Cedar Fair reports net loss of $590 million in 2020

Posted Wednesday, February 17, 2021 9:38 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 its 2020 fourth-quarter and full-year results ended Dec. 31, 2020.

“We are optimistic that levels of attendance at our parks and resort properties will significantly improve in 2021, particularly as COVID-19 vaccines become broadly available over the next few months,” said Cedar Fair President and CEO Richard A. Zimmerman. “In anticipation of improving demand, we are poised to resume normal operations, particularly during our seasonally stronger back half of the year. We have strategically designed our operating plan for the 2021 season specifically to minimize cash burn in the pre-opening period and correlate park operating calendars with forecasted demand while growing our season pass base for the 2021 and 2022 seasons.”

“The safety and welfare of our associates and guests remain our highest priorities, and all of our properties that reopened in 2020 exemplified high-quality immersive entertainment in a safe, sanitized and stress-free environment,” continued Zimmerman. “We are pleased to have earned the trust and confidence of state and local officials, as well as our loyal guests and park communities, and our teams are committed to providing the same world-class experience our guests have come to expect at our parks and resorts.”

“Over the last several quarters, the team implemented significant business process improvements and identified meaningful cost savings opportunities,” added Zimmerman. “These efforts have reduced our use of cash and positioned us well to emerge from the pandemic as a leaner and more cost-efficient organization. We believe the steps we’ve taken, along with other proactive measures already in process, will drive further margin improvement as we return to a normal operating environment and historical levels of attendance and revenues. Cedar Fair is poised to deliver strong performance as operating conditions improve in 2021 and beyond.”

2020 Results

The actions taken by Cedar Fair to safeguard the health of its guests and associates had a significant impact on the Company’s 2020 financial results. As previously reported, the Company suspended operations at its parks beginning on March 14, 2020, in response to the spread of COVID-19 and local government mandates. In accordance with local and state guidelines, the Company resumed partial operations in 2020 at 10 of its 13 properties on a staggered basis beginning in mid-June through mid-July. Two parks – Cedar Point and Kings Island – remained open after Labor Day, operating on weekends through the end of October, while two additional parks – Carowinds and Kings Dominion – reopened on weekends in November and December to host abbreviated versions of their very popular WinterFest events. Following the onset of the pandemic, operations at Knott’s Berry Farm were limited to culinary festivals, which are not included in the Company’s attendance or in-park per capita spending figures after the first quarter.

Given the effects of the coronavirus pandemic on park operations, results for 2020 are not directly comparable to results for 2019, which included full operations of the legacy Cedar Fair parks, as well as operations of the two Schlitterbahn water parks after their acquisition on July 1, 2019. In 2020, the Company had 487 total operating days, excluding the culinary festivals at Knott’s Berry Farm, compared to 2,224 operating days in 2019.

For the full year ended Dec. 31, 2020, net revenues totaled $182 million versus $1.47 billion for 2019. The decrease in net revenues was the direct result of a 25.3 million-visit decrease in attendance and a $101 million decrease in out-of-park revenues, with both shortfalls due to COVID-19-related park closures and operating calendar changes in 2020, as well as the negative impact of the pandemic on demand upon reopening.

In-park per capita spending in 2020 decreased by 4% to $46.38 compared to $48.32 in 2019. This year-over-year decline was attributable to decreases in guest spending on extra-charge attractions, primarily front-of-the-line Fast Lane products, and admissions resulting from a higher season pass mix. These declines were offset in part by higher in-park per capita spending on food, merchandise, and games.

Fewer operating days in 2020, combined with cost-saving measures implemented in response to disrupted park operations, led to a decrease in operating costs and expenses for the year. For 2020, operating costs and expenses totaled $484 million compared with $991 million for 2019, representing a year-over-year decline of 51%, or $507 million. Depreciation and amortization expense in 2020 was $158 million versus $170 million in 2019, largely due to a prior period change in estimated useful life of certain long-lived assets. During the year, the Company also recognized a $104 million loss on impairment of goodwill and other intangibles, which was triggered by the impacts of the COVID-19 pandemic and included impairment of goodwill at the Schlitterbahn parks and Dorney Park, as well as the Schlitterbahn trade name.

After the items noted above, the Company’s operating loss for 2020 totaled $572 million, compared with operating income of $309 million for 2019. The operating loss was the result of the 88% decline in net revenues, offset by the $507 million decrease in operating costs and expenses between years.

