Vail Resorts Inc (MTN) 2003 Q2 法說會逐字稿

Good day, Ladies and Gentlemen, and welcome to the Vail Resorts second quarter results conference call.

At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Adam Aron. Mr. Aron, you may begin.

Thank you very much, operator.

Good morning, everybody. Welcome to Vail Resorts fiscal 2003 second quarter earnings conference and simultaneous Webcast, both open to the public and the press at large.

As you know, I'm Adam Aron, Chairman and CEO of Vail Resorts. Joining me on the call here at our corporate offices in the Vail valley of Colorado this morning are Jim Donohue, our Senior Vice President and Chief Financial Officer, and Leslie Roubos, our Director of Corporate Financial Planning and Investor Relations.

Earlier this morning, we released earnings for our second fiscal quarter ending January 31, 2003. On today's call, I'd like to begin by giving you an overview of what we believe is an excellent second quarter financial performance for Vail Resorts, followed by some comments about the remainder of the '02-'03 ski season, as well as the remainder of our 2003 fiscal year. At the conclusion of my prepared remarks, Jim and I will be happy to take any questions you may have.

Let's start with the fiscal second quarter, covering the three months ending January 31, 2003. All in all we are extremely pleased with our financial performance for the quarter. As we discussed on our December conference call, the ski season started off strong and was robust throughout the quarter.

Second quarter skier visits at our Colorado resorts were five percent ahead of last year, and the average realized effective ticket price, commonly referred to as ETP, was up eight percent year over year. Colorado lift ticket revenue, therefore, was up13 percent for the quarter year over year.

The Heavenly acquisition, which took place in May of 2002, has proven to be quite a success and has outperformed even our high expectations going in. There are several reasons why. New management, higher attention to the quality of our product and service, better employee morale, some $6 million of cosmetic facility upgrades made during the off-season by us at Heavenly, better marketing, and the brand new Heavenly Village, as it is known, with its 1,600 new Marriott-branded beds in the heart of South Lake Tahoe -- all opening around Thanksgiving of 2002 - and link to the mountaintop by Heavenly's $25 million gondola.

As of January 31, Heavenly's paid skier visits, which includes a tripling of the sales of season passes, was up a whopping 21 percent year-over-year. Interestingly, we noticed an opportunity at Heavenly to consciously reduce the number of free and complimentary lift tickets that have been given out in prior years by prior ownership. Indeed, free skiers were reduced year-over-year by a stunning 33 percent during the period. And the ETP at Heavenly increased some 15 percent year-over-year. Big skier day growth -- big pricing increases realized.

Looking at the five ski resorts collectively pro forma, as if Heavenly had been operated by Vail Resorts last year, skier days were up six percent, ETP was up nine percent, and lift ticket revenues were up 16 percent.

Not only were skier days and lift ticket revenues strong, but across our five resorts, our ski school revenues were up 36 percent, our dining revenues were up 28 percent, and our retail rental revenues were up 19 percent in the quarter.

While Heavenly certainly accounts for some of this growth, it is certainly -- does not certainly count for all of that growth. Our various individual lines of business all performed well in the second quarter.

EBITDA for our Mountain segment rose 24 percent year-over-year in the second quarter, and excluding the previously announced severance program, grew 26.5 percent year-over-year.

For a same-store analysis, we would exclude both Heavenly and the one-time severance charges from our autumn management restructuring. Impressively, given the current political and economic climate, same-store Mountain EBITDA was eight and a half percent higher than last year for the three-month period.

In summary, our Mountain segment was booming in the second quarter, and there were smiles around our company's five premier North American ski resorts.

While we're gratified by the strong ski area performance, as important was the fact that the Lodging segment performed as expected during the quarter. The current, somewhat dismal state of the U.S. lodging industry is widely known, and we are more than pleased that through the second quarter Vail Resorts' lodging operations were able to perform as predicted.

Lodging revenue for the quarter increased almost eight percent over last year, and as expected, we saw a $5.9 million decline in lodging EBITDA due to, among other reasons, to our share of the start-up losses of the Ritz-Carlton, Bachelor Gulch, as well as the timing of the acquisitions that we made in the second quarter of fiscal 2002.

