What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-09-24 compared with 2019-09-26 · 480 added, 376 removed, 826 unchanged (51% of the section changed)

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Based on this assessment, management concluded that, as of July 31, 2020, the Company’s internal control over financial reporting was effective.

Management’s evaluation and conclusion on the effectiveness of internal control over financial reporting as of July 31, 2019 excluded certain elements of internal controls of Falls Creek and Hotham (acquired in April 2019), Triple Peaks (acquired in September 2018) and Stevens Pass (acquired in August 2018) due to the timing of these acquisitions.

Those elements of the acquired resorts’ internal controls over financial reporting that have been excluded represent approximately less than 1% of total consolidated assets and approximately 7% of total consolidated net revenues of the Company as of and for the year ended July 31, 2019.

Management’s evaluation and conclusion on the effectiveness of internal control over financial reporting as of July 31, 2020 excluded certain elements of internal controls of Peak Resorts (acquired in September 2019) due to the timing of this acquisition.

Those elements of the acquired resorts’ internal controls over financial reporting that have been excluded represent less than 1% of total consolidated assets and approximately 8% of total consolidated net revenues of the Company as of and for the year ended July 31, 2020.

The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of July 31, 2020, as stated in the Report of Independent Registered Public Accounting Firm on the following page.

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We have audited the accompanying consolidated balance sheets of Vail Resorts, Inc.

and its subsidiaries (the “Company”) as of July 31, 2019 and July 31, 2018, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended July 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of July 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended July 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of July 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 31, 2019 and July 31, 2018 , and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 31, 2020 and 2019 , and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of August 1, 2019.

Basis for Opinions

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded certain elements of the internal control over financial reporting of Falls Creek and Hotham, Triple Peaks, and Stevens Pass from its assessment of internal control over financial reporting as of July 31, 2019, because they were acquired by the Company in purchase business combinations in April 2019, September 2018, and August 2018, respectively.

Subsequent to the acquisitions, certain elements of Falls Creek and Hotham’s, Triple Peaks’, and Stevens Pass’ internal control over financial reporting and related processes were integrated into the Company’s existing systems and internal control over financial reporting.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded certain elements of the internal control over financial reporting of Peak Resorts from its assessment of internal control over financial reporting as of July 31, 2020 because it was acquired by the Company in a purchase business combination during September 2019.

Subsequent to the acquisition, certain elements of Peak Resorts’ internal control over financial reporting and related processes were integrated into the Company’s existing systems and internal control over financial reporting.

Those controls that were not integrated have been excluded from management’s assessment of the effectiveness of internal control over financial reporting as of July 31, 2020.

We have also excluded these elements of the internal control over financial reporting of Falls Creek and Hotham, Triple Peaks, and Stevens Pass from our audit of the Company’s internal control over financial reporting.

The excluded elements represent controls of less than 1% of consolidated assets and approximately 7% of consolidated revenues.

We have also excluded these elements of internal control over financial reporting of Peak Resorts from our audit of the Company’s internal control over financial reporting.

The excluded elements represent controls of less than 1% of consolidated assets and approximately 8% of consolidated net revenues.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain

to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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The Company remeasures the Contingent Consideration to fair value at each reporting date until the contingency is resolved.

The estimated fair value of Contingent Consideration includes the future period resort operations of Park City in the calculation of EBITDA on which participating contingent payments are made, which is determined on the basis of estimated subsequent year performance, escalated by an assumed growth factor.

The estimated fair value of Contingent Consideration includes the future period resort operations of Park City in the calculation of EBITDA on which participating contingent payments are made, which is determined on the basis of estimated performance for the years ending July 31, 2021 and July 31, 2022, escalated by an assumed long-term growth factor and discounted to net present value.

Fair value is estimated using an option pricing valuation model.

As described by management, key assumptions in determining the fair value under this model included a long-term discount rate, volatility, and future period Park City EBITDA.

The principal considerations for our determination that performing procedures relating to the fair value measurement of the Contingent Consideration is a critical audit matter are (i) the significant judgments made by management when developing the fair value measurement, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s option pricing valuation model and cash flow projections, including significant assumptions for the long-term discount rate, volatility, and future period Park City EBITDA;

and (ii) the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

As described by management, key assumptions in determining the fair value under this model included Park City EBITDA for the year ending July 31, 2022, an assumed long- term growth rate, discount rate and volatility.

The principal considerations for our determination that performing procedures relating to the fair value measurement of the Contingent Consideration is a critical audit matter are (i) the significant judgment by management when developing the fair value measurement, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions for the Park City EBITDA for the year ending July 31, 2022, assumed long-term growth rate, discount rate, and volatility;

and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s fair value measurement of the Contingent Consideration including controls over the Company’s model, significant assumptions, and data.

The procedures also included, among others, testing management’s process for developing the fair value measurement;

evaluating the appropriateness of the option pricing valuation model;

testing the completeness, accuracy, and relevance of underlying data used in the model;

and evaluating the significant assumptions used by management, including the long-term discount rate, volatility, and future period Park City EBITDA.

Evaluating management’s assumptions related to the long-term discount rate, volatility, and future period Park City EBITDA involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past EBITDA performance of Park City;

(ii) the consistency with external market data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s option pricing model and certain significant assumptions, including the discount rate and volatility.

Valuation of Property, Plant, and Equipment Acquired in Business Combinations

As described in Note 6 to the consolidated financial statements, the Company completed the acquisitions of Stevens Pass Resort, Triple Peaks, and Falls Creek and Hotham Resorts during the year ended July 31, 2019.

The aggregate purchase consideration for these business combinations was approximately $420.5 million, resulting in the recognition of an aggregate amount of approximately $249.6 million of related property, plant and equipment (“Acquired PPE”).

The process of estimating the fair value of the Acquired PPE includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition.

The principal considerations for our determination that performing procedures relating to the valuation of the Acquired PPE is a critical audit matter are (i) the high degree of auditor subjectivity and effort in performing procedures and evaluating audit evidence over management’s valuation of the assets acquired, including the significant assumptions, such as replacement cost and physical condition at the time of acquisition;

The procedures also included, among others, testing management’s process for developing the fair value measurement and evaluating the significant assumptions used by management, related to the Park City EBITDA for the year ending July 31, 2022, assumed long-term growth rate, discount rate, and volatility.

Evaluating management’s assumptions related to the Park City EBITDA for the year ending July 31, 2022, assumed long-term growth rate, discount rate, and volatility involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past EBITDA performance of Park City;

(ii) the impact of the COVID-19 pandemic on the future EBITDA performance of Park City;

(iii) the consistency with external market data;

and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discount rate and volatility assumptions.

Acquisition of Peak Resorts - Valuation of Acquired Depreciable Property, Plant, and Equipment

As described in Note 7 to the consolidated financial statements, the Company completed the acquisition of Peak Resorts, Inc.

during the year ended July 31, 2020 resulting in the recognition of an aggregate amount of approximately $427.8 million related to property, plant, and equipment.

A substantial portion of the property, plant, and equipment acquired related to depreciable property, plant, and equipment (“Acquired Depreciable PPE”).

The process of estimating the fair value of the Acquired Depreciable PPE includes the use of certain estimates and assumptions related to the determination of replacement cost.

The principal considerations for our determination that performing procedures relating to the valuation of the Acquired Depreciable PPE from the Peak Resorts acquisition is a critical audit matter are (i) the high degree of auditor subjectivity and effort in performing procedures over management’s valuation of the Acquired Depreciable PPE including the significant assumptions related to the replacement cost;

and (ii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the Acquired PPE.

These procedures also included, among others, (i) reading the purchase agreement;

(ii) testing management’s process for estimating the fair value of Acquired PPE;

and (iii) evaluating management’s assumptions of replacement cost and physical condition at the time of acquisition used to estimate the fair value of the Acquired PPE.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation method and certain significant assumptions, including the replacement cost and physical condition at the time of acquisition, and evaluating whether the assumptions used by management were reasonable considering consistency with external market and industry data.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s significant assumptions and data used in the valuation of the Acquired Depreciable PPE.

These procedures also included, among others, (i) testing management’s process for estimating the fair value of Acquired Depreciable PPE;

(ii) testing the completeness and accuracy of the underlying data used to estimate the fair value of the Acquired Depreciable PPE;

and (iii) evaluating management’s replacement cost assumptions used to estimate the fair value of the Acquired Depreciable PPE.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation method and the Company’s replacement cost assumptions, including evaluating whether the assumptions used by management were reasonable considering consistency with external market and industry data.

/s/ PricewaterhouseCoopers LLP

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Real estate held for sale and investment

Deferred charges and other assets

Goodwill, net (Note 8)

Intangible assets, net (Note 8)

Operating right-of-use assets (Note 4)

Deferred charges and other assets

Liabilities and Stockholders’ Equity

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Long-term debt, net (Note 6)

Operating lease liabilities (Note 4)

Other long-term liabilities (Note 8)

Deferred income taxes (Note 10)

Deferred income taxes, net (Note 11)

Total liabilities

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Gain on sale of real property

Asset impairments (Notes 2 & 8)

Change in fair value of contingent consideration (Note 10)

Loss on disposal of fixed assets and other, net

Gain (loss) on disposal of fixed assets and other, net

Income from operations

Interest expense, net

Mountain equity investment income, net

Investment income and other, net

Foreign currency (loss) gain on intercompany loans (Note 5)

Interest expense, net

Foreign currency loss on intercompany loans (Note 6)

Income before (provision) benefit from income taxes

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Year Ended July 31,

Foreign currency translation adjustments and other (net of tax of $0, $1,981 and ($2,831), respectively)

Foreign currency translation adjustments (net of tax of $0, $0 and $1,981, respectively)

Change in estimated fair value of hedging instruments

Comprehensive income

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(In thousands, except share amounts)

Accumulated Other Comprehensive (Loss) Income

Accumulated Other Comprehensive Income (Loss)

Total Vail Resorts, Inc.

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Stock-based compensation (Note 17)

Shares issued for acquisition (Note 6)

Exchangeable share transfers

Measurement period adjustment

Issuance of shares under share award plan, net of shares withheld for employee taxes (Note 17)

Tax benefit from share award plan

Repurchases of common stock (Note 16)

Dividends (Note 5)

Acquisition of noncontrolling interest (Note 6)

Distributions to noncontrolling interests, net

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Stock-based compensation (Note 17)

Measurement period adjustment (Note 6)

Cumulative effect for adoption of revenue standard

Issuance of shares under share award plan, net of shares withheld for employee taxes (Note 17)

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Foreign currency translation adjustments, net of tax

Change in estimated fair value of hedging instruments

Total comprehensive income

Stock-based compensation (Note 17)

Cumulative effect for adoption of revenue standard (Notes 2 & 3)

Issuance of shares under share award plan, net of shares withheld for employee taxes (Note 17)

Exchangeable share transfers

Repurchases of common stock (Note 16)

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Depreciation and amortization

Asset impairments

Cost of real estate sales

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Change in fair value of contingent consideration

Foreign currency loss (gain) on intercompany loans

Foreign currency loss on intercompany loans

Gain on sale of real property

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Proceeds from borrowings under Whistler Credit Agreement

Proceeds from borrowings under 6.25% Notes

Repayments of borrowings under Vail Holdings Credit Agreement

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Other financing activities, net

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash:

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The Company refers to “Resort” as the combination of the Mountain and Lodging segments.

In the Mountain segment, as of July 31, 2019, the Company operated seventeen mountain resort properties and three urban ski areas including:

Mountain Resorts:

Vail Mountain Resort (“Vail Mountain”)

Breckenridge Ski Resort (“Breckenridge”)

Keystone Resort (“Keystone”)

Beaver Creek Resort (“Beaver Creek”)

Crested Butte Mountain Resort (“Crested Butte”)

Heavenly Mountain Resort (“Heavenly”)

Lake Tahoe area of Nevada and California

Northstar Resort (“Northstar”)

Lake Tahoe area of California

Kirkwood Mountain Resort (“Kirkwood”)

Lake Tahoe area of California

Mount Sunapee Resort (“Mount Sunapee”)

New Hampshire

Park City Resort (“Park City”)

Stowe Mountain Resort (“Stowe”)

Okemo Mountain Resort (“Okemo”)

Stevens Pass Mountain Resort (“Stevens Pass”)

Whistler Blackcomb Resort (“Whistler Blackcomb”)

British Columbia, Canada

Perisher Ski Resort (“Perisher”)

New South Wales, Australia

Falls Creek Alpine Resort (“Falls Creek”)

Victoria, Australia

Hotham Alpine Resort (“Hotham”)

Victoria, Australia

Urban Ski Areas:

Afton Alps Ski Area (“Afton Alps”)

Mount Brighton Ski Area (“Mt.

Wilmot Mountain (“Wilmot”)

Additionally, the Mountain segment includes ancillary services, primarily including ski school, dining and retail/rental operations, and for the Company’s Australian resorts, including lodging and transportation operations.

In the Mountain segment, the Company operates the following 37 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 the Company’s regional ski areas, which tend to generate skier visits predominantly from their respective local markets.

Additionally, the Mountain segment includes ancillary services, primarily including ski school, dining and retail/rental operations, and for the Company’s Australian ski areas, including lodging and transportation operations.

Several of the resorts located in the United States (“U.S.”) operate primarily on federal land under the terms of Special Use Permits granted by the U.S.

