Six Flags Entertainment Corp (FUN) 2010 Q2 法說會逐字稿

Good morning, ladies and gentlemen and thank you for standing by.

And welcome to the Cedar Fair Second Quarter 2010 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).

This conference is being recorded today, Tuesday, August 3rd, 2010.

I would now like to turn the call over to Ms.

Stacy Frole, Director of Investor Relations.

Go ahead, ma'am.

Thank you, Jo.

Good morning and welcome to our Second Quarter Earnings Conference Call.

Earlier today, we issued our 2010 Second 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 morning are Dick Kinzel, our Chairman, President and Chief Executive Officer, and Peter Crage, our Corporate 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 Law.

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 SCC 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 will 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 SCC 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 I will turn the call over to Dick Kinzel.

Good morning, everyone.

And thank you for joining us on the call today.

We appreciate your interest in Cedar Fair.

There's been three months since we last talked, but a lot of good things have happened since then.

In June, we added two new members to our Board of Directors.

Last Thursday we announced the successful refinancing of our debt, which provides us with a more secure capital structure and most importantly, as you read in this morning's earnings release, results through July are positive.

So I'd like to take a few minutes to discuss the trends we have seen that are contributing to these results as we head into the second half of our operating season.

I will then address our long term strategy and targets as we continue to move forward with our plans to strengthen our balance sheet, reinvest capital into our properties and reinstate a distribution at an appropriate time in the future.

Finally, Peter will give us more detail on the second quarter and six month results.

He will also provide more color around the terms of our recent refinancing.

We are encouraged by the trends we have seen so far in 2010.

However, we still have a lot of the 2010 season ahead of us.

As noted in today's release, net revenues for the quarter were 4% higher than a year ago, and it's important to point out that we were able to generate that increase on over 40 fewer operating days due to Memorial Day falling a week later this year.

The improved results are primarily due to increased attendance in our western and southern regions, coupled with improved out-of-park revenues.

The positive attendance trends are a result of an increase in seasons pass visits this year.

This is primarily due to our strategy of continuously reinvesting in our parks, including new roller coasters at King's Dominion and Carowinds, coupled with aggressive marketing campaigns, competitive pricing, and of course, better weather so far which is always helpful.

In addition, attendance for the first six months of the year benefited from a modest increase in early season group sales.

This is the result of a more targeted sales program focusing on business and industries that appear to have withstood the recession well, along with the return of some group bookings that did not occur in 2009.

These trends have already continued into July.

Revenues are up year-over-year by approximately $23 million for the first seven months.

In fact, through the last weekend, we have already entertained more than 13 million visitors.

This is 752,000 more visitors than at this time last year.

A large portion of this increase visits continues to be in the form of improved seasons pass and group sales, which have admittedly placed a little bit of pressure on our average in-park guest per caps, which are down approximately 2%.

We anticipated per caps may be lower due to overall marketing strategy at certain parks this year.

Our goal, however, is to maximize revenues and operating profit, which is achieved through an optimal mix of attendance and in-park spending at each individual park.

Our marketing focus has been to get attendance off to a quick start, which I believe we were successful in doing.

Our promotions have focused on creating urgency, improving attendance in [certain] categories such as seasons passes and group sales, and driving traffic to the park during specific periods and in markets where we may be experiencing weaknesses.

We've introduced many Buy In Advance campaigns that have done well this season.

We have also switched some of our advertising to online and social media for 2010, such as running specials through Facebook.

In fact, on Facebook alone, we have over 1 million fans across all of our parks.

We have also partnered with a company to start a text messaging program at the individual parks.

This program will allow us to instantly promote various restaurants, merchandise, games and special events at the parks through text messaging.

This use of digital and social media will make us more effective in attracting attention to our parks and strengthening our relationship with our customers.

I'm modestly pleased with the guest response that we have had from our major new attractions, including the roller coasters at King's Dominion and Carowinds.

We are also pleased that our five new Planet Snoopy children's areas are receiving very high ratings and customer satisfaction.

This weekend all of our parks will be celebrating Snoopy's 60th birthday.

There will be special events taking place at every park and the Snoopy and the PEANUTS gang will be out in full force.

It should be a great family event.

All of this contributes to enhancing the overall entertainment value of our parks.

We continue to take steps to improve our capital structure and strengthen our balance sheet.

Last Thursday, we announced we had successfully completed the refinancing of our debt.

This accomplished two priorities for us, greater certainty within our capital structure, and significantly enhanced financial flexibility.

This flexibility allows us to consider total return to our unit holders through, individually or in combination, debt reduction, growth of the business, and the introduction of a distribution at an appropriate level at the appropriate time.

