Vail Resorts Inc (MTN) 2012 Q1 法說會逐字稿

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Vail Resorts fiscal 2012 first quarter results conference call. During today's presentation, all parties will be in a listen-only mode, and following the presentation the conference will be open for questions. (Operator Instructions). This conference is being recorded today, December 7, 2011, and I would now like to turn the conference over to Rob Katz, Chief Executive Officer of Vail Resorts. Please go ahead.

Thank you. Good morning, ladies and gentlemen. Welcome to the Vail Resorts fiscal first quarter 2012 earnings conference call and simultaneous webcast, both open to the public and press at large. I am Rob Katz, Chief Executive Officer of Vail Resorts. Joining me on the call this morning is Jeff Jones, our co-President and 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 the combination of the Mountain and Lodging segment, 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. 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, 2011, and the Company's Form 10-Q filed today.

In addition, the Safe Harbor language in today's press release also applies to our comments on this call. Our 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 may be required by law.

So with that said, let's turn to our fiscal first quarter 2012 results. The first fiscal quarter is a seasonal low period for us and historically a lost quarter, since our mountain resorts are not open for winter ski operations during the period. The quarter is driven primarily by our late summer mountain activity, dining, retail, and lodging operations and administrative expenses for our year-round employees.

We are pleased with the improved revenue we saw in the quarter in our resort business, which includes both the Mountain and Lodging segments. Mountain net revenue increased 12.8%, excluding the operations of Northstar acquired in late October 2010. The growth was driven by double-digit gains in dining, retail and some activity revenue at our Mountain resorts.

Our Lodging business also reported improved revenue of 4.8% during the first fiscal quarter 2012 due to the addition of Northstar; a 6.3% improvement in revenue at Grand Teton Lodging Company; and additional rooms placed into service, including at One Ski Hill Place at Breckenridge and the Ritz-Carlton Residences Vail, as well as the village of Breckenridge which had been closed for renovation in the first fiscal quarter of 2011.

For the first quarter of fiscal 2012, Resort reported EBITDA loss worsened by $10.1 million, or 25.3%, primarily reflecting the addition of seasonal losses at Northstar in the first fiscal quarter of 2012.

Our Real Estate segment was, again, a net generator of cash in the quarter. During the quarter, we closed on four Ritz-Carlton Residences Vail and two One Ski Hill Place units. Since quarter end, we have closed on another two One Ski Hill Place units and one additional Ritz-Carlton Residence and have now sold 31 Ritz units and 44 One Ski Hill Place units.

Real Estate revenue and EBITDA did decline from last year due to the closings in the prior-year first quarter associated with the opening of the Ritz. That included the sale of 45 fractional units to Marriott for $111 million. While Real Estate reported EBITDA was a loss of $4.7 million for the first quarter, net cash proceeds totaled approximately $11.5 million in the quarter and $16.3 million through December 4, 2011, representing good progress towards our fiscal 2012 net cash proceeds guidance of $35 million to $45 million, particularly since we have not even entered the typically busy selling period during the ski season.

All six of our mountain resort properties are open and ramping up operations as we prepare for the holiday season. While we have not seen the same early-season snowfall as last year, our Colorado resorts have almost doubled the terrain open on average that the other resorts around the state have opened. And in Tahoe, the advantage is even more dramatic with our two resorts having doubled the open lifts of all the other resorts around Lake Tahoe combined.

Our early-season metrics, which includes season pass sales, lodging bookings, and retail sales, are all positive. Season Pass sales are up approximately 5% in units and 13% in dollars through December 4, 2011 compared with the same period in the prior year and including Northstar in both periods. We expect the final results of the program to be modestly lower than these increases as the pace of sales slows in the coming weeks.

Last season was a record year for our Pass program, which included the excitement surrounding our acquisition of Northstar. We are incredibly pleased to show this kind of growth in the program, particularly considering new competition in Tahoe and continued uncertainty in the overall economy.

