UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





xQUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
quarterly period ended October 31, 2009





 ̈TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
transition period from       to





Commission
File Number:  001-09614








Vail
Resorts, Inc.


(Exact
Name of Registrant as Specified in Its Charter)








Delaware
            
            51-0291762(State
      or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
      Employer Identification No.)390
      Interlocken Crescent
              Broomfield,
      Colorado
            
            80021(Address
      of Principal Executive Offices)
            
            (Zip
      Code)





(303)
      404-1800(Registrant’s
      Telephone Number, Including Area
Code)








Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.


x Yes  ̈ No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).


 ̈ Yes  ̈ No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.


Large
accelerated filer x                                                                             Accelerated
filer  ̈


Non-accelerated
filer  ̈ (Do not
check if a smaller reporting company)Smaller reporting
company  ̈





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


 ̈ Yes x No





As of
December 2, 2009, 36,243,341 shares of the registrant’s common stock were
outstanding.














Table
      of ContentsPART
      I
            FINANCIAL
      INFORMATIONItem
      1.
            Financial Statements.
            F-1Item
      2.
            Management's Discussion and Analysis of Financial Condition
      and Results of Operations.
            1Item
      3.
            Quantitative and Qualitative Disclosures About Market
      Risk.
            11Item
      4.
            Controls and Procedures.
            11PART
      II
            OTHER
      INFORMATIONItem
      1.
            Legal Proceedings.
            12Item
      1A.
            Risk Factors.
            12Item
      2.
            Unregistered Sales of Equity Securities and Use
      of Proceeds.
            12Item
      3.
            Defaults Upon Senior Securities.
            13Item
      4.
            Submission of Matters to a Vote of Security
      Holders.
            13Item
      5.
            Other Information.
            13Item
      6.
            Exhibits.
            13

















PART
      I
            FINANCIAL
      INFORMATIONItem
      1.
            Financial Statements --
    UnauditedConsolidated Condensed Balance Sheets as of October
      31, 2009, July 31, 2009 and October 31, 2008
            F-2Consolidated Condensed Statements of
      Operations for the Three Months Ended October 31, 2009 and
      2008
            F-3Consolidated Condensed Statements of Cash
      Flows for the Three Months Ended October 31, 2009 and
    2008
            F-4Notes to Consolidated Condensed Financial
      Statements
            F-5























Vail Resorts, Inc.


Consolidated
Condensed Balance Sheets


(In
thousands, except share and per share amounts)





October
      31,
            
            
            
            July
      31,
            
            
            
            October
      31,2009
            
            
            
            2009
            
            
            
            2008(Unaudited)
            
            
            
            
            
            
            
            (Unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            13,019
            
            
            $
            69,298
            
            
            $
            102,668Restricted
      cash
            
            
            13,436
            
            
            
            11,065
            
            
            
            12,453Trade
      receivables, net
            
            
            32,821
            
            
            
            58,063
            
            
            
            44,468Inventories,
      net
            
            
            62,779
            
            
            
            48,947
            
            
            
            67,718Other
      current assets
            
            
            48,822
            
            
            
            41,615
            
            
            
            41,988Total
      current assets
            
            
            170,877
            
            
            
            228,988
            
            
            
            269,295Property,
      plant and equipment, net (Note 5)
            
            
            1,051,933
            
            
            
            1,057,658
            
            
            
            1,077,760Real
      estate held for sale and investment
            
            
            366,748
            
            
            
            311,485
            
            
            
            256,323Goodwill,
      net
            
            
            167,950
            
            
            
            167,950
            
            
            
            142,282Intangible
      assets, net
            
            
            79,353
            
            
            
            79,429
            
            
            
            72,463Other
      assets
            
            
            33,269
            
            
            
            38,970
            
            
            
            47,062Total
      assets
            
            $
            1,870,130
            
            
            $
            1,884,480
            
            
            $
            1,865,185Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Accounts
      payable and accrued liabilities (Note 5)
            
            $
            330,272
            
            
            $
            245,536
            
            
            $
            327,516Income
      taxes payable
            
            
            5,725
            
            
            
            5,460
            
            
            
            49,784Long-term
      debt due within one year (Note 4)
            
            
            1,862
            
            
            
            352
            
            
            
            354Total
      current liabilities
            
            
            337,859
            
            
            
            251,348
            
            
            
            377,654Long-term
      debt (Note 4)
            
            
            489,919
            
            
            
            491,608
            
            
            
            491,778Other
      long-term liabilities (Note 5)
            
            
            199,288
            
            
            
            233,169
            
            
            
            223,381Deferred
      income taxes
            
            
            87,993
            
            
            
            112,234
            
            
            
            57,063Commitments
      and contingencies (Note 9)Redeemable
      noncontrolling interest (Note 8)
            
            
            16,847
            
            
            
            15,415
            
            
            
            31,947Stockholders’
      equity:Preferred
      stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and
      outstanding
            
            
            --
            
            
            
            --
            
            
            
            --Common
      stock, $0.01 par value, 100,000,000 shares authorized, 40,121,309
      (unaudited), 40,049,988 and 40,000,502 (unaudited) shares issued,
      respectively
            
            
            401
            
            
            
            400
            
            
            
            400Additional
      paid-in capital
            
            
            558,202
            
            
            
            555,728
            
            
            
            547,043Retained
      earnings
            
            
            315,822
            
            
            
            356,995
            
            
            
            260,014Treasury
      stock, at cost; 3,878,535 (unaudited), 3,878,535 and 3,282,508 (unaudited)
      shares, respectively (Note 11)
            
            
            (147,828
            )
            
            
            (147,828
            )
            
            
            (132,873
            )Total
      Vail Resorts, Inc. stockholders’ equity
            
            
            726,597
            
            
            
            765,295
            
            
            
            674,584Noncontrolling interests
            
            
            11,627
            
            
            
            15,411
            
            
            
            8,778Total stockholders’ equity
            
            
            738,224
            
            
            
            780,706
            
            
            
            683,362Total
      liabilities and stockholders’ equity
            
            $
            1,870,130
            
            
            $
            1,884,480
            
            
            $
            1,865,185





The
accompanying Notes are an integral part of these consolidated condensed
financial statements.





Vail
Resorts, Inc.


Consolidated
Condensed Statements of Operations


(In
thousands, except per share amounts)


(Unaudited)





Three
      months endedOctober
      31,2009
            
            
            2008Net
      revenue:Mountain
            $
            39,204
            
            $
            40,778Lodging
            
            41,355
            
            
            45,253Real
      estate
            
            205
            
            
            66,750Total
      net revenue
            
            80,764
            
            
            152,781Segment
      operating expense (exclusive of depreciation and amortization shown
      separately below):Mountain
            
            76,468
            
            
            81,223Lodging
            
            42,623
            
            
            44,898Real
      estate
            
            5,177
            
            
            51,377Total
      segment operating expense
            
            124,268
            
            
            177,498Other
      operating (expense) income:Depreciation
      and amortization
            
            (27,184
            )
            
            (25,078
            )Gain
      on sale of real property
            
            6,087
            
            
            --Loss
      on disposal of fixed assets, net
            
            (113
            )
            
            (180
            )Loss
      from operations
            
            (64,714
            )
            
            (49,975
            )Mountain
      equity investment  income, net
            
            254
            
            
            1,015Investment
      income
            
            230
            
            
            643Interest
      expense, net
            
            (4,835
            )
            
            (7,947
            )Loss
      before benefit from income taxes
            
            (69,065
            )
            
            (56,264
            )Benefit
      from income taxes
            
            25,554
            
            
            19,409Net
      loss
            
            (43,511
            )
            
            (36,855
            )Net
      loss attributable to noncontrolling interests
            
            2,338
            
            
            2,351Net
      loss attributable to Vail Resorts, Inc.
            $
            (41,173
            )
            $
            (34,504
            )Per
      share amounts (Note 3):Basic
      net loss per share
            $
            (1.14
            )
            $
            (0.93
            )Diluted
      net loss per share
            $
            (1.14
            )
            $
            (0.93
            )





TheaccompanyingNotes are an integral part of these
consolidated condensed financial statements.





Vail Resorts, Inc.


Consolidated
Condensed Statements of Cash Flows


(In
thousands)


(Unaudited)





Three
      Months EndedOctober
      31,2009
            
            2008Cash
      flows from operating activities:Net
      loss
            
            $
            (43,511
            )
            
            $
            (36,855
            )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Depreciation
      and amortization
            
            
            27,184
            
            
            
            25,078Cost
      of real estate sales
            
            
            --
            
            
            
            40,127Gain
      on sale of real property
            
            
            (6,087
            )
            
            
            --Stock-based
      compensation expense
            
            
            3,464
            
            
            
            2,567Deferred
      income taxes, net
            
            
            (25,554
            )
            
            
            (19,188
            )Other
      non-cash income, net
            
            
            (2,085
            )
            
            
            (1,807
            )Changes
      in assets and liabilities:Restricted
      cash
            
            
            (2,371
            )
            
            
            45,984Accounts
      receivable, net
            
            
            25,242
            
            
            
            6,616Inventories,
      net
            
            
            (13,832
            )
            
            
            (18,010
            )Investments
      in real estate
            
            
            (59,880
            )
            
            
            (50,774
            )Accounts
      payable and accrued liabilities
            
            
            52,409
            
            
            
            40,063Deferred
      real estate deposits
            
            
            139
            
            
            
            (11,149
            )Private
      club deferred initiation fees and deposits
            
            
            373
            
            
            
            34,637Other
      assets and liabilities, net
            
            
            (442
            )
            
            
            (6,370
            )Net
      cash (used in) provided by operating activities
            
            
            (44,951
            )
            
            
            50,919Cash
      flows from investing activities:Capital
      expenditures
            
            
            (20,753
            )
            
            
            (43,384
            )Cash
      received from sale of real property
            
            
            8,920
            
            
            
            --Other
      investing activities, net
            
            
            (217
            )
            
            
            (2,582
            )Net
      cash used in investing activities
            
            
            (12,050
            )
            
            
            (45,966
            )Cash
      flows from financing activities:Repurchases
      of common stock
            
            
            --
            
            
            
            (7,412
            )Proceeds
      from borrowings under non-recourse real estate financings
            
            
            --
            
            
            
            9,013Payments
      of non-recourse real estate financings
            
            
            --
            
            
            
            (58,407
            )Proceeds
      from borrowings under other long-term debt
            
            
            29,457
            
            
            
            20,640Payments
      of other long-term debt
            
            
            (29,636
            )
            
            
            (35,808
            )Other
      financing activities, net
            
            
            901
            
            
            
            7,344Net
      cash provided by (used in) financing activities
            
            
            722
            
            
            
            (64,630
            )Net
      decrease in cash and cash equivalents
            
            
            (56,279
            )
            
            
            (59,677
            )Cash
      and cash equivalents:Beginning
      of period
            
            
            69,298
            
            
            
            162,345End
      of period
            
            $
            13,019
            
            
            $
            102,668





The
accompanying Notes are an integral part of these consolidated condensed
financial statements.





Vail Resorts, Inc.


Notes
to Consolidated Condensed Financial Statements


(Unaudited)





1.           Organization
and Business




Vail
Resorts, Inc. (“Vail Resorts” or the “Parent Company”) is organized as a holding
company and operates through various subsidiaries.  Vail Resorts and
its subsidiaries (collectively, the “Company”) currently operate in three
business segments: Mountain, Lodging and Real Estate.  In the Mountain
segment, the Company owns and operates five world-class ski resort properties at
the Vail, Breckenridge, Keystone and Beaver Creek mountain resorts in Colorado
and the Heavenly Mountain Resort in the Lake Tahoe area of California and
Nevada, as well as ancillary businesses, primarily including ski school, dining
and retail/rental operations.  These resorts operate primarily on
Federal land under the terms of Special Use Permits granted by the USDA Forest
Service (the “Forest Service”).  The Company holds a 69.3% interest in
SSI Venture, LLC (“SSV”), a retail/rental company.  The Company’s
mountain business is seasonal in nature with its peak operating season from
mid-November through mid-April.  In the Lodging segment, the Company
owns and/or manages a collection of luxury hotels under its RockResorts brand,
as well as other strategic lodging properties and a large number of condominiums
located in proximity to the Company’s ski resorts, the Grand Teton Lodge Company
(“GTLC”), which operates three destination resorts at Grand Teton National Park
(under a National Park Service concessionaire contract), Colorado Mountain
Express (“CME”), a resort ground transportation company, and golf courses. The
Company’s lodging properties at or around the Company’s ski resorts are seasonal
in nature with peak operating seasons from mid-November through
mid-April.  The Company’s operations at GTLC and its golf courses
generally only operate from mid-May through mid-October.  Vail Resorts
Development Company (“VRDC”), a wholly-owned subsidiary, conducts the operations
of the Company’s Real Estate segment, which owns and develops real estate in and
around the Company’s resort communities.  The Company also has
non-majority owned investments in various other entities, some of which are
consolidated (see Note 6, Variable Interest Entities).





2.           Summary
of Significant Accounting Policies





The
Financial Accounting Standards Board (“FASB”) has established the FASB
Accounting Standards Codification (“ASC”) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the United States of America for financial statements of interim and
annual periods ending after September 15, 2009 (the Company’s first quarter for
fiscal year 2010).  This standard does not alter current accounting
principles generally accepted in the United States of America (“GAAP”), but
rather integrates existing accounting standards with other authoritative
guidance.





Basis
of Presentation




Consolidated Condensed Financial
Statements--In the opinion of the Company, the accompanying Consolidated
Condensed Financial Statements reflect all adjustments necessary to state fairly
the Company's financial position, results of operations and cash flows for the
interim periods presented.  All such adjustments are of a normal
recurring nature.  Results for interim periods are not indicative of
the results for the entire fiscal year.  The accompanying Consolidated
Condensed Financial Statements should be read in conjunction with the audited
Consolidated Financial Statements included in the Company's Annual Report on
Form 10-K for the year ended July 31, 2009.  Certain information and
footnote disclosures, including significant accounting policies, normally
included in fiscal year financial statements prepared in accordance with GAAP
have been condensed or omitted.  The July 31, 2009 Consolidated
Condensed Balance Sheet was derived from audited financial
statements.




