Six Flags Entertainment Corp (FUN) 2014 Q2 法說會逐字稿

Good day, and welcome to the Cedar Fair second-quarter conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Stacy Frole. Ms. Frole?

Thank you, Greg. Good morning and welcome to our second-quarter earnings conference call. I'm Stacy Frole, Cedar Fair's Vice President of Investor Relations. This morning we issued our 2014 second-quarter earnings release. A copy of that release can be obtained on our Investor Relations website, ir.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 message 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 the Matt Ouimet.

Thank you, Stacy, and good morning, everyone. Thank you for joining us on today's call.

Before I start, I want to caution you that it's always difficult to extrapolate partial-season performance into full-year results, and this year is no exception. As of today, we still have more than one-third of our annual attendance in front of us, including the busy month of August, and our extremely popular system-wide Halloween events.

That being said, Brian and I will do our best this morning to provide context for our results to date, and provide some perspective on our expectations for the balance of the year. We will also highlight areas where we see opportunities as we head into 2015 and beyond.

Let me start by saying that we were generally pleased with our year-to-date results. As you may have read in our earnings release this morning, through this past Sunday, August 3rd, comparable-park net revenues were up a little more than 1%, when compared with the same period a year ago.

Although we have not met all of out park-level objectives to this point, we are pleased with the 4% increase in average in-park guest per capita spending. We experienced strength in guest spending across all of our parks, and across all categories of our business. This increase was somewhat offset by a 2% decline in attendance and a $2 million decrease in out-of-park revenues over the same period.

I want to emphasize that we continue to see the resilience of our business model and believe the underlying demand for our products remains strong. Our revenue growth to date is the direct result of many of our Fun Forward initiatives, which have successfully produced increases in both our admission per cap, and our guest spending inside of our parks, while remaining close to the record attendance levels we achieved last year. Admittedly, the decline in attendance we have experienced through July was below our expectations, but as we will discuss in a moment, we do not believe this is at all indicative of a broader trend.

To ground this discussion, I want to start with a few high-level comments. First, we did experience two unique operating events early in the season that had an adverse impact on our attendance and net revenues in the second quarter. The closing of our flagship park, Cedar Point, for a full weekend in early June, due to a water main break, was unfortunate. We also experienced localized flooding at our Valleyfair park near Minneapolis, which limited access to our main parking lot, and certain park attractions for roughly a week at the end of June.

We will not disclose the specific impact of these events, but they did negatively affect second-quarter results. With that said, we believe these situations will be immaterial to our full-year results and do expect to recover a portion of the lost business by year-end through our business interruption insurance.

Second, although we know the severe winter caused many school calendars to extend beyond their historical summer dismissal dates, we are not able to credibly quantify an attendance impact at this point. Most likely, we did experience some modest impact, and this was at least partially offset by other factors.

Third, while we can debate the impact of weather on any given day, we continue in our long held belief that inconsistencies in weather will average out over the course of a full operating season. We are, again, anticipating average weather for the full year. Encouragingly, on those days when we experience typical, beautiful summer weather, we see the level of attendance we would expect, which gives us confidence 2014 will again be a record year for Cedar Fair.

Okay. With that backdrop of external factors, I now want to address the role our strategic and tactical decisions have played in our results to date. These can be bundled into three categories: our marketable capital, our marketing plan, and our pricing strategies.

First, our marketable capital additions have been extremely well received. Our strategy of investing in the largest coasters in the industry continues to prove value enhancing for our guests and our investors. The addition of Banshee at Kings Island has the park on pace for another record year in 2014. Meanwhile, our entry into the digitally interactive arena with Wonder Mountain's Guardian at our Canada's Wonderland park, have proven successful, and we will continue to build on lessons learned and technology and advancements in the installation of our next 4-D dark ride.

At Knott's Berry Farm, the refreshment of Calico Mine Ride, and the expansion of Camp Snoopy have helped to solidify the brand revitalization of this important property. More broadly, the continued investment in family attractions and entertainment has been well received by our multi-generation visitors, who enjoy the complement to our thrill rides.

