Six Flags Entertainment Corp (FUN) 2007 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. My name is Markida, and I will be your conference operator today. At this time I would like to welcome everyone to the Cedar Fair conference call. All lines have been placed on mute to prevented any background noise. After the speakers' remarks there will be a question and answer session. (OPERATOR INSTRUCTIONS) Thank you. It is now my pleasure to turn the floor over to your host, Stacy Frole. Ma'am, you may begin your conference.

Thank you, Markida. Good afternoon and welcome to our third quarter earnings conference call. I am Stacy Frole, Cedar Fair's Director of Investor Relations. Earlier today we issued our third quarter earnings release. A copy that release can be obtained on our corporate website at www.cedarfair.com or by contacting our Investor Relations offices at 419-627-2233. On the call this afternoon are Dick Kinzel, our Chairman, President and Chief Executive Officer, and Peter Crage, our Vice President of Finance and Chief Financial Officer. Before we begin, I need to 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 SEC for a more detailed discussion of these risks.

In addition, in accordance with Regulation G, non-GAAP financial measures used on the conference call today are required to be reconciled to the most directly comparable GAAP measures. During today's call we'll make reference to adjusted EBITDA as defined in our earnings release. The required reconciliation of adjusted EBITDA is in the earnings release and is also available to investors on our website via the conference call access page. In compliance with SEC 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 un-selectively disseminated, all content of the call will be considered fully disclosed. Now let me turn the call over to Dick Kinzel.

Thank you for joining us on the call today. Before we begin reviewing our third quarter and October results, I would first like to take some time to address concerns that investors have expressed to me regarding Cedar Fair's performance and financial information. Several investors have asked me about the decrease in our earnings per unit and how this decrease will impact our ability to pay the the quarterly distribution. When reviewing our net income today, it is important to consider the noncash accounting line items that are included in net income that have no impact on our cash flow or our quarterly cash distribution. When managing our business, our focus is to generate cash flow through our daily operations to cover all cash cost requirements and to support our quarterly distribution payments, while continuing to reinvest in our properties. This is why we believe adjusted EBITDA is a meaningful measure of park level operating profitability.

When reviewing and discussing free cash flow we use adjusted EBITDA as a beginning point, but also take into consideration cash payments made for interest, taxes, capital expenditures, and finally distributions. Peter will provide additional detailed information on this calculation later. We are confident that our free cash flow is sufficient to meet our cash requirements. I have also been asked about regional economic and consumer spending trends, specifically unemployment rates in the Ohio and Michigan areas. We have always believed that our regional amusement park operations are recession resistant, not recession proof, but recession resistant. I have been in this industry for 35 years and have experienced gas station closings in the 1970s, recessions in the early 80s and late 90s, and more recently falling home sales and high unemployment rates, particularly Ohio and Michigan.

Heavy job losses in the Midwest, particularly in Michigan/Ohio have led to a deteriorating housing market. Michigan's unemployment rate consistently remains the highest in the nation at 7% as of September and in Ohio nearly 20% of subprime adjustable rate mortgages were either 90 days or more past due or in foreclosure, almost double the national average. During this time there have been only three years that I can recall where we have experienced a small decrease in cash flow. Because of this track record, we believe this is a very stable business and our recent acquisitions also provide additional geographic diversification to regional economic trends. From a regional standpoint, it is no secret that over the past several years we have battled the tough economic conditions of the Ohio and Michigan markets.

During this time we have made slight adjustments year-over-year to our marketing and pricing strategies at Cedar Point, while continuing to reinvest capital to maintain and improve the profitabilities of park over the long-term. As I have stressed in the past, we're always focused on the long-term operations of our business. We did see a slight dip in revenues in 2006 at Cedar Point and given this year's results we're hopeful that this was a short-term trend. I do not typically discuss individual park results, but given the regional economics we have experienced in Ohio and Michigan, I think it is important to mention that Cedar Point through October of this year has experienced record revenues and operating profits. This growth is a combination of stable in-park revenues, along with growth in our out-of-park revenues including resort hotels.

