From the press release:
Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, today announced results for the first quarter ended March 25, 2018. Historically, first-quarter results represent less than 5% of the Company's full-year net revenues as the majority of its parks and facilities are closed during this quarter. As a result, the Company typically operates at a loss during this period.
"Our commitment to investing in high quality and immersive experiences at our parks is a differentiator for Cedar Fair and our guests," said Richard Zimmerman, Cedar Fair's president and chief executive officer. "We believe everything we do should be unique by scale and unique by offer. In doing so, we are able to elevate the overall guest experience, encourage repeat visitation, provide greater pricing power and more aggressively market to incremental audiences outside the traditional geographic market range of our parks."
"The success of this strategy was evident during the first quarter at Knott's Berry Farm, our only park with meaningful first-quarter operations," continued Zimmerman. "During the quarter, the introduction of a new Peanuts Celebration and growth in the Knott's Annual Boysenberry Festival were large contributors to our strong early-season performance in 2018. The immersive, multi-week, multi-generational events we have worked hard to create continue to build upon Knott's unique regional brand and provide even greater value to its 'Seasons of FUN' season pass program, which is also off to a very positive start in 2018."
Commenting on the positive reception of the Company's new rides and attractions, including Cedar Point's world-record-breaking hyper-hybrid roller coaster, Steel Vengeance, Zimmerman stated, "Our season passholders experienced their first rides on Steel Vengeance this past week and the response was extraordinary. We are proud to say Steel Vengeance is truly a ride like no other."
For the first quarter ended March 25, 2018, Cedar Fair's net revenues increased to $55 million, compared with $48 million in the first quarter ended March 26, 2017. The solid increase in revenues for the current-year first quarter was driven by increases in both attendance and average in-park guest per capita spending.
The operating loss for the quarter was $76 million, comparable with the operating loss reported in the first quarter of 2017. The increased revenues noted above, were partially offset by a $6 million increase in operating costs and expenses, which totaled $124 million for the first quarter of 2018. The increase in operating costs and expenses was in-line with the Company's expectations and reflects higher costs to support the increased attendance and guest spending in the quarter; higher labor costs due to market/minimum-wage rate increases; and higher operating expenses attributable to disassembling of attractions and decorations associated with the inaugural WinterFest holiday events at three parks. Depreciation and amortization and loss on impairment/retirement of fixed assets were comparable with the prior-year first quarter.
Interest expense for the first quarter of 2018 increased slightly to $20 million due to an increase in term debt from the Company's April 2017 refinancing. The net effect of the Company's swaps during the quarter resulted in a $4 million benefit to earnings, reflecting the change in fair market value movements in the Company's de-designated swap portfolio offset by the amortization of amounts in "Other Comprehensive Income" related to the outstanding swaps. During the first quarter of 2018, the Company also recognized a $10 million net charge to earnings for foreign currency gains and losses related to the U.S.-dollar denominated Canadian term loan compared with a $3 million net benefit to earnings for the first quarter in 2017.
A net benefit of $19 million was recorded to account for the tax attributes of the Company's corporate subsidiaries and publicly traded partnership taxes during the first quarter of 2018, compared with a net benefit of $28 million for taxes in the same period a year ago. This decrease in benefit for taxes relates largely to the decrease in the federal statutory income tax rate implemented by the Tax Cuts and Jobs Act which was signed into law during the fourth quarter of 2017. Actual cash taxes paid or payable are estimated to be between $40 million and $50 million for the 2018 calendar year.
The net loss for the first quarter ended March 25, 2018, totaled $78 million, or $1.39 per diluted limited partner (LP) unit. This compares with a net loss of $65 million, or $1.16 per diluted LP unit, for the first quarter a year ago. The increase in net loss is primarily a result of increased net revenues more than offset by planned increases in operating costs and expenses, an increase in the loss on foreign currency and a lower benefit for taxes.
Adjusted EBITDA, which management believes is a meaningful measure of the Company's park-level operating results, for the first quarter of 2018 was comparable with the same period a year ago. This is the result of increased net revenues for the quarter due to increased attendance and average in-park guest per capita spending offset by increased operating costs and expenses associated with labor, operating supplies and other planned spending.
Cash Flow and Liquidity Remain Strong
As of March 25, 2018, the Company had $735 million of variable-rate term debt (before giving consideration to fixed-rate interest rate swaps), $950 million of fixed-rate debt (excluding amounts related to debt issuance costs), $40 million of borrowings under its revolving credit facilities, and $43 million of cash and cash equivalents on hand. The Company believes it is in a strong position to produce future cash flows from operations that, combined with its existing credit facilities, will be sufficient to meet working capital needs, debt service, planned capital expenditures and distributions for the foreseeable future.
The Company also announced today the declaration of a cash distribution of $0.89 per LP unit. The distribution will be paid on June 15, 2018, to unitholders of record as of June 4, 2018. This distribution reflects the Company's confidence in its business model and long-term strategy and is consistent with its targeted annualized distribution rate of $3.56 per LP unit for 2018.
"As we head into our core operating season, we remain enthusiastic about our plans, progress and potential - driven by our 2018 initiatives and the highly talented associates at our parks," said Zimmerman. "We have a solid line-up of new attractions for 2018, including four new world-class coasters and the continued investment in the growing market of Charlotte, North Carolina, with the expansion of our PEANUTS-themed children's area at Carowinds. In addition, we expect immersive, multi-week special events and unique culinary offerings to be key drivers of success at each of our parks in 2018."
In February, the Company announced that it had finalized a deal to build a 129-room SpringHill Suites hotel adjacent to Carowinds, which should come on line in late 2019. "We continue to pursue complementary development opportunities adjacent to our parks that will drive incremental attendance and create a consistent revenue stream. Along with the recent investments in the park, we expect the new Carowinds hotel to enhance the park's position as a multi-day destination in the same way the hotel investments have done at Cedar Point. And, we believe there are similar opportunities at our other properties," continued Zimmerman.
The Company also continues to extend the operating season at many of its parks into November and December with its new WinterFest holiday celebrations. With the introduction of WinterFest at Kings Dominion in 2018, more than half of Cedar Fair's amusement parks will be in operation in November and December. The Company continues to analyze the opportunity to bring this event to more parks in the future.
Zimmerman concluded by stating, "This is an exciting time for Cedar Fair as we prepare for our busiest time of the year and continue to execute on our strategies. While the majority of our operating season is still ahead of us, based on early-season trends and confidence in our business model, we believe we are well positioned to deliver another outstanding year in 2018. We remain confident in our ability to maintain the growth trajectory we have produced for the past several years, which supports our commitment to a steady 4% increase in our annual distribution rate going forward."
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