Six Flags Entertainment Corp (FUN) 2013 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Cedar Fair fourth-quarter and year-end earnings conference call.

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

Later, we will conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions).

I would now like to turn the conference over to our host, Miss Stacy Frole.

Please go ahead.

Thank you Danielle.

Good morning and welcome to our 2013 year-end earnings conference call.

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

This morning, we issued our 2013 fourth-quarter and year-end 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.

Joining us on the call this morning with prepared remarks 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 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, a non-GAAP and important measure of operating results in our business.

Please refer to our earnings release for a definition and reconciliation of adjusted EBITDA.

The required reconciliation of adjusted EBITDA is also available 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 would like to turn the call over to Matt Ouimet.

Thank you, Stacy, and good morning, everyone.

On behalf of our management team, I am pleased to report that 2013 was indeed a remarkable year for Cedar Fair.

Building upon our previous record results, full-year net revenues increased 6% and adjusted EBITDA actually increased 9%, leading us to an industry high adjusted EBITDA margin of 37.5%.

Strength came from all areas of our business as comparable park attendance increased 2%, average in-park guest per capita spending increased 5%, and out-of-park revenues, including our resort accommodations, increased 6%.

Our strong current year performance is attributable to the continued success of our FUNforward long-term growth initiative, which we identified just a little over two years ago in January of 2012.

As a reminder, these initiatives focus on six key growth drivers of our business -- and enhanced guest experience, improved consumer messaging, dynamic pricing and advanced purchase commitments, premium product offerings, strategic alliance fees in commercial and leverage, and capital and expense productivity.

We have been fortunate that many of these initiatives have gained traction faster and to a greater degree than we had initially anticipated.

On the strength of these initiatives, we expect to achieve our FUNforward long-term growth goal of $450 million in adjusted EBITDA at least one year, if not two years, earlier than our original target of 2016.

Brian will provide the financial detail behind these results shortly, but before he does I want to take this opportunity to provide insight into our decision process surrounding a couple of our key business drivers.

At this time of year, it is particularly relevant to consider the enhancements we are making to the guest experience that have and will continue to support both attendance and pricing growth.

As we reflect back on our top two performers for 2013, Cedar Point in Sandusky, Ohio and Knott's Berry Farm in Buena Park, California, we see two very different parks operating in two very different markets.

However, both are successfully executing the same value creating strategy, enhancing the guest experience, which I cannot emphasize enough, and investing to scale.

Cedar Fair is the leader in ride innovation, having built some of the most iconic rides in the regional amusement park industry, including the number one steel coaster in the world, Millennium Force, and the first 400 foot tall coaster, Top Thrill Dragster.

These rides were comped during the year they were built and, more importantly, have stood the test of time.

Why?

Because we chose to invest to scale and focus on the overall guest experience.

Throughout my career, I've noticed there are times when management teams are tempted to believe they are taking less risk by investing less capital.

In many of those cases, I would assert they may in fact be taking on additional risk by not investing to scale, and I am convinced that the consumers appreciate and reward you for the difference.

GateKeeper at Cedar Point is a perfect example of the value that comes from investing to scale.

We made a strategic decision to spend a few extra million dollars to build a new record-breaking coaster that would forever change the landscape of Cedar Point and help cement its long-standing position as the best amusement park in the world.

We made the ride longer, stretched out some of the key elements for smoother transitions, and introduce the signature keyholes that tower over the front gate to create the near-miss experience thrill seekers enjoy and non-riders love to watch.

We also chose to purchase three coaster trains, expanding ride capacity and providing cushion for unexpected maintenance.

As part of this process, we took the opportunity to upgrade our front gate along with our season pass and group processing centers.

We also created a new plaza around GateKeeper where everyone could enjoy views of the beach, shade from the summer sun, and new food and merchandise offerings.

We like to refer to this transformation of a large area as place-making, where we not only introduce new ride or rides, but new experiences for our guests through food, merchandise, games, and live entertainment.

As a result of this investment, this past summer, Cedar Point experienced one of the best ride openings in the park's 144-year history, producing guest satisfaction and financial returns that far exceeded our expectations.

We believe this thoughtful level of investment will contribute to the park's success for many years to come.

Now I'll touch briefly on Knott's Berry Farm, which operates in the highly competitive Southern California market.

At this unique property, it is important to understand its rich history and how it evolved from a simple berry farm into America's first theme park.

I'll admit that I did not fully appreciate the legacy of this park and the strength of its individual regional brand until I joined Cedar Fair and then began interacting directly with the park's employees and their guests.

Our capital investment at Knott's for 2013 was much more modest than that required for GateKeeper and focused on families and the park's history.

First, we transformed an outdated section of the park into the vibrant new Boardwalk area.

Rather than introducing one major new ride, we invested to scale and added three new rides that families could enjoy together.

I would also remind you that, to make room for these rides, we removed a low-capacity, high-cost aging asset.

Second, we built upon the legacy of the park and refurbished the 45-year-old Timber Mountain log ride, one of the oldest log flume rides in the United States, and still the most popular ride at Knott's.

