Six Flags Entertainment Corp (FUN) 2013 Q2 法說會逐字稿

Good day ladies and gentlemen.

Thank you for standing by.

Welcome to the Cedar Fair second 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, August 8th of 2013.

I would now like to turn the conference over to Stacy Frole.

Please go ahead ma'am.

Thank you, Lara.

Good morning, and welcome to our second quarter earnings conference call.

I'm Stacy Frole, Cedar Fair's Corporate Vice President of Investor Relations and Corporate Communication.

Earlier today, we issued our 2013 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 Matt Ouimet our President and Chief Executive Officer and Brian Witherow, our Executive Vice President and Chief Financial Officer.

Richard Zimmerman, our Chief Operating Officer, is also with us today for the call.

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 different 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 Matt Ouimet.

Thank you, Stacy, and good morning, everyone.

As we enter the final third of our operating season, I am pleased to report that our results remain strong and we are on track for our 4th consecutive year of record results.

In the second year of our FUNforward initiatives, we continue to build on the momentum that began in 2012.

On today's call, I will discuss several of these initiatives, which have been instrumental in driving our strong current year performance and Brian will provide a more detailed review of the financial results for the second quarter ended June 30.

First, I would like to briefly discuss recent revenue and attendance trends through this past Sunday.

Based on preliminary results through August 4th, net revenues have increased approximately 5% when compared with the same period a year ago.

The increase in net revenues is a result of increases across all areas of our business, including a 5% increase in average in-park guest per capita spending to $43.47 and a 7% increase in out-of-park revenues.

Attendance over the same period was down less than 1%.

Excluding the San Diego water park that we sold in November of 2012, attendance is up 1% to a record 15.0 million visits on a comparable park basis.

We are particularly pleased with our ability to achieve record attendance levels through July, especially considering that we eliminated a separate charge water park gate at our park in Kansas City, Missouri.

That water park, Oceans of Fun, is now included in the admissions gate for our Worlds of Fun amusement park for the 2013 operating season and is no longer counted as a separate gate.

In regards to our FUNforward strategy, we are increasingly confident in our ability to generate growth in both the short and long-term as our initiatives continue to resonate with our guests.

Importantly, as part of our strategy, we will continue to invest in enhancing the overall guest experience.

We know that delivering a great experience to every [park] guest every time they visit is critical to the success of our business.

We believe our recent investments in this area have contributed significantly to the solid performance we are seeing in both attendance and average in-park guest per capita spending.

One way we have enhanced the guest experience is by improving the quality and variety of our food and beverage offerings within our parks to drive greater capture rate and support appropriate pricing.

While we were successful with improving the overall quality in 2012, we sacrificed a little in the way of margins.

Over the past year, Phil Bender, our Executive Vice President of Operations, and Craig Grimes, our Vice President of Foods, have been focused on reengineering our food menus to drive higher value perceptions and guest satisfaction.

I'm pleased to report that thus far in 2013, we are providing a higher-quality food offering and driving increased profitability.

Food revenues are up across all of our parks, and our food, merchandise, and game margins through June 30 have improved by approximately 90 basis points year-over-year.

We are also enhancing the guest experience through our 2013 capital plan.

Our top performing parks this year, including Cedar Point, Knott's Berry Farm, California's Great America, Kings Dominion and Worlds of Fun were all recipients of significant new capital in 2013.

As expected, we are seeing solid attendance trends and strong revenue gains at each of these parks.

The introduction of GateKeeper, a world record-breaking winged coaster at Cedar Point, and the crown jewel of our 2013 capital plan, has truly been transformative.

It involves both riders and non-riders alike as it soars across the front gate.

At Knott's Berry Farm, we added three family rides, and in doing so, created an entirely new boardwalk area, which has been highly marketable and has garnered significant attention.

This new area is a perfect example of place making and the type of capital spending that you can expect to see from us going forward as we continue to invest to scale and refresh, reinvigorate, and reengage specific areas of our park.

Additionally, Gold Striker, a wooden roller coaster at California's Great America, the introduction of the world's largest PEANUTS-themed children's area at Kings Dominion, and a major water park expansion at Worlds of Fun and Oceans of Fun have all been successful capital projects and strong contributors to our second quarter and year-to-date results.

