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Vail Resorts Reports Fiscal 2012 Fourth Quarter and Full Year Results and Provides 2013 Outlook

2012-09-25

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Vail Resorts Resort Reported EBITDA (which includes the Company's Mountain and Lodging segments) was $205.3 million for Fiscal 2012 reflecting a decline of 7.5%, or $16.7 million, compared with the same period in the prior year.

Vail Resorts, Inc. (NYSE: MTN) today reported results for the fourth quarter and fiscal year ended July 31, 2012 and provided its outlook for the fiscal year ending July 31, 2013.

Highlights

Resort Reported EBITDA (which includes the Company's Mountain and Lodging segments) was $205.3 million for Fiscal 2012 reflecting a decline of 7.5%, or $16.7 million, compared with the same period in the prior year. When adjusting for acquisition and litigation settlement related items in both current and prior year, Fiscal 2012 Resort Reported EBITDA declined 3.8% from Fiscal 2011.
Net income attributable to Vail Resorts, Inc. of $16.5 million in Fiscal 2012 declined from $34.5 million in Fiscal 2011.
Sales of season passes through September 23, 2012 for the upcoming 2012/2013 ski season were up approximately 17% in units and approximately 21% in sales dollars versus the comparable period in the prior year, adjusted as if Kirkwood were owned in both periods. Based on historical patterns, approximately 60% of our total sales are made by this date.
During the 2012 fiscal year, we closed on thirteen Ritz-Carlton Residence units and seven One Ski Hill Place units, with Real Estate net revenue of $47.2 million in Fiscal 2012.

Commenting on the Company's Fiscal 2012 results, Rob Katz, Chief Executive Officer said, "I am very pleased with our fourth quarter and fiscal year results. In the fourth quarter, our Resort Reported EBITDA was improved compared to the prior year, reflecting enhanced summer guest visitation. For the full fiscal year, I am very proud of our results given that the 2011/ 2012 ski season was the most challenging winter in the history of the United States ski industry and our performance demonstrated the resiliency of our business model. In particular, the strength of our growing season pass business and the comprehensive and differentiated experience we provide at our resorts stabilized our revenues, in the face of very challenging weather."

Katz added, "In the Mountain Segment, net revenues actually increased 1.9% for Fiscal 2012 despite total skier visits declining 12.1% compared to Fiscal 2011. Several key factors contributed to our Mountain Segment results: the strength of season pass sales, which were up $15.8 million or 13.2% in revenue over a year ago; an increase in our effective ticket price, excluding season passes, of 9.3%; enhanced consumer spending resulting in double-digit growth in yield-per-skier visit in our ski school and dining operations and increased international visitation of approximately 2%. Each of these factors is a positive indicator as we look towards the upcoming season."

Regarding Lodging, Katz said, "Our Lodging business was also impacted by the decline in skier visitation during the season, but mitigated that impact through increased average daily rate ("ADR") and a higher mix of luxury room nights as well as strong summer operations, particularly at our Grand Teton Lodge Company operations, including the addition of the Flagg Ranch National Park concession, all resulting in an increase in total Lodging revenues (excluding payroll cost reimbursement related to managed hotel properties) of 1.1% compared to the prior fiscal year."

Katz added, "Resort Reported EBITDA declined 3.8% from Fiscal 2011 when adjusting for one time items (including the timing of the Northstar, Kirkwood and Skiinfo acquisitions and a prior year litigation settlement). We feel this modest decline is particularly noteworthy when considering that Fiscal 2011 was an all-time record snowfall year and Fiscal 2012 was the lowest snowfall season in our history."

Turning to Real Estate, Katz said, "Sales of units at The Ritz-Carlton Residences, Vail and One Ski Hill Place in Breckenridge continue to demonstrate strong momentum and met our expectations for the year. In the last quarter of Fiscal 2012, we closed on four units at The Ritz-Carlton Residences, Vail, and one unit at One Ski Hill Place in Breckenridge. For the entire fiscal year, we have closed on thirteen units at The Ritz-Carlton Residences, Vail, and seven units at One Ski Hill Place. Real Estate net revenue in Fiscal 2012 was $47.2 million."

Katz added, "Our balance sheet remains in a very strong position. In Fiscal 2012, we generated $185.4 million of operating cash flow and ended the fiscal year with $46.1 million of cash on hand. In the fourth quarter of fiscal 2012, in addition to paying out our quarterly dividend, we repurchased $22.5 million of stock at an average price of $46.78. As of July 31, 2012, Net Debt was 2.3 times trailing twelve months Total Reported EBITDA, and we had no borrowings under the revolver component of our senior credit facility. Additionally, we have virtually no principal payments due on debt until 2019."

