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Vail Resorts Offers Stock Options to Top 100 Executives,Despite Annual Loss
By Aldo Svaldi, The Denver Post
Knight Ridder/Tribune Business News 

Dec. 2, 2003 - Vail Resorts Inc. has offered its top 100 executives 800,000 stock options despite the company's first annual loss in a decade. 

"Stock options are a standard feature of the compensation plan we offer to the top 100 managers," Vail Resorts spokeswoman Kelly Ladyga said Monday. "It is something we have been doing every year." Last month, Vail reported an $8.5 million loss on revenue of $710.4 million for its fiscal year ended July 31. 

The company, which runs the Vail, Beaver Creek, Keystone and Breckenridge resorts, has struggled to attract destination skiers and remains locked in a fierce discount ski-pass battle with Canadian resort developer Intrawest, owner of Copper Mountain and operator of Winter Park resort, to draw Front Range skiers. 

The poor showing resulted in Vail executives losing their 2003 bonuses but didn't stop the awarding of options. 

"It is our way of encouraging management to deliver earnings; that is what they are designed to do," Ladyga said. 

If earnings and the company's stock price rebound, investors and management will both benefit, she said. 

Of the total grant, the company's top 15 executives were offered 400,000 stock options or half the allotment, including 120,000 stock options for chief executive and chairman Adam Aron. In addition, Aron will receive 22,500 restricted shares of Vail stock. 

The new wave of Vail options can eventually be redeemed at a strike price of $14.73, with any value in the share price above that going to the holder. Restricted shares, given to the top four executives, represent an outright grant of stock. Both the options and restricted shares will vest or be given to executives in equal allotments over the next three years. 

At Monday's closing share price of $15.45, Aron's restricted shares would have a value of $347,625 and his options would be in the money, or above the strike price, by 72 cents, giving him a value of $86,400. 

Chief financial officer Jeffrey Jones pulled down 35,000 stock options and 12,000 restricted shares. Those shares would be worth $185,400 at Monday's closing share price, and the options would be in the money by $25,200. 

Vail set a strike price for its options based on how the stock price traded Nov. 19, the day before the options were issued. 

Among those receiving the options are directors on the company's board. Each will receive 5,000 options if they serve on a committee or 2,500 if they do not. Last year, they each received 5,000 stock options. 

Vail's method in setting a strike price for its stock options is not out of the ordinary, and other public ski-resort owners also use stock options and restricted shares. 

Institutional investors also tend to disdain "easy" options issued with a large gain already built in or overly generous grants, compensation experts said. 

Vail is giving options despite a historically weak share price, a move that could be considered a vote of confidence in the stock's potential, said Bruce Brumberg, editor of 

Frank Glassner, chief executive of Compensation Design Group in New York, said a reliance on stock options and restricted shares without forging a closer link to performance is becoming outdated. 

"Options are sort of old hat," he said. "They don't reflect the performance of individual employees as they relate to the company, and they don't insulate them or the company from the vagaries of the market." Companies, faced with mandatory expensing of stock options in 2005, are increasingly moving toward other compensation strategies, Glassner said. 

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(c) 2003, The Denver Post. Distributed by Knight Ridder/Tribune Business News. MTN, IDR, 


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