As we've discussed in the past, our multiyear strategic plan for capital focuses on protecting the base, and supporting new reasons to visit our parks. One of the largest examples of this is the investment we are making in accommodations, including the new cabins at Cedar Point and Kings Dominion this year, and the two-year renovation project of our historical Hotel Breakers at Cedar Point, scheduled to be completed in May of 2015. The new cabins have proven to be popular with our guests, and at this point in time, we will most likely look to introduce these at some of our other parks in the future.

Second, I'm extremely pleased with the ongoing evolution of our marketing programs and capabilities. We are confident that our messaging is compelling to our target audiences, and the allocation of our marketing dollars across the media channels is well-designed.

Further, the addition of our CRM platform has proven well-timed and extremely valuable. Our ability to communicate effectively with our loyal visitors, as well as to pursue lapsed guests and new prospects, is foundational to the way we run our business. This is a long-term investment for us and we simply get smarter every day.

The information insights from our CRM team are continuing to develop, and proving to be invaluable to both our executive team, and general managers as we refine our strategy for 2014 and begin preparing for the upcoming 2015 season.

Also under the category of improved consumer messaging and relationship management, is our group sales business, which continues to trend ahead of where we were at this time last year, in terms of both attendance and revenue. As I mentioned on our last call, our highly trained sales employees have done a great job in managing relationships with our existing client base, while also targeting new groups to visit our parks. Our long-term investment in [Cedar] began at the beginning of 2012, and we are certainly experiencing the reward of this investment today.

While we are pleased with the incremental results to date, we believe there are additional opportunities to build out this book of business in the future, including the expansion of our youth events, our Run and Ride programs, and improved catering facilities to support the needs of our corporate business clients.

Finally, I'd like to comment on the enhanced guest experience at our parks. I've already touched on our capital program that balances thrill and family-friendly offerings at our parks to sustain a valuable family/teen audience mix. I would also like to mention the success we continue to experience on the overall quality and value enhancements we have made to our food offerings, an initiative which has been the primary driver of our increased in-park guest spending to date.

These enhancements, combined with the work of our revenue management team, have allowed us to package our food offerings in a way that drives greater capture and supports pricing premiums. This year, we introduced the Harmony Hall Marketplace at Carowinds, which offers a wide variety of food offerings combined with live entertainment; a new catering facility at California's Great America, which will also support special events that will be held at the new 49ers' stadium throughout the year; new value meals, which now include a beverage; and all-day dining programs across all of our parks. This year we also tested an all-season dining program, which proved to be very popular with our loyal season pass holders. Based on this success, we plan to roll this product out across all of our parks in 2015.

We continue to believe our parks provide a strong value proposition, and we have priced our product accordingly. As we have discussed many times, attendance is an important metric, but it is not "the" metric. Our senior management regularly reviews all of our promotional programs, and we rely substantially on our revenue management team to provide to disciplined analysis that protects our price integrity and insures net revenue incrementality.

With rare exception, we believe we have struck the right balance between pricing and volume. When exceptions are noted, our current structure allows us to quickly adjust our promotional offers to drive near-term performance and position us positively for the 2015 season.

Based on our results and our positive outlook for the remainder of the year, we now expect to achieve record full-year net revenues between $1.16 billion and $1.18 billion, and adjusted EBITDA between $435 million and $445 million.

I'm also pleased to announce that our Board of Directors has declared a $0.70 cash distribution, payable on September 15th, and consistent with our annualized rate of $2.80 per limited partner unit.

We remain committed to providing our investors with a high-quality and sustainable distribution that is poised to grow at least at the pace of our adjusted EBITDA growth over the next several years. Brian will provide more color on this area shortly. But I would like to say that our recent refinancing, where we were able to lower interest rates over a longer tenor, provides us additional confidence in our free cash flow generation.

Finally, before I turn the call over to Brian, I want to say I am proud of the decisions our team has made to bolster our talent and competencies in a number of areas. We are much better positioned today to optimize each and every interaction with our guests, and not only does this drive profitability, but in most cases, it delivers a better guest experience as well.

