Vail Resorts Inc (MTN) 2006 Q3 法說會逐字稿

Welcome to the fiscal 2006 third quarter results conference call. [OPERATOR INSTRUCTIONS] I would now like to turn our conference over to Rob Katz, CEO of Vail Resorts. Please go ahead, sir.

Thank you very much, operator. Good morning, everyone. Welcome to the Vail Resorts fiscal 2006 third quarter earnings conference call and simultaneous Webcast, both open to the public and press at large. I'm Rob Katz, CEO of Vail Resorts. Joining me on the call this morning is Jeff Jones, our Senior Executive Vice President and Chief Financial Officer.

Earlier this morning, we released our earnings for the third fiscal quarter ending April 30, 2006. Before we review these results, I want to remind you that we are using the term reported EBITDA to report earnings for each of our operating segments, namely mountain, lodging, resort. Which as you know, is the combination of the mountain and lodging segments and real estate. Complete reconciliations of reported EBITDA and other non-GAAP financial measures can be found in this morning's earnings release and on the Vail Resorts Website in the Investor Relations sector under the Regulation G compliance tab.

I also need to mention that the comments made during this conference call, other than the statements of historical fact are forward-looking statements that are made pursuant to the Safe Harbor provisions in the Private Securities Litigation Reform Act of 1995. Certain risks and uncertainties could cause actual results to differ materially from those contained in the forward-looking statements. Investors are directed to the risks and uncertainties described in the documents filed in the documents filed by the Company with the Securities and Exchange Commission. Including the Company's Form 10-K for the 2005 fiscal year and the Company's Form 10-Q's filed subsequent to the Form 10-K.

So with that said, let's turn to our results. I am extremely pleased with our results for the third quarter. We exceeded our own strong expectations for the quarter, setting records across many key categories, including net income, resort reported EBITDA, resort revenue and skier visitations. Clearly demonstrating that our focus on continuously enhancing the guest experience is paying off. That performance is evident in our nine month results, as well, which encompasses our entire key season and also resulted in record net income, resort reported EBITDA, resort revenue and skier visitation, among other things.

While we can attribute a portion of our success to strong early season snowfall in Colorado; as the season progressed, snowfall returned to more historically average levels. Certainly, we were able to capitalize on our early season momentum through high high bookings and consequently, skier visits. But I believe our performance is truly the realization of many of the improvements we have made to our mountains and our emphasis on world class service levels.

Our performance continues the terrific progress our Company has made over the last three years in enhancing that guest experience I mentioned earlier. Our strong season at our Colorado resorts was partially offset by a challenging year at Heavenly. Which faced unusually difficult weather conditions especially during the Christmas holiday and many other weekends during the season. However, we are particularly proud of our ability to maximize profits at that resort in such a year, while our commitment to outstanding service for our guests was not compromised.

Skier visits were up 4.4% for the quarter, with year over year growth at all five resorts and increased 6% for the entire season. Additionally, we realized significant price increases, with our effective ticket price up 10% for the third quarter and up 6.5% for the season. Consequently, lift revenues increased 14.9% and 12.8% for the three and nine months ended April 30, 2006, respectively.

Our resorts ancillary businesses including ski school, dining, and retail rental also benefited from both visitation and price increases and experienced commensurate revenue growth for the quarter and nine months. All of the third quarter revenue growth was achieved despite going up against strong comparisons in the third quarter of last year. And given the predominantly fixed cost nature of our business and our constant attention to our expense control, we were able to flow a significant amount of those revenue increases to the bottom line.

I am also pleased with the results of our lodging division. While absolute earnings are down for the quarter, this is due to the impact of the sale of several of our hotel properties. Excluding the operations of the sold hotels, lodging revenues increased by 5% in the third quarter, while expenses also excluding stock-based compensation expense increased less than 0.1%.

Similarly, lodging revenues, excluding the operations of the sold hotels for the nine months, increased 5.4%, while expenses increased 3.2%, excluding stock-based compensation expense. I would also point out that those hotel sales were achieved at very favorable valuations. The successful lodging results prove that our owned and managed assets in and around our Company's resorts help us further capture and enhance the guest experience, while also positively impacting the bottom line.

