Six Flags Entertainment Corp (FUN) 2016 Q2 法說會逐字稿

Good day, everyone, and welcome to the Cedar Fair second-quarter 2016 conference call. Today's conference is being recorded, and at this time I would like to turn the call over to Stacy Frole. Please go a head.

Thank you, Lisa. Good morning, and welcome to our second-quarter earnings conference call. I'm Stacy Frole, Cedar Fair's Vice President of Investor Relations. Earlier today we issued our 2016 second-quarter earnings release. A copy of that release can be obtained on our website at www.CedarFair.com under the Investors tab 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 remind 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.

For a more detailed discussion of these risks you can refer to filings made by the Company with the SEC. 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 the SEC's Regulation FD, this webcast is being made available to the media and the general public as well as analysts and investors.

Because the webcast is open to all constituents and prior notification has been widely and unselectively disseminated, all content of the call will be considered fully disclosed.

Now I will turn the call to Matt Ouimet.

Thank you, Stacey, and good morning everyone. As you read in this morning's earning release, we expect 2016 to be another record year and we remain on track to achieve our long-term adjusted EBITDA goal of $500 million earlier than our original target of 2018. It is important to note our confidence is supported by certain data points, including preliminary year-to-date revenues through July 31, which are up 2%. Season pass sales are up 15%, and second-quarter deferred revenues are up $25 million or 17% over the prior year.

The growth in top-line revenue is the result of increases across all areas of our business, including record levels of attendance and guest spending. Out-of-Park revenues, including resort accommodations, are also up and room reservations for the remainder of the year are trending ahead of the same period a year ago.

In a moment, Brian will address many of the details you need to update your financial models, but first I want to proactively address what we experienced in July. We know our investors value having visibility into not just the previous quarter but the most recent results as well. The shadow side of this transparency is the risk that smaller periods of time are not representative of what we expect for the full year.

We knew coming into this July we would have topped year-over-year comps. In 2015 the July weather was nearly perfect. This year was different, with extended heat-wave and related storms negatively impacting many of our parks towards the end of the month. Even though we experienced a pullback in revenues during the month we had the second-best July in our history, and as I said earlier we remain firmly on track to deliver record results again this year.

To complete the transparency, there is always the risk a Management Team over reacts to short-term trends both positive and negative. That behavior is not unique to stock analysts. At this time we see nothing that would change our promotional programs for the balance of the year.

Our Halloween events continue to increase in popularity and we continue to price into this demand. We also expect the introduction of WinterFest at Great America and Santa Clara, California to be just the first of several such events which increase the productivity of our parks' established asset basis and enhance the appeal of our season-pass programs.

My read of our year-to-date results confirms our strategy is working. Part of our improvement in the first seven months of the year stems from our new approach to early-season value pricing, which I had talked about before. Unlike the destination parks, where most people could readily identify between the peak and value seasons, the regional amusement park industry historically did not have similar clarity.

With this in mind, last year we started a multi-year revenue management and marketing campaign that will let value sensitive consumers know that the May-June timeframe provides both a great value and a great experience. Besides the direct impact on our early-season results, this also provides us with greater pricing confidence through the balance of the season.

It was a successful strategy for us last year and we're certainly seeing the benefits continue into this year. To date our record attendance reflects increases in the number of unique visitors to our park as well as more visits from our loyal season-pass customers.

I would also like to say the quality and efficiency to our operations have never been better. Our guests are staying longer, riding more rides and visiting more often. Our attractions and buildings are freshly painted. We have more comfortable places for people to relax, and there is more midway entertainment to experience.

The quality and diversity of our merchandise and food and beverage offerings have significantly improved. We now offer park-wide Wi-Fi, new mobile apps and a digital imaging platform that amplifies our social media presence by allowing our guests to share their experiences with families and friends all season long.

Our parks have definitely become more than the place to ride rides. They are THE place to be for fun. Many of our full-time employees, including our general managers, have more than 20 years of experience within the amusement park industry. They are the reason we have reported steadily increasing revenues and adjusted EBITDA throughout the years and have paid a distribution to our investors for 30 consecutive years.

Even better, as the success of our FUNforward 2.0 initiatives have indicated, our team is constantly looking towards the future. We have many new initiatives coming online next year and many more in development. Before I discuss our plans for 2017 and beyond, I will let Brian discuss our current-year results in more detail. Brian?