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The operations of Whistler Blackcomb are conducted on land owned by the government of the Province of British Columbia, Canada within the traditional territory of the Squamish and Lil’wat Nations.

The operations of the Company’s Australian resorts are conducted pursuant to long-term leases and licenses on land owned by the governments of New South Wales and Victoria, Australia.

The operations of the Company’s Australian ski areas are conducted pursuant to long-term leases and licenses on land owned by the governments of New South Wales and Victoria, Australia.

Okemo, Mount Sunapee and Stowe operate on land leased from the respective states in which the resorts are located and on land owned by the Company.

In the Lodging segment, the Company owns and/or manages a collection of luxury hotels and condominiums under its RockResorts brand, as well as other strategic lodging properties and a large number of condominiums located in proximity to the Company’s North American mountain resorts, National Park Service (“NPS”) concessionaire properties including the Grand Teton Lodge Company (“GTLC”), which operates destination resorts in Grand Teton National Park, a Colorado resort ground transportation company and mountain resort golf courses.

In the Lodging segment, the Company owns and/or manages a collection of luxury hotels and condominiums under its RockResorts brand;

other strategic lodging properties and a large number of condominiums located in proximity to the Company’s North American mountain resorts;

National Park Service (“NPS”) concessionaire properties including the Grand Teton Lodge Company (“GTLC”), which operates destination resorts in Grand Teton National Park;

a Colorado resort ground transportation company and mountain resort golf courses.

Vail Resorts Development Company (“VRDC”), a wholly-owned subsidiary, conducts the operations of the Company’s Real Estate segment, which owns, develops and sells real estate in and around the Company’s resort communities.

The Company’s mountain business and its lodging properties at or around the Company’s mountain resorts are seasonal in nature with peak operating seasons primarily from mid-November through mid-April in North America.

The operating season at the Company’s Australian resorts, NPS concessionaire properties and golf courses generally occurs from June to early October.

The peak operating season at the Company’s Australian resorts, NPS concessionaire properties and golf courses generally occurs from June to early October.

Summary of Significant Accounting Policies

Principles of Consolidation — The accompanying Consolidated Financial Statements include the accounts of the Company and its consolidated subsidiaries for which the Company has a controlling financial interest.

Investments in which the Company does not have a controlling financial interest are accounted for under the equity method.

Investments in which the Company does not have a controlling financial interest, but has significant influence, are accounted for under the equity method.

All significant intercompany transactions have been eliminated in consolidation.

Cash and Cash Equivalents — The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.

Restricted Cash — The Company considers cash to be restricted when withdrawal or general use is legally restricted.

During peak operations of the North American ski season, the Company’s restricted cash balance is primarily associated with customer reservations deposits that are required to be held in a trust pursuant to statutory requirements until such reservations are fulfilled.

Accounts receivable — The Company records trade accounts receivable in the normal course of business related to the sale of products or services.

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Deferred Financing Costs — Certain costs incurred with the issuance of debt and debt securities are capitalized and included as a reduction in the net carrying value of long-term debt, net of accumulated amortization, with the exception of costs incurred related to line-of-credit arrangements, which are included in deferred charges and other assets, net of accumulated amortization.

Amortization is charged to interest expense over the respective term of the applicable debt issues.

Amortization of such deferred financing costs are recorded to interest expense, net on the Company’s Consolidated Statements of Operations over the respective term of the applicable debt instruments.

When debt is extinguished prior to its maturity date, the amortization of the remaining unamortized deferred financing costs, or pro-rata portion thereof, is charged to loss on extinguishment of debt.

Goodwill and Intangible Assets — The Company has classified as goodwill the cost in excess of estimated fair value of the net assets of businesses acquired in purchase transactions.

The Company’s major intangible asset classes are trademarks, water rights, customer lists, property management contracts, Forest Service permits and excess reorganization value.

Goodwill and various indefinite-lived intangible assets, including excess reorganization value, certain trademarks, water rights and certain property management contracts, are not amortized but are subject to at least annual impairment testing.

The Company tests annually (or more often, if necessary) for impairment as of May 1.

The Company’s major intangible asset classes are trademarks, water rights, customer lists, property management contracts and Forest Service permits.

Goodwill and various indefinite-lived intangible assets, including certain trademarks, water rights and certain property management contracts, are not amortized but are subject to at least annual impairment testing.

The Company tests these non-amortizing assets annually (or more often, if necessary) for impairment as of May 1.

Amortizable intangible assets are amortized over the shorter of their contractual terms or estimated useful lives.

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If the net carrying amount of the assets does not exceed the estimated fair value, no impairment loss is recognized.

If it is determined, based on qualitative factors, that the fair value of the reporting unit or indefinite-lived intangible asset may be more likely than not less than carrying amount, or if significant changes to macro-economic factors related to the reporting unit or intangible asset have occurred that could materially impact fair value, a quantitative impairment test would be required, in which the Company would determine the estimated fair value of its reporting units using discounted cash flow analyses and determine the estimated fair value of its indefinite-lived intangible assets using an income approach.

The Company determined that there was no impairment to goodwill and no material impairment to definite or indefinite-lived intangible assets for the years ended July 31, 2019 , 2018 and 2017 .

For the testing of goodwill and other indefinite-lived intangible assets for impairment, the Company performs 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, which includes an evaluation as to whether there have been significant changes to macro-economic factors related to the reporting unit or intangible asset that could materially impact fair value.

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 carrying amount, a quantitative impairment test would be required, in which the Company would determine the estimated fair value of its reporting units using discounted cash flow analyses and determine the estimated fair value of its indefinite-lived intangible assets using an income approach.

As a result of the coronavirus (COVID-19) pandemic and the impact it has had on the Company’s operations during the year ended July 31, 2020, and the expected continuing impact of the pandemic on future operations, the Company determined that the estimated fair value of its Colorado resort ground transportation company reporting unit within its Lodging segment no longer exceeded its carrying value.

As further discussed in Note 8, the Company recognized an impairment of approximately $ 28.4 million related to its Colorado resort ground transportation company during the year ended July 31, 2020, which was recorded within asset impairments on the Company’s Consolidated Statement of Operations, with a corresponding reduction to goodwill, net of $ 25.7 million and to intangible assets, net and property, plant and equipment, net of $ 2.7 million .

See Note 8, Supplementary Balance Sheet Information, for additional information.

The Company determined that there were no other impairments of goodwill, definite and indefinite-lived assets for the years ended July 31, 2020, and that there was no impairment to goodwill and no material impairment to definite or indefinite-lived intangible assets for the years ended July 31, 2019 and 2018 .

Long-lived Assets — The Company evaluates potential impairment of long-lived assets and long-lived assets to be disposed of whenever events or changes in circumstances indicate that the net carrying amount of an asset may not be fully recoverable.

If the sum of the expected cash flows, on an undiscounted basis, is less than the net carrying amount of the asset, an impairment loss is recognized in the amount by which the net carrying amount of the asset exceeds its estimated fair value.

The Company does not believe any events or changes in circumstances indicating an impairment of the net carrying amount of a long-lived asset occurred during the years ended July 31, 2019 , 2018 and 2017 .

As discussed above, the Company recorded an impairment to long-lived assets related to its Colorado resort ground transportation company during the year ended July 31, 2020.

The Company determined that there were no other impairments of long-lived assets for the year ended July 31, 2020, and determined there was no impairment of the net carrying amount of a long-lived asset occurred during the years ended July 31, 2019 and 2018 .

Revenue Recognition — The Company’s significant accounting policies with regard to revenue recognition are discussed in Note 3, Revenues.

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Income and expense items are translated using the weighted average exchange rate for the period.

Translation adjustments from currency exchange, including intercompany transactions of a long-term nature, are recorded in accumulated other comprehensive (loss) income as a separate component of stockholders’ equity.

Intercompany transactions that are not of a long-term nature are reported as gains and losses within “segment operating expense” and for intercompany loans within “foreign currency (loss) gain on intercompany loans” on the Company’s Consolidated Statements of Operations.

Translation adjustments from currency exchange, including intercompany transactions of a long-term nature, are recorded in accumulated other comprehensive loss as a separate component of stockholders’ equity.

Intercompany transactions that are not of a long-term nature are reported as gains and losses within “segment operating expense” and for intercompany loans within foreign currency loss on intercompany loans on the Company’s Consolidated Statements of Operations.

Reserve Estimates — The Company uses estimates to record reserves for certain liabilities, including medical claims, workers’ compensation claims, third-party loss contingencies and property taxes, among other items.

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The Company’s provision for income taxes is based on pre-tax income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions.

Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying Consolidated Balance Sheets and for operating loss and tax credit carryforwards.

The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period.

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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” to be sustained, on audit, including resolution of related appeals or litigation processes, if any.

The second step requires the Company to estimate and measure the largest tax benefit that is cumulatively greater than 50% likely of being realized upon ultimate

Interest and penalties accrued in connection with uncertain tax positions are recognized as a component of income tax expense (see Note 10, Income Taxes, for more information).

Fair Value of Financial Instruments -- The recorded amounts for cash and cash equivalents, receivables, other current assets and accounts payable and accrued liabilities approximate fair value due to their short-term nature.

The second step requires the Company to estimate and measure the largest tax benefit that is cumulatively greater than 50% likely of being realized upon ultimate settlement.

Interest and penalties accrued in connection with uncertain tax positions are recognized as a component of income tax expense.

See Note 11 “Income Taxes” for more information.

Fair Value of Financial Instruments — The recorded amounts for cash and cash equivalents, restricted cash, receivables, other current assets and accounts payable and accrued liabilities approximate fair value due to their short-term nature.

The fair value of amounts outstanding under the Company’s credit agreements and the Employee Housing Bonds (as defined in Note 6, Long-Term Debt) approximate book value due to the variable nature of the interest rate, which is a market rate, associated with the debt.

The estimated fair value of the 6.25% Notes (as defined in Note 6, Long-Term Debt) is based on quoted market prices (a Level 2 input).

The estimated fair value of the EPR Secured Notes and EB-5 Development Notes (each as defined in Note 6, Long-Term Debt), have been estimated using analyses based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 2 input).

The carrying values, including any unamortized premium or discount, and estimated fair values of the 6.25% Notes, EPR Secured Notes and EB-5 Development Notes as of July 31, 2020 are presented below (in thousands):

July 31, 2020

Carrying Value

Estimated Fair Value

EPR Secured Notes

EB-5 Development Notes

Stock-Based Compensation — Stock-based compensation expense is measured at the grant date based upon the estimated fair value of the award and is recognized as expense over the applicable vesting period of the award generally using the straight-line method (see Note 17 “Stock Compensation Plan” for more information), less the amount of forfeited awards which are recorded as they occur.

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Concentration of Credit Risk — The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and restricted cash.

The Company places its cash and temporary cash investments in high-quality credit institutions.

The Company does not enter into financial instruments for hedging, trading or speculative purposes.

The Company places its cash and temporary cash investments in high-

quality credit institutions.

The Company does not enter into financial instruments for trading or speculative purposes.

Concentration of credit risk with respect to accounts and notes receivables is limited due to the wide variety of customers and markets in which the Company transacts business, as well as their dispersion across many geographical areas.

The Company performs ongoing credit evaluations of its customers and generally does not require collateral, but does require advance deposits on certain transactions.

Accounting for Hedging Instruments — From time to time, the Company enters into interest rate swaps (the “Interest Rate Swaps”) to hedge the variability in cash flows associated with variable-rate borrowings by converting the floating interest rate to a fixed interest rate.

As of July 31, 2020, the Company hedged the future cash flows associated with $ 400.0 million of the principal amount outstanding of its Vail Holdings Credit Agreement (as defined in Note 6 “Long-Term Debt”), which were designated as cash flow hedges.

The accounting for changes in fair value of hedging instruments depends on the effectiveness of the hedge.

In order to qualify for hedge accounting, the underlying hedged item must expose the Company to risks associated with market fluctuations and the financial instrument used must reduce the Company’s exposure to market fluctuation throughout the hedge period.

Changes in estimated fair value of the Interest Rate Swaps are recorded within change in estimated fair value of hedging instruments on the Company’s Consolidated Statements of Comprehensive Income, and such change was recorded as a loss of $ 22.5 million during the year ended July 31, 2020.

Such amounts are reclassified into interest expense, net from other comprehensive income during the period in which the hedged item affects earnings.

As of July 31, 2020, the estimated fair value of the Interest Rate Swaps was a liability of approximately $ 22.5 million and was recorded within other long-term liabilities on the Company’s Consolidated Balance Sheet, and the impact of the underlying cash flows associated with the Interest Rate Swaps are recorded within interest expense, net on the Company’s Consolidated Statements of Operations.

See Note 10 “Fair Value Measurements” for more information.

Leases — The Company determines if an arrangement is or contains a lease at inception or modification of the arrangement.

An arrangement is or contains a lease if there is one or more assets identified and the right to control the use of any identified asset is conveyed to the Company for a period of time in exchange for consideration.

Control over the use of an identified asset means the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

Generally, the Company classifies a lease as a finance lease if the terms of the agreement effectively transfer control of the underlying asset;

otherwise, it is classified as an operating lease.

For contracts that contain lease and non-lease components, the Company accounts for these components separately.

For leases with terms greater than twelve months, the associated lease right-of-use (“ROU”) assets and lease liabilities are recognized at the estimated present value of future lease payments over the lease term at commencement date.

