The Company revised its accounting for recognizing revenue on initiation fees related to the sale of memberships in private member clubs. This Amended 10-K reflects such revised accounting. Under the new accounting method, the Company will recognize the initiation fee as revenue over the life of the club facilities, which the Company has currently estimated to be 30 years. For clubs under construction, recognition does not commence until the club is ready for use by the members. The Company had previously announced that it would recognize the initiation fee as revenue over 12 years, which is the period over which the club member who has made such payment is expected to remain a member in the club. However, after further analysis of the issue and after consultation with the SEC accounting staff, the Company decided that the appropriate way to recognize the initiation fee is over the estimated life of the club, assumed to be the depreciable life of the club facilities. Historically, the Company had recognized the revenue from the initiation fee immediately or upon the completion of certain milestones, whichever was later.

The Company engaged PricewaterhouseCoopers LLP to re-audit its consolidated financial statements for fiscal years 1999-2001. As a result of that re-audit, the Company determined that several other historical adjustments were appropriate, in addition to the adjustment for club initiation fees. The previously reported adjustment for club revenue constitutes approximately 86% of the pre-tax income adjustments included in this Amended 10-K. The additional adjustments reflected in this filing fall generally into three categories, summarized below, and described in more detail elsewhere in this filing:

1. Statement of Operations--In addition to the impact of the initiation fee revenue (which accounts for approximately 86% of the total restated pre-tax income impact), the Company has reflected an aggregate reduction in pre-tax income of $1.6 million and $1.6 million for fiscal 1999 and 2001, respectively (the impact to fiscal 2000 is minor). Resort EBITDA (as defined in Note 3 to Item 6, Selected Financial Data) is reduced in the aggregate $0.7 million and $1.1 million in 1999 and 2001, respectively; the aggregate impact to fiscal 2000 Resort EBITDA is an increase of $0.7 million. These additional adjustments consist primarily of changes in liability amounts for worker's compensation and medical benefits and equity losses with respect to the Company's employee housing joint ventures. The worker's compensation and medical benefits adjustments are discussed more fully below.

2. Reclassification of Income Statement Components--The Company has reclassified, as separate line items on the statement of operations, equity investment income from non-consolidated joint ventures for each of the Company's reporting segments. Although the presentation and format of the statement of operations differs from the presentation of the Original 10-K, there is no impact on net income, earnings per share ("EPS"), or EBITDA (as defined in Notes 3, 5 and 8 to Item 6, Selected Financial Data) from the reclassification of these income items. In the future, the Company will continue with the new presentation.

3. Balance Sheet--The large majority of the restated balance sheet impacts included in the Amended 10-K relate directly to the restatement of the club initiation fee revenue, by recording deferred revenue for the actual receipt of the cash initiation fees in the current and prior years, offset by a reduction to retained earnings in the amount corresponding to the restated reduction in revenue. Other balance sheet adjustments include certain reclassifications and both positive and negative adjustments related to previously mentioned increases in restated liabilities and other miscellaneous items, for the three restated years and the pre-1999 period.

Finally, as previously announced, the Company's historical cash balances are unaffected by the adjustment in club revenue, as well as the additional adjustments reflected in this filing. The statement of cash flows included in this Amended 10-K reflects reconciling adjustments to conform to adjustments made in the statement of operations and balance sheet. Except for the foregoing, no other information included in the Original 10-K is amended by this Amended 10-K.

The following table presents selected historical consolidated financial data of the Company for the periods indicated. The financial data for the fiscal years ended July 31, 2001, 2000 and 1999, the ten-month fiscal period ended July 31, 1998 and fiscal year ended September 30, 1997 are derived from the consolidated financial statements of the Company. The financial data for the fiscal years ended July 31, 2001, 2000, and 1999 should be read in conjunction with the consolidated financial statements and related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this Amended 10-K. The data presented below are in thousands, except per share amounts and percentages.

The following is an analysis of the Company's results of operations, liquidity and capital resources and should be read in conjunction with the Consolidated Financial Statements included in this Form 10-K/A. 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, changes in the competitive environment of the ski and resort industries, general business and economic conditions, the weather and other factors discussed elsewhere herein and in the Company's filings with the Securities and Exchange Commission.

This Amended 10-K of the Company amends Items 6, 7, 8 and 9 of Part II of the Company's Original 10-K to reflect the changes described below under "Restatement".

Restatement--The Company revised its accounting for recognizing revenue on initiation fees related to the sale of memberships in private member clubs. This Amended 10-K reflects such revised accounting. Under the new accounting method, the Company will recognize the initiation fee as revenue over the life of the club facilities, which the Company has currently estimated to be 30 years. For clubs under construction, recognition does not commence until the club is ready for use by the members. The Company had previously announced that it would recognize the initiation fee as revenue over 12 years, which is the period over which the club member who has made such payment is expected to remain a member in the club. However, after further analysis of the issue and after consultation with the SEC accounting staff, the Company decided that the appropriate way to recognize the initiation fee is over the estimated life of the club, assumed to be the depreciable life of the club facilities. Historically, the Company had recognized the revenue from the initiation fee immediately or upon the completion of certain milestones, whichever was later.