We believe this balanced approach will provide the highest long term value for all of our investors.

The combination of our well run properties and aggressive marketing efforts, the improving business conditions, our ability to generate significant cash flows, and an improved capital structure will support our plans to grow the value of our company over the long run.

With almost 45% of our planned attendance to go, we are hopeful that we can continue the positive momentum we experienced through the month of July into the next peak vacation month of August and the important fall season.

At this time, based on preliminary July results, we remain confident that we will achieve our 2010 guidance of a 3% to 5% increase in net revenues and full year adjusted EBITDA, excluding one time costs of between $320 million and $340 million.

Before I turn the call over to Peter, I'd like to publicly welcome Eric Affeldt and John Scott to our Board of Directors.

These two gentlemen have already provided valuable input throughout the refinancing process.

We will continue to benefit from their expertise as we move forward in this challenging business environment.

We are fortunate to have them as members of our Board of Directors, and I look forward to working with them in the future as we continue to grow our business.

On that note, I'd like to turn the call over to Peter to discuss our second quarter financial results in more detail.

Thank you, Dick.

Allow me to begin by emphasizing that virtually all of our revenues, from seasonal amusement parks, water parks, and other 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 third quarter during peak vacation months of July and August.

Only Knott's Berry Farm and Castaway Bay are open year round, with both operating at their highest level of attendance in the third quarter.

Thus, I'll caution you that it's always risky to jump to any conclusions about full year results based on second quarter numbers alone.

As of last Sunday, August 1st, approximately 45% of our planned attendance is yet to come.

Overall, our results for the second quarter were in line with our expectations and improved from 2009.

Consolidated net revenues for the six months ended June 27th, 2010, were $302.9 million, a 4% increase over last year's $290.6 million.

This reflects an increase in attendance in our western and southern regions, as well as a 3% or $1 million increase in out-of-park revenues, including resort hotels.

In addition, to a lesser extent, the increase in revenues reflects the impact of exchange rates and the weakening US dollar on our Canadian operations from this time last year.

During the six month period, we entertained 7.1 million visitors, a 7%, or 477,000 visit increase over the same period a year ago.

As Dick mentioned earlier, the improved attendance was largely due to an increase in season pass visits and some improvement in group sales.

During the first half of the year, average in-park guest per capita spending increased in the northern region, but this increase was offset by declines in spending in the southern and western regions.

Declines in the southern and western regions were, in part, the result of increase in season pass sales and the result in shift in attendance mix towards season pass visits, typically a lower per capita guest.

Nevertheless, even with the decrease in per capita spending, we were able to generate improved revenues in these regions.

Excluding depreciation, amortization, and other non-cash charges, cash operating costs and expenses were $276.4 million, an increase of $17.9 million from last year.

This increase was primarily the result of $10.3 million in costs associated with the merger agreement that was terminated in April, $2.5 million of legal and other costs incurred to refinance our debt, and, to a lesser extent, the negative effect of exchange rates on our Canadian operations.

Excluding one time costs for the merger and refinancing efforts, operating costs were in line with our expectations.

Those of you who regularly follow our results know we believe adjusted EBITDA, earnings before interest, taxes, depreciation, amortization and other non-cash items, provides meaningful insight into our operating results, since we use it for budgeting, cash flow analysis, and measuring park level performance.

Because it is important to us, we make it a point of sharing it with investors.

For the fiscal six month period adjusted EBITDA was $26.5 million, or a $5.6 million decrease from 2009.

The decline in adjusted EBITDA is entirely attributable to the $12.8 million of incremental cash costs associated with the terminated merger and debt refinancing efforts.

Depreciation and amortization increased $687,000, or 1% compared with a year ago.

Interest expense increased $2.6 million to $62.4 million, compared with $59.8 million a year ago.

The increase was due to higher spreads on the $900 million of term debt that was extended in August of last year.

We recorded a net tax benefit of $50.6 million to account for publicly traded partnership taxes and the tax attributes of our corporate subsidiaries during the first half of 2010.

This compared with a tax benefit of $29.3 million last year.

We expect our actual cash taxes to be in the range of $20 million to $23 million for 2010.

After interest expense, credit for taxes and a $9.6 million non-cash charge to income for the change in the fair value of swaps, the net loss for the six months ended June 27th, 2010, totaled $44.1 million, or $0.80 per diluted limited partner unit.

For the six months ended June 28th, 2009, the company reported a net loss of $45.9 million, or $0.83 per diluted limited partner unit.

Excluding $12.8 million in one time merger and financing related costs, our 2010 first half net loss would have totaled $31.3 million, or $0.57 per diluted limited partner unit.

