Krause Fund Research

Fall 2017

Consumer Discretionary Vail Resorts, Inc. (NYSE: MTN)

Recommendation: HOLD November 8, 2017

Analysts

Benjamin Salvador [email protected] Current Price $234.89 Blake Seline Target Price $249-255 [email protected] Company Overview MTN Growth Becoming Capped

Vail Resorts, Inc. (NYSE: MTN) is a premier mountain resort • Unfavorable Stock Price - There is limited upside potential company with properties in Australia, Canada and across the at the stock’s current price. Derived from the fundamental U.S. The business operates three segments: Mountain, PE formula, investors currently value Vail with a 4.2% CV Lodging and Real Estate. The Mountain segment generates EPS growth rate. A DCF and EP analysis yields share revenue by selling lift tickets and offering additional appreciation of 4% - 6%. amenities such as ski school, dining and retail. The • New Rival - In April 2017, KSL Capital and Aspen created company’s lodging segment includes owned or managed a newly formed entity. The partnership, as of November 8th, luxury hotels and condominiums, concessionaire properties, combines for fifteen resorts and will rival MTN’s season golf courses and transportation services. The Real Estate pass Epic for the 2018/2019 ski season.39 segment owns, develops and sells real estate around resorts. • Unsustainable, Speculative Growth – Vail has grown by acquisition. Forecasting future acquisitions is speculative. Over the past decade, the business has gained market share Therefore, skier visitation at Vail hits capacity by 2025. via acquisitions, growing its portfolio of resorts from five to Furthermore, Vail’s historical ticket price growth is fourteen. During FY 2017, MTN purchased the holy grail of unsustainable and decelerates by .3% per year during the ski resorts, Whistler Blackcomb, for an industry record $1.1 projection period. billion transaction. With a $700 million term loan added to • Premier Destinations - Despite emerging headwinds, Vail the balance sheet and a new competitor on the rise, Vail’s will continue to perform as an industry leader. The company historical growth will not be a representation of the future. owns four of the five most visited mountains in the U.S. and the single most visited mountain in North America. Stock Performance Highlights • Favorable Economic Outlook -Vail will benefit from a 52-week High $235.99 forecasted 2.8% rGDP growth the next three years driven 52-week Low $153.66 behind a dovish Fed, a CCI near a 17 year high, and Beta 0.864 continued low unemployment levels. Average Daily Volume 279,083 Share Highlights 1 Year Stock Price Performance Market Capitalization $9.53 b Shares Outstanding 40.4 m P/E (forward) 36.53x EPS (2018E) $6.43 Dividend Yield 1.71% Percent of Revenue by Segment Mountain 85% Lodging 14% Real Estate 1% Company Performance Highlights ROA 6.39% ROE 15.67% Revenues $1.91 b Financial Ratios Current Ratio 0.72

Debt to Equity 1.29 17 Source: Google Finance

1 Executive Summary it becomes more expensive to borrow money and economic growth becomes somewhat restricted. In November, President We recommend a HOLD rating for Vail Resorts, Inc. (NYSE: Trump elected a new Fed Chair, Jerome Powell, to a four-year MTN). Details related to our decision are discussed in depth term. It is important to note that as a member of the Fed Board of throughout the report. In summary, MTN begins to face its Governors, Powell supported current Chair Janet Yellen, who has first real competitor as a result of a newly formed entity only gradually increased rates after leaving them near zero for comprised of KSL and Aspen Ski Co. Future acquisition years after the 2007-2008 financial crisis. Considering President Trump ties himself to the success of the stock market and stated a opportunities are becoming limited with additional debt on 40 Vail’s balance sheet and a small ski industry which is low-interest rate policy, we believe interest rates will continue consolidating, all of which will impede the company from to be heightened only when the economy, and markets, can carrying historical growth rates into future periods. withstand it. Thus, rGDP will continue to flourish behind the same Considering future challenges and the company’s historical dovish sentiment stemming from the Fed. We forecast rates to increase once more in December of 2017 and three times in 2018 growth, we believe there is little upside potential in the 41 intrinsic valuation of the stock. and 2019 alongside continued economic expansion.

Despite the company’s maturation, Vail owns four of the five GDP growth will continue to be driven by the optimism of most visited mountains in the U.S and acquired the single consumers. The Consumer Confidence Index is a leading most visited mountain in North America in 2016, Whistler economic indicator which represents individual sentiment Blackcomb in Canada. The company offers an industry- regarding the current economy and conditions six months into the leading pre-season pass called Epic, which brings in a future. When consumer confidence is high, consumers are more consistent revenue stream and cash flows year to year. inclined to spend money which spurs economic growth. The October reading came in at 125.9, its highest level since Operating behind a positive economic backdrop, the 42 company is still in position to meet analyst expectations and December 2000. We believe the Consumer Confidence Index perform well with its higher-end customer base. will go through its gradual ups and downs before hitting 128.5 by December 2018. Future optimism will be driven by a low The major risk to our thesis is that Vail continues to acquire unemployment rate and continued growth rhetoric stemming from ski resorts. Acquisitions will lead to more revenue, higher Washington. Whether it is tax cuts, deregulation, infrastructure analyst expectations and a higher stock price. spending or a new health care bill, consumers will anticipate what is to come, regardless of whether or not the bills are passed. We believe the current bull-run on the stock market partially reflects this type of rhetoric and is an indication of what is to come in Economic Analysis 2018. Thus, consumer confidence will lead to healthy consumer spending and strong GDP growth. Gross Domestic Product As a result, we forecast real GDP to grow at 2.8% the next three Real GDP is an inflation-adjusted measure that reflects the value years. This leaves Vail Resorts and the Consumer Discretionary of goods and services produced by an economy per year.32 70% sector well positioned for the near future. of GDP is comprised of personal consumption expenditures, of which 23.5% are recreational. Therefore, the indicator is a Unemployment fundamental representation of the overall health of the economy 3 and discretionary sector. Since 2010, GDP has grown at a much The unemployment rate has a large impact on the Consumer slower rate in comparison to historical economic expansions. Discretionary Sector. When unemployment rates are low, as they are now, more consumers have the wages to spend at discretionary businesses such as Vail. However, a tightened labor market naturally leads to an increase in wages as companies compete against each other for their job openings. The unemployment rate has declined for the past six years and currently sits at 4.1%.6

Source:Statista 8

However, the beginning second half of 2017 has shown stronger results. Second and third quarter GDP grew at a rate of 3.1% and 3.0%, respectively.8 We believe a favorable economic environment will continue behind a dovish Fed and high consumer confidence.

The Fed’s major impact on the economy and GDP comes through Source: FRED6 raising and shedding interest rates. When interest rates increase,

2 Industry Analysis We forecast the unemployment rate to hit 3.9% by June 2018 and rise back up gradually to 4.6% by December 2019. Although some consider the U.S. economy to be at full-employment, we believe Overview low participation rates in conjunction with rising median wages will bring more workers back into the labor force. Both the labor Vail Resorts, Inc., falls into the Hotels, Restaurants and Leisure force participation rate and prime-aged participation rate tell the industry within the Consumer Discretionary sector. The industry same story – there is a large quantity of workers who are not comprises roughly 14.6% of the sector with 70% of the weight coming from the restaurant group and 25% from the hotel, resort currently at work, even despite a growing economy. 15 and cruise line group. The Hotels, Restaurants and Leisure industry is very concentrated with ten companies making up 83% of total market capitalization.15 Within the Hotels, Resorts and Leisure industry, Vail Resorts, Inc. is classified within the Ski and Snowboard Resort sub-industry.22

The ski industry is sensitive to macro-economic factors which impact consumer spending. Without an increasing amount of discretionary income behind a growing economy, resorts cannot mark up prices or increase profits by offering additional lodging or dining services. With that said, the ski industry is driven by snowfall. The Great Recession years around 2008 saw the largest amount of ski visits over the last decade, because of snowfall

Source: FRED amounts.

Participation has declined even after a recession and median wages on the rise since 2014.43 As a result, we have implemented heavier pricing pressure occurring on wages within Vail’s DCF model beginning in Fiscal 2018 through 2019 to account for an extremely tight labor market. Inversely, we have taken into consideration an increase in skier growth and effective ticket prices as a result of a strong economic indicator. Netted together, Vail is able to increase their prices higher than wage growth.

Consumer Price Index 47 Source: NSAA The CPI is a metric which indicates changes in prices over time To create consistent results, ski companies offer season passes for a basket of goods. When the CPI increases, the cost of prior to the ski season. This trend has marked Vail with a necessary consumer items, such as food and gasoline, rise. This competitive advantage over the years because the company with leaves less income available for discretionary items such as ski the best portfolio of resorts attracts preseason sales. tickets.44 Therefore, the Consumer Discretionary Sector is negatively impacted with large swings in the CPI. The Fed’s In addition, the industry is highly seasonal. A typical ski season benchmark for inflation is 2%. From 2012 to 2016, the Fed has lasts six months, November to April, capping the industry’s been below its target, ranging from .1% to 1.6% increases.45 growth prospects.46 This impact is clearly evident in Vail’s Going forward, we believe the CPI will stay in check near the 2% financial statements, considering 80% of their revenue is derived target due to the Fed’s objective of increasing rates alongside a in the fiscal half attributable to the ski season. strengthening economy. When interest rates are increased, inflation is curtailed as less money flows around the economy, keeping prices stable. MTN will benefit from maintained, low CPI Recent Developments levels because consumers will have the allocable discretionary income necessary going forward. Acquisitions In recent years, there has been significant consolidation within the Capital Markets Analysis Ski and Snowboard industry, creating Vail’s first real competitor – KSL’s partnership with Aspen Ski Company.

As a result of continued strength across a variety of economic Selected Transactions indicators, we project that the markets will continue to run higher. Vail Resorts: As an added bonus, growth rhetoric stemming from Washington • Jun. 2017: Stowe for $40.9 million. will aid and abed stock gains. Specifically, we see the S&P500 • Oct. 2016: Whistler Blackcomb for $1.1 billion. hitting 2,900 by November 8, 2018. The Consumer Discretionary • Jun. 2015: Perisher for $134.8 million. Sector as a whole will be an outperforming sector because of its cyclicality with the broader economy. KSL and Aspen:

• Apr. 2017: Intrawest Resort Holding for $1.5 billion.

3 • Apr. 2017: Mammoth Mountain circa $400 million. Hotels and Resorts • Aug. 2017: Deer Valley for undisclosed fee.31 Vail Resorts also operates in the four- to five-star hotel and resort There are approximately 480 ski areas across the U.S, of which, industry. Hilton Worldwide Holdings, Hyatt, InterContinental only a small portion are the scale of Stowe or Mammoth. In our Hotels Group and Marriott International are Vail’s main perspective, Vail and KSL/Aspen Snowmass cannot continue to competitors and represent more than 50% of market share.15 snatch up material market share via acquisitions at their historical rate. The deals add a significant amount of debt to their balance Industry Leaders sheets and there are limited opportunities in the small ski industry. Hilton, Hyatt, IHG and Marriott lead the industry in technological As a result, we project KSL/Aspen to become a close competitor innovation. The major players are able to gather information on due to Vail’s inability to find and fund future acquisition guests, manage reservations and purchase supplies in real-time to opportunities. lower costs. In particular, hotels have developed complex algorithms to price hotel rooms based on market demand.15 Considering KSL and Aspen bought their properties right before the 2017/2018 ski season, the partnership did not have the A study by Statista found that consumers find internet access and opportunity to create a unified season pass of their own. However, brand name almost as important as comfortable beds and the ski industry is expecting the newly formed entity to come out location.4 IHG Rewards Club, Marriott Rewards and Hilton with a combined season pass for the 2018/2019 ski season which Honors lead the industry and retain guests by allowing them to will rival Vail’s Epic season pass. This is one of the biggest earn points each night stayed redeemable for future bookings or factors we see impeding Vail’s future growth. KSL/Aspen now upgrades. Reward programs such as these allow hotels to retain holds a portfolio of 15 exclusive resorts, 20,000 skiable acres and their market share.15 Smaller, niche hotels, such as Vail Resorts, 22 an estimated 8-10 million skier visits. Since the market is Belmond and MGM face drawbacks because they do not own as comprised of two giants, remaining operators have teamed up to many properties or chain hotels. In addition, they are limited to create their own version of a season pass to compete: the upper-middle class market

• MAX Pass: The pass was launched by Intrawest, Boyne and Airbnb 48 POWDR in 2015. The pass grants access to 44 different Airbnb is the largest peer-to-peer exchange service in the world 49 mountains at a price of $729 per season. The MAX Pass is for hospitality. The service allows hosts to rent out their private diversified like Vail’s, with offerings ranging from the West property to short-term subletters, such as travelers. The service Coast to the East. The pass is still currently available for the represents a major threat to the hotel industry; however major 2017/2018 despite Intrawest being acquired by KSL/Aspen. hotel chains argue that it will not affect their customer base.38 A This is expected to change next season. recent study by HSV estimates that approximately $450 million in direct revenues will be lost by hotels each year to Airbnb.38 In • Mountain Collective Season Pass: Released in 2012, the pass addition, hotels lose indirect revenues, such as dining, 48 was the first major competitor to Vail’s Epic Pass. The MCP transportation and services which often have higher margins. allows skiers/snowboarders to access seventeen properties at a 50 cost of $489 per season. At each location, pass holders may We conclude that leaders within the Hotels industry are chains, access two free ski days. In addition, the MCP allows access to such as Hilton, Hyatt, IHG and Marriott because they are able to mountains in Chile, France and Japan. Pass holders receive retain customer loyalty. Smaller specialty resorts, such as Vail, special benefits, such as lodging rates with the pass. Belmond and MGM are sensitive to changes in macroeconomic conditions because of the appeal to the extreme high-end • Rocky Mountain Super Pass: The $639 pass allows holders consumer. Vail is specifically vulnerable to snowfall conditions unlimited access to Winter Park Resort, Copper Mountain and since their resort guests visit mainly for the mountain segment. 51 Eldorado Mountain Resort in Colorado. In addition, pass This marks Vail with a lower occupancy rate in comparison to the holders may visit mountains in Alaska, New Zealand, Japan industry average. Resorts that set themselves apart and offer and Iceland. Pass holders receive special rates on activities and identifiable products will be able to reduce the risk Airbnb poses lodging. The pass is the most restrictive, only allowing to the industry. Vail’s lodging demand will continue to be unlimited access to three resorts in Colorado. primarily driven by the health of its ski operations.

