Vail Resorts announced financial results for the second quarter of fiscal 2004 ended January 31, 2004.
The Company historically used the term “EBITDA” when reporting its
financial results for each of its reportable segments: mountain; lodging;
resort, the combination of mountain and lodging; and real estate. In
conjunction with the recently adopted Securities and Exchange rules regarding
the use of non-GAAP financial measures, the Company currently uses the term
“Reported EBITDA” when reporting financial results. The Company defines
Reported EBITDA for the mountain, lodging and resort segments as segment net
revenue less segment operating expense plus segment equity investment income.
SECOND QUARTER PERFORMANCE
Mountain revenue for the second quarter of fiscal 2004 was $201.4 million,
a 6.9% increase from $188.4 million for the comparable period last year.
Mountain expense increased $3.4 million, or 2.7%, to $126.9 million.
Lodging revenue for the quarter grew $2.8 million, or 7.8%, to $38.4
million. Lodging expense increased $0.4 million, or 1.0%, to $38.4 million.
Resort revenue, the combination of mountain and lodging revenues, rose
$15.7 million, or 7.0%, to $239.7 million. Resort expense increased 2.3% to
$165.2 million, up $3.7 million.
Real estate revenue for the quarter fell $16.7 million, as expected due to
the timing and mix of real estate projects, to $7.5 million, and real estate
expense decreased $16.2 million to $6.1 million.
Total revenue declined $1.0 million, or 0.4%, to $247.2 million due to the
expected decline in real estate revenue, and total operating expense decreased
$4.3 million, or 2.1%, to $200.6 million.
Income from operations for the quarter improved $3.4 million, or 7.8%,
despite a $5.5 million pre-tax charge for mold remediation, to $46.6 million
compared to $43.3 million for the same period last year.
Reported EBITDA for the mountain segment grew $9.8 million, or 14.9%, to
$75.1 million compared to $65.3 million for the comparable period last year.
Reported EBITDA for the lodging segment improved from a loss of $4.3
million in the second quarter of last year to a loss of $1.2 million in the
current year second quarter. The second quarter of fiscal 2004 includes $1.2
million of equity loss attributed to the Ritz-Carlton, Bachelor Gulch, which
represents a $0.8 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 second quarter Lodging Reported EBITDA loss
is $0.6 million of depreciation and $0.6 million of interest expense.
Excluding the Ritz-Carlton, Bachelor Gulch in its entirety, Lodging Reported
EBITDA was slightly positive in the second quarter this year versus a loss of
$2.4 million last year.
Second quarter Resort Reported EBITDA rose $12.9 million to $73.9 million,
a 21.1% improvement over the comparable period last year.
Real Estate Reported EBITDA for the quarter fell only $1.0 million to $1.7
million from $2.7 million, despite the $16.7 million decline in real estate
revenue, primarily due to the sale of higher margin properties this quarter
than the same period last year.
During the second quarter of fiscal 2004, the Company completed a highly
successful refinancing of its 8 3/4% senior subordinated notes, replacing
those notes, which were to mature in 2009, with a new $390 million issue of 6
3/4% notes due in 2014. This significant interest rate improvement and five-
year extension of maturity provided the Company with long-term capital at
cheaper rates and give the Company greater flexibility to manage its capital
structure. Additionally, the Company repriced its $100 million Term B bank
loan, saving 50 basis points on interest rate and extending the maturity by
two years from 2008 to 2010. The favorable terms on the new notes and Term B
loan will result in an annual decrease in cash interest expense of
approximately $5.7 million. As a result of these transactions, in the second
quarter of fiscal 2004 the Company recorded a $36.2 million pre-tax charge,
comprised of the tender premium, transaction fees and the non-cash write-off
of the unamortized balance of deferred financing costs and original issue
discount.
In addition, the Company recorded a $5.5 million pre-tax mold remediation
charge associated with the previously disclosed condition at the Breckenridge
Terrace, LLC employee housing facilities as a result of water intrusion
causing mold damage to the interior of the buildings. Breckenridge Terrace is
seeking various means to mitigate a portion of the remediation cost. Any
changes in estimate for the remediation, including if receipt of recoveries
from potentially responsible parties is deemed probable, will be reflected in
future periods.
