Six Flags Entertainment Corp (FUN) 2014 Q3 法說會逐字稿

Good day everyone. Welcome to today's Cedar Fair third quarter conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Ms. Stacy Frole. Please go ahead, ma'am.

Thank you, Alan. Good morning and welcome to our Third Quarter Earnings Conference Call. I'm Stacy Frole, Cedar Fair's Vice President of Investor Relations. This morning we issued our 2014 third quarter earnings release. A copy of that release can be obtained on our corporate Investor Relations website at 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 Bryan 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 are 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 reconciliation 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 SE this webcast is being made available to the media and the general public as well as analysts and investors.

Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated all content of the call will be considered fully disclosed. Now I will turn the call over to Matt Ouimet.

Thank you, Stacy. And good morning everyone. I would like to start by saying how proud I am of our entire Cedar Fair team for their hard work throughout our core operating season. Our team has remained focus on executing our strategic plan and delivering a compelling park experience for audiences of all ages on each and every visit.

Because of their ongoing commitment to the guest experience I'm pleased to report our best post Labor Day performance in the Company's history putting us on track to achieve our fifth consecutive year of record results. As we typically do on our calls we will focus our prepared remarks on three key areas. Our third quarter results and solid October performance, our capital allocation strategy and finally our positive outlook for the Company. We will then answer any questions you may have. First I would like to briefly summarize our results through this past Sunday, November 2nd.

With more than 95% of our operating days behind us our net revenues on a comparable park basis were up 2% to $1.12 billion when compared with the same period a year-ago. Our Halloween events continue to grow in popularity and we are pleased to announce record demand for these events this year. Since the end of the third quarter we have experienced 5% increases in both comparable park attendance and average in-park guest per capita spending reaffirming our confidence in our business model along the strength and loyalty of our consumer base.

We do not plan to discuss this in great detail, however, I do believe it is worth mentioning that our Great America amusement park in Santa Clara California was closed for a total of seven days this year, four days during the third quarter and three days in October as part of our agreement with the city when the new 49ers stadium was built.

We have been compensated accordingly for these days and, in fact, our new partnership with the 49ers has allowed us to host pre game events resulting in additional out-of-park revenues. Excluding the seven days Great America was closed our year-to-date attendance on a comparable park basis would be consistent with last year's record attendance levels. As you saw in our earnings release this morning we expect two of our largest properties, Kings Island and Knott's Berry Farm will produce record profits this year.

Cedar Point, our flagship park, is on track to have its second best year in its 145 year history in spite of a challenging summer season weather-wise and following its record breaking results last year with the successful debut of Gatekeper. This year Kings Island clearly benefited from its world record breaking roller coaster Banshee.

The highlight of our 2014 capital program delivered increases in both attendance and guest spending as planned. Knott's Berry Farm, located in the highly competitive Southern California market, was another large contributor to current year's results and is a park that continues to perform extremely well. Our investments in this park over the past three years have focused on families, the park's history and exceeding the guest expectations in everything we do.

We have transformed several outdated sections of the park into vibrant new areas including the Camp Snoopy children ease area, which was updated this year with several new rides and attractions. Our ongoing commitment to enhancing the overall guest experience at Knott's supported its current year pricing growth and record attendance levels. We believe the programmatic changes we have made at Knott's are replicable across other parts within our portfolio.

While we remain committed to investing in the overall guest experience it does put moderate pressure on operating margins in the short-term similar to what we experienced in 2011 and 2012 when we began making our investment in Knott's. However, we believe our efforts in this area will manifest themselves in the form of increased attendance, price elasticity, length of stay and in park spending over the long-term. This has certainly been the case at Knott's Berry Farm where this program has been actively applied over the past three years.

While we are pleased to report record net revenues this year several of our parks have faced some short-term challenges which in a seasonal business can happen from time to time. For 2014 this included a harsh winter, regional flooding, a water main break in our flagship park and challenging summer weather in the Great Lakes region. Once these short-term challenges were behind us the momentum behind our long-term strategy came through. Since our Labor Day announcement attendance and revenue trends through this past weekend have hit record levels for Cedar Fair. Several of these challenges specifically impacted our largest park, Cedar Point. However, as I mentioned earlier, in spite of these challenges this park is expected to deliver its second most profitable year in the park's 145 year history and its best post-Labor Day performance ever.

