Vail Resorts Inc (MTN) 2009 Q3 法說會逐字稿

Good morning ladies and gentlemen, thank you for standing by. Welcome to the fiscal 2009 third quarter results conference call. During today's presentation, all parties will be a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Thursday, June 4, 2009. I would now like to turn the conference over to Rob Katz, CEO of Vail Resorts. Please go ahead sir.

Thank you operator. Good morning everyone. Welcome to the Vail Resorts fiscal 2009 third quarter earning conference call and simultaneous webcast., both open to the public and press at large. I'm Rob Katz, Chief Executive Officer of Vail Resorts. Joining me on the call this morning is Jeff Jones our Chief Financial Officer.

Before I get into the discussion of our results, let me remind you we are using reported EBITDA to report earnings for each of our operating segments, namely Mountain, Lodging, and Resort, which is the combination of the Mountain and Lodging segments and Real Estate. The Company defines reported EBITDA as segment net revenue, less segment operating expenses, plus or minus segment equity investment income or loss; and for the Real Estate segment, plus gain on sale of real property.

The Company also uses the term net debt, which is defined as long-term debt, plus long term debt due within one year, less cash and cash equivalents. Complete reconciliations of reported EBITDA and other non-GAAP financial measures can be found in this morning's earnings release and on the VailResorts.com website in the Investor Relations section.

I also need to mention that comments made during this conference call, other than 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 these forward-looking statements. Investors are directed to the risks and uncertainties described in the documents filed by the Company with the Securities and Exchange Commission, including the Company's Form 10-K for the fiscal year ended July 31, 2008, and Form 10-Q for the third quarter of fiscal 2009.

In addition, the Safe Harbor language in today's press release also applies to our comments on this call. All guidance and forward-looking statements made on this call are made as of the date hereof, and we do not undertake any obligation to update any forecast or forward-looking statements, except as may be required by law.

So with that said, let's turn to a discussion of our earnings release issued this morning, which included our results for the third quarter ended April 30, 2009. As we mentioned in our release, our third quarter results, which encompassed the second half of the 2008, 2009 ski season were impact by the continued severe downturn in the economy, driving lower destination visitation in the quarter.

However, despite the worsening economic environment over the course of the 2008, 2009 ski season, the Company's Mountain segment metrics, including visitation and list revenue, remained relatively consistent over the entire ski season, with total skier visits down 5.3% for the season, and total lift ticket revenue down 8.4%, consistent with those metrics reported on a season-to-date basis at various points throughout the ski season. The decrease in overall visitation was partially mitigated by growth in visits from season pass holders, due to an increase in then number of passes sold, and an increase in pass usage during the season.

For the season, visitation, excluding season pass holders, decreased 21%, which included less destination visits, as well as a shift to the Epic Season Pass, from certain guests who previously purchased other lift ticket products. Visitation by pass holders, including new Epic Pass holders, increased 17.1% for the season.

Overall, taking into consideration the shift to more season pass products, we believe destination visitation declined by approximately 15% for the ski season. The number of season passes sold for the 2008, 2009 ski season was 12.2% greater than the number of passes sold for the 2007, 2008 ski season, and combined with an 8.3% increase in effective pass price, drove a 21.8% increase in season pass revenue.

Season pass revenue as a percent of total lift ticket revenue, grew from 26% for the 2007, 2008 ski season, to 34% for the 2008, 2009 ski season. We believe growing our season pass revenue provides greater stabilization to our revenue streams, as well as allowing us to capture a greater portion of the ski visits of our guests. Season passes also allow us to better develop our customer database, driving improved efficiency and more opportunities in communicating with a larger percentage of our guests on a year round basis.

The mix of destination to in state guest visits for the 2008, 2009 ski season was approximately 57% to 43% respectively, in the current season, compared to approximately 63% to 37% respectively, in the prior ski season. Our ancillary business revenue lines, including Ski School, Dining, and Retail Rental, experienced even greater percentage declines than our Lift Ticket revenue variance, due to the combination of lower destination visitation and lower average guest spend during their stay.

Our Lodging segment continued to experience a much closer booking window. For example, bookings within two weeks of the actual stay increased by 35% for the 2008, 2009 ski season compared to the prior year ski season. Lodging experienced a deterioration in metrics with lower ADR RevPAR and occupancy, driven by the lower destination visitation at our Mountain Resorts.

We were able to achieve reduced operating expenses, including from our previously announced cost saving initiatives, but our Resort reported EBITDA margin declined, as cost reductions could not offset the revenue declines. We will see the full year impact of these cost savings initiatives in fiscal 2010.

