VAIL RESORTS INC - Annual Report: 2020 (Form 10-K)

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•	the ultimate duration of COVID-19 and its short-term and long-term impacts on consumer behaviors, the economy generally, and our business and results of operations, including the ultimate amount of refunds that we would be required to refund to our pass product holders for qualifying circumstances under our recently launched Epic Coverage program;

•	the willingness of our guests to travel due to terrorism, the uncertainty of military conflicts or outbreaks of contagious diseases (such as the current outbreak of COVID-19), and the cost and availability of travel options and changing consumer preferences or willingness to travel;

•	prolonged weakness in general economic conditions, including adverse effects on the overall travel and leisure related industries;

•	unfavorable weather conditions or the impact of natural disasters;

•	risks related to our reliance on information technology, including our failure to maintain the integrity of our customer or employee data and our ability to adapt to technological developments or industry trends;

•	risks related to cyber-attacks;

•	the seasonality of our business combined with adverse events that may occur during our peak operating periods;

•	competition in our mountain and lodging businesses;

•	the high fixed cost structure of our business;

•	our ability to fund resort capital expenditures;

•	risks related to a disruption in our water supply that would impact our snowmaking capabilities and operations;

•	our reliance on government permits or approvals for our use of public land or to make operational and capital improvements;

•	risks related to federal, state, local and foreign government laws, rules and regulations;

•	risks related to changes in security and privacy laws and regulations which could increase our operating costs and adversely affect our ability to market our products, properties and services effectively;

•	risks related to our workforce, including increased labor costs, loss of key personnel and our ability to hire and retain a sufficient seasonal workforce;

•	adverse consequences of current or future legal claims;

•	a deterioration in the quality or reputation of our brands, including our ability to protect our intellectual property and the risk of accidents at our mountain resorts;

•	our ability to successfully integrate acquired businesses, or that acquired businesses may fail to perform in accordance with expectations, including Peak Resorts, Hotham, Falls Creek or future acquisitions;

•	our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 with respect to acquired businesses;

•	risks associated with international operations;

•	fluctuations in foreign currency exchange rates where the Company has foreign currency exposure, primarily the Canadian and Australian dollars, as compared to the U.S. dollar;

•	changes in accounting judgments and estimates, accounting principles, policies or guidelines or adverse determinations by taxing authorities, as well as risks associated with uncertainty of the impact of tax reform legislation in the United States;

•	risks related to our indebtedness and our ability to satisfy our debt service requirements under our outstanding debt including our unsecured senior notes, which could reduce our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities and other purposes;

•	a materially adverse change in our financial condition; and

•	other risks and uncertainties included under Part I, Item 1A. “Risk Factors” in this document.

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ITEM 1.	BUSINESS

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•	Breckenridge Ski Resort (“Breckenridge”) - the most visited mountain resort in the United States (“U.S.”) for the 2019/2020 ski season with five interconnected peaks offering an expansive variety of terrain for every skill level, including access to above tree line intermediate and expert terrain, and progressive and award-winning terrain parks.

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•	Park City Resort (“Park City”) - the second most visited mountain resort in the U.S. for the 2019/2020 ski season and the largest by acreage in the U.S. Park City offers 7,300 acres of skiable terrain for every type of skier and snowboarder and offers guests an outstanding ski experience with fine dining, ski school, retail and lodging.

•	Vail Mountain Resort (“Vail Mountain”) - the third most visited mountain resort in the U.S. for the 2019/2020 ski season. Vail Mountain offers some of the most expansive and varied terrain in North America with approximately 5,300 skiable acres including seven world renowned back bowls and the resort’s rustic Blue Sky Basin.

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Keystone Resort (“Keystone”) - the fourth most visited mountain resort in the U.S. for the 2019/2020 ski season and home to the highly renowned A51 Terrain Park, as well as the largest area of night skiing in Colorado. Keystone also offers guests a unique skiing opportunity through guided snow cat ski tours accessing five bowls. Keystone is a premier destination for families with its “Kidtopia” program focused on providing activities for kids on and off the mountain.