These results are also consistent with our comments last March, that our focus this year would be on revenue growth versus unit growth. And it's important to remember that this season, we added a number of new restrictions to certain pass products which will help to improve the guest experience at our resorts during peak periods. As a reminder, revenue from Season Pass sales is recognized over the course of the second and third fiscal quarters and represented approximately 35% of total lift ticket revenue during fiscal 2011.

Our Lodging bookings through our central reservations and in our owned and managed lodging properties for the winter season continue to trend higher, which is attributable to sizable increases at our luxury-oriented properties, as well as strengths from several international markets.

As a note, based on historical averages, less than 50% of the bookings for the winter season have been made by this time.

Lastly, retail sales leading into the season have seen increases at both our city and resort locations, even against strong prior-year comparison. In particular, this reflects very strong results at our large pre-season ski and snowboard events.

Our commitment to return capital to shareholders this quarter -- as during the quarter we repurchased 203,377 shares at a cost of approximately $7.9 million, or $38.69 per share. Subsequent to quarter end, our Board of Directors once again declared a quarterly cash dividend on Vail Resorts' common stock. The quarterly dividend of $0.15 per share of common stock will be payable on January 6, 2012 to shareholders of record on December 22, 2011.

Now I would like to turn the call over to Jeff to further discuss our financial results and outlook for fiscal 2012.

Thanks, Rob, good morning, everyone. Earlier this morning we released our earnings for our first quarter of fiscal 2012 ended October 31, 2011 and 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. Our seasonal business performed strongly. As Rob mentioned, our Mountain segment net revenue, excluding the acquisition of Northstar, increased 12.8% led by a 19.8% increase in retail rental growth. Our Colorado Front Range and San Francisco Bay Area stores recorded strong gains at their preseason sales and the acquisition of the online retailer O2 Gear also contributed to the growth. Our summer activity revenue, which is included in the other Mountain revenue, increased 15.4%, which also helped fuel a 13.1% increase in dining.

Ski Hill Grill, situated at the base of Peak 8 in Breckenridge, benefited from traffic for our array of summer activities, including the newly opened Alpine coaster. Our new on-mountain restaurant at Heavenly, the Tamarack Lodge, did well, reflecting a tie-in with scenic gondola ride. The loss in Mountain EBITDA of $48.5 million was $6.9 million greater than in the prior year due to the inclusion of seasonal losses associated with Northstar, including its operating lease expense from the straight-line accounting treatment of the C&L lease, partially offset by Northstar-related transaction expenses incurred in the prior year first quarter.

Lodging segment net revenue excluding payroll cost reimbursement, was up 3.3% to $45.9 million in the first quarter of fiscal 2012 compared to $44.4 in the first quarter of fiscal 2011. The increase was attributable to the inclusion of Northstar as well as a 6.3% increase at Grand Teton Lodging Company, our summer lodging operation. During the quarter, we had 21% more rooms come online versus the prior year due to new rooms at Northstar in the Tahoe region, additional rooms at the Ritz and One Ski Hill Place coming online as well as the new village -- as well as at the village of Breckenridge, which had been closed for renovation in the first fiscal quarter 2011 but subsequently reopened in the second quarter of 2011. Though this added inventory should have a favorable impact on our winter operations, it has a negative impact on our lodging metrics in our seasonally low first quarter and contributed to the 12.4% decline in RevPAR at our owned hotels and managed condos. Excluding the increase in rooms, RevPAR was down 3.9%, which was adversely affected by continued weakness in group business at Keystone, the impact of which is more pronounced outside of the winter season.

Lodging reported EBITDA was a negative $1.7 million in the first quarter of fiscal 2012 compared to a positive $1.5 million in the first quarter of fiscal 2011. Fiscal 2011 first quarter Lodging operating expenses and segment results benefited from the receipt of $2.9 million net of legal expenses for the settlement of alleged damages related to the Colorado Mountain Express acquisition.

Taking a look at the bottom line, net loss attributable to Vail Resorts, Inc. was $55.7 million or a loss of $1.54 per diluted share in the first quarter of fiscal 2012 compared to a net loss attributable to Vail Resorts, Inc. of $43.0 million, or a loss of $1.20 per diluted share in the first quarter of fiscal 2011. The higher net loss is attributable to additional first quarter losses associated with the acquisition of Northstar as well as a $2.9 million pre-tax or $1.8 million after-tax legal settlement in the prior year together with the higher real estate sales in the prior year related to the initial closings at the Ritz-Carlton Residences' Vail project.

