VAIL RESORTS INC 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and notes related thereto included in this Form 10-K. To the extent that the following MD&A contains statements which are not of a historical nature, such statements are forward-looking statements which involve risks and uncertainties. These risks include, but are not limited to, those discussed in Item 1A. “Risk Factors” in this Form 10-K. The following discussion and analysis should be read in conjunction with the Forward-Looking Statements section and Item 1A. “Risk Factors” each included in this Form 10-K. The MD&A includes discussion of financial performance within each of our three segments. We have chosen to specifically include segment Reported EBITDA (defined as segment net revenue less segment operating expense, plus or minus segment equity investment income or loss and for the Real Estate segment, plus gain or loss on sale of real property) and Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents), in the following discussion because we consider these measurements to be significant indications of our financial performance and available capital resources. Resort Reported EBITDA, Total Reported EBITDA and Net Debt are not measures of financial performance or liquidity defined under accounting principles generally accepted in the United States (“GAAP”). We utilize segment Reported EBITDA in evaluating our performance and in allocating resources to our segments. We also believe that Net Debt is an important measurement as it is an indicator of our ability to obtain additional capital resources for our future cash needs. Refer to the end of the Results of Operations section for a reconciliation of net income attributable to Vail Resorts, Inc. to Total Reported EBITDA and long-term debt, net to Net Debt. Items excluded from Reported EBITDA and Net Debt are significant components in understanding and assessing financial performance or liquidity. Reported EBITDA and Net Debt should not be considered in isolation or as an alternative to, or substitute for, net income, net change in cash and cash equivalents or other financial statement data presented in the Consolidated Financial Statements as indicators of financial performance or liquidity. Because Resort Reported EBITDA, Total Reported EBITDA and Net Debt are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations, Resort Reported EBITDA, Total Reported EBITDA and Net Debt, as presented herein, may not be comparable to other similarly titled measures of other companies. In addition, our segment Reported EBITDA (i.e. Mountain, Lodging and Real Estate), the measure of segment profit or loss required to be disclosed in accordance with GAAP, may not be comparable to other similarly titled measures of other companies. Overview Our operations are grouped into three integrated and interdependent segments: Mountain, Lodging and Real Estate. We refer to “Resort” as the combination of the Mountain and Lodging segments. The Mountain, Lodging and Real Estate segments represented approximately 87%, 13% and 0%, respectively, of our net revenue for Fiscal 2020. On March 14, 2020, we announced a temporary closure of our North American Resorts and retail/rental operations as a result of the COVID-19 pandemic and as a precautionary measure for the safety of our guests and employees beginning on March 15, 2020. Subsequently on March 17, 2020, we announced the early closure of the 2019/2020 North American ski season for our North American Resorts, lodging properties and retail stores. Additionally, the ongoing impacts of the COVID-19 pandemic resulted in restrictions, limitations or closures of our 2020 Australian ski area operations and 2020 North American summer operations. Two of our Australian ski areas, Mount Hotham and Falls Creek, opened for their 2020 winter season on July 6, 2020 and were closed four days later due to a “stay at home” order put in place by the Victorian government as a result of a reemergence of COVID-19 in the region. These actions (the “Resort Closures”), and the COVID-19 pandemic in general, had a significant adverse impact to our results of operations for Fiscal 2020 as further described below in the discussion for each of our segments. 41 Mountain Segment 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 our regional ski areas, which tend to generate skier visits predominantly from their respective local markets. Additionally, we operate ancillary services, including ski school, dining and retail/rental operations, and for our Australian ski areas, including lodging and transportation operations. Mountain segment revenue is seasonal, with the majority of revenue earned from our North American destination mountain resorts and regional ski areas (collectively, our “Resorts”) occurring in our second and third fiscal quarters and the majority of revenue earned from our Australian ski areas occurring in our first and fourth fiscal quarters. Our North American Resorts are typically open for business from mid-November through mid-April, which is the peak operating season for the Mountain segment, and our Australian ski areas are typically open for business from June to early October. Our single largest source of Mountain segment revenue is the sale of lift tickets (including pass products), which represented approximately 53%, 53% and 51% of Mountain segment net revenue for Fiscal 2020, the fiscal year ended July 31, 2019 (“Fiscal 2019”) and the fiscal year ended July 31, 2018 (“Fiscal 2018”), respectively. During Fiscal 2020 and as a result of the impacts of the COVID-19 pandemic, including the Resort Closures, we announced that we would offer credits to customers who had purchased 2019/2020 North American pass products towards the purchase of a 2020/2021 North American pass product if such purchase was made by September 17, 2020 (the “Credit Offer”). The Credit Offer discounts range from a minimum of 20% to a maximum of 80% for season pass holders, depending on the number of days the pass holder used their pass product during the 2019/2020 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. As a result of the Credit Offer to 2019/2020 pass product holders, we delayed the recognition of approximately $120.9 million of deferred season pass revenue, as well as approximately $2.9 million of related deferred costs, that would have been recognized in Fiscal 2020 and are now expected to be recognized primarily in the second and third quarters of the fiscal year ending July 31, 2021 (“Fiscal 2021”). While we expect most of this revenue and deferred cost will be recognized during Fiscal 2021, in the event that a pass holder obtains a refund under Epic Coverage (as discussed below) for the 2020/2021 North American ski season and is eligible to utilize their credit toward the purchase of a pass product purchase for the 2021/2022 North American ski season, a portion of this deferred revenue and related deferred cost will be recognized in Fiscal 2022. 42 Lift revenue is driven by volume and pricing. Pricing is impacted by both absolute pricing, as well as the demographic mix of guests, which impacts the price points at which various products are purchased. The demographic mix of guests that visit our North American mountain resorts is divided into two primary categories: (1) out-of-state and international (“Destination”) guests and (2) in-state and local (“Local”) guests. For the 2019/2020 North American ski season, Destination guests comprised approximately 58% of our North American destination mountain resort skier visits (excluding complimentary access), while Local guests comprised approximately 42% of our North American destination mountain resort skier visits (excluding complimentary access), which compares to approximately 57% and 43%, respectively, for the 2018/2019 North American ski season and approximately 59% and 41%, respectively, for the 2017/2018 North American ski season. Skier visitation at our regional ski areas is largely comprised of Local guests. Destination guests generally purchase our higher-priced lift tickets (including pass products) and utilize more ancillary services such as ski school, dining and retail/rental, as well as lodging at or around our mountain resorts. Destination guest visitation is less likely to be impacted by changes in the weather during the current ski season, but may be more impacted by restrictions or preferences for travel due to the COVID-19 pandemic, adverse economic conditions, the global geopolitical climate or weather conditions in the immediately preceding ski season. Local guests tend to be more value-oriented and weather sensitive. We offer a variety of pass products for all of our Resorts marketed towards both Destination and Local guests. Our pass product offerings range from providing access to one or a combination of our Resorts to our Epic Pass, which allows pass holders unlimited and unrestricted access to all of our Resorts. The Epic Day Pass, which we began offering for the 2019/2020 North American ski season, is a customizable one to seven day pass product valid at each of our resorts, purchased in advance of the season, for those skiers and riders who expect to ski a certain number of days during the season. For the upcoming 2020/2021 North American ski season, we introduced Epic Mountain Rewards, a program which gives pass product holders a discount of 20% off on-mountain food and beverage, lodging, group ski and ride school lessons, equipment rentals and more at the Company’s North American owned and operated Resorts. Epic Mountain Rewards is available for everyone who purchases an Epic Pass, Epic Local Pass, Epic Day Pass, Epic Military Pass and most of our other pass products, regardless of whether guests plan to ski one day or every day of the season. Additionally, we introduced Epic Coverage for the 2020/2021 North American ski season, which is free for all pass holders, completely replacing the need for pass insurance, and providing expanded coverage over our historical pass insurance program. Epic Coverage provides refunds in the event of certain resort closures (e.g. for COVID-19), giving pass product holders a refund for any portion of the season that is lost due to qualifying circumstances. Additionally, Epic Coverage provides a refund for personal circumstances that were historically covered by our pass insurance program, such as eligible injuries, job losses and many other personal events, as well as in the event that the pass holder cannot reserve their preferred days. Refunds for resort closure events could vary based on the duration of the closure, certain elections made by the pass product holder and the number of days skied by the pass product holder. We will estimate the amount of expected refunds under the Epic Coverage program and will reduce the amount of pass product revenue recognized by that expected amount. The expected refunds will be calculated utilizing estimates and assumptions, including historical data and current information. If we believe it is probable that upon resolution of the contingencies for which we would provide refunds that a significant amount of revenue may be reversed, we will not recognize those amounts as revenue until such time as the contingencies have been resolved. Our pass program provides a compelling value proposition to our guests, which in turn assists us in developing a loyal base of customers who commit to ski at our Resorts generally in advance of the ski season and typically ski more days each season at our Resorts than those guests who do not buy pass products. Additionally, we have entered into strategic long-term season pass alliance agreements with third-party mountain resorts including Telluride Ski Resort in Colorado, Sun Valley Resort in Idaho, Snowbasin Resort in Utah, Hakuba Valley and Rusutsu Resort in Japan, Resorts of the Canadian Rockies in Canada, Les 3 Vallées in France, 4 Vallées in Switzerland, Skirama Dolomiti in Italy and Ski Arlberg in Austria, which further increases the value proposition of our pass products. As such, our pass program drives strong customer loyalty, mitigates exposure to more weather sensitive guests, generates additional ancillary spending and provides cash flow in advance of winter season operations. In addition, our pass program attracts new guests to our Resorts. All of our pass products, including the Epic Pass and Epic Day Pass, are predominately sold prior to the start of the ski season. Pass product revenue, although primarily collected prior to the ski season, is recognized in the Consolidated Statements of Operations throughout the ski season primarily based on historical visitation (see Notes to Consolidated Financial Statements). Lift revenue consists of pass product lift revenue (“pass revenue”) and non-pass product lift revenue (“non-pass revenue”). Approximately 51%, 47% and 47% of total lift revenue was derived from pass revenue for Fiscal 2020 (including the impact of the deferral of pass revenue as a result of the Credit Offer), Fiscal 2019 and Fiscal 2018, respectively. The cost structure of our mountain resort operations has a significant fixed component with variable expenses including, but not limited to, land use permit or lease fees, credit card fees, retail/rental cost of sales and labor, ski school labor and expenses associated with dining operations. As such, profit margins can fluctuate greatly based on the level of revenues associated with visitation. 