Cedar Fair revenue and attendance down in the first quarter
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From the press release:
Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today announced its 2023 first quarter financial results, ended March 26, 2023. In addition, the Company announced the declaration of a cash distribution of $0.30 per limited partner (LP) unit payable on June 21, 2023, to unitholders of record as of June 7, 2023, and the Board’s authorization to repurchase additional units up to $250 million.
“During the first quarter, rainy and cool weather impacted our California parks, resulting in a slower start to the season,” said Cedar Fair President and CEO Richard A. Zimmerman. “Despite this, Cedar Fair is poised to capture the full potential of our upcoming busiest and most profitable days of the year, as the remaining three quarters typically account for 95% of full-year attendance and net revenues. Underscoring our positive outlook are robust booking trends in our group channel and at our resort properties, along with a compelling lineup of new attractions at our largest parks. Additionally, we are encouraged by early season guest spending levels which are pacing well ahead of last year, driven by higher pricing for admissions and continued strong spending on food and beverage, and merchandise. As we fully reopen all our parks between now and Memorial Day, we are confident we will continue to build on the momentum we achieved last year.”
Zimmerman added, “The Board’s approval of another quarterly cash distribution and a new authorization to repurchase units reflects its confidence in our proven business model and the Company’s near- and long-term growth prospects. We remain committed to driving sustainable value creation through a balanced approach of investing in our business to drive growth, while maintaining a strong balance sheet and returning capital to unitholders through a quarterly cash distribution and opportunistic unit repurchases.”
Results for First Quarter 2023 Compared to First Quarter 2022
Historically, first quarter results represent approximately 5% of the Company’s full-year attendance and net revenues as most parks within Cedar Fair’s 13-market portfolio are closed during the period. Consequently, the Company typically operates at a loss during the first quarter.
Operating days in the first quarter of 2023 totaled 161, compared with 130 operating days in the first quarter of 2022. The increase was due to expanded operating calendars in the first quarter of 2023 at Carowinds, Kings Dominion, and California’s Great America, offset in part by weather-related closures at the Company’s California parks.
For the quarter ended March 26, 2023, net revenues totaled $85 million on attendance of 1.1 million guests, compared with net revenues of $99 million on attendance of 1.5 million guests for the quarter ended March 27, 2022. The decrease in net revenues was attributable to a decline in attendance of approximately 440,000 visits at the Company’s California parks, resulting from the weather challenges during the quarter, and additional prior-period visitation attributable to the extension of 2020 and 2021 season passes at Knott’s Berry Farm through May 2022. While operating days in the first quarter were up, the incremental attendance related to the expanded operating calendars was not enough to offset the attendance shortfalls caused by approximately 30% of the Company’s operating days being significantly impacted by weather during the period, particularly at Knott’s Berry Farm.
Meanwhile, early-season trends in guest spending remained strong. For the first quarter, in-park per capita spending(1) totaled $64.47, up 10% versus $58.86 in the first quarter of 2022. The increase was attributable to higher levels of guest spending on admissions, food and beverage, and merchandise during the period. The increase in admissions spending was driven by higher pricing, a lower season pass mix, and an increase in revenue recognized per season pass visit, while the increase in food and beverage and merchandise spending was primarily driven by an increase in average transactions per guest. Out-of-park revenues(1) for the period were also strong, totaling $19 million, up 17% when compared with the first quarter of 2022. The increase in out-of-park revenues was driven by the reopening of Castaway Bay Resort and Sawmill Creek Resort at Cedar Point following temporary closures for renovations, offset somewhat by a decrease in out-of-park revenues at Knott's Berry Farm due to the inclement weather.
The Company reported a 2023 first quarter operating loss of $123 million compared with an operating loss of $84 million in the prior-year first quarter. The higher operating loss reflects the impact of the extreme inclement weather on first quarter net revenues, and a $19 million increase in operating costs and expenses compared with the prior-year quarter. The higher operating costs and expenses in the current year reflect anticipated increases attributable to incremental land lease and property tax expenses related to the sale-leaseback of land at California’s Great America; higher full-time wages and related benefit costs due to planned higher head count; and an increase in advertising expense related to the expanded first quarter operating calendar. A timing difference related to pre-opening maintenance costs, in part due to supply chain challenges, also impacted first-quarter operating costs and expenses.
