Q3 2020 Cedar Fair LP Earnings Call
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I would now like piano conference over to Mr., Michael Russell Corporate director of Investor Relations. Please go ahead.
Thanks, Amy and good morning, everyone welcome to our 2023rd quarter earnings Conference call.
Earlier. This morning, we distributed via wire service our earnings press release, a copy of which is available under the news tab of our investors website at IR Dot Cedar Fair Dot com.
On the call with me. This morning are Richard Zimmerman, Cedar Fair, President and CEO, and Brian whether ROE, our executive Vice President and CFO.
Before we begin I need to remind you that comments made during this call will include forward looking statements within the meaning of the federal Securities laws.
These statements may involve risks and uncertainties that could cause actual results to differ from those distributed in such statements.
For a more detailed discussion of these risks you may refer to the Companys filings with the FCC.
In compliance with the Fccs Reg FD. This webcast is being made available to the media and the general public as well as the analysts and investors.
Because the webcast is opened to all constituents and prior notification has been widely and Unselectively disseminated all content on this call will be considered fully disclosed.
With that I would like to introduce our CEO Richard Zimmerman Richard.
Thank you Michael and thanks to everyone for joining us this morning, let.
Let me take just a minute here at the outset of our call to wish you and your family all the best as we approach the holidays.
Hope, you're all staying safe and finding ways to navigate through this uncertain and challenging times.
Before Brian gets into the details behind our third quarter results I want to begin this morning's call by stressing this point.
Having the opportunity to open and operate seven of our 13 properties. After the March shutdown was very important an extremely valuable for our team and our company.
Well it felt humbling at times, not having all our parks up and running not to mention the impact. It has had on our results nothing can replace the experience and learnings we gained by interacting with our guests and associates under this season's unique set of circumstances.
Our parks did a great job adjusting their operations to provide our guests with the best possible experience within the necessary health and safety guidelines.
Importantly, we are using what we tested and learned this year to help us improve our operating plans for next season include.
Including the programming elements of our extremely popular event calendars.
Equally important to note that all parks that reopened this year generated positive cash flow.
Revenue was covering variable operating cost.
Furthermore, I want to take a moment and thank our team.
I could not be prouder, what they have achieved this season in such an unusual and dynamic environment.
Their level of dedication professionalism and accomplishment during the pandemic has been nothing short of exceptional, especially given the difficult circumstances and the level of uncertainty under which they were asked to operate.
Our team recently received well deserved recognition and high praise for its development and implementation of COVID-19 safety protocols.
When the state of Ohio contacted us for counsel on how best to manage the long lines at the polls for yesterday's election.
This is one of many examples of the culture of excellence that drives our company's long term success.
I would also like to emphasize that we have done everything possible. This season to open every park in our portfolio when it was appropriate to do so well.
We vigorously pursued permission to reopen from state and local authorities in each of our markets and once granted that approval assess the financial feasibility of opening our parks within the required restrictions.
Kings Dominion in Richmond, Virginia is an example, where initially it did not make economic sense to open given the parks and given the stage in park limitation of 1000 guests.
We continue to maintain an active dialogue in that market with the hope of reopening the park, even on a limited basis yet this year.
Meanwhile, just last week, we announced the Carowinds will open later this month to host an updated version of its winterfest events called taste of the season, which will run through the end of December.
Having a chance to welcome guests back to our Charlotte Park is something we've been actively working on since we were forced to close the park back in March.
Along the same lines, we remain diligent in our efforts to reach.
Canada's Wonderland two of our largest parks.
Both jurisdictions governing these major parks continue to maintain a very conservative posture towards amusement parks in general.
Nevertheless, as we await permission to fully reopened Knott's Berry Farm Park has successfully hosted a growing number of outdoor family friendly dining retail experiences such as taste of notch takes to follow lean and the upcoming taste of Merry farm, where guest enjoy specialty food and beverage.
Selections created by the parks executive chefs and culinary staff.
Looking ahead, we believe that not sold out a series of nontraditional events, which have generated some of our highest guest satisfaction ratings ever offer strategy that can be successfully rolled out to other parks in the future.
While few businesses in our sector have escaped the pandemics impact on demand.
Our company's ability to rebound from past disruptions gives us confidence that a recovery is a matter of when not if.
Our business model has withstood the test of time, regardless of disruptive macro factors, which underscores our confidence in an eventual recovery.
In the meantime, our team has taken full advantage during park closures to ensure we emerge from the disruption with a leaner more efficient and lower cost infrastructure.