Interest expense for 2020 was $151 million, up from $100 million in 2019, due primarily to incremental interest incurred on the Company’s 2025 senior secured notes issued in April 2020, its 2028 senior unsecured notes issued in October 2020, and the 2029 senior notes issued in late June 2019. The net effect of the Company’s swaps resulted in a $16 million charge to earnings during 2020, compared with a $17 million charge in 2019. The difference reflects the change in fair market value movements in the Company’s swap portfolio. During 2020, the Company also recognized a $12 million net benefit to earnings for foreign currency gains and losses related to the U.S.-dollar denominated Canadian notes, compared with a $21 million net benefit to earnings for 2019.

For the full year, a benefit for taxes of $138 million was recorded to account for publicly traded partnership taxes and federal, state, local and foreign income taxes, compared to a tax provision of $43 million in 2019. The benefit for taxes was attributable to the Company’s 2020 pretax loss, as well as benefits from the Coronavirus Aid, Relief and Economic Security Act.

After the items above, the Company reported a 2020 net loss of $590 million, or $10.45 per diluted LP unit. This compares to 2019 net income of $172 million, or $3.03 per diluted LP unit. For 2020, the Company reported an Adjusted EBITDA loss of $302 million versus Adjusted EBITDA of $505 million for 2019. The net loss and the Adjusted EBITDA loss in 2020 are directly attributable to the impact of COVID-19 on attendance and revenues during the year, offset in part by effective cost management. See the attached table for a reconciliation of Net (loss) income to Adjusted EBITDA.

Balance Sheet and Liquidity Update

Deferred revenues at Dec. 31, 2020, totaled $194 million, representing an increase of $33 million, or 21%, when compared to deferred revenues at Dec. 31, 2019. In 2020, the Company’s season pass base grew by approximately 442,000 units, and at year end, the Company had approximately 1.8 million season passes outstanding and valid through the 2021 season, or longer at Knott’s Berry Farm.

At Dec. 31, 2020, the Company had cash on hand of $377 million, compared with a cash balance of $225 million as of the end of the third quarter and a balance of $182 million at the end of 2019. Total liquidity at Dec. 31, 2020, inclusive of $359 million of undrawn capacity under the Company’s revolving credit facility, was $736 million. Based on this level of liquidity, the Company has concluded it will have sufficient liquidity to satisfy its obligations and remain in compliance with debt covenants at least through the first quarter of 2022.

Outlook

Working closely with state and local officials, the Company has established 2021 opening dates for its seasonal parks ranging from May 8 to May 29. Knott’s Berry Farm, the Company’s only year-round park, has announced the return of its very popular “Taste of” walkabout culinary festivals, with the opening of the Taste of Boysenberry Festival on March 5. These limited-duration culinary festivals will be offered again until such time when the State of California and Orange County lift restrictions and allow Knott’s to resume full park operations. Planned opening dates for other parks in Cedar Fair’s portfolio include Kings Island on May 8, both Cedar Point and Canada’s Wonderland on May 14, and Carowinds on May 29.

The Company believes the combination of broader vaccine distribution over the next few months, the public’s pent-up demand for outdoor, closer-to-home entertainment, and the sizable and active 2021 season pass base at its parks will be key drivers of a strong recovery in attendance, particularly in the important second half of the year.

“Although we cannot predict how quickly attendance will reach the record levels achieved pre-pandemic, we remain optimistic in the Company’s prospects for growth and value creation in the second half of 2021 and long-term. Cedar Fair’s resilient business model, rigorous cost management and decades of experience with maximizing free cash flow during periods of demand give us the ability to effectively navigate the current macro environment and its challenges,” added Zimmerman.

“Our balance sheet provides adequate liquidity across a range of potential COVID-disrupted scenarios. With that said, to achieve our highest-priority financial objectives such as meaningfully reducing leverage, we intend to open all our parks this year and optimize performance during the peak of our 2021 season. Our strategy also includes exercising stringent discipline around cost containment and capital allocation and identifying and realizing system-wide operating efficiencies and other cost savings. At the same time, and consistent with the strategic direction we were taking the Company pre-pandemic, we are committed to investing in new capabilities aimed at capitalizing on emerging shifts in consumer behavior and preferences for broader entertainment options,” concluded Zimmerman.

Read the entire release from Cedar Fair.

