VAIL RESORTS INC (MTN)

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and notes related thereto included in this Form 10-K. To the extent that the following MD&A contains statements which are not of a historical nature, such statements are forward-looking statements which involve risks and uncertainties. These risks include, but are not limited to, those discussed in Item 1A. “Risk Factors” in this Form 10-K. The following discussion and analysis should be read in conjunction with the Forward-Looking Statements section and Item 1A. “Risk Factors,” each included in this Form 10-K.

The MD&A includes discussion of financial performance within each of our three segments. We have chosen to specifically include segment Reported EBITDA (defined as segment net revenue less segment operating expense, plus segment equity investment income or loss, and for the Real Estate segment, plus gain or loss on sale of real property) in the following discussion because we consider this measurement to be a significant indication of our financial performance. We utilize segment Reported EBITDA in evaluating our performance and in allocating resources to our segments. Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) is included in the following discussion because we consider this measurement to be a significant indication of our available capital resources. We also

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believe that Net Debt is an important measurement as it is an indicator of our ability to obtain additional capital resources for our future cash needs. Resort Reported EBITDA (defined as the combination of segment Reported EBITDA of our Mountain and Lodging segments), Total Reported EBITDA (which is Resort Reported EBITDA plus segment Reported EBITDA from our Real Estate segment) and Net Debt are not measures of financial performance or liquidity defined under accounting principles generally accepted in the United States (“GAAP”). Refer to the end of the Results of Operations section for a reconciliation of net income attributable to Vail Resorts, Inc. to Total Reported EBITDA and Resort Reported EBITDA, and long-term debt, net to Net Debt.

Items excluded from Resort Reported EBITDA, Total Reported EBITDA and Net Debt are significant components in understanding and assessing financial performance or liquidity. Resort Reported EBITDA, Total Reported EBITDA and Net Debt should not be considered in isolation or as an alternative to, or substitute for, net income, net change in cash and cash equivalents or other financial statement data presented in the Consolidated Financial Statements. Because Resort Reported EBITDA, Total Reported EBITDA and Net Debt are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations, Resort Reported EBITDA, Total Reported EBITDA and Net Debt, as presented herein, may not be comparable to other similarly titled measures of other companies. In addition, our segment Reported EBITDA (i.e. Mountain, Lodging and Real Estate), the measure of segment profit or loss required to be disclosed in accordance with GAAP, may not be comparable to other similarly titled measures of other companies.

Overview

Our operations are grouped into three integrated and interdependent segments: Mountain, Lodging and Real Estate. We refer to “Resort” as the combination of the Mountain and Lodging segments. The Mountain, Lodging and Real Estate segments represented approximately 88%, 12% and 0%, respectively, of our net revenue for Fiscal 2024.

Mountain Segment

In the Mountain segment, the Company operates the following 42 destination mountain resorts and regional ski areas (collectively, “Resorts”):

*Denotes a destination mountain resort, which generally receives a meaningful portion of skier visits from long-distance travelers, as opposed to our regional ski areas, which tend to generate skier visits predominantly from their respective local markets.

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Additionally, we operate ancillary services, primarily including ski school, dining and retail/rental operations, and for our Australian ski areas, including lodging and transportation operations. Mountain segment revenue is seasonal, with the majority of revenue earned from our North American and European ski operations occurring in our second and third fiscal quarters and the majority of revenue earned from our Australian ski operations occurring in our first and fourth fiscal quarters. Our North American and European Resorts typically experience their peak operating season for the Mountain segment from mid-December through mid-April, and our Australian ski areas typically experience their peak operating season from June to early October. Our largest source of Mountain segment revenue comes from the sale of lift tickets (including pass products), which represented approximately 57%, 56%, and 59% of Mountain segment net revenue for Fiscal 2024, the fiscal year ended July 31, 2023 (“Fiscal 2023”) and the fiscal year ended July 31, 2022 (“Fiscal 2022”), respectively.

Lift revenue is driven by volume and pricing. Pricing is impacted by absolute pricing, as well as both the demographic and geographic mix of guests, which impacts the price points at which various products are purchased. The demographic mix of guests that visit our North American Resorts is divided into two primary categories: (i) out-of-state and international (“Destination”) guests and (ii) in-state and local (“Local”) guests. The geographic mix depends on levels of visitation to our destination mountain resorts versus our regional ski areas. For both the 2023/2024 and 2022/2023 North American ski seasons, Destination guests comprised approximately 57% of our North American destination mountain resort skier visits (excluding complimentary access), while Local guests comprised approximately 43%, which compares to approximately 58% and 42%, respectively, for the 2021/2022 North American ski season. Skier visitation at our regional ski areas is largely comprised of Local guests. Destination guests generally purchase our higher-priced lift tickets (including pass products) and utilize more ancillary services such as ski school, dining and retail/rental, as well as lodging at or around our mountain resorts. Additionally, Destination guest visitation is less likely to be impacted by changes in the weather during the current season, but may be more impacted by adverse economic conditions, the global geopolitical climate, travel disruptions or weather conditions in the immediately preceding ski season. Local guests tend to be more value-oriented and weather-sensitive.

We offer a variety of pass products for all of our Resorts, marketed toward both Destination and Local guests. Our pass product offerings range from providing access to one or a combination of our Resorts for a certain number of days to our Epic Pass, which allows pass holders unlimited and unrestricted access to all of our Resorts. The Epic Day Pass is a customizable one to seven day pass product purchased in advance of the season, for those skiers and riders who want to purchase access for a certain number of days during the season, and which is available in three tiers of resort access offerings. Our pass products provide a compelling value proposition to our guests, which in turn assists us in developing a loyal base of customers who commit to ski at our Resorts generally in advance of the ski season and typically ski more days each season at our Resorts than those guests who do not buy pass products. Additionally, we enter into strategic long-term pass alliance agreements with third-party mountain resorts, which further increase the value proposition of our pass products. For the 2024/2025 ski season, our pass alliances include Telluride Ski Resort in Colorado, Hakuba Valley and Rusutsu Resort in Japan, Resorts of the Canadian Rockies in Canada, Les 3 Vallées in France, Disentis Ski Area and Verbier 4 Vallées in Switzerland, Skirama Dolomiti in Italy and Ski Arlberg in Austria. Our pass program drives strong customer loyalty; mitigates exposure to more weather sensitive guests; generates additional ancillary spending; and provides cash flow in advance of winter season operations. In addition, our pass program attracts new guests to our Resorts. All of our pass products, including the Epic Pass and Epic Day Pass, are predominately sold prior to the start of the ski season. Pass product revenue, although primarily collected prior to the ski season, is recognized in our Consolidated Statements of Operations throughout the ski season on a straight-line basis using the number of skiable days of the season-to-date period relative to the total estimated number of skiable days of the season.

Lift revenue consists of pass product lift revenue (“pass revenue”) and non-pass product lift revenue (“non-pass revenue”). Approximately 65%, 61% and 61% of total lift revenue was derived from pass revenue for Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively.

The cost structure of our mountain resort operations has a significant fixed component with variable expenses including, but not limited to, land use permit or lease fees, credit card fees, retail/rental cost of sales and labor, ski school labor and expenses associated with our dining operations; as such, profit margins can fluctuate greatly based on the level of revenues.

Lodging Segment

Operations within the Lodging segment include: (i) ownership/management of a group of luxury hotels through the RockResorts brand proximate to our Colorado and Utah mountain resorts; (ii) ownership/management of non-RockResorts branded hotels and condominiums proximate to our North American Resorts; (iii) National Park Service (“NPS”) concessioner properties, including the Grand Teton Lodge Company (“GTLC”); (iv) a Colorado resort ground transportation company; and (v) mountain resort golf courses.

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The performance of our lodging properties (including managed condominium rooms) proximate to our Resorts, and our Colorado resort ground transportation company, are closely aligned with the performance of the Mountain segment and generally experience similar seasonal trends, particularly with respect to visitation by Destination guests. Revenues from such properties represented approximately 68%, 71% and 73% of Lodging segment net revenue (excluding Lodging segment revenue associated with the reimbursement of payroll costs) for Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively. Management primarily focuses on Lodging net revenue excluding payroll cost reimbursements and Lodging operating expense excluding reimbursed payroll costs (which are not measures of financial performance under GAAP) as the reimbursements are made based upon the costs incurred with no added margin and as such, the revenue and corresponding expense do not affect our Lodging Reported EBITDA, which we use to evaluate Lodging segment performance. Revenue of the Lodging segment during our first and fourth fiscal quarters is generated primarily by the operations of our NPS concessioner properties (as their peak operating season generally occurs during the months of June to October), as well as golf operations and seasonally low operations from our other owned and managed properties and businesses.

Real Estate Segment

The principal activities of our Real Estate segment include the sale of land parcels to third-party developers and planning for future real estate development projects, including zoning and acquisition of applicable permits. We continue undertaking preliminary planning and design work on future projects and are pursuing opportunities with third-party developers rather than undertaking our own significant vertical development projects. Real estate development projects by third-party developers most often result in the creation of certain resort assets that provide additional benefit to the Mountain segment. We believe that, due to our low carrying cost of real estate land investments, we are well situated to promote future projects by third-party developers while limiting our financial risk. Our revenue from the Real Estate segment and associated expense can fluctuate significantly based upon the timing of closings and the type of real estate being sold, causing volatility in the Real Estate segment’s operating results from period to period.

Recent Trends, Risks and Uncertainties

We have identified the following important factors (as well as risks and uncertainties associated with such factors) that could impact our future financial performance or condition:

•Our overall results for the year highlight the stability and resilience of our advance commitment strategy. Skier visitation declined 9.5% compared to the prior year, driven by unfavorable conditions across our resorts in North America and Australia, combined with the impact of broader industry normalization post-COVID following record visitation in North America during the 2022/2023 ski season. In North America, snowfall across our western resorts was down 28% from the prior year and our Eastern U.S. resorts (comprising the Midwest, Mid-Atlantic and Northeast) experienced limited natural snow and variable temperatures. Despite industry normalization and challenging conditions, Resort Reported EBITDA, excluding the impact of the Crans-Montana acquisition, remained consistent with prior year results. Performance was supported by strong growth in ancillary spending per visit across ski school, dining, and rental businesses at our resorts, and by strong delivery of the guest experience and cost discipline across our operations.

•Overall weather conditions, including the timing and amount of snowfall, can have an impact on Mountain and Lodging revenue, particularly with regard to skier visits and the duration and frequency of guest visitation. To help mitigate this impact, we sell a variety of pass products prior to the beginning of the ski season, which results in a more stabilized stream of lift revenue. Additionally, our pass products provide a compelling value proposition to our guests, which in turn create a guest commitment predominately prior to the start of the ski season. In March 2024, we began our season pass sales program for the 2024/2025 North American ski season. Pass product sales through September 20, 2024 for the upcoming 2024/2025 North American ski season decreased approximately 3% in units and increased approximately 3% in sales dollars as compared to the prior year period through September 22, 2023. Pass product sales are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.74 between the Canadian dollar and U.S. dollar in both periods for Whistler Blackcomb pass sales. We cannot predict if these trends will continue through the 2024 North American pass sales campaign or the overall impact that pass sales will have on lift revenue for the 2024/2025 North American ski season.

•The economies in the countries in which we operate and from which we attract our guests may be impacted by economic challenges associated with elevated inflation, prolonged elevated interest rates, geopolitical conflicts, political uncertainty and financial institution disruptions and/or fluctuating commodity prices that could adversely impact our business, including decreased guest spending or visitation or increased costs of operations. Skiing, travel and tourism are discretionary recreational activities that can entail a relatively high cost of participation. As a result, economic downturns and other negative impacts to consumer discretionary spending may have a pronounced impact on visitation to our

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Resorts. We cannot predict the extent to which we may be impacted by such potential economic challenges, whether in North America or globally.

•As of July 31, 2024, we had $322.8 million of cash and cash equivalents, as well as $407.9 million available under the revolver component of the Vail Holdings Credit Agreement, which represents the total commitment of $500.0 million less certain letters of credit outstanding of $92.1 million. Additionally, we have a credit facility which supports the liquidity needs of Whistler Blackcomb (the “Whistler Credit Agreement”). As of July 31, 2024, we had C$296.6 million ($214.8 million) available under the revolver component of the Whistler Credit Agreement which represents the total commitment of C$300.0 million ($217.3 million) less letters of credit outstanding of C$3.4 million ($2.5 million). We believe that our existing cash and cash equivalents, availability under our credit agreements and the continued positive cash flow from operating activities of our Mountain and Lodging segments less resort capital expenditures will continue to provide us with sufficient liquidity to fund our operations.

•On May 2, 2024, we acquired Crans-Montana Mountain Resort (“Crans-Montana”) in Switzerland from CPI Property Group for a cash purchase price of CHF 97.2 million ($106.8 million), after adjustments for certain agreed-upon items. We acquired (i) an 84% ownership stake in Remontées Mécaniques Crans Montana Aminona SA, which controls and operates all of the lifts and supporting mountain operations, including four retail and rental locations; (ii) 100% ownership of SportLife AG, which operates one of the ski schools located at the resort; and (iii) 100% ownership of 11 restaurants located on and around the mountain. The acquisition was funded with cash on hand. We plan to include unlimited and unrestricted access to Crans-Montana on the Epic Pass for the 2024/2025 ski season, as well as provide access on other pass products. We cannot predict the ultimate impact the acquisition of Crans-Montana will have on our future results of operations.

Results of Operations

Summary

Shown below is a summary of operating results for Fiscal 2024, Fiscal 2023 and Fiscal 2022 (in thousands):

A discussion of segment results, including reconciliations of net income attributable to Vail Resorts, Inc. to Total Reported EBITDA, and other items can be found below. The consolidated results of operations, including any consolidated financial metrics pertaining thereto, include the operations of Crans-Montana (acquired May 2, 2024), Andermatt-Sedrun (acquired August 3, 2022) and Seven Springs Mountain Resort, Hidden Valley Resort and Laurel Mountain Ski Area in Pennsylvania (collectively, the “Seven Springs Resorts,” acquired December 31, 2021) prospectively from their respective dates of acquisition.

The sections titled “Fiscal 2024 compared to Fiscal 2023” in each of the Mountain and Lodging segment discussions below provide comparisons of financial and operating performance for Fiscal 2024 to Fiscal 2023, unless otherwise noted. Discussion of our financial results for Fiscal 2023 compared to Fiscal 2022 can be found in our Annual Report on Form 10-K for Fiscal 2023, which was filed on September 28, 2023.