You have heard us many times say you don't change your strategy because you had a bad weekend or two of weather. Cedar Point's current year results and the performance of several of our other parks has caused us to analyze our business model with an even more critical eye to ensure we are responsive to any changes in underlying consumer trends.

At this point we have not identified any changes to our demographics or the consumers' behavior that would have us materially change our multi-year strategy at any of our parks. Finally, I wanted to mention the success we continue to experience from the overall quality and value enhancements we've made to our food offerings. An initiative which has been the primary driver of our increased in-park spending.

As I mentioned in our last call 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 guest capture rates. We also tested an all season dining program for season pass holders at three of our parks this year. This program proved to be popular with our most loyal guests and will be rolled out across all of our parks for the 2015 season. Overall, the experience of our Management Team and our geographically diverse portfolio have allowed us to overcome many of the challenges I mentioned earlier.

With less than 5% of our operating days remaining we anticipate full-year net revenues to be at record levels but at the lower end of our current guidance of $1.15 billion to $1.17 billion. We also anticipate being at the lower end of our current adjusted EBITDA guidance of $425 million to $435 million. Based on our current year performance, our positive outlook and our strong balance sheet our Board has declared a 7% increase in our 2014 fourth quarter cash distribution to $0.75 per limited partner unit.

This increase represents the highest quarterly distribution paid in the Company's history and represents an attractive 6.3% yield at our current market price. We're very proud of this fact and look forward to producing the operating results that will allow us to increase our distribution for many years to come. At this time I would like to turn the call over to Brian to discuss our third quarter and year-to-date results in more detail. Brian?

Thanks, Matt. Good morning to everyone on the call. As Matt mentioned, we are pleased with our strong operating performance through this past Sunday, November 2nd, which puts us on track for our fifth consecutive year of records results. Before I discuss the positive trends we experienced in October, I would first like to provide additional color on our third quarter results. As detailed in our earnings release for the third quarter of 2014 we reported a 1% increase in net revenues to a record $595 million.

This was the direct result of a 2% increase in average in-park guest per capita spending to $46.58 offset somewhat by a 1% decrease in attendance and a 1% decrease in out-of-park revenues. For modeling purposes during the quarter we entertained 11.8 million guests and out-of-park revenues totalled $58 million.

Excluding a non-core standalone water park sold in August of 2013, and the impact from the four days during the third quarter that our Great America park was closed for Levi stadium events, attendance for the third quarter of 2014 would be comparable with the prior year third quarter. We are pleased with the growth in average in-park guest per capita spending across the majority of our parks this year. The increased spend in the third quarter when compared with the same period a year ago came from increases in both admissions per cap and pure in-park spending.

As Matt mentioned earlier, our food and beverage category led the increase in pure in-park spending. Our food and beverage team has done an excellent job of improving the overall quality and the variety of food offerings at our park which has resulted in better capture rates. At the same time our parks have done an excellent job of maintaining the costs of the products sold. As we previously disclosed attendance trends in July and August were below our expectations particularly in the Great Lakes region where we experienced unusual summer weather patterns.

We did see attendance trends accelerate for the remainder of the third quarter once weather-normalized. The modest decrease in out-of-park revenues during the quarter was primarily driven by a decline in occupancy rates at our Cedar Point resort properties reflecting the negative impact of the attendance shortfall at that park. Moving on to the cost front, operating costs an expenses for the third quarter totalled $283 million representing an increase of $8 million or 3% from the third quarter of 2013.

The increase in cost was largely due to planned increases in operating expenses which included an increase in both seasonal labor hours and rates and initiatives focused on enhancing the overall guest experience. Cost of food, merchandising, games increased during the quarter due to greater capture rates in our food and beverage category. As a percentage of sales these costs remain comparable to the same period last year. Slightly offsetting the increases in operating expenses and cost of goods sold was a small decrease in SG&A expenses primarily the results of lower incentive comp when compared with the payout from last year's record performance.

As I mentioned on our last call some of the costs we have incurred this year relate to long-term multi-year initiatives and do not directly correlate to when the associated revenues are expected to be earned. The best examples of this may be our new FUN TV in-park television network and our continued build-out of our CRM platform. We will continue to take a long-term approach to investments such as these whether they run through our income statement or represent capital expenditures. While these expenses put pressure on margins in the short-term we believe they provide us with additional growth opportunities over the long-term.