Katz concluded, "I am pleased to announce that our Board of Directors has declared a quarterly cash dividend on Vail Resorts' common stock of $0.1875 per share, payable on October 25, 2012 to shareholders of record on October 10, 2012."

Operating Results

A complete Management's Discussion and Analysis of Financial Condition and Results of Operations can be found in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2012 filed with the Securities and Exchange Commission. The following are segment highlights:

Mountain Segment

Total Skier Visits for Fiscal 2012 were 6.1 million, versus 7.0 million in Fiscal 2011, a 12.1% decrease.
Mountain segment net revenue was $766.6 million for Fiscal 2012 compared to $752.2 million in the same period in the prior year, a 1.9% increase.
Mountain Reported EBITDA was $198.9 million for Fiscal 2012 compared to $213.2 million in the same period in the prior year, a 6.7% decrease. Excluding $3.1 million of Northstar Fiscal 2012 first quarter EBITDA losses and transition costs net of the prior year transaction costs, and $2.6 million of Kirkwood and Skiinfo acquisition timing and acquisition related costs, Mountain Reported EBITDA would reflect a 4.1% decrease from Fiscal 2011.
Mountain Reported EBITDA includes $7.6 million and $7.1 million of stock-based compensation expense for Fiscal 2012 and 2011, respectively.

Despite the unprecedented adverse weather conditions, Fiscal 2012 Mountain revenue was stable due to increased season pass sales, higher pricing and increased average guest spend. Total Effective Ticket Price ("ETP") (calculated by dividing lift ticket revenue by total skier visits) for Fiscal 2012 increased 13.8% to $55.75 from $48.99 in Fiscal 2011, driven by price increases and a decline from Fiscal 2011 in visitation from season pass holders of approximately 1.2 days per pass. ETP excluding season passes increased by 9.3% and season pass revenue increased by 13.2%, including a 3% increase in units. Both ski school and dining revenues increased in Fiscal 2012 (0.6% and 0.5%, respectively) over the prior fiscal year, with retail/rental revenues increasing 4.3%. Fiscal 2012 fourth quarter results reflect strong momentum in summer revenues, with Mountain net revenues rising 11.3% to $46.4 million from $41.7 million in the same period of the prior year.

Lodging Segment

Lodging segment net revenue was $210.6 million for Fiscal 2012 compared to $214.7 million for the prior fiscal year, a 1.9% decrease. Excluding payroll cost reimbursement related to managed hotel properties, Total Lodging revenues increased 1.1%.
For Fiscal 2012, ADR increased 6.1% and revenue per available room ("RevPAR") decreased 3.7% at the Company's owned hotels and managed condominiums compared to the same period in the prior year.
Lodging Reported EBITDA was $6.4 million for Fiscal 2012 compared to $8.8 million for the same period in the prior year, a decrease of 27.4%. Lodging Reported EBITDA for the first fiscal quarter of 2011 included a $2.9 million benefit from a legal settlement. Excluding the settlement, Lodging Reported EBITDA increased 9.0% in Fiscal 2012.
Lodging Reported EBITDA includes $1.7 million of stock-based compensation expense for Fiscal 2012 compared to $2.1 million in Fiscal 2011.

Revenue from owned hotel rooms and managed condominiums increased by 4.2% and 3.1% respectively in Fiscal 2012, despite a decrease in winter transient guest visitation as well as lower levels of group business at Keystone Resort. These increases were driven by an ADR increase of 4.8% at our owned hotels with a RevPar increase of nearly 1.0%, while our managed condominium ADR increase was 7.9% supported by a higher mix of luxury properties including increased units at The Ritz-Carlton Residences, Vail and One Ski Hill Place in Breckenridge. Additionally, summer operations at Grand Teton Lodge Company were strong in Fiscal 2012 with room revenues increasing $1.1 million from prior year, driven by higher ADR as well as improved weather conditions in May and June 2012 compared to the prior fiscal year and the addition of Flagg Ranch (awarded National Park Service concessionaire contract in November 2011).

Resort – Combination of Mountain and Lodging Segments

Resort net revenue was $977.2 million for Fiscal 2012 compared to $966.8 million in the prior fiscal year, a 1.1% increase.
Resort Reported EBITDA was $205.3 million for the Fiscal 2012 compared to $221.9 million in the same period in the prior year. Adjusted for the acquisition and legal settlement items described above, Resort Reported EBITDA decreased 3.8%.

Real Estate Segment

Real Estate segment net revenue was $47.2 million for Fiscal 2012 compared to $200.2 million in the prior fiscal year.
Real Estate Reported EBITDA was a negative $16.0 million for Fiscal 2012 compared to a negative $5.0 million in the prior year.
Real Estate Reported EBITDA includes $2.6 million of stock-based compensation expense for Fiscal 2012 compared to $3.3 million in Fiscal 2011.

