Resorts and attendance drive record results for Cedar Fair

Posted Wednesday, November 2, 2016 8:41 AM | Contributed by Jeff

From the press release:

Cedar Fair (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today reported results for its third quarter ended September 25, 2016. The Company also announced an increase in its quarterly cash distribution and stated it remains on track to achieve its FUNforward 2.0 growth goal earlier than its original target of 2018.

Highlights

  • Cedar Fair reported record net revenues of $1.1 billion through the third quarter, a 3% increase over last year's record results for the same nine-month period.
  • Net revenues through October 30, 2016, were up 4%, driven by a 2% increase in attendance, a 1% increase in in-park guest per capita spending and a 6% increase in out-of-park revenues, including resort accommodations.
  • Cedar Fair's Board of Directors declared a 4% increase in the Company's quarterly cash distribution to $0.855 per limited partner (LP) unit, payable December 15, 2016. This distribution represents an annualized rate of $3.42 per LP unit and an attractive 6% yield at current market prices.
  • Cedar Fair remains confident in its FUNforward 2.0 business strategy and its ability to reach its Adjusted EBITDA goal of $500 million earlier than its original target of 2018.

"We are pleased with our accomplishments and record results to date for 2016," said Matt Ouimet, Cedar Fair's chief executive officer. "We believe our strategy of getting families to our parks early in the season and getting them to return often will result in our seventh consecutive year of record results, including record attendance, record guest spending and record cash flows.

"Although we faced challenges in 2016, we are very pleased to be at record attendance levels through the end of October, fueled by the record post-Labor Day performance," said Ouimet. "As we finish 2016 we look forward to an expanded operating season at California's Great America with the introduction of WinterFest and the continued success of Knott's Merry Farm. In both cases, the parks are transformed into spectacular winter wonderlands with holiday shows and festivities for every member of the family. Kings Island, Carowinds and Worlds of Fun are already planning their season-extending WinterFest holiday festivals for next year."

Cedar Point Sports Center kicks off its inaugural season in 2017, hosting athletes and their families from around the country, all of whom will combine the thrill of competition with all the thrills offered by Cedar Point. In combination with the opening of the new sports park, the Company is expanding its resort accommodations. Cedar Point's Express Hotel will add more rooms in 2017, and an additional tower of rooms at Hotel Breakers on Cedar Point's mile-long beach is scheduled to open for the 2018 operating season. The Company has also received excellent response to the new rides and attractions it announced for its parks in 2017 and advance purchase commitments, including season pass sales, all-season dining and all-season beverage sales, are trending ahead of 2016's record sales.

Ouimet concluded by stating, "We remain on track to achieve our FUNforward 2.0 Adjusted EBITDA goal of $500 million earlier than our original target of 2018. We remain focused on growing our business in a responsible way that, in turn, supports a sustainable and growing distribution."

Nine-Month Results

Net revenues were $1.1 billion for the nine months ended September 25, 2016, an increase of $28 million, or 3%, compared with the nine-month period ended September 27, 2015. Net income was $184 million, or $3.27 per diluted LP unit, compared with net income of $138 million, or $2.46 per diluted LP unit, for the first nine months of 2015.

The increase in revenues was the result of a 1%, or 283,000-visit, increase in attendance, a 1%, or $0.52, increase in in-park guest per capita spending and a 6%, or $7 million, increase in out-of-park revenues.

Operating costs and expenses through the first nine months of the year were $676 million, an increase of $28 million, or 4%, from the first nine months of 2015. The increase was in-line with Company expectations for the first nine months and reflects higher costs to support the increased attendance and guest spending, combined with higher labor costs due to market/minimum-wage rate increases and normal merit increases. As a percent of net revenues, cost of goods sold was comparable with the same period last year.

Adjusted EBITDA, which management believes is a meaningful measure of the Company's park-level operating results, was $428 million for the first nine months and comparable with the record results for the same period last year. See the attached table for a reconciliation of net income to Adjusted EBITDA.

Third-Quarter Results

Cedar Fair's net revenues increased to a record $650 million for the third quarter, up from $645 million in the third quarter a year ago. Net income for the quarter was $175 million, or $3.10 per diluted LP unit, compared with $164 million, or $2.92 per diluted LP unit, during the same period last year.

The increase in revenues for the quarter was the result of a 1%, or $0.52, increase in in-park guest per capita spending and a 5%, or $3 million, increase in out-of-park revenues, including resort accommodations. These increases were slightly offset by a less than one percent, or 54,000-visit, decrease in attendance compared with last year's record third quarter.