Adjusted EBITDA, which we believe is a meaningful measure of our park level operating results, was $316 million for the third quarter of 2014, down slightly from $318 million in 2013. The modest decrease in adjusted EBITDA was the result of a slightly lower than expected attendance, particularly within the Great Lakes region, in addition to budgeted increases and operating expenses targeted at enhancing the guest experiences within our parks. As for results for the first nine months of the year, net revenues in the period increased to $999 million driven primarily by a 3% or $1.17 increase in average in-park guest per capita spending to $45.41.

Partially offsetting the solid increase in guest per capita spending was a 2% decrease in attendance to 20.3 million guests and a $3 million decrease in out-of-park revenues to $104 million. Excluding the August 2013 sale of the water park attendance on a comparable park basis would have been down only 1%. Now I would like to turn our attention to the results for this past Sundays, November 2nd. Since our Labor Day announcement our parks have reported significant increases in attendance and in-park guest per capita spending.

Confirming our belief throughout the year that demand for our product remains strong. Based on preliminary results net revenues on a comparable park basis through November 2nd were up 2% or $19 million to approximately $1.12 billion. The year-over-year increase was the result of a 3% or $1.20 increase in average in-park guest per capita spending to a record $45.62. During the same period we entertained approximately 22.6 million guests and our out-of-park revenues were $114 million, both down slightly from last year's record results.

When taking into consideration the seven days Great America was closed this year versus 2013, attendance would have been consistent with last year's record levels. I should also mention that the increased guest spending came from a 2% increase in our admission per cap and a 3% increase in pure in-park spending. As Matt mentioned earlier, our strong end of the season finish confirms the investment of the we are making in the overall guest experience are working. For the month of October we have experienced a 5% or 119,000 visit increase in comparable park attendance and a 5% or $2.04 increase in average in-park guest per capita spending.

We're he pleased with this balanced growth and will continue to pursue opportunities to increase our attendance base while not compromising pricing integrity we have built over the years. Now let me highlight a few items on the balance sheet. As you read in our earnings release this morning, our liquidity and cash flow remain strong and we ended the third quarter in solid financial position with $189 million in cash on the balance sheet. At the end of the third quarter of 2014 our consolidated leverage ratio was 3.8 times and is well within our comfort range in the current credit market environment.

For the near future we expect our average cost of debt to be approximately 5.3% and annual cash interest cost to be approximately $85 million. As we look forward to 2015, we do anticipate cash taxes will increase to the $20 million to $25 million range as we begin to fully utilize our NOLs. Our capital spending will also hit its peak next year at approximately $170 million primarily due to the completion of the Hotel Breakers renovation and our significant investment in the Charlotte market at our Carowinds amusement park.

Beyond 2015 we would anticipate spending at least $120 million in core growth capital each year including the normal investments in new rides and attractions at the parks. Finally, we are pleased with the Board's decision to increase our quarterly cash distribution by 7% to an annualized rate of $3 per limited partner units. Based on our solid performance this year our confidence in our business strategy going forward and the strength of our balance sheet we believe we have the appropriate capacity to increase the distribution to our unit holders at this time.

The $0.75 quarterly cash distribution is payable on December 15th to holders of record on December 3rd. Over the past several years we've had many discussions both internally and externally about our distribution philosophy. I want to assure you that it has not changed. We expect our distribution to grow at least at the pace of the growth of our business. We remain committed to maintaining a quality distribution focusing not only on the annual amount paid but its long-term sustainability. In conclusion, our operations continue to generate a significant amount of cash.

We have a capital structure and operating strategy that provides us with the flexibility to increase our distributions more aggressively if we choose similar to what we have done over the past two years. While also having the optionality to make additional capital investments should we believe an attractive return is available to us. As always we will continue to prudently manage our cash flow to maximize value for our unit holders both in the near and long-term. Now, I will turn the call back over to Matt.

Thank you, Brian. As I mentioned on our last call, our multi-year strategic plan centers around continuing to elevate the guest experience and further solidifying our world-class parks as the place to go to make unforgettable memories with friends and family.

We remain highly confident in our business model and our long-term strategic vision which is further supported by the re-acceleration of trends during our popular Halloween season. As we mentioned earlier, the Halloween season was a record for the Company and we expect this momentum to continue into 2015 particularly given our strong capital plan and many new guest experience enhancing initiatives. As Brian just mentioned, we will spend approximately $170 million on our 2015 capital program which includes our regular marketable investment and the final phase of our multi-year investment in renovating Hotel Breakers.