Our business strategy is to create a guest experience that is unique to the regions in which we operate and to build family traditions for many generations to come. Even when times are tough, families are looking for an affordable get away to spend quality time together. I believe our regional parks provide this type of memorabilia experience, which is why over 75% of our visitors to our park have visited in the past. As long as we continue to maintain and improve this experience year-over-year, we will continue to generate the stable cash flows for our investors that we have generated over the past 20 years as a publicly traded partnership. Finally, I would briefly like to comment on our debt. I understand investor concerns regarding the amount of debt we are currently carrying on our balance sheet. Although the debt load is higher than what we have historically carried, we knew this additional leverage was necessary to acquire the five Paramount Parks from CBS.

Based on 12 months results as of September the 30, 2007, we are currently a little over five times EBITDA leveraged. Our goal is to ultimately bring this leverage ratio down to the low 4's. It is important to note that our debt does not mature until 2012 and of the $1.7 billion of debt, approximately $1.3 billion has been converted to fixed, stable rate debt through the use of interest rate swaps. After the acquisition we discussed our intentions of issuing approximately $250 million in equity subject to market conditions. At this time we do not believe that the market conditions are favorable and an equity offering under these conditions would be significantly dilutive to our current unit holders. However, there are other ways to pay down debt and/or generate additional cash flows to improve our leverage ratio. These include but are not limited to the ability to monetize non-core assets, joint venture opportunities, and improvements to our financial structure.

We do not have a timetable as to when or if any of these items will come to fruition. In the short-term we are not going to enter into a transaction that would be cash flow dilutive to our current unit holders. Our strategy is a long-term strategy and actions will be taken when we believe market conditions are most favorable to long-term value. Having said this, we continue to look at ways to reduce our leverage. Currently we are marketing over 500 acres of land at the former site of our Geauga Lake Amusement Park. In September we announced plans to operate Geauga Lake and Wildwater Kingdom exclusively as a water park beginning in 2008. Over the past four years of operations, we determined that the market demand was not sufficient to support the park as it was structured. We plan to market the excess property and have identified assets to be relocated to other locations, to be sold and/or disposed. Our goal over the near future will be to operate a profitable water park at Geauga Lake not unlike our successful water parks in California, while generating value from the relocated rides and available land.

Now on to our third quarter results. Although Peter will review the details behind our results in just a bit, I would like to briefly comment on our performance. Net revenues for the third quarter ended September the 30, 2007, which included one more week of operations than the prior year's third quarter, increased 5% or $25.4 million to $567.5 million. Adjusted EBITDA for the quarter, which as I mentioned earlier is a meaningful measure of park level operating results, increased $5.8 million to $291.4 million. The increase in revenues for the third quarter of 2007 is due to a 5% improvement in in-park guest per capita spending across all of the parks and an increase in out-of-park revenues, including resorts hotels of 4% or $2.2 million. This was offset somewhat by a 1% decrease or 150,000 visit in attendance primarily in our southern and western regions. Included in our 2007 fiscal third quarter results, our additional days of operations due to a later fiscal end period.

During this extra week our seasonal amusement parks were open weekends only, while the year-round properties, Knott's Berry Farm, Castaway Bay and Star Trek:The Experience, were in operation for the full week. The additional operating days in 2007 provided a benefit to revenues in the quarter of approximately $14 million and an additional 304,000 guest visits. In general we are pleased with the strength in our in-park guest per capita spending during the third quarter at all of our parks. The 5% increase in guest spending was more than enough to offset the decrease in attendance on a comparable operating period, excluding the impact of the additional days of operation. 2007 is a transitional year for the Company as we're testing our new markets with various pricing strategy and marketing promotions in an effort to strengthen our price integrity at the newly acquired parks.

During the 2007 operating season we made adjustments to ticket distributions at the newly acquired parks, including the elimination of many complementally tickets. We also have made changes to the 2007 seasons pass program to make them more comparable with our existing parks. For the quarter ended September 30, 2007, we eliminated 220,000 complementary tickets at the newly acquired parks. We also experienced a decrease of approximately 300,000 seasons pass visits during this same period. While we anticipated a decrease in seasons pass visitors due to change in the pricing and benefits that were previously offered, the decrease was larger than originally anticipated. We will continue to adjust the seasons pass programs in all of our parks in an effort to achieve an optimal mix of attendance to maximize revenues and profits. Our long-term strategy is to build integrity into our pricing structure, while offering a high value, high quality experience to our guests.