For the quarter ended June 27th, 2010, net revenues increased $11.5 million or 4%, to $275.6 million from $264.1 million in 2009.

The increase reflects a 7%, or 413,000 visit increase in attendance and a $1.4 million or 5% increase in out-of-park revenues, including resort hotels.

This increase was offset slightly by a 2% decrease in average in-park guest per capita spending.

As we mentioned earlier, the increased attendance and decline in per capita spending were a result of increased season pass and, to a lesser extent, group sales.

Cash operating costs and expenses for the quarter increased 7%, or $12.3 million to $192.4 million from $180.2 million in 2009, primarily due to $6.5 million of costs incurred in connection with the terminated merger and $2.5 million of legal and other costs incurred in our debt refinancing efforts during the quarter.

After depreciation, amortization and other non-cash costs, operating income for the quarter totaled $37.8 million, down $2.9 million from $40.7 million for the second quarter of 2009.

Adjusted EBITDA for the second quarter decreased less than 1% to $83.2 million from $84 million a year ago.

The $800,000 decrease in adjusted EBITDA was entirely attributable to $9 million of cash costs associated with the terminated merger and debt refinancing efforts.

Excluding these merger and refinancing costs, adjusted EBITDA would have totaled $92.1 million, up 10% from 2009, as a result of increases in both attendance and revenues during the second quarter.

Now onto more current results.

During July, positive revenue and attendance trends have continued through this past Sunday, August 1st.

Total revenues are up approximately $23 million, or 4% year-over-year.

Consistent with our second quarter results, improved attendance is the primary contributor to the increased revenues.

Through this past weekend, our parks have entertained approximately 13.4 million guests, representing a 6% or 752,000 visit increase over the first seven months of 2009.

Out-of-park revenues increased approximately $3 million, or 6%, while in-park guest per capita spending remained down 2%.

With respect to both liquidity and capital resources, we ended the quarter in sound condition.

Our receivables and inventories are at normal seasonal levels and we have credit facilities in place to fund current liabilities, capital expenditures and operating expenses as needed.

Partners equity totaled $110.2 million, and our total cash on hand was $23.9 million.

As Dick mentioned earlier, we completed the refinancing of our senior secured credit facilities.

Our current debt structure now consists of a $1.175 billion six and one half year senior secured term debt, $405 million in eight year senior unsecured notes, and a five year $260 million revolving credit facility.

This will provide us with the necessary flexibility we need to successfully pursue our strategy, which includes continued reinvestment in our parks, debt reduction, as well as distributions at an appropriate time in the future.

We are comfortable with where we stand in terms of liquidity and cash flow given our new capital structure.

We now have addressed our refinancing risk by successfully extending our debt and improving the structure of historically good rates given our credit profile.

As a result of this transaction, and our existing swaps which expire in 2011 and early 2012, our current cost of debt is approximately 9%.

Although this cost of debt has increased, given the uncertain state of the markets, and the fact that our debt would have begun to mature in August of 2011, we believe this was the prudent approach.

We will now look to rebalance our current swapped to fixed rate debt with an appropriate mix of fixed and variable rate components.

Our goal is to create a structure that allows for reasonably predictable cash flows while not being overly exposed to market risk.

For 2010, we anticipate our full year cash interest cost to be approximately $140 million.

The new 2010 senior secured credit facilities include typical maintenance covenants.

One of the more important covenants is the consolidated leverage ratio.

Beginning with the third quarter of 2010, this ratio is set at 6.25 times consolidated total debt to consolidated EBITDA, as defined in the credit agreement, stepping down over time.

Similar to our prior credit agreement, the consolidated total debt does not include borrowings under our revolver.

Based on debt levels at the time of closing, our consolidated leverage ratio was 4.9 times under the provision of the 2010 credit agreement.

This provides us with significant consolidated EBITDA cushion on the consolidated leverage ratio.

The 2010 credit agreement also includes a $20 million annual restricted payments basket.

These restricted payments are not subject to any specific covenants.

Beginning in 2012, additional restricted payments are permitted, based on an excess cash flow formula, provided that our pro forma leverage ratio is less than 4.5 times consolidated total debt to consolidated EBITDA, as defined in the 2010 credit agreement.

We are pleased we were able to refinance our debt with favorable terms given the state of the credit markets over the past two years.

The fact that we were able to complete a transaction like this in an uncertain economic environment is a testament to the enthusiasm our lending partners have for our business model, growth potential, and value creation.

This refinancing provides long term stability to our capital structure and will allow us to focus on growing our operating results at the park level, while reducing debt, strengthen our balance sheet.