Beyond our marketable capital program, we have also invested in the guest experience by extending park hours, expanding live entertainment on our midways and increasing the number of park special events.

Over the past two years, we have discussed our focus on advanced purchase commitments and its importance in our business model.

Advanced purchases drive in-park elasticity and provide protection against visitation disruption events including time poverty and unfavorable weather trends.

Our season pass program is a great example of advanced purchases commitments which have contributed nicely to our strong current-year results.

Through August 4, season pass sales were up 17%, including an 8% increase in units sold, a nice improvement from the previous record results we achieved in 2012.

These record sales are the direct result of the successful development and expansion of our ecommerce platform and installment payment program, combined with a compelling marketing message and the incredible value proposition a season pass offers our guests.

With season pass holders expected to represent more than 40% of our attendance in 2013, we want to insure we understand their needs, wants, and tendencies within the park.

This will enable us to unlock additional value from our season pass holder base, and our new customer relationship management platform, or CRM as we call it, has allowed us to take positive steps forward in this area.

While we are still in the early stages of implementing this new platform, we have seen some good successes over the past two months as we have tested various offers and consumer messaging.

What is important to take away from here is our ability to provide additional value to the Company while also providing additional value to our guests.

Our group sales business is another form of advanced purchase commitment, and also has been a nice contributor to our success thus far.

Year-over-year revenues in this category have increased more than 10% as we continue to add value to our offerings, improved catering facilities, and enhanced menu options.

And we have the second-year benefit of an incentivized sales force.

It is also important to note that our group bookings for the remainder of 2013 are trending ahead of this same time last year.

Following better-than-expected success in 2012, our premium product offerings, again, have been a major contributor to our strong results this year.

As our Fast Lane product enters its second season, the awareness and demand for the product has increased, allowing us to move Fast Lane into a two-tiered product, Fast Lane and Fast Lane Plus, at several of our parks.

For an additional $10.00 to $20.00 at five of our parks, guest can upgrade to Fast Lane Plus, which allows access to the two most highly demanded rides at those parks.

At Cedar Point, for example, this would include our new GateKeeper Roller Coaster and Top Thrill Dragster.

The introduction of the tiered products allows us to increase the capacity of an already popular premium benefit.

Today, we have experienced meaningful increases in both the number and average price of Fast Lane passes sold, and we have plans to add additional seasonal features to these premium benefit offerings in the near future.

These and other FUNforward initiatives continue to gain traction and we feel very good about our current position.

Though we still have approximately one third of our 2013 operating days ahead of us, we remain confident that we will are on track to meet our guidance of full-year net revenues between $1.09 billion and $1.115 billion, and adjusted EBITDA between $400 million and $410 million.

Additionally, our 2016 target of $450 million or more of adjusted EBITDA is well within reach.

Lastly, before I turn the call over to Brian to go through our financial results in more detail, I wanted to thank our employees.

While our new rides and attractions, premium benefit offerings, and advanced purchase commitments are important elements to our business model, the guest experience is largely defined by the quality of service our employees provide.

I am very proud of our employees, as they work diligently to serve our guests in a manner consistent with our cornerstones of safety, service, courtesy, cleanliness and integrity.

Now I will turn the call over to Brian.

Thanks, Matt, and good morning to everyone on the call.

First, I want to remind you that virtually all the of the revenues from our seasonal amusement parks, water parks, and other resort facilities are realized during the 130 day to 140 day operating period beginning in the second quarter, with the majority of the revenues concentrated in the third quarter during the peak vacation month of July and August.

Only Knott's Berry Farm is open year-round, and the third quarter is also their highest level of attendance.

Thus, I will caution you.

It is always risky to jump to any conclusion about full-year results based on second quarter numbers alone.

As Matt mentioned earlier, as of this past Sunday, August 4th, approximately one third of our operating days are still to come.

Also, as noted in our release, the fiscal three-month period ended June 30th, 2013 consisted of a 13-week period and included a total of 800 operating days compared with 14 weeks and 905 operating days for the fiscal three-month period ended July 1st, 2012.