Depreciation and amortization expense in the first quarter of 2023 totaled $14 million compared with $10 million in the first quarter of 2022. The increase was due to the additional operating days in the first quarter of 2023 and the shortened useful lives of the assets at California’s Great America. There was also a loss on impairment/retirement of fixed assets of $4 million during the first quarter of 2023, compared with a loss of $2 million in the first quarter of 2022, which resulted from the retirement of assets in the normal course of business during both periods.
Interest expense for the first quarter totaled $32 million, a decrease of $6 million from the prior-year first quarter due to the Company’s repayment of its senior secured term loan facility and related termination of its interest rate swap agreements during 2022. Prior to the termination of the Company’s interest rate swaps, the change in fair value of the swap portfolio resulted in a $14 million benefit to earnings for the three months ended March 27, 2022. During the first three months of 2023, a benefit for taxes of $24 million was recorded to account for publicly traded partnership taxes and income taxes on the Company’s corporate subsidiaries, compared to a benefit for taxes of $19 million in the first quarter of 2022.
For the first quarter of 2023, the Company reported a net loss of $135 million, or $2.61 per diluted LP unit. This compares to a 2022 first quarter net loss of $89 million, or $1.56 per diluted LP unit. The larger net loss was attributable to lower attendance and net revenues resulting from weather-related disruptions to first quarter operations and planned higher operating costs and expenses, offset in part by the impact of higher in-park per capita spending and out-of-park revenues in the first quarter of 2023.
For the 2023 first quarter, Adjusted EBITDA(2), which management believes is a meaningful measure of the Company’s park-level operating results, was a loss of $101 million, compared with an Adjusted EBITDA loss of $68 million for the first quarter of 2022. The larger Adjusted EBITDA loss reflects the decrease in net revenues driven by a decline in attendance, which was impacted by unusually inclement weather in California, and an increase in costs in the current period, particularly for maintenance, labor, and incremental land lease and property taxes associated with the sale-leaseback of the land at California’s Great America. See the attached table for a reconciliation of net loss to Adjusted EBITDA.
Balance Sheet and Liquidity Highlights
Deferred revenues as of March 26, 2023, including non-current deferred revenue, totaled $208 million, representing a decrease of $26 million, or 11%, when compared to March 27, 2022. Included in the prior-period balance was approximately $20 million of deferred revenue carryover related to the extension of 2020 and 2021 season passes into 2022 at Knott’s Berry Farm and Canada’s Wonderland due to pandemic-related park closures in their respective markets. Excluding the carryover, deferred revenues at the end of the 2023 first quarter would have been down approximately $6 million, or 3%, from the balance at the end of the first quarter of 2022. Of the $6 million variance, half was due to a change in the timing of sponsorship revenue billing, while the balance reflects the weather impact on early-season sales of season passes and related all-season products.
As of March 26, 2023, Cedar Fair had total liquidity of approximately $144 million, including cash on hand and available borrowings under its revolving credit facility. This compares with $284 million of total liquidity on March 26, 2022, and $381 million of total liquidity on Dec. 31, 2022. Net debt(3) on March 26, 2023, calculated as total debt of $2.47 billion (before debt issuance costs) less cash and cash equivalents of $34 million, totaled $2.44 billion.
Distribution and Unit Repurchases
On April 12, 2023, the Company completed its $250 million unit repurchase program, buying back a total of 6 million limited partnership units since inception, or approximately 10% of its total units outstanding at the beginning of 2022. Today, Cedar Fair announced the Board of Directors has approved a new authorization, permitting the Company to buy back additional units in the open market, or through privately negotiated transactions, up to $250 million.
“Combined with the payment of our quarterly cash distributions, the new buyback authorization allows us to be opportunistic in the market and gives us a more timely and efficient means for returning capital to unitholders,” added Zimmerman.
As with the recently completed repurchase program, management plans to repurchase units of Cedar Fair opportunistically using free cash flow from operations and does not intend to increase leverage to buy back units. Repurchases may be made at management’s discretion from time to time in accordance with all applicable securities and other laws and regulations. The extent and timing to which the Company repurchases units will depend upon a variety of factors, including liquidity, capital needs of the business, market conditions, regulatory requirements, and other corporate considerations. No limit is placed on the duration of the new authorization, and the authorization does not obligate the Company to repurchase any minimum dollar amount or number of units.
The Company also announced the Cedar Fair Board of Directors has declared a cash distribution of $0.30 per LP unit, payable on June 21, 2023, to holders of record on June 7, 2023.