As part of this refurbishment, we increased the number of audio and animatronic characters from 17 to 56, refreshed the stage sets, and updated the ride system.

The guest response to these completed projects was overwhelmingly positive and again exceeded our expectations, resulting in record season pass sales and all-time record profitability and attendance in 2013.

At both of these locations, we probably could've spent a little less capital and still produced acceptable returns.

Instead, we found that with a small amount of incremental capital, we could exceed guest expectations, in turn protecting the important base of repeat visitors we rely upon and generating higher financial returns for our investors not only in 2013 but well beyond.

It is important to note that these are only two of our 11 properties that have contributed to our string of record results.

Our highlights of 2013 include the major expansion of our water park at Worlds of Fun, the introduction of the world's largest Planet Snoopy children's area at Kings Dominion, the addition of a record-breaking wooden roller coaster at California's Great America, and numerous special events at Kings Island.

All of these are great examples of our strategic capital investments that produced outstanding returns in 2013.

As we have discussed many times, the central theme for our strategy remains providing our guests with a great experience.

Embedded within this theme are the critically important decisions we made surrounding the deployment of our capital, which directly and indirectly impact many of our long-term FUNforward initiatives I mentioned earlier.

Approaching these investments with a disciplined strategic mindset produces higher returns over a longer period of time.

Richard Zimmerman, our Chief Operating Officer, along with the rest of our leadership team, have worked diligently to identify guest behavior insight which directly inform the type of product we will add at each of our parks.

Given the broad audience that we serve, we have to be sensitive to the appropriate mix of thrill rides along with broader family experiences.

We also pay attention to the little things like shade, seating and interesting site lines for those who want to watch rather than ride.

This attention to detail not only makes the experience more comfortable but expands the average length of stay, which in turn helps our per-cap and the guest perception of price value.

I want to assure you that we will continue to be very disciplined in terms of the amount of capital we invest in our parks.

We have applied this same rigor and discipline to the 2014 park enhancements that I will discuss later.

As I said earlier, I'm extremely pleased with the business results we have seen in our most recent investments.

With the continuing combination of insight, innovation and discipline, we expect this pattern will continue.

Now I'd like to turn the call over to Brian to discuss our 2013 results in more detail, and then I will provide you with an update on our 2014 outlook.

Brian?

Thanks Matt.

From a financial perspective, we are very pleased with our 2013 performance which produced our fourth straight year of record results.

In 2013, we drove record attendance and in-park guest per capita spending, which resulted in record net revenues and adjusted EBITDA.

We improved our industry-leading adjusted EBITDA margins by 90 basis points, increasing to 37.5%, while still investing back in our parks in terms of incremental operating initiatives.

We reduced our consolidated leverage ratio to 3.6 times debt to adjusted EBITDA, down from 3.9 times in 2012, and we announced a 12% increase in our annualized distribution rate to $2.80 for 2014, which became effective immediately for the December 2013 distribution payment.

These successes demonstrate the strength of our long-term strategy, which has enabled us to substantially increase our return to unitholders.

Since going public in 1987, our investors have enjoyed a compound rate of return of 10%, increasing to 15% with distribution reinvestment.

During this time, we've paid out more than $1.7 billion in distributions to investors.

In 2014, we expect to pay out at least $156 million in distributions while still investing $145 million in marketable capital, accommodation upgrades and infrastructure improvements at our parks which will help fuel the next layer of growth.

The strength of an investment in Cedar Fair is due to our ability to consistently produce growing results year after year.

In 2013, we reported a 6% or $66 million increase in net revenues to $1.135 billion.

This growth was driven by a 5% or $2.20 increase in average in-park guest per capita spending to $44.15, a 1% or 219,000 visit increase in attendance to 23.5 million guests, and a 6% or $7 million increase in out-of-park revenues to $124 million.

On a comparable park basis, excluding two non-core stand-alone water parks which we sold in November 2012 and August 2013, attendance this past year increased 2%, or 453,000 visits.

It's important to note that average 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 complementary activities outside the park gates.

On a total revenue basis, revenue per attendee increased 5% or $2.39 to a record $48.24 per guest compared with $45.85 per guest in 2012.

The growth in our in park per capita spending is a result of a 5% increase in admissions per-cap and a 7% increase in the remaining in-park spend.

While all parks experienced an increase in both admissions and in-park spend, the largest percentage growth was achieved by our Worlds of Fun park.

Under the recommendation of Phil Bender, our Executive Vice President of Operations, and Frank Wilburn, our General Manager of Worlds of Fun, we added more value to the guest experience by combining the amusement park and water park into one gate.

The market responded extremely favorably, and I'm pleased to report that this park produced record revenues and attendance in 2013.

The contributors to our strong per-cap growth included improved food and beverage sales and continued growth in our Fast Lane product, including the addition of a Fast Lane Plus which was introduced at five of our parks this past year.

F&D sales benefited from a number of initiatives to improve the quality of our food offerings as well as our highly productive system-wide relationship with the Coca-Cola company.

Our 2% increase in attendance is the result of another year of record season pass sales and increases in group sales.

