Six Flags Entertainment Corp (FUN) 2021 Q4 法說會逐字稿

Good morning. My name is Chantel, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cedar Fair Entertainment Company 2021 Fourth Quarter Earnings Call. (Operator Instructions) Michael Russell, you may begin your conference.

Thank you, Chantel, and good morning to everyone. My name is Michael Russell, Corporate Director of Investor Relations for Cedar Fair. Welcome to today's earnings call for the review of our fourth quarter and full year results ended December 31, 2021. 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.cedarfair.com.

On the call with me this morning are Richard Zimmerman, Cedar Fair President and CEO; and Brian Witherow, 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 described in such statements. For a more detailed discussion of these risks, you may refer to the company's filings with the SEC. In compliance with the SEC's 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 widely and unselectively disseminated, all content on this call will be considered fully disclosed.

With that, I'd like to introduce you to our CEO, Richard Zimmerman. Richard?

Thank you, Michael, and good morning to everyone on the call. We appreciate you taking the time to be with us this morning and hope you are all staying well. Before we get into our 2021 operating results and our outlook for the upcoming season -- 2022 season, I'd like to address one specific topic. As we announced on February 1 and as confirmed in SeaWorld's statement yesterday evening, SeaWorld did make an unsolicited, nonbinding proposal to acquire Cedar Fair. The original proposal was for $60 per unit, which they subsequently and informally increased to $63 per unit.

Consistent with its fiduciary responsibilities, our Board, together with its external advisers, carefully evaluated the proposal and determined it was not in the best interest of the company and its unitholders. As we will discuss this morning, the Board and management have a high degree of confidence in our long-range strategic plan. We look forward to reinstating a sustainable distribution to our unitholders, and we are confident that continued successful execution of our plan will result in meaningful per unit value creation. That said, the Board is open-minded and always committed to acting in the best interest of unitholders. They will continue to consider any opportunities to create value for our unitholders. With regard to the SeaWorld proposal, we will have no further comment at this time.

Turning now to our results for the fourth quarter and full year 2021. Our opening remarks today will address 3 primary areas: first, an overview of our strong operating performance from this past season as well as the strategies we will deploy as we carry that momentum into the 2022 season, our first full operating calendar since 2019; second, Brian will provide additional details around our 2021 performance as well as the steps we are taking to further accelerate growth and achieve our capital allocation priorities; finally, I will conclude with a summary of our outlook for the business and strategies for driving unitholder value both in the near and longer term.

I'm pleased to report that 2021 proved to be another outstanding year for Cedar Fair. That's quite remarkable given the macro environment at this time last year, when the country was experiencing a surge in coronavirus cases. COVID restrictions prevented our only year-round park Knott's Berry Farm from operating, and we had not yet established opening dates for any of our seasonal parks. Yet by early November, we had completely turned the tide, generating record revenues in the third quarter in the month of October, driven by steadily improving attendance trends and new highs in guest spending levels. Our performance during this 4-month period clearly demonstrated the strong demand for our well-maintained, best-in-class parks and world-class collection of entertainment offerings and with the eventual return to normalized demand, the attractive long-term growth potential of our business model.

Our outstanding performance over the second half of 2021 puts us on track to achieve one of our key strategic objectives coming out of the pandemic: the reinstatement of a sustainable and growing distribution to our unitholders. As we noted in our earnings release this morning, we believe we are well positioned to reinstate the distribution by the third quarter of this year, if not sooner.

Before discussing our prospects for the year ahead, let me review some of our highlights from this past year. First, we generated robust net revenues of $1.34 billion. Second, demand for our parks was strong, with total attendance on a comparable operating day basis at 85% of 2019 levels. Third, in-park per capita spending was up 28% versus the previous record levels we established in 2019. Fourth, results from our out-of-park revenue channels were solid, finishing the year on par with 2019. And finally, through the early going, sales of 2022 season passes and related all-season products, are pacing ahead of the then record pace set for the sale of 2020 season pass products. These results reflect the strength and quality of our regional park brands, and they would not have been possible without the swift and decisive actions taken last spring by our operations team.

These efforts were led by our Chief Operating Officer, Tim Fisher, who oversaw an aggressive park-by-park recruiting and hiring campaign that kept our opening dates on schedule. By the time we reached the peak operating month of July, in the middle of the most difficult labor market I've seen in my 30-plus years in the industry, our parks were adequately staffed, remained so for our busiest weeks of the year, and most important, were prepared to deliver the high-quality experience our guests have come to expect.

Our successful recruiting strategy meant our revenue centers were staffed and in operation whenever our parks were open, helping us achieve the record in-park per capita spending levels we generated this past season. These results were driven by higher levels of guest spending across all key revenue categories, particularly admissions, food and beverage and extra-charge attractions. While these positive revenue trends benefited from a strong consumer backdrop, they are also the result of a strategic plan we initiated long before the pandemic's arrival.

Our core strategic initiatives, which are grounded in many years of consumer research, are focused on expanding our park offerings and enhancing the guest experience in an effort to extend length of stay, encourage repeat visitation and provide more opportunities for guests to spend with each visit. Building a more robust culinary infrastructure, capable of delivering higher quality food and beverage offerings, will rarely capture headlines like the addition of a world-class coaster, but the impact it has on improving the guest experience can be equally as powerful for many seasons to come. As well, the new technology enhancements that eliminate the need for cash in our parks allow guests to make purchases and pay with touch-free apps, minimize lines at our food and beverage locations and increase the number of sales transactions per hour. Our continued investment in new technologies also improves the real-time analytics of attendance and guest spending data, which gives our newly formed business intelligence team the tools they use to optimize revenue management initiatives around the entire guest experience.

