<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] Quarterly Report Pursuant to Section 13 Or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended October 31, 2000
----------------
[_] 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: 1-9614
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Vail Resorts, Inc.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0291762
--------------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 7
Vail, Colorado 81658
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(Address of principal executive offices) (Zip Code)
(970) 476-5601
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(Registrant's telephone number, including area code)
None.
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(Former name, former address and former fiscal year,
if changed since last report)
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.
[X] Yes [_] No
As of December 12, 2000, 7,439,834 shares of Class A Common Stock and
27,466,528 shares of Common Stock were issued and outstanding.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
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................... 4
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................................ 5
Item 2. Changes in Securities and Use of Proceeds.................................... 5
Item 3. Defaults Upon Senior Securities.............................................. 5
Item 4. Submission of Matters to a Vote of Security Holders.......................... 5
Item 5. Other Information............................................................ 5
Item 6. Exhibits and Reports on Form 8-K............................................. 5
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<S> <C>
Consolidated Condensed Balance Sheets as of October 31, 2000, July 31, 2000
and October 31, 1999..................................................... F-2
Consolidated Condensed Statements of Operations for the Three Months Ended
October 31, 2000 and 1999................................................ F-3
Consolidated Condensed Statements of Cash Flows for the Three Months Ended
October 31, 2000 and 1999................................................ F-4
Notes to Consolidated Condensed Financial Statements........................ F-5
</TABLE>
F-1
<PAGE>
Vail Resorts, Inc.
Consolidated Condensed Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
October 31, July 31, October 31,
2000 2000 1999
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents........................... $ 20,694 $ 18,668 $ 18,954
Receivables, net.................................... 39,296 39,427 26,304
Income taxes receivable............................. -- -- 268
Inventories......................................... 30,905 24,092 29,013
Deferred income taxes............................... 10,364 10,364 10,404
Other current assets................................ 8,752 7,803 6,993
------------ ------------ ------------
Total current assets........................... 110,011 100,354 91,936
Property, plant and equipment, net..................... 657,299 655,172 626,549
Real estate held for sale and investment............... 152,364 147,172 156,628
Deferred charges and other assets...................... 30,373 30,260 31,235
Intangible assets, net ................................ 193,695 194,860 198,924
------------ ------------ ------------
Total assets................................... $ 1,143,742 $ 1,127,818 $ 1,105,272
============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses............... $ 130,531 $ 105,502 $ 121,007
Income taxes payable................................ 1,446 2,645 --
Long-term debt due within one year (Note 5)......... 1,833 2,037 1,478
------------ ------------ ------------
Total current liabilities...................... 133,810 110,184 122,485
Long-term debt (Note 5)................................ 420,197 392,198 424,102
Other long-term liabilities............................ 31,433 31,710 30,726
Deferred income taxes.................................. 77,514 92,577 67,772
Commitments and contingencies (Note 3)................. -- -- --
Minority interest in net assets of consolidated joint
ventures............................................... 5,383 7,394 5,612
Stockholders' equity:
Common stock--
Class A common stock, $0.01 par value,
20,000,000 shares authorized, 7,439,834
shares issued and outstanding................ 74 74 74
Common stock, $0.01 par value, 40,000,000
shares authorized, 27,465,777, 27,182,123 and
27,137,285 shares issued and outstanding at
October 31, 2000, July 31, 2000 and
October 31, 1999, respectively............... 275 272 271
Additional paid-in capital.......................... 407,392 404,564 403,167
Retained earnings................................... 67,664 88,845 51,063
------------ ------------ ------------
Total stockholders' equity..................... 475,405 493,755 454,575
------------ ------------ ------------
Total liabilities and stockholders' equity..... $ 1,143,742 $ 1,127,818 $ 1,105,272
============ ============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-2
<PAGE>
Vail Resorts, Inc.
Consolidated Condensed Statements Of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
2000 1999
------------ ------------
<S> <C> <C>
Net revenues:
Resort........................................................... $ 61,451 $ 56,859
Real estate...................................................... 8,976 8,970
------------ ------------
Total net revenues.......................................... 70,427 65,829
Operating expenses:
Resort........................................................... 79,953 77,298
Real estate...................................................... 4,309 5,863
Depreciation and amortization.................................... 15,643 14,900
------------ ------------
Total operating expenses.................................... 99,905 98,061
------------ ------------
Loss from operations................................................ (29,478) (32,232)
Other income (expense):
Investment income................................................ 673 355
Interest expense................................................. (8,901) (8,883)
Loss on disposal of fixed assets................................. (262) (42)
Other expense.................................................... (9) (17)
Minority interest in consolidated joint ventures................. 1,770 1,444
------------ ------------
Loss before income taxes............................................ (36,207) (39,375)
Credit for income taxes............................................. 15,026 16,931
------------ ------------
Net loss............................................................ $ (21,181) $ (22,444)
============ ============
Net loss per common share (Note 4):
Basic............................................................ $ (0.61) $ (0.65)
============ ============
Diluted.......................................................... $ (0.61) $ (0.64)
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-3
<PAGE>
Vail Resorts, Inc.
Consolidated Condensed Statements Of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................................... $ (21,181) $ (22,444)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization................................. 15,643 14,900
Non-cash cost of real estate sales............................ 1,812 3,081
Non-cash compensation related to stock grants................. 112 81
Non-cash equity income........................................ (2,642) (2,042)
Deferred financing costs amortized............................ 433 478
Loss on disposal of fixed assets.............................. 262 42
Deferred income taxes, net ................................... (15,026) (16,956)
Minority interest in consolidated joint ventures.............. (1,770) (1,444)
Changes in assets and liabilities:
Receivables, net.............................................. 131 3,346
Inventories................................................... (6,813) (6,208)
Accounts payable and accrued expenses......................... 23,953 31,562
Income taxes payable and receivable........................... (1,199) (1,900)
Other assets and liabilities, net............................. (1,288) (2,124)
------------ ------------
Net cash provided by (used in) operating activities........ (7,573) 372
Cash flows from investing activities:
Investments in/distributions from joint ventures, net............ 4,965 --
Resort capital expenditures...................................... (16,612) (26,392)
Investments in real estate....................................... (10,421) (8,058)
------------ ------------
Net cash used in investing activities......................... (22,068) (34,450)
Cash flows from financing activities:
Proceeds from the exercise of stock options...................... 2,796 314
Proceeds from the cancellation of interest rate swap agreements
(Note 2)........................................................ 1,076 --
Proceeds from borrowings under long-term debt.................... 58,800 51,750
Payments on long-term debt....................................... (31,005) (24,356)
------------ ------------
Net cash provided by financing activities..................... 31,667 27,708
------------ ------------
Net increase (decrease) in cash and cash equivalents................ 2,026 (6,370)
Cash and cash equivalents:
Beginning of period.............................................. 18,668 25,324
------------ ------------
End of period.................................................... $ 20,694 $ 18,954
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-4
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
Vail Resorts, Inc. ("Vail Resorts") is organized as a holding company and
operates through various subsidiaries. Vail Resorts and its subsidiaries
(collectively, the "Company") currently operate in two business segments--resort
and real estate. The Vail Corporation (d/b/a Vail Associates, Inc.), an indirect
wholly owned subsidiary of Vail Resorts, and its subsidiaries, (collectively,
"Vail Associates") operate four of the world's largest skiing facilities on
Vail, Breckenridge, Keystone and Beaver Creek mountains in Colorado. In addition
to the ski resorts, Vail Associates owns and operates Grand Teton Lodge Company
("GTLC"), which operates three resorts within Grand Teton National Park (under a
National Park Service concessionaire contract) and the Jackson Hole Golf &
Tennis Club in Wyoming. Vail Resorts Development Company ("VRDC"), a wholly
owned subsidiary of Vail Associates, conducts the Company's real estate
development activities. The Company's mountain resort businesses are seasonal in
nature. The Company's ski resort businesses and related amenities typically have
operating seasons from late October through mid-May; the Company's operations at
GTLC generally run from mid-May through mid-October.
