Six Flags Entertainment Corp (FUN) 2009 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen.

Thank you for standing by.

Welcome on the Cedar Fair first quarter earnings conference call.

During today's presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be open for questions.

(Operator Instructions).

I will now turn the conference over to Miss Stacy Frole.

Please go ahead.

Thank you, David.

Good afternoon, and welcome to our first quarter earnings conference call.

I'm Stacy Frole, Cedar Fair's Director of Investor Relations.

Earlier today we issued our first quarter earnings release.

A copy of 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 our 2008 Form 10-K filed with the SEC on March 2nd for a more detailed discussion of these risks.

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 unselectively 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 we'll discuss our first quarter performance, our 2009 operating season, and provide an update on our strategy to reduce debt and strengthen our balance sheet.

First, I would like to provide an update on potential asset sales.

I'm pleased to say that we have entered into a conditional agreement with the Vaughan Health Campus of, which contemplates the purchase of the 82 acres of land adjacent to Canada's Wonderland in Toronto.

We will provide additional information on this sale of land once the conditional period has expired and more definitive terms have been confirmed, which we anticipate will be within the next 60 to 90 days.

We are also pleased with the numerous inquiries we have received from potential buyers since announcing our plans to explore the sale of Worlds of Fun in Kansas City, Missouri, and Valley Fair in Shakopee, Minnesota.

We continue to move forward with this process, but at this point in time it would be premature to provide any further details or speculate when a sale may occur.

Consistent with our announcement in March, we recently declared our quarterly cash distribution of $0.25 per limited partner unit payable on May 15th.

This reduced distribution rate allowed us to make a prepayment of $13 million during the first quarter of our term debt.

We anticipate making the same prepayment on a quarterly basis going forward.

In light of current economic and market conditions, reducing our debt and strengthening our balance sheet must continue to be a priority.

Fundamentally, our business is sound and these actions demonstrate our commitment to reducing our leverage and strengthening our financial position for the long term.

Before discussing first quarter results, I would like to remind everyone the first quarter represents less than 5% of our full year revenues.

I'll caution you that the first quarter is not material to our full year operating results, and it is always risky to jump to any conclusions based on the first quarter numbers alone.

It is also important to note that last year's first quarter revenues benefited from an early Easter and Spring Break season, which fell during the second quarter of this year.

Net revenues for the first quarter decreased to $26.5 million from $40.4 million a year ago.

This is a result of 31 fewer operating days when compared with the first quarter of 2008, a direct result of the later holiday.

The operating loss for the quarter remained relatively unchanged at $56.3 million.

Only four of our 17 properties were in operation at the end of the first quarter.

The other parks, including our largest seasonal parks, Cedar Point, King's Island and Canada's Wonderland, were in the final stages of preparing to open for their operating seasons.

These preseason operating costs were in line with our expectations for the quarter.

Peter will review the details behind the financial results with you in just a bit, but first I would like to discuss the 2009 operating season in a little more detail.

For 2009, we made changes in our operating schedule at each park based on the current year calendar and when various holidays fall, as well as the profitability of shoulder-season operations.

The decrease in operating days in the first quarter when compared with 2008 will be more than offset by additional operating days in the third quarter, due to Labor Day weekend falling later in September of this year.

Currently, we are anticipating a total of 33 additional operating days in the aggregate for the 2009 operating season when compared with 2008.

At this time, we have seven of our 10 seasonal amusement parks in operation, with the remaining parks scheduled to open within the next several weeks.

I am pleased to say our capital projects have been completed, or are scheduled to be completed, on time and within our overall budget.

In fact many of our new rides and attractions have already been opened.

While a large part of our capital expenditures program is going towards three roller coasters, we will be also be introducing a new wave pool at Valley Fair and family ride at King's Dominion.

We also continue to focus our attention on expanding the live entertainment options at our park, as well as general infrastructure improvements.

In 2009, we will offer more than 50 live shows across our parks, with more than 20 of these being new at their respective park.

Given that the first quarter is not a meaningful part of our full year financial performance, and the Easter and Spring Break season occurred in the month of April this year, it would be premature to comment on expectations for the season.