Now onto more current results. For the month of October our successful execution of late season's programs along with more than favorable weather conditions in our northern region resulted in an increase in revenue of 11% or $8.6 million. This increase was a result of a 9% increase in attendance, or 160,000 visits, a 2% increase in average in-park guest per capita spending and an increase in out-of-park revenues of 8% or $494,000. Over the past several years we have seen a shift in our revenues from August into the growing fall season. Given this trend we have realized that conclusions cannot be accurately drawn about the season until after October when our seasonal amusement parks are closed for the year. At this time, based on preliminary results through October, we anticipate generating full year revenues of between $960 million and $980 million and adjusted EBITDA of between $325 million to $335 million.

In the future due to changes in weather patterns and later school calendars, we will consider adjustments to our full year revenue and adjusted EBITDA guidance only after the third quarter. Looking forward to 2008, our capital program will total $88 million and will be highlighted by Behemoth, a $21 million record breaker roller coaster at Canada's Wonderland near Toronto. In addition to Behemoth, we will introduce four other roller coasters within our family of parks. King's Dominion, our park in Virginia, will introduce Dominator, the world's longest, floorless roller coster. Dorney Park in Allentown, Pennsylvania will be possessed by Voodoo, an inverted steel coster. Knott's Berry Farm in California will debut Pony Express, a family coaster, and finally Michigan's Adventure will introduce Thunder Hawk, the State of Michigan's first suspended roller coster.

Family attractions and new thrill rides will also be introduced at other Cedar Fair parks. Cedar Point, our flagship park, will introduce a brand new children's area along with major hotel renovations. Carowinds in Charlotte, North Caroline will debut a new wave action pool while California's Great American Santa Clara will introduce a new thrill ride. Our press release dated November 5, 2007, highlights our 2008 plans in more detail. I believe that we have an excellent overall entertainment package lined up in all of our parks for the 2008 season. This package shows our commitment to enhancing the guest experience with new shows, thrill rides and family attractions that everyone can enjoy. Before I turn the call over to Peter for a more detailed review of our third quarter results, I want to address our position with regards to the San Francisco 49ers proposal to build a stadium in the middle of our parking lot at California's Great America's Amusement Park in Santa Clara, California.

Approximately a year ago the 49ers and the city of Santa Clara approached us about the possibility of building an NFL stadium in Santa Clara. Our original discussions with the city and the 49ers were on a conceptual level. Early in this year we stated that an NFL stadium could be good fit and we would work with the city and the 49ers to see if it could work. Since that time we've had numerous meetings with the 49ers on a more detailed level and have concluded that the amusement park and the stadium as proposed could not successfully coexist. When we concluded that an amusement park and the stadium as proposed could not successfully coexist, we did offer to the City of Santa Clara and to the 49ers that we would be willing to consider selling the remainder of the lease and all of our interest and assets of the park to the city or 49ers for fair market value. Great America is a profitable park and we would not have acquired it if we did not believe that there is future growth potential in this market.

There have been no additional discussions with the 49ers since our announced opposition to the stadium on October 10th. At this time we are committed to maximizing the experience of our guests at Great America and look forward to entertaining families in the Bay Area for many years to come. At this point I will turn the call over to Peter to discuss the third quarter numbers in more detail.

Thanks very much, Dick. Allow me to first discuss our financial results for the third quarter and then I would like to expand on some of Dick's earlier comments regarding how we interpret results internally. Since current year nine and 12 month results are not comparable to the prior year results due to the the acquisition of the Paramount Parks, as in past calls I will provide you with analysis on a consolidated basis, including the new parks, since the acquisition. And for ease of comparison, I will then discuss our results excluding the acquisition on a same-park basis for these periods. As Dick mentioned earlier, the third fiscal quarter ended September 30, 2007, includes additional days of operations when compared to the third fiscal quarter ended September 24, 2006. During this time our seasonal amusement parks were open weekends only, while our year-round properties, Knott's Berry Farm, Castaway Bay, and Star Trek: The Experience, were in operation for the full week. For ease of comparison, I will also briefly discuss the impact of the additional days of operations had on third quarter 2007 revenue and attendance figures.

