Q2 2019 Earnings Call
Good day and welcome to the Cedar Fair 2019 second quarter Conference call.
Today's conference is being recorded at this time I would like to turn the conference over to Michael Russell Corporate Director Investor Relations. Please go ahead Sir.
Thank you April good morning, and welcome to our second quarter earnings Conference call.
Michael Russell corporate director of Investor Relations for Cedar Fair.
Earlier. This morning, we issued our 2019 second quarter earnings release, a copy of that release is available on our Investor Relations website at <unk> Dot Cedar Fair Dot com under the news tab.
Or by contacting our Investor relations offices at 4196 to seven two to three three.
On the call. This morning are Richard Zimmerman, Zimmerman, Cedar Fair, President and CEO , and Brian with a row, 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 materially from those described your such statements for a more detailed discussion of these risks you can refer to filings made by the company with the FCC in compliance with the Fccs regulation FD. This webcast is being made available to the media and the general public as well as analysts and investors because the webcast is open to all constituents and prior notification has been made widely and unselectively disseminated all content of the call will be considered fully disclosed.
Now I will turn the call over to Richard Zimmerman Richard.
Thank you Michael and good morning, everyone.
As we enter the final five months of the year I am pleased to report that results remain strong and our outlook for the full year remains positive.
The strong results for the second quarter created momentum that has carried through this past Sunday August four.
Producing higher levels of attendance and net revenues when compared with the same seven month period last year.
In addition to the increased attendance levels.
Our results were driven by strong in park guest spending and out of park revenues, which we attribute to the improvements we've made in our parks over the past several years.
Including immersive and Tractions and limited duration special events.
Expanded and enhanced food and beverage options and additional resort accommodations.
At the same time, our park teams have done a very good job of actively managing operating cost, allowing us to drive margin expansion.
Through July we are in a much stronger position when compared to the first seven months of last year, putting us solidly on track to deliver a record level results for 2019.
As our parks were reaching full throttle operationally the second quarter was a highly productive period for us strategically as well.
So before I ask Bryan to review, our second quarter and year to date financial results in more detail I want to recap the series of transactions, we have undertaken since our last call.
In late June we completed a $500 million bond offering with proceeds being used to finance three strategic acquisitions.
On June 20, Eightth, we purchased 112 acres of land underneath California's Great America, Our park in Santa Clara, California.
On July 1st we completed the acquisition of two iconic Texas water parks from Schlitterbahn, including Schlitterbahn water Park, and resort, new Braunfels and Schlitterbahn Waterparks Galveston.
This transaction also gave us the right to purchase an additional property in Kansas City, Kansas, where third splitter fallen Waterpark once operated.
And finally on July 3rd we acquired Sawmill Creek resort, a 236 room Lake front resort and conference center located within minutes of our flagship Park Cedar point.
These transactions will have a lasting impact as they complement our organic growth and provide incremental revenues and free cash flow.
Expand the geographic and operational reach of our existing portfolio of properties.
Leverage the extensive industry expertise of our seasoned leadership team.
And continue to grow unit holder value over the long term.
Regarding schlitterbahn, we're very excited about adding these iconic Texas waterparks to our portfolio.
This acquisition, which felt like a perfect fit throughout the process consistently met the criteria and standards by which we evaluate the long term potential of M&A opportunities.
Specifically the Schlitterbahn parks in new Braunfels in Galveston are well regarded entertainment properties in their respective communities and offer our heritage rarely found in that acquisition candidates.
Each park features high quality assets operating under a highly recognizable regional brand.
And in attractive geographic markets.
In fact central Texas is currently one of the nations fastest growing economic regions were Cedar fair had no existing operations.
We are eager to invest in these parks and resort accommodations in an effort to bring them up to their ideal operating condition.
A process, we expect to complete over the next two to three years at an estimated total investment of between 10 and $15 million.
While maintaining a business as usual approach for the balance of the 2019 season.
Our integration team is hard at work behind the scenes.
As the current seasons calendar winds down for our Schlitterbahn parks, we will be introducing a number of strategies and initiatives aimed at activating cost and revenue synergies for many years to come.
Thereby producing the growth and efficiencies, we expect to enjoy for the long term.
In much the same way sawmill Creek represents an opportunity to take a unique regional asset and restore to its original glory.
