Vail Resorts, Inc. (MTN) Q2 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Vail Resorts Fiscal 2012 Second Quarter Results Conference Call. [Operator Instructions] Today's conference is being recorded, March 6, 2012. I would now like to turn the conference over to our host, Rob Katz, Chief Executive Officer of Vail Resorts. Please go ahead.

Thank you. Good morning, ladies and gentlemen. Welcome to the Vail Resorts Fiscal 2012 Second Quarter Earnings Conference Call and simultaneous webcast, both open to the public and press at large. I'm Rob Katz, Chief Executive Officer of Vail Resorts. Joining me on the call this morning is Jeff Jones, our Co-President and Chief Financial Officer. Before I turn to a discussion of our results, let me remind you that we're using the term reported EBITDA to report earnings for each of our operating segments, namely mountain, lodging and resort, which is the combination of the mountain and lodging segment and real estate. The company defines reported EBITDA as segment net revenue less segment operating expense, plus or minus segment equity investment income or loss. The company also uses the term net debt, which is defined as long-term debt plus long-term debt due within one year less cash and cash equivalents. Complete reconciliations of reported EBITDA and other non-GAAP financial measures can be found in this morning's earnings release and on the vailresorts.com website in the Investor Relations section. I also need to mention that comments made during this conference call, other than statements of historical fact, are forward-looking statements that are made pursuant to the Safe Harbor provisions in the Private Securities Litigation Reform Act of 1995. Certain risks and uncertainties could cause actual results to differ materially from those contained in the forward-looking statements. Investors are directed to the risks and uncertainties described in the documents filed by the company with the Securities and Exchange Commission, including the company's Form 10-K for the fiscal year ended July 31, 2011, and Form 10-Q for the second quarter of fiscal 2012. In addition the Safe Harbor language in today's press release also applies to comments on this call. All guidance and forward-looking statements made on this call are made as of the date hereof, and we do not undertake any obligation to update any forecasts or forward-looking statement, except as may be required by law. So with that said, let's turn to our second quarter fiscal 2012 results, capital plan and outlook. This has been one of the most, if not the most, challenging winters for the U.S. ski industry. In Colorado, snowfall levels were at the lowest in over 30 years, and for the first time in as many years, we were not able to get Vail's Back Bowls open until mid-January. In Tahoe, we experienced weather patterns that have not been seen since the late 1800s, including having 0 inches of snowfall in December. Given that backdrop, we are very pleased with the strength and stability shown by our operating model, as we reported only modest declines across our major revenue lines in what many would consider a worst-case weather scenario, which followed last season's record-setting snowfall. To add some perspective to the resiliency of our business model, snowfall levels at our 6 resorts were down 60% through January as compared with the prior year. However, the Mountain Reported EBITDA declined only 5.2%. The strength of our operating model in this unprecedented environment incorporated 4 key drivers. First, the strength of our season pass program continues to pay significant dividends. Our past sales, which last year accounted for approximately 35% of our total lift ticket revenue for the ski season, are up approximately 12% this season, buffering the impact of the decline in visitation on lift revenue. Second, the continuous investments that we have made to ensure that our assets are the highest-quality clearly rewarded our guests this year as our resorts further differentiated themselves. Our significant snowmaking capabilities enabled us to have significantly more terrain open than other resorts in the region, driving further guest loyalty, as well as attracting new guests to our mountain. Additionally, our guests were engaged during their vacations due to all the amenities that exist at our resorts, both on mountain and at our resort-based villages. Third, these investments helped support our ability to increase prices, which contributed to a 9.1% increase in ETP, excluding season pass holders in the quarter. Fourth, our resorts attract a high-income demographic that allowed us to benefit from the enhanced consumer spending, especially in the luxury segment, as we realized significant increases in guest spending per visit on our ancillary businesses, including ski school, dining and retail, as well as solid results from our lodging business, which had an ADR increase of 13.8%. Ski school revenue per visit increased 17%. Dining revenue per visit was higher by 9.5%, and retail rental revenue per visit was up 9.1%. All of this was further enhanced by continued growth in international visitation, which actually increased by 5% this season despite overall visitation being down 14.6% and continued challenges in the U.K. market. We are clearly seeing the benefit of the growing global appeal of our resorts and our enhanced marketing efforts as we attract guests from around the world who tend to stay longer and spend more during the trip. The snowfall levels did begin to rebound in mid-January. In Colorado, the return of more snowfall levels -- more normal snowfall levels allowed us to open nearly all of our Colorado terrain by quarter end, including Vail's Back Bowls. Snowfall in Tahoe, however, remained scarce, which had a lingering impact on visitation in that region. As a result, our Colorado resort outperformed Tahoe during the quarter as conditions in that region rebounded faster. Visits to our Colorado resorts declined 8.8% during the quarter, while Tahoe reported a 32.6% drop in visitation. While conditions in Tahoe improved dramatically in late February and early March, and all of our resorts are now in full swing, we do not believe we can make up all of the lost ground we have seen to date, particularly given the challenges we saw in Tahoe. As such, we are reducing our fiscal 2012 Resort Reported EBITDA guidance range. It's important to note that despite some of the unprecedented hurdles we have faced this season, we are anticipating a year that comes in at or modestly below last season, which had record snowfall and amazing start-to-finish condition. In an odd way, this year has only furthered our confidence in the drivers of our business and what we can achieve. Before I turn the call over to Jeff, I am very pleased to announce that only 9 months after initiating our dividend, our Board of Directors has approved a 25% increase in the quarterly cash dividend to $0.1875 per share. First payment of the higher dividend will be made on April 10, 2012, to shareholders of record as of March 26, 2012. Our decision to increase the dividend reflects our continued confidence in the cash flow generation of our company and our ability to both invest in the business and return capital to shareholders even in years with challenging weather. Let me now turn the call over to Jeff to further discuss our results and outlook. I will then discuss our calendar 2012 resort capital expenditure plan, as well as some other exciting news.