43 Lodging Segment Operations within the Lodging segment include (i) ownership/management of a group of luxury hotels through the RockResorts brand proximate to our Colorado and Utah mountain resorts; (ii) ownership/management of non-RockResorts branded hotels and condominiums proximate to our North American Resorts; (iii) National Park Service (“NPS”) concessionaire properties including Grand Teton Lodge Company (“GTLC”); (iv) a Colorado resort ground transportation company; and (v) mountain resort golf courses. The performance of our lodging properties (including managed condominium units and our Colorado resort ground transportation company) proximate to our mountain resorts is closely aligned with the performance of the Mountain segment and generally experiences similar seasonal trends, particularly with respect to visitation by Destination guests. Revenues from such properties represented approximately 73%, 70% and 68% of Lodging segment net revenue (excluding Lodging segment revenue associated with reimbursement of payroll costs) for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. Management primarily focuses on Lodging net revenue excluding payroll cost reimbursements and Lodging operating expense excluding reimbursed payroll costs (which are not measures of financial performance under GAAP) as the reimbursements are made based upon the costs incurred with no added margin; as such, the revenue and corresponding expense have no effect on our Lodging Reported EBITDA, which we use to evaluate Lodging segment performance. Revenue of the Lodging segment during our first and fourth fiscal quarters is generated primarily by the operations of our NPS concessionaire properties (as their operating season generally occurs from June to the end of September); mountain resort golf operations and seasonally lower volume from our other owned and managed properties and businesses. As discussed above, our North American lodging properties closed early in March for the remainder of the 2019/2020 ski season as a result of the COVID-19 pandemic. Our summer operations for the 2020 season were also limited or adjusted, including at GTLC with the closures of Jackson Lake Lodge and Jenny Lake Lodge, as well as not offering guided activities, in-restaurant dining and the temporary closure of many facilities, among others. Real Estate Segment The principal activities of our Real Estate segment include the sale of land parcels to third-party developers and planning for future real estate development projects, including zoning and acquisition of applicable permits. We continue undertaking preliminary planning and design work on future projects and are pursuing opportunities with third-party developers rather than undertaking our own significant vertical development projects. Additionally, real estate development projects by third-party developers most often result in the creation of certain resort assets that provide additional benefit to the Mountain segment. We believe that, due to our low carrying cost of real estate land investments, we are well situated to promote future projects by third-party developers while limiting our financial risk. Our revenue from the Real Estate segment and associated expense can fluctuate significantly based upon the timing of closings and the type of real estate being sold, causing volatility in the Real Estate segment’s operating results from period to period. Recent Trends, Risks and Uncertainties We have identified the following significant factors (as well as uncertainties associated with such factors) that could impact our future financial performance: • Given the escalating concerns surrounding the spread of COVID-19 and the potential impact that continuing to operate our resorts would have had on our resort communities, we suspended the operations at all of our North American Resorts and retail stores beginning on March 15, 2020 for the remainder of the 2019/2020 North American ski season. As a result of the COVID-19 pandemic and in response to guidance from the Centers for Disease Control and Prevention and other local and national health authorities, operations for the 2020 North American summer season were limited, adjusted or restricted. Additionally, although our Mount Hotham and Falls Creek ski areas opened for their 2020 winter season on July 6, 2020, we closed these two ski areas four days later due to a “stay at home” order put in place by the Victorian government as a result of a reemergence of COVID-19 in the region. These various closures and limitations on our operations had a significant negative impact on our results for Fiscal 2020, and we cannot predict the ultimate impact that the Resort Closures and other business disruptions as a result of the COVID-19 pandemic will continue to have on our results for the upcoming 2020/2021 North American ski season or our overall results for Fiscal 2021. • The global outbreak of COVID-19 has led to travel restrictions and other adverse economic impacts including reduced consumer confidence, an increase in unemployment rates and volatility in global and local economies. Although we are uncertain as to the ultimate severity and duration of the COVID-19 pandemic, the related global travel restrictions and other adverse impacts, we have seen a significant negative change in performance and expect our future performance will also be negatively impacted. In addition, the North American economy may be impacted by economic challenges in North America or declining or slowing growth in economies outside of North America, accompanied by devaluation of currencies, rising inflation, trade tariffs and lower commodity prices. We cannot predict the ultimate impact that the global economic 44 uncertainty as a result of the COVID-19 pandemic will have on overall travel and leisure spending or more specifically, on our guest visitation, guest spending or other related trends for the upcoming 2020/2021 North American ski season. • The timing and amount of snowfall can have an impact on Mountain and Lodging revenue, particularly with regard to skier visits and the duration and frequency of guest visitation. To help mitigate this impact, we sell a variety of pass products prior to the beginning of the ski season which results in a more stabilized stream of lift revenue. In early March 2020, we began our pass product sales program for the 2020/2021 North American ski season. In April 2020 and in connection with our announcement of the Credit Offer, we announced significant extensions to our traditional deadlines for pass product sales that normally would have occurred throughout the North American summer selling season. These extensions in our traditional deadlines and broader impacts from COVID-19 has had a significant negative impact on pass product sales through July 31, 2020 in comparison to the prior year comparable pass product sales. As previously discussed, as a result of the Resort Closures, we provided a Credit Offer to 2019/2020 pass product holders to apply toward the purchase of a 2020/2021 pass product. Additionally, looking ahead to the 2020/2021 North American ski season, we are optimistic that we will be operational for the ski season, but we also understand that many pass holders are nervous about the future given the current uncertainty, as our ability to open our Resorts may depend on local and/or state restrictions outside of our control. As a result, we introduced Epic Coverage for the 2020/2021 North American ski season, which is free for all pass holders and completely replaces the need to purchase pass insurance. Epic Coverage provides refunds in the event of certain resort closures (e.g., for COVID-19), giving pass product holders a refund for any portion of the season that is lost due to qualifying circumstances. Additionally, Epic Coverage provides a refund for qualifying personal circumstances that were historically covered by our pass insurance for eligible injuries, job losses and many other personal events, as well as in the event that the pass holder cannot reserve their preferred days. In addition to these changes, in order to give our pass product holders the time they need to make decisions regarding next season, we extended the deadline for pass holders to use their Credit Offer and receive spring benefits (including Buddy Tickets) until September 17, 2020, and we extended the period for pass holders to lock in their purchase with only $49 down. We also announced that we would be implementing a reservation system for our 34 North American Resorts for the 2020/2021 North American ski season, which will only be available for pass holders during the early season (paid lift tickets will not be sold until December 8, 2020). Season pass sales through September 18, 2020 for the upcoming 2020/2021 North American ski season increased approximately 18% in units and decreased approximately 4% in sales dollars as compared to the period in the prior year through September 20, 2019, with sales dollars for this year reduced by the value of the redeemed credits provided to 2019/2020 North American pass holders. Without deducting for the value of the redeemed credits, sales dollars increased approximately 24% compared to the prior year. Pass sales results are adjusted to eliminate the impact of foreign currency by applying an exchange rate of $0.76 between the Canadian dollar and U.S. dollar in both periods for Whistler Blackcomb pass sales.We cannot predict if this trend will continue for the entire duration of the fall 2020 North American pass sales campaign, nor can we predict the overall impact that the Credit Offer, Epic Coverage, extended spring benefits and the extended $49 down deadline will have on pass product sales or lift revenue for the upcoming 2020/2021 North American ski season. • On March 27, 2020, in response to the outbreak of the COVID-19 pandemic, the U.S. government enacted legislation commonly referred to as the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act includes various amendments to the U.S. tax code that impacted the Company’s accounting and reporting for income taxes during Fiscal 2020 and is expected to continue to impact the Company’s accounting and reporting for income taxes in the future, including the following: (i) allowing a carryback of the entire amount of eligible Federal net operating losses (“NOLs”) generated in calendar years 2018, 2019 and 2020 for up to five years prior to when such losses were incurred, representing a change from previous rules under the Tax Cuts & Jobs Act of 2017 (the “TCJA”), in which NOLs could not be carried back to prior years and utilization was limited to 80% of taxable income in future years; (ii) treatment of certain qualified improvement property (“QIP”) as 15-year property and allowing such QIP placed in service after December 31, 2017 to be eligible for bonus depreciation, which the Company expects will incrementally add to its pre-existing NOLs; and (iii) increases in the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for calendar years 2019 and 2020. The CARES Act also provides for refundable employee retention tax credits and defers the requirement to remit the employer-paid portion of social security payroll taxes. As a result, we recorded a benefit of approximately $9.6 million during Fiscal 2020, which primarily offset Mountain and Lodging operating expense, as a result of wages paid to employees who were not providing services. We are still in the process of fully evaluating the potential benefits that the amendments discussed above will have on our financial statements. We also recognized a credit of approximately $8.5 million during Fiscal 2020 as a result of the recent Canada Emergency Wage Subsidy and Australian JobKeeper legislation for our Canadian and Australian employees, which primarily offset Mountain and Lodging operating expense. 