Edgar Filing: VAIL RESORTS INC

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

MTN 2013.4.30 Q3

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-09614

Vail Resorts, Inc.

(Exact Name of Registrant as Specified in Its Charter)



Delaware		51-0291762
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

390 Interlocken Crescent Broomfield, Colorado		80021
(Address of Principal Executive Offices)		(Zip Code)

(303) 404-1800

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No

As of June 3, 2013, 35,913,960 shares of the registrant’s common stock were outstanding.

Table of Contents




PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements.	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	19
Item 4.	Controls and Procedures.	20

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings.	20
Item 1A.	Risk Factors.	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	20
Item 3.	Defaults Upon Senior Securities.	20
Item 4.	Mine Safety Disclosures.	20
Item 5.	Other Information.	21
Item 6.	Exhibits.	21

PART I FINANCIAL INFORMATION

Item 1. Financial Statements — Unaudited



Consolidated Condensed Balance Sheets as of April 30, 2013, July 31, 2012 and April 30, 2012						F-2
Consolidated Condensed Statements of Operations for the Three and Nine Months Ended April 30, 2013 and 2012						F-3
Consolidated Condensed Statements of Comprehensive Income for the Three and Nine Months Ended April 30, 2013 and 2012						F-4
Consolidated Condensed Statements of Cash Flows for the Nine Months Ended April 30, 2013 and 2012						F-5
Notes to Consolidated Condensed Financial Statements						F-6

F-1

Vail Resorts, Inc.

Consolidated Condensed Balance Sheets

(In thousands, except share and per share amounts)



	April 30, 2013 (Unaudited)			July 31, 2012			April 30, 2012 (Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	237,735		$	46,053		$	147,110
Restricted cash	11,991			14,284			13,666
Trade receivables, net	73,733			65,743			65,133
Inventories, net	61,201			65,873			56,237
Other current assets	50,478			40,417			55,671
Total current assets	435,138			232,370			337,817
Property, plant and equipment, net (Note 6)	1,039,907			1,049,207			1,056,243
Real estate held for sale and investment	201,861			237,668			248,262
Goodwill, net	271,855			269,769			269,678
Intangible assets, net	92,039			92,070			93,715
Other assets	38,869			46,530			44,024
Total assets	$	2,079,669		$	1,927,614		$	2,049,739
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities (Note 6)	$	246,352		$	227,538		$	224,047
Income taxes payable	13,173			20,721			19,005
Long-term debt due within one year (Note 4)	518			990			1,119
Total current liabilities	260,043			249,249			244,171
Long-term debt (Note 4)	489,240			489,775			489,757
Other long-term liabilities (Note 6)	226,145			232,869			233,923
Deferred income taxes	201,511			139,393			185,160
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and outstanding	—			—			—
Common stock, $0.01 par value, 100,000,000 shares authorized, 40,861,919 (unaudited), 40,531,204 and 40,516,476 (unaudited) shares issued, respectively	409			405			405
Additional paid-in capital	596,167			586,691			583,818
Accumulated other comprehensive (loss) income	(4		)	(255		)	61
Retained earnings	485,368			408,662			469,148
Treasury stock, at cost; 4,949,111 (unaudited), 4,949,111 and 4,468,181 (unaudited) shares, respectively (Note 11)	(193,192		)	(193,192		)	(170,696		)
Total Vail Resorts, Inc. stockholders’ equity	888,748			802,311			882,736
Noncontrolling interests	13,982			14,017			13,992
Total stockholders’ equity (Note 2)	902,730			816,328			896,728
Total liabilities and stockholders’ equity	$	2,079,669		$	1,927,614		$	2,049,739

The accompanying Notes are an integral part of these consolidated condensed financial statements.

F-2

Vail Resorts, Inc.

Consolidated Condensed Statements of Operations

(In thousands, except per share amounts)

(Unaudited)



	Three Months Ended April 30,						Nine Months Ended April 30,
	2013			2012			2013			2012
Net revenue:
Mountain	$	402,017		$	354,586		$	815,670		$	720,194
Lodging	53,834			53,972			152,885			155,872
Real estate	13,840			12,587			39,937			34,784
Total net revenue	469,691			421,145			1,008,492			910,850
Segment operating expense (exclusive of depreciation and amortization shown separately below):
Mountain	207,953			184,211			536,498			478,256
Lodging	45,446			47,103			142,055			149,497
Real estate	16,996			16,069			49,349			46,479
Total segment operating expense	270,395			247,383			727,902			674,232
Other operating expense:
Depreciation and amortization	(33,730		)	(33,266		)	(98,827		)	(95,245		)
Loss on disposal of fixed assets, net	(224		)	(90		)	(757		)	(1,123		)
Income from operations	165,342			140,406			181,006			140,250
Mountain equity investment income, net	266			336			799			944
Investment income (loss), net	153			(18		)	306			356
Interest expense, net	(8,359		)	(8,443		)	(25,268		)	(25,226		)
Income before provision for income taxes	157,402			132,281			156,843			116,324
Provision for income taxes	(59,814		)	(52,753		)	(59,329		)	(46,108		)
Net income	97,588			79,528			97,514			70,216
Net loss attributable to noncontrolling interests	52			41			97			34
Net income attributable to Vail Resorts, Inc.	$	97,640		$	79,569		$	97,611		$	70,250
Per share amounts (Note 3):
Basic net income per share attributable to Vail Resorts, Inc.	$	2.72		$	2.21		$	2.72		$	1.95
Diluted net income per share attributable to Vail Resorts, Inc.	$	2.66		$	2.17		$	2.66		$	1.92
Cash dividends declared per share	$	0.2075		$	0.1875		$	0.5825		$	0.4875

The accompanying Notes are an integral part of these consolidated condensed financial statements.