The Company’s leases do not provide a readily determinable implicit rate;

therefore, the Company uses an estimated incremental borrowing rate to discount the future minimum lease payments.

For leases containing fixed rental escalation clauses, the escalators are factored into the determination of future minimum lease payments.

The Company includes options to extend a lease when it is reasonably certain that such options will be exercised.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

See Note 4 “Leases” for more information.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting period.

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Adopted Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Topic 605.

This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

Subsequent to the issuance of ASU 2014-09, the FASB issued several amendments, which did not change the core principle of the guidance and were intended to clarify and improve understanding of certain topics included within the revenue standard.

On August 1, 2018, the Company adopted this standard using the modified retrospective transition method for contracts which were not completed as of August 1, 2018.

In accordance with this transition method, results for reporting periods beginning after August 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with the Company’s historical accounting methodology under Topic 605.

On August 1, 2018, as a result of adopting this standard, the Company recorded an approximate $7.5 million reduction of retained earnings with a corresponding increase in accounts payable and accrued liabilities, which was primarily associated with the measurement of the loyalty reward programs under the new standard at an estimated fair value of underlying products or services expected to be delivered to satisfy the Company’s obligations associated with such loyalty programs.

The application of this standard had an immaterial impact on total net revenue and net income attributable to Vail Resorts, Inc.

for the year ended July 31, 2019.

In accordance with the new revenue recognition standard disclosure requirements, the impact of adoption of Topic 606 on the Consolidated Balance Sheet as of July 31, 2019 was as follows (in thousands):

As of July 31, 2019

Balance Sheet

Balances Without Adoption of Topic 606

(Under Topic 606)

Accounts payable and accrued liabilities

Stockholders’ equity

Retained earnings

In August 2016, the FASB issued ASU No.

2016-15, “Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts and Cash Payments.” This standard provides guidance for eight targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice.

The Company adopted this accounting standard on August 1, 2018, which did not have an impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No.

2016-18, “Restricted Cash,” which requires that a statement of cash flows present the change during a period for the total of cash, cash equivalents and restricted cash.

Historically, under previous guidance, changes in restricted cash have been included within operating, investing or financing activities, which were eliminated under the new standard.

The Company adopted this standard as of August 1, 2018, which required retrospective application to all periods presented.

As a result, cash provided by operating activities during the years ended July 31, 2018 and 2017 decreased by $3.1 million and $2.2 million , respectively, under the new guidance as compared to what was reported under the previously required guidance, and cash used in investing activities during the year ended July 31, 2017 decreased by $6.2 million with regard to restricted cash acquired in the Whistler Blackcomb acquisition.

Additionally, due to the inclusion of restricted cash in the beginning and end of period balances, cash, cash equivalents and restricted cash as of July 31, 2018 and 2017 increased $6.9 million and $10.3 million , respectively, as compared to what was reported under the previously required guidance.

Standards Being Evaluated

The authoritative guidance listed below is currently being evaluated for its impact to Company policies upon adoption as well as any significant implementation matters yet to be addressed.

In February 2016, the FASB issued ASU No.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, “Leases (Topic 842),” which supersedes “Leases (Topic 840).” The standard requires lessees to recognize the assets and liabilities arising from all leases on the balance sheet, including those classified as operating leases under previous accounting guidance, and to disclose key information about leasing arrangements.

The standard also allows for an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of 12 months or less.

Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset on their balance sheets, while lessor accounting will remain largely unchanged.

The standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those years (the Company’s first quarter of fiscal 2020), and as originally written must be applied using a modified retrospective transition approach to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with early adoption permitted.

The standard also allows for an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of twelve months or less.

Under the new guidance, lessees are required to recognize a lease liability and an ROU asset on their balance sheets, while lessor accounting is largely unchanged.

In July 2018, the FASB released ASU No.

2018-11, “Leases (Topic 842):

Targeted Improvements which included providing an additional and optional transition method.

Targeted Improvements” which, among other items, provided an additional and optional transition method.

Under this method, an entity initially applies the standard at the adoption date, including the election of certain transition reliefs, and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company will adopt ASU 2016-02 on August 1, 2019 using the modified retrospective method provided by ASU No.

By applying ASU 2016-02 as of the adoption date, as opposed to the beginning of the earliest period presented, the presentation and disclosure of financial information for periods before August 1, 2019 will remain unchanged.

The Company adopted ASU No.

2016-02 on August 1, 2019 using the modified retrospective transition method as provided by the standard.

In accordance with this transition method, results for reporting periods beginning on August 1, 2019 are presented under the new standard, while prior periods were not adjusted and continue to be reported in accordance with the previously

applicable accounting guidance.

The Company has elected the package of practical expedients permitted under the transition guidance which allowed the Company to not reassess:

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or (iii) initial direct costs for any existing leases.

The Company has made an accounting policy election to not record leases on the balance sheet with an initial term of 12 months or less.

The Company has made an accounting policy election to not record leases on the balance sheet with an initial term of twelve months or less.

The Company will recognize those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term.

While the Company is still finalizing its quantification of the impact that ASU 2016-02 will have on its financial statements and disclosures, it anticipates recognizing right-of-use lease assets in the range of $212.0 million to $232.0 million and related lease liabilities in the range of $245.0 million to $265.0 million for operating leases.

The Company does not expect any changes related to its current capital leases, which will be considered finance leases under ASU 2016-02.

As a result of adoption, the Company will reclassify net favorable and unfavorable lease balances, deferred rent credits and other amounts from assets and liabilities of approximately $33.0 million , which will have the impact of reducing the amount it recognizes as right-of-use lease assets and which has been factored into the range above.

The Company does not expect the standard to materially affect its consolidated statements of operations, consolidated statements of cash flows or debt covenant compliance agreements as of July 31, 2019.

Additionally, the Company has elected the practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases.

At adoption, the Company was not able to determine the interest rate implicit in its leases;

therefore, for existing operating leases, the lease liability was measured using the Company’s estimated incremental borrowing rate.

For existing leases, the incremental borrowing rate used was based on the remaining lease term at the adoption date.

For leases with minimum lease payments adjusted periodically for inflation, the lease liability was measured using the minimum lease payments adjusted by the inflation index at the adoption date.

On August 1, 2019, as a result of adopting the standard, the Company recorded $ 221.8 million of operating ROU assets and $ 254.2 million of related total operating lease liabilities in the Consolidated Balance Sheet (of which $ 219.3 million was included in operating lease liabilities and $ 34.9 million was included in accounts payable and accrued liabilities).

As a result of the adoption, the Company reclassified $ 32.4 million of unfavorable lease obligations, deferred rent credits and other related amounts to the operating ROU assets balance, primarily from other long-term liabilities, which reduced the amount recognized as operating ROU assets to $ 221.8 million .

The adoption of the new lease standard did not result in a cumulative effect adjustment to beginning retained earnings, and did not materially affect the Company’s Consolidated Statement of Operations or Consolidated Statement of Cash Flows for the year ended July 31, 2020.

The Company’s Canyons finance lease was not affected by the implementation of this standard as the arrangement is classified and recorded as a finance lease arrangement under both the previous and new accounting guidance.

In April 2020, the FASB issued clarifying guidance on accounting for certain lease concessions related to the effects of the COVID-19 pandemic under ASC Topic 842, allowing companies to make an election to either account for such lease concessions (i) in the period that they occur as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract) or (ii) ratably over the remainder of the lease term as modifications to the contract.

The Company made a policy election to account for such lease concessions as though enforceable rights and obligations to make those concessions existed in the contracts and as a result, will account for concessions in the period in which they occur.

This election did not have a material impact on the Company’s Consolidated Financial Statements for the year ended July 31, 2020.

Standards Being Evaluated

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional transition guidance, for a limited time, to companies that have contracts, hedging relationships or other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate which is expected to be discontinued because of reference rate reform.

The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met.

The amendments in this update are effective as of March 12, 2020 through December 31, 2022.

The amendments in this update may be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued.

All other amendments should be applied on a prospective basis.

The Company is in the process of evaluating the effect that the adoption of this standard will have on its Consolidated Financial Statements.

Revenue Recognition

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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 resorts.

Revenue is recognized over time as performance obligations are satisfied as control of the good or service (e.g.

Revenue is recognized over time as performance obligations are satisfied

as control of the good or service (e.g.

access to ski areas, provision of ski school services, etc.) is transferred to the customer, except for the Company’s retail sales and dining operations revenues which are recognized at a point in time when performance obligations are satisfied by transferring control of the underlying goods to the customer.

The Company records deferred revenue primarily related to the sale of pass products.

Deferred revenue is recognized throughout the ski season as the Company’s performance obligations are satisfied as control of the service (e.g.

Deferred revenue is generally recognized throughout the ski season as the Company’s performance obligations are satisfied as control of the service (e.g.

access to ski areas throughout the ski season) is transferred to the customer.

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When sufficient historical data to determine usage patterns is not available, such as in the case of new product offerings, deferred revenue is recognized on a straight-line basis throughout the ski season until sufficient historical usage patterns are available.

The Company also includes other sources of revenue, mostly related to commercial leasing, and employee housing leasing arrangements within other mountain revenue.

The Company also includes other sources of revenue, primarily related to commercial leasing and employee housing leasing arrangements, within other mountain revenue.

Lodging revenue is derived from a wide variety of sources, including, among other things:

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The Company presents revenues in the accompanying Consolidated Statements of Operations, net of taxes, when collected from its customers that are remitted or payable to government taxing authorities, except when products are inclusive of taxes where applicable.

As a result of the COVID-19 pandemic, the Company closed its North American destination mountain resorts, regional ski areas and retail stores beginning on March 15, 2020.

To encourage the Company’s pass product holders to renew their pass purchases for next season following the closures this past spring, the Company announced a credit offer on April 27, 2020 for existing 2019/2020 North American ski season pass product holders to purchase 2020/2021 North American ski season pass products at a discount (the “Credit Offer”).

The Credit Offer discounts range from a minimum of 20% to a maximum of 80% for 2019/2020 season pass holders, depending on the number of days the pass holder used their pass product during the 2019/2020 North American ski season and a credit, with no minimum, but up to 80% for multi-day pass products, such as the Epic Day Pass, based on total unused days.

For accounting purposes, the Credit Offer constituted a material right to existing 2019/2020 pass product holders to which the Company allocated a transaction price of approximately $ 120.9 million .

As a result, the Company deferred $ 120.9 million of pass product revenue, which would have been recognized as lift revenue during the year ended July 31, 2020.

The Company expects to recognize the revenue associated with the Credit Offer in the second and third fiscal quarters of the fiscal year ending July 31, 2021 or the second and third fiscal quarters of the fiscal year ending July 31, 2022.

While the Company expects most of this revenue to be recognized during Fiscal 2021, in the event that a pass holder obtains a refund under Epic Coverage for the 2020/2021 ski season and is eligible to utilize their credit toward the purchase of a pass product for the 2021/2022 ski season, a portion of this deferred revenue and related deferred cost will be recognized in Fiscal 2022.

In addition, as a result of the pass product revenue deferral, the Company also deferred approximately $ 2.9 million of the associated costs of obtaining a contract (primarily credit card processing fees), which will be recognized commensurate with the associated deferred revenue.

The Company estimated the standalone selling price of the Credit Offer by utilizing historical pass holder renewal data to estimate the total amount of credits that are expected to be redeemed.

Estimates and assumptions made regarding expected renewal rates impacted the estimate of the transaction price allocated to the Credit Offer and could vary materially from the amount of revenue deferred depending upon actual customer redemptions.

Disaggregation of Revenues

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The Company expects that credit card fees and sales commissions paid in order to obtain season ski pass products contracts are recoverable.

Accordingly, the Company recognizes these amounts as assets when they are paid prior to the start of the ski season.

Accordingly, the Company records these amounts as assets when they are paid prior to the start of the ski season.

As of July 31, 2020, $ 3.5 million of costs to obtain contracts with customers were recorded within other current assets on the Company’s Consolidated Balance Sheet.

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These fees are recorded within Mountain and Lodging operating expenses on the Company’s Consolidated Statements of Operations.

The Company’s operating leases consist primarily of commercial and retail space, office space, employee residential units, vehicles and other equipment.

The Company determines if an arrangement is or contains a lease at contract inception or modification.

The Company’s lease contracts generally range from 1 year to 60 years , with some lease contracts containing one or more lease extension options, exercisable at the Company’s discretion.

The Company generally does not include these lease extension options in the initial lease term as it is not reasonably certain that it will exercise such options at contract inception.

In addition, certain lease arrangements contain fixed and variable lease payments.

The variable lease payments are primarily contingent rental payments based on:

(i) a percentage of revenue related to the leased property;

(ii) payments based on a percentage of sales over contractual levels;

or (iii) lease payments adjusted for changes in an index or market value.

These variable lease payments are typically recognized when the underlying event occurs and are included in operating expenses in the Company’s Consolidated Statements of Operations in the same line item as the expense arising from fixed lease payments.

The Company’s lease agreements may also include non-lease components, such as common area maintenance and insurance, which are accounted for separately.

Future lease payments that are contingent and non-lease components are not included in the measurement of the operating lease liability.

The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.

Lease expense related to lease payments is recognized on a straight-line basis over the term of the lease.

The Company’s leases do not provide a readily determinable implicit rate.

As a result, the Company measures the lease liability using an estimated incremental borrowing rate which is intended to reflect the rate of interest the Company would pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The Company applies the estimated incremental borrowing rates at a portfolio level based on the economic environment associated with the lease.