While our review of the business continues we believe the improvements we've made thus far plus other cost savings initiatives, we're working on well reset our consolidated spending to lower levels for major opex and SGN a cost categories.
Labour advertising and general procurement.
These cost savings should have a positive impact on gross margins over the long term something we will be prepared to outline in more detail over the coming quarters.
Before I ask Bryan to review, our third quarter results I want to review the purpose and reasoning of our recent bond offering and how it fits within our current strategy.
As you know in early October we completed the issuance of $300 million of senior unsecured notes at 6.5%.
We believed it was a sensible option to further strengthen our liquidity for his position as a reasonably priced insurance policy against the possibility of the disruption lasting longer than anticipated.
With limited market clarity heading into 2021, our long tenured bank group fully understood and supported our strategy to further strengthen our capital structure and we are grateful for their continued confidence in our business.
Ultimately reestablishing the record momentum we work so hard to achieve in 2019 will require renewed broad based consumer confidence in a return of demand.
That is why the value operating during this year's abbreviated summer and fall seasons cannot be overstated.
Nor can our guest experience of safely visiting our parks during a worldwide pandemic.
In hindsight, we better understand why many guests opted out this year many of the reasons confirmed by our own research yet.
Yes, as our guest shared with others that they enjoyed their park visits attendance levels consistently increased even topping 50% of last year's levels once levels on a number of days and more recently, reaching capacity limits at Cedar point and Kings Island.
These are encouraging signs as we build out our operating plans and prepare for the 2021 season.
I'll pause here to allow blinded review, our third quarter results right.
Thanks, Richard and good morning to everyone I'll start with results for our third quarter before reviewing internal initiatives underway to strengthen the core business first I need to remind you that during the effects of the pandemic results for the third quarter of 2020 are not comparable to prior year as regular operations remain suspended at.
Six of our 13 properties during the period.
Seven parks in operation soft early demand combined with capacity limitations and other cobot related protocols impacted attendance.
Six of our properties remaining close and the reopened in parks and abbreviated operating calendars. The third quarter had a total of 314 operating days compared to 1035 operating days in the prior year period and compared to 1069 operating days originally planned for the quarter.
As Richard noted we've been very pleased with how attendance trends have improved since parks reopened.
Initially reopening attendance averaged 20% to 25% of comparable prior year levels that improves during the third quarter from 23% in July to as high as 55% in September.
For the month of August through October attendance was solid averaging close to 40% of prior year up against some of our biggest attendance days in 2019.
Total attendance for the quarter was 1.3 million gas a decline of 11.9 million gas from the same period last year as a result of the 9% decline in attendance and a $47 million increase in out of park revenues third quarter, net revenues decreased $627 million or 88%.
The 87 million.
In Park per capita spending in the period decreased by 5% to $47.29 compared to $49 or 94 cents in the third quarter of 2019.
Per capita spending increases in food and beverage merchandise and games collectively up 18% in the period were more than offset by increases in guest spending on admissions and extra charge attractions, primarily our front on the line Fastlane products.
The decrease in admissions per cap was the result of a higher mix of season pass visitation in the quarter compared to the same period last year.
In the current year season pass visitation represented 55% third quarter attendance compared to 46% a year ago.
Excluding the impact of season passes non season pass admission spending on all other ticket types was 4% in the quarter.
On the cost side operating costs and expenses for the third quarter totaled $141 million compared with $369 million for the third quarter of 2019.
Abbreviated operating calendars and fewer offerings at our parks combined with cost saving measures led to the year over year decline.
The $229 million decrease in operating costs and expenses reflected an 80% or $47 million increase in cost of goods sold.
56% or $127 million increase in operating expenses, and a 66% or $55 million increase in SG and <unk> expense.
Approximately 57% of the decrease in operating cost was related to a reduction in seasonal labor in the quarter, while 49% of the reduction in SG Nay was attributable to reduced advertising spend.
Two priority areas for capturing cost savings once park operations were disrupted.
As we previously noted the flexibility of our business model affords us the opportunity to quickly and impactfully reduce expenditures across the board when needed.
Putting cost we generally consider fixed during normal operations.
Consistent with Richard's earlier comments, there were both strategic and economic value and getting even a fraction of our properties reopen this year.
Operating our seven parks with modified schedules and limited offerings reduce the adjusted EBITDA loss during the quarter by roughly $30 million compared to an internal third quarter projections under a scenario where no parks reopened.
As Richard mentioned, we generated positive cash flow with revenues covering variable operating cost in each of the parks that reopened even at the reduced attendance levels. As we noted on prior calls in order to achieve EBITDA breakeven on a consolidated basis next year, we estimate needing to generate attendance in the range of 45.