On the other side of the coin, we're applying the same level of discipline as we work to mitigate the current inflationary pressures on our cost structure, most notably around labor rates. While our goal is to offset the immediate impact of higher labor costs as quickly as possible, we have confidence in the effectiveness of our time-tested measures to regain our cost of revenue equilibrium. These include revenue management and pricing strategies, workforce management technologies and other operating efficiencies that should steadily improve margins over time. I was especially pleased last season at how our revenue strategies helped to partially offset higher operating costs as we got deeper into the season.

While we anticipate continued cost and labor market pressures for the foreseeable future, our success in navigating the abrupt structural changes last season, combined with our dynamic data-driven pricing and labor rate management strategies, give us confidence that we can successfully manage through whatever additional headwinds we might face going forward. Based on the pace of the recovery over the past 6 months, as well as the strength of long-lead indicators, such as the sales of season passes and other all-season products, we believe we're well positioned to deliver another outstanding year in 2022.

With that, I will turn the call over to Brian for a review of our financial results. Brian?

Thanks, Richard, and good morning, everyone. I'll start by discussing full year 2021 results before reviewing results for the fourth quarter and then provide an update on the balance sheet and our outlook around capital allocation priorities going forward. But first, I need to remind you that the pandemic had a material impact on park operations in both 2020 and 2021. Because we suspended park operations in mid-March of 2020 and had only limited operations that season, results for the past 2 years are not directly comparable. For those reasons, I will provide more relevant comparisons between 2021 and 2019.

In 2021, operating days totaled 1,765 or roughly 20% fewer compared to 2,224 total operating days in 2019. As reported in our earnings release this morning, net revenues for 2021 totaled $1.34 billion compared with $1.47 billion in 2019. The decrease in revenues was due to COVID-19-related park closures, operating calendar changes and capacity limitations at select parks, all of which led to an 8.4 million visit decrease in attendance for 2021. The attendant shortfall was significantly offset by a 28% or $13.71 increase in 2021 in-park per capita spending.

For the full year, 2021 attendance totaled 19.5 million guests or approximately 70% of reported 2019 levels, driven by strength in the season pass and general admission channels. Solid momentum in these 2 channels was offset in part by the 20% decrease in operating days and expected slower recovery in group sales attendance and capacity limitations at certain parks, including 1 of our 4 largest parks, Canada's Wonderland.

Meanwhile, record in-park for capital spending of $62.3 for the year was driven by meaningful lift in guest spending levels across all key revenue channels. The improved per caps also reflect the successful outcome of strategic price increases and higher transaction counts per attendee. Guest spending on food and beverage, merchandise, games and extra-charge attractions was up more than 35% on a combined basis in 2021 over 2019 levels.

In addition to greater consumer demand, the improved in-park per caps reflect our guest desire and willingness to spend more each visit, in large park, the results of the commitment we've made over the past several years to improve the overall quality of the guest experience and our park offerings. As Richard noted, the investments we made to expand and improve revenue centers, particularly within the food and beverage area continue to drive operating efficiencies and higher retail sales, while also meaningfully enhancing the overall guest experience.

During the year, as the tenants continue to improve to pre-pandemic levels, we also dynamically priced into demand, minimized our reliance on promotions by unplugging inefficient third-party distribution channels and funneled nearly all ticket purchases through our e-commerce sites where we have total control over pricing. The result was a 22% or $6.21 increase in our admissions per cap for 2021 compared to 2019.

Finally, despite fewer operating days in the year and 2 signature resort properties, which remain closed for renovations, out-of-park revenues for the year totaled $168 million, which was comparable to 2019 levels and reflected a 5% increase in our average daily room rates across the system with ADRs at certain locations up more than 20%.

Moving on to the cost front. Operating costs and expenses in 2021 increased to $1.03 billion, up 4% or $40 million compared to 2019. This increase was driven by a $56 million increase in operating expenses during the year, offset in part by a $14 million decrease in cost of goods sold and a $3 million decrease in SG&A expense. Of the $56 million increase in operating expenses, approximately 2/3 was attributable to higher full-time and seasonal labor costs. The higher full-time wages reflect an increase in head count, driven in large part by the gradual shift to a more year-round staffing model at our parks.

Meanwhile, the higher seasonal labor costs were driven entirely by significant increases in seasonal wage rates across the parks. As we noted on previous calls, the step-function increases we took in wage rates was part of a strategic shift to become the market leader in terms of rate in each of our regions, a move we felt was necessary in order to effectively recruit in such a challenging labor market. These higher seasonal wage rates were offset in part by fewer labor hours, but more importantly, they allowed us to adequately staff our parks, which was critical in our ability to produce the record per capital levels in 2021. The decrease in SG&A expense was largely driven by a more efficient marketing program and lower advertising expenses, which helped to offset an increase in full-time wages, including expense related to 2021 bonus and equity compensation plans.

For the full year, adjusted EBITDA, which management believes is a meaningful measure of the company's park level operating results, totaled $325 million compared with $505 million for 2019. The shortfall in adjusted EBITDA for 2019 was largely due to the negative impact that operating restrictions, including delayed openings and mandated capacity limitations had on 2021 attendance, coupled with a higher operating cost structure.