Our Real Estate segment results reflect a timing of closings and mix of units sold, including the current year third quarter closing of the final Arrabelle unit, compared to 17 Arrabelle units closed in the prior year quarter. However, we did close our last remaining Chalet unit for $20.2 million in revenue in May, just after quarter end.

Our balance sheet position remains strong, with net debt leverage at only 1.25 times trailing 12 months total reported EBITDA, no borrowings under our revolver and virtually no principal maturities due on any of our debt through fiscal 2013.

Before I turn the call over to Jeff, I wanted to provide you with some color on the news we announced this morning relative to our Spring Pass sales for next ski season. We are extremely pleased with the significant increase in our advanced Spring Pass sales for our upcoming 2009, 2010 ski season, compared to the comparable period of the prior year, particularly given the more difficult economic environment this spring, versus last spring. We believe this gives us strong momentum on a key indicator for the 2010 fiscal year, as these current Spring Pass sales will be recorded as revenue over the 2009, 2010 ski season in fiscal 2010.

Our ability to lock in a greater portion of our Lift revenue before the start of the ski season was certainly a factor in mitigating some of the impacts of the weakening economy on our fiscal 2009 results. Through the end of our spring season pass sales May 31, 2009, our total season pass sales to date for the upcoming 2009, 2010 season have increased approximately 39% in sales dollars, and approximately 37% in units over the same period last year, with the prior year spring selling period representing approximately 30 % of the total passes sold for the 2008, 2009 season.

In particular, we saw increases in each of our major past products, including Epic, Colorado, Summit, and Heavenly Season Passes, with the most significant increase coming from the sale of Epic Season Passes. While this is clearly very strong pre-season performance, it is too early to discern the extent to which this trend will continue, and what the ultimate level of incremental new season pass purchases will be, as opposed to what portion of the increase represents guests making their purchases earlier in the selling period. However, we believe that this is a very strong confirmation of the value our guests, including our destination guests, see in our season pass products, even in challenging economic times.

I would like to turn the call over to Jeff, who will provide you with an overview of our fiscal 2009 third quarter and year to date results.

Thanks Rob, and good morning everyone. Earlier this morning, we released our earnings for our third fiscal quarter ended April 30, 2009 and also filed our Form 10-Q for the third quarter, turning in the highlights by results. As Rob mentioned, our Resort results, which included a combination of our Mountain and Lodging segments, were negatively impacted by the economic conditions.

Starting with our Mountain segment, the severe economic downturn drove lower destination visitation, and also resulted in overall lower lift ticket revenue, despite the favorable impact of the increased season pass sales. We also saw a decline in ancillary business revenue and contribution. Lift ticket revenue in the current year third fiscal quarter decreased 11% from the prior year third fiscal quarter, due primarily to a 21% decrease in lift revenue, excluding season pass revenue, partially offset by a 26% increase in season pass revenue.

Season pass holders skied more on average in the 2008, 2009 ski season per pass, using the season pass on average 10.6 times compared to 9.7 times per season pass in the prior season. Total skier visits in the third quarter fiscal 2009 decreased 7.2% at the Company's four Colorado resorts, and total skier visits including Heavenly decreased 9%, primarily as a result of decreased visitation from destination guests.

Mountain segment lift ticket revenue, and to a larger degree visitation, were also unfavorably impacted in the current year third quarter by the timing of the beginning of the current year quarter compared to the prior year. The current year third quarter began on a Sunday, versus prior year third quarter, which began on a Friday. This timing shift reverses an earlier timing shift, which benefited the current year second quarter. Adjusting for the timing of the quarter, the declines in lift revenue, and to a larger degree visitation in the third quarter, would have been more consistent with the declines experienced for the entire 2008, 2009 ski season compared to the prior year.

Revenues for the Company's ancillary business Ski School, Dining, and Retail Rental operations, were all negatively impacted by the severe downturn in the economic environment and a decrease in destination guest visitation and overall spending per guest. For the third quarter of fiscal 2009 compared to the prior year third quarter, Ski School revenue decreased 21.3%, primarily driven by the decrease in destination guests. Dining revenue decreased 20.1%, due to an approximately 15% decrease in the number of total on-mountain food and beverage transactions, coupled with an even greater decline in average check and transactions in our Fine Dining operations.