Management
has evaluated subsequent events through December 7, 2009, the date these
financial statements were available to be issued.





Use of Estimates--The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the balance
sheet date and the reported amounts of revenue and expenses during the reporting
period.  Actual results could differ from those
estimates.





Noncontrolling Interests in
Consolidated Financial Statements--Effective August 1, 2009, the Company
adopted Statement of Financial Accounting Standards (“SFAS”) No. 160,
“Noncontrolling Interest in Consolidated Financial Statements – an Amendment of
Accounting Research Bulletin No. 51” (“SFAS 160”).  The guidance of
this statement is now included in ASC Topic 810 “Consolidation”.  This
statement requires the presentation of net income (loss) allocable to
noncontrolling interests (previously referred to as minority interest) along
with net income (loss) attributable to the stockholders of the Company
separately in its consolidated statement of operations.  Additionally,
noncontrolling interests in the consolidated subsidiaries of the Company are
reported as a separate component of equity in the consolidated balance sheet,
apart from the Company’s equity.  However, redeemable noncontrolling
interests in which the Company is subject to a put option under which it may be
required to repurchase an interest in a consolidated subsidiary from a
noncontrolling interest holder, must be classified outside of stockholders’
equity.  Since the Company is subject to a put option with respect to
SSV beginning August 1, 2010 and each year thereafter (see Note 8, Redeemable
Noncontrolling Interest, of the Notes to Consolidated Condensed Financial
Statements), the redeemable noncontrolling interest in SSV has been classified
in the mezzanine section of the accompanying consolidated condensed balance
sheets at its estimated redemption value at the end of each reporting
period.





Upon
adoption, the provisions of this statement have been applied to all
noncontrolling interests prospectively, except for the presentation and
disclosure requirements, which have been applied retrospectively for all periods
presented.  The retrospective impact of applying this guidance was a
reclassification of $15.4 million and $31.9 million as of July 31, 2009 and
October 31, 2008, respectively, of minority interest to redeemable
noncontrolling interest, representing noncontrolling interest subject to the SSV
put option, and a reduction in retained earnings of $13.5 million as of October
31, 2008, representing the difference in the estimated redemption value as of
October 31, 2008 and the carrying value of the SSV noncontrolling
interest.  In addition, as of July 31, 2009 and October 31, 2009, the
portion of minority interest, which is not subject to the SSV put option, has
been reclassified as part of equity-noncontrolling interests.  The
following table summarizes the changes in total stockholders’ equity (in
thousands):







Three
      Months Ended October 31,2009
            
            2008Vail
      Resorts Stockholders
            
            
            Noncontrolling
      Interests
            
            
            Total
      Equity
            
            
            
            Vail
      Resorts Stockholders
            
            
            Noncontrolling
      Interests
            
            
            Total
      EquityBalance,
      beginning of period
            $
            765,295
            
            $
            15,411
            
            $
            780,706
            
            
            $
            716,633
            
            $
            8,848
            
            $
            725,481Net loss
            
            (41,173
            )
            
            (2,338
            )
            
            (43,511
            )
            
            
            (34,504
            )
            
            (2,351
            )
            
            (36,855
            )Stock-based compensation  expense
            
            3,464
            
            
            --
            
            
            3,464
            
            
            
            2,567
            
            
            --
            
            
            2,567Issuance
      of shares under share award plans
            
            (724
            )
            
            --
            
            
            (724
            )
            
            
            (1,079
            )
            
            --
            
            
            (1,079
            )Tax
      benefit from share award plans
            
            (265
            )
            
            --
            
            
            (265
            )
            
            
            (214
            )
            
            --
            
            
            (214
            )Repurchases
      of common stock
            
            --
            
            
            --
            
            
            
            
            
            
            (7,413
            )
            
            --
            
            
            (7,413
            )Adjustment
      to redemption value of redeemable noncontrolling interest
            
            --
            
            
            (1,431
            )
            
            (1,431
            )
            
            
            (1,406
            )
            
            2,646
            
            
            1,240Distributions
      to noncontrolling interests, net
            
            --
            
            
            (15
            )
            
            (15
            )
            
            
            --
            
            
            (365
            )
            
            (365
            )Balance,
      end of period
            $
            726,597
            
            $
            11,627
            
            $
            738,224
            
            
            $
            674,584
            
            $
            8,778
            
            $
            683,362





Additionally,
upon adoption of this statement, even though the Company’s total provision
(benefit) for income taxes did not change, the Company’s effective tax rate
calculation has changed because net income (loss) attributable to noncontrolling
interests is no longer included in the determination of pre-tax income (loss) in
calculating its effective tax rate.





Fair Value Instruments--The
recorded amounts for cash and cash equivalents, receivables, other current
assets, and accounts payable and accrued liabilities approximate fair value due
to their short-term nature.  The fair value of amounts outstanding
under the Employee Housing Bonds (Note 4, Long-Term Debt) approximate book value
due to the variable nature of the interest rate associated with that
debt.  The fair value of the 6.75% Notes (Note 4, Long-Term Debt) is
based on quoted market price.  The fair value of the Company's
Industrial Development Bonds (Note 4, Long-Term Debt) and other long-term debt
have been estimated using discounted cash flow analyses based on current
borrowing rates for debt with similar remaining maturities and
ratings.  The estimated fair value of the 6.75% Notes, Industrial
Development Bonds and other long-term debt as of October 31, 2009 is presented
below (in thousands):





October
      31, 2009Carrying
            
            FairValue
            
            Value6.75%
      Notes
            
            $
            390,000
            
            $
            385,125Industrial
      Development Bonds
            
            
            42,700
            
            
            45,464Other
      long-term debt
            
            $
            6,506
            
            $
            6,296








New
Accounting Standards





Fair Value Measurements and
Disclosures--In September 2006, the FASB issued guidance which is
included in ASC Topic 820, “Fair Value Measurements and Disclosures” (SFAS No.
157 “Fair Value Measurements”) on fair value measurements and
disclosures.  This standard defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements.  The fair value guidance in this standard for financial
assets and liabilities was effective for the Company on August 1,
2008.  The Company adopted the guidance for nonfinancial assets and
liabilities on August 1, 2009 and the provisions did not have a material impact
on the Company’s financial position or results of operations.





Business Combinations--In
December 2007, the FASB issued guidance which is included in ASC Topic 805,
“Business Combinations” (SFAS No. 141R, “Business Combinations”) which
establishes principles and requirements on how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in an acquiree, including
the recognition and measurement of goodwill acquired in a business
combination.  This standard also requires acquisition-related
transaction expenses and restructuring costs be expensed as incurred rather than
capitalized as a component of the business combination.  The guidance
was effective for the Company on August 1, 2009 and will be applied
prospectively to business combinations.





Amendments to FASB Interpretation,
Consolidation of Variable Interest Entities--In June 2009, the FASB
issued guidance which is included in ASC 810, “Consolidation” (SFAS 167
“Amendments to FASB No. 46(R)”) which amends the consolidation guidance for
variable interest entities.  Under this new standard, entities must
perform a qualitative assessment in determining the primary beneficiary of a
variable interest entity which includes, among other things, consideration as to
whether a variable interest holder has the power to direct the activities that
most significantly impact the economic performance of the variable interest
entity and the obligation to absorb losses or the right to receive benefits of
the variable interest entity that could potentially be significant to the
variable interest entity.  This standard is effective for the Company
beginning August 1, 2010 (the Company’s fiscal year ending July 31,
2011).  The Company is currently evaluating the impacts, if any, the
adoption of this new standard will have on the Company’s financial position or
results of operations.





Revenue Recognition Guidance for
Arrangements with Multiple Deliverables--In September 2009, the FASB
issued Accounting Standards Update (“ASU”) 2009-13, “Multiple-Deliverables
Revenue Arrangements” (amendments to ASC Topic 605, “Revenue Recognition”, and
the Emerging Issues Task Force Issue No. 08-01 “Revenue Arrangements with
Multiple Deliverables”) which amends the revenue recognition guidance for
arrangements with multiple deliverables.  This new standard requires
entities to allocate revenue in arrangements with multiple deliverables using
estimated selling prices and eliminates the use of the residual
method.  The provisions of this new standard are effective for the
Company beginning August 1, 2010 (the Company’s fiscal year ending July 31,
2011); however, early adoption is permitted.  The Company is currently
evaluating the impacts, if any, the adoption of this new standard will have on
the Company’s financial position or results of operations.





3.           Net
Loss Per Common Share





Basic
earnings per share (“EPS”) excludes dilution and is computed by dividing net
loss attributable to Vail Resorts stockholders by the weighted-average shares
outstanding during the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised, resulting in the issuance of shares of common stock that would
then share in the earnings of Vail Resorts.  Presented below is basic
and diluted EPS for the three months ended October 31, 2009 and 2008 (in
thousands, except per share amounts):





Three
      Months Ended October 31,2009
            
            2008Basic
            
            Diluted
            
            Basic
            
            DilutedNet
      loss per share:Net
      loss attributable to Vail Resorts
            
            $
            (41,173
            )
            
            $
            (41,173
            )
            
            $
            (34,504
            )
            
            $
            (34,504
            )Weighted-average
      shares outstanding
            
            
            36,201
            
            
            
            36,201
            
            
            
            36,922
            
            
            
            36,922Effect
      of dilutive securities
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Total
      shares
            
            
            36,201
            
            
            
            36,201
            
            
            
            36,922
            
            
            
            36,922Net
      loss per share
            
            $
            (1.14
            )
            
            $
            (1.14
            )
            
            $
            (0.93
            )
            
            $
            (0.93
            )





The
number of shares issuable on the exercise of share based awards that were
excluded from the calculation of diluted net loss per share because the effect
of their inclusion would have been anti-dilutive totaled 1.3 million and 0.8
million for the three months ended October 31, 2009 and 2008,
respectively.





4.           Long-Term
Debt





Long-term
debt as of October 31, 2009, July 31, 2009 and October 31, 2008 is summarized as
follows (in thousands):





October
      31,
            July
      31,
            October
      31,Maturity
      (a)
            2009
            2009
            2008Credit
      Facility Revolver
            2012
            $
            --
            $
            --
            $
            --SSV
      Facility
            2011
            
            --
            
            --
            
            --Industrial
      Development Bonds
            2011-2020
            
            42,700
            
            42,700
            
            42,700Employee
      Housing Bonds
            2027-2039
            
            52,575
            
            52,575
            
            52,5756.75%
      Senior Subordinated Notes ("6.75% Notes")
            2014
            
            390,000
            
            390,000
            
            390,000Other
            2009-2029
            
            6,506
            
            6,685
            
            6,857Total
      debt
            
            
            491,781
            
            491,960
            
            492,132Less:  Current
      maturities (b)
            
            
            1,862
            
            352
            
            354Long-term
      debt
            
            $
            489,919
            $
            491,608
            $
            491,778





(a)
            Maturities
      are based on the Company's July 31 fiscal year
  end.





(b)
            Current
      maturities represent principal payments due in the next 12
      months.





Aggregate
maturities for debt outstanding as of October 31, 2009 reflected by fiscal year
are as follows (in thousands):








Total2010
            $
            1692011
            
            1,8312012
            
            3052013
            
            3192014
            
            390,219Thereafter
            
            98,938Total
      debt
            $
            491,781








The
Company incurred gross interest expense of $8.4 million and $9.7 million for the
three months ended October 31, 2009 and 2008, respectively, of which $0.4
million and $0.8 million was amortization of deferred financing
costs.  The Company capitalized $3.5 million and $1.7 million of
interest during the three months ended October 31, 2009 and 2008,
respectively.








5.           Supplementary
Balance Sheet Information





The
composition of property, plant and equipment follows (in
thousands):





October
      31,
            
            July
      31,
            
            October
      31,2009
            
            2009
            
            2008Land
      and land improvements
            
            $
            264,030
            
            
            $
            261,263
            
            
            $
            266,194Buildings
      and building improvements
            
            
            751,038
            
            
            
            750,063
            
            
            
            729,211Machinery
      and equipment
            
            
            499,768
            
            
            
            496,963
            
            
            
            459,544Furniture
      and fixtures
            
            
            175,061
            
            
            
            174,770
            
            
            
            152,735Software
            
            
            51,358
            
            
            
            44,584
            
            
            
            40,359Vehicles
            
            
            34,265
            
            
            
            33,991
            
            
            
            29,588Construction
      in progress
            
            
            47,767
            
            
            
            40,724
            
            
            
            72,744Gross
      property, plant and equipment
            
            
            1,823,287
            
            
            
            1,802,358
            
            
            
            1,750,375Accumulated
      depreciation
            
            
            (771,354
            )
            
            
            (744,700
            )
            
            
            (672,615
            )Property,
      plant and equipment, net
            
            $
            1,051,933
            
            
            $
            1,057,658
            
            
            $
            1,077,760





The
composition of accounts payable and accrued liabilities follows (in
thousands):





October
      31,
            
            July
      31,
            
            October
      31,2009
            
            2009
            
            2008Trade
      payables
            
            $
            60,597
            
            
            $
            42,591
            
            
            $
            73,348Real
      estate development payables
            
            
            55,082
            
            
            
            45,681
            
            
            
            57,001Deferred
      revenue
            
            
            91,753
            
            
            
            57,171
            
            
            
            82,343Deferred
      real estate and other deposits
            
            
            53,134
            
            
            
            21,576
            
            
            
            46,582Accrued
      salaries, wages and deferred compensation
            
            
            16,087
            
            
            
            15,202
            
            
            
            16,052Accrued
      benefits
            
            
            22,489
            
            
            
            23,496
            
            
            
            22,303Accrued
      interest
            
            
            6,592
            
            
            
            14,002
            
            
            
            6,722Liabilities
      to complete real estate projects, short term
            
            
            1,794
            
            
            
            3,972
            
            
            
            2,821Other
      accruals
            
            
            22,744
            
            
            
            21,845
            
            
            
            20,344Total
      accounts payable and accrued liabilities
            
            $
            330,272
            
            
            $
            245,536
            
            
            $
            327,516





The
composition of other long-term liabilities follows (in thousands):





October
      31,
            
            July
      31,
            
            October
      31,2009
            
            2009
            
            2008Private
      club deferred initiation fee revenue and deposits
            
            $
            151,464
            
            
            $
            153,265
            
            
            $
            156,200Deferred
      real estate deposits
            
            
            --
            
            
            
            32,792
            
            
            
            45,856Other
      long-term liabilities
            
            
            47,824
            
            
            
            47,112
            
            
            
            21,325Total
      other long-term liabilities
            
            $
            199,288
            
            
            $
            233,169
            
            
            $
            223,381





On
November 1, 2008, the Company acquired substantially all of the assets of CME, a
resort ground transportation business, for a total consideration of $38.2
million, as well as $0.9 million to reimburse the seller for certain new capital
expenditures as provided for in the purchase agreement.  The
acquisition was accounted for as a business purchase combination using the
purchase method of accounting.  The purchase price was allocated to
tangible and identifiable intangible assets acquired based on their estimated
fair values at the acquisition date.  The Company has completed its
purchase price allocation and has recorded $25.7 million in goodwill and $7.5
million in intangible assets on the date of the acquisition.  The
operating results of CME from the date of acquisition are reported within the
Lodging segment.





