Vail Resorts (MTN)

We are vulnerable to the risk of unfavorable weather conditions.>  The ability to attract visitors to our resorts is influenced by weather conditions and by the amount and timing of snowfall during the ski season.  Unfavorable weather conditions can adversely affect skier visits and our revenue and profits.  Unseasonably warm weather may result in inadequate natural snowfall and reduce skiable terrain which increases the cost of snowmaking and could render snowmaking wholly or partially ineffective in maintaining quality skiing conditions, including in areas which are not accessible by snowmaking equipment.  Excessive natural snowfall may materially increase the costs incurred for grooming trails and may also make it difficult for visitors to obtain access to our mountain resorts.  In the past 20 years, our Colorado ski resorts have averaged between 20 and 30 feet of annual snowfall and Heavenly receives average yearly snowfall of approximately 23 feet, both of which are significantly in excess of the average for United States ski resorts.  However, there is no assurance that our resorts will receive seasonal snowfalls near the historical average in the future.  Also, the early season snow conditions and skier perceptions of early season snow conditions influence the momentum and success of the overall season.  In addition, a severe and prolonged drought could affect our otherwise adequate snowmaking water supplies or increase the cost of snowmaking.  Unfavorable weather conditions, including those which may increase the risk of the occurrence of forest fires, can adversely affect our resorts and lodging properties as vacationers tend to delay or postpone vacations if conditions differ from those that typically prevail at such resorts for a given season.  There is no way for us to predict future weather patterns or the impact that weather patterns may have on our results of operations or visitation.

We are subject to the risk of economic downturns including adverse affects on the overall travel and leisure related industries.>  Periods of economic slowdown or recession, whether regional, national or international, may decrease the discretionary spending of our guests.  Actual or perceived fear of recession may also lead to decreased discretionary spending.  Skiing, travel and tourism are discretionary recreational activities that can entail a relatively high cost of participation and can be adversely affected by economic slowdown or recession, which, in turn, could negatively impact our operating results. This could further be exacerbated by the fact that we charge some of the highest ticket prices, as well as prices for our ancillary businesses including ski school, in the ski industry.  While pricing increases historically have not reduced demand, there can be no assurances that demand will remain price inelastic.  Similarly, there can be no assurance that a decrease in the amount of discretionary spending by the public would not have an adverse effect on our results of operations.  Additionally, many of our guests travel by air and the impact of higher fuel costs in addition to higher cost and availability of air services may cause a decrease in visitation by destination guests to our resorts.  Higher energy costs and gasoline prices may also result in a reduction to in-state visitation.

We depend on a seasonal workforce.>  Our mountain and lodging operations are largely dependent on a seasonal workforce.  We recruit worldwide to fill staffing needs each season and utilize visas to enable the use of foreign workers.  In addition, we manage seasonal wages and the timing of the hiring process to ensure the appropriate workforce is in place.  We cannot guarantee that material increases in the cost of securing our seasonal workforce will not be necessary in the future.  Furthermore, we cannot guarantee that we will be able to obtain the visas necessary to hire foreign workers who are an important source for the seasonal workforce.  Increased seasonal wages or an inadequate workforce could have an adverse impact on our results of operations.

Terrorist acts upon the United States and acts of war (actual or threatened) could have a material adverse effect on us.>  The terrorist acts carried out against the United States on September 11, 2001 and the war with Iraq and its aftermath adversely impacted the international travel and leisure industry.  Additional terrorist acts against the United States and the threat of or actual war by or upon the United States could depress the public's propensity to travel, upon which our operations are highly dependent, which could have a material adverse impact on our results of operations.

We face significant competition.>  The ski resort and lodging industries are highly competitive.  The number of people who ski in the United States (as measured in skier visits) has generally ranged between 52 million and 61 million annually over the last decade, with approximately 60.5 million visits for the 2007/2008 ski season.  The factors that we believe are important to customers include:

·	proximity to population centers;

 

·	availability and cost of transportation to ski areas;

 

·	ease of travel to ski areas (including direct flights by major airlines);

 

·	pricing of lift tickets and/or season passes and the number, quality and price of related ancillary services (ski school, dining and retail/rental), amenities and lodging;

 

·	snowmaking facilities;

 

·	type and quality of skiing and snowboarding offered;

 

·	duration of the ski season;

 

·	weather conditions; and

 

·	reputation.

 

We have many competitors for our ski vacationers, including other major resorts in Colorado, Lake Tahoe area and other major destination ski areas worldwide.  Our destination guests can choose from any of these alternatives, as well as non-skiing vacation destinations around the world.  In addition, other forms of leisure such as sporting events and participation in other competing indoor and outdoor recreational activities are available to potential guests.

RockResorts hotels and our other hotels compete with numerous other hotel companies that may have greater financial resources than we do and they may be able to adapt more quickly to changes in customer requirements or devote greater resources to promotion of their offerings than us.  We believe that developing and maintaining a competitive advantage will require us to make continued capital investment in our resorts.  We cannot assure that we will have sufficient resources to make the necessary capital investments to do so, and we cannot assure that we will be able to compete successfully in this market or against such competitors.

Our future acquisitions might not be successful.>  Historically, we have acquired certain ski resorts and other destination resorts and hotel properties, as well as developable land in proximity to our resorts.  We cannot make assurances that we will be able to continue to successfully integrate and manage these acquired properties profitably or increase our profits from these operations.  We continually evaluate potential acquisitions and intend to actively pursue acquisition opportunities, some of which could be significant.  We could face various risks from additional acquisitions, including:

·	inability to integrate acquired businesses into our operations;

 

·	diversion of our management’s attention;

 

·	potential increased debt leverage;

 

·	litigation arising from acquisition activity; and

 

·	unanticipated problems or liabilities.

 

In addition, we run the risk that any new acquisitions may fail to perform in accordance with expectations, and that estimates of the costs of improvements for such properties may prove inaccurate.

Our future real estate development plans might not be successful.>  We have significant development plans for our properties and/or operations.   We could experience significant difficulties initiating or completing these projects, due to among other things:

·	adverse changes in real estate markets;

 

·	escalation in construction costs due to price increases in commodities, unforeseen conditions, inadequate design or drawings, or other causes;

 

·	difficulty in meeting pre-sale targets;

 

·	work stoppages;

 

·	weather interferences;

 

·	shortages in obtaining materials;

 

·	difficulty in receiving the necessary regulatory approvals;

 

·	difficulty in obtaining qualified contractors or subcontractors; and

 

·	unanticipated incremental remediation costs related to design and construction issues.

 

Our real estate development plans are designed to make our resorts attractive to our guests and to maintain competitiveness.  If we are not successful in implementing our development plans, in addition to not realizing intended profits from the real estate developments, our guests may choose to go to other resorts that they perceive have better amenities and our results of operations could be materially adversely affected.

Future changes in the real estate market could affect the value of our investments.>    We have extensive holdings of real property at our resorts throughout Summit and Eagle Counties in Colorado.  We have plans to make significant additional investments in developing property at all of our mountain resorts.  The value of our real estate property and the revenue from related development activities may be adversely affected by a number of factors, including:

·	local and national economic climate;

 

·	local real estate conditions (such as an oversupply of space or a reduction in demand for real estate in an area);

 

·	attractiveness of the properties to prospective purchasers and tenants;

 

·	increased construction costs, project difficulties or delays;

 

·	government regulations and changes in real estate, environmental, zoning or tax laws;

 

·	interest rate levels and the availability of financing for buyers; and

 

·	potential liabilities under environmental and other laws.

 

We may not be able to fund resort capital expenditures and investment in real estate.   >We expect to continue incurring substantial resort capital expenditures and investments in real estate development.  We currently anticipate resort capital expenditures (primarily related to the Mountain and Lodging segments) will be approximately $105 million to $115 million for calendar year 2008.  Based on the status of several specific real estate projects, we will continue to invest significant amounts in real estate over the next several years and we currently anticipate real estate investments to be approximately $260 million to $280 million for calendar year 2008.  Our ability to fund these investments will depend on our ability to generate sufficient cash flow from operations, obtain substantial pre-sale deposits and/or to borrow from third parties.  We cannot provide assurances that our operations will be able to generate sufficient cash flow to fund such development costs, or that we will be able to obtain sufficient financing on adequate terms, or at all.  Our ability to generate cash flow and to obtain third-party financing will depend upon many factors, including:

·	our future operating performance;

 

·	general economic conditions and economic conditions affecting the resort industry, the ski industry and the general capital markets;

 

·	our ability to meet our pre-sell targets on our vertical real estate development projects;

 

·	competition; and

 

·	legislative and regulatory matters affecting our operations and business.

 

We could finance future expenditures from any combination of the following sources:

·	cash flow from operations;

 

·	construction financing, including non-recourse or other financing;

 

·	bank borrowings;

 

·	public offerings of debt or equity; and

 

·	private placements of debt or equity.

 

Any inability to generate sufficient cash flows from operations or to obtain adequate third-party financing could cause us to delay or abandon certain development plans which could have a material adverse effect on our operating results and financial condition.

