Vail Resorts mountain revenue for the third quarter of fiscal 2004 was $234.2 million, a $23.4 million, or 11.1%, increase from $210.8 million for the comparable period last year. Mountain expense increased $8.0 million, or 6.7%, to $126.7 million.
Lodging revenue for the quarter grew $3.5 million, or 7.5%, to $49.6 million. Lodging expense increased $4.2 million, or 12.3%, to $38.3 million.
Resort revenue, the combination of mountain and lodging revenues, rose $26.8 million, or 10.4%, to $283.8 million. Resort expense increased 8.0% to $164.9 million, up $12.2 million.
Real estate revenue for the quarter fell $7.7 million, as expected, due to the timing and mix of real estate projects, to $4.2 million. Real estate expense decreased $20.2 million to a credit of $8.6 million for the quarter, due primarily to the relief of a $15.1 million capital improvement fee liability on the Company's balance sheet. The elimination of the liability and corresponding reduction in real estate operating expense resulted from the third quarter payoff of the outstanding Smith Creek Metro District (“SCMD”) bonds by the Bachelor Gulch Metro District (“BGMD”), allowing the Company to cancel its letters of credit supporting the SCMD bonds.
Total revenue increased $19.1 million, or 7.1%, to $287.9 million, and total operating expense decreased $8.7 million, or 4.7%, to $178.8 million.
Income from operations for the quarter improved $27.8 million, or 34.2%, to $109.2 million compared to $81.4 million for the same period last year.
Reported EBITDA for the mountain segment grew $16.1 million, or 17.5%, to $108.2 million compared to $92.1 million for the comparable period last year.
Reported EBITDA for the lodging segment improved from $11.7 million in the third quarter of last year to $11.9 million in the current year third quarter. The third quarter of fiscal 2004 includes $0.6 million of equity income attributed to the Ritz-Carlton, Bachelor Gulch, which represents a $0.9 million improvement over the same period last year. As the Company uses the equity method of accounting for the Ritz-Carlton, Bachelor Gulch, included in the fiscal 2004 third quarter Lodging Reported EBITDA is $0.6 million of depreciation and $0.6 million of interest expense.
Third quarter Resort Reported EBITDA grew $16.3 million to $120.1 million, a 15.7% improvement over the comparable period last year.
Real Estate Reported EBITDA for the quarter increased $12.1 million to $13.2 million in the current year third quarter from $1.2 million, due primarily to the reduction in expense associated with the payoff of the SCMD bonds.
The Company reported third quarter net income of $62.5 million, or $1.77 per diluted share, compared to net income of $33.5 million, or $0.95 per diluted share, for the same period last year.
Mountain revenue for the nine months ended April 30, 2004 was $469.6 million, an 8.5% increase from $432.9 million for the comparable period last year. Mountain expense increased $8.6 million, or 2.8%, to $315.4 million.
Lodging revenue for the nine months grew $8.3 million, or 6.8%, to $130.6 million. Lodging expense increased $5.8 million, or 5.2%, to $117.2 million.
Resort revenue rose $45.0 million, or 8.1%, to $600.2 million, and resort expense increased 3.4% to $432.6 million, up $14.4 million.
Real estate revenue for the nine-month period fell $36.9 million to $38.6 million, as expected due to the timing and mix of real estate projects, and real estate expense decreased $51.8 million to $9.6 million in part due to the $15.1 million operating expense reduction associated with the SCMD bond payoff.
Income from operations for the nine months improved $37.3 million, or 42.4%, to $125.4 million compared to $88.1 million for the same period last year.
Reported EBITDA for the mountain segment improved $27.9 million, or 21.9%, to $155.4 million compared to $127.5 million for the comparable period last year.
Reported EBITDA for the lodging segment improved from $7.3 million for the nine-month period last year to $11.1 million, up 51%, in the current year. The first nine months of fiscal 2004 includes $2.2 million of equity loss attributed to the Ritz-Carlton, Bachelor Gulch, which represents a $1.3 million improvement over the same period last year. As the Company uses the equity method of accounting for the Ritz-Carlton, Bachelor Gulch, included in the fiscal 2004 year-to-date Lodging Reported EBITDA is $1.7 million of depreciation and $1.8 million of interest expense.
Resort Reported EBITDA rose $31.7 million to $166.5 million, a 23.5% improvement over the nine-month period last year.
Real Estate Reported EBITDA for the nine months increased $13.1 million to $31.8 million from $18.7 million for the same period a year ago. The payoff of the SCMD bonds by the BGMD accounted for $15.1 million of the increase in Reported EBITDA. The current year's nine-month Real Estate Reported EBITDA includes a $2.1 million net gain from the transfer of property.