As we mentioned on the last call, our parks have benefited from the investments we've made in our eCommerce and CRM platforms.

Both initiatives have been instrumental in increasing the yield and number of admissions sold across all of our ticketing channels, including season pass, group sales and individual retail 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.

I would also like to point out that we did a considerable amount of research and analysis this year to better understand the number of unique visitors to our parks.

This work confirmed that our growth in attendance came primarily from new individuals.

Obviously, this is an important metric to us as we strive to expand the appeal of our parks and grow our base of potential repeat guests.

Finally, on the revenue side, our out-of-park revenue growth of 6% was driven by both higher occupancy rates and higher ADRs across our resort properties.

Now, onto the cost front.

For the year, cost of goods sold decreased to $92 million due to savings initiatives in our food and beverage programs while operating expenses increased to $472 million and SG&A expenses increased to $152 million.

The increase in these costs and expenses was largely attributable to our parks entertaining a record number of guests in 2013.

Also contributing to these increases were higher staffing levels to support additional revenue growth initiatives, investments in our new revenue management and CRM platforms, higher normal operating and maintenance expenses associated with enhancing the guest experience and our park infrastructures, and higher incentive compensation due to the strong current-year performance.

As a percentage of sales, these costs decreased 90 basis points to 63.2% in 2013 from 64.1% in 2012.

While we do not plan on discussing fourth-quarter results in detail today, as the trends are consistent with our full-year performance, I do want to briefly address one anomaly, our fourth-quarter operating expenses.

In 2013, we experienced an increase in fourth-quarter employee related costs due primarily to incentive compensation driven by our record results.

This included the issuance of a one-time special recognition bonus to all full-time and part-time employees, as well as an increase in equity-based compensation costs due to the strong unit price performance in the quarter.

Operating expenses also appear higher in the fourth quarter of 2013 when compared with the lower-than-normal operating expenses in the fourth quarter of 2012.

As you may recall, in 2012, we opportunistically accelerated some off-season maintenance projects into the first half the year due to favorable weather conditions.

This resulted in lower-than-normal expenses in the second half of the year.

Our quarterly results for 2013 represent a more normalized spread of our off-season maintenance projects, similar to what we would expect to see in 2014.

Adjusted EBITDA, which we believe is a meaningful measure of the park level operating results, increased 9% or $34 million to $425 million for 2013.

This increase is a direct result of the record revenue, average in-park guest per capita spending, and attendance produced by our parks this year, coupled with strict control over costs.

As I mentioned, our adjusted EBITDA margin was 37.5%, up 90 basis points from our 2012 margin of 36.6%.

We were particularly pleased with this margin expansion as we were still able to continue to invest in the guest experience, a strategy which we believe has already begun to positively impact our results while also showing margin growth.

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

Our strong 2013 performance and operating cash flows have resulted in further improvement in our balance sheet.

We ended the year with no outstanding borrowings under our revolving credit facility and with approximately $118 million in cash on hand.

Throughout the year, we were able to further reduce our reliance on our revolving credit facility, building a healthy liquidity reserve.

Our record 2013 performance enabled us to further reduce our leverage.

At the end of 2013, our consolidated leverage ratio was 3.6 times, which is a level well within our comfort range in the current credit market environment.

As you are aware, we currently have $405 million in unsecured notes with an interest rate of 9 1/8%.

We have a very flexible capital structure in place and will look to take advantage of opportunities to further optimize this structure as the call premium on these notes significantly decreases over the next six months.

To summarize, we are very pleased with our record level 2013 results and the solid growth in our business.

The prudent management of our cash flows has given us the flexibility to maximize value for our unit holders in both the short-term and long-term for a combination of cash distributions and organic growth opportunities.

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

Thank you Brian.

Now, looking toward the future, our management team continues to identify new opportunities to drive even higher returns from our capital investment.

In 2014, we are focused on introducing new experiences that will continue to be favorite attractions into future decades.

We will launch Banshee, the longest inverted coaster in the world, at Kings Island.

Guests at Kings Island can also expect new dining experiences, new areas to relax, and new live entertainment options as we continue to focus on providing a balanced selection of offerings for the whole family to enjoy.

At Canada's Wonderland, we will introduce an interactive dark ride, Wonder Mountain's Guardian.

This innovative new ride combines a coaster track with an interactive digital gaming system.

This is a great example of investing in innovation to scale as our guests compete with their family and friends on the longest interactive screen in the world.

We are confident guests of all ages will ride multiple times, as each ride provides a new interactive experience.

This is our first step into what we hope will be the creation of a digital content library which can be shared across multiple parks.

In addition, our marketable capital in 2014 will feature complete renovations to Camp Snoopy children's area and iconic Calico Mine ride at Knott's Berry Farm, a major water park expansion in Dorney Park, and refreshment of the Gemini Midway, including several new family-oriented attractions at Cedar Point.

Other capital projects for 2014 included new cabin accommodations at two of our properties and an exciting new in-park TV network which will allow further interaction with our guests.

