Vail Resorts Inc (MTN) 2005 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Vail Resorts' fiscal first quarter conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question and question-and-answer session. If anyone needs assistance at any time during the conference, please press the star followed by the zero. As a reminder, this conference is being recorded today, Friday December 10th, of 2004. I would now like to turn the conference over to Mr. Adam Aron, Chairman and Chief Executive Officer of Vail Resorts. Please go ahead, sir.

Thank you operator. The very best of mornings, everybody. It's nothing but smiles in Vail, Colorado. Welcome to Vail Resorts' fiscal 2005 first quarter earnings conference call and simultaneous webcast, both open to the public and the press at large. I'm Adam Aron, as most of you must know, after eight and a half years, Chairman and CEO of Vail Resorts.

Joining me on the call this morning here in the very snowy Vail Valley of Colorado, are Jeff Jones, our Senior Vice President and Chief Financial Officer, and Leslie Roubos, our Director of Investor Relations and Corporate Financial Planning.

How much snow might some of you ask? Well, a ton of snow. Get this. In just the past 48 hours, Heavenly has received 28 inches of fresh powder, Breckenridge, 26 inches, Keystone, 12 inches, Vail,14 inches, Beaver Creek, five inches, all on top of up to three feet of snow that we received in Eagle and Summit Counties over the Thanksgiving weekend. Ski conditions are just fabulous.

For example, we're opening some of Vail's Back Bowls and Blue Sky Basin today and tomorrow, a full week a ahead of schedule. To quote Bruce Willis in the movie "Die Hard", " yippy yi-o ki yay". For those of you familiar with the movie, the full quote's a bit more colorful, but discretion being the better part of valor, modesty prevents me from repeating it in its entirety.

On Wednesday, two days ago, we issued a press release about our sale of our 49% equity interest in the Ritz Carlton Hotel on Beaver Creek Mountain. Earlier today, this morning, we issued a press release discussing earnings for our first quarter ended October 31, 2004. Importantly, today's release made some comments about our outlook for the 2004/2005 ski season as a whole.

I'd like to begin the call today by briefly reviewing the quarter's financial performance along with some remarks about the recent Ritz-Carlton sale. I'll then turn to providing you with some color about the ski season, which has very much begun. At the completion of my prepared remarks, Jeff Jones and I will both be happy to take any questions you may have.

Before I do so, I want to remind you that in conjunction -- in conjunction with the new SEC rules regarding the use of non-GAAP financial measures, we are using the term "reported EBITDA" to report earnings for each of our operating segments, namely Mountain, Lodging, Resort and Real Estate. The resort segment, as you know, is the combination of the mountain and lodging segments.

Reported EBITDA for the Mountain, Lodging and Resort segments is defined as segment net revenue less segment operating expense, plus segment equity investment income. Real estate reported EBITDA is defined as real estate net revenue, less real estate operating expense, plus gain on transfer of property, plus real estate equity investment income.

A full reconciliation of these and other non-GAAP measures to GAAP can be found in this morning's press release and on the Vail Resorts.com website, in the Investor Relations section under the Regulation G Compliance tab.

Now, turning to the first quarter of fiscal 2005, I have to preface my remarks with the notion that the financial results of this quarter are practically irrelevant in determining what our results will be for the entirety of fiscal 2005. Needless to say, not a lot of skiing takes place in August, September or October in the Northern Hemisphere. Instead, the important activity of the quarter relates to what steps we take early in the year to set ourselves up for the fiscal second and third quarters, November to April, when we make the bulk of our annual income for the year.

That having been said, the first fiscal quarter of 2005 was a fine one for us, financial results for the quarter were quite acceptable, and the variety of our executed strategies and programs seemingly has us sitting pretty for the December to March ski season peak. The financial results we released this morning for the quarter actually exceeded our own internal expectations. So, against our own internal budgets, we have a modest cushion as we enter the heart of the ski season.

Along that line, we are quite pleased that we were able to keep resort reported EBITDA during this typically slow portion of our fiscal year virtually flat with last year. As I just said, the first quarter may be our most-important quarter of the year in ensuring the success of the coming ski season, but simultaneously it's the least important period in terms of what the actual end-quarter financial results may be. As such, I'm only going to mention a few of the highlights of first-quarter financial results.

Noticeably in the first quarter, we kept our costs in check in both the Mountain and Lodging segments, demonstrating that we're sustaining the cost reductions that we achieved last year. This is important because it reflects that we actually have institutionalized, uh , the approximate $45 million in annual cost savings combined, achieved in fiscals -- fiscal years 2002, 2003, and 2004. We continue to tightly manage our expenses. Lodging revenue for the quarter increased $2.5 million or a healthy 6%. That is also quite encouraging.

