Vail Resorts posts higher revenue for fiscal year, mountain segment up

Posted By: The Ski Channel on September 26, 2010 10:30 am

Vail Resorts, Inc. (NYSE: MTN | PowerRating) has reported results for the fourth quarter and fiscal year ended July 31, 2010.

Highlights

Mountain segment net revenue increased by 3.9% and total skier visitation improved by 2.5% for the 2010 fiscal year. Resort revenue increased 2.1%.

Mountain Reported EBITDA improved by $19.6 million, or 12.0%, and Resort Reported EBITDA (which includes the Company’s Mountain and Lodging segments) increased by $15.3 million, or 8.9%, for the 2010 fiscal year.

Net income attributable to Vail Resorts, Inc. of $30.4 million for the 2010 fiscal year declined 37.9% primarily due to the timing of real estate closings.

Since June 6, 2010 season pass sales for the 2010/2011 ski season have been tracking well ahead of the prior year and are now only down approximately 1% in units and sales dollars compared to the same period in the prior year, after having been down 14% and 16%, respectively in June 2010.

Commenting on the Company’s Fiscal 2010 results, Rob Katz, Chief Executive Officer said, “I am very pleased with the performance that we delivered for Fiscal 2010. Even with snowfall at historically low levels and the slow recovery in consumer spending, we were able to deliver growth in all key segments in our Mountain division: skier visits, lift ticket revenue, dining, ski school and retail/rental. The improvements were driven by strengthening destination visitation and guest spending patterns, which accelerated through the spring break and Easter holiday periods. Over the course of the 2009/2010 ski season, we saw consistently improving performance over the prior year in all of our key Mountain segment metrics leading to 12.0% growth in Mountain Reported EBITDA on a 3.9% increase in revenue. Lift ticket revenue increased 4.6%, with season pass revenue up 6.5%. Total skier visitation increased 2.5% for the year led by the Company’s Heavenly resort, which experienced a 10.7% increase in visitation, while overall visitation for our four Colorado resorts increased by 1.2%. Our ski school business experienced the largest revenue increase for an ancillary business for the year, up 8.2%. Retail/rental also achieved strong growth, up 5.0%, while dining revenue increased 2.0%, in line with skier visits. Lodging revenue declined 4.0% and Lodging Reported EBITDA was down $4.4 million, resulting in large part from declines in Keystone transient and group related business.”

Mountain Segment

Mountain segment net revenue was $638.5 million for Fiscal 2010 compared to $614.6 million in the prior year, a 3.9% increase.

Lift revenue increased $12.7 million, or 4.6%, for Fiscal 2010 compared to Fiscal 2009, due to a $6.6 million, or 3.6%, increase in lift revenue excluding season passes and a $6.1 million, or 6.5%, increase in season pass revenue.

Ski school revenue increased $5.4 million, or 8.2%, in Fiscal 2010 compared to Fiscal 2009.

Dining revenue increased $1.1 million, or 2.0%, in Fiscal 2010 compared to Fiscal 2009, primarily due to improved dining revenue for the 2009/2010 ski season compared to the 2008/2009 ski season as on-mountain dining realized an increase in the average revenue per transaction of approximately 3.6%, although dining operations were negatively impacted in the first half of the 2009/2010 ski season by the significantly lower than average early season snowfall in Colorado which resulted in delays in the opening of certain on-mountain dining venues.

Revenue from retail/rental operations increased $7.4 million, or 5.0%, primarily due to higher retail sales and rental volumes at our Vail, Beaver Creek and Breckenridge mountain resort stores and San Francisco Bay area stores as retail/rental revenue increased 8.1% for the 2009/2010 ski season compared to the 2008/2009 ski season. This increase was partially offset by declines in retail sales for both the first and fourth quarters of Fiscal 2010 of 4.0% and 2.1%, respectively, compared to the same periods in the prior year due primarily to a decline in sales volumes at mountain resort stores not proximate to our ski resorts. Retail/rental revenue was particularly strong in the second half of the ski season which was bolstered by increased visitation to our resorts and higher guest spend.

For Fiscal 2010 other revenue decreased $2.7 million, or 3.7%, compared to Fiscal 2009, primarily due to a decrease in employee housing revenue, strategic alliance marketing revenue and municipal services revenue (primarily transportation services provided on behalf of certain municipalities), partially offset by an increase in private club revenues primarily resulting from the November 2008 opening of the Vail Mountain Club and higher on-mountain summer activities related revenue at our Colorado resorts, particularly at Breckenridge as the prior year’s on-mountain summer activities were negatively impacted by construction activities.

