Vail Resorts Inc (MTN) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Vail Resorts fiscal 2010 year-end results conference call. During today's presentation, all parties will be in a listen only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Thursday, September 23, 2010.

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 2010 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 that we are using the term reported EBITDA to report earnings for each of our operating segments, namely Mountain, Lodging, and Resort which is a 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 the 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, 2010, which we filed today. 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 forecasts or forward-looking statements except as required by law.

So with that said let's turn to our fiscal 2010 results and fiscal 2011 outlook. I'm very pleased with the performance that we delivered for fiscal 2010. Even with snowfall at historically low levels and the slow recovery in consumer spending, we were able to deliver growth in all key lines of business in our Mountain division, skier visits, lift ticket revenue, dining, ski school and retail rental. The improvements were driven by strengthening destination visitation and guest spending patterns which accelerated through the spring break and Easter holiday periods. Over the course of the 2009-2010 ski season, we saw consistently improving performance over the prior year in all of our key Mountain segment metrics, leading to a 12% growth in Mountain reported EBITDA on a 3.9% increase in revenue.

Lodging revenue declined 4% and Lodging reported EBITDA was down $4.4 million resulting, in large part, from declines in Keystone transient and group related business. Resort reported EBITDA, including both Mountain and Lodging of $186.4 million, reflected an 8.9% increase over the prior year and was in the upper end of the guidance range we initially established in September 2009 and reaffirmed throughout the season, including on our last earnings call in June 2010. Jeff will go into the numbers in greater detail later in the call.

Regarding real estate, in the fourth fiscal of 2010 we were able to close on 61% of the 59 One Ski Hill Place condominiums that were under contract for total gross proceeds of $50.7 million. In addition, during the first quarter of fiscal 2011, we closed on 100% of the 45 fractional units at the Ritz Carlton Residences Vail for total gross proceeds of $110.9 million. Given the continued challenges in the real estate market, we were very pleased with our ability to deliver these closings which we feel was due to the unique nature of our properties at our world class resorts. Most importantly, we have now passed a critical inflection point, as cash inflows will exceed cash outflows on our existing real estate projects subsequent to July 31, 2010. I will talk about our real estate projects in more detail later in the call.

Now, as we have ended fiscal 2010 and are preparing for the upcoming ski season, there are several encouraging signs that have emerged since our last earnings call in June. First and foremost, our sale of season passes already have improved significantly over the course of the summer and into the early fall selling period. We are pleased to report that through September 19, 2010, our season pass sales are down only 1% in units and sales, a substantial improvement from the 14% and 16% respective declines we reported in June 2010. This recent trend supports our statement made in June that we believe the early season decline was due to an unusual timing shift in the prior year selling period and that we would more than make up for that shortfall in the fall of 2010. We are now just past the midpoint of pass sales based on historical trends and we look forward to continuing to sell all of our pass products into the late fall.

Second, although it is still early in the bookings cycle with less than 15% of winter season bookings historically made by this time, most booking indicators at our resorts are up in both room nights and revenue over the prior year and the same point in time. Especially encouraging is that it appears that bookings for our luxury properties are strong, signaling a lengthening of the bookings cycle for this important segment of our business, but also supporting our optimism on the return of the destination visitation guest, a trend that we began to see in earnest last spring.

Third, sales at our retail outlets during our annual Labor Day sales event exceeded the prior year, another indication that our front range skiers are excited about the upcoming season. And fourth, we saw strong summer visitation at our mountain resorts which indicates that our guest propensity to travel and recreate in the spring carried through the summer despite a volatile global economic environment. With the momentum from all of these indicators aligning with the favorable trends we exited the 2009-2010 ski season with, we are optimistic about the upcoming season.

Let me now turn the call over to Jeff to further discuss our results and our fiscal 2011 guidance. I will then discuss other exciting news for Vail Resorts.

Thanks, Rob. Good morning, everyone. Earlier this morning we released our earnings for fiscal 2010 ended July 31, 2010, and filed our Form 10-K which you can find available now at our VailResorts.com website.

Now turning to highlights of our results. Overall, as Rob mentioned, we were very pleased with our resort results for the year. Our Mountain segment results showed solid improvement with Mountain segment net revenue up 3.9% and Mountain reported EBITDA up 12% compared to the prior year. Mountain EBITDA margins improved 210 basis points to 28.8% from 26.7% in the prior year. Lift ticket revenue increased 4.6% with season pass revenue up 6.5% and pass sales representing 35% of total lift ticket revenue. Total skier visitation increased 2.5% for the year, while visitation by season passholders was up 1.7%. Average visits per season passholder were down only approximately one half day per pass despite the historically low snow conditions, most notably in the first part of the year. ETP grew by 2.1%.

For the year our ski school business experienced the largest revenue increase in ancillary business, up 8.2%, primarily due to 5.6% growth in yield per skier visit as both group and private lessons benefited from higher guest spend and were also favorably impacted by new programs being offered in ski school this year. Retail rental increases of 5% also benefited from higher guest spend specifically at our Beaver Creek, Vail, and Breckenridge Mountain resorts, as well as our San Francisco Bay area stores. Dining revenue gains of 2% were more in line with skier visits. Our other Mountain revenue was down 3.7% impacted by a decrease in employee housing revenue due to lower occupancies and greater availability of alternative housing for our employees as well as lower municipal services revenue. This was partially offset by an increase in private club revenue as well as higher summer activities revenue. Most importantly, our skier metrics improved throughout the season and were especially strong during the Spring Break and Easter period, with absolute levels of revenue during that period comparable to the 2007 and 2008 pre-recessionary seasons.