In the opinion of the Company, the accompanying consolidated condensed
financial statements reflect all adjustments necessary to present 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 year. The accompanying consolidated financial statements should be read
in conjunction with the audited consolidated financial statements for the year
ended July 31, 2000, included in the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 2000.
2. Summary of Significant Accounting Policies
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Interest Rate Agreements--At July 31, 2000, the Company had in effect interest
rate swap agreements ("Swap Agreements") with notional amounts totaling $75.0
million maturing in December 2002. In October 2000, the Company canceled the
Swap Agreements in exchange for a cash payment of $1.1 million. The $1.1 million
gain has been deferred at October 31, 2000 and will be recognized over the
original life of the Swap Agreements, in accordance with the Financial
Accounting Standards Board ("FASB") Emerging Issues Task Force Issue No. 84-7,
"Termination of Interest Rate Swaps".
New Accounting Standards--In June 1998, the FASB issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities". SFAS No. 133 was to be effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
In July 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133". SFAS No. 137 deferred the effective date of SFAS No. 133
until fiscal years beginning after June 15, 2000. In June 2000, the FASB issued
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an Amendment of FASB Statement No. 133". SFAS No. 138 addresses a
limited number of issues causing difficulties in the implementation of SFAS No.
133 and is required to be adopted concurrently with SFAS No. 133. The Company
has not engaged in hedging activities and does not believe the adoption of SFAS
No. 133 and SFAS No. 138 will have a material impact on the Company's financial
position or results of operations.
F-5
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
3. Commitments and Contingencies
Smith Creek Metropolitan District ("SCMD") and Bachelor Gulch Metropolitan
District ("BGMD") were organized in November 1994 to cooperate in the financing,
construction and operation of basic public infrastructure serving the Company's
Bachelor Gulch Village development. SCMD was organized primarily to own, operate
and maintain water, street, traffic and safety, transportation, fire protection,
parks and recreation, television relay and translation, sanitation and certain
other facilities and equipment of BGMD. SCMD is comprised of approximately 150
acres of open space land owned by the Company and members of the Board of
Directors of SCMD. In two planned unit developments, Eagle County has granted
zoning approval for 1,395 dwelling units within Bachelor Gulch Village,
including various single-family homesites, cluster homes, townhomes, and lodging
units. The developers current plans, however, call for approximately 932
dwelling units to be constructed over the next 10 years. As of October 31, 2000,
the Company has sold 104 single-family homesites and sixteen parcels to
developers for the construction of various types of dwelling units. Currently,
SCMD has outstanding $38.4 million of variable rate revenue bonds maturing on
October 1, 2035, which have been enhanced with a $40.7 million letter of credit
issued against the Company's Credit Facility (as defined herein). It is
anticipated that, as Bachelor Gulch Village expands, BGMD will become self
supporting and that within 25 to 35 years it will issue general obligation
bonds, the proceeds of which will be used to retire the SCMD revenue bonds.
Until that time, the Company has agreed to subsidize the interest payments on
the SCMD revenue bonds. The Company has estimated the present value of the
remaining aggregate subsidy to be $19.5 million at October 31, 2000. The Company
has allocated $10.6 million of that amount to the Bachelor Gulch Village
homesites which were sold as of October 31, 2000 and has recorded that amount as
a liability in the accompanying financial statements. The total subsidy incurred
as of October 31, 2000 and July 31, 2000 was $7.4 million and $6.5 million,
respectively.
At October 31, 2000 the Company had various other letters of credit
outstanding in the aggregate amount of $46.2 million.
The Company purchased a Reduced Skier Day Insurance Policy, a customized
insurance product, for the 1999-2000 ski season. Under this policy, the Company
receives a fixed payment for each paid skier day below certain targeted levels
for the season. During fiscal 2000, the net benefit recognized in the financial
statements from the policy was $13.9 million. The proceeds from the insurance
policy have not yet been received. The Company is in settlement discussions with
the insurance carrier and expects to settle the insurance claim in the second
quarter of fiscal 2001.
The Company is a party to various lawsuits arising in the ordinary course of
business. Management believes the Company has adequate insurance coverage and
accrued loss contingencies for all matters and that, although the ultimate
outcome of such claims cannot be ascertained, current pending and threatened
claims are not expected to have a material adverse impact on the financial
position, results of operations and cash flows of the Company.
In July 1999, the U.S. Army Corps of Engineers alleged that certain road
construction which the Company undertook as part of the Blue Sky Basin expansion
involved discharges of fill material into wetlands in violation of the Clean
Water Act. A subsequent review confirmed that the wetland impact involved
approximately seven-tenths of one acre. In August 1999, three organizations and
one individual collectively notified us and the federal agencies that if the
alleged violations were not remedied within 60 days, they intended to file a
citizen enforcement action under the Clean Water Act. No action has been filed
as of the date of this Form 10-Q. Under the Clean Water Act, unauthorized
discharges of fill can give rise to administrative, civil and criminal
enforcement actions seeking monetary penalties and injunctive relief, including
removal of the unauthorized fill. In October 1999, the Environmental Protection
Agency, the lead enforcement agency in this matter, ordered us to stabilize the
road temporarily and restore the wetland in the summer of 2000. (EPA - Region
VIII, Docket No. CWA-8-2000-01). We completed the restoration work on the
wetland impact this summer, pursuant to our restoration plan approved by the
EPA. The EPA is considering enforcement action, and although we cannot guarantee
a particular result, we do not anticipate that a material fine will be levied.
F-6
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
3. Commitments and Contingencies (Continued)
The Company has executed as lessee non-cancelable operating leases for the
rental of office space, employee residential units and office equipment through
fiscal 2009. For the three months ended October 31, 2000 and 1999, lease expense
of $3.0 million and $3.2 million, respectively, related to these agreements was
recorded and is included in the accompanying consolidated statements of
operations.
Future minimum lease payments under these leases as of October 31, 2000 are
as follows (in thousands):
Due during fiscal years ending July 31:
2001............................................................ $ 4,386
2002............................................................ 2,920
2003............................................................ 2,074
2004............................................................ 1,977
2005............................................................ 944
Thereafter...................................................... 3,600
---------
Total........................................................ $ 15,901
=========
4. Net Earnings Per Common Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income (loss) available to common shareholders by the weighted
average shares outstanding. 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 common shares that would then share in
the earnings of the Company.
