Vail Q2 Revenue Up 7%

* Record second quarter Resort revenue, up 7.0% over same period last year

* Successful savings plan implementation, resort expense up only 2.3% over last year

* Record second quarter Resort Reported EBITDA, 21.1% higher than last year

* Heavenly second quarter skier visits up 22%, Beaver Creek skier visits up 11%, both over same period last year, both on track to record skier visits

* $36.2 million pre-tax charge to complete the highly favorable 6 3/4% ten-year bond refinancing results in reported net loss of $6.7 million for the quarter

VAIL, Colo., March 10 /PRNewswire-FirstCall/ — Vail Resorts, Inc. (NYSE:MTN) announced today financial results for the second quarter of fiscal 2004 ended January 31, 2004.

The Company historically used the term “EBITDA” when reporting its financial results for each of its reportable segments: mountain, lodging, resort (the combination of mountain and lodging) and real estate. In conjunction with the recently adopted Securities and Exchange rules regarding the use of non-GAAP financial measures, the Company currently uses the term “Reported EBITDA” when reporting financial results. The Company defines Reported EBITDA for the mountain, lodging and resort segments as segment net revenue less segment operating expense plus segment equity investment income. The Company defines Reported EBITDA for the real estate segment as segment net revenue less segment operating expense plus gain on transfer of property plus segment equity investment income.

SECOND QUARTER PERFORMANCE

Mountain revenue for the second quarter of fiscal 2004 was $201.4 million, a 6.9% increase from $188.4 million for the comparable period last year. Mountain expense increased $3.4 million, or 2.7%, to $126.9 million.

Lodging revenue for the quarter grew $2.8 million, or 7.8%, to $38.4 million. Lodging expense increased $0.4 million, or 1.0%, to $38.4 million.

Resort revenue, the combination of mountain and lodging revenues, rose $15.7 million, or 7.0%, to $239.7 million. Resort expense increased 2.3% to $165.2 million, up $3.7 million.

Real estate revenue for the quarter fell $16.7 million, as expected due to the timing and mix of real estate projects, to $7.5 million, and real estate expense decreased $16.2 million to $6.1 million.

Total revenue declined $1.0 million, or 0.4%, to $247.2 million due to the expected decline in real estate revenue, and total operating expense decreased $4.3 million, or 2.1%, to $200.6 million.

Income from operations for the quarter improved $3.4 million, or 7.8%, despite a $5.5 million pre-tax charge for mold remediation, to $46.6 million compared to $43.3 million for the same period last year.

Reported EBITDA for the mountain segment grew $9.8 million, or 14.9%, to $75.1 million compared to $65.3 million for the comparable period last year.

Reported EBITDA for the lodging segment improved from a loss of $4.3 million in the second quarter of last year to a loss of $1.2 million in the current year second quarter. The second quarter of fiscal 2004 includes $1.2 million of equity loss attributed to the Ritz-Carlton, Bachelor Gulch, which represents a $0.8 million improvement over the same period last year. As the Company uses the equity method of accounting for the Ritz-Carlton, Bachelor Gulch, included in the fiscal 2004 second quarter Lodging Reported EBITDA loss is $0.6 million of depreciation and $0.6 million of interest expense. Excluding the Ritz-Carlton, Bachelor Gulch in its entirety, Lodging Reported EBITDA was slightly positive in the second quarter this year versus a loss of $2.4 million last year.

Second quarter Resort Reported EBITDA rose $12.9 million to $73.9 million, a 21.1% improvement over the comparable period last year.

Real Estate Reported EBITDA for the quarter fell only $1.0 million to $1.7 million from $2.7 million, despite the $16.7 million decline in real estate revenue, primarily due to the sale of higher margin pperties this quarter than the same period last year.

During the second quarter of fiscal 2004, the Company completed a highly successful refinancing of its 8 3/4% senior subordinated notes, replacing those notes, which were to mature in 2009, with a new $390 million issue of 6 3/4% notes due in 2014. This significant interest rate improvement and five- year extension of maturity provided the Company with long-term capital at cheaper rates and give the Company greater flexibility to manage its capital structure. Additionally, the Company repriced its $100 million Term B bank loan, saving 50 basis points on interest rate and extending the maturity by two years from 2008 to 2010. The favorable terms on the new notes and Term B loan will result in an annual decrease in cash interest expense of approximately $5.7 million. As a result of these transactions, in the second quarter of fiscal 2004 the Company recorded a $36.2 million pre-tax charge, comprised of the tender premium, transaction fees and the non-cash write-off of the unamortized balance of deferred financing costs and original issue discount.