It also provides us with the flexibility to be able to consider restricted payments, such as a distribution, at an appropriate time in the future.

We are in a much stronger position having completed this important transaction.

Now, I'll turn the call back to Dick.

Thanks, Pete.

Before we turn the call over for questions, I'd like to follow up on the $20 million restricted payment provisions we have within the 2010 credit agreement.

As we have said in the past, our focus was on creating a capital structure that allows us the flexibility to manage our business.

This provision does just that.

While it provides us with some flexibility in regards to the usage of our available cash flow, it does not guarantee a distribution.

If a distribution is to be paid, it does not dictate the level.

We have worked very hard over the past 18 months to improve our capital structure and reduce debt.

Now that we've accomplished a major milestone towards this goal, we do not want to lose sight of what still lies ahead of us.

We still have a large amount of debt on our balance sheet and we need to be prudent with our management of cash flows and the usage of available cash to maximize value to the investors.

We appreciate the support our investors continue to express for the company.

The board and management team remain committed to executing a strategy that creates maximum value for the long term.

Now we will open the call up for any questions you might have.

Jo, I'll turn it over to you.

Thank you, sir.

(Operator Instructions).

Our first question comes from the line of James Hardiman with Longbow Research.

Go ahead, please.

Good morning and thanks for taking my call.

Just wanted to make sure I understand the $20 million bucket here.

The current covenants of your new debt agreement prevent any distributions above and beyond that $20 million, at least until 2012, is that correct?

James, this is Peter.

For 2010, the answer is yes.

In 2011, albeit a difficult objective to achieve, there is an opportunity for another $20 million, provided our senior secured leverage is below three times.

As I said, that's a tall order.

But then in 2012, the excess cash flow construct comes into play, that is correct.

And can you just give us a little bit of color, when you talk to your big shareholders, your board, I'm not sure if you ever talk to potential shareholders, how do they look at their preferences in terms of uses of cash?

And how do you incorporate that into your plans going forward?

James, this is Dick.

Peter and I will sort of double team that.

We certainly keep in tune with any of our investors, be they large or small.

And our two or three largest investors are certainly aware of what's going on and I can tell you that for the most part, one of our large investors certainly has been in the loop for everything we've done.

The other one we can't comment too much on because they don't agree with some of the things we're doing on the debt that has been finalized.

But Pete why don't you --

James, we've heard, obviously the distribution has been something that has been near and dear to investors' hearts for many years.

Having said that, given the market that we just came through, paying a distribution and dealing with these debt levels was relatively difficult.

We've heard from investors on both sides of this.

We'd like the distribution to come back as soon as possible.

At the same time, many of our investors understand that a load of debt, being 5, 5.25 times levered in a seasonal business that's affected by economic downturns is something that's untenable.

So, what we've tried to do here is balance that, balance what we hear from both groups of investors and do something to bring back the distribution as soon as possible.

But at the same time, balance that against the need to bring down debt and to create a stronger balance sheet.

So, we hope that this, we believe this accomplishes that goal and we hope our investors are happy.

And then can you just help me understand how you get to that 9% aggregate debt cost.

I understand your swaps.

My understanding was that swaps converted about $1 billion to a 5.6% rate.

I think that was the number in the most recent K.

How do I get to that 9% and what does that number look like without the swaps?

The 9% is relatively complicated because we have a half a year under the old credit agreement with existing swaps.

We have a half a year with our notes, yielding 9 and 3/8, as well as a 1.5% [libore] floor, and a 400 basis point spread.

So I will tell you it's a combination of those two without getting into the details of the calculation.

It's a combination of those two for 2010.

If you were to exclude those swaps, we're down in the low to mid 7% range.

So those swaps that we entered in 2006 that still exist.

And of course, the objective back then was to create very predictable cash flows.

Those are obviously putting upward pressure on interest expense.

But the important thing to note is that those expire in 2011 and we are right now looking at ways either of blending and extending to take down interest costs over the next year and a half, or looking at forward starting swaps to make sure that we're properly balanced as I had mentioned in our prepared remarks.

Great.

And then my last question, just in terms of margins.

Prior to the recession, the big focus was getting the Paramount parks ramped up to the type of profitability that you historically generated out of your legacy Cedar Fair parks.

I don't know to what degree that focus got hijacked by the recession.

But how do the margins compare in the two groups of legacy parks at this point and is there any continued opportunity on the margin side from continued improvement of the Paramount parks?

James, we really don't break out individual parks.

But I can tell you certainly the recession sort of heightened our time table of getting those back into the legacy park margins, mainly because we had to accelerate, unfortunately, some cuts we were planning on doing later.