45 • As of July 31, 2020 , we had $391.0 million of cash and cash equivalents as well as $418.8 million available under the revolver component of our Eighth Amended and Restated Credit Agreement, dated as of August 15, 2018 and as amended most recently on April 28, 2020 (the “Vail Holdings Credit Agreement”), which represents the total commitment of $500.0 million less certain letters of credit outstanding of $81.2 million. Additionally, we have a credit facility which supports the liquidity needs of Whistler Blackcomb (the “Whistler Credit Agreement”). As of July 31, 2020, we had C$221.1 million ($165.1 million) available under the revolver component of the Whistler Credit Agreement (which represents the total commitment of C$300.0 million ($224.0 million) less outstanding borrowings of C$78.0 million ($58.2 million) and a letter of credit outstanding of C$0.9 million ($0.7 million)). On April 28, 2020, we entered into the Third Amendment to our Vail Holdings Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, the Company 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 ended July 31, 2020 through January 31, 2022 (unless we make a one-time irrevocable election to terminate such exemption prior to such date) (such period, the “Financial Covenants Temporary Waiver Period”), after which we will be required to comply with such covenants starting with the fiscal quarter ending April 30, 2022 (or such earlier fiscal quarter as elected by us). During the Financial Covenants Temporary Waiver Period, we are subject to other restrictions which will limit our ability to make future acquisitions, investments, distributions to stockholders, share repurchases or incur additional debt. See Liquidity and Capital Resources for additional information. Additionally, on May 4, 2020, we completed an offering of $600.0 million in aggregate principal amount of 6.25% Senior Notes due 2025 (the “Notes”) in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, a portion of which was utilized to pay down the outstanding balance of the revolver component of our 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). The Notes are guaranteed on a senior subordinated basis by certain of the Company’s domestic subsidiaries. We believe that our existing cash and cash equivalents, availability under our credit agreements and the expected positive cash flow from operating activities of our Mountain and Lodging segments less resort capital expenditures will continue to provide us with sufficient liquidity to fund our operations through at least the 2021/2022 ski season, even in the event of extended resort shutdowns. • On September 24, 2019, through a wholly-owned subsidiary, we acquired 100% of the outstanding stock of Peak Resorts, Inc. (“Peak Resorts”) at a purchase price of $11.00 per share or approximately $264.5 million . In addition, contemporaneous with the closing the transaction, Peak Resorts was required to pay approximately $70.2 million of certain outstanding debt instruments and lease obligations in order to complete the transaction. Accordingly, the total purchase price, including the repayment of certain outstanding debt instruments and lease obligations, was approximately $334.7 million , for which we borrowed approximately $335.6 million under the Vail Holdings Credit Agreement to fund the acquisition. The newly acquired resorts include: Mount Snow in Vermont; Hunter Mountain in New York; Attitash Mountain Resort, Wildcat Mountain and Crotched Mountain in New Hampshire; Liberty Mountain Resort, Roundtop Mountain Resort, Whitetail Resort, Jack Frost and Big Boulder in Pennsylvania; Alpine Valley, Boston Mills, Brandywine and Mad River Mountain in Ohio; Hidden Valley and Snow Creek in Missouri; and Paoli Peaks in Indiana. The acquisition included the mountain operations of the resorts, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities), as well as lodging operations at certain resorts. We expect that the acquisition of Peak Resorts will positively contribute to our annual results of operations; however we cannot predict the ultimate impact the new resorts will have on our future results of operations. 46 Results of Operations Summary Shown below is a summary of operating results for Fiscal 2020, Fiscal 2019 and Fiscal 2018 (in thousands): Year Ended July 31, 2020 2019 2018 Net income attributable to Vail Resorts, Inc. $ 98,833 $ 301,163 $ 379,898 Income before (provision) benefit from income taxes $ 116,433 $ 398,965 $ 340,092 Mountain Reported EBITDA $ 500,080 $ 678,594 $ 591,605 Lodging Reported EBITDA 3,269 28,100 25,006 Resort Reported EBITDA $ 503,349 $ 706,694 $ 616,611 Real Estate Reported EBITDA $ (4,128 ) $ (4,317 ) $ 957 A discussion of segment results, including reconciliations of net income attributable to Vail Resorts, Inc. to Total Reported EBITDA, and other items can be found below. The consolidated results of operations, including any consolidated financial metrics pertaining thereto, include the operations of Peak Resorts (acquired September 24, 2019), Falls Creek and Hotham (acquired April 4, 2019), Triple Peaks (acquired September 27, 2018) and Stevens Pass (acquired August 15, 2018), prospectively from their respective dates of acquisition. The COVID-19 pandemic and the Resort Closures both had a significant adverse impact to our results of operations for Fiscal 2020, as further described below in our segment results of operations. The sections titled “Fiscal 2020 compared to Fiscal 2019” and “Fiscal 2019 compared to Fiscal 2018” in each of the Mountain and Lodging segment discussions below provide comparisons of financial and operating performance for Fiscal 2020 to Fiscal 2019 and Fiscal 2019 to Fiscal 2018, respectively, unless otherwise noted. 47 Mountain Segment Mountain segment operating results for Fiscal 2020, Fiscal 2019 and Fiscal 2018 are presented by category as follows (in thousands, except ETP): Percentage Year Ended July 31, Increase/(Decrease) 2020 2019 2018 2020/2019 2019/2018 Mountain net revenue: Lift $ 913,091 $ 1,033,234 $ 880,293 (11.6 )% 17.4 % Ski school 189,131 215,060 189,910 (12.1 )% 13.2 % Dining 160,763 181,837 161,402 (11.6 )% 12.7 % Retail/rental 270,299 320,267 296,466 (15.6 )% 8.0 % Other 177,159 205,803 194,851 (13.9 )% 5.6 % Total Mountain net revenue 1,710,443 1,956,201 1,722,922 (12.6 )% 13.5 % Mountain operating expense: Labor and labor-related benefits 473,365 507,811 443,891 (6.8 )% 14.4 % Retail cost of sales 96,497 121,442 111,198 (20.5 )% 9.2 % Resort related fees 75,044 96,240 87,111 (22.0 )% 10.5 % General and administrative 239,412 233,159 214,090 2.7 % 8.9 % Other 327,735 320,915 276,550 2.1 % 16.0 % Total Mountain operating expense 1,212,053 1,279,567 1,132,840 (5.3 )% 13.0 % Mountain equity investment income, net 1,690 1,960 1,523 (13.8 )% 28.7 % Mountain Reported EBITDA $ 500,080 $ 678,594 $ 591,605 (26.3 )% 14.7 % Total skier visits 13,483 14,998 12,345 (10.1 )% 21.5 % ETP $ 67.72 $ 68.89 $ 71.31 (1.7 )% (3.4 )% Mountain Reported EBITDA includes $17.4 million , $16.5 million and $15.7 million of stock-based compensation expense for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. Fiscal 2020 compared to Fiscal 2019 Mountain Reported EBITDA decreased $178.5 million, or 26.3%, primarily due to the impact of the delayed recognition of $120.9 million of pass product revenue during Fiscal 2020 as a result of the Credit Offer to 2019/2020 North American pass product holders from the Resort Closures and the overall impacts of the COVID-19 pandemic, which resulted in significantly reduced visitation and operations at our Resorts and retail stores for the 2019/2020 North American ski season, the 2020 Australian ski season and our 2020 North American summer operations. These decreases were partially offset by the incremental operations of Peak Resorts, Falls Creek and Hotham. Mountain segment results include $13.6 million and $16.4 million of acquisition and integration related expenses for Fiscal 2020 and Fiscal 2019, respectively, which are recorded within Mountain other operating expense. Lift revenue decreased $120.1 million, or 11.6%, primarily due to a 3.4% decrease in pass product revenue and an 18.8% decrease in non-pass revenue. Pass product revenue decreased primarily as a result of the deferral of approximately $120.9 million of pass product revenue associated with the Credit Offer to 2019/2020 North American pass product holders, which would have been recognized during Fiscal 2020 and which is now expected to be recognized primarily in the second and third quarters of Fiscal 2021, partially offset by a combination of an increase in pricing and units sold and increased pass sales to Destination guests, as well as the introduction of the Epic Day Pass. Non-pass revenue decreased primarily due to significantly reduced skier visitation as a result of the Resort Closures, partially offset by an increase in non-pass ETP (excluding Peak Resorts, Falls Creek and Hotham) of 6.2% and incremental revenue from Peak Resorts, Falls Creek and Hotham of approximately $61.4 million. Total non-pass ETP, including the impact of Peak Resorts, Falls Creek and Hotham decreased 7.3%. Ski school revenue, dining revenue and retail/rental revenue in Fiscal 2020 all decreased compared to Fiscal 2019 due to the Resort Closures. These decreases were partially offset by incremental revenue from our acquisitions of Peak Resorts, Falls Creek and Hotham of $18.0 million of ski school revenue, $23.8 million of dining revenue and $26.8 million of retail/rental revenue. 48 Other revenue mainly consists of summer visitation and mountain activities revenue, employee housing revenue, guest services revenue, commercial leasing revenue, marketing and internet advertising revenue, private club revenue (which includes both club dues and amortization of initiation fees), municipal services revenue and other recreation activity revenue. Other revenue is also comprised of Australian ski area lodging and transportation revenue. For Fiscal 2020, other revenue decreased as a result of the Resort Closures, partially offset by incremental revenue from Peak Resorts of approximately $12.6 million. Resort Closures and the associated actions taken by the Company to reduce costs resulted in a decrease in our operating expense of $67.5 million, or 5.3%, which includes incremental operating expenses from Peak Resorts, Falls Creek and Hotham of approximately $121.4 million, as well as $13.6 million and $16.4 million of acquisition and integration related expenses for Fiscal 2020 and Fiscal 2019, respectively. Labor and labor-related benefits decreased 6.8%, which primarily resulted from cost actions associated with the Resort Closures, including decreased staffing, employee furloughs, salary reductions and reduced variable compensation accruals, as well as tax credits of approximately $12.0 million associated with recent COVID-19 related legislation passed in the U.S., Canada and Australia, partially offset by incremental expenses from Peak Resorts, Falls Creek and Hotham of approximately $50.7 million. Retail cost of sales decreased 20.5% compared to a decrease in retail sales of 20.1%. Resort related fees decreased 22.0% primarily due to decreases in revenue on which those fees are based, partially offset by incremental expenses from Peak Resorts of approximately $4.3 million. General and administrative expense increased 2.7% primarily due to incremental expenses from Peak Resorts, Falls Creek and Hotham of approximately $18.9 million, partially offset by a decrease in allocated corporate overhead costs, a decrease in variable compensation accruals primarily as a result of the Resort Closures and tax credits of approximately $3.3 million associated with recent COVID-19 related legislation passed in the U.S., Canada and Australia. Other expense increased 2.1% primarily due to incremental operating expenses from Peak Resorts, Falls Creek and Hotham of approximately $42.2 million, partially offset by decreases in variable operating expenses associated with the Resort Closures, as well as a decrease in acquisition and integration related expenses. Mountain equity investment income, net primarily includes our share of income from the operations of a real estate brokerage joint venture. Fiscal 2019 compared to Fiscal 2018 The results reflect an increase in Mountain Reported EBITDA of $87.0 million, or 14.7%, primarily as a result of strong North American pass sales growth for the 2018/2019 North American ski season, strong growth in visitation and spending at our western U.S. resorts and the incremental operations of Stevens Pass, Triple Peaks and Falls Creek/Hotham (acquired in August 2018, September 2018 and April 2019, respectively). Although our Destination guest visitation was less than expected in the pre-holiday period, results from the key holiday weeks through the spring were largely in line with our original expectations, which, when combined with incremental skier visits from Stevens Pass, Triple Peaks and Falls Creek/Hotham, resulted in an increase in total skier visitation of 21.5%. Operating results from Whistler Blackcomb and Perisher, which are translated from Canadian dollars and Australian dollars, respectively, to U.S. dollars, were adversely affected by a decrease in the Canadian and Australian dollar exchange rates relative to the U.S. dollar as compared to prior year, resulting in a decline in Mountain Reported EBITDA of approximately $8 million, which the Company calculated on a constant currency basis by applying current period foreign exchange rates to the prior period results. Additionally, Fiscal 2019 and Fiscal 2018 results include $16.4 million and $10.2 million of acquisition and integration related expenses, respectively. Lift revenue increased $152.9 million, or 17.4%, due to increases in both pass revenue and non-pass revenue, as well as incremental revenue from Triple Peaks, Stevens Pass, Falls Creek and Hotham. Pass revenue increased 16.8%, which was driven by a combination of an increase in pricing and units sold and was also favorably impacted by increased pass sales to Destination guests as well as military guests through the introduction of the Military Epic Pass. Non-pass revenue increased 17.9% primarily due to incremental non-pass skier visitation at Triple Peaks, Stevens Pass, Falls Creek and Hotham, and increased non-pass visitation at our western U.S. resorts, which benefited from improved conditions as compared to the prior year and an increase in total non-pass ETP of 4.9%. Total ETP decreased $2.42, or 3.4%, primarily due to higher skier visitation by season pass holders, lower ETP from the acquired Triple Peaks, Stevens Pass, Falls Creek and Hotham resorts and the new Military Epic Pass, partially offset by price increases in both our lift ticket and pass products. Ski school revenue increased $25.2 million, or 13.2%, and dining revenue increased $20.4 million, or 12.7%, primarily as a result of incremental revenue at Triple Peaks, Stevens Pass, Falls Creek and Hotham, which represented approximately $13.4 million and $12.9 million of the total increase for ski school revenue and dining revenue, respectively. The remaining increases were primarily due to higher skier visitation. 