VAIL RESORTS INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Vail Resorts, Inc. Consolidated Financial Statements for the Years Ended July 31, 2020, 2019 and 2018 Management’s Report on Internal Control Over Financial Reporting 68 Report of Independent Registered Public Accounting Firm 69 Consolidated Financial Statements Consolidated Balance Sheets 72 Consolidated Statements of Operations 73 Consolidated Statements of Comprehensive Income 74 Consolidated Statements of Stockholders’ Equity 75 Consolidated Statements of Cash Flows 76 Notes to Consolidated Financial Statements 77 67 Management’s Report on Internal Control over Financial Reporting Management of Vail Resorts, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management, including the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of July 31, 2020. In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on this assessment, management concluded that, as of July 31, 2020, the Company’s internal control over financial reporting was effective. Management’s evaluation and conclusion on the effectiveness of internal control over financial reporting as of July 31, 2020 excluded certain elements of internal controls of Peak Resorts (acquired in September 2019) due to the timing of this acquisition. Those elements of the acquired resorts’ internal controls over financial reporting that have been excluded represent less than 1% of total consolidated assets and approximately 8% of total consolidated net revenues of the Company as of and for the year ended July 31, 2020. The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of July 31, 2020, as stated in the Report of Independent Registered Public Accounting Firm on the following page. 68 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Vail Resorts, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Vail Resorts, Inc. and its subsidiaries (the “Company”) as of July 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended July 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of July 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 31, 2020 and 2019 , and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of August 1, 2019. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s Report on Internal Control over Financial Reporting, management has excluded certain elements of the internal control over financial reporting of Peak Resorts from its assessment of internal control over financial reporting as of July 31, 2020 because it was acquired by the Company in a purchase business combination during September 2019. Subsequent to the acquisition, certain elements of Peak Resorts’ internal control over financial reporting and related processes were integrated into the Company’s existing systems and internal control over financial reporting. Those controls that were not integrated have been excluded from management’s assessment of the effectiveness of internal control over financial reporting as of July 31, 2020. We have also excluded these elements of internal control over financial reporting of Peak Resorts from our audit of the Company’s internal control over financial reporting. The excluded elements represent controls of less than 1% of consolidated assets and approximately 8% of consolidated net revenues. 69 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Fair Value Measurement of the Contingent Consideration As described in Note 10 to the consolidated financial statements, the Company has established a liability of $17.8 million as of July 31, 2020 for additional amounts that management believes are likely to be paid to the previous owner of Park City (the “Contingent Consideration”). The Company remeasures the Contingent Consideration to fair value at each reporting date until the contingency is resolved. The estimated fair value of Contingent Consideration includes the future period resort operations of Park City in the calculation of EBITDA on which participating contingent payments are made, which is determined on the basis of estimated performance for the years ending July 31, 2021 and July 31, 2022, escalated by an assumed long-term growth factor and discounted to net present value. Fair value is estimated using an option pricing valuation model. As described by management, key assumptions in determining the fair value under this model included Park City EBITDA for the year ending July 31, 2022, an assumed long- term growth rate, discount rate and volatility. The principal considerations for our determination that performing procedures relating to the fair value measurement of the Contingent Consideration is a critical audit matter are (i) the significant judgment by management when developing the fair value measurement, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions for the Park City EBITDA for the year ending July 31, 2022, assumed long-term growth rate, discount rate, and volatility; and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s fair value measurement of the Contingent Consideration including controls over the Company’s significant assumptions. The procedures also included, among others, testing management’s process for developing the fair value measurement and evaluating the significant assumptions used by management, related to the Park City EBITDA for the year ending July 31, 2022, assumed long-term growth rate, discount rate, and volatility. Evaluating management’s assumptions related to the Park City EBITDA for the year ending July 31, 2022, assumed long-term growth rate, discount rate, and volatility involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past EBITDA performance of Park City; (ii) the impact of the COVID-19 pandemic on the future EBITDA performance of Park City; (iii) the consistency with external market data; and (iv) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discount rate and volatility assumptions. 70 Acquisition of Peak Resorts - Valuation of Acquired Depreciable Property, Plant, and Equipment As described in Note 7 to the consolidated financial statements, the Company completed the acquisition of Peak Resorts, Inc. during the year ended July 31, 2020 resulting in the recognition of an aggregate amount of approximately $427.8 million related to property, plant, and equipment. A substantial portion of the property, plant, and equipment acquired related to depreciable property, plant, and equipment (“Acquired Depreciable PPE”). The process of estimating the fair value of the Acquired Depreciable PPE includes the use of certain estimates and assumptions related to the determination of replacement cost. The principal considerations for our determination that performing procedures relating to the valuation of the Acquired Depreciable PPE from the Peak Resorts acquisition is a critical audit matter are (i) the high degree of auditor subjectivity and effort in performing procedures over management’s valuation of the Acquired Depreciable PPE including the significant assumptions related to the replacement cost; and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s significant assumptions and data used in the valuation of the Acquired Depreciable PPE. These procedures also included, among others, (i) testing management’s process for estimating the fair value of Acquired Depreciable PPE; (ii) testing the completeness and accuracy of the underlying data used to estimate the fair value of the Acquired Depreciable PPE; and (iii) evaluating management’s replacement cost assumptions used to estimate the fair value of the Acquired Depreciable PPE. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation method and the Company’s replacement cost assumptions, including evaluating whether the assumptions used by management were reasonable considering consistency with external market and industry data. /s/ PricewaterhouseCoopers LLP Denver, Colorado September 24, 2020 We have served as the Company’s auditor since 2002. 71 Vail Resorts, Inc. Consolidated Balance Sheets (In thousands, except per share amounts) July 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 390,980 $ 108,850 Restricted cash 11,106 9,539 Accounts receivable, net of allowances of $2,484 and $724, respectively 106,664 270,896 Inventories, net of reserves of $4,447 and $2,031, respectively 101,856 96,539 Other current assets 54,482 42,116 Total current assets 665,088 527,940 Property, plant and equipment, net (Note 8) 2,192,679 1,842,500 Real estate held for sale and investment 96,844 101,021 Goodwill, net (Note 8) 1,709,020 1,608,206 Intangible assets, net (Note 8) 314,776 306,173 Operating right-of-use assets (Note 4) 225,744 — Deferred charges and other assets 40,081 40,237 Total assets $ 5,244,232 $ 4,426,077 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued liabilities (Note 8) $ 499,108 $ 607,857 Income taxes payable 40,680 62,760 Long-term debt due within one year (Note 6) 63,677 48,516 Total current liabilities 603,465 719,133 Long-term debt, net (Note 6) 2,387,122 1,527,744 Operating lease liabilities (Note 4) 217,542 — Other long-term liabilities (Note 8) 270,245 283,601 Deferred income taxes, net (Note 11) 234,191 168,759 Total liabilities 3,712,565 2,699,237 Commitments and contingencies (Note 13) Stockholders’ equity: Preferred stock, $0.01 par value, 25,000 shares authorized, no shares issued and outstanding — — Common stock, $0.01 par value, 100,000 shares authorized and 46,350 and 46,190 shares issued, respectively 464 461 Exchangeable shares, $0.01 par value, 36 and 56 shares issued and outstanding, respectively (Note 5) — 1 Additional paid-in capital 1,131,624 1,130,083 Accumulated other comprehensive loss ( 56,837 ) ( 31,730 ) Retained earnings 645,902 759,801 Treasury stock, at cost; 6,161 and 5,905 shares, respectively (Note 16) ( 404,411 ) ( 357,989 ) Total Vail Resorts, Inc. stockholders’ equity 1,316,742 1,500,627 Noncontrolling interests 214,925 226,213 Total stockholders’ equity 1,531,667 1,726,840 Total liabilities and stockholders’ equity $ 5,244,232 $ 4,426,077 The accompanying Notes are an integral part of these Consolidated Financial Statements. 72 Vail Resorts, Inc. Consolidated Statements of Operations (In thousands, except per share amounts) Year Ended July 31, 2020 2019 2018 Net revenue: Mountain and Lodging services and other $ 1,578,463 $ 1,807,930 $ 1,584,310 Mountain and Lodging retail and dining 380,394 462,933 423,255 Resort net revenue 1,958,857 2,270,863 2,007,565 Real Estate 4,847 712 3,988 Total net revenue 1,963,704 2,271,575 2,011,553 Operating expense (exclusive of depreciation and amortization shown separately below): Mountain and Lodging operating expense 1,019,437 1,101,670 966,566 Mountain and Lodging retail and dining cost of products sold 159,066 190,044 174,105 General and administrative 278,695 274,415 251,806 Resort operating expense 1,457,198 1,566,129 1,392,477 Real Estate, net 9,182 5,609 3,546 Total segment operating expense 1,466,380 1,571,738 1,396,023 Other operating (expense) income: Depreciation and amortization ( 249,572 ) ( 218,117 ) ( 204,462 ) Gain on sale of real property 207 580 515 Asset impairments (Notes 2 & 8) ( 28,372 ) — — Change in fair value of contingent consideration (Note 10) 2,964 ( 5,367 ) 1,854 Gain (loss) on disposal of fixed assets and other, net 838 ( 664 ) ( 4,620 ) Income from operations 223,389 476,269 408,817 Interest expense, net ( 106,721 ) ( 79,496 ) ( 63,226 ) Mountain equity investment income, net 1,690 1,960 1,523 Investment income and other, net 1,305 3,086 1,944 Foreign currency loss on intercompany loans (Note 6) ( 3,230 ) ( 2,854 ) ( 8,966 ) Income before (provision) benefit from income taxes 116,433 398,965 340,092 (Provision) benefit from income taxes (Note 11) ( 7,378 ) ( 75,472 ) 61,138 Net income 109,055 323,493 401,230 Net income attributable to noncontrolling interests ( 10,222 ) ( 22,330 ) ( 21,332 ) Net income attributable to Vail Resorts, Inc. $ 98,833 $ 301,163 $ 379,898 Per share amounts (Note 5): Basic net income per share attributable to Vail Resorts, Inc. $ 2.45 $ 7.46 $ 9.40 Diluted net income per share attributable to Vail Resorts, Inc. $ 2.42 $ 7.32 $ 9.13 Cash dividends declared per share $ 5.28 $ 6.46 $ 5.046 The accompanying Notes are an integral part of these Consolidated Financial Statements. 73 Vail Resorts, Inc. Consolidated Statements of Comprehensive Income (In thousands) Year Ended July 31, 2020 2019 2018 Net income $ 109,055 $ 323,493 $ 401,230 Foreign currency translation adjustments (net of tax of $0, $0 and $1,981, respectively) ( 9,075 ) ( 34,287 ) ( 61,957 ) Change in estimated fair value of hedging instruments ( 22,510 ) — — Comprehensive income 77,470 289,206 339,273 Comprehensive income attributable to noncontrolling interests ( 3,744 ) ( 17,546 ) ( 5,997 ) Comprehensive income attributable to Vail Resorts, Inc. $ 73,726 $ 271,660 $ 333,276 The accompanying Notes are an integral part of these Consolidated Financial Statements. 74 Vail Resorts, Inc. Consolidated Statements of Stockholders’ Equity (In thousands, except share amounts) Common Stock Additional Paid in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Vail Resorts, Inc. Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity Vail Resorts Exchangeable Balance, July 31, 2017 $ 454 $ 1 $ 1,222,510 $ 44,395 $ 550,985 $ ( 247,189 ) $ 1,571,156 $ 227,803 $ 1,798,959 Comprehensive income: Net income — — — — 379,898 — 379,898 21,332 401,230 Foreign currency translation adjustments, net of tax — — — ( 46,622 ) — — ( 46,622 ) ( 15,335 ) ( 61,957 ) Total comprehensive income 333,276 5,997 339,273 Stock-based compensation (Note 17) — — 19,040 — — — 19,040 — 19,040 Measurement period adjustment — — — — — — — ( 1,776 ) ( 1,776 ) Issuance of shares under share award plan, net of shares withheld for employee taxes (Note 17) 6 — ( 104,083 ) — — — ( 104,077 ) — ( 104,077 ) Repurchases of common stock (Note 16) — — — — — ( 25,800 ) ( 25,800 ) — ( 25,800 ) Dividends (Note 5) — — — — ( 204,161 ) — ( 204,161 ) — ( 204,161 ) Distributions to noncontrolling interests, net — — — — — — — ( 9,795 ) ( 9,795 ) Balance, July 31, 2018 460 1 1,137,467 ( 2,227 ) 726,722 ( 272,989 ) 1,589,434 222,229 1,811,663 Comprehensive income: Net income — — — — 301,163 — 301,163 22,330 323,493 Foreign currency translation adjustments, net of tax — — — ( 29,503 ) — — ( 29,503 ) ( 4,784 ) ( 34,287 ) Total comprehensive income 271,660 17,546 289,206 Stock-based compensation (Note 17) — — 19,856 — — — 19,856 — 19,856 Cumulative effect for adoption of revenue standard — — — — ( 7,517 ) — ( 7,517 ) — ( 7,517 ) Issuance of shares under share award plan, net of shares withheld for employee taxes (Note 17) 1 — ( 27,240 ) — — — ( 27,239 ) — ( 27,239 ) Repurchases of common stock (Note 16) — — — — — ( 85,000 ) ( 85,000 ) — ( 85,000 ) Dividends (Note 5) — — — — ( 260,567 ) — ( 260,567 ) — ( 260,567 ) Distributions to noncontrolling interests, net — — — — — — — ( 13,562 ) ( 13,562 ) Balance, July 31, 2019 461 1 1,130,083 ( 31,730 ) 759,801 ( 357,989 ) 1,500,627 226,213 1,726,840 Comprehensive income: Net income — — — — 98,833 — 98,833 10,222 109,055 Foreign currency translation adjustments, net of tax — — — ( 2,597 ) — — ( 2,597 ) ( 6,478 ) ( 9,075 ) Change in estimated fair value of hedging instruments — — — ( 22,510 ) — — ( 22,510 ) — ( 22,510 ) Total comprehensive income 73,726 3,744 77,470 Stock-based compensation (Note 17) — — 21,021 — — — 21,021 — 21,021 Issuance of shares under share award plan, net of shares withheld for employee taxes (Note 17) 2 — ( 19,480 ) — — — ( 19,478 ) — ( 19,478 ) Exchangeable share transfers 1 ( 1 ) — — — — — — — Repurchases of common stock (Note 16) — — — — — ( 46,422 ) ( 46,422 ) — ( 46,422 ) Dividends (Note 5) — — — — ( 212,732 ) — ( 212,732 ) — ( 212,732 ) Distributions to noncontrolling interests, net — — — — — — — ( 15,032 ) ( 15,032 ) Balance, July 31, 2020 $ 464 $ — $ 1,131,624 $ ( 56,837 ) $ 645,902 $ ( 404,411 ) $ 1,316,742 $ 214,925 $ 1,531,667 The accompanying Notes are an integral part of these Consolidated Financial Statements. 75 Vail Resorts, Inc. Consolidated Statements of Cash Flows (In thousands) Year Ended July 31, 2020 2019 2018 Cash flows from operating activities: Net income $ 109,055 $ 323,493 $ 401,230 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 249,572 218,117 204,462 Asset impairments 28,372 — — Cost of real estate sales 3,684 — 3,701 Stock-based compensation expense 21,021 19,856 19,040 Deferred income taxes, net 17,435 22,419 ( 45,770 ) Canyons obligation accreted interest expense 5,773 5,752 5,723 Change in fair value of contingent consideration ( 2,964 ) 5,367 ( 1,854 ) Foreign currency loss on intercompany loans 3,230 2,854 8,966 Gain on sale of real property ( 207 ) ( 580 ) ( 515 ) Other non-cash income, net ( 16,674 ) ( 13,875 ) ( 13,784 ) Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable, net 167,347 ( 35,406 ) ( 44,261 ) Inventories, net ( 1,924 ) ( 7,274 ) ( 963 ) Accounts payable and accrued liabilities ( 82,394 ) 23,296 1,879 Deferred revenue ( 98,003 ) 35,628 42,007 Income taxes payable - excess tax benefit from share award plans ( 8,236 ) ( 12,932 ) ( 71,077 ) Income taxes payable - other ( 4,951 ) 38,773 38,453 Other assets and liabilities, net 4,814 8,743 1,249 Net cash provided by operating activities 394,950 634,231 548,486 Cash flows from investing activities: Capital expenditures ( 172,334 ) ( 192,035 ) ( 140,611 ) Acquisition of businesses, net of cash acquired ( 327,555 ) ( 419,044 ) ( 1,356 ) Other investing activities, net 7,150 15,045 7,388 Net cash used in investing activities ( 492,739 ) ( 596,034 ) ( 134,579 ) Cash flows from financing activities: Proceeds from borrowings under Vail Holdings Credit Agreement 892,625 543,625 225,000 Proceeds from borrowings under Whistler Credit Agreement 209,634 26,518 46,513 Proceeds from borrowings under 6.25% Notes 600,000 — — Repayments of borrowings under Vail Holdings Credit Agreement ( 811,875 ) ( 235,625 ) ( 182,500 ) Repayments of borrowings under Whistler Credit Agreement ( 204,032 ) ( 45,060 ) ( 91,941 ) Employee taxes paid for share award exercises ( 19,478 ) ( 27,239 ) ( 104,077 ) Repurchases of common stock ( 46,422 ) ( 85,000 ) ( 25,800 ) Dividends paid ( 212,732 ) ( 260,567 ) ( 204,161 ) Other financing activities, net ( 31,487 ) ( 16,210 ) ( 13,749 ) Net cash provided by (used in) financing activities 376,233 ( 99,558 ) ( 350,715 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 5,253 ( 5,290 ) ( 5,814 ) Net increase (decrease) in cash, cash equivalents and restricted cash 283,697 ( 66,651 ) 57,378 Cash, cash equivalents and restricted cash: Beginning of period $ 118,389 $ 185,040 $ 127,662 End of period $ 402,086 $ 118,389 $ 185,040 Cash paid for interest $ 88,398 $ 70,888 $ 53,842 Taxes paid, net $ 4,134 $ 27,212 $ 16,945 Non-cash investing activities: Accrued capital expenditures $ 15,046 $ 18,420 $ 15,638 The accompanying Notes are an integral part of these Consolidated Financial Statements. 