Third-quarter operating costs and expenses of $316 million increased $14 million compared with the third quarter of 2015. The increase was primarily attributable to an increase in labor costs due to higher market/minimum wage rates and normal merit increases. Cost of goods sold was comparable with the prior year period.

Adjusted EBITDA for the third quarter was $336 million, down $10 million, or 3%, when compared with the same period last year. The decrease in Adjusted EBITDA during the third quarter of 2016 was the direct result of an extended period of record high heat during the last half of July and first half of August across the majority of the regions in which the Company operates. This resulted in a shortfall in attendance and a shift in consumer spending away from the amusement parks to the Company's water parks, where guests historically have spent less. A shorter average length of stay also occurred at the Company's parks during this period due to the record heat and humidity.

Momentum Continues Through October

Based on preliminary results, net revenues through October 30, 2016, were approximately $1.23 billion, up 4%, or $42 million, compared with $1.19 billion for the same period last year. The rise in net revenues was the result of a 2%, or 558,000-visit, increase in attendance to a record 24.2 million visits, a 1%, or $0.52, increase in in-park guest per capita spending to a record $46.82 and a 6%, or $8 million, increase in out-of-park revenues to a record $135 million compared with 2015.

"We had a record Post-Labor Day performance, driven by our highly popular Halloween events at all of our parks," said Ouimet. "Along with our world-class rides and attractions, our multi-week special events such as Halloween-themed offerings, help to further differentiate our parks with the kind of unique and compelling family entertainment that our guests cannot find anywhere else."

Distribution Declaration

Today, the Company also announced the declaration of a quarterly cash distribution of $0.855 per LP unit, an increase of 4%. The distribution will be paid on December 15, 2016, to unitholders of record as of December 5, 2016.

"We believe the 4% increase in the distribution represents a very attractive 6% yield at today's prices," said Ouimet. "We remain confident in our business model, the consistency of our cash flow and the strength of our balance sheet, which provides us the ability to grow the distribution on an annual basis, while having the flexibility to invest in strategic growth opportunities."

Read the entire press release from Cedar Fair.

Wednesday, November 2, 2016 10:31 AM

Also, Cedar Fair had different weather than Six Flags, obvs.

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Wednesday, November 2, 2016 11:25 AM

Was thinking the same thing when I read the headline Jeff. I'm not getting how SF is blaming weather.

My daughter plays travel softball. This past summer we were in Michigan, Columbus 3 times, Wheeling, Myrtle Beach and 2 local tournaments (Western PA). That's 8 weekends from Memorial Day through first week of August. Not one tournament got rained out or even delayed due to weather. Compare that to last year where 6 out of 7 tournaments incurred some kind of delay (games pushed back/shortened/eliminated) with one tourney being canceled altogether, again in the Ohio/Western PA area and one in Hershey. Now I realize that is just a small area of the country, but was it that much different everywhere else?

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Wednesday, November 2, 2016 11:55 AM

Couple thoughts about weather. I'll give Six Flags the benefit of the doubt that weather had an actual impact.

  • There are four locations where two parks are within 90 minutes of a competitor (SFMM & Knotts, SFDK & CGA, SFGADV & Dorney, SFA-Dominion). In other words, the majority of the properties do not overlap and would have their own unique weather conditions.
  • In those overlapping markets, the parks are impacted differently from weather. Knott's is open every day and has more tourists (with pre-planned trips) compared to Magic Mountain which draws more regionally. Bad weather at Dorney and bad weather at Great Adventure mean different things for sure. Great Adventure is one of the company's busiest parks, obviously not the case at Dorney.
  • Timing plays a role. Supposing you had 8 rainy days all year, but those 8 days were all Saturdays during your season, that would cause a disparate impact than if those rain days had been during the week. Not all rainy days are equally bad.
  • Forecasts make a difference. Regional parks are susceptible to unfavorable forecasts of rain, whether or not rain actually occurs. Again, a forecast of rain on a weekend can drive down attendance, even if rain never hits.

So if anything, I think Six Flags is guilty of not elaborating on why weather played an impact, and usually that is because they don't want to talk about specific parks under-performing.

Last edited by Fun, Wednesday, November 2, 2016 11:57 AM
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Wednesday, November 2, 2016 2:16 PM

I think more than ever folks are looking for an overall experience that includes good guest service, a "well rounded" guest experience and a perception of feeling money is well spent. Cedar Fair continues to strengthen their delivery of that kind of experience with each passing year as the new leadership regime has settled into a nice rhythm. Six Flags still gives, well, the Six Flags experience.