Operating expense increased $5.0 million, or 1.1%, for Fiscal 2010 compared to Fiscal 2009. This increase was primarily driven by an increase in labor and labor-related benefits expense of $0.8 million, or 0.5%, due to increased employee incentive compensation expense mostly offset by a company-wide wage reduction plan implemented in April 2009 and the suspension of the matching contribution to our 401(k) program in January 2009 (both of which were partially reinstated in April 2010); a $2.3 million, or 7.0%, increase in resort related fees associated with higher Mountain net revenue, including Forest Service fees which are calculated on a graduated scale based on revenue levels achieved by resort, and a $5.6 million, or 6.7%, increase in general and administrative expenses primarily due to higher allocated corporate costs including increased employee incentive compensation expense, employee medical costs and legal expenses when compared to Fiscal 2009. The above increases were offset by a $0.5 million, or 0.7%, decrease in retail cost of sales due to improved inventory management and lower average inventory costs resulting in improved gross margins and a $3.3 million, or 3.2%, decrease in other expenses due primarily to lower operating supply costs resulting from improved procurement practices in addition to lower fuel costs, repairs and maintenance and property tax expense.

Lodging Segment

Lodging segment net revenue was $169.1 million for Fiscal 2010 compared to $176.2 million in the prior year, a 4.0% decrease.

For Fiscal 2010, average daily rate (“ADR”) increased 4.4% and revenue per available room (“RevPAR”) decreased 5.3% at the Company’s owned hotels and managed condominiums compared to the same period in the prior year.

Lodging Reported EBITDA was $2.4 million for Fiscal 2010 compared to $6.8 million in the same period in the prior year, a 64.6% decrease, with the decrease due almost entirely to declines at Keystone lodging properties as well as an increase in general and administrative expense.

Total Lodging net revenue for Fiscal 2010 decreased $7.1 million, or 4.0%, compared to Fiscal 2009. We acquired Colorado Mountain Express (“CME”) on November 1, 2008, and as a result Lodging net revenue for Fiscal 2009 includes only nine months of operations for CME. Excluding the impact of CME revenue for the first quarter of Fiscal 2010, total Lodging net revenue decreased $8.9 million, or 5.0% for Fiscal 2010 compared to Fiscal 2009.

Revenue from owned hotel rooms decreased $1.7 million, or 3.9%, for Fiscal 2010 compared to Fiscal 2009, driven by a decrease in occupancy of 3.4 percentage points partially offset by an increase in ADR of 4.0%. The decrease in occupancy was primarily due to declines in occupancy at our Keystone lodging properties of 11.5 percentage points. This decrease was partially offset by a 3.9 percentage point increase in occupancy at our other lodging properties proximate to our ski resorts (excluding Keystone lodging properties) during the second half of the ski season due to increased visitation particularly during the spring break and Easter holiday periods as discussed in the Mountain segment and an increase in occupancy at Grand Teton Lodging Company (“GTLC”) of 10.8 percentage points in the fourth quarter of Fiscal 2010 compared to the fourth quarter of Fiscal 2009 driven by an increase in both transient and group room nights (GTLC’s room revenue increased $1.2 million in the fourth quarter of Fiscal 2010 compared to the fourth quarter of Fiscal 2009). Revenue from managed condominium rooms decreased $2.5 million, or 7.2%, for Fiscal 2010 compared to Fiscal 2009, driven by a decrease in occupancy of 4.2 percentage points partially offset by an increase in ADR of 6.5%. The decrease in occupancy is largely attributed to declines in group and transient room nights primarily at our Keystone lodging properties.

Dining revenue for Fiscal 2010 decreased $3.0 million, or 9.8%, compared to Fiscal 2009, primarily due to a decline in group visitation primarily at our Keystone lodging properties. This decline was partially offset by an increase in dining revenue of $0.7 million at GTLC in the fourth quarter of Fiscal 2010 compared to the fourth quarter of Fiscal 2009 due to an increase in occupancy as discussed above. Transportation revenues were up $1.1 million, or 5.8%, primarily due to a full twelve months of operations for CME included in Fiscal 2010 compared to only nine months of operations for CME in Fiscal 2009. Golf revenues decreased $1.2 million, or 8.2%, for Fiscal 2010 compared to Fiscal 2009, primarily resulting from a 12.6% decrease in the number of golf rounds played.