In addition, the Company recorded a $5.5 million pre-tax mold remediation charge associated with the previously disclosed condition at the Breckenridge Terrace, LLC employee housing facilities as a result of water intrusion causing mold damage to the interior of the buildings. Breckenridge Terrace is seeking various means to mitigate a portion of the remediation cost. Any changes in estimate for the remediation, including if receipt of recoveries from potentially responsible parties is deemed probable, will be reflected in future periods.

As a result of these charges, the Company reported a second quarter net loss of $6.7 million, or a loss of $0.19 per diluted share, compared to net income of $16.7 million, or $0.47 per diluted share, for the same period last year. Excluding the charges for early extinguishment of debt and mold remediation, the Company’s second quarter net income would have been $20.5 million, or $0.58 per diluted share, using a normalized tax rate.

SIX MONTH PERFORMANCE

Mountain revenue for the six months ended January 31, 2004 was $235.4 million, a 6.0% increase from $222.0 million for the comparable period last year. Mountain expense increased $0.6 million, or 0.3%, to $188.8 million.

Lodging revenue for the six months grew $4.8 million, or 6.3%, to $81.0 million. Lodging expense increased $1.6 million, or 2.0%, to $78.9 million.

Resort revenue, the combination of mountain and lodging revenues, rose $18.2 million, or 6.1%, to $316.5 million, and Resort expense increased 0.8% to $267.7 million, up $2.2 million.

Real estate revenue for the six-month period fell $29.2 million to $34.4 million as expected, and real estate expense decreased $31.7 million to $18.2 million.

Total revenue declined $10.9 million, or 3.0%, to $350.9 million and total operating expense decreased $20.4 million, or 5.7%, to $334.6 million.

Income from operations for the six months improved $9.5 million, or 141.7%, to $16.2 million compared to $6.7 million for the same period last year, despite a $5.5 million pre-tax charge in the second quarter for mold remediation.

Reported EBITDA for the mountain segment improved $11.8 million, or 33.4%, to $47.2 million compared to $35.4 million for the comparable period last year.

Reported EBITDA for the lodging segment improved from a loss of $4.3 million for the six month period last year to a loss of $0.8 million in the current year. The first six months of fiscal 2004 includes $2.8 million of equity loss attributed to the Ritz-Carlton, Bachelor Gulch, which represents a $0.5 million improvement over the same period last year. As the Company uses the equity method of accounting for the Ritz-Carlton, Bachelor Gulch, included in the fiscal 2004 year-to-date Lodging Reported EBITDA loss is $1.1 million of depreciation and $1.3 million of interest expense. Excluding the Ritz- Carlton, Bachelor Gulch in its entirety, Lodging Reported EBITDA was $2.0 million for the first six months this year versus a loss of $1.1 million for the same period last year.

Resort Reported EBITDA rose $15.4 million to $46.4 million, a 49.5% improvement over the six-month period last year.

Real Estate Reported EBITDA for the six months increased $1.0 million to $18.5 million from $17.5 million for the same period a year ago. The current year’s six month Reported EBITDA includes a $2.1 million net gain from the transfer of property.

The Company reported a net loss for the six months of $32.1 million, or $0.91 per diluted share, compared to a net loss of $8.4 million, or $0.24 per diluted share, for the same period last year. Excluding the charges for early extinguishment of debt and mold remediation, the Company’s expected seasonal net loss for the six months would have been $5.5 million, or $0.16 per diluted share, using a normalized tax rate.

Adam Aron, Chairman and Chief Executive Officer, commented, “We couldn’t be more pleased to announce Vail Resorts’ second quarter record Resort Reported EBITDA. With both revenue increases across the board and the implementation of an aggressive expense savings plan, we were able to improve Resort Reported EBITDA by 21% year-over-year. Demonstrating our increased efficiency in managing our business, Resort Reported EBITDA margins improved by approximately 4 percentage points.”

“The refinancing of our senior subordinated notes during the quarter was also an especially favorable development for the Company going forward. We secured significantly lower interest rates, and locked them in until 2014. Of course, the accounting treatment for this type of refinancing resulted in a large pre-tax charge in the quarter of $36.2 million; however, we were able to reduce our cash interest expense for the next 5 years by $5.2 million per year, and most experts would think our interest savings will be even greater beyond that. In addition, we were able to lower the interest rate and extend the maturity on our $100 million Term B loan, saving the Company an additional $500,000 of interest per year for the next several years,” continued Aron.

Aron further added, “The parade of good news in the second fiscal quarter seemed never ending. Beaver Creek and Heavenly are on a course to record skier visit years. And, thanks to increases in lift ticket pricing, Vail and Breckenridge also performed very well during the quarter. Our Keystone resort received approval for a significant terrain expansion for snowcat-served bowl skiing, taking Keystone to more than 2,500 skiable acres and more than a 3,000 foot vertical drop. Our lodging business is showing significant signs of recovery, as well. And, our real estate division has had sufficient profitability in the first six months, that it too should report impressive results for fiscal 2004. We are especially excited with our cooperation with the Town of Vail and its apparent willingness to approve the Company’s dramatic plan to redevelop in Vail Village and in Vail’s Lionshead. These efforts to significantly enhance the base village experiences in Vail promise to literally transform Vail Resorts’ flagship resort.”

