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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) The Securities Exchange Act
Of 1934
For the quarterly period ended April 30, 1999
[_] Transition Report Pursuant To Section 13 Or 15(d) The Securities Exchange
Act Of 1934
For the transition period from _____________________ to ________________________
Commission File Number: 1-9614
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Vail Resorts, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 51-0291762
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(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 June 11, 1999, 7,439,834 shares of Class A Common Stock and
27,089,201 shares of Common Stock were issued and outstanding.
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements....................................................................... F-1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................. 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................... 11
Item 2. Changes in Securities and Use of Proceeds.................................................. 11
Item 3. Defaults Upon Senior Securities............................................................ 11
Item 4. Submission of Matters to a Vote of Security Holders........................................ 11
Item 5. Other Information.......................................................................... 11
Item 6. Exhibits and Reports on Form 8-K........................................................... 11
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of April 30, 1999 and July 31, 1998... F-2
Consolidated Condensed Statements of Operations for the Three Months Ended F-3
April 30, 1999 and 1998........................................................
Consolidated Condensed Statements of Operations for the Nine Months Ended F-4
April 30, 1999 and 1998........................................................
Consolidated Condensed Statements of Cash Flows for the Nine Months Ended F-5
April 30, 1999 and 1998........................................................
Notes to Consolidated Condensed Financial Statements........................... F-6
F-1
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
April 30, July 31,
1999 1998
--------------- ----------------
Assets
Current assets:
Cash and cash equivalents...................................................... $ 10,063 $ 19,512
Receivables.................................................................... 47,917 26,487
Inventories.................................................................... 19,581 8,893
Deferred income taxes.......................................................... 12,126 12,126
Other current assets........................................................... 4,717 4,708
--------------- ----------------
Total current assets....................................................... 94,404 71,726
Property, plant and equipment, net................................................ 553,104 501,371
Real estate held for sale......................................................... 152,141 138,916
Deferred charges and other assets................................................. 19,028 13,977
Intangible assets, net............................................................ 196,133 186,132
--------------- ----------------
Total assets............................................................... $ 1,014,810 $ 912,122
=============== ================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses.......................................... $ 89,419 $ 55,012
Income taxes payable........................................................... 2,239 2,239
Long-term debt due within one year (Note 6).................................... 530 1,734
--------------- ----------------
Total current liabilities.................................................. 92,188 58,985
Long-term debt (Note 6)........................................................... 293,332 282,280
Other long-term liabilities....................................................... 28,398 28,886
Deferred income taxes............................................................. 101,338 79,347
Commitments and contingencies (Note 3)............................................ -- --
Minority interest in net assets of consolidated joint venture..................... 9,582 --
Stockholders' equity:
Common stock--
Class A common stock, $.01 par value, 20,000,000 shares authorized, 74 76
7,439,834 and 7,639,834 shares issued and outstanding at April 30, 1999 and
July 31, 1998, respectively.................................................
Common stock, $.01 par value, 80,000,000 shares authorized, 27,087,701 and 271 269
26,817,346 shares issued and outstanding at April 30, 1999 and July 31,
1998, respectively..........................................................
Additional paid-in capital..................................................... 402,592 401,563
Retained earnings.............................................................. 87,035 60,716
Total stockholders' equity................................................. 489,972 462,624
--------------- ----------------
Total liabilities and stockholders' equity................................. $ 1,014,810 $ 912,122
=============== ================
See accompanying notes to consolidated condensed financial statements.
F-2
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Three Months
Ended Ended
April 30, 1999 April 30, 1998
----------------- -------------------
Net revenues:
Resort......................................................................... $ 188,220 $ 170,051
Real estate.................................................................... 14,022 3,912
----------------- -------------------
Total net revenues......................................................... 202,242 173,963
Operating expenses:
Resort......................................................................... 111,097 82,413
Real estate.................................................................... 14,108 3,292
Corporate expense.............................................................. 1,733 1,544
Depreciation and amortization.................................................. 13,434 11,488
----------------- -------------------
Total operating expenses................................................... 140,372 98,737
----------------- -------------------
Income from operations............................................................ 61,870 75,226
Other income (expense):
Investment income.............................................................. 738 570
Interest expense............................................................... (5,755) (4,869)
Gain on disposal of fixed assets............................................... 18 378
Other expense.................................................................. (9) (101)
Minority interest in consolidated joint venture................................ (1,914) --
----------------- -------------------
Income before income taxes........................................................ 54,948 71,204
Provision for income taxes........................................................ (24,701) (29,541)
----------------- -------------------
Net income........................................................................ $ 30,247 $ 41,663
================= ===================
Net income per common share (Note 4):
Basic...................................................................... $ 0.87 $ 1.21
================= ===================
Diluted.................................................................... $ 0.87 $ 1.20
================= ===================
See accompanying notes to consolidated condensed financial statements.
F-3
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Nine Months Nine Months
Ended Ended
April 30, 1999 April 30, 1998
---------------- -------------------
Net revenues:
Resort......................................................................... $379,346 $324,195
Real estate.................................................................... 31,409 65,760
---------------- -------------------
Total net revenues......................................................... 410,755 389,955
Operating expenses:
Resort......................................................................... 273,900 200,552
Real estate.................................................................... 26,248 58,939
Corporate expense.............................................................. 4,555 4,313
Depreciation and amortization.................................................. 38,181 31,163
---------------- -------------------
Total operating expenses................................................... 342,884 294,967
---------------- -------------------
Income from operations............................................................ 67,871 94,988
Other income (expense):
Investment income.............................................................. 1,643 1,665
Interest expense............................................................... (17,593) (16,064)
Gain on disposal of fixed assets............................................... 44 296
Other income (expense)......................................................... 130 (802)
Minority interest in consolidated joint venture................................ (3,715) --
---------------- -------------------
Income before income taxes........................................................ 48,380 80,083
Provision for income taxes........................................................ (22,061) (33,226)
---------------- -------------------
Net income........................................................................ $ 26,319 $ 46,857
================ ===================
Net income per common share (Note 4):
Basic...................................................................... $ 0.76 $ 1.37
Diluted.................................................................... $ 0.76 $ 1.35
================ ===================
See accompanying notes to consolidated condensed financial statements.
F-4
VAIL RESORTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Nine Months
Ended Ended
April 30, 1999 April 30, 1998
----------------- -----------------
Cash flows from operating activities:
Net income..................................................................... $ 26,319 $ 46,857
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.............................................. 38,181 31,163
Non-cash cost of real estate sales......................................... 8,326 47,397
Non-cash compensation related to stock grants.............................. 268 268
Non-cash equity (income) loss.............................................. 1,424 (2,769)
Deferred financing costs amortized......................................... 448 440
Gain on disposal of fixed assets........................................... (44) (296)
Deferred income taxes, net................................................. 22,061 33,226
Minority interest in consolidated joint venture............................ 3,715 --
Changes in assets and liabilities:
Accounts receivable, net....................................................... (20,420) (10,166)
Inventories.................................................................... (6,074) (989)
Accounts payable and accrued expenses.......................................... 29,652 588
Other assets and liabilities................................................... (2,550) (9,496)
----------------- -----------------
Net cash provided by operating activities.................................. 101,306 136,223
Cash flows from investing activities:
Cash paid in hotel acquisitions, net of cash acquired.......................... (33,800) (54,250)
Cash paid by consolidated joint venture in acquisition of retail operations.... (10,516) --
Resort capital expenditures.................................................... (53,691) (79,853)
Investments in real estate..................................................... (22,850) (17,403)
----------------- -----------------
Net cash used in investing activities...................................... (120,857) (151,506)
Cash flows from financing activities:
Refund of development bond reserve fund........................................ -- 3,297
Proceeds from the exercise of stock options.................................... 628 6,919
Payments under Rights.......................................................... -- (5,707)
Proceeds from borrowings under long-term debt.................................. 132,866 331,297
Payments on long-term debt..................................................... (123,392) (319,058)
----------------- -----------------
Net cash provided by financing activities.................................. 10,102 16,748
----------------- -----------------
Net (decrease) increase in cash and cash equivalents.............................. (9,449) 1,465
Cash and cash equivalents:
Beginning of period............................................................ 19,512 10,217
----------------- -----------------
End of period.................................................................. $ 10,063 $ 11,682
================= =================
See accompanying notes to consolidated condensed financial statements.