The resorts hotel already books, the second most room night accommodations locally for teams playing a tournament at the Cedar point sports centres outdoor facility.
Year round gas volumes should grow substantially once our indoor center opens in January of next year.
Moreover, I fully renovated sawmill Creek Resort Conference Center, and Tom Fazio designed 18 hole Golf course positioned on Lake Erie is waterfront will further strengthen cedar point's appeal as a unique vacation destination.
Rounding out our series of acquisitions was the purchase of 112 acres of land upon which California's Great America operates.
When presented with the opportunity we exercised our right of first refusal to purchase the land, thereby ending our lease with the city of Santa Clara.
This investment represented a once in a generation opportunity to purchase valuable property in the heart of Silicon Valley.
In just a moment I will conclude my prepared remarks, but first I'd like to turn the call over to Brian who will review our financial results in more detail Brian .
Thanks, Richard and good morning.
Before I dive into second quarter numbers I want to caution you that it's always difficult to extrapolate partial season performance into full year results as of this past Sunday August for approximately 40% of our forecasts and attendance and some of our most profitable operating days are still to come.
Also as part of this year's fiscal calendar shift our 2019 second quarter results are not directly comparable to the prior year at 64 operating days were moved from the third quarter into the second quarter, when compared with the prior year respective quarters.
Specifically when comparing results it's important to keep in mind that the 2019 second quarter ended on June Thirtyth, while the 2018 second quarter ended on June 24.
Because material differences in our fiscal operating results are partly due to the additional operating days in the period I'll also discuss operating results on a comparable operating calendar.
I'll begin by briefly discussing our results for the second quarter before moving on to more current revenue and attendance trends.
As Richard mentioned at the beginning of the call and as detailed in our earnings release. This morning, we delivered an outstanding quarter with meaning full increases across all key performance metrics.
For the second quarter of 2019, we reported net revenues of $436 million up $56 million or 15% from $380 million a year ago.
With a portion of the increase attributable to the 10% increase in operating days in the current quarter.
On a comparable operating calendar basis net revenues in the second quarter of 2019 were up $14 million or 3%.
On a 4% increase in guest per capita spending of 4% or $2 million increase in our park revenues and a less than 1% decrease in total attendance.
The largest increase in second quarter guest per caps was in our food and beverage category.
9% on a comparable operating calendar basis.
Followed by a 6% increase in spending on premium products and merchandise.
The strength in food and beverage was largely attributable to the meaningful investments, we've made in expanding and enhancing the food and beverage locations and offerings at our parks as well as the continued growth of our all season dining and beverage programs admissions per capita for the second quarter was up 2% on a comparable operating calendar basis, reflecting the integrity within our pricing structure and the successful efforts of our revenue and yield management initiatives.
Onto the cost front operating costs and expenses in the second quarter increased 8% or $21 million to $277 million, which was generally in line with our expectations and largely due to the effect of the fiscal calendar year shift.
On a comparable operating calendar basis operating costs and expenses in the period were up 3% or only $8 million.
The 3% increase in costs was attributable to higher labor costs in the quarter due to wage rate increases.
As well as the need for incremental labor and operating supplies related to our new immersive events.
Meanwhile, adjusted EBITDA, which we believe is a meaningful measure of park level operating results increased $36 million to $163 million for the second quarter of 2019 from $127 million a year ago.
On a comparable operating calendar basis, adjusted EBITDA for the period was up $7 million or 5% and adjusted EBITDA margin improved by 50 basis points to 37.4%.
The margin expansion and the increase in adjusted EBITDA were primarily attributable to the strong in park per capita spending generated by our parks in the second quarter.
Turning our attention to results for the first seven months of the year.
Positive revenue and a trend is.
Attendance trends have continued through July since our July 4th mid season update same park attendance was up 7% for more than 330000 visits.
Over that same four week period same park revenues were up 8% or more than $20 million.
Based on preliminary results through this past Sunday August 4th year to date net revenues on a same park basis totaled $850 million up $31 million or 4% from the comparable seven month period last year.
Also on a same park basis attendance was up 1% or 213000 visits in park guest per capita spending was up 3% and out of park revenues were up 4% or $4 million from the comparable seven month period in 2018.
