Vail Resorts reports fiscal 2018 results

Vermont Business Magazine Vail Resorts, Inc(NYSE:MTN) today reported results for its fourth quarter and fiscal year endedJuly 31, 2018and provided its outlook for the fiscal year endingJuly 31, 2019. Vail closed on its acquisition of Okemo in Ludlow, Vermont, on Thursday and boughtStowe Mountain Resort last year.

Highlights

• Net income attributable to Vail Resorts, Inc. was$379.9 millionfor fiscal 2018, an increase of 80.4% compared to fiscal 2017, which was positively impacted by tax benefits as described in the operating results highlights below.
• Resort Reported EBITDA was$616.6 millionfor fiscal 2018, an increase of 3.9% compared to fiscal 2017. Fiscal 2018 Resort Reported EBITDA includes$10.2 millionof acquisition and integration related expenses and$2.6 millionof additional payroll taxes related to the CEO's exercise of Stock Appreciation Rights ("SARs").
• Season pass sales throughSeptember 23, 2018for the upcoming 2018/2019 North American ski season increased approximately 25% in units and 15% in sales dollars as compared to the period in the prior year throughSeptember 24, 2017, including all military pass products in both periods. Pass sales exclude Stevens Pass and Triple Peaks pass sales in both periods and are adjusted to eliminate the impact of foreign currency by applying current period exchange rates to the prior period for Whistler Blackcomb pass sales.
• The Company issued its fiscal 2019 guidance range and expects Resort Reported EBITDA to be between$718 millionand$750 million, including approximately$11 millionof acquisition and integration related expenses for the previously announced acquisitions of Stevens Pass, Triple Peaks andStowe.

Commenting on the Company's fiscal 2018 results,Rob Katz, Chief Executive Officer, said, "We are very pleased to complete fiscal 2018 with Resort Reported EBITDA growth from the prior year, despite the very challenging conditions in the western U.S. this past winter. This year's results highlight the positive impact of our expanding geographic diversification, the stability provided by our growing season pass program and the success of our guest-focused marketing efforts. Our western U.S. destination resorts experienced modest visitation declines compared to the prior year due to the historically poor conditions, particularly for the first half of the season. However, revenue at our western U.S. resorts was in line with prior year performance due to season pass sales and yield growth. Whistler Blackcomb had another record-breaking year, growing from an exceptional fiscal 2017 as the resort benefited from excellent conditions throughout the season, currency favorability that attracted guests from the U.S. and around the world and the first season of full integration with Vail Resorts. At Perisher, fiscal 2018 results were strong with double-digit revenue and EBITDA growth compared to the prior year, driven by a strong finish to the 2017 Australian ski season and a strong start to the current 2018 Australian ski season, supported by pass sales momentum, which was positively impacted in part by the new pass partnership with Hakuba Valley inJapan."

Snowboarding at Stowe. Courtesy Stowe.

Katz added, "With a strong base of high-end consumers, we are continuing to leverage our growing network of resorts and sophisticated marketing and yield strategies to drive guest spending across our Mountain segment. For fiscal 2018, total Mountain net revenue increased 6.9% to approximately$1.7 billion. Total skier visits, including results fromStowein fiscal 2018, increased 2.5%, primarily as a result of the inclusion ofStowe, which was acquired inJune 2017, offset by the poor conditions at our western U.S. resorts during the first half of the 2017/2018 ski season. Total Effective Ticket Price ("ETP") increased 5.0%, driven by season pass and lift ticket price increases across our resorts, as well as lower visitation per pass.

"Our ancillary businesses also experienced growth, with ski school, dining and retail/rental revenue up 6.8%, 7.2% and 1.0%, respectively, compared to the prior year, primarily driven by the addition of results atStowe. Our U.S. Epic Discovery business continues to grow and generate strong financial returns on the capital we invested. However, Epic Discovery has not yet reached full maturity on profitability as quickly as we had originally planned. With each summer season, we continue to learn more about our guests, improve operational consistency and refine our pricing, product and promotion strategy to take advantage of the high levels of summer visitation which already exists at these resort locations."