Many of our properties, most significantly at the Lodge at Vail, the Vail Marriott and, in Jackson Hole, Wyoming, at the Grand Teton Lodge Company, experienced increases in both occupancy and average daily rate during the first quarter of fiscal 2005. It was reassuring to see an increase in group business, particularly in the Vail and Beaver Creek markets.

We did have an unusual expense in the first quarter that some of you may not have been expecting, not all that big, but our lodging equity investment loss, which we include on the lodging reported EBITDA line, increased compared to last year due primarily to an $800,000 debt extinguishment charge incurred at the Ritz Carlton in Bachelor Gulch.

This charge was a result of our pro-rata share of the costs associated with the debt refinancing that took place within the hotel joint venture, one of several steps we proactively took in the past few months in order to properly prepare the hotel for sale. Since such a sale, in fact, closed on Wednesday, and on very favorable terms, I might add, we are glad to have paid attention in this area.

As I do each quarter, I'd like to provide you with some statistics for our own hotels. Keep in mind that the first quarter is seasonally weak for most of our hotel properties, as most have a winter-peaking season. RockResorts own hotels on increase occupancy for the quarter, with an occupancy rate this year of 56%, up four points, or 8% up from the 52% occupancy for the same period last year. The average daily rate at the RockResorts-owned properties decreased from $145 last year to $139 this year, a decrease of $6, or 4%. Overall, occupancy times rate at RockResorts-owned hotels, revenue per available room or RevPar was up 3% primarily due to stronger volumes of group business.

Results for the Vail Resorts-owned hotels that do not carry the RockResort brand, hotels that are primarily concentrated at the base of our Colorado ski resorts and in Wyoming, performed just fine. Occupancy increased two points this year from 55 to 57%, and average daily rate increased $3 year-over-year from $138 to $141, resulting in a 6% increase in RevPar. This RevPar increase was driven primarily by growth at the Vail Marriott and the Grand Teton Lodge Company.

Turning to real estate, uh, reported EBITDA for our real estate division decreased $9.9 million, exactly as expected, due to the timing and nature of real estate transactions that are expected to close all throughout fiscal 2005, versus closings last year that were concentrated in the first quarter of fiscal 2004. Loss from operations increased $11.2 million to a loss of 41.6 million, primarily as a result of the expected drop in real estate reported EBITDA by almost a corresponding amount.

This all reverberated throughout the income statement and we recorded a net loss of $31.5 million, or 89 cents per diluted share for the quarter. Consensus estimates for the quarter called for a loss of 88 cents. Incidentally, this one-cent difference equates to the $800,000 pre-tax refinancing charge I mentioned, that we took at the Ritz Carlton Bachelor Gulch in the quarter to put the hotel in a position to be sold.

Speaking of the Ritz-Carlton. I assume you all saw our press release dated Wednesday, December 8th, announcing that we sold our 49% minority interest in the joint venture that owned the hotel for some $13 million, which will result in an approximate $9.0 million total gain. The transaction price translates to a hotel valuation of approximately $90 million, 9-0 million, our $13 million sales price for our equity, divided by our 49% interest, plus the hotel venture's debt for an eye-popping 28 times the total EBITDA of the hotel venture for the 12-month period ended July 31, 2004.

We got a big, big price. Also, since we used the equity method of accounting for this minority joint venture, among other things we report our share of the joint venture's interest depreciation and other charges on our own EBITDA line. While the hotel had positive EBITDA, uh, and, again, in its earliest years prestabilization, one would not expect that that EBITDA would exceed the hotel's associated interest and depreciation charges.

Accordingly, in fiscal 2004, we reported $3.3 million in negative EBITDA from having owned 49% of the Ritz, and will report about $2 million in negative EBITDA for fiscal 2005. Therefore, this sale of our interest in the hotel venture brings us almost 13 million in cash and, importantly, actually improves Vail Resorts reported EBITDA by roughly $1 million in fiscal 2005, versus fiscal 2004, and by some $3.3 million in fiscal 2006, versus fiscal 2004.

The effort to build the Ritz Carlton hotel truly turned out to be a great investment for Vail Resorts because of, A, the gain on the sale of the asset we will book, B, the profits we have already reported in prior years related to the separate Ritz Carlton Club, built next door to the hotel and, C, the benefits that Beaver Creek Ski Resort has reaped and will continue to reap from both the unrivaled quality inherent to the hotel, and the equally inspiring unrivaled spending habits of the hotel's guests. I would remind you that the Beaver Creek ski resort has been on a roll in recent years, profitability has soared at Beaver Creek, of late, as Beaver Creek has risen to become the 10th most visit visited ski resort in the United States and the fourth-best rated ski resort in North America in "Ski Magazine"'s prestigious annual resort rankings, outranking, we are pleased to scream from the hilltops, both Whistler and Aspen.