Now, I'd like to turn the call over to Brian to discuss our financial results in more detail. Brian?

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

As Matt mentioned at the start of the call, it's always difficult to extrapolate partial-season performance into full-year results. Essentially, all of the revenues from our seasonal amusement parks, water parks, and other resort facilities, are realized during the 130-day to 140-day operating period beginning in the second quarter, [with] the vast majority of the revenues concentrated during the third quarter, during the peak vacation months of July and August. Only Knott's Berry Farm is open year-round, and the third quarter is also their highest level of attendance. As of this past Sunday, August 3rd, approximately one-third of our operating results are still to come.

First, I'd like to briefly discuss our results for the second quarter before moving on to more current revenue and attendance trends. As detailed in our earnings release this morning, net revenues for the second quarter, ended June 29, 2014, were $403 million, which is essentially equal to the record net revenues reported for the second quarter of 2013.

In the quarter, average in-park guest per capita spending was up 4%, or a $1.58, to $43.94. This increase in guest spending during the period was offset by a 2%, or a 182,000-visit decrease in attendance to 7.7 million guests, and a $3 million decrease in out-of-park revenues. Excluding the sale of a noncore, standalone water park in August of 2013, attendance on a comparable-park basis was down 1%, or 104,000 visits.

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 complementary activities outside of the park gates, and those revenues are excluded from our guest per capita figures.

We were pleased with the 4% increase we produced in average in-park guest per capita spending as it was in line with our expectations, and was driven by growth across all of our properties, and all categories of our business. This increased spend the second quarter, when compared with the same period a year ago, came from a 4% increase in admissions per capita, and a 4% increase in pure in-park spending.

As Matt mentioned earlier, our food and beverage category led the increase in pure in-park spending. Over the past few years, we have focused on improving the overall guest perception of our food offerings, while maintaining, and in some circumstances, decreasing our costs without sacrificing quality. This year, we've been able to build on the improved perceptions by offering packages that provide greater value for our guests, resulting in greater capture rates. This includes the introduction of value meals, which now include a beverage, and all-day dining programs across all of our parks.

Attendance and out-of-park revenues for the second quarter were below our expectations. However, the majority of this decrease was attributable to the several unique situations already discussed, the water main break at Cedar Point in early June, flooding at Valleyfair in late June, and the impact of extended school calendars.

Even when excluding the water main break at Cedar Point, occupancy rates at our hotels during the quarter were soft. Many of you on this call had the opportunity to stay at our historic Hotel Breakers last year during our Analysts Day event, and I believe you'll agree with us when we say that the weakness we are experiencing at this resort today supports our decision to invest in a full renovation of this hotel. The two-year project will be completed in May of 2015 and we look forward to entertaining all of you, your families, and friends next season.

Moving on to the cost front, operating costs and expenses for the second quarter of the year totaled $225 million, representing an increase of $7 million, or 3% from the second quarter of 2013. The increase in operating expenses was attributable to three main drivers.

First, our continued efforts in enhancing the overall guest experience, including the introduction of more mid-way entertainment, and a new policy of offering complimentary admission to the Dinosaurs Live! attractions to our most loyal season pass customer base. Second, were planned increases in labor and maintenance costs, as we continue to invest in our employees and our park infrastructures.

Finally, there were some unanticipated preopening costs due to the harsher than normal winter conditions at several of our parks that lasted well into April. To ensure our parks opened on time and provided the quality our guests expect from us, we incurred additional costs for snow removal, the trimming and removal of trees that were damaged by ice, and higher utility costs. We expect to recoup a majority of these unanticipated cost variances during the latter part of the year.

I should also mention that some of the costs we've incurred during the first half of the year do not directly correlate to when the associated revenues are expected to be earned. One quick example I can give is our new FunTV in-park television network. FunTV is designed to engage, entertain, and enhance the overall guest experience with original programming content, and it was in place across all of our parks at the time they began 2014 operations.

