Vail Resorts Capital Improvement Projects Dropped Due To COVID-19 Financial Impact

With the early end to the 2019/2020 ski and snowboard season and the continued closures due to the COVID-19 outbreak, ski mountains have been hit hard when it comes to their financial well-being. To this point, Vail Resorts, Inc. announced yesterday, April 1st, a plan to save on spending which affects capital improvement projects, employee status and pay, and shareholder payouts.

"The Company went into this challenging time period with a strong financial position and based on recent events, we are currently incorporating more challenging scenarios into our planning for our fourth fiscal quarter of 2020 and the first fiscal quarter of 2021. As mentioned in our March 18, 2020 press release, we are taking additional proactive steps to align our capital spending and return of capital approach to ensure that we remain positioned for long-term success. We are also taking steps to address our operating costs and the inability of many of our employees to perform their roles in the current environment." - Rob Katz CEO of Vail Resorts, Inc.

Part of the plan includes the deferment of many of what CEO Rob Katz called "discretionary capital projects". This includes new chair lifts, terrain expansion, and other mountain and base area improvements. This plan will, however, allow the vast majority of maintenance capital spending to continue. This will allow for a capital plan reduction of about $80-$85 million.

For employees, there have been steps taken to not only furlough those who are not able to work at their mountain locations, but for upper-level employees to take a reduction in salary during the shutdown. However, there is a bright side as healthcare coverage will continue for a number of employees.

"To ensure we can navigate the financial challenges ahead and because of the reality of their inability to work at their locations, we have made the difficult decision to furlough the majority of our U.S. year-round hourly employees for at least a month, and potentially longer depending on when we are able to reopen our operations. We will be continuing healthcare coverage for these employees, including covering the entire cost of their healthcare premiums and hope to bring these employees back to work as soon as possible. Additionally, we will be implementing a six-month salary reduction for all U.S. salaried employees, with reductions beginning at 5% and rising to 25% for our top executives. As CEO, I will be foregoing my full salary for the next six months and our Board of Directors will also be foregoing 100% of their cash compensation during this period. We also may announce potential changes for our Canadian-based and Australian-based employees, but our approach will be based on the unique challenges faced by those resorts and any other local considerations." - Rob Katz CEO of Vail Resorts, Inc.

Also, in the interest of maintaining liquidity, seen as being in the best long-term interests for the company and shareholders, the Board of Directors has made the decision to suspend quarterly cash dividends for the next two quarters, preserving over $140 million of liquidity for the business. CEO Rob Katz has said, "We remain committed to returning excess capital to shareholders and will re-evaluate decisions on capital allocation in December 2020." However, the company's previously announced dividend payment occurring on April 9, 2020, is not affected by this suspension.

Vail Resorts, Inc. is also looking for ways to address the concerns of its pass holders.

"We have also communicated with our season pass holders and indicated that we have heard their frustration about the early closure to the 2019/2020 ski season and are committed to identifying an approach for them that acknowledges this past season and retains their loyalty for the future. We intend to share more details about our season pass plans with our guests by the end of April and are deferring all auto-renew charges and all spring deadlines for Buddy Tickets into May." - Rob Katz CEO of Vail Resorts, Inc.

It is likely that other companies, from large ski corporations to smaller, independently owned and operated mountains are going to have to make similar financial decisions due to the early closure and continued shutdown orders that are in effect across the country and around the world. Hopefully, these choices will not only serve the financial interests of the company but be able to have some balance with employee and visitor needs, as well. As CEO Rob Katz said, "This is one of the most challenging times many of us can remember..."

Photo Credit: Vail Resorts/FB


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