F-5
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Vail Resorts, Inc., a Delaware corporation ("Vail Resorts"), is a holding
company and operates through various subsidiaries. Vail Resorts and its
subsidiaries (collectively, the "Company") currently operate in two business
segments: resorts and real estate development. The Vail Corporation, a 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. Vail Resorts
Development Company ("VRDC"), a wholly owned subsidiary of Vail Associates,
conducts the Company's real estate development activities. The Company's resort
business, which is currently composed primarily of ski operations and related
amenities, is seasonal in nature with a typical ski season beginning in mid-
October to early November and continuing through late April to mid-May.
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, 1998, included in the Company's Annual Report on Form 10-K for
the fiscal year ended July 31, 1998.
2. Accounting Policies
The Company adopted the provisions of SFAS 130, "Reporting Comprehensive
Income" as of August 1, 1998. SFAS 130 establishes standards for reporting and
display of comprehensive income and its components in a full set of general-
purpose financial statements. The adoption of this statement had no impact on
the Company's financial statements, as there are no differences between net
income and comprehensive income for the periods reported herein.
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. As of April 30, 1999, the Company has sold 104 single-family homesites
and six parcels to developers for the construction of various types of dwelling
units. Currently, SCMD has outstanding $44.5 million of variable rate revenue
bonds maturing on October 1, 2035, which have been enhanced with a $47.2 million
letter of credit issued against the Company's Credit Facility as defined herein.
It is anticipated that as the Bachelor Gulch community expands, BGMD will become
self supporting and that within 25 to 30 years 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 that the present value of this
aggregate subsidy to be $14.3 million at April 30, 1999. The Company has
allocated $10.3 million of that amount to the Bachelor Gulch Village homesites
which were sold as of April 30, 1999 and has recorded that amount as a liability
in the accompanying financial statements. The total subsidy incurred as of April
30, 1999 and July 31, 1998 was $3.6 million and $2.9 million, respectively.
F-6
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -(Continued)
(Unaudited)
3. Commitments and Contingencies (continued)
At April 30, 1999, the Company had various other letters of credit
outstanding in the aggregate amount of $17.7 million.
On October 19, 1998, fires on Vail Mountain destroyed certain of the
Company's facilities including the Ski Patrol Headquarters, a day skier shelter,
the Two Elk Lodge restaurant and the chairlift drive housing for the High Noon
Lift (Chair #5). Chair #5 and three other chairlifts, which sustained minor
damage, have been repaired and are currently fully operational. All of the
facilities damaged are fully covered by the Company's property insurance policy.
Although the Company is unable to estimate the total amount which will be
recovered through insurance proceeds, the Company does not expect to record a
loss related to the property damage. The incident is also covered under the
Company's business interruption insurance policy. The Company is unable to
estimate at this time the impact the incident will have in terms of business
interruption, however the Company expects the incident will not have a material
impact on its results of operations and cash flows due to mitigating measures
being undertaken by the Company and the insurance coverage.
The Company has executed as lessee operating leases for the rental of
office space, employee residential units and office equipment though fiscal
2008. For the nine months ended April 30, 1999, and April 30, 1998, lease
expense related to these agreements of $4.8 million and $5.4 million,
respectively, was recorded and is included in the accompanying consolidated
statements of operations.
Future minimum lease payments under these leases as of April 30, 1999 are
as follows:
Due during fiscal year ending July 31:
1999..................................................... $ 1,332,451
2000..................................................... 2,992,051
2001..................................................... 2,563,510
2002..................................................... 1,743,934
2003..................................................... 1,689,097
Thereafter............................................... 6,174,261
-----------------
Total................................................. $ 16,495,304
=================
The Company is a party to various lawsuits arising in the ordinary course
of business. In the opinion of management, all matters are adequately covered by
insurance or, if not covered, are without merit or are of such kind, or involve
such amounts as would not have a material effect on the financial position,
results of operations and cash flows of the Company if disposed of unfavorably.
F-7
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
4. Net Earnings Per Common Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income 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.
Three Nine
Months Ended Months Ended
April 30, April 30,
1999 1999
------------------------------------------------------------------
(In thousands, except per share amounts)
Basic Diluted Basic Diluted
------------------------------- -------------------------------
Net earnings per common share:
Net earnings........................................... $ 30,247 $ 30,247 $ 26,319 $ 26,319
Weighted average shares outstanding.................... 34,571 34,571 34,557 34,557
Effect of dilutive stock options....................... -- 196 -- 252
------------------------------- -------------------------------
Total shares........................................... 34,571 34,767 34,557 34,809
------------------------------- -------------------------------
Net earnings per common share.......................... $ 0.87 $ 0.87 $ 0.76 $ 0.76
=============================== ===============================
Three Nine
Months Ended Months Ended
April 30, April 30,
1998 1998
------------------------------------------------------------------
(In thousands, except per share amounts)
Basic Diluted Basic Diluted
------------------------------- -------------------------------
Net earnings per common share:
Net earnings........................................... $ 41,663 $ 41,663 $ 46,857 $ 46,857
Weighted average shares outstanding.................... 34,303 34,303 34,183 34,183
Effect of dilutive stock options....................... -- 480 -- 458
------------------------------- -------------------------------
Total shares........................................... 34,303 34,783 34,183 34,641
------------------------------- -------------------------------
Net earnings per common share......................... $ 1.21 $ 1.20 $ 1.37 $ 1.35
=============================== ===============================
5. Acquisitions and Business Combinations
On August 1, 1998, the Company entered into a joint venture with one of the
largest retailers of ski- and golf-related sporting goods in Colorado. The two
companies merged their retail operations into a joint venture named SSI Venture
LLC. The Company contributed its retail and rental operations to the joint
venture and holds a 51.9% share of the joint venture. Specialty Sports, Inc.
contributed 30 stores located in Denver, Boulder, Aspen, Telluride, Vail and
Breckenridge to the joint venture and holds a 48.1% share in the joint venture.
The owners and operators of Specialty Sports, Inc., the Gart family, have been
operating in the sporting goods industry in Colorado since 1929 and run the day-
to-day operations of SSI Venture LLC. Vail Resorts participates in the
strategic and financial management of the joint venture. SSI Venture LLC is a
fully consolidated entity in the Company's accompanying financial statements
with the minority interest in earnings and net assets appropriately reflected on
the financial statements.
F-8
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
5. Acquisitions and Business Combinations (continued)
On August 13, 1998, the Company purchased 100% of the outstanding stock of
The Village at Breckenridge Acquisition Corp., Inc. and Property Management
Acquisition Corp., Inc. (collectively, "VAB") for a total purchase price of
$33.8 million. VAB owned and operated The Village at Breckenridge, which is
strategically located at the base of Peak 9 at Breckenridge Mountain Resort.
Included in the acquisition were the 60-room Village Hotel, the 71-room
Breckenridge Mountain Lodge, two property management companies which currently
hold contracts for approximately 360 condominium units, eight restaurants,
approximately 28,000 square feet of retail space leased to third parties, and
approximately 32,000 square feet of convention and meeting space. In addition,
the acquisition includes the Maggie Building, which is generally considered to
be the primary base lodge of Breckenridge Mountain Resort, but until now had
neither been owned nor managed by the Company. This transaction also included
VAB's other Breckenridge assets, including the Bell Tower Mall and certain other
real estate parcels which the Company sold on April 10, 1999, to East West
Partners of Avon, Colorado for $10 million. The acquisition was funded with
proceeds from the Company's revolving credit facility.