49 Retail/rental revenue increased $23.8 million, or 8.0%, of which retail revenue increased $13.6 million, or 6.7%, and rental revenue increased $10.2 million, or 11.0%. The increase in both retail revenue and rental revenue was primarily attributable to higher sales volumes at stores proximate to our western U.S. resorts and other stores in Colorado, as well as incremental revenue from Triple Peaks, Stevens Pass, Falls Creek and Hotham of approximately $13.1 million. These increases were partially offset by removing the low-margin golf product line from our Colorado city stores, store closures and a decrease in sales at Whistler Blackcomb. Other revenue mainly consists of summer visitation and mountain activities revenue, employee housing revenue, guest services revenue, commercial leasing revenue, marketing and internet advertising revenue, private club revenue (which includes both club dues and amortization of initiation fees), municipal services revenue and other recreation activity revenue. Other revenue is also comprised of Australian ski area lodging and transportation revenue. For Fiscal 2019, other revenue increased $11.0 million, or 5.6%, primarily attributable to incremental revenue from Triple Peaks, Stevens Pass, Falls Creek and Hotham of $6.0 million, as well as increases in marketing revenue and mountain activities and services revenue. Operating expense increased $146.7 million, or 13.0%, which was primarily attributable to the inclusion of Triple Peaks, Stevens Pass, Falls Creek and Hotham, whose operating expenses were recorded prospectively from their respective dates of acquisition. Additionally, operating expense includes $16.4 million and $10.2 million of acquisition and integration related expenses for Fiscal 2019 and Fiscal 2018, respectively. Labor and labor-related benefits increased 14.4% primarily due to incremental labor expenses from Triple Peaks, Stevens Pass, Falls Creek and Hotham of $41.0 million and increased staffing levels at our western U.S. resorts as compared to the prior year due to historic low snowfall during the prior year period, as well as wage increases associated with our minimum wage initiatives, which were in excess of our historical minimum wage increases, and higher variable compensation accruals. Retail cost of sales increased 9.2% compared to an increase in retail sales of 6.7%. Resort related fees increased 10.5% primarily due to incremental expenses from Triple Peaks and Stevens Pass of $5.3 million as well as increases in revenue on which those fees are based. General and administrative expense increased 8.9% primarily due to incremental expenses from Triple Peaks, Stevens Pass, Falls Creek and Hotham of $12.4 million, an increase in variable compensation accruals and an increase in allocated corporate overhead costs primarily associated with marketing and information technology. Other expense increased 16.0% primarily due to incremental expenses from Triple Peaks, Stevens Pass, Falls Creek and Hotham of $26.6 million, as well as increases in season pass alliance expense, acquisition and integration related expenses, employee housing expense, fuel expense and rent expense. Mountain equity investment income, net primarily includes our share of income from the operations of a real estate brokerage joint venture. 50 Lodging Segment Lodging segment operating results for Fiscal 2020, Fiscal 2019 and Fiscal 2018 are presented by category as follows (in thousands, except ADR and RevPAR): Percentage Year Ended July 31, Increase/(Decrease) 2020 2019 2018 2020/2019 2019/2018 Lodging net revenue: Owned hotel rooms $ 44,992 $ 64,826 $ 65,252 (30.6 )% (0.7 )% Managed condominium rooms 76,480 86,236 70,198 (11.3 )% 22.8 % Dining 38,252 53,730 48,554 (28.8 )% 10.7 % Transportation 15,796 21,275 21,111 (25.8 )% 0.8 % Golf 17,412 19,648 18,110 (11.4 )% 8.5 % Other 44,933 54,617 47,577 (17.7 )% 14.8 % 237,865 300,332 270,802 (20.8 )% 10.9 % Payroll cost reimbursements 10,549 14,330 13,841 (26.4 )% 3.5 % Total Lodging net revenue 248,414 314,662 284,643 (21.1 )% 10.5 % Lodging operating expense: Labor and labor-related benefits 114,279 135,940 121,733 (15.9 )% 11.7 % General and administrative 39,283 41,256 37,716 (4.8 )% 9.4 % Other 81,034 95,036 86,347 (14.7 )% 10.1 % 234,596 272,232 245,796 (13.8 )% 10.8 % Reimbursed payroll costs 10,549 14,330 13,841 (26.4 )% 3.5 % Total Lodging operating expense 245,145 286,562 259,637 (14.5 )% 10.4 % Lodging Reported EBITDA $ 3,269 $ 28,100 $ 25,006 (88.4 )% 12.4 % Owned hotel statistics (1) ADR $ 266.43 $ 256.50 $ 250.50 3.9 % 2.4 % RevPar $ 122.34 $ 175.45 $ 173.34 (30.3 )% 1.2 % Managed condominium statistics (1) ADR $ 328.98 $ 324.34 $ 336.29 1.4 % (3.6 )% RevPar $ 83.10 $ 107.67 $ 116.26 (22.8 )% (7.4 )% Owned hotel and managed condominium statistics (combined) (1) ADR $ 310.76 $ 300.47 $ 300.90 3.4 % (0.1 )% RevPar $ 90.37 $ 121.81 $ 131.08 (25.8 )% (7.1 )% (1) RevPAR for Fiscal 2020 declined from the prior comparative period primarily due to the Resort Closures. Owned hotel and managed condominium statistics (combined) for Fiscal 2019 declined from the prior comparative period primarily due to the inclusion of properties acquired through the Triple Peaks acquisition, prospectively from the date of acquisition, as well as a new property management contract for units proximate to our Tahoe resorts. Lodging Reported EBITDA includes $3.4 million , $3.2 million and $3.2 million of stock-based compensation expense for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. Fiscal 2020 compared to Fiscal 2019 Lodging Reported EBITDA for Fiscal 2020 decreased $24.8 million , or 88.4% , primarily due to the impacts of the COVID-19 pandemic and the associated Resort Closures. Primarily as a result of the Resort Closures, revenue from owned hotel rooms, managed condominium rooms, dining, transportation, golf and other revenue each decreased. The decreases resulting from the Resort Closures were partially offset by $13.7 million of incremental revenue from Peak Resorts and Triple Peaks. 51 Operating expense (excluding reimbursed payroll costs) decreased 13.8% . Labor and labor related benefits decreased 15.9% primarily due to cost actions associated with the Resort Closures, including decreased staffing, employee furloughs, salary reductions and reduced variable compensation accruals, as well as tax credits of approximately $2.2 million associated with recent COVID-19 related legislation passed in the U.S., Canada and Australia, partially offset by $6.4 million of incremental expenses from Peak Resorts and Triple Peaks. General and administrative expense decreased 4.8% due to lower allocated corporate overhead costs primarily associated with a reduction in variable compensation accruals, as well as tax credits of approximately $0.5 million associated with recent COVID-19 related legislation passed in the U.S., Canada and Australia. Other expenses decreased 14.7% primarily related to lower variable expenses associated with the impact of the Resort Closures, partially offset by $4.7 million of incremental expenses from Peak Resorts and Triple Peaks. Revenue from payroll cost reimbursement and the corresponding reimbursed payroll costs relate to payroll costs at managed hotel properties where we are the employer and all payroll costs are reimbursed by the owners of the properties under contractual arrangements. Since the reimbursements are made based upon the costs incurred with no added margin, the revenue and corresponding expense have no effect on our Lodging Reported EBITDA. Fiscal 2019 compared to Fiscal 2018 Lodging Reported EBITDA for Fiscal 2019 increased $3.1 million, or 12.4%, primarily due to the incremental operations of Triple Peaks. Revenue from managed condominium rooms increased $16.1 million, or 22.8%, primarily due to incremental revenue from Okemo and Crested Butte of $11.7 million, as well as revenue from incremental managed Tahoe lodging properties that we did not manage in the prior year. Dining revenue increased $5.2 million, or 10.7%, primarily due to incremental revenue from our Okemo and Crested Butte lodging properties of $4.3 million and an increase in dining revenue at our Park City lodging properties. Golf revenue increased $1.5 million, or 8.5%, primarily due to incremental revenue from our golf courses at Okemo of $0.8 million, as well as higher revenue at our golf courses in Beaver Creek and at GTLC. Other revenue increased $7.0 million, or 14.8%, primarily due to an increase in allocated corporate revenue, incremental revenue from our lodging properties at Okemo and Crested Butte of $2.4 million, a business interruption insurance recovery related to a closed event facility in Breckenridge and increases in ancillary revenue. Operating expense (excluding reimbursed payroll costs) increased 10.8%. Labor and labor-related benefits increased 11.7%, primarily due to incremental labor expenses from Okemo, Crested Butte and the incremental managed Tahoe lodging properties that we did not manage in the prior year of $11.3 million, as well as wage increases associated with our minimum wage initiatives, which were in excess of our historical minimum wage increases. General and administrative expense increased 9.4% due to higher corporate overhead costs. Other expense increased 10.1% primarily due to incremental expenses from Okemo and Crested Butte of $6.0 million, as well as an increase in variable operating expenses associated with increases in revenue. Revenue from payroll cost reimbursement and the corresponding reimbursed payroll costs relate to payroll costs at managed hotel properties where we are the employer and all payroll costs are reimbursed by the owners of the properties under contractual arrangements. Since the reimbursements are made based upon the costs incurred with no added margin, the revenue and corresponding expense have no effect on our Lodging Reported EBITDA. Real Estate Segment Our Real Estate net revenue is primarily determined by the timing of closings and the mix of real estate sold in any given period. Different types of projects have different revenue and profit margins; therefore, as the real estate inventory mix changes, it can greatly impact Real Estate segment net revenue, operating expense, gain on sale of real property and Real Estate Reported EBITDA. 52 Real Estate segment operating results for Fiscal 2020, Fiscal 2019 and Fiscal 2018 are presented by category as follows (in thousands): Percentage Year Ended July 31, Increase/(Decrease) 2020 2019 2018 2020/2019 2019/2018 Total Real Estate net revenue $ 4,847 $ 712 $ 3,988 580.8 % (82.1 )% Real Estate operating expense: Cost of sales (including sales commissions) 3,932 13 3,927 30,146.2 % (99.7 )% Other, net 5,250 5,596 (381 ) (6.2 )% 1,568.8 % Total Real Estate operating expense 9,182 5,609 3,546 63.7 % 58.2 % Gain on sale of real property 207 580 515 (64.3 )% 12.6 % Real Estate Reported EBITDA $ (4,128 ) $ (4,317 ) $ 957 4.4 % (551.1 )% Fiscal 2020 During Fiscal 2020, we closed on the sale of a development land parcel for $4.1 million which was recorded within Real Estate net revenue, with a corresponding cost of sale (including sales commission) of $3.9 million. Other, net operating expense of $5.3 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs. Fiscal 2019 We closed on two land sales during the third quarter of Fiscal 2019 with third party developers at Keystone (One River Run site) and Breckenridge (East Peak 8 site) for proceeds of approximately $16.0 million, including $4.8 million associated with the sale of density for the Breckenridge property. The land parcel sales 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. As a result, the estimated gain of $3.6 million associated with the East Peak 8 site and the estimated loss of $3.2 million associated with the One River Run site will be deferred until the Company no longer maintains continuing involvement. Additionally, the Company’s future obligation to repurchase finished commercial space in the two completed projects, as well as other related capital spending, will result in total estimated capital expenditures of up to approximately $9.5 million in future fiscal years. Other, net operating expense of $5.6 million was primarily comprised of general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs. Real Estate Reported EBITDA also included a gain on sale of real property of $0.6 million for the sale of land parcels. Fiscal 2018 During Fiscal 2018, we closed on the sales of development land parcels for $3.5 million which were recorded within Real Estate net revenue, with a corresponding cost of sale (including sales commissions) of $3.9 million. Other, net operating expense included the recognition of a $5.5 million benefit (non-cash in the period) related to a legal settlement in Fiscal 2015 for which cash proceeds were received and established as a liability for estimated future remediation costs of a construction development. All known items were remediated in Fiscal 2018 and, based on continued monitoring, the Company concluded that the need for further remediation is remote. Additionally, other, net operating expense included general and administrative costs, such as labor and labor-related benefits, professional services and allocated corporate overhead costs. Real Estate Reported EBITDA also included a gain on sale of real property of $0.5 million for the sale of a land parcel. 