But I can tell you that all the parks now are well within the guidelines that we're comfortable with.

And so, if I think about peak margins in '06 of 37%, do you think you'll ever get back to there?

And how do you get there, what's the time table?

How do you think about that?

James, it's a tough question.

Certainly the economy plays a lot of roles in that.

As you can tell, our per capitas are down about 2%.

The reason for that is we're discounting more than we've ever had to before.

We've had to compromise on some of our price integrity to get people through the doors.

Certainly the hotel business is now one of the things we've found very favorable this year as we're offering discounted tickets to the parks for people that stay in our hotels, which certainly affects the per capita.

So, basically it's going to be very difficult to get back up to that 37% until the economy really turns around and we can start getting more integrity out of our pricing.

Excellent, thanks, guys.

And our next question comes from the line of Michael Walsh with Wells Fargo.

Go ahead, sir.

Good morning, guys.

Just filling in here for Tim Conder.

I had a follow up question.

Should we expect any type of financing or merger costs to come through in Q3?

Is there anything material there?

We're going through that right now.

On the merger, I would say no.

On the financing, we're trying to determine whether this is an amendment or a brand new financing which will have a different P&L impact.

So, for the time being, it's difficult to tell.

We're working through those numbers right now.

Okay.

I think in the last call we talked about season and group sales passes were 50% booked, back in the beginning of May.

I just wanted to see where we are at right now with that.

This time of the year most of our book, we're about 80%, 85% --

We're selling a few season passes --

But it's pretty well over.

In fact, we're going to start next year's program pretty quickly, actually with Snoopy's birthday.

We're going to start promoting next year's seasons passes already.

I can tell you this, Michael, seasons passes are slightly ahead of 2008.

And they're ahead of 2009 and our group sales are ahead of 2009, but we're just a little bit behind 2008.

So, we haven't caught up to 2008's levels, with the exception of the group sales side.

Is there any markets or parks that you guys are seeing any particular weakness in?

I know you'd commented that some of the western and southern regions are doing pretty well in terms of some of the season passes.

Our Canadian park right outside Toronto seems to be sort of weak this year.

And that's the one that's down, but for the most part all the other parks are doing very well.

Great, thanks, guys.

Sure.

And our next question comes from the line of Mike Pace with JPMorgan.

Go ahead, sir.

Hi, thank you.

One for Peter and one for I guess Dick or Peter.

Peter, I'm just trying to simplify your answer on the swaps question.

If I heard this correctly, you estimate that you would save roughly 200 or some odd basis points on what was the number, $1 billion of debt, once these swaps roll off.

Can you just remind us how much rolls off at the end of '11 and then how much again rolls off in early 2012?

Right.

What rolls off at the end of '11, October of '11, is the $1 billion of domestic swaps.

What rolls off in February, I believe, of 2012, I think we're hedging about $200 million, $260 million in US denominated debt in our Canadian subsidiary.

Obviously, that's all changed with the new credit agreement.

But it's $1 billion in 2011 and $260 million 2012.

And was that 200 basis points roughly what you said?

I'm sorry I couldn't write it all down.

Yeah, that's again an estimate.

About 200 basis points, since of course, we've fixed 562 on the vast majority of our new term loan.

Okay, great, thanks.

And then just my last question, putting the covenants aside for a second, can you or Dick remind us where you want the balance sheet to be before you consider reinstituting a more meaningful dividend, above and beyond what you do for tax purposes for unit holders?

Obviously, that will be an ongoing analysis.

Clearly, the credit agreement is clear and at 4.5 times total leverage at that level we can consider, the board can consider paying a more meaningful distribution in 2012.

Dick, did you want to comment overall on [view], but I think 4 to 4.5 times has always been our goal.

That has always been our goal.

And the other goal we had which the bankers were very generous with is we certainly understand the tax problems that our unit holders have and that they're going to be facing in April of 2011.

And I think we've addressed those in the covenants.

Great, thank you.

And our next question comes from the line of Ross Haberman with Haberman Management Corporation.

Go ahead, sir.

Good morning, gentlemen.

How are you?

Good morning.

Just a couple quick questions.

Could you refresh us on what the capital expenditures are going to be for this year and possibly next year?

We're going to be right around $90 million this year.

We had three large capital programs this year.

And we haven't disclosed next year's capital yet.

Historically, we're always between $80 million and $90 million in CapEx that we're very comfortable with.

Ross, going through that cash flow statement, that's seasonal CapEx, that might be between $80 million, $85 million if you're modeling this.

We figure about $85 million in cash flow this year to Dick's $90 million, right in that range.

