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

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 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.

Why do people keep trying to drag race against an electric car?

Why do people drag race at all?

Raven-Phile's avatar

Because it's something they enjoy doing?

Why do people ride roller coasters and go to amusement parks?

Pretty sure they're not street racing.

The NASCAR track in Fort Worth hosts drag races on the pit road every Friday night for 6 weeks in the summer as a way to discourage street racing. It is very popular and can bring out 10,000 spectators each week. I didn't see it on my one trip this summer, but I know there was a guy showing up to race his Tesla some weeks.

Pete's avatar

Drag racing is one activity where a stick shift separates the good from the mediocre. There is a skill in launching a car with a clutch and then quickly shifting. Electric cars really water it down, anyone can mash the pedal to the floor and hold the steering wheel straight.

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

eightdotthree's avatar

Most drag cars are automatic so all things equal you're at a disadvantage if you're running a manual transmission.

Last edited by eightdotthree,
TheAcrophobicEnthusiast's avatar

The Tesla nerd in me is like "Hellsya" and the coaster nerd in me is like "How did we get here??"

Speaking of the center of gravity in the X, check out this video of the rollover test. They couldn't get it to roll over.

As far as attendance goes, I've definitely seen it at KD. Brand new top 25 in the world roller coaster installed in the park and the line for it is regularly walk on and tbh the crowds seem even smaller than last year. It really depresses me because CF was already of the mindset that only families come to this park and they don't want to invest in thrill rides anymore. This, I fear, will only contribute to that.

Overall I'm on the same boat as Jeff though. CF has seen great numbers during the hard economy of the last decade and I really feel that a lot of gp are spending their money elsewhere now that the economy is coming back. They've been here and done that. They'll be back cyclically.

The best of all the jokers is clearly Mark Hamill.

Jeff's avatar

I think this is another one where you can just chalk it up to things being cyclical.


Jeff - Editor - CoasterBuzz.com - My Blog

Paisley said:
I don't think that many years, I still vividly remember the signs at the end of my street at $4.04 per gallon at one point during the former administration. I'm not saying it was the fault of that administration, just that is hasn't been that horribly long ago and Republicans were not in charge at the time.

This chart shows gas prices shows Doubling under the Bush administration, holding those places in the first years of Obama and then falling under Obama. An excellent example of how republican policies cause fuel prices to go up and then democratic policies investing in green energy causes them to go down

Doubling under the Bush administration, holding those places in the first years of Obama and then falling under Obama. An excellent example of how republican policies cause fuel prices to go up and then democratic policies investing in green energy cause them to go down Gas prices have went up around 50% since Trump took office with the lack of green energy policies. Now he wants to roll back fuel efficiency regulations


So, gas prices only went up around Cedar Fair parks?

Maybe the quote is messed up in terms of knowing which is the response. But it looks like you stated that the party in control of the White House/Congress influences gas prices. But in the same post linked an article which states "Everyone likes to blame the president at the time, or Exxon. But in reality [the price of gasoline at your local point is] not determined in the US. There is a world price for oil...."

The view that the current occupant of the White House has much influence over the price of oil/gasoline is naïve at best. There also isn't a jobs or economy dial in the Oval Office which is turned up when the then President is in a good mood and dialed down when the President isn't. Though they certainly take credit for anything good in terms of both (and blame he "other team" when there is anything bad so I don't feel sorry for them when that happens.

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