We rely on government permits.>  Certain of our resort operations require permits and approvals from certain Federal, state, and local authorities, to the Forest Service and U.S. Army Corps of Engineers.  Virtually all of our ski trails and related activities at Vail Mountain, Breckenridge, Keystone and Heavenly and a majority of Beaver Creek are located on Federal land.  The Forest Service has granted us permits to use these lands, but maintains the right to review and approve many operational matters, as well as the location, design and construction of improvements in these areas.  Currently, our permits expire December 31, 2029 for Breckenridge, October 31, 2031 for Vail Mountain, December 31, 2032 for Keystone, December 31, 2038 for Beaver Creek and May 1, 2042 for Heavenly. The Forest Service can terminate or amend these permits if, in its opinion, such termination is required in the public interest.  A termination or amendment of any of our permits could have a materially adverse affect on our business and operations.

In order to undertake improvements and new development, we must apply for permits and other approvals.  These efforts, if unsuccessful, could impact our expansion efforts.  Furthermore, Congress may materially increase the fees we pay to the Forest Service for use of these Federal lands.

We are subject to extensive environmental laws and regulations in the ordinary course of business.  >Our operations are subject to a variety of Federal, state and local environmental laws and regulations including those relating to emissions to the air, discharges to water, storage, treatment and disposal of wastes, land use, remediation of contaminated sites and protection of natural resources such as wetlands. For example, future expansions of certain of our ski facilities must comply with applicable forest plans approved under the National Forest Management Act or local zoning requirements.  In addition, most projects to improve, upgrade or expand our ski areas are subject to environmental review under the National Environmental Policy Act and, for California projects at Heavenly, the California Environmental Quality Act. Both acts require that the Forest Service study any proposal for potential environmental impacts and include in its analysis various alternatives.  Our ski area improvement proposals may not be approved or may be approved with modifications that substantially increase the cost or decrease the desirability of implementing the project.  Our facilities are subject to risks associated with mold and other indoor building contaminants.  From time to time our operations are subject to inspections by environmental regulators or other regulatory agencies. We are also subject to worker health and safety requirements.  We believe our operations are in substantial compliance with applicable material environmental, health and safety requirements. However, our efforts to comply do not eliminate the risk that we may be held liable, incur fines or be subject to claims for damages, and that the amount of any liability, fines, damages or remediation costs may be material for, among other things, the presence or release of regulated materials at, on or emanating from properties we now or formerly owned or operated, newly discovered environmental impacts or contamination at or from any of our properties, or changes in environmental laws and regulations or their enforcement.

Failure to maintain the integrity of guest data could result in damages of reputation and/or subject us to costs, fines or lawsuits.>  We collect personally identifiable information relating to our guests for various business purposes, including marketing and promotional purposes.  The integrity and privacy of our guest’s information is important to us and our guests have a high expectation that we will adequately protect their personal information.  The regulatory environment governing privacy laws is increasingly demanding and privacy laws continue to evolve and on occasion may be inconsistent from one jurisdiction to another.  Compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our ability to market our products, properties and services to our guests.  Furthermore, non-compliance with applicable privacy regulations by us (or in some circumstances non-compliance by third parties engaged by us), breach of security on systems storing our guest data, a loss of guest data or fraudulent use of guest data could aversely impact our reputation or result in fines or other damages and litigation.

The high fixed cost structure of ski resort operations. >The cost structure of ski resort operations is largely fixed (with the exception of certain variable expenses including Forest Service fees, other resort related fees, credit card fees, retail/rental operations, ski school labor and dining operations) and any unforeseen material declines in the economy, elevated geopolitical uncertainties and/or significant changes in historical snowfall patterns, as well as other risk factors discussed herein could adversely effect revenue.  As such, our margin, profits and cash flows may be materially reduced due to declines in revenue given our high fixed cost structure.

We are subject to litigation in the ordinary course of business.  >We are, from time to time, subject to various asserted or unasserted legal proceedings and claims.  Any such claims, regardless of merit, could be time-consuming and expensive to defend and could divert management’s attention and resources.  While management believes we have adequate insurance coverage and accrues loss contingencies for all known matters that are probable and can be reasonably estimated, we cannot assure that the outcome of all current or future litigation will not have a material adverse effect on us and our results of operations.  For a more detailed discussion of our legal proceedings see Legal Proceedings under Item 3 and Note 13, Commitments and Contingencies, of the Notes to Consolidated Financial Statements.

We are subject to the risks of brand concentration.>  We are subject to the potential risks associated with concentration of our hotels under the RockResorts brand and the brand image associated with each of our ski resorts.  A negative public image or other adverse event which becomes associated with one of our brands could adversely affect our revenue and profitability.

If we do not retain our key personnel, our business may suffer.>  The success of our business is heavily dependent on the leadership of key management personnel, including our Chief Executive Officer, Chief Financial Officer, Executive Vice Presidents of our Mountain Division, Chief Operating Officer of RockResorts, President of VRDC, General Counsel and each of our Senior Vice Presidents.  If any of these persons were to leave, it could be difficult to replace them, and our business could be harmed.  We do not maintain “key-man” life insurance on any of our employees.

We are subject to accounting regulations and use certain accounting estimates and judgments that may differ significantly from actual results.  >Implementation of existing and future legislation, rulings, standards and interpretations from the FASB or other regulatory bodies could affect the presentation of our financial statements and related disclosures.  Future regulatory requirements could significantly change our current accounting practices and disclosures.  Such changes in the presentation of our financial statements and related disclosures could change an investor’s interpretation or perception of our financial position and results of operations.

We use many methods, estimates and judgments in applying our accounting policies (see Critical Accounting Policies in Item 7 of this Form 10-K).  Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead us to change our methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect our results of operations.

Risks Relating to Our Capital Structure

 

Our stock price is highly volatile.  >The market price of our stock is highly volatile and subject to wide fluctuations in response to factors such as the following, some of which are beyond our control:

·	quarterly variations in our operating results;

 

·	operating results that vary from the expectations of securities analysts and investors;

 

·	change in valuations, including our future real estate developments;

 

·	changes in the overall travel, gaming, hospitality and leisure industries;

 

·	changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors or such guidance provided by us;

 

·	announcements by us or companies in the travel, gaming, hospitality and leisure industries of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures, capital commitments, plans, prospects, service offerings or operating results;

 

·	additions or departures of key personnel;

 

·	future sales of our securities;

 

·	trading and volume fluctuations;

 

·	other risk factors as discussed above; and

 

·	other unforeseen events.

 

Stock markets in the United States often experience extreme price and volume fluctuations.  Market fluctuations, as well as general political and economic conditions such as acts of terrorism, a recession or interest rate or currency rate fluctuations, could adversely affect the market price of our stock.

We have not historically paid cash dividends to our common stockholders.  >We have not declared or paid any cash dividends on our common shares since becoming publicly traded in 1997.  Payment of any future dividends on our common stock will depend upon our earnings and capital requirements, the terms of our debt instruments and other factors the Board of Directors considers appropriate.

Anti-takeover provisions affecting us could prevent or delay a change of control that is beneficial to our shareholders.  >Provisions of our certificate of incorporation and bylaws, provisions of our debt instruments and other agreements and provisions of applicable Delaware law and applicable Federal and state regulations may discourage, delay or prevent a merger or other change of control that holders of our securities may consider favorable.  These provisions could:

·	delay, defer or prevent a change in control of the Company;

 

·	discourage bids for our securities at a premium over the market price;

 

·	adversely affect the market price of, and the voting and other rights of the holders of our securities; or

 

·	impede the ability of the holders of our securities to change our management.

 

Our indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations.>  Our level of indebtedness could have important consequences even though we have minimal principal payments due over the next five years (excluding payments of amounts due under non-recourse real estate financings which will be made utilizing proceeds from the applicable real estate closings).  For example, it could:

·	make it more difficult for us to satisfy our obligations;

 

·	increase our vulnerability to general adverse economic and industry conditions;

 

·	require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, real estate developments, marketing efforts and other general corporate purposes;

 

·	limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 

·	place us at a competitive disadvantage compared to our competitors that have less debt; and

 

·	limit our ability to borrow additional funds.

 

We may be able to incur substantial additional indebtedness in the future.  The terms of our Indenture

(as defined below) do not fully prohibit us from doing so.  Our Credit Facility (as defined below) permits additional borrowings of up to $306.2 million as of July 31, 2008.  If new debt is added to our current debt levels, the related risks that we face could intensify.

There are restrictions imposed by the terms of our indebtedness.>  The operating and financial restrictions and covenants in our senior credit facility (the “Credit Facility”) and the Indenture, dated as of January 29, 2004 among us, the guarantors therein and the Bank of New York, as Trustee (“Indenture”), governing the 6.75% Senior Subordinated Notes due 2014 (“6.75% Notes”) may adversely affect our ability to finance future operations or capital needs or to engage in other business activities that may be in our long-term best interests.  For example, the Indenture and the Credit Facility contain a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:

·	incur additional debt;

 

·	pay dividends, repurchase our stock and make other restricted payments;

 

·	create liens;

 

·	make investments;

 

·	engage in sales of assets and subsidiary stock;

 

·	enter into sale-leaseback transactions;

 

·	enter into transactions with affiliates;

 

·	transfer all or substantially all of our assets or enter into merger or consolidation transactions; and

 

·	make capital expenditures.

 

In addition, there can be no assurance that we will meet the financial covenants contained in our Credit Facility.  If we breach any of these restrictions or covenants, or suffer a material adverse change which restricts our borrowing ability under our Credit Facility, we would not be able to borrow funds thereunder without a waiver, which inability could have an adverse effect on our business, financial condition and results of operations.  In addition, a breach, if uncured, could cause a default under the 6.75% Notes and our other debt.  Our indebtedness may then become immediately due and payable.  We may not have or be able to obtain sufficient funds to make these accelerated payments, including payments on the 6.75% Notes.