Also in regard to our lodging division, we are very happy to announce last week that our subsidiary, Grand Teton Lodge Company or GTLC, has been selected to continue as the concessionaire in Grand Teton National Park. GTLC has held the concession contract for the Grand Teton National Park for the past 54 years, under two consecutive contracts providing lodging, restaurants, activities and retail services. We are extremely pleased to have been selected to continue our concessionaire services within Grand Teton National Park and look forward to completing the contract process and to continuing our long-term relationship with the National Park Service.

I would like now to turn the call over to Jeff Jones who will give you a more detailed overview of our results for the quarter and year to date and review guidance for the remainder of the fiscal year. I will then review the status of some of our real estate projects and briefly update you as to the status of the relocation of our corporate headquarters. Jeff and I will then be both available for questions. Let's now turn to Jeff for our third quarter results.

Thanks, Rob. And good morning, everyone. As Rob mentioned previously, earlier this morning we released our earnings for our third fiscal quarter ending April 30, 2006. Net income for the quarter and year to date were both a new all-time record. And for the third consecutive year, we had record third quarter resort reported EBITDA results. Also this morning, we filed our Form 10-Q for the third quarter.

I'd now like to take you through some of those highlights of our third quarter and year to date results. As we review our financial results, it is important that you keep in mind that as of August 1, 2005, Vail Resorts adopted the Fair Value Recognition Provisions of SFAS 123R, share-based payments, using the modified prospective method. As a result, the Company recorded total stock-based compensation expense of $1.1 million, included in segment operating expense in the third quarter of fiscal 2006. This compares to 0.1 million of stock-based compensation expense recorded in the third quarter last year under the provisions of APB 25. For the first nine months of fiscal 2006, the Company recorded total pretax stock-based compensation expense of 4.7 million, as compared to 0.4 million for the first nine months of fiscal 2005.

Looking at both the both quarter and year to date performance, which shows similar trends in the mountain segments, Vail Resorts realized improved resort reported EBITDA of 17.1 million or 12.4% in the third quarter, compared to the previous record last year. And an improvement of 30.8 million or 15.9% for the year to date period. The record results started with an increase in mountain segment revenue of 14.8% and 15.0% for the third quarter and year to date respectively.

These increase are due to double digit lift increases of 14.9% and 12.8%, combined with commensurate strong increases in the ancillary businesses, including ski school, dining and retail rental. The lift revenue increase was driven by a healthy 4.4% and 6% increases in skier visitation for the quarter and year to date, increased ticket yield and increased season pass sales.

Effective ticket price or average realized lift ticket, known in short as ETP, increased 10.0% and 6.5% for the three and nine months ended April 30, 2006. The increases in ETP were due to improved ticket pricing, which was partially offset by increased early season visitation by season passholders, as a result of favorable early season snow conditions in Colorado. ETP, excluding season pass revenue and visitation, increased by 11.4% and 9.4% respectively.

Visitation as the Company's Colorado's resorts was up 5.2% for third quarter and up 8.0 year to date. While visitation at the Company's Heavenly Resort was up 0.7% for the third quarter and down 3.3% for the year to date period. Due to unfavorable weather conditions, including during the Christmas holiday period. In addition to achieving ski lift ticket price increases and increased visitation in the quarter and year to date relative to last year, we were excited to see ski school revenue up over 14.0% and 13.8% respectively. And dining revenue up 7.8% and 6.9% during the quarter and year to date.

Dining experienced a lower percentage growth than the other ancillary businesses due to the reduction in revenue resulting from the conversion of certain formally owned restaurants to leased operations and the closing of certain owned restaurants due to the redevelopment at LionsHead and for the construction of Arrabelle Square. In addition, our retail rental operation experienced growth of 24.1% and 24.6% if for the quarter and nine months, partially as a result of the acquisition six new retail locations in the San Francisco Bay area. Excluding the impact of these successful retail acquisitions, retail rental revenue still increased by a strong 10.6% and 10.2% for the third quarter and nine month periods respectively.

Turning now to the cost side of the business, mountain operating expenses grew in the third quarter by 17.0 million, while corresponding mountain revenues grew 37.9 million in the quarter. Similarly, mountain expenses for the year to date grew 43.2 million, while corresponding mountain revenues grew 75.8 million. Excluding retail rental, which has higher variable costs and had an acquisition this year and excluding stock-based compensation expense, mountain segment expenses during the third quarter and year to date increased 8.5% and 7.6% respectively.