Thanks, Rob. Good morning, everyone. Earlier this morning, we released our earnings for our second quarter fiscal 2012 ended January 31, 2012, and also filed our Form 10-Q for the quarter, which you can find available now at our vailresorts.com website. Now turning to our results. As Rob mentioned, our second quarter fiscal 2012 financial results were affected by the unprecedented weather that befell us both in Colorado and in Tahoe. For the quarter, our mountain net revenue declined 0.7% to $315.9 million and Mountain Reported EBITDA was down 5.2%. We were able to almost entirely offset the 14.6% decline in skier visits through higher spending per skier visit, improved lift ticket pricing and strong season pass revenue. Lift ticket revenue decreased only 0.9% during the quarter due to a 13.5% increase in season pass revenue and a 9.1% increase in ETP or Effective Ticket Price, excluding season pass holders. As a reminder, we record all of our season pass sales and revenue in the second and third quarters of the fiscal year, and therefore, slightly more than half of the season pass sales were recognized as revenue in the second quarter of fiscal 2012. Ski school, dining and retail/rental revenue declined 0.1%, 6.4% and 0.6%, respectively. And as Rob noted, we're up strongly in a per visit basis reflecting the broader improvements in the economy. Other revenue increased 5.3%, primarily due to higher strategic alliance marketing revenue, as well as higher revenue from transportation services we provide on behalf of certain municipalities at our resorts. Looking at mountain operating expenses, mountain operating expense increased $4.3 million in the fiscal second quarter due primarily to a $2.2 million increase in snowmaking expense incurred in the quarter as we made snow well into January this year, allowing us to retain and create guest loyalty by ensuring that we had significantly more terrain open than other resorts in the rest of the region, especially in Tahoe. Lodging results were less affected by the decline in visitation as Lodging Reported EBITDA increased $0.3 million to $1.2 million in the quarter. Revenue at our owned hotels and managed condominiums declined 1.4%, while ADR increased 13.8%, reflecting a mix shift to our luxury properties that more than offset a decline in occupancy, leading to a 0.8% increase in RevPAR. We were able to lower expenses, leading to improved flow-through in the quarter. Moving on to real estate. We continue to see good sales momentum at our 2 real estate projects. Real estate revenue during the quarter totaled $9.1 million, generated by the closing of one Ritz-Carlton residence and 4 One Ski Hill Place units. Since the beginning of fiscal 2012, we have sold 6 units at One Ski Hill Place and 7 units at the Ritz-Carlton. We have now sold 33 whole-ownership units at the Ritz-Carlton Residences and 46 One Ski Hill Place units. The sales momentum and our 2 luxury real estate projects further confirms the broader consumer spending trends that we are seeing across all of our business lines, that our company is well-positioned with the high-end consumer. While Real Estate EBITDA totaled a loss of $3.5 million in the quarter, net cash proceeds totaled $7.2 million. Since the start of fiscal 2012, we have generated net cash proceeds of $23.8 million and are more than halfway to achieving our targeted full-year net cash proceeds goal of $35 million to $45 million. Net income attributable to Vail Resorts Inc. declined by 15% to $46.4 million in the quarter due to the lower EBITDA, as well as higher depreciation and amortization expense. Our balance sheet remains in a very strong position. We generated $137.4 million of operating cash flow in the 6-month period ended January 31, 2012, ending the second quarter of fiscal 2012 with cash on hand of $95.6 million and net debt at 2.1x trailing 12 months reported EBITDA, and we had no borrowings under our revolver. Moreover, we have virtually no principal maturities due on any of our debt until 2019. Today, we also announced our ski season to date metrics for the comparable periods from the beginning of ski season through Sunday, February 26, 2012, and for the similar prior year period through Sunday, February 27, 2011, a period that extends into our third fiscal quarter. Our ski season to date metrics reflect visitation improvements from the metrics released earlier in the season. Our total skier visits through February 26, 2012 at our 6 mountain resort properties were down approximately 12.3%, with our Colorado results down 7%. Total lift revenue was down 1.5% as compared to the similar period through February 27, 2011, of the prior year, which includes an allocated portion of season pass revenue for each applicable period. Our ski school revenue is up 0.3%. Our dining and retail/rental revenues were down 4.7% and 1.4%, respectively, and guest spending per visit continues to show strong increases. In addition, our lodging bookings through our central reservations and directly at our owned and managed properties continue to track ahead of last year's levels. Now to discuss our guidance for fiscal year 2012. The slow start to the season extended well into January, causing a larger-than-anticipated impact on visitation. Although visitation levels have improved overall. Tahoe continues to track below expectation. As a result, we are reducing our fiscal 2012 Resort EBITDA guidance. Our revised guidance calls for Resort Reported EBITDA to be in the range of the $205 million to $215 million. It is important to note that included in our estimates for Resort Reported EBITDA for the fiscal 2012 is a $7.2 million seasonal loss associated with owning Northstar, which did not occur in fiscal 2011, and $2 million of estimated seasonal losses and transaction/transition expenses relating to the acquisitions of Kirkwood and skiinfo.com, based on an expected close in late March for the Kirkwood acquisition. However, fiscal 2012 will not include $4.1 million of one-time Northstar acquisition-related expenses that occurred primarily in the first quarter of fiscal 2011. Finally, the first fiscal quarter of 2011 benefited from a $2.9 million favorable litigation settlement in the lodging segment. Adjusted for all these items, we are forecasting fiscal 2012 Resort EBITDA to be in the range of up 1% to down 4% compared to fiscal 2011 Resort EBITDA. Our real estate EBITDA guidance is modestly higher. For fiscal 2012, we are anticipating net proceeds from real estate sales to total $35 million to $45 million, partially offset by Real Estate Reported EBITDA between negative $13 million to negative $21 million, including approximately of $3 million of noncash stock compensation expense resulting in estimated net positive cash flow from real estate of $20 million to $30 million dollars. Our net income attributable to Vail Resorts Inc. guidance range is now $13 million to $23 million. Before I turn the call back to Rob, I wanted to mention that in April, we will again announce certain season to date ski season metrics, which will include the spring break and Easter holiday periods. Now back to Rob.

