Six Flags Entertainment Corp (FUN) 2002 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Cedar Fair 2002 third quarter earnings conference call. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anybody has any difficulties hearing the conference please press star 0for operator assistance at any time. We'll now turn the conference over to Mr. Brian Witherow, Investor Relations.

Good morning, everyone. Welcome to our third quarter earnings conference call. Our earnings were released yesterday afternoon and a copy of that release can be obtained on our website, cedarfair.com or by contacting our Investor Relations offices at 419-627-2233.

On the call this morning, Dick Kinzel, President and Chief Executive Officer, and Bruce Jackson, our Vice President of Finance and Chief Financial Officer. Before we begin, let me caution 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 in such statements. You may refer to filings by the company with the S.E.C. for a more detailed discussion of these risks. In compliance with S.E.C. regular regulation this webcast is being made available to the media and the general public as well as analysts and investors. Because of the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content of the call will be considered fully disclosed. Now let me turn to the call over to Dick Kinzel.

Good morning. As you can see from yesterday's earnings release, we are very pleased with our results through the first nine months of the year. Although we did not achieve the levels of guess per capita spending we would have liked, we are very satisfied with the solid increases we were able to gain generate in both park attendance and out-of-park revenues, and most importantly at the bottom line.

Through the first nine months of the year we earned record revenues on a 3% increase in combined attendance across our 11 properties. A 9% increase in out of park revenues including our resort hotels, and flat in-part guest per capita PEND spending. In addition, through constant focus on controlling operating costs at our parks, we were able to achieve solid growth and EBITDA and net income for the period. Very A very effective capital program combined with good weather throughout the season at most of our parks helped produce solid attendance figures this year. For the 2002 season, our flagship park, Cedar Point, performed very well with the introduction of the park's 15th roller coaster, Wicked Twister and the addition of a new peanuts Peanuts-themed ice show aimed at the family market. Full year attendance at Cedar Point increased almost 5% to 3,250,000 million did 50,000 guests.

While occupancy trends at the park's hotels were also very strong. Hotel revenues at the park were up 12% through the end of October. We are also very pleased with the performance of Dorney Park this year. The park was coming off a record year in 2001, and it continued to build upon that momentum by producing record results again on a very moderate capital program. For the full 2002 season, attendance at Dorney totaled 1.6 million guests, up 4% from last year.

Results of our other three seasonal amusement parks were also solid. At Worlds of Fun, the introduction of a new intermediate ride helped produce a 2% increase in attendance to 940,000 guests. Worlds of Fun Water Park also performed well this year. At our newest park, Michigan’s Adventure, attendance was flat between years at approximately 420,000 guests. However, in-park guests per capita spending at the park increased by more than 15% as we added a number of new revenue-producing locations, in addition to several new rides and attractions and a complete overhaul of landscaping, fencing, and signage.

Valley Fair, our park near Minneapolis and St. Paul, was the only park to experience poor weather throughout much of the season. Record rainfall together with the lack of a major new attraction led to a slight decrease in attendance. For the year, attendance at that park totaled 1 one million guests, down less than 1% from 2001. However, the park was still very profitable and contributed nicely to our free cash flow.

Our only year-round park, Knott’s Berry Farm, continues to perform reasonably well in its market in spite of the fact that tourism in southern California still remains soft. The introduction of a new roller coaster helped produce solid results for the park since its debut to the public in Earl early July. In addition, Knott’s had a record-setting October because of the success of its acclaimed Halloween Haunt. Attendance was up 1% over last year. We are also pleased with the performance of our five water parks in 2002. High temperatures throughout much of the season were ideal conditions for those parks and combined attendance across the five water parks increased 15% to 1.5 million guests. Excluding the impact of our newest water park in Palm Springs, combined attendance was still up 10% for the year. As I mentioned earlier, our in-park guest per capita spending levels fell short of our expectations in 2002.

On a combined basis, average in-park guest per capita spending across the 11 parks was flat between years through the end of September. This was due in part to the overall get back to the soft economy as well as the overall mix of attendance among parks. Particularly the growth in attendance at our water parks which traditionally have lower per capita levels. In addition, our efforts to increase seasons pass sales at several of our parks including Cedar Point proved very successful and have contributed to softer average per capita spending levels at those parks.

