Vail Resorts: When Real Estate Equals Operations

Aug.28.07 | About: Vail Resorts, (MTN)

Interesting cash flow statement restatement from Vail Resorts filed on Friday.

The company has a real estate segment whose activities:

. . . Include the planning, oversight, marketing, infrastructure improvement and development of the Company’s real property holdings. In addition to the substantial cash flow generated from real estate sales, these development activities benefit the Company’s mountain and lodging operations through (1) the creation of additional resort lodging which is available to guests, (2) the ability to control the architectural themes of the Company’s resorts, (3) the creation of unique facilities and venues (primarily restaurant, retail and private club operations) which provide the Company with the opportunity to create new sources of recurring revenue and (4) the expansion of the Company’s property management and commercial leasing operations . . .

That is according to the latest Vail Resorts 10-K.

The description sounds like a pretty active operation - something that’s a day-to-day veritable beehive of real estate happenings. Yet the company had accounted for its real estate segment activities within the investing section of the cash flow statement instead of the operating section.

Big difference: when restated, operating cash flows for year end (July) 2006 were 67% lower; for 2005, 33% lower; and for 2004, 15% lower. With real estate transactions requiring big lumps of investment over long periods of time, resulting in big gushing inflows later, you’d expect that the new presentation will show cash from operations in truer, spikier fashion.

The cash flow statement remains a source of restatement issues. Stay tuned.