Our balance sheet remains strong. We ended this seasonally low first quarter with cash and cash equivalents of $44.7 million and total debt of $491.4 million. Even after the quarterly dividend paid during the quarter and share repurchase Rob mentioned and following two consecutive seasonal loss quarters, net debt was only 2.3 times trailing 12 months total reported EBITDA and improved from 2.7 times at the end of the prior year first quarter.

Before turning it back to Rob, I'll conclude with some comments on our guidance for fiscal 2012. We are reaffirming the guidance issued in September, which calls for 8% to 12% growth in resort reported EBITDA adjusted for certain onetime factors related to the Northstar acquisition in the prior-year settlement gain. Based on our current estimates, our fiscal 2012 guidance range anticipates resort reported EBITDA of between $233 million and $243 million. Our Real Estate segment results are impacted in any given year by the timing and mix of real estate sold and closed. For fiscal 2012 we are anticipating net proceeds from Real Estate sales to total $35 million to $45 million partially offset by Real Estate reported EBITDA of between negative $16 million to negative $24 million, including approximately $3 million of non-cash stock compensation expense resulting in an estimated net positive cash flow from Real Estate of $20 million to $30 million.

Our guidance includes the expected impact in fiscal 2012 from the re-organization that was announced in Lodging last week.

Now I will turn it back to Rob.

Thanks, Jeff. I'd like to finish by highlighting some of our recent accomplishments and announcements.

During the off-season, we were busy implementing our calendar 2011 capital plan, including a dramatic upgrade to Northstar. As a result, we have a number of exciting new amenities ready to greet guests this winter.

We have added two new on-mountain restaurants, The 10th at Vail, a unique on-mountain fine dining experience and the Zephyr Lodge at Northstar as well as a Elway's restaurant at the Lodge at Vail.

The 10th, with 276 seats, offers one of the most dramatic on-mountain fine dining experience on anywhere and it is open to the public and located right in the heart of the mountain at mid-Vail.

The 734-seat Zephyr Lodge offers stunning panoramic views of the Tahoe Basin and add much-needed capacity for the Resort. When combined with Heavenly Tamarack Lodge, opened last season, Heavenly and Northstar stands alone in offering a whole new level of on-mountain dining not found anywhere else around the Lake.

Both Beaver Creek and Northstar added new high-speed quad chair lift that significantly improve access to great terrain with Northstar adding 10% more skiable acreage as well.

We replaced the slow fixed-grip Rose Bowl lift at Beaver Creek with a high-speed quad that will make the area more enjoyable to ski and improve the flow of skiers on the mountain. The terrain expansion at Northstar now opens some great intermediate and advanced trails on the back side of the mountain.

Families visiting Keystone will have a new ice skating rink in the main base area and Breckenridge will benefit from the extensive renovation and re-branding of the former Great Divide Lodge into a Doubletree by Hilton, which will be one of the few properties in the country where Hilton HHonors participants can utilize their points towards a ski vacation and stay within steps of the slopes.

In terms of retail, we have just opened several new stores at various locations as part of our goal to expand our successful retail operations. Northstar added an enhanced Burton Academy, a North Face store and a Patagonia store in addition to an overall reprogramming of the village. We added large stores in the Bay Area and in Denver, our Marmot store in Vail Village, a new store on Main Street in Breckenridge as well as other new locations.

We also released EpicMix Photo, a groundbreaking addition to the award-winning application we launched last year, and we also announced the conversion of the majority of our paper tickets to RFID-enabled hard cards. Our on-mountain photographers are fast becoming some of the most popular employees to our guests. They easily scan a guest's RFID-enabled pass, take a stunning photo of them, and we automatically deliver their photo to their EpicMix account. This second release of EpicMix is already a huge hit with skiers and riders and is far exceeding our performance from last year. While we are only about 5% of the way through the season, we have already increased total guest activations by 37% and seen over 200,000 guest posts to Facebook and Twitter, which is about three-quarters of the total number of posts we saw for all of last year.