Thanks, Matt, and good morning, everyone. Before I begin, and in following with Matt's earlier comments, I want to remind everyone on the call that it is always difficult to extrapolate partial season performance into full-year results. Essentially, all the revenues from our seasonal amusement parks to 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 revenues concentrated in 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, July 31, approximately 40% of our operating results are still to come.

First, I would like to briefly discuss our results through the second quarter before moving on to more current revenue and attendance trends. As noted in our earnings release issued earlier this morning, the 2016 season is off to a strong start with meaningful increases in both revenues and adjusted EBITDA.

Net revenues for the six months ended June 26, 2016 were $446 million, up 5% or $22 million when compared with the same six-month period a year ago. Our revenue growth over this period was largely driven by a 4% or a 337,000-visit increase in attendance to 9 million guests, and a 1% or $0.59 increase in average in-park guest-per-capita spending, to $45.16.

Over the same period out-of-park revenues increased 7%, or $3 million, to $54 million. When excluding the impact of changes in foreign currency exchange rates, guest-per-capita spending would be up 2%, year over year. This revenue growth we produced over the first half of the year is balanced across all areas of our business. The 4% growth in attendance is largely attributable to our focus on attracting more value-orient customers through dynamically priced ticket offerings early in the season.

At the same time we remain committed to creating urgency for our growing season pass-holder base to visit early and to visit often through multi-week special events. Attendance from our season-pass and advanced sales ticketing categories were particularly strong during the first six months of the year. In regards to season-pass sales, total revenue for 2016 has increased by 15% when compared with our record sales from last year.

This growth in season-pass revenues is the direct result of increases in both the number of passes sold as well as the average price paid per pass. Through the end of June we've now sold a record number of season passes, and the average visitation per pass is also up year over year.

At the end of the second quarter our deferred-revenue balance totaled $173 million, representing an increase of $25 million from the second quarter of 2015. The year-over-year increase in deferred revenues reflects our record season-pass sales, as well as the strong second-year adoption of our all-season dining program and the addition of a new all-season beverage program, which was introduced across all of our parks for the first time this year.

Given the continued shift in attendance mix towards season passes, we are very pleased in our ability to generate continued improvement in guest-per-capita spending levels through the first half of the year. The slightly more than 1% increase in per-capita spending was driven by improved spending across all major categories including admissions, food and beverage and premium-product offerings.

The 7% or $3 million increase in out-of-park revenues we generated through the first half of the year reflects the continued growth of our resort properties, led largely by the second-year performance of the renovated historic Hotel Breakers at our flagship park, Cedar Point. Average occupancy rates and ADR's are up year over year across the system and the forward-booking curve looks solid for the balance of the year.

Out-of-park revenues through the first half of the year have also been boosted by the continued growth in special events at catering facilities across our parks, including our great America Park in Santa Clara, California which is adjacent to the 49ers' stadium.

Moving onto the cost front, operating costs and expenses through the second quarter totaled $360 million, representing an increase of $14 million or 4% from the same six-month period in 2015. The increase in operating costs are in line with our expectations and reflect higher costs associated with the record attendance and guest spending levels through the first six months of the year.

The increased operating costs also reflect higher labor costs due to normal merit increases and seasonal wage rate increases, as well is higher operating and maintenance supplies and expenses as we continue to support investments made in the infrastructures of our parks. Meanwhile, adjusted EBITDA, which we believe is a meaningful measure of our park-level operating results, totaled $92 million for the first half of 2016, up 10% or $8 million from 2015.

Adjusted EBITDA margins during the same six month period improved by approximately 90 basis points compared with the prior-year period. The increase in adjusted EBITDA and adjusted EBITDA margins is attributable to top-line revenue growth outpacing the growth in operating costs as we continue to focus on effectively managing our fixed cost base.

Consistent with the prior year, it's important to note that our year-over-year operating comparisons continue to be impacted by foreign currency translation from our park in Canada. Adjusting for the impact of foreign currency exchange rates, our revenues through the first six months of the year grew 6% or $24 million, and operating expenses were up 5% or $15 million.