These increases are primarily due to higher variable costs associated with higher revenues, including the United States Forest Service fee, credit card fees, higher cost of sales supporting higher dining revenues, higher fuel and utility costs, which were also up due to higher absolute cost increase. And labor related expenses to support increased visitation, including in our ski school operations. As a result of revenue increases combined with continued cost controls, reported EBITDA for the mountain segment rose 17.0% year over year in the third quarter to a record 146.1 million and rose 18.9% year over year for nine months for a record 212.0 million.

Reported EBITDA for mountain excluding stock-based compensation increased by 17.5% for the quarter and 23.3% for year to date. And mountain margins, defined as mountain reported EBITDA divided by mountain net revenues, increased 1 full point to 48.6% to 49.6% for the quarter and over 1 point from 35.3% to 36.5% for the year to date period.

Turning to our lodging segment. In fiscal 2005, the Company sold its minority interest in the Ritz-Carlton, Bachelor Gulch and sold the assets of two additional hotels; the lodge at Rancho Mirage and the Vail Marriott. Additionally in the second quarter of fiscal 2006, the Company sold the Snake River Lodge & Spa in Teton Village Wyoming. We retained management contracts for the lodge at Rancho Mirage, the Vail Marriott and Snake River Lodge & Spa. While the Bachelor Gulch Hotel continues to be managed by Ritz-Carlton.

Therefore, while lodging revenue for the quarter and year to date fell by 29.8% and 21.9% respectively, excluding the impact of the hotel sales, lodging revenue actually increased 1.9 million or 5.0% for the quarter. And 5.5 million or 5.4% for the year to date, which includes the incremental management fees 0.6 million and 1.2 million respectively related to the management contracts we retained. The improved same store performance for the quarter was primarily due to increases in ADR and occupancy rates, driven by increases in business from leisure travelers, primarily in the properties at or around the Company's ski resorts.

Similarly for the nine months on a same store basis, increases in ADR and occupancy rates were driven not only by the properties at or around the Company's ski resorts, but also by GTOC, as well as increases in late summer 2005 group business, which was captured in the first quarter of this year, particularly in the Keystone market. Excluding the impact of the sales of Rancho Mirage, the Vail Marriott and Snake River Lodge & Spa, as well as stock-based compensation expense; expenses increased less than 0.1 million or 0.1% for the quarter and 2.9 million or 3.2% for the year to date.

Let me provide you with some operating statistics for our owned hotels for the current quarter as compared to the same period last year. On a same store basis, our owned hotels had a 12.3% growth in REVPAR, that's revenue per available room. Occupancy increased 3.7 points in the third quarter to 60.5%, and we experienced an ADR, or average daily rate increase of 5.5% or $12.88, up to $247.32.

Similarly for the nine months on a same store basis, REVPAR increased 13.0% on a 3.4% and a 4.8% increase in ADR or $9.88 to $216.19. Our strong lodging results further show that we have developed expertise in operating hotel properties in and around our mountain resorts. And we plan to continue to look for new opportunities to leverage this expertise.

Turning to total resort reported EBITDA, the combination of our mountain and lodging segments. As I mentioned earlier, total resort reported EBITDA was another all-time record in the third quarter for Vail Resorts with 155.1 million this year, a 12.4% increase over last year's record third quarter resort reported EBITDA. Similarly, resort reported EBITDA for the year to date rose 15.9% over last year to 224.2 million this year. Excluding stock-based compensation expense, resort reported EBITDA increased by 13.0% in the third quarter and 17.6% in the year to date period.

I'd now like to turn to our real estate segment where revenue decreased to 7.2 million and reported EBITDA decreased 2.4 million for the third quarter. For the year to date, real estate revenue decreased 19.1 million and reported EBITDA decreased 9.8 million. The Company's real estate operating revenues are primarily driven by the timing of closings and the mix of real estates sold in any given period. And there are minimal closings on real estate during the quarter and nine month period.

Real estate reported EBITDA in the current year is primarily generated by contingent gains on development parcel that closed in prior periods. Additionally, in the third quarter this year, the Company recorded 1.1 million in unanticipated costs of sales related to the Jackson Hole Golf and Tennis development. The Company is currently in the development stage for several major real estate projects, including the Arrabelle at Vail Square, Gore Creek Place Townhomes, Vail's "Front Door", the Peaks of Breckenridge, the Jackson Hole Golf and Tennis residential development in the second phase of the Mountain Thunder Condominiums in Breckenridge, among other projects. And Rob will speak in more detail about these later in the call.