ITEM 1B.  UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.  PROPERTIES.

The following table sets forth the principal properties owned or leased by the Company for use in its operations:

Location		Ownership		Use
Arrowhead Mountain, CO		Owned		Ski resort operations, including ski lifts, ski trails, buildings and other improvements and commercial space
BC Housing Riveredge, CO		26% Owned		Employee housing facilities
Bachelor Gulch Village, CO		Owned		Ski resort operations, including ski lifts, ski trails, buildings and other improvements and commercial space
Beaver Creek Resort, CO		Owned		Ski resort operations, including ski lifts, ski trails, buildings and other improvements, commercial space and real estate held for sale or development
Beaver Creek Mountain, CO (3,849 acres)		Special Use Permit		Ski trails, ski lifts, buildings and other improvements
Beaver Creek Mountain Resort, CO		Owned		Golf course, clubhouse, commercial space  and residential spaces
Breckenridge Ski Resort, CO		Owned		Ski resort operations, including ski lifts, ski trails, buildings and other improvements, commercial space and real estate held for sale or development
Breckenridge Mountain, CO (5,702 acres)		Special Use Permit		Ski trails, ski lifts, buildings and other improvements
Breckenridge Terrace, CO		50% Owned		Employee housing facilities
Broomfield, CO		Leased		Corporate offices
Colter Bay Village, WY		Concessionaire contract		Lodging and dining facilities
Eagle-Vail, CO		Owned		Warehouse facility
Great Divide Lodge, CO		Owned		Lodging, dining and conference facilities
Heavenly Mountain Resort, CA		Owned		Ski resort operations, including ski lifts, ski trails, buildings and other improvements and commercial space
Heavenly Mountain Resort, CA (7,050 acres)		Special Use Permit		Ski trails, ski lifts, buildings and other improvements
Inn at Keystone, CO		Owned		Lodging, dining and conference facilities
Jackson Hole Golf & Tennis Club, WY		Owned		Golf course, clubhouse, tennis facilities, dining and real estate held for sale or development
Jackson Lake Lodge, WY		Concessionaire contract		Lodging, dining and conference facilities
Jenny Lake Lodge, WY		Concessionaire contract		Lodging and dining facilities
Keystone Conference Center, CO		Owned		Conference facility
Keystone Lodge, CO		Owned		Lodging, spa, dining and conference facilities
Keystone Resort, CO		Owned		Ski resort operations, including ski lifts, ski trails, buildings and other improvements, commercial space, dining and real estate held for sale or development
Keystone Mountain, CO (8,376 acres)		Special Use Permit		Ski trails, ski lifts, buildings and other improvements
Keystone Ranch, CO		Owned		Golf course, clubhouse and dining facilities
Red Sky Ranch, CO		Owned		Golf courses, clubhouses, dining facilities and real estate held for sale or development
River Course at Keystone, CO		Owned		Golf course and clubhouse
Seasons at Avon, CO		Leased/50% Owned		Administrative offices
Ski Tip Lodge, CO		Owned		Lodging and dining facilities
The Arrabelle at Vail Square, CO		Owned		Lodging, spa, dining and conference facilities
The Lodge at Vail, CO		Owned		Lodging, spa, dining and conference facilities
The Osprey at Beaver Creek, CO		Owned		Lodging, dining and conference facilities
The Tarnes at Beaver Creek, CO		31% Owned		Employee housing facilities
Tenderfoot Housing, CO		50% Owned		Employee housing facilities
The Pines Lodge at Beaver Creek, CO		Owned		Lodging, dining and conference facilities
Vail Mountain, CO		Owned		Ski resort operations, including ski lifts, ski trails, buildings and other improvements, commercial space and real estate held for sale or development
Vail Mountain, CO (12,226 acres)		Special Use Permit		Ski trails, ski lifts, buildings and other improvements
Village at Breckenridge, CO		Owned		Lodging, dining, conference facilities and commercial space
SSV Properties		69.3% Owned		Over 140 retail stores for recreational products including rental

The Forest Service SUPs are encumbered under certain debt instruments of the Company.  Many of the Company's properties are used across all segments in complementary and interdependent ways.

ITEM 3.                      LEGAL PROCEEDINGS.

The Company is a party to various lawsuits arising in the ordinary course of business, including Resort (Mountain and Lodging) related cases and contractual and commercial litigation that arises from time to time in connection with the Company's real estate and other business operations.  Management believes the Company has adequate insurance coverage or has accrued for loss contingencies for all known matters and that, although the ultimate outcome of such claims cannot be ascertained, current pending and threatened claims are not expected to have a material, individually and in the aggregate, adverse impact on the financial position, results of operations and cash flows of the Company.

The Canyons Ski Resort Litigation

During the fourth quarter of the fiscal year ended July 31, 2007, the Company entered into an agreement with Peninsula Advisors, LLC (“Peninsula”) for the negotiation and mutual acquisition of The Canyons ski resort (“The Canyons”) and the land underlying The Canyons.  On July 15, 2007, American Skiing Company (“ASC”) entered into an agreement to sell The Canyons to Talisker Corporation and Talisker Canyons Finance Company, LLC (together “Talisker”).  On July 27, 2007, the Company filed a complaint in the District Court in Colorado against Peninsula and Talisker claiming, among other things, breach of contract by Peninsula and intentional interference with contractual relations and prospective business relations by Talisker and seeking damages, specific performance and injunctive relief.  On October 19, 2007, the Company’s request for a preliminary injunction to prevent the closing of the acquisition by Talisker of The Canyons from ASC was denied.  On November 8, 2007, Talisker filed an answer to the Company’s complaint along with three counterclaims.  On November 12, 2007, Peninsula filed a motion to dismiss and for partial summary judgment.  The Company believes that these counter claims and motions are without merit.  These motions were set for hearing on June 20, 2008 but the date was vacated upon request of new counsel to Peninsula and a new hearing date has not yet been set.  The Company is unable to predict the ultimate outcome of the above described actions.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

 

 

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PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The Company's common stock is traded on the New York Stock Exchange under the symbol “MTN”.  As of September 22, 2008, 36,921,791 shares of common stock were outstanding, held by approximately 402 holders of record.

The declaration of cash dividends in the future will depend on the Company's earnings, financial condition, capital needs, restrictions under debt instruments and on other factors deemed relevant by the Board of Directors at that time.  It is the current policy of the Company's Board of Directors to retain earnings to finance the operations and expansion of the Company's business.

The following table sets forth, for the years ended July 31, 2008 and 2007, and quarters indicated (ended October 31, January 31, April 30, and July 31) the range of high and low per share sales prices of the Company’s common stock as reported on the New York Stock Exchange Composite Tape.

		Vail Resorts
		Common Stock
		High			Low
Year Ended July 31, 2008
1st Quarter		$	66.25		$	48.41
2nd Quarter			60.15			40.94
3rd Quarter			51.65			39.32
4th Quarter			51.38			30.03
Year Ended July 31, 2007
1st Quarter		$	41.55		$	34.01
2nd Quarter			47.54			38.50
3rd Quarter			59.32			46.19
4th Quarter			64.97			52.06

Repurchase of Equity Securities

The following table summarizes the purchase of the Company’s equity securities during the fourth quarter of the year ended July 31, 2008:

Period		Total Number of Shares Purchased			Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)			Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
May 1, 2008 – May 31, 2008		--		$	--			--			1,493,767
June 1, 2008 – June 30, 2008		683,649			43.29			683,649			810,118
July 1, 2008 – July 31, 2008		814,226			35.80			814,226			2,995,892
Total		1,497,875		$	39.22			1,497,875

(1)

On March 9, 2006, the Company’s Board of Directors approved the repurchase of up to 3,000,000 shares of common stock and subsequently on July 16, 2008 approved an increase of the Company’s common stock repurchase authorization by an additional 3,000,000 shares.  Acquisitions under the share repurchase program may be made from time to time at prevailing prices as permitted by applicable laws, and subject to market conditions and other factors.  The stock repurchase program may be discontinued at any time.

Performance Graph

The total return graph is presented for the period from the end of the Company’s 2003 fiscal year through the end of the Company’s 2008 fiscal year.  The comparison assumes that $100 was invested at the beginning of the period in the common stock of the Company (“MTN”), The Russell 2000, The Standard & Poor’s 500 Stock Index and the Dow Jones U.S. Travel and Leisure Stock Index.  The Company included the Dow Jones U.S. Travel and Leisure Index as the Company believes it competes in the travel and leisure industry.

The performance graph is not deemed filed with the SEC and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933 or the Exchange Act of 1934, unless it specifically incorporates the performance graph by reference therein.

 

 

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ITEM 6.  SELECTED FINANCIAL DATA.

The following table presents selected historical consolidated financial data of the Company derived from the Company's Consolidated Financial Statements for the periods indicated.  The financial data for the years ended July 31, 2008, 2007 and 2006 and as of July 31, 2008 and 2007 should be read in conjunction with the Consolidated Financial Statements, related notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere in this Form 10-K.  The table presented below is unaudited.  The data presented below are in thousands, except for diluted per share net income (loss), effective ticket price (“ETP”), ADR and RevPAR amounts.