F-3

Vail Resorts, Inc.

Consolidated Condensed Statements of Comprehensive Income

(In thousands)

(Unaudited)



	Three Months Ended April 30,					Nine Months Ended April 30,
	2013			2012		2013		2012
Net income	$	97,588		$	79,528	$	97,514	$	70,216
Foreign currency translation adjustments, net of tax	(202		)	61		251		61
Comprehensive income	97,386			79,589		97,765		70,277
Comprehensive loss attributable to noncontrolling interests	52			41		97		34
Comprehensive income attributable to Vail Resorts, Inc.	$	97,438		$	79,630	$	97,862	$	70,311

The accompanying Notes are an integral part of these consolidated condensed financial statements.

F-4

Vail Resorts, Inc.

Consolidated Condensed Statements of Cash Flows

(In thousands)

(Unaudited)



	Nine Months Ended April 30,
	2013			2012
Cash flows from operating activities:
Net income	$	97,514		$	70,216
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	98,827			95,245
Cost of real estate sales	30,282			25,357
Stock-based compensation expense	9,544			9,349
Deferred income taxes, net	59,329			46,108
Other non-cash income, net	(5,697		)	(4,548		)
Changes in assets and liabilities:
Restricted cash	2,292			(1,109		)
Trade receivables, net	(7,354		)	(1,890		)
Inventories, net	5,944			(1,494		)
Investments in real estate	(1,662		)	(2,005		)
Accounts payable and accrued liabilities	12,231			(6,596		)
Other assets and liabilities, net	(9,905		)	5,412
Net cash provided by operating activities	291,345			234,045
Cash flows from investing activities:
Capital expenditures	(65,461		)	(107,999		)
Acquisition of businesses	(19,958		)	(23,479		)
Other investing activities, net	861			(944		)
Net cash used in investing activities	(84,558		)	(132,422		)
Cash flows from financing activities:
Proceeds from borrowings under long-term debt	96,000			56,000
Payments of long-term debt	(96,989		)	(57,002		)
Repurchases of common stock	—			(7,869		)
Dividends paid	(20,905		)	(17,559		)
Other financing activities, net	6,778			1,778
Net cash used in financing activities	(15,116		)	(24,652		)
Effect of exchange rate changes on cash and cash equivalents	11			(4		)
Net increase in cash and cash equivalents	191,682			76,967
Cash and cash equivalents:
Beginning of period	46,053			70,143
End of period	$	237,735		$	147,110

The accompanying Notes are an integral part of these consolidated condensed financial statements.

F-5

Vail Resorts, Inc.

Notes to Consolidated Condensed Financial Statements

(Unaudited)


1.	Organization and Business

Vail Resorts, Inc. (“Vail Resorts” or the “Parent Company”) is organized as a holding company and operates through various subsidiaries. Vail Resorts and its subsidiaries (collectively, the “Company”) currently operate in three business segments: Mountain, Lodging and Real Estate. In the Mountain segment, the Company operates the seven world-class ski resort properties of Vail, Breckenridge, Keystone and Beaver Creek mountain resorts in Colorado, and Heavenly, Northstar and Kirkwood mountain resorts in the Lake Tahoe area of California and Nevada; the ski areas of Afton Alps in Minnesota and Mount Brighton in Michigan ("Urban Ski Areas"); as well as ancillary services, primarily including ski school, dining and retail/rental operations. The resorts (with the exception of Northstar and the Urban Ski Areas) operate primarily on Federal land under the terms of Special Use Permits granted by the USDA Forest Service (the “Forest Service”). In the Lodging segment, the Company owns and/or manages a collection of luxury hotels under its RockResorts brand, as well as other strategic lodging properties and a large number of condominiums located in proximity to the Company’s ski resorts; National Park Service (“NPS”) concessionaire properties including the Grand Teton Lodge Company (“GTLC”), which operates destination resorts in the Grand Teton National Park; Colorado Mountain Express (“CME”), a Colorado resort ground transportation company; and mountain resort golf courses. Vail Resorts Development Company (“VRDC”), a wholly-owned subsidiary, conducts the operations of the Company’s Real Estate segment, which owns and develops real estate in and around the Company’s resort communities. The Company’s mountain business and its lodging properties at or around the Company’s ski resorts are seasonal in nature with peak operating seasons from mid-November through mid-April. The Company’s operations at its NPS concessionaire properties and its golf courses generally operate from mid-May through mid-October. The Company also has non-majority owned investments in various other entities, some of which are consolidated (see Note 7, Variable Interest Entities).


2.	Summary of Significant Accounting Policies

Basis of Presentation

Consolidated Condensed Financial Statements— In the opinion of the Company, the accompanying Consolidated Condensed Financial Statements reflect all adjustments necessary to state fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. Results for interim periods are not indicative of the results for the entire fiscal year. The accompanying Consolidated Condensed Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2012. Certain information and footnote disclosures, including significant accounting policies, normally included in fiscal year financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. The Consolidated Condensed Balance Sheet as of July 31, 2012 was derived from audited financial statements.