Regarding Lodging, Katz said, "Fiscal 2018 Lodging results were impacted by the less favorable conditions inColoradoandUtahcompared to the prior year. Revenue (excluding payroll cost reimbursements) increased 2.4% and revenue per available room ("RevPAR") increased 2.4% compared to the prior year, while Lodging Reported EBITDA declined 7.7% compared to fiscal 2017, which included a one-time association fee benefit in the prior year."

Turning to Real Estate, Katz commented, "We generated$0.1 millionof Net Real Estate Cash Flow in fiscal 2018. During fiscal 2018, we closed on the sale of a land parcel atKeystonefor$3.0 millionand contributed$4.3 millionto theTown of Vailrelated to a parking development. As ofJuly 31, 2018, we had approximately$99.4 millionof real estate held for sale and investment associated with land parcels at our resorts."

Katz continued, "Our balance sheet continues to be very strong. We ended the fiscal year with$178.1 millionof cash on hand,$130.0 millionof borrowings under the revolver portion of our senior credit facility and total long-term debt, net (including long-term debt due within one year) of approximately$1.3 billion. As ofJuly 31, 2018, we had available borrowing capacity under the revolver component of our Vail Holdings, Inc. credit facility of$185.1 million. In addition, we had$164.6 millionavailable under the revolver component of our Whistler Blackcomb credit facility. Our Net Debt was 1.8 times trailing twelve months Total Reported EBITDA, which includes$334.5 millionof long-term capital lease obligations associated with the Canyons transaction. OnAugust 15, 2018, the Company entered into an amendment agreement to amend and restate in its entirety the senior credit facility. The amended agreement provides for a revolving loan facility in an aggregate principal amount of$400.0 millionand a term loan facility in an aggregate principal amount of$950.0 million, increased from the previous term loan facility of$684.4 millionas ofJuly 31, 2018. The Company borrowed$70.0 milliononAugust 15, 2018, primarily to fund the Stevens Pass acquisition and onSeptember 27, 2018, the Company borrowed an additional$195.6 million, primarily to fund the Triple Peaks acquisition. I am also very pleased to announce that our Board of Directors has declared a quarterly cash dividend on Vail Resorts' common stock. The quarterly dividend will be$1.47per share of common stock and will be payable onOctober 26, 2018to shareholders of record onOctober 9, 2018."

Operating Results

A complete Management's Discussion and Analysis of Financial Condition and Results of Operations can be found in the Company's Form 10-K for the fiscal year endedJuly 31, 2018filed today with the Securities and Exchange Commission. The following are segment highlights:

Mountain Segment

• Fiscal 2018 results reflect a full year of Whistler Blackcomb operations, as compared to fiscal 2017 results which include Whistler Blackcomb operations from the date of acquisition,October 17, 2016, throughJuly 31, 2017.
• Total skier visits for fiscal 2018 increased to approximately 12.3 million, an increase of 2.5% compared to the prior fiscal year, which includes incremental skier visits fromStowe.
• Total lift revenue increased$62.0 million, or 7.6%, compared to the prior fiscal year, primarily due to an increase in pass revenue and incremental revenue fromStowe.
• Ski school revenue increased$12.2 million, or 6.8%, primarily as a result of increased revenue at Whistler Blackcomb andPark City, as well as incremental revenue fromStowe.
• Dining revenue increased$10.8 million, or 7.2%, primarily as a result of incremental revenue fromStoweand increased revenue from Whistler Blackcomb, partially offset by lower revenue at our western U.S. resorts.
• Retail/rental revenue increased$3.0 million, or 1.0%, of which rental revenue increased$2.9 million, or 3.2%, and retail revenue was relatively flat. Both rental and retail revenue were positively impacted by an increase in revenue at Whistler Blackcomb and incremental revenue fromStowe, partially offset by decreased revenue at stores proximate to our western U.S. resorts and other city stores.
• Operating expense for Fiscal 2018 increased$85.5 million, or 8.2%, which was primarily attributable to the inclusion ofStoweoperations and incremental operating expenses from Whistler Blackcomb as a result of reflecting a full year of operations for fiscal 2018.
• Mountain Reported EBITDA increased$25.3 million, or 4.5%, which includes$15.7 millionof stock-based compensation expense and$10.2 millionof acquisition and integration related expenses for fiscal 2018, compared to$15.0 millionand$10.8 millionfor fiscal 2017, respectively.