The growth in same park attendance through the first seven months of the year is very encouraging, particularly given the slow start to the season, we continue to see great demand from the season pass channel, which is trending in line with prior year in terms of mix of total attendance and to date. We've also seen solid growth in the number of unique visitors.
Including results from the two Schlitterbahn Waterparks, we acquired on July Onest combined net revenues through August 4th totaled approximately $877 million up 7%.
Over this period combined to tenants totaled 16.5 million visits up 4% in park guest per capita spending was $40.59 up 3% and out of park revenues totaled $104 million up 7%.
Looking at long lead indicators for a moment.
Our advanced purchase commitments, including season pass sales group event bookings hotel reservations and the sale of all season products, such as all season dining and all season beverage are collectively up when compared with the same period last year. This positive momentum is reflected in our deferred revenues, which were up more than $15 million or more than 15% at the end of July when compared with the same period last year.
Now, let me shift focus to the balance sheet and free cash flow guidance.
At the end of the second quarter, our balance sheet remains healthy and in sound condition with $325 million of cash on hand, and approximately $2.2 billion of debt. The majority of which is fixed through long term notes or interest rate swaps.
Our debt outstanding we have no significant maturities before 2024 with our nearest term maturity being our revolver in April of 2022.
At the end of the second quarter, our total our rep leverage ratio stood at 4.4 times debt to adjusted EBITDA and based on our current outlook. We anticipate our total leverage ratio will be in the same relative range at the end of the year.
While we were comfortable levering up in the near term to complete the strategic acquisitions of the Schlitterbahn properties the land in Santa Clara and the sawmill Creek resort, our priority is to reduce leverage back down inside four times as quickly as possible.
Regarding cash cash payments for interest and taxes for the full year, we expect to pay approximately $98 million in cash interest costs and $45 million in cash taxes.
As I hope you can tell we are very pleased with our operating results through the first seven months of the year and we remain confident in our long term strategy.
We will continue to take advantage of market conditions to maintain a strong balance sheet, while at the same time, having the flexibility to invest in future strategic growth opportunities.
With that I'd like to turn the call back over to Richard.
Thank you Brian .
As my opening remark suggested.
This year's first half was a very busy and productive period strategically for Cedar fair.
It's exciting when our team can share news of transactions the constitute new milestones in our company's history.
And it's especially rewarding when we're confident those strategic ashu actions present attractive opportunities to drive incremental long term growth and profitability for our unitholders.
As we take advantage of marketplace opportunities. It is imperative to maintain our non stop focus on enhancing the strength and resiliency of our core operations.
Doing so means continually improving all aspects of our business, none more important than offering unique immersive entertainment options, our guest enjoy and will return to experienced multiple times throughout each season.
With that objective in mind, our team built a long range plan that included broadening the guest experience as a major strategic focus.
Here are a couple of examples of how that strategy has already begun to take shape.
When the gates opened this year for Cedar points 149 season guest packed our new exhibit in staging areas for a chance to experience Monster Jam Thunder Valley.
Through our partnership with felt entertainment guest by the tens of thousands strolled through Thunder alleys interactive display areas on their way to climb aboard authentic monster truck favorites grave digger and methadone.
Once safely strapped in writers experienced an unforgettable thrill ride through a custom design action packed obstacle course.
Well guess inside the park, we are drawn to the traction by the monster trucks roars, our marketing team was busy rolling out targeted advertising and social media campaigns urging unique visitors and park veterans alike to take advantage of this limited time immersive entertainment experience.
After earning excellent net promoter scores at Cedar 0.6 week attraction rolled on to Kings Dominion for the summer and we'll wrap things up later this fall Dorney Park.
Grand Carnivale is another new immersive activity that is dazzled guests this year.
First at Kings Island, and Kings Dominion.
And then it worlds of fun and Dorney Park.
The pageantry surrounding the spectacle color parades and street parties has energized energized crowds with Mardi Gras inspired flows electrifying music professional street performances and unique food offerings.
Towards evening, the festivities rollout on our mid ways as a joyous internationally theme celebration.
Offering something for everyone and creating larger than life memories for our guests.
While monster gym, and Grand Carnivale are great. Examples of how we are executing on our strategy to broaden the guest experience. We're also making great progress with our other major growth strategies within our long range plan.
