Six Flags Entertainment Corp (FUN) 2011 Q3 法說會逐字稿

Good morning ladies and gentlemen.

Thank you for standing by.

Welcome to the Cedar Fair third 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).

This conference is being recorded today, Thursday, November 3, 2011.

At this time, I'd like to turn the conference over to Ms.

Stacy Frole.

Please go ahead, ma'am.

Good morning and welcome to our third quarter earnings conference call.

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

This morning we issued our 2011 third 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 Chief Executive Officer, and Matt Ouimet, our President who will assume the role of Chief Executive Officer upon Dick's retirement in January, and Brian Witherow, our Vice President and Corporate Controller, who will walk you through the particulars of our financial results.

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 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 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 I will turn the call over to Dick Kinzel.

Thanks Stacy.

Good morning everyone and thank you for joining us on the call today.

We are pleased to report the strong momentum we experienced in our operations during the first half of the year not only carried into our peak vacation months of July and August, but into the increasingly important fall season we have been cultivating over the past few years.

We firmly believe our continued investments in our world class properties and our creative marketing strategy for 2011 has produced solid increases in both attendance and per capita spending, both of which are on pace for a record setting year.

For the third quarter, we reported record revenues with net revenues increasing $27 million or 5% despite a still challenging consumer market.

During the quarter, we saw attendance increase 276,000 visits and in-park guest spending increase by approximately $1 per attendee.

Out-of-park revenues also increased nicely during this time by $4 million.

We saw total revenues increase across the majority of our parks led by Canada's Wonderland, California's Great America, Knott's Berry Farm, and Kings Island.

Cedar Point's Resorts Hotel also continued to see year-over-year increases.

Our cost during the quarter also increased when compared with last year.

The increase in cost, while largely anticipated, is primarily the result of the increases in attendance and higher wage costs as well as several one-time items.

As stated in our release this morning, the positive revenue and attendance trends from the third quarter have continued into the fourth quarter.

In October, attendance was up approximately 6% or 155,000 visits and average in-park guest per capita spending increased approximately 4% or $1.39.

This record setting October performance is even more impressive when you consider that our results a year ago were the strongest October we had ever had up to that point.

This combined with a more than 10% increase in out-of-park revenues produced an $11 million or 10% increase in revenues for the month.

Based on our record setting results through October and our continued optimism for the balance of 2011, we are increasing our guidance for the year as we now expect to achieve net revenues of between $1.015 billion and $1.025 billion and adjusted EBITDA of between $365 million and $375 million.

Throughout my career with Cedar Fair, I have said that we believe our business model in parks are recession resistant, not recession proof.

I believe our ability to improve this year on a record 2010 results and volatile marketplace is proof of the stability and resiliency of our business.

Our employees work hard every day to provide our guests with the best possible experience while visiting our parks.

As I mentioned on our last call, the fundamentals that have made us the most successful regional amusement park company in the world remain the cornerstones for our continued success.

This is the basics of safety, service, courtesy, and cleanliness along with innovative new rides, shows, and the total sum of what the parks offer that create the family traditions that have maintained the loyalty of our guests.

This is what allows us to consistently increase revenues and cash flows on a yearly basis.

I am also pleased to report that our Board of Directors has declared a $0.70 distribution per unit payable on December the 15, 2011.

With the December distribution, we'll have only paid $1 per unit to unit holders this year.

Going forward, we expect to return to our regular quarterly cash distribution in 2012 and we are on track to pay $2 or more per unit in 2013.

This return of value to our unit holders combined with additional reduction of debt creates a strong foundation for Cedar Fair to build under Matt's leadership as CEO.

As you know, this is my last earnings conference call as the CEO of Cedar Fair, and I want to take a moment to recognize and say thank you to the full-time and seasonal employees who have made this company so successful.

I have had a great respect and appreciation for their talent, integrity, and professionalism they exhibit on a daily basis.

It has been a privilege and an honor to represent them over the past 25 years.

I'd also like to thank all of you, our investors, for the support you have given to me and Cedar Fair over the years.

It has been an honor to serve you as the CEO.

At this time, I'd like to turn our call over to Matt Ouimet.

Matt?

Thanks, Dick.

And good morning to everyone on the call.

Dick, I do need to say at this forum I appreciate the support you've provided me over the last several months.