Because the second quarter is not easily comparable with the prior year, I will focus my discussion on 6 months results which compare to 26 week periods.

So moving on, as detailed in our earnings release this morning, we have had a strong start to the first half of the year with meaningful increases in net revenues and adjusted EBITDA.

Net revenues for the six months ended June 30, 2013 were $403.4 million, up $17.6 million, or 5%, from $385.8 million for the six-month period a year ago.

The solid revenue growth was a direct result of a 5%, or $1.93 increase in average in-park guest per capita spending to $42.17 and a 6%, or $2.8 million increase in out-of-park revenues to $48.1 million.

These increases were slightly offset by a less than 1% or 52,000 visit decrease in attendance to 8.7 million visits compared with the prior year.

Excluding the results of the San Diego water park, which we sold last November, attendance was comparable between years for the first six month of the year.

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 of the park gates, and those revenues are excluded from our guests per capita figures.

The 6% or $2.8 million increase in out-of-park revenues, has been primarily driven by the strong performance of our resort properties at Cedar Point and Knott's Berry Farm.

The success of it our capital programs at both of those parks has not only driven higher attendance at the parks, but it has also allowed us to drive higher ADR's at our resort properties while maintaining or growing our occupancy rates, ultimately producing meaningful revenue gains at all of our hotel and resort properties.

The strong growth in guest per capita spending for the six month period came from a 4% increase in admissions per capita spending and a 5% increase in pure in-park spending.

As Matt mentioned earlier, we are extremely pleased with the gains in both areas, particularly given the success of our season pass initiatives and growth in season pass visitation, which would naturally put pressure on average guest per capital spending as the season pass holders typically spend less with each incremental visit.

As a result of record season pass sales, deferred revenue at the end of the quarter totaled $132.4 million compared with $108.5 million for the second quarter of 2012, representing an increase of $23.9 million.

All of this deferred revenue will ultimately be recognized in the third quarter and fourth quarter of this year.

On the cost front, operating costs and expenses for the first six months of the year totaled $320.8 million, representing an increase of $4.2 million or 1% from the first six months of 2012.

This modest increase in operating expenses was largely attributable to an increase in selling, general administrative costs in the period.

SG&A costs were up primarily as result of higher labor costs, largely related to full-time staffing levels, and increased advertising costs during the first six months of the year.

Adjusted EBITDA, which we believe is a meaningful measure of park-level operating results, increased $13.6 million or 19% to $86.8 million for the six months ended June 30, 2013.

Adjusted EBITDA margins during the same six-month period improved by approximately 250 basis points compared with the prior-year period.

The increase in adjusted EBITDA and adjusted EBITDA margins is attributable to the solid net revenue growth in addition to our continued focus on effectively managing our fixed cost base.

Through the second quarter, we reported a decrease in the cost of sales associated with food, merchandise, and games revenues, as well as a decrease in operating expenses as a percent of net revenues.

These decreases were slightly offset by the increases in SG&A cost that I just mentioned.

On an overall basis, operating costs and expenses are in line with our expectations through the first half of the year.

Adjusted EBITDA on a trailing 12-month basis totaled $404.6 million, in line with our current year adjusted EBITDA guidance of $400 million to $410 million.

As we discussed in our first quarter call, we completed a refinancing of our previous senior secured credit facilitates in the first quarter of 2013 with new senior secured credit facilities along with new senior unsecured notes.

This refinancing enabled us to take advantage of historically low rates and significantly improve our financial flexibility.

As a result of the March 2013 refinancing, we recognized a $34.6 million non-cash charge to earnings to account for the write-off of loan fees from our 2010 and 2011 finances.

This non-cash charge, along with a $23.8 million unrealized and realized foreign currency loss, were only partially offset by the increased revenue for the period.

As a result, we reported a larger net loss for the first six months of 2013 compared with the first six months of 2012.

Net loss as of June 30, 2013 totaled $61.7 million or $1.11 per diluted limited partner unit, versus a net loss of $28.8 million of $0.52 per diluted limited partner unit for the same period in 2012.

Turning our attention to the results for the five-week period after the second quarter and through August 4th.

Positive revenue trends have continued in the month of July, with net revenues up $19 million or 6% year-over-year.