76 Notes to Consolidated Financial Statements 1. Organization and Business Vail Resorts, Inc. (“Vail Resorts”) is organized as a holding company and operates through various subsidiaries. Vail Resorts and its subsidiaries (collectively, the “Company”) operate in three business segments: Mountain, Lodging and Real Estate. The Company refers to “Resort” as the combination of the Mountain and Lodging segments. In the Mountain segment, the Company operates the following 37 destination mountain resorts and regional ski areas: *Denotes a destination mountain resort, which generally receives a meaningful portion of skier visits from long-distance travelers, as opposed to the Company’s regional ski areas, which tend to generate skier visits predominantly from their respective local markets. Additionally, the Mountain segment includes ancillary services, primarily including ski school, dining and retail/rental operations, and for the Company’s Australian ski areas, including lodging and transportation operations. Several of the resorts located in the United States (“U.S.”) operate primarily on federal land under the terms of Special Use Permits granted by the U.S. Department of Agriculture Forest Service. The operations of Whistler Blackcomb are conducted on land owned by the government of the Province of British Columbia, Canada within the traditional territory of the Squamish and Lil’wat Nations. The operations of the Company’s Australian ski areas are conducted pursuant to long-term leases and licenses on land owned by the governments of New South Wales and Victoria, Australia. Okemo, Mount Sunapee and Stowe operate on land leased from the respective states in which the resorts are located and on land owned by the Company. In the Lodging segment, the Company owns and/or manages a collection of luxury hotels and condominiums under its RockResorts brand; other strategic lodging properties and a large number of condominiums located in proximity to the Company’s North American mountain resorts; National Park Service (“NPS”) concessionaire properties including the Grand Teton Lodge Company (“GTLC”), which operates destination resorts in Grand Teton National Park; a Colorado resort ground transportation company and mountain resort golf courses. 77 Vail Resorts Development Company (“VRDC”), a wholly-owned subsidiary, conducts the operations of the Company’s Real Estate segment, which owns, develops and sells real estate in and around the Company’s resort communities. The Company’s mountain business and its lodging properties at or around the Company’s mountain resorts are seasonal in nature with peak operating seasons primarily from mid-November through mid-April in North America. The peak operating season at the Company’s Australian resorts, NPS concessionaire properties and golf courses generally occurs from June to early October. 2. Summary of Significant Accounting Policies Principles of Consolidation — The accompanying Consolidated Financial Statements include the accounts of the Company and its consolidated subsidiaries for which the Company has a controlling financial interest. Investments in which the Company does not have a controlling financial interest, but has significant influence, are accounted for under the equity method. All significant intercompany transactions have been eliminated in consolidation. Cash and Cash Equivalents — The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Restricted Cash — The Company considers cash to be restricted when withdrawal or general use is legally restricted. During peak operations of the North American ski season, the Company’s restricted cash balance is primarily associated with customer reservations deposits that are required to be held in a trust pursuant to statutory requirements until such reservations are fulfilled. Accounts receivable — The Company records trade accounts receivable in the normal course of business related to the sale of products or services. The allowance for doubtful accounts is based on a specific reserve analysis and on a percentage of accounts receivable and takes into consideration such factors as historical write-offs, the economic climate and other factors that could affect collectability. Write-offs are evaluated on a case by case basis. Inventories — The Company’s inventories consist primarily of purchased retail goods, food and beverage items and spare parts. Inventories are stated at the lower of cost or net realizable value, determined using primarily an average weighted cost method. The Company records a reserve for estimated shrinkage and obsolete or unusable inventory. Property, Plant and Equipment — Property, plant and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property, plant and equipment is retired or otherwise disposed of, the related gain or loss is included in income from operations. Leasehold improvements are amortized on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the straight-line method, including property, plant and equipment under capital leases, generally based on the following useful lives: Estimated Life in Years Land improvements 10-35 Buildings and building improvements 7-30 Machinery and equipment 2-30 Furniture and fixtures 3-10 Software 3 Vehicles 3-10 Real Estate Held for Sale and Investment — The Company capitalizes as real estate held for sale and investment the original land acquisition cost, direct construction and development costs, property taxes, interest recorded on costs related to real estate under development and other related costs. Sales and marketing expenses are charged against income in the period incurred. Additionally, sales commission expenses are charged against income in the period that the related revenue from real estate sales is recorded. Deferred Financing Costs — Certain costs incurred with the issuance of debt and debt securities are capitalized and included as a reduction in the net carrying value of long-term debt, net of accumulated amortization, with the exception of costs incurred related to line-of-credit arrangements, which are included in deferred charges and other assets, net of accumulated amortization. Amortization of such deferred financing costs are recorded to interest expense, net on the Company’s Consolidated Statements of Operations over the respective term of the applicable debt instruments. When debt is extinguished prior to its maturity date, the amortization of the remaining unamortized deferred financing costs, or pro-rata portion thereof, is charged to loss on extinguishment of debt. 78 Goodwill and Intangible Assets — The Company has classified as goodwill the cost in excess of estimated fair value of the net assets of businesses acquired in purchase transactions. The Company’s major intangible asset classes are trademarks, water rights, customer lists, property management contracts and Forest Service permits. Goodwill and various indefinite-lived intangible assets, including certain trademarks, water rights and certain property management contracts, are not amortized but are subject to at least annual impairment testing. The Company tests these non-amortizing assets annually (or more often, if necessary) for impairment as of May 1. Amortizable intangible assets are amortized over the shorter of their contractual terms or estimated useful lives. The testing for impairment consists of a comparison of the estimated fair value of the assets with their net carrying values. If the net carrying amount of the assets exceed its estimated fair value, an impairment will be recognized for indefinite-lived intangibles, including goodwill, in an amount equal to that excess. If the net carrying amount of the assets does not exceed the estimated fair value, no impairment loss is recognized. For the testing of goodwill and other indefinite-lived intangible assets for impairment, the Company performs a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset exceeds the carrying amount, which includes an evaluation as to whether there have been significant changes to macro-economic factors related to the reporting unit or intangible asset that could materially impact fair value. If it is determined, based on qualitative factors, that the fair value of the reporting unit or indefinite-lived intangible asset is more likely than not less than carrying amount, a quantitative impairment test would be required, in which the Company would determine the estimated fair value of its reporting units using discounted cash flow analyses and determine the estimated fair value of its indefinite-lived intangible assets using an income approach. As a result of the coronavirus (COVID-19) pandemic and the impact it has had on the Company’s operations during the year ended July 31, 2020, and the expected continuing impact of the pandemic on future operations, the Company determined that the estimated fair value of its Colorado resort ground transportation company reporting unit within its Lodging segment no longer exceeded its carrying value. As further discussed in Note 8, the Company recognized an impairment of approximately $ 28.4 million related to its Colorado resort ground transportation company during the year ended July 31, 2020, which was recorded within asset impairments on the Company’s Consolidated Statement of Operations, with a corresponding reduction to goodwill, net of $ 25.7 million and to intangible assets, net and property, plant and equipment, net of $ 2.7 million . See Note 8, Supplementary Balance Sheet Information, for additional information. The Company determined that there were no other impairments of goodwill, definite and indefinite-lived assets for the years ended July 31, 2020, and that there was no impairment to goodwill and no material impairment to definite or indefinite-lived intangible assets for the years ended July 31, 2019 and 2018 . Long-lived Assets — The Company evaluates potential impairment of long-lived assets and long-lived assets to be disposed of whenever events or changes in circumstances indicate that the net carrying amount of an asset may not be fully recoverable. If the sum of the expected cash flows, on an undiscounted basis, is less than the net carrying amount of the asset, an impairment loss is recognized in the amount by which the net carrying amount of the asset exceeds its estimated fair value. As discussed above, the Company recorded an impairment to long-lived assets related to its Colorado resort ground transportation company during the year ended July 31, 2020. The Company determined that there were no other impairments of long-lived assets for the year ended July 31, 2020, and determined there was no impairment of the net carrying amount of a long-lived asset occurred during the years ended July 31, 2019 and 2018 . Revenue Recognition — The Company’s significant accounting policies with regard to revenue recognition are discussed in Note 3, Revenues. Real Estate Cost of Sales — Costs of real estate transactions include direct project costs, common cost allocations (primarily determined on relative sales value) and sales commission expense. The Company utilizes the relative sales value method to determine cost of sales for condominium units sold within a project when specific identification of costs cannot be reasonably determined. Foreign Currency Translation — The functional currency of the Company’s entities operating outside of the United States is the principal currency of the economic environment in which the entity primarily generates and expends cash, which is generally the local currency. The assets and liabilities of these foreign operations are translated at the exchange rate in effect as of the balance sheet dates. Income and expense items are translated using the weighted average exchange rate for the period. Translation adjustments from currency exchange, including intercompany transactions of a long-term nature, are recorded in accumulated other comprehensive loss as a separate component of stockholders’ equity. Intercompany transactions that are not of a long-term nature are reported as gains and losses within “segment operating expense” and for intercompany loans within foreign currency loss on intercompany loans on the Company’s Consolidated Statements of Operations. Reserve Estimates — The Company uses estimates to record reserves for certain liabilities, including medical claims, workers’ compensation claims, third-party loss contingencies and property taxes, among other items. The Company estimates the probable costs related to these liabilities that will be incurred and records that amount as a liability in its Consolidated Financial Statements. 79 Additionally, the Company records, as applicable, receivables related to insurance recoveries for loss contingencies if deemed probable of recovery. These estimates are reviewed and adjusted as the facts and circumstances change. The Company records legal costs related to defending claims as incurred. Advertising Costs — Advertising costs are expensed at the time such advertising commences. Advertising expense for the years ended July 31, 2020 , 2019 and 2018 was $ 41.6 million , $ 44.6 million and $ 39.8 million , respectively, and was recorded within Mountain and Lodging operating expenses on the Company’s Consolidated Statement of Operations. Income Taxes — Income tax expense includes U.S. tax (federal and state) and foreign income taxes. The Company’s provision for income taxes is based on pre-tax income, changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying Consolidated Balance Sheets and for operating loss and tax credit carrybacks or carryforwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. The Company’s deferred tax assets have been reduced by a valuation allowance to the extent it is deemed to be more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes 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” to be sustained, on audit, including resolution of related appeals or litigation processes, if any. The second step requires the Company to estimate and measure the largest tax benefit that is cumulatively greater than 50% likely of being realized upon ultimate settlement. Interest and penalties accrued in connection with uncertain tax positions are recognized as a component of income tax expense. See Note 11 “Income Taxes” for more information. Fair Value of Financial Instruments — The recorded amounts for cash and cash equivalents, restricted cash, receivables, other current assets and accounts payable and accrued liabilities approximate fair value due to their short-term nature. The fair value of amounts outstanding under the Company’s credit agreements and the Employee Housing Bonds (as defined in Note 6, Long-Term Debt) approximate book value due to the variable nature of the interest rate, which is a market rate, associated with the debt. The estimated fair value of the 6.25% Notes (as defined in Note 6, Long-Term Debt) is based on quoted market prices (a Level 2 input). The estimated fair value of the EPR Secured Notes and EB-5 Development Notes (each as defined in Note 6, Long-Term Debt), have been estimated using analyses based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 2 input). The carrying values, including any unamortized premium or discount, and estimated fair values of the 6.25% Notes, EPR Secured Notes and EB-5 Development Notes as of July 31, 2020 are presented below (in thousands): July 31, 2020 Carrying Value Estimated Fair Value 6.25% Notes $ 600,000 $ 643,500 EPR Secured Notes $ 137,314 $ 150,628 EB-5 Development Notes $ 47,833 $ 47,212 Stock-Based Compensation — Stock-based compensation expense is measured at the grant date based upon the estimated fair value of the award and is recognized as expense over the applicable vesting period of the award generally using the straight-line method (see Note 17 “Stock Compensation Plan” for more information), less the amount of forfeited awards which are recorded as they occur. The following table shows total net stock-based compensation expense for the years ended July 31, 2020 , 2019 and 2018 included in the Consolidated Statements of Operations (in thousands): Year Ended July 31, 2020 2019 2018 Mountain stock-based compensation expense $ 17,410 $ 16,474 $ 15,716 Lodging stock-based compensation expense 3,399 3,219 3,215 Real Estate stock-based compensation expense 212 163 109 Pre-tax stock-based compensation expense 21,021 19,856 19,040 Less: benefit from income taxes 5,027 4,589 5,406 Net stock-based compensation expense $ 15,994 $ 15,267 $ 13,634 Concentration of Credit Risk — The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and restricted cash. The Company places its cash and temporary cash investments in high- 80 quality credit institutions. The Company does not enter into financial instruments for trading or speculative purposes. Concentration of credit risk with respect to accounts and notes receivables is limited due to the wide variety of customers and markets in which the Company transacts business, as well as their dispersion across many geographical areas. The Company performs ongoing credit evaluations of its customers and generally does not require collateral, but does require advance deposits on certain transactions. Accounting for Hedging Instruments — From time to time, the Company enters into interest rate swaps (the “Interest Rate Swaps”) to hedge the variability in cash flows associated with variable-rate borrowings by converting the floating interest rate to a fixed interest rate. As of July 31, 2020, the Company hedged the future cash flows associated with $ 400.0 million of the principal amount outstanding of its Vail Holdings Credit Agreement (as defined in Note 6 “Long-Term Debt”), which were designated as cash flow hedges. The accounting for changes in fair value of hedging instruments depends on the effectiveness of the hedge. In order to qualify for hedge accounting, the underlying hedged item must expose the Company to risks associated with market fluctuations and the financial instrument used must reduce the Company’s exposure to market fluctuation throughout the hedge period. Changes in estimated fair value of the Interest Rate Swaps are recorded within change in estimated fair value of hedging instruments on the Company’s Consolidated Statements of Comprehensive Income, and such change was recorded as a loss of $ 22.5 million during the year ended July 31, 2020. Such amounts are reclassified into interest expense, net from other comprehensive income during the period in which the hedged item affects earnings. As of July 31, 2020, the estimated fair value of the Interest Rate Swaps was a liability of approximately $ 22.5 million and was recorded within other long-term liabilities on the Company’s Consolidated Balance Sheet, and the impact of the underlying cash flows associated with the Interest Rate Swaps are recorded within interest expense, net on the Company’s Consolidated Statements of Operations. See Note 10 “Fair Value Measurements” for more information. Leases — The Company determines if an arrangement is or contains a lease at inception or modification of the arrangement. An arrangement is or contains a lease if there is one or more assets identified and the right to control the use of any identified asset is conveyed to the Company for a period of time in exchange for consideration. Control over the use of an identified asset means the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset. Generally, the Company classifies a lease as a finance lease if the terms of the agreement effectively transfer control of the underlying asset; otherwise, it is classified as an operating lease. For contracts that contain lease and non-lease components, the Company accounts for these components separately. For leases with terms greater than twelve months, the associated lease right-of-use (“ROU”) assets and lease liabilities are recognized at the estimated present value of future lease payments over the lease term at commencement date. The Company’s leases do not provide a readily determinable implicit rate; therefore, the Company uses an estimated incremental borrowing rate to discount the future minimum lease payments. For leases containing fixed rental escalation clauses, the escalators are factored into the determination of future minimum lease payments. The Company includes options to extend a lease when it is reasonably certain that such options will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. See Note 4 “Leases” for more information. Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Recently Issued Accounting Standards Adopted Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842),” which supersedes “Leases (Topic 840).” The standard requires lessees to recognize the assets and liabilities arising from all leases on the balance sheet, including those classified as operating leases under previous accounting guidance, and to disclose key information about leasing arrangements. The standard also allows for an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of twelve months or less. Under the new guidance, lessees are required to recognize a lease liability and an ROU asset on their balance sheets, while lessor accounting is largely unchanged. In July 2018, the FASB released ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” which, among other items, provided an additional and optional transition method. Under this method, an entity initially applies the standard at the adoption date, including the election of certain transition reliefs, and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted ASU No. 2016-02 on August 1, 2019 using the modified retrospective transition method as provided by the standard. In accordance with this transition method, results for reporting periods beginning on August 1, 2019 are presented under the new standard, while prior periods were not adjusted and continue to be reported in accordance with the previously 81 applicable accounting guidance. The Company has elected the package of practical expedients permitted under the transition guidance which allowed the Company to not reassess: (i) whether any existing or expired contracts are or contain leases; (ii) lease classification of any expired or existing leases; or (iii) initial direct costs for any existing leases. The Company has made an accounting policy election to not record leases on the balance sheet with an initial term of twelve months or less. The Company will recognize those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term. Additionally, the Company has elected the practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases. At adoption, the Company was not able to determine the interest rate implicit in its leases; therefore, for existing operating leases, the lease liability was measured using the Company’s estimated incremental borrowing rate. For existing leases, the incremental borrowing rate used was based on the remaining lease term at the adoption date. For leases with minimum lease payments adjusted periodically for inflation, the lease liability was measured using the minimum lease payments adjusted by the inflation index at the adoption date. On August 1, 2019, as a result of adopting the standard, the Company recorded $ 221.8 million of operating ROU assets and $ 254.2 million of related total operating lease liabilities in the Consolidated Balance Sheet (of which $ 219.3 million was included in operating lease liabilities and $ 34.9 million was included in accounts payable and accrued liabilities). As a result of the adoption, the Company reclassified $ 32.4 million of unfavorable lease obligations, deferred rent credits and other related amounts to the operating ROU assets balance, primarily from other long-term liabilities, which reduced the amount recognized as operating ROU assets to $ 221.8 million . The adoption of the new lease standard did not result in a cumulative effect adjustment to beginning retained earnings, and did not materially affect the Company’s Consolidated Statement of Operations or Consolidated Statement of Cash Flows for the year ended July 31, 2020. The Company’s Canyons finance lease was not affected by the implementation of this standard as the arrangement is classified and recorded as a finance lease arrangement under both the previous and new accounting guidance. In April 2020, the FASB issued clarifying guidance on accounting for certain lease concessions related to the effects of the COVID-19 pandemic under ASC Topic 842, allowing companies to make an election to either account for such lease concessions (i) in the period that they occur as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract) or (ii) ratably over the remainder of the lease term as modifications to the contract. The Company made a policy election to account for such lease concessions as though enforceable rights and obligations to make those concessions existed in the contracts and as a result, will account for concessions in the period in which they occur. This election did not have a material impact on the Company’s Consolidated Financial Statements for the year ended July 31, 2020. Standards Being Evaluated In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional transition guidance, for a limited time, to companies that have contracts, hedging relationships or other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate which is expected to be discontinued because of reference rate reform. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met. The amendments in this update are effective as of March 12, 2020 through December 31, 2022. The amendments in this update may be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. All other amendments should be applied on a prospective basis. The Company is in the process of evaluating the effect that the adoption of this standard will have on its Consolidated Financial Statements. 3. Revenues Revenue Recognition The following provides information about the Company’s composition of revenue recognized from contracts with customers and other revenues, the performance obligations under those contracts, and the significant judgments made in accounting for those contracts: • Mountain revenue is derived from a wide variety of sources, including, among other things: lift revenue, which includes sales of lift tickets and pass products; ski school revenue, which includes the revenue derived from ski school operations; dining revenue, which includes both casual and fine dining on-mountain operations; retail sales and equipment rentals; and other on-mountain revenue, which includes private ski club revenue (which includes both club dues and amortization of initiation fees), marketing and internet advertising revenue, municipal services and lodging and transportation operations at the Company’s Australian ski areas. Revenue is recognized over time as performance obligations are satisfied 82 as control of the good or service (e.g. access to ski areas, provision of ski school services, etc.) is transferred to the customer, except for the Company’s retail sales and dining operations revenues which are recognized at a point in time when performance obligations are satisfied by transferring control of the underlying goods to the customer. The Company records deferred revenue primarily related to the sale of pass products. Deferred revenue is generally recognized throughout the ski season as the Company’s performance obligations are satisfied as control of the service (e.g. access to ski areas throughout the ski season) is transferred to the customer. Transfer of control is based on an estimated number of pass product holder visits relative to total expected visits. Total expected visits are estimated based on historical data, and the Company believes this estimate provides a faithful depiction of its customers’ pass product usage. When sufficient historical data to determine usage patterns is not available, such as in the case of new product offerings, deferred revenue is recognized on a straight-line basis throughout the ski season until sufficient historical usage patterns are available. The Company also includes other sources of revenue, primarily related to commercial leasing and employee housing leasing arrangements, within other mountain revenue. • Lodging revenue is derived from a wide variety of sources, including, among other things: revenue from owned hotel rooms and managed hotel rooms; revenue from hotel dining operations; transportation revenue which relates to the Company’s Colorado resort ground transportation operations; and other lodging revenue which includes property management services, managed properties other costs reimbursements, private golf club revenue (which includes both club dues and amortization of initiation fees), and golf course fees. Lodging revenue also includes managed hotel property payroll cost reimbursements related to payroll costs at managed properties where the Company is the employer, which are reimbursed by the owner with no added margin. Therefore, these revenues and corresponding expenses have no net effect on the Company’s operating income or net income. Other than revenue from dining operations, lodging revenue is mostly recognized over time as performance obligations are satisfied as control of the service (e.g. nightly hotel room access) is transferred to the customer. • Real estate revenue primarily relates to the sale of development land parcels. Real estate revenue is generally recognized at a point in time when performance obligations have been satisfied, which is usually upon closing of the sales transaction and in an amount that reflects the consideration to which the Company expects to be entitled. For certain contracts that have an original term length of one year or less, the Company uses the practical expedient applicable to such contracts and does not consider the time value of money. For contracts with an expected term in excess of one year, the Company has considered the provisions of Topic 606 in determining whether contracts contain a financing component. The Company presents revenues in the accompanying Consolidated Statements of Operations, net of taxes, when collected from its customers that are remitted or payable to government taxing authorities, except when products are inclusive of taxes where applicable. As a result of the COVID-19 pandemic, the Company closed its North American destination mountain resorts, regional ski areas and retail stores beginning on March 15, 2020. To encourage the Company’s pass product holders to renew their pass purchases for next season following the closures this past spring, the Company announced a credit offer on April 27, 2020 for existing 2019/2020 North American ski season pass product holders to purchase 2020/2021 North American ski season pass products at a discount (the “Credit Offer”). The Credit Offer discounts range from a minimum of 20% to a maximum of 80% for 2019/2020 season pass holders, depending on the number of days the pass holder used their pass product during the 2019/2020 North American ski season and a credit, with no minimum, but up to 80% for multi-day pass products, such as the Epic Day Pass, based on total unused days. For accounting purposes, the Credit Offer constituted a material right to existing 2019/2020 pass product holders to which the Company allocated a transaction price of approximately $ 120.9 million . As a result, the Company deferred $ 120.9 million of pass product revenue, which would have been recognized as lift revenue during the year ended July 31, 2020. The Company expects to recognize the revenue associated with the Credit Offer in the second and third fiscal quarters of the fiscal year ending July 31, 2021 or the second and third fiscal quarters of the fiscal year ending July 31, 2022. While the Company expects most of this revenue to be recognized during Fiscal 2021, in the event that a pass holder obtains a refund under Epic Coverage for the 2020/2021 ski season and is eligible to utilize their credit toward the purchase of a pass product for the 2021/2022 ski season, a portion of this deferred revenue and related deferred cost will be recognized in Fiscal 2022. In addition, as a result of the pass product revenue deferral, the Company also deferred approximately $ 2.9 million of the associated costs of obtaining a contract (primarily credit card processing fees), which will be recognized commensurate with the associated deferred revenue. The Company estimated the standalone selling price of the Credit Offer by utilizing historical pass holder renewal data to estimate the total amount of credits that are expected to be redeemed. Estimates and assumptions made regarding expected renewal rates impacted the estimate of the transaction price allocated to the Credit Offer and could vary materially from the amount of revenue deferred depending upon actual customer redemptions. 83 Disaggregation of Revenues The following table presents net revenues disaggregated by segment and major revenue type for the years ended July 31, 2020, 2019 and 2018 (in thousands): Year Ended July 31, 2020 2019 2018 Mountain net revenue: Lift $ 913,091 $ 1,033,234 $ 880,293 Ski School 189,131 215,060 189,910 Dining 160,763 181,837 161,402 Retail/Rental 270,299 320,267 296,466 Other 177,159 205,803 194,851 Total Mountain net revenue $ 1,710,443 $ 1,956,201 $ 1,722,922 Lodging net revenue: Owned hotel rooms $ 44,992 $ 64,826 $ 65,252 Managed condominium rooms 76,480 86,236 70,198 Dining 38,252 53,730 48,554 Transportation 15,796 21,275 21,111 Golf 17,412 19,648 18,110 Other 44,933 54,617 47,577 237,865 300,332 270,802 Payroll cost reimbursements 10,549 14,330 13,841 Total Lodging net revenue $ 248,414 $ 314,662 $ 284,643 Total Resort net revenue $ 1,958,857 $ 2,270,863 $ 2,007,565 Total Real Estate net revenue 4,847 712 3,988 Total net revenue $ 1,963,704 $ 2,271,575 $ 2,011,553 Arrangements with Multiple Performance Obligations Several of the Company’s contracts with customers include multiple performance obligations, primarily related to bundled services such as ski school packages, lodging packages and events (e.g. weddings and conferences). For such contracts, revenue is allocated to each distinct and separate performance obligation based on its relative standalone selling price. The standalone selling prices are generally based on observable prices charged to customers or estimated based on historical experience and information. Contract Balances Contract liabilities are recorded primarily as deferred revenues when payments are received or due in advance of the Company’s performance, including amounts which may be refundable. The deferred revenue balance is primarily related to accounts receivable or cash payments recorded in advance of satisfying the Company’s performance obligations related to sales of pass products prior to the start of the ski season, private club initiation fees and other related advance purchase products, including advance purchase lift tickets, multiple-day lift tickets, ski school lessons, equipment rentals and lodging advance deposits. Due to the seasonality of the Company’s operations, its largest deferred revenue balances occur during the North American pass product selling window, which generally begins in the fourth quarter of its fiscal year. Deferred revenue balances of a short-term nature were $ 256.4 million and $ 335.7 million as of July 31, 2020 and 2019, respectively. Deferred revenue balances of a long-term nature, comprised primarily of long-term private club initiation fee revenue, were $ 121.9 million and $ 124.3 million as of July 31, 2020 and 2019, respectively. For the year ended July 31, 2020, the Company recognized approximately $ 266.5 million of revenue that was included in the deferred revenue balance as of July 31, 2019. As of July 31, 2020, the weighted average remaining period over which revenue for unsatisfied performance obligations on long-term private club contracts will be recognized was approximately 16 years. Contract assets are recorded as trade receivables when the right to consideration is unconditional. Trade receivable balances were $ 106.7 million and $ 270.9 million as of July 31, 2020 and 2019, respectively. Payments from customers are based on billing terms established in the contracts with customers, which vary by the type of customer, the location and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, contracts require payment before the products are delivered or services are provided to the customer. Impairment losses related 84 to contract assets are recognized through the Company’s allowance for doubtful accounts analysis. Contract asset write-offs are evaluated on an individual basis. Costs to Obtain Contracts with Customers The Company expects that credit card fees and sales commissions paid in order to obtain season ski pass products contracts are recoverable. Accordingly, the Company records these amounts as assets when they are paid prior to the start of the ski season. As of July 31, 2020, $ 3.5 million of costs to obtain contracts with customers were recorded within other current assets on the Company’s Consolidated Balance Sheet. Deferred credit card fees and sales commissions are amortized commensurate with the recognition of season ski pass revenue. The Company recorded amortization of $ 11.0 million , $ 10.6 million and $ 8.3 million for these costs during the years ended July 31, 2020, 2019 and 2018, respectively, which were recorded within Mountain and Lodging operating expenses on the Company’s Consolidated Statement of Operations. Utilizing the practical expedient provided for under Topic 606, the Company has elected to expense credit card fees and sales commissions related to non-season ski pass products and services as incurred, as the amortization period is generally one year or less for the time between customer purchase and utilization. These fees are recorded within Mountain and Lodging operating expenses on the Company’s Consolidated Statements of Operations. 