And if my math is right, you should be paying back about $75 million or $80 million worth of debt this year?

That's a good estimate.

You should know that the majority of that would be paid on a revolver.

If you remember from earlier this year, we used the revolver to deal with our term debt in our covenant issues.

So that would be paid on revolver.

Our objective is to try to bring our revolver down to more comfortable levels.

And just two other quick numbers questions.

[$1,693,000,000] you show on the balance sheet of debt, that's net of the $23 million, $24 million of cash?

As of June?

Yeah.

No, as of June, we've got $23 million, we've $1 billion in long term debt.

We have $1.5 billion.

We have $197 million in revolver.

$1.5 billion in term debt as of June 30th, then we have $23.9 million in cash gross.

Okay.

Got it, got the numbers.

You were talking about, and I had forgotten if you had sold some of that excess real estate you were talking about a year or two ago.

You had I think it was a piece in Canada, next to one of your parks.

Where does the whole excess real estate disposition stand today?

The Canadian land was sold, that's correct.

That was put on the debt.

The only land that we really have out there now for sale is basically the old Geauga Lake property in Aurora, Ohio.

And basically due to the economic conditions, there's certainly no building going on and so that land is basically sitting there.

But once the economy turns around, we certainly hope we can divest of that property at the appropriate time.

Thanks guys.

Best of luck.

Thanks, Ross.

And our next question comes from the line of Jane Pedreira with FBR Capital.

Go ahead, please.

Hi, good morning.

Can you just give us a little bit of big picture where your group business was sort of as a percentage of the overall attendance back maybe in '08, kind of before the recession hit and maybe where you are this year?

Where you expect to be?

Kind of group business as a percentage of the overall attendance?

Jane, this is Peter.

Typically, our group business is about 25% of our attendance.

Between group and season pass, somewhere between 45% and 60%, depending on the year.

As Dick had mentioned, we brought back some groups this year, but not to the 2008 levels.

To give you an estimate of where we think we'll be at the end of the year is difficult to say.

Because we have, as Dick said, 45% of the season left to go.

So, those are some rough numbers, but it's the best I can do for you.

And then can you say of the group business that you have is that slanted more towards school outings that you might see in the second quarter, or might it be corporate groups that you would see also in October, September, October time frame?

The school business is in the first part of the season before school is out.

And corporate picnics and that are during the heart of the season.

And basically during the fall promotions, it's mainly walk-up business and internet business.

We don't get a whole lot of group business after Labor Day.

The majority of our group business is pretty well booked for 2010.

We're still out there knocking on doors.

And the one thing we are following very closely is the, we're seeing a lot this year, of shorter time periods to book picnics, for the first time.

I think companies are checking their economics and their cash flows coming in.

So we're getting a lot of last minute picnics as opposed to booking them three or four months in advance.

Okay, but for the larger groups, is it fair to say that they're in the guidance for the year at this point?

What we budgeted for our group sales, yes.

What we budgeted for in group sales is there and what we budgeted for in season passes is there.

Is that what you mean, Jane?

Yeah, in other words, so there may be some upward revision from the picnics that you're referring to that are shorter time frame.

But it sounds like the larger groups are already booked for the year?

Yes, I would say, yes.

As Dick pointed out, unless there's a, we could get a call next week for a picnic in mid to late August.

The booking windows have tightened.

So, difficult to say that we have all of the groups already in because we could get some more, because the booking window is tighter, so it's difficult to say that all of them have absolutely booked at this point in time.

Yeah, we're still out knocking on doors and making calls, for sure.

Okay, that's good.

In terms of your sponsorship revenue, I don't know how material that is to the overall business, but are you seeing any upticks this year in terms of sponsors?

Is the media spend increasing this year, or do you think that's really next year's business?

Our sponsorship, it is what it is and if you try to compare that with our competitors, it's very, very difficult to do that.

But if you're talking about our media spend, it's pretty much in line with what we did last year and we have a [pretty good] model that we follow.

So, our media spends are right in line with where we expect them to be.

As I mentioned in my opening remarks, we've shifted some of that to the internet and social media networks.

But for the most part, our budgets are pretty much followed every year and they don't vary that much with the exception of inflation or if we have special promotions and things like that.

But our sponsorships are what they are.

We don't promote them really heavily.

We have some, but not a whole lot, Jane.

I think it's how you define sponsorships also.

It's a small portion of our business, Jane.

[We've got] competitors points out that there's substantial sponsorship opportunity.

Dick has mentioned many times that we don't see that without a cost and so it all falls down to ultimately to the margin.

But on the sponsorship side, there has been a little bit of pressure.

This year, obviously, as companies have pulled back on their marketing and their media spend.

