Six Flags Entertainment Corp (FUN) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Cedar Fair third quarter earnings conference call.

At this time, all participants in a listen-only mode.

Following the presentation, we will conduct a question and answer session, and instructions will be given at that time.

(Operator Instructions)

I'll now turn the conference over to Ms. Stacy Frole, Vice President of Investor Relations.

Please go ahead.

Thank you, Ron.

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

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

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

Before we begin, I need to caution you that comments made during this call will include forward-looking statements within the meaning of the federal securities laws.

These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements.

You may refer to filings by the Company with the SEC for a more detailed discussion of these risks.

In addition, in accordance with Regulation G, non-GAAP financial measures used on the conference call today are required to be reconciled to the most directly comparable GAAP measures.

During today's call, we 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.

Let me start by saying how proud I am of our entire Cedar Fair team for their hard work throughout our core operating season.

It is because of their dedication to the overall guest experience and their commitment to disciplined execution that we're on track to achieve our fourth consecutive year of record operating results.

We have an abundance of positive news to report so in the interest of time, we will focus our prepared remarks on three key areas this morning -- our record third quarter results and solid performance through October, an update on our capital allocation strategy, and our positive short and long term outlook for Cedar Fair.

We will then answer any questions you may have.

First, I'd like to briefly summarize our results through this past Sunday, November 3. With 97% of our operating days behind us, our net revenues were up 6% to $1.104 billion when compared with the same period a year ago.

I am pleased to say we have experienced growth across all areas of our business, including a 6% increase in average in-park guest per capita spending, a 2% increase in comparable park attendance, and a 7% increase in out-of-park revenues.

Our strong performance to date has resulted from the success of our FUNforward long-term growth initiatives which we introduced in January of 2012.

Many of these initiatives have grained traction much faster and to a greater degree than we had initially anticipated.

Going forward, we will continue to refine the implementation of these initiatives with a particularly strong focus on protecting and enhancing the value of the guest experience to drive repeat visitation and provide us with enhanced pricing power.

This year we have clearly benefitted from investments in our e-commerce and CRM platforms as they have been instrumental in increasing the yield of admission across all channels, including season pass, group, and individual sales.

Going forward, we will continue to utilize these platforms to allow for better segmentation of our guests giving everyone their own unique experience at an appropriate price.

We will also leverage these systems to expand our installment payment programs and more efficiently administer group event options.

Also contributing to our record results this year was our strong capital program as we invested to scale and placed increased emphasis on place making striving to reinvigorate and reinvent specific areas of our parks.

GateKeeper, a world record breaking coaster at Cedar Point and the highlight of our 2013 capital program, was highly successful, but more importantly, each and every park where we have added capital has reported a solid return on investment this year.

Our 2013 core operating season also benefitted from higher quality food offerings and re-engineered menus.

Consistent with our second quarter results, food and beverage revenues are up across all of our parks and our food, merchandise, and games margin through September 29 have improved by approximately 160 basis points year over year.

Embedded within these results are the benefits of our newly consolidated beverage contract with Coke that we entered into at the end of last year.

We appreciate this strong partnership and believe we will see further progress in 2014.

Finally, our premium product offerings continue to contribute to our record results.

The awareness and demand for these products continues to increase, allowing us to strategically introduce new products such as Fast Lane Plus and the Skeleton Key at specifics parks and dynamically take pricing as demand permits.

With 97% of our operating days completed for 2013, we now expect to achieve full year net revenues between $1.125 billion and $1.135 billion.

We also anticipate being at the high end of our adjusted EBITDA guidance range of $415 million to $425 million.

The solid performance of our parks this year combined with the sale of two standalone water parks has provided us with cash flow that has exceeded our expectations.

As a result, our management team and our Board of Directors are faced with the strategic decision of how best to maximize our value.

Consistent with what we have said in the past, every decision we make is evaluated against our commitment to provide a high quality and sustainable distribution to our unit holders that is poised to grow over time.

I am pleased with the Board's decision to increase our quarterly cash distribution to $0.70 per limited partner unit in December of this year.

We expect to maintain this rate into 2014 allowing for an annualized rate of $2.80 per limited partner unit next year.

This 12% distribution increase is reflective of growth slightly above the anticipated adjusted EBITDA growth of approximately 9% at the high end of our range.

Over the next several years, we would expect the distribution to grow at least at the pace of our adjusted EBITDA growth.