For instance.
We are market testing market testing of our season pass loyalty program is going well at four parks.
With the portfolio wide rollout of the program still plan for the 2020 season.
Our pursuit of adjacent development near our parks is also in full swing with our newly constructed Springhill suites hotel scheduled the opened near care wins in the next few months.
I'm also pleased to report our plans to build a Hyatt branded hotel, new Canada's Wonderland recently cleared a difficult design challenge with groundbreaking now within reach.
And set to open in January 2020, New Cedar point is our indoor Sports Center, which will create increased demand for hotel rooms at our Cedar point resort properties, including the newly acquired sawmill Creek resort.
And finally, our targeted marketing initiative focused on improving penetration rates within underserved markets and sales channels kicked off early this year with an updated market sizing study across all of our parks.
Our teams are working through analyzing the information obtained from that study and I anticipate that this initiative will meaningfully ramp up once we finalize that analysis and begin to build our marketing plans for the 2020 season.
Before we take your questions, let me address guidance.
We will not be announcing updated guidance today, nor at our analyst day event. This week.
Let me explain the reasoning behind our decision.
Stepping back for a moment, we entered 2019 with renewed momentum having finished 2018 with a very strong fourth quarter, resulting in a record year for both revenues and attendance.
We achieved those new highs after experiencing a difficult and uncertain first seven months of the year.
Our year end rebound reinforced our confidence in the business model and we followed that up with the company's best season ever in advanced sales of season passes and all season products.
With that strong momentum, we set new long term guidance within adjusted EBITDA target of 575 million by 2023.
That was less than six months ago.
Now fast forward to today.
While market concerns around the economic slowdown persist we remain very pleased with how our business has performed to date and believe the company is in a strong position to achieve record results on a same park basis.
As I mentioned a few minutes ago. We're also very excited about the additions of the two schlitterbahn parks in Texas.
We believe these properties will be meaningfully accretive to adjusted EBITDA in 2021 and beyond once post acquisition synergies are realized and our planned capital investments over the next two to three years have a chance to positively affect the guest experience and drive growth.
Having closed on our recent acquisitions less than six weeks ago and also watching the current macroeconomic environment closely.
We are not yet ready to update our long term guidance. However, we will be in a better position to do so later this year or when we announce our 2019 full year results.
As we work through the task of integrating our newly acquired properties as efficiently and seamlessly as possible.
Our priority is reducing our debt to adjusted EBITDA leverage ratio to inside four times as quickly as possible.
We are also committed to ensuring confidence in the sustainability of our distribution and are planning to moderate growth in the distribution in the near term.
This is a direct result of prioritizing de leveraging as we absorb the recent acquisitions and believing that at the current yield.
The market is discounting the quality of the distribution.
As we've previously stated we do not anticipate making a final decision on our 2020 distribution rate until after our important fall season is complete and our board has better visibility on our 2019 full year results.
From a capital allocation perspective.
We are committed to reassessing, the appropriate level of marketable and infrastructure capital necessary to produce the attendance and revenue growth we are targeting.
Our team is critically evaluating the required level of capital investment in the core going forward.
As evidenced by the level of capital we've invested in our property over the past several years.
Our parks have gone through major expansions and transformations.
And I want to make sure that we extract full value from these investments.
This critical review of capital expenditures combined with our move towards more capex slide initiatives, such as events and experiential attractions.
Should provide meaningful capital investment efficiencies going forward.
In turn this will provide us with increased flexibility with respect to use of free cash flow and allow us to achieve our objectives around reducing leverage and ensuring confidence in the distribution.
Before we wrap up I want to reiterate how pleased I am with the strength and resiliency our company has demonstrated over the past year.
This resiliency of our business model has proven itself during challenging economic cycles, such as 2009.
As well as during challenging weather year, such as last year.
Coming out of 2018, I'm very proud of what our team has accomplished so far this year.
Guest response has been extremely positive for our new rides and attractions, including the new coasters at Canada's Wonderland and Carowinds.
And the new immersive attractions, such as Grand Carnivale Monster gym and forbidden frontier.
In park spending in out of Park revenues are also on the rise and our season pass holder base is at a record level and continues to grow.
Fundamentals such as these give us confidence that our strategies are working and that the financial health of our consumer remains solid.