The hotel renovation has been the largest capital project in Cedar Fair's history. Needless to say, renovating a more than 100 year old hotel will come with a few surprises. Our team led by Phil Bender, Rob Decker an Dave Hoffman has done an excellent job over the past three years managing costs while not compromising the quality and experience this unique property brings to the Cedar Point brand. This modernized property will become the center piece of Cedar Point's mile Long Beach allowing us to take advantage of this under utilized asset in the future.

We cannot wait to show off the historic property's new look next year. On the marketable capital front we're eagerly anticipating the 2015 opening of Fury 325, a new record breaking coaster at Carowinds that will serve as an anchor for the re-launch of the Carowinds brand in the dynamic Charlotte market. Also in 2015 we are introducing Rug-A-Roo, a brand new coaster experience at Cedar Point. This represents a new strategy for us where we are taking a less popular roller coaster and transforming it into an exciting new coaster experience with the introduction of new floorless trains.

At the fraction of the cost of a new coaster we believe this to be an effective use of capital and an efficient way to introduce an exciting new experience to our guests. If this is as successful as we believe it will be, we have already identified at least two additional coasters in our portfolio where we can make similar investments.

As we look for new experience to market across all of our properties our capital plans will also include new water park rides, family attractions, and state-of-the-art catering facilities. Our comments on the call today have been primarily focused on the guest experience. However, we remain equally excited about the opportunities available to us with our new FUN TV in-park television network, our CRM platform, the continued growth of our group sales network and the continued expansion of our resort accommodations. As I hope we have effectively conveyed today we believe our long-term strategy is working and we remain fully committed to executing that strategy to drive the greatest experience for our guests and in turn strong returns for our unit holders.

Our confidence in our business model and our strategy reaffirms our belief that we are on track to achieve our FUN forward long-term growth goal of $450 million or more in adjusted EBITDA by our original target of 2016. Now we will open up the call for any questions you may have.

Thank you. (Operator Instructions). We will take our first question from James Hardiman with Longbow Research.

Hi. Good morning. Thanks for taking my call. I would say it was a disappointing year not just for you guys but I think for some of your peers. Obviously, the weather early part of the year didn't help but let me play devils advocate here for a second. I guess first with respect to placing and we have always talked about how you never know how much pricing you can get until you get hit up against that ceiling. And then I guess secondly, with respect to your customer maybe that middle America customer is scaling back on some of their purchases. Talk about those two sort of arguments with respect to your business and then just generally about the pricey elasticity of your ticket and what you have seen this year. Thanks.

Yes. James, good morning, good questions. So I think one of the things that this type of year gives you is let's call it the opportunity from an optimistic standpoint to go back and critically assess questions such as price elasticity and as you will appreciate and Brian and I have done a lot of that work this year. Quite honestly, most of the disappointment, to use your word, in the year was centered in the Great Lakes region at our Cedar Point Park. If you look across our portfolio from an attendance and pricing standpoint the vast majority of our parks met or exceeded our expectation. Now, what I will tell you is that this bifurcated economy and I think James we've had conversation before is with us on a long-term basis.

So the optimization formula of pricing and attendance is certainly something that Brian and I spend a lot of time particularly paying attention to and I think the strategy we have got in place address those. So the premium offerings in our parks for those consumers that have the extra dollars are clearly paying back and will continue to be expanded. And then on the lower end economic spectrum it is important that we pay attention to where it's not a value position because I think the value position is as strong as it's of been for all of our parks. It's an affordability requirement. So you're going to see that we pay a lot of attention in our softer parts of the season to that young family, if I can characterize it broadly, where it's more of an affordability issue. So I think pricey elasticity clearly remains in this system but we have to pay particular attention to the bifurcation of the consumer.

James, this is Brian just real quick to add on to what Matt said. I think as you look at pricing, it's not in the average across the season, right. We have said all along that we believe we have more pricing power in certain ticketing channels and at certain times of the year more than we do others and I think the Halloween season clearly, the fall season, and the results that we produce where we did stay aggressive or stay leaning forward if you will, from a pricing perspective and got it without really any sacrifice to volume. So I think when you see that, when you see season pass as another channel where we think there is high demand we will continue to take a different tact in those times of the year or those channels than we will maybe in May and June when urgency is a little harder to drive in the markets.

