Cedar Fair reports "lower than anticipated" results for 2018 second quarter

Posted Wednesday, August 1, 2018 11:03 AM | 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 the second quarter ended June 24, 2018, along with revenue trends for the month of July and the declaration of a quarterly cash distribution for unitholders.

CEO Commentary

Commenting on the Company's second-quarter results and trends through July 29, 2018, Richard Zimmerman, Cedar Fair's president and CEO, said, "The investments we have made in our parks over the past several years have significantly enhanced the guest experience and, combined with our current and future investments, will provide meaningful economic returns for many years to come. As a result of our investments, the guest response to our new rides and attractions has been very positive, guests are increasing spending levels inside our parks, and the renewal rates of season passholders remain strong. We believe disruptive weather patterns have contributed negatively to our year-to-date attendance, however, we have launched incremental research efforts to better understand market-specific results."

"In response to the lower-than-anticipated first half results, we have implemented a number of initiatives designed to drive attendance and maximize profits over the balance of the season," added Zimmerman. "These initiatives, combined with our very popular Halloween events, WinterFest celebrations at five parks, including the recent addition of Kings Dominion, and the continued strength of long-lead demand indicators, such as group bookings and resort reservations, give us confidence that we are well positioned heading into the second half of 2018."

Zimmerman continued by stating that despite some recent areas of strength in the business, the lack of meaningful momentum or attendance pickup in July could have results fall below the low end of the Company's full-year guidance of net revenues between $1.34 billion and $1.38 billion and Adjusted EBITDA1 between $475 million and $495 million. Because full-year results will be heavily influenced by the parks' performance over the next month, the Company will update its guidance in early September.

"We remain confident in the resiliency of our business model, the experience of our management team, the strength of our balance sheet and the outlook for growth in the business long term. As a result, we remain committed to delivering a steady 4% annual increase in the cash distribution to unitholders while continuing to invest in our business at a responsible level," concluded Zimmerman.

Six-Month Results

Net revenues were $435 million for the six months ended June 24, 2018, a decrease of $6 million, or 1%, compared with the six-month period ended June 25, 2017. The decrease was attributable to a 2%, or 211,000-visit, decrease in attendance to 8.7 million guests. This was partially offset by a 1%, or $0.27, increase in average in-park per capita spending to $45.42, and a 2%, or $1 million, increase in out-of-park revenues to $56 million when compared with the prior-year period.

Short-term factors, such as inclement weather in the Mid-Atlantic region and a delayed ride opening at California's Great America, combined with a decrease in the number of season passes sold at Kings Island, negatively impacted early-season attendance at the Company's seasonal amusement parks. This was somewhat offset by increased attendance at Knott's Berry Farm, the Company's only year-round park. The increase in average in-park per capita spending through the first half of the year was driven by increased spending on food and beverage, merchandise and extra charge attractions. These increases were partially offset by a small decrease in admissions revenue per capita attributable to a higher season pass mix, the introduction of a free pre-K season pass at three more parks in 2018 and the recognition of season pass revenue over a longer period of time at a fifth park that will be hosting a new WinterFest celebration in November and December this year.

The increase in out-of-park revenues is the result of higher occupancy rates and average daily room rates at the Company's resort hotels, including the new 158-room tower at Cedar Point's historic beachfront Hotel Breakers.

The operating loss for the six-month period was $7 million compared with operating income of $19 million for the six-month period in 2017. The decline in operating income is the result of the 1% decrease in net revenues noted above, combined with a 4%, or $16 million, increase in operating costs and expenses, which totaled $380 million for the first half of 2018. The increase in operating costs and expenses was in-line with the Company's expectations and reflects higher labor costs due to market/minimum-wage rate increases, higher operating and maintenance supplies, and additional expenses as the Company continues to invest in technology and the overall guest experience. Depreciation and amortization was up $2 million due to growth in capital improvements over the past several years. Loss on impairment/retirement of fixed assets was up $3 million, reflecting the retirement of assets in the normal course of business at several of the Company's properties.

