Vail Resorts sees expected quarterly loss
The loss of $25.4 million was 1.2 percent greater than expected, said Adam Aron, chairman and CEO of Vail Resorts. The company typically loses money in its first quarter, which spans late summer and autumn. The bigger loss was attributed to an increase in interest expense and depreciation associated with the Ritz-Carlton, Bachelor Gulch and other properties.
But Aron described the results as “encouraging,” because revenue increased and the company began to see results from is $25 million cost-cutting initiative. It had $103.6 million in revenue and expenses of $134 million for the quarter ended Oct. 31.
In 2003, the company announced it had lost $14 million during the past fiscal year, largely because the war in Iraq quashed business during March, the company’s most profitable month, during which approximately 25 percent of the company’s on-mountain business occurs.
Aron said the company is positioned to take advantage of the business expected for the 2004 ski season, adding he’s feeling optimistic enough to stand behind a $130 million to $140 million earnings forecast for 2004.
“We remain upbeat about the coming ski season,” he said. “We reduced cost at all our properties on and off the mountains.”
Aron said the company invested $10 million at both Keystone and Heavenly to improve base facilities, on-mountain facilities, terrain and lifts.
Tough to predict
Even with the good early snow, however, skier business at the start of this season is softer than last season, when heavy snows allowed Vail Mountain to open much of its terrain early, Aron said.
Early season indicators of business are providing a mixed message. The slow start, Aron said, probably cost the company $1 million to $2 million.
Ski-pass sales at the company’s five ski resorts are up nearly 20 percent, Aron said, bringing $9 million to the company’s coffers, and there’s a 7 percent increase in bookings into the Eagle County airport. Children’s ski school bookings are up 22 percent, but oddly enough, Aron said, bookings at adult ski school are up just 10 percent.
“Presumably these kids wouldn’t be coming here without their parents,” he said. “It’s hard to to read all this data. There’s so much conflicting stuff. We’re all using a crystal ball.”
One of the indicators of business – bookings – has become more difficult to use as a measure of potential earnings because of the growing trend of travelers to book closer to their time of planned arrival, Aron said.
Of the company’s three divisions, mountain operations, lodging and real estate, the latter has continued to be a bright spot for the company, Aron said. Lot sales at Bachelor Gulch and Breckenridge, which are more profitable than the condo sales that drove profitability last year, provided revenue of $26.9 million. That pushed $16.8 million to that division’s bottom line, Aron said.
The company is reporting it has $115.5 million worth of real estate for sale and investment, compared to the $152 million it held last year at this time.
The company’s lodging division, meanwhile, continues to show mixed results, but the best performance occurred at the company’s slopeside hotel properties. The newly renovated Vail Marriott helped drive lodging revenues up 5 percent, to $42.6 million. At the same time, operating expenses for the lodging division increased 3 percent to $40.5 million.
Aron said the company will not aggressively pursue acquiring additional lodging outlets but will likely opt instead for management contracts on properties and for minor equity stakes in lodging properties that would yield management opportunities. He said it was unfortunate that the company diversified into the lodging sector during “the worst time in the lodging sector history.”
“It’s not our plan today to acquire a lot of additional hotels at $50 million a pop,” he said.
Mountain operations reported revenue of $34 million, a 1.1 percent increase against $61.9 million in expenses – which represents a 4 percent decrease in expenses compared to last year.
The total operating expense for the quarter was $134 million compared to $150.1 million reported during the same period last year.
The company reduced its debt by $41.4 million during the quarter, taking the debt from $603.3 million to $561.9 million.
Don’t forget Ryan and Trista
Ever quick to spot a marketing opportunity, Aron pointed out that the Vail Resorts-owned Lodge at Rancho Mirage was the beneficiary of nearly two hours of ABC’s primetime coverage Wednesday night of the wedding of “Bachelorette” Trista Rehn to Ryan Sutter –the latter a Vail firefighter. The reported viewing audience for that wedding was nearly 30 million, Aron said.
“This show was one of the 10 most-watched shows of the year,” he said. “We could not have asked for better publicity.”
Looking ahead, Aron said that if the the company experiences anything resembling a “normal” March, it should have a good year.
“If we just keep pace with last year that should put us in good stead if we have a normal March,” he said. “All bets are off if there is a new terrorist incident.”
As has been his habit in previous earnings announcements, Aron promoted skiing conditions at the resorts.
“We’re open,” he said. “Make your reservations and tell all your friends.”
At a glance
First Quarter Financials
Total revenue: $103.6 million
Total expenses: $134 million
After-tax loss $25.4 million
Stock Price: $16.88 + 4.5 percent
Vail Resorts’ stock (MTN-NYSE) at the close of trading Thursday was selling for $16.88 a share, up 4.5 percent. Trading volume was 226,000 shares, nearly twice the average volume.
Cliff Thompson can be reached at 970-949-0555 x450 or email@example.com
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