Presentation of Comprehensive Income — Effective August 1, 2012, the Company adopted Accounting Standard Update ("ASU") No. 2011-05 -“Comprehensive Income (Topic 220): Presentation of Comprehensive Income” which amends existing guidance by allowing two options for presenting the components of net income and other comprehensive income: (1) in a single continuous financial statement, a statement of comprehensive income or (2) in two separate but consecutive financial statements, an income statement followed by a separate statement of other comprehensive income. The Company also adopted ASU No. 2011-12—“Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU No. 2011-05” which defers until further notice ASU No. 2011-05's requirement that items that are reclassified from other comprehensive income to net income be presented on the face of the financial statements (see below). ASU No. 2011-05 required retrospective application. The adoption of these standards only amended presentation and disclosure requirements concerning comprehensive income; therefore, the adoption of these standards did not affect the Company’s financial position or results of operations. The Company elected to present the total of comprehensive income, the components of net income (i.e. statements of operations), and the components of other comprehensive income for both the three and nine months ended April 30, 2013 and 2012, in two separate but consecutive statements.

New Accounting Standards -- In January 2013, the FASB issued ASU No. 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income", to improve the transparency of reporting these reclassifications. The amendments in this ASU supersede and replace the presentation requirements for reclassifications out of accumulated other comprehensive income in ASU No. 2011-05 (issued in June 2011) and ASU No.

F-6

2011-12 (issued in December 2011). This amendment does not change the current requirements for reporting net income or other comprehensive income in financial statements, but the standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. If a component is not required to be reclassified to net income in its entirety, companies would instead cross reference to the related footnote for additional information. The amendments are effective for fiscal years beginning after December 15, 2012 (the Company's 2014 first fiscal quarter). The Company does not currently have any components of other comprehensive income that require reclassification to net income, as such, the adoption of this standard is not expected to have an impact on the presentation of the Company's financial statements.

Use of Estimates— The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Noncontrolling Interests in Consolidated Financial Statements— Net loss attributable to noncontrolling interests along with net income attributable to the stockholders of the Company are reported separately in the Consolidated Condensed Statement of Operations. Additionally, noncontrolling interests in the consolidated subsidiaries of the Company are reported as a separate component of equity in the Consolidated Condensed Balance Sheet, apart from the Company’s equity. The following table summarizes the changes in total stockholders’ equity (in thousands):



	For the Nine Months Ended April 30,
	2013									2012
	Vail Resorts Stockholders’ Equity			Noncontrolling Interests			Total Stockholders' Equity			Vail Resorts Stockholders’ Equity			Noncontrolling Interests			Total Stockholders' Equity
Balance, beginning of period	$	802,311		$	14,017		$	816,328		$	829,723		$	13,996		$	843,719
Net income (loss)	97,611			(97		)	97,514			70,250			(34		)	70,216
Stock-based compensation expense	9,544			—			9,544			9,349			—			9,349
Issuance of shares under share award plans, net of shares withheld for taxes	(3,832		)	—			(3,832		)	(2,661		)	—			(2,661		)
Tax benefit from share award plans	3,768			—			3,768			1,442			—			1,442
Cash dividends paid on common stock	(20,905		)	—			(20,905		)	(17,559		)	—			(17,559		)
Repurchases of common stock	—			—			—			(7,869		)	—			(7,869		)
Contributions from noncontrolling interests, net	—			62			62			—			30			30
Foreign currency translation adjustments, net of tax	251			—			251			61			—			61
Balance, end of period	$	888,748		$	13,982		$	902,730		$	882,736		$	13,992		$	896,728

Fair Value Instruments— The recorded amounts for cash and cash equivalents, trade receivables, other current assets, and accounts payable and accrued liabilities approximate fair value due to their short-term nature. The fair value of amounts outstanding under the Employee Housing Bonds (Note 4, Long-Term Debt) approximate book value due to the variable nature of the interest rate associated with that debt. The fair value of the 6.50% Senior Subordinated Notes due 2019 (“6.50% Notes”) (Note 4, Long-Term Debt) are based on quoted market prices (a Level 1 input). The fair value of the Company’s Industrial Development Bonds (Note 4, Long-Term Debt) and other long-term debt have been estimated using discounted cash flow analyses based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 3 input). The estimated fair values of the 6.50% Notes, Industrial Development Bonds and other long-term debt as of April 30, 2013 are presented below (in thousands):

F-7



	April 30, 2013
	Carrying Value		Fair Value
6.50% Notes	$	390,000	$	420,713
Industrial Development Bonds	$	41,200	$	48,644
Other long-term debt	$	5,983	$	6,696


3.	Net Income Per Common Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income attributable to Vail Resorts stockholders by the weighted-average shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, resulting in the issuance of shares of common stock that would then share in the earnings of Vail Resorts. Presented below is basic and diluted EPS for the three months ended April 30, 2013 and 2012 (in thousands, except per share amounts):



	Three Months Ended April 30,
	2013				2012
	Basic		Diluted		Basic		Diluted
Net income per share:
Net income attributable to Vail Resorts	$	97,640	$	97,640	$	79,569	$	79,569
Weighted-average shares outstanding	35,911		35,911		36,032		36,032
Effect of dilutive securities	—		863		—		672
Total shares	35,911		36,774		36,032		36,704
Net income per share attributable to Vail Resorts	$	2.72	$	2.66	$	2.21	$	2.17

The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. The number of shares issuable on the exercise of share based awards that were excluded from the calculation of diluted net income per share because the effect of their inclusion would have been anti-dilutive totaled 25,000 and 42,000 for the three months ended April 30, 2013 and 2012, respectively.