Looking at our Mountain segment operating expenses, operating expenses increased only 1.1% for the year primarily due to an increase in labor and labor related benefits expense due to increased employee incentive compensation. Mostly offset by the full year impact of a Company-wide wage reduction plan implemented in April 2009 and the suspension of the matching contribution to our 401(k) program in January 2009, both of which were partially reinstated in April 2010. Additionally we had higher resort related fees including US Forest Service fees associated with our higher on-mountain revenue as well as higher G&A expenses due in part to increased medical costs. These expense increases were offset by lower retail cost of sales, despite the increased retail revenue given favorable inventory management as well as lower other expenses partially due to benefits realized from our expanded procurement programs.

Turning to our Lodging segment, our Lodging reported EBITDA for fiscal 2010 was $2.4 million down from $6.8 million in the prior year. For the year RevPAR at our owned hotels and managed condominiums was down 5.3% with ADR up 4.4% and occupancy lower by 3.8 percentage points. The overall drop in both owned and managed room revenue is primarily a result of decreased ADR and occupancy at the Company's Keystone lodging properties, reflecting declines in group business with group room nights down 26% combined with a decline in transient room nights of 18.2%. Excluding Keystone properties, RevPAR would have increased by 2.7% for our lodging business with ADR increasing by 4.7% and occupancy down 0.9 percentage points. We were able to tightly manage our labor and other lodging expenses, mitigating some of the impact of the decreased lodging revenue, partially offset by higher G&A expense associated in part with higher employee medical costs.

Now to our Real Estate segment. Our Real Estate segment results are primarily determined by the timing of closings and the mix of our real estates sold in any given period. In the fourth quarter of fiscal 2010 the Company closed on 36 units at One Ski Hill Place for a revenue of $50.7 million contributing most of the full year Real Estate revenue of $61 million. We also retained $5.2 million of deposits from units at One Ski Hill Place that went to default. In the prior year, we had 42 Crystal Peak units, eight Lodge at Vail Chalets and two Arrabelle units close, contributing to $186.2 million in fiscal 2009 Real Estate revenue.

Taking a look at our bottom line, net income attributable to Vail Resorts Inc. was $30.4 million or $0.83 per diluted share for fiscal 2010 compared to net income attributable to Vail Resorts Inc. of $49 million or $1.33 per diluted share in fiscal 2009. Our effective tax rate for fiscal 2010 totaled 33.5%, down from 37.7% primarily due to the favorable impact of the tax effect of the Company's April 30, 2010, purchase of the remaining non-controlling interest in Specialty Sports Venture, the Company's retail business. On the subject of SSV, because we acquired the remaining 30% that we did not own in April 2010, net income attributable to Vail Resorts included 100% of the SSV seasonal losses in the fourth quarter rather than the 70% share of such losses in the prior year. This reduced net income attributable to Vail Resorts Inc. by approximately $1.6 million and was not contemplated in the guidance we issued for fiscal 2010.

During fiscal 2010 the Company repurchased 386,269 shares of common stock at a cost of $15.0 million and average price of $38.83 per share, all of which was repurchased during the fourth fiscal quarter of 2010. We have 1,735,196 shares remaining on our authorization.

Regarding the balance sheet, as of July 31, 2010, the Company had cash and cash equivalents on hand of $14.7 million and total debt of $526.7 million including $35 million in revolver borrowings under our $400 million senior credit facility which matures in 2012 and had $283.9 million available for borrowing after considering $81.1 million in currently issued letters of credit. The Company has virtually no principal maturities due until 2014 except for amounts outstanding under the revolver. Even after self-funding our two large real estate projects, repurchasing stock and completing the acquisitions of Mountain News and the remaining non-controlling interest in SSV, we ended fiscal 2010 with net debt of 2.8 times trailing 12 months total reported EBITDA. As of July 31, 2010, the Company had $20 million to $30 million remaining to be spent on its two active real estate projects. While subsequent to year-end, in September 2010, the Company closed on the $110.9 million sale of the fractional units at the Ritz Carlton Residences Vail, and we have just begun closings on the whole ownership units under contract.

Turning to our guidance for fiscal 2010, while we recognize the ski season has not yet begun and our visibility is limited at this point, we are optimistic for the upcoming season based on recent trends in bookings and pass sales, and our expectation to return to more traditional price increases in lift tickets and ancillary products. Our Lodging segment should benefit from improved destination bookings, rate and a recovery in group business. Therefore based on our current estimates our fiscal 2011 full year Resort reported EBITDA, the combination of our Mountain and Lodging segments, is expected to range from $200 million to $210 million, up between 7% and 13%. Mountain reported EBITDA is projected to range between $194 million to $204 million after $7 million of stock based compensation expense. And Lodging reported EBITDA is estimated to range from $2 million to $8 million after $2 million of stock based compensation expense.