Got it. And then second question here just on the longer-term guidance your $450 million EBITDA target. That's about 6% growth versus the low end of your current guidance for this year. Prior quarters you talked about maybe getting there a year ahead of time. Now it seems like you're backing off of that a little bit so how should we think about next year certainly to the extent that these are some temporary issues this year, why would that necessarily affect your ability to get back to the previous trajectory next year, especially as we think about the post-Labor Day performance that seems like it's been pretty good.

Yes. Let me be clear. I have enormous confidence in 2015, but I want to ground us in the fact that three years ago we put together a FUNforward strategic plan that got us from point A to point Z if you will over the course of five years and we are spot on that plan. Last year we grew revenue by 6%, we grew EBITDA by 9% this year we're at a record level although below where we thought we would like to be for this year but spot on for our plan and that average growth was about 4% a year from an EBITDA standpoint. I would like to think next year is a better year than this year James, but I want to be careful that we continue to invest in programs we believe in that have long-term payoffs, et cetera and that we can continue to meet those expectations that are in that five year plan. I will stop with that at this point. Thanks, James.

Got it and then just last question here the post-Labor Day performance I think you had an extra weekend in October. How much did that help? Would it have been still up nicely in the absence of that? And help us think about the fact that your Labor Day release you lowered guidance a little bit. It seems like things have been positive since then but now you're even at the lower end of your lowered guidance. How should I think about all of that?

So let me take the first part, James, on the extra weekend. The way the calendar fell as we indicated on our last call and in our Labor Day release there were going to be extra operating days at a number of our parks related to haunt program, the Halloween weekend program, et cetera. The incremental attendance or the growth that we saw was not all entirely attributable to the extra weekend. We saw incremental growth on a week-by-week basis. Again, sort of depending on how a weather weekend shook out, et cetera, but there was definitely incrementally in that extra weekend but not to the entirety of the lift that we saw. And going into 2015 we will have the opportunity for a similar calendar the way Halloween falls next year you would look at a similar kind of number of operating days in 2015 as in 2014.

Great. Just to the question of sort of the low end of the lowered guidance it seems like things have maybe been better than you thought over the last past Halloween. How should I think about that?

Yes. So when we had taken the guidance down back with the Labor Day announcement, that was with more than just the outlook to end a little bit maybe higher in the range or towards the top end was predicated on September being better than what September ended up being. Where a lot of the lift since Labor Day or all of the lift quite frankly since Labor Day was in the five weekends in October or the five week period of what was October. So we would have needed a stronger September that just didn't really manifest itself.

Got it. Thanks a lot, guys.

Next we will go to Barton Crockett with FBR Capital Markets.

Thank you for taking the question. I was interested in your CapEx discussion. So you said next year $170 million. Could you remind us how much you're spending this year and you said a minimum of 120 after that. Should we read that to say that the big bulge is done after next year and we get into a more normalized pace? That's my first question.

Sure, Barton. From a capital perspective the spend for 2014 we had talked about $145 million to $150 million number for this year. Going into next year the $170 million that we just talked about is definitely the peak, if you will, or the top of the bubble. At beginning of 2016 as we indicated we would expect that would start to run back to more of a normalized rate and where we're positioning right now is we think we'll be investing at least $120 million a year, which gets pretty close to that number is pretty close to about a 9% of revenue kind of number. It's not too far off from what you have heard us historically talk about and then anything that's incremental that would have to be supportable by some very solid returns so we think that's the base level of investment going forward. I can't tell you that there wouldn't be anything above that number, but that's the baseline or the normalized rate running forward.

Okay. And then looking at the distribution relative to the free cash flow. With your guidance this kind of annualized $3 dividend how would that compare to your free cash flow this year? Would that be over 90% of it?

Looking at this year's cash flow?

Yes. This year's cash flow versus your annualized dividend that you just moved to.

The payout ratio is definitely moving up. I can't say that when we look at the CapEx bubble that we have got in 2014 and 2015 some of the deferred infrastructure work that we're making or investments that we're making definitely play into that a little bit, but I think just taking a step back for a minute on the payout ratio as we have talked about over the last couple of years as we have been rebuilding or resetting the balance sheet we have in intentionally kept that payout ratio a little light as we have been trying to get ourselves back to a stronger position from a balance sheet perspective.