Aron added, “As you know, we expect to increase our fiscal 2004 year-end Resort Reported EBITDA by a range of approximately $26 to $36 million year-over-year, to between $130 million and $140 million. Given that we already have a $15.4 million year-to-date year-over-year increase under our belt through January, we remain comfortable with this previously issued guidance. We are also encouraged that February skier visits and revenue were strong compared to the same period last year. On the other hand, it is too early to know for certain how we will perform in March and April at our ski resorts. And, looking at the remainder of fiscal 2004, Lodging advance bookings for the fourth quarter are robust. Therefore, at this time, we itz- Carlton, Bachelor Gulch in its entirety, Lodging Reported EBITDA was $2.0 million for the first six months this year versus a loss of $1.1 million for the same period last year.

Resort Reported EBITDA rose $15.4 million to $46.4 million, a 49.5% improvement over the six-month period last year.

Real Estate Reported EBITDA for the six months increased $1.0 million to $18.5 million from $17.5 million for the same period a year ago. The current year’s six month Reported EBITDA includes a $2.1 million net gain from the transfer of property.

The Company reported a net loss for the six months of $32.1 million, or $0.91 per diluted share, compared to a net loss of $8.4 million, or $0.24 per diluted share, for the same period last year. Excluding the charges for early extinguishment of debt and mold remediation, the Company’s expected seasonal net loss for the six months would have been $5.5 million, or $0.16 per diluted share, using a normalized tax rate.

Adam Aron, Chairman and Chief Executive Officer, commented, “We couldn’t be more pleased to announce Vail Resorts’ second quarter record Resort Reported EBITDA. With both revenue increases across the board and the implementation of an aggressive expense savings plan, we were able to improve Resort Reported EBITDA by 21% year-over-year. Demonstrating our increased efficiency in managing our business, Resort Reported EBITDA margins improved by approximately 4 percentage points.”

“The refinancing of our senior subordinated notes during the quarter was also an especially favorable development for the Company going forward. We secured significantly lower interest rates, and locked them in until 2014. Of course, the accounting treatment for this type of refinancing resulted in a large pre-tax charge in the quarter of $36.2 million; however, we were able to reduce our cash interest expense for the next 5 years by $5.2 million per year, and most experts would think our interest savings will be even greater beyond that. In addition, we were able to lower the interest rate and extend the maturity on our $100 million Term B loan, saving the Company an additional $500,000 of interest per year for the next several years,” continued Aron.

Aron further added, “The parade of good news in the second fiscal quarter seemed never ending. Beaver Creek and Heavenly are on a course to record skier visit years. And, thanks to increases in lift ticket pricing, Vail and Breckenridge also performed very well during the quarter. Our Keystone resort received approval for a significant terrain expansion for snowcat-served bowl skiing, taking Keystone to more than 2,500 skiable acres and more than a 3,000 foot vertical drop. Our lodging business is showing significant signs of recovery, as well. And, our real estate division has had sufficient profitability in the first six months, that it too should report impressive results for fiscal 2004. We are especially excited with our cooperation with the Town of Vail and its apparent willingness to approve the Company’s dramatic plan to redevelop in Vail Village and in Vail’s Lionshead. These efforts to significantly enhance the base village experiences in Vail promise to literally transform Vail Resorts’ flagship resort.”

Aron added, “As you know, we expect to increase our fiscal 2004 year-end Resort Reported EBITDA by a range of approximately $26 to $36 million year-over-year, to between $130 million and $140 million. Given that we already have a $15.4 million year-to-date year-over-year increase under our belt through January, we remain comfortable with this previously issued guidance. We are also encouraged that February skier visits and revenue were strong compared to the same period last year. On the other hand, it is too early to know for certain how we will perform in March and April at our ski resorts. And, looking at the remainder of fiscal 2004, Lodging advance bookings for the fourth quarter are robust. Therefore, at this time, we are reiterating the year-end Reported EBITDA guidance we provided in November for the Mountain, Lodging, Resort and Real Estate segments. Similarly, excluding the impact of the charges associated with the early extinguishment of debt and Breckenridge Terrace mold remediation, we would be reiterating our net income guidance of $2 to $10 million for the fiscal year.”

