Vail Resorts Inc (MTN) 2012 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Vail Resorts fiscal 2012 second-quarter results conference call. During today's presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). Today's conference is being recorded March 6, 2012. I would now like to turn the conference over to our host, Rob Katz, Chief Executive Officer of Vail Resorts. Please go ahead.

Thank you. Good morning, ladies and gentlemen. Welcome to the Vail Resorts fiscal 2012 second-quarter earnings conference call and simultaneous webcast, both open to the public and press at large. I'm Rob Katz, Chief Executive Officer of Vail Resorts. Joining me on the call this morning is Jeff Jones, our Co-President and Chief Financial Officer.

Before I turn to a discussion of our results, let me remind you 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 segments and Real Estate. The Company defines reported EBITDA as segment net revenue, less segment operating expense, plus or minus segment equity investment income or loss. 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.

Also, I 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 Safe Harbor Provisions and 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 Form 10-Q for the second quarter of fiscal 2012.

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

So with that said, let's turn to our second-quarter fiscal 2012 results, capital plan and outlook. This has been one of the most, if not the most, challenging winters for the US ski industry. In Colorado, snowfall levels were the lowest in over 30 years, and for the first time in as many years, we were not able to get Vail's Back Bowls open until mid-January. In Tahoe, we experienced weather patterns that have not been seen since the late 1800s, including having zero inches of snowfall in December.

Given that back drop, we are very pleased with the strength and stability shown by our operating model, as we reported only modest declines across our major revenue lines, in what many would consider a worst-case weather scenario, which followed last seasons' record-setting snowfall. To add some perspective to the resiliency of our business model, snowfall levels at our six resorts were down 60% through January, as compared with the prior year; however, non-reported EBITDA declined only 5.2%.

The strength of our operating model in this unprecedented environment incorporated four key drivers. First, the strength of our season pass program continues to pay significant dividends. Our pass sales, which last year, accounted for approximately 35% of our total lift ticket revenue for the ski season are up approximately 12% this season, buffering the impact of the decline in visitation on lift revenue.

Second, the continuous investments we have made to insure our assets are the highest-quality clearly rewarded our guests this year, as our resorts further differentiated themselves. Our significant snow-making capabilities enabled us to have significantly more terrain open than other resorts in the region, driving further guest loyalty, as well as attracting new guests to our Mountain. Additionally, our guests were engaged during their vacations due to all of the amenities that exist at our resorts, both on-mountain and at our resort-based Villages.

Third, these investments help support our ability to increase prices, which contributed to a 9.1% increase in ETP, excluding season passholders in the quarter. Fourth, our resorts attract a high income demographic that allowed us to benefit from the enhanced consumer spending, especially in the luxury segment, as we realized significant increases in guest spending per visit on our ancillary businesses, including ski school, dining, and retail, as well as solid results from our Lodging business, which had an ADR increase of 13.8%. Ski school revenue per visit increased 17%. Dining revenue per visit was higher by 9.5%, and retail rental revenue per visit was up 9.1%.

All of this was further enhanced by continued growth in international visitation, which actually increased by 5% this season, despite overall visitation being down 14.6%, and continued challenges in the UK market. We are clearly seeing the benefit of the growing global appeal of our resorts and our enhanced marketing efforts as we attract guests from around the world who tend to stay longer and spend more during the trip.

The snowfall levels did begin to rebound in mid January. In Colorado, the return of more normal snowfall levels allowed us to open nearly all of our Colorado terrain by quarter-end, including Vail's Back Bowls. Snowfall in Tahoe, however remains scarce, which had a lingering impact on visitation in that region. As a result, our Colorado resorts outperformed Tahoe during the quarter, as conditions in that region rebounded faster.

Visits to our Colorado resorts declined 8.8% during the quarter, while Tahoe reported a 32.6% drop in visitation. While conditions in Tahoe improved dramatically in late February and early March, and all of our resorts are now in full swing, we do not believe we can make up all of the lost ground we have seen to date, particularly given the challenges we saw in Tahoe.

As such, we are reducing our fiscal 2012 resort reported EBITDA guidance range. It's important to note that despite some of the unprecedented hurdles we have faced this season, we are anticipating a year that comes in at or modestly below last season, which had record snowfall and amazing start to finish conditions. In an odd way, this year has only furthered our confidence in the drivers of our business and what we can achieve.

