Vail Resorts, Inc. Mountain revenue for the second quarter of fiscal 2006 was $246.2 million, a 15.0% increase from $214.2 million for the comparable period last year. Mountain expense increased $17.8 million, or 13.4%, to $150.7 million. Excluding stock-based compensation expense, Mountain expense increased $16.9 million, or 12.7%, to $149.7 million.
Lodging revenue for the quarter decreased by $10.5 million, or 24.7%, to $32.1 million. Lodging expense decreased $7.7 million, or 18.9%, to $32.9 million. Excluding stock-based compensation expense, Lodging expense decreased $8.1 million, or 19.9 %, to $32.5 million. In fiscal 2005 the Company sold the assets constituting the Vail Marriott Mountain Resort & Spa (“Vail Marriott”) and The Lodge at Rancho Mirage (“Rancho Mirage”). Consequently, results for the second quarter of fiscal 2006 do not reflect the operations of the sold assets. For the second quarter of fiscal 2005, the Lodging segment included revenue of $11.9 million and operating expense of $9.6 million related to these entities. In addition, the Company retained management contracts for both the Vail Marriott and Rancho Mirage. As a result, Lodging revenue includes incremental management fee revenue of $366,000 for these entities for the second quarter of fiscal 2006.
Resort revenue, the combination of Mountain and Lodging revenues, rose $21.6 million, or 8.4%, to $278.3 million. Resort expense increased 5.8% to $183.6 million, up $10.1 million. Excluding stock-based compensation expense, Resort expense increased $8.9 million, or 5.1%, to $182.1 million.
Total revenue grew $23.4 million, or 8.8%, to $288.0 million and total segment operating expense increased $9.8 million, or 5.4%, to $189.9 million. Excluding stock-based compensation expense, total segment operating expense increased $8.2 million, or 4.5%, to $188.1 million.
Income from operations for the quarter improved $16.4 million, or 27.1%, to $77.0 million compared to $60.6 million for the same period last year.
Reported EBITDA for the Mountain segment grew $14.9 million, or 18.2%, to $97.0 million compared to $82.1 million for the comparable period last year. Reported EBITDA excluding stock-based compensation for the Mountain segment increased $15.8 million, or 19.3%, to $98.0 million compared to $82.2 million for the prior year fiscal quarter.
Reported EBITDA for the Lodging segment decreased from $1.3 million in the second quarter of last year to a loss of $0.8 million in the current year second quarter. Reported EBITDA excluding stock-based compensation for the Lodging segment decreased $1.7 million, to a loss of $0.4 million compared to $1.3 million of positive Reported EBITDA for the same period last year. As mentioned previously, the results for the second quarter of fiscal 2006 do not reflect the operations of the sold assets constituting the Vail Marriott and Rancho Mirage. In addition, in fiscal 2005, the Company sold its 49% interest in the joint venture that owned the Ritz-Carlton, Bachelor Gulch (“BG Resort”). For the second quarter of fiscal 2005, Lodging Reported EBITDA included revenue of $11.9 million and operating expense of $9.6 million relating to the Vail Marriott and Rancho Mirage as well as equity investment loss of $0.8 million related to BG Resort. Lodging Reported EBITDA includes incremental management fee revenue of $366,000 for the Vail Marriott and Rancho Mirage for the second quarter of fiscal 2006.
Second quarter Resort Reported EBITDA rose $12.9 million to $96.2 million, a 15.4% improvement over the comparable period last year. Resort Reported EBITDA excluding stock-based compensation was $97.6 million, a $14.1 million, or 16.9%, improvement over the $83.5 million reported in the second fiscal quarter of last year.
On January 19, 2006, the Company sold the assets constituting the Snake River Lodge & Spa. The sale had minimal impact on the Lodging segment results for the three and six months ended January 31, 2006. Associated with the sale, the Company recorded a $4.7 million gain in the three and six months ended January 31, 2006.
The Company reported second quarter net income of $43.0 million, or $1.12 per diluted share, compared to net income of $32.2 million, or $0.89 per diluted share, for the same period last year, an increase of 33.4%. Excluding stock-based compensation expense required to be recorded pursuant to the adoption of SFAS 123R in fiscal 2006, the Company's net income for the second quarter of fiscal 2006 would have been $44.1 million, or $1.15 per diluted share compared to $32.4 million excluding stock-based compensation recorded pursuant to APB 25, or $0.90 per diluted share, for the same period last year, an increase of 36.5%.
Mountain revenue for the six months ended January 31, 2006 was $286.5 million, a 15.2% increase from $248.7 million for the comparable period last year. Mountain expense increased $26.1 million, or 13.3%, to $223.0 million. Excluding stock-based compensation expense, Mountain expense increased $24.3 million, or 12.4%, to $221.0 million.