We remain dedicated to our mission to make people happy and look forward to ensuring that they have that opportunity through our busiest days ahead.
During the fourth quarter Halloween weekend to produce some of our biggest days and seven of our parks will be opened this year for wintertime festivities, including a first time winterfest at Canada's Wonderland.
Everything is in place for a strong finish this year and we look forward to keeping you apprised of our progress.
April that concludes our remarks, and we're ready to answer questions.
Thank you.
She would like to ask a question. Please signal by pressing star one on your telephone keypad.
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Again that is star one if you would like to ask a question.
And we'll take our first question from Brett Andrus with Keybanc capital markets. Please go ahead.
Hey, good morning.
Morning, Brett morning, Brett.
So really good strength.
That you guys are seeing or saw in July .
I think bucking some of the trends that some of your other peers are we're seeing but can you maybe give us some more detail on what park or regions drove that.
It seems like July acceleration.
Or was it more broad based.
Strength across the broader portfolio.
Brad one of the things that we saw last year as we went through the first difficult seven months is that the impact was widespread I will tell you. What we've seen this year is equally the rebound is very broad based so not only in good weather days, but as we go weak through week, we've seen strength across all regions of our parks.
Not just in California, but on the east coast as well so.
It was very broad based.
Thank you and just to make sure I'm thinking about the third quarter right.
Assuming we just take the 64 day shift out.
But can you remind us of any other things to consider is the kind of model Threeq and Fourq you again.
Yes, Brett.
For the most part.
I would say Thats correct right now.
We're forecasting roughly 60 last operating days in Q3, so essentially.
Your your analysis is pretty spot on as we look over the balance of the year.
Richard mentioned in additional Winterfest this year Canada's Wonderland those have traditionally.
Offered up an incremental 20 to 25 operating days, when we sort through everything by the end of the year all the various changes in the calendar.
Operating seasons.
Throughout the throughout the year and across the system will end. This year, probably was something around 10 to 15 extra operating days net by the end of the year.
Got it and one last one and maybe on front running something you're going to talk about on Friday, but if you think about improving the capital efficiency are there any updated capital spend targets, whether it's on a dollar or a percent of sales basis, and then I guess.
Also what over what over what timeframe are you expecting to hit those targets.
Yes, Brett as we've stated on previous calls and the planned investments within the core.
Properties in terms of infrastructure in marketable new attractions for 2019 was roughly $140 million with an additional 30 to 40 million this year.
Related to the business development.
Projects that Richard alluded to Charlotte Hotel Indoor sports complex in Sandusky, So while some additional employee housing facilities at several parks that were in the process of process of constructing.
As we look forward to the activating those efficiencies. The 2020 plan is fairly base. So I would I would say looking at it in a comparable light to 19, although we haven't given a specific number yet for 2020, I think thats the range that I content.
The real ability to impact on those efficiencies begins in 2021, just based on the lead times around most of the big projects.
Understood. Thank you.
Thanks, Brett Thanks, Brett.
We'll take our next question from James Hardiman with.
Wedbush Securities. Please go ahead.
Hi, good morning, Thanks for taking my call, obviously, no matter, how we cut the lag.
Well month, plus it's been.
Really nice for you guys, but maybe just.
Some quick math, Brian I know you don't low ball.
Do the math, but I get to about a 6% increase in revenues on maybe 2% increase in attendance over the last.
Four weeks since your post July 4th.
Really I guess, a is that right and b that Matt.
We're both given all the moving parts.
Yeah, James Good morning, as it relates to as you said the last since about the middle of June the.
The trend of the macro trends definitely shifted in our favor and the attendance trends have followed over the last four weeks. So basically looking since our July 4th mid season update, which I think actually took us through the Sunday July seven so if we look at July 8th basically through this past Sunday August 4th.
Attendance up about 7% or north of 330000 visits and revenues.
In the north of $20 million range or 8%.
Well, okay. So so I'm glad you asked me to do the math obviously.
A little bit light there okay that is.
Really encouraging and then.
I found that the commentary around margins to be really helpful. Obviously margins are way up year to date, but there is some calendar effects there.
I think you said 50 basis points of expansion.
On a comparable basis in the second quarter.
I guess.