Operating expense decreased $2.7 million, or 1.6%, for Fiscal 2010 compared to Fiscal 2009. Due to the acquisition of CME on November 1, 2008, operating expenses for Fiscal 2010 included twelve months of CME operating expenses compared to only nine months of CME operating expenses for Fiscal 2009. Excluding the impact of CME operating expenses for the first quarter of Fiscal 2010 of $2.7 million, operating expenses decreased $5.5 million, or 3.2%, primarily due to (i) a decrease in labor and labor-related benefits of $4.3 million, or 5.3%, primarily due to lower staffing levels associated with decreased occupancy and the impacts of cost reduction initiatives including a company-wide wage reduction plan implemented in April 2009 and the suspension of the matching contribution to our 401(k) program in January 2009 (both of which were partially reinstated in April 2010) and (ii) a decrease in other expense of $2.7 million, or 4.5%, primarily due to decreased variable operating costs associated with lower revenue including lower food and beverage cost of sales and a decrease in operating supplies and repairs and maintenance. The above decreases were partially offset by an increase in general and administrative expense of $1.5 million, or 5.5%, primarily due to higher allocated corporate expenses including increased employee incentive compensation expense, employee medical costs and legal expenses.

Resort – Combination of Mountain and Lodging Segments

Resort net revenue was $807.6 million for Fiscal 2010 compared to $790.8 million in the prior year, a 2.1% increase.

Resort Reported EBITDA was $186.4 million for Fiscal 2010 compared to $171.1 million in the prior year, an 8.9% increase.

Real Estate Segment

Real Estate segment net revenue was $61.0 million for Fiscal 2010 compared to $186.2 million in the prior year.

Real Estate Reported EBITDA was a negative $4.3 million for Fiscal 2010 compared to positive Real Estate Reported EBITDA of $44.1 million in the prior year.

In Fiscal 2010, real estate revenue was driven primarily by the closings of 36 residences at One Ski Hill Place, for $50.7 million of revenue (average price of $1.4 million per unit, or $1,241 per square foot) and 17 affordable housing units associated with the Jackson Hole Golf & Tennis Club (“JHG&TC”) development ($3.1 million of revenue with an average selling price per unit of $0.2 million and an average price per square foot of $188). Additionally, during Fiscal 2010, we recognized $5.2 million of revenue related to deposits from buyers who defaulted on units under contract at One Ski Hill Place. We also recorded a gain on sale of real property of $6.1 million (net of $2.4 million in related cost of sales) for a land parcel located at the Arrowhead base area of the Beaver Creek Resort which sold for $8.5 million.

Operating expense for Fiscal 2010 included cost of sales of $39.7 million resulting from the closing of 36 condominium units at One Ski Hill Place (average cost per square foot of $971) and $3.1 million resulting from the closing of 17 affordable housing units associated with the JHG&TC development (average cost per square foot of $188, net of impairment charges taken in previous periods). The cost per square foot for One Ski Hill Place is reflective of the high-end features and amenities associated with this project compared to other Breckenridge properties and high construction costs associated with mountain resort development.

Additionally, sales commissions of approximately $3.6 million were incurred commensurate with revenue recognized. Other operating expense of $25.0 million (including $4.5 million of stock-based compensation expense) was primarily comprised of general and administrative costs which includes marketing expense for the real estate projects under development (including those that have not yet closed), overhead costs, such as labor and labor-related benefits and allocated corporate costs.

Real Estate segment net revenue for Fiscal 2009 was driven primarily by the closing of eight Lodge at Vail Chalet units ($111.5 million), 42 residences at Crystal Peak Lodge ($54.9 million) and two condominiums at the Arrabelle ($16.7 million).

Operating expense for Fiscal 2009 included cost of sales of $101.1 million commensurate with revenue recognized, primarily driven by the closing on eight Chalet units ($54.1 million in cost of sales), 42 residences at Crystal Peak Lodge ($34.2 million in cost of sales) and two units at the Arrabelle ($12.4 million in cost of sales). Additionally, sales commissions of approximately $10.6 million were incurred commensurate with revenue recognized. Other operating expenses of $30.4 million (including $4.1 million of stock-based compensation expense) were primarily comprised of general and administrative costs which include marketing expenses for the major real estate projects under development (including those that have not yet closed), overhead costs such as labor and labor-related benefits and allocated corporate costs. In addition, included in other segment operating expense for Fiscal 2009, we recorded $2.8 million of estimated costs in excess of anticipated sales proceeds for an affordable housing commitment resulting from the cancellation of a contract by a third party developer related to our JHG&TC development.

Total Performance

Total net revenue was $868.6 million for Fiscal 2010 compared to $977.0 million in the prior year, an 11.1% decrease.

Net income attributable to Vail Resorts, Inc. was $30.4 million, or $0.83 per diluted share, for Fiscal 2010 compared to net income attributable to Vail Resorts, Inc. of $49.0 million, or $1.33 per diluted share, in the prior year.

The effective tax rate for Fiscal 2010 was 33.5% compared to the effective tax rate for the prior year of 37.7%. The current year’s effective tax rate was favorably impacted by the Company’s purchase of the remaining noncontrolling interest in SSV, the Company’s retail/rental business on April 30, 2010.

 

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