Interest expense for the first six months of 2018 was comparable to the same period in the prior year. We recognized a $1 million loss on early debt extinguishment during the first quarter of 2018 in connection with amending our 2017 Credit Agreement, as compared to a $23 million loss on early debt extinguishment related to our refinancing in the first half of 2017. The net effect of our swaps resulted in a benefit to earnings of $5 million for the first six months of 2018 compared with a $5 million charge to earnings for the comparable period in 2017. The difference reflects the change in fair market value movements in our swap portfolio offset by the amortization of amounts in OCI for our de-designated swaps. During the current period, we also recognized a $25 million net charge to earnings for foreign currency gains and losses compared with a $6 million net benefit to earnings for the comparable period in 2017. Both amounts primarily represent re-measurement of the U.S.-dollar denominated debt held at our Canadian property from the applicable currency to the legal entity's functional currency.

A benefit for taxes of $5 million was recorded during the first half of 2018 to account for the tax attributes of the Company's corporate subsidiaries and publicly traded partnership taxes, compared with a benefit of $10 million in the same period a year ago.

The net loss through June 24, 2018, totaled $64 million, or $1.14 per diluted LP unit. This compares with a net loss of $33 million, or $0.60 per diluted LP unit, for the same period a year ago. The increase in net loss is primarily a result of the 1% decrease in net revenues, combined with planned increases in operating costs and expenses.

Adjusted EBITDA, which management believes is a meaningful measure of the Company's park-level operating results, for the six months ended June 24, 2018, was $62 million, down $23 million when compared with the six months ended June 25, 2017. This is the result of the attendance shortfall through the first six months of 2018, combined with planned increases in operating costs and expenses. See the attached table for a reconciliation of net income to Adjusted EBITDA.

July Operations

Based on preliminary July results, net revenues through the seven-month period ended July 29, 2018, were approximately $752 million, down $15 million, or 2%, when compared with the similar period last year. The decrease in revenues is attributable to a 3%, or 480,000-visit, decrease in attendance to 14.6 million guests. This was somewhat offset by a 1% increase in average in-park guest per capita spending and a 4%, or $3 million, increase in out-of-park revenues compared with the similar period last year.

Distribution Declaration

The Company also announced the declaration of a cash distribution of $0.89 per LP unit, which is consistent with its targeted annualized distribution rate of $3.56 per LP unit. The distribution will be paid on Sept. 17, 2018, to unitholders of record as of Sept. 5, 2018.

Read the entire press release from Cedar Fair.

Friday, August 3, 2018 7:39 PM
Jeff's avatar

You're dropping my qualifier... I know they exist. I've driven in Silicon Valley. I said they'll never be widely deployed, and I'll stand by that prediction.

Vater said:

Maybe not the best analogy, but I've raced go karts (not the lame glorified riding mowers you find at amusement parks--really fast competition karts), and I was skeptical to try electric ones, but was pleasantly surprised at how fast they were.

That's a great analogy, to be honest. It's like that. My first drive was a Nissan Leaf rental, and I giggled like crazy launching off of a red light with it. I had to have one (and I did... we're about to turn in our 2-year lease that we've had for four years). The more surprising thing is that the torque is there at any speed, even in the cheap Leaf (which is in fact starting at $30k, before the $7,500 tax credit).

Look, the tech is already there for long-range EV's to be sub-$30k, but no one has the economy of scale that Tesla does (finally), and they're in no hurry to sell the cheap ones until the demand lets up a little on the high margin cars. They said in their earnings call that, for now, the new performance, AWD Model 3 is dominating their new reservations, and that's $64k (analysts estimate margin might be as high as 25%, which the old car companies can't even get close to).

I can't even describe how awesome that car is. I had a Model S for three years, and the Model 3 is that car, but better, longer range, and even with the forced options, 40% less in cost. Three years ago, we'd have to stop every three hours to supercharge, now five hours. And of course, for 99% of driving, charging at home is all we need. It's moving so fast. Trust me, you'll leave behind engine noise after you silently dust some Fast-n-Furious wannabe douchebag in a Mustang. It's unsettling.