Retail Rental revenue decreased 19%, primarily due to lower sales and rental volumes at the Company's Mountain Resorts stores. Other revenues favorably impacted by Club operations, which increased $1.2 million due to the November 2008 opening of the Vail Mountain Club, which partially offset other revenue declines. All this culminated in a 14.3% decrease in Mountain segment revenue for the quarter.

Partially offsetting the Mountain revenue declines, Mountain segment operating expenses decreased 8.1% for the third quarter of fiscal 2009, compared to the prior year third quarter, attributable to a decrease in variable based operating expenses in our cost savings plan implemented in the second quarter ended January 31, 2009, followed by our Company-wide wage reduction plan implemented in April of the third quarter ended April 30, 2009. Excluding Retail Rental expense, which has a higher variable cost component, was down 13.1% on a Retail Rental revenue decline of 19%.

Operating expense decreased 6.4% for the three months ended April 30, 2009 compared to the three months ended April 30, 2008. This is primarily attributable to fees tied directly to revenue, including [four] service fees, other resort-related fees, and credit card fees, which together decreased 11.2%, lower labor and a labor related benefit costs, including lower Ski School labor expense, which decreased 10.5%, and other operating expenses including SG&A, which decreased 0.7%. The decreases in operating expenses were not enough to offset the declines in segment revenues resulting in lower flow-through of revenue to Mountain-reported EBITDA of approximately four percentage points for the three months ended April 30, 2009 compared to the same period in the prior year.

Our Lodging segment results were impacted by similar trends realized by the Mountain segment, including a decline in destination visitation at our Mountain Resorts. Due to current economic weakness, the Lodging segment offered promotions and packages to attract skiers to the mountains, driving the 7.1% ADR decline, which coupled with the decline in occupancy of 7.0 percentage points, resulted in a RevPAR decline of 18.6%, and a room revenue decrease of $4.4 million for the current year third quarter versus the prior year third quarter.

The Lodging segment implemented a reduced cost structure to partially offset the revenue decline. Overall, the Lodging segment continued to experience significantly less visibility, with a much shorter booking window in both peak and non-peak periods.

In addition, the third quarter fiscal 2009 included a full quarter of operations from CME, which was acquired on November 1, 2008, and which contributed $8.2 million in revenue, $4.9 million in operating expenses to our Lodging segment results. Lodging segment revenue, excluding CME, decreased 15.9% for the third quarter, excluding the impact of CME operating expenses, would have decreased $1.5 million or 4.1% for the three months ended April 30, 2009, compared to the three months ended April 30, 2008, which was attributable to the decline in revenue excluding CME, other variable expenses associated with occupancy, and a reduced cost structure from savings plans initiatives.

Our Real Estate segment results are primarily determined by the timing of closings, project specific profit, and the mix of our real estate sold in any given period. Additionally, Real Estate reported EBITDA each quarter includes administrative and overhead costs, allocated corporate G&A, and marketing expenses, all of which are generally not related to the timing of closings.

As Rob mentioned in the third quarter of fiscal 2009, Real Estate revenue was primarily comprised of the closing of one condominium unit, the Arrabelle, for $9 million of revenue, while the prior year included the closing of 17 Arrabelle units. Subsequent to the end of the third quarter of fiscal 2009, in May 2009, the Company closed on the final lodge at (inaudible) Chalet for $20.2 million of revenue, which will be reflected in our 2009 fiscal fourth quarter.

Taking a look at the bottom line, net income was $61.6 million, or $1.68 per diluted share in the third quarter of fiscal 2009, compared to net income of $87.3 million, or $2.24 per diluted share in the third quarter fiscal 2008. The results were also impacted by increased depreciation due to a higher level of capital expenditures associated with placing in service significant resort assets over the course of the past two years, which included the Arrabelle Hotel, Spa, Arrabelle Club, Commercial and Skier service areas, as well the Lodge at Vail Spa, Vail Mountain Club, New Skier Services building at the base of Vail Mountain. In addition, we've added multiple gondolas and lifts within the last two years.

Net income was also negatively impacted by a decrease in investment income, due to reduction in the average interest earned on investments, since the average interest rate has decreased by approximately two percentage points [per year] versus the prior year as well as a decrease in average invested cash during the period. Our nine-month results were similarly impacted by the economic conditions that have persisted over the duration of our fiscal 2009.

