Vail Resorts Inc (MTN) 2010 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Vail Resorts fiscal 2010 second quarter results conference call.

(Operator Instructions). This conference is being recorded today, Wednesday March 10, 2010.

I'd now like to turn the conference over to our host, Mr. Rob Katz, Chief Executive Officer of Vail Resorts. Please go ahead, sir. presentation.

Thank you operator.

Good morning everyone. Welcome to the Vail Resorts fiscal 2010 second quarter earnings 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 turn to a discussion of our results, let me remind you we're using the term reported EBITDA to report earnings for each of our operating segments, namely Mountain Lodging and Resort, which is combination of the Mountain and Lodging segments, and Real Estate. The Company defines reported EBITDA as segment net revenue less segment operating expense, 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 Vail Resorts. 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 or forward-looking statements that are made pursuant to the Safe Harbor provisions in the Private Securities Litigation Reform Act of 1995. Investors are directed to the risks and uncertainties described in the documents filed by the Company with the Securities and Exchange Commission, statements. Including the Company's Form 10-K for the fiscal year ended July 31, 2009, and Form 10-Q for the second quarter of fiscal 2010.

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 or 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 our second quarter fiscal 2010 results and outlook. I'm pleased with how we've performed so far this season, particularly given the low early season snowfall levels at our Colorado resorts, and a still challenging economy. Our Mountain reported EBITDA increased 3.6% in the second quarter, due in part to an increase in our season pass revenue and cost reduction initiatives, implemented during the second half of the prior fiscal year.

While current conditions at all of our resorts are terrific, snowfall in the earlier part of the ski season was at 30-year lows at our Colorado resorts, leading to a1.6% decline in visitation at our Colorado resorts when compared to prior year. Though our overall visitation was up 0.1% due to increased visitation at Heavenly. Vail Mountain visitation was the most impacted as we could not open the vast majority of the back bowls until after Christmas.

Lift ticket revenue increased 1.9% during the quarter, due to a 6.2% increase in season pass revenue, partially offset by a reduction in other lift ticket revenue. The increase in season pass revenue was generated on overall flat visitation from season passholders and lower visits per pass, demonstrating the value of the program even in periods of challenging snow conditions. Also encouraging was the improvement we saw in guest spending in our ski school and retail rental operations which realized revenue increases of 3.8% and 3%, respectively.

Total skier visitation and, to a lesser degree, total lift revenue, were favorably impacted by the timing of the current year quarter-end, compared to the prior year, since the current year-end quarter ended on a Sunday, versus the prior year-end quarter, which ended on a Saturday. Total skier visitation was down 1.6% and lift ticket revenue was up 0.6% when comparing the season-to-date period ended Sunday, January 31, 2010 with prior year period ending Sunday, February 1, 2009.

Ski school and retail rental revenues were up 2.3% and 2.4%, respectively, while dining revenue was down 3.3%, when adjusting for the one-day impact.

Lodging segment results fell below the prior year due primarily to declines at our Keystone lodging properties, which have been hardest hit in the current economic environment. But I'm pleased with improvements reported by our lodging properties at other mountain resorts. Our Lodging segment bookings have trended lower than the prior year. Although, our guests continue to book closer to their arrival date than they have in years past, and we've seen the gaps fully closed in all our of our resorts except Keystone.

As expected Real Estate segment revenue and Real Estate reported EBITDA declined significantly due to prior-year quarter closings of certain Lodge at Vail Chalet, Crystal Peak Lodge and Arrabelle units. The strength of our resort business has led to strong free cash flow over the past 12 months, before Real Estate activities, despite the state of the economy.

Now let's take a look at our ski-season-to-date metrics from the comparative periods for the beginning of the ski season through Sunday, March 7, 2010, and for the similar prior-year period through Sunday, March 8, 2009. As mentioned in the earnings release, we are pleased with the improvement of our ski-season-to-date metrics through Sunday, March 7, 2010, compared to the earlier season-to-date metrics we reported on. Since we released our early season metrics through January 6, 2010, our metrics have shown consistent improvement. Our total skier visits through March 7 are now up 0.4%, reflecting improved visitation as the year has progressed. Total lift revenue is now up by 1.6%.