4. Leases The Company’s operating leases consist primarily of commercial and retail space, office space, employee residential units, vehicles and other equipment. The Company determines if an arrangement is or contains a lease at contract inception or modification. The Company’s lease contracts generally range from 1 year to 60 years , with some lease contracts containing one or more lease extension options, exercisable at the Company’s discretion. The Company generally does not include these lease extension options in the initial lease term as it is not reasonably certain that it will exercise such options at contract inception. In addition, certain lease arrangements contain fixed and variable lease payments. The variable lease payments are primarily contingent rental payments based on: (i) a percentage of revenue related to the leased property; (ii) payments based on a percentage of sales over contractual levels; or (iii) lease payments adjusted for changes in an index or market value. These variable lease payments are typically recognized when the underlying event occurs and are included in operating expenses in the Company’s Consolidated Statements of Operations in the same line item as the expense arising from fixed lease payments. The Company’s lease agreements may also include non-lease components, such as common area maintenance and insurance, which are accounted for separately. Future lease payments that are contingent and non-lease components are not included in the measurement of the operating lease liability. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants. Lease expense related to lease payments is recognized on a straight-line basis over the term of the lease. The Company’s leases do not provide a readily determinable implicit rate. As a result, the Company measures the lease liability using an estimated incremental borrowing rate which is intended to reflect the rate of interest the Company would pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The Company applies the estimated incremental borrowing rates at a portfolio level based on the economic environment associated with the lease. The Company uses the long-lived assets impairment guidance to determine recognition and measurement of an ROU asset impairment, if any. The Company monitors for events or changes in circumstances that require a reassessment. The components of lease expense for the year ended July 31, 2020 , were as follows (in thousands): Year Ended July 31, 2020 Finance leases: Amortization of the finance ROU assets $ 9,753 Interest on lease liabilities $ 34,035 Operating leases: Operating lease expense $ 43,303 Short-term lease expense (1) $ 13,943 Variable lease expense $ 1,583 (1) Short-term lease expense is attributable to leases with terms of 12 months or less which are not included within the Company’s Consolidated Balance Sheet. 85 The following table presents the supplemental cash flow information associated with the Company’s leasing activities for the year ended July 31, 2020 (in thousands): Year Ended July 31, 2020 Cash flow supplemental information: Operating cash outflows for operating leases $ 55,344 Operating cash outflows for finance leases $ 29,311 Financing cash outflows for finance leases $ 5,387 Non-cash supplemental information: Operating ROU assets obtained in exchange for operating lease obligations $ 18,013 Weighted-average remaining lease terms and discount rates are as follows: As of July 31, 2020 Weighted-average remaining lease term (in years) Operating leases 10.6 Finance leases 42.9 Weighted-average discount rate Operating leases 4.5 % Finance leases 10.0 % Future lease payments for operating and finance leases as of July 31, 2020 reflected by fiscal year (August 1 through July 31) are as follows (in thousands): Operating Leases Finance Leases 2021 $ 47,013 $ 28,818 2022 43,699 29,394 2023 38,353 29,982 2024 34,431 30,582 2025 32,405 31,193 Thereafter 137,501 1,773,855 Total future minimum lease payments 333,402 1,923,824 Less amount representing interest ( 79,256 ) ( 1,577,790 ) Total lease liabilities $ 254,146 $ 346,034 The current portion of operating lease liabilities of approximately $ 36.6 million as of July 31, 2020 is recorded within accounts payables and accrued liabilities in the Consolidated Balance Sheet. Finance lease liabilities are recorded within long-term debt, net in the Consolidated Balance Sheets. 86 Future minimum lease payments in accordance with Topic 840 as of July 31, 2019, reflected by fiscal year (August 1 through July 31), were as follows (in thousands): Operating Leases Capital Leases 2020 $ 44,984 $ 28,253 2021 42,512 28,818 2022 39,440 29,394 2023 34,840 29,982 2024 30,836 30,582 Thereafter 142,526 1,805,048 Total future minimum lease payments 335,138 1,952,077 Less amount representing interest — ( 1,611,816 ) Net future minimum lease payments $ 335,138 $ 340,261 The Canyons finance lease obligation represents the only material finance lease entered into by the Company and was $ 346.0 million as of July 31, 2020 , which represents the estimated annual lease payments for the remaining initial 50 year term of the lease assuming annual increases at the floor of 2% and discounted using an interest rate of 10% . As of July 31, 2020 , the Company has recorded $ 117.8 million of finance lease ROU assets in connection with the Canyons lease, net of $ 65.8 million of accumulated amortization, which is included within property, plant and equipment, net in the Company’s Consolidated Balance Sheet. 5. Net Income Per Common Share Earnings per Share Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income attributable to Vail Resorts stockholders by the weighted-average shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, resulting in the issuance of shares of common stock that would then share in the earnings of Vail Resorts. In connection with the Company’s acquisition of Whistler Blackcomb in October 2016 (see Note 7, Acquisitions), the Company issued consideration in the form of shares of Vail Resorts common stock (the “Vail Shares”) and shares of the Company’s wholly-owned Canadian subsidiary (“Exchangeco”). Whistler Blackcomb shareholders elected to receive 3,327,719 Vail Shares and 418,095 shares of Exchangeco (the “Exchangeco Shares”). Both Vail Shares and Exchangeco Shares have a par value of $ 0.01 per share, and Exchangeco Shares, while outstanding, are substantially the economic equivalent of the Vail Shares and are exchangeable, at any time prior to the seventh anniversary of the closing of the acquisition, into Vail Shares. The Company’s calculation of weighted-average shares outstanding includes the Exchangeco Shares. Presented below is basic and diluted EPS for the years ended July 31, 2020 , 2019 and 2018 (in thousands, except per share amounts): Year Ended July 31, 2020 2019 2018 Basic Diluted Basic Diluted Basic Diluted Net income per share: Net income attributable to Vail Resorts $ 98,833 $ 98,833 $ 301,163 $ 301,163 $ 379,898 $ 379,898 Weighted-average shares outstanding 40,227 40,227 40,292 40,292 40,337 40,337 Weighted-average Exchangeco shares outstanding 46 46 57 57 60 60 Total Weighted-average shares outstanding 40,273 40,273 40,349 40,349 40,397 40,397 Effect of dilutive securities — 565 — 809 — 1,221 Total shares 40,273 40,838 40,349 41,158 40,397 41,618 Net income per share attributable to Vail Resorts, Inc. $ 2.45 $ 2.42 $ 7.46 $ 7.32 $ 9.40 $ 9.13 The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. The number of shares issuable on the exercise of share based awards that were excluded from the calculation of diluted net income per share because the effect of their inclusion would have been anti-dilutive totaled approximately 2,000 , 4,000 and 2,000 for the years ended July 31, 2020 , 2019 and 2018 , respectively. 87 Dividends For the year ended July 31, 2020 , the Company paid cash dividends of $ 5.28 per share ( $ 212.7 million in the aggregate). The Company announced on April 1, 2020 that it would be suspending its quarterly dividend for at least the next two quarters, and will be subject to a dividend limitation under the Financial Covenants Temporary Waiver Period of the Vail Holdings Credit Agreement (as defined in Note 6, Long-Term Debt). 6. Long-Term Debt Long-term debt as of July 31, 2020 and 2019 is summarized as follows (in thousands): Maturity July 31, 2020 July 31, 2019 Vail Holdings Credit Agreement revolver (a) 2024 $ — $ 208,000 Vail Holdings Credit Agreement term loan (a) 2024 1,203,125 914,375 6.25% Notes (b) 2025 600,000 — Whistler Credit Agreement revolver (c) 2024 58,236 45,454 EPR Secured Notes (d) 2034-2036 114,162 — EB-5 Development Notes (e) 2021 51,500 — Employee housing bonds (f) 2027-2039 52,575 52,575 Canyons obligation (g) 2063 346,034 340,261 Other (h) 2020-2033 18,616 19,465 Total debt 2,444,248 1,580,130 Less: Unamortized premiums, discounts and debt issuance costs (i) ( 6,551 ) 3,870 Less: Current maturities (j) 63,677 48,516 Long-term debt, net $ 2,387,122 $ 1,527,744 (a) On September 23, 2019, in order to fund the acquisition of Peak Resorts, Inc. (“Peak Resorts”), which included the prepayment of certain portions of the outstanding debt and lease obligations of Peak Resorts contemporaneous with the closing of the transaction (see Note 7, Acquisitions), the Company’s wholly-owned subsidiary, Vail Holdings, Inc. (“VHI”), entered into the Second Amendment to the Eighth Amended and Restated Credit Agreement (the “Vail Holdings Credit Agreement”), with Bank of America, N.A., as administrative agent, and other lenders named therein, through which those lenders agreed to provide an additional $ 335.6 million in incremental term loans and agreed, on behalf of all lenders, to extend the maturity date for the outstanding term loans and revolver facility under the Vail Holdings Credit Agreement to September 23, 2024. No other material terms of the Vail Holdings Credit Agreement were altered under the amendment. On April 28, 2020, VHI, certain subsidiaries of the Company, as guarantors, Bank of America, N.A., as administrative agent, and certain Lenders entered into a Third Amendment to the Vail Holdings Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, among other terms, VHI is exempt from complying with the Vail Holdings Credit Agreement’s maximum leverage ratio and minimum interest coverage ratio financial maintenance covenants for each of the fiscal quarters ending July 31, 2020 through January 31, 2022 (unless VHI makes a one-time irrevocable election to terminate such exemption period prior to such date) (such period, the “Financial Covenants Temporary Waiver Period”), after which VHI will again be required to comply with such covenants starting with the fiscal quarter ending April 30, 2022 (or such earlier fiscal quarter as elected by VHI). After the expiration of the Financial Covenants Temporary Waiver Period: • the maximum leverage ratio permitted under the maximum leverage ratio financial maintenance covenant reduces each quarter as follows: (A) first full fiscal quarter: 6.25 to 1.00; (B) second full fiscal quarter: 5.75 to 1.00; (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. 88 In addition, VHI is required to comply with a monthly minimum liquidity test (liquidity is defined as unrestricted cash and temporary cash investments of VRI and its restricted subsidiaries and available commitments under the Vail Holdings Credit Agreement revolver) of not less than $ 150.0 million , during the period that began on July 31, 2020 and ending on the date VHI delivers a compliance certificate for the Company and its subsidiaries’ first fiscal quarter following the end of the Financial Covenants Temporary Waiver Period. The Company is prohibited from the following activities during the Financial Covenants Temporary Waiver Period (unless approval is obtained by a majority of the Lenders): • paying any dividends or making share repurchases, unless (x) no default or potential default exists under the Vail Holdings Credit Agreement and (y) the Company has liquidity (as defined above) of at least $ 400.0 million , and the aggregate amount of dividends paid and share repurchases made by the Company during the Financial Covenants Temporary Waiver Period may not exceed $ 38.2 million in any fiscal quarter; • making capital expenditures in excess of $ 200.0 million per 12-month period ending January 31, other than non-recurring extraordinary capital expenditures incurred in connection with emergency repairs, life safety repairs or ordinary course maintenance repairs; • incurring any indebtedness secured by the collateral under the Vail Holdings Credit Agreement other than pursuant to the existing revolving commitments under the Credit Agreement; • making non-ordinary course investments in unrestricted subsidiaries unless the Company has liquidity (as defined above) of at least $ 300.0 million ; • making investments in non-subsidiaries in excess of $ 50.0 million in the aggregate; 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, bear interest annually at LIBOR plus 2.50% and, for amounts in excess of $400.0 million, LIBOR is subject to a floor of 0.75%. In addition, pursuant to the Third Amendment, the amount by which we are able to increase availability (under the revolver or in the form of term loans) was increased to an aggregate principal amount not to exceed the greater of (i) $ 2.25 billion and (ii) the product of 3.25 and the trailing four-quarter Adjusted EBITDA (as defined in the Credit Agreement). As of July 31, 2020 , the Vail Holdings Credit Agreement consists of a $ 500.0 million revolving credit facility and a $ 1.2 billion outstanding term loan facility. The term loan facility is subject to quarterly amortization of principal of approximately $ 15.6 million (which began in January 2020), in equal installments, for a total of 5% of principal payable in each year and the final payment of all amounts outstanding, plus accrued and unpaid interest due in September 2024. The proceeds of the loans made under the Vail Holdings Credit Agreement may be used to fund the Company’s working capital needs, capital expenditures, acquisitions, investments and other general corporate purposes, including the issuance of letters of credit, subject to the Financial Covenants Temporary Waiver Period limitations, as discussed above. Borrowings under the Vail Holdings Credit Agreement, including the term loan facility, bear interest annually at LIBOR plus 2.50% as of July 31, 2020 ( 2.66 % as of July 31, 2020 for $400.0 million of borrowings, and for amounts in excess of $400.0 million in which LIBOR is subject to a floor of 0.75% during the Financial Covenants Temporary Waiver Period, 3.25 % as of July 31, 2020 ). Other than as impacted by the provisions in place during the Financial Covenants Temporary Waiver Period, interest rate margins may fluctuate based upon the ratio of the Company’s Net Funded Debt to Adjusted EBITDA on a trailing four-quarter basis. The Vail Holdings Credit Agreement also includes a quarterly unused commitment fee, which is equal to a percentage determined by the Net Funded Debt to Adjusted EBITDA ratio, as each such term is defined in the Vail Holdings Credit Agreement, multiplied by the daily amount by which the Vail Holdings Credit Agreement commitment exceeds the total of outstanding loans and outstanding letters of credit ( 0.4 % as of July 31, 2020 ). During the year ended July 31, 2020 , the Company entered into various interest rate swap agreements to hedge the LIBOR-based variable interest rate component of underlying cash flows of $ 400.0 million in principal amount of its Vail Holdings Credit Agreement for the remaining term of the agreement at an effective rate of 1.46 % . (b) On May 4, 2020, the Company completed its offering of $ 600 million aggregate principal amount of 6.25 % senior notes due 2025 at par (the “Notes”), and a portion of the net proceeds were utilized to pay down the outstanding balance of the revolver component of its Vail Holdings Credit Agreement in its entirety (which will continue to be available to the Company to borrow including throughout the Financial Covenants Temporary Waiver Period) and to pay the fees and expenses associated with the offering, with the remaining net proceeds intended to be used for general corporate purposes. The Company will pay interest on the Notes on May 15 and November 15 of each year commencing on November 15, 2020. The Notes will mature on May 15, 2025. The Notes are redeemable, in whole or in part, at any time on or after May 15, 2022 89 at the redemption prices specified in an Indenture dated as of May 4, 2020 (the “Indenture”) plus accrued and unpaid interest. Prior to May 15, 2022, the Company may redeem some or all of the Notes at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, plus a “make-whole” premium as specified in the Indenture. In addition, prior to May 15, 2022, the Company may redeem up to 35% of the aggregate principal amount of the Notes with an amount not to exceed the net cash proceeds from certain equity offerings at the redemption price of 106.25% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Notes are senior unsecured obligations of the Company, are guaranteed by certain of the Company’s domestic subsidiaries, and rank equally in right of payment with existing and future senior indebtedness of the Company and the guarantors (as defined in the Indenture). The Indenture requires that, upon the occurrence of a Change of Control (as defined in the Indenture), the Company shall offer to purchase all of the outstanding Notes at a purchase price in cash equal to 101% of the outstanding principal amount of the Notes, plus accrued and unpaid interest. If the Company or certain of its subsidiaries dispose of assets, under certain circumstances, the Company will be required to either invest the net cash proceeds from such assets sales in its business within a specified period of time, repay certain senior secured debt or debt of its non-guarantor subsidiaries, or make an offer to purchase a principal amount of the Notes equal to the excess net cash proceeds at a purchase price of 100% of their principal amount, plus accrued and unpaid interest. The Indenture contains covenants that, among other things, restrict the ability of the Company and the guarantors to incur liens on assets; merge or consolidate with another company or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company’s assets or engage in Sale and Leaseback Transactions (as defined in the Indenture). The Indenture does not contain any financial maintenance covenants. Certain of the covenants will not apply to the Notes so long as the Notes have investment grade ratings from two specified rating agencies and no event of default has occurred and is continuing under the Indenture. The Indenture includes customary events of default, including failure to make payment, failure to comply with the obligations set forth in the Indenture, certain defaults on certain other indebtedness, certain events of bankruptcy, insolvency or reorganization, and invalidity of the guarantees of the Notes issued pursuant to the Indenture. (c) Whistler Mountain Resort Limited Partnership (“Whistler LP”) and Blackcomb Skiing Enterprises Limited Partnership (“Blackcomb LP”), together “The WB Partnerships,” are party to a credit agreement, dated as