Thanks, Jeff. As is customary for this time of the year, we also have released our resort capital expenditure plans for the current calendar year, in this case, calendar 2012. Our operating philosophy is to continually reinvest in our resort to offer the absolute highest quality experience to our guests, supporting our pricing strategy and creating very high guest loyalty. We currently anticipate we will spend approximately $75 million to $85 million of resort capital expenditures in calendar 2012, down from $124.5 million in calendar 2011, which included approximately $30 million of spending on Northstar. The centerpiece of our 2012 capital plan is a new 10-person state-of-the-art gondola serving as the gateway to Vail Mountain through Vail Village, where almost 1/2 of our Vail guests start their ski day. With heated cabins and WiFi, the gondola will set a standard for how guests are transported up a mountain while dramatically reducing wait times by increasing uphill capacity by 40%. Other key elements of our capital plan include new retail stores, given our growing leadership position in specialty mountain sports retail, implementing a new state-of-the-art retail point of sales or POS system with more dynamic pricing capabilities, adding further enhancements to our award-winning EpicMix application following this season's addition of Photo and continued investments in marketing technology initiatives, including customer relationship marketing system. All of the proposed capital projects are subject to applicable regulatory approval. Our 2012 capital plan reflects our commitment to improving our resort and providing guests with new amenities, which will continue despite any temporary weather challenges. In addition to investing in our business and returning capital to shareholders, we also continue to utilize our strong balance sheet on strategic initiatives. A few weeks ago, we announced our planned acquisition of Kirkwood Mountain in Lake Tahoe, and we expect to close later this month. As previously announced, we intend to pay approximately $18 million to acquire Kirkwood, including a 51% interest in a 2.7-acre parcel at the base of the resort. Kirkwood is a unique resort, offering 2,300 acres of extraordinary high alpine, expert terrain with a loyal and passionate customer base. Kirkwood is the closest mountain to San Jose, California on Highway 88 and boast the most average annual snowfall of any mountain in the Tahoe region. We are very excited about this acquisition, in large part because it is a compelling new addition to our Tahoe season passes, offering guests from across the Bay Area, Silicon Valley, Sacramento and Reno, truly the best of Tahoe, Heavenly, Northstar and Kirkwood. We have already heard lots of very positive feedback from our Tahoe guests and look forward to being able to include Kirkwood as part of Vail Resorts. As we talk today, we have entered our historically largest revenue month for the year for our resort business. We expect to see good momentum to the spring break and Easter period. Our mountains are in great shape, the snow has finally come in abundance, and we have exciting activities planned throughout the remainder of the season. We are very proud of all of our employees who have continued to deliver experiences of a lifetime to our guests each and every day. At this time, Jeff and I will be happy to answer your questions. Operator, we are ready for questions.