Presented below is basic and diluted EPS for the nine months ended April 30, 2013 and 2012 (in thousands, except per share amounts):



	Nine Months Ended April 30,
	2013				2012
	Basic		Diluted		Basic		Diluted
Net income per share:
Net income attributable to Vail Resorts	$	97,611	$	97,611	$	70,250	$	70,250
Weighted-average shares outstanding	35,835		35,835		36,034		36,034
Effect of dilutive securities	—		846		—		630
Total shares	35,835		36,681		36,034		36,664
Net income per share attributable to Vail Resorts	$	2.72	$	2.66	$	1.95	$	1.92

The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. The number of shares issuable on the exercise of share based awards that were excluded from the calculation of diluted net income per share because the effect of their inclusion would have been anti-dilutive totaled 10,000 and 24,000 for the nine months ended April 30, 2013 and 2012, respectively.

On June 7, 2011 the Company’s Board of Directors approved the commencement of a regular quarterly cash dividend on the Company's common stock at an annual rate of $0.60 per share, subject to quarterly declaration. On March 5, 2012 the Company’s Board of Directors approved a 25% increase to the annual cash dividend to an annual rate of $0.75 per share, subject to quarterly declaration. On March 4, 2013 the Company’s Board of Directors approved an approximate 10% increase to its annual cash dividend to an annual rate of $0.83 per share, subject to quarterly declaration. During the three and nine months ended April 30, 2013, the Company paid cash dividends of $0.2075 and $0.5825 per share, respectively ($7.5 million

F-8

and $20.9 million, respectively, in the aggregate). During the three and nine months ended April 30, 2012, the Company paid cash dividends of $0.1875 and $0.4875 per share, respectively ($6.8 million and $17.6 million, respectively, in the aggregate). On June 5, 2013 the Company’s Board of Directors declared a quarterly cash dividend of $0.2075 per share payable on July 9, 2013 to stockholders of record as of June 24, 2013.


4.	Long-Term Debt

Long-term debt as of April 30, 2013, July 31, 2012 and April 30, 2012 is summarized as follows (in thousands):



	Maturity (a)	April 30, 2013		July 31, 2012		April 30, 2012
Credit Facility Revolver	2016	$	—	$	—	$	—
Industrial Development Bonds	2020	41,200		41,200		41,200
Employee Housing Bonds	2027-2039	52,575		52,575		52,575
6.50% Notes	2019	390,000		390,000		390,000
Other	2013-2029	5,983		6,990		7,101
Total debt		489,758		490,765		490,876
Less: Current maturities (b)		518		990		1,119
Long-term debt		$	489,240	$	489,775	$	489,757


(a)	Maturities are based on the Company’s July 31 fiscal year end.


(b)	Current maturities represent principal payments due in the next 12 months.

Aggregate maturities for debt outstanding as of April 30, 2013 reflected by fiscal year are as follows (in thousands):




2013	$	9
2014	509
2015	533
2016	244
2017	257
Thereafter	488,206

Total debt	$	489,758

The Company incurred gross interest expense of $8.4 million for both the three months ended April 30, 2013 and 2012, respectively, of which $0.5 million was amortization of deferred financing costs. The Company had no capitalized interest during the three months ended April 30, 2013 and 2012. The Company incurred gross interest expense of $25.3 million and $25.4 million for the nine months ended April 30, 2013 and 2012, respectively, of which $1.5 million was amortization of deferred financing costs in both years. The Company had no capitalized interest during the nine months ended April 30, 2013. The Company capitalized $0.1 million of interest during the nine months ended April 30, 2012.


5.	Acquisitions

Skiinfo

On February 1, 2012, the Company acquired the capital stock of Skiinfo, AS, a Norwegian company which owns and operates several European websites focused on the ski and snowboarding industry, for total cash consideration of $5.7 million, net of cash assumed. The purchase price was allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The Company completed its purchase price allocation and recorded $2.4 million in property, plant and equipment, $2.7 million in other assets, $1.8 million in goodwill, $0.7 million in indefinite-lived intangible assets, $0.5 million in other intangible assets (with a weighted-average amortization period of 6.7 years), and $2.6 million of assumed liabilities on the date of acquisition. The operating results of Skiinfo are reported within the Mountain segment.

F-9

Kirkwood Mountain Resort

On April 12, 2012, the Company acquired substantially all of the assets of Kirkwood Mountain Resort (“Kirkwood”), a mountain resort located in Lake Tahoe, California, for total cash consideration of approximately $18.2 million, net of cash assumed, subject to certain working capital adjustments as provided for in the purchase agreement. The purchase price was allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The Company completed its purchase price allocation and recorded $16.8 million in property, plant and equipment, $2.5 million in other assets, $0.8 million in indefinite-lived intangible assets, $1.2 million in other intangible assets (with a weighted-average amortization period of 21.5 years), and $3.1 million of assumed liabilities on the date of acquisition. The operating results of Kirkwood are reported within the Mountain segment.

Urban Ski Areas

In December 2012, the Company acquired all of the assets of two ski areas in the Midwest, Afton Alps in Minnesota and Mount Brighton in Michigan, for total cash consideration of $20.0 million, net of cash assumed. The purchase price was allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The Company has completed its preliminary purchase price allocation and has recorded $17.8 million in property, plant and equipment, $1.0 million in other assets, $2.0 million in goodwill, $1.0 million in other intangible assets (with a weighted-average amortization period of 10 years), and $1.8 million of assumed liabilities on the date of acquisition. The operating results of Afton Alps and Mount Brighton are reported within the Mountain segment.