of November 12, 2013 (as amended, the “Whistler Credit Agreement”), by and among Whistler LP, Blackcomb LP, certain subsidiaries of Whistler LP and Blackcomb LP party thereto as guarantors (the “Whistler Subsidiary Guarantors”), the financial institutions party thereto as lenders and The Toronto-Dominion Bank, as administrative agent. The Whistler Credit Agreement consists of a C$ 300.0 million revolving credit facility, and during the year ended July 31, 2020, the Company entered into an amendment of the Whistler Credit Agreement which extended the maturity date of the revolving credit facility to December 15, 2024 . No other material terms of the Whistler Credit Agreement were altered. The WB Partnerships’ obligations under the Whistler Credit Agreement are guaranteed by the Whistler Subsidiary Guarantors and are collateralized by a pledge of the capital stock of the Whistler Subsidiary Guarantors and a pledge of substantially all of the assets of Whistler LP, Blackcomb LP and the Whistler Subsidiary Guarantors. In addition, pursuant to the terms of the Whistler Credit Agreement, the WB Partnerships have the ability to increase the commitment amount by up to C$75.0 million, subject to lender approval. Borrowings under the Whistler Credit Agreement are available in Canadian or U.S. dollars and bear interest annually, subject to an applicable margin based on the WB Partnerships’ Consolidated Total Leverage Ratio (as defined in the Whistler Credit Agreement), with pricing as of July 31, 2020, in the case of borrowings (i) in Canadian dollars, at the WB Partnerships’ option, either (a) at the Canadian Prime Rate plus 1.25% per annum or (b) by way of the issuance of bankers’ acceptances plus 2.25% per annum; and (ii) in U.S. dollars, at the WB Partnerships option, either at (a) the U.S. Base Rate plus 1.25% per annum or (b) Bankers Acceptance Rate plus 2.25% per annum . As of July 31, 2020 , all borrowings under the Whistler Credit Agreement were made in Canadian dollars and by way of the issuance of bankers’ acceptances plus 2.25% (approximately 2.79 % as of July 31, 2020 ). The Whistler Credit Agreement also includes a quarterly unused commitment fee based on the Consolidated Total Leverage Ratio, which as of July 31, 2020 is equal to 0.5063 % per annum. The Whistler Credit Agreement provides for affirmative and negative covenants that restrict, among other things, the WB Partnerships’ ability to incur indebtedness and liens, dispose of assets, make capital expenditures, make distributions and make investments. In addition, the Whistler Credit Agreement includes the restrictive financial covenants (leverage ratios and interest coverage ratios) customary for facilities of this type. (d) On September 24, 2019, in conjunction with the acquisition of Peak Resorts (see Note 7, Acquisitions), the Company assumed various secured borrowings (the “EPR Secured Notes”) under the master credit and security agreements and other related agreements, as amended, (collectively, the “EPR Agreements”) with EPT Ski Properties, Inc. and its affiliates (“EPR”). The EPR Secured Notes include the following: i. The Alpine Valley Secured Note. The $ 4.6 million Alpine Valley Secured Note provides for interest payments through its maturity on December 1, 2034. As of July 31, 2020 , interest on this note accrued at a rate of 11.21 % . 90 ii. The Boston Mills/Brandywine Secured Note. The $ 23.3 million Boston Mills/Brandywine Secured Note provides for interest payments through its maturity on December 1, 2034. As of July 31, 2020 , interest on this note accrued at a rate of 10.75 % . iii. The Jack Frost/Big Boulder Secured Note. The $ 14.3 million Jack Frost/Big Boulder Secured Note provides for interest payments through its maturity on December 1, 2034. As of July 31, 2020 , interest on this note accrued at a rate of 10.75 % . iv. The Mount Snow Secured Note. The $ 51.1 million Mount Snow Secured Note provides for interest payments through its maturity on December 1, 2034. As of July 31, 2020 , interest on this note accrued at a rate of 11.78 % . v. The Hunter Mountain Secured Note. The $ 21.0 million Hunter Mountain Secured Note provides for interest payments through its maturity on January 5, 2036. As of July 31, 2020 , interest on this note accrued at a rate of 8.57 % . The EPR Secured Notes are secured by all or substantially all of the assets of Peak Resorts and its subsidiaries, including mortgages on the Alpine Valley, Boston Mills, Brandywine, Jack Frost, Big Boulder, Mount Snow and Hunter Mountain ski resorts. The EPR Secured Notes bear interest at specified interest rates, as discussed above, which are subject to increase each year by the lesser of (i) three times the percentage increase in the Consumer Price Index or (ii) a capped index (the “Capped CPI Index”), which is 1.75 % for the Hunter Mountain Secured Note and 1.50 % for all other notes. The EPR Agreements provide for affirmative and negative covenants that restrict, among other things, the ability of Peak Resorts and its subsidiaries to incur indebtedness, dispose of assets, make distributions and make investments. In addition, the EPR Agreements include restrictive covenants, including maximum leverage ratio and consolidated fixed charge ratio. An additional contingent interest payment would be due to EPR if, on a calendar year basis, the gross receipts from the properties securing any of the individual EPR Secured Notes (the “Gross Receipts”) are more than the result (the “Interest Quotient”) of dividing the total interest charges for the EPR Secured Notes by a specified percentage rate (the “Additional Interest Rate”). In such a case, the additional interest payment would equal the difference between the Gross Receipts and the Interest Quotient multiplied by the Additional Interest Rate. This calculation is made on an aggregated basis for the notes secured by the Jack Frost, Big Boulder, Boston Mills, Brandywine and Alpine Valley ski resorts, where the Additional Interest Rate is 10.0 % ; on a standalone basis for the note secured by the Company’s Mount Snow ski resort, where the Additional Interest Rate is 12.0 % ; and on a standalone basis for the note secured by the Company’s Hunter Mountain ski resort, where the Additional Interest Rate is 8.0 % . Peak Resorts does not have the right to prepay the EPR Secured Notes. The EPR Secured Notes were recorded at their estimated fair value in conjunction with the acquisition of Peak Resorts on September 24, 2019. The EPR Agreements grant EPR certain other rights including (i) the option to purchase the Boston Mills, Brandywine, Jack Frost, Big Boulder or Alpine Valley resorts, which is exercisable no sooner than two years and no later than one year prior to the maturity dates of the applicable EPR Secured Note for such properties, with any closings to be held on the applicable maturity dates; and, if EPR exercises the purchase option, EPR will enter into an agreement with the Company for the lease of each acquired property for an initial term of 20 years, plus options to extend the lease for two additional periods of ten years each; (ii) a right of first refusal through 2021, subject to certain conditions, to provide all or a portion of the financing associated with any purchase, ground lease, sale/leaseback, management or financing transaction contemplated by Peak Resorts with respect to any new or existing ski resort properties; and (iii) a right of first refusal through 2021 to purchase the Company’s Attitash ski resort in the event the Company were to desire to sell the Attitash ski resort. To date, EPR has not exercised any such purchase options. In addition, Peak Resorts is required to maintain a debt service reserve account which amounts are applied to fund interest payments and other amounts due and payable to EPR. As of July 31, 2020 the Company had funded the EPR debt service reserve account in an amount equal to approximately $ 5.7 million , which was included in other current assets in the Company’s Consolidated Balance Sheet. (e) Peak Resorts serves as the general partner for two limited partnerships, Carinthia Group 1, LP and Carinthia Group 2, LP (together, the “Carinthia Partnerships”), which were formed to raise $ 52.0 million through the Immigrant Investor Program administered by the U.S. Citizenship and Immigration Services (“USCIS”), pursuant to the Immigration and Nationality Act (the “EB-5 Program”). The EB-5 Program was created to stimulate the U.S. economy through the creation of jobs and capital investments in U.S. companies by foreign investors. The program allocates immigrant visas to qualified individuals (“EB-5 Investors”) seeking lawful permanent resident status based on their investment in a U.S commercial enterprise. On December 27, 2016, Peak Resorts borrowed $ 52.0 million from the Carinthia Partnerships to fund two capital projects at Mount Snow. The amounts were borrowed through two loan agreements, which provided $ 30.0 million and $ 22.0 million (together, the “EB-5 Development Notes”). Amounts outstanding under the EB-5 Development Notes accrue simple interest at a fixed rate of 1.0 % per annum until the maturity date, which is December 27, 2021, subject to an extension of up to two additional years at the option of the borrowers, with lender consent. If the maturity date is extended, amounts outstanding under the EB-5 Development Notes will accrue simple interest at a fixed rate of 7.0 % per annum during the first year of extension and a fixed rate of 10.0 % per annum during the second year of extension. Upon an event of default (as defined), amounts outstanding 91 under the EB-5 Development Notes shall bear interest at the rate of 5.0 % per annum, subject to the extension increases. While the EB-5 Development Notes are outstanding, Peak Resorts is restricted from taking certain actions without the consent of the lenders, including, but not limited to, transferring or disposing of the properties or assets financed with loan proceeds. In addition, Peak Resorts is prohibited from prepaying outstanding amounts owed if such prepayment would jeopardize any of the EB-5 Investors from being admitted to the U.S. via the EB-5 Program. (f) The Company has recorded the outstanding debt of four Employee Housing Entities (each an “Employee Housing Entity” and collectively the “Employee Housing Entities”): Breckenridge Terrace, Tarnes, BC Housing and Tenderfoot. The proceeds of the Employee Housing Bonds were used to develop apartment complexes designated primarily for use by the Company’s seasonal employees at its Colorado mountain resorts. The Employee Housing Bonds are variable rate, interest-only instruments with interest rates tied to LIBOR plus 0% to 0.1% ( 0.17 % to 0.27 % as of July 31, 2020 ). Interest on the Employee Housing Bonds is paid monthly in arrears and the interest rate is adjusted weekly. No principal payments are due on the Employee Housing Bonds until maturity. Each Employee Housing Entity’s bonds were issued in two series. The bonds for each Employee Housing Entity are backed by letters of credit issued under the Vail Holdings Credit Agreement. The table below presents the principal amounts outstanding for the Employee Housing Bonds as of July 31, 2020 (in thousands): Maturity (a) Tranche A Tranche B Total Breckenridge Terrace 2039 $ 14,980 $ 5,000 $ 19,980 Tarnes 2039 8,000 2,410 10,410 BC Housing 2027 9,100 1,500 10,600 Tenderfoot 2035 5,700 5,885 11,585 Total $ 37,780 $ 14,795 $ 52,575 (g) On May 24, 2013 , VR CPC Holdings, Inc. (“VR CPC”), a wholly-owned subsidiary of the Company, entered into a transaction agreement with affiliate companies of Talisker Corporation (“Talisker”) pursuant to which the parties entered into a master lease agreement (the “Lease”) and certain ancillary transaction documents on May 29, 2013 related to the former stand-alone Canyons Resort (“Canyons”), pursuant to which the Company assumed the resort operations of the Canyons. The Lease between VR CPC and Talisker has an initial term of 50 years with six 50-year renewal options . The Lease provides for $ 25 million in annual payments, which increase each year by an inflation-linked index of CPI less 1% per annum, with a floor of 2% . Vail Resorts has guaranteed the payments under the Lease. The obligation at July 31, 2020 represents future lease payments for the remaining initial lease term of 50 years (including annual increases at the floor of 2%) discounted using an interest rate of 10 % , and includes accumulated accreted interest expense of approximately $ 40.7 million . (h) During the year ended July 31, 2019, the Company completed two real estate sales transactions that were accounted for as financing arrangements as a result of the Company’s continuing involvement with the underlying assets that were sold, including but not limited to, the obligation to repurchase finished commercial space from the development projects upon completion. The Company received approximately $ 11.2 million of proceeds for these sales transactions during the year ended July 31, 2019, which are reflected within long-term debt, net. Other obligations also consist of a $ 3.6 million note outstanding to the Colorado Water Conservation Board, which matures on September 16, 2028 , and other financing arrangements. Other obligations, including the Colorado Water Conservation Board note, bear interest at rates ranging from 5.1 % to 5.5 % . (i) In connection with the acquisition of Peak Resorts, the Company estimated the acquisition date fair values of the debt instruments assumed, including the EPR Secured Notes and the EB-5 Development Notes, and recorded any difference between such estimated fair values and the par value of debt instruments as unamortized premiums and discounts, which is amortized and recorded to interest expense, net on the Company’s Consolidated Statements of Operations over the respective term of the applicable debt instruments. Additionally, certain costs incurred with regard to the issuance of debt instruments are capitalized and included as a reduction in the net carrying value of long-term debt, net of accumulated amortization, with the exception of costs incurred related to line-of-credit arrangements, which are included in deferred charges and other assets, net of accumulated amortization. Amortization of such deferred financing costs are recorded to interest expense, net on the Company’s Consolidated Statements of Operations over the respective term of the applicable debt instruments (j) Current maturities represent principal payments due in the next 12 months , and exclude approximately $ 6.2 million of proceeds resulting from a real estate transaction accounted for as a financing arrangement, as discussed above, which are expected to be recognized on the Company’s Statement of Operations during the year ending July 31, 2021 as a result of the anticipated resolution of continuing involvement, with no associated cash outflow. 92 Aggregate maturities for debt outstanding, including capital lease obligations, as of July 31, 2020 reflected by fiscal year are as follows (in thousands): Total 2021 (1) $ 69,827 2022 115,195 2023 63,740 2024 63,796 2025 1,612,120 Thereafter 519,570 Total debt $ 2,444,248 (1) Includes approximately $ 6.2 million of proceeds resulting from a real estate transaction accounted for as a financing arrangement, as discussed above, which are expected to be recognized on the Company’s Statement of Operations during the year ending July 31, 2021 as a result of the anticipated resolution of continuing involvement, with no associated cash outflow. The Company recorded interest expense of $ 106.7 million , $ 79.5 million and $ 63.2 million for the years ended July 31, 2020 , 2019 and 2018 , respectively, of which $ 1.9 million , $ 1.3 million and $ 1.3 million , respectively, was amortization of deferred financing costs. The Company was in compliance with all of its financial and operating covenants required to be maintained under its debt instruments for all periods presented. In connection with the acquisition of Whistler Blackcomb, VHI funded a portion of the purchase price through an intercompany loan to Whistler Blackcomb of $ 210.0 million , which was effective as of November 1, 2016 and 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 the Company’s results of operations. The Company recognized approximately $ 3.2 million , $ 2.9 million and $ 9.0 million of non-cash foreign currency loss on the intercompany loan to Whistler Blackcomb during the years ended July 31, 2020, 2019 and 2018, respectively, on the Company’s Consolidated Statements of Operations. 7. Acquisitions Peak Resorts On September 24, 2019, the Company, through a wholly-owned subsidiary, acquired 100% of the outstanding stock of Peak Resorts, Inc. (“Peak Resorts”) at a purchase price of $ 11.00 per share or approximately $ 264.5 million . In addition, contemporaneous with the closing of the transaction, Peak Resorts was required to pay approximately $ 70.2 million of certain outstanding debt instruments and lease obligations in order to complete the transaction. Accordingly, the total purchase price, including the repayment of certain outstanding debt instruments and lease obligations, was approximately $ 334.7 million , for which the Company borrowed approximately $ 335.6 million under the Vail Holdings Credit Agreement (see Note 6, Long-Term Debt) to fund the acquisition, repayment of debt instruments and lease obligations, and associated acquisition related expenses. The newly acquired resorts include: Mount Snow in Vermont; Hunter Mountain in New York; Attitash Mountain Resort, Wildcat Mountain and Crotched Mountain in New Hampshire; Liberty Mountain Resort, Roundtop Mountain Resort, Whitetail Resort, Jack Frost and Big Boulder in Pennsylvania; Alpine Valley, Boston Mills, Brandywine and Mad River Mountain in Ohio; Hidden Valley and Snow Creek in Missouri; and Paoli Peaks in Indiana. The Company assumed the Special Use Permits from the U.S. Forest Service for Attitash, Mount Snow and Wildcat Mountain, and assumed the land leases for Mad River and Paoli Peaks. The acquisition included the mountain operations of the resorts, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities), as well as lodging operations at certain resorts. 