In addition to increasing distributions, we plan to invest further in our business.

As I had mentioned in the past, under Richard Zimmerman's leadership we have spent a significant amount of time analyzing our historical capital spend and identifying the rationale as to why a ride or attraction was or was not successful.

These reviews have made us even more confident in the capital projects we currently have planned and the additional opportunities we have identified going forward.

As we pursue the next generation of growth initiatives, we believe allotting a portion of our cash flow to invest in the construction and/or acquisition of new assets is an accretive use of our capital.

Historically, we've limited our annual capital expenditures to 9% of our net revenues.

Over the past three years, we improved our financial flexibility and have taken a more analytical approach to our investments.

We do not want to limit our growth potential based solely on historical metrics.

Going forward, I will anticipate you will see us invest at least 9% of our net revenues in marketable capital with plans to make additional short and long term capital investments as we identify new growth opportunities.

I would emphasize that we are looking for investments that directly leverage the installed asset base of our existing parks and are expected to produce specifically measurable long-term incremental revenue streams.

For 2014, this will include an expansion of our popular cottage and cabins at two parks.

These are assets that are complementary to our core business and lengthen the guest stay ultimately improving their experience and increasing guest spend.

We will also invest in an in-park television network that will provide additional entertainment for our guests and support increased activity with our strategic alliance and marketing partners.

With these new investments slated for 2014 and additional investments anticipated for 2015, we now expect to achieve our FUNforward long term growth goal of $450 million in adjusted EBITDA earlier than our original target of 2016.

And with that, I will turn the call over to Brian to provide additional detail on our financial results.

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

As Matt mentioned, we're extremely pleased with our record third quarter results and the positive momentum that we carry through October.

For the third quarter of 2013, we reported an increase of $38.6 million in revenues or 7% to a record $592.1 million.

This solid revenue growth was a direct result of a 7% or $2.83 increase in average in-park guest per capital spending to $45.73 as well as an 8% or $4.4 million increase in out-of-park revenues to $58.7 million and a 15,000 visit increase in attendance to 12 million guests.

Excluding the two non-core standalone water parks sold in November of 2012 and August of 2013, attendance on a comparable park basis would've increased 2% or 207,000 visits to 11.9 million guests.

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 the park gates and are excluded from our guest per capita figures.

The solid growth in average in-park guest per capital spending during the third quarter came from a combination of strength in admissions per cap and pure in-park guest spending.

Our admissions per cap increased 6% as our guests continue to see high value in our product offerings, particularly in our season pass program and new rides and attractions.

Additionally, we experienced an 8% increase in pure in-park guest spending driven by improved capture rates on food and beverage products at all parks and the second year momentum of our premium product offerings.

We are extremely pleased with the solid per cap increases across all of our parks, particularly given the record season pass sales, which tend to place additional pressure on this metric.

For the quarter, operating costs and expenses increased $11.3 million or 4% to $275 million from $263.7 million in the third quarter of 2012.

The increased costs are largely attributable to higher staffing levels to support our additional revenue growth initiatives, investments in new customer relationship management and revenue management platforms, and higher incentive compensation due to our strong current year performance.

These cost increases were slightly offset by a decrease in costs of goods sold, the direct result of savings initiatives in our food and beverage programs and continued focus on operating expense control.

As a percent of net revenues, costs and expenses decreased 120 basis points, which was in line with our expectations coming into the year.

Adjusted EBITDA, which we believe is a meaningful measure of our park level operating results, increased to a record $318.4 million for the third quarter of 2013 from $292.3 million in 2012 reflecting a 9% increase in adjusted EBITDA for the quarter.

The solid increase in adjusted EBITDA is a direct result of the strong revenue and attendance trends produced by our parks during the quarter combined with our ongoing focus of cost control.

Our adjusted EBITDA margin for the quarter improved 100 basis points as compared to the third quarter of 2012.

Moving on to our nine-month results for a moment.

For the first nine months of the year, net revenues increased 6% to $995.5 million driven by a 6% or $2.40 increase in average in-park guest per capita spending to $44.24, 7% or $7.3 million increase in out-of-park revenues to $106.8 million, and attendance which was comparable with the same period a year ago.

Excluding the sale of the two waterparks, comparable park attendance for the nine-month would have increased 1% or 195,000 visits to 20.5 million.

Adjusted EBITDA for the nine-month period increased 11% to a record $405.2 million up $39.7 million from the same period a year ago.