However, we did not enter into our agreement with Time Warner Cable Media, which will serve as the exclusive advertising representative for FunTV, until July. We expect this new arrangement to provide value during the second half of 2014, with momentum building heading into 2015 and beyond, as FunTV provides a great avenue for advertisers to reach an in-demand audience delivering more than one billion impressions to teens, adults, and families with young children in an ideal environment.

I want to assure you that we as a team remain highly focused on costs, and we continue to believe in our long-term strategy to maintain, or modestly grow our adjusted EBITDA margins, while continuing to invest in the guest experience, an initiative which we believe is crucial to the long-term success of business. Again, to emphasize what Matt said earlier, it's always difficult to extrapolate partial-season performance into full-year results. This is especially true when talking about seasonal operating costs.

Adjusted EBITDA, which we believe is a meaningful measure of park-level operating results, was $141 million for the second quarter of 2014, down $3 million when compared with the same period a year ago. The decrease in our adjusted EBITDA for the quarter was the direct result of a lower attendance base, along with the higher year-over-year operating experiences that we have discussed.

Turning our attention to results through this past Sunday, August 3rd, based on preliminary results, comparable-park net revenues through this Sunday were up 1%, or $8 million, to $715 million. Consistent with results through the second quarter, average in-park guest per capita spending was up 4%, or $1.55, to $45.12 through the first seven months of the year. This increase was somewhat offset by a 2% or 273,000-visit decrease in comparable park attendance to 14.6 million visits and a $2 million decrease in out-of-park revenues to $76 million.

The continued strength of our average in-park guest per capita spending through this past weekend gives us confidence that our 2014 plans and long-tern strategies are working, and the fundamentals of our business model remain strong. Given where we are in our operating season, it will be challenging to fully recover the current attendance shortfall, however, not impossible. Especially when we take into consideration, an extra weekend of operations our parks will have at the end of October due to the timing of Halloween this year.

We do believe weather will average itself out this year, and we have said over the past several years, the success of our Fun Forward long-term strategy was not dependent on meaningful attendance growth. We will continue to monitor trends, and make adjustments where we deem appropriate. But, to quote Matt: If it rains on any given Saturday, you don't change your strategy on Monday.

Now, let me shift focus to our balance sheet for a moment. We ended the second quarter in strong financial position in terms of liquidity and financial flexibility. Our receivables and inventories are at normal seasonal levels, and we have credit facilities in place to fund current liabilities, capital expenditures, and operating expenses as needed.

At the end of the second quarter, we have $40 million in cash on hand, and $619 million of variable-rate term debt, before giving consideration to fixed-rate interest swaps. We also had $950 million of fixed-rate bonds and $39 million in outstanding borrowings on our revolving credit facilities. Of our total term debt, only $3 million is scheduled to mature within the next 12 months. Based on our current adjusted EBITDA guidance, we expect our total leverage ratio at the end of 2014, excluding our revolving credit facilities, to be approximately 3.6 times debt to adjusted EBITDA, which is well within our comfort level.

As some of you may have seen, in the beginning of June we announced the completion of the refinancing of $405 million of unsecured notes. As we have discussed on past calls, these notes were at an interest rate of 9 1/8%, representing our highest cost of debt. We replaced these notes with $450 million of 10-year senior unsecured notes at an attractive rate of 5 3/8%.

This completes the final step in a multiphase process of optimizing our capital structure, and we are pleased with both the favorable rate, and the tenor which locks in historically low rates for a longer period of time. Our average cost of debt going forward is expected to be approximately 5.3%, down from 6.3% a year ago.

The strong free cash flow generation of our business, coupled with the increased cash flow savings from our recent refinancing, support our high level of confidence in our ability to pay a stable and growing distribution, increasing at least in line with the growth of the business to drive value for our unit holders in both the near and the long-tern.

With that, I'll pass the call back to Matt for concluding remarks. Matt?

Thank you, Brian.

I continue to have great confidence in the resilience of our business model, the value of our strategic plan, and our ability to successfully implement it. I also have a great degree of confidence in the quality of our total entertainment package, and the value proposition it provides.