6.	Supplementary Balance Sheet Information

The composition of property, plant and equipment follows (in thousands):



	April 30, 2013			July 31, 2012			April 30, 2012
Land and land improvements	$	295,559		$	281,729		$	282,038
Buildings and building improvements	852,483			838,780			835,291
Machinery and equipment	599,199			563,309			566,466
Furniture and fixtures	254,671			243,587			240,367
Software	91,987			81,659			80,591
Vehicles	48,592			44,798			44,536
Construction in progress	27,273			36,979			26,341
Gross property, plant and equipment	2,169,764			2,090,841			2,075,630
Accumulated depreciation	(1,129,857		)	(1,041,634		)	(1,019,387		)
Property, plant and equipment, net	$	1,039,907		$	1,049,207		$	1,056,243

The composition of accounts payable and accrued liabilities follows (in thousands):



	April 30, 2013		July 31, 2012		April 30, 2012
Trade payables	$	59,515	$	56,508	$	55,619
Deferred revenue	81,092		78,793		68,182
Accrued salaries, wages and deferred compensation	28,563		21,242		23,534
Accrued benefits	24,002		20,216		26,089
Deposits	12,173		12,031		12,310
Accrued interest	13,543		8,015		13,534
Other accruals	27,464		30,733		24,779
Total accounts payable and accrued liabilities	$	246,352	$	227,538	$	224,047

F-10

The composition of other long-term liabilities follows (in thousands):



	April 30, 2013		July 31, 2012		April 30, 2012
Private club deferred initiation fee revenue	$	133,578	$	135,660	$	136,740
Unfavorable lease obligation, net	34,055		36,058		36,726
Other long-term liabilities	58,512		61,151		60,457
Total other long-term liabilities	$	226,145	$	232,869	$	233,923

7. Variable Interest Entities

The Company is the primary beneficiary of four employee housing entities (collectively, the “Employee Housing Entities”), Breckenridge Terrace, LLC, The Tarnes at BC, LLC, BC Housing, LLC and Tenderfoot Seasonal Housing, LLC, which are variable interest entities (“VIEs”), and has consolidated them in its Consolidated Condensed Financial Statements. As a group, as of April 30, 2013, the Employee Housing Entities had total assets of $30.3 million (primarily recorded in property, plant and equipment, net) and total liabilities of $62.9 million (primarily recorded in long-term debt as “Employee Housing Bonds”). The Company’s lenders have issued letters of credit totaling $53.4 million under the Company's senior credit facility (“Credit Agreement”) related to Employee Housing Bonds. Payments under the letters of credit would be triggered in the event that one of the entities defaults on required payments. The letters of credit have no default provisions.

The Company is the primary beneficiary of Avon Partners II, LLC (“APII”), which is a VIE. APII owns commercial space and the Company currently leases substantially all of that space. APII had total assets of $4.4 million (primarily recorded in property, plant and equipment, net) and no debt as of April 30, 2013.

8. Fair Value Measurements

The FASB issued fair value guidance that establishes how reporting entities should measure fair value for measurement and disclosure purposes. The guidance establishes a common definition of fair value applicable to all assets and liabilities measured at fair value and prioritizes the inputs into valuation techniques used to measure fair value. Accordingly, the Company uses valuation techniques which maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value. The three levels of the hierarchy are as follows:

Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities;

Level 2: Inputs include quoted prices for similar assets and liabilities in active and inactive markets or that are observable for the asset or liability either directly or indirectly; and

Level 3: Unobservable inputs which are supported by little or no market activity.

The table below summarizes the Company’s cash equivalents measured at fair value (all other assets and liabilities measured at fair value are immaterial) (in thousands):

F-11




	Fair Value Measurement as of April 30, 2013
Description	Balance at April 30, 2013		Level 1		Level 2		Level 3
Description	Balance at April 30, 2013		Level 1		Level 2		Level 3
Money Market	$	49,025	$	49,025	$	—	$	—
Commercial Paper	$	630	$	—	$	630	$	—
Certificates of Deposit	$	630	$	—	$	630	$	—

	Fair Value Measurement as of July 31, 2012
Description	Balance at July 31, 2012		Level 1		Level 2		Level 3
Money Market	$	6,581	$	6,581	$	—	$	—
Commercial Paper	$	2,441	$	—	$	2,441	$	—
Certificates of Deposit	$	1,260	$	—	$	1,260	$	—

	Fair Value Measurement as of April 30, 2012
Description	Balance at April 30, 2012		Level 1		Level 2		Level 3
Money Market	$	1,392	$	1,392	$	—	$	—
Commercial Paper	$	6,993	$	—	$	6,993	$	—
Certificates of Deposit	$	1,890	$	—	$	1,890	$	—

The Company’s cash equivalents are measured utilizing quoted market prices or pricing models whereby all significant inputs are either observable or corroborated by observable market data.

9. Commitments and Contingencies

Metropolitan Districts

The Company credit-enhances $8.0 million of bonds issued by Holland Creek Metropolitan District (“HCMD”) through an $8.1 million letter of credit issued under the Company’s Credit Agreement. HCMD’s bonds were issued and used to build infrastructure associated with the Company’s Red Sky Ranch residential development. The Company has agreed to pay capital improvement fees to Red Sky Ranch Metropolitan District (“RSRMD”) until RSRMD’s revenue streams from property taxes are sufficient to meet debt service requirements under HCMD’s bonds, and the Company has recorded a liability of $1.8 million primarily within “other long-term liabilities” in the accompanying Consolidated Condensed Balance Sheets, as of April 30, 2013, July 31, 2012 and April 30, 2012, respectively, with respect to the estimated present value of future RSRMD capital improvement fees. The Company estimates that it will make capital improvement fee payments under this arrangement through the year ending July 31, 2028.

Guarantees/Indemnifications

As of April 30, 2013, the Company had various other letters of credit in the amount of $58.4 million, consisting primarily of $53.4 million in support of the Employee Housing Bonds and $3.4 million for workers’ compensation and general liability deductibles related to construction and development activities.