Before I turn the call over to Jeff, I am very pleased to announce that only nine months after initiating our dividend, our Board of Directors has approved a 25% increase in the quarterly cash dividend to $0.1875 per share. First payment of the higher dividend will be made on April 10, 2012, to shareholders of record as of March 26, 2012. Our decision to increase the dividend reflects our continued confidence in the cash flow generation of our Company, and our ability to both invest in the business and return capital to shareholders, even in years with challenging weather.

Let me now turn call over to Jeff to further discuss our results and outlook. I will then discuss our calendar 2012 resort capital expenditure plans, as well as some other exciting news.

Thanks, Rob. Good morning, everyone. Earlier this morning, we released our earnings for our second-quarter fiscal 2012 ended January 31, 2012, and also filed our Form 10-Q for the quarter, which you can find available now at our VailResorts.com website.

Now turning to our results. As Rob mentioned, our second-quarter fiscal 2012 financial results were affected by the unprecedented weather that befell us both in Colorado and in Tahoe. For the quarter, our Mountain net revenue declined 0.7% to $315.9 million, and Mountain reported EBITDA was down 5.2%. We were able to almost entirely offset the 14.6% decline in skier visits through higher spending per skier visit, improved lift ticket pricing, and strong season pass revenue.

Lift ticket revenue decreased only 0.9% during the quarter, due to a 13.5% increase in season pass revenue, and a 9.1% increase in ETP or Effective Ticket Price, excluding season passholders. As a reminder, we record all of our season pass sales as revenue in the second and third quarters of the fiscal year, and therefore, slightly more than half of the season pass sales were recognized as revenue in the second quarter of fiscal 2012.

Ski school, dining and retail rental revenue declined 0.1%, 6.4% and 0.6% respectively, and as Rob noted, were up strongly on a per-visit basis, reflecting the broader improvements in the economy. Other revenue increased 5.3%, primarily due to higher strategic alliance marketing revenue, as well as higher revenue from transportation services we provide on behalf of certain municipalities at our resorts.

Looking at Mountain operating expenses, Mountain operating expense increased $4.3 million in the fiscal second quarter, due primarily to a $2.2 million increase in snow-making expense incurred in the quarter, as we made snow well into January this year, allowing us to retain and create guest loyalty by ensuring that we have significantly more terrain open than other resorts in the rest of the region, especially in Tahoe.

Lodging results were less affected by the decline in visitation, as Lodging reported EBITDA increased $0.3 million to $1.2 million in the quarter. Revenue at our own hotels and managed condominiums declined 1.4%, while ADR increased 13.8%, reflecting a mix shift to our luxury properties that more than offset a decline in occupancy, leading to a 0.8% increase in RevPAR. We were able to lower expenses, leading to improved flow through in the quarter.

Moving on to Real Estate. We continue to see good sales momentum at our two Real Estate projects. Real Estate revenue during the quarter totaled $9.1 million, generated by the closing of one Ritz Carlton residence and four One Ski Hill Place units. Since the beginning of fiscal 2012, we have sold six units at One Ski Hill Place and seven units at the Ritz Carlton.

We've now sold 33 whole ownership units at the Ritz Carlton residences and 46 One Ski Hill Place units. The sales momentum at our two luxury Real Estate projects further confirms the broader consumer spending trends we are seeing across all of our Business lines, that our Company is well-positioned with the high end consumer.

While Real Estate's EBITDA totaled a loss of $3.5 million in the quarter, net cash proceeds totaled $7.2 million. Since the start of fiscal 2012, we have generated net cash proceeds of $23.8 million and are more than halfway to achieving our targeted full-year net cash proceeds goal of $35 million to $45 million. Net income attributable to Vail Resorts, Inc. declined by 15% to $46.4 million in the quarter due to the lower EBITDA, as well as higher depreciation and amortization expense.

Our balance sheet remains in a very strong position. We generated $137.4 million of operating cash flow in a six-month period ended January 31, 2012, ending the second quarter of fiscal 2012 with cash on hand of $95.6 million and net debt at 2.1 times trailing 12 months reported EBITDA, and we had no borrowings under our revolver. Moreover, we have virtually no principal maturities due on any of our debt until 2019.

Today, we also announced our ski season to date metrics for the comparable periods from the beginning of the ski season through Sunday, February 26, 2012, and for the similar prior year periods through Sunday, February 27, 2011, a period that extends into our third fiscal quarter. Our ski season to date metrics reflect visitation improvements from the metrics released earlier in the season.