•	Beaver Creek Resort (“Beaver Creek”) - the ninth most visited mountain resort in the U.S. for the 2019/2020 ski season. Beaver Creek is a European-style resort with multiple villages and also includes a world renowned children’s ski school program focused on providing a first-class experience with unique amenities such as a dedicated children’s gondola.

•	Crested Butte Mountain Resort (“Crested Butte”) - acquired in September 2018, Crested Butte is located in southwest Colorado and includes over 1,500 skiable acres and over 3,000 feet of vertical drop. Crested Butte is known for its historic town, iconic mountain peaks and legendary skiing and riding terrain.

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Whistler Blackcomb (“Whistler Blackcomb”) - located in the Coast Mountains of British Columbia, Canada, approximately 85 miles from the Vancouver International Airport, Whistler Blackcomb is the most visited and largest year-round mountain resort in North America, with two mountains connected by the PEAK 2 PEAK gondola, which combined offer over 200 marked runs, over 8,000 acres of terrain, 14 alpine bowls, three glaciers and one of the longest ski seasons in North America. In the summer Whistler Blackcomb offers a variety of activities, including hiking trails, a bike park and sightseeing. Whistler Blackcomb is a popular destination for international visitors and was home to the 2010 Winter Olympics.

•	Heavenly Mountain Resort (“Heavenly”) - the tenth most visited mountain resort in the U.S. for the 2019/2020 ski season. Heavenly is located near the South Shore of Lake Tahoe with over 4,800 skiable acres, straddling the border of California and Nevada and offers unique and spectacular views of Lake Tahoe. Heavenly offers great nightlife, including its proximity to several casinos.

•	Northstar Resort (“Northstar”) - located near the North Shore of Lake Tahoe, Northstar is the premier luxury mountain resort destination near Lake Tahoe which offers premium lodging, a vibrant base area and over 3,000 skiable acres. Northstar’s village features high-end shops and restaurants, a conference center and a 9,000 square-foot skating rink.

•	Kirkwood Mountain Resort (“Kirkwood”) - located about 35 miles southwest of South Lake Tahoe, offering a unique location atop the Sierra Crest, Kirkwood is recognized for offering some of the best high alpine advanced terrain in North America with 2,000 feet of vertical drop and over 2,300 acres of terrain.

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•	World-Class Mountain Resorts and Integrated Base Resort Areas

•	Snow Conditions

•	Lift Service

•	upgrading the Daisy and Brooks fixed-grip lifts at Stevens Pass to four-person high-speed lifts;

•	upgrading the Teocalli fixed-grip lift at Crested Butte to a four-person high-speed lift;

•	installing a new four-person lift at Park City, Over and Out;

•	replacing the Leichardt T-bar lift at Perisher with a new four-person lift;

•	installing a new 10-person gondola running from the base to the top of Blackcomb Mountain, replacing the Wizard and Solar four person chairs with a single state-of-the-art gondola;

•	upgrading the four-person Emerald express lift to a high speed six-person lift on Whistler Mountain;

•	upgrading the three-person fixed grip Catskinner lift to a four-person high speed lift at Blackcomb Mountain;

•	upgrading the fixed-grip High Meadow lift to a four-person high speed lift at the Canyons area of Park City;

•	replacing the Galaxy two-person lift with a three-person lift at Heavenly,

•	replacing each of the Northwoods lift at Vail Mountain, the Peak 10 Falcon SuperChair at Breckenridge and the Montezuma lift at Keystone with new high speed, six-passenger lifts; and

•	upgrading the Drink of Water lift at Beaver Creek with a new high speed, four-person lift.

•	Terrain Parks

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•	Commitment to the Guest Experience

•	Season Pass & Epic Day Pass Products

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•	Premier Ski Schools

•	Dining

•	Retail/Rental

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•	On-Mountain Activities

•	Lodging and Real Estate

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•	all of our hotels are located in unique, highly desirable resort destinations;

•	our hotel portfolio has achieved some of the most prestigious hotel designations in the world, including two properties in our portfolio that are currently rated as AAA 4-Diamond;

•	many of our hotels (both owned and managed) are designed to provide a look that feels indigenous to their surroundings, enhancing the guest’s vacation experience;