As a result of these charges, the Company reported a second quarter net
loss of $6.7 million, or a loss of $0.19 per diluted share, compared to net
income of $16.7 million, or $0.47 per diluted share, for the same period last
year. Excluding the charges for early extinguishment of debt and mold
remediation, the Company's second quarter net income would have been $20.5
million, or $0.58 per diluted share, using a normalized tax rate.
SIX MONTH PERFORMANCE
Mountain revenue for the six months ended January 31, 2004 was $235.4
million, a 6.0% increase from $222.0 million for the comparable period last
year. Mountain expense increased $0.6 million, or 0.3%, to $188.8 million.
Lodging revenue for the six months grew $4.8 million, or 6.3%, to $81.0
million. Lodging expense increased $1.6 million, or 2.0%, to $78.9 million.
Resort revenue, the combination of mountain and lodging revenues, rose
$18.2 million, or 6.1%, to $316.5 million, and Resort expense increased 0.8%
to $267.7 million, up $2.2 million.
Real estate revenue for the six-month period fell $29.2 million to $34.4
million as expected, and real estate expense decreased $31.7 million to $18.2
million.
Total revenue declined $10.9 million, or 3.0%, to $350.9 million and total
operating expense decreased $20.4 million, or 5.7%, to $334.6 million.
Income from operations for the six months improved $9.5 million, or
141.7%, to $16.2 million compared to $6.7 million for the same period last
year, despite a $5.5 million pre-tax charge in the second quarter for mold
remediation.
Reported EBITDA for the mountain segment improved $11.8 million, or 33.4%,
to $47.2 million compared to $35.4 million for the comparable period last
year.
Reported EBITDA for the lodging segment improved from a loss of $4.3
million for the six month period last year to a loss of $0.8 million in the
current year. The first six months of fiscal 2004 includes $2.8 million of
equity loss attributed to the Ritz-Carlton, Bachelor Gulch, which represents a
$0.5 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 loss is $1.1 million
of depreciation and $1.3 million of interest expense. Excluding the Ritz-
Carlton, Bachelor Gulch in its entirety, Lodging Reported EBITDA was $2.0
million for the first six months this year versus a loss of $1.1 million for
the same period last year.
Resort Reported EBITDA rose $15.4 million to $46.4 million, a 49.5%
improvement over the six-month period last year.
Real Estate Reported EBITDA for the six months increased $1.0 million to
$18.5 million from $17.5 million for the same period a year ago. The current
year's six month Reported EBITDA includes a $2.1 million net gain from the
transfer of property.
The Company reported a net loss for the six months of $32.1 million, or
$0.91 per diluted share, compared to a net loss of $8.4 million, or $0.24 per
diluted share, for the same period last year. Excluding the charges for early
extinguishment of debt and mold remediation, the Company's expected seasonal
net loss for the six months would have been $5.5 million, or $0.16 per diluted
share, using a normalized tax rate.
Adam Aron, Chairman and Chief Executive Officer, commented, “We couldn't
be more pleased to announce Vail Resorts' second quarter record Resort
Reported EBITDA. With both revenue increases across the board and the
implementation of an aggressive expense savings plan, we were able to improve
Resort Reported EBITDA by 21% year-over-year. Demonstrating our increased
efficiency in managing our business, Resort Reported EBITDA margins improved
by approximately 4 percentage points.”
“The refinancing of our senior subordinated notes during the quarter was
also an especially favorable development for the Company going forward. We
secured significantly lower interest rates, and locked them in until 2014. Of
course, the accounting treatment for this type of refinancing resulted in a
large pre-tax charge in the quarter of $36.2 million; however, we were able to
reduce our cash interest expense for the next 5 years by $5.2 million per
year, and most experts would think our interest savings will be even greater
beyond that. In addition, we were able to lower the interest rate and extend
the maturity on our $100 million Term B loan, saving the Company an additional
$500,000 of interest per year for the next several years,” continued Aron.