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Mountain Segment

Mountain segment operating results for Fiscal 2024, Fiscal 2023 and Fiscal 2022 are presented by category as follows (in thousands, except effective ticket price (“ETP)):

Mountain Reported EBITDA includes $23.2 million, $21.2 million and $20.9 million of stock-based compensation expense for Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively.

Fiscal 2024 compared to Fiscal 2023

Mountain Reported EBITDA decreased $20.5 million, or 2.5%. The decrease was primarily driven by (i) challenging conditions at our North American resorts for a large portion of the 2023/2024 ski season compared to the prior year, as well as broader industry normalization post-COVID following record visitation in North America during the 2022/2023 ski season, which led to a decline in both Local and Destination skier visitation and decreases in non-pass revenue and retail/rental revenue; (ii) our Australian operations, which experienced weather-related challenges that impacted terrain during the 2023 and 2024 Australian ski seasons, compared to record visitation and favorable snow conditions during the 2022 ski season; and (iii) increases in general and administrative expenses, property tax expense and repairs and maintenance expense, each including the impact of inflation. These decreases were partially offset by (i) an increase in pass revenue, driven by an increase in pass product sales for the 2023/2024 North American ski season compared to the prior year; (ii) strong growth in spending per visit in our ski school and dining businesses compared to the prior year; (iii) decreased labor and labor-related benefits due to disciplined cost management in response to decreased skier visits; and (iv) other decreases in variable expenses. Mountain segment results also include $8.0 million and $3.1 million of acquisition and integration related expenses for Fiscal 2024 and Fiscal 2023, respectively.

Lift revenue increased $21.9 million, or 1.5%, primarily due to an increase in pass revenue of 9.4%, which was primarily driven by an increase in pass product sales for the 2023/2024 North American ski season compared to the prior year, partially offset by a decrease in non-pass revenue of 10.7%, primarily driven by challenging conditions at our North American resorts for a large portion of the season compared to the prior year, as well as broader industry normalization post-COVID following record visitation in North America during the 2022/2023 ski season, and a decrease in non-pass revenue at our Australian resorts as a result of decreased visitation from weather-related challenges that impacted terrain during the 2023 and 2024 Australian ski seasons, compared to record visitation and favorable snow conditions in the 2022 Australian ski season. The decrease in non-pass revenue was partially offset by an increase in non-pass ETP of 11.2%.

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Ski school revenue increased $17.3 million, or 6.0%, and dining revenue increased $2.9 million, or 1.3%, both primarily as a result of an increase in guest spending per visit at our North American resorts. Retail/rental revenue decreased $44.3 million, or 12.3%, for which retail sales decreased $29.2 million, or 13.8%, and rental sales decreased $15.2 million, or 10.1%. The decrease in both retail and rental revenue was primarily driven by a decrease in skier visitation of 9.5%, which impacted sales at our on-mountain retail outlets in North America, as well as broader industry-wide customer spending trends and our exit of certain leased store operations which we operated in the prior year, which resulted in a revenue reduction of approximately $18.2 million.

Other revenue mainly consists of summer revenues, other mountain activities revenue, employee housing revenue, guest services revenue, commercial leasing revenue, marketing and internet advertising revenue, private club revenue (which includes both club dues and amortization of initiation fees), municipal services revenue and other recreation activity revenue. Other revenue also includes Australian resort lodging and transportation revenue. Other revenue increased $5.7 million, or 2.3%, primarily driven by an increase in guest spending per visit at our North American resorts.

Operating expense increased $24.4 million, or 1.4%, which was primarily attributable to an increase in general and administrative expenses, property tax expense, and repairs and maintenance expense, partially offset by reduced labor hours at our North American Resorts in the current year as a result of challenging weather conditions that existed for a large portion of the season, which impacted our ability to operate at full capacity, as well as disciplined cost management. Operating expense includes $8.0 million and $3.1 million of acquisition and integration related expenses for Fiscal 2024 and Fiscal 2023, respectively.

Labor and labor-related benefits decreased 1.8%, primarily attributable to reduced labor hours at our North American Resorts in the current year as a result of challenging weather conditions that existed for a large portion of the season, which impacted our ability to operate at full capacity, as well as disciplined cost management. Retail cost of sales decreased 9.8%, compared to a decrease in retail sales of 13.8%, reflecting decreased margins on retail products driven by higher sales of discounted inventory. Resort related fees increased 5.1% primarily as a result of an increase in revenues on which those fees are based. General and administrative expense increased 7.6%, primarily due to an increase in allocated corporate overhead costs across nearly all corporate functions (which includes the incremental impact of our prior year investments in employee wages, which went into effect in October 2022, and the impact of updated allocations of general and administrative expenses between segments which offsets primarily with decreases in the Lodging segment). Other expense increased 4.5%, primarily due to increased property taxes ($5.0 million), acquisition and integration related expenses ($4.9 million), repairs and maintenance expense ($4.6 million), professional services expense ($3.3 million) and utilities expense ($2.5 million), including the impact of inflation, partially offset by decreased dining cost of sales ($3.8 million) and fuel expenses ($3.4 million).

Mountain equity investment income, net primarily includes our share of income from the operations of a real estate brokerage company.

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Lodging Segment

Lodging segment operating results for Fiscal 2024, Fiscal 2023 and Fiscal 2022 are presented by category as follows (in thousands, except average daily rate (“ADR”) and revenue per available room (“RevPAR”)):

Lodging Reported EBITDA includes $3.3 million, $4.0 million and $3.7 million of stock-based compensation expense for Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively.

Fiscal 2024 compared to Fiscal 2023

Lodging Reported EBITDA increased $10.8 million, or 87.6%, driven by a decrease in labor and labor-related benefits primarily associated with strong cost management and lower staffing required to support a reduced inventory of managed condominium rooms, as well as a decrease in general and administrative expense, partially offset by a decrease in revenues primarily due to a reduction in our inventory of available managed condominium rooms proximate to our mountain resorts.

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Revenue from owned hotel rooms increased $3.9 million, or 4.8%, primarily due to an increase in revenue at GTLC as a result of improved visitation which was assisted by favorable weather conditions, and which enabled increased room pricing for owned hotel rooms and resulted in higher ADR. Revenue from managed condominium rooms decreased $10.6 million, or 10.9% primarily due to a reduction in our inventory of available managed condominium rooms proximate to our mountain resorts, as well as decreased demand, including the impact of decreased skier visitation driven by challenging weather conditions at our North American resorts for a large portion of the season compared to the prior year.

Operating expense (excluding reimbursed payroll costs) decreased 4.5%. Labor and labor-related benefits decreased 6.1%, primarily associated with strong cost management and lower staffing required to support a reduced inventory of managed condominium rooms. General and administrative expense decreased 6.8% compared to the prior year, primarily due to a decrease in allocated corporate overhead costs, including the impact of updated allocations of general and administrative expenses between segments which offsets primarily with increases in the Mountain segment.

Revenue from payroll cost reimbursement and the corresponding reimbursed payroll costs relate to payroll costs at managed hotel properties where we are the employer and all payroll costs are reimbursed by the owners of the properties under contractual arrangements. Since the reimbursements are made based upon the costs incurred with no added margin, the revenue and corresponding expense have no effect on our Lodging Reported EBITDA.

Real Estate Segment

Our Real Estate net revenue is primarily determined by the timing of closings and the mix of real estate sold in any given period. Different types of projects have different revenue and profit margins; therefore, as the real estate inventory mix changes, it can greatly impact Real Estate segment net revenue, operating expense, gain or loss on sale of real property and Real Estate Reported EBITDA.

Real Estate segment operating results for Fiscal 2024, Fiscal 2023 and Fiscal 2022 are presented by category as follows (in thousands):

Fiscal 2024

During Fiscal 2024, we closed on the sale of a land parcel in Keystone, CO for $4.2 million, which was recorded within Real Estate net revenue, with a corresponding cost of sale of $3.6 million. Additionally, we recorded a gain on sale of real property for $6.3 million related to a land parcel sale in Beaver Creek, CO, which closed for proceeds of $6.5 million.

Other operating expense of $5.9 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs.

Fiscal 2023

During Fiscal 2023, we closed on the sale of a land parcel in Keystone for $7.5 million, which was recorded within Real Estate net revenue, with a corresponding cost of sale (including sales commission) of $5.1 million.

Other operating expense of $5.5 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs.

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Other Items

In addition to segment operating results, the following items contributed to our overall financial position and results of operations (in thousands).

Depreciation and amortization. Depreciation and amortization expense for Fiscal 2024 increased $8.0 million compared to the prior year, primarily due to depreciation expense recorded for capital projects recently completed at our Resorts and assets acquired in the acquisition of Crans-Montana ($3.4 million).

Interest expense, net. Interest expense, net for Fiscal 2024 increased $8.8 million compared to the prior year, primarily due to an increase in variable interest rates associated with the unhedged portion of our term loan borrowings under the Vail Holdings Credit Agreement.

Investment income and other, net. Investment income and other, net for Fiscal 2024 decreased $5.2 million compared to Fiscal 2023, primarily as a result of decreased average balances of interest-earning investments, as excess cash balances were utilized during Fiscal 2024 for share repurchases and the cash purchase price for the acquisition of Crans-Montana.

Provision for income taxes. The effective tax rate for Fiscal 2024 was 28.6%, compared to 23.7% for Fiscal 2023. The increase in the effective tax rate was primarily due to an increase in net unfavorable discrete items impacting the tax provision in the current period, including a decrease in the impact of the lapse of the statute of limitations for an uncertain tax position ($5.9 million) and a nonrecurring foreign partnership basis adjustment ($4.7 million).

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Reconciliation of Non-GAAP Measures

The following table reconciles net income attributable to Vail Resorts, Inc. to Total Reported EBITDA for Fiscal 2024, Fiscal 2023 and Fiscal 2022 (in thousands):

The following table reconciles long-term debt, net to Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) (in thousands):

Liquidity and Capital Resources

Changes in significant sources and uses of cash for Fiscal 2024, Fiscal 2023 and Fiscal 2022 are presented by categories as follows (in thousands):

Historically, we have lower cash available at the end of each first and fourth fiscal quarter-ends as compared to our second and third fiscal quarter-ends, primarily due to the seasonality of our Mountain segment operations.

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Fiscal 2024 compared to Fiscal 2023

We generated $586.8 million of cash from operating activities during Fiscal 2024, a decrease of $52.8 million compared to $639.6 million generated during Fiscal 2023. The decrease in operating cash flows was primarily a result of (i) an increase in income tax payments of approximately $35.0 million, driven by overpayments, net operating loss carryforwards and other deductions in the prior year which offset our estimated payments during Fiscal 2023; (ii) an increase in cash interest payments ($6.1 million); and (iii) a decrease in investment income collected ($5.2 million).

Cash used in investing activities for Fiscal 2024 decreased by $32.1 million, primarily due to (i) a decrease in capital expenditures of approximately $103.7 million as compared to the prior year, driven by our significant investments in lift upgrades impacting Fiscal 2023; (ii) prior year short-term bank deposit investments of $86.8 million, which were invested in deposits with maturity dates of more than three months at the date of purchase and were therefore not reflected as cash equivalents as of July 31, 2023, of which $57.6 million and $38.0 million matured during the Fiscal 2024 and Fiscal 2023, respectively; and (iii) $38.6 million of cash paid to Andermatt Swiss Alps AG upon closing the acquisition of Andermatt-Sedrun, net of cash acquired, on August 3, 2022. These decreases in cash used in investing activities were partially offset by the prior year return of a cash deposit of approximately $114.5 million (CHF 110.0 million) originally made in July 2022 in conjunction with the acquisition of Andermatt-Sedrun, which closed on August 3, 2022. The cash deposit was invested into Andermatt-Sedrun, which is included in our consolidated financial statements subsequent to the acquisition being completed. Additionally, the decreases were also partially offset by the cash purchase price of $94.4 million, net of cash acquired of $12.4 million, related to the acquisition of Crans-Montana on May 2, 2024.

Cash used in financing activities decreased by $340.9 million during Fiscal 2024 compared to Fiscal 2023, primarily due to a decrease in repurchases of common stock of $350.0 million.

Significant Sources of Cash

We had $322.8 million of cash and cash equivalents as of July 31, 2024, compared to $563.0 million as of July 31, 2023, and the decrease was primarily attributable to the cash purchase price associated with the acquisition of Crans-Montana, net of cash acquired, and share repurchases completed during Fiscal 2024. We currently anticipate that our Mountain and Lodging segment operating results will continue to provide a significant source of future operating cash flows (primarily generated in our second and third fiscal quarters).

In addition to our $322.8 million of cash and cash equivalents at July 31, 2024, we had $407.9 million available under the revolver component of our Vail Holdings Credit Agreement as of July 31, 2024 (which represents the total commitment of $500.0 million less outstanding letters of credit of $92.1 million). Additionally, we had C$296.6 million ($214.8 million) available under the revolver component of our Whistler Credit Agreement (which represents the total commitment of C$300.0 million ($217.3 million) less certain outstanding letters of credit of C$3.4 million ($2.5 million)). We expect that our liquidity needs in the near term will be met by continued use of our existing cash and cash equivalents, operating cash flows and borrowings under both the Vail Holdings Credit Agreement and Whistler Credit Agreement, if needed. Under the Vail Holdings Credit Agreement and the Whistler Credit Agreement, any new borrowings would be priced at the Secured Overnight Financing Rate plus 1.60% and Canadian Overnight Repo Rate Average plus 1.75%, respectively.

Significant Uses of Cash

Capital Expenditures

We have historically invested significant amounts of cash in capital expenditures for our resort operations, and we expect to continue to do so, subject to operating performance particularly as it relates to discretionary projects. Currently planned capital expenditures primarily include investments that will allow us to maintain our high-quality standards for the guest experience, as well as certain incremental discretionary improvements at our Resorts, throughout our owned hotels and in technology that can impact the full network. We evaluate discretionary capital improvements based on an expected level of return on investment.

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We currently anticipate that we will spend approximately $189 million to $194 million on resort capital expenditures during calendar year 2024, excluding $13 million of incremental capital investments in premium fleet and fulfillment infrastructure to support the official launch of My Epic Gear for the 2024/2025 winter season at 12 destination mountain resorts and regional ski areas across North America, $8 million of growth capital investments at Andermatt-Sedrun, $1 million of reimbursable capital, and investments at Crans-Montana, which we expect will include $3 million of maintenance capital expenditures and $2 million associated with integration activities at Crans-Montana. Including My Epic Gear premium fleet, fulfillment infrastructure capital, one-time investments, and investments at Crans-Montana, our total capital plan for calendar year 2024 is expected to be approximately $216 million to $221 million. Included in these estimated capital expenditures are approximately $117 million to $122 million of maintenance capital expenditures (excluding Crans-Montana), which are necessary to maintain appearance and level of service appropriate to our resorts. We currently plan to utilize cash on hand, borrowings available under our credit agreements and/or cash flow generated from future operations to provide the cash necessary to complete our capital plans.