At this juncture, it's probably a good idea to reiterate and clarify one aspect of our ongoing lodging strategy. We believe our lodging division is vital in helping us succeed in our mountain ski resort and we are glad to have diversified the company's business ventures outside Colorado. We continue to be very much committed to this strategy.

On the other hand, today we do have a blend of owned and managed hotel and condominium assets. Looking ahead, uh, it would seem that that blend of owned versus managed assets, uh , will and should move in the direction of more managed and fewer owned properties.

I mentioned in our earnings conference call in September, and then since, that we have aggressively been exploring the inherent value of our hotel asset portfolio, given that the market prices being paid to hotel sellers seem to be sizzling these days. But we believe it's possible for us to sell certain hotel assets at a significant positive arbitrage above their current valuation as a part of Vail Resorts' ongoing cash flow, given the multiples of, uh, hotel prices and the multiples of our cash flow. At the same time, we would expect in most case cases, not all, but in most cases to be able to retain our management and/or the RockResorts brand affiliation of sold properties. Most other leading hoteliers manage for a fee, rather than own many of their major properties, and we believe it's clear that option is open to Vail Resorts and RockResorts as well.

Now, let me move on to the ski season that is currently well underway. We are less than a month into the 2004/2005 ski season as we speak, but we are thrilled with the -- the momentum we have going into the season.

First, we've had excellent snowfall at all five of our resorts. Second, we are on pace to generate yet again a record season pass sales effort. Third, we have bookings from lucrative, out-of-state, so-called "destination visitors', having said bookings in considerable quantity. And, fourth, we have not been shy in charging premium prices for the premium product we offer at the industry's best mountain resorts.

Starting with, and thanks to, our season passes, we have already generated $50 million in lift-ticket collections, up 1% over last year's record amount, at this time. As in prior years, these sales will be recorded as revenue throughout our second and third fiscal quarters.

As for advanced bookings, bookings on a variety of metrics are extremely encouraging. For example, air bookings in the local Vail/Eagle County Airport are 6% higher than last year at this time. Hotel bookings for the ski season across the whole of our bed bases, booked through our central reservation system, look solid. They're up 7% compared to last season at this time.

Our own owned hotels and condominiums are doing even better. I should say owned and managed hotels and condominiums are doing even better, up about 10% year-over-year in booked room nights. Our ski school bookings are also robust and I can also report that the ski season has gotten off to a very good start in terms of visitation and spending.

As for pricing, lift ticket prices will rise from $2 to $4 year-over-year in the heart of the season at each of our resorts this year. We're optimistic and confident that the consumer will continue to perceive great value from the significant product and experiential enhancements we have made at our resorts, even with these not insignificant price pricing changes. All good news to be sure.

On the other hand, since we completed only about 6% of the ski season so far, and have completed only about half of the so-called booking season, it's still difficult to predict precisely what will result from all this positive data. We typically see most of our booking activity in December, January, and February for the month of February, March, and April. So we are still a long way from knowing precisely what to expect for the 2004/2005 ski season. What we do know now today, however, does look quite good.

Before we take your questions, I have some exciting news on the status of the single most important real estate project on which Vail Resorts has ever embarked, the redevelopment of Vail, especially at LionsHead. From a governmental standpoint we are all approved and we are fully ready to take to market the new LionsHead RockResort condominium hotel located just 20 yards from Vail's Eaglebahn Gondola. Have been finalized. You can see it at newVail.com. Look at the LionsHead tab under Vail Square. And we believe that the architecture and design are stunning example, inspired by an eclectic brand of what you might see at Ensbrook, Salzburg, Amsterdam, and Prague's Old time Square. The new complex will be known as the Arrabelle at Vail Square. The Arrabelle loosely translates to "beautiful eagle" from a blend of French and German. The Arrabelle includes $70 multimillion for-sale condominiums which will all go on sale before Christmas.

The whole project, including some 60,000 square feet of all new restaurant retail and skier service space on the new and handsome handsomely designed plaza to be known as Vail Square as well as as the RockResort's Luxury Hotel which we are trying to set at a standard above even the Ritz-Carlton Bachelor Gulch which portends to transform the Vail vacation experience. Vail Square is going to be beautiful, by the way. It will have a Norman Rockwell-esque outdoor skating rink, a signature glockenspiel clock tower, among other icons. And as important as anything, we believe it can be extraordinarily lucrative for Vail Resorts.

I, personally, am so excited about the location and design of Vail Square and the "Arrabelle', "beautiful eagle" that I am, that I want to announce today that I intend to personally purchase a four-bedroom condominium unit there myself at full retail price without even a penny of discount. upon its completion I expect to sell my Beaver Creek home and move into the Arrabelle, good morning Vail.