6. Long-Term Debt
Long-term debt as of April 30, 1999 and July 31, 1998 is summarized as
follows (in thousands):
April 30, July 31,
Maturity(d) 1999 1998
----------------------------------------------------------
Industrial Development Bonds(a)............. 1999-2020 $ 63,200 $ 64,560
Credit Facilities (b)....................... 2003 225,688 218,000
Other(c).................................... 1999-2028 4,974 1,454
--------------- ---------------
293,862 284,014
Less: Maturities due within 12 months....... 530 1,734
--------------- ---------------
$ 293,332 $ 282,280
=============== ===============
(a) The Company has $41.2 million of outstanding Industrial Development
Bonds (the "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 2006 and 7.875% for bonds maturing in 2008. The Series 1991
Sports Facilities Refunding Revenue Bonds have an aggregate outstanding
principal amount of $3 million and bear interest at 7.125% for bonds
maturing in 2002 and 7.375% for bonds maturing in 2010.
F-9
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
6. Long-Term Debt (continued)
(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
(4.90% at April 30, 1999) plus a margin ranging from 0.50% to 1.25% or
(ii) the agent's prime lending rate, (7.75% at April 30, 1999) plus a
margin of up to 0.125%. The Company also pays a quarterly unused
commitment fee ranging from 0.125% to 0.30%. 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.
On December 30, 1998, SSI Venture LLC established a credit facility
("SSV Facility") that provides debt financing up to an aggregate
principal amount of $20 million. The SSV Facility consists of (i) a $10
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. Minimum
amortization under the Tranche B Term Loan Facility is $625,000, $1.38
million, $1.75 million, $2.25 million, $2.63 million, and $1.38 million
during the fiscal years 1999, 2000, 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) Other obligations bear interest at rates ranging from 0.0% to 6.5% and
have maturities ranging from 1999-2028.
(d) Maturity years based on fiscal year end July 31.
Aggregate maturities for debt outstanding are as follows (in thousands):
Due during fiscal years ending July 31. As of
April 30,
1999
--------------
1999.................................................................................................. $ 340
2000.................................................................................................. 548
2001.................................................................................................. 430
2002.................................................................................................. 439
2003.................................................................................................. 227,243
Thereafter............................................................................................ 64,862
--------------
Total Debt......................................................................................... $ 293,862
==============
F-10
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
(Unaudited)
7. Guarantor Subsidiaries and Non-Guarantor Subsidiaries
The Company's payment obligations under the 8 3/4% Senior Subordinated
Notes due 2009 (see Note 8), are fully and unconditionally guaranteed on a joint
and several, senior subordinated basis by 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 and
Vail Associates Investments, Inc. (together, the Non-Guarantor Subsidiaries").
SSI Venture, LLC is a 51.9%-owned joint venture which owns and operates certain
retail and rental operations. Vail Associates Investments, Inc. is a 100%-owned
corporation which owns 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 April 30, 1999 and for the nine months then ended.
As SSI Venture LLC began operations on August 1, 1998, no financial information
for SSI Venture, LLC existed prior to that date. In addition, in the Company's
opinion, the financial information of Vail Associates Investments, Inc. as of
and prior to July 31, 1998 is immaterial to the financial position of the
Company and would not provide additional meaningful Information to investors.
Therefore, the Company has not presented herein comparative
consolidated condensed financial information for the nine months ended April 30,
1998.
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-11
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Supplemental Condensed Consolidating Balance Sheet
April 30, 1999
(in thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------------- ------------- ------------- -------------- -------------
Current assets:
Cash and cash equivalents..................... $ -- $ 9,246 $ 817 $ -- $ 10,063
Receivables................................... 321 47,395 201 -- 47,917
Inventories, net.............................. -- 5,871 13,710 -- 19,581
Deferred income taxes......................... 1,634 10,492 -- -- 12,126
Other current assets.......................... -- 4,454 657 -- 5,111
------------- ------------- ------------- ------------- -------------
Total current assets........................ 1,955 77,458 15,385 -- 94,798
Property, plant and equipment, net................ -- 541,758 11,346 -- 553,104
Real estate held for sale......................... -- 147,815 4,326 -- 152,141
Deferred charges and other assets................. 373 18,111 544 -- 19,028
Intangible assets, net............................ -- 183,898 12,235 -- 196,133
Investments in subsidiaries and advances to
(from) subsidiaries........................... 492,091 195,112 (5,780) (681,423) --
============= ============= ============= ============= =============
Total assets................................ $ 494,419 $ 1,164,152 $ 38,056 $ (681,423) $ 1,015,204
============= ============= ============= ============= =============
Current liabilities:
Accounts payable and accrued expenses......... $ 1,080 $ 80,409 $ 7,930 $ -- $ 89,419
Income taxes payable.......................... 2,239 -- -- -- 2,239
Long-term debt due within one year............ -- 464 66 -- 530
------------- ------------- ------------- ------------- -------------
Total current liabilities................... 3,319 80,873 7,996 -- 92,188
Long-term debt.................................... -- 283,644 9,688 -- 293,332
Other long-term liabilities....................... 1,128 27,270 -- -- 28,398
Deferred income taxes............................. -- 101,732 -- -- 101,732
Minority interest in net assets of consolidated
joint venture................................. -- -- 9,582 -- 9,582
Total stockholders' equity........................ 489,972 670,633 10,790 (681,423) 489,972
============= ============= ============= ============= =============
Total liabilities and stockholders' equity.. $ 494,419 $ 1,164,152 $ 38,056 $ (681,423) $ 1,015,204
============= ============= ============= ============= =============
F-12
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Supplemental Condensed Consolidating Statement of Operations
For the Nine Months Ended April 30, 1999
(in thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------------- -------------- -------------- -------------- --------------
Total revenues ............................ $ -- $ 348,017 $ 64,326 $ (1,588) $ 410,755
Total operating expenses .................. 916 287,545 56,011 (1,588) 342,884
-------------- -------------- -------------- -------------- --------------
Income (loss) from operations ......... (916) 60,472 8,315 -- 67,871
Other income (expense) .................... 187 (15,371) (592) -- (15,776)
Minority interest in net income of
consolidated joint venture ............ -- -- (3,715) -- (3,715)
-------------- -------------- -------------- -------------- --------------
Income (loss) before income taxes ..... (729) 45,101 4,008 -- 48,380
Benefit (provision) for income taxes .. 332 (22,393) -- -- (22,061)
-------------- -------------- -------------- -------------- --------------
Net income (loss) before equity in
income of consolidated subsidiaries ... (397) 22,708 4,008 -- 26,319
Equity in income of consolidated
subsidiaries .......................... 26,716 4,008 -- (30,724) --
-------------- -------------- -------------- -------------- --------------
Net income (loss) ......................... $ 26,319 $ 26,716 $ 4,008 $ (30,724) $ 26,319
============== ============== ============== ============== ==============
F-13
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Supplemental Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended April 30, 1999
(in thousands)
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
-------------- -------------- -------------- -------------- --------------
Cash flows provided by (used in)
operating activities...................... $ (397) $ 92,142 $ 9,561 $ -- $ 101,306
Cash flows from investing activities:
Cash paid in hotel acquisitions, net
of cash acquired .................... -- (33,800) -- -- (33,800)
Cash paid by consolidated joint
venture in acquisition of retail
operations .......................... -- -- (10,516) -- (10,516)
Resort capital expenditures ........... -- (49,370) (4,321) -- (53,691)
Investments in real estate ............ -- (22,850) -- -- (22,850)
-------------- -------------- -------------- -------------- --------------
Net cash used in
investing activities ............. -- (106,020) (14,837) -- (120,857)
Cash flows from financing activities:
Proceeds from the exercise of stock
options ............................. 628 -- -- -- 628
Proceeds from borrowings under
long-term debt ...................... -- 128,020 4,846 -- 132,866
Payments on long-term debt ............ -- (123,392) -- -- (123,392)
Advances to (from) affiliates ......... (231) (1,016) 1,247 -- --
-------------- -------------- -------------- -------------- --------------
Net cash provided by financing
activities ....................... 397 3,612 6,093 -- 10,102
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in cash and cash
equivalents ............................. -- (10,266) 817 -- (9,449)
Cash and cash equivalents:
Beginning of period ................... -- 19,512 -- -- 19,512
-------------- -------------- -------------- -------------- --------------
End of period ........................ $ -- $ 9,246 $ 817 $ -- $ 10,063
============== ============== ============== ============== ==============
F-14
VAIL RESORTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
8. Subsequent Events
On June 14, 1999, the Company purchased 100% of the outstanding shares of
Grand Teton Lodge Company, a Wyoming corporation, from CSX Corporation for a
total purchase price of $50 million. The Grand Teton Lodge Company operates four
resort properties in northwestern Wyoming: Jenny Lake Lodge, Jackson Lake Lodge,
Colter Bay Village and Jackson Hole Golf & Tennis Club. Grand Teton Lodge
Company operates the first three properties, 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
Grand Teton Lodge Company and includes approximately 30 acres of developable
land.