6.           Variable
Interest Entities





The
Company is the primary beneficiary of four employee housing entities
(collectively, the “Employee Housing Entities”), Breckenridge Terrace, LLC, The
Tarnes at BC, LLC, BC Housing, LLC and Tenderfoot Seasonal Housing, LLC, which
are Variable Interest Entities (“VIEs”), and has consolidated them in its
Consolidated Condensed Financial Statements.  As a group, as of
October 31, 2009, the Employee Housing Entities had total assets of $34.5
million (primarily recorded in property, plant and equipment, net) and total
liabilities of $62.2 million (primarily recorded in long-term debt as “Employee
Housing Bonds”).  The Company has issued under its senior credit
facility (the “Credit Facility”) letters of credit in the amount of $53.4
million related to Employee Housing Bonds.  Payments under the letters
of credit would be triggered in the event that one of the entities defaults on
required payments.  The letters of credit have no default
provisions.





The
Company is the primary beneficiary of Avon Partners II, LLC (“APII”), which is a
VIE.  APII owns commercial space and the Company currently leases
substantially all of that space.  APII had total assets of $5.3
million (primarily recorded in property, plant and equipment, net) and no debt
as of October 31, 2009.





The
Company, through various lodging subsidiaries, manages hotels in which the
Company has no ownership interest in the entities that own such
hotels.  The Company has extended a $2.0 million note receivable to
one of these entities.  These entities were formed by unrelated third
parties to acquire, own, operate and realize the value in resort hotel
properties.  The Company managed the day-to-day operations of six
hotel properties as of October 31, 2009.  The Company has determined
that the entities that own the hotel properties are VIEs, and the management
contracts are significant variable interests in these VIEs.  The
Company has also determined that it is not the primary beneficiary of these
entities and, accordingly, is not required to consolidate any of these
entities.  Based upon the latest information provided by these third
party entities, these VIEs had estimated total assets of approximately $229
million and total liabilities of approximately $151 million.  The
Company's maximum exposure to loss as a result of its involvement with these
VIEs is limited to a $2.4 million note receivable including accrued interest
from one of the third parties and the net book value of the intangible asset
associated with a management agreement in the amount of $0.6 million as of
October 31, 2009.





7.           Fair
Value Measurements





The FASB
issued fair value guidance that establishes how reporting entities should
measure fair value for measurement and disclosure purposes.  The
guidance establishes a common definition of fair value applicable to all assets
and liabilities measured at fair value and prioritizes the inputs into valuation
techniques used to measure fair value.  Accordingly, the Company uses
valuation techniques which maximize the use of observable inputs and minimize
the use of unobservable inputs when determining fair value.  The three
levels of the hierarchy are as follows:





Level 1:
Inputs that reflect unadjusted quoted prices in active markets that are
accessible to the Company for identical assets or liabilities;





Level 2:
Inputs include quoted prices for similar assets and liabilities in active and
inactive markets or that are observable for the asset or liability either
directly or indirectly; and





Level 3:
Unobservable inputs which are supported by little or no market
activity.





The table
below summarizes the Company’s assets and liabilities measured at fair value in
accordance with the guidance as of October 31, 2009 (all other assets and
liabilities measured at fair value are immaterial) (in thousands):





Fair
      Value Measurements at Reporting Date UsingBalance
      atOctober
      31,Description
            
            2009
            
            Level
      1
            
            Level
      2
            
            Level
      3Cash
      equivalents
            
            $
            8,998
            
            $
            7,448
            
            $
            1,550
            
            $
            --





The
Company’s cash equivalents include money market funds, U.S. government debt
securities and time deposits which are measured using Level 1 and Level 2 inputs
utilizing quoted market prices or pricing models whereby all significant inputs
are either observable or corroborated by observable market data.





8.           Redeemable
Noncontrolling Interest





The
Company holds an approximate 69.3% ownership interest in
SSV.  Additionally, the Company holds call rights and GSSI LLC
(“GSSI”), the noncontrolling interest holder in SSV, holds put rights for the
remaining interest in SSV beginning August 1, 2010, as further discussed below,
and GSSI has a management agreement which extends to coincide with the exercise
of the put and call rights.





The
Company’s and GSSI’s put and call rights are as follows: (i) beginning August 1,
2010 and each year thereafter, each of the Company and GSSI has the right to
call or put, respectively, 100% of GSSI's ownership interest in SSV to the
Company during certain periods each year and (ii) GSSI has the right to put to
the Company 100% of its ownership interest in SSV at any time after GSSI has
been removed as manager of SSV or after an involuntary transfer of the Company's
ownership interest in SSV has occurred.  The put and call pricing is
generally based on the trailing twelve month EBITDA (as defined in the operating
agreement) of SSV for the fiscal period ended prior to the commencement of the
put or call period, as applicable.





Since
GSSI's remaining interest in SSV has a redemption feature, as a result of the
put option, the Company has classified the redeemable noncontrolling interest in
SSV in the mezzanine section in the Consolidated Condensed Balance Sheets,
outside of stockholders' equity.  The Company has recorded the
redeemable noncontrolling interest at the estimated redemption value at the end
of each reporting period.  At the end of each reporting period if the
redemption value is below the carrying value of the noncontrolling interest, the
difference is recorded in noncontrolling interests as a component of
stockholders’ equity; however, if the redemption value exceeds the carrying
value of the noncontrolling interest the difference is recorded in retained
earnings.  As of October 31, 2009, July 31, 2009 and October 31, 2008,
the estimated redemption value of the put/call option for the remaining
noncontrolling interest was $16.8 million, $15.4 million and $31.9 million,
respectively.





9.           Commitments
and Contingencies





Metropolitan
Districts





The
Company credit-enhances $8.5 million of bonds issued by Holland Creek
Metropolitan District (“HCMD”) through an $8.6 million letter of credit issued
against the Company's Credit Facility.  HCMD's bonds were issued and
used to build infrastructure associated with the Company's Red Sky Ranch
residential development.  The Company has agreed to pay capital
improvement fees to Red Sky Ranch Metropolitan District (“RSRMD”) until RSRMD's
revenue streams from property taxes are sufficient to meet debt service
requirements under HCMD's bonds, and the Company has recorded a liability of
$1.8 million, $1.9 million and $1.5 million, primarily within “other long-term
liabilities” in the accompanying Consolidated Condensed Balance Sheets, as of
October 31, 2009, July 31, 2009 and October 31, 2008, respectively, with respect
to the estimated present value of future RSRMD capital improvement
fees.  The Company estimates that it will make capital improvement fee
payments under this arrangement through the year ending July 31,
2018.





Guarantees





As of
October 31, 2009, the Company had various other letters of credit in the amount
of $86.4 million, consisting primarily of $53.4 million in support of the
Employee Housing Bonds, $26.9 million of construction and development related
guarantees and $5.3 million for workers’ compensation and general liability
deductibles related to construction and development activities.





In
addition to the guarantees noted above, the Company has entered into contracts
in the normal course of business which include certain indemnifications under
which it could be required to make payments to third parties upon the occurrence
or non-occurrence of certain future events.  These indemnities include
indemnities to licensees in connection with the licensees’ use of the Company’s
trademarks and logos, indemnities for liabilities associated with the
infringement of other parties’ technology and software products, indemnities
related to liabilities associated with the use of easements, indemnities related
to employment of contract workers, the Company’s use of trustees, indemnities
related to the Company’s use of public lands and environmental
indemnifications.  The duration of these indemnities generally is
indefinite and generally do not limit the future payments the Company could be
obligated to make.





As
permitted under applicable law, the Company and certain of its subsidiaries
indemnify their directors and officers over their lifetimes for certain events
or occurrences while the officer or director is, or was, serving the Company or
its subsidiaries in such a capacity.  The maximum potential amount of
future payments the Company could be required to make under these
indemnification agreements is unlimited; however, the Company has a director and
officer insurance policy that should enable the Company to recover a portion of
any future amounts paid.





Unless
otherwise noted, the Company has not recorded any significant liabilities for
the letters of credit, indemnities and other guarantees noted above in the
accompanying Consolidated Condensed Financial Statements, either because the
Company has recorded on its Consolidated Condensed Balance Sheets the underlying
liability associated with the guarantee, the guarantee is with respect to the
Company’s own performance and is therefore not subject to the measurement
requirements as prescribed by GAAP, or because the Company has calculated the
fair value of the indemnification or guarantee to be immaterial based upon the
current facts and circumstances that would trigger a payment under the
indemnification clause.  In addition, with respect to certain
indemnifications it is not possible to determine the maximum potential amount of
liability under these guarantees due to the unique set of facts and
circumstances that are likely to be involved in each particular claim and
indemnification provision.  Historically, payments made by the Company
under these obligations have not been material.





As noted
above, the Company makes certain indemnifications to licensees in connection
with their use of the Company’s trademarks and logos.  The Company
does not record any liabilities with respect to these
indemnifications.





Self
Insurance





The
Company is self-insured for claims under its health benefit plans and for the
majority of workers’ compensation claims, subject to a stop loss
policy.  The self-insurance liability related to workers' compensation
is determined actuarially based on claims filed.  The self-insurance
liability related to claims under the Company’s health benefit plans is
determined based on analysis of actual claims.  The amounts related to
these claims are included as a component of accrued benefits in accounts payable
and accrued liabilities (see Note 5, Supplementary Balance Sheet
Information).





Legal





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 operations.  Management believes the Company has
adequate insurance coverage or has accrued for loss contingencies for all known
matters that are deemed to be probable losses and estimable.  As of
October 31, 2009, July 31, 2009 and October 31, 2008 the accrual for the above
loss contingencies was not material individually and in the
aggregate.





10.           Segment
Information





The
Company has three reportable segments: Mountain, Lodging and Real
Estate.  The Mountain segment includes the operations of the Company’s
ski resorts and related ancillary activities.  The Lodging segment
includes the operations of all of the Company’s owned hotels, RockResorts, GTLC,
condominium management, CME and golf operations.  The Real Estate
segment owns and develops real estate in and around the Company’s resort
communities.  The Company’s reportable segments, although integral to
the success of the others, offer distinctly different products and services and
require different types of management focus.  As such, these segments
are managed separately.




The
Company reports its segment results using Reported EBITDA (defined as segment
net revenue less segment operating expenses, plus or minus segment equity
investment income or loss, and for the Real Estate segment, plus gain on sale of
real property) which is a non-GAAP financial measure.  The Company
reports segment results in a manner consistent with management’s internal
reporting of operating results to the chief operating decision maker (Chief
Executive Officer) for purposes of evaluating segment performance.





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





The
Company utilizes Reported EBITDA in evaluating performance of the Company and in
allocating resources to its segments.  Mountain Reported EBITDA
consists of Mountain net revenue less Mountain operating expense plus or minus
Mountain equity investment income or loss.  Lodging Reported EBITDA
consists of Lodging net revenue less Lodging operating expense.  Real
Estate Reported EBITDA consists of Real Estate net revenue less Real Estate
operating expense plus gain on sale of real property.  All segment
expenses include an allocation of corporate administrative
expense.  Assets are not allocated between segments, or used to
evaluate performance, except as shown in the table below.