53 Other Items In addition to segment operating results, the following items contributed to our overall financial position and results of operations (in thousands). Year Ended July 31, Percentage Increase/(Decrease) 2020 2019 2018 2020/2019 2019/2018 Depreciation and amortization $ (249,572 ) $ (218,117 ) $ (204,462 ) 14.4 % 6.7 % Asset impairments $ (28,372 ) $ — $ — nm nm Change in fair value of contingent consideration $ 2,964 $ (5,367 ) $ 1,854 155.2 % (389.5 )% Interest expense, net $ (106,721 ) $ (79,496 ) $ (63,226 ) 34.2 % 25.7 % Foreign currency loss on intercompany loans $ (3,230 ) $ (2,854 ) $ (8,966 ) 13.2 % (68.2 )% (Provision) benefit from income taxes $ (7,378 ) $ (75,472 ) $ 61,138 (90.2 )% 223.4 % Effective tax rate (provision) benefit (6.3 )% (18.9 )% 18.0 % (12.6 pts) 36.9 pts Depreciation and amortization . Depreciation and amortization expense for Fiscal 2020 and Fiscal 2019 increased over the applicable prior fiscal year primarily due to assets acquired in the Peak Resorts acquisition (acquired in Fiscal 2020), as well as due to assets acquired in the Falls Creek, Hotham, Triple Peaks and Stevens Pass acquisitions (each acquired in Fiscal 2019) and discretionary capital projects completed at our resorts in each fiscal year. Asset impairments. We recorded an asset impairment of approximately $28.4 million during Fiscal 2020 as a result of the effects of the COVID-19 pandemic on our Colorado resort ground transportation company, with corresponding reductions to goodwill, net of $25.7 million and intangible assets, net and property, plant and equipment, net of $2.7 million. See Notes to the Consolidated Financial Statements for additional information. Change in fair value of contingent consideration. We recorded a gain of $3.0 million during Fiscal 2020 primarily related to the estimated Contingent Consideration payments for Fiscal 2020 and Fiscal 2021. We recorded a loss of $5.4 million during Fiscal 2019 primarily related to the estimated Contingent Consideration payment for Fiscal 2019. We recorded a gain of $1.9 million during Fiscal 2018 primarily related to a decrease in the estimated Contingent Consideration payment for Fiscal 2018. The estimated fair value of contingent consideration is based on assumptions for EBITDA of Park City in future periods, as calculated under the lease on which participating payments are determined, and was $17.8 million and $27.2 million as of July 31, 2020 and 2019, respectively. Interest expense, net. Interest expense, net for Fiscal 2020 increased compared to Fiscal 2019 primarily due to debt obligations assumed in the Peak Resorts acquisition; borrowings under our 6.25% unsecured bond offering which was completed on May 4, 2020; incremental term loan borrowings under the Vail Holdings Credit Agreement of $335.6 million, which were used to fund the Peak Resorts acquisition in September 2019; and incremental borrowings under the revolver components of our Vail Holdings Credit Agreement and Whistler Credit Agreement, which were almost entirely drawn on during Fiscal 2020 as a precautionary measure in order to increase our cash position and financial flexibility in light of the financial market conditions resulting from the COVID-19 pandemic and were subsequently paid down, partially offset by a decrease in variable interest rates. Interest expense, net for Fiscal 2019 increased compared to Fiscal 2018 primarily due to interest expense associated with incremental term loan borrowings under the Vail Holdings Credit Agreement of $265.6 million during Fiscal 2019, which were used to fund the Stevens Pass and Triple Peaks acquisitions in August 2018 and September 2018, respectively, as well as an increase in variable interest rates. Foreign currency loss on intercompany loans. Foreign currency loss on intercompany loans for Fiscal 2020 increased compared to Fiscal 2019 and decreased for Fiscal 2019 as compared to Fiscal 2018 as a result of the Canadian dollar fluctuating relative to the U.S. dollar, and was associated with an intercompany loan from Vail Holdings, Inc. to Whistler Blackcomb in the original amount of $210.0 million that was funded, effective as of November 1, 2016, in connection with the acquisition of Whistler Blackcomb. This intercompany loan, which had an outstanding balance of approximately $137.1 million as of July 31, 2020, requires foreign currency remeasurement to Canadian dollars, the functional currency for Whistler Blackcomb. As a result, foreign currency fluctuations associated with the loan are recorded within our results of operations. (Provision) benefit from income taxes. Our effective tax rate was a (provision) benefit of (6.3%), (18.9%) and 18.0% in Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. Our tax (provision) benefit and effective tax rate are driven primarily by (i) anticipated pre-tax book income for the full fiscal year, adjusted for items that are deductible/non-deductible for tax purposes only 54 (i.e., permanent items); (ii) excess tax benefits from employee share awards and enacted tax legislation, which are both recorded as discrete items; (iii) taxable income generated by state and foreign jurisdictions that varies from the consolidated pre-tax book income, (iv) the amount of net income attributable to noncontrolling interests and (v) discrete items. The decrease in the effective tax rate provision during Fiscal 2020 compared to Fiscal 2019 was primarily due to lower full year pre-tax net income, as well as a one-time, provisional $3.8 million benefit related to NOL carryback provision of the CARES Act, partially offset by a decrease in excess tax benefits from employee share awards that were exercised (stock appreciation rights) and that vested (restricted stock awards), which are recorded within (provision) benefit from income taxes on the Company’s Consolidated Statements of Operations. The increase in the effective tax rate provision during Fiscal 2019 compared to Fiscal 2018 was primarily due to a one-time, net tax benefit of $61.0 million recorded during Fiscal 2018 as a result of U.S. federal tax reform, which became effective on January 1, 2018, as well as a reduction in excess tax benefits from employee share awards that were exercised (stock appreciation awards) and that vested (restricted stock awards), which are recorded within (provision) benefit from income taxes on the Company’s Consolidated Statements of Operations. Excess tax benefits totaled $7.9 million, $12.9 million and $71.1 million for Fiscal 2020, Fiscal 2019 and Fiscal 2018, respectively. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. The Tax Act transitioned the U.S. tax system to a new territorial system and lowered the statutory federal corporate income tax rate from 35% to 21%. The reduction of the statutory federal corporate tax rate to 21% became effective on January 1, 2018. As a result of the Tax Act, we recorded a one-time, net tax benefit of $61.0 million on our Consolidated Statement of Operations during Fiscal 2018. Due to the reduction in the federal corporate tax rate, we remeasured our U.S. net deferred tax liabilities as of the effective date of the Tax Act using the reduced statutory federal corporate income tax rate. The U.S. net deferred tax liabilities remeasurement resulted in a one-time tax benefit of $67.0 million, which was recognized as a discrete item and was recorded within (provision) benefit from income taxes on our Consolidated Statement of Operations during Fiscal 2018. Also, in transitioning to the new territorial tax system, the Tax Act requires us to include certain foreign earnings of non-U.S. subsidiaries in our taxable income. Such foreign earnings were subject to a one-time transition tax at the time of enactment of the Tax Act, which was $6.0 million and was recorded during Fiscal 2018. Reconciliation of Segment Earnings The following table reconciles net income attributable to Vail Resorts, Inc. to Total Reported EBITDA for Fiscal 2020, Fiscal 2019 and Fiscal 2018 (in thousands): Year Ended July 31, 2020 2019 2018 Net income attributable to Vail Resorts, Inc. $ 98,833 $ 301,163 $ 379,898 Net income attributable to noncontrolling interests 10,222 22,330 21,332 Net income 109,055 323,493 401,230 Provision (benefit) from income taxes 7,378 75,472 (61,138 ) Income before provision (benefit) from income taxes 116,433 398,965 340,092 Depreciation and amortization 249,572 218,117 204,462 Asset impairments 28,372 — — (Gain) loss on disposal of fixed assets and other, net (838 ) 664 4,620 Change in fair value of contingent consideration (2,964 ) 5,367 (1,854 ) Investment income and other, net (1,305 ) (3,086 ) (1,944 ) Foreign currency loss on intercompany loans 3,230 2,854 8,966 Interest expense, net 106,721 79,496 63,226 Total Reported EBITDA $ 499,221 $ 702,377 $ 617,568 Mountain Reported EBITDA $ 500,080 $ 678,594 $ 591,605 Lodging Reported EBITDA 3,269 28,100 25,006 Resort Reported EBITDA 503,349 706,694 616,611 Real Estate Reported EBITDA (4,128 ) (4,317 ) 957 Total Reported EBITDA $ 499,221 $ 702,377 $ 617,568 55 The following table reconciles long-term debt, net to Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) (in thousands): July 31, 2020 2019 Long-term debt, net $ 2,387,122 $ 1,527,744 Long-term debt due within one year 63,677 48,516 Total debt 2,450,799 1,576,260 Less: cash and cash equivalents 390,980 108,850 Net Debt $ 2,059,819 $ 1,467,410 Liquidity and Capital Resources Changes in significant sources and uses of cash for Fiscal 2020, Fiscal 2019 and Fiscal 2018 are presented by categories as follows (in thousands): Year Ended July 31, 2020 2019 2018 Net cash provided by operating activities $ 394,950 $ 634,231 $ 548,486 Net cash used in investing activities $ (492,739 ) $ (596,034 ) $ (134,579 ) Net cash provided by (used in) financing activities $ 376,233 $ (99,558 ) $ (350,715 ) Historically, we have lower cash available at the end of each first and fourth fiscal quarter-end as compared to our second and third fiscal quarter-ends, primarily due to the seasonality of our Mountain segment operations, although our available cash balance as of July 31, 2020 is higher than our historical July 31 balance as a result of proceeds reflected in the net cash provided by financing activities for fiscal 2020 from the Notes offering, as discussed further below. Fiscal 2020 compared to Fiscal 2019 We generated $395.0 million of cash from operating activities during Fiscal 2020, a decrease of $239.3 million when compared to $634.2 million of cash generated during Fiscal 2019. The decrease in operating cash flows was primarily a result of decreased Mountain and Lodging segment operating results in Fiscal 2020, primarily due to the Resort Closures; a decrease in accounts payable and accrued liabilities due to declines associated with the Resort Closures (excluding accounts payable and accrued liabilities assumed through acquisitions) and an increase in cash interest payments of approximately $17.5 million primarily associated with debt assumed in the Peak Resorts acquisition and incremental term loan and revolver borrowings under our Vail Holdings Credit Agreement. These decreases were partially offset by increased North American pass product sales and receivable collections for the 2019/2020 North American ski season as compared to the prior year and a decrease in estimated tax payments of $23.1 million. Additionally we generated approximately $4.4 million of proceeds from real estate development land parcel sales in Fiscal 2020 compared to $0.1 million in proceeds from real estate development project closings that occurred in the prior year. Cash used in investing activities for Fiscal 2020 decreased by $103.3 million, primarily due to cash payments of $327.6 million, net of cash acquired, related to the acquisition of Peak Resorts during Fiscal 2020, as compared to cash payments of $419.0 million, net of cash acquired, related to the acquisitions of Triple Peaks, Stevens Pass, Falls Creek and Hotham during Fiscal 