The Company completed a $200 million private debt offering of Senior
Subordinated Notes (the "Notes") on May 11, 1999. The Notes have a fixed annual
interest rate of 8.75% which will be paid every six months on May 15 and
November 15, beginning November 15, 1999. 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. The private debt offering is not registered with the Securities
and Exchange Commission. Pursuant to the terms of the offering, the Company will
register with the Securities and Exchange Commission exchange notes with
substantially the same terms as the Notes to enable holders of the Notes to make
a market in the Notes.
In conjunction with the private debt offering the Company amended its Credit
Facility effective May 1, 1999. The amended Credit Facility provides the Company
additional financial flexibility. Borrowings under the amended Credit Facility
bear interest annually at the Company's option at the rate of (i) LIBOR (4.90%
at April 30, 1999) plus a margin ranging from 0.75% to 2.25% or (ii) the agent's
prime lending rate, (7.75% at April 30, 1999) 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.
F-15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis of financial condition and results of
operations of the Company should be read in conjunction with the Company's
July 31, 1998, Annual Report on Form 10-K and the consolidated condensed interim
financial statements as of April 30, 1999 and July 31, 1998, and for the three
and nine month periods ended April 30, 1999 and 1998, 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 April 30, 1999 versus Three Months Ended April 30, 1998
Three Months Three Months
Ended Ended
April 30, April 30, Percentage
1999 1998 Increase Increase
--------------- --------------- --------------- ---------------
(dollars in thousands)
(unaudited)
Resort Revenue............................. $188,220 $170,051 $18,169 10.7
Resort Operating Expense................... 111,097 82,413 28,684 34.8
Resort Revenue. Resort Revenue for the three months ended April 30, 1999 and
1998 is presented by category as follows:
Three Months Three Months Percentage
Ended Ended Increase Increase
April 30,1999 April 30,1998 (Decrease) (Decrease)
---------------- ---------------- --------------- ---------------
(dollars in thousands, except ETP amounts)
(unaudited)
Lift Ticket............ $ 75,637 $ 82,523 $(6,886) (8.3)
Ski School............. 22,151 22,115 36 0.2
Dining................. 27,497 23,769 3,728 15.7
Retail/Rental.......... 26,878 10,136 16,742 165.2
Hospitality............ 22,990 19,709 3,281 16.6
Other.................. 13,067 11,799 1,268 10.7
---------------- ---------------- --------------- ---------------
Total Resort Revenue... $188,220 $170,051 $18,169 10.7
================ ================ =============== ===============
Total Skier Days....... 2,497 2,565 (68) (2.7)
================ ================ =============== ===============
ETP.................... $30.29 $32.17 $(1.88) (5.8)
================ ================ =============== ===============
1
Lift ticket revenue decreased due to a 2.7% decrease in total skier days as
well as a 5.8% decrease in ETP (effective ticket price, ("ETP"), is defined as
total lift ticket revenue divided by total skier days). The Company attributes
the decrease in skier days to above-average temperatures and below-average
snowfall throughout the majority of the ski season, which had a negative impact
on the entire Colorado market. In addition, the negative perception resulting
from the October 19, 1998 fires on Vail Mountain and the Canadian dollar
exchange rate, which favored the Canadian ski industry, also impacted skier
days. The decrease in ETP is the result of a shift in the proportion of total
skier days to local and Front Range (Denver/Colorado Springs) skier days (non-
destination skier days). Lift tickets sold to local and Front Range skiers tend
to have a lower ETP than tickets sold to destination guests. This shift mainly
occurred due to the popularity of the Buddy Pass, a discounted season pass for
Keystone and Breckenridge resorts, which accounted for a significant portion of
local and Front Range skier days.
Ski and Snowboard School revenue remained level despite a decrease in total
skier days through price increases, increased participation and expansion of the
children's ski school at Beaver Creek during the three months ended April 30,
1999 compared to the three months ended April 30, 1998.
Dining revenue increased primarily as a result of the addition of eight dining
operations with the acquisition of VAB on August 13, 1998, coupled with modest
growth at existing facilities. The Company also added TenMile Station, the first
new on-mountain restaurant at Breckenridge in over 10 years.
The increase in Retail/Rental revenue is due to the addition of approximately
30 retail and rental outlets provided by the joint venture (SSI Venture LLC) the
Company entered into with Specialty Sports, Inc. as of August 1, 1998.
Specialty Sports, Inc. is one of the largest retailers of ski- and golf-related
sporting goods in Colorado.
Hospitality revenue increased as a result of strong performance from existing
operations due in part to a combination of effective yield management and
expansion of the managed property inventory. The acquisition of VAB also
contributed significantly. In addition to adding lodging capacity, VAB added
additional property management operations. VAB also runs a vacation services
operation/travel agency.
Other revenue increased primarily due to increases in brokerage and commercial
leasing revenue, expanded licensing and sponsorship contracts and expanded
contract services for Beaver Creek, Bachelor Gulch and Arrowhead Villages during
the three months ended April 30, 1999 compared to the three months ended
April 30, 1998.
Resort Operating Expense. Resort Operating Expense for the three months ended
April 30, 1999 was $111.1 million, an increase of $28.7 million, or 34.8%,
compared to the three months ended April 30, 1998. The increase in Resort
Operating Expense is primarily attributable to the incremental operating
expenses contributed by VAB and SSI Venture LLC. A portion of the increase can
also be attributed to the increased variable expenses associated with the
increased level of resort revenue derived from non-lift businesses such as
dining, retail/rental and hospitality operations. These operations tend to have
a greater level of variable operating expenses proportionate to revenues as
compared to lift operations. These increases are partially offset by cost saving
measures that have been implemented at all levels of the Company's operations
throughout the fiscal year.
Real Estate Revenue. Revenue from real estate operations for the three months
ended April 30, 1999 was $14.0 million, an increase of $10.1 million, or 258.4%,
compared to the three months ended April 30, 1998. The increase is primarily
attributable to the sale of the Bell Tower Mall and certain other real estate
parcels that the Company sold to East West Partners of Avon for $10 million.
Other real estate revenue for the three months ended April 30, 1999 consisted of
the sales of one single family home site and one multi-family site at Bachelor
Gulch. Real estate revenue for the three months ended April 30, 1998 consisted
primarily of the sales of one single-family homesite at Bachelor Gulch, a parcel
of land near Aspen which was sold to the United States Forest Service, and the
Company's investment in Keystone/Intrawest LLC, which is accounted for using the
equity method.
2
Real Estate Operating Expense. Real estate operating expense for the three
months ended April 30, 1999 was $14.1 million, an increase of $10.8 million, or
328.6%, compared to the three months ended April 30, 1998. The increase in real
estate operating expense is primarily due to the cost of sales associated with
the sale of the Bell Tower Mall and certain other real estate parcels as
discussed above. Other real estate cost of sales for the three months ended
April 30, 1999 consisted primarily of the cost of sales and real estate
commissions associated with the sales of one single family homesite and one
multi-family homesite at Bachelor Gulch. Real estate cost of sales for the
three months ended April 30, 1998 consisted primarily of the cost of sales and
real estate commissions associated with the sales of one single-family homesite
at Bachelor Gulch and one parcel of land near Aspen, which was sold to the
United States Forest Service. Real estate operating expenses include selling,
general and administrative expenses associated with the Company's real estate
operations.
