Cedar Fair reduces salaries, cuts expenses, stops distribution in response to pandemic

Posted | Contributed by Jeff

From the press release:

Cedar Fair Entertainment Company (NYSE: FUN), a leader in regional amusement parks, water parks and immersive entertainment, said today that, given the continued uncertainty surrounding the coronavirus (COVID-19) pandemic, the Company has undertaken proactive cost-reduction measures to provide it with enhanced financial flexibility while its parks remain closed.

“As we work to ensure the safety and well-being of our employees, guests and business partners from the effects of COVID-19, it’s important we also embrace measures that will ensure our financial flexibility through this difficult period,” said Richard Zimmerman, President and CEO of Cedar Fair. “After social distancing recommendations by the authorities are lifted, we look forward to opening our parks as soon as reasonably possible. The actions we are announcing today help put us in a better position to do so as we navigate the unknown environment ahead.”

COVID-19 Response

Since closing its parks in March 2020 in response to COVID-19 health recommendations, the Company has taken the following proactive measures to reduce operating expenses and cash outflows:

  • Eliminated nearly all of its seasonal and part-time labor costs until its parks prepare to reopen,
  • Suspended all advertising and marketing expenses, and reduced general and administrative expenses and other park-level operating expenses to better align with the disruption in operations while still remaining in readiness position to reopen parks,
  • Reduced the CEO’s base salary by 40% and the base salaries of all other executives by 25%, effective April 27, 2020,
  • Deferred base salaries for all other salaried employees by 25%, subject to minimum thresholds or other statutory limitations,
  • Reduced scheduled hours for full-time hourly employees by 25% to 30 hours per week, and
  • Suspended cash retainer fees for its Board of Directors until business conditions improve.

To provide incremental liquidity and enhanced financial flexibility, the Company has taken proactive steps to reduce its capital spending for calendar year 2020, including the suspension of at least $75-100 million of non-essential capital projects planned for the 2020 and 2021 operating seasons. The Company now anticipates spending $85-100 million on capital improvements in calendar year 2020.

In addition, the Board of Directors has determined that it is in the best interests of unitholders for the Company to preserve liquidity by suspending the quarterly distribution until operating visibility improves. The Board is committed to reinstituting a quarterly distribution when it is appropriate to do so.

Given the uncertainty around the timing of the parks reopening, and in order to ensure its season pass holders receive a full season of value, the Company also recently announced it has paused collections of guest payments on installment purchase products, and that its parks are working with season pass holders to extend their usage privileges into the 2021 season to compensate for lost access to the parks in the current year.

Liquidity Update

As of the end of the first quarter, the Company had cash on hand of $26 million and $190 million available under its revolving credit facility, net of $15 million of outstanding letters of credit. Based on the cost-cutting and cash-savings measures taken to date, under a scenario where its parks remain in a state of readiness to reopen for the 2020 season, the Company anticipates its average cash burn rate, including operating expenses, capital expenditures and debt facility costs, will be approximately $25-35 million per month. Should the park closures extend later into the year, the Company is prepared to activate additional cost-cutting and cash-savings measures. Out of an abundance of caution, at this time, the Company is also taking steps to secure additional liquidity and address any potential debt covenant issues, in the event that the COVID-19 crisis continues.

Preliminary First-Quarter Financial Results

The Company expects net revenues in the first quarter of 2020 to be approximately $10-15 million lower than the same period in 2019. Prior to the mid-March disruption in operations, revenues were higher than the prior-year period and in line with current-year expectations, primarily driven by a record start to the year at Knott’s Berry Farm, the Company’s only year-round park. In addition to the lost revenues over the last two weeks of March, sales of advance purchase products, including season passes and related all-season products, declined significantly as a result of COVID-19. In spite of this decline, deferred revenues at the end of the first quarter remained up more than $30 million, or more than 20%, over the same time last year.

Long-Term Financial Guidance

Due to the uncertainty surrounding the magnitude and duration of the COVID-19 pandemic at this time, the Company is unable to predict the impact on its business and operating results, both in the near term and long term. As such, the Company is withdrawing its previously provided long-term Adjusted EBITDA target of $600 million by 2024.

Read the entire press release from Cedar Fair.

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