You have a comparable number for the year to date period.
And then how should we think about the third quarter I'm, assuming given the negative calendar should we assume that there is some de leverage and that margins will contract in third quarter.
Yes, James again.
Good question in terms of margins as you've heard us talk about in the past key metric for us on that we continue to focus on but but not necessarily the.
The all Mighty last decision otherwise, we probably wouldn't be doing some of the incremental events on that as we said in our prepared remarks are a little bit more high capex heavy a little more labor heavy.
Than than some other things that we've done.
So the 50 Bips increase in the in the quarter was on a comparable basis.
As comparable as any any two years can be I mean, the macro factors of weather of course and things like that.
Always playing a role.
And again as we talked about in the past margin is in large part often driven when we talk about it on an average across the system by the performance of the individual parks.
Within the system and so when we see our largest parks three of which are concentrated here in the great Lakes region between Cedar Point Kings Island, Canada's Wonderland doing well.
That helps out a lot.
And so the 50 basis points as I said up on a comparable basis as we go forward.
We talked about last year right results from about August one on.
On the comparisons get a little bit more challenging and so that will make some of the margin upside be a little bit more challenging doesn't mean that it can't be beat again, those the mix of performance by parks will play into that but there is no doubt that the margin lift.
As for the quarter was was was helped dramatically by the strong performance over the last part of June at those Big parks.
But just to clarify.
Once we do our sort of top line adjustments.
For the calendar in the third quarter I'm, assuming we should somehow figure out how to also have you got.
The leverage piece right in other words that the margins as a result of the change in calendar will also be under some pressure.
Yes, if you're looking at things on a more on the fiscal comparative on like what you'll see in the second quarter Q and then and then try and take strip that out of Q3. That's that's exactly how you look at it we would intend to do is when we get to third quarter results. Much like we just did and given results updated through the end of July is provide results through.
On more of a comparable basis to try and normalize for those those calendar this fiscal calendar shifts, but the way you're describing it is a fair approach.
Okay, Great and then just last quick question for me I mean, we've seen.
Really good per caps I think across the industry.
Attendance, it's been I think more mix is there something from a macro perspective that you think is driving that dynamic.
Yes, James This is Richard when we look at the financial health of the consumer we think it is that the consumer is feeling good they're looking for places to come where they can spend time with family and friends.
And we've seen.
As we've always said and you've heard me say this before with good weather. There are more people are coming they're staying longer and they're spending more so I think as we continue to do more research and focus on what the consumers are looking for we can continue to program the things that really there, they're looking for and one of the things that come through and Brian called it out in his remarks, food and beverage up 9% food and beverage and the quality and the ability to serve.
Food and beverage in an immersive environment, we've made significant investments in our facilities, we've programmed to put in executive chefs and culinary talent at all of our parks as Weve continued to do that over the last few years were really now reaping the benefit of this whole new approach to something that the consumers tell us is critically important in their experience, but also critically important to their decision on whether or not to visit so we think the food and beverage quality the ability to do more transactions per hour all those things fold into a really important piece of the in park per capita spending.
Excellent.
Great work guys and good luck the rest of the way.
Thanks James.
We'll take our next question from Tim Conder with Wells Fargo. Please go ahead.
Thank you and then.
Gentlemen, Brian if you could.
The question related to the advance purchase commitments and deferred is your answer Im sorry. Your commentary there is that is that ex schlitterbahn and saw mill Creek.
In terms of the the advance purchase commitments through through the end of July yes, the sawmill really nor schlitterbahn really moving that materially.
15 mountain North of.
$15 million in cash.
And up North of 15% is really an apples to apples comparison.
Okay, great great.
And then.
In response to how things have gone in the last month, there again, just to just to make sure thats on a comparable.
Basis ex.
Ex acquisition last four weeks, the attendance jump and 330000, and so forth or are you, including Schlitterbahn in that also.
A bit there they are in those numbers.
Pushing those up a bit.
Okay, and I guess, then that any any color you can give us on schlitterbahn. What you expect the contribution here in 2019 to be you know.
No part of the part of the seasons off season, but.
Just any color you can give us as far as maybe revenue or attendance or adjusted EBITDA.
Related splitter bond to kind of help in the modeling.
Well, we're still watching how that develops I will say as Richard said in the prepared remarks and were pleased with the.