• Peak Pass: The pass predominantly attracts East Coast skiers to Porter’s Five Forces a portfolio of seven resorts which includes Mount Snow, Wild Cat and Hunter for $599. Competitive Rivalry: High. Consolidation within the ski industry has created Vail’s first real We believe Vail’s service offering will continue to outperform its rival. Additionally, there are several other inexpensive season current competition. Vail’s Epic pass offers unrestricted access to passes out on the market. The hotels, restaurants and leisure the most premier mountains across North America. However, a industry is highly competitive. Consumers have the ability to competitor has matched Vail’s business model of growth by choose from a variety of options and compare prices. In addition, acquisition and will impede its growth beginning next year. different resort locations offer varying snow levels, proximity to KSL/Aspen’s new portfolio is as lucrative as Vail’s. towns and airports, and experiences. Online travel reservation sights allow guests to book rooms for low rates, and can cause price wars within the industry.15 Airbnb poses a significant threat

4 to the industry because it allows consumers to book a resort. When a mountain receives low snowfall, there is a accommodations through short-term rentals. decrease in the number of visits and companies must make snow, which increases costs and lowers margins. Bargaining Power of Suppliers: High. Major players in the industry have the ability to negotiate with suppliers when it comes to food, linens, and other assets.15 However, the industry is exposed to fluctuations in the prices of commodities and wages. Minimum wage laws pose a threat to the industry due the amount of human capital required to operate resorts. Mountain resorts have little to no barraging power with governmental agencies. Resorts must sign a long-term lease with the National Parks Service to operate on public land. The lease requirements often include concessionaire agreements, royalty payments and monthly lease payments.1 Furthermore, the government requires the industry to follow guidelines and environmental regulations regarding the use of public lands. The MAX pass features the highest true snowfall. However, when

looking at the data, Vail Resorts receives the most incremental Bargaining Power of Buyers: Moderate. snowfall when compared to the amount of resorts they own. East Buyers have moderate bargaining power in the selection of season Coast resorts often receive less snowfall, but more ice, which passes. Mountain resorts offer price discounts before the start of creates a divergence in the metric. In addition, skiable acres the season to earn a steady revenue stream. Buyers often choose indicate the size of mountains. Pass holders are able to access a passes based on the amount of properties they may visit, the variety of terrain with the Epic Pass and Mountain Collective duration of the season, price and quality of resorts. Consumers can Pass. We believe Vail’s existing portfolio hedges itself against choose from a variety of hotels and restaurants. Visitors ultimately weak snowfall with operations across the U.S. and three different choose based on amenities, price, location and quality of service. countries. For example, the company acquired Perisher in However, customer loyalty programs help retain guests. Australia to increase earnings during the summer months, as Additionally, the market for hotel rooms and condominiums is Australia is in the Southern Hemisphere. saturated. High-end hotels and resorts must cater to the needs of buyers in order to gain market share. RevPAR, Average Daily Rate (ADR) & Occupancy Rate

RevPAR is a performance metric utilized by the hotel industry to Threat of Substitutes: High. determine revenue per available room. It is calculated by Consumers have the ability to choose from a variety of leisure multiplying the average daily rate (ADR) by occupancy rate. The activities ranging from casinos, water parks, cruise lines and other metric assesses a hotel’s ability to fill its hotel rooms given the vacation destinations. If there is limited snowfall, consumers will daily rate.16 Vail Resorts leads its competitors in RevPAR. certainly choose another option. However, we believe the However, when looking at the data, it is due to the fact that they steadiness of skier visitation and Vail’s ability to successfully charge more per room, not because they sell more rooms than their market their season passes prior to the ski season diminishes this competitors. threat.

Threat of New Entrants: Low. There is a significant barrier to entry for ski and snowboard resorts industry. Environmental and government regulations, limited suitable sights and high development costs make it difficult for others to enter into the market. Ski resorts must obtain government approvals to develop on public land, and are required to pay monthly lease obligations as well as royalties. In addition, the startup costs for four-star and five-star hotels and resorts remain substantially high.15 It is difficult for new hotels and resorts to establish brand recognition and a loyal client base.

Recent acquisitions make it difficult for new resorts to enter the Source: FactSet market. When looking at the percent change data, Vail was able to Key Operating Metrics increase their RevPAR 8% more than their closest competitor. The large increase is due to the fact that Vail can increase prices Ski Resorts without losing their loyal, high-end customers. Key metrics for the ski industry are average true snowfall, skiable acres and number of days in a season, which often determine the Gross Margin price of season passes. Average true snowfall is a measure of the Gross margin is a key performance indicator for the Ski industry. total amount of snow a resort receives throughout the entire The industry has high operating costs due to the amount of human season. The metric indicates the amount of snow a resort must capital required to operate resorts.37 MTN has an advantage over make each year. In addition, snowfall is an indicator of visitors to Ski Star due to the size of the company. The company was able to

5 increase gross margin this year by acquiring two new mountain Negatives properties. The overhead costs to operate the company decreased. Specialty resorts are particularly vulnerable to changes in In addition, the 17.88% increase in gross margin was due to an consumer sentiment and snowfall. The industry has begun to increase in mountain facilities which have lower costs than mature after a rapid period of consolidation, leaving limited lodging resorts. Direct costs associated with the Mountain investment opportunities available. Finally, the business is segment are approximately 65% of sales; however, direct costs extremely seasonal, placing a cap on growth possibilities. associated with the Lodging segment are approximately 90% of sales.1 MTN will continue to increase margins as they use technology to maximize efficiencies at resorts. Company Analysis

Return on Assets Vail Resorts, Inc. is a premier mountain resort company. It was For companies in the hospitality industry, return on assets is a key 16 organized in 1997 as a holding company. The business is indicator of the use of assets. The industry is capital intensive comprised of three segments: and requires companies to focus on strategies to maximize assets. MTN spends approximately $150 million per year on upgrading Mountain (85% of revenue) mountain runs, chair lifts and lodging facilities. Vail Resorts operates eleven world-class mountain resort properties and three urban ski areas located in Colorado, California, Utah, Minnesota, Wisconsin, Michigan, Vermont, Canada and Perisher, Australia. The company owns and operates, four of the five most visited ski resorts in the country in the world’s most prominent ski destinations such as Colorado and Park City, Utah.1

Lodging (14% of revenue) Lodging properties include five owned or managed luxury hotels under the RockResorts brand, five company-owned hotels, two National Park Service concessionaire properties, Colorado Mountain Express (CME) transportation company, and five Source: FactSet mountain resort golf courses. The segment includes 2,900 owned When looking at the data, SkiStar was the most efficient when it and/or managed hotel rooms. All hotels are considered on the higher-end of the industry scale and possess an average ADR of comes to asset management. Vail, Marriott and SkiStar achieved 1 an ROA of 6.4%, 5.2% and 9.1% respectively. SkiStar beat $227.27, occupancy rate of 68.5% and RevPAR of $153.13. completion because it does not operate in the hotel industry, which is often more capital intensive due to wages.3 Real Estate (1% of revenue) Vail owns, develops and sells condominiums and land parcels Catalysts for Growth/Change near resort communities. The segment operates through a wholly- owned subsidiary, Vail Resorts Development Company. The

1 segment has been unprofitable recently due to rising commission • More than 50% of Vail’s revenues are derived from lift tickets. costs and holding periods. An area of growth for the Ski and Snowboard Resorts industry is in equipment rental, equipment sales, and food and beverages. Resorts that offer additional amenities will be able Target Markets to increase revenue spent per skier each visit. • Vail Resorts, Inc. earned 79% of total revenues in the winter Lift Tickets months of last year.1 Ski and snowboard resorts have been More than 50% of Mountain revenues are derived from lift 1 behind in diversifying their business to summer tourism. A tickets. In 2016 and 2017, lift ticket revenues have grown at a study by Dean Runyan indicates than Colorado tourism peaks rate of 22% and 24% respectively, which caused a 23% increase during the summer months, instead of the winter months.15 in Mountain revenues. Lift ticket revenues are derived from skier 1 Resorts that can capture the summer market will be able to earn visits and effective ticket price (ETP). The 2017 jump in lift a more diversified revenue stream. ticket revenue was tied to the acquisition of Whistler Blackcomb which caused skier visits to increase 20%. In 2018, we expect Key Investment Positives and Negatives revenues to grow at a rate of 10%, then stabilize around 5%.

Positives Owned Hotel & Managed Condominium The major players within the industry have made acquisitions to Owned hotel and managed condominium revenues account for over 50% of lodging revenue. The company owns and operates increase market share. Vail has an existing portfolio of ski resorts 1 that is considered lucrative and attracts a consistent and growing approximately 2,800 hotel rooms and 1,900 condos. Dining skier base. Skiers within the U.S. are limited to a select number of revenues, transportation revenues, lift ticket sales and retail sales resorts. Strong GDP growth of 2.7% has increased consumer are directly tied to the occupancy rates of hotels and condos. In 2016, hotel revenues and managed condominium revenues grew sentiment and personal disposable income. The hospitality 1 industry is set to benefit from increasing tourism. at a rate of 0.66 % and 6.07% respectively. The market for managed condos is primarily high-income, retirees. However, the

6 market for hotel rooms are lift tick users, families and visitors. Whistler Blackcomb Acquisition Managed condos are generally used in the winter months during On October 16, 2016, Vail Resorts, Inc. agreed to acquire the ski season. Whistler Blackcomb for $1.09 billion.23 Whistler Blackcomb Resort is the largest year-round mountain resort in North America, Destination Guests & Local Guests with two mountains connected by gondolas. The resort offers over Vail’s major customers are out-of-state guests (61%) and in-state 200 marked runs, over 8,000 acres of terrain, 14 alpine bowls, guests (39%)1. Destination guests often purchase higher-priced three glaciers and one of the longest ski season in North America. lift tickets, ski school, meals and rent hotel rooms for their stay. In addition, Whistler Blackcomb offers summer hiking trails, bike In-state guests are MTN’s primary market for season passes. trails and sightseeing. The move allows Vail Resorts to expand its Destination guests often one-time lift tickets. presence to Canada and build its brand name considering the location was home to the 2010 Winter Olympics.19

Key Metrics

Average Annual Precipitation Average annual precipitation compares yearly precipitation to the historical average precipitation. The Ski and Snowboard Resort industry is vulnerable to changes in the yearly precipitation. If snowfall decreases, Vail Resorts must make snow for the trails. Snowmaking costs decrease operating margins and efficiencies. In addition, snow cover affects the number of visitors and duration of stay to resorts. Low snow cover will decrease revenues and

Source: Dean Runyan Associates18 increase expenses. In 2012, total skier visits declined by 12% due to poor weather conditions. The company’s mountain and lodging Since 2000, domestic visitors to Colorado has risen by 5%.18 We revenues were stagnant due to the decrease in visitors. believe this is a growing trend that plays into the hands of Vail’s Colorado resorts. MTN has seen steady growth as the number of Skier Visits yearly visitors increases. Destination guests comprise 60% of total Skier visits is a key metric for the Mountain and Lodging visitors to the mountain resorts. Increasing tourism levels help segments of MTN. Lift ticket revenue is derived from skier visits. resorts because they earn the majority of their revenues from this In addition, any changes in skier visits affect revenues from ski market. school, rental sales and retail sales. Lodging is also affected by changes in skier visits in the form of occupied rooms. Vail Resorts Life Cycle operates in the ski and hotel travel industry. A primary metric of Vail and the Ski and Snowboard Resorts Industry is in the the ski industry is the number of skier visits per year. A skier visit beginning stages of maturation.22 Vail Resorts will face increased represents a person using a ticket to access a mountain for any part competition from another industry leader and smaller resorts. of one day. The 2015/2016 ski season saw 52.8 million and 68.6 However, Vail Resorts will achieve higher profit margins by million total ski visits across the U.S. and North America, acting as an economy of scale.22 respectively. Vail accounted for 17.6% of U.S visits and 13.6% of North American visits.1 Recent Developments

In FY 2017, Vail saw a 23% increase in mountain revenues due to two recent acquisitions. Vail has completed, on average, two acquisitions per year since 2015. The acquisitions have created substantial growth for the company; however, have burdened the company with debt. In 2022, the company owes a $700million debt payment associated with the acquisition of resort, which we assume will be refinanced. Although acquisitions show great growth opportunities, they represent risk due to the premium acquiring companies must pay. We do not believe the company is at any risk of defaulting on its long-term debt, however, we believe the company will be unable to fund similar deals with its existing debt outstanding. Historical growth rates and future growth rates indicate that skier

visits and mountain revenue are highly correlated. In addition, Stowe Mountain Resort lodging revenues move in the same direction as growth rates. We On June 7, 2017, Vail Resorts acquired Stowe Mountain Resort expect skier visits cap off at 15 million per year when MTN in Vermont for $41 million.24 The resort will be Vail’s first reaches capacity. In addition, we expect to market to hit steady- premier, high-end on the East Coast. The new resort offers over state growth with 8 years. 485 skiable acres, 116 trails and summer activities. Stowe

Mountain Resort is now included in Vail’s Epic Pass for the winter season.