It's been an honor to work beside you and learn from the best amusement park operator in the industry.

And I look forward to working with you in the future as both a member of our board and as an investor in funds.

Since we last spoke in this forum, I've continued to spend time at all of our properties understanding unique aspects of each park and its respective consumer base.

We also completed the first round of updated research on two of our largest parks.

The combination of site visits, management discussions, and this research informs our capital menu discussions I will refer to later.

As you've already hear this morning, our parks completed their operating season trending toward record revenues and attendance in 2011.

Before I begin discussing our plans for 2012 and beyond, I'd like to ask Brian to provide a few more details on our most recent financial performance as well as the improvements we've made to our balance sheet.

Brian?

Thanks, Matt.

As Dick mentioned at the beginning of the call and as detailed in our earnings release this morning, we had another strong quarter with meaningful increases in both attendance and revenues.

For the third quarter of 2011, we reported revenue growth of $27.3 million or 5%.

This was primarily driven by a 2% or 276,000 visit increase in attendance, a 3% or $1.01 increase in average in-park guest per capita spending, and an 8% or $4.3 million increase in out-of-park revenues.

It's important to note that in-park guest per capita spending represents the amount spent per attendee to gain admission to our parks plus all amounts spent while inside the park gates.

Out-of-park revenues primarily represent the sale of hotel rooms, food, merchandise, and other complimentary activities outside our park gates.

Now let's take a closer look at the increase in attendance for a moment.

As we've mentioned on previous calls, we've placed a particular emphasis over the past two years on restoring our season pass visit business after a somewhat down year in 2009, as many of our customers managed through the macro economic turmoil.

To this end, we launched targeted marketing campaigns at several of our parks this year including California's Great America, Knott's Berry Farm, and Valleyfair.

This strategy clearly proved to be successful given our notable uptick in attendance in the quarter and the increase in the number of season passes sold for the 2011 season.

Now onto cost for the quarter.

Operating costs during the third quarter of 2011 increased $15.8 million or 6%.

Dick already mentioned that the year-over-year increase in cost were largely anticipated and are the result in the increase in attendance and higher wage costs as well as several one-time items.

The increase in wage costs, which are reported through the operating expense line, is primarily due to increased seasonal labor hours during the third quarter of 2011 compared with 2010.

This was the result of expanded operating hours at several parks, the addition of new attractions and guest services, and the overall effect of the higher attendance and improved occupancy at our hotels.

The one-time items, which are components of SG&A costs, reflect the impact of legal and professional costs incurred during the quarter as well as a credit recognized in the third quarter of 2010 related to debt refinancing efforts at that time.

The legal and professional costs from the current year primarily include litigation expenses and costs for SEC compliance matters related to special meeting requests.

Adjusted EBITDA, which we believe is a meaningful measure of our park level operating results, increased $10 million or 3% to $309.7 million for the third quarter of 2011.

This increase is a direct result of the strong revenue and attendance trends produced by our parks in the period.

These gains were partially offset by the higher park level operating costs during the quarter.

For the period, our adjusted EBITDA margin declined by 80 basis points to 54.2% from 55% a year ago.

While all of our parks are very profitable, the slight margin compression is a result of a shift in the weighted average mix of operating profit during the quarter toward lower margin parks such as Knott's Berry Farm and California's Great America.

Speaking to more current results for a moment, our revenue and attendance trends in the month of October remain strong.

For the month, net revenues increased $10.8 million or 10% on a 6% increase in attendance, a 4% increase in average in park guest per capita spending, and a 13% or $1.1 million increase in out-of-park revenues.

Now let me highlight a few items on our balance sheet.

As stated in our news release this morning, we remain confident in our liquidity and cash flow.

Our improved year-over-year performance on last year's record results has allowed us to further reduce our leverage in the third quarter by $18 million, and we anticipate additional measured debt reduction in the future.

As a result of this prepayment, we now have no additional term debt maturities due before 2013.

At the end of the third quarter of 2011, our consolidated leverage ratio was 4.3 times, which is down from 4.5 times a year ago.

And we had no outstanding borrowings on our revolving credit facility.

By prudently managing our cash flows, we're able to maximize our financial flexibility and our ability to create value for unit holders in both the short-term and long-term through debt reduction, capital investments, and cash distributions.