<TABLE>
<CAPTION>
Three Months Ended
October 31,
-----------------------------------------------
2000 1999
---------------------- ------------------------
(In thousands, except per share amounts)
Basic Diluted Basic Diluted
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Net loss per common share:
Net loss................................... $ (21,181) $ (21,181) $ (22,444) $ (22,444)
Weighted average shares outstanding........ 34,762 34,762 34,647 34,647
Effect of dilutive stock options........... -- 172 -- 206
--------- --------- ----------- ----------
Total shares............................... 34,762 34,934 34,647 34,853
--------- --------- ----------- ----------
Net loss per common share.................. $ (0.61) $ (0.61) $ (0.65) $ (0.64)
========= ========= =========== ==========
</TABLE>
5. Long-Term Debt
Long-term debt as of October 31, 2000 and July 31, 2000 is summarized as
follows (in thousands):
October 31, July 31,
Maturity(e) 2000 2000
----------------------------------------
Industrial Development Bonds(a).... 2003-2020 $ 63,200 $ 63,200
Credit Facilities (b).............. 2003 154,050 126,000
Senior Subordinated Notes (c)...... 2009 200,000 200,000
Other(d)........................... 2001-2029 4,780 5,035
---------- -----------
422,030 394,235
Less: Maturities due within 12
months............................. 1,833 2,037
---------- -----------
$ 420,197 $ 392,198
========== ===========
F-7
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
5. Long-Term Debt (Continued)
(a) The Company has $41.2 million of outstanding Industrial Development
Bonds issued by Eagle County, Colorado that mature, subject to prior
redemption, on August 1, 2019. These bonds accrue interest at 6.95% per
annum, with interest being payable semi-annually on February 1 and
August 1. In addition, the Company has outstanding two series of
refunding bonds. The Series 1990 Sports Facilities Refunding Revenue
Bonds have an aggregate outstanding principal amount of $19.0 million,
which matures in installments in 2006 and 2008. These bonds bear
interest at a rate of 7.75% for bonds maturing in fiscal 2007 and 7.875%
for bonds maturing in fiscal 2009. The Series 1991 Sports Facilities
Refunding Revenue Bonds have an aggregate outstanding principal amount
of $3.0 million and bear interest at 7.125% for bonds maturing in fiscal
2003 and 7.375% for bonds maturing in fiscal 2011. Collectively, the
bonds are referred to herein as the "Industrial Development Bonds".
(b) The Company's credit facilities consist of a revolving credit facility
("Credit Facility") that provides for debt financing up to an aggregate
principal amount of $450 million. Borrowings under the Credit Facility
bear interest annually at the Company's option at the rate of (i) LIBOR
(6.62% at October 31, 2000) plus a margin ranging from 0.75% to 2.25% or
(ii) the agent's prime lending rate, (9.50% at October 31, 2000) plus a
margin of up to 0.75%. The Company also pays a quarterly unused
commitment fee ranging from 0.20% to 0.50%. The interest margins
fluctuate based upon the ratio of the Company's total Funded Debt to the
Company's Resort EBITDA (as defined in the underlying Credit Facility.
The Credit Facility matures on December 19, 2002.
SSI Venture LLC's credit facility ("SSV Facility") provides debt
financing up to an aggregate principal amount of $25 million. The SSV
Facility consists of (i) a $15 million Tranche A revolving credit
facility and (ii) a $10 million Tranche B term loan facility. The SSV
Facility matures on the earlier of December 31, 2003 or the termination
date of the Credit Facility discussed above. Vail Associates guarantees
the SSV Facility. The principal amount outstanding on the Tranche B term
loan was $8.25 million at October 31, 2000. Future minimum amortization
under the Tranche B Term Loan Facility is $0.75 million, $1.0 million,
$1.0 million and $5.5 million during fiscal years 2001, 2002, 2003, and
2004, respectively. The SSV Facility bears interest annually at the
rates prescribed above for the Credit Facility. SSI Venture LLC also
pays a quarterly unused commitment fee at the same rates as the unused
commitment fee for the Credit Facility.
(c) The Company has outstanding $200 million of Senior Subordinated Notes
(the "Notes"). The Notes have a fixed annual interest rate of 8.75%,
with interest due semi-annually on May 15 and November 15. The Notes
will mature on May 15, 2009 and no principal payments are due to be paid
until maturity. The Company has certain early redemption options under
the terms of the Notes. Substantially all of the Company's subsidiaries
have guaranteed the Notes. The Notes are subordinated to certain of the
Company's debts, including the Credit Facility, and will be subordinated
to certain of the Company's future debts. The proceeds of the offering
were used to reduce the Company's outstanding debt under the Credit
Facility.
(d) Other obligations bear interest at rates ranging from 5.45% to 8.0% and
have maturities ranging from 2001 to 2029.
(e) Maturities are based on the Company's July 31 fiscal year end.
Aggregate maturities for debt outstanding are as follows (in thousands):
As of
October 31,
Due during fiscal years ending July 31. 2000
------------
2001........................................................ $ 1,630
2002........................................................ 1,682
2003........................................................ 148,355
2004........................................................ 5,558
2005........................................................ 61
Thereafter.................................................. 264,744
-----------
Total Debt............................................... $ 422,030
===========
F-8
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
6. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company's payment obligations under the 8.75% Senior Subordinated Notes
due 2009 (see Note 5), 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 the Non-Guarantor
Subsidiaries (as defined below), the "Guarantor Subsidiaries") except for SSI
Venture LLC ("SSV"), Vail Associates Investments, Inc. and Vail Resorts
Holdings, Inc. (together, the "Non-Guarantor Subsidiaries"). SSV is a 51.9%-
owned joint venture which owns and operates certain retail and rental
operations. Vail Associates Investments, Inc. and Vail Resorts Holdings, Inc.
are a 100%-owned corporations which own certain real estate held for sale.
Presented below is the consolidated condensed financial information of Vail
Resorts, Inc. (the "Parent Company"), the Guarantor Subsidiaries and the Non-
Guarantor Subsidiaries as of October 31, 2000 and July 31, 2000 and for the
three months ended October 31, 2000 and 1999.
Investments in subsidiaries are accounted for by the Parent Company and
Guarantor Subsidiaries using the equity method of accounting. Net income 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 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 Non-Guarantor
Subsidiaries and intercompany balances and transactions.