•	each of our RockResorts hotels provides the same high level of quality and services, while still providing unique characteristics which distinguish the resorts from one another. This appeals to travelers looking for consistency in quality and service offerings together with an experience more unique than typically offered by larger luxury hotel chains;

•	many of the hotels in our portfolio provide a wide array of amenities available to the guest such as access to world-class ski and golf resorts, spa and fitness facilities, water sports and a number of other outdoor activities, as well as highly acclaimed dining options;

•	conference space with the latest technology is available at most of our hotels. In addition, guests at Keystone can use our company-owned Keystone Conference Center, the largest conference facility in the Colorado Rocky Mountain region with more than 100,000 square feet of meeting, exhibit and function space;

•	we have a central reservations system that leverages off of our mountain resort reservations system and has an online planning and booking platform, offering our guests a seamless and useful way to make reservations at our resorts; and

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we actively upgrade the quality of the accommodations and amenities available at our hotels through capital improvements. Capital funding for third-party owned properties is provided by the owners of those properties to maintain standards required by our management contracts. Projects at our owned properties completed over the past several years include extensive refurbishments and upgrades to the Grand Summit Hotel, Colter Bay Village Cabins, and DoubleTree by Hilton Breckenridge. Additionally, we have completed guest room renovations at the Keystone Lodge and The Pines Lodge.

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ITEM 1A.	RISK FACTORS.

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•	our ability to open our North American Resorts for their winter season in a timely manner, if at all, and keep such Resorts open;

•	our ability to attract and retain guests given the risks, or perceived risks, of gathering in public places;

•	the willingness of guests to travel or purchase advanced commitment products, such as our portfolio of season pass products;

•	existing or future restrictions imposed by governmental authorities that may restrict our operations or the ability of our guests to return to our Resorts;

•	actual or perceived deterioration or weakness in economic conditions, unemployment levels, the job or housing markets, consumer debt levels or consumer confidence, as well as other adverse economic or market conditions due to COVID-19 or otherwise, and their collective impacts on demand for travel and leisure;

•	our ability to adjust capital spending and maintain sufficient liquidity to remain positioned for long-term success;

•	our ability to incentivize and retain our current employees, reinstate our furloughed employees as we reopen, attract and hire sufficient future seasonal employees, and the risk of lawsuits related to COVID-19;

•	our ability to access debt and equity capital on attractive terms, or at all; and

•	the impact of disruption and instability in the global financial markets or deteriorations in credit and financing conditions on our access to capital necessary to fund operating costs, including maintenance capital spending, or to address maturing liabilities.

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•	proximity to population centers;

•	availability and cost of transportation to ski areas;

•	availability and quality of lodging options in resort areas;

•	ease of travel to ski areas (including direct flights by major airlines);

•	pricing of lift tickets and/or pass products and the magnitude, quality and price of related ancillary services (ski school, dining and retail/rental), amenities and lodging;

•	snowmaking facilities;

•	type and quality of skiing and snowboarding offered;

•	duration of the ski season;

•	weather conditions; and

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•	reputation.

•	our future operating performance;

•	general economic conditions and economic conditions affecting the resort industry, the ski industry and the capital markets;

•	competition; and

•	legislative and regulatory matters affecting our operations and business;

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•	our evaluation of the synergies and/or long-term benefits of an acquired business;

•	our inability to integrate acquired businesses into our operations as planned;

•	diversion of our management’s attention;

•	increased expenditures (including legal, accounting and due diligence expenses, higher administrative costs to support the acquired entities, information technology, personnel and other integration expenses);

•	potential increased debt leverage;

•	potential issuance of dilutive equity securities;

•	litigation arising from acquisition activity;

•	potential impairment of goodwill, intangible or tangible assets; and

•	unanticipated problems or liabilities.

•	restriction on the transfer of funds to and from foreign countries, including potentially negative tax consequences;

•	currency exchange rates;

•	increased exposure to general market and economic conditions outside the United States;

•	additional political risk;

•	compliance with international laws and regulations (including anti-corruption regulations, such as the U.S. Foreign Corrupt Practices Act);

•	data security; and

•	foreign tax treaties and policies.