We're there today. So I think what you could expect to see is that that payout ratio going forward will start to move towards that kind of level that you're referring to, a 90% plus or more going forward. It's not something that we use as on input or that we target a specific payout ratio but more so something that we evaluate up against and we're comfortable with where it is at a $3.00 distribution we're comfortable at where that payout ratio falls.

Okay. And then on the margin pressures that you had this year from investments if you're investing more next year, should we expect more margin pressure next year or how should we think about that?

No. Not necessarily. I mean a lot of the investments that we have talked about over the last two to three years on the OpEx side of things we understand that's put pressure on margins particularly in a year like 2014 where some of our parks missed in terms of volume. Margin remains a key metric for us. It's not the only metric by any means. What I would tell you is when you look at overall margins one of the things that impacts overall margin is the mix so in a year like 2014 where we have been pretty transparent and talked about the struggles that we have seen in a couple of our largest parks in the Midwest region, Cedar Point most notably, it's also our highest margin park so the fact that in a year like 2014 Cedar Point plays a smaller role in the mix, that hurts the overall margin more than the incremental investment that we're making.

Okay. Alright. I will leave it there. Thank you.

Thank you, Barton.

Now we will go to Tim Conder with Wells Fargo.

Thank you. Let's stay on that incremental margin question. Brian, could you remind us, you had some somewhat unusual in the second quarter I think primarily related to your Toronto park where you pulled forward some maintenance that I would think that would benefit you in 2015 and maybe even 2016. Could you remind us maybe how much of that was out of the ordinary?

Yes. I don't know that we of gave a specific number, Tim. We did talk to the fact that coming out of what was a very challenging winter we had some first and second quarter costs that were not typical for us related to the storm damages at a number of our parks, and I know we did call out Canada's Wonderland and as one of those. As we have said all along our ability to recoup against those costs wasn't going to be something that we felt comfortable activating until the November, December time frame when our parks were closed.

We weren't comfortable with taking costs out of the system that would negatively impact the guest experience so I think we've identified a number of projects coming up in November and December at the parks that our general managers an our teams are ready to activate against and realize some savings to offset that, but I think as we look towards 2015 while we wouldn't anticipate maybe that same nature of cost spend, there's bound to be something else that will spend towards in that first and second quarter that we didn't get to this year. So while we might have spent monies on dealing with storm damage at Canada's Wonderland next year might be a painting of a coaster that takes its place, but the CapEx spend that weighed on us early in the year we do feel that we can offset some of that here coming up in November and December.

Okay. And then just a clarification on that CapEx guidance that you gave. In the past you said okay, roughly 9% of revenues and then we've got the breakers and then we have cabins and things like that the in-park TV. So on a go forward basis here it sounds like, and please correct me if I'm wrong, that you're lumping everything together whether it's let's just say the core rides or whether it's sort of the special things. Is that how should we interpret the numbers that you gave to us?

Tim, this is Matt. I think the general answer is yes, but as Brian talked about, to the extent that we see something that is giving us return that is demonstrable and significant, like, if these cabins continue to be as successful as we see they are, then that could be added to the 120 if we thought we were being too patient in expanding that, but generally I think for modeling purposes I would put in $120 million and hold us accountable for incremental returns of that.

Okay. Okay. And then just to clarify on your statements regarding San Francisco so you said both in the third quarter and year-to-date and then of course the water park that was sold last year to take that out of the comparable base your attendance would have been flat both in the third quarter and year-to-date adjusting for those seven days in San Francisco. Is that correct?

That is correct.

Okay. And staying on San Francisco then, Matt you called out that you were compensated or Brian did in the out-of-park for those days. Again, all part of the agreement with the 49ers. Was that a one time occurrence that happened this year because of the opening of the stadium or will that be now a comparable continuing going forward?

It's both, Tim. Candidly there's a one time payment of significance that gets amortized over the life of that particular arrangement, but there are also, and we have already had one of them this year, the opportunity for them to buy out our park in order to get access to parking. There was the California/Oregon game on a Friday night this last month where they literally paid for the entire park in order to have parking. So we like that relationship with them. They're a quality organization. They need to play a little better football but we do think there's incremental opportunity there. I was just up there last weekend and for example we do the high-end tail gating in partnership with the 49ers and that's incremental revenue for us. Beyond the parking agreement that we talked about.

