From the press release on preliminary results:
Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today provided preliminary operating results for its third quarter ended Sept. 27, 2020, and, in light of the ongoing COVID-19 pandemic, updated the market on its current liquidity position.
As previously announced, the Company suspended operations of its parks beginning on March 14, 2020, in response to the spread of COVID-19 and local government mandates, which has had a significant impact on the Company’s 2020 financial performance. Beginning late in the second quarter, the Company resumed partial operations at seven of its parks on a staggered basis, in accordance with state and local approvals and health and safety guidelines.
In connection with reopening the parks, the Company has implemented enhanced health and safety protocols, including increased cleaning and sanitization procedures, social distancing protocols, capacity limitations, face covering requirements, and health and temperature screenings for both guests and employees. In addition, the Company has actively managed the parks’ operating days and hours to optimize cash flow.
Attendance at the reopened parks has been impacted by self-imposed limitations, fewer operating days and hours, significantly reduced marketing spend, and a limited event lineup. Despite these limitations, park attendance trends have gradually improved since reopening. Attendance versus the prior-year period has ranged from approximately 20% to 25% upon initially reopening, to approximately 35% to 40% for the last few weeks leading up to Labor Day. On several days in August, attendance at several parks easily exceeded 50% of prior-year attendance.
“Given the challenges and uncertain environment caused by the pandemic, we are pleased to have opened seven of our parks to date,” said Cedar Fair President and CEO Richard A. Zimmerman. “Getting parks open has allowed us to reengage with our customers and, at the same time, demonstrate the ability to provide our guests and associates with a safe and enjoyable entertainment offering. While attendance levels were somewhat soft upon initially reopening, we are pleased with how demand trends have improved and are encouraged with this positive momentum as we look ahead to 2021.”
Preliminary Third Quarter Operating Results
The following third quarter operating results are estimates based on the latest information available and subject to change as the Company completes its customary quarterly financial closing procedures. The Company anticipates reporting final third quarter results in early November 2020.
- Attendance in the third quarter totaled 1.3 million guests, a decline of 11.9 million guests from the third quarter of 2019. The attendance decline was largely due to 6 of the Company’s 13 properties being closed in the quarter, while its open parks offered only limited operations due to the pandemic.
- In-park per capita spending is expected to decrease by approximately 6% to $47 compared to $49.94 in the third quarter of 2019. In-park per capita spending increases in food/beverage, merchandise and games, collectively up 18% in the period, were more than offset by decreases of guest spending in admissions and extra charge, primarily front-of-line Fast Lane products. The decrease in admissions spending was the result of a higher mix of season pass visitation in the quarter (55%) compared to the same period last year (46%). Excluding the impact of season passes, admissions spending on all other ticket types was up 4% in the quarter.
- Net revenues for the quarter are expected to be between $85 million and $90 million, compared to $715 million in the third quarter of 2019. The decrease in net revenues was the direct result of the 11.9 million-visit decrease in attendance and a decrease in out-of-park revenues of approximately $50 million, both shortfalls due to COVID-19-related park closures in the current period.
- The Company’s season pass base has increased by approximately 80,000 units, or 5%, since mid-June and the reopening of seven parks. By the end of the third quarter, the Company anticipates having more than 1.76 million season passes outstanding heading into the fourth quarter and valid through the end of the 2021 season.
- As of today, two parks – Cedar Point and Kings Island – remain open on weekends, hosting fall festival events through November 1, when both parks close for the 2020 season.
Liquidity and Balance Sheet Update
As of Sept. 27, 2020, the Company had cash on hand of approximately $215 million, compared with a balance of $301 million as of June 28, 2020, which represents an average cash burn rate(1) of approximately $30 million per month during the third quarter.
Including $359 million available under its revolving credit facility, net of $16 million of letters of credit, the Company had total liquidity of approximately $574 million as of Sept. 27, 2020. Based on this level of liquidity, the Company anticipates it will have ample liquidity to meet its cash obligations through the end of 2021, even if operations remain disrupted.
“The actions we’ve taken to date to manage our cash burn rate and improve our capital structure provide us with the necessary financial flexibility and balance sheet strength to manage through this pandemic-related disruption,” added Zimmerman. “Given the ongoing uncertainty surrounding COVID-19, we will continue to explore ways to further enhance our liquidity position and reduce cash outflows.”
Read the entire press release from Cedar Fair.
From the press release on the offering:
Cedar Fair, L.P. (NYSE: FUN) (the “Company” or “Cedar Fair”) today announced that it, together with its wholly owned subsidiaries Magnum Management Corporation (“Magnum”), Canada’s Wonderland Company (“Cedar Canada”) and Millennium Operations LLC (“Millennium”), intends to commence a private offering of $300 million aggregate principal amount of senior unsecured notes due 2028 (the “Notes”). Obligations under the Notes will be guaranteed by the Company’s wholly owned subsidiaries that guarantee its senior secured credit facilities (other than Magnum, Cedar Canada and Millennium) (the “Credit Facilities”).
The Company intends to use the net proceeds of the offering for general corporate and working capital purposes, including fees and expenses related to the transaction. Completion of the offering of the Notes is subject to, among other things, pricing and market conditions.
The Company has amended its Credit Facilities to, among other things, permit the issuance of the Notes and suspend and revise certain of the financial covenants under the Credit Facilities, in part, in response to the novel coronavirus (“COVID-19”) pandemic-related disruption that the Company is experiencing in 2020.
Read more from Cedar Fair.
They picked a suboptimal year to push the season pass strategy, which pushes per capita spending down in the hopes they can make it up on volume.
Without the increased pass sales, they start 2020 with less cash on the balance sheet (or more debt or a mix of both). Means they borrow more during the season to keep afloat. Without the passes its not clear attendance (which dropped 90% in the third quarter compared to 2019 and which was a really suboptimal part of the year) would have remained the same. Would expect at least some of the people who did go this season went because they had passes and would not have paid for single day admission with the limited offerings, masks, distancing, etc. And while there, they spent money in the part which wouldn't have been spent had they stayed home.
Based on this level of liquidity, the Company anticipates it will have ample liquidity to meet its cash obligations through the end of 2021, even if operations remain disrupted.
This is the most important part, and, if accurate, positive signs that Cedar Fair was financially sound and well-managed prior to the proverbial crap hitting the fan.
And I think we have a new slogan: 2020 was suboptimal.
Promoter of fog.
At this point, the conversation about liquidity has to go to "is 2021 long enough?" It really doesn't allow for much breathing room if we see sustained job losses like in 2008, or there is a crappy weather year that seems to come every few years (see 2018), or the seemingly indefinite moratorium on foreign workers that will put pressure on labor costs.
If the 2021 season looks a lot like the 2020 season, Cedar Fair will likely need to address liquidity issues a year from now. But that isn't a certainty right now. So it doesn't really make sense to line up liquidity for 2021 or beyond at this point. Saying now they have sufficient liquidity right now to get through 2021 doesn't mean January 1, 2022 they can't pay bills.
Given the seasonality of their business, the first half of the year could be throw-away and they would be fine. A soft July might not even be terrible. But August to October with proper Halloween events would go a long way toward demonstrating some amount of normalcy. Probably correctly, no one is banking on that certainty.
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