MAD RIVER GLEN COOPERATIVE

BOARD OF TRUSTEES

MINUTES OF MEETING Ð Final

May 15, 2004

 

 

After due notice, a meeting of the board of trustees of the Mad River Glen Cooperative was convened at 8:05 AM on May 15, 2004 on the 3^rd floor of the Basebox at Mad River Glen Ski Area in Fayston, Vermont.

 

Trustees Alan Moats (Board Chair), Jay Appleton, Paul Finnerty, Bill Reynolds, Mary Schramke, Rick Moulton, and Jed Kalkstein were present. Leigh Michl participated via teleconference. Deb Steines was absent. Also present were President Jamey Wimble, Eric Friedman, and Sharon Crawford as well as several shareholders.

 

CALL TO ORDER:

Board Chair Alan Moats called the meeting to order at 8:05 AM.

 

APPROVAL OF APRIL MINUTES

Upon motion duly made by Jay Appleton and seconded by Bill Reynolds, it was unanimously

 

VOTED:                  To accept the minutes of the April 10, 2004 board of trustee meeting.

 

SHAREHOLDER COMMENTS

There were no shareholder comments.

 

MANAGEMENT REPORT

Jamey mentioned that we received a 100% grade for timely reporting of ski reports. There were clarifying questions regarding potential usage of biodeisel. Jamey clarified that 20% biodeisel appeared workable, but still had a significant price differential. Alan commented that the actual environmental benefit of the 20% biodeisel was suspect. Higher percentages of biodeisel were still not workable.

 

There were several clarifying questions about a proposed partnership with EMS. It was reported by Eric that commercialism would not be rampant. Regarding the previously discussed homeowner easement request, it did not appear that their septic was tied into the Co-op septic. It was also clarified that the homeowner would bear the Co-op costs for the easement.

 

Work was progressing on hiring new Co-op counsel through a sub-Committee of the Board.

 

FINANCIAL REPORT

There were no questions on the financial statements.

 

REVIEW OF PROPOSED BUDGET

Jamey reported that the board and finance committee had discussed the proposed budget more than on any other budget in Co-op history. Jamey made a PowerPoint presentation (see attached).

 

He covered major assumptions and their consistency with the Strategic Plan. The plan called for $2.39 million of revenue, net operating income of $214, which is in line with long-range financial plan targets. As in prior years, we had major ($47K) increase in uncontrollable expenses (health care, workers comp, and insurance). A 3% increase in salaries resulted in a $27K increase in expenses, ski school wages up with corresponding higher revenue, and marketing had been reduced from a high of over $200K two years ago to a proposed $168K, with a focus on skier retention. Basebox expenses are significantly higher than last yearÕs budget because of a prior year budgeting error, but is in line with last yearÕs actuals.

 

He noted that the second family pass discount for shareholders and passholders was eliminated. Instead, there would be a flat 15% discount on shareholder ticket prices, passes and tickets. $50 ticket at all times. Several scenarios of day ticket pricing were discussed. At the $50 price, we are in the middle of the State, compared to other ski areasÕ prior year prices. It can be expected that we will be very affordable relative to other ski areasÕ current year prices. Jamey reviewed the proposed 10% pass price increase for the Full and Value Passes, no change to the midweek pass, and establishing a student pass of $200, which would replace the teen pass and college pass. The Mad Card will still be $99, representing a $33 ticket, providing very affordable skiing. It also represents the highest yielding ticket, because of unredeemed vouchers of approximately $55K. Mad Cards must be purchased before December 15^th. Individuals can purchase multiple Mad Cards and they are transferable.

 

Rick Moulton felt that there was a history of providing Vermont skiers with affordable skiing. Mary felt that tiered pricing for skiers based on their state was no longer legal, Leigh Michl found the notion that Vermont skiers were more desirable than those from out-of-state to be problematic. Mary asked why the midweek pass couldnÕt be cheaper. Jamey reported that they topic had been discussed and they found that we are still among the cheapest midweek. Further, the vast majority of promotions are midweek, as weekend volume increases are not desirable at this point. Eric outlined the promotional/value pricing strategy. He stated that discounts were very targeted, not blanketed. For instance, midweek January tickets would be aggressively priced, particularly midweek lodging/ski packages. A number of coupons would be readily available on the web site. He also reiterated the value of the Mad Card.

 

Jamey also clarified for Mary that operational expenses are largely fixed so that expenses were the same if there were 10 skiers or a thousand. It was also pointed out that higher ski school expenses and Basebox expenses corresponded to higher revenues from those departments.

