Vail Resorts Inc (MTN) 2012 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Vail Resorts fiscal 2012 third-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 your questions. (Operator instructions). Today's conference is being recorded June 6, 2012. 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 2012 third-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 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 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.

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 Form 10-Q for the third order of fiscal 2012 released this morning.

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

So with that said, let's move onto our third quarter results. We are very pleased with our third quarter results as they showed our ability to successfully navigate the most challenging winter in the history of the United States ski industry. Overall, the US ski industry reported a 16% decline in visitation, the worst on record since the 1980-1981 ski season and the first time the industry has reported declines across all geographies. At our resorts, cumulative snowfall for the 2011-2012 ski season were down more than 50% compared with the prior year, and snowfall at our Colorado resort was down more than 70% in March.

The lack of snow, combined with unseasonable temperatures affected visitation levels during the key spring break and Easter vacation periods. Yet, despite these unprecedented conditions, we actually delivered an almost 1% increase in both Mountain net revenue and Mountain reported EBITDA during the quarter of fiscal 2012, despite total visits being down 9.8% in the quarter. This performance demonstrates the stability and resiliency of our business model, including our growing season pass business as well as the quality and breadth of the experience we offer at all of our resorts.

There were several positive indicators in the third quarter and for the 2011-2012 ski season that contributed to our performance and bode well as we look toward the 2012-2013 ski season. First, through a combination of strong season pass sales and a meaningful increase in our effective ticket price, or ETP, we were able to more than offset the decline in skier visits during the third quarter and actually report a 0.7% increase in lift ticket revenue. Season pass revenue during the third quarter increased 12.8%, and ETP excluding season pass holders was up 9.4%, reflecting higher pricing and a mix shift toward higher-priced ticket products.

Second, our ancillary business saw revenue performance that far outpaced the visitation decline with ski school and retail rental revenue both up in the third quarter and dining slightly down. Informally, on a per-visit basis, our ski school revenue per visit increased 12.1%, dining revenue per visit was higher by 9.7% and retail rental revenue per visit was up 12.3%, reflecting the high income demographic of our resort guests, enabling us to benefit from enhanced consumer spending. In fact, although over the course of the 2011-2012 ski season, visitation at our Tahoe resorts declined 22.4% to the prior year and our Colorado results were down 8.9%, our Beaver Creek resort was essentially flat in visitation, reflecting its higher mix of luxury and destination guests who had a higher propensity to spend in the current year.

Third, visitation from the international markets actually increased 2% over the course of 2011-2012 ski season, despite an overall visitation decline of 12.1% as well as the continued economic challenges in Europe, reflecting the global appeal of our resorts and our enhanced marketing efforts. Mexico continues to be a significant market for us and we saw strong growth from Brazil and other Latin American countries as well as Australia. And, despite the economic issues in Europe, visits from European countries were relatively flat for the 2011-2012 ski season.

Fourth, our season pass business continued to provide a strong and stable foundation to our business and a tremendous value to our most loyal guests. Total season pass revenue for the season increased approximately 13% and grew to represent 40% of total lift ticket revenue. Furthermore, despite the unprecedented conditions, our season pass holders, who represent arguably our most weather-sensitive guests, skied only about one day less on average in the current ski season as compared to the prior year.

Fifth, during the third quarter, we closed on our acquisition of a third Tahoe resort, Kirkwood, once again opportunistically leveraging our strong balance sheet. While we closed on that resort on April 12, it already is proving to be a great addition to our lift ticket and season pass network. Kirkwood's challenging terrain, geographic proximity to San Jose, high elevation and average snowfall that is best in Tahoe is a perfect complement to our other Tahoe resorts, Northstar and Heavenly. We look forward to the enhanced growth opportunities that Kirkwood offers in the attractive San Francisco, San Jose and Sacramento markets.

Finally, providing perhaps the strongest indicator for the upcoming 2012-2013 ski season, we are extremely pleased that our total spring season pass sales through May 29, 2012 for the upcoming 2012-2013 ski season adjusted as if Kirkwood were owned in both periods increased approximately 17% in units and approximately 22% in sales dollars as compared to the prior-year period through May 31, 2011. This strong sales performance was achieved despite record performance in the prior year's spring sales period and on the heels of the weather challenges of the past winter.