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Wednesday, November 2, 2016 5:42 PM

IMO CF charges more on admissions and Season Passes than Six Flags does, so you see CF getting much more revenue than SF. Also Six Flags gives away way too many Bring a Friend Free Admissions, at Six Flags over Georgia they have a weekly bring a friend free day for Season Pass holders. It does bring people into the gates at Six Flags by the troves, but they are getting no revenue on those free admissions. Also people like myself tends to stay away from the park on those days. When I get an email stating Bring a Friend Free is going on a day I want to go. I avoid the park at all costs.

When Cedar Fair does Bring a Friend at my home park Worlds of Fun, they generally gives us a very nice discounted price, sometimes as low as $9.95, but usually $19.95 and $24.95 during the Haunt. The only exception to this Bring a Friend is they do 1 free admission to the Haunt for a Friend when I renewal (or bring yourself if you got a new pass) and you can only use it once. However that is still not as much as Six Flags does it and not all Cedar Fair Parks does it. In fact I don't think all Six Flags Parks does it either but most of them do and when they do, they do it too much.

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Wednesday, November 2, 2016 10:27 PM

Jeff said:

Also, Cedar Fair had different weather than Six Flags, obvs.

What's your deal with Six Flags?

Did you read the press release or the financials.... of either company?

Through 9/30, Six Flags revenue is up 3% and EBITDA is up 3% (4% on constant-currency basis)

Through 9/30, Cedar Fair revenue is up 3% and EBITDA is flat.

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Thursday, November 3, 2016 10:48 AM

My "deal?" I almost never think about Six Flags, because there isn't one even remotely close to me. So thanks for playing. I was merely pointing out that while CF grows revenue and attendance, Six Flags did the opposite and blamed the weather. And honestly, EBITDA strikes me as a silly thing to watch with a capital intensive business like theme parks. It sure didn't measure Cedar Fair accurately under the previous leadership.

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Thursday, November 3, 2016 1:38 PM

Jeff said:

My "deal?" I almost never think about Six Flags, because there isn't one even remotely close to me. So thanks for playing. I was merely pointing out that while CF grows revenue and attendance, Six Flags did the opposite and blamed the weather. And honestly, EBITDA strikes me as a silly thing to watch with a capital intensive business like theme parks. It sure didn't measure Cedar Fair accurately under the previous leadership.

Huh?

Cedar Fair revenue increased 3%, Six Flags revenue increased 3%. That's pretty simple fact.

And EBITDA, which Cedar Fair calls "a meaningful measure of park-level operating results" increased 3% for Six Flags and was flat for Cedar Fair. Another pretty simple fact.

Both companies are doing very well right now with stock at record-highs, yet what you are saying about CF "growing revenues" and Six Flags "doing the opposite" just is demonstrably not true.

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Thursday, November 3, 2016 1:46 PM

Chicago07 said:

Six Flags revenue increased 3%. That's pretty simple fact.

Huh?

From the nasdaq link:

Revenue fell 3% to $557.6 million.

Revenue from admissions fell 4.4%, and total guest spending also declined.

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Thursday, November 3, 2016 2:07 PM

Its a matter of looking at different time periods. For the quarter ending September 30 (3 month period), Six Flags revenues were down 3%. For the 9 months ending September 30 (year to date), SF revenues were up 3%.

EBITDA is a commonly used measurement of cash flow generated from a company's operations (including those in capital intensive industries). You can argue EBIT would be better but that comes with its own issues if depreciation and capital expenditures do not track with each other. You can also get there is you look at EBITDA and projected capital expenditures (though outside management, that is typically a guess). EBITDA is also the basis for valuing companies (multiple of EBITDA) and as a component of financial covenants in credit/debt documents. To say its a silly thing to watch EBITDA with capital intensive businesses is quite frankly, silly.

Last edited by GoBucks89, Thursday, November 3, 2016 2:33 PM
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Thursday, November 3, 2016 2:15 PM

Lord Gonchar said:

Chicago07 said:

Six Flags revenue increased 3%. That's pretty simple fact.

Huh?

From the nasdaq link:

Revenue fell 3% to $557.6 million.

Revenue from admissions fell 4.4%, and total guest spending also declined.