However, I would like to update you on early season sales for seasons passes and group outings.

As I mentioned last year at this time, our seasons pass and group business make up approximately 25% of our annual admissions revenues.

Over half of these sales occur after our parks are in operation, and therefore it is still too early to accurately forecast 2009's full year performance based on current trends.

Through the first quarter, seasons pass sales were down when compared to the same time last year but it has improved somewhat through April.

Our group business is also trending behind in sales when compared with the same period a year ago.

Within the area of group business there's always turnover from year to year, and we have consistently been able to replace those groups with new group business.

However, 2009 is proving to be a little more challenging for us, as the macro economy continues to be a concern for many businesses.

We will continue to work with the companies and large groups to offer a package and/or good any day tickets that are attractive to them.

Given the general concerns over the economy, I believe it is important to provide a little color on Knott's Berry Farm's early season operations.

After a slow first quarter due to a later Easter and Spring Break season, and some unfavorable weather conditions, including two days where the park closed due to significant rainfall, we have seen improvement in revenues and attendance in April, and are hopeful this trend will continue.

I must caution you that Knott's operates at its lowest level of attendance during the first quarter of the year, and with approximately 80% of its season still to come, it's too early to predict how the regional economic conditions may impact future business.

The broader economy will continue to be a challenge for us, but one we are ready to face.

This is something we have been dealing with on a regional basis in the midwest for several years now, with some success.

Our business strategy has not changed for 2009.

We are hopeful that our high quality parks and resorts will meet the demands for entertainment for families that don't want to travel long distances over long periods of time, as we have seen in the past during tough economic cycles.

We hope that our convenient locations to most metropolitan areas we serve, coupled with the outstanding value we offer in a full day of entertainment and exceptional guest service, will prove to be desirable this season and for many years to come.

On a personal note, I did want to briefly mention how disappointed I was when I had to sell some units earlier this year in order to meet a margin loan call.

This sale in no way reflected my view of Cedar Fair's financial position or its future performance potential.

Since that time, the margin call has been settled and no units are pledged as collateral.

I believe Cedar Fair is a great investment, and my confidence in this Company remains unchanged.

At this point I'll turn the call over to Peter, to discuss the first quarter numbers in more detail and to provide a more detailed update on our long-term strategy for reducing debt and strengthening our financial position.

Peter?

Thanks very much, Dick.

Allow me to begin by reminding you virtually all of the revenues from our seasonal amusement parks, water parks and other seasonal resort facilities, are realized during a 130 to 140-day operating period beginning in the second quarter, with the majority of revenues concentrated in the peak vacation months of July and August.

Only Knott's Berry Farm and Castaway Bay are open year around, with Knott's Berry Farm opening at its lowest level of attendance during the first quarter of the year.

Thus, as Dick mentioned earlier, the first quarter is not material to our full year operating results, and it's always risky to jump to any conclusions based on first quarter numbers alone.

Consolidated net revenues for the three months ended March 29th, 2009 were $26.5 million, broken down as follows.

$10.3 million in admissions revenues; $11.5 million in food merchandise and games revenues; and $4.7 million in accommodation and other non-park revenues.

This was a $13.9 million decrease over 2008 first quarter net revenues of $40.4 million, a result of the late timing of Easter and Spring Break in 2009.

Excluding depreciation and other noncash charges, cash operating costs and expenses were $78.3 million, a $12.2 million decrease from last year's first quarter cash expenses of $90.5 million.

Again, this decrease is a result of the late Easter and Spring Break seasons.

As Dick mentioned earlier, at the end of the first quarter only four of our 17 properties were in operation.

Our other parks were in the final stages of preparing to open for their operating seasons in April and May.

All preseason operating costs were in line with our expectations for the quarter.

After depreciation and amortization, which decreased $2 million from last year due to fewer operating days, and all other noncash costs, the operating loss for the quarter remained relatively unchanged from a year ago at $56.3 million.

Interest expense for the first quarter decreased 12% to $28.9 million in 2009 compared with $32.8 million in 2008, primarily due to lower rates and balances on debt.