Our ski school and retail rental revenues are up approximately 3.8% and approximately 5.5%, respectively, through March 7, 2010, reflecting a meaningful improvement in guest spend per visit. Our dining revenue which was negatively impacted in the early season by the lack of facilities being open with limited terrain available, is now down 1.3% through March 7, 2010. In addition, our lodging bookings through our central reservations and directly at our owned and managed properties have improved considerably from being down approximately 13% in room nights in early December 2009 to now being down approximately 6% as of February 28, 2010, with our Keystone lodging entirely driving the unfavorable comparison to last year. Excluding Keystone, our bookings are up 1% compared to last year at this time.

Let me now turn the call over to Jeff to further discuss our results and outlook, I'll then discuss our calendar 2010 resort capital expenditure plans, as well as some other exciting news.

Thanks, Rob.

Good morning, everyone. Earlier this morning, we released our earnings for second quarter fiscal 2010, ended January 31, 2010, and also filed our Form 10-Q for the quarter, which you can find available now at our Vailresorts. com website.

Now turning to the highlights of our results. Overall, as Rob mentioned, we were pleased with our resort results for second quarter fiscal 2010, given the low early season snowfall levels at our Colorado resorts and a still-challenging economy. Our Mountain segment results were solid, with Mountain reported EBITDA of 3.6%. We saw a 9% increase in the number of season passes sold for the 2009/2010 ski season, enabling us to lock in a commitment from a large portion of our guests prior to start of ski season.

As a reminder, we record all season pass sales as revenue in the second and third quarter of the fiscal year, and therefore approximately half of the season pass sales were recognized as revenue in the second quarter of fiscal 2010. Despite the increase in season pass units sold, visitation for passholders was relatively flat, while visitation excluding season passholders was up slightly by 0.2%. both impacted by the low early season snowfall levels at the Company's Colorado resorts. In addition, ETP, or effective ticket price growth, of 1.7% was driven by an increase in season pass revenue when combined with the decline in the average number of days skied by passholders, partially offset by a decline of 1.1% in ETP, excluding season pass products.

Ski school performed well, generating a 3.8% increase in revenue compared to the prior year, indicating a higher spend per guest. Dining revenue was negatively impacted by the delayed opening of certain on-mountain dining locations due to the limited terrain open and snowfall conditions in the early season, while retail rental experience increased sales and importantly combined with improved gross margins. Other revenue was impacted by a decline in employee housing, due to a much broader availability of non-Vail controlled housing to our employees in Vail and Breckenridge, and lower strategic alliance marketing revenue.

Looking at our Mountain segment operating expenses, operating expense decreased 1.4% in the quarter, primarily due to a decrease in labor and labor-related benefits expense, due to tight management of the variable labor component, together with the favorable impact of cost reduction measures taken in second half of the prior fiscal year. This is partially offset by higher general and administrative expenses, primarily due to increased employee medical costs, as well as the timing of marketing spend, as more marketing expenditures occurred in the first quarter of the prior year, as compared to second quarter of the current year.

Turning to our Lodging segment, our Lodging results declined primarily due to our lodging operations in Keystone, as Keystone lodging has been the hardest hit by the economic downturn of any of our lodging operations. In addition, the increase in general and Administrative expenses contributed to the year-over-year decline in Lodging results. Overall, RevPAR was down 11.1% and ADR was down 2.1% for our own hotels and managed condos. We were able to tightly manage expenses in our Lodging business, and therefore were able to mitigate the impact of the lower Lodging revenue.

Now to our Real Estate segment. Our Real Estate segment results are primarily determined by the timing of closings and a mix of real estate sold in any given period, which was certainly the case in the second quarter of fiscal 2010. In the second quarter of fiscal 2010, the Company didn't close on any units, while in the prior year we closed six Vail Chalets, one Arrabelle unit and three Crystal Peak Lodge units. Therefore Real Estate results for the current year second quarter essentially represented marketing expense for the projects under construction, direct administrative costs as well as allocated corporate expense. No Real Estate project closings are expected until the fourth quarter of fiscal 2010, when closings on One Ski Hill Place are expected to begin.