The Company uses the long-lived assets impairment guidance to determine recognition and measurement of an ROU asset impairment, if any.

The Company monitors for events or changes in circumstances that require a reassessment.

The components of lease expense for the year ended July 31, 2020 , were as follows (in thousands):

July 31, 2020

Finance leases:

Amortization of the finance ROU assets

Interest on lease liabilities

Operating leases:

Operating lease expense

Short-term lease expense (1)

Variable lease expense

(1) Short-term lease expense is attributable to leases with terms of 12 months or less which are not included within the Company’s Consolidated Balance Sheet.

The following table presents the supplemental cash flow information associated with the Company’s leasing activities for the year ended July 31, 2020 (in thousands):

July 31, 2020

Cash flow supplemental information:

Operating cash outflows for operating leases

Operating cash outflows for finance leases

Financing cash outflows for finance leases

Non-cash supplemental information:

Operating ROU assets obtained in exchange for operating lease obligations

Weighted-average remaining lease terms and discount rates are as follows:

As of July 31, 2020

Weighted-average remaining lease term (in years)

Operating leases

Finance leases

Weighted-average discount rate

Operating leases

Finance leases

Future lease payments for operating and finance leases as of July 31, 2020 reflected by fiscal year (August 1 through July 31) are as follows (in thousands):

Operating Leases

Finance Leases

Total future minimum lease payments

Less amount representing interest

Total lease liabilities

The current portion of operating lease liabilities of approximately $ 36.6 million as of July 31, 2020 is recorded within accounts payables and accrued liabilities in the Consolidated Balance Sheet.

Finance lease liabilities are recorded within long-term debt, net in the Consolidated Balance Sheets.

Future minimum lease payments in accordance with Topic 840 as of July 31, 2019, reflected by fiscal year (August 1 through July 31), were as follows (in thousands):

Operating Leases

Capital Leases

Total future minimum lease payments

Less amount representing interest

Net future minimum lease payments

The Canyons finance lease obligation represents the only material finance lease entered into by the Company and was $ 346.0 million as of July 31, 2020 , which represents the estimated annual lease payments for the remaining initial 50 year term of the lease assuming annual increases at the floor of 2% and discounted using an interest rate of 10% .

As of July 31, 2020 , the Company has recorded $ 117.8 million of finance lease ROU assets in connection with the Canyons lease, net of $ 65.8 million of accumulated amortization, which is included within property, plant and equipment, net in the Company’s Consolidated Balance Sheet.

Net Income Per Common Share

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The number of shares issuable on the exercise of share based awards that were excluded from the calculation of diluted net income per share because the effect of their inclusion would have been anti-dilutive totaled approximately 2,000 , 4,000 and 2,000 for the years ended July 31, 2020 , 2019 and 2018 , respectively.

On March 7, 2019, the Company’s Board of Directors approved an increase of approximately 20% in the annual cash dividend to an annual rate of $7.04 per share, subject to quarterly declaration.

For the year ended July 31, 2020 , the Company paid cash dividends of $ 5.28 per share ( $ 212.7 million in the aggregate).

On September 25, 2019 the Company’s Board of Directors approved

a quarterly cash dividend of $1.76 per share payable on October 25, 2019 to stockholders of record as of October 8, 2019 .

Additionally, a Canadian dollar equivalent dividend on the Exchangeco Shares will be payable on October 25, 2019 to the shareholders of record on October 8, 2019 .

The Company announced on April 1, 2020 that it would be suspending its quarterly dividend for at least the next two quarters, and will be subject to a dividend limitation under the Financial Covenants Temporary Waiver Period of the Vail Holdings Credit Agreement (as defined in Note 6, Long-Term Debt).

Long-Term Debt

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Vail Holdings Credit Agreement term loan (a)

Whistler Credit Agreement revolver (b)

Employee housing bonds (c)

Canyons obligation (d)

Unamortized debt issuance costs

Current maturities (f)

6.25% Notes (b)

Whistler Credit Agreement revolver (c)

EPR Secured Notes (d)

EB-5 Development Notes (e)

Employee housing bonds (f)

Canyons obligation (g)

Unamortized premiums, discounts and debt issuance costs (i)

Current maturities (j)

Long-term debt, net

On August 15, 2018 , in order to fund the Stevens Pass and Triple Peaks acquisitions (see Note 6, Acquisitions), the Company’s wholly-owned subsidiary, Vail Holdings, Inc.

(“VHI”) entered into the Eighth Amended and Restated Credit Agreement (the “Vail Holdings Credit Agreement”), with Bank of America, N.A., as administrative agent, and other lenders named therein, through which those lenders agreed to provide an additional $265.6 million in incremental term loans and agreed, on behalf of all lenders, to extend the maturity date for the outstanding term loans and revolver facility under the Vail Holdings Credit Agreement to August 15, 2023 .

Subsequently, on April 15, 2019, the Company entered into an amendment to the Vail Holdings Credit Agreement which primarily extended the maturity date for the outstanding term loans and revolver facility to April 15, 2024, increased the amount of dividends the Company is permitted to pay in each fiscal quarter under the agreement and increased the amount of the revolver facility by $100.0 million .

The Vail Holdings Credit Agreement consists of a $500.0 million revolving credit facility and a $950.0 million term loan facility.

VHI’s obligations under the Vail Holdings Credit Agreement are guaranteed by the Company and certain of its subsidiaries and are collateralized by a pledge of all the capital stock of VHI and substantially all of its subsidiaries (with certain additional exceptions for the pledge of the capital stock of foreign subsidiaries).

In addition, pursuant to the terms of the Vail Holdings Credit Agreement, VHI has the ability to increase availability (under the revolver or in the form of term loans) to an aggregate principal amount not to exceed the greater of (i) $1.2 billion and (ii) the product of 2.75 and the trailing twelve-month Adjusted EBITDA, as defined in the Vail Holdings Credit Agreement.

The term loan facility is subject to quarterly amortization of principal of approximately $11.9 million, which began on January 31, 2019, in equal installments, for a total of five percent payable in each year and the final payment of all amounts outstanding, plus accrued and unpaid interest due in April 2024.

The proceeds of the loans made under the Vail Holdings Credit Agreement may be used to fund the Company’s working capital needs, capital expenditures, acquisitions, investments and other general corporate purposes, including the issuance of letters of credit.

Borrowings under the Vail Holdings Credit Agreement, including the term loan facility, bear interest annually at LIBOR plus 1.25% as of July 31, 2019 (3.48% as of July 31, 2019) .

Interest rate margins may fluctuate based upon the ratio of the Company’s Net Funded Debt to Adjusted EBITDA on a trailing four-quarter basis.

The Vail Holdings Credit Agreement also includes a quarterly unused commitment fee, which is equal to a percentage determined by the Net Funded Debt to Adjusted EBITDA ratio, as each such term is defined in the Vail Holdings Credit Agreement, times the daily amount by which the Vail Holdings Credit Agreement commitment exceeds the total of outstanding loans and outstanding letters of credit ( 0.25% as of July 31, 2019).

The unused amounts are accessible to the extent that the Net Funded Debt to Adjusted EBITDA ratio does not exceed the maximum ratio allowed at quarter-ends and the Adjusted EBITDA to interest on Funded Debt (as defined in the Vail Holdings Credit Agreement) ratio does not fall below the minimum ratio allowed at quarter-ends.

The Vail Holdings Credit Agreement provides for affirmative and negative covenants that restrict, among other things, the Company’s ability to incur indebtedness, dispose of assets, make capital expenditures, make distributions and make investments.

In addition, the Vail Holdings Credit Agreement includes the following restrictive financial covenants:

Net Funded Debt to Adjusted EBITDA ratio and Adjusted EBITDA to interest on Funded Debt ratio.

On September 23, 2019, VHI entered into a further amendment to its Vail Holdings Credit Agreement, dated August 15, 2018, which increased the term loan facility by approximately $335.6 million and extended the maturity date to September 23, 2024.

Refer to Note 18, Subsequent Events, for additional information.

The WB Partnerships (as defined in Note 6, Acquisitions) are party to a credit agreement, dated as of November 12, 2013 (as amended, the “Whistler Credit Agreement”), by and among Whistler Mountain Resort Limited Partnership (“Whistler LP”), Blackcomb Skiing Enterprises Limited Partnership (“Blackcomb LP”), certain subsidiaries of Whistler LP and Blackcomb LP party thereto as guarantors (the “Whistler Subsidiary Guarantors”), the financial institutions party thereto as lenders and The Toronto-Dominion Bank, as administrative agent.

(a) On September 23, 2019, in order to fund the acquisition of Peak Resorts, Inc.

(“Peak Resorts”), which included the prepayment of certain portions of the outstanding debt and lease obligations of Peak Resorts contemporaneous with the closing of the transaction (see Note 7, Acquisitions), the Company’s wholly-owned subsidiary, Vail Holdings, Inc.

(“VHI”), entered into the Second Amendment to the Eighth Amended and Restated Credit Agreement (the “Vail Holdings Credit Agreement”), with Bank of America, N.A., as administrative agent, and other lenders named therein, through which those lenders agreed to provide an additional $ 335.6 million in incremental term loans and agreed, on behalf of all lenders, to extend the maturity date for the outstanding term loans and revolver facility under the Vail Holdings Credit Agreement to September 23, 2024.

No other material terms of the Vail Holdings Credit Agreement were altered under the amendment.

On April 28, 2020, VHI, certain subsidiaries of the Company, as guarantors, Bank of America, N.A., as administrative agent, and certain Lenders entered into a Third Amendment to the Vail Holdings Credit Agreement (the “Third Amendment”).

Pursuant to the Third Amendment, among other terms, VHI is exempt from complying with the Vail Holdings Credit Agreement’s maximum leverage ratio and minimum interest coverage ratio financial maintenance covenants for each of the fiscal quarters ending July 31, 2020 through January 31, 2022 (unless VHI makes a one-time irrevocable election to terminate such exemption period prior to such date) (such period, the “Financial Covenants Temporary Waiver Period”), after which VHI will again be required to comply with such covenants starting with the fiscal quarter ending April 30, 2022 (or such earlier fiscal quarter as elected by VHI).

After the expiration of the Financial Covenants Temporary Waiver Period:

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

(A) first full fiscal quarter:

6.25 to 1.00;

(B) second full fiscal quarter:

5.75 to 1.00;

5.25 to 1.00;

(D) fourth full fiscal quarter and for each fiscal quarter thereafter:

5.00 to 1.00.

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

In addition, VHI is required to comply with a monthly minimum liquidity test (liquidity is defined as unrestricted cash and temporary cash investments of VRI and its restricted subsidiaries and available commitments under the Vail Holdings Credit Agreement revolver) of not less than $ 150.0 million , during the period that began on July 31, 2020 and ending on the date VHI delivers a compliance certificate for the Company and its subsidiaries’ first fiscal quarter following the end of the Financial Covenants Temporary Waiver Period.

The Company is prohibited from the following activities during the Financial Covenants Temporary Waiver Period (unless approval is obtained by a majority of the Lenders):

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;

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.

During the Financial Covenants Temporary Waiver Period, borrowings under the Vail Holdings Credit Agreement, including the term loan facility, bear interest annually at LIBOR plus 2.50% and, for amounts in excess of $400.0 million, LIBOR is subject to a floor of 0.75%.

In addition, pursuant to the Third Amendment, the amount by which we are able to increase availability (under the revolver or in the form of term loans) was increased to an aggregate principal amount not to exceed the greater of (i) $ 2.25 billion and (ii) the product of 3.25 and the trailing four-quarter Adjusted EBITDA (as defined in the Credit Agreement).

As of July 31, 2020 , the Vail Holdings Credit Agreement consists of a $ 500.0 million revolving credit facility and a $ 1.2 billion outstanding term loan facility.

The term loan facility is subject to quarterly amortization of principal of approximately $ 15.6 million (which began in January 2020), in equal installments, for a total of 5% of principal payable in each year and the final payment of all amounts outstanding, plus accrued and unpaid interest due in September 2024.

Borrowings under the Vail Holdings Credit Agreement, including the term loan facility, bear interest annually at LIBOR plus 2.50% as of July 31, 2020 ( 2.66 % as of July 31, 2020 for $400.0 million of borrowings, and for amounts in excess of $400.0 million in which LIBOR is subject to a floor of 0.75% during the Financial Covenants Temporary Waiver Period, 3.25 % as of July 31, 2020 ).

Other than as impacted by the provisions in place during the Financial Covenants Temporary Waiver Period, interest rate margins may fluctuate based upon the ratio of the Company’s Net Funded Debt to Adjusted EBITDA on a trailing four-quarter basis.

The Vail Holdings Credit Agreement also includes a quarterly unused commitment fee, which is equal to a percentage determined by the Net Funded Debt to Adjusted EBITDA ratio, as each such term is defined in the Vail Holdings Credit Agreement, multiplied by the daily amount by which the Vail Holdings Credit Agreement commitment exceeds the total of outstanding loans and outstanding letters of credit ( 0.4 % as of July 31, 2020 ).

During the year ended July 31, 2020 , the Company entered into various interest rate swap agreements to hedge the LIBOR-based variable interest rate component of underlying cash flows of $ 400.0 million in principal amount of its Vail Holdings Credit Agreement for the remaining term of the agreement at an effective rate of 1.46 % .