In Fiscal 2012, we closed on thirteen condominium units at The Ritz-Carlton Residences, Vail ($33.2 million of revenue with an average selling price per unit of $2.6 million and an average price per square foot of $1,146) and seven condominium units at One Ski Hill Place ($8.6 million of revenue with an average selling price per unit of $1.2 million and an average price per square foot of $975). The large year-over-year variance in net revenue and EBITDA is driven by the Fiscal 2011 closing of 71 condominium units at The Ritz-Carlton Residences, Vail for $186.4 million, which included 45 units sold to The Ritz-Carlton Development Company at the completion of construction on the project.

Total Performance

Total net revenue was $1,024.4 million for Fiscal 2012 compared to $1,167.0 million in the prior year, a 12.2% decrease.
Net income attributable to Vail Resorts, Inc. was $16.5 million, or $0.45 per diluted share, for Fiscal 2012 compared to net income attributable to Vail Resorts, Inc. of $34.5 million, or $0.94 per diluted share, in the prior year. In Fiscal 2011, net income attributable to Vail Resorts, Inc. included a pretax charge of $7.4 million, or $4.6 million after tax, for extinguishment of debt related to the Company's successful bond refinancing.

Dividends and Share Repurchases

In Fiscal 2012, total dividends paid were $0.675 per share, after increasing the dividend amount by 25% in the third fiscal quarter from $0.15 to $0.1875 per share.

In the fourth quarter of Fiscal 2012, the Company repurchased 480,930 shares at an average price of $46.78 for a total of $22.5 million. Since inception of the share repurchase program, the Company has repurchased 4,949,111 shares of stock, at an average share price of $39.04 for a total amount of $193.2 million. There are approximately 1.1 million shares remaining available for repurchase under the current authorization.

Outlook and Fiscal Year 2013 Guidance

Commenting on the Company's season pass sales for the upcoming 2012/2013 ski season, Katz said, "We continue to be extremely pleased with the strength of our season pass sales to date, especially coming off the challenging weather of the past ski season and the record performance we had in season passes last year. Sales of season passes through September 23, 2012 for the upcoming 2012/2013 season were up approximately 17% in units and approximately 21% in sales dollars versus the comparable period in the prior year, adjusted as if Kirkwood were owned in both periods. To date, we have sold approximately 178,000 passes for the upcoming 2012/2013 ski season. We have seen strong gains across all our key products and geographies, including from both our destination and regional guests, with particularly strong momentum in Tahoe, with the addition of Kirkwood and the Tahoe Local Pass, and in international markets. We anticipate seeing continued strength in the Tahoe market and from Europe, particularly with the recently announced addition of 3 days of skiing at Verbier to our Epic Pass. While we believe that a portion of the significant increase in sales to date is due to some timing shifts, we hope to maintain the vast majority of these absolute gains through the rest of the selling period, with a resulting moderation of the ultimate percentage increase in the program. Based on historical purchasing patterns, approximately 60% of our passes have typically been sold at this point in the selling process. It is also important to remember that all of the pass sales for the upcoming 2012/2013 ski season will be recorded as revenue in Fiscal 2013, over the course of the 2012/2013 ski season. This season pass sales performance provides a strong, pre-season indicator as we head into the 2012/2013 ski season."

Regarding advance Lodging bookings, Katz said, "Although it is still early in the cycle (less than 15% of winter season bookings are historically made by this time), we are pleased that at this point bookings are up in both room nights and revenue over the prior year."

Commenting on Fiscal 2013 guidance, Katz continued, "We would like to announce our guidance for Fiscal 2013. As always, our visibility on the upcoming season at this point in time is limited. Our guidance for Fiscal 2013 anticipates a return to more normal weather conditions and the continuation of a challenging, but stable economic environment. Based on our current estimates, our Fiscal 2013 guidance range anticipates Resort Reported EBITDA of between $260 million and $270 million, reflecting a 27% to 32% increase over Resort Reported EBITDA in Fiscal 2012. Our Real Estate segment results are impacted in any given year by the timing and mix of real estate sold and closed. For Fiscal 2013, we are estimating Real Estate Reported EBITDA of negative $9 million to negative $17 million, including approximately $2 million of non-cash stock-based compensation expense. Included in these estimates are Net Real Estate Cash Flow of $15-$25 million (defined as Real Estate Reported EBITDA, plus non-cash real estate cost of sales, plus non-cash stock-based compensation expense, plus change in real estate deposits less investment in real estate). Net income attributable to Vail Resorts, Inc. is expected to be in a range of $50 to $60 million in Fiscal 2013."

The following table reflects the forecasted guidance range for the Company's fiscal year ending July 31, 2013, 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 2013.

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

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