Approximately $81 million was spent for capital expenditures in calendar year 2024 as of July 31, 2024, leaving approximately $135 million to $140 million to spend in the remainder of calendar year 2024.

Acquisition of Crans-Montana

On May 2, 2024, we acquired Crans-Montana for a purchase price of CHF 97.2 million ($106.8 million), after adjustments for certain agreed-upon items, which was funded with cash on hand.

Debt

As of July 31, 2024, principal payments on $2.0 billion of our $2.8 billion in long-term debt outstanding as of July 31, 2024 are not due until fiscal year 2029 and beyond. As of both July 31, 2024 and 2023, total long-term debt, net (including long-term debt due within one year) was $2.8 billion. Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) was $2.5 billion and $2.3 billion as of July 31, 2024 and 2023, respectively.

As of July 31, 2024, the Vail Holdings Credit Agreement provides for (i) a revolving loan facility in an aggregate principal amount of $500.0 million and (ii) a term loan facility of $959.8 million, and the Whistler Credit Agreement provides for a revolving loan facility in an aggregate principal amount of C$300.0 million. We expect that our liquidity needs in the near term will be met by continued use of our existing cash and cash equivalents, operating cash flows and borrowings under the Vail Holdings Credit Agreement and the Whistler Credit Agreement, if needed.

Our debt service requirements can be impacted by changing interest rates as we had approximately $0.6 billion of net variable-rate debt outstanding as of July 31, 2024 (net of $400.0 million of interest rate swap agreements which hedged the variable interest rate component of the Vail Holdings Credit Agreement, and which expired on September 23, 2024). A 100-basis point change in our borrowing rates would cause our annual interest payments on our net variable-rate debt to change by approximately $6.1 million based on the rates in effect as of July 31, 2024, which does not include the impact of the expiration of the interest rate swaps. Additionally, the annual payments associated with the financing of the Canyons Resort transaction increase by the greater of CPI less 1%, or 2%. The fluctuation in our debt service requirements, in addition to interest rate and inflation changes, may be impacted by future borrowings under our credit agreements or other alternative financing arrangements we may enter into. Our long term liquidity needs depend upon operating results that impact the borrowing capacity under our credit agreements. We can respond to liquidity impacts of changes in the business and economic environment by managing our capital expenditures, variable operating expenses, the timing of new real estate development activity and the payment of cash dividends on our common stock.

On May 8, 2024, we completed our offering of $600 million aggregate principal amount of 6.50% senior notes due 2032 at par (the “Notes”). The Notes are unsecured senior obligations of the Company and will be guaranteed by certain of our domestic subsidiaries (other than certain excluded subsidiaries). The net proceeds, together with cash on hand, funded the redemption of all $600 million of our outstanding 6.25% Senior Notes due 2025 at a redemption price equal to 100% of their principal amount and all related fees and expenses. We will pay interest on the Notes on May 15 and November 15 of each year commencing on November 15, 2024. The Notes will mature on May 15, 2032. The Notes are redeemable, in whole or in part, at any time on or after May 15, 2027 at the redemption prices specified in a 2024 Indenture dated as of May 8, 2024 (the “2024 Indenture”) plus accrued and unpaid interest. Prior to May 15, 2027, we may redeem some or all of the Notes at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, plus a “make-whole” premium as specified in the 2024 Indenture. In addition, prior to May 15, 2027, we may redeem up to 40% of the aggregate principal amount of the Notes with an amount not to exceed the net cash proceeds from certain equity offerings at the redemption price of 106.50% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. The Notes are senior unsecured obligations of the Company and rank equally in right of payment with existing and future senior indebtedness of the Company and the guarantors (as defined in the 2024 Indenture).

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The 2024 Indenture contains covenants that, among other things, restrict the ability of the Company and the guarantors to incur liens on assets; merge or consolidate with another company or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company’s assets or engage in Sale and Leaseback Transactions (as defined in the 2024 Indenture). The 2024 Indenture does not contain any financial maintenance covenants. Certain of the covenants will not apply to the Notes so long as the Notes have investment grade ratings from two specified rating agencies and no event of default has occurred and is continuing under the 2024 Indenture. The 2024 Indenture includes customary events of default, including failure to make payment, failure to comply with the obligations set forth in the 2024 Indenture, certain defaults on certain other indebtedness, certain events of bankruptcy, insolvency or reorganization, and invalidity of the guarantees of the Notes issued pursuant to the 2024 Indenture.

Material Cash Requirements

As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as debt agreements and construction agreements in conjunction with our resort capital expenditures. Debt obligations, which totaled $2.8 billion as of July 31, 2024, are recognized as liabilities in our Consolidated Balance Sheet. Obligations under construction contracts and other purchase commitments are not recognized as liabilities in our Consolidated Balance Sheet until services and/or goods are received. A summary of our material cash obligations as of July 31, 2024 (excluding obligations presented elsewhere, including Notes to Consolidated Financial Statements) is presented below (in thousands):

(1) Long-term debt includes principal payments, fixed-rate interest payments (including payments that are required under interest rate swaps) and estimated variable interest payments utilizing interest rates in effect at July 31, 2024, and assumes all debt outstanding as of July 31, 2024 will be held to maturity. The future annual interest obligations noted herein are estimated only in relation to debt outstanding as of July 31, 2024, and do not reflect interest obligations on potential future debt or refinancing.

Long-term debt also includes $12.8 million of proceeds resulting from real estate transactions accounted for as financing arrangements, which are expected to be recognized on the Company’s Statements of Operations in future years as a result of the anticipated resolution of continuing involvement, with no associated cash outflow.

(2) Purchase obligations and other primarily includes amounts which are classified as trade payables ($141.2 million), accrued payroll and benefits ($104.2 million), accrued fees and assessments ($33.9 million), contingent consideration liability ($104.2 million) and accrued taxes (including taxes for uncertain tax positions) ($112.5 million) on our Consolidated Balance Sheet as of July 31, 2024. These amounts also include other commitments for goods and services not yet received, including construction contracts and minimum commitments under season pass alliance agreements, which are not included on our Consolidated Balance Sheet as of July 31, 2024 in accordance with GAAP.

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Share Repurchase Program

Our share repurchase program is conducted under authorizations made from time to time by our Board of Directors. On March 9, 2006, our Board of Directors initially authorized the repurchase of up to 3,000,000 shares of Vail Shares and later authorized additional repurchases of up to 3,000,000 additional Vail Shares (July 16, 2008), 1,500,000 Vail Shares (December 4, 2015), and 2,500,000 Vail Shares (March 7, 2023), for a total authorization to repurchase shares of up to 10,000,000 Vail Shares. During Fiscal 2024, we repurchased 721,378 shares (at an average price of $207.93) for a total cost of approximately $150.0 million, excluding accrued excise tax. Since the inception of this stock repurchase program through July 31, 2024, we have repurchased 9,369,680 Vail Shares at a cost of approximately $1,129.4 million. As of July 31, 2024, 630,320 Vail Shares remained available to repurchase under the existing repurchase authorization. On September 25, 2024, the Company’s Board of Directors approved an increase in the number of shares authorized to be repurchased under the share repurchase program by an additional 1,100,000 Vail Shares. As a result, 1,730,320 Vail Shares are available to repurchase under the share repurchase program. Vail Shares purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of shares under our share award plan. Repurchases under the program may be made from time to time at prevailing prices as permitted by applicable laws, and subject to market conditions and other factors. The timing, as well as the number of Vail Shares that may be repurchased under the program, will depend on several factors, including our future financial performance, our available cash resources and competing uses for cash that may arise in the future, the restrictions in our Vail Holdings Credit Agreement, prevailing prices of Vail Shares and the number of Vail Shares that become available for sale at prices that we believe are attractive. The share repurchase program has no expiration date.

Dividend Payments

During Fiscal 2024, we paid cash dividends of $8.56 per share ($323.7 million). During Fiscal 2023, we paid cash dividends of $7.94 per share ($314.4 million, including cash dividends paid to Exchangeco shareholders). On September 25, 2024, our Board of Directors approved a cash dividend of $2.22 per share payable on October 24, 2024 to stockholders of record as of October 8, 2024. We expect to fund the dividend with available cash on hand. The amount, if any, of dividends to be paid in the future will depend on our available cash on hand, anticipated cash needs, overall financial condition, restrictions contained in our Vail Holdings Credit Agreement, future prospects for earnings and cash flows, as well as other factors considered relevant by our Board of Directors.

Covenants and Limitations

We must abide by certain restrictive financial covenants under our credit agreements. The most restrictive of those covenants include the following: for the Vail Holdings Credit Agreement, Net Funded Debt to Adjusted EBITDA ratio, Secured Net Funded Debt to Adjusted EBITDA ratio and the Interest Coverage ratio (each as defined in the Vail Holdings Credit Agreement); for the Whistler Credit Agreement, Consolidated Total Leverage Ratio and Consolidated Interest Coverage Ratio (each as defined in the Whistler Credit Agreement); and for the EPR Secured Notes, Maximum Leverage Ratio and Consolidated Fixed Charge Ratio (each as defined in the EPR Agreements). Additionally, the New Regional Policy loan between Andermatt-Sedrun and the Canton of Uri and Canton of Graubünden dated June 24, 2016 includes restrictive covenants requiring certain minimum financial results (as defined in the agreement). In addition, our financing arrangements limit our ability to make certain restricted payments, pay dividends on or redeem or repurchase stock, make certain investments, make certain affiliate transfers and may limit our ability to enter into certain mergers, consolidations or sales of assets and incur certain indebtedness. Our borrowing availability under the Vail Holdings Credit Agreement is primarily determined by the Net Funded Debt to Adjusted EBITDA ratio, which is based on our operating performance, as defined in the Vail Holdings Credit Agreement. Our borrowing availability under the Whistler Credit Agreement is primarily determined by the Consolidated Total Leverage Ratio, which is based on the operating performance of the loan parties, as defined in the Whistler Credit Agreement.

We were in compliance with all restrictive financial covenants in our debt instruments as of July 31, 2024. We expect that we will continue to meet all applicable financial maintenance covenants in effect in our credit agreements throughout the year ending July 31, 2025; however, there can be no assurance that we will continue to meet such financial covenants. If such covenants are not met, we would be required to seek a waiver or amendment from the banks participating in our credit agreements. There can be no assurance that such waiver or amendment would be granted, which could have a material adverse impact on our liquidity.

Off Balance Sheet Arrangements

We do not have off balance sheet transactions that are expected to have a material effect on our financial condition, revenue, expenses, results of operations, liquidity, capital expenditures or capital resources.

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Critical Accounting Policies

The preparation of Consolidated Financial Statements in conformity with GAAP requires us to select accounting policies and to make judgments and estimates affecting the application of those accounting policies. In applying our accounting policies, different business conditions or the use of different assumptions may result in materially different amounts reported in the Consolidated Financial Statements.

We have identified the most critical accounting policies which were determined by considering accounting policies that involve the most complex or subjective decisions or assessments. We also have other policies considered key accounting policies; however, these policies do not meet the definition of critical accounting policies because they do not generally require us to make estimates or judgments that are complex or subjective. We have reviewed these critical accounting policies and related disclosures with our Audit Committee of the Board of Directors.

Goodwill and Intangible Assets

Description

The carrying value of goodwill and indefinite-lived intangible assets are evaluated for possible impairment on an annual basis or between annual tests if an event occurs or circumstances change that would more likely than not reduce the estimated fair value of a reporting unit or indefinite-lived intangible asset below its carrying value. Definite-lived intangible assets are evaluated for impairment only when there is evidence that events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

Judgments and Uncertainties

Application of the goodwill and indefinite-lived intangible asset impairment test requires judgment, including the identification of reporting units, determination of the type of impairment test that should be performed, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and determination of the estimated fair value of reporting units and indefinite-lived intangible assets. We have the option to first perform a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset exceeds the carrying amount. If it is determined, based on qualitative factors, that the fair value of the reporting unit or indefinite-lived intangible asset is more likely than not less than its carrying amount, or if significant changes to macro-economic factors related to the reporting unit or intangible asset have occurred that could materially impact the estimated fair value since the previous quantitative analysis was performed, a quantitative impairment test may be required. The quantitative test includes determination of the estimated fair value of our reporting units using a discounted cash flow analysis and determination of the estimated fair value of indefinite-lived intangible assets primarily using the income approach based upon estimated future revenue streams. These analyses require significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, available industry/market data (to the extent available), estimation of the long-term rate of growth for our business including expectations and assumptions regarding the impact of general economic conditions on our business, estimation of terminal value, determination of the respective weighted average cost of capital and market participant assumptions. Changes in these estimates and assumptions could materially affect the determination of estimated fair value and the amount of any potential impairment for each reporting unit or indefinite-lived intangible asset.

Effect if Actual Results Differ From Assumptions

Goodwill and indefinite-lived intangible assets are tested for impairment at least annually as of May 1. If the net carrying value of the reporting units or assets exceed their estimated fair value, an impairment will be recognized in an amount equal to that excess; otherwise, no impairment loss is recognized. During Fiscal 2024, we performed qualitative analyses of our reporting units and indefinite-lived intangible assets and determined that the estimated fair value of all material reporting units and indefinite-lived intangible assets exceeded their respective carrying values.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill or indefinite-lived asset impairment tests are accurate. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting units may include such items as: (1) prolonged adverse weather conditions resulting in a sustained decline in guest visitation; (2) a prolonged weakness in the general economic conditions in which guest visitation and spending is adversely impacted; and (3) volatility in the equity and debt markets which could result in a higher discount rate.

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While we believe that our estimates and judgments are reasonable and while historical quantitative tests concluded that the estimated fair values of our reporting units and indefinite-lived assets that are in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future. However, it is not possible at this time to determine if an impairment charge would result or if such a charge would be material. As of July 31, 2024, we had $1,678.0 million of goodwill and $252.2 million of indefinite-lived intangible assets recorded on our Consolidated Balance Sheet. There can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and indefinite-lived intangible asset impairment tests will prove to be an accurate prediction of the future.