[Operator Instructions] And our first question comes from the line of Felicia Hendrix with Barclays Capital.

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

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

Okay. So would you expect that to just kind of flatten out for the rest of the ski season?

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

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

You're talking about our Epic pass?

Yes.

So one, we'll be announcing plans for season passes and starting to put them on sale right around the mid-March, so probably a week out or so from now. And what I would say is I think we feel like we have a terrific product line-up. Obviously that's performed quite well, and I think for the most part, we're talking about a continuation of that. I would say in Tahoe, we're going to take real advantage of the addition of Kirkwood, obviously, based on the planned acquisition and really take an aggressive approach to that market. Probably more to talk about after we announce the lineup in mid-March, but I think that's what you'll see at that point.

Okay, great. And then actually, Kirkwood is a good segue to just my last -- my final question. You guys have, over the years, done a good job of growing your company. You've made a bunch of prudent acquisitions. Kirkwood is your latest one. But that -- you've largely been focused in the U.S. I'm just wondering, have you -- can you give us -- share your thoughts if you've thought about growth outside the U.S.? Any initiatives you might have been working on to expand the reach of your brands beyond North America? Certainly, you do have a nice international destination visitation, but perhaps you could be thinking about growing that to other regions around the world?

Yes, I think -- and I think as you know, we've talked about that, I think, at the last investor conference, and certainly, we'll be talking about it again. I think we have taken a more global approach to the business. We do feel like our approach, as you mentioned, in North America, has been to acquire things that we believe we can either add value or they immediately add value to us. So really high on the kind of strategic and synergistic opportunity lift. And I -- what I would say is, I think we are now feeling like there could be those opportunities outside of North America as well. But we're going to take the same approach. So we're not -- this is about how we can add value or how that new asset could add value to us. We're going to be disciplined on price. We're going to be disciplined on terms. And like anything in the ski industry, things take time. So we are pursuing it, but what I would say is it's not going to be all that different than what you've seen over the last decade from our company, which is taking a more methodical approach to it.