Beginning this fiscal year, we have been reporting our proportionate share of the newly-created joint venture, which owns and operates the luxurious Ritz-Carlton at the base of Bachelor Gulch in Beaver Creek. Included in the second quarter lodging EBITDA is two million dollars of equity investment loss, which represents our share of both the pre-opening costs, as well as start-up losses associated with operating the hotel since its opening in November in 2002.

Interestingly, since we are using an equity income accounting treatment for our minority interest joint ventures, some one million dollars in interest and depreciation at the Ritz-Carlton is nonetheless recorded on the Vail Resorts' Lodging EBITDA line, which is obviously a measure that typically is calculated excluding interest and depreciation.

As for the lodging acquisitions, they include the Vail Marriott, the Lodge at Rancho Mirage and a majority interest in RockResorts. If you recall, all three were purchased in the middle of the second quarter last year.

We did not own and operate these hotel properties during much or all of the seasonally slow November period last year. And therefore, benefited from 1.4 million more EBITDA in the second quarter of fiscal quarter 2002 last year at these properties than in this year.

In addition, we continue to build and invest in the RockResorts brand name. And as such, we had a $1 million expense in additional marketing and management during the second quarter in fiscal 2003 monies we expect to recoup many times over during the medium to long-term.

Still, even without these three issues associated with the new Ritz-Carlton and the new hotel in RockResorts acquisitions, because of overall weakness in the U.S. lodging sector, we also saw a $1.5 million decrease in same store lodging EBITDA.

While, of course, we would hope to do better in future years, given the U.S. lodging sector's widely known lackluster condition we believe a same store lodge EBITDA of only 1.5 million is a bit of a moral victory.

Let me provide you as well with some operating statistics for our own hotels. RockResorts own hotels, again, this quarter responded well in a tough market. We saw an increase in occupancy for own RockResorts properties in the second quarter of some 15 percent with an occupancy rate this quarter, this year of 61 percent. Up eight points from the 53 percent occupancy for the same period last year.

The average daily rate, however, of $181.00 was down $26.00 or 13 percent from 2007 for the comparable period last year. This reflects our conscious effort to reduce prices if need be to drive occupancies into our hotels during these difficult times. As a result of these strategies, growth was positive in the quarter.

Results for the non-RockResorts lodging properties were less encouraging with occupancy totaling 56 percent, down two points from the 58 percent occupancy the year before and with average daily rate decreasing $10.00 year over year from $153.00 to $143.00.

As I previously mentioned, the lodging picture is mixed, but we believe it is a moral victory relative to the rest of the industry in our own and branded RockResorts, luxury resorts seem to be holding their own competitively.

Now, looking at both our mountain and lodging segments combined, total resort EBITDA for the quarter was 6.8 million or 12.6 percent favorable the last year excluding the second quarter 2003 severance change, resort EBITDA was 14.8 percent higher than last year.

And for those of you who may want to focus on same store analyses -- excluding all of the fiscal 2002 acquisitions, the Ritz-Carlton joint venture and the severance charge -- resort EBITDA grew 5.8 percent in the second quarter compared to the same period last year. Very solid performance given the economic and political environment we've been facing.

As expected, real estate revenue and real estate EBITDA were both down year over year due to the timing of home site lot sales as we closed many Bachelor Gulch and Arrowhead lots at our Beaver Creek resort in the first quarter of fiscal 2003.

As I mentioned in December, this is purely a timing issue between the first and second quarters. I would point out that we're still having a great real estate run this year. Indeed, six months year-to-date real estate EBITDA still exceeds all real estate EBITDA that was reported for the full 12-month year in fiscal 2002.

I'm pleased to report that our mountain lodging and real estate EBITDA, as well as earnings per share for the quarter, all fell within the guidance ranges we gave you for each in the December conference call. Looking beyond the numbers, per se, there were several key highlights in the second quarter in which Vail Resorts made real progress.

In the mountain division, Heavenly is doing just great, as I previously discussed. Thanks in no small part to the new Ritz Carlton that really has opened to rave reviews, our Beaver Creek resort is well on its way to a record-ever year. Skier days there through January are up 19 percent year over year, and Beaver Creek is likely to cross the 700,000 skier day mark for the full season for the first time in Beaver Creek's 21-year history.