Tax Contingencies

Description

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties relating to uncertain tax positions. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the largest tax benefit that is cumulatively greater than 50% likely of being reversed upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, interpretation of tax law, effectively settled issues under audit and new audit activity. A significant amount of time may pass before a particular matter, for which we may have established a reserve, is audited and fully resolved.

Judgments and Uncertainties

The estimates of our tax contingencies reserve contain uncertainty because management must use judgment to estimate the potential exposure associated with our various filing positions.

Effect if Actual Results Differ From Assumptions

We believe the estimates and judgments we have made related to tax contingencies are reasonable and we have adequate reserves for uncertain tax positions. Our reserves for uncertain tax positions, including any income tax related interest and penalties, are $57.1 million as of July 31, 2024. This reserve solely relates to the treatment of the Canyons lease payments obligation as payments of debt obligations and that the tax basis in Canyons goodwill is deductible. Actual results could differ and we may be exposed to increases or decreases in those reserves and tax provisions that could be material.

An unfavorable tax settlement could require the use of cash and could possibly result in increased tax expense and effective tax rate and/or adjustments to our deferred tax assets and deferred tax liabilities in the year of resolution. A favorable tax settlement could possibly result in a reduction in our tax expense, effective tax rate, income taxes payable, other long-term liabilities and/or adjustments to our deferred tax assets and deferred tax liabilities in the year of settlement or in future years.

Depreciable Lives of Assets

Description

Mountain and lodging operational assets, furniture and fixtures, computer equipment, software, vehicles and leasehold improvements are primarily depreciated using the straight-line method over the estimated useful life of the asset. Assets may become obsolete or require replacement before the end of their useful life in which the remaining book value would be written-off or we could incur costs to remove or dispose of assets no longer in use.

Judgments and Uncertainties

The estimates of our useful lives of the assets contain uncertainty because management must use judgment to estimate the useful life of the asset.

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Effect if Actual Results Differ From Assumptions

Although we believe the estimates and judgments discussed herein are reasonable, actual results could differ, and we may be exposed to increased expense related to depreciable assets disposed of, removed or taken out of service prior to its originally estimated useful life, which may be material. A 10% decrease in the estimated useful lives of depreciable assets would have increased depreciation expense by approximately $30.3 million for Fiscal 2024.

Business Combinations

Description

A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations in accordance with the guidance for business combinations and related literature. Accordingly, we allocate the purchase price of acquired businesses to the identifiable tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The difference between the purchase price and the estimated fair value of assets acquired and liabilities assumed is recorded as goodwill. In determining the estimated fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling and referenced market values (where available). Valuations are performed by management or independent valuation specialists under management’s supervision, where appropriate.

Judgments and Uncertainties

Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date, including our estimates for intangible assets, contractual obligations assumed and contingent consideration, where applicable. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to: determination of weighted average cost of capital, market participant assumptions, royalty rates, terminal multiples and estimates of future cash flows to be generated by the acquired assets. In addition to the estimates and assumptions applied to valuing intangible assets acquired, the determination of the estimated fair value of contingent consideration, including estimating the likelihood and timing of achieving the relevant thresholds for contingent consideration payments, requires the use of subjective judgments. We estimate the fair value of the Park City contingent consideration payments using an option pricing valuation model which incorporates, among other factors, projected achievement of specified financial performance measures, discount rates and volatility for the respective business.

Effect if Actual Results Differ From Assumptions

We believe that the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions that a marketplace participant would use. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments, which could be significant, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the estimated fair values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments would be recorded on our Consolidated Statements of Operations.

We recognize the fair value of contingent consideration, if any, at the date of acquisition as part of the consideration transferred to acquire a business. The liability associated with contingent consideration is remeasured to fair value at each reporting period subsequent to the date of acquisition taking into consideration changes in financial projections and long-term growth rates, among other factors, that may impact the timing and amount of contingent consideration payments until the term of the agreement has expired or the contingency is resolved. Increases in the fair value of contingent consideration are recorded as losses on our Consolidated Statements of Operations, while decreases in fair value are recorded as gains.

New Accounting Standards

Refer to the Summary of Significant Accounting Policies within the Notes to Consolidated Financial Statements for a discussion of new accounting standards.

Seasonality and Quarterly Results

Our mountain and lodging operations are seasonal in nature, with a typical peak operating season in North America and Europe generally beginning in mid-December and running through mid-April. In particular, revenue and profits for our North American and European mountain and most of our lodging operations are substantially lower and historically result in losses from late

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spring to late fall. Conversely, peak operating seasons for our NPS concessioner properties, our mountain resort golf courses and our Australian resorts’ ski season generally occur during the North American summer months, and these operations typically incur operating losses during the North American and European winter months. Revenue and profits generated by NPS concessioner properties’ summer operations, golf operations and Australian resorts’ ski operations are not sufficient to fully offset our off-season losses from our North American and European mountain and other lodging operations. During Fiscal 2024, approximately 82% of total combined Mountain and Lodging segment net revenue (excluding Lodging segment revenue associated with reimbursement of payroll costs) was earned during the second and third fiscal quarters. Therefore, the operating results for any three-month period are not necessarily indicative of the results that may be achieved for any subsequent quarter or for a full year (see Notes to Consolidated Financial Statements).

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and notes related thereto included in this Form 10-K. To the extent that the following MD&A contains statements which are not of a historical nature, such statements are forward-looking statements which involve risks and uncertainties. These risks include, but are not limited to, those discussed in Item 1A. “Risk Factors” in this Form 10-K. The following discussion and analysis should be read in conjunction with the Forward-Looking Statements section and Item 1A. “Risk Factors,” each included in this Form 10-K.

The MD&A includes discussion of financial performance within each of our three segments. We have chosen to specifically include segment Reported EBITDA (defined as segment net revenue less segment operating expense, plus segment equity investment income or loss, and for the Real Estate segment, plus gain or loss on sale of real property) in the following discussion because we consider this measurement to be a significant indication of our financial performance. We utilize segment Reported EBITDA in evaluating our performance and in allocating resources to our segments. Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) is included in the following discussion because we consider this measurement to be a significant indication of our available capital resources. We also believe that Net Debt is an important measurement as it is an indicator of our ability to obtain additional capital resources for our future cash needs. Resort Reported EBITDA (defined as the combination of segment Reported EBITDA of our Mountain and Lodging segments), Total Reported EBITDA (which is Resort Reported EBITDA plus segment Reported EBITDA from

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our Real Estate segment) and Net Debt are not measures of financial performance or liquidity defined under accounting principles generally accepted in the United States (“GAAP”). Refer to the end of the Results of Operations section for a reconciliation of net income attributable to Vail Resorts, Inc. to Total Reported EBITDA and Resort Reported EBITDA, and long-term debt, net to Net Debt.

Items excluded from Resort Reported EBITDA, Total Reported EBITDA and Net Debt are significant components in understanding and assessing financial performance or liquidity. Resort Reported EBITDA, Total Reported EBITDA and Net Debt should not be considered in isolation or as an alternative to, or substitute for, net income, net change in cash and cash equivalents or other financial statement data presented in the Consolidated Financial Statements as indicators of financial performance or liquidity. Because Resort Reported EBITDA, Total Reported EBITDA and Net Debt are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations, Resort Reported EBITDA, Total Reported EBITDA and Net Debt, as presented herein, may not be comparable to other similarly titled measures of other companies. In addition, our segment Reported EBITDA (i.e. Mountain, Lodging and Real Estate), the measure of segment profit or loss required to be disclosed in accordance with GAAP, may not be comparable to other similarly titled measures of other companies.

Overview

Our operations are grouped into three integrated and interdependent segments: Mountain, Lodging and Real Estate. We refer to “Resort” as the combination of the Mountain and Lodging segments. The Mountain, Lodging and Real Estate segments represented approximately 88%, 12% and 0%, respectively, of our net revenue for Fiscal 2023.

Mountain Segment

In the Mountain segment, the Company operates the following 41 destination mountain resorts and regional ski areas (collectively, “Resorts”):

*Denotes a destination mountain resort, which generally receives a meaningful portion of skier visits from long-distance travelers, as opposed to our regional ski areas, which tend to generate skier visits predominantly from their respective local markets.

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Additionally, we operate ancillary services, primarily including ski school, dining and retail/rental operations, and for our Australian ski areas, including lodging and transportation operations. Mountain segment revenue is seasonal, with the majority of revenue earned from our North American and European ski operations occurring in our second and third fiscal quarters and the majority of revenue earned from our Australian ski operations occurring in our first and fourth fiscal quarters. Our North American and European Resorts typically experience their peak operating season for the Mountain segment from mid-December through mid-April, and our Australian ski areas typically experience their peak operating season from June to early October. Our largest source of Mountain segment revenue comes from the sale of lift tickets (including pass products), which represented approximately 56%, 59% and 63% of Mountain segment net revenue for Fiscal 2023, the fiscal year ended July 31, 2022 (“Fiscal 2022”) and the fiscal year ended July 31, 2021 (“Fiscal 2021”), respectively.

Lift revenue is driven by volume and pricing. Pricing is impacted by absolute pricing, as well as both the demographic and geographic mix of guests, which impacts the price points at which various products are purchased. The demographic mix of guests that visit our North American Resorts is divided into two primary categories: (i) out-of-state and international (“Destination”) guests and (ii) in-state and local (“Local”) guests. The geographic mix depends on levels of visitation to our destination mountain resorts versus our regional ski areas. For the 2022/2023 North American ski season, Destination guests comprised approximately 57% of our North American destination mountain resort skier visits (excluding complimentary access), while Local guests comprised approximately 43% of our North American destination mountain resort skier visits (excluding complimentary access), which compares to 58% and 42%, respectively, for the 2021/2022 North American ski season and approximately 52% and 48%, respectively, for the 2020/2021 North American ski season. Skier visitation at our regional ski areas is largely comprised of Local guests. Destination guests generally purchase our higher-priced lift tickets (including pass products) and utilize more ancillary services such as ski school, dining and retail/rental, as well as lodging at or around our mountain resorts. Additionally, Destination guest visitation is less likely to be impacted by changes in the weather during the current season, but may be more impacted by adverse economic conditions, the global geopolitical climate, travel disruptions or weather conditions in the immediately preceding ski season. Local guests tend to be more value-oriented and weather-sensitive.

We offer a variety of pass products for all of our Resorts, marketed toward both Destination and Local guests. Our pass product offerings range from providing access to one or a combination of our Resorts for a certain number of days to our Epic Pass, which allows pass holders unlimited and unrestricted access to all of our Resorts. The Epic Day Pass is a customizable one to seven day pass product purchased in advance of the season, for those skiers and riders who expect to ski a certain number of days during the season, and which is available in three tiers of resort access offerings. Our pass products provide a compelling value proposition to our guests, which in turn assists us in developing a loyal base of customers who commit to ski at our Resorts generally in advance of the ski season and typically ski more days each season at our Resorts than those guests who do not buy pass products. Additionally, we enter into strategic long-term pass alliance agreements with third-party mountain resorts, which further increase the value proposition of our pass products. For the 2023/2024 ski season, our pass alliances include Telluride Ski Resort in Colorado, Hakuba Valley and Rusutsu Resort in Japan, Resorts of the Canadian Rockies in Canada, Les 3 Vallées in France, Disentis Ski Area and Verbier 4 Vallées in Switzerland, Skirama Dolomiti in Italy and Ski Arlberg in Austria. Our pass program drives strong customer loyalty, mitigates exposure to more weather sensitive guests, generates additional ancillary spending and provides cash flow in advance of winter season operations. In addition, our pass program attracts new guests to our Resorts. All of our pass products, including the Epic Pass and Epic Day Pass, are predominately sold prior to the start of the ski season. Pass product revenue, although primarily collected prior to the ski season, is recognized on the Company’s Consolidated Statements of Operations throughout the ski season on a straight-line basis using the skiable days of the season to date relative to the total estimated skiable days of the season.

Lift revenue consists of pass product lift revenue (“pass revenue”) and non-pass product lift revenue (“non-pass revenue”). Approximately 61% of total lift revenue was derived from pass revenue for each of Fiscal 2023, Fiscal 2022, and Fiscal 2021 (including the impact of the deferral of pass product revenue from Fiscal 2020 to Fiscal 2021 as a result of credits offered to 2019/2020 North American pass product holders who purchased 2020/2021 pass products).

The cost structure of our mountain resort operations has a significant fixed component with variable expenses including, but not limited to, land use permit or lease fees, credit card fees, retail/rental cost of sales and labor, ski school labor and expenses associated with dining operations; as such, profit margins can fluctuate greatly based on the level of revenues.

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Lodging Segment

Operations within the Lodging segment include: (i) ownership/management of a group of luxury hotels through the RockResorts brand proximate to our Colorado and Utah mountain resorts; (ii) ownership/management of non-RockResorts branded hotels and condominiums proximate to our North American Resorts; (iii) National Park Service (“NPS”) concessioner properties, including the Grand Teton Lodge Company (“GTLC”); (iv) a Colorado resort ground transportation company; and (v) mountain resort golf courses.

The performance of our lodging properties (including managed condominium units) proximate to our Resorts, and our Colorado resort ground transportation company, are closely aligned with the performance of the Mountain segment and generally experience similar seasonal trends, particularly with respect to visitation by Destination guests. Revenues from such properties represented approximately 71%, 73% and 67% of Lodging segment net revenue (excluding Lodging segment revenue associated with the reimbursement of payroll costs) for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. Management primarily focuses on Lodging net revenue excluding payroll cost reimbursements and Lodging operating expense excluding reimbursed payroll costs (which are not measures of financial performance under GAAP) as the reimbursements are made based upon the costs incurred with no added margin and as such, the revenue and corresponding expense do not affect our Lodging Reported EBITDA, which we use to evaluate Lodging segment performance. Revenue of the Lodging segment during our first and fourth fiscal quarters is generated primarily by the operations of our NPS concessioner properties (as their peak operating season generally occurs from mid-May through the end of September); mountain resort golf operations and seasonally lower volume from our other owned and managed properties and businesses.

Real Estate Segment

The principal activities of our Real Estate segment include the sale of land parcels to third-party developers and planning for future real estate development projects, including zoning and acquisition of applicable permits. We continue undertaking preliminary planning and design work on future projects and are pursuing opportunities with third-party developers rather than undertaking our own significant vertical development projects. Additionally, real estate development projects by third-party developers most often result in the creation of certain resort assets that provide additional benefit to the Mountain segment. We believe that, due to our low carrying cost of real estate land investments, we are well situated to promote future projects by third-party developers while limiting our financial risk. Our revenue from the Real Estate segment and associated expense can fluctuate significantly based upon the timing of closings and the type of real estate being sold, causing volatility in the Real Estate segment’s operating results from period to period.