Our past results are a testament to the strong connection our guests have to our resorts and their confidence in our ability to deliver the best possible guest experience in a wide range of conditions. The strength in spring season pass sales spanned across the entire spectrum of products and geographies, including an approximate 30% increase in pass sales to the international market. We are particularly pleased to see a very strong response to our enhanced Tahoe offering. As a reminder, historically our spring pass sale period represents roughly one third of our total season passes sold over the entire program period. It is also important to note that we believe that a portion of the increase this spring is due to the success of our continued efforts to entice guests to purchase their passes even earlier in the year, and we do not believe these results are indicative of the results we expect to see in our season pass sales in the fall 2012.

Now I'll turn it over to Jeff, who will go into greater detail on our financial performance and outlook. I will then discuss other news.

Thanks, Rob, and good morning, everyone. Early this morning we released our earnings for third quarter of fiscal 2012, ended April 30, 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 third quarter fiscal 2012 financial results were affected by the unprecedented weather conditions that persisted through the entire season. For the third quarter, Resort reported EBITDA of $177.6 million was down less than 1% and Resort revenue was relatively flat at $408.6 million. Mountain segment operating expense increased $2.1 million, or 1.1% in the third quarter on transaction and transition costs related to acquisitions of Kirkwood and Skiinfo and higher spending associated with new initiatives, such as EpicMix Photo and Skiinfo. Retail cost of sales increased due to the higher level of overall retail sales as well as reduced retail gross margins brought about by a higher level of discounting required by the current year environment. This was largely offset by lower labor expense as well as reductions in other expenses, including supplies and repairs and maintenance.

Lodging results, while down compared with the prior year, held up relatively well, reflecting improvements of luxury room nights and the benefits of the higher consumer spending, which fueled an 8.2% increase in average daily rate, partially offsetting a decline in occupancy resulting from lower visitation. Lodging results also were impacted by costs associated with the previously announced RockResorts reorganization, though the Lodging business should benefit going forward by over $2 million annually in lower net costs resulting from these structural changes.

Turning to our Real Estate business, Real Estate net revenue totaled $12.6 million due to four closings at the The Ritz-Carlton Residences. Since quarter end, we closed on two additional units at The Ritz-Carlton Residences and one additional One Ski Hill Place unit. For the year, we have sold 11 Ritz-Carlton whole ownership units for a total of 37 sold units out of 71 and have one additional unit under contract. At One Ski Hill Place, we have sold seven units this year for a total of 47 units sold out of 88.

While Real Estate reported EBITDA totaled a loss of $3.5 million in the quarter, net proceeds from sales since the beginning of fiscal 2012 equaled $34.6 million, including the closings that occurred subsequent to quarter end. Accordingly, with one additional Ritz-Carlton unit under contract, we're currently tracking the fault in our targeted full-year net cash proceeds goals set in September 2011 of $35 million to $40 million.

Net income attributable to Vail Resorts, Inc. increased 3.5% to $79.6 million in the third quarter. The prior-year quarter included a loss on extinguishment of debt charge related to our subordinated debt refinancing.

Now moving on to a quick review of the year-to-date period, for the nine-month period ended April 30, 2012, which captures our entire ski season, Mountain net revenue was up 1.4% while total lift revenue was flat despite the 12.1% drop in visitation as season pass revenue increased 13.2% on a 3% increase in units and ETP excluding season passes increased 9.3%. Similar to the lift revenue trends, our ancillary businesses performed relatively well against the backdrop of down visitations with ski school and retail rental up 0.6% and 3.4%, respectively, while dining was off less than 1%. Mountain reported EBITDA for the nine-month period was down 4.9%, partly due to seasonal first-quarter losses at Northstar not included in the prior-year period as well as higher snow making experiences in our current-year second fiscal quarter. Resort reported EBITDA for the same period declined 6.5% with the prior-year Resort reported EBITDA including a favorable litigation settlement in the Lodging segment.