Now let me briefly turn to our fourth quarter results. Based on normal calendar shifts as well as a strategic focus on expanding park operating calendars where appropriate, operating days in the fourth quarter of 2021 totaled 384 or 21 more operating days than in the fourth quarter of 2019. Net revenues in the period totaled $351 million, up 36% or $94 million compared with the fourth quarter of 2019. The higher revenues were driven by 5% or 246,000 visit increase in attendance to 5.3 million visits, a 32% or $14.98 increase in in-park per capita spending to $61.42 and a 20% or $6 million increase in out-of-park revenues to $34 million. The increase in attendance and out-of-park revenues were attributable to the 21 incremental operating days in the quarter as well as record attendance during our extremely popular Halloween-themed events and strong demand for our (technical difficulty) operations.

The 32% increase in fourth quarter per capita spending reflects the continued strength in guest spending across all revenue channels. After fourth quarter operating costs and expenses, which were up $75 million when compared to the same period in 2019, adjusted EBITDA for the quarter totaled a record $73 million, up $19 million or 34% over the same period in 2019. The increase in 2021 fourth quarter operating cost was the result of the 21 additional operating days in the period as well as higher wage rates, incremental variable operating costs directly associated with the record attendance levels in the period and higher maintenance costs. In spite of the pressures on operating costs and expenses, adjusted EBITDA margin for the fourth quarter was 21%, in line with our pre-pandemic fourth quarter EBITDA margin in 2019.

Turning to our balance sheet. We are entering 2022 with a sound balance sheet, which we expect to continue to strengthen as we build on the momentum we've established over the past 6 months. We ended 2021 with no outstanding borrowings under our revolving credit facility and no significant debt maturities before 2024. At the end of the year, we had total liquidity of $421 million, including cash on hand of $61 million and $359 million available under our revolver, net of $16 million of letters of credit. This compares to $442 million of total liquidity at the end of 2019.

Going forward, our capital allocation priorities remain consistent. First, continue to reinvest in the core business. As we previously announced, we plan to invest between $170 million to $175 million in 2022 on new rides, attractions and other park improvements to support future growth at our parks. We also plan to invest an additional $40 million to complete renovations on our Castaway Bay and Sawmill Creek Resort properties at Cedar Point. The completion of these capital projects, which were suspended during the pandemic will bring our projected full year capital spend for 2022 into the $210 million to $215 million range.

Our second priority, continue to pay down debt until we reach our net debt target of $2 billion or less, further enhancing the strength and financial flexibility of our balance sheet. This past December, we took the first meaningful step toward accomplishing this goal with the early redemption of our 2024 bonds using cash on hand to reduce outstanding debt by $450 million or close to half of the COVID-related debt we put on the books back in 2020. We will continue to look for additional ways to improve our capital structure and enhance our financial flexibility, including a potential refinancing of our credit agreement later this year.

The successful execution of these first 2 objectives positions us to achieve our third priority, reinstatement of a quarterly cash distribution, which as Richard noted, we now believe we are well positioned to do by the third quarter this year, if not earlier.

Looking at long-lead indicators, the trends remain positive. As Richard noted earlier, sales of 2022 season passes and related all-season products remain strong, with early sales being driven by an 8% increase in average season pass sales price to date and higher penetration rates on our all-season add-on products. Deferred revenues as of December 31, 2021, totaled $198 million representing an increase of $37 million or 23% when compared to deferred revenues at the end of 2019. While we are still early in our season pass sales cycle, we are nevertheless pleased with our current pace to date and our team is laser-focused on building upon this momentum as we prepare to enter the most critical portion of our annual sales cycle.

In terms of labor, we anticipate seasonal labor costs in 2022 being up from 2021 levels, primarily the result of a 35% increase in planned operating days compared to this past year and less the result of incremental pressure from wage rates. Planned operating days in 2022 are projected to total almost 2,400 days, while planned operating hours will total more than 23,000 hours or nearly 60% higher than this past year. While the labor market remains challenging, (technical difficulty) staffing position today than we were at the same time last year when we were still unsure of our park opening -- reopening dates. This year, we've had a full off-season to prepare and recruit for our staffing needs and our base of returning associates looks solid, something we didn't have in 2021.

Our average wage rates in 2022 should also benefit from the return of the J-1 Visa program, and most importantly, from the rate increases we've already taken. As Richard mentioned, we also have confidence in our labor management strategies as well as other ongoing cost-saving measures aimed at minimizing the impact of cost pressures across the business. To further offset some of the cost headwinds, our business intelligence team is focused on optimizing yields through more dynamic pricing and creating additional revenue streams throughout the system, something we did well this past season as evidenced by the record growth in guest spending levels.

Finally, while we are optimistic that the global recovery will continue, we are keeping a close eye on Omicron and other variants of the coronavirus. We will continue to withhold financial guidance until we have a greater confidence that further business disruptions are unlikely. Ultimately, our performance in 2022 will be highly dependent on the continued pace of the recovery and several other factors that remain out of our direct control, including the state of the labor market, broad consumer sentiment around the pandemic and the potential for further capacity limitations or other mandated park restrictions. We will continue to evaluate each of these as we get closer to the core operating season.

With that, I'd like to turn the call back to Richard.

Thanks, Brian. Last quarter, I reminded everyone of our pledge to emerge from the COVID-19 disruption stronger than when it began. The initiatives that drove our recovery over the second half of 2021 demonstrated our commitment to that pledge. And it's safe to say that we are closer to achieving our goal than we originally thought possible in such a short period of time.