 

Marketing expenses were discussed. They were declining and largely comprised of salaries. There was almost no advertising. Some expenses were also tied to marketing revenues. Andrew pointed out the effectiveness of our web site in gathering email addresses and offering email discounts at very low cost.

 

Paul asked about various budget vs. prior year actual differences. For instance, credit cards expenses would increase and decrease with revenue. With respect to Co-op expenses, Jamey pointed out that certain programs were put back in the budget and that actual Co-op expenses were more accurately captured.

 

Alan commented that the pricing model did not factor price elasticity into the day ticket projections and that the projected net operating profit assumed that there would be no decline in day ticket sales with a $50 ticket. Leigh mentioned that he did not mind a loss in skier days because of weekend overcrowding (at the expense of passholders, shareholders). Further, he did not see the logic in cheap tickets if we attracted skiers who waited in long lines and did not want to come back. Mary was in favor of a $51 or $52 ticket. Jamey noted that some potential skiers equate a low ticket price to a second rate ski area. Midweek volume was discussed further. Midweek skier days were declining everywhere, but it was not known whether this was owing to ticket prices or other factors. Indications were that the decline is not related to price.

 

There was a discussion yield (average revenue per skier day). Paul commented that everyday low prices versus discounting would be desirable to him. Jamey was cautious about this. On the one hand, we may be unique enough to pull it off. On the other hand, the discount philosophy was ingrained in many skiersÕ psyche. Jed commented that he was most concerned about weekend yield, when he did not see the benefit of discounting. Weekend yield was affected by marketing trades (advertising in Backcountry magazine), VSAA contractual comp tickets, and employee comp tickets. There were comments that crowded Saturdays may be the result of passholders. But no data exists to prove or disprove that theory.

 

Alan clarified listserve questions regarding Òmaximizing revenuesÓ. He pointed out that the necessary early marketing philosophy of the Co-op was to Òmaximize skier daysÓ. Now that we have achieved the appropriate level of skier days (perhaps even overcrowded at times), we needed to increase revenue per skier day rather than continuing to increase skier days to stay on our mission of being sustainable. Therefore, Alan commented that the Òmaximizing revenueÓ comment was not a departure from the character of Mad River, but was consistent in that it built sustainability and that we recognize that the level of skier days is approaching a maximum. Jed and Leigh discussed the fact that, although we are sustainable at an operating level, it is not yet clear that we are at a sustainable level when you factor in needed capital expenditures, including most immediately the Single Chair. Mary also commented that we had a need to build a cushion for disastrous winters. Alan mentioned that our model was to be sustainable in operations, not through a combination of lower prices and lower operating profits and separate fundraising capital campaigns from shareholders. This is in the Strategic Plan.

 

Several trustees (Rick, Mary, and Jay) expressed a desire to see a $51 day ticket and a 5% pass increase. Management felt that this was risky. Our passes would be such a compelling value that there would be so many more passes that our revenues would not be sufficient if there was a good snow year. Andrew pointed out that the early Co-op pass had a 17 day payback and the payback was only 14 days in the proposed budget. Jamey was also concerned about a pricing strategy where there were all passholders and we were no new skiers introduced to the mountain. It was noted that 70% of shareholders purchase season passes

 

The floor was opened to shareholder comments. Deri Meier is against the $50 ticket and felt that it was not justified financially. He wanted to see a target operating income of $190K (versus over $200K), attention to expense reductions and noted that skier days were perhaps overly conservative in the budget. He wanted to see a further increase in pass prices because they had been increased so much less than day tickets over the history of the Co-op. He felt that pass prices are now too attractive.

 

Rick felt comfortable with pass pricing being cheaper because we did not have snowmaking, making a pass purchase more risky. Paul felt that skiers who come only when the snow is good should pay a premium. Jay stated that he viewed the situation opposite from Deri. We offer a premium ski experience, and day ticket prices should reflect that. A higher day ticket price may help reduce weekend lift lines on powder days. Conversely affordable season passes benefit shareholders and the local community, and we must keep an eye on the competition. Smugglers and Jay offer sub-$300 full season passes if purchased in the spring. We are attracting new skiers in droves with the 12 and under program Ð a great success Ð and now we are crowded. Alan felt that if we did want to increase pass prices further (as suggested by Deri), it should be done more gradually. Eric was concerned about pass prices in general. He noted some real bargains being offered by competing areas. Jamey stated he was reluctant to tinker with the sales model. He wants to base skier days on 9 years of history, rather than assuming historic growth would continue.