2019. Additionally, capital expenditures decreased by $19.7 million primarily as a result of actions associated with the deferral of discretionary capital projects related to the Company’s decision to prioritize near-term liquidity. Cash provided by financing activities increased by $475.8 million during Fiscal 2020 compared to Fiscal 2019, primarily due to (i) the $600.0 million issuance of the Notes in Fiscal 2020; (ii) an increase in proceeds from incremental borrowings under the term loan portion of our Vail Holdings Credit Agreement from $265.5 million during Fiscal 2019, which were used to fund the Triple Peaks and Stevens Pass acquisitions, to $335.6 million during Fiscal 2020, which were used to fund the Peak Resorts acquisition; (iii) an increase in net borrowings under the revolver component of our Whistler Credit Agreement of $24.1 million, primarily relating to funds which were drawn as a precautionary measure in order to increase our cash position and financial flexibility in light of the financial market conditions resulting from the COVID-19 pandemic; (iv) a decrease in repurchases of common stock of $38.6 million; and (v) a decrease in dividend payments of $47.8 million associated with the Company’s decision to prioritize near-term liquidity. These increases in cash provided by financing activities were partially offset by (i) an increase in net payments on borrowings under the revolver component of our Vail Holdings Credit Agreement of $286.0 million; (ii) an 56 increase in financing cost payments of $8.8 million, primarily associated with the issuance of the Notes; and (iii) a payment for contingent consideration with regard to our lease for Park City. Fiscal 2019 compared to Fiscal 2018 We generated $634.2 million of cash from operating activities during Fiscal 2019, an increase of $85.7 million when compared to $548.5 million of cash generated during Fiscal 2018. The increase in operating cash flows was primarily a result of improved Mountain segment operating results in Fiscal 2019, including operating benefits from the acquisitions of Triple Peaks, Stevens Pass, Falls Creek and Hotham, as compared to Fiscal 2018. Additionally, the increase in operating cash flows was a result of an increase in accounts payable. These increases were partially offset by an increase in cash interest payments during Fiscal 2019 primarily associated with incremental term loan borrowings under our Vail Holdings Credit Agreement and an increase in estimated foreign tax payments. Cash used in investing activities for Fiscal 2019 increased by $461.5 million, primarily due to cash payments of $419.0 million, net of cash acquired, related to the acquisitions of Triple Peaks, Stevens Pass, Falls Creek and Hotham during Fiscal 2019 as well as an increase in capital expenditures of $51.4 million during Fiscal 2019 compared to Fiscal 2018. Cash used in financing activities decreased $251.2 million during Fiscal 2019 compared to Fiscal 2018, primarily due to proceeds from incremental borrowings under the term loan portion of our Vail Holdings Credit Agreement of $265.6 million during Fiscal 2019, which was used to fund the Triple Peaks and Stevens Pass acquisitions. In addition, cash used in financing activities benefited from (i) a reduction of $76.8 million for employee taxes related to exercises of share awards, (ii) a reduction of $26.9 million in net payments on borrowings under our Whistler Credit Agreement and (iii) $11.2 million of proceeds related to real estate sales transactions completed during Fiscal 2019, that are reflected as financing arrangements. These decreases in cash used in financing activities were partially offset by an increase in repurchases of common stock of $59.2 million, an increase in dividends paid of $56.4 million and payments for commitments in conjunction with the Canyons transaction of $9.5 million. Significant Sources of Cash We had $391.0 million of cash and cash equivalents as of July 31, 2020 , compared to $108.9 million as of July 31, 2019 . We generated $395.0 million of cash from operating activities during Fiscal 2020 compared to $634.2 million and $548.5 million generated during Fiscal 2019 and Fiscal 2018, respectively, with the decrease in Fiscal 2020 primarily resulting from operational impacts of the COVID-19 pandemic, including the Resort Closures. Although we cannot predict the future impact associated with the COVID-19 pandemic on our business, we currently anticipate that our Mountain and Lodging segment operating results will continue to provide a significant source of future operating cash flows (primarily generated in our second and third fiscal quarters). In addition to our $391.0 million of cash and cash equivalents at July 31, 2020, we had $418.8 million available under the revolver component of our Vail Holdings Credit Agreement as of July 31, 2020 (which represents the total commitment of $500.0 million less certain letters of credit outstanding of $81.2 million ). Also, to further support the liquidity needs of Whistler Blackcomb, we had C $221.1 million ( $165.1 million ) available under the revolver component of our Whistler Credit Agreement (which represents the total commitment of C $300.0 million ( $224.0 million ) less outstanding borrowings of C $78.0 million ( $58.2 million ) and a letter of credit outstanding of C $0.9 million ( $0.7 million )). We believe that our liquidity needs in the near term will be met by our existing cash and cash equivalents, availability under our credit agreements and the expected positive cash flow from operating activities of our Mountain and Lodging segments less resort capital expenditures, which we expect will provide us with sufficient liquidity to fund our operations through at least the 2021/2022 ski season, even in the event of extended resort shutdowns. The Vail Holdings Credit Agreement and the Whistler Credit Agreement provide adequate flexibility and are priced favorably with any new borrowings currently priced at LIBOR plus 2.5% and Bankers Acceptance Rate plus 1.75%, respectively. Significant Uses of Cash Capital Expenditures We have historically invested significant amounts of cash in capital expenditures for our resort operations, and we expect to continue to do so, subject to operating performance particularly as it relates to discretionary projects. On April 1, 2020, we announced that we would be reducing our capital plan for calendar 2020 as compared to our previously issued guidance by approximately $80 million to $85 million, with the vast majority of these savings coming from the deferral of many of our discretionary capital projects. We are planning to defer all new chair lifts, terrain expansions and other mountain base area improvements, while continuing the vast majority of our maintenance capital spending. Accordingly we now anticipate that we will spend approximately $125 million to $130 million on resort capital expenditures during calendar year 2020. In addition, we may incur capital expenditures for retained ownership interests associated with third-party real estate development projects. Normal discretionary capital expenditures primarily include investments that will allow us to maintain our high-quality standards, as well 57 as certain incremental discretionary improvements at our Resorts, throughout our owned hotels, and in technology that can impact the full network. We evaluate additional discretionary capital improvements based on an expected level of return on investment. Approximately $51 million was spent for capital expenditures in calendar year 2020 as of July 31, 2020, leaving approximately $74 million to $79 million to spend in the remainder of calendar year 2020. We currently plan to utilize cash on hand, borrowings available under our credit agreements and/or cash flow generated from future operations to provide the cash necessary to complete our capital plans. Pursuant to the Third Amendment and discussed further below, we are prohibited, during the Financial Covenants Temporary Waiver Period, from making capital expenditures in excess of $200.0 million per twelve-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. Acquisition of Peak Resorts On September 23, 2019, we entered into an amendment to our Vail Holdings Credit Agreement in which we incurred additional term loans of approximately $335.6 million, and we utilized the proceeds to fund the acquisition of 100% of the outstanding stock of Peak Resorts on September 24, 2019 at a purchase price of $11.00 per share or approximately $264.5 million, and to prepay certain portions of Peak Resorts’ outstanding debt and lease obligations that were required to be repaid in order to complete the transaction. Debt As of July 31, 2020, principal payments on the majority of our long-term debt ( $2.1 billion of the total $2.4 billion debt outstanding as of July 31, 2020) are not due until fiscal year 2025 and beyond. As of July 31, 2020 and 2019, total long-term debt, net (including long-term debt due within one year) was $2,450.8 million and $1,576.3 million , respectively. Net Debt (defined as long-term debt, net plus long-term debt due within one year less cash and cash equivalents) increased from $1,467.4 million as of July 31, 2019 to $2,059.8 million as of July 31, 2020, primarily as a result of $335.6 million in incremental term loans, as discussed above, resulting from the September 23, 2019 amendment of our Vail Holdings Credit Agreement and the assumption of certain debt obligations of Peak Resorts, which have maturities ranging from 2021 through 2036 and were recorded at their estimated fair values of approximately $184.7 million. See Notes to the Consolidated Financial Statements for additional information. On April 28, 2020, through a wholly-owned subsidiary, we entered into the Third Amendment. Pursuant to the Third Amendment, among other terms, we are exempt from complying with the Vail Holdings Credit Agreement’s maximum leverage ratio and minimum interest coverage ratio financial maintenance covenants for the Financial Covenants Temporary Waiver Period, after which we 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 us). After the Financial Covenants Temporary Waiver Period: • the maximum leverage ratio permitted under the maximum leverage ratio financial maintenance covenant reduces each quarter after the expiration of the Financial Covenants Temporary Waiver Period as follows: (A) first full fiscal quarter: 6.25 to 1.00; (B) second full fiscal quarter: 5.75 to 1.00; (C) third full fiscal quarter: 5.25 to 1.00; and (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, we are 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 our 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 we deliver a compliance certificate for the Company and its subsidiaries’ first fiscal quarter following the end of the Financial Covenants Temporary Waiver Period. We are also prohibited from the following activities during the Financial Covenants Temporary Waiver Period (unless approval is obtained by a majority of the lenders under the Vail Holdings Credit Agreement): • 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 58 of dividends paid and share repurchases made by the Company during the Financial Covenants Temporary Waiver Period may not exceed $38.2 million in any fiscal quarter; • making capital expenditures in excess of $200.0 million per 12-month period ending January 31, other than non-recurring extraordinary capital expenditures incurred in connection with emergency repairs, life safety repairs or ordinary course maintenance repairs; • incurring any indebtedness secured by the collateral under the Vail Holdings Credit Agreement other than pursuant to the existing revolving commitments under the Credit Agreement; • making non-ordinary course investments in unrestricted subsidiaries unless the Company has liquidity (as defined above) of at least $300.0 million; • making investments in non-subsidiaries in excess of $50.0 million in the aggregate; and • acquiring all or a majority of the capital stock or all or any substantial portion of the assets of any entity or merging or consolidating with another entity. During the Financial Covenants Temporary Waiver Period, borrowings under the Vail Holdings Credit Agreement, including the term loan facility, bears 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 Vail Holdings Credit Agreement). On May 4, 2020, we completed our offering of $600 million aggregate principal amount of 6.25% senior notes due 2025 at par (the “Notes”). The Notes are unsecured senior obligations of the Company and are guaranteed by certain of our domestic subsidiaries. A portion of the net proceeds was utilized to pay down the outstanding balance of the revolver component of our 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 proceeds intended to be used for general corporate purposes. We 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, we may redeem some or all of the Notes at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, plus a “make-whole” premium as specified in the Indenture. In addition, prior to May 15, 2022, we 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. The Notes 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 contains covenants that, among other things, restrict the ability of the Company and the guarantors of the Notes 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. 