Cedar Fair announces mid-year results, record pass sales, quarterly loss

Posted | Contributed by Jeff

From the press release:

Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today announced results for its second quarter ended June 27, 2021.

“With all parks now open, guests are enjoying another FUN-filled season at our parks and we are seeing strong demand across our portfolio of properties,” said Cedar Fair President and CEO Richard A. Zimmerman. “Our team did an excellent job of managing through early-season headwinds, allowing us to return most park operations to full capacity without the need for guests to make reservations. We also took decisive actions to mitigate the effects of labor shortages, attracting thousands of seasonal associates to bridge the gap in our workforce and allowing us to resume more normal operating schedules at most of our parks. As park restrictions have been relaxed and capacity expanded, attendance is now approaching 2019 levels, particularly on our busiest days. Our ability to drive historical levels of attendance across our parks so quickly following a generational business disruption, while effectively adjusting our operations to meet changing consumer preferences, reconfirms our confidence in the overall strength and integrity of our business model.”

Zimmerman added, “We are seeing strong consumer confidence across our markets, creating a tailwind in terms of guest purchasing power and enabling us to build momentum as we approach our busiest period of the year. Guest spending started off strong this year and has continued to increase in recent weeks, similar to the trends we saw at parks that reopened during 2020. Our business intelligence team has done an outstanding job of dynamically pricing into the robust demand environment both at the gate and within the parks, and we continue to offer additional opportunities for guests to enhance their experience with each visit. Together, all of these initiatives have successfully pushed in-park per capita spending to record levels through July.”

Second Quarter 2021 Results

Given the effects of the coronavirus pandemic on park operations in both 2021 and 2020, results for the second quarter and six-month periods are not directly comparable. This year, all Cedar Fair parks opened for the season on various dates in May except for Canada’s Wonderland, which remained closed through the entire first half of the year due to local COVID-19 restrictions and reopened for the first time on July 5, 2021. Last year, full park operations of Knott’s Berry Farm, as well as abbreviated operations of the two Schlitterbahn water parks, had begun prior to the suspension of all park operations on March 14, 2020.

In 2021, operating days in the second quarter totaled 393, excluding the culinary festival at Knott’s Berry Farm. This compared to 39 total operating days in the second quarter of 2020. For the six-month period, the Company had 393 total operating days in 2021 compared to 129 operating days in 2020.

For the second quarter ended June 27, 2021, net revenues totaled $224 million versus $7 million for the second quarter of 2020. The increase in net revenues was attributable to a 354-operating-day increase in the period, resulting in a 3.4 million-visit increase in attendance. Meanwhile, in-park per capita spending in the quarter totaled $55.94, representing high levels of guest spending across all key revenue categories, and out-of-park revenues increased $35 million due to the earlier opening of the parks, as well as the revenue contribution of the Knott’s Berry Farm culinary festival in the current period.

Operating costs and expenses in the quarter totaled $227 million, compared with $93 million for the second quarter of 2020. The $134 million increase in operating costs and expenses was due primarily to an increase of 354 operating days in the current-year period versus the same period last year. Depreciation and amortization expense, which is spread over planned operating days, was $34 million in the second quarter versus $55 million for the 2020 second quarter due to fewer planned operating days in the current period. Including the items noted above, the Company’s operating loss for the second quarter totaled $38 million, compared with an operating loss of $142 million for the second quarter of 2020.

Interest expense for the second quarter totaled $46 million, up $9 million from $37 million in the second quarter of 2020, due to incremental interest incurred on the Company’s 2025 senior secured notes issued in April 2020 and its 2028 senior unsecured notes issued in October 2020. The net effect of the Company’s swaps resulted in a $4 million benefit to earnings during the second quarter of 2021, compared with a $2 million charge to earnings in the same period a year ago. The difference reflects the change in fair market value movement in the Company’s swap portfolio. During the second quarter, the Company also recognized an $11 million net benefit to earnings for foreign currency gains and losses related to its U.S.-dollar denominated Canadian notes, compared with a $13 million net benefit to earnings for the second quarter of 2020.

In the second quarter of 2021, a benefit for taxes of $11 million was recorded to account for publicly traded partnership taxes and federal, state, local and foreign income taxes, compared to a benefit for taxes of $37 million in the second quarter of 2020. The decrease in benefit for taxes was attributable to the larger prior-period pretax loss from the Company’s corporate subsidiaries, as well as benefits from the Coronavirus Aid, Relief, and Economic Security Act.

After the items above, the Company reported a second quarter net loss of $59 million, or $1.04 per diluted LP unit. This compares to a second quarter 2020 net loss of $133 million, or $2.35 per diluted LP unit.

Adjusted EBITDA, which management believes is a meaningful measure of the Company’s park-level operating results, increased 102%, or $86 million, to $2 million for the 2021 second quarter, compared with an Adjusted EBITDA loss of $85 million in the second quarter of 2020. The $86 million increase in Adjusted EBITDA reflects the impact of COVID-19-related park closures in 2020, and the related improvement in attendance, per capita spending, and out-of-park revenues from the reopening parks in 2021.

Results of Second Quarter 2021 Compared to Second Quarter 2019

As previously noted, given the effects of the coronavirus pandemic and suspension of park operations during the summer of 2020, results for the second quarters of 2021 and 2020 are not directly comparable. Due to the postponed opening of our parks for the 2021 operating season until May 2021, the results for the second quarters of 2021 and 2019 are also not directly comparable. The parks had 393 of total operating days in second quarter of 2021 compared with 726 total operating days in the second quarter of 2019.