Depending upon the strength of presales, construction of the Arrabelle is expected to commence this coming spring or summer. And closings of the condominiums are expected to begin in the summer of 2007.

In summary, we have great snow, solid season pass sales, and strong air, hotel and ski school advance bookings. We sold our interest in the Ritz-Carlton at a whopper of a price, and, finally, you, too, can reserve your condominium at the Arrabelle at Vail Square in just a few days' time.

As you can probably hear, we continue to be upbeat about this year's ski season. Therefore, at this time we are reiterating without change the financial guidance we provided in September. Please refer to our press release, dated September 30, 2004 for specific guidance range.

At this juncture, Jeff and I will be happy to answer any of your questions. As you prepare for your questions, you know that I need to mention that the comments made during this conference call, other than the statements of historical information, are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such risks and uncertainties include but are not limited to general business and economic conditions, competitive factors in the skiing resort , failure to successfully integrate and operate future acquisitions, adverse consequences resulting from the ongoing existing SEC investigation, failure to commence or complete the planned real estate development projects and/or achieve the short and long-term financial benefits, from those developments and/or an inability to obtain financing on favorable terms, adverse changes in the real estate market, terrorist acts upon the United States, the threat of or actual war, economic downturns, expenses or adverse consequences arising from current or potential litigation against the company, implications arising from any new governmental rulings or interpretations, reliance on government permits for use of federal land and, the weather. Investors are also directed to other risks and and documents filed by the company for the Securities and Exchange Commission. Operator, we are ready for questions.

Thank you, sir. Ladies and gentlemen at this time we will begin the question-and-answer session. If you have a question, please press the star followed by the one on your push button phone. If you would like to decline from the polling process, press the star followed by the two. You will hear a three-tone prompt acknowledging your selection. Your questions will be polled in the order they are received. If you are using speaker equipment, you will need to lift the handset before pressing the numbers. One moment, please, for the first question. And our first question is from Bryan Maher with Calyon Securities. Please go ahead.

Good morning, Adam.

Morning, Bryan.

How are you?

Fabulous.

Sounds like it.

I am.

Two quick questions. One, with the Ritz-Carlton sale now behind you, how many more of the RockResort assets do you think you might sell in the next, say, 12 to 18 months?

Um, you know, since September, I've been saying we could sell one, two, three, or four of our hotels over a 18-month time frame and do so at premiums above with the way the cash flow is valued as a multiple of Vail Resorts' cash flow, that it may be worth a buck or two or even more a share. I still think that's the right time frame. I think that's the right scoping. Somewhere between one and four properties over 18 months. Obviously we delivered our first sale, uh, in just I guess, what, 60 days from the first time I started talking about it publicly. So I don't want to raise expectations too high, but we are actively talking to financial parties interested in owning these hotels, Uh, I'm pretty sure we're going to keep management, at most, we obviously did not manage the Ritz so there was nothing to keep. Part of a 50-year management contract with the Ritz-Carlton hotel company. We might give up management on a property or so, but I -- I think our Lodging strategy is -- is very much intact. On that score, Bryan, is a tangent, one thing we're excited about, uh, right now we manage a host of our properties for third-party owners, including, uh, La Prasad to Santa Fe which is one of the best of the ten RockResorts properties. We were notified by the hotel's owner back in August or September that they wanted to sell the hotel. And we actually found a new investment syndicate that wanted to purchase the hotel at a fairly healthy price, but retain RockResort as the manager, uh, that transaction's under contract, it is not closed. We're not involved in the transaction, but assuming it goes as scheduled, the hotel will change ownership and RockResorts will be retained as the manager in a new long-term management contract. We think that's a nice vote of confidence by a independent third party, uh, in the management of our RockResort hotels.

Thanks. And then the second question I had is, can you elaborate on where you think and where the board thinks RockResorts goes from here, and how do you facilitate, uh, you know, future growth to the brand when you're selling off a couple of assets?

Sure. Well, you know, we -- we always had modest goals for Rock. We said that -- you know, if -- if RockResorts added a property a year, that would be just fine. And, you know, in fact, we didn't expect to add the properties we already have, but, uh, the Cheeca Lodge was sold by its owner out from underneath us. We found an investment syndicate to buy it. That investment syndicate gave Vail Resorts and RockResorts a new 20-year management contract to run it. The same thing appears to be happening at La Posada. We are obviously not in the market to be a hotel buyer at the kinds of prices hotels are trading at. If anything, we're in the market to be a hotel seller. So for RockResorts to continue to grow, we're going to have to continue to convince owners of hotel assets that we're a high-quality luxury manager, and grow via management contract, and as I just said, with both Cheeca and La Posada we've done that twice now in the past 36 months.

Thanks. And then, lastly, I continue to get calls as I'm sure you do regarding -- from reporters regarding the sale of Vail Resorts. Can you unequivocally say that Vail's just not for sale as a company?