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 Vail Holdings Credit Agreement provides for (i) a revolving loan facility in an aggregate principal amount of $500.0 million and (ii) a term loan facility of $1.25 billion. We expect that our liquidity needs in the near term will be met by continued use of operating cash flows and borrowings under the Notes, the Vail Holdings Credit Agreement and the Whistler Credit Agreement. 59 Our debt service requirements can be impacted by changing interest rates as we had approximately $0.9 billion of net variable-rate debt outstanding as of July 31, 2020, after consideration of $400.0 million in interest rate swaps which convert variable-rate debt to fixed-rate debt. A 100-basis point change in LIBOR would cause our annual interest payments on our net variable-rate debt to change by approximately $9.1 million . Additionally, the annual payments associated with the financing of the Canyons transaction increase by the greater of CPI less 1%, or 2%. The fluctuation in our debt service requirements, in addition to interest rate and inflation changes, may be impacted by future borrowings under our credit agreements or other alternative financing arrangements we may enter into. Our long term liquidity needs depend upon operating results that impact the borrowing capacity under our credit agreements, which can be mitigated by adjustments to capital expenditures, the flexibility of investment activities and the ability to obtain favorable future financing. We can respond to liquidity impacts of changes in the business and economic environment, including the COVID-19 pandemic, by managing our capital expenditures, variable operating expenses, the timing of new real estate development activity and the payment of cash dividends on our common stock. Share Repurchase Program Our share repurchase program is conducted under authorizations made from time to time by our Board of Directors. On March 6, 2006, our Board of Directors initially authorized the repurchase of up to 3,000,000 shares of Vail Resorts common stock (“Vail Shares”) and later authorized additional repurchases of up to 3,000,000 additional Vail Shares (July 16, 2008) and 1,500,000 Vail Shares (December 4, 2015), for a total authorization to repurchase shares of up to 7,500,000 Vail Shares. During Fiscal 2020, we repurchased 256,418 Vail shares at a cost of $46.4 million . Since the inception of this stock repurchase program through July 31, 2020, we have repurchased 6,161,141 Vail Shares at a cost of approximately $404.4 million . As of July 31, 2020, 1,338,859 Vail Shares remained available to repurchase under the existing repurchase authorization. Pursuant to the Third Amendment and as discussed above, we are prohibited from repurchasing shares of common stock during the Financial Covenants Temporary Waiver Period 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. Vail Shares purchased pursuant to the repurchase program will be held as treasury shares and may be used for the issuance of shares under the Company’s share award plan. Repurchases under the program may be made from time to time at prevailing prices as permitted by applicable laws, and subject to market conditions and other factors. The timing, as well as the number of Vail Shares that may be repurchased under the program, will depend on several factors, including our future financial performance, our available cash resources and competing uses for cash that may arise in the future, the restrictions in our Vail Holdings Credit Agreement, prevailing prices of Vail Shares and the number of Vail Shares that become available for sale at prices that we believe are attractive. The share repurchase program has no expiration date. Dividend Payments We announced on April 1, 2020 that we would be suspending the declaration of our quarterly dividend for at least the next two quarters in response to the impacts of the COVID-19 pandemic. Subsequently, pursuant to the Third Amendment and as discussed above, we are prohibited from paying any dividends during the Financial Covenants Temporary Waiver Period 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. For the year ended July 31, 2020, we paid cash dividends of $5.28 per share ( $212.7 million in the aggregate). These dividends were funded through available cash on hand and borrowings under the revolving portion of our Vail Holdings Credit Agreement. The amount, if any, of the dividends to be paid in the future will depend on our available cash on hand, anticipated cash needs, overall financial condition, restrictions contained in our Vail Holdings Credit Agreement, future prospects for earnings and cash flows, as well as other factors considered relevant by our Board of Directors. 60 Covenants and Limitations We must abide by certain restrictive financial covenants under our credit agreements. The most restrictive of those covenants include the following covenants: for the Vail Holdings Credit Agreement, Net Funded Debt to Adjusted EBITDA ratio and the Interest Coverage ratio (each as defined in the Vail Holdings Credit Agreement); for the Whistler Credit Agreement, Consolidated Total Leverage Ratio and Consolidated Interest Coverage Ratio (each as defined in the Whistler Credit Agreement); and for the EPR Secured Notes, Maximum Leverage Ratio and Consolidated Fixed Charge Ratio (each as defined in the EPR Agreements). In addition, our financing arrangements limit our ability to make certain restricted payments, pay dividends on or redeem or repurchase stock, make certain investments, make certain affiliate transfers and may limit our ability to enter into certain mergers, consolidations or sales of assets and incur certain indebtedness. Our borrowing availability under the Vail Holdings Credit Agreement is primarily determined by the Net Funded Debt to Adjusted EBITDA ratio, which is based on our segment operating performance, as defined in the Vail Holdings Credit Agreement. Our borrowing availability under the Whistler Credit Agreement is primarily determined based on the commitment size of the credit facility and our compliance with the terms of the Whistler Credit Agreement. Pursuant to the Third Amendment and as discussed above in further detail, we are exempt from complying with the restrictive covenants of the Vail Holdings Credit Agreement during the Financial Covenants Temporary Waiver Period, but are required to comply with a monthly minimum liquidity test during such period. We were in compliance with all restrictive financial covenants in our debt instruments as of July 31, 2020. We expect that we will continue to meet all applicable financial maintenance covenants in effect in our credit agreements throughout the year ending July 31, 2021. However, there can be no assurance that we will continue to meet such financial covenants. If such covenants are not met, we would be required to seek a waiver or amendment from the banks participating in our credit agreements. There can be no assurance that such waiver or amendment would be granted, which could have a material adverse impact on our liquidity. Contractual Obligations As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as debt agreements, lease agreements and construction agreements in conjunction with our resort capital expenditures. Debt obligations, which totaled $2.4 billion as of July 31, 2020, are recognized as liabilities in our Consolidated Balance Sheet. Obligations under construction contracts are not recognized as liabilities in our Consolidated Balance Sheet until services and/or goods are received which is in accordance with GAAP. A summary of our contractual obligations as of July 31, 2020 is presented below (in thousands): Payments Due by Period Fiscal 2-3 4-5 More than Contractual Obligations Total 2021 years years 5 years Long-Term Debt (Outstanding Principal) (1) $ 2,444,248 $ 69,827 $ 178,935 $ 1,675,916 $ 519,570 Fixed Rate Interest (1) 414,370 56,517 112,736 108,268 136,849 Canyons Obligation (2) 1,577,790 28,827 59,395 61,795 1,427,773 Operating Leases and Service Contracts (3) 363,283 68,419 90,527 66,836 137,501 Purchase Obligations and Other (4) 440,387 336,666 87,069 432 16,220 Total Contractual Cash Obligations $ 5,240,078 $ 560,256 $ 528,662 $ 1,913,247 $ 2,237,913 (1) The fixed-rate interest payments (including payments that are required under interest rate swaps that we have entered into) as well as long-term debt payments, included in the table above, assume that all debt outstanding as of July 31, 2020 will be held to maturity. Interest payments associated with variable-rate debt have not been included in the table. Assuming that our approximately $0.9 billion of variable-rate long-term debt as of July 31, 2020 is held to maturity and utilizing interest rates in effect at July 31, 2020, our annual interest payments (including commitment fees and letter of credit fees) on variable rate long-term debt as of July 31, 2020 is anticipated to be approximately $24.4 million for Fiscal 2021, approximately $22.7 million for Fiscal 2022 and approximately $14.9 million for at least each of the next three years subsequent to Fiscal 2022. The future annual interest obligations noted herein are estimated only in relation to debt outstanding as of July 31, 2020 and do not reflect interest obligations on potential future debt. Included in Long-Term Debt (Outstanding Principal) are $11.2 million of proceeds resulting from real estate transactions accounted for as a financing arrangements. Fiscal 2021 payments shown above include approximately $6.2 million of proceeds, which are expected to be recognized on the Company’s Statement of Operations during the year ending July 31, 2021 as a 61 result of the anticipated resolution of continuing involvement, with no associated cash outflow (see Notes to Consolidated Financial Statements for additional information). (2) Reflects principal and interest expense payments associated with the remaining lease term of the Canyons obligation, initially 50 years, assuming a 2% per annum (floor) increase in payments. Any potential increases to the annual fixed payment above the 2% floor due to inflation linked index of CPI less 1% have been excluded. (3) The payments under noncancelable operating leases included in the table above reflect the applicable minimum lease payments and exclude any potential contingent rent payments. (4) Purchase obligations and other primarily include amounts which are classified as trade payables ( $59.7 million ), accrued payroll and benefits ( $69.3 million ), accrued fees and assessments ($26.1 million), contingent consideration liability ($17.8 million), and accrued taxes (including taxes for uncertain tax positions) ($117.2 million) on our Consolidated Balance Sheet as of July 31, 2020; and, other commitments for goods and services not yet received, including construction contracts and minimum commitments under season pass alliance agreements, not included on our Consolidated Balance Sheet as of July 31, 2020 in accordance with GAAP. Off Balance Sheet Arrangements We do not have off balance sheet transactions that are expected to have a material effect on our financial condition, revenue, expenses, results of operations, liquidity, capital expenditures or capital resources. Critical Accounting Policies The preparation of Consolidated Financial Statements in conformity with GAAP requires us to select appropriate accounting policies and to make judgments and estimates affecting the application of those accounting policies. In applying our accounting policies, different business conditions or the use of different assumptions may result in materially different amounts reported in the Consolidated Financial Statements. We have identified the most critical accounting policies which were determined by considering accounting policies that involve the most complex or subjective decisions or assessments. We also have other policies considered key accounting policies; however, these policies do not meet the definition of critical accounting policies because they do not generally require us to make estimates or judgments that are complex or subjective. We have reviewed these critical accounting policies and related disclosures with our Audit Committee of the Board of Directors. Goodwill and Intangible Assets Description The carrying value of goodwill and indefinite-lived intangible assets are evaluated for possible impairment on an annual basis or between annual tests if an event occurs or circumstances change that would more likely than not reduce the estimated fair value of a reporting unit or indefinite-lived intangible asset below its carrying value. Other intangible assets are evaluated for impairment only when there is evidence that events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. 