Switching the focus to more current results, our revenue trends for this past weekend remain solid.

Based on preliminary results, net revenues through November 3 totaled $1.104 billion, up 6% or $65 million, compared with $1.039 billion for the same period last year.

The year-over-year increase was the result of a 6% or $2.31 improvement in average in-park guest per capital spending to a record $44.33 and a 7% or $8 million increase in out-of-park revenues to $117 million.

Also contributing to the revenue growth was a 100,000 visit increase in attendance compared with the same time last year.

Again, excluding the sale of the two waterparks, attendance would've been up 2% or 334,000 visits to a record 22.7 million visits on a comparable park basis.

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

As you read in our news release this morning, our liquidity and cash flow remains strong, and we ended the third quarter in solid financial position with $183.5 million in cash on our balance sheet.

This compares to $96.1 million a year earlier.

Our ability to achieve another year of record results combined with the proceeds from the sale of the two non-core waterparks has contributed to our healthy liquidity reserve.

At the end of the third quarter, our consolidated leverage ratio was 3.6 times, which is down from 3.9 times a year ago, and our net leverage ratio stood at 3.1 times.

Our current leverage position is well within our comfort range in the current credit market environment.

For 2013, we expect our average cost of debt to be just over 6%, and we'll continue to closely monitor the credit markets and look to take advantage of opportunities to further optimize our capital structure.

Commenting on our cash distribution for just a moment.

Taking into account our solid liquidity reserve and the strong operating results to date, along with the positive momentum we have heading into 2014, we are confident in our capacity to increase the distribution to our unit holders at this time.

As Matt mentioned earlier, the Board has declared a 12% increase in our fourth quarter distribution amount.

The $0.70 per limited partner unit quarterly cash distribution is payable on December 16 to unit holders of record on December 4. We also expect to maintain this distribution amount into 2014 resulting in an annualized distribution of $2.80 per limited partner unit.

Going forward over the next several years, we expect the distribution to grow at least at the pace of the growth of our business.

As you've heard us say many times in the past, and Matt reiterated today, we're focused on maintaining a quality distribution that is sustainable and growing in both the short and long term.

To summarize, we've ended our core operating season in very strong financial condition.

Our solid cash position along with existing credit facilities provide ample financial capacity to address our current working capital needs, pay growing partnership distributions, and support growth through our capital expenditure programs and organic growth opportunities.

Now I'll turn things back over to Matt.

Thank you, Brian.

As you can tell from our prepared remarks today, we are evolving from a Company that was primarily operationally driven and relied heavily on macro metrics, particularly attendance and per capita spend, to an insight driven organization where each individual guest and each transaction presents an opportunity to optimize our profitability.

The returns from our investment in tools to drive insights such as our e-commerce, CRM, and revenue management platforms have been impressive and will continue to grow.

Equally impressive returns have come from the strategic choices we made in terms of improving the guest experience, most notably the new rides and attractions.

One constancy underlying our capital investment decisions is the objective of delivering new experiences that will continue to be favorite attractions into future decades.

While we certainly are rewarded with the attendance that comes in the early years of a new attraction and its marketing campaigns, if we are thoughtful, we also have increased the value of the guest experience for the long term.

We have always been a Company that has introduced innovative new attractions with great success.

The first 200-foot, 300-foot, and 400-foot tall rollercoasters were built at Cedar Point.

Luminosity was the first evening entertainment spectacle to scale in the regional amusement park business.

In 2014, we will launch Banshee, the longest inverted coaster in the world, at King's Island.

We will also introduce the first edition to our Amusement Dark portfolio, the Guardian of Wonder Mountain at Canada's Wonderland, which combines a coaster track with an interactive digital gaming system.

The longest interactive screen in the world provides a compelling adventure in search of the dragon's gold and as Halloween approaches, the adventure changes as zombies make their presence known.

These are just two examples of the next generation of FUN's innovation.

I am very proud of the success our team has had this year, and I remain very confident in our business strategy going forward.

Our parks, with the exception of Knott's Berry Farm, our only year-round park, are now focused on 2014.

As always, we will continue to look for ways to add value for our guests, employees, and ultimately our unit holders maximizing the near and long term value of Cedar Fair.

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

Thank you.

(Operator Instructions)

James Hardiman, Longbow Research

Thanks for taking my call and congrats on a great first nine months of the year.

A couple quickies here.

We should be able to back into this, but sometimes with rounding it's a little bit tougher.

