Vail Resorts posts strong third quarter
June 6, 2012
BROOMFIELD – Vail Resorts was able to make a little lemonade out of the lemon of a snow season in its third quarter.In a Wednesday conference call, Vail Resorts CEO Rob Katz detailed the company’s financial performance in its fiscal third quarter, from Feb. 1 – April 30. He had good news, considering.Despite a drop of 9.8 percent in skier visits, the skiers who came to the company’s resorts spent more money. Ski school revenue was up more than 12 percent, and the average daily rate charged by the company’s hotels went up as well.And, while skier visits did drop off, especially during the spring break and Easter holiday periods, season pass holders still came to the mountains. Katz said those pass holders, on average, skied just one day less this season than the season before.Those pass holders also seem to believe that what Katz called “the most challenging winter in the history of the U.S. ski industry,” is an anomaly, not a trend. Season pass sales for the quarter were up 17 percent over same period last year.Season pass sales have become a crucial source of cash for the company, now representing about 40 percent of the company’s lift ticket revenue.The report also focused on increases in international visits, which were up about 2 percent in the quarter.Responding to a question from analyst Steven Wieczynski – the same analyst who upgraded Vail Resorts stock to “buy” last week – Katz said he expected to see continued strength in the international markets, particularly in Brazil, Mexico and the United Kingdom. Katz said those countries, particularly, the United Kingdom, are doing relatively better than their neighbors, and the company is continuing its marketing efforts there.Vail Resorts closing stock price Wednesday was $47, up 7.43 percent from Tuesday’s closing price of $43.75. The Dow and S&P also posted their best day of 2012 Wednesday.Katz said the company’s current balance sheet – Vail Resorts has $147.1 million in cash and “cash equivalents” on hand, as well as very little debt – has allowed it to boost its planned capital spending by about $10 million, to between $85 and $95 million. That increase also includes money to start working on new summer activities on Vail Mountain, he said.Analyst Fred Lawrence asked Katz if the company’s plans had been delayed by changes to a law passed last year that allows ski areas to build more summer recreation facilities on federal land.Katz said the law hasn’t changed, but the U.S. Forest Service still requires ski area operators to go through an approval process before building anything new on that federal land. While specific plans haven’t yet been released, Katz said the first efforts at Vail will probably be around existing facilities such as Adventure Ridge. Those improvements could be in place by next summer, he said.Katz said the summer program will start at resorts that already have strong summer traffic at the base areas, and mentioned Vail, Breckenridge and Heavenly specifically.The improvements in Vail “should be a great first start for our entire summer program,” Katz said. “It’s a small beginning of what should be a significant opportunity.”While building on leased Forest Service land is coming, the company also has been selling – if slowly – already-built condos in Vail and Breckenridge.Vail Resorts closed on four units at the Ritz-Carlton residences in Vail during the quarter. Two more have closed since April 30, as well as one unit at One Ski Hill Place in Breckenridge. In total, Vail Resorts has sold 37 of the 71 whole-ownership units at the Ritz-Carlton Residences and 47 of the 88 units at One Ski Hill Place.Analyst Will Marks asked Katz and company Chief Financial Officer Jeff Jones if prices at those units had been dropped to make the sales.Jones said prices at the Ritz-Carlton Residences were adjusted two years ago and haven’t changed since. One Ski Hill Place units haven’t changed in price since the project was completed.The third quarter performance was strong enough that the company will again pay a dividend to shareholders – about 18 cents per share. That dividend will be paid July 10 to those who own the company’s stock as of June 25. The company announced its first-ever dividend last year.