In addition to the segment operating results that I've just reviewed, I'd briefly like to discuss a few other material material items that contributed to the Company's overall financial results. Depreciation and amortization expense for the three and nine months decreased 2.1 million and 6.1 million respectively. These decreases are primarily due to the previously mentioned sale of hotel assets, as well as higher fiscal 2005 accelerated depreciation for certain assets, which were retired in advance of their previously estimated useful lives. Offset by capital expenditures in the current year and accelerated amortization associated with certain intangibles.

The Company experienced increased net investment income of 3.0 million and 3.9 million for the quarter and year to date respectively, due to significant increases in average invested cash balances during the period. We ended up the third quarter with $240 million of cash on hand. Interest expense decreased 0.5 million and 2.9 million for the quarter and year to date respectively, versus the same period in the prior year, due to a reduction in outstanding debt and margin rates. Partially offsetting these positive variances, the Company recognized 3.8 million of expense in the quarter in association with the separation agreement with the Company's former Chairman and CEO, and the Company's planned relocation of its corporate headquarters, which Rob will discuss further later on in the call.

Finally, for the three months ended April 30, 2006; the Company experienced a 1.1 million increase in stock-based compensation over the prior year. And for the nine months ended April 30 2006, the Company experienced a 4.3 million increase in stock-based compensation expense over the prior year period. As a result of all of that I have mentioned, the Company reported third quarter net income of 68.3 million or $1.75 per diluted share, compared to 58.8 million or $1.61 per diluted share for the same period last year, an increase of 16.2% net income. If we exclude stock-based compensation expense, the Company's third quarter net income would have been 69.1 million or $1.77 per diluted share for fiscal 2006, as compared to net income of 58.8 million or $1.61 per diluted share in fiscal 2005. A 17.4% improvement in net income.

Net income for the year to date period was 77.0 million or $2.01 per diluted share, compared to 59.6 million or $1.65 per diluted share for the same period last year. If we exclude stock-based compensation for the year to date period, the Company's net income would have been 80.0 million or $2.08 per diluted share, as compared to net income of 59.8 million or $1.66 per diluted share in fiscal 2005. A 33.7% improvement in net income excluding stock-based compensation.

As you know, our fiscal year ends on July 31. Given the strong results of the first nine months of fiscal 2006, we'd like to take this opportunity to increase our full year of fiscal 2006 earnings guidance. Based on our current estimates, we now expect full-year fiscal 2006 resort reported EBITDA to range between 189 million and 194 million. And resort reported EBITDA excluding stock-based compensation, to range between 194 million and 199 million. We are not changing our guidance for real estate reported EBITDA. And continue to expect it to range between 4 million and 9 million. While real estate reported EBITDA, excluding stock-based compensation, will range between 5 million and 10 million.

The Company now expects net income for the year to range from 42 million to 48 million. And net income excluding stock-based compensation to range from 46 million to 52 million. This new net income guidance includes our estimates for the relocation and separation charges related to our corporate headquarters move this summer, as well as the former Chairman and CEO separation agreement. However, this new net income guidance does not include any estimate for the Cheeca Lodge & Spa contract dispute, that Rob will address later in the call. Additionally, included in the reported EBITDA net income guidance, we are anticipating increased expenses in the fourth quarter due to certain timing issues between the third and fourth quarter. And due to a number of programs we have initiated to better position our results for the fiscal 2007 ski season.

Now, let us turn our attention to our balance sheet and the quarter's capitalization events. We have now generated 177.7 million of cash from operating activities during the first nine months of the year. At the end of our third quarter, as I noted earlier, we had approximately 240.1 million of cash on hand, excluding restricted cash.

We also had no revolver borrowings under senior credit facility. And net debt, as defined as total debt less cash and cash equivalents of 281.2 million, as compared to 481.5 million just one year ago. A reduction in net debt of over 200 million in just one year. This calculates to a significant improvement in the ratio of net debt to total reported EBITDA, from 2.72 at the end of the third quarter of fiscal 2005 to 1.39 at the end of our fiscal 2006 third quarter. At this time, I'd like to turn the call back over to Rob.