5% to 55% of 2019 levels and in terms of free cash flow breakeven for the company, which would cover our interest cost attendance needs to average 70% to 75% of historical levels.
Looking at deferred revenues for a moment at the end of the third quarter deferred revenues totaled $193 million, which was up 30% compared to $148 million at the end of the third quarter last year.
The year over year increase reflects the impact of last season pass attendance in the third quarter versus the prior year and the carry forward of 2020 season pass benefits and use privileges through the 2021 season.
We're pleased to report that since our parks began reopening in mid June we sold approximately 9000 additional season passes generating more than $10 million and incremental sales at this point in time, we have approximately 1.8 million season passes outstanding or close to 70% of our 2019 full year base, providing solid momentum in.
That critical attendance channel as we head into the 2021 season.
Of the $193 million or deferred revenues on the books at the end of the third quarter, we expect to recognize approximately $10 million yet in the fourth quarter of 2020 with the balance extending into 2021 or beyond.
This is in large part due to our decision to extend the use privileges of our season passes and all season products through the 2021 season.
Turning to our outlook around liquidity with.
With only two parks currently plan to operate in December for holiday events, we continue to closely manage our cash burn rate, while ensuring that we appropriately maintain our properties and remain prepared to reopen as many parts as possible as soon as fiscally appropriate.
At the end of the third quarter total liquidity was 585 million, which included $359 million of Undrawn revolver capacity and $225 million of cash on hand disc.
This compares to a total liquidity position of 661 million as of the end of the second quarter, representing a reduction of $76 million in the quarter or approximately $25 million per month of net cash outflows.
As Richard mentioned to provide for incremental liquidity should COVID-19 create an extended disruption. We recently completed a $300 million notes offering we amended our credit agreement to further suspend and revise certain financial covenants by an additional year and we obtained agreement to extend the tenor on $300 million of our revolving credit for.
Deliveries through the end of 2023, the combination of these steps successfully enhancing our financial flexibility going forward.
I wouldn't waiver period was extended through the end of 2021 and the covenant modification period was extended through the end of 2022.
Along with the widening of the senior secured leverage requirements.
Under terms of the amendment, we must maintain a minimum liquidity level of $125 million and we may not make restricted payments such as distribution payments generally through the end of 2022.
Considering the net proceeds from the recent bond issuance, which closed in early October our pro forma liquidity position at the end of the third quarter totaled approximately $877 million.
Regarding capital expenditures since the shutdown in mid March we effectively suspended our largest capital pro projects to minimize cash outflows will operations were suspended.
In the first nine months of the year, we spent approximately $120 million on capital expenditures with the expectation of investing minimal capital during the fourth quarter for the full year, we are projecting capital investments of 120 to 125 million, reflecting a savings of approximately $60 million to $65 million from our original 2020 Capex budget.
At this point, we remain current on all payables for all active capital projects and we have no material long term commitments for new attractions, providing us maximum flexibility to tailor, our 2021 and 2022 capital programs based on the speed of the recovery and our outlook around liquidity.
With nearly half of our parks unable to open this year, many new rides and attractions. Originally planned for 2020 have yet to be introduced to our guests, meaning our capital investments for the 2021 season will be a fraction of what we've invested in previous years and what we focused on completing projects already in process that are critical to reopening.
Next year, plus any necessary compliance or infrastructure work.
Because of uncertainty around the recovery and the flexibility we built into our capital planning process, we are not going to commit to or provide specific guidance on calendar year 2021 capital expenditures at this time once business conditions normalize we will be in a better position to frame up what our capital programs for the 2021.
And 2022 seasons will entail.
Looking at the cash burn given how fluid the environment is it's difficult to project more than three months out with that said, we know that the second and fourth quarters consume more cash due to the timing of interest payments on our outstanding bonds and we know that the first quarter has historically consume more cash than the balance of the year as we.
Have fewer properties and operation and many parks ramping up operating costs in preparation for spring openings along.
Along those lines, we estimate that our net cash outflows will average 40 to 45 million per month over the next two quarters, including operating costs associated with our current plans for park Reopenings next year interest payments, which will average $13 million per month, and a modest amount of capital investment.
We will have better visibility into the operating environment in each of our markets by the time, We report fourth quarter results. Early next year. However, should operations again be suspended across our portfolio. We have the ability to adjust operating plans and remain within our previously disclosed average monthly cash burn rate of $30 million to $40 million cover.
