Vail Resorts Reports Fiscal 2010 First Quarter Results and Early Season Indicators

08 December 2009

BROOMFIELD, Colo., -- Dec 08, 2009 -- Vail Resorts, Inc. (NYSE: MTN) today reported results for the first quarter of fiscal 2010 ended October 31, 2009, as well as certain early season indicators.

Highlights

    --  Resort Reported EBITDA, which includes our Mountain and Lodging
        segments, for the first quarter improved from the prior year by $0.8
        million, or 2.0%, due in part to the favorable impact of cost savings
        initiatives implemented subsequent to the prior year first quarter.
    --  Total revenue and Real Estate Reported EBITDA declined and net loss was
        greater for the first quarter compared to the prior year due to the
        timing of real estate project closings.
    --  Net Debt leverage ratio of 2.4 times trailing twelve months Total
        Reported EBITDA and no revolver borrowings under the Company's $400
        million senior credit facility as of October 31, 2009.
    --  Season pass sales to date, including the Epic Season Pass, up
        approximately 11% in units and approximately 9% in sales dollars
        compared to the same time period in the prior year.


Commenting on the Company's fiscal 2010 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 first quarter Resort results are generally driven by the Company's summer mountain operations, lodging operations including our summer seasonal business at Grand Teton Lodge Company ("GTLC"), golf operations and group business. The Company's Mountain Reported EBITDA results in this year's first quarter improved by $2.4 million, or 6.1%, compared to the prior year first quarter and benefited from the cost savings initiatives previously implemented in January and April of 2009, including wage reductions for our full-time and seasonal employees. Additionally, Mountain segment results were favorably impacted by improved retail/rental contribution due to higher gross margins, improved summer operations due in part to prior year construction impacts, higher fees and dues revenue from private club operations and the timing of marketing spend including a significant shift away from more traditional print media. Lodging segment results in the current year first fiscal quarter included Colorado Mountain Express ("CME"), which was acquired after the prior year first quarter on November 1, 2008, and negatively impacted year-over-year Lodging Reported EBITDA comparisons by $1 million in a seasonal loss first quarter. The Company's Lodging segment results in the first fiscal quarter are historically impacted by group business, which was down as expected in the current year compared to the pre-recessionary period of the prior year. When combined with a similarly impacted drop-off in transient guest occupancy, hotel revenue per available room ("RevPAR") declined by 11.7% at our owned hotels, which is a much smaller decline than that experienced by the luxury and the upper upscale segments of the lodging industry as a whole for the same period, which experienced estimated RevPAR declines of approximately 22% and 17%, respectively. Real Estate revenue and Real Estate Reported EBITDA was significantly decreased, as expected, due to the prior year closings of 39 Crystal Peak Lodge units and one Lodge at Vail Chalet unit, partially offset by the current year sale of a land parcel at the Arrowhead base area of the Beaver Creek Resort for $8.5 million, resulting in a gain on sale of $6.1 million (net of $2.4 million in related cost of sales). Despite the impacts of the back-to-back seasonally low fourth and first fiscal quarters as well as our continued investment in two real estate projects under construction, our balance sheet position remains solid with Net Debt leverage of 2.4 times trailing twelve months Total Reported EBITDA, no borrowings under our revolver at the end of the first quarter of fiscal 2010 and virtually no principal maturities due on any of our debt until 2014."

Mountain Segment

    --  Mountain segment net revenue was $39.2 million in the first quarter of
        fiscal 2010 compared to $40.8 million in the first quarter of fiscal
        2009, a 3.9% decline.
    --  Mountain Reported EBITDA was a loss of $37.0 million in the first
        quarter of fiscal 2010 compared to a loss of $39.4 million in the first
        quarter of fiscal 2009, a 6.1% improvement.


The Company's first fiscal quarter historically results in negative Mountain Reported EBITDA, as the Company's ski resorts generally do not open for ski operations until the Company's second fiscal quarter. The first fiscal quarter consists primarily of operating and administrative expenses plus summer business and retail/rental operations.