Corporate expense. Corporate expense increased by $189,000, or 12.2%, for the
three months ended April 30, 1999 as compared to the three months ended April
30, 1998. The increase is primarily attributable to an increase in professional
service fees. Corporate expense includes certain executive salaries, directors'
and officers' insurance, investor relations expenses and tax, legal, audit,
transfer agent, and other consulting fees.
Depreciation and Amortization. Depreciation and amortization expense
increased by $1.9 million, or 16.9%, for the three months ended April 30, 1999
as compared to the three months ended April 30, 1998. The increase was primarily
attributable to the inclusion of depreciation and amortization associated with
the VAB acquisition and the SSI Venture LLC discussed above, and an increased
fixed asset base due to fiscal 1999 capital improvements.
Interest expense. During the three months ended April 30, 1999 and April 30,
1998, the Company recorded interest expense of $5.8 million and $4.9 million,
respectively, relating primarily to the Company's Credit Facility and the
Industrial Development Bonds. The increase in interest expense for the three
months ended April 30, 1999 compared to the three months ended April 30, 1998,
is attributable to a higher average balance outstanding on the Credit Facility
due to amounts borrowed for the VAB acquisition in the first quarter and the SSV
Facility. The increase in interest expense was partially offset by favorable
interest rates.
Nine Months Ended April 30, 1999 versus Nine Months Ended April 30, 1998
Nine Months Nine Months
Ended Ended Percentage
April 30, 1999 April 30, 1998 Increase Increase
--------------- --------------- ---------------- ---------------
(dollars in thousands)
(unaudited)
Resort Revenue............................. $379,346 $324,195 $55,151 17.0
Resort Operating Expense................... 273,900 200,552 73,348 36.6
3
Resort Revenue. Resort Revenue for the nine months ended April 30, 1999 and 1998
is presented by category as follows:
Nine Months Nine Months Percentage
Ended Ended Increase Increase
April 30, 1999 April 30, 1998 (Decrease) (Decrease)
----------------- ----------------- ----------------- ---------------
Lift Ticket......................... $135,667 $146,458 $(10,791) (7.4)
Ski School.......................... 37,833 38,639 (806) (2.1)
Dining.............................. 52,325 45,972 6,353 13.8
Retail/Rental....................... 66,198 19,727 46,471 235.6
Hospitality......................... 50,886 39,057 11,829 30.3
Other............................... 36,437 34,342 2,095 6.1
----------------- ----------------- ----------------- ---------------
Total Resort Revenue................ 379,346 324,195 55,151 17.0
================= ================= ================= ===============
Total Skier Days.................... 4,579 4,706 (127) (2.7)
================= ================= ================= ===============
ETP................................. $29.63 $31.12 $(1.49) (4.8)
================= ================= ================= ===============
Lift ticket revenue decreased due to a 2.7% decrease in total skier days as
well as a 4.8% decrease in ETP. The Company attributes the decrease in skier
days to above-average temperatures and below-average snowfall throughout the
majority of the ski season, which had a negative impact on the entire Colorado
market. In addition, the October 19, 1998 fires on Vail mountain and the
Canadian dollar exchange rate which favored the Canadian ski industry also
impacted skier days. The decrease in ETP is the result of a shift in the
proportion of total skier days to local and Front Range skier days. Lift
tickets sold to local and Front Range skiers tend to have a lower ETP than
tickets sold to destination guests. This shift mainly occurred due to the
popularity of the Buddy Pass, which accounted for a significant portion of local
and Front Range skier days.
Ski and Snowboard School revenue decreased due to a decrease in skier days and
the shift in the proportion of total skier days to local and Front Range skier
days as Front Range skiers are less likely to purchase lessons than destination
skiers.
Dining revenue increased primarily as a result of the addition of 12 dining
operations acquired in four hotel acquisitions, coupled with modest growth at
existing facilities. The Lodge at Vail acquisition added two fine dining
establishments, eight restaurants were added with the acquisition of VAB,
and the Inn at Keystone and the Great Divide Lodge (formerly the Breckenridge
Hilton) each added one dining facility. The Company also added TenMile Station,
the first new on-mountain restaurant at Breckenridge in over 10 years.
The increase in Retail/Rental revenue is due to the addition of approximately
30 retail and rental outlets provided by SSI Venture LLC.
Hospitality revenue increased as a result of strong performance from existing
operations due in part to a combination of effective yield management and
expansion of the managed property inventory. The acquisitions of the Lodge at
Vail, the Great Divide Lodge, and the Inn at Keystone in fiscal 1998 and
VAB in fiscal 1999 also contributed significantly. In addition to adding
lodging capacity, the Lodge at Vail and the Village at Breckenridge each added
additional property management operations. The Village at Breckenridge also
runs a vacation services operation/travel agency.
4
Other revenue increased as a result of the increased popularity of the summer
mountain activities including the new Alpine Slide at Breckenridge mountain,
expanded contract services for Beaver Creek, Bachelor Gulch, and Arrowhead
Villages, growth in club operations, expanded licensing and sponsorship
contracts, and increases in commercial leasing revenue.
Resort Operating Expense. Resort Operating Expense for the nine months ended
April 30, 1999 was $273.9 million, an increase of $73.3 million, or 36.6%,
compared to the nine months ended April 30, 1998. The increase in resort
operating expense is primarily attributable to the incremental operating
expenses contributed by VAB, SSI Venture L.L.C. the Inn at Keystone, the Lodge
at Vail and the Great Divide Lodge. A portion of the increase can also be
attributed to the increase variable expenses associated with the increased level
of resort revenue derived from non-lift businesses such as dining, retail/rental
and hospitality operations. These operations tend to have a greater level of
variable operating expenses proportionate to revenues as compared to lift
operations. These increases have been partially offset by cost saving measures
that have been implemented at all levels of the Company's operations throughout
the fiscal year.
Real Estate Revenue. Revenue from real estate operations for the nine months
ended April 30, 1999 was $31.4 million, a decrease of $34.4 million, or 52.2%,
compared to the nine months ended April 30, 1998. The decrease is attributed to
the sell-out of homesites at Bachelor Gulch Village in fiscal 1998. Revenue for
the nine months of fiscal 1999 consists primarily of the sales of the Bell Tower
Mall, one luxury residential penthouse condominium at the Lodge at Vail, the
sale of three development sites at Arrowhead Village, the sale of two single
family homesites and one multi-family homesite at Bachelor Gulch and the
Company's investment in Keystone/Intrawest LLC. Profits from Keystone/Intrawest
LLC during the nine months ended April 30, 1999 included the sale of 137 village
condominium units, primarily at the River Run development, and 57 single-family
homesites surrounding an 18-hole golf course development. Real estate revenue
for the nine months ended April 30, 1998 consisted primarily of the sales of 37
single-family homesites at Bachelor Gulch, two multi-family homesite at
Arrowhead, six luxury residential condominiums at the Golden Peak base area of
Vail mountain and the Company's investment in Keystone/Intrawest LLC.
Real Estate Operating Expense. Real estate operating expense for the nine
months ended April 30, 1999 were $26.2 million, a decrease of $32.7 million, or
55.5%, compared to the nine months ended April 30, 1998. The decrease in real
estate operating expense is due to the sell-out of homesites at Bachelor Gulch
Village in fiscal 1998. Real estate cost of sales for the nine months ended
April 30, 1999 consists primarily of the cost of sales and real estate
commissions associated with the sale of the Bell Tower Mall, one luxury
residential penthouse condominium at the Lodge at Vail, three development sites
at Arrowhead Village, and two single family homesites and one multi-family
homesite at Bachelor Gulch. Real estate cost of sales for the nine months ended
April 30, 1998 consisted primarily of the cost of sales and real estate
commissions associated with the sales of 37 single-family homesites at Bachelor
Gulch, two development sites at Arrowhead, and six luxury residential
condominiums at the Golden Peak base area of Vail mountain. Real estate
operating expenses include selling, general and administrative expenses
associated with the Company's real estate operations.