Wednesday, February 17, 2021 9:43 AM
Jeff's avatar

Emphasizing passes always comes with a reduction in per capita spending, and they couldn't have picked a worse year to make that shift. Six Flags showed us that 20 years ago, and I'm not sure why Cedar Fair expects a different result. Granted, this year is a terrible year no matter what, but I still think you can make it up on volume maybe for a year, or two years if you're doing these silly loyalty programs. Seems like Disney is the only company that maintains its gate integrity and believes in the strength of its product enough to not artificially push more visits as a means to higher total spending.


Jeff - Editor - CoasterBuzz.com - My Blog - Silly Nonsense

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Wednesday, February 17, 2021 9:49 AM

I had not checked the Unit price in a while and was pleasantly surprised to see it is in the mid 40s.

After going to Epcot twice now during the pandemic I can't help but wonder if the idea of selling a premium ticket for limited access days is the wave of the future. The 35% capacity at Epcot has been wonderful...and I'd likely pay more for that experience if given the opportunity to do so. A 30 minute wait for Soarin alone harkened back to the "good old days" of reasonable crowds.

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Wednesday, February 17, 2021 9:56 AM

wahoo skipper said:

The 35% capacity at Epcot has been wonderful...and I'd likely pay more for that experience if given the opportunity to do so.

Until you get priced out.

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Wednesday, February 17, 2021 10:02 AM

My concern is how quickly things will bounce back (generally speaking not just limited to amusement parks) and what the long term impact it will have on these businesses?

Is it possible that in 2021 or even 2022 we might see a large bounce in attendance (CP speaking) if people were to stay local rather than looking to travel or simply looking to get out of the house? Or does the opposite play out as people look to leave the area because they have might feel trapped and have to get away?


There is no such thing as a terrible Coaster just ones that haven't been taken care of

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Wednesday, February 17, 2021 10:38 AM

To Shades' point...I don't think the premium ticket should be standard practice, but I could see them doing it certain days of the week per month, during shoulder seasons, etc.

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Wednesday, February 17, 2021 11:16 AM

Monday at Disney = Rich people

Tuesday = Stinking rich people

Wednesday = Filthy rich people

No day = Poor people

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Wednesday, February 17, 2021 12:04 PM

Jeff said:

Seems like Disney is the only company that maintains its gate integrity and believes in the strength of its product enough to not artificially push more visits as a means to higher total spending.

And even Disney is realizing that they could take a firmer line. From Chapek's comments in the most recent Quarterly call:

I would characterize this last year as being not only a year of challenge, but also a year of learning in terms of what we can do, in terms of sustained margin growth in our parks. I say that because there's nothing like a pandemic to challenge the status quo and make you be fairly introspective about a lot of things that you've maybe taken as fairly dogmatic.

I think you've all seen several new announcements about things that we've done recently that may have been heresy prior to the pandemic like recasting of our annual pass program at Disneyland and reconsidering the overwhelming demand we have relative to supply. Everything we do the first lens we look at is to exceed guest expectations. And it's very tough when your park has more demand than supply, we have to put limits on it.

Well as you know, we have a wide variety of margins depending on the nature of the guest and how they visit and when they visit. So with a lens towards maximizing the guest experience, we are now able to essentially reset many pieces of our business both on the cost and revenue side of the business in order to say, if we had a blank piece of paper how would we set up our parks business and be a little bit more aggressive than we typically might be able to be without the impetus of unfortunately a year-long closure. So we've had a lot of time to think particularly, at Disneyland about what could be and I think you're about to see some of those strategies be born.

Last edited by Brian Noble, Wednesday, February 17, 2021 12:04 PM
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Wednesday, February 17, 2021 12:05 PM
Fun's avatar

Jeff said:

Emphasizing passes always comes with a reduction in per capita spending, and they couldn't have picked a worse year to make that shift. Six Flags showed us that 20 years ago, and I'm not sure why Cedar Fair expects a different result.

Reading between the lines, I think they believe they can make up the difference with dining plans (high value) and food events (high quality). The season pass is the key to unlocking these additional streams of revenue.

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Wednesday, February 17, 2021 12:09 PM

Shades said:

wahoo skipper said:

The 35% capacity at Epcot has been wonderful...and I'd likely pay more for that experience if given the opportunity to do so.

Until you get priced out.

There are lots of things that cost more than I am willing to pay for them. Most of those are not things I "couldn't afford" if considered independently. Instead, there are other things I'd rather spend my money on.

There are a few things that I am willing to pay for that others think costs too much. If any one of those doubled in price, I might still keep paying for it, or I might not. Depends on the thing. But, I don't assume that what I think is worth paying for today always should be.


