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VR: a record quarter

Cliff Thompson

Vail Resorts is reporting a record third quarter and strong rebound from last year’s $14.5 million loss, despite a dry and hot March.Buoyed by $25 million in cost reductions last year; increases in ticket prices and other prices; and the return of free-spending destination guests, the resort company is reporting pre-tax earnings of $62.5 million for its third quarter (ended March 31) of its 2003-04 fiscal year. That’s nearly double last year’s $33.5 million and amounts to $1.77 a share.In spite of that, the company will not show a profit this year because of one-time refinancing costs and other charges.The company owns and operates Vail, Beaver Creek, Keystone and Breckenridge in Colorado and Heavenly at Lake Tahoe, as well as 10 RockResorts hotels and numerous slopeside hotels.”That’s the best quarter this company has had in 42 years,” said Adam Aron, CEO and chairman. “That’s an enormous recovery and improvement.”The improvement follows recession and war that cut deeply into the travel and leisure market beginning in the spring of 2003. The recovery is made more impressive, said Aron, by the fact that it occurred in a quarter when the month traditionally responsible for the bulk of the revenue for the month, March, actually saw skier numbers decline 2 percent at the company’s Colorado resorts.”Nature did not do us any favors, especially in March,” he said. “It was the warmest and driest since any of us have been alive.”One thing that did favor the company is a weak dollar that makes vacationing in this country a bargain for foreign travelers. Destination guests’ on-mountain expenditures were up 12 percent, Aron said.Skier numbers at the company’s five resorts were actually down 1.6 percent for the season across the company’s five resorts, but increases in ticket prices averaging 10.2 percent and increases spending by destination guests offset that. The ticket prices this year averaged $37.74, up from $34.24 last year. The largest dip in skier numbers came from snow-starved Keystone, which saw its skier numbers dip nearly 10 percent from 1.039 million last year to 944,000 this year. Beaver Creek jumped from 718,000 to 769,000.Let ’em use passesThe decrease in Colorado skiers was largely attributed to the snow-sensitive day skiers, who abandoned skiing in March when the temperatures hit the 70s. It’s a group on which the company concentrated to sell discount ski passes. Last season it sold 125,000 of the passes to Coloradans. It also sold a record number of passes at Heavenly.”It’s another affirmation to get Coloradans to purchase ski on passes and take day to day changes in weather out of the equation,” Aron said. “With our unique array of assets, Vail Resorts is not as snowfall dependent as some observers may think.”The largest of the company’s three divisions, its mountain division, which consists of ski-related revenue, generated $234.2 million or an 11.1 percent increase over the third quarter of 2003.In the lodging division, an improving economy boosted occupancy and room rates, increasing revenue 7.5 percent to $49.5 million. A large portion of that Aron attributed to the first full season of operation of the Vail Marriott. It was back on line after a two-year remodel.The company’s real estate division, as projected, saw revenue fall $7.7 million to $4.2 million, due to the timing and mix of real estate projects. But this division actually showed a profit because of a $15.1 million advance paid by the company for bonds to build the water, sewer and roads in Bachelor Gulch that this year were paid off by the homeowners of Bachelor Gulch. Aron is predicting that the company’s real estate activities – including the $1 billion Vail redevelopment which began this spring, and a golf course community in Jackson, Wyo. will fuel a boom over the next five years. He said the value of the real estate projects on the books has been underestimated by analysts by nearly $100 million, and said he thinks they will fuel a boom at Vail and elsewhere.”These projects could generate profitability far greater than anything we have ever experienced as a community.”Total revenue for the quarter increased $19.1 million, or 7.1 percent to $287.9 million, while expenses decreased $8.7 million or $4.7 percent to $178.8 million. As a result of the third quarter’s results, Aron said the company increased its pre-tax profit estimate by $5 million for its July 31 year end. It now is projected the company’s earnings will be $140 million, up from $104 million. Aron said since 9/11 the company has pried $45 million in “embedded operational expenses” from the company. That included paring more than 150 people from its payroll. Vail Resorts is the largest employer in Summit and Eagle Counties and has nearly 14,000 employees company-wide. ‘Keystone’ pricing”We offer a premium product and will charge a premium price,” Aron said. “Lift ticket prices at the window last year were the highest in the nation and will probably stay there. We’re not going to be shy in charging for it.”New lifts and facilities will be built at Beaver Creek and Heavenly this summer and the company is purchasing more snowcats which it will use to increase by one-third, the grooming on Vail and Beaver Creek.Aron also said he will see recent history repeat itself in Vail.”We think redevelopment of Vail Village could cause an explosion of visitation in Vail,” he said. “We’ve seen that at Beaver Creek.”At the Beav, skier numbers mushroomed from 600,000 three years ago to 769,000 this year. Aron said intensive development there drove the increased usage.He said he expects to see improved revenue for the fourth quarter this year over last because of the improved economy and more lodging revenue. He said pre-sales of discount ski passes are up 8 percent over last year.The stock market took notice. The company’s stock at close of trading was priced at $16.80, up 7.9 percent.Cliff Thompson can be reached via e-mail at: cthompson@vaildaily.com or by calling 949-0555 ext. 450.One-time refinancing and mold remediation charges will dent bottom lineBy Cliff ThompsonDaily Staff WriterIn spite of a record quarter and strong ski season, Vail Resorts will not end the year with a profit showing on its books.In fact, the company will show a loss of $4 million to $14 million, the company’s chairman said. What’s going on here?According to Vail Resorts’ quarterly report, it’s a matter of finances. In January the company refinanced $360 million of its debt to take advantage of a new, lower interest rate. That cost approximately $36 million, a one-time charge for the company that will be assessed to its earnings this fiscal year, said Adam Aron, CEO and chairman.On top of that, the company also incurred a one time $5 million expense getting rid of mold at one of its Summit County employee housing projects.Combined, the two expenses will take a profitable year, operations-wise, and will create a $4 million to $14 million loss at the bottom line.If that loss is not included in the financials, the company’s operations from its three divisions would have generated a $12 to $22 million profit, the quarterly report said.The company’s pre-tax earnings will range from $135 milliion to $145 million, up from $104 million last year.”That’s a huge swing,” Aron said. “It demonstrates the importance of the this year’s $25 million in expense reductions.”Cliff Thompson can be reached via e-mail at: cthompson@vaildaily.com or by calling 949-0555 ext. 450.


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