Lodging Segment

• Lodging segment net revenue (excluding payroll cost reimbursements) increased$6.5 million, or 2.4%.
• Occupancy increased 1.3 percentage points and Average Daily Rate ("ADR") decreased 0.6% at the Company's owned hotels and managed condominiums compared to the prior fiscal year.
• Lodging Reported EBITDA for Fiscal 2018 decreased$2.1 million, or 7.7% compared to fiscal 2017, which included a one-time benefit for association fees with respect to a lodging property atPark Cityin the prior year.
• Lodging Reported EBITDA includes$3.2 millionof stock-based compensation expense for both fiscal 2018 and fiscal 2017.

Resort - Combination of Mountain and Lodging Segments

• Resort net revenue was$2,007.6 millionfor fiscal 2018, an increase of$117.3 million, or 6.2%,compared to fiscal 2017, primarily attributable to growth at Whistler Blackcomb, strong North American pass sales growth for the 2017/2018 North American ski season and the incremental operations ofStowe.
• Resort Reported EBITDA was$616.6 million for fiscal 2018, an increase of$23.2 million, or 3.9%, compared to fiscal 2017. Results included$10.2 millionof acquisition and integration related expenses compared to$10.8 millionof acquisition and integration related expenses in the prior fiscal year. Additionally, fiscal 2018 results included$2.6 millionof additional payroll taxes related to the CEO's exercise of SARs.

Real Estate Segment

• Real Estate segment net revenue decreased$12.9 million, or 76.4%, as compared to the prior fiscal year, primarily due to the Company selling out of condominium units as ofJuly 31, 2017.
• Real Estate segment operating expense for fiscal 2018 includes the recognition of a$5.5 millionbenefit of non-cash income in the current period related to a legal settlement in fiscal 2015 for which cash proceeds were received and established as a liability for estimated future remediation costs of a construction development. All known items have been remediated, and, based on continued monitoring, the Company has concluded that the need for further remediation is remote. Additionally, Real Estate segment operating expense for the prior year included the$4.3 millionone-time charge related to the resolution of our financial contribution to the newTown of Vailpublic parking structure, which was paid during fiscal 2018.
• Net Real Estate Cash Flow for fiscal 2018 was$0.1 million, which includes the$4.3 millioncontribution to theTown of Vailparking structure noted above, a decreaseof$18.3millioncompared to the prior fiscal year.
• Real Estate Reported EBITDA was$1.0 million, an increase of$1.4 millionas compared to the prior year.

Total Performance

• Total net revenue increased$104.3 million, or 5.5%, to$2,011.6 million.
• Net income attributable toVail Resorts, Inc.was$379.9 million, or$9.13per diluted share, compared to$210.6 million, or$5.22per diluted share, in the prior fiscal year. Net income attributable to Vail Resorts, Inc. for fiscal 2018 included a tax benefit of approximately$71.1 million(or$1.71earnings per diluted share) related to employee exercises of equity awards (primarily related to the CEO's exercise of SARs) which, beginningAugust 1, 2017, is recorded in net income as a result of the adoption of revised accounting guidance related to employee stock compensation. Additionally, included in net income attributable to Vail Resorts, Inc. for fiscal 2018 was a one-time, provisional net tax benefit related to U.S. tax reform legislation, estimated to be approximately$61.0 million, or$1.47per diluted share, which was recognized as a discrete item and recorded within benefit (provision) for income taxes during fiscal 2018. The above-mentioned accounting impacts related to U.S. tax reform legislation ("U.S. Tax Reform") are provisional, based on currently available information and technical guidance on the interpretation of the new law.

Return of Capital

The Company declared a quarterly cash dividend of$1.47per share of Vail Resorts common stock that will be payable onOctober 26, 2018, to shareholders of record onOctober 9, 2018. Additionally, a Canadian dollar equivalent dividend on the exchangeable shares of Whistler Blackcomb will be payable onOctober 26, 2018, to exchangeable shareholders of record onOctober 9, 2018. The exchangeable shares were issued to certain Canadian persons in connection with our acquisition of Whistler Blackcomb.

