[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 announced results for the second quarter ended June 29, 2014, provided preliminary attendance and net revenues through this past Sunday, August 3, 2014, and declared a quarterly cash distribution.
"We continue to see the resilience of our business model and believe the underlying demand for our products remains strong," said Matt Ouimet , Cedar Fair's president and chief executive officer. "The positive comparable-park net revenues we have produced to date are the direct result of increased average in-park guest per capita spending across all of our parks. Consistent with our long-term strategy, we continue to make investments in the overall guest experience, including enhanced live entertainment, the addition of high value and on-trend product offerings, and of course, innovative new rides. Our commitment to maintaining our premium regional brands is at the core of the value proposition we provide our guests, and is directly correlated to increased guest spending across all categories of our business."
For the 2014 second quarter, Cedar Fair's net revenues were $363 million, comparable with the $362 million in net revenues reported for the second quarter ended June 30, 2013. In the second quarter of 2014, the Company reported a 4% increase in average in-park guest per capita spending to $43.94, offset by a 2%, or 182,000-visit, decrease in attendance to 7.7 million guests, and a $3 million decrease in out-of-park revenues to $35 million. Excluding a non-core, stand-alone water park sold in August 2013, attendance on a comparable-park basis decreased 1%, or 104,000 visits.
The Company attributes the increased average in-park guest per capita spending to enhancements it has made to the overall guest experience, including improvements in food and beverage programs, resulting in increased spending and capture rates across all categories of its business. Factors affecting the decrease in comparable-park attendance for the second quarter of 2014 primarily included the closure of the Company's flagship park, Cedar Point, for a weekend in early June due to a water main break, partial flooding at its Valleyfair park during the last week of June and a prolonged school calendar in certain regions due to harsher than normal winter conditions.
Operating costs and expenses for the second quarter of 2014 were $225 million, representing an increase of $7 million from the prior-year second quarter. The increased costs for the quarter were largely a result of increased operating expenses due to three main drivers: 1) initiatives focused on enhancing the overall guest experience, including the introduction of more midway entertainment and a new policy of offering complimentary admission to the Dinosaurs Alive! attraction for the Company's most loyal season pass customer base; 2) budgeted increases in labor and maintenance costs as the Company continues to invest in its employees and its infrastructure; and 3) unanticipated pre-opening costs due to the harsher than normal winter conditions at several of the Company's parks, including additional snow removal, the trimming and removal of trees, and higher utility costs. The Company expects to recoup a majority of these unanticipated cost variances during the latter part of the year. "We are extremely proud of the effort our employees have put forth to maintain our parks and to provide a one-of-kind 'Best Day' experience to our guests each and every time they visit one of our parks," added Ouimet. "Our parks have never looked better and we are confident our commitment to the overall guest experience provides additional value to our customers and our investors over the long term."
Adjusted EBITDA, which management believes is a meaningful measure of the Company's park-level operating results, decreased $3 million, or 2%, to $141 million for the second quarter ended June 29, 2014 compared with the prior-year period. The decrease is a direct result of a lower attendance base during the quarter compared with the prior-year period, along with the higher year-over-year operating expenses in the period -- both of which the Company expects to partially recoup during the second half of 2014. The attendance decrease and higher operating expenses in the quarter were slightly offset by increased average in-park guest per capita spending at all of its parks.
Based on preliminary results, comparable-park net revenues through August 3, 2014 were approximately $715 million, up 1%, or $8 million, compared with $707 million for the same period last year. The increase was a result of an approximate 4%, or $1.55, increase in average in-park guest per capita spending to $45.12. The increase in guest per capita spending was somewhat offset by a 2%, or 273,000-visit, decrease in attendance to 14.6 million visits and a $2 million decrease in out-of-park revenues to $76 million.
"Although we have not met all of our park-level objectives to this point, we are pleased with the positive trends in guest spending at all of our properties," said Ouimet. "There are times we encounter short-term variability in our results which appears to be the case this year relative to attendance at certain parks. Based on the nature of the attendance patterns we have experienced to date and the strength of our average in-park guest per capita spending, we continue to believe the underlying demand for our business remains strong, and we expect 2014 to be another record year for Cedar Fair."
Cash Flow and Liquidity Remain Strong
As of June 29, 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, $39 million borrowed under its revolving credit facilities and $40 million of cash on hand. 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 $0.70 per LP unit. The distribution will be paid on September 15, 2014, to unitholders of record as of September 4, 2014. This distribution is consistent with the Company's targeted annualized distribution rate of $2.80 per LP unit and reflects the stability of the Company's performance and continued confidence in its long-term growth strategy. Ouimet added, "We remain committed to providing our investors with a high-quality and sustainable distribution that is poised to grow at least at the pace of our Adjusted EBITDA growth over the next several years. Our recent refinancing, where we were able to lower interest rates over a longer tenor, provides us additional confidence in our free cash flow generation."
Cedar Fair's new rides and attractions, including the world-record-breaking roller coaster, Banshee, at Kings Island; an interactive, 4-D roller coaster, Wonder Mountain's Guardian, at Canada's Wonderland; and a major water park expansion at Dorney Park, are all receiving strong reviews from park guests. "Over the next several months our parks will begin announcing exciting new capital programs for the 2015 operating season," said Ouimet. "These investments will continue to focus on the overall guest experience, will be innovative and will continue to expand our digital footprint. One of the things I am personally most excited about when it comes to our future is the organic growth opportunities that exist at our core properties. Most notably in the near term is the re-launch of our Carowinds regional brand in 2015, which will be anchored by a new record-breaking attraction, and the complete renovation of our historic Hotel Breakers at Cedar Point."
Ouimet concluded by stating, "We have approximately one third of the operating season still ahead of us, and we expect 2014 to be another record year for Cedar Fair. Based on current results and our positive outlook for the remainder of the year, we now expect our full-year net revenues to be between $1.16 billion and $1.18 billion and Adjusted EBITDA to be between $435 million and $445 million. We are proud of our ability to grow our business every year and we remain committed to driving sustainable, profitable growth for our investors for many years to come."
Read the entire press release from Cedar Fair.