7 Competitive Advantages to guests. The mountain resorts offer high-speed lift service and 1 receive yearly snowfall between 20 and 39 feet, which reduces Epic Pass MTN’s reliance on snow making equipment. In addition, The Epic Pass was launched in 2010.25 The season pass allows partnerships offer all-inclusive travel offers and marketing. guests to visit all Vail Resorts’ locations and 30 European ski resorts by purchasing a one-year pass. In addition, pass holders Season Pass: Season pass products drive customer loyalty and receive benefits and discounts for purchasing the pass. Vail offer revenue stability during the off-season. The Epic Pass, Epic derives over 50% of its revenue from lift tickets. The Epic Pass Mix App and EpicMix Academy allow Vail to target guests and provides a cushion for Vail during the summer months. In to create unique customer experiences. addition, the pass increases profit margins for the company because it is priced higher than a one-time lift ticket. Weaknesses Seasonality: The seasonality of the business can create losses Epic Mix Application from spring to late fall for mountain resorts, or during the winter The EpicMix application was released by Vail in 2010. The app for non-mountain resorts. 79% of total revenues for the Mountain and Lodging segments were earned during the second and third allows users to compete against one another, share photos, track 1 activity, access ski lift times and plan routes.25 Guests may access quarter of Fiscal 2016. The resort segment would be particularly the app with the purchase of an Epic Pass. The app was new to the vulnerable if there is a decline in visits during the busy season. ski industry and creates a unique guest experience. In addition, it allows Vail to track which trails are popular and if there are delays Government Approvals: All mountain resorts must obtain in ski lifts. approval from the Forest Service, U.S. Army Corp of Engineers and the New South Wales government. The Forest Service Epic Mix Academy reserves the right to review operations, approve construction and grant permits to use land. Mountain resorts must pay the In 2013, Vail Resorts launch EpicMix Academy to market to 1 guests. The goal of the software is to convert guests into season government 1.5% to 4% of sales to use these lands. pass holders.25 Season passes generate the most revenue for the company. The software collects information on the days skied, Opportunities activity, background of the guest and products purchased. The Year-round Activities: Given that Colorado continues to software allows Vail to have a competitive advantage over other experience population growth and increased visitors, resorts have resorts by establishing a loyal customer base and by personalizing the opportunity to offer year-round excursions such as hiking, marketing strategies to individual guests. In addition, the software climbing and mountain biking. The resort continues to offer new has the ability to target more local guests, which would provide amenities and services to attract guests during the summer season. revenue stability in the summer and winter months. Amenities: A $13 million investment to enhance chairlifts was completed in 2016. The investment increases capacity, reduces wait time for guests and improves passenger safety. Vail plans to update additional chairlifts at Whistler Blackcomb this year.

Threats Climate Change: The timing and amount of snowfall impact the frequency of guest visits and the duration of stay. Warm weather that leads to reduced snowfall may result in reduced skiable terrain and increased snowmaking costs. Mountain resorts are Source: Vail Resorts News Release25 particularly vulnerable to changing weather conditions because destination guests make up more than 50% of skier visits. Vail Facilities Resorts has made committed to a Zero Net Operating Footprint Vail Resorts has committed to improving ski lifts, snow by 2030 by achieving zero net emissions, zero waste to landfill, production equipment and their primary websites. In FY 2018, and zero impact to forests and wildlife.23 Vail will spend $148.37 million on capital expenditures.23 The most significant will be on upgrading chairlifts. The upgraded Leisure Travel: The hospitality industry is influenced by changes chairlifts will increase rider capacity and decrease the time it takes in consumer confidence, consumer spending and unemployment. to travel to the top of the mountain. The ongoing facility A recessionary period could impact revenues and create operating maintenance and chairlift upgrades create a competitive losses. advantage for the company. In the past three years, the company has upgraded more than 10 ten chairlifts. Catalyst for Growth/Change

S.W.O.T. Analysis International Markets Vail has recently focused on the East Coast and international Strengths markets. The company currently owns the majority of market Resorts: Each property offers a multitude of skiing and share on the West Coast and Canada. Vail’s most recent snowboarding experiences from beginner level to advanced. The acquisition of Stowe early this year signaled a shift in strategy. In resorts offer an array of lodging, dining, retail and other amenities the most recent investors’ presentation, Vail Resorts indicated that

8 it may look to Japan and the East Coast to grow its business (We KSL/Aspen formation. Effective ticket prices in 2018 will remain assume no acquisitions will be made.)23 consistent with 4% growth in comparison to 2017 taking into consideration a strong economy, high consumer confidence and Summer Tourism pricing power. Ticket prices FY 2019 to 2025 progress to a natural Summer tourism exceeds winter tourism in Colorado, Utah and rate of 2% inflation due to an increase in competition and a Lake Tahoe.18 However, ski resorts have not captured the market standardized economy over time. It is important to note that we for summer tourism. Vail announced that it will offer zip lines, do not believe Vail will enter into a pricing war with KSL/Aspen, ATV tours, mountain bike paths and other recreational activities as some suggest, due to the business’ premier portfolio of resorts. during the summer months. More than 50% of Vail’s revenues are Instead, growth rates will diminish to a normal rate of 2% earned during the winter months. Vail has committed to investing inflation. Ski school is forecasted as a percentage of lift ticket $6.0 million in summer activities this year. revenue year to year because these activities are driven by skier visits and similar pricing standards to the mountains. We Analysis of Recent Earnings determined dining revenue has historically grown by skier visit growth, and the forecast period reflects that. Retail and rental Vail Resorts released FY 2017 earnings on July 31, 2017. Net revenue will grow at 3% in 2018 due to an increase in mountain income was $210.6 million, an increase of 40.6%. Season pass visitation and rental sales, and slow to 2% inflation when sales increased 17% in units and 23% in sales dollars. Total skier mountain capacity is hit. Other revenue has been volatile due to visits increased 20.1% to 12.0 million; however, total visitation to acquisitions. Vail’s 2017 10-K suggests that, without acquisition U.S. resorts declined 5.4%. The primary reason for a 40.6% effects, other revenue grew by 2.2%. Thus, we continue to grow increase in earnings is due to the Whistler Blackcomb acquisition. Other revenue by 2.2% in the projection period, also because of Total Lodging Resort EBITDA increased 31.1% and real estate continued implementation of summer resort programs. EBITDA decreased 23.5%. EPS beat expectations primarily due to increased season pass sales. Lodging Revenues Owned hotel and managed condominiums revenue are the largest components of lodging revenue at 47%. We forecasted hotel revenue using the ADR formula of lodging revenue divided by hotel stays. Therefore, ADR and hotel stays were forecasted in order to determine hotel revenue. ADR will continue to grow at historical rates of near 5% in 2018 through 2019 based upon our positive economic and company analyses, progressing down to 2% inflation by 2025, taking into consideration price capacity and competition. We derived 2017 hotel stays from 2017 ADR, calculated total hotel stays possible and forecasted future stays

Source: NASDAQ based upon our occupancy rate forecast. We expect occupancy rates to grow at 1% in 2018 and hit capacity by 2022. Future occupancy rates will grow slower in comparison to the three-year historical average of 2.4% because, due to seasonality, we believe Valuation Analysis Vail is near capacity at their resorts. Hence, our model capped occupancy at 70.69% compared to the upper upscale hotel Financial Summary industry average of 74.1%. Forecasting ADR and occupancy increases, we derived hotel revenue. The same approach was used Vail is a $9.2B company with 2017 revenue of $1,907.2 million. for condominium revenue. Other revenue was held constant as a The company generates positive cash flow from operations year percentage of hotel and condominium revenue because it is to year, has a substantial line of revolving credit and reports impacted by similar lodging price increases and occupancy. $1,272,000,000 of long-term debt on the balance sheet.1 Transportation and golf revenue will grow at a 2% inflation rate because these activities are not closely tied to hotel or Revenue Growth condominium related fees. Dining revenue in 2018 was forecasted as an average of 2015 and 2016 hotel and condominium revenue Mountain Revenues to account for a temporary 2017 restaurant renovation, and grows To forecast lift tick revenues, we multiplied skier visits by the at 2% for inflation. effective ticket price. Historically, Vail has grown their skier base through acquisitions of other resorts. Our revenue forecast Real Estate Revenues analyzes Vail based upon its existing portfolio and does not reflect Real estate revenue was forecasted as a constant historical average an acquisition being made in the future. Thus, growth in skier due to the segment’s volatility and lack of information regarding visits is lower in 2018 through the final projection period future sales of properties. compared to historical years. Fiscal 2018 will see the highest growth in skier visits at 9.5% due to a full year of operations from Segment Operating Expenses Whistler and Stowe, an earlier Easter holiday, and the organic growth Vail will achieve. Fiscal 2019 through 2025 skier visits Mountain Expenses: decline year over year because Vail will eventually hit capacity at Total labor expenses will grow at 8% in 2018 and 4% in 2019 to its resorts and face increasing competition, especially from the account for an increase in staffing with Vail’s visitation growth

9 and wage pressure coming from low unemployment. In future Weighted Average Cost of Capital (WACC) years, wage expenses will stabilize down to 2% inflation. Retail cost of sales grows with retail revenue, keeping the company’s The Weighted Average Cost of Capital was used in order to margins constant with sales growth. General and administrative discount the free cash flows in the DCF and economic profit expenses decrease as a percentage of mountain revenue over time models to their present value. We used a one-time calculation of because, as the company grows revenue, general and WACC to discount all future cash flows, assuming that the administrative expenses generally remain constant. Since general amount of debt Vail has on its books is refinanced and remains as and administrative costs and other expenses cannot be tied to a percentage of non-cash assets. The market value of debt was specific revenue sources or economic impacts, they are kept as a calculated by adding the book value of long-term debt, long-term historical percentage of overall mountain revenue which debt due within one year and the PV of operating leases. The decreases through to the continuing value, assuming the company market value of equity is equal to the stock price multiplied by becomes more efficient as revenue grows. Along the same lines, shares outstanding both at November 8, 2017. The respective resort related fees are kept constant as a percent of mountain weights of each were then calculated to determine the WACC. revenue. Cost of Debt Lodging Expenses: Pre-tax Cost of Debt: 4.10%2 Labor, general and administrative other and reimbursed payroll After-tax Cost of Debt: 2.75% costs follow the same logic as mountain expenses. Vail Resorts has one 30-year bond issuance at a 2.95% yield. We believe the difference between the bond yield and the risk-free Real Estate Expenses: rate, .16%, is too small when valuing a company over a 30-year Real Estate expenses remain constant compared to historical valuation forecast taking into consideration the maturity of the ski averages because the segment is extremely volatile due to cost of industry and an increase in competition. Therefore, we took a sales. weighted average cost of bond yields from Vail’s comparable companies. This technique is effective because these companies Depreciation and Amortization represent the same growth, profitability and risk as Vail, but are in more mature industries. We arrived at a 4.10% cost of debt. The A depreciation rate was calculated in historical years, and an after-tax cost of debt, 2.75%, was used to determine the WACC average was taken into the forecasted period to depreciate gross because interest payments on debt are tax-deductible. property plant and equipment. Amortization expense was calculated using the same method. As a result, depreciation and Cost of Equity amortization are in line with guidance. Raw Beta: 0.8912 Risk-free Rate: 2.79%2 Investment Income Equity Risk Premium: 4.52%3 To determine the cost of equity, the capital asset pricing model Investment income increased nearly $6 million because of a $3.4 (CAPM) was used. Bloomberg was utilized to determine the raw million gain recognized on a short-term foreign currency forward beta and 30-year risk-free rate. Using a 30-year U.S bond yield, contract. We view the gain as a one-time event. Thus, we the risk-free rate as of November 8th, 2017 is 2.79%. The beta is calculated a historical ROI excluding Fiscal 2017 and multiplied based on a two-year, weekly return against the S&P 500. The it by investment assets which returned 2018E investment income daily beta was too volatile, and the monthly beta did not have to historical levels. sufficient data. The equity risk premium used is Damodaran’s trailing twelve months, adjusted payout number. Capital Expenditures Valuation Models Capital expenditures remains consistent with historical averages in the beginning stages of the projection period. Using this Discounted Cash Flow (DCF) & Economic Profit (EP) method, depreciation expense is slightly higher than capital The DCF and EP model is the most reliable valuation technique expenditures throughout these years. Although uncommon, we for Vail Resorts because of incomparable competitors and the believe this is appropriate for Vail because it occurs in non- opportunity to implement economic, industry and company acquisition years. At the end of the projection period, capital analyses. The one pitfall to the DCF and EP valuation for Vail is expenditures begin to exceed depreciation expense, assuming that the company has made a number of acquisitions over the Vail must revamp its capital expenditures as equipment grows years, making historical data difficult to analyze and older over time. Since the 10-K does not include CapEx guidance, carryforward. The DCF and EP model led to an intrinsic valuation historical growth rates were used. ranging from $249 to $255 per share, which we believe is an accurate representation of the firm. A key assumption, not already Dividends and Treasury Stock mentioned, within the DCF and EP model was the CV growth of NOPLAT. We chose 3%, appropriate considering historical GDP Assuming the company does not make acquisitions in the future, averages and the company’s current growth prospects. CV of Vail will generate a substantial amount of cash flow from ROIC was determined by dividing CV NOPLAT by CV-1 IC, operations over its investing section. Thus, we increased the which amounts to 30.57%. portion of net income attributable to a dividend and increased the percentage increase in treasury shares made per year.