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

Just 2 questions for you. Just given the historically poor snowfall we've had in this ski season -- obviously, since its historic, you wouldn't really have too much to go off of, but do you sense that you will have any sort of headwinds facing you when you go into this next season pass selling season in terms of your ability just to push season passes in general or to push pricing higher, just given the -- maybe some season pass holders feeling a little let down this year?

I think there's no question that there will always be a concern if you have a challenging snow year early. I think the good news is that we have seen really good conditions kind of come to all of our resorts ahead of when we're going to launch season passes. And I also think that people understand that when you buy season pass, sometimes the season will be incredible. Obviously, we had record snowfall last year. At that point, you've locked in a great price. This year, it may not be as good as it was last year, but I think people have the sense that we price our passes in a way that they get to lock-in year after year their ski experience, and then based on mother nature, sometimes it's better, sometimes it's worse. So there's no question that I think Tahoe probably will be -- have a little bit more challenge there, but the flipside to that, we think the addition of Kirkwood and some of our plans for Tahoe really give us some, I think, terrific momentum there to counter that.

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

I'd say on the second part of that question, the vast majority of people that have bought units have stayed in one of the units prior to their purchase. So we think that having those units available for people to occupy in advance of a purchase decision is a real strong selling tool for us, and we've seen continued momentum coming from that policy or that approach that we've taken for the real estate. And we don't anticipate and haven't seen to date any impact on pricing discussions or offers based on the fact that someone might have stayed in that unit in advance of someone occupying it. I think actually, the fact that those units that are furnished and people can really see the whole feel of the unit really helps out quite a bit. I think we have over half the units in the rental pool at the Ritz, and we have a significant majority of the units at One Ski Hill Place in the rental pool, and that's including unsold units that we've added to the rental pool, as well as people that have closed on their units and then add those into the rental pool. So I think it's been really successful on both fronts. And One Ski Hill Place, it really has set a new standard for what we're able to generate from an ADR standpoint in that market for people that are renting in One Ski Hill Place, and it's really bringing a new luxury consumer into that bed base in Breckenridge, which helps us overall in things like our ancillary businesses, ski school and dining and everything else. So I think we're really, really pleased with the success of One Ski Hill Place and what it's doing to that market. Likewise at the Ritz, it's really creating a -- filling a need for significant demand, especially at multi-room condo units of a luxury nature in Vail, and we've been using that quite a bit. We -- as we've been adding units to the rental pool, we've been filling them especially in peak periods right away almost because there's such a demand for some of those specially numerous unit condo room -- units that we have available at the Ritz. So we've been very pleased on both fronts.

And our next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch.

Just wanted to ask a little bit more about kind of the expense management throughout the quarter. Kind of, as you guys saw some of the snow coming through, clearly, I think you guys made some investment in snowmaking and some other things to kind of keep the guests happy. Can you just talk about, like, I guess strategically, how you thought about the expense side working through this season and how we should think about, I guess, expenses from an operating perspective kind of in the next season? Was there really any change at all? Or were you able to kind of just keep levels where they were and not -- and focus more on the guest experience?

Yes, I think there's no question that our approach has been to use expense to drive revenue, meaning that our focus is in periods -- this is true during recession. It's true now -- which is really make sure that the guest is having an incredible visit, and that's even more important when the weather conditions may be more challenging, and I think we've seen the results of that, obviously, with our revenue numbers, I think, which far exceeded, I think, what people's expectations would be any year where snowfall is down as much as it's been. I would say there's no question that in a more normal year next year, we would definitely be able to back off quite a bit on a lot of the snowmaking expense because we obviously wouldn't need that as much. I think some of the other things that we might have done for guests this year are certainly not things we would take away. I think those are things that would stay. So I don't -- I think we were very judicious about our expenses throughout the season, but at the same time making sure that we're not being penny wise, pound foolish and ultimately focusing on how we drive Resort EBITDA across our business.

That's helpful, Rob. And then I guess second was just strategically, obviously, you guys announced Kirkwood a few weeks ago. Could -- you didn't give much in the way of kind of information about the mountain, and that may be partially because, I guess, the deal hasn't closed yet. Or -- and correct me if I'm wrong on that, but just kind of was wondering, is there's any kind of sense from a visitation perspective? We've kind of heard and done a lot of goodwill searching for some numbers out there, but could you give us a sense as to what kind of contribution we should start to think about this in the portfolio from a visitor perspective or revenue perspective?