Corporate expense. Corporate expense increased by $242,000, or 5.6%, for the
nine months ended April 30, 1999 as compared to the nine months ended April 30,
1998. The increase is primarily attributable to an increase in professional
service fees. Corporate expense includes certain executive salaries, directors'
and officers' insurance, investor relations expenses and tax, legal, audit,
transfer agent, and other consulting fees.
Depreciation and Amortization. Depreciation and amortization expense increased
by $7.0 million, or 22.5%, for the nine months ended April 30, 1999 as compared
to the nine months ended April 30, 1998. The increase was primarily attributable
to the inclusion of depreciation and amortization associated with the three
hotel acquisitions in fiscal 1998 and one hotel acquisition and the SSI Venture
LLC discussed above in fiscal 1999 and an increased fixed asset base due to
fiscal 1999 capital improvements.
Interest expense. During the nine months ended April 30, 1999, and the nine
months ended April 30, 1998, the Company recorded interest expense of $17.6
million and $16.1 million, respectively, relating primarily to the Company's
Credit Facility and the Industrial Development Bonds in fiscal 1999 and fiscal
1998, as well as the
5
Company's Credit Facility and the Industrial Development Bonds. The increase
in interest expense for the nine months ended April 30, 1999 compared to the
nine months ended April 30, 1998, is attributable to a higher average balance
outstanding on the Credit Facility due to amounts borrowed for the VAB
acquisition and working capital funding to SSI Venture LLC made during the first
quarter, and the SSV Facility established in the second quarter. The increase in
interest expense was partially offset by favorable interest rates.
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 from investing activities have historically consisted
of payments for acquisitions, resort capital expenditures, and investments in
real estate. During the nine months ended April 30, 1999, the Company made
payments of $33.8 million for the acquisition of one hotel property, $10.5
million for the acquisition of retail operations by SSI Venture LLC, $53.7
million for resort capital expenditures, and $22.9 million for investments in
real estate.
During the nine months ended April 30, 1999, the Company acquired one hotel
property. On August 13, 1998 the Company purchased 100% of the outstanding
stock of VAB for a total purchase price of $33.8 million. VAB owned and
operated The Village at Breckenridge, which is strategically located at the base
of Peak 9 at Breckenridge Mountain Resort. Included in the acquisition were the
60-room Village Hotel, the 71-room Breckenridge Mountain Lodge, two property
management companies which currently hold contracts for 360 condominium units,
eight restaurants, approximately 28,000 square feet of retail space leased to
third parties, and approximately 32,000 square feet of convention and meeting
space. In addition, the acquisition includes the Maggie Building, which is
generally considered to be the primary base lodge of Breckenridge Mountain
Resort, but until now has neither been owned nor managed by the Company. This
transaction also included VAB's other Breckenridge assets, including the Bell
Tower Mall and certain other real estate parcels which the Company sold on April
10, 1999 to East West Partners of Avon, Colorado for $10 million. The
acquisition was funded with proceeds from the Company's revolving credit
facility.
On August 1, 1998, the Company entered into a joint venture with one of the
largest retailers of ski- and golf-related sporting goods in Colorado. The two
companies merged their retail operations into a joint venture named SSI Venture
LLC. The Company contributed its retail and rental operations to the joint
venture and holds a 51.9% share of the joint venture. Specialty Sports, Inc.
contributed 30 stores located in Denver, Boulder, Aspen, Telluride, Vail and
Breckenridge to the joint venture and holds a 48.1% share in the joint venture.
The owners and operators of Specialty Sports, Inc., the Gart family, have been
operating in the sporting goods industry in Colorado since 1929 and run the day-
to-day operations of SSI Venture LLC. Vail Resorts participates in the
strategic and financial management of the joint venture.
Resort capital expenditures for the nine months ended April 30, 1999 were
$53.7 million. Investments in real estate for that period were $22.9. The
primary projects included in resort capital expenditures were (i) trail and
infrastructure improvements and a new high speed quad chairlift at Keystone
Mountain, (ii) upgrades to the snowmaking system at Keystone, (iii) terrain and
facilities improvements and a new on-mountain restaurant at Breckenridge
Mountain, (iv) expansion of the children's ski school at Beaver Creek, (v)
expansion of Adventure Ridge at Vail, (vi) development of Adventure Point at
Keystone, (vii) expansion of the grooming fleet at all four resorts, (viii)
upgrades to office and front line information systems, (ix) significant
renovations of the Great Divide Lodge as well as minor renovations of the
Company's other hotels, and (x) infrastructure for the Category III expansion on
Vail Mountain. The primary projects included in investments in real estate were
(i) continuing infrastructure related to Beaver Creek, Bachelor Gulch and
Arrowhead Villages, (ii) construction of the Arrowhead Alpine Club, (iii) golf
course development, and (iv) investments in developable land at strategic
locations at all four mountain resorts.
6
The Company estimates that it will make resort capital expenditures totaling
between $20 and $25 million during the remainder of fiscal 1999. The primary
projects are anticipated to include (i) continued hotel renovations, (ii) fleet
replacement at all four resorts, (iii) continued upgrades to office and front
line information systems, (iv) infrastructure for the Category III expansion on
Vail Mountain, (v) trail and infrastructure improvements across all four
resorts, and (vi) the purchase of two warehouse units near the town of Avon.
Investments in real estate during the remainder of fiscal 1999 are expected to
total approximately $5 million. The primary projects are anticipated to include
(i) infrastructure related to Bachelor Gulch and Arrowhead Villages, (ii)
construction of the Arrowhead Alpine Club and Bachelor Gulch Club (iii) golf
course development, and (iv) investments in developable land at strategic
locations at all four resorts. The Company plans to fund capital expenditures
and investments in real estate for the remainder of fiscal 1999 with cash flow
from operations and borrowings under its revolving credit facility.
During the nine months ended April 30, 1999, the Company generated $10.1
million in cash from its financing activities consisting of net long-term debt
borrowings of $9.4 million and $0.6 million received from the exercise of
employee stock options.
During the nine months ended April 30, 1999, 62,160 employee stock options
were exercised at exercise prices ranging from $10.00 to $10.75. Additionally,
8,751 shares were issued to management under the Company's restricted stock
plan.
Based on current 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.
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. 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, general business and economic conditions, competitive
factors in the ski and resort industry, the ability to integrate acquisitions
and the weather.
Year 2000 Compliance
The Year 2000 issue is a result of certain computer programs being written
using two digits rather than four to define the applicable year. Computer
programs which are date-sensitive may recognize a date using "00" as the year
1900 rather than the year 2000, which could result in major computer system or
program failures or miscalculations or equipment malfunctions. The Company
recognizes that the impact of the Year 2000 issue extends beyond traditional
computer hardware and software to embedded hardware and software contained in
equipment used in operations, such as chairlifts, alarm systems and elevators,
as well as to third parties.
State of Readiness. The Year 2000 issue is being addressed within the
Company, under the direction of the information systems department, by its
individual business units. The Company has established a Year 2000 task force
consisting of representatives from all major business units to coordinate the
Company's Year 2000 efforts and progress is reported periodically to a Year 2000
executive committee consisting of certain senior management members.
The Company has committed resources to conduct risk assessments and to take
corrective action, where required, within each of the following areas:
information technology, operations equipment, and external parties. Information
technology includes telecommunications as well as traditional computer software
and hardware in the mainframe, midrange and distributed applications
environments. Operations equipment includes all automation and embedded chips
used in business operations. External parties include any third party with whom
the Company interacts, or upon whom the Company relies in the performance of
day-to-day operations. The Company's program for addressing the Year 2000 issue
includes the following phases: (1) inventory; (2) assessment; (3) remediation;
(4) testing; and (5) contingency planning. Approximately 10% of the Company's
normal information technology work has been deferred due to the fact that
personnel of the information systems department have dedicated certain portions
of
7
their time to the Year 2000 issue. However, the Company plans to complete and
implement its information technology projects as planned.