I find it ironic that they blame it on the “weather.” Many of their parks are infamous for closing early due to low attendance and then blaming the weather.
They have sent a loud message to customers not to come if the weather looks bad.
The revenue is down because their business plan relies on good weather! They don’t invest in indoor attractions and theaters. They thought they could operate Kings Dominion year round with all outdoor attractions?! Hoping the weather would be great all winter?
I personally will not go to a Cedar Fair park if it’s an unfavorable forecast. I have been burnt by their early ghost weather closures multiple times after traveling.
It used to be the amusement park entertainment was a safe decision regardless of weather. They shears used to operate advertised hours. Not any more.
Cedar Fair isn’t the only one that does this. Kennywood is even worse. I never go there because of it.
Part of the problem is their cheap season pass strategy IMO. On these early closure days I’m guessing it’s a high percentage of local passholders since they have discouraged travelers from attending with their early closure policies. I think there’s an attitude that they can crap on the season pass holders and they will still be another season pass since the passes are priced so low.
Kennywood closes when there is any kind of an indication of bad weather because of the tragic incident with the Whip building. I imagine that procedure was implemented strongly under the "suggestion" of their liability underwriter. https://www.wtae.com/articl...2/40149382
super7*:
I find it ironic that thru bksne it on the “weather.”
Well, I find it ironic that shmel frclaeif with the "sausage."
At some point the nearly 2.5 billion dollar debt is going to have to be dealt with, especially given our world now where low interest rates are a thing of the past. Buy-backs and quarterly cash distributions are just happiness-inducing incentives for Wall St. and short term investors to hang around to make a quick buck, it’s the long-term investors who end up getting hurt IMO.
My recollection of the Burke days at Six Flags is that his philosophy of just spending and sitting on/rolling over billions of dollars of debt is what got the company into big trouble when the Great Recession hit. Cedar Fair would be wise to think about that given they have better income generation right now than Six Flags did in the former scenario.
super7*:
I find it ironic that they blame it on the “weather.”
I mean, the average rainfall in Fullerton (closest I could find in 12 seconds of Googling) is about 7.5 inches per year, whereas this year they had 18 inches of rain through March 15. So it might be justified this quarter?
Gunkey Monkey:
At some point the nearly 2.5 billion dollar debt is going to have to be dealt with
Pretty sure that's what this was about.
The thing is, it's cyclical. But when you look at it relative to revenue multipliers, I think that's what makes investors nervous. Just a guess, but I think demand will soften this year. If that's the case, that ratio gets more important.
Jeff - Editor - CoasterBuzz.com - My Blog
Post-winter demand seems to be up. At least here in Ohio where both big-hitter seasonals have had full parking lots for their opening weekends.
super7*:
I find it ironic that they blame it on the “weather.” Many of their parks are infamous for closing early due to low attendance and then blaming the weather.
They have sent a loud message to customers not to come if the weather looks bad.
Last May I did a trip to Hershey Park and the two days I was there it was cool and rained non-stop. They opened the rides they could throughout the day as the rain let up at times, but Candymonium, SkyRush and Storm Runner never even tested throughout my two day visit.
I give them credit for staying open on a weekday in May throughout the two days of non-stop rain. A lot of the other parks in the area stuck in the same storm closed at noon, including Great Adventure and Dorney park. Meanwhile Hershey Park's stores and restaurants were packed with people spending money while looking to stay dry during the periods of heavy rain.
They also gave out rainchecks for future visits. Even though I knew I wouldn't be able to use the raincheck, and didn't get to ride the coasters I went for, I still ended up leaving happy. The park stayed open the whole time. I was able to enjoy most of the rides during the light periods of rain, and I ended up enjoying a lot of the food options I might have missed had the weather been better. Had Hershey Park decided to close at noon both those days like the other parks did, a lot of people who ended up leaving happy would have definitely had a bad experience. Unfortunately it seems a lot of the parks that decide to close early are short sighted and the cut your losses attitude ultimately has a effect on future attendance.
If Hershey is operating like that, it encourages me to travel there. That sounds like proper bad weather operations. Everything doesn’t have to be open, but at least keep the park open advertised hours for the customers that have traveled and spent money on travel and lodging.
Not all Cedar Fair parks crap on their customers when it rains. I went to Canada’s Wonderland last year and it stayed open advertised hours on rainy days. The first day it rained hard. Does Canada have a law protecting employees to work scheduled hours or is CW simply better managed?
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