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

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

Yes.

Our next question comes from the line of Will Marks with JMP Securities.

Wanted to start on real estate, can you discuss the markets in general? I have a sense of your projects, but are we seeing a pickup in the market of Breckenridge in Vail?

I think, Will, on the residential side, things have improved a little bit in Vail and in Breckenridge, so it feels like there's been a bottoming out and starting to be some momentum going upwards in those markets, just even from across the residential front. On the project basis, I think we're really the only major project selling in One Ski Hill Place or in Breckenridge for One Ski Hill Place. In Vail, there's other projects selling at the same time, and I think based on the records that have been reported, there's very few closings that have been reported on those other 2 projects, and I think we continue to have more announced closings at the Ritz than the other projects. But I think certainly, the feel is pretty good in both markets, especially given the way this season played out and the impact destination visitation. There were certainly less people in town and everything like that, and despite all that, we're well on our way to hitting our goals for this year in real estate that we set obviously before knowing what the season was going to look like. So I do think that speaks well to the luxury component of our guests really coming back strongly in both markets, and I think we're seeing that play out a bit in real estate.

And to confirm, you have not changed pricing at all on the Ritz since when it was 2 years ago or so when you lowered pricing?

That's correct.

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

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

[indiscernible] it will cost?

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

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

We have not included anything significant in our capital plan for Kirkwood yet, in large part because we had not really sat down and talked with the folks there and done an assessment and kind of really set down -- set kind of a long-term strategic plan. We'll be doing that after we close, and whether there's things that might go into summer or down the road, I think we'll be -- I think that we'll announce later. But I guess I would emphasize that it's certainly nothing like what you saw with Northstar. So obviously, that is a -- was a unique situation where we made those investments in the first year, and that's certainly not something we'll be doing at Kirkwood in terms of those types of amounts.

Okay. And just one final question. Jeff, in looking out at the final 2 quarters of the year, how -- should we be looking at the fourth quarter, the July quarter as similar in terms of the Resort EBITDA losses as last year?

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

[Operator Instructions] Our next question comes from the line of Martin Pyykkonen with Wedge Partners.

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

Yes. I guess maybe I -- maybe rephrase it a little bit, which is to say that we definitely are seeing signs of a real strength and momentum in the spring break and Easter period. I'm not going to comment on exactly the timing of when all that went through, but there's no question that our guidance includes a very strong spring break and Easter, and that's based on the bookings that we've seen, some of which came in 6 months ago, and others have come in over the last few months.

Okay, fair enough. And to just comment about the real estate market there, the luxury market, again, given the bad year start and so forth being pretty good, I know these are more back burner, but any sort of timeframe as to when you think you might launch or announce any other new real estate projects kind of base mountain? It doesn't sound like it would be this year in your fiscal year, but could it be or would it be potentially next year given conditions as they are today?

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

And then just lastly on Ever Vail, is that actually in the -- have been approved from the local community town standpoint, or I mean, in other words, can you push the button if you wanted to or is there's still that process going on?

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

Our next question comes from the line of Smedes Rose with Keefe, Bruyette & Woods.

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

I think when -- I think we look at both, and I think we've made a commitment over a number of years now to return capital to shareholders, and I think obviously we were doing that through buybacks primarily then initiated a dividend. When we initiated a dividend, I think we made it clear that we started at a level that we felt like we had growth. I think this is a year that only gives us more confidence in our business, and so I think we felt like this was a good opportunity to increase it. We have not yet set, I would say, a definitive timetable for future increases or definitive policy for future increases, but I think it's possible that we get there over time, as we get out a couple of years. But at the moment, I think we certainly still feel like our business has opportunity, and therefore, our dividend has opportunity to grow.

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

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

Our next question comes from the line of Jeff Kauffman with Sterne Agee.

I want to circle back to Felicia's question. You mentioned forward growth kind of looking beyond the season, and I don't want to get too far ahead because I know Kirkwood hasn't closed, but which is more appealing to you? Is Europe a more attractive opportunity for you, given what's going on out there with the weaker currency? Or would something maybe in the Eastern U.S. make more sense? Can you just kind of talk about moving outside of the Western Rockies and Pacific region, what makes more sense in the long term?

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

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

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

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