The net effect of foreign exchange rates on reported adjusted EBITDA for the first half of the year was nominal, and based on current rates we estimate the full-year impact on 2016 reported adjusted EBITDA will be immaterial when compared with 2015.

Turning our attention to operating results through this past Sunday, July 31, based on preliminary results year-to-date net revenues through July 31 were up 2%, or $16 million to $769 million. The increase was the result of a 1% increase in attendance, a 1% increase in average in-park guest-per-capita spending, and an approximate 4% increase in out-of-park revenues when compared with July, 2015. To date, we have produced increased guest spending across all major categories while also increasing attendance from the record levels we achieved last year.

As Matt mentioned, while we did experience a pullback in attendance in July, we do not believe this is indicative of a broader trend or a change in the underlying business fundamentals. Throughout the season, when we've seen good whether we've produce the attendance levels and operating results we expected coming into the year. Based on the nature of the attendance patterns we've generated to date and the strength of our advanced purchase commitments such as season-pass sales, group bookings and hotel reservations, we continue to believe the underlying demand for our business remains strong.

To quote Matt, if it rains on any given Saturday you don't change your strategy on Monday. With that in mind, we remain confident in the capital and marketing programs we have in place, as well as the dynamic pricing programs and operational initiatives we've implemented. We will continue to run our 2016 play-book and execute against our long-term growth strategy as we look to deliver our seventh straight year of record results.

Now let me shift focus to our balance sheet for a moment. At the close of the second quarter our balance sheet remains in excellent condition in terms of providing both liquidity and financial flexibility. Our receivables and inventories are at normal seasonal levels, and we have long-term credit facilities in place to fund current liabilities, capital expenditures and operating expenses as needed.

At the end of the quarter, we had $68 million in cash on hand and $596 million of variable-rate debt before giving consideration to interest rate swaps. We also had $939 million of fixed-rate bonds and $55 million in outstanding borrowings under our revolving credit facilities. In 2016 our revolver usage levels were similar to 2015.

Over the past five years we've significantly improved our balance sheet and financial flexibility. We've reduced our consolidated leverage ratio from 4.1 times debt-to-adjusted EBITDA at the end 2011 to inside 3.4 times debt-to-adjusted EBITDA today. Our cash interest costs have decreased to approximately $80 million on an annual basis, down from approximately $150 million five years ago.

Over that same timeframe, we've gone from drawing on our revolver during the fourth quarter to having approximately $120 million in cash on hand at the end of the year. Finally we've increased our annual distribution rate from $1.00 per limited partner unit in 2011 to $3.30 per limited partner unit this year. While still aggressively investing in growth opportunities at our parks.

And we expect our distributions to keep growing. As I hope you can tell, we are pleased with our operating results through the first of seven months of the year and we remain confident in our long-term strategy. We will continue to opportunistically take advantage of market conditions to maintain a strong balance sheet and to growing distribution, while at the same time having the flexibility to invest in strategic growth opportunities.

With that, I'll turn the call back over to Matt.

Thank you, Brain. As Brian just mentioned, we 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. We also have a great degree of confidence in the quality of our total entertainment package and the value proposition it provides.

This includes our upcoming Halloween events, which continue to be an important part of our operating season. In fact, weekends in October are often the highest volume and most profitable weekends of the year. We remain focused on ensuring we continue to deliver and add to the high quality experience our guests have come to expect from our notorious haunt events.

This year we will have new Skeleton Key rooms, which are actor-driven experiences included with the purchase of Fright Lane, new themes for many of our mazes, new parades and more family day experiences around the 50th anniversary of, Its the Great Pumpkin, Charlie Brown. Also we will be testing a new haunt virtual reality attraction at several of our parks. This is just another example of our broad approach to our testing VR at our parks as we look for finding the operational and commercial sweet spot for techtainment offerings that will appeal to the consumers. More details around our Halloween events will be released in the near future.

Beyond the Halloween period, we will be expanding Great America's operating schedule with the addition of WinterFest, a new holiday experience at the park. During WinterFest, guests will be able to ice skate in front of the park's iconic double-decker carousel, enjoy a magnificent light display, view spectacular live holiday shows and enjoy a wide variety of food and beverage offerings, specifically tailored to the event.