Mountain reported EBITDA declined 20.8%, and Resort reported EBITDA declined 19.9%. Real Estate reported EBITDA increased $32.5 million, driven by the timing and mix of real estate closings, with seven Chalet units, 42 Crystal Peak Lodge units, and two Arrabelle units closing in the current year nine months, while the prior year nine months primarily included the closings on 29 Arrabelle units, and on the remaining Jackson Hole Golf and Tennis Club Cabins. Net income for the nine months decrease $26.4 million or 23.1%, with the prior year nine months including $11.9 million, net of final attorneys fees, and on a pre-tax basis, in contract dispute credit net for the receipt of final cash settlement from [Chico Holdings, LLC].

As Rob mentioned earlier, we are very pleased that we have a strong balance sheet. At April 30, 2009, the Company had cash and cash equivalents on hand of $170.5 million, net debt of 1.25 times showing 12 months' total reported EBITDA, and a $400 million senior credit facility, which matures in 2012, with no revolver borrowings under the facility, currently priced at Libor plus 50 basis points. The Company has approximately $2.9 million of principal maturities due in total through fiscal 2013.

We currently have two major development projects under construction, the Ritz Carlton Residences Vail, and One Ski Hill Place in Breckenridge. We expect to incur approximately $220 million to $240 million of remaining development costs subsequent to April 30, 2009 on these projects, which are currently tracking on schedule. The Company remains in a strong position from a capital structure and balance sheet perspective, which we believe offers us even greater flexibility during these times of economic uncertainty.

Now let me turn to our fiscal 2009 outlook. Navigating through the deteriorating economic environment, we have stayed true to our mission of offering guests a truly exceptional experience, while delivering solid operational performance given the challenging economic climate and maintaining a strong balance sheet that positions us well for the future.

Given our performance in fiscal 2009 to date and our outlook for the fourth quarter, we are reaffirming the guidance range issued in early March 2009. Incorporated in our guidance is a decline in Resort EBITDA for fourth quarter of fiscal 2009 over the prior year quarter, due in part to some one time prior year favorable expense credits, which are not expected to reoccur in the fourth quarter of fiscal 2009, as well lower expected Lodging related revenues, including group business, mountain equity investment income, and mountain summer operations for this year's fourth quarter compared to the prior year fourth quarter, due again to the worsened economic environment on a comparative basis.

Our fiscal 2009 full year Resort reported EBITDA, the combination of our Mountain and Lodging segments, is expected to range from $164 million to $174 million. The Resort guidance includes a range from Mountain reported EBITDA of $152 million to $162 million, including $4 million of stock based compensation expense, and Lodging reported EBITDA to range from $9 million to $15 million, including $2 million of stock based compensation expense, and approximately $5 million of contributions from CME. Real Estate reported EBITDA is expected to range from $40 million to $44 million, including $4 million of stock based compensation expense. Based on our current estimates, we expect net income to range from $41 million to $51 million.

And finally, turning to our repurchase activity during the third quarter fiscal 2009, the Company did not repurchase any shares of common stock during the three months ended April 30, 2009. Since inception of this stock repurchase plan through April 30, 2009, the Company has repurchased 3,600,235 shares at a cost of approximately $140.3 million. As of April 30, 2009, 2,399,765 shares remain available for repurchase under the existing repurchase authorization.

The purchases under this program are reviewed by the Company's Board quarterly, and are based on a number of factors, including the Company's expected future financial performance, the Company's available cash resources and competing uses for cash that may arise in the future, the restrictions in the Company's credit facility and in the indenture governing the outstanding 6.75 senior subordinated notes, prevailing prices of the Company's common stock, and a number of shares that become available for sale at prices that the Company believes are attractive. At this time I would like the turn the call back to Rob.

Thanks, Jeff. Before I turn the call over to questions, I wanted to thank the more than 15,000 employees of our Company. During one of the most difficult business climates in the last century, our folks rose to the challenge and delivered in so many ways. Economic corrections can definitely change the landscape and produce winners, survivors, and stragglers. While our current year financial performance is not something we can trumpet, we are confident that we have positioned the Company very well for the future. At this time, Jeff and I will be very happy to answer your questions. Operator we are ready for questions.

Thank you, sir, we will now begin the question-and-answer session. (Operator Instructions) Our first question comes from the line of Felicia Hendrix with Barclays Capital. Please go ahead.

Good morning, guys.

Hi. I just had a few questions for you. First on the cost side of your business, certainly the cost savings that you achieved in the quarter were rather impressive, they beat our expectations, I'm wondering if you remain in a challenged revenue environment for next year, where else can you cut? I think what I would say is this, I think there are ways that we can become more efficient for next year. I think a number of the expense initiatives that we implemented this year are actually going to roll into next year, for instance, the wage reduction effort that we announced is only going to have a partial impact on this year, and the larger impact will really be next year, and we have, I would say, about ten different initiatives on non-labor related measures right now that will be implemented for next year.

