Cedar Fair attendance up, loss narrows, on first half results

Posted Tuesday, August 3, 2010 12:37 PM | Contributed by Jeff

[Ed. note: The following is an unedited, though partial, press release. -J]

Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today announced results for the second quarter ended June 27, 2010, and provided attendance and revenue trends through July.

Cedar Fair generated net revenues of $275.6 million in the second quarter of 2010 and a net loss of $4.2 million, or $0.08 per diluted limited partner unit. For the same period last year, the Company reported net revenues of $264.1 million and net income of $7.4 million, or $0.13 per diluted limited partner unit. The net loss in the 2010 second quarter is attributable to one-time merger and financing related costs of $9.0 million. Excluding these costs, the Company would have reported net income of $4.8 million, or $0.09 per diluted limited partner unit for the 2010 second quarter.

Net revenues for the fiscal six months ended June 27, 2010, which included 40 fewer operating days compared with 2009, were $302.9 million and the net loss for the period was $44.1 million, or $0.80 per diluted limited partner unit. This compares with net revenues of $290.6 million and a net loss of $45.9 million, or $0.83 per diluted limited partner unit, for the six months ended June 28, 2009. The difference in operating days was primarily the result of Memorial Day falling a week later in 2010, which resulted in several of the Company's parks opening later when compared with 2009.

Adjusted EBITDA, which management believes is a meaningful measure of the Company's park-level operating results, decreased $5.6 million to $26.5 million for the six months ended June 27, 2010, compared with $32.1 million during the same period last year. The decline in adjusted EBITDA is entirely attributable to $12.8 million in incremental cash costs associated with the terminated merger and legal and other costs incurred with the Company's recent financing efforts. Excluding these merger and financing costs, adjusted EBITDA would have totaled $39.3 million, up more than 20% from 2009 as a result of increases in both attendance and revenues during the first six months of 2010. See the attached table for a reconciliation of adjusted EBITDA to net income (loss).

"We are pleased with our operating performance through the first half of the year," said Dick Kinzel, Cedar Fair's chairman, president and chief executive officer. "Through the end of the second quarter, our parks have already entertained 7.1 million visitors, which is an increase of 7% – or approximately 477,000 more visitors – than this time last year." For the first six months of 2010, average in-park spending decreased to $38.50 from $39.50 and out-of-park revenues increased to $37.6 million compared with $36.6 million through the second quarter of 2009.

"We have seen an increase in season-pass visits, particularly in the western and southern regions," added Kinzel. "Season-pass attendance during this time was up when compared with the same period a year ago. Our strategy of continuously reinvesting in our parks – including new roller coasters at Kings Dominion and Carowinds – coupled with an aggressive marketing and pricing strategy, has worked thus far to help drive increased season pass sales in these regions. In addition, attendance through the first six months of 2010 benefited from a modest increase in early-season group sales as many of our parks saw the return of some group bookings that did not occur in 2009."

For the first six months, excluding depreciation, amortization and other non-cash expenses, cash operating costs and expenses increased $17.9 million, to $276.4 million for the period ended June 27, 2010 versus $258.5 million for the period ended June 28, 2009. This increase was largely attributable to $10.3 million of costs incurred in connection with the terminated merger and $2.5 million of legal and other costs incurred with efforts to refinance debt. After depreciation, amortization and all other non-cash costs, operating loss for the first six months was $22.8 million in 2010 compared with an operating loss of $15.6 million in 2009.

Interest expense increased $2.6 million, or 4%, to $62.4 million, compared with $59.8 million in 2009, as a result of higher interest-rate spreads on the $900 million of term debt that was extended in August 2009 for a period of two years. Lower interest rates on $300 million of term debt, which resulted from the expiration of certain fixed-rate interest rate swaps in July 2009, slightly offset this increase. A tax benefit of $50.6 million was recorded to account for publicly traded partnership taxes and the tax attributes of the Company's corporate subsidiaries during the first half of 2010, compared with a tax benefit of $29.3 million in the same period a year ago.

After interest expense, tax benefit and a $9.6 million non-cash charge to income for the net effect of swaps, the net loss for the first six months of 2010 totaled $44.1 million, or $0.80 per diluted limited partner unit, compared with a net loss of $45.9 million, or $0.83 per unit in 2009. Excluding $12.8 million in merger and financing related costs, the Company's 2010 first-half net loss would have totaled $31.3 million, or $0.57 per diluted limited partner unit.

Positive Impact from July Operations Based on preliminary July results, revenues for the first seven months of the year were approximately $587 million compared with $563 million for the same period a year ago. This is a result of an increase in attendance to 13.4 million visitors compared with 12.6 million in 2009, a decrease of 2% in average in-park guest per capita spending to approximately $39.02, and an increase in out-of-park revenues of $3 million to approximately $64 million, primarily due to increases in hotel occupancy.

