Vail Resorts Inc. expects to spend $5 million this fiscal year on litigation over the lease for most of the lands under Park City Mountain Resort (PCMR), Vail said Friday in its latest earnings report.
The lawsuit is part of $7.2 million in expenses the Colorado-based ski giant expects to incur in the year ending July 31, 2014, from its move into Utah. In late May, Talisker brought in Vail to operate Canyons Resort and to take the lead in fighting a lawsuit in which PCMR is seeking to extend an expired lease for 2,800 acres of mountain laced with ski runs.
Talisker, which owns the land, contends PCMR missed its 2011 deadline to extend the lease and has issued an eviction notice to PCMR's owners, Park City-based PowdrCorp. In the ongoing lawsuit, PCMR maintains it had assurances the lease would have been extended and subsequently made sizable investments in lifts and other improvements.
Even with those costs, Vail Resorts' Chief Executive Rob Katz said the company's expectations of earnings from Canyons Resort are higher than before. That conclusion is based on "its impact on our overall season pass sales" but does not count "non-recurring integration and litigation-related expenses."
Vail included Canyons this year in its Epic Pass, dropping the season pass price for the Summit County resort to $529, down $310 from last year. A prime Epic Pass ($689) gave purchasers the right to several days of free skiing at 26 resorts around the world that are owned or affiliated with Vail, up from 12 in the previous ski season.
"Season pass sales for the upcoming ski season continue to show strong growth," Katz said, "and demonstrate the compelling value proposition of our season pass products."
Through Sept. 22, season pass sales are up 19 percent in numbers and 23 percent in dollar value over the same period a year earlier, he said. "Since announcing the Canyons transaction in late May, we have seen a material acceleration in pass sales in the Tahoe and Utah markets as well as in our destination markets."
Katz said Vail expects to "build upon the positive momentum" of the past fiscal year, when ski resort and real estate operations generated net revenues of $1.1 billion, up 9.4 percent over 2011-12.
That translated into net earnings of $37.7 million, or $1.03 per diluted share, up from $16.5 million, or 45 cents per share, a year ago. Shareholders will get a dividend of 21 cents a share, he said.
Vail's mountain operations attracted 7 million skiers last year (Utah had 4 million), up from 6.1 million the previous winter, a 13.6 percent increase.
Having more people at the resorts boosted earnings in other areas, Katz noted. Dining revenue jumped 18.7 percent, ski school earnings 13 percent and retail/rental business 9.7 percent.
Increased visitation in the summer and during winter holiday periods also lifted lodging revenues 6.5 percent to $200 million, Katz added. Real-estate income declined $5 million from a year earlier.
"Our balance sheet continues to be strong," he said, with $139 million of cash on hand.
Highlights of the earnings report Vail Resorts Inc. released Friday for the fiscal year ending July 31, 2013:
Earnings of $37.7 million on revenues of $1.12 billion.
Skier visits increased to 7 million from 6.1 million the previous winter.
With Canyons Resort now part of the package, season pass sales for the coming winter are up 19 percent in numbers and 23 percent in dollar value over 2012-13.
Integrating Canyons into Vail's system will cost $7.2 million in 2013-14, including $5 million to cover litigation expenses with Park City Mountain Resort.
Source: Vail Resorts Inc.