62 Judgments and Uncertainties Application of the goodwill and indefinite-lived intangible asset impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units and determination of the estimated fair value of reporting units and indefinite-lived intangible assets. We perform a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset exceeds the carrying amount. If it is determined, based on qualitative factors, that the fair value of the reporting unit or indefinite-lived intangible asset 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 we would determine the estimated fair value of our reporting units using a discounted cash flow analysis and determine the estimated fair value of indefinite-lived intangible assets primarily using the income approach based upon estimated future revenue streams. These analyses require significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, available industry/market data (to the extent available), estimation of the long-term rate of growth for our business including expectations and assumptions regarding the impact of general economic conditions on our business, estimation of the useful life over which cash flows will occur (including terminal multiples), determination of the respective weighted average cost of capital and market participant assumptions. Changes in these estimates and assumptions could materially affect the determination of estimated fair value and impairment for each reporting unit or indefinite-lived intangible asset. We evaluate our reporting units on an annual basis and allocate goodwill to our reporting units based on the reporting units expected to benefit from the acquisition generating the goodwill. Effect if Actual Results Differ From Assumptions Goodwill and indefinite-lived intangible assets are tested for impairment at least annually as of May 1. As a result of the coronavirus (COVID-19) pandemic and the impact it has had on our operations during Fiscal 2020, and the expected continuing impact of the pandemic on future operations, we determined that it was appropriate to test certain assets within our Colorado resort ground transportation company for impairment. Our testing for goodwill and indefinite-lived intangible asset impairment consists of a comparison of the estimated fair value of those assets with their net carrying values. If the net carrying value of the assets exceed their estimated fair value, an impairment will be recognized for indefinite-lived intangibles, including goodwill, in an amount equal to that excess; otherwise, no impairment loss is recognized. We recorded an impairment of approximately $28.4 million related to our Colorado resort ground transportation company during Fiscal 2020, which was recorded within asset impairments on our Consolidated Statement of Operations, with corresponding reductions to goodwill, net of $25.7 million and to intangible assets, net and property, plant and equipment, net of $2.7 million. See Notes to Consolidated Financial Statements for additional information. As of July 31, 2020, we determined that no other impairment of goodwill or indefinite-lived intangible assets existed. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will prove to be an accurate prediction of the future. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting units may include such items as: (1) prolonged adverse weather conditions resulting in a sustained decline in guest visitation; (2) a prolonged weakness in the general economic conditions in which guest visitation and spending is adversely impacted (particularly with regard to the ongoing COVID-19 pandemic); and (3) volatility in the equity and debt markets which could result in a higher discount rate. While historical performance and current expectations have resulted in estimated fair values of our reporting units in excess of carrying values (with the exception of our Colorado resort ground transportation company, as discussed above), if our assumptions are not realized, it is possible that an additional impairment charge may need to be recorded in the future. However, it is not possible at this time to determine if an impairment charge would result or if such a charge would be material. As of July 31, 2020, we had $1,709.0 million of goodwill and $247.0 million of indefinite-lived intangible assets recorded on our Consolidated Balance Sheet. There can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment tests for goodwill will prove to be an accurate prediction of the future. 63 Tax Contingencies Description We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties relating to uncertain tax positions. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations, including those enacted under the Tax Act. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the largest tax benefit that is cumulatively greater than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, interpretation of tax law, effectively settled issues under audit and new audit activity. A significant amount of time may pass before a particular matter, for which we may have established a reserve, is audited and fully resolved. Judgments and Uncertainties The estimates of our tax contingencies reserve contain uncertainty because management must use judgment to estimate the potential exposure associated with our various filing positions. Effect if Actual Results Differ From Assumptions We believe the estimates and judgments discussed herein are reasonable and we have adequate reserves for our tax contingencies for uncertain tax positions. Our reserves for uncertain tax positions, including any income tax related interest and penalties ($76.5 million as of July 31, 2020), relate to the treatment of the Canyons obligation lease payments as payments of debt obligations and that the tax basis in Canyons goodwill is deductible. Actual results could differ and we may be exposed to increases or decreases in those reserves and tax provisions that could be material. An unfavorable tax settlement could require the use of cash and could possibly result in increased tax expense and effective tax rate and/or adjustments to our deferred tax assets and deferred tax liabilities in the year of resolution. A favorable tax settlement could possibly result in a reduction in our tax expense, effective tax rate, income taxes payable, other long-term liabilities and/or adjustments to our deferred tax assets and deferred tax liabilities in the year of settlement or in future years. Depreciable Lives of Assets Description Mountain and lodging operational assets, furniture and fixtures, computer equipment, software, vehicles and leasehold improvements are primarily depreciated using the straight-line method over the estimated useful life of the asset. Assets may become obsolete or require replacement before the end of their useful life in which the remaining book value would be written-off or we could incur costs to remove or dispose of assets no longer in use. Judgments and Uncertainties The estimates of our useful lives of the assets contain uncertainty because management must use judgment to estimate the useful life of the asset. Effect if Actual Results Differ From Assumptions Although we believe the estimates and judgments discussed herein are reasonable, actual results could differ, and we may be exposed to increased expense related to depreciable assets disposed of, removed or taken out of service prior to its originally estimated useful life, which may be material. A 10% decrease in the estimated useful lives of depreciable assets would have increased depreciation expense by approximately $24.9 million for Fiscal 2020. 64 Business Combinations Description A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations in accordance with the guidance for business combinations and related literature. Accordingly, we allocate the purchase price of acquired businesses to the identifiable tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The difference between the purchase price and the estimated fair value of the net assets acquired or the excess of the aggregate estimated fair values of assets acquired and liabilities assumed is recorded as goodwill. In determining the estimated fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling and referenced market values (where available). Valuations are performed by management or independent valuation specialists under management’s supervision, where appropriate. Judgments and Uncertainties Accounting for business combinations requires our management to make significant estimates and assumptions, especially at the acquisition date, including our estimates for intangible assets, contractual obligations assumed and contingent consideration, where applicable. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are not limited to determination of weighted average cost of capital, market participant assumptions, royalty rates, terminal multiples and estimates of future cash flows to be generated by the acquired assets. In addition to the estimates and assumptions applied to valuing intangible assets acquired, the determination of the estimated fair value of contingent consideration, including estimating the likelihood and timing of achieving the relevant thresholds for contingent consideration payments, requires the use of subjective judgments. We estimate the fair value of the Park City contingent consideration payments using an option pricing valuation model which incorporates, among other factors, projected achievement of specified financial performance measures, discounts rates and volatility for the respective business. Effect if Actual Results Differ From Assumptions We believe that the estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions that a marketplace participant would use. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the estimated fair values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments would be recorded in our Consolidated Statements of Operations. We recognize the fair value of contingent consideration at the date of acquisition as part of the consideration transferred to acquire a business. The liability associated with contingent consideration is remeasured to fair value at each reporting period subsequent to the date of acquisition taking into consideration changes in financial projections and long-term growth rates, among other factors, that may impact the timing and amount of contingent consideration payments until the term of the agreement has expired or the contingency is resolved. Increases in the fair value of contingent consideration are recorded as losses in our Consolidated Statements of Operations, while decreases in fair value are recorded as gains. New Accounting Standards Refer to the Summary of Significant Accounting Policies within the Notes to Consolidated Financial Statements for a discussion of new accounting standards. Inflation Although we cannot accurately determine the precise effect of inflation on our operations, management does not believe inflation has had a material effect on the results of operations in the last three fiscal years. When the costs of operating resorts increase, we generally have been able to pass the increase on to our customers. However, there can be no assurance that increases in labor and other operating costs due to inflation will not have an impact on our future profitability. In May 2013, we entered into a long-term lease pursuant to which we assumed the operations of Canyons which includes the ski terrain and related amenities. The lease has an initial term of 50 years with six 50-year renewal options. The lease provides for $25.0 million in annual payments, which increase each year by an inflation linked index of CPI less 1%, with a floor of 2% per 65 annum. As lease payments increase annually, there can be no assurance that these increases will be offset by increased cash flow generated from operations at Park City. Seasonality and Quarterly Results Our mountain and lodging operations are seasonal in nature. In particular, revenue and profits for our North America mountain and most of our lodging operations are substantially lower and historically result in losses from late spring to late fall. Conversely, peak operating seasons for our NPS concessionaire properties, our mountain resort golf courses and our Australian resorts’ ski season generally occur during the North American summer months while the North American winter months result in operating losses. Revenue and profits generated by NPS concessionaire properties summer operations, golf operations and Australian resorts’ ski operations are not sufficient to fully offset our off-season losses from our North American mountain and other lodging operations. During Fiscal 2020, there were several interruptions to our normal North American and Australian ski seasons as a result of the COVID-19 pandemic, which resulted in early resort closures. During Fiscal 2020, approximately 83% of total combined Mountain and Lodging segment net revenue (excluding Lodging segment revenue associated with reimbursement of payroll costs) was earned during the second and third fiscal quarters. Therefore, the operating results for any three-month period are not necessarily indicative of the results that may be achieved for any subsequent quarter or for a full year (see Notes to Consolidated Financial Statements).