For the Real Estate segment we are projecting Real Estate reported EBITDA to range from a positive $4 million to a negative $4 million after $3 million of stock compensation expense. Most important to note, Real Estate guidance supports an expectation of approximately $160 million to $200 million of net cash proceeds on the Ritz and One Ski Hill Place projects for fiscal 2011 as construction is essentially complete. For fiscal 2011, Real Estate results should benefit from closings at the Ritz Carlton Residences as well as continued sales at One Ski Hill Place. With construction now complete and the properties open we expect an increase in enthusiasm from potential buyers, though given the current economic environment our Real Estate estimate contemplates an extended multi-year selling period for both projects. Based on our current estimates we expect net income attributable to Vail Resorts Inc. to range between $30 million and $40 million. As it pertains to net income, last year we capitalized approximately $16 million of interest expense on our self-funded real estate projects. This year in the absence of any construction projects, our interest expense is expected to return to a more normalized level of approximately $34 million compared with $17.5 million last year.

Now back to Rob.

Thanks, Jeff. I wanted to conclude by touching on some of the highlights for the upcoming year. We've been busy this summer developing numerous exiting capital projects for our Resort business and these capital projects are on track to favorably impact our 2010-2011 ski season. We are replacing Chair 5 at Vail which serves the Sun Up Bowl and Sun Down Bowl with a high speed lift that will cut the ride time in half from 12 minutes to 6 minutes and increase uphill capacity by 70%. The new Chair 5 will allow skiers and riders to better enjoy Vail's legendary back bowls by giving them a faster lift that provides easier access to some of our best skiing, while improving skier circulation across Vail Mountain.

At Heavenly we broke ground and construction is well underway on the new 14,750 square foot year-round restaurant, increasing on-mountain indoor seating at the resort. The restaurant is centrally located, providing guests with easy access to services steps away from the Gondola. Vail will also welcome a tubing hill expansion at Adventure Ridge with an additional tubing hill lanes and a new enclosed lift. We just opened on private land the Gold Runner Alpine Coaster at Breckenridge, one of only a few of its kind in the US. This all-season attraction will take our guests down the mountain and through the trees on an exciting ride before dropping them off at the base of Peak 8 in Breckenridge, where One Ski Hill Place will welcome them to enjoy a drink, a meal or just people watch on the patio.

The Keystone Lodge guest room renovation will offer upgraded amenities in all guest rooms, targeted at helping meeting planners to book more group events into Keystone. We are also investing in new marketing campaign management tools which will enable sophisticated targeting of customers and more efficient marketing campaigns, as well as providing analytical tools to evaluate campaign efficacy. We will also continue to invest in grooming and snow making equipment at all five of our mountain resorts. We are very excited about these capital projects as we continue to enhance the world class experience for all of our guests, and these investments further distinguish Vail Resorts as the leader in the mountain resort industry.

One of our most exciting initiatives for the upcoming season is Epic Mix, a revolutionary new online and mobile application that allows guests to digitally capture and share their skiing experience. Epic Mix will track our guests' skiing accomplishments, help them connect with friends and family on the mountain and give them the option to share their experience with friends on Facebook and Twitter. Epic Mix utilizes our existing RF technology and ski passes and Peaks lift tickets, eliminating the need for guests to purchase or carry any new gadgets or devices. The launch of Epic Mix has already been featured in numerous prominent technology and social media outlets earning positive reviews for its innovative design and hassle free user experience. While Epic Mix is perfectly targeted to the millennial and Gen Y generations, we also believe it will be of interest to a wide range of guests across a spectrum of age and income demographics. We believe Epic Mix will pique the interest of skiers around the world and help drive both repeat and first time visitation at our resorts. We also believe that Epic Mix will extend the ski experience as our guests look to monitor their progress for the day, week, or year, lengthening our opportunity to communicate and engage with our guests. To participate all a guest needs is one of our season pass products or a Peaks lift ticket which will give them free access to the Epic Mix website and mobile application. Epic Mix is a terrific example of how we are bringing together our innovative initiatives in new lift ticket products, investments in technology and digital marketing to help drive the guest experience.

Moving to our just completed real estate projects, we are excited to have One Ski Hill Place and the Ritz Carlton Residences Vail open for the upcoming season and believe that our guests will appreciate the unique attributes of these properties which will help stimulate interest in the real estate. Our One Ski Hill Place property in Breckenridge has been open to guests since June and we also recently received the Certificate of Occupancy on our Ritz Carlton Residences Vail project. Both projects were completed on schedule and below our cost budgets. One Ski Hill Place is truly an iconic property, greatly enhancing the guest experience at Breckenridge while contributing ongoing dining and lodging revenue to the Company. With its array of amenities such as a 20,000 square foot ski restaurant, the Ski Hill Grill, and an apres ski venue the T-bar, One Ski Hill Place fills a much needed void at Breckenridge, the most visited resort in the United States. It is the first luxury lodging property at the resort and also connects to the vibrant town of Breckenridge by a scenic gondola ride. We look forward to this property transforming the base of Peak 8 in Breckenridge this ski season, much as the Arrabelle has done for the Lion's Head area of Vail.

The Ritz Carlton project is a terrific new addition to the Vail community, bringing together for the first time the world class nature of Vail Mountain with the power of the Ritz Carlton brand, one of the best names in luxury travel. The Ritz Carlton Residences Vail has the highest quality standards and offers tremendous views of the mountains, as well as arguably the best pool deck in the town of Vail. The Ritz Carlton affords all residents a feeling of privacy, but offers convenient access to all of the amenities that Vail has to offer. In addition, the Ritz Carlton will be joined by other ultra luxury properties coming online in Vail that were developed by third parties. The expected opening of the Four Seasons at Vail in December, which will add over 100 high end hotel rooms in addition to fractional and whole ownership units, as well as the opening of the luxury Solaris project for this season, will serve to further enhance the world class appeal of Vail to the destination guest.