93 The following summarizes the purchase consideration and the preliminary purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands): Acquisition Date Estimated Fair Value Current assets $ 19,578 Property, plant and equipment 427,793 Goodwill 135,879 Identifiable intangible assets 19,221 Other assets 16,203 Assumed long-term debt ( 184,668 ) Other liabilities ( 99,275 ) Net assets acquired $ 334,731 During the three months ended July 31, 2020, the Company recorded measurement period adjustments of approximately $ 8.6 million primarily related to the finalization of pre-acquisition period tax returns for Peak Resorts, which decreased deferred income taxes, net (included in other liabilities in the table above) with a corresponding decrease to goodwill, net. Identifiable intangible assets acquired in the transaction were primarily related to trade names and property management contracts, which had acquisition date estimated fair values of approximately $ 15.8 million and $ 3.1 million , respectively. The process of estimating the fair value of the depreciable property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost. The excess of the purchase price over the aggregate estimated fair values of the assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of the resorts and other factors, and is not expected to be deductible for income tax purposes. The Company assumed various debt obligations of Peak Resorts, which were recorded at their respective estimated fair values as of the acquisition date (see Note 6, Long-Term Debt). The Company incurred $ 3.1 million of acquisition related expenses associated with the transaction which were recorded within Mountain and Lodging operating expense in its Consolidated Statement of Operations for the year ended July 31, 2020. The operating results of Peak Resorts are reported within the Mountain and Lodging segments prospectively from the date of acquisition. The estimated fair values of assets acquired and liabilities assumed in the acquisition of Peak Resorts are preliminary and are based on the information that was available as of the acquisition date. The Company believes that this information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed; however, the Company is obtaining additional information necessary to finalize those estimated fair values. Therefore, the preliminary measurements of estimated fair values reflected are subject to change. The Company expects to finalize the valuation and complete the purchase consideration allocation no later than one year from the acquisition date. 94 Falls Creek and Hotham Resorts On April 4, 2019, the Company, through a wholly-owned subsidiary, acquired ski field leases and related infrastructure used to operate two resorts in Victoria, Australia. The Company acquired Australian Alpine Enterprises Holdings Pty. Ltd and all related corporate entities that operate the Falls Creek and Hotham resorts from Living and Leisure Australia Group, a subsidiary of Merlin Entertainments, for a cash purchase price of approximately AU $ 178.9 million ( $ 127.4 million ), after adjustments for certain agreed-upon terms, including an increase in the purchase price for operating losses incurred for the period from December 29, 2018 through closing. The acquisition included the mountain operations of both resorts, including base area skier services (ski and snowboard school facilities, retail and rental, reservation and property management operations). The following summarizes the purchase consideration and the purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands): Acquisition Date Estimated Fair Value Current assets $ 6,986 Property, plant and equipment 54,889 Goodwill 71,538 Identifiable intangible assets and other assets 5,833 Liabilities ( 11,894 ) Net assets acquired $ 127,352 Identifiable intangible assets acquired in the transaction were primarily related to trade names. The process of estimating the fair value of the property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition. The excess of the purchase price over the aggregate estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of Falls Creek and Hotham and other factors. None of the goodwill is expected to be deductible for income tax purposes under Australian tax law. The Company recognized $ 4.6 million of acquisition related expenses associated with the transaction, including stamp duty expense of $ 2.9 million , within Mountain and Lodging operating expense in its Consolidated Statement of Operations for the year ended July 31, 2019. The operating results of Falls Creek and Hotham are reported within the Mountain segment prospectively from the date of acquisition. Stevens Pass Resort On August 15, 2018, the Company, through a wholly-owned subsidiary, acquired Stevens Pass Resort in the State of Washington from Ski Resort Holdings, LLC, an affiliate of Oz Real Estate (“Ski Resort Holdings”), for total cash consideration of $ 64.0 million , after adjustments for certain agreed-upon terms. The Company borrowed $ 70.0 million on August 15, 2018 under its Vail Holdings Credit Agreement term loan (see Note 6, Long-Term Debt) to fund the transaction and associated acquisition related expenses. The acquisition included the mountain operations of the resort, including base area skier services (food and beverage, retail and rental, lift ticket offices and ski and snowboard school facilities). The following summarizes the purchase consideration and the purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands): Acquisition Date Estimated Fair Value Current assets $ 752 Property, plant and equipment 34,865 Goodwill 28,878 Identifiable intangible assets 2,680 Deferred income taxes, net 886 Liabilities ( 4,029 ) Net assets acquired $ 64,032 95 The process of estimating the fair value of the property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition. The excess of the purchase price over the aggregate estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of Stevens Pass and other factors, and is expected to be deductible for income tax purposes. The Company recognized $ 1.2 million of acquisition related expenses associated with the transaction within Mountain and Lodging operating expense in its Consolidated Statement of Operations for the year ended July 31, 2019. The operating results of Stevens Pass are reported within the Mountain segment prospectively from the date of acquisition. Triple Peaks On September 27, 2018, the Company, through a wholly-owned subsidiary, acquired Triple Peaks, LLC (“Triple Peaks”), the parent company of Okemo Mountain Resort in Vermont, Crested Butte Mountain Resort in Colorado, and Mount Sunapee Resort in New Hampshire, for a cash purchase price of approximately $ 74.1 million , after adjustments for certain agreed-upon terms. In addition, contemporaneous with the closing of the transaction, Triple Peaks paid $ 155.0 million to pay the remaining obligations of the leases that all three resorts had with Ski Resort Holdings, with funds provided by the Company. Accordingly, the total purchase price, including the repayment of lease obligations, was $ 229.1 million , for which the Company utilized cash on hand and borrowed $ 195.6 million under the Vail Holdings Credit Agreement term loan (see Note 6, Long-Term Debt) to fund the transaction and associated acquisition related expenses. The Company obtained a new Special Use Permit from the U.S. Forest Service for Crested Butte, and assumed the state land leases for Okemo and Mount Sunapee. 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). The following summarizes the purchase consideration and the purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the date the transaction was effective (in thousands): Acquisition Date Estimated Fair Value Current assets $ 5,197 Property, plant and equipment 159,799 Goodwill 51,742 Identifiable intangible assets 27,360 Deferred income taxes, net 3,093 Liabilities ( 18,098 ) Net assets acquired $ 229,093 Identifiable intangible assets acquired in the transaction were primarily related to property management contracts and trade names. The process of estimating the fair value of the property, plant, and equipment includes the use of certain estimates and assumptions related to replacement cost and physical condition at the time of acquisition. The excess of the purchase price over the aggregate estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies, the assembled workforce of the resorts and other factors, and is expected to be deductible for income tax purposes. The Company recognized $ 2.8 million of acquisition related expenses associated with the transaction within Mountain and Lodging operating expense in its Consolidated Statement of Operations for the year ended July 31, 2019. The operating results of Triple Peaks are reported within the Mountain and Lodging segments prospectively from the date of acquisition. Pro Forma Financial Information The following presents the unaudited pro forma consolidated financial information of the Company as if the acquisitions of Peak Resorts, Falls Creek and Hotham, Stevens Pass and Triple Peaks were completed at the beginning of the fiscal year preceding the respective fiscal year in which each acquisition occurred. The following unaudited pro forma financial information includes adjustments for (i) depreciation on acquired property, plant and equipment; (ii) amortization of intangible assets recorded at the date of the transactions; (iii) lease expenses incurred by the prior owners which the Company will not be subject to; (iv) transaction and business integration related costs; and (v) interest expense associated with financing the transactions. This unaudited pro forma financial information is presented for informational purposes only and does not purport to be indicative of the results of future operations or the results that would have occurred had the transaction taken place at the beginning of the fiscal year preceding the fiscal year in which each acquisition occurred (in thousands, except per share amounts). 96 Year Ended July 31, 2020 2019 Pro forma net revenue $ 1,970,363 $ 2,490,809 Pro forma net income attributable to Vail Resorts, Inc. $ 100,205 $ 301,234 Pro forma basic net income per share attributable to Vail Resorts, Inc. $ 2.49 $ 7.47 Pro forma diluted net income per share attributable to Vail Resorts, Inc. $ 2.45 $ 7.32 8. Supplementary Balance Sheet Information The composition of property, plant and equipment, including capital lease assets, follows (in thousands): July 31, 2020 2019 Land and land improvements $ 750,714 $ 619,561 Buildings and building improvements 1,475,661 1,284,438 Machinery and equipment 1,361,178 1,160,817 Furniture and fixtures 308,267 309,271 Software 104,223 118,815 Vehicles 80,510 65,556 Construction in progress 81,967 79,282 Gross property, plant and equipment 4,162,520 3,637,740 Accumulated depreciation ( 1,969,841 ) ( 1,795,240 ) Property, plant and equipment, net $ 2,192,679 $ 1,842,500 Depreciation expense, which included depreciation of assets recorded under capital leases, for the years ended July 31, 2020 , 2019 and 2018 totaled $ 243.1 million , $ 210.7 million and $ 199.2 million , respectively. The following table summarizes the composition of property, plant and equipment recorded under finance leases as of July 31, 2020 and 2019 (in thousands): July 31, 2020 2019 Land $ 31,818 $ 31,818 Land improvements 49,228 49,228 Buildings and building improvements 42,160 42,160 Machinery and equipment 60,384 60,384 Gross property, plant and equipment 183,590 183,590 Accumulated depreciation ( 65,792 ) ( 56,040 ) Property, plant and equipment, net $ 117,798 $ 127,550 97 The composition of goodwill and intangible assets follows (in thousands): July 31, 2020 2019 Goodwill Goodwill $ 1,752,062 $ 1,625,560 Accumulated impairments ( 25,688 ) — Accumulated amortization ( 17,354 ) ( 17,354 ) Goodwill, net $ 1,709,020 $ 1,608,206 Indefinite-lived intangible assets Trademarks $ 230,000 $ 215,905 Other 41,667 42,166 Total gross indefinite-lived intangible assets 271,667 258,071 Accumulated amortization ( 24,713 ) ( 24,713 ) Indefinite-lived intangible assets, net $ 246,954 $ 233,358 Amortizable intangible assets Trademarks $ 38,208 $ 42,108 Other 70,772 67,538 Total gross amortizable intangible assets 108,980 109,646 Accumulated amortization ( 41,158 ) ( 36,831 ) Amortizable intangible assets, net 67,822 72,815 Total gross intangible assets 380,647 367,717 Total accumulated amortization ( 65,871 ) ( 61,544 ) Total intangible assets, net $ 314,776 $ 306,173 Amortization expense for intangible assets subject to amortization for the years ended July 31, 2020 , 2019 and 2018 totaled $ 6.5 million , $ 7.4 million and $ 5.3 million , respectively, and is estimated to be approximately $ 4.3 million annually, on average, for the next five fiscal years. The changes in the net carrying amount of goodwill allocated between the Company’s segments for the years ended July 31, 2020 and 2019 are as follows (in thousands): Mountain Lodging Goodwill, net Balance at July 31, 2018 $ 1,407,787 $ 67,899 $ 1,475,686 Acquisitions (including measurement period adjustments) 152,049 — 152,049 Effects of changes in foreign currency exchange rates ( 19,529 ) — ( 19,529 ) Balance at July 31, 2019 1,540,307 67,899 1,608,206 Acquisitions (including measurement period adjustments) 135,987 — 135,987 Asset impairments — ( 25,688 ) ( 25,688 ) Effects of changes in foreign currency exchange rates ( 9,485 ) — ( 9,485 ) Balance at July 31, 2020 $ 1,666,809 $ 42,211 $ 1,709,020 Asset Impairments The Company recorded asset impairments during the year ended July 31, 2020 of $ 28.4 million , with corresponding reductions to goodwill, net of $ 25.7 million and intangible assets, net and property, plant and equipment, net of $ 2.7 million . These asset impairments encompass various estimates and assumptions about fair value, which are based predominately on significant unobservable inputs. 98 As a result of the COVID-19 pandemic and the impact it has had on the Company’s operations during the year ended July 31, 2020, and the expected continuing impact of the pandemic on future operations, the Company determined that the estimated fair value of its Colorado resort ground transportation company reporting unit within its Lodging segment no longer exceeded its carrying value. Additionally, the Company determined that certain long-lived assets of its Colorado resort ground transportation company were not recoverable. As a result, the Company recognized impairments of goodwill of approximately $ 25.7 million and intangible assets and long-lived assets of $ 2.7 million , which were recorded within asset impairments on the Company’s Consolidated Statement of Operations during the year ended July 31, 2020. The Company estimated the fair value of its Colorado resort ground transportation company reporting unit based on an analysis of the present value of future cash flows (an income approach). The significant estimates used in the discounted cash flow model included the Company’s weighted average cost of capital for the reporting unit, projected cash flows and the long-term rate of growth, all of which are significant unobservable (Level 3) inputs. The Company’s assumptions were based on the actual historical performance of the reporting unit, taking into account the recent weakening of operating results and the expected continuation of operating results for transportation services. As a result of this impairment, the Company’s Colorado ground transportation company had no remaining goodwill recorded as of July 31, 2020. The composition of accounts payable and accrued liabilities follows (in thousands): July 31, 2020 2019 Trade payables $ 59,692 $ 96,377 Deferred revenue 256,402 335,669 Accrued salaries, wages and deferred compensation 25,588 50,318 Accrued benefits 43,704 37,797 Deposits 20,070 32,108 Operating lease liabilities 36,604 — Other accruals 57,048 55,588 Total accounts payable and accrued liabilities $ 499,108 $ 607,857 The composition of other long-term liabilities follows (in thousands): July 31, 2020 2019 Private club deferred initiation fee revenue $ 105,108 $ 109,749 Unfavorable lease obligation, net 1,651 19,017 Other long-term liabilities 163,486 154,835 Total other long-term liabilities $ 270,245 $ 283,601 9. Investments in Affiliates The Company held the following investments in equity method affiliates as of July 31, 2020 : Equity Method Affiliates Ownership Interest Slifer, Smith, and Frampton/Vail Associates Real Estate, LLC (“SSF/VARE”) 50 % KRED 50 % Clinton Ditch and Reservoir Company 43 % The Company had total net investments in equity method affiliates of $ 10.2 million and $ 8.8 million as of July 31, 2020 and 2019 , respectively, included within deferred charges and other assets in the accompanying Consolidated Balance Sheets. The amount of retained earnings that represent undistributed earnings of 50% or less owned entities accounted for by the equity method was $ 6.5 million and $ 5.4 million as of July 31, 2020 and 2019 , respectively. During the years ended July 31, 2020 , 2019 and 2018 , distributions in the amounts of $ 0.7 million , $ 1.0 million and $ 1.5 million , respectively, were received from equity method affiliates. 99 10. Fair Value Measurements The Company utilizes FASB issued fair value guidance that establishes how reporting entities should measure fair value for measurement and disclosure purposes. The guidance establishes a common definition of fair value applicable to all assets and liabilities measured at fair value and prioritizes the inputs into valuation techniques used to measure fair value. Accordingly, the Company uses valuation techniques which maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value. The three levels of the hierarchy are as follows: Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities; Level 2: Inputs include quoted prices for similar assets and liabilities in active and inactive markets or that are observable for the asset or liability either directly or indirectly; and Level 3: Unobservable inputs which are supported by little or no market activity. The table below summarizes the Company’s cash equivalents, other current assets, Interest Rate Swaps and Contingent Consideration measured at their estimated fair values (all other assets and liabilities measured at fair value are immaterial) (in thousands): Estimated Fair Value Measurement as of July 31, 2020 Description Total Level 1 Level 2 Level 3 Assets: Money Market $ 203,158 $ 203,158 $ — $ — Commercial Paper $ 2,401 $ — $ 2,401 $ — Certificates of Deposit $ 8,208 $ — $ 8,208 $ — Liabilities: Interest Rate Swaps $ 22,510 $ — $ 22,510 $ — Contingent Consideration $ 17,800 $ — $ — $ 17,800 Estimated Fair Value Measurement as of July 31, 2019 Description Total Level 1 Level 2 Level 3 Assets: Money Market $ 3,043 $ 3,043 $ — $ — Commercial Paper $ 2,401 $ — $ 2,401 $ — Certificates of Deposit $ 7,871 $ — $ 7,871 $ — Liabilities: Contingent Consideration $ 27,200 $ — $ — $ 27,200 The Company’s cash equivalents, other current assets and Interest Rate Swaps are measured utilizing quoted market prices or pricing models whereby all significant inputs are either observable or corroborated by observable market data. During the year ended July 31, 2020, the Company entered into the Interest Rate Swaps to hedge the LIBOR-based variable interest rate component of $400.0 million in principal amount of its Vail Holdings Credit Agreement. Changes in the estimated fair value are recognized in change in estimated fair value of hedging instruments on the Company’s Consolidated Statements of Comprehensive Income. Such amounts are reclassified into interest expense, net from other comprehensive income during the period in which the hedged item affects earnings. The estimated fair value of the Interest Rate Swaps are included within other long-term liabilities on the Company’s Consolidated Balance Sheet as of July 31, 2020. 