I can unequivocally say that we do not comment about rumors and speculation. However, anybody who may have noticed, our stock has moved from $11 around the time of the Iraqi war to closer to $23 today, from $15 last spring to closer to $23 today. I don't believe there are any sale rumors in the marketplace. And I, Adam Aron, just said today I'm buying a multimillion, um -- a multimillion condominium in Vail, Colorado, that isn't going to be ready for two and a half years. Finally, what is also public, is that Apollo has distributed their six million shares into -- into the marketplace. So you have a shareholder with about 18% of the shares who could have voted as a bloc in favor of some kind of transaction that is no longer on the scene and those shares have been split up into much smaller institutional hands. I think you can draw from everything that I just said the right conclusion, and let me stay, uh, not violating our company's policy, not to comment on rumors.

Thanks, Adam, good luck for the season.

Thanks, Bryan.

Thank you. Our next question comes from Glenn Reid with Bear Stearns. Please go ahead with your question.

Yeah, hi, hi Adam. Three questions. First, um, the weakness in the dollar, obviously, um, continues. Last year, you know, was an issue that we were kind of looking at, um -- can you comment on -- you know, whether or not it -- you saw it show up in the numbers last year? I mean, I know the season kind of ended, uh, a little bit weak because the weather deteriorated, but did you see any trend, uh, you know, that might have lead you to believe that the dollar had an impact?

Good morning, Glen, hello, and, yes, we saw two trends with the dollar impact. One, even with, uh, snow melting away a little bit in March, which was unusual. It was very warm last March, which by the way is a great harbinger for this March, because we're expecting normal weather. Um, the -- even with that slowdown at the end, international visitation was -- showed double-digit growth at our ski resorts last season. This year, our advanced bookings, and early indicators coming out of Europe and South America, suggest that again we're going to have double-digit growth out of international visitors. And another factor that people forget about, um, Americans stayed at home and -- you know, a lot of -- some people think oh, that means Americans aren't going to Europe. Not that many Americans go to Europe to ski, but a lot of U.S. citizens go to Canada to ski. And we also saw a major shift back from Canada to the United States because of the falling U.S. dollar against the Canadian dollar.

Along those lines, have you guys stepped up any marketing in Canada to try and draw people down here?

Not yet, but that's a pretty good idea.

Okay.

I'll -- I'll be sure not to tell my friends in Vancouver where we sourced the idea.

Okay. Um, all right. The second question. Um, you know, a little bit of press talk, uh, out there in the Colorado press. And I'm not sure how meaningful of an issue it is, but of the highway closings, some rock slides and things like that. Does that have a potential to be a problem for you?

I'm glad you asked the question because there could be some confusion on the score. Right around Thanksgiving, it was all over the CNN, among other networks, that I-70 was closed because of a rock slide. That rock slide was in Glenwood Springs, approximately 20 miles west of Eagle Airport, meaning on the other side of Eagle Airport from where we are. And not -- not between Eagle Airport and Vail and Beaver Creek, and also, not between Denver and Vail and Beaver Creek. So that -- that really -- you know, it might have -- might as well have been in Timbuktu for as far as we're concerned.

Okay. That's good to know. And then the final thing is -- you know, your guidance that you gave back in September, um, you know, suggests -- you know, 5% resort EBITDA growth on the low end and 10% on the high end, I guess. You know, given the trends you're seeing -- I mean I understand, you know, you don't have a ton of visibility until the back end of the season, but, um, you know, could it perhaps take out the low end of the range of guidance that you gave? Kind of the trends that you're seeing now?

I'm a man who under promises and over delivers. The guidance range is intact, uh, the midpoint of that range called for about 8% resort EBITDA growth. Remember, full disclosure here, uh, we lose a key operating day in the season. Uh, last year we had the benefit of something called February 29, which does not exist this year. And that's worth about 2% -- that extra day in February right at the heart of the season was worth about an extra 2% of resort EBITDA for us. So, really, when you adjust fiscal 2004 down as if Leap Year had not existed, uh, we obviously had a great year last year, resort EBITDA grew 40%. Without Leap Year, it would have grown 38%. So if you adjust 2004 down to -- to exclude Leap Year, the midpoint of the current range is 10% resort, uh, reported EBITDA growth. That's a healthy enough number for December 10. And, uh, we'll see how the rest of the season plays out. You're free to do whatever you want, but I'm staying with existing-- the existing guidance range.

Okay. Thanks a lot.

Thank you. Our next question comes from Will Marks with JMP Securities. Please go ahead with your question.

Good morning, Adam, good morning, Jeff.

Will, good morning to you.

So, um, a couple questions here. On the -- on the condos, the complex where you're going to be a proud owner. Um , 70 -- can you actually -- first, just give some details on the whole project. It's 200 million, and can you just remind us again what that includes?