Following
is key financial information by reportable segment which is used by management
in evaluating performance and allocating resources (in thousands):





Three
      Months EndedOctober
      31,2009
            
            2008Net
      revenue:Lift
      tickets
            $
            --
            
            
            $
            --Ski
      school
            
            --
            
            
            
            --Dining
            
            3,468
            
            
            
            3,929Retail/rental
            
            21,538
            
            
            
            22,426Other
            
            14,198
            
            
            
            14,423Total
      Mountain net revenue
            
            39,204
            
            
            
            40,778Lodging
            
            41,355
            
            
            
            45,253Total
      Resort net revenue
            
            80,559
            
            
            
            86,031Real
      Estate
            
            205
            
            
            
            66,750Total
      net revenue
            $
            80,764
            
            
            $
            152,781Operating
      expense:Mountain
            $
            76,468
            
            
            $
            81,223Lodging
            
            42,623
            
            
            
            44,898Total
      Resort operating expense
            
            119,091
            
            
            
            126,121Real
      estate
            
            5,177
            
            
            
            51,377Total
      segment operating expense
            $
            124,268
            
            
            $
            177,498Gain
      on sale of real property
            $
            6,087
            
            
            $
            --Mountain
      equity investment income, net
            $
            254
            
            
            $
            1,015Reported
      EBITDA:Mountain
            $
            (37,010)
            
            
            $
            (39,430
            )Lodging
            
            (1,268)
            
            
            
            355Resort
            
            (38,278)
            
            
            
            (39,075
            )Real
      Estate
            
            1,115
            
            
            
            15,373Total
      Reported EBITDA
            $
            (37,163)
            
            
            $
            (23,702
            )Real
      estate held for sale and investment
            $
            366,748
            
            
            $
            256,323Reconciliation
      to net loss attributable to Vail Resorts, Inc.:Total
      Reported EBITDA
            $
            (37,163)
            
            
            $
            (23,702
            )Depreciation
      and amortization
            
            (27,184)
            
            
            
            (25,078
            )Loss
      on disposal of fixed assets, net
            
            (113)
            
            
            
            (180
            )Investment
      income
            
            230
            
            
            
            643Interest
      expense, net
            
            (4,835)
            
            
            
            (7,947
            )Loss
      before benefit from income taxes
            
            (69,065)
            
            
            
            (56,264
            )Benefit
      from income taxes
            
            25,554
            
            
            
            19,409Net
      loss
            $
            (43,511)
            
            
            $
            (36,855
            )Net
      loss attributable to noncontrolling interests
            
            2,338
            
            
            
            2,351Net
      loss attributable to Vail Resorts, Inc.
            $
            (41,173)
            
            
            $
            (34,504
            )








11.           Stock
Repurchase Plan





On March
9, 2006, the Company’s Board of Directors approved the repurchase of up to
3,000,000 shares of common stock and on July 16, 2008 approved an increase of
the Company’s common stock repurchase authorization by an additional 3,000,000
shares.  The Company did not repurchase any shares of common stock
during the three months ended October 31, 2009.  Since inception of
this stock repurchase plan through October 31, 2009, the Company has repurchased
3,878,535 shares at a cost of approximately $147.8 million.  As of
October 31, 2009, 2,121,465 shares remained available to repurchase under the
existing repurchase authorization.  Shares of common stock purchased
pursuant to the repurchase program will be held as treasury shares and may be
used for the issuance of shares under the Company's employee share award
plans.





12.           Guarantor
Subsidiaries and Non-Guarantor Subsidiaries





The
Company’s payment obligations under the 6.75% Notes (see Note 4, Long-Term Debt)
are fully and unconditionally guaranteed on a joint and several, senior
subordinated basis by substantially all of the Company’s consolidated
subsidiaries (collectively, and excluding Non-Guarantor Subsidiaries (as defined
below), the “Guarantor Subsidiaries”) except for Eagle Park Reservoir Company,
Gros Ventre Utility Company, Mountain Thunder, Inc., SSV, Larkspur Restaurant
& Bar, LLC, Gore Creek Place, LLC and certain other insignificant entities
(together, the “Non-Guarantor Subsidiaries”).  APII and the Employee
Housing Entities are included with the Non-Guarantor Subsidiaries for purposes
of the consolidated financial information, but are not considered subsidiaries
under the indenture governing the 6.75% Notes.





Presented
below is the consolidated financial information of the Parent Company, the
Guarantor Subsidiaries and the Non-Guarantor Subsidiaries.  Financial
information for the Non-Guarantor Subsidiaries is presented in the column titled
“Other Subsidiaries.”  Balance sheets are presented as of October 31,
2009, July 31, 2009 and October 31, 2008.  Statements of operations
are presented for the three months ended October 31, 2009 and
2008.  Statements of cash flows are presented for the three months
ended October 31, 2009 and 2008.





Investments
in subsidiaries are accounted for by the Parent Company and Guarantor
Subsidiaries using the equity method of accounting.  Net income (loss)
of Non-Guarantor Subsidiaries is, therefore, reflected in the Parent Company's
and Guarantor Subsidiaries' investments in and advances to (from)
subsidiaries.  Net income (loss) of the Guarantor and Non-Guarantor
Subsidiaries is reflected in Parent Company and Guarantor Subsidiaries as equity
in income (loss) of consolidated subsidiaries.  The elimination
entries eliminate investments in Other Subsidiaries and intercompany balances
and transactions for consolidated reporting purposes.





Supplemental
      Condensed Consolidating Balance SheetAs
      of October 31, 2009(in
      thousands)(Unaudited)100%
      OwnedParent
                
                
                Guarantor
                
                
                Other
                
                
                EliminatingCompany
                
                
                Subsidiaries
                
                
                Subsidiaries
                
                Entries
                
                
                ConsolidatedCurrent
      assets:Cash
      and cash equivalents
                $
                --
                
                $
                9,926
                
                $
                3,093
                
                $
                --
                
                $
                13,019Restricted
      cash
                
                --
                
                
                13,306
                
                
                130
                
                
                --
                
                
                13,436Trade
      receivables, net
                
                --
                
                
                31,788
                
                
                1,033
                
                
                --
                
                
                32,821Inventories,
      net
                
                --
                
                
                10,313
                
                
                52,466
                
                
                --
                
                
                62,779Other
      current assets
                
                22,611
                
                
                23,755
                
                
                2,456
                
                
                --
                
                
                48,822Total
      current assets
                
                22,611
                
                
                89,088
                
                
                59,178
                
                
                --
                
                
                170,877Property,
      plant and equipment, net
                
                --
                
                
                986,754
                
                
                65,179
                
                
                --
                
                
                1,051,933Real
      estate held for sale and investment
                
                --
                
                
                366,748
                
                
                --
                
                
                --
                
                
                366,748Goodwill,
      net
                
                --
                
                
                148,702
                
                
                19,248
                
                
                --
                
                
                167,950Intangible
      assets, net
                
                --
                
                
                63,506
                
                
                15,847
                
                
                --
                
                
                79,353Other
      assets
                
                3,048
                
                
                25,206
                
                
                5,015
                
                
                --
                
                
                33,269Investments
      in subsidiaries and advances to (from) parent
                
                1,220,067
                
                
                318,849
                
                
                (23,082
                )
                
                (1,515,834
                )
                
                --Total
      assets
                $
                1,245,726
                
                $
                1,998,853
                
                $
                141,385
                
                $
                (1,515,834
                )
                $
                1,870,130Current
      liabilities:Accounts
      payable and accrued liabilities
                $
                5,721
                
                $
                290,295
                
                $
                34,256
                
                $
                --
                
                $
                330,272Income
      taxes payable
                
                5,725
                
                
                --
                
                
                --
                
                
                --
                
                
                5,725Long-term
      debt due within one year
                
                --
                
                
                1,509
                
                
                353
                
                
                --
                
                
                1,862Total
      current liabilities
                
                11,446
                
                
                291,804
                
                
                34,609
                
                
                --
                
                
                337,859Long-term
      debt
                
                390,000
                
                
                41,214
                
                
                58,705
                
                
                --
                
                
                489,919Other
      long-term liabilities
                
                29,690
                
                
                166,793
                
                
                2,805
                
                
                --
                
                
                199,288Deferred
      income taxes
                
                87,993
                
                
                --
                
                
                --
                
                
                --
                
                
                87,993Redeemable
      noncontrolling interest
                
                --
                
                
                --
                
                
                16,847
                
                
                --
                
                
                16,847Total
      Vail Resorts, Inc. stockholders’ equity
                
                726,597
                
                
                1,499,042
                
                
                16,792
                
                
                (1,515,834
                )
                
                726,597Noncontrolling
      interests
                
                --
                
                
                --
                
                
                11,627
                
                
                --
                
                
                11,627Total
      stockholders’ equity
                
                726,597
                
                
                1,499,042
                
                
                28,419
                
                
                (1,515,834
                )
                
                738,224Total
      liabilities and stockholders' equity
                $
                1,245,726
                
                $
                1,998,853
                
                $
                141,385
                
                $
                (1,515,834
                )
                $
                1,870,130




Supplemental
Condensed Consolidating Balance Sheet


As
of July 31, 2009


(in
thousands)











100%
      OwnedParent
            
            Guarantor
            
            Other
            
            EliminatingCompany
            
            Subsidiaries
            
            Subsidiaries
            
            Entries
            
            ConsolidatedCurrent
      assets:Cash
      and cash equivalents
            
            $
            --
            
            
            $
            66,364
            
            
            $
            2,934
            
            
            $
            --
            
            
            $
            69,298Restricted
      cash
            
            
            --
            
            
            
            11,065
            
            
            
            --
            
            
            
            --
            
            
            
            11,065Trade
      receivables, net
            
            
            --
            
            
            
            56,834
            
            
            
            1,229
            
            
            
            --
            
            
            
            58,063Inventories,
      net
            
            
            --
            
            
            
            11,895
            
            
            
            37,052
            
            
            
            --
            
            
            
            48,947Other
      current assets
            
            
            21,333
            
            
            
            18,407
            
            
            
            1,875
            
            
            
            --
            
            
            
            41,615Total
      current assets
            
            
            21,333
            
            
            
            164,565
            
            
            
            43,090
            
            
            
            --
            
            
            
            228,988Property,
      plant and equipment, net
            
            
            --
            
            
            
            991,027
            
            
            
            66,631
            
            
            
            --
            
            
            
            1,057,658Real
      estate held for sale and investment
            
            
            --
            
            
            
            311,485
            
            
            
            --
            
            
            
            --
            
            
            
            311,485Goodwill,
      net
            
            
            --
            
            
            
            148,702
            
            
            
            19,248
            
            
            
            --
            
            
            
            167,950Intangible
      assets, net
            
            
            --
            
            
            
            63,580
            
            
            
            15,849
            
            
            
            --
            
            
            
            79,429Other
      assets
            
            
            3,226
            
            
            
            30,710
            
            
            
            5,034
            
            
            
            --
            
            
            
            38,970Investments
      in subsidiaries and advances to (from) parent
            
            
            1,290,532
            
            
            
            307,124
            
            
            
            (15,179
            )
            
            
            (1,582,477
            )
            
            
            --Total
      assets
            
            $
            1,315,091
            
            
            $
            2,017,193
            
            
            $
            134,673
            
            
            $
            (1,582,477
            )
            
            $
            1,884,480Current
      liabilities:Accounts
      payable and accrued liabilities
            
            $
            12,412
            
            
            $
            214,021
            
            
            $
            19,103
            
            
            $
            --
            
            
            $
            245,536Income
      taxes payable
            
            
            5,460
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            5,460Long-term
      debt due within one year
            
            
            --
            
            
            
            9
            
            
            
            343
            
            
            
            --
            
            
            
            352Total
      current liabilities
            
            
            17,872
            
            
            
            214,030
            
            
            
            19,446
            
            
            
            --
            
            
            
            251,348Long-term
      debt
            
            
            390,000
            
            
            
            42,716
            
            
            
            58,892
            
            
            
            --
            
            
            
            491,608Other
      long-term liabilities
            
            
            29,690
            
            
            
            200,974
            
            
            
            2,505
            
            
            
            --
            
            
            
            233,169Deferred
      income taxes
            
            
            112,234
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            112,234Redeemable
      noncontrolling interest
            
            
            --
            
            
            
            --
            
            
            
            15,415
            
            
            
            --
            
            
            
            15,415Total Vail Resorts, Inc. stockholders’ equity
            
            
            765,295
            
            
            
            1,559,473
            
            
            
            23,004
            
            
            
            (1,582,477
            )
            
            
            765,295Noncontrolling interests
            
            
            --
            
            
            
            --
            
            
            
            15,411
            
            
            
            --
            
            
            
            15,411Total stockholders’ equity
            
            
            765,295
            
            
            
            1,559,473
            
            
            
            38,415
            
            
            
            (1,582,477
            )
            
            
            780,706Total
      liabilities and stockholders’ equity
            
            $
            1,315,091
            
            
            $
            2,017,193
            
            
            $
            134,673
            
            
            $
            (1,582,477
            )
            
            $
            1,884,480





Supplemental
Condensed Consolidating Balance Sheet
 As
of October 31, 2008
 (in
thousands)
 (Unaudited)
 
 
 100%
      OwnedParent
              
              Guarantor
              
              Other
              
              EliminatingCompany
              
              Subsidiaries
              
              Subsidiaries
              
              Entries
              
              ConsolidatedCurrent
      assets:Cash
      and cash equivalents
              
              $
              --
              
              
              $
              92,806
              
              
              $
              9,862
              
              
              $
              --
              
              
              $
              102,668Restricted
      cash
              
              
              --
              
              
              
              12,193
              
              
              
              260
              
              
              
              --
              
              
              
              12,453Trade
      receivables, net
              
              
              --
              
              
              
              43,662
              
              
              
              806
              
              
              
              --
              
              
              
              44,468Inventories,
      net
              
              
              --
              
              
              
              10,965
              
              
              
              56,753
              
              
              
              --
              
              
              
              67,718Other
      current assets
              
              
              16,115
              
              
              
              21,622
              
              
              
              4,251
              
              
              
              --
              
              
              
              41,988Total
      current assets
              
              
              16,115
              
              
              
              181,248
              
              
              
              71,932
              
              
              
              --
              
              
              
              269,295Property,
      plant and equipment, net
              
              
              --
              
              
              
              828,390
              
              
              
              249,370
              
              
              
              --
              
              
              
              1,077,760Real
      estate held for sale and investment
              
              
              --
              
              
              
              204,323
              
              
              
              52,000
              
              
              
              --
              
              
              
              256,323Goodwill,
      net
              
              
              --
              
              
              
              123,034
              
              
              
              19,248
              
              
              
              --
              
              
              
              142,282Intangible
      assets, net
              
              
              --
              
              
              
              56,584
              
              
              
              15,879
              
              
              
              --
              
              
              
              72,463Other
      assets
              
              
              3,758
              
              
              
              36,570
              
              
              
              6,734
              
              
              
              --
              
              
              
              47,062Investments
      in subsidiaries and advances to (from) parent
              
              
              1,160,589
              
              
              
              699,571
              
              
              
              (114,512
              )
              
              
              (1,745,648
              )
              
              
              --Total
      assets
              
              $
              1,180,462
              
              
              $
              2,129,720
              
              
              $
              300,651
              
              
              $
              (1,745,648
              )
              
              $
              1,865,185Current
      liabilities:Accounts
      payable and accrued liabilities
              