Our balance sheet remains strong. We generated $234 million of operating cash flow in the nine-month period ended April 30, 2012, ending the third quarter of fiscal 2012 with cash on hand of $147.1 million, net debt at 1.8 times trailing 12 months total reported EBITDA and no borrowings under the revolver component of our senior credit facility.

Turning to outlook for the remainder of fiscal 2012, as we noted in our May 1, 2012 metrics release, we currently believe that our Resort reported EBITDA results for fiscal 2012 will fall slightly below the low end of the guidance range issued on March 6, 2012 but would represent only a mid-single-digit percentage decline over the prior year after adjusting for one-time acquisition and litigation settlement related items in both years. These adjustments include $7.2 million in seasonal losses in 2012 for Northstar since we did not own the resort in the first fiscal quarter of 2011, a $2.9 million favorable legal settlement in fiscal 2011 and approximately $3.3 million of transition and transaction costs as well as seasonal losses in fiscal 2012 associated with acquisitions of Kirkwood and Skiinfo.com, partially offset by $4.1 million of prior-year acquisition-related expenses for Northstar. Now back to Rob.

Thanks, Jeff. We're busy implementing our capital plan now that the lifts have closed for the season and are excited about the new initiatives that are being constructed over the summer, including the centerpiece of our 2012 capital plan, a new 10-person state of the art gondola replacing the Vista Bahn chair which serves as the gateway to Vail Mountain through Vail Village where almost one half of our Vail guests start their ski day. With ski-in cabins and other amenities, the gondola will set a standard for how guests are transported up a mountain while dramatically reducing wait times by increasing uphill capacity by 40%.

We are also increasing our planned capital spending for calendar 2012 by $10 million to a range of $85 million to $95 million, including maintenance capital of $43 million to $47 million. We anticipate making initial capital investments in 2012 towards a first phase of summer activity at Vail Mountain, as we are diligently working on plans for a large comprehensive summer experience at certain of our resorts that will be rolled out in phases over the next few years with the initial opening of Vail Mountain's first phase currently expected in calendar 2013. We hope to be able to reveal more specifics of these plans over the next several months.

In addition, the revised capital planning incorporates an estimated $5 million in capital spending for the newly acquired Kirkwood Resort, including normal maintenance capital of around $1 million as well as capital to install our own lift ticket scanning and other systems as well as implementing EpicMix. These initiatives will enable us to combine the unique ski experience at Kirkwood with some of our industry-leading best practices and elevate the overall guest experience.

I'm incredibly proud of how our employees and our Company performed during a season that was filled with many trials and tribulations. I want to take this time to thank all of our employees for their tremendous effort over the 2011-2012 ski season and for their relentless focus on delivering the best possible guest experience. While I mention this each year, it absolutely carries extra resonance given what we have just gone through. The passion and commitment of all of our folks was the integral part of our performance this past season.

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

(Operator instructions) Felicia Hendrix, Barclays Capital.

Rob, regarding the season pass sales, I clearly understand the comment that you made that the current pace, we should expect that to slow. Just wondering, though, it's kind of early, this environment that we are in. But are you seeing anything economically driven at all to maybe affect that view?

No. I don't think we've seen anything in our season pass sales this spring that would indicate that an economic -- a negative economic impact to our sales performance. Obviously, it's out there and we're certainly selling in a period right now that's a little bit maybe less robust than six months ago, nine months ago. But, yes, we certainly did not see that, or if it was there, we overcome it quite easily.

Okay, thanks. And then also, the detail about your season pass holders only skiing one day less was really interesting, especially given the poor snowfall. I was just wondering what that data point is telling you.

I think it tells you to things. One is I think that people, and I think it was reflected right in the season pass sales performance this spring. So one is, I think it shows that people did use their season pass. And despite a challenging whether year, they still got up to the mountain and were able to get an experience, even if the experience this year wasn't as good as it was last year because of conditions.

I think maybe to our business model, what it says is that our most weather-sensitive guests, because they purchased the season pass, skis more. Right? And they are apt to take more trips up to the mountain. And even for folks in the Denver or bay area, we get extra spending for them. So they will still contribute to results for us on dining and retail and even ski school or kids ski school. And so I think the season pass really helps on so many different levels, and one is that we absolutely believe our folks ski more because they have the pass, even during challenging weather conditions.

