related to the company’s bond refinancing.
As of July 31, 2011, Vail Resorts had cash and cash equivalents on hand of $70.1 million, Net Debt of 1.9 times trailing twelve months Total Reported EBITDA, and no revolver borrowings under the company’s $400 million senior credit facility that has $332.9 million available for borrowing after considering $67.1 million in currently issued letters of credit.
Vail Resorts did not repurchase any shares of common stock during Fiscal 2011. Since inception of the company’s stock repurchase plan in 2006, Vail Resorts has repurchased 4,264,804 shares at a cost of approximately $162.8 million, through July 31, 2011. As of July 31, 2011, there were 1,735,196 shares available to repurchase under the existing share repurchase authorization.
COMPANY OUTLOOK FOR 2012
“We are excited about the upcoming season and expect to build upon the positive dynamics from Fiscal 2011 with several new initiatives in Fiscal 2012 that will further elevate the market position of our resorts,” commented Katz. “Our optimism, however, is tempered by the uncertainty we are seeing in the broader economy, which has worsened over the past few months, and its potential impact on consumer spending on travel and leisure for the coming year. We still are anticipating continued growth in Fiscal 2012, supported by some positive momentum in our preseason indicators, which include the sale of season passes, lodging bookings and retail sales.
“First,” Katz explained, “our season pass sales through September 20, 2011 are 9% higher in sales dollars and up 1% in units against the same period in the prior year and adjusted as if Northstar-at-Tahoe were owned in both periods. While our growth rates have moderated since early June, as expected due to some timing shifts, these results are very much in line with the overall increase we expect in the total pass program when the selling periods generally conclude in late November. Season pass sales, which accounted for 35% of total lift revenue in Fiscal 2011, provide stability to our business and we are pleased with our ability to get an increasing number of guests to commit to buying passes well in advance of the start of the ski season, particularly in these economic times.
“Second,” said Katz, “although it is still early in the cycle (less than 15% of winter season bookings are historically made by this time), bookings are up in both room nights and revenue over the prior year at the same point in time with demand stronger at the higher end. Third, sales at our retail stores during our annual Labor Day sales events significantly exceeded the strong levels achieved in the prior year, with gross margin percentages higher as well.”
Commenting on capital projects, Katz added, “Our capital projects are on track to be completed in time for the upcoming season. We have several initiatives that will further our goal of enhancing the guest experience and differentiating our resorts. Among these initiatives, at our Colorado Resorts, we are replacing the Rose Bowl Chair at Beaver Creek with a high speed lift, which will improve the accessibility of some of the mountain’s best terrain, and we are building a fine dining restaurant, available to the general public, adjacent to Mid-Vail. In California, Northstar-at-Tahoe is undergoing a dramatic capital program, including terrain expansion, a new high speed lift and a mountaintop restaurant which, when combined with the recently built base village and high end lodging, completes a comprehensive transformation not seen anywhere else in the US ski industry. In addition to these high impact projects, we are adding several new retail locations and are renovating certain of our hotel properties.”
Commenting on Fiscal 2012 guidance, Katz continued, “We would like to announce our guidance for Fiscal 2012. As always, our visibility on the upcoming season at this point in time is limited. Based on our current estimates, our Fiscal 2012 guidance range anticipates Resort Reported EBITDA of between $233 million and $243 million. It is important to note that included in our estimates for Resort Reported EBITDA for Fiscal 2012 is an estimated $7.2 million seasonal loss associated with owning Northstar-at-Tahoe in the first quarter of fiscal 2012, which did not occur in Fiscal 2011 (since it was acquired in the last week of the first quarter of fiscal 2011). However, Fiscal 2012 will not include $4.1 million of one-time Northstar-at-Tahoe acquisition related expenses that occurred primarily in the first quarter of Fiscal 2011. Finally, the first fiscal quarter of 2011 benefited from a $2.9 million favorable litigation settlement in the Lodging segment. Excluding the impact of these unusual items, our Resort Reported EBITDA guidance range for Fiscal 2012 would reflect an increase of 8%-12% over Fiscal 2011. Our Real Estate segment results are impacted in any given year by the timing and mix of real estate sold and closed. For Fiscal 2012, we are anticipating net proceeds from real estate sales to total $35-$45 million partially offset by Real Estate Reported EBITDA of negative $16 million to negative $24 million, including approximately $3 million of non-cash stock compensation expense, resulting in estimated net positive cash flow from real estate of $20-$30 million.”