              $
              5,889
              
              
              $
              224,520
              
              
              $
              97,107
              
              
              $
              --
              
              
              $
              327,516Income
      taxes payable
              
              
              49,784
              
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              49,784Long-term
      debt due within one year
              
              
              --
              
              
              
              11
              
              
              
              343
              
              
              
              --
              
              
              
              354Total
      current liabilities
              
              
              55,673
              
              
              
              224,531
              
              
              
              97,450
              
              
              
              --
              
              
              
              377,654Long-term
      debt
              
              
              390,000
              
              
              
              42,721
              
              
              
              59,057
              
              
              
              --
              
              
              
              491,778Other
      long-term liabilities
              
              
              3,142
              
              
              
              217,436
              
              
              
              2,803
              
              
              
              --
              
              
              
              223,381Deferred
      income taxes
              
              
              57,063
              
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              57,063Redeemable
      noncontrolling interest
              
              
              --
              
              
              
              --
              
              
              
              31,947
              
              
              
              --
              
              
              
              31,947Total
      Vail Resorts, Inc. stockholders’ equity
              
              
              674,584
              
              
              
              1,645,032
              
              
              
              100,616
              
              
              
              (1,745,648
              )
              
              
              674,584Noncontrolling
      interests
              
              
              --
              
              
              
              --
              
              
              
              8,778
              
              
              
              --
              
              
              
              8,778Total
      stockholders’ equity
              
              
              674,584
              
              
              
              1,645,032
              
              
              
              109,394
              
              
              
              (1,745,648
              )
              
              
              683,362Total
      liabilities and stockholders’ equity
              
              $
              1,180,462
              
              
              $
              2,129,720
              
              
              $
              300,651
              
              
              $
              (1,745,648
              )
              
              $
              1,865,185







Supplemental
      Condensed Consolidating Statement of OperationsFor
      the three months ended October 31, 2009(in
      thousands)(Unaudited)100%
      OwnedParent
            
            
            Guarantor
            
            
            Other
            
            
            EliminatingCompany
            
            
            Subsidiaries
            
            
            Subsidiaries
            
            
            Entries
            
            
            ConsolidatedTotal
      net revenue
            $
            --
            
            $
            59,820
            
            $
            22,975
            
            $
            (2,031
            )
            $
            80,764Total
      operating expense
            
            162
            
            
            115,717
            
            
            31,592
            
            
            (1,993
            )
            
            145,478Loss
      from operations
            
            (162
            )
            
            (55,897
            )
            
            (8,617
            )
            
            (38
            )
            
            (64,714
            )Other
      (expense) income, net
            
            (6,758
            )
            
            2,505
            
            
            (390
            )
            
            38
            
            
            (4,605
            )Equity
      investment, net
            
            --
            
            
            254
            
            
            --
            
            
            --
            
            
            254Loss
      before benefit from income taxes
            
            (6,920
            )
            
            (53,138
            )
            
            (9,007
            )
            
            --
            
            
            (69,065
            )Benefit
      from income taxes
            
            2,561
            
            
            22,993
            
            
            --
            
            
            --
            
            
            25,554Net
      loss before equity in (loss) incomeof
      consolidated subsidiaries
            
            (4,359
            )
            
            (30,145
            )
            
            (9,007
            )
            
            --
            
            
            (43,511
            )Equity
      in (loss) income of consolidated subsidiaries
            
            (36,814
            )
            
            (6,669
            )
            
            --
            
            
            43,483
            
            
            --Net
      (loss) income
            
            (41,173
            )
            
            (36,814
            )
            
            (9,007
            )
            
            43,483
            
            
            (43,511
            )Net
      loss attributable to noncontrolling interests
            
            --
            
            
            --
            
            
            2,338
            
            
            --
            
            
            2,338Net
      (loss) income attributable to Vail Resorts, Inc.
            $
            (41,173
            )
            $
            (36,814
            )
            $
            (6,669
            )
            $
            43,483
            
            $
            (41,173
            )







Supplemental
      Condensed Consolidating Statement of OperationsFor
      the three months ended October 31, 2008(in
      thousands)(Unaudited)100%
      OwnedParent
            
            
            Guarantor
            
            
            Other
            
            
            EliminatingCompany
            
            
            Subsidiaries
            
            
            Subsidiaries
            
            
            Entries
            
            
            ConsolidatedTotal
      net revenue
            $
            --
            
            $
            117,168
            
            $
            38,838
            
            $
            (3,225
            )
            $
            152,781Total
      operating expense
            
            169
            
            
            162,157
            
            
            43,617
            
            
            (3,187
            )
            
            202,756Loss
      from operations
            
            (169
            )
            
            (44,989
            )
            
            (4,779
            )
            
            (38
            )
            
            (49,975
            )Other
      (expense) income, net
            
            (6,761
            )
            
            468
            
            
            (1,049
            )
            
            38
            
            
            (7,304
            )Equity
      investment, net
            
            --
            
            
            1,015
            
            
            --
            
            
            --
            
            
            1,015Loss
      before benefit from income taxes
            
            (6,930
            )
            
            (43,506
            )
            
            (5,828
            )
            
            --
            
            
            (56,264
            )Benefit
      (provision) for income taxes
            
            2,494
            
            
            16,918
            
            
            (3
            )
            
            --
            
            
            19,409Net
      loss before equity in (loss) incomeof
      consolidated subsidiaries
            
            (4,436
            )
            
            (26,588
            )
            
            (5,831
            )
            
            --
            
            
            (36,855
            )Equity
      in (loss) income of consolidated subsidiaries
            
            (30,068
            )
            
            5,863
            
            
            --
            
            
            24,205
            
            
            --Net
      (loss) income
            
            (34,504
            )
            
            (20,725
            )
            
            (5,831
            )
            
            24,205
            
            
            (36,855
            )Net
      loss attributable to noncontrolling interests
            
            --
            
            
            --
            
            
            2,351
            
            
            --
            
            
            2,351Net
      (loss) income attributable to Vail Resorts, Inc.
            $
            (34,504
            )
            $
            (20,725
            )
            $
            (3,480
            )
            $
            24,205
            
            $
            (34,504
            )










Supplemental
      Condensed Consolidating Statement of Cash FlowsFor
      the three months ended October 31, 2009(in
      thousands)(Unaudited)100%
      OwnedParent
            
            
            Guarantor
            
            
            OtherCompany
            
            
            Subsidiaries
            
            
            Subsidiaries
            
            
            ConsolidatedNet
      cash used in operating activities
            $
            (36,441
            )
            $
            (1,991
            )
            $
            (6,519
            )
            $
            (44,951
            )Cash
      flows from investing activities:Capital
      expenditures
            
            --
            
            
            (19,191
            )
            
            (1,562
            )
            
            (20,753
            )Cash
      received from sale of real property
            
            --
            
            
            8,920
            
            
            --
            
            
            8,920Other
      investing activities, net
            
            --
            
            
            (289
            )
            
            72
            
            
            (217
            )Net
      cash used in investing activities
            
            --
            
            
            (10,560
            )
            
            (1,490
            )
            
            (12,050
            )Cash
      flows from financing activities:Proceeds
      from borrowings under other long-term debt
            
            --
            
            
            18,000
            
            
            11,457
            
            
            29,457Payments
      of other long-term debt
            
            --
            
            
            (18,000
            )
            
            (11,636
            )
            
            (29,636
            )Other
      financing activities, net
            
            214
            
            
            (459
            )
            
            1,146
            
            
            901Advances
      from (to) affiliates
            
            36,227
            
            
            (43,428
            )
            
            7,201
            
            
            --Net
      cash provided by (used in) financing activities
            
            36,441
            
            
            (43,887
            )
            
            8,168
            
            
            722Net
      decrease in cash and cash equivalents
            
            --
            
            
            (56,438
            )
            
            159
            
            
            (56,279
            )Cash
      and cash equivalents:Beginning
      of period
            
            --
            
            
            66,364
            
            
            2,934
            
            
            69,298End
      of period
            $
            --
            
            $
            9,926
            
            $
            3,093
            
            $
            13,019










Supplemental
      Condensed Consolidating Statement of Cash FlowsFor
      the three months ended October 31, 2008(in
      thousands)(Unaudited)100%
      OwnedParent
            
            
            Guarantor
            
            
            OtherCompany
            
            
            Subsidiaries
            
            
            Subsidiaries
            
            
            ConsolidatedNet
      cash (used in) provided by operating activities
            $
            (36,215
            )
            $
            43,155
            
            $
            43,979
            
            $
            50,919Cash
      flows from investing activities:Capital
      expenditures
            
            --
            
            
            (38,399
            )
            
            (4,985
            )
            
            (43,384
            )Other
      investing activities, net
            
            --
            
            
            (2,665
            )
            
            83
            
            
            (2,582
            )Net
      cash used in investing activities
            
            --
            
            
            (41,064
            )
            
            (4,902
            )
            
            (45,966
            )Cash
      flows from financing activities:Repurchases
      of common stock
            
            (7,412
            )
            
            --
            
            
            --
            
            
            (7,412
            )Proceeds
      from borrowings under non-recoursereal
      estate financings
            
            --
            
            
            --
            
            
            9,013
            
            
            9,013Payments
      of non-recourse real estate financings
            
            --
            
            
            --
            
            
            (58,407
            )
            
            (58,407
            )Proceeds
      from borrowings under other long-term debt
            
            --
            
            
            --
            
            
            20,640
            
            
            20,640Payments
      of other long-term debt
            
            --
            
            
            (15,000
            )
            
            (20,808
            )
            
            (35,808
            )Other
      financing activities, net
            
            (207
            )
            
            3,572
            
            
            3,979
            
            
            7,344Advances
      from (to) affiliates
            
            43,834
            
            
            (54,639
            )
            
            10,805
            
            
            --Net
      cash provided by (used in) financing activities
            
            36,215
            
            
            (66,067
            )
            
            (34,778
            )
            
            (64,630
            )Net
      (decrease) increase in cash and cash equivalents
            
            --
            
            
            (63,976
            )
            
            4,299
            
            
            (59,677
            )Cash
      and cash equivalents:Beginning
      of period
            
            --
            
            
            156,782
            
            
            5,563
            
            
            162,345End
      of period
            $
            --
            
            $
            92,806
            
            $
            9,862
            
            $
            102,668





ITEM 2.  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 should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended July 31, 2009 (“Form 10-K”) and the
Consolidated Condensed Financial Statements as of October 31, 2009 and 2008, and
for the three months then ended, included in Part I, Item 1 of this Form 10-Q,
which provide additional information regarding the financial position, results
of operations and cash flows of the Company.  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 this Form 10-Q and in the Company's other filings
with the Securities and Exchange Commission (“SEC”), including the risks
described in Item 1A “Risk Factors” of Part I of the 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 loss attributable to Vail Resorts,
Inc.  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 (loss), net
change in cash and cash equivalents or other financial statement data presented
in the Consolidated Condensed 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.  Resort is the
combination of the Mountain and Lodging segments.





Mountain
Segment





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.  The Company's first fiscal quarter is a seasonally low
period as the Company's ski operations are generally not open for business until
mid-November, which falls in the Company's second fiscal
quarter.  Revenue of the Mountain segment during the first fiscal
quarter is primarily generated from summer and group related visitation at the
Company's five mountain resorts, as well as SSI Venture, LLC’s (“SSV”) retail
operations.





Lodging
Segment





Operations
within the Lodging segment include (i) ownership/management of a group of luxury
hotels through the RockResorts brand, including several proximate to the
Company's ski resorts; (ii) ownership/management of non-RockResorts branded
hotels and condominiums proximate to the Company's ski resorts; (iii) Grand
Teton Lodge Company (“GTLC”); (iv) Colorado Mountain Express (“CME”), a resort
ground transportation company; and (v) golf courses.





Revenue
of the Lodging segment during the Company's first fiscal quarter 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 seasonally low
operations from the Company's other owned and managed properties and
businesses.  In addition, the Company's lodging properties benefit
from group business in the fall season.  Performance of the lodging
properties (including managed condominium rooms) at or around the Company's ski
resorts experience similar seasonal trends as the Mountain segment.





Real
Estate Segment





The Real
Estate segment owns and develops real estate in and around the Company's resort
communities and primarily engages in the vertical development of projects, as
well as, occasionally the sale of land to third-party developers which often
includes a contingent revenue structure based on the ultimate sale of the
developed units.  Revenue from vertical development projects is not
recognized until closing of individual units within a project which occurs after
substantial completion of the project.  Contingent future profits from land
sales, if any, are recognized only when received.  The Company
attempts to mitigate the risk of vertical development by often utilizing
guaranteed maximum price construction contracts (although certain construction
costs may not be covered by contractual limitations), pre-selling a portion of
the project, requiring significant non-refundable deposits and potentially
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 Mountain and Lodging
segments.  The Company’s revenue from the Real Estate segment, and
associated expense, fluctuate based upon the timing of closings and the type of
real estate being sold, causing volatility in the Real Estate Segment’s
operating results from period to period.





Recent
Trends, Risks and Uncertainties





Together
with those risk factors identified in the Company’s Form 10-K, the Company’s
management has identified the following important factors (as well as risks and
uncertainties associated with such factors) that could impact the Company’s
future financial performance or condition:





·
            The
      economic recession that has affected the U.S. and global economies, the
      tightened credit markets and eroded consumer confidence has had a negative
      impact on overall trends in the travel and leisure industries and on the
      Company’s results of operations.  Currently, the Company is
      experiencing a decline in reservations as compared to the same period in
      the prior year from destination guests at certain of its
      properties.  Furthermore, the Company is experiencing a change
      in booking trends such that guest reservations are being made much closer
      to the actual date of stay.  In an attempt to mitigate the
      impact of the current economic environment the Company is offering various
      discounts, promotions and incentives in areas such as lodging, ski school,
      dining and retail/rental operations.  The Company cannot predict
      the ultimate impact these programs will have on its future results of
      operations, in particular on the 2009/2010 ski season, as this will depend
      on the extent to which these negative trends continue, worsen, or improve
      or the timing and nature of any changes to the macroeconomic
      environment.