Yes, 200 million is the revenue we expect to generate from the sale of the 70 condos.

I'm sorry, 200 million is?

200 plus million, yes. That was a round -- that was a round number. If we -- if we can sell these things at our pro forma prices, the revenue's of the -- of the project will exceed 200 million from the sale of the condos. The project includes roughly 40 hotel rooms, a full -- the full public space of a hotel, spa, ballrooms, beautiful lobbies, restaurants, normal -- normal luxury hotel. This -- the 70 condominiums are all interspersed throughout the hotel with their 200 bedrooms. We're expecting about half of them will rent their units as part of the hotel inventory. So we're thinking of this as being about 150-room luxury hotel as far as guests will be able to book into it.

But you just said 40 -- I'm sorry, 70 condos, 40 hotel rooms.

40 hotel rooms, 70 condos with -- with 200 bedrooms.

200 bedrooms--

In the 70 condos.

Right, got it.

These are not small condos. This is not a 900-square-foot condo. These condos are 2500 to 9,000 square feet. Uh, 50 of the condos will have a full lock-off bedroom, which will be indistinguishable from a regular hotel room if you're inside that locked-off condominium bedroom. In addition to this full condominium hotel, we've got this full skier-service retail restaurant plaza with the glockenspiel. Do you know what a glockenspiel is, by the way? It's kind of a coo-coo clock, where the characters come out on the quarter and half hour. There's going to be a carillon bell tower in this complex. We really think it's going to be stunning. We're going to have a dramatically new ski-school facilities for our booming children's ski-school business in Vail. And the whole complex is just like a spitting distance from the Eaglebahn Gondola. I think we measured it, 29 steps from the gondola to the Vail Square Plaza where the Arrabelle will exist.

What's the cost--

The construction costs of the condominiums will be in the neighborhood of $100 million, construction costs are, uh, rising, not falling, so that number could -- could grow. But I also think we're going to have about $60 million of residual investment, you know, plus or minus adjusted for construction costs as they go up over the next two or three years. In all of the public spaces that we will be building, whether it's the hotel public space, the hotel rooms that we will be -- you know, 100% owner of, this 60,000 square feet of plaza space, the plaza itself. But, anyway you slice it, this -- assuming that we sell these things at the prices we're expecting, which are in the neighborhood of a thousand to $1100 a square foot, um, this is going to be a very lucrative project for Vail Resorts.

And, uh, how will -- how will we hear about the sales? Are you going to do a -- is this a -- say one-day sale thing where you're going to try to sell as many as you can, you know, with a Lodge party or something like that?

We're -- we won't actually be taking a hard binding contract until early March. Uh, but we are going to do what we're going to call a soft launch, uh, between Christmas and the end of February where people for a $100,000 check can designate a certain unit and get themselves in a position to have a binding on us reservation for a particular condominium unit. God, it's impossible for me to imagine that we're going to sell $200 million of condominium product, you know, in -- in a day, like, uh -- like it used to be the case around here when you were selling ten of those things, uh, or -- you know, $30 million worth, not $200 million worth. But we're optimistic that sales are going to be quite brisk and we will put out some press releases either along the way, uh, or talk about our sales progress in the next quarterly conference call.

Great. Okay. Just one other question. On -- related to Heavenly. Um, I understand that Squaw Valley season ticket prices are still over a thousand dollars, and I think you're at 299, or something like that. Uh, can you just comment on how you think you've been doing competitively against Squaw Valley or any other Tahoe resort?

Yeah, the words "cleaning up" comes to mind. Uh, we -- we sell in excess of 20,000 season passes last year and this year. And when you check their usage, they're only used about six days a year on average. So when you look at that $300 price, you know, it's like 50 bucks a day for a lift ticket, that's not a bad price for a season pass day. I think Squaw's using the old model. The old model is you charge $1500 for a season pass. You sell a few thousand and you sell them to the people who are going to ski 30, 40 days in the ski season. I would venture to guess that our price per day skied on our so-called "cheap" season passes is actually much higher than the price per day skied on their so-called "expensive" season passes. And, you know, we have both products down here in Colorado. We sell in excess of 100,000 of our cheap season passes priced between 299 and $349. But we also sell some number, 10, 20 thousand of our higher-priced season passes, uh, priced anywhere from $700 to $1500. And it -- I know it's counterintuitive, but the price we receive for a day skied is anywhere from 50% to 100% higher on the cheap season passes than the expensive season passes. Basically, you've got self-selecting populations and the real heavy skiers are willing to -- are -- the only ones willing to buy an expensively priced pass. Infrequent skiers are willing to buy an inexpensively priced pass. Okay. That's helpful. Thank you very much.