What I would say is six months from now, nine months from now, after a lot of that is rolled in, I'm not sure that there is more that we can do without potentially digging into required services and our brand promise to our customers, and I would say that the year that we just ended is obviously one of the worst years anybody can remember, and I think we took a very, very tough and hard line approach, both to impact positively this year, but also to position us well for next year.

Great, and just of those cost savings that you have implemented so far and that will roll into next year, how much would you say are sustainable on a long-term basis?

I would say that a portion of the reduced operating expenses this year are from variable expenses that went down with our revenue, but in terms of all of the expense initiatives that we are implementing, those are things that we do see as sustainable. Now, things like wage reductions, as the economy picks up, those are certainly things we would anticipate re-addressing with our employees and obviously making wage increases.

So I think as the economy improves and our business improves, you will see some of those expenses come up, but to the extent that the economy does not improve and business stays where it is, we think these are long-term sustainable.

Okay. Moving to just Real Estate, can you just help us with some of our modeling for next year, what are your expectation for closings next year?

I think the schedule, Felicia, right now is that One Ski Hill Place, that building will be finished in the fourth quarter of next year, and that's when closings will be available to occur for all the units that we have contracts on. Obviously it depends on how many more contracts come into place between now and that time period. But certainly we would at a minimum expect everything that's currently under contract to close on One Ski Hill Place in the fourth quarter of next year, and again, any other new activity that would occur between now over the course of the ski season up into the fourth quarter.

Okay. And have you seen any change in those units that are contracted now?

No, we have not announced any new sales in One Ski Hill Place.

Or what about anyone walking away from deposits or anything?

No, we haven't seen that on One Ski Hill Place at all.

Great. Finally on the Lodging side, obviously you have limited visibility into next year, but I'm just wondering, best guess, what kind of changes in RevPAR you might see at some of the properties for next year?

I don't think we are ready to give that kind of guidance. We think, when you look at the metrics that I think our Company put forward and compare that to a number of the publicly available metrics from the industry, we really do feel like we outperform the industry in a number of different ways. We also know that we outperformed a lot of our competitors in our resorts, and I think that was because we took an aggressive and pretty nimble approach to promotions packages, and I think that's a strategy that we are going to implement for next year as well. But it's too early to tell what the business will look like come next ski season.

Okay. Great, thanks a lot for your time.

Thank you.

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

Thank you. Good morning Rob; good morning Jeff.

Good morning Will.

On the fourth quarter, can you quantify at all, you mentioned some reasons why you faced a tough comp. And maybe it's in last year's fourth quarter release, but if you can just mention, particularly that one time credit.

Yes, well we definitely had some credits last year's fourth quarter, including in areas of property taxes, medical insurance, and there was workers' comp adjustments, not all of which are expected to reoccur in this current year fourth quarter. And then on top of that, obviously we are looking at a different environment compared to the early summer of last year with respect to Lodging, group sales. And even in our equity investment income, which is really our retail brokage joint venture, obviously there is anticipated to be a lot less closings and less real estate closings compared to our own real estate closings, which the retail brokage benefits from as well, that occurred in the fourth quarter last year compared to the fourth quarter this year.

So when you add all that up, there is definitely going to be adjustment that we are anticipating in the fourth quarter of this year of less reported EBITDA from our Resort business than last year.

Okay. You don't care to quantify any of those figures, right?

No.

I understand. Back to Real Estate, and the with what you did at the Ritz Residences in terms of cutting prices, can you refresh on that and mention what, if any, impact that's had, if it's led to more tours, if you gotten some nice feedback from the people who had put down deposits and now get money back?

Yes, what I would say is that it's been very well received, that we have seen more activity around the project. We anticipate really re-launching our sales effort on that project around the July 4th timeframe, which is typically when there is more sales activity in Vail, and so I think we would anticipate seeing more tours, more buyers come through all the rest of it at that time. Again, all subject to the fact that the market is very challenging.

But we have definitely just seen more interest from brokers, more interest from people who are kind of interested in taking another look. But we were not anticipating any major sales effort in this mud season so to speak out in Vail, but we wanted to kind of set the stage. We have definitely seen a very good response from many of our existing buyers, and I think that's a project that we are obviously going to be closely monitoring and working on for the next 12 months until we bring it to closing in the fall of 2010.