(b) On May 4, 2020, the Company completed its offering of $ 600 million aggregate principal amount of 6.25 % senior notes due 2025 at par (the “Notes”), and a portion of the net proceeds were utilized to pay down the outstanding balance of the revolver component of its Vail Holdings Credit Agreement in its entirety (which will continue to be available to the Company to borrow including throughout the Financial Covenants Temporary Waiver Period) and to pay the fees and expenses associated with the offering, with the remaining net proceeds intended to be used for general corporate purposes.

The Company will pay interest on the Notes on May 15 and November 15 of each year commencing on November 15, 2020.

The Notes will mature on May 15, 2025.

The Notes are redeemable, in whole or in part, at any time on or after May 15, 2022

at the redemption prices specified in an Indenture dated as of May 4, 2020 (the “Indenture”) plus accrued and unpaid interest.

Prior to May 15, 2022, the Company 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 Indenture.

In addition, prior to May 15, 2022, the Company may redeem up to 35% 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 106.25% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The Notes are senior unsecured obligations of the Company, are guaranteed by certain of the Company’s domestic subsidiaries, and rank equally in right of payment with existing and future senior indebtedness of the Company and the guarantors (as defined in the Indenture).

The Indenture requires that, upon the occurrence of a Change of Control (as defined in the Indenture), the Company shall offer to purchase all of the outstanding Notes at a purchase price in cash equal to 101% of the outstanding principal amount of the Notes, plus accrued and unpaid interest.

If the Company or certain of its subsidiaries dispose of assets, under certain circumstances, the Company will be required to either invest the net cash proceeds from such assets sales in its business within a specified period of time, repay certain senior secured debt or debt of its non-guarantor subsidiaries, or make an offer to purchase a principal amount of the Notes equal to the excess net cash proceeds at a purchase price of 100% of their principal amount, plus accrued and unpaid interest.

The 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 Indenture).

The 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 Indenture.

The Indenture includes customary events of default, including failure to make payment, failure to comply with the obligations set forth in the 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 Indenture.

(c) Whistler Mountain Resort Limited Partnership (“Whistler LP”) and Blackcomb Skiing Enterprises Limited Partnership (“Blackcomb LP”), together “The WB Partnerships,” are party to a credit agreement, dated as of November 12, 2013 (as amended, the “Whistler Credit Agreement”), by and among Whistler LP, Blackcomb LP, certain subsidiaries of Whistler LP and Blackcomb LP party thereto as guarantors (the “Whistler Subsidiary Guarantors”), the financial institutions party thereto as lenders and The Toronto-Dominion Bank, as administrative agent.

The Whistler Credit Agreement consists of a C$ 300.0 million revolving credit facility, and during the year ended July 31, 2020, the Company entered into an amendment of the Whistler Credit Agreement which extended the maturity date of the revolving credit facility to December 15, 2024 .

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Base Rate plus 1.25% per annum or (b) Bankers Acceptance Rate plus 2.25% per annum .

As of July 31, 2019 all borrowings under the Whistler Credit Agreement were made in Canadian dollars and by way of the issuance of bankers’ acceptances plus 1.75% ( 3.76% as of July 31, 2019).

As of July 31, 2020 , all borrowings under the Whistler Credit Agreement were made in Canadian dollars and by way of the issuance of bankers’ acceptances plus 2.25% (approximately 2.79 % as of July 31, 2020 ).

The Whistler Credit Agreement also includes a quarterly unused commitment fee based on the Consolidated Total Leverage Ratio, which as of July 31, 2020 is equal to 0.5063 % per annum.

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In addition, the Whistler Credit Agreement includes the restrictive financial covenants (leverage ratios and interest coverage ratios) customary for facilities of this type.

The Company has recorded the outstanding debt of four Employee Housing Entities (each an “Employee Housing Entity” and collectively the “Employee Housing Entities”):

(d) On September 24, 2019, in conjunction with the acquisition of Peak Resorts (see Note 7, Acquisitions), the Company assumed various secured borrowings (the “EPR Secured Notes”) under the master credit and security agreements and other related agreements, as amended, (collectively, the “EPR Agreements”) with EPT Ski Properties, Inc.

and its affiliates (“EPR”).

The EPR Secured Notes include the following:

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 % .

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 % .

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 % .

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 % .

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 % .

The EPR Secured Notes are secured by all or substantially all of the assets of Peak Resorts and its subsidiaries, including mortgages on the Alpine Valley, Boston Mills, Brandywine, Jack Frost, Big Boulder, Mount Snow and Hunter Mountain ski resorts.

The EPR Secured Notes bear interest at specified interest rates, as discussed above, which are subject to increase each year by the lesser of (i) three times the percentage increase in the Consumer Price Index or (ii) a capped index (the “Capped CPI Index”), which is 1.75 % for the Hunter Mountain Secured Note and 1.50 % for all other notes.

The EPR Agreements provide for affirmative and negative covenants that restrict, among other things, the ability of Peak Resorts and its subsidiaries to incur indebtedness, dispose of assets, make distributions and make investments.

In addition, the EPR Agreements include restrictive covenants, including maximum leverage ratio and consolidated fixed charge ratio.

An additional contingent interest payment would be due to EPR if, on a calendar year basis, the gross receipts from the properties securing any of the individual EPR Secured Notes (the “Gross Receipts”) are more than the result (the “Interest Quotient”) of dividing the total interest charges for the EPR Secured Notes by a specified percentage rate (the “Additional Interest Rate”).

In such a case, the additional interest payment would equal the difference between the Gross Receipts and the Interest Quotient multiplied by the Additional Interest Rate.

This calculation is made on an aggregated basis for the notes secured by the Jack Frost, Big Boulder, Boston Mills, Brandywine and Alpine Valley ski resorts, where the Additional Interest Rate is 10.0 % ;

on a standalone basis for the note secured by the Company’s Mount Snow ski resort, where the Additional Interest Rate is 12.0 % ;

and on a standalone basis for the note secured by the Company’s Hunter Mountain ski resort, where the Additional Interest Rate is 8.0 % .

Peak Resorts does not have the right to prepay the EPR Secured Notes.

The EPR Secured Notes were recorded at their estimated fair value in conjunction with the acquisition of Peak Resorts on September 24, 2019.

The EPR Agreements grant EPR certain other rights including (i) the option to purchase the Boston Mills, Brandywine, Jack Frost, Big Boulder or Alpine Valley resorts, which is exercisable no sooner than two years and no later than one year prior to the maturity dates of the applicable EPR Secured Note for such properties, with any closings to be held on the applicable maturity dates;

and, if EPR exercises the purchase option, EPR will enter into an agreement with the Company for the lease of each acquired property for an initial term of 20 years, plus options to extend the lease for two additional periods of ten years each;

(ii) a right of first refusal through 2021, subject to certain conditions, to provide all or a portion of the financing associated with any purchase, ground lease, sale/leaseback, management or financing transaction contemplated by Peak Resorts with respect to any new or existing ski resort properties;

and (iii) a right of first refusal through 2021 to purchase the Company’s Attitash ski resort in the event the Company were to desire to sell the Attitash ski resort.

To date, EPR has not exercised any such purchase options.

In addition, Peak Resorts is required to maintain a debt service reserve account which amounts are applied to fund interest payments and other amounts due and payable to EPR.

As of July 31, 2020 the Company had funded the EPR debt service reserve account in an amount equal to approximately $ 5.7 million , which was included in other current assets in the Company’s Consolidated Balance Sheet.

(e) Peak Resorts serves as the general partner for two limited partnerships, Carinthia Group 1, LP and Carinthia Group 2, LP (together, the “Carinthia Partnerships”), which were formed to raise $ 52.0 million through the Immigrant Investor Program administered by the U.S.

Citizenship and Immigration Services (“USCIS”), pursuant to the Immigration and Nationality Act (the “EB-5 Program”).

The EB-5 Program was created to stimulate the U.S.

economy through the creation of jobs and capital investments in U.S.

companies by foreign investors.

The program allocates immigrant visas to qualified individuals (“EB-5 Investors”) seeking lawful permanent resident status based on their investment in a U.S commercial enterprise.

On December 27, 2016, Peak Resorts borrowed $ 52.0 million from the Carinthia Partnerships to fund two capital projects at Mount Snow.

The amounts were borrowed through two loan agreements, which provided $ 30.0 million and $ 22.0 million (together, the “EB-5 Development Notes”).

Amounts outstanding under the EB-5 Development Notes accrue simple interest at a fixed rate of 1.0 % per annum until the maturity date, which is December 27, 2021, subject to an extension of up to two additional years at the option of the borrowers, with lender consent.

If the maturity date is extended, amounts outstanding under the EB-5 Development Notes will accrue simple interest at a fixed rate of 7.0 % per annum during the first year of extension and a fixed rate of 10.0 % per annum during the second year of extension.

Upon an event of default (as defined), amounts outstanding

under the EB-5 Development Notes shall bear interest at the rate of 5.0 % per annum, subject to the extension increases.

While the EB-5 Development Notes are outstanding, Peak Resorts is restricted from taking certain actions without the consent of the lenders, including, but not limited to, transferring or disposing of the properties or assets financed with loan proceeds.

In addition, Peak Resorts is prohibited from prepaying outstanding amounts owed if such prepayment would jeopardize any of the EB-5 Investors from being admitted to the U.S.

via the EB-5 Program.

(f) The Company has recorded the outstanding debt of four Employee Housing Entities (each an “Employee Housing Entity” and collectively the “Employee Housing Entities”):

Breckenridge Terrace, Tarnes, BC Housing and Tenderfoot.

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Breckenridge Terrace

On May 24, 2013 , VR CPC Holdings, Inc.

(g) On May 24, 2013 , VR CPC Holdings, Inc.

(“VR CPC”), a wholly-owned subsidiary of the Company, entered into a transaction agreement with affiliate companies of Talisker Corporation (“Talisker”) pursuant to which the parties entered into a master lease agreement (the “Lease”) and certain ancillary transaction documents on May 29, 2013 related to the former stand-alone Canyons Resort (“Canyons”), pursuant to which the Company assumed the resort operations of the Canyons.

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The obligation at July 31, 2020 represents future lease payments for the remaining initial lease term of 50 years (including annual increases at the floor of 2%) discounted using an interest rate of 10 % , and includes accumulated accreted interest expense of approximately $ 40.7 million .

During the year ended July 31, 2019, the Company completed two real estate sales transactions that were accounted for as financing arrangements as a result of the Company’s continuing involvement with the underlying assets that were sold, including but not limited to, the obligation to repurchase finished commercial space from the development projects upon completion.

(h) During the year ended July 31, 2019, the Company completed two real estate sales transactions that were accounted for as financing arrangements as a result of the Company’s continuing involvement with the underlying assets that were sold, including but not limited to, the obligation to repurchase finished commercial space from the development projects upon completion.

The Company received approximately $ 11.2 million of proceeds for these sales transactions during the year ended July 31, 2019, which are reflected within long-term debt, net.

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Other obligations, including the Colorado Water Conservation Board note, bear interest at rates ranging from 5.1 % to 5.5 % .

Current maturities represent principal payments due in the next 12 months , and exclude approximately $6.2 million of proceeds resulting from a real estate transaction accounted for as a financing arrangement, as discussed above, which are expected to be recognized on the Company’s Statement of Operations during the year ending July 31, 2020 as a result of the anticipated resolution of continuing involvement, with no associated cash outflow.

(i) In connection with the acquisition of Peak Resorts, the Company estimated the acquisition date fair values of the debt instruments assumed, including the EPR Secured Notes and the EB-5 Development Notes, and recorded any difference between such estimated fair values and the par value of debt instruments as unamortized premiums and discounts, which is amortized and recorded to interest expense, net on the Company’s Consolidated Statements of Operations over the respective term of the applicable debt instruments.

Additionally, certain costs incurred with regard to the issuance of debt instruments are capitalized and included as a reduction in the net carrying value of long-term debt, net of accumulated amortization, with the exception of costs incurred related to line-of-credit arrangements, which are included in deferred charges and other assets, net of accumulated amortization.

(j) Current maturities represent principal payments due in the next 12 months , and exclude approximately $ 6.2 million of proceeds resulting from a real estate transaction accounted for as a financing arrangement, as discussed above, which are expected to be recognized on the Company’s Statement of Operations during the year ending July 31, 2021 as a result of the anticipated resolution of continuing involvement, with no associated cash outflow.

Aggregate maturities for debt outstanding, including capital lease obligations, as of July 31, 2020 reflected by fiscal year are as follows (in thousands):

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As a result, foreign currency fluctuations associated with the loan are recorded within the Company’s results of operations.

The Company recognized approximately $(2.9) million , $(9.0) million and $15.3 million of non-cash foreign currency (loss) gain on the intercompany loan to Whistler Blackcomb during the years ended July 31, 2019, 2018 and 2017, respectively, on the Company’s Consolidated Statements of Operations.

The Company recognized approximately $ 3.2 million , $ 2.9 million and $ 9.0 million of non-cash foreign currency loss on the intercompany loan to Whistler Blackcomb during the years ended July 31, 2020, 2019 and 2018, respectively, on the Company’s Consolidated Statements of Operations.

On September 24, 2019, the Company, through a wholly-owned subsidiary, 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 of 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 the Company borrowed approximately $ 335.6 million under the Vail Holdings Credit Agreement (see Note 6, Long-Term Debt) to fund the acquisition, repayment of debt instruments and lease obligations, and associated acquisition related expenses.

