Vail Resorts ousts more top execs
Vail Resorts Senior Vice President of Public Affairs Porter Wharton III, the man who landed the Denver Broncos a new stadium in the mid-1990s, was sacked by the ski company Tuesday, Oct. 29.Wharton, who rode into Vail in a blaze of glory following that razor-thin vote in Denver, joined Vail Resorts in the wake of the 1998 arson attacks, ostensibly to repair damaged relations between the ski conglomerate and disenchanted locals.Now Wharton and 49 other VR employees are victims of the kind of bottom-line cost cutting Wall Street is so fond of in times of economic turmoil.Wharton’s ouster was announced as part of cost-cutting measures aimed at saving VR $20 million in expenses in fiscal 2003.The move comes hard on the heels of the elimination of President Andy Daly’s positions last week.In addition to the 50 staff positions being cut, another 50 currently vacant positions will remain unfilled.Asked if he thought the cuts will impact VR’s ability to do business, Wharton says, “I don’t think so, but it depends on how you define doing business. Sure, I think that my not being there is going to impact their ability to do business, but that’s just one man’s opinion.”You’ve got the best ski operations people in the business at that company, and they’re not going to do anything that’s going to impact guest services.”Vail Resorts officials were not commenting on specific job cuts, but CEO Adam Aron said in a conference call with investment analysts to announce fourth-quarter earnings that the positions are mostly “back-of-the-shop” jobs that will not impact frontline guest services this coming ski season.Total net income for fiscal 2002 was “a meager $7.6 million,” Aron said in an internal memo to employees, and “the fourth quarter was particularly weak.”The company’s losses for the quarter ending July 31 were $35.1 million, compared to losses of $19.1 million last year. VR posted that $7.6 million profit for fiscal 2002, but that was off 44.5 percent from $13.6 million a year ago. The ski company missed analyst’s estimates for the first time in 23 quarters.Citing fear of more losses with a continuing weak economy and the threat of war in the Middle East, Aron also announced a management reorganization that reduces the number of top-tier executives from six to four.Roger McCarthy, chief operating officer of Breckenridge, will assume that position for both Breckenridge and Keystone, replacing John Rutter, COO of Keystone, who will take over as COO the Grand Teton Lodge Company in Jackson.John Garnsey, COO of Beaver Creek, and Blaise Carrig, newly appointed COO of Heavenly Ski Resort, will remain in their positions but will report directly to Bill Jensen, current COO of Vail Mountain, who will continue his day-to-day responsibilities for Vail.While rank-and-file job cuts were not detailed by the company Oct. 29, Aron addresses some of the rumors swirling around the valley the last few weeks in his internal memo:”There is a popular myth emerging that these cost reductions have been forced on our company by our board of directors or shareholders, or that Wall Street is somehow dictating our fate. Actually, it was the senior officers of our company, who live and work here in Colorado, who came forward to volunteer that these cost cuts were vital if Vail Resorts is to succeed, emerging healthy and strong,” the memo reads.Outgoing VR President Daly may have fueled some of that discussion with comments he made to the media in the wake of his termination.”Our principle responsibility is to the shareholders,” Daly told The Vail Trail last week. “Public companies whose livelihoods are tied to small mountain communities that sets up a dynamic tension that is at time both draining and sets up so many potential conflicts.”Daly, a longtime ski industry veteran, was viewed as on old-guard fixture in the community. Aron, in his memo Oct. 29, goes on to tackle that topic.”Similarly, a second popular myth has emerged that there is some kind of victory here of corporate suits over those who care. Having led Vail Resorts since 1996, it has been my honor to work with so many of you – who have so much love for the sports of skiing and snowboarding and for the beauty of these exquisite mountains.”Even Wharton, who says he did not see his termination coming until Daly’s release last week, says the company is making the right moves.”I know that there are going to be questions and criticism and second guessing, but Adam is in charge and he has a very difficult course to steer right now with all the challenge out there facing the company and the industry, and he and the management team are taking appropriate steps to face those challenges,” Wharton says.”That doesn’t minimize for a minute the fact that a lot of very good people got caught in this, and believe me, I’m one of them. I know how they must feel, and a lot of those people gave a lot more good years than I did.”Asked if he intends to stay in the valley and whether he harbors any bitterness toward VR, Wharton refers back to his 18 years working with the Broncos, which ended in a lawsuit over payment.”I was a Bronco fan before, and I’m a fan still, and it’s a very similar situation with Vail Resorts, and certainly with the Vail Valley,” he says, adding his family has owned a home here since 1988.Aron says in his memo that all the cuts will be finalized by Nov. 1 so that the company can focus fully on the coming ski season and put the pain of the last few weeks behind it.”For sure, in recent weeks all of us have felt the looming anxiety, uncertainty and change that are now upon us. But as it is said, this too shall pass. Ski season is at hand.”There is reason for optimism, Aron says, pointing to a 23 percent jump over last year in bookings at Vail Resorts’ hotel properties for Aug. 1 through Oct. 26. He also says the coming season looks promising, with Christmas bookings up 11 percent over last season.But those figures, particularly in light of the post-9/11 travel environment of last season, were not enough to prevent job cuts and a continued drag on the company’s stock price, which recently bottomed out at $12.23 a share. It was trading as high at $14.25 as of Wednesday afternoon, still way off the 52-week high of $21.80.That plunge was exacerbated late last week by the announcement that VR was restating earnings for 1999-2001 because some prior accounting of revenue from private club memberships was improperly handled by its accounting firm, Arthur Andersen.The ski company lowered its profits for that period to $32.9 million from $46.8 million. It had announced the pending restatement in June when in fired Arthur Andersen in the wake of the Enron scandal.Because VR voluntarily took steps to correct the problem, consulting SEC accountants, some stock analysts have dismissed the importance of the move. But other industry observers haven’t been so kind.”They’re sort of poo-pooing this, but this had a major affect on the stock value,” says ski industry consultant Jerry Jones. “A long time ago I called Vail the Enron of the ski industry, and this is just an example of what they will do to influence their stock value.”
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