Cedar Fair reduces salaries, cuts expenses, stops distribution in response to pandemic

Posted Thursday, April 16, 2020 4:33 PM | Contributed by Jeff

From the press release:

Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, said today that, given the continued uncertainty surrounding the coronavirus (COVID-19) pandemic, the Company has undertaken proactive cost-reduction measures to provide it with enhanced financial flexibility while its parks remain closed.

“As we work to ensure the safety and well-being of our employees, guests and business partners from the effects of COVID-19, it’s important we also embrace measures that will ensure our financial flexibility through this difficult period,” said Richard Zimmerman, President and CEO of Cedar Fair. “After social distancing recommendations by the authorities are lifted, we look forward to opening our parks as soon as reasonably possible. The actions we are announcing today help put us in a better position to do so as we navigate the unknown environment ahead.”

COVID-19 Response

Since closing its parks in March 2020 in response to COVID-19 health recommendations, the Company has taken the following proactive measures to reduce operating expenses and cash outflows:

  • Eliminated nearly all of its seasonal and part-time labor costs until its parks prepare to reopen,
  • Suspended all advertising and marketing expenses, and reduced general and administrative expenses and other park-level operating expenses to better align with the disruption in operations while still remaining in readiness position to reopen parks,
  • Reduced the CEO’s base salary by 40% and the base salaries of all other executives by 25%, effective April 27, 2020,
  • Deferred base salaries for all other salaried employees by 25%, subject to minimum thresholds or other statutory limitations,
  • Reduced scheduled hours for full-time hourly employees by 25% to 30 hours per week, and
  • Suspended cash retainer fees for its Board of Directors until business conditions improve.

To provide incremental liquidity and enhanced financial flexibility, the Company has taken proactive steps to reduce its capital spending for calendar year 2020, including the suspension of at least $75-100 million of non-essential capital projects planned for the 2020 and 2021 operating seasons. The Company now anticipates spending $85-100 million on capital improvements in calendar year 2020.

In addition, the Board of Directors has determined that it is in the best interests of unitholders for the Company to preserve liquidity by suspending the quarterly distribution until operating visibility improves. The Board is committed to reinstituting a quarterly distribution when it is appropriate to do so.

Given the uncertainty around the timing of the parks reopening, and in order to ensure its season pass holders receive a full season of value, the Company also recently announced it has paused collections of guest payments on installment purchase products, and that its parks are working with season pass holders to extend their usage privileges into the 2021 season to compensate for lost access to the parks in the current year.

Liquidity Update

As of the end of the first quarter, the Company had cash on hand of $26 million and $190 million available under its revolving credit facility, net of $15 million of outstanding letters of credit. Based on the cost-cutting and cash-savings measures taken to date, under a scenario where its parks remain in a state of readiness to reopen for the 2020 season, the Company anticipates its average cash burn rate, including operating expenses, capital expenditures and debt facility costs, will be approximately $25-35 million per month. Should the park closures extend later into the year, the Company is prepared to activate additional cost-cutting and cash-savings measures. Out of an abundance of caution, at this time, the Company is also taking steps to secure additional liquidity and address any potential debt covenant issues, in the event that the COVID-19 crisis continues.

Preliminary First-Quarter Financial Results

The Company expects net revenues in the first quarter of 2020 to be approximately $10-15 million lower than the same period in 2019. Prior to the mid-March disruption in operations, revenues were higher than the prior-year period and in line with current-year expectations, primarily driven by a record start to the year at Knott’s Berry Farm, the Company’s only year-round park. In addition to the lost revenues over the last two weeks of March, sales of advance purchase products, including season passes and related all-season products, declined significantly as a result of COVID-19. In spite of this decline, deferred revenues at the end of the first quarter remained up more than $30 million, or more than 20%, over the same time last year.

Long-Term Financial Guidance

Due to the uncertainty surrounding the magnitude and duration of the COVID-19 pandemic at this time, the Company is unable to predict the impact on its business and operating results, both in the near term and long term. As such, the Company is withdrawing its previously provided long-term Adjusted EBITDA target of $600 million by 2024.

Read the entire press release from Cedar Fair.

Thursday, April 16, 2020 4:36 PM
Jeff's avatar

Weird, they didn't issue stock grants to the executive team. 🙄


Jeff - Editor - CoasterBuzz.com - My Blog - Music: The Modern Gen-X - Video

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Thursday, April 16, 2020 6:53 PM

That only happens where things are a little "fishy" B-)

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Thursday, April 16, 2020 8:27 PM

SEASoned management teams buck conventional wisdom. /eyeroll

Last edited by CreditWh0re, Thursday, April 16, 2020 8:36 PM
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Thursday, April 16, 2020 8:27 PM

Absolutely no surprise that the dividend was cut.

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Thursday, April 16, 2020 9:34 PM

Press release indicates that their current liquidity gets them to/thru the 4th quarter of this year. At this point its not clear there will be any positive cash flow from operations before that liquidity is exhausted. As they note, they are pursuing additional liquidity both in terms of additional financing (increase the revolver or additional term debt) and also talking with their lenders about covenant and payment relief. Part of those discussions would require suspension of the distributions. You won't get concessions from lenders and/or additional financing and keep making the distributions.

Per the 2019 10-K:

The Amended 2017 Credit Agreement includes a Consolidated Leverage Ratio, which if breached for any reason and not cured could result in an event of default. The ratio is set at a maximum of 5.50x Consolidated Total Debt-to-Consolidated EBITDA. As of December 31, 2019, we were in compliance with this financial condition covenant and all other financial covenants under the Amended 2017 Credit Agreement.

Our long-term debt agreements include Restricted Payment provisions, which could limit our ability to pay partnership distributions. Pursuant to the terms of the indenture governing the 2024 senior notes, which includes the most restrictive of these Restricted Payments provisions, if our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is greater than 5.00x, we can still make Restricted Payments of $60 million annually so long as no default or event of default has occurred and is continuing. If our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio is less than or equal to 5.00x, we can make Restricted Payments up to our Restricted Payment pool which totals a sufficient amount for partnership distributions for the foreseeable future. Our pro forma Total-Indebtedness-to-Consolidated-Cash-Flow Ratio was less than or equal to 5.00x as of December 31, 2019.

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Friday, April 17, 2020 8:46 AM

Reduced scheduled hours for full-time hourly employees by 25% to 30 hours per week

Hope this doesn't change their eligibility for insurance, as most companies use a 32-hour week as its base. Sometimes it's based on a rolling average, but if this last through all of 2020, these employees are going to be toeing that line.

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Friday, April 17, 2020 12:20 PM

I know at Disney it was a 30 hour average full timers had to keep. I'm sure they'll be ok, especially if they do open for an abbreviated 2020. It'll take a lot of man power to make that happen.

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Saturday, April 18, 2020 12:16 AM

Well, if the parks are operating those full-timers who had their hours cut will be back to their customary seasonal 336-hour weeks...

--Dave Althoff, Jr.

Last edited by RideMan, Saturday, April 18, 2020 12:16 AM

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Saturday, April 18, 2020 11:35 AM

mmmm very clearly says, Dividend Suspended

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Sunday, April 26, 2020 2:07 AM

Is there a suggestion it wasn't?

Last edited by GoBucks89, Sunday, April 26, 2020 2:08 AM
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