The Company engaged PricewaterhouseCoopers LLP to re-audit its consolidated financial statements for fiscal years 1999-2001. As a result of that re-audit, the Company determined that several other historical adjustments were appropriate, in addition to the adjustment for club initiation fees. The previously reported adjustment for club revenue constitutes approximately 86% of the pre-tax income adjustments included in this Amended 10-K. The additional adjustments reflected in this filing fall generally into three categories, summarized below, and described in more detail elsewhere in this filing:

1. Statement of Operations--In addition to the impact of the initiation fee revenue (which accounts for approximately 86% of the total restated pre-tax income impact), the Company has reflected an aggregate reduction in pre-tax income of $1.6 million and $1.6 million for fiscal 1999 and 2001, respectively (the impact to fiscal 2000 is minor). Resort EBITDA (as defined in Note 3 to Item 6, Selected Financial Data) is reduced in the aggregate $0.7 million and $1.1 million in 1999 and 2001, respectively; the aggregate impact to fiscal 2000 Resort EBITDA is an increase of $0.7 million. These additional adjustments consist primarily of changes in liability amounts for workers' compensation and medical benefits and equity losses with respect to the Company's employee housing joint ventures. The worker's compensation and medical benefits adjustments are discussed more fully below.

2. Reclassification of Income Statement Components--The Company has reclassified, as separate line items on the statement of operations, equity investment income from non-consolidated joint ventures for each of the Company's reporting segments. Although the presentation and format of the statement of operations differs from the presentation of the Original 10-K, there is no impact on net income, earnings per share ("EPS"), or EBITDA (as defined in Notes 3, 5 and 8 to Item 6, Selected Financial Data) from the reclassification of these income items. In the future, the Company will continue with the new presentation.

3. Balance Sheet--The large majority of the restated balance sheet impacts included in the Amended 10-K relate directly to the restatement of the club initiation fee revenue, by recording deferred revenue for the actual receipt of the cash initiation fees in the current and prior years, offset by a reduction to retained earnings in the amount corresponding to the restated reduction in revenue. Other balance sheet adjustments include certain reclassifications and both positive and negative adjustments related to previously mentioned increases in restated liabilities and other miscellaneous items, for the three restated years and the pre-1999 period.

As previously announced, the Company's historical cash balances are unaffected by the adjustment in club revenue, as well as the additional adjustments reflected in this filing. The statement of cash flows included in this Amended 10-K reflects reconciling adjustments to conform to adjustments made in the statement of operations and balance sheet. Except for the foregoing, no other information included in the Original 10-K is amended by this Amended 10-K.

The Company's 2000/01 ski season was highlighted by a number of positive trends: a) an 87% increase in the number of season passes sold compared to the 1999/2000 season, b) more normal early season snowfall than in the previous two ski seasons, which contributed to a strong early season as well as providing momentum for the remainder of the season, c) a return to more normal Christmas/New Year holiday travel patterns after concerns surrounding the millennium dampened holiday travel for the 1999/2000 season, d) a rebound in visitation from international guests as compared to the 1999/2000 season, and e) an increase in the Company's share of the Colorado skier market from the 1999/2000 ski season. As a result, the Company's four ski resorts combined logged a total of approximately 5.0 million skier visits, the best in the Company's history. In addition, Vail Mountain regained its position as the most popular ski resort in the U.S. in terms of visitation, with nearly 1.65 million skier visits. These trends, coupled with aggressive cost management, have resulted in favorable financial performance for the Company's resort segment as compared to the fiscal year ended July 31, 2000, particularly after taking into account the net benefit of $13.9 million related to skier visit insurance and $5.6 million related to business interruption insurance included in fiscal 2000.

While the ski industry nationally had a record-breaking 2000/01 ski season with an estimated 57.3 million skier visits according to preliminary reports from the National Ski Areas Association, it is estimated that approximately 78% of the national increase in skier visits from the 1999/2000 season was from existing customers participating more days rather than from new participants to the sport. As such, the Company anticipates that the resort industry will remain highly competitive. As a result, the Company intends to implement aggressive strategies to continue meaningful growth in the resort segment. The Company announced a management consolidation in the fourth fiscal quarter of 2001 which resulted in the elimination of 80 full-time positions, achieved primarily through attrition but also included the termination of 37 existing full-time management staff. The Company is also redesigning its sales and marketing strategy to leverage the success in the Front Range market and also place a stronger emphasis on attracting destination guests.

