Peak Resorts Reports Second Quarter Fiscal 2018 Results
Timothy D. Boyd, President and Chief Executive Officer, commented, “As we closed out the first half of fiscal 2018, which is the seasonally slowest part of our fiscal year, Peak Resorts delivered second quarter revenue growth of 4% and overall results consistent with our expectations. In fiscal 2018 to-date, we have succeeded with our expense management and strategic investment initiatives to position the Company for what we believe will be a very successful ski season and a strong second half of our 2018 fiscal year. In particular, Peak Pass sales were running approximately 9% higher on a unit and revenue basis over the prior year through mid-October and we have seen further strength in sales through November, including increased interest for the Drifter pass for young adults, which remains available at pre-season pricing through mid-December.
“More recently, the completion of our EB-5 funded West Lake snowmaking project enabled Mount Snow to open for the 2017/2018 season on November 11, representing one of the earliest openings on record for our flagship resort. The powerful new snowmaking infrastructure in place at Mount Snow allowed our team to welcome skiers with the most skiable terrain in the Northeast and build on that initial opening capacity with more than 180 skiable acres for the Thanksgiving holiday weekend. Skier interest at Mount Snow has been very strong, as has early visitation at Hunter Mountain, Wildcat and Big Boulder, which represents a very favorable start to the new ski season for our Northeast resorts.
“Furthermore, we expect customer excitement at Mount Snow to build throughout the season as skiers and snowboarders experience the power of our expanded snowmaking capacity to create great conditions and they see the progress we are making on the Carinthia Ski Lodge, which remains on schedule to open for the 2018/2019 ski season. Both the West Lake and Carinthia base development projects highlight Peak’s ability to structure, finance and execute facility enhancement projects that are expected to drive increased patronage and revenue growth as well as provide an attractive ROI.
“The recent federal approval of the Great North Regional Center, our new privately-managed regional center, positions Peak to leverage this new EB-5 investment sponsor for additional Northeast region development projects. As a central component of our long-term organic growth strategy, the Great North Regional Center provides us with enhanced oversight and improved flexibility for future EB-5 projects, including the upcoming phase two of our Mount Snow development plan, which will include 104 ski-in/ski-out residential units centered on the Carinthia base.”
Fiscal Second Quarter Results Review
Fiscal 2018 second quarter revenue increased 4.3% year over year to $8.8 million as the Company benefited from an increase in other revenue. While the fiscal second quarter is traditionally the Company’s slowest seasonal period, results in the quarter were roughly in-line with expectations.
Resort operating expenses in the fiscal 2018 second quarter rose 16.2% year over year to $15.1 million as the Company’s operating expense levels normalized versus the prior year. Peak significantly reduced variable expenses in the prior year period through employee furloughs and strict spending controls to mitigate ongoing liquidity restraints driven by the negative impact from unusually warm winter weather during the 2015/2016 ski season which led to lower overall visitation levels. The liquidity restraints which impacted the prior year period were also related to the delay in the Company’s EB-5 escrow reimbursement. General and administrative expenses remained flat at $1.5 million.
Reported EBITDA for the second fiscal quarter of 2018 was a loss of $8.6 million, compared to a loss of $6.9 million in the year-ago quarter.
Balance Sheet Update
As of October 31, 2017, the Company had cash and cash equivalents of $13.0 million and total outstanding debt of $182.2 million, including $12.4 million drawn against its revolving line of credit and long-term debt of $164.9 million. During the 2018 fiscal second quarter, the Company renewed its acquisition line of credit and entered into a new revolving line of credit.
Christopher J. Bub, Chief Financial Officer, added, “Our fiscal second quarter historically operates at a loss as our resorts are not open for ski operations during the period. However, the fiscal 2018 second quarter was a very productive period for Peak Resorts and we are positioned for solid growth in the second half of this fiscal year, dependent of course on the expectation of normal seasonal weather.
“Capital spending of $9.5 million in the quarter included $3.0 million of West Lake snowmaking project expenditures and $2.7 million for the Carinthia Ski Lodge project, both of which were EB-5 funded. The remaining $3.8 million of capital spending included the widening of the Long John trail at Mount Snow, initial spending on the Hunter Mountain expansion project and normal maintenance capital spending to prepare our resorts for the upcoming season. These capital projects are in keeping with our long-term strategy of investing in our resorts to further improve the guest experience and operating performance, which we believe will result in yield improvements across our business and enhance our resorts for the 2017/2018 ski season.
“More recently, we bolstered our liquidity position, closing on a new $10 million revolving line of credit and renewing our $15 million acquisition line of credit with Royal Banks of Missouri. In all, Peak Resorts’ capital structure positions the Company to pursue return-focused expansion at our existing resorts and growth in our mountain portfolio while returning capital to shareholders through our regular quarterly cash dividend and enhancing long-term shareholder value.”
Definitions and Reconciliations of Non-GAAP Financial Measures
Reported EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles (“GAAP”). The Company defines Reported EBITDA as net income before interest, income taxes, depreciation and amortization, gain on sale/leaseback, other income or expense and other non-recurring items. The following table includes a reconciliation of Reported EBITDA to the GAAP related measure of net loss.
The Company has specifically chosen to include Reported EBITDA as a measurement of its results of operations because it considers this measurement to be a significant indication of its financial performance and available capital resources. Because of large depreciation and other charges relating to the Company’s ski resorts operations, it is difficult for management to fully and accurately evaluate financial performance and available capital resources using net income alone. In addition, the use of this non-U.S. GAAP measure provides an indication of the Company’s ability to service debt, and management considers it an appropriate measure to use because of the Company’s highly leveraged position. Management believes that by providing investors with Reported EBITDA, they will have a clearer understanding of the Company’s financial performance and cash flows because Reported EBITDA: (i) is widely used in the ski industry to measure a company’s operating performance without regard to items excluded from the calculation of such measure; (ii) helps investors to more meaningfully evaluate and compare the results of the Company’s operations from period to period by removing the effect of its capital structure and asset base from operating results; and (iii) is used by the Board of Directors, management and lenders for various purposes, including as a measure of the Company’s operating performance and as a basis for planning.
The items excluded from net income to arrive at Reported EBITDA are significant components for understanding and assessing the Company’s financial performance and liquidity. Reported EBITDA 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 Company’s condensed consolidated financial statements as indicators of financial performance or liquidity. Because Reported EBITDA is not a measurement determined in accordance with U.S. GAAP and is susceptible to varying calculations, Reported EBITDA as presented may not be comparable to other similarly titled measures of other companies, limiting its usefulness as a comparative measure.