While Knott's Berry Farm has been a huge success at Knott's for some time now, this is the first phase of a broader strategy to introduce winter holiday experiences at our seasonal parks. We are extremely excited about the potential WinterFest represents for extending our season and expanding the entertainment offerings to our guests.

While our comments so far are primarily focused on the current operating season, I assure you we are already actively engaged in the execution of all strategic aspects of the upcoming 2017 season. This includes Mystic Timbers, a world-class wooden roller coaster at Kings Island which we just announced last week. A major water park expansion at our Soak City water park, adjacent to Knott's Berry Farm, and the extension of our operating season and three more parks, where WinterFest will be introduced. More new rides and attractions at our parks will be announced over the coming weeks.

We also continue to move forward with our branding initiative. As I mentioned on our last call, we have found that embracing the heritage of our unique brands and strategically operationalizing those brands leads to a guest experience unmatched by other generic amusement parks. The in-depth analysis we're performing at each of our parks directly informs our investment strategy, works across all departments and functions, and supports strong consumer loyalty. To date we've completed the brand research and positioning plans at five of our largest parks and we expect to have three more completed by the end of next year.

Finally our 1,300 acres of undeveloped land adjacent to our parks continues to be a large opportunity for growth. We're not prepared to announce all of our plans at this time, but I will say our focus is on projects that will drive both direct value and admission synergies. A great example of this is the construction of Cedar Point Sports Center, which is currently ahead of schedule and is expected to be completed by the end of this year.

Sports Force, the company that will be managing these deals has already begun taking tournament registrations beginning next spring. Embedded within these tournaments is a length-of-event ticket to Cedar Point and Soak City for the athletes, along with ticket packages available for their families and friends. We are more aggressively positioning Cedar Point as a true regional destination with a combination of this new-use sports facility, the ongoing evolution of the park's resort offerings, including expanding the amenities and entertainment on its mile-long Lake Erie beach, and the completion of the park's brand positioning as THE place to take thrills to the next level.

At Cedar Point, the average length of stay and the average rides per guest, two key performance metrics in our world, have both steadily been increasing and based on future plans we would expect to see this trend continue. Unfortunately our marketing team won't let even me announce any specifics today, but look for their announcement in the coming weeks.

Speaking of water parks the expansion and rebranding of our water park at Carowinds has been extremely successful this year. The attractive growing Charlotte market continues to be an area we plan to invest in. This park has 100 acres of undeveloped land, and similar to the play-book at Cedar Point, we believe this area could be well-positioned for amateur-use sports facilities and resort development. Discussions and analysis are ongoing. We will be sure to keep you updated as our long-term strategic plans continue to progress for this market.

In addition we continue to develop our CRM platform, our dynamic pricing models, our food beverage programs, our mobile app and digital imaging platforms, our rezoning efforts at Great America and our immersive live entertainment offerings. Each of these initiatives represents an exciting and lucrative area of growth for us both in the near term and the long term.

In conclusion, we remain very confident in our ability to deliver record results this year and remain on track to achieve our long-term adjusted EBITDA goal of $500 million earlier than our original target of 2018. Our top priorities remain to grow our distribution while we continue to invest in our business to create greater value. We are a total return investment with an extremely attractive tax advantage, 5.6% yield and valuation growth opportunities when compared to our closest peers.

With that we'll now open up the call to questions.

Thank you, sir.

(Operator Instructions)

We'll take our first question from Tim Conder with Wells Fargo Securities.

Thank you. Matt, if you could maybe go over a little bit on the July weather comments and so we can get that fully off the table here. Did you see more of the impact from the season pass guests and which parks in particular, if you'd maybe call out the top two or three that were impacted?

Yes, Tim. Look, I'm not going to go to too much detail, because again I think there is a risk of extrapolating this beyond what it should be. But I would also have said the same thing about our good results at the end the second quarter. The way we sort through it, though, to give you a little bit of color -- the reason I'm so confident it was weather-related is the only two parks that outperformed our expectations in the month were in California. I think we are very confident that's what we experienced and we will look for better results over the next several weeks.

Okay. No, that's fine. You touched a little bit on VR and how you were doing some exploration there. Also, a little bit of the augmented reality given the whole Pokemon GO and things like that -- how do you see VR versus potential for augmented reality or is there any potential that you could maybe talk about here at this point?