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•	quarterly variations in our operating results;

•	operating results that vary from the expectations of securities analysts and investors;

•	change in valuations, including our real estate held for sale;

•	changes in the overall travel, gaming, hospitality and leisure industries;

•	changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors or such guidance provided by us;

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•	announcements by us or companies in the travel, gaming, hospitality and leisure industries of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures, capital commitments, plans, prospects, service offerings or operating results;

•	additions or departures of key personnel;

•	future sales of our securities;

•	trading and volume fluctuations;

•	other risk factors as discussed herein; and

•	other unforeseen events.

•	delay, defer or prevent a change in control of our Company;

•	discourage bids for our securities at a premium over the market price;

•	adversely affect the market price of, and the voting and other rights of the holders of our securities; or

•	impede the ability of the holders of our securities to change our management.

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•	make it more difficult for us to satisfy our obligations under our outstanding debt;

•	increase our vulnerability to general adverse economic and industry conditions;

•	require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, including the annual payments under the Canyons lease, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, real estate developments, marketing efforts and other general corporate purposes;

•	limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

•	place us at a competitive disadvantage compared to our competitors that have less debt;

•	limit our ability to borrow additional funds, refinance debt, or obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or other general corporate purposes;

•	make it difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt; and

•	cause potential or existing customers to not contract with us due to concerns over our ability to meet our financial obligations, such as insuring against our professional liability risks, under such contracts.

•	enter into agreements that restrict the ability of subsidiaries to make dividends, distributions or other payments to us or the guarantors;

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•	paying any dividends or making share repurchases, unless (x) no default or potential default exists under the Credit Agreement and (y) the Company has liquidity of at least $400.0 million, and the aggregate amount of dividends paid and share repurchases made by the Company during the Temporary Waiver Period may not exceed $38.2 million in any fiscal quarter;

•	making capital expenditures in excess of $200.0 million per 12-month period ending January 31, other than non-recurring extraordinary capital expenditures incurred in connection with emergency repairs, life safety repairs or ordinary course maintenance repairs;

•	incurring any indebtedness secured by the collateral under the Vail Holdings Credit Agreement other than pursuant to the existing revolving commitments under the Vail Holdings Credit Agreement;

•	making (i) non-ordinary course investments in unrestricted subsidiaries unless the Company has liquidity of at least $300.0 million and (ii) investments in non-subsidiaries in excess of $50.0 million in the aggregate; and

•	acquiring all or a majority of the capital stock or all or any substantial portion of the assets of any entity or merging or consolidating with another entity.

•	grant or permit liens;

•	engage in sale/leaseback transactions; and

•	engage in a consolidation or merger, or sell, transfer or otherwise dispose of all or substantially all of our assets.

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ITEM 1B.	UNRESOLVED STAFF COMMENTS.

ITEM 2.	PROPERTIES.

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ITEM 3.	LEGAL PROCEEDINGS.

ITEM 4.	MINE SAFETY DISCLOSURES.

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ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

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ITEM 6.	SELECTED FINANCIAL DATA.

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

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Given the escalating concerns surrounding the spread of COVID-19 and the potential impact that continuing to operate our resorts would have had on our resort communities, we suspended the operations at all of our North American Resorts and retail stores beginning on March 15, 2020 for the remainder of the 2019/2020 North American ski season. As a result of the COVID-19 pandemic and in response to guidance from the Centers for Disease Control and Prevention and other local and national health authorities, operations for the 2020 North American summer season were limited, adjusted or restricted. Additionally, although our Mount Hotham and Falls Creek ski areas opened for their 2020 winter season on July 6, 2020, we closed these two ski areas four days later due to a “stay at home” order put in place by the Victorian government as a result of a reemergence of COVID-19 in the region. These various closures and limitations on our operations had a significant negative impact on our results for Fiscal 2020, and we cannot predict the ultimate impact that the Resort Closures and other business disruptions as a result of the COVID-19 pandemic will continue to have on our results for the upcoming 2020/2021 North American ski season or our overall results for Fiscal 2021.