Thanks. And, Jeff, on the Lodging side, obviously your revenues were kind of flat year-over-year and the flow-through was worse than expected. I'm assuming that's mostly due to the RockResorts charge. Just wondering, can you adjust that for us, maybe what you're EBIT -- what was that charge that we -- so we could make that adjustment?

I think that we are not going to disclose that individually as part of the Lodging results, but I'd say a big part of what the expense hit was, was given that, both in all that reorganization effectiveness from this quarter that we instituted and initialized. I think the big thing for you to look forward to is the net increase in Lodging results that we'll see annually from this, and a return to a more normal flow-through that we typically see in our Lodging results.

But after this, there's nothing else in that business that you saw this quarter? If this wasn't there, we would see more normalized flow-through?

Yes, definitely.

Okay, and then just on your balance sheet, your net debt is at 1.8 times last 12 months EBITDA. You obviously have kept powder dry to do certain acquisitions which have been very strategic. But can you just discuss debt level, first how you would think about -- would you lever up to perhaps buy back more stock? And how are you thinking about your really low debt levels right now?

I think that we are absolutely committed to returning capital to shareholders. I think we have had a pretty long track record of buying back stock. We instituted a dividend recently. I think we've had -- obviously are focused there. We also increased that dividend substantially this year. There's no question that I think we will be looking very closely at buying back more stock as we go forward in the current quarter. And I think we're going to be looking at both dividends and buybacks continuously.

Obviously, we're going to constantly be on the lookout for opportunities to both invest in our business and make acquisitions. But certainly in the absence of that, we're not just going to hold onto cash. And I would say that we intend to continue to be aggressive on actually all three fronts -- internal investment, acquisitions and returning capital to shareholders.

Great, thanks guys.

Steven Wieczynski, Stifel Nicolaus.

On the international side, it was pretty impressive in terms of the demand for your products later in the ski season this year. But can you talk about what you are expecting for the 2012-2013 ski season I guess from the international side? And I guess also with the dollar strengthening, do you think that's going to have any material impact on visitation?

I think we absolutely feel like we're going to see continued strength from our international business next year. But you're right; there are exogenous factors that do weigh in here, and certainly the dollar is one of them. But the other piece, though, is relative economic strength. So how is the economies in Brazil, Mexico and Australia, Canada and then the UK? Probably -- the UK probably -- if they -- we could see some strengthening there. There's probably more upside there than anywhere else.

But, what I would say, though, is we now have really established a good flow, right, and good inbound traffic from a number of different countries. Where maybe 10 years ago we were more focused on the UK almost alone, now we are really seeing it across numerous countries in Europe and then around the world. So we actually feel like our international business is much more balanced today than it was before and we have continued opportunities to drive more visitation. So I think we are absolutely expecting more strength. Of course, some of these exogenous factors will weigh on that.

Okay, gotcha. And then, in terms of the summer programs, I guess when you look at what you guys are expecting to eventually spend on your assets in Colorado, is it going to be fairly kind of across the board in terms of the assets there, in terms of where you spend most of your capital?

What I would say is, I think, of the seven resorts that we have, I think certain of the resorts have a tremendous amount of secular tourism flow that just comes through the resorts, regardless. And obviously, for the most part it's the resorts that have more significant towns at their base, like Breckinridge and Vail and Heavenly. So I think there's no questions that when we look at our plans for summer, we're going to try to leverage that existing visitation. And so you'll probably see a more intense focus or more expansive plan for the ones that we feel like people are kind of at already in much greater numbers.

With that said, we do think there's an opportunity in each of our resorts to actually put new summer amenities in and that each of them will be terrific ROI projects with very, very high flow-through. But I think Breck, Vail and Heavenly would be, just because of their existing demand I think that goes through there already, those will be getting more focus and attention.

Okay, great, thanks, guys.

Shaun Kelley, Bank of America Merrill Lynch.