The Company has implemented a strategy to expand its hospitality business and is actively pursuing other opportunities for hospitality acquisitions in and around its resorts and other attractive locations. In June 2001, the Company announced its acquisition of the Inn at Beaver Creek, a 42-room hotel in the heart of Beaver Creek. The Company also announced in July 2001 that it had entered into a contract to acquire the Vail Marriott Mountain Resort, which closed in December 2001. In October 2001, the Company announced that the Company had entered into an agreement with Olympus Real Estate Partners ("Olympus"), a private investment fund, to acquire a majority interest in Rockresorts International LLC ("Rockresorts"), a luxury resort hotel management company, and had secured management contracts on Olympus' five resort hotels across the United States. The Company also announced that it had entered into a contract to acquire The Ritz-Carlton, Rancho Mirage from Olympus. Both transactions with Olympus closed in November 2001. The Ritz-Carlton, Rancho Mirage has been renamed The Lodge at Rancho Mirage and is managed by Rockresorts. Additionally, Vail Resorts announced that four of its existing hotels, currently managed as independent properties, have been re-branded Rockresorts. See Note 18, Subsequent Events, of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for more detailed information on these transactions.

The real estate climate in and around the Company's resorts remains strong. While the Company's inventory of real estate held for sale is lower in fiscal 2001 as compared to fiscal 2000, the Company has several development projects currently underway, including the development of Red Sky Ranch, a residential golf community near Beaver Creek that will include two 18-hole golf courses, Mountain Thunder Lodge, a timeshare condominium project in Breckenridge, and 11 single-family lots in Arrowhead at Beaver Creek. As of the time of the Original 10-K filing, approximately 65% of the Mountain Thunder Lodge units and all of the Arrowhead lots had been placed under contract. Red Sky Ranch pre-sales had exceeded the Company's expectations, with over 75% of the first offering under contract. In addition, the Company continued to benefit from its equity-method investment in the real estate joint venture completing the development of River Run at Keystone.

The Company established a new reporting segment in fiscal 2001, the Technology segment. This segment engages in the development and sales of technology-based products and services for the hospitality and resort industries, and includes the operations of Resort Technology Partners LLC ("RTP"), a website development and technology service provider, and the Company's equity investment in Lowther Ltd.

While the Company is pleased with its fiscal 2001 financial performance, management recognizes that as always there are uncertainties related to the continuation of this favorable financial performance in fiscal 2002 and beyond, as noted above and in the "Cautionary Statement" section of this Amended 10-K. In addition, the terrorist acts against the United States on September 11, 2001 and military action as a result of those acts have created great uncertainty within the travel and leisure industry nationally and worldwide.

Presented below is more detailed comparative data regarding the Company's results of operations for the following periods:

• fiscal year ended July 31, 2001 versus fiscal year ended July 31, 2000, and
• fiscal year ended July 31, 2000 versus fiscal year ended July 31, 1999.

Resort net revenue. Resort revenue for the fiscal years ended July 31, 2001 and 2000 is presented by category as follows:

Fiscal 2001 resort revenue increased $23.9 million, or 4.9%, as compared to fiscal 2000. This increase in resort revenue is due primarily to an 8.3% increase in skier visits and a 2.4% increase in ETP (effective ticket price, "ETP", is defined as total lift ticket revenue divided by total skier visits) compared to fiscal 2000. Front Range (Denver/Colorado Springs metropolitan areas) skiers, who tend to generate less revenue per skier visit in all resort revenue categories as compared to destination skiers, constituted a significant portion of the overall increase in skier visits. The 2.4% increase in ETP is due primarily to increased pricing. All categories of resort revenue except "other" had increased revenue as compared to fiscal 2000. In addition to the increase in skier visits, resort revenue was also enhanced by innovative ski school product offerings, increased conference and banquet business in the first fiscal quarter of 2001, an increase in the number of retail/rental outlets operated by SSI Venture LLC ("SSV", a 51.9%-owned, fully consolidated retail/rental joint venture), internet-based rental sales, an increase in the Company's inventory of managed properties, aggressive hospitality marketing strategies during the late summer and fall seasons, and the Company's acquisition of SRL&S in December 2000.

The $18.0 million decrease in other resort revenue for fiscal 2001 as compared to fiscal 2000 is due primarily to the absence of $15.9 million of skier day insurance revenue and $5.6 million of business interruption insurance that was recorded in fiscal 2000. Other resort revenue also consists of ancillary recreation operations such as Adventure Ridge and Adventure Point, golf operations, private club operations (including revenue from membership sales, as restated), municipal support services for the resort villages, brokerage operations and commercial leasing.

Resort operating expense. Resort operating expense for fiscal 2001 was $403.5 million, an increase of $17.5 million, or 4.5%, compared to fiscal 2000. The increase in resort operating expense is primarily attributable to the increase in revenue over fiscal 2000, particularly with respect to non-lift ticket businesses, which have a higher percentage of associated variable expenses. The increased variable expenses are partially offset by a successful cost management program that was implemented at all levels of the Company's operations throughout fiscal 2001.