Even with the Company's funding of our two Real Estate development projects underway, the Ritz Carlton Residence Vail and One Ski Hill Place in Breckenridge, the Company remains in a strong position from a capital structure and balance sheet perspective. As of January 31, 2010, the Company's net debt leverage was 2.6 times trailing 12 months total reported EBITDA. Our $400 million senior credit facility, which matures in 2012 and has $308 million available for borrowing after considering $92 million in currently issued letters of credit, had no outstanding borrowings under our revolver at the end of the second quarter of fiscal 2010. In addition, our 6.75% senior subordinated debt does not mature until 2014. During the second year, second quarter fiscal 2010 -- during the current year second quarter fiscal year 2010, we didn't purchase any stock, and our remaining authorization is approximately 2.1 million shares.

Turning to our guidance, as we mentioned in out release, we're experiencing a number of favorable operating trends during this year, we currently believe the slow start to the ski season, which lasted through the beginning of the Christmas holiday period, will make it challenging for us to reach the top end of the guidance we issued in September 2009, and reiterated on December 8, 2009 for resort reported EBITDA and net income attributable to Vail Resorts, Inc.

Before I turn the call back to Rob, I wanted to mention in April, we will again announce certain season-to-date ski season metrics, which will include the spring break and Easter holiday periods. These metrics will include season-to-date skier visits on a combined basis for all five of our mountain resorts and season-to-date lift ticket revenue. Now back to Rob.

Thanks, Jeff.

Before I turn to our calendar 2010 resort capital expenditure plan and Real Estate development project, I wanted to highlight exciting news. This morning, we also announced our season pass products for the upcoming 2010/2011 ski season. We are excited to bring back the Epic Pass for its third season, providing unlimited, unrestricted access to six world class resorts at a price of $599.

In addition we'll be selling online for the second season in a row, the Summit Pass, providing unlimited, unrestricted access to Keystone, Breckenridge, Arapahoe Basin for $409. We are also introducing two new products for the upcoming 2010/2011 season as we continue to capitalize on the success of the Epic Season Pass and look for opportunities to develop products that will allow us to lock in sales before the start of the ski season, as well as providing an attractive value proposition for our guests.

The first is the Epic 7-Pack, a seven-day unrestricted ticket where you can use the seven days at any of our five resorts and Arapahoe Basin any time during the season for a price of $449, or almost 35% off of our single-day lift ticket price. The second is a Keystone/Arapahoe Basin Pass providing unlimited and unrestricted access to both of those resorts for $359. The prices of all of these products are guaranteed only through May 31.

The Winter Olympics concluded just a few short weeks ago, and we were captivated by the performances of our US athletes and the success they had. Particularly in Alpine Skiing, where the US brought home eight olympic medals, it's all-time record performance. We are also incredibly proud of our hometown hero, Vail's Lindsey Vonn, who brought home the first-ever US women's gold medal in the prestigious Downhill, and a bronze medal in Super G. Lindsey has also had tremendous success this season outside of the Olympics, capturing an American record third World Cup Downhill title, the Super G title, the Super Combined title, a US record 10 World Cup wins in a season, and tied Bode Miller for the most US wins on the World Cup with 32. And, oh, she still has a few more races to go this week, with maybe more news to come.

We couldn't be more pleased with our decision last year to sponsor Lindsey. She embodies everything that Vail Resorts strives for, incredible dedication, committment and work ethic, and an unbelievable level of respect and love for the sport, particularly in connecting with kids and families. Lindsey will continue to represent all five of our resorts and be a key spokesperson in our marketing efforts for the Epic season pass and other our other pass products. Her accomplishments are truly epic, providing a perfect platform for the message we try to deliver to our guests about these products. Feel free to follow Lindsey on Lindseyisepic.com, which gives skiing fans an in-depth behind-the-scenes account of her season for the record books.

Now turning to our calendar 2010 resort capital expenditure plan, which we announced earlier this morning. Vail Resorts remains committed to offering our guests an exceptional guest experience by investing in our resort assets and amenities. Today, the Company announced its calendar 2010 resort capital expenditure plans, exclusive of resort depreciable assets associated with the Company's Real Estate projects.