And operating costs and interest payments under either scenario based on the steps. We've taken to date. We've concluded that we will have sufficient liquidity to meet our cash obligations and remain in compliance with our debt covenants through the end of 2021.
Following up on what Richard mentioned earlier, the pursuit of our goal to emerge stronger from this disruption is well underway stronger in our terms means being smarter more flexible and more efficient which applies to all areas of our business one of the initiatives.
Implemented immediately after the March shutdown was the elimination of almost 100% of our seasonal and part time positions and the suspension of Backfilling full time positions left empty through attrition.
Thus far that policy plus positions taken out of the system through streamlining initiatives has reduced our full time headcount by more than 250 positions or approximately 10% of our permanent workforce with incremental reductions under review. Additionally, during the shutdown we have pushed forward with our rollout.
Of a new workforce management system designed to build efficiencies and cost saving measures into our the management of our seasonal labor force, which totals more than 45000 associates and represents roughly 50% of our total labor cost.
Another major budget item historically as advertising, which we meaningfully pull back on consistent with our broader efforts to minimize cash outflows as we received approval to reopen parks, our marketing teams relied almost exclusively on lower cost digital and social media advertising to share the news on park, Reopenings, which proved to be.
Successful strategy overall.
Although traditional meaning we will continue to be a part of our marketing strategy going forward. Our experience. This year has given us confidence there are significant cost savings to be realized by adjusting our advertising mix to include more cost efficient alternatives whenever possible.
Reductions to labor and advertising costs are just two examples of where we are focusing for needle moving cost savings bank chairman being a third major area combined with savings produced and other areas of our business. We believe the potential exists to realize margin expansion under a scenario, where the business recovers to historical attendance levels.
Finally until market place clarity returns will be what's holding long term financial guidance given how fluid. The current environment remains it is difficult to project more than three months out and our own forecasting is being performed under multiple scenarios as I mentioned on our second quarter call. We will remain on the sidelines relative to guide.
Yes until market visibility improves and we have a clear line of sight into the reopening of our entire portfolio of parks.
In the meantime, our near term capital allocation strategy remains unchanged that of reestablishing growth in our core business and paying down debt to return our net leverage ratio back inside five times adjusted EBITDA as quickly and responsibly as possible with that I will turn the call back over to Richard.
Thanks, Brian.
This is the time of year when our teams turns its attention to nailing down specifics for the upcoming season, and I can't recall, a more important season for which to plan and to plan well.
With little visibility to bank on our list of priorities will address what we can control as we await additional market clarity.
Our near term focus will center on the following first as Brian mentioned, we will aggressively manage cash burn.
Second we will complete capital projects critical for the 2021 season.
Third we will continue the examination of our infrastructure and operations to identify additional cost savings opportunities with a focus on the big ticket areas of labor advertising and procurements fourth.
Fourth as parks reopened in our business begins to normalize we will optimize our capital allocation with a focus on paying down debt and returning our net leverage ratio back inside five times, adjusted EBITDA and last but certainly not least.
We will focus on recapturing demand and drive attendance volumes back to historical levels.
As we approach the start of the 2021 season. It is critical our teams and operating plans are flexible with a host of actionable options available to match conditions on the ground ops.
Options may include changes in operating days and hours, including delaying park openings. If we believe demand could be compromised by the pandemic as you've heard me say before we are advantaged to some extent with the majority of our revenues EBITDA and cash flow being generated in the second half of the year.
It also gives us additional runway, while a vaccine or other therapeutics are developed and distributed which in the end could be the biggest game changer for a speedy and efficient recovery.
If we've proved anything to ourselves in 2020.
It is that no challenges insurmountable there were times early this season, one attracting more than 50% of historical attendance or reaching our restricted capacity seemed unlikely yet we did it.
We are fortunate to have the most seasoned and talented team in the space.
Possess a time tested business model that has recovered from past disruptions and own some of the most treasured entertainment properties in the industry.
We have always been respected for the quality of the guest experience and the professionalism of our park operators.
We have also been known as strong financial stewards on behalf of our investors.
Despite the limitations and challenges placed on us by the cobot outbreak. These three fundamental characteristics remain you can be assured that we will continue to focus on disciplined execution in all areas of our business.
While remaining responsive to this unusually dynamic environment.
That concludes our prepared remarks, Amy please open up the call for questions.
At this time, ladies and gentlemen, if you would like to ask a question. Please press Star then the number one on your telephone.
Your first question today comes from the line of Steve Wilson with Stifel. Please proceed with your question.
Hey, good morning, guys.
Yeah.
So Brian, but I don't know if I heard you right I.