F-9
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL SUBSIDIARIES--(CONTINUED)
(UNAUDITED)
6. Guarantor Subsidiaries and Non-Guarantor Subsidiaries (Continued)
Supplemental Condensed Consolidating Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ -------------- ------------ ------------
October 31, 2000
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............. $ -- $ 19,912 $ 782 $ -- $ 20,694
Receivables, net...................... 200 38,799 297 -- 39,296
Inventories........................... -- 7,600 23,305 -- 30,905
Deferred income taxes................. 1,134 9,230 -- -- 10,364
Other current assets.................. -- 7,694 1,058 -- 8,752
--------- ----------- --------- ------------ -----------
Total current assets................ 1,334 83,235 25,442 -- 110,011
Property, plant and equipment, net....... -- 645,721 11,578 -- 657,299
Real estate held for sale and investment. -- 146,730 5,634 -- 152,364
Deferred charges and other assets........ 6,281 23,837 255 -- 30,373
Intangible assets, net................... -- 180,401 13,294 -- 193,695
Investments in subsidiaries and advances
to (from) subsidiaries................ 677,550 (18,729) (5,885) (652,936) --
--------- ----------- --------- ------------ -----------
Total assets........................ $ 685,165 $ 1,061,195 $ 50,318 $ (652,936) $ 1,143,742
========= =========== ========= ============ ===========
Current liabilities:
Accounts payable and accrued expenses. $ 9,032 $ 101,756 $ 19,743 $ -- $ 130,531
Income taxes payable.................. -- 1,446 -- -- 1,446
Long-term debt due within one year.... -- 833 1,000 -- 1,833
--------- ----------- --------- ------------ -----------
Total current liabilities........... 9,032 104,035 20,743 -- 133,810
Long-term debt........................... 200,000 202,147 18,050 -- 420,197
Other long-term liabilities.............. 728 30,705 -- -- 31,433
Deferred income taxes.................... -- 77,514 -- -- 77,514
Minority interest in net assets of
consolidated joint ventures........... -- 100 5,283 -- 5,383
Total stockholders' equity............... 475,405 646,694 6,242 (652,936) 475,405
--------- ----------- --------- ------------ -----------
Total liabilities and stockholders'
equity................................ $ 685,165 $ 1,061,195 $ 50,318 $ (652,936) $ 1,143,742
========= =========== ========= ============ ===========
July 31, 2000
---------------------------------------------------------------------
Current assets:
Cash and cash equivalents............. $ -- $ 18,346 $ 322 $ -- $ 18,668
Receivables, net...................... 200 38,591 636 -- 39,427
Inventories........................... -- 8,720 15,372 -- 24,092
Deferred income taxes................. 1,134 9,230 -- -- 10,364
Other current assets.................. -- 7,122 681 -- 7,803
--------- ----------- --------- ------------ -----------
Total current assets................ 1,334 82,009 17,011 -- 100,354
Property, plant and equipment, net....... -- 643,680 11,492 -- 655,172
Real estate held for sale and investment. -- 141,538 5,634 -- 147,172
Deferred charges and other assets........ 6,452 23,708 100 -- 30,260
Intangible assets, net................... -- 182,492 12,368 -- 194,860
Investments in subsidiaries and advances
to (from) subsidiaries................ 691,670 (9,324) (6,004) (676,342) --
--------- ----------- --------- ------------ -----------
Total assets........................ $ 699,456 $ 1,064,103 $ 40,601 $ (676,342) $ 1,127,818
========= =========== ========= ============ ===========
Current liabilities:
Accounts payable and accrued expenses. $ 4,699 $ 89,962 $ 10,841 $ -- $ 105,502
Income taxes payable.................. -- 2,645 -- -- 2,645
Long-term debt due within one year.... -- 1,037 1,000 -- 2,037
--------- ----------- --------- ------------ -----------
Total current liabilities........... 4,699 93,644 11,841 -- 110,184
Long-term debt........................... 200,000 179,198 13,000 -- 392,198
Other long-term liabilities.............. 1,002 30,708 -- -- 31,710
Deferred income taxes.................... -- 92,577 -- -- 92,577
Minority interest in net assets of
consolidated joint ventures........... -- 100 7,294 -- 7,394
Total stockholders' equity............... 493,755 667,876 8,466 (676,342) 493,755
--------- ----------- --------- ------------ -----------
Total liabilities and stockholders'
equity................................ $ 699,456 $ 1,064,103 $ 40,601 $ (676,342) $ 1,127,818
========= =========== ========= ============ ===========
</TABLE>
F-10
<PAGE>
VAIL RESORTS, INC,
NOTES TO CONSOLIDATED CONDENSED FINANCIAL SUBSIDIARIES--(CONTINUED)
(UNAUDITED)
6. Guarantor Subsidiaries and Non-Guarantor Subsidiaries (Continued)
Supplemental Condensed Consolidating Statement of Operations
(in thousands)
<TABLE>
<CAPTION>
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Consolidated Eliminations
--------- ------------ -------------- ------------ ------------
For the Three Months ended october 31, 2000
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues............................ $ -- $ 57,199 $ 13,405 $ (177) $ 70,427
Total operating expenses.................. 372 82,918 16,792 (177) 99,905
--------- --------- ---------- --------- -----------
Loss from operations................... (372) (25,719) (3,387) -- (29,478)
Other expense............................. (4,545) (3,666) (288) -- (8,499)
Minority interest in net loss of
consolidated joint ventures............ -- -- 1,770 -- 1,770
--------- --------- ---------- --------- -----------
Loss before income taxes............... (4,917) (29,385) (1,905) -- (36,207)
Credit for income taxes................ 2,041 12,985 -- -- 15,026
--------- --------- ---------- --------- -----------
Net loss before equity in loss of
consolidated subsidiaries.............. (2,876) (16,400) (1,905) -- (21,181)
Equity in loss of consolidated
subsidiaries........................... (18,305) (1,905) -- 20,210 --
--------- --------- ---------- --------- -----------
Net loss.................................. $ (21,181) $ (18,305) $ (1,905) $ 20,210 $ (21,181)
========= ========= ========== ========= ===========
For the Three Months Ended October 31, 1999
--------------------------------------------------------------------
Total revenues............................ $ -- $ 54,108 $ 11,860 $ (139) $ 65,829
Total operating expenses.................. 706 82,921 14,573 (139) 98,061
--------- --------- ---------- --------- -----------
Loss from operations................... (706) (28,813) (2,713) -- (32,232)
Other expense............................. (4,326) (3,972) (289) -- (8,587)
Minority interest in net loss of
consolidated joint ventures............ -- -- 1,444 -- 1,444
--------- --------- ---------- --------- -----------
Loss before income taxes............... (5,032) (32,785) (1,558) -- (39,375)
Credit for income taxes................ 2,164 14,767 -- -- 16,931
--------- --------- ---------- --------- -----------
Net loss before equity in loss of
consolidated subsidiaries.............. (2,868) (18,018) (1,558) -- (22,444)
Equity in loss of consolidated
subsidiaries........................... (19,576) (1,558) -- 21,134 --
--------- --------- ---------- --------- -----------
Net loss.................................. $ (22,444) $ (19,576) $ (1,558) $ 21,134 $ (22,444)
========= ========= ========== ========= ===========
</TABLE>
F-11
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
6. Guarantor Subsidiaries and Non-Guarantor Subsidiaries (Continued)
Supplemental Condensed Consolidating Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Consolidated
------- ------------ ------------ ------------
For the Three Months Ended October 31, 2000
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows provided by (used in) operating activities........... $ (33,398) $ 29,500 $ (3,675) $ (7,573)
Cash flows from investing activities:
Resort capital expenditures.................................. -- (15,379) (1,233) (16,612)
Investments in real estate................................... -- (10,421) -- (10,421)
Investments in/distributions from joint ventures, net........ -- 4,965 -- 4,965
---------- ---------- ---------- -----------
Net cash used in investing activities...................... -- (20,835) (1,233) (22,068)
Cash flows from financing activities:
Proceeds from borrowings under long-term debt................ -- 53,500 5,300 58,800
Payments on long-term debt................................... -- (30,755) (250) (31,005)
Other financing activities................................... 2,796 1,076 -- 3,872
Advances (to) from affiliates................................ 30,602 (30,920) 318 --
---------- ---------- ---------- -----------
Net cash provided by (used in) financing activities........ 33,398 (7,099) 5,368 31,667
---------- ---------- ---------- -----------
Net increase in cash and cash equivalents....................... -- 1,566 460 2,026
Cash and cash equivalents:
Beginning of period.......................................... -- 18,346 322 18,668
---------- ---------- ---------- -----------
End of period................................................ $ -- $ 19,912 $ 782 $ 20,694
========== ========== ========== ===========
For the Three Months Ended October 31, 1999
--------------------------------------------------------------
Cash flows provided by (used in) operating
activities................................................... $ (1,311) $ 1,458 $ 225 $ 372
Cash flows from investing activities:
Resort capital expenditures.................................. -- (25,254) (1,138) (26,392)
Investments in real estate................................... -- (8,058) -- (8,058)
---------- ---------- ---------- -----------
Net cash used in investing activities...................... -- (33,312) (1,138) (34,450)
Cash flows from financing activities:
Proceeds from the exercise of stock options.................. 314 -- -- 314
Proceeds from borrowings under long-term debt................ -- 49,772 1,978 51,750
Payments on long-term debt................................... -- (24,356) -- (24,356)
Advances (to) from affiliates................................ 997 (485) (512) --
---------- ---------- ---------- -----------
Net cash provided by financing activities................. 1,311 24,931 1,466 27,708
---------- ---------- ---------- -----------
Net increase (decrease) in cash and cash equivalents............ -- (6,923) 553 (6,370)
Cash and cash equivalents:
Beginning of period.......................................... -- 25,096 228 25,324
---------- ---------- ---------- -----------
End of period................................................ $ -- $ 18,173 $ 781 $ 18,954
========== ========== ========== ===========
</TABLE>
F-12
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
7. Related Party Transactions
In October 2000, in connection with the employment of Martin White as
Senior Vice President, Marketing, the Company agreed to invest up to $800,000,
but not to exceed 50% of the purchase price, for the purchase of a primary
residence for Mr. White and his family in the Vail Valley. Based on the actual
amount invested by the Company, the Company will obtain a proportionate
undivided ownership interest in such residence. The Company shall be entitled to
receive its proportionate share of the resale price of the residence, less
certain deductions, upon the earlier of the resale of the residence or within
approximately 18 months after Mr. White's termination from the Company.