The Company has traditionally upgraded and replaced its information technology
systems on a regular basis. As a result of this process, most of the Company's
information technology systems and applications are currently Year 2000
compliant. In the remaining information technology area, inventory and
assessment audits in the telecommunications, mainframe, midrange and distributed
applications areas are substantially complete with remediation, verification and
testing expected to be completed by October 31, 1999. With respect to operations
equipment, the Company has identified areas that it considers "mission
critical", in that a Year 2000 failure could impact the health or safety of
employees or resort guests or could have a material adverse effect on the
Company. The Company is engaging a third party consultant to assist the Company
in completing inventory and assessment audits of operations equipment. The
Company has extended its targeted completion date for these audits to
October 31, 1999 to allow the outside consulting firm to perform the necessary
work. Remediation, verification and testing with respect to operations equipment
are now expected to be completed by November 30, 1999.
The Company is communicating with its significant suppliers to determine the
extent to which the Company is vulnerable to those third parties' failure to
remediate their own Year 2000 issue. However, there can be no guarantee that
the systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company. Many of the external parties that the
Company relies on provide commodity goods or services that are widely available
from a range of vendors; therefore, third party impact on the Company is
expected to be minimal. The Company is seeking confirmation of Year 2000
compliance from critical suppliers and is identifying alternative suppliers as
part of its contingency plans. The Company will seek letters of compliance or
other satisfactory evidence of compliance (for example, web site disclosures)
from certain non-critical suppliers based on risk assessment of such suppliers.
Risk assessment with respect to external parties is expected to be completed by
July 31, 1999, and monitoring of risk in this area will continue throughout
1999, as many external parties will not have completed their work with respect
to the Year 2000 issue.
Costs. The total estimated multi-year cost of the Year 2000 project is
estimated to be between $900,000 and $1,100,000 and is being funded from
operating cash flow. These costs are not expected to be material to the
Company's consolidated results of operations, liquidity or capital resources.
Of the total project cost, approximately $600,000 is attributable to the
purchase of new software or equipment that will be capitalized. The remaining
costs will be expensed as incurred. In a number of instances, the Company may
decide to install new software or upgraded versions of current software programs
that are Year 2000 compliant. In these instances, the Company may capitalize
certain costs of the new system in accordance with current accounting
guidelines. As of April 30, 1999 $360,000 of the total estimated Year 2000
project costs have been incurred of which $300,000 has been expensed and
$60,000 was capitalized. Fiscal 1998 expensed costs were approximately
$150,000, and expensed costs for the nine months ended April 30, 1999 were
approximately $150,000. Costs exclude expenditures for systems that were
replaced under the Company's regularly planned schedule.
Risks. Failure to address a Year 2000 issue could result in a business
disruption that could materially affect the Company's operations, liquidity or
capital resources. The Company believes that the most reasonably likely worst
case scenario would consist of isolated instances of minor system or equipment
failures, for which the Company will have developed contingency plans.
There is still uncertainty around the scope of the Year 2000 issue and its
implications for the Company. At this time the Company cannot quantify the
potential impact of these failures. Due to the general uncertainty inherent in
the Year 2000 problem, as well as, in part, the uncertainty of the Year 2000
readiness of suppliers and the current status of the Company's Year 2000
program, the Company is unable to determine at this time whether any Year 2000
failures will have material adverse consequences on the Company's results of
operations, liquidity or financial condition. The Company's Year 2000 program
and related contingency plans are being developed to address issues within the
Company's control and to reduce the level of the Company's uncertainty about its
Year 2000 issues. The program minimizes, but does not eliminate, the issues
relating to external parties. Further, there can be no assurance
8
that the Company will successfully identify or remediate its potential Year 2000
problems and failure to do so may have a material adverse effect on the Company.
Contingency Plans. The Company is developing contingency plans, and expects to
complete them by October 31, 1999. The Company will consider, among other
factors, the results and responses from its communications with material third
parties in determining the nature and the scope of contingency plans. However,
generally, the Company's contingency plans will include, but are not limited to,
development of manual work-arounds to system failures, identification of
alternative sources for goods and services and reasonable increases in the
amount of on-hand goods and supplies. Typically these plans address the
anticipated consequences of single events, while the scope of the Year 2000
issues may cause multiple concurrent events for a longer duration. Development
of contingency plans for multiple concurrent events is in progress and is
expected to be completed by November 30, 1999.
The costs of the project, estimated completion dates, worst-case scenario
and other forward-looking statements above are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantees that
these estimates will be achieved, or that events will occur as projected, and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, timely implementation
of, and allocation of resources to, the Company's Year 2000 program, success of
the Company in identifying computer systems and non-information technology
systems that contain two digit date codes, the Company's appropriate risk
assessment and prioritization of such systems, the nature and amount of
programming and testing required and the time it actually takes to upgrade,
replace or otherwise take corrective action with respect to each of the affected
systems and the success of the Company's suppliers and other external parties
with which the Company interacts in addressing their Year 2000 issues.
Recent Developments
On October 19, 1998, fires on Vail Mountain destroyed certain of the Company's
facilities including the Ski Patrol Headquarters, a day skier shelter, the Two
Elk Lodge restaurant and the chairlift drive housing for the High Noon Lift
(Chair #5). The fires have been determined to have been deliberately set and
are under investigation by federal, state and local law enforcement officials.
Chair #5 and three other chairlifts, which sustained minor damage, have been
repaired and are currently fully operational. All of the facilities damaged are
fully covered by the Company's property insurance policy. The Company has placed
temporary structures at the Two Elk Lodge and Ski Patrol Headquarters sites.
These facilities will provide food service and other amenities during the
reconstruction period of the Two Elk Lodge and Ski Patrol Headquarters. In
addition, the Company has constructed a 200-seat pavilion and relocated and
covered the patio food delivery system at the Mid-Vail Restaurant, and has
provided portable radiant heaters on the patios at Mid-Vail Restaurant and
Eagle's Nest to accommodate overflow from Two Elk Lodge. The fires did not
affect Vail Mountain's opening day for the 1998-1999 season and had little, if
any, impact on the World Alpine Ski Championships that were hosted January 30,
1999 through February 14, 1999. Although the Company is unable to estimate the
total amount which will be recovered through insurance proceeds, the Company
does not expect to record a loss related to the property damage. The incident is
also covered under the Company's business interruption insurance policy. The
Company is unable to estimate at this time the impact the incident will have in
terms of business interruption, however the Company expects the incident will
not have a material impact on its financial results due to mitigating measures
being undertaken by the Company and the insurance coverage.
9
On June 14, 1999 the Company purchased 100% of the outstanding shares of Grand
Teton Lodge Company, a Wyoming corporation, from CSX Corporation for a total
purchase price of $50 million. The Grand Teton Lodge Company operates four
resort properties in northwestern Wyoming: Jenny Lake Lodge, Jackson Lake Lodge,
Colter Bay Village and Jackson Hole Golf & Tennis Club. Grand Teton Lodge
Company operates the first three properties, all located within the 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
Grand Teton Lodge Company and includes approximately 30 acres of developable
land .
The Company completed a $200 million private debt offering of Senior
Subordinated Notes (the "Notes") on May 11, 1999. The Notes have a fixed annual
interest rate of 8.75% with interest due semi-annually on May 15, and November
15, beginning November 15, 1999. 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. The private debt offering is not registered with the Securities and
Exchange Commission. Pursuant to the terms of the offering, the Company will
register with the Securities and Exchange Commission exchange notes with
substantially the same terms as the Notes to enable holders of the Notes to make
a market in the Notes.