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The global outbreak of COVID-19 has led to travel restrictions and other adverse economic impacts including reduced consumer confidence, an increase in unemployment rates and volatility in global and local economies. Although we are uncertain as to the ultimate severity and duration of the COVID-19 pandemic, the related global travel restrictions and other adverse impacts, we have seen a significant negative change in performance and expect our future performance will 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 lower commodity prices. We cannot predict the ultimate impact that the global economic

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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. In early March 2020, we began our pass product sales program for the 2020/2021 North American ski season. In April 2020 and in connection with our announcement of the Credit Offer, we announced significant extensions to our traditional deadlines for pass product sales that normally would have occurred throughout the North American summer selling season. These extensions in our traditional deadlines and broader impacts from COVID-19 has had a significant negative impact on pass product sales through July 31, 2020 in comparison to the prior year comparable pass product sales. As previously discussed, as a result of the Resort Closures, we provided a Credit Offer to 2019/2020 pass product holders to apply toward the purchase of a 2020/2021 pass product. Additionally, looking ahead to the 2020/2021 North American ski season, we are optimistic that we will be operational for the ski season, but we also understand that many pass holders are nervous about the future given the current uncertainty, as our ability to open our Resorts may depend on local and/or state restrictions outside of our control. As a result, we introduced Epic Coverage for the 2020/2021 North American ski season, which is free for all pass holders and completely replaces the need to purchase pass insurance. Epic Coverage provides refunds in the event of certain resort closures (e.g., for COVID-19), giving pass product holders a refund for any portion of the season that is lost due to qualifying circumstances. Additionally, Epic Coverage provides a refund for qualifying personal circumstances that were historically covered by our pass insurance for eligible injuries, job losses and many other personal events, as well as in the event that the pass holder cannot reserve their preferred days. In addition to these changes, in order to give our pass product holders the time they need to make decisions regarding next season, we extended the deadline for pass holders to use their Credit Offer and receive spring benefits (including Buddy Tickets) until September 17, 2020, and we extended the period for pass holders to lock in their purchase with only $49 down. We also announced that we would be implementing a reservation system for our 34 North American Resorts for the 2020/2021 North American ski season, which will only be available for pass holders during the early season (paid lift tickets will not be sold until December 8, 2020).

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On March 27, 2020, in response to the outbreak of the COVID-19 pandemic, the U.S. government enacted legislation commonly referred to as the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act includes various amendments to the U.S. tax code that impacted the Company’s accounting and reporting for income taxes during Fiscal 2020 and is expected to continue to impact the Company’s accounting and reporting for income taxes in the future, including the following: (i) allowing a carryback of the entire amount of eligible Federal net operating losses (“NOLs”) generated in calendar years 2018, 2019 and 2020 for up to five years prior to when such losses were incurred, representing a change from previous rules under the Tax Cuts & Jobs Act of 2017 (the “TCJA”), in which NOLs could not be carried back to prior years and utilization was limited to 80% of taxable income in future years; (ii) treatment of certain qualified improvement property (“QIP”) as 15-year property and allowing such QIP placed in service after December 31, 2017 to be eligible for bonus depreciation, which the Company expects will incrementally add to its pre-existing NOLs; and (iii) increases in the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for calendar years 2019 and 2020. The CARES Act also provides for refundable employee retention tax credits and defers the requirement to remit the employer-paid portion of social security payroll taxes. As a result, we recorded a benefit of approximately $9.6 million during Fiscal 2020, which primarily offset Mountain and Lodging operating expense, as a result of wages paid to employees who were not providing services. We are still in the process of fully evaluating the potential benefits that the amendments discussed above will have on our financial statements. We also recognized a credit of approximately $8.5 million during Fiscal 2020 as a result of the recent Canada Emergency Wage Subsidy and Australian JobKeeper legislation for our Canadian and Australian employees, which primarily offset Mountain and Lodging operating expense.

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As of July 31, 2020, we had $391.0 million of cash and cash equivalents as well as $418.8 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 April 28, 2020 (the “Vail Holdings Credit Agreement”), which represents the total commitment of $500.0 million less certain letters of credit outstanding of $81.2 million. Additionally, we have a credit facility which supports the liquidity needs of Whistler Blackcomb (the “Whistler Credit Agreement”). As of July 31, 2020, we had C$221.1 million ($165.1 million) available under the revolver component of the Whistler Credit Agreement (which represents the total commitment of C$300.0 million ($224.0 million) less outstanding borrowings of C$78.0 million ($58.2 million) and a letter of credit outstanding of C$0.9 million ($0.7 million)).