At the beginning of October, $1 billion of our fixed rate swap agreements matured.

And as a result, our cash interest cost will be significantly reduced going forward.

In order to maintain fixed interest cost on a portion of our term debt we previously entered into additional swap agreements that have effectively converted a total of $800 million of variable rate debt to fixed-rate.

These swaps, which became effective in October, have been designated as cash flow hedges and fixed LIBOR at a weighted average rate of approximately 2.5%.

Those swaps mature in December of 2015.

For the full year, we expect to pay approximately $150 million in cash interest cost in 2011.

In 2012, cash interest costs are expected to decrease to approximately $100 million thanks to the new interest rate swaps.

Offsetting the $50 million in cash interest savings will be a termination payment next February on our 2007 cross-currency swap agreements.

This cash settlement will not impact our 2012 adjusted EBITDA or our ability to increase our annual distributions next year.

In conclusion, we finished the core operating season in sound financial condition.

Our cash position together with existing lines of credit provides sufficient flexibility to manage working capital and support growth through our capital expenditure program and distributions.

Now, I'll turn the call back over to Matt.

Thank you, Brian.

Looking ahead to 2012 and beyond, I continue to be confident in the fundamentals of our business model and growth opportunities.

Consumers continue to choose to spend their discretionary entertainment dollars in our parks.

And given the on-going budgetary strains all consumers are experiencing, this is a particularly strong endorsement of the price value we provide.

Over the past few months, we've started to put our plans in place to enhance the effectiveness of our marketing communication with our audience.

After an extensive RFP process we have selected Cramer-Krasselt, one of the largest independent advertising agencies in the US as our agency of record for all of our parks.

Their strategic market assessment capabilities along with their impressive creative and digital marketing resources make them the ideal partner for Cedar Fair.

Additionally, by early next year, we will roll out a comprehensive modernization of our e-commerce platform.

This platform will allow us to continue to grow our advanced purchase commitment volume, refine our approach to yield management, and lessen our dependency on third-party distribution channels.

The vast majority of our visitors go online during their decision and trip preparation process and we simply have to give them intuitive, easy to use tools to match their needs with our offerings.

Last month, we announced the additions of Scott Tanner, Corporate Vice President of Sales, and Bob Wagner, Corporate Vice President of Strategic Alliances.

These gentlemen have been tasked with expanding the relationships our sales teams have with our corporate customers and other sales channels as well as forming strategic alliances with other corporations to generate promotional leverage and sponsorship dollars.

It will take us 12 months to 18 months to ramp up these efforts.

However, I expect we will begin to achieve some of the benefits beginning next year.

We also recently promoted Richard Zimmerman to Chief Operating Officer.

Richard has a proven track record of success and I am confident that his leadership and guidance will continue to contribute to the Company's long-term growth.

To provide you with an update on the sale of our California's Great America property, I was just in California this week to meet with JMA, the buyers of the property, and representatives of the 49ers.

The meeting went well and we anticipate we'll be able to close on the $70 million sale before the end of the year.

The net proceeds from the sale will be used to pay down our term debt.

Finally as we look forward into the next season, we announced earlier this week our commitment to a $90 million capital plan that focuses on both the family and thrill seeker markets.

The program is highlighted by a new 306-foot tall coaster at Canada's Wonderland near Toronto.

This new ride places the park on the international coaster map as one of the top 3 destinations for both the quality and quantity of roller coasters.

In fact, Cedar Point and Canada's Wonderland are one of the very few parks in the world where you can experience both a 200-foot tall and the 300-foot tall coaster in 2012.

Of course, at Cedar Point, you can also go over 400 feet.

Riders at Dorney Park will enjoy 138-foot tall inverted roller coaster.

Stinger, the park's 8th coaster, will sit riders face-to-face with friends as they are flipped 6 times and race along an overhead track both forward and backwards at speeds up to 55 miles per hour.

Our capital plan also includes family attractions like Dinosaurs Alive and other thrill rides such as the 301-foot tall swing ride, WindSeeker.

Both were successful in attracting guests to our various parks this past year and I believe will have a similar impact in 2012.

At Kings Island, we'll be expanding and rebranding their water park, and at Cedar Point's water park we'll be introducing a new mat racer complex.

These items along with new restaurants, entertainment offerings, resort and water park upgrades create a balanced offering of both thrill and family entertainment and will surely offer our guests reasons to visit our parks again in 2012.