Vail, our is up nicely. Breckenridge enjoyed a very successful opening of the beautiful new ski terrain of 30 percent expansion of our intermediate ski terrain on Breckinridge Mountain that is sure to benefit our business at Breck in the future. And our new management team at Keystone is already generating guest satisfaction ratings that are at five-year highs. Indeed, Zagat's just picked our Keystone Ranch restaurant as the single best restaurant in the entire state of Colorado. That makes us optimistic about Keystone's prospects for growth in the years ahead.

Progress is happening at our lodging division too. RockResorts properties are doing relatively well, and RockResorts is getting noticed. Just last month, "Conde Nast Traveler" honored the Lodge at Vail and the Lodge at Rancho Mirage, selecting them both for the 2003 gold list, the best traveling experiences in the world, according to "Conde Nast." Not to be outdone, "Travel & Leisure" just named the Equinox one of the best hotels in the world, and Zagat's named the Lodge at Rancho Mirage as the single best hotel in its market; namely, all of greater Palm Springs.

That's not all. The new Ritz Carlton is open and stunning. So, too, is the now renovated Vail Marriott. And our Red Sky Ranch Golf Club has just in the past couple of weeks received an extraordinary recognition. It was featured as the lead story in "Golf Magazine's" new and latest issue that designated the 10 best new golf courses to open in the United States this past year. We were simply overwhelmed that "Golf Magazine" would rate Red Sky Ranch so highly.

The quarter was also a good one for progress in our real estate business. All three penthouses at the Vail Marriott were sold for some $6.5 million at prices exceeding $900 per square foot. This sets a new price threshold in Lion's Head and bodes well for our overall Vail Lion's Head redevelopment, which, by the way, is making great strides in an orderly planning and approval process.

And in Breckinridge, we took a new real estate development to market in the quarter: 18 single family home sites named Timber Trail. To our surprise and delight, all 18 properties sold out in three weeks at prices of $550,000 per home site lot. This blazed new precedence for us in the Breckenridge market. Closings are scheduled for late May to early June of 2003.

In conclusion, the second quarter was an excellent one for us, and we believe the quarter demonstrates why Vail Resorts is positioned very well for the long haul.

But, let me now give you some color on the balance of fiscal 2003, which runs through July 31. By dramatic contrast to the first half of the year, the near-term, immediate future, colored by the likely outburst of war in just a few days or few weeks' time, is more traumatic. With approximately 75 percent of the ski season complete as we speak, a lot of good things have already happened for us this year. If we stay on the current pace, Beaver Creek should have its record year, Vail continues to perform well, we continue to have high expectations for Heavenly, whose operations are exceeding even our wildest dreams, and ski conditions at all our resorts are fantastic. We have plenty of snow to last through season end. That's the good news.

For the bad news, just read a daily newspaper or look at the declining Dow almost each and every day, which broke below 7,500 as we began this call this morning. The economy is soft and war is imminent. As you know, Vail and Beaver Creek receive a literal parade of CEOs and financially sophisticated visitors. As I've compared notes recently with many of them, I've been hearing consistent reports of consumer slow-downs across just about all sectors of the U.S. economy of late. Not just war talk, but the likely prospect of real war seems to have put a definite chill in the consumer spending across the board in recent weeks.

Indeed, at our ski resorts, visitation has slowed modestly since January. I don't want to over-dramatize the slow-down. In unit volumes it's only a modest slowing. But, in a mostly fixed-cost business, any slow-down in visitation can be painful at the bottom line. In recent weeks, the metrics we track in order to monitor how we're doing at our ski resorts compared to prior years have become less than encouraging. Looking at our ski resorts' central reservations' data, for example, the dollar volume of year-to-date bookings, which were made in this fiscal year from August 1, 2002 through Feb. 28, 2003 for the entire ski season through April, are up seven percent compared to the same time, same date last year.

Unfortunately, the last time I gave you these same statistics on our December call, year-to-date revenue from such bookings was up 25 percent, so we have seen a definite decline in that favorable trend.

