Vail Resorts, Inc. reported resort net revenue, which includes its mountain and lodging segments, increased 5.7%, for the first quarter of fiscal 2011 on improved summer business at its Mountain resorts and Lodging properties.

Other highlights of the three months ended Oct. 31:


  • Resort Reported net revenue, which includes its mountain and lodging segments, increased $4.6 million, or 5.7%, for the first quarter of fiscal 2011 on improved summer business at our Mountain resorts and Lodging properties.
  • Total Real Estate net revenue equaled $149.3 million reflecting closings at the Ritz-Carlton Residences, Vail.  Real estate net cash proceeds totaled approximately $130 million in the quarter.
  • Net loss attributable to Vail Resorts, Inc. in the historical loss first quarter worsened by $1.9 million in the current year due to the ownership of 100% of Specialty Sports Venture in the current year.  Net loss before adjustments for noncontrolling interests improved 1% for the first quarter of 2011 compared to the same period in the prior year.
  • Through Dec. 5, 2010, and compared to the same period last year, season pass sales are up 5% in units and 7% in sales dollars, excluding Northstar-at-Tahoe.  Including Northstar-at-Tahoe during these same periods, season pass sales have increased 8% and 10%, respectively.  Both Heavenly and Northstar-at-Tahoe have experienced a significant acceleration of season pass sales following the acquisition by Vail Resorts, Inc. of Northstar-at-Tahoe on Oct. 25, 2010.
  • Raising Resort Reported EBITDA guidance range by $11 million primarily to reflect the acquisition of Northstar-at-Tahoe.
Commenting on its fiscal 2011 first quarter results, Rob Katz, Chief Executive Officer, said, “Our first fiscal quarter is a seasonally low earnings period and historically a loss quarter since our mountain resorts are not open for winter ski operations during the period.  The quarter is driven primarily by our summer mountain and lodging operations, together with our administrative expenses for our year-round employees.  During the quarter, our Mountain segment experienced improving trends in its seasonal operations.  Mountain revenue increased 4.0% to $40.8 million in the first quarter on an 18.4% improvement in dining revenue reflecting better group and wedding business at our resorts.  Our lodging business reported favorable results in the quarter, with revenue per available room ('RevPAR') at our owned and managed hotels and condominiums increasing 21.0% to $64.25 and occupancy up 5.8 points.”

Katz continued, “We also had an exciting announcement during the quarter as we closed on the acquisition of Northstar-at-Tahoe on October 25, 2010 for $63 million, adding a sixth premier resort to our portfolio of world-class mountain resort assets.  For fiscal 2011, Northstar-at-Tahoe is expected to contribute approximately $8 million to Mountain Reported EBITDA, after transaction and transition related expenses, and without the loss months of August through October 2010.  If we had owned Northstar-at-Tahoe from the beginning of fiscal 2011, our full year EBITDA estimate would be $10 million, excluding transaction and transition expenses.  We believe that Northstar-at-Tahoe will be a great addition to our Company and build upon our leadership position in the Tahoe area. With substantial and diverse ski terrain, a completely renovated and modern base village, and outstanding guest service, Northstar-at-Tahoe has been one of the fastest growing mountain resorts over the past few years.  It is estimated that over $350 million was spent on the base area of Northstar in the past few years prior to our acquisition and the resort also boasts one of only a select few Ritz-Carlton hotels at any ski resort, which opened on the mountain last December. We believe the modern and upscale infrastructure of Northstar-at-Tahoe is ideally suited to serve the Bay area and Silicon Valley consumer markets.  In fact, many folks from those markets already have purchased luxury home sites and condominiums in some of Tahoe's most upscale mountain communities at Northstar-at-Tahoe, such as Lahontan, Martis Camp, Old Greenwood and The Village at Northstar.  We also believe guests of Heavenly and Northstar-at-Tahoe will greatly appreciate the flexibility to enjoy both the north and south shores of Lake Tahoe on a single pass and lift ticket product.  Most important for our guests, we intend to continue to invest in the resort, further driving its premier position in the area, with terrain expansion, new lifts, new restaurants and new village amenities.”