To provide more informative comparisons, the following information compares results for the second quarter of 2021 versus the second quarter of 2019, and also includes comparisons on a comparable same-day basis for attendance and in-park per capita spending .

With abbreviated operating calendars and 333 fewer operating days in the current period, attendance for the second quarter of 2021 decreased 60% compared with attendance for the second quarter of 2019. On a comparable same-day basis, attendance for the second quarter of 2021 represented approximately 70% of 2019 levels, driven by general admission and season pass attendance, offset in part by an expected slower recovery in the group sales channel and capacity limitations in the early going. In-park per capita spending for the second quarter of 2021 increased 18% compared with in-park per capita spending for the second quarter of 2019. On a comparable same-day basis, in-park per capita spending for the second quarter of 2021 represented approximately 115% of 2019 spending levels, with the improvement driven by increases in guest spending across all key revenue categories. Meanwhile, out-of-park revenues in the quarter represented approximately 80% of out-of-park revenues for the second quarter of 2019. The decrease in out-of-park revenues was directly attributable to the delayed opening of our parks in 2021, which was somewhat offset by revenues from the very successful Knott’s Berry Farm culinary festival in the current period. All three key performance metrics increased from the initial reopening of our parks in May 2021 through the end of the second quarter of 2021.

July 2021 Update

Including the results from Canada’s Wonderland since its opening on July 5, 2021, preliminary net revenues for the seven-month period ended August 1, 2021, totaled $587 million. Over the same period, attendance totaled 8.6 million visits, in-park per capita spending was $59.57, and out-of-park revenues totaled $91 million.

Given the effects of the coronavirus pandemic and suspension of park operations during the summer of 2020, results for the July 2021 and July 2020 periods are not directly comparable. To provide more informative comparisons, the following information reflects results for the 5-week periods of June 28 through Aug. 1, 2021, versus July 1 through Aug. 4, 2019. The parks had 471 of total operating days in July 2021 compared to 525 total operating days in July 2019.

For the 5-week period ended Aug. 1, 2021, attendance totaled 5.2 million visits, a 23% decrease compared with the 5-week period ended Aug. 4, 2019. Attendance for the current 5-week period represented approximately 85% of comparable same-day 2019 attendance levels (3). Since the Company opened its parks beginning in May 2021, monthly attendance levels as a percentage of comparable same-day 2019 levels have steadily improved as mandated capacity limitations have been lifted and as the parks have expanded their capacity and removed reservation requirements. Excluding Canada’s Wonderland, which remained under capacity limitations in July, total attendance for the current 5-week period at the balance of the parks represented approximately 90% of comparable same-day 2019 attendance levels. In-park per capita spending was $61.93 for the five weeks ended Aug. 1, 2021, or roughly 120% of results for the five weeks ended Aug. 4, 2019, which was the result of increases in guest spending in all key revenue categories. Out-of-park revenue for the five weeks ended Aug. 1, 2021, was comparable to the results for the five weeks ended Aug. 4, 2019.

Balance Sheet and Liquidity Update

Deferred revenues as of June 27, 2021, totaled $292 million, representing an increase of $86 million, or 42%, compared with deferred revenues as of March 28, 2021. The increase in deferred revenues was driven by the strong sales of single-day tickets, season passes and other all-season products during the quarter, as well as improving booking trends at the Company’s resort properties. Of the $292 million of total deferred revenues outstanding at June 27, 2021, approximately $30 million is projected to be recognized as revenue in 2022, due to use privileges of 2021 season passes at Knott’s Berry Farm and Canada’s Wonderland being extended into next year.

At the end of July, the Company had approximately 2.9 million season passes outstanding and valid through the 2021 season, or longer at Knott’s Berry Farm and Canada’s Wonderland, with sales of season passes since the end of the first quarter exceeding more than 1 million units.

As of June 27, 2021, the Company had cash on hand of $293 million and $359 million available under its revolving credit facility, net of $16 million of letters of credit, for total liquidity of $652 million. This compares to $631 million of total liquidity at the end of the first quarter. The Company's $21 million of positive cash flow in the second quarter benefited from strong 2021 season pass sales, the earlier reopening of several parks, and higher-than-expected attendance and guest spending levels during the period.

Business Optimization Program

Cedar Fair commenced its Business Optimization Program earlier this year with the goal of improving the guest experience, producing sustainable cost savings, and creating incremental value for unitholders. Under the program, the Company is strengthening functional areas of responsibility, establishing new and more effective ways of doing business, and innovating by embracing new, user-friendly technologies to create efficiencies and more clearly communicate with guests and other stakeholders.

As previously communicated, the Company expects its optimization efforts to generate an incremental $50 million in annual run-rate benefit over the next two to three years once fully executed and the business has returned to historical attendance levels under normal operating conditions.

“While change can be challenging, our team is united in its commitment to implementing our business optimization initiatives to improve the way we do business and ensure we continue to meet and exceed the expectations of our guests and associates,” said Zimmerman. “We have remained flexible and continue to modify our plans to mitigate unanticipated headwinds that challenge some of our cost-saving assumptions, including pressure on seasonal labor wages and costs of goods sold, by identifying additional efficiency opportunities in areas like centralized procurement and business intelligence. We remain confident in our ability to achieve the program’s target of $50 million of annual run-rate benefit and position Cedar Fair to drive sustainable growth and value creation.”

Read the entire press release from Cedar Fair.