Interestingly, approximately one-half of these social posts contain one of our professional photos showing guests having their experience of a lifetime. We have not even begun to realize the full benefit of our guests sharing their pins and photos so broadly across their social networks which Facebook estimates at over 100 friends per person.

What we are seeing is that EpicMix is not just another ski or resort app, but a ground-breaking integration of what it means to capture and share your vacation experience. Within the entire travel and leisure industry, our Company is at the forefront of how to use digital technology and social media to both enhance the guest experience and get them to share that experience with others.

Second -- after many years of hard work, we are very pleased that the Ski Area Recreational Opportunity and Enhancement Act of 2011, or in the Summer Bill as we have referred to it, was passed into law. This piece of legislation will enable our Company to offer guests a more comprehensive year-round outdoor experience that will significantly increase our revenue opportunity during the summer and broaden the types of guests that our Company can market to. We are now working closely with the US Fire Service as they go through the process of developing the regulations based on the new law to determine what activities and experiences will be appropriate across our resorts and how we can best achieve our mutual objectives. As the Fire Service regulations and our plans become more finalized, we look forward to updating you on this very exciting development.

Third, on the topic of summer, we announced that the National Park Service awarded us a 15-year concessionaire contract for Flagg Ranch in Moran, Wyoming. The relatively small resort is centrally located between Yellowstone National Park and Grand Teton National Park on the John D. Rockefeller Memorial Parkway. We believe we can leverage this proximity to GTLC to create an enhanced guest experience and that these national park service assets in general share many of the attractive characteristics of our mountain resorts and we will continue to pursue these opportunities as they become available.

Fourth, last week we announced a reorganization in our Lodging segment that will both improve the focus of that business as well as its profitability. We announced that we would no longer seek to grow the managed property business outside of our six mountain resorts. Over the past several years the dynamics of that business have changed dramatically due in part to a weakness in the economy and the real estate markets, making it difficult to achieve our internal growth goals. We will now streamline our Lodging resources and better focused them on our premier Mountain resorts and National Park business. We will be retraining the RockResorts brand on our mountain properties, such as the Arrabelle, The Lodge at Vail, The Osprey, The Pines, and One Ski Hill Place. We will continue to support the RockResorts properties located outside of our mountain under the terms of those agreements, though we do expect certain of those properties to transition to other managers.

With this new strategic focus we will be making certain expense reductions and we expect an increase in Lodging reported EBITDA starting in fiscal 2013 from these changes, even taking into account the potential loss of certain contracts. We intend to continue to look for new Lodging properties inside our mountain resorts and in the National Park system.

Before we conclude, I want to thank you for your interest in Vail Resorts. Our six mountains looked great and our employees already have begun to enthusiastically greet all of the people who have chosen to enjoy one of our extraordinary resorts this season. We are looking forward to another great season. And at this time, I would like to thank all of our employees for their passion and commitment to providing the ultimate in guest experience to our millions of visitors as we enter the 2011/2012 ski season.

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

(Operator Instructions). Will Marks, JMP Securities.

First question, you guys spent a lot of money in the off-season, over $100 million, I believe on various projects, and you talked a little bit about them on the call. You've generalized with an ROI in the past; can you maybe talk a little bit about that? And I gather you're not going to give me what that return is this year, but maybe discuss it in more detail.

Sure. I think what we've talked about is we use a 20% unleveraged pre-tax IRR as our benchmark for our projects. Now, obviously, that doesn't mean that every project meets that. Some are well in excess of that; some have longer-term strategic implications. But that's definitely something that we focus on and we certainly use that same process to look at all the projects that we did last year. And I would note that, obviously, that is -- relates the ROI hurdle that we use related to our discretionary capital and now to our maintenance capital.

Right, so you take out roughly $40 million from the totals?

Right, $40 million to $50 million.

$40 million to $50 million, okay. And I gather, it would be crazy for you to comment on next year's CapEx, or whether it's going to be higher or lower than this year's.