Okay. So as being based in St. Louis and the Rams here in town here we have a very low bar so they're playing pretty decent football on a relative basis. Any color, gentlemen, that you can give on the season passes? Twofold. One, as a percent of attendance that you have seen this year and then any early read on what you're seeing as far as the trends looking into 2015?

Yes. So the trends, Tim, are we always say look, at this time of year it's a small percentage of our season passes but Brian and I were going through it part by park today and yesterday and we feel good about where this season is starting for next year. I think it's a reflection of the quality of of the experience that our guests got this last year, in terms of renewals, and I also think it's the increasing effectiveness of our CRM communication system. So we feel very good about where that's going out of the box. As it relates to the percentage of our attendance, Tim, it's stable. We see almost identical attendance levels as we have seen in the prior years coming out of the season pass program.

Okay. So somewhat in the low 40% range, is that fair?

Yes. Tim being that's we said before and that's exactly what weary seeing.

Okay. My last question, gentlemen, is if you look at the attendance challenges this year and you called out maybe that young family, you called out clearly weather has been a factor, did that impact more of the single day passes, the season pass folks just not maybe they missed a visit and just didn't make it up or was it group events or a little more color from that perspective.

So, Tim, the season pass visitors came at almost exactly the same number of visits as they did in prior year, a little bit higher, which I think is a positive trend. So generally it was that third buckets of what we call good any day tickets or the consumer that buys this week to come next week, et cetera. Brian you can probably say that better than I did.

Yes. I think along just dove tailing onto Matt's comments I mean season pass, what we tall the active group channel, Tim, which would be attendance that ties to a group event date specific. Those continued to show strength and we were pleased with not only the average number of visits the season pass holders were using I think a reflection of success of some of the CRM efforts, but also what we saw fares positive trends in that B2B channel on active attendance. Where we did see the softness broadly was in what Matt was referring to the general demand ticket channels whether that be consignment tickets in the group segment or just maybe front gates or web sales, et cetera. The urgency was hard to generate in particular in some of the Great Lakes region because of weather and then just certain times of the year it continues to be a challenge with time poverty issues.

Okay. Great. Thank you, gentlemen.

Thank you, Tim.

(Operator Instructions). We'll now go to (inaudible) with Goldman Sachs.

Thanks. Just two for me of first on the labor front on the seasonal labor front, are you seeing more cost pressures beyond inflationary cost pressures? And what are some of the competitors that you would think about higher end labor from whether it's a McDonald's the fast food industry? Is that going up more than inflation would suggest and how are you keeping up with that? And then second, for next year how do you think about maintaining season pass members especially those who may not have used the product as much as they would have thought given the weather this year? Do you have to spend more to ensure that they signed up against next year or to ensure that they even show up next year? Thanks.

So this is Matt. I will take the second one and then I will defer to Brian on the labor question. We saw on average exactly the same number of visits or even slightly higher for the season pass program standpoint at all of our parks. So the season pass guests tend to do four, four and a half visits depending on parks it can be a little bit more, a little bit less, but they tend to work around the weather. They have that flexibility. It's one of the features that is a benefit of the season pass program. So actually we think we will do better next year with season pass renewals than we did this year. The other reason is we have provided incremental benefit and we have provided incremental communication this year to season pass holders to make sure that they did in fact activate it earlier that means they visit more often and provide them opportunities to bring friends and family which worked very well for us and is a highly valued feature for them. So I think on season pass side we're actually on a positive trend relative to those concerns. And then on the labor, Brian?

Yes. So on the labor front pressure to increase minimum wage is pretty much consistent throughout the country so just about every market that we're in, we're facing that issue. I can tell l you it remains a focus for us at all of our parks, all of our GMs and their teams are focused on finding ways to offset whether it be through efficiencies in technology or reviewing their hours, their operating hours, et cetera. For 2014 what increases we did have to absorb not material to our results, but definitely an area that we're spending a lot of time looking into as I know everybody in the space is.

Thank you.

Next we'll go to Steve (inaudible) with (inaudible) Capital.

Yes. Hi. I apologize if this was asked already but could you talk a little bit more about the hotel renovation in terms of any risks that it could disrupt revenue either in the hotel or in the park, and then also just thinking about the benefit of it how to quantify that on a kind of direct and indirect basis? Thanks.