In closing, let me summarize why we have plenty of reasons to be optimistic about our business. First, based on the robust demand we drove in the second half of 2021 and a strong early start in our 2022 season pass campaign, we believe our parks are well positioned to return to 2019 attendance levels in the upcoming season.

Second, higher levels of guest spending at our properties are correlated with our strategic investments to elevate the guest experience beyond our world-class thrill rides, and we have yet to maximize returns on many of those initiatives.

Third, heading into 2022, both our recruiting efforts and returning seasonal associate base looks strong, while the number of applicants through this year's J-1 Visa program is again approaching historical levels.

Fourth, we are preparing for our first full year of operations at our Schlitterbahn parks. After the pandemic disrupted our first 2 years of operations and prevented us from realizing the full value we envisioned when we acquired those parks.

Fifth, we have 2 fully renovated hotel properties reopening this spring that will further strengthen the revenue performance of our resort channel, a primary differentiator for us in the regional attraction space.

And finally, our rapid recovery from the pandemic has allowed us to progress more swiftly towards the pursuit of our top strategic priorities that of deleveraging our balance sheet and reinstating a distribution for our unitholders.

As we prepare our seasonal parks over the next few months for their springtime openings, I'm excited for our associates who have overcome nearly 2 years of uncertainty, but now have an opportunity to prepare our parks and resort properties for a full season of operations and programming, free of closures and delays. We greatly appreciate their commitment, patience and fortitude to persevere through market conditions as difficult as any we have faced in our lifetimes. With the disruptions from the pandemic becoming seemingly smaller in the rearview mirror every day, I'm confident Cedar Fair's best seasons remain ahead.

Chantel, at this point, could you open up the call for questions?

(Operator Instructions)

Your first question comes from the line of Steven Wieczynski with Stifel.

So it seems the reinstatement of the distribution is probably on pay for a quicker return than what you guys had previously suggested. So I guess the question is here, how should we think about the level of distribution in the current environment? And maybe relative to where the distribution was before it was suspended? And I guess what we're trying to figure out here is, how you think about the payout level going forward relative to historical levels?

Yes, Steve, there's some technical aspects relative to the distribution. We've got to work out through our credit agreement. But in our conversations with the Board, we want to make sure that we step back in at a level that commensurate with what we see in the business, the cash flow we're generating, but then also reinstated at a sustainable and growing level.

Okay. Understood. And then second question is probably going to be a bigger picture question, and you'll probably try to probably figure out where I'm going with this. But I guess what we're trying to figure out here is, how you guys or the Board view Cedar Fair's long-term growth prospects? And maybe what you think the market or investors are currently misunderstanding with your business? And I hope that makes sense. But I think what we're trying to do here is figure out what you guys or the Board view as being the most underappreciated piece of your story?

I think when I think about what we've got in place, and we said this in our prepared remarks, I've got real confidence that the Board does in our long-range plans. I think post pandemic, the world does look different, but there are different opportunities and different challenges. As you saw from our record in the last 6 months of the year, we've been able to tap some things that maybe weren't available to us prior to the pandemic. So as we look forward, it's all about leaning into the recovery, making sure we're reinvesting in the business.

This business has -- and the business model has been very attractive for many decades. It generates significant amount of free cash flow over an extended period of time. And from our case, the Board -- we regularly review the MLP structure with the Board, but it's been a very tax-efficient structure for us. And over the last -- since we went public in 1987, we've distributed almost $2.9 billion in distributions to our unitholders. So we think we've got an ability and we've got plans that will continue to leverage that business model, but as we build out the new capabilities like business intelligence, make sure we're capturing where the opportunities are and leaning into you what's available to us now that wasn't available to us prepandemic.

Our next question comes from James Hardiman with Citi.

So I know you're -- you don't really want to comment on the deal or the proposed deal. But I guess just from a big picture perspective, I mean, if you're going to turn down a deal that was worth $3.4 billion or $3.6 billion at the end of the day, it seems like it's implicitly saying you think your company is worth significantly more than that. Is it over, but not-too-distant future. Is that a fair assessment?

Listen, I think as I just said with Steve, James, I think it's a fair question. Our industry and our business model is very attractive and it lets us really create value in a lot of different ways over an extended period of time. We've got some things. Our core strategy rests at Cedar Fair, always rested in engagement with our customer, making sure that we understand what drives our guest behavior.

You've heard me talk time and time again about lifetime customers and people coming to us over the generations of their lifetime. We really started to see the impact of that. And when we think about what's possible going forward and how we can leverage that connection to our communities and our customers, the challenge for me and my management team, we're excited about that is how we leverage that and to really create value going forward and continue to drive performance and that's what we're focused on.

Makes sense. And maybe digging a little bit more here, and I guess, forget about SeaWorld as a potential suitor, but SeaWorld as a potential competitor. Obviously, they've done a great job in terms of expanding their margins over the last couple of years, really going from worst to first in the theme park industry. And I don't doubt for a second that, that was a big part of the rationale as they look at you and say, "There's a big margin opportunity here."

Historically, you guys have not put margin expansion out there as a big part of the story. But I guess what they've been able to accomplish or what they are seeing in you guys, do either of those things inspire you to lean into that part of the model a little bit more? Or do you think that how you've been doing it all along is the correct course of action, I guess, particularly on the staffing level side? It seems like that's the lever they pulled most significantly. Do you see a big opportunity to lower those hours much more significantly than you have thus far?