The Company has historically invested significant cash and expenditures for cash its resorts operation and expects to continue to invest in the future. In fact, over the past four calendar years of 2006 through 2009, the Company has spent approximately $580 million in resort capital investments, including resort depreciable assets arising from our Real Estate projects. Plans for such investments reduced in calendar year 2009, given the significant level of capital expenditures made in the previous few years, coupled with the economic environment. With today's announcement, the Company has increased its expected level of resort discretionary investment for calendar year 2010 above the calendar year 2009 level, but still well below the 2007 and 2008 calendar year levels.

The Company evaluates additional discretionary capital improvements based on an expected level of return on investment, and we do not intend in any way to back off of the rigor we put each potential project through. The Company currently anticipates it will spend approximately $75 million to $85 million of resort capital expenditures for calendar year 2010, excluding resort depreciable assets, arising from Real Estate activities. Including in these capital expenditures are approximately $37 million to $42 million, which are necessary to maintain appearance and level of service appropriate to the Company's resort operations, including routine replacement of snow grooming equipment and rental fleet equipment.

Discretionary expenditures for calendar 2010 focus on high-profile, high-return projects that underscore our commitment to delivering an unparalleled guest experience through the highest quality amenities. key investments are expected to include a new Chair 5 replacement of a fixed-grip triple with a high-speed quad chairlift, The first high-speed lift to serve Vail's Mountain's famous Sun Up and Sun Down bowls; the addition of a year-round restaurant at the top of Heavenly's gondola, significantly increasing the indoor seating capacity of the resort; a new coaster slide at Breckenridge; Expansion of Vail Mountain's Adventure Ridge, Keystone Lodge guest room innovation; and a new marketing campaign management software, among other projects.

Our ability to continue to invest in our world class assets further distinguishes Vail Resorts as the leader in the mountain resorts industry.

Now turning to our real estate development projects under construction, One Ski Hill Place in Breckenridge and the Ritz-Carlton Residence in Vail. Construction is nearing completion at One Ski Hill Place in Breckenridge, with approximately $30 million in project costs remaining to be spent from February to completion in May 2010. At our Ritz-Carlton Residence Vail project, we expect to complete construction in the late fall of 2010 with approximately $80 million in project costs remaining to be spent from February to completion.

Clearly, Real Estate sales activities has been slowed by the economy. However, we do believe that if potential buyers are able to occupy units concurrent with or soon after their purchases, we'll begin to see a pick-up in activity, especially as we head into future selling seasons for both projects. We look forward to completing both of these projects in calendar 2010 and are very pleased with the progress of construction and the level of finishes as both have risen out of the ground and are nearing their finished state.

As we talked today, we have entered our historically largest revenue month of the year for our resort business, followed up by an Easter holiday period in early April this year. We are seeing good momentum recently, and there is still much more to come of this season, and still more time to come and visit us in the mountains. I look forward to seeing you there.

At this time, Jeff and I will be happy to answer your questions. Operator, we're ready for questions.

Thank you, sir.

(Operator Instructions).

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

Thank you, Good morning, Jeff, good morning Rob.

Good morning.

Let me start first with the last thing you were talking about, Breckenridge and Vail real estate development. And, can you give us comfortable -- I know there's no guarantee, but we'll see the closings on the units where you collected deposits to date. Is there any visibility into that?

I think that ultimately, I think that's something we have to go through person by person. I think we obviously feel like both of these projects are -- provide an outstanding value. I think between the location, the finishes, the interest that people have had in the project, and so, I'd say we go into both of the closing periods, cautiously optimistic.

At the same time, I think we do have to acknowledge that, for certain buyers, their economic situation has changed and that might make it more difficult for them to close. But we are certainly going into both of those processes looking to close as many units as possible. And like I said, cautiously optimistic that given the quality and value of both projects that we'll see some real success.

Can you tell us the number, I think we could do approximate calculations, but of the revenues that you would collect at each project based on what you've -- based on the units that have deposits?

Let me -- I don't have that right in front of me, but I can get that right back to you.

Okay.

Second question is on, let's see, Keystone. Seems to be the underachiever of the portfolio this year, can you just give us a little more insight into the problems at Keystone, if that's how it's really worded?