Total Mountain segment net revenue decreased in part due to a $0.9 million, or 4.0%, decrease in retail/rental revenue due to lower sales volumes primarily at the Company's mountain resort stores. In addition, dining revenue decreased $0.5 million, or 11.7%, in the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009, primarily due to a reduction in group business at the Company's mountain resorts. Other revenue primarily consists of private club revenue (which includes both club dues and amortization of initiation fees), summer visitation, other mountain activities revenue, marketing revenue, employee housing revenue as well as commercial leasing revenue. For the first quarter of fiscal 2010, other revenue decreased $0.2 million, or 1.6%, compared to the first quarter of fiscal 2009, primarily due to a decrease in marketing and employee housing revenue, mostly offset by an increase in private club operations resulting from the opening of the Vail Mountain Club in November 2008 and an increase in on-mountain summer activities at Breckenridge and Keystone as the prior year's on-mountain summer activities were restricted due to construction activities at the respective resorts.

Mountain segment operating expense decreased $4.8 million, or 5.9%, during the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009, which primarily resulted from a decrease in labor and labor-related benefits expense, retail cost of sales and general and administrative expenses. Labor and labor-related benefits decreased $0.6 million, or 2.6%, due to decreased staffing levels driven by lower volume in dining and retail/rental operations as well as the impacts of cost reduction initiatives including the suspension of the Company's matching contribution to its 401(k) program effective January 2009 and the company-wide wage reduction plan implemented in April 2009, partially offset by severance charges and increased stock compensation expense in the first quarter of fiscal 2010. Retail cost of sales decreased $0.7 million, or 5.2%, due to the decrease in retail revenue combined with an increase in gross margins from improved inventory management. General and administrative expenses decreased $2.7 million, or 11.7%, primarily due to the timing of marketing spend as well as lower allocated corporate expenses, which were also impacted by the cost reduction initiatives discussed above. Other expenses decreased $0.8 million, or 3.6%, primarily due to lower supplies and repairs and maintenance expense resulting from strategic sourcing initiatives, partially offset by higher property taxes.

Mountain equity investment income, net, which primarily represents the Company's share of income from its real estate brokerage joint venture, decreased $0.8 million for the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009, was unfavorably impacted by an overall decline in real estate closings compared to the same period in the prior year from both commercial projects and residential sales.

Lodging Segment

    --  Lodging segment net revenue was $41.4 million in the first quarter of
        fiscal 2010 compared to $45.3 million in the first quarter of fiscal
        2009, an 8.6% decrease.
    --  First fiscal quarter 2010 average daily rate ("ADR") increased 5.1% and
        RevPAR decreased 17.0% at the Company's owned hotels and managed
        condominiums compared to the prior year first fiscal quarter.
    --  Lodging Reported EBITDA was a negative $1.3 million in the first quarter
        of fiscal 2010 compared to a positive $0.4 million in the first quarter
        of fiscal 2009.  Fiscal 2010 first quarter Lodging segment results
        included $1.8 million of net revenue and $2.7 million of operating
        expense from CME, which was acquired on November 1, 2008.


Total Lodging net revenue for the first quarter of fiscal 2010 decreased $3.9 million, or 8.6%, compared to the first quarter of fiscal 2009. This decrease in lodging net revenue was partially offset by transportation revenue of $1.8 million due to the acquisition of CME on November 1, 2008. Excluding the impact of CME revenue, total lodging net revenue decreased $5.7 million, or 12.6%, for the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009.

Revenue from owned hotel rooms for the first quarter of fiscal 2010 decreased $1.2 million, or 9.9%, compared to the first quarter of fiscal 2009, which was driven by a decrease in occupancy of 10.6 percentage points primarily due to significant declines in group business as well as declines in transient guest visitation, partially offset by an increase in ADR of 6.7% at the Company's owned hotels, due primarily to increases at GTLC. GTLC's room revenue for the first quarter of fiscal 2010 was flat compared to the first quarter of fiscal 2009, as GTLC's ADR increased by 9.6%, which offset a 5.5 percentage point decline in occupancy from lower transient guest visitation. Revenue from managed condominium rooms decreased $0.6 million, or 12.8%, for the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009, primarily due to a decline in group business.

First quarter fiscal 2010 dining revenue decreased $1.5 million, or 14.7%, as compared to the first quarter of fiscal 2009 mainly due to decreased group visitation primarily at the Company's Colorado mountain resorts. Golf revenues decreased $1.2 million, or 15.1%, for the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009, resulting from a 15% decrease in the number of golf rounds played combined with lower revenue per round. Other revenue decreased $1.1 million, or 11.5%, in the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009, primarily due to a decrease in revenue from spa and conferences services, which were negatively impacted by lower occupancy from groups.