Can you just give us the isolated October numbers between attendance and per cap?

James, we typically don't break out the month of October in that level of detail.

I can tell you, though, the month of October was a record month for us in terms of attendance and revenue.

Okay, and do you think -- I mean, obviously -- I know you guys have talked about it last year, the weather was unfavorable during the HalloWeekends period.

I know at least here in the Midwest it was sort of all over the place.

You had some really nice weather then some really wet weather.

More so as we think about looking to next year, was this, you think, an average HalloWeekend period from a weather perspective?

Obviously, that has big swings.

James, this is Matt.

Good morning.

I think with the exception of one general manager who lives north of the border, I think we would say we had overall for the course of the year what you would expect, a very normal year on average.

For the fall season, I would say that over the course of September to the end of October it probably averaged out to be about the same as it usually is.

Got it.

And then sort of going back to the statement you made with regards to the FUNforward initiatives coming in much faster and to a greater degree, I think I ask this question pretty much every call, but if you could pull apart, how much was much faster and how much was to a greater degree.

I guess another way of asking that -- what inning do we think we're in in terms of some of these pricing initiatives?

Where are we with Fast Pass?

Where are we with Fast Pay and some of these other initiatives.

So I'm a Boston fan, so I'm happy to talk baseball, James.

The way I look at it is this is my third operating season, but it really is more the second and even the first to some degree, like for Kelley Semmelroth our CMO, operating season that I've had this management team together executing against the FUNforward initiatives and now adding to the FUNforward initiatives.

So there are certain things that are bigger and faster and I would say the Fast Lane product is probably in the latter innings, but there is no doubt that our continued leverage of the accesso e-commerce platform, what we've set up in terms of CRM, our greater understanding and insight into the season pass holder, particularly.

Those things are still in the very early innings, so I think we've got a lot of running room, and I tell people that the more I go around and talk about these initiatives, the more I feel that we haven't quite figured out how much upside is left.

Got it.

And then just last question.

Obviously you guys have done a great job on the top line this year, but the margin, I would argue, has been even more impressive, certainly relative to I think how the Street was looking at it and I thought how maybe you guys were looking at it coming into the year.

The better margin, is that just a function of better sales and holding costs with the incremental sales flowing through, and I guess as we look forward, any tips on how we should think about that flow-through between sales and EBITDA or operating income?

Thanks.

Yes, James, this is Brian.

As far as the margin goes, I will tell you we came into the year with a number of initiatives specifically earmarked towards improving margins, as we mentioned on the call, the -- in particular in the food and beverage products where we re-engineered our menus and really took a hard look at those costs.

And as I said on the call, we hit on those initiatives.

I will tell you just to give you some look forward towards the end of the year, when you look back on 2012, much of our costs were very front loaded as far as the year was concerned, so some of the off season costs, the painting of rides, some of the what we call the downtime expenses for those parks that aren't year-round properties.

This year those costs were more [disciplinely] spread throughout the year, so we'll see a little bit of margin compression in the fourth quarter as some of those projects that we did in the first quarter of 2012 are going to hit in the fourth quarter, but we should and we will still see margin expansion by the end of the year.

Got it, and just -- I don't know how much you can tell us on 2014.

It would be pretty hard to match the margin expansion, at least that we've seen through the first three quarters of the year next year, any tidbits you want to give us in terms of how we should think about cost discipline next year, potential margin expansion, maybe some offsets in terms of incremental dollar investments?

How should we think about next year.

Yes, so James, I'll take that.

I think a little bit is we just closed the books on most of our operating season for this year, so Brian and I and the rest of the team got our sleeves rolled up to think about the discipline we'll have in place next year.

Now, we've always had great cost discipline, so that's I don't think anything new to this audience particularly.

What I will tell you, though, is I want to make sure that we continue to deliver great value to the consumer so our cost discipline needs to be around those things that don't have good value to the consumer, and in exchange for that, we need to invest some of it back in to make sure we can continue to drive the repeat visitation and the pricing that we want to drive.

So, we'll be good cost managers.

I just don't want to do it on the back of the consumer.

Excellent.

Thanks, guys.

Scott Hamann, KeyBanc Capital Markets.

Yes, hi.

Good morning, everyone.

Just in terms of the incremental investments that you talked about, Matt, is this above the $15 million to $20 million that you had talked about before or is that just expanding the scope of that $15 million to $20 million program over the next couple of years?

Yes, it is in addition to.