Jeff - Editor - CoasterBuzz.com - My Blog - Phrazy

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Friday, August 3, 2018 7:56 PM
Pete's avatar

The Tesla Roadster looks pretty cool. Give me a nice low to the ground sports car, gas or electric.... No thanks on the SUV.


I'd rather be in my boat with a drink on the rocks, than in the drink with a boat on the rocks.

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Friday, August 3, 2018 11:31 PM

I have a car in my driveway as we speak that is 20 inches longer than the X and seats up to 8. No, it's not new but any vehicle to be considered has to be more alluring to me than what I already own. My van seats 7 and feels like a small house on the inside. When I google images of the interior of the X I question how comfy the people in that third row are. The thing is in the future maybe there will be a larger selection of styles to appeal to more of us who each like different things in a vehicle. Price is a major deal breaker even if I did think I would like it. The MSRP is $79K. Until they've been on the market long enough to get them used in the $5K range there's no point in me even worrying about whether or not they come out with one I like. I'm not buying a car that costs almost as much as my house. It's a completely impractical option for me as an individual. Works fine for many but I don't see it in my future for a long time.

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Saturday, August 4, 2018 8:55 AM
kpjb's avatar

Vater said:

...my hesitance to embrace EV's is more personal and isn't with any perceived inconvenience or impracticality. If I do own one someday, I will likely always have at least one gas vehicle because I really love engine noise and a manual transmission.

This is me. I love the tech, the futuristic vibe, the practicality that I only drive over 5 hours straight maybe 4 times a year. I'd love to have one as a "spare car". That being said, I refuse to buy a car that isn't a manual. I refuse to buy a car that parks itself or drives itself. I happen to like driving, and the more that's automated, the more you're just a passenger in your own taxi. That's not for me.


Hi

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Saturday, August 4, 2018 9:56 AM
Raven-Phile's avatar

Paisley said:

I have a car in my driveway as we speak that is 20 inches longer than the X and seats up to 8.

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Saturday, August 4, 2018 10:32 AM

So, is this all to say that Cedar Fair’s first half performance was an anomaly and that they still anticipate meeting their expectations at year end?


tall and fast but not much upside down

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Saturday, August 4, 2018 11:28 AM

^ pretty much.

^^ Very close actually but the Buicks look nicer and mine is brown.

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Saturday, August 4, 2018 11:32 AM
Vater's avatar

Jeff said:
Trust me, you'll leave behind engine noise after you silently dust some Fast-n-Furious wannabe douchebag in a Mustang. It's unsettling.

If that were true, I wouldn't be looking to replace my 270hp turbocharged hatchback for a 112hp naturally aspirated roadster. Carving corners has always been my motivator, not straight-line performance. Having power is great fun, but solid handling is my preference. I'm sure Teslas have that in spades, but again, more importantly, they lack a manual transmission. If an EV can somehow replicate the feel and control of a manual with a clutch pedal and stick shift, I might actually be interested.

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Saturday, August 4, 2018 11:57 AM
Jeff's avatar

The AWD models handle like they're on rails. You just point the car where you want to go and it does. The center of gravity is like 12 inches off the ground at the center of the car. It's insane.

Control is different, but it's way more precise. Obviously you don't need gears with an electric motor, but the precision in acceleration and deceleration (driven largely by "engine braking") is extraordinary. And then you can tune the steering to your preference. If control and fun driving is your thing, I think you need to spend some quality time in a Model S (or the new AWD performance version of the Model 3). I'm not even a car guy and it blows my mind.


Jeff - Editor - CoasterBuzz.com - My Blog - Phrazy

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Saturday, August 4, 2018 1:31 PM
Pete's avatar

I think I know what Vater is talking about. There is a certain amount of fun in having a clutch pedal and gearshift lever to row around. In this age of electric cars, DSG transmissions and computer control on everything it is a little old school. But it is a lot of fun and takes you back to a simpler time where it took more skill to swiftly drive a car on a road coarse. I've had stick shifts for much of my adult life (except now) and they are engaging and great fun. Unfortunately, such cars are hard to come by now.