		Year Ended July 31,
		2008(1)				2007(1)				2006(1)			2005(1)				2004 (1)
Statement of Operations Data:
Revenue:
Mountain		$	685,533			$	665,377			$	620,441		$	540,855			$	500,995
Lodging			170,057				162,451				155,807			196,351				180,525
Real estate			296,566				112,708				62,604			72,781				45,123
Total net revenue			1,152,156				940,536				838,852			809,987				726,643
Segment operating expense:
Mountain			470,362				462,708				443,116			391,889				368,875
Lodging			159,832				144,252				142,693			177,469				165,983
Real estate			251,338				115,190				56,676			58,254				16,791
Total segment operating expense			881,532				722,150				642,485			627,612				551,649
Income from operations			176,005				128,206				105,339			88,329				81,811
Gain on sale of real property			709				--				--			--				--
Mountain equity investment income, net			5,390				5,059				3,876			2,303				1,376
Lodging equity investment loss, net			--				--				--			(2,679	)			(3,432	)
Investment income, net			8,285				12,403				7,995			2,066				1,886
Interest expense, net			(30,667	)			(32,625	)			(36,478	)		(40,298	)			(47,479	)
Loss on extinguishment of debt			--				--				--			(612	)			(37,084	)
Contract dispute credit (charges), net			11,920				(4,642	)			(3,282	)		--				--
(Loss) gain from sale of businesses, net			--				(639	)			4,625			(7,353	)			--
Net income (loss)		$	102,927			$	61,397			$	45,756		$	23,138			$	(5,959	)
Diluted per share net income (loss)		$	2.64			$	1.56			$	1.19		$	0.64			$	(0.17	)
Other Data:
Mountain
Skier visits(2)			6,195				6,219				6,288			5,940				5,636
ETP (3)		$	48.74			$	46.15			$	41.83		$	39.30			$	37.67
Lodging
ADR(4)		$	230.17			$	216.83			$	202.27		$	196.26			$	187.90
RevPAR(5)		$	106.43			$	99.58			$	92.41		$	90.98			$	81.33
Real Estate
Real estate held for sale and investment(6)		$	249,305			$	357,586			$	259,384		$	154,874			$	134,548
Other Balance Sheet Data
Cash and cash equivalents(7)		$	162,345			$	230,819			$	191,794		$	136,580			$	46,328
Total assets		$	1,925,954			$	1,909,123			$	1,687,643		$	1,525,921			$	1,533,957
Long-term debt (including long-term debt due within one year)		$	556,705			$	594,110			$	531,228		$	521,710			$	625,803
Net debt(8)		$	394,360			$	363,291			$	339,434		$	385,130			$	579,475
Stockholders' equity		$	728,756			$	714,039			$	642,777		$	540,529			$	491,163

 

(footnotes to selected financial data appear on following page)

 

 

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Footnotes to Selected Financial Data:

 

(1)

The Company has made several acquisitions and dispositions which impact comparability between years during the past five years.  The more significant of those include the sale of its majority interest in RTP, LLC (“RTP”) (sold in April 2007), Snake River Lodge & Spa (“SRL&S”) (sold in January 2006), The Lodge at Rancho Mirage (“Rancho Mirage”) (sold in July 2005), Vail Marriott (sold in June 2005) and its minority interest in Ritz-Carlton, Bachelor Gulch (“BG Resort”) (sold in December 2004). Additionally, the Company acquired 18 retail/rental locations (acquired by SSV in June 2007), two licensed Starbucks stores (acquired in June 2007) and six retail locations (acquired by SSV in August 2006).  Effective August 1, 2005, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment” (“SFAS 123R”).  See Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for the impact to the Consolidated Statements of Operations as a result of the adoption of SFAS 123R.

(2)	A skier visit represents a person utilizing a ticket or pass to access a mountain resort for any part of one day, and includes both paid and complimentary access.

(3)	ETP is calculated by dividing lift ticket revenue by total skier visits during the respective periods.

(4)	ADR is calculated by dividing total room revenue by the number of occupied rooms during the respective periods.

(5)	RevPAR is calculated by dividing total room revenue by the number of rooms that are available to guests during the respective periods.

(6)	Real estate held for sale and investment includes all land, development costs and other improvements associated with real estate held for sale and investment, as well as investments in real estate joint ventures.

(7)	Cash and cash equivalents excludes restricted cash.

(8)	Net debt is defined as long-term debt plus long-term debt due within one year less cash and cash equivalents.

 

 

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ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company should be read in conjunction with the Consolidated Financial Statements and notes related thereto included in this Form 10-K.  To the extent that the following Management's Discussion and Analysis contains statements which are not of a historical nature, such statements are forward-looking statements which involve risks and uncertainties.  These risks include, but are not limited to, those discussed in Item 1A, “Risk Factors” in this Form 10-K.  The following discussion and analysis should be read in conjunction with the Forward-Looking Statements and Item 1A, “Risk Factors” each included in this Form 10-K.

Management’s Discussion and Analysis includes discussion of financial performance within each of the Company’s segments.  The Company has chosen to specifically include Reported EBITDA (defined as segment net revenue less segment operating expense, plus or minus segment equity investment income or loss and for the Real Estate segment, plus gain on sale of real property) and Net Debt (defined as long-term debt plus long-term debt due within one year less cash and cash equivalents), in the following discussion because management considers these measurements to be significant indications of the Company’s financial performance and available capital resources.  Reported EBITDA and Net Debt are not measures of financial performance or liquidity under accounting principles generally accepted in the United States of America (“GAAP”).  The Company utilizes Reported EBITDA in evaluating performance of the Company and in allocating resources to its segments.   Refer to the end of the Results of Operations section for a reconciliation of Reported EBITDA to net income.  Management also believes that Net Debt is an important measurement as it is an indicator of the Company’s ability to obtain additional capital resources for its future cash needs.  Refer to the end of the Results of Operations section for a reconciliation of Net Debt.

Items excluded from Reported EBITDA and Net Debt are significant components in understanding and assessing financial performance or liquidity.  Reported EBITDA and Net Debt should not be considered in isolation or as an alternative to, or substitute for, net income, net change in cash and cash equivalents or other financial statement data presented in the Consolidated Financial Statements as indicators of financial performance or liquidity.  Because Reported EBITDA and Net Debt are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations, Reported EBITDA and Net Debt as presented may not be comparable to other similarly titled measures of other companies.

Overview

The Company's operations are grouped into three integrated and interdependent segments: Mountain, Lodging and Real Estate, which represented 59%, 15% and 26%, respectively, of the Company's net revenue for the year ended July 31, 2008.  The Mountain segment is comprised of the operations of five ski resort properties as well as ancillary businesses, primarily including ski school, dining and retail/rental operations.  Mountain segment revenue is seasonal in nature, the majority of which is earned in the Company’s second and third fiscal quarters.  Operations within the Lodging segment include (i) ownership/management of a group of nine luxury hotels through the RockResorts brand, including five proximate to the Company's ski resorts; (ii) the ownership/management of non-RockResorts branded hotels and condominiums proximate to the Company's ski resorts; (iii) GTLC; and (iv) golf courses.  The Resort segment is the combination of the Mountain and Lodging segments.  The Real Estate segment owns and develops real estate in and around the Company's resort communities.

The Company's single largest source of Mountain segment revenue is the sale of lift tickets (including season passes), which represented approximately 44%, 43% and 42% of Mountain segment net revenue for the years ended July 31, 2008, 2007 and 2006, respectively.  Lift ticket revenue is driven by volume and pricing.  Pricing is impacted by both absolute pricing as well as the demographic mix of guests, which impacts the price points at which various products are purchased.  The demographic mix of guests is divided into two primary categories: (i) out-of-state and international guests (“Destination”) and (ii) in-state and local visitors (“In-State”).  For the 2007/2008 ski season, Destination guests comprised an estimated 63% of the Company's skier visits, while the In-State market comprised an estimated 37% of the Company's skier visits.  Destination guests generally purchase the Company's higher-priced lift ticket products and utilize more ancillary services such as ski school, dining and retail/rental as well as the lodging at or around the Company’s resorts.  Destination guests are less likely to be impacted by changes in the weather, due to the advance planning required for their trip, but can be impacted by general economic conditions and the global geopolitical climate.  In-State guests tend to be more weather-sensitive and value-oriented; to address this, the Company markets season passes to In-State guests, generally prior to the start of the ski season.  Approximately 26%, 25% and 23% of the total lift revenue was comprised of season pass revenue for the 2007/2008, 2006/2007 and 2005/2006 ski seasons, respectively.  The cost structure of ski resort operations once a certain level of visitation is achieved is largely fixed (with the exception of certain variable expenses including Forest Service fees, other resort related fees, credit card fees, retail/rental operations, ski school labor and dining operations); as such, incremental revenue generally has high associated profit margin.

Lodging properties at or around the Company's ski resorts represented approximately 63%, 61% and 62% of the Lodging segment net revenue for the years ended July 31, 2008, 2007 and 2006, respectively, and are closely aligned with the performance of the Mountain segment, particularly with respect to visitation by Destination guests.  Revenue generated through management fees is based upon the revenue of managed individual hotel properties within the lodging portfolio, and to the extent that these managed properties are not proximate to ski resorts, the seasonality of those hotels more closely resembles the seasonality and trends within the overall travel industry.  Revenue of the Lodging segment during the Company's first and fourth fiscal quarters is generated primarily by the operations of GTLC (as GTLC's peak operating season occurs during the summer months), as well as golf operations and operations from the Company's other owned and managed properties.

