Resorts and attendance drive record results for Cedar Fair

Posted | 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.