I mean, there's a lot going on this morning, but I hope I did hear this right, but you guys lost 50 million in the quarter on the on the EBITDA side of things did you say that that was 30 million better than your kind of so called internal projections.
Yes, Steve under a scenario, where all our parks remain closed if you if you think back to.
The burn rate that we talked about and you look at just the operating side of that is set aside interest and Capex. We would have been in that mid 20 range per month or something in that 24 26 million per month under that scenario, which pushes up around that $80 million kind of level.
All that and so our internal projections would have been $30 million worse had we not gotten those seven parks open.
Okay, Gotcha, and so I guess, maybe what.
What what kind of.
Helped on the improvement side was that obviously the parks being opened but was it kind of across the board both on the cost side and attendant side or was it more on the cost side I guess I'm just trying to figure out I mean, maybe what the what the difference was there.
You know its really as we've been saying all along in a scenario where were trying to maintain the properties and stay ready to open we can only take our operating costs down to a certain level and.
The teams have done a very good job of doing that at that point in time, the ability to minimize that that burn rate. Any further really lies almost entirely on your ability to get open and start generating attendance and revenue. So I would say that that delta was driven largely almost entirely.
By our ability and operate even at these these lower attendance levels still at a.
Eddie point, as we said cash flow positive in terms of covering the incremental variable cost associated with reopening.
Okay got you and then second question would.
What would be around your pass sales and.
I think in a normal year.
Your pass sales for the following year, what it would have gone on sale and call. It I don't know mid August late August runs through the fall opened back up in.
In the spring and I guess the question now is as we look to next year. What do you guys have the opportunity to get a little bit more aggressive on that then in terms of really be able to push those 21 season passes and maybe having that longer runway should that ultimately be a kind of a net positive for you guys that make sense.
Well I will as we said on the call Steve I would underscore again, we're very pleased with that.
The bid a momentum that we are able to gain and getting parks reopening in selling a little more than 90000 season passes since mid June and started reopening parks clearly as you're aware the fall.
As as an important time of the year for for season pass sales as is the spring there is no doubt not having all of our parks open and not having our traditional event.
Portfolio running this fall and winter will hurt sales on a comparative basis.
That said spring is a huge sales cycle or window for us and so.
We are going to lean and as aggressively as we need to be.
And trying to build on that 1.8 million unit base that we have going into 2021, but.
But having parks open it's there's a clear delineation in terms of momentum in sales.
Parks that were reopened this year versus ones that werent and so getting all of our parks reopened well is the first big step towards building that momentum in the spring next year.
Okay got you and if I can ask one more super quick one that you guys talked about that you reached restricted your your your restricted capacity levels that certain parks through the.
Through the quarter over the last couple of weeks is there any way to help us understand which parks kind of hit that level or how many days you kind of solved you guys hitting that capacity level.
Okay.
Yes, it was Steve the the parks that.
We're open after labor day, and as you know some of our biggest tenants days happened in September and October with the.
Hilarity of the fall events, while we didnt host our traditional haunt at Cedar point and Kings Island.
We did host falls festivals that were very popular those were the two parks that bumped up against those capacity numbers.
Just a few days.
And so like we said on the call. We encouraged by the fact that demand continued to build the longer we stayed open.
And that gives us confidence as we look ahead towards 2021.
Okay, great. Thanks, guys appreciate it.
Your next question today comes from the line of James Hardiman.
Please proceed with your question.
Hey, good morning.
Thanks for taking my cold so.
I guess more than anything I'm, just trying to handicap your ability to reach.
Those breakeven, whether its EBITDA or cash flow levels.
In the absence of the vaccine and I guess, if I, if I look at that.
5%.
Prior year in September obviously September is kind of a different animal than the summer time is what is that a decent assumption as to where we are likely to start the spring season.
In terms of attendance levels mean basically sounds like.
Though the open parks, you're sort of there in terms of EBITDA cash flow. So we're just moving issue of getting the incremental parts back open was there something special about September and just the weekend to being opened that maybe that sort of overshoot the momentum at this point.
Hey gains Richard Good morning. This is a great question listen as I as I think through demand that we saw in the appeal of our product and Brian referenced in his remarks I referenced in mind the strength in demand really relates to I think the desire of consumers to get out and do something the benefit of our model is we are outdoors.
We're really really pleased with the way we've been able to put in the health and safety cobot protocols and procedures and operate in a safe and fun environment. So you know paying attention to Everybodys safety, both our employees and our guest is hugely important it's once our priority and when I think of.
About what we saw this year, we did see the benefit of.