Commenting on early season indicators, Katz said, “With the 2010/2011 ski season just underway, we are seeing strong momentum across several metrics including pass sales, bookings and retail sales.  Our season pass sales continued to improve throughout the fall selling season and are now higher by 5% in units and 7% in sales dollars, excluding Northstar in both years.  Including Northstar during the same periods of both years, pass sales are up 8% in units and 10% in sales dollars.  Additionally, Heavenly and Northstar-at-Tahoe pass sales have seen a significant increase since the announcement of the Northstar-at-Tahoe acquisition.  As a reminder, revenue from season pass sales is recognized over the course of the second and third fiscal quarters.  Lodging bookings are trending higher, with bookings through our central reservations and at our owned and managed lodging properties for the winter season up for most of our properties from a range of mid-single digits to double digit increases in units and sales dollars.  Based on historical averages, less than 50% of the bookings for the winter season have been made by this time.  Retail sales leading into the season have been very strong, especially at our Colorado front range and San Francisco Bay area locations.  To top it off, we also have had outstanding snowfall so far at all of our resorts, enabling us to have 10 times as many runs open this Thanksgiving compared to last.  While it is still early, these trends and indicators certainly are encouraging.”

Regarding real estate, Katz said, “Real Estate net revenue was significantly higher in the first quarter of fiscal 2011 on closings at the Ritz-Carlton Residences, Vail.  During the quarter, we closed on 12 whole ownership units and all 45 fractional units, which led to $149.3 million in Real Estate net revenue.  The rate of closings of whole ownership units, while below our expectations, was a solid beginning to what we believe will be a multi-year sales process for the project. While Real Estate Reported EBITDA was only $4.2 million for the first quarter despite these closings, it is important to note that since most of the costs included in the real estate results were incurred from a cash perspective in prior years, the favorable cash impact of these closings was much greater, with net cash proceeds from the Ritz-Carlton Residences, Vail closings of approximately $130 million in the quarter.  Most importantly, in the first fiscal quarter of 2011 we passed the critical inflection point for these projects, such that future cash inflows for these two projects will significantly exceed any remaining cash outflows as the two projects essentially are complete.  At this time, we do not plan on launching any new real estate projects until we see a meaningful improvement in the market from its current state.”

Katz added, “Our balance sheet remains in strong condition. We ended the seasonally low first quarter of fiscal 2011 with Net Debt at 2.7 times trailing twelve months Total Reported EBITDA, $20 million of borrowings under our revolver offset by $19.6 million of cash on hand, and other than the revolver borrowings, virtually no principal maturities due on any of our debt until 2014.”

Mountain Segment

    * Mountain segment net revenue was $40.8 million in the first quarter of fiscal 2011 compared to $39.2 million in the first quarter of fiscal 2010, a 4.0% improvement.
    * Mountain Reported EBITDA totaled a loss of $41.6 million in the first quarter of fiscal 2011 compared to a loss of $37.0 million in the first quarter of fiscal 2010, a 12.3% decline.  Adjusted for transaction expenses related to the acquisition of Northstar-at-Tahoe, as well as current year assessments related to a Breckenridge commercial property, Mountain Reported EBITDA would have been essentially flat as compared to the prior year.

Its first fiscal quarter historically results in negative Mountain Reported EBITDA, as its ski resorts generally do not open for ski operations until our second fiscal quarter. The first fiscal quarter consists primarily of operating and administrative expense plus summer business and retail operations.

Total Mountain net revenue increased in the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009 in part due to a $0.6 million, or 18.4%, increase in dining revenue primarily due to an increase in group and wedding business at its mountain resorts.  Additionally, retail/rental revenue increased $0.5 million, or 2.4%, due to increased retail sales primarily driven by higher sales at its Colorado front range and San Francisco Bay area stores.

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 the three months ended Oct. 31, 2010, other revenue increased $0.4 million, or 3.0%, compared to the three months ended Oct. 31, 2009, primarily due to an increase in internet advertising and marketing revenue due to the acquisition of Mountain News Corporation in May 2010, employee housing revenue and on-mountain summer activities primarily in Breckenridge and Vail, partially offset by a decrease in municipal services revenue (primarily transportation services provided on behalf of certain municipalities).

Operating expense increased $6.7 million, or 8.7%, during the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009.  This increase in operating expense was primarily attributable to acquisition related costs of $3.1 million relating to its acquisition of Northstar-at-Tahoe (included in general and administrative), operating expenses of Northstar-at-Tahoe for the period from date of acquisition of $0.4 million, and $0.9 million (included in other expense) in assessments for extensive renovations to a commercial property in Breckenridge in which we are a tenant.  Excluding the impact of these expenses, operating expense increased $2.2 million, or 2.9%, for the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009.  Labor and labor-related benefits increased $1.1 million, or 4.6%, during the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009 due to increased staffing levels driven by higher sales volume in dining, retail and summer operations, and reinstatement of some of the prior year's wage and benefit reductions with a 2.0% wage increase for employees effective April 1, 2010.  Retail cost of sales increased $0.1 million, or 0.7%, mostly due to increased volume.  Other expense increased $0.5 million, or 2.3%, primarily due to increased food and beverage cost of sales due to an increase in dining revenue and higher repairs and maintenance expense.