10 Relative Valuation Beta and the Risk-Free Rate Relative valuation is an ineffective method for valuing Vail at the present time. First, there is only one other publicly traded ski The risk-free rate utilized for the model was based off the yield of company in the U.S, which is incomparable in size and growth. a 30-year Treasury. The same risk-free rate was used for the cost Second, we believe Vail deserves to trade at a premium because of debt and the cost of equity. We were interested in observing Vail dominates the current market. We chose Vail’s comparable how rising interest rates would affect the value of Vail Resorts. companies using Yahoo Finance’s stock screener, taking into Rates are expected to increase in December. A 0.2% increase in account for growth, profitability, size and risk factors such as the interest rate would decrease the intrinsic value to $208.28. market capitalization, return on equity, return on assets, beta, sector, TTM debt/equity and TTM PE multiples. The screen led us to a selection of Six Flags, Las Vegas Sands, Marriott Beta and the Equity Risk Premium International and Brown Forman. Each company faces more competition and is in a more mature or smaller industry compared Equity risk premium may be calculated many ways. The way to Vail. Although relative stock valuation is not appropriate at the utilized for the model was based upon Damodaran’s expected present time, we believe using comparable companies for other return. If the expected market to return increased, the cost of benchmarks, such as cost of debt, is appropriate. Reason being, equity for Vail Resorts would increase. For example, a 0.1% the ski industry will mature over a 30-year valuation time horizon. increase in our firms Beta and equity risk premium would decrease the intrinsic value by 14.75% DDM The dividend discount model returned a value of $172.91 per share. We believe this is an inaccurate representation of Vail’s future intrinsic valuation because the company’s growth expectations will change throughout the projection period. Vail is currently experiencing growth via acquisitions and the market values them at 4.2% CV EPS growth. In the future, we believe the growth rate will come down to 3% when the company grows organically. Therefore, our future stock price is extremely low in the CV year. As long as Vail meets expectations throughout the years, which we expect will decrease over time, Vail will grow at its cost of equity or CAPM, near our DCF and EP model forecast.

Sensitivity Analysis

CV Growth of NOPLAT and the WACC

When comparing these two metrics, we were interested in observing how a change in the CV growth or WACC would affect the stock price. These two metrics greatly affect the stock price. Our CV growth of NOPLAT was based on our prediction of real GDP growth. WACC is particularly sensitive to changes in our stock’s beta, the expected market return and the risk-free rate. A change in any of these variables is possible if the economy grows at a different rate than expected. For example, a 0.25% increase in CV growth of NOPLAT and a 0.10% decrease in WACC would increase the intrinsic value per share by 11.46%.

CV Growth of ROIC and WACC

Capital expenditures are a large part of Vail’s yearly budget. We would like to test how a change in ROIC would alter the value of our company. If the company were able to increase efficiencies at their facilities by implementing more technology, their ROIC will increase. Vail is expected to upgrade chair lifts and invest in their mobile application. A 2% increase or decrease in ROIC would increase intrinsic value by 0.62% or decrease it by 0.71%.

11 References: http://clients1.ibisworld.com.proxy.lib.uiowa.edu/reports/us/ industry/default.aspx?entid=1653 1. Vail Resorts, Inc. 2017 10-K 23. “Vail Resorts Reports Fiscal 2017 Fourth Quarter and Full http://files.shareholder.com/downloads/MTN/52270663 Year Results and Provides Fiscal 2018 Outlook.” Vail 41x0x960466/930534E1-1982-45E0-92A2- Resorts, 10 Nov 2017, AB6C1EEBD3CF/2017_Proxy_and_Form_10-K.pdf http://investors.vailresorts.com/releasedetail.cfm?ReleaseID 2. Bloomberg =1041959 3. FactSet 24. “Vail Resorts Closes Its Acquisition of Stowe Mountain 4. “Hotels Worldwide.” Hotels Worldwide Dossier, Statista Resort in Vermont, Representing the Company's First Ski Survey, Aug. 2017, statista.com. Resort on the East Coast.” Vail Resorts, 10 Nov 2017 5. “Civilian Unemployment Rate.” FRED, 3 Nov. 2017, http://investors.vailresorts.com/releasedetail.cfm?ReleaseID fred.stlouisfed.org/series/UNRATE. =1029453 6. “Nonfarm Business Sector: Real Compensation Per 25. “2017 Investors’ Conference.” Vail Resorts, 10 Nov 2017 Hour.” FRED, 2 Nov. 2017, http://files.shareholder.com/downloads/MTN/5227066341x fred.stlouisfed.org/series/COMPRNFB. 0x933005/F3A493E9-8F25-4CE5-96C3- 7. “Nonfarm Business Sector: Real Output Per Hour of All 242618888357/2017_Investor_Presentation_vFINAL.pdf Persons.” FRED, 2 Nov. 2017, 26. “National Temperature and Precipitation Maps.” NOAA, 10 fred.stlouisfed.org/series/OPHNFB. Nov 2017 8. “Real Gross Domestic Product.” FRED, 27 Oct. 2017, https://www.ncdc.noaa.gov/temp-and-precip/us-maps/ fred.stlouisfed.org/series/GDPC1. 27. “Epic Pass.” EpicPass, 10 Nov 2017 9. Applied Equity Valuation Course Pack https://www.epicpass.com 10. Investopedia 28. “Winter Sports.” Winter Sports Dossier, Statista Survey, 11. Fidelity Investments. Hotels, Restaurants and Leisure. April. 2017, statista.com. https://eresearch.fidelity.com/eresearch/m 29. “Travel and Tourism in the U.S.” Travel and Tourism arkets_sectors/sectors/industries.jhtml?tab=learn&industry= Dossier, Statista Survey, Aug. 2017, statista.com. 253010 30. “Real Disposable Person Income: Per Capita.” FRED, 2 Nov. 12. Moody’s Analytics. Economic Forecasts. 2017 https://www.economy.com/dismal/data/forecast https://fred.stlouisfed.org/series/A229RX0 13. Net Advantage, Capital IQ. 31. Jason Blevins. “Aspen Skiing, KSL Capital venture adds https://www-capitaliq. com.proxy.lib.uiowa.edu Utah’s Deer Valley to growing resort portfolio.” Denver /CIQDotNet/Research/Document Post, 14 Nov 2017 14. IBISWorld, Chain Restaurants http://www.denverpost.com/2017/08/21/aspen-skiing-ksl- http://clients1.ibisworld.com.proxy.lib.uiowa.edu/reports/us/ capital-venture-buys-utahs-deer-valley/ industry/default.aspx?entid=1677 32. Staff, Investopedia. “Real Gross Domestic Product 15. IBIS World, Hotels and Motels (GDP).” Investopedia, 3 Oct. 2014, http://clients1.ibisworld.com.proxy.lib.uiowa.edu/reports/us/ www.investopedia.com/terms/r/realgdp.asp. industry/default.aspx?entid=1661 33. Nath, Trevir. “Airbnb vs The Hotel Industry, Who Will 16. Investopedia, “Key Financial Ratios to Analyze Hospitality Win.” Investopedia, 13 Dec. 2014, Industry” www.investopedia.com/articles/investing/112414/airbnb- http://www.investopedia.com/articles/active- brings-sharing-economy-hotels.asp. trading/082615/key-financial-ratios-analyze-hospitality- 34. Staff, Investopedia. “Disposable Income.” Investopedia, 5 industry.asp Nov. 2014, 17. Google Stock Indicator. www.investopedia.com/terms/d/disposableincome.asp. https://www.google.com/search?q=vail+resorts+stock&oq= 35. Elivs Picardo, CFA. “How Mergers and Acquisitions Can vail+resorts+stock&aqs=chrome.0.35i39j69i61j69i60j69i61 Affect a Company.” 13 Nov 2017 j0l2.2132j0j7&sourceid=chrome&ie=UTF-8 https://www.investopedia.com/articles/investing/102914/ho 18. Dean Runyan Associates. Colorado Travel Impacts. w-mergers-and-acquisitions-can-affect-company.asp http://files.shareholder.com/downloads/MTN/5027306305x 36. Aspen Snowmass. “About Us.” 14 Nov 2017, 0x913014/68BF4BB5-DB35-4BCD-AAA4- https://www.aspensnowmass.com/we-are-different/about-us 92512CF4D0B4/2016_Proxy_and_Form_10-K.pdf 37. Investopedia. “Gross Margin.” Investopedia, 3 Oct. 2014, 19. Whistler Blackcomb. 2010 Winter Olympic and Paralympic https://www.investopedia.com/terms/g/grossmargin.asp Games. https://www.whistlerblackcomb.com/about- 38. Net, Hospitality. “The Impact of AirBnb on Hotel and us/2010-winter-games Hospitality Industry | By Ahmed Mahmoud – Hospitality 20. Vail Resorts, Inc. 10-Q. Net.” Hospitality Net, 1 Jan. 6735, http://investors.vailresorts.com/secfiling.cfm?filingID=8120 www.hospitalitynet.org/opinion/4074708.html 11-17-39 39. Editors, SKI Magazine. “Aspen and KSL Close $1.5 Billion 21. “Winners and Losers Under Trump’s Tax Plan.” WSJ, 3 Nov. Deal.” Ski Mag, 2 Aug. 2017, www.skimag.com/ski-resort- 2017, life/aspen-ksl-continue-buying-spree. https://www.wsj.com/articles/winners-and-losers-under-the- 40. Ydstie, John. “Trump Picks Federal Reserve Insider Jerome trump-tax-plan-1506542307 Powell To Be Its Chairman.” NPR, NPR, 2 Nov. 2017, 22. “Ski and Snowboard Resorts.” IBISWorld, 10 Nov 2017

12 www.npr.org/sections/thetwoway/2017/11/02/ 560800923/trump-picks-federal-reserve-insider-jerome- powell-to-be-its-chairman. 41. Ydstie, John. “Trump Picks Federal Reserve Insider Jerome Powell To Be Its Chairman.” NPR, NPR, 2 Nov. 2017, www.npr.org/sections/thetwo- way/2017/11/02/560800923/trump-picks-federal-reserve- insider-jerome-powell-to-be-its-chairman. 42. Consumer Confidence Index® | The Conference Board, www.conference-board.org/data/consumerconfidence 43. https://seekingalpha.com/article/4102557-united-states- really-full-employment?page=2 44. “Consumer Price Index Frequently Asked Questions.” U.S. Bureau of Labor Statistics, U.S. Bureau of Labor Statistics, www.bls.gov/cpi/questions-and-answers.htm. 45. “CPI Calculator Information.” The Minneapolis Fed, 14 Nov 2017, https://www.minneapolisfed.org/community/teaching- aids/cpi-calculator-information/consumer-price-index-and- inflation-rates-1913. 46. Mike Doyle. “How Long is a Typical Ski Season.” 14 Nov 2017, https://www.thoughtco.com/how-long-is-typical-ski-season- 3009674 47. RRC Associates. “Kottke National End of Season Survey.” 14 Nov 2017, http://www.nsaa.org/media/303945/visits.pdf 48. ZRankings. “Season Pass Buyer's Guide.” ZRankings, 14 Nov 2017, www.zrankings.com/ski-resorts/season-passes. 49. MAX Pass. “The Mountain.” 14 Nov 2017, https://www.themaxpass.com 50. Mountain Collective. “Details.” 14 Nov 2017, 51. https://mountaincollective.com 52. Ski Colorado. “Pass Details.” 14 Nov 2017, https://www.skicolorado.com/#pass-details 53. Donny O’Neil. “Recent major ski resort acquisitions result in widespread speculation of new season pass.” 14 Nov 2017, https://freeskier.com/stories/with-ski-resorts-being-bought- at-a-rapid-rate-speculation-of-a-new-season-pass-pervades

13 Important Disclaimer

This report was created by students enrolled in the Applied Equity Valuation (FIN:4250) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report.