 

Some shareholders expressed a desire to see other combinations of varying midweek, weekend, and seasons passes. Shawn Kalkstein commented that the doubling in day ticket prices over the history of the Co-op was not necessarily relevant given the extremely low initial prices. Jed expressed a desire to pursue the budget as a test and pointed out that future adjustments were possible, as it was possible to adjust midstream with coupons.

 

Jed commented that the budget proposal was recommended by the Finance Committee. The idea of a smaller pass increase and a larger day ticket increase was discussed further. Jed commented that the breakeven was already so low (14 days) that we should not go lower. Leigh commented that a lower pass increase and a higher day ticket increase would drive more passes and cap our upside in a great winter. He further commented that we needed winters with $300K operating profit to offset very bad snow years. If there were too many passholders, our upside would be capped.

 

Rick made a motion and Mary seconded to increase pass prices by 5% (full pass), value pass by 10%, a $51 day ticket on weekends. Bill offered an amendment of a $48 day ticket midweek.

 

Regarding the amendment, Jed and Leigh commented that the management recommendation was diligently studied and the above proposal would be a wild guess by the trustees. Eric and Jamey commented that there would be additional SKUs, complicating our recordkeeping and slowing our ticket purchase lines. Mary expressed a deep concern about the $60 increase (10%) in pass prices. The amendment was withdrawn.

 

Another amendment was discussed whereby full passes and value passes would be increased by only 5%. Management had mixed reactions but did not strenuously oppose the amendment. Budgeted operating income would then be about $200K.

 

Upon motion duly made by Rick Moulton and seconded by Mary Schramke, it was

 

VOTED:                  To approve the budget proposed by management, with a 5% full and value pass price increase as opposed to a 10% increase.

.

The amended motion passed by a vote of seven in favor and one against. Alan Moats voted against the amendment.

 

ASSIGNMENT OF COMMITTEE CHAIRS

Mr. Moats presented the following slate of Committee Chairs:

Personnel:                 Alan Moats

Finance:                       Jed Kalkstein

Facilities:                   Jay Appleton

Election:                      Paul Finnerty

Board Dev.:            Deb Steines

20^th Hole:                   Alan Moats

SRC:                                Rick Moulton

 

 

SHAREHOLDER COMMENTS

Shawn Kalkstein asked if the board had developed a list of criteria for new Co-op counsel. Alan reported that this had been done.

 

EXECUTIVE SESSION:

The board entered executive session at 11:40 AM to discuss personnel matters. .

 

ADJOURNMENT

There was no action from the Executive Session and, there being no further business to come before the board, the meeting adjourned at 12:40 PM.

 

Respectfully submitted, Leigh Michl

 

A true record.

 

 

ATTEST: __________________________________________

             Leigh Michl, Secretary

 

Attachments

1. a.          Management Report
2. b.          Financial Report
3. c.          Budget Slides

 

Mad River Glen

Management Report

May 15, 2004

 

Operations:

 

The main office building was broke into a couple of days after we closed. A cash bank of $200 was stolen. Nothing else was touched. The police still have no suspects at this time.

 

Insurance premiums for this year are in. Our General Liability has finally stabilized a little. An 11% increase. However health and workmanÕs comp continue to have large premium hikes. Both over 20%.

 

Summer maintenance is in full swing. Nate will be out of the picture for 4 weeks. He is having a section of his intestine taking out that has been leaking. He should be fine.

 

We will be looking for a new coop lawyer and someone to replace Andrew. We have had inquiries about both positions.

 

I have signed a ROW and septic easement with Tim Crowley for the Heming house. In short, we are liable for nothing, they are liable for everything.

 

We are testing about 55 gallons of Bio Diesel. The biggest problem I have seen is a 20% cost increase. I have approached David Dillon at VSAA to go to the legislature to see if we could get some state funding to absorb the cost.

 

We are working on a corporate relationship with EMS. This could turn out to be a great thing for us.

 

Share Sales:        

 

We sold 0 shares against a budget of 3 for the month of April. 35 shares have been sold YTD against a budget of 36. 21 shares have been tendered YTD. We have proposed some pricing structure changes in the 04-05 budget that we hope will help share sales.

 

Financials:

 

April is off on revenue and expense do to early closing. YTD numbers are ok. Projected net op income is $178,000. Cash position remains strong at 698,000. $225,000 is the Single reserve.

 

 

 

 

 

April Financial Statement

 

 

 

Year To Date