Our total skier visits through February 26, 2012 at our six Mountain Resort properties were down approximately 12.3%, with our Colorado resorts down 7%. Total lift revenue was down 1.5% as compared to the similar period through February 27, 2011 of the prior year, which includes an allocated portion of season pass revenue for each applicable period.

Our ski school revenue was up 0.3%, while our dining and retail rental revenues were down 4.7% and 1.4% respectively, and guest spending per visit continues to show strong increases. In addition, our Lodging bookings through our central reservations and directly at our owned and managed properties continue to track ahead of last year's levels.

Now to discuss our guidance for fiscal year 2012. The slow start to the season extended well into January, causing a larger than anticipated impact on visitation. Although visitation levels have improved overall, Tahoe continues to track below expectations. As a result, we are reducing our fiscal 2012 resort EBITDA guidance. Our revised guidance calls for resort-reported EBITDA to be in a range of $205 million to $215 million.

It is important to note that included in our estimates for resort reported EBITDA for fiscal 2012 is a $7.2 million seasonal loss associated with owning Northstar, which did not occur in fiscal 2011, and $2 million of estimated seasonal losses and transaction transition expenses relating to the acquisitions of Kirkwood and SkiInfo.com, based on an expected close in late March for the Kirkwood acquisition.

However, fiscal 2012 will not include $4.1 million of one-time Northstar acquisition-related expenses that occurred primarily in the first quarter of fiscal 2011. Finally, the first fiscal quarter of 2011 benefited from a $2.9 million favorable litigation settlement in the Lodging segment. Adjusted for all these items, we are forecasting fiscal 2012 resort EBITDA to be in a range of up 1% to down 4% compared to fiscal 2011 resort EBITDA.

Our Real Estate EBITDA guidance is modestly higher. For fiscal 2012, we are anticipating net proceeds from Real Estate sales that total $35 million to $45 million, partially offset by Real Estate reported EBITDA of between negative $13 million to negative $21 million, including approximately $3 million of non-cash stock compensation expense, resulting in estimated net positive cash flow from Real Estate of $20 million to $30 million. Our net income attributable to Vail Resorts, Inc. guidance range is now $13 million to $23 million.

Before I turn the call back to Rob, I wanted to mention that in April we will again announce certain season to date ski season metrics, which will include the Spring break and Easter holiday periods. Now back to Rob.

Thanks, Jeff. As is customary for this time of year, we also have released our resort capital expenditure plans for the current calendar year. In this case, calendar 2012. Our operating philosophy is to continually reinvest in our resorts to offer the absolute highest quality experience to our guests, supporting our pricing strategy, and creating very high guest loyalty. We currently anticipate we will spend approximately $75 million to $85 million of resort capital expenditures in calendar 2012, down from $124.5 million in calendar 2011, which included approximately $30 million of spending on Northstar.

The centerpiece of our 2012 capital plan is a new 10 person state-of-the-art Gondola, serving as the gateway to Vail Mountain through Vail Village, where almost one half of our Vail guests start their ski day. With heated cabins and Wi-Fi, the Gondola will set a standard for how guests are transported up the mountain, while dramatically reducing wait times by increasing up-hill capacity by 40%.

Other key elements of our capital plan include new retail stores, given our growing leadership position in specialty Mountain sports retail, implementing a new state-of-the-art retail point of sale or POS system, with more dynamic pricing capabilities, adding further enhancements to our award-winning Epic mix application, following this season's addition of Photo, and continued investments in marketing technology initiatives including customer relationship marketing system.

All of the proposed capital projects are subject to applicable regulatory approval. Our 2012 capital plan reflects our commitment to improving our resorts and providing guests with new amenities which will continue despite any temporary weather challenges.

In addition to investing in our Business and returning capital to shareholders, we also continue to utilize our strong balance sheet on strategic initiatives. A few weeks ago, we announced our planned acquisition of Kirkwood Mountain in Lake Tahoe, and we expect to close later this month. As previously announced, we intend to pay approximately $18 million to acquire Kirkwood, including a 51% interest in a 2.7-acre parcel at the base of the resort.

Kirkwood is a unique resort, offering 2,300-acres of extraordinary high alpine expert terrain, with a loyal and passionate customer base. Kirkwood is the closest mountain to San Jose, California on Highway 88, and boasts the most average annual snowfall of any mountain in the Tahoe region.