Acquisitions

OnAugust 15, 2018, the Company announced the closing of the Stevens Pass acquisition. The final purchase price, after adjustments, was approximately$64.0 million.

OnSeptember 27, 2018, the Company announced the closing of the Triple Peaks acquisition. Triple Peaks is the parent company of Okemo Mountain Resort inVermont, Mount Sunapee Resort inNew Hampshire, and Crested Butte Mountain Resort inColorado. The Company purchased Triple Peaks for a final purchase price of approximately$74 million, after adjustments for certain agreed-upon terms. As part of the transaction and with funds provided by Vail Resorts, Triple Peaks paid off$155 millionin leases that all three resorts had with Ski Resort Holdings, LLC, an affiliate of Oz Real Estate. The 2018/2019 Epic Pass, Epic Local Pass and Military Epic Pass now include unlimited and unrestricted access to Okemo Mountain Resort, Mount Sunapee Resort and Crested Butte Mountain Resort; the Epic 7 Day and the Epic 4 Day now offer up to seven and four unrestricted days, respectively.

Season Pass Sales

Commenting on season pass sales, Katz said, "We are very pleased with our season pass sales to date. ThroughSeptember 23, 2018, North American ski season pass sales increased approximately 25% in units and 15% in sales dollars as compared to the period in the prior year throughSeptember 24, 2017, including all military pass sales in both periods and excluding pass sales from Stevens Pass and Triple Peaks in both periods and adjusted to eliminate the impact of foreign currency by applying current period exchange rates to the prior period for Whistler Blackcomb pass sales. Growth in our total season pass sales dollars was lower than our unit growth, given the inclusion of the new Military Epic Pass, which is available at a substantial discount to our Epic Pass. The average price increase on all non-military passes was approximately 4.5%. Excluding sales of military passes to new purchasers who were not pass holders last year, season pass sales increased approximately 9% in units and 12% in sales dollars over the comparable period in 2017."

Katz continued, "We experienced strong growth in our season pass sales across nearly all products and geographies, including continued strong growth in destination markets, which drove over half of the unit growth. We also saw very strong growth in the local Whistler Blackcomb market and continued growth in theColoradoand Tahoe markets. We believe this growth continues to be driven by our increasingly sophisticated and data-driven targeted marketing efforts to move destination guests into our season pass products, as well as the strategic long-term pass partnerships and acquisitions we have announced that continue to expand our resort network and make the network incrementally more compelling to skiers worldwide. Our growth was also positively impacted by the significant success of sales of our new Military Epic Pass. The vast majority of Military Epic Passes were sold to guests that were not previously season pass purchasers and over half of the Military Epic Pass purchasers were not previously in our guest database. While the Military Epic Pass has a price that is much lower than our other season pass products, we are seeing significant incremental revenue for the program that far exceeds any loss of revenue from prior year pass holders who purchased a Military Epic Pass for this year. Furthermore, we are helping to introduce our sport to, and create much higher engagement for, the men and women who have served their countries in the armed forces and their immediate families. While inDecember 2017our reported season pass growth rates were materially below the rates reported inSeptember 2017, we expect ourDecember 2018season pass growth rates to be relatively consistent with ourSeptember 2018growth rates."

Katz concluded, "Our Epic Australia Pass sales are off to a very strong start with growth of approximately 20% in units and approximately 23% in sales dollars throughSeptember 23, 2018compared to the prior year period endingSeptember 24, 2017. The Epic Australia Pass continues to be a very compelling product for our Australian guests who can ski locally at Perisher, experience our growing network inNorth Americaand, for the first time, ski at Hakuba Valley inJapanthrough our new long-term partnership. Pass sales will continue through the Australian off-season leading up to the 2019 season."