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On September 24, 2019, through a wholly-owned subsidiary, we acquired 100% of the outstanding stock of Peak Resorts, Inc. (“Peak Resorts”) at a purchase price of $11.00 per share or approximately $264.5 million. In addition, contemporaneous with the closing the transaction, Peak Resorts was required to pay approximately $70.2 million of certain outstanding debt instruments and lease obligations in order to complete the transaction. Accordingly, the total purchase price, including the repayment of certain outstanding debt instruments and lease obligations, was approximately $334.7 million, for which we borrowed approximately $335.6 million under the Vail Holdings Credit Agreement to fund the acquisition. The newly acquired resorts include: Mount Snow in Vermont; Hunter Mountain in New York; Attitash Mountain Resort, Wildcat Mountain and Crotched Mountain in New Hampshire; Liberty Mountain Resort, Roundtop Mountain Resort, Whitetail Resort, Jack Frost and Big Boulder in Pennsylvania; Alpine Valley, Boston Mills, Brandywine and Mad River Mountain in Ohio; Hidden Valley and Snow Creek in Missouri; and Paoli Peaks in Indiana. The acquisition included the mountain operations of the resorts, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities), as well as lodging operations at certain resorts. We expect that the acquisition of Peak Resorts will positively contribute to our annual results of operations; however we cannot predict the ultimate impact the new resorts will have on our future results of operations.

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•	the maximum leverage ratio permitted under the maximum leverage ratio financial maintenance covenant reduces each quarter after the expiration of the Financial Covenants Temporary Waiver Period as follows:

•	the minimum interest coverage ratio permitted under the minimum interest coverage ratio financial maintenance covenant will be 2.00 to 1.00.

•	paying any dividends or making share repurchases, unless (x) no default or potential default exists under the Vail Holdings Credit Agreement and (y) the Company has liquidity (as defined above) of at least $400.0 million, and the aggregate amount

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•	making capital expenditures in excess of $200.0 million per 12-month period ending January 31, other than non-recurring extraordinary capital expenditures incurred in connection with emergency repairs, life safety repairs or ordinary course maintenance repairs;

•	incurring any indebtedness secured by the collateral under the Vail Holdings Credit Agreement other than pursuant to the existing revolving commitments under the Credit Agreement;

•	making non-ordinary course investments in unrestricted subsidiaries unless the Company has liquidity (as defined above) of at least $300.0 million;

•	making investments in non-subsidiaries in excess of $50.0 million in the aggregate; and

•	acquiring all or a majority of the capital stock or all or any substantial portion of the assets of any entity or merging or consolidating with another entity.

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ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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2.	Summary of Significant Accounting Policies

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Mountain revenue is derived from a wide variety of sources, including, among other things: lift revenue, which includes sales of lift tickets and pass products; ski school revenue, which includes the revenue derived from ski school operations; dining revenue, which includes both casual and fine dining on-mountain operations; retail sales and equipment rentals; and other on-mountain revenue, which includes private ski club revenue (which includes both club dues and amortization of initiation fees), marketing and internet advertising revenue, municipal services and lodging and transportation operations at the Company’s Australian ski areas. Revenue is recognized over time as performance obligations are satisfied

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Lodging revenue is derived from a wide variety of sources, including, among other things: revenue from owned hotel rooms and managed hotel rooms; revenue from hotel dining operations; transportation revenue which relates to the Company’s Colorado resort ground transportation operations; and other lodging revenue which includes property management services, managed properties other costs reimbursements, private golf club revenue (which includes both club dues and amortization of initiation fees), and golf course fees. Lodging revenue also includes managed hotel property payroll cost reimbursements related to payroll costs at managed properties where the Company is the employer, which are reimbursed by the owner with no added margin. Therefore, these revenues and corresponding expenses have no net effect on the Company’s operating income or net income. Other than revenue from dining operations, lodging revenue is mostly recognized over time as performance obligations are satisfied as control of the service (e.g. nightly hotel room access) is transferred to the customer.