Yes, it is definitely premature. I think what we did talk about, though, last year was that we were certainly spending an amount at Northstar that was in excess -- well in excess of what we would be spending on an annual basis. So I certainly would expect overall our capital for the year to come down.

Okay, a few other things. The season pass sales, how much -- what percent of the passes have you sold at this point, approximately, or how much time is left before you end the program?

What I would say is, we are substantially done with the program, but there are renewals that take place and passes that were sold last year into December, particularly in the Tahoe region. And that is why we said we think -- obviously, we're really pleased with our performance. And when the program kind of finally winds down over the next couple of weeks or whatever, final renewals come in, we anticipate the percentages that we announced today to come down by a handful of percentage points. But that's -- we can't emphasize enough that the total program, given the record year last year and the fact that we were focused on raising revenue this year, has been a huge success.

Great, okay. And in terms of lodging, you discussed a little bit the new strategic direction. This didn't change guidance at all. Do you expect it to impact the next calendar year in any kind of negative way?

Will, it's Jeff. We said just on the call that it should positively impact us in fiscal 2013. There won't be any individual negative hits, it's just the timing of some of the employee impacted items will come into play at the same time we're starting to realize the savings. So it will pretty much net in the current fiscal year and then become a positive -- and I think meaningfully so for the Lodging group going forward in fiscal 2013.

Great, thanks. And just a final question. Do you have any comments on -- I haven't seen data, but on airline flights into Eagle -- what's changed from last year at all?

Yes, I think it's -- no real comments, no material announcements either way, really, and, again, which I think has been a real positive for us in general. And I think we have -- as the airlines have contracted and pulled back in a lot of different markets, I think we been able to see the capacity to both Eagle, Denver, Reno -- all remain relatively strong.

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

Smedes Rose, KBW.

Could you just quantify little more this re-organization in lodging? Just on the cost-savings side, how much would you anticipate?

And also, could you talk a little bit about -- you seem to make a point of saying you will pursue this concessionaire contract. So what is the scope of that business, or where do you think you could be over the next couple of years? Because with four, I guess it's not all that meaningful to your overall numbers. So when do you get a critical mass there that might be a real earnings stream?

Smedes, I would say on the first thing, we will next year incorporate obviously changes that come out of the Lodging reorganization into our guidance and talk about it more specifically once this is all settled down and we understand how many of the current contracts we will be going forward with and all that. So we'll talk about that at a future date.

Again, I think what we feel confident in saying now is that it didn't change our guidance for this year, but it will be a positive impact on lodging EBITDA going forward starting in fiscal 2013 from where we are today.

On the National Park piece, I think we have a significant concession contract at GTLC, which is a significant contributor to our Lodging business. Again, I'd remind everyone, our Lodging business, when you see the results of our Lodging business, that's net of all G&A, including a portion of the overall corporate G&A. But I think the GTLC is a real contributor to that. Obviously, the new Flagg Ranch addition really helps with that nearby.

And on going forward, I think there's a lot of I'd call them, rather large concession contracts that should be coming up for bid over the next handful of years, some of which would be very appealing for us to bid on. Again, it's a bidding process, and therefore, there's no guarantees that you'll be successful on those. And we have looked at some in the past, and again, some we have been successful on, some we haven't been, given the nature of the process. But I think we're very encouraged by what could be coming out from the National Park on new -- well, existing park businesses that should be up for new bidding, and we plan to participate on many of those.

Okay. And then, also, could you just -- what is the remaining inventory of available at the Ritz, and then at One Ski Hill Place?

So at the Ritz, again, we sold all 45 fractional units last year, and then we had 71 whole ownership units to sell, of which we've sold 31 to date, so that would leave 40 additional Ritz units left to sell.

At the One Ski Hill Place, we had 88 total units to sell. We've now sold half of those, or 44 of those units -- so 44 left to go at One Ski Hill Place.

Great. And then finally, could I just ask you -- in your press release, you talked about that you're seeing luxury trends or luxury demand as well as international trends pacing up. Is there any particular source on the international side that is doing well, and also conversely, anything that's not doing so well relative to your expectations?