14 Vail Resorts, Inc. Key Assumptions of Valuation Model

Ticker Symbol MTN Current Share Price $234.89 Current Model Date 11/08/17 FY End (month/day) 31-Jul

Pre-Tax Cost of Debt 4.10% Cost of Debt 2.75% Beta 0.891 Risk-Free Rate 2.79% Equity Risk Premium 4.52% CV Growth of NOPLAT 3.00% CV Growth of EPS 3.00% CV ROIC 28.64% WACC 6.16% Current Dividend Yield 1.86% Marginal Tax Rate 33.00% Vail Resorts, Inc. Revenue Decomposition In thousands Fiscal Years Ending July 31st 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 Mountain net revenue Lift Tickets 536,458 658,047 818,341 931,940 1,011,807 1,079,684 1,142,657 1,200,504 1,245,928 1,284,814 1,318,354 Ski School 126,206 143,249 177,748 202,231 219,562 234,292 247,957 260,509 270,366 278,805 286,083 Dining 101,010 121,008 150,587 161,881 169,975 175,924 181,202 185,732 188,518 190,403 191,355 Retail/rental 219,153 241,134 293,428 302,231 311,298 319,080 326,100 333,274 339,940 346,738 353,673 Other 121,202 141,166 171,682 175,459 179,319 183,264 187,296 191,416 195,628 199,931 204,330 Total Mountain net revenue 1,104,029 1,304,604 1,611,786 1,773,742 1,891,962 1,992,245 2,085,212 2,171,436 2,240,380 2,300,691 2,353,795 Lodging net revenue Owned hotel rooms 57,916 63,520 63,939 67,639 71,077 74,475 77,092 79,099 80,959 82,661 84,564 Managed condominiums 58,936 61,934 65,694 68,322 70,030 71,605 73,038 74,498 75,988 77,508 79,058 Dining 46,209 49,225 48,449 53,351 54,418 55,507 56,617 57,749 58,904 60,082 61,284 Transportation 23,079 22,205 22,173 22,616 23,069 23,530 24,001 24,481 24,970 25,470 25,979 Golf 16,340 17,519 17,837 18,194 18,558 18,929 19,307 19,693 20,087 20,489 20,899 Other 41,760 47,833 46,238 47,255 48,295 49,357 50,344 51,351 52,378 53,426 54,494 Payroll cost reimbursement 10,313 12,318 14,184 14,874 15,437 15,981 16,424 16,804 17,170 17,522 17,900 Total Lodging net revenue 254,553 274,554 278,514 292,252 300,883 309,384 316,823 323,675 330,458 337,159 344,179 Real Estate net revenue Total Real Estate net revenue 41,342 22,128 16,918 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Mountain Statistics Skier visits (in thousands) 8,466 10,032 12,047 13,191 13,851 14,336 14,766 15,135 15,362 15,516 15,593 Effective ticket price 63.37 65.59 67.93 70.65 73.05 75.31 77.38 79.32 81.10 82.81 84.55 Lodging Hotel ADR 216.76 227.27 245.31 257.58 268.65 279.40 287.78 294.97 301.61 307.64 314.41 Condominium ADR 316.32 325.38 347.64 361.55 376.01 387.29 396.97 405.90 414.02 422.30 430.75 Occupancy rate 64.70% 67.40% 68.50% 69.01% 69.53% 70.05% 70.40% 70.47% 70.54% 70.61% 70.69% Real Estate Real estate held for sale and investment (in thousands) 129,825 111,088 103,405 99,269 95,298 91,486 87,827 86,070 84,349 82,662 81,009 Resort revenue by fiscal half: Quarters 2 and 3 80% 79% 80% 80% 80% 80% 80% 80% 80% 80% 80% Quarters 1 and 4 20% 21% 20% 20% 20% 20% 20% 20% 20% 20% 20% By skier Destination guests 59% 58% 61% 61% 61% 61% 61% 61% 61% 61% 61% Local guests 41% 42% 39% 39% 39% 39% 39% 39% 39% 39% 39% Ski destinations World-class resorts 10 9 11 11 11 11 11 11 11 11 11 Urban ski areas 2 3 3 3 3 3 3 3 3 3 3 Vail Resorts, Inc. Income Statement In thousands, except per share amounts Fiscal Years Ending July 31st 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 Net revenue: Mountain revenue 1,104,029 1,304,604 1,611,786 1,773,742 1,891,962 1,992,245 2,085,212 2,171,436 2,240,380 2,300,691 2,353,795 Lodging revenue 254,553 274,554 278,514 292,252 300,883 309,384 316,823 323,675 330,458 337,159 344,179 Real estate revenue 41,342 22,128 16,918 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Total net revenue 1,399,924 1,601,286 1,907,218 2,085,994 2,212,845 2,321,629 2,422,035 2,515,111 2,590,838 2,657,850 2,717,974 Mountain expense: Total labor expense 291,582 338,250 403,020 435,262 452,672 468,516 482,571 498,255 508,220 518,384 528,752 Retail cost of sales 87,817 93,946 112,902 116,289 119,778 122,772 125,473 128,234 130,798 133,414 136,082 Resort related fees 59,685 68,890 83,503 91,880 98,004 103,198 108,014 112,480 116,052 119,176 121,927 General and administrative 147,272 173,640 199,582 216,397 227,981 237,077 243,970 249,715 252,043 255,377 260,094 Other 190,791 206,746 248,324 271,383 287,578 300,829 312,782 323,544 331,576 338,202 343,654 Total Mountain expense 777,147 881,472 1,047,331 1,131,210 1,186,013 1,232,392 1,272,810 1,312,228 1,338,689 1,364,552 1,390,509 Lodging expense: Labor expenses 110,168 114,404 117,183 121,284 125,529 129,295 133,174 137,502 140,252 143,057 145,918 General and administrative 32,481 35,351 37,217 38,782 39,626 40,436 41,187 41,754 42,629 43,156 43,711 Other 79,915 84,312 82,843 86,653 89,061 91,423 93,463 95,322 97,155 98,956 100,500 Reimbursed payroll cost 10,313 12,318 14,184 14,613 15,044 15,469 15,841 16,184 16,523 16,858 17,209 Total Lodging expense 232,877 246,385 251,427 261,332 269,261 276,624 283,665 290,762 296,559 302,028 307,338 Real Estate expense: Cost of sales 34,765 17,682 14,534 16,108 16,108 16,108 16,108 16,108 16,108 16,108 16,108 Other 13,643 6,957 9,549 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 Total Real Estate expense 48,408 24,639 24,083 24,108 24,108 24,108 24,108 24,108 24,108 24,108 24,108 Depreciation & amortization expense 149,123 161,488 189,157 200,399 209,409 220,045 230,140 240,787 249,552 262,852 278,822 Other Operating Gains (Losses) 18,144 (4,323) (15,964) ------Income (loss) from operations 210,513 282,979 379,256 468,946 524,054 568,460 611,312 647,226 681,930 704,310 717,196 Other: Investment Income, net 1,068 2,006 7,997 2,026 2,046 2,067 2,087 2,108 2,129 2,151 2,172 Interest expense, net (51,241) (42,366) (54,089) (52,169) (50,226) (49,499) (48,899) (42,957) (42,980) (43,517) (40,501) Gain (loss) on extinguishment of debt (11,012) - 15,285 ------Income (loss) before provision for income taxes 149,328 242,619 348,449 418,803 475,874 521,028 564,500 606,377 641,080 662,943 678,867 Provision (benefit) for income taxes 34,718 93,165 116,731 138,205 157,038 171,939 186,285 200,104 211,556 218,771 224,026 Net income (loss) 114,610 149,454 231,718 280,598 318,836 349,089 378,215 406,273 429,523 444,172 454,841 Net loss (income) attributable to noncontrolling interests 144 300 (21,165) (21,277) (22,571) (23,681) (24,705) (25,654) (26,427) (27,110) (27,723) Net income attributable to Vail Resorts, Inc. 114,754 149,754 210,553 259,321 296,265 325,408 353,510 380,619 403,097 417,062 427,118

Weighted average shares outstanding - basic 36,342 36,276 39,251 40,325 40,815 41,305 41,792 42,119 42,183 42,138 42,091 Year end shares outstanding 36,514 36,179 40,081 40,570 41,060 41,551 42,034 42,205 42,160 42,116 42,065 Net income (loss) per share - basic 3.16 4.13 5.36 6.43 7.26 7.88 8.46 9.04 9.56 9.90 10.15 Vail Resorts, Inc. Balance Sheet In thousands Fiscal Years Ending July 31st 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 Assets Current Assets: Cash & cash equivalents 35,459 67,897 117,389 231,956 405,495 574,320 597,885 755,602 867,105 848,852 894,952 Restricted cash 13,012 6,046 10,273 10,430 11,064 11,608 12,110 12,576 12,954 13,289 13,590 Trade receivables, net 113,990 147,113 186,913 198,169 210,220 220,555 230,093 238,936 246,130 252,496 258,208 Inventories, net 73,485 74,589 84,814 93,870 99,578 104,473 108,992 113,180 116,588 119,603 122,309 Deferred income taxes 27,962 ------Other current assets 24,235 27,220 33,681 35,462 37,618 39,468 41,175 42,757 44,044 45,183 46,206 Total Current Assets 288,143 322,865 433,070 569,888 763,976 950,424 990,255 1,163,050 1,286,821 1,279,424 1,335,264 Property, Plant & Equipment: Land & land improvements 431,854 440,300 553,655 564,728 576,023 593,303 611,102 629,436 654,613 680,797 708,029 Buildings & building improvements 1,006,821 1,025,515 1,210,864 1,283,516 1,360,527 1,455,764 1,557,667 1,666,704 1,800,040 1,962,044 2,158,248 Machinery & equipment 815,946 866,008 987,080 1,046,305 1,109,083 1,175,628 1,257,922 1,345,977 1,453,655 1,584,484 1,742,932 Furniture & fixtures 286,863 284,959 280,292 283,095 285,926 288,785 291,673 294,590 297,536 300,511 303,516 Software 106,433 103,754 108,048 111,289 114,628 118,067 122,790 127,701 132,809 139,450 146,422 Vehicles 61,036 58,159 59,596 60,788 62,004 63,864 66,418 69,075 71,838 76,148 80,717 Construction in progress 53,158 39,396 49,359 50,346 51,353 52,380 53,952 55,570 57,237 59,527 61,908 Gross property, plant & equipment 2,762,111 2,818,091 3,248,894 3,400,067 3,559,543 3,747,791 3,961,524 4,189,052 4,467,728 4,802,961 5,201,773 Accumulated depreciation (1,375,836) (1,454,277) (1,534,740) (1,726,844) (1,927,958) (2,139,708) (2,361,554) (2,594,046) (2,835,303) (3,089,860) (3,360,352) Property, plant & equipment, net 1,386,275 1,363,814 1,714,154 1,673,223 1,631,585 1,608,083 1,599,971 1,595,006 1,632,425 1,713,100 1,841,420 Real estate held for sale & investment 129,825 111,088 103,405 99,269 95,298 91,486 87,827 86,070 84,349 82,662 81,009 Deferred charges & other assets 40,796 35,207 45,414 47,978 50,895 53,397 55,707 57,848 59,589 61,131 62,513 Goodwill, net 500,433 509,037 1,519,743 1,519,743 1,519,743 1,519,743 1,519,743 1,519,743 1,519,743 1,519,743 1,519,743 Intangible assets, net 144,149 140,007 294,932 286,637 278,342 270,047 261,752 253,457 245,162 236,867 228,537 Total Assets 2,489,621 2,482,018 4,110,718 4,196,738 4,339,840 4,493,181 4,515,254 4,675,174 4,828,088 4,892,926 5,068,486 Liabilities and Stockholders' Equity Current Liabilities: Total accounts payable & accrued liabilities 331,299 397,488 467,669 510,026 541,041 572,281 597,032 625,005 643,823 660,476 675,416 Income taxes payable 57,194 95,639 98,491 82,923 94,223 103,163 111,771 120,063 126,934 131,263 134,416 Total Current Liabilities 388,493 493,127 566,160 592,949 635,264 675,445 708,803 745,068 770,757 791,738 809,832 Long-term debt, net of current maturities 816,830 700,263 1,272,421 1,225,018 1,207,282 1,192,669 1,047,730 1,048,285 1,061,395 987,836 1,029,102 Other long-term liabilities 255,916 270,168 301,736 281,736 261,736 241,736 221,736 201,736 181,736 161,736 141,736 Deferred income taxes 147,796 129,994 171,442 174,871 178,368 181,936 185,574 189,286 193,072 196,933 200,872 Total Liabilities 1,609,035 1,593,552 2,311,759 2,274,574 2,282,650 2,291,786 2,163,843 2,184,375 2,206,960 2,138,243 2,181,542 Stockholders' Equity: Common stock and additional paid in capital 623,925 636,402 1,222,965 1,253,734 1,284,504 1,315,273 1,346,042 1,358,350 1,358,350 1,358,350 1,358,350 Accumulated other comprehensive income (loss) (4,913) (1,550) 44,395 44,395 44,395 44,395 44,395 44,395 44,395 44,395 44,395 Retained earnings 440,748 486,667 550,985 629,559 718,883 816,505 921,851 1,034,515 1,153,025 1,274,807 1,398,671 Treasury stock (193,192) (246,979) (247,189) (254,605) (262,243) (270,110) (280,914) (292,151) (306,759) (322,097) (341,422) Noncontrolling interests 14,018 13,926 227,803 249,080 271,651 295,332 320,037 345,691 372,117 399,227 426,951 Total Stockholders' Equity 880,586 888,466 1,798,959 1,922,164 2,057,190 2,201,395 2,351,411 2,490,799 2,621,128 2,754,683 2,886,944 Total Liabilities and Stockholders' Equity 2,489,621 2,482,018 4,110,718 4,196,738 4,339,840 4,493,181 4,515,254 4,675,174 4,828,088 4,892,926 5,068,486 Vail Resorts, Inc. Cash Flow Statement In thousands Fiscal Years Ending July 31st 2015 2016 2017 Cash flows from Operating Activities Net income (loss) 114,610 149,454 231,718 Adjustments to reconcile: Depreciation & amortization 149,123 161,488 189,157 Stock-based compensation expense 15,753 17,025 18,315 Deferred income taxes, net 12,968 7,626 36,437 Canyons obligation accreted interest expense 5,596 5,644 5,687 Change in fair value of contigent consideration (3,650) 4,200 16,300 Foreign currency gain on intercompany loans - - (15,285) Loss (gain) on litigation settlement (26,400) - - Loss (gain) on sale of real property (151) (5,295) (6,766) Loss on extinguishment of debt 11,012 - - Payment of tender premium (8,636) - - Other non-cash expense (income), net 25,260 7,680 (1,966) Changes in working capital and non-current accounts: Restricted cash 162 6,966 2,206 Accounts receivable, net (15,350) (32,991) (36,291) Inventories, net (1,304) (843) 8,086 Investments in real estate - - - Accounts payable & accrued liabilities 4,498 42,367 (14,177) Income taxes payable 41,783 56,553 18,076 Other assets & liabilities, net (21,614) 6,888 5,417 Net cash flows from operating activities 303,660 426,762 456,914 Cash Flows from Investing Activities Capital expenditures (123,884) (109,237) (144,432) Acquisition of businesses, net of cash acquired (307,051) (20,245) (553,220) Cash received from sale of real property 2,541 7,386 7,992 Other investing activities, net 1,326 (1,920) 6,824 Net cash flows from investing activities (427,068) (124,016) (682,836) Cash Flows from Financing Activities Proceeds from borrowings under term loan and revolver 688,000 210,000 686,292 Payment on debt (510,222) (329,641) (267,014) Repurchases of common stock - (53,787) (210) Dividends paid (75,506) (103,835) (146,235) Other financing activities, net 12,979 6,046 (941) Net cash flows from financing activities 115,251 (271,217) 271,892 Effect of exchange rate changes on cash & cash equivalents (790) 909 3,522 Net increase (decrease) in cash & cash equivalents (8,947) 32,438 49,492 Cash & cash equivalents, beginning of period 44,406 35,459 67,897 Cash & cash equivalents, end of period 35,459 67,897 117,389 Vail Resorts, Inc. Forecasted Cash Flow Statement In thousands Fiscal Years Ending July 31st 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 Cash Flows from Operating Activities Net income (loss) 280,598 318,836 349,089 378,215 406,273 429,523 444,172 454,841 Adjustments to reconcile: Depreciation & amortization 200,399 209,409 220,045 230,140 240,787 249,552 262,852 278,822 Deferred income taxes, net 3,429 3,497 3,567 3,639 3,711 3,786 3,861 3,939 Changes in working capital and non-current accounts: Restricted cash (157) (634) (544) (502) (465) (379) (335) (301) Accounts receivable, net (11,256) (12,051) (10,334) (9,539) (8,842) (7,194) (6,366) (5,712) Inventories, net (9,056) (5,708) (4,895) (4,518) (4,188) (3,408) (3,016) (2,706) Deferred charges and other assets (2,564) (2,918) (2,502) (2,309) (2,141) (1,742) (1,541) (1,383) Other current assets (1,781) (2,156) (1,849) (1,707) (1,582) (1,287) (1,139) (1,022) Investments in real estate 4,136 3,971 3,812 3,659 1,757 1,721 1,687 1,653 Accounts payable & accrued liabilities 42,357 31,015 31,241 24,750 27,974 18,818 16,653 14,941 Income taxes payable (15,568) 11,300 8,940 8,607 8,292 6,871 4,329 3,153 Net cash from operating activities 490,537 554,561 596,569 630,436 671,574 696,263 721,157 746,226 Cash Flows from Investing Activities Capital expenditures (151,173) (159,476) (188,248) (213,733) (227,528) (278,676) (335,233) (398,812) Acquisition of businesses, net of cash acquired ------Net cash from investing activities (151,173) (159,476) (188,248) (213,733) (227,528) (278,676) (335,233) (398,812) Cash Flows from Financing Activities Proceeds (payment) of debt (47,403) (17,736) (14,613) (144,939) 555 13,110 (73,559) 41,266 Proceeds (payment) of other long-term debt (20,000) (20,000) (20,000) (20,000) (20,000) (20,000) (20,000) (20,000) Repurchases of common stock (7,416) (7,638) (7,867) (10,804) (11,237) (14,608) (15,338) (19,326) Proceeds from exercise of stock options 30,769 30,769 30,769 30,769 12,308 0 0 0 Dividends paid (180,747) (206,941) (227,786) (248,164) (267,955) (284,586) (295,280) (303,254) Net cash from financing activities (224,796) (221,546) (239,497) (393,138) (286,329) (306,084) (404,177) (301,313) Net increase (decrease) in cash & cash equivalents 114,567 173,539 168,825 23,565 157,717 111,503 (18,253) 46,100 Cash & cash equivalents, beginning of period 117,389 231,956 405,495 574,320 597,885 755,602 867,105 848,852 Cash & cash equivalents, end of period 231,956 405,495 574,320 597,885 755,602 867,105 848,852 894,952 Vail Resorts, Inc. Value Driver Estimation In thousands Fiscal Years Ending July 31st 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 Assumptions: WACC 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% Cost of Debt 4.10% 4.10% 4.10% 4.10% 4.10% 4.10% 4.10% 4.10% 4.10% 4.10% 4.10% Normal Cash % of Sales 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% Marginal Tax Rate 33.00% 33.00% 33.00% 33.00% 33.00% 33.00% 33.00% 33.00% 33.00% 33.00% 33.00%