We're also seeing a drop-off in our lodging business. The so-called group or meetings in convention market has been weak for some time now across the whole U.S. hotel industry, and thanks to the economy and war, it appears to be getting even weaker still now.

Complicating our lives further, individual bookings are being made so close in now to date of arrival that it's very difficult to forecast with any degree of certainty what the rest of the fiscal year will look like; war or no war, weak economy or strong. For example, in the last week of February, the travel Web site Expedia had its single best week ever in bookings for our lodging properties for the month of March. That's good news. But, historically, it would have been the first two weeks in January, not the last week of February that would be the strongest period for month of March bookings.

As for the cost side, our staff has been hard at work to make sure we deliver the expense reductions and costs cuts that we previously announced. We are tracking the savings and all areas of the Company are performing as or better than expected in expense management.

In summary, as the U.S. and especially the U.S. travel and tourism industry -- sorry, my cell phone's ringing. I'll turn it off.

As for the -- in summary, as the U.S. and especially the U.S. travel and tourism industry races for war we are understandably concerned. We're already experiencing slowed visitation at our ski resorts and lodging properties as the talk of war escalates.

There's simply no way of knowing the extent to which an actual war and its aftermath will soften our near-term financial performance. Vail Resorts has performed successfully in both absolute and relative terms thus far in our fiscal year, but it should be no secret to you that this will increasingly be difficult to achieve as global political uncertainty and instability intensifies.

With that said, we continue to project without change that mountain EBITDA for fiscal 2003 will range from $117 million to $127 million before severance payments. However, whereas in December we might have hoped to exceed that range, the imminence of war and the dampening effect it's likely to have on travel now have us believe mountain EBITDA could be closer to the lower to mid-end of that range.

Additionally, we are reducing our fiscal 2003 estimate of lodging EBITDA to a range of 5 million to 13 million from the previous range of 13 million to 17 million. Similarly, we originally gave a range for fiscal 2003 for total resort EBITDA -- the mountain and lodging segments combined -- of $132 million to $142 million before severance payments.

We are now reducing that range slightly to $128 million to $138 million, again, before severance pay-outs. Still, this is a very healthy increase over the $107 million of resort EBITDA actually recorded in fiscal 2002. The estimated range of real estate EBITDA remains unchanged at $15 million to $17 million.

As for the fiscal third quarter, the current consensus range is between $119 and $130 million -- $133 million for resort EBITDA in most analyst models that we have seen. We believe this range maybe high. And we encourage both analysts and investors to rethink their models to reflect our current full fiscal year-end guidance.

Bringing my prepared remarks on this call to an end, I'll summarize just one more time. We believe our Q2 for Vail Resorts was a very good one. The ski season got off to a flying start and we expect the mountain segment to continue to perform well.

Our product is excellent and guest satisfaction is high and our costs are in check. Our lodging is performing inline with lodging competitors, but admittedly, these are tough times for the U.S. resort hotel industry. And our real estate division seems ready for yet another record year yet again.

But, but, but, the process of war grows ever closer and the U.S. economy is far from robust.

Putting this all aside, all political viewpoints about the wisdom or need for military conflict or lack thereof, it simply cannot be helpful for near-term profits for companies such as ours. On the other hand, in addition to fiscal 2003, there are also future fiscal years to think of. I do not think Vail Resorts could be better positioned for the years beyond.

To be sure, there may be a few complicating bumps on the road, but Vail clear market leader with economies of scale. We have great and unique premier resorts with insurmountable barriers to entry. Intriguing projects at all of our resorts drive growth; a talented management team and an experienced workforce; the best and strongest balance sheet in our industry, with the successful first half of 2003 now behind us. And despite a tough external climate likely for the next few months, we believe with a longer-term view that the prospects for Vail Resorts are still very much exciting and bright.