Finally, our resort guests at Cedar Point will see a new exterior look to our historic Hotel Breakers as the first phase of a two-year project to renovate the hotel is completed.

The interior renovation will be accomplished next winter.

While my comments today were dominated by the strategies we applied to our capital decision, the initiatives that leverage these investments are all performing well and will continue to support our growth for many more years.

We expanded our season pass benefit offerings across all of our parks, focusing on new ways to add value for our most loyal guests.

In 2014, for the first time, we will be offering a season pass dining program.

We will also expand our RFID wristband technology tested at Dorney Park in 2013 to two more locations, Cedar Point and Worlds of Fun.

The RFID wristband will also serve as a season pass for these guests.

I want to also mention our new incentivized sales force which produced impressive results in 2013, and we look for even more of the same in 2014.

Richard has added a new Corporate Director of Entertainment position to his staff to help us leverage our best shows and practices across multiple parks.

He has also added a Corporate Director of Merchandise and Games which will allow us to put more focus on opportunities in this area.

I recently had the opportunity to meet with our consumer insight and revenue management teams in Charlotte and it's clear we are still in the early innings in terms of using big data to optimize our marketing spend and consumer purchase behavior.

As Brian mentioned earlier, insights from this team allow us to better segment our guests and give everyone their own unique experience at an appropriate price.

Finally, we are very pleased with our ongoing relationship with the San Francisco 49ers and the city of Santa Clara.

The new Levi's Stadium, which is immediately adjacent to our California's Great America amusement park, provides both strategic and direct economic benefits that will begin to accrue when the stadium opens later this year.

In addition, over the course of 2014, we will be working through the rezoning process which will support the long-term buildout of this park.

In conclusion, we expect 2014 to be another record year for Cedar Fair.

And as I said earlier, we expect to achieve our FUNforward long-term growth goal of $450 million and adjusted EBITDA at least one, if not two, years earlier than our original target of 2016.

Now, we will open the call for questions and comments.

Stacy?

Great.

I think we are ready for questions.

(Operator Instructions).

James Hardiman, Longbow Research.

Hi, good morning.

Thanks for taking my call and congrats on a great year.

Just a couple follow-up items here just real quickly, Brian.

So this OpEx increase in the fourth quarter, you talked about a special recognition bonus in the equity-based comp.

How should we think about those in 2014?

I'm assuming that bonus goes away.

And sort of what are the conditions that will drive the equity base comps?

Fundamentally, how should we think about OpEx, whether it's fourth quarter of next year, or just on a full-year basis, ex those items.

Sure James.

So as far as the equity comp, that's really going to be a function of in large part what the units do from a market price perspective over the course of 2014.

So given the lift that we saw in 2013, in particular towards the latter part of the year, that influenced those plans and the related expenses directly.

As far as the one-time bonus, it's not a big or material number.

I would say it's low single digits in millions of dollars.

So that was a one-time.

Whether or not we would activate something similar in 2014 would really have to be based on results in 2014.

But you can take that for what it's worth.

Great.

And then I guess just bigger picture, and Brian or Matt can take this one I guess.

Just how do we think about the natural operating leverage of the business?

I think, Matt, coming into the year, we still sort of frame 2013 as a year that you were not necessarily maximizing the margin opportunity based on a number of the investments you were making.

I guess two questions.

One, as we think about 2014, is that another sort of investment year?

You actually did a great job in 2013, and the flow-through was fantastic.

But does that get better in 2014?

And if not, when does that happen and what does that sort of operating leverage look like?

Yes, James, good morning, and a very fair question.

You have heard me talk about in the past that we need to take a very balanced approach with it.

This is a very effective business model with a high degree of leverage, particularly if you're able to push pricing.

But at the same time, we want to make sure that the repeat visitation pattern that we are seeing in a favorable way continues.

So we will continue -- you will continue to see leverage out of the system.

I don't know that it will be much different than what we achieved this year, at least for the next couple of years, because we still think there's growth opportunity from new initiatives, which put a little pressure on that.

But more importantly, I think we just have to be consumers -- at some point be respectful of the margin that the consumer will feel.

And so at this point, I think you could expect to see similar leverage next year, assuming we achieve these remarkable results again, but it's not the primary focus for us.

Operator?

Barton Crockett, FBR Capital Markets.

Thank you for taking the question.

I was curious about your CapEx trajectory after this year.

This year, obviously you've spoken to a step-up in spending on initiatives that seem interesting and promising.

How do you feel about the potential at this point for that pace to maybe level to kind of the normalized trend in after 2014, or do you think there is a possibility you'll keep on spending at this pace for a number of years?

There are generally three components we look at when we look at our capital spend.

And Brian, you can jump in here.

But for the next two or three years, this is probably more of a normal level of spend.

We spend about 9% of revenue on marketable capital, which I think we focused on pretty specifically today.

We are also intrigued by the growth capital opportunities that are available to us.

And this year, as we say, we are expanding some resort accommodations, particularly some cabin properties at a couple of resorts, which we think will give us a higher return than hurdle by a substantial amount.

And then we are still working through a little pool of catch-up capital or deferred capital, particularly on the hotel renovations which happens over the next two years.