Yes, James, this is Brian. Listen, it's difficult to comment on others' margins. But what we've always said is, it's margin -- park-operating margin is a critical metric for us in evaluating the performance of our parks and our teams. And certainly, there has been pressure on margin over the last couple of years, some of it related to inflation, particularly around labor rates; some of it related to the fact that we've expanded the business through acquisitions of lower-margin businesses like the Schlitterbahn Parks, which, as Richard noted, we haven't had the opportunity to fully integrate because of the disruption of the pandemic right on the heels of that acquisition, but also the expansion of our resort side of the business, which we view as a differentiator. It's certainly not as high a margin line of business as our theme parks, but still a very profitable one.

So while we expect near-term pressure due to the challenges of the tight labor market and inflationary environment, we're going to continue to deploy initiatives to better manage against those pressures and focus on pushing margins back to prepandemic levels. Where we go long term will be -- is yet to be seen. But as we've always said -- and this goes back even to Matt Ouimet's leadership. We can go get your margin tomorrow, if you want, but I'm not sure you're going to want to own the stock 2 or 3 years from now because the guest experience is going to erode. So it's a balancing equation as we think about it.

Okay. That makes sense. And just to clarify, it sounds like what you're saying pre-pandemic was a pretty good number. We should not be underwriting significant sort of pre-to-post margin expansion. That's not a big part of where you see the story going?

I wouldn't necessarily say that just right before the pandemic. 2009, like I said, was still impacted by the drag of margins from the acquisitions of Sawmill Creek and the Schlitterbahn property, the opening of the new hotel in Charlotte, all of which those initiatives, those projects, those acquisitions got disrupted right after basically coming online.

And so I think you can look back towards '16, '17 when park operating margins were higher. And certainly, our ability to price in today's environment gives us the ability to potentially get back to historical levels, but it will take time, as we've seen. The cost pressures are immediate. The pricing power sometimes takes a little bit of time, but we will continue to look for ways to expand margin. It's not to say that we're not focused on it.

Our next question comes from the line of Ben Chaiken with Crédit Suisse.

How much of your '22 season pass goal, if that's an appropriate way to express it, have you already sold? And then secondly, has the momentum and pricing seen in 2021 on the single day side translated to the passes being sold for '22? I'm kind of referring to the fact that a lot of your pass revenue released in '21 was priced in '20. So I'm just trying to see again if the single day momentum has translated to the passes that you're selling, I guess, at the end of '21 and into '22? If that didn't make sense, I can try it again.

No, Ben, it's Brian. Let me -- I'll try and answer it this way, you tell me if I hit what you're looking for. So you're exactly right. Coming into '21, we had very little pricing power around season passes because we were carrying over used privileges for a big chunk of those passes from 2020 and the disrupted year. And so we certainly are very focused in this environment, this inflationary environment, taking price around season passes as we get into '22. As we noted on the call, to date, those price increases have averaged about 8% across the system.

Certainly, there are parks that are well north of that and others that are inside of that as we're running different strategies at different parks. Our goal is to see that number push towards double digits, and so we're pacing well. Keep in mind, fall is usually where we take -- as we're pushing renewals, we tend to take the least increase and then that gradually matriculates up as we get into spring and summer.

Around year-end, we're usually -- and it varies year-to-year, but let's say about 30% through a full program. The big chunk, as we mentioned on the call, is the upcoming spring sales program, which could represent as much as maybe 40% to 50% just depending on the year. So we're moving into a critical period in that sales cycle and are very encouraged by the momentum that we have right now, always ways to make it better. And as I mentioned, the team is laser-focused on building on that early momentum.

As it relates to season, our single-day tickets, we definitely used our business intelligence teams and their capabilities to dynamically price last year. I would say it really wasn't until the fourth quarter that we got maybe more aggressive around pricing. So we still believe that there is meaningful opportunity to get pricing on single-day tickets as well as we get into '22. But again, that one is a little different than the season pass program. It's much more dynamic. We'll will push the price when demand is high. We'll lean into the value-oriented consumer when demand is a little bit lower as a means to provide an opportunity for everybody to visit our parks.

That makes sense. Appreciate it. And then the 8% comment was on the -- just to confirm, that's on passes. And is that versus '21 or is that versus '19?

The 8% lift is a lift over what would have been the '20 -- going into the '21 season since the price of the -- it's a 2020 price pass, but that's what basically carried over for '21. So you can almost look at it as both years.

(Operator Instructions) Our next question comes from Mike Swartz with Truist.

I wanted to follow up on the comments on the prior question. Just trying to get a sense of with the season pass, I think you said -- or deferred revenue is up 23%. I think you said pricing is up 8% relative to the 2021. Just give us a sense, I know there's some carryover revenue for used privileges into '22 as well. So give us a sense of maybe how much season pass is up right now in terms of units?

Yes. So Mike, let me try it this way. The majority of the lift that we're seeing right now out of season pass revenue is pricing related. In that deferred number that I mentioned, we do have some carryover of 2 properties that are carrying over used privileges, Knott's Berry Farm through about the end of April and Canada's Wonderland much longer through basically the end of the summer, I think, Labor Day kind of timing.

There's roughly, and we said this, I think, on the third quarter call as well, about $30 million carryover of revenues related to those continued use privileges into '22. So when we look at units, I will tell you the expectation was around renewals at those 2 parks, we'd see a little bit of headwinds because of the carryover of those used privileges, more so maybe in Canada than Knott's as we hit the spring sales cycle. The Knott's used privileges are going to start to unwind and so we believe that we'll see demand start to pick up around renewals or new purchases as we get into the spring. So what's driving the deferred revenue balance up is you do have the carryover but you also have increased penetration rates around the add-on products, as I mentioned, driving that lift as well.