100 The changes in Contingent Consideration during the years ended July 31, 2020 and 2019 were as follows (in thousands): Contingent Consideration Balance at July 31, 2018 $ 21,900 Payment ( 67 ) Change in estimated fair value 5,367 Balance at July 31, 2019 27,200 Payment ( 6,436 ) Change in estimated fair value ( 2,964 ) Balance at July 31, 2020 $ 17,800 The Lease for Park City, as discussed in Note 6, Long-term Debt, provides for participating contingent payments (the “Contingent Consideration”) to the landlord of 42% of the amount by which EBITDA for the Park City resort operations, as calculated under the Lease, exceeds approximately $35 million, as established at the transaction date, with such threshold amount subsequently increased annually by an inflation linked index and a 10% adjustment for any capital improvements or investments made under the Lease by the Company. The estimated fair value of Contingent Consideration includes the future period resort operations of Park City in the calculation of EBITDA on which participating contingent payments are made, which is determined on the basis of estimated performance for the years ending July 31, 2021 and July 31, 2022, escalated by an assumed long-term growth factor and discounted to net present value. The Company estimated the fair value of the Contingent Consideration payments using an option pricing valuation model. Key assumptions included Park City EBITDA for the year ending July 31, 2022, an assumed long-term growth rate, a discount rate of 10.49% and volatility of 17.0%, which are unobservable inputs and thus are considered Level 3 inputs. The Company prepared a sensitivity analysis to evaluate the effect that changes on certain key assumptions would have on the estimated fair value of the Contingent Consideration. A change in the discount rate of 100 basis points or a 5% change in estimated future performance would result in a change in the estimated fair value within the range of approximately $2.9 million to $4.1 million. Contingent Consideration is classified as a liability in our Consolidated Balance Sheets and is remeasured to an estimated fair value at each reporting date until the contingency is resolved. During the year ended July 31, 2020, the Company made a payment to the landlord for Contingent Consideration of approximately $ 6.4 million and recorded a decrease in the estimated fair value of approximately $ 3.0 million primarily related to changes in the expected Contingent Consideration payments for the year ended July 31, 2020 and the year ending July 31, 2021, and other key assumptions noted above, resulting in an estimated fair value of the Contingent Consideration of $ 17.8 million as of July 31, 2020 , which is reflected in accounts payable and accrued liabilities and other long-term liabilities in the Consolidated Balance Sheet. 11. Income Taxes The Company is subject to taxation in U.S. federal, state, and local jurisdictions and various non-U.S. jurisdictions, including Australia and Canada. The Company’s effective tax rate is impacted by the tax laws, regulations, practices and interpretations in the jurisdictions in which it operates and may fluctuate significantly from period to period depending on, among other things, the geographic mix of the Company’s profits and losses, changes in tax laws and regulations or their application and interpretation, the outcome of tax audits and changes in valuation allowances associated with the Company’s deferred tax assets. On March 27, 2020, in response to the COVID-19 pandemic, the U.S. government enacted legislation commonly referred to as the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act includes various amendments to the U.S. tax code that impacted the Company’s accounting and reporting for income taxes during the year ended July 31, 2020, and the Company expects these amendments will continue to impact its accounting and reporting for income taxes in the future. The primary provisions of the CARES Act that the Company has been impacted by include: • allowing a carryback of the entire amount of eligible Federal net operating losses (“NOLs”) generated in calendar years 2018, 2019 and 2020 for up to five years prior to when such losses were incurred, representing a change from previous rules under the Tax Cuts & Jobs Act of 2017 (the “TCJA”), in which NOLs could not be carried back to prior years and utilization was limited to 80% of taxable income in future years. Under the CARES Act, the Company was permitted to carry back its pre-existing NOLs to tax years prior to the enactment of the TCJA and obtain an incremental benefit of $ 3.8 million related to the differential in federal tax rates between years that NOLs were generated and years that the NOLs will be carried back to; 101 • treatment of certain qualified improvement property (“QIP”) as 15-year property and allowing such QIP placed in service after December 31, 2017 to be eligible for bonus depreciation, which could incrementally add to its pre-existing NOLs; and • increases in the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income for calendar years 2019 and 2020. The CARES Act also provides refundable employee retention credits and defers the requirement to remit the employer-paid portion of social security payroll taxes. As a result, during the year ended July 31, 2020, the Company recorded a benefit of approximately $ 9.6 million , which primarily offset Mountain and Lodging operating expense as a result of wages paid to employees who were not providing services. Additionally, the Company deferred payment of the employer-paid portion of social security payroll taxes through the end of calendar year 2020 and will remit such amounts in equal installments during calendar years 2021 and 2022. The Company also recognized a benefit of approximately $ 8.5 million during the year ended July 31, 2020 as a result of the recent Canada Emergency Wage Subsidy and Australian JobKeeper legislation for its Canadian and Australian employees, which primarily offset Mountain and Lodging operating expense. U.S. and foreign components of income before (provision) benefit from income taxes is as follows (in thousands): Year Ended July 31, 2020 2019 2018 U.S. $ 89,838 $ 306,323 $ 264,379 Foreign 26,595 92,642 75,713 Income before income taxes $ 116,433 $ 398,965 $ 340,092 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows (in thousands): July 31, 2020 2019 Deferred income tax liabilities: Fixed assets $ 216,016 $ 153,182 Intangible assets 86,509 73,146 Operating lease right of use assets 53,727 — Other 13,709 13,425 Total 369,961 239,753 Deferred income tax assets: Canyons obligation 14,997 13,922 Stock-based compensation 10,313 9,620 Investment in Partnerships 12,400 13,281 Deferred compensation and other accrued benefits 9,918 10,674 Contingent Consideration 4,468 6,771 Unfavorable lease obligation, net 285 4,896 Net operating loss carryforwards and other tax credits 13,205 5,631 Operating lease liabilities 60,838 — Other, net 21,427 18,850 Total 147,851 83,645 Valuation allowance for deferred income taxes ( 5,330 ) ( 5,365 ) Deferred income tax assets, net of valuation allowance 142,521 78,280 Net deferred income tax liability $ 227,440 $ 161,473 102 The components of deferred income taxes recognized in the Consolidated Balance Sheets are as follows (in thousands): July 31, 2020 2019 Deferred income tax asset $ 6,751 $ 7,286 Deferred income tax liability 234,191 168,759 Net deferred income tax liability $ 227,440 $ 161,473 Significant components of the provision (benefit) from income taxes are as follows (in thousands): Year Ended July 31, 2020 2019 2018 Current: Federal $ ( 13,467 ) $ 24,309 $ ( 43,366 ) State ( 731 ) 8,539 9,562 Foreign 4,141 20,205 18,436 Total current ( 10,057 ) 53,053 ( 15,368 ) Deferred: Federal 12,597 16,983 ( 45,922 ) State 4,266 5,282 2,941 Foreign 572 154 ( 2,789 ) Total deferred 17,435 22,419 ( 45,770 ) Provision (benefit) from income taxes $ 7,378 $ 75,472 $ ( 61,138 ) A reconciliation of the income tax provision (benefit) from continuing operations and the amount computed by applying the United States federal statutory income tax rate to income before income taxes is as follows: Year Ended July 31, 2020 2019 2018 At U.S. federal income tax rate 21.0 % 21.0 % 26.8 % State income tax, net of federal benefit 3.5 % 2.8 % 3.0 % Change in uncertain tax positions ( 3.8 )% ( 1.6 )% — % Change in valuation allowance — % — % 0.3 % Excess tax benefits related to stock-based compensation ( 7.1 )% ( 3.0 )% ( 20.9 )% Impacts of the Tax Act and other legislative changes ( 3.2 )% — % ( 24.7 )% Noncontrolling interests ( 2.4 )% ( 1.5 )% ( 1.7 )% Foreign rate differential ( 2.4 )% 0.4 % ( 1.5 )% Other 0.7 % 0.8 % 0.7 % Effective tax rate 6.3 % 18.9 % ( 18.0 )% A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest and penalties, if applicable, is as follows (in thousands): Year Ended July 31, 2020 2019 2018 Balance, beginning of year $ 72,222 $ 78,242 $ 76,111 Additions for tax positions of prior years 16,654 11,520 12,394 Lapse of statute of limitations ( 18,577 ) ( 17,540 ) ( 10,263 ) Balance, end of year $ 70,299 $ 72,222 $ 78,242 103 As of July 31, 2020 , the Company’s unrecognized tax benefits associated with uncertain tax positions relate to the treatment of the Talisker lease payments as payments of debt obligations and that the tax basis in Canyons goodwill is deductible, and are included within “other long-term liabilities” in the accompanying Consolidated Balance Sheets. During the year ended July 31, 2020, the Company experienced a reduction in the uncertain tax positions due to the lapse of the statute of limitations of $ 18.6 million , which was partially offset with an increase to the uncertain tax position of $ 16.7 million . Interest and penalties associated with the statute of limitations lapse were approximately $ 3.1 million . The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. Additionally, the Company expects a reduction to its uncertain tax positions for the fiscal year ending July 31, 2021, due to the lapse of the statute of limitations. As of July 31, 2020 and 2019, accrued interest and penalties, net of tax, was $ 6.2 million and $ 6.3 million , respectively. For the years ended July 31, 2020, 2019 and 2018, the Company recognized income tax (benefit) expense of ( $ 0.1 million ), $ 1.1 million and $ 1.6 million of interest (benefit) expense and penalties, net of tax, respectively. The Company’s major tax jurisdictions in which it files income tax returns are the U.S. federal jurisdiction, various state jurisdictions, Australia, and Canada. The Company is no longer subject to U.S. federal examinations for tax years prior to 2015. With few exceptions, the Company is no longer subject to examination by various U.S. state jurisdictions for tax years prior to 2014. Additionally, the Company is no longer subject to audits for the tax years prior to 2015 for Australia and Canada. The Company has NOL carryforwards totaling $ 58.6 million , primarily comprised of $ 49.8 million of federal and state NOLs as a result of the acquisition of Peak Resorts in September 2019 that will expire beginning July 31, 2032, $ 4.9 million of historical state NOLs that will expire by July 31, 2032 and non-U.S. NOLs of $ 3.9 million that will carry forward indefinitely. In connection with Peak Resorts’ initial public offering in November 2014, as well as the Company’s acquisition of Peak Resorts in September 2019, Peak Resorts had two ownership changes pursuant to the provisions of the Tax Reform Act of 1986. As a result, the Company’s usage of its eligible Federal NOL carryforwards will be limited each year by these ownership changes; however, management believes the full benefit of those carryforwards will be realized prior to their respective expiration dates. As of July 31, 2020, the Company has recorded a valuation allowance on $ 3.9 million of the historical non-U.S. NOL carryforwards, as the Company has determined that it is more likely than not that the associated NOL carryforwards will not be realized. Additionally, the Company has foreign tax credit carryforwards of $ 4.2 million , which expire by the year ending July 31, 2028. As of July 31, 2020, the Company has recorded a valuation allowance of $ 4.2 million on foreign tax credit carryforwards, as the Company has determined that it is more likely than not that these foreign tax credit carryforwards will not be realized. The Company may be required to record additional valuation allowances if, among other things, adverse economic conditions, including those caused by the COVID-19 pandemic, negatively impact the Company’s ability to realize its deferred tax assets. Evaluating and estimating the Company’s tax provision, current and deferred tax assets and liabilities and other tax accruals requires significant management judgment. The Company intends to indefinitely reinvest undistributed earnings, if any, in its Canadian foreign subsidiaries. It is not practical at this time to determine the income tax liability related to any remaining undistributed earnings. 12. Related Party Transactions The Company has the right to appoint four of nine directors of the Beaver Creek Resort Company of Colorado (“BCRC”), a non-profit entity formed for the benefit of property owners and certain others in Beaver Creek. The Company has a management agreement with the BCRC, renewable for one-year periods, to provide management services on a fixed fee basis. Management fees and reimbursement of operating expenses paid to the Company under its agreement with the BCRC during the years ended July 31, 2020 , 2019 and 2018 were $ 8.3 million , $ 9.6 million and $ 9.2 million , respectively. 104 13. Commitments and Contingencies Metropolitan Districts The Company credit-enhances $ 6.3 million of bonds issued by Holland Creek Metropolitan District (“HCMD”) through a $ 6.4 million letter of credit issued under the Vail Holdings Credit Agreement. HCMD’s bonds were issued and used to build infrastructure associated with the Company’s Red Sky Ranch residential development. The Company has agreed to pay capital improvement fees to Red Sky Ranch Metropolitan District (“RSRMD”) until RSRMD’s revenue streams from property taxes are sufficient to meet debt service requirements under HCMD’s bonds. The Company recorded a liability of $ 2.1 million and $ 2.0 million , primarily within other long-term liabilities in the accompanying Consolidated Balance Sheets, as of July 31, 2020 and 2019 , respectively, with respect to the estimated present value of future RSRMD capital improvement fees. The Company estimates that it will make capital improvement fee payments under this arrangement through the year ending July 31, 2031 . Guarantees/Indemnifications As of July 31, 2020 , the Company had various other letters of credit outstanding totaling $ 75.5 million , consisting of $ 53.4 million to support the Employee Housing Bonds and $ 22.1 million primarily for workers’ compensation, a wind energy purchase agreement and insurance-related deductibles. The Company also had surety bonds of $ 9.6 million as of July 31, 2020 , primarily to provide collateral for its U.S. workers compensation self-insurance programs. In addition to the guarantees noted above, the Company has entered into contracts in the normal course of business that include certain indemnifications under which it could be required to make payments to third parties upon the occurrence or non-occurrence of certain future events. These indemnities include indemnities related to licensees in connection with third-parties’ use of the Company’s trademarks and logos, liabilities associated with the infringement of other parties’ technology and software products, liabilities associated with the use of easements, liabilities associated with employment of contract workers and the Company’s use of trustees, and liabilities associated with the Company’s use of public lands and environmental matters. The duration of these indemnities generally is indefinite and generally do not limit the future payments the Company could be obligated to make. As permitted under applicable law, the Company and certain of its subsidiaries have agreed to indemnify their directors and officers over their lifetimes for certain events or occurrences while the officer or director is, or was, serving the Company or its subsidiaries in such a capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that should enable the Company to recover a portion of any amounts paid. Unless otherwise noted, the Company has not recorded any significant liabilities for the letters of credit, indemnities and other guarantees noted above in the accompanying Consolidated Financial Statements, either because the Company has recorded on its Consolidated Balance Sheets the underlying liability associated with the guarantee, the guarantee is with respect to the Company’s own performance and is therefore not subject to the measurement requirements as prescribed by GAAP, or because the Company has calculated the estimated fair value of the indemnification or guarantee to be immaterial based on the current facts and circumstances that would trigger a payment under the indemnification clause. In addition, with respect to certain indemnifications it is not possible to determine the maximum potential amount of liability under these potential obligations due to the unique set of facts and circumstances likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material. As noted above, the Company makes certain indemnifications to licensees for their use of the Company’s trademarks and logos. The Company does not record any liabilities with respect to these indemnifications. 