These are just a few of the many growth opportunities I believe are available to Cedar Fair in 2012 and beyond.

As I've mentioned in the past, disciplined execution that delivers a best day of the year experience for families and friends is the foundation not only for us but for our industry.

Safety, service, cleanliness, and courtesy are and will continue to be our cornerstones.

It is important that we have the right combination of new product, consumer messaging, group sales, and targeted offers to drive the top line, which in turn drives our free cash flow.

For our unit holders, we will continue to generate a significant amount of free cash flow going forward.

We will prudently manage these cash flows to insure a quality distribution that our unit holders can depend on year after year.

The 2011 operating performance puts us on pace for significant entries to the distribution in 2012 and for $2 or more in 2013 while at the same time reducing our debt and investing in our core business.

Cedar fair has a solid long-term business model and we will continue to make every effort to maximize the near and long-term value potential of Cedar Fair.

Now we will open up the call for any questions or comments you may have.

Thank you, sir.

Ladies and gentlemen, at this time we will now be conducting a question and answer session.

(Operator Instructions).

One moment please.

The first question comes from the line of Tim Conder, Wells Fargo.

Please go ahead.

Good morning.

Hey, this is actually Mike Walsh sitting in for Tim.

Congratulations on the quarter, guys.

I just wanted to -- on Great American, just wanted to revisit -- are you guys on schedule with them already at the end of the year for them to talk about whether or not they're going to approve that, the city of Santa Clara?

Is that --

Mike, this is Matt Ouimet.

We are, in fact, on track with both the city and JMA for a 12-31 closing.

Okay okay.

How should we think about -- you've got $70 million in proceeds there.

I notice that you prepaid about $18 million on the term facility.

And you've talked the distribution and where we're going to be at here in the next couple years, but how should we think about capital deployment going forward or do we need to wait to hear a little bit more on a financial framework, if you will, in the next couple months?

Mike, what I would say is a couple things.

One is -- and it's a phrase you'll hear me say more and more often -- we're looking at the quality of the distribution not just the magnitude.

Right?

And so, as I said in my prepared remarks, being able to continue to pay an ever increasing distribution that grows as our operating results grow and is sustainable even in down years is part of the objectives the board has laid out for our cash.

That being said, we are in very good shape to do what we committed to in terms of our distribution for next year where we had talked about a range of $1.35 to $1.65.

And based upon the results we see this year, I think the expectation can be that we will be on the high end of that range.

But we'll continue to pay down debt until we can get to what we believe are good, sustainable level of leverage, which we've said basically is 4 times in total and 3 times on our senior secured.

I see.

So, do you think you'd be a little more stringent on CapEx or do you think, maybe going forward, you're still going to be in that $80 million to $90 million range.

And then maybe a little flexibility depending on what each park needs and --

Yes, I think you said that well.

We're going to be disciplined about our CapEx as we go forward.

We've always been in the same neighborhood at about 9% of revenue roughly, which this is.

But we're going to be disciplined around that so we can balance out the objectives of the distribution to the degree of leverage we'd like to have as well as the investment in our core business.

Just one quick one here.

Matt, you mentioned just analyzing customers and outcomes there a little bit deeper, kind of putting them into buckets or segments if you will.

Just kind of wanted to see how that's progressing.

I know it's kind of early but if there's anything noteworthy there.

And depending on the changes, how long do those items actually take to get implemented through the parks?

Yes, Mike, I would say that although I talk about them maybe a little differently than we've done historically, it is just leveraging the way we've thought about the consumer before.

But there are two basic ends of the spectrum.

There is a benefit oriented consumer who is willing to pay extra for a premium level experience, if you will, or experiences.

And then, there's a value oriented consumer on the other end of the spectrum who is looking for value and in many cases bundled activities such as buying food and beverage ahead of their visit, as an example.

That work is progressing and that will be foundational to what we do next year from a yield management standpoint.

Got you.

Thanks a lot.

Thank you.

Scott Hamann, KeyBanc Capital Markets.

Dick, I just wanted to say congratulations, good luck on the future, and hopefully we'll see you walking the midway at Cedar Point for many years to come.

Thanks a lot, Scott.

I really appreciate that.