I'd rather be in my boat with a drink on the rocks, than in the drink with a boat on the rocks.

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Saturday, August 4, 2018 4:30 PM
HeyIsntThatRob?'s avatar

One of my observations on a recent European trip was the amount of cars that were stick. Over there stick is the norm and finding an automatic was pretty rare. I found it interesting to me because up until January I was still driving a stick shift car. But you're right, finding a manual transmission car in the states is becoming harder to do.

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Saturday, August 4, 2018 6:13 PM

That's because manual transmissions used to be less expensive to make than automatics. I can remember when a three speed auto trans was optional, adding up to a thousand more to the price of a car.With automated production lines being run from computers they now cost considerably less to make than a manual one, which takes more manual assembly than an automatic transmission.

Last edited by Dutchman, Saturday, August 4, 2018 6:14 PM
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Saturday, August 4, 2018 11:58 PM
ApolloAndy's avatar

urumqi said:
So, is this all to say that Cedar Fair’s first half performance was an anomaly and that they still anticipate meeting their expectations at year end?

Yay! Someone brought the conversation back on topic recently enough for me to make my joke:
“The attendance slide is because they don’t sell merch online.”


Hobbes: "What's the point of attaching a number to everything you do?"
Calvin: "If your numbers go up, it means you're having more fun."

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Sunday, August 5, 2018 8:27 AM

Pete said:

There is a certain amount of fun in having a clutch pedal and gearshift lever to row around. In this age of electric cars, DSG transmissions and computer control on everything it is a little old school.

I know someone who drives a stick shift car. Likes to tell people that having a stick shift is the best anti-theft device you can have (no one knows how to drive it). :-P

Last edited by 0g, Sunday, August 5, 2018 8:28 AM
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Sunday, August 5, 2018 10:44 AM

I can still handle a Spicer with a two speed rear end, not that anyone would hire me now. When you can see retirement in a matter of months you are no longer qualified,regardless what the law says.

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Monday, August 6, 2018 11:02 AM
Vater's avatar

Jeff said:

The center of gravity is like 12 inches off the ground at the center of the car. It's insane.

Yeah, that's the thing that intrigues me most about the Tesla's handling, considering most of the weight is below the driver. It's absolutely nuts to think the center of gravity height is that low; that's getting pretty close to what you'd find on F1 cars.

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Monday, August 6, 2018 11:44 AM
Jeff's avatar

I will say that it's definitely better in the AWD (dual motor) cars. My S was AWD (because it gets a little more range, less tire wear, and grips better in the Florida deluges), and I don't remember one time that it ever slipped in a turn. The 3 didn't have AWD as an option yet, and I can definitely feel a little slip if I push it hard through a turn.


Jeff - Editor - CoasterBuzz.com - My Blog - Phrazy

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Monday, August 6, 2018 12:45 PM
Vater's avatar

I'd probably have more fun in the non-AWD 3. Love me some RWD.

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Monday, August 6, 2018 1:03 PM
Jeff's avatar

This sure looks like a lot of fun, 0-60 in 3.18 seconds, all stock configuration...

https://www.teslarati.com/tesla-model-3-performance-3-18-sec-0-60-m...ry-charge/


Jeff - Editor - CoasterBuzz.com - My Blog - Phrazy

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Tuesday, August 7, 2018 9:26 AM
eightdotthree's avatar

There's a guy on YouTube with a stripped down Model S that drag races nitrous and twin turbo cars and leaves them on the starting line. It's pretty hilarious.

I'm torn on electric because I love my GTI and need my Subaru on ski trips. In two years I'll be back to bike commuting instead of suburban country road commuting so the GTI may be replaced with something more practical... or I'll mod the GTI into more of a hobby car.

Regarding manual transmissions... VW is removing their manual GTI and R cars from the product line in New Zealand. I think that's going to start happening in more markets and eventually a hybrid GTI/R will be the base model.


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