Thanks, Jeff. As I turn to our real estate efforts, I would like to start by welcoming Keith Fernandez, as the new President of Vail Resorts Development Company, our real estate subsidiary. Keith brings with him a vast amount of experience and will oversee our continued commitment to our real estate development projects, including the several exciting vertical development projects we have underway. I would also like to welcome Steve [Fitzgerald], who will join our Company in mid-July as our Senior Vice President of Human Resources. Steve brings a wealth of experiences in HR best practices. And I'm confident he will help lead our talented HR team in managing, developing and supporting all of our Vail Resorts' employees.

Back to real estate. We continue to be enormously excited by our ongoing real estate projects, as well as by those that we have just recently begun. While these projects will be highly profitable on their own, they are also key to our core strategy by providing significant upgrades to our resorts and offering guests new services and amenities. Planning and design for our development of the Peaks of Breckenridge, a master planned ski-in ski-out community, is well underway. And we are still anticipating a Christmas 2006 launch of our sales efforts.

Construction of the new gondola, connecting the Peaks to historic Main Street in Breckenridge has begun and is expected to be operational by Christmas 2006. The gondola will certainly enhance our development activities but will also help bring Breckenridge to a whole new level of guest experience. The Peaks of Breckenridge will feature approximately 450 residential units and 75,000 square feet of skier services.

Construction of the Arrabelle at Vail Square is continuing on schedule. And one of the first major development projects of Vail’s New Dawn, Gore Creek Place Townhomes, is still on track to be completed this summer. We anticipate that a portion of those Gore Creek closings will occur during the current fiscal year, with the remainder closing at the start of fiscal 2007.

We recently closed on a land exchange with the USDA Forest Services as part of the Company's proposed "Front Door" project near the Vista Bahn chairlift at the base of Vail Mountain. The land exchange involved the exchange of approximately 493 acres of non-Federal land for approximately five acres of Federal land; both in the White River National Forest in Eagle County, Colorado. We are very pleased to announce that we commenced a premarketing process for the The Lodge at Vail Chalets, part of the Front Door project, which resulted in the execution of contracts on nine of the 13 chalets. Upon the closing of the nine chalets, we will recognize gross proceeds of 110.5 million, representing an average price of approximately $2,400 per square foot.

We have also recently signed a guaranteed maximum price contract with a general contractor and are beginning construction this summer. We currently estimate that operating income, before provision for taxes and allocated corporate or Vail Resorts Development Company overhead for this project, will range from $57 to $67 million. And will be realized upon the closing of the chalets, expected in the summer of 2008. We also plan to make cash investments in resort assets related to the Front Door project. These resort assets include a new skier services building and a completely revamped ski art, which taken together, are the centerpiece of our new Front Door to Vail Mountain and will help to ensure that Vail Mountain will remain the preeminent ski mountain in North America for many years to come.

An additional part of the project includes two new suites and a new spa for the Lodge at Vail. Representing a major upgrade to one of the best mountain resort hotels in the world. Also included as additional resort assets, are retail venues, a private club and a parking garage with loading docks. We currently estimate the total cost of these amenities at $60 to $65 million, net of estimated cash proceeds from the sale of private club memberships. All of these estimates on the Front Door project are based upon current expectation of future sales revenues, our most recent construction cost estimates, and how the costs relate to both the real estate and resort projects.

In addition to these projects, we continue to plan and design additional real estate projects in and around our ski resorts. One of our highest priorities is our redevelopment activities in West LionsHead, an area just west of the Vail Marriott. We are currently planning, subject to certain regulatory approvals, over 600,000 salable square feet and a new lift portal for Vail Mountain.

This is a once in a lifetime opportunity to master plan a new community, which will further enhance Vail's leadership position in the mountain resort industry. While design work continues on the previously announced Ritz-Carlton residences project, it is possible that a launch of our sales efforts could be delayed beyond Christmas of 2006. This project is very much a part of West LionsHead and we want to make sure we execute on this opportunity in the best way possible.

Finally we closed in the fourth quarter, subsequent to our results we're reporting today, on a land sale in Avon, which be developed by a third party into a large Westin branded development, to include a gondola connecting Avon with our Beaver Creek Resort. Although we chose not to be the developer on this project, in addition to the land sell, we will clearly profit from this development for many years to come at one of our fastest growing resorts.

On March 9, 2006, we announced that our RockResorts subsidiary will no longer manage the Cheeca Lodge & Spa as part of its luxury hotel brand. The hotel's ownership Cheeca Holdings LLC, terminated the management agreement, without advance notice, effective March 6, 2006. And I can assure you we are vigorously pursuing our legal rights in regards to that termination.