Lodging segment operating expense decreased $2.3 million, or 5.1%, for the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009. Lodging segment operating expense in the first quarter fiscal 2010 included $2.7 million of CME operating expense. Excluding the impact of CME operating expense, total operating expense decreased $5.0 million, or 11.2%, for the first quarter of fiscal 2010 compared to the first quarter of fiscal 2009, primarily due to a decrease in labor and labor-related benefits of $2.2 million, or 10.5%, primarily due to lower staffing levels associated with decreased occupancy and wage decreases as a result of the company-wide wage reduction plan implemented in April 2009 and a decrease in other expenses of $2.4 million, or 14.3%, primarily due to decreased variable operating costs associated with the lower revenue including lower food and beverage cost of sales, credit card fees and other operating expenses and a decrease in general and administrative expenses of $0.4 million, or 5.7%, primarily due to a decrease in marketing spend.

Resort - Combination of Mountain and Lodging Segments

    --  Resort net revenue was $80.6 million in the first quarter of fiscal 2010
        compared to $86.0 million in the first quarter of fiscal 2009, a 6.4%
        decline.
    --  Resort Reported EBITDA was a loss of $38.3 million in the first quarter
        of fiscal 2010 compared to a loss of $39.1 million in the first quarter
        of fiscal 2009, a 2.0% improvement.


Real Estate Segment

    --  Real Estate segment net revenue was $0.2 million in the first quarter of
        fiscal 2010 compared to $66.8 million in the first quarter of fiscal
        2009.
    --  Real Estate Reported EBITDA was $1.1 million in the first quarter of
        fiscal 2010 compared to $15.4 million in the first quarter of fiscal
        2009.


In the first quarter of fiscal 2010, the Company sold a land parcel located at the Arrowhead base area of the Beaver Creek Resort for $8.5 million and recorded a gain on sale of real property of $6.1 million (net of $2.4 million in related cost of sales), which is included in Real Estate Reported EBITDA but not in Real Estate segment net revenue. In the first quarter of fiscal 2009, Real Estate segment net revenue was driven primarily by the closings on 39 residences at Crystal Peak Lodge ($51.2 million of revenue with an average selling price per unit of $1.3 million and an average price per square foot of $1,045) in Breckenridge and the closing on one Lodge at Vail Chalet unit ($14.4 million of revenue with an average price per square foot of $2,880).

In the first quarter of fiscal 2010, Real Estate segment operating expense primarily included general and administrative costs of approximately $5.2 million (including $1.4 million of stock-based compensation expense). General and administrative costs were primarily comprised of marketing expense for the real estate projects under development, overhead costs such as labor and labor-related benefits and allocated corporate costs. In the first quarter of fiscal 2009, operating expense included cost of sales of $40.1 million commensurate with revenue recognized, primarily driven by the closing on 39 residences at Crystal Peak Lodge ($33.0 million in cost of sales with an average cost per square foot of $679) and the closing on one Lodge at Vail Chalet unit ($7.3 million in cost of sales with an average cost per square foot of $1,465). Prior year operating expense also included sales commissions of approximately $4.2 million commensurate with revenue recognized and general and administrative costs of approximately $7.1 million (including $0.9 million of stock-based compensation expense).

Total Performance

    --  Total net revenue was $80.8 million in the first quarter of fiscal 2010
        compared to $152.8 million in the first quarter of fiscal 2009, a 47.1%
        decline, driven primarily by the timing of real estate closings.
    --  Net loss attributable to Vail Resorts, Inc. was $41.2 million, or a loss
        of $1.14 per diluted share, in the first quarter of fiscal 2010 compared
        to a net loss attributable to Vail Resorts, Inc. of $34.5 million, or a
        loss of $0.93 per diluted share, in the first quarter of fiscal 2009.


Balance Sheet
As of October 31, 2009, the Company had cash and cash equivalents on hand of $13.0 million, Net Debt of 2.4 times trailing twelve months Total Reported EBITDA and no revolver borrowings under a $400 million senior credit facility, which matures in 2012 and has $307 million available for borrowing after considering $93 million in currently issued letters of credit. The Company has virtually no principal maturities due until 2014.