Yea, I am using year-to-date for both Six Flags and Cedar Fair 1/1/16 through 9/30/16 (end of Q3)

Revenue for both up 3% with EBITDA up 3% at Six Flags and flat at Cedar Fair

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Thursday, November 3, 2016 3:17 PM

Well, I believe the discussion prior was third quarter results of both companies based on latest reports. At least that's what both news articles in question refer to.

I don't think Jeff's take is really out of line in context and a SF blaming the weather is a long running joke around here.

Let the record show that YTD, SF is doing just as well as CF, but during the peak summer quarter they sucked balls...because weather.

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Thursday, November 3, 2016 4:08 PM

#wronglyentitledballs?

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Thursday, November 3, 2016 5:04 PM

GoBucks89 said:

To say its a silly thing to watch EBITDA with capital intensive businesses is quite frankly, silly.

Is it though? Not also paying attention to debt, or the debt to EBITDA ratio, is like pretending that everything is awesome because you can run the business and not talk about what you owe. And with regard to cap ex, how do you not talk about depreciation and amortization when you have to spend tens of millions of dollars in each park (except Michigan's Adventure ;)) year after year?

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Thursday, November 3, 2016 5:14 PM

Sawblade5 said:

A bunch of stuff about pricing

Now maybe Six Flags really is that dumb, but they've maintained their pricing structure (and pass pricing in particular) at nearly constant levels for as long as I've paid attention (15 years) and through multiple leadership changes. I have to assume that they know something we don't or they see themselves fundamentally differently from CF. In particular, I can't imagine that their financial issues can be boiled down to "we forgot to charge more money."

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Thursday, November 3, 2016 11:17 PM

So its silly to track EBITDA because debt also matters? Who said it didn't? How do you calculate a debt to EBITDA ratio without tracking EBITDA? Revenues, net income and attendance also do not take into account debt. Presumably its not silly to track those?

Looking at debt to EBITDA ratio, what ratio is good? Or too high? I recall that Cedar Fair's credit docs include debt to EBITDA ratio covenant which I believes steps down over time. That gives you an idea where the company's lenders want to see leverage. May not be whats best for the company itself (particularly in the long run).

As I noted, EBIT could be a better cash flow measurement with capital intensive companies. But what happens when annual depreciation is $10 million and annual capex is $30 million (made up numbers) if you look at EBIT (not adding depreciation back to income to calculate cash flow)? Or when capex does varies from year to year but depreciation does not?

Looking at EBITDA and projected capex (or historical capex which is available to the public) takes into account those issues.

EBITDA isn't the only factor when looking at the financial health of a company. But it is part of the total picture.

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Friday, November 4, 2016 10:07 AM

My point is that the press releases always emphasize EBITDA in a vacuum, and you have to dig deeper to get a bigger sense of what's going on. All the way up through Six Flags' bankruptcy and Cedar Fair's almost-sale, they would tout it quarter after quarter. Give three cheers for EBITDA strikes me as dishonest.

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Friday, November 4, 2016 4:15 PM

Would striking the EBITDA discussion make the earnings release more honest? Revenue, net income and attendance figures are stated in a vacuum too (at least relative to debt and/or capital expenditures). Though in reality, none of that info (including EBITDA) is given in a vacuum. There is other info available in the earnings release and in other info the company provides investors/analysts. Might not fit easily in a text box but its there.

If someone wanted to calculate the debt to EBITDA ratio they would only need to scroll down the earnings release to get to the balance sheet summary for debt. Had they breached the covenant in their credit agreement, the earnings release would have mentioned that (or they would have made a separate disclosure).

I don't remember Six Flags or Cedar Fair EBITDA disclosures leading up to and through SF's bankruptcy or CF's almost sale. But I do recall the financial meltdown (and financial institutions not wanting/being unable to lend money as a result thereof) were significant causes of both events. SF may not have filed bankruptcy had they been able to refinance their debt. May have been more likely they just would have been able to delay the filing though. I don't see the CF proposed sale ever coming up for a unitholder vote had CF been able to refinance its debt (I recall them giving that as the reason for the sale -- without refinancing there were going concern issues).

Without that financial markets collapse (which next to no one saw coming) seems clear CF would have been fine. Not as clear with respect to SF. May well just have delayed some type of restructuring (in or out of a bankruptcy). What disclosures/discussions would you expect companies to make for such an unlikely event (other than in the list of risk factors which I suspect few people actually read)?

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Friday, November 4, 2016 4:45 PM

Context, man... slide back up the thread. This was all in response to the other dude's post who suggested that I was a Six Flags hater.

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