I would say broadly, Mexico, Canada, Australia is really where we've seen our broad strength. I think where we've seen weakness has been the UK. I am actually talking broadly, not just in the last couple of months. But that's the broad trend.

Germany actually has been stronger than the UK, but -- again broadly, but it's just not as big a market for us as the UK is within Europe.

Okay. And then -- I know -- and Mexico tends to be a good source of demand, but anything -- is South America typically strong for you guys, or is that a big source of demand as well?

No, it is, and I would say Brazil is definitely -- we're seeing real strength and growth out of Brazil. It's a smaller market for us than Mexico right now, but it's definitely going to be, we think -- we'll continue to become a more and more prominent market and source of growth for us, particularly for Vail and Beaver Creek.

All right, thank you.

(Operator Instructions). Fred Lowrance, Avondale Partners.

Good morning, guys, and thanks for taking my call. Just a couple of questions, if I could, obviously, you've got your financial leverage coming down, down to about 2.3 times right now with the denominator heading in the right traction. So just wondering if you could -- not sure if you've ever updated us on what you're comfortable with on the leverage side now that you know you've got all your real estate development taken care of for the time being. So what should we be looking for on the financial leverage side?

I think what we've talked about is, we certainly would be, quote, comfortable, with more leverage. That doesn't mean that we are looking to put on more leverage, and those two statements are different.

I think that our view is that, with the dividend we put in place and I think the indication that we believe there's room to grow that dividend over time, obviously, this past quarter we were in the market again buying stock. I think we're looking to continue to return capital to shareholders. Those are the two programs that we would use. Any other opportunity to put on leverage would have to be a very compelling opportunity where we felt like we could generate strong returns for shareholders over the long haul.

And that leads into my follow-up question, assuming that was going to be your answer. Obviously, with this financial flexibility, returning capital to shareholders, I think everybody appreciates that, probably room for more. But can you talk to us generally about what your appetite is for mountain acquisitions or other little tuck-in acquisitions right now in the current environment?

I think what we've said pretty much hasn't changed, which is I think we would aggressively look at acquisitions that we think -- where we can add value. And at the same time, we're going to continue to be incredibly disciplined about the price and structure and types of assets that we look at. So I think it's both.

And I think the track record of the Company over the last decade or so speaks for itself in terms of -- I think using capital wisely and only on situations, especially when we do it in size, where there's huge strategic rationale.

And then just finally, one last one -- if there are even opportunities out there right now, could you characterize what the acquisition landscape would look like? Are there enough acquisitions out there but they're too pricey? Is there not really anything available right now? Can you give us some color on that?

I think maybe what I'd say is that just, generally speaking, the market for ski resort acquisitions is not very fluid. There are not that many transactions done in any year or sometimes in any few years.

So I think the market hasn't really shifted all that much in the last decade. I think that's why it is critical to be disciplined and patient, but aggressive when the right thing comes up.

Thank you, guys.

(Operator Instructions). Felicia Hendrix, Barclays Capital.

Hi, guys, this is actually Anthony Powell -- just a few questions. Number one, you seem very optimistic going into the ski season. We have the good season pass sales data and also forward bookings. Is there anything else that you're seeing that makes you optimistic going into the media part of the season?

I would say that certainly our retail sales at those preseason events I think was a great sign -- showed there was continued enthusiasm. I think that we are already seeing just great enthusiasm about the resorts, about all the new amenities that we have launched, whether that's EpicMix, new restaurants, it's just -- we're seeing a ton of enthusiasm.

I think our focus, as we said, was on revenue. Units and price are two different components of revenue, but we're looking to maximize revenue.

The other piece, I would say is that we have continued to see strength in the upper end and luxury part of the market. And while, obviously, that's not 100% of our guest, that's obviously where we have our highest opportunity for revenue and profit per guest and per trip. And so it's great to see that segment, or continuing their comeback after the crisis.

And just a quick question on the first quarter results on the Mountain side -- the non-Northstar expenses were a bit higher than we thought they would be. What is your cost outlook in general going forward this ski season and beyond?