For the five-week period, average in-park guest per capita spending at our parks was up 6% or $2.65 on the continued strength of admissions per caps and in-park revenue initiatives.

Out-of-park revenues during the same period were up 7% or approximately $2 million, and attendance was comparable with a year ago.

Excluding the water parks sold in 2012, attendance for the five-week period was up a little more than 1%.

On a year-to-date basis, preliminary net revenues through August 4th were approximately $712 million, up 5% or $36 million compared with the $676 million generated for the same period last year.

This increase was a result of an approximate 5% or $2.24 increase in average in-park guest spending to $43.47 an approximate 7% or $5 million increase in out-of-park revenues to $78 million.

These increases were slightly offset by a less than 1% or 52,000 visit decrease in attendance.

Again, excluding the sale of water park in 2012, attendance was up 1% or 75,000 visits to a record 15 million visits on a comparable park basis.

Now let me shift focus to our balance for sheet just a moment.

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

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

At the end of the second quarter, we had $43.6 million in cash on hand and $628.4 million of variable rate term debt, all of which has been converted to fixed rates through several swap agreements which run through December 2015.

We also had $901.4 million of fixed-rate bonds and $58 million in borrowings under our revolving credit facilities.

I will note that our revolver was fully repaid as of July 17th, and we now have more than $115 million in cash-on-hand as of yesterday, August 7th.

To conclude, we are very pleased with our results through the first weekend of August.

Our initiatives are gaining momentum.

Our business continues to generate significant free cash flow, and our balance sheet is strong, enabling flexibility into the future.

While we still have approximately one-third of our operating season ahead of us, we will remain very upbeat about the duration of the 2013 season and our long-term strategy.

With that, I will pass the call back over to Matt for concluding remarks.

Thank you, Brian.

Before we open the call for questions, I would like to briefly comment on our upcoming Halloween events.

Halloween continues to it be an increasingly important part of our operating season.

In fact, weekends in October are often the highest volume and most profitable weekends of the year.

As such, our Chief Operating Officer, Richard Zimmerman, and the general managers remain focused insuring that we continue to deliver and add to the high quality experiences our guests have come to expect from our notorious Haunt.

This year, our Halloween haunts will have 23 new themed mazes, 7 brand-new scare zones, expanded theming dining options, and even more live, or living dead, as the case may be, entertainment.

In addition, we have expanded our marketing programs, as well as the very successful public relations activities that draw considerable media attention.

By providing a strong value proposition and an excellent experience, the Haunt drives repeat visitation, supports our pricing strategies and stimulates per capita spending.

And beyond the Halloween period, we are actively launching our new 2014 new rides and attractions.

Our first big announcement happens tonight at Kings Island in Cincinnati, Ohio.

While social media sites have been speculating for months as to what this announcement will be, and our local public relations team has enjoyed providing the occasional misleading clue, I can assure our loyal guests that they will be able to proudly report another record-breaking addition to the Cedar Fair portfolio.

Over the next several months, the other new product additions will be announced.

The list includes expanded family rides at several of our parks, an innovative interactive dark rides that will set a new industry standard, water park expansions, reinvigoration of some of our most popular Legacy attractions, as we did this year with the Timber Mountain log ride at Knott's Berry Farm, along with an expansive collection of new entertainment shows.

In closing, I would just like to remind everyone that the foundation for our future success remains providing a great experience at a strong value for our guests.

As long as we remain committed to this principle, we will continue to create loyalty from our guests and value for unit holders.

And it with that, I will turn it back over tomorrow Stacy.

Stacy?

I think at this point in time, we are ready for questions.

Thank you, ma'am.

We will now begin the question and answer session.

(Operator Instructions).

And our first question comes from the line of Scott Hamann with KeyBanc Capital markets.

Please go ahead.

Good morning, everyone.

I know the weather trends were a little bit sketchy throughout the course of the quarter and even into July.

Can you talk about some of the regional variations that you saw, and if there's any evidence based on the booking or ticket sales trends that might indicate that some of these visits were simply deferred into later periods versus actually just lost?

Yeah, Scott happy to talk about it.

Or as Richard and Brian knows, not happy to talk about weather.

