Vail Resorts 2009 Net Income Drops 52.4%

mike lewis

• September 25 2009
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Vail Resorts Inc. reported its results for the fiscal year ended July 31 in which net income dropped $54 million, or 52.4 percent from 2008. Vail has aggressively targeted costs as skier visits dropped as did their spending through last year’s tough economic times.

Here are the highlights:

–  Resort Reported EBITDA, which includes the Company’s Mountain and
Lodging segments, of $171.1 million in Fiscal 2009 decreased $59.6
million, or 25.8%, from the prior year.
–  Real Estate Reported EBITDA of $44.1 million in Fiscal 2009 decreased
$1.9 million, or 4.0%, from the prior year.
–  Net income of $49.0 million in Fiscal 2009 decreased $54.0 million, or
52.4%, from the prior year.
–  Net Debt leverage ratio of 1.96 times trailing twelve months Total
Reported EBITDA, $69.3 million of cash and cash equivalents on hand as
of July 31, 2009, and no revolver borrowings under the Company’s
$400 million senior credit facility.

Commenting on the Company’s Fiscal 2009 results, Rob Katz, Chief Executive Officer said, “I am pleased that Vail Resorts was able to deliver solid results for the fiscal year ended July 31, 2009, given the unprecedented economic environment and its impact on the travel and leisure sectors. Our fourth fiscal quarter is a seasonally low quarter with no ski operations. Therefore, our year-end results, especially in our Mountain segment, tracked with trends previously reported for our third quarter to date. Overall, our Fiscal 2009 net income as well as Resort Reported EBITDA fell in the upper end of our guidance ranges (which we issued in March 2009 and reaffirmed in June 2009, in our second and third quarter earnings releases, respectively), while Real Estate Reported EBITDA slightly exceeded the upper end of our previous range. These results all benefited from our continued focus on cost controls. The Company implemented cost savings initiatives in Fiscal 2009, which helped to insulate our results from the full impact of the downturn in travel and leisure spending and better position the Company for Fiscal 2010. Importantly, we were able to achieve these expense reductions, while actually improving our company-wide overall guest satisfaction scores over the prior year. Total skier visits declined 5.3% for the 2008/2009 ski season and total lift ticket revenue declined 8.4%. We estimate that total Destination (out-of-state and international) visitation declined by approximately 15% for the 2008/2009 ski season, while we saw overall visits from season pass holders improve by 17.0% due to an increase in the number of passes sold and an increase in pass usage during the season. Visitation at our Colorado resorts declined by 3.5% during the 2008/2009 ski season compared to the 2007/2008 ski season. This compares very favorably to the skier visit results reported by the rest of the Colorado ski industry, which declined 6.9% over the same period and the Utah ski industry, which declined 6.5%. The number of season passes sold for the 2008/2009 ski season was 12.2% greater than the number of passes sold for the 2007/2008 ski season, due in large part to the introduction of the Epic Season Pass in the 2008/2009 season, and when combined with an 8.3% increase in effective pass price, drove a 21.7% increase in season pass revenue. Season pass revenue as a percent of total lift ticket revenue grew from 26% for the 2007/2008 ski season to 34% for the 2008/2009 ski season. Our ancillary business revenue lines, including ski school, dining and retail/rental, experienced greater percentage declines than our lift ticket revenue variance due to the combination of lower Destination visitation and lower average guest spend during their stay.”

Katz continued, “The impact of the economic environment continued into the fourth quarter for our Lodging segment, where our properties continued to experience a much closer-in booking window and offered an increased level of promotions and packaging discounts that reduced revenue per available room (”RevPAR”). RevPAR at our owned hotels, on a same store basis, declined by 10.9% for Fiscal 2009, which was a smaller decline than that experienced by the luxury and the upper upscale segments of the lodging industry as a whole, which had estimated RevPAR declines of approximately 21% and 15%, respectively. Our group lodging business was also negatively impacted and as a result the Company saw a mix shift from group to transient business. While the Company was able to reduce Resort operating expenses, including from our previously announced cost savings initiatives, our Resort Reported EBITDA as a percentage of revenue for Fiscal 2009 declined by 5.4 percentage points as cost reductions could not offset revenue declines. We were very pleased with our Fiscal 2009 Real Estate segment results, which included the closing on eight Lodge at Vail Chalet units, 42 residences at Crys