Technology net revenue. Technology revenue increased $1.3 million, or 67.0%, as compared to fiscal 2000. The increase in technology revenue is due to the Company's acquisition of RTP in March 2001.

Technology operating expense. Technology operating expense for fiscal 2001 was $3.8 million, an increase of $2.1 million as compared to fiscal 2000. The increase in operating expense is related to the Company's acquisition of RTP.

Real estate net revenue. Revenue from real estate operations for fiscal 2001 was $28.2 million, a decrease of $20.5 million, or 42.0%, compared to fiscal 2000. The decrease in real estate revenue as compared to fiscal 2000 was expected, as the Company's inventory of available "for sale" real estate had declined.

Real estate operating expense. Real estate operating expense for fiscal 2001 was $23.0 million, a decrease of $19.1 million, or 45.4%, compared to fiscal 2000. Real estate operating expense consists primarily of the cost of sales and related real estate commissions associated with sales of real estate. Real estate operating expense also includes the selling, general and administrative expenses associated with the Company's real estate operations. The decrease in real estate operating expense for fiscal 2001 as compared to fiscal 2000 is commensurate with the decrease in real estate sales noted above.

Resort equity investment income. Resort equity investment income consists primarily of income from the Company's equity investment in a real estate brokerage and a joint venture which owns and operates the building in which the Company's corporate offices are located. Resort equity income declined $1.2 million in fiscal 2001 compared to fiscal 2000 due to a decline in brokerage operations as a result of the Company's slow-down in real estate development activity in fiscal 2001.

Real estate equity investment income. Real estate equity investment income includes the Company's equity investment in the Keystone JV, the joint venture developing the River Run development at Keystone. Fiscal 2001 real estate equity investment income increased $4.0 million compared to fiscal 2000 due to the Keystone JV's completion and sale of an increased number of condominiums and single-family lots compared to fiscal 2000.

Technology equity investment loss. Losses from the Company's equity investment in Lowther Ltd., which the Company acquired in fiscal 2001, comprise the technology equity investment loss. Lowther Ltd. is a development stage entity formed to develop a web-based resort reservation system.

Depreciation and amortization. Depreciation and amortization expense was $65.5 million, an increase of $3.7 million, or 6.0%, for fiscal 2001 as compared to fiscal 2000. The increase was primarily attributable to an increased fixed asset base due to the acquisitions of SRL&S and the Company's 51% interest in RTP as well as fiscal 2001 capital improvements.

Interest expense. During fiscal 2001 and 2000 the Company recorded interest expense of $32.1 million and $35.2 million, respectively, relating primarily to the Credit Facility, the Industrial Development Bonds and the senior subordinated debt issued in May 1999. The decrease in interest expense for fiscal 2001 compared to fiscal 2000 is attributable to a decrease in the average balance outstanding under the Credit Facility combined with reduced interest rates during fiscal 2001.

Resort net revenue. Resort revenue for the fiscal years ended July 31, 2000 and 1999 is presented by category as follows:

Lift ticket revenue increased due to a 3.9% increase in ETP. The increase in ETP is primarily attributable to increased ticket sales during peak-pricing periods during the third quarter due to increased visitation, an increase in lead ticket prices at Keystone and Breckenridge along with a higher sales price on the Company's Buddy Pass season pass product, a discounted season pass product for Keystone and Breckenridge Mountains. The increase in ETP from these factors was offset slightly by a downturn in the percentage of destination and international guests, who tend to generate higher ETP than local and Front Range skiers. Skier visits were impacted by the slow millennium period travel patterns across the U.S. travel industry, weak pre-Christmas activity and unfavorable weather early in the second quarter.

Ski school revenue increased due to a favorable shift in the skier demographic, which resulted in increased participation by a higher percentage of the Company's ski resort guests. In addition, the favorable demographic drove an increase in private lesson sales versus group lessons as well as increased enrollment in children's ski school programs.

The increase in dining revenue is primarily a result of the addition of eight dining operations with the acquisition of GTLC on June 14, 1999. The re-opening of Two Elk Lodge on Vail Mountain in December 1999, a strong operating season for GTLC, and successful repositioning of one of the Company's fine dining restaurants also contributed to the increased revenues. In addition, a dining joint venture which had previously been accounted for under the equity method is now being fully consolidated due to the Company's increased investment in the joint venture.

Retail/rental revenue increased primarily due to a strong operating season for GTLC and the inclusion of a full fiscal year's results for GTLC compared to only two months in fiscal 1999. The Company's retail/rental outlets operated by SSV also experienced increased revenue over fiscal 1999.

Hospitality revenue increased primarily as a result of a full fiscal year's results included for GTLC and higher occupancy rates at GTLC during the current operating season. In addition, the Great Divide Lodge at Breckenridge saw increased occupancy during fiscal 2000 due to extensive renovations to the hotel in fiscal 1999 and increased conference room nights due to focused sales efforts.