But a couple things I would say to you.

One is, I think we what we are seeing is the benefit of a geographically disbursed portfolio.

Clearly, we benefited this year from having parks in Southern and Northern California in the early part of the season here.

The other is that our July results, I think, start to demonstrate the recapture that's available when you have unfavorable conditions in the first part of the year.

What I would say more broadly, is every industry has uncontrollable factors.

Our job is to mitigate those uncontrollable factors.

And I would say the advanced purchase commitment, particularly Season Pass programs, our group sales programs, and, again, in our case, the resorts we have, are all examples of things that help mitigate when the weather maybe isn't as sunny as you would like it to be.

Okay.

Sounds good.

And then just a follow-up.

It seems like there's a lot of activity going on in the San Francisco area around the new stadium.

Just curious if you had any thoughts about potential opportunities out that way, given what looks like is going to be a big increase in kind of attendance and visitation to that area around your park.

I that's it's a great question.

I appreciate it Scott.

I was just there last week myself, visiting with the city and talking with the 49ers and touring the park with the general manager.

Richard Zimmerman has been there a couple times this year, as have our development people.

So for those that don't track as directly, the NFL has a brand-new stadium.

It's the 49er's stadium.

It will begin in the 2014 season and is immediately adjacent to our parking lot and to our park there.

Beyond the anticipated promotional, cross-promotional activities we will have with the 49ers organization particularly, we are looking at what type of activities, particularly catering and special events, we can do to extend our operating season there.

And I think you will see some of our investments in the future will be things that we could not have contemplated as recently as two or three years ago, before the stadium was announced.

So we are excited about that opportunity.

I don't know another regional amusement park that sits adjacent to an NFL stadium.

And so it's not just the NFL games, I should make clear.

It's all the concerts and other events that happen at that stadium that should benefit us as well.

Thank you.

Thank you Scott?

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

Please go ahead.

Thank you and, Matt, congrats to the whole team on the good year-to-date so far and the execution here.

Just a couple.

Let's go first to maybe one of the obvious here.

Your adjusted EBITDA, Brian, you called out.

You are up 19% year-to-date, and now you are at $404 million on a trailing $12 million, but the trajectory is good given, you know, the -- what you are seeing as far as your advanced ticket sales, your group business.

Comments through August 4, and, let's face it, even I know you don't like to talk weather, but in a good sense here, the first half of August also has easy comparisons from a hot period last year.

So, I guess, why no change to the guidance here, and do you expect those EBITDA margins for what different regions maybe to compress over the back half of the year.

Thanks, Tim.

First, I will take the first half of that.

As far as from the guidance-side of things, as you said, we are, you know, very strong numbers through the first half of the year and trends top-line trends through the week ended end August 4th, and we are very pleased by that fact.

With that said, we still do have a third of our operating season in front of us.

And as we have seen in prior years, a turn in October can work against you.

So at this point in time, we are still very comfortable with that we are pacing well towards our $400 to $410 EBITDA guidance and don't feel the need to adjust that at this point in time, given that we still have so much of the season in front of us.

As far as margin goes, I think the one thing that we take great pride in is that we are great cost managers.

And that discipline will always remain.

With that said, we have talked about reinvesting in the parks.

You have seen that doing that over the last year and a half as we continue to try and drive guest service levels as a means of adding value for the parks.

We think, ultimately, that gives us more pricing power.

So while we are up point 250 basis points through the first six months of the year, year over year, I wouldn't be surprised if we saw a little bit of compression on that as our costs get a little bit more comparable.

If you remember last year, we were very heavily loaded in the first quarter of 2012 compared to 2013.

So I see potentially some compression between now and the end of the year.

However, we did, at 20 basis points, last year to margin, and it I would expect that you would see some margin expansion again this year.

Maybe just not at that 250 basis points for a full year.

Okay.

And more of a housekeeping item here, thank you for the color on the attendance down 52,000 year to date all in, up 75,000 if you exclude the sale of Knott's Soak City in San Diego.

Can you -- did that 75,000, I just want to clarify, that plus 75,000 on adjusted basis.

Are you normalizing also the combination of the water park and the theme park gate in Kansas City?

We are not, Tim.