·
            The
      timing and amount of snowfall can have an impact on Mountain and Lodging
      revenue particularly in regards to skier visits and the duration and
      frequency of guest visitation.  To mitigate this impact, the
      Company focuses efforts on the sale of season passes prior to the
      beginning of the season to in-state and local guests and destination
      guests.  Additionally, the Company has invested in snowmaking
      upgrades in an effort to address the inconsistency of early season
      snowfall where
possible.


·
            As
      part of an effort to provide a more stabilized stream of lift revenue the
      Company introduced the Epic Season Pass for the 2008/2009 ski season,
      which largely contributed to season pass revenue as a percentage of total
      lift revenue increasing from 26% for the 2007/2008 ski season to 34% for
      the 2008/2009 ski season.  In March 2009, the Company began its pass
      sales campaign for the 2009/2010 ski season, including the Epic Season
      Pass, and as of October 31, 2009 had deferred revenue related to season
      pass sales of $73.1 million compared to $66.0 million as of October 31,
      2008. Even though the Company collects the vast majority of its
      season pass sales prior to the start of the ski season, the deferred
      revenue related to season pass sales will be recognized over the 2009/2010
      ski season. The Company cannot predict the impact that season pass sales
      may have on total lift revenue or effective ticket price for the 2009/2010
      ski season.


·
            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 or mix 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 fiscal quarter or
      fiscal year. The Company has two real estate projects currently under
      development which are scheduled to be completed in the spring/summer of
      2010 (One Ski Hill Place in Breckenridge) and the fall of 2010 (The
      Ritz-Carlton Residences, Vail) and has entered into definitive sales
      contracts with a value of approximately $327.0 million, which represents
      approximately 68% of the total current estimated sales value for these two
      projects.  The Company has increased risk associated with
      selling and closing real estate as a result of the continued instability
      in the capital and credit markets and slowdown in the overall real estate
      market.  The Company cannot predict the ultimate number of units
      that it will sell and/or close, the ultimate price it will receive, or
      when the units will sell and/or close.  Additionally, if a more
      severe prolonged economic downturn were to occur the Company may have to
      adjust its selling prices in an effort to sell and close on units
      currently under development, although it currently has no plans to do
      so.


·
            The
      Company had $13.0 million in cash and cash equivalents as of October 31,
      2009 as well as $307.0 million available under the revolver component of
      its senior credit facility (the “Credit Facility”). The Company plans
      to continue to self-fund its current real estate projects under
      construction (the Company estimates to incur between $150 and $170 million
      in cash expenditures subsequent to October 31, 2009 on the projects
      currently under construction) which will require the Company to borrow
      under the revolver component of its Credit Facility from time to time
      during fiscal 2010; however, the Company currently believes it has
      adequate capacity under its revolver to address potential borrowing needs,
      even in the event of a more sustained negative economic
      environment.


·
            Under
      GAAP, the Company is required to test goodwill for impairment annually,
      which the Company does so during the fourth quarter of each fiscal
      year.  The Company evaluates the recoverability of its goodwill
      by estimating the future discounted cash flows of its reporting units and
      terminal values of the businesses using projected future levels of income
      as well as business trends, prospects and market and economic
      conditions.  The Company evaluates the recoverability of
      indefinite-lived intangible assets using the income approach based upon
      estimated future revenue streams.  The Company’s fiscal 2009
      annual impairment test did not result in a goodwill or indefinite-lived
      intangible asset impairment, however, if a more severe prolonged economic
      downturn were to occur it could cause less than expected growth and/or
      reduction in terminal values of the Company’s reporting units which may
      result in a goodwill and/or indefinite-lived intangible asset impairment
      charge.





RESULTS
OF OPERATIONS





Summary





Due to
the seasonality of the Company’s Resort operations, the Company normally incurs
net losses during the first fiscal quarter, as shown in the summary of operating
results below for the three months ended October 31, 2009, compared to the three
months ended October 31, 2008 (in thousands):





Three
      Months EndedOctober
      31,2009
            
            2008Mountain
      Reported EBITDA
            $
            (37,010
            )
            
            $
            (39,430
            )Lodging
      Reported EBITDA
            
            (1,268
            )
            
            
            355Resort
      Reported EBITDA
            
            (38,278
            )
            
            
            (39,075
            )Real
      Estate Reported EBITDA
            
            1,115
            
            
            
            15,373Loss
      before benefit from income taxes
            
            (69,065
            )
            
            
            (56,264
            )Net
      loss attributable to Vail Resorts, Inc.
            $
            (41,173
            )
            
            $
            (34,504
            )





A
discussion of segment results and other items can be found below.





Mountain
Segment





Three
months ended October 31, 2009 compared to the three months ended October 31,
2008





Mountain
segment operating results for the three months ended October 31, 2009 and 2008
are presented by category as follows (in thousands):





Three
      months ended
            
            PercentageOctober
      31,
            
            Increase2009
            
            2008
            
            (Decrease)Net
      Mountain revenue:Lift
      tickets
            
            $
            --
            
            $
            --
            
            --
            %Ski
      school
            
            
            --
            
            
            --
            
            --
            %Dining
            
            
            3,468
            
            
            3,929
            
            (11.7
            )
      %Retail/rental
            
            
            21,538
            
            
            22,426
            
            (4.0
            )
      %Other
            
            
            14,198
            
            
            14,423
            
            (1.6
            )
      %Total
      Mountain net revenue
            
            $
            39,204
            
            $
            40,778
            
            (3.9
            )
      %Mountain
      operating expense:Labor
      and labor-related benefits
            
            $
            23,384
            
            $
            24,017
            
            (2.6
            )
      %Retail
      cost of sales
            
            
            12,563
            
            
            13,251
            
            (5.2
            )
      %General
      and administrative
            
            
            20,273
            
            
            22,949
            
            (11.7
            )
      %Other
            
            
            20,248
            
            
            21,006
            
            (3.6
            )
      %Total
      Mountain operating expense
            
            $
            76,468
            
            $
            81,223
            
            (5.9
            )
      %Mountain
      equity investment income, net
            
            
            254
            
            
            1,015
            
            (75.0
            )
      %Total
      Mountain Reported EBITDA
            
            $
            (37,010
            )
            $
            (39,430
            )
            6.1
            %




Total
Mountain Reported EBITDA includes $1.6 million and $1.2 million of stock-based
compensation expense for the three months ended October 31, 2009 and 2008,
respectively.





The
Company's first fiscal quarter historically results in negative Mountain
Reported EBITDA, as the Company's ski resorts generally do not open for ski
operations until the Company's second fiscal quarter.  The first
fiscal quarter consists primarily of operating and administrative expense plus
summer business and retail/rental operations.





Total
Mountain net revenue decreased in part due to a $0.9 million, or 4.0%, decrease
in retail/rental revenue due to lower sales volumes primarily at the Company’s
mountain resort stores.  Dining revenue decreased $0.5 million, or
11.7%, in the three months ended October 31, 2009 compared to the three months
ended October 31, 2008, primarily due to a reduction in group business at the
Company’s mountain resorts.





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, marketing revenue, commercial leasing revenue, employee
housing revenue, municipal services revenue and other recreation activity
revenue.   For the three months ended October 31, 2009 other
revenues decreased $0.2 million, or 1.6%, compared to the three months ended
October 31, 2008, primarily due to a decrease in marketing and employee housing
revenue offset by an increase in private club operations resulting from the
opening of the Vail Mountain Club in November 2008 and an increase in
on-mountain summer activities in Breckenridge and Keystone as the prior year’s
on-mountain summer activities were negatively impacted by construction
activities at the respective resorts.





Operating
expense decreased $4.8 million, or 5.9%, during the three months ended October
31, 2009 compared to the three months ended October 31, 2008, which primarily
resulted from a decrease in labor and labor-related benefits expense, retail
cost of sales and general and administrative expense.  Labor and
labor-related benefits decreased $0.6 million, or 2.6%, due to decreased
staffing levels driven by lower volume in dining and retail/rental operations as
well as the impacts of cost reduction initiatives including the suspension of
the Company’s matching contribution to its 401(k) program effective January 2009
and a company-wide wage reduction plan implemented in April 2009, partially
offset by severance charges and increased stock compensation expense in the
three months ended October 31, 2009.  Retail cost of sales decreased
$0.7 million, or 5.2%, due to the decrease in retail revenue combined with an
increase in gross margins from improved inventory management. General and
administrative expense decreased $2.7 million, or 11.7%, primarily due to the
timing of marketing spend as well as lower allocated corporate expense which was
also impacted by the cost reduction initiatives as discussed
above.  Other expense decreased $0.8 million, or 3.6%, primarily due
to lower supplies and repairs and maintenance expense resulting from enhanced
strategic sourcing initiatives, partially offset by higher property
taxes.





Mountain
equity investment income, net, which primarily represents the Company’s share of
income from its real estate brokerage joint venture, was unfavorably impacted by
an overall decline in real estate closings compared to the same period in the
prior year from both commercial projects and residential sales.





Lodging
Segment





Three
months ended October 31, 2009 compared to the three months ended October 31,
2008





Lodging
segment operating results for the three months ended October 31, 2009 and 2008
are presented by category as follows (in thousands, except average daily rates
(“ADR”) and revenue per available room (“RevPAR”):





Three
      months ended
            
            PercentageOctober
      31,
            
            Increase2009
            
            2008
            
            (Decrease)Lodging
      net revenue:Owned
      hotel rooms
            $
            10,997
            $
            12,200
            
            (9.9
            )
            %Managed
      condominium rooms
            
            4,410
            
            5,055
            
            (12.8
            )
            %Dining
            
            8,946
            
            10,489
            
            (14.7
            )
            %Transportation
            
            1,787
            
            --
            
            --
            
            %Golf
            
            6,759
            
            7,958
            
            (15.1
            )
            %Other
            
            8,456
            
            9,551
            
            (11.5
            )
            %Total
      Lodging net revenue
            $
            41,355
            $
            45,253
            
            (8.6
            )
            %Lodging
      operating expense:Labor
      and labor-related benefits
            $
            20,375
            $
            20,843
            
            (2.2
            )
            %General
      and administrative
            
            6,707
            
            7,113
            
            (5.7
            )
            %Other
            
            15,541
            
            16,942
            
            (8.3
            )
            %Total
      Lodging operating expense
            $
            42,623
            $
            44,898
            
            (5.1
            )
            %Total
      Lodging Reported EBITDA
            $
            (1,268)
            $
            355
            
            (457.2
            )
            %Owned
      hotel statistics:ADR
            $
            175.92
            $
            164.82
            
            6.7
            
            %RevPar
            $
            89.24
            $
            101.03
            
            (11.7
            )
            %Managed
      condominium statistics:ADR
            $
            176.07
            $
            172.89
            
            1.8
            
            %RevPar
            $
            26.46
            $
            37.23
            
            (28.9
            )
            %Owned
      hotel and managed condominium statistics (combined):ADR
            $
            175.96
            $
            167.45
            
            5.1
            
            %RevPar
            $
            53.08
            $
            63.95
            
            (17.0
            )
            %




Total
Lodging Reported EBITDA includes $0.5 million and $0.4 million of stock-based
compensation expense for the three months ended October 31, 2009 and 2008,
respectively.





Total
Lodging net revenue for the three months ended October 31, 2009 decreased $3.9
million, or 8.6%, compared to the three months ended October 31,
2008.  This decrease in Lodging net revenue was partially offset by
transportation revenue of $1.8 million due to the acquisition of CME on November
1, 2008.  Excluding the impact of CME revenue, total Lodging net
revenue decreased $5.7 million, or 12.6%, for the three months ended October 31,
2009 compared to the three months ended October 31, 2008.





Revenue
from owned hotel rooms decreased $1.2 million, or 9.9%, for the three months
ended October 31, 2009 compared to the three months ended October 31, 2008,
which was driven by a decrease in occupancy of 10.6 percentage points primarily
due to significant declines in group business, as well as declines in transient
guest visitation, partially offset by an increase in ADR of 6.7%, due primarily
to increases at GTLC.  GTLC’s room revenue for the three months ended
October 31, 2009 was flat compared to the three months ended October 31, 2008,
as GTLC’s ADR increased by 9.6% which offset a 5.5 percentage point decline in
occupancy from lower transient guest visitation.  Revenue from managed
condominium rooms decreased $0.6 million, or 12.8%, for the three months ended
October 31, 2009 compared to the three months ended October 31, 2008, primarily
due to a decline in group business.





Dining
revenue for the three months ended October 31, 2009 decreased $1.5 million, or
14.7%, as compared to the three months ended October 31, 2008, mainly due to
decreased group visitation primarily at the Company’s Colorado mountain
resorts.  Golf revenues decreased $1.2 million, or 15.1%, for the
three months ended October 31, 2009 compared to the three months ended October
31, 2008, resulting from a 15% decrease in the number of golf rounds played
combined with lower revenue per round.  Other revenue decreased $1.1
million, or 11.5%, in the three months ended October 31, 2009 compared to the
three months ended October 31, 2008, primarily due to a decrease in revenue from
spa and conferences services, which were negatively impacted by lower occupancy
from groups.




Operating
expense decreased $2.3 million, or 5.1%, for the three months ended October 31,
2009 compared to the three months ended October 31, 2008.  Operating
expense for the three months ended October 31, 2009 included $2.7 million of CME
operating expense. Excluding the impact of CME operating expense, total
operating expense decreased $5.0 million, or 11.2%, for the three months ended
October 31, 2009 compared to the three months ended October 31, 2008, primarily
due to (i) a decrease in labor and labor-related benefits of $2.2 million, or
10.5%, primarily due to lower staffing levels associated with decreased
occupancy and wage decreases as a result of the company-wide wage reduction plan
implemented in April 2009, (ii) a decrease in other expense of $2.4 million, or
14.3%, primarily due to decreased variable operating costs associated with lower
revenue including lower food and beverage cost of sales, credit card fees and
other operating expense, and (iii) a decrease in general and administrative
expense of $0.4 million, or 5.7%, primarily due to a decrease in marketing
spend.