So I would say, for the predictable future, this is about the level we will spend.

Okay.

So if this is the level you're spending, how do you feel about your ability to raise your payouts?

You know, obviously it's dependent on what your EBITDA trajectory is, but in general, does your gut tell you that you'll be able to raise the payout and grow free cash flow while spending at the tightened CapEx, or do you think that might take a break for a bit?

No, that won't take a break.

The investment thesis behind this product has a substantial interest in the distribution, and we are committed to a paced growth in that distribution on a sustainable basis.

We've said that distribution will grow at least at the pace that EBITDA grows.

And the good news is I think these investments are going to generate larger EBITDA with full support of larger distribution.

So no, that remains a priority for management and the board.

Okay.

And then one additional question, if I could, on the MLP structure.

Could you update us on where you are in terms of using up the NOLs for the non-MLP parks, and how you feel about the potential to perhaps over time roll those non-MLP parks into the MLP structure, if that might be something that's possible?

This is Brian.

So as far as the NOLs in the non-MLP parks, based on the forecast, those NOLs will effectively be used up over the next two to three years.

So looking out towards 2016, we should start to see our cash tax number going up.

With that in mind, we are spending a lot of time, Dave Huffman, our Chief Accounting Officer, is spending a great deal of his time working with our tax advisors on some potential opportunities to reduce our exposure on that front, one of which could be possibly bringing the non-MLP parks into that structure.

But there's still a lot of work to be done and that before we know for certain what that path might look like.

Okay, great.

Thank you.

Ray Cheesman, Anfield Capital.

Congratulations on a very nice year.

The question is your current properties, obviously you are and you have been investing very thoughtfully into them and the returns have been very high.

Once you get past your $450 million number, which, again, terrific news that you're going to be one to two years early, what do you see going forward to be able to raise the target from the identical properties, or must you go out and find a 12th, 13th, 14th pad to build on to continue the kind the growth you've shown in the markets over the last couple of years?

So, Brian, jump in if I miss something.

I don't think we are done yet, in the foreseeable future, of extracting the value potential from the parks that exist in our portfolio.

And the best example of that quite honestly is the investments we are making into in Carowinds in Charlotte.

If you look at the demographic forecast, Charlotte is projected to be the size of Houston in the next 20 years, and that park is a modest-sized park by our typical standards.

The Santa Clara property which I referenced that we have the synergistic relationship with the 49ers is a property in a very dynamics market that we feel strongly about.

And then Valley Fair Minneapolis is something that is probably undersized relative to that market.

So I would say, in the foreseeable three to five years, those type of organic opportunities are available to us.

And then some of the stuff that we put in place over the last two to three years were properties that probably are at kind of maximum scale will drive more revenue opportunities for places like Cedar Point where, again, we saw probably our largest growth in revenue last year.

So my challenge from the Board, appropriately so, in 2014 is to figure out what happens after $450 million.

It's a fair challenge, but I'm pretty optimistic about it.

How does $515 million sound?

I'll get back to you.

All right.

I wanted to circle back.

You've gotten -- You've said some things and some people have asked you about pricing power.

A year ago, if we were on this call and we played it back, I think we were all still thinking about customers' uncertainty about the future.

How does consumer behavior now look to you?

Does it look like people have gained additional confidence?

Obviously, you're using the word record potential for 2014.

Is that what you are seeing for people maybe purchasing a little earlier or a little higher grade, or the fourth-quarter spend in the park maybe surprised you?

What do you see from a consumer perspective as you look into 2014?

We take pride in trying to be consistent on these calls, so hopefully when you play the tape back, this will be close.

Right now, this particular product, I would say the Cedar Fair product, which obviously I am most familiar with, receives a great value measured by the consumer.

Otherwise they wouldn't be paying the price they are and coming in the record numbers they are.

So I still feel like the economy is stressed.

And you've got the bifurcated economy.

You've got the benefit oriented consumers which are taking advantage of our premium products.

And we will continue to expand that portfolio, much like the season pass, the all-season dining program.

And then you've got the lower-end consumer which is kind of -- it's a little tougher for them to budget.

And fortunately there we've got the tool available for them in terms of the installment purchase program for our season passes.

So I am still bullish about it, although I have said in the past we will continue to push pricing until we bump our head, and we haven't yet bumped our head.

So as long as we deliver a great value proposition -- and that's why I am a little more tempered on the margin than perhaps you would like me to be -- I think we are still in good shape for this particular product.

The consumer seems to have a preference for still doing their ritual amusement park visit.

Last, probably an easier one.

Your Coke alliance seems to have done very nice things for you.

I know you said in the past that, on a regional basis, it's a little harder to get a big name to cover everything.

But are there other alliances which present themselves which you think might be beneficial in a year or two ahead?

There are some people we talk to that I'm not prepared to address, but we do look for leveraging strategic alliances.

And quite actually to give a little more disclosure, those people are starting to line up as we think about that in-park TV network.

Super.

Thanks very much and again congrats on a great year.

Tim Conder, Wells Fargo.