For the third quarter consolidated net revenues for the three months ended September 30, 2007, increased 5% or $25.4 million to $567.5 million from $542.1 million in 2006. The increase in revenues is attributable to a 5% increase in per capita spending across all of the parks, offset somewhat by a 1% decrease or 150,000 visits in attendance primarily in southern and western regions. Out-of-park revenues, including resort hotels, increased 4% or $2.2 million. The additional week of operations in the third quarter of 2007 provided an approximate $14 million benefit to revenues in the quarter, as well as an additional 304,000 guest visits. We are pleased with the strength in our in-park per capita spending during the third quarter, which more than offset somewhat disappointing attendance trends during this same period. The 5% increase in guest spending was more than enough to offset the decrease in attendance over a comparable operating period, excluding the impact of additional days of operations.

Excluding depreciation, amortization, and other noncash charges, consolidated operating costs and expenses for the quarter increased 8% to $276.1 million, due primarily to the additional week of operations in the current period. Those of you who regularly follow our results know we believe adjusted EBITDA, earnings before interest, taxes, depreciation, and other noncash items, provides meaningful insight into our operating results, since we use it for budgeting and measuring park level performance. Because it is important to us, we make it a point of sharing it with investors. For the quarter, consolidated adjusted EBITDA increased $5.8 million to $291.4 million from $285.5 million for the same period a year ago. The majority of the increase is attributable to the additional week of operations in the quarter, aided in part by improved performances at several of our parks located in the northern region. In September we announced plans to operate Geauga Lake and Wildwater Kingdom exclusively as a water park beginning in 2008.

In connection with this restructuring, we incurred loses primarily associated with noncash charges for impairment of fixed assets. Noncash impairment losses totaled $39.2 million for the quarter. In total depreciation and amortization expense increased $10.9 million to $67.2 million for the quarter, due primarily to the additional operating days in the current period. After depreciation, amortization, and impairment losses, operating income for the third quarter of 2007 decreased to $184.9 million from $229.2 million a year ago. Interest expense for the quarter increased $6.1 million to $41 million, due primarily to the additional days in the quarter. A provision for taxes of $88 million was recorded to account for the tax attributes of our corporate subsidiaries and publicly traded partnership taxes during the third quarter of 2007. This compared to a provision for taxes of $56.7 million in the same period a year ago.

To determine the interim period income tax provision or benefit of our corporate subsidiaries, we apply an estimated annual effective tax rate to our year-to-date income or loss as required by the accounting rules. The 2007 estimated annual effective tax rate includes the effect of an anticipated adjustment to the valuation allowance that relates to foreign tax credit carryforwards arising from our foreign corporate subsidiary. The amount of this adjustment has a disproportionate impact on our annual effective tax rate and results in a significant variation in the customary relationship between the provision for taxes and income before taxes. This is expected to substantially reverse in the fourth quarter. This situation has arisen as a result of our structuring of the Paramount Parks as a tax efficient corporate acquisition along with a substantial seasonality of underlying business operations.

Cash taxes paid or payable are not impacted by these interim tax provisions and are estimated to be between $15 million and $18 million for the 2007 calendar year. After interest expense, a charge for impairment of assets and provision for taxes, the net income for the quarter totaled $54.1 million or $0.98 per diluted limited partner unit, compared with net income of $132.9 million or $2.42 per unit a year ago. Now I will discuss nine month results on a same park basis and then on a combined basis. On a same park basis, excluding the effect of the acquisition and corporate costs, net revenues through the first nine months of 2007 were $20.7 million or 4% higher at $503.2 million versus $482.4 million in 2006. The increase in revenues is due to a 5% increase in per capital spending across all parks, offset somewhat by a 1% decrease or 122,000 visits in attendance and an increase of 3% or $2.1 million in out-of-park revenues including resort hotels.

On a same-park basis the additional days of operations provided an approximate $8 million benefit to revenues, as well as an additional 166,000 guest visits for the current period. Excluding the impact of the additional days of operation, the increase in revenues for the first nine months of the year was the result of increased in-park per capita spending across all of our parks, which more than offset a decrease in attendance. Excluding depreciation, amortization, and other noncash charges, total operating costs and expenses for the first nine months remained relatively unchanged on a same park basis at $297.7 million. A decrease in operating costs and expenses during the first half of the year resulting from a decrease in operating days during nonpeak periods and a reduction in operating costs in our northern region, primarily Geauga Lake, were offset by additional days of operations in the third quarter.