Aron further added, “The parade of good news in the second fiscal quarter
seemed never ending. Beaver Creek and Heavenly are on a course to record
skier visit years. And, thanks to increases in lift ticket pricing, Vail and
Breckenridge also performed very well during the quarter. Our Keystone resort
received approval for a significant terrain expansion for snowcat-served bowl
skiing, taking Keystone to more than 2,500 skiable acres and more than a 3,000
foot vertical drop. Our lodging business is showing significant signs of
recovery, as well. And, our real estate division has had sufficient
profitability in the first six months, that it too should report impressive
results for fiscal 2004. We are especially excited with our cooperation with
the Town of Vail and its apparent willingness to approve the Company's
dramatic plan to redevelop in Vail Village and in Vail's Lionshead. These
efforts to significantly enhance the base village experiences in Vail promise
to literally transform Vail Resorts' flagship resort.”
Aron added, “As you know, we expect to increase our fiscal 2004 year-end
Resort Reported EBITDA by a range of approximately $26 to $36 million
year-over-year, to between $130 million and $140 million. Given that we
already have a $15.4 million year-to-date year-over-year increase under our
belt through January, we remain comfortable with this previously issued
guidance. We are also encouraged that February skier visits and revenue were
strong compared to the same period last year. On the other hand, it is too
early to know for certain how we will perform in March and April at our ski
resorts. And, looking at the remainder of fiscal 2004, Lodging advance
bookings for the fourth quarter are robust. Therefore, at this time, we are
reiterating the year-end Reported EBITDA guidance we provided in November for
the Mountain, Lodging, Resort and Real Estate segments. Similarly, excluding
the impact of the charges associated with the early extinguishment of debt and
Breckenridge Terrace mold remediation, we would be reiterating our net income
guidance of $2 to $10 million for the fiscal year.”
CAPITAL EXPENDITURE ANNOUNCEMENT
The Company also announced that its Board of Directors authorized
approximately $62 million of capital expenditures for maintenance capital and
discretionary resort improvements at the Company's five ski resorts and
throughout its hotels for calendar 2004. Highlights of these expenditures
include three new high-speed chairlifts at the Beaver Creek and Heavenly ski
resorts, restaurant upgrades at Heavenly's mid-mountain East Peak area,
sufficient new snowcats to enable a 30% increase in grooming hours at Vail and
Beaver Creek, and a multi-million dollar renovation at the Lodge at Rancho
Mirage.
In addition, anticipating the impending redevelopment of the base village
experience in Vail, an additional $72 million of real estate-related capital
expenditures were also approved. This real estate-related capital will mark
the beginning of a multi-year redevelopment of both Vail Village and Vail's
Lionshead, the creation of a new golf course community in Jackson Hole, and
other projects.
Commenting on the capital expenditure announcement, Aron said, “Vail
Resorts has always stood for industry leading quality in the guest experience
that we offer. While resort-related spending for calendar 2004 is projected
to be down somewhat from prior years, it is still more than ample to continue
to make certain Vail Resorts' clear leadership position among mountain resort
operators. New lifts, more grooming, better restaurants and renovated hotels
will continue to widen the gap between the premier experiences we offer
visitors to our resorts, as contrasted with that offered by our competitors.
Perhaps as dramatic, after years of planning, a transformation of our flagship
resort, Vail, is literally at hand. Vail's New Dawn real estate development
will refine the charm and enhance the amenities of Vail Village, and will
create an all-new pedestrian village with handsome European-inspired
architecture in what is now Lionshead.”
Vail Resorts, Inc.