Thank you.

And Matt, congratulations to you, Richard, Brian and the whole team again also.

A real easy one here, just a clarification.

On the $145 million of CapEx in the press release, does that include the other pieces, Matt, the catch-up capital with the hotels and the growth capital also?

Yes.

Okay, great.

Thank you.

Regarding 2014 and looking -- you said you're going to be pushing price until you bump your head, basically.

But I guess, without talking percentages or anything, if you stand back, do you still anticipate admissions per caps growing faster than in-park, or should we think about that more in a balanced perspective?

I think about it balanced.

It's a great question.

What I have been extremely pleased by, and Richard and his team get the credit for it, is even as we continue to grow modestly our percentage, which is season pass attendance, we still grow in-park and we still grow the front gate, which both you would expect to be dilutive a little bit.

Right?

Yes.

So no, I expect to see growth in both of those this year.

Two years ago, not even two seasons ago, we hired a guy to run the food and beverage operation for us from the Levy Restaurant Group.

So he got great traction last year but, again, to use the phrase everybody seems to like, he's still in the early innings.

We are introducing in Carowinds, as an example, a very efficient large-scale indoor dining facility that we think will bump the per-cap at a park that has the lowest food and beverage per cap in our system.

And so there's still those type of opportunities out there.

Okay, okay.

And then if we look at the season passes as a percent of your attendance, just an update number on that.

And then what you are rolling out in Toronto, again since you announced it, the digital interactive sounds very, very opportunistic here.

That should drive additional revenues.

At what point will you start making decisions, after the first year obviously in Toronto, but to roll that out potentially to other parks?

Yes, I'll take that and then I'll turn the season pass over to Brian.

Look.

I have said before that the amusement park industry hasn't really been hurt by the expansion of digital entertainment options, but we also haven't taken advantage of it.

And so I've got Richard sitting across the table from me.

We got an update from our new Director of Entertainment yesterday on the Guardian project.

It looks outstanding.

And more importantly, it looks fun.

So, we will not wait a year to pull the trigger for another one.

Obviously, our seasons define when we will want to deliver it, but I would say that, within 30 days of installation, if it's successful, we will be talking to our friends in Montreal about how to do more things with it.

And I will remind people on it, the interactive game component at Halloween takes -- you hit a switch and it automatically converts from the dragon to the zombies.

And we think that type of (inaudible) in season and then promise to each season is going to be really valuable to us.

Okay, okay.

As far as season pass performance, as we said, that channel continues to be an area of meaningful growth for us.

In 2013, season pass visitation represented a little north of 40% of our total attendance, which is up about 200 to 300 basis points from where it was in 2012.

Okay.

And Tim, if I could build off that one thing, Brian said something in his comments that I think is important, which is -- in the script -- which is we also have studied unique visitors.

One of the concerns that I've had coming in was that maybe the growth in season pass program was shadowing the fact that we were losing traffic in terms of unique individuals, which would not be a good thing.

And so all the work we have done this year, Kelly Semmelroth, our CMO, the Insight Group, CRM, etc., has confirmed that the attendance growth we saw this year was primarily new individuals, which obviously is important for a healthy business.

So, I just want to point that out.

One last question, if I may.

Along that line then, of those new visitors, are you seeing -- and you referenced earlier the bifurcation of your customer that we are seeing across the whole economy, but are you seeing, of those unique new visitors, are they -- how are they skewed versus let's call it the folks that would be going more towards the installment plan versus those who may consider season pass.

I'll give you some sound bites.

And it's not complete and please appreciate that some of that we'd just like to just keep to ourselves.

Understood.

We are seeing more young families, which is great as you think about building a repeat visitation base.

We are seeing the average visitation at or above what we see from the people who have been in the system a while.

That's important because you don't -- they've got to get the value out of the season pass, and so you want them to visit the 4.5-plus times.

And we are seeing that their spending is generally what we see from everybody else.

So, I am pleased by that because I think you've got to be careful in this business not to chase attendance, and so I think right now Kelly's programs as it relates to our marketing programs are making sure that we are getting an audience that is purely incremental and valuable to us.

Very helpful.

Thank you.

John Hwang, Crescent Capital.

Hey guys.

Thanks for taking my questions.

Maybe I missed this, and I apologize if I did, but could you give me a little color on Q4 in terms of attendance and in part guest per capita spending?

I didn't realize it's obviously not one of your peak quarters but --.

So, the trends we saw generally -- so keep in mind, in Q4, you would have the Halloween programs and then we continue -- all the parks close except for Knott's Berry Farm.

So what I would tell you about Q4 is the trends we saw for the year generally extended themselves certainly through Halloween and then Knott's had, quite honestly, remarkable attendance numbers for November and December.

And you can follow up with Stacy and Lisa later if you want more detail.

Oh, in terms of exact percentage year-over-year.

Yes.

We generally continue the trend that we saw in the rest of the year.

Right, because your sales for the quarter were up.

Your EBITDA was down slightly.

(multiple speakers)

(multiple speakers) up about 7.5% and EBITDA was down about 20%, so I'm just trying to bridge.