I guess what I would say is this, I think when you look at particularly Keystone lodging, I think Keystone lodging, we have obviously a significant number of units there. It is also, of all of our lodging properties, it has by far the largest group business component, and, as I think everyone remembers, group business for this year was going to be a huge struggle because those commitments typically would have had to have been made last year. And last year, obviously groups weren't in the mood to make significant commitments. We do feel like that's a trend we'll see turn around next year, and we are starting to see momentum in groups engaging and talking about future opportunities for the upcoming ski season and off season, for that matter. So that's one.

Two is, I think the price point of Keystone, one of the things we shared with folks is that if you think about somebody going to Vail or Beaver Creek for a long vacation, they have numerous expenditures typically on their vacation, and if they want to reduce the costs of things they can do, there are things they can do. We've seen things like that, like in their fine-dining restaurants. In Keystone, where the spend didn't start as high, sometimes for people to cut back on some of their vacation costs, they have to reduce days. I think we saw some of that this year, particularly in our lodging.

The other piece that I think we'll be able to speak to, even though all our resorts obviously saw some lower snowfall, Keystone versus Breckenridge really had -- Breckenridge had much better, even though it was low, Keystone snowfall was actually much lower. We also think we saw some front range business shift from Keystone to Breckenridge because of the relative snow quality. Again, while that doesn't hurt us from a pass revenue perspective, it would hurt Keystone lodging.

I think all those factors kind of contributed to it. I think it's, in some respects, some of that was -- we could have anticipated, some was a bit of a surprise, but again, I think we feel very good about the resort. We have a ton of confidence in where it's going. We've had huge success with repositioning a lot of events there towards kids and families, like the Largest Snow Fort in the World and Kidtopia. And I think you're going to see a lot more of that next year, and I think as the economy comes back, the weather improves a little bit, we're going to see that rebound quite a bit.

Just to clarify, the second of the three factors, price point, I was a little bit confused. You mean that because it's the lowest price point of the five resorts or the four Colorado resorts, people cut back more on that than at the higher level?

What I'm saying is that it's the lowest -- when you look at the total vacation costs, it's -- if you're going to cut back on your vacation costs to Vail, I think one of the things we've seen is people cutting back on private ski school, some fine dining, some other amenities, lodging. At Keystone I think we saw that some people who were cutting back on their vacation expenses actually just cut back on days spent there. They're not starting with as big a budget, so when you start cutting, you lose a day here and there.

I think we actually shared at the beginning of this season that we felt like we would see better performance at the upper end than we would at the lower end of the income scale.

Okay, great. Thank you.

Thanks.

Our next question comes from the line of David Katz with Oppenheimer. Please go ahead.

Hi, good morning. Morning. So what can we talk about to update your view of the acquisition landscape? We've looked at you as somebody with an appetite and the resources and we look at the environment where there could very well be some interesting opportunities. It's been maybe a month or so, Jeff, since we talked about it, what's happened, what does it look like? What can you share with us?

I think what I would say is that our Company has always had an interest in acquisitions and strategic growth and we still do.

At the same time, I think we've also had a fair amount of discipline. I think that discipline has kind of shown itself in living color over the last 18 months to two years. I think that what we're seeing today, is that you have I think there are folks today, I think you see any every economic downturn, which is people who own assets don't necessarily look to sell if they feel that their asset is underperforming, unless they're forced to sell. And I think you're seeing that, not just in the ski industry, but broadly. I think many people feel if there's a way for them to hang on or continue to control an asset that that's something they'll do. They'll look to potentially do a transaction in a better economic environment. I think, as we all know, I think there are, again, broadly, not just in the skiing industry, but broadly in the hospitality industry, banks have a lot of assets they may have issues with, but they're also giving those assets and giving those owners and managers more time, extending out defaults or maturities, covenants and this and that, to hope to try and weather the storm.

What I would say is that we absolutely are interested in doing something, but we're not going to do something that we don't think is justified by the overall value of an asset or by the economic environment. So I think we're going to wait for the right opportunity, and when it presents itself, we'll do it.

Okay. If I can just follow that up. Has Whistler formally reached some terms on a restructuring or an extension, at this point?

Yes, I'm not going to comment on that at all.

Okay, all right, thanks very much.

Thanks.