8. Acquisitions
On June 14, 1999, the Company purchased 100% of the outstanding shares of
GTLC, a Wyoming corporation, from CSX Corporation for a total purchase price of
$55 million. The acquisition was accounted for under the purchase method of
accounting. GTLC operates four resort properties in northwestern Wyoming: Jenny
Lake Lodge, Jackson Lake Lodge, Colter Bay Village and Jackson Hole Golf &
Tennis Club. GTLC operates the first three resorts, all located within Grand
Teton National Park, under a concessionaire contract with the National Park
Service. Jackson Hole Golf & Tennis Club is located outside the park on property
owned by GTLC and includes approximately 30 acres of developable land.
The following unaudited pro forma revenue for the three months ended
October 31, 1998 assumes the acquisition of GTLC occurred on August 1, 1998. The
pro forma revenue is not necessarily indicative of the actual revenue that would
have been recognized, nor is it necessarily indicative of future revenue. The
unaudited revenue for the three months ended October 31, 2000 and 1999 is
provided for comparative purposes. Pro forma net income and EPS are not
presented, as the pro forma adjustments are immaterial to the actual net income
and EPS of the Company, and, in the opinion of the Company, would not provide
additional meaningful information to the reader.
Pro Forma
Three Months Three Months Three Months
Ended Ended Ended
October 31, October 31, October 31,
2000 1999 1998
------------ ------------ ------------
(unaudited)
Total revenue $ 61,451 $ 56,859 $ 49,151
============ ============ ============
In October 2000, the Company invested in a newly formed Irish corporation
whose purpose is to develop a resort-based reservations system which will enable
the shopping, booking and distribution of packaged vacations. In return for an
initial investment of $5 million, the Company received a 49% interest in the
joint venture. The Company paid $0.8 million at closing and the remainder of the
initial investment is due in quarterly installments over the following
twelve-month period. The Company will be granted a free license to use the
system and will be charged at favorable rates for ongoing maintenance and
on-site support. In addition, the Company is obligated to provide certain levels
of marketing assistance. The Company will also earn a commission for all
customers referred. The Company anticipates that such system will be completed
and ready for the Company's use in time for the 2002-03 ski season.
F-13
<PAGE>
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
8. Acquisitions (Continued)
Also in October 2000, the Company entered into a joint venture agreement
with a venture led by an affiliate of Continental Gencom for the construction of
The Ritz-Carlton(R), Bachelor Gulch (the "Hotel"). The Hotel, scheduled to open
in late 2002, is being developed by The Athens Group, of Phoenix, Arizona, and
will include a 238-room hotel, a 20,000-square-foot spa and fitness center, ski
rental, lesson and retail space, restaurants plus meeting space. In addition, 23
privately owned luxury penthouse residences are also being built above the
hotel. All twenty-three of these penthouses are currently under contract. The
Company will receive a 49% interest in the joint venture in return for a cash
investment of $3.8 million, land contribution with a $3.4 million book value,
and an interest-bearing loan to the joint venture of up to $4.5 million.
Construction of the entire hotel project is expected to cost approximately $162
million. In order to cover construction costs, the joint venture is obtaining
$97 million in debt financing from a syndicate of banks. The remainder is being
funded by a combination of equity and debt contributed by the partners,
mezzanine financing, and the sale of condominiums. Under the terms of the joint
venture, the Company will provide golf, spa and club privileges for a fee of
$3.7 million. The Company will receive $1.5 million up front, $1.5 million when
the golf course opens, and $0.7 million as penthouse residences close.
Separately, the Company will contract with the hotel joint venture to acquire
the 20,000-square-foot spa, plus 8,000 square feet of skier services area, at
the developer's cost of approximately $13 million. The majority of this expense
is expected to be recouped through membership sales in the Bachelor Gulch Club.
F-14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's July
31, 2000 Annual Report on Form 10-K and the consolidated condensed interim
financial statements as of October 31, 2000 and 1999 and for the three months
then ended, included in Part I, Item 1 of this Form 10-Q, which provide
additional information regarding the financial position, results of operations
and cash flows of the Company.
Three Months Ended October 31, 2000 versus Three Months Ended October 31, 1999
<TABLE>
<CAPTION>
Three Months Ended
October 31, Percentage
2000 1999 Increase Increase
------------ --------- ------------ ------------
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C>
Resort Revenue............................ $ 61,451 $ 56,859 $ 4,592 8.1
Resort Operating Expense.................. 79,953 77,298 2,655 3.4
</TABLE>
Resort Revenue. Resort revenue for the three months ended October 31, 2000
and 1999 is presented by category as follows:
<TABLE>
<CAPTION>
Three Months Ended Percentage
October 31, Increase Increase
2000 1999 (Decrease) (Decrease)
--------- ---------- ----------- ---------
(unaudited)
(dollars and skier days in thousands, except ETP)
<S> <C> <C> <C> <C>
Lift Ticket.............................. $ 186 $ 465 $ (279) (60.0)
Ski School............................... 11 36 (25) (69.4)
Dining................................... 12,403 11,789 614 5.2
Retail/Rental............................ 15,918 14,964 954 6.4
Hospitality.............................. 15,956 15,468 488 3.2
Other.................................... 16,977 14,137 2,840 20.1
--------- ---------- ----------- ---------
Total Resort Revenue..................... $ 61,451 $ 56,859 $ 4,592 8.1
========= ========== =========== =========
Total Skier Days......................... 8 19 (11) (57.9)
========= ========== =========== =========
ETP...................................... $ 23.25 $ 24.47 $ (1.22) (5.0)
========= ========== =========== =========
</TABLE>
Lift ticket revenue decreased due to a 57.9% decrease in total skier days
along with a 5.0% decrease in ETP (effective ticket price ("ETP") is defined as
total lift ticket revenue divided by total skier days). The decrease in skier
days is due to scheduled later opening dates at both Breckenridge and Keystone
Mountains for the 2000-01 ski season as compared to the 1999-2000 season. The
decrease in ETP is due to a shift in the type of lift tickets used in the first
quarter to a higher proportion of discount season pass usage as opposed to lead
rate tickets and other higher-ETP daily lift ticket products. This shift is
primarily due to the introduction of the Colorado Pass, a new discount season
pass product, which generated a significant increase in the number of season
passes sold for the 2000-01 ski season.