Did the the buyers that have deposits on the units actually get cash back?

Yes, for the differential. Okay.

And on One Ski Hill Place, you have not announced any price cuts there. Do you feel like you are in line with the market? I realize that your project is completely unique.

No I think we feel very good about where the pricing is on One Ski Hill Place, and at this point have no plans to make any changes there.

Okay. That's all from me, thank you.

Thank you, our next question comes from the line of Chris Woronka with Deutsche Bank. Please go ahead.

Hey, guys.

Hey, Chris.

Could you maybe, I appreciate the color you gave us on the 2008, 2009 ski season, all the season pass metrics, but this really kind of throws Epic Pass presales for next year. Is there any way to quantify what percentage of those are upgrades versus new or destination people buying season passes; is there any way to get our arms around that?

One of the things that we do disclose is that we saw increase in each and every major pass product that we have. So what we did not see is a decline in Colorado or Summit Passes and an increase in Epic; the big increase came in Epic, but Colorado and Summit and Heavenly were all up as well.

What I would say is what we saw is certainly, we are not seeing evidence of a lot of upgrading. Two, I think we are seeing evidence of significant incremental purchases. And we are also seeing evidence of significant destination purchases. So again, I think we are pleased on all fronts with both the effort around Epic Season Pass sales and the results of the overall program.

Great, and was there any discernible difference after you raised the price to $599.00?

I guess what I will say is that we continued to sell passes after we made that increase. It's hard, I'm not going to get into exactly when the passes were sold, but we certainly sold material numbers of passes even after the price increase.

Right. As you think about next season on the Lodging side, how do you, I know it's early and I know your booking windows are shorter, but how do you think about the tradeoff on price versus volume and getting folks out there? Is there a magic number, how much rate do you want to give up to get some of those bookings blocked in early?

There is definitely not a magic number. I think this year is as good an example as any in terms of, at least for our Lodging properties, our efforts to maximize revenue and occupancy. So the strategies and some of the metrics you are seeing this year I think are a good indicator.

I think if the business stabilizes or improves next year, obviously we will employ different strategies. But I think this year is certainly good indicator, because we really started that effort right at the beginning of the ski season, so I think looking at these metrics are a good indicator as to how we see the strategy that's playing out.

Great. Just a final one on housekeeping. The cash back to the existing buyers at the Ritz project, when does that run through the P&L?

It's not in the P&L to begin with as far as the deposits, all those are on the balance sheet until we close. And again the difference is the difference in the 15% deposit that they had on the old pricing versus the 15% deposit that they are still required to have on the new pricing, so it's that differential and that just comes out as they sign agreements and they get that money back. But it's really just a balance sheet event from a standpoint of cash and deposits on the - -

Yes, and I would say, the total amount of money on that, just looking at the 15% of the deposit changes, is insignificant in terms of the overall project.

Yes, definitely.

Okay, great. Thanks, guys.

Thanks.

Thank you, ladies and gentlemen. (Operator Instructions) And our next question come from the line of Jake Hindelong with Monness, Crespi, and Hardt. Please go ahead.

A couple of questions. First question is on the guidance, and when you last gave us guidance it was for a petty strong Easter season. Would it be fair to say that your expectations are now at the higher end of the range?

No, I think we are going to stick with what we said in the press release and on today's call, that we are affirming the guidance that we gave before. When I say no, what I'm saying is that is all we are saying about guidance.

Great, okay, thanks, Rob. On then on the money back to your previous deposits on the Ritz, is there an incremental agreement that every individual has to sign the get that money back, or is that part of the initial contract.

No, there is an amendment that people have to sign.

Have they all signed it at this point?

We are through a process. I think we have set a deadline for later in the summer for everybody to get back to us, and we are monitoring that closely. It's ongoing.

Great, thanks . And then just lastly, Jeff I'm sorry, I know you discussed it once already, but could you go over the timing of the completion of construction for One Ski Hill Place, and then it sounds like when that finishes that you think you can close them all in the fourth quarter? Just want to make sure we model this

I think what we are anticipating is that right now, that project to close in the spring. And so I think we would just tell people that just assume that the closings would occur obviously when that project is complete. For ease I would just recommend doing that in the fourth quarter of next fiscal year.

Great. Thanks very much.

Thank you, and our next question comes from the line of Hayley Wolff with Rochdale Securities. Please go ahead.

Hi, guys. A couple of questions, first, given that you have more lead time to plan for the upcoming winter versus what was pretty much dropped on your plate right when the season was starting off, how do you think about your ability to yield manage, fill in the some of the white spaces better next year versus what you had this year, in terms of the promotions that you are planning?