Mountain equity investment income, net, which primarily represents its share of income from its real estate brokerage joint venture, was favorably impacted for the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009 by an overall increase in real estate closings primarily from multi-unit projects.

Lodging Segment

    * Lodging segment net revenue was $44.4 million in the first quarter of fiscal 2011 compared to $41.4 million in the first quarter of fiscal 2010, a 7.3% increase.
    * First fiscal quarter 2011 average daily rate (“ADR”) increased 1.5% and RevPAR advanced 21.0% at the company's owned hotels and managed condominiums compared to the prior year first fiscal quarter.
    * Lodging Reported EBITDA was a positive $1.5 million in the first quarter of fiscal 2011 compared to a negative $1.3 million in the first quarter of fiscal 2010.  Fiscal 2011 first quarter Lodging segment results benefited from a legal settlement of $2.9 million (net of legal expenses) partially offset by a $0.4 million assessment at a Breckenridge commercial property.

Revenue from owned hotel and managed condominium rooms increased $1.1 million, or 7.2%, for the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009, which was driven primarily by an increase in occupancy of 5.8 percentage points.  This increase in room revenue was primarily due to an increase in group business at its Keystone lodging properties, resulting in an increase in group room revenue of $0.7 million, or 28.7%, as well as an increase in transient guest visitation primarily at Grand Teton Lodging Company (“GTLC”).  GTLC's room revenue increased from $6.8 million to $7.2 million for the three months ended Oct. 31, 2010 resulting in an increase of  $0.4 million, or 6.3%, compared to the three months ended Oct. 31, 2009, as GTLC's ADR and occupancy increased 3.0% and 4.3 percentage points, respectively.

Dining revenue for the three months ended Oct. 31, 2010 increased $1.0 million, or 11.3%, as compared to the three months ended Oct. 31, 2009, due to an increase in group visitation primarily at its Keystone lodging properties ($0.5 million increase in revenue) and an increase in transient visitation at GTLC ($0.4 million increase in revenue).  Transportation revenue was down $0.1 million, or 1.8%, for the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009, due to a decline in revenue per passenger partially offset by a 1.2% increase in passengers.  Golf revenue increased $0.1 million, or 2.1%, for the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009, due to a 7.7% increase in the number of golf rounds played partially offset by lower revenue per round.  Other revenue increased $0.8 million, or 9.5%, in the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009, primarily due to a $0.3 million increase in conference services revenue due to increased group business at our Keystone lodging properties, an increase in retail sales at GTLC due to an increase in transient guest visitation, and an increase in ancillary revenue from managed properties.

Operating expense increased $0.2 million, or 0.5%, for the three months ended Oct. 31, 2010 compared to the three months ended Oct. 31, 2009.  Operating expense in the current year benefited from the receipt of $2.9 million, net of legal expenses (included as a credit in other expense), for the settlement of alleged damages related to the Colorado Mountain Express (“CME”) acquisition, partially offset by $0.4 million (included in other expense) in assessments for extensive renovations to a commercial property in Breckenridge in which we are a tenant.  Excluding the impact of these items, operating expense increased $2.7 million, or 6.4%, primarily due to (i) an increase in labor and labor-related benefits of $1.5 million, or 7.3%, primarily due to higher staffing levels associated with the increased occupancy and reinstatement of some of the prior year's wage and benefit reductions with a 2.0% wage increase for employees effective April 1, 2010, (ii) an increase in general and administrative expense of $0.4 million, or 5.4%, primarily due to an increase in estimated uncollectible accounts receivable due to a prior year credit and (iii) an increase in other expense of $0.9 million, or 5.7 %, primarily due to variable operating costs associated with higher revenue including higher food and beverage and retail cost of sales, repairs and maintenance and other operating expense.

Resort – Combination of Mountain and Lodging Segments

    * Resort net revenue was $85.2 million in the first quarter of fiscal 2011 compared to $80.6 million in the first quarter of fiscal 2010, a 5.7% improvement.
    * Resort Reported EBITDA was a loss of $40.0 million in the first quarter of fiscal 2011 compared to a loss of $38.3 million in the first quarter of fiscal 2010, a 4.6% decline.

Real Estate Segment

    * Real Estate segment net revenue was $149.3 million in the first quarter of fiscal 2011 compared to $0.2 million in the first quarter of fiscal 2010.
    * Real Estate Reported EBITDA was $4.2 million in the first quarter of fiscal 2011 compared to $1.1 million in the first quarter of fiscal 2010.