At this juncture, Jim and I would be happy to answer any of your questions. As you prepare for your questions, I need to point out that the comments made during this conference call, other than statements of historical information, are forward-looking statements that are made pursuant to the Safe Harbor provisions in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such risks and uncertainties included, but are not limited to, general business and economic conditions; uncertainties and impacts of the threat of war or actual war; continuing or worsening economic slowdown or additional terrorist attacks; competitive factors in the ski and resort areas; failure to integrate acquisitions; uncertainties and issues arising positive or negative related to the restatement in 2002 of earnings, including the change in accounting for the revenue recognition of club membership fees or the SEC investigation of same; the impact of the September 11 terrorist attacks on the travel industry; and the company and/or misinterpretation of same; failure to achieve anticipated revenue goals, cost savings or operational efficiencies; or, conversely, adverse consequences arising there from; and the weather. Investors are also certainly directed to other risks discussed in documents filed by the company with the Securities and Exchange Commission.

We are now ready to take your questions - operator.

Thank you. If you have a question at this time, please press the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, if you have a question, please press the number one key.

Your first question is from William Marks of JMP Securities.

Hello, Adam and Jim.

Hi, Will.

A couple of questions on Heavenly. Can you give what Heavenly's EBITDA was for the quarter?

We can, obviously, but we won't. Without being difficult, we haven't in the last six years since going public released EBITDA statistics resort by resort.

Can you give a same-store resort by resort?

No, for the same reason. Because then you'd know Heavenly per se, and it would be a slippery slope precedent. But, you just have to look at what's going on with the revenue at Heavenly with lift tickets up 21 percent, ETP up 15 percent, to imagine that Heavenly is doing just great.

OK. And in your note on the last page when you give the skier days, you have Heavenly at 382 with no '02 number, but we can figure that out from your -- it would be just up the 14 percent, right?

That's right.

OK. It's just ...

And remember, the 14 percent increase is the combination of the 21 percent increase in paid and season pass days, less the 33 percent decrease in free days, obviously on which we are not getting paid very much money on free days.

Right. OK. How about the ETPs at the different areas? Do you give that out at all?

Same thing; we do not.

OK.

But, we did give you the Heavenly stats just to give you a sense that Heavenly is really zooming.

OK. And just the last question on Resort and Real Estate cap ex for the quarter.

I'll give it to Jim.

OK, thanks.

We spent $56 million in cap ex in the second quarter, which brings total expenditures to 94 million for the first and second quarters combined for Resort and for Real Estate, which is what we expected to spend.

OK. Yeah, and can you give any -- there's no light -- like, how much of that was maintenance cap ex versus Real Estate or other?

Yeah, I can handle that. Basically, maintenance cap ex for the year averages between about 28 and 32 million. We didn't break it out for the first and second quarters, but during the year, calendar year, because we do most of our maintenance in the summer, it ranges between those two numbers.

OK. Great. OK, that's it. Thanks a lot, you guys.

Thanks, Will.

Thank you. Your next question is from Stacy Forbes of Janco Partners.

Hi. Good morning.

I'm just wondering, in looking at the Mountain results, as well as the Lodging results, is there something we can read into in terms of -- you know, with the strong skier day numbers, is it mostly day trippers that are coming up there and not using the lodging properties? Can we get some sort of break out between destination and Front Range?

Sure, Stacy. You know, we've been doing -- it is by no means a growth just in local or day trippers. But, our local performance has -- our local performance has been stronger than our increases in destination. For example, if I look -- season to date, not necessarily the quarter -- actually, let me not do that. Let me give you the quarter. I'll talk about the full season in the next call. How's that?

The local market at a resort like Vail, for example, is only up four tenths of a percent. The Colorado day market at Vail, for example, was actually down 9.4 percent because the so-called Colorado overnight market -- meaning Coloradoans are coming up probably from the Denver area and staying for the weekend, as opposed to just coming up for a single day -- was up 15.3 percent. So, Colorado -- there's been a shift from day skiers to weekend skiers.

But, our out-of-state skier increases at Vail, for example, were 10.1 percent. So, that does -- you know, that belies the theory that all of the strength has been coming out of the Front Range, and that the out-of-state market has not been responding. The out of state market has been responding quite well this year.

OK. And then based on your comments you made on the lodging, it's really, you know, not the occupancy issues. It's the ADR's that are dropping because you're trying to drive that occupancy? Would you say that's ...