Okay. Great. That's helpful. And then maybe just trying to parse out any impact in the quarter and maybe the first quarter at Knott's from Omicron. I think you said during the third quarter call that October attendance like-for-like was up about 8%. It looks like it ended the quarter down maybe a bit. So did you see any impact in the month of December? And maybe any commentary on what you've seen thus far in the first quarter?

Yes, Mike, what we saw was, again, really good strength heading into our WinterFest and our holiday event Knott's Berry Farm. We saw some weakening due to Omicron in the second half of December and it carried over into January slightly. But honestly, we also saw things a little bit of weather in Southern California, particularly a little weather at some of our other sites. We've kind of parsed through it. But as we've gotten deeper into this year, and again, the first quarter is not meaningful. On good weather days, we've seen what we would expect to see out of Knott's in their performance, particularly with such a large season pass holder base with lots of season passes already sold, and as Brian said, some of that carryover effect.

Our next question comes from Paul Golding with Macquarie Capital.

So I wanted to ask about the themes like the dynamic pricing opportunity by going through your e-commerce channel has been a great tailwind and reducing the third-party reliance. I was wondering if you could give some color on how you're thinking about SG&A, just generally, the marketing operation going forward? Is there -- do you think there might be more reliance? It seems like you found efficiencies in cost this past year. So I'm just trying to see how you're thinking about that going forward now that it's going through your channel mostly?

Yes, Paul, it's Brian. Yes, we are certainly pleased with the progress we made and the improved efficiency around the shift, both broadened base marketing, as we have commented this past year, the pivot to more digital and social media away from mainstream, a lot more flexible, less expensive approach. And so we are going to continue to explore the opportunities there. I'm not sure that we've fully identified what the total potential is there, but the marketing team is going to continue to look for more cost efficiencies on that front.

And then as it relates to the unplugging of the third-party distribution channels, I think if we look back at the disruption from the pandemic, certainly, one of the silver linings was needing to shut down all ticket sales. And as we realize when it was time to put those back in place, there were a number of them that were pretty rigid in terms of our ability to move price, adjust price and we also weren't capturing data on a lot of those folks. So as we look at the opportunities to continue going forward, there may be a handful of those third-party distribution channels and partnerships that have value for other reasons, maybe hitting a certain market segment that we don't penetrate well in through our own e-commerce site. But for the most part, I think the plan is to continue to look for more efficiencies around marketing broadly and to continue to push ticket sales through those e-commerce sites as a means of, as you said, identifying more SG&A efficiencies on the cost front.

Great. And then on -- just thinking about liquidity, you redeemed $450 million in principal on your note -- your notes. You've got $210 million to $215 million CapEx plan for '22, the distribution. How are you thinking about liquidity in light of sort of the you alluding to staying flexible or vigilant in terms of just further disruption, if it were to happen? What's sort of the liquidity framework that you're working with in terms of a minimum or just any color on how you view it?

Well, we feel very good as we said on the call about where we stand right now. And it was one of the motivations behind the early redemption of the 2024 bonds. Our goal, as we've said for the past few quarters, is to get net debt back down into that $2 billion-or-less range, and we think we're well on our way with the steps we've just recently taken.

Currently, under the credit agreement, we have a minimum liquidity requirement of $125 million and that's actually measured on a daily basis. So that in the near term remains our core focus. As we look out at our projected view of '22 and how the season will build with parks coming online in their more traditional April-May time frame than the last couple of years, we think we're well positioned to meet those requirements.

Longer term, as Richard said, we see great upside to our free cash flow generating abilities, which is one of the reasons why we're motivated and optimistic about getting the distribution back in place by the third quarter, if not earlier, and again, at a sustainable level that shows growth as the business continues to grow.

Yes. Paul, if I can jump in here. Brian sketched his remarks. We really got 3 strategic priorities: reinvesting responsibly in the business to fuel the growth, delever the balance sheet and then ultimately reinforce the -- reinstate the distribution. So our capital allocation priorities are clearly spelled out.

Our next question comes from Brett Andress with KeyBanc.

There was some news this week, I think, the starting wages at Cedar Point are going from $20 to $15, and I know there's a lot of park-specific factors that were there last year. But are there any other downward labor trends forming anywhere else in the portfolio? And then the second part of that question is, is there any way to, maybe put in dollar terms, the benefit you expect to see from J-1 labor coming back?

Brett, let me jump in here. It's Richard. On the labor front -- and we sketched this in our prepared remarks, Brian touched on it, getting the J-1s back having a returner base, challenge going into 2021 with -- so many of our parks open in 2020 on a limited schedule, we didn't have that base of returners. So it would not be unusual, if you go back into our history for us to have a first-year rate, a second-year rate, those types of things.

I will say we feel really good about the rates and where we're positioned in each market, and we went to market-leading rates in each to make sure we could get the level of applicants we needed. But as we look at configuring whether it's our wage rate structure -- and it is market-by-market on the wage rate. It gives us an opportunity to watch what we're getting, monitoring real time like we do on the pricing front and adjust as we need to. I think this is something that we monitor certainly weekly, if not daily. And as we think about making sure we're monitoring the applicant flow, the key is when you add all the various channels up that we've got what we need to open our parks and give our guests the quality of experience they've expected to come from Cedar Point. Brian, anything for you?