Adjusted EBITDA during the same time was $205.4 million, $20.7 million higher than last year, a 100% flow through reflecting tight costs controls, improved operating results in our northern and western region and, to a lesser extent, additional operating days in 2007. For the nine months depreciation and amortization on a same park basis increased $4.3 million or 9% due primarily to the additional days of operation in '07. After depreciation, amortization, and impairment losses of $39.2 million, operating income for the period on a same park basis decreased to $111.1 million from $134 million a year ago. On a combined basis, including the newly acquired parks, net revenue for the first nine months of 2007 were $871.5 million compared to $711.5 million in 2006. As I mentioned earlier, the additional days of operations provided a benefit of approximately $14 million to revenues, as well as an additional 304,000 guest visits for the nine month period ended September 30, 2007.

Excluding depreciation, amortization, and other noncash charges, combined operating costs and expenses were $540.5 million versus $412.1 million a year ago. Adjusted EBITDA for the nine month period increased $31.6 million to $331 million. After depreciation, amortization, and a $39.2 million impairment loss from the Geauga Lake restructuring, operating income for the period on a combined basis was $174.2 million compared with $221.4 million for the first nine months of 2006. Interest expense over the nine-month period increased $60.4 million to $110.6 million due to the Paramount acquisition. A provision for taxes of $57 million was recorded in 2007 to account for the tax attributes of our corporate subsidiaries and PTP taxes. This compares with a provision for taxes of $49.1 million for the same period in 2006. As I explained earlier, the tax provision for the current nine month period reflects a significant variation in the customary relationship between income before taxes and the provision for taxes.

And as I mentioned, this situation is expected to substantially reverse in the fourth quarter. After interest expense, a charge for impairment of assets and provision for taxes, net income for the nine months totaled $4.5 million or $0.08 per diluted limited partner unit, compared with net income of $117.5 million or $2.14 per unit a year ago. The trailing 12 months ended September 30, 2007, also benefits from additional days of operations as discussed earlier. Combined net revenues for the 12 months ended September 30, 2007, which includes 2006 fourth quarter operating result, were $991.4 million and operating costs and expenses, excluding depreciation and amortization and an impairment charge, were $649.4 million. Adjusted EBITDA for the same period was $342 million. After depreciation and amortization of $129.9 million and an impairment loss of $39.2 million, operating income totaled $172.3 million compared with $227.7 million for the same period in 2006.

Interest expense for the 12 month period increased $93 million to $150 million due primarily to the acquisition of the Paramount Parks and some noncash interest costs. During this period we recorded a provision for taxes of $47 million to account for the tax attributes of our corporate subsidiaries and PTP taxes. This compares with the provision for taxes of $46.6 million a year ago. The 12 month period ended September 24, 2006, also reflects $4.6 million of other expense, of which the primary component was a recognition of a $4.7 million loss on the early extinguishment of debt during that period. After interest expense, provision for taxes, and other noncash charges, the net loss for the 12 months ended September 30, 2007, was $25.4 million or $0.47 per diluted limited partner unit, compared with net income of $119.9 million or $2.18 per diluted limited partner unit for the 12 months ended September 24, 2006.

When we announced the acquisition and our timeline for integrating the new properties, we stated that we believed it would be slightly cash flow accretive by 2008 and believed a more significant amount of free cash flow would be generated once our management approach and cost synergies were fully realized within three to five years. Based on the results through the third quarter of 2007, we believe that we are still on track to meet these objectives. Finally, I will review the balance sheet. At the end of the third quarter our receivables and inventories were at normal seasonal levels and we have the necessary revolving credit facilities in place to fund current liabilities, capital expenditures, and operating expenses as required. Partners equity totaled $346.4 million and our total cash on hand was $37 million. As of September 30, 2007, total outstanding -- total debt outstanding was $1.725 billion of variable rate debt, $17.5 million of which is classified as current and no outstanding borrowings on our revolving credit facilities.