We are very excited about its acquisition, in large part because it is a compelling new addition to our Tahoe season passes, offering guests from across the Bay Area, Silicon Valley, Sacramento, and Reno truly the best of Tahoe, Heavenly, Northstar, and Kirkwood. We have already heard lots of very positive feedback from our Tahoe guests, and look forward to being able to include Kirkwood as part of Vail Resorts.

As we have talked today, we have entered our historically largest revenue month of the year for our Resort business. We expect to see good momentum through the spring break and Easter period. Our mountains are in great shape. The snow has finally come in abundance, and we have exciting activities planned throughout the remainder of the season. We are very proud of all of our employees, who have continued to deliver experiences of a lifetime to our guests, each and every day. At this time, Jeff and I will be happy to answer your questions. Operator, we are ready for questions.

(Operator Instructions). Our first question comes from the line of Felicia Hendrix with Barclays Capital. Please go ahead.

Good, thank you. Just a few questions. One is, if you look at the year-over-year change in your lift ticket revenue, it did slow or did deteriorate a little bit from your January 2 update through February 26, but your skier visits improved, so I'm assuming that was mainly coming from mix. I was wondering if you could address that. Perhaps, maybe, we don't benefit new from the peak period pricing or some other mix issues, so if you could address that, that would be helpful.

Felicia, I think in that period, you definitely had more pass holder visits picking up. I think catching up the days they hadn't skied earlier in the year, and therefore, that lift revenue relationship of mix changed a little bit from the pass, from the destination over to the pass, in a period we normally don't get a lot of destination visitation, in even normal conditions.

Okay, so would you expect that to just flatten out for the rest of the ski season?

I think March and April, you certainly get a much stronger destination mix, and you typically get an international strength as well, so I think that's what we would expect going forward, which would be more like normal conditions.

Okay, great, and then is it too soon, or can you just give us any thoughts of what your Epic product might look like for next year? Obviously, you're penetrating that season pass holder base deeper and deeper every year, so what are some of your plans to continue to stimulate the sales to generate growth?

You're talking about our Epic Pass?

Yes.

Yes, so we'll be announcing plans for season passes and starting to put them on sale right around the mid-March, so probably be a week out or so from now, and what I would say is I think we feel like we have a terrific product line. Obviously, they have performed quite well, and I think for the most part we're talking about a continuation of that.

I would say in Tahoe, we're going to take real advantage of the addition of Kirkwood, obviously based on the planned acquisition, and really take an aggressive approach to that market. Probably be more to talk about after we announce the line-up in mid-March, but I think that's what you'll see at that point.

Great. Actually Kirkwood is a great segue to my final question. You have over the years have done a good job of growing your Company. You've made a bunch of prudent acquisitions. Kirkwood is your latest one, but largely you've been focused in the US. I'm just wondering, could you give us or share thoughts if you've thought about growth outside the US?

Any initiatives you might have been working on to expand the reach of your brand beyond North America? Certainly you do have a nice international destination visitation, but perhaps you could be thinking about growing that to other regions around the world?

Yes, I think as you know, we've talked about that, I think at the last investor conference, and certainly we will be talking about it again. I think we have taken a more global approach to the Business. We do feel like our approach, as you mentioned in North America, has been to acquire things where we believe we can either add value, or they immediately add value to us, so really high on the kind of strategic and synergistic opportunity list.

And what I would say is, that I think we are now feeling like there could be those opportunities outside of North America as well, so we're going to take the same approach. So this is about how we can add value, or how that new asset could add value to us.

We're going to be disciplined on price. We're going to be disciplined on terms, and like anything in the ski industry, things take time, so we are pursuing it, but what I would say is that it's not going to be all that different than what you've seen over the last decade from our Company, which is taking a more methodical approach to it.

Okay, great. Thank you.

Our next question comes from the line of Fred Lowrance with Avondale Partners. Please go ahead.

Just two questions for you. Just given the historically poor snowfall we've had in this ski season, obviously since it's historic, you wouldn't really have too much to go off of, but do you sense that you will have any sort of headwinds facing you when you go into this next season pass selling season, in terms of your ability just to push season passes in general, or to push pricing higher, just given, maybe, some season passholders feeling a little let down this year?