Tim, I think what we've done is really I think appropriate, which is we talk about techtainment more broadly. I have a guy I enormously respect who ran Ocean Park in Hong Kong, Tom Merhmann, and Tom said just because you can doesn't mean you should. And so what we are looking for, and I think we've cracked the code on virtual reality on the coaster, we'll have a plan for next on how to do it in a way that doesn't provided a disservice to those who want to ride it without VR, et cetera.

But you can continue seeing us play in this arena. Particularly define how you commercialize it in a way that makes a guest happy but makes us money as well. So VR, as we mentioned, we're going to experiment with it at Halloween Haunt this year; a VR -- you also may see us continue to expand in augmented reality, but I've got nothing specific for you at this point, Tim.

Okay. Brian, I wanted to delve into the capital deployment a little bit. And Matt, you alluded looking at resorts maybe in the Carowinds that you've talked about before. Any timing that you gentlemen can talk about of when we can see some ramped up resort cabin rollout, and then the potential maybe for even some modest unit repo to maybe offset any dilution at minimum or anything like that?

Sure, Tim. On the resort side, what I can tell you at this point is that we are currently in the due diligence process on several potential projects across the system. Nothing specific I can give you at this point in time, but I would say it would be fair to expect to hear more on specifics on some of these projects on one of our upcoming earnings calls later this year.

As it relates then to buybacks, I would say at this point, buyback remains a topic of conversation with our Board on a regular basis. To date, our efforts and use of free cash flow has been concentrated on reinvesting in the parks and the opportunities presented there as we look to grow the business. In the near-term, I would say that is where we will remain focused, but it remains a tool in the tool belt for us and we will take opportunistic chances or take opportunities to buy back shares at the right time based on those other uses.

Okay, thank you gentlemen.

Our next question comes from James Hardiman with Wedbush Securities.

Good morning, thanks for taking my call. I promise I'm not going to overreact on the July numbers but I was hoping you could just --

James, I hear you were listening closely.

Yes, very closely. I thought we could use help [as a] handicap what the weakness in July means for the quarter. I guess first, if we could maybe try to do the math as to how far down July was. Any help with that would be great.

How much of the third quarter is actually left? You give us some specs on sort of how much of the year is complete. I guess I'm just trying to figure out if August and September return to 5% type revenue growth what does that mean for the third quarter, just based on the math? Any help you could give us there that would be great.

James, as we said the third quarter is the key quarter for the year. As I commented on in the prepared remarks, at the end of July we still had 40% of the year in front of us so with that in mind, I would say our ability, if we look broadly -- and we are not going to get into giving specific guidance as it relates to the quarter itself, but as we look at the balance of the year, we are still very confident as Matt said on the call as well in our ability to deliver on our seventh straight record year.

So a little bit of a bump in the road towards the end of July, those last couple of weeks in July, we are confident there is more than enough runway for us to recover. And it's not unusual for us to see during the course of the year where we have ups and downs. This one just happened to come right up against an earnings call, and you know us, we tend to be very transparent and this is one of the outcomes of being overly transparent.

James, the other thing I would call out is, obviously the deferred revenue sitting on the balance sheet and the volume of season pass sales that are yet to flow through the income statement are -- provided a substantial cushion for even what the effect we saw here in July.

That's helpful. We've got the 40% of the year is left, can you just maybe give us a number for how much of the quarter is left?

Not at this time. What we have told you in the past -- I'll give you a little bit more color and we'll leave it at this -- is that after Labor Day -- the business has grown with the introduction of Halloween and the growth of the Haunt events over the year is that post-Labor Day represents about 15% at our full-year. You can do the rough math there to give you an idea of how important August is.

Okay, that's perfect. I can do the math there. I just want to make sure I understand maybe some of the shifts that are going on here. I guess first, the early-season value pricing, is there a possibility here that as more people come to the park earlier, that some of the people -- you might've been pulling maybe visitation out of Q3 and into Q2, and then I guess secondly, help me understand sort of the dynamic of the season passes.

Initially looking at 15% growth there and only 2% revenue growth overall year-to-date, I would think that maybe there is some more of that to release as we work our way to the year. But then, I think there was a comment that average visitation per pass was actually up year over year. So maybe there is less revenue to book as we go move forward and some of this comes down to just how you account for the season passes when you release, sort of unused visits in revenues; but help me understand some of the shift going here.