The Company’s Real Estate segment primarily engages in both the vertical development of projects and to a lesser degree the sale of land to third-party developers, which latter activity generally includes the retention of some involvement and control in the infrastructure, development, oversight and design of the projects and a contingent revenue structure based on the ultimate sale of the developed units.  The Company attempts to mitigate the risk of vertical development by utilizing guaranteed maximum price construction contracts (although certain construction costs may not be covered by contractual limitations), pre-selling a portion of the project, which generally requires significant non-refundable deposits, and obtaining non-recourse financing for certain projects.  The Company’s real estate development projects also may result in the creation of certain resort assets that provide additional benefit to the Resort segment.  The Company’s Real Estate revenue and associated expense fluctuate based upon the timing of closings and the type of real estate being sold, thus increasing the volatility of Real Estate operating results between periods.  In the near-term, the majority of Real Estate revenue is expected to be generated from vertical development projects that are currently under construction, in which revenue and related cost of sales will be recorded at the time of real estate closings.

Recent Trends, Risks and Uncertainties

The data provided in this section should be read in conjunction with the risk factors identified in Item 1A and elsewhere in this Form 10-K.  The Company's management has identified the following important factors (as well as uncertainties associated with such factors) that could impact the Company's future financial performance:

·

The timing and amount of snowfall can have an impact on skier visits.  To mitigate this impact, the Company focuses efforts on sales of season passes prior to the beginning of the season to In-State skiers, who the Company believes are the most weather sensitive visitors to the Company’s ski resorts.  Additionally, the Company has invested in snowmaking upgrades in an effort to address the inconsistency of early season snowfall where possible.  Season pass revenue, although primarily collected prior to the ski season, is recognized in the Consolidated Statements of Operations throughout the ski season.  Total season pass revenue for the 2007/2008 and the 2006/2007 ski seasons increased by 7.7% and 17.7% over revenue for the prior ski seasons, respectively.

·

In March 2008, the Company announced a new season pass product (the “Epic Season Pass”) for the upcoming 2008/2009 ski season, which offers unrestricted and unlimited access to the Company’s five ski resorts.  The Epic Season Pass is being marketed towards the Company’s Destination guests although is also available to In-State guests and must be purchased on or before November 15, 2008, prior to the vast majority of the ski season.  As such, the Company expects an increase in season pass revenue for the 2008/2009 ski season; however, the Company cannot predict the overall impact the Epic Season Pass will have on overall lift revenue and ETP.

·

The economic downturn currently affecting the U.S. economy combined with higher energy costs may continue to have a negative impact on overall trends in the travel and leisure industries.  Consequently, visitation to the Company’s resorts and/or the amount the Company’s guests spend at its resorts may be negatively impacted by the weaker U.S. economy, in addition to potential lowered demand for the Company’s real estate projects.

·

Consistent with prior years, the Company plans to raise prices on the majority of its lift ticket products, including season pass products, for the 2008/2009 ski season and continues to charge some of the highest prices in the industry.  While pricing increases historically have not reduced demand, there can be no assurances that demand will remain price inelastic.

·

The Company operates its ski areas under various Forest Service permits, and many of the Company's operations require permits and approval from governmental authorities; therefore many of the Company’s on-mountain capital improvements must go through an approval process.  Changes or impacts to the applicable regulatory environment may have detrimental effects on the Company.

·

Real Estate Reported EBITDA is highly dependent on, among other things, the timing of closings on real estate under contract, which determines when revenue and associated cost of sales is recognized.  Changes to the anticipated timing of closing on one or more real estate projects, or unit closings within a real estate project, could materially impact Real Estate Reported EBITDA for a particular quarter or fiscal year.  Additionally, the magnitude of real estate projects currently under development or contemplated could result in significant fluctuations in Real Estate Reported EBITDA between periods.  For example, the Company closed on 64 of the 66 units at The Arrabelle at Vail Square (“Arrabelle”) during the year ended July 31, 2008 and expects to close on the remaining condominium units during the year ending July 31, 2009.  The Company closed on five of the 13 Lodge at Vail Chalets (“Chalets”) during the year ended July 31, 2008 and expects to close on the remaining Chalets during the year ending July 31, 2009.  Additionally, the Company expects to close on a vast majority, if not all of the 45 units at Crystal Peak Lodge during the year ending July 31, 2009.  The Company has entered into definitive sales contracts with a value of approximately $448 million related to these projects of which $272.4 million of revenue was recognized in the year ended July 31, 2008, along with the associated cost of sales.

·

The Company has several other real estate projects across its resorts under development and in the planning stages.  While the current instability in the capital markets and slowdown in the national real estate market have not, to date, materially impacted the Company’s real estate development, the Company does have elevated risk associated with the selling and/or closing of its real estate under development as a result of the current economic climate.  These risks surrounding the Company’s real estate developments are partially mitigated by the fact that the Company’s projects include a relatively low number of luxury and ultra luxury units situated at the base of its resorts, which are unique due to the relatively low supply of developable land.  Additionally, the Company’s real estate projects must meet the Company’s pre-sale requirements, which include substantial non-refundable deposits, before significant development begins; however, there is no guarantee that a sustained downward trend in the capital and real estate markets would not materially impact the Company’s real estate development activities or operating results. In addition to the expected completion of the Arrabelle, Chalets and Crystal Peak Lodge development projects during the year ending July 31, 2009, the Company is also moving forward with the development of One Ski Hill Place located at the base of Peak 8 in Breckenridge and The Ritz-Carlton Residences, Vail.  The Company expects to incur between $335 million to $355 million of development costs subsequent to July 31, 2008 on the remaining Chalets, Crystal Peak Lodge, One Ski Hill Place and The Ritz-Carlton Residences, Vail projects.

·

The Company had $162.3 million in cash and cash equivalents as of July 31, 2008 with no borrowings under the revolver component of its Credit Facility and expects to generate additional cash from operations, including future closures on real estate vertical development projects during the 2009 fiscal year.  In addition to building excess cash, the Company continuously evaluates how to utilize its excess cash, including any combination of the following strategic options: self-fund real estate under development; continue recent levels of investment in resort assets; pursue strategic acquisitions; pay off outstanding debt; repurchase additional common stock of the Company (see Note 16, Stock Repurchase Plan, of the Notes to Consolidated Financial Statements for more information regarding the Company’s stock repurchase plan); and/or other options to return value to stockholders.  The Company’s debt is long-term in nature and the Company believes its debt has favorable interest rates.  In determining its uses of excess cash, the Company has some constraints as a result of the Company’s Fourth Amended and Restated Credit Agreement, dated as of January 28, 2005, as amended, between The Vail Corporation (a wholly-owned subsidiary of the Company), Bank of America, N.A. as administrative agent and the Lenders party thereto (the “Credit Agreement”) underlying the Company’s Credit Facility and the Indenture, governing the 6.75% Notes, which limit the Company’s ability to pay dividends, repurchase stock and pay off certain of its debt, including its 6.75% Notes.

·

On June 16, 2008, the Company and East West Resort Transportation Holdings LLC entered into a definitive agreement whereby the Company will acquire substantially all of the assets and operations of Colorado Mountain Express (“CME”), a ground transportation related business.  The purchase price is approximately $38.3 million, net of certain working capital and other adjustments.  The acquisition remains subject to regulatory approvals and certain other closing conditions.  The acquisition is expected to close in the first half of the fiscal year ending July 31, 2009.

·

The Company uses many methods, estimates and judgments in applying its accounting policies (see “Critical Accounting Policies” in this section of this Form 10-K). Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead the Company to change its methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect the Company’s results of operations.

Results of Operations

Summary

Shown below is a summary of operating results for the years ended July 31, 2008, 2007 and 2006 (in thousands):

		Year Ended July 31,
		2008				2007				2006
Mountain Reported EBITDA		$	220,561			$	207,728			$	181,201
Lodging Reported EBITDA			10,225				18,199				13,114
Resort Reported EBITDA			230,786				225,927				194,315
Real Estate Reported EBITDA			45,937				(2,482	)			6,719
Total Reported EBITDA		$	276,723			$	223,445			$	201,034
Income before provision for income taxes		$	166,013			$	100,651			$	75,010
Net income		$	102,927			$	61,397			$	45,756

Mountain Segment

Mountain segment operating results for the years ended July 31, 2008, 2007 and 2006 are presented by category as follows (in thousands, except ETP):

											Percentage
		Year Ended July 31,									Increase/(Decrease)
		2008			2007			2006			2008/2007			2007/2006
Lift tickets		$	301,914		$	286,997		$	263,036		5.2	%		9.1	%
Ski school			81,384			78,848			72,628		3.2	%		8.6	%
Dining			62,506			59,653			56,657		4.8	%		5.3	%
Retail/rental			168,765			160,542			149,350		5.1	%		7.5	%
Other			70,964			79,337			78,770		(10.6	)%		0.7	%
Total Mountain net revenue			685,533			665,377			620,441		3.0	%		7.2	%
Total Mountain operating expense			470,362			462,708			443,116		1.7	%		4.4	%
Mountain equity investment income, net			5,390			5,059			3,876		6.5	%		30.5	%
Total Mountain Reported EBITDA		$	220,561		$	207,728		$	181,201		6.2	%		14.6	%
Total skier visits			6,195			6,219			6,288		(0.4	)%		(1.1	)%
ETP		$	48.74		$	46.15		$	41.83		5.6	%		10.3	%

Total Mountain Reported EBITDA includes $3.8 million, $3.8 million and $3.7 million of stock-based compensation expense for the years ended July 31, 2008, 2007 and 2006, respectively.