Thank you. Our next question from Grant Jordan with Wachovia Securities. Please go ahead with your question.

Good morning. I've got a couple of questions.

Good morning.

First housecleaning. What was the cash flow from operations in the quarter, and then the CapEx and investment in real estate?

I'll let Jeff Jones, our Chief Financial Officer --

Okay.

Take you through those specifics.

Okay. Well, he --

Here he comes.

Hi. The CapEx for the quarter was just under 30 $30 million on the resort side of the business, which is our Mountain Lodging business -- which as many of you are aware, we track our CapEx on a calendar basis, so for calendar '04, which is January through October of '04, we have now spent about 38 million on the resort side of the business. We estimate when all is said by done by the end of the year, be at or around 60 million or so for the resort side. Uh, on cash flow from operations for the quarter, uh, the total net change in cash for the quarter, was a negative $14.7 million. We still had invested cash at the end of the quarter, and as we said today have no borrowings under our revolver even though we have actively been involved in our ski season today.

Okay. Um, next, when we were on the last call one of the ideas that you talked about taking to the Board room was potentially a dividend on the stock, is there any update to that?

There is no update to that. We believe this company is going to be generating positive cash, uh, in fiscal 2005 just as we did in fiscal 2004. Uh, the Board has not yet decided what is the optimal strategy on how best to deploy that cash.

Okay. And then, finally, are there any attractive ski properties that you're seeing out there in terms of an acquisition, particularly in the California market?

Not yet. Our eyes are open. That is one of the many things we could use, that growing cash balance--

Certainly.

uh, on. I haven't heard of any good -- good assets to come onto the market. And, you have to remember, I mean, we have gone from two resorts when I got here eight years ago and a 4% national share to five now with a 10% share. We do believe we know how to buy ski resorts right and which ones to buy. Uh, we don't want to just acquire ski resorts, to acquire ski resorts. We've got very tight acquisition criteria. We only want the kinds of resorts that after a little Vail Resorts magic is applied, could be positioned as Top-20 resorts in North America. We know which resorts those are. and if and when they come to market, uh, we're relatively flush these days. we will be first in line. Having said that, we have also proven over the years to be a very disciplined buyer. We believe the best asset could be the worst investment if you overpay. So we -- we have many times in the past six years passed on a high-quality ski resort acquisition if the price the seller wanted was too much in our judgment.

Thank you.

Thank you. Our next question is from Geoff Garbacz with Quantitative Partners go ahead.

Yes, my question for you is two-fold. The first question is, um, can you break out for me Summit County skiers, um, in terms of day skiers versus destination skiers? And the second part of the question is earlier you discussed part of the construction issues in Glenwood but now there's a new project, which is undertaken in Georgetown, which I'm not sure if you're aware of, that literally just started this week, which is scheduled to run for about 25 days. And it's going to run from 8:00 in the morning till about 4:30, Monday to Thursday, and Friday is 8:00 to 1:00. And what the impact that might be on day skiers?

Sure. Happy to take both. Um, my view of the Glenwood project is, so what? We don't have that many day skiers on a Wednesday or a Thursday. The -- not at Glenwood, um, Georgetown. They're going to close a lane out of four is my understanding for a few weeks. You know, daytime only, midweek only. Our -- our big day skier population comes up Saturday and Sunday. Um, so I -- I -- we're not expecting any grand problems. That's a road I drive, uh, personally every week of my life, and the big volumes on that road are Saturday and Sunday. During the week it's -- it's a very uncrowded, lonely interstate. As for your first question, uh -- at least that's our view. We'll find out if I'm wrong. As for your first question, if you look at our Summit County resorts, which are Keystone and Breckenridge, you've got about 10% of their customer base comes from within ten or 15 miles of the resorts themselves. Uh, about 5% comes from international visitors. Probably about -- if you average Keystone and Breck , probably about 55, 60% of their visitors come from around the 48 United States. And about 30% of their business comes from the -- from within the Front Range of Colorado. However, of that 30% that comes from within the Front Range of Colorado, about half are day skiers, as you would think of them, and about half are what we call Colorado overnight skiers, people who will come up for three and four-day weekends.

Great. Um, one quick follow-up question. One quick follow-up question?

Sure, go ahead.

Okay. In my discussions I actually called the Colorado Department of Transportation. The way the project is gonna work is it's really kind of a three-pronged project and the reason they're doing it is their concerns about rock slides coming down. The first is going to be scaling and drilling, then they're actually gonna end up flying helicopters in to put up new barriers. And then they're going to have to make sure that that works. Um, and the way it's going to get shut down is it's going to be done at 20-minute intervals starting at 8 o'clock in the morning Monday through, um, Thursday till 4:30 and then up until that -- that 1 o'clock period. And the potential problem I see is that if they're doing construction -- because you mentioned like it's not going to have an impact on the weekends, which I would agree. If they aren't in the middle of construction and they get hit with a snow storm and then as a result they got to keep, you know, the westbound side shut down or one of those lanes shut down. So I -- I just was kind of curious if you thought that -- if you guys have actually talked to them about this issue and that's my last question.