Looking at Great America, is there any way you could break out what the revenue, EBITDA kind of contribution is so we can kind of think about that for next year?

Scott, what we have said all along, is it's less than 3% of our consolidated EBITDA.

Okay.

And then secondly, on the distribution, is it fair to think -- in the release you talked about even quarterly distributions -- you talk about the high end of that range and then just divide that by 4.

It really should be level each quarter?

The short answer to that question is yes.

We think it's important to pay a consistent quarterly distribution.

Okay.

And just on the operating expenses, it kind of -- look like maybe even ex some of these one-time items that your seasonal labor cost might have -- it's still been up higher than the revenue.

And I'm just kind of wondering, as you think about balancing longer park hours and more seasonal labor cost increases versus the benefit that you're getting.

How are you thinking about that?

What are the initial thoughts on hours for the parks or operating days next year?

Brian?

Scott, this is Brian.

First and most importantly, let me say that the increase in cost was largely anticipated and budgeted.

As you mentioned, the increase is primarily being driven by cost that flexed higher with attendance, such as operating [spies] and seasonal labor.

Seasonal labor cost increase is largely due to the expanded hours as well as the addition of new rides, attractions, services, all of those things aimed at improving the guest experience.

Whenever we look at expanding park hours or adding attractions, those are taken into account.

I think the thing that's also important to note is that in spite of the higher cost, we're still essentially holding margins.

So we will and we do look at those things, but we're not necessarily frightened by the increase in costs that we've seen so far through the first 10 months of the year.

Scott Hamann.

Okay, great.

Thank you.

Thank you.

[Sahari Raja], Deutsche Bank.

-- Quarter and just a follow-up on the Great America.

What was the rationale behind the sale.

And are there other parks that you're looking at for future divestitures?

Yes, I'll take them in reverse order.

There are no other parks that we're looking at for divestiture.

The Great America sale was really an alignment of interests that came together for a unique situation, which is predicated by the desire for the city and the 49ers to build a new stadium essentially in our parking lot.

For us, the price was right, the time was right, and again, it only represented about 3% of our EBITDA.

Great.

And now that leverage is around 4.3 times and with the free cash flow you're generating next year, probably under 4, is there opportunity to look to acquire other parks that are available out there today?

One thing I should point out for those of you that are working models out there -- and Brian touched on it.

In 2012, we do have to settle our cross-currency swaps, which is about $50 million cash item.

And so, for next year, that obviously -- more cash available to us in 2013 and beyond.

But to answer your specific question, we'll continue to look for accretive acquisitions of individual parks that're out there.

Historically, we've successfully done that using units as the primary currency, because it's a more tax effective transaction for the seller.

And that's helped us in a couple of the parks that we've acquired previously.

But if there're opportunistic accretive acquisitions of quality parks, we would add to the portfolio.

Great.

And I think last time we were talking about this.

You guys were testing ticket strategies in terms of doing a VIP ticket with no wait in lines.

How are those testing throughout different parks that you tested it at?

I would say our tests of those type of items has been successful.

And as I spoke before, they direct themselves toward an audience, which is more benefit oriented and probably a higher end income demographics.

So, those tests have been successful.

Great.

So, are we going to look at higher per capita spend in the future?

All right.

Thank you guys.

Thank you.

(Operator Instructions).

One moment please.

Phil Anderson, Longbow Research.

Yes, good morning everybody, and thanks for taking my question.

For 2012, your CapEx budget of $90 million is kind of at the higher end of your historical range.

Just wondering if it's safe then to assume that you would expect higher returns since you're willing to spend a little bit more this year than you maybe have in the past.

Phil, that would certainly be the intent of the spending.

The other thing that I should point out.

As it is true for everyone in the industry this year, there's a requirement -- a new ADA, American Disabilities Act, requirements that're requiring us to modify several things within each of our parks.

And that number is somewhere between $5 million and $10 million for us.

So if we're at the high end of the scale, that's the primary driver of it.

Okay.

Are there any recent years that you would point to as kind of comps in terms of not just the magnitude of CapEx but the types of rides that you're adding?

Yes, I think this is the same type of rhythm and portfolio that this company has traditionally had.

We have a major coaster announcement.

We have the WindSeeker announcement going in.

And the mix of family and thrill rides is relatively close.

I would say there's a little more money in the budget this year to continue to refresh in our resorts.