In addition to the guarantees noted above, the Company has entered into contracts in the normal course of business which include certain indemnifications under which it could be required to make payments to third parties upon the occurrence or non-occurrence of certain future events. These indemnities include indemnities to licensees in connection with the licensees’ use of the Company’s trademarks and logos, indemnities for liabilities associated with the infringement of other parties’ technology and software products, indemnities related to liabilities associated with the use of easements, indemnities related to employment of contract workers, the Company’s use of trustees, indemnities related to the Company’s use of public lands and environmental indemnifications. The duration of these indemnities generally is indefinite and generally do not limit the future payments the Company could be obligated to make.

As permitted under applicable law, the Company and certain of its subsidiaries indemnify their directors and officers over their lifetimes for certain events or occurrences while the officer or director is, or was, serving the Company or its subsidiaries in such a capacity. The maximum potential amount of future payments the Company could be required to make under these

F-12

indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that should enable the Company to recover a portion of any future amounts paid.

Unless otherwise noted, the Company has not recorded any significant liabilities for the letters of credit, indemnities and other guarantees noted above in the accompanying Consolidated Condensed Financial Statements, either because the Company has recorded on its Consolidated Condensed Balance Sheets the underlying liability associated with the guarantee, the guarantee is with respect to the Company’s own performance and is therefore not subject to the measurement requirements as prescribed by GAAP, or because the Company has calculated the fair value of the indemnification or guarantee to be immaterial based upon the current facts and circumstances that would trigger a payment under the indemnification clause. In addition, with respect to certain indemnifications it is not possible to determine the maximum potential amount of liability under these guarantees due to the unique set of facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material.

As noted above, the Company makes certain indemnifications to licensees in connection with their use of the Company’s trademarks and logos. The Company does not record any liabilities with respect to these indemnifications.

Self Insurance

The Company is self-insured for claims under its health benefit plans and for the majority of workers’ compensation claims, subject to a stop loss policy. The self-insurance liability related to workers’ compensation is determined actuarially based on claims filed. The self-insurance liability related to claims under the Company’s health benefit plans is determined based on analysis of actual claims. The amounts related to these claims are included as a component of accrued benefits in accounts payable and accrued liabilities (see Note 6, Supplementary Balance Sheet Information).

Legal

The Company is a party to various lawsuits arising in the ordinary course of business. Management believes the Company has adequate insurance coverage and/or has accrued for loss contingencies for all known matters that are deemed to be probable losses and estimable. As of April 30, 2013, July 31, 2012 and April 30, 2012, the accrual for the above loss contingencies was not material individually and in the aggregate.

10. Segment Information

The Company has three reportable segments: Mountain, Lodging and Real Estate. The Mountain segment includes the operations of the Company’s ski resorts/areas and related ancillary services. The Lodging segment includes the operations of all of the Company’s owned hotels, RockResorts, NPS concessionaire properties, condominium management, CME and mountain resort golf operations. The Real Estate segment owns and develops real estate in and around the Company’s resort communities. The Company’s reportable segments, although integral to the success of each other, offer distinctly different products and services and require different types of management focus. As such, these segments are managed separately.

The Company reports its segment results using Reported EBITDA (defined as segment net revenue less segment operating expenses, plus or minus segment equity investment income or loss), which is a non-GAAP financial measure. The Company reports segment results in a manner consistent with management’s internal reporting of operating results to the chief operating decision maker (the Chief Executive Officer) for purposes of evaluating segment performance.

Reported EBITDA is not a measure of financial performance under GAAP. Items excluded from Reported EBITDA are significant components in understanding and assessing financial performance. Reported EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, net change in cash and cash equivalents or other financial statement data presented in the Consolidated Condensed Financial Statements as indicators of financial performance or liquidity. Because Reported EBITDA is not a measurement determined in accordance with GAAP and thus is susceptible to varying calculations, Reported EBITDA as presented may not be comparable to other similarly titled measures of other companies.

The Company utilizes Reported EBITDA in evaluating performance of the Company and in allocating resources to its segments. Mountain Reported EBITDA consists of Mountain net revenue less Mountain operating expense plus or minus Mountain equity investment income or loss. Lodging Reported EBITDA consists of Lodging net revenue less Lodging operating expense. Real Estate Reported EBITDA consists of Real Estate net revenue less Real Estate operating expense. All segment expenses include an allocation of corporate administrative expenses. Assets are not allocated between segments, or used to evaluate performance, except as shown in the table below.

F-13

The following table presents financial information by reportable segment which is used by management in evaluating performance and allocating resources (in thousands):



	Three Months Ended April 30,						Nine Months Ended April 30,
	2013			2012			2013			2012
Net revenue:
Lift tickets	$	215,163		$	188,712		$	390,820		$	342,411
Ski school	53,531			47,040			95,254			84,292
Dining	37,876			31,388			74,075			61,757
Retail/rental	66,329			60,144			176,802			160,958
Other	29,118			27,302			78,719			70,776
Total Mountain net revenue	402,017			354,586			815,670			720,194
Lodging	53,834			53,972			152,885			155,872
Total Resort net revenue	455,851			408,558			968,555			876,066
Real estate	13,840			12,587			39,937			34,784
Total net revenue	$	469,691		$	421,145		$	1,008,492		$	910,850
Operating expense:
Mountain	$	207,953		$	184,211		$	536,498		$	478,256
Lodging	45,446			47,103			142,055			149,497
Total Resort operating expense	253,399			231,314			678,553			627,753
Real estate	16,996			16,069			49,349			46,479
Total segment operating expense	$	270,395		$	247,383		$	727,902		$	674,232
Mountain equity investment income, net	$	266		$	336		$	799		$	944
Reported EBITDA:
Mountain	$	194,330		$	170,711		$	279,971		$	242,882
Lodging	8,388			6,869			10,830			6,375
Resort	202,718			177,580			290,801			249,257
Real estate	(3,156		)	(3,482		)	(9,412		)	(11,695		)
Total Reported EBITDA	$	199,562		$	174,098		$	281,389		$	237,562