A net credit for taxes of $31.9 million was recorded to account for the tax attributes of our corporate subsidiaries and publicly-traded partnership taxes during the first quarter of 2009, compared with a net credit for taxes of $44.8 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.

The 2009 estimated annual effective tax rate includes our expectations of pretax book income for the year, as well as the effect of an anticipated adjustment in the evaluation allowance that relates to foreign tax credit carry forwards arising from our corporate subsidiaries.

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 or loss before taxes in interim periods.

Most importantly, though, cash taxes paid or payable are not impacted by these tax provisions, and are estimated to be between $17 million and $20 million for the 2009 calendar year.

After interest expense and the credit for taxes, the net loss for the period totaled $53.3 million or $0.97 per diluted limited partner unit, compared with a net loss of $43.8 million or $0.81 per unit a year ago.

At the end of the first quarter, our receivables and inventories were at normal seasonal levels, and we have the necessary credit facilities in place to fund current liabilities, capital expenditures, and preopening expenses as required.

Partners' equity totaled $32.5 million, and our total cash on hand was $7.9 million.

The decrease in partners' equity is primarily related to noncash accounting items that have impacted our net income in previous quarters, and the recording of the fair market value of our interest rate swap agreements as a component of accumulated other comprehensive loss in equity.

As we have communicated to you in the past, we entered into these swap agreements as a means of reducing the risk associated with volatility in interest rates in order to keep our cash interest costs predictable.

Although the fair market value of these instruments is recorded as a liability of $118 million in derivative liability on the balance sheet, with the offset reducing partners' equity, this is expected to reverse over time as the swaps approach their maturity dates and continue to serve the purpose of fixing cash interest costs.

Finally, our structure as a publicly-traded partnership does not allow us to significantly increase balance sheet partners' equity, as our partnership agreement contemplates the payout of our available cash as defined in that agreement in distributions to our partners.

Because of this structure, we do not have any debt covenants that are tied to partner's equity, but instead our covenants are typically based on adjusted EBITDA and cash flow, as this is what drives our operating decisions and dictates performance.

At the end of the quarter total debt outstanding was $1.688 billion of variable rate debt, $17.3 million of which is classified as current and $148.7 million of which is borrowed under our revolving credit facility.

As of March 29th, 2009, $1.57 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, the cost of our debt is approximately 6.2% at the current time.

I'm pleased to report that we finished the quarter in sound condition in terms of both liquidity and cash flow, and consistent with our expectations as to results for the quarter.

Our cash position, together with existing lines of credit, which do not expire until August of 2011, provide sufficient financial flexibility to manage our working capital needs and support growth to our capital expenditure program.

Now I would like to follow-up on Dick's earlier comments regarding our strategy for reducing debt and addressing our capital structure in more detail.

In March, we issued a news release modifying our cash distribution, and announcing we were exploring the sale of certain assets.

The reduction in distribution, along with the schedule debt repayments and interest savings on the lower debt balance, will allow us to reduce our debt by approximately $70 million in 2009 and by approximately $200 million over the next three fiscal years.

As Dick mentioned, we have already made a $13 million prepayment on our debt in the first quarter as a result of this reduced distribution rate, and anticipate making the same prepayments on a quarterly basis going forward.

The decreased distribution rate is just one step in our strategy of reducing debt and strengthening our balance sheet.

We have also entered into a conditional agreement with the Vaughan Health Campus of Care that contemplates the potential sale of our excess land in Canada.

The net proceeds from this sale will be applied against our Canadian term debt.

At this time the agreement precludes us from providing any additional information regarding the potential sale.

However, we will issue a news release once the conditional period has expired and more definitive terms have been confirmed, which we anticipate will be within the next 60 to 90 days.

We also continue to work with Merrill Lynch Bank of America with regard to the potential sale of Worlds of Fun and Valley Fair.

Since our announcement in March, we have received numerous inquiries regarding these parks.

These are profitable parks with stable annual cash flows, which we believe could be attractive to the right buyer.

Over the next several months we will be able to better understand the value potential buyers are placing on the properties, as well as the buyers' financial capabilities.

At this point, it would be premature to provide any further details or speculate when a sale may occur.