(Operator Instructions). Our next question comes from the line of Tim (inaudible) with Deutsche Bank. Please go ahead.

Hi, good morning, guys.

Can you provide us with an update on plans for expanded summer offerings?

I think what I'd say there is, we're actually going to share probably a little bit more on that in our investor conference that is upcoming. There'll be slides on that when we post that to the website in the next day.

What I would say today is that it's actually a big focus for us as we go forward. I think one of the things that we saw, even over the last 18 months, is really some of our best performing activities were some of the non-ski or off-season activities, whether that be the zipline at Heavenly, whether that's the alpine slide at Breckenridge, whether that's summer tubing, winter tubing, I think we have a number of ideas for how to roll that forward. Some of which are, that we can do on either private land or would be consistent with the rights and approvals that we already have. Some of which would be dependent upon an expansion of the opportunities that we could pursue on Forest Service land. As many of you may know, there's a bill right now, which obviously has the support of the whole industry, in front of Congress to alter the legislation that supports ski resorts to allow for year-round activities.

So it is definitely a primary focus for us and something we'll be spending additional time on as we go forward. Again, we'll probably get into that a little bit more in our conference and again, we'll have slides on that that will be posted to the website.

Great, thanks.

Thank you. Our next question is a follow-up question from the line of Will Marks with JMP Securities. Please go ahead.

Thank you.

On the remainder of the season, there's only roughly a month or so left, can you just talk about visibility in the remainder of the season? Are your bookings typically completely done at this point? Just to give us a sense of ability to hit the guidance.

No, I would say that we, I think we have better visibility, obviously, than we did a couple months ago. But I think there is a tremendous amount of short-term bookings. And I think one of the things that we shared at the beginning of the year, was that when bookings were down 13%, and I think at that point shared that we were pretty confident that that would not translate into some, a 13% decline in visitation. What I would say is I think we're using that same intelligence and insight to try and figure out how we see the rest of the season, and that's based on the commentary that we gave today on guidance.

With that said, I think we are still seeing a very close-end booking curve that -- where even the week before, you are seeing a lot of bookings, but we've included that in the commentary we gave on the guidance. So I think we're kind of assuming continuing trends continue.

Does that help?

Yes, very much, thank you.

And then on the increased pricing for the Epic Pass, the larger Epic Pass, I think there are obvious reasons for it, maybe just give us your thoughts.

Well I think we absolutely feel that as we've seen greater stability in bookings, as we've seen greater stability in some pick-up and guest spend, that last year, the season that we're currently in, was obviously a season where we held prices pretty much flat or even were more aggressive on promotions, particularly in our Lodging business. I think we're going to see that trend start to turn as we go into next season. Some of the past pricing increases that we're going to put forward are consistent with that. I think they're modest, but they -- we do feel that each of our passes provide incredible value and are really the best products for us to start kind of that shift.

Would you consider adding a third party resort to your Epic Pass? I guess you have A Basin already, but -- that's the question.

I think it's something we would always consider, but there are many difficulties in trying to work through a relationship when you have a third party resort. Not that it can't be done, I think it's something we'd be open to if we thought it would improve the value of the pass and could be worked through, but there are challenges to doing it, and so I think we'll just continue to monitor that as we go forward .

Okay, and just my last question, how would you describe the -- if you could quantify the turnout for the investor day, is it better than average? Increased from last year?

I'm expecting a record turnout. No, I don't know, Jeff, maybe you can comment on that.

I think it's a good turnout, it's what it's looking like. I would say, I don't know the exact comparison to last year, but it feels at or little bit more than last year.

Great, that's all for me, thanks guys.

Thank you. Our next question comes from Mimi Noel with Sidoti & Co. Please go ahead.

Thank you, good morning.

Really just two questions, first one for Rob. Do you think you could safely say that snow -- weather conditions, resort conditions not only affect your Front Range visitors, but also your destination skiers as well, given the tighter booking curve?

Yes, I think they do, and I think, again, I think it's -- there's two factors that go into that. I think one factor is, in non-peak periods when the trip is a little bit more discretionary, so to speak, you're taking a longer weekend or something, obviously having better conditions helps instigate that, as much from marketing as anything else. The fact that people are booking closer in means they're obviously looking at the closest weather information. I think, obviously, that makes a difference.