I just wanted to ask a little bit about starting off on pricing. Obviously, effective ticket price in the quarter wasn't fantastic; it was a big offset to what you saw on the visitation side. Could you give us a sense -- we can see a little bit of the spread between your dollars and units on the season pass side. But I guess where I was more interested on was you clearly have a big jump in your window or -- I guess your window ticket pricing as well. So could you talk about how you think about that next year? And was there some positive mix as you saw less season passes that you'd expect to maybe work against you in a more normalized season, just so we can think about the price increase or price potential next year?

Yes, I would say I think that there is -- so, two pieces. One is I think, on season passes, I think actually one of the things that hurt the effective pass price this spring was that we had real growth in Tahoe, which had lower price products than some of the Colorado products or the Epic Pass. And so that obviously is a good thing on an overall basis, but it does pull down the mix a little bit.

So I would say embedded in those numbers are nice increases across most of our passes pulled down a little bit by the strength that we're seeing some of our lower pass products. But we did see growth across the entire portfolio.

To me, I think that actually bodes quite well for next year. But you're right; we did see growth this year in some of our higher-priced daily lift ticket products and less momentum in some of the lower-priced products. We would assume for next year that we'd have more balance, and so there would be a mix shift the other way and so we would expect ETP excluding season passes to maybe modulate a little bit, but that should be far outweighed, of course, by a return to more normal visitation.

So what I would say is, going into next year, we don't see any difference in terms of our pricing opportunity than what saw going into fiscal 2012.

That's very helpful. And then I guess the second question on that in terms of some of your decisions -- your season pass comments, last year, we saw a pretty big deceleration in pass growth in the period ended for your fourth quarter, and then things ticked up end of balance of the year. This year, though, you kind of called out the growth that you were seeing in international pass sales as well as what you're seeing in Tahoe. Maybe we're reading a little too closely into it, but just trying to get a sense of a little bit more optimistic given those two categories and where you think you can end this year, just given how good -- because both of those seem like they should be somewhat incremental on the existing days versus more renewal activity on the front range.

Yes, and we agree with that. I think we are more optimistic, and that is why we called out both of those pieces. There's no question that I think the momentum around some of our marketing programs and maybe even the acquisition of Kirkwood, I think, probably really helped the spring this year. But of course, we were also fighting against challenging whether that was in everybody's short-term memory.

So when we look out to the fall, I think we feel like we should be heading in with some real strength, and the two categories that you mentioned should not decelerate, really, when we get to the fall.

With that said, we have a much larger pass program, right, that two thirds of our program that goes into the fall, a huge percentage of that is traditional Colorado passes. We're not going to see these kind of growth rates on that base program, because just the numbers don't allow that in terms of our penetration within Colorado. But internationally, out of state and Tahoe all offer real upside opportunity for us.

Got it. And the last question was just -- you mentioned it in the prepared remarks and I think you kind of said that you probably didn't want to talk about it too much. But is there any color you can give us on maybe some of the incremental CapEx dollars that are going to go into summer at this point? Any just kind of buckets of where some of those dollars might start being allocated in terms of what the programs might look like, so we can start to get a little bit more color on would be helpful.

Sure. Maybe just under half the increase is really attributed towards summer, and it's part -- a little bit related to planning for all of our resorts, but a big chunk of it is really related to activity that we can put into Vail Mountain. And I'd say it's the first phase of the program for Vail Mountain, and it's really focused around Adventure Ridge and the existing area that we've got activities going on right now. The things that we're looking at are zip lines and summer tubing, a pretty advanced kind of unique climbing wall experience, and some other pieces for kids, for families. And we think these will be projects that are very, very high ROI, high flow-through project that should really be dropping a good incremental EBITDA right away. And we do see these as being operational next summer. Exactly how much of that flows into fiscal 2013 versus fiscal 2014 because of -- our fiscal year ends July 31, so right smack in the middle of the summer. So we're not ready to start plotting that out in this quarter. Obviously, we'll include that in our guidance when we release it in September. But this should be a great first start, really, for our entire summer program. And I think we'll give people, both guests a taste of it, and I think we'll give investors a taste of it. But it really is only the small beginning of what should be a much more significant opportunity.

Perfect, thank you, guys, really appreciate it. Good quarter.

(Operator instructions) Fred Lowrance, Avondale Partners.