Being able to get out there and open but we also saw the benefit as I said of word of mouth in the market and I think we started to soften we see consumer confidence you could call it consumer sentiment improve over the course of the last few months so.
While we while we don't know and can't give guidance in terms of percentages of attendance into next year. What we do know is that consumers are showing a willingness to do things outdoors in particular, and then theres a desire to go places where they can spend time together.
Comfortable and safe environment. So I think we fit that bill I think is one of the benefits of our business model.
It gets it will serve us well as we head into 2021.
And James just adding on to Richard's comment mathematically I think the other point to make is that.
Two thirds or better lets say two thirds to 70% of our attendance comes in the second half of the year.
And so you know those trends that Richard just mentioned I think it's all we all sort of ascribe to that the idea that the second half of 21.
Is likely to have more tailwinds than than in the first half of the year and that fits our model a lot better just purely from a from a mathematical perspective, when you look at where our tenants come from.
Got it that's really helpful and then just.
From a longer term perspective, obviously 2021 is going to be.
Probably about in terms of how it ends up and we're going through the course of the year, but I guess, if we look past.
2021, obviously you guys are talking your consumers on a regular basis what are your consumers telling you about their willingness to return to the park. Once there is a vaccine in place.
And then.
The cost side, you probably won't answer this but maybe an order of magnitude how much you.
Do you think you might be able to generate savings maybe way too early to say, but obviously you're going to be dealing with some incremental interest costs.
Given the financing any chance that the cost savings could offset that on a on a cash flow basis. Thanks James.
James I'll take the first question I, Brian take the second on the cost side, but everything we see in our research whether it was early in the year and how consumers felt about the second half of the year. We now see in the later stages of 2020 the 2021.
Everything that we see says consumers and our consumers and our guests and our visitors want to come back next year, there's a great desire to do that we've held onto our season pass base, our most loyal customer and.
And I think we've got that opportunity that Brian said to really get into the meat of next summer when we traditionally do our bigger days.
And while we don't know and my Crystal ball is very cloudy on vaccines therapeutics and other things I do think the further out you look the more comfortable consumers are with saying that they want to come back on that they think they'll come back Brian on the cost side.
Yeah, James on the cost saving side too early to put specific numbers around it I will tell you. The three big areas that we highlighted in our prepared remarks on the on the labor side advertising in general procurement across the company those initiatives.
Continue.
And the analysis around each of those on you can see is ongoing but we think those can be material over the long term.
Terms of interest cost as.
As Richard noted in his comments the the most recent financing the $300 million bond issuance was really done.
For insurance purposes, and if it plays out as as purely insurance and improves that we won't need it as as we start to see the recovery in 21 and head into 22 with a lot of momentum you will see us take that.
Incremental free cash flow on the balance sheet and and pay down debt quickly hopefully bring that those interest costs back in line with more historical levels as fast as possible. So hopefully that helps a little bit will definitely be in a better position I think to start framing up the cost.
Opportunities.
Over the next quarter or two as we continue to work through our efforts internally.
Got it Richard Brian Thanks, a lot. Thanks.
Thanks.
Your next question comes from the line of Michael Swartz with Qs Securities.
These proceeds to your question.
Hey, good morning, guys.
Just wanted to touch on some of the the attendance trends.
During the quarter in cities in July.
23%.
Mike I, just want make sure that I heard correctly I'm seeing.
Remember the average.
Got it.
In certain markets.
Give us a sense of where on that as well. Thank you.
Yes, Mike it's Brian So Thats correct tenants in July.
I was.
That 20% to 25% kind of range keep in mind, our parks were still opening on a staggered basis than what we saw pretty much at each one of the parks was.
Soft early demand.
And then as word of mouth sort of spread I guess.
Guest experience was with strong back out in the markets. We saw each of our parks sort of built so that ends September those.
Those the number was.
Averaging 55%.
For the month now keep in mind, a couple of things you know us as James noted september's, a little bit of a different animal than than July or August both in terms of your only opening weekends.
And so the numbers that you are up against maybe arent quite as big as we were in the month of August August basically sort of sat.
Between those numbers and and was in the range for that.
That that overall average that I talked about for August through October.
The other thing to note is that September was largely just our two biggest parks.
Which which helps.
Probably skew that a little bit higher because demand was very strong at Cedar point Kings Island in this disrupted in abbreviated operating here.
Okay. Thank you for that and then just.
Question in terms of the cost savings.
Said earlier, just not ready to quantify it but I think you said in your prepared remarks, you think you can get back to more is to work with margin levels.
Based doing obviously intended to rebound into the bubbles as well so.