I think what I'd say is we're going to be very diligent about maintaining cost controls throughout the year. But we also have -- when we add new operations, whether that is Northstar, whether that is retail stores, whether that is new restaurants -- you're going to see those expenses go up.

Now, net-net, we're generating incremental EBITDA to the bottom line. So what I would say again, is our goal is trying to grow overall EBITDA. Margin is important to us, but we're not going to make silly decisions and give up EBITDA because something brings the margin down. And obviously, any time we add something like Northstar where you have the lease payments or same thing when you have retail stores where you have lease payments, those margin dynamics are different, new restaurants which have -- where F&B is a lower margin opportunity than ski lift tickets.

So again, I think the key focus should be on what is the growth rate of our EBITDA, not necessarily what the margin is, because we are in so many different businesses.

That's it for me, thank you.

Tim Hamby, Janco Partners.

Thanks for taking my question, guys. My question is on pass sales. We know that you are implementing a few new restrictions. And keeping in mind that your strategy is to drive total pass revenue up, how are you seeing the results of those restrictions? Are you trying to drive people to purchase higher prices, or are you really just trying to accommodate more of the destination visitor and their customer experience?

Yes, I think it is very much the latter. You know, we -- but it's both. I think we -- by adding restrictions to certain passes, obviously, we see folks upgrade into higher value and higher margin products. And then we also see lower volume on those peak days. So for instance, some of the days that we added, one was Saturday of MLK weekend, and it's because we have really started to see MLK weekend develop as a destination holiday weekend that probably over time will start to rival Presidents' weekend. And so we want to make room for that destination customer.

I would say the same thing about Northstar. We saw huge growth last year. We added restrictions to our Tahoe value pass to Northstar on Saturdays and we expect that to significantly increase the experience, which will help the transition of that resort to more of the Beaver Creek model.

Okay, Thank you.

(Operator Instructions). Stephen Shulstein, Jefferies.

Thanks for taking the question. I just had two quick questions. First, on the off-season strategies, I know there is lots of opportunity ahead with the bill that passed Congress, so if you can give some more info on what your strategy is there, maybe quantify some opportunities there.

And second, on the Lodging business particularly, are there any other efficiencies that you can get in the Lodging business, or even in the Mountain segment that -- doing something similar that you did in the Lodging business that hasn't been done already? Thanks, guys.

So on the summer piece, I'd say we're not really going to give more details right now. I think we're going to be working closely with the fire service and putting together our plans and thoughts, and also listening to what the fire service, also our local communities, all of that.

My guess is that in the months ahead, we probably would have more to share, but at this point what I would say is we just think this is a pretty big sea change. It is probably the biggest expansion of recreational activities on ski mountains in decades.

And so, this is a long-term, huge opportunity and one that we're going to approach patiently and in the right way by making sure we take everybody's input as to anything that we do. So when we're ready to talk about it, we will, but this really is a huge positive.

On the Lodging business, I would say no. I don't think -- we would not expect to be rationalizing or changing our Mountain business in the same way that we made on Lodging. I think Lodging was really a change in strategy. On the Mountain side, we believe our strategy is exactly right, that our strengths, our competitive advantages -- and when I say the Mountain, I would include all businesses within the resort, whether that is Real Estate, whether that is Lodging, retail, transportation, media, all of it -- we believe are very, very strong.

So I think we would not be looking to go down the same path as we just did on the Lodging business.

Okay, thanks guys, very helpful.

And there are no further questions in queue. At this time, I'd like to turn the call back over to management for closing remarks.

Thank you, operator. This concludes our first fiscal quarter of 2012 earnings call. Thanks to everyone who joined us in the conference call today. Please feel free to contact either myself or Jeff directly should you have any further questions. Thank you for your time this morning and goodbye.

Thank you. Ladies and gentlemen, that does conclude our conference for today. If you would like to listen to a replay of today's conference, please dial 303-590-3030, or 800-406-7325 and enter the access code 4488100. We'd like to thank you for your participation and you may now disconnect.