In conjunction with the private debt offering the Company amended its Credit
Facility effective May 1, 1999. The amended Credit Facility provides the
Company additional financial flexibility. Borrowings under the amended Credit
Facility bear interest annually at the Company's option at the rate of (i) LIBOR
(4.90% at April 30, 1999) plus a margin ranging from 0.75% to 2.25% or (ii) the
agent's prime lending rate, (7.75% at April 30, 1999) 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. The Company enters into interest rate swap agreements
"Swap Agreements" to reduce its exposure to interest rate fluctuations on its
floating-rate debt. Swap Agreements exchange floating-rate for fixed-rate
interest payments periodically over the life of the agreement without exchange
of the underlying notional amounts. The notional amounts of interest rate
agreements are used to measure interest to be paid or received and do not
represent an amount of exposure to credit loss. For interest rate instruments
that effectively hedge interest rate exposures, the net cash amounts paid or
received on the agreements are accrued and recognized as an adjustment to
interest expense. As of April 30, 1999, the Company had Swap Agreements in
effect with notional amounts totaling $150.0 million, of which $75.0 million
will mature in February 2000. The remaining $75.0 million will mature December
2002. Borrowings not subject to Swap Agreements at April 30, 1999 totaled $66.0
million. Swap Agreement rates are based on one-month LIBOR. Based on average
floating-rate borrowings outstanding during the three months ended April 30,
1999, a 100-basis point change in LIBOR would have caused the Company's monthly
interest expense to change by $55,000. The Company believes that these amounts
are not significant to the earnings of the Company.
10
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. 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 incorporated by reference to the documents
indicated in parentheses which have previously been filed with the Securities
and Exchange Commission.
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ----
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.)
4.2 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.)
11
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ----
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 Employment Agreement dated October 8, 1992 between Vail Associates,
Inc. and Andrew P. Daly. (Incorporated by reference to Exhibit 10.15
of the Registration Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No. 33-52854) including all amendments thereto.)
10.6 Employment Agreement dated October 30, 1992 between Vail Associates,
Inc. and James Kent Myers. (Incorporated by reference to Exhibit 10.10
of the report on Form 10-K of Gillett Holdings, Inc. for the period from
October 9, 1992 through September 30, 1993.)
10.7 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.)
10.8(a) 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.)
10.8(b) 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.)
10.9(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.)
10.9(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.)
12
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ----
10.10 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.)
10.11(a) Credit Agreement dated as of January 3, 1997 among the Vail Corporation, the Banks
named therein and NationsBank of Texas, N.A., as issuing banks and agent.
(Incorporated by reference to Exhibit 10.10(p) of the Registration Statement on Form
S-2 of Vail Resorts, Inc. (Registration # 333-5341) including all amendments
thereto.)
10.11(b) Pledge Agreement dated as of January 3, 1997 among the Vail Corporation and
NationsBank of Texas, N.A. as agent. (Incorporated by reference to Exhibit 10.10(r)
of the Registration Statement on Form S-2 of Vail Resorts, Inc. (Registration #
333-5341) including all amendments thereto.)
10.11(c) Credit Agreement dated as of October 10, 1997 among the Vail Corporation and
NationsBank of Texas, N.A., as lender. (Incorporated by reference to Exhibit
10-11(c) of the report on Form 10-K of Vail Resorts, Inc. for the year ended
September 30, 1997.)
10.11(d) Trust Indenture dated as of September 1, 1992 between Eagle County, Colorado, and
Colorado National Bank, as Trustee, securing Sports Housing Facilities Revenue
Refunding Bonds. (Incorporated by reference to Exhibit 10.16(g) of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No. 33-52854)
including all amendments thereto.)
10.11(e) First Amendment to Trust Indenture dated as of November 23, 1993 between Eagle
County, Colorado and Colorado National Bank, as Trustee, securing Sports and Housing
Facilities Revenue Refunding Bonds. (Incorporated by reference to Exhibit 10.17(f)
of the report on Form 10-K of Gillett Holdings, Inc. for the period from October 9,
1992 through September 30, 1993.)
10.11(f) Trust Indenture dated as of September 1, 1992 between Eagle County, Colorado, and
Colorado National Bank, as Trustee, securing Sports Facilities Revenue Refunding
Bonds. (Incorporated by reference to Exhibit 10.16(h) of the Registration Statement
on Form S-4 of Gillett Holdings, Inc. (Registration No. 33-52854) including all
amendments thereto.)
10.11(g) First Amendment to Trust Indenture dated as of November 23, 1993 between Eagle
County, Colorado and Colorado National Bank, as Trustee, securing Sports Facilities
Revenue Refunding Bonds. (Incorporated by reference to Exhibit 10.17(h) of the
report on Form 10-K of Gillett Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)
10.11(i) First Amendment to Sports and Housing Facilities Financing Agreement and Assignment
and Assumption Agreement dated as of November 23, 1993 between Eagle County,
Colorado, Vail Associates, Inc. and The Vail Corporation. (Incorporated by
reference to Exhibit 10.17(j) of the report on Form 10-K of Gillett Holdings, Inc.
for the period from October 9, 1992 through September 30, 1993.)
13
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ----
10.11(j) Sports Facilities Financing Agreement dated as of September 1, 1992 between Eagle
County, Colorado and Beaver Creek Associates, Inc., with Vail Associates, Inc. as
Guarantor. (Incorporated by reference to Exhibit 10.16(j) of the Registration
Statement on Form S-4 of Gillett Holdings, Inc. (Registration No. 33-52854)
including all amendments thereto.)
10.11(k) First Amendment to Sports Facilities Financing Agreement and Assignment and
Assumption Agreement dated as of November 23, 1993 by and among Eagle County,
Colorado, Beaver Creek Associates, Inc., Vail Associates, Inc., and The Vail
Corporation. (Incorporated by reference to Exhibit 10.17(l) of the report on Form
10-K of Gillett Holdings, Inc. for the period from October 9, 1992 through
September 30, 1993.)
10.11(l) Guaranty dated as of September 1, 1992, by Vail Associates, Inc. delivered to
Colorado National Bank, as Trustee. (Incorporated by reference to Exhibit 10.16(k)
of the Registration Statement on Form S-4 of Gillett Holdings, Inc. (Registration
No. 33-52854) including all amendments thereto.)
10.12(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.)
10.12(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.)
10.12(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.)
10.12(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.)
10.13 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.)
14
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ----
10.14 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.)
10.15 Employment Agreement dated April 1, 1994 between Gillett Holdings, Inc. and James S.
Mandel (Incorporated by reference to Exhibit 10.22 of the report on Form 10-K of
Gillett Holdings, Inc. for the year ended September 30, 1994.)
10.16 Employment Agreement dated April 1, 1994 between Vail Associates, Inc. and James S.
Mandel (Incorporated by reference to Exhibit 10.23 of the report on Form 10-K of
Gillett Holdings, Inc. for the year ended September 30, 1994.)
10.17 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.)
10.18 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.)
10.19 Shareholder Agreement among Vail Resorts, Inc., Ralston Foods, Inc., and Apollo Ski
Partners 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.)
10.20 1996 Stock Option Plan (Incorporated by reference from the Company's Registration
Statement on Form S-3, File No. 333-5341).
10.21 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.)
10.22 Amended and Restated Credit Agreement among the Vail Corporation (d/b/a "Vail
Associates, Inc.") and Nations Bank of Texas, N.A. (Incorporated by reference to
Exhibit 10 of the report on Form 10-Q of Vail Resorts, Inc. for the quarter ended
January 31, 1998.)
10.23 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.)
10.24 Credit agreement dated December 30, 1998 among SSI Venture LLC and NationsBank of
Texas, N.A. (Incorporated by reference to Exhibit 10.23 of the report on Form of the
Vail Resorts, Inc. for the quarter ended January 31, 1999.)
10.25 Amended and Restarted Credit Agreement among the Vail Corporation (d/b/a "Vail Associates, Inc"),
NationsBank, N.A. and NationsBank Montgomery Securities LLC dated as of May 1, 1999.
27 Financial Data Schedules
15
b) Reports on Form 8-K
None.
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 June 14, 1999.
VAIL RESORTS, INC.
Date: June 14, 1999 By /s/
------------------------------
James P. Donohue
Senior Vice President and
Chief Financial Officer
16