Are you talking about 34% level. They did in 2019 or do you think it's back to more than 36, 37% range.
You operated at a just a few years ago.
We think that Theres margin upside from where we were at in 2019 based on some of the things that we're looking at and those cost savings areas I just mentioned, but it does all hinge on the ability to get back towards more historical attendance.
Or revenue levels right I mean, it's as you understand Mike I mean this is that this is an attendance driven out.
And the leverage comes from attendance the attendance side of it and so getting back to those historical levels of attendance or something very close to it with maybe a slightly higher per cap is critical it's not we're not going to able to get above that that 34, 35% range in margin without the the up the volume side of things.
Okay, great. Thank you.
Thanks, Mike next.
Your next question comes from the line of Paul Golding with Macquarie capital.
Please proceed with your question.
Hey, Brian Richard Thanks, So much for taking my question.
I wanted to ask on sort of the optimistic side here given the strong.
Swell in attendance metrics toward the end of last quarter. If there was some progress made is there any opening where you think you might bring some parks.
Back online earlier than the traditional memorial day window.
And then along those lines my follow up and it's going to be around any thoughts.
Thoughts on the California guidelines and any progress there given you have those two parts there. Thanks so much.
Thanks for a really good question, let me take the first one you know we're in the process of evaluating our spring calendar now and as I said in my prepared remarks, I think what we showed this year in 2020 is an ability to really configure the operating calendar due to reflect the demand we see the other thing that we did this year and it's very spin.
Perfect to Knott's out in that California marketplace is start rolling out the limited duration events.
Which have really resonated well with our consumers. So I think we're going to look at what the opportunity is in each market look at the timing of that opportunity and how to configure. The event just like we did out at not swear.
I've got a stressed this you know we saw that some of our highest guest satisfaction ratings in our company's history in reacting to that that tells me in that reiterate to us that there is a strong desire.
An appeal for people come out and once they come out they are both very appreciative that were opened but they really have a good time. So we're going to we're going to take a hard look at the operating calendar for the spring and and look at local conditions in all the markets.
Out in California, traditionally Knott's Berry farm is is our only year round park and they would be open every day. So we've got an opportunity in southern California.
Versus northern California, due to look at when we can't get knots open under the health and safety guidelines, both at the state and the local level and then do that same process and look at how think conditions on the ground in northern California.
As we set our priorities to try and get every park open and we're going to go through that drill again next year I think as consumer sentiment changes I think as conditions around the pandemic change.
We'll have an opportunity to really lean into that.
Open up and give our guests a good time.
Great. Thanks, so much.
And again, ladies and gentlemen, if you would like to ask a question. Please go ahead. Please press Star then the number one on your telephone keypad.
Your next question comes from the line of Ben.
Please proceed with your question.
Hey, How's it going.
I think in the past you implied that roughly 75% of the season pass Reds that you have this year would be allocated to 21.
Just based on all the moving parts did you provide an updated number this quarter. So I guess would be of the of the deferred revenue of 193, I guess, how much would be recognized this year and how much would be recognized next year or however, you want to think about it I guess, that's the first one.
Yes, Brian as of right now based on our outlook for visitation over the balance of this year as well as our outlook for estimated visitation and 21, roughly 10 million of the.
Of the deferred revenue balance of 193 is estimated to be recognized here in 2020, with the the balance carrying into 21 or or or or beyond.
Okay Awesome. That's that's helpful. And then on the cash taxes side can you remind us how much of the business sits inside the MLP structure, thus not subject to.
I guess, the federal tax rate correct me, if I'm wrong there.
Yes, so I guess the way I would describe it trying to answer that for you Ben because it gets pretty complicated with the variety or the the the entities that sit underneath the the broader MLP structure, our effective tax rate.
When you look at the PTP tax in the C Corp taxes has sat in the in the high teens.
The last on the last few years and so I think as we as we think about.
The potential for corporate taxes going up it will have an impact on us, albeit a modest one comparatively speaking to a straight C Corp structure.
Okay. That's really helpful. And then just just last one then just to clarify one of the earlier comments on the margins if I may.
Back in 13, 14, 15, new we're kind of at this 36 37, 38% margin now that much lower revenues than you ended 20.
2019, I think back in the 13 14 15 timeframe you were kind of in the 1.11 0.2 range relative to 2019, which was closer to one five so just just and I know it's still early so not like press the issue of really but just trying to figure out.
Like would you be could you be back at the could be back at the kind of the high mid to high Thirtys margins.
On revenues that we saw in 13 14 or would you need to be.