Lift ticket revenue increased $14.9 million and $24.0 million for the years ended July 31, 2008 and July 31, 2007, respectively, primarily as a result of increased ETP excluding season pass products, which was driven by an increase in absolute pricing.  Additionally, season pass revenue rose $5.5 million and $10.9 million (an increase of 7.7% and 17.7%), respectively, for the years ended July 31, 2008 and July 31, 2007.  For the year ended July 31, 2008, almost all of the increase in season pass revenue was due to increases in pricing, with season pass holders’ average visitation per pass increasing for the 2007/2008 ski season compared to the prior year, partially offsetting the increase in ETP resulting from price increases; whereas, the increase in season pass revenue for the year ended July 31, 2007 was impacted by both price increases and higher sales volume.  Partially offsetting the above discussed increases in price and season pass revenue was a decline in skier visits excluding season pass holders of 3.0% and 1.0% for the years ended July 31, 2008 and July 31, 2007, respectively, at the Company’s five ski resorts.  The decline for the year ended July 31, 2008 was the result of lower skier visitation excluding season pass holders in non-peak periods, including the early season (prior to December 24) due to below average snow conditions, and early March and April due in part to the timing of Easter which was in March for the year ended July 31, 2008 versus April in the years ended July 31, 2007 and 2006, all of which was partially offset by significant increases in international visitation which was higher by an estimated 26% for the year ended July 31, 2008.  The decline in overall skier visits for the year ended July 31, 2007 was due to a decline at the Company’s Heavenly resort primarily attributable to below average snowfall, while visitation excluding season pass holders at the Colorado resorts increased.

Revenue for the Company’s ski school and dining increased for the years ended July 31, 2008 and July 31, 2007, primarily as a result of absolute price increases.  However, the overall revenue increase from ski school for the year ended July 31, 2008 was impacted by a decline in skier visitation excluding season pass holders (as discussed above) as these guests have a higher participation rate in ski school.  Additionally, dining revenue for the year ended July 31, 2008 was impacted by a decline in skier visitation excluding season pass holders, but was favorably impacted by the acquisition of two licensed Starbucks stores in June 2007.

Retail/rental revenue improved by $8.2 million for the year ended July 31, 2008 over the prior year and was due in part to the operations of 18 Breeze Ski Rental locations acquired in June 2007.  Retail/rental experienced an $11.2 million increase in revenue for the year ended July 31, 2007, due to increased visitation at the Company’s Colorado resorts excluding season pass holders, as the majority of the retail/rental locations are concentrated in Colorado.

Other revenue mainly consists of private club revenue (which includes both club dues and amortization of initiation fees), summer visitation and other mountain activities revenue, allocated strategic alliance revenue, commercial leasing revenue, employee housing revenue, technology services revenue (until the disposition of the Company’s investment in RTP in April 2007), municipal services revenue and other recreation activity revenue.  For the year ended July 31, 2008 revenues were down $8.4 million compared to the prior year due to the disposition in April 2007 of the Company’s investment in RTP.  Excluding this disposition, other revenue would have increased by $0.6 million, or 0.8% for the year ended July 31, 2008 compared to the year ended July 31, 2007.  For the year ended July 31, 2007 other revenue was flat compared to the year ended July 31, 2006, primarily due to lost revenue for the fourth fiscal quarter in the year ended July 31, 2007 as a result of the disposition of the Company’s investment in RTP which offset increased revenues from commercial leasing and other ancillary mountain activities.

Operating expense increased $7.7 million and $19.6 million during the years ended July 31, 2008 and 2007, respectively.  Excluding retail/rental expense (which has a high variable cost component and therefore increased in relation to the retail/rental revenue) and RTP, operating expense increased 2.3% and 3.8% for the years ended July 31, 2008 and 2007, respectively, which was primarily attributable to higher variable costs related to higher revenue, including Forest Service fees, other resort related fees and credit card fees, and certain labor related costs, including higher ski school labor expense to support the higher ski school revenue.

Mountain equity investment income primarily includes the Company's share of income from the operations of a real estate brokerage joint venture; the increase in equity investment income in both the years ended July 31, 2008 and 2007 is due primarily to increased commissions earned by the brokerage associated with increased real estate closures surrounding the Company’s Colorado resorts, both from residential and multi-unit projects.

Lodging Segment

Lodging segment operating results for the years ended July 31, 2008, 2007 and 2006 are presented by category as follows (in thousands, except ADR and RevPAR):

																	Percentage
		Year Ended July 31,															Increase/(Decrease)
		2008				2007				2006						2008/2007					2007/2006
Total Lodging net revenue		$	170,057			$	162,451			$	155,807					4.7			%		4.3		%
Total Lodging operating expense			159,832				144,252				142,693					10.8			%		1.1		%
Total Lodging Reported EBITDA		$	10,225			$	18,199			$	13,114					(43.8		)	%		38.8		%
ADR		$	230.17			$	216.83			$	202.27					6.2			%		7.2		%
RevPAR		$	106.43			$	99.58			$	92.41					6.9			%		7.8		%

Total Lodging Reported EBITDA includes $1.3 million, $1.1 million and $1.3 million of stock-based compensation expense for the years ended July 31, 2008, 2007 and 2006, respectively.

Total Lodging segment net revenue for the year ended July 31, 2008 increased by $7.6 million as compared to the year ended July 31, 2007.  Included in net revenue for the year ended July 31, 2007 was the recognition of $5.4 million in termination fees primarily associated with the termination of the management agreements at The Equinox and Rancho Mirage (pursuant to the terms of the management agreements).  Excluding these termination fees, Lodging segment net revenue would have increased $13.0 million, or 8.3% for the year ended July 31, 2008, compared to the year ended July 31, 2007.  ADR increased 6.2% for the year ended July 31, 2008 compared to the prior year due to high demand during peak periods in the year (partially offset by lower visitation during non-peak periods, including the early season and the timing of Easter as described in the Mountain segment discussion) and as a result of the addition of The Arrabelle Hotel.  RevPAR increased 6.9% for the year ended July 31, 2008 compared to the year ended July 31, 2007, which, in addition to increases in ADR, was driven by a 6.9% increase in conference and group room nights, occurring primarily at GTLC and Keystone lodging properties during the Company’s fourth fiscal quarter ended July 31, 2008.  Additionally, Lodging revenue was impacted by fewer available rooms, down 2.5% for the year ended July 31, 2008 as compared to the prior year, primarily as a result of a reduction in managed condominium units at Keystone.

For the year ended July 31, 2006, Lodging Reported EBITDA includes revenue of $5.2 million and operating expenses of $4.5 million related to SRL&S prior to the sale of SRL&S in January 2006.  Excluding the impact of the sale of SRL&S, Lodging revenue increased $11.9 million, or 7.9%, for the year ended July 31, 2007, compared to the year ended July 31, 2006.  The revenue increase for the year ended July 31, 2007 was partially due to the recognition of $5.4 million in termination fees as discussed above.  ADR and RevPAR, which do not include the impact of the termination fees, and excluding the impact of the SRL&S sale, increased 8.5% and 9.5% for the year ended July 31, 2007, respectively, compared to the year ended July 31, 2006.  The increase in ADR and RevPAR for the year ended July 31, 2007 was driven by the lodging properties proximate to the Company’s ski resorts and increased revenue at GTLC.  The overall Lodging revenue increase during the year ended July 31, 2007 was partially impacted by fewer available rooms, primarily as a result of construction at The Lodge at Vail and a reduction in managed condominium units.

Operating expense increased by $15.6 million for the year ended July 31, 2008 compared to the year ended July 31, 2007 due in part to start-up and pre-opening expenses of approximately $3.1 million associated with the opening of The Arrabelle Hotel.  Excluding the current year start-up and pre-opening expenses of The Arrabelle Hotel, operating expenses increased by approximately $12.4 million, or 8.6%, and was primarily attributable to operating expenses of The Arrabelle Hotel after its opening, additional National Park Service fees incurred by GTLC resulting from a new concession contract which became effective January 2007, and other variable operating costs associated with incremental revenue, partially offset by fewer available rooms.

Excluding the impact of the sale of SRL&S, operating expense increased $6.0 million, or 4.3%, for the year ended July 31, 2007 compared to the year ended July 31, 2006.  These increases are commensurate with normal increases in variable operating costs, higher RockResorts corporate expenses and increased NPS fees paid by GTLC, partially offset by fewer available rooms.