CAPITAL EXPENDITURE ANNOUNCEMENT

The Company also announced that its Board of Directors authorized approximately $62 million of capital expenditures for maintenance capital and discretionary resort improvements at the Company’s five ski resorts and throughout its hotels for calendar 2004. Highlights of these expenditures include three new high-speed chairlifts at the Beaver Creek and Heavenly ski resorts, restaurant upgrades at Heavenly’s mid-mountain East Peak area, sufficient new snowcats to enable a 30% increase in grooming hours at Vail and Beaver Creek, and a multi-million dollar renovation at the Lodge at Rancho Mirage.

In addition, anticipating the impending redevelopment of the base village experience in Vail, an additional $72 million of real estate-related capital expenditures were also approved. This real estate-related capital will mark the beginning of a multi-year redevelopment of both Vail Village and Vail’s Lionshead, the creation of a new golf course community in Jackson Hole, and other projects.

Commenting on the capital expenditure announcement, Aron said, “Vail Resorts has always stood for industry leading quality in the guest experience that we offer. While resort-related spending for calendar 2004 is projected to be down somewhat from prior years, it is still more than ample to continue to make certain Vail Resorts’ clear leadership position among mountain resort operators. New lifts, more grooming, better restaurants and renovated hotels will continue to widen the gap between the premier experiences we offer visitors to our resorts, as contrasted with that offered by our competitors. Perhaps as dramatic, after years of planning, a transformation of our flagship resort, Vail, is literally at hand. Vail’s New Dawn real estate development will refine the charm and enhance the amenities of Vail Village, and will create an all-new pedestrian village with handsome European-inspired architecture in what is now Lionshead.”

Vail Resorts, Inc. is the premier mountain resort operator in North America. The Company’s subsidiaries operate the mountain resorts of Vail, Beaver Creek, Breckenridge and Keystone in Colorado, Heavenly Resort in California and Nevada and the Grand Teton Lodge Company in Jackson Hole, Wyoming. In addition, the Company’s RockResorts luxury resort hotel company operates 10 resort hotels throughout the United States. The Vail Resorts corporate website is www.vailresorts.com and the consumer websites are www.snow.com and www.rockresorts.com . Vail Resorts, Inc. is a publicly held company traded on the New York Stock Exchange (NYSE:MTN). we are reiterating the year-end Reported EBITDA guidance we provided in November for the Mountain, Lodging, Resort and Real Estate segments. Similarly, excluding the impact of the charges associated with the early extinguishment of debt and Breckenridge Terrace mold remediation, we would be reiterating our net income guidance of $2 to $10 million for the fiscal year.”

CAPITAL EXPENDITURE ANNOUNCEMENT

The Company also announced that its Board of Directors authorized approximately $62 million of capital expenditures for maintenance capital and discretionary resort improvements at the Company’s five ski resorts and throughout its hotels for calendar 2004. Highlights of these expenditures include three new high-speed chairlifts at the Beaver Creek and Heavenly ski resorts, restaurant upgrades at Heavenly’s mid-mountain East Peak area, sufficient new snowcats to enable a 30% increase in grooming hours at Vail and Beaver Creek, and a multi-million dollar renovation at the Lodge at Rancho Mirrage.

In addition, anticipating the impending redevelopment of the base village experience in Vail, an additional $72 million of real estate-related capital expenditures were also approved. This real estate-related capital will mark the beginning of a multi-year redevelopment of both Vail Village and Vail’s Lionshead, the creation of a new golf course community in Jackson Hole, and other projects.

Commenting on the capital expenditure announcement, Aron said, “Vail Resorts has always stood for industry leading quality in the guest experience that we offer. While resort-related spending for calendar 2004 is projected to be down somewhat from prior years, it is still more than ample to continue to make certain Vail Resorts’ clear leadership position among mountain resort operators. New lifts, more grooming, better restaurants and renovated hotels will continue to widen the gap between the premier experiences we offer visitors to our resorts, as contrasted with that offered by our competitors. Perhaps as dramatic, after years of planning, a transformation of our flagship resort, Vail, is literally at hand. Vail’s New Dawn real estate development will refine the charm and enhance the amenities of Vail Village, and will create an all-new pedestrian village with handsome European-inspired architecture in what is now Lionshead.”

Vail Resorts, Inc. is the premier mountain resort operator in North America. The Company’s subsidiaries operate the mountain resorts of Vail, Beaver Creek, Breckenridge and Keystone in Colorado, Heavenly Resort in California and Nevada and the Grand Teton Lodge Company in Jackson Hole, Wyoming. In addition, the Company’s RockResorts luxury resort hotel company operates 10 resort hotels throughout the United States. The Vail Resorts corporate website is www.vailresorts.com and the consumer websites are www.snow.com and www.rockresorts.com . Vail Resorts, Inc. is a publicly held company traded on the New York Stock Exchange (NYSE:MTN).