Just a few weeks ago we closed on the sale of the 45 fractional ownership units at the Ritz Carlton with Marriott for gross proceeds of $110.9 million and now have commenced closings on our whole ownership units under contract. We believe that both projects offer unique attributes and we will be patient in our approach to ensure that we maximize the proceeds from future sales at both One Ski Hill Place and the Ritz Carlton.

Before we conclude, I want to thank you for your interest in Vail Resorts and hope you will join us at one of our extraordinary properties this season. Our Company is readying for the first snowfall and the excitement is building for the upcoming season. At this time I would like to thank all of our employees for their passion and commitment to this organization. It never ceases to amaze me how dedicated they are to the success of our Company.

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

Thank you, sir. (Operator Instructions). Our first question comes from the line of Shaun Kelley with Bank of America Merrill Lynch. Please go ahead.

Hi guys, good morning. Jeff, just had a quick question about the guidance to start off with. Kind of wanted to get your sense, obviously you're seeing some positive trends in the bookings and the season pass activity has picked up. How do you start thinking about, as we look at the guidance, how do you think about the mix between visitation and what you guys are going to be able to do on the pricing side looking out to next year?

Thanks, Shaun. I think our guidance contemplates a balance of both, so when we look at what increases we'll see in Mountain revenue over the course of the year, we think it's pretty well balanced between the impacts of price increases and the impact of destination visitation increases, as well as increases in overall pass revenue from the price increases especially.

Got it. And could you just remind us a little bit more what you have done in the past pricing this season versus last season?

Sure. Rob, do you want to speak to that a little bit on pass pricing?

Sure. I think pass prices across-the-board were probably up about in the neighborhood of anywhere from $10 to $20 depending on the product, and so I think we are seeing some pickup on that side. We also introduced two new pass products this year. One was the Epic 7 which was seven unrestricted days at any of our five resorts for $449. And we also introduced a Keystone A Basin only pass which was priced slightly below the Summit pass. So what we're seeing is a little bit of a trade down. Right now is when you're looking at unit sales and revenue down 1%. What we're seeing is some price increase, some trade down to these other products, but we're also seeing is really capturing additional people in our overall pass family which was one of our key drivers for this year.

Got it. And that leads into my next question which is just remind us of when you reopened the selling period because obviously you guys saw a big acceleration in your season pass sales. So when did that reopen? And has the trend been pretty even across the last six or eight weeks since you've been selling those passes? Or how has the consumer felt on that side?

We have two things that drive our pass sales. One is renewals and one is new sales. So basically in terms of new sales we really ended that in May of 2010 and then we reopened that over Labor Day weekend and it's going to be open really through the middle of November. Renewals though, which can be done online, were basically open throughout the entire summer. And what I would say is that we actually saw throughout the summer some very good momentum on renewals across-the-board and some new sales of Epic passes. So we saw some real pickup there. But then, obviously, Labor Day weekend was probably singularly one of the biggest drivers, and I think since then we've just seen a stabilization of those trends. Typically, we do a lot of business right before we have price breaks where we announce that we're going to guarantee a price through a certain date. And right now that would be the middle of October, and then the middle of November, so typically we'll see a fair amount of activity in those two time frames.

That's helpful. And then maybe just one last one for me. Obviously, the stock buybacks were an interesting use of the cash this quarter, particularly the prices they were done. Can you guys just help us walk through, number one, Jeff, I think you guys have a restriction on how much you can buy back given some of the debt stuff. If that restriction is still in place and what that is. And then number two, how you guys start thinking about prioritizing the cash that you're going to get in from all of the real estate closings.

On the restrictions, Shaun, we do have a restricted payment basket that is in place through our indenture on our high yield debt and we have room under that basket. We never technically disclose that and it actually changes every quarter because it adds or subtracts based on a percentage of our net income for each quarter. But we had obviously room, and had more than enough room to do what we did in the quarter. We felt like it was, now that the real estate projects, the construction had been completed essentially, it was a good use of some of our cash to go out and buy the stock at the prices they were at.

Yes, and I think going forward, Shaun, what I would say is that we're going to be looking at this obviously quarter by quarter. What I would say is I think we've had, since 2006, a pretty consistent approach to this program, with some moments where we've been in and out of the market, but in general. And I think we really do take a long term view of the program. The goal is to return capital to shareholders through this and I think that's something we certainly intend to continue, but always subject to market conditions.

Got it. Thanks guys.

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

Hello, Rob and Jeff and Hayley. A question starting on Lodging. You have guidance of $2 million to $8 million and guidance for 2010 was $5 million to $11 million. What's causing the decline?

Obviously I think the Lodging results fell below that guidance in 2010. Our Mountain results fell well above what our expectations were and our Lodging results were below that. So what we're expecting in 2011 is a recovery in growth from 2010 certainly across our Lodging properties, but not probably to the point where we had maybe been expecting over a year ago. So I think we're probably conservatively estimating some growth in Lodging this year but obviously not fully back to where we were expecting to be maybe when we had in the past gave guidance on Lodging.