Operating Revenues 1,399,924 1,601,286 1,907,218 2,085,994 2,212,845 2,321,629 2,422,035 2,515,111 2,590,838 2,657,850 2,717,974 Less: Operating Expenses (1,058,432) (1,152,496) (1,322,841) (1,416,649) (1,479,382) (1,533,124) (1,580,583) (1,627,098) (1,659,355) (1,690,688) (1,721,956) Less: Depreciation and Amortization (149,123) (161,488) (189,157) (200,399) (209,409) (220,045) (230,140) (240,787) (249,552) (262,852) (278,822) Add: Implied Interest on Operating Leases 8,607 9,556 9,856 10,390 10,131 9,985 9,935 9,904 10,136 10,637 11,434 EBITA 200,976 296,858 405,076 479,336 534,185 578,445 621,247 657,130 692,066 714,947 728,630

Income Tax Provisions 34,718 93,165 116,731 138,205 157,038 171,939 186,285 200,104 211,556 218,771 224,026 Less: Tax Shield on Interest and Investment Income (352) (662) (2,639) (669) (675) (682) (689) (696) (703) (710) (717) Add: Tax on Interest Expense 16,910 13,981 17,849 17,216 16,574 16,335 16,137 14,176 14,183 14,361 13,365 Add: Tax on Operating Leases 2,840 3,153 3,252 3,429 3,343 3,295 3,278 3,268 3,345 3,510 3,773 Less: Gain on Sale of Real Property & Litigation (8,712) (1,747) (2,233) ------Add: Loss on Extinguishment of Debt (50) ------Less: Total Adjusted Taxes (45,353) (107,890) (132,961) (158,181) (176,281) (190,887) (205,011) (216,853) (228,382) (235,933) (240,448)

Add: Total Change in Deferred Taxes 20,521 10,160 41,448 3,429 3,497 3,567 3,639 3,711 3,786 3,861 3,939

NOPLAT 176,143 199,128 313,563 324,584 361,401 391,125 419,874 443,988 467,470 482,876 492,121 NOPLAT Growth 90.83% 13.05% 57.47% 3.51% 11.34% 8.22% 7.35% 5.74% 5.29% 3.30% 1.91%

Normal Cash 23,799 27,222 32,423 35,462 37,618 39,468 41,175 42,757 44,044 45,183 46,206 Trade Receivables 113,990 147,113 186,913 198,169 210,220 220,555 230,093 238,936 246,130 252,496 258,208 Inventories 73,485 74,589 84,814 93,870 99,578 104,473 108,992 113,180 116,588 119,603 122,309 Other Current Assets 24,235 27,220 33,681 35,462 37,618 39,468 41,175 42,757 44,044 45,183 46,206 Current Operating Assets 235,509 276,144 337,831 362,963 385,035 403,963 421,434 437,629 450,806 462,466 472,927

Trades Payable 62,099 72,658 71,558 78,225 82,982 87,061 90,826 94,317 97,156 99,669 101,924 Accrued Salaries, Wages, Benefits & Deferred Compensation 33,461 43,086 77,374 83,440 88,514 92,865 96,881 100,604 103,634 106,314 108,719 Deferred Revenue 145,949 182,506 240,096 262,835 278,818 297,168 310,020 326,964 336,809 345,520 353,337 Deposits 19,336 23,307 23,742 26,075 27,661 29,020 30,275 31,439 32,385 33,223 33,975 Income Taxes Payable 57,194 95,639 98,491 82,923 94,223 103,163 111,771 120,063 126,934 131,263 134,416 Other Current Liabilities 46,018 46,756 54,899 59,451 63,066 66,166 69,028 71,681 73,839 75,749 77,462 Noninterest-Bearing Current Liabilities 364,057 463,952 566,160 592,949 635,264 675,445 708,803 745,068 770,757 791,738 809,832

Total Working Capital (128,548) (187,808) (228,329) (229,986) (250,229) (271,482) (287,369) (307,438) (319,951) (329,273) (336,905) Add: Net PPE 1,386,275 1,363,814 1,714,154 1,673,223 1,631,585 1,608,083 1,599,971 1,595,006 1,632,425 1,713,100 1,841,420 Add: Intangibles 144,149 140,007 294,932 286,637 278,342 270,047 261,752 253,457 245,162 236,867 228,537 Add: PV of Operating Leases 209,916 233,068 240,383 253,404 247,098 243,538 242,310 241,558 247,225 259,443 278,876 Less: Other Liabilities (255,916) (270,168) (301,736) (281,736) (261,736) (241,736) (221,736) (201,736) (181,736) (161,736) (141,736) Invested Capital 1,355,876 1,278,913 1,719,403 1,701,542 1,645,060 1,608,451 1,594,928 1,580,846 1,623,124 1,718,401 1,870,193 Invested Capital Growth 18.87% -5.68% 34.44% -1.04% -3.32% -2.23% -0.84% -0.88% 2.67% 5.87% 8.83%

NOPLAT 176,143 199,128 313,563 324,584 361,401 391,125 419,874 443,988 467,470 482,876 492,121 Less: Change in Invested Capital (215,194) 76,963 (440,491) 17,861 56,482 36,610 13,523 14,081 (42,278) (95,277) (151,792) FCF (39,051) 276,091 (126,928) 342,445 417,883 427,735 433,397 458,070 425,192 387,599 340,329

Beginning Invested Capital 1,140,682 1,355,876 1,278,913 1,719,403 1,701,542 1,645,060 1,608,451 1,594,928 1,580,846 1,623,124 1,718,401 ROIC 15.44% 14.69% 24.52% 18.88% 21.24% 23.78% 26.10% 27.84% 29.57% 29.75% 28.64% WACC 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% EP 105,882 115,612 234,787 218,676 256,593 289,796 320,800 345,747 370,096 382,898 386,274 Vail Resorts, Inc. Common Size Balance Sheet (Percent Sales)

Fiscal Years Ending July 31st 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 Assets Current Assets: Cash & cash equivalents 2.53% 4.24% 6.15% 11.12% 18.32% 24.74% 24.69% 30.04% 33.47% 31.94% 32.93% Restricted cash 0.93% 0.38% 0.54% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% Trade receivables, net 8.14% 9.19% 9.80% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% 9.50% Inventories, net 5.25% 4.66% 4.45% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% Deferred income taxes 2.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Other current assets 1.73% 1.70% 1.77% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% 1.70% Total Current Assets 20.58% 20.16% 22.71% 27.32% 34.52% 40.94% 40.89% 46.24% 49.67% 48.14% 49.13% Property, plant & equipment, net 99.03% 85.17% 89.88% 80.21% 73.73% 69.27% 66.06% 63.42% 63.01% 64.45% 67.75% Real estate held for sale & investment 9.27% 6.94% 5.42% 4.76% 4.31% 3.94% 3.63% 3.42% 3.26% 3.11% 2.98% Deferred charges & other assets 2.91% 2.20% 2.38% 2.30% 2.30% 2.30% 2.30% 2.30% 2.30% 2.30% 2.30% Goodwill, net 35.75% 31.79% 79.68% 72.85% 68.68% 65.46% 62.75% 60.42% 58.66% 57.18% 55.91% Intangible assets, net 10.30% 8.74% 15.46% 13.74% 12.58% 11.63% 10.81% 10.08% 9.46% 8.91% 8.41% Total Assets 177.84% 155.00% 215.53% 201.19% 196.12% 193.54% 186.42% 185.88% 186.35% 184.09% 186.48% Liabilities and Stockholders' Equity Current Liabilities: Total accounts payable & accrued liabilities 23.67% 24.82% 24.52% 24.45% 24.45% 24.65% 24.65% 24.85% 24.85% 24.85% 24.85% Income taxes payable 4.09% 5.97% 5.16% 3.98% 4.26% 4.44% 4.61% 4.77% 4.90% 4.94% 4.95% Total Current Liabilities 27.75% 30.80% 29.69% 28.43% 28.71% 29.09% 29.26% 29.62% 29.75% 29.79% 29.80% Long-term debt, net of current maturities 58.35% 43.73% 66.72% 58.73% 54.56% 51.37% 43.26% 41.68% 40.97% 37.17% 37.86% Other long-term liabilities 18.28% 16.87% 15.82% 13.51% 11.83% 10.41% 9.15% 8.02% 7.01% 6.09% 5.21% Deferred income taxes 10.56% 8.12% 8.99% 8.38% 8.06% 7.84% 7.66% 7.53% 7.45% 7.41% 7.39% Total Liabilities 114.94% 99.52% 121.21% 109.04% 103.15% 98.71% 89.34% 86.85% 85.18% 80.45% 80.26% Stockholders' Equity: Common stock and additional paid in capital 44.57% 39.74% 64.12% 60.10% 58.05% 56.65% 55.57% 54.01% 52.43% 51.11% 49.98% Accumulated other comprehensive income (loss) -0.35% -0.10% 2.33% 2.13% 2.01% 1.91% 1.83% 1.77% 1.71% 1.67% 1.63% Retained earnings 31.48% 30.39% 28.89% 30.18% 32.49% 35.17% 38.06% 41.13% 44.50% 47.96% 51.46% Treasury stock -13.80% -15.42% -12.96% -12.21% -11.85% -11.63% -11.60% -11.62% -11.84% -12.12% -12.56% Noncontrolling interests 1.00% 0.87% 11.94% 11.94% 12.28% 12.72% 13.21% 13.74% 14.36% 15.02% 15.71% Total Stockholders' Equity 62.90% 55.48% 94.32% 92.15% 92.97% 94.82% 97.08% 99.03% 101.17% 103.64% 106.22% Total Liabilities and Stockholders' Equity 177.84% 155.00% 215.53% 201.19% 196.12% 193.54% 186.42% 185.88% 186.35% 184.09% 186.48% Vail Resorts, Inc. Common Size Balance Sheet (Percent Assets)