The way we have thought about it, Scott, as you remember or may remember, we went back and did a disciplined assessment of our portfolio and discovered that we had a couple non-core waterparks that weren't going to grow.

So, this next year we're redeploying that capital into the cabins, the campgrounds, and the in-park TV network.

I said something in my prepared remarks which I think is important.

These have very identifiable and measurable income streams associated with them and so the commitment for Brian and I, [back] from the operators as well with Richard Zimmerman, is to make sure that these produce the results we anticipate they will.

If that is the case, then we will continue to make similar investments going forward, but we've got cash from the waterparks to put into this.

We think these are very logical, high return investments, and in our past, we stopped -- we've avoided some of this growth because we've been a little too disciplined around the 9% of marketable capital.

So it's a little bit of a run-on sentence there, I apologize, but this is additive but the returns should be additive, as well.

Is the magnitude similar to the $15 million to $20 million or it's going to be or it's going [to be] (inaudible)?

Essentially, this is -- it's a little less than we got from the waterparks.

Okay.

Perfect.

And then just a follow-up on season pass.

I know that you've been out selling season passes.

I know it's early.

Any indication on where some of those may be trending and then also just some of the new programs in terms of installment plans that you may have in the hopper this year versus what you had last year?

Sure, Scott.

This is Brian.

So, as we talked about, we're very pleased with the expansion of the season pass programs the last two years.

It's been an area of significant growth for us.

As we head into the 2014 season -- and you're right, we're just really tapping into that with the fall renewal program that just wrapped up.

We did introduce a nine-month installment program this year.

We did not have that last year.

We had a six-month program last year, so the fall renewal that just wrapped was under a nine-month installment.

We did see lift, so we're up in units again [in] price.

It's very early, so too early to really take that and extrapolate it anywhere, but it's definitely encouraging that the momentum continues.

All right.

Thank you.

Tim Conder, Wells Fargo Securities.

Thank you.

Congrats, Brian, to you and the whole team.

Just a phenomenal execution and great performance, [sir].

A couple things here, wanted to get a little bit more details just to wrap Scott's question.

Given that you do have 97% of your operating days behind you now, what does it look like at this point that season passes will represent as a percentage of attendance for 2013?

It'll be a little north of 40%, and the way to think about that, too, is to remember that there's -- that's direct, and then we have an influence factor on top of that, which we don't specifically disclose, which is the number of tickets they buy for families and friends.

So, I would say the way we generally think about it is somewhere around 50% of our attendance is either directly or indirectly influenced by the season pass holders.

Okay.

Okay.

And then on the new initiatives, you've outlined some of those.

Most intriguing here -- a little bit -- well, all of it's very interesting, but one of the things on the margin here that seems very interesting is what you describe with the ride there in Toronto.

How do you see that potentially being applied to other parks on a go-forward basis?

Yes, our hope -- I'll give you the specific answer and then I'll take one step back.

Our hope is that we're able to create something that is relatively affordable, highly repeatable, and has the ability to change software on both a seasonal basis and from year to year, and you can read [that] in to some of the information that I put in the prepared remarks, we put in our press release.

When we take a step back, and we've been challenged by our Board to do this, this is an industry that has been so hardware focused for decades and really has not -- as the world has become much more saturated with digital content and software, it really hasn't played out very much in our business, and that's -- to some degree that's great because you can't replicate the roller coaster from the couch, but we think there's an opportunity to do much more with this type of product and we're excited about our new relationship with these guys.

Brian and I were just up in Montreal in a warehouse playing Ghostbuster, essentially, and we got a -- you know what?

We won't get it perfect, but over time it's going to be fun, it's going to be interactive, and it's going to be affordable, and that should help us in so many different ways, as you can appreciate.

Right.

Right.

Okay.

Okay.

A couple things, zooming out a little bit on the bigger picture here.

The distribution increase, you alluded that obviously it's a 280 annualized here distribution now.

You do have those bonds that are callable in August of 2014, and Brian, you mentioned you're always looking -- could there be opportunities maybe to do some earlier rather than waiting till then, but obviously, you'll do what's the most accretive here.

But when you get that done, would it be within the realm of reason to say that there could be the potential for a supplement, let's call it, to the dividend or to the distribution, excuse me, once that's done?

And then also, I think you had talked earlier this year about you would also balance looking at return of capital from maybe repurchasing of units.

Just maybe give us an update on that also.

Yes, Tim.