And maybe I would just add to that. Keystone does drive a lot of some of these shifts both last year and this year in terms of improvement. But what I would say is that the Keystone group business is also a big driver. And so I think while we are seeing a pickup in the transient side of our business, while we did see that last year, group business takes much longer to set up and to book, and so there was really, even though the market improved last year and we did see and are seeing greater levels of interest in bookings and discussions about new conferences going forward, there was just no time for that to impact the summer of 2010 which includes both fiscal 2010 and fiscal 2011. Right now, I think we believe that we will see a pickup in the summer of 2011 and that will partially benefit fiscal 2011 and then partially benefit fiscal 2012. So for fiscal '11 we're not really getting a full pickup, so to speak, in the Keystone group business.

Okay, that makes sense. Switching gears, trying to get a sense of what the balance sheet is going to look like maybe at the end of the next quarter. And you gave $20 million to $30 million to finish the two real estate projects. What about CapEx for the high speed lift, et cetera? How much do you have left to spend?

I'd say that the high speed lift for example, is well underway, so it obviously has to be functional for the year so they've been working on that all summer. I think our capital is fairly well spread. Our capital estimate, when we went out and gave guidance of $75 million to $85 million for calendar 2010, that's fairly well spread and concentrated in the fourth quarter and first quarter where you'll see the majority of that, and some in the second and third quarters. But the majority of that is fairly well spread between those two quarters. And I'd say that's the way it's carrying out. So again, what you're getting in the first quarter is you had, as you said $20 million to $30 million left to spend in total on the real estate projects. We said on the release today and on the call that we've already gotten in and closed on the Marriott fractional units in the first quarter which was gross proceeds of $110.9 million. And obviously also in the first quarter, even though it's a seasonally low quarter from an operations standpoint, we are continuing to sell passes in the first quarter, so we're getting a good level of cash in from those pass sales up through the end of the quarter, as well. So when you add all of that in we certainly anticipate a positive cash quarter for this quarter.

Okay. And then as that carries out through the fiscal year, you're not giving guidance on how many units you expect to close in these two projects, is that correct?

That's correct. Yes, we're not at this point. I think what we said on the call is that we anticipate now, given the status of the real estate market, although there is definitely more activity than we saw a year or two ago, and certainly we think having the buildings complete and having people be able to access them is a real positive, including skiers using One Ski Hill Place throughout the season as part of their whole visitation experience to Breckenridge, we certainly are now saying it's going to take a multi-year time period to get these sold through. I think the key is what we said on the call, is when you look at EBITDA, obviously when you spread that EBITDA on a multi-year selling period over any individual year, then, it's not going to be that significant. But the significant part since the construction and the spending is done is the proceeds that we bring in as we close out and sell these units. So even just a fractional sale loan was $100 million plus of net cash proceeds, and as we said on the call, we anticipate even in that guidance that we gave this year, that would reflect $160 million to $200 million of net cash proceeds coming in from real estate just in this year, and obviously, then, more to come after that.

Including the $100 million, right?

Right.

Okay. On the Breckenridge project, the 59 less 36 implies 23 units in default. Is that correct? Should we assume that those 23 are now back to you, you keep the deposits and you're going to try to sell them?

That's correct.

Okay, and switching gears, a couple other questions. Late Easter this year, I think April 24th coming up, I assume that that hurts you a little bit and you've obviously thought about it?

Yes. I think obviously, particularly in comparison to last year where Easter was probably in that first week of April or right after that, I think is probably the best time for Easter for us, so this is definitely, I think that will make that late spring time frame more challenging versus last year. But we factored that into the guidance.

I assumed that. And just last question. There was a fourth quarter decline on the retail side I believe you pointed out. Can you discuss that and why should there have been a fourth quarter decline?

It's just a seasonal low period so it's not a decline per se on a comparative basis to the same period in the prior year. What it is, is it's on an absolute basis in the fourth quarter our retail business is going to lose money, given that you've got the ratable expense load of lease expense. And even though you can take down some of the operating expenses you do have fixed expenses, primarily third party leases and such that you incur. So the point we were trying to make is, since we bought out the remaining interest at the end of the third quarter, typically the minority partner would have incurred 30% of the fourth quarter losses and that would not have shown up in our net income attributable to Vail Resorts. In this year, we would have absorbed 100% of those losses in that quarter that we had not contemplated when we first put out guidance earlier in the year and continued to reiterate. Obviously, over the whole course of the year, the retail business is profitable, so buying out that remaining interest gives us 100% of that net profit for the overall year on a go forward basis so this is really just a one quarter phenomenon from that standpoint.

Okay, that makes sense. Thank you.

Thank you. Our next question comes from the line of Steve Wieczynski with Stifel Nicolaus. Please go ahead.

Good morning, guys. Most of my questions have been answered but just one. If you can go into what you're expecting for -- it's probably a little bit too early -- international visitation this year and how that's incorporated into your guidance, that would be great. Thanks.

I think we are expecting I would say a stable situation international vis-a-vis last year. I think there's a lot of pluses and minuses. I think that where Germany has probably picked up quite a bit, Latin America, Brazil I think again could probably really contribute to this year. The UK, which is a large market for us, obviously the economy is not as strong as in other places so I think we're monitoring that pretty closely. I think same thing, Australia should probably be a pickup for this year. So when we're looking, it's really country by country. It's pretty hard to broad brush all international right now. So what I would say is on balance we think we'll have some wins and losses, and we'll see some growth but it will be consistent with the overall business.