Our belief there was that was a strategic decision.

We went into it eyes wide open that there was some attendance risk.

However, when you pared it really back to how much for the full year, attendance was exposed potentially.

Those folks that weren't already buying a ticket or a pass that had dual-purpose use, it was maybe about 150,000-ish visits, roughly speaking, for the full year.

We believe that we could fully make that up through the combination, the draw of a two parks, one price messaging.

And we are seeing strong results, as Matt said.

We are not only getting better per caps, but we are still -- we are getting it on the attendance front as well.

So we haven't made any adjust testimonies for that.

If you would, what would that be, Brian?

Or do you have that handy?

I would say, you know, it's tough mid-season to really say with where it's at, Tim.

I would tell you, if we looked at it for the full year, if you took that off of that, roughly that 150,000 number I spoke to.

The exposure for the full year would be somewhere between about a 0.5% to 1% of full-year attendance.

Okay.

So about, so maybe we could add another 75,000 on year-to-date.

Would that be a rough guesstimate to get to up 150,000?

It's really hard to say based -- when you're mid-season, based on the visitation pattern.

I think what we are happy is that on a same-park basis, attendance is up essentially 1% year-to-date through August 4, and, you know, the decision in Kansas City is one that we are very pleased with the results that we are getting.

Okay.

And then final question, Matt, you called out specifically what Phil and Craig were doing on the food front, and how that's enhanced your margins as one of the drivers of margins.

Can you talk about what you have done or potentially are considering to do as far as food packages?

I know a competitor has offered an all-season dining pass.

Just maybe different things you may be considering now that you have done some major changes on how you approach food?

Yes, and I think, Tim, the foundation for that, actually, is going to be a little bit back-ended for you.

Which is, our new CRM system, combined with our point-of-sales system, is going to let us better understand what our season pass holders are doing today in terms of purchase behavior, as well as all guests.

So I think what you will see.

I'm not ready to sort to a particular bell or whistle on this.

I think that we will continue to drive food per cap.

I think we will drive it in several different ways, but part of it, the foundation will be a much more, a much solider intellectual understanding how to segment guests this terms of their food preferences, in terms of their spending habits on visits, et cetera.

I'm not ready to go into details on that.

And the other thing to think about is, in the regional amusement park business, because the season is relatively condensed, you can only successfully execute against a specific number of initiatives, and I want to make sure we stay on the initiatives that we believe have the most impact and that we execute well against them.

And that's a reminder Richard gives to me each and every day.

So I wouldn't expect to see us to go down that path immediately, but you can expect us to continue to drive that important source of revenue.

Okay.

Thank you for the answers and the focus.

Thanks Tim.

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

Please go ahead.

Good morning.

Thanks for taking my call.

Just a real quick housekeeping here, Brian.

Help us with the calendar in the third quarter.

I thought, and maybe I'm wrong.

I thought that last year's third quarter, that the calendar was a negative, a shift out of 2Q into 3Q.

But it sounds like what you were saying earlier is that the shift was more first quarter and second quarter a year ago.

Is it an even operating calendar this year's third quarter versus last year?

Yeah, James.

So most of the meaningful impact, as far as the operating calendar is concerned, was first, second quarter with the timing of the Easter Break, as well as the second quarter end.

So when we look at this year's third quarter and fourth quarter, any change in operating days is really more so tied to just slight shifts in the actual operating calendar as opposed to any fiscal calendar.

We were projecting six less operating days this third quarter versus last year's third quarter, so not really much of a difference.

Okay perfect.

And then I guess a little bit of a piggy back on Tim's question.

I short of get the point about margins coming back to earth a little bit based on some investments.

But, you know, would you call out anything in the back half of the year that would suggest that sales would decelerate in any way?

And, I guess, maybe split that into two separate questions.

On the attendance side, rejog our memories.

Weather was a pretty significant negative for you, not only in August of last year but, I think, during the Halloween weekends time.

And then, separately, on the per cap side, obviously you guys have a whole lot of initiatives going on.

Are we [lapping] some of these initiatives being meaningful from a year ago, such that much maybe the per cap decelerates here in the back half of the year.

How should we think about that?