The decrease in Ski School revenue is consistent with the decrease in skier
days.
Dining revenue increased primarily due to the operations of its restaurant
joint venture, Larkspur Restaurant and Bar LLC, which opened in the second
quarter of fiscal 2000. In addition, revenue related to banquet services were up
as a result of increased conference business.
1
<PAGE>
Retail/Rental revenue increased due primarily to an increase at the
Company's retail/rental outlets operated by SSV, a 51.9%-owned fully
consolidated retail/rental joint venture. During the first quarter, SSV acquired
a large Colorado bicycle retailer. In addition, Colorado Pass sales and good
early-season snowfall have contributed to the increase in SSV's revenues, as
both events generated increased in-store traffic.
Hospitality revenue increased as a result of increased conference bookings,
an increase in the number of managed properties, and aggressive marketing
strategies during the late summer and fall seasons.
The increase in Other revenue is primarily attributable to the River Course
at Keystone, which opened for operations this past summer, the operations of
VailNet and InterNetWorks, the technology companies purchased by the Company
November 1, 1999, and increased private club operations.
Resort Operating Expense. Resort operating expense for the three months
ended October 31, 2000 was $80.0 million, an increase of $2.7 million, or 3.4%,
compared to the three months ended October 31, 1999. Operating expense did not
grow at a rate similar to the growth in revenue due primarily to the later
opening dates at Keystone and Breckenridge, decreased snowmaking as a result of
increased snowfall, and close management of operating costs.
Real Estate Revenue. Revenue from real estate operations for each of the
three months ended October 31, 2000 and 1999 was $9.0 million. Revenue for the
three months ended October 31, 2000 consists primarily of the sale of one
Bachelor Gulch development site, two residential condominiums in Breckenridge
and the profit share from the Company's investment in Keystone/Intrawest LLC.
Profits generated by Keystone/Intrawest LLC during the three months ended
October 31, 2000 included the sale of 63 village condominium units at the River
Run development and three single-family homesites surrounding the River Run golf
course. Revenue for the three months ended October 31, 1999 consisted primarily
of the sale of two Bachelor Gulch development sites, one Arrowhead development
site, and our investment in the Keystone/Intrawest LLC. Profits generated by
Keystone/Intrawest LLC during the quarter ended October 31, 1999 included the
sale of 29 Village condominiums at the River Run development.
Real Estate Operating Expense. Real estate operating expense for the three
months ended October 31, 2000 was $4.3 million, a decrease of $1.6 million, or
26.5%, compared to the three months ended October 31, 1999. The decrease is due
to fewer inventory sales in fiscal 2001 coupled with an increase in profit
contribution from Keystone/Intrawest LLC compared to fiscal 2000. Real estate
operating expense consists primarily of the cost of sales and related real
estate commissions associated with the real estate sales detailed above for both
fiscal 2001 and fiscal 2000. Profits generated by Keystone/Intrawest LLC are
recorded using the equity method; therefore there are no operating expenses
associated with this joint venture. Real estate operating expense also includes
the selling, general and administrative expenses associated with the Company's
real estate operations.
Depreciation and Amortization. Depreciation and amortization expense
increased by $0.7 million, or 5.0% for the three months ended October 31, 2000
as compared to the three months ended October 31, 1999. The increase was
primarily attributable to an increased fixed asset base due to fiscal 2000
capital improvements.
Interest expense. The Company recorded interest expense of $8.9 million
during each of the three months ended October 31, 2000 and 1999, relating
primarily to the Senior Subordinated Notes, the Credit Facility, the SSV
Facility and the Industrial Development Bonds.
2
<PAGE>
Liquidity and Capital Resources
The Company has historically provided for operating expenditures, debt
service, capital expenditures and acquisitions through a combination of cash
flow from operations, short-term and long-term borrowings and sales of real
estate.
The Company's cash flows used for investing activities have historically
consisted of payments for acquisitions, resort capital expenditures, and
investments in real estate. During the three months ended October 31, 2000 the
Company made payments of $16.6 million for resort capital expenditures and $10.4
million for investments in real estate. The primary projects included in resort
capital expenditures were a) the expansion of Pete's Bowl in Blue Sky Basin at
Vail, including a new high-speed four-passenger chairlift, b) implementation of
an enterprise resource planning system, c) a new laundry facility at Keystone,
d) expansion of the grooming fleet, and e) upgrades and remodeling at the
Village at Breckenridge and Lodge at Vail. The primary projects included in
investments in real estate were a) continued development of the Red Sky Ranch
golf community, b) planning and construction of The Ritz-Carlton, Bachelor
Gulch, and c) planning and development of projects in and around each of the
Company's resorts.
The Company estimates that it will make resort capital expenditures
totaling between $40 and $50 million during the remainder of fiscal 2001. The
primary projects are anticipated to include (i) snowboarding halfpipe and
terrain park improvements at Keystone, (ii) expansion of Vail's snowmaking
capabilities, (iii) new activities at and renovations to Adventure Ridge at
Vail, (iv) expansion of the grooming fleet at Vail, Beaver Creek and
Breckenridge, (v) base area amenity and parking improvements at Beaver Creek,
(vi) upgrades to office and front line information systems, and (vii)
significant renovations of the Lodge at Vail. Investments in real estate during
the remainder of fiscal 2001 are expected to total approximately $35 to $45
million. The primary projects are anticipated to include (i) planning and
development of projects at Vail, Bachelor Gulch, Arrowhead, Avon, Breckenridge,
Keystone and the Jackson Hole Valley, (ii) continued development of Red Sky
Ranch, a golf community that will include two 18-hole golf courses, (iii)
construction of The Ritz-Carlton, Bachelor Gulch, and (iv) investments in
developable land at strategic locations at all four ski resorts. The Company
plans to fund these capital expenditures and investments in real estate with
cash flow from operations and borrowings under the Credit Facility.
In October 2000, the Company invested $0.8 million in a new technology
joint venture in exchange for a 49% share. In addition, the Company received
distributions from various joint ventures totaling $5.8 million.
During the three months ended October 31, 2000, the Company received $31.7
million in cash in its financing activities consisting of $27.8 million in net
long-term debt borrowings, $2.8 million in proceeds from the exercise of stock
options and $1.1 million from the cancellation of swap agreements. During the
three months ended October 31, 2000, 279,460 employee stock options were
exercised at exercise prices ranging from $10.00 to $10.75. Additionally, 1,834
shares of restricted stock were issued to management.