Fiscal Years Ending July 31st 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 Assets Current Assets: Cash & cash equivalents 1.42% 2.74% 2.86% 5.53% 9.34% 12.78% 13.24% 16.16% 17.96% 17.35% 17.66% Restricted cash 0.52% 0.24% 0.25% 0.25% 0.25% 0.26% 0.27% 0.27% 0.27% 0.27% 0.27% Trade receivables, net 4.58% 5.93% 4.55% 4.72% 4.84% 4.91% 5.10% 5.11% 5.10% 5.16% 5.09% Inventories, net 2.95% 3.01% 2.06% 2.24% 2.29% 2.33% 2.41% 2.42% 2.41% 2.44% 2.41% Deferred income taxes 1.12% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Other current assets 0.97% 1.10% 0.82% 0.84% 0.87% 0.88% 0.91% 0.91% 0.91% 0.92% 0.91% Total Current Assets 11.57% 13.01% 10.54% 13.58% 17.60% 21.15% 21.93% 24.88% 26.65% 26.15% 26.34% Property, plant & equipment, net 55.68% 54.95% 41.70% 39.87% 37.60% 35.79% 35.43% 34.12% 33.81% 35.01% 36.33% Real estate held for sale & investment 5.21% 4.48% 2.52% 2.37% 2.20% 2.04% 1.95% 1.84% 1.75% 1.69% 1.60% Deferred charges & other assets 1.64% 1.42% 1.10% 1.14% 1.17% 1.19% 1.23% 1.24% 1.23% 1.25% 1.23% Goodwill, net 20.10% 20.51% 36.97% 36.21% 35.02% 33.82% 33.66% 32.51% 31.48% 31.06% 29.98% Intangible assets, net 5.79% 5.64% 7.17% 6.83% 6.41% 6.01% 5.80% 5.42% 5.08% 4.84% 4.51% Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Liabilities and Stockholders' Equity Current Liabilities: Total accounts payable & accrued liabilities 13.31% 16.01% 11.38% 12.15% 12.47% 12.74% 13.22% 13.37% 13.33% 13.50% 13.33% Income taxes payable 2.30% 3.85% 2.40% 1.98% 2.17% 2.30% 2.48% 2.57% 2.63% 2.68% 2.65% Total Current Liabilities 15.60% 19.87% 13.77% 14.13% 14.64% 15.03% 15.70% 15.94% 15.96% 16.18% 15.98% Long-term debt, net of current maturities 32.81% 28.21% 30.95% 29.19% 27.82% 26.54% 23.20% 22.42% 21.98% 20.19% 20.30% Other long-term liabilities 10.28% 10.89% 7.34% 6.71% 6.03% 5.38% 4.91% 4.32% 3.76% 3.31% 2.80% Deferred income taxes 5.94% 5.24% 4.17% 4.17% 4.11% 4.05% 4.11% 4.05% 4.00% 4.02% 3.96% Total Liabilities 64.63% 64.20% 56.24% 54.20% 52.60% 51.01% 47.92% 46.72% 45.71% 43.70% 43.04% Stockholders' Equity: Common stock and additional paid in capital 25.06% 25.64% 29.75% 29.87% 29.60% 29.27% 29.81% 29.05% 28.13% 27.76% 26.80% Accumulated other comprehensive income (loss) -0.20% -0.06% 1.08% 1.06% 1.02% 0.99% 0.98% 0.95% 0.92% 0.91% 0.88% Retained earnings 17.70% 19.61% 13.40% 15.00% 16.56% 18.17% 20.42% 22.13% 23.88% 26.05% 27.60% Treasury stock -7.76% -9.95% -6.01% -6.07% -6.04% -6.01% -6.22% -6.25% -6.35% -6.58% -6.74% Noncontrolling interests 0.56% 0.56% 5.54% 5.94% 6.26% 6.57% 7.09% 7.39% 7.71% 8.16% 8.42% Total Stockholders' Equity 35.37% 35.80% 43.76% 45.80% 47.40% 48.99% 52.08% 53.28% 54.29% 56.30% 56.96% Total Liabilities and Stockholders' Equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Vail Resorts, Inc. Common Size Income Statement

Fiscal Years Ending July 31st 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 Net revenue: Mountain revenue 78.86% 81.47% 84.51% 85.03% 85.50% 85.81% 86.09% 86.34% 86.47% 86.56% 86.60% Lodging revenue 18.18% 17.15% 14.60% 14.01% 13.60% 13.33% 13.08% 12.87% 12.75% 12.69% 12.66% Real estate revenue 2.95% 1.38% 0.89% 0.96% 0.90% 0.86% 0.83% 0.80% 0.77% 0.75% 0.74% Total net revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Mountain expense: Total labor expense 20.83% 21.12% 21.13% 20.87% 20.46% 20.18% 19.92% 19.81% 19.62% 19.50% 19.45% Retail cost of sales 6.27% 5.87% 5.92% 5.57% 5.41% 5.29% 5.18% 5.10% 5.05% 5.02% 5.01% Resort related fees 4.26% 4.30% 4.38% 4.40% 4.43% 4.45% 4.46% 4.47% 4.48% 4.48% 4.49% General and administrative 10.52% 10.84% 10.46% 10.37% 10.30% 10.21% 10.07% 9.93% 9.73% 9.61% 9.57% Other 13.63% 12.91% 13.02% 13.01% 13.00% 12.96% 12.91% 12.86% 12.80% 12.72% 12.64% Total Mountain expense 55.51% 55.05% 54.91% 54.23% 53.60% 53.08% 52.55% 52.17% 51.67% 51.34% 51.16% Lodging expense: Labor and labor-related benefits 7.87% 7.14% 6.14% 5.81% 5.67% 5.57% 5.50% 5.47% 5.41% 5.38% 5.37% General and administrative 2.32% 2.21% 1.95% 1.86% 1.79% 1.74% 1.70% 1.66% 1.65% 1.62% 1.61% Other 5.71% 5.27% 4.34% 4.15% 4.02% 3.94% 3.86% 3.79% 3.75% 3.72% 3.70% Reimbursed payroll cost 0.74% 0.77% 0.74% 0.70% 0.68% 0.67% 0.65% 0.64% 0.64% 0.63% 0.63% Total Lodging expense 16.63% 15.39% 13.18% 12.53% 12.17% 11.92% 11.71% 11.56% 11.45% 11.36% 11.31% Real Estate expense: Cost of sales 2.48% 1.10% 0.76% 0.77% 0.73% 0.69% 0.67% 0.64% 0.62% 0.61% 0.59% Other 0.97% 0.43% 0.50% 0.38% 0.36% 0.34% 0.33% 0.32% 0.31% 0.30% 0.29% Total Real Estate expense 3.46% 1.54% 1.26% 1.16% 1.09% 1.04% 1.00% 0.96% 0.93% 0.91% 0.89% Depreciation & amortization expense 10.65% 10.08% 9.92% 9.61% 9.46% 9.48% 9.50% 9.57% 9.63% 9.89% 10.26% Income (loss) from operations 15.04% 17.67% 19.89% 22.48% 23.68% 24.49% 25.24% 25.73% 26.32% 26.50% 26.39% Other: Investment Income 0.08% 0.13% 0.42% 0.10% 0.09% 0.09% 0.09% 0.08% 0.08% 0.08% 0.08% Interest expense, net 3.66% 2.65% 2.84% 2.50% 2.27% 2.13% 2.02% 1.71% 1.66% 1.64% 1.49% Income (loss) before provision for income taxes 10.67% 15.15% 18.27% 20.08% 21.51% 22.44% 23.31% 24.11% 24.74% 24.94% 24.98% Provision (benefit) for income taxes 2.48% 5.82% 6.12% 6.63% 7.10% 7.41% 7.69% 7.96% 8.17% 8.23% 8.24% Net income (loss) 8.19% 9.33% 12.15% 13.45% 14.41% 15.04% 15.62% 16.15% 16.58% 16.71% 16.73% Net loss (income) attributable to noncontrolling interests 0.01% 0.02% -1.11% -1.02% -1.02% -1.02% -1.02% -1.02% -1.02% -1.02% -1.02% Net income attributable to Vail Resorts, Inc. 8.20% 9.35% 11.04% 12.43% 13.39% 14.02% 14.60% 15.13% 15.56% 15.69% 15.71% Vail Resorts, Inc. Weighted Average Cost of Capital (WACC) Estimation

Cost of Capital Assumptions Cost of Debt 4.10% Tax Rate 33.00% After-Tax Cost of Debt 2.75%

Risk-Free Rate (30Y) 2.79% Beta 0.891 Equity Risk Premium 4.52% Cost of Equity 6.82%

Capital Weights Amount % of Total Market Value of Equity 9,414,626 83.84% Total Debt 1,814,540 16.16%

Weighted Average Cost of Capital 6.16%

Net Debt Long Term Debt 1,574,157 PV of Operating Leases 240,383 Vail Resorts, Inc. Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Assumptions CV Growth 3.00% CV ROIC 28.64% WACC 6.16% Cost of Equity 6.82%

Fiscal Years Ending July 31st 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025

DCF Model NOPLAT 324,584 361,401 391,125 419,874 443,988 467,470 482,876 492,121 Less: Change in Invested Capital 17,861 56,482 36,610 13,523 14,081 (42,278) (95,277) (151,792) Free Cash Flow 342,445 417,883 427,735 433,397 458,070 425,192 387,599 340,329 Continuing Value 13,943,858 Discount Period 1 2 3 4 5 6 7 7 PV of FCF 322,575 370,797 357,517 341,231 339,731 297,050 255,075 9,176,315

Value of Operating Assets 11,460,293 Add: Excess Cash 84,966 Add: Real Estate Held for Sale 103,405 Less: PV of Operating Leases (240,383) Less: Long-Term Debt Obligations (1,272,421) Less: Current Maturities of LT Debt - Less: Employee Stock Options (379,580) Value of Equity 9,756,280 Shares Outstanding 40,081

Intrinsic Value of Stock at 7/31/17 $ 243.41

EP Model NOPLAT 324,584 361,401 391,125 419,874 443,988 467,470 482,876 492,121 Beginning Invested Capital 1,719,403 1,701,542 1,645,060 1,608,451 1,594,928 1,580,846 1,623,124 1,718,401 ROIC 18.88% 21.24% 23.78% 26.10% 27.84% 29.57% 29.75% 28.64% WACC 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% Economic Profit 218,676 256,593 289,796 320,800 345,747 370,096 382,898 386,274 Continuing Value 12,225,457 Discount Period 1 2 3 4 5 6 7 7 PV of Economic Profit 205,988 227,681 242,223 252,579 256,426 258,559 251,981 8,045,452

Value of Operating Assets 11,460,293 Add: Excess Cash 84,966 Add: Real Estate Held for Sale 103,405 Less: PV of Operating Leases (240,383) Less: Long-Term Debt Obligations (1,272,421) Less: Current Maturities of LT Debt - Less: Employee Stock Options (379,580) Value of Equity 9,756,280 Shares Outstanding 40,081

Intrinsic Value of Stock at 7/31/17 $ 243.41

Model Date 11/08/17 Next FYE 07/31/18 Last FYE 07/31/17 Days in FY 365 Days to FYE 265 Elapsed Fraction 0.726 Adjusted Stock Price $252.59 Vail Resorts, Inc. Dividend Discount Model (DDM)

Key Assumptions CV Growth 3.00% CV ROE 16.12% Cost of Equity 6.82%

Fiscal Years Ending July, 31st 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 EPS 6.43 7.26 7.88 8.46 9.04 9.56 9.90 10.15

Future Cash Flows P/E Multiple (CV Year) 21.32 EPS (CV Year) 10.15 Future Stock Price 216.37 Dividends Per Share 4.48 5.07 5.51 5.94 6.36 6.75 7.01 Discount Periods 1 2 3 4 5 6 7 7 Discounted Cash Flows 4.20 4.44 4.52 4.56 4.57 4.54 4.42 136.37

Intrinsic Value at 7/31/17 $ 167.63

Model Date 11/08/17 Next FYE 07/31/18 Last FYE 07/31/17 Days in FY 365 Days to FYE 265 Elapsed Fraction 0.726 Adjusted Stock Price $ 170.78 Vail Resorts, Inc. Relative Valuation Models In thousands, except per share amounts and multiples EPS EPS Ent. Ticker Company Price 2017E 2018E P/E 17 P/E 18 Value EBIT 17 EBIT 18 EV/EBIT 17 EV/EBIT 18 SIX Six Flags Entertainment Co. $60.70 $1.81 $2.31 33.54 26.28 7,737,000 448,000 462,000 17.27 16.75 LVS Las Vegas Sands Co. $67.90 $2.76 $2.88 24.60 23.58 62,344,000 3,302,000 3,454,000 18.88 18.05 MAR Marriott International Inc. $119.98 $4.14 $4.75 28.98 25.26 46,594,000 2,436,000 2,739,000 19.13 17.01 BF.B Brown-Forman Corp. $56.46 $1.91 $2.08 29.56 27.14 24,148,000 1,079,000 1,158,000 22.38 20.85 29.17 25.56 19.41 18.17