Before we close the call, I want to emphasize our commitment to the quality of the guest experience for all our guests. The number one reason our guests will return next year is because they had a good time this year. We keep that fundamental truth in mind as we make all of our decisions.

As I start to wrap up the call, I want to specifically recognize the great work that is done by our park general managers and their teams. I am fortunate to be able to spend time with all of them personally. They are not just great executives, they are great people who have committed their careers to this industry. They have the experience and maturity that supports an effective dialogue that, in turn, results in better decisions. We've worked hard to create a culture where we blend the best thinking of corporate-based functional experts with our park-based operating teams, resulting in the consistent record performance we have experienced over the past four years.

While today's call was primarily focused on the current operating season, I will assure you that we are already actively engaged in the execution of all of our strategic aspects of the upcoming 2015 season. This will include a marketing re-launch of our Carowinds park in Charlotte, anchored by a new record-breaking attraction, and the completion of the Hotel Breakers renovation at Cedar Point. Several new rides and attractions will be announced in the upcoming weeks.

I would summarize by saying, the decisions we are making are responsive to what we are given by the marketplace, and respectful of long-term value creation. We are mindful and motivated to perform well each year, and we are equally mindful that the vast majority of our investors are counting on us to be part of their portfolios for years to come. I can assure you we will do our best to deliver against both near-term and long-term objectives.

Now we will open the call for questions.

(Operating Instructions) Our first question today comes from James Hardiman with Longbow Research.

Hi, good morning. Thanks for taking my call. I guess first, just a quick clarification. Brian, I know you guys don't like giving one-month worth of results, but just to help us connect the dots between the year-to-date -- or through 2Q and the year-to-date though August, did attendance -- sounds like per cap was roughly in-line. Did attendance improve at all in the month of July?

So James, I can tell you, through the end of the second quarter, attendance on a same-park basis was down roughly about 160,000 visits, or 2%. For the month of July, I would say that the trending we saw in attendance was pretty comparable, again in that 1% to 2% shortfall. We were down roughly 2% for the month of July in attendance with per capita trending comparable to what we've seen year to date, which has been roughly up 4%.

Where we did see a little bit of pick-up in July was our out-of-park revenues. As you may have noticed, the shortfall that we had at the end of Q2, close to $3 million, shrunk to about a $2 million shortfall. So we started to see some pick-up in the out-of-park revenue channel.

Okay, great. Then, I guess along those same lines -- obviously there are a lot of exogenous factors that hit you guys in the first half. I'm assuming that those weren't really an issue during, at least the month of July. I guess, as we think about the macro environment, do you think that's playing a role in the soft attendance numbers that you've seen? And I guess conversely, the issue with pricing -- it's always somewhat uncertain. You don't know how much room you have until you hiit up again some ceiling, and you see a [gift back] on attendance. Do you think that some of that is at play here, or are pretty confident that the weaker attendance numbers are a function of some of these exogenous factors, as opposed to going too far in pricing?

So James, Hi, this is Matt. Let me take your exogenous factors question first. I think your premise is generally accurate. The one thing I would tell you that we've talked about before, is this issue of time poverty. So you not only need to be a great value proposition, you need to be a time priority on somebody's schedule. And I think the extension of the school years may have eaten into that a little bit, but you're generally right about that.

I will tell you this, we have had, as you would expect us to have, a series of conversations routinely about this particular issue. We don't see any specific factor that would contribute significantly to an attendance decline. There are a lot of variables out there, James, but we don't see any specific factor.

I will tell you where we focused though because of the way -- the nature of this economy, which is, like most discretionary consumer products over the last several years, much of the gains have been with those people we call the benefit-oriented consumer. We are increasingly focused on the value-oriented consumer, which is that person who is trying to budget to come to Cedar Point for a day or two. For us those are made up substantially of younger families, so I think that our pricing strategies are in fact working; I think they're yielding value and it's the quality of customer who's spending in our parks. But I do think we need to continue to be very disciplined about providing the right promotions and product features to that value-oriented consumer.