How about in-park guest per capita spending?

They are up as well, but go ahead Brian.

There are some parts in there we should explain.

Yes, as we said in our prepared comments, really the fourth quarter is a little anomalistic on the cost side.

There were a number of initiatives that were cost oriented.

And we talked specifically about the compensation related items, performance-based compensation that came through in the fourth quarter based on the record year, much higher than what it would've been in 2012, as well as a one-time bonus to our full-time and part-time park level employees for the strong year.

And there was also some off-season maintenance costs in 2013 that, from a timing perspective, don't marry up with what we would've seen in 2012 as most of those costs were accelerated into the early shoulder season based on a mild winter that year.

So in 2013, those costs, those maintenance type costs, painting of coasters, reworking of maybe a wood coaster track, etc., those things were done in a much more normalized, what I would call normalized basis in 2013, elevating those costs.

So, I think what you are seeing in the fourth quarter of 2013 is a little bit of a normalization as it relates to some maintenance cost, but also some incremental costs that wouldn't necessarily repeat in the fourth quarter of 2014.

Okay.

And then I think you guys touched on this a little bit, but in terms of any color you can give on 2014 thus far in terms of advanced ticket sales.

I think you touched on sort of 2013 versus 2012.

If you can give any guidance as to sort of what you guys are seeing right now in terms of the season pass advance sales.

Sure.

So from a season pass perspective, as well I'll throw group bookings in there, we don't have a lot of long lead indicators, unfortunately, in this space.

So what visibility we have to date is only a small portion of the full year, so take that with a grain of salt with these comments.

But the trends in both season pass and group bookings are up at this point in time versus a year ago.

As a point of reference, I can tell you that deferred revenue at the end of 2013 was up 13% from where it was in 2012 reflective of that.

So we've continued to see that positive in the first two months here of 2014.

But really the lion's share of activity on season pass sales, group bookings, is really going to happen over the next two to three months.

So that will be, that will really be the point of proof in how the 2014 season is going to shake out.

Okay.

That's helpful.

Just lastly, a check the box item, but in terms of your $255 million revolver, you guys have nothing drawn on it, but have a number of LCs against that, right, issued against it?

Yes, a small number, $10 million to $15 million of LCs against it, nothing new.

Okay, so the bulk of it is still available.

Correct.

Okay.

That's it.

Thank you.

[Tom Omak].

It looks like we may have lost Tom.

Sorry, it's Andrew [Goss].

The question I have is, given the strong performance in 2013, I was just wondering.

It was -- if I remember correctly what your long-term revenue targets were, it's nicely above that.

I was just wondering how you think about the long-term revenue potential of the business, given how you did in 2013 and how it changes your thinking, if at all.

It's a fair question.

So over the last three years, we have generally accelerated at a pace that was uncommon, I would say, in our history, although we have a long history of being successful, which is nice to build off of.

Okay, this is my fourth operating season, and there is a lot that we as a new management team haven't been able to get to.

So I am not -- I am -- I was going to say I'm not concerned.

I'm always concerned.

But what I think will happen here is we will continue to show growth above our historical pace for at least the next few years.

There are so many things that we haven't had the opportunity to either get to or fully take advantage of.

So, if you'd asked me three years ago, I would've been a little more pensive, but the more I see, the more optimistic I am.

Okay.

So I was just wondering.

When you look out beyond the three years, do you think the industry should only grow in the low single digits?

I'm just curious because Disney, which you ran, grew gross nicer than that, a lot nicer.

I'm just wondering how you think about that.

I'd say they grow a lot nicer by spending billions of dollars that this industry is never going to (inaudible).

Okay.

That's why.

So, I'll do return on capital with you someday versus that.

Okay.

Fair enough.

Thanks.

James Hardiman, Longbow Research.

Thanks for taking the follow-up here.

Sorry, I think I hung up on myself earlier in the call.

So I just wanted to circle back on the CapEx.

Obviously, that's a much higher percentage of sales than historically you've guided.

Where does that number go to in 2015 and sort of beyond?

Do we get back closer to that 9% number?

And then as I think about sort of the return on that spend, just because the CapEx is higher, talk a little bit about what type of an impact you think that might have on attendance or sales.

Obviously, you had a fantastic new addition in 2013 at your most important park, and that was a really big deal.

I guess, to a degree, this is sort of like asking which of your children do you like the most.

But if we could compare sort of the 2014 capital investments to 2013, anything you would call out there?

Yes, so I'll break it into pieces and Brian can touch on it.

The call-out in summary of $145 million is exactly what we've talked about for the last year plus.

And so I don't see marketable capital going over the 9% level.

We took the money of the two water parks we sold and we are reinvesting that where we expect to get above -- about $15 million of that we're reinvesting.

We expect to get a return well in excess of our hurdle rate of 15%.

And then the balance of that spend in the next couple of years is dominated by the redo of the Breakers Hotel, which we also had an IRR associated with it, although lower simply because a lot of that was a required refreshment after using the property for so many years.