I think there's no question that will always be a concern if you have a challenging snow year early. I think the good news is that we have seen really good conditions kind of come to all of our resorts, ahead of when we're going to launch season passes, and I also think that people understand that when you buy season passes, sometimes the season will be incredible. Obviously, we had record snowfall last year. At that point you've locked in a great price.

This year, it may not be as good as it was last year, but I think people have the sense that we priced our passes in a way that they get to lock in year-after-year their ski experience, and then based on mother nature, sometimes it's better, sometimes it's worse. So, there's no question that I think Tahoe probably will have a little bit more challenge there, but on the flip side to that, we think the addition of Kirkwood and some of our plans for Tahoe really give us some, I think, terrific momentum there to counter that.

Great, and just switching gears for a second, moving into the Real Estate business. Obviously, you've got a few units at One Ski Hill and at the Ritz Carlton that you sort of put into the rental program. Just wondering, one, how many of those units you were renting out during this past quarter, and if you sold any of those units, or if you haven't, what's the -- if there's any anticipated impact on selling price of those sort of used units, if you will.

I'd say on the second part of that question, the vast majority of people that have bought units have stayed in one of the units prior to their purchase, so we think that having those units available for people to occupy in advance of a purchase decision is a real strong selling tool for us, and we've seen continued momentum coming from that policy or approach that we've taken for the real estate.

And we don't anticipate and haven't seen to date any impact on pricing discussions or offers based on the fact that someone might have stayed in that unit in advance of someone occupying it. I think actually the fact that those units are furnished, and people can really see the whole feel of the unit really helps out quite a bit.

I think we have over half the units in the rental pool at the Ritz and we have a significant majority of the units at One Ski Hill Place in the rental pool, and that's including unsold units that we've added to the rental pool, as well as people that have closed on their units and then added those into the rental pool, so its been really successful in both fronts.

And One Ski Hill Place, it has really set a it new standard for what we're able to generate from an ADR standpoint in that market, for people that are renting in One Ski Hill Place, and it's really bringing a new luxury consumer into that bed base in Breckenridge, which helps overall in things like our ancillary businesses, ski school and dining and everything else. So, I think we're really pleased with the success of One Ski Hill Place and what it's doing to that market.

Likewise at the Ritz, it's really creating, filling a immediate for significant demand, especially of multi-room condo units of a luxury nature in Vail, and we've been using that quite a bit. As we've been adding units to the rental pool, we've been filling them, especially in peak periods right away almost, because there's such a demand for some of those especially numerous unit, condo units that we have available at the Ritz, so we've been very pleased on both fronts.

Thank you. That's it for me.

Thank you. And our next question comes from the line of Shaun Kelley with Bank of America-Merrill Lynch. Please go ahead.

Just wanted to ask a little bit more about kind of the expense management throughout the quarter. As you saw some of the snow coming through, clearly I think you made some investment in snow-making and some other things to kind of keep the guests happy.

Could you just talk about strategically, how you thought about the expense side working through this season, and how we should think about I guess expenses from an operating perspective in the next season? Was there really any change at all or were you able to keep levels where they were and focus more on the guest experience?

Yes, I think there's no question that our approach has been to use expense to drive revenue, meaning that our focus is, in periods -- this is true during the recession, it's true now, which is really make sure that the guest is having an incredible visit. And that's even more important when the weather conditions may be more challenging. I think we've seen the results of that, obviously, with our revenue numbers, I think, which far exceeded what people's expectations would be in a year where snowfall is down as much as its been.

I would say that there's no question that in a more normal year next year, we would definitely be able to back off quite a bit on a lot of the snow-making expense because, obviously, we wouldn't need that as much. I think some of the other things that we might have done for guests this year are certainly not things we would take away.

I think those are things that would stay. So I think we were very judicious about our expenses throughout the season, but at the same time, making sure that we're not being penny-wise, pound-foolish and ultimately focusing on how we drive resort EBITDA across our Business.

That's helpful, Rob. And then I guess, second was just strategically, obviously, you guys announced Kirkwood a few weeks ago. You didn't give much in the way of kind of information about the Mountain, and that may be partially because I guess the deal hasn't closed yet, or correct me if I'm wrong on that.

But just kind of was wondering is there any kind of sense from a visitation perspective, we've kind of heard and done a lot of Google searching for some numbers out there. But could you give us a sense as just kind of what contribution we should start to think about this in this portfolio either from a visitor perspective or a revenue perspective?