Over the past five weeks, revenues were up 4%, or approximately $11 million. This increase was largely due to a 5%, or 275,000-visit, increase in attendance, and an approximately $2 million increase in out-of-park revenues. Over the same five-week period, average in-park guest per capita spending was down 1%.

"The positive momentum we have created for the Company clearly is continuing as we enter into the second-half of the fiscal year," added Kinzel. "In July, we continued to see strength in our season pass and group sales across the majority of our parks. We have also benefited from favorable weather trends when compared with the same period last year."

Cash and Liquidity

Peter Crage, corporate vice president finance and chief financial officer, said, "In terms of both liquidity and cash flow, we are comfortable with where we ended the second quarter of 2010." As of June 27, 2010, the Company had $1.5 billion of variable-rate debt and $197.0 million in borrowings under its revolving credit facilities. Crage also noted that credit facilities and cash flow from operations are expected to be sufficient to meet working capital needs, debt service and planned capital expenditures for the foreseeable future.

"As recently announced, we have completed the refinancing of our debt with new senior secured and revolving credit facilities, along with new senior unsecured notes. This new debt structure will provide us with the financial flexibility we need to pursue our strategy of continued re-investment in our parks and debt reduction, as well as distributions at an appropriate time in the future," added Crage.

Outlook

"With approximately 45% of our budgeted attendance still ahead of us, we are hopeful that we can continue the positive momentum we experienced during the first seven months of the year, into the next peak vacation month of August and the important fall season. At this time, based on preliminary results through July, we are reaffirming our full-year guidance of net revenues increasing between 3% and 5% and full-year adjusted EBITDA, excluding one-time costs, between $320 million and $340 million," concluded Kinzel.

Read the entire release from Cedar Fair.

Tuesday, August 3, 2010 4:57 PM

Attendence up...wait for it...per caps down! What a wonderful trend!

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Tuesday, August 3, 2010 9:35 PM

Ya well It's the norm in an economy like this.

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Tuesday, August 3, 2010 9:38 PM

Not really sure about the rest of the chain, but at Cedar Point, they've been discounting admission more aggressively than I ever remember in the past. They probably should have done more of that last year. They should still take a look at some of the insulting prices inside the park I think.


-Matt

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Wednesday, August 4, 2010 8:02 AM

MRC..the problem is that the "attendance down, per cap up" was a trend before Kinzel had the economy to blame.

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Wednesday, August 4, 2010 10:49 AM
LostKause's avatar

That's their deal though, MDOmnis. Lure the customers inside with a cheap gate price, then gouge once they are inside.

I say it should be the opposite. Charge more to get inside, then offer reasonable prices for the extras. You only pay once to get in, but being gouged all day makes for a less satisfying day.

But it could be turned around... Cheaper gate prices do get more people inside, so that they can be gouged. The more people, the more money.

Now I don't know which is better. :p


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Wednesday, August 4, 2010 11:27 AM
rollergator's avatar

Universal (pre-Potter) had managed to pull off the reverse...attendance down, per-caps up. Clearly it can't just be "the economy", there's something to be said about the effect of business decisions...

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Wednesday, August 4, 2010 5:15 PM

I don't disagree that they should do the opposite. To be honest, the admission price for what CP has in terms of rides is very fair and maybe even too cheap when you compare it to other parks or shows or pro sports. Same goes for their season pass offerings, not that I want to see them raised. The price/quality on things like food and merch once you're through the gate leaves a lot to be desired.


-Matt

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Wednesday, August 4, 2010 7:15 PM

That's where they could do one of those counter-intuitive things where reducing prices results in a higher per-cap.

It's been clear to me that Kings Island and Cedar Point have both been experiencing higher attendance this season; this report more or less confirms what I have suspected all season. And it's a good trend to see; I hope it keeps up. I think it indicates that we're seeing the first signs of actual recovery in the amusement industry. Which is particularly interesting in that we also saw some slowing in attendance and customer spending BEFORE the broader economy went into the donniker. Could it be that the amusement industry is a better barometer of overall economic health than we thought?

Another takeaway from this is just how mind-bogglingly stupid it was for Cedar Fair to try to sell itself...not just to sell itself, but to sell itself *short*. Read that bit again: had they not lost money in the selloff deal, they would have made a tidy little profit.

--Dave Althoff, Jr.


    /X\        _      *** Respect rides. They do not respect you. ***
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/XXXXX\ /XXX\ /XXXX\_ /X\ /XXXXX\ /X\ /X\ /XXXXX
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Wednesday, August 4, 2010 9:54 PM

Could it be that the amusement industry is a better barometer of overall economic health than we thought?

Could be. It is a pretty direct measurement of "confidence", and the impact of the guests decisions are measured and reported nearly immediately.


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