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 Company assumed the Special Use Permits from the U.S.

Forest Service for Attitash, Mount Snow and Wildcat Mountain, and assumed the land leases for Mad River and Paoli Peaks.

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.

The following summarizes the purchase consideration and the preliminary purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands):

Acquisition Date Estimated Fair Value

Current assets

Property, plant and equipment

Identifiable intangible assets

Assumed long-term debt

Other liabilities

Net assets acquired

During the three months ended July 31, 2020, the Company recorded measurement period adjustments of approximately $ 8.6 million primarily related to the finalization of pre-acquisition period tax returns for Peak Resorts, which decreased deferred income taxes, net (included in other liabilities in the table above) with a corresponding decrease to goodwill, net.

Identifiable intangible assets acquired in the transaction were primarily related to trade names and property management contracts, which had acquisition date estimated fair values of approximately $ 15.8 million and $ 3.1 million , respectively.

The process of estimating the fair value of the depreciable property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost.

The excess of the purchase price over the aggregate estimated fair values of the assets acquired and liabilities assumed was recorded as goodwill.

The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of the resorts and other factors, and is not expected to be deductible for income tax purposes.

The Company assumed various debt obligations of Peak Resorts, which were recorded at their respective estimated fair values as of the acquisition date (see Note 6, Long-Term Debt).

The Company incurred $ 3.1 million of acquisition related expenses associated with the transaction which were recorded within Mountain and Lodging operating expense in its Consolidated Statement of Operations for the year ended July 31, 2020.

The operating results of Peak Resorts are reported within the Mountain and Lodging segments prospectively from the date of acquisition.

The estimated fair values of assets acquired and liabilities assumed in the acquisition of Peak Resorts are preliminary and are based on the information that was available as of the acquisition date.

The Company believes that this information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed;

however, the Company is obtaining additional information necessary to finalize those estimated fair values.

Therefore, the preliminary measurements of estimated fair values reflected are subject to change.

The Company expects to finalize the valuation and complete the purchase consideration allocation no later than one year from the acquisition date.

Falls Creek and Hotham Resorts

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The acquisition included the mountain operations of both resorts, including base area skier services (ski and snowboard school facilities, retail and rental, reservation and property management operations).

The following summarizes the purchase consideration and the purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands):

Acquisition Date Estimated Fair Value

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The acquisition included the mountain operations of the resort, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities).

Acquisition Date Estimated Fair Value

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Acquisition Date Estimated Fair Value

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The operating results of Triple Peaks are reported within the Mountain and Lodging segments prospectively from the date of acquisition.

The estimated fair values of assets acquired and liabilities assumed in the acquisitions of Falls Creek, Hotham, Stevens Pass and Triple Peaks are preliminary and are based on the information that was available as of the respective acquisition dates.

The Company believes that this information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed;

however, the Company is obtaining additional information necessary to finalize those estimated fair values.

Therefore, the preliminary measurements of estimated fair values reflected are subject to change.

The Company expects to finalize the valuation and complete the purchase consideration allocation no later than one year from the respective acquisition dates.

Pro Forma Financial Information for Falls Creek, Hotham, Stevens Pass and Triple Peaks

The following presents the unaudited pro forma consolidated financial information of the Company as if the acquisitions of Falls Creek, Hotham, Stevens Pass and Triple Peaks were completed on August 1, 2017, the beginning of the fiscal year preceding the fiscal year in which the acquisitions occurred.

Pro Forma Financial Information

The following presents the unaudited pro forma consolidated financial information of the Company as if the acquisitions of Peak Resorts, Falls Creek and Hotham, Stevens Pass and Triple Peaks were completed at the beginning of the fiscal year preceding the respective fiscal year in which each acquisition occurred.

The following unaudited pro forma financial information includes adjustments for (i) depreciation on acquired property, plant and equipment;

(ii) amortization of intangible assets recorded at the date of the

transactions;

(ii) amortization of intangible assets recorded at the date of the transactions;

(iii) lease expenses incurred by the prior owners which the Company will not be subject to;

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and (v) interest expense associated with financing the transactions.

This unaudited pro forma financial information is presented for informational purposes only and does not purport to be indicative of the results of future operations or the results that would have occurred had the transaction taken place on August 1, 2017 (in thousands, except per share amounts).

This unaudited pro forma financial information is presented for informational purposes only and does not purport to be indicative of the results of future operations or the results that would have occurred had the transaction taken place at the beginning of the fiscal year preceding the fiscal year in which each acquisition occurred (in thousands, except per share amounts).

Year Ended July 31,

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Pro forma diluted net income per share attributable to Vail Resorts, Inc.

On June 7, 2017 , the Company, through a wholly-owned subsidiary, acquired Stowe Mountain Resort in Stowe, Vermont, from Mt.

Mansfield Company, Inc., a wholly-owned subsidiary of American International Group, Inc., for total cash consideration of $40.7 million .

The Company acquired all of the assets related to the mountain operations of the resort, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities).

The purchase price was allocated to identifiable tangible and intangible assets acquired based on their estimated fair values at the acquisition date.

The Company has completed its purchase price allocation and has recorded $39.2 million in property, plant and equipment;

$3.0 million in intangible assets;

$2.3 million in other assets;

and $3.8 million of assumed liabilities on the date of acquisition.

The Company recognized $2.0 million of transaction related expenses associated with the transaction in Mountain and Lodging operating expense in the Consolidated Statements of Operations for the year ended July 31, 2017.

The operating results of Stowe are reported within the Mountain segment.

Whistler Blackcomb

On October 17, 2016 , the Company, through Exchangeco, acquired all of the outstanding common shares of Whistler Blackcomb, for aggregate purchase consideration paid to Whistler Blackcomb shareholders of $1.09 billion .

The consideration paid consisted of (i) approximately C$673.8 million ( $512.6 million ) in cash (or C$17.50 per Whistler Blackcomb share), (ii) 3,327,719 Vail Shares and (iii) 418,095 Exchangeco Shares.

Each Exchangeco Share is exchangeable by the holder thereof for one Vail Share (subject to customary adjustments for stock splits or other reorganizations).

In addition, the Company may require all outstanding Exchangeco Shares to be exchanged into an equal number of Vail Shares upon the occurrence of certain events and at any time following the seventh anniversary of the closing of the acquisition.

While outstanding, holders of Exchangeco Shares are entitled to cast votes on matters for which holders of Vail Shares are entitled to vote and are entitled to receive dividends economically equivalent to the dividends declared by the Company with respect to the Vail Shares.

Whistler Blackcomb owns a 75% interest in each of Whistler LP and Blackcomb LP (the “WB Partnerships”), which together operate Whistler Blackcomb resort, a year round mountain resort in British Columbia, Canada with a comprehensive offering of recreational activities, including both snow sports and summer activities.

The remaining 25% limited partnership interest in each of the WB Partnerships is owned by Nippon Cable Co.

(“Nippon Cable”), an unrelated party to the Company.

The WB Partnerships hold land leases and rights-of-way under long-term agreements with the government of the province of British Columbia, Canada within the traditional territory of the Squamish and Lil’wat Nations, which provide for the use of land at Whistler Mountain and Blackcomb Mountain.

The Company executed forward contracts for the underlying Canadian dollar cash consideration to economically hedge the risk associated with the U.S.

dollar to Canadian dollar exchange rates.

The Company’s total cost was $509.2 million to accumulate C$673.8 million which was required for the cash component of the purchase consideration.

The estimated fair value of the Canadian dollars was approximately $512.6 million upon settlement.

Accordingly, the Company realized a gain of $3.4 million on foreign currency exchange rate changes.

The gain on foreign currency is a separate transaction as it primarily benefited the Company and therefore the Company recorded this gain within Investment income and other, net in its Consolidated Statement of Operations for the year ended July 31, 2017.

The estimated fair value of $512.6 million is considered the cash component of the purchase consideration.

The Company held shares of Whistler Blackcomb common stock prior to the acquisition and, as such, the acquisition-date estimated fair value of this previously held investment was a component of the purchase consideration.

Based on the acquisition-date estimated fair value of this investment of $4.3 million , the Company recorded a gain of $0.8 million within Investment income and other, net in its Consolidated Statement of Operations for the year ended July 31, 2017.

Nippon Cable’s 25% limited partnership interest is a noncontrolling economic interest containing certain protective rights and no ability to participate in the day to day operations of the WB Partnerships.

The WB Partnership agreements provide that distributions made out of the partnerships be made on the basis of 75% to Whistler Blackcomb and 25% to Nippon Cable.

In addition, based upon the terms of the WB Partnership agreements, the annual distribution rights are non-transferable and transfer of the limited partnership interest is limited to Nippon Cable’s entire interest.

Accordingly, the estimate of fair value associated with the noncontrolling interest at the date of acquisition has been determined based on expected underlying cash flows of the WB Partnerships discounted at a rate commensurate with a market participant’s expected rate of return for an equity instrument with these associated restrictions.

The following summarizes the purchase consideration and the estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands, except exchange ratio and share price):

(in thousands, except exchange ratio and share price amounts)

Acquisition Date Estimated Fair Value

Total Whistler Blackcomb shares acquired

Exchange ratio as of October 14, 2016

Total Vail Resorts shares issued to Whistler Blackcomb shareholders

Vail Resorts closing share price on October 14, 2016

Total value of Vail Resorts shares issued

Total cash consideration paid at C$17.50 ($13.31 on October 17, 2016) per Whistler Blackcomb share

Total purchase consideration to Whistler Blackcomb shareholders

Estimated fair value of previously held investment in Whistler Blackcomb

Estimated fair value of Nippon Cable’s 25% interest in Whistler Blackcomb

Total estimated purchase consideration

Allocation of total estimated purchase consideration:

Estimated fair values of assets acquired:

Current assets

Property, plant and equipment

Real estate held for sale and investment

Identifiable intangibles

Deferred income taxes, net

Current liabilities

Assumed long-term debt

Other long-term liabilities

Net assets acquired

During the year ended July 31, 2018, the Company recorded adjustments in the measurement period to its purchase price allocation which decreased the estimated fair value of noncontrolling interest and season pass holder relationships intangible asset with a corresponding net decrease to goodwill.

The estimated fair values of definite-lived and indefinite-lived identifiable intangible assets were determined using significant estimates and assumptions.

The estimated fair value and estimated useful lives of identifiable intangible assets, where applicable, are as follows.

Estimated Fair Value

Weighted Average Amortization Period

($ in thousands)

(in years) (1)

Season pass holder relationships

Property management contracts

Total acquired identifiable intangible assets

(1) Trademarks and property management contracts are indefinite-lived intangible assets.

The excess of the purchase consideration over the aggregate estimated fair values of assets acquired and liabilities assumed was recorded as goodwill.

The goodwill recognized is attributable primarily to expected cost efficiencies from the elimination of certain public company costs as well as other select areas of general and administrative functions, synergies, including utilization of the Company’s yield management strategies at Whistler Blackcomb and increased pass product sales and visitation across the Company’s resort portfolio, the assembled workforce of Whistler Blackcomb and other factors.

The goodwill is not deductible for income tax purposes.

The operating results of Whistler Blackcomb, which are primarily recorded in the Mountain segment, contributed $257.8 million of net revenue and $65.6 million of earnings for the year ended July 31, 2017, prospectively from the acquisition date of October 17, 2016.

The Company recognized $3.2 million of Whistler Blackcomb transaction related expenses in Mountain operating expense in the Consolidated Statement of Operations for the year ended July 31, 2017.

On February 23, 2017, Whistler LP, by its general partner Whistler Blackcomb Holdings Inc.

(“WBHI”), a wholly-owned subsidiary of the Company, entered into a master development agreement (the “Whistler MDA”) with Her Majesty, the Queen in Right of British Columbia (the “Province”) with respect to the operation and development of Whistler Mountain.

Additionally, on February 23, 2017, Blackcomb LP, by its general partner WBHI, entered into a master development agreement (the “Blackcomb MDA” and together with the Whistler MDA, the “MDAs”) with the Province with respect to the operation and development of Blackcomb Mountain.

Each of Whistler LP and Blackcomb LP were operating under existing master development agreements that terminated upon execution of the new MDAs.

The MDAs grant a general license to the WB Partnerships to use the Whistler Mountain lands and the Blackcomb Mountain lands for the operation and development of the Whistler Blackcomb Resort.

Each WB Partnership is permitted to develop new improvements to Whistler Mountain or Blackcomb Mountain, as the case may be, within standard municipal type development control conditions.

The MDAs each have a term of 60 years and are replaceable for an additional 60 years by option exercisable by the WB Partnerships after the first 30 years of the initial term.

In accordance with the MDAs, each WB Partnership is obligated to pay annual fees to the Province at a percentage certain gross revenues related to the Whistler Blackcomb Resort.

Supplementary Balance Sheet Information

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Depreciation expense, which included depreciation of assets recorded under capital leases, for the years ended July 31, 2020 , 2019 and 2018 totaled $ 243.1 million , $ 210.7 million and $ 199.2 million , respectively.

The following table shows the composition of property, plant and equipment recorded under capital leases as of July 31, 2019 and 2018 (in thousands):

The following table summarizes the composition of property, plant and equipment recorded under finance leases as of July 31, 2020 and 2019 (in thousands):

Land improvements

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The composition of goodwill and intangible assets follows (in thousands):

Accumulated impairments

Accumulated amortization

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Balance at July 31, 2019

Acquisitions (including measurement period adjustments)

Asset impairments

Effects of changes in foreign currency exchange rates

Balance at July 31, 2020

Asset Impairments

The Company recorded asset impairments during the year ended July 31, 2020 of $ 28.4 million , with corresponding reductions to goodwill, net of $ 25.7 million and intangible assets, net and property, plant and equipment, net of $ 2.7 million .