I will take the first part of it and let Brian take the second. We don't believe their has been a significant pull-forward, but that being said we did change our strategies. There is a little bit of that in the back of our minds as well, James, but we haven't been able to quantify it at this point. And Brian, on the revenue?

Just to add on there to the pull-forward, I think one of the facts I'll give you that helps us get comfortable with that, James, is we were having this call a couple weeks ago, prior to the heat wave that hit most of our parks, our July attendance was looking really good about midpoint of the month. So, we definitely didn't just pull-forward peak visitors, peak vacation time visitors into May and June. The attendance was there in the first half of the month of July.

As it relates to season pass, we did say the average visitation is up per pass-holder year over year. The draws that each one of our parks books revenue towards on a season pass visitation basis, I guess reviewed on a weekly basis. I will tell you we -- and Matt alluded to in his remarks, as did I -- and we are sitting on a good chunk of deferred revenue associated with the season pass programs as well as the related programs: all season dining, all season beverage, et cetera.

We continue to review those, but there is no doubt that there is more visitation that we expect, and so that is one of the things that I think gives us comfort in the balance of the year is that we still have a good chunk of visitation based on historic visitation patterns that we would expect to see over the balance of the year from season pass holders.

Great, that's really helpful. Thanks, guys.

Our next question comes from Ben Chaiken with Credit Suisse.

Hello, guys. On the cost side, you called out higher COGS, I guess from higher attendance and spending, but it still looks like as a percentage of revenues is expenses were higher, anything to read into here? Was there any impact from the roll-out of your all-seasons dining that inflated that number or any reason why costs would be more front-end loaded this year?

No, it is a little bit in a couple of those programs, Ben, where all-season dining continues to evolve and for some of our parks, they are only in the second year of it. So we continue to get a little bit smarter, our guests continue to change their use of the program; so similar to the season pass draws, our parks are constantly reviewing the draws on deferred revenue related to those programs, so some of that is a little bit at play, as early in the season we get maybe more season pass visitors in the park. They tend to use those programs and put a little bit of pressure.

I would anticipate by the end of year that you will see cost of goods across the board being pretty comparable to where they were this past year. Not a lot of pressures in that area. It's probably a little more of a timing related item. The biggest area of pressure, as we said on the call, that we are seeing on operating costs and expenses, is from the pressures in the seasonal labor arena.

The other thing I would say, Ben, is the team is doing a really good job, and I will think you will see a lot of this as we grow into 2017 of modifying our facilities to reduce the amount of labor required to address these programs.

So as an example, we have dedicated beverage retail stations now that don't clog up the lines or require the labor that typically is at food and beverage station. It's exclusive to those who have all-season beverage programs, as an example. We are introducing more tablet ordering at our fast food locations and some of our sit down restaurants, so I think the flip side of this you should expect to see a lot more of those programs rollout to reduce our reliance on labor somewhat.

Got it. And just real quick, you mentioned COGS similar to last year. You're talking about on a percentage of revenue basis for the full year?

Yes.

Okay. And then on the labor side, were there any specifically type labor markets that impacted this, or was it normal minimum wage increases.

It was generally more minimum wage increases, although I would say broadly, although I wouldn't call it tight, I would call tightening, and those are specific positions that we usually have a challenge with. I won't call those out on this call, but we get a weekly report, Brian and I, that comes up from Richard Zimmerman about where we are on staffing and whether we need to respond in certain markets, and right now we are exactly where we would like to be.

Thanks a lot, that's helpful.

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

Thank you for taking the question. I wanted to -- it's a little bit bigger picture, just really to get this off the table, you had a little bit of a slowdown, you've said it's weather -- but just to be clear, there has been tons of news reporting about terrible events in public venues. Does that have any impact in any way that you can detect on people's interest in coming to your theme parks?

The short answer is no. I have been in the industry 30 years and I've seen events happen over time, and my radar is pretty damn good on this. I have heard from not a single person, as I travel around, that this is a barrier for people visiting our parks.