Our preliminary October results show a strong performance from Knott’s Berry Farm as well as our seasonal parks that were still opened only on weekends. We are comfortable with projecting that full year 2002 revenues will be in the $490 to $500 million range, up 3% to 5%. And that adjusted EBITDA will be up 5% to 10% in the $160 to S170 million range.

Before I turn things over to Bruce Jackson for a more detailed review of our third-quarter results, I’d like to take a moment to update you on our capital plans for the 2003 season. With the 2002 operating season concluded the at all of our seasonal parks, we've already begun to focus on next season. And construction has started on new rides and attractions that we will be adding to the parks. Our 2003 Capex program will total between $45 and $50 million and will be highlighted by the addition of major new thrill rides at both Cedar Point and Valley Fair. At Valley Fair, we'll be introducing a new roller coaster that will be similar to Wicked Twister which proved very popular this past season. The new coaster called Steel Venom will be the first new roller coaster added at Valley Fair since 1996. At Cedar Point construction is well under way on a major new thrill ride near the middle of the park. And we are confident that will be received well by our thrill-rider segment. The park will make further announcements and details on the new ride in the near future. Specific details regarding capital expenditures at our other parks for the 2003 season should be announced in the next several weeks. At this point, I'll turn the call over to Bruce for more analysis of our third-quarter numbers.

Thank you, Dick. And good morning, everyone. Let me begin by explaining this year's third quarter has one less week of operations than last year's third quarter because of the way the calendar fell around June 30th. So quarter-to-quarter comparisons are very confusing, as they were in the second quarter.

To really understand our 2002 results, it is much easier to look at our nine-month numbers in order to eliminate the timing inconsistencies of the individual quarters. Despite of this year's uncertain economic conditions we were still able to achieve record numbers revenues and EBITDA through the first nine months of the year. For the nine month period ended September 30, 2002, nine month revenues increased 4% to $445 million from $429.2 million in 2001. This is made up of $222 million of admissions revenues, up 3%, $177 million of food merchandise and games revenues, also up 3%, and $46 million of revenues from accommodations and other, up 7%.

The overall increase and net revenues was the result of a 3% increase in combined attendance, a 9% increase in out-of-park revenues, and basically flat combined in-park guest per capita spending. The increase in out of park revenues was driven primarily by an increase in occupancy rates at Cedar Points resorts hotels. For the nine-month period, earnings before interest, taxes, depreciation and amortization and non cash charges or adjusted EBITDA, increased 7% to $168 million from $157 million in 2001. Through the end of the third quarter, total operating costs and expenses before depreciation and other non cash charges had increased only 2% to $277 million.

Each of our parks did an excellent job of keeping operating costs in line this season and all major costs as a percentage of revenues remain comparable to or below historical levels. Consistent with prior periods, we also had to mark our variable priced unit options to market at the end of the third quarter, which required a non cash charge of $1.7 million in the current quarter. This brought the total expense for the first three quarters of the year to $3 million or 6 cents per unit which is comparable to last year's non-cash charge to you. $2.6 million over the same period. After depreciation and the [inaudible] expense, operating expense, operating income for the nine-month period increased 7% to $125 million from $117 million last year. After interest expense and a provision for taxes, both of which were comparable between years, net income for the first nine months of the year was $91.3 million or $1.78 per unit, up from $83.4 million or $1.63 per unit in 2001. Looking at the at the third quarter itself for a minute, as a result of the seven fewer days of operations in the current period, reported revenues for the quarter decreased 4% to $273.5 million. Adjusted EBITDA for the period decreased 2% to $139 million, entirely because of the timing difference. For the comparable 14-week period, revenues for the third quarter actually increased 4% to $297.5 million, from $285.6 million last year. Adjusted EBITDA increased 7%, to $155.5 million from $141.6 million last year. These gains were the result of a 3% increase in combined attendance, an 11% increase in out-of-park revenues, and flat in-park guest per capita spending during the heart of our season.