These asset impairments encompass various estimates and assumptions about fair value, which are based predominately on significant unobservable inputs.

As a result of the COVID-19 pandemic and the impact it has had on the Company’s operations during the year ended July 31, 2020, and the expected continuing impact of the pandemic on future operations, the Company determined that the estimated fair value of its Colorado resort ground transportation company reporting unit within its Lodging segment no longer exceeded its carrying value.

Additionally, the Company determined that certain long-lived assets of its Colorado resort ground transportation company were not recoverable.

As a result, the Company recognized impairments of goodwill of approximately $ 25.7 million and intangible assets and long-lived assets of $ 2.7 million , which were recorded within asset impairments on the Company’s Consolidated Statement of Operations during the year ended July 31, 2020.

The Company estimated the fair value of its Colorado resort ground transportation company reporting unit based on an analysis of the present value of future cash flows (an income approach).

The significant estimates used in the discounted cash flow model included the Company’s weighted average cost of capital for the reporting unit, projected cash flows and the long-term rate of growth, all of which are significant unobservable (Level 3) inputs.

The Company’s assumptions were based on the actual historical performance of the reporting unit, taking into account the recent weakening of operating results and the expected continuation of operating results for transportation services.

As a result of this impairment, the Company’s Colorado ground transportation company had no remaining goodwill recorded as of July 31, 2020.

The composition of accounts payable and accrued liabilities follows (in thousands):

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Accrued benefits

Operating lease liabilities

Other accruals

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Clinton Ditch and Reservoir Company

The Company had total net investments in equity method affiliates of $8.8 million and $7.7 million as of July 31, 2019 and 2018 , respectively, classified as deferred charges and other assets in the accompanying Consolidated Balance Sheets.

The amount of retained earnings that represent undistributed earnings of 50-percent-or-less-owned entities accounted for by the equity method was $5.4 million and $4.4 million as of July 31, 2019 and 2018 , respectively.

The Company had total net investments in equity method affiliates of $ 10.2 million and $ 8.8 million as of July 31, 2020 and 2019 , respectively, included within deferred charges and other assets in the accompanying Consolidated Balance Sheets.

The amount of retained earnings that represent undistributed earnings of 50% or less owned entities accounted for by the equity method was $ 6.5 million and $ 5.4 million as of July 31, 2020 and 2019 , respectively.

During the years ended July 31, 2020 , 2019 and 2018 , distributions in the amounts of $ 0.7 million , $ 1.0 million and $ 1.5 million , respectively, were received from equity method affiliates.

SSF/VARE is a real estate brokerage with multiple locations in Eagle and Summit Counties, Colorado in which the Company has a 50% ownership interest.

SSF/VARE leases space for real estate offices from the Company.

The Company recognized approximately $0.4 million in revenue related to these leases for each of the years ended July 31, 2019 , 2018 and 2017 .

Fair Value Measurements

The FASB issued fair value guidance that establishes how reporting entities should measure fair value for measurement and disclosure purposes.

The Company utilizes FASB issued fair value guidance that establishes how reporting entities should measure fair value for measurement and disclosure purposes.

The guidance establishes a common definition of fair value applicable to all assets and liabilities measured at fair value and prioritizes the inputs into valuation techniques used to measure fair value.

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Unobservable inputs which are supported by little or no market activity.

The table below summarizes the Company’s cash equivalents, other current assets and Contingent Consideration measured at estimated fair value (all other assets and liabilities measured at fair value are immaterial) (in thousands):

The table below summarizes the Company’s cash equivalents, other current assets, Interest Rate Swaps and Contingent Consideration measured at their estimated fair values (all other assets and liabilities measured at fair value are immaterial) (in thousands):

Estimated Fair Value Measurement as of July 31, 2020

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Certificates of Deposit

Interest Rate Swaps

Contingent Consideration

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Contingent Consideration

The Company’s cash equivalents and other current assets are measured utilizing quoted market prices or pricing models whereby all significant inputs are either observable or corroborated by observable market data.

The following change in Contingent Consideration during the years ended July 31, 2019 and 2018 were as follows (in thousands):

The Company’s cash equivalents, other current assets and Interest Rate Swaps are measured utilizing quoted market prices or pricing models whereby all significant inputs are either observable or corroborated by observable market data.

During the year ended July 31, 2020, the Company entered into the Interest Rate Swaps to hedge the LIBOR-based variable interest rate component of $400.0 million in principal amount of its Vail Holdings Credit Agreement.

Changes in the estimated fair value are recognized in change in estimated fair value of hedging instruments on the Company’s Consolidated Statements of Comprehensive Income.

Such amounts are reclassified into interest expense, net from other comprehensive income during the period in which the hedged item affects earnings.

The estimated fair value of the Interest Rate Swaps are included within other long-term liabilities on the Company’s Consolidated Balance Sheet as of July 31, 2020.

The changes in Contingent Consideration during the years ended July 31, 2020 and 2019 were as follows (in thousands):

Contingent Consideration

Balance at July 31, 2018

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The Lease for Park City, as discussed in Note 6, Long-term Debt, provides for participating contingent payments (the “Contingent Consideration”) to the landlord of 42% of the amount by which EBITDA for the Park City resort operations, as calculated under the Lease, exceeds approximately $35 million, as established at the transaction date, with such threshold amount subsequently increased annually by an inflation linked index and a 10% adjustment for any capital improvements or investments made under the Lease by the Company.

The estimated fair value of Contingent Consideration includes the future period resort operations of Park City in the calculation of EBITDA on which participating contingent payments are made, which is determined on the basis of estimated performance for the years ending July 31, 2021 and July 31, 2022, escalated by an assumed long-term growth factor and discounted to net present value.

The Company estimated the fair value of the Contingent Consideration payments using an option pricing valuation model.

Key assumptions included a discount rate of 11.15%, volatility of 17.0% and future period Park City EBITDA, which are unobservable inputs and thus are considered Level 3 inputs.

Key assumptions included Park City EBITDA for the year ending July 31, 2022, an assumed long-term growth rate, a discount rate of 10.49% and volatility of 17.0%, which are unobservable inputs and thus are considered Level 3 inputs.

The Company prepared a sensitivity analysis to evaluate the effect that changes on certain key assumptions would have on the estimated fair value of the Contingent Consideration.

A change in the discount rate of 100 basis points or a 5% change in estimated subsequent year performance would result in a change in the estimated fair value within the range of approximately $3.8 million to $5.3 million.

A change in the discount rate of 100 basis points or a 5% change in estimated future performance would result in a change in the estimated fair value within the range of approximately $2.9 million to $4.1 million.

Contingent Consideration is classified as a liability in our Consolidated Balance Sheets and is remeasured to an estimated fair value at each reporting date until the contingency is resolved.

During the year ended July 31, 2019, the Company made a payment to the landlord for Contingent Consideration of approximately $0.1 million and recorded an increase in the estimated fair value of approximately $5.4 million primarily related to the Contingent Consideration payment for the year ended July 31, 2019 and other key assumptions noted above, resulting in an estimated fair value of the Contingent Consideration of $27.2 million as of July 31, 2019 , which is reflected in accounts payable and accrued liabilities and other long-term liabilities in the Consolidated Balance Sheet.

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”).

The Tax Act includes broad and complex changes to the U.S.

tax code that impacted the Company’s accounting and reporting for income taxes during the year ended July 31, 2018.

These changes primarily consist of a reduction in the U.S.

federal corporate income tax rate from 35% to 21% , the remeasurement of U.S.

net deferred tax liabilities as of the effective date utilizing the new U.S.

federal corporate income tax rate of 21% , the elimination of the domestic production activities deduction, as well as revised limitations on certain business expenses and executive compensation deductions under “Section 162(m)” of the Internal Revenue Code and provides for a tax on global intangible low-taxed income (“GILTI”), a base erosion anti-abuse tax (“BEAT”) and a deduction for foreign derived intangible income (“FDII”).

On December 22, 2017, the Securities and Exchange Commission (“SEC”) staff issued Staff Accounting Bulletin No.

118 (“SAB 118”) to provide guidance related to accounting for the income tax effects of the Tax Act.

SAB 118 provides that companies (i) should record the effects of the changes from the Tax Act for which the accounting is complete.

In addition, SAB 118 established a one-year measurement period (through December 22, 2018) where a provisional amount could be subject to adjustment, and requires certain qualitative and quantitative disclosures related to provisional amounts and accounting during the measurement period.

As a result of the Tax Act, the Company recorded a one-time, net tax benefit of $61.0 million on its Consolidated Statement of Operations for the year ended July 31, 2018, as described below.

The Company has determined there is no GILTI inclusion for the year, BEAT would not apply and there is no FDII deduction for the year.

The Company has not made a policy decision regarding whether to record deferred taxes on GILTI or use the period cost method as the Company has yet to be subject to a GILTI inclusion.

Due to the reduction in the U.S.

corporate tax rate, the Company remeasured its U.S.

net deferred tax liabilities as of the effective date and recognized a one-time benefit of $67.0 million as a discrete item in the benefit from income taxes for the year ended July 31, 2018, which was a reduction in net deferred tax liabilities in the accompanying Consolidated Balance Sheet as of July 31, 2018.

The Company also recorded a charge for the Transition Tax of $6.0 million as a discrete item in the benefit from income taxes for the year ended July 31, 2018.

The Tax Act does not provide for additional income taxes for any remaining undistributed foreign earnings not subject to the Transition Tax, or for any additional outside basis differences inherent in foreign entities, as these amounts continue to be indefinitely reinvested in those foreign operations.

Substantially all of the Company’s unremitted foreign earnings that have not been previously taxed have now been subjected to U.S.

taxation under the Transition Tax.

The Company has made no additional provision for U.S.

income taxes or additional non-U.S.

taxes on the remaining unremitted accumulated earnings of non-U.S.

subsidiaries.

It is not practical at this time to determine the income tax liability related to any remaining undistributed earnings or additional basis difference not subject to the Transition Tax.

During the year ended July 31, 2020, the Company made a payment to the landlord for Contingent Consideration of approximately $ 6.4 million and recorded a decrease in the estimated fair value of approximately $ 3.0 million primarily related to changes in the expected Contingent Consideration payments for the year ended July 31, 2020 and the year ending July 31, 2021, and other key assumptions noted above, resulting in an estimated fair value of the Contingent Consideration of $ 17.8 million as of July 31, 2020 , which is reflected in accounts payable and accrued liabilities and other long-term liabilities in the Consolidated Balance Sheet.

The Company is subject to taxation in U.S.

federal, state, and local jurisdictions and various non-U.S.

jurisdictions, including Australia and Canada.

The Company’s effective tax rate is impacted by the tax laws, regulations, practices and interpretations in the jurisdictions in which it operates and may fluctuate significantly from period to period depending on, among other things, the geographic mix of the Company’s profits and losses, changes in tax laws and regulations or their application and interpretation, the outcome of tax audits and changes in valuation allowances associated with the Company’s deferred tax assets.

On March 27, 2020, in response to 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 the year ended July 31, 2020, and the Company expects these amendments will continue to impact its accounting and reporting for income taxes in the future.

The primary provisions of the CARES Act that the Company has been impacted by include:

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;

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;

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 refundable employee retention credits and defers the requirement to remit the employer-paid portion of social security payroll taxes.

As a result, during the year ended July 31, 2020, the Company recorded a benefit of approximately $ 9.6 million , which primarily offset Mountain and Lodging operating expense as a result of wages paid to employees who were not providing services.

Additionally, the Company deferred payment of the employer-paid portion of social security payroll taxes through the end of calendar year 2020 and will remit such amounts in equal installments during calendar years 2021 and 2022.

The Company also recognized a benefit of approximately $ 8.5 million during the year ended July 31, 2020 as a result of the recent Canada Emergency Wage Subsidy and Australian JobKeeper legislation for its Canadian and Australian employees, which primarily offset Mountain and Lodging operating expense.

and foreign components of income before (provision) benefit from income taxes is as follows (in thousands):

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Intangible assets

Operating lease right of use assets

Deferred income tax assets:

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Net operating loss carryforwards and other tax credits

Operating lease liabilities

Valuation allowance for deferred income taxes

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The components of deferred income taxes recognized in the Consolidated Balance Sheets are as follows (in thousands):

Non-current deferred income tax asset

Net non-current deferred income tax liability

Deferred income tax asset

Deferred income tax liability

Net deferred income tax liability

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Provision (benefit) from income taxes

A reconciliation of the income tax (benefit) provision from continuing operations and the amount computed by applying the United States federal statutory income tax rate to income before income taxes is as follows:

A reconciliation of the income tax provision (benefit) from continuing operations and the amount computed by applying the United States federal statutory income tax rate to income before income taxes is as follows:

Year Ended July 31,

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Excess tax benefits related to stock-based compensation

Impacts of the Tax Act

Impacts of the Tax Act and other legislative changes

Noncontrolling interests

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Balance, beginning of year

Additions based on tax positions related to the current year

Additions for tax positions of prior years

Reductions for tax positions of prior years

Lapse of statute of limitations

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As of July 31, 2020 , the Company’s unrecognized tax benefits associated with uncertain tax positions relate to the treatment of the Talisker lease payments as payments of debt obligations and that the tax basis in Canyons goodwill is deductible, and are included within “other long-term liabilities” in the accompanying Consolidated Balance Sheets.