Real estate held for sale and investment	$	201,861		$	248,262		$	201,861		$	248,262

Reconciliation to net income attributable to Vail Resorts, Inc.:
Total Reported EBITDA	$	199,562		$	174,098		$	281,389		$	237,562
Depreciation and amortization	(33,730		)	(33,266		)	(98,827		)	(95,245		)
Loss on disposal of fixed assets, net	(224		)	(90		)	(757		)	(1,123		)
Investment income (loss), net	153			(18		)	306			356
Interest expense, net	(8,359		)	(8,443		)	(25,268		)	(25,226		)
Income before provision for income taxes	157,402			132,281			156,843			116,324
Provision for income taxes	(59,814		)	(52,753		)	(59,329		)	(46,108		)
Net income	$	97,588		$	79,528		$	97,514		$	70,216
Net loss attributable to noncontrolling interests	52			41			97			34
Net income attributable to Vail Resorts, Inc.	$	97,640		$	79,569		$	97,611		$	70,250

11. Stock Repurchase Plan

On March 9, 2006, the Company’s Board of Directors approved the repurchase of up to 3,000,000 shares of common stock and on July 16, 2008 approved an increase of the Company’s common stock repurchase authorization by an additional 3,000,000 shares. The Company did not repurchase any shares of common stock during the three and nine months ended April 30, 2013. Since inception of its stock repurchase program through April 30, 2013, the Company has repurchased 4,949,111 shares at a cost of approximately $193.2 million. As of April 30, 2013, 1,050,889 shares remained available to repurchase under the

F-14

existing repurchase authorization. Shares of common stock purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of shares under the Company’s employee share award plan.

12. Guarantor Subsidiaries and Non-Guarantor Subsidiaries

The Company’s payment obligations under the 6.50% Notes (see Note 4, Long-Term Debt) are fully and unconditionally guaranteed on a joint and several, senior subordinated basis by substantially all of the Company’s consolidated subsidiaries (collectively, and excluding Non-Guarantor Subsidiaries (as defined below), the “Guarantor Subsidiaries”), except for Eagle Park Reservoir Company, Larkspur Restaurant & Bar, LLC, Black Diamond Insurance, Inc., Skiinfo AS and certain other insignificant entities (together, the “Non-Guarantor Subsidiaries”). APII and the Employee Housing Entities are included with the Non-Guarantor Subsidiaries for purposes of the consolidated financial information, but are not considered subsidiaries under the indenture governing the 6.50% Notes.

Presented below is the consolidated financial information of the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. Financial information for the Non-Guarantor Subsidiaries is presented in the column titled “Other Subsidiaries.” Balance sheets are presented as of April 30, 2013, July 31, 2012, and April 30, 2012. Statements of operations and statements of comprehensive income (loss) are presented for the three and nine months ended April 30, 2013 and 2012. Statements of cash flows are presented for the nine months ended April 30, 2013 and 2012.

Investments in subsidiaries are accounted for by the Parent Company and Guarantor Subsidiaries using the equity method of accounting. Net income (loss) of Guarantor and Non-Guarantor Subsidiaries is, therefore, reflected in the Parent Company’s and Guarantor Subsidiaries’ investments in and advances to (from) subsidiaries. Net income (loss) of the Guarantor and Non-Guarantor Subsidiaries is reflected in Guarantor Subsidiaries and Parent Company as equity in consolidated subsidiaries. The elimination entries eliminate investments in Other Subsidiaries and intercompany balances and transactions for consolidated reporting purposes.

F-15

Supplemental Condensed Consolidating Balance Sheet

As of April 30, 2013

(in thousands)

(Unaudited)



	Parent Company			100% Owned Guarantor Subsidiaries			Other Subsidiaries			Eliminating Entries			Consolidated
Current assets:
Cash and cash equivalents	$	—		$	230,429		$	7,306		$	—		$	237,735
Restricted cash	—			10,894			1,097			—			11,991
Trade receivables, net	—			70,424			3,309			—			73,733
Inventories, net	—			61,014			187			—			61,201
Other current assets	28,699			20,543			1,236			—			50,478
Total current assets	28,699			393,304			13,135			—			435,138
Property, plant and equipment, net	—			993,813			46,094			—			1,039,907
Real estate held for sale and investment	—			201,861			—			—			201,861
Goodwill, net	—			270,076			1,779			—			271,855
Intangible assets, net	—			72,563			19,476			—			92,039
Other assets	6,319			37,661			4,348			(9,459		)	38,869
Investments in subsidiaries	1,885,121			(2,153		)	—			(1,882,968		)	—
Advances	(385,997		)	382,375			3,622			—			—
Total assets	$	1,534,142		$	2,349,500		$	88,454		$	(1,892,427	)	$	2,079,669
Current liabilities:
Accounts payable and accrued liabilities	$	12,856		$	225,420		$	8,076		$	—		$	246,352
Income taxes payable	13,173			—			—			—			13,173
Long-term debt due within one year	—			299			219			—			518
Total current liabilities	26,029			225,719			8,295			—			260,043
Long-term debt	390,000			41,502			57,738			—			489,240
Other long-term liabilities	27,852			197,158			10,594			(9,459		)	226,145
Deferred income taxes	201,513			—			(2		)	—			201,511
Total Vail Resorts, Inc. stockholders’ equity (deficit)	888,748			1,885,121			(2,153		)	(1,882,968		)	888,748
Noncontrolling interests	—			—			13,982			—			13,982
Total stockholders’ equity	888,748			1,885,121			11,829			(1,882,968		)	902,730
Total liabilities and stockholders’ equity	$	1,534,142		$	2,349,500		$	88,454		$	(1,892,427	)	$	2,079,669