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Wednesday, February 17, 2021 12:27 PM
Lord Gonchar's avatar

I'm about two months shy of my 20th anniversary on this website/forum.

For almost all of those 20 years I have argued that premium pricing for a premium experience would be my preferred approach in regards to theme parks.

I believe it now more than I ever did. Three words:

Gonch' Business Model™


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Wednesday, February 17, 2021 12:55 PM

They gave away a year of season pass revenue. They are not going to be in good financial shape for a while. The stock price makes no sense. Do people think the large distribution is coming back soon?

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Wednesday, February 17, 2021 1:02 PM

I agree with the Gonch model given a choice. But its a lot more nuanced than that and far less simple. Premium offering potentials at a worldwide, year round destination operation are much different than seasonal parks with largely daytrippers.

If Biden is correct in that things will return to "normal" by Christmas, I would not expect the amusement parks to recover until at least 2022 (and likely a year or two after that with some not fully recovering ever). There is a lot of data out there that the equity markets are in a large bubble at this point. Other people are saying we are not there yet. So its not limited to Cedar Fair stock.

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Wednesday, February 17, 2021 1:59 PM
Jeff's avatar

Fun said:
Reading between the lines, I think they believe they can make up the difference with dining plans (high value) and food events (high quality). The season pass is the key to unlocking these additional streams of revenue.

Yeah, and that too is in the Six Flags playbook. Universal Orlando does this as well, but what's different is that they're not giving away annual passes. Maybe that's my real point, that yes, you should have strategies to boost spending, but trying to make that happen by diluting your gate is a wash. While it certainly varies by market, amusement parks have a fairly unique and interesting product, and many seem willing to act as though it's a commodity and race themselves to the bottom. More people in the parks to eek out a modest gain in revenue just makes a more crowded place I don't want to go back to.


Jeff - Editor - CoasterBuzz.com - My Blog - Silly Nonsense

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Wednesday, February 17, 2021 2:09 PM

Brian Noble said:

There are lots of things that cost more than I am willing to pay for them. Most of those are not things I "couldn't afford" if considered independently. Instead, there are other things I'd rather spend my money on.

In other words, you got priced out on the things that cost more than you are willing to pay for.

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Wednesday, February 17, 2021 2:19 PM
Jeff's avatar

No, I think you're forcing an argument on him. There's a difference between being priced out and one's perception of relative value. There are all kinds of inexpensive things that I don't spend money on because I don't think they're worth it. People far more well off than me would find the amount I spend on live theater to be absurd. It doesn't mean that they're priced out.


Jeff - Editor - CoasterBuzz.com - My Blog - Silly Nonsense

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Wednesday, February 17, 2021 2:35 PM

In this situation I think there is no argument that if Disney charged the same $100 to get into a park with a capped capacity of 35% as they do with no reduction in capacity we would all sign up for that. But that is not going to happen - the price will go up to get that exclusivity. Will people pay $1 more, $2, $200, $2,000? At some point you get priced out whether that is because you simply cannot afford it or you don't see the value in it.

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Wednesday, February 17, 2021 2:40 PM
ApolloAndy's avatar

"Somebody change the sign!"

Last edited by ApolloAndy, Wednesday, February 17, 2021 2:41 PM

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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Wednesday, February 17, 2021 2:43 PM
ApolloAndy's avatar

wahoo skipper said:

To Shades' point...I don't think the premium ticket should be standard practice, but I could see them doing it certain days of the week per month, during shoulder seasons, etc.

Isn't this what all the holiday parties, VIP tours, early morning magic (the exclusive pay version of EMH), club level Fast Passes, etc. etc. were?

Last edited by ApolloAndy, Wednesday, February 17, 2021 2:43 PM

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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Wednesday, February 17, 2021 2:49 PM

Shades said:

Brian Noble said:

There are lots of things that cost more than I am willing to pay for them. Most of those are not things I "couldn't afford" if considered independently. Instead, there are other things I'd rather spend my money on.

In other words, you got priced out on the things that cost more than you are willing to pay for.

I'm going to give you a pass on this, because you don't really know me. But I will tell you that there are very few leisure activities I couldn't pay for. When I think about vacations, entertainment, etc. I run out of time before I run out of money. Cost almost certainly influences my decision about how I spend my leisure time, but cost isn't the primary driver.

Edited to add in light of your later post: And no, I don't have to change the way I eat, skip a housing payment, or borrow from my 403(b) to do any of it.

Last edited by Brian Noble, Wednesday, February 17, 2021 2:52 PM
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