Well, that's exactly right, although it's not that ADR's are dropping because we're trying to drive occupancy. The only way we can get occupancy is to reduce ADR's because of the weakness in the lodging sector generally.

Everyone in the lodging business is competing for fewer customers on the individual side. In the group markets, which you know, historically account for about half of all visitation to the U.S. lodging industry.

The corporate group meetings market has been weak for 18 months now ever since 9/11. And so you're also using individual bookings to fill in the holes that were created by weak group market. So, you know, again, if you look at how we're doing relatively -- relatively I think it's -- RockResorts is holding up quite nicely.

But the way it's holding up quite nicely is we're being quite competitive on rate to make sure that we have reasonable occupancies.

OK. And then on the real estate side in terms of margin or expectations on projects that are going to be sold for the remainder of the year, can we expect that margins are going to remain similar to what we've seen in this quarter? Or are we expecting some various different -- maybe single family versus condos to be sold, et cetera?

Well, we sold a lot of land in the first quarter as well. Look, the real estate is a great story for us this year. We posted real estate EBITDA in the first quarter -- I think it was $14.6 million compared to 15 point something for all of last year.

The range that we gave for real estate EBITDA was $15 to $17 million. So, essentially, what we have predicted is that we breakeven in quarters two, three and four. Realizing we have, oh, probably $12 million of real estate overhead to sustain in those three quarters.

So, breaking even does not mean there's no real estate activity. It just means that the real estate activity that's taking place puts the real estate division in a breakeven posture. But we see nothing on the horizon that makes us uncomfortable with our $15 to $17 million real estate EBITDA projection for the year.

And it looks like for the -- who knows how many years this will be by small amount of money the best real estate year in the history of the Company.

But for the remaining two quarters should we expect the margins to be similar to what we saw in second quarter?

Just assume -- assume breakeven and that revenues and expenses will match and you won't be far from the point.

Thank you.

You bet.

Thank you. Again, if you have a question, please press the number one. Your next question is from of Wagner Asset Management.

Yes, I had question regarding the margins in the mountain EBITDA. They were down year over year. And considering the growth in skier days as well as the effected ticket prices, why didn't you get more leverage there?

Well, we actually think we did get pretty good leverage there. I mean if you look at the mountain division EBITDA, it was up 26.5 percent pre-severance.

But the margins were down year over year.

I haven't checked it. So if you say so, I won't dispute you. But we were managing for dollars and though the 26.5 percent improvement in EBITDA in the mountain division was pretty strong, especially given the extra that we faced.

OK, thanks.

Thank you. Your next question is from Michael Rosenthal of Shenkman Capital.

Hi - good morning. Is there any update you can potentially give on the SEC investigation and when there might be some closure?

Sure. You know we have been living with the potential for an accounting change in our club business since June of 2002. We think we did everything right along the way in changing the way we had traditionally treated club revenues. So this is a bit of an old news story.

We certainly respect the SEC; they're doing their jobs. We did restate earnings. It is quite customary in this day and age for the SEC to take a look. We're cooperating with them fully.

It's not going to change our accounting going forward because, as you recall, we actually consulted with the SEC on a voluntary basis back in September and October before we actually issued the restatement on 10- K(a) for fiscals - years '99 to 2001. So we and our outside securities counsel are taking the SEC investigation seriously but are not particularly concerned about it, and expect no new news to break.

You all know the full story on this restatement, including all the cash that was - we said came in the door, came in the door. It's just a question of which years we recognized it.

As for the timing of how and when the government will act to resolve the matter, obviously it's in the company's interest to get this matter resolved as quickly as we can. But we are cooperating with the SEC fully, and yet we run our company. We don't run either the SEC or the government. They will, I'm sure, do a thorough review.

So I can't tell you if this is going to be behind us in two weeks, 90 days or later. But as we learn more, we will let you know.

OK, thank you. In terms of the last 25 percent of the ski season, how important is the front-range skier versus the destination, as you go through March and into April? And would you consider maybe shutting down earlier than ski conditions would warrant?