F-16

Supplemental Condensed Consolidating Balance Sheet

As of July 31, 2012

(in thousands)



	Parent Company			100% Owned Guarantor Subsidiaries			Other Subsidiaries			Eliminating Entries			Consolidated
Current assets:
Cash and cash equivalents	$	—		$	38,380		$	7,673		$	—		$	46,053
Restricted cash	—			13,300			984			—			14,284
Trade receivables, net	—			64,185			1,558			—			65,743
Inventories, net	—			65,673			200			—			65,873
Other current assets	24,458			15,522			437			—			40,417
Total current assets	24,458			197,060			10,852			—			232,370
Property, plant and equipment, net	—			1,000,767			48,440			—			1,049,207
Real estate held for sale and investment	—			237,668			—			—			237,668
Goodwill, net	—			268,058			1,711			—			269,769
Intangible assets, net	—			72,751			19,319			—			92,070
Other assets	7,113			42,939			5,937			(9,459		)	46,530
Investments in subsidiaries	1,775,195			(553		)	—			(1,774,642		)	—
Advances	(421,115		)	418,001			3,114			—			—
Total assets	$	1,385,651		$	2,236,691		$	89,373		$	(1,784,101	)	$	1,927,614
Current liabilities:
Accounts payable and accrued liabilities	$	6,542		$	215,308		$	5,688		$	—		$	227,538
Income taxes payable	20,721			—			—			—			20,721
Long-term debt due within one year	—			782			208			—			990
Total current liabilities	27,263			216,090			5,896			—			249,249
Long-term debt	390,000			41,817			57,958			—			489,775
Other long-term liabilities	28,104			203,589			10,635			(9,459		)	232,869
Deferred income taxes	137,973			—			1,420			—			139,393
Total Vail Resorts, Inc. stockholders’ equity (deficit)	802,311			1,775,195			(553		)	(1,774,642		)	802,311
Noncontrolling interests	—			—			14,017			—			14,017
Total stockholders’ equity	802,311			1,775,195			13,464			(1,774,642		)	816,328
Total liabilities and stockholders’ equity	$	1,385,651		$	2,236,691		$	89,373		$	(1,784,101	)	$	1,927,614

F-17

Supplemental Condensed Consolidating Balance Sheet

As of April 30, 2012

(in thousands)

(Unaudited)



	Parent Company			100% Owned Guarantor Subsidiaries		Other Subsidiaries			Eliminating Entries			Consolidated
Current assets:
Cash and cash equivalents	$	—		$	138,001	$	9,109		$	—		$	147,110
Restricted cash	—			12,619		1,047			—			13,666
Trade receivables, net	—			62,390		2,743			—			65,133
Inventories, net	—			56,050		187			—			56,237
Other current assets	32,809			20,925		1,937			—			55,671
Total current assets	32,809			289,985		15,023			—			337,817
Property, plant and equipment, net	—			1,007,074		49,169			—			1,056,243
Real estate held for sale and investment	—			248,262		—			—			248,262
Goodwill, net	—			268,057		1,621			—			269,678
Intangible assets, net	—			74,327		19,388			—			93,715
Other assets	7,368			32,124		4,532			—			44,024
Investments in subsidiaries	1,857,590			2,147		—			(1,859,737		)	—
Advances	(381,351		)	387,860		(6,509		)	—			—
Total assets	$	1,516,416		$	2,309,836	$	83,224		$	(1,859,737	)	$	2,049,739
Current liabilities:
Accounts payable and accrued liabilities	$	12,852		$	205,081	$	6,114		$	—		$	224,047
Income taxes payable	19,005			—		—			—			19,005
Long-term debt due within one year	—			911		208			—			1,119
Total current liabilities	31,857			205,992		6,322			—			244,171
Long-term debt	390,000			41,799		57,958			—			489,757
Other long-term liabilities	28,105			204,455		1,363			—			233,923
Deferred income taxes	183,718			—		1,442			—			185,160
Total Vail Resorts, Inc. stockholders’ equity (deficit)	882,736			1,857,590		2,147			(1,859,737		)	882,736
Noncontrolling interests	—			—		13,992			—			13,992
Total stockholders’ equity	882,736			1,857,590		16,139			(1,859,737		)	896,728
Total liabilities and stockholders’ equity	$	1,516,416		$	2,309,836	$	83,224		$	(1,859,737	)	$	2,049,739

F-18

Supplemental Condensed Consolidating Statement of Operations

For the three months ended April 30, 2013

(in thousands)

(Unaudited)



	Parent Company			100% Owned Guarantor Subsidiaries		Other Subsidiaries		Eliminating Entries			Consolidated
Total net revenue	$	—		$	467,095	$	6,406	$	(3,810	)	$	469,691
Total operating expense	116			301,696		6,309		(3,772		)	304,349
(Loss) income from operations	(116		)	165,399		97		(38		)	165,342
Other expense, net	(6,600		)