To that end, we recognized $816,000 in expenses reported as contract dispute charges in the third quarter. And we are incurring additional expenses relating to this matter in the fourth quarter, as well. While our Company is not a fan of litigation, we consider the protection of our legal rights in the hotel management business to be a critical part of our strategy. Due to the ongoing nature of this dispute, I cannot comment on it any further.

As you know, we previously announced that Vail Resorts will relocate its Avon Colorado corporate and administrative offices to new offices in the Denver-metropolitan area. We are pleased to report that we have secured space in a great building in the Interlocken Corporate Park in Broomfield, located between Denver and Boulder. Our relocation efforts are now well underway and we are on target to complete the initial stages of the move by late this summer. We are pleased that many of our employees will be making the move with us. And we continue to be believe that moving our headquarters operations will facilitate lower occupancy costs, provide greater administrative efficiencies, enhance recruiting opportunities, allow more centralized access to all of the Company's properties and better position the Company for future strategic growth.

We have already seen some early signs of the recruiting benefits of the move. We recently held a job fair in Denver to recruit for about 120 positions. Of which, about 25 were for our new corporate headquarters in Broomfield to replace employees who had chosen not to move. We were quite surprised with the reaction. In one day, we interviewed and took resumes from about 1,500 people. The vast majority were interested in the 25 corporate positions. And most of them already had jobs but wanted to be associated with our Company and what we represent.

We actually had to turn away at least another 500 folks and the parking lot and building lobby were completely packed. Needless to say there were a couple important learnings from this First, is that we will have more people on hand and more space available next time we have a job fair. But the second and more important part is that making our Company an attractive place to work is critical to our strategy. It is our employees who make our guest experience what it is. And we owe a great deal of gratitude to them for our performance this past season.

Although we have completed the 2005/2006 ski season and the new season does not officially begin until November, we have a lot going on this summer. Our lodging operations enter a key travel period and our golf and GTLC properties all get into full swing. Also, planning and construction of our many real estate projects, the relocation of our corporate headquarters, the bulk of our annual capital expenditures and Company-wide marketing efforts are all well underway as we speak.

We are currently selling season passes for the 2006/2007 season. And we clearly have momentum from the strong season we just completed. While it is still very early, season pass presales for the '06/'07 season are up 4.8% on a unit basis and 17.4% on a dollar sales basis, over this same time last year. That concludes our prepared remarks. At this time, Jeff and I will be happy to answer any of your questions.

Thank you.

Operator, we are ready for your questions.

Thank you, . [OPERATOR INSTRUCTIONS] Our first question comes from Mimi Sokolowski from Sidoti & Company. Please go ahead.

Thank you. Jeff, I have one question for you. And that's about the D&A expense in the quarter.

Okay.

Accelerated from the January quarter and again, from the October quarter. Why does that happen?

A couple things, we had some accelerated amortization of our intangible assets. Specifically assets related to our Cheeca Hotel.

Okay.

And so we accelerated that about 1.3 million this quarter. And that's the biggest of that.

That really answers that question then. And then I have one for you Rob, a quick one. Can you talk a little bit about any M&A activity that might be going on? And in general, if you were to do one, is it easier, better, more advantageous to do it in the off-season or during the ski season?

I think -- well, thanks for the question, Mimi. I think -- as you know, I can't comment on our M&A activities in any specificity. What I can say is, I certainly continue to see acquisitions as a part of our strategic directions. And I think we're certainly actively looking at and considering a number of opportunities. But that's about all I can say on that. In terms of we were to acquire a ski resort, yes it would be better, obviously, to acquire it in the off-season. But having said that, we've looked at a number of different transactions. And there's -- I think the most important factor, quite frankly, is making sure you have the right acquisition at the right price and it's the right asset for us, rather than the exact timing.

Sure. I understand the situation, I just thought I'd ask in general. That's all I really have, thank you very much.

Thank you. Our next question comes from Felicia Hendrix from Lehman Brothers. Please go ahead.

Hi, guys. I have a few questions for you. First in your guidance, you had given us resort reported EBITDA. I was wondering if there was a way you could break that out between mountain and lodging?

We don't break that out, Felicia, so we're just going to stick with the resort side.