Lodging revenue for the six months declined $15.0 million, or 16.9%, to $73.8 million. Lodging expense decreased $13.6 million, or 16.1%, to $70.5 million. Excluding stock-based compensation expense, Lodging expense decreased $14.4 million, or 17.1 %, to $69.7 million. For the six months ended January 31, 2005, the Lodging segment includes revenue of $19.0 million and operating expense of $17.6 million relating to the Vail Marriott and Rancho Mirage. Lodging revenue includes incremental management fee revenue of $595,000 for these entities for the six months ended January 31, 2006.
Resort revenue rose $22.8 million, or 6.8%, to $360.3 million, and Resort expense increased 4.5% to $293.5 million, up $12.6 million. Excluding stock-based compensation expense, Resort expense increased $10.0 million, or 3.6%, to $290.7 million.
Total revenue grew $10.9 million, or 3.0%, to $373.4 million and total segment operating expense increased $8.2 million, or 2.8%, to $305.9 million. Excluding stock-based compensation expense, total segment operating expense increased $5.0 million, or 1.7%, to $302.4 million.
Income from operations for the six months improved $8.2 million, or 42.9%, to $27.1 million compared to $19.0 million for the same period last year.
Reported EBITDA for the Mountain segment improved $12.4 million, or 23.3%, to $65.9 million compared to $53.4 million for the comparable period last year. Reported EBITDA excluding stock-based compensation for the Mountain segment increased $14.2 million, or 26.6%, to $67.8 million compared to $53.6 million for the first half of fiscal 2005.
Reported EBITDA for the Lodging segment improved from $2.1 million for the six-month period last year to $3.3 million in the current year, an improvement of 59.4%. Reported EBITDA excluding stock-based compensation for the Lodging segment increased $2.0 million, or 94.1%, to $4.1 million compared to $2.1 million for the same period last year. For the six months ended January 31, 2005, Lodging Reported EBITDA includes revenue of $19.0 million and operating expense of $17.6 million related to the Vail Marriott and Rancho Mirage, as well as equity investment loss of $2.7 million related to BG Resort. Lodging Reported EBITDA includes incremental management fee revenue of $595,000 for the Vail Marriott and Rancho Mirage for the six months ended January 31, 2006.
Resort Reported EBITDA rose $13.7 million to $69.1 million, a 24.6% improvement over the six-month period last year. Resort Reported EBITDA excluding stock-based compensation was $71.9 million, a $16.2 million, or 29.1%, improvement over the $55.7 million reported in the first half of the last fiscal year.
The Company reported net income for the six months of $8.7 million, or $0.23 per diluted share, compared to net income of $0.8 million, or $0.02 per diluted share, for the same period last year. Excluding stock-based compensation required to be recorded pursuant to the adoption of SFAS 123R in fiscal 2006, the Company's net income for the first half of fiscal 2006 would have been $10.9 million, or $0.29 per diluted share compared to $1.0 million excluding stock-based compensation recorded pursuant to APB 25, or $0.03 per diluted share, for the same period last year.
Robert Katz, Chief Executive Officer, commented, “I am very pleased with our results for the second quarter. It is a further indication of the success of our focus on the guest experience and the incredible contribution of all of our employees. Overall, our resorts showed strong increases in skier visits, even after absorbing a decline at Heavenly due to certain adverse weather impacts. We also realized price increases at all of our resorts, and season pass sales exceeded last year by 10.8%. Ski school, dining and retail/rental all had strong growth as we continued our success at providing guests a comprehensive service offering.”
“While I am satisfied with the financial results of our Real Estate segment, much of the most significant activity of our new projects is still in the construction and planning stages. The Arrabelle project is a critical part of our redevelopment plans for Vail Mountain and it represents an important upgrade to one of our primary guest gateways to the mountain. We are currently estimating, based on our most recent construction cost estimates, that the Arrabelle and Gore Creek Place projects combined will generate income, before provision for income taxes and before allocated corporate or Vail Resorts Development Company overhead, of between $63 million and $73 million. We are also estimating that our investment in resort depreciable assets related to this project, including the hotel and public space components, will be between $90 million and $95 million, partially offset by estimated up-front cash from initiation fees related to club membership sales of $20 million to $25 million. I am disappointed that our original profit targets for the project have turned out to be too optimistic, given the increase in construction costs. However, with the combined benefit of the significant enhancement to our guest experience and its overall financial contribution to the Company, I still view the Arrabelle as a major success for Vail Resorts and an indication of what is possible at our resorts in the future,” continued Katz.