Real Estate segment net revenue for the three months ended October 31, 2010 was driven primarily by the closing of 57 condominium units (45 units sold to The Ritz-Carlton Development Company and 12 units sold to individuals) at The Ritz-Carlton Residences, Vail ($149.0 million of revenue with an average selling price per unit of $2.6 million and an average price per square foot of $1,213).  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 Eagle Bahn gondola and the comprehensive and exclusive amenities related to the project.

Operating expense for the three months ended Oct. 31, 2010 included cost of sales of $135.5 million resulting from the closing of 57 condominium units at The Ritz-Carlton Residences, Vail (average cost per square foot of $1,103).  The cost per square foot for The Ritz-Carlton Residences, Vail is reflective of the high-end features and amenities associated with a Ritz-Carlton project compared to other Vail properties and high construction costs associated with mountain resort development.  Additionally, sales commissions of approximately $3.1 million were incurred commensurate with revenue recognized. Other operating expense of $6.5 million (including $0.8 million of stock-based compensation expense) was primarily comprised of general and administrative costs which includes 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 allocated corporate costs.

Total Performance

    * Total net revenue was $234.4 million in the first quarter of fiscal 2011 compared to $80.8 million in the first quarter of fiscal 2010, a 190.3% increase, driven primarily by the timing of real estate closings.
    * Net loss attributable to Vail Resorts, Inc. was $43.0 million, or a loss of $1.20 per diluted share, in the first quarter of fiscal 2011 compared to a net loss attributable to Vail Resorts, Inc. of $41.2 million, or a loss of $1.14 per diluted share, in the first quarter of fiscal 2010 with the current year reflecting the 100% ownership of Specialty Sports Venture and the resulting additional losses in the first quarter seasonal low period as compared to the approximate 70% ownership in the same quarter last year.

Balance Sheet

As of Oct. 31, 2010, we had cash and cash equivalents on hand of $19.6 million and Net Debt of 2.7 times trailing twelve months Total Reported EBITDA.  At quarter end, we had $20 million of revolver borrowings drawn on our $400 million senior credit facility, which matures in 2012, and virtually no other principal maturities due until 2014.

Stock Repurchase Program

The company did not repurchase any shares of common stock during the three months ended Oct. 31, 2010.  Since inception of this stock repurchase plan in 2006, and through Oct. 31, 2010, it has repurchased 4,264,804 shares at a cost of approximately $162.8 million, or $38.18 per share.  As of Oct. 31, 2010, 1,735,196 shares remained available to repurchase under the existing repurchase authorization. 

Outlook

Commenting on its fiscal 2011 outlook, Katz said, “Overall, our key early season metrics are running ahead of last year, however, the vast majority of the ski season remains ahead.   While we are optimistic, we also believe that it would be premature to make changes to our Resort outlook for the 2010/2011 ski season based on early indicators.  We are raising our fiscal 2011 Resort Reported EBITDA guidance to reflect the recent acquisition of Northstar-at-Tahoe (from the closing date of October 25th through the July time period, Northstar is expected to contribute approximately $8 million to Resort Reported EBITDA this year, after absorbing acquisition related expenses), as well as a favorable legal settlement related to CME.  Our revised guidance calls for Resort Reported EBITDA to be in a range of $211-$221 million, representing a 13-19% increase over fiscal 2010.  We are reducing our Real Estate Reported  EBITDA guidance to reflect the reduced number of anticipated closings at our Ritz-Carlton Residences, Vail project this year based on the lower number of closings from contracts in the first quarter. The combination of higher Resort Reported EBITDA guidance and the lowered Real Estate Reported EBITDA guidance results in a slight increase in guidance for net income attributable to Vail Resorts, Inc.”

The following table reflects the forecasted guidance range for its fiscal year ending July 31, 2011, for Reported EBITDA (after stock-based compensation expense) and reconciles such Reported EBITDA guidance to net income attributable to Vail Resorts, Inc. guidance for fiscal 2011.

































































































Fiscal 2011 Guidance




(In thousands)




For the Year Ending




July 31, 2011




Low End


Range



High End


Range



Mountain Reported EBITDA (1)


$


203,000




$


213,000




Lodging Reported EBITDA (2)



6,000





12,000




Resort Reported EBITDA (3)



211,000





221,000




Real Estate Reported EBITDA  (4)



(10,000)








Total Reported EBITDA



201,000





221,000




Depreciation and amortization



(115,750)





(117,250)




Loss on disposal of fixed assets, net