Based on current anticipated levels of operations and cash availability,
management believes the Company is in a position to satisfy its current working
capital, debt service, and capital expenditure requirements for at least the
next twelve months.
Other
The Company purchased a Reduced Skier Day Insurance Policy, a customized
insurance product, for the 1999-2000 ski season. Under this policy, the Company
receives a fixed payment for each paid skier day below certain targeted levels
for the season. During fiscal 2000, the net benefit recognized in the financial
statements from the policy was $13.9 million. The Company opted not to purchase
a similar insurance product for the 2000-01 ski season.
3
<PAGE>
Cautionary Statement
Statements in this Form 10-Q, other than statements of historical
information, are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. You
can identify these statements by forward-looking words such as "may", "will",
"expect", "plan", "intend", "anticipate", "believe", "estimate", and "continue"
or similar words. Such forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those projected. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Such risks
and uncertainties include, but are not limited to:
. a significant downturn in general business and economic conditions,
. unfavorable weather conditions, including inadequate snowfall in the
early season,
. failure to attract and retain sufficient workforce,
. failure to obtain necessary approvals needed to implement planned
development projects,
. competition in the ski and resort industry,
. failure to successfully integrate acquisitions,
. adverse changes in vacation real estate markets, and
. failure or delay in receiving reduced skier day insurance cash
proceeds.
Readers are also referred to the uncertainties and risks identified in the
Company's Registration Statement on Form S-4 for its Senior Subordinated Debt
exchange notes (Commission File No. 333-80621) and the Annual Report on Form
10-K for the year ended July 31, 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. The Company's exposure to market risk is limited primarily
to the fluctuating interest rates associated with variable rate indebtedness. At
October 31, 2000, the Company had $154.1 million of variable rate indebtedness,
representing 37% of the Company's total debt outstanding, at an average interest
rate during the quarter of 7.5% (see Note 5 of the Notes to Consolidated
Financial Statements). Based on the average floating rate borrowings outstanding
during the quarter, a 100 basis-point change in LIBOR would have caused the
Company's monthly interest expense to change by $0.1 million.
4
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item . Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-k.
(a) Index to Exhibits
The following exhibits are either filed herewith or, if so indicated,
incorporated by reference to the documents indicated in parentheses, which
have previously been filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ----
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation filed with the
Secretary of State of the State of Delaware on the Effective
Date. (Incorporated by reference to Exhibit 3.1 of the
Registration Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No 33-52854) including all amendments thereto.)
3.2 Amended and Restated By-Laws adopted on the Effective Date.
(Incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration
No. 33-52854) including all amendments thereto.)
4.1 Form of Class 2 Common Stock Registration Rights Agreements
between the Company and holders of Class 2 Common Stock.
(Incorporated by reference to Exhibit 4.13 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
4.2 Purchase Agreement, dated as of May 6, 1999 among Vail Resorts,
Inc., the guarantors named on Schedule I thereto, and Bear Sterns
& Co. Inc., NationsBanc Montgomery Securities LLC, BT Alex. Brown
Incorporated, Lehman Brothers Inc. and Salomon Smith Barney Inc.
(Incorporated by reference to Exhibit 4.2 of the Registration
Statement on Form S-4 of Vail Resorts, Inc. (Registration No.
333-80621) including all amendments thereto.)
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ----
<S> <C> <C>
4.3 Indenture, dated as of May 11, 1999, among Vail Resorts, Inc.,
the guarantors named therein and the United States Trust Company
of New York, as trustee. (Incorporated by reference to Exhibit
4.3 of the Registration Statement on Form S-4 of Vail Resorts,
Inc. (Registration No. 333-80621) including all amendments
thereto.)
4.4 Form of Global Note (Included in Exhibit 4.3 incorporated by
reference to Exhibit 4.3 of the Registration Statement on Form
S-4 of Vail Resorts, Inc. (Registration No. 333-80621) including
all amendments thereto.)
4.5 Registration Rights Agreement, dated as of May 11, 1999 among
Vail Resorts, Inc., the guarantors signatory thereto and Bear
Stearns & Co. Inc., NationsBanc Montgomery Securities LLC, BT
Alex. Brown Incorporated, Lehman Brothers Inc. and Salomon Smith
Barney Inc. (Incorporated by reference to Exhibit 4.5 of the
Registration Statement on Form S-4 of Vail Resorts, Inc.
(Registration No. 333-80621) including all amendments thereto.)
4.6 First Supplemental Indenture, dated as of August 22, 1999, among
the Company, the guarantors named therein and the United States
Trust Company of New York, as trustee. (Incorporated by reference
to Exhibit 4.6 of the Registration Statement on Form S-4 of Vail
Resorts, Inc. (Registration No. 333-80621) including all
amendments thereto.)
10.1 Management Agreement by and between Beaver Creek Resort Company
of Colorado and Vail Associates, Inc. (Incorporated by reference
to Exhibit 10.1 of the Registration Statement on Form S-4 of
Gillett Holdings, Inc. (Registration No. 33-52854) including all
amendments thereto.)
10.2 Forest Service Term Special Use Permit for Beaver Creek ski area.
(Incorporated by reference to Exhibit 10.2 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
10.3 Forest Service Special Use Permit for Beaver Creek ski area.
(Incorporated by reference to Exhibit 10.3 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
10.4 Forest Service Unified Permit for Vail ski area. (Incorporated by
reference to Exhibit 10.4 of the Registration Statement on Form
S-4 of Gillett Holdings, Inc. (Registration No. 33-52854)
including all amendments thereto.)
10.5 Joint Liability Agreement by and among Gillett Holdings, Inc. and
the subsidiaries of Gillett Holdings, Inc. (Incorporated by
reference to Exhibit 10.10 of the Registration Statement on Form
S-4 of Gillett Holdings, Inc. (Registration No. 33-52854)
including all amendments thereto.)
10.6 Management Agreement between Gillett Holdings, Inc. and Gillett
Group Management, Inc. dated as of the Effective Date.
(Incorporated by reference to Exhibit 10.11 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)
10.7 Amendment to Management Agreement by and among the Company and
its subsidiaries dated as of November 23, 1993. (Incorporated by
reference to Exhibit 10.12(b) of the report on Form 10-K of
Gillett Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)
</TABLE>
6
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10.8(a) Tax Sharing Agreement between Gillett Holdings, Inc. dated as of
the Effective Date. (Incorporated by reference to Exhibit 10.12
of the Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all amendments
thereto.)
10.8(b) Amendment to Tax Sharing Agreement by and among the Company and
its subsidiaries dated as of November 23, 1993. (Incorporated by
reference to Exhibit 10.13(b) of the report on Form 10-K of
Gillett Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)
10.9 Form of Gillett Holdings, Inc. Deferred Compensation Agreement
for certain GHTV employees. (Incorporated by reference to Exhibit
10.13(b) of the Registration Statement on Form S-4 of Gillett
Holdings, Inc. (Registration No. 33-52854) including all
amendments thereto.)