Great. Maybe one more, if I could just on the, you talked a lot about, back in March, possible M&A activity, just what you're seeing out there in the marketplace right now.

Yes, we obviously don't comment on M&A activity either anything actual, hypothetical or don't really discuss it. I would reiterate, though, that the Company is certainly very committed to strategic growth and to acquisitions when they make sense, when they fit the profile that we're looking for, and the financial returns we think are commensurate with obviously what we have to pay. So I think with that statement, nothing has changed over the last few months and when we have something to report we will.

Okay, great. Thanks guys.

Thank you. Our next question comes from the line of Martin Pyykkonen with Wedge Partners. Please go ahead.

Yes, thanks, good morning. If you could update on both of the real estate projects, I just want to make sure we all have the numbers correctly. First, for One Ski Hill, at the end of the quarter then, how many are still available for sale, how many under contract? And if you could possibly update that as through August and first half of September that would be great too. I just want to make sure we get the numbers right.

I think on One Ski Hill Place, the numbers are that we have closed on 36 units out of the 88 units totally available in the project, so the remaining units are now available because as we said on the discussion with Will, the remaining units that were under contract that did not close prior to year-end were under default. We retained the deposits and those units are now available again for resale.

So they're all available. There's really nothing under contract at the moment? Is that what you're saying?

That's correct. Now, as we go forward, obviously I think when you're in the pre sale environment there's a long time period between things under contract and when they actually close. Obviously now going forward on both of these projects, as we get new contracts in place, we would close very quickly after that. So that's why you're not going to see that same kind of time line.

Can you put any number on what actually closed on One Ski Hill in August and so far in September, even though that's not obviously Q4?

Again, it's to date we have closed on 36 units.

Okay. And then similarly on Vail, in terms of the wholly owned ones, are you expecting some closings, maybe it's modest, to start fairly soon? But how many of those are actually under contract, just the wholly owned ones?

Overall, we have 48 of the 71 whole ownership units under contract and we'll start those closings here. We just actually completed a closing this week, the one that was scheduled, and the rest of those closings now would be scheduled here over the next couple months.

Okay. And have units gone under contract since you got the Certificate of Occupancy? I know that was fairly recent.

No, nothing new on that. I think obviously what people were looking for is that I think now, the people coming in, obviously we're in a seasonal low period as far as people at the mountain but obviously I think waiting for the building to be complete, see that. And I think one of the nice things is, with the Marriott fractional closing, so the Ritz fractional units on all 45 of the units with them, the business and the building is now officially basically open for business. So all the Ritz personnel are onboard there and the building is essentially now open, so I think that's great news and that's what anyone will see now going and taking a look at the building. We obviously have a lot of events that are there to bring people in, both brokers and potential buyers into the building to see it. And I think that's the good news about this year now, is having completely finished units people aren't relying on drawings or things like that to estimate what this thing is going to look like. They actually can see everything including all of the units that are available to them and that obviously helps the sale process.

Thanks. On the summer numbers for Q4, there seem to be a general feeling that Breckenridge and Vail have a lot of activity visitors and so forth doing a variety of things, to some extent up year-over-year, but the actual resort revenue was flat or down 1%. Do you read into that just very cautious spending and visitation for a variety of activities was up or was the activity level also flattish? I'm just trying to see if there's a consumer spend inference in that.

I think when you look at the summer, you've got two things at work. One is, again, it goes back to some of the comments I made earlier about Keystone lodging. The summer is split between both fiscal 2010 and fiscal 2011. A lot of the business and activity actually is in August and in that Labor Day time period. So I think what it says is it's just a mix of different activities across the different resorts. But what we would tell you is I think when we're looking at it, looking at the bookings, especially the most recent pace and activity, candidly, in our Grand Teton Lodge Company in the national park, what we're seeing is some nice trends across the board.

Last question. You brought up Labor Day earlier, Rob, when you mentioned the retail spend sounds like it was up on the weekend itself. Any kind of range you can give in terms of season pass sales on Labor Day weekend being the big push for a lot of retailers year-over-year in terms of up low mid single high digit percentages on pass sales?

No, we're going to break down results like that but what I would say is it was certainly a strong weekend.

Okay, thanks.

Thank you. Our next question comes from the line of Tim Hamby with Janco Partners. Please go ahead.

Hi, good morning. First question here is on season pass sales. With the average season passholder hitting the slopes a half day less last year year-over-year, do you see a migration away from the Epic pass towards the Colorado pass or across your other product pass lines?

It's two implicit questions. What I would say is I think we had some obviously tougher snow conditions in Colorado in the early part of the season. I think that definitely impacted season pass usage, although I think what's amazing is that even with 30 year record low snowfall in Colorado, people basically still got, because it recovered throughout the rest of the season, I think people really still got out there and got to use their pass. So we do feel like people still walk away from the season with a pretty good impression of the product. At this point, I think we disclosed early on that in the spring, we had some timing issues with when people were renewing their Epic passes and we have seen that start to shift, but apart from that I'm not really going to get into color as between the various products.

Okay, thank you very much.

Thank you. Our next question comes from the line of Mimi Noel with Sidoti & Company. Please go ahead.