In addition to the steps we are currently taking, we will continue to monitor and explore other opportunities.

Given the continued challenging debt and equity capital market environment, we're taking proactive but thoughtful steps to address our capital structure for the long-term.

While we still have some time to resolve our balance sheet challenges, we believe this is the right direction at the right time.

At this point, I will conclude our prepared remarks, and allow for any questions you might have.

Thank you, sir.

(Operator Instructions).

Our first question is from the line of Scott Hamann with Keybanc Capital Markets.

Please go ahead.

Good afternoon.

In terms of the park admission prices this year, on average are they higher and can you give us a sense of how much?

Sure, Scott.

Admission parks, on average each park is different.

Some parks we actually held the prices.

Others, where we put big capital in, why we have increased them accordingly.

I would say on average our price is probably up somewhere between $0.75 and $1 on average.

And as far as seasons passes, in most cases these were held pretty stable with last year's pricing.

Okay.

And then, Peter, just to reconcile the operating days for the year, are all of these going to come in the third quarter?

Yes, the vast majority.

We have a slight fluctuation in the second quarter, but the third quarter is where you will see the vast majority of the add-back to get us to about 33 days ahead of last year on an aggregate basis.

Okay.

And then last year it seems like commodity prices were kind of pressuring the food and some of the other businesses.

Is there any potential benefit that you might see this year as some of those roll off, or are you able to renegotiate some better pricing going into the season?

Nothing really that really stands out, Scott.

What we try to do is -- we are fortunate we can pass along increased prices in our food as those increases come along to us.

In areas such as merchandise and games, we know what those prices are because we buy ahead of time on those, so we feel that we're in pretty good shape there.

Food pricing, we just don't know.

B ut again as I mentioned, we are able to adjust to economic conditions as the season goes on.

Okay, and then Peter on these debt reduction targets, this year just contemplates the distribution and potential land sale, and I guess the next three years.

Is there anything outside of the distribution -- how are you breaking down those numbers?

Well, the number that I gave you in the call, are you talking about the number I just gave you in the call?

Yes.

Prepared remarks was $200 million over the next three fiscal years is sincerely strictly distribution reduction.

Distribution reduction, a regular 1% amortization on our $1.7 billion in term debt, and the interest cost savings associated with reduced debt levels.

So the $70 million this year and the $200 million over the next three fiscal years is strictly distribution reduction related.

Okay.

And on that Toronto land, are you still comfortable with the prior range you gave us an acreage basis that was like $600,000 to $1 million bucks an acre, and then what is that land on your books for right now?

It would be -- a cost basis really had no bearing on the market value.

Right now I would say $600,000 to $1 million is fine, but with respect to what we're talking about with Vaughan, we're not commenting on that at this point.

Okay, thank you.

Thank you, sir.

Our next question comes from the line of James Hardiman with FTN Equity Capital Markets.

Please go ahead.

Good afternoon.

A couple of quick questions.

On the distribution, given the recent distribution cut as well as the planned debt prepayments, what kind of work have you done from a sensitivity standpoint in terms of figuring out how just bad would things have to get this year for you to be in a position where, even after the current dividend cut, you would be a situation where you might not be able to satisfy your fixed levered ratio covenants?

James, let me make sure I clarify the question.

Are you saying how bad we're going to have to get to not meet our default covenant or our distribution suspension covenant?

Either, really.

Let's put it this way.

It would have to get worse than it has ever been in the history of the Company from a year-over-year reduction in EBITDA.

Our worst year in 2001 was a 6%, 6.5% reduction in EBITDA; so in order to trip the default covenant, we would have to do substantially worse than that.

We have done the sensitivity, but I don't have the numbers in front of me.

With respect to the distribution suspension covenant, with these reductions in debt, although we can make no guarantees about where we'll be at the end of the year, we'd have to have a similarly bad year.

Similar in terms of that 6% to 6.5% reduction in EBITDA?

In terms of our worst year, our 2001 year.

And do you feel -- that seems unlikely, but let's say it did go in that direction.