James, I will take that and then, Brian, I don't know whether you want to add to anything to it.

But even though we had, I would say, unfavorable [compariance] in 2012 versus 2011, on a weather basis for August and into October, we still had our second most successful fall period that we have ever had.

So I think, James, that we are optimistic about the fall for a number of reasons, the most being the quality of our product we are going to provide and kind of our new sales and marketing programs.

So we remain optimistic about the fall, but last year, even despite those challenges, it was our second best fall we have ever had.

I don't know that you will see a deceleration on any of our initiatives.

We will be rolling over the latter part of Fast Lane, which was more, I would say more well installed by the time we got to the end of last season.

But still think we have running room there as well.

Okay that's very helpful and I guess, just last, clarification.

I thought you guys made a brief reference to seasonal features of Fast Lane.

What is that?

How should I think about that?

James, you were listening closely.

And we did make that reference.

And you will hear more about that from our media team as we get toward the next couple weeks.

Got it.

Thanks guys.

Our next question comes from the line of Steve Altebrando with Sidoti & Company.

Please go ahead.

Good morning.

The 5% increase in revenue through August 4th, is that on a comparable operating days basis?

Yes, it is, Steve.

Okay.

And then in terms of Fast Pay, is there any color you can provide how that testing is going and if you are planning to proceed to roll that will out across the portfolio in 2014?

Yeah, and glad you touch on that.

So Fast Pay is the pilot program we are running at Dorney Park this year where basically there is an RFID wrist band you can buy as you enter the park and basically have preloaded cash on your wrist to spend throughout the park, most particularly the water park.

We are very pleased with the results we see there.

I would expect you will see that in multiple parks next year on somewhat of a modified basis, but we are a big believer that, that over time will become a standard for us.

I just think the adoption rate will be slower because it's a product that isn't widely available throughout the industry and we have got a little bit of training of the consumer.

But so far, we are very pleased with those results.

Thanks.

And if you could touch on accommodations.

I know it's a fairly small part of the business, but pretty significant increase.

Are you suspect it's economic tailwinds or the payment plan that's boosting that?

It's interesting.

It's probably a combination of things.

But I would say the number one thing that's boosting it is the quality of experience at Cedar Point and Knott's.

The new capital investments in those parks, as Brian touched on, drive not only attendance but overnight stays and two-day visits as well.

And our team has done a really good job there, along with applying some revenue management practices that are typical for hotels.

We run pretty high occupancies.

So we have been pushing ADR and being able to -- still able to sustain or grow our occupancies.

But fundamentally, if a day at the park is great, two days is better.

Okay thank you.

(Operator instructions).

Next question comes from the line of Afua Ahwoi with Goldman Sachs.

Please go ahead.

Hi, good morning.

Just two questions from me.

First of it all, have you seen any impact to your attendance numbers or any feedback from guests based on, maybe, some of the recent incident that happened at one of the competitors' parks?

And then, secondly, I know you touched on this in multiple ways.

But as we think about the operating expense line on the variable side, is there anything you are doing that is helping you be very nimble to adapt to declining attendance trends, especially when it's temporary and maybe weather and [Easter shift] driven.

I think that is definitely one of the things that has surprised to the upside for both you and your competitors is that, in the face of declining revenues, you were able to show good flow-through and show good margins.

Thanks.

I will take the first one and give Brian the second one.

There has been no discernible impact to our business from the incident in Texas.

Brian?

Yes, Afua, as far as the operating expenses are concerned, as I have said before, cost discipline and being the best cost managers in the industry remains a focus for us.

And part of that is Richard and his team of general managers.

On a daily basis, managing their seasonal labor, which is probably the most controllable and largest variable cost that we have.

On days where we do have weather, and weather will happen from time to time, the general managers do an excellent job of dialing their seasonal staffing levels back accordingly.

So I think that's probably been the thing that they have been most active on and will continue to stay focused on.

Afua, I will add, though, that I think it's important to make sure that we meet or exceed the guests' expectations when they show up.

That is an important balance in that equation.

The weather should not affect the experience people have beside they get a little wetter.

Understood.

And, actually, I figured it would probably be on the season labor front.