Good morning, Rob, good morning, Jeff. A few questions. First to start on the Real Estate guidance. Jeff, you said $160 million to $200 million. I assume that's revenue right?

No it's net cash proceeds.

Net cash, okay. So there's some non-cash expenses that will flow through and work against that then?

Yes. I think the point there is when you look at Real Estate EBITDA more than anything else we're out there with, since you have a multi-year construction cycle, the costs build up on the balance sheet in our real estate held for sale line item, and then when we close on units that cost comes through as cost of sale. So it will impact our EBITDA. But EBITDA, when you look at resort EBITDA, it can often be a pretty good proxy for operating cash flow on the real estate side, only from a multi-year standpoint. So when we're just looking at this year, since that investment in construction has already been made over the last couple years, it really is going to be a strong net cash flow positive period as we close on those units this year, and even beyond that. And I think obviously this year we already have in excess of $100 million in the bank from the sale of the Ritz fractionals and then obviously any more units we close on, both for One Ski Hill Place and Ritz, will just add to that. So it's a significant amount of cash above the EBITDA number. And I think that's certainly the way to look at it. Certainly the way we're looking at it.

Okay. And the follow on question that ties in that I don't think is answered yet, but with the more protracted selling closing process, that would imply, I think, that your infrastructure, the overhead to support those efforts, would also drag on longer. And that being the case, in the end are these projects perhaps less profitable than you would have thought a year, year-and-a-half ago because of the longer selling cycle?

Mimi, what I would say is this. I think broadly speaking, and I think we made this comment back in the end of '08, beginning of '09, I think there's no question that these projects are less profitable than what we would have expected before the financial crisis and the economic recession hit. And I'd add to that that I do think what we're seeing is that the travel habits of folks are really coming back. People are starting to spend again, they are starting to travel again. But that has obviously come back first and it would be natural to assume that real estate purchases, which is obviously an even higher ticket item, would come back next. So I think that is what we're expecting. But the timing of that will ultimately be more about how the economy really starts to improve and people's comfort in the financial markets, as well.

I think what we're very pleased with, though, is because of the unique nature of the product, that we are seeing some pretty strong closings. So what I'd say is yes, I do think the projects are less profitable than we probably expected when we launched them at this point, barring a huge recovery over the next couple years, but I would actually say, since the financial crisis hit, we've actually been incredibly pleased with the success and performance of both projects.

My last question on the real estate, those units where there's been a default and you collect on the deposit and you put their units up for resale again, do you change the pricing at all or do you typically maintain the price?

One Ski Hill Place we haven't changed the pricing at all, so as we put the default units back out there they go back out. We can always, on an individual unit, reassess from time to time, but on an overall basis, we have not touched the average price of One Ski Hill Place and so the closings that we did get reflected that today.

Okay, that's encouraging. And then the last question relates, I don't know if this is something that you would be prepared to disclose, but the performance of the Lodging segment, if you excluded Keystone, what would that have been in 2010?

Better. But what I would say is, I think to be fair, what's important to realize is that we have two different businesses in Lodging. One is our transient business that basically is mostly related to the ski season and we do have obviously summer transient business, as well. Again, I'm talking about in Colorado versus out in Grand Tetons, but in Colorado. And then the other piece is we have a significant group business. It's not significant to the Company as a whole but it's significant in terms of what it generates for our Lodging business on the margin. Obviously because of lots of fixed expenses the bottom line is if you can bring in that group business over the summer and the shoulder season that really helps drive your overall profitability of that business, even though it's not as critical to the overall Company. And I think one of the things you saw over this recession was group business down across the market all over the country. While that didn't affect us like it did most hotel companies because that's not where most of our business is, within Lodging it did have that impact.

That helps and those are really all the questions I have. Thank you.

Thank you. (Operator Instructions). Our next question comes from the line of Chris Woronka with Deutsche Bank. Please go ahead.

Good morning guys. I was hoping maybe you could talk a little bit about how, if you look back at 2010, how that unfolded versus your initial expectations given the short booking windows. Where I'm going with that is you are here now with a slightly better bookings pace on hotels entering the season, how does that -- when you think about guidance how do you bridge the gap between what you've got now and what you ended up with last year relative to initial expectations?

If you remember, last year at this time, we had come out with booking numbers that were some pretty significant declines, and down, I think it was maybe in the neighborhood of 15% or so around this time last year. And I think we've made it clear to people that we thought that was a timing issue and that that would correct itself and that we would ultimately be able to stick with our guidance. And I think that's exactly what happened last year. We did see the bookings come through. And I think one of the things we've been doing, and I think we try and update all of you whenever we can, is if we're seeing some numbers that we think are real endemic trends we would highlight that, if we think a lot of it is timing we highlight that. Obviously we did the same thing with season passes earlier this year.

What I would say is our comments today about bookings being up through most of the indicators at our resorts, what I would say is we feel like that is an endemic trend, an optimistic sign, that we obviously incorporated into our guidance for this year. So I think that's not something, the positive note that we gave on that is not a timing issue, but we are really seeing some good signs of, again, a lot of our luxury properties, Christmas, holiday weeks, this and that, are starting to really pick up. And I think you're seeing that broadly across travel where people, the message I think now is, don't necessarily wait until the last minute. Buying in advance probably will wind up being your best deal and that's a message that we're going to be out very strong with this year because we do think the cycle is shifting. Maybe not fully back to where we were a couple years ago but, again, that cycle is starting to shift.