Recent Trends, Risks and Uncertainties

We have identified the following important factors (as well as risks and uncertainties associated with such factors) that could impact our future financial performance or condition:

•The economies in the countries in which we operate and from which we attract our guests may be impacted by economic challenges associated with rising inflation, increasing interest rates, financial institution disruptions and/or fluctuating commodity prices that could adversely impact our business, including decreased guest spending or visitation or increased costs of operations. Skiing, travel and tourism are discretionary recreational activities that can entail a relatively high cost of participation. As a result, economic downturns and other negative impacts to consumer discretionary spending may have a pronounced impact on visitation to our Resorts. We cannot predict the extent to which we may be impacted by such potential economic challenges, whether in North America or globally.

•The timing and amount of snowfall can have an impact on Mountain and Lodging revenue, particularly with regard to skier visits and the duration and frequency of guest visitation. To help mitigate the impact of weather variability, we sell a variety of pass products prior to the beginning of the ski season, which results in a more stabilized stream of lift revenue. Additionally, our pass products provide a compelling value proposition to our guests, which in turn creates a guest commitment predominately prior to the start of the ski season. In March 2023, we began selling pass products for the 2023/2024 North American and European ski seasons. Pass product sales through September 22, 2023 for the upcoming 2023/2024 North American ski season increased approximately 7% in units and approximately 11% in sales dollars as compared to the prior year through September 23, 2022. Pass product sales are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.74 between the Canadian dollar and U.S. dollar in both periods for Whistler Blackcomb pass product sales. We cannot predict if this favorable trend will continue through the remainder of the 2023 North American pass product sales campaign or the overall impact that pass product sales will have on lift revenue for the 2023/2024 North American and European ski seasons.

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•Our overall results throughout the 2022/2023 North American ski season highlight the stability of the advance commitment from season pass products in a season with challenging conditions, including travel disruptions during the peak holiday period, abnormal weather conditions which significantly reduced operating days, terrain availability, and activity offerings across our 26 Midwest, Mid-Atlantic and Northeast resorts (collectively, “Eastern” U.S. resorts), and severe weather disruptions at our Tahoe resorts. Our ancillary businesses, including ski school, dining, and retail/rental, experienced strong growth compared to the prior year period, when those businesses were impacted by capacity constraints driven by staffing, and in the case of dining, by operational restrictions associated with COVID-19. Our dining business rebounded strongly from the prior year, though underperformed expectations for the year as guest dining behavior did not fully return to pre-COVID levels following two years of significant operational restrictions associated with COVID-19. The return to normal staffing levels enabled our mountain resorts to deliver a strong guest experience resulting in a significant improvement in guest satisfaction scores, which exceeded pre-COVID-19 levels at our destination mountain resorts.

•Given that we operate in the travel and leisure industry, we are subject to risks related to public health emergencies, including the potential outbreak and spread of contagious disease. Public health emergencies may lead to adverse economic impacts in global and local economies, including the economies in which we operate, which may in turn impact consumer demand, the willingness or ability of guests to travel, guest visitation, staffing levels or financial results. We cannot predict the ultimate impact that any potential public health emergency may have on our guest visitation, guest spending, staffing capabilities, other related trends or overall results of operations.

•As of July 31, 2023, we had $563.0 million of cash and cash equivalents as well as $421.0 million available under the revolver component of the Vail Holdings Credit Agreement, which represents the total commitment of $500.0 million less certain letters of credit outstanding of $79.0 million. Additionally, we have a credit facility which supports the liquidity needs of Whistler Blackcomb (the “Whistler Credit Agreement”). As of July 31, 2023, we had C$296.6 million ($224.9 million) available under the revolver component of the Whistler Credit Agreement which represents the total commitment of C$300.0 million ($227.5 million) less letters of credit outstanding of C$3.4 million ($2.6 million). We believe that our existing cash and cash equivalents, availability under our credit agreements and the expected positive cash flow from operating activities of our Mountain and Lodging segments less resort capital expenditures will continue to provide us with sufficient liquidity to fund our operations.

•On August 3, 2022, through a wholly-owned subsidiary, we acquired a 55% controlling interest in Andermatt-Sedrun Sport AG (“Andermatt-Sedrun”) from Andermatt Swiss Alps AG (“ASA”). Andermatt-Sedrun controls and operates all of Andermatt-Sedrun's mountain and ski-related assets, including lifts, most of the restaurants and a ski school operation at the ski area. The total consideration we paid was comprised of a $114.4 million (CHF 110.0 million) investment into Andermatt-Sedrun for use in capital investments to enhance the guest experience on the mountain and $41.3 million (CHF 39.3 million) paid to ASA. As of August 3, 2022 the total fair value of the consideration paid was $155.4 million (CHF 149.3 million). The proceeds paid to ASA will be fully reinvested into real estate developments in the base area. ASA retains a 40% ownership stake in Andermatt-Sedrun, with a group of existing shareholders comprising the remaining 5% ownership. We cannot predict the ultimate impact the acquisition of Andermatt-Sedrun will have on our future results from operations.

Results of Operations

Summary

Shown below is a summary of operating results for Fiscal 2023, Fiscal 2022 and Fiscal 2021 (in thousands):

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A discussion of segment results, including reconciliations of net income attributable to Vail Resorts, Inc. to Total Reported EBITDA, and other items can be found below. The consolidated results of operations, including any consolidated financial metrics pertaining thereto, include the operations of Andermatt-Sedrun (acquired August 3, 2022) and Seven Springs Mountain Resort, Hidden Valley Resort and Laurel Mountain Ski Area in Pennsylvania (collectively, the “Seven Springs Resorts,” acquired December 31, 2021) prospectively from their respective dates of acquisition.

COVID-19 in general had an adverse impact on our results of operations for Fiscal 2022 and Fiscal 2021.

The sections titled “Fiscal 2023 compared to Fiscal 2022” in each of the Mountain and Lodging segment discussions below provide comparisons of financial and operating performance for Fiscal 2023 to Fiscal 2022, unless otherwise noted. Discussion of our financial results for Fiscal 2022 compared to Fiscal 2021 can be found in our Annual Report on Form 10-K for Fiscal 2022, which was filed on September 28, 2022.

Mountain Segment

Mountain segment operating results for Fiscal 2023, Fiscal 2022 and Fiscal 2021 are presented by category as follows (in thousands, except ETP):

Mountain Reported EBITDA includes $21.2 million, $20.9 million and $20.3 million of stock-based compensation expense for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.

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Fiscal 2023 compared to Fiscal 2022

Mountain Reported EBITDA increased $11.4 million, or 1.4%. The increase was driven by: (i) an overall increase in skier visitation that benefited our ancillary lines of business, which remained disproportionately impacted by COVID-19 restrictions and limitations in the prior year; (ii) an increase in North American pass revenue, which benefited from an increase in pass product sales for the 2022/2023 North American ski season compared to the prior year; and (iii) our Australian operations, which experienced record visitation and favorable snow conditions in the 2022 ski season following periodic COVID-19 related closures in the prior year at Perisher, Falls Creek and Hotham. These increases were partially offset by: (i) increased labor and labor-related benefits and general and administrative expense, primarily as a result of investments in North American employee wages and increased headcount to support more normalized staffing and operations at our Resorts; (ii) increased variable expenses associated with increased revenues; (iii) increased expenses related to variable weather conditions; and (iv) the impact of inflation. Mountain segment results also include $3.1 million and $7.7 million of acquisition and integration related expenses for Fiscal 2023 and Fiscal 2022, respectively.

Lift revenue increased $110.7 million, or 8.4%, due to increases in both pass revenue and non-pass revenue. Pass revenue increased 8.5% primarily as a result of an increase in pass product sales for the 2022/2023 North American ski season compared to the prior year, as well as an increase in pass product sales for the 2022 Australian ski season compared to the prior year. Non-pass revenue increased 8.3% primarily due to an increase non-pass ETP (excluding Andermatt-Sedrun) of 7.8%, as well as incremental non-pass revenue from Andermatt-Sedrun of $13.2 million. Total non-pass ETP, including the impact of Andermatt-Sedrun, increased 4.3%. The increase in non-pass revenue also benefited from an increase in visitation at our Australian ski areas in the first quarter of Fiscal 2023, which experienced record visitation and favorable snow conditions during the 2022 ski season following periodic COVID-related closures and restrictions in the prior year. Total ETP decreased 3.4% primarily as a result of an increase in the proportion of pass product visitation (which generally results in lower ETP per visit) to total skier visits, driven by a continued migration to advance commitment products, partially offset by the increase in non-pass ETP discussed above.

Ski school revenue increased $63.6 million, or 28.5%, dining revenue increased $60.9 million, or 37.2%, and retail/rental revenue increased $49.7 million, or 15.9%, each primarily driven by the greater impact of COVID-19 and related limitations and restrictions in the prior year, including staffing challenges which limited our ability to operate at full capacity, as well as increased skier visitation.

Other revenue mainly consists of revenues from summer visitation and other mountain activities, employee housing, guest services, commercial leasing, marketing, private clubs (which includes both club dues and amortization of initiation fees), municipal services, other recreation activities and Australian ski area lodging and transportation. Other revenue increased $42.8 million, or 21.0%, primarily as a result of increased visitation at our Resorts compared to the prior year. Additionally, the increase was driven by the greater impact of COVID-19 and related limitations and restrictions in the prior year, which impacted the Company’s ability to operate ancillary services and other on-mountain activities at full capacity, as well as our Australian ski areas, which were disproportionately impacted by restrictions on international travel in the prior year.

Operating expense increased $314.4 million, or 22.4%, which was primarily attributable to investments in employee wages and salaries and increased headcount to support more normalized staffing and operations at our Resorts, as well as increased variable expenses associated with increased revenue, the impact of inflation and incremental expenses associated with Andermatt-Sedrun and the Seven Springs Resorts. Additionally, operating expense includes $3.1 million and $7.7 million of acquisition and integration related expenses for Fiscal 2023 and Fiscal 2022, respectively.

Labor and labor-related benefits increased 32.7%, primarily due to investments in wages and salaries for North American employees and increased headcount to support more normalized staffing and operations at our Resorts, as well as an increase in Australian operations as a result of periodic closures during the 2021 ski season, additional labor costs incurred as a result of variable weather conditions, and incremental expenses from Andermatt-Sedrun and the Seven Springs Resorts of $21.0 million for the comparable period they were not owned in the prior year. Retail cost of sales increased 19.9%, compared to an increase in retail sales of 16.1%, reflecting decreased margins on retail products driven by higher sales of discounted inventory. Resort related fees increased 12.5% primarily as a result of an increase in revenues on which those fees are based. General and administrative expense increased 11.5% due to an increase in costs across all corporate functions, which were primarily driven by investments in employee wages and salaries. Other expense increased 18.5%, primarily due to increases in variable operating expenses associated with increased revenues, in addition to incremental expenses from Andermatt-Sedrun and the Seven Springs Resorts of $17.3 million for the comparable period they were not owned in the prior year, increased utility costs of $10.0 million primarily associated with higher variable rates and increased snowmaking operations at our Eastern U.S. ski areas, and an increase in repairs and maintenance expense of $4.0 million.

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Mountain equity investment income, net primarily includes our share of income from the operations of a real estate brokerage company.

Lodging Segment

Lodging segment operating results for Fiscal 2023, Fiscal 2022 and Fiscal 2021 are presented by category as follows (in thousands, except average daily rate (“ADR”) and revenue per available room (“RevPAR”)):

(1) Owned hotel RevPAR for Fiscal 2023 declined from the prior comparative period primarily due to the inclusion of properties acquired through the Seven Springs Resorts for the full year-to-date period, compared to only being included for seven months in the prior year period, as well as the sale of the DoubleTree at Breckenridge hotel, which was sold after the 2021/2022 ski season, partially offset by price increases at our other lodging properties. For Fiscal 2022, the DoubleTree at Breckenridge contributed $8.6 million of owned hotel revenue.

Lodging Reported EBITDA includes $4.0 million, $3.7 million and $3.8 million of stock-based compensation expense for Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively.

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Fiscal 2023 compared to Fiscal 2022

Lodging Reported EBITDA decreased $13.5 million, or 52.4%, primarily driven by an increase in labor and labor-related benefits and general and administrative expense, including the impacts of investments in employee wages and salaries and increased headcount to support more normalized staffing and operations at our lodging properties.

Dining revenue increased $13.9 million, or 28.6%, primarily due to incremental revenue from the Seven Springs Resorts of $7.2 million for the comparable period they were not owned in the prior year, as well as increases in revenue at our other lodging properties as a result of fewer COVID-19 related limitations and restrictions as compared to the prior year. Golf revenue increased $1.8 million, or 16.1%, primarily associated with an increase in revenue at our golf course in Wyoming. Other revenue increased $9.3 million, or 20.0%, primarily due to increases in ancillary revenue associated with the return to more normalized operations, which include lodging property support fees, lodging retail sales, conference services, and spa services.

Operating expense (excluding reimbursed payroll costs) increased 13.2%. Labor and labor-related benefits increased 15.5%, primarily due to investments in employee wages and salaries, and increased headcount to support more normalized staffing and operations at our lodging properties as compared to prior year, as well as incremental costs from the Seven Springs Resorts of $6.8 million for the comparable period they were not owned in the prior year. General and administrative expense increased 15.4% compared to the prior year, due to an increase in costs across all corporate functions, and particularly for our central reservations booking services, which were primarily driven by employee wage and salary investments. Other expense increased 8.6%, primarily related to increases in variable expenses associated with increased revenues, as well as incremental costs from the Seven Springs Resorts of $4.2 million for the comparable period they were not owned in the prior year.

Revenue from payroll cost reimbursement and the corresponding reimbursed payroll costs relate to payroll costs at managed hotel properties where we are the employer and all payroll costs are reimbursed by the owners of the properties under contractual arrangements. Since the reimbursements are made based upon the costs incurred with no added margin, the revenue and corresponding expense have no effect on our Lodging Reported EBITDA.

Real Estate Segment

Our Real Estate net revenue is primarily determined by the timing of closings and the mix of real estate sold in any given period. Different types of projects have different revenue and profit margins; therefore, as the real estate inventory mix changes, it can greatly impact Real Estate segment net revenue, operating expense, gain or loss on sale of real property and Real Estate Reported EBITDA.