Is there anything -- is there any technology or any enhancements that has made it even better to sort of balance those moving parts now than maybe a few years ago?

I know sometimes you talk about tools that will give the park manager even more real-time attendance updates or real time get a better sense on real-time attendance trends that make these decisions even more efficient than, maybe, historically.

Well, you know what, Afua, we have always had, as far as from an attendance standpoint, the systems in place that allow our general managers to monitor the parks on a very tight interval inside of 15 minutes.

So they're monitoring that.

Their front line staffs are monitoring that and making adjustments.

As Matt said, maintaining guest service levels.

So it's going both ways, right?

It's cutting back on days where weather is against us, and it's ramping up where the attendance is pacing ahead.

That said, we are and do have initiatives in place.

Some that were rolled out this year on time and attendance systems going to a common platform.

We will be continuing to roll those out across our systems, so we think we will have even more opportunity, more efficiencies built in over the course of the next several years.

But the parks are doing an excellent job working with what they have from a tool perspective at this point.

Okay.

Thank you.

And our next question comes from the line of Jeffrey Thomison with Hilliard Lyons.

Please go ahead.

Thank you.

First of all, good job on year-to-date performance to the whole team there.

Two operations-related questions.

One, why does combining a water park gate and an amusement park gate into one ticket purchase work at one some locations but not at others?

And why was the change at Worlds and Oceans of Fun a good idea now, but not earlier?

And then the second question, following up on your comments on Halloween events, Matt, do you expect the Halloween season this year to be similar to last year in terms of Company-wide number of operating days, and, just as importantly, collective budget?

Yeah, the Halloween, I will take the Halloween one.

It is essentially the same number of operating days plus or minus a day here or there.

And our expectations for Haunt continue to be strong.

And again, I would just challenge, some of it will be attendance but a lot of it will be pricing.

We believe that will we have got a product that we can get behind, and we want to make sure that we don't chase volume at the risk of losing some profitability.

But I would, to give an honest response, I expect both from the Halloween Haunt this year.

As it relates to the water park, this is an idea that's been out in this Company for a long time, considered over the years.

And I'll take specifically this was, I've got, we've got Cedar Point and we've got Knott's Berry Farm where we still maintain separate water parks and separate amusement park gates.

Those two have unique characteristics that I'm not going to go into today which makes us think that sustaining that current structure is the appropriate ticketing strategy for those two parks.

Worlds of Fun, if you set those aside, Worlds of Fun was our last park that didn't take advantage of two parks for one price, which is incredibly compelling consumer messaging.

And we have seen exactly that happen at Worlds of Park, as we anticipated.

It's also a strongly defensible position against water parks, stand-alone water parks.

Because the value proposition is great for the consumer.

And the third thing is, water parks play a disproportionate role in driving season pass sales because people see themselves going to the water park even more times than they go to the amusement park.

And so, all of that came together and I'm very proud of Phil Bender who championed this for us in this organization.

And we took a little bit of risk, and we're seeing almost the same attendance with very strong per cap growth.

Great.

Good luck the rest of the way.

Thanks, Jeff.

Appreciate it.

And I'm showing no further questions at this time.

Please continue.

On behalf of the entire management team, I would like to sincerely thank you for your time this morning, and your continued interest in support of Cedar Fair.

To summarize, we feel very good about our long-term strategy and our progress thus far in the 2013 season, which I truly believe is attributable to our loyal, dedicated, and committed employees.

Following my third operating season, I continue to be impressed by the potential of all of our parks.

We have the right people in place at the right time, a portfolio of high-quality assets, and our guest-facing initiatives are continuing to gain traction.

We continue to drive maximum value to our unit holders by executing against our strategy, which we believe will optimize believe value in both the near-term and the long-term.

Finally, to those of you who haven't had a chance to visit, I strongly recommend that you get to one of our parks this summer to experience the unmatched it quality of our parks and employees.

Thank you for your time today.

Stacy?

Thank you everyone for joining us on the call today.

Should you have any follow-up questions, feel free to give me a call at 419-627-2227 or Lisa Broussard at 419-609-5929.

We look forward to speaking with you again in about three months to discuss our third quarter results.

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

Thank you for your participation.

You may now disconnect