Guidance

Commenting on guidance for fiscal 2019, Katz said, "Net income attributable to Vail Resorts, Inc. is expected to be between$288 millionand$335 millionin fiscal 2019. Our guidance includes an estimated benefit between$32 millionand$40 millionfrom the reduction of our U.S. federal tax rate from 35% to 21% as a result of the U.S. Tax Reform. We estimate Resort Reported EBITDA for fiscal 2019 will be between$718 millionand$750 million. Our Resort Reported EBITDA guidance includes the operating results for Stevens Pass, Okemo,Mount SunapeeandCrested Buttefrom the date of acquisition and also includes approximately$11 millionof anticipated acquisition and integration related expenses. Apart from our normal business drivers, our guidance for fiscal 2019 includes the following additional assumptions: (i) a full rebound in our performance in our second fiscal quarter, as compared to fiscal 2018, from assumed normal conditions throughout the period; (ii) a negative impact to our fiscal 2019 third quarter from the late Easter holiday (which is onApril 21, 2019); (iii)$15 millionof incremental expense related to above normal increases in labor costs, due to increasing our minimum wage by over$1per hour at most resorts and other significant investments in compensation, all implemented due to both local market wage pressure and the benefits the Company received from U.S. Tax Reform; and (iv) a$6 millionnegative Resort Reported EBITDA impact from assumed lower rates for the Australian and Canadian dollars versus the average rates in fiscal 2018. We expect Resort EBITDA Margin to be approximately 31.5% in fiscal 2019, using the midpoint of the guidance range. This is an estimated 80 basis point increase over fiscal 2018. We estimate fiscal 2019 Real Estate Reported EBITDA to be between negative$3 millionand$3 million. Fiscal 2019 guidance does not include any payroll tax impacts or income tax benefits related to the potential exercise of CEO stock appreciation awards."

All of these estimates are predicated on the assumption of normal weather conditions throughout the ski season and an exchange rate of$0.77between the Canadian Dollar and U.S. Dollar, related to the operations of Whistler Blackcomb inCanadaand an exchange rate of$0.72between the Australian Dollar and U.S. Dollar, related to the operations of Perisher inAustralia.

The following table reflects the forecasted guidance range for the Company's fiscal year endingJuly 31, 2019, 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 2019.

Earnings Conference Call

The Company will conduct a conference call today at11:30 a.m. eastern timeto discuss the financial results. The call will be webcast and can be accessed atwww.vailresorts.comin the Investor Relations section, or by dialing (888) 394-8218 (U.S. andCanada) or (323) 701-0225 (international). A replay of the conference call will be available two hours following the conclusion of the conference call throughOctober 12, 2018, at12:30 p.m. eastern time. To access the replay, dial (888) 203-1112 (U.S. andCanada) or (719) 457-0820 (international), pass code 4503803. The conference call will also be archived atwww.vailresorts.com.

About Vail Resorts, Inc. (NYSE :MTN)

Vail Resorts, Inc., through its subsidiaries, is the leading global mountain resort operator. The Company's subsidiaries operate 15 world-class mountain resorts and three urban ski areas, includingVail,Beaver Creek,Breckenridge,KeystoneandCrested ButteinColorado;Park CityinUtah; Heavenly,NorthstarandKirkwoodin theLake Tahoearea ofCaliforniaandNevada; Whistler Blackcomb inBritish Columbia, Canada;Stoweand Okemo inVermont;Mount SunapeeinNew Hampshire;Stevens PassinWashington; Perisher inNew South Wales, Australia;Wilmot MountaininWisconsin; Afton Alps inMinnesotaand Mt.BrightoninMichigan.Vail Resortsowns and/or manages a collection of casually elegant hotels under the RockResorts brand, as well as theGrand Teton Lodge CompanyinJackson Hole, Wyoming.Vail Resorts Development Companyis the real estate planning and development subsidiary ofVail Resorts, Inc.Vail Resortsis a publicly held company traded on theNew York Stock Exchange (NYSE :MTN). TheVail Resortscompany website iswww.vailresorts.comand consumer website iswww.snow.com.