Well, number one, I want your name and phone number because I want to hire you. Because you are a guy who knows his stuff. No. Uh, we -- we're fully aware of what CDOT's doing and we're not at all worried.

Okay. Great. Thank you very much.

Thank you. Ladies and gentlemen, if there are any additional questions, please press the star followed by the one at this time. As a reminder, if you are using speaker equipment, you will need to lift the handset before pressing the numbers. One moment, please, for our next question. And our next question is from Will Marks. Please go ahead with your follow-up question.

Yeah. Just a quick -- couple of quick questions, uh, probably for you, Jeff. The -- the -- the cash that you're receiving from the Ritz sale, um, what would that be after tax? What do you anticipate on taxes on that number?

We haven't -- we haven't done all the tax, you know, analysis around that investment yet. We'll be recording all this in the second quarter. But I can tell you it's safe to say with our NOL position, even including this, we haven't changed our thoughts on the fact that when we built it into our forecast over the next few years we should not be a cash taxpayer of any magnitude.

Okay. Uh, and then, secondly, on the balance sheet data that you gave -- and I think you commented on some of this, I may have missed it. But, um, given that your 652 of total debt and the 32 million of cash, what -- what's gonna happen I guess in the next year, maybe you can give us a sense of CapEx uh, both from real estate development and from the ski resort?

We anticipate, uh, from a resort CapEx standpoint, although we have not gone through our calendar '05 budgeting process or approval process yet. We still anticipate that it should approximate the same levels that we're planning the complete spending on in calendar '04, so around that 60 $62 million range for resort. On the real estate side, when you factor everything in, in other words the CapEx that we're spend spending net of the deposits that we get in and the sales and reservations of the sales for the properties in Vail and elsewhere, as well as some of the land sales that we're doing at the same time, including a -- the fact that in the first quarter of this year we -- we closed on the sale of the tennis court lots in -- in Vail as an example in the LionsHead area. When you mix all those in, you really do not have a significant cash outflow on the real estate side in each of the next two years. Call it 20 million or less over the next two years in each of those years and then after that obviously you get a significant cash inflow to the company as all those sales close, both in Vail and other areas of the company. So, again, the mix of the deposits we're getting in, the land sales, and also, I should add, on certain of the properties including the Gore Creek town homes, uh, in Vail, we have signed a term sheet to do non-recourse financing on that which will also help from a cash flow standpoint.

That's great. Well, not to pat you on the back, or put words in your mouth, I guess -- this is obviously what you've been saying over the last year or so, that you think you can, uh, maintain your debt level, uh, through through some real estate sales and land sales that will finance all these projects. That seems like you're sticking to it.

Yeah. Absolutely, that's what we're seeing. We've got a very updated model that's telling us the same thing.

And that's not based on additional hotel sales at all?

That's correct. No additional hotels sales in that.

That's great. Thanks, guys.

Thank you. Our next question is from John Mattesich with Hayground Cove Asset Management. Please go ahead with your question.

Thanks. All my questions have been answered.

Thank you. Thanks anyway.

Thank you. Once again, ladies and gentlemen, if there are any additional questions, please press the star followed by the one at this time. And as a reminder, if you're using speak er equipment, you will need to lift the handset before pressing the numbers. One moment, please, for our next question. Mr. Aron, there are no further questions at this time. Please continue.

Operator, thank you. Just because on prior calls some people haven't had a chance, can you just poll one more time and assuming there are no questions we'll wrap up.

Thank you, sir. Once again, ladies and gentlemen, if there are any additional questions, please press the star followed by the one at this time. And as a reminder, if you are using speaker equipment, you will need to lift the handset before pressing the numbers. One moment, please, for the next question. And Mr. Aron, there are no further questions at this time.

Thank you, operator. Thank you everyone. As I conclude, let me remind you simply, five to 28 inches of fresh snow at our five ski resorts in just the past 48 hours. The skiing's great. The bookings are great. Uh, we're all smiling out here. Good-bye, thank you for listening.

Thank you, sir. Ladies and gentlemen, this concludes the Vail Resorts' fiscal first-quarter conference call. If you would like to listen to a replay of today's conference call. Please dial 303-590-3000, 4800, 4052236 with access code 11016421 followed by the pound sign. Once again, if you would like to listen to a replay of today's conference call. Please dial 303-590-300 or 800-405-2236 with access code 11016421 followed by the pound sign. You may now disconnect and thank you for using AT&T teleconferencing.