Stock Repurchase Program
The Company did not repurchase any shares of common stock during the three months ended October 31, 2009. Since inception of this stock repurchase plan in 2006, the Company has repurchased 3,878,535 shares at a cost of approximately $147.8 million, through October 31, 2009. As of October 31, 2009, 2,121,465 shares remained available to repurchase under the existing repurchase authorization. The purchases under this program are reviewed by the Company's Board quarterly and are based on a number of factors, including the Company's expected future financial performance, the Company's available cash resources and competing uses for cash that may arise in the future, the restrictions in the Company's senior credit facility and in the indenture governing the outstanding 6.75% senior subordinated notes, prevailing prices of the Company's common stock and the number of shares that become available for sale at prices that the Company believes are attractive.

Outlook
Commenting on the Company's 2009/2010 season pass sales, Katz said, "We are very pleased with the results of our season pass sales efforts. Even in this challenging economic environment, our Company has been able to markedly grow total season pass sales in advance of the ski season, which continues to expand one of our most important guest loyalty programs. Through December 6, 2009, compared to the comparable period of the prior year, our total season pass sales to date have increased approximately 11% in units and approximately 9% in sales dollars. As season pass sales in the prior year represented 34% of ultimate total lift ticket revenue, we believe this season pass sales performance provides stability and good momentum heading into this ski season. Among the various season pass products, the sales of the Summit Season Pass increased significantly, with a majority of the increase coming from guests outside of Colorado. We believe this increase was due to the inclusion of the Summit Season Pass in our national marketing efforts for the Epic Season Pass and its availability starting this year online for first time purchasers. The season pass program is a cornerstone of our business model, as more of our guests are committing earlier to the Vail Resorts experience and finding value in our season pass products, while enabling the Company to continue to lock-in an even greater portion of our lift ticket revenue before the start of the ski season."

Commenting on advance bookings trends, Katz continued, "As of November 30, 2009, the Company's lodging advance bookings through our central reservations and directly at our owned and managed properties for the 2009/2010 ski season are down approximately 13% in room nights compared to the same period last year. However, at this point in the bookings cycle, it is still very difficult to project trends for the current season. Though overall advanced reservations are lower than the prior year, we have seen an even shorter booking window than last year and are seeing bookings at some resorts and some time periods actually ahead of last year. In fact, as of November 30, at our owned and managed properties, total room night bookings are down 7% for the second quarter ending January 31, 2010. It is also important to note that as of November 30 of last year, advance bookings for transient guests represented less than 50% of such total ultimate bookings for the prior year ski season. In addition, airline reservations for Eagle County Airport, the nearest airport to our Vail and Beaver Creek resorts, are currently approximately 4% ahead in the number of seats sold compared to the same time in the prior year. Given all of these trends, we currently anticipate the booking trend for the full ski season to improve significantly from the booking status as of November 30."

Commenting on the Company's fiscal 2010 outlook, Katz said, "Overall, our key early season metrics are indicating some optimistic signs with strong year-over-year season pass sales and improved airline bookings into Eagle County Airport. However, our overall lodging bookings are showing mixed results with some periods and locations stronger, while most periods are down compared to the prior year, especially in Summit County. Accordingly, at this early point in our 2009/2010 ski season, we are reiterating our fiscal 2010 guidance ranges issued in late September 2009."

 

About Vail Resorts
Vail Resorts, Inc., through its subsidiaries, is the leading mountain resort operator in the United States. The Company's subsidiaries operate the mountain resort properties of Vail, Beaver Creek, Breckenridge and Keystone mountain resorts in Colorado, Heavenly Mountain Resort in the Lake Tahoe area of California and Nevada, and the Grand Teton Lodge Company in Jackson Hole, Wyo. The Company's subsidiary, RockResorts, a luxury resort hotel company, manages casually elegant properties across the United States and the Caribbean. Vail Resorts Development Company is the real estate planning, development and construction subsidiary of Vail Resorts, Inc. Vail Resorts is a publicly held company traded on the New York Stock Exchange (NYSE: MTN). The Vail Resorts company website is www.vailresorts.com and the consumer website is www.snow.com.

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