Okay, that's helpful. On the kind of trend towards expanding the season, which is interesting, you called out that you're going to do this WinterFest, I think, at great America. Can you just update us on how many parks you think have an opportunity, what percentage of your portfolio has an opportunity to have a WinterFest? Like I don't know if it's off the table in a cold place like Canada, or if that even really matters.

I think we're going to learn a lot. What we've said is we're doing WinterFest at Great America this year and we're internally committed to three additional ones next year. I suspect Canada is a little harder for the reasons you describe, but the ones we've picked generally have more favorable weather and also have a population base and a strong season pass base to leverage off of.

All right, but do you think this is something most of your parks could do, or just kind of a --

It probably won't end up as being as common as Halloween, but it will be more than half of our parks, if I had to give you a number today.

And then on the VR commentary, which is interesting, you've got kind of a lab to look at, right? I mean Six Flags is giving people (multiple speakers).

We have our own lab about 400 yards from my office.

So you have two labs, you can look that, they can also look at how it's doing outside of the lab in a real-world experience and use that as an observation point. Are you seeing anything in what Six Flags is doing that makes you think that, that's an approach you should copy or should stay away from in terms of giving VR (multiple speakers).

I can't speak to what they do. That would not be appropriate. But what I can tell you is that, our parks, because of the attendance levels at our park, we would never mass-market a product that the vast majority of the guests can't handle from a capacity standpoint.

What we are pursuing, and I'm very comfortable with this is I've met with our leadership team, is a strategy that makes sure that when guests who come who want to ride VR, they can ride VR, and guests who come who want to ride the coaster without VR, can ride the coaster. We just don't have any coasters really that are --where the ridership is so low that you'd want to convert it to 100% VR at this point.

I think going more broadly, though, and I think is probably helpful, Barton, where there's new technology available, whether that be VR, digital entertainment, or it be something else that the coaster manufacturers come up with; I think everybody is really pretty good at trying to find out how to put that overtop of the existing asset base. But at this point, I think we have a plan we're confident in that will keep our guests happy and that is where I will leave it.

Then one final thing on one of the numbers you threw out, the 15% growth in season pass revenues -- can you give us another metric kind of related that, and that is a sense of the percentage of attendance from season pass. Has that changed much? Is it still around, I think you said -- I think you gave a number in the past, has that changed much?

The number we have traditionally given out is low 40s. It continues to creep up.

Thank you.

Our next question comes from Joe Edelstein with Stephens Inc.

Hello. Good morning, everyone. I wanted to follow-up to the question that was asked earlier, whether there was a pull-forward on the attendance, and I think you addressed that side of the question, but my question more is related to just the in-park spending per-cap metrics. It looks like that was down a little bit.

Did you see any mix shift in terms of your guest profile, whether it's a family group, teams, mix -- really, I'm thinking likely from the impact of those value seekers that you were trying to go after in the early season, but if you if you could just confirm any trend there, that would be helpful.

Sure, Joe. As we said with season pass being up year over year, we're pleased with the growth we are generating in, in-park spend. We are getting it in all the core revenue channels that we would expect, admissions, F&B, extra charge, or premium product offerings like Fast Lane. There is no doubt that, and I think this is true for everybody in the industry, that season pass holders on a per visit bases aren't necessarily going to spend as much as a single day visitor might spend, and there can be some of that truth as well with the value-oriented consumer.

I think typically what we expect to see is growth in per capital spending improves as we work through the season. As we get into July and August, we tend to see per-caps picking up as we get more towards that peak vacation season, and maybe our season pass mix for those months is a little bit lower. That will also be true as we get into October, which happened to have some of our higher percentages of non-season pass attendance. So we are comfortable and happy with where our per capita spending is, particularly as we look at the fact that season pass is a higher percentage of attendance at this point in time.

Joe, I think I may have misheard you -- but per-caps are up 1%, 2% when you take the FX out of it. I have actually been pretty pleased given that you would think you would have a little pressure from the volume of season pass holders, and perhaps from the new value oriented customers we're attracting; but we are actually up 2% when you take out the FX.

I appreciate that detail and the clarification, Matt. I did want to also, just try to clarify something on the number of events and perhaps you could even talk about it in terms of the number of extra days that you might be putting into the calendar this year as it relates to Halloween, and certainly WinterFest is new.