“As previously reported, our proposed land trade with the United States Forest Service was appealed,” Katz added. “This land trade is an important part of our Vail's Front Door project, which represents a critical upgrade to our other primary guest gateway to Vail Mountain. This project has been reviewed by a number of important constituents and we believe it enjoys widespread support, particularly in the Town of Vail. We are hopeful that this appeal can be adjudicated quickly so that we can proceed with these enhancements to the guest experience at Vail Mountain.”
Katz concluded, “Based on the strength of the results we announced today, we would like to take this opportunity to update the previously announced full-year guidance given during our first quarter fiscal 2006 earnings release. Based on our current estimates, we now believe that we will be in the upper end of our full-year guidance ranges for Resort Reported EBITDA, Resort Reported EBITDA excluding stock-based compensation, net income, and net income excluding stock-based compensation. All of these ranges were announced in conjunction with our first quarter earnings release on December 7, 2005.”
“Our Board took this action based upon our Company's continued strong financial condition and it reflects the Board's confidence in Vail Resorts' growth potential, financial outlook, and excess cash flow generation,” commented Katz.
The Company also announced that it expects to spend approximately $75 million – $80 million for capital expenditures for maintenance capital and discretionary resort improvements at the Company's five ski resorts and throughout its hotels in calendar 2006. Highlights of these expenditures include a proposed new gondola at Breckenridge to connect the Town to Peaks 7 and 8; a new high-speed chairlift at Heavenly Ski Resort; a greatly expanded spa at the Keystone Lodge; snowmaking upgrades at Vail, Beaver Creek, Keystone and Breckenridge; on-mountain restaurant upgrades at Vail, Beaver Creek and Heavenly; and upgrades to the central reservations, marketing database and ecommerce booking systems, among other projects.
In addition, the Company expects to spend $185 million to $195 million for real estate-related capital expenditures, including costs to be incurred for the construction of associated resort-related depreciable assets. However, net cash outlays for real estate are expected to be significantly less as the Company anticipates that it will secure additional non-recourse financing for the major Vail projects in addition to the receipt of proceeds from real estate deposits and land sales. Included in the approved real estate capital are both new (Vail's Front Door) and ongoing (Arrabelle and Gore Creek Place) projects related to the multi-year redevelopment of Vail. Also contributing to the real estate capital expenditures is the continued development of a golf course community in Jackson Hole and Phase II of the Mountain Thunder Lodge condominiums at Breckenridge.
Commenting on the capital expenditure announcement, Katz said, “Our capital plan continues our investment in the guest experience. We will be maintaining the high quality standards of our resorts while also making a number of exciting new improvements. We are especially pleased to announce the gondola project in Breckenridge, which represents a truly collaborative effort between Vail Resorts and the Town of Breckenridge. The proposed gondola will completely transform one of the primary access points to the mountain and represents a very significant enhancement to the experience that many of our guests have in starting their day of skiing at Breckenridge.”
Vail Resorts, Inc.
Consolidated Condensed Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Ended
January 31,
2006 2005
Net revenue:
Mountain $246,228 $214,166
Lodging 32,079 42,589
Real estate 9,709 7,873
Total net revenue 288,016 264,628
Segment operating expense:
Mountain 150,666 132,849
Lodging 32,894 40,570
Real estate 6,383 6,714
Total segment operating expense 189,943 180,133
Other operating (expense) income:
Depreciation and amortization (21,431) (23,273)
Mold remediation credit 852 --
Loss on disposal of fixed assets, net (486) (623)
Income from operations 77,008 60,599
Mountain equity investment income, net 1,455 771
Lodging equity investment loss, net -- (761)
Real estate equity investment income
(loss), net 31 (24)
Investment income, net 1,046 1,174
Interest expense (9,502) (10,809)
Loss on extinguishment of debt -- (612)
Gain on sale of businesses, net 4,625 5,693
Gain on put options, net 1,026 975
Other income, net 51 84
Minority interest in income of consolidated
subsidiaries, net (5,231) (4,665)
Income before provision for income taxes 70,509 52,425
Provision for income taxes (27,498) (20,184)
Net income $43,011 $32,241
Per share amounts:
Basic net income per share $1.15 $0.91
Diluted net income per share $1.12 $0.89
Other Data:
Mountain Reported EBITDA $97,017 $82,088
Mountain Reported EBITDA excluding
stock-based compensation $98,016 $82,192
Lodging Reported EBITDA $(815) $1,258
Lodging Reported EBITDA excluding
stock-based compensation $(401) $1,293
Resort Reported EBITDA $96,202 $83,346
Resort Reported EBITDA excluding
stock-based compensation $97,615 $83,485
Real Estate Reported EBITDA $3,357 $1,135
Real Estate Reported EBITDA excluding
stock-based compensation $3,758 $1,172