Forward-Looking Statements

Certain statements discussed in this press release and on the conference call, other than statements of historical information, are forward-looking statements within the meaning of the federal securities laws, including our expectations regarding our fiscal 2019 performance, including our expected net income attributable to Vail Resorts, Inc., Resort Reported EBITDA, anticipated acquisition and integration related expenses, Resort EBITDA Margin and Real Estate Reported EBITDA; our assumptions related to our fiscal 2019 guidance, including a full rebound in our fiscal 2019 second quarter performance from assumed normal conditions and exchange rates; the estimated benefit from the reduction of our U.S. tax rate; the payment of dividends; our expectations regarding season pass growth rates; the effects of our marketing and season pass sales efforts; and the expected timing of the completion of our capital investments. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include but are not limited to prolonged weakness in general economic conditions, including adverse effects on the overall travel and leisure related industries; unfavorable weather conditions or the impact of natural disasters; risks related to our reliance on information technology, including our failure to maintain the integrity of our customer or employee data; risks related to cyber-attacks; willingness of our guests to travel due to terrorism, the uncertainty of military conflicts or outbreaks of contagious diseases, and the cost and availability of travel options and changing consumer preferences; the seasonality of our business combined with adverse events that occur during our peak operating periods; competition in our mountain and lodging businesses; high fixed cost structure of our business; our ability to fund resort capital expenditures; risks related to a disruption in our water supply that would impact our snowmaking capabilities and operations; our reliance on government permits or approvals for our use of public land or to make operational and capital improvements; risks related to federal, state, local and foreign government laws, rules and regulations; risks related to changes in security and privacy laws and regulations which could increase our operating costs and adversely affect our ability to market our products and services effectively; our ability to hire and retain a sufficient seasonal workforce; risks related to our workforce, including increased labor costs; loss of key personnel; adverse consequences of current or future legal claims; a deterioration in the quality or reputation of our brands, including our ability to protect our intellectual property and the risk of accidents at our mountain resorts; our ability to successfully integrate acquired businesses, or that acquired businesses may fail to perform in accordance with expectations, including Okemo,Crested Butte,Stevens Pass,Mt. Sunapeeor future acquisitions; our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, with respect to acquired businesses; risks associated with international operations; fluctuations in foreign currency exchange rates where the Company has foreign currency exposure, primarily the Canadian and Australian dollars; changes in accounting judgments and estimates, accounting principles, policies or guidelines or adverse determinations by taxing authorities; risks associated with uncertainty of the impact of recently enacted tax reform legislation inthe United States; a materially adverse change in our financial condition; and other risks detailed in the Company's filings with the Securities and Exchange Commission, including the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year endedJuly 31, 2018, which was filed onSeptember 28, 2018.

All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. All guidance and forward-looking statements in this press release are made as of the date hereof and we do not undertake any obligation to update any forecast or forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by law.

Statement Concerning Segment and Non-GAAP Financial Measures

When reporting financial results, we use the terms Resort Reported EBITDA, Total Reported EBITDA, Resort EBITDA Margin, Net Debt and Net Real Estate Cash Flow, which are not financial measures under accounting principles generally accepted inthe United States of America("GAAP"). Resort Reported EBITDA, Total Reported EBITDA, Resort EBITDA Margin, Net Debt and Net Real Estate Cash Flow should not be considered in isolation or as an alternative to, or substitute for, measures of financial performance or liquidity prepared in accordance with GAAP. In addition, we report segment Reported EBITDA (i.e. Mountain, Lodging and Real Estate), the measure of segment profit or loss required to be disclosed in accordance with GAAP. Accordingly, these measures may not be comparable to similarly-titled measures of other companies.

Reported EBITDA (and its counterpart for each of our segments) has been presented herein as a measure of the Company's performance. The Company believes that Reported EBITDA is an indicative measurement of the Company's operating performance, and is similar to performance metrics generally used by investors to evaluate other companies in the resort and lodging industries. The Company defines Resort EBITDA Margin as Resort Reported EBITDA divided by Resort net revenue. The Company believes Resort EBITDA Margin is an important measurement of operating performance. The Company believes that Net Debt is an important measurement of liquidity as it is an indicator of the Company's ability to obtain additional capital resources for its future cash needs. Additionally, the Company believes Net Real Estate Cash Flow is important as a cash flow indicator for its Real Estate segment. See the tables provided in this release for reconciliations of our measures of segment profitability and non-GAAP financial measures to the most directly comparable GAAP financial measures.

SOURCE BROOMFIELD, Colo.,Sept. 28, 2018/PRNewswire/ --Vail Resorts, Inc.www.snow.com