105 Commitments The operations of Northstar are conducted on land and with operating assets owned by affiliates of EPR Properties, a real-estate investment trust, primarily under operating leases which were assumed in the acquisition of Northstar by the Company. The leases provide for the payment of a minimum annual base rent over the lease term which is recognized on a straight-line basis over the remaining lease term from the date of assumption. In addition, the leases provide for the payment of percentage rent of certain gross revenues generated at the property over a revenue threshold which is incrementally adjusted annually. The initial term of the leases expires in fiscal 2027 and allows for three 10 -year extensions at the Company’s option. The operations of Perisher are conducted on land under a license and lease granted by the Office of Environment and Heritage, an agency of the New South Wales government, which initially commenced in 2008, and which the Company assumed in its acquisition of Perisher. The lease and license has a term that expires in fiscal 2048 and allows for an option to renew for an additional 20 years . The lease and license provide for the payment of an initial minimum annual base rent, with annual CPI increases, and percentage rent of certain gross revenue generated at the property. The operations of Falls Creek and Hotham are conducted on land under leases granted by the Governor of the State of Victoria, Australia and its dependencies, which initially commenced in 1991 and 1992, respectively, which the Company assumed in its acquisition of Falls Creek and Hotham in April 2019. The leases have terms that expire in fiscal 2041 for Falls Creek and fiscal 2058 for Hotham, and provide for the payment of rent with both a fixed and variable component. The operations of Mad River Mountain is conducted on land under a lease granted by EPT Mad River, Inc., which initially commenced in 2005, which the Company assumed in its acquisition of Peak Resorts in September 2019. The lease has a term that expires in the year ending July 31, 2035, and provides for the payment of an initial minimum annual base rent, with annual CPI increases, and percentage rent of certain gross revenue generated at the property. Additionally, the Company has entered into strategic long-term season pass alliance agreements with third-party mountain resorts in which the Company has committed to pay minimum revenue guarantees over the remaining terms of these agreements. The Company has executed or assumed as lessee other operating leases for the rental of office and commercial space, employee residential units and land primarily through fiscal 2079 . Certain of these leases have renewal terms at the Company’s option, escalation clauses, rent holidays and leasehold improvement incentives. Rent holidays and rent escalation clauses are recognized on a straight-line basis over the lease term. Leasehold improvement incentives are recorded as leasehold improvements and amortized over the shorter of their economic lives or the term of the lease. For the years ended July 31, 2020 , 2019 and 2018 , the Company recorded lease expense (including Northstar, Perisher, Falls Creek & Hotham and Mad River Mountain), excluding executory costs, related to these agreements of $ 58.8 million , $ 57.8 million and $ 52.8 million , respectively, which is included in the accompanying Consolidated Statements of Operations. See Note 4 “Leases” for additional information regarding the Company’s leasing arrangements. Self Insurance The Company is self-insured for claims under its U.S. health benefit plans and for the majority of workers’ compensation claims in the U.S. Workers compensation claims in the U.S. are subject to stop loss policies. The self-insurance liability related to workers’ compensation is determined actuarially based on claims filed. The self-insurance liability related to claims under the Company’s U.S. health benefit plans is determined based on analysis of actual claims. The amounts related to these claims are included as a component of accrued benefits in accounts payable and accrued liabilities (see Note 8, Supplementary Balance Sheet Information). Legal The Company is a party to various lawsuits arising in the ordinary course of business. Management believes the Company has adequate insurance coverage and/or has accrued for all loss contingencies for asserted and unasserted matters deemed to be probable losses and estimable. As of July 31, 2020 and 2019 , the accruals for the above loss contingencies were not material individually or in the aggregate. 14. Segment and Geographic Area Information Segment Information The Company has three reportable segments: Mountain, Lodging and Real Estate. The Company refers to “Resort” as the combination of the Mountain and Lodging segments. The Mountain segment includes the operations of the Company’s mountain resorts/ski areas and related ancillary activities. The Lodging segment includes the operations of the Company’s owned hotels, RockResorts, NPS concessionaire properties, condominium management, Colorado resort ground transportation operations and mountain resort golf operations. The Real Estate segment owns, develops and sells real estate in and around the Company’s resort communities. The Company’s reportable segments, although integral to the success of the others, offer distinctly different products and services and require different types of management focus. As such, these segments are managed separately. 106 The Company reports its segment results using Reported EBITDA (defined as segment net revenue less segment operating expenses, plus or minus segment equity investment income or loss, and for the Real Estate segment, plus gain or loss on sale of real property). The Company reports segment results in a manner consistent with management’s internal reporting of operating results to the chief operating decision maker (Chief Executive Officer) for purposes of evaluating segment performance. Items excluded from Reported EBITDA are significant components in understanding and assessing financial performance. Reported EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, net change in cash and cash equivalents or other financial statement data presented in the Consolidated Financial Statements as indicators of financial performance or liquidity. The Company utilizes Reported EBITDA in evaluating the performance of the Company and in allocating resources to its segments. Mountain Reported EBITDA consists of Mountain net revenue less Mountain operating expense plus or minus Mountain equity investment income or loss. Lodging Reported EBITDA consists of Lodging net revenue less Lodging operating expense. Real Estate Reported EBITDA consists of Real Estate net revenue less Real Estate operating expense plus gain or loss on sale of real property. All segment expenses include an allocation of corporate administrative expense. Assets are not used to evaluate performance, except as shown in the table below. The accounting policies specific to each segment are the same as those described in Note 2 “Summary of Significant Accounting Policies.” 107 Following is key financial information by reportable segment which is used by management in evaluating performance and allocating resources (in thousands): Year Ended July 31, 2020 2019 2018 Net revenue: Lift $ 913,091 $ 1,033,234 $ 880,293 Ski school 189,131 215,060 189,910 Dining 160,763 181,837 161,402 Retail/rental 270,299 320,267 296,466 Other 177,159 205,803 194,851 Total Mountain net revenue 1,710,443 1,956,201 1,722,922 Lodging 248,414 314,662 284,643 Total Resort net revenue 1,958,857 2,270,863 2,007,565 Real Estate 4,847 712 3,988 Total net revenue $ 1,963,704 $ 2,271,575 $ 2,011,553 Segment operating expense: Mountain $ 1,212,053 $ 1,279,567 $ 1,132,840 Lodging 245,145 286,562 259,637 Total Resort operating expense 1,457,198 1,566,129 1,392,477 Real Estate, net 9,182 5,609 3,546 Total segment operating expense $ 1,466,380 $ 1,571,738 $ 1,396,023 Gain on sale of real property $ 207 $ 580 $ 515 Mountain equity investment income, net $ 1,690 $ 1,960 $ 1,523 Reported EBITDA: Mountain $ 500,080 $ 678,594 $ 591,605 Lodging 3,269 28,100 25,006 Resort 503,349 706,694 616,611 Real Estate ( 4,128 ) ( 4,317 ) 957 Total Reported EBITDA $ 499,221 $ 702,377 $ 617,568 Real estate held for sale and investment $ 96,844 $ 101,021 $ 99,385 Reconciliation of net income attributable to Vail Resorts, Inc. to Total Reported EBITDA: 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 $ 617,568 108 Geographic Information Net revenue and property, plant and equipment, net by geographic region are as follows (in thousands): Year Ended July 31, Net revenue 2020 2019 2018 U.S. $ 1,655,961 $ 1,865,062 $ 1,610,323 International (1) 307,743 406,513 401,230 Total net revenue $ 1,963,704 $ 2,271,575 $ 2,011,553 July 31, Property, plant and equipment, net 2020 2019 U.S. $ 1,759,692 $ 1,381,378 International (1) 432,987 461,122 Total property, plant and equipment, net $ 2,192,679 $ 1,842,500 (1) The only individual international country (i.e. except the U.S.) to account for more than 10% of the Company’s revenue and property plant and equipment, net was Canada. Canada accounted for $ 223.3 million , $ 308.1 million , and $ 321.0 million of revenue for the years ended July 31, 2020 , 2019 and 2018 , respectively, and for $ 291.7 million and $ 319.4 million of property, plant and equipment, net as of July 31, 2020 and 2019 , respectively. 15. Selected Quarterly Financial Data (Unaudited) Year Ended July 31, 2020 (in thousands, except per share amounts) Full Year Fourth Quarter Third Quarter Second Quarter First Quarter Total net revenue $ 1,963,704 $ 77,209 $ 694,087 $ 924,638 $ 267,770 Income (loss) from operations $ 223,389 $ ( 170,046 ) $ 218,232 $ 310,733 $ ( 135,530 ) Net income (loss) $ 109,055 $ ( 157,965 ) $ 159,831 $ 217,018 $ ( 109,829 ) Net income (loss) attributable to Vail Resorts, Inc. $ 98,833 $ ( 153,608 ) $ 152,546 $ 206,370 $ ( 106,475 ) Basic net income (loss) per share attributable to Vail Resorts, Inc. $ 2.45 $ ( 3.82 ) $ 3.79 $ 5.12 $ ( 2.64 ) Diluted net income (loss) per share attributable to Vail Resorts, Inc. $ 2.42 $ ( 3.82 ) $ 3.74 $ 5.04 $ ( 2.64 ) Year Ended July 31, 2019 (in thousands, except per share amounts) Full Year Fourth Quarter Third Quarter Second Quarter First Quarter Total net revenue $ 2,271,575 $ 244,006 $ 957,987 $ 849,578 $ 220,004 Income (loss) from operations $ 476,269 $ ( 120,582 ) $ 422,598 $ 301,848 $ ( 127,595 ) Net income (loss) $ 323,493 $ ( 92,301 ) $ 308,530 $ 217,990 $ ( 110,726 ) Net income (loss) attributable to Vail Resorts, Inc. $ 301,163 $ ( 89,525 ) $ 292,134 $ 206,349 $ ( 107,795 ) Basic net income (loss) per share attributable to Vail Resorts, Inc. $ 7.46 $ ( 2.22 ) $ 7.26 $ 5.12 $ ( 2.66 ) Diluted net income (loss) per share attributable to Vail Resorts, Inc. $ 7.32 $ ( 2.22 ) $ 7.12 $ 5.02 $ ( 2.66 ) 109 16. Share Repurchase Program On March 9, 2006, the Company’s Board of Directors approved a share repurchase program, authorizing the Company to repurchase up to 3,000,000 Vail Shares. On July 16, 2008, the Company’s Board of Directors increased the authorization by an additional 3,000,000 Vail Shares, and on December 4, 2015, the Company’s Board of Directors increased the authorization by an additional 1,500,000 Vail Shares for a total authorization to repurchase shares of up to 7,500,000 Vail Shares. During the year ended July 31, 2020 , the Company repurchased 256,418 Vail Shares (at a total cost of $ 46.4 million ). During the year ended July 31, 2019, the Company repurchased 353,007 Vail Shares (at a total cost of $ 85.0 million ). During the year ended July 31, 2018, the Company repurchased 115,422 Vail Shares (at a total cost of $ 25.8 million ). Since inception of this stock repurchase program through July 31, 2020 , the Company has repurchased 6,161,141 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 share repurchase program, which has no expiration date. Vail Shares purchased pursuant to the repurchase program will be held as treasury shares and may be used for issuance under the Company’s employee share award plan. 17. Stoc k Compensation Plan The Company has a share award plan (the “Plan”) which has been approved by the Company’s stockholders. Under the Plan, up to 4.4 million shares of common stock could be issued in the form of options, stock appreciation rights, restricted shares, restricted share units, performance shares, performance share units, dividend equivalents or other share-based awards to employees, directors or consultants of the Company or its subsidiaries or affiliates. The terms of awards granted under the Plan, including exercise price, vesting period and life, are set by the Compensation Committee of the Board of Directors. All share-based awards (except for restricted shares and restricted share units) granted under the Plan have a life of ten years . Most awards vest ratably over three years ; however, some have been granted with different vesting schedules. Of the awards outstanding, none have been granted to non-employees (except those granted to non-employee members of the Board of Directors of the Company) under the Plan. At July 31, 2020 , approximately 3.2 million share based awards were available to be granted under the Plan. The fair value of stock-settled stock appreciation rights (“SARs”) granted in the years ended July 31, 2020 , 2019 and 2018 were estimated on the date of grant using a lattice-based option valuation model that applies the assumptions noted in the table below. A lattice-based model considers factors such as exercise behavior, and assumes employees will exercise equity awards at different times over the contractual life of the equity awards. As a lattice-based model considers these factors, and is more flexible, the Company considers it to be a better method of valuing equity awards than a closed-form Black-Scholes model. Because lattice-based option valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatility is based on historical volatility of the Company’s stock. The Company uses historical data to estimate equity award exercises and employee terminations within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of equity awards granted is derived from the output of the option valuation model and represents the period of time that equity awards granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the equity award is based on the United States Treasury yield curve in effect at the time of grant. Year Ended July 31, 2020 2019 2018 Expected volatility 29.7 % 38.6 % 40.0 % Expected dividends 2.8 % 2.1 % 2.0 % Expected term (average in years) 6.5-7.1 6.0-6.6 5.8-6.4 Risk-free rate 1.8-2.0% 2.4-2.9% 1.2-2.3% The Company records actual forfeitures related to unvested awards upon employee terminations. 110 A summary of aggregate SARs award activity under the Plan as of July 31, 2020 , 2019 and 2018 , and changes during the years then ended is presented below (in thousands, except exercise price and contractual term): Awards Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at August 1, 2017 2,290 $ 59.12 Granted 86 $ 237.86 Exercised ( 1,049 ) $ 33.25 Forfeited or expired ( 3 ) $ 172.03 Outstanding at July 31, 2018 1,324 $ 91.01 Granted 80 $ 293.82 Exercised ( 219 ) $ 49.09 Forfeited or expired ( 14 ) $ 217.58 Outstanding at July 31, 2019 1,171 $ 111.12 Granted 146 $ 245.26 Exercised ( 247 ) $ 67.19 Forfeited or expired ( 9 ) $ 252.75 Outstanding at July 31, 2020 1,061 $ 138.59 5.0 years $ 75,736 Vested and expected to vest at July 31, 2020 1,042 $ 136.66 4.9 years $ 75,736 Exercisable at July 31, 2020 846 $ 108.73 4.1 years $ 75,736 The weighted-average grant-date estimated fair value of SARs granted during the years ended July 31, 2020 , 2019 and 2018 was $ 58.25 , $ 98.19 and $ 78.07 , respectively. The total intrinsic value of SARs exercised during the years ended July 31, 2020 , 2019 and 2018 was $ 35.0 million , $ 41.2 million and $ 213.8 million , respectively. The Company had 91,000 , 131,000 and 169,000 SARs that vested during the years ended July 31, 2020 , 2019 and 2018 , respectively. These awards had a total estimated fair value of $ 2.6 million , $ 15.2 million and $ 18.5 million at the date of vesting for the years ended July 31, 2020 , 2019 and 2018 , respectively. A summary of the status of the Company’s nonvested SARs as of July 31, 2020 and changes during the year then ended is presented below (in thousands, except fair value amounts): Awards Weighted-Average Grant-Date Fair Value Outstanding at July 31, 2019 168 $ 80.75 Granted 146 $ 58.25 Vested ( 91 ) $ 71.57 Forfeited ( 8 ) $ 79.23 Nonvested at July 31, 2020 215 $ 69.45 A summary of the status of the Company’s nonvested restricted share units as of July 31, 2020 and changes during the year then ended is presented below (in thousands, except fair value amounts): Awards Weighted-Average Grant-Date Fair Value Nonvested at July 31, 2019 126 $ 230.10 Granted 83 $ 217.46 Vested ( 63 ) $ 216.07 Forfeited ( 16 ) $ 229.97 Nonvested at July 31, 2020 130 $ 228.77 111 The Company granted 83,000 restricted share units during the year ended July 31, 2020 with a weighted-average grant-date estimated fair value of $ 217.46 . The Company granted 68,000 restricted share units during the year ended July 31, 2019 with a weighted-average grant-date estimated fair value of $ 264.44 . The Company granted 77,000 restricted share units during the year ended July 31, 2018 with a weighted-average grant-date estimated fair value of $ 215.14 . The Company had 63,000 , 102,000 and 101,000 restricted share units that vested during the years ended July 31, 2020 , 2019 and 2018 , respectively. These units had a total estimated fair value of $ 14.8 million , $ 28.8 million and $ 23.5 million at the date of vesting for the years ended July 31, 2020 , 2019 and 2018 , respectively. As of July 31, 2020 , there was $ 25.9 million of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the Plan, of which $ 15.7 million , $ 9.0 million and $ 1.2 million of expense is expected to be recognized in the years ending July 31, 2021 , 2022 and 2023 , respectively, assuming no share-based awards are granted in the future or forfeited. The tax benefit realized or expected to be realized from SARs exercised and restricted stock units vested was $ 12.3 million , $ 16.3 million and $ 79.7 million for the years ended July 31, 2020 , 2019 and 2018 , respectively. The Company has a policy of using either authorized and unissued shares or treasury shares, including shares acquired by purchase in the open market, to satisfy equity award exercises. 18. Retirement and Profit Sharing Plans The Company maintains a defined contribution retirement plan (the “Retirement Plan”), qualified under Section 401(k) of the Internal Revenue Code, for its U.S. employees. Under this Retirement Plan, U.S. employees are eligible to make before-tax contributions on the first day of the calendar month following the later of: (i) their employment commencement date or (ii) the date they turn 21 . Participants may contribute up to 100 % of their qualifying annual compensation up to the annual maximum specified by the Internal Revenue Code. When the Company participates in 401(k) contribution matching, it matches an amount equal to 50 % of each participant’s contribution up to 6 % of a participant’s bi-weekly qualifying compensation starting the pay period containing the first day of the month after obtaining the later of: (i) 12 months of employment with at least 1,000 service hours from the commencement date or (ii) if 1,000 hours within the first 12 months was not completed, then after the employee completed a cumulative 1,500 service hours. On April 1, 2020, the Company announced a temporary six month suspension of its 401(k) contribution matching as a result of the impacts of the COVID-19 pandemic and resulting resort closures. Additionally, the Company’s matching contribution is entirely discretionary and may be reduced or eliminated at any time. Total Retirement Plan expense recognized by the Company for the years ended July 31, 2020 , 2019 and 2018 was $ 5.8 million , $ 7.9 million and $ 6.9 million , respectively. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.