Steve that's a fair question. So it remains very much on schedule and on time to be opened for the early season next year. So at this point I am not losing a lot of sleep about that. It's a very well managed project. Although as you can appreciate once you open the walls of 120 year old hotel you tend to find things that are less than pleasant. As we have said over time, this is primarily an episodic investment that has a return associated with it, but it does not reach the typical return threshold of 15% to 20% that we typically look for. This is a little bit of catch-up capital on that hotel. So we think it will be good for the property, we think there is an incremental return on it, but a lot of this is just protecting the base.

Does it add substantial rooms? I mean is there a direct revenue benefit just from the hotel itself?

It does not add substantial rooms. In fact, it reduces the rooms in inventory modestly, but it does protect the rate and it does have the opportunity to extend length of stay which extends the average ticket purchase. There's very little opportunity in terms of occupancy. We tend to be full for most of the peak season. Most of the opportunity is a little bit in rate and average length of stay and ticket purchases as I described. Ideally we will get guests to spend instead of 1.2 nights or 1.3 nights something longer, which again will provide different ticketing sales and revenue management opportunities.

Okay. Thank you.

(Operator Instructions). We'll now go to Ray Cheeseman with Anfield capital.

Thank you very much for taking the questions. As we have gotten through the fall and you have done better one of the underlying expenses of average people have gone down and namely gasoline and fuel. I guess the government is telling people that their heating bills will be less this coming season. Are you finding any feedback from your customers at all that part of your pickup came from an extra buck that they didn't have to leave at the gas station?

You know, we really don't. You know, I would like to think that impact is helping that consumer where that is a particular budget issue for them, but we really don't. I think what we're' seeing is a more normalization of the weather patterns particularly in the Midwest, but also the compelling urgency of the end of the summer. If the beginning of the summer lacks a little bit of urgency, the he end of the summer has a tangible urgency to it, but, no, it hasn't been associated necessarily with the reduction in gas prices.

One of your competitors recently said that he was going to kind of add a holiday at some of his parks stringing up a bunch of blinking lights, I guess. Is there any potential for any of your parks to add a holiday event? And possibly increase utilization that way?

The short an is we think with the expansion of some of our parks that opportunity may present itself. It depends on a lot of variables but I wouldn't take that off. I would say that's possible in the future, it's just not urgent on our list.

Okay. Lastly I was wondering if the roll out of your FUN TV across the whole system this year generated any new information for you or how was it perceived? Did it do what you wanted?

I think it's been extremely well received. We have said over time it has three functions and it's about a third, a third, a third. A third is commercialization and selling advertising, a third is increasing guest spending and a third is guest entertainment and enhancing the line waiting experience and we have been successful on all those variables. We had, I think it was Nielsen, back in to measure the impressions. It was exactly where we thought it was going to be and we have a contract with Time Warner to go out and sell the advertising space. I'm happy with the experience. Particularly happy with the experience. I'm happy with the team. Now we need just to go out and sell the revenue and produce the revenue we anticipated.

Lastly, following up on the gentleman just before me about the hotel, you said it's really not an occupancy opportunity. It's really a rate opportunity. When would you begin to gain visibility if the customer agrees that there's a rate opportunity? Do people book now for next June? Because you say you're running pretty full so you must have to book pretty far in advance.

No. It's still going to be in the early spring next year before you see the ramp-up of the hotel demand.

Okay. Thank you very much.

And at this time we have no further questions so I would like to turn it back over to our speakers for any additional or closing remarks.

So first of all thanks everybody for your questions and most particularly for your ongoing interest in Cedar Fair. This is my fourth operating season with the Company and I can tell you sincerely that I'm more convinced today of the quality of our business model than I was early in my tenure. We have well maintained assets and our employees are the best in the industry at providing our guests with a great experience. These two value drivers are why our guests continue to return year-after-year allowing us to consistently produce record results. We also appreciate the open dialogue with and support of our unit holders. Let me assure you are we are committed to executing a strategy that creates value on a long-term basis. Stacy?

Thank you everyone for joining us on the call today. Should you have any follow-up questions please feel free to give me a call at 419-627-2227, or Lisa Broussard at 419-609-5929. We look forward to speaking with you again in about three months to discuss our fourth quarter and year-end results. Thank you.

That does conclude today's call. We thank everyone again for their participation.