Real Estate segment operating results for Fiscal 2023, Fiscal 2022 and Fiscal 2021 are presented by category as follows (in thousands):

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Fiscal 2023

During Fiscal 2023, we closed on the sale of a land parcel in Keystone for $7.5 million, which was recorded within Real Estate net revenue, with a corresponding cost of sale (including sales commission) of $5.1 million.

Other operating expense of $5.5 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs.

Fiscal 2022

We did not close on any significant real estate transactions during Fiscal 2022. Other operating expense of $5.7 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs.

Other Items

In addition to segment operating results, the following items contributed to our overall financial position and results of operations (in thousands).

Depreciation and amortization. Depreciation and amortization expense for Fiscal 2023 increased $16.1 million compared to the prior year, primarily due to assets acquired in the acquisition of Andermatt-Sedrun.

Change in estimated fair value of contingent consideration. We recorded expense of $49.8 million for Fiscal 2023, primarily related to an increase in the expected long-term EBITDA performance for Park City, as well as an increase in the expected contingent rent payment to be made for Fiscal 2023. We recorded expense of $20.3 million for Fiscal 2022 primarily related to an increase in the estimated contingent consideration payment for Fiscal 2022.

(Loss) gain on disposal of fixed assets and other, net. Loss on disposal of fixed assets and other, net for Fiscal 2023 included a loss of $5.9 million related to the sale of five retail and rental stores in Telluride, Colorado, as well as other annual disposals of fixed assets. Gain on disposal of fixed assets and other, net for Fiscal 2022 included (i) $32.2 million from the sale of the DoubleTree at Breckenridge hotel; (ii) $10.3 million in proceeds from the NPS related to partial payments for a leasehold surrender interest at GTLC associated with assets that have been fully depreciated by the Company (payments were made at the request of the NPS); and (iii) $7.9 million from the sale of an administrative building in Avon, CO. These gains were partially offset by losses on other annual disposals of fixed assets.

Investment income and other, net. Investment income and other, net for Fiscal 2023 increased $20.0 million compared to Fiscal 2022, primarily as a result of an increase in earned interest rates.

Foreign currency (loss) gain on intercompany loans. Foreign currency (loss) gain on intercompany loans is associated with an intercompany loan from Vail Holdings, Inc. to Whistler Blackcomb in the original amount of $210.0 million that was funded, effective as of November 1, 2016, in connection with the acquisition of Whistler Blackcomb. This intercompany loan requires foreign currency remeasurement to Canadian dollars, the functional currency for Whistler Blackcomb. As a result, foreign currency fluctuations between the Canadian dollar and U.S. dollar associated with the loan are recorded within our results of operations.

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Provision for income taxes. The effective tax rate for Fiscal 2023 was 23.7%, compared to 19.4% for Fiscal 2022. The increase in the effective tax rate was primarily due to a shift in income to higher tax rate jurisdictions, as well as a reduction in favorable discrete items, including excess tax benefits from employee share awards.

Net (income) loss attributable to noncontrolling interest. Net (income) loss attributable to noncontrolling interest is primarily associated with the income or loss attributable to the minority shareholder of Whistler Blackcomb, and accordingly, fluctuations are primarily associated with changes in income or loss from Whistler Blackcomb operations. Beginning in Fiscal 2023, net income (loss) attributable to noncontrolling interest also includes income or loss attributable to the minority shareholder of Andermatt-Sedrun, for which fluctuations are primarily associated with changes in income or loss from Andermatt-Sedrun operations.

Reconciliation of Non-GAAP Measures

The following table reconciles net income attributable to Vail Resorts, Inc. to Total Reported EBITDA for Fiscal 2023, Fiscal 2022 and Fiscal 2021 (in thousands):

The following table reconciles long-term debt, net to Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) (in thousands):

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Liquidity and Capital Resources

Changes in significant sources and uses of cash for Fiscal 2023, Fiscal 2022 and Fiscal 2021 are presented by categories as follows (in thousands):

Historically, we have lower cash available at the end of each first and fourth fiscal quarter-end as compared to our second and third fiscal quarter-ends, primarily due to the seasonality of our Mountain segment operations, although our available cash balances as of July 31, 2022 and 2021 were higher than our historical July 31 balance primarily as a result of the debt offerings we completed in Fiscal 2021 and Fiscal 2020.

Fiscal 2023 compared to Fiscal 2022

We generated $639.6 million of cash from operating activities during Fiscal 2023, a decrease of $70.9 million compared to $710.5 million generated during Fiscal 2022. The decrease in operating cash flows was primarily a result of (i) an increase in income tax payments of approximately $74.7 million and (ii) an increase in payments for accounts payable and accrued liabilities primarily associated with the lower level of operations as of the beginning of the prior fiscal year. These decreases were partially offset by an increase in earned interest on short-term investments of approximately $20.0 million. Additionally, we generated $7.5 million of proceeds from real estate land parcel sales during Fiscal 2023.

Cash used in investing activities for Fiscal 2023 decreased by $74.8 million primarily due to the prior year acquisition of the Seven Springs Resorts for $116.3 million, net of cash acquired. Additionally, we made a cash deposit of $114.4 million (CHF 110.0 million) in July 2022 related to the acquisition of Andermatt-Sedrun, which was returned in the current year upon closing of the acquisition on August 3, 2022. The cash deposit was invested into Andermatt-Sedrun, which is consolidated in our consolidated financial statements subsequent to the acquisition being completed. Accordingly, the deposit is shown as a cash outflow in Fiscal 2022 and a cash inflow in Fiscal 2023. These decreases in cash used in investing activities were partially offset by (i) an increase in capital expenditures of approximately $122.1 million as compared to the prior year, driven by our significant investment in lift upgrades in calendar year 2022; (ii) $48.8 million of short-term investments in bank deposits in the current year, net of maturities, which were invested in deposits with maturity dates of more than three months at the date of purchase and are therefore not reflected as cash equivalents; (iii) $38.6 million of cash paid to ASA upon closing the acquisition of Andermatt-Sedrun, net of cash acquired, on August 3, 2022 and (iv) proceeds in the prior year due to the sale of the DoubleTree at Breckenridge, payment from the NPS related to a leasehold surrender interest at GTLC associated with assets that had been fully depreciated by the Company and the sale of an administrative building in Avon, CO, which did not recur in the current year.

Cash used in financing activities increased by $422.6 million during Fiscal 2023 compared to Fiscal 2022, primarily due to an increase in repurchases of common stock of $425.0 million and an increase in dividends paid of $88.6 million. These increases were partially offset by a decrease in debt repayments, including (i) the prior year repayment associated with the maturity of the EB-5 Development Notes, which were assumed in our acquisition of Peak Resorts, Inc. ($51.5 million) and (ii) a reduction in net repayments under the revolver component of our Whistler Credit Agreement ($21.2 million), as well as a decrease in employee taxes paid for share award exercises ($31.8 million).

Significant Sources of Cash

We had $563.0 million of cash and cash equivalents as of July 31, 2023, compared to $1,107.4 million as of July 31, 2022. The decrease was primarily due to a $425.0 million increase in share repurchases during Fiscal 2023. We currently anticipate that our Mountain and Lodging segment operating results will continue to provide a significant source of future operating cash flows.

In addition to our $563.0 million of cash and cash equivalents at July 31, 2023, we had $421.0 million available under the revolver component of our Vail Holdings Credit Agreement as of July 31, 2023 (which represents the total commitment of $500.0 million less certain letters of credit outstanding of $79.0 million). Also, to further support the liquidity needs of Whistler Blackcomb, we had C$296.6 million ($224.9 million) available under the revolver component of our Whistler Credit Agreement (which represents the total commitment of C$300.0 million ($227.5 million) less letters of credit outstanding of

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C$3.4 million ($2.6 million)). We expect that our liquidity needs in the near term will be met by continued use of our existing cash and cash equivalents, operating cash flows and borrowings under both the Vail Holdings Credit Agreement and Whistler Credit Agreement, if needed. The Vail Holdings Credit Agreement and the Whistler Credit Agreement provide adequate flexibility and are priced favorably with any new borrowings currently priced at SOFR, plus 1.60% for the Vail Holdings Credit Agreement, and Bankers Acceptance Rate plus 1.75% for the Whistler Credit Agreement.

Significant Uses of Cash

Capital Expenditures

We have historically invested significant amounts of cash in capital expenditures for our resort operations, and we expect to continue to do so, subject to operating performance particularly as it relates to discretionary projects. In addition, we may incur capital expenditures for retained ownership interests associated with third-party real estate development projects. Currently planned capital expenditures primarily include investments that will allow us to maintain our high-quality standards for the guest experience throughout our owned hotels and in technology that can impact the full network. Additionally, planned capital expenditures include discretionary improvements at our Resorts which we evaluate based on an expected level of return on investment.

We currently anticipate we will spend approximately $180 million to $185 million on resort capital expenditures during calendar year 2023, excluding one-time investments related to integration activities, deferred capital associated with the Keystone and Park City projects, $4 million of reimbursable investments associated with insurance recoveries, and $9 million of growth capital investments at Andermatt-Sedrun. Including these one-time items, our total capital plan for calendar year 2023 is expected to be approximately $204 million to $209 million. Included in these estimated capital expenditures are approximately $112 million to $117 million of maintenance capital expenditures (excluding Andermatt-Sedrun), which are necessary to maintain appearance and level of service appropriate to our resort operations. We currently plan to utilize cash on hand, borrowings available under our credit agreements and/or cash flow generated from future operations to provide the cash necessary to complete our capital plans.

Approximately $108 million was spent for capital expenditures in calendar year 2023 as of July 31, 2023, leaving approximately $96 million to $101 million to spend in the remainder of calendar year 2023.

Acquisitions

On August 3, 2022, we acquired a majority stake in Andermatt-Sedrun, which was funded with cash on hand. The purchase price was comprised of a $114.4 million (CHF 110.0 million) investment into Andermatt-Sedrun for use in capital investments to enhance the guest experience on the mountain and $41.3 million (CHF 39.3 million) paid to the seller. As of August 3, 2022, the value of the total consideration paid was $155.4 million (CHF 149.3 million).

Debt

As of July 31, 2023, principal payments on the majority of our long-term debt ($2.1 billion of the total $2.8 billion debt outstanding as of July 31, 2023) are not due until fiscal year 2026 and beyond. As of July 31, 2023 and 2022, total long-term debt, net (including long-term debt due within one year) was $2.8 billion and $2.7 billion, respectively. Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) was $2.3 billion and $1.6 billion as of July 31, 2023 and 2022, respectively, and the increase was primarily associated with the use of cash to fund increased share repurchases under our share repurchase program during Fiscal 2023.

As of July 31, 2023, the Vail Holdings Credit Agreement provides for (i) a revolving loan facility in an aggregate principal amount of $500.0 million and (ii) a term loan facility of $1.0 billion. We expect that our liquidity needs in the near term will be met by continued use of our existing cash and cash equivalents, operating cash flows and borrowings under the Vail Holdings Credit Agreement and the Whistler Credit Agreement, if needed.

Our debt service requirements can be impacted by changing interest rates as we had approximately $0.7 billion of net variable-rate debt outstanding as of July 31, 2023, after consideration of $400.0 million in interest rate swaps which effectively convert variable-rate debt to fixed-rate debt. A 100-basis point change in our borrowing rates would cause our annual interest payments on our net variable-rate debt to change by approximately $6.7 million. Additionally, the annual payments associated with the financing of the Canyons transaction increase by the greater of CPI less 1%, or 2%. The fluctuation in our debt service requirements, in addition to interest rate and inflation changes, may be impacted by future borrowings under our credit agreements or other alternative financing arrangements we may enter into. Our long term liquidity needs depend upon operating results that impact the borrowing capacity under our credit agreements. We can respond to liquidity impacts of changes in the

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business and economic environment by managing our capital expenditures, variable operating expenses, the timing of new real estate development activity and the payment of cash dividends on our common stock.

Material Cash Requirements

As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as debt agreements and construction agreements in conjunction with our resort capital expenditures. Debt obligations, which totaled $2.8 billion as of July 31, 2023, are recognized as liabilities in our Consolidated Balance Sheet. Obligations under construction contracts and other purchase commitments are not recognized as liabilities in our Consolidated Balance Sheet until services and/or goods are received which is in accordance with GAAP. A summary of our material cash requirements as of July 31, 2023 (excluding obligations presented elsewhere, including Notes to Consolidated Financial Statements) is presented below (in thousands):

(1) Long-term debt includes principal payments, fixed-rate interest payments (including payments that are required under interest rate swaps) and estimated variable interest payments utilizing interest rates in effect at July 31, 2023, and assumes all debt outstanding as of July 31, 2023 will be held to maturity. The future annual interest obligations noted herein are estimated only in relation to debt outstanding as of July 31, 2023, and do not reflect interest obligations on potential future debt or refinancing.

Long-term debt also includes $12.8 million of proceeds resulting from real estate transactions accounted for as financing arrangements, which are expected to be recognized on the Company’s Statements of Operations in future years as a result of the anticipated resolution of continuing involvement, with no associated cash outflow.

(2) Purchase obligations and other primarily includes amounts which are classified as trade payables ($148.5 million), accrued payroll and benefits ($99.4 million), accrued fees and assessments ($27.6 million), contingent consideration liability ($73.3 million) and accrued taxes (including taxes for uncertain tax positions) ($140.3 million) on our Consolidated Balance Sheet as of July 31, 2023. These amounts also include other commitments for goods and services not yet received, including construction contracts and minimum commitments under season pass alliance agreements, which are not included on our Consolidated Balance Sheet as of July 31, 2023 in accordance with GAAP.

Share Repurchase Program

Our share repurchase program is conducted under authorizations made from time to time by our Board of Directors. On March 9, 2006, our Board of Directors initially authorized the repurchase of up to 3,000,000 shares of Vail Shares and later authorized additional repurchases of up to 3,000,000 additional Vail Shares (July 16, 2008), 1,500,000 Vail Shares (December 4, 2015), and 2,500,000 Vail Shares (March 7, 2023), for a total authorization to repurchase shares of up to 10,000,000 Vail Shares. During Fiscal 2023, we repurchased 2,182,594 shares (at an average price of $229.09) for a total cost of approximately $500.0 million, excluding accrued excise tax. Since the inception of this stock repurchase program through July 31, 2023, we have repurchased 8,648,302 Vail Shares at a cost of approximately $979.4 million. As of July 31, 2023, 1,351,698 Vail Shares remained available to repurchase under the existing repurchase authorization. Vail Shares purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of shares under our share award plan. Repurchases under the program may be made from time to time at prevailing prices as permitted by applicable laws, and subject to market conditions and other factors. The timing, as well as the number of Vail Shares that may be repurchased under the program, will depend on several factors, including our future financial performance, our available cash resources and competing uses for cash that may arise in the future, the restrictions in our Vail Holdings Credit Agreement, prevailing prices of Vail Shares and the number of Vail Shares that become available for sale at prices that we believe are attractive. The share repurchase program has no expiration date.