Would you have the necessary flexibility to see that coming and maybe adjust your distribution payment accordingly, or would it be a situation where by the time it happens it would be too late and there wouldn't really be a whole lot you can do about it in terms of maybe scaling back that distribution even more?

That's a difficult question to answer, for this reason.

Most of our business and our upside and profitability comes in the third quarter, so we will not know until the end of September, early October, and then if we did not meet that covenant, that would trip on December 31st, so it would be a very tight window between the time that we knew we would be in a non-compliant situation and what we could do over that period of time.

Great.

And then in terms of your capital expenditures, there is going to be a lot less this year versus last year.

But if I recall correctly, a big chunk of the delta year-over-year is just some rides that you were potentially going to build this year which you weren't able to get around to for a number of reasons.

Sort of going forward, should we expect sort of the annual CapEx spend to be more like the $60 million range that we're looking for this year or more like $90 million range from last year, or somewhere in between?

James, this is Dick.

No, this year's capital is approximately $63 million.

Going forward, we expect to get back into the range of the $80 million to $90 million range that we ran the parks with previously.

2010 should be a very exciting year for us.

We have some great capital already in process for the park by 2010, hopefully the economy will be turned around by then.

But this year we do have a lower capital number of $63 million, basically that -- we made some adjustments at the early part of last year.

We were able to work with a ride manufacturer to put off a ride until 2010, so consequently this year's capital is a little bit light than normal.

Great.

And then finally, obviously you're not really ready to talk about any of the land deals really past the Canada's Wonderland, and even that is limited at this point in terms of what you can talk about, but given the fact you haven't even mentioned anything about the Java Lake or the San Francisco 49'ers deal, should we assume at this point those are more or less dead in the water for the time being?

On the Java Lake property, certainly with the economy we just can't be giving the land away.

It is very valuable property on a beautiful lake, and sooner or later it is going to have some real economic value commercially or residentially.

As far as the 49'ers go, and the property there, we still are in negotiations with the 49'ers.

They're still discussing it with us, and we continue to talk to them on a regular basis to see if an agreement can be reached.

Excellent.

Thanks, guys.

Thank you, sir.

(Operator Instructions).

Our next question comes from the line of Tim Conder with Wells Fargo.

Please go ahead.

Thank you.

Just to follow up on the CapEx question, what was the number for first quarter that you guys spent?

And I apologize if I missed that.

And then related to that, your expectations again if you just remind us for D&A for this year and next year?

For the first quarter, Tim, we spent about $23 million on CapEx, that's cash CapEx.

And depreciation and amortization for this year I think is in the $120 million to $125 million range.

I think that would be a fair number to use on noncash D&A.

Okay.

And then is it similar or a little bit higher, Peter, for '10?

Probably come down slightly in '10, maybe $115 million to $120 million.

Okay.

And then that number for the quarter?

Never mind.

I apologize.

D&A?

Yes.

D&A for the quarter was --

I got it in the press release.

I apologize, Peter.

Okay.

And then can you kind of talk about if this is a good or not a good way to look at it, if we looked at your operating days in the first quarter on a year-over-year basis, and then just took your total revenues and looked at that per operating day, is that a good way to truly give a good apples-to-apples comparison of revenue, or even just looking at expense performance in a given quarter?

I wish it were that simple, Tim.

Really, additional operating days, particularly less operating days in the early part of the year depending on the amount of money that you spend in labor, can work to your disadvantage, whereas later in the season they can have a completely different flavor.

I wish it were as simple as just doing a quick division, but it isn't.

Obviously weather plays into it, the time of the year.

Obviously the extended summer, we're hopeful that will have some upside for us, but it is not a simple mathematical calculation.

Dick, do you have any --

No, in the way that the calendar has fallen the last few years, not basically the calendar but with the attendance trends going stronger and stronger into September and October, it would be pretty dangerous to try to base anything on the first month of the operating season, especially when all of the parks, with the exception of Knott's Berry Farm, are just basically open on weekends.

Okay.

That's we what I thought, but I just wanted to ask the question.

Then Peter, you mentioned that cash taxes would be $17 million to $20 million for the year.

Yes.

Anything -- and before that comment, you mentioned that you got some valuation allowances going on with some deferred taxes and so forth.