Yes, I think at this point there's not much that we can say. I think that is part of the acquisition. Obviously, it's not an asset that we own yet. And then, I think that's something that we'll kind of take into consideration post-closing, in terms of how we disclose metrics about it, when that's entirely our decision. Versus, obviously, where we are today, where it's a pending transaction.

Is the anticipation it will be, I guess, accretive as you guys think about, kind of, the style of acquisitions you've done previously?

Yes.

Great. That's helpful. I appreciate it.

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

Wanted to start on Real Estate. Can you discuss the markets in general, and not have a sense of your projects, but are we seeing a pick up in the markets at Breckenridge and Vail?

I think, Will, on the residential side, things have improved a little bit in Vail and in Breckenridge. So deals like, there's been a bottoming out, and starting to be some momentum going upwards in those markets, just even from across the residential front. On the project basis, I think we're really the only major project selling in One Ski Hill Place, or in Breckenridge for One Ski Hill Place. In Vail there's other projects selling at the same time, and I think based on the records that have been imported there's very few closings that have been reported on those other two projects. And I think we continue to have more announced closings at the Ritz than the other projects.

I think it's certainly the feel is pretty good in both markets, especially given the way the season played out, and the impact destination visitation, there was certainly less people in town. And despite all that we're well on our way to hitting our goals for this year in Real Estate that we set, obviously, before knowing what the season was going to look like. So, I do think that speaks well to the luxury component of our guests really coming back strongly in both markets, and I think we're seeing that play out a bit in Real Estate.

Thanks, and to confirm, you have not changed pricing at all on the Ritz since whenever it was, two years or so ago, when you lowered pricing?

That's correct.

Looking at Kirkwood, a couple of questions. One, can you just discuss the market share, if it's an issue in terms of having too much share from that competitive standpoint? And two, I know at that resort there's an issue with it being, I guess, off the grid and not having the best power in some situations. Can you discuss that, if that's part of your CapEx plan, if that's a way you can mitigate that?

Sure. I'm not going to comment on the first question, but the second question, there is a new power plant that will be coming online very shortly, which we believe will completely remove any issue whatsoever on power, so--

And what's the cost?

Sorry. The cost of that Power Plant is really being paid for by the PUD and the homeowners, it has nothing to do with our balance sheet or anything we're going to spend money on. But what we believe, based on what we looked at, that when it comes online which again should be almost momentarily, that it really removes the power issue, so to speak, from Kirkwood at all.

Okay, great and in your CapEx, I may have missed this. Is there anything meaningful at Kirkwood this summer that you plan to put in, whether it's high speed lifts or any kind of development?

We have not included anything significant in our capital plan for Kirkwood yet, in large part because we have not really sat down and talked with the folks there, and done the assessment, and set a long term strategic plan. We'll be doing that after we close, and whether there's things that might go in this summer or down the road I think will be things that we'll announce later.

But I guess I would emphasize that it's certainly nothing like what you saw with Northstar. So, obviously, that was a unique situation, where we made those investments in the first year and that's certainly not something we'll be doing at Kirkwood in those amounts.

Thank you. Just one final question. Jeff? In looking out at the final two quarters of the year, how should we, should we be looking at the fourth quarter, or the July quarter, as similar in terms of the resort EBITDA loss as last year?

Yes, with just some normal expense increases that you'll see in predominantly non-revenue quarters, and a few of those were called out, as well, in the release, and that is some initial transition transaction expenses, and seasonal fourth-quarter losses from the new acquisitions, Kirkwood and SkiInfo. So those were called out, that that would be incremental, and then just normally, there might be some normal expense increases, more inflationary type increases you'll see in a non-revenue quarter.

Okay, that's great. Thank you.

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

A couple things. I just wanted to see if I'm accurate in characterizing this way, considering the season and the fact that its gone a little bit better, from a couple things Jeff said and just looking at your numbers. Is it fair to say that in the month of January, bookings coming from out of state and I'm thinking a lot of the Northeast kind of family that might have been planning a February trip, maybe didn't because of the lack of snow in January? But then it sounds like maybe in the month of February, bookings have picked up from that out of state destination, so you feel a little better about March/April? Is that sequentially how things have gone month-to-month?

I guess I'd maybe rephrase it a little bit, which is to say that we definitely are seeing signs of real strength and momentum in the spring break and Easter period. I'm not going to comment on exactly the timing of when all that went through, but there's no question that our guidance includes a very strong spring break and Easter, and that's based on bookings that we've seen, some of which came in six months ago and others have come in over the last few months.