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Dividend Payments

During Fiscal 2023, we paid cash dividends of $7.94 per share ($314.4 million). During Fiscal 2022, we paid cash dividends of $5.58 per share ($225.8 million, including cash dividends paid to Exchangeco shareholders). On September 27, 2023, our Board of Directors approved a cash dividend of $2.06 per share payable on October 26, 2023 to stockholders of record as of October 10, 2023. We expect to fund the dividend with available cash on hand. The amount, if any, of dividends to be paid in the future will depend on our available cash on hand, anticipated cash needs, overall financial condition, restrictions contained in our Vail Holdings Credit Agreement, future prospects for earnings and cash flows, as well as other factors considered relevant by our Board of Directors.

Covenants and Limitations

We must abide by certain restrictive financial covenants under our credit agreements. The most restrictive of those covenants include the following: for the Vail Holdings Credit Agreement, Net Funded Debt to Adjusted EBITDA ratio, Secured Net Funded Debt to Adjusted EBITDA ratio and the Interest Coverage ratio (each as defined in the Vail Holdings Credit Agreement); for the Whistler Credit Agreement, Consolidated Total Leverage Ratio and Consolidated Interest Coverage Ratio (each as defined in the Whistler Credit Agreement); and for the EPR Secured Notes, Maximum Leverage Ratio and Consolidated Fixed Charge Ratio (each as defined in the EPR Agreements). Additionally, the New Regional Policy loan between Andermatt-Sedrun and the Canton of Uri and Canton of Graubünden dated June 24, 2016 includes restrictive covenants requiring certain minimum financial results (as defined in the agreement). In addition, our financing arrangements limit our ability to make certain restricted payments, pay dividends on or redeem or repurchase stock, make certain investments, make certain affiliate transfers and may limit our ability to enter into certain mergers, consolidations or sales of assets and incur certain indebtedness. Our borrowing availability under the Vail Holdings Credit Agreement is primarily determined by the Net Funded Debt to Adjusted EBITDA ratio, which is based on our segment operating performance, as defined in the Vail Holdings Credit Agreement. Our borrowing availability under the Whistler Credit Agreement is primarily determined based on the commitment size of the credit facility and our compliance with the terms of the Whistler Credit Agreement.

We were in compliance with all restrictive financial covenants in our debt instruments as of July 31, 2023. We expect that we will continue to meet all applicable financial maintenance covenants in effect in our credit agreements throughout the year ending July 31, 2024; however, there can be no assurance that we will continue to meet such financial covenants. If such covenants are not met, we would be required to seek a waiver or amendment from the banks participating in our credit agreements. There can be no assurance that such waiver or amendment would be granted, which could have a material adverse impact on our liquidity.

Off Balance Sheet Arrangements

We do not have off balance sheet transactions that are expected to have a material effect on our financial condition, revenue, expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The preparation of Consolidated Financial Statements in conformity with GAAP requires us to select appropriate accounting policies and to make judgments and estimates affecting the application of those accounting policies. In applying our accounting policies, different business conditions or the use of different assumptions may result in materially different amounts reported in the Consolidated Financial Statements.

We have identified the most critical accounting policies which were determined by considering accounting policies that involve the most complex or subjective decisions or assessments. We also have other policies considered key accounting policies; however, these policies do not meet the definition of critical accounting policies because they do not generally require us to make estimates or judgments that are complex or subjective. We have reviewed these critical accounting policies and related disclosures with our Audit Committee of the Board of Directors.

Goodwill and Intangible Assets

Description

The carrying value of goodwill and indefinite-lived intangible assets are evaluated for possible impairment on an annual basis or between annual tests if an event occurs or circumstances change that would more likely than not reduce the estimated fair value of a reporting unit or indefinite-lived intangible asset below its carrying value. Definite-lived intangible assets are evaluated for impairment only when there is evidence that events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

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Judgments and Uncertainties

Application of the goodwill and indefinite-lived intangible asset impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and determination of the estimated fair value of reporting units and indefinite-lived intangible assets. We perform a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset exceeds the carrying amount. If it is determined, based on qualitative factors, that the fair value of the reporting unit or indefinite-lived intangible asset is more likely than not less than its carrying amount, or if significant changes to macro-economic factors related to the reporting unit or intangible asset have occurred that could materially impact the estimated fair value since the previous quantitative analysis was performed, a quantitative impairment test would be required. The quantitative test includes determination of the estimated fair value of our reporting units using a discounted cash flow analysis and determination of the estimated fair value of indefinite-lived intangible assets primarily using the income approach based upon estimated future revenue streams. These analyses require significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, available industry/market data (to the extent available), estimation of the long-term rate of growth for our business including expectations and assumptions regarding the impact of general economic conditions on our business, estimation of terminal value, determination of the respective weighted average cost of capital and market participant assumptions. Changes in these estimates and assumptions could materially affect the determination of estimated fair value and the amount of any potential impairment for each reporting unit or indefinite-lived intangible asset.

Effect if Actual Results Differ From Assumptions

Goodwill and indefinite-lived intangible assets are tested for impairment at least annually as of May 1. If the net carrying value of the reporting units or assets exceed their estimated fair value, an impairment will be recognized in an amount equal to that excess; otherwise, no impairment loss is recognized. During Fiscal 2023, we performed qualitative analyses of our reporting units and indefinite-lived intangible assets and determined that the estimated fair value of all material reporting units and indefinite-lived intangible assets significantly exceeded their respective carrying values.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill or indefinite-lived asset impairment tests are accurate. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting units may include such items as: (1) prolonged adverse weather conditions resulting in a sustained decline in guest visitation; (2) a prolonged weakness in the general economic conditions in which guest visitation and spending is adversely impacted; and (3) volatility in the equity and debt markets which could result in a higher discount rate.

While we believe that our estimates and judgments are reasonable and while historical performance and current expectations have generally resulted in estimated fair values of our reporting units and indefinite-lived assets that are in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future. However, it is not possible at this time to determine if an impairment charge would result or if such a charge would be material. As of July 31, 2023, we had $1,720.3 million of goodwill and $254.4 million of indefinite-lived intangible assets recorded on our Consolidated Balance Sheet. There can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and indefinite-lived intangible asset impairment tests will prove to be an accurate prediction of the future.

Tax Contingencies

Description

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties relating to uncertain tax positions. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the largest tax benefit that is cumulatively greater than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, interpretation of tax law, effectively settled issues under audit and new audit activity. A significant amount of time may pass before a particular matter, for which we may have established a reserve, is audited and fully resolved.

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Judgments and Uncertainties

The estimates of our tax contingencies reserve contain uncertainty because management must use judgment to estimate the potential exposure associated with our various filing positions.

Effect if Actual Results Differ From Assumptions

We believe the estimates and judgments we have made related to tax contingencies are reasonable and we have adequate reserves for uncertain tax positions. Our reserves for uncertain tax positions, including any income tax related interest and penalties, are $56.8 million as of July 31, 2023. This reserve solely relates to the treatment of the Canyons lease payments obligation as payments of debt obligations and that the tax basis in Canyons goodwill is deductible. Actual results could differ and we may be exposed to increases or decreases in those reserves and tax provisions that could be material.

An unfavorable tax settlement could require the use of cash and could possibly result in increased tax expense and effective tax rate and/or adjustments to our deferred tax assets and deferred tax liabilities in the year of resolution. A favorable tax settlement could possibly result in a reduction in our tax expense, effective tax rate, income taxes payable, other long-term liabilities and/or adjustments to our deferred tax assets and deferred tax liabilities in the year of settlement or in future years.

Depreciable Lives of Assets

Description

Mountain and lodging operational assets, furniture and fixtures, computer equipment, software, vehicles and leasehold improvements are primarily depreciated using the straight-line method over the estimated useful life of the asset. Assets may become obsolete or require replacement before the end of their useful life in which the remaining book value would be written-off or we could incur costs to remove or dispose of assets no longer in use.

Judgments and Uncertainties

The estimates of our useful lives of the assets contain uncertainty because management must use judgment to estimate the useful life of the asset.

Effect if Actual Results Differ From Assumptions

Although we believe the estimates and judgments discussed herein are reasonable, actual results could differ, and we may be exposed to increased expense related to depreciable assets disposed of, removed or taken out of service prior to its originally estimated useful life, which may be material. A 10% decrease in the estimated useful lives of depreciable assets would have increased depreciation expense by approximately $28.3 million for Fiscal 2023.

Business Combinations

Description

A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations in accordance with the guidance for business combinations and related literature. Accordingly, we allocate the purchase price of acquired businesses to the identifiable tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The difference between the purchase price and the estimated fair value of assets acquired and liabilities assumed is recorded as goodwill. In determining the estimated fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling and referenced market values (where available). Valuations are performed by management or independent valuation specialists under management’s supervision, where appropriate.

Judgments and Uncertainties

Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date, including our estimates for intangible assets, contractual obligations assumed and contingent consideration, where applicable. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to: determination of weighted average cost of capital, market participant assumptions, royalty rates, terminal multiples and estimates of future cash flows to be generated by the acquired assets. In addition to the estimates and assumptions applied to valuing intangible assets acquired, the determination of the estimated fair value of

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contingent consideration, including estimating the likelihood and timing of achieving the relevant thresholds for contingent consideration payments, requires the use of subjective judgments. We estimate the fair value of the Park City contingent consideration payments using an option pricing valuation model which incorporates, among other factors, projected achievement of specified financial performance measures, discount rates and volatility for the respective business.

Effect if Actual Results Differ From Assumptions

We believe that the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions that a marketplace participant would use. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments, which could be significant, to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the estimated fair values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments would be recorded on our Consolidated Statements of Operations.

We recognize the fair value of contingent consideration, if any, at the date of acquisition as part of the consideration transferred to acquire a business. The liability associated with contingent consideration is remeasured to fair value at each reporting period subsequent to the date of acquisition taking into consideration changes in financial projections and long-term growth rates, among other factors, that may impact the timing and amount of contingent consideration payments until the term of the agreement has expired or the contingency is resolved. Increases in the fair value of contingent consideration are recorded as losses on our Consolidated Statements of Operations, while decreases in fair value are recorded as gains.

New Accounting Standards

Refer to the Summary of Significant Accounting Policies within the Notes to Consolidated Financial Statements for a discussion of new accounting standards.

Seasonality and Quarterly Results

Our mountain and lodging operations are seasonal in nature, with a typical peak operating season in North America and Europe generally beginning in mid-December and running through mid-April. In particular, revenue and profits for our North American and European mountain and most of our lodging operations are substantially lower and historically result in losses from late spring to late fall. Conversely, peak operating seasons for our NPS concessioner properties, our mountain resort golf courses and our Australian resorts’ ski season generally occur during the North American summer months, and these operations typically incur operating losses during the North American and European winter months. Revenue and profits generated by NPS concessioner properties’ summer operations, golf operations and Australian resorts’ ski operations are not sufficient to fully offset our off-season losses from our North American and European mountain and other lodging operations. During Fiscal 2023, approximately 81% of total combined Mountain and Lodging segment net revenue (excluding Lodging segment revenue associated with reimbursement of payroll costs) was earned during the second and third fiscal quarters. Therefore, the operating results for any three-month period are not necessarily indicative of the results that may be achieved for any subsequent quarter or for a full year (see Notes to Consolidated Financial Statements).

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and notes related thereto included in this Form 10-K. To the extent that the following MD&A contains statements which are not of a historical nature, such statements are forward-looking statements which involve risks and uncertainties. These risks include, but are not limited to, those discussed in Item 1A. “Risk Factors” in this Form 10-K. The following discussion and analysis should be read in conjunction with the Forward-Looking Statements section and Item 1A. “Risk Factors” each included in this Form 10-K.

The MD&A includes discussion of financial performance within each of our three segments. We have chosen to specifically include segment Reported EBITDA (defined as segment net revenue less segment operating expense, plus or minus segment equity investment income or loss and for the Real Estate segment, plus gain or loss on sale of real property) in the following discussion because we consider this measurement to be a significant indication of our financial performance. We utilize segment Reported EBITDA in evaluating our performance and in allocating resources to our segments. Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) is included in the following discussion because we consider this measurement to be a significant indication of our available capital resources. We also believe that Net Debt is an important measurement as it is an indicator of our ability to obtain additional capital resources for our future cash needs. Resort Reported EBITDA (defined as the combination of segment Reported EBITDA of our Mountain and Lodging segments), Total Reported EBITDA (which is Resort Reported EBITDA plus segment Reported EBITDA from our Real Estate segment) and Net Debt are not measures of financial performance or liquidity defined under accounting principles generally accepted in the United States (“GAAP”). Refer to the end of the Results of Operations section for a reconciliation of net income attributable to Vail Resorts, Inc. to Total Reported EBITDA and Resort Reported EBITDA, and long-term debt, net to Net Debt.

Items excluded from Resort Reported EBITDA, Total Reported EBITDA and Net Debt are significant components in understanding and assessing financial performance or liquidity. Resort Reported EBITDA, Total Reported EBITDA and Net Debt should not be considered in isolation or as an alternative to, or substitute for, net income, net change in cash and cash equivalents or other financial statement data presented in the Consolidated Financial Statements as indicators of financial performance or liquidity. Because Resort Reported EBITDA, Total Reported EBITDA and Net Debt are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations, Resort Reported EBITDA, Total Reported EBITDA and Net Debt, as presented herein, may not be comparable to other similarly titled measures of other companies. In addition, our segment Reported EBITDA (i.e. Mountain, Lodging and Real Estate), the measure of segment profit or loss required to be disclosed in accordance with GAAP, may not be comparable to other similarly titled measures of other companies.

Overview

Our operations are grouped into three integrated and interdependent segments: Mountain, Lodging and Real Estate. We refer to “Resort” as the combination of the Mountain and Lodging segments. The Mountain, Lodging and Real Estate segments represented approximately 88%, 12% and 0%, respectively, of our net revenue for Fiscal 2022.

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Mountain Segment

In the Mountain segment, the Company operates the following 41 destination mountain resorts and regional ski areas:

*Denotes a destination mountain resort, which generally receives a meaningful portion of skier visits from long-distance travelers, as opposed to our regional ski areas, which tend to generate skier visits predominantly from their respective local markets.

