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Vail Resorts reduces earnings expectations

AVON – Vail Resorts (VR) announced Tuesday it is reducing its expected earnings for the year by nearly $20 million, with officials citing reduced skier visits in the face of a war in Iraq.

Looking at the company’s performance to date in the third quarter, officials said they anticipate financial results will fall below an original analysis for the quarter ending today and the 2003 fiscal year.

A statement released by Vail Resorts said the company expects earnings before interest, taxes, depreciation and amortization (EBITDA) to range from $108 million to $118 million, including severance payouts and a $4 million to $7 million loss associated with the startup of the Ritz Carlton Hotel in Bachelor Gulch. VR’s second-quarter statement put the figure at $128 million to $138 million, excluding $2.5 million in expected severance payouts.



It is the second time this year Vail Resorts has lowered its earnings expectations.

In the company statement, chairman and chief executive officer Adam Aron said, “Heightened public debate about the prospects of impending war, followed by the actual outbreak of hostilities, in what would normally be the busiest time during Vail Resorts’ year, had a profound impact on our resort revenues and profitability in our fiscal third quarter. This was especially true for the month of March.”



As an example, Aron said lift ticket revenues were about 30 percent above last year’s sales through February but were 1 percent less in March. Aron said the increase in revenue was evident in nearly every aspect of the resorts’ business areas.

In the fall, VR prepared for hard times with drastic cost-cutting measures including layoffs and executive buyouts. An October 2002 plan attempted to trim $10 million in expenses, including the elimination of 100 jobs.

“Even though Vail Resorts continues to outperform a broad array of other companies in the U.S. travel industry, we are nonetheless disappointed by this outcome,” Aron said in the statement. “Looking ahead, the company is assessing significant additional cost reductions, while maintaining its commitment to offering an excellent guest service experience, to generate increased profitability in fiscal 2004 and beyond.”

Vail Resorts dropped cancellation fees and extended travel programs to lure travelers who were hesitant to come to the mountains during uncertain economic and military times. The resort and its reservations subsidiary, RockResorts Colorado, dropped cancellation fees after callers expressed concerns about making reservations with an upcoming war. The company also extended the “Kids Fly Free” program with airline partners.

But according to a research analyst, war and impassable weather conspired against Vail Resorts in March. Stacy Forbes, an analyst with Janco Partners in Denver, said the third-

quarter malaise probably isn’t isolated to Vail Resorts ski areas. Skier numbers will probably be down throughout the state for that period, especially for resorts dependent on destination skiers.

“And we had the blizzard – we tried, but we couldn’t get there,” Forbes said.

The VR statement estimated year-end resort operations earnings of between $47 million and $56 million and a loss of $77 million to $80 million in real estate revenue.

Vail Resorts stock closed down 27 cents Tuesday to $12.02 a share in average trading.

Reid Williams can be reached at (970) 668-3998, ext. 237, or rwilliams@summitdaily.com.


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