Without risking the erosion of your pricing integrity -- and the best example I have of that is our installment payment program, which is proven to be very popular. But if I have any tension in that particular pricing versus the consumer expectations, it's in that segment, James. I will tell you, that without exception, our CRM practices and our revenue management team are keeping us very focused on incrementality of revenue.

There have been a couple programs, candidly -- one program we ran that did not yield the level of incrementality, so we won't repeat it, and another pricing promotion program that we discontinued at my encouragement, and ultimately figured out that it was a lot more incremental than we thought. But that's exactly the way revenue management should work. So broadly, we don't see anything in the economy that would contribute more broadly to a decline in attendance, but that's how we think about it.

That's very helpful. I guess, just another quick question here. Do you have any visibility with respect to some of the attendance declines, how much of that was daily passes versus seasons pass. Obviously if these are seasonal pass holders, you're more likely to get some of that back. And then I guess, just lastly, and most importantly, which of the Cedar Point rides should we expect to get renamed after LeBron James? Thanks.

We thought if he doesn't take the option, maybe you'd step up, James. I'll turn it over to Brian for your first question.

As far as mix is concerned, as Matt said on the call, we continue to be pleased with what we see out of the group channel. I'm not going to go into specifics behind each one of the segments, but particularly as it relates to, what we call the active side of the group channel, which would be the catered event, the noncatered event, very date specific -- we continue to see solid growth in that channel, and that continues what we saw in 2013 and, to a lesser extent, 2012.

Season pass continues to be an area of focus for us. We will have a record year in terms of season pass sales, again in 2014 -- a little bit of a different mix this time than what we've seen in the past couple of years. Those record sales will be generated a little bit more on pricing this time than volume. We're actually seeing -- have seen -- a little bit of a decline in the number of units sold in 2014. Our average pass usage so far year to date is up a little bit, so when we look at season passes as a percent of overall attendance, it's right on pace with plan and prior year.

Excellent. Thanks, guys.

Next, from Wells Fargo, we'll hear from Tim Conder.

Thank you. Let me stay on that same line of questioning, gentlemen, if I may. The season pass trends -- so, Brian you just mentioned that the usage and attendance is sort of on par year over year. I guess, what you saw due to the many factors in the second quarter -- are you seeing those visitors come back in July? It sounds like that's the case.

And then, Matt, also from your related comments, it sounds like the July, in particular, shortfall and year-to-date therefore, is more due to that daily walk-up visitor. I mean, can you just clarify -- am I interpreting your comments correctly?

I think you are generally, Tim. It gets a little harder because people cross over between programs. So, as an example, to the extent that we're growing our B2B business, that could be somebody who came in on a front gate pass before, separately, right?

Okay.

And so, the crossover between segments maybe complicates your conversation. But look, if we -- yea -to date is fascinating, because I've been in the business a long time, and it's not unusual to have a year like this where it's very hard to sort out which of the factors is causing what you are seeing. If we throw out the flood and the lack of flood -- lack of water, we round down to 1% change in attendance. And so we are certainly not happy with that, but it is not something that we think is at all indicative of something broader. And we hope that when the sun shines, and we get that typical summer weather, we are at or ahead of where we would expect to be. We hope we have a few more of those days in the fall.

Okay. Related to the utility cost, we've heard that mentioned by some other folks in the industry also. Would you say that that's concentrated more in California in your case, or is that a little bit broader? And then, utility, meaning the water and everything and also the electric costs, is that, again, concentrated more on the California side, given the shortfalls that they've had in water and everything out there?

No, I think we probably should've narrowed that comment a little bit. It was almost exclusively relating to heating during the winter for the hotel renovation, as well as the Mountain structure at Canada's Wonderland. So it was much more related to the winter than anything else, and not specific to California, Tim.

Okay, and nothing you're seeing from the California side with water utilities?

No, not structurally yet. I'll be anxious to talk to you separately and see if you are seeing something, but we haven't seen anything yet.

Okay. One other clarification on the attendance side. So you are anticipating at this point -- you're seeing the season pass customer come back who may have delayed those visits during the second quarter?