The increase in other revenue is primarily attributable to the estimated net insurance claim from the Company's Reduced Skier Visit Insurance Policy along with the final settlement of the business interruption claim from the Vail fires. Other revenue also increased as a result of the increase in commercial leasing revenue, the inclusion of revenue related to the Internet Service Provider and web site development company purchased in November 1999 and GTLC's revenues for a full fiscal year and an increase in municipal support operations at Beaver Creek and Keystone, licensing and sponsorships, and brokerage operations.

Resort operating expense. Resort operating expense for the year ended July 31, 2000 was $386.0 million, an increase of $39.1 million, or 11.3%, compared to the year ended July 31, 1999. The increase in resort operating expense is commensurate with the increase in revenue over fiscal 1999. In addition, the Company accelerated implementation of marketing and technology strategies for the fiscal 2001 ski season into the fourth quarter of fiscal 2000 and employee benefits expenses rose due to the increasing costs of medical care and management bonuses payable under the Company's long term incentive plan. A portion of the increase can also be attributed to the increased variable expenses associated with the increased level of resort revenue derived from lower-margin non-lift businesses such as dining, retail/rental and hospitality operations. These operations tend to have a greater level of variable operating expenses proportionate to revenues as compared to lift operations. These increases have been partially offset by a successful cost management program that was implemented at all levels of the Company's operations throughout the fiscal year.

Technology net revenue. Technology revenue for fiscal 2000 was $2.0 million. Technology revenue is derived from the operations of the Internet Service Provider and web site development company the Company purchased in November 1999.

Technology operating expense. Technology operating expense for fiscal 2000 was $1.7 million and is attributable to the technology acquisition in November 1999.

Real estate net revenue. Revenue from real estate operations for the year ended July 31, 2000 was $48.7 million, an increase of $11.8 million, or 31.9%, compared to the year ended July 31, 1999. Revenue for fiscal 2000 consisted primarily of the sale of 17 Arrowhead Alpine Club residential condominiums, one residential condominium each in Beaver Creek and Arrowhead Villages, the sale of seven development sites in Bachelor Gulch, the sale of three development sites in Arrowhead, and the sale of one development site in Avon. Real estate revenue for fiscal 1999 consisted primarily of the sale of the Bell Tower Mall, one luxury residential penthouse condominium at the Lodge at Vail, the sale of three development sites at Arrowhead, the sale of two single-family homesites and four multi-family homesites at Bachelor Gulch.

Real estate operating expense. Real estate operating expense for the year ended July 31, 2000 was $42.1 million, an increase of $7.7 million, or 22.3%, compared to the year ended July 31, 1999. Real estate operating expense consisted primarily of the cost of sales and related real estate commissions associated with the real estate sales detailed above for both fiscal 2000 and 1999. Real estate operating expense also includes the selling, general and administrative expenses associated with the Company's real estate operations.

Resort equity investment income. Resort equity investment income increased $0.3 million for fiscal 2000 as compared to fiscal 1999 due to increased brokerage business as a result of the Company's increase in real estate operations noted above.

Real estate equity investment income. Real estate equity investment income decreased $4.0 million in fiscal 2000 as compared to fiscal 1999 due to decreased sales of the Keystone JV as a result of a decline in its available for sale inventory.

Depreciation and amortization. Depreciation and amortization expense increased by $8.2 million, or 15.3%, for the year ended July 31, 2000 as compared to the year ended July 31, 1999. The increase was primarily attributable to an increased fixed asset base due to the acquisition of GTLC and fiscal 2000 capital improvements.

Interest expense. During the years ended July 31, 2000 and 1999 the Company recorded interest expense of $35.2 million and $25.1 million, respectively, relating primarily to the Credit Facility, the Industrial Development Bonds and the senior subordinated debt issued in May 1999. The increase in interest expense for the year ended July 31, 2000 compared to the year ended July 31, 1999 is attributable to the outstanding senior subordinated notes issued in May 1999, partially offset by a reduction in the balance outstanding on the Credit Facility.

The Company has historically provided for operating expenditures, debt service, capital expenditures and acquisitions through a combination of cash flow from operations (including sales of real estate) and short-term and long-term borrowings.

Cash flows used in investing activities have historically consisted of payments for acquisitions, resort capital expenditures, and investments in real estate. Resort capital expenditures for fiscal 2001 were $57.8 million and investments in real estate for that period were $39.2 million. The primary projects included in resort capital expenditures were (i) the expansion of Pete's Bowl in Blue Sky Basin at Vail, including a new high-speed four-passenger chairlift, (ii) implementation of the first phase of an enterprise resource planning system, (iii) a new laundry facility at Keystone, (iv) expansion of the grooming fleet, and (v) upgrades and remodeling at the Village at Breckenridge and Lodge at Vail. The primary projects included in investments in real estate were (i) continued development of the Red Sky Ranch golf community, (ii) construction of the Mountain Thunder Lodge condominium project at Breckenridge, and (iii) investments in developable land and the planning and development of projects in and around each of the Company's resorts.