Great. And you touched on it earlier but on the I'll call it the non-lift ticket revenue, we've seen across some of the other businesses we look at that hotel room rates and actual visitations may be better but the ancillary stuff is still lagging a little bit. Is that implicit in your guidance? Do you think the ancillary revenues are higher than the growth in visitation or about the same or lower?

I think we saw a pretty strong end of the season last year in ancillary revenue, in particular in our ski school. I think we've also started to see some pickups, and we saw this last year and I think we're obviously seeing it again this year in retail. So what I would say is that I think last year, probably areas that might have been a little bit more sluggish, fine dine was still a little bit more sluggish for us, dining in general a little bit behind some of the other areas, so I think we're hoping that picks up this year. I'd say we're pretty consistent across-the-board so we do feel like while, again, we may not be back to where we were in 2008 and 2007, I do feel like we're starting to see that ancillary spend pick up.

Okay, very good. Thanks.

Thank you. (Operator Instructions). Our next question comes from the line of Will Marks with JMP Securities.

Thanks. A few questions here. Are you still promoting the $9.95 lunch this year? Was that successful?

I think that was a good product for us last year. And it's something that lunch or discount option is going to be continued for this year as well. So I think it was good. I wouldn't call it a home run but I think it was a good product and I think what we'll be focused on this year is a lot of not just that one promotion but lots of different promotions through our entire dining operation to really energize that and get the results of dining to be more in line with what we saw in ski school last year in terms of really returning to where we were before the financial crisis.

Okay, great, thanks. And on Eagle Airport, I don't think you've discussed the incoming flights or flights into that airport this year. If there have been any additions, any airlines that have moved out of the airport?

I don't have at the tip of my finger any kind of pluses or minuses but what I would say, in general, it's been fairly stable so I don't think anything. No material wins or losses and I think we can get back to you with specific flights that might have gotten added or pulled out.

Yes, I think there was a Delta flight that pulled out, Will, but it's been really made up for by some expanded flights out of Miami, more days, more flights. And there's definitely more seats coming out of United, as well. So I think it's a little bit of, what Rob just said, pluses and minuses.

What are -- obviously you don't have to name them all -- but some of the airports where there are direct flights into Eagle?

You have Dallas/Fort Worth, you have Chicago, you have Miami, you have LaGuardia, JFK, LAX, obviously Denver, a lot of United puts through into Denver and then back out, Houston. So I think those are several.

Okay, great. And I have one final question, big picture, and you've addressed it in many ways on the call but it has to do with on the Real Estate EBITDA line. I fully understand that it's all about cash flow at this point. But in looking at that line and seeing that it's roughly flat this year, and I know there's going to be real estate sales throughout the next few years, but if you're carrying roughly $25 million of annual overhead, it doesn't make sense to carry that much overhead when you've only got two projects right now and nothing new is going to open up for several years because you haven't broken ground on anything new?

I think one thing I'd point out, Will, is that I wouldn't characterize that whole amount as just overhead that we're carrying at the real estate level. So in that line what you have is you have marketing expenses to sell the remaining units because on marketing we do have to record that expense when it's incurred. It does not go into real estate held for sale. We obviously have direct and we'll have some carry costs on those units until we sell them -- property taxes and things like that. You then have direct G&A that's incurred at the Real Estate level, and then you have a portion of overall corporate G&A and that's what adds that up. What I would tell you is we've definitely had some things occur that allow us to streamline the real estate direct overhead, so to speak, to more right-size that group to what projects we are working on and look to work on going forward, and I think that's definitely been part of what's happened over the last year.

Okay, fair enough. And then I do have one final question on Keystone. You had built a gondola a few years ago. Is there a chance that we're going to see real estate develop there, breaking ground this year, or sales beginning?

No. We have no plans for that right now. I don't think we would launch a project in Keystone until we saw a greater velocity of sales at One Ski Hill Place and really gave us a sign that the real estate market had really started to pick up and we're seeing much larger numbers of folks really committing to new projects.

Okay, that's all for me. Thanks guys.

Thank you. Our next question comes from the line of Ray Cheeseman with LAB Capital. Please go ahead.

Rob, a follow-up to the question that was just asked. Does the same thought process at your level apply to the Ever Vail development? Have you modified your outlook for the speed and time line based upon the economy and the existing Ritz project?

Yes, I think the same philosophy would apply. I'm not sure we've changed our outlook for it. I think our view right now is that the important thing is to work through all of the local approval processes, build community support, input, and ready that project so that when the real estate market is stronger that it's ready to go. But yes, we would not expect to be launching Ever Vail in the next year either.

Thank you.

Thank you. That's all the time we have for questions. I'd like to turn the call back over to management for any closing comments.

Thank you, Operator. This concludes our fiscal 2010 earnings call. Thanks to everyone who joined us on the conference call today. Please feel free to contact myself or Jeff directly should you have any further questions. Thank you for your time this morning and goodbye.

Thank you. Ladies and gentlemen, this concludes the Vail Resorts fiscal 2010 year-end results conference call. If you'd like to listen to a replay of today's conference, please dial 303-590-3030 or 1-800-406-7325 followed by passcode of 4354360. ACT would like to thank you for your participation. You may now disconnect.