Well if you look at demand, March is our great out-of-state destination market month. The - in any case, about 70 percent of our Colorado visitors come from out of state. And in March, those numbers are even - that's a season-long number. In March, those numbers are much higher.

We do prune our expenses back dramatically in April so that even though there's a lessening of demand, because the out-of-state market tends to focus on spring activities elsewhere, than skiing in Colorado and Lake Tahoe, and so a greater proportion of our skiers in April are local skiers. It's also true that we wind down a lot of our facilities and a lot of our lifts so that we match our expenses with our likely revenues.

In terms of any notion that we would shut earlier in April than currently planned, I doubt that would occur. We are still operating -- because we do manage down our expenses in April, we are still operation above breakeven in April, so it's not a negative for us to stay open. The only thing that might cause us to shut early is if ski conditions were marginal so that we couldn't offer a good product. But, based on what has happened all year long, including just in the last week -- we've gotten something like 21 inches of snowfall in the last six days alone out here -- we have abundant snow, ample snow to make it to closing day. I wouldn't anticipate closing early.

So, if out-of-state visitors and destination skiers sort of don't perform the way you expect in mid-March or later, you wouldn't take -- what sort of steps would you take, necessarily, to cut that cost even more?

Well, you know, right now, I mean we're . Our issues isn't so much that out-of-state skiers are gonna fall by some huge, enormous, you know, 30, 40, 50 percent. Our problem may be that destination skiers fall one to five percent because this is primarily a fixed-cost business. And if we have 19,000 people skiing on Vail Mountain, our costs are gonna be very similar, whether it's 19,000 or 19,800. And yet, as you know, in a fixed-cost business, it's those last several points of visitation that fall -- you know, like 80 percent to the bottom line in the Lift Ticket segment, and in the other segments -- you know, Dining, Retail, among others -- you know, the margins are smaller, but on a variable cost basis, still a third of it probably drops to the bottom line. And if you have small changes in visitation, you can't really take that much out of your cost structure, because it still may be one of the busiest periods of time during the entire ski season. So, you, as our guest here, may think we're just zooming, but that doesn't necessarily mean that we are seeing visitation to the extent that we might like.

So, I think that as a company we should congratulate ourselves that rather than trying to respond on March 12th to the possibility of war, and trying to take out, you know, kind of cost with a week's notice, which is very difficult to do, we anticipated this problem back in August of 2002 and spent eight weeks, between August of 2002 and October of 2002, going through a very extensive cost-reduction planning effort, which we announced and described in October. We reduced expenses by about $20 million to our budget for the full season, about 10 million of which were actual year-over-year reductions that were spent in fiscal 2002 that would not be spent in fiscal 2003. And that's where we think we got the real expense savings, because we got the expense savings when we had sufficient time to be able to get them.

Now, having said that, while, you know, I just said, you know, don't look for a lot of cost reductions, nonetheless, we are -- we think we're able and nimble managers. And to the extent that we can find a million dollars here or there in expense reductions in February, March and April you can be sure we have already been on the case and our team is at work seeing where we can cut expenses at the margin without reducing the quality of the guest service experience in anyway.

OK. Thank you very much.

Thank you.

Thank you. I am showing no further questions at this time.

Operator, we have had two calls where lots of people had questions and somehow couldn't get through. So, can you just recycle through whatever system you have just to make sure that anyone who has a question can get an answer?

Thank you, sir. Again, if you have a question, please press the number one. Sir, I am showing no questions.

Thank you. And to defend the operator, I say it's two calls every six years. So, not a huge criticism there. Anyway, there being no further questions, thank you very much.

I think the simplest easiest way to close this call is simply to reiterate that Vail Resorts is in an amazingly strong competitive position despite these uncertain times.

We've had a very fine first half. We will manage well and as best we can through the second half realizing that the external climate is likely to get worse, not get better. Thank you all for your participation this morning.

Should you have any further questions, please feel free to contact me, Jim or Leslie directly. Leslie's phone number, for those of you who want to call her anytime soon, is 970-845-2958 and Leslie's e-mail is lroubos -- that's l-r-o-u-b-o-s -- @vailresorts.com.

Thank you one and all. Good bye.

Thank you, ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may disconnect at this time. Have a good day.