As of the time of the Original 10-K filing, the Company estimated that it would make resort capital expenditures of approximately $50 million to $60 million during fiscal 2002. The primary projects were anticipated to include (i) construction of a comprehensive 13,000 square foot children's ski school and daycare facility at Breckenridge, (ii) planning and development of the Peak 7 skiway improvements in Breckenridge which includes 165 acres of slopes and trails, power and telecommunications, construction of a patrol hut and the purchase of snowmaking equipment, (iii) expansion and enhancement of grooming and snowmaking equipment at all four ski resorts, (iv) renovation and expansion of employee housing facilities at GTLC, and (v) implementation and improvement of back-office systems. Investments in real estate during fiscal 2002 were expected to total approximately $65 to $75 million. The primary projects were anticipated to include (i) continued development of the Red Sky Ranch residential golf community near Beaver Creek, which will eventually include 87 single-family homesites surrounding two championship 18-hole golf courses, (ii) preparing for the redevelopment of the Lionshead base area and other land holdings located within the Town of Vail, (iii) development of the Breckenridge Master Plan, which was announced in September 2000 and includes the Mountain Thunder Lodge condominium project, (iv) infrastructure development for the Mountain Road project at Arrowhead near Beaver Creek, and (v) additional planning and development projects in and around each of the Company's resorts.

The Company's cash flows used in investing activities also included $19.5 million in cash paid for two hotels and other acquisitions, $7.4 million in loans made to a joint venture, an investment in a technology joint venture, $15.9 million in net distributions from equity-method investments, and $0.5 million cash received from the sale of fixed assets.

During fiscal 2001, the Company used $0.5 million in cash in its financing activities, consisting of $5.9 million in net long-term debt payments, net of $4.3 million in proceeds from the exercise of stock options and $1.1 million from the cancellation of swap agreements. 490,649 employee stock options were exercised at exercise prices ranging from $6.85 to $21.13. Additionally, 8,619 shares of restricted stock were issued to management.

Based on current levels of operations and cash availability, management believes the Company is in a position to satisfy its current working capital, debt service, and capital expenditure requirements for at least the next twelve months.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 was to be effective for all fiscal quarters of fiscal years beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. In July 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133". SFAS No. 137 deferred the effective date of SFAS No. 133 until fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities -- an Amendment of FASB Statement No. 133". SFAS No. 138 addresses a limited number of issues causing difficulties in the implementation of SFAS No. 133 and was required to be adopted concurrently with SFAS No. 133. The Company does not currently engage in significant hedging activities and therefore the adoption of SFAS No. 133 and SFAS No. 138 did not have a material impact on the Company's financial position or results of operations.

The Company adopted Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements", and FASB Emerging Issues Task Force Issue 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent" ("EITF 99-19"), in the fourth quarter of fiscal 2001. SAB 101 provides guidance on the application of existing accounting standards with respect to revenue recognition. EITF 99-19 provides guidance on reporting revenue and related costs of revenue. The adoption of SAB 101 and EITF 99-19 did not have a material impact on the Company's financial position or results of operations.

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities--a Replacement of FASB Statement No. 125". SFAS No. 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, yet carries over the majority of the provisions of FASB Statement No. 125. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Company has not entered into transactions falling under the scope of SFAS No. 140 and therefore its adoption did not have a material impact on its financial position or results of operations.