Yes. I guess the only thing I would add, Brett, as a follow-up to Richard's comments, is, much like you saw last year, at the parks, the focus for us is on the staffing levels, getting to those adequate staffing levels so that we can generate the per capita levels we were successful -- we successfully generated last year. And so we'll do whatever is necessary when it comes to seasonal labor rates. But we do feel, as we've said in our prepared remarks, and Richard just reiterated, we do feel like there are tailwinds that are going to benefit us around rate compared to where we were at the same time last year.

Got it. Okay. And then maybe I missed this, but on the OpEx line in the quarter, is there any way to break out a little bit more how much of the increase in OpEx dollars versus 2019 was maybe some of that labor inflation related? And were there any maybe one-off items in there in the quarter as well?

I would say in terms of the labor, similar to the number, I think we commented at close to 2/3 of our full year OpEx lift was labor related. You're in that neighborhood, I believe as you relate -- as we would relate to the fourth quarter as well. Maintenance expense was up. That's the one that we called out in our prepared remarks. A couple of factors -- contributing factors to that.

One, you're playing a little bit of catch-up with -- after a year of disruption. And as a reminder, right, we really pulled the flaps in around all cash spend in 2020. So certainly not painting some rides that we might normally have in the cycle and things -- examples like that, maybe more cosmetic things that in the fourth quarter of '21 as the seasonal parks went into hibernation, we started to have the opportunity to reactivate some of those things. And we also tried to get ahead of the game a little bit in advance of '22 to the extent that we had nice weather in parks to get a head start on some of their prep work for the '22 season in anticipation of a more normal operating calendar. Always good to get ahead of some spend in advance of what you don't know might happen in terms of winter weather in the spring in some of our markets. So a little bit of that contributing to some of those maintenance dollars I mentioned being up in the fourth quarter.

Our next question comes from Barton Crockett with DCF.

I wanted to use the opportunity of the M&A discussion to ask kind of a little bit of a particular question to Cedar Fair and not really this transaction, but just your structure as a master limited partnership, which is very unique. And I was curious if you could tell us in the instance of potentially a merger like if we were to contemplate a scenario where Cedar Fair could be bought by someone else. Should it be a base assumption that the master limited partnership structure that you have at Cedar Fair would cease to exist? I mean is there any way that, that could reasonably survive an acquisition of the company?

And then on the other side, you guys have been an active acquirer in the past, smaller kind of park Schlitterbahn, Paramount Parks before that, you've been able to acquire, but retain your MLP structure. What are the limits on that? I mean how much could you acquire and remain an MLP? So if you could talk about how that kind of survived through merger scenarios, that would be interesting?

Yes, Barton, I'll jump in here and then Brian can weigh in. Difficult for me to speculate on hypothetical what would happen in a potential scenario. What I can tell you, to the second part -- to the first part of your question, very difficult to think about what -- how you would structure a transaction, each would be unique to the circumstances.

But to your second point, we've always been -- this company has been built through M&A, all the way back to when the first parks put together, Cedar Point Valley Fair over the course of a couple of decades, smaller acquisitions like Michigan's Adventure, larger acquisitions like the Paramount Parks chain, almost $1.3 billion. So it's been a robust structure that's had a unique attractiveness to some of the folks that we've transacted with. We still have members of the Knott's family that still have their units from that acquisition back in the late '90s.

So very attractive structure. We've used it effectively to be able to build a portfolio. But as you as you know, and Brian can elaborate, we're a bit of a hybrid. There's -- and most of our parks exist on the MLP. We do have a couple of C-corp entities as a result of the Paramount Parks' acquisition. But Brian, anything you want to add?

Yes. Just really quick. As you said, Richard, the MLP structure has never been a barrier for Cedar Fair on the M&A front. In fact, in a number of instances, it's been an asset, some of those tuck-in family park acquisitions. In terms of the limits, Barton, to your last question, there's no real limits around the MLP structure beyond in this sort of a general comment.

We -- the MLP structure can continue to exist, provided that we're acquiring assets that were in the lines of business that we were in at the time we formed as an MLP. So that's a little broad for us. When you think about our business, it's theme parks, it's water parks. Certainly, we had hotels under management at the time. So as long as we're staying in our space or maybe adjacent around the fringes, the MLP structure is not an issue.

Okay. So there's no size constraint there. Was it kind of tax considerations for why the Paramount Parks came in as a C-corp?

Yes. Ultimately, the structure that we used that time, as Richard alluded to, devil is always in the detail, and it's -- there's 2 parties involved. That was the outcome that was the most tax efficient for both the seller and the buyer, Cedar Fair in this case. And that's how it ended up in the structure that it did.

Okay. And then if I could step back a little bit, there really has not -- there's been a fair amount of tuck-ins, you guys have been kind of a leader in that. But there hasn't been a lot of big theme park company kind of combinations in this industry. And I was wondering if you could talk about that as an idea?

Is that -- is there a synergy -- meaningful synergy potential from combinations of big theme park complexes in your view? Some industries, there's a lot of synergy value from being in different companies together or maybe less so on theme parks than maybe some other industries. How do you think about big consolidation at the value of that, pros and cons?

Barton, I think back to the M&A question, there's always been, and we get this question all the time, interest and industry consolidation. What I would say is, I think each player in this space has what they need to be successful. We all pursue slightly different strategies, but it's a very attractive business model. So I think our focus and the focus of me and my team is on what we can do to drive the operating performance and make sure that we're able to grow over time that free cash flow we generate and then decide what's the best use of our capital allocation strategy, which we've clearly laid out at this point to generate and create value for our unitholders. So from my perspective, I think it's an attractive industry. I understand the interest and the intrigue, but that's all because it has been so successful for so long for so many companies.