Just wanted to dig in a little bit deeper on some other questions that have already been answered. But it feels like in talking to people that maybe the actual legislation itself for the summer act is still going through some fine-tuning. And I'm wondering if that has impacted what maybe earlier in the year what you thought the timing of all this would look like at this point. I feel like earlier this year you were prepared to talk about what you might do and maybe what some of those financial impacts might have been maybe at your investor day. And now, it sounds like potentially we get some fiscal 2013 financial impact, but maybe it's 2014. So can you comment on where you think you are in the process at this point and how that compares to where you thought you would have been at this point?

Sure. First of all, what I'd say is in terms of the legislation, there is no fine-tuning, per se. The legislation has passed. The Forest Service does -- so that piece of it that involves Congress, the White House, the hard part of it is over. The Forest Service has to develop policies as it relates to summer, and that's certainly stuff that they're taking on their own and we're being as supportive as possible through that process.

But regardless of that, even when things are permitted, even when things are allowed by either legislation or the Forest Service, you still have to go through an approval process on each and every thing that you do. So each of the lifts that we put in when we expand terrain, we put in a new restaurant, we still go through a process with the Forest Service to look at any environmental impacts or other things that they want to do a review of. And so there's no question that that's a process that's going to go on for everything that we do here.

Now, because most of the activities that we're looking to put in are already in, right, areas of our mountain that are highly trafficked, have plenty of infrastructure, the environmental issues are much less because we're not really going into new terrain or new areas that are somehow pristine. So that makes it simpler. And what I'd say is that the reason why we are moving quicker with this program at Eagle's Nest is because Eagle's Nest and Adventure Ridge at Vail have already a number of activities and we are just swapping old ones out for new ones or expanding some of the things that we have. And that's a relatively simple process because there's clearly no new impact.

I would say that at the moment we are absolutely proceeding as we would have expected and have not seen any issues whatsoever. But it still -- for some of the larger plans, it will still take a year or so to get the approval. And that's not something that we want to rush and not something we think should be rushed.

And what I would say is, it's key for us also to, I think, make sure that -- this is going to be the largest expansion for us on our resorts, and we want to make sure we get it right and we get community input and we get everybody's input. And then the great news, though, as these activities, just like our existing ski opportunity, is there for decades in terms of creating a terrific business opportunity and a terrific opportunity for guests.

Sounds good, and just one more question, if I could. As I look at your season pass numbers that you put out there, the 22% sales dollars increase, you're trying to get more people earlier in the season. Maybe there are more people doing the $49 deposit for the auto renewal. When people renew, including that sales dollar year-over-year comparison, do you have the full price of the pass that they are technically signed on for, or how do you count for that in your year-over-year comps?

Yes, we do. So the fact that somebody has only put $49 down -- they do -- they give us their credit card, and so we don't -- we just run their credit card when we get to September. And so we do include that as part of the reporting we are doing now. Obviously, when we get to reporting the season passes as part of revenue, the only season passes that are included are ones that are fully paid for.

And what I would say is that's a comparison to the same exact thing in the prior year, so the same year -- last year, same $49 down. So we're comparing year-over-year the same way. And, historically, the amount of basically cancellations between the $49 and the full charge to their credit card is very minimal each year.

Okay, thank you for all that.

Will Marks, JMP Securities.

I wanted to just start with the passes. I don't want to drag it on, but I couldn't help but look back at the third quarter of 2011 press release in the outlook section. And it said it's important that we believe a large portion of the increase in this spring is due to our efforts to entice guests to purchase their passes even earlier in the year. Almost the same sentence as this year, so how should we really think about that?

Well, I think, Will, I guess what I'd say is we have to make an assessment, right, on two different factors or three, maybe. One is, what percentage of our past sales are truly incremental, what percent have been pulled in from the fall? And then three, even if we do very well in the spring, just because the base is so much larger in the fall, comping the exact same percentage increase in the fall means the numbers have to be much bigger. And I think what our experience tells us, and I think we've also guided the other way, as you probably remember a few years back when pass sales were down in spring, and we said, wait a minute, hey, guess what, this is a timing issue and I think we were on target about that.