As of September 30, 2007, $1.3 billion of our outstanding variable rate long-term debt has been converted to fixed rate debt through the use of several interest rate swap agreements. As a result, our cost of debt is approximately 7.3% at the current time. I am pleased to report that we finished the quarter in sound financial condition in terms of both liquidity and cash flow and consistent with our expectations for the quarter and trailing 12 months including the newly acquired parks. Now that we've reviewed the results in greater detail, I would like to expand on Dick's earlier comments with regard to how management interprets these results. As Dick mentioned, our focus is to generate cash flow through our daily operations to cover all cash requirements and to support our quarterly distribution payments, while continuing to reinvest in our properties. This is why we believe adjusted EBITDA is a meaningful measure of park level operating profitability.

You can see from the adjusted EBITDA reconciliation included within our earnings release that was issued earlier today that there are substantial noncash items that are included in net income but do not impact the cash available to support our quarterly distribution and future capital expenditures. From this reconciliation you can see two sizable noncash items that affected our net income for the period. One, the tax provision of $88 million, which we have discussed and is expected to substantially reverse in the fourth quarter of this year, and, two, the impairment loss of $39.2 million on our restructuring of Geauga Lake. This park as currently configured was not and could not deliver positive free cash flow. As such, after much analysis, we concluded that the assets there would have more economic value and could deliver free cash flow to the Company after a comprehensive restructuring. This restructuring is ongoing.

Although we have not necessarily been pleased with all of our park level results this year, we are pleased that our current guidance is not much different than that we communicated earlier this year. We have mentioned several times today that adjusted EBITDA is just the beginning point when considering free cash flow. We also take into consideration cash payments made for interest, taxes, capital expenditures, and finally distributions. We believe that the adjusted EBITDA we are forecasting at this time for 2007 will be sufficient to fund all of those items notwithstanding accounting net income. At this point, I will conclude our prepared remarks and allow for any questions that you might have.

(OPERATOR INSTRUCTIONS) Our first question comes from Kit Spring of Stifel.

Hi, guys, a little better than we were looking for a few weeks ago. Can you talk about first about the impact on revenues and EBITDA for the changes you're making for Geauga Lake? Obviously it will have a negative revenue impact, but will it be a negative EBITDA impact and then what do you think the land might fetch that you're selling there? Let's start with that. I have a few more.

Okay. On the EBITDA side we think it is going to be a positive. We were operating at a loss there at Geauga Lake taking into consideration all aspects. On the cash flow situation we were negative on that. We felt, as Peter explained, that it was best for the Company to close that, to close part of it and operate it the way we operate our waterparks in California. Basically this is going to be a division of Cedar Point under John Hildebrandt and his team here. Pete, you want to comment on the -- .

On the revenue side as well.

I don't think you are going to see a substantial impact. In fact, the revenue may be slightly lower, but again EBITDA should, as Dick mentioned, should increase. On the land value we're in the process right now of going through a land planning study. We've engaged the Colliers here in Cleveland and engaged a land planning firm to identify the usable and developable acreage and that process is ongoing right now. Estimates with respect to value are being compiled as we speak and then a marketing of the land will be done in the early part of next year and then we'll know.

On your CapEx plans of $88 million, it's a little bit more than last year, but if I recall, I think I looked back to 1987 since you've been public and the average has been about 13%. Do you think the 8% that $88 million is enough?

We sure do, Kit. The main reason for that is that we're getting an awful lot of value out of three of the rides that we're pulling out of Geauga Lake this year and putting in our parks. Those basically are $0.50 on the dollar that we estimate for the capital of those rides especially the ones that are going into Kings Dominion and Dorney Park.

What's the remaining life of the lease in Santa Clara?

We have until 2037 -- 2039 on that lease.

And then you benefited from some changes in the operating days. Was that for the year or for the quarter and what do you anticipate for next year? Will it be the same number of days or is there a reduction that was just temporary this year?

The additional operating days affected the third quarter, it affected our trailing 12 month and our nine month results. That flips in October and I suspect next year they will be comparable because our fiscal quarter will end about the same time, the 29th of September, so I think next year will be comparable.

Our next question comes from Tim Conder of Wachovia.

First of all, again, congratulations, gentlemen. A couple of items here. Back to the rides that came out of Geauga Lake. Dick, you mentioned one going to Kings Dominion, one to Dorney Park. Was there a third ride that was coming out of Geauga and where is that going or is that going to be sold?