So from the bond perspective, we do continue to monitor the markets and will look to take those 9 1/8 cost bonds out as soon as it makes financial and economic sense.

Right now, the call premium's still a little bit too high, but there's no doubt, and we've said this publicly before that that event provides us with another opportunity to look at and consider a step function in the distribution.

So as we think about the timing of that, August of 2014 is when the call premium gets down at closer to $16 million, $18 million, which is a much more reasonable and manageable number.

We'll continue to look before then.

I don't know that you would see us do a one-time distribution.

I don't think we see a lot of value in that but more so think about step function opportunity much like you saw a year ago.

Okay.

Okay.

Thank you on that.

And lastly, Matt, you said you're nicely on track to achieve your $450 million adjusted EBITDA goal earlier than your 2016 time period.

Any thoughts at this point maybe what a new 2016 goal would be, and then can we infer that that $450 million then should we -- 2015 would likely that should be achieved?

Tim, we are, as I said, just trying to roll up our sleeves and look at exactly what has -- we've benefitted from so far to get to where we are, so our plan currently is to give guidance.

Typically, we give next year's guidance when we do our first quarter earnings call for next year, which is around the May timeframe.

At that point in time is probably when we'll give you more insight onto the longer term goals outside of the $450 million.

Okay.

Okay.

Look forward to seeing you at our conference next Wednesday.

Thanks.

That'd be great.

Look forward to it.

Afua Ahwoi, Goldman Sachs.

Hi, thank you.

Good morning.

So two questions.

First, on the cost of goods sold line, I think you mentioned that you have some initiatives there and versus our estimate that was actually where a lot of the beat came from.

So maybe can you go into specifics of some of the initiatives you have there and is that -- and how early are you in that and how far can that continue to sort of benefit that line item?

And then separately, just broadly on your trends, in the other consumer spaces, we have seen some weakness and there was some talk of weakness whether it's regional consumer or rental cars, [even] hotels, but the amusement park sector appears to be sort of bucking the trend.

I was wondering any feedback from your consumer or is there anything different about the spending patterns versus the others that you can point out?

Thanks.

Let me take that second one, and then I'll kick the other one over to Brian.

The whole key here is to make sure that the consumer feels like they're getting value for their money.

And I will tell you the industry's healthy and appears to be doing that broadly, not only in regional parks but in the destination parks, as well.

So, I think the secret is make sure you pay an awful lot of attention to making sure people have fun on any given day, and so far, that's seems to be working.

And I agree with you, it seems to be bucking some of the other trends, but that is where I get some confidence about our ability to continue to price.

If we're doing this well in this economy, there ought to be an opportunity to continue to push the fair pricing, if you will, for the consumer and for our unit holders.

Afua, this is Brian.

As far as the cost of goods sold question, the initiatives that we had I would say were really across the broad spectrum of our revenue channels, but we're probably most concentrated or most impactful came from the F&B side.

As I mentioned on the call, everything from re-engineering our food menus, which benefitted cost of goods sold, to the relationship, the new relationship, with Coke that Matt mentioned and the first year impact of that, and I think we still got room to run on both of those fronts.

We'll continue to push that, but only to the extent that it doesn't impact, as Matt said, the guest experience or the value perception.

Ray Cheesman, Anfield Capital.

A follow up for just a quick question.

First, I want to say thank you very much for a fabulous summer.

I wanted to follow up on your pricing comment a second ago.

What industries do you look at for -- I don't necessarily want to say leadership, but kind of confirmation that you're going the right direction.

As the analyst just before me said that if we look at quick serve food, they've been pressured.

If we look at the movies, they had a reasonable summer, but it's mostly price not attendance.

How do you think about pricing as you look forward, and I know you said you've just rolled up your sleeves, but are there other parts of the economy you look to for information about how much pricing flexibility you might have?

Yes, and so Ray, a fair question.

And I will elaborate a little bit which is our sleeves have been rolled up on revenue management for about two years.

And so we've done an enormous amount of work, and it is less about benchmarking [their] alternatives because their real alternatives can cost you nothing.

You could go to the lake that day, you could go to the park that day.

The issue for us is the right price to the right consumer at the right time, so the industries we look at are the industries that do a specific -- a particularly good job with the revenue management discipline.

So our woman that heads up revenue management is a very strong executive we hired out of the cruise industry.