In June 2001, the FASB issued SFAS No. 141, "Business Combinations". SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations". The major provisions of SFAS No. 141 include (a) the elimination of the pooling-of-interests method of accounting for business combinations, (b) additional criteria for the recognition of intangible assets independent of goodwill, and (c) disclosure of the primary reasons for a business combination and the allocation of the purchase price paid to the assets acquired and liabilities assumed by major balance sheet caption. The majority of the provisions of APB Opinion No. 16 are retained by SFAS No. 141. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets". SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in business combinations) should be accounted for in financial statements upon their acquisition, and also addresses how goodwill and other intangible assets (including those acquired in business combinations) should be accounted for after they have been initially recognized in the financial statements. The major provisions of SFAS No. 142 and differences from APB Opinion No. 17 include (a) no amortization of goodwill and other certain intangible assets with indefinite lives, including excess reorganization value, (b) a more aggregate view of goodwill and accounting for goodwill based on units of the combined entity, (c) a better defined "two-step" approach for testing impairment of goodwill, (d) a better defined process for testing other intangible assets for impairment, and (e) disclosure of additional information related to goodwill and intangible assets. The "two-step" impairment approach to testing goodwill is required to be performed at least annually with the first step involving a screen for potential impairment and the second step measuring the amount of impairment. The provisions of SFAS No. 142 are required to be applied starting with fiscal years after December 15, 2001. Earlier application is permitted for entities with fiscal years beginning after March 15, 2001. The Company adopted the provisions of SFAS No. 142 as of August 1, 2001 and was therefore required to have completed the first "step" of its goodwill impairment testing by the end of its second fiscal quarter of 2002 and the transitional impairment testing of its other intangible assets by the end of its first fiscal quarter of 2002. As a result of the completion of the second "step" of its goodwill impairment testing, the goodwill associated with the Village at Breckenridge was found to be impaired. In addition, pursuant to SFAS No. 142, the Company is no longer amortizing goodwill and its intangible assets that carry indefinite lives, and will therefore not incur approximately $1.9 million per quarter in amortization expense on a prospective basis. Prior to adoption of SFAS No. 142, the Company incurred amortization expense of $9.9 million for the year ended July 31, 2001. If SFAS No. 142 had been applied during the prior periods, net income, as adjusted for the exclusion of amortization expense, would have been $21.2 million for the year ended July 31, 2001. Similarly, basic and diluted EPS, as adjusted for the exclusion of amortization expense, would have been $0.61 for the year ended July 31, 2001. See Note 18, Subsequent Events, of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this report for additional information regarding the Company's adoption of SFAS No. 142.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain obligations of lessees. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company does not currently have any obligations falling under the scope of SFAS No. 143, and therefore does not believe its adoption will have a material impact on its financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", but retains the requirements of SFAS No.121 to (a) recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the asset. SFAS No. 144 removes goodwill from its scope as the impairment of goodwill is addressed prospectively pursuant to SFAS No. 142. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those years. The Company does not expect the adoption of SFAS No. 144 will have a material impact on its financial position or results of operations.

In September of 2001, the Emerging Issues Task Force reached consensus on EITF Issue No. 01-10, "Accounting for the Impact of the Terrorist Attacks of September 11, 2001" ("EITF 01-10"). EITF 01-10 provides accounting and disclosure guidance for losses and costs incurred as a result of the September 11 events, and for related insurance recoveries and federal assistance provided to air carriers in the form of direct compensation. The Company does not believe the provisions of EITF 01-10 will have a material impact on the Company's financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". This Statement rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt", SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers" and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". This statement amends SFAS No. 13, "Accounting for Leases", to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 is generally effective for the Company for fiscal year 2003. The Company does not expect the adoption of SFAS No. 145 will have a significant effect on its results of operations or financial position.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". This statement requires that a liability for a cost that is associated with an exit or disposal activity be recognized when the liability is incurred. It nullifies the guidance of the Emerging Issues Task Force ("EITF") in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in Restructuring)". Under EITF No. 94-3, an entity recognized a liability for an exit cost on the date that the entity committed itself to an exit plan. SFAS No. 146 acknowledges that an entity's commitment to a plan does not, by itself, create a present obligation to other parties that meets the definition of a liability. SFAS No. 146 also establishes that fair value is the objective for the initial measurement of the liability. SFAS No. 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. The Company has not had any exit or disposal activities falling under the scope of SFAS No. 146, and therefore its adoption did not have a material impact on its financial position or results of operations.

The Company purchased a Reduced Skier Visit Insurance Policy, a customized insurance product, for the 1999-2000 ski season. The policy provided for the Company to receive a fixed payment for each paid skier visit below certain targeted levels for the season. The Company settled its claim under the Reduced Skier Visit Insurance Policy in January 2001 for a total of $16.1 million, $15.9 million of which was recorded as revenue in fiscal 2000 and $0.2 million of which was recorded as revenue in fiscal 2001. The entire settlement amount has been collected by the Company.

Although the Company cannot accurately determine the precise effect of inflation on its operations, management does not believe inflation has had a material effect on the results of operations in the last three fiscal years. When the cost of operating resorts increases, the Company generally has been able to pass the increase on to its customers. However, there can be no assurance that increases in labor and other operating costs due to inflation will not have an impact on the Company's future profitability.

Seasonality and Quarterly Results

The Company's ski and resort operations are seasonal in nature. In particular, revenues and profits at the Company's ski resorts are substantially lower and historically result in losses in the summer months due to the closure of its ski operations. SRL&S, while open year-round, generates the majority of its revenues during the winter season. Conversely, GTLC's peak operating season occurs during the summer months while the winter season generally results in operating losses due to closure of all revenue generating operations. However, revenues and profits generated by GTLC's summer operations are not sufficient to fully offset the Company's off-season losses from its ski resorts. During the 2001 fiscal year, 76.2% of total resort revenues were earned during the second and third fiscal quarters. Quarterly results may be materially affected by the timing of snowfall and the integration of acquisitions. Therefore, the operating results for any three-month period are not necessarily indicative of the results that may be achieved for any subsequent fiscal quarter or for a full fiscal year. The Company is taking steps to smooth its earnings cycle by investing in additional summer activities, such as golf course development, and also through the acquisition of new resorts, such as GTLC. (See Note 14 of the Notes to Consolidated Financial Statements for Selected Quarterly Financial Data).