Actually, I think you misread that. We are actually seeing a slight uptick in visits per guest through July for the season pass holder. And so we would expect to see them visit at least at the same pace they did last year, if not a little higher.

Okay, thank you, gentlemen.

Our next question comes from Barton Crockett with FBR Capital Markets.

Okay, great. Thanks for taking the question. I wanted to make sure I understand a little bit better, the assumptions behind your guidance, and fully understanding that it's hard to extrapolate, but I want to understand how you're extrapolating. So you say that you see revenues for the year up $25 million to $45 million, but through July, which is two-thirds of the season, you're up about $8 million, on a comparable-park basis, probably a little less on an actual basis.

So what is it that drives those additional revenues? Is it that you see attendance trends kind of perking up, or is it new revenues from the advertising on the TV network, or the insurance proceeds? A little bit more color there would be helpful. Thanks.

Sure, Barton. This is Brian. As we look at the balance of the year, and the guidance that sits out there right now, without a doubt there is some consideration that we will see a recovery of some of the attendance shortfall that we've seen year to date. The 2% that we're down year to date, we definitely believe that there's demand in the market, as Matt just said momentarily ago. When over the last few weeks, as we've seen good weather days -- sunny, typical summer days -- we've had the attendance that maybe we weren't getting in June and July when those days weren't quite as nice.

So we believe that there's pent-up demand. There's a little bit more urgency in August, and as we work through September and October with the realization that kids are going back to school, and the summer and fall season will be quickly wrapping up, and winter will be upon us. So attendance recovery is definitely part of it.

The other piece is, as I said, the extra operating days at the end of October. Nine of our 11 parks will have an extra weekend, three operating days each, which will provide a big opportunity to recoup some of the attendance shortfall that we've seen. But as you know, this is a big leverage play, right? So the better the attendance with the kind of per caps that we're generating, it pushes out some big revenue pick-ups pretty quickly, provided we get those attendance pick-ups.

Okay. Separately, on the distribution -- you've repeated what you've said before, which is you expect to grow it at least at the pace of your EBITDA, as I read it. Your EBITDA guidance says 2% to 4.6% growth. Last year, you guys grew your distribution at an annualized pace in the double digits. When you look at this kind of guidance of 2% to 4.6% -- what would it take for you guys to grow your distribution in excess of that? You've opened that door; you did it last year. What would it take to repeat that performance this year, do you think?

I think it will take us to a great Halloween. I think that we'll continue to look at it -- I shouldn't [quip] it quite that shortly. But here's the reality -- we're in a very good cash position versus where we were a couple years ago. And so the quality distribution, as we've talked about, Barton, is about the ability to grow it, as well as to sustain it in times that maybe were a little more challenging.

So I don't know that I can give you a specific example to that. Our Board is committed to exactly what we described here. It's certainly at this point in the year, given the difficulties and extrapolation, it would not be a question I'd be comfortable answering more directly at this point.

Okay, great, thank you.

Next from Goldman Sachs, we'll hear from Afua Ahwoi.

Thank you. Two questions from me. First of all, on the four weeks in June -- at the end of June, when you gave an update on trends and you maintained the guidance there. So I was actually curious maybe what changed within those four weeks that caused a [lowering] of the top half. Now, it sounds like maybe a little more on the attendance, but maybe you can tell us a little bit more in detail what exactly you were expecting, versus what happened.

And then, as we think about the reasons for the weather, can you be specific maybe which parks were more affected than other -- just because some of the other peers have mentioned it, so we want to get a sense of which regions were more affected.

And then just, last, you made a comment that you would recoup some of the expenses from the extra costs for the winter, and I was just a little curious what you meant by that, how you'd recoup that. Thank you.

Sure, Afua. Let me tackle the last question first on the expense front. As we said on the call, expenses are trending up about 3%. We went into the year with an expectation that costs were going to be up, based on the plans and strategies that we had in place for 2014. So there's nothing in our cost variances to date that surprise us. I can tell you, there were some unanticipated costs early in the year, as we said, around the harsh winter, and some work that had to be done to repair, in some cases, and clean up our parks from ice storms, etc.