So what I'd say here is, as I've said in earlier answers, a portion of this is absolutely people being pulled forward from the fall. A portion of this is we don't think we're going to comp the same percentage on a larger base in the fall. But the good news, though, is that we've got I would say the out-of-state segment, but certainly international and Tahoe, which we think are up truly, as we mentioned earlier, incremental sales -- we're clearly seeing real growth. The numbers are too big for us to attribute that just to pulling people forward. That's not the dynamic that we attribute that to.

So when we go into the fall, the good news for us is when we see people buy earlier, we think that's a great indicator, right, for next year, regardless, because what it means is that there is momentum for booking vacations, for thinking about -- for booking their vacations, for thinking about skiing. And so I guess we look at all of these numbers as nothing but an unmitigated positive, big positive, right, six months out or nine months out from our season. But we don't want people to think that we're going to report a 17% increase in units, in December. (multiple speakers) guide people down to realize that this is great news, but remember that the overall program is two thirds bigger than the spring, and as everything flashes through, good news but let's not just take this number and apply it to the whole program.

That makes sense. Sorry to beat a dead horse, I guess I was just trying to be clever looking at last year's press release, but thank you. One more question on passes just related to Kirkwood. How were Kirkwood passes sold last year? Was it all just standalone? Was it with any other resorts, and what was the pricing, if you care to comment?

So Kirkwood did have some passes that were available last year that did have other resorts attached. One that actually I'm pretty sure was Alpine Meadows, and then they had some other resorts that were attached through common ownership. I think Purgatory was one of them as well. So, obviously, we're not renewing those programs.

They also had five or six different season passes that they offered, everything -- they have a name, the Seven Wood, Six Wood, Five Wood, which was how many days during the week they were available for, then there were some premium options to some of them.

So what we did was we really -- when we announced Kirkwood, we said that we would keep initially a Kirkwood pass available at comparable pricing or relative pricing to where they were last year. And so we have kind of kept that product available, and we just took the six or seven different products that they had and tried to narrow it down to one, to just be more simple for guests.

Why I would say is, we think that a big majority of Kirkwood pass holders are going into the Tahoe value and Tahoe local. And so we think we're converting them to our existing products, but that Kirkwood-only pass is certainly still available for folks.

All right, that's helpful, thanks. I think for Jeff, as we all try to get our arms around fiscal 2013 with obviously not much information, can you help us out on fiscal year 2012? I think you pretty much said this, but just simplistically if we take the anomalies, so I want to make sure I'm looking at this correctly, $2 million for hotels and some amount for Kirkwood. Is there anything else?

From this year, you mean? No, so you (multiple speakers) --

Yes.

While you I think unusual snow making expense in the second quarter that we would, of course, not expect to recur.

Which was about how much?

A couple million.

Okay.

$2 million, and then -- so we had that. We had, again, the Lodging reorg costs turned around with -- so not only we had the hit, but you were having net savings going forward of a couple million, and then over $3 million in unusual expense this year from the acquisitions based on the timing of when we acquired in going into their seasonal low periods, and then just the associated transaction/transition costs.

Okay, right, perfect, thanks. And just lastly on -- actually, two more things. One, the guidance for this year -- I know the implied guidance of under that range -- what does that say about cash flow, what the guidance for cash flow would be? I guess I could back into it, but I'm curious.

I think we don't -- we give guidance on capital on a calendar year basis because, again, a lot of that capital gets done in the summer and we didn't want to have to cut off capital depending on what the status of the timing of the construction between July and August. So some of that can just swing between the fourth quarter and first quarter. But bottom line is I think from a free cash flow standpoint on the Resort business, it's going to continue to be fairly positive and in the zone of what we have been seeing in past years, despite what we had reported on. And then Real Estate continues to be a net positive, obviously, because we're not spending any more money on Real Estate. So every unit that we sell and all the units that we sold this year, so 18 in total between the Ritz and One Ski Hill Place is all just positive net cash proceeds to us.

Okay, thanks, and this is truly my final question. On Real Estate, can you just confirm -- you have not lowered prices in Vail since about two years ago and have not lowered them, period, in Breckenridge, I guess. I guess there are 75 units or so left. Do you plan to change pricing?