Net income for the nine months was $30.3 million, or $0.86 per diluted share, compared to net income of $25.1 million, or $0.71 per diluted share, for the same period last year. Excluding the previously announced second quarter charges for early extinguishment of debt and mold remediation, the Company's net income for the nine months would have been $52.1 million, or $1.48 per diluted share, using a normalized tax rate compared to $0.71 per diluted share in the prior year. The charges associated with the early extinguishment of debt resulted from the successful refinancing in January 2004 of the Company's 10-year senior subordinated notes and other debt, which will save the Company approximately $5.7 million in annual cash interest costs for at least the next five years.
Adam Aron, Chairman and Chief Executive Officer, commented, “This is proving to be a fabulous year for Vail Resorts, and we couldn't be more thrilled to announce our best ever third quarter.
Our mountain segment had an exceptionally strong performance this year, growing revenue and Reported EBITDA across all lines of business. And the 10.2% growth in our average realized price for the ski season is reflective of increases at each and all of our five ski resorts. Beaver Creek and Heavenly both had record skier visits for the second year in a row.
Four of our five mountain resorts (Vail, Beaver Creek, Breckenridge and Heavenly) also achieved record revenues. Overall, our ski areas performed exceptionally well during the 2003/2004 ski season. Careful management of expenses coupled with strong revenues caused profit margins to increase in our mountain segment from 29.4% to 33.0%.”
“We are equally pleased with our Lodging segment results this year. Our lodging properties have benefited from the rebound in the national economy, the improving fortune of the U.S. travel industry, our careful management of expenses, improved occupancy in our RockResorts luxury hotels, positive consumer response to the renovated Vail Marriott, and improved financial results at the Ritz-Carlton, Bachelor Gulch in its second year of operations. This was evidenced by a 6.8% year-to-date increase in lodging revenues as well as our hefty 51% increase in Lodging Reported EBITDA.
The increase was primarily driven by growth in the average daily rates at a majority of our owned hotels thanks to our sophisticated yield management efforts, coupled with a company-wide focus on containing costs while improving the guest experience,” continued Aron.
Aron further added, “Resort Reported EBITDA is already $31.7 million favorable to last year through the third quarter, with three months remaining in fiscal 2004. The mid-range of our previously announced full-year guidance contemplated a $31.4 million year-over-year increase in Resort Reported EBITDA for the entire twelve months.
Therefore, we believe we can prudently increase our guidance ranges at this time. While the fourth quarter is typically a slower season for our company, we do expect stronger year-over-year fourth quarter performance in our lodging segment. We also expect that through tight expense management we will continue to see improvement in normal operating expense growth across the Company.
As such, we currently expect Mountain Reported EBITDA for fiscal 2004 to range from $124 million to $134 million and Lodging Reported EBITDA to range from $8 to $14 million, with total Resort Reported EBITDA between $135 and $145 million. We now expect Real Estate Reported EBITDA to be in the range of $28 to $34 million. The Company now expects to report a net loss for the year ranging from approximately $4 to $14 million.
Excluding the impact of the previously announced charges associated with the early extinguishment of debt and Breckenridge Terrace mold remediation, and using a normalized tax rate, we expect net income to range between approximately $12 and $22 million for the fiscal year. This represents a dramatic recovery from the loss recorded by the Company in fiscal 2003, that we attributed primarily to the one-time impact of the outbreak of the Iraqi War.”
Aron further added, “Looking to the balance of fiscal 2004, the entirety of fiscal 2005 and well into the future, there are a number of other key developments that bode well for Vail Resorts. First, the highly encouraging results achieved so far in fiscal 2004 were achieved despite abnormally low snowfall and unusually warm weather in our peak ski month of March. This caused actual March results to be well below management's expectations.
Accordingly, assuming normal weather next year, one would certainly expect to see upside in our mountain revenues in fiscal 2005. Second, advance sales of season passes for the 2004/2005 ski season are currently running up 8.3% year-over-year. Based on this strength, we are announcing today that the price of our most popular season pass product, the Colorado Pass (of which we have sold approximately 100,000 passes per year), will rise to $349 effective August 15, 2004. Third, we are improving the product offering at several of our resorts. This summer we are installing new high-speed lifts at Beaver Creek and Heavenly and commencing the renovation of the Lodge at Rancho Mirage. Similarly, we are initiating a major grooming initiative, increasing grooming at both Vail and Beaver Creek by a whopping 33%.
We believe these improvements in our product will generate both increased visitation and allow us to charge higher prices over time. And fourth, as previously announced, construction associated with our lucrative redevelopment of Vail, known as Vail's Front Door, has begun. We have similarly broken ground on a new golf community surrounding our Jackson Hole Golf and Tennis Club in Wyoming. We are also in detailed negotiations with a number of third parties to sell them other parcels of our real estate holdings throughout all of our resort locations. Given such discussions and with some of these projects now underway or near launch, we are optimistic that the profitability and cash flows of our real estate segment will rise significantly in the next several years, commencing in fiscal 2006.