With the initial.
Results were seeing out of out of them over the first several weeks since the acquisition closed on July Onest.
So as we said at the time of the announcement on the the Schlitterbahn properties did between $65 million to $70 million in revenue a little north of a million almost $1.2 million in total attendance. We acquired amount on July one so we've got them for two of the key months.
About half of the year. So I don't think it would be too far off if you think of things in terms of maybe a little bit better than than half of those numbers just based on the.
On the fact that we have.
Well they will be under under our ownership for the two the two big summer months of July and August .
Okay, Okay, and then gentlemen weather weather.
Here here on the call or the next couple of days here.
Can you talk about organic margins and again, the 50 basis points, the nice bring down here.
The incremental margins, but can you talk about how the progress or your plans for that and enhance that on a go forward basis here and any goals for.
This year next year from that perspective is that as we've alluded to earlier that feeds into the de leveraging side of the the focus also.
Yes, it does to them.
I think as I said earlier a bit of the that answer lies a little somewhat in the performance of the individual properties, we often find ourselves talking about things and sort of the model it.
On these calls, but clearly our discussions inside the walls here when reviewing the performance is much more to park level.
There is no doubt that over the last couple of years. In addition to the pressure that we've seen on attendance because of macro factors like the weather, particularly in the first seven months of 18 put pressure on on on margins as as as you know the volume fall off in volume or shortfalls in volume definitely have a meaningful impact on on margin, but certainly has.
The first couple of years of the investments we've made in the more experiential attractions, adding winterfest and and Grand Carnivale and things of that nature put pressure on our operating margins, but we we believe benefit us long term significantly I think you're already we're already seeing that play out in the strength, we're seeing in advance purchase commitments commitments, particularly in the season pass sales I will say one of the things we've been most pleased with here in 2019, and we Havent commented on it directly but I'll say now is that the sale of season passes while it typically wanes by about the end of June we've continued to see strong demand even through the month of July .
For for season pass sales for the 19 season, because there's so much still to do at the parks in the fall and winter and so those events, while a little bit margin heavy early on are going to benefit us significantly going forward with that in mind. It is fair and we've seen it with with the Vanslyke haunted Winterfest. That's when you get into year, two or three those margins begin to improve because a lot of the ramp up costs are now behind you and a lot of those startup costs don't persist and so I think we'll start seeing a lot of benefits pay are paying off.
Relative to some of the pain that we've taken in 17 and 18, but ultimately margin is no doubt it driven by the performance of the individual parks and the big parks performing well goes a long way.
Okay. Thanks for the color gentlemen, we'll see tomorrow evening.
Thanks, David.
As a reminder to star one if you would like to ask a question.
Well move onto our next question from Michael Swartz with Suntrust. Please go ahead.
Hey, good morning, guys.
Just.
But a little more expansion on Schlitterbahn I think you gave some good color on on how much that adds on an annualized basis.
Maybe just in terms of the synergies maybe talk about some of the some of the things from a very high level, what you're doing there to kind of integrate that in the broader cedar fair portfolio.
And then as it relates to those parks from attendance mix standpoint, how much of their attendance is on a path to season pass.
And.
How much of the visitation is more of a local gas versus a bait domestic traveling guests.
Good morning, Michael It's Richard I'll take the second part first and then I'll, let Brian talk about the synergies when we looked at it splitter bond and got closer to it I got more excited the closer we got to Cedar fair as a house of brands.
And these brands are really well established the Schlitterbahn brand is so iconic in Texas, we keep using that word is what it is more about I'll tell you. It's probably the part that we've looked at that we didn't know that most reminds me of knots in the heritage we have at Knott's Berry farm.
So when we looked at that and this sort of gets to your question.
It penetrates throughout that whole central Texas region, really really well so.
And it does it has got a nice profile within the market, but also when we looked at it and this gets to your synergy question. There were probably where we were in the season in terms of evolution season Pro pass program, probably a decade or so ago, we havent had the op and they haven't had the opportunity to rollout installment payments, which you know has been a big driver behind our season pass program so that.
Ability to go in there Polish up a really strong brand, bringing our capabilities and competencies, particularly those that we've built over the last several years, our robust CRM platform our e-commerce capability, our revenue management capability now.