Real Estate Segment

Real Estate segment operating results for the years ended July 31, 2008, 2007 and 2006 are presented by category as follows (in thousands):

												Percentage
		Year Ended July 31,										Increase/(Decrease)
		2008			2007				2006			2008/2007				2007/2006
Total Real Estate net revenue		$	296,566		$	112,708			$	62,604		163.1		%		80.0		%
Total Real Estate operating expense			251,338			115,190				56,676		118.2		%		103.2		%
Gain on sale of real property			709			--				--		100.0		%		N/A
Real Estate equity investment income			--			--				791		N/A				(100.0	)	%
Total Real Estate Reported EBITDA		$	45,937		$	(2,482	)		$	6,719		1,950.8		%		(136.9	)	%

Total Real Estate Reported EBITDA includes $3.1 million, $2.1 million and $1.5 million of stock-based compensation expense for the years ended July 31, 2008, 2007 and 2006, respectively.

The Company’s Real Estate operating revenue is primarily determined by the timing of closings and the mix of real estate sold in any given period.  Different types of projects have different revenue and expense volumes and margins; therefore, as the real estate inventory mix changes it can greatly impact Real Estate segment net revenue, operating expense and Real Estate Reported EBITDA.

Real Estate segment net revenue for the year ended July 31, 2008 was driven primarily by the closing on 64 of the 66 condominium units at Arrabelle ($213.6 million), the closing on five of the 13 units at Chalets ($58.8 million), the closing on the remaining JHG&TC cabins ($9.0 million) and contingent gains on development parcels sales that closed in previous periods.  Operating expense for the year ended July 31, 2008 included cost of sales of $225.9 million (including sales commissions) commensurate with revenue recognized, as well as general and administrative costs of approximately $25.4 million.  General and administrative costs are primarily comprised of marketing expenses for the major real estate projects under development (including those that have not yet closed), overhead costs such as labor and benefits and allocated corporate costs.

Real Estate segment net revenue for the year ended July 31, 2007 was driven primarily by the closings of the Gore Creek Place ($42.9 million) and Mountain Thunder ($24.1 million) developments, certain JHG&TC cabins ($14.2 million), the sale of land together with certain related infrastructure improvements in Red Sky Ranch and Breckenridge to third-party developers, the sale of the sole asset in the FFT Investment Partners real estate joint venture and contingent gains on development parcel sales that closed in previous periods.  Operating expense for the year ended July 31, 2007 included cost of sales of $83.6 million (including sales commissions) commensurate with revenue recognized, as well as general administrative costs of approximately $24.0 million.  General and administrative costs are primarily comprised of marketing expenses for the major real estate projects under development, overhead costs such as labor and benefits as the Company increased its infrastructure relative to the increased vertical development activity, and professional services fees.  In addition, the Company recorded $7.6 million of charges during the year ended July 31, 2007 for incremental remediation costs to complete the JHG&TC cabins that had design and construction issues.

Real Estate segment net revenue for the year ended July 31, 2006 was primarily generated from the closing of certain townhomes at Gore Creek Place, developer parcel sales in the Beaver Creek area, a land exchange with the Forest Service and contingent gains on development parcel sales that closed in prior periods.  Operating expense included cost of sales of $34.1 million (including sales commissions) commensurate with revenue recognized, as well as general and administrative costs of approximately $20.8 million.  General and administrative costs are primarily comprised of marketing expenses, overhead costs such as labor and benefits and professional services fees.  In addition, the Company recorded $1.8 million in incremental cost of sales during the year ended July 31, 2006 related to the JHG&TC development.

Real Estate equity investment income includes the Company's share of income from the operations of Keystone/Intrawest, LLC (“KRED”), a joint venture with Intrawest Resorts, Inc. formed to develop land at the base of Keystone.  In the year ended July 31, 2006, the Company received a distribution from KRED in excess of its carrying basis in the amount of $0.7 million, which the Company recorded as income.  The distribution reflected the final proceeds from the sale of developed real estate.  As a result, KRED will be dissolved and the Company does not anticipate any further distributions.

The Company currently expects to close on the remaining two Arrabelle units, the remaining eight Chalets and the vast majority, if not all of the Crystal Peak Lodge units during the year ending July 31, 2009 and will recognize the revenue and related cost of sales for these projects at closing.  The Company has entered into definitive sales contracts with a value of approximately $175.6 million on the above units yet to be closed.  The Company also has significant ongoing construction activities including One Ski Hill Place in Breckenridge and The Ritz-Carlton Residences, Vail.

Other Items

In addition to segment operating results, the following material items contribute to the Company's overall financial position.

Depreciation and amortization.  Depreciation and amortization expense for the years ended July 31, 2008 and 2007 increased primarily as a result of placing in service resort assets, which for the year ended July 31, 2008 included The Arrabelle Hotel and a new skier services building associated with the Chalet project and for both the years ended July 31, 2008 and 2007, an increase in the fixed asset base due to normal capital expenditures.

Relocation and separation charges.  In February 2006, the Company announced a plan to relocate its corporate headquarters, and the plan was approved by the Company’s Board of Directors in April 2006.  The Company recorded $1.4 million and $2.4 million of relocation charges in the years ended July 31, 2007 and 2006, respectively.  The Company’s relocation plan was completed as of July 31, 2007.  In addition, in February 2006, Adam Aron, the former Chairman and Chief Executive Officer of the Company, resigned.  In connection with Mr. Aron’s resignation, the Company entered into a separation agreement with Mr. Aron, whereby the Company recorded $2.7 million of separation related expenses during the year ended July 31, 2006.

Mold remediation credit. During the year ended July 31, 2006, the Company recorded a $1.4 million mold remediation credit due to Breckenridge Terrace receiving reimbursement from third parties for costs incurred in conjunction with its mold remediation efforts and a true-up adjustment as the remediation project was substantially complete.  This credit has been recognized by the Company as a reduction of the remediation expense that was originally recognized in the year ended July 31, 2004 (see Note 13, Commitments and Contingencies, of the Notes to Consolidated Financial Statements, for more information regarding this credit).

Investment income, net.  The Company invests excess cash in highly liquid investments, as permitted under the Credit Agreement underlying the Credit Facility and the Indenture relating to the 6.75% Notes.  The decrease in investment income for the year ended July 31, 2008 compared to the previous year is primarily due to a reduction in the average interest earned on investments, a decrease in average invested cash during the period as a result of significant capital investments and common stock repurchases and a $1.0 million impairment on a short-term investment resulting from a commercial paper write-down.

The increase in investment income for the year ended July 31, 2007 compared to the previous year is due to a significant increase in average invested cash balances during the year resulting primarily from increased cash flows net of increased capital expenditures.

Interest expense, net.  The Company’s primary sources of interest expense are the 6.75% Notes, its credit facilities, including unused commitment fees and letter of credit fees related to the $400 million revolving credit facility (the “Credit Facility Revolver”) thereunder, the outstanding $57.7 million of industrial development bonds (collectively, the “Industrial Development Bonds”) and the series of bonds issued to finance the construction of employee housing facilities (the “Employee Housing Bonds”).  Interest expense decreased $2.0 million for the year ended July 31, 2008 compared to the year ended July 31, 2007 primarily due to a reduction in the average variable borrowing rate of the employee housing bonds and an increase in capitalized interest associated with significant ongoing real estate and related resort development.

Interest expense decreased $3.9 million for the year ended July 31, 2007 compared to the year ended July 31, 2006, due primarily to an increase in capitalized interest associated with significant ongoing real estate and related resort development.

(Loss) gain on sale of businesses, net.  The Company recorded a net loss of $0.6 million in the year ended July 31, 2007 on the sale of its investment in RTP.  The Company recorded a $4.7 million gain in the year ended July 31, 2006 associated with the sale of the assets constituting SRL&S.  Additionally in the year ended July 31, 2006, the Company recorded a $0.1 million loss associated with the December 2004 sale of the Company’s interest in BG Resort due to the settlement of certain contingencies (see Note 9, Sale of Businesses, of the Notes to Consolidated Financial Statements).

Contract dispute credit (charges), net.  In March 2006, RockResorts was notified by the ownership of Cheeca Lodge & Spa, formerly a RockResorts managed property, that its management agreement was being terminated effective immediately.  RockResorts believed that the termination was in violation of the management agreement and pursued its legal rights.  In October 2007, RockResorts received payment from Cheeca Holdings as final settlement of the parties’ management agreement termination dispute in the amount of $13.5 million, of which $11.9 million (net of final attorney’s fees) is recorded in “contract dispute credit (charges), net” in the Consolidated Statements of Operations for the year ended July 31, 2008.  The Company incurred $4.6 million and $3.3 million of legal related costs related to this matter in the years ended July 31, 2007 and 2006, respectively (see Note 13, Commitments and Contingencies, of the Notes to Consolidated Financial Statements, for more information regarding this settlement).

Gain (loss) on put options, net.  The net gain for the year ended July 31, 2007 was related to the elimination of the put option liability (net of the write-off of the associated put option intangible asset) as a result of the sale of the Company’s investment in RTP in April 2007.  The net loss in the year ended July 31, 2006 was related to an increase in the estimated fair market value of the RTP put option.  As a result of the sale of the Company’s investment in RTP in April 2007, the Company currently does not anticipate recognizing further gain (loss) on put options (see Note 10, Put and Call Options, of the Notes to Consolidated Financial Statements, for more information regarding the Company's put options).

Minority interest in income of consolidated subsidiaries.  Minority interest in income of consolidated subsidiaries is a function of the performance of the Company's consolidated subsidiaries in which there is minority ownership.  The decrease in minority interest in the year ended July 31, 2008 is primarily due to a decrease in the minority shareholder’s ownership interest in SSV combined with a decrease in SSV's income before provision for income taxes. The increase in minority interest in the years ended July 31, 2007 and 2006 is primarily due to improvement in SSV's income before provision for income taxes.