Real
Estate Segment





Real
Estate segment operating results for the three months ended October 31, 2009 and
2008 are presented by category as follows (in thousands):





Three
      Months Ended
            
            PercentageOctober
      31,
            
            Increase2009
            2008
            (Decrease)Total
      Real Estate net revenue
            
            $
            205
            
            $
            66,750
            
            (99.7
            )
            %Total
      Real Estate operating expense
            
            
            5,177
            
            
            51,377
            
            (90.0
            )
            %Gain
      on sale of real property
            
            
            6,087
            
            
            --
            
            --
            
            %Total
      Real Estate Reported EBITDA
            
            $
            1,115
            
            $
            15,373
            
            (92.7
            )
            %





Real
Estate Reported EBITDA includes $1.4 million and $0.9 million of stock-based
compensation expense for the three months ended October 31, 2009 and 2008,
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.





Three
months ended October 31, 2009





During
the three months ended October 31, 2009 the Company sold a land parcel located
at the Arrowhead base area of the Beaver Creek Resort for $8.5 million and
recorded a gain on sale of real property of $6.1 million (net of $2.4 million in
related cost of sales).





Operating
expense for the three months ended October 31, 2009 primarily included general
and administrative costs of approximately $5.2 million (including $1.4 million
of stock-based compensation expense).  General and administrative
costs were primarily comprised of marketing expense for the real estate projects
under development (including those that have not yet closed), overhead costs
such as labor and labor-related benefits and allocated corporate
costs.





Three
months ended October 31, 2008





Real
Estate segment net revenue for the three months ended October 31, 2008 was
driven primarily by the closing on 39 residences at Crystal Peak Lodge ($51.2
million of revenue with an average selling price per unit of $1.3 million and an
average price per square foot of $1,045) and the closing of one Lodge at Vail
Chalet (“Chalet”) unit ($14.4 million of revenue with an average price per
square foot of $2,880).  The higher average price per square foot for
the Chalet unit was driven by its premier location at the base of Vail mountain
in Vail Village and the fact that this development consisted of only 13
exclusive chalets.  The Crystal Peak Lodge average price per square
foot though significantly lower than the Vail project real estate sales, was
significantly higher than historical Breckenridge project real estate sales and
was primarily driven by its ski-in/ski-out location at the base of Peak 7 in
Breckenridge and close proximity to the BreckConnect Gondola.


Operating
expense for the three months ended October 31, 2008 included cost of sales of
$40.1 million commensurate with revenue recognized, primarily driven by the
closing on 39 residences at Crystal Peak Lodge ($33.0 million in cost of sales
with an average cost per square foot of $679) and the closing on one Chalet unit
($7.3 million in cost of sales with an average cost per square foot of
$1,465).  The cost per square foot for the Chalet unit is reflective
of the high-end features and amenities associated with this project and the
relatively high construction costs associated with mountain resort
development.  The cost per square foot for Crystal Peak Lodge is
reflective of its less complicated design features and fewer amenities
associated with this project relative to the Chalets.  Operating
expense also included sales commissions of approximately $4.2 million
commensurate with revenue recognized and general and administrative costs of
approximately $7.1 million (including $0.9 million of stock-based compensation
expense).  General and administrative costs were primarily comprised
of marketing expense for the real estate projects under development (including
those that have not yet closed), overhead costs such as labor and labor-related
benefits and allocated corporate costs.





Other
Items





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





Depreciation and
amortization.  Depreciation and amortization expense for the
three months ended October 31, 2009 increased $2.1 million compared to the same
period in the prior year, primarily due to an increase in the fixed asset base
due to incremental capital expenditures including a new gondola placed
in-service within the last year and the acquisition of CME.





Investment
income.  The decrease in investment income for the three months
ended October 31, 2009 compared to the same period in the prior year is
primarily due to a decrease in average invested cash during the
period.





Interest expense,
net.  The reduction in interest expense, net for the three
months ended October 31, 2009 compared to the same period in the prior year is
primarily due to an increase in capitalized interest on self-funded real estate
projects coupled with the payoff of a scheduled debt maturity in the three
months ended October 31, 2008.





Income taxes.  The
effective tax rate for the three months ended October 31, 2009 was 37.0%
compared to the effective tax rate for the three months ended October 31, 2008
of 34.5%.  The interim period effective tax rate is primarily driven
by the amount of anticipated pre-tax book income for the full fiscal year
adjusted for items that are deductible/non-deductible for tax purposes only
(i.e. permanent items).  Additionally, the Company recorded a $0.3
million income tax benefit in the three months ended October 31, 2009 due to a
reversal of an income tax contingency resulting from the expiration of the
statue of limitations.





Beginning
August 1, 2009, the Company adopted a FASB statement regarding noncontrolling
interest (see Note 2, Summary of Significant Accounting Policies, of the Notes
to Consolidated Condensed Financial Statements) which requires that the net
income (loss) attributable to noncontrolling interest in the Company’s
consolidated subsidiaries no longer be included in the determination of pretax
income (loss) in the Company’s effective tax rate calculation.





In 2005,
the Company amended previously filed tax returns (for the tax years from 1997
through 2002) in an effort to remove restrictions under Section 382 of the
Internal Revenue Code on approximately $73.8 million of net operating losses
(“NOLs”) relating to fresh start accounting from the Company’s reorganization in
1992.  As a result, the Company requested a refund related to the
amended returns in the amount of $6.2 million and has reduced its Federal tax
liability in the amount of $19.6 million in subsequent tax
returns.  In 2006, the Internal Revenue Service (“IRS”) completed its
examination of the Company’s filing position in its amended returns and
disallowed the Company’s request for refund and its position to remove the
restriction on the NOLs.  The Company appealed the examiner’s
disallowance of the NOLs to the Office of Appeals.  In December 2008,
the Office of Appeals denied the Company’s appeal, as well as a request for
mediation.  The Company disagrees with the IRS interpretation
disallowing the utilization of the NOLs and in August 2009, filed a complaint in
the United States District Court for the District of Colorado seeking recovery
of $6.2 million in over payments that were previously denied by the IRS, plus
interest.  Due to the uncertainty surrounding the utilization of the
NOLs, the Company has not reflected any of the benefits of the utilization of
the NOLs within its financial statements; thus if the Company is unsuccessful in
its action regarding this matter it will not negatively impact the Company’s
results of operations.





Reconciliation
of Non-GAAP Measures





The
following table reconciles from segment Reported EBITDA to net loss attributable
to Vail Resorts, Inc. (in thousands):





Three
      Months EndedOctober
      31,2009
            
            2008Mountain
      Reported EBITDA
            $
            (37,010
            )
            
            $
            (39,430
            )Lodging
      Reported EBITDA
            
            (1,268
            )
            
            
            355Resort
      Reported EBITDA
            
            (38,278
            )
            
            
            (39,075
            )Real
      Estate Reported EBITDA
            
            1,115
            
            
            
            15,373Total
      Reported EBITDA
            
            (37,163
            )
            
            
            (23,702
            )Depreciation
      and amortization
            
            (27,184
            )
            
            
            (25,078
            )Loss
      on disposal of fixed assets, net
            
            (113
            )
            
            
            (180
            )Investment
      income
            
            230
            
            
            
            643Interest
      expense, net
            
            (4,835
            )
            
            
            (7,947
            )Loss
      before benefit from income taxes
            
            (69,065
            )
            
            
            (56,264
            )Benefit
      from income taxes
            
            25,554
            
            
            
            19,409Net
      loss
            
            (43,511
            )
            
            
            (36,855
            )Net
      loss attributable to noncontrolling interests
            
            2,338
            
            
            
            2,351Net
      loss attributable to Vail Resorts, Inc.
            $
            (41,173
            )
            
            $
            (34,504
            )





The
following table reconciles Net Debt (in thousands):





October
      31,2009
            
            2008Long-term
      debt
            
            $
            489,919
            
            $
            491,778Long-term
      debt due within one year
            
            
            1,862
            
            
            354Total
      debt
            
            
            491,781
            
            
            492,132Less:
      cash and cash equivalents
            
            
            13,019
            
            
            102,668Net
      debt
            
            $
            478,762
            
            $
            389,464





LIQUIDITY
AND CAPITAL RESOURCES





Significant
Sources of Cash





Historically,
the Company has seasonally low cash and cash equivalents on hand in the first
fiscal quarter given that the first and the prior year’s fourth fiscal quarters
have essentially no ski operations.  Additionally, cash provided by or
used in operating activities can be significantly impacted by the timing or mix
of closings on and investment in real estate development projects.  In
total, the Company used $56.3 million and $59.7 million of cash in the three
months ended October 31, 2009 and October 31, 2008, respectively.  The
Company currently anticipates that Resort Reported EBITDA will provide a
significant source of future operating cash flows primarily generated in the
Company’s second and third fiscal quarters.  Additionally, anticipated
closings of real estate projects currently under development are expected to
provide a source of future cash flows from operations beginning in the Company’s
fourth quarter of fiscal year 2010 and beyond, partially offset by further
investments in real estate to complete these projects.





In
addition to the Company’s $13.0 million of cash and cash equivalents at October
31, 2009, the Company has $307.0 million available under its Credit Facility
(which represents the total commitment of $400.0 million less certain letters of
credit outstanding of $93.0 million).  The Company continued to
self-fund its current real estate projects under construction (the Company
estimates to incur between $150 and $170 million in cash expenditures subsequent
to October 31, 2009) which, when combined with historically low operating cash
flows during the Company’s first fiscal quarter required the Company to borrow
under the revolver component of its Credit Facility (which was subsequently
repaid during the three months ended October 31, 2009).  The Company
expects that its liquidity needs in the near term will be met by the utilization
of cash flows generated by operating activities and borrowings under the Credit
Facility.  The Company believes the Credit Facility, which matures in
2012, provides adequate flexibility and is priced favorably with any new
borrowings currently being priced at LIBOR plus 1.0%.





Three
months ended October 31, 2009 compared to the three months ended October 31,
2008





The
Company used $45.0 million of cash from operating activities during the three
months ended October 31, 2009, compared to generating $50.9 million of cash for
the three months ended October 31, 2008.  The difference between these
two periods was primarily a result of the timing of real estate closings and
construction spending as proceeds from real estate sales decreased $53.9 million
during the three months ended October 31, 2009 compared to the three months
ended October 31, 2008, in addition to an increase in investments in real estate
of $9.1 million during the three months ended October 31, 2009 compared to the
three months ended October 31, 2008.  Further contributing to the
decrease in cash provided by operating activities for the three months ended
October 31, 2009 compared to the three months ended October 31, 2008 was the
receipt of $20.8 million of private club initiation fees for the Vail Mountain
Club in the three months ended October 31, 2008 and a reduction in restricted
cash of $48.4 million in the prior year period which became available for
general purpose use due to the payoff of the Company’s non-recourse real estate
financing.  Partially offsetting the above items were an increase in
proceeds from the sale of season passes, a reduction in inventory levels and an
increase in real estate development payables.




Cash used
in investing activities for the three months ended October 31, 2009 decreased by
$33.9 million compared to the three months ended October 31, 2008, due to
decreased resort capital expenditures of $22.6 million and cash receipts of $8.9
million primarily related to a land parcel the Company sold during the three
months ended October 31, 2009.





The
Company generated $0.7 million of cash from financing activities during the
three months ended October 31, 2009, compared to using $64.6 million for the
three months ended October 31, 2008, primarily resulting from the $58.4 million
pay off of non-recourse real estate financing during the three months ended
October 31, 2008 and no repurchases of common stock during the three months
ended October 31, 2009, compared to repurchases of $7.4 million during the three
months ended October 31, 2008.





Significant
Uses of Cash





The
Company’s cash uses currently include providing for operating expenditures and
capital expenditures for assets to be used in operations and for real estate
projects under construction.





The
Company expects to spend approximately $160 million to $180 million in calendar
year 2009 for real estate under development, including the construction of
associated resort-related depreciable assets, of which approximately $130
million was spent as of October 31, 2009, leaving approximately $30 million to
$50 million to spend in the remainder of the calendar year 2009.  The
Company has entered into contracts with third parties to provide services to the
Company throughout the course of project development; commitments for future
services to be performed under such current contracts total approximately $110
million and are expected to be performed primarily over the next calendar
year.





The
Company has historically invested significant cash in capital expenditures for
its resort operations, and expects to continue to invest in the future; however,
plans for such investment in the near term have been reduced given the
significant level of capital expenditures made in the past few years including
individually significant projects that do not annually re-occur such as gondolas
and major hotel renovations coupled with the current economic
recession.  Current capital expenditure levels will primarily include
investments that allow the Company to maintain its high quality standards, as
well as certain incremental discretionary improvements at the Company’s five ski
resorts and throughout its owned hotels.  The Company evaluates
additional capital improvements based on expected strategic impacts and/or
expected return on investment.  The Company currently anticipates it
will spend approximately $50 million to $60 million of resort capital
expenditures for calendar year 2009, excluding resort depreciable assets arising
from real estate activities noted above, of which approximately $36 million was
spent as of October 31, 2009, leaving approximately $14 million to $24 million
to spend in the remainder of the calendar year 2009.  Included in
these capital expenditures are approximately $32 million to $37 million which
are necessary to maintain appearance and level of service appropriate to the
Company’s resort operations, including routine replacement of snow grooming
equipment and rental fleet equipment.  The Company currently plans to
utilize cash on hand, borrowing available under its Credit Facility and/or cash
flow generated from future operations to provide the cash necessary to execute
its capital plans.





Principal
payments on the vast majority of the Company’s long-term debt ($489.2 million of
the total $491.8 million debt outstanding as of October 31, 2009) are not due
until fiscal 2014 and beyond.  As of October 31, 2009 and 2008, total
long-term debt (including long-term debt due within one year) was $491.8 million
and $492.1 million, respectively.  Net Debt (defined as long-term debt
plus long-term debt due within one year less cash and cash equivalents)
increased from $389.5 million as of October 31, 2008 to $478.8 million as of
October 31, 2009 due primarily to the decrease in cash and cash
equivalents.