10.10(a) Agreement for Purchase and Sale dated as of August 25, 1993 by
and among Arrowhead at Vail, Arrowhead Ski Corporation,
Arrowhead at Vail Properties Corporation, Arrowhead Property
Management Company and Vail Associates, Inc. (Incorporated by
reference to Exhibit 10.19(a) of the report on Form 10-K of
Gillett Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)
10.10(b) Amendment to Agreement for Purchase and Sale dated September 8,
1993 by and between Arrowhead at Vail, Arrowhead Ski
Corporation, Arrowhead at Vail Properties Corporation, Arrowhead
Property Management Company and Vail Associates, Inc.
(Incorporated by reference to Exhibit 10.19(b) of the report on
Form 10-K of Gillett Holdings, Inc. for the period from October
9, 1992 through September 30, 1993.)
10.10(c) Second Amendment to Agreement for Purchase and Sale dated
September 22, 1993 by and between Arrowhead at Vail, Arrowhead
Ski Corporation, Arrowhead at Vail Properties Corporation,
Arrowhead Property Management Company and Vail Associates, Inc.
(Incorporated by reference to Exhibit 10.19(c) of the report on
Form 10-K of Gillett Holdings, Inc. for the period from October
9, 1992 through September 30, 1993.)
10.10(d) Third Amendment to Agreement for Purchase and Sale dated
November 30, 1993 by and between Arrowhead at Vail, Arrowhead
Ski Corporation, Arrowhead at Vail Properties Corporation,
Arrowhead Property Management Company and Vail/Arrowhead, Inc.
(Incorporated by reference to Exhibit 10.19(d) of the report on
Form 10-K of Gillett Holdings, Inc. for the period from October
9, 1992 through September 30, 1993.)
10.11 1993 Stock Option Plan of Gillett Holdings, Inc. (Incorporated by
reference to Exhibit 10.20 of the report on Form 10-K of Gillett
Holdings, Inc. for the period from October 9, 1992 through
September 30, 1993.)
10.12 Agreement to Settle Prospective Litigation and for Sale of
Personal Property dated May 10, 1993, between the Company,
Clifford E. Eley, as Chapter 7 Trustee of the Debtor's Bankruptcy
Estate, and George N. Gillett, Jr. (Incorporated by reference to
Exhibit 10.21 of the report on Form 10-K of Gillett Holdings,
Inc. for the period from October 9, 1992 through September 30,
1993.)
10.13 Employment Agreement dated October 1, 1996 between Vail
Associates, Inc. and Andrew P. Daly. (Incorporated by reference
to Exhibit 10.5 of the report on Form S-2/A of Vail Resorts, Inc.
(Registration # 333-5341) including all amendments thereto.)
</TABLE>
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10.14 Employment Agreement dated July 29, 1996 between Vail Resorts,
Inc. and Adam M. Aron. (Incorporated by reference to Exhibit
10.21 of the report on Form S-2/A of Vail Resorts, Inc.
(Registration # 333-5341) including all amendments thereto.)
10.15(a) Shareholder Agreement among Vail Resorts, Inc., Ralston Foods,
Inc., and Apollo Ski Partners, L.P. dated January 3, 1997.
(Incorporated by reference to Exhibit 2.4 of the report on Form
8-K of Vail Resorts, Inc. dated January 8, 1997.)
10.15(b) First Amendment to the Shareholder Agreement dated as of November
1, 1999, among Vail Resorts, Inc., Ralcorp Holdings, Inc. (f/k/a
Ralston Foods, Inc.) and Apollo Ski Partners, L.P. (Incorporated
by reference to Exhibit 10.17(b) of the report on Form 10-Q of
Vail Resorts, Inc. for the quarter ended January 31, 2000.)
10.16 1996 Stock Option Plan (Incorporated by reference from the
Company's Registration Statement on Form S-3, File No. 333-5341).
10.17 Agreement dated October 11, 1996 between Vail Resorts, Inc. and
George Gillett. (Incorporated by reference to Exhibit 10.27 of
the report on Form S-2/A of Vail Resorts, Inc. (Registration #
333-5341) including all amendments thereto.)
10.18(a) Sports and Housing Facilities Financing Agreement among the Vail
Corporation (d/b/a "Vail Associates, Inc.") and Eagle County,
Colorado, dated April 1, 1998. (Incorporated by reference to
Exhibit 10 of the report on Form 10-Q of Vail Resorts, Inc. for
the quarter ended April 30, 1998.)
10.18(b) Trust Indenture dated as of April 1, 1998 securing Sports and
Housing Facilities Revenue Refunding Bonds by and between Eagle
County, Colorado and US Bank, N.A., as Trustee. (Incorporated by
reference to Exhibit 10.1 of the report on Form 10-Q of Vail
Resorts, Inc. for the quarter ended April 30, 1998.)
10.19 Credit agreement dated December 30, 1998 among SSI Venture LLC
and NationsBank of Texas, N.A., (Incorporated by reference to
Exhibit 10.24 of the report on Form 10-Q of Vail Resorts, Inc.
for the quarter ended January 31, 1999.)
10.20(a) Amended and Restated Credit Agreement among The Vail Corporation
(d/b/a "Vail Associates, Inc"), and NationsBank, N.A. and
NationsBanc Montgomery Securities LLC dated as of May 1, 1999.
(Incorporated by reference to Exhibit 10.25 of the report on Form
10-Q of Vail Resorts, Inc. for the quarter ended April 30, 1999.)
10.20(b) First Amendment and Consent to Amended and Restated Credit
Agreement among The Vail Corporation (d/b/a "Vail Associates,
Inc."), Bank of America, N.A., and the lenders named therein
dated as of December 31, 1999. (Incorporated by reference to
Exhibit 10.20(b) of the report on Form 10-Q of Vail Resorts, Inc.
for the quarter ended April 30, 2000.)
10.20(c) Second Amendment to Amended and Restated Credit Agreement among
The Vail Corporation (d/b/a "Vail Associates, Inc."), Bank of
America, N.A., and the lenders named therein dated as of April
21, 2000 but effective as of February 1, 2000. (Incorporated by
reference to Exhibit 10.20(c) of the report on Form 10-Q of Vail
Resorts, Inc. for the quarter ended April 30, 2000.)
</TABLE>
8
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10.21 Employment Agreement dated October 28, 1996 by and between Vail
Resorts, Inc. and James P. Donohue. (Incorporated by reference to
Exhibit 10.24 of the report on Form 10-Q of Vail Resorts, Inc.
for the quarter ended October 31, 1999.)
10.22 Vail Resorts, Inc. 1999 Long Term Incentive and Share Award Plan.
(Incorporated by reference to the Company's registration
statement on Form S-8, File No. 333-32320).
10.23 Vail Resorts Deferred Compensation Plan effective as of October
1, 2000. (Incorporated by reference to Exhibit 10.23 of the
report on Form 10-K of Vail Resorts, Inc. for the year ended
July 31, 2000.)
21 Subsidiaries of Vail Resorts, Inc. (Incorporated by reference to
Exhibit 27 of the report on Form 10-Q of Vail Resorts, Inc. for
the quarter ended April 30, 2000.)
27 Financial Data Schedules
</TABLE>
(b) Reports on Form 8-K
None.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on December 14, 2000.
VAIL RESORTS, INC.
Date: December 14, 2000 By /s/ JAMES P. DONOHUE
---------------------------
James P. Donohue
Senior Vice President and
Chief Financial Officer
10