As Brian will tell you we need to put some systems into get those things going and Thats part of our plan, but we think theres meaningful and significant upside in the performance of these parks both on the revenue side and then on the cost side, so with that let me hand, it over to Brian .
Yeah, Michael as it relates to the synergies it doubled dovetailing off of Richards comments.
The revenue synergies because of that.
The time, it's going to take to fully integrate the platforms in the systems.
I think the revenue synergies build a little bit slower than the cost synergies.
But it would be our intention to have.
Those parts fully integrated on to our systems and platforms by the 2021 season, we'll take the next 12 to 18 months to to accomplish that and Thats why in the interim I think we'll start mining some synergies on the revenue side. It just will take us a little bit longer to build up the cost synergies that are only available are the ones that you would typically think about and are a little bit more easily realized right the ability to talk to them up underneath some of the the corporate overhead functions that already exist here at Cedar Fair.
That would wouldn't necessarily need to be duplicated down there and so we should be able to mine most of those synergies.
By 2020, and so it's going to take a couple of years to fully realize the revenue synergies, but we're really excited as we said in our prepared remarks about where the opportunity goes that we've talked about publicly that there is three to four we believe there are several hundred maybe in that three of 300 to 500 basis.
Room in terms of margin expansion from where they've traditionally been.
But we need to get in there and do some work in order to capture that that that upside.
Okay. That's that's fantastic color and then Brian just a quick follow up I think you said.
You gave some numbers for cash taxes and cash interest expense this year.
What do you see as far as annualized I think that Theres, a partial years with some of the new debt.
I don't really know the tax structure of some of the acquisitions.
Yes, you should see.
The cash taxes.
We've said publicly before that we think those are probably in that $45 million to $55 million range for the next several years.
A little bit dependent on how the business grows and then where is the growth in the <unk>.
In the business.
The C Corp related properties versus the partnership properties interesting cost cash payments on interest.
I would imagine will be a little bit closer to that.
Hundred $105 million range at least for the next next couple of years.
Okay, great the Sydney Geismar.
Thanks, Michael Thanks, Michael.
Well move onto our next question from Steve Lesinski with Stifel. Please go ahead.
Hey, guys good morning.
Good morning.
I might be thinking about this a little bit too much but it's probably a different type of customer, but as you know when you look at Knott's Berry farm and I think you guys or I don't know 10 miles away from from Disneyland.
Have you seen any pressure on you guys there.
As Star Wars has been rolled out.
Steve.
Knott's Berry farm sits five miles away from from Disneyland and and as we said earlier in the year and I can reiterate now through the first seven months Knott's is off to its best start ever in spite of what was really choppy January and February because a little bit of weather, but knott's is performing extremely well so best start ever.
Okay. Good to hear and then second question would just be around Europe , the indoor sports complex and maybe give us some kind of update in terms of how thats booking out so far.
Yes, Steve its Brian .
In terms of the the end or well first let me say, we're extremely pleased with the the booking trends on the outdoor as we've said this is year three and they've been pacing up each year.
Over these first three years and as we said at the tail end of last year, we had already sort of past that the year four year five milestone in in terms of the original pro forma and only the only the second year. The first big sets a tournaments start.
In mid January the facility will have a soft opening.
Late this year early next year in the first big tournaments.
Started mid January we're pleased with the early bookings again, the indoor is going to be focused on a basketball jail volleyball.
And.
We.
We're excited about what what that offers and are seeing ours are seeing good early season trends on the booking curves there, but I try not to get too excited because we haven't even open the front door jet.
Okay got you thanks, guys appreciate it.
Thanks, Steve.
It appears there are no further questions at this time.
Richard Zimmerman and I would like to turn the conference back to you for any additional or closing remarks.
Thank you April and thank you for your interest and ongoing support of Cedar Fair I know many of you have had an opportunity to visit a cedar fair parks for those of you haven't I encourage you to take the time to visit us and experience what differentiates Cedar fair parks from the pack.
Michael.
Thanks, Richard we look forward to speaking with many of you over the next few days at our analyst day event being held at our flagship Park.
Cedar point with that.
April that concludes our call. Thank you.
Ladies and gentlemen, this does conclude todays presentation. We thank you for your participation you may now disconnect.