No, actually there is two rides. One of them is the suspended coaster is going to Michigan's Adventure.

Okay.

That should be a good asset at that park, that needs a steel coaster. And then we're taking a smaller ride and putting it in California's Great America.

Okay.

So all the major rides there now have been relocated to our other properties.

And again you said with the cost factored into your CapEx of the move and the reset up and all that at about a 50% clip to what would have to build a new?

Correct. And then a lot of the kiddy rides that were at Geauga Lake are going to be relocated here to Sandusky.

And that leads into my second question, then. In the press release it stated that it is replacing our Snoopy playground in your CapEx press release. Is that in any way looking into potentially changing the relationship with the licensing of the Snoopy properties?

No way at all, Tim. Basically where this is going to go, it is not Camp Snoopy, if you're thinking about out near the waterpark, this is basically used to be Berenstain Bears country years ago. It is basically an under used portion of the park that gets very little usage from families and we just think it would be better used by incorporating some of the ideas that we picked up at the Paramount Parks this past year. But certainly this is not meant in any way to look that we are putting less emphasis on the Charles Schultz characters.

Okay. And then, Peter, could you maybe just again refresh us and again your operating guys will commend you operating in a difficult environment, but maybe refresh us, let's assume that things get really dire here for the economy as a whole just working under a worse case scenario. At what point do any of your covenants or anything start -- do you get to the point where you have to maybe look at the distribution? Can you kind of go through a little bit of those details?

Sure. As everyone knows we've also filed that credit agreement and it is public information, but it is complicated. I will tell you that we're well within our distributable, available distributable cash, that's a term of art in our credit agreement. We're well within the parameters of available distributable cash as we speak right now. They're two different tests. The test that we perform at this point in time is one that calculates cumulative cash flow in and out of the company essentially, so the banks have -- are of course secured. It would have to get very dire.

Our EBITDA guidance in the 325 to 335 range is more than adequate to cover that -- those particular covenants. The money covenants, as I like to call them, the debt to EBITDA and our fixed charge ratios were well within those. As you know, we had plans and we do have plans and continue to be on track to improve our EBITDA, and we believe that as those covenants tighten later next year that we'll be well within those covenant ranges as well. Tim, I hope that gives you enough detail without me getting into the stuff -- .

Sure, sure. And then lastly, I know you're, again, just wrapping up the formal operating season on the seasonal parks at this point, but any thoughts at this juncture as to what we should anticipate for any ticket price average increase across the whole Corporation and then also any preliminary plans at this point for the in-park and the out-of-park revenues, just looking at all that collectively?

Tim, we're really not in a position we can discuss that. We have in a week and a half from now we start all of our budget discussions with our General Managers, and at that time everything will be decided. But at this time it is just a little too early to project what's going to happen next year. I can tell you that we have started our seasons pass programs and we have some promotions going on there, so that is well in swing.

Okay. And along that line, Dick, do you anticipate any major changes in the season passes similar to what you did at some of the Paramount Parks for this season?

Yes, Tim. We certainly hope that we can generate more revenue. As I mentioned in my prepared remarks, we were disappointed in the attendance we received from on the seasons pass side. We might have made changes that were not maybe the wisest thing to do. We're re-evaluating each of the parks on an individual basis. We went back to the customers that maybe we lost to the Paramount Parks and we're offering them a lot of value and hopefully we'll get a lot of those customers back next year.

Thank you again, gentlemen.

(OPERATOR INSTRUCTIONS) Our next question comes from Robert Russo of Neuberger Berman.

Just a quick one. Just wondering how, if at all, the Southern California fires have impacted your business at Knott's Berry Farm or any of the other parks?

We're very fortunate they were not affected. We had to evacuate the waterpark there in San Diego for a day, but other than that, we're very fortunate. We were not affected at all by those disasters.

Okay. Great. Thanks.

Thank you.

Our next question comes from Hayley Wolff of Rochdale Securities

Hi, there. Just a couple questions. First, can you go through what kind of systems upgrades we might see for the next operating season? Second, just help me understand why EBITDA margins contracted in the quarter. And then sort of following on Tim's question about the season pass programs, I know you went to a more simplified pass program. What kind of response have you seen to that new program and will we see a dropoff in comp tickets next year or are we pretty much at a baseline number now?