Income taxes.  The Company's tax provision and effective tax rate are driven primarily by the amount of pre-tax income, taxable income generated by state jurisdictions that varies from the consolidated pre-tax income and other non-deductible items.  The increase in the Company’s tax provision for the years ended July 31, 2008, 2007 and 2006 was primarily driven by a significant increase in pre-tax income.  The effective tax rate was 38.0%, 39.0% and 39.0% in the years ended July 31, 2008, 2007 and 2006, respectively.  The income tax provision recorded in the year ended July 31, 2008 reflects the impact of favorable settlements with state taxing authorities of $1.0 million.

The Internal Revenue Service (“IRS”) has completed its examination of the Company’s tax returns for tax years 2001 through 2003 and has issued a report of its findings.  The examiner’s primary finding is the disallowance of the Company’s position to remove the restrictions under Section 382 of the Internal Revenue Code of approximately $73.8 million of net operating losses (“NOL”) carryforwards.  These restricted NOL carryforwards relate to fresh start accounting from the Company’s reorganization in 1992.  The Company has appealed the examiner’s disallowance of these NOL carryforwards to the Office of Appeals.  However, if the Company is unsuccessful in its appeals process, it will not negatively impact the Company’s financial position or results of operations.

Reconciliation of Non-GAAP Measures

The following table reconciles from segment Reported EBITDA to net income (in thousands):

		Year Ended July 31,
		2008				2007				2006
Mountain Reported EBITDA		$	220,561			$	207,728			$	181,201
Lodging Reported EBITDA			10,225				18,199				13,114
Resort Reported EBITDA			230,786				225,927				194,315
Real Estate Reported EBITDA			45,937				(2,482	)			6,719
Total Reported EBITDA			276,723				223,445				201,034
Depreciation and amortization			(93,794	)			(87,664	)			(86,098	)
Relocation and separation charges			--				(1,433	)			(5,096	)
Asset impairment charges			--				--				(210	)
Mold remediation credit			--				--				1,411
Loss on disposal of fixed assets, net			(1,534	)			(1,083	)			(1,035	)
Investment income, net			8,285				12,403				7,995
Interest expense, net			(30,667	)			(32,625	)			(36,478	)
(Loss) gain on sale of businesses, net			--				(639	)			4,625
Contract dispute credit (charges), net			11,920				(4,642	)			(3,282	)
Gain (loss) on put options, net			--				690				(1,212	)
Other income, net			--				--				50
Minority interest in income of consolidated subsidiaries, net			(4,920	)			(7,801	)			(6,694	)
Income before provision for income taxes			166,013				100,651				75,010
Provision for income taxes			(63,086	)			(39,254	)			(29,254	)
Net income		$	102,927			$	61,397			$	45,756

The following table reconciles Net Debt (defined as long-term debt plus long-term debt due within one year less cash and cash equivalents) (in thousands):

		July 31,
		2008			2007
Long-term debt		$	541,350		$	593,733
Long-term debt due within one year			15,355			377
Total debt			556,705			594,110
Less: cash and cash equivalents			162,345			230,819
Net Debt		$	394,360		$	363,291

Liquidity and Capital Resources

Significant Sources of Cash

The Company's liquidity profile remained strong during the year ended July 31, 2008.  The Company had no borrowings under its Credit Facility and had $162.3 million of cash and cash equivalents as of July 31, 2008.  For the years ended July 31, 2008, 2007 and 2006, cash and cash equivalents (decreased) increased by $(68.5) million, $39.0 million and $55.2 million, respectively.  The Company generated $217.0 million of cash from operating activities during the year ended July 31, 2008, compared to $118.4 million and $63.7 million generated during the years ended July 31, 2007 and 2006, respectively.  For the last three fiscal years, the Company’s cash flows from operations have been positively impacted by an increase in Resort Reported EBITDA (the combination of Mountain Reported EBITDA and Lodging Reported EBITDA).  In addition, significant net cash flows from operating activities were generated in the year ended July 31, 2008 due to an increase in Real Estate Reported EBITDA adjusted for real estate cost of sales less investments in real estate.  For the years ended July 31, 2007 and 2006 net cash generated from operating activities was negatively impacted as investments in real estate exceeded Real Estate Reported EBITDA adjusted for real estate cost of sales.  The Company currently anticipates that Resort Reported EBITDA will continue to provide a significant source of future operating cash flows.  Additionally, anticipated closings of real estate projects will provide a significant source of future cash flows from operations, offset by further investments in real estate (as further discussed below within Significant Uses of Cash).

Included within investing activities, the Company generated $30.7 million of cash from the sale of SRL&S in the year ended July 31, 2006. The Company does not currently anticipate material future cash from the sale of businesses in the near term.

Net cash provided by financing activities for the year ended July 31, 2008 decreased by $190.1 million compared to the year ended July 31, 2007 due to the decrease in net non-recourse borrowings of $111.0 million as well as an increase in repurchases of $84.6 million of the Company’s common stock during the year ended July 31, 2008 (as further discussed below within Significant Uses of Cash).  Additionally, cash proceeds from the exercise of stock options decreased by $14.6 million (including tax benefits) for the year ended July 31, 2008 compared to the year ended July 31, 2007.  The Company’s net cash provided by financing activities for the year ended July 31, 2007 was consistent with the year ended July 31, 2006; however, cash proceeds from the exercise of stock options decreased by $42.6 million (including tax benefits) for the year ended July 31, 2007 compared to the year ended July 31, 2006, which was offset by an increase in proceeds from non-recourse borrowings in the year ended July 31, 2007.

In addition to the Company’s $162.3 million of cash and cash equivalents as of July 31, 2008, the Company has available $306.2 million under its Credit Facility (which represents the total commitment of $400 million less certain letters of credit outstanding of $93.8 million).  As of July 31, 2008 and 2007, total long-term debt (including long-term debt due within one year) was $556.7 million and $594.1 million, respectively, with the decrease as of July 31, 2008 due to the net repayment of non-recourse financing related to the Company’s vertical real estate projects.  Net Debt (defined as long-term debt plus long-term debt due within one year less cash and cash equivalents) increased from $363.3 million as of July 31, 2007 to $394.4 million as of July 31, 2008 due to a reduction in cash and cash equivalents as discussed above, partially off-set by a reduction in borrowings under the Company’s non-recourse financings.  The Company believes it is well positioned to take advantage of potential strategic options as further discussed below, as the Company has significant cash and cash equivalents on hand and no revolver borrowings under its Credit Facility.

The Company expects that its liquidity needs in the near term will be met by continued utilization of operating cash flows (including cash to be generated from anticipated real estate closings net of proceeds used to pay off real estate specific financing) and borrowings, if necessary, under the Credit Facility.  In order to provide additional flexibility for the Company’s liquidity needs, the Company finalized in March 2008 an agreement with the lenders in its Credit Facility to utilize an accordion feature to expand commitments under the existing facility by $100 million (for a total borrowing capacity of $400 million), at the same terms existing in the current facility.  The Company believes the Credit Facility, which matures in 2012, including the expanded commitments would provide added flexibility especially when evaluating future financing needs for its real estate projects given the current state of the non-recourse financing available in the capital markets, and is priced favorably, with any new borrowings currently being priced at LIBOR plus 0.50%.

In addition to building excess cash, the Company continuously evaluates how to utilize its excess cash, including any combination of the following strategic options: self-funded real estate under development, continue recent levels of investment in resort assets, pursue strategic acquisitions, pay off outstanding debt, repurchase additional common stock of the Company and/or other options to return value to stockholders.  The Company’s debt generally has favorable fixed interest rates and is long-term in nature.  The Company’s Credit Facility and the Indenture limit the Company’s ability to make investments or distributions, including the payment of dividends and/or the repurchase of the Company’s common stock, and the pay off of certain of its debt, including its 6.75% Notes.

Significant Uses of Cash

The Company’s cash needs typically include providing for operating expenditures, debt service requirements and capital expenditures for both assets to be used in operations and real estate development projects.  In addition, the Company expects it will incur a significant increase in cash income tax payments for the next two to three years due to the utilization of all NOL carryforwards previously available to offset taxable income (subject to the appeal of the IRS ruling described above), real estate under development and an estimated decline in tax benefits resulting from stock award exercises.

The Company expects to spend approximately $260 million to $280 million in calendar year 2008 for real estate development projects, including the construction of associated resort-related depreciable assets, of which $153 million was spent as of July 31, 2008, leaving approximately $107 million to $127 million to spend in the remainder of calendar year 2008.  The Company has entered into contracts with third parties to provide construction-related services to the Company throughout the course of construction for these projects; commitments for future services to be performed over the next several years under such current contracts total approximately $291 million.  The primary projects are expected to include continued construction and development costs, as well as planning and infrastructure costs associated with planned development projects in and around each of the Company’s resorts.  The Company expects investments in real estate will be significant for the foreseeable future as the Company continues its vertical development efforts.  The Company has not finalized its real estate development plan for calendar year 2009.  The Company obtained non-recourse financing to partially fund construction of Arrabelle and Chalets projects.  In addition to utilizing project-specific financing and cash on hand as appropriate, the Company also pre-sells units requiring deposits in a proposed development prior to committing to the completion of the development.

The Company has historically invested significant cash in capital