The days -- other than WinterFest, the balance of the year, the days don't materially shift from the prior year. And WinterFest is a little over three weeks of incremental days.

Okay. Matt, I also wanted to just get your take on whether M&A opportunities are out in the market today, and if you were looking to expand through that avenue, what type of criteria you would be measuring against?

It is interesting, because this Company really was very good at M&A over the years. That's how we got Valleyfair, that's how we got Knott's Berry Farm and Worlds of Fun, et cetera. One of the advantages we have in these is generally our long-standing relationships with the families or individuals who control these assets.

The other is the fact we have generally been successful at using the MLP structure that units with the associated distribution, is attractive to many of these families that sell. If there was a quality park out there that was available we would be an active player in that arena.

I appreciate the comments, and I will yield to the next. Thank you.

(Operator Instructions)

The next question comes from Michael Bunyaner with TLF Capital.

Yes, good morning. I just wanted to ask two questions. One is bigger picture and the other is a little bit shorter-term. On the bigger picture, your free cash flow should start accelerating this year and into next year and beyond, unless the capital spending needs and opportunities in terms of reinvesting back into the business will continue. What is your view of the total CapEx, and how are you thinking about the free cash flow as we go forward?

Michael, it's Brian. As we've discussed in the past, I think you're alluding to it, we would expect that the CapEx spend this year and going forward is going to be down from the peak -- I would call it artificially, during peak numbers of the last couple of years as we invested in infrastructure projects like the Breakers remodeling, as well as, some ramped up investment in Carowinds, which will start to level off a little bit or at least normalize.

So going forward, for modeling purposes what we've been using internally, I will give you a little inside baseball -- in that $140 million to $150 million range, as the level of investment that we think is necessary to drive the core growth in the business. That said, on free cash flow basis, there is some movement in the opposite direction as we've talked about. Cash tax payments are going to be accelerating from the low $20 million range of this past year to probably $50 million-ish in 2016 and over the next several years being in that $55 million to $60 million range going forward.

So those two are offsetting one another, and then quite frankly, the incremental projects that we've talked to, funding of those we'll look at the various ways, funding some those out of pre-cash flow is a possibility. Funding some of those through incremental borrowings depending on the scale of the investment is another possibility. That is our outlook right now as it relates to free cash flows, at least as a relates to say 2016 and 2017.

Thank you very much. The second question is, you have been exceedingly successful over the past four-plus years and you have been able to execute your strategy without increasing your borrow rate, while you have distribution's at nearly double-digit rate almost every year.

Matt, when you think about the Company three to five years from now, clearly you will have that opportunity to use your free cash flow either to grow the business and/or to return the capital back to the shareholders' side of the increased distributions and/or share buybacks. As you think about the share repurchase or unit repurchase, because it will allow you to permanently reduce the capital needs in terms of distributions, how do you value that, vis-a-vis the rest of priorities for capital and how valuable is it? Like what yield or rate that becomes exceedingly attractive to you? How does the Board and how do think and what do you think about that?

Michael, I think a couple of things. One is, no surprise to the people on this call that the distribution remains kind of our top priority when we talk about alternative uses of the cash. I will tell you that the Board is very much in favor of continuing to grow our core assets that we own today, so we still believe opportunities like Great America will be -- provide more than double digit returns once we get that rezoning done, et cetera.

Will there come a point? I don't want to speculate here, but I suspect three or four years from now -- hopefully not that much sooner -- but three or four years from now there will be a more rigorous debate about whether were going to buy back the stock at scale. Today that doesn't remain the priority for the Board in the conversations we have had.

And that does conclude today's question and answer session. I would like to turn the conference back over to Matt Ouimet for any additional or closing remarks.

Thank you, Lisa, and thank you all for your interest and ongoing support in Cedar Fair. I know many of you on this call have had an opportunity to visit a Cedar Fair park this summer. For those of you haven't, I strongly encourage you to take the time to visit one or more of our parks to really understand what differentiates Cedar Fair. So with that I'll turn it back over to Stacy.

Thank you. Thank you, everyone, for joining us on the call today. Should you have any follow-up questions, please feel free to contact our Investor Relations Department at (419)627-2233. We look forward to speaking with you again in about three months to discuss our third-quarter results.

And that does conclude today's presentation. Thank you for your participation, and you may now disconnect.