As it stands now, on annualized basis, and granted there will be substantial variances by quarter, what would be a good guesstimate for an effective tax rate from an accounting perspective?

I don't have that in front of me.

I think the first quarter was about 45%, but as you might expect that can fluctuate from quarter to quarter depending on the attributes and the things that affect the effective rate, but I think the first quarter is 45%, but we can get back to you on that.

Okay.

Sure.

And then, Dick, to circle back, you made some comments relating to the seasons passes that were down year-over-year through the first quarter, but you saw an uptick in April, and you mentioned the group business was also down in the first quarter, and I apologize, did you make any commentary how that was trending and how that trended in April?

Yes, I did.

Basically, Tim, in -- April's seasons passes did pick up somewhat.

However, we are seeing some softness in the group business, and what we're seeing is that basically companies are maybe buying tickets for the park, however, they're not buying the catering aspect of it, and a lot of companies would do both.

Some companies are bowing out and basically just doing the tickets, or in other cases we have talked to them and they'll subsidize tickets.

We're working with them in some way that they come to the park, whether it be as a group, or at least we offer them good any day tickets at a discount or things like that.

Our sales are down when compared to 2008, both in group sales and in the seasons passes; however, considering the economy, this really is not unexpected.

This is what we planned for.

Okay.

And then lastly, gentlemen, any update -- again a lot of things have been slow on the corporate development front for a lot of companies, but any update as far as plans looking into '10 or '11, thoughts with adjacent hotel properties or JV potential relationships, anything that you have been working on, on that front?

Tim, we do operate off of a five-year plan, but I can tell you very honestly our main concerns, especially with our balance sheet problems, has been to keep the parks operating at maximum capacity.

As far as expanding the land at some of the other parks, for example, at the Carowinds or Kings Dominion, places where we feel we have the possibilities of putting in accommodations, those have sort of been put on the back burner until we can get some of the debt down.

But certainly going forward, once we get this debt down, and we certainly have a lot of potential, we have a lot of land surrounding the parks, and we can explore possibilities with what we have done at both Cedar Point and Knott's Berry Farm in expanding the accommodations, and not only growing the Company externally but also internally.

Our emphasis right now is to reduce the debt.

Okay.

Would you look at that any -- from any perspective of maybe a license arrangement with a third-party provider?

We certainly would look at it.

I can tell you we have not had any talks with anyone, nor has an accommodations company approached us to do anything like that.

Okay.

Thank you, gentlemen.

You're welcome.

Thank you, sir.

Our next question comes from the line of Jeff Kauffman with [Siren] Capital Management.

Please go ahead.

Hey, Peter, Dick, how are you?

Hey, Jeff.

Just a question, I'm going to follow Tim's reasoning down a different path.

The season's early, can't read too much into what you've seen so far, but based on what you're seeing in your parks, based on what you're seeing at Knott's Berry, can you tell us your opinion of how the consumer, not the corporate event, but the consumer is changing in park spend habits this year?

And then I guess kind of the back side of the weak economy is, I am sure you have a lot of high-quality part-time labor to choose from this season.

Can you talk a little bit about any potential benefit that we might see in terms of quality or cost as you hire into the full park season?

I will start at the end if I could there, Jim.

Our seasonal labor certainly in these economic times, specially here at Cedar Point, where we're so heavily dependent on the automotive industry, we think we're going to have -- we have certainly had a lot of applications this year, and our screening process would be very, very deliberate and very careful, and hopefully we're hiring the best possible people out there, and that -- the people that visit the park will get the best experience that they have ever had.

The first question you had was --

Consumer behavior so far this year.

It is really a little bit early to tell, Jim, to be very honest with you.

There are trends that we have seen over the years, certainly we know that with the advent of the games that the kids have, IT, things like that, that our games per capita has held pretty soft the last few years.

We don't expect that to increase, but people continue to eat.

Even with the economy, while we think we might see a decrease in merchandise, we certainly might see a little bit of a decrease in games, but certainly people continue to eat, and hopefully they'll come to the park, but it is just way too early to see any trends at this time.