Back to more one side range that we saw in 2019, and that's too granular and not.
To answer that now it's also I get it as well.
No. It's a fair question, but I think what makes it challenging often comparing.
Periods of time.
What are the other factors that have changed to that I would call out that.
That are maybe headwinds towards any I'm, just easily getting back to those numbers.
One is where the labor market.
Lies today in terms of minimum wage right as I think back five or six years ago, where minimum wage rates were versus where they are today and the correction that we've seen across the country.
Is that pretty stark difference right and for as I mentioned in the call about 50% of our labor overall labor costs are seasonal and part time, which are directly impacted by that so that has definitely changed if we went back in time and sort of applied a more comparable labor.
Labor environment to that I don't think you'd see margins quite quite where they work. So that's one difference that we still need to work our way through and that's why something like our our new workforce management platform and that initiative is so critical our ability to take hours out of the system is our best remedy for offsetting some of that pressure. The other is.
When you look at the portfolio and the mix of properties.
And where we stand today Weve added our parks like the Schlitterbahn parks and 2019, we've added hotel properties and expanded our resort portfolio. Those are all very good lines of business for us, but they aren't at the same margin as maybe some of the big parks that were carrying us to those higher margins.
Back then Cedar point Kings Island, Knott's Berry farm et cetera. So there are some things working against us, but I do want to underscore we definitely do believe there's margin upside.
But but it's not.
An easy path there are some headwinds that we have to work through.
Got it I appreciate it gentlemen, thanks, Thanks Ben.
Your next question comes from the line of Stephen Grambling with Goldman Sachs. Please proceed with your question.
Hi, Thanks for taking the questions. These are two unrelated topic the first.
Think about the cadence of next year that you described can you just talk about.
How you might change your approach to it.
And it really focusing on.
Season passes if at all and then the second question, which again is unrelated is just as you think about.
The current environment has your thought process around ways to.
Really I'd say surface value of the underlying real estate that you said on where even thinking about capital allocation evolve.
Yes, even fair question, let me take the first one in regards to season passes as you know we've seen season pass go from about a third of our business to 53% of our business in 2019, it's an important program one of our centerpieces of our longer term strategy. So we're going to continue to.
To focus on season pass.
Listen to the customers.
Focus on the value side of the price value equation within that channel, we've seen tremendous growth over the last several years as we've expanded the season and they will put.
These limited duration events. Another tentpole strategy, we're a long range plan into both spring and ultimately winter. So I think being able to return to our normal calendar over the course of the next year or two lets us play to our strength our seasons of fun messaging and provide.
More reasons to visit more often during the season that creates a lot of value. So I wouldn't say that we were going to change anything I think we're looking to always enhance the appeal of our season pass listen our customer trying to add values and benefits.
That provides a lot of perceived value to the passes so I think we think we're in good shape in terms of our approach and we like the format and the timing of our program.
Relative to the rest of the broader capital allocation as as Brian said listen on where our priority is to de lever as quickly as possible and get down under five times, we're reviewing a host of.
Of items that can help us get there, but the easiest way to get there is to stand the business back up on its feet and generate the revenues get back to those more traditional revenue.
Levels.
And then work on the margin attached to those so.
Brian anything you want to add on capital allocation.
No I think just underscoring what you said and as we said in our prepared remarks, Steve.
Deleveraging remains a top priority for us, but not at the at the detriment necessarily of growth in the in the core business.
We will continue to review as Richard alluded to the variety of options that we have.
Available to us including.
Any nonstrategic underlying.
Assets that we can that we can liquidate.
As well as.
Taking some of that that insurance thing as I mentioned earlier that insurance from.
Proceeds from the recent bond issuance.
And paying down debt as we go forward. So I think there is a number of levers that we will have at our disposal.
But really all engines as Richard just said on on standing the core business back up.
Four to have any of those levers to have real value.
Sounds good thanks, so much.
And that concludes our question answer session for today I will now turn the call back to the Newman for any closing remarks.
Thank you everybody for joining us on todays call and for your interest and ongoing support of Cedar Fair. We look forward to putting this year behind us and are excited about returning our parks to the Premier entertainment destinations for which there are no.
We look forward to keeping you apprised of our progress in the meantime, please take care and stay safe. Thank you again, Michael Thanks, Richard should you have any follow up questions. Please feel free to contact our Investor Relations Department at 4196 to seven two to three three we look forward to speaking with you again.
Larry to discuss our 2020 full year results.
Thank you operator, Amy that's at the end of our call.
And this concludes today's conference call. Thank you for your participation you may now disconnect.
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