The other thing, if people come out to visit us, we sometimes think that somebody might be out for four days, but if they feel like the weather isn't the best, they might buy a three-day ticket instead of a four-day ticket, or they'll buy single-day tickets.

I think what we've always shared is that on the margin, weather can absolutely affect the business, but that we feel like, and I think this season is proving that, while we can certainly can see the impact, this was probably -- this was essentially a, a worst-case -- if you went back, I've been around the Company a long time, almost 20 years, this was the worst case scenario, which was you had a bad economy and you also had 30-year low snowfalls at the beginning of the season.

Okay.

What we feel like is that, despite all that, we still had -- yes our pass program was incredibly helpful to that, but obviously, that pass program only represents about one-third of our business. So the other third also came through. I think that that -- it speaks to the fact that people are coming out for a comprehensive vacation. The weather plays a factor on the margins, but again, we feel like if anything comes out of this season, and obviously this was a tougher one for us because of the tough conditions at the beginning, I think it might dispel some myths about the Company as we go forward.

Okay, and there's nothing to -- following the first half of the season, there's nothing to change your outlook than the weakness, the prevailing weakness is really due to the macroeconomic backdrop, more so than snow conditions. Do you agree with that?

Absolutely. The only thing I would point to, if you look at the other areas of travel and look particularly at the rate issues that a lot of other folks have, and the fact we've been able to keep our rate pretty stable, I think that speaks to the strength of our business and it -- but yes, it's harder to grow double-digits and things like that in an environment where people still aren't back to the levels they were in 2007 and 2008.

Thank you, that was helpful.

I have one question for Jeff. Jeff, is the benefits from more shared purchasing activity, was that evident in this latest quarter?

Yes definitely, and that is something that's sustainable in our Company now, it's really become incorporated into our way of doing business. And I think we see versions coming out of improved enhancements that we can keep getting more and more of that.

So I think it's really been something that's been really received very well in our organization. And as people see that we're able to realize savings across things that they normally have to pay more for, in their cost centers, et cetera, then they're embracing it and we're seeing more and more of that. We also even see that into our capital plans and how we buy our capital as well as our -- on the expense side. We're really encouraged by it, and I think that's something, again, that is not only sustainable, but we should be able to grow as we go forward.

You've shot away from it in the past, but do you care to quantify anything on that front at this point?

Not specifically.

Okay. Actually, I lied. I do have one more question. And that's about the increased medical expenses? Was there an increase, is it just a higher rate? Was there a level of incidence that was breached or -- ?

I think we, I think what I would say is they --I think you did have a high, really a higher level of incidence, and I think that is probably consistent with what you're seeing in some national trends as well.

Okay. That's all I have, thank you.

Thanks.

Thanks.

(Operator Instructions).

Our next question comes from the line of Yasuna Murakami with MC2 Capital Management. Please go ahead.

Hi guys.

How are you?

Very good, we won't make it to the investor meeting, but I'm sure it'll go well.

There's snow falling right now in Vail.

Well we may be able to come after, but anyways, back to these questions.

Following up on Dave Katz's comments. I know you're not going to elaborate so I'm not going to go there. But as far as the financing aspect, can you at least discuss what kind of modes of financing, if you did engage in an acquisition, you'd be looking at. Is everything on the table at this point, just looking forward?

I think absolutely. I think absolutely we -- what I'd say, when you look at our financial ability to do anything going forward, I think it's incredibly strong and a huge advantage for us, both in terms of using internal resources and raising external resources. So we don't see that as a limiting factor at all.

Okay. And I don't expect you to elaborate any further on anything else that obviously has been in the news and stuff like that.

Thank you.

Thanks.

(Operator Instructions). Mr. Katz, I show there are no further questions at this time. Please continue with any closing remarks.

Thank you, operator.

This concludes our fiscal 2010 second quarter earnings call. Thanks to everyone who joined us on the conference call today. Please contact me or Jeff directly should you have further questions.

Thank you for your time this morning and goodbye.

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This concludes the Vail Resorts fiscal 2010 second quarter results conference call. Thank you for your participation. You may now disconnect.