Okay. Fair enough. And to just go on the Real Estate market there, the luxury market again given the bad year start, and so forth, being pretty good, I know these are more back-burner. But any sort of time frame as to when you think you might launch or announce any other new Real Estate projects kind of base Mountain? Doesn't sound like it would be this year in your fiscal year, but could it be? Or would it be potentially next year, given conditions as they are today?

Yes, I think we're not going to say. Obviously, we're going to continue to monitor how inventory sells through in the active projects and continue to monitor the overall economy with respect to second home Real Estate. I think we are proceeding with the approval stage of Ever Vail, so that it will be ready when we have the feeling that it's the right time to launch. But as of now, I can tell you there's no plans to launch anything or announce launching anything in this year. And as far as in the future, it will be evaluated based on, again, where things stand as far as specifically inventory in the market, and the overall more global Real Estate second home market.

And just lastly on Ever Vail. Has that actually all been approved from the local community town standpoint? In other words, could you push the button if you wanted to, or is there still back process going on?

The process is still proceeding, but I think it's proceeding very well, so I think its made a lot of progress over the last year, and what I'd say is, it's getting pretty close.

Okay, thanks.

Thank you. Our next question comes from the line of Smedes Rose with Keefe, Bruyette & Woods. Please go ahead.

I just wanted to ask you your thinking around dividends versus buybacks. You didn't buyback any stock in the quarter, but you raised the dividend. And just going forward on the dividend, is it something you would expect to address on an annual basis, on a calendar annual basis, and is there any kind of thought around what some sort of targeted pay-out ratio, or coverage, or just kind of maybe thinking about the dividend in general?

I think we look at both, and I think we've made a commitment over a number of years now to return capital to shareholders, and I think, obviously, we're doing that through buybacks primarily, and then initiated the dividend. When we initiated the dividend, I think we made it clear that we started at a level we felt like we had growth.

I think this is a year that only gives us more confidence in our Business, and so I think we felt like this was a good opportunity to increase it. We have not yet set, I would say, a definitive timetable for future increases or a definitive policy for future increases, but I think that's possible that we get there over time, as you get out a couple years. But at the moment, I think we certainly still feel like our Business has opportunity, and therefore our dividend has opportunity to grow.

Okay, and I wanted to ask you in general, with such a poor ski season, you guys are obviously well-capitalized. But did the opportunity with Kirkwood stem from maybe being a little less well-capitalized? And is that something that you think smaller resorts in general, do you see more potential opportunities there, or are people coming to you more? Is there more sort of we need to get bought here kind of attitude? Any kind of thoughts around that, I think would be helpful.

Yes, I'm not going to comment on anything specifically. I think environments change and I think there's some environments that do offer opportunities. I think, but it's so for us very specific, in terms of the resort that we want to buy and where it is, and how it strategically fits in, and what the situation is like with the ownership group, things like that. I think that plays much more into it, in terms of timing and things like that. So, there's no question though that any time there are challenges in the ski industry, given the strength of our Company and the strength of our balance sheet, it certainly gives us an advantage.

Great. Thanks.

Thank you. Our next question comes from the line of Jeff Kauffman with Sterne, Agee. Please go ahead.

I want to circle back to Felicia's question. You mentioned forward growth kind of looking beyond the season, and I don't want to get too far ahead because I know Kirkwood hasn't closed, but which is more appealing to you?

Is Europe a more attractive opportunity for you, given what's going on out there with the weaker currency, or would something maybe in the Eastern US make more sense? Could you just kind of talk about moving outside of the Western Rockies and Pacific region, what makes more sense in the long term?

Yes, again, I kind of like the last answer I just gave. Our ski resorts are very unique, and there's not a kind of cookie cutter approach that you can use to this, and every resort has, I think, different unique opportunities and intrinsic opportunities, and then also provides different strategic benefits to us, or we could provide different strategic benefits to them. And what I would say is, those things really drive the kind of acquisitions and resorts that we would acquire rather than making blanket statements about regions of either the US or the world. So, I think that's probably about all I can say on that.

Okay. That answers it fine. Thanks, guys.

Thank you.

(Operator Instructions). I'm showing no further questions in the queue at this time. I'd like to turn the conference back to Mr. Katz for any closing remarks.

Thank you, operator. This concludes our fiscal 2012 second quarter 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.

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