[Ed. note: The following is an excerpt of a press release. -J]
Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today reported record revenues for its third quarter ended September 28, 2014 and announced a 7% increase in its quarterly cash distribution.
Cedar Fair reported record net revenues of $595 million in the third quarter. The 1% increase over last year's record results reflects the Company's continued success in increasing average in-park guest per capita spending1 across all categories.
Net revenues on a comparable-park basis through Sunday, November 2, 2014, were up 2%, driven by a 3% increase in average in-park guest per capita spending, which was offset somewhat by a less than 1% decline in attendance.
With more than 95% of its operating days complete, the Company expects to achieve full-year net revenues at the low end of its current revenue guidance range of $1.15 billion to $1.17 billion. It also anticipates being at the low end of its current Adjusted EBITDA guidance range of $425 million to $435 million.
The Company continues to believe in the strength of its business model and, with an Adjusted EBITDA CAGR of 4% since 2012, is on track to achieve its FUNforward long-term growth goal of $450 million or more in Adjusted EBITDA by its original target of 2016. Cedar Fair's Board of Directors declared a 7% increase in its quarterly cash distribution to $0.75 per limited partner (LP) unit, payable December 15, 2014.
"The foundation for our continuing ability to drive a fifth year of record results is our commitment to providing a compelling park experience for audiences of all ages," said Matt Ouimet , Cedar Fair's president and chief executive officer. "Our high-quality assets and operational excellence drive increased guest spending and repeat visitation. Through this past weekend, net revenues increased at all of our properties, with the exception of those in the Great Lakes region which experienced challenging weather patterns throughout the year. Two of our largest parks - Kings Island and Knott's Berry Farm - will deliver record profitability and in spite of a challenging year weather-wise, our flagship park, Cedar Point, will have its second best year ever.
"Guests have responded extremely well to our new rides, attractions and live entertainment this year bringing our in-park guest spending to record levels," continued Ouimet. "While remaining committed to investing in the guest experience puts moderate pressure on our 2014 operating margins, we believe our efforts in this area will manifest themselves in the form of increased attendance, price elasticity, length-of-stay and in-park spending over the long term. This has certainly been the case at Knott's Berry Farm, where this program has been actively applied over the past three years."
Ouimet concluded, "Based on our current year performance, our positive outlook and our strong balance sheet, our Board has declared a 7% increase in our 2014 fourth-quarter distribution. This reflects our confidence that our cash flow will continue to be more than sufficient to maintain this distribution amount into 2015 and beyond, while also allowing us to strategically invest in our business to support long-term growth."
Cedar Fair's net revenues increased to a record $595 million for the third quarter, up from $592 million in the third quarter a year ago. Net income for the quarter was $162 million, or $2.90 per diluted LP unit, compared with net income of $190 million, or $3.41 per diluted LP unit, during the same period last year.
The increase in revenues for the quarter was the result of a 2%, or $0.85, increase in average in-park guest per capita spending, offset somewhat by 1% decreases in both attendance and out-of-park revenues. Excluding a non-core, stand-alone water park sold in August 2013, attendance on a comparable-park basis was down less than 1%, or 65,000 visits.
Strength within in-park guest per capita spending has been widespread across all parks and categories. In-park food and beverage spending was a strong contributor to third-quarter results and was driven by momentum in bundled value meals and a variety of new, all-inclusive dining options. Comparable-park attendance for the quarter was negatively impacted by challenging weather in the Great Lakes region.
For the third quarter of 2014, operating costs and expenses were $283 million, up $8 million from the prior-year third quarter. The increased costs for the quarter were largely the result of budgeted increases in operating expenses, which included: 1) an increase in both seasonal labor hours and rates; and 2) initiatives focused on enhancing the overall guest experience, including the introduction of more midway entertainment throughout the parks and a new policy offering complimentary admission to the Dinosaurs Alive! attraction for the Company's most loyal season pass customer base. The cost of food, merchandise and games revenues also increased slightly due to increased guest spending across all categories of the Company's business. As a percent of revenues, these costs remain comparable with the prior year period. Slightly offsetting these increases in the quarter was a small decrease in selling, general and administrative expenses - a result of decreased incentive compensation when compared with last year's record performance.
Adjusted EBITDA, which management believes is a meaningful measure of the Company's park-level operating results, for the third quarter of 2014 was $316 million compared with $318 million for the same period last year. The decrease in Adjusted EBITDA for the quarter is the result of higher operating costs associated with the Company's long-term commitment to enhancing the overall guest experience, combined with a slight year-over-year decrease in attendance. This was partially offset by increased net revenues in the quarter which were driven by the higher guest spending levels.
Results Through October
Based on preliminary results, net revenues on a comparable-park basis through November 2, 2014 were up 2%, or $19 million, to approximately $1.12 billion. The increase was the result of a 3%, or $1.20, increase in average in-park guest per capita spending to a record $45.62, somewhat offset by a $2 million decrease in out-of-park revenues to $114 million and a less than 1% decrease in comparable-park attendance to 22.6 million visits.
Commenting on October results, Ouimet said, "Our Halloween events continue to grow in popularity, and we are pleased to announce we achieved record demand for these events this year. Since the end of the third quarter, we have experienced 5% increases in both comparable-park attendance and average in-park guest per capita spending. The record attendance and revenues achieved at our parks over the past five weeks reaffirms our confidence in our business model along with the strength and loyalty of our consumer base."
Cash Flow and Liquidity Remain Strong
As of September 28, 2014, the Company had $619 million of variable-rate term debt (before giving consideration to fixed-rate interest rate swaps), $950 million of fixed-rate debt, no outstanding borrowing under its revolving credit facilities and cash on hand of $189 million. The Company believes its credit facilities and cash flows are sufficient to meet working capital needs, debt service, planned capital expenditures and distributions for the foreseeable future.
Today, the Company also announced the declaration of a cash distribution of $0.75 per LP unit. The distribution represents an increase of 7% and will be paid on December 15, 2014, to unitholders of record as of December 3, 2014.
"While we are pleased to report record net revenues this year, undoubtedly our team has faced some short-term challenges," said Ouimet. "A harsh winter, regional flooding, a water main break and challenging weather in the Great Lakes region has caused us to analyze our business model with an even more critical eye to ensure we are responsive to any changes in underlying consumer trends. Through this analysis we have even greater confidence that our business model is strong and our long-term strategy is working. With less than 5% of our operating days remaining, we anticipate full-year net revenues to be at the lower end of our current guidance of $1.15 billion to $1.17 billion. We also anticipate being at the lower end of our current Adjusted EBITDA guidance range of $425 million to $435 million.
"As we move into 2015, we believe the experience of our management team, combined with our high-quality assets and the insights gained from this past year, provides us with a strong base to build upon. We will continue to market innovative new products and experiences across all of our parks with our capital spending concentrated in the regions where we believe we will see the greatest long-term returns. Leading the swarm, Fury325, a world-record breaking roller coaster at Carowinds, will serve as the centerpiece of a new, state-of-the-art main entrance, and it represents the first step in a multi-year plan to transform Carowinds into a world-class entertainment destination. Our 2015 capital plan also includes the introduction of Rougarou, a new coaster experience at Cedar Point, and the debut of the newly-renovated, historic Hotel Breakers, located on the park's mile-long beach in Sandusky, Ohio," continued Ouimet.
Ouimet concluded by stating, "I am proud of our team and their unwavering commitment to the guest experience and our world-class properties. Based on current trends, we believe we are on track to achieve our long-term target of $450 million or more in Adjusted EBITDA by our original target of 2016."
Get the entire press release from Cedar Fair.