During the year ended July 31, 2019, the Company experienced a reduction in the uncertain tax positions due to the lapse of the statute of limitations of $17.5 million , which was offset with an increase to the uncertain tax position of $11.5 million .

During the year ended July 31, 2020, the Company experienced a reduction in the uncertain tax positions due to the lapse of the statute of limitations of $ 18.6 million , which was partially offset with an increase to the uncertain tax position of $ 16.7 million .

Interest and penalties associated with the statute of limitations lapse were approximately $ 3.1 million .

The Company is not aware of any

tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

Additionally, the Company expects a reduction to its uncertain tax positions for the fiscal year ending July 31, 2021, due to the lapse of the statute of limitations.

As of July 31, 2020 and 2019, accrued interest and penalties, net of tax, was $ 6.2 million and $ 6.3 million , respectively.

For the years ended July 31, 2019, 2018 and 2017, the Company recognized as income tax expense $1.1 million , $1.6 million and $2.0 million of interest expense and penalties, net of tax, respectively.

The Company’s major tax jurisdictions in which it files income tax returns is the U.S.

For the years ended July 31, 2020, 2019 and 2018, the Company recognized income tax (benefit) expense of ( $ 0.1 million ), $ 1.1 million and $ 1.6 million of interest (benefit) expense and penalties, net of tax, respectively.

The Company’s major tax jurisdictions in which it files income tax returns are the U.S.

federal jurisdiction, various state jurisdictions, Australia, and Canada.

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Additionally, the Company is no longer subject to audits for the tax years prior to 2015 for Australia and Canada.

The Company has NOL carryforwards totaling $8.9 million which are primarily comprised of state net operating loss (“NOL”) carryforwards that expire by the year ending July 31, 2031.

As of July 31, 2019, the Company has recorded a valuation allowance on $4.0 million of these NOL carryforwards as the Company has determined that it is more likely than not that these NOL carryforwards will not be realized.

The Company has NOL carryforwards totaling $ 58.6 million , primarily comprised of $ 49.8 million of federal and state NOLs as a result of the acquisition of Peak Resorts in September 2019 that will expire beginning July 31, 2032, $ 4.9 million of historical state NOLs that will expire by July 31, 2032 and non-U.S.

NOLs of $ 3.9 million that will carry forward indefinitely.

In connection with Peak Resorts’ initial public offering in November 2014, as well as the Company’s acquisition of Peak Resorts in September 2019, Peak Resorts had two ownership changes pursuant to the provisions of the Tax Reform Act of 1986.

As a result, the Company’s usage of its eligible Federal NOL carryforwards will be limited each year by these ownership changes;

however, management believes the full benefit of those carryforwards will be realized prior to their respective expiration dates.

As of July 31, 2020, the Company has recorded a valuation allowance on $ 3.9 million of the historical non-U.S.

NOL carryforwards, as the Company has determined that it is more likely than not that the associated NOL carryforwards will not be realized.

Additionally, the Company has foreign tax credit carryforwards of $ 4.2 million , which expire by the year ending July 31, 2028.

As of July 31, 2020, the Company has recorded a valuation allowance of $ 4.2 million on foreign tax credit carryforwards, as the Company has determined that it is more likely than not that these foreign tax credit carryforwards will not be realized.

The Company may be required to record additional valuation allowances if, among other things, adverse economic conditions, including those caused by the COVID-19 pandemic, negatively impact the Company’s ability to realize its deferred tax assets.

Evaluating and estimating the Company’s tax provision, current and deferred tax assets and liabilities and other tax accruals requires significant management judgment.

The Company intends to indefinitely reinvest undistributed earnings, if any, in its Canadian foreign subsidiaries.

It is not practical at this time to determine the income tax liability related to any remaining undistributed earnings.

Related Party Transactions

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The Company has agreed to pay capital improvement fees to Red Sky Ranch Metropolitan District (“RSRMD”) until RSRMD’s revenue streams from property taxes are sufficient to meet debt service requirements under HCMD’s bonds.

The Company recorded a liability of $2.0 million , primarily within other long-term liabilities in the accompanying Consolidated Balance Sheets, as of both July 31, 2019 and 2018 with respect to the estimated present value of future RSRMD capital improvement fees.

The Company recorded a liability of $ 2.1 million and $ 2.0 million , primarily within other long-term liabilities in the accompanying Consolidated Balance Sheets, as of July 31, 2020 and 2019 , respectively, with respect to the estimated present value of future RSRMD capital improvement fees.

The Company estimates that it will make capital improvement fee payments under this arrangement through the year ending July 31, 2031 .

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The initial term of the leases expires in fiscal 2027 and allows for three 10 -year extensions at the Company’s option.

The operations of Perisher are conducted on land under a license and lease granted by the Office of Environment and Heritage, an agency of the New South Wales government, which initially commenced in 2008, which the Company assumed in its acquisition of Perisher.

The operations of Perisher are conducted on land under a license and lease granted by the Office of Environment and Heritage, an agency of the New South Wales government, which initially commenced in 2008, and which the Company assumed in its acquisition of Perisher.

The lease and license has a term that expires in fiscal 2048 and allows for an option to renew for an additional 20 years .

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The leases have terms that expire in fiscal 2041 for Falls Creek and fiscal 2058 for Hotham, and provide for the payment of rent with both a fixed and variable component.

The operations of Mad River Mountain is conducted on land under a lease granted by EPT Mad River, Inc., which initially commenced in 2005, which the Company assumed in its acquisition of Peak Resorts in September 2019.

The lease has a term that expires in the year ending July 31, 2035, and provides for the payment of an initial minimum annual base rent, with annual CPI increases, and percentage rent of certain gross revenue generated at the property.

Additionally, the Company has entered into strategic long-term season pass alliance agreements with third-party mountain resorts in which the Company has committed to pay minimum revenue guarantees over the remaining terms of these agreements.

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Leasehold improvement incentives are recorded as leasehold improvements and amortized over the shorter of their economic lives or the term of the lease.

For the years ended July 31, 2019 , 2018 and 2017 , the Company recorded lease expense (including Northstar, Perisher, Falls Creek & Hotham), excluding executory costs, related to these agreements of $57.8 million , $52.8 million and $51.9 million , respectively, which is included in the accompanying Consolidated Statements of Operations.

As of July 31, 2019 , the Canyons obligation was $340.3 million , which represents the estimated annual lease payments for the remaining initial 50 year term of the lease assuming annual increases at the floor of 2% and discounted using an interest rate of 10% .

Future minimum operating lease payments under the above leases and future minimum capital lease payments under the Canyons obligation as of July 31, 2019 reflected by fiscal year are as follows (in thousands):

Operating Leases

Capital Leases

Total future minimum lease payments

Less amount representing interest

Net future minimum lease payments

For the years ended July 31, 2020 , 2019 and 2018 , the Company recorded lease expense (including Northstar, Perisher, Falls Creek & Hotham and Mad River Mountain), excluding executory costs, related to these agreements of $ 58.8 million , $ 57.8 million and $ 52.8 million , respectively, which is included in the accompanying Consolidated Statements of Operations.

See Note 4 “Leases” for additional information regarding the Company’s leasing arrangements.

Self Insurance

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All segment expenses include an allocation of corporate administrative expense.

Assets are not allocated between

segments, or used to evaluate performance, except as shown in the table below.

Assets are not used to evaluate performance, except as shown in the table below.

The accounting policies specific to each segment are the same as those described in Note 2 “Summary of Significant Accounting Policies.”

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Total Mountain net revenue

Total Resort net revenue

Total net revenue

Segment operating expense:

Total Resort operating expense

Real Estate, net

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Real estate held for sale and investment

Reconciliation to net income attributable to Vail Resorts, Inc.:

Total Reported EBITDA

Reconciliation of net income attributable to Vail Resorts, Inc.

to Total Reported EBITDA:

Net income attributable to Vail Resorts, Inc.

Net income attributable to noncontrolling interests

Provision (benefit) from income taxes

Income before provision (benefit) from income taxes

Depreciation and amortization

Asset impairments

(Gain) loss on disposal of fixed assets and other, net

Change in fair value of contingent consideration

Loss on disposal of fixed assets and other, net

Investment income and other, net

Foreign currency (loss) gain on intercompany loans

Foreign currency loss on intercompany loans

Interest expense, net

Income before (provision) benefit from income taxes

(Provision) benefit from income taxes

Net income attributable to noncontrolling interests

Net income attributable to Vail Resorts, Inc.

Total Reported EBITDA

Geographic Information

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Year Ended July 31,

International (a)

International (1)

Total net revenue

As of July 31,

Property, plant and equipment, net

International (a)

International (1)

Total property, plant and equipment, net

(a) The only individual international country (i.e.

(1) The only individual international country (i.e.

except the U.S.) to account for more than 10% of the Company’s revenue and property plant and equipment, net was Canada.

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Vail Shares purchased pursuant to the repurchase program will be held as treasury shares and may be used for issuance under the Company’s employee share award plan.

Stock Compensation Plan

Stoc k Compensation Plan

The Company has a share award plan (the “Plan”) which has been approved by the Company’s stockholders.

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Participants may contribute up to 100 % of their qualifying annual compensation up to the annual maximum specified by the Internal Revenue Code.

The Company matches an amount equal to 50% of each participant’s contribution up to 6% of a participant’s bi-weekly qualifying compensation starting the pay period containing the first day of the month after obtaining the later of:

When the Company participates in 401(k) contribution matching, it matches an amount equal to 50 % of each participant’s contribution up to 6 % of a participant’s bi-weekly qualifying compensation starting the pay period containing the first day of the month after obtaining the later of:

(i) 12 months of employment with at least 1,000 service hours from the commencement date or (ii) if 1,000 hours within the first 12 months was not completed, then after the employee completed a cumulative 1,500 service hours.

The Company’s matching contribution is entirely discretionary and may be reduced or eliminated at any time.

On April 1, 2020, the Company announced a temporary six month suspension of its 401(k) contribution matching as a result of the impacts of the COVID-19 pandemic and resulting resort closures.

Additionally, the Company’s matching contribution is entirely discretionary and may be reduced or eliminated at any time.

Total Retirement Plan expense recognized by the Company for the years ended July 31, 2020 , 2019 and 2018 was $ 5.8 million , $ 7.9 million and $ 6.9 million , respectively.

Subsequent Events

Amendment of Vail Holdings Credit Facility

On September 23, 2019, VHI, a wholly-owned subsidiary of the Company, entered into an amendment to the Vail Holdings Credit Agreement, which increased the amount of the outstanding term loan by approximately $335.6 million and extended the maturity date of the Vail Holdings Credit Agreement to September 23, 2024.

The proceeds from the term loan increase were utilized to fund the acquisition of Peak Resorts, Inc.

(“Peak Resorts’), as discussed below, and to prepay certain portions of the debt assumed in connection with the acquisition.

Acquisition of Peak Resorts, Inc.

On September 24, 2019, VHI, a wholly-owned subsidiary of the Company, completed its previously announced acquisition of Peak Resorts, a Missouri corporation, through the merger of VRAD Holdings, Inc., formerly a Missouri corporation and a wholly-owned subsidiary of VHI (“Merger Sub”), with and into Peak Resorts, with Peak Resorts surviving as a wholly-owned subsidiary of VHI (the “Merger”).

The Merger was consummated pursuant to the Agreement and Plan of Merger, dated as of July 20, 2019 (the “Merger Agreement”), by and among VHI, Merger Sub, Peak Resorts and, solely for the purposes stated in Section 9.14 of the Merger Agreement, the Company.

At the effective time of the Merger (the “Effective Time”) and pursuant to the terms and conditions of the Merger Agreement, (i) each share of outstanding common stock of Peak Resorts (other than shares owned (A) by VHI or Merger Sub and (B) by Peak Resorts in treasury) ceased to be outstanding and was converted into the right to receive $11.00 in cash, without interest;

(ii) each outstanding share of Series A Cumulative Convertible Preferred Stock of Peak Resorts (the “Series A Preferred Stock”) was converted into the right to receive an amount equal to the sum of:

(a) $1,748.81 ;

plus (b) the aggregate amount of all accrued and unpaid dividends on the applicable issuance of Series A Preferred Stock as of the Effective Time, in cash without interest;

(iii) each outstanding restricted stock unit that was granted pursuant to Peak Resorts’ 2014 Equity Incentive Plan became fully vested and was cancelled and extinguished in exchange for the right to receive $11.00 in cash, without interest;

and (iv) each warrant issued by Peak Resorts to purchase shares of common stock of Peak Resorts that was issued and outstanding immediately prior to the Effective Time (collectively, the “Warrants”), was cancelled in exchange for the right to receive an amount in cash, without interest, equal to the product of:

(a) the aggregate number of shares of common stock of Peak Resorts in respect of such Warrant;

multiplied by (b) the excess of $11.00 over the per share exercise price under such Warrant.

The aggregate consideration paid by the Company to the former Peak Resorts stockholders in the Merger was approximately $265 million , excluding related transaction fees and expenses.

The Company funded the payment of the aggregate consideration with the proceeds from the September 23, 2019 amendment of the Vail Holdings Credit Agreement, as discussed above.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data