Consolidated Financial Statements
(in thousands except per share amounts)
(unaudited)Three Months Ended Six Months Ended
January 31, January 31,
2004 2003 2004 2003
(as restated) (as restated)
Net revenue:
Mountain $201,368 $188,385 $235,447 $222,014
Lodging 38,372 35,612 81,024 76,213
Real estate 7,496 24,192 34,388 63,546
Total net revenue 247,236 248,189 350,859 361,773
Operating expense:
Mountain 126,860 123,505 188,775 188,161
Lodging 38,367 37,982 78,885 77,275
Real Estate 6,065 22,294 18,189 49,839
Gain on transfer
of property (233) -- (2,147) --
Depreciation &
amortization 22,568 21,138 42,933 39,764
Asset impairment
charge 933 -- 933 --
Mold remediation
charge 5,500 -- 5,500 --
Loss on disposal
of fixed assets,
net 545 3 1,556 19
Total operating
expense 200,605 204,922 334,624 355,058
Income from
operations 46,631 43,267 16,235 6,715
Other income (expense)
Mountain equity
investment income,
net 586 452 568 1,541
Lodging equity
investment loss,
net (1,214) (1,975) (2,954) (3,281)
Real estate equity
investment income,
net 3 771 206 3,841
Investment income 328 404 893 610
Interest expense (12,857) (12,935) (26,266) (24,714)
Loss on
extinguishments
of debt (36,195) -- (36,195) --
Gain (loss) on
put option, net (696) 1,371 (1,306) 1,371
Other income
(expense), net (10) (10) (10) 19
Minority interest
in income of
consolidated
subsidiaries (4,094) (2,343) (2,003) (319)
Income (loss) before
provision for
income taxes (7,518) 29,002 (50,832) (14,217)
Benefit (provision)
for income taxes 781 (12,277) 18,691 5,827
Net income (loss) $(6,737) $16,725 $(32,141) $(8,390)Basic weighted
average shares 35,286 35,187 35,280 35,176
Diluted weighted
average shares 35,286 35,227 35,280 35,176Per share amounts:
Basic net loss
per share $(0.19) $0.48 $(0.91) $(0.24)
Diluted net loss
per share $(0.19) $0.47 $(0.91) $(0.24)
Other Data:
Mountain Reported
EBITDA $75,094 $65,332 $47,240 $35,394
Lodging Reported
EBITDA (1,209) (4,345) (815) (4,343)
Resort Reported
EBITDA 73,885 60,987 46,425 31,051
Real Estate Reported
EBITDA $1,667 $2,669 $18,552 $17,548Note: Certain reclassifications have been made to the Consolidated
Financial Statements as of and for the three and six months ended
January 31, 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 Six Months Ended
January 31, January 31,2004 2003 % Change 2004 2003 % Change
Business Line
Lift tickets $97,147 $91,028 6.7% $97,173 $90,915 6.9%
Ski school 25,022 23,894 4.7% 25,046 23,965 4.5%
Dining 18,411 18,249 0.9% 22,325 22,067 1.2%
Retail/rental 45,035 41,297 9.1% 62,075 57,627 7.7%
Other 15,753 13,917 13.2% 28,828 27,440 5.1%
Total Mountain
Operating
Revenue 201,368 188,385 6.9% 235,447 222,014 6.1%Total Lodging
Operating
Revenue 38,372 35,612 7.8% 81,024 76,213 6.3%Total Resort
Revenue $239,740 $223,997 7.0% $316,471 $298,227 6.1%Three Months Ended Six Months Ended
January 31, January 31,2004 2003 % Change 2004 2003 % Change
Skier Visits
Vail 698 736 (5.2)% 698 736 (5.2)%
Breckenridge 657 658 (0.2)% 657 658 (0.2)%
Heavenly 464 382 21.5 % 464 382 21.5 %
Keystone 452 517 (12.6)% 452 517 (12.6)%
Beaver Creek 349 314 11.1 % 349 314 11.1 %
Total Skier
Visits 2,620 2,607 0.5 % 2,620 2,607 0.5 %As of January 31,
2004 2003
Key Balance Sheet Data:
Real estate held for sale
and investment $111,587 $136,983
Total stockholders' equity 464,462 496,455Total debt 643,027 572,773
Less: cash and
cash equivalents 42,569 24,690
Net debt $600,458 $548,083