Okay. So and then, Jeff, you had mentioned just in the preamble, that -- and I might have just part of this, that there were going to be some increased expenses in the fourth quarter. If you haven't already elaborated on that, can you?

I think what I'd say, Felicia, and it's included in the guidance, so it's part of the guidance that we issued today. Is that, we evaluate in the early summer certain expenses, including maintenance expenses that we would want to spend to get in better position going into the '07 season. And I think we are going to have more of those type of expenses in this fourth quarter than we would generally have in the past.

Okay. And then, just moving to Heavenly. Heavenly, obviously, had a tough season this year. And typically, what seems to happen in the ski industry is that when you have a tough season, you kind of lose some of your typical client or skiers for a year or so. Are you planning on doing any kind of promotional or advertising kind of campaigns to bring those people back?

I think as it relates to Heavenly, I think the entire Tahoe market was hit by some very unusual weather. It wasn't necessarily low snow, which sometimes people associate with bad weather at the ski resorts but it was 100-mile plus winds, which was again, very unusual. And I actually think that the past holders, that are our key local customer group, basically, they actually came and showed up toward the end of the season when the weather went down. And so, I actually don't think that we're going to see any drop off in Heavenly's season pass sales for next year because of the weather from this past season. Having said that, I think we have a whole variety of programs targeted towards building that season pass base for next year; promotions and other things. But I don't think we're going to have to do anything unusual because of the weather.

Okay, great. And have you released what your peak ticket prices are going to be at Vail this ski season?

No, we haven't yet.

Is it fair to say that if you look at kind of historically, the increase year over year, it would kind of be something similar to that?

I'm going to hold off giving any color on that. I think we'll probably share more about that on the next call.

Okay, great, thanks a lot.

Thank you.

Our next question comes from Will Marks from JMP Securities. Please go ahead.

Great, thanks. Hello Rob and Jeff. So general question on the chalets, can you give us a profile of the buyers? Nine units, I'm curious if they're Americans, foreign --?

No, I don't think I can share that at this point. What I would share though, is that I think that because we did this more quiet premarketing effort for the chalets, I can share that we really went out to, I think, a group of folks who are long time Vail customers. Folks who have expressed interest in Vail before. And so, what I would say is that they are very much a broad-based representation of our long time higher end Vail customers.

Okay. And then just looking at the math on that. If you take midpoint of the operating profit you mentioned and you assume -- I don't know, probably a high tax rate of 40%, you get the 37 million. Where -- what's the land value? What's it on the books for right now?

The land value itself is pretty minimal. It just really represent the basis in the exchange land that we got and the remaining land that we have owned, which is the predominant portion of the land that's going to be used for the actual construction at a very low basis. I don't want to quote an exact number but it was a low basis.

Okay. Any comments on share repurchasing? Where you are, how much you have left on the program?

No, I think I can say, we did not repurchase any shares this past quarter. So, the full program is still available to us going forward.

Okay. And then on next year, I know you just commented that, at least on the ski lift tickets, you're not going to comment. But how should in general we be looking at it it? This is going to be a very tough comp for you it seems like on the demand side, maybe absent Heavenly. And I assume there will some expense increases. So is a flat year something we should look at? Or is there a chance you could have a down year? However you can comment, thank you.

Yes, I think the answer is obviously, the good part about having a great season like we just completed is that these are great results that we have reported. I think the hard part about it, obviously, is where we go from here. And I think the entire management team is very much focused on that for next year. I'm not going to comment on guidance for next year. But what I would certainly say is we have a lot of long-term confidence in our continued growth. And so -- and I think as I've mentioned earlier in our -- in my remarks, I think while clearly early season snow benefited somewhat, the results for this year; I think it's our conclusion that these results are really the result of a lot of the work that went over the last few years of improving the resorts and better targeting and better targeting our guests and providing a better experience for our guests. And that's certainly all going to be in the works for next year, as well.

And, the only thing I'd add to that is; in addition to the demand this year, we obviously disclosed very strong effective ticket price increases year over year. And again, as we're not speaking to the price increases in the future yet. But I think that just shows that over and above demand, the model, the organic growth engine is working very well. And that we can take those price increases and pass a significant amount of them to the bottom line.

Okay. Great. Thanks, guys.

Thank you.

Thank you. [OPERATOR INSTRUCTIONS] We have a follow-up question from Mimi Sokolowski. Please, go ahead.