Additionally, we operate ancillary services, primarily including ski school, dining and retail/rental operations, and for our Australian ski areas, including lodging and transportation operations. Mountain segment revenue is seasonal, with the majority of revenue earned from our North American ski operations occurring in our second and third fiscal quarters and the majority of revenue earned from our Australian ski operations occurring in our first and fourth fiscal quarters. Our North American destination mountain resorts and regional ski areas (collectively, “Resorts”) typically experience their peak operating season for the Mountain segment from mid-December through mid-April, and our Australian ski areas typically experience their peak operating season from June to early October. Our largest source of Mountain segment revenue comes from the sale of lift tickets (including pass products), which represented approximately 59%, 63% and 53% of Mountain segment net revenue for Fiscal 2022, the fiscal year ended July 31, 2021 (“Fiscal 2021”) and the fiscal year ended July 31, 2020 (“Fiscal 2020”), respectively.

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Lift revenue is driven by volume and pricing. Pricing is impacted by both absolute pricing, as well as the demographic mix of guests, which impacts the price points at which various products are purchased. The demographic mix of guests that visit our North American Resorts is divided into two primary categories: (i) out-of-state and international (“Destination”) guests and (ii) in-state and local (“Local”) guests. For the 2021/2022 North American ski season, Destination guests comprised approximately 58% of our North American destination mountain resort skier visits (excluding complimentary access), while Local guests comprised approximately 42% of our North American destination mountain resort skier visits (excluding complimentary access), which compares to 52% and 48%, respectively, for the 2020/2021 North American ski season and approximately 58% and 42%, respectively, for the 2019/2020 North American ski season. Skier visitation at our regional ski areas is largely comprised of Local guests. Destination guests generally purchase our higher-priced lift tickets (including pass products) and utilize more ancillary services such as ski school, dining and retail/rental, as well as lodging at or around our mountain resorts. Additionally, Destination guest visitation is less likely to be impacted by changes in the weather during the current season, but may be more impacted by adverse economic conditions, the global geopolitical climate or weather conditions in the immediately preceding ski season. Local guests tend to be more value-oriented and weather sensitive.

We offer a variety of pass products for all of our Resorts, marketed toward both Destination and Local guests. Our pass product offerings range from providing access to one or a combination of our Resorts for a certain number of days to our Epic Pass, which allows pass holders unlimited and unrestricted access to all of our Resorts. The Epic Day Pass is a customizable one to seven day pass product purchased in advance of the season, for those skiers and riders who expect to ski a certain number of days during the season, and which is available in three tiers of resort access offerings. Our pass products provide a compelling value proposition to our guests, which in turn assists us in developing a loyal base of customers who commit to ski at our Resorts in advance of the ski season and typically ski more days each season at our Resorts than those guests who do not buy pass products. Additionally, we enter into strategic long-term pass alliance agreements with third-party mountain resorts, which further increase the value proposition of our pass products. For the 2022/2023 ski season, our pass alliances include Telluride Ski Resort in Colorado, Hakuba Valley and Rusutsu Resort in Japan, Resorts of the Canadian Rockies in Canada, Les 3 Vallées in France, Verbier 4 Vallées in Switzerland, Skirama Dolomiti in Italy and Ski Arlberg in Austria. Our pass program drives strong customer loyalty; mitigates exposure to more weather sensitive guests; generates additional ancillary spending; and provides cash flow in advance of winter season operations. In addition, our pass program attracts new guests to our Resorts. All of our pass products, including the Epic Pass and Epic Day Pass, are predominately sold prior to the start of the ski season. Pass product revenue, although primarily collected prior to the ski season, is recognized in the Consolidated Statements of Operations throughout the ski season on a straight-line basis using skiable days (see Notes to the Consolidated Financial Statements for additional information).

Lift revenue consists of pass product lift revenue (“pass revenue”) and non-pass lift product revenue (“non-pass revenue”). Approximately 61%, 61% and 51% of total lift revenue was derived from pass revenue for Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively (including the impact of the deferral of pass product revenue from Fiscal 2020 to Fiscal 2021 as a result of credits offered to 2019/2020 North American pass product holders who purchased 2020/2021 pass products). Additionally, lift revenue for Fiscal 2021 was impacted by restrictions which only allowed pass product holders to access our Resorts during the early portion of the 2020/2021 North American ski season, as well as our use of a reservation system, which limited capacity for both pass product holders and non-pass lift tickets.

The cost structure of our mountain resort operations has a significant fixed component with variable expenses including, but not limited to, land use permit or lease fees, credit card fees, retail/rental cost of sales and labor, ski school labor and expenses associated with dining operations; as such, profit margins can fluctuate greatly based on the level of revenues.

Lodging Segment

Operations within the Lodging segment include: (i) ownership/management of a group of luxury hotels through the RockResorts brand proximate to our Colorado and Utah mountain resorts; (ii) ownership/management of non-RockResorts branded hotels and condominiums proximate to our North American Resorts; (iii) National Park Service (“NPS”) concessioner properties, including the Grand Teton Lodge Company (“GTLC”); (iv) a Colorado resort ground transportation company; and (v) mountain resort golf courses.

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The performance of our lodging properties (including managed condominium units) proximate to our Resorts, and our Colorado resort ground transportation company, are closely aligned with the performance of the Mountain segment and generally experience similar seasonal trends, particularly with respect to visitation by Destination guests. Revenues from such properties represented approximately 73%, 67% and 75% of Lodging segment net revenue (excluding Lodging segment revenue associated with the reimbursement of payroll costs) for Fiscal 2022, Fiscal 2021 and Fiscal 2020, respectively. Management primarily focuses on Lodging net revenue excluding payroll cost reimbursements and Lodging operating expense excluding reimbursed payroll costs (which are not measures of financial performance under GAAP) as the reimbursements are made based upon the costs incurred with no added margin and as such, the revenue and corresponding expense do not affect our Lodging Reported EBITDA, which we use to evaluate Lodging segment performance. Revenue of the Lodging segment during our first and fourth fiscal quarters is generated primarily by the operations of our NPS concessioner properties (as their peak operating season generally occurs from mid-May through the end of September); mountain resort golf operations and seasonally lower volume from our other owned and managed properties and businesses.

Real Estate Segment

The principal activities of our Real Estate segment include the sale of land parcels to third-party developers and planning for future real estate development projects, including zoning and acquisition of applicable permits. We continue undertaking preliminary planning and design work on future projects and are pursuing opportunities with third-party developers rather than undertaking our own significant vertical development projects. Additionally, real estate development projects by third-party developers most often result in the creation of certain resort assets that provide additional benefit to the Mountain segment. We believe that, due to our low carrying cost of real estate land investments, we are well situated to promote future projects by third-party developers while limiting our financial risk. Our revenue from the Real Estate segment and associated expense can fluctuate significantly based upon the timing of closings and the type of real estate being sold, causing volatility in the Real Estate segment’s operating results from period to period.

Recent Trends, Risks and Uncertainties

We have identified the following important factors (as well as risks and uncertainties associated with such factors) that could impact our future financial performance or condition:

•COVID-19 has led to travel restrictions and other adverse economic impacts in global and local economies. Our operations for Fiscal 2022 continued to be negatively impacted by COVID-19 and associated government-mandated restrictions, including capacity limitations, vaccination requirements and mask and social distancing requirements. Additionally, we may impose our own COVID-19 related restrictions in addition to what is required by state and local governments in the interest of the safety of our guests, employees and resort communities. The ongoing impacts of COVID-19 and associated regional shutdowns resulted in periodic closures of our Australian ski areas during their 2021 ski seasons. Although conditions have improved relative to the prior year, we are uncertain as to the ultimate severity and duration of the COVID-19 pandemic as well as the related global or other travel restrictions and other adverse impacts. We have experienced a negative change in performance and our future performance could also be negatively impacted. In addition, the North American economy may be impacted by economic challenges in North America or declining or slowing growth in economies outside of North America, accompanied by devaluation of currencies, rising inflation, trade tariffs and fluctuating commodity prices. While we anticipate improvements as compared to Fiscal 2022 and Fiscal 2021, we cannot predict the ultimate impact that the global economic uncertainty as a result of COVID-19 will have on overall travel and leisure spending or more specifically, on our guest visitation, guest spending or other related trends for the upcoming 2022/2023 North American ski season.

•The timing and amount of snowfall can have an impact on Mountain and Lodging revenue, particularly with regard to skier visits and the duration and frequency of guest visitation. To help mitigate this impact, we sell a variety of pass products prior to the beginning of the ski season, which results in a more stabilized stream of lift revenue. Additionally, our pass products provide a compelling value proposition to our guests, which in turn create a guest commitment predominately prior to the start of the ski season. In March 2022, we began our pass product sales program for the 2022/2023 North American ski season. Pass product sales through September 23, 2022 for the upcoming 2022/2023 North American ski season increased approximately 6% in units and approximately 7% in sales dollars as compared to the prior year through September 24, 2021. Pass product sales are adjusted to include pass product sales for the Seven Springs Resorts in both periods and to eliminate the impact of foreign currency by applying an exchange rate of $0.76 between the Canadian dollar and U.S. dollar to both periods for Whistler Blackcomb pass product sales. We cannot predict if this favorable trend will continue through the remainder of the 2022 North American pass product sales campaign or the overall impact that pass product sales will have on lift revenue for the 2022/2023 North American ski season.

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•The 2021/2022 North American ski season got off to a slow start with challenging early season conditions which persisted through the holiday period, but results were strong from January through the remainder of the season. We had particularly strong Destination visitation this year, which was further supported by lift ticket sales at our Colorado and Utah resorts that exceeded our expectations through the spring. Our results at Whistler Blackcomb were also stronger than expected after the holiday period due to the easing of travel restrictions in Canada in late February. Additionally, after the holiday period, performance at our eastern U.S. ski areas was in-line with our expectations while our Tahoe resorts were impacted by challenging spring conditions, resulting in performance below our expectations. Throughout the season, our ancillary businesses continued to be capacity constrained by staffing and, in the case of dining, by operational restrictions associated with COVID-19. During the fourth quarter of Fiscal 2022, our Australian resorts experienced record visitation, driven by strong demand following two years of COVID-19 related disruptions, continued momentum in advance commitment pass product sales following the addition of Hotham and Falls Creek in April 2019, and favorable early season conditions that continued throughout the quarter. We cannot predict the impact that COVID-19 limitations and restrictions, future weather conditions or continued staffing challenges may have on our skier visitation and results of operations for the year ending July 31, 2023 (“Fiscal 2023”) and beyond.

•As of July 31, 2022, we had $1,107.4 million of cash and cash equivalents as well as $417.4 million available under the revolver component of our Eighth Amended and Restated Credit Agreement, dated as of August 15, 2018 and as amended most recently on December 18, 2020 (the “Vail Holdings Credit Agreement”), which represents the total commitment of $500.0 million less certain letters of credit outstanding of $82.6 million. Additionally, we have a credit facility which supports the liquidity needs of Whistler Blackcomb (the “Whistler Credit Agreement”). As of July 31, 2022, we had C$281.6 million ($220.0 million) available under the revolver component of the Whistler Credit Agreement which represents the total commitment of C$300.0 million ($234.3 million) less outstanding borrowings of C$15.0 million ($11.7 million) and letters of credit outstanding of C$3.4 million ($2.6 million). We believe that our existing cash and cash equivalents, availability under our credit agreements and the expected positive cash flow from operating activities of our Mountain and Lodging segments less resort capital expenditures will continue to provide us with sufficient liquidity to fund our operations.

•On December 31, 2021, through a wholly-owned subsidiary, we acquired Seven Springs Mountain Resort, Hidden Valley Resort and Laurel Mountain Ski Area in Pennsylvania (collectively, the “Seven Springs Resorts”) from Seven Springs Mountain Resort, Inc. and its affiliates for a purchase price of approximately $116.5 million, after adjustments for certain agreed-upon terms, which we funded with cash on hand. The acquisition included the mountain operations of the Seven Springs Resorts, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities), as well as hotel, conference center and other related operations. We cannot predict the ultimate impact the acquisition of the Seven Springs Resorts will have on our future results from operations.

•On August 3, 2022, through a wholly-owned subsidiary, we acquired a 55% controlling interest in Andermatt-Sedrun Sport AG (“Andermatt-Sedrun”) from Andermatt Swiss Alps AG (“ASA”). Andermatt-Sedrun controls and operates all of Andermatt-Sedrun's mountain and ski-related assets, including lifts, most of the restaurants and a ski school operation at the ski area. We invested CHF 149.3 million ($155.7 million), comprised of a CHF 110.0 million ($114.4 million) investment into Andermatt-Sedrun for use in capital investments to enhance the guest experience on the mountain and CHF 39.3 million ($41.3 million) paid to ASA. The proceeds paid to ASA will be fully reinvested into the real estate developments in the base area. ASA retains a 40% ownership stake, with a group of existing shareholders comprising the remaining 5% ownership. We will provide unlimited and unrestricted access to Andermatt-Sedrun on the Epic Pass for the 2022/2023 ski season, as well as provide access on other pass products. We cannot predict the ultimate impact the acquisition of Andermatt-Sedrun will have on our future results from operations.

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Results of Operations

Summary

Shown below is a summary of operating results for Fiscal 2022, Fiscal 2021 and Fiscal 2020 (in thousands):

(1) Segment results for Fiscal 2021 and Fiscal 2020 have been retrospectively adjusted to reflect current period presentation. See Notes to the Consolidated Financial Statements for additional information.

A discussion of segment results, including reconciliations of net income attributable to Vail Resorts, Inc. to Total Reported EBITDA, and other items can be found below. The consolidated results of operations, including any consolidated financial metrics pertaining thereto, include the operations of the Seven Springs Resorts (acquired December 31, 2021) prospectively from the date of acquisition.

COVID-19 in general had an adverse impact on our results of operations for Fiscal 2022, Fiscal 2021 and Fiscal 2020 as further described below in our segment results of operations.

The sections titled “Fiscal 2022 compared to Fiscal 2021” and “Fiscal 2021 compared to Fiscal 2020” in each of the Mountain and Lodging segment discussions below provide comparisons of financial and operating performance for Fiscal 2022 to Fiscal 2021 and Fiscal 2021 to Fiscal 2020, respectively, unless otherwise noted.

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Mountain Segment

Mountain segment operating results for Fiscal 2022, Fiscal 2021 and Fiscal 2020 are presented by category as follows (in thousands, except ETP):