•	Real estate revenue primarily relates to the sale of development land parcels. Real estate revenue is generally recognized at a point in time when performance obligations have been satisfied, which is usually upon closing of the sales transaction and in an amount that reflects the consideration to which the Company expects to be entitled.

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•	the maximum leverage ratio permitted under the maximum leverage ratio financial maintenance covenant reduces each quarter as follows:

•	the minimum interest coverage ratio permitted under the minimum interest coverage ratio financial maintenance covenant will be 2.00 to 1.00.

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paying any dividends or making share repurchases, unless (x) no default or potential default exists under the Vail Holdings Credit Agreement and (y) the Company has liquidity (as defined above) of at least $400.0 million, and the aggregate amount of dividends paid and share repurchases made by the Company during the Financial Covenants Temporary Waiver Period may not exceed $38.2 million in any fiscal quarter;

•	making capital expenditures in excess of $200.0 million per 12-month period ending January 31, other than non-recurring extraordinary capital expenditures incurred in connection with emergency repairs, life safety repairs or ordinary course maintenance repairs;

•	incurring any indebtedness secured by the collateral under the Vail Holdings Credit Agreement other than pursuant to the existing revolving commitments under the Credit Agreement;

•	making non-ordinary course investments in unrestricted subsidiaries unless the Company has liquidity (as defined above) of at least $300.0 million;

•	making investments in non-subsidiaries in excess of $50.0 million in the aggregate; and

•	acquiring all or a majority of the capital stock or all or any substantial portion of the assets of any entity or merging or consolidating with another entity.

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i.	The Alpine Valley Secured Note. The $4.6 million Alpine Valley Secured Note provides for interest payments through its maturity on December 1, 2034. As of July 31, 2020, interest on this note accrued at a rate of 11.21%.

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ii.	The Boston Mills/Brandywine Secured Note. The $23.3 million Boston Mills/Brandywine Secured Note provides for interest payments through its maturity on December 1, 2034. As of July 31, 2020, interest on this note accrued at a rate of 10.75%.

iii.	The Jack Frost/Big Boulder Secured Note. The $14.3 million Jack Frost/Big Boulder Secured Note provides for interest payments through its maturity on December 1, 2034. As of July 31, 2020, interest on this note accrued at a rate of 10.75%.

iv.	The Mount Snow Secured Note. The $51.1 million Mount Snow Secured Note provides for interest payments through its maturity on December 1, 2034. As of July 31, 2020, interest on this note accrued at a rate of 11.78%.

v.	The Hunter Mountain Secured Note. The $21.0 million Hunter Mountain Secured Note provides for interest payments through its maturity on January 5, 2036. As of July 31, 2020, interest on this note accrued at a rate of 8.57%.

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allowing a carryback of the entire amount of eligible Federal net operating losses (“NOLs”) generated in calendar years 2018, 2019 and 2020 for up to five years prior to when such losses were incurred, representing a change from previous rules under the Tax Cuts & Jobs Act of 2017 (the “TCJA”), in which NOLs could not be carried back to prior years and utilization was limited to 80% of taxable income in future years. Under the CARES Act, the Company was permitted to carry back its pre-existing NOLs to tax years prior to the enactment of the TCJA and obtain an incremental benefit of $3.8 million related to the differential in federal tax rates between years that NOLs were generated and years that the NOLs will be carried back to;

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•	treatment of certain qualified improvement property (“QIP”) as 15-year property and allowing such QIP placed in service after December 31, 2017 to be eligible for bonus depreciation, which could incrementally add to its pre-existing NOLs; and

•	increases in the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for calendar years 2019 and 2020.

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ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

ITEM 9A.	CONTROLS AND PROCEDURES.

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ITEM 9B.	OTHER INFORMATION.

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

ITEM 11.	EXECUTIVE COMPENSATION.

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

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ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES.

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

a)	Index to Financial Statements.

(1)	See Item 8. “Financial Statements and Supplementary Data” for the index to the Financial Statements.

(2)	Schedules have been omitted because they are not required or not applicable, or the required information is shown in the financial statements or notes to the financial statements.

(3)	See the Index to Exhibits below.

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ITEM 16.	FORM 10-K SUMMARY.

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