I am sorry. Did you say cost tickets?

Complementary tickets.

Complementary tickets. Let me start at the last question first. Complementary tickets pretty well have dropped off to where we expected them to be. We certainly have to give some complementary tickets away. We have trade tickets out there and things like that. But I think our managers did an excellent job of controlling tickets that used to be -- flooded the market and of course it has always been the Cedar Fair's conviction that if you get too many people in the park, why it certainly affects ride lines and the enjoyment of the parks to people that have paid full price to get in. On our seasons passes, Hayley, right now we're taking each of the parks on an individual basis.

Some parks we have a promotion going on now with a jacket if you buy an early seasons pass, that ends this Sunday. In some areas that program has responded very positively, in some of the markets it hasn't quite responded the way we hope it to. We have our next promotion coming in after the 12th which will emphasize Christmas. We'll have some special promotions for that. And again, we will analyze each of the markets as they come in and we will make the necessary adjustments to try to maximize revenues next year with the seasons pass program. Pete, do you want to -- I can mention other systems upgrade if you want to mention that basically we are full force ahead of our systems upgrade with a POS system if that's what you mean, Hayley.

Yes.

What exactly did you mean by a systems upgrade?

Putting the POS in the legacy parks?

That certainly is -- For next year we're taking what we call gate central. We're starting with our ticketing and front gate business and then look at the point of sale in future years.

We should have something in Kings Island next year to expand that one.

And, Hayley, you had a question on EBITDA compression in the third quarter.

Right.

August, as you know, was a disappointing month for us and being a high operating margin leverage business those lost revenues, if you will, pushed our margins down. The good news is that in October we're seeing the flip side of that and taking advantage of the volume and, as Dick had mentioned, our October results were strong, so that's the reason for the third quarter margins and I think we may see something different hopefully in the fourth quarter.

And in the prepared remarks did you say that you would no longer give periodic EBITDA guidance updates throughout the year because the tail of the season is getting so significant?

Yes. We certainly -- we didn't say we never would, but certainly we're going to take an awful lot into consideration before. The last couple of years we've made some guidance forecasts in the first part of August and then we've turned out that we had a very successful fall campaign and we sort of went above what we had projected. And so going forward we're going to wait until after September to make any adjustments in our forecasting.

We want to be careful that we just -- we don't give bad information.

Okay. All right. Thanks.

(OPERATOR INSTRUCTIONS) Our next question is a follow-up from Tim Conder of Wachovia.

Just one follow-up item here, gentlemen. Can you comment how the premium sort of ticket package went for you this year? I think definitely had it at Cedar Point and maybe a couple of the other parks, and then what's your thought process about expanding that, continuing that, or tweaking that going forward?

I believe you're talking about the platinum pass we're offering this year?

Yes.

Said yes.

In the VIP programs. The platinum program is going especially well in our legacy parks, especially here at Cedar Point that program is going over very well. Again, because it does include free parking, which is something we've never introduced to the people here at Cedar Point before and plus it offers all the other parks that we have in the system the 10 other parks plus the home park. Of course the farther you're away from a core market why it is more difficult it is to sell that platinum pass. But for the most parks, especially at Cedar Point, there has been a tremendous upgrade to the platinum pass. The other parks are pretty much in line with what we thought they would be or what we hoped they would be?

Any thought again to maybe tweaking the approach? Historically you've not done it, but tweaking the approach at some of the other parks similar to a pass system that is incorporated at, say so to speak, a Disney park? A fast-pass type of line system?

Yes, we constantly look at that, Tim, and if we see something out there that we think is going to make it easier for our guests to get through and it takes some of the hassle out of visiting the amusement parks and make their life easier we certainly will incorporate it. We look at it all the time.

Okay. Great.

(OPERATOR INSTRUCTIONS) At this time there appear to be no further questions.

At this point, if there are no further questions, I would like to thank everyone for joining us on the call today. Should you have any follow-up questions, please feel free to contact me at 419-627-2227. We look forward to speaking with you again in early February to discuss our fourth quarter and full year results. Thank you.

Thank you. This does conclude today's teleconference. You may now disconnect.