The hotel background is where we pull some of our other talent from, etc., and so I think the biggest insight in that regard is, and I'm sorry I'm not going to give you more elaboration because some of it I consider a little bit proprietary.

But look, the best thing we've been able to do over the last couple years is segment our audiences more specifically and be able to put pricing targeted toward those segments, so our group business pricing is much more a target depending on the nature of the group, certainly our season pass and the related benefits, etc.

But we don't really price against something else that's out there.

We try to make sure that they commit to us at a fair price, and then the biggest lever to a great degree also has been getting them to commit earlier because once you get them to commit earlier, the other alternatives become less relevant.

And I'm sorry, I don't think I exactly answered your question but we really don't look at movie ticket prices as an example.

I also wanted to follow up -- you said you're in the early innings on the CRM and the season pass data, but are there any things that the customers communicated through the increasing relationship with you guys, either over the monthly payment periods or from customer surveys you probably take in the parks all the time?

What are they telling you that they did like or didn't like about this year?

No, the number one thing, and you'll hear it in my closing comments, is we have to remember that having fun should be fun.

And so, can you make the lines a little shorter?

Can you make the parades a little happier?

Can you open up for a few more hours?

Those type of things -- and we've done it, and so as ordinary or pedestrian as that sounds, a lot of the initiatives our general managers are taking are just to make sure that they look at that consumer as if they would for their own family or friends.

And we -- our guest satisfaction metrics are telling us we're doing a good job on that, but we're not perfect.

And so let's just make sure there are more smiles, more laughs, and a lot of that is just make sure the lines are less, make sure the parades are better, etc., and we're working on all that.

And then, look, let's face it, a new ride or attraction such as Banshee or Guardian, those are the things that bring back repeat guests, and I feel very good about what we've got in our pipeline for 2014.

As a follow-up, I just wanted to ask obviously your capital investment last year you've indicated was a big help this year.

As you look forward and you're going to possibly spend even more as a percentage of revenues, I'm wondering how do you protect yourself, and this is probably a bad example because it's kind of the polar opposite, but we've all read stories of $100 million rides that never work properly, be it at the big Florida parks or at big parks in California.

How do you kind of protect yourself from going over the edge of knowing what's fun and, let's face it, these $100 million rides were supposed to be fun, but when it takes five years to make it work, it doesn't end up being a very good rate of return.

Yes, fortunately or unfortunately, we can't afford $100 million to start with, but the magnitude of the error could be just as great for us depending on it.

I've got a management team that have committed their careers to this industry, and so I worry less about the tragic -- picking the wrong $30 million ride or $25 million ride.

I actually think what's happening is based upon our review of every ride we put in over the last eight years in every park, our filter now is very, very productive.

So, obviously, building something and having to knock it down or not have guests enjoy it would not be fun, but I don't worry too much about that, to be honest with you.

Again, thanks very much because I had a lot of fun owning your shares this year.

Glad to hear that, Ray.

John Maxwell, Jefferies.

Hi, good morning.

Most of my questions have been asked and answered, but just turning to the attendance side of the equation a little bit, is there any thought that you may have to expand your lodging amenities more so than maybe you were thinking in the past, just bringing people in from a wider distance?

I know you mentioned in the press release you're adding more to the cottages and cabins, but I'm just wondering if -- are you getting to a point where maybe you just need to expand the radius a little bit and to do that you need to offer more overnight accommodations?

Yes, John, this is Brian.

As we thought about the accommodation side of things, we've got a couple parks in Cedar Point and Knott's Berry Farm that are a little bit broader reaching parks than your typical regional amusement park; Knott's because of its location in Southern California and Cedar Point because of just the sheer size and offering of the property.

As we think of the accommodations expansion Matt alluded to that we're going to undertake for next year with expanding some of the cottage and cabins offerings at two of the properties, it's more about as much as anything trying to extend the length of stay for the visitor and get that advance purchase commitment.

When the decision to visit is married up with an overnight stay, the commitment becomes that much firmer and locked in.

So it's more about that.

There's no doubt that it will open it up to, I think -- having those overnight accommodations will open up to a broader audience and we can extend the radius, but I really think the core markets alone can support this and it's more about that extended stay.

Okay.

All right.

Perfect.

Then, I apologize, I think -- you touched on it, Brian, but the 9 1/8 that are callable in August of next year, did I hear you say right now it's too cost prohibitive to take it out?

You're kind of just waiting till it gets closer to the call date?

Yes, John.

Right now the call premium's just a little bit too rich.