The list prices have remained the same since they were two years ago at Ritz, when we made that one change. And One Ski Hill Place, we have not changed the list prices since we initially offered the units.

Do you feel there's enough demand to keep those -- your balance sheet certainly isn't forcing you to make any changes?

No. I actually think we're very pleased with the Real Estate sales this year. I think the dynamic, if you think about it, of a highly unusual year where you just had less people visiting -- we still were able to sell to people that were in town the same number of units that we thought we'd sell when we set out that target in September of last year, before the season even started. And I think we're seeing really good momentum. And as more and more units sell, I think it makes a project easier to sell through to the end because you've obviously got prospective buyers looking around and seeing a lot more people that have been confident in the near-term in buying in this environment those units. So I think that really says a lot for the projects and the momentum that they have.

At the same time, and you mentioned it, which is very true, we are thrilled with when people come in and rent the unsold units at One Ski Hill Place, it's the most successful lodging ADRs by far that we've seen in the Breck market, and it brings in a different type of customer, some who may end up buying units, others who are obviously contributing strongly to the mountain from a luxury standpoint because that's what that project is. And seeing things that we haven't seen before in Breckenridge (technical difficulty) ski school usage and, obviously, fine dining and retail purchases. So I think all that is a big help and why, given our balance sheets, no need to do any kind of fire sale approach to this real estate. I think it's selling through nice, ratably, clearly outperforming the marketplace. And we are very comfortable with that pace.

Okay, perfect, thank you.

Tim Hamby, Janco Partners.

Just wanted to see, your international visits were up 2% in a difficult year, and it looks like you guys are obviously seeing some strong demand from international markets still. But I wanted to see if you could drill down to the Brazilian and Mexican markets and see what you're doing as far as your marketing programs there. And then, also, you said you see some upside in the UK markets. I wanted to see if you will be increasing your efforts there or maintaining more of just the same balance that you have now.

Sure. In the UK, I guess what I shared was that there's upside because the UK economy has been so bad that you would tend to believe that as that economy stabilizes and eventually comes back, there's upside. I can't say that we are seeing upside at the moment. We are seeing relatively flat performance, though it's relatively flat after being hit pretty hard over the last few years. So I think we feel like we're probably at the bottom, and so at this point, I think that provides -- and the UK was such a big market for us and it was down so much over the last few years that it really does provide upside when the economy comes back.

Mexico, a very, very strong market for us. We have a huge penetration there, very active marketing both on almost any front that you look at, whether it's group sales, tour operators, Internet marketing, having events down there and marketing to folks in Mexico for numerous different products -- club, real estate sales, season passes, lodging, everything. We have a very robust program there.

Brazil, I think, was one of our top growth markets for this past season and we're looking to replicate a lot of activities and programs that we have in Mexico into Brazil as well. A little bit different clientele, different air considerations, different things that Brazilians are looking for versus Mexicans, so we actually feel like that's one of our top targets as we think about next year. It was for this year, and again we expect to see even greater growth from that market going forward.

And then also kind of follow up on that is -- what are you seeing here as far as the appetite for season passes from international guests? You said they were up 30% this season, but I want to know if you're seeing a lot of demand there and if you're specifically marketing the Epic and the season passes to them?

We have absolutely -- I think the 30% increase would tend to indicate that we are seeing some real growth there. We tend to see that continue through the fall, and I think we are being even more aggressive with reaching out to international clients directly and through tour operators to try and drive that business.

Relative to Colorado and Tahoe and New York and Chicago, it's not -- any particular country is not as big as those markets, obviously. And there's a pretty high barrier for international folks, obviously, to buy a season pass because they typically can't take multiple trips. But I think these folks that come, many of them sometimes consider going to multiple resorts when they're here. And I think what we're convincing them of is that the best deal possible for them is to buy our pass, and if they come in for 10 days or 14 days, to just spend that entire time within our family of resorts. And we're seeing real traction along that front. I think, again, real opportunity for us going forward, but it won't move the needle like Colorado does, obviously.

Thank you. Great quarter, guys.

(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 final remarks.

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

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