Jeff, just one more for you. The guidance for real estate EBITDA for the year is between 4 and 9 million, right?

That's correct after stock comp expense.

Okay. And year to date it's a loss of about 3.5 million?

That's correct.

Okay. Can you help me bridge that gap? Where's the earnings going to come from in the fourth quarter?

Sure, really two things, Mimi. The first is, as Rob mentioned, we plan on closing on about half of the Gore Creek Townhomes that we -- that are under construction right now or have basically finished construction, before the end of our fiscal year. So, about half of those Gore Creek Townhomes will be closed. And secondly, we're closing on the confluence land that we sold. We call the confluence site in Avon, again, that Rob mentioned is going to be used for the West LionsHead site. And we closed on that literally days after the third quarter end. So, that's already been closed on.

Okay.

And will be picked up in the fourth quarter.

Okay, thank you very much.

Sure.

Thanks We have a follow-up question from Will, Marks. Please, go ahead.

Just a couple of things. One, resort, maintenance CapEx, what should we be looking at? I assume things haven't changed.

Nothing's changed. In our last quarter earning, we disclosed our CapEx plan for the calendar year. And that included about 35 million or so of maintenance CapEx for our resort business and that hasn't changed.

Okay. And then on the project, I think you said 60 to 65 million -- sorry about the noise. 60 to 65 million for at the base at Vail Village. Is there -- and I know that's net of selling the memberships. What kind of return do you expect on that investment? And it maybe it's hard to tell because you're just improving the area. But is there any -- there will be cash flow from the parking, I assume.

No -- well, the parking, I think, will be primarily one of the amenities that are sold with club. So, that will come from there. I think we will certainly have a return from the new rooms that we put into the lodge and obviously the new spa that we put into the lodge at Vail. I think both in terms of obviously the revenue from the rooms and the spa. And also we think an upgrade to the overall ADR at the lodge because of the better amenities there. And I think we'll also have an income stream from the services, both rental, retail, food, that we have in the new skier services building.

But what I would say to you is that the biggest return from this project, as it relates to the resort, is going to come from the complete redevelopment, essentially, of what the guest experiences when they get to the Vista Bahn. And so, as I know you know, when you get to the Vista Bahn today, it is not really the right entry statement for what Vail represents. And when we are done with this project, all of a sudden you will have a -- people will arrive there and I think kind of their initial impression will be far superior than what it is today. And we think that will go a long way, both to helping us increase skier visitation and also, quite frankly, price to Vail Mountain.

Okay. And then on -- a couple other quick questions. The land sale to Westin, can you -- any comment on where that is on the book? I assume that's also at a pretty small value on the books?

Yes. I won't comment specifically on that valuation. And again, just to clarify, it was sold to a third party developer who is going to have it branded Westin. So it wasn't sold to Westin. But it's -- again, if you think about the Gore Creek Townhomes, about half the profit there and then this profit and then that bridges the gap. You can kind of get there pretty close to what that is. But I wouldn't speak to the exact basis on the confluence.

Okay. And then just, final question. Have you seen any change in visits from Canada at all? Has that become a bigger market given the weakness up there in the last couple of years?

I don't think we've -- weakness you're saying, meaning from the dollar?

Well yes, I mean the dollar but also weak snow conditions, at least the previous season and then early this season.

Yes, I think what we've seen is an increase overall in international. But, I'm not sure that it's necessarily coming from Canada, number one. I do think that we've benefited from the dollars decrease as of vis a vis Canada, vis a vis Europe. I think like any other Company that that is -- can attract international customers. I don't think that was a major driver, per se of the overall year. But I certainly think our international business was up this year. And I think a combination of the dollar and again, the service offerings.

Okay. Great, thanks again.

Thanks.

[OPERATOR INSTRUCTIONS] And gentlemen, there are no further questions at this time. Do you have any concluding comments?

Well, thank you, operator. I wanted to thank everyone for participating on our conference call today. We've obviously had a very strong first nine months of the current fiscal year. And we are very optimistic about the Company's continued growth potential going forward. Should you have any further questions, please feel free to contact Jeff or myself directly. Thank you one and all for your time this morning and goodbye.

Thank you. Ladies and gentlemen, that does conclude this fiscal 2006 third quarter results conference call. You may now disconnect. Thank you for your participation and please have a pleasant day.