Skiing and tourism are discretionary recreational activities that can be impacted by a significant economic slowdown, which, in turn, could impact the Company's operating results. Although historically economic downturns have not had an adverse impact on the Company's operating results, there can be no assurance that a decrease in the amount of discretionary spending by the public in the future would not have an adverse effect on the Company.

The ski industry's ability to attract visitors to its resorts is influenced by weather conditions and the amount and timing of snowfall during the ski season. Unfavorable weather conditions can adversely affect skier visits. In the past 20 years the Company's ski resorts have averaged between 20 and 30 feet of annual snowfall, significantly in excess of the average for U.S. ski resorts. However, there is no assurance that the Company's resorts will receive seasonal snowfalls near the historical average in the upcoming or future seasons. Also, the early season snow conditions and skier perceptions of early season snow conditions influence the momentum and success of the overall season. The Company believes that poor snow conditions early in the ski season during the 1998/99 and 1999/2000 ski seasons had an adverse effect on operating results for those periods. There is no way for the Company to predict future weather patterns or the impact that weather patterns may have on results of operations or visitation.

The Company's resort operations are largely dependent on a seasonal workforce. The Company recruits worldwide to fill staffing needs each season, and utilizes H2B visas to enable the use of foreign workers. In addition, the Company manages seasonal wages and timing of the hiring process to ensure the appropriate workforce is in place. While the Company does not currently foresee the need to increase seasonal wages to attract employees, it cannot guarantee that such an increase would not be necessary in the future. In addition, the Company cannot guarantee that it will be able to obtain the visas necessary to hire foreign workers, who are an important source for the seasonal workforce. Increased seasonal wages or an inadequate workforce could have an adverse impact on the Company's results of operations; however, the Company is unable to predict with any certainty whether such situations will arise or the potential impact to results of operations.

The terrorist acts carried out against the United States on September 11, 2001 have had an adverse effect on the global travel and leisure industry. The Company cannot guarantee if or when normal travel and vacation patterns will resume. In addition, additional terrorist acts against the United States and the declaration of war by the United States could result in further degradation of discretionary travel upon which the Company's operations are highly dependent. Such degradation could have a material adverse impact on the Company's results of operations.

* As Restated. See Note 2 to the Consolidated Financial Statements.

To the Shareholders and Board of Directors of

Vail Resorts, Inc.:

As discussed in Note 2 to the accompanying consolidated financial statements, the Company has restated its financial statements for the years ended July 31, 2001, 2000, and 1999.

Denver, Colorado

October 21, 2002

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

Vail Resorts, Inc. ("Vail Resorts") is organized as a holding company and operates through various subsidiaries. The Company operates in three business segments: Resort, Real Estate, and Technology. The Vail Corporation (d/b/a Vail Associates, Inc.), an indirect wholly owned subsidiary of Vail Resorts, and its subsidiaries (collectively, "Vail Associates") operate four world-class skiing facilities on Vail, Breckenridge, Keystone and Beaver Creek mountains in Colorado. In addition to the ski resorts, Vail Associates owns GTLC, which operates three resorts within Grand Teton National Park (under a National Park Service concessionaire contract) and the Jackson Hole Golf & Tennis Club in Wyoming. The Company also owns a 51% interest in SRL&S located near Jackson, Wyoming. Vail Resorts Development Company ("VRDC"), a wholly owned subsidiary of Vail Associates, conducts the operations of the Company's Real Estate segment. The Technology segment is engaged in the development and sale of technology-based products and services for the hospitality and resort industries, and includes the operations of Resort Technology Partners, LLC ("RTP"), a 51%-owned joint venture, and Lowther Ltd., a 49%-owned equity-method investee. The Company's resort businesses are seasonal in nature. The Company's ski resort businesses and related amenities typically have operating seasons from late October through late April; the Company's operations at GTLC generally run from mid-May through mid-October. SRL&S operates year-round.

In these restated consolidated financial statements, the Company revised its accounting for recognizing revenue on initiation fees related to the sale of memberships in private member clubs. Under the new accounting method, the Company will recognize the initiation fee as revenue over the life of the club facilities, which the Company has currently estimated to be 30 years. For clubs under construction, recognition does not commence until the club is ready for use by the members. The Company had previously announced that it would recognize the initiation fee as revenue over 12 years, which is the period over which the club member who has made such payment is expected to remain a member in the club. However, after further analysis of the issue and after seeking the guidance of and having discussions with the SEC accounting staff, the Company decided to recognize the initiation fee over the estimated life of the club, assumed to be the depreciable life of the club facilities. Historically, the Company had recognized the revenue from the initiation fee immediately or upon the completion of certain milestones, whichever was later.