But it's remained relatively steady from the prior years and we expect it to stay steady into next year, hopefully.

Okay, that's good.

And then my last question is just with the credit facility.

I don't know if that's been filed yet, but I'm trying to find out if the revolver has sort of like an evergreen quality where you need to pay it down to zero at any particular point in time during the year?

We have a clean down provision in the revolving credit facility that does not come into play until 2011.

And it requires a 30 consecutive day balance at $25 million or less to comply with the clean down provision.

Okay, perfect.

Thank you so much.

And our next question comes from the line of John Maxwell with Jefferies & Company.

Go ahead, please.

Hi, just a couple of follow ups on the numbers.

The $12.8 million, was that all in the second quarter?

The second quarter was $9 million.

That was the cost with the merger you were saying, the $9 million.

$6.5 million on the terminated merger and $2.5 million on refinancing.

And then we had $3.8 million in merger related costs in the first quarter.

And the total of those is the $12.8 million.

Okay, perfect.

And then on your, I think Peter you mentioned your covenant calculation does not take into account revolver balance?

On the senior secured credit facility it does not.

It did not in the past and it continues not to.

Is there a pro forma amount you can give in terms of what's outstanding under the revolver now after you closed on the facility?

We don't have that.

We'll disclose that when we release third quarter numbers.

Okay.

And then just lastly on the operational front.

Do you need to add management debt, I guess, just asking about you had the change this year.

Just wondering if there was any thoughts in terms of adding any other management debt to the company?

No, we have a very deep and a very strong management team, John.

For example, our two regional vice presidents have 38 years experience with the company.

Phil Bender, for example, our Regional Vice President has been with us for 38 years.

Our four general managers at our four biggest parks have 33 years of average in the industry and 22 years average with Cedar Fair.

So, we have a very deep and very strong management team.

What we've done with the leaving of our COO is the regionals are reporting to me and we basically have empowered them to make decisions.

And we have very strong general managers also that are managing their parks in a very efficient way.

Okay, alright, perfect.

Thank you.

Thanks.

John, I think it's important to know that we've really been a public traded company, except for four years in the '80s, we've been publicly traded since 1961.

So we've built a great tradition and a great history here.

And our management team is very, very deep.

Thank you.

And our next question comes from the line of Jeff Kauffman with Sterne, Agee.

Go ahead, please.

Thank you very much.

Hey, guys, how are you?

Hey, Jeff.

Just a couple detail questions.

I normally think of good midday attendance around 15,000, weekends maybe around 40,000.

Can you give me an idea of where you're seeing the stronger attendance?

Is it more focused on weekends, mid-week?

How are those numbers moving around right now?

Jeff, it's been pretty much the same pattern for a lot of years.

Saturday is the biggest day of the year.

And certainly we have some promotions at some of our parks on Sunday with a special rate, Sunday and Wednesdays.

And certainly the attendance has picked up over those days.

But for the most part, you can go back for as long as I've been here, and Saturday is always the biggest day of the year and it usually follows pretty much that pattern.

The only big change is Sunday used to be the second busiest day of the year, and that really slowed off at the first part of the last couple of years.

Sundays has really slowed off for us, but other than that it's always Saturday is the biggest day of the year followed by the rest of the calendar weeks.

Okay.

In terms of the attendance improvement, are you seeing any difference in terms of what's coming through the theme park versus the water parks?

Well, heat plays a big part in that, Jeff.

And certainly our water parks are doing very well this year because of the heat that we've experience throughout the country.

The only exception to that rule, it seems like San Diego has been a little cool this year.

But certainly the water park in (inaudible) Park in Palm Springs, and Kansas City and the other locations are doing very well because of the extreme hot weather that we've had this year.

I remember a couple of years ago we had that stretch where it was over 100 degrees.

I think in the Midwest for about 10 straight days and it negatively it affected results.

We have had a couple heat waves so far this year.

Have there been any pockets of weakness associated with the heat that is in these second quarter numbers that look so good?

I don't think so.

No really pockets.

I remember exactly what you're talking about.

I remember in '88 we had a real hot spell that really affected attendance.

We haven't really noticed a real decrease in attendance, even though we've had three or four days of 90s.

But it really hasn't stayed for six or seven days in a row.

We really haven't seen that effect where the heat has affected the attendance.

Okay, thank you.

One more detail question, one strategic.

You mentioned 40 fewer operating days, could you just remind us what the amount of operating days was in the quarter versus last year and give us an idea of what third quarter looks like?

Sure.

The second quarter operating days this year are 804.

Last year of course, as we mentioned, was 844.

So that's the 40 day difference.