What I would say is actually, I think from a Lift Ticket perspective, from a packaging with Lodging perspective, I think we feel very good about how last year played out. I think if there is going to be any upside on that front for next year, it's going to be because there is more stability in the economy even if it's at a lower level, which would mean that there is little bit less fear, which mean that people are willing to make commitments a little bit earlier, which would help us, I think, and improve our yield management.

The big effort really for us next year is targeting the two areas that were down much more this year, which was Ski School and Dining. And I think, as we talked about in the Investor Conference, we have a number of activities going on right now to come up with some different products, packages, concepts, that we could offer to our guests to make both of those products more accessible, again not necessarily offering just straight discounts but more creative ways to essentially get people into purchasing more of those next year. So I think what you will see is a lot more activity and discussion from us about that next year. I think a lot of the pricing, promotion, pass efforts, I think we felt good about from last year, not that we feel good about the results on a absolute basis, but in terms of how we tackled that.

Is there any way that you can convince some of your guests that the pricing will be better earlier on versus motivating them to wait and get lower prices like they did this year?

Well, there are two things to that. One is on our - - obviously the best opportunity for our guests is the pass products, and certainly the Epic Season Pass. And so, if you don't purchase that product, you don't have the opportunity to decide on it later, because we cut off, had a major break in price pointing on November 15th, and then cut it totally off in earlier December.

I do think we are seeing a lot of people purchasing the Epic Season Pass today who realized later in the season that they should have purchased it, and I think we will continue to see that. So I think you have that. Two is, we actually did not discount the single day lift ticket price really, to any large degree or even our multi-day pricing, I think we set that pretty much as we got into Christmas and left it pretty much constant throughout.

I do think on Lodging, that is still something we will be reactive to. I think on that, I think we have to be cognizant of the rest of the industry. I I don't know that we are going to make any commitments to not be more flexible on Lodging pricing as you get closer in, like everybody else is. But I do think that, as there is more stability in the economy, I think that will ultimately, again even if the economy doesn't pick up that much, but stability in the economy will help people feel better about making some commitments earlier, even if it's just by a few weeks, which can dramatically impact our yield management.

Okay, great. The Eagle Airport expansion, I guess they're expanding a runway to help bring in some summer business? How do you think about that and I guess how is Epic Summer doing and bookings at Grand Teton?

Okay, those are three things. Eagle Airport, runway expansion is a negative now because it's really shut down activity at the airport. But it's something that long-term I think is a real positive obviously, for the winter.

The Epic Summer Program I would say, has gotten tremendous enthusiasm, a lot of attention. We have heard from so many different people, both in the media and from guests, that it's perfectly positioned; at the same time I would say I'd consider our bookings on that program modest relative to the total bookings that we would do in any particular summer. I think that's a combination of it's a new product; I also think it's a combination of the booking window for the summer, we are seeing as probably condensed by about four weeks.

I think just like we saw in the winter, people are making their decisions about summer travel even closer in than they do for the winter, because summer typically has a shorter booking window. At GTLC, I think we are seeing a lot of that same trend in terms of closer-in booking, but really GTLC doesn't have a lot of advance bookings, the vast majority of its business is really booked very, very close in, so that's an operation whose results won't really show up until we are almost on top of the actual nights of stay.

I thought the Eagle expansion had to do with being able to bring flights in in the summer time because of the temperature issue?

I think that's partially true, but I'm just saying that helps the summer of 2010.

Right. But is that something that you ultimately think will help you start to drive summer business?

I think so. I think again, the run rate extensions still actually help the winter as well, because it allows a greater number of airplanes; it minimizes some of the weather issues that come up. So ultimately, I think we are still much more leveraged to the the winter on any improvement in that airport.

Okay. Thanks a lot.

Sure.

Thanks Hayley.

(Operator Instructions) Our next question comes from the line of Mimi Noel with Sidoti and Company.

Thank you. Hi Rob, hi Jeff. Rob, you mentioned the cost saving programs, and we know specifically about the wage reduction program, but it sounds as though there are some on core initiatives behind that as well. Can you give us a sense of the magnitude of that effort?

No. I don't think we are prepared to do that today. But I would say that it comes in the type of categories like really improving our purchasing efficiency by reducing vendors, by standardizing a lot of the products that we buy, really going through and taking expense out of a lot of the things that we do as a Company maybe in a more fragmented way, that we really can be brought in and consolidated. And what it is, is attacking every single piece of our expense line, other than labor, which we really address with the wage reduction.