We talk about out-of-park revenues particularly at Cedar Point.

We bumped up occupancy by 300 basis points or 400 basis points this year.

And so, we needed to put a little bit more money back into our resorts.

Okay.

And you've said really the last couple quarters, the west coast parks have been among some of the best performing ones.

Just wondering if you could flesh out sort of the geographic disparities between the different areas, not only for the quarter but October.

I know the west -- I'm sorry, the Midwest, the weather wasn't the greatest in October.

Just wondering kind of where all the year-over-year growth came from.

Yes, if you look at it, it is pretty well geographically dispersed.

Because Canada had a very successful year, Knott's had a very successful year, and Valleyfair had a very successful year along with Kings Island.

If you just put those dots on a map, you're going to see you're pretty well dispersed in that regard.

Okay.

And then finally, we know from your past commentary that October represented an extremely difficult comp.

Just wondering sort of how November and December stack up in terms of difficultly, comp-wise.

I'll take it from a top line.

Since the only park that's operating is Knott's, I think we have a relatively fair comparison year-over-year.

I'm not aware that we had -- I'm looking at Brian.

I'm not aware we had a particularly strong November or December at Knott's last year.

And the rest is our discipline around cost management, which we are particularly good at.

So, Brian?

Yes, as Matt said, the comparison for Knott's, the only property that is in operation, December results were difficult last year.

Rainy December for that property.

The other parks are in their downtime mode and they will be keeping a close eye on those off-season costs, if you will.

So, it should be a fairly consistent -- minus any non-recurring, one-time things that might pop up that we're not anticipating at this point.

Okay.

Very good.

Thank you.

Matthew Dodson, Edmund White Partners.

My question was answered.

Thank you.

Thank you.

Our next question is a follow-up question from the line of Tim Conder with Wells Fargo.

Just wanted to see if you could talk about how inflation is impacting your business.

I know you mentioned wage cost, but didn't necessarily seem that that was inflation related.

But if we look at your COGS line for instance, about 8% to 10% of your overall sales.

Are you seeing that you're able to pass on some of that cost in food and merchandise?

Yes, we, like everybody else, have seen some increase in the commodity pricing, Mike, as you would've seen across other businesses.

But for the most part, we've been able to pass that through to the consumer.

And this may be a wait and see question, but is there any more thoughts on some of the land purchases that you've made, near Carowinds for instance, on what you're going to do there?

No, nothing has changed since our prior call.

And this is more of a model clarifying question.

If we looked at your cash flow for 2012 on the investment section, what's CapEx expected to be?

Is it really expected to be $90 million or is that something a little bit lower?

We've said and we target about 9% of revenue.

But that'll be over a years on average.

So, I think you can probably use that as a placeholder.

Great.

Thanks a lot.

Mike Pace, J.P.

Morgan.

Two questions.

The first one's difficult for us to grapple without the Q, but if we look at the magnitude of the cash you generate in the third quarter, and the increase in cash, and the reduction in revolver.

I'm just wondering when we compare that to the third quarter of last year, were there any meaningful working Cap uses during the third quarter?

Why we're not seeing a bigger spike in cash given the lower amount of revolver pay down in this quarter?

And then, the second question.

Can you just remind us what the cash flow sweep covenant is in your credit agreement?

I know that was amended earlier in the year.

Just given your 4 times and 3 times target you mentioned earlier.

Thank you.

Mike, as far as the changes in the third quarter from a working capital, there's nothing of any significance to flag as far as a delta from 2010 to 2011.

As far as the excess cash flow sweep, as long as we stay above 3 times senior secured, there's a 25% cash flow sweep.

We anticipate and are projecting that it'll be above 3 times until the end of the year.

So, that formula will require us to make a 25% sweep on the excess cash flow [gap].

Okay, great.

And your recent pay down on the term loan doesn't impact that?

You'll still have to make that?

It does.

It goes against it.

So, it won't be the full amount.

The $18 million will go against that.

Understand.

Thank you.

Thank you.

And at this time, I show there's no further questions in the queue.

I'd turn the call back over to management for any closing comment.

Thank you, 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 about three months to discuss our fourth quarter and year end results.

Thank you.

Ladies and gentlemen, that does conclude today's Cedar Fair third quarter earnings conference call.

Thank you for your participation.

You may now disconnect.