Our next question comes from Stephen Grambling with Goldman Sachs.

Maybe another one that's somewhat related to the tax structure of M&A. I mean given the deal was rejected at, I guess, it looks like $60, $63, are there any limitations on how you might take advantage of the dislocation that you see in the public market through buyback rather than dividend given the MLP structure?

Yes, Stephen, this is Richard. We've never had a large scale unit buyback program in place. There was a very small one put in place 20 years ago in the early 2000s. We've always thought that the most tax efficient way is returning to distribution to that sustainable level. So that's our focus.

And right now, I'll go back to the other priority we've laid out, which is get our leverage back down. We referenced our 2019 acquisition of Schlitterbahn, also the land underneath California's Great America that took our leverage up from mid- to high 3s up to low 4s, low to mid-4s, depending on how you calculate it. So it was always our intent as we headed in the pandemic, and I'll remind you we'd a record year in 2019, really strong performance set in 2020.

It was always our intent to digest that acquisition and then get our levels back down to that 3 to 4x where we were more comfortable. So our priority right now is really as we laid out, getting the debt back down and reinstating the distribution. But over time, with the Board and management consider other capital allocations, once we got to the point where we wanted to be, I think that's the question. But first, we very clearly laid out what our aiming point is, and we're going to pursue that.

Got it. And does the tax basis of unitholders influence how you think about the underlying value of the shares? And does buyback trigger any kind of a taxable event that people have either reinvested the dividend set on capital gains? And is there any way to assess how the taxable basis of unitholders has maybe evolved over the past couple of years with the pandemic and dividend cut?

Well, as an MLP, Stephen, the tax basis of our investors is very different investor to investor. And so we can't and don't worry ourselves about what each individual investor's tax basis is. Certainly, if we did a buyback program on the open market, any sale is going to trigger a tax event for an investor. But our focus is on what's in the best interest, as Richard said, of creating value for all unitholders. Individual tax situations are ultimately the focus of the individual investor.

And our final question comes from Eric Wold with B. Riley Securities.

As you think about the stronger season pass demand pacing that you referenced and kind of what you saw last year, can you give us some color in terms of what you think has been driving this? Are you seeing the TAM of reach kind of around the parks get wider and wider or are you just penetrating the prior kind of ring better, so to speak? I know you may not have as much data on daily pass buyers unless they kind of convert, but any sense there as well in terms of if that region is getting wider?

Well, what I would say broadly, I think, it applies to both. Typically, season pass holders, Eric, would come from closer into the park. They use the park more often that it's not a monolith. But typically, they would live a little bit closer. The reach of each of our regional -- the reach and the penetration ring of each of our parks is different park by park. But what we have seen, and it correlates, I think, with the research that's out there, during the pandemic, all the research said that people were going -- were getting their cars and driving further for experiences they want. So I think what we've seen in the data correlates to that. So we've been able to expand our reach.

What I'm really watching closely as we get into this year is, does that continue to sustain itself? Are people still driving further for the things they want to do? We think we're well positioned as an experience. People have bought a lot of goods and while they're cooped up, were able to buy lots of things. Now they're going to go out and look for things that they can experience and things they can do.

So as we have believed for a long time, we think we're really well positioned as an outdoor entertainment venue as we -- COVID and the pandemic and the effects of that gets to the rearview mirror. So I think our appeal is broadening, particularly as we get into the event strategy and what we've seen is different, be able to target different demographics with each of our respective events, park by park. So I think we're going to watch that this year, but I do think there's been a broadening of the reach, and I'd be surprised if that didn't continue.

Got it. And then just a follow-up on that. Obviously, it's a -- the main driver is closeness to the park to drive visitation and season pass. Any color on what you're seeing for the average visitation number of times per pass holder? Is that increasing or if you get further away from the parks as people drive further for more experiences, will that kind of average come down, so to speak?

It's -- the answer probably, Eric, varies park to park. And certainly, the last 2 years have sort of disrupted a lot of the averages -- the historical averages, I should say. '21, while we got our parks reopened, truncated season still with capacity limitations. So it influenced a lot of the metrics. We'll continue to watch. I think it's fair to believe that for folks that are closer in markets, the visitation is naturally a little bit higher out of a convenience and those folks that are a little bit further, maybe a bit lower. But for some of our parks, we have -- take Cedar Point as an example, it's a thrill park Mecca.

We have folks that have season passes that are 2 or 3 hours away that come quite often because of the draw of the coasters and the other thrill rides. So it tends to vary. I think one of the things that we're going to be paying close attention to, as Richard said, is as we come out of this pandemic, how do some of those historical metrics change? And how do we need to change our ways of motivating visitation and driving repeat visitation as consumer expectations and preferences change?

At this time, I would like to turn the call back over to Richard Zimmerman for closing remarks.

Thank you, Chantel. And I'd like to thank everybody for their participation in today's call and for your continued -- especially for your investment and continued interest in Cedar Fair. We look forward to seeing you all at an upcoming conference, either in person or via video. Michael?

Thanks, Richard. Should you have any additional questions, please feel free to contact our Investor Relations Department, that number is (419) 627-2233. And we look forward to speaking with you again in May after releasing our 2022 first quarter earnings report. Chantel, that ends our call today. Thank you.

This concludes today's conference call. You may now disconnect.