And in a normal year, how does that in-park spend traditionally break out between games revenue, merchandise revenue and food?

A lot of it depends on the park.

Here at Cedar Point, for example it is almost 45%, 50%-- in-park, about $0.45 out of park.

We don't break out games, merch, and miscellaneous and food, Jeff.

We break out the in- park spend versus the admission spend, and that's been a 45%/55% mix.

Okay.

Thanks, guys.

Good luck this season.

Thanks, Jim.

(Operator Instructions).

Our next question is a follow-up from the line of Scott Hamann with Keybanc Capital Markets.

Please go ahead.

Could you provide a little detail, if you have any, on hotel bookings so far this year relative to last year, and kind of what you have had to do with average daily rates to draw those people in?

Sure.

Scott, we are seeing some softness.

But this has happened for the last couple of years, and we think that the majority of that softness -- we basically have two parks that have hotels, that Knott's Berry Farm and here at Cedar Point.

With the increase of inventory in the Sandusky area, we find that there is some softness at this time, but that softness has been for the last few years, and what we find with the internet is there is more last minute decision as opposed to planning their picnic or their summer vacation here at Cedar Point, and also at Knott's Berry Farm, two or three weeks or a month ahead of time.

I think with the inventory of rooms and with the economy the way it is, we're getting -- we get more, certainly it showed last year, we get more last-minute decisions.

They can get on the internet and get their room and -- except for the weekends, they pretty well could get a room any time they want I think.

So it is really switched to internet sales, as opposed to trying to get their reservations two or three months ahead of time.

Okay, thanks.

And then, Peter, could you just break out the operating expenses for the quarter, please?

Sure.

We have cost of goods of $3.9 million, operating expenses of $61 million, SG&A of $13.6 million, and then D&A of $4.2 million.

Thank you very much.

Thank you, sir.

Our next question is a follow-up as well from the line of James with FTN Equity Capital Markets.

Please go ahead.

Hey, guys, just a quick follow-up.

The question earlier where we talked about exactly how bad things would have to get for some of the covenants to be an issue, I guess the suspension covenant is obviously the more onerous covenant.

Am I to assume that that excludes any benefit that you guys are going to get from the sale of this Toronto land?

Yes.

Yes, James, it does.

We've made -- reached no conclusions on when that, if it would close and when it would close, so we have excluded that from the sensitivity.

Great.

And assuming that deal closes, the outlook is obviously going to be a lot better, so I guess my question is if that deal closes, maybe some of these other deals come through, clearly you're in a pretty good position from an operating standpoint.

At what point from a leverage perspective, in terms of the debt on your books, at what point do you feel a little bit more comfortable to the extent that maybe you consider ramping up the distribution once again, or maybe paying down debt isn't sort of your number one priority?

What's sort of the long-term leverage number that you're looking to get to before you readjust your outlook?

Based on what we're hearing from our advisors, and our need to recapitalize the Company in a couple of years, that number used to be in the low 4s, and it is beginning to drop into the mid 3s.

We really think we need to work toward a leverage -- a debt to EBITDA ratio in the mid-to-high 3s to put us in a good position for the future.

In terms of when we would bring back the distribution, that would have to be evaluated once we got to that point.

Dick, did you want to make some comments?

James, that certainly would be a Board decision, but I don't think it would even consider increasing the distribution until we got our debt in line, and by that I mean we take the total debt and we get tranches that we see that we're safe for a period of years, where we don't have this big bullet any more coming at us to refinance.

What we hope to do during the restructuring or the refinancing phase is to have tranches that maybe expire every two or three years, as opposed to that one big bullet that we have to face now.

Once we get that under control and we can get working with the debt in a manageable way, by then certainly I think we'll go back to our original plan of trying to increase the distribution.

Perfect.

Thank you, guys.

Thank you, sir.

(Operator Instructions).

I show no further questions in the queue.

I would like to turn the call back over to management for any closing remarks.

Thank you.

At this point in time 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 August to discuss our second quarter results.

Thank you.

Ladies and gentlemen, this concludes the Cedar Fair first quarter earnings conference call.

We thank you for your participation, and you may now disconnect.