As Dick mentioned earlier, we're also very pleased with the performance of our parks in October. Based on preliminary results which included a very strong performance from Knott’s Berry Farm and its Halloween Haunt promotion, revenues for the first ten months of the year were up 5% over last year. With these results in mind we now expect 2002 full-year revenues to be 490 to $500 million range in line with our original guidance and full year adjusted EBITDA to be up 5% to 10% over last year and be in the 160 to $170 million range.

Absent any unusual items in the last two months of the year, earnings per unit should PSH finish the year well ahead of last year’s level. Based on this, our full-year free cash flow should be sufficient to fund our partnership distribution of $1.68 per unit or approximately $85 million in the aggregate. And a if full-year results come in at the higher end of our ranges, our port board could consider a second increase in the distribution rate at its March meeting which it has done twice before.

Turning to our balance sheet for a moment, total debt outstanding at the end of the third quarter was $348 million, including $240 million of fixed rate term debt and $108 million of (inaudible) borrowings under our bank revolver. Based on our projected fourth-quarter need our capital program for next season, we anticipate the total debt outstanding at the end of the year will be similar to the 2001 year-end borrowing level of around $383 million. With our favorable borrowing rates and balance sheet strength, we remain comfortable with our current debt levels and have no immediate plans or needs to significantly pay down debt at this time. At the end of the quarter, partners equity total $373 million and our total cash on hand was $5.4 million. At this point, I'll conclude our prepared remarks and allow for any questions that you might have.

We will now conduct the question-and-answer session. If you have a question, please press star 1 on your touch tone phone. You will hear a three-tone prompt acknowledging your request. Your questions will be polled in the order they are received. Please ensure you lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Robert Routh from Arnold Bleichroeder

Yes, Dave Bruener from Arnold, actually. It seems like the out of parkof park hotels and campground facilities perform fairly well, if not strong this year. Wondering if you have any plansforplans for more hotels or more out of park facilities for 2003 orbeyondor beyond? And second question would be it seems like thewatertheater parks in California also seem to be performingfairlyperforming fairly well. Wonder if anything you see future water parkacquisitionspark acquisitions probably in California or other places?

Dave, this is Dick Kinzel. I'll respond to the hotels first. The hotels were very successful this year. The major reason for that we did a tremendous amount of packaging within our local markets, our drive markets. As far as going forward, we're continuing to look at adding hotels, especially at Cedar Point. We don't think that we’ve saturated the market at Cedar Point. In fact, we’re talking probably in the year 2000 -- not next year, but in 2004, we're looking at expanding a Lighthouse Point, which is proven very successful the two years that it’s been in operation, and we're looking to expand that in the year 2004 with several more cabins and cottages and drive-thru RV sites.

As far as the water parks in California, again our acquisition strategy remains as it always has always been, if the right acquisition comes along, we certainly will look at it. Again we're very sensitive toward the distribution, so the price has to be right, especially with water parks. They have to be close to one of our major parks in order to use the synergies of that general manager and the facility that big park has. That's the secret why our small water parks can be successful, as we do utilize the fixed costs of the California Knott's Berry Farm to the two smaller parks in California.

Great. Just a final question I always ask for an update on the unit buy-back program.

Dave, we haven't repurchased any units this year, third or fourth quarter last year was the last time we made any PRPs. We don't have any immediate plans to continue. We do have authority for $20 million or more from the board if the price were to go down, we'd look at that again.

Great. Thanks very much

Thank you.

Ladies and gentlemen, is there any additional questions at this time, please press star 1. As a reminder, if you're using a speaker phone, please lift the handset before pressing any keys. Gentleman, there are no further questions at this time. Please continue.

Well, if there are no further questions at this time, I’d like to thank everybody for par participating in the call. If anyone has any further questions contact me at 419-627-2173. And at this point, I'd like to thank you again and we look forward to talking with you once our fourth quarter numbers are out.

Ladies and gentlemen, this concludes the conference call for today. Thank you for par participating and please disconnect your lines.--- 0