MTN Vail Resorts, Inc. $234.89 $5.90 $6.84 39.84 34.32 10,797,461 467,256 481,785 23.11 22.41

Implied Relative Values:

P/E (17) $ 171.96 P/E (18) $ 174.98

EV/EBIT (17) Implied Enterprise Value 9,071,533 + Cash 117,389 - Debt (1,272,421) - NCI (227,803) Implied Equity Value 7,688,698 Shares Outstanding 40,570 Implied Valuation $ 189.52

EV/EBIT (18) Implied Enterprise Value 8,751,744 +Cash 231,956 - Debt (1,225,018) - NCI (249,080) Implied Equity Value 7,509,602 Shares Outstanding 40,570 Implied Valuation $ 185.10 Vail Resorts, Inc. Key Management Ratios

Fiscal Years Ending July 31st 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025

Liquidity Ratios Current Ratio 0.74 0.65 0.76 0.96 1.20 1.41 1.40 1.56 1.67 1.62 1.65 Quick Ratio 0.38 0.44 0.54 0.73 0.97 1.18 1.17 1.33 1.44 1.39 1.42 Cash Ratio 0.09 0.14 0.21 0.39 0.64 0.85 0.84 1.01 1.13 1.07 1.11 Cash Conversion Cycle 28.54 32.05 34.58 38.67 39.24 39.73 40.09 40.42 40.77 41.03 41.24 Activity or Asset-Management Ratios Fixed Asset Turnover 1.01 1.17 1.11 1.25 1.36 1.44 1.51 1.58 1.59 1.55 1.48 ROA 4.92% 6.02% 6.39% 6.24% 6.94% 7.37% 7.85% 8.28% 8.48% 8.58% 8.58% ROE 13.38% 16.93% 15.67% 15.08% 16.02% 16.39% 16.61% 16.78% 16.80% 16.52% 16.12% Financial Leverage Ratios Debt Ratio 0.65 0.64 0.56 0.54 0.53 0.51 0.48 0.47 0.46 0.44 0.43 Interest Coverage Ratio 4.11 6.68 7.01 8.99 10.43 11.48 12.50 15.07 15.87 16.18 17.71 Debt-to-Equity Ratio 1.83 1.79 1.29 1.18 1.11 1.04 0.92 0.88 0.84 0.78 0.76 Profitability Ratios EBIT Margin 15.04% 17.67% 19.89% 22.48% 23.68% 24.49% 25.24% 25.73% 26.32% 26.50% 26.39% EBITDA Margin 26.99% 27.49% 28.97% 32.09% 33.15% 33.96% 34.74% 35.31% 35.95% 36.39% 36.65% Mountain Segment Profit Margin 29.61% 32.43% 35.02% 36.22% 37.31% 38.14% 38.96% 39.57% 40.25% 40.69% 40.92% Lodging Segment Profit Margin 8.52% 10.26% 9.73% 10.58% 10.51% 10.59% 10.47% 10.17% 10.26% 10.42% 10.70% Real Estate Segment Profit Margin -17.09% -11.35% -42.35% -20.54% -20.54% -20.54% -20.54% -20.54% -20.54% -20.54% -20.54% Total Profit Margin 8.19% 9.33% 12.15% 13.45% 14.41% 15.04% 15.62% 16.15% 16.58% 16.71% 16.73% Effective Tax Rate 23.25% 38.40% 33.50% 33.00% 33.00% 33.00% 33.00% 33.00% 33.00% 33.00% 33.00% Payout Policy Ratios Dividend Payout Ratio 65.66% 69.37% 69.51% 67.06% 67.30% 67.51% 68.47% 68.72% 69.66% 69.93% 70.92% Present Value of Operating Lease Obligations (2017) Present Value of Operating Lease Obligations (2016) Present Value of Operating Lease Obligations (2015) Present Value of Operating Lease Obligations (2014)

Operating Operating Operating Operating Fiscal Years Ending Leases Fiscal Years Ending 42947 Leases Fiscal Years Ending Leases Fiscal Years Ending Leases 2018 $40,783 2017 $36,024 2016 $34,937 2015 $31,242 2019 $35,338 2018 $31,642 2017 $31,417 2016 $28,382 2020 $31,876 2019 $28,223 2018 $28,701 2017 $26,617 2021 $29,453 2020 $25,448 2019 $25,447 2018 $24,198 2022 $26,110 2021 $23,458 2020 $22,698 2019 $21,308 Thereafter $149,285 Thereafter $157,564 Thereafter $148,750 Thereafter $129,459 Total Minimum Payments $312,845 Total Minimum Payments $302,359 Total Minimum Payments $291,950 Total Minimum Payments $261,206 Less: Interest $59,441 Less: Interest $61,976 Less: Interest $58,882 Less: Interest $51,290 PV of Minimum Payments $253,404 PV of Minimum Payments $240,383 PV of Minimum Payments $233,068 PV of Minimum Payments $209,916

Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases

Pre-Tax Cost of Debt 4.10% Pre-Tax Cost of Debt 4.10% Pre-Tax Cost of Debt 4.10% Pre-Tax Cost of Debt 4.10% Number Years Implied by Year 6 Payment 5.7 Number Years Implied by Year 6 Payment 6.7 Number Years Implied by Year 6 Payment 6.6 Number Years Implied by Year 6 Payment 6.1

Lease PV Lease Lease PV Lease Lease PV Lease Lease PV Lease Year Commitment Payment Year Commitment Payment Year Commitment Payment Year Commitment Payment 1 40783 39176.8 1 36024 34605.2 1 34937 33561.0 1 31242 30011.5 2 35338 32609.2 2 31642 29198.6 2 31417 28991.0 2 28382 26190.4 3 31876 28256.1 3 28223 25017.9 3 28701 25441.6 3 26617 23594.3 4 29453 25079.9 4 25448 21669.6 4 25447 21668.7 4 24198 20605.2 5 26110 21357.6 5 23458 19188.3 5 22698 18566.7 5 21308 17429.7 6 & beyond 26110 106924.0 6 & beyond 23458 110702.9 6 & beyond 22698 104838.7 6 & beyond 21308 92085.3 PV of Minimum Payments 253403.6 PV of Minimum Payments 240382.6 PV of Minimum Payments 233067.7 PV of Minimum Payments 209916.3 Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 2,290 Average Time to Maturity (years): 4.40 Expected Annual Number of Options Exercised: 520

Current Average Strike Price: $59.12 Cost of Equity: 6.82% Current Stock Price: $234.89

2018E 2019E 2020E 2021E 2022E 2023E 2024E CV2025 Increase in Shares Outstanding: 520 520 520 520 208 Average Strike Price: $ 59.12 $ 59.12 $ 59.12 $ 59.12 $ 59.12 $ 59.12 $ 59.12 $ 59.12 Increase in Common Stock Account: 30,769 30,769 30,769 30,769 12,308 - - -

Change in Treasury Stock 7,416 7,638 7,867 10,804 11,237 14,608 15,338 19,326 Expected Price of Repurchased Shares: $ 234.89 $ 250.90 $ 268.01 $ 286.28 $ 305.80 $ 326.64 $ 348.91 $ 372.70 Number of Shares Repurchased: 32 30 29 38 37 45 44 52

Shares Outstanding (beginning of the year) 40,081 40,570 41,060 41,551 42,034 42,205 42,160 42,116 Plus: Shares Issued Through ESOP 520 520 520 520 208 0 0 0 Less: Shares Repurchased in Treasury 32 30 29 38 37 45 44 52 Shares Outstanding (end of the year) 40,570 41,060 41,551 42,034 42,205 42,160 42,116 42,065 Valuation of Options Granted in ESOP

Ticker Symbol MTN Current Stock Price $234.89 Risk Free Rate 2.79% Current Dividend Yield 1.86% Annualized St. Dev. of Stock Returns 40.30%

Average Average B-S Value Range of Number Exercise Remaining Option of Options Outstanding Options of Shares Price Life (yrs) Price Granted Range 1 2,290 59.12 4.40 $ 165.76 $ 379,580 Total 2,290 $ 59.12 4.40 $ 183.89 $ 379,580 CV Growth of NOPLAT Cost of Debt $ 243.41 2.85% 2.90% 2.95% 3.00% 3.05% 3.10% 3.15% $ 243.41 2.45% 2.55% 2.65% 2.75% 2.85% 2.95% 3.05% 6.46% $ 211.46 $ 213.85 $ 216.30 $ 218.83 $ 221.43 $ 224.10 $ 226.86 36.00% $ 231.71 $ 231.71 $ 231.71 $ 231.71 $ 231.71 $ 231.71 $ 231.71 6.35% $ 219.37 $ 221.95 $ 224.59 $ 227.32 $ 230.13 $ 233.02 $ 236.01 35.00% $ 235.63 $ 235.63 $ 235.63 $ 235.63 $ 235.63 $ 235.63 $ 235.63 WACC 6.26% $ 226.23 $ 228.97 $ 231.79 $ 234.69 $ 237.69 $ 240.78 $ 243.97 Tax Rate 34.00% $ 239.53 $ 239.53 $ 239.53 $ 239.53 $ 239.53 $ 239.53 $ 239.53 6.16% $ 234.32 $ 237.26 $ 240.29 $ 243.41 $ 246.64 $ 249.97 $ 253.42 33.00% $ 243.41 $ 243.41 $ 243.41 $ 243.41 $ 243.41 $ 243.41 $ 243.41 6.06% $ 242.84 $ 246.00 $ 249.26 $ 252.63 $ 256.11 $ 259.71 $ 263.43 32.00% $ 247.28 $ 247.28 $ 247.28 $ 247.28 $ 247.28 $ 247.28 $ 247.28 5.96% $ 251.94 $ 255.35 $ 258.87 $ 262.51 $ 266.27 $ 270.16 $ 274.20 31.00% $ 251.13 $ 251.13 $ 251.13 $ 251.13 $ 251.13 $ 251.13 $ 251.13 5.86% $ 261.65 $ 265.33 $ 269.13 $ 273.07 $ 277.15 $ 281.38 $ 285.76 30.00% $ 254.97 $ 254.97 $ 254.97 $ 254.97 $ 254.97 $ 254.97 $ 254.97

CV Growth of ROIC Beta $ 243.41 22.64% 24.64% 26.64% 28.64% 30.64% 32.64% 34.64% $ 243.41 0.591 0.691 0.791 0.891 0.991 1.091 1.191 6.46% $ 212.47 $ 214.93 $ 217.03 $ 218.83 $ 220.39 $ 221.77 $ 222.98 4.22% $ 437.57 $ 361.80 $ 306.79 $ 265.03 $ 232.25 $ 205.83 $ 184.08 6.35% $ 220.71 $ 223.27 $ 225.45 $ 227.32 $ 228.95 $ 230.38 $ 231.64 4.32% $ 425.28 $ 351.63 $ 298.11 $ 257.47 $ 225.55 $ 199.81 $ 178.62 WACC 6.26% $ 227.86 $ 230.51 $ 232.76 $ 234.69 $ 236.38 $ 237.85 $ 239.16 Equity Risk Premium 4.42% $ 413.61 $ 341.96 $ 289.86 $ 250.27 $ 219.17 $ 194.08 $ 173.42 6.16% $ 236.31 $ 239.06 $ 241.40 $ 243.41 $ 245.16 $ 246.70 $ 248.05 4.52% $ 402.51 $ 332.75 $ 282.00 $ 243.41 $ 213.09 $ 188.62 $ 168.46 6.06% $ 245.25 $ 248.11 $ 250.54 $ 252.63 $ 254.45 $ 256.04 $ 257.45 4.62% $ 391.94 $ 323.98 $ 274.51 $ 236.87 $ 207.28 $ 183.41 $ 163.73 5.96% $ 254.83 $ 257.80 $ 260.33 $ 262.51 $ 264.40 $ 266.06 $ 267.52 4.72% $ 381.86 $ 315.61 $ 267.35 $ 230.63 $ 201.74 $ 178.43 $ 159.21 5.86% $ 265.07 $ 268.17 $ 270.81 $ 273.07 $ 275.04 $ 276.77 $ 278.30 4.82% $ 372.24 $ 307.62 $ 260.52 $ 224.66 $ 196.44 $ 173.66 $ 154.88

Beta $ 243.41 0.591 0.691 0.791 0.891 0.991 1.091 1.191 2.49% $ 465.31 $ 376.34 $ 314.02 $ 267.94 $ 232.47 $ 204.33 $ 181.46 2.59% $ 442.49 $ 360.72 $ 302.66 $ 259.31 $ 225.69 $ 198.86 $ 176.95 Risk-Free Rate 2.69% $ 421.63 $ 346.23 $ 292.01 $ 251.14 $ 219.24 $ 193.63 $ 172.62 2.79% $ 402.51 $ 332.75 $ 282.00 $ 243.41 $ 213.09 $ 188.62 $ 168.46 2.89% $ 384.90 $ 320.18 $ 272.57 $ 236.08 $ 207.22 $ 183.82 $ 164.46 2.99% $ 368.64 $ 308.43 $ 263.68 $ 229.12 $ 201.62 $ 179.22 $ 160.61 3.09% $ 353.58 $ 297.41 $ 255.28 $ 222.50 $ 196.27 $ 174.80 $ 156.90