The
Company’s debt service requirements can be impacted by changing interest rates
as the Company had $52.6 million of variable-rate debt outstanding as of October
31, 2009.  A 100-basis point change in LIBOR would cause the Company’s
annual interest payments to change by approximately $0.5 million.  The
fluctuation in the Company’s debt service requirements, in addition to interest
rate changes, may be impacted by future borrowings under its Credit Facility or
other alternative financing arrangements, including non-recourse real estate
financings, it may enter into.  The Company’s long term liquidity
needs are dependent upon operating results that impact the borrowing capacity
under the Credit Facility, which can be mitigated by adjustments to capital
expenditures, flexibility of investment activities and the ability to obtain
favorable future financing.  The Company can respond to liquidity
impacts of changes in the business and economic environment by managing its
capital expenditures and the timing of new real estate development
activity.





On March
9, 2006, the Company’s Board of Directors approved the repurchase of up to
3,000,000 shares of common stock and on July 16, 2008 approved an increase of
the Company’s common stock repurchase authorization by an additional 3,000,000
shares.  The Company did not repurchase any shares of common stock
during the three months ended October 31, 2009.  Since inception of
this stock repurchase plan, the Company has repurchased 3,878,535 shares at a
cost of approximately $147.8 million, through October 31, 2009.  As of
October 31, 2009, 2,121,465 shares remained available to repurchase under the
existing repurchase authorization.  Shares of common stock purchased
pursuant to the repurchase program will be held as treasury shares and may be
used for the issuance of shares under the Company’s employee share award
plans.  Acquisitions under the stock 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 timing as well as
the number of shares that may be repurchased under the program will depend on a
number of factors, including the Company’s future financial performance, the
Company’s available cash resources and competing uses for cash that may arise in
the future, the restrictions in 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”)
governing the Company’s Credit Facility and the Indenture, dated as of January
29, 2004 among the Company, the guarantors therein and The Bank of New York
Mellon Trust Company, N.A. as Trustee (“Indenture”), governing the 6.75% Senior
Subordinated Notes due 2014 (“6.75% Notes”), prevailing prices of the Company’s
common stock and the number of shares that become available for sale at prices
that the Company believes are attractive.  The stock repurchase
program may be discontinued at any time and is not expected to have a
significant impact on the Company’s capitalization.





Covenants
and Limitations





The
Company must abide by certain restrictive financial covenants under its Credit
Facility and the Indenture.  The most restrictive of those covenants
include the following Credit Facility covenants: Net Funded Debt to Adjusted
EBITDA ratio, the Interest Coverage ratio and Minimum Net Worth (each as defined
in the Credit Agreement).  In addition, the Company’s financing
arrangements, including the Indenture, limit its ability to incur certain
indebtedness, make certain restricted payments, enter into certain investments,
make certain affiliate transfers and may limit its ability to enter into certain
mergers, consolidations or sales of assets.  The Company’s borrowing
availability under the Credit Facility is primarily determined by the Net Funded
Debt to Adjusted EBITDA ratio, which is based on the Company’s segment operating
performance, as defined in the Credit Agreement.





The
Company was in compliance with all restrictive financial covenants in its debt
instruments as of October 31, 2009.  The Company expects it will meet
all applicable financial maintenance covenants in its Credit Agreement,
including the Net Funded Debt to Adjusted EBITDA ratio throughout the year
ending July 31, 2010.  However, there can be no assurance that the
Company will continue to meet such financial covenants.  If such
covenants are not met, the Company would be required to seek a waiver or
amendment from the banks participating in the Credit Facility.  While
the Company anticipates that it would obtain such waiver or amendment, if any
were necessary, there can be no assurance that such waiver or amendment would be
granted, which could have a material adverse impact on the liquidity of the
Company.





OFF
BALANCE SHEET ARRANGEMENTS





The
Company does not have off balance sheet transactions that are expected to have a
material effect on the Company's financial condition, revenue, expenses, results
of operations, liquidity, capital expenditures or capital
resources.





FORWARD-LOOKING
STATEMENTS





Except
for any historical information contained herein, the matters discussed in this
Form 10-Q contain certain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.  These statements
relate to analyses and other information available as of the date hereof, which
are based on forecasts of future results and estimates of amounts not yet
determinable.  These statements also relate to our contemplated future
prospects, developments and business strategies.





These
forward-looking statements are identified by their use of terms and phrases such
as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,”
“plan,” “predict,” “project,” “will” and similar terms and phrases, including
references to assumptions.  Although we believe that our plans,
intentions and expectations reflected in or suggested by such forward-looking
statements are reasonable, we cannot assure you that such plans, intentions or
expectations will be achieved.  Important factors that could cause
actual results to differ materially from our forward-looking statements include,
but are not limited to:





·
            prolonged
      downturn in general economic conditions, including continued adverse
      affects on the overall travel and leisure related
    industries;


·
            unfavorable
      weather conditions or natural
disasters;


·
            adverse
      events that occur during our peak operating periods combined with the
      seasonality of our business;


·
            competition
      in our mountain and lodging
businesses;


·
            our
      ability to grow our resort and real estate
  operations;


·
            our
      ability to successfully complete real estate development projects and
      achieve the anticipated financial benefits from such
    projects;


·
            further
      adverse changes in real estate
markets;


·
            continued
      volatility in credit markets;


·
            our
      ability to obtain financing on terms acceptable to us to finance our real
      estate development, capital expenditures and growth
    strategy;


·
            our
      reliance on government permits or approvals for our use of Federal land or
      to make operational improvements;


·
            adverse
      consequences of current or future legal
claims;


·
            our
      ability to hire and retain a sufficient seasonal
  workforce;


·
            willingness
      of our guests to travel due to terrorism, the uncertainty of military
      conflicts or outbreaks of contagious diseases, and the cost and
      availability of travel options;


·
            negative
      publicity or unauthorized use of our trademarks which diminishes the value
      of our brands;


·
            our
      ability to integrate and successfully operate future acquisitions;
      and


·
            implications
      arising from new Financial Accounting Standards Board
      (“FASB”)/governmental legislation, rulings or
    interpretations.





All
forward-looking statements attributable to us or any persons acting on our
behalf are expressly qualified in their entirety by these cautionary
statements.





If one or
more of these risks or uncertainties materialize, or if underlying assumptions
prove incorrect, our actual results may vary materially from those expected,
estimated or projected.  Given these uncertainties, users of the
information included in this Form 10-Q, including investors and prospective
investors, are cautioned not to place undue reliance on such forward-looking
statements.  Actual results may differ materially from those suggested
by the forward-looking statements that the Company makes for a number of reasons
including those described in this Form 10-Q and in Part I, Item 1A “Risk
Factors” of the Form 10-K.  All forward-looking statements are made
only as of the date hereof. Except as may be required by law, the Company does
not intend to update these forward-looking statements, even if new information,
future events or other circumstances have made them incorrect or
misleading.





ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.





Interest Rate
Risk.The Company's exposure to market risk is limited
primarily to the fluctuating interest rates associated with variable rate
indebtedness.  At October 31, 2009, the Company had $52.6 million of
variable rate indebtedness, representing 10.7% of the Company's total debt
outstanding, at an average annualized interest rate during the three months
ended October 31, 2009 of 1.2%.  Based on variable-rate borrowings
outstanding as of October 31, 2009, a 100-basis point (or 1.0%) change in LIBOR
would have caused the Company's annual interest payments to change by $0.5
million.  The Company's market risk exposure fluctuates based on
changes in underlying interest rates.





ITEM 4.  CONTROLS AND
PROCEDURES.





Disclosure
Controls and Procedures





Management
of the Company, under the supervision and with participation of the Chief
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), have evaluated
the effectiveness of the Company's disclosure controls and procedures as such
term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 (the “Act”) as of the end of the period covered by this report on
Form 10-Q.





Based
upon their evaluation of the Company's disclosure controls and procedures, the
CEO and the CFO concluded that the disclosure controls are effective to provide
reasonable assurance that information required to be disclosed by the Company in
the reports that it files or submits under the Act is accumulated and
communicated to management, including the CEO and CFO, as appropriate, to allow
timely decisions regarding required disclosure and are effective to provide
reasonable assurance that such information is recorded, processed, summarized
and reported within the time periods specified by the SEC's rules and
forms.





The
Company, including its CEO and CFO, does not expect that the Company's internal
controls and procedures will prevent or detect all error and all
fraud.  A control system, no matter how well conceived or operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met.





Changes
in Internal Control over Financial Reporting





There
were no changes in the Company's internal control over financial reporting
during the period covered by this Form 10-Q that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.





PART II OTHER INFORMATION





ITEM 1.  LEGAL PROCEEDINGS.





The Canyons Ski Resort
Litigation





During
the fourth quarter of the year ended July 31, 2007 (“Fiscal 2007”), the Company
entered into an agreement with Peninsula Advisors, LLC (“Peninsula”) for the
negotiation and mutual acquisition of 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, which was heard on March 21, 2009 and
denied.  On October 21, 2009, the Company filed a Stipulated Motion to
Dismiss ASC and agreed that it would not seek any relief that would have the
effect of invalidating the sale by ASC to Talisker Canyons Finance Co, LLC. The
Company continues to pursue all other remedies against the remaining
defendants.  The matter has been set for trial commencing July 19,
2010.  The Company is unable to predict the ultimate outcome of the
above described actions.





Internal Revenue Service
Litigation





On August
24, 2009, the Company filed a complaint in the United States District Court for
the District of Colorado against the United States of America seeking a refund
of approximately $6.2 million in federal income taxes paid for the tax years
ended December 31, 2000 and December 31, 2001.  The Company’s amended
tax returns for those years included calculations of net operating losses
(“NOL”) carried forward from prior years to reduce its tax years 2000 and 2001
tax liabilities.  The Internal Revenue Service (“IRS”) has disallowed
refunds associated with those NOL carry forwards and the Company disagrees with
the IRS action disallowing the utilization of the NOLs.  The Company
is unable to predict the ultimate outcome of this matter.





ITEM 1A. RISK FACTORS.





There
have been no material changes from risk factors previously disclosed in Item 1A
to Part I of the Company’s Form 10-K.





ITEM 2.  UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.





None.





ITEM 3.  DEFAULTS UPON SENIOR
SECURITIES.





None.





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





None.





ITEM 5.  OTHER INFORMATION.





None.





ITEM 6.  EXHIBITS.





The
following exhibits are either filed herewith or, if so indicated, incorporated
by reference to the documents indicated in parentheses, which have previously
been filed with the Securities and Exchange Commission.





Exhibit
      Number
            Description
            Sequentially
      Numbered Page3.1
            Amended
      and Restated Certificate of Incorporation of Vail Resorts, Inc., dated
      January 5, 2005. (Incorporated by reference to Exhibit 3.1 on Form 10-Q of
      Vail Resorts, Inc. for the quarter ended January 31,
2005.)3.2
            Amended
      and Restated By-Laws. (Incorporated by reference to Exhibit 3.1 on Form
      8-K of Vail Resorts, Inc. filed February 6, 2009.)4.1(a)
            Indenture,
      dated as of January 29, 2004, among Vail Resorts, Inc., the guarantors
      therein and the Bank of New York as Trustee (Including Exhibit A, Form of
      Global Note).  (Incorporated by reference to Exhibit 4.1 on Form
      8-K of Vail Resorts, Inc. filed on February 2, 2004.)4.1(b)
            Supplemental
      Indenture, dated as of March 10, 2006 to Indenture dated as of January 29,
      2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as
      Guarantors, and The Bank of New York, as Trustee.  (Incorporated
      by reference to Exhibit 10.34 on Form 10-Q of Vail Resorts, Inc. for the
      quarter ended January 31, 2006.)4.1(c)
            Form
      of Global Note.  (Incorporated by reference to Exhibit 4.1 on
      Form 8-K of Vail Resorts, Inc. filed February 2, 2004.)4.1(d)
            Supplemental
      Indenture, dated as of April 26, 2007 to Indenture dated as of January 29,
      2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as
      Guarantors, and The Bank of New York, as Trustee. (Incorporated by
      reference to Exhibit 4.1(d) on Form 10-K of Vail Resorts, Inc. for the
      year ended July 31, 2008.)4.1(e)
            Supplemental
      Indenture, dated as of July 11, 2008 to Indenture dated as of January 29,
      2004 among Vail Resorts, Inc., as Issuer, the Guarantors named therein, as
      Guarantors, and The Bank of New York Mellon Trust Company, N.A., as
      Trustee. (Incorporated by reference to Exhibit 4.1(e) on Form 10-K of Vail
      Resorts, Inc. for the year ended July 31, 2008.)4.1(f)
            Supplemental
      Indenture, dated as of January 29, 2009 to Indenture dated as of January
      29, 2004 among Vail Resorts, Inc., as Issuer, the Guarantors named
      therein, as Guarantors, and The Bank of New York Mellon Trust Company,
      N.A., as Trustee.  (Incorporated by reference to Exhibit 4.1(f)
      on Form 10-Q of Vail Resorts, Inc. for the quarter ended January 31,
      2009.)4.1(g)
            Supplemental
      Indenture, dated as of August 24, 2009 to Indenture dated as of January
      29, 2004 among Vail Resorts, Inc., as Issuer, the Guarantors named
      therein, as Guarantors, and The Bank of New York Mellon Trust Company,
      N.A., as Trustee.  (Incorporated by reference to Exhibit 4.1(g)
      on Form 10-K of Vail Resorts, Inc. for the year ended July 31,
      2009.)31.1
            Certifications
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.
            1531.2
            Certifications
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.
            1632
            Certifications
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.
            17

























SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





Date:  December
      8, 2009
            Vail
      Resorts, Inc.By:
            /s/ Jeffrey W. JonesJeffrey
      W. JonesSenior
      Executive Vice President andChief
      Financial Officer(Duly
      Authorized Officer)








Date:  December
      8, 2009
            Vail
      Resorts, Inc.By:
            /s/ Mark L. SchoppetMark
      L. SchoppetVice
      President, Controller andChief
      Accounting Officer