Some of those unanticipated costs -- we're going to have the ability in the latter part of the year, probably focused more on the fourth quarter when we're out of the operating season, to extract savings from some discretionary costs that won't impact the guest experience. So we'll look at things like the painting of rides and other such discretionary work. We've already identified several big buckets that'll help us on that front. So that's where we're going to get that ability to recoup the costs. During the operating season, it's very challenging to do that without negatively impacting the guest experience, in particular when attendance is only off a percentage or two, year to date.

As it relates to the guidance question, I can tell you, coming into 2014, our guidance range at the EBITDA level was a little broader than we typically have, as well as at the revenue line. At the EBITDA level, we typically come into a year with about a $10 million range, and this was a $15 million range. So as we get deeper into the year, it's only natural that we were going to start to look at narrowing that range. It seemed inappropriate to us to continue to maintain a $15 million range when we're pretty much close to two-thirds of the way through the season.

As we said, the July trends -- had we picked up in July a little bit better, maybe the shift would have been to narrow on the lower end. But the fact of the matter is, July was soft as in a comparable level to what we've seen through the end of Q2, and so we narrowed off to the higher end.

Then, just a final one on the regions for the -- which parts were more affected in terms of the school calendar?

Yes, so I think as far as the school calendar is concerned -- that really touched on a number of our parks. I'm not going to go into specifics park by park, but I can tell you all of our parks in the East and Midwest were impacted in various markets to some extent, either through, as I said, an extension of the school calendar, or just the psyche of the consumer getting out of what was a pretty long and difficult winter.

Thank you.

(Operator Instructions) Next, we'll hear from Ray Cheesman with Anfield Capital.

Yeah, thanks very much for taking the question. I was wondering if you would share with us any of the lessons you've learned from the in-park television network this season. I know that Time Warner only came on relatively recently, but I'm just wondering if there are any lessons that confirmed your ideas of the investment, or that you've possibly changed direction based upon anything you've learned.

Hi, Ray. This is Matt. I'll give you a little bit, but it'll certainly develop as Time Warner gets their legs under them. So we are seeing, as we're out there making sales presentations with the Time Warner team, we're seeing the level of interest that we had anticipated, and in fact seeing some positives in that regard, beyond maybe what we anticipated to some degree.

I think the one thing that is important for this audience to understand is, we are going to calibrate the utilization of that system such that we make a meaningful amount of revenue, but we try not to step over and become intrusive to the guest experience -- that it adds to the guest experience as well. So all signs are positive, but we have limited the inventory, as we get into this, that they can sell. I expect we'll see -- we'll have more to talk about on the next call, specifically, and then certainly as we get into the early part of next year.

And, Matt, the other guy waxed eloquently on his call about those offshore contracts again. Can you remind us -- I think you might have covered it in the past, but just remind me again, why picking up a few million dollars for sending over some schematics is not a good business plan addition to what you're already doing?

It may be a good business plan for others. But with our case -- the better example for me is the attention we can pay to Carowinds, where we're going to re-launch that park, and have a step-function available to us over years, is more valuable, at least to us today. And that's only one example. We think our parks have the opportunity to continue to grow if we can dedicate this management talent to that. I have meaningful international experience, and a lot of that is very wary of how difficult that can be to really make money without distracting the team. But if may be a better business plan for others. Right now I want to see just how great Richard Zimmerman and his team can make our parks here in North America.

Just one final, if I may. The guy with the fish is having a big problem this year. Are those customers potentially your customers, or the way that the geography works does it not really work out that way?

I suspect -- look, I think very highly of that management team. I suspect that, much like the visitors who go to Disney, much like the visitors that go to Universal, and much like the visitors that go to LEGO -- when they come home, they are our customers. And so we're happy that those people visit us when they're home. And by all indications, the cumulative destination market has been relatively healthy as well. So, no, I think those people are our customers. They just happen to be within 60 miles, as compared to maybe driving down the East Coast.

It appears that we have no further questions at this time. I'll turn things back over to Management for any additional or closing remarks.

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

Once again, that does conclude the conference. We thank you for your participation.