I think when we get into the first quarter of 2014 we'll -- it'll start to maybe get a little bit more close to reality where taking it out makes sense, but right now it's a little too rich.

Okay.

I appreciate it.

Thank you.

(Operator Instructions) James Hardiman, Longbow Research.

Hey, thanks for taking a couple follow-ups here.

It seems like there's a lot of meat here, so I wanted to dive a little bit deeper.

The distribution, I think not only was it more than most people expected, but it's a little bit earlier.

Your pattern the last couple of years is sort of announce the distribution for the following year.

This one we're going to see the increase in December.

What's the thought there?

Is that just higher confidence?

Is it sort of you had this extra cash from some of the park sales?

As I look to next year, should this pattern continue?

It seems significant.

How should I think about that?

I think in a normal circumstance, James, this probably is the pattern going forward.

I won't commit to that 100%, but we had a good operating season.

We sold some waterparks.

Our confidence in the growth next year and beyond is increasing as we approach it, so all of the above contributed to that, and the other thing we realize is investors don't really identify with the distribution.

Even if we announced it now and we paid it in March, they don't really identify with it as broadly until it actually gets declared and gets up on the screen, so all of that contributed to the timing of this.

Got it.

And then the in-park TV network seems like an interesting idea.

What's the impact on financials?

Is it all about advertising type income, or is there actually an impact maybe in, I don't know, attendance or per capita?

How should we think about how that affects your business?

Yes, there are three components.

I give Richard Zimmerman enormous credit for doing the due diligence on this.

One is there is an income stream from advertising much like it is for all other [out of home] channels, and we lacked the platform for that, quite honestly.

And this is an acknowledgement of that, but the challenge to the team is make it additive to the guest experience, and so we think there is a per cap opportunity as we're able to do daily -- different offers during different times of day.

We think that our show attendance will go up as we are able to show -- basically advertise the in-park entertainment that's available.

And then we also think there's some social networking aspect that this will play out with over time, so I do not want to turn our queues into commercial factories.

I need to make sure that in the end you're happy to be looking at these televisions while you're waiting to ride Top Thrill Dragster.

Got it.

And then on length of stay, you guys have mentioned that a number of times.

Any stats you could share with us on that?

It seems like that's a big driver behind the per capita increases.

Any way to quantify what's changed there?

I don't want to give you the specifics, but what we've done and to encourage you to stay crosses -- there's a number of initiatives, some of them that you would laugh at as being too simplistic if I told you what they were, but it is something we're going to continue to focus on because there is no doubt there's value for us and the consumer sees greater value when they spend more time with us.

Got it, and then last question.

Just the balance between pricing and attendance.

We're sitting here at about 2% attendance increase, 6% per cap.

I guess two things there.

Is that how you envisioned it coming into this year?

I don't know if you called any audibles as we got into the spring and the weather was pretty crummy, and secondly, forgetting about the magnitude for a minute, is that the sort of mix of revenue growth that we should think about as we move forward.

Thanks.

So, the one thing you have to remember in this industry is the easiest thing to get addicted to is attendance because it's the easiest metric to get on almost a quarterly, hourly basis, but attendance alone without pricing at the appropriate level makes the guest experience worse and you don't actually make more money.

So, yes, I think where we ended up we were very pleased with it to be honest with you, and I've always said that if we could get 1% to 2% attendance growth each year and get the balance of our growth through pricing, I would see that as a very favorable circumstance.

And so this year, James, I think we ended up a little higher than where I would've expected to be with attendance given our pricing, but that speaks to some of the other programs we've run.

Very helpful.

Thanks, guys.

There are no further questions at this time.

Please continue.

So, thank you for the questions, everyone, this morning and for your ongoing interest in Cedar Fair.

We've covered a lot of ground in today's call but I want to make sure that I close with two planks or our management philosophy that are central to our decision making process and our success to date.

The first is protecting and enhancing the value of the guest experience is the key lever that drives repeat visitation and enhanced pricing.

We simply must continue to make the experience in our parks more valuable to our guests.

And second, we are committed to both near term and long term value creation.

The decisions we make are grounded in our desire to ensure we are still proud of those decisions ten years from now.

Stace?

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 or Lisa Broussard at 419-609-5929, and we look forward to speaking with you again in about three months to discuss our fourth quarter and year end results.

Ladies and gentlemen, this concludes the conference call for today.

Thanks for participating.

You may now disconnect your lines.