So I think you're seeing a relatively stable level of investment for the next two to three years in that $145 million range, assuming, James, and importantly, that the growth capital gets us the returns we want.

If our experiment with some of this growth capital, pretty low-risk stuff like cabins, does not give us the return, and Brian is pretty good about keeping us honest on that, then we will not continue to invest the growth capital.

So, as long as we see the returns, we're going to spend capital to grow this business within the boundaries that I just described.

Brian?

Yes, James, just to add to what Matt said, we continue to manage the capital program in those three buckets really to hold ourselves accountable to a discipline as to what projects we are willing to take on.

As Matt indicated, the marketable capital is going to -- we are holding ourselves, right, wrong, or indifferent, to that 9%.

And we know there's a number of projects in the past that we haven't gotten to that have attractive returns on them, such as the cabins, the TV network, that the sale of those two California water parks is giving us the opportunity to take some of that roughly $30 million in proceeds and allocate that back towards these what we'll call complementary growth projects.

But I will tell you, within that bucket, we are holding ourselves to a discipline that any project that fits into that bucket has to have an incremental revenue/EBITDA stream associated with it.

We will not expand the marketable capital and invest in incremental roller coasters or other attractions that have that episodic attendance lift.

And that's just an internal discipline that we are holding ourselves to.

As far as the infrastructure work that we're doing like the Hotel Breakers, while maybe in some of those projects have low near-term ROIs, a number of them set the stage for longer-term marketable capital programs that we want to activate.

A good example is the work we did on the Mountain at Canada's Wonderland that has now made the dark ride, the interactive dark ride for 2014, a reality.

So there will be a number of those things, but we are going to continue to manage them in those three silos, or three buckets, if you will, and maintain those disciplines and not move off of those disciplines.

Extremely helpful guys.

And then just a nitty-gritty modeling question here, and I apologize if you answered this.

I missed a couple minutes there.

So Easter shift, it seems like Easter is going to move around a little bit here.

How much of an impact, if any, do you think that has on your first-quarter and second-quarter business as we think about modeling that?

And I guess sort of beyond that, I don't know, any sort of qualitative or ideally quantitative discussion on how much weather impacted your business?

I know that's your least favorite question, blaming anything on weather, but you did have some pretty bad weather in the second quarter last year.

Any thoughts there?

So, I'll take the first part as far as the timing of the calendar.

One thing I want to point out in relation to that, let's talk operating days for a second, not much of a shift in operating days on a same-park basis.

But keep in mind the sale of the Palm Springs water park will take roughly 120 operating days out of our system in 2014 that we had in 2013.

As far as the calendar shift is concerned with Easter being later, no real impact between first and second quarter in the number of operating days because the park with the most meaningful operating days for us is Knott's Berry Farm, which is year round.

I will say, on an attendance basis, we do anticipate a shift from Q1 to Q2.

That could be as much as 125,000 to 150,000 visits, so that's a rough estimate as to what we think the visitation shift could be between Q1 and Q2.

I'll take the opportunity of the weather to say a couple of things.

We do think it balanced itself out over the course of last year, as I said before.

My general manager in Canada would disagree with me.

But what happened was a lot of that bad weather was early, which allowed us to recapture.

And the other thing that the industry has gotten better at is this advanced purchase commitment helps mitigate the impact of weather.

And so I think the season pass visitors still visited almost exactly the same amount they did last year.

People who deferred visits in the early months because the weather wasn't quite what they wanted came later.

So by the end of the year, we had balanced it out.

Extremely helpful.

Thanks guys.

Good luck this year.

Steve Altebrando, Sidoti and Company.

Good morning.

Were there any parks in 2013 that were meaningful out performers?

And specifically I'm thinking of Cedar Point and GateKeeper, whether that creates a tough comp for you guys in 2014.

We are pretty optimistic about the sophomore year here, but clearly Cedar Point, Knott's Berry Farm and Worlds of Fun led the pact last year.

Okay.

And then in terms of getting back to the season pass, you mentioned it's a relatively small piece so far.

Could you put a rough percentage on that in terms of how much of your season pass is typically sold by now, say late February?

I would say less than 15% of season pass would be sold now.

As I said, the lion's share will happen in the March through June timeframe.

By the end of June, we should be north of 80%, 85% of season pass sales.

So as you can tell, the next few months are really critical.

Okay, that's helpful.

Thank you.

There are no questions in the queue at this time.

Please continue with any closing statements.

First and importantly, I want to thank you for your time and continued interest in Cedar Fair.

We remind our employees on a regular basis that we are in the business of fun.

In addition to years of experience in the industry, our teams have a passion for entertaining guests, and as long as we keep the guest experience at the forefront of everything we do, I am confident Cedar Fair will continue to build on its decades of success for many years to come.

And now, as I'm sure everyone on this call will agree, we are looking forward to warmer weather and the summer season.

So, Stacy?

Great.

Thank you, everyone, for joining us on the call today.

If you have any follow-up questions, please feel free to contact me 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 first-quarter results for 2014.

Ladies and gentlemen, that does conclude our conference for today.

Thank you for your participation and you may now disconnect.