Posted Thursday, November 3, 2011 9:30 AM | Contributed by Jeff
[Ed. note: The following is an excerpt of a press release. -J]
Cedar Fair Entertainment Company (NYSE: FUN), today reported results for the third quarter ended September 25, 2011, updated its outlook for the full-year and announced the declaration of its fourth quarter distribution.
Commenting on the Company's results through the third quarter of 2011, Dick Kinzel, Cedar Fair's chief executive officer said, "The 2011 operating season is shaping up to be another record-setting year for Cedar Fair, despite a still challenging consumer marketplace. This season we have experienced increases in both attendance and in-park guest per capita spending, following a record-setting 2010. This speaks volumes to the strength and stability of our properties and our business model. Total revenues increased across the majority of our parks, led by Canada's Wonderland, California's Great America, Knott's Berry Farm and Kings Island."
"We are equally thrilled to see the continued success our parks are having during our fall operations," added Matt Ouimet, Cedar Fair's president. "Our guests find great value in the Halloween events which has allowed us to build on the record results from last year. Compelling ad campaigns and dynamic pricing strategies continued to drive this year-over-year demand with both attendance and average in-park guest per capita spending increasing over the prior year month of October. We will continue to invest in our Halloween events and believe there are opportunities to expand the overall guest experience in the future through continued innovation and entertainment capacity expansion.
"Looking at our balance sheet, we remain confident in our liquidity and cash flow," said Ouimet. "Our improved year-over-year performance on last year's record results has allowed us to further reduce our leverage in the third quarter and we anticipate additional measured debt reduction in the future. At the end of the quarter, our Consolidated Leverage Ratio(1) was 4.3 times, down from 4.5 times at the end of the prior year third quarter, and we had no outstanding borrowings under our revolving credit facility. By continuing to prudently manage our cash flows, we are able to maximize our financial flexibility and our ability to create value for unitholders in both the short- and long-term through debt reduction, capital investment and distributions.
"Finally, we are pleased to announce our Board of Directors has declared a cash distribution of $0.70 per LP unit, payable on December 15, 2011," said Ouimet. "With this fourth-quarter distribution, we will have satisfied our previously announced intention to pay $1.00 in distributions to unitholders in 2011. We expect to return to a regular quarterly distribution in 2012 with a continued focus on providing a sustainable and growing distribution for our unitholders, while at the same time appropriately managing our debt levels and investing in our business."
Third Quarter Results
Cedar Fair's net revenues increased $27.3 million to a record $572.3 million for the third quarter, up 5% from $545.0 million in the third quarter ended September 26, 2010. The increase in net revenues for the third quarter of 2011 is due to:
For the third quarter of 2011, costs and expenses increased $15.8 million, or 6%, to $262.2 million from $246.4 million in 2010, the result of:
The year-over-year increase in costs, while largely anticipated, is the result of the increase in attendance and higher wage costs, as well as several one-time items. The increase in wage costs, reported through the operating expense line item, is primarily due to increased seasonal labor hours during the third quarter of 2011 compared with 2010, as a result of expanded operating hours at several parks, additional attractions and guest services, and the overall effect of increased attendance. The one-time items were reported through selling, general and administrative costs and reflect the impact of legal and professional costs incurred during the third quarter 2011 including litigation expenses and costs for SEC compliance matters related to Special Meeting requests, as well as a credit recognized in the third quarter of 2010 related to debt refinancing efforts.
Net income for the current quarter was $152.7 million, or $2.74 per diluted limited partner (LP) unit, versus net income of $75.7 million, or $1.36 per diluted LP unit, for the same period in 2010.
Adjusted EBITDA which management believes is a meaningful measure of the Company's park-level operating results, increased $10.0 million, or 3 percent, to $309.7 million, compared with $299.7 million during the same period last year. The increase in Adjusted EBITDA is primarily attributable to the strong revenue and attendance trends experienced by the parks in the third quarter. See the attached table for a reconciliation of net income to Adjusted EBITDA.
Record-Setting Pace Continues into October
Preliminary results for revenues and attendance for the month of October and the 10-months ended October, 31, 2011, were: (click here for table) Cash Flow and Liquidity Remain Strong
As of September 25, 2011, the Company had $1.16 billion of variable-rate term debt (before giving consideration to fixed-rate interest rate swaps), $400.2 million of fixed-rate debt, no outstanding borrowings under its revolving credit facilities and cash on hand of $96.3 million. During the third quarter the Company made an $18 million optional prepayment on its term debt and as a result, there are no debt maturities due before 2013.
The Company expects to pay cash interest costs of approximately $150 million in 2011 and expects these costs to decrease to approximately $100 million annually, beginning in 2012, based on the expiration of several interest-rate and foreign currency swap agreements in October 2011 and February 2012.
In September 2011, the Company entered into an agreement for the sale of the assets of California's Great America for $70 million. The Company, which purchased the park in 2006, expects to use the cash proceeds from this sale to reduce its term debt. The transaction, which is subject to approval by the City of Santa Clara and certain closing conditions, is anticipated to close by the end of the fourth quarter of 2011.
The Company's Board of Directors also announced today the declaration of a cash distribution of $0.70 per LP unit. The distribution will be paid on December 15, 2011, to holders of record as of December 5, 2011.
"As we head into the final quarter of 2011, we feel very good about our near-term outlook and long-range potential," said Kinzel. "Based on our performance to date and our expectations through the end of the year, we now expect to achieve full-year net revenues between $1.015 billion and $1.025 billion and Adjusted EBITDA between $365 million and $375 million."
The Company's previously stated guidance for 2011 was net revenues of $975 million to $1.0 billion, and Adjusted EBITDA between $350 million and $370 million.
"After what should be two consecutive record-setting years, Cedar Fair moves into 2012 with tremendous momentum," said Ouimet. "With the recent additions to our already talented management team and a portfolio of world-class properties, we fully expect to improve our profitability while steadily increasing the distribution and strengthening our balance sheet in 2012 and beyond."
Read the entire press release from Cedar Fair.