VR to trim $25 million
A 24-percent dip in third-quarter net income means Vail Resorts is once again breaking out the budget-cutting axe, though CEO Adam Aron says this round won’t include “significant” personnel changes.”Our employees will be happy to know that we expect to get these cuts without having to resort to significant personnel reductions, so the sweeping company-wide layoffs in March of 2001 and October of 2002 are unlikely to be repeated anytime soon,” Aron says.In addition to $25 million in cost-cutting measures in fiscal 2004, the ski and real estate company also announced Thursday, June 12, it will scale back its capital expenditures to the $80 million to $90 million range (from a projected $100 million).As a result, the renovation of the company’s Lodge at Rancho Mirage in California will be deferred by a year, but there will be no significant impacts to projects locally, Aron says.”Included in the $80 million to $90 million is full funding for the public approval process for Lionshead (redevelopment) and the Front Door project,” Aron says, “and the $4.3 million check for the town (for a new deck on the Lionshead Parking Structure) is fully envisioned.”Aron says the company expects to spend between $5 million and $10 million in preparation for the town-approval process for its massive Lionshead redevelopment and Vail Village Front Door projects mainly on architectural work required before approval.The bulk of the budget cuts will come in the areas of marketing, sales and health insurance, Aron says. The company will save $4 million by cutting its marketing and sales budget to $45 million a year. By better managing its health plan for its 16,000 employees, VR hopes to save another $4 million.The rest of the cuts will come in the form of dramatically reduced operating costs in areas such as administration ($250,000 by trimming shipping and cell phone service) and employee housing.”It’s a different climate today economically in the Vail Valley than it was three or four years ago,” Aron says. “A lot of new housing stock has been built in Avon, and we think we can save between $500,000 and $1 million a year in our employee housing program.”In announcing its financial performance for the three months ending April 30, Vail Resorts Thursday, June 12, disclosed net income of $35.5 million ($1.01 a share) compared to $47 million ($1.34 a share) a year ago, well below analyst’s projections of $1.21 a share. Vail stock (MTN on the New York Stock Exchange) closed higher by 42 cents at $13.20 a share Thursday.The company reports revenue rose 9.1 percent to $269.1 million from $246.7 million for the quarter, due mainly to the acquisition in 2002 and strong performance last season of Heavenly ski area in South Lake Tahoe, Calif. Skier days and lift ticket sales there rose 12.5 percent and 19.3 percent respectively.Locally, Beaver Creek had a record year, recording 718,000 skier days, Aron says, mainly due to the opening of the new Ritz-Carlton, Bachelor Gulch.The Associated Press Thursday reported Vail’s skier days were up 4.9 percent, but Breckenridge and Keystone both experienced 3 percent declines last ski season. Overall, AP reports VR’s skier days at its five resorts were 5.73 million last season.Colorado Ski Country USA at its annual meeting at the Ritz-Carlton, Bachelor Gulch, announced Thursday, June 12, that its 24-member resorts enjoyed a 4.29 percent bump in skier visits during the 2002-03 season.Rob Perlman, president and chief executive officer of CSCUSA, said in a release that the 11,605,588 skier visits an increase of 477,457 skier days from the previous season and 198,958 above the five-year average was only 374,131 skier days shy of the record number of skiers during the 1997-98 season.”The momentum we garnered in the early season gave us the jump start we needed to sustain our business for the remainder of the season,” Perlman says, noting that despite abundant late-season snow, visits fell off slightly in March and April because of the war with Iraq.Aron says Vail Resorts felt the same impacts from international events. “The financial results for the first half of our fiscal year were impressive and robust, but as talk of war with Iraq heightened after New Year’s Day we began to experience a slowdown of bookings at our resorts.”With the war essentially over and the economy showing signs of recovery, Aron says summer bookings are still luke-warm. “It’s not all that bullish, but it’s not all that slow either; it’s sort of muddling along.”
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