Okay. That's all I have. Oh, I did have one for point of clarification, Jeff. I apologize, you were talking about some sort of mix shift, 57, 43 to 63, 37 earlier on the call, can you tell me what that was in reference to? That was between our destination and in state visitation mix. Okay. Thank you very much, that's all I have.

Thank you.

Thank you, and we have a follow-up question from the line of Chris Woronka with Deutsche Bank, please go ahead.

Just on CME, did those results pretty much hit your expectations, or was there any kind of impact from when you originally underwrote to what it turned out?

I guess what I would say is that the original expectations when we talked about it assumed a better economy. I think, given the challenges that the economy saw, I think the results from CME were in line with that reduced expectation, so to speak. I would also say that CME had the benefit of cost side with fuel, which obviously came down quite a bit from the initial time that we looked at it, and we had some labor benefits as well. So overall, I would say given what happened in the economy, and the fact that their business is obviously almost 100% dedicated to destination visitors, it came in right in line with our expectations.

Okay, great. You mentioned the increase in season pass usage, if I remember correctly, for everything except the Epic Pass you amortize that over the season using a three-year usage average, so the increase in this past season that may impact how you amortize over the quarters next year, is that right?

Yes. I think what that is for everyone is just, it's how we bring it in between the second and third quarter, obviously we still bring all of that in over the course of the fiscal year, but it depends on the mix between the second quarter and third quarter. Because the Epic is a new product introduced last year, we bring that in on a straight line basis over the course of the season, on our other past products we use a three-year history, most recent three-year average, so depending on that, based on the usage this year that could cause that.

What I would tell you, it could cause as a shift in that three-year average, what I would tell you though is they obviously used it more, and it didn't necessarily mean they used it more in one quarter versus the other. So even using it more in total would just still keep those percentages between second quarter and third quarter of how we amortize it in pretty consistent.

Okay. Great, thanks.

Thank you, and our next question come from the line of Jordan [Laykoff], with [Marsico] Capital Management. Please go ahead.

Yes, thanks for taking my question. Congratulations on putting up some good numbers in a tough economy, guys.

Thanks, Jordan.

Just back to the season pass sales, I was pretty impressed with the growth rate and the unit growth rate. I was just wondering, it seems like it's an acceleration over where we were last year relative to the economy, and I'm wondering if it makes you guys feel more comfortable going into the fall and potential price increases as you close out the past sales for next season?

I think we consider the results from the spring's pass sales to be a very significant event; does that mean that it's eliminated any risk or guaranteed anything for next year, no. But it certainly takes, I think, a big risk out for us in terms of looking at next year, there was obviously a lot of chatter both internally and externally about the fact that our great season pass results last year started obviously before the economy really started to go downhill. And so I think the ability for us to repeat that performance and then actually increase on it, I think makes us feel good.

One of the things that we really look at with season passes, in the travel business right now where people are making decisions on their vacations sometimes as close as two weeks before Christmas, with the absolute peak of the season, the fact that we are pre-selling essentially these vacations six months, nine months in advance, I think is really a huge advantage for us as we go forward. And that's really how we look at it. And I think it's one of the reasons why we really do believe that continuing to drive this part of our business is a very important strategic initiative, and just so critical in these types of economic times where guests, even your most loyal guests, are uncertain about exactly what their travel plans would be.

Great, and just to double check, there is not anything different about the pre-season pass package, the benefits that come with the passes, really any different than what it was last year that would have incentivized business to book more this year than last year?

No, there was no improvement on the package that was offered this year versus last year.

Thanks.

Thanks, Jordan.

Thank you ladies and gentlemen. (Operator Instructions) Our next question comes from the line of [Yasuna Murakami] with mc2 Capital Management. Please go ahead.

Hey guys, my question actually just got answered. Good job.

Thank you.

Thank you, at this time, there is are no further questions. I would like to turn the call back over to management for any closing remarks.

Thank you operator. That wraps up our fiscal 2009 third quarter earnings call. Thanks to everyone who joined us on the conference call today. Feel free to contact me or Jeff directly should you have any further questions. Thank you for your time this morning and good-bye.

Thank you. Ladies and gentlemen, this concludes the fiscal 2009 third quarter results conference call. if you like to listen to replay of today's conference, please dial 303-590-3030, rr 1-800-406-7325, followed by the pass code of 4082570. Thank you for your participation you may now disconnect