Third quarter projected operating days at this point 1253, versus last year 1255, so essentially flat.

1255.

Final question, when we think about some of your smaller parks in the upper Midwest, I know when were going through the restructuring there had been some thought about strategically how to think about these parks.

Could you give us an idea as you think about the capital plan next year, where do these parks fit in in the overall product and what are your thoughts in terms of how to grow these markets?

Well, we think capital certainly is the way to grow them, if you're talking about Worlds of Fun and Valleyfair.

Certainly I think when we announce our capital programs very shortly, you'll see that there's going to be an emphasis put on those two properties that I think are going to excite a lot of people.

We certainly haven't given up on them.

We think they're valuable assets.

And we still think there's growth there.

And even when they do, they're very, very stable cash flows and they contribute an awful lot to the EBITDA line, with very good margins.

Okay, well, congratulations on the refinancings and thank you.

Thank you, Jeff.

(Operator Instructions).

And our next question is a follow up question from the line of James Hardiman with Longbow Research.

Go ahead, please.

Thank you.

A couple quick follow ups.

Is there any update on the '49ers and what's going on with the city of Santa Clare and the Great America Park?

No, we're still talking with the city of Santa Clare and also with the '49ers concerning that property, James.

Okay, no updates.

And then, you gave us sort of the cash numbers in terms of interest and tax costs.

I think it was $140 million in terms of interest and $20 [million] to $23 [million] both cash.

Can you give us any indication what that's going to look like on the income statement?

I know that fluctuates a lot and it's difficult to project, but your guess is probably better than mine at this point.

Yeah, it's tough to say, to one of the previous callers.

Ultimately in the third quarter, depending on how this refinancing is treated for accounting purpose, for the accounting rules.

I'd hate to make a guess as to what any of these numbers are right now, James.

I apologize for that, but to give you a number and just have it be wrong when we get on the phone in early November just wouldn't serve anyone well at this point.

Fair enough.

And then per capita spend, it looks like it's actually getting a little bit better.

It was down 2% in the second quarter.

I think that number was a little bit worse in the first quarter because I think the first half number was down [3%] and then it sounds like in July it was down [1%].

Should I take anything out of that improving trend and what's driving it?

Is it just that the majority of the season pass sales take place early and that hurts and then as you get later in the year that's less of an impact?

Or how should I think about that?

That's correct.

We also raised prices the first part of July this year also, James.

So that played somewhat of an impact in it also.

What was the increase in pricing?

For the most part we went up $1.00 at most of our properties on the Fourth of July weekend.

Okay, I guess I could probably do the math here, but it sounds like in terms of the calendar, you had almost 5% fewer operating days.

So what would it have looked like on an even calendar?

It looks like the revenue number is a lot better than what you guys actually reported.

Is that fair or am I thinking about that wrong?

It's always difficult as we've said many times in the past.

Just adding operating days doesn't necessarily drive additional revenue.

It can, but there's no guarantee.

It's not a linear calculation.

So, if you were to ask me to speculate as to what revenues might look like if we had those 40 days, it would be difficult for me to say.

Although we can say is that we're up 4% in revenues even with those 40 less operating days because of how the calendar fell.

And in some instances, those 40 days, or two or three of those days, are a water park that doesn't drive, necessarily, the same level of revenue or the decision is made to keep costs down and shift attendance into a different period.

So, difficult to come up with a linear formula to determine what our revenues might be.

What we do know is that they're up through July $23 million, or 4%, and that's right in our range of guidance.

Okay, that helps.

And then just to close the loop there, for the fourth quarter is it an apples to apples calendar?

For the most part, yes.

The fourth quarter, I just gave the days for the third quarter, the fourth quarter is 237 versus last year 231, so essentially flat.

Great, thanks, guys.

Sure.

And gentlemen, it appears there are no further questions at this time.

I'll turn it back to management for any closing remarks.

Thanks, Jo.

And thank you for your questions and your interest in Cedar Fair.

You can be assured that the board and management team will continue to make every effort to maximize the near and long term value potential of Cedar Fair as a public company.

We believe we are headed in the right direction in our effort to improve our capital structure, and we have a sound business strategy in place to generate profitable growth.

We look forward to reporting our progress to you in the future.

Stacy?

Thank you everyone for joining us 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 about three months to discuss our third quarter results.

Ladies and gentlemen, this does conclude the Cedar Fair Second Quarter 2010 Earnings Call.

If you wish to listen to a replay of today's call, please dial 1-877-870-5176 with the access code 4323194.

It will be available for replay after 1:00 PM today through August 17th, 2010.

Thank you for your participation and you may now disconnect.