We believe that many investors value our real estate holdings near to its book value. Actually, we believe such estimates may be low by $100 million or more. As compelling as this potential real estate profitability is, the development of such projects has the added benefit of enhancing our various resorts and increasing their consumer appeal as well.”
Vail Resorts, Inc.
Consolidated Financial Statements
(in thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
April 30, April 30,
2004 2003 2004 2003
(as restated) (as restated)
Net revenue:
Mountain $234,167 $210,841 $469,614 $432,855
Lodging 49,594 46,143 130,618 122,356
Real estate 4,165 11,888 38,553 75,434
Total net revenue 287,926 268,872 638,785 630,645
Operating expense:
Mountain 126,654 118,687 315,430 306,848
Lodging 38,267 34,070 117,151 111,345
Real Estate (8,578) 11,592 9,610 61,431
Gain on transfer of property -- -- (2,147) --
Depreciation & amortization 22,406 22,878 65,340 62,642
Asset impairment charge -- -- 933 --
Mold remediation charge -- -- 5,500 --
Loss on disposal
of fixed assets, net 11 270 1,567 289
Total operating expense 178,760 187,497 513,384 542,555
Income from operations 109,166 81,375 125,401 88,090
Other income (expense)
Mountain equity
investment income (loss), net 654 (74) 1,222 1,467
Lodging equity investment
income (loss), net 570 (390) (2,384) (3,671)
Real estate equity
investment income, net 486 881 692 4,721
Investment income 445 474 1,338 1,084
Interest expense (10,664) (12,767) (36,930) (37,481)
Loss on extinguishment of debt -- -- (36,195) --
Gain (loss) on put option, net (433) -- (1,739) 1,371
Other income (expense), net 1 -- (9) 20
Minority interest in
income of consolidated
subsidiaries (4,178) (2,577) (6,181) (2,896)
Income before provision
for income taxes 96,047 66,922 45,215 52,705
Provision for income taxes (33,562) (33,386) (14,871) (27,559)
Net income $62,485 $33,536 $30,344 $25,146
Basic weighted average shares 35,294 35,188 35,287 35,180
Diluted weighted average shares 35,371 35,193 35,345 35,206
Per share amounts:
Basic net income per share $ 1.77 $ 0.95 $ 0.86 $ 0.71
Diluted net income per share $ 1.77 $ 0.95 $ 0.86 $ 0.71
Other Data:
Mountain Reported EBITDA $108,167 $92,080 $155,406 $127,474
Lodging Reported EBITDA 11,897 11,683 11,083 7,340
Resort Reported EBITDA 120,064 103,763 166,489 134,814
Real Estate Reported EBITDA $13,229 $1,177 $31,782 $18,724
Note: Certain reclassifications have been made to the Consolidated
Financial Statements as of and for the three and nine months
ended April 30, 2003 and the year ended July 31, 2003 to
conform to the current period presentation.
Vail Resorts, Inc.
Resort Revenue by Business Line and Skier Visits
(in thousands)
Three Months Ended Nine Months Ended
April 30, April 30,
2004 2003 % Change 2004 2003 % Change
(as restated) (as restated)
Business Line
Lift tickets $115,515 $105,174 9.8% $212,688 $196,089 8.5%
Ski school 33,126 31,401 5.5% 58,171 55,367 5.1%
Dining 25,093 22,889 9.6% 47,418 44,955 5.5%
Retail/rental 39,917 36,817 8.4% 101,991 94,443 8.0%
Other 20,516 14,560 40.9% 49,346 42,001 17.5%
Total Mountain
Operating
Revenue 234,167 210,841 11.1% 469,614 432,855 8.5%
Total Lodging
Operating Revenue 49,594 46,143 7.5% 130,618 122,356 6.8%
Total
Resort Revenue $283,761 $256,984 10.4% $600,232 $555,211 8.1%
Three Months Ended Nine Months Ended
April 30, April 30,
2004 2003 % Change 2004 2003 % Change
Skier Visits
Vail 857 873 (1.8)% 1,556 1,612 (3.5)%
Breckenridge 746 766 (2.6)% 1,402 1,425 (1.6)%
Heavenly 498 509 (2.2)% 965 934 3.3 %
Keystone 492 519 (5.2)% 944 1,039 (9.1)%
Beaver Creek 420 404 4.0 % 769 718 7.1 %
Total Skier Visits 3,013 3,071 (1.9)% 5,636 5,728 (1.6)%
ETP $38.34 $34.25 12.0% $37.74 34.24 10.2%
